<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the three months ended SEPTEMBER 30, 1996 Commission File Number 0-14371
- --------------------------------------------- -------------------------------
COMPUCOM SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 38-2363156
- ----------------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10100 N. CENTRAL EXPRESSWAY, DALLAS, TX 75231
- ----------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 265-3600
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of the Registrant's common stock outstanding as of November
8, 1996 was 44,798,200 shares.
- --------------------------------------------------------------------------------
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION Page
- ------ --------------------- ----
Item 1. Condensed Consolidated Balance Sheets
September 30, 1996 (unaudited) and December 31, 1995 3
Condensed Consolidated Statements of Operations
Three months and nine months ended September 30,
1996 and 1995 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1996 and 1995
(unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
- -------- -----------------
Item 6. Exhibits and Reports on Form 8-K 11
2
<PAGE>
COMPUCOM SYSTMNS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
Assets (unaudited)
------
<S> <C> <C>
Current assets:
Cash $ 4,290 $ 4,249
Receivables 339,786 265,071
Inventories 253,944 196,531
Other 4,179 2,151
--------- ---------
Total current assets 602,199 468,002
Property and equipment, net 52,568 18,253
Cost in excess of fair value of
tangible net assets purchased,
less accumulated amortization 16,580 18,146
Other assets 2,296 4,303
--------- ---------
$ 673,643 $ 508,704
========= =========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 221,414 $ 189,180
Accrued liabilities 50,711 53,867
--------- ---------
Total current liabilities 272,125 243,047
Long-term debt 231,408 120,364
Deferred income taxes 5,277 3,952
Convertible subordinated notes 3,000 3,000
Shareholders' equity:
Preferred stock 15,000 15,000
Common stock 448 441
Additional paid-in capital 58,907 57,788
Retained earnings from July 1, 1987 87,478 65,112
--------- ---------
Total shareholders' equity 161,833 138,341
--------- ---------
$ 673,643 $ 508,704
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
---------- ---------- ------------ -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue
Product $ 449,950 $ 319,562 $ 1,295,750 $ 946,390
Service 46,570 26,988 118,267 71,860
Other 1,961 1,349 6,553 3,846
----------- ----------- ------------ -----------
Total revenue 498,481 347,899 1,420,570 1,022,096
----------- ----------- ------------ -----------
Cost of revenue
Product 403,862 286,428 1,164,420 847,716
Service 32,100 18,727 79,930 49,788
Other 1,213 602 4,372 1,719
----------- ----------- ------------ -----------
Total cost of revenue 437,175 305,757 1,248,722 899,223
----------- ----------- ------------ -----------
Gross margin 61,306 42,142 171,848 122,873
Operating expenses
Selling and service 32,382 21,519 87,123 60,595
General and administrative 14,418 8,054 38,501 25,801
Depreciation and amortization 2,339 1,526 6,193 4,523
----------- ----------- ------------ -----------
Total operating expenses 49,139 31,099 131,817 90,919
----------- ----------- ------------ -----------
Earnings from operations 12,167 11,043 40,031 31,954
Interest expense ( 3,926) ( 2,997) ( 10,368) ( 9,494)
Non-recurring gain 8,738
----------- ----------- ------------ -----------
Earnings before income taxes 8,241 8,046 38,401 22,460
Income taxes 3,296 3,219 15,360 8,984
----------- ----------- ------------ -----------
Net earnings $ 4,945 $ 4,827 $ 23,041 $ 13,476
=========== =========== ============ ===========
Earnings per common share
Primary $ .10 $ .12 $ .47 $ .34
Fully diluted $ .10 $ .10 $ .46 $ .29
Average common shares outstanding
Primary 47,331 37,206 47,270 36,476
Fully diluted 49,934 45,808 49,874 45,661
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine Months ended September 30, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 23,041 $ 13,476
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 6,193 4,523
Deferred income taxes 1,325 (398)
Gain on sale of securities (8,738)
Changes in assets and liabilities:
Receivables (74,124) 11,477
Inventories (57,413) (16,490)
Other current assets (2,028) 443
Accounts payable 32,234 9,179
Accrued liabilities and other 1,064 1,608
----------- -----------
Net cash provided by (used in) operating activities (78,446) 23,818
----------- -----------
Cash flows from investing activities:
Capital expenditures, net (38,617) (4,023)
Business acquisitions, net of cash acquired (5,759) (2,481)
Proceeds from sale of securities 11,368
----------- -----------
Net cash (used in) investing activities (33,008) (6,504)
----------- -----------
Cash flows from financing activities:
Net bank credit facility and other borrowings (repayments) 111,044 (17,524)
Issuance of common stock 1,126 1,363
Preferred stock dividend (675) (1,125)
----------- -----------
Net cash provided by (used in) financing activities 111,495 (17,286)
----------- -----------
Net increase in cash 41 28
Cash at beginning of period 4,249 4,076
----------- -----------
Cash at end of period $ 4,290 $ 4,104
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1996
(1) General
-------
These condensed interim consolidated financial statements should be
read in conjunction with the consolidated financial statements and the
summary of significant accounting policies and notes thereto included in
the Company's 1995 Annual Report on Form 10-K. The information furnished is
unaudited but reflects all adjustments consisting only of normal recurring
accruals which are, in the opinion of management, necessary to present a
fair statement of the results for these interim periods. Interim results
are not necessarily indicative of results expected for the full year.
(2) Long-Term Debt
--------------
During September 1996, the Company amended the August 1993 Financing
and Security Agreement ("Credit Facility") increasing the amount of the
Company's Credit Facility to $225 million from $175 million and extending
the maturity date to September 25, 1999. The $225 million Credit Facility
is comprised of two elements: a $200 million working capital facility and a
$25 million facility to be used solely to purchase real property intended
to be utilized as the Company's corporate headquarters. Initial pricing on
the $200 million component is LIBOR plus 1% while initial pricing on the
$25 million component is LIBOR plus 1.25%. All pricing on the expanded
Credit Facility is subject to adjustment based on certain performance
criteria. The Company had previously amended its Credit Facility in April
1996, extending its maturity and making substantially all of its Credit
Facility LIBOR-based. In addition, the Company executed amendments to its
April 1996 receivable securitization, whereby a portion of trade
receivables are pledged to a third party as collateral, increasing the
amount from $75 million to $100 million and extending its maturity to
September 17, 1999, subject to certain conditions. The interest rate
applicable to the receivable securitization is based upon the bank's
commercial paper rate (which at September 30, 1996 was 5.33%) plus 55 basis
points.
(3) Investments
-----------
During the second quarter of 1996, the Company participated in the
secondary stock offering of PC Service Source, Inc. ("PCSS") resulting in
an after tax, non-recurring gain on the sale of securities of $5.2 million.
The Company founded PC Service Source, Inc. in 1990 and, after the
participation in the secondary offering, owns less than 5% of the
outstanding common shares of PCSS.
(4) Contingencies
-------------
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position and results of operations, taken
as a whole.
(5) Reclassifications
-----------------
Certain amounts in the 1995 condensed consolidated financial
statements have been reclassified to conform with the 1996 presentation,
the most significant of which is the reclassification of direct expenses
related to the service business from operating expense to cost of revenue.
6
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations
September 30, 1996
The following table shows the Company's total revenue, gross margin and
gross margin percentage by revenue source. Operating expenses, interest and net
earnings are shown as a percentage of total net revenue, for the three months
and nine months ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
----------- ----------- ------------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue:
Product $ 449,950 $ 319,562 $ 1,295,750 $ 946,390
Service 46,570 26,988 118,267 71,860
Other 1,961 1,349 6,553 3,846
----------- ----------- ------------- -----------
Total revenue 498,481 347,899 1,420,570 1,022,096
----------- ----------- ------------- -----------
Gross margin:
Product 46,088 33,134 131,330 98,674
Service 14,470 8,261 38,337 22,072
Other 748 747 2,181 2,127
----------- ----------- ------------- -----------
Total gross margin 61,306 42,142 171,848 122,873
----------- ----------- ------------- -----------
Gross margin percentage:
Product 10.2% 10.4% 10.1% 10.4%
Service 31.1% 30.6% 32.4% 30.7%
Other 38.1% 55.4% 33.3% 55.3%
----------- ----------- ------------- -----------
Total gross margin 12.3% 12.1% 12.1% 12.0%
Operating expenses:
Selling 4.3% 4.5% 4.1% 4.5%
Service 2.2% 1.7% 2.1% 1.5%
General and administrative 2.9% 2.3% 2.7% 2.5%
Depreciation and amortization 0.5% 0.4% 0.4% 0.4%
----------- ----------- ------------- -----------
Total operating expenses 9.9% 8.9% 9.3% 8.9%
----------- ----------- ------------- -----------
Earnings from operations 2.4% 3.2% 2.8% 3.1%
Interest expense (0.8%) (0.9%) (0.7%) (0.9%)
Non-recurring gain 0.6%
----------- ----------- ------------- -----------
Earnings before income taxes 1.6% 2.3% 2.7% 2.2%
Income taxes 0.7% 0.9% 1.1% 0.9%
----------- ----------- ------------- -----------
Net earnings 0.9% 1.4% 1.6% 1.3%
=========== =========== ============= ===========
</TABLE>
(Continued)
7
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Product revenue, which is primarily derived from the sale of personal
computer hardware, peripherals and software to corporate customers, for the
quarter and nine months ended September 30, 1996 increased 41% and 37% from the
same periods in 1995 to $449.9 million and $1.3 billion, respectively. This
increase in product revenue reflects higher demand for personal computers,
particularly related to the Pentium upgrade cycle occurring in large
corporations, as well as increased demand for laptops. The strong product
results also reflect the advancements the Company has made in customer
procurement systems, data warehouse queries and web-based order statusing,
reducing the customers' overall procurement cost. Although product revenues
continued to exceed prior year, the Company experienced a slight decline in
product revenues when compared to the second quarter of 1996, which the Company
believes can be attributed to the timing of shipments to certain large customers
and product availability from certain manufacturers.
Product gross margin as a percentage of product net revenue for the three
months and nine months ended September 30, 1996 was 10.2% and 10.1%,
respectively, compared to 10.4% for the same periods in 1995. These lower 1996
margins are principally due to pricing to win new business and increased pricing
pressures from competition. Future product margins will be influenced by
manufacturers' pricing strategies together with competitive pressures from other
resellers in the industry.
Service revenue for the three months and nine months ended September 30,
1996 increased 73% and 65% from the same periods in 1995 to $46.6 million and
$118.3 million, respectively. Service revenue is primarily derived from systems
integration services, including field engineering, systems engineering, product
configuration, network management and help desk services. Service revenue
reflects revenue generated by the actual performance of specific services and
does not include product sales associated with service projects. The increase in
service revenue reflects the Company's continued focus on expanding its network
and technology services at competitive prices to meet increased customer demand
for the Company's value-added PC network services, as well as the impact of
various small service acquisitions. Service revenue continues to be strong with
third quarter 1996 revenues up 20% over second quarter 1996.
Service gross margin as a percentage of service net revenue for the three
months and nine months ended September 30, 1996 improved to 31.1% and 32.4%,
respectively, from the comparable periods in 1995 of 30.6% and 30.7%,
respectively, primarily due to an increase in higher-end, higher margin services
performed for customers.
Operating expenses for the three month and nine month periods ended
September 30, 1996 increased $18.0 and $40.9 million, respectively, from the
comparable periods of 1995, to support the continued revenue growth. As a
percentage of net revenue, operating expenses for the three and nine months
ended September 30, 1996 increased to 9.9% and 9.3%, respectively, compared to
8.9% for each comparable period in 1995, principally as a result of the
Company's continued investment in its service business and information services
resources. The Company's operating expenses are reported net of reimbursements
by certain manufacturers for specific training, promotional and marketing
programs. These reimbursements offset the expenses incurred by the Company.
(Continued)
8
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations
On a quarterly and year-to-date basis, service expense, which increased
both as a percentage of net revenue and in absolute dollars, primarily reflects
costs related to the infrastructure established starting in 1995 necessary to
manage and expand the service business and the investment in the development of
certain aspects of the service business which should enable the Company to
increase its service offerings. Selling expense, as a percentage of net
revenues, for the three months and nine months of 1996, decreased when compared
to 1995 primarily due to the fixed component of expense being spread over higher
volume. General and administrative expenses for the three months and nine
months ended September 30, 1996, increased as a percentage of net revenue from
2.3% and 2.5% in 1995 to 2.9% and 2.7%, respectively, primarily due to the
continued investment in the Company's information system resources required to
enhance customer satisfaction particularly through data warehousing, improved
customer procurement systems, and better reporting for the service business, and
expenses related to its campus recruiting program whereby approximately 120
recent technology college graduates entered a six month system engineering
training program.
Depreciation and amortization expense increased in absolute dollars and as
a percentage of net revenue for the quarter but remained relatively flat for the
nine months ended September 30, 1996. The dollar increase reflects amortization
expense associated with the Company's recent acquisitions as well as increased
depreciation expense related to fixed asset purchases and facility enhancements
in 1996 and 1995. The Company does not expect to commence depreciation on the
new corporate headquarters until the consolidation of the Company's facilities
is substantially completed in 1997.
Interest expense increased in absolute dollars for the three months and
nine months ended September 30, 1996 primarily due to increased borrowing to
support the significant revenue growth, partially offset by a lower effective
interest rate resulting from amendments to the credit facility, particularly the
use of LIBOR tranches and, to a lesser extent, the receivable securitization,
and the redemption in October 1995 of the Company's $18.5 million 9% Convertible
Subordinated Notes ("Notes"). The Notes were converted into 8.4 million shares
of the Company's common stock resulting in an interest expense savings of almost
$1.7 million annually.
During the second quarter of 1996, the Company participated in the
secondary stock offering of PC Service Source, Inc. ("PCSS") resulting in an
after tax, non-recurring gain on the sale of securities of $5.2 million. The
Company founded PC Service Source, Inc. in 1990 and, after the participation in
the secondary offering, owns less than 5% of the outstanding common shares of
PCSS.
Net earnings increased 2% to $4.9 million in the third quarter of 1996 from
$4.8 million in 1995. Excluding the non-recurring gain, net earnings for the
nine months ended September 30, 1996 increased 32% to $17.8 million, up from
$13.5 million in 1995. The reduced net earnings growth rate for the third
quarter 1996 compared to 1995 is a result of the Company's continued investment
in the service business as well as the Company's decision to make additional
investments to exploit opportunities with customers and new market segments.
As a result, the slower net earnings growth rate is expected to continue through
the fourth quarter of 1996. Net earnings, including the non-recurring gain, for
the nine months of 1996 and 1995 were $23.0 million and $13.5 million,
respectively, reflecting an increase of 71% over the prior year. The earnings
per share impact of the non-recurring gain was $.10 on a fully diluted basis for
the nine months ended September 30, 1996. Future improved profitability will
depend on the Company's ability to retain and hire quality service personnel,
increased focus on providing technical service and support to customers,
competition, manufacturer product pricing changes, as well as the Company's
control of operating expenses, product availability, and effective utilization
of vendor programs.
(Continued)
9
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
-------------------------------
During recent years, the Company has utilized its bank credit facilities,
operating earnings, equity financing and long-term subordinated notes to fund
its significant revenue growth and related operating asset requirements. During
September 1996, the Company amended the August 1993 Financing and Security
Agreement ("Credit Facility") increasing the amount of the Company's Credit
Facility to $225 million from $175 million and extending the maturity date to
September 25, 1999. The $225 million Credit Facility is comprised of two
elements: a $200 million working capital facility and a $25 million facility to
be used solely to purchase real property intended to be utilized as the
Company's corporate headquarters. Initial pricing on the $200 million component
is LIBOR plus 1% while initial pricing on the $25 million component is LIBOR
plus 1.25%. All pricing on the expanded Credit Facility is subject to
adjustment based on certain performance criteria. The Company had previously
amended its Credit Facility in April 1996, extending its maturity and making
substantially all of its Credit Facility LIBOR-based. In addition, the Company
executed amendments to its April 1996 receivable securitization, whereby a
portion of trade receivables are pledged to a third party as collateral,
increasing the amount from $75 million to $100 million and extending its
maturity to September 17, 1999, subject to certain conditions. The interest
rate applicable to the receivable securitization is based upon the bank's
commercial paper rate (which at September 30, 1996 was 5.33%) plus 55 basis
points. At September 30, 1996 approximately $75 million was outstanding on the
receivable securitization, $25 million was outstanding on the real property and
$129 million was outstanding on the credit facility, with an additional $71
million available for borrowing. The Company is currently in the process of
seeking alternative permanent financing for the $25 million real estate loan.
Cash used in operating activities for the nine months ended September 30,
1996 resulted primarily from the increase in working capital. Working capital
at September 30, 1996 is $330 million compared to $225 million at December 31,
1995 resulting in an increase in the working capital ratio from 1.9 to 2.2. The
increase in working capital was principally due to higher accounts receivable
primarily related to the Company's significant revenue growth and higher levels
of inventory allocated to specific customers, partially offset by a somewhat
lower increase in accounts payable.
Capital asset requirements are generally funded through the bank credit
facilities, internally generated funds or leasing sources. The business is not
capital asset intensive, and capital expenditures in any year normally would not
be significant in relation to the overall financial position of the Company.
However, during the third quarter, the Company purchased real property intended
to be utilized as a new corporate headquarters campus for approximately $26
million which will be funded on an interim basis through the amended Credit
Facility pending permanent mortgage financing. This new facility, located in
Dallas, Texas consists of two buildings containing approximately 250,000 square
feet of office space, situated on approximately 20 acres, and will allow the
Company to centralize its corporate operations while providing expansion
capability for future growth. The Company will begin relocation and
consolidation of its existing Dallas headquarters and operations from two leased
facilities to the new site beginning in 1997, which will require additional
capital spending to refurbish and update the new headquarters facility. In
addition, during the third quarter, the Company relocated its Eastern
Distribution Center to a new leased facility in Paulsboro, New Jersey. This new
300,000 square foot facility contains a state-of-the-art 90,000 square foot
configuration center which will enable the Company to meet the increasing
customer demand for advanced system and network configuration technologies.
Capital expenditures for the third quarter were $32.7 million, resulting in
total spending for the first three quarters of $38.6 million, of which
approximately $26 million is related to the purchase of the new headquarters
building. Excluding spending related to the new corporate headquarters facility,
the Company expects capital expenditures to return to normal historical levels
which are not significant to the overall financial position of the Company.
10
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
--------
Exhibit
No. Description
--- -----------
10.1 Credit Agreement, dated as of September 26, 1996, between
NationsBank of Texas, N.A. and CompuCom Systems, Inc. (exhibits
and schedules omitted)
10.2 First Amendment to Master Security and Administration Agreement,
dated as of September 25, 1996, among CompuCom Systems, Inc.,
NationsBank of Texas, N.A., CSI Funding, Inc. and Enterprise
Funding Corporation. (exhibits omitted)
10.3 First Amendment to Receivables Purchase Agreement, dated as of
September, 25, 1996, between CompuCom Systems, Inc. and CSI
Funding, Inc. (exhibits omitted)
10.4 First Amendment to Transfer and Administration Agreement, dated
as of September 25, 1996, among CSI Funding, Inc., CompuCom
Systems, Inc., Enterprise Funding Corporation and NationsBank,
N.A. (exhibits omitted)
10.5 Special Warranty Deed, dated as of September 27, 1996, from
Forest/Hillcrest Partners to CompuCom Systems, Inc., conveying
title to the property located at 7171 Forest Lane, Dallas,
Texas. (exhibits omitted)
10.6 Blanket Conveyance, Bill of Sale and Assignment, dated as of
September 27, 1996, from Forest/Hillcrest Partners to CompuCom
Systems, Inc. (exhibits omitted)
10.7 Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Financing Statement, dated as of September 27,
1996, from CompuCom Systems, Inc. to NationsBank of Texas, N.A.
and CompuCom Systems, Inc. (exhibits omitted)
10.8 Lease dated May 16, 1996, between CompuCom Systems, Inc. and The
Riggs National Bank of Washington, D.C. for premises at 1225
Forest Parkway, Paulsboro, New Jersey. (exhibits omitted)
11 Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K have been filed by the Registrant during the
three months ended September 30, 1996.
11
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPUCOM SYSTEMS, INC.
-------------------------------------
(Registrant)
DATE: November 12, 1996 /s/ Edward Anderson
-------------------------------------
Edward Anderson,
President and Chief Executive Officer
DATE: November 12, 1996 /s/ Robert J. Boutin
-------------------------------------
Robert J. Boutin,
Senior Vice President, Finance and
Chief Financial Officer
12
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Exhibit
No. Description
------- ----------------------------------
10.1 Credit Agreement, dated as of September 26, 1996,
between NationsBank of Texas, N.A. and CompuCom
Systems, Inc. (exhibits and schedules omitted)
10.2 First Amendment to Master Security and Administration
Agreement, dated as of September 25, 1996, among
CompuCom Systems, Inc., NationsBank of Texas, N.A.,
CSI Funding, Inc. and Enterprise Funding Corporation.
(exhibits omitted)
10.3 First Amendment to Receivables Purchase Agreement,
dated as of September, 25, 1996, between CompuCom
Systems, Inc. and CSI Funding, Inc. (exhibits omitted)
10.4 First Amendment to Transfer and Administration
Agreement, dated as of September 25, 1996, among CSI
Funding, Inc., CompuCom Systems, Inc., Enterprise
Funding Corporation and NationsBank, N.A. (exhibits
omitted)
10.5 Special Warranty Deed, dated as of September 27, 1996,
from Forest/Hillcrest Partners to CompuCom Systems,
Inc, conveying title to the property located at 7171
Forest Lane, Dallas, Texas. (exhibits omitted)
10.6 Blanket Conveyance, Bill of Sale and Assignment, dated
as of September 27, 1996, from Forest/Hillcrest
Partners to CompuCom Systems, Inc. (exhibits omitted)
10.7 Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Financing Statement, dated as
of September 27, 1996, from CompuCom Systems, Inc. to
NationsBank of Texas, N.A. and CompuCom Systems, Inc.
(exhibits omitted)
10.8 Lease dated May, 1996, between CompuCom Systems, Inc.
and The Riggs National Bank of Washington, D.C. for
premises at 1225 Forest Parkway, Paulsboro, New
Jersey. (exhibits omitted)
11 Computation of Per Share Eamings
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant during
the three months ended September 30, 1996.
11
<PAGE>
EXHIBIT 10.1
================================================================================
$225,000,000
CREDIT AGREEMENT
AMONG
COMPUCOM SYSTEMS, INC.
CERTAIN LENDERS PARTY HERETO
AND
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE LENDER
September 26, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions
-----------
Section 1.1 Defined Terms....................................... 1
Section 1.2 Amendments and Renewals............................. 25
Section 1.3 Construction........................................ 26
ARTICLE 2
Advances
--------
Section 2.1 The Advances........................................ 26
Section 2.2 Manner of Borrowing and Disbursement................ 27
Section 2.3 Interest............................................ 29
Section 2.4 Fees................................................ 31
Section 2.5 Prepayments......................................... 32
Section 2.6 Reduction of Commitments............................ 33
Section 2.7 Non-Receipt of Funds by the Administrative Lender... 33
Section 2.8 Payment of Principal of Advances.................... 34
Section 2.9 Reimbursement....................................... 34
Section 2.10 Manner of Payment................................... 35
Section 2.11 LIBOR Lending Offices............................... 36
Section 2.12 Sharing of Payments................................. 36
Section 2.13 Calculation of LIBOR Rate........................... 36
Section 2.14 Taxes............................................... 36
Section 2.15 Letters of Credit................................... 40
ARTICLE 3
Conditions Precedent
--------------------
Section 3.1 Conditions Precedent to the Initial Advance and the
Initial Issuance of Letters of Credit............... 45
Section 3.2 Conditions Precedent to All Advances and Letters of
Credit.............................................. 47
Section 3.3 Conditions Precedent to Conversions and Continuations 48
ARTICLE 4
Representations and Warranties
------------------------------
<PAGE>
Section 4.1 Representations and Warranties...................... 49
Section 4.2 Survival of Representations and Warranties, etc..... 56
ARTICLE 5
General Covenants
-----------------
Section 5.1 Preservation of Existence and Similar Matters....... 56
Section 5.2 Business; Compliance with Applicable Law............ 57
Section 5.3 Maintenance of Properties........................... 57
Section 5.4 Accounting Methods and Financial Records............ 57
Section 5.5 Insurance........................................... 57
Section 5.6 Payment of Taxes and Claims......................... 57
Section 5.7 Visits and Inspections.............................. 57
Section 5.8 Use of Proceeds..................................... 58
SECTION 5.9 INDEMNITY........................................... 58
Section 5.10 Environmental Law Compliance........................ 59
Section 5.11 Further Assurances.................................. 60
Section 5.12 Subsidiaries........................................ 60
Section 5.13 Real Property....................................... 61
Section 5.14 Agreements in Respect of RPA and TAA................ 61
ARTICLE 6
Information Covenants
---------------------
Section 6.1 Borrowing Base Report............................... 62
Section 6.3 Annual Financial Statements and Information;
Certificate of No Default........................... 62
Section 6.4 Compliance Certificate.............................. 62
Section 6.5 Copies of Other Reports and Notices................. 63
Section 6.6 Notice of Litigation, Default and Other Matters..... 64
Section 6.7 ERISA Reporting Requirements........................ 64
Section 6.8 RPA and TAA Reporting Requirements.................. 65
ARTICLE 7
Negative Covenants
------------------
Section 7.1 Indebtedness........................................ 66
Section 7.2 Liens............................................... 67
Section 7.3 Investments......................................... 67
Section 7.4 Liquidation, Merger................................. 68
Section 7.5 Sales of Assets..................................... 68
-ii-
<PAGE>
Section 7.6 Acquisitions........................................ 69
Section 7.7 Capital Expenditures................................ 69
Section 7.8 Restricted Payments................................. 69
Section 7.9 Affiliate Transactions.............................. 70
Section 7.10 Compliance with ERISA............................... 70
Section 7.11 Maximum Leverage Ratio.............................. 70
Section 7.12 Minimum Fixed Charge Coverage Ratio................. 70
Section 7.13 Minimum Tangible Net Worth.......................... 70
Section 7.14 Minimum Asset Coverage Ratio........................ 71
Section 7.15 Maximum Funded Debt to Capital...................... 71
Section 7.16 Sale and Leaseback.................................. 71
Section 7.17 Sale or Discount of Receivables..................... 71
Section 7.18 Capital Stock....................................... 71
Section 7.19 Business............................................ 71
Section 7.20 Fiscal Year......................................... 71
Section 7.21 Amendment of Organizational Documents............... 71
Section 7.22 Amendments and Waivers of Subordinated Debt......... 72
Section 7.23 Operating Leases.................................... 72
ARTICLE 8
Default
-------
Section 8.1 Events of Default................................... 72
Section 8.2 Remedies............................................ 75
ARTICLE 9
Changes in Circumstances
------------------------
Section 9.1 LIBOR Basis Determination Inadequate................ 76
Section 9.2 Illegality.......................................... 76
Section 9.3 Increased Costs..................................... 77
Section 9.4 Effect On Base Rate Advances........................ 78
Section 9.5 Capital Adequacy.................................... 78
Section 9.6 Replacement Lender.................................. 79
ARTICLE 10
Agreement Among Lenders
-----------------------
Section 10.1 Agreement Among Lenders............................. 79
Section 10.2 Lender Credit Decision.............................. 82
Section 10.3 Benefits of Article................................. 82
-iii-
<PAGE>
ARTICLE 11
Miscellaneous
-------------
Section 11.1 Notices............................................. 83
Section 11.2 Expenses............................................ 83
Section 11.3 Waivers............................................. 84
Section 11.4 Calculation by the Lenders Conclusive and Binding... 84
Section 11.5 Set-Off............................................. 84
Section 11.6 Assignment.......................................... 85
Section 11.7 Counterparts........................................ 87
Section 11.8 Severability........................................ 87
Section 11.9 Interest and Charges................................ 87
Section 11.10 Headings............................................ 88
Section 11.11 Amendment and Waiver................................ 88
Section 11.12 Exception to Covenants.............................. 89
Section 11.13 No Liability of Issuing Bank........................ 89
Section 11.14 Confidentiality..................................... 89
Section 11.15 Amendment, Restatement, Extension, Renewal and
Increase............................................ 90
SECTION 11.16 GOVERNING LAW....................................... 90
SECTION 11.17 WAIVER OF JURY TRIAL................................ 90
SECTION 11.18 ENTIRE AGREEMENT.................................... 91
-iv-
<PAGE>
Schedules and Exhibits
- ----------------------
Schedule 1: LIBOR Lending Offices
Schedule 2: Existing Liens
Schedule 3: Existing Litigation and Material Liabilities
Schedule 4: Subsidiaries
Schedule 5: Existing Investments
Schedule 6: Existing Indebtedness
Schedule 7: Qualification and Good Standing
Schedule 8: Labor Relations
Schedule 9: Permitted Real Estate Expenditures
Exhibit A: Facility A Note
Exhibit B: Facility B Note
Exhibit C: Swing Line Note
Exhibit D: Security Agreement
Exhibit E: Borrowing Base Report
Exhibit F: Pledge Agreement
Exhibit G: Compliance Certificate
Exhibit H: Assignment Agreement
Exhibit I: Subsidiary Guaranty
Exhibit J: Notice of Borrowing
-v-
<PAGE>
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT is dated as of September 26, 1996, among COMPUCOM
SYSTEMS, INC., a Delaware corporation (the "Borrower"), the Lenders from time to
--------
time party hereto, and NATIONSBANK OF TEXAS, N.A., a national banking
association, as administrative agent for the Lenders.
BACKGROUND
----------
The Lenders have been requested to provide the Borrower the funds
required to (i) refinance existing debt of the Borrower outstanding to
NationsBank of Texas, N.A. pursuant to the terms of that certain Financing and
Security Agreement, dated as of August 4, 1993, as amended, modified,
supplemented and restated from time to time (the "Existing Credit Agreement"),
-------------------------
(ii) finance acquisitions permitted hereunder, (iii) finance the ongoing working
capital and general corporate requirements of the Borrower and its Subsidiaries
(as hereinafter defined) and (iv) finance the purchase of certain real estate.
The Lenders have agreed to provide such financing, subject to the terms and
conditions set forth below.
In consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration hereby acknowledged, the
parties hereto agree that the Existing Credit Agreement shall be amended,
restated and superseded as follows:
ARTICLE 1
Definitions
-----------
Section 1.1 Defined Terms. For purposes of this Agreement:
-------------
"Account" has the meaning assigned to such term in the UCC.
-------
"Acquisition" means any transaction pursuant to which the Borrower or
-----------
any of its Subsidiaries, (i) whether by means of a capital contribution or
purchase or other acquisition of stock or other securities or other equity
participation or interest, (A) acquires more than 50% of the equity interest in
any Person pursuant to a solicitation by the Borrower or such Subsidiary of
tenders of equity securities of such Person, or through one or more negotiated
block, market, private or other transactions, or a combination of any of the
foregoing, or (B) makes any corporation a Subsidiary of the Borrower or such
Subsidiary, or causes any corporation, other than a Subsidiary of the Borrower
or such Subsidiary, to be merged into the Borrower or such Subsidiary (or agrees
to be merged into any other corporation other than a wholly-owned Subsidiary
(excluding directors' qualifying shares) of the Borrower or such Subsidiary), or
(ii) purchases all or substantially all of the business or assets of any Person
or of any operating division of any Person.
<PAGE>
"Administrative Lender" means NationsBank of Texas, N.A., a national
---------------------
banking association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to Section 10.1(b) hereof.
---------------
"Administrative Lender Fee Letter" has the meaning specified in Section
-------------------------------- -------
2.4(c) hereof.
- ------
"Advance" means a Facility A Advance, a Facility B Advance or a Swing
-------
Line Advance and "Advances" means Facility A Advances, Facility B Advances and
--------
Swing Line Advances.
"Affiliate" means, as applied to any Person, any other Person that,
---------
directly or indirectly, through one or more Persons, Controls or is Controlled
By or Under Common Control with, that Person.
"Agreement" means this Credit Agreement, as
---------
amended, modified, supplemented or restated from time to time.
"Agreement Date" means the date of this Agreement.
--------------
"Applicable Environmental Laws" means applicable laws pertaining to
-----------------------------
health or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
------
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, "RCRA").
----
"Applicable Law" means (a) in respect of any Person, all provisions of
--------------
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "Applicable Law" shall mean
--------------
the laws of the United States of America, including without limitation 12 USC
(S)(S) 85 and 86, as amended from time to time, and any other statute of the
United States of America now or at any time hereafter prescribing the maximum
rates of interest on loans and extensions of credit, and the laws of the State
of Texas, including, without limitation, Article 5069-1.04, Title 79, Revised
Civil Statutes of Texas, 1925, as amended ("Art. 1.04"), and any other statute
---------
of the State of Texas; provided that the parties hereto agree that the
provisions of Chapter 15, Title 79, Revised Civil Statutes of Texas, 1925, as
amended, shall not apply to Advances, this Agreement, the Notes or any other
Loan Documents.
"Applicable LIBOR Rate Margin" means the following per annum percentages,
----------------------------
applicable in the following situations:
-2-
<PAGE>
<TABLE>
<CAPTION>
Applicability Facility A Facility B
- ---------------------------------------- ----------- -----------
<S> <C> <C>
(a) Initial Pricing Period 1.000% 1.250%
(b) Subsequent Pricing Period
(1) The Fixed Charge Coverage Ratio 0.750% 1.000%
is greater than or equal to 2.50 to 1
(2) The Fixed Charge Coverage Ratio 0.875% 1.125%
is less than 2.50 to 1 but greater
than or equal to 2.00 to 1
(3) The Fixed Charge Coverage Ratio 1.000% 1.250%
is less than 2.00 to 1 but greater
than or equal to 1.50 to 1
(4) The Fixed Charge Coverage Ratio 1.250% 1.500%
is less than 1.50 to 1
</TABLE>
The Applicable LIBOR Rate Margin payable by the Borrower on the LIBOR Advances
outstanding hereunder shall be subject to reduction or increase, as applicable
and as set forth in the table above, on a quarterly basis according to the
performance of the Borrower as tested by using the Fixed Charge Coverage Ratio
calculated as of the end of each fiscal quarter during the Subsequent Pricing
Period; provided, that each adjustment in the LIBOR Basis shall be effective
--------
with respect to LIBOR Advances (i) made following receipt by the Administrative
Lender of the financial statements required to be delivered pursuant to Section
-------
6.2 or 6.3 hereof, as applicable, for each such fiscal quarter, and the
- --- ---
corresponding Compliance Certificate required pursuant to Section 6.4 hereof, on
-----------
the date of making such LIBOR Advance and (ii) outstanding on the date of
receipt of such financial statements and Compliance Certificate referred to in
clause (i) immediately preceding, on the date which is two Business Days
following the date of receipt of such financial statements and Compliance
Certificate. If such financial statements and Compliance Certificate are not
received by the Administrative Lender by the date required, effective as of the
first Business Day following notification thereof from the Administrative Lender
to the Borrower, the Applicable LIBOR Rate Margin shall be determined as if the
Fixed Charge Coverage Ratio is less than 1.50 to 1 until such time as such
financial statements and Compliance Certificate are received.
"Asset Coverage Ratio" means, for the Borrower and its Subsidiaries
--------------------
determined in accordance with GAAP on a consolidated basis, at the time in
question, the ratio of (a) the sum of (i) Cash and Cash Equivalents, plus (ii)
Accounts, plus (iii) Inventory to (b) the sum of (i) outstanding obligations in
respect of Facility A and Swing Line Advances, Reimbursement Obligations and
other Indebtedness, plus (ii) the Net Exposure Under Securitization, plus (iii)
accounts payable and accrued liabilities in the ordinary course of business.
"Assignees" means any assignee of a Lender pursuant to an Assignment
---------
Agreement and shall have the meaning ascribed thereto in Section 11.6 hereof.
------------
-3-
<PAGE>
"Assignment Agreement" has the meaning specified in Section 11.6 hereof.
-------------------- ------------
"Authorized Signatory" means such senior personnel of the Borrower as
--------------------
may be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower, and to request
Advances and Letters of Credit hereunder.
"Base Rate Advance" means any Advance bearing interest at the Base Rate
-----------------
Basis.
"Base Rate Basis" means, for any day, a per annum interest rate equal
---------------
to the higher of (a) the sum of (i) 0.50% plus (ii) the Federal Funds Rate on
such day or (b) the Prime Rate on such day. The Base Rate Basis shall be
adjusted automatically without notice as of the opening of business on the
effective date of each change in the Prime Rate to account for such change.
"Borrower" has the meaning specified in the introductory provision hereof.
--------
"Borrowing Base" means, at the time in question, an amount equal to
--------------
the sum of (i) 85% of the net amount of the Borrower's and its Subsidiaries
(other than CFI) ownership interest in Eligible Accounts, plus (ii) an amount
equal to 50% of Eligible Inventory.
"Borrowing Base Report" means a report, signed by an Authorized
---------------------
Signatory, in substantially the form of Exhibit E, appropriately completed.
---------
"Business Day" means a day on which commercial banks are open (a) for
------------
the transaction of business in Dallas, Texas, and, (b) with respect to any LIBOR
Advance, for the transaction of international business (including dealings in
U.S. dollar deposits) in London, England.
"Capital" means, for any date of calculation, for the Borrower and its
-------
Subsidiaries, on a consolidated basis determined in accordance with GAAP, the
sum of (a) Funded Debt plus (b) Net Worth.
"Capital Expenditures" means, for any period, expenditures made by the
--------------------
Borrower and its Subsidiaries to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements during such period
and the aggregate amount of items leased or acquired under Capitalized Lease
Obligations at the cost of the item, but excluding capital expenditures made
with insurance proceeds to the extent used to replace or repair damaged fixed
assets, plant and equipment) computed in accordance with GAAP, consistently
applied.
"Capital Stock" means, as to any Person, the equity interests in such
-------------
Person, including, without limitation, the shares of each class of capital stock
in any Person that is a corporation, and each class of partnership interest
(including, without limitation, general, limited and preference units) in any
Person that is a partnership.
-4-
<PAGE>
"Capitalized Lease Obligations" means that portion of any obligation
-----------------------------
of the Borrower or any Subsidiary of the Borrower as lessee under a lease which
at the time are recorded as capitalized lease obligations on the balance sheet
of the Borrower or such Subsidiary prepared in accordance with GAAP.
"Cash and Cash Equivalents" means with respect to the Borrower and
-------------------------
each Subsidiary of the Borrower (i) cash (which, after the occurrence of an
Event of Default, shall exclude any cash proceeds of Accounts), (ii) securities
issued or directly and fully guaranteed or insured by the United States
Government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any Lender or with any domestic
commercial bank having capital and surplus in excess of $500,000,000, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) entered into with
any financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper issued by any Lender or the parent corporation of
any Lender, and commercial paper rated A-1 or the equivalent thereof by Standard
& Poor's Ratings Group, a Division of McGraw-Hill, Inc., a New York corporation,
or P-1 or the equivalent thereof by Moody's Investors Service, Inc., and in each
case maturing within six months after the date of acquisition, and (vi) a
readily redeemable "money market mutual fund" advised by a bank described in
clause (iii) hereof, or an investment advisor registered under Section 203 of
the Investment Advisors Act of 1940, that has and maintains an investment policy
limiting its investments primarily to instruments of the types described in
clauses (i) through (v) hereof and having on the date of such Investment total
assets of at least One Hundred Million Dollars ($100,000,000.00).
"CFI" means CSI Funding, Inc., a Delaware corporation and wholly-owned
---
Subsidiary of the Borrower, as purchaser under the RPA.
"CFI Note" means the "Subordinated Note" as defined by the RPA, and
--------
any and all renewals, extensions, modifications, amendments, supplements or
restatements thereof.
"Change of Control" means the occurrence of any of the following
-----------------
events after the Agreement Date: (a) any Person or any Persons acting together
which would constitute a "group" (a "Group") for purposes of Section 13(d) of
-----
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
------------
successor provision thereto, other than the Group whose nominees constituted a
majority of the board of directors of the Borrower as of the close of business
on the Agreement Date, together with any Affiliates or Related Persons thereof,
shall beneficially own (as defined in Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act or any successor provision thereto) at least
30% of the aggregate voting power of all classes of Capital Stock of the
Borrower entitled to vote generally in the election of directors of the
Borrower; or (b) any Person or Group, other than any Person or Group whose
nominees constituted a majority of the board of directors of the Borrower as of
the close of business on the Agreement Date, together with any Affiliates or
Related Persons thereof, shall succeed in having sufficient of its or their
nominees elected to the Board of Directors of the
-5-
<PAGE>
Borrower, such that such nominees, when added to any existing director remaining
on the Board of Directors of the Borrower after such election who is an
Affiliate or Related Person of such Group, shall constitute a majority of the
Board of Directors of the Borrower.
"ClientLink Note" means that certain promissory note, dated September
---------------
5, 1996, in the original principal amount of $2,500,000 executed and delivered
by ClientLink, Inc. and payable to the order of the Borrower, and any and all
renewals, extensions, modifications, amendments, supplements or restatements
thereof.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral" means any collateral hereafter granted by any Person to
----------
the Administrative Lender for the benefit of the Lenders to secure the
Obligations.
"Collateral Document" means any document under which Collateral is granted
-------------------
and any document related thereto.
"Commitment Fee" has the meaning specified in Section 2.4(a) hereof.
-------------- --------------
"Commitments" means, collectively, the Facility A Commitment and the
-----------
Facility B Commitment, as reduced from time to time pursuant to Section 2.6
-----------
hereof.
"Compliance Certificate" means a certificate, signed by an Authorized
----------------------
Signatory, in substantially the form of Exhibit G, appropriately completed.
---------
"Control" or "Controlled By" or "Under Common Control" means possession,
------- ------------- --------------------
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of voting securities, by
contract or otherwise); provided, however, that in any event any Person which
beneficially owns, directly or indirectly, 10% or more (in number of votes) of
the securities having ordinary voting power for the election of directors of a
corporation shall be conclusively presumed to control such corporation.
"Controlled Group" means as of the applicable date, as to any Person
----------------
not an individual, all members of a controlled group of corporations and all
trades or businesses (whether or not incorporated) which are under common
control with such Person and which, together with such Person, are treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code; provided,
however, that the Subsidiaries of the Borrower shall be deemed to be members of
the Borrower's Controlled Group.
"Creditor" means a creditor of the Borrower or any Subsidiary of the
--------
Borrower and shall not include any Affiliate of any such creditor.
"Current Maturities" means, with respect to any Person, the principal
------------------
portion payable by such Person on Long Term Debt during the twelve-month period
immediately succeeding the date of determination.
-6-
<PAGE>
"Debtor Relief Laws" means any applicable liquidation, conservatorship,
------------------
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
debtor relief Laws affecting the rights of creditors generally from time to time
in effect.
"Deed of Trust" means any Deed of Trust or Mortgage, as applicable,
-------------
relating to the real property of the Borrower purchased with the proceeds of the
Facility B Advances, in a form acceptable to the Administrative Lender, as
amended, modified, renewed, supplemented or restated from time to time.
"Default" means an Event of Default and/or any of the events specified
-------
in Section 8.1, regardless of whether there shall have occurred any passage of
-----------
time or giving of notice that would be necessary in order to constitute such
event an Event of Default.
"Default Rate" means a simple per annum interest rate equal to (a)
------------
with respect to Base Rate Advances the lesser of (i) the Highest Lawful Rate or
(ii) the Prime Rate plus 2.00% or (b) with respect to LIBOR Advances, the lesser
of (i) the Highest Lawful Rate or (ii) the LIBOR Basis plus 2% in excess of the
Applicable Rate Margin then in effect.
"Determining Lenders" means, on any date of determination, any combination
-------------------
of the Lenders having at least 66-2/3% of the aggregate amount of the Advances
(which for purposes of the calculation shall include for each Lender an amount
equal to the product of such Lender's Specified Percentage multiplied by the
aggregate principal amount of Swing Line Advances outstanding) then outstanding;
provided, however, that if there are no Advances outstanding hereunder,
"Determining Lenders" shall mean any combination of Lenders whose Specified
-------------------
Percentages aggregate at least 66-2/3%.
"Dividend" means, as to any Person, (a) any declaration or payment of
--------
any dividend (other than a stock dividend) on, or the making of any distribution
on account of, any shares of Capital Stock of, or other similar interest in,
such Person and (b) any purchase, redemption, or other acquisition or retirement
for value of any shares of Capital Stock of, or similar interest in, such
Person.
"Dollar" or "$" means the lawful currency of the United States of America.
------ -
"Domestic Subsidiary" means any Subsidiary of the Borrower other than a
-------------------
Foreign Subsidiary.
"EBIT" means, for any period, determined in accordance with GAAP on a
----
consolidated basis for the Borrower and its Subsidiaries, the sum of (a) Pretax
Net Income (excluding therefrom, to the extent included in determining Pretax
Net Income, any items of extraordinary gain, including net gains on the sale of
assets other than asset sales in the ordinary course of business, and adding
thereto, to the extent included in determining Pretax Net Income, any items of
extraordinary loss, including net losses on the sale of assets other than asset
sales in the ordinary course of business), plus (b) interest expense.
-7-
<PAGE>
"EBITDA" means, for any period, determined in accordance with GAAP on
------
a consolidated basis for the Borrower and its Subsidiaries, the sum of (a) EBIT
plus (b) depreciation, amortization and other non-cash charges (to the extent
included in determining EBIT).
"EFC" means Enterprise Funding Corporation, a Delaware corporation, as
---
purchaser of a portion of the RPA Interest as provided by the TAA.
"Eligible Accounts" means at the time of any determination thereof,
-----------------
the net amount of the Accounts of the Obligors which are reasonably acceptable
to the Determining Lenders in their discretion for the purposes of determining
the Borrowing Base and as to which the following requirements have been
fulfilled, less any reserves against such Eligible Accounts as the Determining
Lenders may, from time to time in their sole discretion without prior notice,
deem to be necessary or appropriate:
(i) An Obligor has lawful and absolute (subject to the RPA Interest)
title to such Account;
(ii) Such Account is a valid, legally enforceable obligation of the
Person who is obligated under such Account (the "account debtor") for goods
--------------
or services that have been delivered or that have been rendered to such
Person;
(iii) If such Account and other Accounts are owed by a Creditor of
the Borrower or any Subsidiary of the Borrower, the amount of all such
Accounts included as Eligible Accounts shall be the amount by which all
such Accounts exceeds the aggregate accounts payable owed by the Borrower
or such Subsidiary to such Creditor;
(iv) There has been excluded from such Account any portion that is
subject to any asserted dispute, offset, discount, counterclaim or other
claim or defense on the part of the account debtor or to any asserted claim
on the part of the account debtor denying liability under such Account;
(v) The applicable Obligor(s) have full and unqualified right to
assign and grant a security interest in such Account (or the applicable
Obligor's ownership interest in such Account) to Administrative Lender as
security for the Obligations;
(vi) Such Account is not evidenced by chattel paper, promissory note
or other instrument payable to any Obligor;
(vii) Such Account has not been due and payable for more than 120
days from the invoice date; provided, that, unless Determining Lenders
agree otherwise, no Accounts from an account debtor shall constitute
Eligible Accounts if 50% or more of the aggregate dollar amount of all
Accounts owed to the Borrower or any Subsidiary of the Borrower by such
account debtor have been due and payable for 120 days or more from their
respective invoice dates;
-8-
<PAGE>
(viii) No account debtor in respect of such Account is (a) primarily
conducting business in and organized under the laws of any jurisdiction
located outside the United States of America, (b) the subject of a
proceeding under any Debtor Relief Laws or (c) a Tribunal;
(ix) No account debtor in respect of such Account is (a) an Affiliate
of the Borrower or any Subsidiary or (b) an employee of the Borrower or any
Subsidiary of the Borrower;
(x) The interest of the applicable Obligor(s) in such Account is (a)
subject to a fully perfected first priority (subject, in the case of the
Borrower, to Liens in favor of the Administrative Secured Party under the
MSAA) security interest in favor of Administrative Lender pursuant to the
Loan Documents, prior to the rights of, and enforceable as such against,
any other Person (including holders of a purchase money security interest)
and (b) not subject to any Lien in favor of any other Person except for
Liens in favor of the Administrative Secured Party under the MSAA.
(xi) Such Account was generated in the ordinary course of the
Borrower's business, represents amounts payable in respect of goods that
have been delivered or services that have been performed and is denominated
and payable only in United States dollars in the United States; and
(xii) Such Account is required to be paid in full not more than 30
days after the original invoice date and satisfies all applicable
requirements of the Borrower's credit and collection policies and
practices, as in effect from time to time.
"Eligible Inventory" means, at the time of any determination thereof, each
------------------
item of the Obligors' Inventory (excluding work-in-process, obsolete Inventory,
Inventory on consignment and Inventory used for demonstrations and display)
valued at the lower of cost or market value (allocated on a first-in, first-out
basis), which is reasonably acceptable to the Determining Lenders in their
discretion for purposes of determining the Borrowing Base and as to which the
following requirements have been fulfilled to the satisfaction of the
Determining Lenders, less any reserves against such Eligible Inventory as the
Determining Lenders may, from time to time in their sole discretion without
prior notice, deem to be necessary or appropriate:
(i) An Obligor has lawful and absolute title to such Inventory;
(ii) Such Inventory is not defective or unmerchantable goods;
(iii) Such Inventory is located in the United States of America;
-9-
<PAGE>
(iv) Such Inventory is (a) subject to a fully perfected first priority
security interest in favor of Administrative Lender pursuant to the Loan
Documents, prior to the rights of, and enforceable as such against, any
other Person (including holders of a purchase money security interest) and
(b) not subject to any Lien in favor of any other Person;
(v) The sale of such Inventory by Administrative Lender (or its
successors or assigns) upon an Event of Default is not subject to any
Necessary Authorization, restriction or limitation;
(vi) Such Inventory was not supplied (directly or through an agent or
bailee) to the Borrower or any Subsidiary of the Borrower by Compaq
Computer Corporation and such Inventory has not been, and will not be,
attached to, integrated into or installed on any such Inventory supplied by
Compaq Computer Corporation while such Inventory is owned by the Borrower
or any Subsidiary of the Borrower;
(vii) Such Inventory was not manufactured by, or provided to the
Borrower or any Subsidiary of the Borrower by, Hewlett-Packard Company and
such Inventory has not been, and will not be, attached to, integrated into
or installed on any such Inventory manufactured or provided by Hewlett-
Packard Company while such Inventory is owned by the Borrower or any
Subsidiary of the Borrower;
(viii) Such Inventory was not manufactured by, or sold or provided to
the Borrower or any Subsidiary of the Borrower by, Apple Computer, Inc. or
any company affiliated with Apple Computer, Inc. and such Inventory has not
been, and will not be, attached to, integrated into or installed on any
such Inventory manufactured, sold or provided by Apple Computer, Inc. or
any company affiliated with Apple Computer, Inc. while such Inventory is
owned by the Borrower or any Subsidiary of the Borrower;
(ix) Such Inventory was not manufactured by, or sold to the Borrower
or any Subsidiary of the Borrower by, International Business Machines
Corporation or any of its affiliates or Lexmark International, Inc.
(collectively, the "IBM Parties"), such Inventory does not bear the
-----------
trademark, trade name or label of any of the IBM Parties and such Inventory
has not been, and will not be, attached to, integrated into or installed on
any such Inventory manufactured by, sold by or bearing the trademark, trade
name or label of any of the IBM Parties while such Inventory is owned by
the Borrower or any Subsidiary of the Borrower;
(x) Such Inventory is not included in the items classified as "Other
Accessories" in the Borrower's monthly DIMS Valuation Report; and
(xi) Such Inventory is not included in the items classified as "SIMS
Inventory" in the Borrower's monthly SIMS Valuation Report.
-10-
<PAGE>
Provided, however, that until November 25, 1996, the failure of the
Borrower to deliver Landlord's Waivers to the Administrative Lender shall not
preclude the Borrower from including in "Eligible Inventory" any of its
inventory that otherwise satisfies the foregoing requirements. Provided
further, however, that if, on or before November 25, 1996, the Borrower has not
delivered to the Administrative Lender Landlord's Waivers covering the
Borrower's Eastern Distribution Center warehouse in Paulsboro, New Jersey, the
Borrower's Western Distribution Center warehouse in Stockton, California, the
Borrower's RMA location on Lombardy Lane in Dallas, Texas and the Borrower's SLC
location in Coppell, Texas, none of the Borrower's Inventory shall thereafter
constitute "Eligible Inventory", or otherwise be included in the calculation of
the Borrowing Base, until all of such Landlord's Waivers have been delivered to
the Administrative Lender.
"Equipment" has the meaning assigned to such term in the UCC.
---------
"Equity" means shares of capital stock or partnership, profits, capital or
------
member interest, or options, warrants or any other right to subscribe for or
otherwise acquire capital stock or a partnership, profits, capital or member
interest, of the Borrower or any Subsidiary of the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and any regulation promulgated thereunder.
"ERISA Event" means, with respect to the Borrower and its Subsidiaries, (a)
-----------
a Reportable Event (other than a Reportable Event not subject to the provision
for 30-day notice to the PBGC pursuant to regulations issued under Section 43
of ERISA), (b) the withdrawal of any such Person or any member of its Controlled
Group from a Plan subject to Title IV of ERISA during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate under Section 4041(c) of ERISA, (d)
the institution of proceedings to terminate a Plan by the PBGC, (e) the failure
to make required contributions which could result in the imposition of a lien
under Section 412 of the Code or Section 302 of ERISA, or (f) any other event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or the imposition of any liability under Title IV of ERISA
other than PBGC premiums due but not delinquent under Section 4007 of ERISA.
"Event of Default" means any of the events specified in Section 8.1,
---------------- -----------
provided that any requirement for notice or lapse of time has been satisfied.
"Existing Credit Agreement" has the meaning specified in the Background
-------------------------
provision hereof.
"Facility A Advance" means an Advance made pursuant to Section 2.1(a)
------------------ --------------
hereof.
"Facility A Commitment" means $200,000,000.00, as reduced pursuant to
---------------------
Section 2.6 hereof.
- -----------
-11-
<PAGE>
"Facility A Maturity Date" means September 25, 1999, or the earlier date of
------------------------
termination in whole of the Facility A Commitment pursuant to Section 2.6 or 8.2
----------- ---
hereof.
"Facility A Notes" means the promissory notes of Borrower evidencing
----------------
Facility A Advances hereunder, substantially in the form of Exhibit A hereto,
---------
together with any extension, renewal, or amendment thereof, or substitution
therefor.
"Facility B Advance" means an Advance made pursuant to Section 2.1(b)
------------------ --------------
hereof.
"Facility B Commitment" means $25,000,000.00, as reduced from time to time
---------------------
pursuant to Section 2.6 hereof.
-----------
"Facility B Commitment Termination" means the earlier of (a) September 24,
---------------------------------
1997 or (b) the date on which the Facility B Advances are made.
"Facility B Maturity Date" means September 25, 1999, or the earlier date of
------------------------
termination in whole of the Facility B Commitment pursuant to Section 2.6 or 8.2
----------- ---
hereof.
"Facility B Notes" means the promissory notes of Borrower evidencing
----------------
Facility B Advances hereunder, substantially in the form of Exhibit B hereto,
---------
together with any extension, renewal, or amendment thereof, or substitution
therefor.
"Federal Funds Rate" means, for any day, the rate per annum equal to the
------------------
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average of the quotations for
the day for such transactions received by the Administrative Lender from three
Federal funds brokers of recognized standing selected by it.
"Fixed Charges" means, for any date of calculation, calculated for Borrower
-------------
and its Subsidiaries on a consolidated basis, the sum of, without duplication,
(a) the greater of (i) Current Maturities and (ii) 10% of Funded Debt, plus (b)
interest expense (including interest expense pursuant to Capitalized Lease
Obligations).
"Fixed Charge Coverage Ratio" means the ratio of EBITDA to Fixed Charges,
---------------------------
calculated for the four consecutive fiscal quarters immediately preceding the
date of calculation.
"Foreign Subsidiary" means any Subsidiary of the Borrower which is not
------------------
organized under the laws of any state of the United States of America or the
District of Columbia.
-12-
<PAGE>
"Funded Debt" means, as of any date of determination, determined for the
-----------
Borrower and its Subsidiaries on a consolidated basis, (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations to pay the deferred purchase price of
property or services other than trade payables incurred in the ordinary course
of business, (iv) Capitalized Lease Obligations and (v) Net Exposure Under
Securitization.
"GAAP" means generally accepted accounting principles applied on a
----
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants, or their successors
which are applicable in the circumstances as of the date in question. The
requirement that such principles be applied on a consistent basis shall mean
that the accounting principles applied in a current period are comparable in all
material respects to those applied in a preceding period.
"Guaranties" means, collectively, the Parent Guaranty and the Subsidiary
----------
Guaranty.
"Guarantor" means each direct and indirect Subsidiary of the Borrower that
---------
executes and delivers a Subsidiary Guaranty hereunder.
"Guaranty" or "Guaranteed", as applied to an obligation of another Person,
-------- ----------
means (a) a guaranty, direct or indirect, in any manner, of any part or all of
such obligation, and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such obligation, including, without limiting the foregoing, any
reimbursement obligations with respect to amounts which may be drawn by
beneficiaries of outstanding letters of credit; provided, however, Guaranty does
not mean (i) the endorsement of instruments for collection or deposit in the
ordinary course of business and (ii) customary indemnities given in connection
with asset sales in the ordinary course of business.
"Hedge Agreements" means any and all agreements, devices or arrangements
----------------
designed to protect at least one of the parties thereto from the fluctuations of
interest rates, exchange rates or forward rates applicable to such party's
assets, liabilities or exchange transactions, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap, swap or collar protection
agreements, and forward rate currency or interest rate options, as the same may
be amended or modified and in effect from time to time, and any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"Highest Lawful Rate" means at the particular time in question the maximum
-------------------
rate of interest which, under Applicable Law, the Lenders are then permitted to
charge on the Obligations. If the maximum rate of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrower.
-13-
<PAGE>
"Indebtedness" means, with respect to any Person, without duplication, (a)
------------
all obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations under conditional
sale or other title retention agreements relating to property or assets
purchased by such Person, (d) all obligations issued or assumed as the deferred
purchase price of property or services, (e) all obligations secured by any Lien
on any property or asset owned by such Person (other than accounts payable
arising in the ordinary course of business), whether or not the obligation
secured thereby shall have been assumed (provided that, unless such obligations
shall have been assumed, for purposes of this definition the amount of such
Indebtedness at any time shall be deemed to equal the fair market value of such
property or asset at such time), (f) to the extent not otherwise included, all
Capitalized Lease Obligations of such Person, all obligations in respect of
letters of credit, bankers' acceptances and similar instruments, and all
obligations under Hedge Agreements, (g) any Guaranty of such Person of any
obligation of another Person constituting obligations of a type set forth above
and (h) the Net Exposure Under Securitization.
"Indemnified Matters" has the meaning specified in Section 5.9(a) hereof.
------------------- --------------
"Indemnitees" has the meaning specified in Section 5.9(a) hereof.
----------- --------------
"Initial Pricing Period" means the period from and including the Agreement
----------------------
Date to and including the Rate Adjustment Date.
"Intangible Assets" means those assets which are treated as intangible
-----------------
pursuant to GAAP, and in any event including, without limitation: (i)
obligations, if any, owing by Affiliates to the Borrower or any Subsidiary of
the Borrower, (ii) the amount, if any, by which inventory exceeds the lower of
cost or market value thereof, (iii) the value of any inventory which is obsolete
or damaged or is otherwise deemed by the Administrative Lender not to be of a
marketable quality commensurate with the inventory of the Borrower and its
Subsidiaries as a whole; (iv) accounts receivable which are deemed by the
Borrower, any of its Subsidiaries or the Administrative Lender to be
uncollectible or which should be subject to a reserve for bad debts in
accordance with GAAP or which are subject to claims or setoffs; (v) leases and
leasehold improvements; (vi) any asset which is intangible or lacks intrinsic
and marketable value or collectibility, including without limitation goodwill,
noncompetition agreements, patents, copyrights, trademarks, franchises or
organization or research and development costs; (vii) organizational and
experimental expense; and (viii) unamortized debt discount and expense.
"Intercreditor Agreements" collectively means the following certain
------------------------
agreements: (i) Amended and Restated Intercreditor Agreement dated effective as
of April 1, 1996 among NationsBank of Texas, N.A., in its capacity as a lender,
the Borrower, IBM Credit Corporation and NationsBank of Texas, N.A. in its
capacity as Administrative Secured Party under the MSAA, (ii) Subordination
Agreement dated August 22, 1994 among NationsBank of Texas, N.A., in its
capacity as a lender, the Borrower, IBM Credit Corporation and Hewlett-Packard
Company, (iii) Intercreditor Agreement dated December 27, 1993 among NationsBank
of Texas, N.A., in its capacity as a lender, the Borrower and Compaq Computer
Corporation, and (iv) any other intercreditor agreement hereafter entered into
among NationsBank of Texas, N.A., in its
-14-
<PAGE>
capacity as the Administrative Lender, the Borrower and any Person that is a
vendor to the Borrower of Inventory, as any of the foregoing may be renewed,
extended, modified, amended, supplemented or restated from time to time.
"Interest Period" means the period beginning on the day any LIBOR Advance
---------------
is made and ending one, two, three or six months thereafter (as the Borrower
shall select); provided, however, that all of the foregoing provisions are
-------- -------
subject to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day, unless, with respect to a LIBOR Advance, the result of such
extension would be to extend such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period with respect to a LIBOR Advance that begins
on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a calendar
month; and
(iii) the Borrower may not select any Interest Period which ends
after the date of a scheduled principal payment on the Advances unless,
after giving effect to such selection, the aggregate unpaid principal
amount of the LIBOR Advances for which Interest Periods end after such
scheduled principal payment shall be equal to or less than the principal
amount to which the Advances or Facility B Commitment are required to be
reduced after such scheduled principal payment is made.
"Inventory" has the meaning assigned to such term in the UCC.
---------
"Investment" means any acquisition of all or substantially all assets of
----------
any Person, or any direct or indirect purchase or other acquisition of, or
beneficial interest in, capital stock or other securities of any other Person,
or any direct or indirect loan, advance (other than loans or advances to
employees for moving and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution to, or
investment in any other Person, including without limitation the purchase of
accounts receivable of any other Person that are not current assets or do not
arise in the ordinary course of business.
"Issuing Bank" means NationsBank of Texas, N.A., a national banking
------------
association, in its capacity as issuer of the Letters of Credit.
"Landlord's Waiver" means an agreement in form and substance satisfactory
-----------------
to the Administrative Lender pursuant to which the landlord of any leased
location where any Collateral is located shall waive its rights, if any, to the
Collateral and shall grant to the Administrative Lender rights to enter upon the
premises to inspect, remove or dispose of the Collateral.
-15-
<PAGE>
"Law" means any statute, law, ordinance, regulation, rule, order, writ,
---
injunction, or decree of any Tribunal.
"Lender" means each financial institution shown on the signature pages
------
hereof so long as such financial institution maintains a portion of the
Commitments or is owed any part of the Obligations (including the Administrative
Lender in its individual capacity), and each Assignee that hereafter becomes a
party hereto pursuant to Section 11.6 hereof, subject to the limitations set
------------
forth therein.
"L/C Related Documents" has the meaning specified in Section 2.15(e)
--------------------- ---------------
hereof.
"Letter of Credit" has the meaning specified in Section 2.15(a) hereof.
---------------- ---------------
"Letter of Credit Agreement" has the meaning specified in Section 2.15(b)
-------------------------- ---------------
hereof.
"Letter of Credit Facility" has the meaning specified in Section 2.15(a)
------------------------- ---------------
hereof.
"Leverage Ratio" means, for any date of calculation, the ratio of Funded
--------------
Debt as of the date of determination to EBITDA calculated for the four
consecutive fiscal quarters immediately preceding the date of calculation.
"LIBOR Advance" means an Advance which the Borrower requests to be made as
-------------
a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance with
the provisions of Section 2.2 hereof.
-----------
"LIBOR Basis" means a simple per annum interest rate equal to the lesser of
-----------
(a) the Highest Lawful Rate, or (b) the sum of the LIBOR Rate plus the
Applicable LIBOR Rate Margin. The LIBOR Basis shall, with respect to LIBOR
Advances subject to reserve or deposit requirements, be subject to premiums for
such reserve or deposit requirements assessed by each Lender to the extent
incurred by such Lender, which are payable directly to each Lender. Once
determined, the LIBOR Basis shall remain unchanged during the applicable
Interest Period.
"LIBOR Lending Office" means, with respect to a Lender, the office
--------------------
designated as its LIBOR Lending Office on Schedule 1 attached hereto, and such
----------
other office of the Lender or any of its Affiliates hereafter designated by
notice to the Borrower and the Administrative Lender.
"LIBOR Rate" means, for any LIBOR Advance for any Interest Period therefor,
----------
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR Rate" shall mean, for any LIBOR Advance for any
----------
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in
-16-
<PAGE>
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen LIBO
- -------- -------
Page, the applicable rate shall be the arithmetic mean of all such rates.
"Lien" means, with respect to any property, any mortgage, lien, pledge,
----
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other similar
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"Litigation" means any proceeding, claim, lawsuit, arbitration, and/or
----------
investigation by or before any Tribunal, including, without limitation,
proceedings, claims, lawsuits, and/or investigations under or pursuant to any
environmental, occupational, safety and health, antitrust, unfair competition,
securities, Tax or other Law, or under or pursuant to any contract, agreement or
other instrument.
"Loan Documents" means this Agreement, the Notes, the Security Agreement,
--------------
the Pledge Agreement, the Subsidiary Guaranty, any other Collateral Document,
the Administrative Lender Fee Letter, the Upfront Fee Letter, any Hedge
Agreements entered into with any Lender, and any other document or agreement
executed or delivered from time to time by the Borrower, any Subsidiary of the
Borrower or any other Person in connection herewith or as security for the
Obligations.
"Long Term Debt" means any obligation which is due one year or more from
--------------
the date of creation thereof which under GAAP is shown as a liability, plus
(without duplication) amounts equal to the aggregate net rentals (after making
allowances for any interest, taxes or other expenses included therein) payable
more than one year from the date of creation thereof under Capitalized Lease
Obligations.
"Material Adverse Effect" means any act or circumstance or event that (a)
-----------------------
could reasonably be expected to be material and adverse to the business,
financial condition, results of operations, or business prospects of the
Borrower and its Subsidiaries taken as a whole, or (b) in any manner whatsoever
does or could reasonably be expected to materially and adversely affect the
validity or enforceability of any Loan Document.
"MSAA" means the certain Master Security and Administration Agreement,
----
dated as of April 1, 1996, among the Borrower, NationsBank of Texas, N.A. in its
capacity as the original Administrative Secured Party thereunder, NationsBank of
Texas, N.A., in its capacity as a lender, CFI and EFC, as the same may be
renewed, extended, modified, amended or restated from time to time.
"Multiemployer Plan" means, as to any Person, at any time, a "multiemployer
------------------
plan" within the meaning of Section 4001(a)(3) of ERISA and to which such Person
or any member of its Controlled Group is making, or is obligated to make
contributions or has made, or been obligated to make, contributions.
-17-
<PAGE>
"NationsBank" means NationsBank of Texas, N.A., a national banking
-----------
association, in its capacity as a Lender hereunder.
"NCGI Note" means that certain subordinated convertible note, dated October
---------
31, 1995, in the original principal amount of $3,000,000, executed and delivered
by the Borrower and payable to the order of Network Compatibility Group, Inc.
"Necessary Authorization" means any right, franchise, license, permit,
-----------------------
consent, approval or authorization from, or any filing or registration with, any
Tribunal or any Person necessary or appropriate to enable the Borrower or any
Subsidiary of the Borrower to maintain and operate its business and properties,
including the sale of any Inventory.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer or
-----------------
other disposition of any asset by any Person, the amount of cash received by
such Person in connection with such transaction (including cash proceeds of any
property received in consideration of any such sale, lease, transfer or other
disposition) after deducting therefrom the aggregate, without duplication, of
the following amounts to the extent properly attributable to such transaction or
to the asset that is the subject thereof: (i) reasonable brokerage commissions,
legal fees, finder's fees, financial advisory fees, accounting fees,
underwriting fees, investment banking fees and other similar commissions and
fees, in each case, to the extent paid or payable by such Person; (ii) filing,
recording or registration fees or charges or similar fees or charges paid by
such Person; (iii) taxes paid or payable by such Person or any shareholder,
partner or member of such Person to governmental taxing authorities as a result
of such sale or other disposition; and (iv) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness that is
secured by a Lien on the asset in question and that is required to be repaid
under the terms thereof as a result of such asset sale.
"Net Exposure Under Securitization" means, for any date of calculation, the
---------------------------------
sum of the following (without duplication): (i) the "Net Investment" (as such
term is defined in the TAA) as of such date of calculation and (ii) any and all
obligations and liabilities of the Borrower, CFI or any other Subsidiary of
Borrower under, or in connection with, the Securitization, as of such date of
calculation, to the extent that same constitute liabilities of the Borrower of
any Subsidiary of the Borrower under GAAP or would, under GAAP, constitute
liabilities of the Borrower or of any Subsidiary of the Borrower if the
Securitization was treated as an on balance sheet transaction.
"Net Income" means, with respect to any Person for any period, the net
----------
income (loss) of such Person, after provisions for taxes and extraordinary
items, determined in accordance with GAAP.
"Net Worth" means, as of any date of calculation, for the Borrower and its
---------
Subsidiaries, on a consolidated basis, determined in accordance with GAAP, the
consolidated total stockholders' equity of the Borrower and its Subsidiaries.
-18-
<PAGE>
"Notes" means, collectively, the Facility A Notes, the Facility B Notes and
-----
the Swing Line Note.
"Notice of Borrowing" has the meaning specified in Section 2.2(a) hereof.
------------------- --------------
"Notice of Issuance" has the meaning specified in Section 2.15(b) hereof.
------------------ ---------------
"Obligations" means (a) all obligations of any nature (whether matured or
-----------
unmatured, fixed or contingent, including the Reimbursement Obligations) of the
Borrower or any other Obligor to any Lender or the Administrative Lender under
any of the Loan Documents as they may be amended from time to time, and (b) all
obligations of the Borrower or any other Obligor for losses, damages, expenses
or any other liabilities of any kind that any Lender may suffer by reason of a
breach by the Borrower or any other Obligor of any obligation, covenant or
undertaking with respect to any Loan Document payable by the Borrower or any
other Obligor under any Loan Document.
"Obligor" means the Borrower and each Guarantor.
-------
"Operating Lease" means any operating lease, as defined in the Financial
---------------
Accounting Standard Board Statement of Financial Accounting Standards No. 13,
dated November, 1976 or otherwise in accordance with GAAP.
"Participant" has the meaning specified in Section 11.6(c) hereof.
----------- ---------------
"Participation" has the meaning specified in Section 11.6(c) hereof.
------------- ---------------
"Payment Date" means the last day of the Interest Period for any LIBOR
------------
Advance.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means, as applied to any Person:
---------------
(a) Any Lien in favor of the Lenders to secure the Obligations hereunder;
(b) (i) Liens on real estate for ad valorem taxes not yet delinquent, and
(ii) Liens for taxes, assessments, governmental charges, levies or claims that
are not yet delinquent or that are being diligently contested in good faith by
appropriate proceedings in accordance with Section 5.6 hereof and for which
-----------
adequate reserves shall have been set aside on such Person's books, but only so
long as no foreclosure, restraint, sale or similar proceedings have been
commenced with respect thereto;
-19-
<PAGE>
(c) Liens of carriers, warehousemen, mechanics, laborers and materialmen
incurred in the ordinary course of business for sums not yet due or being
contested in good faith, if such reserve or appropriate provision, if any, as
shall be required by GAAP shall have been made therefor;
(d) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(e) Easements, right-of-way, restrictions and other similar encumbrances
on the use of real property which do not interfere in any material respect with
the ordinary conduct of the business of such Person;
(f) Liens created to secure the purchase price of assets acquired (or
existing on property at the time such property is acquired) by such Person or
created to secure Indebtedness permitted by Section 7.1(c) or 7.1(d) hereof,
-------------- ------
which is incurred solely for the purpose of financing the acquisition of such
assets and incurred at the time of acquisition or which exists against such
assets at the time of acquisition thereof, so long as each such Lien shall at
all times be confined solely to the asset or assets so acquired (and proceeds
thereof), and refinancings thereof so long as any such Lien remains solely on
the asset or assets acquired and the amount of Indebtedness related thereto is
not increased;
(g) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully insured
(subject to customary deductibles) and the insurer shall not have denied
coverage, or (iii) such judgments or awards shall have been bonded to the
satisfaction of the Determining Lenders;
(h) Any Liens which are described on Schedule 2 hereto, and Liens
----------
resulting from the refinancing of the related Indebtedness, provided that the
Indebtedness secured thereby shall not be increased and the Liens shall not
cover additional assets of the Borrower;
(i) Liens arising from filing Uniform Commercial Code financing statements
for precautionary purposes relating solely to true leases of personal property
permitted by this Agreement under which the Borrower or any of its Subsidiaries
is a lessee;
(j) Any zoning or similar law or right reserved to or vested in any
Tribunal to control or regulate the use of any real property;
(k) Any other title exception with respect to real property assets
disclosed by any preliminary title report, title commitment report or other
search of title provided to the Administrative Lender in accordance with this
Agreement unless disapproved by the Administrative Lender prior to the Agreement
Date;
-20-
<PAGE>
(l) Any Lien in favor of any Lender to secure any obligations owed to such
Lender in respect of any Hedge Agreement;
(m) Liens incurred or deposits made to secure the performance of bids,
trade contracts (other than for Indebtedness), statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(n) Liens securing Indebtedness or other obligations of the Borrower or a
Subsidiary of the Borrower owing to the Borrower or a Subsidiary;
(o) Liens to the extent allowed under the MSAA or the Intercreditor
Agreements;
(p) any replacements or renewals of Liens (but no increases in the
Indebtedness secured thereby) permitted by clauses (f), (h), (i), (j), (m) and
(o) hereof; and
(q) Liens securing Indebtedness permitted by Section 7.1(k) hereof, to the
--------------
extent only that such Liens cover Inventory manufactured by, purchased from or
acquired from the holder of such Indebtedness and any renewals thereof.
"Permitted Real Estate Expenditures" means those Capital Expenditures in
----------------------------------
respect of real estate described on Schedule 9 hereto.
----------
"Person" means an individual, corporation, partnership, trust or
------
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan as defined in Section 3(3) of ERISA
----
(including a Multiemployer Plan) pursuant to which any employees of the
Borrower, its Subsidiaries or any member of their Controlled Group participate.
"Pledge Agreement" means the pledge agreement, substantially in the form of
----------------
Exhibit F hereto, as amended, modified, renewed, supplemented or restated from
- ---------
time to time, executed by the Borrower.
"Pretax Net Income" means net profit (or loss) before taxes of the Borrower
-----------------
and its Subsidiaries, on a consolidated basis, determined in accordance with
GAAP.
"Prime Rate" means, at any time, the prime interest rate announced or
----------
published by the Reference Lender from time to time as its reference rate for
the determination of interest rates for loans of varying maturities in United
States dollars to United States residents of varying degrees of creditworthiness
and being quoted at such time by the Reference Lender as its "prime rate;" it
being understood that such rate may not be the lowest rate of interest charged
by the Reference Lender.
-21-
<PAGE>
"Projected Unused Availability" means, as of any date of determination, the
-----------------------------
amount, if any, by which the lesser of (i) the Borrowing Base or (ii) the
Facility A Commitment, exceeds the sum of outstanding Facility A Advances, Swing
Line Advances and Reimbursement Obligations, plus the amount of pending Facility
A Advances, Swing Line Advances and Letters of Credit to be made or issued on
such date (calculated after giving effect to any proposed increase in the RPA
Interest as of such date).
"Quarterly Date" means the last day of each March, June, September and
--------------
December, beginning December 31, 1996.
"Rate Adjustment Date" means the date which is two Business Days following
--------------------
the date that the Lenders receive the financial statements for the fiscal year
ending December 31, 1996, required to be delivered pursuant to Section 6.2
-----------
hereof.
"Receivables" means all of the Obligors' present and future accounts,
-----------
contract rights and accounts receivable, whether now or hereafter owned, held,
or acquired by any Obligor and includes, without limitation, all of the
following insofar as same constitute, result from or are attributable to any of
the foregoing: all of the Obligors' chattel paper, documents, instruments,
deposit accounts, general intangibles and accounts receivable, including all
rights to payment for goods sold or leased or for services rendered, whether or
not earned by performance (and in any case where an account arises from the sale
of goods, the interest of the Obligor(s) in such goods); lease receivables;
license receivables; notes receivable; all other rights to receive payments of
money from any Person; the Obligors' right, title and interest under equipment
leases; the Obligors' rights under any service, lease rental, consulting or
similar agreements; rights or claims under contracts; books of account, customer
lists and other records relating in any way to any of the foregoing.
"Reference Lender" means NationsBank; provided that if the NationsBank
----------------
Commitments shall terminate and it shall have no Advances and Letters of Credit
outstanding hereunder, NationsBank shall cease to be the Reference Lender, and
Administrative Lender (after consultation with Borrower) shall, with notice to
Borrower and Lenders, designate another Lender as the Reference Lender.
"Reimbursement Obligations" means, in respect of any Letter of Credit as at
-------------------------
any date of determination, the sum of (a) the maximum aggregate amount which is
then available to be drawn under such Letter of Credit plus (b) the aggregate
amount of all drawings under such Letter of Credit not theretofore reimbursed by
the Borrower.
"Related Person" means (a) any Affiliate of the Borrower, (b) any
--------------
individual or entity who directly or indirectly holds 10% or more of any class
of Capital Stock of the Borrower, (c) any relative of such individual by blood,
marriage or adoption not more remote than first cousin and (d) any officer or
director of the Borrower.
-22-
<PAGE>
"Release Date" means the date on which the Notes have been paid, all other
------------
Obligations due and owing have been paid and performed in full, and the
Commitments have been terminated.
"Reportable Event" has the meaning set forth in Section 4043(b) of ERISA.
----------------
"Restricted Payments" means, collectively, (i) Dividends and (ii) any (A)
-------------------
payment or prepayment of principal, premium or penalty on any Subordinated Debt
of the Borrower or any Subsidiary of the Borrower or any defeasance, redemption,
purchase, repurchase or other acquisition or retirement for value, in whole or
in part, of any Subordinated Debt (including, without limitation, the setting
aside of assets or the deposit of funds therefor) and (B) prepayment of interest
on any Subordinated Debt.
"Rights" means rights, remedies, powers and privileges.
------
"RPA" means the certain Receivables Purchase Agreement, dated as of April
---
1, 1996, between the Borrower and CFI providing for the sale by the Borrower to
CFI and the purchase by CFI from the Borrower (subject to the terms of the MSAA)
of an undivided fractional ownership interest in all Receivables now owned and
hereafter acquired and arising from time to time prior to termination of the
RPA, on the terms provided therein, as the same may be renewed, extended,
modified, amended or restated from time to time.
"RPA Interest" means, at any time, the undivided fractional ownership
------------
interest in the Receivables sold and transferred by the Borrower to CFI pursuant
to the RPA.
"Securitization" means, collectively, the transactions evidenced and
--------------
governed by the Securitization Documents.
"Securitization Documents" means, collectively, the MSAA, the RPA and the
------------------------
TAA and any other agreements or documents executed or delivered by any Person in
connection therewith.
"Security Agreement" means the security agreement relating to all
------------------
Receivables, Inventory and Equipment (and all computer programs, applications,
disks, plans, manuals, specifications, files and other records pertaining
thereto) of the Borrower and its Subsidiaries, substantially in the form of
Exhibit D hereto, as amended, modified, renewed, supplemented or restated from
- ---------
time to time.
"Solvent" means, with respect to any Person, that the fair value of the
-------
assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can
-23-
<PAGE>
reasonably be expected to become an actual or matured liability discounted to
present value at rates believed to be reasonable by such Person.
"Special Counsel" means the law firm of Donohoe, Jameson & Carroll, P.C.,
---------------
or such other legal counsel as the Administrative Lender may select.
"Specified Percentage" means, as to any Lender, the percentage indicated
--------------------
beside its name on the signature pages hereof, or if applicable, specified in
its most recent Assignment Agreement.
"Subordinated Debt" means (i) the NCGI Note and (ii) any other Indebtedness
-----------------
of the Borrower or any Subsidiary of the Borrower having maturities and terms,
and which is subordinated to payment of the Obligations in a manner, approved in
writing by the Administrative Lender and the Determining Lenders, with only such
changes or amendments as are not prohibited by Section 7.22 hereof.
------------
"Subsequent Pricing Period" means the period from and including the date
-------------------------
which is the first day following the end of the Initial Pricing Period to and
including the Facility A Maturity Date or Facility B Maturity Date, whichever is
later.
"Subsidiary" of any Person means any corporation, partnership, joint
----------
venture, trust or estate or other Person of which (or in which) more than 50%
of:
(a) the outstanding capital stock having voting power to elect a
majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency),
(b) the interest in the capital or profits of such partnership or
joint venture,
(c) the beneficial interest of such trust or estate, or
(d) the equity interest of such other Person,
is at the time directly or indirectly owned by such Person, by such Person
and one or more of its Subsidiaries or by one or more of such Person's
Subsidiaries; provided, however, that no Person shall be deemed to be a
Subsidiary of the Borrower solely by virtue of the fact that certain shares
of the stock of such Person have been pledged to the Borrower.
"Subsidiary Guaranty" means a guaranty, substantially in the form of
-------------------
Exhibit I hereto, executed and delivered by each Guarantor, as such
- ---------
guaranty(ies) may be amended, supplemented, modified, renewed or otherwise
restated from time to time.
"Swing Line Advance" means an Advance made pursuant to Section 2.1(c)
------------------ --------------
hereof.
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<PAGE>
"Swing Line Bank" means NationsBank of Texas, N.A. and any successor
---------------
thereto appointed in accordance with Section 10.1(b) hereof.
---------------
"Swing Line Facility" has the meaning specified in Section 2.1(c) hereof.
------------------- --------------
"Swing Line Note" means the Swing Line Note of the Borrower payable to the
---------------
order of the Swing Line Bank, substantially in the form of Exhibit C hereto,
---------
together with any extension, renewal, or amendment thereof, or substitution
therefor.
"TAA" means the certain Transfer and Administration Agreement, dated as of
---
April 1, 1996, between the Borrower, CFI, EFC and NationsBank, N.A. in its
capacity as Agent and a Bank Investor thereunder, providing for the transfer by
CFI to EFC and the acceptance by EFC from CFI of a portion of the RPA Interest,
from time to time, on the terms provided therein, as the same may be renewed,
extended, modified, amended or restated from time to time.
"Tangible Net Worth" means the sum of the following for the Borrower and
------------------
its Subsidiaries, on a consolidated basis, determined in accordance with GAAP,
(a) Net Worth minus (b) the sum of the following (without duplication in respect
of items already deducted in arriving at Net Worth): Intangible Assets, and any
write-up in the book value of assets resulting from revaluation thereof
subsequent to December 31, 1995.
"Taxes" has the meaning specified in Section 2.14 hereof.
----- ------------
"Tribunal" means any state, commonwealth, federal, foreign, territorial, or
--------
other court or government body, subdivision, agency, department, commission,
board, bureau, or instrumentality of a governmental or other regulatory or
public body or authority.
"UCC" means the Uniform Commercial Code of Texas, as amended from time to
---
time, and the Uniform Commercial Code applicable in such other states as any
Collateral may be located.
"Unused Portion" means an amount equal to the result of (a) the sum of (i)
--------------
the Facility A Commitment plus (ii) the Facility B Commitment minus (b) the sum
of (i) the outstanding Facility A Advances plus (ii) the outstanding Facility B
Advances plus (iii) the outstanding Reimbursement Obligations in respect of the
Letters of Credit.
"Upfront Fee Letter" has the meaning specified in Section 2.4(b) hereof.
------------------ --------------
Section 1.2 Amendments and Renewals. Each definition of an agreement in
-----------------------
this Article 1 shall include such agreement as amended to date, and as amended
---------
or renewed from time to time in accordance with its terms, but only with the
prior written consent of the Determining Lenders or all the Lenders as required
pursuant to Section 11.11 hereof.
-------------
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<PAGE>
Section 1.3 Construction. The terms defined in this Article 1 (except as
------------
otherwise expressly provided in this Agreement) for all purposes shall have the
meanings set forth in Section 1.1 hereof, and the singular shall include the
-----------
plural, and vice versa, unless otherwise specifically required by the context.
All accounting terms used in this Agreement which are not otherwise defined
herein shall be construed in accordance with GAAP on a consolidated basis for
the Borrower and its Subsidiaries, unless otherwise expressly stated herein.
ARTICLE 2
Advances
--------
Section 2.1 The Advances.
------------
(a) Facility A Advances. Each Lender severally agrees, upon the terms and
-------------------
subject to the conditions of this Agreement, to make Facility A Advances to the
Borrower from time to time until the Facility A Maturity Date in an aggregate
amount not to exceed its Specified Percentage of the Facility A Commitment less
its Specified Percentage of the aggregate amount of all Reimbursement
Obligations then outstanding (assuming compliance with all conditions to
drawing), for the purposes set forth in Section 5.8(a) hereof. Subject to
--------------
Section 2.9 hereof, Facility A Advances may be repaid and then reborrowed.
- -----------
Notwithstanding any provision in any Loan Document to the contrary, in no event
shall the principal amount of all outstanding Facility A Advances exceed the
lesser of (i) the result of (A) the Borrowing Base minus (B) the aggregate
outstanding Reimbursement Obligations and Swing Line Advances and (ii) the
Facility A Commitment.
(b) Facility B Advances. Each Lender severally agrees, upon the terms and
-------------------
subject to the conditions of this Agreement, to make a one-time Facility B
Advance to the Borrower prior to or on the Facility B Commitment Termination
Date in an amount not to exceed its Specified Percentage of the Facility B
Commitment for the purposes set forth in Section 5.8(b) hereof. Notwithstanding
--------------
any provision in any Loan Document to the contrary, in no event shall the
principal amount of all outstanding Facility B Advances exceed the Facility B
Commitment. Facility B Advances may not be repaid and then reborrowed.
(c) The Swing Line Loans. The Borrower mayrequest Swing Line Bank to
--------------------
make, and Swing Line Bank agrees to make, on the terms and conditions
hereinafter set forth, advances ("Swing Line Advances") to the Borrower from
-------------------
time to time on any Business Day during the period from the date hereof until
the Facility A Maturity Date in an aggregate amount not to exceed at any time
outstanding the lesser of (i) $5,000,000, and (ii) the Borrowing Base, less the
sum of (A) the aggregate principal amount of Facility A Advances then
outstanding plus (B) the aggregate principal amount of all Reimbursement
----
Obligations then outstanding (assuming compliance with all conditions to
drawing) (the "Swing Line Facility"). Each Swing Line Advance shall be in an
-------------------
amount not less than $100,000 and in multiples thereof. Each Swing Line Advance
shall be a Base Rate Advance. Within the limits of the Swing Line Facility,
Swing Line Advances may be repaid and then reborrowed.
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<PAGE>
(d) Any Advance shall, at the option of the Borrower as provided in
Section 2.2 hereof (and, in the case of LIBOR Advances, subject to the
- -----------
provisions of Article 9 hereof), be made as a Base Rate Advance or a LIBOR
---------
Advance; provided that there shall not be outstanding, at any one time, more
than ten LIBOR Advances.
Section 2.2 Manner of Borrowing and Disbursement.
------------------------------------
(a) In the case of Base Rate Advances, the Borrower, through an Authorized
Signatory, shall give the Administrative Lender prior to 11:00 a.m., Dallas,
Texas time, on the date of any proposed Base Rate Advance irrevocable written
notice, or irrevocable telephonic notice followed immediately by written notice,
in substantially the form of Exhibit J hereto (a "Notice of Borrowing")
--------- -------------------
(provided, however, that the Borrower's failure to confirm any telephonic notice
in writing shall not invalidate any notice so given), of its intention to borrow
a Base Rate Advance hereunder. Such notice of borrowing shall specify the
requested funding date, which shall be a Business Day, and the amount of the
proposed aggregate Base Rate Advances to be made by Lenders.
(b) In the case of LIBOR Advances, the Borrower, through an Authorized
Signatory, shall give the Administrative Lender at least two Business Days'
irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the Borrower's failure to
confirm any telephonic notice in writing shall not invalidate any notice so
given) pursuant to a Notice of Borrowing, of its intention to borrow a LIBOR
Advance hereunder. Notice shall be given to the Administrative Lender prior to
11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward
the minimum number of Business Days required. LIBOR Advances shall in all cases
be subject to Article 9 hereof. For LIBOR Advances, the notice of borrowing
---------
shall specify the requested funding date, which shall be a Business Day, the
amount of the proposed aggregate LIBOR Advances to be made by Lenders and the
Interest Period selected by the Borrower, provided that no such Interest Period
shall extend past the Facility A Maturity Date or the Facility B Maturity Date,
as appropriate, or prohibit or impair the Borrower's ability to comply with
Section 2.5 or 2.8 hereof.
- ----------- ---
(c) In the case of Swing Line Advances, the Borrower, through an
Authorized Signatory, shall give the Swing Line Bank and the Administrative
Lender prior to 12:00 noon, Dallas, Texas time, on the date of any proposed
Swing Line Advance irrevocable written notice or irrevocable telephonic notice
followed immediately by written notice (provided, however, that the Borrower's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of its intention to borrow or reborrow a Swing Line Advance.
Such notice of borrowing shall specify the requested funding date, which shall
be a Business Day, and the amount of the proposed Swing Line Advance.
(d) Subject to Sections 2.1 and 2.9 hereof, the Borrower shall have the
------------ ---
option (i) to convert at any time all or any part (subject to the requirements
contained herein as to the minimum amounts of LIBOR Advances) of the outstanding
Base Rate Advances to LIBOR Advances and all or any part of the outstanding
LIBOR Advances to Base Rate Advances or (ii) upon expiration of any Interest
Period applicable to a LIBOR Advance, to continue all or
-27-
<PAGE>
any portion of such LIBOR Advance equal to $5,000,000 and integral multiples of
$1,000,000 in excess of that amount as a LIBOR Advance and the succeeding
Interest Period(s) of such continued LIBOR Advance shall commence on the last
day of the Interest Period of the LIBOR Advance to be continued; provided,
however, (a) LIBOR Advances may only be converted into Base Rate Advances on the
expiration date of the Interest Period applicable thereto and (b)
notwithstanding anything in this Agreement to the contrary, no outstanding
Advance may be continued as, or converted into, a LIBOR Advance when any Default
or Event of Default has occurred and is continuing. At least two Business Days
prior to a proposed conversion/continuation date, the Borrower, through an
Authorized Signatory, shall give the Administrative Lender irrevocable written
notice, or irrevocable telephonic notice followed immediately by written notice
(provided, however, that the Borrower's failure to confirm any telephonic notice
in writing shall not invalidate any notice so given), stating (i) the proposed
conversion/continuation date (which shall be a Business Day), (ii) the amount of
the Advance to be converted/continued, (iii) in the case of a conversion to, or
a continuation of, a LIBOR Advance, the requested Interest Period, and (iv) in
the case of a conversion of a Base Rate Advance to a LIBOR Advance or
continuation of a LIBOR Advance, stating that no Default or Event of Default has
occurred and is continuing. If the Borrower shall fail to give any notice in
accordance with this Section 2.2(d), the Borrower shall be deemed irrevocably to
--------------
have requested that such LIBOR Advance be converted to a Base Rate Advance in
the same principal amount. Notice shall be given to the Administrative Lender
prior to 11:00 a.m., Dallas, Texas time, in order for such Business Day to count
toward the minimum number of Business Days required.
(e) The aggregate amount of Base Rate Advances to be made by the Lenders
on any day shall be in a principal amount which is at least $3,000,000 and which
is an integral multiple of $500,000; provided, however, that such amount may
equal the unused amount of the applicable Commitment. The aggregate amount of
LIBOR Advances having the same Interest Period and to be made by the Lenders on
any day shall be in a principal amount which is at least $5,000,000 and which is
an integral multiple of $1,000,000.
(f) The Administrative Lender shall promptly notify the Lenders of each
notice (other than with respect to a Swing Line Advance) received from the
Borrower pursuant to this Section. Each Lender shall, not later than 2:00 p.m.,
Dallas, Texas time, on the date of any Advance, deliver to the Administrative
Lender, at its address set forth herein, such Lender's Specified Percentage of
such Advance in immediately available funds in accordance with the
Administrative Lender's instructions. Prior to 2:30 p.m., Dallas, Texas time, on
the date of any Advance hereunder, the Administrative Lender shall, subject to
satisfaction of the conditions set forth in Article 3, disburse the amounts made
---------
available to the Administrative Lender by the Lenders by (i) transferring such
amounts by wire transfer pursuant to the Borrower's instructions, or (ii) in the
absence of such instructions, crediting such amounts to the account of the
Borrower maintained with the Administrative Lender. All Advances shall be made
by each Lender according to its Specified Percentage.
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<PAGE>
(g) The Swing Line Bank shall, not later than 1:30 p.m., Dallas, Texas
time, on the date of any Swing Line Advance, deliver to the Administrative
Lender at its address set forth herein, the amount of such Swing Line Advance in
immediately available funds in accordance with the Administrative Lender's
instructions. Prior to 2:00 p.m., Dallas, Texas time, on the date of any Swing
Line Advance, the Administrative Lender shall, subject to the conditions set
forth in Article 3, disburse the amount made available to the Administrative
---------
Lender by the Swing Line Bank by (i) transferring such amounts by wire transfer
pursuant to the Borrower's instruction or (ii) in the absence of such
instructions, crediting such amounts to the account of the Borrower maintained
with the Administrative Lender. Forthwith upon demand by the Swing Line Bank and
in any event upon the making of the request or the granting of the consent
specified by Section 8.2 to authorize the Administrative Lender to declare the
-----------
Advances due and payable pursuant to the provisions of Section 8.2, each Lender,
-----------
including the Swing Line Bank, notwithstanding the failure of the Borrower at
such time to satisfy each condition specified in Article 3, shall make by 12:00
noon (Dallas, Texas time) on the first Business Day following receipt by such
Lender of notice from the Swing Line Bank, a Facility A Advance which is a Base
Rate Advance in an amount equal to the product of (i) the Specified Percentage
of such Lender times (ii) the aggregate outstanding principal amount of the
Swing Line Advances. The proceeds of such Facility A Advances shall be applied
by the Administrative Lender to repay the outstanding Swing Line Advance.
Section 2.3 Interest.
--------
(a) On Base Rate Advances.
---------------------
(i) The Borrower shall pay interest on the outstanding unpaid
principal amount of the Base Rate Advances outstanding from time to time,
until such Base Rate Advances are due (whether at maturity, by reason of
acceleration, by scheduled reduction, or otherwise) or repaid at a simple
interest rate per annum equal to the Base Rate Basis for the Base Rate
Advances as in effect from time to time. If at any time the Base Rate
Basis would exceed the Highest Lawful Rate, interest payable on the Base
Rate Advances shall be limited to the Highest Lawful Rate, but the Base
Rate Basis shall not thereafter be reduced below the Highest Lawful Rate
until the total amount of interest accrued on the Base Rate Advances equals
the amount of interest that would have accrued if the Base Rate Basis had
been in effect at all times.
(ii) Interest on the Base Rate Advances shall be computed on the basis
of a year of 365 or 366 days, as appropriate, for the actual number of days
elapsed, and shall be payable in arrears on each Quarterly Date and on the
Facility A Maturity Date or the Facility B Maturity Date, as appropriate.
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<PAGE>
(b) On LIBOR Advances.
-----------------
(i) The Borrower shall pay interest on the unpaid principal amount of
each LIBOR Advance, from the date such Advance is made until it is due
(whether at maturity, by reason of acceleration, by scheduled reduction, or
otherwise) or repaid, at a rate per annum equal to the LIBOR Basis for such
LIBOR Advance. The Administrative Lender, whose determination shall be
controlling in the absence of manifest error, shall determine the LIBOR
Basis on the second Business Day prior to the applicable funding date and
shall notify the Borrower and the Lenders of such LIBOR Basis.
(ii) Subject to Section 11.9 hereof, interest on each LIBOR Advance
------------
shall be computed on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in arrears on the applicable Payment
Date and on the Facility A Maturity Date and the Facility B Maturity Date,
as appropriate; provided, however, that if the Interest Period for such
LIBOR Advance exceeds three months, interest shall also be due and payable
in arrears on each three-month anniversary of the commencement of such
Interest Period during such Interest Period.
(c) On Swing Line Advances.
----------------------
(i) The Borrower shall pay interest on the outstanding principal
amount of each Swing Line Advance, from the date each Swing Line Advance is
made until it is due (whether at maturity, by acceleration or otherwise) or
repaid, at a rate per annum equal to the Base Rate Basis in effect from
time to time. If at any time the Base Rate Basis would exceed the Highest
Lawful Rate, interest payable on the Swing Line Advances shall be limited
to the Highest Lawful Rate, but the Base Rate Basis shall not thereafter be
reduced below the Highest Lawful Rate until the total amount of interest
accrued on the Swing Line Advances equals the amount of interest that would
have accrued if the Base Rate Basis had been in effect at all times.
(ii) Interest on each Swing Line Advance shall be computed on the
basis of a year of 365 or 366 days, as applicable, for the number of days
elapsed, and shall be payable quarterly in arrears on each Quarterly Date
and on the Facility A Maturity Date.
(d) Interest After an Event of Default. (i) After an Event of Default
----------------------------------
(other than an Event of Default specified in Section 8.1(f) or (g) hereof) and
-------------- ---
during any continuance thereof, at the option of Determining Lenders and
provided that the Administrative Lender has given notice of the decision to
charge interest at the Default Rate, and (ii) after an Event of Default
specified in Section 8.1(f) or (g) hereof and during any continuance thereof,
-------------- ---
automatically and without any action or notice by the Administrative Lender or
any Lender, the Obligations shall bear interest at a rate per annum equal to the
Default Rate. Such interest shall be payable on the earlier of demand or the
Facility A Maturity Date or the Facility B Maturity Date, as appropriate, and
shall accrue until the earlier of (i) waiver or cure (to the satisfaction of the
Determining Lenders) of the applicable Event of Default, (ii) agreement by the
Lenders to
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<PAGE>
rescind the charging of interest at the Default Rate, or (iii) payment in full
of the Obligations. The Lenders shall not be required to accelerate the maturity
of the Advances, to exercise any other rights or remedies under the Loan
Documents, or to give notice to the Borrower of the decision to charge interest
at the Default Rate.
Section 2.4 Fees.
----
(a) Commitment Fee. Subject to Section 11.9 hereof, the Borrower agrees
-------------- ------------
to pay to the Administrative Lender, for the ratable account of the Lenders, a
commitment fee (the "Commitment Fee") on the daily average Unused Portion during
--------------
the period commencing on the Agreement Date and ending on the Facility A
Maturity Date, at the following per annum percentages, applicable in the
following situations:
<TABLE>
<CAPTION>
Applicability Percentage
------------- ----------
<S> <C>
(a) Initial Pricing Period 0.300%
----------------------
(b) Subsequent Pricing Period
-------------------------
(1) The Fixed Charge Coverage 0.225%
Ratio is greater than or equal to
2.50 to 1
(2) The Fixed Charge Coverage 0.250%
Ratio is less than 2.50 to 1 but
greater than or equal to 2.00 to 1
(3) The Fixed Charge Coverage 0.300%
Ratio is less than 2.00 to 1 but
greater than or equal to 1.50 to 1
(4) The Fixed Charge Coverage 0.375%
Ratio is less than 1.50 to 1
</TABLE>
The Commitment Fee shall be subject to reduction or increase, as applicable and
as set forth in the table above, on a quarterly basis according to the
performance of the Borrower as tested by using the Fixed Charge Coverage Ratio
calculated as of the end of each fiscal quarter during the Subsequent Pricing
Period; provided, that each adjustment in the Commitment Fee shall be effective
--------
on the date which is two Business Days following the date of receipt of the
financial statements required to be furnished pursuant to Section 6.2 or 6.3
----------- ---
hereof, as applicable, and the corresponding Compliance Certificate required
pursuant to Section 6.4 hereof. If such financial statements are not received
-----------
by the Administrative Lender by the date required, effective as of the first
Business Day following notification thereof from the Administrative Lender to
the Borrower the Commitment Fee shall be determined as if the Fixed Charge
Coverage Ratio is less than 1.50 to 1 until such time as such financial
statements and Compliance Certificate are received. The fee shall be (i)
payable in arrears on each Quarterly Date and on the Facility A Maturity Date,
(ii) fully earned when due and, subject to Section 11.9 hereof, nonrefundable
------------
when paid and (iii) subject to Section 11.9 hereof, computed on the basis of a
------------
year of 365 or 366 days, as appropriate, for the actual number of days elapsed.
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<PAGE>
(b) Upfront Fee. Subject to Section 11.9 hereof, the Borrower agrees to
----------- ------------
pay to the Administrative Lender, for the account of the Lenders (other than the
Administrative Lender) the fees on the dates and in the amounts specified in the
letter agreement, dated July 26, 1996, between the Borrower and the
Administrative Lender and the term sheet attached thereto (collectively, the
"Upfront Fee Letter").
(c) Other Fees. Subject to Section 11.9 hereof, the Borrower agrees to
---------- ------------
pay to the Administrative Lender, for the account of the Administrative Lender,
the fees on the dates and in the amounts specified in the letter agreement (the
"Administrative Lender Fee Letter"), dated as of the Agreement Date, between the
--------------------------------
Borrower and the Administrative Lender.
Section 2.5 Prepayments.
-----------
(a) Voluntary LIBOR Advance Prepayments. Upon three Business Days' prior
-----------------------------------
telephonic notice (to be promptly followed by written notice) by an Authorized
Signatory to the Administrative Lender, LIBOR Advances may be voluntarily
prepaid but only so long as the Borrower concurrently reimburses the Lenders in
accordance with Section 2.9 hereof. Any notice of prepayment shall be
-----------
irrevocable.
(b) Mandatory Prepayment. On or before the date of any reduction of the
--------------------
Facility A Commitment, the Borrower shall prepay applicable outstanding Facility
A Advances in an amount necessary to reduce the sum of outstanding Facility A
Advances, Swing Line Advances and Reimbursement Obligations to an amount less
than or equal to the Facility A Commitment as so reduced. On any date that the
aggregate principal amount of outstanding Facility A Advances, Swing Line
Advances and Reimbursement Obligations (other than such Reimbursement
Obligations which are fully secured by funds in the L/C Cash Collateral Account
pursuant to Section 2.15(g) hereof) exceed the Borrowing Base, the Borrower
---------------
shall immediately prepay Facility A Advances in an amount equal to such excess
amount and all interest attributable to such excess amount. To the extent
required by the immediately preceding two sentences, the Borrower shall first
prepay all Base Rate Advances, second prepay all Swing Line Advances and shall
thereafter prepay LIBOR Advances. To the extent that any prepayment requires
that a LIBOR Advance be repaid on a date other than the last day of its Interest
Period, the Borrower shall reimburse each Lender in accordance with Section 2.9
-----------
hereof. To the extent that outstanding Facility A and Swing Line Advances
exceed the Facility A Commitment after any reduction thereof, the Borrower shall
repay any such excess amount and all accrued interest attributable to such
excess Facility A Advances on the date of such reduction.
(c) Prepayment from Sales of Equity/Issuance of Indebtedness.
--------------------------------------------------------
Concurrently with receipt of Net Cash Proceeds from (i) the issuance of any
Indebtedness the proceeds of which are used to purchase or refinance
Indebtedness with respect to real property or (ii) the sale or disposition by
the Borrower of any Equity, the Borrower shall prepay Facility B Advances in an
aggregate principal amount equal to 100% of the aggregate Net Cash Proceeds
received by the Borrower from such issuance, sale or disposition of Equity or
Indebtedness. Any such prepayments shall be applied in the inverse order of
maturity to the scheduled payments of the Facility B Advances required pursuant
to Section 2.6(c).
--------------
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<PAGE>
(d) Payments, Generally. Any prepayment of any LIBOR Advance shall be
-------------------
accompanied by interest accrued on the principal amount being prepaid. Any
voluntary partial payment of a Base Rate Advance shall be in a principal amount
which is at least $3,000,000 and which is an integral multiple of $500,000. Any
voluntary partial payment of a LIBOR Advance shall be in a principal amount
which is at least $5,000,000 and which is an integral multiple of $1,000,000,
and to the extent that any prepayment of a LIBOR Advance is made on a date other
than the last day of its Interest Period, the Borrower shall reimburse each
Lender in accordance with Section 2.9 hereof. Any voluntary partial payment of
-----------
a Swing Line Advance shall be in a principal amount which is at least $100,000
or an integral multiple thereof.
Section 2.6 Reduction of Commitments.
------------------------
(a) Voluntary Reduction. The Borrower shall have the right, upon not less
-------------------
than ten Business Days' notice by an Authorized Signatory to the Administrative
Lender (if telephonic, to be confirmed by telex or in writing on or before the
date of reduction or termination), which shall promptly notify the Lenders, to
terminate or reduce either the Facility A Commitment or the Facility B
Commitment, in whole or in part, without premium or penalty except as provided
in the next sentence. Each partial termination shall be in an aggregate amount
which is at least $5,000,000 and which is an integral multiple of $1,000,000,
and no voluntary reduction of the Facility A Commitment shall cause any LIBOR
Advance to be repaid prior to the last day of its Interest Period unless the
Borrower shall reimburse each Lender in accordance with Section 2.9 hereof.
-----------
(b) Mandatory Reduction. The Facility A Commitment shall be automatically
-------------------
reduced to zero on the Facility A Maturity Date. The Facility B Commitment
shall be automatically reduced to zero on the Facility B Commitment Termination
Date.
(c) Amortization. An amount equal to 50% of the principal amount of the
------------
Facility B Advances outstanding on the Facility B Commitment Termination shall
be payable on (i) September 25, 1998 and (ii) the Facility B Maturity Date.
(d) General Requirements. Upon any reduction of a Commitment pursuant to
--------------------
this Section, the Borrower shall immediately make a repayment of applicable
Advances in accordance with Section 2.5(b) hereof. The Borrower shall reimburse
--------------
each Lender in connection with any such payment in accordance with Section 2.9
-----------
hereof to the extent applicable. The Borrower shall not have any right to
rescind any termination or reduction. Once reduced, the Commitments may not be
increased or reinstated.
Section 2.7 Non-Receipt of Funds by the Administrative Lender. Unless the
-------------------------------------------------
Administrative Lender shall have been notified by a Lender prior to the date of
any proposed Advance (other than a Swing Line Advance) that such Lender does not
intend to make the proceeds of such Advance available to the Administrative
Lender, the Administrative Lender may assume that such Lender has made such
proceeds available to the Administrative Lender on such date, and the
Administrative Lender may in reliance upon such assumption (but shall not be
required to) make available to the Borrower a corresponding amount. If such
-33-
<PAGE>
corresponding amount is not in fact made available to the Administrative Lender
by such Lender, the Administrative Lender shall be entitled to recover such
amount on demand from such Lender (or, if such Lender fails to pay such amount
forthwith upon such demand, from the Borrower) together with interest thereon in
respect of each day during the period commencing on the date such amount was
available to the Borrower and ending on (but excluding) the date the
Administrative Lender receives such amount from (a) the Lender, at a per annum
rate equal to the lesser of (i) the Highest Lawful Rate or (ii) the Federal
Funds Rate or (b) the Borrower, at the per annum rate applicable at the time to
such Advance. No Lender shall be liable for any other Lender's failure to fund
an Advance hereunder.
Section 2.8 Payment of Principal of Advances. To the extent not otherwise
--------------------------------
required to be paid earlier as provided herein, the principal amount of the
Facility A Advances, all accrued interest and fees thereon, and all other
Obligations related thereto, shall be due and payable in full on the Facility A
Maturity Date. To the extent not otherwise required to be paid earlier as
provided herein, the principal amount of the Facility B Advances, all accrued
interest and fees thereon, and all other Obligations related thereto, shall be
due and payable in full on the Facility B Maturity Date. To the extent not
otherwise required to be paid earlier as provided herein, the principal amount
of each Swing Line Advance, all accrued interest and fees thereon, and all other
Obligations related thereto, shall be due and payable in full on the seventh
Business Day following the making of such Swing Line Advance.
Section 2.9 Reimbursement. Whenever any Lender shall sustain or incur
-------------
(other than through a default by that Lender) any losses (inclusive of any such
losses attributable to change(s) in the LIBOR Rate during the applicable
period(s), but exclusive of any losses of any other anticipated profits on the
part of such Lender) or reasonable out-of-pocket expenses actually incurred in
connection with (a) failure by the Borrower to borrow any LIBOR Advance after
having given notice of its intention to borrow in accordance with Section 2.2
-----------
hereof (whether by reason of the Borrower's election not to proceed or the non-
fulfillment of any of the conditions set forth in Article 3 hereof) or (b) any
prepayment for any reason of any LIBOR Advance in whole or in part (including a
prepayment pursuant to Section 9.3(b) hereof) on other than the last day of an
--------------
Interest Period applicable to such LIBOR Advance, the Borrower agrees to pay to
any such Lender, within 30 days after demand by such Lender, an amount
sufficient to compensate such Lender for all such losses (inclusive of any such
losses attributable to change(s) in the LIBOR Rate during the applicable
period(s), but exclusive of any losses of any other anticipated profits on the
part of such Lender) and out-of-pocket expenses, subject to Section 11.9 hereof.
------------
Such losses shall include, without limiting the generality of the foregoing,
reasonable expenses incurred by such Lender in connection with the re-employment
of funds prepaid, repaid, converted or not borrowed, converted or paid, as the
case may be. A certificate as to any amounts payable to any Lender under this
Section 2.9 submitted to the Borrower by such Lender shall certify that such
- -----------
amounts were actually incurred by such Lender and shall show in reasonable
detail an accounting of the amount payable and the calculations used to
determine in good faith such amount and shall be conclusive absent manifest or
demonstrable error. Nothing in this Section 2.9 shall provide the Borrower or
-----------
any Subsidiary of the Borrower the right to inspect the records, files or books
of any Lender.
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<PAGE>
Section 2.10 Manner of Payment.
-----------------
(a) Each payment (including prepayments) by the Borrower of the principal
of or interest on the Advances, fees, and any other amount owed under this
Agreement or any other Loan Document shall be made not later than 12:00 noon
(Dallas, Texas time) on the date specified for payment under this Agreement to
the Administrative Lender at the Administrative Lender's office, in lawful money
of the United States of America constituting immediately available funds.
(b) If any payment under this Agreement or any other Loan Document shall
be specified to be made upon a day which is not a Business Day, it shall be made
on the next succeeding day which is a Business Day, unless, with respect to a
payment due in respect of a LIBOR Advance, such Business Day falls in another
calendar month, in which case payment shall be made on the preceding Business
Day. Any extension of time shall in such case be included in computing interest
and fees, if any, in connection with such payment.
(c) Without waiving any other rights or recourse that the Borrower may
otherwise have against any Lender for such Lender's breach of its obligations
hereunder, the Borrower agrees to pay principal, interest, fees and all other
amounts due under the Loan Documents without deduction for set-off or
counterclaim or any deduction whatsoever.
(d) If some but less than all amounts due from the Borrower are received
by the Administrative Lender, the Administrative Lender shall apply such amounts
in the following order of priority: (i) to the payment of the Administrative
Lender's expenses incurred on behalf of the Lenders then due and payable, if
any; (ii) to the payment of all other fees then due and payable; (iii) to the
payment of interest then due and payable on the Advances; (iv) to the payment of
all other amounts not otherwise referred to in this clause (d) then due and
payable under the Loan Documents; and (v) to the payment of principal then due
and payable on the Advances.
(e) Each payment by the Borrower in respect of obligations relating to the
Facility A Advances, Facility B Advances and the Letters of Credit (whether for
principal, interest, fees or otherwise) shall be made to the Administrative
Lender for the account of the Lenders pro rata in accordance with their
respective Specified Percentages. Each payment by the Borrower in respect of
obligations relating to Swing Line Advances (whether for principal, interest,
fees or otherwise) shall be made to the Administrative Lender for the account of
the Swing Line Bank. Notwithstanding anything in this Section 2.10(e) or any
---------------
other provision of this Agreement or any other Loan Document to the contrary,
any payment by the Borrower in respect of any Advances after acceleration of the
Advances pursuant to Section 8.2 or any monies received by the Administrative
-----------
Lender as a result of the exercise of remedies under any Loan Documents after
acceleration of the Advances pursuant to Section 8.2 shall be distributed pro
-----------
rata to each Lender based on the percentage that the outstanding Advances and
Reimbursement Obligations owed to such Lender bears to the aggregate Advances
and Reimbursement Obligations owed to all Lenders.
-35-
<PAGE>
Section 2.11 LIBOR Lending Offices. Each Lender's initial LIBOR Lending
---------------------
Office is set forth opposite its name in Schedule 1 attached hereto. Each
----------
Lender shall have the right at any time and from time to time to designate a
different office of itself or of any Affiliate of such Lender as such Lender's
LIBOR Lending Office, and to transfer any outstanding LIBOR Advance to such
LIBOR Lending Office. No such designation or transfer shall result in any
liability on the part of the Borrower for increased costs or expenses resulting
solely from such designation or transfer (except any such transfer which is made
by a Lender pursuant to Section 9.2 or 9.3 hereof, or otherwise for the purpose
----------- ---
of complying with Applicable Law, to the extent that Applicable Law, or any
relevant construction or interpretation thereof, changes after the Agreement
Date). Increased costs for expenses resulting from a change in law occurring
subsequent to any such designation or transfer shall be deemed not to result
solely from such designation or transfer.
Section 2.12 Sharing of Payments. Any Lender obtaining a payment (whether
-------------------
voluntary or involuntary, due to the exercise of any right of set-off, or
otherwise) on account of its Facility A Advances, Facility B Advances or its
participation in the Letters of Credit (other than pursuant to Sections 2.4(b),
---------------
2.14, 2.15(d), 9.3 or 9.5) in excess of its Specified Percentage of all payments
- ---- ------- --- ---
made by the Borrower with respect to Facility A Advances, Facility B Advances
and the Letters of Credit shall purchase from each other Lender such
participation in the Facility A Advances and Facility B Advances made by such
other Lender or its participation in the Letters of Credit as shall be necessary
to cause such purchasing Lender to share the excess payment pro rata according
to Specified Percentages with each other Lender; provided, however, that if all
or any portion of such excess payment is thereafter recovered from such
purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section, to the fullest extent permitted by law, may exercise
all its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
Section 2.13 Calculation of LIBOR Rate. The provisions of this Agreement
-------------------------
relating to calculation of the LIBOR Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid hereunder that are
based upon such rate, it being understood that each Lender shall be entitled to
fund and maintain its funding of all or any part of a LIBOR Advance as it sees
fit.
Section 2.14 Taxes.
-----
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.10, free and clear of and without deduction for any
------------
and all present or future taxes, levies, imposts, deductions, charges and
withholdings, and all liabilities with respect thereto, excluding, in the case
---------
of each Lender and the Administrative Lender, (i) taxes imposed on, based upon
or measured by its overall net income, net worth or capital, and franchise
taxes, doing business taxes or minimum taxes imposed on it, (A) by the
jurisdiction under the laws of which such Lender or the Administrative Lender
(as the case may be) is organized or in which
-36-
<PAGE>
it has its applicable lending office or any political subdivision thereof; or
(B) by any other jurisdiction, or any political subdivision thereof, other than
those imposed by reason of (1) an asserted relation of such jurisdiction to the
transactions contemplated by this Agreement, (2) the activities of the Borrower
in such jurisdiction or (3) the activities in connection with the transactions
contemplated by this Agreement of a Lender or the Administrative Lender; (ii)
taxes imposed by reason of failure by the Lender or the Administrative Lender to
comply with the requirements of paragraph (e) of this Section 2.14; and (iii) in
------------
the case of any Lender, any Taxes in the nature of transfer, stamp, recording or
documentary taxes resulting from a transfer (other than as a result of
foreclosure) by such Lender of all or any portion of its interest in this
Agreement, the Notes or any other Loan Documents; (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by Law to
-----
deduct or withhold any Taxes from or in respect of any sum payable hereunder to
any Lender or the Administrative Lender, (x) the sum payable shall be increased
as may be necessary so that after making all required deductions for Taxes
(including deductions applicable to additional sums payable under this Section
-------
2.14) such Lender or the Administrative Lender (as the case may be) receives an
- ----
amount equal to the sum it would have received had no such deductions been made,
(y) the Borrower shall make such deductions and (z) the Borrower shall pay the
full amount of Taxes deducted to the relevant taxation authority or other
authority in accordance with Applicable Law.
(b) In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies (other than Taxes described in clause (iii) of the first sentence
of Section 2.14(a)) that arise from any payment made hereunder or from the
---------------
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
-----------
(c) The Borrower will indemnify each Lender and the Administrative Lender
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.14) paid by such Lender or the Administrative Lender (as the case may
- ------------
be) and all liabilities (including penalties, additions to tax, interest and
reasonable expenses) arising therefrom or with respect thereto whether or not
such Taxes or Other Taxes were correctly or legally asserted, other than
penalties, additions to tax, interest and expenses arising as a result of gross
negligence or wilful misconduct on the part of such Lender or the Administrative
Lender, provided, however, that the Borrower shall have no obligation to
-------- -------
indemnify such Lender or the Administrative Lender unless and until such Lender
or the Administrative Lender shall have delivered to the Borrower a certificate
certifying that such Taxes or Other Taxes (and/or penalties, additions to tax,
interest and reasonable expenses) were actually incurred by such Lender or the
Administrative Lender and showing in reasonable detail an accounting of the
amount payable and the calculations used to determine in good faith such amount,
which certificate shall be conclusive absent manifest or demonstrable error.
Nothing in this Section 2.14 shall provide the Borrower or any Subsidiary of the
------------
Borrower the right to inspect the records, files or books of any Lender or the
Administrative Lender. This indemnification shall be made within 30 days from
the date such Lender or the Administrative Lender (as the case may be) makes
written demand therefor.
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<PAGE>
(d) As soon as practicable after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Lender the original or a certified
copy of a receipt evidencing payment thereof. For purposes of this Section 2.14
------------
the terms "United States" and "United States Person" shall have the meanings set
------------- --------------------
forth in Section 7701 of the Code.
(e) Each Lender which is not a United States Person hereby agrees that:
(i) it shall, no later than the Agreement Date (or, in the case of a
Lender which becomes a party hereto pursuant to Section 11.6 after the
------------
Agreement Date, the date upon which such Lender becomes a party hereto) and
at such times as necessary in the reasonable determination of the Borrower,
deliver to the Borrower through the Administrative Lender, with a copy to
the Administrative Lender:
(A) if any lending office is located in the United States of America,
two (2) accurate and complete signed originals of Internal
Revenue Service Form 4224 or any successor thereto ("Form 4224"),
---------
(B) if any lending office is located outside the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 1001 or any successor thereto
("Form 1001"),
-----------
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such lending office or lending offices under this Agreement free
from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office or lending
offices or selects an additional lending office it shall, at the same time
or reasonably promptly thereafter but only to the extent the forms
previously delivered by it hereunder are no longer effective, deliver to
the Borrower through the Administrative Lender, with a copy to the
Administrative Lender, in replacement for the forms previously delivered by
it hereunder:
(A) if such changed or additional lending office is located in the
United States of America, two (2) accurate and complete signed
originals of Form 4224; or
(B) otherwise, two (2) accurate and complete signed originals of Form
1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such changed or additional lending office under this Agreement
free from withholding of United States Federal income tax;
-38-
<PAGE>
(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in clause
(ii) above) requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Lender and if the delivery of the same be
lawful, deliver to the Borrower through the Administrative Lender with a
copy to the Administrative Lender, two (2) accurate and complete original
signed copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by such Lender;
(iv) it shall, promptly upon the request of the Borrower to that
effect, deliver to the Borrower such other forms or similar documentation
as may be required from time to time by any applicable law, treaty, rule or
regulation in order to establish such Lender's tax status for withholding
purposes; and
(v) it shall notify the Borrower after any event (including an
amendment to, or a change in any applicable law or regulation or in the
written interpretation thereof by any regulatory authority or any judicial
authority, or by ruling applicable to such Lender of any governmental
authority charged with the interpretation or administration of any law)
shall occur that results in such Lender no longer being capable of
receiving payments under this Agreement without any deduction or
withholding of United States federal income tax.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.14 shall survive the payment in full of principal and interest
------------
hereunder.
(g) Each Lender (and the Administrative Lender with respect to payments to
the Administrative Lender for its own account) agrees that (i) it will take all
reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available by
treaty, existing administrative waiver or by virtue of the location of any
Lender's lending office), (ii) it will use reasonable best efforts (consistent
with its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its lending office, if the making of such a change would avoid
the need for, or reduce the amount of, any such additional amounts which may
thereafter accrue and would not, in the reasonable judgment of such Lender, be
materially disadvantageous to such Lender, and (iii) otherwise cooperate with
the Borrower to minimize amounts payable by the Borrower under this Section
-------
2.14; provided, however, the Lenders and the Administrative Lender shall not be
- ---- -------- -------
obligated by reason of this Section 2.14(g) to contest the payment of any Taxes
---------------
or Other Taxes or to disclose any information regarding its tax affairs or tax
computations or reorder its tax or other affairs or tax or other planning.
Subject to the foregoing, to the extent the Borrower pays sums pursuant to this
Section 2.14 and the Lender or the Administrative Lender receives a refund of
- ------------
any or all of such sums, such refund shall be applied to reduce any amounts then
due and owing under this Agreement or, to the extent that no amounts are due and
owing under this Agreement at the time such refunds are received, the party
receiving such refund shall promptly pay over all such refunded sums to the
Borrower, provided that (i) no Event of Default is in existence at such time or
(ii) all of the Obligations have been fully and finally paid or satisfied. At
such time, if any, that such Default or
-39-
<PAGE>
Event of Default is cured or waived, the party receiving such refund shall
promptly pay over all such refunded sums to the Borrower.
(h) If the Borrower becomes obligated to pay additional amounts described
in this Section 2.14 to any Lender, the Borrower may designate a financial
------------
institution reasonably acceptable to the Administrative Lender to replace such
Lender by purchasing for cash and receiving an assignment of such Lender's pro
rata share of the Commitments and the Rights of such Lender under the Loan
Documents without recourse to or warranty by, or expense to, such Lender, for a
purchase price equal to the outstanding amounts owed to such Lender (including
such additional amounts owing to such Lender pursuant to this Section 2.14).
------------
Upon execution of an Assignment Agreement, such other financial institution
shall be deemed to be a "Lender" for all purposes of this Agreement as set forth
in Section 11.6 hereof.
------------
Section 2.15 Letters of Credit.
-----------------
(a) The Letter of Credit Facility. The Borrower may request the Issuing
-----------------------------
Bank, on the terms and conditions hereinafter set forth, to issue, and the
Issuing Bank shall, if so requested, issue, letters of credit (the "Letters of
----------
Credit") for the account of the Borrower from time to time on any Business Day
- ------
from the date of the initial Advance until the Facility A Maturity Date in an
aggregate maximum amount (assuming compliance with all conditions to drawing)
not to exceed, at any time outstanding, the lesser of (i) $5,000,000 (the
"Letter of Credit Facility") and (ii) the Borrowing Base, less the sum of (A)
- --------------------------
the aggregate principal amount of Facility A Advances then outstanding plus (B)
the aggregate principal amount of Swing Line Advances outstanding. No Letter of
Credit shall have an expiration date (including all rights of renewal) later
than the earlier of (i) the Facility A Maturity Date or (ii) one year after the
date of issuance thereof. Immediately upon the issuance of each Letter of
Credit, the Issuing Bank shall be deemed to have sold and transferred to each
Lender, and each Lender shall be deemed to have purchased and received from the
Issuing Bank, in each case irrevocably and without any further action by any
party, an undivided interest and participation in such Letter of Credit, each
drawing thereunder and the obligations of the Borrower under this Agreement in
respect thereof in an amount equal to the product of (x) such Lender's Specified
Percentage times (y) the maximum amount available to be drawn under such Letter
of Credit (assuming compliance with all conditions to drawing). Within the
limits of the Letter of Credit Facility, and subject to the limits referred to
above, the Borrower may request the issuance of Letters of Credit under this
Section 2.15(a), repay any Facility A Advances resulting from drawings
- ---------------
thereunder pursuant to Section 2.15(c) and request the issuance of additional
---------------
Letters of Credit under this Section 2.15(a).
---------------
(b) Request for Issuance. Each Letter of Credit shall be issued upon
--------------------
notice, given not later than 11:00 a.m. (Dallas, Texas time) on the fourth
Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to the Issuing Bank. Each Letter of Credit shall be
issued upon notice given in accordance with the terms of any separate agreement
between the Borrower and the Issuing Bank in form and substance reasonably
satisfactory to the Borrower and the Issuing Bank providing for the issuance of
Letters of Credit pursuant to this Agreement and containing terms and conditions
not inconsistent with this
-40-
<PAGE>
Agreement (a "Letter of Credit Agreement"), provided that if any such terms and
-------------------------- --------
conditions are inconsistent with this Agreement, this Agreement shall control.
Each such notice of issuance of a Letter of Credit by the Borrower (a "Notice of
---------
Issuance") shall be by telecopier, specifying therein, in the case of a Letter
- --------
of Credit, the requested (A) date of such issuance (which shall be a Business
Day), (B) maximum amount of such Letter of Credit, (C) expiration date of such
Letter of Credit, (D) name and address of the beneficiary of such Letter of
Credit, and (E) form of such Letter of Credit and specifying such other
information as shall be required pursuant to the relevant Letter of Credit
Agreement. If the requested terms of such Letter of Credit are acceptable to the
Issuing Bank in its reasonable discretion, the Issuing Bank will, upon
fulfillment of the applicable conditions set forth in Article 3 hereof, make
---------
such Letter of Credit available to the Borrower at its office referred to in
Section 11.1 or as otherwise agreed with the Borrower in connection with such
- ------------
issuance.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a draft
-------------------------
drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Facility A Advance, which shall
bear interest at the Base Rate Basis, in the amount of such draft (but without
any requirement for compliance with the conditions set forth in Article 3
---------
hereof). In the event that a drawing under any Letter of Credit is not
reimbursed by the Borrower by 11:00 a.m. (Dallas, Texas time) on the first
Business Day after such drawing, the Issuing Bank shall promptly notify
Administrative Lender and each other Lender. Each such Lender shall, on the
first Business Day following such notification, make a Facility A Advance, which
shall bear interest at the Base Rate Basis, and shall be used to repay the
applicable portion of the Issuing Bank's Advance with respect to such Letter of
Credit, in an amount equal to the amount of its participation in such drawing
for application to reimburse the Issuing Bank (but without any requirement for
compliance with the applicable conditions set forth in Article 3 hereof) and
---------
shall make available to the Administrative Lender for the account of the Issuing
Bank, by deposit at the Administrative Lender's office, in same day funds, the
amount of such Advance. In the event that any Lender fails to make available to
the Administrative Lender for the account of the Issuing Bank the amount of such
Advance, the Issuing Bank shall be entitled to recover such amount on demand
from such Lender together with interest thereon at a rate per annum equal to the
lesser of (i) the Highest Lawful Rate or (ii) the Federal Funds Rate.
(d) Increased Costs. If after the Agreement Date any change in any Law or
---------------
in the interpretation thereof by any court or administrative or governmental
authority charged with the administration thereof shall either (i) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against letters of credit or guarantees issued by, or assets held by, or
deposits in or for the account of, the Issuing Bank or any Lender or any
corporation controlling the Issuing Bank or any Lender or (ii) impose on the
Issuing Bank or any Lender or any corporation controlling the Issuing Bank or
any Lender any other condition regarding this Agreement or any Letter of Credit,
and the result of any event referred to in the preceding clause (i) or (ii)
shall be to increase the cost to the Issuing Bank or any corporation controlling
the Issuing Bank of issuing or maintaining any Letter of Credit or to any Lender
or any corporation controlling such Lender of purchasing any participation
therein or making any Advance pursuant to Section 2.15(c), then, within 30 days
---------------
after demand by the Issuing Bank or
-41-
<PAGE>
such Lender (which demand shall be made not later than one year after the
Issuing Bank or applicable Lender receives notice of the relevant change), the
Borrower shall, subject to Section 11.9 hereof, pay to the Issuing Bank or such
------------
Lender, from time to time as specified by the Issuing Bank or such Lender,
additional amounts that shall be sufficient to compensate the Issuing Bank or
such Lender or any corporation controlling such Lender for such increased cost.
A certificate as to the amount of such increased cost, submitted to the Borrower
by the Issuing Bank or such Lender, shall certify that such increased costs were
actually incurred by the Issuing Bank or such Lender and shall show in
reasonable detail an accounting of the amount payable and the calculation used
to determine in good faith such amount and shall be conclusive absent manifest
or demonstrable error. In determining such amount, the Issuing Bank or such
Lender may use any reasonable averaging or attribution method. Nothing in this
Section 2.15(d) shall provide the Borrower or any Subsidiary of the Borrower the
- ---------------
right to inspect the records, files or books of the Issuing Bank or any Lender.
If the Borrower becomes obligated to pay additional amounts described in this
Section 2.15(d) to any Lender, the Borrower may designate a financial
- ---------------
institution reasonably acceptable to the Administrative Lender to replace such
Lender by purchasing for cash and receiving an assignment of such Lender's pro
rata share of the Commitments and the Rights of such Lender under the Loan
Documents without recourse to or warranty by, or expenses to, such Lender, for a
purchase price equal to the outstanding amounts owing to such Lender (including
such additional amounts owing to such Lender pursuant to this Section 2.15(d).
---------------
Upon execution of an Assignment Agreement, such other financial institution
shall be deemed to be a "Lender" for all purposes of this Agreement as set forth
in Section 11.6 hereof. The obligations of the Borrower under this Section
------------ -------
2.15(d) shall survive termination of this Agreement. The Issuing Bank or any
- -------
Lender claiming any additional compensation under this Section 2.15(d) shall use
---------------
reasonable efforts (consistent with legal and regulatory restrictions) to reduce
or eliminate any such additional compensation which may thereafter accrue and
which efforts would not, in the reasonable judgment of the Issuing Bank or such
Lender, be otherwise disadvantageous.
(e) Obligations Absolute. Except in the case of gross negligence or
--------------------
wilful misconduct on the part of the Issuing Bank, the obligations of the
Borrower under this Agreement with respect to any Letter of Credit, any Letter
of Credit Agreement and any other agreement or instrument relating to any Letter
of Credit or any Facility A Advance pursuant to Section 2.15(c) shall be
---------------
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement, such Letter of Credit Agreement and such other
agreement or instrument under all circumstances, including, without limitation,
the following circumstances:
(i) any lack of validity or enforceability of this Agreement, any
other Loan Document, any Letter of Credit Agreement, any Letter of Credit
or any other agreement or instrument relating thereto (collectively, the
"L/C Related Documents");
----------------------
(ii) (A) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of the Borrower in respect
of the Letters of Credit or any Facility A Advance pursuant to Section
-------
2.15(c) or (B) any other amendment or waiver of or any consent to departure
-------
from all or any of the L/C Related Documents;
-42-
<PAGE>
(iii) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, any
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C Related Documents or any
unrelated transaction;
(iv) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not comply with the terms
of the Letter of Credit;
(vi) any exchange, release or non-perfection of any Collateral, or any
release or amendment or waiver of or consent to departure from any
guarantee, for all or any of the Obligations of the Borrower in respect of
the Letters of Credit or any Revolving Credit Advance pursuant to Section
-------
2.15(c); or
-------
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor.
(f) Compensation for Letters of Credit.
----------------------------------
(i) Credit Fee. Subject to Section 11.9 hereof, the Borrower shall
---------- ------------
pay to the Administrative Lender for the ratable account of each Lender a
fee (which shall be payable quarterly in arrears on each Quarterly Date and
on the Facility A Maturity Date) equal to a rate per annum equal to the
product of the Applicable LIBOR Rate Margin in effect from time to time
multiplied by the average daily amount available for drawing under all
outstanding Letters of Credit. Subject to Section 11.9 hereof, such fee
------------
shall be computed on the basis of a 360-day year for the actual number of
days elapsed.
(ii) Issuance Fee. Subject to Section 11.9 hereof, the Borrower shall
------------ ------------
pay to the Administrative Lender for the account of the Issuing Bank an
issuance fee (which shall be payable on the date of issuance of each Letter
of Credit) in an amount equal to the greater of (a) $250 or (b) the product
of (x) 0.125% times (y) the face amount of the Letter of Credit being
issued.
(iii) Other Fees. Subject to Section 11.9 hereof, the Borrower shall
---------- ------------
pay, with respect to each amendment, renewal or transfer of each Letter of
Credit and each drawing made thereunder, reasonable documentary and
processing charges in accordance with the Issuing Bank's standard schedule
for such charges in effect at the time of such amendment, renewal, transfer
or drawing, as the case may be.
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<PAGE>
(g) L/C Cash Collateral Account.
---------------------------
(i) Upon the Facility A Maturity Date or the occurrence, and during
the continuance, of an Event of Default and demand by the Administrative
Lender pursuant to Section 8.2(c), the Borrower will promptly pay to the
--------------
Administrative Lender in immediately available funds an amount equal to the
maximum amount then available to be drawn under the Letters of Credit then
outstanding. Any amounts so received by the Administrative Lender shall be
deposited by the Administrative Lender in a deposit account maintained by
the Issuing Bank (the "L/C Cash Collateral Account").
---------------------------
(ii) As security for the payment of all Reimbursement Obligations and
for any other Obligations, the Borrower hereby grants, conveys, assigns,
pledges, sets over and transfers to the Administrative Lender (for the
benefit of the Issuing Bank and Lenders), and creates in the Administrative
Lender's favor (for the benefit of the Issuing Bank and Lenders) a Lien in,
all money, instruments and securities at any time held in or acquired in
connection with the L/C Cash Collateral Account, together with all proceeds
thereof. The L/C Cash Collateral Account shall be under the sole dominion
and control of the Administrative Lender and the Borrower shall have no
right to withdraw or to cause the Administrative Lender to withdraw any
funds deposited in the L/C Cash Collateral Account. At any time and from
time to time, upon the Administrative Lender's request, the Borrower
promptly shall execute and deliver any and all such further instruments and
documents, including UCC financing statements, as may be necessary,
appropriate or desirable in the Administrative Lender's judgment to obtain
the full benefits (including perfection and priority) of the security
interest created or intended to be created by this paragraph (ii) and of
the rights and powers herein granted. The Borrower shall not create or
suffer to exist any Lien on any amounts or investments held in the L/C Cash
Collateral Account other than the Lien granted under this paragraph (ii).
(iii) The Administrative Lender shall (A) apply any funds in the L/C
Cash Collateral Account on account of Reimbursement Obligations when the
same become due and payable, (B) after the Facility A Maturity Date, apply
any proceeds remaining in the L/C Cash Collateral Account first to pay any
-----
unpaid Obligations then outstanding hereunder and then to refund any
----
remaining amount to the Borrower.
(iv) The Borrower, no more than once in any calendar month, may direct
the Administrative Lender to invest the funds held in the L/C Cash
Collateral Account (so long as the aggregate amount of such funds exceeds
any relevant minimum investment requirement) in (A) Cash and Cash
Equivalents or direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof and (B) one or more other types of investments permitted by the
Determining Lenders, in each case with such maturities as the Borrower,
with the consent of the Determining Lenders, may specify, pending
application of such funds on account of Reimbursement Obligations or on
account of other Obligations, as the case may be. In the absence of any
such direction from the Borrower, the Administrative Lender shall invest
the funds held in the L/C Cash Collateral Account (so long as the aggregate
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<PAGE>
amount of such funds exceeds any relevant minimum investment requirement)
in one or more types of investments with the consent of the Determining
Lenders with such maturities as the Borrower, with the consent of the
Determining Lenders, may specify, pending application of such funds on
account of Reimbursement Obligations or on account of other Obligations, as
the case may be. All such investments shall be made in the Administrative
Lender's name for the account of the Lenders, subject to the ownership
interest therein of the Borrower. The Borrower recognizes that any losses
or taxes with respect to such investments shall be borne solely by the
Borrower, and the Borrower agrees to hold the Administrative Lender and the
Lenders harmless from any and all such losses and taxes, except to the
extent that such losses or taxes are finally judicially determined by a
court of competent jurisdiction to be the result of gross negligence or
wilful misconduct of the Administrative Lender. Administrative Lender may
liquidate any investment held in the L/C Cash Collateral Account in order
to apply the proceeds of such investment on account of the Reimbursement
Obligations as provided in Section 2.15(g)(iii) hereof (or on account of
--------------------
any other Obligation then due and payable, as the case may be) without
regard to whether such investment has matured and without liability for any
penalty or other fee incurred (with respect to which the Borrower hereby
agrees to reimburse the Administrative Lender) as a result of such
application.
(v) After the establishment of the L/C Cash Collateral Account
pursuant to Section 2.15(g)(i) hereof, the Borrower shall pay to the
------------------
Administrative Lender the fees customarily charged by the Issuing Bank with
respect to the maintenance of accounts similar to the L/C Cash Collateral
Account.
ARTICLE 3
Conditions Precedent
--------------------
Section 3.1 Conditions Precedent to the Initial Advance and the Initial
-----------------------------------------------------------
Issuance of Letters of Credit. The obligation of each Lender to make any Advance
- -----------------------------
and the obligation of the Issuing Bank to issue Letters of Credit is subject to
(i) receipt by the Administrative Lender of the following items which are to be
delivered, in form and substance satisfactory to each Lender, with a copy
(except for the Notes and this Agreement) for each Lender, and (ii) satisfaction
of the following conditions which are to be satisfied:
(a) A loan certificate of each Obligor certifying as to the accuracy of
its representations and warranties in the Loan Documents, certifying that no
Default has occurred, and including a certificate of incumbency with respect to
each Authorized Signatory, and including (i) a copy of the articles or
certificate of incorporation of such Obligor, certified to be true, complete and
correct by the secretary of state of its state of organization, and (ii) a copy
of a certificate of good standing and a certificate of existence for its state
of organization and, with respect to the Borrower, the States of Texas,
California and New Jersey;
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<PAGE>
(b) a duly executed Facility A Note and Facility B Note payable to the
order of each Lender and in an amount for each Lender equal to its Specified
Percentage of each Commitment, respectively;
(c) UCC searches in appropriate jurisdictions where Collateral is located;
(d) opinions of counsel to each Obligor addressed to the Lenders and in
form and substance satisfactory to the Lenders, dated the Agreement Date, and
covering certain of the matters set forth in Sections 4.1(a), (b), (c), (e),
--------------- --- --- ---
(f), (h), (m), (n), (o) and (p) and such other matters incident to the
- --- --- --- --- --- ---
transactions contemplated hereby as the Administrative Lender or Special Counsel
may reasonably request;
(e) reimbursement for the Administrative Lender for Special Counsel's
reasonable and customary fees (on an hourly basis) and expenses rendered through
the date hereof, to the extent invoiced;
(f) evidence that all proceedings of each Obligor taken in connection with
the transactions contemplated by this Agreement and the other Loan Documents
shall be reasonably satisfactory in form and substance to the Lenders and
Special Counsel; and the Lenders shall have received copies of all documents or
other evidence which the Administrative Lender, Special Counsel or any Lender
may reasonably request in connection with such transactions;
(g) any fees or expenses required to be paid on or before the Agreement
Date pursuant to the Administrative Lender Fee Letter and/or the Upfront Fee
Letter;
(h) duly executed and completed Security Agreements, dated as of the
Agreement Date, granting a Lien, in all Collateral covered thereby, together
with related financing statements, the CFI Note and the ClientLink Note duly
endorsed, and insurance certificates listing Administrative Lender as loss payee
and additional insured and otherwise in a form required by the Collateral
Documents;
(i) the duly executed Swing Line Note payable to the order of the Swing
Line Bank in the aggregate principal amount of $5,000,000;
(j) a duly executed completed Pledge Agreement, dated as of the Agreement
Date, granting a Lien in all Collateral covered thereby, together with related
financing statements, stock powers and stock certificates evidencing ownership
of CFI;
(k) simultaneously with the making of the initial Advance, executed UCC-3
Termination Statements to be filed in appropriate jurisdictions to terminate all
Liens against assets of the Borrower and its Subsidiaries other than Permitted
Liens;
-46-
<PAGE>
(l) all Securitization Documents, which shall be on terms and conditions
acceptable to the Administrative Lender, including any amendments and
modifications thereto as the Administrative Lender determines are necessary as a
result of the transactions contemplated by this Agreement and the other Loan
Documents;
(m) there shall have occurred no material adverse change in the business,
assets or financial condition of the Borrower and its Subsidiaries, taken as a
whole, since the date of the financial statements referred to in Section
-------
4.1(j)(i) hereof;
- ---------
(n) each of the Guaranties, duly executed by the Guarantor party thereto;
(o) all Indebtedness of the Borrower under the Existing Credit Agreement
shall have been (or shall simultaneously therewith be) refinanced in full
pursuant to the terms hereof;
(p) in form and substance reasonably satisfactory to the Lenders and
Special Counsel, such other documents, instruments and certificates as the
Administrative Lender or any Lender may reasonably require in connection with
the transactions contemplated hereby, including without limitation, evidence of
the status, organization or authority of the Borrower or any Subsidiary of the
Borrower, and the enforceability of the Obligations; and
(q) The Borrower shall have delivered a Borrowing Base Report reflecting
Eligible Accounts and Eligible Inventory as of August 31, 1996, but reflecting
the RPA Interest as of the Agreement Date.
Section 3.2 Conditions Precedent to All Advances and Letters of Credit.
----------------------------------------------------------
The obligation of each Lender to make each Advance hereunder (including the
initial Advance) and the obligation of the Issuing Bank to issue each Letter of
Credit (including the initial Letter of Credit) is subject to fulfillment of the
following conditions immediately prior to or contemporaneously with each such
Advance or issuance:
(a) With respect to each Advance and each issuance of a Letter of Credit,
all of the representations and warranties of each Obligor under the Loan
Documents, which, pursuant to Section 4.2 hereof, are made at and as of the time
-----------
of each such Advance or issuance, shall be true and correct at such time in all
material respects, both before and after giving effect to the application of the
proceeds of the Advance or Letter of Credit.
(b) The incumbency of the Authorized Signatories shall be as stated in the
certificate of incumbency delivered in the Borrower's loan certificate pursuant
to Section 3.1(a) or as subsequently modified and reflected in a certificate of
--------------
incumbency delivered to the Administrative Lender. The Lenders may, without
waiving this condition, consider it fulfilled and a representation by the
Borrower made to such effect if no written notice to the contrary, dated on or
before the date of such Advance or Letter of Credit, is received by the
Administrative Lender from the Borrower prior to the making of such Advance or
issuance of such Letter of Credit;
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<PAGE>
(c) There shall not exist a Default or Event of Default hereunder that has
not been waived;
(d) The aggregate Advances and Letters of Credit, after giving effect to
such proposed Advance or Letter of Credit, shall not exceed the maximum
principal amount then permitted to be outstanding hereunder;
(e) No order, judgment, injunction or decree of any Tribunal shall purport
to enjoin or restrain any Lender or the Issuing Bank from making any Advance or
issuing any Letter of Credit;
(f) There shall not be pending, or to the knowledge of the Borrower,
threatened any Litigation against or affecting the Borrower or any Subsidiary of
the Borrower or any property of the Borrower or any Subsidiary of the Borrower
that has not been disclosed in writing by the Borrower pursuant to Section
-------
4.1(h) or 6.6(a) prior to the making of the last preceding Advance or the
- ------ ------
issuance of the last preceding Letter of Credit (or in the case of the initial
Advances and Letters of Credit, prior to the Agreement Date) and there shall
have occurred no development not so disclosed in any such Litigation that, in
either event, could reasonably be expected to have a Material Adverse Effect;
and
(g) There shall have occurred no material adverse change in the business,
financial condition, results of operations or business prospects of the Borrower
and its Subsidiaries, taken as a whole, since December 31, 1995.
Notwithstanding anything herein to the contrary, the obligation of
each Lender to make a Facility A Advance, pursuant to Section 2.2(g) and 2.15(c)
-------------- -------
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, (i) the occurrence of any Default
or Event of Default, (ii) the failure of the Borrower to satisfy any condition
set forth in this Section 3.2 or (iii) any other circumstance, happening or
-----------
event whatsoever.
Section 3.3 Conditions Precedent to Conversions and Continuations.
-----------------------------------------------------
The obligation of the Lenders to convert any existing Base Rate
Advance into a LIBOR Advance or to continue any existing LIBOR Advance is
subject to the condition precedent that on the date of such conversion or
continuation no Default or Event of Default shall have occurred and be
continuing or would result from the making of such conversion or continuation.
The acceptance of the benefits of each such conversion and continuation shall
constitute a representation and warranty by the Borrower to each of the Lenders
that no Default or Event of Default shall have occurred and be continuing or
would result from the making of such conversion or continuation.
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<PAGE>
ARTICLE 4
Representations and Warranties
------------------------------
Section 4.1 Representations and Warranties. The Borrower hereby
------------------------------
represents and warrants to each Lender as follows:
(a) Organization; Power; Qualification. The respective jurisdiction of
----------------------------------
organization or incorporation and percentage ownership by the Borrower of the
Subsidiaries listed on Schedule 4 are true and correct as of the Agreement Date.
----------
Schedule 4 is a complete and accurate listing as of the Agreement Date, showing
- ----------
with respect to the Borrower and each Subsidiary of the Borrower (a) its mailing
address, which is its principal place of business, (b) the classes of its
Capital Stock and the number and amount of its Capital Stock authorized and
outstanding, (c) each record and beneficial owner of 5% or more of its
outstanding Capital Stock, and (d) all outstanding options, rights, rights of
conversion, redemption, purchase or repurchase, rights of first refusal and
similar rights relating to the Capital Stock. All of the outstanding Capital
Stock of the Borrower and each Subsidiary of the Borrower is validly issued,
fully paid and non-assessable. Each of the Borrower and its Subsidiaries is a
corporation or other legal Person duly organized, validly existing and in good
standing under the laws of its state of incorporation or organization. Each of
the Borrower and its Subsidiaries has the legal power and authority to own its
properties and to carry on its business as now being and hereafter proposed to
be conducted. Each of the Borrower and its Subsidiaries is authorized to do
business, duly qualified and in good standing as set forth in Schedule 7 and no
----------
qualification or authorization is necessary in any other jurisdictions in which
the character of its properties or the nature of its business requires such
qualification or authorization, except where the failure to be so qualified or
authorized could not reasonably be expected to have a Material Adverse Effect.
(b) Authorization. The Borrower has legal power and has taken all
-------------
necessary legal action to authorize it to borrow and request Letters of Credit
hereunder. Each of the Borrower and its Subsidiaries has legal power and has
taken all necessary legal action to execute, deliver and perform the Loan
Documents to which it is party in accordance with the terms thereof, and to
consummate the transactions contemplated thereby. Each Loan Document has been
duly executed and delivered by the Borrower or the Subsidiary of the Borrower
executing it. Each of the Loan Documents to which the Borrower or any of its
Subsidiaries is a party is a legal, valid and binding obligation of the Borrower
or such Subsidiary, as applicable, enforceable in accordance with its terms,
subject, to enforcement of remedies, to the following qualifications: (i)
equitable principles generally, and (ii) Debtor Relief Laws (insofar as any such
law relates to the bankruptcy, insolvency or similar event of the Borrower or
any Subsidiary of the Borrower).
(c) Compliance with Other Loan Documents and Contemplated Transactions.
------------------------------------------------------------------
Borrower and its Subsidiaries of the Loan Documents to which they are
respectively a party, and the consummation of the transactions contemplated
thereby, do not and will not (i) require any consent or approval necessary on or
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<PAGE>
prior to the Agreement Date not already obtained, except to the extent that the
failure to obtain any such consent or approval could not reasonably be expected
to have a Material Adverse Effect, (ii) violate any Applicable Law, (iii)
conflict with, result in a breach of, or constitute a default under the
certificate of incorporation or by-laws of the Borrower or any Subsidiary of the
Borrower, (iv) conflict with, result in a breach of, or constitute a default
under any Necessary Authorization, indenture, agreement or other instrument, to
which the Borrower or any Subsidiary of the Borrower is a party or by which they
or their respective properties may be bound, the result of which could
reasonably be expected to have a Material Adverse Effect, or (v) result in or
require the creation or imposition of any Lien (other than Liens in favor of the
Lenders to secure the Obligations hereunder) upon or with respect to any
property now owned or hereafter acquired by the Borrower or any Subsidiary of
the Borrower.
(d) Business. The Borrower and its Subsidiaries are engaged primarily
--------
in the business of providing distributed desktop computer-related products and
network integration services for large corporate customers worldwide and
providing related services, including LAN/WAN projects and consulting, network
management, help desk, field engineering configuration, distribution and
procurement and activities directly related thereto.
(e) Licenses, etc. All Necessary Authorizations have been duly obtained,
--------------
and are in full force and effect without any known conflict with the rights of
others and free from any unduly burdensome restrictions, unless the failure to
obtain or have in effect such Necessary Authorizations could not reasonably be
expected to result in a Material Adverse Effect. The Borrower and its
Subsidiaries are and will continue to be in compliance in all material respects
with all provisions thereof. No circumstance exists which could reasonably be
expected to impair the utility of the Necessary Authorization or the right to
renew such Necessary Authorization the effect of which could reasonably be
expected to have a Material Adverse Effect. No Necessary Authorization is the
subject of any pending or, to the best of the Borrower's knowledge, threatened
challenge, suspension, cancellation or revocation, the effect of which could
reasonably be expected to have a Material Adverse Effect.
(f) Compliance with Law. The Borrower and its Subsidiaries are in
-------------------
compliance in all respects with all Applicable Laws, except where the failure to
so comply could not reasonably be expected to have a Material Adverse Effect.
(g) Title to Properties. The Borrower and its Subsidiaries have good and
-------------------
indefeasible title to, or a valid leasehold interest in, all of their material
assets. None of their assets are subject to any Liens, except Permitted Liens.
No financing statement or other Lien filing (except relating to Permitted Liens)
is on file in any state or jurisdiction that names the Borrower or any of its
Subsidiaries as debtor or covers (or purports to cover) any assets of the
Borrower or any of its Subsidiaries. The Borrower and its Subsidiaries have not
signed any such financing statement or filing, nor any security agreement
authorizing any Person to file any such financing statement or filing (except
relating to Permitted Liens).
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(h) Litigation. Except as reflected on Schedule 3 hereto, as of the
---------- ----------
Agreement Date there is no Litigation pending against, or, to the Borrower's
current actual knowledge, threatened against the Borrower, or in any other
manner relating directly and adversely to the Borrower or any of its
Subsidiaries, or any of their respective properties, in any court or before any
arbitrator of any kind or before or by any governmental body in which the amount
claimed (in excess of applicable insurance) exceeds $100,000.
(i) Taxes. All material federal, state and other tax returns of the
-----
Borrower and its Subsidiaries required by law to be filed have been duly filed
or extensions have been timely filed, and all material federal, state and other
Taxes upon the Borrower, its Subsidiaries or any of their properties, income,
profits and assets, which are due and payable, have been paid, unless the same
are being diligently contested in accordance with Section 5.6 hereof. The
-----------
charges, accruals and reserves on the books of the Borrower and its Subsidiaries
in respect of their Taxes are, in the reasonable judgment of the Borrower,
adequate.
(j) Financial Statements; Material Liabilities.
------------------------------------------
(i) The Borrower has heretofore delivered to Lenders (a) the audited
consolidated balance sheets of the Borrower and its Subsidiaries as at
December 31, 1995, and the related statements of earnings and changes in
investment and statement of cash flows for the twelve-month period then
ended, and (b) unaudited consolidated balance sheets of the Borrower and
its Subsidiaries as at June 30, 1996, and the related statements of
earnings and changes in investment and statement of cash flows for the six-
month period then ended. Such financial statements were prepared in
conformity with GAAP (except for the absence of footnotes) and fairly
present, in all material respects, the financial position of the Borrower
and its Subsidiaries as at the date thereof and the combined results of
operations and cash flows for the period covered thereby.
(ii) The projected financial statements of the Borrower and its
Subsidiaries delivered to the Lenders prior to or on the Agreement Date
were prepared in good faith and management of the Borrower believes them to
be based on reasonable assumptions (which assumptions have been included in
the most recent projections furnished to the Lenders prior to the Agreement
Date) and to fairly present in all material respects the projected
financial condition of the Borrower and its Subsidiaries and the projected
results of operations as of the dates and for the periods shown for the
Borrower and its Subsidiaries, it being recognized by the Lenders that such
projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections
may differ from the projected results.
(iii) The financial statements of the Borrower and its Subsidiaries
delivered to the Lenders pursuant to Section 6.1, 6.2 and 6.3 hereof fairly
----------- --- ---
present in all material respects their respective financial condition and
their respective results of operations as of the dates and for the periods
shown, all in accordance with GAAP, subject to normal year-end adjustments.
The latest of such financial statements reflects all material liabilities,
direct and contingent, of the Borrower and each Subsidiary of the Borrower
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that are required to be disclosed in accordance with GAAP. As of the date
of the latest of such financial statements, there were no Guaranties,
liabilities for Taxes, forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are substantial in
amount that are required to be reflected but that are not reflected on such
financial statements.
(k) No Adverse Change. Since December 31, 1995, no event or circumstance
-----------------
has occurred or arisen which is reasonably likely to have a Material Adverse
Effect.
(l) ERISA. None of the Borrower or its Controlled Group maintains or
-----
contributes to any Plan subject to Title IV of ERISA other than those disclosed
to the Administrative Lender in writing. Each such Plan (other than any
Multiemployer Plan) is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and any other applicable Law, except
to the extent that failure to so comply would not reasonably be expected to have
a Material Adverse Effect. With respect to each Plan (other than any
Multiemployer Plan) of the Borrower and each member of its Controlled Group, all
reports required under ERISA or any other Applicable Law to be filed with any
Tribunal, the failure of which to file could reasonably be expected to result in
liability of the Borrower or any member of its Controlled Group in excess of
$100,000, have been duly filed. All such reports are true and correct in all
material respects as of the date given. No Plan of the Borrower or any member
of its Controlled Group has been terminated under Section 4041(c) of ERISA nor
has any accumulated funding deficiency (as defined in Section 412(a) of the
Code) been incurred (without regard to any waiver granted under Section 412 of
the Code), nor has any funding waiver from the Internal Revenue Service been
received or requested the result of which could reasonably be expected to have a
Material Adverse Effect. None of the Borrower or any member of its Controlled
Group has failed to make any contribution or pay any amount due or owing as
required under the terms of any such Plan, or by Section 412 of the Code or
Section 302 of ERISA by the due date under Section 412 of the Code and Section
302 of ERISA, the result of which could reasonably be expected to have a
Material Adverse Effect. There has been no ERISA Event or any event requiring
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any
Plan or its related trust of the Borrower or any member of its Controlled Group
since the effective date of ERISA. The present value of the benefit
liabilities, as defined in Title IV of ERISA, of each Plan subject to Title IV
of ERISA (other than a Multiemployer Plan) of the Borrower and each member of
its Controlled Group does not exceed by more than $500,000 the present value of
the assets of each such Plan as of the most recent valuation date using each
such Plan's actuarial assumptions at such date. There are no pending, or to the
Borrower's knowledge threatened, claims, lawsuits or actions (other than routine
claims for benefits in the ordinary course) asserted or instituted against, and
neither the Borrower nor any member of its Controlled Group has knowledge of any
threatened litigation or claims against, the assets of any Plan or its related
trust or against any fiduciary of a Plan with respect to the operation of such
Plan, the result of which could reasonably be expected to have a Material
Adverse Effect. None of the Borrower or, to the Borrower's knowledge, any
member of its Controlled Group has engaged in any prohibited transactions,
within the meaning of Section 406 of ERISA or Section 4975 of the Code, in
connection with any Plan the result of which could reasonably be expected to
have a Material Adverse Effect. None of the Borrower or any member of its
Controlled
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Group has withdrawn from any Multiemployer Plan, nor has incurred or
reasonably expects to incur (A) any liability under Title IV of ERISA (other
than premiums due under Section 4007 of ERISA to the PBGC), (B) any withdrawal
liability (and no event has occurred which with the giving of notice under
Section 4219 of ERISA would result in such liability) under Section 4201 of
ERISA as a result of a complete or partial withdrawal (within the meaning of
Section 4203 or 4205 of ERISA) from a Multiemployer Plan, or (C) any liability
under Section 4062 of ERISA to the PBGC or to a trustee appointed under Section
4042 of ERISA. None of the Borrower, any member of its Controlled Group, or any
organization to which the Borrower or any member of its Controlled Group is a
successor or parent corporation within the meaning of ERISA Section 4069(b), has
engaged in a transaction within the meaning of ERISA Section 4069, the result of
which could reasonably be expected to have a Material Adverse Effect. None of
the Borrower or any member of its Controlled Group maintains or has established
any Plan, which is a welfare benefit plan within the meaning of Section 3(1) of
ERISA and which provides for continuing benefits or coverage for any participant
or any beneficiary of any participant after such participant's termination of
employment, except as may be required by any Applicable Law, the result of which
could reasonably be expected to have a Material Adverse Effect. Each of
Borrower and its Controlled Group which maintains a Plan which is a welfare
benefit plan within the meaning of Section 3(1) of ERISA has complied in all
material respects with any applicable notice and continuation requirements of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
regulations thereunder. None of the Borrower or any member of its Controlled
Group maintains, has established, or has ever participated in a multiemployer
welfare benefit arrangement within the meaning of Section 3(40)(A) of ERISA.
(m) Compliance with Regulations G, T, U and X. The Borrower is not
-----------------------------------------
engaged principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, and no part of the proceeds of the Advances or Letters
of Credit will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock. No more
than 25% of the assets of the Borrower and its Subsidiaries are margin stock.
None of the Borrower and its Subsidiaries nor any agent acting on their behalf,
have taken or will knowingly take any action which would cause this Agreement or
any other Loan Documents to violate any regulation of the Board of Governors of
the Federal Reserve System or to violate the Securities Exchange Act of 1934, in
each case as in effect now or as the same may hereafter be in effect.
(n) Authorization. The Borrower and its Subsidiaries are not required to
-------------
obtain any Necessary Authorization on or prior to the Agreement Date that has
not already been obtained from, or effect any material filing or registration
that has not already been effected with, any Tribunal in connection with the
execution and delivery of this Agreement or any other Loan Document, or the
performance thereof, in accordance with their respective terms, including any
borrowings hereunder, except for the filing of financing statements (and other
similar notices) containing a description of the Collateral with certain
Tribunals, including the United States Trademark and Copyright Offices.
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(o) Absence of Default. The Borrower and its Subsidiaries are in
------------------
compliance in all material respects with all of the provisions of their
certificate of incorporation and by-laws, and no event has occurred or failed to
occur, which has not been remedied or waived, the occurrence or non-occurrence
of which constitutes, or which with the passage of time or giving of notice or
both would constitute, (i) an Event of Default or (ii) a default by the Borrower
or any of its Subsidiaries under any material indenture, agreement or other
instrument, or any judgment, decree or order to which the Borrower or any of its
Subsidiaries or by which they or any of their respective properties is bound,
except to the extent that such default could not reasonably be expected to have
a Material Adverse Effect.
(p) Governmental Regulation. Neither the Borrower nor any of its
-----------------------
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940. Neither the entering into or performance by the
Borrower of this Agreement nor the issuance of the Notes violates any provision
of such act or requires any consent, approval, or authorization of, or
registration with, the Securities and Exchange Commission or any other Tribunal
pursuant to any provisions of such act.
(q) Environmental Matters. Neither the Borrower nor any Subsidiary has
---------------------
any current actual knowledge that any substance deemed hazardous by any
Applicable Environmental Law, has been installed (i) on any real property fee
title to which is now owned by the Borrower or any of its Subsidiaries or (ii)
by Borrower or any of its Subsidiaries on any real property leased by the
Borrower or any of its Subsidiaries, in either case in a manner which does not
comply with Applicable Environmental Laws, except to the extent that the failure
to so comply could not reasonably be expected to have a Material Adverse Effect.
The Borrower and its Subsidiaries are not in violation of or subject to any
existing, pending or, to the best of the Borrower's knowledge, threatened
investigation or inquiry by any Tribunal or to any remedial obligations under
any Applicable Environmental Laws, the effect of which could reasonably be
expected to have a Material Adverse Effect. The Borrower and its Subsidiaries
have not obtained and are not required to obtain any permits, licenses or
similar authorizations other than certificates of occupancy and building permits
and other authorizations that have been obtained to construct, occupy, operate
or use any buildings, improvements, fixtures, and equipment forming a part of
any real property owned or leased by the Borrower or any Subsidiary of the
Borrower by reason of any Applicable Environmental Laws, except to the extent
that the failure to so obtain could not reasonably be expected to have a
Material Adverse Effect. The Borrower and its Subsidiaries undertook, at the
time of acquisition of fee title to any real property, reasonable inquiry into
the previous ownership and uses of such real property consistent with good
commercial or customary practice. The Borrower and its Subsidiaries have taken
reasonable steps to determine, and the Borrower and its Subsidiaries have no
current actual knowledge, that any hazardous substances or solid wastes have
been disposed of or otherwise released (i) on or to the real property fee title
to which is owned by the Borrower or any of its Subsidiaries or (ii) by Borrower
or any of its Subsidiaries on or to any real property leased by Borrower or any
of its Subsidiaries, all within the meaning of the Applicable Environmental
Laws, the effect of which could reasonably be expected to have a Material
Adverse Effect. The Borrower and its Subsidiaries have disposed of all
hazardous substances and solid wastes (if
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<PAGE>
any), all within the meaning of the Applicable Environmental Laws, generated in
their respective businesses in compliance with all Applicable Environmental
Laws, except to the extent that the failure to so comply could not reasonably be
expected to have a Material Adverse Effect.
(r) Certain Fees. No broker's, finder's or other fee or commission will
------------
be payable by the Borrower (other than to the Lenders hereunder) with respect to
the making of the Commitments or the Advances hereunder. The Borrower agrees to
indemnify and hold harmless the Administrative Lender and each Lender from and
against any claims, demand, liability, proceedings, costs or expenses asserted
with respect to or arising in connection with any such fees or commissions.
(s) Patents, Etc. The Borrower and its Subsidiaries have collectively
------------
obtained or applied for all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their business as presently conducted and as
proposed to be conducted, except to the extent that the failure to so obtain or
apply could not reasonably be expected to have a Material Adverse Effect.
Nothing has come to the current actual knowledge of the Borrower or any of its
Subsidiaries to the effect that (i) any process, method, part or other material
presently contemplated to be employed by the Borrower or any Subsidiary of the
Borrower may infringe any patent, trademark, service mark, trade name,
copyright, license or other right owned by any other Person, or (ii) there is
pending or overtly threatened any claim or litigation against or affecting the
Borrower or any Subsidiary of the Borrower contesting its right to sell or use
any such process, method, part or other material, which could reasonably be
expected to have a Material Adverse Effect.
(t) Disclosure. All factual information furnished by the Borrower or any
----------
of its Subsidiaries in writing to the Administrative Lender or any Lender in
connection with this Agreement, the other Loan Documents or any transaction
contemplated herein or therein is, and all other factual information hereafter
furnished by or on behalf of the Borrower or any of its Subsidiaries in writing
to the Administrative Lender or any Lender will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided. There is no fact known
to the Borrower and not known to the public generally that could reasonably be
expected to have a Material Adverse Effect, which has not been set forth in this
Agreement or in the documents, certificates and statements furnished to the
Lenders by or on behalf of the Borrower prior to the date hereof in connection
with the transaction contemplated hereby.
(u) Solvency. The Borrower is, and Borrower and its Subsidiaries on a
--------
consolidated basis are, Solvent.
(v) Labor Relations. Except as provided on Schedule 8, neither the
--------------- ----------
Borrower nor any Subsidiary is a party to a collective bargaining agreement or
similar agreement, and the Borrower and each Subsidiary is in compliance in all
material respects with all Laws respecting employment and employment practices,
terms and conditions of employment, wages and hours
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and other laws related to the employment of its employees, except where the
failure to comply could not reasonably be expected to result in a Material
Adverse Effect, and there are no arrears in the payment of wages, withholding or
social security taxes, unemployment insurance premiums or other similar
obligations of the Borrower or any Subsidiary or for which the Borrower or any
Subsidiary may be responsible other than in the ordinary course of business,
except for such unpaid or unwithheld arrears which could not reasonably be
expected to result in a Material Adverse Effect. There is no strike, work
stoppage or labor dispute with any union or group of employees pending or
overtly threatened involving Borrower or any Subsidiary that could reasonably be
expected to have a Material Adverse Effect.
(w) Consolidated Business Entity. The Borrower and its Material
----------------------------
Subsidiaries are operated as a part of one consolidated business entity and are
directly or indirectly dependent upon each other for and in connection with
their respective business activities.
Section 4.2 Survival of Representations and Warranties, etc. All
-----------------------------------------------
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be made at and as of the Agreement Date and at and
as of the date of each Advance and the date of issuance of each Letter of
Credit, and each shall be true and correct in all material respects when made,
except to the extent (a) previously fulfilled in accordance with the terms
hereof or (b) previously waived in writing by the Determining Lenders with
respect to any particular factual circumstance or permitted by the terms of this
Agreement. All such representations and warranties shall survive, and not be
waived by, the execution hereof by any Lender, any investigation or inquiry by
any Lender, or by the making of any Advance or the issuance of any Letter of
Credit under this Agreement.
ARTICLE 5
General Covenants
-----------------
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 5.1 Preservation of Existence and Similar Matters. The Borrower
---------------------------------------------
shall, and shall cause each Subsidiary of the Borrower to:
(a) except as otherwise permitted pursuant to Section 7.4 hereof,
-----------
preserve and maintain, or timely obtain and thereafter preserve and maintain,
its existence, rights, franchises, licenses, authorizations, consents,
privileges and all other Necessary Authorizations from any Tribunal, the loss of
which could reasonably be expected to have a Material Adverse Effect; and
(b) except as otherwise permitted pursuant to Section 7.4 hereof,
-----------
qualify and remain qualified and authorized to do business in each jurisdiction
in which the character of its properties or the nature of its business requires
such qualification or authorization, unless the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
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Section 5.2 Business; Compliance with Applicable Law. The Borrower and
----------------------------------------
its Subsidiaries shall (a) engage primarily in the businesses set forth in
Section 4.1(d) hereof, and (b) comply in all respects with the requirements of
- --------------
all Applicable Law, except where the failure to so comply could not reasonably
be expected to have a Material Adverse Effect.
Section 5.3 Maintenance of Properties. The Borrower shall, and shall
-------------------------
cause each Subsidiary of the Borrower to, maintain or cause to be maintained all
its properties (whether owned or held under lease) in reasonably good repair,
working order and condition, taken as a whole, and from time to time make or
cause to be made all appropriate (in the reasonable judgment of the Borrower)
repairs, renewals, replacements, additions, betterments and improvements
thereto, except where the failure to so maintain, repair, renew, replace or
improve could not reasonably be expected to have a Material Adverse Effect.
Section 5.4 Accounting Methods and Financial Records. The Borrower
----------------------------------------
shall, and shall cause each Subsidiary of the Borrower to, maintain a system
of accounting established and administered in accordance with GAAP, keep
adequate records and books of account in which complete entries will be made and
all transactions reflected in accordance with GAAP, and keep accurate and
complete records of its respective assets. Except with respect to a change in
the fiscal year of any Subsidiary to conform to the fiscal year of the Borrower,
the Borrower and each of its Subsidiaries shall maintain its fiscal year in the
manner in existence on the Agreement Date.
Section 5.5 Insurance. The Borrower shall, and shall cause each
---------
Subsidiary of the Borrower to, maintain insurance from responsible companies in
such amounts and against such risks as shall be customary and usual in the
industry for companies of similar size and capability. Each insurance policy
shall (a) provide for at least 30 days' prior notice to the Administrative
Lender of any proposed termination or cancellation of such policy, whether on
account of default or otherwise and (b) otherwise contain the requirements for
insurance set forth in the Security Agreements.
Section 5.6 Payment of Taxes and Claims. The Borrower shall, and shall
---------------------------
cause each Subsidiary of the Borrower to, pay and discharge all material Taxes
to which they are subject prior to the date on which penalties attach thereto,
and all lawful material claims for labor, materials and supplies which, if
unpaid, might become a Lien upon any of its properties; except that no such Tax
or claim need be paid which is being diligently contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on the appropriate books, but only so long as no Lien shall attach with
respect thereto and no foreclosure, distraint, sale or similar proceedings shall
have been commenced. The Borrower shall, and shall cause each Subsidiary of the
Borrower to, timely file all information returns (or extensions of such filing
deadlines) required by federal, state or local tax authorities.
Section 5.7 Visits and Inspections. The Borrower shall, and shall cause
----------------------
each Subsidiary of the Borrower to, promptly permit representatives of the
Administrative Lender or any Lender from time to time after reasonable notice by
the Administrative Lender or any Lender to (a) visit and inspect the properties
of the Borrower and its Subsidiaries as often as the
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Administrative Lender or any Lender shall reasonably deem advisable, (b) audit,
inspect and make extracts from and copies of the Borrower's and each such
Subsidiary's books and records, and (c) discuss with the Borrower's and each
such Subsidiary's appropriate directors, officers, employees and auditors its
business, assets, liabilities, financial positions, results of operations and
business prospects, provided that such representatives of the Administrative
--------
Lender or any Lender shall keep confidential all information obtained pursuant
to this Section 5.7 to the extent required by Section 11.14. The Borrower shall
----------- -------------
pay the reasonable expenses related to inspections and audits performed by the
Administrative Lender. Prior to the occurrence of an Event of Default, all such
visits and inspections shall be conducted during normal business hours.
Following the occurrence and during the continuance of an Event of Default, such
visits and inspections shall be conducted at any time requested by the
Administrative Lender or any Lender without any requirement for reasonable
notice.
Section 5.8 Use of Proceeds. The proceeds of (a) the Facility A Advances
---------------
and the Letters of Credit shall be used by the Borrower for refinancing of
Indebtedness of the Borrower, Capital Expenditures, Acquisitions permitted under
Section 7.6 hereof and for working capital and for other general corporate
- -----------
purposes and (b) the Facility B Advances shall be used solely to purchase real
property to be utilized as the corporate headquarters for the Borrower.
SECTION 5.9 INDEMNITY.
---------
(a) THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS
THE ADMINISTRATIVE LENDER, EACH LENDER, EACH OF THEIR RESPECTIVE AFFILIATES, AND
EACH OF THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES') OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS AND CONSULTANTS (INCLUDING, WITHOUT LIMITATION,
THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED SATISFACTION OF
ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING (COLLECTIVELY,
"INDEMNITEES") FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
-----------
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, REASONABLE COSTS,
REASONABLE EXPENSES AND REASONABLE DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS
OF COUNSEL FOR SUCH INDEMNITEES IN CONNECTION WITH ANY INVESTIGATIVE,
ADMINISTRATIVE OR JUDICIAL PROCEEDING, WHETHER OR NOT SUCH INDEMNITEES SHALL BE
DESIGNATED A PARTY THERETO), IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH
INDEMNITEES (WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL AND WHETHER BASED ON ANY
FEDERAL, STATE, OR LOCAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT EQUITABLE
CAUSE, OR ON CONTRACT, TORT OR OTHERWISE, ARISING FROM OR CONNECTED WITH THE
PAST, PRESENT OR FUTURE OPERATIONS OF THE BORROWER, ITS SUBSIDIARIES OR THEIR
RESPECTIVE PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR FUTURE
ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWER OR ITS SUBSIDIARIES),
RELATING TO OR ARISING OUT OF
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THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY ACT, EVENT OR TRANSACTION OR
ALLEGED ACT, EVENT OR TRANSACTION RELATING OR ATTENDANT THERETO, THE MANAGEMENT
OF THE ADVANCES OR LETTERS OF CREDIT, INCLUDING IN CONNECTION WITH, OR AS A
RESULT, IN WHOLE OR IN PART, OF ANY ORDINARY OR MERE NEGLIGENCE OF
ADMINISTRATIVE LENDER OR ANY LENDER (OTHER THAN THOSE MATTERS RAISED EXCLUSIVELY
BY A PARTICIPANT AGAINST THE ADMINISTRATIVE LENDER OR ANY LENDER AND NOT THE
BORROWER OR ANY OF ITS SUBSIDIARIES), OR THE USE OR INTENDED USE OF THE PROCEEDS
OF THE ADVANCES OR LETTERS OF CREDIT HEREUNDER, OR IN CONNECTION WITH ANY
INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY, BUT EXCLUDING (i) ANY
CLAIM OR LIABILITY THAT ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR WILFUL
MISCONDUCT OF ANY INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF
COMPETENT JURISDICTION, AND (ii) MATTERS RAISED BY ONE LENDER AGAINST ANOTHER
LENDER OR BY ANY SHAREHOLDERS OF A LENDER AGAINST A LENDER OR ITS MANAGEMENT
(COLLECTIVELY, "INDEMNIFIED MATTERS"). TO THE EXTENT THAT ANY INDEMNIFIED MATTER
--------------------
INVOLVES ONE OR MORE INDEMNITEES, SUCH INDEMNITEES SHALL USE THE SAME LEGAL
COUNSEL UNLESS ANY INDEMNITEE IN ITS REASONABLE DISCRETION DETERMINES THAT
CONFLICTS EXIST OR MAY ARISE IN CONNECTION WITH SUCH REPRESENTATION.
(b) WITHOUT DUPLICATION, THE BORROWER SHALL PERIODICALLY, UPON REQUEST,
REIMBURSE EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL REASONABLE
EXPENSES (INCLUDING THE REASONABLE COST OF ANY INVESTIGATION AND PREPARATION)
INCURRED IN CONNECTION WITH ANY INDEMNIFIED MATTER. THE REIMBURSEMENT, INDEMNITY
AND CONTRIBUTION OBLIGATIONS UNDER THIS SECTION SHALL BE IN ADDITION TO ANY
LIABILITY WHICH THE BORROWER MAY OTHERWISE HAVE, SHALL EXTEND UPON THE SAME
TERMS AND CONDITIONS TO EACH INDEMNITEE, AND SHALL BE BINDING UPON AND INURE TO
THE BENEFIT OF ANY SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF
THE BORROWER, THE ADMINISTRATIVE LENDER, THE LENDERS AND ALL OTHER INDEMNITEES.
THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE
OBLIGATIONS.
Section 5.10 Environmental Law Compliance. The use which the Borrower or
----------------------------
any Subsidiary of the Borrower intends to make of any real property which is
owned or leased by it will not result in the disposal or other release of any
hazardous substance or solid waste on or to such real property which is in
violation of Applicable Environmental Laws, the effect of which could reasonably
be expected to have a Material Adverse Effect. As used herein, the terms
"hazardous substance" and "release" as used in this Section shall have the
meanings specified in CERCLA (as defined in the definition of Applicable
Environmental Laws), and the terms "solid waste" and "disposal" shall have the
meanings specified in RCRA (as defined in the definition of Applicable
Environmental Laws); provided, however, that if CERCLA or
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RCRA is amended so as to broaden or lessen the meaning of any term defined
thereby, such broader or lesser meaning shall apply subsequent to the effective
date of such amendment; and provided further, to the extent that any other law
applicable to the Borrower, any Subsidiary or any of their properties
establishes a meaning for "hazardous substance," "release," "solid waste," or
"disposal" which is broader or lesser than that specified in either CERCLA or
RCRA, such broader or lesser meaning shall apply. The Borrower agrees to
indemnify and hold the Administrative Lender and each Lender harmless from and
against, and to reimburse them with respect to, any and all claims, demands,
causes of action, loss, damage, liabilities, reasonable costs and reasonable
expenses (including reasonable attorneys' fees and courts costs) of any kind or
character, known or unknown, fixed or contingent, asserted against or incurred
by any of them at any time and from time to time by reason of or arising out of
(a) the failure of the Borrower or any Subsidiary to perform any of their
obligations hereunder regarding asbestos or Applicable Environmental Laws, (b)
any violation on or before the Release Date of any Applicable Environmental Law
in effect on or before the Release Date, and (c) any act, omission, event or
circumstance existing or occurring on or prior to the Release Date (including
without limitation the presence on such real property or release from such real
property of hazardous substances or solid wastes disposed of or otherwise
released on or prior to the Release Date), resulting from or in connection with
the ownership of the real property, regardless of whether the act, omission,
event or circumstance constituted a violation of any Applicable Environmental
Law at the time of its existence or occurrence; provided that, the Borrower
shall not be under any obligation to indemnify the Administrative Lender or any
Lender to the extent that any such liability arises as the result of the gross
negligence or wilful misconduct of such Person, as finally judicially determined
by a court of competent jurisdiction. The provisions of this paragraph shall
survive the Release Date and shall continue thereafter in full force and effect.
Section 5.11 Further Assurances. At any time or from time to time upon
------------------
request by the Administrative Lender, the Borrower or any Subsidiary of the
Borrower shall execute and deliver such further documents and do such other acts
and things as the Administrative Lender may reasonably request in order to
effect fully the purposes of this Agreement and the other Loan Documents and to
provide for payment of the Obligations in accordance with the terms of this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, the Borrower agrees to (a) update and deliver to the Administrative
Lender Schedules 3 and 4 hereto at the time of delivery of the financial
-----------------
statements set forth in Sections 6.1 and 6.2 hereof if the information provided
------------ ---
therein is not complete and correct, and (b) update and deliver to the
Administrative Lender Schedule 1 to the Security Agreements promptly upon
----------
discovery if the information provided therein is not complete and correct.
Section 5.12 Subsidiaries. At any time that any Person becomes a
------------
Subsidiary other than pursuant to Section 7.3(f) hereof, (a) such Subsidiary
--------------
shall execute a Subsidiary Guaranty of the Obligations and a Security
Agreement granting a first priority Lien in all its assets of the types or
classes included in the Collateral, except, to the extent applicable, for Liens
permitted in clause (f) of the definition of Permitted Liens, to secure the
Obligations and (b) the Lenders shall receive such board resolutions, officer's
certificates and opinions of counsel as the
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Administrative Lender shall reasonably request in connection with the actions
described in clause (a) above.
Section 5.13 Real Property. At any time that the Borrower acquires any
-------------
real property with the proceeds of a Facility B Advance, the Borrower shall (a)
execute a Deed of Trust granting a first priority Lien in the real property
acquired with such proceeds, (b) deliver to the Administrative Lender a title
insurance policy with respect to such real property, in form and substance
acceptable to the Administrative Lender, (c) deliver to the Administrative
Lender an environmental site assessment with respect to such real property, in
form and substance acceptable to the Administrative Lender, prepared by a Person
acceptable to the Administrative Lender, (d) deliver to the Administrative
Lender surveys with respect to such real property, in form and substance
acceptable to the Administrative Lender, and (e) the Lenders shall receive such
board resolutions, officer's certificates and opinions of counsel as the
Administrative Lender shall reasonably request with respect thereto.
Section 5.14 Agreements in Respect of RPA and TAA. With respect to the
------------------------------------
RPA and the TAA, respectively, (a) unless otherwise agreed by the
Administrative Lender, the Borrower at all times shall have and maintain the
sole and exclusive right to service, administer and collect the Receivables,
subject at all times, however, to the Loan Documents and the MSAA, (b) the
- -----------------------------
Borrower will not in any event effect an increase in the RPA Interest Percentage
(as defined by the MSAA) if as of the proposed time of the effectiveness of any
such increase (i) any Default or Event of Default is in existence, or would
exist upon such effectiveness or (ii) Projected Unused Availability is less than
zero dollars ($0.00), (c) contemporaneously upon effecting any increase in the
RPA Interest Percentage (as defined by the MSAA) the Borrower shall deliver to
the Administrative Lender a current Borrowing Base Report, dated as of the
effective date of any such increase, (d) at all times after the occurrence and
during the continuance of any Default or Event of Default, the Borrower shall
cause all proceeds of any increase in the Net Investment (as defined by the TAA)
received by CFI and paid to the Borrower in payment of any RPA Interest under
the RPA to be paid directly to the Administrative Lender for application to the
Obligations, (e) the Borrower will not effect any increase in the Maximum Net
Investment (as defined by the TAA) without the prior written consent of the
Administrative Lender and (f) the Borrower will not enter into any agreement to
amend the RPA without the prior written consent of the Determining Lenders if
such agreement, or the amendment to the RPA contemplated thereby, would have a
material adverse effect upon any of the Lenders or the Administrative Lender.
ARTICLE 6
Information Covenants
---------------------
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled), the Borrower shall furnish or cause to be furnished to
each Lender or shall notify each Lender of the following events:
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Section 6.1 Borrowing Base Report. Within 15 days after the end of each
---------------------
month of each fiscal year and contemporaneously with any change in the RPA
Interest or any change in the Administrative Lender's beneficial interest under
the MSAA, the Borrowing Base Report setting forth a certification of Eligible
Accounts and Eligible Inventory, and calculation of the Borrowing Base. Each
Borrowing Base Report shall certify the CompuCom Interest Percentage and the RPA
Interest Percentage (each as defined in the MSAA) outstanding as of the
effective date thereof.
Section 6.2 Quarterly Financial Statements and Information. Within 45
----------------------------------------------
days after the end of each fiscal quarter of each fiscal year, the consolidated
balance sheets of the Borrower and its Subsidiaries as at the end of such fiscal
quarter and the related consolidated statements of income for such fiscal
quarter and for the elapsed portion of the year ended with the last day of such
fiscal quarter, and consolidated statements of cash flow for the elapsed portion
of the year ended with the last day of such fiscal quarter, all of which shall
be certified by the president, chief financial officer, treasurer or controller
of the Borrower, to, in his or her opinion acting solely in his or her capacity
as an officer of the Borrower, present fairly in all material respects, in
accordance with GAAP (except for the absence of footnotes), the financial
position and results of operations of the Borrower and its Subsidiaries as at
the end of and for such fiscal quarter, and for the elapsed portion of the year
ended with the last day of such fiscal quarter, subject only to normal year-end
adjustments.
Section 6.3 Annual Financial Statements and Information; Certificate of
-----------------------------------------------------------
No Default.
- ----------
(a) Within 120 days after the end of each fiscal year, a copy of (i) the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries, as of the end of the current and prior fiscal years and (ii) the
consolidated and consolidating statements of earnings and consolidated
statements of changes in shareholders' equity, and statements of cash flow as of
and through the end of such Fiscal Year, all of which are prepared in accordance
with GAAP, and certified by independent certified public accountants reasonably
acceptable to the Lenders (provided, however, any big six public accounting firm
shall be acceptable to the Lenders), whose opinion shall be in scope and
substance in accordance with generally accepted auditing standards and shall be
unqualified as to scope of audit and going concern.
(b) As soon as available, but in any event within 30 days after December
31, 1997 and within 30 days after the end of each fiscal year thereafter, a copy
of the annual consolidated financial projections (including proforma income
statements, balance sheets and statements of cash flow) of the Borrower and its
Subsidiaries for the succeeding three fiscal years.
Section 6.4 Compliance Certificate. At the time financial statements are
----------------------
furnished pursuant to Sections 6.2 and 6.3 hereof, the Compliance Certificate,
------------ ---
completed as provided therein, executed by the Chief Financial Officer,
Treasurer or Vice President of Finance of the Borrower.
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Section 6.5 Copies of Other Reports and Notices.
-----------------------------------
(a) Promptly upon their becoming available, a copy of (i) all material
final reports or letters submitted to the Borrower or any Subsidiary of the
Borrower by accountants in connection with any annual, interim or special audit,
including without limitation any final report prepared in connection with the
annual audit referred to in Section 6.2 hereof, and, if requested by the
-----------
Administrative Lender, any other comment letter submitted to management in
connection with any such audit, (ii) each financial statement, report, notice or
proxy statement sent by the Borrower to stockholders generally, (iii) each
regular, periodic or other report and any registration statement (other than
statements on Form S-8) or prospectus (or material written communication in
respect of any thereof) filed by the Borrower or any Subsidiary of the Borrower
with any securities exchange, with the Securities and Exchange Commission or any
successor agency, and (iv) all press releases concerning material financial
aspects of the Borrower or any Subsidiary of the Borrower;
(b) Promptly upon becoming aware that (i) the holder(s) of any note(s) or
other evidence of indebtedness or other security of the Borrower or any
Subsidiary of the Borrower in excess of $500,000 in the aggregate has given
notice or taken any action with respect to a breach, failure to perform, claimed
default or event of default thereunder, (ii) any occurrence or non-occurrence of
any event which constitutes or which with the passage of time or giving of
notice or both could constitute a material breach by the Borrower or any
Subsidiary of the Borrower under any material agreement or instrument other than
this Agreement to which the Borrower or any Subsidiary of the Borrower is a
party or by which any of their properties may be bound, or (iii) any event,
circumstance or condition which could reasonably be expected to be classified as
a Material Adverse Effect, a written notice specifying the details thereof (or
the nature of any claimed default or event of default) and what action is being
taken or is proposed to be taken with respect thereto;
(c) Promptly upon becoming aware that any party to any Capitalized Lease
Obligations or Operating Lease, in each case, in excess of $500,000, has given
notice or taken any action with respect to a breach, failure to perform, claimed
default or event of default thereunder, a written notice specifying the details
thereof (or the nature of any claimed default or event of default) and what
action is being taken or is proposed to be taken with respect thereto;
(d) Promptly upon receipt thereof, information with respect to and copies
of any notices received from any Tribunal relating to any order, ruling, law,
information or policy that relates to a breach of or noncompliance with any Law,
or could reasonably be expected to result in the payment of money by the
Borrower or any Subsidiary of the Borrower in an amount of $500,000 or more in
the aggregate, or otherwise have a Material Adverse Effect, or result in the
loss or suspension of any Necessary Authorization where such loss could
reasonably be expected to have a Material Adverse Effect; and
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(e) From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information regarding
the assets, business, liabilities, financial position, projections, results of
operations or business prospects of the Borrower and its Subsidiaries, as the
Administrative Lender or any Lender may reasonably request.
Section 6.6 Notice of Litigation, Default and Other Matters. Prompt
-----------------------------------------------
notice of the following events after the Borrower has knowledge or notice
thereof:
(a) The commencement of all Litigation and investigations by or before any
Tribunal, and all actions and proceedings in any court or before any arbitrator
involving claims for damages (including punitive damages) in excess of $500,000
(after deducting the amount with respect to the Borrower or any Subsidiary of
the Borrower is insured), against or in any other way relating directly to the
Borrower, any Subsidiary of the Borrower, or any of their respective properties
or businesses; and
(b) Promptly upon the happening of any condition or event of which the
Borrower has current actual knowledge which constitutes a Default, a written
notice specifying the nature and period of existence thereof and what action is
being taken or is proposed to be taken with respect thereto.
Section 6.7 ERISA Reporting Requirements.
----------------------------
(a) Promptly and in any event (i) within 30 days after the Borrower or any
member of its Controlled Group has current actual knowledge that any ERISA Event
described in clause (a) of the definition of ERISA Event or any event described
in Section 4063(a) of ERISA with respect to any Plan of the Borrower or any
member of its Controlled Group has occurred, and (ii) within 10 days after the
Borrower or any member of its Controlled Group has current actual knowledge that
any other ERISA Event with respect to any Plan of the Borrower or any member of
its Controlled Group has occurred or a request for a minimum funding waiver
under Section 412 of the Code has been made with respect to any Plan of the
Borrower or any member of its Controlled Group, a written notice describing such
event and describing what action is being taken or is proposed to be taken with
respect thereto, together with a copy of any notice of such event that is given
to the PBGC;
(b) Promptly and in any event within three Business Days after receipt
thereof by the Borrower or any member of its Controlled Group from the PBGC,
copies of each notice received by the Borrower or any member of its Controlled
Group of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(c) Promptly and in any event within 30 days after the filing thereof by
the Borrower or any member of its Controlled Group with the United States
Department of Labor or the Internal Revenue Service, copies of each annual
report (including Schedule B thereto, if applicable) with respect to each Plan
subject to Title IV of ERISA of which Borrower or any member of its Controlled
Group is the "plan sponsor";
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(d) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence the Borrower or any member of its
Controlled Group receives from the Plan Sponsor (as defined by Section
4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability
pursuant to Section 4219 or 4202 of ERISA, and a statement from the chief
financial officer of the Borrower or such member of its Controlled Group setting
forth details as to the events giving rise to such potential withdrawal
liability and the action which the Borrower or such member of its Controlled
Group is taking or proposes to take with respect thereto;
(e) Notification within 30 days of any material increases in the benefits
provided under any existing Plan which is not a Multiemployer Plan, or the
establishment of any new Plans, or the commencement of contributions to any Plan
to which the Borrower or any member of its Controlled Group was not previously
contributing, which could reasonably be expected in any such case to result in
an additional material liability to the Borrower;
(f) Notification within three Business Days after the Borrower or any
member of its Controlled Group knows that the Borrower or any such member of its
Controlled Group has filed or intends to file a notice of intent to terminate
any Plan under a distress termination within the meaning of Section 4041(c) of
ERISA and a copy of such notice; and
(g) Within three Business Days after receipt of written notice of
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower or any member of
its Controlled Group with respect to any Plan, except those which, in the
aggregate, if adversely determined could not reasonably be expected to have a
Material Adverse Effect.
Section 6.8 RPA and TAA Reporting Requirements.
----------------------------------
(a) (i) At such times as the Administrative Lender may request, the amount
of the RPA Interest Percentage (as defined by the MSAA) and the Maximum Net
Investment (as defined by the TAA), (ii) at least one (1) Business Day before
effecting any change in the RPA Interest under the terms of the RPA, as provided
in Section 2.2(b) of the MSAA, (iii) promptly upon any termination of the RPA or
the TAA, or upon receiving or sending any notice of intended or pending or
potential termination of the RPA or the TAA, (iv) promptly at any time when the
"Percentage Factor" exceeds the "Maximum Percentage Factor" (as those terms are
defined by the TAA); (v) promptly upon becoming aware of any assignment by EFC,
or any request by CFI for an assignment by EFC, of EFC's interest under the TAA
to any "Bank Investor" (as defined in the TAA) pursuant to Section 9.7 of the
TAA and (vi) promptly upon becoming aware of any "Termination Event" or
"Potential Termination Event" (as those terms are defined in the TAA) under the
TAA.
(b) A true and correct copy of (i) at Administrative Lender's request,
each report delivered by the Borrower to CFI and/or EFC under the RPA and/or the
TAA; (ii) each notice, if any, at any time given by CFI pursuant to Section
5.1(b)(i) of the TAA (notifications in
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respect of any "Termination Event" or "Potential Termination Event", as those
terms are defined by the TAA) and (iii) any notice (or copy of any such notice)
of termination, or of intended, pending or potential termination of the RPA or
the TAA sent or received by the Borrower or CFI.
ARTICLE 7
Negative Covenants
------------------
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 7.1 Indebtedness. The Borrower shall not, and shall not permit
------------
any Subsidiary of the Borrower to, create, assume, incur or otherwise become or
remain obligated in respect of, or permit to be outstanding, or suffer to exist
any Indebtedness, except:
(a) Indebtedness under the Loan Documents;
(b) Accounts payable and accrued liabilities incurred in the ordinary
course of business;
(c) Indebtedness, including in respect of Capitalized Lease Obligations,
incurred to purchase, or to finance the purchase of, assets which constitute
property, plant and equipment, in an aggregate principal amount not in excess of
$10,000,000 outstanding at any time;
(d) Indebtedness incurred or assumed in respect of Acquisitions permitted
pursuant to Section 7.6 hereof in an aggregate principal amount not in excess of
-----------
$20,000,000 per calendar year;
(e) Hedging obligations under Agreements entered into with any Lender;
(f) Indebtedness existing on the Agreement Date which is described on
Schedule 6 hereto, including renewals, replacements and refinancings (but no
- ----------
increases) thereof;
(g) Indebtedness in respect of endorsement of negotiable instruments in
the ordinary course of business;
(h) Indebtedness owing to the Borrower or any Guarantor by any Subsidiary
or the Borrower, which Indebtedness is evidenced by an entry on the financial
records of the Borrower and any such Subsidiary of the Borrower;
(i) Indebtedness of ClientLink, Inc. not to exceed $3,000,000 for working
capital;
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(j) Guaranties by the Borrower or by Subsidiaries of the Borrower of
Indebtedness of the Borrower or Subsidiaries of the Borrower, to the extent such
underlying Indebtedness is permitted hereunder;
(k) Trade accounts payable owing by the Borrower or any of its
Subsidiaries to any of (i) IBM Credit Corporation, (ii) Compaq Computer
Corporation, (iii) Hewlett-Packard Company or (iv) Apple Computer, Inc. for
goods furnished by any of such Persons to any of the Obligors;
(l) Unsecured trade accounts payable, incurred in the ordinary course of
the business of Borrower or any of its Subsidiaries; and
(m) Indebtedness of CFI to the Borrower evidenced by the CFI Note if, and
to the extent that, the Administrative Lender has a valid, perfected first
priority Lien in, and physical possession of, the CFI Note, together with any
and all necessary or appropriate endorsements to such CFI Note.
(n) Unsecured Indebtedness not otherwise permitted pursuant to clauses (a)
through (m) above not to exceed $50,000,000 (less any and all Indebtedness under
Subsections (c), (d) and/or (i) of this Section 7.1) in the aggregate principal
--- --- -----------
amount outstanding at any time.
Section 7.2 Liens. The Borrower shall not, and shall not permit any
-----
Subsidiary of Borrower to, create, assume, incur, permit or suffer to exist,
directly or indirectly, any Lien on any of its assets, whether now owned or
hereafter acquired, except Permitted Liens. The Borrower shall not, and shall
not permit any Subsidiary to, agree with any other Person that it shall not
create, assume, incur, permit or suffer to exist or to be created, assumed,
incurred or permitted to exist, directly or indirectly, any Lien on any of its
assets other than in respect of Indebtedness permitted by Sections 7.1(c), (d),
-------- ---
(f) and (k), provided that such agreement relates only to the assets purchased
- --- ---
or acquired.
Section 7.3 Investments. The Borrower shall not, and shall not permit
-----------
any Subsidiary of Borrower to, make any Investment, except that the Borrower and
any Subsidiary of the Borrower may purchase or otherwise acquire and own:
(a) Cash and Cash Equivalents;
(b) Accounts receivable that arise in the ordinary course of business and
are payable on standard terms;
(c) Investments in existence on the Agreement Date which are described
on Schedule 5 hereto;
----------
(d) Investments which are Acquisitions permitted pursuant to
Section 7.6 hereof;
- -----------
(e) Investments in the form of Hedge Agreements permitted by
Section 7.1(e) hereof;
- --------------
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(f) Investments (excluding accounts receivable from Subsidiaries of the
Borrower created in the ordinary course of business) in, and expenditures in
respect of Acquisitions of, Subsidiaries which are not Guarantors by the
Borrower in an aggregate amount not to exceed (calculated immediately prior to
the date of each such Investment or Acquisition) 5% of Net Worth at any time
outstanding;
(g) Investments in Subsidiaries of the Borrower (i) which have executed a
Subsidiary Guaranty and a Security Agreement granting a first priority Lien in
all its assets of the types or classes included in the Collateral to secure the
Obligations and (ii) which have delivered to the Lenders such board resolutions,
officer's certificates and opinions of counsel as the Administrative Lender
shall reasonably request;
(h) Guaranties permitted under Section 7.1(j) hereof;
--------------
(i) Investments arising from transactions by the Borrower or any of its
Subsidiaries with customers or suppliers in the ordinary course of business,
including endorsements of negotiable instruments, debt obligations and other
investments received in connection with the bankruptcy or reorganization of
customers and suppliers and in settlement of delinquent obligations of, and
other disputes with, customers and suppliers; and
(j) Other Investments not to exceed $5,000,000 in aggregate amount
outstanding at any time.
Section 7.4 Liquidation, Merger. The Borrower shall not, and shall not
-------------------
permit any Subsidiary of Borrower to, at any time:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up, except that a Subsidiary of the Borrower may
liquidate or dissolve into the Borrower or a Subsidiary of the Borrower; o r
(b) enter into any merger or consolidation unless (i) with respect to a
merger or consolidation involving the Borrower, the Borrower shall be the
surviving corporation, or if the merger or consolidation involves a Subsidiary
of the Borrower and not the Borrower, such Subsidiary shall be the surviving
corporation, (ii) such transaction shall not be utilized to circumvent
compliance with any term or provision herein and (iii) no Default or Event of
Default shall then be in existence or occur as a result of such transaction.
Section 7.5 Sales of Assets. The Borrower shall not, and shall not
---------------
permit any Subsidiary of the Borrower to, sell, lease, transfer or otherwise
dispose of, any of its assets except (a) inventory in the ordinary course of
business, (b) obsolete or worn-out assets, (c) asset sales in which the Net Cash
Proceeds from the disposition thereof are reinvested, within 90 days before or
after such disposition, in productive tangible assets of a similar nature of the
Borrower and its Subsidiaries, (d) asset sales between Obligors, (e) sales of
interests in Accounts pursuant to the Securitization and (f) other asset sales
not to exceed $100,000 in the aggregate amount during any one fiscal year.
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Section 7.6 Acquisitions. The Borrower shall not, and shall not permit
------------
any Subsidiary of Borrower to, make any Acquisitions; provided, however, if
immediately prior to and after giving effect to the proposed Acquisition there
shall not exist a Default or Event of Default, the Borrower or any Subsidiary of
the Borrower may make Acquisitions so long as (i) such Acquisition shall not be
opposed by the board of the directors of the Person being acquired, (ii) Lenders
shall have received written notice at least 15 Business Days prior to the date
of such Acquisition, (iii) the Administrative Lender shall have received at
least 10 Business Days prior to the date of such Acquisition a Compliance
Certificate setting forth the covenant calculations both immediately prior to
and after giving effect to the proposed Acquisition, (iv) the assets, property
or business acquired shall be in the business described in Section 4.1(d) hereof
--------------
and the Administrative Lender for the benefit of the Lenders shall have a first
priority Lien in such assets except for Liens permitted in clause (f) of the
definition of Permitted Liens, (v) the aggregate consideration (exclusive of
Equity in the Borrower or any Subsidiary of the Borrower, but inclusive of any
Indebtedness incurred or assumed by the Borrower or any Subsidiary of the
Borrower) paid or given by the Borrower and/or Borrower's Subsidiaries during
any calendar year in connection with Acquisitions shall not exceed $20,000,000
and (vi) at the Borrower's option, (A) such Subsidiary shall execute a
Subsidiary Guaranty of the Obligations and a Security Agreement granting a first
priority Lien in all its assets of the types or classes included in the
Collateral, except for Liens permitted in clause (f) of the definition of
Permitted Liens, to secure the Obligations and (B) the Lenders receive such
board resolutions, officer's certificates and opinions of counsel as the
Administrative Lender shall reasonably request in connection with the actions
described in clause (A) above. Notwithstanding anything in this Section 7.6 or
-----------
any other provision of this Agreement to the contrary, the aggregate
amount of expenditures in respect of Acquisitions of, and Investments in,
Subsidiaries of the Borrower that are not Obligors shall not exceed (calculated
immediately prior to the date of each such Investment or Acquisition) 5% of Net
Worth at any time outstanding.
Section 7.7 Capital Expenditures. The Borrower shall not, and shall not
--------------------
permit any Subsidiary of the Borrower to, make or commit to make any Capital
Expenditures (excluding Permitted Real Estate Expenditures) during any fiscal
year in an aggregate amount in excess of $15,000,000.
Section 7.8 Restricted Payments. The Borrower shall not, and shall not
-------------------
permit any Subsidiary of the Borrower to, directly or indirectly declare, pay or
make any Restricted Payments except (a) Dividends payable by a Subsidiary to the
Borrower or to a Guarantor, (b) scheduled payments of principal and interest on
the Subordinated Debt, (c) Dividends payable on "Series B Cumulative Preferred
Stock" of the Borrower to Safeguard Scientifics, Inc. in an aggregate amount for
any fiscal year not to exceed $2,000,000, (d) purchases by the Borrower of
treasury stock of the Borrower in an aggregate amount per fiscal year not to
exceed 25% of the Net Income of the Borrower and its Subsidiaries for the
immediately preceding fiscal year and (e) payments to the Borrower under the CFI
Note; provided, however, the Borrower shall not, and shall not permit any
Subsidiary of the Borrower to, declare, pay or make any Restricted Payments
permitted by this Section 7.8 unless there shall exist no Default or Event of
-----------
Default prior to or after giving effect to any such proposed Restricted Payment.
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Section 7.9 Affiliate Transactions. The Borrower shall not, and shall
----------------------
not permit any Subsidiary of the Borrower to, at any time engage in any
transaction with an Affiliate (other than as evidenced by the RPA or the TAA)
other than in the ordinary course of business and on terms not materially less
advantageous to the Borrower or such Subsidiary than would be the case if such
transaction had been effected with a non-Affiliate. The Borrower shall not, and
shall not permit any Subsidiary of the Borrower to, incur or suffer to exist any
Indebtedness or Guaranty in favor of any Affiliate, unless such Affiliate shall
(i) subordinate the payment and performance thereof to the Obligations on terms,
conditions and documentation satisfactory to the Determining Lenders or (ii)
pledge the applicable Indebtedness to the Administrative Lender pursuant to
documentation acceptable to the Administrative Lender.
Section 7.10 Compliance with ERISA. The Borrower shall not, and shall
---------------------
not permit any Subsidiary to, directly or indirectly, or permit any member of
its Controlled Group to directly or indirectly, (a) terminate any Plan so as
likely to result in any material (in the reasonable opinion of the Determining
Lenders) liability to the Borrower or any member of its Controlled Group taken
as a whole, (b) permit to exist any ERISA Event, or any other event or condition
with respect to a Plan which could reasonably be expected to have a Material
Adverse Effect, (c) make a complete or partial withdrawal (within the meaning of
Section 4201 of ERISA) from any Multiemployer Plan so as likely to result in any
material (in the reasonable opinion of the Determining Lenders) liability to the
Borrower or any member of its Controlled Group taken as a whole, (d) enter into
any new Plan or modify any existing Plan so as to increase its obligations
thereunder which could reasonably be expected to have a Material Adverse Effect,
or (e) permit the present value of all benefit liabilities, as defined in Title
IV of ERISA, under any Plan (other than a Multiemployer Plan) of the Borrower or
any member of its Controlled Group that is subject to Title IV of ERISA (using
the actuarial assumptions utilized by each such Plan) to exceed the fair market
value of Plan assets allocable to such benefits by more than $500,000, all
determined as of the most recent valuation date for such Plan.
Section 7.11 Maximum Leverage Ratio. The Borrower shall not permit the
----------------------
Leverage Ratio to be greater than (a) 4.75 to 1 at the end of any fiscal quarter
ending prior to and including December 31, 1997 and (b) 4.25 to 1 at the end of
any fiscal quarter thereafter.
Section 7.12 Minimum Fixed Charge Coverage Ratio. The Borrower shall not
-----------------------------------
permit the Fixed Charge Coverage Ratio to be less than 1.25 to 1 at the end of
any fiscal quarter.
Section 7.13 Minimum Tangible Net Worth. The Borrower shall not permit
--------------------------
the Tangible Net Worth to be less than an amount equal to the sum of (a)
$110,000,000, plus (b) 75% of cumulative Net Income for the period from, but not
including, June 30, 1996 through the date of calculation (but excluding from the
calculation of such cumulative Net Income the effect, if any, of any fiscal
quarter (or portion of a fiscal quarter not then ended) of the Borrower for
which Net Income was a negative number), plus (c) 75% of the Net Cash Proceeds
received by the Borrower as a result of any offering of Equity or pursuant to
any conversion or exchange of convertible Indebtedness or preferred Capital
Stock into common Capital Stock of the Borrower, plus (d) an amount equal to the
net worth of any Person that
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becomes a Subsidiary of the Borrower or is merged into or consolidated with the
Borrower or any Subsidiary of the Borrower or substantially all of the assets of
which are acquired by the Borrower or any Subsidiary of the Borrower to the
extent the purchase price paid therefor is paid in equity securities of the
Borrower or any Subsidiary of the Borrower.
Section 7.14 Minimum Asset Coverage Ratio. The Borrower shall not permit
----------------------------
the Asset Coverage Ratio to be less than 1.10 to 1 at the end of any fiscal
quarter.
Section 7.15 Maximum Funded Debt to Capital. The Borrower shall not
------------------------------
permit the ratio of Funded Debt to Capital to exceed 0.65 to 1 at the end of any
fiscal quarter.
Section 7.16 Sale and Leaseback. The Borrower shall not, and shall not
------------------
permit any Subsidiary of the Borrower to, enter into any arrangement whereby it
sells or transfers any of its assets, and thereafter rents or leases such
assets.
Section 7.17 Sale or Discount of Receivables. The Borrower shall not,
-------------------------------
and shall not permit any Subsidiary of the Borrower to, directly or indirectly,
sell, with or without recourse, for discount or otherwise, any notes or Accounts
other than pursuant to the Securitization.
Section 7.18 Capital Stock. The Borrower shall not, and shall not permit
-------------
any Subsidiary of the Borrower to, issue, sell or otherwise dispose of any
Capital Stock in the Borrower or any Subsidiary of the Borrower or any options
or any rights to acquire such Capital Stock, except (i) to the extent that the
Net Cash Proceeds thereof during any fiscal year do not exceed $3,000,000 and
the Net Cash Proceeds thereof are, within 90 days after receipt by the Borrower
or the applicable Subsidiary of the Borrower, reinvested in productive tangible
assets of the Borrower and its Subsidiaries, (ii) to the extent that the Net
Cash Proceeds thereof are applied as provided in Section 2.5(c) hereof, (iii)
-------------
any Subsidiary of the Borrower may issue Capital Stock to the Borrower or to any
Guarantor which is the parent of such Subsidiary and (iv) the issuance or
disposition of Capital Stock in the Borrower attributable to the conversion of
the NCGI Note into Equity in the Borrower in accordance with the terms of the
NCGI Note.
Section 7.19 Business. Neither the Borrower nor any Subsidiary of the
--------
Borrower shall conduct any business other than the business described in
Section 4.1(d) hereof.
- --------------
Section 7.20 Fiscal Year. Except with respect to a change in the fiscal
-----------
year of any Subsidiary to conform to the fiscal year of the Borrower, neither
the Borrower nor any Subsidiary of the Borrower shall change its fiscal year.
Section 7.21 Amendment of Organizational Documents. The Borrower shall
-------------------------------------
not, and shall not permit any Subsidiary of the Borrower to, amend its articles
of incorporation or bylaws in any manner that could reasonably be expected to
(a) result in a Material Adverse Effect or (b) impair or affect the Rights of
the Administrative Lender or any Lender under any Loan Documents or in respect
of any Collateral.
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Section 7.22 Amendments and Waivers of Subordinated Debt. The Borrower
-------------------------------------------
shall not, and shall not permit any Subsidiary to, change or amend (or take any
action or fail to take any action the result of which is an effective amendment
or change) or accept any waiver or consent with respect to, any document,
instrument or agreement relating to any Subordinated Debt that would result in
(a) an increase in the principal, interest, overdue interest, fees or other
amounts payable under the Subordinated Debt, (b) an acceleration in any date
fixed for payment or prepayment of principal, interest, fees or other amounts
payable under the Subordinated Debt (including, without limitation, as a result
of any redemption), (c) a reduction in any percentage of holders of the
Subordinated Debt required under the terms of the Subordinated Debt to take (or
refrain from taking) any action under the Subordinated Debt, (d) a change in any
financial covenant under the Subordinated Debt making such financial covenant
more restrictive, (e) a change in any default or event of default (however
designated) under the Subordinated Debt which makes such default or event of
default more restrictive, (f) a change in the definition of "Change of Control"
as provided in the Subordinated Debt which would result in such definition being
more restrictive than such definition in this Agreement, (g) a change in any of
the subordination provisions of the Subordinated Debt, (h) a change in any
covenant, term or provision in the Subordinated Debt which would result in such
term or provision being more restrictive than the terms of this Agreement and
the other Loan Documents or (i) a change in any term or provision of the
Subordinated Debt that could have, in any material respect, an adverse effect on
the interest of the Lenders.
Section 7.23 Operating Leases. The Borrower shall not, and shall not
----------------
permit any Subsidiary of the Borrower to, enter into any Operating Leases except
for Operating Leases entered into in the ordinary course of business in a manner
and to an extent consistent with past practice; provided, however, that the
total rent per annum for all Operating Leases of the Borrower and its
Subsidiaries shall not exceed $12,000,000 in aggregate amount for any fiscal
year.
ARTICLE 8
Default
-------
Section 8.1 Events of Default. Each of the following shall constitute an
-----------------
Event of Default, whatever the reason for such event, and whether voluntary,
involuntary, or effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or non-
governmental body:
(a) Any representation or warranty made under any Loan Document shall
prove to have been incorrect or misleading in any material respect when made;
(b) The Borrower shall fail to pay any (i) principal under any Note when
due or (ii) interest under any Note or any fees payable hereunder or any other
costs, fees, expenses or other amounts payable hereunder or under any other Loan
Document within two Business Days after the date due;
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(c) The Borrower or any Subsidiary of the Borrower shall default in the
performance or observance of any agreement or covenant contained in Section 5.1
-----------
or Article 7;
---------
(d) The Borrower or any Subsidiary of the Borrower shall default in the
performance or observance of any other agreement or covenant contained in this
Agreement not specifically referred to elsewhere in this Section 8.1, and such
-----------
default shall not be cured within a period of fifteen days after the earlier of
notice from the Administrative Lender thereof or actual notice thereof by the
Borrower or such Subsidiary;
(e) There shall occur any default or breach in the performance or
observance of any agreement or covenant in any of the Loan Documents (other than
this Agreement) and such default shall not be cured within a period of thirty
days after the earlier of notice from the Administrative Lender thereof or
actual notice thereof by an officer of any Obligor;
(f) There shall be entered a decree or order by a court having
jurisdiction in the premises constituting an order for relief in respect of any
Obligor under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable Federal, state or foreign bankruptcy
law or other similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official of any Obligor, or of any
substantial part of their respective properties, or ordering the winding-up or
liquidation of the affairs of any Obligor, and any such decree or order shall
continue unstayed and in effect for a period of thirty consecutive days;
(g) Any Obligor shall file a petition, answer or consent seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable Federal, state or foreign bankruptcy law or
other similar law, or any Obligor shall consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment or taking of possession of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of any Obligor or of
substantially all of its properties, or any Obligor shall take any corporate
action in furtherance of any such action;
(h) A final judgment or judgments shall be entered by any court against
any Obligor for the payment of money which exceeds $500,000 in the aggregate, or
a warrant of attachment or execution or similar process shall be issued or
levied against property of any Obligor which, together with all other such
property of the Borrower and its Subsidiaries subject to other such process,
exceeds in value $500,000 in the aggregate, and if such judgment or award is not
insured or, within 30 days after the entry, issue or levy thereof, such
judgment, warrant or process shall not have been paid or discharged or stayed
pending appeal, or if, after the expiration of any such stay, such judgment,
warrant or process shall not have been paid or discharged;
(i) With respect to any Plan of the Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other party-in-
interest or disqualified person (other than any Lender) shall engage in
transactions which in the aggregate would reasonably be expected to result in a
direct or indirect liability to the Borrower or any member of its
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<PAGE>
Controlled Group under Section 409 or 502 of ERISA or Section 4975 of the Code;
(ii) the Borrower or any member of its Controlled Group shall incur any
accumulated funding deficiency, as defined in Section 412 of the Code, or
request a funding waiver from the Internal Revenue Service for contributions;
(iii) the Borrower or any member of its Controlled Group shall incur any
withdrawal liability as a result of a complete or partial withdrawal within the
meaning of Section 4203 or 4205 of ERISA, or any other liability with respect to
a Plan, unless the amount of such liability has been funded within the Plan or
pursuant to one or more insurance contracts; (iv) the Borrower or any member of
its Controlled Group shall fail to make a required contribution by the due date
under Section 412 of the Code or Section 302 of ERISA which would result in the
imposition of a lien under Section 412 of the Code or Section 302 of ERISA; (v)
the Borrower, any member of its Controlled Group or any Plan sponsor shall
notify the PBGC of an intent to terminate, or the PBGC shall institute
proceedings to terminate, or the PBGC shall institute proceedings to terminate,
any Plan subject to Title IV of ERISA; (vi) a Reportable Event shall occur with
respect to a Plan subject to Title IV of ERISA, and within 15 days after the
reporting of such Reportable Event to the Administrative Lender, the
Administrative Lender shall have notified the Borrower in writing that the
Determining Lenders have made a determination that, on the basis of such
Reportable Event, there are reasonable grounds for the termination of such Plan
by the PBGC or for the appointment by the appropriate United States District
Court of a trustee to administer such Plan and as a result thereof an Event of
Default shall have occurred hereunder; (vii) a trustee shall be appointed by a
court of competent jurisdiction to administer any Plan or the assets thereof; or
(viii) any ERISA Event with respect to a Plan subject to Title IV of ERISA shall
have occurred, and 30 days thereafter (A) such ERISA Event, other than such
event described in clause (f) of the definition of ERISA Event herein, (if
correctable) shall not have been corrected and (B) the then present value of
such Plan's benefit liabilities, as defined in Title IV of ERISA, shall exceed
the then current value of assets accumulated in such Plan; provided, however,
-------- -------
that the events listed in subsections (i) - (viii) above shall constitute Events
of Default only if the maximum aggregate liability which the Borrower or any
member of its Controlled Group has a reasonable likelihood of incurring under
the applicable provisions of ERISA resulting from an event or events exceeds
$100,000.
(j) The Borrower or any Subsidiary of the Borrower shall default in the
payment of any Indebtedness or any lease obligations in an aggregate amount of
$1,000,000 or more beyond any grace period provided with respect thereto, or any
other event or condition shall exist under any agreement or instrument under
which such Indebtedness is created or evidenced beyond any applicable grace
period, if the effect of such event or condition is to permit or cause the
holder of such Indebtedness (or a trustee on behalf of any such holder) to (i)
cause such Indebtedness to be prepaid or to become due prior to its date of
maturity or (ii) require the Borrower or any Subsidiary of the Borrower to
purchase such Indebtedness;
(k) Any lease where the Borrower or any Subsidiary of the Borrower is the
lessee shall terminate or cease to be effective, and termination or cessation
thereof, together with all other leases, if any, which have been terminated or
cease to be effective, could reasonably be expected to have a Material Adverse
Effect; provided, however, that termination or cessation
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<PAGE>
of a lease shall not constitute an Event of Default if another lease reasonably
satisfactory to the Determining Lenders is contemporaneously substituted
therefor;
(l) Any material provision of any Loan Document shall for any reason cease
to be valid and binding on or enforceable against any party to it (other than
the Administrative Lender or any Lender) other than in accordance with its
terms, or any such party (other than the Administrative Lender or any Lender)
shall so assert in writing and any such event or circumstance shall continue for
seven days following notification of the occurrence or existence thereof from
the Administrative Lender to the Borrower; provided, however, that such notice,
grace and cure period shall not apply to any event or circumstance evidenced or
represented by any assertion in writing by the Borrower or any Affiliate of the
Borrower;
(m) Any Collateral Document shall for any reason (other than pursuant to
the terms thereof) cease to create a valid and perfected first priority Lien in
Collateral having a value in an aggregate amount in excess of $100,000;
(n) A Change of Control shall occur; or
(o) The Borrower, CFI or EFC shall breach or be in default of any
obligations under the MSAA and such breach or default continues beyond any
applicable grace and/or cure period contained therein; or there shall occur a
material impairment of the enforceability of the rights and benefits intended
for the benefit of NationsBank as a Beneficial Secured Party (as such term is
defined in the MSAA) under the MSAA or the taking of any action by any Person to
challenge same; or the Borrower, CFI or EFC shall breach or be in default of any
obligations under the RPA and such breach or default continues beyond any
applicable grace and/or cure period contained therein; or there shall occur any
"Termination Event" or "Potential Termination Event" as those terms are defined
by the TAA.
Section 8.2 Remedies. If an Event of Default shall have occurred and
--------
shall be continuing:
(a) With the exception of an Event of Default specified in Section 8.1(f)
--------------
or (g) hereof, the Administrative Lender shall, upon the direction of the
---
Determining Lenders, terminate the Commitments and/or declare the principal of
and interest on the Advances and all Obligations and other amounts owed under
the Loan Documents to be forthwith due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything in the Loan Documents to the contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Section
-------
8.1(f) or (g) hereof, such principal, interest and other amounts shall thereupon
- ------ ---
and concurrently therewith become due and payable and the Commitments shall
forthwith terminate, all without any action by the Administrative Lender, any
Lender or any holders of the Notes and without presentment, demand, protest or
other notice of any kind, all of which are expressly waived, anything in the
Loan Documents to the contrary notwithstanding.
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<PAGE>
(c) If any Letter of Credit shall be then outstanding, the Administrative
Lender may, and upon the direction of the Determining Lenders shall, demand upon
the Borrower to, and forthwith upon such demand, the Borrower shall, pay to the
Administrative Lender in same day funds at the office of the Administrative
Lender for deposit in the L/C Cash Collateral Account, an amount equal to the
maximum amount available to be drawn under the Letters of Credit then
outstanding.
(d) The Administrative Lender and the Lenders may exercise all of the
Rights granted to them under the Loan Documents or under Applicable Law.
(e) The Rights of the Administrative Lender and the Lenders hereunder
shall be cumulative, and not exclusive.
ARTICLE 9
Changes in Circumstances
------------------------
Section 9.1 LIBOR Basis Determination Inadequate. If with respect to
------------------------------------
any proposed LIBOR Advance for any Interest Period, (i) any Lender determines
that deposits in dollars (in the applicable amount) are not being offered to
that Lender in the relevant market for such Interest Period or (ii) the
Determining Lenders determine that the LIBOR Rate for such proposed LIBOR
Advance does not adequately cover the cost to such Lender of making and
maintaining such proposed LIBOR Advance for such Interest Period, such Lender or
Determining Lenders, as the case may be, shall forthwith give notice thereof to
the Borrower, whereupon until such Lender or Determining Lenders, as the case
may be, notify the Borrower that the circumstances giving rise to such situation
no longer exist, the obligation of such Lender to make LIBOR Advances shall be
suspended; provided, however, such Lender or the Determining Lenders, as the
-------- -------
case may be, shall promptly notify the Borrower if the circumstances giving rise
to such situation no longer exist.
Section 9.2 Illegality. If any change in applicable law, rule or
----------
regulation, or adoption thereof, or any change in any interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its LIBOR Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency, shall make it unlawful or impossible for such Lender (or its
LIBOR Lending Office) to make, maintain or fund its LIBOR Advances, such Lender
shall so notify the Borrower and the Administrative Lender. Before giving any
notice to the Borrower pursuant to this Section, the notifying Lender shall
designate a different LIBOR Lending Office or other lending office if such
designation will avoid the need for giving such notice and will not, in the sole
judgment of the Lender, be materially disadvantageous to the Lender. Upon
receipt of such notice, notwithstanding anything contained in Article 2 hereof,
---------
the Borrower shall repay in full the then outstanding principal amount of each
LIBOR Advance owing to the notifying Lender,
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together with accrued interest thereon and any reimbursement required under
Section 2.9 hereof, on either (a) the last day of the Interest Period applicable
- -----------
to such Advance, if the Lender may lawfully continue to maintain and fund such
Advance to such day, or (b) immediately, if the Lender may not lawfully continue
to fund and maintain such Advance to such day or if the Borrower so elects.
Concurrently with repaying each affected LIBOR Advance owing to such Lender if
the Borrower does not terminate this Agreement, notwithstanding anything
contained in Article 2 hereof, the Borrower may, without any requirement to
---------
satisfy the conditions precedent set forth in Section 3.1, 3.2 or 3.3, borrow a
----------- --- ---
Base Rate Advance from such Lender, and such Lender shall make such Base Rate
Advance, in an amount such that the outstanding principal amount of the Advances
owing to such Lender shall equal the outstanding principal amount of the
Advances owing immediately prior to such repayment.
Section 9.3 Increased Costs.
---------------
(a) If after the Agreement Date any change in or adoption of any law, rule
or regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by any Lender (or its
LIBOR Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or compatible agency:
(i) shall subject a Lender (or its LIBOR Lending Office) to any Tax
(net of any tax benefit engendered thereby) with respect to its LIBOR
Advances or its obligation to make such Advances, or shall change the basis
of taxation of payments to a Lender (or to its LIBOR Lending Office) of the
principal of or interest on its LIBOR Advances or in respect of any other
amounts due under this Agreement, as the case may be, or its obligation to
make such Advances (except for changes in the rate of tax on the overall
net income, net worth or capital of the Lender and franchise taxes, doing
business taxes or minimum taxes imposed upon such Lender); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, a Lender's
LIBOR Lending Office or shall impose on the Lender (or its LIBOR Lending
Office) or on the London interbank market any other condition affecting its
LIBOR Advances or its obligation to make such Advances (but excluding any
reserves or deposits that are included in the calculation of LIBOR Basis);
and the result of any of the foregoing is to increase the cost to a Lender (or
its LIBOR Lending Office) of making or maintaining any LIBOR Advances, or to
reduce the amount of any sum received or receivable by a Lender (or its LIBOR
Lending Office) with respect thereto, by an amount deemed by a Lender to be
material, then, within 30 days after demand by a Lender, the Borrower agrees to
pay to such Lender such additional amount as will compensate such Lender for
such increased costs or reduced amounts, subject to Section 11.9 hereof. The
------------
affected
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Lender will as soon as practicable notify the Borrower of any event of which it
has knowledge, occurring after the date hereof, which will entitle such Lender
to compensation pursuant to this Section and will designate a different LIBOR
Lending Office or other lending office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the reasonable
judgment of the affected Lender made in good faith, be disadvantageous to such
Lender.
(b) A certificate of any Lender claiming compensation under this Section
and setting forth the additional amounts to be paid to it hereunder shall
certify that such amounts or costs were actually incurred by such Lender and
shall show in reasonable detail an accounting of the amount payable and the
calculations used to determine in good faith such amount and shall be conclusive
absent manifest or demonstrable error. In determining such amount, a Lender may
use any reasonable averaging and attribution methods. Nothing in this Section
-------
9.3 shall provide the Borrower or any Subsidiary of the Borrower the right to
- ---
inspect the records, files or books of any Lender. If a Lender demands
compensation under this Section, the Borrower may at any time, upon at least
five Business Days' prior notice to the Lender, after reimbursement to the
Lender by the Borrower in accordance with this Section of all costs incurred,
prepay in full the then outstanding LIBOR Advances of the Lender, together with
accrued interest thereon to the date of prepayment, along with any reimbursement
required under Section 2.9 hereof. Concurrently with prepaying such LIBOR
-----------
Advances, the Borrower may borrow a Base Rate Advance from the Lender, and the
Lender shall make such Base Rate Advance, in an amount such that the outstanding
principal amount of the Advances owing to such Lender shall equal the
outstanding principal amount of the Advances owing immediately prior to such
prepayment.
Section 9.4 Effect On Base Rate Advances. If notice has been given
----------------------------
pursuant to Section 9.1, 9.2 or 9.3 hereof suspending the obligation of a Lender
----------- --- ---
to make LIBOR Advances, or requiring LIBOR Advances of a Lender to be repaid or
prepaid, then, unless and until the Lender notifies the Borrower that the
circumstances giving rise to such repayment no longer apply, all Advances which
would otherwise be made by such Lender as LIBOR Advances shall be made instead
as Base Rate Advances.
Section 9.5 Capital Adequacy. If after the Agreement Date, (a) the
----------------
introduction of or any change in or in the interpretation of any law, rule or
regulation or (b) compliance by a Lender with any law, rule or regulation or any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) adopted or promulgated after the
Agreement Date affects or would affect the amount of capital required or
expected to be maintained by a Lender or any corporation controlling such
Lender, and such Lender determines that the amount of such capital is increased
by or based upon the existence of such Lender's commitment or Advances hereunder
and other commitments or advances of such Lender of this type, then, within 30
days after demand by such Lender, subject to Section 11.9, the Borrower shall
------------
immediately pay to such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender with respect to such
circumstances, to the extent that such Lender reasonably determines in good
faith such increase in capital to be allocable to the existence of such Lender's
Commitments hereunder. A
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certificate as to any additional amounts payable to any Lender under this
Section 9.5 submitted to the Borrower by such Lender shall certify that such
- -----------
amounts were actually incurred by such Lender or corporation controlling such
Lender and shall show in reasonable detail an accounting of the amount payable
and the calculations used to determine in good faith such amount and shall be
conclusive absent manifest or demonstrable error. In determining such amount,
such Lender or a corporation controlling such Lender may use any reasonable
averaging and attribution methods. Notwithstanding the foregoing, nothing in
this Section 9.5 shall provide the Borrower or any Subsidiary of the Borrower
-----------
the right to inspect the records, files or books of any Lender or any
corporation controlling such Lender.
Section 9.6 Replacement Lender. If (i) any Lender is unable or unwilling
------------------
to make, maintain or fund any LIBOR Advance pursuant to Section 9.1 or 9.2 or
----------- ---
(ii) the Borrower becomes obligated to pay additional amounts to any Lender
described in Section 9.3 or 9.5, the Borrower may designate a financial
----------- ---
institution reasonably acceptable to the Administrative Lender to replace such
Lender by purchasing for cash and receiving an assignment of such Lender's pro
rata share of such Lender's Commitment and the Rights of such Lender under the
Loan Documents without recourse to or warranty by, or expense to, such Lender,
for a purchase price equal to the outstanding amounts owing to such Lender
(including such additional amounts owing to such Lender pursuant to Section 9.2,
------------
9.3 or 9.5). Upon execution of an Assignment Agreement, such other financial
- --- ---
institution shall be deemed to be a "Lender" for all purposes of this Agreement
as set forth in Section 11.6 hereof.
------------
ARTICLE 10
Agreement Among Lenders
-----------------------
Section 10.1 Agreement Among Lenders. The Lenders agree among themselves
-----------------------
that:
(a) Administrative Lender. Each Lender hereby appoints the
---------------------
Administrative Lender as its nominee in its name and on its behalf, to receive
all documents and items to be furnished hereunder; to act as nominee for and on
behalf of all Lenders under the Loan Documents; to, except as otherwise
expressly set forth herein, take such action as may be requested by the
Determining Lenders, provided that, (i) unless and until the Administrative
Lender shall have received such requests, the Administrative Lender may take
such administrative action, or refrain from taking such administrative action,
as it may deem advisable and in the best interests of the Lenders, and (ii) the
Administrative Lender shall not be required to take any action that exposes the
Administrative Lender to personal liability or that is contrary to any Loan
Document or Applicable Law; to arrange the means whereby the proceeds of the
Advances of the Lenders are to be made available to the Borrower; to distribute
promptly to each Lender information, requests and documents received from the
Borrower hereunder and not otherwise provided to such Lender by the Borrower or
any other Person, and each payment (in like funds received) with respect to any
of such Lender's Advances, or the ratable amount of fees or other amounts; and
to deliver to the Borrower requests, demands, approvals and consents received
from the
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Lenders. Administrative Lender agrees to promptly distribute to each Lender, at
such Lender's address set forth below information, requests, documents and
payments received from the Borrower and not otherwise provided to such Lender by
the Borrower or any other Person. The Administrative Lender shall have no
fiduciary relationship in respect of any Lender by reason of this Agreement or
any other Loan Document. The Administrative Lender shall have no duties or
responsibilities except those expressly set forth in this Agreement. The duties
of the Administrative Lender are mechanical and administrative in nature.
(b) Replacement of Administrative Lender. Should the Administrative
------------------------------------
Lender or any successor Administrative Lender ever cease to be a Lender
hereunder, or should the Administrative Lender or any successor Administrative
Lender ever resign as Administrative Lender, or should the Administrative Lender
or any successor Administrative Lender ever be removed with cause or without
cause by the action of all Lenders (other than the Administrative Lender), then
the Lender appointed by the other Lenders (with the consent of the Borrower,
which consent shall not be unreasonably withheld) shall forthwith become the
Administrative Lender, and the Borrower and the Lenders shall execute such
documents as any Lender may reasonably request to reflect such change. If the
Administrative Lender also then serves in the capacity of the Swing Line Bank or
the Issuing Bank, such resignation or removal shall constitute resignation or
removal of the Swing Line Bank and the Issuing Bank. Any resignation or removal
of the Administrative Lender or any successor Administrative Lender shall become
effective upon the appointment by the Lenders of a successor Administrative
Lender; provided, however, if no successor Administrative Lender shall have been
so appointed and shall have accepted such appointment within 30 days after the
retiring Administrative Lender's giving of notice of resignation or the Lenders'
removal of the retiring Administrative Lender, then the retiring Administrative
Lender may, on behalf of the Lenders, appoint a successor Administrative Lender,
which shall be a commercial bank organized under the Laws of the United States
of America or of any State thereof and having a combined capital and surplus of
at least $500,000,000. Upon the acceptance of any appointment as the
Administrative Lender hereunder by a successor Administrative Lender, such
successor Administrative Lender shall thereupon succeed to and become vested
with all the rights and duties of the retiring Administrative Lender, and the
retiring Administrative Lender shall be discharged from its duties and
obligations under the Loan Documents, provided that if the retiring or removed
Administrative Lender is unable to appoint a successor Administrative Lender,
the Administrative Lender shall, after the expiration of a 60 day period from
the date of notice, be relieved of all obligations as Administrative Lender
hereunder. Notwithstanding any Administrative Lender's resignation or removal
hereunder, the provisions of this Article shall continue to inure to its benefit
as to any actions taken or omitted to be taken by it while it was the
Administrative Lender under this Agreement.
(c) Expenses. Each Lender shall pay its pro rata share, based on its
--------
Specified Percentage, of any expenses paid by the Administrative Lender directly
and solely in connection with any of the Loan Documents and/or the
Securitization Documents if Administrative Lender does not receive reimbursement
therefor from other sources within 60 days after the date incurred. Any amount
so paid by the Lenders to the Administrative Lender shall be returned
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by the Administrative Lender pro rata to each paying Lender to the extent later
paid by the Borrower or any other Person on the Borrower's behalf to the
Administrative Lender.
(d) Delegation of Duties. The Administrative Lender may execute any of
--------------------
its duties hereunder by or through officers, directors, employees, attorneys or
agents, and shall be entitled to (and shall be protected in relying upon) advice
of counsel concerning all matters pertaining to its duties hereunder.
(e) Reliance by Administrative Lender. The Administrative Lender and its
---------------------------------
officers, directors, employees, attorneys and agents shall be entitled to rely
and shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype
message, statement, order, or other document or conversation reasonably believed
by it or them in good faith to be genuine and correct and to have been signed or
made by the proper Person and, with respect to legal matters, upon opinions of
counsel selected by the Administrative Lender. The Administrative Lender may, in
its reasonable judgment, deem and treat the payee of any Note as the owner
thereof for all purposes hereof.
(f) Limitation of Administrative Lender's Liability. Neither the
-----------------------------------------------
Administrative Lender nor any of its officers, directors, employees, attorneys
or agents shall be liable for any action taken or omitted to be taken by it or
them hereunder in good faith and believed by it or them to be within the
discretion or power conferred to it or them by the Loan Documents or be
responsible for the consequences of any error of judgment, except for its or
their own gross negligence or wilful misconduct. Except as aforesaid, the
Administrative Lender shall be under no duty to enforce any rights with respect
to any of the Advances, or any security therefor. The Administrative Lender
shall not be compelled to do any act hereunder or to take any action towards the
execution or enforcement of the powers hereby created or to prosecute or defend
any suit in respect hereof, unless indemnified to its reasonable satisfaction
against loss, cost, liability and expense unless expressly provided to the
contrary herein. The Administrative Lender shall not be responsible in any
manner to any Lender for the effectiveness, enforceability, genuineness,
validity or due execution of any of the Loan Documents, or for any
representation, warranty, document, certificate, report or statement made herein
or furnished in connection with any Loan Documents, or be under any obligation
to any Lender to ascertain or to inquire as to the performance or observation of
any of the terms, covenants or conditions of any Loan Documents on the part of
the Borrower. TO THE EXTENT NOT REIMBURSED BY THE BORROWER, EACH LENDER HEREBY
SEVERALLY INDEMNIFIES AND HOLDS HARMLESS THE ADMINISTRATIVE LENDER, PRO RATA
ACCORDING TO ITS SPECIFIED PERCENTAGE, FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND/OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY THE ADMINISTRATIVE LENDER (IN SUCH
CAPACITY) IN ANY WAY WITH RESPECT TO ANY LOAN DOCUMENTS OR ANY ACTION TAKEN OR
OMITTED BY THE ADMINISTRATIVE LENDER UNDER THE LOAN DOCUMENTS (INCLUDING ANY
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NEGLIGENT ACTION OF THE ADMINISTRATIVE LENDER), EXCEPT TO THE EXTENT THE SAME
ARE FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION TO RESULT FROM GROSS
NEGLIGENCE OR WILFUL MISCONDUCT BY THE ADMINISTRATIVE LENDER. THE INDEMNITY
PROVIDED IN THIS SECTION 10.1(f) SHALL SURVIVE TERMINATION OF THIS AGREEMENT.
---------------
(g) Liability Among Lenders. No Lender shall incur any liability (other
-----------------------
than the sharing of expenses and other matters specifically set forth herein and
in the other Loan Documents) to any other Lender, except for acts or omissions
in bad faith.
(h) Rights as Lender. With respect to its commitment hereunder, the
----------------
Advances made by it and the Notes issued to it, the Administrative Lender shall
have the same rights as a Lender and may exercise the same as though it were not
the Administrative Lender, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Lender in its individual
capacity. The Administrative Lender or any Lender may accept deposits from, act
as trustee under indentures of, and generally engage in any kind of business
with, the Borrower and any of its Affiliates, and any Person who may do business
with or own securities of the Borrower or any of its Affiliates, all as if the
Administrative Lender were not the Administrative Lender hereunder and without
any duty to account therefor to the Lenders.
Section 10.2 Lender Credit Decision. Each Lender acknowledges that it
----------------------
has, independently and without reliance upon the Administrative Lender or any
other Lender and based upon the financial statements referred to in Sections
--------
4.1(j), 6.1, and 6.2 hereof, and such other documents and information as it has
- ------ --- ---
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Lender or any other Lender and based upon such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents. Each Lender also acknowledges that its
decision to fund the initial Advances shall constitute evidence to the
Administrative Lender that such Lender has deemed all of the conditions set
forth in Section 3.1 to have been satisfied.
Section 10.3 Benefits of Article. None of the provisions of this Article
-------------------
shall inure to the benefit of any Person other than Lenders and, with respect to
Section 10.1(b), the Borrower; consequently, no such other Person shall be
- ---------------
entitled to rely upon, or to raise as a defense, in any manner whatsoever, the
failure of the Administrative Lender or any Lender to comply with such
provisions.
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ARTICLE 11
Miscellaneous
-------------
Section 11.1 Notices.
-------
(a) All notices and other communications under this Agreement shall be in
writing (except in those cases where giving notice by telephone is expressly
permitted) and shall be deemed to have been given on the date personally
delivered or sent by telecopy (answerback received), or three days after deposit
in the mail, designated as certified mail, return receipt requested, postage-
prepaid, or one day after being entrusted to a reputable commercial overnight
delivery service, addressed to the party to which such notice is directed at its
address determined as provided in this Section. All notices and other
communications under this Agreement shall be given to the parties hereto at the
following addresses:
(i) If to the Borrower, at:
CompuCom Systems, Inc.
10100 North Central Expressway
Dallas, Texas 75231
Attn: Robert J. Boutin
Senior Vice President, Finance and Chief Financial Officer
(ii) If to the Administrative Lender, at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Brent W. Mellow
Vice President
(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.
(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other parties.
Section 11.2 Expenses. The Borrower shall promptly pay:
--------
(a) all reasonable out-of-pocket expenses of the Administrative Lender in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents, the transactions contemplated hereunder
and thereunder, and the making of
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Advances hereunder, including without limitation the reasonable fees and
disbursements of Special Counsel;
(b) all reasonable out-of-pocket expenses and reasonable attorneys' fees
of the Administrative Lender in connection with the administration of the
transactions contemplated in this Agreement and the other Loan Documents and the
preparation, negotiation, execution and delivery of any waiver, amendment or
consent by the Administrative Lender relating to this Agreement or the other
Loan Documents; and
(c) all reasonable costs, out-of-pocket expenses and reasonable attorneys'
fees of the Administrative Lender and each Lender incurred for enforcement,
collection, restructuring, refinancing and "work-out", or otherwise incurred in
obtaining performance under the Loan Documents, which in each case shall include
without limitation fees and expenses of consultants, counsel for the
Administrative Lender and any Lender, and administrative fees for the
Administrative Lender.
Section 11.3 Waivers. The rights and remedies of the Lenders under this
-------
Agreement and the other Loan Documents shall be cumulative and not exclusive of
any rights or remedies which they would otherwise have. No failure or delay by
the Administrative Lender or any Lender in exercising any right shall operate as
a waiver of such right. The Lenders expressly reserve the right to require
strict compliance with the terms of this Agreement in connection with any
funding of a request for an Advance or issuance of a Letter of Credit. In the
event that any Lender decides to fund an Advance at a time when the Borrower is
not in strict compliance with the terms of this Agreement, such decision by such
Lender shall not be deemed to constitute an undertaking by the Lender to fund
any further requests for Advances or preclude the Lenders from exercising any
rights available under the Loan Documents or at law or equity. Any waiver or
indulgence granted by the Lenders shall not constitute a modification of this
Agreement, except to the extent expressly provided in such waiver or indulgence,
or constitute a course of dealing by the Lenders at variance with the terms of
the Agreement such as to require further notice by the Lenders of the Lenders'
intent to require strict adherence to the terms of the Agreement in the future.
Any such actions shall not in any way affect the ability of the Administrative
Lender or the Lenders, in their discretion, to exercise any rights available to
them under this Agreement or under any other agreement, whether or not the
Administrative Lender or any of the Lenders are a party thereto, relating to the
Borrower.
Section 11.4 Calculation by the Lenders Conclusive and Binding. Any
-------------------------------------------------
mathematical calculation required or expressly permitted to be made by the
Administrative Lender or any Lender under this Agreement shall be made in its
reasonable judgment and in good faith, and shall when made, absent manifest
error, be controlling.
Section 11.5 Set-Off. In addition to any rights now or hereafter granted
-------
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence and during the continuation of an Event of Default, each Lender and
any subsequent holder of any Note, and any assignee of any Note is hereby
authorized by the Borrower at any time or from time to
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time, without notice to the Borrower or any other Person, any such notice being
hereby expressly waived, to set-off, appropriate and apply any deposits (general
or special (except trust and escrow accounts), time or demand, including without
limitation Indebtedness evidenced by certificates of deposit, in each case
whether matured or unmatured) and any other Indebtedness at any time held or
owing by such Lender or holder to or for the credit or the account of the
Borrower, against and on account of the Obligations and other liabilities of the
Borrower to such Lender or holder, irrespective of whether or not (a) the Lender
or holder shall have made any demand hereunder, or (b) the Lender or holder
shall have declared the principal of and interest on the Advances and other
amounts due hereunder to be due and payable as permitted by Section 8.2. Any
-----------
sums obtained by any Lender or by any assignee or subsequent holder of any Note
shall be subject to pro rata treatment of all Obligations and other liabilities
hereunder. Any Lender exercising any Rights under this Section 11.5 shall give
------------
the Borrower prompt notice thereof after such exercise.
Section 11.6 Assignment.
----------
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder or under the other Loan Documents without the prior
written consent of the Lenders.
(b) No Lender shall be entitled to assign or grant a participation in its
interest in this Agreement, its Notes or its Advances, except as hereinafter set
forth.
(c) Without the consent of the Borrower, any Lender may at any time sell
participations in all or any part of its Advances and Reimbursement Obligations
(collectively, "Participations") to any banks or other financial institutions
--------------
("Participants") provided that neither such Participation nor any agreement
- --------------
relating thereto shall confer on any Person (other than the parties hereto) any
right to vote on, approve or sign amendments or waivers, or any other
independent benefit or any legal or equitable right, remedy or other claim under
this Agreement or any other Loan Documents, other than the right to vote on,
approve, or sign amendments or waivers or consents with respect to items that
would result in (i) any increase in the commitment of any Participant; or
(ii)(A) the extension of the date of maturity of, or (B) the extension of the
due date for any payment of principal, interest or fees respecting, or (C) the
reduction of the amount of any installment of principal or interest on or the
change or reduction of any mandatory reduction required hereunder, or (D) a
reduction of the rate of interest on, the Advances, the Letters of Credit, or
the Reimbursement Obligations to which such Participant is entitled; or (iii)
the release of security for the Obligations, including without limitation any
guarantee, except pursuant to this Agreement or the other Loan Documents; or
(iv) the reduction of any fees payable hereunder to which such Participant is
entitled. Notwithstanding the foregoing, the Borrower agrees that the
Participants shall be entitled to the benefits of Article 9 hereof as though
---------
they were Lenders and the Lenders may, subject to Section 11.14 hereof, provide
-------------
copies of all financial information received from the Borrower to such
Participants.
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(d) Each Lender may assign to one or more financial institutions organized
under the laws of the United States, or any state thereof, or under the laws of
any other country that is a member of the Organization for Economic Cooperation
and Development, or a political subdivision of any such country, which is
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business (each, an "Assignee") its rights and obligations
--------
under this Agreement and the other Loan Documents; provided, however, that (i)
-------- -------
each such assignment shall be subject to the prior written consent of the
Administrative Lender and Borrower, which consent shall not be unreasonably
withheld (provided, however, notwithstanding anything herein to the contrary, no
-------- -------
consent of the Borrower is required for any assignment during any time that an
Event of Default has occurred and is continuing), (ii) no such assignment shall
be in an amount of Commitments less than $10,000,000 unless such lesser amount
represents the entirety of the Commitments of the applicable Lender, (iii) the
applicable Lender, Administrative Lender and applicable Assignee shall execute
and deliver to the Administrative Lender an Assignment and Acceptance Agreement
(an "Assignment Agreement") in substantially the form of Exhibit H hereto,
-------------------- ---------
together with the Notes subject to such assignment, (iv) the Assignee executing
the Assignment, shall deliver to the Administrative Lender a processing fee of
$3,000 and (v) each such assignment shall be a constant, not a varying,
percentage of the assigning Lender's Rights and obligations in respect of the
Facility A Advances and the Facility B Advances. Upon such execution, delivery
and acceptance from and after the effective date specified in each Assignment,
which effective date shall be at least three Business Days after the execution
thereof, (A) the Assignee thereunder shall be party hereto and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such
Assignment, have the rights and obligations of a Lender hereunder and (B) the
applicable Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment, relinquish such rights and
be released from such obligations under this Agreement.
(e) Notwithstanding anything in clause (d) above to the contrary, any
Lender may assign and pledge all or any portion of its Advances and Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A of F.R.S.
Board and any Operating Circular issued by such Federal Reserve Bank; provided,
however, that no such assignment under this clause (e) shall release the
assignor Lender from its obligations hereunder.
(f) Upon its receipt of an Assignment Agreement executed by a Lender and
an Assignee, and any Note or Notes subject to such assignment, the Borrower
shall, within five Business Days after its receipt of such Assignment Agreement,
at no expense to the Borrower, execute and deliver to the Administrative Lender
in exchange for the surrendered Notes new Notes to the order of such Assignee in
an amount equal to the portion of the Advances and Commitments assigned to it
pursuant to such Assignment Agreement and new Notes to the order of the assignor
Lender in an amount equal to the portion of the Advances and Commitments
retained by it hereunder. Such new Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Notes, shall
be dated the effective date of such Assignment Agreement and shall otherwise be
in substantially the form of Exhibit A or B hereto, as applicable.
--------- -
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(g) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 11.6, disclose to
------------
the assignee or Participant or proposed assignee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower, provided such Person agrees in writing to handle such information in
accordance with the standards set forth in Section 11.14 hereof.
-------------
(h) Except as specifically set forth in this Section 11.6, nothing in this
------------
Agreement or any other Loan Documents, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan Documents.
(i) Notwithstanding anything in this Section 11.6 to the contrary, no
------------
Assignee or Participant (nor the assigning or participating Lender) shall be
entitled to receive (whether individually or collectively) any greater payment
under Section 2.14 or Section 9.3 or Section 9.5 than such assigning or
------------ ----------- -----------
participating Lender would have been entitled to receive with respect to the
interest assigned or participated to such Assignee or Participant.
Section 11.7 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 11.8 Severability. Any provision of this Agreement which is for
------------
any reason prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 11.9 Interest and Charges. It is not the intention of any parties
--------------------
to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Documents, no Lender shall ever be entitled to receive, collect or apply,
as interest on the Obligations, any amount in excess of the Highest Lawful
Amount. If any Lender or participant ever receives, collects or applies, as
interest, any such excess, such amount which would be excessive interest shall
be deemed a partial repayment of principal and treated hereunder as such; and if
principal is paid in full, any remaining excess shall be paid to the Borrower.
In determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Highest Lawful Rate, the Borrower and the Lenders
shall, to the maximum extent permitted under Applicable Law, (a) characterize
any nonprincipal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) amortize,
prorate, allocate and spread in equal parts, the total amount of interest
throughout the entire contemplated term of the Obligations so that the interest
rate is uniform throughout the entire term of the Obligations; provided,
however, that if the Obligations are paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the
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Highest Lawful Rate, the Lenders shall refund to the Borrower the amount of such
excess or credit the amount of such excess against the total principal amount of
the Obligations owing, and, in such event, the Lenders shall not be subject to
any penalties provided by any laws for contracting for, charging or receiving
interest in excess of the Highest Lawful Rate. This Section shall control every
other provision of all agreements pertaining to the transactions contemplated by
or contained in the Loan Documents.
Section 11.10 Headings. Headings used in this Agreement are for
--------
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 11.11 Amendment and Waiver. The provisions of this Agreement may
--------------------
not be amended, modified or waived except by the written agreement of the
Borrower and the Determining Lenders; provided, however, that no such amendment,
modification or waiver shall be made (a) without the consent of all Lenders, if
it would (i) increase the Specified Percentage or commitment of any Lender, or
(ii) extend or postpone the date of maturity of, extend the due date for any
payment of principal or interest on, reduce the amount of any installment of
principal or interest on, or reduce the rate of interest on, any Advance, the
Reimbursement Obligations or other amount owing under any Loan Documents to
which such Lender is entitled, or (iii) release any security for or guaranty of
the Obligations (except pursuant to this Agreement or the other Loan Documents),
or (iv) reduce the fees payable hereunder to which such Lender is entitled, or
(v) revise this Section 11.11, or (vi) waive the date for payment of any
-------------
principal, interest or fees hereunder or (vii) amend the definition of
Determining Lenders; (b) without the consent of the Swing Line Bank, if it would
alter the rights, duties or obligations of the Swing Line Bank; (c) without the
consent of the Administrative Lender, if it would alter the rights, duties or
obligations of the Administrative Lender; or (d) without the consent of the
Issuing Bank, if it would alter the rights, duties or obligations of the Issuing
Bank. Neither this Agreement nor any term hereof may be amended orally, nor may
any provision hereof be waived orally but only by an instrument in writing
signed by the Administrative Lender and, in the case of an amendment, by the
Borrower. Notwithstanding the foregoing, each Lender (in its capacity as a
Lender hereunder and, if applicable, in its capacity as a "Participant" under
the Existing Credit Agreement) hereby consents to, and authorizes, the release
by the Administrative Lender of any and all Liens insofar as same (i) arose
under the Existing Credit Agreement and (ii) cover property other than the
Borrower's Receivables, the Borrower's Inventory, the CFI Note, the ClientLink
Note, the Equity interest of the Borrower in CFI, the rights of CompuCom
Properties, Inc. under that certain Trademark License Agreement, dated as of
October 25, 1991, between CompuCom Properties, Inc., as licensor, and the
Borrower, as licensee, and/or any proceeds, products, amendments, modifications
and/or restatements of or to any of the foregoing property. Furthermore, each
Lender which is a "Participant" (as such term is defined in the Existing Credit
Agreement) hereby consents to, and authorizes, the sale and transfer of the
Existing Credit Agreement and the indebtedness, Liens and other rights
thereunder or in connection therewith to the Administrative Lender, for the
ratable benefit of the Lenders hereunder.
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Section 11.12 Exception to Covenants. Neither the Borrower nor any
----------------------
Subsidiary of the Borrower shall be deemed to be permitted to take any action or
fail to take any action which is permitted as an exception to any of the
covenants contained herein or which is within the permissible limits of any of
the covenants contained herein if such action or omission would result in the
breach of any other covenant contained herein.
Section 11.13 No Liability of Issuing Bank. The Borrower assumes all
----------------------------
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any Lender nor any of their respective officers or directors shall be
liable or responsible for: (a) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing
Bank against presentation of documents that do not comply with the terms of a
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to the Letter of Credit, except for any payment made upon the
Issuing Bank's gross negligence or wilful misconduct; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, except that the Borrower shall have a claim against the Issuing Bank,
------
and the Issuing Bank shall be liable to the Borrower, to the extent of any
direct, but not consequential, damages suffered by the Borrower that a court of
competent jurisdiction determines were caused by (i) the Issuing Bank's wilful
misconduct or gross negligence or (ii) the Issuing Bank's wilful failure to make
lawful payment under a Letter of Credit after the presentation to it of a draft
and certificates strictly complying with the terms and conditions of the Letter
of Credit. In furtherance and not in limitation of the foregoing, the Issuing
Bank may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
Section 11.14 Confidentiality. Each Lender and the Administrative Lender
---------------
agrees (on behalf of itself and each of its Affiliates, directors, officers,
employees and representatives) to use reasonable precautions to keep
confidential, in accordance with customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices, any non-public information supplied to it by the Borrower pursuant to
this Agreement which is identified by the Borrower as being confidential at the
time the same is delivered to the Lenders or the Administrative Lender, provided
that nothing herein shall limit the disclosure of any such information (a) to
the extent required by statute, rule, regulation or judicial process, (b) to
counsel for any Lender or the Administrative Lender, (c) to bank examiners,
auditors or accountants of any Lender, (d) to the Administrative Lender or any
other Lender, (e) in connection with any Litigation to which any one or more of
Lenders is a party, provided, further, that, unless specifically prohibited by
Applicable Law or court order, each Lender shall, prior to disclosure thereof,
notify Borrower of any request for disclosure of any such non-public information
(i) by any Tribunal or representative thereof (other than any such request in
connection with an examination of such Lender's financial condition by such
governmental agency) or (ii) pursuant to legal process, or (f) to any Assignee
or Participant (or prospective Assignee or
-89-
<PAGE>
Participant) so long as such Assignee or Participant (or prospective Assignee or
Participant) agrees in writing to handle such information in accordance with the
provisions of this Section 11.14.
-------------
Section 11.15 Amendment, Restatement, Extension, Renewal and Increase.
-------------------------------------------------------
This Agreement is a renewal, extension, amendment, increase and restatement of
the Existing Credit Agreement, and is not a novation of the "Obligations" (as
defined in the Existing Credit Agreement) thereunder. On the Agreement Date,
the "Revolving Note" (as defined in the Existing Credit Agreement), all of the
outstanding indebtedness of the Borrower under the Existing Credit Agreement and
all of the liens, security interests and other rights and interests of
NationsBank of Texas, N.A. under the Existing Credit Agreement and under the
other Loan Documents (as defined in the Existing Credit Agreement) shall be
acquired by the Administrative Lender for the ratable benefit of the Lenders in
their respective Specified Percentages. On the Agreement Date, the outstanding
indebtedness of the Borrower under the Revolving Note shall be renewed,
extended, modified and restated by the Facility A Notes. The Borrower hereby
consents to the acquisition by the Administrative Lender of the indebtedness,
rights and interests described above. All terms and provisions of this
Agreement supersede in their entirety the Existing Credit Agreement. All Liens
covering the Collateral, or any part thereof, under the collateral documents
executed in connection with the Existing Credit Agreement shall remain valid,
binding and enforceable Liens against the Persons which granted such Liens.
SECTION 11.16 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
-------------
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS) AND THE UNITED
STATES OF AMERICA. THE LOAN DOCUMENTS ARE PERFORMABLE IN DALLAS, TEXAS, AND
BORROWER AND EACH SURETY, GUARANTOR, ENDORSER AND ANY OTHER PARTY EVER LIABLE
FOR PAYMENT OF ANY MONEY PAYABLE WITH RESPECT TO THE LOAN DOCUMENTS, JOINTLY AND
SEVERALLY WAIVE THE RIGHT TO BE SUED ELSEWHERE. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, THE BORROWER, THE ADMINISTRATIVE LENDER AND EACH LENDER EACH
AGREES THAT THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS,
SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS AND HEREBY SUBMITS WITH RESPECT TO ITSELF AND ITS
PROPERTY TO THE JURISDICTION OF ANY SUCH COURT FOR THE PURPOSE OF ANY SUIT,
ACTION, PROCEEDING OR JUDGMENT RELATING TO OR ARISING OUT OF THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT.
SECTION 11.17 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
--------------------
ADMINISTRATIVE LENDER AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
-90-
<PAGE>
THEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO
THIS AGREEMENT AND MAKING ANY ADVANCES HEREUNDER.
SECTION 11.18 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
----------------
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
REGARDING THE SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
-91-
<PAGE>
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
set forth above.
BORROWER: COMPUCOM SYSTEMS, INC.
By: /s/ Robert J. Boutin
------------------------------------------
Name: Robert J. Boutin
Title: Senior Vice President, Finance and
Chief Financial Officer
-92-
<PAGE>
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A., as Administrative
Lender
By: /s/ Donald L. Harrison, Jr.
------------------------------------------
Name: Donald L. Harrison
Title: Senior Vice President
-93-
<PAGE>
LENDERS: NATIONSBANK OF TEXAS, N.A., as a Lender, Swing
Line Bank and Issuing Bank
Specified Percentage:
14.222222223%
By: /s/ Donald L. Harrison, Jr.
------------------------------------------
Name: Donald L. Harrison
Title: Senior Vice President
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Brent W. Mellow
Vice President
-94-
<PAGE>
Specified Percentage: SANWA BUSINESS CREDIT CORPORATION
10.666666667%%
By: /s/ John P. Thacker
--------------------------------------------
Name: John P. Tacker
Title: Vice President
1 South Wacker Drive, Suite 2800
Chicago, Illinois 60606
-95-
<PAGE>
Specified Percentage: CORESTATES BANK, N.A.
8.888888889% By: /s/ Kristen V. Metzger
--------------------------------------------
Name: Kristen v. Metzger
Title: Commercial Officer
1339 Chestnut Street, FC 1-8-3-14
Philadelphia, Pennsylvania 19107
-96-
<PAGE>
Specified Percentage: NATIONAL CITY BANK OF KENTUCKY
8.888888889% By: /s/ John Z. Barr
--------------------------------------------
Name: John Z. Barr
Title: Senior Vice President
101 South Fifth Street, 8th Floor
Louisville, Kentucky 40202
-97-
<PAGE>
Specified Percentage: PNC BANK, NATIONAL ASSOCIATION, successor-
by-merger to Midlantic Bank, N.A.
8.888888889%
By: /s/ Daniel R. Reagle
--------------------------------------------
Name: Daniel R. Reagle
Title: Banking Officer
1535 Locust Street
Philadelphia, Pennsylvania 19102
-98-
<PAGE>
Specified Percentage: CREDIT LYONNAIS NEW YORK BRANCH
8.888888889% By: /s/ Jacques-Yves Mulliez
--------------------------------------------
Name: Jacques-Yves Mulliez
Title: Senior Vice President
1301 Avenue of the Americas
New York, New York 10019
-99-
<PAGE>
Specified Percentage: UNION BANK OF CALIFORNIA, N.A.
8.888888889% By: /s/ Stephen Sweeney
--------------------------------------------
Name: Stephen Sweeney
Title: Vice President
By: /s/ Steven Bierman
--------------------------------------------
Name: Steven Bierman
Title: Vice President
70 South Lake Avenue, Suite 900
Pasadena, California 91109
-100-
<PAGE>
Specified Percentage: NATIONAL BANK OF CANADA
8.000000000%
By: /s/ Doug Clark
--------------------------------------------
Name: Doug Clark
Title: Vice President
By: /s/ William W. Handley
--------------------------------------------
Name: William W. Handley
Title: Vice President
2121 San Jacinto
Dallas, Texas 75201
-101-
<PAGE>
Specified Percentage: THE SUMITOMO BANK, LIMITED
6.666666666% By: /s/ Kirk L. Stites
--------------------------------------------
Name: Kirk L. Stites
Title: Vice President & Manager
By: /s/ Julie A. Schell
--------------------------------------------
Name: Julie A. Schell
Title: Vice President
1601 Elm Street, Suite 4250
Dallas, Texas 75201
-102-
<PAGE>
Specified Percentage: BARNETT BANK, N.A.
5.333333333% By: /s/ Kimberly A. Bruce
--------------------------------------------
Name: Kimberly A. Bruce
Title: Assistant Vice President
101 East Kennedy Boulevard
Tampa, Florida 33602
-103-
<PAGE>
Specified Percentage: COMERICA BANK
5.333333333% By: /s/ Reginald M. Goldsmith, III
--------------------------------------------
Name: Reginald M. Goldsmith
Title: Vice President
500 Woodward Avenue
9th Floor
Mail Code 3281
Detroit, Michigan 48226
-104-
<PAGE>
Specified Percentage: FLEET NATIONAL BANK
5.333333333% By: /s/ Frank H. Benesh III
--------------------------------------------
Name: Frank H. Benesh III
Title: Vice President
One Federal Street, MA-OF-0323
Boston, Massachusetts 02211
-105-
<PAGE>
EXHIBIT 10.2
================================================================================
AMENDED AND RESTATED MASTER
SECURITY AND ADMINISTRATION AGREEMENT
COMPUCOM SYSTEMS, INC.
NATIONSBANK OF TEXAS, N.A.,
IN ITS CAPACITY AS
ADMINISTRATIVE SECURED PARTY
NATIONSBANK OF TEXAS, N.A.,
IN ITS CAPACITY AS
ADMINISTRATIVE LENDER
CSI FUNDING, INC.
ENTERPRISE FUNDING CORPORATION
DATED AS OF SEPTEMBER 25, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Definitions................................................................. 1
ARTICLE I.
GRANT OF SECURITY INTEREST;
APPOINTMENT OF ADMINISTRATOR; COLLATERAL COVENANTS.......................... 11
1.1 Security Interest................................................... 11
1.2 Administrative Secured Party Appointed as Administrator............. 12
1.3 Receivables......................................................... 12
1.4 Adjustment and Compromise of Receivables............................ 13
1.5 Books and Records................................................... 13
1.6 Perfection and Protection........................................... 13
1.7 Examinations; Inspections........................................... 14
1.8 Right to Cure....................................................... 14
1.9 Preservation of Rights.............................................. 14
1.10 Special Rights; Power of Attorney................................... 15
ARTICLE II.
COLLECTIONS ADMINISTRATION.................................................. 16
2.1 Administration of Collections....................................... 16
2.2 Certification of RPA Interest and CompuCom Interest................. 18
2.3 Fees................................................................ 20
ARTICLE III.
CLOSING REQUIREMENTS........................................................ 20
3.1 Items to be Delivered by CompuCom................................... 20
ARTICLE IV.
REPRESENTATIONS............................................................. 21
4.1 Corporate Name; Trade Names......................................... 22
4.2 Chief Executive Office.............................................. 22
4.3 Corporate Existence................................................. 22
4.4 Corporate Power and Authority; Validity............................. 22
4.5 No Conflicting Agreements........................................... 22
4.6 Compliance with Laws................................................ 22
4.7 Judgments........................................................... 22
4.8 Taxes............................................................... 23
4.9 Title to Property................................................... 23
i
<PAGE>
4.10 Consents............................................................ 23
4.11 Representations and Warranties Cumulative........................... 23
ARTICLE V.
COVENANTS................................................................... 23
5.1 Compliance Certificate.............................................. 23
5.2 Authority........................................................... 23
5.3 Books and Records................................................... 24
5.4 Corporate Existence................................................. 24
5.5 Monthly Receivables Report.......................................... 24
5.6 Notices, Information in Respect of RPA and TAA...................... 24
5.7 Copies in Respect of RPA and TAA.................................... 24
5.8 Additional Information.............................................. 25
5.9 Notification of Material Changes.................................... 25
5.10 Notification Regarding Default...................................... 25
5.11 Compliance with Laws................................................ 25
5.12 Payment of Taxes.................................................... 26
5.13 Waivers and Consents................................................ 26
5.14 Restriction on Disposition of Collateral............................ 26
5.15 Prohibition Against Liens on Collateral............................. 26
5.16 Covenants Cumulative................................................ 26
ARTICLE VI.
EVENT OF DEFAULT............................................................ 27
6.1 Event of Default.................................................... 27
ARTICLE VII.
REMEDIES.................................................................... 27
7.1 Remedies............................................................ 27
7.2 Cash Collateral; Injunctive Relief.................................. 29
7.3 Application of Proceeds; Deficiency................................. 29
7.4 Waiver of Notices................................................... 30
7.5 Setoff.............................................................. 30
7.6 Performance by Administrative Secured Party......................... 30
7.7 Non-waiver.......................................................... 30
7.8 Remedies Cumulative................................................. 31
ARTICLE VIII.
ADMINISTRATION.............................................................. 31
8.1 Administration...................................................... 31
ii
<PAGE>
ARTICLE IX.
ADDITIONAL AGREEMENTS....................................................... 39
9.1 Equal Dignity....................................................... 39
9.2 Pro-Rata Treatment Among Beneficial Secured Parties................. 40
9.3 Subordination of Interests.......................................... 40
9.4 Other Rights; Waiver of Marshaling.................................. 44
9.5 Access to Information............................................... 44
9.6 Payments by Administrative Secured Party............................ 44
9.7 Notices, Consents, Agreements Regarding EFC......................... 45
9.8 Limitation.......................................................... 45
ARTICLE X.
MISCELLANEOUS............................................................... 45
10.1 Effective Date; Term; Termination................................... 45
10.2 Payments............................................................ 45
10.3 Notices............................................................. 45
10.4 Benefit to CompuCom................................................. 47
10.5 Administrative Secured Party........................................ 47
10.6 Exercise of Rights.................................................. 48
10.7 Administrative Secured Party's Records; Account Statements.......... 48
10.8 Indemnity........................................................... 48
10.9 Interest Limitation................................................. 49
10.10 Costs and Expenses.................................................. 49
10.11 Acceptance and Performance; Venue................................... 50
10.12 WAIVER OF TRIAL BY JURY............................................. 50
10.13 Copies Valid as Financing Statements................................ 51
10.14 Governing Law....................................................... 51
10.15 Entirety and Amendments............................................. 51
10.16 Parties Bound....................................................... 51
10.17 Exhibits............................................................ 52
10.18 Descriptive Titles.................................................. 52
10.19 Cumulative Rights................................................... 52
10.20 Severability........................................................ 52
10.21 Multiple Counterparts............................................... 53
10.22 Survival............................................................ 53
iii
<PAGE>
AMENDED AND RESTATED MASTER
SECURITY AND ADMINISTRATION AGREEMENT
This Amended and Restated Master Security and Administration Agreement is
executed and entered into by and among COMPUCOM SYSTEMS, INC., a Delaware
corporation, NATIONSBANK OF TEXAS, N.A., a national bank, in its capacity as
Administrative Secured Party under this Agreement, NATIONSBANK OF TEXAS, N.A., a
national bank, in its individual corporate capacity, CSI FUNDING, INC., a
Delaware corporation, and ENTERPRISE FUNDING CORPORATION, a Delaware
corporation, effective as of September 25, 1996, as follows:
DEFINITIONS
-----------
The following definitions shall apply throughout this Agreement:
"Account Debtor" means a Person that is obligated for payment of a
--------------
Receivable.
"Administration Documents" means this Agreement, the Concentration Account
------------------------
Agreement, any Lockbox Agreement, the NationsBank Account, the CompuCom
Account and the CFI Account, respectively, all financing statements in
respect of this Agreement, and any and all renewals, extensions,
modifications, amendments or restatements of any of the foregoing.
"Administrative Lender" means NationsBank of Texas, N.A., as administrative
---------------------
lender for the ratable benefit of the Lenders under the Credit Agreement,
and its successors and assigns in such capacity.
"Administrative Secured Party" means NATIONSBANK OF TEXAS, N.A., a
----------------------------
national bank, in its capacity as Administrative Secured Party under this
Agreement, whose principal place of business is located at 901 Main Street,
Dallas, Dallas County, Texas 75202. When used throughout this Agreement,
"Administrative Secured Party" also includes Administrative Secured Party's
successors and any party to whom Administrative Secured Party, or its
successors, assigns its rights and interests under this Agreement as
allowed by, and pursuant to, paragraph 8.1(h).
"Agreement" means this Master Security and Administration Agreement and all
---------
exhibits and addenda, and any renewal, extension, amendment, modification
or restatement thereof.
<PAGE>
"Beneficial Secured Party" means each of (i) NationsBank (until full
------------------------
payment of all NationsBank Secured Obligations and termination of the
Credit Agreement, but not thereafter) and (ii) CFI (until termination of
the RPA and collection, or write-off by CFI, of all Receivables in which an
RPA Interest was transferred under the RPA, but not thereafter) and, until
termination of the TAA (but not thereafter), EFC as assignee of the CFI
Secured Obligations and a portion of the RPA Interest, as its interest
therein appears pursuant to the TAA, and its permitted assigns and any Bank
Investors (as defined therein); and in each case their legal successors,
respectively.
"Books and Records" means all books, records, books or records of account,
-----------------
files, journals, ledgers, correspondence, bank statements, registers, logs,
customer lists and related customer credit information, address or
telephone number lists, records of sales and payments made and received,
computer programs, discs, tapes, cards, software, printouts, systems and
other records, in whatever form, relating in any way to any of the
foregoing, and all other tangible and intangible media created, generated,
received, kept or otherwise used for recording actions, transactions and
other facts relating or pertaining to the Collateral.
"Business Day" means any calendar day except Saturday, Sunday and those
------------
days on which Administrative Secured Party is closed for business or which
are legal public holidays specified in 5 U.S.C. (S)6103(a), as may be
amended from time to time.
"CFI" means CSI Funding, Inc., a Delaware corporation and wholly owned
---
subsidiary of CompuCom, whose chief executive office and principal place of
business is located at 10100 Central Expressway, Dallas, Texas 75321.
"CFI Account" means account No. 1291795475 maintained by CFI at NationsBank
-----------
or any other demand deposit account maintained by CFI and designated to
Administrative Secured Party in writing as an account for deposits by
Administrative Secured Party pursuant to paragraph 2.1(c)(1).
"CFI Secured Obligations" means all obligations now or hereafter owing by
-----------------------
CompuCom to or for the benefit of CFI (or EFC as transferee of a portion of
the RPA Interest under the TAA) under the RPA, the TAA or this Agreement,
whether pursuant to their respective terms or as may otherwise be
determined by applicable law (in all events including, without limitation,
CompuCom's obligation to deliver, or cause to be delivered, to
Administrative Secured Party all
2
<PAGE>
Collections for the benefit of the Beneficial Secured Parties as required
by this Agreement and the RPA and also including, to the extent (if any)
that the transactions under the RPA are recharacterized by a court of
competent jurisdiction to be a financing transaction, CompuCom's
obligations to repay any loans deemed made to it by CFI thereunder), and
all renewals, extensions, amendments, modifications or restatements
thereof.
"Collateral" means collectively all Receivables, Related Security, and
----------
Books and Records now owned and hereafter acquired by CompuCom, and all
proceeds thereof at any time arising.
"Collateral Access and Waiver Agreement" means an agreement in form and
--------------------------------------
substance satisfactory to Administrative Secured Party pursuant to which,
among other things, the owner and landlord of any real property leased by
CompuCom where any Books and Records are located shall waive its rights, if
any, thereto and allow Administrative Secured Party to enter upon the
premises to inspect, use, copy, or remove same.
"Collections" means all proceeds of Receivables in whatever form, including
-----------
without limitation money, electronic funds transfers or checks, drafts,
notes, or other instruments in payment of Receivables or otherwise
constituting proceeds of Receivables.
"CompuCom" means COMPUCOM SYSTEMS, INC., a Delaware corporation, with its
--------
chief executive office located at 10100 Central Expressway, Dallas, Texas
75321.
"CompuCom Account" means account No. 0187100969 maintained by CompuCom at
----------------
NationsBank, or any other demand deposit account maintained by CompuCom and
designated to the Administrative Secured Party in writing as an account for
deposits by Administrative Secured Party pursuant to paragraph 2.1.
"CompuCom Interest" means, at any time, the undivided fractional ownership
-----------------
interest in the Receivables other than the RPA Interest, which together
with the RPA Interest constitutes a one hundred percent (100%) ownership
interest.
3
<PAGE>
"CompuCom Interest Percentage" means, at any time, the CompuCom Interest
----------------------------
expressed as a percentage of the sum of the CompuCom Interest and the RPA
Interest, which percentage at any time shall be as most recently certified
to Administrative Secured Party by CompuCom and CFI pursuant to paragraph
2.2(a) or paragraph 2.2(b), subject however, to paragraph 2.2(c) and
paragraph 2.2(d).
"Concentration Account" means account No. 0187101017 maintained by CompuCom
---------------------
at NationsBank, over which Administrative Secured Party alone has power of
withdrawal or transfer, for the direct deposit of Collections and/or the
transfer of Collections made to the Lockbox pursuant to the Concentration
Account Agreement as prescribed by this Agreement.
"Concentration Account Agreement" means the agreement by and among
-------------------------------
CompuCom, Administrative Secured Party and a depository bank acceptable to
Administrative Secured Party and the Beneficial Secured Parties under which
the Concentration Account is established and maintained with such
depository bank, in form and substance satisfactory to Administrative
Secured Party and containing such provisions as Administrative Secured
Party may require, including without limitation the following: (a) such
depository bank agrees to hold all funds from time to time deposited to the
Concentration Account as bailee for Administrative Secured Party; (b)
following an Event of Default hereunder and notice by the Administrative
Secured Party to such depository bank, CompuCom and such depository bank
agree that they shall have no power of withdrawal over the funds in the
Concentration Account; (c) such depository bank waives any right, claim or
interest in the Concentration Account, and funds on deposit therein, and
agrees that it shall neither claim nor exercise any right of offset,
banker's lien or other rights against such funds; (d) CompuCom agrees to
pay directly all costs and expenses of such depository bank associated with
the Concentration Account; and (e) CompuCom and such depository bank agree
that CompuCom may not terminate the Concentration Account or the
Concentration Account Agreement, without the prior written consent of
Administrative Secured Party.
"Contract Term" means the period beginning on the Effective Date and ending
-------------
on the earlier of (1) both (i) termination of the RPA and the TAA and
certification thereof to Administrative Secured Party by CompuCom and the
RPA Interest Owner and (ii) full payment and performance of the NationsBank
Secured Obligations and termination of the Credit Agreement, and
certification thereof to Administrative Secured Party by CompuCom and
NationsBank or (2) mutual
4
<PAGE>
agreement in writing signed by CompuCom, Administrative Secured Party and
each of the Beneficial Secured Parties.
"Credit Agreement" means that certain Credit Agreement, dated September 25,
----------------
1996, between NationsBank and CompuCom, as the same may from time to time
be amended, supplemented or otherwise modified and in effect, which Credit
Agreement amends and restates that certain Financing and Security Agreement
dated effective as of August 4, 1993 between NationsBank and CompuCom, as
itself amended by the following: (i) the First Amendment to Financing and
Security Agreement dated effective as of March 31, 1994, (ii) the Second
Amendment to Financing and Security Agreement dated effective as of
December 12, 1994, (iii) the Third Amendment to Financing and Security
Agreement dated effective as of April 26, 1995, (iv) the Fourth Amendment
to Financing and Security Agreement dated effective as of October 1, 1995,
(v) Amendment 4A to Financing and Security Agreement dated effective as of
March 22, 1996 and (v) the Fifth Amendment to Financing and Security
Agreement dated as of April 1, 1996.
"EFC" means Enterprise Funding Corporation, a Delaware corporation.
---
"Effective Date" means the effective date specified in the preamble of this
--------------
Agreement.
"Indemnified Claims" means any and all claims, demands, actions, causes of
------------------
action, judgments, obligations, liabilities, losses, damages and
consequential damages, penalties, fines, costs, fees, expenses and
disbursements (including without limitation, reasonable fees and expenses
of attorneys and other professional consultants and experts in connection
with investigation or defense) of every kind, known or unknown, existing or
hereafter arising, foreseeable or unforeseeable, which may be imposed upon,
threatened or asserted against, or incurred or paid by, any Indemnified
Person at any time and from time to time, because of, resulting from, in
connection with, or arising out of any transaction, act, omission, event or
circumstance in any way connected with the Collateral or the Administration
Documents (including enforcement, defense or protection of any rights of
Administrative Secured Party or the Beneficial Secured Parties thereunder),
including but not limited to economic loss or property damage in connection
with any act performed or omitted to be performed under any Administration
Documents, any breach by CompuCom of any representation, warranty,
covenant, agreement or condition contained in any Administration Documents
or any Event of Default as defined in this Agreement. The foregoing
includes claims
5
<PAGE>
based upon or arising from ordinary negligence of any Indemnified Person
but excludes claims based upon or arising from gross negligence or willful
misconduct of any Indemnified Person.
"Indemnified Persons" collectively means Administrative Secured Party and
-------------------
each of the Beneficial Secured Parties, and their respective officers,
directors, shareholders, employees, agents, attorneys and representatives,
and any person owned or controlled by, or which owns or controls or is
under common control or is otherwise affiliated with, any of them,
respectively, and any other person, if any, who acquires a portion of the
Collateral in any manner through exercise of rights and remedies under the
Administration Documents.
"Lender" means any Person executing the Credit Agreement and named as a
------
lender thereunder, and its successors and assigns in such capacity.
"Lockbox" means a United States Post Office Box designated for the receipt
-------
of Collections pursuant to a Lockbox Agreement.
"Lockbox Agreement" means an agreement between Administrative Secured Party
-----------------
and CompuCom designating a Lockbox for the receipt, deposit and collection
of Collections, in form and substance satisfactory to Administrative
Secured Party and containing provisions for the receipt of Collections and
daily deposit of same to the Concentration Account, and such other
provisions as Administrative Secured Party may require.
"Material Adverse Effect" means (i) a materially adverse effect on the
-----------------------
business, assets, operations, prospects or condition, financial or
otherwise, of CompuCom or (ii) material impairment of the ability of
CompuCom to perform any obligations under the Administration Documents or
(iii) material impairment of the enforceability of the rights and remedies
intended to be provided to Administrative Secured Party and the Beneficial
Secured Parties by this Agreement.
"Maximum Rate" means the greater of (i) the "monthly ceiling" as referred
------------
to and in effect from time to time under the provisions of Tex. Rev. Civ.
Stat. Ann. art. 5069-1.04(c), as amended, or (ii) the maximum rate of
interest permitted from day to day by any other applicable state or federal
law.
6
<PAGE>
"NationsBank" means NationsBank of Texas, N.A., a national bank, in its
------------
capacity as Administrative Lender for the ratable benefit of the several
Lenders named in the Credit Agreement, whose chief executive office and
principal place of business is located at 901 Main Street, Dallas, Dallas
County, Texas 75202, and its respective successors and assigns, including
specifically any party to whom NationsBank or its successors or assigns may
assign its rights and interests in any NationsBank Secured Obligations.
"NationsBank Secured Obligations" means all "Obligations" defined in the
-------------------------------
Credit Agreement (which definition is incorporated herein by reference, and
includes without limitation, all obligations and indebtedness now or
hereafter owing by CompuCom to the Administrative Lender and/or the Lenders
under or in connection with the Credit Agreement and all other obligations
and indebtedness from time to time owing by CompuCom to the Administrative
Lender and/or the Lenders), and all renewals, extensions, amendments,
modifications or restatements thereof.
"Ownership Certification" means a written certification of the RPA Interest
-----------------------
Percentage and the CompuCom Interest Percentage, respectively, jointly
signed by the president, chief financial officer, treasurer or controller
of CompuCom and CFI, respectively, in form as appears in Exhibit 2.2 or
otherwise satisfactory to Administrative Secured Party, delivered by
CompuCom pursuant to paragraph 2.2.
"Permitted Subordinated Interests" means all interests in the Collateral
--------------------------------
evidenced by (i) each of the Credit Agreement, the RPA and the TAA, in each
case, however, subject to the provisions of this Agreement as provided by
paragraph 9.3, and (ii) interests of IBM Credit Corporation pursuant to the
certain Agreement for Wholesale Financing dated August 27, 1991 between IBM
Credit Corporation and CompuCom, as amended from time to time, subject at
all times, however, to the certain Amended and Restated Intercreditor
Agreement of even date herewith (the "IBM Intercreditor Agreement") among
---------------------------
IBM Credit Corporation, CompuCom, Administrative Secured Party and
NationsBank, as amended from time to time.
"Person" means any individual, corporation, joint venture, general or
------
limited partnership, trust, unincorporated organization or governmental
entity or agency.
7
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"Pro Rata Percentage" means, with respect to any Receivable, a percentage
-------------------
of such Receivable equal to (i) the CompuCom Interest Percentage in the
case of CompuCom or NationsBank, and (ii) the RPA Interest Percentage in
the case of CFI, or until termination of the TAA (but not thereafter), CFI
and EFC, collectively (as their respective interests in the RPA Interest
appear pursuant to the TAA).
"Receivables" means all of CompuCom's rights to payment from time to time
-----------
owing to CompuCom in connection with the sale of inventory or other goods,
or performance of services, by CompuCom (including without limitation,
accounts, chattel paper, instruments, contract rights and general
intangibles).
"Related Security" means all security interests or liens, and all property
----------------
subject thereto, from time to time securing payment and performance of any
Receivable, and all guarantees, insurance or other agreements or
arrangements of any kind from time to time supporting or securing payment
of any Receivable and all returned goods the sale of which gave rise to any
Receivable (subject to the provisions of Section 9-306 of the Uniform
Commercial Code and the IBM Intercreditor Agreement).
"RPA" means the certain Receivables Purchase Agreement of even date
---
herewith between CompuCom and CFI providing for the sale by CompuCom to CFI
and the purchase by CFI from CompuCom (subject to the interests and rights
of the Administrative Secured Party under this Agreement) of an undivided
fractional ownership interest in all Receivables now owned and hereafter
acquired and arising from time to time prior to termination thereof, on the
terms provided therein, as the same may be renewed, extended, modified,
amended or restated from time to time.
"RPA Interest" means the undivided fractional ownership interest in the
------------
Receivables that has been sold and transferred, and alternatively, in which
a security interest has been granted, by CompuCom to CFI pursuant to, and
which is the subject of, the RPA.
"RPA Interest Owner" means CFI, and until termination of the TAA (but not
------------------
thereafter) also includes EFC, and its permitted assigns, as purchaser and
assignee of a portion of the RPA Interest pursuant to the TAA, as its
interest therein appears pursuant to the RPA.
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"RPA Interest Percentage" means the RPA Interest expressed as a percentage
-----------------------
of the sum of the CompuCom Interest and the RPA Interest, which percentage
at any time shall be as most recently certified to Administrative Secured
Party by CompuCom and CFI pursuant to paragraph 2.2(a) or paragraph 2.2(b),
subject however, to paragraph 2.2(c) and paragraph 2.2(d).
"Secured Obligations" collectively means (i) all obligations from time to
-------------------
time owing by CompuCom to Administrative Secured Party under this
Agreement, (ii) the NationsBank Secured Obligations and (iii) the CFI
Secured Obligations, and any and all renewals or extensions thereof,
respectively.
"TAA" means the certain Transfer and Administration Agreement of even date
---
herewith among CFI, EFC, CompuCom and NationsBank, N.A. in its capacity as
Agent and a Bank Investor thereunder, providing for the transfer by CFI to
EFC and the acceptance by EFC from CFI of a portion of the RPA Interest,
from time to time, on the terms provided therein, as the same may be
renewed, extended, modified, amended or restated from time to time.
"Texas UCC" means the Texas Uniform Commercial Code as in effect on the
---------
date of this Agreement and as it may hereafter be amended from time to
time.
All words and phrases used herein which are expressly defined in Section 1.201
or in Chapter 9 of the Texas UCC shall have the meaning provided for therein.
Other such words and phrases defined elsewhere in the Texas UCC shall have the
meanings specified therein except to the extent such meaning is inconsistent
with a definition in Section 1.201 or Chapter 9 thereof.
RECITALS
--------
CompuCom, the Lenders and NationsBank are parties to the Credit
Agreement which provides for a credit facility for loans by
NationsBank and the Lenders to CompuCom, from time to time, secured by
(among other collateral) all of CompuCom's Receivables now owned and
hereafter acquired, on the terms provided therein.
CFI is a special purpose, bankruptcy remote, wholly owned subsidiary
of CompuCom, formed and operating for the sole purpose of entering
into and performing (i) this
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Agreement, (ii) the RPA, pursuant to which CompuCom will sell to CFI
and CFI will purchase from CompuCom, from time to time, the RPA
Interest, (iii) the TAA, pursuant to which CFI will transfer to EFC
and EFC will accept from CFI, from time to time, a portion of the RPA
Interest, and (iv) various related agreements.
CompuCom, NationsBank, CFI and EFC wish to establish a means by which
CompuCom may utilize its Receivables to access working capital sources
via both the Credit Agreement and the RPA, as CompuCom shall determine
in accordance with this Agreement, the Credit Agreement and the RPA,
and contemporaneous means by which the interests of the Beneficial
Secured Parties may be administered on terms, and in a manner,
mutually agreeable to Administrative Secured Party, CompuCom and the
Beneficial Secured Parties.
CompuCom and CFI intend that the transaction contemplated by the RPA
create an absolute transfer to CFI from CompuCom of the RPA Interest
in effect from time to time. In that regard, CFI has entered into
this Agreement to provide a means for administration of the
Receivables, the Related Security and Collections in a manner
consistent with its rights therein and the rights of NationsBank
therein. This agreement provides for the grant by CompuCom to
Administrative Secured Party, for the benefit of the Beneficial
Secured Parties as provided herein, of a security interest in the
Collateral as a whole (and not just the portion thereof as might
separately secure the NationsBank Secured Obligations) because CFI has
requested that, in the event of any possible recharacterization by a
court of competent jurisdiction of the transactions contemplated by
the RPA not as an absolute transfer to CFI of the RPA Interest but
rather as a financing (despite the expressed intent of CompuCom and
CFI), CFI have the equivalent benefit of a security interest in that
portion of the Receivables, the Related Security and the Collections
as might separately secure the payment to CFI of any loan deemed to
have been made to CompuCom
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by CFI pursuant to any such recharacterization. As a means to address
administrative impracticabilities caused by the nature of trade
accounts receivable and intercreditor matters regarding the rights of
NationsBank on the one hand and CFI on the other, this Agreement
provides for the grant by CompuCom to Administrative Secured Party,
for the benefit of the Beneficial Secured Parties, of a security
interest in all of the Receivables, the Related Security and the
Collections, to secure both the CFI Secured Obligations and the
NationsBank Secured Obligations as well as to provide for the
administration of the Collateral in a manner which is acceptable to
all parties, consistent with CFI's rights therein and the rights of
NationsBank therein.
Therefore, the undersigned parties have determined to enter into
certain agreements and arrangements according to the terms and
provisions as set forth hereinbelow.
THEREFORE, for value received and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
benefits provided herein, the undersigned parties hereby agree as follows:
ARTICLE I.
GRANT OF SECURITY INTEREST;
APPOINTMENT OF ADMINISTRATOR; COLLATERAL COVENANTS
I.1 SECURITY INTEREST.
a. Grant of Security Interest. CompuCom hereby grants to
--------------------------
Administrative Secured Party, for the benefit of the Beneficial
Secured Parties according to their respective Pro Rata Percentages, a
continuing security interest, collateral assignment and lien in and to
the Collateral to secure full payment and performance of the Secured
Obligations.
b. Priority. Subject to paragraph 9.3, the security
--------
interest, collateral assignment and lien in the Collateral granted to
Administrative Secured Party for the benefit of Beneficial Secured
Parties under this Agreement at all times shall be and remain first,
prior and senior to any other interests in the Collateral. CompuCom
represents to Administrative
11
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Secured Party that no other security interests, liens, financing
statements or other encumbrances exist or shall be allowed to exist
with respect to any of the Collateral, except the Permitted
Subordinated Interests and perfected rights, if any, in returned
inventory in favor of any Person who is a seller of inventory to
CompuCom, existing as of the Effective Date.
I.2 ADMINISTRATIVE SECURED PARTY APPOINTED AS ADMINISTRATOR. The
Beneficial Secured Parties hereby appoint Administrative Secured Party as
administrator to collect, receive and administer all Collections, on the
Beneficial Secured Parties' joint behalf, as provided by Article II and in
accordance with the other provisions of this Agreement. Until termination of
this Agreement (i) each Beneficial Secured Party irrevocably appoints
Administrative Secured Party as its nominee and attorney in fact with full power
coupled with an interest, to exercise and enforce any and all rights or remedies
in respect of its interests in the Receivables, whether under this Agreement,
the FSA (in the case of NationsBank), the RPA (in the case of CFI), the TAA (in
the case of CFI or EFC), or otherwise. Administrative Secured Party may exercise
or refrain from exercising any and all such rights or remedies as it may
determine in its discretion as provided, and subject to, the provisions of
Article VIII, subject to all other terms of this Agreement, and all Collections
received by Administrative Secured Party in the exercise of any such rights or
remedies shall be deemed received for the benefit of the Beneficial Secured
Parties according to their respective Pro Rata Percentages as of the time of
receipt thereof and administered according to the provisions of Article II and
the other provisions of this Agreement. The rights delegated and appointed to
Administrative Secured Party under this paragraph 1.2 are separate, distinct and
independent of Administrative Secured Party's rights as a secured party arising
under paragraph 1.1(a).
I.3 RECEIVABLES. CompuCom hereby represents, warrants and agrees as
follows (such representations, warranties and covenants being deemed made daily
by CompuCom to Administrative Secured Party for the benefit of the Beneficial
Secured Parties until this Agreement has been terminated): (a) CompuCom is the
sole owner of and has full unrestricted power and right to grant to
Administrative Secured Party a continuing security interest, collateral
assignment and pledge of all Receivables free from any lien, security interest
or encumbrance, other than Permitted Subordinated Interests; (b) each Receivable
is in existence, unconditional and valid, and arose from a bona fide outright
sale of inventory or performance of services in the ordinary course of business,
for liquidated amounts and maturing as set forth on its face and such inventory
has been shipped to, or such services have been performed for, the respective
Account Debtors; (c) no Receivable is or will be subject to any sale,
assignment, claim or security interest of any character, other than the
Permitted Subordinated Interests, and CompuCom will not make any sale or other
assignment thereof or create any other security interest
12
<PAGE>
therein; (d) except as disclosed to Administrative Secured Party in writing,
CompuCom has no knowledge that any Receivable is subject to any claim for
credit, deduction, allowance or adjustment by an Account Debtor, or to any
defense, dispute, setoff or counterclaim, and no extension or indulgence has
been granted by CompuCom with respect thereto; and (e) CompuCom believes and
expects that each Receivable will be paid in full at maturity. CompuCom
represents, warrants and confirms that the existing security interest in certain
inventory previously granted by CompuCom to each of Apple Computer, Inc. and
Compaq Computer Corporation, respectively, in each case, is limited by agreement
such that the security interest in proceeds of such inventory is limited only to
cash proceeds and insurance proceeds and excludes all other proceeds (it being
understood that CompuCom has, prior to the date hereof, delivered to
Administrative Secured Party a written statement from each such secured party
confirming that its security interest in proceeds of such inventory is so
limited), and CompuCom agrees that, for so long as this Agreement is in full
force and effect, it will not enter into any inventory agreement with any Person
unless, prior to the effectiveness of such inventory agreement, CompuCom limits
the interest of such Person in the proceeds of inventory in the manner specified
in this sentence.
I.4 ADJUSTMENT AND COMPROMISE OF RECEIVABLES. CompuCom agrees that it
will not settle, adjust, compromise, discharge or extend the time for payment of
any Receivable except in compliance with CompuCom's credit policy and involving
an amount not in excess of $2,000,000.00, without Administrative Secured Party's
consent.
I.5 BOOKS AND RECORDS. CompuCom represents and warrants to Administrative
Secured Party that all Books and Records are located at CompuCom's chief
executive office designated for CompuCom in the "Definitions" of this Agreement,
and at such other locations, if any, as may be specified in Exhibit 1.5.
CompuCom agrees that it will not maintain any Books and Records at any location
other than as designated in Exhibit 1.5 unless it gives Administrative Secured
Party at least 30 days prior written notice and first executes such financing
statements and other documents as Administrative Secured Party may request in
connection therewith, provided that, if any such location is a leased location
CompuCom shall first cause each owner or landlord thereof to execute and deliver
to Administrative Secured Party a Collateral Access and Waiver Agreement.
CompuCom shall immediately notify Administrative Secured Party upon receipt of
any notice from any Person claiming past due rent, fees or other charges in
respect of any material location where any Books and Records are located.
CompuCom will not deliver possession of any Books and Records to any Person
(other than pursuant to valid judicial process) without the prior written
consent of Administrative Secured Party.
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<PAGE>
I.6 PERFECTION AND PROTECTION. CompuCom shall perform, at its expense, all
action requested by Administrative Secured Party at any time to perfect,
maintain, protect, and enforce Administrative Secured Party's security interests
in the Collateral, including without limitation executing and filing financing
statements and amendments thereof, in form and substance satisfactory to
Administrative Secured Party; delivering to Administrative Secured Party any
proceeds of Collateral the possession of which is required for continued
perfection of Administrative Secured Party's security interests, duly endorsed
or assigned to Administrative Secured Party without restriction, as may be
required for such purpose; placing notations on books of account to disclose
Administrative Secured Party's security interests; and such other steps as are
deemed necessary by Administrative Secured Party to maintain its security
interests. So long as this Agreement is in effect and until all Secured
Obligations have been fully satisfied, Administrative Secured Party's security
interest and lien hereunder shall continue in full force and effect in all
Collateral.
I.7 EXAMINATIONS; INSPECTIONS. Administrative Secured Party or its
designee shall have the right, upon at least two (2) days' prior notice, without
hindrance or delay and during normal business hours, to examine and inspect the
Collateral. Administrative Secured Party is authorized to discuss CompuCom's
affairs with any employees of CompuCom, as Administrative Secured Party may deem
necessary in relation to the Collateral. CompuCom agrees to pay Administrative
Secured Party's customary fees and disbursements relating to any such
examinations or inspections. Administrative Secured Party shall have full
access to all records available to CompuCom from any credit reporting service,
bureau or similar service and shall have the right to examine and make copies of
any such records. Administrative Secured Party may exhibit a copy of this
Agreement to such service and such service shall be entitled to rely on the
provisions hereof in providing access to Administrative Secured Party as
provided herein.
I.8 RIGHT TO CURE. Administrative Secured Party in its sole discretion
may pay any amount or take any action in order to preserve, protect and maintain
the Collateral and Administrative Secured Party's security interest therein,
including without limitation, payment of any landlord's claim or other
encumbrance or claim asserted against the Collateral (provided that with respect
to any payment or obligation owing by CompuCom to any Person other than
Administrative Party, CompuCom shall have first had the opportunity to make any
such payment or perform any such obligation). All such payments and all out-of-
pocket costs and expenses made or incurred by Administrative Secured Party shall
be payable by CompuCom to Administrative Secured Party on demand. Any payment
made or other action taken by Administrative Secured Party under this paragraph
shall be without prejudice to any right to assert an Event of Default or
exercise any other remedy hereunder.
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<PAGE>
I.9 PRESERVATION OF RIGHTS. To the extent allowed by law, neither
Administrative Secured Party nor any of its officers, directors, employees, and
agents shall be liable or responsible in any way for the safekeeping of any
Collateral or for any act or failure to act with respect to the Collateral, or
for any loss or damage thereto or any diminution in the value thereof, or for
any act by any other Person. In the case of any instruments and chattel paper
included within any proceeds of the Collateral, Administrative Secured Party
shall have no duty or obligation to preserve rights against prior parties. The
Secured Obligations shall not be affected by any failure of Administrative
Secured Party to take any steps to perfect its security interests or to collect
or realize upon the Collateral, nor shall loss of or damage to the Collateral
release CompuCom from any of the Secured Obligations. Unless otherwise
expressly agreed by Administrative Secured Party and the Beneficial Secured
Parties, no (i) modification or amendment of the terms of any Administration
Documents, (ii) compromise, forbearance or grant of renewals, extensions,
indulgences or releases with respect to any Administration Documents, the
Collateral or the Secured Obligations or (iii) other action with respect to the
Collateral or any Person directly or indirectly obligated in connection
therewith shall impair the Secured Obligations, or Administrative Secured
Party's or the Beneficial Secured Parties' interests in the Collateral or any
rights under the Administration Documents.
I.10 SPECIAL RIGHTS; POWER OF ATTORNEY. CompuCom hereby irrevocably
appoints Administrative Secured Party as CompuCom's agent and attorney-in-fact,
for the benefit of the Beneficial Secured Parties, from time to time in
Administrative Secured Party's discretion, to take any action necessary to
preserve and protect the Collateral and Administrative Secured Party's interests
under the Administration Documents. CompuCom hereby authorizes and appoints
Administrative Secured Party as attorney in fact to sign and file any financing
statement or other document necessary to perfect Administrative Secured Party's
security interest in the Collateral. Administrative Secured Party shall have
the right at any time to take any of the following actions, in its own name or
in the name of CompuCom, if an Event of Default is in existence: (i) make
written or verbal requests for verification of amounts owing on Receivables from
any or all Persons which Administrative Secured Party believes may be an Account
Debtor; (ii) take possession and control of Collections; (iii) redirect the
deposit and disposition of Collections; (iv) endorse the name of CompuCom on
checks, instruments constituting Collections; (v) prepare, sign and file, on
behalf of CompuCom in CompuCom's name or in Administrative Secured Party's name
as assignee, any notice of lien, or any proof of claim or other document in any
bankruptcy proceedings of any Account Debtor; (vi) access, copy or utilize any
information recorded or contained in any computer or data processing equipment
or system in respect of the Receivables maintained by CompuCom
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<PAGE>
or any affiliate, or to which CompuCom has access; (vii) enter onto CompuCom's
premises and discuss CompuCom's affairs with CompuCom's personnel as may be
reasonably necessary in connection with maintaining or enforcing Administrative
Secured Party's rights under the Administration Documents; (viii) access and
utilize the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Receivables or
other Collateral to which CompuCom has access; and (ix) take all other action
allowed by law as may be necessary to carry out the Administration Documents and
give effect to Administrative Secured Party's rights thereunder. In addition,
Administrative Secured Party shall have the right to take any of the following
actions, in its own name or in the name of CompuCom, at any time when any Event
of Default is in existence, whether or not Administrative Secured Party has
taken any action to exercise any remedies under the Administration Documents:
(x) notify any Person which Administrative Secured Party believes may be an
Account Debtor to make payments directly to Administrative Secured Party; (xi)
settle, adjust, compromise or discharge Receivables or extend time of payment
upon such terms as Administrative Secured Party may determine; (xii) take action
in Administrative Secured Party's name or CompuCom's name to enforce collection
of Receivables; (xiii) open mail addressed to CompuCom to take possession of and
dispose of checks or other proceeds of Receivables in accordance with this
Agreement; and (xiv) direct the U.S. Postal service to change the address to
which CompuCom's mail is delivered. Should Administrative Secured Party at any
time elect to exercise its right of verification or notification with respect to
the Receivables as provided in clause (i) or clause (x) above, respectively,
Administrative Secured Party shall have the right in its sole discretion to
direct such request for verification, or notification, as the case may be, to
all Persons which Administrative Secured Party believes may have transacted
business with CompuCom at any time, whether or not such Persons are then
indebted to CompuCom, and Administrative Secured Party is hereby released and
discharged from any liability by reason of any such request for verification or
notification. Costs and expenses incurred by Administrative Secured Party in
connection with any of such actions by Administrative Secured Party, including
reasonable attorneys' fees and out-of-pocket expenses, shall be reimbursed by
CompuCom to Administrative Secured Party on demand.
16
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ARTICLE II.
COLLECTIONS ADMINISTRATION
II.1 ADMINISTRATION OF COLLECTIONS. Unless otherwise expressly agreed in
writing by Administrative Secured Party and the Beneficial Secured Parties:
(a) CompuCom will instruct each Account Debtor to address all
remittances in payment of Receivables to the Lockbox or the Concentration
Account and will cause all invoices evidencing Receivables to be noted with
a legend stating that payment thereon is to be made to CompuCom at the
Lockbox or the Concentration Account.
(b) All Collections received in the Lockbox shall be deposited daily
to the Concentration Account.
(c) Unless and until agreed otherwise by Administrative Secured
Party and the Beneficial Secured Parties, all deposits to the Concentration
Account shall be disbursed simultaneously by Administrative Secured Party
as follows (subject to prior payment of Secured Obligations due and payable
by CompuCom to Administrative Secured Party as provided by the
Administration Documents):
If no Event of Default has occurred:
(1) If CFI elects not to reduce the Net Investment under the
TAA, or if the Net Investment under the TAA is not otherwise required
to be reduced pursuant to the terms thereof, a percentage of each
dollar thereof equal to the product of the Purchase Discount (as
defined in the RPA) and the RPA Interest Percentage as of the time of
disbursement shall be deposited to the CFI Account; and
(2) If CFI elects not to reduce the Net Investment under the
TAA, or if the Net Investment under the TAA is not otherwise required
to be reduced pursuant to the terms thereof, a percentage of each
dollar thereof equal to one minus the product of the Purchase Discount
(as defined in the RPA) and the RPA Interest Percentage as of the time
of disbursement shall be deposited to the CompuCom Account for the
benefit of CFI in satisfaction of certain of its obligations under the
RPA.
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(3) If CFI elects to reduce the Net Investment under the TAA,
or if the Net Investment under the TAA is otherwise required to be
reduced pursuant to the terms thereof, a percentage of each dollar
thereof as designated by CFI (up to a maximum percentage equal to the
RPA Percentage) at the time of disbursement shall be deposited to the
CFI Account and (ii) after giving effect to the deposit described in
clause (i), a percentage of each dollar equal to one minus such
percentage at the time of disbursement shall be deposited to the
CompuCom Account for the benefit of CFI in satisfaction of certain of
its obligations under the RPA.
If an Event of Default has occurred and is continuing:
(1) A percentage of each dollar thereof equal to the RPA
Interest Percentage as of the time of disbursement shall be deposited
to the CFI Account; and
(2) A percentage of each dollar thereof equal to the CompuCom
Interest Percentage as of the time of disbursement shall be deposited
to the CompuCom Account; provided that at all times following receipt
--------
by the Administrative Secured Party of written instructions from the
Administrative Lender, all such funds described in this paragraph 2
shall be disbursed by the Administrative Secured Party in accordance
with such written instructions.
(a) All Collections at all times shall be subject to an express trust
in favor of Administrative Secured Party for the benefit of the Beneficial
Secured Parties. Following an Event of Default, CompuCom will not use,
dispose of, withhold or otherwise exercise dominion over any Collections.
CompuCom agrees that it will not commingle proceeds of Collections with any
other funds, and that no deposits will be made to the Lockbox or the
Concentration Account other than Collections. All amounts from time to
time deposited to the Lockbox or the Concentration Account are for the
benefit of the Beneficial Secured Parties and shall remain subject to
Administrative Secured Party's interests under this Agreement.
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<PAGE>
.1 CERTIFICATION OF RPA INTEREST AND COMPUCOM INTEREST.
(a) Initial Certification. On or after the Effective Date CompuCom
---------------------
shall deliver to Administrative Secured Party an Ownership Certification,
dated effective as of a specified Business Day (which shall be on or after
the date of delivery thereof) therein certifying the RPA Interest
Percentage and the CompuCom Interest Percentage, respectively, as of such
day. On and after the specified effective date of such initial Ownership
Certification, the RPA Interest Percentage and the CompuCom Interest
Percentage each shall be deemed to be as specified in such Ownership
Certification, and Administrative Secured Party shall be entitled to rely
thereon in connection with its administration of this Agreement until such
time, if any, as any subsequent Ownership Certification is actually
delivered to Administrative Secured Party and becomes effective as provided
in paragraph 2.2(b).
(b) After the Effective Date. Subject to at least two Business Days'
------------------------
prior written notice to Administrative Secured Party of its intention to do
so (unless otherwise agreed by the Administrative Secured Party after
consultation with EFC), CompuCom may effect a change in the RPA Interest
Percentage and the CompuCom Interest Percentage, for purposes of this
Agreement, by delivering to Administrative Secured Party an Ownership
Certification, dated as of a Business Day subsequent to expiration of such
notice period, therein certifying the RPA Interest Percentage and the
CompuCom Interest Percentage, respectively, as of such day. Provided that
no Event of Default is then in existence and provided further, that any
such change in the CompuCom Interest Percentage and the RPA Interest
Percentage to be effected thereby does not create an Event of Default, such
Ownership Certification shall become effective as of the day in the future
specified therein (which shall be on or after the beginning of the third
Business Day following the Business Day of Administrative Secured Party's
receipt of the foregoing notice), whereupon the RPA Interest Percentage and
the CompuCom Interest Percentage each shall be deemed to be as specified
therein, and Administrative Secured Party shall be entitled to rely thereon
in connection with its administration of this Agreement until such time, if
any, as any subsequent Ownership Certification is actually delivered to
Administrative Secured Party and becomes effective as provided in this
paragraph 2.2(b).
(c) Upon and Following Termination of RPA. Notwithstanding any
-------------------------------------
Ownership Certification, the RPA Interest Percentage in all Receivables
created on or after the effective date of any termination of the RPA
automatically shall be
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zero percent (0.00%) and the CompuCom Interest Percentage therein shall be
one hundred percent (100.00%). At Administrative Secured Party's option in
its sole discretion, Administrative Secured Party may cause all Collections
received in respect of Receivables created on or after the effective date
of termination of the RPA to be segregated and deposited to a separate
account for collection and transfer to the NationsBank Account in
accordance with paragraph 2.1(c)(2). It is understood and agreed that the
RPA Interest Percentage in effect at the time of any such termination of
the RPA shall remain in effect as to all Receivables created prior to the
effective time of any such termination of the RPA.
(d) Receivables Subject to Reconveyance. Notwithstanding any
-----------------------------------
Ownership Certification, the RPA Interest Percentage in Receivables, if
any, with respect to which the RPA Interest is reconveyed in full by CFI to
CompuCom pursuant to the RPA, at any time, shall be zero percent (0.0%) and
the CompuCom Percentage Interest therein shall be one hundred percent
(100.0%). CompuCom and CFI shall notify Administrative Secured Party and
NationsBank in writing prior to effecting any such reconveyance, therein
describing the Receivable(s) which are to be the subject thereof. At
Administrative Secured Party's request, CompuCom will assist Administrative
Secured Party in identifying Collections in respect of such Receivables
and, at Administrative Secured Party's option in its discretion,
Administrative Secured Party may cause all Collections at any time received
in respect of such Receivables to be segregated and deposited to a separate
account for collection and transfer to the NationsBank account in
accordance with paragraph 2.1(c)(2).
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.2 FEES.
In order to compensate Administrative Secured Party for its
administration of the Administration Documents, CompuCom agrees to pay to
Administrative Secured Party, for its own account, an administration fee of
$37,500 per year payable monthly in advance on the last Business Day of
each month.
ARTICLE I.
CLOSING REQUIREMENTS
I.1 ITEMS TO BE DELIVERED BY COMPUCOM. Prior to or simultaneously with
execution and delivery hereof, CompuCom shall deliver, or cause to be delivered,
to Administrative Secured Party the following:
(a) Secretary's Certificate. A certificate in form satisfactory to
-----------------------
Administrative Secured Party, signed by the corporate secretary of CompuCom
and authenticated by the president of CompuCom, attaching and certifying
the following:
1. Articles of Incorporation and Certificate of Existence. A
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copy of the articles of incorporation, and all amendments thereto, of
CompuCom, accompanied by the certificate of the Secretary of State of
Delaware and bearing a date no more than thirty (30) days prior to
the date hereof, to the effect that such copy is correct and complete
and that CompuCom is a corporation duly incorporated and validly
existing in such state.
2. Good Standing. A certification by the appropriate official
-------------
of the State of Delaware bearing a date no more than thirty (30) days
prior to the date hereof, to the effect that CompuCom is in good
standing in such state with respect to payment of franchise and
similar taxes, and a certification by the Comptroller of Public
Accounts of the State of Texas bearing a date no more than thirty (30)
days prior to the date hereof confirming that CompuCom is duly
qualified to transact business in the State of Texas, bearing a date
no more than thirty (30) days prior to the date hereof confirming that
CompuCom is duly qualified to transact business in such state.
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3. Bylaws. A correct and complete copy of the bylaws of
------
CompuCom, and all amendments thereto.
4. Incumbency. Certification of the name and signature of all
----------
incumbent corporate officers of CompuCom authorized to act on behalf
of CompuCom in respect of the Administration Documents.
5. Resolutions. A copy of corporate resolutions of CompuCom
-----------
approving the Administration Documents and authorizing the
transactions contemplated hereby, and authorizing and directing a
named officer or officers to sign and deliver all Administration
Documents to be executed by CompuCom, duly adopted by its board of
directors, including the certificate of CompuCom's corporate
secretary, dated the date hereof, that such copy is a true and
complete copy of resolutions duly adopted by the board of directors,
and that such resolutions have not been amended, modified, or revoked
in any respect and are in full force and effect as of the date hereof.
(b) Administration Documents. This Agreement and all other
------------------------
Administration Documents, duly executed.
(c) Financing Statements. All financing statements required by
--------------------
Administrative Secured Party in connection with perfection of
Administrative Secured Party's security interests in the Collateral.
(d) Collateral Access and Waiver Agreements. All Collateral Access
---------------------------------------
and Waiver Agreements, if any, as may be required by Administrative Secured
Party pursuant to paragraph 1.5.
(e) Opinion of CompuCom's Counsel. An opinion of counsel for
-----------------------------
CompuCom in form and substance satisfactory to Administrative Secured
Party, addressing such matters in connection with this Agreement as
Administrative Secured Party may request.
(f) Other Documents. Such other items as Administrative Secured
---------------
Party may request in order to perfect or protect its interests and rights
under the Administration Documents.
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ARTICLE II.
REPRESENTATIONS
II.1 CORPORATE NAME; TRADE NAMES. CompuCom is conducting, transacting, and
carrying on its business under the name shown for CompuCom in the Definitions of
this Agreement, and such other names, if any, as may be specified in Exhibit
4.1, and is not engaged in business under any other name. Except as provided in
Exhibit 4.1, during the past five (5) years CompuCom has not (i) done business
under any other name, (ii) been party to a merger or consolidation or (iii)
acquired any of the property included within the Collateral from any other
Person.
II.2 CHIEF EXECUTIVE OFFICE. CompuCom's chief executive office is located
at the address specified for CompuCom in the Definitions of this Agreement.
II.3 CORPORATE EXISTENCE. CompuCom is a corporation, duly incorporated,
validly existing, and in good standing under the laws of the State of Delaware,
and is duly qualified or licensed to transact business in all jurisdictions the
laws of which require it to be so qualified or licensed, except for those
jurisdictions, if any, where the failure to be so qualified or licensed would
not cause a Material Adverse Effect.
II.4 CORPORATE POWER AND AUTHORITY; VALIDITY. CompuCom possesses all
requisite authority and power and authority to conduct to own, lease and operate
its properties and to carry on its business as now conducted and proposed to be
conducted and to execute, deliver, and comply with the Administration Documents.
Each of the Administration Documents has been duly authorized by all necessary
corporate action and duly executed and delivered by CompuCom, and evidences
valid and binding obligations enforceable in accordance with its respective
terms.
II.5 NO CONFLICTING AGREEMENTS. CompuCom represents that the execution,
delivery and performance of the Administration Documents will not violate its
articles of incorporation or bylaws, nor constitute a default under, or result
in a breach of, any material contract, agreement, or other instrument to which
it is a party or which is applicable to its property.
II.6 COMPLIANCE WITH LAWS. CompuCom represents that it is not in violation
of any laws, regulations and orders in any respect which will result in or
cause, or reasonably would be expected to result in or cause, a Material Adverse
Effect.
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II.7 JUDGMENTS. There are no outstanding or unpaid material judgments or
assessments against CompuCom, except for tax and similar assessments in the
ordinary course of business which are not delinquent.
II.8 TAXES. All tax returns or filings required to be filed by CompuCom
have been filed and taxes imposed upon CompuCom which are due and payable have
been paid.
II.9 TITLE TO PROPERTY. CompuCom has good and indefeasible title to all
Collateral.
II.10 CONSENTS. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution, delivery and
performance of the Administration Documents other than financing statements
required by Administrative Secured Party under the Texas UCC. CompuCom has all
required governmental permits and licenses, if any, on account of its operations
and activities and is in full compliance with the terms and conditions thereof,
and all such permits and licenses are in full force and effect.
II.11 REPRESENTATIONS AND WARRANTIES CUMULATIVE. The representations and
warranties contained in this Article IV are in addition to all other
representations and warranties provided in the Administration Documents.
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ARTICLE II.
COVENANTS
Throughout the Contract Term, CompuCom agrees as follows (unless
otherwise allowed by prior written consent of Administrative Secured Party):
III.1 COMPLIANCE CERTIFICATE. Within forty five (45) days following the
end of each fiscal quarter of CompuCom, CompuCom shall deliver to Administrative
Secured Party a certificate signed by the president or chief financial officer,
controller or treasurer of CompuCom certifying to Administrative Secured Party
that, except as may be expressly identified and described in such certificate,
CompuCom is in compliance with its obligations under this Agreement and that no
event or condition that would be the subject of a required notice under
paragraph 5.7, paragraph 5.8 or paragraph 5.9 is in existence as of the date of
such certificate. Such certificate shall be deemed to be a continuing
representation and warranty pending any subsequent certification or notification
by CompuCom respecting its compliance or non-compliance with this Agreement.
III.2 AUTHORITY. Immediately following any effective change thereof
(and at such other times, from time to time, at the request of Administrative
Secured Party) CompuCom shall certify to Administrative Secured Party the names
and signatures of all Persons authorized to execute and deliver to
Administrative Secured Party any documentation contemplated by or relating to
any Administration Documents.
III.3 BOOKS AND RECORDS. CompuCom shall keep and maintain proper, complete
and consistent books of record and account respecting the Collateral and
CompuCom's affairs in accordance with GAAP.
III.4 CORPORATE EXISTENCE. CompuCom shall preserve and maintain its
corporate existence, good standing and authority to transact business in all
jurisdictions where necessary for the proper conduct of its business, and shall
maintain all of its properties, rights, privileges and franchises necessary or
desirable in the normal conduct of its business.
III.5 MONTHLY RECEIVABLES REPORT. Within 15 days after the end of each
calendar month, CompuCom shall furnish to Administrative Secured Party and the
Beneficial Secured Parties a listing and analysis of all Receivables
substantially in the form attached as Exhibit E to the TAA.
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III.6 NOTICES, INFORMATION IN RESPECT OF RPA AND TAA. CompuCom and CFI
will notify Administrative Secured Party and the Beneficial Secured Parties in
writing (i) at least two (2) Business Days before effecting any change in the
RPA Interest under the terms of the RPA, as provided in paragraph 2.2(b), (ii)
promptly upon any termination of the RPA or the TAA, or upon receiving or
sending any notice of intended, pending or potential termination of the RPA or
the TAA, (iii) promptly at any time when the Percentage Factor exceeds the
Maximum Percentage Factor (as those terms are defined by the TAA); (iv) promptly
upon any assignment by EFC, or any request by CFI for an assignment by EFC, of
EFC's interest under the TAA to any Bank Investor pursuant to Section 9.7 of the
TAA.
III.7 COPIES IN RESPECT OF RPA AND TAA. Promptly upon execution, CompuCom
will deliver to Administrative Secured Party and the Beneficial Secured Parties
a true and correct copy of the RPA and the TAA, respectively, and all other
agreements, certifications, opinions and other documentation in connection
therewith. CompuCom will provide Administrative Secured Party and the Beneficial
Secured Parties with a true and correct copy of (i) each Ownership Certification
delivered to Administrative Secured Party, (ii) each monthly report delivered by
CompuCom to CFI under the RPA; (iii) each Investor Report delivered by CompuCom
to EFC under the TAA; (iv) each notice, if any, at any time given by CFI
pursuant to Section 5.1(b)(i) of the TAA (notifications in respect of
Termination Events or Potential Termination Events, as those terms are defined
by the TAA) and (v) any notice of termination, or of intended, pending or
potential termination of the RPA or the TAA sent or received by CompuCom or CFI.
III.8 ADDITIONAL INFORMATION. In addition to information and items
specifically required by the Administration Documents, CompuCom shall promptly
furnish to Administrative Secured Party such other information or documentation
respecting the Collateral, and its business affairs in connection therewith, as
Administrative Secured Party may reasonably request.
III.9 NOTIFICATION OF MATERIAL CHANGES. CompuCom shall promptly notify
Administrative Secured Party of any change in any other material fact or
circumstance represented or warranted in any of the Administration Documents.
Without limitation, CompuCom will notify Administrative Secured Party in writing
at least thirty (30) days prior to the occurrence of any of the following: (i)
change of CompuCom's name, (ii) change of the location of CompuCom's chief
executive office, or (iii) use of any trade name, fictitious name or other
assumed name not disclosed to Administrative Secured Party at the time of
execution of this Agreement.
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III.10 NOTIFICATION REGARDING DEFAULT. CompuCom shall immediately notify
Administrative Secured Party and the Beneficial Secured Parties in writing upon
becoming aware of the existence of any condition or event which constitutes an
Event of Default or any condition or event which, after notice or lapse of time,
or both, would constitute an Event of Default, therein specifying the nature and
period of existence thereof and what action CompuCom is taking or proposes to
take with respect to such condition or event. CompuCom shall immediately notify
Administrative Secured Party and the Beneficial Secured Parties in writing if it
knows, or reasonably expects, that an Event of Default will occur, therein
specifying the nature of the anticipated Event of Default. CompuCom will
immediately notify Administrative Secured Party and the Beneficial Secured
Parties if CompuCom is aware that any covenant under this Agreement has been
breached, or reasonably expects that any such covenant will be breached, or if
CompuCom's board of directors authorizes the filing by CompuCom of a petition in
bankruptcy.
III.11 COMPLIANCE WITH LAWS. CompuCom shall comply with all applicable
laws, regulations and orders applicable to it or its property, a violation of
which would reasonably be expected to result in a Material Adverse Effect.
III.12 PAYMENT OF TAXES. CompuCom shall promptly pay, or cause to be paid,
when due, all assessments, taxes, governmental charges and levies imposed upon
CompuCom or its income or profits, the non payment of which could give rise to
any notice of tax lien, levy or other lien or process against any of the
Collateral, except such as may be contested in good faith by appropriate
proceedings, provided, that adequate reserves shall be maintained as are
appropriate according to GAAP. CompuCom shall promptly pay any amounts adjudged
to be due pursuant to any such contest, with all costs, penalties, and interest
thereon, before such judgment becomes final or any writ or order is issued under
which the Collateral, or any portion thereof, may become subject to any lien or
encumbrance. Promptly upon Administrative Secured Party's request, CompuCom will
furnish to Administrative Secured Party evidence of payment of all such
contested amounts and will authorize the appropriate governmental official to
deliver to Administrative Secured Party at any time a written statement of any
taxes or other such amounts owing by CompuCom.
III.13 WAIVERS AND CONSENTS. CompuCom shall furnish to Administrative
Secured Party such waivers and consents as may reasonably be requested by
Administrative Secured Party with respect to Administrative Secured Party's
security interests and liens in the Collateral.
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<PAGE>
III.14 RESTRICTION ON DISPOSITION OF COLLATERAL. CompuCom will not sell or
dispose of any interest in the Collateral except pursuant to the RPA.
III.15 PROHIBITION AGAINST LIENS ON COLLATERAL. CompuCom will not grant,
create or allow to exist any security interest, lien, financing statement or
other encumbrance on any Collateral other than (i) under this Agreement, or (ii)
the Permitted Subordinated Interests. CompuCom will take prompt action as may be
necessary to discharge or dismiss any tax lien notice, judgment, levy,
attachment or other process filed or levied against any of the Collateral.
III.16 COVENANTS CUMULATIVE. The covenants contained in this Article V are
in addition to all other covenants provided in the Administration Documents.
ARTICLE IV.
EVENT OF DEFAULT
IV.1 EVENT OF DEFAULT. Each of the following shall constitute an Event of
Default on any day under this Agreement:
(a) Any Event of Default defined by the Credit Agreement;
(b) Any default or breach by CompuCom of any obligation under the
RPA;
(c) Any Termination Event defined by the TAA;
(d) Any violation, breach or default of any covenant, agreement or
other obligation under the Administration Documents which shall not have
been cured or otherwise waived in accordance with the terms of the
Administration Documents;
(e) Any representation or warranty made by CompuCom in the
Administration Documents was false in any material respect at the time when
made, and such representation and warranty shall not have been cured or
waived in accordance with the terms of the Administration Documents;
(f) Material impairment of the enforceability of the interests,
rights or remedies granted to Administrative Secured Party or the
Beneficial Secured
28
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Parties under this Agreement, or the taking of any action by any party to
this Agreement to repudiate or challenge same.
29
<PAGE>
ARTICLE V.
REMEDIES
30
<PAGE>
V.1 REMEDIES. Should an Event of Default occur at any time,
Administrative Secured Party may at its option take any or all of the following
actions: (a) notify Account Debtors to make all payments on Receivables directly
to Administrative Secured Party at such address as Administrative Secured Party
shall designate; (b) make demand for payment on Account Debtors and take action
(including without limitation, filing suit) to enforce payment of Receivables,
in the name of Administrative Secured Party (on behalf of the Beneficial Secured
Parties) or CompuCom, as Administrative Secured Party shall determine in its
discretion; (c) take any other action to enforce the collection rights of a
secured party under the Texas UCC; and (d) exercise, enforce and avail itself of
any and all other rights or remedies as may be available under this Agreement or
any other Administration Documents or as otherwise may be available under the
Texas UCC or other applicable law. Administrative Secured Party at all times
shall have the collection rights and all other rights and remedies of a secured
party under the Texas UCC, including but not limited to the right to take
possession of Collections and enforce direct payment of Receivables. To the
extent necessary to protect and enforce its rights under the Administration
Documents, Administrative Secured Party is expressly authorized to receive,
open, and dispose of mail addressed to CompuCom and endorse notes, checks,
drafts, money orders, or other evidences of payment, on behalf of and in the
name of CompuCom. Administrative Secured Party may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose or otherwise realize upon the
Receivables as Administrative Secured Party may determine in its discretion. In
collecting or pursuing collection of Receivables, Administrative Secured Party
may utilize CompuCom's books and records, premises, telephones, telecopiers,
copiers, and other facilities, or the services of CompuCom's personnel, at
CompuCom's cost and expense, as may be necessary for prompt and expedient
collection. CompuCom agrees that Administrative Secured Party's use of such
facilities or personnel is a commercially reasonable method of pursuing timely
collection and enforcement of Receivables and that, in taking any such action,
Administrative Secured Party is acting solely in its capacity as a secured party
under the Texas UCC and as attorney in fact and administrator, as provided by
this Agreement. Administrative Secured Party may give verbal or written notice
to any Person who Administrative Secured Party reasonably believes is or may be
an Account Debtor on Receivables and thereby demand payment of all amounts which
may be or become due by such Person on Receivables. In taking possession of any
Collateral, Administrative Secured Party is authorized to enter upon any
premises owned or leased by CompuCom where any Collateral is located. At its
option, Administrative Secured Party may require CompuCom to assemble the
Collateral and make it available to Administrative Secured Party at a place to
be designated by Administrative Secured Party which is reasonably convenient to
both Administrative Secured Party and CompuCom. CompuCom agrees that
Administrative Secured Party shall be entitled to collect or dispose of any
Collateral on CompuCom's premises. Unless the Collateral is perishable
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or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Administrative Secured Party will give CompuCom reasonable
notice of the time and place of any public sale of Collateral or of the time
after which any private sale or any other intended disposition thereof is to be
made. For this purpose, it is agreed that at least five (5) days notice of the
time of sale or other intended disposition of Collateral delivered in accordance
with paragraph 10.3 shall be deemed to be reasonable notice in conformity with
the Texas UCC. Administrative Secured Party may adjourn or otherwise reschedule
any public sale by announcement at the time and place specified in the notice of
such public sale, and such sale may be made at the time and place as so
announced without necessity of further notice. Administrative Secured Party
shall not be obligated to sell or dispose of any Collateral, or to pursue any
particular manner of collection or disposition, notwithstanding any prior notice
of intended disposition. With respect to any instruments or chattel paper at any
time included within the Collateral, Administrative Secured Party shall not have
any duty or obligation to take steps to preserve rights against prior parties.
V.2 CASH COLLATERAL; INJUNCTIVE RELIEF. All cash proceeds of Collateral
from time to time existing, including without limitation all Collections, at all
times shall be and remain subject to Administrative Secured Party's continuing
security interest, lien and administration under this Agreement, and shall be
subject to an express trust for the benefit of Administrative Secured Party, for
the benefit of the Beneficial Secured Parties. Except as may be specifically
allowed otherwise by this Agreement, and following an Event of Default, CompuCom
is expressly prohibited from using, spending, retaining or otherwise exercising
any dominion over such proceeds, and all such proceeds shall be promptly turned
over to Administrative Secured Party in the form in which they are received by
CompuCom, either by mailing or delivering the same to Administrative Secured
Party not later than the Business Day following receipt thereof by CompuCom.
CompuCom acknowledges and agrees that an action for damages against CompuCom for
any breach of the prohibitions and obligations of this paragraph shall not be an
adequate remedy at law. In the event of any such breach, CompuCom agrees, to the
fullest extent allowed by law, that Administrative Secured Party shall be
entitled to injunctive relief to restrain such breach and require compliance
with the requirements of this Agreement.
V.3 APPLICATION OF PROCEEDS; DEFICIENCY. After deducting all costs,
fees and expenses of collection and enforcement for which CompuCom is obligated
to Administrative Secured Party pursuant to the Administration Documents or
applicable law, any remaining Collections or other proceeds of collection, sale
or disposition of the Collateral shall be deposited to the Concentration Account
and administered according to paragraph 2.1(c), and the excess, if any,
remaining after expiration of the Contract Term shall be held or disbursed by
Administrative Secured Party by mutual agreement among
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CompuCom, Administrative Secured Party and the Beneficial Secured Parties or, in
the absence of such mutual agreement, in accordance with applicable law.
CompuCom expressly agrees that it shall remain liable for all Secured
Obligations, if any, remaining after liquidation or other disposition of the
Collateral (provided, that the foregoing shall not be construed to create any
liability of CompuCom under the RPA except as expressly provided therein).
V.4 WAIVER OF NOTICES. CompuCom expressly waives any notices from
Administrative Secured Party or the Beneficial Secured Parties except as
otherwise expressly provided for and required by this Agreement.
V.5 SETOFF. CompuCom irrevocably authorizes Administrative Secured Party
to charge any account of CompuCom maintained with Administrative Secured Party
with such amount as may be necessary from time to time to pay any Secured
Obligations. CompuCom agrees that Administrative Secured Party shall have a
contractual right to setoff any and all deposits or other sums at any time
credited by or due from Administrative Secured Party to CompuCom against any
part of the Secured Obligations. Such right of setoff may be exercised at any
time by Administrative Secured Party without prior notice, irrespective of
whether an Event of Default exists or whether the Secured Obligations have fully
matured; provided that the Administrative Secured Party shall promptly notify
--------
CompuCom following any such setoff of funds. Upon the occurrence of an Event of
Default and for so long as the same shall remain in existence and is not cured
or waived, Administrative Secured Party shall be entitled in its discretion,
without prior notice, to hold any such deposits or other sums (and return checks
or other items presented for payment against same, and otherwise deny access to
same) pending acceleration of any Secured Obligations. All amounts, if any,
charged or set off by Administrative Secured Party against any Collections shall
be deposited to the Concentration Account and administered as provided by
paragraph 2.1(c).
V.6 PERFORMANCE BY ADMINISTRATIVE SECURED PARTY. Should CompuCom fail to
perform any covenant, duty, or agreement required by the Administration
Documents (including without limitation, payment and discharge of any taxes,
liens or encumbrances affecting or potentially affecting the Collateral)
Administrative Secured Party may in its sole discretion perform or attempt to
perform or cause performance of same on behalf of CompuCom at CompuCom's
reasonable cost and expense, provided that Administrative Secured Party shall
have no obligation or duty to take any such action. CompuCom agrees to reimburse
Administrative Secured Party for such reasonable out-of-pocket costs and
expenses on demand and until paid.
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V.7 NON-WAIVER. Forbearance or indulgence by Administrative Secured Party
of any Event of Default or any other event or condition which is or would be the
subject of a required notice under paragraph 5.10, at any time from time to
time, shall not be deemed a waiver of any rights of Administrative Secured Party
under the Administration Documents. The acceptance by Administrative Secured
Party or the Beneficial Secured Parties, at any time and from time to time, of
any partial payment of the Secured Obligations shall not be deemed to be a
waiver of any Event of Default then existing. No delay or omission by
Administrative Secured Party in exercising any right or remedy shall impair such
right or remedy, or be construed as a waiver thereof, nor shall any single or
partial exercise of any such rights or remedies preclude other or further
exercise thereof. Administrative Secured Party shall not be required or
obligated to file suit or otherwise pursue any Account Debtor or other Person
for enforcement or collection of any Receivables or to otherwise take any action
to realize upon any of the Collateral.
V.8 REMEDIES CUMULATIVE. The remedies specified in this Article VII are
cumulative with and in addition to all other rights and remedies provided by
this Agreement and the other Administration Documents, or by applicable law.
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ARTICLE VI.
ADMINISTRATION
VI.1 ADMINISTRATION. Administrative Secured Party, each of the Beneficial
Secured Parties and CompuCom each agrees as follows:
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(a) Administrative Secured Party: Appointment; Powers. Subject to
-------------------------------------------------
the terms of this Agreement, each of the Beneficial Secured Parties hereby
irrevocably appoints and authorizes Administrative Secured Party to act as
nominee on behalf of itself and any of the other Beneficial Secured
Parties, in the name of Administrative Secured Party, the Beneficial
Secured Parties or any of them, to take any one or more of the following
actions: Administer the Administration Documents in accordance with their
terms, and act or refrain from acting under the Administration Documents in
accordance with powers delegated to Administrative Secured Party under the
Administration Documents and such other powers as are reasonably incidental
thereto; execute and enter into the Administration Documents; hold the
Administration Documents; hold and enforce the security interests and liens
in the Collateral granted under the Administration Documents; exercise and
enforce rights and remedies in respect of the Receivables as attorney-in-
fact and administrator as provided by paragraph 1.2; receive all documents,
certifications, opinions and other items furnished by CompuCom under the
Administration Documents; take actions as may be requested or instructed by
the Beneficial Secured Parties (provided, that unless the Administration
Documents specifically require or permit direction or consent by the
Beneficial Secured Parties and, in such event, unless further assurance of
indemnification (if requested by Administrative Secured Party) is furnished
as provided by paragraph 8.1(g), Administrative Secured Party shall not be
obligated to comply with any such instructions); collect, receive and
administer Collections as provided by this Agreement; distribute to the
Beneficial Secured Parties such information, requests and documents
received from CompuCom pursuant to the Administration Documents; and
deliver to CompuCom requests, demands, approvals and consents as required
or allowed under the Administration Documents. Except as otherwise
expressly provided by the Administration Documents, each of the Beneficial
Secured Parties irrevocably authorizes Administrative Secured Party to take
or refrain from taking such actions on the Beneficial Secured Parties'
behalf as Administrative Secured Party in its discretion determines
necessary or appropriate in administering the Administration Documents.
Except as otherwise provided by this Agreement, Administrative Secured
Party may take such action, or refrain from taking such action, in respect
of the Collateral, or in respect of administration of the Administration
Documents, as it may deem in its discretion to be advisable in the
performance of its obligations under this Agreement. Unless otherwise
agreed by Administrative Secured Party, any action taken by Administrative
Secured Party with the consent or at the direction of the Beneficial
Secured Parties shall be deemed to have been taken for and on behalf of
each of the Beneficial Secured Parties. Administrative Secured Party shall
not be required to take action or exercise any remedy except to the
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extent expressly required by this Agreement upon direction of the
Beneficial Secured Parties, provided, that Administrative Secured Party
shall not be required to take any action which Administrative Secured Party
believes would expose it or any of the Beneficial Secured Parties to
personal liability, or which Administrative Secured Party believes is
contrary to any of the Administration Documents or applicable law.
Administrative Secured Party may perform any of its duties under the
Administration Documents by or through officers, directors, employees,
attorneys or agents, and shall be entitled to employ and consult with legal
counsel, independent public accountants, and other experts or consultants
and shall not be liable for any action taken or omitted to be taken in good
faith in accordance with the advice of such counsel, accountants, experts
or consultants, and may rely and act upon any resolution, notice, consent,
certificate, affidavit, letter or other document or instrument or writing,
or any telecopy, fax, telegram, telex or teletype, or any court order, or
any conversation, which it believes to be genuine and correct and to have
been signed or made by the proper Person. Administrative Secured Party
shall be fully protected in acting, or in refraining from acting, under the
Administration Documents in accordance with instructions signed by the
Beneficial Secured Parties, and such instructions and any action or
inaction by Administrative Secured Party pursuant thereto shall be binding
on each of the Beneficial Secured Parties. Neither Administrative Secured
Party nor its affiliates, officers, directors, employees, attorneys, or
agents shall be liable for any action taken or omitted to be taken in
connection with the Administration Documents except for gross negligence or
willful misconduct.
(b) Limitation of Scope. Administrative Secured Party's appointment
-------------------
hereunder is expressly limited as provided in this Agreement.
Administrative Secured Party accepts such appointment solely as a secured
party under the Texas UCC, and as attorney-in-fact and administrator, on
the terms provided by this Agreement. The duties and responsibilities of
Administrative Secured Party under this Agreement are ministerial and
administrative in nature, and it is expressly agreed that Administrative
Secured Party shall not be a fiduciary or trustee on behalf of any Person.
Administrative Secured Party shall have no duties or obligations, express
or implied, except as expressly set forth in this Agreement.
(c) Availability of Information. Administrative Secured Party will
---------------------------
forward to the Beneficial Secured Parties copies of all reports of a
material nature which are furnished by CompuCom to Administrative Secured
Party, other than those, if any, which by the terms of this Agreement are
to be delivered by CompuCom directly to the Beneficial Secured Parties,
provided, that
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Administrative Secured Party shall not have any liability to any Beneficial
Secured Party for failure to do so. Administrative Secured Party shall
promptly notify the Beneficial Secured Parties upon becoming aware of any
Event of Default, provided, that in the absence of gross negligence or
intentional misconduct Administrative Secured Party shall not have any
liability to any of the Beneficial Secured Parties for failure to do so,
and provided further, that Administrative Secured Party shall not be deemed
to have knowledge or notice of any Event of Default (other than breaches by
CompuCom, of which Administrative Secured Party has actual knowledge, of
CompuCom's obligations under paragraph 2.1, or failure of timely payment to
Administrative Secured Party of any costs or fees as required by the
Administration Documents) unless it receives written notice from CompuCom
or any Beneficial Secured Party specifying an event or condition and
designating the same as an Event of Default. Upon request, Administrative
Secured Party will make available to any Beneficial Secured Party any
documents, reports or other items from time to time received from CompuCom
and remaining in Administrative Secured Party's possession.
(d) Required Consent of Beneficial Secured Parties. Notwithstanding
----------------------------------------------
the authority granted to Administrative Secured Party elsewhere in this
Agreement:
1. The written consent of Administrative Secured Party and all
Beneficial Secured Parties shall be required as a condition to the
effectiveness of any of the following actions: (i) extend the Contract
Term; (ii) release any security interest or lien in any Collateral;
(iii) agree to waive, modify or amend any covenants, agreements or
other provisions contained in Article I ("Security Interest and
Collateral Covenants"), Article II ("Collections Administration") or
Article V ("Covenants"), Article VI ("Event of Default") or Article
VII ("Remedies"), Article VIII ("Administration"), Article IX
("Additional Agreements") or Article X ("Miscellaneous") of this
Agreement; (iv) consent to allow any security interests, liens or
encumbrances on any Collateral (other than the Permitted Subordinated
Interests), or consent to allow the disposition of any Collateral
other than as expressly provided by the Administration Documents; (v)
grant any consent or make any agreement which is expressly subject to
the consent of the Beneficial Secured Parties pursuant to this
Agreement; (vi) exercise any remedies under this Agreement to sell or
otherwise dispose of Receivables; (vii) file, or join with any other
Person in filing, any petition against CFI for an order of relief
under the United States Bankruptcy Code or for receivership or similar
relief under
38
<PAGE>
any other applicable law; (viii) agreement to amend this subparagraph
(1) of this paragraph 8.1(d).
2. Subject to paragraph 8.1(a), Administrative Secured Party
agrees to take any of the following actions upon written direction of
each and all of the Beneficial Secured Parties, provided, that in each
instance, such written direction references this paragraph 8.1(d) and
specifically identifies the requested action: (i) request or direct
CompuCom to take any action which may be requested or directed by
Administrative Secured Party under the Administration Documents; (ii)
pursue any remedies provided by the Administration Documents; or (iii)
perform or take any action which may be taken by Administrative
Secured Party under the Administration Documents.
3. Subject to paragraph 8.1(a), Administrative Secured Party
agrees to take any of the following actions upon written direction of
any Beneficial Secured Party, provided, that in each instance, such
written direction references this paragraph 8.1(d) and specifically
identifies the requested action: (i) request information from CompuCom
which may be requested by Administrative Secured Party under the
Administration Documents or (ii) report requested information
regarding Collections administration under Article II.
Notwithstanding the foregoing, no consent shall be required with respect to
any action if Administrative Secured Party is required to take any such
action by court order or applicable law. Otherwise, except as provided or
referenced above, Administrative Secured Party may amend, modify or waive
any of the terms of the Administration Documents, consent to any action or
failure to act by CompuCom, or exercise or refrain from exercising any
powers or rights which it may have under the Administration Documents or as
a matter of law, without the requirement of prior notice to or consent of
the Beneficial Secured Parties. Any consent requested by Administrative
Secured Party from any Beneficial Secured Party, and any directive, consent
or refusal of consent given to Administrative Secured Party by any
Beneficial Secured Party, shall be communicated as provided in paragraph
10.3. In the event any consent requested by Administrative Secured Party
is not granted or refused within ten (10) days after it is requested by
Administrative Secured Party, the same shall be deemed to have been
granted.
(e) Limitation of Administrative Secured Party's Liability. Neither
------------------------------------------------------
Administrative Secured Party nor any of its officers, directors, employees,
at-
39
<PAGE>
torneys or agents shall be liable for any action taken or omitted to be
taken in connection with the Administration Documents in conformity with
instructions or consents of any Beneficial Secured Party, or based upon its
belief that such action or inaction is within the discretion or power
conferred to Administrative Secured Party under the Administration
Documents, nor shall Administrative Secured Party or any of such officers,
directors, employees, attorneys or agents be liable for the consequences of
any error of judgment, except for gross negligence or wilful misconduct.
Administrative Secured Party shall not be responsible to the Beneficial
Secured Parties for the due execution, validity, effectiveness,
enforceability, or sufficiency of this Agreement or any of the other
Administration Documents, or for any recitals, representations or
warranties, reports, statements contained in the Administration Documents
or furnished in connection therewith, or for the perfection or value of any
Collateral or for any failure by any other Person to perform any
obligations under the Administration Documents. Administrative Secured
Party shall have no liability to any Beneficial Secured Party with respect
to ascertaining or confirming performance or observation by CompuCom of any
terms, covenants or conditions of any Administration Documents.
(f) Expenses. Each Beneficial Secured Party severally agrees to
--------
reimburse Administrative Secured Party promptly upon demand for its Pro
Rata Percentage share of any and all out-of-pocket expenses (including
reasonable attorneys' fees) incurred by Administrative Secured Party in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement of the Administration Documents, and
legal advice in respect of rights or obligations thereunder (whether in
connection with negotiations, legal proceedings, or otherwise) to the
extent that any such expenses are not paid or reimbursed to Administrative
Secured Party by CompuCom or from other sources within 60 days after
request for payment or reimbursement is made to CompuCom (provided that any
such payment by any Beneficial Secured Party to Administrative Secured
Party shall be without prejudice to the right to contest such Beneficial
Secured Party's obligation to make such payment, and provided further, that
EFC shall make any such reimbursement only to the extent that it has
received sufficient funds from all sellers of accounts to it in excess of
the amount necessary to pay matured and maturing commercial paper). To the
extent any such expenses are recovered by Administrative Secured Party from
CompuCom or other sources after any such amounts have been paid to
Administrative Secured Party by any Beneficial Secured Party(ies), the
amount so recovered shall be refunded by Administrative Secured Party to
each such paying Beneficial Secured Party ratably according to its
respective payments.
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<PAGE>
(g) Indemnification. Each Beneficial Secured Party hereby severally
---------------
indemnifies, in accordance with its Pro Rata Percentage, and holds harmless
Administrative Secured Party from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and/or disbursements of any kind or nature whatsoever which may be
imposed on, asserted against, or incurred by Administrative Secured Party
in any way with respect to any Administration Documents (including without
limitation as may arise as a result of any order of a court of competent
jurisdiction pursuant to which Administrative Secured Party is required to
refund, repay or otherwise return any Collections to any other Person) or
any action taken or omitted by Administrative Secured Party under the
Administration Documents, except to the extent the same is caused by gross
negligence or wilful misconduct by Administrative Secured Party (it being
acknowledged that it is the express intention of Administrative Secured
Party and the Beneficial Secured Parties that such indemnification and hold
harmless obligations shall include any such actions or inactions which are
a result of negligence other than gross negligence), provided, that EFC's
obligation to make payment under the foregoing indemnity is limited to the
extent that it has received sufficient funds from all sellers of accounts
to it in excess of the amount necessary to pay matured and maturing
commercial paper). Prior to compliance with any instructions by the
Beneficial Secured Parties under the Administration Documents,
Administrative Secured Party shall be entitled to request further assurance
of any such indemnification in form satisfactory to Administrative Secured
Party, and unless and until such further assurance is provided to
Administrative Secured Party, Administrative Secured Party shall have no
obligation to comply with such instructions and may disregard same.
41
<PAGE>
(h) Replacement of Administrative Secured Party. Subject to the
-------------------------------------------
following, Administrative Secured Party may resign as Administrative
Secured Party at any time by giving written notice of such resignation to
the Beneficial Secured Parties and CompuCom, and Administrative Secured
Party may be removed upon written notice by unanimous consent of the
Beneficial Secured Parties. Should Administrative Secured Party give any
such notice of its resignation as Administrative Secured Party, or should
the Beneficial Secured Parties give any such notice of removal, then the
Beneficial Secured Parties collectively shall forthwith appoint another
Person, acceptable to them and to CompuCom (such acceptance not to be
unreasonably withheld or delayed), to become Administrative Secured Party,
whereupon such newly appointed Person shall thereafter be Administrative
Secured Party and CompuCom and the Beneficial Secured Parties shall execute
such documents as any Beneficial Secured Party may reasonably request to
reflect such change. Any resignation or removal of Administrative Secured
Party shall become effective upon the appointment of a successor
Administrative Secured Party (provided, that if the Beneficial Secured
Parties fail for any reason to appoint a successor within sixty (60) days
after written notice of such resignation or removal, Administrative Secured
Party shall thereafter have no obligation to act as Administrative Secured
Party hereunder). Any Person appointed as successor Administrative Secured
Party as provided above shall be deemed to accept such appointment, and
such successor Administrative Secured Party shall thereupon succeed to and
become vested with all rights, powers, privileges, immunities, and duties
of the resigning or removed Administrative Secured Party, and the resigning
or removed Administrative Secured Party shall be discharged from its duties
and obligations under this Agreement and the other Administration
Documents. After any Administrative Secured Party's resignation or removal
as Administrative Secured Party, the provisions of this Article VIII shall
continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was Administrative Secured Party.
NationsBank has been appointed as Administrative Secured Party, and has
accepted such appointment, subject to the terms of this Agreement, as of
the Effective Date. As of the Effective Date, NationsBank has delegated
administration of its functions as Administrative Secured Party hereunder
to its affiliate, NationsBank, N.A., headquartered in Charlotte, North
Carolina, and at EFC's request hereby agrees that it will not transfer such
administration to any other division unless such division is acceptable to
Beneficial Secured Parties (such acceptance not to be unreasonably withheld
or delayed).
42
<PAGE>
(i) Rights of Administrative Secured Party as Beneficial Secured
------------------------------------------------------------
Party. Any Beneficial Secured Party who serves as Administrative Secured
-----
Party shall nonetheless continue to have the same rights as a Beneficial
Secured Party, in its individual corporate capacity as a Beneficial Secured
Party, as any other Beneficial Secured Party and may exercise the same as
though it were not acting as Administrative Secured Party, and unless the
context indicates otherwise, to the extent that Administrative Secured
Party in its individual capacity is a Beneficial Secured Party, the term
"Beneficial Secured Party" or "Beneficial Secured Parties," wherever used
in the Administration Documents shall include the Administrative Secured
Party in its individual corporate capacity as a Beneficial Secured Party.
(j) Independent Credit Decisions. Each Beneficial Secured Party
----------------------------
represents, warrants and agrees that it has made its own underwriting
analysis of CompuCom and its own evaluation and valuation of the Collateral
and has made its own decision to enter into this Agreement independently
and without reliance on Administrative Secured Party or any other
Beneficial Secured Party and based on such documents and information as it
has deemed appropriate. Each Beneficial Secured Party further acknowledges
and agrees that it will continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other
Administration Documents, independently and without reliance upon
Administrative Secured Party or any other Beneficial Secured Party and
based upon such documents and information as it shall deem appropriate at
the time. Each Beneficial Secured Party acknowledges that it shall have no
right to rely upon Administrative Secured Party to inform it of the
financial conditions or creditworthiness of CompuCom or the condition,
value, marketability or other conditions in respect of the Collateral.
Upon written request by any Beneficial Secured Party, Administrative
Secured Party will make any documents, reports or other information
received by Administrative Secured Party from CompuCom and designated in
such request available to such Beneficial Secured Party. Otherwise, except
as specifically provided in this Agreement, Administrative Secured Party
shall not have any duty or responsibility to provide any Beneficial Secured
Party with any credit or other financial information concerning the
affairs, financial condition or business of CompuCom or any of its
subsidiaries or affiliates.
(k) Several Commitments. Administrative Secured Party shall not be
-------------------
liable to CompuCom or any Beneficial Secured Party for any act or omission
by any Beneficial Secured Party, and no Beneficial Secured Party shall be
responsible
43
<PAGE>
to CompuCom or any other Beneficial Secured Party for any act or omission
of any other Beneficial Secured Party.
(l) Collection Administration: Lockbox; Concentration Account. On
---------------------------------------------------------
and after the Effective Date and continuing through the end of the Contact
Term, for so long as NationsBank is serving in the capacity as
Administrative Secured Party, it is agreed that (i) the lockbox presently
established and operating in connection with the Credit Agreement shall be
deemed to be the Lockbox and (ii) the concentration account presently
established and operating in connection with the Credit Agreement shall be
deemed to be the Concentration Account, and all Collections during any such
period, from time to time, received or deposited thereto, respectively,
shall be deemed to have been received by Administrative Secured Party
solely pursuant, and subject to, the terms of this Agreement.
(m) Benefits. CompuCom expressly acknowledges and agrees to the
--------
provisions of this Article VIII, provided, that none of the provisions of
this Article shall inure to the benefit of CompuCom or any Person other
than Administrative Secured Party and the Beneficial Secured Parties.
CompuCom shall not be entitled to rely upon, or to raise as a defense, any
failure of Administrative Secured Party or any Beneficial Secured Party to
comply with such provisions. Subject to the requirements of paragraph
8.1(d)1, CompuCom shall be entitled to rely on actions, agreements and
consents of Administrative Secured Party in connection with administering
the Administration Documents as the actions, agreements and consents of all
Beneficial Secured Parties.
ARTICLE VII.
ADDITIONAL AGREEMENTS
In consideration of the mutual benefits under this Agreement,
Administrative Secured Party and the Beneficial Secured Parties each agrees
among themselves as follows:
VII.1 EQUAL DIGNITY. The rights and interests pertaining to the CompuCom
Interest and the RPA Interest, under this Agreement or otherwise, are of equal
dignity and neither shall enjoy or be entitled to any right or benefit in
priority or preference over the other. All such rights and interests, and all
proceeds thereof, shall be shared by the Beneficial Secured Parties according to
their respective Pro Rata Percentage.
44
<PAGE>
VII.2 PRO-RATA TREATMENT AMONG BENEFICIAL SECURED PARTIES. All
Collections and other proceeds of Receivables at any time received by
Administrative Secured Party shall be for the account of the Beneficial Secured
Parties in accordance with their respective Pro Rata Percentage as of the time
of Administrative Secured Party's receipt thereof.
VII.3 SUBORDINATION OF INTERESTS.
a. As among Administrative Secured Party and the Beneficial Secured
Parties only and subject to paragraph 9.3(e), NationsBank agrees that all
valid and perfected rights and interests pertaining to the CompuCom
Interest and the RPA Interest under this Agreement are and shall be first,
senior and prior to any other rights now or hereafter claimed therein by
NationsBank, whether under the Credit Agreement or otherwise, and all
security interests, collateral assignments, pledges, liens, mortgages,
rights or other interests now or hereafter claimed by NationsBank with
respect to the Collateral (other than its interest as a Beneficial Secured
Party under this Agreement) shall be and hereby are expressly subordinated
and made junior to all such valid and perfected rights and interests
pertaining to the CompuCom Interest and the RPA Interest under this
Agreement.
b. All sales and transfers of the RPA Interest under the RPA are
expressly subject to the interests granted or delegated to Administrative
Secured Party under this Agreement. As among Administrative Secured Party
and the Beneficial Secured Parties only and subject to paragraph 9.3(e),
CFI agrees that all valid and perfected rights and interests pertaining to
the CompuCom Interest and the RPA Interest under this Agreement are and
shall be first, senior and prior to any other rights now or hereafter
claimed therein by CFI, whether under the RPA, the TAA or otherwise, and
any and all security interests, collateral assignments, pledges, liens,
mortgages, rights or other interests now or hereafter claimed by CFI with
respect to the Collateral (other than its interest as a Beneficial Secured
Party under this Agreement) shall be and hereby are expressly subordinated
and made junior to all such valid and perfected rights and interests
pertaining to the CompuCom Interest and the RPA Interest under this
Agreement. CFI agrees that it will not sell or transfer any RPA Interest
to any Person except EFC pursuant to the TAA subject to the rights of
Administrative Secured Party and the Beneficial Secured Parties under this
Agreement.
45
<PAGE>
c. All sales and transfers of any portion of the RPA Interest under
the TAA are expressly subject to the interests granted to Administrative
Secured Party under this Agreement. As among Administrative Secured Party
and the Beneficial Secured Parties only, and subject to paragraph 9.3(e),
EFC agrees that all valid and perfected rights and interests pertaining to
the CompuCom Interest and the RPA Interest under this Agreement are and
shall be first, senior and prior to any rights now or hereafter claimed
therein by EFC (or any assignee of EFC under the TAA), whether under the
TAA or otherwise and any and all security interests, collateral
assignments, pledges, liens, mortgages, rights or other interests now or
hereafter claimed by EFC (or any assignee of EFC under the TAA) with
respect to the Collateral (other than EFC's interest as a Beneficial
Secured Party under this Agreement) shall be and hereby are expressly
subordinated and made junior to all such valid and perfected rights and
interests pertaining to the CompuCom Interest and the RPA Interest under
this Agreement. CompuCom, CFI and EFC each agree that the RPA and the TAA
at all times will contain provisions expressly providing that all rights
and interests in the RPA Interest conveyed or claimed thereunder are
subject to the rights and interests of Administrative Secured Party under
this Agreement. EFC agrees that it will not sell or transfer any portion
of the RPA Interest to any Person (except assignments of EFC's rights
therein to the limited extent provided by the TAA as of the Effective Date,
provided that any such portions of the RPA Interests assigned pursuant to
any such assignments shall at all times be and remain subject to the rights
of Administrative Secured Party under the Administration Documents).
d. The Beneficial Secured Parties each agrees, among themselves,
that until termination of this Agreement, if it from time to time comes
into possession of any Collections other than as provided by paragraph
2.1(c) this Agreement, all of such amounts shall be received in trust for
the benefit of the Beneficial Secured Parties according to their respective
Pro Rata Percentages and shall be paid forthwith to Administrative Secured
Party, for the account of the Beneficial Secured Parties, for deposit to
the Concentration Account and administration under paragraph 2.1(c) of this
Agreement. In the event any Beneficial Secured Party is required to
deliver to Administrative Secured Party any amounts received by such
Beneficial Secured Party in respect of Collections as required by this
paragraph 9.3(d) then, for purposes of this paragraph 9.3(d) and clause (1)
of the definition of "Contract Term" in the Definitions of this Agreement,
such Beneficial Secured Party shall be deemed to have received payment in
respect of such Collections only to the extent that it actually receives
46
<PAGE>
payment of its Pro Rata Percentage thereof from Administrative Secured
Party pursuant to this paragraph 9.3(d).
e. As among Administrative Secured Party and the Beneficial Secured
Parties only, the subordinations, priorities and agreements specified in
paragraph 9.3(a), paragraph 9.3(b) and paragraph 9.3(c) are applicable
irrespective of the time or order of filing of financing statements with
respect thereto, provided, that such subordinations, priorities and
agreements are solely for the respective benefit of Administrative Secured
Party and the Beneficial Secured Parties, as a separate contractual
agreement among themselves only, and shall not in any event operate,
entitle or be construed to allow any other Person (specifically including
without limitation any trustee in bankruptcy) to any rights or priority
over Administrative Secured Party or the Beneficial Secured Parties, or any
of them. The subordinations, priorities and agreements specified in
paragraph 9.3(a), paragraph 9.3(b) and paragraph 9.3(c) shall not be
effective to the extent, if any, that any rights or interests pertaining to
the CompuCom Interest or the RPA Interest for any reason are determined by
a court of competent jurisdiction to be invalid, unenforceable, unperfected
or avoidable, or subordinate to any Person other than Administrative
Secured Party and the Beneficial Secured Parties.
f. Each of the Beneficial Secured Parties may release any Person
now or hereafter liable to such Beneficial Secured Party upon any of the
Secured Obligations, or permit substitutions, or renew, increase, extend or
accept partial payments upon any of the Secured Obligations, or amend or
modify the terms of any instrument or agreement evidencing or otherwise
securing same, or any part thereof, in such manner and at such times from
time to time, as it may determine in its sole discretion, without notice to
or consent from the other, and without in any manner impairing the rights
and obligations under this Agreement (provided, that the foregoing shall
not impair any condition or requirement imposed upon CompuCom by any
Beneficial Secured Party pursuant to the FSA, the RPA or the TAA,
respectively).
g. Until termination of this Agreement each of NationsBank, CFI and
EFC each agrees, for itself and its successors and assigns, that it will
not take any action to foreclose, repossess, marshal, control, or exercise
remedies or other rights with respect to any Collateral, whether pursuant
to the Credit Agreement, the RPA or the TAA, respectively, or otherwise
(subject to NationsBank's prior rights in respect of returned inventory
under the FSA as provided in paragraph 9.3(h)), provided, that the
foregoing shall not prohibit or restrict NationsBank, CFI or EFC from
asserting and protecting their respective interests in the
47
<PAGE>
Collateral in any bankruptcy proceeding, subject at all times however, to
all other terms and provisions of this Agreement.
h. Notwithstanding any other provisions in this Agreement regarding
rights and relative priorities of interests among Administrative Secured
Party and the Beneficial Secured Parties, it is agreed that all rights and
interests, if any, of Administrative Secured Party, CFI and EFC,
respectively, at any time arising in returned inventory shall be subject to
the prior rights and interests of NationsBank in returned inventory under
the FSA and perfected rights, if any, in returned inventory in favor of any
Person who is a seller of inventory to CompuCom, existing as of the
Effective Date.
i. Notwithstanding the sale and transfer by CompuCom to CFI of the
RPA Interest pursuant to the RPA, and any contemporaneous or subsequent
transfer of a portion thereof by CFI to EFC, from time to time, and
notwithstanding anything to the contrary contained in the RPA or the TAA,
for so long as CompuCom is owner of the CompuCom Interest and until
termination of this Agreement, CFI and EFC each agrees, for itself and its
successors and assigns, that (i) for so long as no Event of Default is in
existence and continuing, CompuCom shall have the sole and exclusive right
to service, administer and collect the Receivables, subject at all times,
however, to the administration of Collections as provided in Article II and
all other rights, interests and remedies of Administrative Secured Party
under the terms and provisions of this Agreement, and no notice or action
under the RPA or TAA shall be effective to limit or preclude such rights of
CompuCom or grant rights to any Person which are inconsistent or in
conflict therewith, (ii) following the occurrence and during the existence
of any Event of Default, any Person other than CompuCom who is appointed to
service Receivables under the RPA or who is appointed as "Collection Agent"
under the TAA shall be a Person that is acceptable to Administrative
Secured Party and the Beneficial Secured Parties, and (iii) without the
prior written consent of Administrative Secured Party, no party to this
Agreement shall (A) exercise any dominion and control over the Collateral
except as expressly provided herein and (B) following an Event of Default,
notify any Account Debtor of CompuCom's transfer to CFI of the RPA Interest
or of CFI's transfer of a portion thereof to EFC.
j. Except as expressly provided in this Agreement, nothing in this
Agreement shall limit or restrict (i) NationsBank in the exercise of rights
and remedies under the Credit Agreement, (ii) CFI in the exercise of rights
and reme-
48
<PAGE>
dies under the RPA or (iii) EFC in the exercise of rights and remedies
under the TAA or, as assignee of CFI, the exercise of rights and remedies
under the RPA.
k. In the event of any bankruptcy of CompuCom or CFI, until
termination of this Agreement Administrative Secured Party shall have the
right, and hereby is irrevocably authorized by the Beneficial Secured
Parties, to assert Administrative Secured Party's rights, on behalf of the
Beneficial Secured Parties, to receive, collect and administer the
Receivables in accordance with the provisions of the Administration
Documents.
l. The agreements in this paragraph 9.3 are irrevocable and
continuing, and the Beneficial Secured Parties may continue to rely upon
same in making financial accommodations to or for the account of CompuCom,
without notice to the other except as otherwise provided in this Agreement.
VII.4 OTHER RIGHTS; WAIVER OF MARSHALING. Each of NationsBank, CFI and
EFC waives marshaling as to the other, and agrees that each shall be entitled to
pursue rights and remedies against CompuCom or in respect of property of
CompuCom other than the Collateral as may be provided by any other agreement.
VII.5 ACCESS TO INFORMATION. In consideration of the mutual benefits of
this Agreement, each of NationsBank, CFI and EFC agrees that, upon request, it
will provide to Administrative Secured Party any information available to it in
respect of CompuCom or the Collateral for the purpose of assisting
Administrative Secured Party in administering this Agreement or enforcing and
collecting Receivables. CompuCom expressly agrees and consents to the providing
of any such information for such purpose.
VII.6 PAYMENTS BY ADMINISTRATIVE SECURED PARTY. Administrative Secured
Party shall have no further duty or obligations in respect of any Collections
following administration and transfer thereof in compliance with the
requirements of paragraph 2.1. Each Beneficial Secured Party, severally
according to its respective Pro Rata Percentage, agrees to promptly reimburse
Administrative Secured Party for any checks or items deposited to the
Concentration Account and transferred to such Beneficial Secured Party pursuant
to paragraph 2.1 which are returned unpaid for any reason, provided, that EFC
shall make any such reimbursement only to the extent that it has received
sufficient funds from all sellers of accounts to it in excess of the amount
necessary to pay matured and maturing commercial paper. In the event EFC, CFI,
or any Person claiming through or under either of them, including any assignee
under the TAA, at any time makes demand upon Administrative Secured Party for
payment of any amount in respect of Collections
49
<PAGE>
relative to the RPA Interest, Administrative Secured Party shall be fully
protected in depositing such amount to the CFI Account or, at Administrative
Secured Party's option in its sole discretion, making such payment jointly
payable to CFI and any such claimant and delivering same to an officer of CFI or
such claimant, and in either of such instances, Administrative Secured Party
shall be fully released and discharged from further duty or obligation in
respect of such amount.
VII.7 NOTICES, CONSENTS, AGREEMENTS REGARDING EFC. Any notice, consent or
agreement to or by EFC or any of its permitted assigns pursuant to or in
connection with the Administration Documents shall be effective for all purposes
if given or made to or by the Person serving in the capacity as "Agent" under
the TAA, and the same shall be deemed valid and binding for all purposes of this
Agreement as having been given or made to or by EFC.
VII.8 LIMITATION. CompuCom expressly acknowledges and agrees to the
provisions of this Article IX, provided, that none of the provisions of this
Article IX shall inure to the benefit of CompuCom. CompuCom shall not be
entitled to rely upon, or to raise as a defense, any matters contained in this
Article IX. Notwithstanding anything in this Agreement to the contrary,
NationsBank, CFI and EFC may amend or modify any agreement contained in this
Article IX by mutual agreement in writing among themselves without necessity of
joinder or consent by any other Person.
ARTICLE VIII.
MISCELLANEOUS
VIII.1 EFFECTIVE DATE; TERM; TERMINATION. This Agreement shall become
effective upon acceptance by Administrative Secured Party, as of the Effective
Date and shall continue in full force and effect through the end of the Contract
Term.
VIII.2 PAYMENTS. All Collections received to the Concentration Account
after the time for closing business on any Business Day as internally
established by applicable depository bank, or otherwise received by
Administrative Secured Party after its internally established time for closing
business on any Business Day, shall be deemed received as of the next succeeding
Business Day.
VIII.3 NOTICES. Any consent, approval, notice, request, or demand from one
party to another must be made in writing to be effective, and shall be deemed to
have been given on the third Business Day after its deposit in the United States
mail, postage
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<PAGE>
prepaid and properly addressed, by certified or registered mail, return receipt
requested, or on the Business Day on which it is actually delivered by messenger
delivery, telecopy or other electronic transmission, whichever is earlier. The
address of each party for the purposes hereof is as follows:
If to CompuCom:
- --------------
CompuCom Systems, Inc.
10100 North Central Expressway
Dallas, Texas 75231
Attention: Mr. Dan Celoni, Treasurer
Telecopy: 214-265-5449
If to the Administrative Lender:
- -------------------------------
NationsBank of Texas, N.A.,
Messenger delivery: NationsBank Plaza, 67th Floor
------------------
901 Main Street
Dallas, Texas 75202
Attention: Brent W. Mellow
Vice President
Telecopy: (214) 508-0980
If to the Administrative Secured Party:
- --------------------------------------
NationsBank, N.A.
Messenger delivery: NationsBank Corporate Center
------------------
100 North Tryon Street
10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath, Structured Finance
Telecopy: (704) 388-9169
If to CFI:
- ---------
CSI Funding, Inc.
10100 North Central Expressway
Dallas, Texas 75231
Attention: Mr. Dan Lane, Vice President and Secretary
Telecopy: 214-265-5449
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<PAGE>
If to EFC:
- ---------
Enterprise Funding Corporation
c/o Merrill Lynch Money Markets, Inc.
World Financial Center--South Tower
225 Liberty Street
New York, New York 10281
Telecopy: 212-236-7584
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center, 10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath, Investment Banking
Telecopy: 704-388-9169
or such other address as may hereafter be designated and delivered in writing.
VIII.4 BENEFIT TO COMPUCOM. This Agreement is executed at the request of
CompuCom for the purpose of establishing a means by which CompuCom may utilize
its Receivables to access working capital sources via the Credit Agreement and
the RPA, as CompuCom shall determine. CompuCom acknowledges that it has and will
continue to receive direct equivalent value for the interests granted pursuant
to this Agreement. CompuCom acknowledges and agrees that (i) Administrative
Secured Party's agreement to serve in such capacity and perform its duties under
the Administration Documents, (ii) NationsBank's agreements under the Credit
Agreement and (iii) CFI's agreements under the RPA and EFC's agreements under
the TAA, respectively, each separately and also collectively together,
constitutes value given to CompuCom for purposes of Section 9.203(a)(2) of the
Texas UCC.
VIII.5 ADMINISTRATIVE SECURED PARTY. CompuCom and the Beneficial Secured
Parties have designated NationsBank, in its capacity as Administrative Secured
Party, to serve as Administrative Secured Party as provided by this Agreement.
Each party to this Agreement, for itself and its successors and assigns,
acknowledges that (i) NationsBank is a creditor of CompuCom and that CFI is a
wholly owned subsidiary of CompuCom, (ii) NationsBank, N.A., which is an
affiliate of NationsBank, is a party to the TAA as Agent thereunder, and also is
a Bank Investor, the Liquidity Support Provider and the Credit Support Provider,
as such terms are defined, and as provided, thereunder, (iii)
52
<PAGE>
appointment of NationsBank to serve as Administrative Secured Party is not a
condition or prerequisite to execution or performance of this Agreement, and
each of CompuCom, NationsBank, CFI and EFC has indicated its willingness to
enter into this Agreement with the Administrative Secured Party being a Person
other than NationsBank, provided that any such Person otherwise is acceptable to
all parties.
VIII.6 EXERCISE OF RIGHTS. The Beneficial Secured Parties shall not at any
time be required to institute suit or exercise or exhaust remedies against any
Person obligated to pay any of the Secured Obligations, or against any other
property or other security of the payment of same, prior to exercise by
Administrative Secured Party of the rights under this Agreement.
VIII.7 ADMINISTRATIVE SECURED PARTY'S RECORDS; ACCOUNT STATEMENTS.
Administrative Secured Party's records in respect of Collections administered
under this Agreement shall be deemed conclusive absent demonstration of error
and all statements of account rendered by Administrative Secured Party to
CompuCom relating same shall be presumed to be correct and accurate unless,
within thirty (30) days after receipt thereof, CompuCom shall notify
Administrative Secured Party in writing of any claimed error therein.
VIII.8 INDEMNITY.
(a) Third Party Claims. Any Indemnified Person shall notify
------------------
CompuCom promptly after such Indemnified Person's receipt of notice, or
such Indemnified Person otherwise becoming aware, of any third-party claims
with respect to which indemnification may be sought under this Section;
provided that, the failure of any Indemnified Person so to notify CompuCom
-------------
shall not relieve CompuCom of any liability (x) under any provision hereof,
(y) to such Indemnified Person by reason of this Section unless such
Indemnified Person's failure to so notify CompuCom materially prejudices
CompuCom's ability to contest the third-party claim, or (z) to any other
Indemnified Person under this Section or any other provision hereof. In
case any such action is brought against any Indemnified Person and it
notifies CompuCom of the commencement thereof, CompuCom shall be entitled
to participate therein and, to the extent that it may wish to assume the
defense thereof, with counsel reasonably satisfactory to such Indemnified
Person, and after notice from CompuCom to such Indemnified Person of its
election to assume the defense thereof, CompuCom will not be liable to such
Indemnified Person under this Subsection for any legal fees and expenses
subsequently incurred by such Indemnified Person in connection with the
defense thereof. Any one or more of the Indemnified Persons shall have the
right to
53
<PAGE>
employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person or Indemnified Persons unless (i) the
employment of such has been specifically authorized in writing by CompuCom
or (ii) representation of both CompuCom and such Indemnified Person or
Indemnified Persons by the same counsel would be inappropriate due to
actual or potential differing interests between them. CompuCom shall not be
liable for any settlement of any such action effected without its written
consent, but if settled with such consent or if there be a final judgment
for the plaintiff in any such action with or without consent, CompuCom
agrees to indemnify and hold harmless the Indemnified Persons from and
against any loss or liability by reason of such settlement or final
judgment. CompuCom shall not, without the prior written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been
a party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liabilities and claims that are the subject
matter of such proceeding. Any indemnification will be paid promptly upon
demand therefor.
(b) Contribution. If for any reason the indemnification provided
------------
above in this Section is unavailable to an Indemnified Person or is
insufficient to hold an Indemnified Person harmless, then CompuCom shall
contribute to the amount paid or payable by such Indemnified Person as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by such
Indemnified Person on the one hand and CompuCom on the other hand but also
the relative fault of such Indemnified Person, as well as any other
relevant equitable considerations.
VIII.9 INTEREST LIMITATION. CompuCom expressly agrees that any provision
contained in the Credit Agreement, the RPA, the TAA or any other agreement
between CompuCom and NationsBank, CFI or EFC, respectively, pertaining to
limitations on the maximum rate of interest that may be contracted, charged or
received in connection therewith shall be deemed applicable to any payments,
rights or benefits paid or accrued to such party under the Administration
Documents.
VIII.10 COSTS AND EXPENSES. CompuCom agrees to pay all costs and expenses
incurred by Administrative Secured Party in connection with the Administration
Documents, including without limitation: (i) negotiation, preparation and
closing of the Administration Documents, including attorneys fees and
disbursements, search fees, filing and recording fees, (ii) ongoing
administration of the Administration Documents,
54
<PAGE>
including without limitation, fees and costs incurred in consultation with
attorneys, (iii) negotiation, preparation and closing of any amendment, waiver
or consent relating to the Administration Documents, including attorneys fees
and disbursements, search fees, filing and recording fees, and (iv) enforcing
any provision of the Administration Documents, collection and pursuit of
collection and enforcement of Receivables, taking possession, exercising any
rights or remedies or pursuing or defending any claim arising out of, or in any
way relating to the Administration Documents, including without limitation fees
and costs of attorneys, experts or other consultants retained by Administrative
Secured Party in connection therewith and any other costs, fees or expenses for
which CompuCom is obligated pursuant to any other provision of the
Administration Documents. CompuCom will pay any applicable stamp, registration,
recordation and similar taxes, fees and charges in respect of the Collateral or
perfection or maintenance of Administrative Secured Party's rights under the
Administration Documents, and agrees to indemnify Administrative Secured Party
against any liabilities resulting from any delay, deferral or omission in
payment of any such taxes, fees or charges. All fees, costs and expenses for
which CompuCom is obligated under the Administration Documents shall be payable
to Administrative Secured Party on demand.
VIII.11 ACCEPTANCE AND PERFORMANCE; VENUE. This Agreement shall become
effective only upon acceptance by Administrative Secured Party at its offices in
Dallas, Dallas County, Texas. This Agreement is performable at Administrative
Secured Party's offices in Dallas, Dallas County, Texas, such acceptance to be
conclusively established by execution of this Agreement by Administrative
Secured Party. CompuCom and Administrative Secured Party each agree that Dallas
County, Texas shall be the exclusive venue for litigation of any dispute or
claim arising under or relating to the Administration Documents, and that such
county is a convenient forum in which to decide any such dispute. CompuCom and
Administrative Secured Party each consents to the personal jurisdiction of the
state and federal courts located in Dallas County, Texas for the litigation of
any such dispute or claim.
55
<PAGE>
VIII.12 WAIVER OF TRIAL BY JURY . THE PARTIES HERETO AGREE THAT NO PARTY
SHALL REQUEST A TRIAL BY JURY IN THE EVENT OF LITIGATION BETWEEN THEM CONCERNING
THE LOAN DOCUMENTS OR ANY CLAIMS OR TRANSACTIONS IN CONNECTION THEREWITH, IN
EITHER A STATE OR FEDERAL COURT, THE RIGHT TO TRIAL BY JURY BEING EXPRESSLY
WAIVED. ADMINISTRATIVE SECURED PARTY, COMPUCOM, AND BENEFICIAL SECURED PARTIES
EACH ACKNOWLEDGE THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING
OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF
ADVICE OF COUNSEL OF ITS CHOOSING.
VIII.13 COPIES VALID AS FINANCING STATEMENTS. CompuCom grants to
Administrative Secured Party a special power of attorney to sign CompuCom's
name, on behalf of CompuCom, to any financing statement describing the
Collateral, or any part thereof, or to any amendment of any financing statement
filed pursuant to this Agreement, and to file such financing statement or
amendment in any jurisdiction deemed necessary by Administrative Secured Party
to perfect Administrative Secured Party's interests under this Agreement. A
carbon, photographic or other reproduction, including photocopy, telecopy or
electronic transmission, of this Agreement or any financing statement shall be
sufficient as a financing statement and may be filed as an original.
VIII.14 GOVERNING LAW. THIS AGREEMENT, AND ALL DOCUMENTS AND INSTRUMENTS
EXECUTED IN CONNECTION HEREWITH, SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF TEXAS, PROVIDED, THAT TO THE EXTENT FEDERAL LAW WOULD
ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE ALLOWED BY THE LAWS OF THE STATE
OF TEXAS, THEN WITH RESPECT TO THE PROVISIONS OF ANY LAW WHICH PURPORTS TO LIMIT
THE AMOUNT OF INTEREST THAT MAY BE CONTRACTED FOR, CHARGED OR RECEIVED IN
CONNECTION WITH ANY OF THE OBLIGATIONS, SUCH FEDERAL LAW SHALL APPLY.
VIII.15 ENTIRETY AND AMENDMENTS. This Agreement embodies the entire
agreement between the parties relating to the subject matter hereof, and may be
modified or amended only by an instrument in writing executed by an authorized
officer of each of Administrative Secured Party, each of the Beneficial Secured
Parties and CompuCom. It is expressly agreed that no conversations, statements,
negotiations or other verbal communications between Administrative Secured Party
and CompuCom, nor any purported modification or amendment, or waiver, shall be
binding unless the same is evidenced in writing executed by an authorized
officer of each of Administrative Secured Party, each of the Beneficial Secured
Parties and CompuCom.
56
<PAGE>
VIII.16 PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of CompuCom, Administrative Secured Party and the Beneficial Secured
Parties, and their respective successors in interest. CompuCom may not assign
any right, power, duty, or obligation under this Agreement, or any document or
instrument executed in connection herewith, without the prior written consent of
Administrative Secured Party and each Beneficial Secured Party. Neither CFI nor
EFC may assign any right, power, duty, or obligation under this Agreement, or
any document or instrument executed in connection herewith, without the prior
written consent of Administrative Secured Party (except assignments to the
limited extent provided in the RPA and TAA as of the Effective Date, provided
that any such portions of the RPA Interests assigned pursuant to any such
assignments at all times shall be and remain subject to Administrative Secured
Party's rights and interests under this Agreement). This Agreement is intended
for the benefit of CompuCom, Administrative Secured Party, the Beneficial
Secured Parties (and any Person properly claiming through any of them as an
assignee to the limited extent otherwise permitted by this Agreement), and may
not be relied upon by any other Person.
VIII.17 EXHIBITS. All exhibits referenced herein, and attached hereto, are
incorporated in this Agreement and made a part hereof for all purposes.
VIII.18 DESCRIPTIVE TITLES. The descriptive titles "Administrative
Secured Party" and "Beneficial Secured Party" are for convenience only and shall
not themselves be construed to limit the rights and powers granted to
Administrative Secured Party or Beneficial Secured Parties under this Agreement.
VIII.19 CUMULATIVE RIGHTS. All rights and remedies of Administrative
Secured Party under the Administration Documents are cumulative, and are in
addition to rights and remedies available to Administrative Secured Party by
applicable law. Such rights and remedies may be exercised concurrently or
successively, at such times as Administrative Secured Party may determine in its
discretion. CompuCom waives any right to require marshaling. If Administrative
Secured Party, in its individual corporate capacity, and CompuCom are parties to
any prior agreement, either written or oral, relating to the Collateral, the
terms of this Agreement shall supersede the terms of such prior agreements as to
transactions respecting the Collateral on or after the Effective Date, but all
security agreements, financing statements, guaranties, other contracts and
notices for the benefit of Administrative Secured Party, in its individual
corporate capacity, in connection with any such prior agreement shall continue
in full force and effect (subject to the terms of this Agreement) to secure all
obligations under the terms
57
<PAGE>
thereof unless Administrative Secured Party specifically releases its rights
thereunder by separate release in writing executed by Administrative Secured
Party.
VIII.20 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future laws effective
during the Contract Term, such provisions shall be fully severable, and this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement. In such
case, the remaining provisions of the Agreement shall remain in full force and
effect and shall not be effected thereby.
VIII.21 MULTIPLE COUNTERPARTS. This Agreement may be executed
simultaneously in one or more multiple originals, each of which shall be deemed
an original, but all of which together shall constitute one and the same
Agreement.
VIII.22 SURVIVAL. All covenants, agreements, representations, and
warranties made by CompuCom herein shall survive the execution, delivery, and
closing of this Agreement, and all documents executed in connection herewith,
and shall not be affected by any investigation made by any party.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
58
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[Remainder of page intentionally left blank]
59
<PAGE>
EXECUTED as of the effective date specified in the preamble.
COMPUCOM SYSTEMS, INC.
By: /s/ Robert J. Boutin
------------------------------------
Authorized Signatory
NATIONSBANK OF TEXAS, N.A.,
IN ITS CAPACITY AS ADMINISTRATIVE
SECURED PARTY
By: /s/ Michele M. Heath
------------------------------------
Authorized Signatory
NATIONSBANK OF TEXAS, N.A.,
IN ITS CAPACITY AS ADMINISTRATIVE
LENDER ON BEHALF OF THE LENDERS
By: /s/ Donald L. Harrison
------------------------------------
Authorized Signatory
CSI FUNDING, INC.
By: /s/ Robert J. Boutin
------------------------------------
Authorized Signatory
ENTERPRISE FUNDING CORPORATION
By: /s/ Stewart L. Cutler
------------------------------------
Authorized Signatory
60
<PAGE>
EXHIBIT 10.3
AMENDMENT NO. 1 TO RECEIVABLES PURCHASE AGREEMENT
AMENDMENT NO. 1 (this "Amendment"), dated as of September 25, 1996, TO
---------
RECEIVABLES PURCHASE AGREEMENT dated as of April 1, 1996, between CSI FUNDING
INC., a Delaware corporation (hereinafter, together with its successors and
assigns, called the "Purchaser") and COMPUCOM SYSTEMS, INC., a Delaware
---------
corporation (hereinafter, together with its successors and assigns, called the
"Seller").
------
W I T N E S S E T H :
--------------------
WHEREAS, the Purchaser and the Seller have entered into a Receivables
Purchase Agreement, dated as of April 1, 1996 (the "Agreement"); and
---------
WHEREAS, the parties hereto wish to amend the Agreement as hereinafter
provided.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1. Defined Terms. Unless otherwise defined herein, the terms
-------------
used herein shall have the meanings assigned to such terms in, or incorporated
by reference into, the Agreement.
SECTION 2. Amendments to Agreement. The Agreement is hereby amended,
-----------------------
effective on the Effective Date, as follows:
(a) Section 2.1(b) of the Agreement shall be amended in the eleventh
line thereof by deleting the comma and by replacing it with the words "and/or".
(b) Section 5.1(j) of the Agreement shall be amended in the
thirteenth line thereof after the word "UCC" and before the parenthesis by
inserting the words "and/or the Inventory Financing Agreements".
SECTION 3. Effectiveness. This Amendment shall become effective on
-------------
the first date on which (i) the parties hereto shall have executed and delivered
one or more counterparts to this Amendment and each shall have received one or
more counterparts of this amendment executed by the others and (ii) Enterprise
Funding Corporation and NationsBank, N.A. shall have received such certificates,
opinions of counsel and other documents with respect to this Amendment, the
Agreement and the transactions contemplated hereby and thereby as each may
reasonably request.
SECTION 4. Execution in Counterparts. This Amendment may be executed
-------------------------
in any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Amendment.
2
<PAGE>
SECTION 5. Consents; Binding Effect. The execution and delivery by
------------------------
the Seller and the Purchaser of this Amendment shall constitute the written
consent of each of them to this Amendment. This Amendment shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns.
SECTION 6. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
SECTION 7. Severability of Provisions. Any provision of this
--------------------------
Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 8. Captions. The captions in this Amendment are for
--------
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 9. Agreement to Remain in Full Force and Effect. Except as
--------------------------------------------
amended hereby, the Agreement shall remain in full force and effect and is
hereby ratified, adopted and confirmed in all respects. This Amendment shall be
deemed to be an amendment to the Agreement. All references in the Agreement to
"this Agreement", "hereunder", "hereof", "herein", or words of like import, and
all references to the Agreement in any other agreement or document shall
hereafter be deemed to refer to the Agreement as amended hereby.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to Receivables Purchase Agreement to be executed as of the date and year first
above written.
CSI FUNDING INC., as Purchaser
By /s/ Robert J. Boutin
----------------------------------------------------
Name: Robert J. Boutin
Title: President
COMPUCOM SYSTEMS, INC.,
as Seller
By /s/ Robert J. Boutin
----------------------------------------------------
Name: Robert J. Boutin
Title: Senior Vice President,
Finance and Chief Financial
Officer
Acknowledged and agreed as of
the date first above written:
ENTERPRISE FUNDING CORPORATION
By: /s/ Stewart L. Cutler
--------------------------
Name: Stewart L. Curtler
Title: Officer
NATIONSBANK, N.A.
By: /s/ Michele M. Heath
--------------------------
Name: Michele M. Heath
Title: Vice President
4
<PAGE>
EXHIBIT 10.4
AMENDMENT NO. 1 TO TRANSFER AND ADMINISTRATION AGREEMENT
AMENDMENT NO. 1 (this "Amendment"), dated as of September 25, 1996, TO
---------
TRANSFER AND ADMINISTRATION AGREEMENT dated as of April 1, 1996, by and among
CSI FUNDING INC., a Delaware corporation, as transferor (hereinafter, together
with its successors and assigns in such capacity, called the "Transferor"),
----------
COMPUCOM SYSTEMS, INC., a Delaware corporation, as collection agent
(hereinafter, together with its successors and assigns in such capacity, called
the "Collection Agent"), ENTERPRISE FUNDING CORPORATION, a Delaware corporation
----------------
(hereinafter, together with its successors and assigns, called the "Company")
-------
and NATIONSBANK, N.A., a national banking association, as agent for the benefit
of the Company and the Bank Investors (hereinafter, together with its successors
and assigns in such capacity, called the "Agent").
-----
W I T N E S S E T H :
--------------------
WHEREAS, the Transferor, the Collection Agent, the Company and the
Agent have entered into a Transfer and Administration Agreement, dated as of
April 1, 1996 (the "Agreement"); and
---------
WHEREAS, the parties hereto wish to amend the Agreement as hereinafter
provided.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1. Defined Terms. Unless otherwise defined herein, the terms
-------------
used herein shall have the meanings assigned to such terms in, or incorporated
by reference into, the Agreement.
SECTION 2. Amendments to Agreement. The Agreement is hereby amended,
-----------------------
effective on the Effective Date, as follows:
(a) Section 1.1 of the Agreement shall be amended in the definition
of "Loss Reserve" by deleting the reference to "$7,500,000" and by replacing it
with "$10,000,000".
(b) Section 1.1 of the Agreement shall be amended in the definition
of "Maximum Net Investment" by deleting the reference to "$75,000,000" and by
replacing it with "$100,000,000".
(c) Section 1.1 of the Agreement shall be amended in the definition
of "Related Security" after the word "UCC" and before the parenthesis by
inserting the words "and/or the Inventory Financing Agreements".
(d) Section 1.1 of the Agreement shall be amended in the definition
of "Termination Date" by deleting the reference to "April 1, 1998" in clause (v)
thereof and by replacing it with "September 17, 1999".
(e) Section 5.1(e) of the Agreement shall be amended in the
seventeenth line thereof by deleting the words "any of the" and by replacing
them with the words "the appropriate".
2
<PAGE>
(f) Pursuant to the terms of Section 5.1(j) of the Agreement, the
Agent hereby consents to the making by the Transferor of dividends or
distributions in respect of its common stock; provided that no such dividend or
--------
distribution shall be made by the Transferor if, after giving effect thereto,
the Transferor would become insolvent or would otherwise have a material adverse
effect on the Transferor or its financial condition.
(g) Section 6.2 (c) shall be amended in the fourth and fifth lines by
deleting the words "a firm of independent public accountants" and by inserting
the words "either the Business Credit Field Exam Group of NationsBank of Texas,
N.A. or such other Person as may be approved by the Agent".
(h) Section 8.1(b) of the Agreement shall be amended in the third and
sixth lines thereof after the word "applicable" and before the words "law, rule
or regulation" by inserting the words "and material".
(i) Section 7.1(t) of the Agreement shall be amended in the sixth
line thereof by deleting the words "any Person, and such Person shall commence"
and by replacing them with the words "any Person (other than NationsBank of
Texas, N.A., as Administrative Lender on behalf of the several Lenders named in
the Credit Agreement)(as such terms are defined in the Master Security and
Administration Agreement), and NationsBank of Texas, N.A. or any such other
Person shall commence".
3
<PAGE>
SECTION 3. Effectiveness. This Amendment shall become effective on
-------------
the first date on which (i) the parties hereto shall have executed and delivered
one or more counterparts to this Amendment and each shall have received one or
more counterparts of this amendment executed by the others and (ii) the Company
and the Agent shall have received such certificates, opinions of counsel and
other documents with respect to this Amendment, the Agreement and the
transactions contemplated hereby and thereby as each may reasonably request.
SECTION 4. Execution in Counterparts. This Amendment may be executed
-------------------------
in any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Amendment.
SECTION 5. Consents; Binding Effect. The execution and delivery by
------------------------
the Seller and the Purchaser of this Amendment shall constitute the written
consent of each of them to this Amendment. This Amendment shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns.
SECTION 6. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
SECTION 7. Severability of Provisions. Any provision of this
--------------------------
Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
4
<PAGE>
SECTION 8. Captions. The captions in this Amendment are for
--------
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 9. Agreement to Remain in Full Force and Effect. Except as
--------------------------------------------
amended hereby, the Agreement shall remain in full force and effect and is
hereby ratified, adopted and confirmed in all respects. This Amendment shall be
deemed to be an amendment to the Agreement. All references in the Agreement to
"this Agreement", "hereunder", "hereof", "herein", or words of like import, and
all references to the Agreement in any other agreement or document shall
hereafter be deemed to refer to the Agreement as amended hereby.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to Transfer and Administration Agreement to be executed as of the date and
year first above written.
ENTERPRISE FUNDING CORPORATION,
as Company
By /s/ Stewart L. Cutler
----------------------------------------------------
Name: Stewart L. Cutler
Title: Officer
CSI FUNDING INC., as Transferor
By /s/ Robert J. Boutin
----------------------------------------------------
Name: Robert J. Boutin
Title: President
COMPUCOM SYSTEMS, INC.,
as Collection Agent
By /s/ Robert J. Boutin
----------------------------------------------------
Name: Robert J. Boutin
Title: Senior Vice President,
Finance and Chief Financial
Officer
NATIONSBANK, N.A., as Agent
and as Bank Investor
Commitment: By: /s/ Michele M. Heath
----------------------------------------------------
$100,000,000 Name: Michele M. Heath
Title: Vice President
6
<PAGE>
EXHIBIT 10.5
SPECIAL WARRANTY DEED
---------------------
THE STATE OF TEXAS (S)
(S) KNOW ALL MEN BY THESE PRESENTS
COUNTY OF DALLAS (S)
THAT, FOREST/HILLCREST PARTNERS, a Texas joint venture ("GRANTOR"),
for an in consideration of the sum of Ten Dollars ($10.00) cash in hand paid by
COMPUCOM SYSTEMS, INC., a Delaware corporation ("GRANTEE"), whose address is
10100 North Central Expressway, Dallas, Texas 75231 and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged by
Grantor, has GRANTED, BARGAINED, SOLD, and CONVEYED, and by these presents does
GRANT, BARGAIN, SELL, and CONVEY unto Grantee, the real property more
particularly described on EXHIBIT "A" attached hereto, together with all
-----------
improvements, located thereon (the "PROPERTY").
This conveyance is being made by Grantor and accepted by Grantee
subject only to those certain title exceptions set forth in EXHIBIT "B" attached
-----------
hereto and made a part hereof for all purposes, but only to the extent that such
exceptions are valid, existing, and in fact, affect the Property (the "PERMITTED
EXCEPTIONS").
Ad valorem taxes for the year of this deed have been prorated;
accordingly, Grantee assumes responsibility to pay all ad valorem taxes on the
Property for such year.
TO HAVE AND TO HOLD the Property, together with, all and singular, the
rights and appurtenances thereto in anywise belonging, to Grantee and Grantee's
successors and assigns forever, and subject to the Permitted Exceptions, Grantor
does hereby bind Grantor and Grantor's successors and assigns to warrant and
forever defend, all and singular, the Property unto the Grantee and Grantee's
successors and assigns, against every person whomsoever lawfully claiming or to
claim the same, or any part thereof by, through, or under Grantor, but not
otherwise.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
EXECUTED to be effective the 27th day of September, 1996.
GRANTOR:
FOREST/HILLCREST PARTNERS,
a Texas joint venture
By: FOREST HILLS PARTNERS, LTD.,
a Texas limited partnership, a venturer
By: RPG/EP COMPANY, INC., a Texas corporation,
its general partner
By: /s/ Richard C. Strauss
------------------------------------------
Name: Richard C. Strauss
Title: Chairman
By: OLY HILLCREST, L.P., a Texas limited partnership, a
venturer
By: OLY GP INVESTMENTS, L.P., a Texas limited
partnership, its general partner
By: OLYMPUS REAL ESTATE FUND GP PARTNERS, a
Texas general partnership, its general
partner
By: HMTFD FUND I PARTNERS, L.P., a Texas
limited partnership, its managing
partner
By: HMTF/OLYMPUS GP, INC., a Texas
corporation, its general partner
By: /s/ Jeffrey G. Mundy
-----------------------------
Name: Jeffrey G. Mundy
Title: Vice President
2
<PAGE>
EXHIBIT 10.6
BLANKET CONVEYANCE, BILL OF SALE AND ASSIGNMENT
-----------------------------------------------
THE STATE OF TEXAS (S)
(S) KNOW ALL MEN BY THESE PRESENTS THAT:
COUNTY OF DALLAS (S)
Concurrently with the execution and delivery of this Blanket Conveyance,
Bill of Sale and Assignment (the "ASSIGNMENT"), FOREST/HILLCREST PARTNERS, a
Texas joint venture ("ASSIGNOR"), is conveying to COMPUCOM SYSTEMS, INC., a
Delaware corporation ("ASSIGNEE"), by Special Warranty Deed (the "DEED"), that
certain tract of land lying and being situated in Dallas County, Texas, being
more particularly described on EXHIBIT "A" attached hereto and made a part
-----------
hereof for all purposes, together with the improvements located thereon
(collectively the "PROPERTY").
It is the desire of Assignor to assign, transfer, and convey to Assignee
certain tangible personal property, together with certain contract rights,
guaranties, licenses, and other specified items of intangible property, affixed
or attached to the Property, except those owned by tenants of the Property (such
tangible and intangible properties herein below specified being collectively
called the "ASSIGNED PROPERTIES").
NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignee to Assignor, the
receipt and sufficiency of which are hereby acknowledged and confessed by
Assignor, Assignor does hereby ASSIGN, TRANSFER, SET OVER, and DELIVER to
Assignee, its successors and assigns, subject to any and all matters of record
in Dallas County, Texas, to the extent they affect the Property, all of the
Assigned Properties, including, without limitation of the generality of the
foregoing, the following:
1. All equipment and other tangible personal property owned by Assignor
and situated upon the Property and used in the operation and maintenance
thereof, including, but not limited to, the personal property listed on the
inventory attached hereto as EXHIBIT "B".
-----------
2. The rights and interests of Assignor in and to, and existing under and
by virtue of, the contracts and agreements listed on EXHIBIT "C" attached hereto
-----------
and made a part hereof for all purposes to which Assignor is now a party and
which relate to the operation or maintenance of the Property.
3. All assignable warranties, bonds, and guaranties (express or implied),
licenses, permits, and franchises issued in connection with or arising out of
(a) the purchase and repair of any fixtures, equipment, or personal property
owned by Assignor and assigned to Assignee pursuant thereto, including, but not
limited to (i) all heating, air conditioning, plumbing, and lighting fixtures
and equipment, and (ii) all carpeting, furniture, and window draperies owned by
Assignor and affixed to or located within the Property; or (b) the construction
of any of the
<PAGE>
improvements located in the Property; provided that Assignor makes no
representation or warranty with respect to the assignability or enforceability
of any warranty, bond, or guaranty.
TO HAVE AND TO HOLD the Assigned Properties unto Assignee, its successors,
and assigns, forever, and Assignor does hereby bind itself, its successors, and
assigns, to WARRANT and FOREVER DEFEND, all and singular, title to the Assigned
Properties unto Assignee, its successors, and assigns, against every person
whomsoever lawfully claiming or to claim the same.
Other than the warranty of title contained in the Deed executed and
delivered by Assignor to Assignee of even date herewith, and other than any
express warranties set forth herein and in the purchase contract previously
executed by Assignor and Assignee with respect to the Property, Assignor sells
the Assigned Properties and Assignee purchases and accepts the Assigned
Properties, "AS IS, WITH ALL FAULTS" and Assignee assumes all risks thereof and
acknowledges that ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, OF THE
ASSIGNED PROPERTIES, OR ANY PART THEREOF. BY ACCEPTANCE HEREOF ASSIGNEE WAIVES
ANY AND ALL SUCH WARRANTIES.
It is specifically agreed that Assignor shall not be responsible for the
discharge and performance of any duties or obligations to be performed and/or
discharged in connection with the Assigned Properties after the date hereof. By
acceptance of this Assignment, Assignee accepts and agrees to perform all of the
terms, covenants, and conditions in connection with the Assigned Properties
required to be performed by the owner thereof, from and after the date hereof,
but not prior thereto, and agrees to indemnify, save, and hold harmless Assignor
from and against any and all loss, liability, claims, or causes of action
existing in favor of or asserted by any party arising out of or relating to
Assignee's failure to perform any duties or obligations required by the owner of
the Assigned Properties after the date hereof.
It is further agreed that Assignee shall not be responsible for the
discharge and performance of any duties or obligations required to be performed
and/or discharged in connection with the Assigned Properties prior to the date
hereof. In such regard Assignor agrees to indemnify, save, and hold harmless
Assignee from and against any and all loss, liability, claims, or causes of
action existing in favor of or asserted by any party arising out of or relating
to Assignor's failure to perform any duties or obligations required by the owner
of the Assigned Properties prior to the date hereof.
Simultaneously with the execution and delivery of this Assignment, Assignor
has executed and delivered to Assignee the Deed and the specific conveyances
described in the recitals hereof. Nothing herein contained shall be deemed to
limit or restrict the properties, assets, and rights conveyed, assigned, or
transferred to or acquired by Assignee pursuant thereto.
2
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment to be
executed the 27th day of September, 1996.
ASSIGNOR:
FOREST/HILLCREST PARTNERS,
a Texas joint venture
By: FOREST HILLS PARTNERS, LTD.,
a Texas limited partnership, a venturer
By: RPG/EP COMPANY, INC., a Texas corporation,
its general partner
By: /s/ Richard C. Strauss
--------------------------------------
Name: Richard C. Strauss
Title: Chairman
By: OLY HILLCREST, L.P., a Texas limited
partnership, a venturer
By: OLY GP INVESTMENTS, L.P., a Texas limited
partnership, its general partner
By: OLYMPUS REAL ESTATE FUND GP PARTNERS,
a Texas general partnership, its
general partner
By: HMTFD FUND I PARTNERS, L.P., a
Texas limited partnership, its
managing partner
By: HMTF/OLYMPUS GP, INC., a
Texas corporation, its
general partner
By: /s/ Jeffrey G. Mundy
------------------------
Name: Jeffrey G. Mundy
Title: Vice President
3
<PAGE>
ASSIGNEE:
COMPUCOM SYSTEMS, INC.,
a Delaware corporation
By: /s/ Robert J. Boutin
-------------------------------------------------
Name: Robert J. Boutin
Title: Senior Vice President and Chief Financial
Officer
4
<PAGE>
EXHIBIT 10.7
EXECUTION COUNTERPART
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FINANCING STATEMENT
STATE OF TEXAS (S)
(S) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS (S)
THAT, COMPUCOM SYSTEMS, INC., a Delaware corporation (hereinafter called
"Grantor"), in order to secure the payment of the indebtedness hereinafter
-------
referred to and the performance of the obligations, covenants, agreements and
undertakings of Grantor hereinafter described, does hereby GRANT, BARGAIN, SELL,
CONVEY, TRANSFER, ASSIGN and SET OVER to MICHAEL F. HORD, Trustee, of Dallas
County, Texas (hereinafter called the "Trustee") for the benefit of NATIONSBANK
-------
OF TEXAS, N.A., a national banking association (hereinafter called
"NationsBank"), having its principal office at 901 Main Street, Suite 6700,
-----------
Dallas, Texas 75202, as the administrative agent (hereinafter in such capacity
NationsBank is called the "Administrative Agent") on behalf of NationsBank and
--------------------
each other lender a party to the Credit Agreement described below (hereinafter
collectively called "Banks"), all of the real estate situated in the State of
-----
Texas in the Counties set forth in Exhibit "A" attached hereto and described in
-----------
Exhibit "A" attached hereto and made a part hereof (the "Land"), together with
- ----------- ----
(i) all the buildings and other improvements now on or that may be hereafter
placed on said Land; (ii) Grantor's interest in all materials, equipment,
fixtures or other property whatsoever, now or hereafter attached to, installed
in, or used in connection with the buildings and other improvements now erected
or hereafter to be erected on said Land, including, but not limited to, all
heating, plumbing, lighting, water heating, cooking, laundry, refrigerating,
incinerating, ventilating and air conditioning equipment, disposals,
dishwashers, refrigerators and ranges, utility lines and equipment (whether
owned individually or jointly with others), sprinkler systems, fire
extinguishing apparatus and equipment, tanks, engines, pipes, fittings, dynamos,
generators, machines, elevators, motors, cabinets, shades, blinds, partitions,
window screens, screen doors, storm windows, awnings, drapes, and rugs and other
floor coverings, and all fixtures, accessions and appurtenances thereto, and all
renewals or replacements of or substitutions for any of the foregoing, all of
which property and things are hereby declared to be permanent fixtures and
accessions to the freehold and part of the realty conveyed herein as security
for the indebtedness herein mentioned; (iii) Grantor's interest in all easements
and rights of way now or hereafter used in connection with any of the foregoing
real estate or as a means of ingress to or egress from said real estate; (iv)
Grantor's interest, now or hereafter acquired, in and to any streets, ways,
alleys and/or strips and gores of land adjoining said Land or any part thereof;
and (v) Grantor's interest in and to all rights, estates, hereditaments, powers
and privileges appurtenant or incident to the foregoing.
<PAGE>
TO HAVE AND TO HOLD the foregoing property (herein called the
"Mortgaged Property") unto the Trustee and his successors or substitutes in this
- -------------------
trust and to his or their successors and assigns, IN TRUST, however, upon the
terms, provisions and conditions herein set forth.
In order to secure the payment of the indebtedness hereinafter referred to
and the performance of the obligations, covenants, agreements and undertakings
of Grantor hereinafter described, Grantor further grants (to the extent not
prohibited by Applicable Law) to the Administrative Agent a security interest
and lien in Grantor's right, title and interest in and to all present and future
(i) goods, equipment, furnishings, fixtures, furniture, chattels owned by
Grantor now or hereafter attached or affixed to or used in or about the building
or buildings now erected or hereafter to be erected on the Mortgaged Property or
otherwise located on the Mortgaged Property, (ii) fixtures, accessions and
appurtenances to any of the foregoing or following, (iii) renewals or
replacements of or substitutions for any of the foregoing or following, (iv)
building materials and equipment now or hereafter delivered to said premises and
intended to be installed therein, (v) occupancy agreements, leases, rents
(including security and other deposits and advance rentals under occupancy
agreements and lease agreements now or at any time hereafter covering or
affecting any of the Mortgaged Property and all property described in this
paragraph and held by or for the benefit of Grantor), fees, royalties, bonuses,
issues, profits, revenues or other income or benefits of whatever nature
received or due in connection with the Mortgaged Property and all property
described in this paragraph, (vi) monetary deposits which Grantor has been
required to give to any public or private utility with respect to utility
services furnished to the Mortgaged Property, (vii) permits, licenses,
franchises, certificates, and agreements relating to any of the foregoing or
following, and all other rights and privileges obtained in connection with the
Mortgaged Property and all property described in this paragraph, (viii) plans,
specifications, maps, surveys, reports, operating and management contracts,
architectural, engineering, construction and development contracts, books of
account, insurance policies, guarantees, warranties and other documents, of
whatever kind or character, relating to the ownership, use, construction upon,
occupancy, leasing, sale or operation of the Mortgaged Property and all property
described in this paragraph, (ix) oil, gas and other hydrocarbons and other
minerals produced from or allocated to the Mortgaged Property and all products
processed or obtained therefrom, the proceeds thereof, and all accounts and
general intangibles under which such proceeds may arise, (x) all proceeds from
the taking of any of the Mortgaged Property and any property described in this
paragraph or any rights appurtenant thereto by right of eminent domain or by
private or other purchase in lieu thereof, (xi) all proceeds (including premium
refunds) of each policy of insurance relating to the Mortgaged Property and any
property described in this paragraph, (xii) all guarantees, sureties and other
agreements assuring performance of any obligation of any tenant of the Mortgaged
Property and all property described in this paragraph, and (xiii) all proceeds
arising from or by virtue of the sale, lease or other disposition of the
Mortgaged Property and any property described in this paragraph (all of the
property described in this paragraph hereinafter collectively called the
Personal Property") and all proceeds and products of the Personal Property.
- ------------------
(The Mortgaged Property and the Personal Property are hereinafter sometimes
collectively called the "Property").
--------
-2-
<PAGE>
ARTICLE I.
Secured Indebtedness
--------------------
1.1. Secured Indebtedness. This Deed of Trust, Assignment of Leases and
--------------------
Rents, Security Agreement and Financing Statement (hereinafter called this "Deed
----
of Trust") is made to secure and enforce the payment of the following,
- --------
agreements, documents, obligations, indebtedness and liabilities: (a) all
present and future obligations, indebtedness and liabilities, and all renewals
and extensions of all or any part thereof of Grantor to Banks or any Bank
arising from, by virtue of, or pursuant to the Credit Agreement dated as of
September 26, 1996 among Grantor, Administrative Agent and Banks (said Credit
Agreement, as amended, modified, renewed, extended or restated from time to
time, the "Credit Agreement"), the Notes (as defined in the Credit Agreement),
----------------
the other Loan Documents (as defined in the Credit Agreement), including,
without limitation, interest, fees and other charges that would accrue or become
owing both prior to and subsequent to and but for the commencement of any
proceeding against or with respect to Grantor under any chapter of the
Bankruptcy Code of 1978, 11 U.S.C. (S) 101 et. seq. whether or not a claim is
-- ---
allowed for the same in any such proceeding, and (b) all indebtedness and
obligations incurred or arising pursuant to the provisions of this Deed of
Trust. The indebtedness referred to in this Paragraph 1.1 is hereinafter
sometimes called the "Secured Indebtedness". This Deed of Trust, the Credit
--------------------
Agreement, the Notes, the other Loan Documents as defined in the Credit
Agreement, and all other instruments, certificates, affidavits or documents
evidencing, governing, securing, guaranteeing, or relating to the Secured
Indebtedness all as amended, modified, renewed, extended or restated from time
to time, are hereinafter called the "Financing Documents".
-------------------
ARTICLE II.
Representations and Warranties
------------------------------
2.1. Representations and Warranties. Grantor represents and warrants to the
------------------------------
Trustee, the Administrative Agent and the Banks as follows:
(a) Title and Authority. Grantor is the lawful owner of good and
-------------------
indefeasible fee simple title to the Property, subject only to the matters
described in Exhibit "B" attached hereto and made a part hereof (the
-----------
"Permitted Encumbrances") and has good right and authority to grant,
-----------------------
bargain, sell, transfer, assign and mortgage the Mortgaged Property and to
grant a security interest in the Personal Property.
(b) Compliance with Covenants and Laws. To the best of Grantor's
----------------------------------
knowledge after reasonable investigation, the construction, occupancy,
operation and use of the Property and the intended use thereof by Grantor
subject to the provisions of Article V below complies with all laws,
statutes, ordinances, rules, regulations, orders and determinations of any
governmental authority and any board of fire underwriters (or
-3-
<PAGE>
any body exercising similar functions) and any restrictive covenants or
deed restrictions (whether recorded or otherwise), including, without
limitation, all applicable zoning, subdivision, platting, licensing,
building, flood disaster, statutes, ordinances, rules, regulations, orders
and determinations of any governmental authority (hereinafter sometimes
collectively called "Applicable Laws"), except where the failure to so
---------------
comply could not have a material adverse effect on (i) the financial
condition or prospects of Grantor, (ii) the value of the Property taken as
a whole, (iii) Grantor's use of, and business operations of, the Property
taken as a whole, or (iv) the validity or enforceability of this Deed of
Trust or the liens and security interests granted hereunder (hereinafter
collectively called "Material Adverse Effect"). To the best of Grantor's
-----------------------
knowledge after reasonable investigation, Grantor has obtained all
requisite zoning, utility, building, health, operating and occupancy
permits from the governmental authorities having jurisdiction over the
Property, except where the failure to obtain such zoning and permits would
not have a Material Adverse Effect.
(c) No Suits. There are no judicial or administrative actions, suits
--------
or proceedings pending or, to the best of Grantor's knowledge threatened,
affecting the Property which, if adversely determined, would be reasonably
likely to have a Material Adverse Effect, or involving the validity,
enforceability or priority of this Deed of Trust.
(d) Condition of Property. To the best of Grantor's knowledge after
---------------------
reasonable investigation, the Mortgaged Property is served by electric,
gas, storm and sanitary sewers, sanitary water supply, telephone and other
utilities required for the Grantor's current and anticipated uses thereof
on the date hereof at or within the boundary lines of the Mortgaged
Property. To the best of Grantor's knowledge after reasonable
investigation, all streets, alleys and easements (including without
limitation easements for ingress and egress, easements for vehicular
traffic and parking and for pedestrian traffic, easements for utilities,
and easements for reciprocal uses) necessary to serve Grantor's current and
anticipated uses of the Mortgaged Property have been completed and are
serviceable, such streets, alleys and easements have been dedicated and
accepted by applicable governmental entities, and/or all agreements
creating such easements have been filed of record in the real property
records of the County set forth on Exhibit "A" attached hereto. The
---------------------------
Mortgaged Property is in reasonably good condition and repair and proper
working order, and is free from damage caused by fire or other casualty.
Grantor has no actual knowledge of any latent or patent structural or other
significant defect or deficiency in the Mortgaged Property that (i) would
materially and adversely affect Grantor's intended use of the Mortgaged
Property or (ii) have a Material Adverse Effect. None of the Mortgaged
Property not covered by flood insurance is within a flood plain. To the
best of Grantor's knowledge after reasonable investigation, none of the
improvements on the Mortgaged Property create an encroachment over, across
or upon any of the Mortgaged Property boundary lines, rights of way or
easements, and no buildings or other improvements on adjoining land create
such an encroachment, except as disclosed on the survey of the Land
delivered to the
-4-
<PAGE>
Administrative Agent. There is, to the actual knowledge of Grantor, no
condemnation proceeding pending or threatened that would affect the
Mortgaged Property.
(e) Warranty. Grantor will warrant and forever defend the title to
--------
the Mortgaged Property against the claims of all persons whomsoever
claiming or to claim the same or any part thereof, subject to the Permitted
Encumbrances.
2.2. Covenants and Agreements. So long as the Secured Indebtedness or any
------------------------
part thereof remains unpaid, Grantor covenants and agrees with the
Administrative Agent and the Banks as follows:
(a) Taxes on Lien.
-------------
In the event of the enactment after the date hereof of any law of the
State of Texas or of any other governmental entity deducting from the value
of property for the purpose of taxation any lien or security interest
thereon, or imposing upon the Trustee, the Administrative Agent or any Bank
the payment of the whole or any part of the taxes (other than taxes imposed
on the overall income of Banks, the Trustee or the Administrative Agent) or
assessments or charges or liens herein required to be paid by Grantor, or
changing in any way the laws relating to the taxation of deeds of trust or
mortgages or security agreements or debts secured by deeds of trust or
mortgages or security agreements or the interest of the trustee or
beneficiary or mortgagee or secured party in the property covered thereby,
or the manner of collection of such taxes, so as to affect this Deed of
Trust or any of the Secured Indebtedness or the Trustee, the Administrative
Agent or any Bank, then, and in any such event, Grantor, upon demand by the
Trustee, the Administrative Agent or any Bank, shall to the extent not
prohibited by Applicable Law, pay such taxes, assessments, charges or
liens, or reimburse the Trustee, the Administrative Agent or such Bank
therefor.
(b) Ad Valorem Taxes. Grantor will cause to be paid prior to
----------------
delinquency all taxes and assessments heretofore or hereafter levied or
assessed against the Property, or any part thereof, and upon request of the
Administrative Agent will furnish the Administrative Agent with receipts
showing payment of such taxes and assessments prior to the applicable
delinquency date therefor; except that Grantor in good faith may contest,
by appropriate proceedings, the validity, applicability or amount of any
asserted tax or assessment, and, pending such contest, Grantor shall not be
deemed in Default hereunder if, prior to delinquency of the asserted tax or
assessment, Grantor establishes an escrow, or provides security reasonably
acceptable to the Administrative Agent, or reserves have been established
adequate to cover the payment of such tax or assessment with costs,
interest and penalties and a reasonable additional sum to cover possible
costs, interest and penalties (which escrow and/or security shall be
returned to Grantor upon payment of all such taxes, assessments, costs,
interest and penalties), and if Grantor promptly causes to be paid any
amount adjudged by a court of competent jurisdiction to be due, with all
costs, interest and penalties thereon, promptly after such judgment
-5-
<PAGE>
becomes final; provided, however, that in any event each such contest shall
be concluded and the tax assessment, costs, interest and penalties shall be
paid prior to the date any writ or order is issued under which the
Property, or any part thereof, may be sold. No reserve (or security
required in (d) below) is required until such time that the aggregate of
alleged unpaid ad valorem taxes on all properties of Grantor and all unpaid
debts described in (d) below shall exceed $10,000.
(c) Operation of Property. Grantor will operate, and will cause the
---------------------
operation of, the Property in a reasonably good and workmanlike manner and
in accordance with all Applicable Laws and will pay all fees or charges of
any kind in connection therewith, except where the failure to so operate
and pay such fees or charges would not have a Material Adverse Effect.
Grantor will keep, and will cause the keeping of, the Property occupied to
the extent necessary not to impair the insurance carried thereon. Grantor
will not use or occupy, or allow the use or occupancy of, the Property in
any manner which violates any Applicable Law, or except where the failure
to so occupy would not have a Material Adverse Effect, which constitutes a
public or private nuisance or which makes void, voidable or cancelable, any
insurance then in force with respect thereto. Grantor will not, without
the prior written consent of the Administrative Agent (which consent shall
not be unreasonably withheld), initiate or consent to any zoning
reclassification of the Property or seek or consent to any variance under
existing zoning ordinances applicable to the Property or use or permit the
use of the Property in such a manner as would result in such use becoming a
nonconforming use under applicable zoning ordinances or other Applicable
Laws. Grantor will not, without the prior written consent of the
Administrative Agent (which consent shall not be unreasonably withheld),
impose any restrictive covenant or any encumbrance upon the Property which
does not constitute a Permitted Encumbrance, execute or file any
subdivision plat affecting the Property or consent to the annexation of the
Property to any municipality. Grantor shall not cause or permit any
drilling or exploration for, or extraction, removal or production of,
minerals from the surface or subsurface of the Property. Grantor will not
do anything to cause the value of the Property to be materially lessened.
If Grantor receives a written notice or claim from any federal, state or
other governmental entity pertaining to the Property, including,
specifically but without limitation, a notice that the Property is not in
compliance with any Applicable Law, Grantor promptly will furnish a copy of
such notice or claim to the Administrative Agent.
(d) Debts for Construction. Grantor will cause all debts and
----------------------
liabilities of any character, including without limitation all debts and
liabilities for labor, material and equipment and all debts and charges for
utilities servicing the Property, incurred in the construction,
maintenance, operation or development of the Property to be paid before the
same become delinquent. Notwithstanding the foregoing, Grantor in good
faith may contest, by appropriate proceedings, the validity, applicability
or amount of any asserted mechanics' or materialmen's liens, and, pending
such contest, Grantor shall not be deemed in Default hereunder if Grantor
provides the Administrative Agent with security reasonably satisfactory to
the Administrative Agent and if Grantor promptly causes to be
-6-
<PAGE>
paid any amount adjudged by a court of competent jurisdiction to be due,
with all costs and interest thereon, promptly after such judgment becomes
final; provided, however, that in any event each such contest shall be
concluded and the lien, interest and costs shall be paid, bonded around or
otherwise removed prior to the date any writ or order is issued under which
the Property, or any part thereof, may be sold. No security (or reserve
required in (b) above) is required until such time that the aggregate of
alleged unpaid ad valorem taxes on all properties and all unpaid debts
described in this clause (d) shall exceed $10,000.
(e) Repair and Maintenance. Grantor will keep the Property
----------------------
reasonably in good order, repair, operating condition and appearance,
causing all reasonably necessary repairs and replacements, promptly to be
made, and will not allow any of the Property to be misused, abused or
wasted or to deteriorate, normal wear and tear and casualty excepted.
Grantor promptly will replace all worn-out or obsolete fixtures or personal
property covered by this Deed of Trust that are reasonably necessary in the
operation of the Property with fixtures or personal property comparable to
the replaced fixtures or personal property, and will repaint the Property
when reasonably needed. Notwithstanding the foregoing, Grantor will not,
without the prior written consent of the Administrative Agent do or permit
to be done anything to the Property that materially may impair its value,
including but not limited to (i) removing from the Property any fixtures or
personal property covered by this Deed of Trust (but not including any
personal property in which Grantor is the lessee thereof) which are
necessary or desirable in the operation of the Property, except such as is
replaced by Grantor by an article of equal suitability and value, owned by
Grantor, free and clear of any lien or security interest (except that (i)
created by this Deed of Trust or any other Financing Document, (ii)
otherwise permitted in the Loan Documents or (iii) in respect of
capitalized leases) or such as is permitted to be removed by a tenant
pursuant to such tenant's lease or (ii) making any structural or other
alteration to the Property that materially impairs the value thereof.
Nothing contained herein will prevent tenants of the Property from making
alterations and improvements expressly permitted under their leases of any
part of the Mortgaged Property. Upon request of the Administrative Agent,
Grantor will deliver to the Administrative Agent an inventory describing
and showing the make, model, serial number and location of all fixtures and
personal property used in the management, maintenance and operation of the
Property, with a certification by Grantor that said inventory is a true and
complete schedule of all such fixtures and personal property used in the
management, maintenance and operation of the Property, that such items
specified in the inventory constitute all of the fixtures and personal
property required in the management, maintenance and operation of the
Property, and that all such items are owned by Grantor free and clear of
any lien or security interest (except the Permitted Encumbrances).
(f) Insurance and Casualty. Grantor will keep the Property insured
----------------------
against loss or damage by fire, explosion, windstorm, hail, flood (as to
any portion of the Property which shall at any time be located in an
identified "flood prone" area in which
-7-
<PAGE>
flood insurance has been made available pursuant to the Flood Disaster
Protection Act of 1973, and then in the amount of the outstanding balance
of the Notes or the maximum amount of coverage available, whichever is
less), tornado and such other hazards as required by the Administrative
Agent and consistent with industry standards. Notwithstanding the
foregoing, Grantor further covenants and agrees to keep the property
insured by policies of fire, extended coverage and other insurance in such
company or companies reasonably acceptable to the Administrative Agent and
upon such terms and provisions, and with such endorsements, all as
reasonably may be acceptable to the Administrative Agent and consistent
with industry standards. Grantor further agrees that Grantor will deliver
to the Administrative Agent receipts evidencing the payment of all
premiums, and certificates of insurance addressed to the Administrative
Agent evidencing compliance with the insurance requirements set forth
herein and, when appropriate, evidencing renewals of all such policies of
insurance before any such insurance shall expire. All insurance policies
required pursuant to this subparagraph (f) shall contain a prohibition
against cancellation, material endorsement, material alteration or
reissuance of such policy effecting a change in coverage thereunder unless
such insurer first shall have given the Administrative Agent 30 days prior
written notice thereof. All fire, extended and other insurance coverage
insurance policies required hereunder shall be on a replacement cost basis
in an amount not less than that necessary to comply with any co-insurance
percentage stipulated in the policy, but not less than one hundred percent
(100%) of the Property's insurable value, and shall be subject to
deductibles, if any, not to exceed $250,000. Grantor further agrees that
all insurance policies shall provide that proceeds thereunder will be
jointly payable to the Administrative Agent and Grantor, for the benefit of
the Grantor and Banks as their interests may appear pursuant and subject to
a mortgagee clause (without contribution) of standard form attached to or
otherwise made a part of the applicable policy. In the event any of the
Property covered by such insurance is destroyed or damaged by fire,
explosion, windstorm, hail or by any other casualty against which insurance
shall have been required hereunder, (i) the Administrative Agent may, but
shall not be obligated to, make proof of loss if not made promptly by
Grantor, (ii) each insurance company concerned is hereby authorized and
directed to make payment for such loss jointly to the Administrative Agent
and Grantor, and (iii) the Administrative Agent shall apply the insurance
proceeds as follows:
(A) first, to reimburse the Administrative Agent or the Trustee
-----
for all costs and expenses, including reasonable attorneys' fees,
incurred in connection with the collection of such proceeds; and
(B) second, if a Default has not occurred or, if a Default has
------
occurred, such Default is not then continuing, proceeds of insurance
from losses shall be used at Grantor's option by Grantor (i) for
repair or replacement of Property and Grantor shall provide the
Administrative Agent with evidence satisfactory to the Administrative
Agent of such use or (ii) to be applied to Secured Indebtedness.
-8-
<PAGE>
(C) third, if a Default has occurred and is continuing, proceeds
-----
of insurance from losses shall at Banks' option be applied to Secured
Indebtedness or to repair or replacement of Property.
In any event, the unpaid portion of the Secured Indebtedness shall remain
in full force and effect and Grantor shall not be excused in the payment
thereof. If any act or occurrence of any kind or nature (including any
casualty on which insurance was not obtained or obtainable) shall result in
material damage to or material loss or destruction of the Property, Grantor
shall give prompt notice thereof to the Administrative Agent and, if
Grantor elects to restore the Property to its prior condition (pursuant to
subparagraph B of this Paragraph 2.2(f)(iii)), Grantor, at Grantor's sole
cost and expense and regardless of whether the insurance proceeds, if any,
shall be sufficient for the purpose, promptly shall restore, repair,
replace and rebuild the Property as nearly as possible to its value,
condition and character immediately prior to such damage, loss or
destruction in accordance with plans and specifications submitted to and
reasonably and promptly approved by the Administrative Agent. Grantor
hereby irrevocably appoints the Administrative Agent as Grantor's attorney-
in-fact, with full authority in place and stead of Grantor and in the name
of Grantor or otherwise, after the occurrence of any Default and during the
continuance of same to obtain any insurance required to be obtained
pursuant to this Paragraph 2.2(f) and which is not so obtained and to
receive, indorse, and collect any drafts or other instruments, documents
and chattel paper, in connection therewith. The appointment of the
Administrative Agent as attorney-in-fact is coupled with an interest and is
irrevocable prior to final payment in full of the Secured Indebtedness.
(g) Liability and Other Insurance. Grantor shall maintain
-----------------------------
comprehensive general liability insurance against claims for bodily injury
or death and property damage occurring in or upon or resulting from the
Property, in standard form and with such insurance company or companies and
policy coverage limits and terms as reasonably may be acceptable to the
Administrative Agent, and such other insurance as the Administrative Agent
from time to time reasonably may require, with companies reasonably
acceptable to the Administrative Agent, upon such terms and provisions, in
such amounts, and with such endorsements, all as reasonably are approved by
the Administrative Agent. Grantor shall maintain with respect to each
policy or agreement evidencing such comprehensive general liability
insurance such endorsements as reasonably may be required by the
Administrative Agent consistent with accepted industry practice and shall
at all times following request therefor by the Administrative Agent deliver
and maintain with the Administrative Agent receipts evidencing the payment
of all premiums, and certificates of insurance addressed to the
Administrative Agent, evidencing compliance with the insurance requirements
set forth herein and, when appropriate, evidencing renewals of all such
policies of insurance 30 days before any such insurance shall expire. All
insurance policies required pursuant to this subparagraph (g) shall contain
a prohibition against cancellation, material endorsement, material
alteration or reissuance of such policy effecting a change in coverage
thereunder unless such insurer first shall have given
-9-
<PAGE>
the Administrative Agent 30 days prior written notice thereof. Grantor
further agrees that all insurance policies described in this Paragraph
2.2(g) shall name the Administrative Agent, for the benefit of the Banks,
as an additional insured party.
(h) Condemnation. Promptly upon obtaining actual knowledge of the
------------
institution of any proceedings for the condemnation of the Property, or any
portion thereof, or any other proceedings arising out of injury or damage
to the Property, or any portion thereof, Grantor will notify the
Administrative Agent of the pendency of such proceedings. The
Administrative Agent may participate in any such proceedings if in the
reasonable opinion of the Administrative Agent such participation is
necessary to protect the rights or interests of the Administrative Agent,
and Grantor shall from time to time deliver to the Administrative Agent all
instruments reasonably requested by it to permit such participation.
Grantor shall, at its expense, diligently prosecute any such proceedings,
and shall consult with the Administrative Agent, its attorneys and experts,
and cooperate with them in the carrying on or defense of any such
proceedings. All proceeds of condemnation awards or proceeds of sale in
lieu of condemnation with respect to the Property, or any portion thereof,
and all judgments, decrees and awards for injury or damage to the Property,
or any portion thereof, shall be paid to the Administrative Agent and shall
be applied as follows:
(i) first, to reimburse Grantor, the Administrative Agent or
-----
the Trustee for all reasonable costs and expenses, including
reasonable attorneys' fees, incurred in connection with collection of
such proceeds;
(ii) second, to the payment of Secured Indebtedness [which
------
shall reduce the Facility B Commitment (as such term is defined in the
Credit Agreement), by such amount]; and
(iii) third, to the extent of the balance (if any) of such
-----
proceeds, to Grantor or other party legally entitled thereto.
Grantor hereby assigns and transfers all such proceeds, judgments, decrees
and awards to Banks and agrees to execute such further assignments of all
such proceeds, judgments, decrees and awards as Banks may reasonably
request; provided, however, the disbursement of such proceeds, judgments,
decrees and awards shall be applied as provided above in this Paragraph
2.2(h). The Banks are hereby authorized, in the name of Grantor, to execute
and deliver valid acquittances for, and to appeal from, any such judgment,
decree or award. The Banks shall not be, in any event or circumstances,
liable or responsible for failure to collect, or for failure to exercise
diligence in the collection of, any such proceeds, judgments, decrees
and/or awards.
(i) Protection and Defense of Lien. If the validity or priority of
------------------------------
this Deed of Trust or of any rights, titles, liens or security interests
created or evidenced hereby with respect to the Property, or any part
thereof, shall be attacked directly or indirectly or if
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<PAGE>
any legal proceedings are instituted against Grantor with respect thereto,
Grantor will give prompt written notice thereof to the Administrative Agent
and at Grantor's own cost and expense diligently will endeavor to cure any
defect that may be developed or claimed, and will take all necessary and
proper steps for the defense of such legal proceedings, including but not
limited to the employment of counsel, the prosecution or defense of
litigation and the release or discharge of all adverse claims, and the
Trustee and the Administrative Agent, or either of them, (whether or not
named as parties to legal proceedings with respect thereto) are hereby
authorized and empowered to take such additional steps as in their judgment
and discretion reasonably may be necessary or proper for the defense of any
such legal proceedings or the protection of the validity or priority of
this Deed of Trust and the rights, titles, liens and security interests
created or evidenced hereby, including but not limited to the employment of
counsel, the prosecution or defense of litigation, the compromise or
discharge of any adverse claims made with respect to the Property, or any
part thereof, the purchase of any tax title and the removal of prior liens
or security interests which do not constitute Permitted Encumbrances, and
all reasonable expenses so incurred of every kind and character shall be a
demand obligation owing by Grantor, and the party incurring such expenses
shall be subrogated to all rights of the person receiving such payment.
Should the Trustee or the Administrative Agent intend to take any such
action described in the immediately preceding sentence, the Trustee or the
Administrative Agent, as appropriate, shall, subject to the immediately
succeeding proviso, prior to taking any such action notify Grantor of such
-------
intention and give Grantor a reasonable opportunity to provide such defense
or protection; provided, however, if in the reasonable opinion of the
-------- -------
Trustee or the Administrative Agent the giving of such notice and
opportunity to provide such defense or protection would impair or hinder
such defense or protection or would otherwise be disadvantageous to rights
or interests of the Trustee or the Administrative Agent hereunder or the
rights, title, liens or security interests created or evidenced hereby, the
Trustee and the Administrative Agent shall have no obligation to give such
notice and opportunity to provide such defense or protection.
(j) Permitted Encumbrances. Grantor will comply with and will
----------------------
perform all of the covenants, agreements and obligations imposed upon it or
the Property in the Permitted Encumbrances in accordance with their
respective terms and provisions. Grantor will not modify or permit any
modification of any Permitted Encumbrance the result of which would have a
Material Adverse Effect without the prior written consent of the
Administrative Agent.
(k) Books and Records. Grantor will permit all contracts,
-----------------
statements, invoices, bills and claims for labor, materials and services
supplied for the construction and operation of the improvements forming a
part of the Property to be inspected and copied by the Administrative Agent
and its representatives at all times during reasonable business hours upon
reasonable notice; provided, however, if a Default shall have occurred and
be continuing there shall be no requirement to give reasonable notice.
-11-
<PAGE>
(l) Leases. Grantor may not lease or enter into any other occupancy
------
agreement covering any material portion of any of the Property without the
prior written consent of Grantor.
(m) Fees and Expenses; Indemnification. Grantor will pay all
----------------------------------
appraisal fees, filing and recording fees, inspection fees, survey fees,
taxes, brokerage fees and commissions, abstract fees, title policy fees,
uniform commercial code search fees, escrow fees, reasonable attorney's
fees, and all other costs and expenses of every character reasonably and
properly incurred by Grantor, the Trustee, the Administrative Agent or
Banks in connection with this Deed of Trust, either at the closing thereof
or at any time during the term thereof, or otherwise attributable or
chargeable to Grantor as owner of the Property, and will reimburse the
Trustee, the Administrative Agent and Banks for all such costs and expenses
incurred by each of them. Grantor shall pay all reasonable and proper
expenses and reimburse the Trustee, the Administrative Agent and Banks for
any reasonable expenditures, including reasonable attorney's fees and legal
expenses, incurred or expended in connection with (i) the breach, by
Grantor of any covenant herein or (ii) the Trustee's or the Administrative
Agent's or Bank's reasonable exercise of any of the rights and remedies
hereunder or the Trustee's or the Administrative Agent's or Banks'
reasonable protection of the Property and the lien and security interest
therein. Grantor will indemnify and hold harmless the Trustee, the
Administrative Agent and Banks (for purposes of this subparagraph (m), the
terms "Administrative Agent" and "Banks" shall include the directors,
-------------------- -----
officers, employees and agents of the Administrative Agent and Banks and
any persons or entities owned or controlled by or affiliated with the
Administrative Agent and Banks) from and against, and reimburse them for,
all claims, demands, liabilities, losses, damages, judgments, penalties,
costs and expenses (including, without limitation, reasonable attorney's
fees) which may be imposed upon, asserted against or incurred or paid by
any of them by reason of, on account of or in connection with any bodily
injury or death or property damage occurring in or upon or in the vicinity
of the Property through any cause whatsoever, or asserted against any of
them on account of any act performed or omitted to be performed hereunder
or on account of any transaction arising out of or in any way connected
with the Property or with this Deed of Trust. The foregoing indemnities
shall not apply with respect to matters caused by or arising out of the
gross negligence or willful misconduct of the Administrative Agent, Banks
and/or the Trustee. Grantor agrees, however, that it expressly intends to
indemnify the Administrative Agent, Banks and the Trustee from and hold
each of them harmless against any and all losses, liabilities, claims,
damages or expenses arising out of their ordinary negligence. The
foregoing indemnities, however, shall not apply with respect to any losses,
liabilities, claims, damages or expenses incurred by the Administrative
Agent, Banks or the Trustee in any action or proceeding by Grantor against
the Administrative Agent, Banks or the Trustee unless the Administrative
Agent, Banks or the Trustee prevail in such action or proceeding. The
foregoing indemnities shall not terminate upon release, foreclosure or
other termination of this Deed of Trust but will survive foreclosure of
this Deed of Trust or conveyance in lieu of foreclosure and the repayment
of the Secured Indebtedness and
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<PAGE>
the discharge and release of this Deed of Trust and the other Financing
Documents, but Grantor shall not be liable for any damages as a result of
an event that occurs after foreclosure of the Mortgaged Property (or any
portion thereof) or the taking of a deed in lieu of foreclosure covering
the Mortgaged Property (or any portion thereof), unless such damage occurs
as a result of or arises out of a condition that existed prior to such
foreclosure or such taking of a deed in lieu of foreclosure. Any amount to
be paid hereunder by Grantor to the Administrative Agent, Banks and/or the
Trustee shall be a demand obligation owing by Grantor to the Administrative
Agent, Banks and/or the Trustee and shall be subject to and governed by the
provisions of Paragraph 2.3 hereof.
(n) Estoppel Certificate. Grantor shall at any time and from time to
--------------------
time furnish promptly upon request a written statement in such form as may
be reasonably required by the Administrative Agent stating that this Deed
of Trust is a valid and binding obligation of Grantor, enforceable against
Grantor in accordance with its terms, subject to Debtor Relief Laws (as
such term is defined in the Credit Agreement); that this Deed of Trust has
not been released, subordinated or modified; and that to the best of
Grantor's knowledge there are no offsets or defenses against the
enforcement of this Deed of Trust, or if any of the foregoing statements
are untrue, specifying the reasons therefor.
(o) Compliance with Laws. Grantor shall, and shall use reasonable
--------------------
efforts to cause any tenant of the Property to, comply with all applicable
restrictive covenants and all Applicable Laws with respect to which the
failure to so comply would have a Material Adverse Effect.
(p) Tax and Insurance Escrow. In order to secure the performance and
------------------------
discharge of Grantor's obligations under subparagraphs (b), (f) and (g) of
this Paragraph 2.2, but not in lieu of such obligations, Grantor will upon
written request of the Administrative Agent, deposit with the
Administrative Agent upon the occurrence and continuance of a Default, a
sum equal to ad valorem taxes, assessments and charges (which charges for
the purpose of this subparagraph shall include without limitation ground
rents and water and sewer rents and any other recurring charge which could
create or result in a lien against the Property) against the Property for
the then current year and the premiums for such policies of insurance for
the then current year, all as estimated by the Administrative Agent and
prorated to the end of the calendar month following the month during which
such Default occurred, and thereafter will deposit with the Administrative
Agent, on each date when an installment of interest is due on the Notes,
sufficient funds (as estimated from time to time by the Administrative
Agent) to permit the Administrative Agent to pay, at least 15 days prior to
the delinquency date thereof, the next maturing ad valorem taxes,
assessments and charges and premiums for such policies of insurance. The
Administrative Agent shall have the right to rely upon tax information
furnished by applicable taxing authorities in the payment of such taxes or
assessments and shall have no obligation to make any protest of any such
taxes or assessments. Any excess over the amounts required for such
purposes shall be held by
-13-
<PAGE>
the Administrative Agent for future use, applied to any Secured
Indebtedness, or refunded to Grantor, at the Administrative Agent's option;
and any deficiency in such funds so deposited shall be made up by Grantor
upon demand of the Administrative Agent. All such funds so deposited shall
bear interest at the normal interest rate for money market deposits at
NationsBank, may be mingled with the general funds of the Administrative
Agent and shall be applied by the Administrative Agent toward the payment
of such taxes, assessments, charges and premiums when statements therefor
are presented to the Administrative Agent by Grantor (which statements
shall be presented by Grantor to the Administrative Agent a reasonable time
before the applicable amount is due); provided, however, that if the
Administrative Agent has made demand for payment of all of the Secured
Indebtedness, such funds may at the Administrative Agent's option be,
applied to the payment of the Secured Indebtedness in the order determined
by the Administrative Agent and that the Administrative Agent may at any
time, in its discretion, apply all or any part of such funds toward the
payment of any such taxes, assessments, charges or premiums which are past
due, together with any penalties or late charges with respect thereto. The
conveyance or transfer of Grantor's interest in the Property for any reason
(including without limitation the foreclosure of a subordinate lien or
security interest or a transfer by operation of law) shall constitute an
assignment or transfer of Grantor's interest in and rights to such funds
held by the Administrative Agent under this subparagraph (p) but subject to
the rights of the Administrative Agent hereunder.
(q) Further Assurances. Grantor will, on request of the
------------------
Administrative Agent, (i) promptly correct any defect or error which may
be discovered in the contents of this Deed of Trust or in any other
instrument executed in connection herewith or in the execution or
acknowledgment thereof; (ii) execute, acknowledge, deliver and record or
file such further instruments (including without limitation further deeds
of trust, security agreements, financing statements, continuation
statements and assignments of rents or leases) and do such further acts as
may be reasonably necessary or proper to carry out more effectively the
purposes of this Deed of Trust and such other instruments and to subject to
the liens and security interests hereof and thereof any property intended
by the terms hereof or thereof to be covered hereby or thereby, including
specifically, but without limitation, any renewals, additions,
substitutions, replacements, or appurtenances to the Property; (iii)
execute, acknowledge, deliver, procure and record or file any document or
instrument (including specifically any financing statement) deemed
advisable by the Administrative Agent to protect the lien or the security
interest hereunder against the rights or interests of third persons, and
Grantor will pay all reasonable costs associated with any of the foregoing;
(iv) use reasonable efforts to cause any tenant under any lease agreement
of any of the Property to furnish any instrument or perform any act deemed
advisable by the Administrative Agent to protect the lien or the security
interest hereunder; and (v) provide such certificates, documents, reports,
information, affidavits and other instruments (including but not limited to
appraisals, surveys and current title reports) and do such further acts as
may be reasonably necessary or proper in the reasonable determination of
the Administrative Agent to enable the Administrative Agent
-14-
<PAGE>
to comply with the requirements or requests of any agency having
jurisdiction over the Administrative Agent or any of the Banks or any
examiners of such agencies with respect to the Secured Indebtedness,
Grantor or the Property.
2.3. Right of the Administrative Agent to Perform. Grantor agrees that, if
--------------------------------------------
Grantor fails to perform any act or to take any action which hereunder Grantor
is required to perform or take, or to pay any money which hereunder Grantor is
required to pay, the Administrative Agent, in Grantor's name or in its own name
and after the giving of any required notice and expiration of any applicable
cure period, may but shall not be obligated to perform or cause to be performed
such act or take such action or pay such money, and any reasonable expenses so
incurred by the Administrative Agent, and any money so paid by the
Administrative Agent, shall be a demand obligation owing by Grantor to the
Administrative Agent and the Administrative Agent, upon making such payment,
shall be subrogated to all of the rights of the person or entity receiving such
payment. Any amounts due and owing by Grantor to the Administrative Agent
pursuant to this Deed of Trust shall bear interest from the date such amount
becomes due until paid at a rate of interest per annum equal to the lesser of
(i) the prime rate of NationsBank as announced or published by NationsBank from
time to time, plus 2%, or (ii) the highest lawful rate, and shall be a part of
the Secured Indebtedness and shall be secured by this Deed of Trust and by any
other Financing Document. Should the Administrative Agent intend to perform or
cause to be performed such act or take such action or pay such money, the
Administrative Agent shall, subject to the immediately succeeding proviso, prior
-------
to taking any such action notify Grantor of such intention and give Grantor a
reasonable opportunity to take such action; provided, however, if in the
-------- -------
reasonable opinion of the Administrative Agent the giving of such notice and
opportunity to take action would impair the validity or priority of this Deed of
Trust, the rights or interests of the Trustee or the Administrative Agent
hereunder or any rights, titles, liens or security interests created or
evidenced hereby, the Administrative Agent shall have no obligation to give such
notice and opportunity to take action.
ARTICLE III.
Remedies in Event of Default
----------------------------
3.1. Defaults. The term "Default" as used in this Deed of Trust shall
-------- -------
mean the occurrence and continuance of an "Event of Default" as defined in the
----------------
Credit Agreement.
3.2. Acceleration. Upon the occurrence and during the continuance of a
------------
Default, the Administrative Agent shall have the option of declaring all Secured
Indebtedness in its entirety to be immediately due and payable, and the liens
and security interests evidenced hereby shall be subject to foreclosure in any
manner provided for herein or provided for by law as the Administrative Agent
may elect.
3.3. Possession. Upon the occurrence and during the continuance of a
----------
Default, the Administrative Agent is authorized prior or subsequent to the
institution of any foreclosure proceedings to enter upon the Property, or any
part thereof, and to take possession of the
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<PAGE>
Property and of all books, records and accounts relating thereto and to exercise
without interference from Grantor any and all rights which Grantor has with
respect to the management, possession, operation, protection or preservation of
the Property, including the right to rent the same for the account of Grantor
and to deduct from such rents all reasonable costs, expenses and liabilities of
every character incurred by the Administrative Agent in collecting such rents
and in managing, operating, maintaining, protecting or preserving the Property
and to apply the remainder of such rents on the Secured Indebtedness in such
manner as the Administrative Agent may elect. All such costs, expenses and
liabilities incurred by the Administrative Agent in collecting such rents and in
managing, operating, maintaining, protecting or preserving the Property, if not
paid out of rents as hereinabove provided, shall constitute a demand obligation
owing by Grantor and shall bear interest from the date of expenditure until paid
at a rate of interest per annum equal to the lesser of (i) the prime rate of
NationsBank, as announced or published by NationsBank from time to time, plus
2%, or (ii) the highest lawful rate, all of which shall constitute a portion of
the Secured Indebtedness. If necessary to obtain the possession provided for
above, the Administrative Agent may invoke any and all legal remedies to
dispossess Grantor, including specifically one or more actions for forcible
entry and detainer, trespass to try title and restitution. In connection with
any action taken by the Administrative Agent pursuant to this Paragraph 3.3, the
Administrative Agent shall not be liable for any loss sustained by Grantor
resulting from any failure to let the Property, or any part thereof, or from any
other act or omission of the Administrative Agent in managing the Property,
including without limitation, the negligence of the Administrative Agent, unless
such loss is caused by the gross negligence or willful misconduct of the
Administrative Agent, and the Administrative Agent shall not be obligated to
perform or discharge any obligation, duty or liability under any lease agreement
covering the Property or any part thereof or under or by reason of this
instrument or the exercise of rights or remedies hereunder. Should the
Administrative Agent incur any such liability, the amount thereof, including
reasonable costs, expenses and reasonable attorneys' fees, shall be secured
hereby, and Grantor shall reimburse the Administrative Agent therefor
immediately upon demand. Nothing in this Paragraph 3.3 shall impose any duty,
obligation or responsibility upon the Administrative Agent for the control,
care, management or repair of the Property, or shall operate to make the
Administrative Agent responsible or liable for any waste committed on the
Property or by any other parties or for any dangerous or defective condition of
the Property, or for any negligence in the management, upkeep, operation, repair
or control of the Property resulting in loss or injury or death to any tenant,
licensee, employee or stranger, unless such waste, dangerous or defective
condition or injury or death is directly a result of gross negligence or willful
misconduct by the Administrative Agent, and not just the Administrative Agent's
own ordinary negligence. Grantor hereby assents to, ratifies and confirms any
and all actions of the Administrative Agent with respect to the Property taken
under this Paragraph 3.3.
3.4. Foreclosure. Upon the occurrence and during the continuance of a
-----------
Default, the Trustee or his or her successor or substitute is authorized and
empowered and it shall be his or her special duty at the request of the
Administrative Agent to sell the Mortgaged Property, or any part thereof,
situated in the State of Texas at the courthouse of any county in the State of
Texas in which any part of the Mortgaged Property is situated, at public vendue
to the highest
-16-
<PAGE>
bidder for cash at any hour designated between the hours of 10:00 o'clock a.m.
and 4:00 o'clock p.m. on the first Tuesday in any month after having given
notice of such sale in accordance with the statutes of the State of Texas then
in force governing sales of real estate under powers conferred by deed of trust.
Any sale made by the Trustee hereunder may be as an entirety or in such parcels
as the Administrative Agent may request, and any sale may be adjourned by
announcement at the time and place appointed for such sale without further
notice except as may be required by law. The sale by the Trustee of less than
the whole of the Mortgaged Property shall not exhaust the power of sale herein
granted, and the Trustee is specifically empowered to make successive sale or
sales under such power until the whole of the Mortgaged Property shall be sold;
and, if the proceeds of such sale of less than the whole of the Mortgaged
Property shall be less than the aggregate of the Secured Indebtedness and the
expense of executing this trust as provided herein, this Deed of Trust and the
lien hereof shall remain in full force and effect as to the unsold portion of
the Mortgaged Property just as though no sale had been made; provided, however,
that Grantor shall never have any right to require the sale of less than the
whole of the Mortgaged Property but the Administrative Agent shall have the
right, at its sole election, to request the Trustee to sell less than the whole
of the Mortgaged Property. After each sale, the Trustee shall make to the
purchaser or purchasers at such sale good and sufficient conveyances in the name
of Grantor, conveying the Property so sold to the purchaser or purchasers in fee
simple with general warranty of title subject to Permitted Encumbrances, and
shall receive the proceeds of said sale or sales and apply the same as herein
provided. Payment of the purchase price to the Trustee shall satisfy the
obligation of purchaser at such sale therefor, and such purchaser shall not be
responsible for the application thereof. The power of sale granted herein shall
not be exhausted by any sale held hereunder by the Trustee or his or her
substitute or successor, and such power of sale may be exercised from time to
time and as many times as the Administrative Agent may deem necessary until all
of the Mortgaged Property has been duly sold and all Secured Indebtedness has
been fully paid. In the event any sale hereunder is not completed or is
defective in the opinion of the Administrative Agent, such sale shall not
exhaust the power of sale hereunder and the Administrative Agent shall have the
right to cause a subsequent sale or sales to be made hereunder. Any and all
statements of fact or other recitals made in any deed or deeds given by the
Trustee or any successor or substitute appointed hereunder as to nonpayment of
the Secured Indebtedness, or as to the occurrence of any Default, or as to the
Administrative Agent having declared all of such indebtedness to be due and
payable, or as to the request to sell, or as to notice of time, place and terms
of sale and of the properties to be sold having been duly given, or as to the
refusal, failure or inability to act of the Trustee or any substitute or
successor, or as to the appointment of any substitute or successor trustee, or
as to any other act or thing having been duly done by the Administrative Agent
or by such Trustee, substitute or successor, shall be taken as prima facie
evidence of the truth of the facts so stated and recited. The Trustee or his or
her successor or substitute may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by the
Trustee, including the posting of notices and the conduct of sale, but in the
name and on behalf of the Trustee or his or her successor or substitute.
3.5. Judicial Foreclosure. This instrument shall be effective as a mortgage
--------------------
as well as a deed of trust and upon the occurrence and during the continuance of
a Default may be
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<PAGE>
foreclosed as to any of the Property in any manner permitted by the laws of the
State of Texas or of any other state in which any part of the Property is
situated, and any foreclosure suit may be brought by the Trustee or by the
Administrative Agent. In the event a foreclosure hereunder shall be commenced by
the Trustee or his or her substitute or successor, the Administrative Agent may
at any time before the sale of the Property direct the said Trustee to abandon
the sale, and may then institute suit for the collection of the Notes and the
other Secured Indebtedness, and for the foreclosure of this Deed of Trust. It is
agreed that if the Administrative Agent should institute a suit for the
collection of the Notes or any other Secured Indebtedness and for the
foreclosure of this Deed of Trust, the Administrative Agent may at any time
before the entry of a final judgment in said suit dismiss the same, and require
the Trustee or his or her substitute or successor to sell the Property in
accordance with the provisions of this Deed of Trust.
3.6. Receiver. In addition to all other remedies herein provided for,
--------
Grantor agrees that upon the occurrence and during the continuance of a Default,
the Administrative Agent shall as a matter of right be entitled to the
appointment of a receiver or receivers for all or any part of the Property,
whether such receivership be incident to a proposed sale of such Property or
otherwise, and without regard to the value of the Property or the solvency of
any person or persons liable for the payment of the Secured Indebtedness, and
Grantor does hereby consent to the appointment of such receiver or receivers,
waives any and all defenses to such appointment and agrees not to oppose any
application therefor by the Administrative Agent, but nothing herein is to be
construed to deprive the Administrative Agent of any other right, remedy or
privilege it may now or hereafter have under the law to have a receiver
appointed; provided, however, that the appointment of such receiver, trustee or
other appointee by virtue of any court order, statute or regulation shall not
impair or in any manner prejudice the rights of the Administrative Agent to
receive payment of the rents, room rents, deposits for lodging and income from
the Property. Any money advanced by the Administrative Agent in connection with
any such receivership shall be a demand obligation owing by Grantor to the
Administrative Agent and shall bear interest from the date of making such
advancement by the Administrative Agent until paid at a rate of interest per
annum equal to the lesser of (i) the prime rate of NationsBank, as announced or
published by NationsBank from time to time, plus 2%, or (ii) the highest lawful
rate, and shall be secured by this Deed of Trust and by any other instrument
securing the Secured Indebtedness.
3.7. Proceeds of Sale. The proceeds of any sale held by the Trustee or any
----------------
receiver or public officer in foreclosure of the liens evidenced hereby shall be
applied:
first, to the payment of all necessary costs and expenses incident to
-----
such foreclosure sale, including but not limited to all court costs and
charges of every character in the event foreclosed by suit, and a
reasonable fee to the Trustee acting under the provisions of Paragraph 3.4
if foreclosed by power of sale as provided in Paragraph 3.4;
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<PAGE>
second, to the payment in full of the Secured Indebtedness, to be
------
distributed pro rata to each Bank based on the percentage that the amount
of the Secured Indebtedness owing to each Secured Party bears to the total
unpaid amount of the Obligations; and
third, the remainder, if any, shall be paid to Grantor or other party
-----
legally entitled thereto.
3.8. The Administrative Agent as Purchaser. The Administrative Agent shall
-------------------------------------
have the right to become the purchaser at any sale held by any Trustee or
substitute or successor or by any receiver or public officer, and the
Administrative Agent purchasing at such sale shall have the right to credit upon
the amount of the bid made therefor, to the extent necessary to satisfy such
bid, the Secured Indebtedness owing to the Administrative Agent and/or Banks for
the equal and ratable benefit of Banks.
3.9. Uniform Commercial Code.
-----------------------
(a) Upon the occurrence and during the continuance of a Default, the
Administrative Agent may exercise its rights of enforcement with respect to
the Personal Property under the Texas Business and Commerce Code, as
amended from time to time, and in conjunction with, in addition to or in
substitution for those rights and remedies, and all rights and remedies
granted to the Administrative Agent and/or Banks under any Loan Paper
executed by Grantor governing security interests in personal property of
Grantor;
(b) any sale made pursuant to the provisions of this Paragraph 3.9
shall be deemed to have been a public sale conducted in a commercially
reasonable manner if held contemporaneously with the sale of the Mortgaged
Property under power of sale as provided herein upon giving the same notice
with respect to the sale of the Personal Property hereunder as is required
for such sale of the Mortgaged Property under power of sale;
(c) any and all statements of fact or other recitals made in any bill
of sale or assignment or other instrument evidencing any foreclosure sale
hereunder as to nonpayment of the Secured Indebtedness, or as to the
occurrence of any Default, or as to the Administrative Agent and/or Banks
having declared all of such indebtedness to be due and payable, or as to
notice of time, place and terms of sale and of the properties to be sold
having been duly given, or as to any other act or thing having been duly
done by the Administrative Agent and/or Banks, shall be taken as prima
facie evidence of the truth of the facts so stated and recited; and
(d) The Administrative Agent may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any
sale held by the Administrative Agent, including the sending of notices and
the conduct of the sale, but in the name and on behalf of the
Administrative Agent.
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3.10. Partial Foreclosure. In the event of a default in the payment of
-------------------
any part of the Secured Indebtedness, the Administrative Agent shall have the
right to proceed with foreclosure of the liens and security interests evidenced
hereby without declaring the entire Secured Indebtedness due, and in such event
any such foreclosure sale may be made subject to the unmatured part of the
Secured Indebtedness; and any such sale shall not in any manner affect the
unmatured part of the Secured Indebtedness, but as to such unmatured part this
Deed of Trust shall remain in full force and effect just as though no sale had
been made. The proceeds of any such sale shall be applied as provided in
Paragraph 3.7 except that the amount paid under subparagraph second thereof
shall be only the matured portion of the Secured Indebtedness and any proceeds
of such sale in excess of those provided for in subparagraphs first and second
(modified as provided above) shall be applied to installments of principal of
and interest on the Notes in the inverse order of maturity. Several sales may
be made hereunder without exhausting the right of sale for any unmatured part of
the Secured Indebtedness.
3.11. Remedies Cumulative. All remedies herein expressly provided for are
-------------------
cumulative of any and all other remedies existing at law or in equity and are
cumulative of any and all other remedies provided for in any other instrument
securing the payment of the Secured Indebtedness, or any part thereof, or
otherwise benefiting the Trustee, the Administrative Agent and the Banks, and
the Trustee, the Administrative Agent and the Banks shall, in addition to the
remedies herein provided, be entitled to avail themselves of all such other
remedies as may now or hereafter exist at law or in equity for the collection of
the Secured Indebtedness and the enforcement of the covenants herein and the
foreclosure of the liens and security interests evidenced hereby, and the resort
to any remedy provided for hereunder or under any such other instrument or
provided for by law shall not prevent the concurrent or subsequent employment of
any other appropriate remedy or remedies.
3.12. Resort to Any Security. The Administrative Agent may resort to any
----------------------
security given by this Deed of Trust or to any other security now existing or
hereafter given to secure the payment of the Secured Indebtedness, in whole or
in part, and in such portions and in such order as may seem best to the
Administrative Agent in its sole and uncontrolled discretion, and any such
action shall not in anywise be considered as a waiver of any of the rights,
benefits, liens or security interests evidenced by this Deed of Trust.
3.13. Waiver. To the full extent Grantor may do so, Grantor agrees that
------
Grantor will not at any time insist upon, plead, claim or take the benefit or
advantage of any law now or hereafter in force pertaining to the rights and
remedies of sureties or providing for any appraisement, stay, extension or
redemption, and Grantor, for Grantor and Grantor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Property, to the extent permitted by law, hereby
waives and releases all rights of redemption, valuation, appraisement, stay of
execution, notice of intention to mature or declare due the whole of the Secured
Indebtedness and all rights to a marshaling of the assets of Grantor, including
the Property, or to a sale in inverse order of alienation in the event of
foreclosure of the liens and security interests hereby created. Grantor shall
not have or assert any right under any statute or rule of law pertaining to the
marshaling of assets, sale in inverse
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<PAGE>
order of alienation, the exemption of homestead, the administration of estates
of decedents or other matters whatever to defeat, reduce or affect the rights of
the Trustee or the Administrative Agent under the terms of this Deed of Trust to
a sale of the Property for the collection of the Secured Indebtedness without
any prior or different resort for collection, or the rights of the Trustee or
the Administrative Agent under the terms of this Deed of Trust to the payment of
such indebtedness out of the proceeds of sale of the Property in preference to
every other claimant whatsoever. If the Property is sold for an amount less than
the Secured Indebtedness, the deficiency shall be determined by the purchase
price at the sale or sales. To the extent permitted by law, Grantor waives all
rights and claims with respect to Lender's ability to obtain a Deficiency
Judgment under Section 51.003 of the Texas Property Code. If any law referred to
in this Paragraph 3.13 and now in force, of which Grantor or Grantor's
successors and assigns and such other persons claiming any interest in the
Property might take advantage despite this Paragraph 3.13 shall hereafter be
repealed or cease to be in force, such law shall not thereafter be deemed to
preclude the application of this Paragraph 3.13.
3.14. Delivery of Possession After Foreclosure. In the event there is a
----------------------------------------
foreclosure sale hereunder and at the time of such sale Grantor or Grantor's
successors or assigns or any other persons claiming any interest in the Property
by, through or under Grantor are occupying or using the Property, or any part
thereof, each and all shall immediately become the tenant of the purchaser at
such sale, which tenancy shall be a tenancy from day-to-day, terminable at the
will of either landlord or tenant, at a reasonable rental per day based upon the
value of the property occupied, such rental to be due daily to the purchaser.
In the event the tenant fails to surrender possession of said property upon
demand, the purchaser shall be entitled to institute and maintain an action for
forcible entry and detainer of said property in the Justice of the Peace Court
in the Justice Precinct in which such property, or any part thereof, is
situated.
3.15. Tender After Acceleration. If, following the occurrence of a
-------------------------
Default and the acceleration of the Secured Indebtedness but prior to the
foreclosure of this Deed of Trust against the Property, Grantor shall tender to
the Administrative Agent and/or Banks payment of an amount sufficient to pay the
entire Secured Indebtedness, such tender shall be deemed to be a voluntary
prepayment and, consequently, Grantor shall also pay to Banks any charge or
premium required to be paid in order to prepay principal and, if such principal
payment is made during any period when prepayment is prohibited by this Deed of
Trust, or the Financing Documents, the applicable charge or premium shall be the
maximum prepayment penalty provided for in the Financing Documents; provided,
however, that in no event shall any amount payable under this Paragraph 3.15,
when added to the interest otherwise payable on the Secured Indebtedness, exceed
the maximum interest permitted under Applicable Law.
3.16. Insurance Premiums. Upon any foreclosure of the Mortgaged Property
------------------
pursuant to this Deed of Trust, the Administrative Agent shall have the right to
cancel any policy of insurance covering all or any part of the Mortgaged
Property and shall be entitled to receive any unearned premiums from such
policy. The unearned premiums received by the Administrative Agent shall be
applied in the same manner as provided in Paragraph 3.7 above regarding the
application of proceeds of sale of the Mortgaged Property.
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<PAGE>
ARTICLE IV.
Assignment of Rents, Profits, Income,
-------------------------------------
Contracts and Bonds
-------------------
4.1. Assignment. Grantor does hereby absolutely and unconditionally assign,
transfer and set over to the Administrative Agent all rents, income, profits and
proceeds to be derived from the Property, including without limitation the
immediate and continuing right to collect and receive all of the rents, income,
receipts, revenues, issues, profits and other sums of money that may now or at
any time hereafter become due and payable to Grantor under the terms of any
present or future leases now or hereafter covering the Property, or any part
thereof, including but not limited to minimum rents, additional rents,
percentage rents, deficiency rents and liquidated damages following default, all
proceeds payable under any policy of insurance covering the loss of rents
resulting from untenantability caused by destruction or damage to the Property,
and liens and rights, whether constitutional, statutory, contractual or
otherwise, in favor of Grantor as the lessor of any of the Property, and all of
Grantor's rights to recover monetary amounts from any lessee in bankruptcy
including, without limitation, rights of recovery for use and occupancy and
damage claims arising out of lease defaults, including rejections, under the
Bankruptcy Reform Act of 1978, as amended, or any other present or future
federal or state insolvency, bankruptcy or similar law (all of the foregoing
hereinafter collectively called "Applicable Bankruptcy Law"), together with any
-------------------------
sums of money that may now or at any time hereafter become due and payable to
Grantor by virtue of any and all royalties, overriding royalties, bonuses, delay
rentals and any other amount of any kind or character arising under any and all
present and future oil, gas and mining leases covering the Property, or any part
thereof; and all proceeds and other amounts paid or owing to Grantor under or
pursuant to any and all contracts and bonds relating to the construction,
erection or renovation of the Property, or any part thereof; subject however to
a license hereby granted by the Administrative Agent to Grantor to collect and
receive and expend all of the foregoing, subject to the terms and conditions
hereof. Upon the occurrence and continuance of any Default, the Administrative
Agent shall have the right, power and privilege (but shall be under no duty) to
terminate such license whereupon the Administrative Agent shall have the right
and authority, whether or not it takes possession of the Property, to seek
enforcement of any such lease, contract or bond and to demand, collect, receive,
sue for and recover in its own name any and all of the above described amounts
assigned hereby and to apply the sum(s) collected, first to the payment of
reasonable expenses incident to the collection of the same, second to the
payment of the Secured Indebtedness, and the balance, if any, to Grantor or
other party legally entitled thereto; provided, however, that the Administrative
Agent shall not be deemed to have taken possession of the Property except on the
exercise of its option to do so, evidenced by its demand and overt act for such
purpose. Grantor shall make no assignment or other disposition of the above
described amounts assigned hereby, nor, unless permitted under the Credit
Agreement, shall Grantor cancel or amend any such lease, contract, bond or any
other instrument under which such amounts are to be paid or waive, excuse,
condone, discount, set off, compromise or in any manner release any obligation
thereunder, nor shall Grantor receive or collect any such amount thus assigned
for a period of more than one month in advance of the
-22-
<PAGE>
date on which payment thereof is due and Grantor shall duly and punctually
observe and perform every obligation to be performed by it under each such
lease, contract, bond or other instrument and shall not do or permit to be done
anything to impair the security thereof and shall enforce, to the extent such
enforcement would be reasonably prudent under the circumstances, every
obligation of each other party thereto. The assignment contained in this
Paragraph 4.1. shall become null and void upon the release of this Deed of
Trust. It shall never be necessary for the Administrative Agent to institute
legal proceedings of any kind whatsoever to enforce the provisions of this
Paragraph 4.1.
ARTICLE V.
Hazardous Materials
-------------------
5.1. Definitions. For the purpose of this Deed of Trust, Grantor, the
-----------
Administrative Agent and Trustee agree that, unless the context otherwise
specifies or requires, the following terms shall have the meaning specified
below:
(a) "Hazardous Materials" shall mean (a) any "hazardous waste" as
-------------------
defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.), as amended from time to time, and regulations
promulgated thereunder; (b) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. Section 9601 et seq.) ("CERCLA"), as amended from time to
------
time, and regulations promulgated thereunder; (c) asbestos; (d)
polychlorinated biphenyls; (e) underground storage tanks, whether empty,
filled or partially filled with any substance, (f) any substance the
presence of which on the Mortgaged Property is prohibited by any
Governmental Requirements (as defined below); and (g) any other substance
which by any Governmental Requirements requires special handling or
notification of any federal, state or local governmental entity in its
collection, storage, treatment, or disposal.
(b) "Hazardous Materials Contamination" shall mean the contamination
---------------------------------
(whether presently existing or hereafter occurring) of the buildings,
facilities, soil, groundwater, air or other elements on or of the Mortgaged
Property by Hazardous Materials, or the contamination of the buildings,
facilities, soil, groundwater, air or other elements on or of any other
property as a result of Hazardous Materials at any time (whether before or
after the date of this Deed of Trust) emanating from the Mortgaged
Property.
(c) "Governmental Requirements" shall mean all laws, ordinances,
-------------------------
rules, and regulations of any Governmental Authority (as defined below)
applicable to Grantor or the Mortgaged Property.
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<PAGE>
(d) "Governmental Authority" shall mean the United States, the state,
----------------------
county, city, or any other political subdivision in which the Mortgaged
Property is located, and any other political subdivision, agency, or
instrumentality exercising jurisdiction over Grantor or the Mortgaged
Property.
5.2. Grantor's Warranties. Grantor hereby represents and warrants that:
--------------------
(a) To the best of Grantor's knowledge after reasonable
investigation, no Hazardous Materials have been collected, stored, treated
or disposed of in a manner which violates Applicable Law and no Hazardous
Materials which would have a Material Adverse Effect are now located on the
Mortgaged Property and neither Grantor nor, to the best of Grantor's actual
knowledge and belief, any other person has ever caused or permitted any
Hazardous Materials which would have a Material Adverse Effect to be
placed, held, located or disposed of on, under or at the Mortgaged
Property, or any part thereof;
(b) To the best of Grantor's knowledge after reasonable
investigation, no part of the Mortgaged Property is being used nor, to the
best of Grantor's actual knowledge and belief, has been used at any
previous time for the disposal, storage, treatment, processing or other
handling of Hazardous Materials the effect of which would have a Material
Adverse Effect, nor is any part of the Mortgaged Property affected by any
Hazardous Materials Contamination which would have a Material Adverse
Effect;
(c) To the best of Grantor's actual knowledge and belief, no property
adjoining the Mortgaged Property is being used, or has ever been used at
any previous time for the disposal, storage, treatment, processing or other
handling of Hazardous Materials which would have a Material Adverse Effect
nor is any other property adjoining the Mortgaged Property affected by
Hazardous Materials Contamination which would have a Material Adverse
Effect.
5.3. Grantor's Covenants. Grantor agrees to (a) give notice to the
-------------------
Administrative Agent promptly upon Grantor's acquiring knowledge of the presence
of any Hazardous Materials which would have a Material Adverse Effect on the
Mortgaged Property or of any Hazardous Materials Contamination which would have
a Material Adverse Effect with a full description thereof; (b) promptly comply
with any Governmental Requirements requiring the removal, treatment or disposal
of such Hazardous Materials or Hazardous Materials Contamination and provide the
Administrative Agent with reasonably satisfactory evidence of such compliance;
and (c) provide the Administrative Agent within thirty (30) days after demand by
the Administrative Agent, with a bond, letter of credit or similar financial
assurance evidencing to the Administrative Agent's reasonable satisfaction that
the necessary funds are available to pay the cost of removing, treating and
disposing of such Hazardous Materials or Hazardous Materials Contamination and
discharging any assessments which may be established on the Mortgaged Property
as a result thereof.
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<PAGE>
5.4. Site Assessments. Grantor will permit the Administrative Agent (by
----------------
its officers, employees and agents) at any time and from time to time to
contract for the services of persons (the "Site Reviewers") to perform
--------------
environmental site assessments (the "Site Assessments") on any Mortgaged
----------------
Property for the purpose of determining whether there exists on such Mortgaged
Property any environmental condition which could reasonably be expected to
result in any liability, cost or expense to the owner, occupier or operator of
such Mortgaged Property arising under any Governmental Requirements relating to
Hazardous Materials. The Site Assessments may be performed at any time or
times, upon reasonable notice, and under reasonable conditions established by
Grantor which do not impede the performance of the Site Assessments. The Site
Reviewers are hereby authorized to enter upon any Mortgaged Property for such
purposes. The Site Reviewers are further authorized to perform both above and
below the ground testing for environmental damage or the presence of Hazardous
Materials on any Mortgaged Property and such other tests on any Mortgaged
Property as may be necessary to conduct the Site Assessments in the reasonable
opinion of the Site Reviewers. Grantor will supply to the Site Reviewers such
historical and operational information regarding any Mortgaged Property as may
be reasonably requested by the Site Reviewers to facilitate the Site Assessments
and will make available for meeting with the Site Reviewers appropriate
personnel having knowledge of such matters. The costs of performing such Site
Assessments prior to the occurrence of a Default or Event of Default shall be
paid by the Administrative Agent. The reasonable cost of performing such Site
Assessments after the occurrence and during the continuance of a Default or
Event of Default shall be paid by Grantor upon demand of the Administrative
Agent and any such expenses borne by the Administrative Agent and not
immediately reimbursed by Grantor shall be secured by this Deed of Trust.
5.5. Indemnification. Regardless of whether any Site Assessments are
---------------
conducted hereunder, if any Default or Event of Default shall have occurred and
be continuing or any remedies in respect of any Mortgaged Property are exercised
by the Administrative Agent or any Bank, Grantor shall defend, indemnify and
hold harmless the Administrative Agent and Banks from any and all liabilities
(including strict liability), actions, demands, penalties, losses, costs or
expenses (including, without limitation, attorneys' fees and expenses, and
remedial costs), suits, costs of any settlement or judgment and claims of any
and every kind whatsoever which may now or in the future (whether before or
after the release of this Deed of Trust) be paid, incurred or suffered by or
asserted against the Administrative Agent or Banks by any person or entity or
governmental agency for, with respect to, or as a direct or indirect result of,
the presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission or release from any Mortgaged Property of any Hazardous Materials or
any Hazardous Materials Contamination or arise out of or result from the
environmental condition of any Mortgaged Property or the applicability of any
Governmental Requirements relating to Hazardous Materials (including, without
limitation, CERCLA or any federal, state or local so-called "superfund" or
"superlien" laws, or any code, rule, regulation, order or decree promulgated
thereunder); provided, however, the indemnity provided above shall not apply to
any liabilities, actions, demands, penalties, losses, costs or expenses, suits,
costs of any settlement or judgment and claims of any and every kind whatsoever
which are determined in a final, non-appealable judgment by a court of competent
jurisdiction to have been (i) caused by or within the control
-25-
<PAGE>
of the Administrative Agent and/or Banks as a result of actions in their
capacities as beneficiaries of this Deed of Trust and not as a result of any
determination in such judgment or otherwise that any covenants, conditions or
provisions in any of the Loan Documents give or purport to give control over
Grantor or any of the Mortgaged Property or (ii) the result of an event that
occurs after foreclosure of the Mortgaged Property (or any portion thereof) or
the taking of a deed in lieu of foreclosure covering the Mortgaged Property (or
any portion thereof), unless such event occurs as a result of or arises out of a
Hazardous Materials Contamination or an environmental condition of the Mortgaged
Property that occurred or existed prior to such foreclosure or such taking of a
deed in lieu of foreclosure. The covenants, warranties and indemnifications
contained in this Section 5.5 shall survive the release of this Deed of Trust
and termination of the Credit Agreement. For the purposes of this Section 5.5,
the term "Administrative Agent" and "Banks" shall include all subsequent owners
or holders of any obligations secured by this Deed of Trust, all directors,
officers, employees and agents of such entity and any persons or entities owned
or controlled by or affiliated with the Administrative Agent or any Bank, and
their respective directors, officers, employees and agents.
ARTICLE VI.
Miscellaneous
-------------
6.1. Release. If all of the Secured Indebtedness be finally and fully paid,
-------
the Property shall become wholly clear of the liens, security interests,
conveyances and assignments evidenced hereby, which shall be released by the
Administrative Agent at Grantor's cost.
6.2. Successor Trustee. The Trustee may resign by an instrument in writing
-----------------
addressed to the Administrative Agent, or the Trustee may be removed at any time
with or without cause by an instrument in writing executed by the Administrative
Agent. In case of the death, resignation, removal or disqualification of the
Trustee or if for any reason the Administrative Agent shall deem it desirable to
appoint a substitute or successor trustee to act instead of the herein named
trustee or any substitute or successor trustee, then the Administrative Agent
shall have the right and hereby is authorized and empowered to appoint a
successor trustee, or a substitute trustee, without other formality than
appointment and designation in writing executed by the Administrative Agent and
the authority hereby conferred shall extend to the appointment of other
successor and substitute trustees successively until the Secured Indebtedness
finally has been paid in full or until the Property is sold hereunder. If the
Administrative Agent is a corporation and such appointment is executed in its
behalf by an officer of such corporation, such appointment shall be conclusively
presumed to be executed with authority and shall be valid and sufficient without
proof of any action by the board of directors or any superior officer of the
corporation. Upon the making of any such appointment and designation, all of the
estate and title of the Trustee in the Property shall vest in the named
successor or substitute trustee and thereupon he shall succeed to and shall
hold, possess and execute all the rights, powers, privileges, immunities and
duties herein conferred upon the Trustee; but, nevertheless, upon the written
request of the Administrative Agent or of the successor or substitute Trustee,
the Trustee ceasing to act shall execute and deliver an instrument transferring
to such successor or substitute
-26-
<PAGE>
Trustee all of the estate and title in the Property of the Trustee so ceasing to
act, together with all the rights, powers, privileges, immunities and duties
herein conferred upon the Trustee, and shall assign, transfer and deliver any of
the properties and moneys held by said Trustee hereunder to said successor or
substitute Trustee. All references herein to the Trustee shall be deemed to
refer to the Trustee (including any successor or substitute appointed and
designated as herein provided) from time to time acting hereunder. Grantor
hereby ratifies and confirms any and all acts which the herein named Trustee or
her successor or successors, substitute or substitutes, in this trust, lawfully
shall do by virtue hereof.
6.3. Liability and Indemnification of Trustee. The Trustee shall not be
----------------------------------------
liable for any error of judgment or act done by the Trustee in good faith, or be
otherwise responsible or accountable under any circumstances whatsoever, except
for the Trustee's gross negligence or willful misconduct. The Trustee shall have
the right to rely on any instrument, document or signature authorizing or
supporting any action taken or proposed to be taken by him or her hereunder,
believed by him or her in good faith to be genuine. All moneys received by the
Trustee, until used or applied as herein provided, shall be held in trust for
the purposes for which they were received, but need not be segregated in any
manner from any other moneys (except to the extent required by law), and the
Trustee shall be under no liability for interest on any monies received by him
or her hereunder. Grantor will reimburse the Trustee for, and indemnify and save
harmless him or her against, any and all liability and expenses which reasonably
may be incurred by him or her in the performance of his or her duties hereunder.
The foregoing indemnity shall not terminate upon release, foreclosure or other
termination of this Deed of Trust.
6.4. Waiver by the Administrative Agent. The Administrative Agent may at
----------------------------------
any time and from time to time in writing (a) waive compliance by Grantor with
any covenant herein made by Grantor to the extent and in the manner specified in
such writing; (b) consent to Grantor doing any act which Grantor hereunder is
prohibited from doing, or consent to Grantor failing to do any act which Grantor
hereunder is required to do, to the extent and in the manner specified in such
writing; (c) release any part of the Property, or any interest therein, from the
lien and security interest of this Deed of Trust without the joinder of the
Trustee, or (d) release any party liable, either directly or indirectly, for the
Secured Indebtedness or for any covenant herein or in any other instrument now
or hereafter securing the payment of the Secured Indebtedness, without impairing
or releasing the liability of any other party. No such act shall in any way
impair the rights of the Administrative Agent hereunder except to the extent
specifically agreed to by the Administrative Agent in such writing.
6.5. Actions by the Administrative Agent. The lien, security interest and
-----------------------------------
other security rights of the Administrative Agent and Banks hereunder shall not
be impaired by any indulgence, moratorium or release granted by the
Administrative Agent (except as provided in Section 6.1), including but not
limited to (a) any renewal, extension, increase or modification which the
Administrative Agent or any Bank may grant with respect to any Secured
Indebtedness, (b) any surrender, compromise, release, renewal, extension,
exchange or substitution which the Administrative Agent or any Bank may grant in
respect of the Property,
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<PAGE>
or any part thereof or any interest therein (except to the extent specifically
surrendered, compromised, released, renewed, extended, exchanged or
substituted), or (c) any release or indulgence granted to any endorser,
guarantor or surety of any Secured Indebtedness. The taking of additional
security by the Administrative Agent or any Bank shall not release or impair the
lien, security interest or other security rights of the Administrative Agent
hereunder or affect the liability of Grantor or of any endorser or guarantor or
other surety or improve the right of any permitted junior lienholder in the
Property.
6.6. Rights of the Administrative Agent. The Administrative Agent may waive
----------------------------------
any Default or other default without waiving any other prior or subsequent
Default or other default. the Administrative Agent may remedy any Default or
other default without waiving the Default or other default remedied. Neither the
failure by the Administrative Agent to exercise, nor the delay by the
Administrative Agent in exercising, any right, power or remedy upon any Default
or other default shall be construed as a waiver of such Default or other default
or as a waiver of the right to exercise any such right, power or remedy at a
later date. No single or partial exercise by the Administrative Agent of any
right, power or remedy hereunder shall exhaust the same or shall preclude any
other or further exercise thereof, and every such right, power or remedy
hereunder may be exercised at any time and from time to time. No modification or
waiver of any provision hereof or consent to any departure by Grantor therefrom
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent, and then such waiver or consent shall be effective
only in the specific instances, for the purpose for which given and to the
extent therein specified. No notice to or demand on Grantor in any case shall of
itself entitle Grantor to any other or further notice or demand in similar or
other circumstances. Acceptance by the Administrative Agent of any payment in an
amount less than the amount then due on any Secured Indebtedness shall be deemed
an acceptance on account only and shall not in any way affect the existence of a
Default or other default hereunder.
6.7. Reproduction as Financing Statement. A carbon, photographic or other
-----------------------------------
reproduction of this Deed of Trust or of any financing statement relating to
this Deed of Trust shall be sufficient as a financing statement.
6.8. Fixture Filing. This Deed of Trust shall be effective as a financing
--------------
statement filed as a fixture filing with respect to all fixtures included within
the Property and is to be filed for record in the real property records of the
county where the Property (including said fixtures) is situated. This Deed of
Trust shall also be effective as a financing statement covering minerals or the
like (including oil and gas) and accounts subject to Section 9.103(e) of the
Texas Business and Commerce Code, as amended, and is to be filed for record in
the real property records of the county where the Property is situated. The
mailing address of Grantor is set forth below the signature of Grantor to this
Deed of Trust and the address of the Administrative Agent from which information
concerning the security interest may be obtained is 901 Main Street, Suite 6700,
Dallas, Texas 75202. Grantor does have an interest of record in the Mortgaged
Property.
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<PAGE>
6.9. Filing and Recordation. Grantor will cause this Deed of Trust and all
----------------------
amendments and supplements thereto and substitutions therefor and all financing
statements and continuation statements relating hereto to be recorded, filed,
re-recorded and refiled in such manner and in such places as the Trustee or the
Administrative Agent shall reasonably request, and will pay all such recording,
filing, re-recording and refiling taxes, fees and other charges.
6.10. Dealing with Successor. In the event the ownership of the Property or
----------------------
any part thereof becomes vested in a person other than Grantor, the
Administrative Agent may, without notice to Grantor, deal with such successor or
successors in interest with reference to this Deed of Trust and to the Secured
Indebtedness in the same manner as with Grantor, without in any way vitiating or
discharging Grantor's liability hereunder or for the payment of the Secured
Indebtedness. No sale of the Property, no forbearance on the part of the
Administrative Agent or any Bank and no extension of the time for the payment of
any of the Secured Indebtedness given by the Administrative Agent or any Bank
shall operate to release, discharge, modify, change or affect, in whole or in
part, the liability of Grantor hereunder or for the payment of the Secured
Indebtedness or the liability of any other person hereunder or for the payment
of the Secured Indebtedness, except to the extent proceeds of any such sale are
applied as provided in Paragraph 3.7.
6.11. Place of Payment. All Secured Indebtedness which may be owing
----------------
hereunder at any time by Grantor shall be payable at the place designated in the
Financing Documents, or if no such designation is made, at the office of the
Administrative Agent at the address indicated in this Deed of Trust, or at such
other place in the continental United States as the Administrative Agent may
designate in writing.
6.12. Subrogation. To the extent that proceeds of the Secured Indebtedness
-----------
are used to pay indebtedness secured by any outstanding lien, security interest,
charge or prior encumbrance against the Property, such proceeds have been
advanced by Banks at Grantor's request and Banks shall be subrogated to any and
all rights, security interests and liens owned or held by any owner or holder of
such outstanding liens, security interests, charges or encumbrances,
irrespective of whether said liens, security interests, charges or encumbrances
are released; provided, however, that the terms and provisions of this Deed of
Trust shall govern the rights and remedies of Banks and shall supersede the
terms, provisions, rights and remedies under and pursuant to the instruments
creating the lien or liens to which Banks are subrogated hereunder.
6.13. Application of Indebtedness. If any part of the Secured Indebtedness
---------------------------
cannot be lawfully secured by this Deed of Trust or if any part of the Property
cannot be lawfully subject to the lien and security interest hereof to the full
extent of such indebtedness, then all payments made shall be applied on said
indebtedness first in discharge of that portion thereof which is unsecured by
this Deed of Trust.
6.14. Usury. It is the intent of the Administrative Agent, the Banks and
-----
Grantor in the execution of the Credit Agreement, this Deed of Trust, the other
Financing Documents and all
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<PAGE>
other instruments now or hereafter securing the Secured Indebtedness or executed
in connection therewith or under any other written or oral agreement by the
undersigned in favor of the Administrative Agent and/or Banks to contract in
strict compliance with applicable usury law. In furtherance thereof, the
Administrative Agent, Banks and Grantor stipulate and agree that none of the
terms and provisions contained in the Credit Agreement, this Deed of Trust, the
other Financing Documents or any other instrument securing the Notes or executed
in connection herewith, or in any other written or oral agreement by Grantor in
favor of Banks and/or the Administrative Agent, shall ever be construed to
create a contract to pay for the use, forbearance or detention of money,
interest at a rate in excess of the maximum interest rate permitted to be
charged by applicable law. Neither Grantor nor any guarantors, endorsers,
sureties or other parties now or hereafter becoming liable for the Secured
Indebtedness or any part thereof shall ever be required to pay interest on
secured indebtedness or arising under any instrument securing the Secured
Indebtedness or under any of the other Financing Documents, or in any other
written or oral agreement by Grantor in favor of Banks and/or the Administrative
Agent, at a rate in excess of the maximum interest that may be lawfully charged
under applicable law, and the provisions of this Paragraph 6.14 shall control
over all other provisions of the Credit Agreement, this Deed of Trust, the other
Financing Documents and any other instruments now or hereafter securing the
Secured Indebtedness or executed in connection herewith or any other oral or
written agreements which may be in apparent conflict herewith. All interest paid
or agreed to be paid to Banks and/or the Administrative Agent shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full period until payment in full of the principal of the Secured
Indebtedness so that the interest thereon for such full period shall not exceed
the maximum amount permitted by applicable law. Banks and/or the Administrative
Agent expressly disavow any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of the Secured
Indebtedness is accelerated. If the maturity of the Secured Indebtedness shall
be accelerated for any reason or if the principal of the Secured Indebtedness is
paid prior to the end of the term of the Secured Indebtedness, and as a result
thereof the interest received for the actual period of existence of the loan
evidenced by the Secured Indebtedness exceeds the applicable maximum lawful
rate, Banks and/or the Administrative Agent shall refund to Grantor the amount
of such excess or shall credit the amount of such excess against the principal
balance of the Secured Indebtedness then outstanding. In the event that Banks
and/or the Administrative Agent shall collect monies and/or any other thing of
value which are deemed to constitute interest which would increase the effective
interest rate on the Secured Indebtedness to a rate in excess of that permitted
to be charged by applicable law, an amount equal to interest in excess of the
lawful rate shall, upon such determination, at the option of Banks and/or the
Administrative Agent, be either immediately returned to Grantor or credited
against the principal balance of the other Secured Indebtedness, without further
penalty to such holder. By execution of this Deed of Trust, Grantor acknowledges
that it believes the loan to be non-usurious and agrees that if, at any time,
Grantor should have reason to believe that such loan is in fact usurious, it
will give Banks and/or the Administrative Agent notice of such condition, and
Grantor agrees that Banks and/or the Administrative Agent shall have 90 days
after receipt of such notice in which to make appropriate refund or other
adjustment in order to correct such condition if in fact such condition exists.
As used in this Paragraph 6.14, "interest" means any sum that must be treated as
interest
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<PAGE>
under applicable law in determining whether a loan is usurious. THE TERM
"APPLICABLE LAW" AS USED IN THIS PARAGRAPH 6.14 SHALL MEAN THE LAWS OF THE STATE
OF TEXAS OR THE LAWS OF THE UNITED STATES, WHICHEVER LAWS ALLOW THE GREATER RATE
OF INTEREST, AS SUCH LAWS NOW EXIST OR MAY BE CHANGED OR AMENDED OR COME INTO
EFFECT IN THE FUTURE.
6.15. Notice. Any notice, request, demand or other communication required
-------
or permitted hereunder, or under the Loan Documents, or under any other
instrument securing the payment of the Loan Documents (unless otherwise
expressly provided therein) shall be given in writing by (a) personal delivery,
or (b) United States Mail, postage prepaid, certified mail, return receipt
requested, sent to the intended addressee at the address shown in Section
10.1(a) of the Credit Agreement, or to such different address as the addressee
shall have designated by written notice sent in accordance with Section 10.1(b)
of the Credit Agreement, and shall be deemed to have been given and received as
provided in Section 10.1(a) of the Credit Agreement, provided that service of a
notice required by Texas Property Code Section 51.002 shall be considered
complete when the requirements of that statute are met.
6.16. Successors and Assigns. The terms, provisions, covenants and
----------------------
conditions hereof shall be binding upon Grantor, and the representatives,
successors and assigns of Grantor including all successors in interest of
Grantor in and to all or any part of the Property, and shall inure to the
benefit of the Trustee, the Administrative Agent and the Banks, and their
respective heirs, successors, substitutes and assigns and shall constitute
covenants running with the land. All references in this Deed of Trust to
Grantor, Trustee, the Administrative Agent or the Banks shall be deemed to
include all such heirs, devisees, representatives, successors, substitutes and
assigns.
6.17. Severability. A determination that any provision of this Deed of
------------
Trust is unenforceable or invalid shall not affect the enforceability or
validity of any other provision and any determination that the application of
any provision of this Deed of Trust to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of such provision
as it may apply to any other persons or circumstances.
6.18. Gender and Number. Within this Deed of Trust, words of any gender
-----------------
shall be held and construed to include any other gender, and words in the
singular and plural number shall be held and construed to include the other
number, unless the context otherwise requires.
6.19. Counterparts. This Deed of Trust may be executed in any number of
------------
counterparts with the same effect as if all parties hereto had signed the same
document. All such counterparts shall be construed together and shall constitute
one instrument.
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<PAGE>
6.20. Reporting Requirements. Grantor agrees to comply with any and all
----------------------
reporting requirements applicable to the transaction secured by this Deed of
Trust which are set forth in any law, statute, ordinance, rule, regulation,
order or determination of any governmental authority, and further agrees upon
request of the Administrative Agent to furnish the Administrative Agent with
evidence of such compliance.
6.21. Headings. The paragraph headings contained in this Deed of Trust are
--------
for convenience only and shall in no way enlarge or limit the scope or meaning
of the various and several paragraphs hereof.
6.22. Consent of the Administrative Agent. Except where otherwise provided
-----------------------------------
herein or in any of the other Loan Documents, in any instance hereunder where
the approval, consent or the exercise of judgment of the Administrative Agent is
required, the granting or denial of such approval or consent and the exercise of
such judgment shall be within the sole discretion of the Administrative Agent,
and the Administrative Agent shall not, for any reason or to any extent, be
required to grant such approval or consent or exercise such judgment in any
particular manner, regardless of the reasonableness of either the request or the
Administrative Agent's judgment.
6.23. Modification or Termination. The Financing Documents may only be
---------------------------
modified or terminated by a written instrument or instruments executed by the
party against whom enforcement of the modification or termination is asserted.
Any alleged modification or termination which is not so documented shall not be
effective as to any party.
6.24. ENTIRE AGREEMENT. THIS DEED OF TRUST, TOGETHER WITH THE CREDIT
----------------
AGREEMENT, AND ALL OTHER LOAN DOCUMENTS (ALL AS IN EFFECT ON THE DATE HEREOF AND
AS THE SAME MAY BE HEREAFTER FROM TIME TO TIME) REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
6.25. GOVERNING LAW. THIS DEED OF TRUST SHALL BE CONSTRUED, INTERPRETED,
-------------
ENFORCED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
AND THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN SUCH STATE.
-32-
<PAGE>
IN WITNESS WHEREOF, Grantor has executed this Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Financing Statement as of
the 27th day of September, 1996.
COMPUCOM SYSTEMS, INC. a Delaware
corporation
By: /s/ Robert J. Boutin
--------------------
Name: Robert J. Boutin
Title: Senior Vice President, Finance
and Chief Financial Officer
Address: 10100 N. Central Expressway
Dallas, Texas 75231
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<PAGE>
EXHIBIT 10.8
FOREST PARK CORPORATE CENTER
1225 FOREST PARKWAY
STANDARD
LEASE AGREEMENT
<PAGE>
STANDARD COMMERCIAL LEASE AGREEMENT 1225 Forest Parkway
(BUILDING TO BE CONSTRUCTED) 84 Suite 200
Paulsboro, New Jersey 08066
298,523 (approximate) square feet
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between RIGGS BANK,
N.A., formerly known as THE RIGGS NATIONAL BANK OF WASHINGTON, D.C., as Trustee
for the Multi-Employer Property Trust, a Trust created under the authority of 12
CFR Section 9.18, having an address at 800 17th Street, N.W., Washington, D.C.
20006, hereinafter referred to as "Landlord", and COMPUCOM SYSTEMS, INC., a
Delaware corporation having an address at 10100 North Central Expressway,
Dallas, TX 75231, hereinafter referred to as "Tenant".
W I T N E S S E T H
1. PREMISES AND TERM. In consideration of the obligation of Tenant
to pay rent as herein provided, and in consideration of the other terms,
provisions and covenants hereof, Landlord hereby demises and leases to Tenant,
and Tenant hereby takes from Landlord certain premises situated within the
County of Gloucester, State of New Jersey, more particularly described on
EXHIBIT "A" attached hereto and incorporated herein by reference, together with
all rights, privileges, easements, appurtenances, and immunities belonging to or
in any way pertaining to the premises and together with the buildings and other
improvements situated or to be situated upon said premises (said real property,
building and improvements being hereinafter referred to as the "premises").
TO HAVE AND TO HOLD the same for a term commencing on the "commencement
date", as hereinafter defined, and ending sixty (60) months thereafter,
provided, however, that, in the event the "commencement date", is a date other
than the first day of a calendar month, said term shall extend for said number
of months in addition to the remainder of the calendar month following the
"commencement date".
The "commencement date" shall be thirty (30) days after the date upon
which the building and other improvements erected and to be erected upon the
premises shall have been substantially completed in accordance with the PLANS
AND SPECIFICATIONS and Landlord has procured a Certificate of Occupancy for the
Premises, whether Temporary or Permanent, authorizing occupancy of the Premises
for all of the uses contemplated by this Lease. Landlord shall not, however,
have any responsibility for obtaining a Certificate of Occupancy for any
improvements installed or to be installed in the Premises by Tenant. The Plans
and Specifications for improvement of the Premises (sometimes hereinafter
referred to as the "Plans and Specifications") shall be prepared by Landlord and
approved by Tenant as provided in Paragraph 31 hereof. Landlord shall notify
Tenant in writing at least three (3) days prior to the date Landlord expects
said building and other improvements to be completed and ready for occupancy as
aforesaid. Taking of possession by Tenant shall be deemed conclusive to
establish that said buildings and other improvements have been completed in
accordance with the plans and specifications and that the premises are in good
and satisfactory condition, as of when possession was so taken, subject to
Landlord's completion of punchlist items as provided in Paragraph 31 hereof.
Tenant acknowledges that no representations as to the condition of the premises
have been made by Landlord, unless such are expressly set forth in this lease.
After such "commencement date" Landlord and Tenant shall execute and deliver a
letter agreement confirming the completion of the premises and the commencement
date of this lease. In the event of any dispute as to substantial completion of
work performed or required to be performed by Landlord, the certificate of
Landlord's architect shall be conclusive.
Landlord shall use good faith efforts to cause construction of the
Premises to proceed expeditiously in accordance with Paragraph 31 hereof. For
purposes of determining the date of substantial completion for any portion of
the Premises, there shall not be considered the duration of delay (as determined
by Landlord's architect) which is caused by: (i) changes in Landlord's work
which have been requested by Tenant after the approval by Landlord and Tenant of
the Tenant Plans; (ii) force majeure delays including but not limited to delays
caused by labor disputes, fire or other casualty, or availability of materials
through regular sources of supply; (iii) any failure by Tenant, without regard
to any grace period that may be applicable thereto, to furnish any required
plan, information, approval or consent (including without limitation the Tenant
Plans) within the required period of time, or to fully and
<PAGE>
completely cooperate with Landlord in the preparation of the Tenant Plans; or
(iv) the performance of any work or activity in the Premises by Tenant or any of
its employees, agents or contractors, including without limitation the
installation of racking or trade fixtures. Delays in the completion of
construction due to any of the foregoing are referred to herein as "Permitted
Delays."
"Landlord and Tenant do further agree that all obligations and
privileges, covenants and conditions contained in and under this lease agreement
shall be in full force and effect to the extent that same shall apply whether
the subject premise is ever occupied by Tenant or not. And, in the event that
Tenant fails to occupy the subject premise for any reason after the same is
substantially completed in accordance with the Plans and Specifications
aforestated, or in the event that Tenant, whether constructively or actually
prevents Landlord from constructing the improvements contemplated herein and by
the said Plans and Specifications, Tenant does further agree that the Lease will
commence, in all things, on the "commencement date" as defined hereinabove or on
the date the improvements would reasonably have been completed if Tenant had not
prevented Landlord from constructing the same."
2. BASE RENT, ADJUSTMENT THEREOF AND SECURITY DEPOSIT.
A. Tenant agrees to pay to Landlord rent for the premises, in advance,
without demand, deduction or set off, for the entire term hereof at the rate of
One Hundred Five Thousand Seven Hundred Twenty Six Dollars and Eighty Nine Cents
- --------------------------------------------------------------------------------
($105,726.89) per month. One such monthly installment shall be due and payable
-----------
on the date hereof and a like monthly installment shall be due and payable on or
before the first day of each calendar month succeeding the commencement date
recited above during the hereby demised term, except that the rental payment for
any fractional calendar month at the commencement or end of the lease period
shall be prorated.
B. In addition, Tenant agrees to deposit with Landlord on the date
hereof the sum of One Hundred Ten Thousand Dollars ($110,000), which sum shall
-------------------------------- -------
be held by Landlord, as security for the performance of Tenant's covenants and
obligations under this lease, it being expressly understood and agreed that such
deposit is not an advance rental deposit or a measure of Landlord's damages in
case of Tenant's default. If Tenant provides Landlord with Tenant's taxpayer
identification number and completes such confirmation forms as Landlord's bank
may require, Landlord will hold the security deposit in a separate interest
bearing account, with interest to accrue and be held and applied as part of the
principal of such security deposit. Upon the occurrence of any event of default
by Tenant, Landlord may, from time to time, without prejudice to any other
remedy provided herein or provided by law, use such fund to the extent necessary
to make good any arrears of rent or other payments due Landlord hereunder, and
any other damage, injury, expense or liability caused by such event of default;
and Tenant shall pay to Landlord on demand the amount so applied in order to
restore the security deposit to its original amount. Tenant shall not assign,
pledge or otherwise encumber the security deposit. Provided that Tenant is not
then in default hereunder, on the third anniversary of the commencement date
Landlord shall return the security deposit, together with the interest thereon,
to Tenant.
3. USE. The premises shall be used only for the purpose of receiving,
storing, assembling, preparing for sale, shipping and selling (other than
retail) products, materials and merchandise made and/or distributed by Tenant
and for such other lawful purposes as may be incidental thereto. Outside
storage, including without limitation, trucks and other vehicles and the washing
thereof at any time, is prohibited without Landlord's prior written consent,
provided that the overnight parking of tractor trailers perpendicular to and
abutting Tenant's loading docks is permitted. Tenant shall at its own cost and
expense obtain any and all licenses and permits necessary for any such use.
Tenant shall comply with all governmental laws, ordinances and regulations
applicable to the use of the premises, and shall promptly comply with all
governmental orders and directives for the correction, prevention and abatement
of nuisances in or upon, or connected with, the premises, all at Tenant's sole
expense; provided, that Tenant shall not be obligated to correct any failure of
--------
Landlord's Work to comply with applicable laws as of the commencement date.
Tenant shall not permit any objectionable or unpleasant odors, smoke, dust, gas,
noise or vibrations to emanate from the premises, nor take any other action
which would constitute a nuisance or would disturb or endanger any other tenants
of the building in which the premises are situated or unreasonably interfere
with their use of their respective premises. Without Landlord's prior written
consent, Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly inflammable. Tenant will
not permit the premises to be used for any purpose or in any manner (including
without limitation any method of storage) which would render the insurance
thereon void or the insurance risk more hazardous or cause the State Board of
Insurance or other insurance authority to disallow any sprinkler credits. If
any increase in the fire and extended coverage insurance premiums paid by
Landlord for the building in which Tenant occupies space is caused by Tenant's
use and occupancy of the premises, or if Tenant vacates the premises and causes
an increase in such premiums, then Tenant shall pay as additional rental the
amount of such increase to Landlord.
-2-
<PAGE>
4. OPERATING EXPENSES.
A. In the event the operating expenses of Landlord upon the building
and/or project of which the premises are a part shall, in any calendar year
during the term of this lease, exceed Zero Dollars ($0.00) per square
-------------------
foot, Tenant agrees to pay to Landlord as additional rental, upon demand,
Tenant's proportionate share of the excess operating expenses. In the year in
which this lease terminates, Landlord, in lieu of waiting until the close of the
calendar year in order to determine any excess operating expenses, has the
option to charge Tenant for Tenant's proportionate share of the operating
expenses based upon the previous year's excess operating expenses. The
procedures for payment of excess operating expenses are set forth in Paragraph
25 hereof.
B. The term "operating expenses" as used above includes all expenses
incurred by Landlord with respect to the ownership, maintenance and operation of
the building and/or project of which the premises are a part, including, but not
limited to, maintenance and repair costs, water, sewer, security, trash and snow
removal, landscaping, wages and fringe benefits payable to employees or
authorized agents of Landlord whose duties are connected with the operations and
maintenance of the building and/or project in an amount equal to 4% of the gross
annual rental to be received hereunder, amounts paid to contractors and
subcontractors for work or services performed in connection with the operation
and maintenance of the building and/or project, all services, supplies, repairs,
replacements or other expenses for maintaining and operating the building and/or
project including common area and parking area. The term "operating expenses"
also includes all real property taxes, assessments (whether general or special)
and governmental charges of any kind and nature whatsoever including assessments
due to deed restrictions and/or owners' associations, which accrue against the
building and/or project of which the premises are a part during the term of this
lease as well as all insurance premiums Landlord is required to pay or deems
necessary to pay, including without limitation public liability insurance and
fire and extended coverage insurance with respect to the building and/or
project. The term "operating expenses" does not include any capital costs,
including those for structural, roof or parking lot replacement, nor shall it
include repairs, restoration or other work occasioned by fire, windstorm or
other casualty to the extent of net insurance proceeds received by Landlord with
respect thereto (and Landlord shall use diligent efforts to obtain available
insurance proceeds), income and franchise taxes of Landlord, expenses incurred
in leasing to or procuring of tenants, leasing commissions, advertising
expenses, expenses for the renovating of space for new tenants, interest or
principal payments on any mortgage or other indebtedness of Landlord, nor
depreciation allowance or expense.
C. Tenant's "proportionate share", as used in this lease, shall mean
a fraction, the numerator of which is the space contained in the premises and
the denominator of which is the entire space contained in the building.
D. If at any time during the term of this lease, the present method
of taxation shall be changed so that in lieu of the whole or any part of any
taxes, assessments or governmental charges levied, assessed or imposed on real
estate and the improvements thereon, there shall be levied, assessed or imposed
on Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based, shall be deemed to be included within
the term "taxes" for the purposes hereof.
E. Tenant may audit Landlord's books relevant to the additional
rentals due under this paragraph; however, Tenant agrees to pay all costs
associated with or resulting from such audit, including reimbursement to
Landlord for any additional costs incurred by Landlord; provided, that if an
--------
audit reveals that operating expenses as reported by Landlord are five percent
(5%) or more in excess of the actual operating expenses incurred, then Landlord
shall reimburse Tenant for the reasonable third party out of pocket costs of its
audit.
F. Any payment to be made pursuant to this Paragraph 4 with respect
to the calendar year in which this lease commences or terminates shall be
prorated.
5. LANDLORD'S REPAIRS. Landlord shall at its expense maintain only
the roof, foundation and the structural soundness of the exterior walls of the
building in good repair, reasonable wear and tear excepted. Tenant shall repair
and pay for any damage caused by Tenant, or Tenant's employees, agents or
invitees, or caused by Tenant's default hereunder. The term "walls" as used
herein shall not include windows, glass or plate glass, doors, special store
fronts or office entries. Tenant shall immediately give Landlord written notice
of defect or need for repairs, after which Landlord shall have reasonable
opportunity to repair same or cure such defect. Landlord's liability with
respect to any defects, repairs or maintenance for which Landlord is responsible
under any of the provisions of this lease shall be limited
-3-
<PAGE>
to the cost of such repairs or maintenance or the curing of such defect.
6. TENANT'S REPAIRS AND OTHER COVENANTS OF CARE AND TREATMENT OF PREMISES.
A. Tenant shall at its own cost and expense keep and maintain all
parts of the premises (except those for which Landlord is expressly responsible
under the terms of this lease) in good condition, promptly making all necessary
repairs and replacements, including but not limited to, windows, glass and plate
glass, doors, any special office entry, interior walls and finish work, doors
and floor covering, downspouts, gutters, heating and air conditioning systems,
dock boards, truck doors, dock bumpers, plumbing work and fixtures, termite and
pest extermination, regular removal of trash and debris, keeping the parking
areas, driveways, alleys and the whole of the premises in a clean and sanitary
condition. Tenant shall not be obligated to repair any damage caused by fire,
tornado or other casualty covered by the insurance to be maintained by Landlord
pursuant to subparagraph 12(A) below, except that Tenant shall be obligated to
repair all wind damage to glass except with respect to tornado or hurricane
damage.
B. Tenant shall not damage any demising wall or disturb the integrity
and support provided by any demising wall and shall, at its sole cost and
expense, promptly repair any damage or injury to any demising wall caused by
Tenant or its employees, agents, customers, invitees, and/or licensees.
C. In the event the premises constitute a portion of a multiple
occupancy building, Tenant and its employees, agents, customers, invitees,
and/or licensees shall have the exclusive right to use the parking areas, if
any, as may be designated by Landlord in writing, subject to such reasonable
rules and regulations as Landlord may from time to time prescribe and subject to
rights of ingress and egress of other tenants. Landlord shall not be
responsible for enforcing Tenant's exclusive parking rights against any third
parties. As part of the operating expenses, Landlord shall, at Tenant's cost on
a pro rata basis, perform the paving and landscape maintenance, exterior
painting and common sewage line plumbing and Tenant shall be liable for its
proportionate share (as defined in subparagraph 4(C) above) of the cost and
expense of the care for the grounds around the building, including but not
limited to, the mowing of grass, care of shrubs, general landscaping,
maintenance of parking areas, driveways and alleys, exterior repainting and
common sewage line plumbing; provided, however, the Landlord shall have the
right to require Tenant to pay such other reasonable proportion of said mowing,
shrub care and general landscaping costs as may be determined by Landlord in its
sole discretion; and further provided that if Tenant or any other particular
tenant of the building can be clearly identified as being responsible for
obstructions or stoppage of the common sanitary sewage line, then Tenant, if
Tenant is responsible, or such other tenant, shall pay the entire cost thereof,
upon demand, as additional rent. Tenant shall pay when due its share,
determined as aforesaid, of such costs and expenses along with the other tenants
of the building to Landlord upon demand, as additional rent, for the amount of
its share as aforesaid of such costs and expenses in the event Landlord elects
to perform or cause to be performed such work.
D. Landlord shall either assign to Tenant all warranties received by
Landlord with respect to the systems and equipment installed in the premises or
enforce such warranties at Tenant's request and expense for Tenant's benefit.
Tenant shall, at its own cost and expense, enter into a regularly scheduled
preventive maintenance/service contract with a maintenance contractor for
servicing all hot water, heating and air conditioning systems and equipment
within the premises. The maintenance contractor and the contract must be
approved by Landlord. The service contract must include all services suggested
by the equipment manufacturer within the operation/maintenance manual and must
become effective (and a copy thereof delivered to Landlord) within thirty (30)
days of the date Tenant takes possession of the premises.
E. Tenant agrees that no washing of any type (other than reasonable
restroom or kitchen washing) will take place in the premises including the truck
apron and parking areas.
7. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the premises (including but not limited to roof and wall
penetrations) without the prior written consent of Landlord, which consent shall
not be unreasonably withheld if the proposed alteration, addition or improvement
is non-structural, is not visible from the exterior of the building and does not
affect any building system. Tenant may, without the consent of Landlord, but at
its own cost and expense and in a good workmanlike manner erect such shelves,
bins, machinery and trade fixtures as it may deem advisable, without altering
the basic character of the building or improvements and without overloading or
damaging such building or improvements, and in each case complying with all
applicable governmental laws, ordinances, regulations and other requirements.
All alterations, additions, improvements and partitions erected by Tenant shall
be and remain the property of Tenant during the term of this lease and Tenant
shall, if Landlord so elects as hereinafter provided, remove all alterations,
additions, improvements and partitions erected by Tenant and restore the
premises to their original condition, reasonable wear and tear excepted, by the
date of termination of this lease or upon earlier vacating of the premises;
otherwise such alterations, additions, improvements and partitions shall become
the property
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of Landlord as of the date of termination of this lease or upon earlier vacating
of the premises and shall be delivered up to the Landlord with the premises. All
shelves, bins machinery and trade fixtures installed by Tenant may be removed by
Tenant prior to the termination of this lease if Tenant so elects, and shall be
removed by the date of termination of this lease or upon earlier vacating of the
premises if required by Landlord; upon any such removal Tenant shall restore the
premises to their original condition, reasonable wear and tear excepted. All
such removals and restoration shall be accomplished in a good workmanlike manner
so as not to damage the primary structure or structural qualities of the
buildings and other improvements situated on the premises. If requested to do so
by Tenant in writing at the time Tenant requests Landlord's consent to a
proposed alteration, addition or improvement, Landlord will indicate in its
consent to the proposed alteration, addition or improvement (assuming that
Landlord otherwise consents thereto) whether Landlord will require the removal
of such alteration, addition or improvement upon the termination of this Lease.
Otherwise, Landlord may elect to require Tenant to remove any alteration,
addition or improvement made by Tenant to the premises, or all or any part of
Landlord's Work or Tenant's Work (as provided in Paragraph 31) by giving written
notice to Tenant at any time prior to termination of this lease specifying the
alterations, additions and/or improvements to be removed.
8. SIGNS. Tenant shall have the right to install signs upon the premises
only when first approved in writing by Landlord and subject to any applicable
governmental laws, ordinances, regulations and other requirements. Tenant shall
have the right to install, at its expense, a window-mounted sign next to
Tenant's building entrance in compliance with the standard signage program in
effect at Forest Park, which provides for the installation of one 2-1/2 foot by
2-1/2 foot plaque. Tenant shall remove all such signs by the termination of this
lease. Such installations and removals shall be made in such manner as to avoid
injury or defacement of the building and other improvements, and Tenant shall
repair any injury or defacement, including without limitation, discoloration
caused by such installation and/or removal.
9. INSPECTION. Landlord and Landlord's agents and representatives
shall have the right to enter and inspect the premises at any reasonable time
during business hours, upon reasonable advance notice (except in the case of
emergency) for the purpose of ascertaining the condition of the premises or in
order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this lease. During the period that is six (6)
months prior to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the premises at any reasonable
time during business hours for the purpose of showing the premises and shall
have the right to erect on the premises a suitable sign indicating the premises
are available. Tenant shall arrange to meet with Landlord for a joint
inspection of the premises at least thirty (30) days prior to Tenant's vacating
the premises. In the event of Tenant's failure to arrange such joint
inspection, Landlord's inspection at or after Tenant's vacating the premises
shall be conclusively deemed correct for the purposes of determining Tenant's
responsibility for repairs and restoration.
10. UTILITIES. Landlord agrees to provide at its cost water, electricity
and telephone service connections into the premises, but Tenant shall pay for
all water, gas, heat, light, power, telephone, sewer, sprinkler charges and
other utilities and services used on or from the premises, together with any
taxes, penalties, surcharges or the like pertaining thereto and any maintenance
charges for utilities and shall furnish all electric light bulbs and tubes. Gas
and electric service shall be separately metered to the premises and Tenant
shall contract directly with the utilities for such services. With respect to
water, sewer and any other service not separately metered to the premises,
Tenant shall pay a reasonable proportion as determined by Landlord of all
charges jointly metered with other premises. Landlord shall in no event be
liable for any interruption or failure of utility services on the premises.
"In the event water is not separately metered to Tenant, Tenant agrees
that it will not use water for uses other than normal restroom usage; and,
Tenant does further agree to reimburse Landlord for the entire amount of common
water costs as additional rental if, in fact, Tenant uses water for uses other
than normal restroom uses without first obtaining Landlord's written permission.
"Tenant agrees it will not use sewer capacity for any use other than
normal, domestic restroom use. Tenant further agrees to notify Landlord of any
other sewer use ("excess sewer use") and also agrees to reimburse Landlord for
the costs and expenses related to Tenant's excess sewer use, which shall
include, but is expressly herein not limited to the cost of acquiring additional
sewer capacity to service Tenant's lease."
11. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to
assign, sublet, transfer or encumber this lease, or any interest therein,
without the prior written consent of Landlord. Landlord shall not unreasonably
withhold or delay its consent to an assignment of this lease or a subletting of
the premises provided that: (i) the proposed user shall be of a character, and
shall be engaged in a business, in keeping with the commercial standards
generally applied by Landlord for new tenants in Forest Park,
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(ii) the proposed user shall have a financial condition in keeping with the
commercial standards generally applied by Landlord for new tenants in Forest
Park; (iii) the proposed assignee or subtenant shall not then be occupying other
space in the Building, and as a result would cease to occupy such space, nor
shall it be a prospective tenant then negotiating with Landlord for comparable
sized space; (iv) the proposed user shall not have parking requirements in
excess of the parking made available to Tenant under this Lease; (v) Tenant
shall not publicly advertise (whether through mail solicitation of brokers or
otherwise) Tenant's net offered rent if such rent is less than the net effective
rent then being offered by Landlord for new leases of space in Forest Park; and
(vi) the documents creating the sublease or assignment, and the nature of the
fixtures and improvements to be performed or installed, shall be subject to
Landlord's approval, which shall not be unreasonably withheld or delayed. Tenant
may assign this Lease or sublet the Premises without the need for Landlord's
consent, but upon written notice to Landlord, to a corporation that is the
parent or subsidiary corporation of Tenant or a subsidiary of Tenant's parent.
Any attempted assignment, subletting, transfer or encumbrance by Tenant in
violation of the terms and covenants of this Paragraph shall be void. Fifty
percent (50%) of the proceeds as exceed the rentals called for hereunder in the
case of a subletting and fifty percent (50%) all cash or other proceeds of any
other transfer of Tenant's interest in this lease shall be paid to Landlord,
whether such assignment, subletting or other transfer is consented to by
Landlord or not, unless Landlord agrees to the contrary in writing, and Tenant
hereby assigns all rights it might have or ever acquire in any such proceeds to
Landlord. Any assignment, subletting or other transfer of Tenant's interest in
this lease shall be for an amount equal to the then fair market value of such
interest. These covenants shall run with the land and shall bind Tenant and
Tenant's heirs, executors, administrators, personal representatives,
representatives in any bankruptcy proceeding, successors and assigns. Any
assignee, sublessee or transferee of Tenant's interest in this lease (all such
assignees, sublessees and transferees being hereinafter referred to as
"successors"), by assuming Tenant's obligations hereunder shall assume liability
to Landlord for all amounts paid to persons other than Landlord by such
successors in contravention of the Paragraph. No assignment, subletting or other
transfer, whether consented to by Landlord or not, shall relieve Tenant of its
liability hereunder. Upon the occurrence of an "event of default" as hereinafter
defined, if the premises or any part thereof are then assigned or sublet,
Landlord, in addition to any other remedies herein provided, or provided by law,
may at its option collect directly from such assignee or subtenant all rents
becoming due to Tenant under such assignment or sublease and apply such rent
against any sums due to Landlord from Tenant hereunder, and no such collection
shall be construed to constitute a novation or a release of Tenant from the
further performance of Tenant's obligations hereunder.
12. FIRE AND CASUALTY DAMAGE.
A. Landlord agrees to maintain standard fire and extended coverage
insurance covering the building of which the premises are a part with an
insurance company rated A-VII or better by AM Best's Insurance Reports, in an
amount not less than 80% (or such greater percentage as may be necessary to
comply with provisions of any co-insurance clauses of the policy) of the
"replacement cost" thereof as such term is defined in the Replacement Cost
Endorsement to be attached thereto, insuring against the perils of Fire,
Lightning and Extended Coverage, such coverages and endorsements to be as
defined, provided and limited in the standard bureau forms prescribed by the
insurance regulatory authority for the State in which there premises are
situated for use by insurance companies admitted in such state for the writing
of such insurance on risks located within such state. Subject to the provisions
of subparagraphs 12(C), 12(D), and 12(E) below, such insurance shall be for the
sole benefit of Landlord and under its sole control.
B. If the buildings situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
C. If the buildings situated upon the premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby the rebuilding or repairs cannot in Landlord's estimation be completed
within one hundred sixty five (165) days after the date upon which Landlord is
notified by Tenant of such damage, then either party shall have the option to
terminate this Lease by giving written notice to the other within ten (10) days
after Landlord gives Tenant Landlord's written estimate of the time required to
repair the damage. If a party elects to terminate this Lease pursuant to the
preceding sentence, such termination shall be effective from the date of the
occurrence of such damage, and rent shall abate from such date. Notwithstanding
the foregoing, if Landlord elects to terminate this Lease under this
subparagraph, Tenant shall have the right to nullify such election by giving
Landlord written notice within five (5) days after receipt of Landlord's
termination notice, whereby Tenant agrees to extend the term of this Lease as
necessary to ensure that the remaining term of this Lease after completion of
the repair and restoration will be not less than five (5) years. If Tenant
gives this notice nullifying Landlord's termination notice, Landlord shall then
diligently pursue repair and restoration of the premises, using commercially
reasonable efforts to complete repair and restoration within the period
estimated by Landlord.
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D. If the buildings situated upon the premises should be damaged by any
peril covered by the insurance to be provided by Landlord under subparagraph
12(A) above, but only to such extent that rebuilding or repairs can in
Landlord's estimation be completed within one hundred sixty five (165) days
after the date upon which Landlord is notified by Tenant or otherwise receives
notice of such damage, this lease shall not terminate, and Landlord shall at it
sole cost and expense thereupon proceed with reasonable diligence to rebuild and
repair such buildings to substantially the condition in which they existed prior
to such damage, except that Landlord shall not be required to rebuild, repair or
replace any part of the partitions, fixtures, additions and other improvements
which may have been placed in, on, or about the premises by Tenant. Landlord
shall advise Tenant, within sixty (60) days after notice to Landlord of such
damage, of Landlord's estimate of the time required to repair the damage. If the
premises are untenantable in whole or in part following such damage (including
portions of the premises that are unusable due to damage to other portions of
the premises), the rent payable hereunder during the period in which they are
untenantable shall be reduced to such extent as may be fair and reasonable under
all of the circumstances. In the event that Landlord should fail to diligently
pursue such repairs and rebuilding within one hundred sixty five (165) days
after the date upon which Landlord is notified of such damage, Tenant may at its
option terminate this lease by delivering written notice of termination to
Landlord as Tenant's exclusive remedy, whereupon all rights and obligations
hereunder shall cease and terminate.
E. Anything in this lease to the contrary notwithstanding, Landlord and
Tenant hereby waive and release each other of and from any and all rights of
recovery, claim, action or cause of action, against each other, their agents,
officers and employees, for any loss or damage that may occur to the premises,
improvements to the building of which the premises are a part, or personal
property (building contents) within the building, by reason of fire or the
elements regardless of cause or origin, including negligence of Landlord or
Tenant and their agents, officers and employees, but only to the extent of the
insurance proceeds payable under the policies of insurance covering the property
or required to cover the property by the terms of this lease. Because this
subparagraph will preclude the assignment of any claim mentioned in it by way of
subrogation (or otherwise) to an insurance company (or any other person), each
party to this lease agrees immediately to give to each insurance company which
has issued to it policies of fire and extended coverage insurance, written
notice of the terms of the mutual waivers contained in this subparagraph, and to
have the insurance policies properly endorsed, if necessary, to prevent the
invalidation of the insurance coverages by reason of the mutual waivers
contained in this subparagraph.
13. LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, resulting
from and/or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employees, or of any other person entering upon the
premises, or caused by the buildings and improvements located on the premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the premises, or due to any cause whatsoever, and
Tenant hereby covenants and agrees that it will at all times indemnify and hold
safe and harmless the property, the Landlord (including without limitation the
trustee and beneficiaries if Landlord is a trust), Landlord's agents and
employees from any loss, liability, claims, suits, costs, expenses, including
without limitation attorney's fees and damages, both real and alleged, arising
out of any such damage or injury; except injury to persons or damage to property
to the extent caused by the negligence of Landlord or the failure to Landlord to
repair any part of the premises which Landlord is obligated to repair and
maintain hereunder within a reasonable time after the receipt of written notice
from Tenant or any governmental authority having jurisdiction of needed repairs.
Tenant shall procure and maintain throughout the term of this lease a policy or
policies of insurance, at its sole cost and expense, insuring both Landlord and
Tenant against all claims, demands or actions arising out of or in connection
with: (i) the premises; (ii) the condition of the premises; (iii) Tenant's
operations in and maintenance and use of the premises; and (iv) Tenant's
liability assumed under this lease, the limits of such policy or policies to be
in the amount of not less than $1,000,000 per occurrence in respect of injury to
persons (including death), and in the amount of not less than $500,000 per
occurrence in respect of property damage or destruction, including loss of use
thereof. All such policies shall be procured by Tenant from responsible
insurance companies satisfactory to Landlord. Certified copies of such policies,
together with receipt evidencing payment of premiums therefor, shall be
delivered to Landlord prior to the commencement date of this lease. Not less
than fifteen (15) days prior to the expiration date of any such policies,
certified copies of the renewals thereof, bearing notations evidencing the
payment of renewal premiums shall be delivered to Landlord. Such policies shall
further provide that not less than thirty (30) days written notice shall be
given to Landlord before such policy may be canceled or changed to reduce
insurance provided thereby.
14. CONDEMNATION.
A. If the whole or any substantial part as determined by Landlord of the
premises should be taken for any public or quasi-public use under governmental
law, ordinance or regulation, or by right of eminent domain, or by private
purchase in lieu thereof and the taking would prevent or materially
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interfere with the use of the premises for the purpose for which they are being
used, as determined by Landlord this lease shall terminate and the rent shall be
abated during the unexpired portion of this lease, effective when the physical
taking of said premises shall occur.
B. If part of the premises shall be taken for any public or quasi-
public use under any governmental law, ordinance or regulation, or by right of
eminent domain, or by private purchase in lieu thereof, and this lease is not
terminated as provided in the subparagraph above, this lease shall not terminate
but the rent payable hereunder during the unexpired portion of this lease shall
be reduced to such extent as may be fair and reasonable under all of the
circumstances.
C. In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards as may be allocated to their respective interests in any condemnation
proceedings.
15. HOLDING OVER. Tenant will, at the termination of this lease by
lapse of time or otherwise, yield up immediate possession to Landlord. If
Landlord agrees in writing that Tenant may hold over after the expiration or
termination of this lease, unless the parties hereto otherwise agree in writing
on the terms of such holding over, the hold over tenancy shall be subject to
termination by Landlord at any time upon not less than thirty (30) days advance
written notice, or by Tenant at any time upon not less than thirty (30) days
advance written notice, and all of the other terms and provisions of this lease
shall be applicable during that period, except that Tenant shall pay Landlord
from time to time upon demand, as rental for the period of any hold over, an
amount equal to one hundred fifty percent (150%) of the rent in effect on the
termination date, computed on a daily basis for each day of the hold over
period. No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this lease except as otherwise expressly provided. The
preceding provisions of this paragraph 15 shall not be construed as consent for
Tenant to hold over.
16. QUIET ENJOYMENT. Landlord covenants that it now has, or will acquire
before Tenant takes possession of the premises, good title to the premises, free
and clear of all liens and encumbrances, excepting only the lien for current
taxes not yet due, such mortgage or mortgages as are permitted by the terms of
this lease, zoning ordinances and other building and fire ordinances and
governmental regulations relating to the use of such property, and easements,
restrictions and other conditions of record. In the event this lease is a
sublease, then Tenant agrees to take the premises subject to the provision of
the prior leases. Landlord represents and warrants that it has full right and
authority to enter into this lease and that Tenant, upon paying the rental
herein set forth and performing its other covenants and agreements herein set
forth, shall peaceably and quietly have, hold and enjoy the premises for the
term hereof without hindrance or molestation from Landlord, subject to the terms
and provisions of this lease.
17. EVENTS OF DEFAULT. The following events shall be deemed to be events of
default by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent herein reserved
when due, or any payment with respect to operating expenses hereunder when due,
or any other payment or reimbursement to Landlord required herein when due, and
such failure shall continue for a period of five (5) days following notice from
Landlord that such payment is due; provided that Landlord shall not be obligated
to provide Tenant notice of non-payment of rent more than two times in any
twelve month period; for the balance of such twelve month period an event of
default shall have occurred if a payment of rent is more than five (5) days past
due, with or without notice from Landlord.
(b) Tenant shall become insolvent, or shall make a transfer in fraud
of creditors, or shall make an assignment for the benefit of creditors.
(c) Tenant shall file a petition under any section or chapter of the
United States Bankruptcy Code, as amended, or under any similar law or statute
of the United States or and State thereof; or an order for relief shall be
entered against Tenant in any proceedings filed against Tenant thereunder.
(d) A receiver or trustee shall be appointed for all or substantially all
of the assets of Tenant.
(e) Tenant shall vacate all or a substantial portion of the premises
without prior written notice to Landlord, whether or not Tenant is in default of
the rental payments due under this lease.
(f) Tenant shall fail to discharge any lien placed upon the premises
in violation of Paragraph 21 hereof within thirty (30) days after any such lien
or encumbrance is filed against the premises.
(g) Tenant shall fail to comply with any term, provision or covenant
of this lease (other than the
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foregoing in this Paragraph 17), and shall not cure such failure within thirty
(30) days after written notice thereof to Tenant, provided that if such failure
--------
is curable but not within thirty (30) days, Tenant shall have such longer period
(not to exceed ninety (90) days in the aggregate) that may be reasonably
required to cure such failure, provided that Tenant commences such cure within
the original thirty (30) day period and thereafter diligently pursues such cure
to completion.
18. REMEDIES.
A. Upon the occurrence of any of such events of default described in
Paragraph 17 hereof, Landlord shall have the option to pursue any one or more of
the following remedies without any notice or demand whatsoever:
(a) Terminate this lease, in which event Tenant shall immediately
surrender the premises to Landlord, and if Tenant fails so to do, Landlord
may, without prejudice to any other remedy which it may have for possession
or arrearage in rent, enter upon and take possession of the premises by
legal process and expel or remove Tenant and any other person who may be
occupying such premises or any part thereof, without being liable for
prosecution or any claim of damages therefor.
(b) Enter upon and take possession of the premises by legal process
and expel or remove Tenant and any other person who may be occupying such
premises or any part thereof without being liable for prosecution or any
claim for damages therefor, and relet the premises and receive the rent
therefor.
(c) Enter upon the premises by legal process without being liable for
prosecution or any claim for damages therefor, and do whatever Tenant is
obligated to do under the terms of this lease; and Tenant agrees to
reimburse Landlord on demand for any expenses which Landlord may incur in
thus effecting compliance with Tenant's obligations under this lease, and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to the Tenant from such action.
In the event Landlord may elect to regain possession of the premises by a
forcible detainer proceeding, Tenant hereby specifically waives any statutory
notice which may be required prior to any such proceeding, and agrees that
Landlord's execution of this lease is, in part, consideration for this waiver.
In the event Tenant fails to pay any installment of rent hereunder and such
failure continues for ten (10) days after such installment is due, to help
defray the additional cost to Landlord for processing such late payments, Tenant
shall pay to Landlord, on demand, a late charge in an amount equal to five
percent (5%) of such installment; and the failure to pay such amount within ten
(10) days after demand therefor shall be an event of default hereunder. The
provision for such late charge shall be in addition to all of Landlord's other
rights and remedies hereunder or at law and shall not be construed as liquidated
damages or as limiting Landlord's remedies in any manner.
B. Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant. No such removal or other exercise of dominion by Landlord
over the property of Tenant or others at the premises shall be deemed
unauthorized or constitute a conversion, Tenant hereby consenting, after any
event of default, to the aforesaid repossession and all claims by Tenant
therefor are hereby waived, as are all claims for damages by reason of any
distress warrant, forcible detainer proceedings, sequestration proceedings or
other legal process. Tenant agrees that any re-entry by Landlord may be
pursuant to judgment obtained in forcible detainer proceedings or other legal
proceedings as Landlord may elect, and Landlord shall not be liable in trespass
or otherwise.
C. In the event Landlord elects to terminate the lease by reason of an
event of default, then notwithstanding such termination, Tenant shall be liable
for and shall pay to Landlord, at the address specified for notice to Landlord
herein, the sum of all rental and other indebtedness accrued to date of such
termination, plus, as damages, an amount equal to the difference between (i) the
total rental hereunder for the remaining portion of the lease term (had such
term not been terminated by Landlord prior to the date of expiration stated in
Paragraph 1) and (ii) the then present value of the then fair rental values of
the premises for such period.
D. In the event that Landlord elects to repossess the premises without
terminating the lease, then Tenant shall be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, all rental and
other indebtedness accrued to the date of such repossession, plus rental
required to be paid by Tenant to Landlord during the remainder of the lease term
until the date of expiration of the term as stated in Paragraph 1 diminished by
any net sums thereafter received by Landlord through
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reletting the premises during said period (after deducting expenses incurred by
Landlord as provided in subparagraph 17(E) below). In no event shall Tenant be
entitled to any excess of any rental obtained by reletting over and above the
rental herein reserved. Actions to collect amounts due by Tenant to Landlord
under this subparagraph may be brought from time to time, on one or more
occasions, without the necessity of Landlord's waiting until expiration of the
lease term.
E. In case of any event of default or breach by Tenant, Tenant shall also
be liable for and shall pay to Landlord, at the address specified for notice to
Landlord herein, in addition to any sum provided to be paid above, brokers' fees
incurred by Landlord in connection with reletting the whole or any part of the
premises; the costs of removing and storing Tenant's or other occupant's
property; the costs of repairing, altering, remodeling or otherwise putting the
premises into condition acceptable to a new tenant or tenants; and all
reasonable expenses incurred by Landlord in enforcing or defending Landlord's
rights and/or remedies including reasonable attorney's fees which shall be not
less than five percent (5%) of all sums then owing by Tenant to Landlord whether
suit is actually filed or not.
F. Landlord shall use commercially reasonable efforts to relet the
premises (or, in Landlord's reasonable discretion, a part thereof) for the
account of Tenant for such term or terms (which may be greater or less than the
period which would otherwise have constituted the balance of the term of this
lease) and on such conditions (which may include concessions or free rent) and
for such uses as Landlord, in its reasonable discretion, may determine, and
Landlord may collect and receive any rents payable by reason of such reletting.
For purposes of such mitigation, Landlord need not attempt to lease the Premises
prior to the lease of other vacant space in Forest Park, shall not be required
to accept a tenant for less than the entire space, and shall not be required to
accept any tenant offered by Tenant or observe any instruction given by Tenant
about such reletting. For the purpose of such reletting, Landlord may decorate
or make repairs, changes, alterations or additions in or to the premises or any
part thereof to the extent deemed by Landlord desirable or convenient, and the
reasonable cost of such decoration, repairs, changes, alterations or additions
shall be charged to and be payable by Tenant as additional rent hereunder, as
well as any reasonable brokerage and legal fees expended by Landlord. In the
event of any dispute over whether Landlord exercised commercially reasonable
efforts to mitigate damages, the burden of proof shall be on Tenant.
G. If Tenant should fail to make any payment or cure any default hereunder
within the time herein permitted, Landlord, without being under any obligation
to do so and without thereby waiving such default, may make such payment and/or
remedy such other default for the account of Tenant (and enter the premises for
such purpose), and thereupon Tenant shall be obligated to, and hereby agrees, to
pay Landlord, upon demand, all costs, expenses and disbursements (including
reasonable attorney's fees) incurred by Landlord in taking such remedial action.
H. In the event of any default by Landlord, Tenant's exclusive remedy
shall be an action for damages (Tenant hereby waiving the benefit of any laws
granting it a lien upon the property of Landlord and/or upon rent due Landlord),
but prior to any such action Tenant will give Landlord written notice specifying
such default with particularity, and Landlord shall thereupon have ten (10) days
in which to commence and thereafter diligently pursue the cure of any such
default. Unless and until Landlord fails to so cure any default after such
notice, Tenant shall not have any remedy or cause of action by reason thereof.
All obligations of Landlord hereunder will be construed as covenants, not
conditions; and all such obligations will be binding upon Landlord only during
the period of its possession of the premises and not thereafter. The term
"Landlord" shall mean only the owner, for the time being of the premises, and in
the event of the transfer by such owner of its interest in the premises, such
owner shall thereupon be released and discharged from all covenants and
obligations of the Landlord thereafter accruing, but such covenants and
obligations shall be binding during the lease term upon each new owner for the
duration of such owner's ownership. Notwithstanding any other provision hereof,
Landlord shall not have any personal liability hereunder. In the event of any
breach or default by Landlord in any term or provision of this lease, Tenant
agrees to look solely to the equity or interest then owned by Landlord in the
premises; however, in no event, shall any deficiency judgement or any money
judgement of any kind be sought or obtained against any party Landlord.
I. In the event that Landlord shall have taken possession of the premises
pursuant to the authority herein granted then Landlord shall have the right to
keep in place and use all of the furniture, fixtures and equipment at the
premises, including that which is owned by or leased to Tenant at all times
prior to any foreclosure thereon by Landlord or repossession thereof by any
lessor thereof or third party having a lien thereon. Landlord shall also have
the right to remove from the premises (without the necessity of obtaining a
distress warrant, writ of sequestration or other legal process) all or any
portion of such furniture, fixtures, equipment and other property located
thereon and to place same in storage at any premises within the County in which
the premises is located; and in such event, Tenant shall be liable to Landlord
for costs incurred by Landlord in connection with such removal storage.
Landlord shall also
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<PAGE>
have the right to relinquish possession of all or any portion of such furniture,
fixtures, equipment and other property to any person ("Claimant") claiming to be
entitled to possession thereof who presents to Landlord a copy of any instrument
represented to Landlord by Claimant to have been executed by Tenant (or any
predecessor of Tenant) granting Claimant the right under various circumstances
to take possession of such furniture, fixtures, equipment or other property,
without the necessity on the part of Landlord to inquire into the authenticity
of said instrument's copy of Tenant's or Tenant's predecessor's signature
thereon and without the necessity of Landlord making any nature of investigation
or inquiry as to the validity of the factual or legal basis upon which Claimant
purports to act; and Tenant agrees to indemnify and hold Landlord harmless from
all cost, expense, loss, damage and liability incident to Landlord's
relinquishment of possession of all or any portion of such furniture, fixtures,
equipment or other property to Claimant. The rights of Landlord herein stated
shall be in addition to any and all other rights which Landlord has or may
hereafter have at law or in equity; and Tenant stipulates and agrees that the
rights herein granted Landlord are commercially reasonable.
19. WAIVER OF LANDLORD'S LIEN. Landlord waives its statutory lien rights
in Tenant's personal property. At Tenant's request Landlord shall execute such
documents as may be reasonably required to confirm the waiver in favor of any
lender or equipment lessor providing financing or leasing equipment to Tenant.
Tenant shall be responsible for the reasonable fees and expenses of Landlord's
counsel for the review and negotiation of any such requested documentation.
20. MORTGAGES. Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a
lien or charge upon the premises or the improvements situated thereon, provided,
however, that if the mortgagee, trustee, or holder of any such mortgage or deed
of trust elects to have Tenant's interest in this lease superior to any such
instrument in whole or in part, then by notice to Tenant, from such mortgagee,
trustee or holder, this lease shall be deemed superior to such lien, whether
this lease was executed before or after said mortgage or deed of trust. Tenant
shall at any time hereafter on demand execute any instruments, releases or other
documents which may be required by any mortgagee for the purpose of subjecting
and subordinating this lease or making this lease superior to the lien of any
such mortgage.
Anything contained in this Paragraph to the contrary notwithstanding, the
subordination of this Lease to any future mortgage encumbering the Building is
conditioned upon the mortgagee's agreement that Tenant shall not be disturbed in
its possession of the Premises pursuant to the terms of this Lease. Such non-
disturbance covenant shall be evidenced by the mortgagee's standard
subordination, non-disturbance and attornment agreement, which Tenant agrees to
execute, provided such agreement does not impose upon Tenant any obligations in
excess of those obligations assumed by Tenant under this lease. Landlord
represents and warrants to Tenant that as of the date of this lease there are no
mortgages encumbering the Building.
21. MECHANIC'S LIENS AND TENANT'S PERSONAL PROPERTY TAXES.
A. Tenant shall have no authority, express or implied, to create or place
any lien or encumbrance of any kind or nature whatsoever upon, or in any manner
to bind, the interest of Landlord or Tenant in the premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
premises on which any lien is or can be validly and legally asserted against its
leasehold interest in the premises or the improvements thereon and that it will
save and hold Landlord harmless from any and all loss, cost or expense based on
or arising out of asserted claims or liens against the leasehold estate or
against the right, title and interest of the Landlord in the premises or under
the terms of this lease. Tenant agrees to give Landlord immediate written
notice of the placing of any lien or encumbrance against the premises.
B. Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if the
assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.
22. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
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<PAGE>
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address for Landlord
hereinbelow set forth or at such other address as Landlord may specify from
time to time by written notice delivered in accordance herewith. Tenant's
obligation to pay rent and any other amounts to Landlord under the terms of
this lease shall not be deemed satisfied until such rent and other amounts
have been actually received by Landlord.
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith.
(c) With the exception of Paragraph 21(a) above, any notice or
document required or permitted to be delivered hereunder shall be deemed to
be delivered whether actually received or not when deposited in the United
States Mail, postage prepaid, Certified or Registered Mail, addressed to
the parties hereto at the respective addresses set out below, or at such
other address as they have theretofore specified by written notice
delivered in accordance herewith:
LANDLORD: TENANT:
The Riggs National Bank of Washington Compucom Systems, Inc.
as Trustee for the Multi-Employer 10100 North Central
Property Trust Expressway
c/o Trammell Crow NE, Inc. Dallas, Texas 75231
Commerce Center Attention: Mr. Ron Giles
1820 Chapel Avenue West Assistant Vice President
Suite 220 Property Mgmt. Dept.
Cherry Hill, New Jersey 08002
If and when included within the term "Landlord", as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectfully, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
23. MISCELLANEOUS.
A. Words of any gender used in this lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained in this
lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise herein expressly provided. Landlord
shall have the right to transfer and assign, in whole or in part, its rights and
obligations in the building and property that are the subject of this lease.
Each party agrees to furnish to the other, promptly upon demand, a corporate
resolution, proof of due authorization by partners, or other appropriate
documentation evidencing the due authorization of such party to enter into this
lease.
C. The captions inserted in this lease are for convenience only and in no
way define, limit or otherwise describe the scope or intent of this lease, or
any provision hereof, or in any way affect the interpretation of this lease.
D. Tenant agrees from time to time within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate stating that this lease is in full force and effect, the date to
which rent has been paid, the unexpired term of this lease and such other
matters pertaining to this lease as may be requested by Landlord.
E. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
F. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition
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of the premises. Upon the expiration or earlier termination of the term hereof,
following the inspection of the premises contemplated by Paragraph 9, Tenant
shall pay to Landlord any amount reasonably estimated by Landlord as necessary
to put the premises, including without limitation all heating and air
conditioning systems and equipment therein, in the condition and repair that
Tenant is required to maintain the premises during the term of this Lease,
normal wear and tear excepted. Tenant shall also, prior to vacating the
premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's
obligation hereunder for real estate taxes and insurance premiums for the year
in which the lease expires or terminates. All such amounts shall be used and
held by Landlord for payment of such obligations of Tenant hereunder, with
Tenant being liable for any additional costs therefor upon demand by Landlord,
or with any excess to be returned to Tenant after all such obligations have been
determined and satisfied, as the case may be. Any security deposit held by
Landlord and the accrued interest thereon shall be credited against the amount
payable by Tenant under this Paragraph 23(F).
G. If any clause or provision of this lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each clause or provision
of this lease that is illegal, invalid or unenforceable, there be added as a
part of this lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
H. Because the premises are on the open market and are presently being
shown, this lease shall be treated as an offer with the premises being subject
to prior lease and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the premises without notice, and this lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
I. All references in this lease to "the date hereof" or similar references
shall be deemed to refer to the last date, in point of time, on which all
parties hereto have executed this lease.
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<PAGE>
J. Tenant represents and warrants that it has dealt with no broker, agent
or other person in connection with this transaction or that no broker, agent or
other person brought about this transaction, other than The Nichols Company, and
Tenant agrees to indemnify and hold Landlord harmless from and against any
claims by any other broker, agent or other person claiming a commission or other
form of compensation by virtue of having dealt with Tenant with regard to this
leasing transaction.
24. ADDITIONAL PROVISIONS. [See paragraphs 25 through 35 attached
hereto.]
EXECUTED BY A DULY AUTHORIZED OFFICER OF LANDLORD, this day of May, 1996.
--
RIGGS BANK, N.A., as Trustee for the
Multi-Employer Property Trust
Attest/Witness
/s/ Scott B. Woosley By: /s/ Patrick O. Mayberry
- ----------------------------------- -----------------------------------
Title: Vice President Title: Vice President
--------------------------- --------------------------------
EXECUTED BY a duly authorized officer of TENANT, this 16 day of May, 1996.
--
COMPUCOM SYSTEMS, INC.
Attest/Witness
/s/ Ron Giles By: /s/ Robert J. Boutin
- ----------------------------------- -----------------------------------
Title: Vice President Real Estate Title: Senior Vice President,
--------------------------- Chief Financial Officer
--------------------------------
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<PAGE>
25. OPERATING EXPENSE ADJUSTMENT
----------------------------
In the event that Tenant's proportionate share of projected operating
expenses for common area services as described in Paragraphs 4, 6, and 10
exceeds the amount specified in Paragraph 4 (a), (such excess to be called
"Excess Operating Expenses"), Tenant agrees to pay Landlord monthly, as an
additional rental, one twelfth (1/12) of the projection of "Excess Operating
Expenses".
The most recent projection for "Excess Operating Expenses" for the
building and/or project is $1.00 per square foot per year. Tenant's
proportionate share of this projection of "Excess Operating Expenses" amounts to
a monthly charge of $24,876.66, for which the Tenant will be separately billed.
On or about April 15 of each calendar year during Tenant's occupancy
and the calendar year following termination of this lease, or as soon thereafter
as is practical, Landlord shall furnish to Tenant a statement in reasonable
detail of the actual Operating Expenses for the previous year. If for any
calendar year Tenant's payments on account for Excess Operating Expenses exceeds
Tenant's proportionate share of the actual Excess Operating Expenses, Landlord
shall either credit the overpayment against the next installment of rent due
from Tenant or promptly refund to Tenant the overpayment. Conversely, if the
payments made by Tenant on account of the prior year's Excess Operating Expenses
are less than Tenant's proportionate share of the actual Excess Operating
Expenses, Tenant shall pay to Landlord, within thirty (30) days after receipt of
such statement, as additional rent, the underpayment with respect to Tenant's
Proportionate Share of the Excess Operating Expenses for the prior year.
Landlord, upon notice to Tenant, may elect to lower or raise the projected cost
paid monthly by Tenant so that Tenant's payments are equal to the adjusted
projection of "Excess Operating Expenses".
Notwithstanding anything to the contrary in Paragraph 4B, to the
extent that employees or agents of Landlord perform tasks associated with the
operation and maintenance of the building premises, which would have otherwise
been performed by outside contractors, 100% of such reasonable costs for these
services may be charged as operating expenses. These costs will be treated as
if the services were performed by outside contractors and shall not be subject
to the cap of 4% of gross annual rental which shall apply to management tasks
performed by employees of agents of Landlord. The term "Excess Operating
Expenses" shall specifically exclude capital improvements which under generally
accepted accounting principles and practices would be classified as capital
expenditures to the building or the project of which the Premises is a part.
26. ENVIRONMENTAL MATTERS
---------------------
a. Tenant shall not engage in operations at the Premises which involve the
generation, manufacture, refining, transportation, treatment, storage, handling
or disposal of "Hazardous Substances" or "Hazardous Waste" as such terms are
defined under the Industrial Site Recovery Act ("ISRA"). In no event shall
Tenant violate any governmental statutes, laws and ordinances regarding the use,
handling, storage, and disposal of Hazardous Waste and Hazardous Substances.
Tenant further covenants that it will not cause or permit to exist as result of
an intentional or unintentional action or omission on its part, the releasing,
spilling, leaking, pumping, pouring, emitting, emptying or dumping from, on or
about the Premises of any hazardous substance (as such term is defined under
N.J.S.A. 58:10-23.11(b)(k) and N.J.A.C. 7:1-3.3.
b. Tenant shall, at Landlord*s request, provide such certifications and
affidavits as Landlord may require in connection with any filing made by
Landlord under ISRA. If Tenant's operations on the Premises now or hereafter
constitute an "Industrial Establishment" subject to the requirements of ISRA,
then prior to the expiration or sooner termination of this Lease or to any
assignment of this Lease or any subletting of any portion of the Premises,
Tenant shall, at its expense, comply with all requirements of ISRA pertaining to
the transfer or closure of an Industrial Establishment. Without limitation of
the foregoing, Tenant's obligations shall include (i) the proper filing of an
initial notice to the New Jersey Department of Environmental Protection ("DEP")
(ii) the performance of any soil, ground water and surface water sampling and
tests required by the DEP and (iii) either the filing of a "negative
declaration" with the DEP or the performance of a proper and approved clean up
plan to the satisfaction of the DEP.
c. In the event of Tenant's failure to comply in full with this Article,
Landlord may, at its option, perform any and all of Tenant's obligations as
aforesaid and all costs and expenses incurred by Landlord in the exercise of
this right shall be deemed to be Additional Rent payable on demand.
d. This Article shall survive the expiration or sooner termination of the
Lease.
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<PAGE>
27. ESTOPPEL CERTIFICATE
--------------------
Tenant shall at any time upon not less than twenty (20) days written
notice execute and deliver to Landlord, lender or assignee or subtenant of
Tenant, an estoppel certificate as reasonably requested by Landlord in the form
attached as Exhibit "C" with any modifications thereto required by the then
applicable state of facts.
28. ACCESS LAWS
-----------
(a) As used in this paragraph, the term "Access Laws" shall mean the
Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of
1988, all state and local laws or ordinances related to handicapped access, or
any statute, rule, regulation, ordinance, order of governmental bodies or
regulatory agencies, or order or decree of any court adopted or enacted with
respect to any of the foregoing. The term Access Laws shall include all Access
Laws now in existence or hereafter enacted, adopted or applicable.
(b) Landlord makes no representations regarding the compliance of the
Premises, Building or the Project with Access Laws; provided that, if any
improvements or alterations constructed by Landlord do not comply with Access
Laws, Landlord shall be responsible for correcting such defects if and to the
extent required by law.
(c) Tenant agrees to notify Landlord immediately if Tenant becomes
aware of (i) any condition or situation in or on the Premises which would
constitute a violation of any Access Laws, or (ii) any threatened or actual
lien, action or notice of the Premises not being in compliance with any Access
Laws. Tenant shall inform Landlord of the nature of any such condition,
situation, lien, action or notice and of the action Tenant proposes to take in
response thereto.
(d) Tenant shall be solely responsible for all costs and expenses
relating to or incurred in connection with bringing the Premises, the Building
and the common areas into compliance with the Access Laws if and to the extent
such costs and expenses arise out of or relate to Tenant*s use of the Premises
or Tenant*s modifications, improvements or alterations to the Premises after the
date of this Lease.
(e) Tenant agrees to indemnify, defend and hold Landlord harmless from
and against any and all claims, demands, damages, losses, liens, liabilities,
penalties, fines, lawsuits, and other proceedings and costs and expenses
(including attorneys fees), arising directly or indirectly from or out of, or in
any way connected with, any activity on or use of the Premises, the Building or
the Project by Tenant, its agents, employees, contractors, invitees, or any
subtenant or concessionaire put into possession of all or any part of the
Premises by Tenant, which activity or use results in the Premises violating any
applicable Access Laws.
(f) The provisions in this Paragraph 28 shall supersede any other
provisions in this Lease regarding Access Laws to the extent inconsistent with
the provisions of this paragraph. The provisions in this Paragraph 28 shall
survive the expiration of the term or the termination of this Lease for any
other reason whatsoever.
29. ERISA
-----
With the exception of this Lease, neither the Tenant nor any affiliate
of the Tenant is a tenant under a lease or any other tenancy arrangement (i)
with (a) Riggs Bank, N.A., formerly known as The Riggs National Bank of
Washington, D.C., as Trustee of the Multi-Employer Property Trust; (b) the
Multi-Employer Property Trust; (c) The National Bank of Washington Multi-
Employer Property Trust, the previous name of the Multi-Employer Property Trust;
(d) Alameda Industrial Properties Joint Venture; (e) Harman International
Business Campus Joint Venture; (f) Beaverton-Redmond Tech Properties; (g)
Corporate Drive Corporation as trustee of the Corporate Drive Nominee Realty
Trust; (h) Goldbelt Place Joint Venture; or (i) Boca 1515; or (j) Arboretum
Lakes I, L.L.C.; or (ii) involving any property in which the entities named in
clauses (a), (b), or (c) are known by the Tenant to have an ownership interest.
30. LIMITATION OF LANDLORD'S LIABILITY
----------------------------------
Notwithstanding any provision to the contrary contained in this Lease,
Tenant shall look solely to the estate and interest of Landlord in and to the
Land and the building, and Landlord shall have no personal liability, in the
even of any claim against Landlord arising out of or in connection with this
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<PAGE>
Lease, the relationship of Landlord and Tenant, or Tenant*s use of the Leased
Premises, and Tenant agrees that the liability of Landlord arising out of or in
connection with this Lease, the relationship of Landlord and Tenant, or Tenant*s
use of the Leased Premises shall be limited solely to such estate or interest of
Landlord in and to the Land and the Building and that Landlord shall have no
personal liability as provided above in this sentence. No properties or assets
of Landlord other than the estate and interest of Landlord in and to the Land
and the Building, and no property owned by any partners, officer, member,
director or trustee in or of Landlord, shall be subject to levy, execution or
other re-enforcement procedures for the satisfaction of any judgment (or other
judicial process) or for the satisfaction of any other remedy of Tenant arising
out of or in connection with this Lease, the relationship of Landlord and Tenant
or Tenant*s use of the Leased Premises. Further, in no event whatsoever shall
any partner, officer, member, director or trustee in or of Landlord have any
liability or responsibility whatsoever arising out of or in connection with this
Lease, the relationship of Landlord and Tenant or Tenant*s use of the Leased
Premises.
31. TENANT IMPROVEMENTS
-------------------
Landlord shall construct and provide improvements to the base building
(collectively, "Landlord's Work") in accordance with the terms of this
Paragraph. Landlord's Work is generally described and depicted on the progress
prints listed on Exhibit "D-1" (the "Space Plans") and the Tenant Summary
Specifications attached hereto as Exhibit "D-2." Landlord's Work specifically
excludes those items listed on the Tenant Summary Specifications attached hereto
as "Work by Tenant"; such items (collectively, "Tenant's Work") shall be
constructed and provided by Tenant as its expense.
(a) Tenant Plans. Landlord's architect has commenced preparation of
------------
the construction documents required to obtain permits and construct Landlord's
Work (the "Plans and Specifications"). Tenant shall fully and completely
cooperate with Landlord in the preparation of the Plans and Specifications.
Tenant shall promptly respond to Landlord's requests for information and
approvals, and shall use good faith efforts to assist Landlord to complete the
Plans and Specifications as soon as possible. Landlord may forward to Tenant
from time to time progress prints for portions of Landlord's Work. Within two
business days of receipt of a progress print Tenant shall, in writing, either
approve the progress print or specify in detail any objections based on the
failure of such progress print to reflect the general concepts and intent of
Landlord's Work reflected in the Space Plans and Tenant Summary Specifications.
Subject to Tenant's prompt response to progress prints, on or before May 17,
1996 Landlord shall submit to Tenant for its approval a set of architectural
design documents that are at least 75% complete and MEP design documents that
are at least 25% complete. On or before May 22, 1996 Tenant shall, in writing,
either approve such design documents or specify in detail any objections based
on the failure of such design documents to reflect the general concepts and
intent of Landlord's Work reflected in the Space Plans and Tenant Summary
Specifications.
Notwithstanding the foregoing, the Plans and Specifications remain
subject to Landlord's review and approval, which approval shall not be
unreasonably withheld, and shall be deemed modified to take account of any
changes reasonably required by Landlord. In connection with its review of
progress prints and other design documents Tenant may request changes that are
not required to reflect the general concepts and intents of the Space Plans and
Tenant Summary Specifications. Any such changes (i) shall be subject to
Landlord's consent, which shall not be unreasonably withheld or delayed, and
(ii) constitute Tenant Delays (as hereinafter defined) and result in extension
of the Scheduled Completion Date (as hereinafter defined) by the amount of delay
resulting from such change.
(b) Schedule. Landlord shall use diligent efforts to substantially
--------
complete Landlord's Work by August 1, 1996 (the "Scheduled Completion Date"),
subject to extension for Permitted Delays. If Landlord's Work is not completed
by the Scheduled Completion Date (as it may be extended by the time lost to
Permitted Delays), then Tenant shall be entitled, as Tenant's exclusive remedy
therefor, to one day of free base rent for each day following the Scheduled
Completion Date until Landlord's Work is substantially completed. If
substantial completion of Landlord's Work is delayed due to Permitted Delays
that are within Tenant's control (including but not limited to Tenant's failure
to timely approve plans and other submissions, changes in Landlord's Work
requested by Tenant, or delays caused by Tenant's performance of Tenant's Work)
("Tenant Delays"), then on the commencement date Tenant shall pay to Landlord,
as additional rent, one day's base rent for each day by which substantial
completion of Landlord's Work is delayed due to Tenant Delays.
(c) Construction. Landlord has selected and Tenant has approved
------------
Allied General Construction Company as the general contractor for Landlord's
Work. Landlord shall, in a good and workmanlike manner, cause the Premises to
be improved and completed in accordance with the Plans and Specifications by the
general contractor. Landlord reserves the right, however: (i) to make
substitutions of material of equivalent grade and quality when and if any
specified material shall not be readily and
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<PAGE>
reasonably available, and (ii) to make changes necessitated by conditions met in
the course of construction, provided that Tenant's approval of any substantial
change shall first be obtained (which approval shall not be unreasonably
withheld or delayed so long as there shall be general conformity with the Plans
and Specifications). As of the commencement date of the lease term, the building
and the premises shall comply with all federal, state and local laws and
ordinances which are generally and uniformly administered and enforced against
landlords of warehouse buildings in the southern New Jersey marketplace, other
than to the extent such compliance is dependent on work performed or to be
performed by Tenant.
At such time as Landlord deems construction of the Premises sufficiently
completed to allow Tenant to do so, Landlord shall allow Tenant access to the
Premises prior to the Commencement Date for the construction and installation of
Tenant's Work. Prior to commencing such work, Tenant shall (i) obtain landlord's
written approval of professionally prepared plans and specifications, prepared
at Tenant's expense, for Tenant's Work, which approval shall not be unreasonably
withheld or delayed, and (ii) deliver to Landlord certificates of insurance
confirming that Tenant has in force the insurance required by this Lease and
that Tenant's contractor maintains commercial general liability insurance
written on an occurrence basis, with a combined single limit of not less than
$1,000,000, naming Landlord as an additional insured, workers' compensation
insurance in statutory amounts and employer liability insurance with a limit of
not less than $100,000. Tenant's entry into the Premises prior to the
Commencement Date shall be at Tenant's sole risk and subject to all of the terms
of this Lease (other than the obligation to pay rent). Any work or installation
performed by Tenant shall be subject to coordination by Landlord's contractor
and must be performed using workers compatible with Landlord's contractors and
subcontractors in order to avoid labor disputes and delays in completion.
Landlord shall not be responsible for any delays in completion of the Premises
attributable to installations or work performed by or on behalf of Tenant.
(d) Punchlist. After Landlord gives Tenant notice of the projected
---------
substantial completion of Landlord's Work as contemplated by Paragraph 1,
representatives of Landlord, Tenant and the general contractor shall inspect the
premises for the purpose of developing a comprehensive list of punchlist items
that require completion or repair. The punchlist items shall not suspend or
delay the commencement of the lease term, but Landlord shall, as soon as
reasonably possible following the commencement date, complete the punchlist
items.
(e) Construction Costs. Landlord shall pay $1,194,092 (the
------------------
"Allowance") towards the cost of designing, constructing and installing
Landlord's Work ("Landlord's Work Costs"). Landlord's Work Costs will include
all actual hard and soft costs incurred by Landlord in connection with the
construction of Landlord's Work, including but not limited to architectural and
engineering fees, the cost of labor and materials, including the general
contractor's overhead and profit, and a construction management fee to Landlord
equal to five percent (5%) of all such hard and soft costs. The portion of
Landlord's Work Costs in excess of the Allowance shall be paid by Tenant as
provided herein.
Based on the construction cost estimate provided by the general contractor
after review of the Space Plans and Tenant Summary Specifications, Landlord
estimates that the Landlord's Work Costs will be approximately $3,310,860. On or
about June 1, 1996, assuming that Tenant has timely responded to Landlord's
requests for review and approval of submitted Plans and Specifications, Landlord
will provide Tenant with an updated estimate of the Landlord's Work Costs, based
on updated bids provided by subcontractors. Within five (5) days after delivery
of such updated estimates of Landlord's Work Costs to Tenant, Tenant shall
deposit with Landlord, in cash, fifty percent (50%) of the amount by which the
estimated Landlord's Work Costs exceed the Allowance. Within five (5) days after
receipt of notice from Landlord that Landlord's Work is fifty percent (50%)
complete, Tenant shall deposit with Landlord, in cash, an additional twenty five
percent (25%) of the amount by which the estimated Landlord's Work Costs exceed
the Allowance.
Promptly after completion of the Premises, Landlord shall provide Tenant
with a statement in reasonable detail of the Landlord's Work Costs incurred by
Landlord in construction of the Premises. The remaining balance of the
Landlord's Work Costs in excess of the Allowance shall be paid by Tenant in a
lump sum payment due fifteen (15) days after receipt of Landlord's statement,
provided that Tenant shall have the right, by giving written notice to Landlord
within such fifteen (15) day period, to apply all or part of the net rent credit
granted Tenant pursuant to Paragraph 34 hereof against the payment otherwise due
from Tenant. In such event Tenant shall pay the difference between the total
amount due and the amount of the net rent credit applied against the total
amount due within such fifteen (15) day period. Tenant shall have the right to
review, at its request, all invoices, receipts and related records from the
architect, design consultants and general contractor included within the
Landlord's Work Costs.
(f) Removal at End of Term. Landlord reserves the right, upon the
----------------------
expiration or sooner
-18-
<PAGE>
termination of this Lease, to require Tenant to remove the configuration room,
including the special flooring in the configuration room and repair any damage
caused to the Premises by such removal. If Landlord exercises this right Tenant
shall remove the specified improvements in accordance with the requirements of
Paragraph 7 hereof. Tenant shall not be obligated to remove the mezzanine,
office area or secondary employee's entrance to be constructed as part of
Landlord's Work.
32. OPTION TO RENEW
---------------
While the Lease is in full force and effect, and provided that Tenant is
not in default of any of the terms, covenants, and conditions hereof, Tenant
shall have the right or option to extend the original term of the Lease for one
(1) further term of, at Tenant's option, either thirty six (36), forty eight
(48) or sixty (60) months. Such extension or renewal of the original term shall
be on the same terms, covenants, and conditions as provided in the original term
except that the annual net rental rate during the extended term shall be at the
greater of the fair market rental then being offered to similar third party
prospects by Landlord in Forest Park Corporate Center at the time of Tenant's
notification to Landlord of its intent to exercise this Option to Renew or the
annual net rental under this Lease for the year immediately preceding the
effective date of the extended term. Notice of Tenant's intention to exercise
the renewal option must be given to Landlord in writing no less than twelve (12)
months, nor more than eighteen (18) months prior to the expiration of the
original lease term. Such notice must specify the length of the renewal term
selected by Tenant. If no term is specified, Tenant will be deemed to have
selected a sixty (60) month renewal term.
In the event the Premises is sublet or this Lease assigned or available for
sublease or assignment, this Option to Renew shall be null, void, and of no
further effect.
33. ONE-TIME RIGHT OF FIRST OFFER CONTIGUOUS SPACE
----------------------------------------------
Provided Tenant is not in default of any of the terms and conditions of
this Lease, Landlord agrees to extend a one-time right of first offer to Tenant
on the 55,560 (approximate) square feet of contiguous space (the "Contiguous
Space") in the building as indicated on the attached Exhibit "B" which may
become vacant and available after its initial leasing to a third party tenant,
but only if the remaining term of this Lease at the time the Contiguous Space
becomes available (including any renewal option exercisable by Tenant) is not
less than three (3) years. This one-time right of first offer to lease the
Contiguous Space shall be subordinate to any extensions, renewals, or other
terms and conditions granted to the third party tenant in connection with the
initial leasing of the Contiguous Space. However, upon request from Tenant,
Landlord will use reasonable efforts to relocate the existing tenant of the
Contiguous Space to other space in Forest Park to permit Tenant's expansion into
the Contiguous Space, including payment by Landlord of all costs of relocating
the existing tenant. Tenant acknowledges that Landlord has no right to require
the existing tenant to relocate, so that any relocation would be subject to
negotiation of terms mutually satisfactory to the existing tenant and Landlord.
In the event the Contiguous Space becomes available to Tenant, Tenant shall have
the right to lease the entire Contiguous Space, but shall specifically not have
the right to lease only part of said Contiguous Space under this provision.
When and if such Contiguous Space should become available during the term
of this Lease, or at Landlord's option, up to six (6) months prior to the date
that the Contiguous Space is scheduled to become available, Landlord shall first
offer in writing to lease such Contiguous Space to Tenant and Tenant shall
accept such offer, if at all, in writing within fifteen (15) days after receipt
of such notice from Landlord. If Tenant shall not exercise this right of first
offer within the time period specified herein, this one-time right of first
offer of Contiguous Space shall be null, void, and of no further effect.
Notwithstanding the foregoing, in no event shall this one-time right of first
offer to lease Contiguous Space be in effect if this Lease is assigned or
available for assignment or if the Premises are subleased or available for
sublease. If this one-time right of first offer is exercised, the annual net
rent for the Contiguous Space shall be equal to the greater of the fair market
rental rate then being offered by Landlord to similar third party prospects in
Forest Park Corporate Center or the annual net rent then in effect on Tenant's
Premises at the time of Landlord's notice to Tenant of the availability of said
Contiguous Space. The lease term of the Contiguous Space shall be co-terminus
with the lease term for the Premises. In no event shall the lease term for the
Contiguous Space be for a period of less than three (3) years. If necessary to
assure a term of not less than three years, Tenant must exercise any available
renewal option in conjunction with its exercise of this one-time right of first
offer. Further, to assure a term of not less than three (3) years for the entire
premises following the commencement date with respect to the Contiguous Space,
Tenant may not exercise the termination option granted pursuant to paragraph 35
if as a result thereof this lease would expire less than three (3) years
following the commencement date with respect to the Contiguous Space. The
Contiguous Space shall be delivered to Tenant in its then "as-is" condition,
with no obligation on Landlord's part to construct tenant
-19-
<PAGE>
improvements. The lease of the Contiguous Space shall otherwise be on the same
terms and conditions as set forth in this Lease.
34. NET RENTAL ABATEMENT.
--------------------
Notwithstanding anything to the contrary contained herein, Landlord
hereby grants Tenant the use of the Premises free of Base Rent (i.e., without
payment of monthly Base Rent) for a period of four (4) months beginning on the
commencement date of the lease term (the "Rental Abatement Period"). The total
value of the free rent granted to Tenant pursuant to this paragraph is equal to
the sum of Four Hundred Twenty Two Nine Hundred Seven Dollars and Fifty Six
----------------------------------------------------------------
Cents ($422,907.56). Except for the non-payment of monthly Base Rent specified
- ----- ----------
herein, Tenant shall, throughout the Rental Abatement Period, be obligated to
make all other payments which Tenant is obligated to make pursuant to the terms
and conditions of this Lease and shall be subject to all of the other covenants
and conditions of this Lease. Tenant agrees that if, at any time during the
term of this Lease Agreement, there is a default of this Lease by Tenant which
remains uncured beyond any cure period specified herein, the value of the Rental
Abatement Period shall be deemed an additional obligation payable by Tenant.
Upon the occurrence of a default by Tenant under the terms and conditions of
this Lease, Tenant shall be required to pay the value of the Rental Abatement
Period upon demand by Landlord and any other amounts owed under the terms and
conditions of this Lease Agreement.
35. TERMINATION OPTION.
-------------------
Tenant shall have the option to terminate this Lease, at Tenant's election,
either as of the last day of the month in which the thirty six (36) month
anniversary of the commencement date falls, or the last day of the month in
which the forty eight (48) month anniversary of the commencement date falls.
Tenant may exercise this option only by giving Landlord written notice of
termination at least twelve (12) months prior to the designated termination
date. To be effective, Tenant's notice of termination must be followed by
payment to Landlord, no later than the date that is ninety (90) days prior to
the designated termination date, of a termination payment equal to the sum, as
of the designated termination date, of the unamortized portion of the tenant
improvement costs funded by Landlord, brokerage commissions and the value of the
Rental Abatement Period, amortized over the initial term with interest at 10.5%
per annum. Such termination payment is agreed to be $1,001,247.11 if the
termination is effective as of the 36th month anniversary and $526,768.17 if the
termination is effective as of the 48th month anniversary.
-20-
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Exhibit 11 - Computation of Per Share Earnings
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------- -----------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Primary earnings per common share
Net earnings $ 4,945 $ 4,827 $ 23,041 $ 13,476
Preferred dividend (225) (300) (675) (900)
---------- ---------- ----------- -----------
$ 4,720 $ 4,527 $ 22,366 $ 12,576
========== ========== =========== ===========
Average common shares outstanding 44,765 34,428 44,548 34,115
Average common share equivalents 2,566 2,778 2,722 2,361
---------- ---------- ----------- -----------
Average number of common shares and
common share equivalents outstanding 47,331 37,206 47,270 36,476
========== ========== =========== ===========
Primary earnings per common share $ .10 $ .12 $ .47 $ .34
========== ========== =========== ===========
Fully diluted earnings per common share
Primary net earnings $ 4,945 $ 4,827 $ 23,041 $ 13,476
Preferred dividend (300) (900)
Interest expense, net of income tax expense 23 250 69 750
---------- ---------- ----------- -----------
$ 4,968 $ 4,777 $ 23,110 $ 13,326
========== ========== =========== ===========
Average common shares outstanding 44,765 34,428 44,548 34,115
Average common share equivalents 2,566 2,971 2,723 3,137
Additional shares issuable 2,603 8,409 2,603 8,409
---------- ---------- ----------- -----------
Average number of common shares
assuming full dilution 49,934 45,808 49,874 45,661
========== ========== =========== ===========
Fully diluted earnings per common share $ .10 $ .10 $ .46 $ .29
========== ========== =========== ===========
</TABLE>
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of September 30, 1996 and the Consolidated
Statement of Operations for the nine months ended September 30, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,290
<SECURITIES> 0
<RECEIVABLES> 342,118
<ALLOWANCES> 2,332
<INVENTORY> 253,944
<CURRENT-ASSETS> 602,199
<PP&E> 67,621
<DEPRECIATION> 15,053
<TOTAL-ASSETS> 673,643
<CURRENT-LIABILITIES> 272,125
<BONDS> 234,408
0
15,000
<COMMON> 448
<OTHER-SE> 146,385
<TOTAL-LIABILITY-AND-EQUITY> 673,643
<SALES> 1,295,750
<TOTAL-REVENUES> 1,420,570
<CGS> 1,164,420
<TOTAL-COSTS> 1,248,722
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,368
<INCOME-PRETAX> 38,401
<INCOME-TAX> 15,360
<INCOME-CONTINUING> 38,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,041
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.46
</TABLE>
