<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 June 30, 1999 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)
7171 Forest Lane, Dallas, TX 75230
- ---------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 856-3600
---------------------------
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 August
12, 1999 was 47,659,950 shares.
- --------------------------------------------------------------------------------
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION Page
- ------- --------------------- ----
Item 1. Condensed Consolidated Balance Sheets
June 30, 1999 and December 31, 1998 (unaudited) 3
Condensed Consolidated Statements of Operations
Three and six months ended June 30, 1999 and 1998 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
PART II. OTHER INFORMATION
- -------- -----------------
Item 6. Exhibits and Reports on Form 8-K 19
2
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
Assets
------
Current assets:
Cash $ 4,516 $ 4,526
Receivables 411,655 262,380
Inventories 213,101 138,551
Other 7,515 9,965
-------------- --------------
Total current assets 636,787 415,422
Property and equipment, net 43,371 72,004
Cost in excess of fair value of tangible net assets
purchased, less accumulated amortization 87,290 54,786
Other 8,423 3,277
-------------- --------------
$775,871 $545,489
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable $332,919 $160,524
Accrued liabilities 74,835 89,218
Current portion of long-term debt 1,500
-------------- --------------
Total current liabilities 407,754 251,242
Long-term debt 157,391 81,929
Deferred income taxes 1,378
Other 659
Shareholders' equity:
Preferred stock 15,000 15,000
Common stock 477 474
Additional paid-in capital 66,987 66,329
Retained earnings 128,262 128,478
-------------- --------------
Total shareholders' equity 210,726 210,281
-------------- --------------
$775,871 $545,489
============= =============
</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)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue
Product $ 728,043 $ 530,495 $1,149,335 $ 907,273
Service 74,030 63,127 142,589 120,253
Other 522 3,935 3,991 7,782
-------------- -------------- --------------- ---------------
Total revenue 802,595 597,557 1,295,915 1,035,308
-------------- -------------- --------------- ---------------
Cost of revenue
Product 671,506 479,967 1,059,250 812,864
Service 48,967 43,372 94,205 82,131
Other 230 2,064 2,097 3,994
-------------- -------------- --------------- ---------------
Total cost of revenue 720,703 525,403 1,155,552 898,989
-------------- -------------- --------------- ---------------
Gross margin 81,892 72,154 140,363 136,319
Operating expenses
Selling 28,616 28,318 52,278 49,448
Service 11,699 13,039 22,607 27,704
General and administrative 24,865 15,698 44,164 30,578
Depreciation and amortization 6,302 3,696 10,389 7,026
-------------- -------------- --------------- ---------------
Total operating expenses 71,482 60,751 129,438 114,756
-------------- -------------- --------------- ---------------
Earnings from operations 10,410 11,403 10,925 21,563
Financing expenses 6,207 4,260 10,537 8,015
-------------- -------------- --------------- ---------------
Earnings before income taxes 4,203 7,143 388 13,548
Income taxes 1,681 2,857 155 5,419
-------------- -------------- --------------- ---------------
Net earnings $ 2,522 $ 4,286 $ 233 $ 8,129
============== ============== =============== ===============
Earnings per common share
Basic $ .05 $ .09 $ .00 $ .17
Diluted $ .05 $ .09 $ .00 $ .16
Average common shares outstanding
Basic 47,647 46,150 47,641 46,141
Diluted 48,091 49,514 47,641 50,025
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 233 $ 8,129
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 10,389 7,026
Deferred income taxes 1,012 (360)
Changes in assets and liabilities:
Receivables (151,880) (48,663)
Inventories 18,357 3,046
Other current assets (5,254) 191
Accounts payable 172,395 98,534
Accrued liabilities and other (17,414) (16,895)
---------------- ----------------
Net cash provided by operating activities 27,838 51,008
---------------- ----------------
Cash flows from investing activities:
Capital expenditures, net (4,002) (8,855)
Contributions to investee (576)
Proceeds from sale of building 39,791
Business acquisitions, net of cash acquired (137,235) (45,490)
---------------- ----------------
Net cash (used in) investing activities (102,022) (54,345)
---------------- ----------------
Cash flows from financing activities:
Net bank credit facility and other borrowings 98,962 3,616
Repayment of real estate loan (25,000)
Issuance of common stock 662 162
Preferred stock dividend (450) (450)
---------------- ----------------
Net cash provided by financing activities 74,174 3,328
---------------- ----------------
Net decrease in cash (10) (9)
Cash at beginning of period 4,526 4,456
---------------- ----------------
Cash at end of period $ 4,516 $ 4,447
================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1999
(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 1998 Annual Report on Form 10-K for CompuCom Systems, Inc. (the
Company). 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) 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.
(3) Earnings per share
In accordance with SFAS No. 128, "Earnings Per Share," basic earnings
per common share have been computed based on net earnings after preferred
stock dividend requirements and the weighted-average number of common
shares outstanding during each period. Diluted earnings per common share
assumes conversion of dilutive convertible securities into common stock at
the later of the beginning of the period or date of issuance and includes
the add-back of related interest expense and/or dividends, as required.
Earnings per common share have been computed as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Three months ended June 30, 1999 Six months ended June 30, 1999
-------------------------------------- --------------------------------------
Income Shares Income Shares
(Numerator) (Denominator) EPS (Numerator) (Denominator) EPS
----------- ------------- ----- ----------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Net earnings $2,522 $ 233
Less: Preferred stock dividends (225) (450)
Basic EPS
- ---------
Income available to common shareholders 2,297 47,647 $.05 (217) 47,641 $.00
Effect of dilutive securities
- -----------------------------
Stock options 439
Employee Stock Purchase Plan 5
Diluted EPS
- -----------
Income available + assumed conversions 2,297 48,091 $.05 (217) 47,641 $.00
=========== ============= ===== =========== ============= =====
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Three months ended June 30, 1998 Six months ended June 30, 1998
-------------------------------------- --------------------------------------
Income Shares Income Shares
(Numerator) (Denominator) EPS (Numerator) (Denominator) EPS
----------- ------------- ----- ----------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Net earnings $4,286 $ 8,129
Less: Preferred stock dividends (225) (450)
Basic EPS
- ---------
Income available to common shareholders 4,061 46,150 $.09 7,679 46,141 $ .17
Effect of dilutive securities
- -----------------------------
Stock options 1,148 1,280
Convertible preferred stock 225 2,216 450 2,216
Convertible debt - - 46 388
----------- ------------- ----------- -------------
Diluted EPS
- -----------
Income available + assumed conversions 4,286 49,514 $ .09 8,175 50,025 $ .16
=========== ============= ===== =========== ============= =====
</TABLE>
The Company has excluded 1,928,886 and 1,732,395 options from its
calculations of diluted earnings per share for the three and six months
ended June 30, 1999, and has excluded 1,815,037 and 497,942 options from
its calculations of diluted earnings per share for the three and six months
ended June 30, 1998, respectively, as they are considered anti-dilutive.
The shares excluded from the calculation for the six months ended June 30,
1999 represents all of the Company's weighted-average options outstanding
since the numerator used in calculating earnings per share is a negative
amount.
(4) Business Combinations
During 1998, the Company consummated three business combinations
(collectively, "the 1998 acquisitions"). The total consideration given for
these business combinations was approximately $49 million in cash. In
addition, the Company assumed liabilities of approximately $95 million, in
aggregate. The business combinations were accounted for as purchases and
accordingly the consolidated financial statements reflect the operations of
the acquired entities since the respective acquisition dates.
On May 10, 1999, the Company consummated the acquisition of the TASD
division of ENTEX Information Services, Inc ("the TASD acquisition"). The
total consideration given for this acquisition was approximately $137
million in cash. The business combination was accounted for as a purchase
and accordingly the condensed consolidated financial statements reflect the
operations of the acquired entity since the acquisition date. The Company
has not completed the allocation of the purchase price for this
acquisition. Therefore, the allocation of the purchase price recorded could
be adjusted once the evaluation of the assets acquired and liabilities
assumed is completed.
The following unaudited proforma financial information presents the
combined results of operations for the three and six months ended June 30,
1998 as if the 1998 acquisitions and the TASD acquisition had occurred as
of the beginning of 1998, after giving effect to certain adjustments,
including amortization of goodwill, increased financing expense on debt
related to the acquisitions, and related income tax effects. The proforma
results do not necessarily represent results which would have occurred if
the acquisition had taken place on the basis assumed above, nor are they
indicative of the results of future combined operations.
7
<PAGE>
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
Revenue $1,153,349 $2,194,550
Net loss ($1,187) ($274)
Diluted loss per share ($.03) ($.01)
The following unaudited proforma financial information presents the
Company's combined results of operations for the three and six months ended
June 30, 1999 as if the TASD acquisition had occurred as of the beginning
of 1999, after giving effect to certain adjustments, including amortization
of goodwill, increased financing expense on debt related to the
acquisitions, and related income tax effects. The proforma results do not
necessarily represent results which would have occurred if the acquisition
had taken place on the basis assumed above, nor are they indicative of the
results of future combined operations.
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
Revenue $990,095 $1,915,655
Net loss ($1,597) ($6,812)
Diluted loss per share ($.04) ($.15)
(5) Client Link/ E-Certify merger
On April 13, 1999, the Company completed the merger ("the E-Certify
merger") of its majority-owned subsidiary, ClientLink, Inc. ("ClientLink")
with E-Certify Corporation ("E-Certify"). The combined operations of
ClientLink and E-Certify will be conducted under the name E-Certify, Inc.
The Company has recorded its investment in E-Certify at the net carrying
amount of its investment in ClientLink and will account for the ongoing
operation using the equity method and as such has condensed its net
investment into a single investment account, which is included in Other
Non-current Assets as of June 30, 1999.
8
<PAGE>
(6) Restructuring Accrual
During the fourth quarter of 1998, the Company recorded a $16.4 million
restructuring charge, primarily consisting of costs associated with the
closing of facilities and disposing of related fixed assets as well as
employee severance and benefits related to a reduction in workforce. The
following table provides a summary of the restructuring charge by category
as well as a rollforward of the restructuring accrual through June 30,
1999:
<TABLE>
<CAPTION>
Restructuring Accrual at Cash Accrual at
Charge 12/31/98 Outlays 6/30/99
-------------------------------------------------------
<S> <C> <C> <C> <C>
Lease termination costs $ 7,259 $ 6,415 $ 4,408 $ 2,007
Employee severance and related benefits 3,804 2,986 1,988 998
Disposal of assets, net of estimated proceeds 3,044 2,907 1,300 1,607
Other 2,330 1,780 1,673 107
-------------------------------------------------------
Total $ 16,437 $ 14,088 $ 9,369 $ 4,719
=======================================================
</TABLE>
The Company expects the restructuring activities to be substantially
completed by the end of 1999 and believes the restructuring accrual is
adequate.
(7) Segment Information
The Company defines its operations as three distinct businesses - sales of
computer products ("product"); services, which includes configuration,
network integration, and technology support ("service") and ClientLink.
During the quarter ended June 30, 1999, ClientLink merged with E-Certify
and is accounted for on the equity basis after the merger.
The Company measures segment earnings as operating earnings, defined as
income before restructuring charges, financing expenses and income taxes.
All significant intersegment activity has been eliminated. Business assets
are the owned or allocated assets used by each business. The majority of
revenue in the "Other" column is royalties the Company receives from
previously sold businesses and other miscellaneous revenue. The "Other"
column also includes all assets not specifically allocated to a segment.
For the Quarter ended June 30, 1999
<TABLE>
<CAPTION>
Operating Results Product Service ClientLink, Inc. Other Total
----------------- -------- -------- ---------------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $728,043 $74,030 $ 522 $802,595
Gross margin 56,537 25,063 292 81,892
Operating
earnings 2,060 8,619 (269) 10,410
Total assets $573,445 $54,636 $ - $147,790 $775,871
</TABLE>
9
<PAGE>
For the Quarter ended June 30, 1998
<TABLE>
<CAPTION>
Operating Results Product Service ClientLink, Inc. Other Total
----------------- -------- -------- ---------------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $530,495 $63,127 $3,935 $ - $597,557
Gross margin 50,528 19,755 1,871 - 72,154
Operating
earnings 8,251 1,768 1,384 - 11,403
Total assets $450,925 $38,410 $3,113 $158,330 $650,778
</TABLE>
For the Six Months ended June 30, 1999
<TABLE>
<CAPTION>
Operating Results Product Service ClientLink, Inc. Other Total
----------------- -------- -------- ---------------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $1,149,335 $142,589 $3,991 $ - $1,295,915
Gross margin 90,085 48,384 1,894 140,363
Operating
earnings (6,717) 17,168 474 10,925
Total assets $ 573,445 $ 54,636 $ - $147,790 $ 775,871
</TABLE>
For the Six Months ended June 30, 1998
<TABLE>
<CAPTION>
Operating Results Product Service ClientLink, Inc. Other Total
----------------- -------- -------- ---------------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $907,273 $120,253 $7,737 $ 45 $1,035,308
Gross margin 94,408 38,123 3,743 45 136,319
Operating
earnings 15,565 3,948 2,005 45 21,563
Total assets $450,925 $ 38,410 $3,113 $158,330 $ 650,778
</TABLE>
10
<PAGE>
(8) Financing Arrangements
During the three months ended June 30, 1999, the Company finalized the
following new credit agreements: a) a $175 million receivables
securitization and b) a $225 million working capital facility. These new
credit facilities replaced the Company's previous securitization and
working capital facility. The new securitization, which has a term of 3
years, allows the Company to sell an interest in its accounts receivable on
a revolving basis and is accounted for as a sale of accounts receivable in
accordance with Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". As of June 30, 1999 the Company has fully
utilized the securitization. The new working capital facility, which
matures in May 2002, bears interest at LIBOR plus an agreed-upon spread and
is secured by a lien on the Company's assets. As of June 30, 1999, the
interest on the revolver was 6.7%. Both of the new facilities require the
Company to maintain compliance with selected financial covenants and
ratios.
(9) Reclassification
Certain amounts in the 1998 condensed consolidated financial statements
have been reclassified to conform with the 1999 presentation.
11
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
June 30, 1999
Results of Operations
The following table shows the Company's total revenue, gross margin and gross
margin percentage by revenue source. Operating expenses, financing expense,
income taxes and net earnings are shown as a percentage of total net revenue for
the three and six months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenue:
Product $ 728,043 $ 530,495 $ 1,149,335 $ 907,273
Service 74,030 63,127 142,589 120,253
Other 522 3,935 3,991 7,782
---------------- ---------------- ---------------- -----------------
Total revenue 802,595 597,557 1,295,915 1,035,308
---------------- ---------------- ---------------- -----------------
Gross margin:
Product 56,537 50,528 90,085 94,408
Service 25,063 19,755 48,384 38,123
Other 292 1,871 1,894 3,788
---------------- ---------------- ---------------- -----------------
Total gross margin 81,892 72,154 140,363 136,319
---------------- ---------------- ---------------- -----------------
Gross margin percentage:
Product 7.8% 9.5% 7.8% 10.4%
Service 33.9% 31.3% 33.9% 31.7%
Other 55.9% 47.5% 47.5% 48.7%
---------------- ---------------- ---------------- -----------------
Total gross margin percentage 10.2% 12.1% 10.8% 13.2%
Operating expenses:
Selling 3.6% 4.8% 4.0% 4.8%
Service 1.5% 2.2% 1.8% 2.7%
General and administrative 3.0% 2.6% 3.4% 2.9%
Depreciation and amortization 0.8% 0.6% 0.8% 0.7%
---------------- ---------------- ---------------- -----------------
Total operating expenses 8.9% 10.2% 10.0% 11.1%
---------------- ---------------- ---------------- -----------------
Earnings from operations 1.3% 1.9% 0.8% 2.1%
Financing expenses 0.8% 0.7% 0.8% 0.8%
---------------- ---------------- ---------------- -----------------
Earnings before income taxes 0.5% 1.2% 0.0% 1.3%
Income taxes 0.2% 0.5% 0.0% 0.5%
---------------- ---------------- ---------------- -----------------
Net earnings 0.3% 0.7% 0.0% 0.8%
================ ================ ================ =================
</TABLE>
(Continued)
12
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
COMPARISON OF THE QUARTER ENDED JUNE 30, 1999 TO THE QUARTER ENDED JUNE 30, 1998
Product revenue, which is primarily derived from the sale of distributed
desktop computer products to corporate customers, increased approximately 37% to
$728 million in the second quarter of 1999 from $530 million in the second
quarter of 1998. The increase in product revenue is a result of the TASD
acquisition. The Company's products have traditionally exhibited relatively
short life cycles and rapidly declining prices. As a result, the Company must
sell more units to generate the same amount of revenue as the prior year.
During the three months ended June 30, 1999, the Company continued to experience
a decline in average selling prices ("ASPs") in desktops, laptops and servers
when compared to the prior year. However, the rate of decline in ASPs has slowed
compared to recent history. Due to the declining ASPs, the Company's growth in
desktop, laptop and server units shipped has outpaced its related product
revenue growth. Product gross margin as a percentage of product revenue for the
second quarter of 1999 was 7.8% compared to 9.5% for the second quarter of 1998.
The Company attributes this decline primarily to heightened competition from
direct marketers and other corporate resellers and a reduction in manufacturer
sponsored incentives. The Company expects to continue to experience lower
product gross margin percentages when compared to the comparable prior year
period.
Service revenue increased approximately 17% to $74.0 million for the second
quarter of 1999 from $63.1 million during the second quarter of 1998. Service
revenue is primarily derived from LAN/WAN projects, consulting, asset tracking,
network management, help desk, field engineering, procurement, configuration,
distribution, and software management. 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
is due to increases in both configuration and field engineering, both of which
benefited from the increase in product unit sales volume. Service gross margin
as a percentage of service net revenue for the three months ended June 30, 1999
was 33.9% compared to 31.3% for the same period in 1998. The increase was
primarily due to improved performance in the Company's field engineering
business. In the short term, the Company expects to continue to experience
improved service gross margin percentages when compared to the comparable prior
year period.
Selling expense increased approximately $0.3 million for the three months
ended June 30, 1999 as compared to the same prior year period. This increase is
primarily a result of the TASD acquisition, which resulted in an increase in
sales and sales support personnel. In addition, the Company incurred
professional services fees related to the integration of the TASD business into
its operations. These incremental costs were offset partially by the Company's
cost reduction efforts related to the 1998 restructuring. Although the TASD
acquisition resulted in an increase in the dollar amount of selling expense,
selling expense as a percentage of revenue declined to approximately 3.6% of
revenue for the three months ended June 30, 1999 from approximately 4.8% for the
same prior year period. The Company attributes this decline to increased
leverage of its infrastructure resulting from the TASD acquisition and its own
cost reduction efforts.
Service expense decreased approximately $1.3 million to $11.7 million for
the three months ended June 30,1999 from $13.0 million for the same prior year
period. As a result of the E-Certify merger, the Company no longer consolidates
ClientLink and consequently does not reflect ClientLink's expenses subsequent to
the E-Certify merger in the service expense line. The Company's equity interest
in E-Certify's Loss is recorded in general and administrative expense. The
Company's interest in the loss was less than $0.2 million.
(Continued)
13
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
General and administrative expense increased to approximately $24.9 million
for the three months ended June 30, 1999 from $15.7 million for the same period
in the prior year. This increase was primarily due to expenditures to continue
expansion of the Company's electronic commerce capabilities as well as increases
in distribution and administrative personnel to support the Company's revenue
growth and expenses related to the TASD acquisition. 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.
Depreciation and amortization expense increased for the three months ended
June 30, 1999 in absolute dollars and as a percentage of net revenue when
compared to the same period in 1998. The increase primarily relates to
amortization of goodwill on two business combinations that were completed during
the second quarter of 1998. The Company completed the allocation of the
purchase price on these two acquisitions during the three months ended June 30,
1999. A portion of the purchase price was allocated to customer lists which
were deemed to have a shorter useful life than the associated goodwill. As a
result, the Company recorded approximately $0.7 million in incremental
amortization expense related to the customer lists during the three months ended
June 30, 1999.
Financing expense remained flat as a percentage of net revenue, but
increased in absolute dollars for the three months ended June 30, 1999, as
compared to the same period in 1998. During the three months ended June 30, 1999
the Company incurred approximately $1 million in charges related to the
extension of its previous credit facilities until the new credit facilities were
finalized. These charges, along with higher borrowing levels due to the TASD
acquisition, were the primary reasons for the increase in financing expenses.
As a result of the factors discussed above, net earnings decreased 41% for
the quarter ended June 30, 1999 to $2.5 million compared to $4.3 million for the
same period in 1998. However, net earnings improved from the $2.3 million net
loss experienced in the first quarter of 1999.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 TO THE SIX MONTHS ENDED
JUNE 30, 1998
Product revenue increased approximately 27% to $1.1 billion for the six
months ended June 30, 1999 from approximately $907 million in the same period of
1998. The increase in product revenue is a result of the TASD acquisition. The
Company's products have traditionally exhibited relatively short life cycles and
rapidly declining prices. As a result, the Company must sell more units to
generate the same amount of revenue as the prior year. During the six months
ended June 30, 1999, the Company continued to experience a decline in average
selling prices ("ASPs") in desktops, laptops and servers when compared to the
prior year. However, the rate of decline in ASPs has slowed compared to recent
history. Due to the declining ASPs, the Company's growth in desktop, laptop and
server units shipped has outpaced its related product revenue growth. Product
gross margin as a percentage of product revenue for the six months ended June
30, 1999 was 7.8% compared to 10.4% for the same period in 1998. The Company
attributes this decline primarily to heightened competition from direct
marketers and other corporate resellers and a reduction in manufacturer
sponsored incentives.
(Continued)
14
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Service revenue increased approximately 19% to $143 million for the six
months ended June 30, 1999 from $120.3 million during the same period of 1998.
The increase in service revenue is due to increases in both configuration and
field engineering, which are typically driven in part by product unit sales
volume. Service gross margin as a percentage of service net revenue was 33.9%
for the first half of 1999 compared to 31.7% for the same period in 1998. The
increase was primarily caused by improved performance in the Company's field
engineering business.
Selling expense increased approximately $2.8 million for the six months
ended June 30, 1999 as compared to the same prior year period. This increase is
primarily a result of the TASD acquisition, which resulted in an increase in
sales and sales support personnel. In addition, the Company incurred certain
professional services fees related to the integration of the TASD business into
its operations. These incremental costs were offset partially by the Company's
cost reduction efforts related to the 1998 restructuring. Although the TASD
acquisition resulted in an increase in the dollar amount of selling expense,
selling expense as a percentage of revenue declined to approximately 4.0% of
revenue for the six months ended June 30, 1999 from approximately 4.8% for the
same prior year period. The Company attributes this decline to increased
leverage of its infrastructure resulting from the TASD acquisition and its own
cost reduction efforts.
Service expense decreased in both dollar terms and as a percentage of
revenue for the six months ended June 30, 1999 when compared to the comparable
prior year period. The decrease was primarily a result of the Company's cost
reduction efforts as well as a change in the timing of certain training expenses
for the Company's service personnel.
General and administrative expense increased to $44.2 million for the six
months ended June 30, 1999 from $30.6 million for the same period in the prior
year. This increase is primarily due to expenditures to continue expansion of
the Company's electronic commerce capabilities as well as increases in
distribution and administrative personnel to support the Company's revenue
growth and expenses resulting from the TASD acquisition. General and
administrative expense, as a percentage of net revenue, increased for the six
months ended June 30, 1999 to 3.4% compared to 2.9% for the comparable period of
the prior year. 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.
Depreciation and amortization expense increased for the six months ended
June 30, 1999 in absolute dollars and as a percentage of net revenue when
compared to the same period in 1998. The increase primarily relates to
amortization of goodwill on two business combinations that were completed during
the second quarter of 1998. The Company completed the allocation of the
purchase price on these two acquisitions during the six months ended June 30,
1999. A portion of the purchase price was allocated to customer lists which
were deemed to have a shorter useful life than the associated goodwill. As a
result, the Company recorded approximately $0.7 million in incremental
amortization related to the customer lists during the six months ended June 30,
1999.
Financing expense remained relatively flat as a percentage of revenue but
increased in absolute dollars for the six months ended June 30, 1999, as
compared to the same period in 1998. During the six months ended June 30, 1999
the Company incurred approximately $1 million in charges related to the
extension of its previous credit facililities until the new credit facilities
were finalized. These charges, along with higher borrowing levels due to the
TASD acquisition, were the primary reasons for the increase in financing
expenses.
(Continued)
15
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
As a result of the factors discussed above, net earnings decreased 97% for
the six months ended June 30, 1999 to $0.2 million compared to $8.1 million for
the same period in 1998.
Liquidity and Capital Resources
Working capital at June 30, 1999 was $229 million compared to $164 million
at December 31, 1998. The increase is primarily due to an increase in accounts
receivable resulting from higher revenues in the three months ended June 30,
1999 than in the three months ended December 31, 1998 and an increase in
inventory partially offset by an increase in accounts payable, resulting from
the TASD acquisition. The Company's accounts payable balance fluctuates relative
to the timing of the receipts of product and the mix of vendors.
The Company's working capital requirements are generally funded through
financing arrangements and internally generated funds. During the second
quarter of 1999, the Company finalized negotiations on its new credit
facilities. As of June 30, 1999 the Company's financing arrangements consisted
of a $175 million receivables securitization facility ("the Securitization") and
a $225 million working capital facility ("the Revolver") (collectively, "the
Credit Agreements"). The Securitization utilizes a master trust structure to
provide the Company increased flexibility in regards to term and pricing options
available to it. As of June 30, 1999 the Company has fully utilized the
Securitization with pricing based on a designated short term interest rate plus
an agreed-upon spread. The Company plans to increase the Securitization to $250-
$300 million during the second half of 1999. The Revolver is scheduled to be
reduced by $25 million in September 1999 and by an additional $25 million in May
2000. The Revolver bears interest at LIBOR plus an agreed upon spread and is
secured by a lien on the Company's assets. Availability under the Revolver is
subject to a borrowing base calculation and compliance with certain financial
covenants. As of June 30, 1999 the Company had sufficient collateral to enable
it to fully utilize the Revolver and had $155 million outstanding under the
Revolver. The Company does not expect its effective interest rate under the new
facilities to be materially different from the levels it experienced in 1998.
The Company's liquidity continues to be negatively impacted by vendor
rebate programs, which generally exist to enable the Company to sell its
products at a price that is competitive with direct marketers. Under these
programs, the Company is required to pay a higher initial price for product and
claim a rebate to reduce the price. As a result of the administrative
requirements of the vendors, the collection of these rebates can take several
months. Due to these programs, the Company's initial price for the product is
often higher than the sales price the Company can obtain from its customers. As
of June 30, 1999 these programs are a material factor in the Company's financing
needs. As of June 30, 1999, the Company was owed approximately $83 million
under these programs.
The Company's 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. Excluding acquisitions, capital
expenditures were approximately $4.0 million for the six months ended June 30,
1999 as compared to $8.9 million for the same period in 1998. The majority of
the 1999 and 1998 capital expenditures were related to the upgrading of Company
hardware and software. The Company does not expect capital expenditures in the
second half of 1999 to be materially different from the first half expenditures.
16
<PAGE>
Year 2000 Readiness Disclosure
The Year 2000 issue results from the fact many computer programs were
previously written using two digits rather than four to define the applicable
year. Programs written in this way may recognize a date ending in "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing business delays and disruptions of operations. The
Company has developed a step-by-step plan which details the tasks, deliverables,
resources, and target dates necessary to monitor the Company's information
systems at the turn of the century and beyond. Assessment of the Company's
systems has been divided into five areas - Core information systems and
components ("Core IS"), Distributed Desktop systems, Non-IS systems, new IS
purchases by the Company, and mergers and acquisitions.
The Company's Core IS includes purchasing, order management, warehouse
management, distribution, service dispatch, service parts, engineer billing,
human resources and financial information systems. Distributed Desktop systems
include all desktop computers and related components used by the Company's
associates, wherever they are located. Initial assessment of these systems has
included the identification of each hardware, software, tool, and package
comprising these systems to determine whether or not they support Year 2000 date
codes. Testing, remediation, and validation of the Company's Core IS and
Distributed Desktop systems is planned to be completed by the end of the
September quarter. Remediation includes the enhancement, upgrading, migration,
or replacement of non-compliant hardware, software, tools and/or systems.
Validation entails testing of all systems including a "quality control"
environment in which the date is artificially set forward to the Year 2000 to
simulate the turn of the century and beyond. The Company has also purchased a
Year 2000 compliance software package that will generate audit reports on a
regular basis to report any noncompliant Distributed Desktop systems. The
Company began using this software package in January 1999 and will produce and
review the reports on a regular basis through 2000.
Non-IS systems include all microcontroller systems and back-up processes of Core
IS. Microcontroller systems comprise all electronic systems such as telephones,
security systems, alarms, etc. Initial assessment and remediation of the
Company's Non-IS Systems was completed during the first quarter of 1999. The
Company reviews each of its new potential hardware and software purchases to
ensure they are Year 2000 compliant. The Company completed three acquisitions
during 1998 and the TASD acquisition in 1999; however, these acquisitions have
been integrated into the Company and the major processes of the acquired systems
have been replaced with the Company's Core IS.
As part of its Year 2000 assessment, the Company must also consider the
compliance of third parties with which the Company has a material relationship,
namely its vendors, suppliers, and customers. The Company relies on vendors and
suppliers for hardware, software, and tools used within its own business
environment. The Company has developed a Year 2000 questionnaire which has been
sent to its vendors and suppliers in order to ascertain whether vendors and
suppliers warrant their hardware, software, and tools to be Year 2000 compliant
and whether vendors and suppliers have adequately addressed the Year 2000 issue.
The Company has documented compliance via the questionnaire of the hardware,
software, and tools currently in use. By the end of June 1999, the Company
upgraded, replaced or decommissioned any noncompliant vendors and suppliers of
hardware, software and tools currently in use.
Noncompliance could result in a system failure, business delays, and/or
disruptions in operations. The Company is in the process of developing a
contingency plan in case a Year 2000 problem occurs. As a reseller of computer
products, the Company only passes through to its customers the applicable
vendor's warranties; it generally makes no warranties regarding Year 2000
compliance on any of the products it resells. However, if one of the Company's
major vendors or suppliers is found to be Year 2000 noncompliant, which is not
corrected on a timely basis, it could have a material adverse effect on the
Company's results of operations. Due to that fact, the Company is continuing the
process of obtaining assurances from its vendors and suppliers regarding their
readiness for Year 2000.
17
<PAGE>
The Company's plan also includes the availability of a test team that will test
the Company's information systems on an on-going basis to further validate that
additions or modifications to any of the Company's systems do not create Year
2000 compliance issues. The Company's expectations with respect to the Year
2000 issues noted above are based on the premise there will be no material
general failure of external systems (including power, communications,
transportation or financial systems) necessary for the ordinary conduct of
business. At the present time, the company is developing a contingency plan to
operate in the event its computer systems or those of its vendors, suppliers, or
customers are not Year 2000 compliant. The Company expects to have this
contingency plan completed by October 1999.
The Company currently anticipates it will spend approximately $1,400,000 on Year
2000 compliance, of which approximately $934,000 has been spent through June
1999. The majority of the remaining expense is expected to be for previously
identified desktop equipment and full-time associates dedicated to the Year 2000
compliance effort. All previous as well as future expenditures on Year 2000
compliance have or will come from operating cash flow or the Company's credit
facilities.
This document contains certain forward-looking statements regarding revenues,
margin, earnings, growth rates and certain business trends that involve risks
and uncertainties that could cause actual results to differ materially from the
results discussed herein, specifically, the recent sales training may not
continue or be sufficient to increase service growth acceleration; the
restructuring cost reductions may not be adequate to offset costs needed for
other operations; and additional product cost reductions may continue to reduce
revenues, margins, and earnings. Other factors that could cause actual results
to differ materially are: the Company's ability to successfully integrate the
TASD acquisition into its operations, the Company's ability to effectively
manage inventory levels in response to changes in its major suppliers' price
protection and return programs, the Company's ability to sell its services and
effectively manage the utilization of service personnel, the Company's ability
to respond to increased competition from its suppliers' direct selling
initiatives, the Company's ability to reduce operating expenses at a pace equal
to the decline in margin percentages, competitive pricing and supply, short-term
interest rate fluctuations, general economic conditions, employee turnover and
possible future litigation, as well as the risks and uncertainties set forth
from time to time in the Company's other public reports and filings and public
statements.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to interest rate risk primarily through its
Securitization and Revolver facilities. The Company utilizes these facilities
for its working capital and other borrowing needs. As of June 30, 1999 the
Company had $175 million outstanding under the Securitization and $155 million
outstanding under the Revolver. If the Company's effective interest rate were
to increase by 75 basis points (.75%), the impact on the Company's net income
would recognize approximately $1.8 million in annual incremental financing
expense based on the average outstandings under the Securitization and Revolver
during the six months ended June 30, 1999.
18
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description
------- ----------------------------------
2.1* Asset Purchase Agreement, dated as of May 10, 1999, by and
between CompuCom Systems, Inc. and ENTEX Information
Services, Inc.
10.1 CompuCom Receivables MasterTrust I Pooling and Servicing
Agreement, dated as of May 7, 1999, between Norwest Bank
Minnesota National Association, CompuCom Systems, Inc., and
CSI Funding, Inc.
10.2 CompuCom Receivables MasterTrust I Pooling and Servicing
Agreement Series 1999-1 Supplement, dated as of May 7, 1999,
among PNC Bank, National Association, Market Street Capital
Corporation, Norwest Bank Minnesota, National Association,
CompuCom Systems, Inc., and CSI Funding, Inc.
10.3 Inventory and Working Capital Financing Agreement, dated as
of May 11, 1999, between IBM Credit Corporation and CompuCom
Systems, Inc.
10.4 Attachment A to Inventory and Working Capital Financing
Agreement dated May 11, 1999.
10.5 Receivables Contribution and Sale Agreement dated May 7, 1999
between CompuCom Systems, Inc. and CSI Funding, Inc.
10.6** Non-Competition, Referral and Non-Disclosure Agreement dated
as of May 10, 1999, by and between CompuCom Systems, Inc. and
ENTEX Information Services, Inc.
27 Financial Data Schedule
* Filed on May 25, 1999 as Exhibit 2.1 to Form 8-K and
incorporated herein by reference.
** Filed on May 25, 1999 as Exhibit 10.1 to Form 8-K and
incorporated herein by reference.
(b) Reports on Form 8-K
-------------------
1. On May 25, 1999 the Company filed a Current Report on Form 8-K to
announce its acquisition of certain assets of the Technology Acquisition
Services Division of ENTEX Information Services, Inc.
19
<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: August 16, 1999 /s/ Harry Wallasea
----------------------------------
Harry Wallasea,
Chief Executive Officer
DATE: August 16, 1999 /s/ M. Lazane Smith
----------------------------------
M. Lazane Smith,
Senior Vice President, Finance and
Chief Financial Officer
20
<PAGE>
EXHIBIT 10.1
CSI FUNDING, INC.,
Transferor,
COMPUCOM SYSTEMS, INC.,
Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee
on behalf of the Certificateholders
COMPUCOM RECEIVABLES MASTER TRUST I
POOLING AND SERVICING AGREEMENT
Dated as of May 7, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS 1
Section 1.01 Definitions 1
Section 1.02 Other Definitional Provisions 1
Section 1.03 Calculations and Payments 2
ARTICLE II
CONVEYANCE OF RECEIVABLES; ISSUANCE OF CERTIFICATES 2
Section 2.01 Conveyance of Receivables 2
Section 2.02 Declaration of Trust; Acceptance by Trustee 3
Section 2.03 Representations and Warranties of the Transferor Relating
to the Transferor 3
Section 2.04 Representations and Warranties of the Transferor Relating
to the Agreement and any Supplement and the Receivables;
Reassignment of Receivables 7
Section 2.05 Covenants of the Transferor 10
Section 2.06 Authentication of Certificates 14
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES 14
Section 3.01 Acceptance of Appointment and Other Matters Relating to
the Servicer 15
Section 3.02 Servicing Compensation 18
Section 3.03 Representations, Warranties and Covenants of the Servicer 19
Section 3.04 Records and Reports for the Trustee 24
Section 3.05 Annual Servicer's Certificate 25
Section 3.06 Annual Independent Public Accountants' Servicing Report 25
Section 3.07 Tax Treatment 26
Section 3.08 Notices to Transferor 27
Section 3.09 Dilution Factors 27
Section 3.10 Covenant to Maintain Privileges 27
ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS 27
Section 4.01 Rights of Certificateholders 27
Section 4.02 Establishment of Collection Account 28
Section 4.03 Collections and Allocations 29
Section 4.04 Daily Allocations of Collections Allocated to a Series 31
Section 4.05 Determination of Interest Distributable on Investor
Certificate 31
Section 4.06 Determination of Principal Distributable on Investor
Certificates 31
<PAGE>
Section 4.07 Distributions from Series Collection Sub-subaccounts 31
Section 4.08 Funds Unrelated to Receivables 31
ARTICLE V DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS 32
Section 5.01 Distributions 32
Section 5.02 Monthly Investor Certificateholders' Statement; Annual Tax
Statement 32
ARTICLE VI
THE CERTIFICATES 33
Section 6.01 The Certificates 33
Section 6.02 Authentication of Certificates 33
Section 6.03 Registration of Transfer and Exchange of Certificates 34
Section 6.04 Mutilated, Destroyed, Lost or Stolen Certificates 36
Section 6.05 Persons Deemed Owners 36
Section 6.06 Appointment of Paying Agent 37
Section 6.07 Access to List of Certificateholders' Names and Addresses 37
Section 6.08 Authenticating Agent 38
Section 6.09 New Issuances 39
Section 6.10 Book-Entry Certificates 40
Section 6.11 Notices to Clearing Agency 41
Section 6.12 Definitive Certificates 41
Section 6.13 Letter of Representations 42
ARTICLE VII OTHER MATTERS RELATING TO THE TRANSFEROR 42
Section 7.01 Liability of the Transferor 42
Section 7.02 Merger or Consolidation of, or Assumption of the Obligations
of, the Transferor 42
Section 7.03 Limitation on Liability of the Transferor 43
ARTICLE VIII OTHER MATTERS RELATING TO THE SERVICER 43
Section 8.01 Liability of the Servicer 43
Section 8.02 Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer 43
Section 8.03 Limitation on Liability of the Servicer and Others 44
Section 8.04 Servicer Indemnification of the Trust and the Trustee 44
Section 8.05 The Servicer Not to Resign 44
Section 8.06 Access to Certain Documentation and Information Regarding the
Receivables 45
Section 8.07 Delegation of Duties 45
Section 8.08 Examination of Records 45
Section 8.09 Successor Servicer Indemnification of Transferor 45
<PAGE>
ARTICLE IX EARLY AMORTIZATION EVENTS 46
Section 9.01 Early Amortization Events with Respect to Any Series 46
Section 9.02 Additional Rights Upon the Occurrence of Certain Events 47
ARTICLE X SERVICER DEFAULTS 49
Section 10.01 Servicer Defaults 49
Section 10.02 Trustee to Act; Appointment of Successor Servicer 51
Section 10.03 Notification to Certificateholders 52
Section 10.04 Waiver of Past Defaults 52
ARTICLE XI THE TRUSTEE 53
Section 11.01 Duties of Trustee 53
Section 11.02 Certain Matters Affecting the Trustee 55
Section 11.03 Trustee Not Liable for Recitals in Certificates 56
Section 11.04 Trustee May Own Certificates, Etc. 57
Section 11.05 The Servicer to Pay Trustee's (and Paying Agent's) Fees
and Expenses 57
Section 11.06 Eligibility Requirements for Trustee 58
Section 11.07 Resignation or Removal of Trustee 58
Section 11.08 Successor Trustee 59
Section 11.09 Merger or Consolidation of Trustee 59
Section 11.10 Appointment of Co-Trustee or Separate Trustee 59
Section 11.11 Tax Returns 61
Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates 61
Section 11.13 Suits for Enforcement 61
Section 11.14 Rights of Certificateholders to Direct Trustee 62
Section 11.15 Representations and Warranties of Trustee 62
Section 11.16 Maintenance of Office or Agency 63
Section 11.17 Statements, Certificates and Reports 63
ARTICLE XII TERMINATION 63
Section 12.01 Termination of Trust 63
Section 12.02 Optional Purchase and Series Termination Date of Investor
Certificates of any Series 64
Section 12.03 Final Payment 64
Section 12.04 Transferor's Termination Rights 65
ARTICLE XIII MISCELLANEOUS PROVISIONS 66
Section 13.01 Amendment 66
Section 13.02 Protection of Right, Title and Interest of Trust 67
Section 13.03 Limitation on Rights of Certificateholders 68
<PAGE>
Section 13.04 Governing Law 69
Section 13.05 Notices 69
Section 13.06 Severability of Provisions 69
Section 13.07 Assignment 70
Section 13.08 Certificates Nonassessable and Fully Paid 70
Section 13.09 Further Assurances 70
Section 13.10 No Waiver; Cumulative Remedies 70
Section 13.11 Counterparts 70
Section 13.12 Third-Party Beneficiaries 70
Section 13.13 Actions by Certificateholders 71
Section 13.14 Merger and Integration 71
Section 13.15 Headings 71
Section 13.16 Enhancement Providers 71
Section 13.17 Schedules and Exhibits 72
Section 13.18 Assignment of Related Property 72
Section 13.19 No Proceedings 72
Section 13.20 Texas Limited Liability Company Act 72
Section 13.21 Rating Agencies 73
<PAGE>
EXHIBITS
- --------
Exhibit 3.01(i) List of Post Office Boxes, Banks and Accounts
Exhibit 3.01(i)(D) Form of Lock-Box/Transfer Receipt Account Agreement
Exhibit 3.04(b) Form of Daily Report
Exhibit 3.04(c) Form of Settlement Statement
Exhibit 3.04(d) List of Data Fields
=============== ===================
Exhibit 3.05 Form of Annual Servicer's Certificate
Exhibit 4.02(c) Collection Account, Collection Master Subaccount
and Transferor Collection Subaccount
Exhibit 6.01 Form of Transferor Certificate
Exhibit 6.03(d) Form of Transferee Representation Letter
ANNEX
- -----
Annex X Definitions
<PAGE>
THIS POOLING AND SERVICING AGREEMENT, dated as of May 7, 1999, is by and
among CSI FUNDING, INC., a Delaware corporation, as Transferor, COMPUCOM
SYSTEMS, INC., a Delaware corporation, as Servicer, and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association, as Trustee.
This Pooling and Servicing Agreement shall be applicable to the maintenance
of the Trust and the governance of the Transferor Certificate and, upon the
execution of any Supplement, shall apply also to the issuance of any Series of
Certificates issued thereby.
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties, for the benefit of the
Certificateholders and for the benefit of any Enhancement Provider with respect
to any Series to the extent provided herein:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. For all purposes of this Agreement, except as
-----------
otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions attached hereto as Annex X which is
-------
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.
"Agreement" means this Pooling and Servicing Agreement as it may from time
---------
to time be amended, supplemented or otherwise modified in accordance with the
terms hereof, including by any Supplement.
Section 1.02 Other Definitional Provisions.
-----------------------------
(a) All terms defined in any Supplement or this Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Annex X or
-------
otherwise defined herein, and accounting terms partly defined in Annex X or
-------
otherwise defined herein, to the extent not defined, shall have the respective
meanings given to them under GAAP. To the extent that the definitions of
accounting terms herein or in
1
<PAGE>
Annex X are inconsistent with the meanings of such terms under GAAP, the
- -------
definitions contained herein or in Annex X shall control.
-------
(c) The agreements, representations and warranties of CompuCom in this
Agreement in its capacity as Servicer shall be deemed to be the agreements,
representations and warranties of CompuCom solely in such capacity.
(d) The words "hereof," "herein" and "hereunder" and words of similar
------ ------ ---------
import when used in this Agreement or any Supplement shall refer to such
Supplement or this Agreement, as the case may be, as a whole and not to any
particular provision of such Supplement or this Agreement, as the case may be;
and Section, Schedule and Exhibit references contained in this Agreement or any
Supplement are references to Sections, Schedules and Exhibits in or to this
Agreement or such Supplement unless otherwise specified.
(e) The word "including" (and with correlative meaning "include") means
--------- -------
including without limiting the generality of any description preceding such
term.
Section 1.03 Calculations and Payments. Unless otherwise specified
-------------------------
herein, expressions of a time of day refer to such time in New York, New York.
Except as otherwise specified in this Agreement or in a Supplement, amounts
payable hereunder shall be paid in immediately available funds. Whenever any
reference is made to an amount or time the determination or calculation of which
is governed by this Section 1.03, the provisions of this Section 1.03 shall be
------------ ------------
applicable to such determination or calculation, whether or not reference is
specifically made to this Section 1.03, unless some other method of
------------
determination or calculation is expressly specified in the particular provision.
2
<PAGE>
ARTICLE II
CONVEYANCE OF RECEIVABLES; ISSUANCE OF CERTIFICATES
Section 2.01 Conveyance of Receivables. By execution of this Agreement
-------------------------
the Transferor does hereby assign, transfer and otherwise convey to the Trust
from time to time, without recourse (except as specifically provided herein),
and without any other formal or other written instrument of assignment, all of
the Transferor's right, title and interest in, to and under (i) all Receivables
existing on the date of execution hereof and all Receivables thereafter
generated (but excluding Reconveyed Receivables), (ii) all Related Property,
(iii) all monies due or to become due with respect thereto and (iv) all
Collections and other proceeds (as defined in the UCC) of any of the foregoing.
Such property, together with (x) all monies relating to the Receivables on
deposit in the Collection Account and any other Series Accounts and (y) the
benefits of any Enhancements shall constitute the assets of the Trust (the
"Trust Assets"). Notwithstanding anything to the contrary in this Agreement,
- -------------
the Trust Assets shall not include proceeds (as defined in the UCC) of returned
inventory. The foregoing transfer, assignment and conveyance does not
constitute and is not intended to result in the creation, or an assumption by
the Trust, the Trustee, any Enhancement Provider or any Investor
Certificateholder, of any obligation of CompuCom, the Transferor or any other
Person in connection with the Receivables or under any agreement or instrument
relating thereto, including any obligation to any Obligors or any Affiliate of
or other Person to whom the Servicer may delegate servicing duties hereunder or
insurers.
In connection with such transfer, the Transferor agrees to record and file,
at its own expense, any financing statements (and continuation statements with
respect to such financing statements when applicable) required to be filed with
respect to the Receivables now existing and hereafter created and the other
Trust Assets meeting the requirements of applicable state law in such manner and
in such jurisdictions as are necessary under the applicable UCC to perfect the
transfer and assignment of the Receivables and the other Trust Assets to the
Trust. The Trustee shall be under no obligation whatsoever to file such
financing or continuation statements or make any other filings under the UCC in
connection with such transfer.
Section 2.02 Declaration of Trust; Acceptance by Trustee.
-------------------------------------------
(a) In consideration of the premises and mutual covenants set forth herein,
the Trustee hereby declares that it holds and will hold as trustee in trust
under this Agreement all of its right, title and interest in, to and under, and
hereby acknowledges its acceptance on behalf of the Trust of all right, title
and interest in, to and under the property, now existing and hereafter created,
conveyed to the Trust pursuant to Section 2.01; to have and to hold such
------------
property unto the Trustee and its successors in trust under this Agreement; in
trust nevertheless, under and subject to the terms and conditions set forth in
this Agreement, for the benefit of all Certificateholders and Enhancement
Providers.
3
<PAGE>
(b) It is intended by the Transferor that this Agreement constitute a
security agreement under the UCC (as defined in the UCC as in effect in the
State of New York). The Transferor hereby grants to the Trustee on the terms
and conditions of this Agreement a perfected first priority security interest in
and against all of the Transferor's right, title and interest in the Receivables
and the other Trust Assets, whether now owned or hereafter acquired, now
existing or hereafter created and wherever located for the purpose of securing
the rights of the Trustee for the benefit of the Certificateholders and
Enhancement Providers under this Agreement.
(c) The Trustee hereby agrees not to use any information it obtains
pursuant to this Agreement for any purpose unrelated to this Agreement or to
compete or assist any Person in competing with the Transferor or CompuCom in its
business; provided, however, that the Trustee shall not be prohibited from
-------- -------
acting as trustee or backup servicer in transactions similar in nature to
transactions contemplated hereunder.
Section 2.03 Representations and Warranties of the Transferor Relating to
------------------------------------------------------------
the Transferor. The Transferor (x) hereby represents and warrants, as of the
- --------------
date of this Agreement and the Initial Closing Date and, with respect to any
Series, as of the date of any Supplement and the related Closing Date, unless
otherwise stated in such Supplement, and (y) shall be deemed to represent and
warrant on each day that any Receivable is transferred to the Trust, that:
(a) Organization and Good Standing. The Transferor is a corporation duly
------------------------------
organized and validly existing in good standing under the laws of the State of
Delaware, and has full corporate power, authority and legal right to execute,
deliver and perform its obligations under the Receivables Contribution and Sale
Agreement, this Agreement, each Supplement and each other Transaction Document
to which it is, or is to be, a party, to execute and deliver to the Trustee
pursuant hereto the Certificates, to own its properties and to conduct its
business as such properties are presently owned and such business is presently
conducted.
(b) Due Qualification. The Transferor is duly qualified to do business and
-----------------
is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals, in each
jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would render any Contract or any Receivable unenforceable by the
Transferor or the Trust or has had, or could reasonably be expected to have, a
Material Adverse Effect.
(c) Due Authorization. The execution, delivery and performance of the
-----------------
Receivables Contribution and Sale Agreement, this Agreement, each Supplement and
each other Transaction Document to which it is, or is to be, a party and the
execution and delivery to the Trustee of the Certificates by the Transferor and
the consummation of the transactions provided for in this Agreement, the
Receivables Contribution and Sale Agreement, each Supplement and each other
Transaction Document to which it is,
4
<PAGE>
or is to be, a party, have been duly authorized by the Transferor by all
necessary corporate action on the part of the Transferor.
(d) Binding Obligation. Each of the Receivables Contribution and Sale
------------------
Agreement, this Agreement, each Supplement and each other Transaction Document
to which it is, or is to be, a party constitutes (or will, when executed and
delivered by the Transferor, constitute) the legal, valid and binding obligation
of the Transferor, enforceable against it in accordance with its terms, except
(x) the enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect
relating to creditors' rights, and (y) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(e) No Conflicts. The execution, delivery and performance of this
------------
Agreement, each Supplement, the Certificates, the Receivables Contribution and
Sale Agreement and each other Transaction Document to which it is, or is to be,
a party, the performance of the transactions contemplated by this Agreement,
each Supplement, the Receivables Contribution and Sale Agreement and each other
Transaction Document to which it is, or is to be, a party and the fulfillment of
the terms hereof and thereof by the Transferor, do not (i) contravene its
Certificate of Incorporation or By-Laws, (ii) violate any provision of, or
require any filing (except for the filings under the UCC required by this
Agreement, each of which has been duly made and is in full force and effect),
registration, consent or approval under, any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award presently in effect having
applicability to the Transferor, except for such filings, registrations,
consents or approvals as have already been obtained and are in full force and
effect or which the failure to obtain or accomplish has not had, and could not
reasonably be expected to have, a Material Adverse Effect, (iii) result in a
breach of or constitute a default or require any consent under any indenture or
loan or credit agreement or any other agreement, lease or instrument to which
the Transferor is a party or by which it or its properties may be bound or
affected except those as to which a consent or waiver has been obtained and is
in full force and effect and an executed copy of which has been delivered to the
Trustee or which breach or default has not had, and could not reasonably be
expected to have, a Material Adverse Effect, or (iv) result in, or require, the
creation or imposition of any Lien upon or with respect to any of the properties
now owned or hereafter acquired by the Transferor other than as specifically
contemplated by this Agreement or the Receivables Contribution and Sale
Agreement.
(f) Taxes. The Transferor has filed all tax returns (federal, state and
-----
local) required to be filed and has paid or made adequate provision for the
payment of all taxes, assessments and other governmental charges due from the
Transferor or is contesting any such tax, assessment or other governmental
charge in good faith through appropriate proceedings, provided, that the
--------
Transferor is maintaining adequate reserves with respect thereto in accordance
with GAAP.
5
<PAGE>
(g) No Proceedings. There are no proceedings or investigations pending or,
--------------
to the best knowledge of the Transferor, threatened against the Transferor,
before any Governmental Authority (i) asserting the invalidity of the
Receivables Contribution and Sale Agreement, this Agreement, any Supplement, the
Certificates or any other Transaction Document to which it is, or is to be, a
party, (ii) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement, any
Supplement, the Certificates, the Receivable Contribution and Sale Agreement or
any other Transaction Document to which it is, or is to be, a party, (iii)
seeking any determination or ruling that has had, or could reasonably be
expected to have, a Material Adverse Effect, or (iv) seeking to assert any tax
liability against the Trust under the United States Federal or any state income
tax systems.
(h) All Consents Required. All approvals, authorizations, consents, orders
---------------------
or other actions of any Person or of any Governmental Authority required to be
obtained by the Transferor in connection with the execution and delivery by the
Transferor of this Agreement, each Supplement, the Receivables Contribution and
Sale Agreement, the Certificates and each other Transaction Document to which it
is, or is to be, a party, the performance by the Transferor of the transactions
contemplated by this Agreement, each Supplement, the Receivables Contribution
and Sale Agreement and each other Transaction Document to which is, or it to be,
a party, and the fulfillment by the Transferor of the terms hereof and thereof,
have been obtained and are in full force and effect.
(i) Bona Fide Receivables. Each Receivable classified as an "Eligible
---------------------
Receivable" by the Transferor or the Servicer in any document or report
delivered hereunder satisfies the requirements of eligibility contained in the
definition of Eligible Receivable.
(j) Place of Business. The principal place of business of the Transferor
-----------------
and its chief executive office (as that term is used in the UCC) is in Dallas,
Texas and the offices where the Transferor keeps its records concerning the
Receivables and related Contracts are in Dallas, Texas, or such other location
as chosen by the Transferor, provided that the Transferor has complied with
Section 2.05(d).
- ---------------
(k) Use of Proceeds. No proceeds of the issuance of any Certificate will
---------------
be used by the Transferor to acquire any security in a transaction that is
subject to sections 13 and 14 of the Securities Exchange Act of 1934, as
amended, or to purchase or carry any margin security.
(l) Lock-Box Banks and Accounts. The Lock-Box Banks are the only
---------------------------
institutions holding any accounts for the receipt of payments from Obligors in
respect of Receivables (subject to such changes as may be made from time to time
in accordance with Section 3.01(i)). All Obligors of the Receivables have been
---------------
instructed
6
<PAGE>
by invoice to make payments only to the Post Office Boxes or the Wire Transfer
Receipt Account and such instructions are in full force and effect.
(m) Early Amortization Event. As of the Initial Closing Date and each
------------------------
Closing Date, no Early Amortization Event, and no condition that with the giving
of notice and/or the passage of time would constitute an Early Amortization
Event (a "Prospective Early Amortization Event"), existed.
------------------------------------
(n) Not an Investment Company. Neither the Transferor nor the Trust is an
-------------------------
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or the Transferor and the Trust are exempt from all provisions of
such Act.
(o) ERISA. No Plan maintained by the Transferor or any of its ERISA
-----
Affiliates has any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Internal Revenue Code), whether or
not waived. The Transferor and each ERISA Affiliate of the Transferor has
timely made all contributions required to be made by it to any Plan and
Multiemployer Plan to which contributions are or have been required to be made
during the preceding five years by the Transferor or such ERISA Affiliate, and
no event requiring notice to the PBGC under Section 302(f) of ERISA has occurred
and is continuing or could reasonably be expected to occur with respect to any
such Plan, in any case, that could reasonably be expected to result, directly or
indirectly, in any Lien being imposed on the property of the Transferor or the
payment of any material amount to avoid such Lien. No Plan Event with respect
to the Transferor or any of its ERISA Affiliates has occurred or could
reasonably be expected to occur that could reasonably be expected to result,
directly or indirectly, in any Lien being imposed on the property of the
Transferor or the payment of any material amount to avoid such Lien.
The representations and warranties set forth in this Section 2.03 shall
------------
survive the transfer and assignment of the Receivables to the Trust, and
termination of the rights and obligations of the Servicer pursuant to Section
-------
10.01. Upon discovery by the Transferor, the Servicer or a Responsible Officer
- -----
of the Trustee of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give written notice thereof
to the others within three Business Days of such discovery.
Section 2.04 Representations and Warranties of the Transferor Relating to
------------------------------------------------------------
the Agreement and any Supplement and the Receivables; Reassignment of
- ---------------------------------------------------------------------
Receivables.
- -----------
(a) Representations and Warranties. The Transferor (x) hereby represents
------------------------------
and warrants, as of the date of this Agreement and the Initial Closing Date with
respect to the Receivables created on or prior to, and outstanding on, such
dates, and (y) shall be deemed to represent and warrant on each day thereafter
that any Receivable is transferred to the Trust with respect to the Receivable
or Receivables transferred on such date, that:
7
<PAGE>
(i) the Transferor is not insolvent;
(ii) the Transferor is the legal and beneficial owner of all right,
title and interest in and to each such Receivable, the Transferor has the
full right to transfer the Receivables to the Trust and each such
Receivable has been or will be transferred to the Trust free and clear of
any Lien;
(iii) all notices to or approvals, authorizations, consents, orders
or other actions of any Person or of any Governmental Authority required to
be obtained, effected or given in connection with the transfer of Trust
Assets to the Trust have been duly obtained, effected or given and are in
full force and effect, except where the failure to so obtain, effect or
give has not had, and could not reasonably be expected to have, a Material
Adverse Effect; and
(iv) (A) the Transferor has indicated and will continue to indicate
on its books and records (including any computer files) regarding such
Receivables that the Receivables are the property of the Trust and shall
maintain such records in a manner such that the Trust shall have a first
priority perfected interest in the Receivables and the other Trust Assets.
This Agreement either constitutes a valid transfer and assignment to the
Trust of all right, title and interest of the Transferor in and to the
Receivables now existing and hereafter created and in the Related Property
and all other Trust Assets, or constitutes a grant of a "security interest"
(as defined in the UCC) in such property to the Trust as provided in
Section 2.02(b), which, in the case of existing Receivables and the Related
---------------
Property and all monies due or to become due with respect thereto and the
proceeds thereof (other than proceeds (as such term is defined in the UCC)
of returned inventory) , is enforceable upon execution and delivery of this
Agreement, and which will be enforceable with respect to such Receivables
and such other property hereafter created and the proceeds thereof (other
than proceeds (as such term is defined in the UCC) of returned inventory)
upon such creation. The Receivables Contribution and Sale Agreement
constitutes a valid sale or contribution to the Transferor of all of the
right, title and interest of CompuCom in and to the Receivables now
existing or hereafter created and in the Related Property and all monies
due or to become due with respect thereto (other than proceeds (as such
term is defined in the UCC) of returned inventory) and all proceeds (as
defined in the UCC) of each Receivable and the Related Property.
(B) Upon the filing of the financing statements described in Section
-------
2.01 and, in the case of the Receivables hereafter created and the proceeds
----
thereof (other than proceeds (as such term is defined in the UCC) of
returned inventory), upon the creation thereof, the Trust shall have a
first priority perfected security interest (as such term is defined in the
UCC) in such property free and clear of any Lien or interest of any Person,
except as otherwise contemplated by this Agreement. Except as otherwise
provided in
8
<PAGE>
this Agreement, neither the Transferor nor any Person claiming through or
under the Transferor has any claim to or interest in the Collection Account
or any Series Account. Notwithstanding anything to the contrary in this
Agreement, the Trust shall have no interest in, to and under proceeds (as
defined in the UCC) of returned inventory relating to the Receivables.
(b) Notice of Breach. The representations and warranties set forth in this
----------------
Section 2.04 shall survive the transfer and assignment of the Trust Assets to
- ------------
the Trust. Upon discovery by the Transferor, the Servicer or a Responsible
Officer of the Trustee of a breach of any of the representations and warranties
set forth in this Section 2.04, the Person discovering such breach shall give
------------
written notice to the other parties hereto within three Business Days of such
discovery.
(c) Transfer Upon Breach of Warranty. In the event of a breach with respect
--------------------------------
to a Receivable of any of the representations and warranties set forth in
Section 2.03(i) or 2.04(a) (other than Section 2.04(a)(iv)(A)), and (I) as a
- --------------- ------- ----------------------
result thereof such Receivable is an Ineligible Receivable, and the exclusion of
such Receivable from the Aggregate Eligible Unpaid Balance would cause the
Aggregate Eligible Unpaid Balance to be less than the Aggregate Target
Receivables Amount, or (II) such breach has a material adverse effect on the
Investors' Interest of any Series in any Receivable, in each case as determined
without regard to any Enhancement with respect to any Series, and such material
adverse effect continues for 30 days after the earlier to occur of the discovery
of such breach by the Transferor or the Servicer or receipt of written notice of
such breach by the Transferor or the Servicer, then the Transferor shall cause
such Receivable to be removed from the Trust (a "Reconveyed Receivable"),
---------------------
without the need of any formal or other instrument of assignment, prior to the
second Business Day next following (x) the day on which such Aggregate Target
Deficiency Amount exists or (y) such 30th day, as the case may be, by making or
causing to be made (on a pro rata basis based on their respective Target
Deficiency Amounts (if any)) a deposit in the Series Principal Collection Sub-
subaccount of each outstanding Series in immediately available funds in an
aggregate amount equal to the Transfer Deposit Amount for such Reconveyed
Receivable. Such deposit(s) shall be considered a payment in full of the
Reconveyed Receivable during the Settlement Period to which such payment relates
and shall be allocated in accordance with Section 4.03. Upon the making of such
------------
a deposit in respect of a Reconveyed Receivable, the Trust shall automatically
and without further action be deemed to transfer, assign and otherwise convey to
or upon the order of the Transferor, without recourse, representation or
warranty, all the right, title and interest of the Trust in and to such
Reconveyed Receivable, all Related Property and Collections with respect thereto
and all proceeds thereof, and to release and terminate the security interest
granted pursuant to Section 2.02 to the extent it covers such property, without
------------
the need of any formal or other instrument of assignment. On and after the date
of such removal, any defined term herein or in any applicable Supplement, the
definition of which assumes that such Receivable is not a Reconveyed Receivable,
shall thereafter be computed on the basis of the assumption that such Receivable
is no longer a Trust Asset. Notwithstanding anything to the contrary
9
<PAGE>
contained herein, the Trustee shall execute such documents and instruments of
transfer or assignment and UCC termination statements as shall be prepared by
the Transferor, and shall take such other actions as shall reasonably be
requested by the Transferor, at the Transferor's expense, in connection with the
conveyance of any Reconveyed Receivable pursuant to this Section. The obligation
of the Transferor to make a deposit in respect of any Reconveyed Receivable as
set forth in this Section shall constitute the sole remedy respecting any breach
of the representations and warranties set forth in Section 2.03(i) or 2.04(a)
--------------- -------
(other than Section 2.04(a)(iv)(A)) with respect to such Receivable available to
-----------------------
the Investor Certificateholders or the Trustee on behalf of the Investor
Certificateholders.
(d) Reassignment of Trust Portfolio. In the event of a breach of any of the
-------------------------------
representations and warranties set forth in Section 2.03(a), (b), (c), (d) or
--------------- --- --- ---
(e), or Section 2.04(a)(iv)(A), and the effect of such breach is materially
- --- ----------------------
adverse to the interests of the Certificateholders of all Series (without regard
to any Enhancement with respect to any Series), any Control Party, by notice
then given in writing to the Transferor (with a copy thereof to the Rating
Agencies) (and to the Trustee and the Servicer if given by the
Certificateholders), may direct the Transferor to make the payment described in
the next sentence on or prior to the first Payment Date next succeeding 30 days
after receipt by the Transferor of such notice, or within such longer period as
may be specified in such notice, and the Transferor shall be obligated to make
such payment or cause such payment to be made on such Payment Date on the terms
and conditions set forth below; provided, however, that no such payment shall be
-------- -------
required to be made if, at such Payment Date, the representations and warranties
set forth in Section 2.03(a), (b), (c), (d), (e), and Section 2.04(a)(iv)(A),
--------------- --- --- --- --- ----------------------
shall be true and correct in all material respects as if made on such date. The
Transferor shall deposit in the Collection Master Subaccount on the date
permitted by the notice described in the preceding sentence an amount equal to
the sum of (w) the Aggregate Adjusted Invested Amount at the end of the day on
the Record Date preceding the date such deposit is to be made, less (x) (without
----
duplication) the aggregate principal amount on deposit in any subaccounts or
sub-subaccounts of the Collection Account, plus (y) (without duplication) an
----
amount equal to interest at the applicable Certificate Rate accrued but unpaid
on the Investor Certificates of each Series through such Record Date and (z) all
amounts then due and payable to any Enhancement Provider for each outstanding
Series under the applicable Enhancement Agreement. Notwithstanding anything to
the contrary in this Agreement, the entire amount deposited in the Collection
Master Subaccount pursuant to the preceding sentence shall be distributed to the
Certificateholders on such Payment Date pursuant to Section 12.03 and to any
-------------
Enhancement Provider for each outstanding Series, as applicable. Payment of
such deposit amount into the Collection Master Subaccount in immediately
available funds shall otherwise be considered a payment in full of all of the
Receivables. The obligation of the Transferor to make the payment specified in
this Section 2.04(d) shall constitute the sole remedy available to any of the
---------------
Enhancement Providers, the Certificateholders or the Trustee on behalf of the
Certificateholders for a breach of the
10
<PAGE>
representations and warranties contained in Section 2.03(a), (b), (c), (d), (e)
--------------- --- --- --- ---
or Section 2.04(a)(iv)(A).
----------------------
Section 2.05 Covenants of the Transferor.
---------------------------
During the term of this Agreement, and until (i) the Aggregate Invested
Amount is reduced to zero, (ii) the Investor Certificateholders shall have
received all accrued interest and all accrued discount on the applicable
Certificates, (iii) all amounts owed by the Transferor pursuant to this
Agreement have been paid and (iv) all commitments of the Investor
Certificateholders (if any) to provide funding have terminated, the Transferor
covenants and agrees as follows:
(a) Compliance with Laws, etc. The Transferor shall duly satisfy all
-------------------------
obligations on its part to be fulfilled under or in connection with the
Receivables, will maintain in effect all qualifications required under
Requirements of Law in order to properly purchase and convey the
Receivables and other Trust Assets and will comply in all material respects
with all Requirements of Law applicable to it.
(b) Preservation of Corporate Existence. The Transferor (i) shall
-----------------------------------
preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and (ii) shall qualify
and remain qualified in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualification would, if not remedied,
have a Material Adverse Effect.
(c) Audits. At any time and from time to time during the Transferor's
------
regular business hours, on reasonable prior notice (unless an Early
Amortization Event has occurred, in which case no notice shall be required)
and for a purpose reasonably related to this Agreement, the Transferor
shall, in response to any request of the Trustee or any Enhancement
Provider, permit such Person, or its agents or representatives, (i) to
examine and make copies of and abstracts from all books, records and
documents (including computer tapes and disks) in the possession or under
the control of the Transferor relating to the Receivables, the Related
Property and the related Contracts and (ii) to visit the offices and
properties of the Transferor for the purpose of examining such materials
and to discuss matters relating to the Receivables or the Transferor's
performance hereunder with any of the officers or employees of the
Transferor having knowledge thereof. Any such examination or visit made
pursuant to this Section 2.05(c) shall be at the cost and expense of the
---------------
party or parties making such examination or visit except as otherwise
provided in any Enhancement Agreement and except as set forth in any
Supplement.
(d) Continuous Perfection; Computer Records. The Transferor shall not
---------------------------------------
change its name, identity or structure in any manner which might make any
financing or continuation statement filed hereunder misleading within the
11
<PAGE>
meaning of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless the Transferor shall have given the Trustee at
least 90 days' prior written notice thereof and shall have taken all action
60 days prior to making such change (or made arrangements to take such
action substantially simultaneously with such change if it is impossible to
take such action in advance) necessary or advisable to amend such financing
statement or continuation statement so that it is not misleading. The
Transferor shall not change its chief executive office or change the
location of its principal records concerning the Receivables, the Related
Property or the Collections from the locations specified in Section 2.03(j)
---------------
unless it has given the Trustee at least 30 days' prior written notice of
its intention to do so and has taken such action as is necessary or
advisable to cause the interest of the Trustee in the Receivables and the
other Trust Assets to continue to be perfected with the priority required
by this Agreement. The Transferor will at all times maintain its principal
executive office and any other office at which it maintains records
relating to the Receivables and the Related Property within the United
States of America. The Transferor will at all times, at its expense,
indicate on its books and records (including any computer files) that all
Receivables and Related Property have been transferred to the Trust
pursuant to this Agreement.
(e) Extension or Amendment of Receivables. Provided no Early
-------------------------------------
Amortization Event shall have occurred and be continuing, and subject to
Section 3.09, the Transferor shall only extend, amend or otherwise modify
------------
the terms of any Receivable, or amend, modify or waive any term or
condition of any Contracts related thereto, or permit the Servicer to do
any of the foregoing, in accordance with the Credit and Collection Policy.
(f) Reports. The Transferor shall furnish to the Trustee and to each
-------
Rating Agency as soon as possible and in any event within two Business Days
after the occurrence of each Early Amortization Event or the Transferor's
knowledge of a Prospective Early Amortization Event, the statement of one
of the officers of the Transferor primarily responsible for administering
the transactions contemplated by this Agreement setting forth the details
of such Early Amortization Event or Prospective Early Amortization Event
and the action taken, or which the Transferor proposes to take, with
respect thereto.
(g) Certain Documentation. The Transferor shall cause the Servicer to
---------------------
maintain custody for the account of the Trust (to the extent of its
interest therein) of any document evidencing or securing a Receivable and
the related Contract.
(h) Assessments. The Transferor will promptly pay and discharge all
-----------
taxes, assessments, levies and other governmental charges imposed on it
which may adversely affect any of the Receivables or the Trust's rights
with respect
12
<PAGE>
thereto, or that otherwise could reasonably be expected to have a Material
Adverse Effect.
(i) Further Action. The Transferor shall, from time to time, execute
--------------
and deliver to the Trustee any instruments, financing or continuation
statements or other writings reasonably necessary or desirable to maintain
the perfection or priority of the Trustee's ownership or security interest
in the Receivables, the Related Property, the Collections and the other
Trust Assets under the UCC or other applicable law. The Transferor shall,
at the direction of the Servicer or the Trustee, from time to time, execute
and deliver to the Obligors on the Receivables any bills, statements and
letters or other writings necessary to carry out the terms and provisions
of this Agreement and to facilitate the collection of the Receivables.
(j) Additional Indebtedness. The Transferor shall not create, incur,
-----------------------
assume or suffer to exist any indebtedness (including any guaranty) or
expense (whether or not accounted for as a liability) except (i)
indebtedness hereunder, under the Receivables Contribution and Sale
Agreement or under the Investor Certificates, (ii) other expenses incurred
in the ordinary course of business, provided that in the case of any such
--------
indebtedness or expense, the Person to whom such indebtedness or expense
will be owing has delivered to the Transferor an undertaking that it will
not institute against, or join any other Person in instituting against, the
Transferor or the Trust any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal
or state bankruptcy or similar law, for one year and a day after all
Investor Certificates are paid in full; provided, further, that
-------- -------
notwithstanding anything to the contrary in this Agreement, the obligations
of the Transferor to the Certificateholders or any Enhancement Provider
shall be payable solely from the Trust Assets in accordance herewith and
that the Certificateholders and each Enhancement Provider shall not look to
any other property or assets of the Transferor in respect of such
obligations, and such obligations shall not constitute a claim against the
Transferor in the event that the Trust Assets are insufficient to pay in
full such obligations.
(k) No Transfer. The Transferor agrees that, except as contemplated
-----------
by this Agreement and the Receivables Contribution and Sale Agreement, it
(i) shall not sell, assign, pledge, convey or otherwise transfer any
Receivable (other than Reconveyed Receivables) or any interest therein or
any other Trust Asset, (ii) shall not grant, create, incur, or suffer to
exist any Lien on any Receivable or any interest therein or any other Trust
Asset, (iii) shall notify the Trustee and each Enhancement Provider
immediately upon becoming aware of any such Lien, and (iv) shall defend the
interest of the Trust in the Receivables and other Trust Assets against all
claims of other Persons claiming through the Transferor.
13
<PAGE>
(l) No Other Business. The Transferor agrees to engage in no business
-----------------
other than the business contemplated hereunder and under the Receivables
Contribution and Sale Agreement, and activities necessary or incidental
thereto.
(m) Enforcement. The Transferor agrees to take all action necessary
-----------
and appropriate to enforce its rights and claims under the Receivables
Contribution and Sale Agreement. If, upon notice from the Trustee, the
Transferor does not take such necessary and appropriate action, then, at
the direction of any Control Party, the Trustee shall take such action.
(n) Separate Business. The Transferor will not permit its assets to
-----------------
be commingled with those of CompuCom or any Affiliate of CompuCom, the
Transferor shall maintain separate corporate records and books of account
from those of CompuCom and its Affiliates, and the Transferor shall conduct
its business from an office separate from that of CompuCom. The Transferor
will conduct its business solely in its own name and will cause CompuCom
and its Affiliates to not conduct their business in the name of the
Transferor so as not to mislead others as to the identity of the entity
with which those others are concerned. The Transferor will provide for its
own operating expenses and liabilities from its own funds, except that the
organizational expenses of the Transferor may be paid by CompuCom. Except
as contemplated by the purchase agreement, placement agency agreement or
underwriting agreement (or similar agreement) in respect of any Series
among the Transferor, CompuCom, and any initial purchaser, placement agent,
underwriters or any similar party referred to therein, the Transferor will
not hold itself out, or permit itself to be held out, as having agreed to
pay, or as being liable for, the debts of CompuCom or any of its
Affiliates, and the Transferor shall cause CompuCom and its Affiliates not
to hold themselves out, or permit themselves to be held out, as having
agreed to pay, or as being liable for, the debts of the Transferor. The
Transferor will maintain an arm's length relationship with CompuCom and its
Affiliates with respect to any transactions between the Transferor, on the
one hand, and CompuCom or its Affiliates, on the other.
(o) Corporate Documents. The Transferor shall not amend Articles III,
-------------------
IV, X, XI or XII of its Certificate of Incorporation without the prior
==== ===
consent of the Requisite Holders.
(p) ERISA. The Transferor shall promptly give the Trustee and each
-----
Enhancement Provider notice of the following events, as soon as possible
and in any event within 30 days after the Transferor or any of its ERISA
Affiliates knows or has reason to know thereof: (i) the occurrence or
expected occurrence of any Reportable Event with respect to any Plan to
which the Transferor or any of its ERISA Affiliates contributed, or any
withdrawal from, or the termination, Reorganization or Insolvency of any
Multiemployer Plan to which the
14
<PAGE>
Transferor or any of its ERISA Affiliates contributes or to which
contributions have been required to be made by the Transferor or such ERISA
Affiliate during the preceding five years or (ii) the institution of
proceedings or the taking of any other action by the PBGC or the Transferor
or any of its ERISA Affiliates or any such Multiemployer Plan with respect
to the withdrawal from, or the termination, Reorganization or Insolvency
of, any such Plan or Multiemployer Plan.
(q) Receivables Contribution and Sale Agreement Notices, Waivers, Etc.
-----------------------------------------------------------------
The Transferor shall promptly give the Trustee copies of any notices,
reports or certificates given or delivered to the Transferor under the
Receivables Contribution and Sale Agreement.
(r) Issuance of Capital Stock, etc. The Transferor shall not (i)
------------------------------
issue any capital stock (except to CompuCom) or (ii) create any Subsidiary.
The Transferor shall not pay any dividends to CompuCom if such payment
would be prohibited under the General Corporation Law of the State of
Delaware, would result in an Early Amortization Event or would cause the
Transferor's tangible net worth to be less than the Required Net Worth.
Section 2.06 Authentication of Certificates. Pursuant to the request of
------------------------------
the Transferor, the Trustee has caused Certificates in authorized denominations
evidencing the entire beneficial ownership of the Trust to be duly authenticated
and delivered to or upon the order of the Transferor pursuant to Section 6.02.
------------
15
<PAGE>
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.01 Acceptance of Appointment and Other Matters Relating to the
-----------------------------------------------------------
Servicer.
- --------
(a) CompuCom agrees to act, and is hereby appointed by the Trustee and the
Transferor to act, as the Servicer under this Agreement, and all
Certificateholders, including the Transferor, by their acceptance of the
Certificates consent to CompuCom acting as Servicer. The Servicer shall service
and administer the Receivables and shall collect payments due under the
Receivables in accordance with all Requirements of Law and in accordance with
its customary and usual servicing procedures for servicing receivables owned by
it and comparable to the Receivables (and in no event in accordance with lesser
standards than would be employed by a prudent institution in servicing
comparable receivables for its own account) and in accordance with the Credit
and Collection Policy, and shall have full power and authority, acting alone or
through any party properly designated by it hereunder, to do any and all things
in connection with such servicing and administration which it may deem necessary
or desirable. Without limiting the generality of the foregoing and subject to
Section 10.01, the Servicer is hereby authorized and empowered (i) to instruct
- -------------
the Trustee to make withdrawals and payments from the Collection Account and any
Series Account as set forth in this Agreement or any Supplement, (ii) to execute
and deliver, on behalf of the Trust for the benefit of the Certificateholders,
any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the
Receivables and, after the delinquency of any Receivable and to the extent
permitted under and in compliance with all Requirements of Law, to commence
enforcement proceedings with respect to such Receivable, and (iii) to make any
filings, reports, notices, applications, registrations with, and to seek any
consent or authorizations from, the Securities and Exchange Commission and any
state securities authority on behalf of the Trust as may be necessary or
advisable to comply with any federal or state securities or reporting
requirements or laws.
(b) The Servicer shall not, and no Successor Servicer shall, be obligated
to use separate servicing procedures, offices, employees or accounts for
servicing the Receivables from the procedures, offices, employees and accounts
used by the Servicer or such Successor Servicer, as the case may be, in
connection with servicing other receivables of the same type.
(c) The Servicer shall maintain fidelity bond coverage or coverage under
one or more umbrella policies insuring against losses through wrongdoing of its
officers and employees who are involved in the servicing of Receivables covering
such actions and in an amount equal to $10,000,000.
16
<PAGE>
(d) Subject to the rights retained by the Trustee pursuant to Section
-------
10.01, each of the Transferor and the Trustee hereby appoints the Servicer to
enforce its respective rights and interest in and under the Receivables, the
related Contracts and the Related Property. CompuCom shall hold in trust and,
if CompuCom is not the Servicer, CompuCom shall promptly deliver to the
Successor Servicer, and the Successor Servicer shall hold in trust, for the
Transferor and the Trustee in accordance with their respective interests, any
and all documents, instruments and records (including computer tapes or disks)
that evidence or relate to Receivables.
(e) Provided no Early Amortization Event shall have occurred and be
continuing, subject to Section 3.09, the Servicer may, in accordance with the
------------
Credit and Collection Policy and at the direction of the Transferor, extend,
amend or otherwise modify the terms of any Receivable or amend, modify or waive
any term or condition of any Contract relating thereto. The Servicer may not
make any change to the Credit and Collection Policy (including changes in
respect of credit approval criteria, extensions of payment terms, and aging and
write-off policies), unless the Rating Agency Condition is satisfied.
(f) Except as otherwise required by law, Dilution Factors and Collections
shall be applied to the Receivables to which they relate.
(g) The Servicer shall provide all reports and documentation required by
Section 3.04.
- ------------
(h) In the event that the Transferor is unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of this Agreement
(including by reason of any court of competent jurisdiction ordering that the
Transferor not transfer any additional Receivables to the Trust) then, in any
such event, (A) the Servicer agrees to allocate and pay to the Trust, after the
date of such inability, all Collections with respect to Receivables transferred
to the Trust prior to the occurrence of such event; and (B) the Servicer agrees
to have such amounts applied as Collections in accordance with Section 4.03.
------------
For the purpose of the immediately preceding sentence of this Section 3.01(h),
---------------
the Servicer shall treat the first received Collections with respect to the
Receivables as allocable to the Trust for the benefit of all Certificateholders
until the Trust shall have been allocated and paid Collections in an amount
sufficient to pay the aggregate amount of Receivables in the Trust as of the
date of occurrence of such event.
(i) (A) Invoices sent to Obligors in respect of the Receivables will
instruct the Obligors to send payments thereon by mail to the Post Office Boxes
or by wire transfer to the wire transfer receipt account identified on Exhibit
-------
3.01(i) (such wire transfer receipt account, together with any other wire
- -------
transfer receipt account permitted hereunder, being referred to collectively as
the "Wire Transfer Receipt Account"). Exhibit 3.01(i) hereto lists (x) post
----------------------------- ---------------
office boxes which the Servicer maintains and to which Obligors are directed to
send payments in respect of Receivables (such post
17
<PAGE>
office boxes, together with any other post office boxes permitted hereunder,
being referred to collectively as the "Post Office Boxes"), (y) banks (such
-----------------
banks, together with any other bank holding a Lock-Box Account in accordance
with the terms hereof, being referred to collectively as the "Lock-Box Banks")
--------------
which remove checks representing Collections from the Post Office Boxes and
deposit the same in deposit accounts maintained at such banks in the name of the
Servicer (the "Lock-Box Accounts"), and (z) the banks at which the Wire Transfer
-----------------
Receipt Account is maintained (such banks, together with any other bank holding
the Wire Transfer Receipt Account, being referred to collectively as the "Wire
----
Transfer Receipt Account Bank"). All Collections on Receivables transmitted by
- -----------------------------
Obligors to the Post Office Boxes rather than directly to the Servicer or to the
Wire Transfer Receipt Account will, pending remittance to the Concentration
Account, be held for the benefit of the Trust and are and shall be transferred
to the Concentration Account (or the Collection Master Subaccount, if
applicable) not later than the Business Day on which funds are available
following receipt thereof.
(B) CompuCom maintains at the bank identified in Exhibit 3.01(i) (such
---------------
bank, together with any other bank holding the Concentration Account in
accordance with the terms hereof, being referred to collectively as the
"Concentration Account Bank") a deposit account (the "Concentration Account")
- --------------------------- ---------------------
identified in Exhibit 3.01(i) into which funds available for withdrawal from the
---------------
Lock-Box Accounts are deposited on a daily basis. Any payments on the
Receivables made by Obligors directly to the Servicer or to the Wire Transfer
Receipt Account shall be deposited in the Concentration Account not later than
the Business Day following the date on which funds are available. All
Collections in the Concentration Account shall be held for the benefit of the
Trust and applied in accordance with Article IV.
----------
(C) The Servicer agrees that it will not change the foregoing method of
collection or its related instructions to Obligors except in accordance with
this Agreement.
(D) The Servicer has entered into letter agreements with each Lock-Box
Bank. Pursuant to such agreements and this Agreement, upon the occurrence and
during the continuance of an Early Amortization Event or a Servicer Default, the
Trustee at the direction of any Control Party shall have the right to change the
name in which such Lock-Box Accounts and Post Office Boxes are maintained and
assume control over amounts deposited in such Lock-Box Accounts and Post Office
Boxes by sending a specified form of notice (a "Lock-Box Notice") to the Lock-
---------------
Box Bank (and, if necessary, to the applicable Post Office branch), and to
direct that such amounts be remitted directly to the Collection Master
Subaccount. Each such letter agreement (as well as letter agreements entered
into with new Lock-Box Banks pursuant to Section 3.01(i)(E)) shall be in
------------------
substantially the form of Exhibit 3.01(i)(D), and the Servicer may amend,
------------------
supplement, restate or otherwise modify such letter agreements from time to time
with the prior written consent of each Control Party (each such letter
18
<PAGE>
agreement, as amended, supplemented, restated or otherwise modified from time to
time, shall be referred to herein as a "Lock-Box Agreement").
------------------
The Servicer has entered into a letter agreement with the Wire Transfer
Receipt Account Bank. Pursuant to such agreement and this Agreement, upon the
occurrence and during the continuance of an Early Amortization Event or a
Servicer Default, the Trustee at the direction of any Control Party shall have
the right to change the name in which the Wire Transfer Receipt Account is
maintained and assume control over amounts deposited in the Wire Transfer
Receipt Account by sending a specified form of notice to the Wire Transfer
Receipt Account Bank, and to direct that such amounts be remitted directly to
the Collection Master Subaccount. Each such letter agreement (as well as letter
agreements entered into with new Wire Transfer Receipt Account Banks pursuant to
Section 3.01(i)(E)) shall be in substantially the form of Exhibit 3.01(i)(D),
- ------------------ ------------------
and the Servicer may amend, supplement, restate or otherwise modify such letter
agreements from time to time with the prior written consent of each Control
Party (each such letter agreement, as amended, supplemented, restated or
otherwise modified from time to time, shall be referred to herein as a "Wire
----
Transfer Receipt Account Agreement").
- ----------------------------------
(E) The Servicer may add or terminate any bank as a Lock-Box Bank, Wire
Transfer Receipt Account Bank or Concentration Account Bank from those listed in
Exhibit 3.01(i) hereto, or make any change in its instructions to Obligors
- ---------------
regarding payments of Collections, including in respect of Post Office Boxes (so
long as an Obligor remains instructed to make such payments to the Wire Transfer
Receipt Account or a post office box to which a Lock-Box Bank party to a Lock-
Box Agreement has access), but in each case only (i) upon 30 days' prior written
notice from the Servicer to the Trustee, the Transferor and any Enhancement
Provider for each outstanding Series and (ii) so long as no Early Amortization
Event or Servicer Default shall have occurred and be continuing. The Servicer
shall give notice to the Trustee of the name and address of each new Lock-Box
Bank, Wire Transfer Receipt Account Bank and Concentration Account Bank, which
notice shall identify the related Lock-Box Account, Wire Transfer Receipt
Account, Concentration Account and Post Office Box, as the case may be. The
Servicer shall enter into a Lock-Box Agreement with each new Lock-Box Bank and a
Wire Transfer Receipt Account Agreement with each new Wire Transfer Receipt
Account Bank, and shall deliver to the Trustee and any Enhancement Provider for
each outstanding Series a copy of the executed Lock-Box Agreement or Wire
Transfer Receipt Account Agreement, as the case may be, prior to instructing any
Obligors to make payment to such new Lock-Box Bank or Wire Transfer Receipt
Account Bank.
19
<PAGE>
Section 3.02 Servicing Compensation.
----------------------
(a) As compensation for its servicing activities hereunder and
reimbursement for its expenses as set forth in the immediately following
paragraph, the Servicer shall be entitled to receive a servicing fee prior to
the termination of the Trust pursuant to Section 12.01 (the "Servicing Fee"),
------------- -------------
payable on the dates specified in the applicable Supplement, equal to the
product of (i) one-twelfth, (ii) the weighted average Servicing Fee Percentage
(based upon the Servicing Fee Percentage for each Series and the Invested Amount
thereof), and (iii) the daily average Aggregate Unpaid Balance of Receivables in
the Trust with respect to the related Accrual Period. The share of the
Servicing Fee allocable to each Series with respect to any date of payment
generally shall be equal to the product of (i) one-twelfth, (ii) the applicable
Servicing Fee Percentage for such Series and (iii) the Invested Amount of such
Series as of the date of determination for such payment as specified in the
applicable Supplement. The remainder of the Servicing Fee, which shall be
allocable to the Transferor as Holder of the Transferor Certificate, shall be
paid by the Transferor from Collections allocated to the Transferor's Interest,
and in no event shall the Trust, the Trustee, any Enhancement Provider or the
Investor Certificateholders be liable for the share of the Servicing Fee to be
paid by the Transferor. Any Servicing Fees shall be payable to the Servicer
solely pursuant to the terms of, and to the extent amounts are available for
payment as provided in, Article IV and each Supplement.
----------
(b) In the event a Successor Servicer is appointed pursuant to Section
-------
10.02, the Servicing Fee Percentage with respect to each Series with respect to
- -----
such Successor Servicer shall be equal to the Servicing Fee Percentage with
respect to such Series in effect immediately prior to the appointment of such
Successor Servicer or, if higher, the current market rate for servicing
receivables similar in nature to the Receivables; provided, however, that the
-------- -------
servicing fees attributable to CompuCom as Servicer and to another Person as
Successor Servicer may be bifurcated and distributed in the manner provided in
the related Supplement.
(c) The Servicer's expenses include expenses related to enforcement of the
Receivables, the amounts due to the Trustee pursuant to Section 11.05, the
-------------
reasonable fees and disbursements of independent accountants, the amounts due to
the Lock-Box Banks and the Wire Transfer Receipt Account Banks, all other
expenses incurred by the Servicer in connection with its activities hereunder,
and all other fees and expenses of the Trust not expressly stated herein to be
for the account of the Certificateholders; provided that in no event shall the
--------
Servicer be liable for any federal, state or local income or franchise tax, or
any interest or penalties with respect thereto, assessed on the Trust, the
Trustee or the Certificateholders except as expressly provided herein. In the
event that the Servicer fails to pay the amounts due to the Trustee pursuant to
Section 11.05, the Trustee shall be entitled to deduct and receive such amounts
- -------------
from the Servicing Fee, prior to the payment thereof to the Servicer. The
Servicer shall be
20
<PAGE>
required to pay expenses for its own account and shall not be entitled to any
payment or reimbursement therefor other than the Servicing Fee.
Section 3.03 Representations, Warranties and Covenants of the Servicer .
---------------------------------------------------------
CompuCom as initial Servicer, and any Successor Servicer by its appointment
hereunder, hereby represents, warrants and covenants (except that no
representation, warranty or covenant is made by any Successor Servicer with
respect to paragraphs (l) and (t) below), in the case of the initial Servicer,
-------------- ---
as of the date of this Agreement and the Initial Closing Date and, with respect
to any Series as of the date of any Supplement and the related Closing Date, and
in the case of any Successor Servicer, as of the date of its appointment:
(a) Organization and Good Standing. The Servicer is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has full corporate power as a corporation
organized under the laws of its state of incorporation and authority
granted by its board of directors, any committees thereof and otherwise
granted or permitted by applicable law to execute, deliver and perform its
obligations under this Agreement, each Supplement and each other
Transaction Document to which it is, or is to be, a party, and has the
legal right to execute, deliver and perform its obligations under this
Agreement, each Supplement and each other Transaction Document to which it
is, or is to be, a party and to own its property and conduct its business
as such properties are presently owned and as such business is presently
conducted.
(b) Due Qualification. The Servicer is duly qualified to do business
-----------------
and is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals in
Texas and in each jurisdiction in which the failure to be so qualified, to
be in good standing or to obtain such license or approval has had, or could
reasonably be expected to have, a Material Adverse Effect.
(c) Due Authorization. The execution, delivery and performance of
-----------------
this Agreement, each Supplement and each other Transaction Document to
which it is, or is to be, a party, and the consummation of the transactions
provided in this Agreement, each Supplement and each other Transaction
Document to which it is, or is to be, a party, have been duly authorized by
the Servicer by all necessary corporate action on the part of the Servicer.
(d) Binding Obligation. Each of this Agreement, each Supplement and
------------------
each other Transaction Document to which it is, or is to be, a party
constitutes (or will, when executed and delivered by the Servicer,
constitute) legal, valid and binding obligations of the Servicer,
enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now
21
<PAGE>
or hereinafter in effect, relating to the enforcement of creditors' rights
in general and, with respect to any Successor Servicer which is a national
banking association, the rights of creditors of national banks under United
States law and except as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at law or in
equity).
(e) No Violation. The execution and delivery of this Agreement, each
------------
Supplement and each other Transaction Document to which it is, or is to be,
a party by the Servicer, and the performance of the transactions
contemplated by this Agreement, each Supplement and each other Transaction
Document to which it is, or is to be, a party and the fulfillment of the
terms hereof and thereof applicable to the Servicer, will not conflict
with, violate, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default
under, or require any consent, approval or registration under, any
Requirement of Law applicable to the Servicer or any material indenture,
contract, agreement, mortgage, deed of trust or other instrument to which
the Servicer is a party or by which it is bound.
(f) No Proceeding. There are no proceedings or investigations,
-------------
pending or, to the best knowledge of the Servicer, threatened against the
Servicer before any Governmental Authority (i) seeking to prevent the
issuance of the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any Supplement or any other Transaction
Document, or (ii) seeking any determination or ruling that has had, or
could reasonably be expected to have, a Material Adverse Effect.
(g) Compliance with Requirements of Law. The Servicer shall (i) duly
-----------------------------------
satisfy all material obligations on its part to be fulfilled under or in
connection with the Receivables and the Related Property; (ii) maintain in
effect all qualifications to do business required under Requirements of Law
in order to service properly the Receivables and the Related Property; and
(iii) comply in all material respects with all Requirements of Law
applicable to the Receivables and in connection with servicing the
Receivables and the Related Property the failure to comply with which has
had, or could reasonably be expected to have, a Material Adverse Effect.
(h) No Rescission or Cancellation. The Servicer shall not permit any
-----------------------------
rescission or cancellation of a Receivable or a Contract except (i) as
ordered by a court of competent jurisdiction or other Governmental
Authority or otherwise required by a Requirement of Law or (ii) in the
ordinary course of its business in accordance with the Credit and
Collection Policy.
(i) Year 2000 Problem. The Servicer (a) has reviewed the areas within
-----------------
its business and operations which could be adversely affected by, and has
developed or is developing a program to address on a timely basis, the Year
22
<PAGE>
2000 Problem and (b) has made appropriate inquiries as to the effect the
Year 2000 Problem will have on its material suppliers and customers. Based
on such review, program and inquiries, the Servicer reasonably believes
that the "Year 2000 Problem" will not have a Material Adverse Effect.
(j) All Consents Required. All approvals, authorizations, consents,
---------------------
orders or other actions of any Person or of any Governmental Authority
required in connection with the execution and delivery by the Servicer of
this Agreement, each Supplement and each other Transaction Document to
which it is, or is to be, a party, the performance by the Servicer of the
transactions contemplated by this Agreement, each Supplement and each other
Transaction Document to which it is, or is to be, a party and the
fulfillment by the Servicer of the terms hereof and thereof, have been
obtained or have been completed and are in full force and effect, except
for those approvals, authorizations, consents, orders or other actions the
failure to obtain or accomplish has not had, and could not reasonably be
expected to have, a Material Adverse Effect.
(k) Credit and Collection Policy. The Servicer, (i) except as
----------------------------
otherwise permitted in Section 3.01(e) and subject to Section 3.09, shall
--------------- ------------
not extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Contract related
thereto, in any manner which would have a material adverse effect on the
interests of the Certificateholders (without regard to any Enhancement) or
any Enhancement Provider or the Trust, including extending the due dates,
or impairing the collectibility of the Receivables and (ii) shall comply in
all material respects with the Credit and Collection Policy in regard to
each Receivable and the related Contract.
(l) No Change in Ability to Service. With respect to the initial
-------------------------------
Servicer only, since the Initial Closing Date there has been no material
adverse change in the ability of the Servicer to service and collect the
Receivables and the Related Property.
(m) Modification of Systems. The Servicer agrees, promptly after the
-----------------------
replacement or any material modification of any computer, automation or
other operating systems (in respect of hardware or software) used to
provide the Servicer's services as Servicer or to make any calculations or
reports hereunder, to give notice of any such replacement or modification
to the Trustee.
(n) Business Days. No later than January 1 of each year, the Servicer
-------------
shall furnish the Trustee with a list of days other than Saturday and
Sunday on which the office of the Servicer listed in Section 13.05 shall be
-------------
closed during the immediately succeeding year, except that with respect to
the calendar year 1999, the Servicer shall furnish such list to the Trustee
on or before the Initial Closing Date.
23
<PAGE>
(o) Keeping of Records and Books of Account. The Servicer shall
---------------------------------------
maintain and implement administrative and operating procedures (including
the ability to recreate records evidencing the Receivables in the event of
the destruction of the originals thereof), and keep and maintain all
documents, books, computer records and other information, reasonably
necessary or advisable for the collection of all the Receivables and the
Related Property. Such documents, books and computer records shall reflect
all facts giving rise to the Receivables and the Related Property, all
payments and credits with respect thereto, and the computer records shall
indicate the contribution and sale of Receivables by the Seller to the
Transferor, by the Transferor to the Trust, and, in all cases, the
interests of the Trust in the Receivables.
(p) Performance and Compliance with Contracts. The Servicer shall or,
-----------------------------------------
if CompuCom is no longer the Servicer, CompuCom shall timely and fully
perform and comply with all material provisions, covenants and other
promises required to be observed by it under the Contracts related to the
Receivables.
(q) No Servicer Default. No Servicer Default has occurred and is
-------------------
continuing.
(r) No Early Amortization Event. No Early Amortization Event has
---------------------------
occurred and is continuing.
(s) No Lien. None of the Lock-Box Accounts, the Wire Transfer Receipt
-------
Account or the Concentration Account is subject to any Lien except for (i)
rights of the banks holding such accounts under the applicable agreements
(including the Lock-Box Agreements), and (ii) the rights of the Trustee
under any Lock-Box Agreement or Wire Transfer Receipt Account Agreement.
(t) Financial Condition. The consolidated balance sheets of CompuCom
-------------------
and its consolidated Subsidiaries as at December 31, 1998, and the related
statements of earnings, shareholders' equity and cash flows of CompuCom and
its consolidated Subsidiaries for the fiscal year then ended, certified by
KPMG, LLP, fairly present the consolidated financial condition, business
and operations of CompuCom and its consolidated Subsidiaries as at such
dates and the consolidated results of the operations of CompuCom and its
consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP consistently applied.
(u) Accurate Reports. No Settlement Statement or Daily Report or
----------------
other information, exhibit, financial statement, document, book, record or
report furnished or to be furnished by or on behalf of the Servicer to the
Trustee, in connection with this Agreement was or will be inaccurate in any
material respect as of the date it was or will be dated or as of the date
so
24
<PAGE>
furnished, or contained or will contain any material misstatement of fact
or omitted or will omit to state a material fact or any fact necessary to
make the statements contained therein not materially misleading.
In the event there is any breach of any of the representations, warranties
or covenants of the Servicer contained in Section 3.03(g), (h), (k) or (p) with
--------------- --- --- ---
respect to any Receivable and as a result thereof, such Receivable has been
charged off as uncollectible or the proceeds of any such Receivable are not
available to the Trust, then upon the expiration of 30 days from the earlier to
occur of the discovery of any such event by the Servicer or receipt by the
Servicer of written notice of such event given by the Trustee (such notice to be
given within three Business Days of the discovery thereof by a Responsible
Officer of the Trustee), the Servicer shall accept the transfer of all the
Receivables as to which such event relates on the terms and conditions set forth
below; provided, however, that no such removal shall be required to be made with
-------- -------
respect to a Receivable if, within such 30-day period, such representations,
warranties or covenants with respect to such Receivable shall be true and
correct, or shall have been complied with, in all material respects. The
Servicer shall accept the transfer of a Receivable and the Related Property and
all monies due or to become due with respect thereto by making or causing to be
made a deposit into the Concentration Account (or Collection Master Subaccount,
if applicable) in immediately available funds on or prior to the Determination
Date following the Settlement Period during which such obligation arises in an
amount equal to the Transfer Deposit Amount for such Receivables, which deposit
shall be allocated in accordance with Section 4.03. Upon each such transfer of
------------
a Receivable to the Servicer, the Trustee shall automatically and without
further action be deemed to transfer, assign and otherwise convey to or upon the
order of the Servicer, without recourse, representation or warranty, all right,
title and interest of the Trust in and to such Receivable, the Related Property
and all monies due or to become due with respect thereto and all proceeds
thereof, and to release and terminate the security interest granted pursuant to
Section 2.02(b) to the extent it covers such property; and such Receivable shall
- ---------------
be treated by the Trustee as collected in full as of the Settlement Period to
which such Transfer Deposit Amount relates. The Trustee shall execute such
documents and instruments of transfer or assignment as shall be prepared by the
Servicer, and shall take such other actions as shall be reasonably requested by
the Servicer, at the Servicer's expense, to effect the conveyance of any
Receivable pursuant to this Section. The obligation of the Servicer to accept
the transfer of any such Receivables, the Related Property and all monies due or
to become due shall constitute the sole remedy respecting any breach of the
representations, warranties and covenants set forth in Section 3.03(g), (h), (k)
--------------- --- ---
or (p) available to Certificateholders or the Trustee on behalf of
---
Certificateholders.
25
<PAGE>
Section 3.04 Records and Reports for the Trustee.
-----------------------------------
(a) Daily Records. Upon reasonable prior notice by the Trustee, the
-------------
Servicer shall make available at an office of the Servicer selected by the
Servicer for inspection by the Trustee on a Business Day during the Servicer's
normal business hours a record setting forth (i) the Collections on each
Receivable and (ii) the amount of Receivables for the Business Day preceding the
date of the inspection. The Servicer shall, at all times, maintain its computer
files with respect to the Receivables in such a manner so that the Receivables
may be specifically identified and, upon reasonable prior request of the
Trustee, shall make available to the Trustee at an office of the Servicer
selected by the Servicer on any Business Day during the Servicer's normal
business hours any computer programs necessary to make such identification.
(b) Daily Report.
------------
(i) On each Business Day, the Servicer shall prepare, or, if
CompuCom is not the Servicer, CompuCom shall cooperate with the Successor
Servicer in preparing, a completed Daily Report (which shall include
directions regarding allocation of Collections as described in Article IV
----------
of this Agreement).
(ii) The Servicer shall deliver to the Trustee the Daily Report by
12:00 noon (New York City time) on each Business Day with respect to
activity in the Receivables for the prior Business Day.
(iii) Upon discovery of any error or receipt of notice of any error
in any Daily Report, the Servicer, the Transferor and the Trustee shall
arrange to confer and shall agree upon any adjustments necessary to correct
any such errors. Until correction of such error, the Servicer or the
Trustee, as the case may be, shall retain all Collections (or such lesser
amount as the Trustee and the Servicer shall agree to be necessary to cover
any error) in the Collection Account. Unless the Trustee has received
actual notice of any error in a Daily Report, the Trustee may rely on such
Daily Report for all purposes hereunder.
(c) Settlement Statement. On each Determination Date, the Servicer shall,
--------------------
or if CompuCom is not the Servicer, the Successor Servicer shall with
information provided by CompuCom prior to 10:00 a.m. (New York City time) on
such day, deliver to the Trustee, the Paying Agent, each Enhancement Provider
and the Rating Agencies the Settlement Statement for the related Settlement
Period.
(d) On each Determination Date, the Servicer shall deliver to the Trustee a
computer tape or disk, in form and substance satisfactory to the Trustee,
=
containing the information and data fields set forth on the attached Exhibit
============================================================================
3.04(d) (the "Monthly Tape"). In addition, the Trustee may request the delivery
======= ------------
of such Monthly Tape on an interim basis. The Trustee shall have no obligation
to verify the contents of any Monthly Tape it receives.
26
<PAGE>
Section 3.05 Annual Servicer's Certificate'. The Servicer will deliver to
-----------------------------
the Trustee and each Enhancement Provider on or before April 30 of each calendar
year, beginning with April 30, 2000, an Officer's Certificate substantially in
the form of Exhibit 3.05 (or such other form as reasonably requested by any
------------
Agent under any Series Supplement) stating that (a) a review of the activities
of the Servicer during the preceding fiscal year of the Servicer and of its
performance under this Agreement and each Supplement was made under the
supervision of the officer signing such certificate and (b) to the best of such
officer's knowledge, based on such review, the Servicer has in all material
respects fully performed or has caused to be fully performed all of its
obligations under this Agreement and each Supplement throughout such year, or,
if there has been a default in the performance of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.
Section 3.06 Annual Independent Public Accountants' Servicing Report'.
-------------------------------------------------------
(a) On or before April 30 of each calendar year, beginning with April 30,
2000, the Servicer shall cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer or the
Transferor) to furnish a report (which report shall cover the period from
December 31 of the prior calendar year to and including December 31 of the
current calendar year) to the Trustee, each Enhancement Provider and each Rating
Agency to the effect that they have applied certain procedures agreed upon with
the Servicer and reviewed certain documents and records relating to the
servicing of Receivables with respect to the Servicer's compliance with the
terms and conditions set forth in Sections 3.04, 3.05, 4.02, 4.03, 4.04, 4.06,
------------- ---- ---- ---- ---- ----
4.07 and 12.01 of this Agreement (including any Supplement amending or
- ---- -----
superseding those Sections with respect to a Series), which report shall include
all findings of such accountants.
(b) On or before April 30 of each calendar year, beginning with April 30,
2000, the Servicer shall cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer or the
Transferor), or other Person acceptable to each Control Party, to furnish a
report to the Trustee and each Enhancement Provider to the effect that they have
compared the mathematical calculations of each amount set forth in the
Settlement Statements forwarded by the Servicer pursuant to Section 3.04(c)
---------------
during the period covered by such report (which shall be the period from
December 31 of the prior calendar year to and including December 31 of the
current calendar year) with the Servicer's computer reports which were the
source of such amounts and that on the basis of such comparison, such
accountants have found that such amounts are in agreement, except for such
exceptions as they believe to be immaterial and such other exceptions as shall
be set forth in such statement. The Servicer shall promptly forward a copy of
such report to each Rating Agency.
27
<PAGE>
(c) In the event such independent public accountants require the Trustee to
agree to the procedures to be performed by such firm in any of the reports
required to be prepared pursuant to this Section 3.06, the Servicer shall direct
------------
the Trustee, in writing to so agree; it being understood and agreed that the
Trustee will deliver such letter of agreement in conclusive reliance upon the
direction of the Servicer, and the Trustee has not made any independent inquiry
or investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.
Section 3.07 Tax Treatment. The Transferor has entered into this
-------------
Agreement, and the Investor Certificates have been (or will be) issued, with the
intention that such Investor Certificates will qualify under applicable tax law
as indebtedness of the Transferor, secured by the Receivables. The Transferor,
the Servicer, each Investor Certificateholder by acceptance of its Investor
Certificate and each Certificate Owner by acquiring an interest in an Investor
Certificate agrees to treat, and to take no action inconsistent with the
treatment of, the Investor Certificates (or beneficial interest therein) as
indebtedness of the Transferor, for purposes of federal, state and local income
or franchise taxes and for any other tax imposed on or measured by income. In
accordance with the foregoing, the Transferor agrees that it will report its
income for such federal, state, and local income or franchise taxes, or for
purposes of any other taxes on or measured by income, on the basis that it is
the owner of the Receivables. Each Investor Certificateholder and each Holder
of the Transferor Certificate, by acceptance of its Certificate, and each
Certificate Owner, by acquisition of a beneficial interest in an Investor
Certificate, agree to be bound by the provisions of this Section 3.07. Nothing
------------
contained in the foregoing or elsewhere in this Agreement shall, however, be
deemed to prohibit the Transferor from making any election that may in the
future be available to it under the Internal Revenue Code to have the Trust or
any Series treated as a "financial asset securitization investment trust" (or
similar entity), so long as prior to the effectiveness of that election the
Transferor delivers to the Trustee an Opinion of Counsel to the effect that the
election (a) will not cause the Trust to be classified, for Federal income tax
purposes, as an association (or publicly traded partnership) taxable as a
corporation and (b) will not cause or constitute an event in which gain or loss
would be recognized by any Investor Certificateholder.
Section 3.08 Notices to Transferor. The Servicer shall deliver or make
---------------------
available to the Transferor each certificate and report required to be prepared,
forwarded or delivered pursuant to Sections 3.04, 3.05 and 3.06.
------------- ---- ----
Section 3.09 Dilution Factors. If the Unpaid Balance of any Eligible
----------------
Receivable is adjusted by the Servicer for any Dilution Factors (which Dilution
Factors shall only be determined in accordance with the Credit and Collection
Policy), the Aggregate Eligible Unpaid Balance with respect to the Business Day
following the Business Day on which such adjustment takes place will be reduced
by the amount of the adjustment. In the event that such adjustment would cause
the Aggregate Eligible Unpaid Balance to be less than the Aggregate Target
Receivables Amount, the
28
<PAGE>
Transferor shall make or cause to be made by the close of business on the
Business Day following the day on which such adjustment occurs a deposit in
immediately available funds, (on a pro rata basis based on the respective Target
Deficiency Amounts of each Series, if any), in an aggregate amount equal to such
deficiency into the Series Principal Collection Sub-subaccount for each
outstanding Series (such deposit being referred to as a "Dilution Factor
---------------
Payment").
- -------
Section 3.10 Covenant to Maintain Privileges. The Servicer shall maintain
-------------------------------
all of its rights, powers and privileges material to the collectibility of the
Receivables.
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.01 Rights of Certificateholders. Each Series shall evidence an
----------------------------
interest in the Trust Assets representing the right to receive Collections and
other amounts at the times and in the amounts specified in this Article IV to be
----------
deposited in the Collection Account or Series Accounts or paid to or on behalf
of the Investor Certificateholders (such interest for each Series, collectively,
the "Investors' Interest"). The Transferor Certificate shall represent the
-------------------
remaining interest in the Trust Assets, including the right to receive
Collections and other amounts at the times and in the amounts specified in this
Article IV to be paid to or on behalf of the Holder of the Transferor
- ----------
Certificate (the "Transferor's Interest"); provided, however, that such
--------------------- -------- -------
certificate shall not represent any interest in the Collection Account (except
to the extent provided in this Agreement) and neither the Transferor nor the
Servicer shall have the right to withdraw funds from the Collection Account or
to receive funds on deposit therein except as and when provided by this
Agreement.
29
<PAGE>
Section 4.02 Establishment of Collection Account.
-----------------------------------
(a) The Collection Account. The Trustee, for the benefit of
----------------------
Certificateholders and the Enhancement Providers (if any), shall establish and
maintain or shall cause to be established and maintained with an Eligible
Institution in the name of the Trustee, on behalf of the Trust, a segregated
trust account (the "Collection Account"), bearing a designation clearly
------------------
indicating that the funds deposited therein are held for the benefit of the
Certificateholders and the Enhancement Providers (if any). The Collection
Account (and any subaccounts and sub-subaccounts thereof) shall be under the
sole dominion and control of the Trustee for the benefit of the
Certificateholders and the Enhancement Providers (if any). If, at any time, the
institution holding the Collection Account (and any subaccounts and sub-
subaccounts thereof) ceases to be an Eligible Institution, the Trustee shall
within 10 Business Days of a Responsible Officer learning of such event
establish a new Collection Account meeting the conditions specified above with
an Eligible Institution, transfer any cash and/or any investments to such new
Collection Account and from the date such new Collection Account is established,
it shall be the "Collection Account." Neither the Transferor nor the Servicer,
nor any Person claiming by, through or under the Transferor or Servicer, shall
have any right, title or interest in, or any right to withdraw any amount from,
the Collection Account (and any subaccounts and sub-subaccounts thereof) except
to the extent provided in this Agreement. Pursuant to the authority granted to
the Servicer pursuant to Section 3.01(a), the Servicer shall have the revocable
---------------
power to instruct the Trustee to make withdrawals and payments from the
Collection Account (and any subaccounts and sub-subaccounts thereof) for the
purposes of carrying out the Servicer's, and, where applicable, the Trustee's
duties hereunder. The Trustee shall divide the Collection Account into
subaccounts and sub-subaccounts. The first of such subaccounts shall be a
subaccount established for the benefit of Certificateholders of all Series (the
"Collection Master Subaccount"). The Trustee shall also establish individual
----------------------------
subaccounts of the Collection Account for each outstanding Series (each,
respectively, a "Series Collection Subaccount" and, collectively, the "Series
---------------------------- ------
Collection Subaccounts") and for the Transferor (the "Transferor Collection
- ---------------------- ---------------------
Subaccount"). For administrative purposes only, the Trustee shall establish or
- ----------
cause to be established for each Series, so long as such Series is an
outstanding Series, sub-subaccounts of the Series Collection Subaccount with
respect to such Series (respectively, the "Series Principal Collection Sub-
-------------------------------
subaccount" and "Series Non-Principal Collection Sub-subaccount"). The Trustee
- ---------- ----------------------------------------------
may also establish for each Series any additional Series Collection Sub-
subaccounts which are set forth in the related Supplement.
(b) Administration of the Collection Account. Funds on deposit in the
----------------------------------------
Collection Account (and any subaccounts or sub-subaccounts thereof) shall, at
the direction of the Servicer, be invested by the Trustee in Eligible
Investments that will mature, or that are payable or redeemable upon demand of
the holder thereof, so that such funds will be available on or before the
Payment Date next following the date of the Trust's investment therein (other
than investment earnings and amounts deposited
30
<PAGE>
pursuant to Article XII, which shall at the direction of the Servicer be
-----------
invested by the Trustee in Eligible Investments that will mature on or before
the Business Day next following the date of the Trust's investment therein). All
interest and investment earnings (net of losses and investment expenses)
("Investment Earnings") on funds in the Collection Account (and any subaccounts
-------------------
or sub-subaccounts thereof) shall be paid by the Trustee to the Transferor on
each Payment Date, unless an Early Amortization Event shall have occurred and be
continuing, in which event such Investment Earnings shall be retained in the
Collection Account and be treated as Collections. Any request by the Servicer to
invest funds on deposit in the Collection Account (and any subaccounts or sub-
subaccounts thereof) shall be in writing and shall certify that the requested
investment is an Eligible Investment which matures at or prior to the time
required hereby. If the Trustee does not receive written direction from the
Servicer, any such amounts on deposit shall be invested in investments of the
type described in clause (iv) of the definition of Eligible Investments. The
Trustee shall maintain possession of the negotiable instruments or securities,
if any, evidencing the Eligible Investments described in clause (a) of the
----------
definition thereof from the time of purchase thereof until maturity. The
Servicer will have the revocable power to instruct the Trustee to make
withdrawals and payments from the Collection Account (and any subaccounts or
sub-subaccounts thereof) for the purpose of carrying out the Servicer's or the
Trustee's duties under this Agreement. Neither the Transferor nor the Servicer
shall deposit any of their funds in the Collection Account (and any subaccounts
or sub-subaccounts thereof) at any time except for funds unconditionally
required to be paid on account of the purchase price of Certificates or
Receivables pursuant to this Agreement or as specified in any Supplement.
(c) Identification of Collection Account, the Collection Master Subaccount
----------------------------------------------------------------------
and the Transferor Collection Subaccount. Exhibit 4.02(c) identifies the
- ---------------------------------------- ---------------
Collection Account, the Collection Master Subaccount and the Transferor
Collection Subaccount by setting forth the account number of each such account,
the account designation of each such account and the name and location of the
institution with which each such account has been established. Each Supplement
shall identify the Series Collection Subaccounts and Series Collection Sub-
subaccounts for the related Series.
Section 4.03 Collections and Allocations.
---------------------------
(a) Collections and Transfers. (i) The Servicer will allocate, pay or
-------------------------
deposit all Collections with respect to the Receivables for each Business Day as
described in this Article IV. Except as provided in any Supplement with respect
----------
to any Series, no later than the Business Day following the receipt of any
Collections, the Servicer shall deposit such Collections into the Concentration
Account (or Collection Master Subaccount, if applicable) and shall allocate and
transfer such Collections as indicated below.
(ii) On each Business Day (each such Business Day, a "Deposit Date") the
------------
Servicer (or the Trustee, in accordance with written directions from the
Servicer) shall
31
<PAGE>
allocate and transfer from Collections on deposit in the form of available funds
in the Concentration Account (or Collection Master Subaccount, if applicable):
(a) to the respective Series Collection Subaccount of each outstanding Series,
(A) during the Revolving Period of such Series, an amount equal to the lesser of
(1) the product of (x) the Invested Percentage for such Series and (y) such
Collections and (2) the sum of the Accrued Expense Amount, any Miscellaneous
Deficiency and Expense Amount and any Target Deficiency Amount with respect to
such Series for such Business Day and (B) during the Amortization Period or the
Early Amortization Period of such Series, the lesser of (1) the product of (x)
the Invested Percentage for such Series and (y) such Collections and (2) the sum
of the Accrued Expense Amount, any Miscellaneous Deficiency and Expense Amount
and the Controlled Amortization Amount or the Target Receivables Amount, as
applicable, with respect to such Series for such Business Day, and (b) to the
Transferor Collection Subaccount (or, at the election of the Transferor by
notice to the Servicer and the Trustee, to the Series Principal Collection Sub-
subaccount of another Series) the remaining funds, if any, on deposit in the
Concentration Account (or Collection Master Subaccount, if applicable) on such
date after giving effect to transfers to be made pursuant to clause (a) of this
----------
subsection (a)(ii). If the amount transferred under this subsection (a)(ii) to
- ------------------ ------------------
the Series Collection Subaccounts is less than the amount required to be so
transferred under this subsection (a)(ii), any funds on deposit in the
------------------
Concentration Account (or Collection Master Subaccount, if applicable) shall be
allocated by the Trustee (in accordance with the written directions received
pursuant to Section 3.04 above) pro rata to each outstanding Series based on
------------
their respective Invested Percentages in an aggregate amount not to exceed the
amount of such deficiency and the funds so allocated shall be transferred to the
respective Series Collection Subaccounts.
(b) Certain Allocations Following an Early Amortization Event. (i) If, on
---------------------------------------------------------
any Determination Date, an Early Amortization Event has occurred and is
continuing with respect to any outstanding Series and at such Determination Date
a Revolving Period is still in effect with respect to any other outstanding
Series (a "Special Allocation Determination Date"), then the Servicer shall make
-------------------------------------
the following calculations:
(A) determine the amount (the "Allocable Charged-Off Amount") equal to
----------------------------
the excess, if any, of (I) the aggregate Unpaid Balance of all Receivables
that became Writeoffs during the related Settlement Period over (II) the
aggregate amount of Recoveries received during the related Settlement
Period; or
(B) determine the amount (the "Allocable Recoveries Amount") equal to
---------------------------
the excess, if any, of (I) the aggregate amount of Recoveries received
during the related Settlement Period over (II) the aggregate Unpaid Balance
of Receivables that became Writeoffs during the related Settlement Period.
32
<PAGE>
(ii) If, on any Special Allocation Determination Date, any of the
Allocable Charged-Off Amount or the Allocable Recoveries Amount is greater than
zero for the related Settlement Period, the Trustee shall (in accordance with
written directions received pursuant to Section 3.04 above) make (A) a pro rata
------------
allocation to each outstanding Series (based on the Invested Percentage for such
Series) of a portion (as determined in clause (iii) below) of each such positive
------------
amount and (B) an allocation to the Transferor Certificate of the remaining
portion of each such positive amount.
(iii) With respect to each portion of the Allocable Charged-Off Amount
and the Allocable Recoveries Amount which is allocated to an outstanding Series
pursuant to this Section 4.03(b), the Trustee shall apply each such amount to
---------------
such Series in accordance with the related Supplement for such Series.
(c) Allocations for the Transferor Certificate. On each Business Day,
------------------------------------------
after making all allocations required pursuant to Section 4.03(a), the Trustee
---------------
shall (in accordance with the written direction of the Servicer) transfer to the
Transferor the amounts on deposit in the Transferor Collection Subaccount.
(d) Allocation and Application of Funds. Pursuant to Section 3.04, the
----------------------------------- ------------
Servicer shall direct the Trustee in writing to apply all Collections with
respect to the Receivables as described in this Article IV and in the Supplement
----------
with respect to each outstanding Series. The Servicer shall direct the Trustee
in writing to pay Collections to the Transferor to the extent such Collections
are transferred to the Transferor Collection Subaccount and as otherwise
provided in Article IV. Notwithstanding anything in this Agreement or any
----------
Supplement to the contrary, to the extent that the Trustee receives any Daily
Report prior to 12:00 noon, New York City time, on any Business Day, the Trustee
shall make any applications of funds required thereby on the same Business Day
and otherwise on the next succeeding Business Day.
Section 4.04 Daily Allocations of Collections Allocated to a Series.
------------------------------------------------------
Daily allocations of the portion of Collections allocated to the Series
Collection Subaccount of each Series shall be made in the manner set forth in
the related Supplement.
Section 4.05 Determination of Interest Distributable on Investor
---------------------------------------------------
Certificates. The determination of the amount of interest distributable with
- ------------
respect to the Investor Certificates of any Series shall be made in the manner
set forth in the related Supplement.
Section 4.06 Determination of Principal Distributable on Investor
----------------------------------------------------
Certificates. The determination of the amount of principal distributable with
- ------------
respect to the Investor Certificates of any Series shall be made in the manner
set forth in the related Supplement.
33
<PAGE>
Section 4.07 Distributions from Series Collection Sub-subaccounts-. The
----------------------------------------------------
distribution of amounts on deposit in the Series Collection Sub-subaccounts of
any Series shall be made in the manner set forth in the related Supplement.
Section 4.08 Funds Unrelated to Receivables. In the event that the
------------------------------
Trustee shall have received amounts in respect of payments made by any Person on
an obligation of a customer of CompuCom or other obligation which has not been
transferred to the Trust, the Trustee shall, as soon as practicable and as
instructed in the most recently delivered Daily Report or Settlement Statement,
forward such amounts, in the manner specified in writing by CompuCom, to
CompuCom or such other Person as CompuCom designates and, pending the forwarding
of such amounts, hold such amounts in trust for CompuCom or such other Person
designated by CompuCom. The Trustee will, if requested in writing by CompuCom,
acknowledge and confirm the foregoing to any Person designated by CompuCom.
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
Section 5.01 Distributions. On each Payment Date, the Paying Agent shall
-------------
distribute (in accordance with the Settlement Statement delivered by the
Servicer to the Trustee on the preceding Determination Date pursuant to Section
-------
3.04(c)) to each Investor Certificateholder of any Series on the preceding
- -------
Record Date (other than as provided in Section 2.04(d) or in Section 12.03(b)
--------------- ----------------
hereof respecting a final distribution) such Investor Certificateholder's pro
---
rata share (based on the aggregate Undivided Interests represented by Investor
- ----
Certificates of such Series held by such Investor Certificateholder) of amounts
on deposit in the Collection Account (or other applicable Series Accounts
specified in the applicable Supplement) as are payable to the Investor
Certificateholders of such Series pursuant to Article IV. Such distribution
----------
shall be made by check mailed to each Certificateholder or, if so stated in any
Supplement, by wire transfer to each Certificateholder so qualified as stated
therein, except that to the extent that Investor Certificates of a Series are
registered in the name of Cede & Co., the nominee registrar for The Depository
Trust Company, such distribution to Investor Certificateholders shall be made in
immediately available funds to The Depository Trust Company. All payments on
account of principal and interest to Certificateholders of any Series shall be
made from amounts on deposit in the Collection Account or other applicable
Series Accounts specified in the applicable Supplement.
34
<PAGE>
Section 5.02 Monthly Investor Certificateholders' Statement; Annual Tax
----------------------------------------------------------
Statement.
- ---------
(a) On each Payment Date, the Paying Agent shall forward to each Investor
Certificateholder of each Series the Settlement Statement received by the Paying
Agent pursuant to Section 3.04(c).
---------------
(b) On or before January 31 of each calendar year, beginning with calendar
year 2000, the Servicer shall deliver to the Paying Agent, which shall thereupon
furnish to each Person who at any time during the preceding calendar year was a
Certificateholder, a statement prepared by the Servicer containing the
information which is required to be contained in the regular monthly report to
Investor Certificateholders as set forth in Section 5.02(a), aggregated for such
---------------
calendar year or the applicable portion thereof during which such person was a
Certificateholder, together with such other information as is required to be
provided by an issuer of indebtedness under the Code and such other customary
information as the Servicer deems necessary or desirable to enable the
Certificateholders to prepare their tax returns. Such obligation of the
Servicer shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Paying Agent pursuant to this
Agreement or pursuant to any requirements of the Code as from time to time in
effect. Upon the written request of any Investor Certificateholder, the Trustee
shall provide such Investor Certificateholder with information necessary for
such Investor Certificateholder to complete its federal tax returns with respect
to its investment in the Certificates issued hereunder.
35
<PAGE>
ARTICLE VI
THE CERTIFICATES
Section 6.01 The Certificates. The Investor Certificates of each Series
----------------
shall be substantially in the form attached as an exhibit to the applicable
Supplement, and the Transferor Certificate shall be substantially in the form of
Exhibit 6.01 hereto, and shall, upon issuance pursuant hereto or to Section
- ------------ -------
6.09, be executed and delivered by the Transferor to the Trustee for
authentication and redelivery as provided in Section 6.02. Investor
------------
Certificates shall be issued in the minimum denominations or commitment amounts
or commitment percentages indicated in the related Supplement. The Transferor
Certificate shall be issued in one certificate to the Transferor. Each
Certificate shall be executed by manual or facsimile signature on behalf of the
Transferor by its Chairman of the Board, its President, its Vice Chairman of the
Board or any Vice President. Certificates bearing the signature of the
individual who was, at the time when such signature was affixed, authorized to
sign on behalf of the Transferor or the Trustee shall not be rendered invalid,
notwithstanding that such individual has ceased to be so authorized prior to the
authentication and delivery of such Certificates or does not hold such office at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement or any applicable Supplement, or be valid for any purpose,
unless there appears on such Certificate a certificate of authentication
substantially in the form provided for herein executed by or on behalf of the
Trustee by the manual signature of a duly authorized signatory, and such
certificate upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 6.02 Authentication of Certificates. Contemporaneously with the
------------------------------
initial assignment and transfer of the Receivables, whether now existing or
hereafter created and the other components of the Trust to the Trust, the
Trustee shall authenticate and deliver the Transferor Certificate to the
Transferor and, upon the execution of any Supplement and the satisfaction of the
conditions provided in Section 6.09, shall authenticate and deliver the Series
------------
of Investor Certificates to be issued thereunder as provided in Section 6.09.
------------
The Certificates of each Series shall be duly authenticated by or on behalf of
the Trustee as provided for herein and in the applicable Supplement, (x) in
authorized denominations equal to (in the aggregate) the Initial Invested Amount
of such Series or (y) in authorized maximum commitment amounts or commitment
percentages, in each case as specified in such Supplement. As provided in any
Supplement, Investor Certificates of any Series may be issued and sold pursuant
to an effective registration statement under the Securities Act, or pursuant to
an exemption therefrom, and may be delivered in book-entry form as provided in
Sections 6.11 through 6.12. Further, if any such Series is sold pursuant to an
- ------------- ----
exemption from registration under the Securities Act pursuant to Section 4(2) of
the Securities Act or its substantial equivalent (the "Private Placement
-----------------
Exemption") as stated in the applicable
- ---------
36
<PAGE>
Supplement, the Certificates of such Series may only be transferred as provided
in Section 6.03(d).
---------------
Section 6.03 Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) The Trustee shall cause to be kept at the office or agency to be
maintained by a transfer agent and registrar (which may be the Trustee) (the
"Transfer Agent and Registrar") a register (the "Certificate Register") in
- ----------------------------- --------------------
which, subject to such reasonable regulations as it may prescribe, the Transfer
Agent and Registrar shall provide for the registration of each Series of the
Investor Certificates and the Transferor Certificate and of transfers and
exchanges of such Certificates as herein provided. The Trustee is hereby
initially appointed Transfer Agent and Registrar for the purpose of registering
each Series of Investor Certificates and of registering transfers and exchanges
of the Investor Certificates as herein provided. The Trustee shall be permitted
to resign as Transfer Agent and Registrar upon 30 days' written notice to the
Transferor and the Servicer; provided, however, that such resignation shall not
-------- -------
be effective and the Trustee shall continue to perform its duties as Transfer
Agent and Registrar until the Servicer has appointed a successor Transfer Agent
and Registrar acceptable to the Transferor. The Trustee shall register the
Transferor Certificate in the name of the Transferor.
Upon surrender for registration of transfer of any Investor Certificate of
a Series at any office or agency of the Transfer Agent and Registrar maintained
for such purpose, the Transferor shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more Investor Certificates of such Series in authorized
denominations (or commitment percentages or commitment amounts) evidencing the
same aggregate Undivided Interests; provided, however, that any Investor
-------- -------
Certificate of any Series sold pursuant to the Private Placement Exemption shall
satisfy the conditions provided in Section 6.03(d) prior to such registration of
---------------
transfer.
At the option of an Investor Certificateholder, Investor Certificates of a
Series may be exchanged for one or more Investor Certificates of such Series of
authorized denominations evidencing the same aggregate Undivided Interests, upon
surrender of the Investor Certificates to be exchanged at any office or agency
of the Transfer Agent and Registrar maintained for such purpose. Whenever any
Investor Certificates are so surrendered for exchange, the Transferor shall
execute, and the Trustee shall authenticate and deliver, the Investor
Certificates which the Investor Certificateholder making the exchange is
entitled to receive. Every Investor Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in a form reasonably satisfactory to the Trustee and the
Transfer Agent and Registrar duly executed by the Certificateholder thereof or
its attorney duly authorized in writing.
37
<PAGE>
No service charge shall be imposed for any registration of transfer or
exchange of Investor Certificates, but the Transfer Agent and Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Investor Certificates.
All Investor Certificates surrendered for registration of transfer or
exchange shall be canceled by the Transfer Agent and Registrar and disposed of
in a manner satisfactory to the Trustee or retained by the Trustee in accordance
with its standard retention policy.
(b) Neither the Transferor Certificate nor any interest represented thereby
shall be sold, transferred, assigned, exchanged, pledged or otherwise conveyed.
(c) The Transfer Agent and Registrar will maintain at its expense in
Minneapolis, Minnesota, an office or offices or agency or agencies where
Certificates may be surrendered for registration of transfer or exchange.
(d) Unless otherwise specified in the related Supplement, until such time
as the Trustee shall receive an Officer's Certificate of the Transferor
certifying that a Series of Investor Certificates has been registered under the
Securities Act and qualified under all applicable state securities laws, neither
the Trustee nor the Transfer Agent and Registrar shall register a transfer of
any Investor Certificates of such Series or any interest therein unless such
transfer is to be made in a transaction that does not require such registration
or qualification. Unless otherwise specified in the related Supplement, until
such time as such Series of Investor Certificates shall be registered pursuant
to a registration statement filed under the Securities Act, such Series of
Investor Certificates shall bear a legend to the effect set forth in the
preceding sentence. Unless otherwise specified in the related Supplement, in
the event that registration of a transfer is to be made in reliance upon an
exemption of the transfer from the Securities Act, the Trustee shall require, in
order to assure compliance with the Securities Act and the Investment Company
Act of 1940, as amended, the transferee to deliver to the Trustee and the
Transferor an Opinion of Counsel reasonably satisfactory to the Transferor and
the Trustee that such transfer may be made pursuant to an exemption from the
Securities Act and applicable state securities laws and would not subject the
Trust to the registration requirements of the Investment Company Act of 1940, as
amended. Any such Opinion of Counsel shall be obtained at the expense of the
prospective transferor or transferee, and not at the expense of the Trustee or
the Transferor, and shall be delivered to the Trustee and the Transferor prior
to or contemporaneously with any such transfer. Neither the Transferor nor the
Trustee shall be obligated to register any Series of Investor Certificates under
any state securities laws or under the Securities Act or to take any other
action not otherwise required under this Agreement to permit the transfer of
such Series without registration.
Notwithstanding anything to the contrary contained herein, in no event
shall an Investor Certificate of any Series be transferred to a Benefit Plan,
unless permitted
38
<PAGE>
pursuant to the related Supplement. Each Holder of an Investor Certificate of
any such Series, by its acceptance thereof, represents and warrants that it is
not a Benefit Plan and is not acquiring or holding its Investor Certificates by,
with or on behalf of plan assets of any Benefit Plan, unless permitted pursuant
to the related Supplement. By acquiring any interest in an Investor Certificate,
the applicable Certificate Owner or Owners shall be deemed to have represented
and warranted that it or they are not Benefit Plans and are not acquiring such
interest by, with or on behalf of plan assets of any Benefit Plan, unless
permitted pursuant to the related Supplement.
In connection with any transfer of an Investor Certificate, unless
otherwise specified in the related Supplement, each transferee shall execute and
deliver to the Trustee a representation letter substantially in the form of
Exhibit 6.03(d).
- ---------------
Section 6.04 Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
-------------------------------------------------
any mutilated Certificate is surrendered to the Transfer Agent and Registrar, or
the Transfer Agent and Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any such Certificate and (b) there is delivered to
the Transfer Agent and Registrar, the Trustee and the Transferor such security
or indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Trustee that such Certificate has been acquired by
a bona fide purchaser, the Transferor shall execute and the Trustee shall
---- ----
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
aggregate Undivided Interest, if applicable. In connection with the issuance of
any new Certificate under this Section 6.04, the Trustee or the Transfer Agent
------------
and Registrar may require the payment by the Certificateholder of a sum
sufficient to cover any tax or other expenses (including the fees and expenses
of the Trustee and Transfer Agent and Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this Section 6.04 shall constitute
------------
complete and indefeasible evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
Section 6.05 Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Trustee, the Paying Agent, the
Transfer Agent and Registrar and any agent of any of them may treat the Person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 5.01 and for all
------------
other purposes whatsoever, and neither the Trustee, the Paying Agent, the
Transfer Agent and Registrar nor any agent of any of them shall be affected by
any notice to the contrary; provided, however, that in determining whether the
-------- -------
holders of the requisite Undivided Interests have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Certificates
owned by the Transferor, the Servicer or any Affiliate thereof, shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates which a
Responsible Officer of the Trustee knows to be so owned shall be so disregarded.
Certificates so owned which
39
<PAGE>
have been pledged in good faith shall not be disregarded and may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates and that the pledgee
is not the Transferor, the Servicer or an affiliate (as defined above) thereof.
Section 6.06 Appointment of Paying Agent. The Paying Agent shall be the
---------------------------
Trustee or shall (i) have a rating by Moody's of at least P-1 or satisfy the
Rating Agency Condition and (ii) have a rating by Standard & Poor's of at least
A-1 or satisfy the Rating Agency Condition and (iii) be approved by the
Servicer, and shall be a depositary institution organized under the laws of the
United States or any one of the states thereof, including the District of
Columbia. The Paying Agent shall make distributions to Certificateholders from
the Collection Account and Series Accounts as contemplated by Section 5.01. Any
------------
Paying Agent shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions referred to above.
The Trustee may revoke such power and remove any Paying Agent if the Trustee
determines in its sole discretion that the Paying Agent shall have failed to
perform its obligations under this Agreement in any material respect. The
Paying Agent shall initially be the Trustee. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Trustee,
the Servicer and the Transferor; provided, however, that such resignation shall
-------- -------
not be effective and the Paying Agent shall continue to perform its duties until
the Trustee has appointed, and such appointment has been accepted by, a
successor Paying Agent. The Trustee shall cause the resigning Paying Agent and
each successor Paying Agent to execute and deliver to the Trustee an instrument
in which such resigning or successor Paying Agent or additional Paying Agent
shall agree with the Trustee that, as Paying Agent, such resigning or successor
Paying Agent or additional Paying Agent will hold all sums, if any, held by it
for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Paying Agent shall return all unclaimed funds to the
Trustee and upon removal shall also return all funds in its possession to the
Trustee. The provisions of Sections 11.01, 11.02 and 11.03 shall apply to the
-------------- ----- -----
Paying Agent in its role as Paying Agent.
Section 6.07 Access to List of Certificateholders' Names and Addresses'.
---------------------------------------------------------
The Trustee shall furnish or instruct the Transfer Agent and Registrar to
furnish to the Servicer or the Paying Agent, within five Business Days after
receipt by the Trustee of a request therefor from the Servicer or the Paying
Agent, respectively, in writing, a list in such form as the Servicer or the
Paying Agent may reasonably require, of the names and addresses of the
Certificateholders. If Holders of Investor Certificates of any Series or
Holders representing Undivided Interests in the Trust aggregating not less than
5% of the Invested Amount of the Investor Certificates of any Series (the
"Applicants") apply in writing to the Trustee, and such application states that
- -----------
the Applicants desire to communicate with other Investor Certificateholders of
any Series with respect to their rights under this Agreement or under the
Investor Certificates and is accompanied by a copy of the communication which
such Applicants propose to
40
<PAGE>
transmit, then the Trustee, after having been indemnified to its reasonable
satisfaction by such Applicants for its costs and expenses, shall afford or
shall instruct the Transfer Agent and Registrar to afford such Applicants access
during normal business hours to the most recent list of Certificateholders held
by the Trustee, within five Business Days after the receipt of such application.
Such list shall be as of a date no more than 30 days prior to the date of
receipt of such Applicants' request. Every Certificateholder agrees with the
Trustee that neither the Trustee, the Transfer Agent and Registrar, nor any of
their respective agents shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Certificateholders
hereunder, regardless of the sources from which such information was derived.
Section 6.08 Authenticating Agent.
--------------------
(a) The Trustee may appoint one or more authenticating agents with respect
to the Certificates which shall be authorized to act on behalf of the Trustee in
authenticating the Certificates in connection with the issuance, delivery,
registration of transfer, exchange or repayment of the Certificates. Whenever
reference is made in this Agreement to the authentication of Certificates by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication on behalf of the Trustee by an authenticating
agent and a certificate of authentication executed on behalf of the Trustee by
an authenticating agent. Each authenticating agent must be acceptable to the
Transferor.
(b) Any institution succeeding to all or substantially all of the corporate
agency business of an authenticating agent shall continue to be an
authenticating agent without the execution or filing of any paper or any further
act on the part of the Trustee or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written notice
of resignation to the Trustee and to the Transferor. The Trustee may at any
time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent and to the Transferor. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
an authenticating agent shall cease to be acceptable to the Trustee or the
Transferor, the Trustee promptly may appoint a successor authenticating agent.
Any successor authenticating agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an authenticating agent.
No successor authenticating agent shall be appointed unless acceptable to the
Trustee and the Transferor.
(d) The Servicer agrees to pay, on behalf of the Trust, to each
authenticating agent from time to time reasonable compensation for its services
under this Section 6.08.
------------
41
<PAGE>
(e) The provisions of Sections 11.01, 11.02 and 11.03 shall be applicable
-------------- ----- -----
to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.08, the
------------
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
This is one of the Certificates referred to in the Pooling and Servicing
Agreement.
__________________________
as Authenticating Agent
for the Trustee,
by
__________________________
Authorized Signatory
Section 6.09 New Issuances. (a) The Transferor may from time to time
-------------
direct the Trustee, on behalf of the Trust, to issue one or more new Series of
Investor Certificates pursuant to one or more Supplements. The Investor
Certificates of all outstanding Series shall be equally and ratably entitled as
provided herein to the benefits of this Agreement without preference, priority
or distinction, all in accordance with the terms and provisions of this
Agreement and the applicable Supplement except, with respect to any Series or
Class, as provided in the related Supplement.
(b) On or before the Series Issuance Date relating to any new Series, the
parties hereto will execute and deliver a Supplement which will specify the
Principal Terms of such new Series. The terms of such Supplement may modify or
amend the terms of this Agreement solely as applied to such new Series. The
obligation of the Trustee to issue the Investor Certificates of such new Series
and to execute and deliver the related Supplement is subject to the satisfaction
of the following conditions:
(i) on or before the fifth Business Day immediately preceding the
Series Issuance Date, the Transferor shall have given the Trustee, the
Servicer, each Rating Agency and each Enhancement Provider written notice
of such issuance and the Series Issuance Date (the "Issuance Notice");
---------------
(ii) the Transferor shall have delivered to the Trustee the related
Supplement, in form reasonably satisfactory to the Trustee, executed by
each party hereto other than the Trustee;
42
<PAGE>
(iii) the Transferor shall have delivered to the Trustee the form of
any Enhancement relating to such Series, if any, and any related
Enhancement Agreement executed by each of the parties thereto, other than
the Trustee;
(iv) if any of the Certificates are then rated, the Rating Agency
Condition shall have been satisfied with respect to such issuance;
(v) such issuance will not result in the occurrence of an Early
Amortization Event and the Transferor shall have delivered to the Trustee
and any Enhancement Provider a certificate of a Vice President or more
senior officer, dated the Series Issuance Date, to the effect that the
Transferor reasonably believes that such issuance will not result in the
occurrence of an Early Amortization Event and is not reasonably expected to
result in the occurrence of an Early Amortization Event at any time in the
future;
(vi) the Transferor shall have delivered to the Trustee a Tax
Opinion, an enforceability opinion, a security interest opinion and a true
sale/substantive consolidation opinion, each dated the Series Issuance
Date, with respect to such issuance; and
(vii) the Aggregate Eligible Unpaid Balance shall not be less than
the Aggregate Target Receivables Amount, in each case as of the Series
Issuance Date and after giving effect to such issuance.
Upon satisfaction of the above conditions, the Trustee shall execute the
Supplement and issue to the Transferor the Investor Certificates of such Series
for execution and redelivery to the Trustee for authentication. Without
limiting the generality of the foregoing, the Trustee will hold any Enhancement
provided pursuant to any Supplement only on behalf of each Series (or related
Class) to which such Enhancement relates.
Section 6.10 Book-Entry Certificates. If and to the extent provided in
-----------------------
any Supplement, the Investor Certificates of any Series, upon original issuance,
will be issued in the form of one or more typewritten Certificates representing
the Book-Entry Certificates, to be delivered to The Depository Trust Company,
the initial Clearing Agency, by, or on behalf of, the Transferor. The Investor
Certificates of such Series represented by Book-Entry Certificates shall
initially be registered on the Certificate Register in the name of Cede & Co.,
the nominee of the initial Clearing Agency, and no Certificate Owner with
respect to such Book-Entry Certificates will receive a Definitive Certificate
representing such Certificate Owner's interest in the Investor Certificates,
except as provided in Section 6.12. Unless and until certificated, fully
------------
registered Investor Certificates (the "Definitive Certificates") have been
-----------------------
issued to Certificate Owners pursuant to Section 6.12:
------------
(i) the provision of this Section 6.10 shall be in full force and
------------
effect;
43
<PAGE>
(ii) the Transferor, the Servicer, the Paying Agent, the Transfer
Agent and Registrar and the Trustee may deal with the Clearing Agency and
the Clearing Agency Participants for all purposes (including the making of
distributions on the Investor Certificates) as the authorized
representatives of the Certificate Owners;
(iii) to the extent that the provisions of this Section 6.10 conflict
------------
with any other provisions of this Agreement, the provisions of this Section
-------
6.10 shall control; and
----
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and shall
be limited to those established by law and agreements between such
Certificate Owners and the Clearing Agency and/or the Clearing Agency
Participants. Unless and until Definitive Certificates are issued pursuant
to Section 6.12, the initial Clearing Agency will make book-entry trnsfers
------------
among the Clearing Agency Participants and recieve and transmit
distributions of principal and interest on the Investor Certificates to
such Clearing Agency Participants.
Section 6.11 Notices to Clearing Agency. Whenever notice or other
--------------------------
communication to the Investor Certificateholders of any Series delivered as
provided in Section 6.10 is required under this Agreement, unless and until
------------
Definitive Certificates shall have been issued to Certificate Owners pursuant to
Section 6.12, the Trustee, the Servicer and the Paying Agent shall give all such
- ------------
notices and communications specified herein to be given to applicable Holders of
the Investor Certificates of such Series to the Clearing Agency.
Section 6.12 Definitive Certificates. If (i)(A) the Transferor advises
-----------------------
the Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities with respect to the Book-Entry
Certificates, and (B) the Trustee or the Transferor is unable to locate a
qualified successor, (ii) the Transferor, at its option, advises the Trustee in
writing that, with respect to any Series, it elects to terminate the book-entry
system through the Clearing Agency or (iii) after the occurrence of a Servicer
Default, Certificate Owners representing beneficial interests aggregating more
than 50% of the Invested Amount of each affected Series then issued and
outstanding represented by Book-Entry Certificates advise (x) the Trustee and
(y) the Clearing Agency through the Clearing Agency Participants in writing that
the continuation of a book-entry system through the Clearing Agency is no longer
in the best interests of the Certificate Owners of such Series, then the Trustee
shall notify the Clearing Agency, and shall request the Clearing Agency to
notify all Certificate Owners, of the availability through the Trustee of
Definitive Certificates of such Series to Certificate Owners of such Series
requesting the same. Upon surrender to the Trustee of Investor Certificates of
such Series represented by Book-Entry Certificates by the Clearing Agency
accompanied by registration instructions from such Clearing Agency for
registration, the Trustee shall authenticate and deliver Definitive
44
<PAGE>
Certificates of such Series in respect of such Book-Entry Certificates. Neither
the Transferor, the Transfer Agent and Registrar nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates of any Series, all references herein to obligations with
respect to such Series imposed upon or to be performed by the Clearing Agency
shall be deemed to be imposed upon and performed by the Trustee, to the extent
applicable with respect to such Definitive Certificates, and the Trustee shall
recognize the Holders of the Definitive Certificates as Certificateholders
hereunder.
Section 6.13 Letter of Representations. Notwithstanding anything to the
-------------------------
contrary in this Agreement or any Supplement, the parties hereto shall comply
with the terms of each Letter of Representations.
ARTICLE VII
OTHER MATTERS RELATING
TO THE TRANSFEROR
Section 7.01 Liability of the Transferor. The Transferor shall be liable
---------------------------
for each obligation, covenant, representation and warranty of the Transferor
arising under or related to this Agreement or any Supplement and shall be liable
only to such extent.
Section 7.02 Merger or Consolidation of, or Assumption of the Obligations
------------------------------------------------------------
of, the Transferor.
- ------------------
(a) The Transferor shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person unless:
(i) the corporation formed by such consolidation or into which the
Transferor is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Transferor substantially as an entirety
shall be, if the Transferor is not the surviving entity, organized and
existing under the laws of the United States of America or any state or the
District of Columbia, and, if the Transferor is not the surviving entity,
shall expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
performance of every covenant and obligation of the Transferor hereunder;
(ii) the Transferor shall have delivered to the Trustee and each
Enhancement Provider an Officer's Certificate of the Transferor and an
Opinion of Counsel, each stating that such consolidation, merger,
conveyance or transfer
45
<PAGE>
complies with this Section 7.02 and that all conditions precedent herein
------------
provided for relating to such transaction have been complied with;
(iii) if any of the Certificates are then rated, the Rating Agency
Condition shall have been satisfied with respect to such action; and
(iv) each Control Party shall have consented to such action.
(b) The obligations of the Transferor hereunder shall not be assignable nor
shall any Person succeed to the obligations of the Transferor hereunder except
in each case in accordance with the provisions of Section 7.02(a).
---------------
Section 7.03 Limitation on Liability of the Transferor. The Transferor
-----------------------------------------
and any director or officer or employee or agent of the Transferor may rely in
good faith on any document of any kind prima facie properly executed and
----- -----
submitted by any Person respecting any matters arising hereunder. Each of the
Trustee and the Servicer agrees that the obligations of the Transferor to the
Trustee, the Servicer, the Certificateholders and the Trust hereunder, including
the obligation of the Transferor in respect of indemnities pursuant hereto,
shall be payable solely from the Trust Assets in accordance with the provisions
of this Agreement and any Supplement and that the Trustee, the Servicer, the
Certificateholders and the Trust shall not look to any other property or assets
of the Transferor in respect of such obligations and that such obligations shall
not constitute a claim against the Transferor in the event that the Transferor's
assets are insufficient to pay in full such obligations.
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
Section 8.01 Liability of the Servicer. The Servicer shall be liable
-------------------------
under this Agreement only to the extent of the obligations specifically
undertaken by the Servicer in its capacity as Servicer.
Section 8.02 Merger or Consolidation of, or Assumption of the Obligations
------------------------------------------------------------
of, the Servicer.
- ----------------
(a) The Servicer shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(i) the corporation formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Servicer substantially as an entirety
shall be a
46
<PAGE>
corporation organized and existing under the laws of the United States of
America or any State or the District of Columbia, and, if the Servicer is
not the surviving entity, such corporation shall qualify as an Eligible
Servicer and shall expressly assume, by an agreement supplemental hereto
executed and delivered to the Trustee in a form satisfactory to the
Trustee, the performance of every covenant and obligation of the Servicer
hereunder; and
(ii) the Servicer has delivered to the Trustee an Officer's
Certificate of the Servicer stating that such consolidation, merger,
conveyance or transfer complies with this Section 8.02 and that all
------------
conditions precedent herein provided for relating to such transaction have
been complied with and an Opinion of Counsel with respect to the
enforceability of the assumption agreement referred to above. The Servicer
shall promptly notify each Rating Agency following the occurrence of any
transaction covered by this Section 8.02.
------------
(b) Change in Control Notice. The Servicer shall provide the Trustee and
----------------------------
the Agent pursuant to any Series Supplement with 30 days written notice prior to
Safeguard Scientifics, Inc. ceasing to own voting securities of Servicer
entitled to cast at least 25% of the total votes entitled to be cast by the
Servicer's equity holders.
Section 8.03 Limitation on Liability of the Servicer and Others. The
--------------------------------------------------
Servicer and any director or officer or employee or agent of the Servicer may
rely in good faith on any document of any kind prima facie properly executed and
----- -----
submitted by any Person respecting any matters arising hereunder. The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties to service the Receivables in
accordance with this Agreement or any Supplement. The Servicer may undertake
any legal action which it may deem necessary or desirable for the benefit of
Certificateholders with respect to this Agreement and any Supplement and the
rights and duties of the parties hereto and thereto and the interest of the
Certificateholders hereunder and thereunder.
Section 8.04 Servicer Indemnification of the Trust and the Trustee. The
-----------------------------------------------------
Servicer shall indemnify and hold harmless the Trustee (and its respective
directors, officers, employees and agents) and the Trust, for the benefit of the
Certificateholders and the Enhancement Providers, from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of any acts
or omissions of the Servicer pursuant to this Agreement or any Supplement,
including any judgment, award, settlement, reasonable attorneys' fees and other
costs or expenses incurred in connection with the defense of any actual action,
proceeding or claim; provided, however, that the Servicer shall not indemnify
-------- -------
the Trustee or the Trust if such acts or omissions were attributable to fraud,
gross negligence, breach of fiduciary duty or willful misconduct by the Trustee;
and provided, further, that the Servicer shall not indemnify the Trust or the
-------- -------
Investor Certificateholders (x) for any liabilities, costs or expenses of the
Trust with respect to any action taken by the Trustee at the request of
47
<PAGE>
any Investor Certificateholder or (y) with respect to any federal, state or
local income or franchise taxes or any other taxes imposed on or measured by
income (or any interest or penalties or additions with respect thereto) required
to be paid by the Trust or the Investor Certificateholders in connection
herewith to any taxing authority, or (z) with respect to any liabilities,
losses, costs or expenses incurred by any Certificateholder in the Investor
Certificates of any Series as a result of defaults or other losses with respect
to the Receivables as a result of the creditworthiness of the Obligors. Subject
to Sections 8.01 and 10.02(b), any indemnification pursuant to this Section
------------- --------
shall be had only from the assets of the Servicer. The provisions of such
indemnity shall run directly to and be enforceable by an injured party subject
to the limitations hereof. The provisions of this Section shall survive the
resignation or removal of the Trustee and the termination of the Trust.
Section 8.05 The Servicer Not to Resign. The Servicer shall not resign
--------------------------
from the obligations and duties hereby imposed on it except upon determination
that (i) the performance of its duties hereunder is no longer permissible under
applicable law, regulation or order and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law, regulation or order. Any such determination
permitting the resignation of the Servicer shall be evidenced as to clause (i)
----------
above by an Opinion of Counsel to such effect delivered to the Trustee. No such
resignation shall become effective until the Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 10.02 hereof; provided, that if within one hundred
------------- --------
twenty (120) days of the date that the Servicer notifies the Trustee of its
resignation in accordance with this Section 8.05 the Trustee does not receive
------------
any bids from Eligible Servicers in accordance with Section 10.02(c) to act as
----------------
Successor Servicer, then the Trustee shall automatically be appointed Successor
Servicer in accordance with Section 10.02.
-------------
Section 8.06 Access to Certain Documentation and Information Regarding the
-------------------------------------------------------------
Receivables. The Servicer shall provide to the Trustee and its representatives
- -----------
access to the documents, books, computer records and other information regarding
the Receivables and the other Trust Assets, such access being afforded without
charge but only (i) upon reasonable request (it being understood that if a
Servicer Default has occurred and is continuing, no advance notice shall be
required), (ii) during normal business hours, (iii) subject to the Servicer's
normal security and confidentiality procedures and (iv) at the offices of the
Servicer in Dallas, Texas. Nothing in this Section 8.06 shall derogate from the
------------
obligation of the Transferor, the Trustee or the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors and
the failure of the Servicer to provide access as provided in this Section 8.06
------------
as a result of such obligation shall not constitute a breach of this Section
-------
8.06.
- ----
Section 8.07 Delegation of Duties. In the ordinary course of business,
--------------------
the Servicer may at any time delegate any duties hereunder to any Person who
agrees to
48
<PAGE>
conduct such duties in accordance with the Credit and Collection Policy and this
Agreement or any Supplement. Any delegation shall not relieve the Servicer of
its liability and responsibility with respect to such duties and shall not
constitute a resignation within the meaning of Section 8.05 hereof.
------------
Section 8.08 Examination of Records. The Transferor and the Servicer
----------------------
shall, prior to the sale or transfer to a third party of any receivable,
contract or invoice held in its custody, examine its computer and other records
to determine that such receivable, contract or invoice is not part of the Trust
Assets.
Section 8.09 Successor Servicer Indemnification of Transferor. In the
------------------------------------------------
event of a Service Transfer, the Successor Servicer will indemnify and hold
harmless the Transferor for any losses, claims, damages and liabilities of the
Transferor arising from the fraud, negligence, breach of fiduciary duty or
willful misconduct of such Successor Servicer.
ARTICLE IX
EARLY AMORTIZATION EVENTS
Section 9.01 Early Amortization Events with Respect to Any Series. If any
----------------------------------------------------
one of the following events shall occur at such time as there shall be at least
one outstanding Investor Certificate:
(i) failure on the part of the Seller, the Transferor, the Trust or
the Servicer to make any payment or deposit required by the terms of this
Agreement, any Supplement or the Receivables Contribution and Sale
Agreement on or before two Business Days after the date such payment or
deposit is required to be made herein or therein (after giving effect to
any other grace periods specified herein or therein);
(ii) failure on the part of the Transferor or the Seller,
respectively, duly to observe or perform in any material respect any other
covenants or agreements of the Transferor or the Seller, as the case may
be, set forth in this Agreement, any Supplement, the Receivables
Contribution and Sale Agreement or any other Transaction Document, which
continues unremedied for a period of 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Transferor, the Seller (if applicable) and the
Trustee by any Control Party; provided, however, that an Early Amortization
-------- -------
Event pursuant to this Section 9.01(ii) shall not be deemed to have
----------------
occurred hereunder with respect to any Series if the Transferor has
accepted the transfer of the related Receivable, or all of such
Receivables, if applicable, in accordance with Section 2.04(c) during such
---------------
30-day period (or
49
<PAGE>
such longer period as each Control Party may specify, not to exceed an
additional 30 days) in accordance with the provisions hereof;
(iii) any representation or warranty made by the Transferor in this
Agreement or any Supplement (or the Seller in the Receivables Contribution
and Sale Agreement) or any information required to be delivered by the
Transferor (or the Seller, if applicable) to the Trustee shall prove to
have been incorrect in any material respect when made, and which continues
to be incorrect in any material respect for a period of 30 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Transferor (or the Seller, if
applicable) and the Trustee by any Control Party; provided, however, that
-------- -------
an Early Amortization Event pursuant to this Section 9.01(iii) shall be
-----------------
deemed not to have occurred hereunder if the Transferor has accepted the
transfer of the related Receivable, or all of such Receivables, if
applicable, in accordance with Section 2.04(c) during such 30-day period
---------------
(or such longer period as each Control Party may specify, not to exceed an
additional 30 days) in accordance with the provisions hereof;
(iv) (a) the Seller or the Transferor voluntarily seeks, consents to
or acquiesces in the benefit or benefits of any Debtor Relief Law or
becomes a party to (or is made the subject of) any proceeding provided for
by any Debtor Relief Law, other than as creditor or claimant, and in the
event such proceeding is involuntary, the petition instituting the same is
not dismissed within 60 days of its filing; or (b) the Transferor shall
become unable for any reason to transfer Receivables to the Trust in
accordance with the provisions of this Agreement, or (c) the Seller shall
become unable for any reason to sell Receivables to the Transferor in
accordance with the provisions of the Receivables Contribution and Sale
Agreement, or (d) the Seller shall elect to no longer sell Receivables to
================================================================
the Transferor by delivery to the Trustee of a notice to that effect;
====================================================================
(v) the Trust or the Transferor shall be required to register as an
"investment company" within the meaning of the Investment Company Act of
1940, as amended;
(vi) this Agreement, any Supplement or the Receivables Contribution
and Sale Agreement shall cease to be in full force and effect except in
accordance with the terms thereof;
(vii) the security interest of the Trustee in the Trust Assets shall
cease to be effective or shall cease to be a first priority perfected
security interest; or
(viii) the occurrence of a Servicer Default;
then,
50
<PAGE>
(a) in the case of any event described in any of subparagraphs (i), (ii),
----------------- ----
(iii) or (viii), after the expiration of any applicable grace period set forth
- ----- ------
in such subparagraphs, any Control Party by notice then given in writing to the
Transferor, the Trustee and the Servicer may declare that an Early Amortization
Event has occurred with respect to the particular Series for which such Person
is the Control Party as of the date of such notice, and
(b) in the case of any event described in any of subparagraphs (iv), (v),
------------------ ---
(vi) or (vii) an Early Amortization Event with respect to all Series shall occur
- ---- -----
without any notice or other action on the part of any Control Party immediately
upon the occurrence of such event.
Section 9.02 Additional Rights Upon the Occurrence of Certain Events.
-------------------------------------------------------
(a) If the Seller or the Transferor voluntarily or involuntarily (i) seeks,
consents to or acquiesces in the benefit or benefits of any Debtor Relief Law or
becomes a party to (or is made the subject of) any proceeding provided for by
any Debtor Relief Law, other than as a creditor or claimant, or (ii) goes into
liquidation or any other Person shall be appointed as a bankruptcy trustee or
receiver or conservator of the Seller or the Transferor, on the day of any event
described in clause (i) or clause (ii) of this Section 9.02(a) (the "Appointment
---------- ----------- --------------- -----------
Date") (x) if such event relates to the Seller, the Seller will immediately
- ----
cease to sell or contribute Receivables to the Transferor or the Trust under the
Receivables Contribution and Sale Agreement, and promptly give notice to the
Trustee of such appointment; (y) if such event relates to the Seller or the
Transferor, the Transferor shall immediately cease to transfer Receivables to
the Trust and shall promptly give notice to the Trustee of such event; and (z)
notwithstanding any other provision of this Agreement, if such event relates to
the Transferor, this Agreement and the Trust shall terminate and the Receivables
shall be liquidated as provided herein unless the requisite Investor
Certificateholders (and, if applicable, each Enhancement Provider) shall give
the Trustee the instructions described below.
Notwithstanding any cessation of the transfer to the Trust of additional
Receivables, Receivables transferred to the Trust prior to the occurrence of
such event and Collections in respect of such Receivables whenever created,
accrued in respect of such Receivables, shall continue to be a part of the
Trust. Within 15 days of the day on which a Responsible Officer of the Trustee
first receives written notice of the occurrence of the Appointment Date with
respect to the Transferor, the Trustee shall send written notice to the Investor
Certificateholders of all Series and to each Enhancement Provider describing the
provisions of this Section 9.02. Unless within 75 days from the day written
------------
notice pursuant to the preceding sentence is sent by the Trustee the Trustee
shall have received (i) written instructions of Investor Certificateholders
representing Undivided Interests aggregating more than 50% of the Invested
Amount of each Series (or if any Series has more than one Class, of each Class
of such Series) and, if any Control Party is an Enhancement Provider, written
51
<PAGE>
instructions from such Enhancement Provider, in each case to the effect that the
Person(s) giving such notice disapprove of the sale, disposition or liquidation
of the Receivables, or (ii) an Opinion of Counsel addressed to the Trustee to
the effect that any such sale, disposition or liquidation is prohibited by law,
the Trustee shall proceed after such 75 days to sell, dispose of, or otherwise
liquidate the Receivables in a commercially reasonable manner and, to the best
of its ability, on commercially reasonable terms, which shall include the
solicitation of competitive bids. In the event that the Trustee shall have been
instructed pursuant to the preceding sentence not to sell, dispose or liquidate
any portion of the Receivables allocable to such Series, then the Trust shall
continue to receive Receivables in respect of such Series pursuant to the terms
of this Agreement and the related Supplements. The Trustee may obtain, and
shall be fully protected in relying on, a prior determination from such
bankruptcy trustee or receiver or conservator that the terms and manner of any
proposed sale, disposition or liquidation hereunder are commercially reasonable.
The provisions of Sections 9.01 and 9.02 shall not be deemed to be mutually
------------- ----
exclusive.
(b) The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to subsection (a) above, net of all reasonable expenses
--------------
incurred by the Trustee in connection with such sale, disposition or
liquidation, which shall be paid to the Trustee from such proceeds, shall be
treated as Collections of the Receivables and shall be allocated in accordance
with the provisions of Section 4.03 and the applicable Supplements.
------------
Notwithstanding anything in this Agreement to the contrary, this Section
-------
9.02 shall not limit the obligations of any Enhancement Provider to make
- ----
payments in respect of the applicable Series in a timely manner and, to the
extent required, in accordance with the applicable Enhancement Agreement.
ARTICLE X
SERVICER DEFAULTS
Section 10.01 Servicer Defaults. If any one of the following events (a
-----------------
"Servicer Default") shall occur and be continuing:
- -----------------
(a) failure by the Servicer to make any payment, transfer or deposit or to
give instructions or to give notice to the Trustee to make such payment,
transfer or deposit on or before the date occurring five days after the date
such payment, transfer or deposit or such instruction or notice is required to
be made or given, as the case may be, under the terms of this Agreement or any
Supplement;
(b) failure on the part of the Servicer duly to observe or perform any
covenants or agreements of the Servicer set forth in this Agreement or any
Supplement which failure continues unremedied for a period of 30 days after (x)
the date on which
52
<PAGE>
written notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer by any Control Party or (y) the date on which the
Servicer has actual knowledge of such failure;
(c) any representation, warranty or certification made by the Servicer in
this Agreement, any Supplement or in any certificate delivered pursuant to this
Agreement or any Supplement shall prove to have been incorrect when made in any
material respect which inaccuracy continues unremedied for a period of 30 days
after (x) the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Servicer by any Control Party or
(y) the date on which the Servicer has actual knowledge of such failure; or
(d) the Servicer shall voluntarily seek, consent to or acquiesce in the
benefit or benefits of any Debtor Relief Law or becomes a party to (or be made
the subject of) any proceeding provided for under any Debtor Relief Law, other
than as creditor or claimant, and in the event such proceeding is involuntary,
the petition instituting same is not dismissed within 60 days of its filing; or
the Servicer shall assign its duties under this Agreement, except as permitted
by this Agreement;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied, the Requisite Holders by notice then given in
writing to the Servicer and the Transferor (with a copy thereof to each Rating
Agency) and to the Trustee (a "Termination Notice"), may terminate all of the
------------------
rights and obligations of the Servicer as Servicer under this Agreement and in
and to the Receivables and the proceeds thereof.
After receipt by the Servicer of a Termination Notice, and on the date that
a Successor Servicer shall have been appointed pursuant to Section 10.02:
-------------
(x) all authority and power of the Servicer under this Agreement and each
Supplement shall pass to and be vested in a Successor Servicer (a "Service
-------
Transfer"); and, without limiting the generality of the foregoing, the Trustee
- --------
is hereby authorized and empowered (upon the failure of the Servicer to
cooperate) to execute and deliver, on behalf of the Servicer, as attorney-in-
fact or otherwise, all documents and other instruments upon the failure of the
Servicer to execute or deliver such documents or instruments, and to do and
accomplish all other acts or things necessary or appropriate to effect the
purposes of such Service Transfer; and
(y) the Servicer agrees to cooperate with the Trustee, the Transferor and
such Successor Servicer in effecting the termination of the responsibilities and
rights of the Servicer to conduct servicing hereunder, including the transfer to
such Successor Servicer of all authority of the Servicer to service the
Receivables and the Related Property provided for under this Agreement,
including all authority over all Collections which shall on the date of transfer
be held by the Servicer for deposit, or which have been deposited by the
Servicer in the Collection Account, or which shall thereafter be
53
<PAGE>
received with respect to the Receivables and the Related Property, and in
assisting the Successor Servicer; and without limiting the generality of the
foregoing, the Servicer shall assist and cooperate with the Successor Servicer
in transferring all material and data (other than software) used by the Servicer
and necessary to service the Receivables effectively in accordance with the
terms of this Agreement.
The Servicer, at its expense, will license to the Trustee all computer
software used by the Servicer and necessary to service the Receivables
effectively in accordance with the terms of this Agreement, to the extent
permitted by the underlying agreements if such software is licensed from an
unrelated third party, provided that such license shall not take effect unless a
--------
Servicer Default has occurred and is continuing. The Servicer shall use its
best efforts, so long as a Servicer Default shall have occurred and be
continuing, to obtain sublicenses of all third-party computer software used by
the Servicer and necessary to service the Receivables effectively in accordance
with the terms of this Agreement.
To the extent that compliance with this Section 10.01 shall require the
-------------
Servicer to disclose to the Successor Servicer or the Trustee information of any
kind which the Servicer reasonably deems to be confidential, the Successor
Servicer and the Trustee shall enter into such customary licensing and
confidentiality agreements as the Servicer shall reasonably deem necessary to
protect its interest.
The Servicer shall immediately notify the Trustee in writing of any
Servicer Default. In connection with any Service Transfer, all Transition Costs
and reasonable costs and expenses (including attorneys' fees) incurred in
connection with amending this Agreement to reflect such succession as Successor
Servicer pursuant to this Section 10.01 and Section 10.02 shall be paid by the
------------- -------------
Servicer upon presentation of reasonable documentation of such costs and
expenses. To the extent not promptly paid by the Servicer, such Transition
Costs shall be paid in accordance with Section 4.03(a)(ii).
-------------------
54
<PAGE>
Section 10.02 Trustee to Act; Appointment of Successor Servicer.
-------------------------------------------------
(a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 10.01, the Servicer shall continue to perform all servicing
-------------
functions under this Agreement and any Supplement until the date specified in
the Termination Notice or as otherwise specified by the Trustee in writing or,
if no such date is specified in such Termination Notice, or as otherwise
specified by the Trustee, until a date mutually agreed upon by the Servicer and
Trustee. After the giving of a Termination Notice, the Trustee shall as
promptly as possible appoint an Eligible Servicer satisfactory to each Control
Party as a successor servicer (the "Successor Servicer"), provided that (i) if
------------------ --------
any of the Certificates are then rated, the Rating Agency Condition shall have
occurred with respect to such appointment and (ii) such Successor Servicer shall
have accepted its appointment by a written assumption and agreement to perform
all of the duties, obligations and liabilities of the Servicer hereunder in a
form acceptable to the Trustee. In the event that a Successor Servicer has not
been appointed or has not accepted its appointment at the time when the Servicer
ceases to act as Servicer, or upon the occurrence of the events specified in
Section 8.05, the Trustee without further action shall automatically be
- ------------
appointed the Successor Servicer. The Trustee may delegate any of its servicing
obligations to an Affiliate. The Trustee may employ subservicers with respect
==================================================
to its servicing obligations provided that the Trustee shall remain responsible
===============================================================================
for its obligations as Successor Servicer. Notwithstanding the foregoing, the
==========================================
Trustee shall, if it is legally unable to act as Successor Servicer or desires
that a Person other than itself be appointed as Successor Servicer pursuant to
this Section 10.02(a), petition a court of competent jurisdiction to appoint as
----------------
Successor Servicer an Eligible Servicer. The Trustee shall promptly give notice
to each Rating Agency and each Enhancement Provider of the appointment of a
Successor Servicer upon such appointment.
(b) Upon its appointment, the Successor Servicer shall be the successor in
all respects to the Servicer with respect to servicing functions under this
Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Agreement and any Supplement to the Servicer
shall be deemed to refer to the Successor Servicer except for the references in
Sections 3.03 (to the extent provided therein), 8.04 and 11.05 which shall
- ------------- ---- -----
continue to refer to CompuCom.
(c) Prior to any Service Transfer, the Trustee will seek to obtain bids
from Eligible Servicers and shall be permitted to appoint any Eligible Servicer
satisfactory to each Control Party submitting such a bid as a Successor Servicer
for servicing compensation not in excess of the Servicing Fee permitted for a
Successor Servicer pursuant to Section 3.02. In the event that the Trustee
------------
fails to obtain a satisfactory bid from an Eligible Servicer, then the
Transferor shall have the option, in accordance with and upon satisfaction of
the terms of Section 12.02(a), to purchase each Series of Investor Certificates.
----------------
55
<PAGE>
(d) All authority and power granted to the Successor Servicer under this
Agreement shall automatically cease and terminate upon termination of the Trust
pursuant to Section 12.01, and shall pass to and be vested in the Transferor
-------------
and, without limiting the generality of the foregoing, the Transferor is hereby
authorized and empowered to execute and deliver, on behalf of the Successor
Servicer, as attorney-in-fact or otherwise, all documents and other instruments,
and to do and accomplish all other acts or things necessary or appropriate to
effect the purposes of such transfer of servicing rights. The Successor
Servicer agrees to cooperate with the Transferor in effecting the termination of
the responsibilities and rights of the Successor Servicer to conduct servicing
of the Receivables and the Related Property, including all authority over
Collections then held by the Successor Servicer or which shall thereafter be
received by the Successor Servicer. The Successor Servicer shall promptly
transfer its electronic records relating to the Receivables to the Transferor in
such electronic form as the Transferor may reasonably request and shall promptly
transfer all other records, correspondence and documents to the Transferor in
the manner and at such times as the Transferor shall reasonably request. To the
extent that compliance with this Section 10.02 shall require the Successor
-------------
Servicer to disclose to the Transferor information of any kind which the
Successor Servicer deems to be confidential, the Transferor shall be required to
enter into such customary licensing and confidentiality agreements as the
Successor Servicer shall deem necessary to protect its interests.
Section 10.03 Notification to Certificateholders. Upon the occurrence of
----------------------------------
any Servicer Default, the Servicer shall give prompt written notice thereof to
the Trustee and each Enhancement Provider and, upon receipt of such written
notice, the Trustee shall give notice to each Rating Agency and the Investor
Certificateholders at their respective addresses appearing in the Certificate
Register. Upon any termination or appointment of a Successor Servicer pursuant
to this Article X, the Trustee shall give prompt written notice thereof to the
---------
Investor Certificateholders at their respective addresses appearing in the
Certificate Register.
Section 10.04 Waiver of Past Defaults. A Control Party may waive any
-----------------------
default by the Servicer or the Transferor in the performance of their
obligations hereunder and its consequences, except a default in the failure to
make any required deposits or payments of interest or principal with respect to
any Series of Certificates, with respect to the Series for which such Person is
the Control Party. Upon any such waiver of a past default, such default shall
cease to exist, and any default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to
any subsequent or other default or impair any right consequent thereon except to
the extent expressly so waived. The Servicer shall promptly notify each Rating
Agency of any such waiver promptly after the granting of such waiver.
56
<PAGE>
ARTICLE XI
THE TRUSTEE
Section 11.01 Duties of Trustee. (a) The Trustee, prior to the
-----------------
occurrence of a Servicer Default of which a Responsible Officer of the Trustee
has knowledge and after the curing of all Servicer Defaults which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. If to the knowledge of a Responsible
Officer of the Trustee a Servicer Default has occurred (which has not been cured
or waived), the Trustee shall exercise such of the rights and powers vested in
it by this Agreement or any Supplement, as the case may be, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of such prudent person's own
affairs.
(b) The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement or any Supplement, shall examine them to determine
whether they substantially conform to the requirements of this Agreement or any
Supplement. The Trustee shall give prompt written notice to each Control Party
of any material lack of conformity of any such instrument to the applicable
requirements of this Agreement or any Supplement discovered by the Trustee which
would entitle any Control Party to take any action pursuant to this Agreement or
any Supplement.
(c) Subject to Section 11.01(a), no provision of this Agreement or any
----------------
Supplement shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct; provided, however, that:
-------- -------
(i) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(ii) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with, unless otherwise specified herein, the direction of the
Transferor, the Servicer, any Enhancement Provider or any Control Party
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement or any Supplement;
(iii) The Trustee shall not be charged with knowledge of any failure
by the Servicer to comply with the obligations of the Servicer referred to
in clause (a), (b) or (c) of Section 10.01, or of the occurrence of any
---------- --- --- -------------
Early
57
<PAGE>
Amortization Event, unless a Responsible Officer of the Trustee obtains
actual knowledge of such failure or the Trustee receives written notice of
such failure from the Servicer, any Enhancement Provider or any Holders of
Investor Certificates evidencing Undivided Interests aggregating not less
than 10% of the Invested Amount of any Series adversely affected thereby;
and
(iv) Prior to the occurrence of a Servicer Default of which a
Responsible Officer has knowledge, and after the curing or waiver of such
Servicer Defaults that may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express provisions of this
Agreement and any Supplements, the Trustee shall not be liable except for
the performance of such duties and obligations as shall be specifically set
forth in this Agreement and any Supplement, no implied covenants or
obligations shall be read into this Agreement or any Supplement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and, if specifically required to be
furnished pursuant to any provision of this Agreement or any Supplement,
conforming to the requirements of this Agreement or such Supplement.
(d) The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement or any Supplement shall in
any event require the Trustee to perform, or be responsible for the manner of
performance of, any obligations of the Servicer under this Agreement or any
Supplement except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
the Servicer in accordance with the terms of this Agreement or any Supplement.
(e) Except for actions expressly authorized by this Agreement or any
Supplement, the Trustee shall take no action reasonably likely to impair the
interests of the Trust in any Receivable now existing or hereafter created or to
impair the value of any Receivable now existing or hereafter created.
(f) Except as specifically provided in this Agreement or any Supplement,
the Trustee shall have no power to vary the corpus of the Trust.
(g) If, to the knowledge of a Responsible Officer of the Trustee, the
Paying Agent or the Transfer Agent and Registrar shall fail to perform any
obligation, duty or agreement in the manner or on the day required to be
performed by the Paying Agent or the Transfer Agent and Registrar, as the case
may be, under this Agreement, the Trustee shall be obligated as soon as possible
after such Responsible Officer obtains
58
<PAGE>
knowledge thereof and receives appropriate records, if any, to perform such
obligation, duty or agreement in the manner so required.
(h) Except as specifically otherwise provided in this Agreement, any
action, suit or proceeding brought in respect of one or more particular Series
shall have no effect on the Trustee's rights, duties and obligations hereunder
with respect to any one or more Series not the subject of such action, suit or
proceeding.
Section 11.02 Certain Matters Affecting the Trustee. Except as otherwise
-------------------------------------
provided in Section 11.01:
-------------
(a) The Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accordance with, any resolution, Officer's
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document believed by it to be genuine and to have
been signed or presented to it pursuant to this Agreement or any Supplement
by the proper party or parties.
(b) The Trustee may consult with counsel and other experts deemed
appropriate by the Trustee and any advice from such counsel or Opinion of
Counsel or written advice from such other experts shall be full and
complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance with
such advice or Opinion of Counsel.
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or any Supplement, or to
institute, conduct or defend any litigation hereunder or in relation hereto
or any Supplement, at the request, order or direction of any Person or
Persons, pursuant to the provisions of this Agreement or any Supplement,
unless such Person or Persons shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby; nothing contained herein shall, however,
relieve the Trustee of the obligation, upon the occurrence of a Servicer
Default (which has not been cured) of which a Responsible Officer has
knowledge, to exercise such of the rights and powers vested in it by this
Agreement or any Supplement, and to use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such prudent person's own affairs.
(d) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement or any Supplement.
59
<PAGE>
(e) The Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing so to do by a
Control Party or the Holders of Investor Certificates evidencing Undivided
Interests aggregating more than 50% of the Invested Amount of any Series
which could be adversely affected if the Trustee does not perform such
acts; provided, however, that if the payment within a reasonable time to
-------- -------
the Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation shall be, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to
it by the terms of this Agreement, the Trustee may require reasonable
indemnity against such cost, expense or liability as a condition to so
proceeding. The reasonable expense of every such examination shall be paid
by the Servicer or, if paid by the Trustee, shall be reimbursed by the
Servicer upon demand.
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or custodians, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, attorney or
custodian appointed with due care by it hereunder.
(g) Except as may be required by Section 11.01(a) hereof, the Trustee
----------------
shall not be required to make any initial or periodic examination of any
documents or records related to the Receivables for the purpose of
establishing the presence or absence of defects, the compliance by the
Transferor or the Servicer with their representations and warranties or for
any other purpose.
(h) The right of the Trustee to perform any discretionary act
enumerated in this Agreement or any Supplement shall not be construed as a
duty, and the Trustee shall not be answerable for other than its negligence
or willful misconduct in the performance of any such act.
(i) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement or any Supplement.
Section 11.03 Trustee Not Liable for Recitals in Certificates. The
-----------------------------------------------
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Certificates (other than the certificate of authentication on
the Certificates). Except as set forth in Section 11.15, the Trustee makes no
-------------
representations as to the validity or sufficiency of this Agreement or any
Supplement or of the Certificates (other than the certificate of authentication
on the Certificates) or of any Receivable or related document. The Trustee
shall not be accountable for the use or application by the
60
<PAGE>
Transferor of any of the Certificates or of the proceeds of such Certificates,
or for the use or application of any funds paid to the Transferor in respect of
the Receivables or deposited in the Collection Account or other accounts now or
hereafter established to effectuate the transactions contemplated herein and in
accordance with the terms hereof.
The Trustee shall have no duty to conduct any affirmative investigation as
to the occurrence of any condition requiring the repurchase of any Receivable by
the Transferor or the Servicer pursuant to this Agreement or any Supplement or
the eligibility of any Receivable for purposes of this Agreement or any
Supplement. The Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder (unless the Trustee shall have become the Successor Servicer) or to
prepare or file any Securities and Exchange Commission filing for the Trust or
to record this Agreement or any Supplement.
Section 11.04 Trustee May Own Certificates, Etc. Each of the Trustee, the
----------------------------------
Transferor, the Servicer, and each of such Person's respective Affiliates in its
individual or any other capacity may become the owner or pledgee of Investor
Certificates; provided, that any Investor Certificates so held shall not be
--------
entitled to participate in any decisions made or instructions given to the
Trustee by the Certificateholders as a group. The Trustee (and its Affiliates)
may enter into banking and trustee relationships with the Transferor and the
Servicer, and may deal with the Transferor and the Servicer (and their
respective Affiliates) in banking and trustee transactions, with the same rights
as it would have if it were not the Trustee.
Section 11.05 The Servicer to Pay Trustee's (and Paying Agent's) Fees and
-----------------------------------------------------------
Expenses. The Servicer covenants and agrees to pay to the Trustee (and the
- --------
Paying Agent if applicable) from time to time, and the Trustee (and the Paying
Agent if applicable) shall be entitled to receive, reasonable compensation as
set forth in a fee letter between the Servicer and the Trustee (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by it in the execution of the trust
hereby created and in the exercise and performance of any of the powers and
duties hereunder or under any Supplement of the Trustee (or the Paying Agent if
applicable), and, subject to Section 8.04, the Servicer will pay or reimburse
------------
the Trustee (and the Paying Agent if applicable) upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
(or the Paying Agent if applicable) in accordance with any of the provisions of
this Agreement or any Supplement (including the reasonable fees and expenses of
its agents and counsel) except as set forth in a fee letter between the Servicer
and the Trustee any such expense, disbursement or advance as may arise from its
fraud, gross negligence, breach of fiduciary duty or willful misconduct and
except as provided in the following sentence. If the Trustee is appointed
Successor Servicer pursuant to Section 10.02, the provisions of this Section
------------- -------
11.05 shall not apply to expenses, disbursements and advances made or incurred
- -----
by the Trustee in its capacity as Successor Servicer, which shall be covered out
of the Servicing Fee. The provisions of
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this paragraph and Sections 8.04 and 8.09 shall survive the termination of the
------------- ----
Trust and the resignation or removal of the Trustee.
Section 11.06 Eligibility Requirements for Trustee. The Trustee hereunder
------------------------------------
shall at all times be a corporation organized and doing business under the laws
of the United States or any state thereof, including the District of Columbia,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $250,000,000 and be rated at least P1 by Moody's
or at least A-1 by Standard & Poor's or be approved by the Rating Agency and
subject to supervision or examination by Federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section 11.06, the combined capital and surplus of such
-------------
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 11.06, the Trustee shall resign immediately in the manner and with the
- -------------
effect specified in Section 11.07.
-------------
Section 11.07 Resignation or Removal of Trustee.
---------------------------------
(a) The Trustee may at any time resign and be discharged from the trust
hereby created by giving written notice thereof to the Transferor and the
Servicer. Upon receiving such notice of resignation, the Servicer (with the
consent of each Control Party, which consent shall not be unreasonably withheld)
shall promptly appoint a successor trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 11.06 hereof and shall fail to resign after
-------------
written request therefor by the Servicer, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or if a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer may remove the Trustee with the consent of each Control Party, which
consent shall not be unreasonably withheld, appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and appointment of successor
trustee pursuant to any of the provisions of this Section 11.07 shall not become
-------------
62
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effective until acceptance of appointment by the successor trustee as provided
in Section 11.08 hereof.
-------------
Section 11.08 Successor Trustee .
-----------------
(a) Any successor trustee appointed as provided in Section 11.07 hereof
-------------
shall execute, acknowledge and deliver to the Transferor and to its predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder and under any Supplement with like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
trustee all documents or copies thereof, at the expense of the Servicer, and
statements held by it hereunder; and the Transferor and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor trustee all such rights, powers, duties and obligations. The Servicer
shall immediately give notice to the Rating Agency upon the appointment of a
successor trustee.
(b) No successor trustee shall accept appointment as provided in this
Section 11.08 unless at the time of such acceptance such successor trustee shall
- -------------
be eligible under the provisions of Section 11.06 hereof.
-------------
(c) Upon acceptance of appointment by a successor trustee as provided in
this Section 11.08 hereof, such successor trustee shall mail notice of such
-------------
succession hereunder to all Certificateholders at their addresses as shown in
the Certificate Register.
Section 11.09 Merger or Consolidation of Trustee. Any Person into which
----------------------------------
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 11.06 hereof, without the execution or filing of any paper
-------------
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding.
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Section 11.10 Appointment of Co-Trustee or Separate Trustee-.
---------------------------------------------
(a) Notwithstanding any other provisions of this Agreement or any
Supplement, at any time, for the purpose of meeting any legal requirements of
any jurisdiction in which any part of the Trust may at the time be located, the
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof, and, subject
to the other provisions of this Section 11.10, such powers, duties, obligations,
-------------
rights and trusts as the Trustee may consider necessary or desirable. No co-
trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 11.06 and no notice to
-------------
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 11.08 hereof. Any such appointment of a co-
-------------
trustee shall not relieve the Trustee of its duties under this Agreement.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Servicer hereunder), the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
Assets or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) No trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) The Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XI. Each separate trustee and co-trustee, upon its acceptance
----------
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this
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<PAGE>
Agreement or any Supplement, specifically including every provision of this
Agreement or any Supplement relating to the conduct of, affecting the liability
of, or affording protection to, the Trustee. Every such instrument shall be
filed with the Trustee and a copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement or any Supplement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 11.11 Tax Returns. No federal income tax return shall be filed on
-----------
behalf of the Trust unless either (i) the Trustee or the Servicer shall receive
an Opinion of Counsel based on a change in applicable law occurring after the
date hereof that the Code requires such a filing or (ii) the Internal Revenue
Service shall determine that the Trust is required to file such a return. In
the event the Trust shall be required to file tax returns, the Servicer shall
prepare or shall cause to be prepared any tax returns required to be filed by
the Trust and shall remit such returns to the Trustee for signature at least
five days before such returns are due to be filed; the Trustee shall promptly
sign such returns and deliver such returns after signature to the Servicer and
such returns shall be filed by the Servicer. Subject to the responsibilities of
the Trustee set forth in Section 5.02(b), the Servicer in accordance with
---------------
Section 5.02(b) shall also prepare or shall cause to be prepared all tax
- ---------------
information required by law to be distributed to Investor Certificateholders.
The Trustee, upon request, will furnish the Servicer with all such information
known to the Trustee as may be reasonably required in connection with the
preparation of all tax returns of the Trust, and shall, upon request, execute
such returns. In no event shall the Trustee, the Servicer or the Transferor be
liable for any liabilities, costs or expenses of the Trust, the Investor
Certificateholders or the Certificate Owners arising out of the application of
any tax law, including federal, state or local income or excise taxes or any
other tax imposed on or measured by income (or any interest, penalty or addition
with respect thereto or arising from a failure to comply therewith).
Section 11.12 Trustee May Enforce Claims Without Possession of
------------------------------------------------
Certificates. All rights of action and claims under this Agreement or any
- ------------
Supplement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
65
<PAGE>
Section 11.13 Suits for Enforcement. If a Servicer Default of which a
---------------------
Responsible Officer has knowledge shall occur and be continuing, the Trustee, in
its discretion may, subject to the provisions of Article X, proceed to protect
---------
and enforce its rights and the rights of the Certificateholders under this
Agreement or any Supplement by suit, action or proceeding in equity or at law or
otherwise, whether for the specific performance of any covenant or agreement
contained in this Agreement or any supplement or in aid of the execution of any
power granted in this Agreement or any Supplement or for the enforcement of any
other legal, equitable or other remedy as the Trustee, being advised by counsel,
shall deem most effectual to protect and enforce any of the rights of the
Trustee or the Certificateholders. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Certificateholder any plan of reorganization, arrangement, adjustment or
composition affecting the Certificates or the rights of any holder thereof, or
authorize the Trustee to vote in respect of the claim of any Certificateholder
in any such proceeding.
Section 11.14 Rights of Certificateholders to Direct Trustee. The Holders
----------------------------------------------
of Investor Certificates evidencing Undivided Interests aggregating more than
50% of the Invested Amount of any Series with respect to matters affecting the
related Series, or the Holders of Certificates aggregating together more than
50% of the Undivided Interests of each Series affected by such matter with
respect to matters affecting more than one Series (unless with respect to any
Series another Person is designated as the Control Party with respect to that
Series in the applicable Supplement, in which case such Control Party shall have
the right to direct with respect to such Series) shall have the right to direct
the time, method and place at or by which the Trustee conducts any proceeding
for any remedy available to the Trustee, or exercises any such trust or power
conferred upon the Trustee; provided that to the extent that the Trustee fails
--------
to make a demand for payment pursuant to or under any Enhancement Agreement then
any Holder of an Investor Certificate shall have the right to direct the Trustee
to make such demand for payment; provided, however, that, subject to Section
-------- ------- -------
11.01, the Trustee shall have the right to decline to follow any such direction
- -----
if the Trustee being advised by counsel determines that the action so directed
may not lawfully be taken, or if the Trustee in good faith shall, by a
Responsible Officer or Responsible Officers of the Trustee, determine that the
proceedings so directed would be illegal or involve it in personal liability;
and provided, further, that nothing in this Agreement or any Supplement shall
-------- -------
impair the right of the Trustee to take any action deemed proper by the Trustee
and which is not inconsistent with such direction of the Certificateholders.
Section 11.15 Representations and Warranties of Trustee. The Trustee
-----------------------------------------
represents and warrants, as of the Initial Closing Date and, with respect to any
Series, as of the related Closing Date, that:
(i) The Trustee is a national banking association organized,
existing and in good standing under the laws of the United States of
America;
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<PAGE>
(ii) The Trustee has full power, authority and right to execute,
deliver and perform this Agreement, and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement;
(iii) This Agreement has been duly executed and delivered by the
Trustee;
(iv) The Trustee is not required to obtain, other than those that
have already been obtained, any authorization, consent, approval, exemption
or license from, or to file any registration with, any Governmental
Authority, as a condition to the validity of, or for the execution and
delivery of, this Agreement, or to the performance by the Trustee of its
obligations under this Agreement; and
(v) This Agreement constitutes the legal, valid and binding
obligation of the Trustee, enforceable in accordance with its terms
(subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights
generally).
Section 11.16 Maintenance of Office or Agency. The Trustee will maintain
-------------------------------
at its expense in Minneapolis, Minnesota, an office or offices or agency or
agencies where notices and demands to or upon the Trustee in respect of the
Certificates and this Agreement may be served. The Trustee initially appoints
the Corporate Trust Office as its office for such purposes. The Trustee will
give prompt written notice to the Servicer and to Certificateholders of any
change in the location of the Certificate Register or any such office or agency.
Section 11.17 Statements, Certificates and Reports. A copy of this
------------------------------------
Agreement, any Supplement, and each statement, certificate and report furnished
to the Trustee pursuant to this Agreement shall be provided without charge to
any Certificateholder requesting the same in a writing to the Trustee addressed
to the Corporate Trust Office.
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<PAGE>
ARTICLE XII
TERMINATION
Section 12.01 Termination of Trust. (a) The respective obligations and
--------------------
responsibilities of the Transferor, the Servicer and the Trustee created hereby
(other than the obligation of the Trustee to make payments to Certificateholders
as hereafter set forth) shall terminate, except with respect to the duties
described in Sections 8.04, 11.05 and 12.03(b), upon the earlier of (i) the
------------- ----- --------
Business Day after the day on which the Aggregate Invested Amount is zero and
all amounts owing to each Enhancement Provider for all outstanding Series under
the related Supplements and Enhancement Agreements have been paid, all other
amounts owing under this Agreement, any Supplement, any Enhancement Agreement or
any other Transaction Document have been paid and all commitments of any
Investor Certificateholder shall have been terminated (unless the parties hereto
shall have agreed that the Final Trust Termination Date pursuant to this clause
------
(i) shall be deemed not to have occurred until a later date); (ii) the
- ---
expiration of 21 years from the death of the last survivor of the descendants of
Bruce Springsteen living on the date of this Agreement; and (iii) the time
provided in Section 9.02 (the "Final Trust Termination Date").
------------ ----------------------------
(b) If on the Determination Date in the month immediately preceding the
month in which the Final Trust Termination Date occurs (after giving effect to
all transfers, withdrawals, deposits and drawings to occur on such date and the
payment of principal on any Series of Investor Certificates to be made on the
related Payment Date pursuant to Section 4.06) the Invested Amount of any Series
------------
would be greater than zero, the Servicer on behalf of the Trust shall sell in a
commercially reasonable manner within 30 days of such Determination Date all of
the Receivables and the Related Property. The proceeds of such sale, net of all
reasonable expenses of the Trustee incurred in connection with such sale, which
shall be paid to the Trustee from such proceeds, shall be treated as Collections
of the Receivables and shall be allocated in accordance with Section 4.03.
------------
During such 30-day period, the Servicer shall continue to collect Collections on
the Receivables and allocate such payments in accordance with the provisions of
Section 4.03.
- ------------
Section 12.02 Optional Purchase and Series Termination Date of Investor
---------------------------------------------------------
Certificates of any Series.
- --------------------------
(a) If and as provided in any Supplement, the Transferor may, but shall not
be obligated to, retire any Series of Investor Certificates in accordance with
the terms of such Supplement, unless such purchase would result in an Early
Amortization Event with respect to any other Series.
(b) All principal or interest with respect to any Series of Investor
Certificates shall be due and payable no later than the Series Termination Date
with respect to such Series. Unless otherwise provided in a Supplement (e.g.,
providing for
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<PAGE>
Enhancement to cover payment of such principal and interest), in the event that
the Invested Amount of any Series of Certificates is greater than zero on its
Series Termination Date, the Servicer will use its best efforts to sell or cause
to be sold in a commercially reasonable manner, and pay the proceeds (net of all
reasonable expenses of the Trustee incurred in connection with such sale, which
shall be paid to the Trustee from such proceeds), to the extent necessary, to
all Certificateholders of such Series pro rata, in final payment of all
principal of and accrued interest on such Series of Certificates, an amount of
Receivables and Related Property up to the Target Receivables Amount of such
Series calculated as of the related Series Termination Date, at the close of
business on such date; but in no event shall the amount of Receivables and
Related Property sold cause the Aggregate Eligible Unpaid Balance to be less
than the Aggregate Target Receivables Amount. Any proceeds of such sale in
excess of such principal and interest paid and such expenses of the Trustee
shall be paid first in respect of any amounts owing to any Enhancement Provider
-----
for such Series and second to the Transferor. Upon payment of the proceeds of
------
such sale as provided in this Section 12.02(b), all principal of and accrued
----------------
interest on such Series shall be deemed for all purposes to have been paid in
full. Upon such Series Termination Date, or (if applicable) on the first Payment
Date following the sale of Receivables and Related Property called for above in
this Section 12.02(b), with respect to the applicable Series of Certificates,
----------------
final payment of all amounts allocable to any Investor Certificates of such
Series shall be made in the manner provided in Section 12.03.
-------------
Section 12.03 Final Payment.
-------------
(a) Written notice of any termination, specifying the Payment Date upon
which the Investor Certificateholders of any Series may surrender their
Certificates for payment of the final distribution with respect to such Series
and cancellation, shall be given (subject to at least ten days' prior notice
from the Servicer to the Trustee) by the Trustee to the Investor
Certificateholders of such Series mailed not later than the fifth day of the
month of such final distribution specifying (i) the Payment Date (which shall be
the Payment Date in the month in which the deposit is made pursuant to Section
-------
2.04(d) or 12.02(a)) upon which final payment of or such Investor Certificates
- ------- --------
will be made upon presentation and surrender of such Certificates at the office
or offices therein designated, (ii) the amount of any such final payment and
(iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Investor Certificates at the office or offices therein specified. The
Servicer's notice to the Trustee in accordance with the preceding sentence shall
be accompanied by an Officer's Certificate setting forth the information
specified in Section 5.02(a), as applicable, covering the period during the then
---------------
current calendar year through the date of such notice and setting forth the date
of such final distribution. The Trustee shall give such notice to the Transfer
Agent and Registrar and the Paying Agent at the time such notice is given to
such Certificateholders.
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<PAGE>
(b) Notwithstanding the termination of the Trust pursuant to Section
-------
12.01(a) or the occurrence of the Series Termination Date with respect to any
- --------
Series in connection with Section 12.02, all funds then on deposit in the
-------------
Collection Account and related Series Accounts shall continue to be held in
trust for the benefit of the Certificateholders and the Paying Agent or the
Trustee shall pay such funds to the Certificateholders upon surrender of their
Certificates. In the event that all of the Investor Certificateholders of all,
or the applicable, Series, shall not surrender their Certificates for
cancellation within six months after the date specified in the above-mentioned
written notice, the Trustee shall give a second written notice to the remaining
Investor Certificateholders, upon receipt of the appropriate records from the
Transfer Agent and Registrar to surrender their Certificates for cancellation
and receive the final distribution with respect thereto. If within one year
after the second notice all, or the applicable Investor Certificates of such
Series shall not have been surrendered for cancellation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Investor Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds in the
Collection Account held for the benefit of such Investor Certificateholders.
(c) The payments specified in this Section 12.02 shall be made in respect
-------------
of a Certificate only upon presentation and surrender of such Certificate for
payment and cancellation in accordance with the terms of this Agreement. All
Certificates surrendered for payment of the final distribution with respect to
such Certificates and cancellation, shall be canceled by the Transfer Agent and
Registrar and be disposed of in a manner satisfactory to the Trustee. Upon the
termination of the Trust, the Transferor shall return the Transferor Certificate
to the Trustee, and the Trustee shall dispose of such Certificates in a manner
satisfactory to the Trustee.
Section 12.04 Transferor's Termination Rights'. Upon the termination of
-------------------------------
the Trust pursuant to this Article XII and the surrender of the Transferor
-----------
Certificate, the Trustee shall assign, transfer and otherwise convey to the
Transferor or its designee (without recourse, representation or warranty) all
right, title and interest of the Trust in and to the Receivables and the other
Trust Assets, whether then existing or thereafter created, all moneys due or to
become due with respect thereto, and all proceeds thereof except for amounts
held by the Trustee pursuant to Section 12.03(b), and release and terminate the
----------------
security interest granted pursuant to Section 2.02. The Trustee shall execute
------------
and deliver such instruments of transfer and assignment, and UCC termination
statements, in each case prepared by the Transferor and without recourse,
representation or warranty, as shall be reasonably requested by the Transferor
to vest in the Transferor or its designee all right, title and interest which
the Trust had in the Receivables and other Trust Assets and to evidence the
release and termination of such security interest.
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<PAGE>
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Amendment.
---------
(a) This Agreement (including any Supplement) may be amended from time to
time by the Servicer, the Transferor and the Trustee, but without the consent of
any of the Certificateholders, to cure any ambiguity, to correct or supplement
any provisions herein or therein which may be inconsistent with any other
provisions herein or therein or to add any other provisions with respect to
matters or questions raised under this Agreement (including any Supplement)
which shall not be inconsistent with the provisions of this Agreement (including
any Supplement). In connection with such amendment, an officer of the Servicer
===============================================================
shall deliver a certificate that the requirements for such amendment pursuant to
================================================================================
this Section are satisfied.
===========================
(b) This Agreement (including any Supplement) may also be amended or the
provisions thereof waived from time to time by the Servicer, the Transferor and
the Trustee, without the consent of any of the Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement (including any Supplement) or of modifying
in any manner the rights of the Certificateholders of any Series then issued and
outstanding including the addition, modification or elimination of such
provisions as may be necessary or advisable in order to enable all or a portion
of the Trust to qualify as, and to permit an election to be made to cause the
Trust to be treated as, a "financial asset securitization investment trust" as
described in the provisions of (S)(S) 860H through 860L of the Internal Revenue
Code; provided, however, that (i) the Servicer shall have provided an Officer's
-------- -------
Certificate to the Trustee to the effect that such amendment will not materially
and adversely affect the interests of the Certificateholders of any outstanding
Series (or 100% of the Class of Certificateholders so affected shall have
consented); (ii) such amendment shall not, as evidenced by an Opinion of
Counsel, cause the Trust to be characterized for Federal income tax purposes as
an association taxable as a corporation or otherwise have any material adverse
impact on the Federal income taxation characterization of any outstanding Series
of Certificates or any Certificate Owner; (iii) the Rating Agency Condition
shall have been satisfied with respect to such amendment; and (iv) the
Transferor shall have delivered an Opinion of Counsel to the Trustee to the
effect that such amendment shall not materially and adversely affect the
interests of the Certificateholders of any Series.
(c) This Agreement (including any Supplement) may also be amended or the
provisions thereof waived from time to time by the Transferor, the Servicer and
the Trustee with the consent of the Holders of Investor Certificates evidencing
Undivided Interests aggregating not less than 66-2/3% of the principal amount of
all Series adversely affected for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of this Agreement
(including any Supplement) or of
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modifying in any manner the rights of Certificateholders of any Series then
issued and outstanding. No such amendment or waiver, however, may (i) reduce in
any manner the amount of or delay the timing of, distributions required to be
made on such Series, (ii) change the definition or the manner of calculating
interest in respect of any Certificate of such Series, or (iii) reduce the
aforesaid percentage of Undivided Interests the Holders of which are required to
consent to any such amendment or waiver, in each case without the consent of all
Certificateholders of all Series adversely affected. In connection with such
=======================
amendment, an officer of the Servicer shall deliver a certificate that the
==========================================================================
requirements for such amendment pursuant to this Section are satisfied.
======================================================================
(d) Promptly after the execution of any amendment or waiver in respect of
this Agreement, the Trustee shall furnish written notification of the substance
of such amendment to the Enhancement Provider for each outstanding Series and
each Investor Certificateholder (or, with respect to an amendment or waiver of a
Supplement, to each Enhancement Provider and to the Holders of the Certificates
of the related Series), and the Servicer shall furnish written notification of
the substance of such amendment or waiver to each Rating Agency.
(e) It shall not be necessary for the consent of the Investor
Certificateholders under this Section 13.01 to approve the particular form of
-------------
any proposed amendment or waiver, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by the Persons required
to consent under Section 13.01 shall be subject to such reasonable requirements
-------------
as the Trustee may prescribe.
(f) The Trustee may, but shall not be obligated to, enter into any such
amendment or waiver which affects the Trustee's own rights, duties or immunities
under this Agreement, any Supplement or otherwise.
72
<PAGE>
Section 13.02 Protection of Right, Title and Interest of Trust.
------------------------------------------------
(a) The Servicer shall cause this Agreement, any Supplement, all amendments
hereto or thereto and/or all financing statements and continuation statements
and any other necessary documents covering the Certificateholders and the
Trustee's right, title and interest to the Trust Assets to be promptly recorded,
registered and filed, and at all times to be kept recorded, registered and
filed, all in such manner and in such places as may be required by law fully to
preserve and protect the right, title and interest of the Trustee hereunder to
all property comprising the Trust Assets. The Servicer shall deliver to the
Trustee file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. The Transferor shall cooperate fully with the
Servicer in connection with the obligations set forth above and will execute any
and all documents reasonably required to fulfill the intent of this Section
-------
13.02(a). In the event that the Servicer fails to file such financing or
- --------
continuation statements, then the Trustee shall have the right, but not the
obligation, to file the same on behalf of the Transferor.
(b) The Servicer will give the Trustee and each Enhancement Provider for
each outstanding Series prompt written notice of any relocation of any office
from which it services Receivables or keeps records concerning the Receivables
or of its principal place of business or chief executive office and whether, as
a result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall file such financing
statements or amendments as may be necessary to perfect or to continue the
perfection of the Trust's ownership or security interest in the Receivables and
the other Trust Assets. The Servicer will at all times maintain each office
from which it services Receivables and the Related Property and its principal
executive office within the United States of America.
(c) If at any time the Servicer is no longer CompuCom, the Transferor shall
deliver to the Successor Servicer powers-of-attorney such that such Successor
Servicer may perform the obligations set forth in Sections 13.02(a) and
-----------------
13.02(b).
- --------
Section 13.03 Limitation on Rights of Certificateholders.
------------------------------------------
(a) The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust, nor shall such death or incapacity
entitle such Certificateholders' legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any court for a
partition or winding up of the Trust, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except as
specifically provided in this Agreement or any Supplement) or in any manner
otherwise control the
73
<PAGE>
operation and management of the Trust, or the obligations of the parties hereto,
nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any provisions
of this Agreement or any Supplement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless,
subject to the rights of each Control Party provided in this Agreement, the
Holders of Investor Certificates evidencing Undivided Interests in the Trust
aggregating more than 50% of the Invested Amount of any Series which may be
materially adversely affected but for the institution of such suit, action or
proceeding shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
no one or more Certificateholders shall have any right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
or any Supplement to affect, disturb or prejudice the rights of the
Certificateholders of any other of the Certificates, or to obtain or seek to
obtain priority over or preference to any other such Certificateholder, or to
enforce any right under this Agreement or any Supplement, except in the manner
herein provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of
this Section 13.03, each and every Certificateholder and the Trustee shall be
-------------
entitled to such relief as can be given either at law or in equity.
Section 13.04 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 13.05 Notices. All demands, notices, instructions and
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered , if sent by facsimile transmission or five
days after mailing by certified or registered mail, return receipt requested,
(a) in the case of the Servicer, to CompuCom Systems, Inc., 7171 Forest Lane,
Dallas, Texas 75230, Attention: Treasurer; (b) in the case of the Trustee, to
the Corporate Trust Office; (c) in the case of the Transferor, to CSI Funding,
Inc., 7171 Forest Lane, Dallas, Texas 75230, Attention: Treasurer; (d)
74
<PAGE>
in the case of any Enhancement Provider, at the address set forth in the related
Enhancement Agreement; or, as to each such Person, at such other address as
shall be designated by such Person in a written notice to each other party. Any
notice required or permitted to be mailed to a Certificateholder shall be given
by first-class mail, postage prepaid, at the address of such Certificateholder
as shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder receives such notice.
Section 13.06 Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders thereof.
Section 13.07 Assignment. Notwithstanding anything to the contrary
----------
contained herein, except as provided in Section 8.02 or 8.05, this Agreement,
------------ ----
including any Supplement, may not be assigned by the Servicer without the prior
consent of each Control Party.
Section 13.08 Certificates Nonassessable and Fully Paid . It is the
-----------------------------------------
intention of the parties to this Agreement that the Investor Certificateholders
shall not be personally liable for obligations of the Trust, that the interests
in the Trust represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and that
Certificates upon authentication thereof by the Trustee pursuant to Sections
--------
2.07 and 6.02 are and shall be deemed fully paid.
- ---- ----
Section 13.09 Further Assurances. The Transferor and the Servicer agree
------------------
to do and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the Trustee more
fully to effect the purposes of this Agreement, including the execution of any
financing statements or continuation statements relating to the Receivables and
the other Trust Assets for filing under the provisions of the UCC of any
applicable jurisdiction.
Section 13.10 No Waiver; Cumulative Remedies. No failure to exercise and
------------------------------
no delay in exercising, on the part of the Certificateholders or any party
hereto, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
75
<PAGE>
Section 13.11 Counterparts. This Agreement and any Supplement may be
------------
executed in two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which together
shall constitute one and the same instrument.
Section 13.12 Third-Party Beneficiaries-. This Agreement and any
-------------------------
Supplement will inure to the benefit of and be binding upon the parties hereto,
and, in addition, shall inure to the benefit of the Certificateholders and their
respective successors and permitted assigns and to the extent provided herein
and in any Supplement, to the Control Party and any Enhancement Provider for any
outstanding Series. Except as otherwise provided in this Article XIII, no other
------------
Person will have any right or obligation hereunder.
Section 13.13 Actions by Certificateholders.
-----------------------------
(a) Wherever in this Agreement or any Supplement, a provision is made that
an action may be taken or a notice, demand or instruction given by Investor
Certificateholders, such action, notice or instruction may be taken or given by
any Investor Certificateholder of any Series, unless such provision requires a
specific percentage of Investor Certificateholders of a certain Series or all
Series.
(b) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind such Certificateholder and every
subsequent holder of such Certificate issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or omitted to be done by the Trustee or the Servicer in reliance thereon,
whether or not notation of such action is made upon such Certificate.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement or any Supplement to be given or
taken by Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders in
person or by an agent duly appointed in writing; and except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, when required, to the Transferor
or the Servicer. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Agreement
or any Supplement and conclusive in favor of the Trustee, the Transferor and the
Servicer, if made in the manner provided in this Section.
(d) The fact and date of the execution by any Certificateholder of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(e) The Trustee may require such additional proof of any matter referred to
in this Section as it shall deem necessary.
76
<PAGE>
Section 13.14 Merger and Integration. Except as specifically stated
----------------------
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 13.15 Headings. The headings herein are for purposes of reference
--------
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
Section 13.16 Enhancement Providers. Notwithstanding anything to the
---------------------
contrary in this Agreement or any Supplement, an Enhancement Provider shall have
rights under this Agreement and any Supplement (including the right to grant or
withhold consents) only if such Enhancement Provider is then providing
Enhancement for a Series (and no Enhancement Provider Default shall have
occurred and be continuing relating to such Enhancement) or any amounts are
owing to such Enhancement Provider under the applicable Enhancement Agreement.
Section 13.17 Schedules and Exhibits. The schedules and exhibits attached
----------------------
hereto and referred to herein shall constitute a part of this Agreement and are
incorporated into this Agreement for all purposes.
Section 13.18 Assignment of Related Property. (a) Notwithstanding the
------------------------------
Transferor's assignment of the Related Property hereunder, the Transferor shall
nevertheless be permitted to give all consents, requests, notices, directions,
approvals, extensions or waivers, if any, which are required by the specific
terms of the Receivables Contribution and Sale Agreement to be given by it to
CompuCom. The assignment of the Related Property hereunder shall not relieve
the Transferor or CompuCom from the performance of any term, covenant, condition
or agreement on the part of the Transferor or CompuCom to be performed or
observed under or in connection with the Receivables Contribution and Sale
Agreement.
(b) The Transferor agrees to exercise any and all rights, remedies, powers
and privileges lawfully available to the Transferor under or in connection with
the Receivables Contribution and Sale Agreement, including the transmission of
notices of default on the part of the Transferor thereunder and the institution
of legal or administrative actions or proceedings to compel or secure
performance by CompuCom of its obligations under the Receivables Contribution
and Sale Agreement. The Transferor will not amend, waive or terminate any of
the terms of the Receivables Contribution and Sale Agreement without the prior
written consent of each Control Party.
(c) The Transferor agrees to give the Trustee and each Control Party prompt
written notice of any default on the part of CompuCom under the Receivables
Contribution and Sale Agreement that comes to the Transferor's attention.
77
<PAGE>
Section 13.19 No Proceedings. The Trustee, CompuCom, the Servicer and any
--------------
Successor Servicer each hereby agrees that it will not institute against the
Transferor, or join any other Person in instituting against the Transferor, any
proceeding under any Debtor Relief Law so long as any Investor Certificates
shall be outstanding or there shall not have elapsed one year plus one day since
the last day on which any such Investor Certificates shall have been
outstanding.
Section 13.20 Texas Limited Liability Company Act. The Trustee agrees
-----------------------------------
that it shall not cause or permit the Trust to elect to procure a certificate of
authority pursuant to the Texas Limited Liability Company Act.
Section 13.21 Rating Agencies. At any time that none of the Certificates
---------------
are rated, each provision hereof requiring notice to the Rating Agencies or that
the Rating Agency Condition be satisfied shall be of no force or effect.
78
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
CSI FUNDING, INC.,
as Transferor
By:
Name:
Title:
79
<PAGE>
COMPUCOM SYSTEMS, INC.,
as Servicer
By:
Name:
Title:
80
<PAGE>
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
Name: Bruce C. Wandersee
Title: Assistant Vice President
81
<PAGE>
EXHIBIT 10.2
CSI FUNDING, INC.,
as Transferor,
COMPUCOM SYSTEMS, INC.
as Servicer,
PNC BANK, NATIONAL ASSOCIATION
as Agent,
MARKET STREET CAPITAL CORPORATION
as Initial Series 1999-1
Certificateholder,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
on behalf of the Certificateholders
---------------------------------
SERIES 1999-1 SUPPLEMENT
Dated as of May 7, 1999
=====
to
COMPUCOM RECEIVABLES MASTER TRUST I
POOLING AND SERVICING AGREEMENT
Dated as of May 7, 1999
=====
---------------------------------
VARIABLE FUNDING ACCOUNTS RECEIVABLE TRUST CERTIFICATES
SERIES 1999-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE OF THE SERIES
1999-1 INVESTOR CERTIFICATES
SECTION 1.1 Designation 1
SECTION 1.2 The Series 1999-1 Certificates 1
SECTION 1.3 Purchases of Interests in the Series 1999-1 Certificates. 2
SECTION 1.4 Delivery 2
SECTION 1.5 Procedure for Initial Issuance and for Increasing Each Series 1999-1
Certificateholder's Invested Amount 2
SECTION 1.6 Procedure for Decreasing Each Series 1999-1 Certificateholder's
Invested Amount 3
SECTION 1.7 Reductions of the Commitments 4
SECTION 1.8 Interest; Commitment Fee, Etc. 4
SECTION 1.9 Certificate Rate Limitation 6
ARTICLE II AGREEMENT MODIFICATIONS
SECTION 2.1 Agreement Modifications 6
ARTICLE III
DISTRIBUTIONS AND REPORTS
SECTION 3.1 Distributions 15
SECTION 3.2 Reports, Statements and Notices 15
ARTICLE IV CHANGE IN CIRCUMSTANCES
SECTION 4.1 Requirements of Law 17
SECTION 4.2 Taxes 18
SECTION 4.3 Indemnity 20
SECTION 4.4 Limitation 21
ARTICLE V REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Transferor and
the Servicer 21
SECTION 5.2 Obligations Unaffected 21
ARTICLE VI CONDITIONS PRECEDENT
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 6.1 Conditions Precedent to Effectiveness of Supplement 21
ARTICLE VII
THE AGENT
SECTION 7.1 Appointment 23
SECTION 7.2 Delegation of Duties 23
SECTION 7.3 Exculpatory Provisions 24
SECTION 7.4 Reliance by Agent 24
SECTION 7.5 Notice of Servicer Default or Early Amortization Event
or Prospective Early Amortization Event 24
SECTION 7.6 Non-Reliance on Agent and Other Series 1999-1
Certificateholders 25
SECTION 7.7 Indemnification 25
SECTION 7.8 Agent in Its Individual Capacity 26
SECTION 7.9 Successor Agent 26
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Ratification of Agreement 26
SECTION 8.2 Governing Law 26
SECTION 8.3 Further Assurances 27
SECTION 8.4 Payments 27
SECTION 8.5 Costs and Expenses 27
SECTION 8.6 No Waiver; Cumulative Remedies 27
SECTION 8.7 Severability 28
SECTION 8.8 Notices 28
SECTION 8.9 Successors and Assigns 28
SECTION 8.10 Counterparts 31
SECTION 8.11 Adjustments 31
SECTION 8.12 Limitation of Payments by Transferor 31
SECTION 8.13 No Bankruptcy Petition 31
SECTION 8.14 The Trustee 32
SECTION 8.15 Consent to Jurisdiction 32
ARTICLE IX
DEFINITIONS
SECTION 9.1 Definitions 33
SCHEDULES
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Schedule 1 Commitments
Schedule 2 List of Trust Accounts
Schedule 3 Initial Invested Amount
EXHIBITS
Exhibit A Form of Notice of Increase
Exhibit B Form of Notification of Obligors
Exhibit C Form of Commitment Transfer Supplement
Exhibit D Form of Series 1999-1 Investor Certificate
</TABLE>
<PAGE>
SERIES 1999-1 SUPPLEMENT, dated as of May 7, 1999 (as amended from time to
=====
time, this "Supplement") among CSI FUNDING, INC., a Delaware corporation, as
----------
Transferor (the "Transferor"), COMPUCOM SYSTEMS, INC., a Delaware corporation,
----------
as Servicer (the "Servicer"), MARKET STREET CAPITAL CORPORATION, a Delaware
--------
corporation, as the initial Series 1999-1 Certificateholder (the "Initial Series
--------------
1999-1 Certificateholder"), PNC BANK, NATIONAL ASSOCIATION, a national banking
- ------------------------
association, as agent (the "Agent") for the Series 1999-1 Certificateholders (as
-----
hereinafter defined) and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trustee (together with its successors in trust
thereunder as provided in the Pooling and Servicing Agreement referred to below,
the "Trustee"), under the Pooling and Servicing Agreement, dated as of May 7,
------- =====
1999 (as amended and supplemented from time to time, the "Agreement") among the
---------
Transferor, the Servicer and the Trustee.
PRELIMINARY STATEMENT
Section 6.09 of the Agreement provides, among other things, that the
------------
Transferor and the Trustee may at any time and from time to time enter into a
supplement to the Agreement for the purpose of authorizing the issuance of
Investor Certificates. The Transferor has delivered the Issuance Notice
required by Section 6.09 of the Agreement and hereby enters into this Supplement
------------
with the Servicer, the Agent, the Initial Series 1999-1 Certificateholder and
the Trustee to provide for the issuance, authentication and delivery of the
Variable Funding Accounts Receivable Trust Certificates, Series 1999-1.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the parties
hereto agree as follows:
ARTICLE I
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE SERIES 1999-1 INVESTOR CERTIFICATES-
SECTION 1.1 Designation. The Certificates issued pursuant to this
-----------
Supplement shall be designated generally as the Variable Funding Accounts
Receivable Trust Certificates, Series 1999-1.
SECTION 1.2 The Series 1999-1 Certificates-. (a) The Series 1999-1
-------------------------------
Certificates shall represent fractional undivided interests in the Trust Assets,
consisting of the right to receive Collections and other amounts at the times
and in the amounts specified in the Agreement as amended by this Supplement
(collectively, the "Series 1999-1 Certificateholders' Interest").
------------------------------------------
1
<PAGE>
(b) The Series 1999-1 Certificates shall, upon issue, be executed and
delivered by the Transferor to the Trustee for authentication and redelivery as
provided in Section 1.4 hereof and Section 6.01 of the Agreement.
----------- ------------
SECTION 1.3 Purchases of Interests in the Series 1999-1 Certificates.-
--------------------------------------------------------
(a) Initial Purchase. Subject to the terms and conditions of this Supplement,
----------------
the Initial Series 1999-1 Certificateholder hereby agrees (A) to purchase on the
Issuance Date a Series 1999-1 Certificate in an amount equal to the Initial
Invested Amount and (B) to maintain the Invested Amount of its Series 1999-1
Certificate during the Revolving Period, subject to decrease during the
Revolving Period, in accordance with the provisions of this Supplement.
Payments by the Initial Series 1999-1 Certificateholder in respect of its Series
1999-1 Certificate shall be made in immediately available funds on the Issuance
Date to the Agent for payment to the Transferor.
(b) Maximum Invested Amount. Notwithstanding anything to the contrary
-----------------------
contained in this Supplement, at no time shall the Invested Amount of any Series
1999-1 Certificateholder exceed such Series 1999-1 Certificateholder's
Commitment at such time.
SECTION 1.4 Delivery. On the Issuance Date, the Transferor shall sign on
--------
behalf of the Trust and shall deliver to the Trustee pursuant to Section 6.01 of
------------
the Agreement, and the Trustee, upon receipt, shall so authenticate the initial
Series 1999-1 Certificate in the name of the Initial Series 1999-1
Certificateholder and with a Commitment Percentage of 100% and deliver such
Series 1999-1 Certificate to the Initial Series 1999-1 Certificateholder. The
Trustee shall mark on its books the actual Invested Amount of each Series 1999-1
Certificateholder outstanding on any date of determination, which, absent
manifest error, shall constitute prima facie evidence of such outstanding
----- -----
Invested Amount from time to time.
2
<PAGE>
SECTION 1.5 Procedure for Initial Issuance and for Increasing Each Series
-------------------------------------------------------------
1999-1 Certificateholder's Invested Amount-'. (a) Subject to Section 1.5(b) of
- ------------------------------------------ --------------
this Supplement, on the Issuance Date, the Initial Series 1999-1
Certificateholder agrees to purchase a Series 1999-1 Certificate in accordance
with Section 1.3(a) of this Supplement and on any Payment Date during the
--------------
Revolving Period, each Series 1999-1 Certificateholder agrees that the Series
1999-1 Aggregate Invested Amount may be increased by increasing pro rata based
upon Commitment Percentage each Series 1999-1 Certificateholder's Invested
Amount (an "Increase"), up to an amount, with respect to each such Series 1999-1
--------
Certificateholder, not exceeding such Series 1999-1 Certificateholder's
Commitment, upon the request of the Servicer or the Transferor on behalf of the
Trust (each date on which an increase in the Series 1999-1 Aggregate Invested
Amount occurs hereunder being herein referred to as the "Increase Date"
-------------
applicable to such Increase); provided, however, that the Servicer or the
-------- -------
Transferor, as the case may be, shall have given the Agent irrevocable written
notice (effective upon receipt) (with a copy thereof to the Trustee and, as
applicable, the Transferor or the Servicer), substantially in the form of
Exhibit A hereto, of such request no later than two Business Days prior to such
- ---------
Increase Date. Such notice shall state (x) the Issuance Date or the Increase
Date, as the case may be which, in the case of an Increase Date, shall be a
Payment Date; and (y) the Initial Invested Amount or the proposed amount of such
Increase (the "Increase Amount"), as the case may be.
---------------
(b) No Series 1999-1 Certificateholder shall be required to make the
initial purchase of Series 1999-1 Certificates on the Issuance Date or to
increase its respective Invested Amount on any Increase Date hereunder unless,
after giving effect thereto:
(i) (A) the amount of such initial purchase or, in the case of an
Increase Date, the amount of the related Increase Amount, is equal to at
least $10,000,000;
(ii) the Series 1999-1 Aggregate Invested Amount would not exceed
the Maximum Commitment Amount on the Issuance Date or such Increase Date,
as the case may be;
(iii) the Series 1999-1 Target Receivables Amount would not exceed
the Series 1999-1 Allocated Receivables Amount on the Issuance Date or such
Increase Date, as the case may be;
(iv) the Aggregate Target Receivables Amount would not exceed the
Aggregate Allocated Receivables Amount on the Issuance Date or such
Increase Date, as the case may be; and
(v) no Early Amortization Event or Prospective Early Amortization
Event shall have occurred and be continuing.
3
<PAGE>
(c) After receipt by the Agent of the notice required by Section 1.5(a) of
--------------
this Supplement from the Servicer or the Transferor on behalf of the Trust, the
Agent shall, so long as the conditions set forth in Sections 1.5(a) and (b) of
--------------- ---
this Supplement are satisfied, promptly provide telephonic notice to each Series
1999-1 Certificateholder of the Increase Date and of the portion of the Increase
Amount allocable to such Series 1999-1 Certificateholder (which shall equal such
Series 1999-1 Certificateholder's Commitment Percentage of the Increase Amount).
Each Series 1999-1 Certificateholder agrees to pay in immediately available
funds such Series 1999-1 Certificateholder's Commitment Percentage of each
Increase on the related Increase Date to the Agent for payment to the Transferor
and, to the extent the Agent receives such funds, the Agent shall pay such
Increase Amount to the Transferor in immediately available funds on such
Increase Date.
SECTION 1.6 Procedure for Decreasing Each Series 1999-1
-------------------------------------------
Certificateholder's Invested Amount-'. (a) On any Business Day during the
- -------------------------------------
Revolving Period or the Early Amortization Period, the Servicer or the
Transferor on behalf of the Trust shall have the right but not the obligation to
cause all or a portion of the Series 1999-1 Aggregate Invested Amount to be
reduced (a "Decrease") by instructing the Trustee to distribute to the Agent for
--------
the pro rata benefit of the Series 1999-1 Certificateholders in accordance with
--- ----
their Commitment Percentages the amount of such Decrease from (x) the funds
available for distribution to the Transferor on such day under Section 4.03(c)
---------------
of the Agreement and Sections 4.04(c)(i), 4.04(c)(ii) and 4.04(d) of the
------------------- ----------- -------
Agreement as set forth in this Supplement, and (y) the funds retained as of such
day in the Series 1999-1 Principal Collection Sub-subaccount pursuant to clause
------
(A) of Section 4.04(c)(i) of the Agreement as set forth in this Supplement;
- --- ------------------
provided, however, that the Servicer shall have given the Agent irrevocable
- -------- -------
written notice (effective upon receipt) (with a copy thereof to the Trustee), on
the second Business Day prior to such Decrease and which notice shall state the
amount of such Decrease; provided, further, that: (i) such Decrease shall be in
-------- -------
an amount equal to $1,000,000 and integral multiples of $1,000,000 in excess
thereof; and (ii) no prepayment may occur on any date other than a Payment Date.
(b) Any reduction in the Invested Amounts on any Business Day shall be
allocated pursuant to Section 1.8(c) of this Supplement.
--------------
SECTION 1.7 Reductions of the Commitments. (a) On any Business Day
-----------------------------
during the Revolving Period, the Transferor, on behalf of the Trust, may, upon
thirty (30) days' prior written notice (effective upon receipt) to the Agent
(with a copy thereof to the Trustee) irrevocably reduce or terminate the
Commitments (a "Commitment Reduction") in an aggregate amount equal to
--------------------
$5,000,000 or a whole multiple of $1,000,000 in excess thereof; provided that no
--------
such reduction shall be permitted if, after giving effect thereto and to any
reduction in the Series 1999-1 Aggregate Invested Amount on such date, the
Series 1999-1 Aggregate Invested Amount would exceed the Aggregate Commitment
Amount then in effect or if the Commitments would be reduced to an amount less
than $50,000,000. Each Series 1999-1 Certificateholder's
4
<PAGE>
Commitment shall be reduced by such Series 1999-1 Certificateholder's Commitment
Percentage of the amount of such Commitment Reduction.
(b) Once reduced, the Commitments may not be subsequently reinstated
without the written consent of each Series 1999-1 Certificateholder. Upon
effectiveness of any such reduction, the Agent shall prepare a revised Schedule
--------
1 to this Supplement in order to reflect the reduced Commitment of each Series
- -
1999-1 Certificateholder and Schedule 1 to this Supplement shall be deemed to be
----------
automatically superseded by such revised Schedule 1. The Agent shall promptly
----------
distribute such revised Schedule 1 to the Transferor, the Servicer, the Trustee
----------
and each Series 1999-1 Certificateholder.
SECTION 1.8 Interest; Commitment Fee, Etc. (a) (i) Interest shall be
------------------------------
payable on the Series 1999-1 Certificates on each Payment Date pursuant to
Section 4.07(a) of the Agreement as set forth in this Supplement. Interest
- ---------------
shall accrue on the Series 1999-1 Certificates from the Issuance Date.
(ii) The Agent shall provide written notification to the Trustee and
the Servicer before 1:00 p.m. Minneapolis Time on the Business Day
==============================================
preceding each Payment Date, of the Monthly Interest Amount for the Series
=========
1999-1 Certificates payable on such Payment Date with respect to the
related Accrual Period.
(b) The Trustee (acting at the written direction of the Servicer, pursuant
to a Settlement Statement or otherwise) shall pay to the Agent, for the account
of the Initial Series 1999-1 Certificateholder a commitment fee (the "Commitment
----------
Fee") with respect to each Accrual Period, on each Payment Date in an amount
- ---
equal to the product of (A) the Commitment Fee Percentage, times (B) the daily
average Liquidity Commitment Amount during the Accrual Period, times (C) a
fraction the numerator of which is the number of days in the related Accrual
Period and the denominator of which is three hundred sixty. The "Commitment
----------
Fee" with respect to any other Series 1999-1 Certificateholder shall mean the
amount described in a fee letter among such Series 1999-1 Certificateholder, the
Transferor and the Agent. To the extent that on any Payment Date funds
distributed to the Agent pursuant to Section 4.07(b)(iii) of the Agreement as
--------------------
set forth in this Supplement are insufficient to pay the Commitment Fee due on
such date, the Trustee shall pay the Agent the amount of any such deficiency out
of funds otherwise distributable to the Transferor pursuant to Section
-------
4.03(a)(ii) of the Agreement until such Commitment Fee is paid in full.
- -----------
(c) The Trustee (acting at the written direction of the Servicer, pursuant
to a Settlement Statement or otherwise) shall pay to the Agent for the pro rata
--- ----
account of the Series 1999-1 Certificateholders in accordance with their
Commitment Percentages a program fee (the "Program Fee") with respect to each
-----------
Accrual Period, on each Payment Date in an amount equal to the product of (A)
the Program Fee Percentage, times (B) the daily average Series 1999-1 Aggregate
=====
Invested Amount during such Accrual Period, times (C) a fraction the numerator
======
of which is the number of days in
5
<PAGE>
the related Accrual Period and the denominator of which is three hundred sixty.
To the extent that on any Payment Date funds distributed to the Agent pursuant
to Section 4.07(b)(ii) of the Agreement as set forth in this Supplement are
-------------------
insufficient to pay the Program Fee due on such date, the Trustee shall pay the
Agent the amount of any such deficiency out of funds otherwise distributable to
the Transferor pursuant to Section 4.03(a)(ii) of the Agreement until such
-------------------
Program Fee is paid in full.
(d) Calculations of the Alternate Base Rate under this Supplement shall be
made on the basis of a 365-day (or, where applicable, a 366-day) year. CP
Rates, Eurodollar Rates, Commitment Fees and Program Fees shall be calculated
===========
on the basis of a 360-day year for actual days elapsed. Each determination of
the Certificate Rate, the Commitment Fee and the Program Fee (and the components
thereof) by the Agent shall be conclusive and binding upon each of the parties
hereto in the absence of manifest error.
(e) In the event, and on each occasion, that on the day two Business Days
prior to the commencement of any Accrual Period when not funding at the CP Rate
the Agent shall have determined that dollar deposits in the principal amounts of
the related LIBOR Rate Tranche are not generally available in the London
interbank market, or that the rates at which such dollar deposits are being
offered will not adequately and fairly reflect the cost to any Series 1999-1
Certificateholder or Program Support Provider of making or maintaining such
LIBOR Rate Tranche during such Accrual Period, or that reasonable means do not
exist for ascertaining the Eurodollar Rate, the Agent shall, as soon as
==========
practicable thereafter, give written or telecopy notice of such determination to
the Transferor, the Servicer and the Series 1999-1 Certificateholders. In the
event of any such determination, until the Agent shall have advised the
Transferor, the Servicer and the Series 1999-1 Certificateholders that the
circumstances giving rise to such notice no longer exist, any LIBOR Rate Tranche
shall be deemed to be a Prime Rate Tranche. Each such determination by the
Agent hereunder shall be conclusive absent manifest error.
SECTION 1.9 Certificate Rate Limitation. Notwithstanding anything herein
---------------------------
to the contrary, if at any time any Certificate Rate, together with all fees,
charges and other amounts which are treated as interest on the Series 1999-1
Certificates, under applicable law (collectively the "Charges"), shall exceed
-------
the maximum lawful rate (the "Maximum Rate") which may be contracted for,
------------
charged, taken, received or reserved by the Series 1999-1 Certificateholders in
accordance with the terms hereof, then such Certificate Rate, together with all
Charges payable in respect of the Series 1999-1 Certificates, shall be limited
to the Maximum Rate and, to the extent lawful, such Certificate Rate and Charges
that would have been payable in respect of the Series 1999-1 Certificates, but
were not payable as a result of the operation of this Section, shall be
cumulated and the Certificate Rate and Charges payable to such Series 1999-1
Certificateholders in respect of other periods shall be increased (but not above
the Maximum Rate therefor) until such cumulated amount, together with interest
thereon at
6
<PAGE>
the Federal Funds Effective Rate to the date of repayment, shall have been
received by such Series 1999-1 Certificateholders.
ARTICLE II
AGREEMENT MODIFICATIONS
SECTION 2.1 Agreement Modifications.
The following terms of the Agreement are hereby modified only with respect
to this Supplement and the Series 1999-1 Investor Certificates as follows:
Section 2.05(c) is modified to add the phrase ", the Agent" after the
phrase "any request of the Trustee" where it appears therein. The cost and
expense of the Agent or its agents or representatives incurred in connection
with any visit or examination described in Section 2.05(c) shall be the
responsibility of the Transferor.
Section 3.01(e) is modified to add the phrase "and the Series 1999-1
Certificateholders consent thereto" immediately before the period at the end of
the second sentence thereof.
Section 3.03 is modified by adding the following new paragraph (v)
immediately after paragraph (u) thereof:
(v) No Material Adverse Change. Since December 31, 1998 there has
--------------------------
been no material adverse change in CompuCom's financial condition,
business, properties or operations.
Section 3.04(a) is modified to add the phrase "or the Agent" after the
phrase "the Trustee" each place it appears in the first and second sentences
thereof.
Article III is modified by adding the following new Section 3.11 to the end
-----------
thereof:
Section 3.11 Program Costs. So long as CompuCom is the Servicer, the
-------------
Servicer shall pay from its servicing compensation all Program Costs as they
arise.
7
<PAGE>
Section 4.02 is modified to add the following:
------------
(d) Establishment of Trust Accounts. (i) The Trustee shall cause to
-------------------------------
be established and maintained in the name of the Trustee, on behalf of the
Trust, (x) for the benefit of the Series 1999-1 Certificateholders and (y) for
the benefit, subject to the prior and senior interest of the Series 1999-1
Certificateholders, of the holder of the Transferor Certificate, (A) a
subaccount of the Collection Account (the "Series 1999-1 Collection
------------------------
Subaccount"), which subaccount is the Series Collection Subaccount with respect
to Series 1999-1; (B) two subaccounts of the Series 1999-1 Collection
Subaccount: (1) the Series 1999-1 Principal Collection Sub-subaccount, and (2)
the Series 1999-1 Non-Principal Collection Sub-subaccount (respectively, the
"Series 1999-1 Principal Collection Sub-subaccount" and the "Series 1999-1 Non-
- -------------------------------------------------- -----------------
Principal Collection Sub-subaccount"); (C) a subaccount of the Series 1999-1
- -----------------------------------
Principal Collection Sub-subaccount (the "Series 1999-1 Principal Collection
----------------------------------
Subordinated Sub-subaccount"); and (D) a subaccount of the Series 1999-1 Non-
- ---------------------------
Principal Collection Sub-subaccount (the "Series 1999-1 Accrued Interest Sub-
----------------------------------
subaccount"). The subaccounts and sub-subaccounts established pursuant to this
- ----------
Section 4.02(d)(i) and listed on Schedule 2 attached to the Supplement with
- ------------------ ----------
respect to Series 1999-1 shall be referred to collectively as the "Trust
-----
Accounts". Each Trust Account shall bear a designation indicating that the
- --------
funds deposited therein are held for the benefit of the Persons (and for each
such Person, to the extent) set forth in clauses (x) and (y) above. The
----------- ---
Trustee, on behalf of the Series 1999-1 Certificateholders, shall possess all
right, title and interest in all funds from time to time on deposit in, and all
Eligible Investments credited to, the Trust Accounts and in all proceeds
thereof. The Trust Accounts shall be under the sole dominion and control of the
Trustee for the exclusive benefit of the Persons (and, for each such Person to
the extent) set forth in clauses (x) and (y) above.
----------- ---
(ii) All Eligible Investments in the Trust Accounts shall be held by the
Trustee, on behalf of the Series 1999-1 Certificateholders, for the exclusive
benefit of the Persons (and, for each such Person, to the extent) set forth in
clauses (x) and (y) of Section 4.02(d)(i) above. Funds on deposit in a Trust
- ----------- --- ------------------
Account shall, at the direction of the Servicer, be invested together with funds
held in other Trust Accounts. After giving effect to any distribution to the
Transferor pursuant to Section 4.04(c), amounts on deposit and available for
---------------
investment in the Trust Accounts shall be invested by the Trustee at the written
direction of the Servicer in Eligible Investments that mature, or that are
payable or redeemable upon demand of the holder thereof, so that funds will be
available on or prior to the Business Day immediately preceding the related
Payment Date. If the Trustee does not receive written direction from the
Servicer, any such amounts on deposit shall be invested in the investments
described in subclause (iv) of the definition of Eligible Investments.
8
<PAGE>
Section 4.03(a)(i) is modified in its entirety to read as follows:
------------------
(i) The Servicer will allocate, pay or deposit all Collections with
respect to the Receivables for each Business Day as described in this Article
-------
IV. Except as provided below, no later than the Business Day following the
receipt of any Collections (or, in the case of checks received directly by the
Servicer, two Business Days after receipt), the Servicer shall deposit (or cause
to be deposited) such Collections into the Concentration Account and shall
allocate and transfer such Collections as required by Section 4.03(a)(ii) below.
-------------------
In the event a Servicer Default or an Early Amortization Event shall have
occurred, the Servicer shall cause (unless the Control Party and the Servicer
shall have agreed in writing that the Servicer need not comply with this
sentence for the period or periods set forth in such agreement) all Collections
to be remitted directly (without deposit into the Concentration Account) to the
Collection Master Subaccount within two Business Days after receipt of such
Collections.
Section 4.04 is modified in its entirety to read as follows:
------------
Section 4.04. Daily Allocations. (a) The portion of Collections
-----------------
allocated to the Series 1999-1 Investor Certificates pursuant to this Article IV
----------
shall be allocated and distributed as set forth in this Article IV by the
----------
Trustee based solely on the information provided it by the Servicer in the Daily
Report (upon which the Trustee may conclusively rely unless otherwise notified
by the Control Party).
(b)(i) On each Business Day, (x) an amount equal to the Accrued Expense
Amount for such day shall be transferred by the Trustee from the Series 1999-1
Collection Subaccount to the Series 1999-1 Non-Principal Collection Sub-
subaccount and (y) an amount equal to the Monthly Interest Amount for such day
shall be transferred by the Trustee from the Series 1999-1 Non-Principal
Collection Sub-subaccount to the Series 1999-1 Accrued Interest Sub-subaccount.
(ii) Following the transfers pursuant to clause (i) above, on each
----------
Business Day any remaining funds on deposit in the Series 1999-1 Collection
Subaccount shall be transferred by the Trustee to the Series 1999-1 Principal
Collection Sub-subaccount.
(c)(i) On each Business Day during the Revolving Period (including Payment
Dates), after giving effect to all allocations of Collections on such Business
Day, amounts on deposit in the Series 1999-1 Principal Collection Sub-subaccount
shall (but only to the extent that the Trustee has received a Daily Report which
reflects the receipt of the Collections on deposit therein) be distributed as
indicated on the Daily Report by the Trustee in the following order of priority:
(A) to any Successor Servicer, any Additional Servicing Fee due and arising, (B)
to be retained in the Series 1999-1 Principal Collection Sub-subaccount to the
extent the Series 1999-1 Target Receivables Amount exceeds the Series 1999-1
Allocated Receivables Amount;(C) to the Series 1999-1 Certificateholders to the
extent of any Commitment Fees and Program Fees that
9
<PAGE>
were accrued and unpaid as of the previous Payment Date; (D) if CompuCom is not
the Servicer, to the payment of all accrued and unpaid Program Costs; (E) to the
Agent to the extent of any accrued and unpaid Article IV Costs; and (F) subject
to the last sentence of Section 4.04(d), (x) to the Transferor in accordance
with the directions contained in the Daily Report or (y) at the election of the
Transferor by written notice to the Servicer, the Agent and the Trustee, (A) to
be retained in the Series 1999-1 Principal Collection Sub-subaccount, an amount
specified in such notice (which amount may be distributed at the direction of
the Transferor) or (B) to the Series Principal Collection Sub-subaccount of
another Series.
(ii) On each Business Day during the Early Amortization Period
(including Payment Dates) (after giving effect to all allocations of Collections
on such Business Day and transfers pursuant to Sections 4.04(d) and (e)),
---------------- ----
amounts on deposit in the Series 1999-1 Principal Collection Sub-subaccount
shall (but only to the extent that the Trustee has received a Daily Report which
reflects the receipt of the Collections on deposit therein) be distributed as
indicated on the Daily Report by the Trustee in the following order of priority:
(A) to any Successor Servicer, any Additional Servicing Fee due and arising, (B)
to be retained in the Series 1999-1 Principal Collection Sub-subaccount, an
amount up to the Series 1999-1 Aggregate Invested Amount; and (C) the remainder
of such funds shall be distributed by the Trustee in accordance with clauses (B)
-----------
through (E) of Section 4.04(c)(i) above.
--- ------------------
(d) On each Business Day during the Early Amortization Period (including
Payment Dates), the Trustee shall transfer from the Series 1999-1 Principal
Collection Sub-subaccount to the Series 1999-1 Principal Collection Subordinated
Sub-subaccount out of amounts deposited into the Series 1999-1 Principal
Collection Sub-subaccount (prior to any withdrawal pursuant to Section 4.04(c)
---------------
above) the product of (i) the Series 1999-1 Subordinated Percentage and (ii) the
amount of funds deposited into the Series 1999-1 Principal Collection Sub-
subaccount on such day (other than funds transferred to the Series 1999-1
Principal Collection Sub-subaccount pursuant to Section 4.04(e) below). Upon
---------------
termination of the Early Amortization Period, amounts remaining on deposit in
the Series 1999-1 Principal Collection Subordinated Sub-subaccount shall be
transferred to the Series 1999-1 Principal Collection Sub-subaccount to the
extent of the Adjusted Invested Amount and the remainder shall be distributed in
accordance with clauses (B) through (E) of Section 4.04(c)(i) above. The
----------- --- ------------------
Trustee shall not distribute any funds from the Series 1999-1 Principal
Collection Sub-subaccount and the Series 1999-1 Principal Collection
Subordinated Sub-subaccount to the Transferor (x) if any Prospective Early
Amortization Event has occurred and is continuing or (y) during the Early
Amortization Period until the Adjusted Invested Amount has been reduced to zero
and all other amounts owing under this Supplement have been paid in full.
(e) On each Business Day (including Payment Dates) during the Early
Amortization Period, the Trustee shall transfer from funds on deposit in the
Series 1999-1 Principal Collection Subordinated Sub-subaccount to the Series
1999-1 Principal Collection Sub-subaccount an amount equal to the sum of (i) the
product of (A) the
10
<PAGE>
Invested Percentage and (B) the excess of (1) the Dilution Factors made and the
Unpaid Balance of Ineligible Receivables designated since the prior Business Day
minus (2) the amount deposited by the Transferor in the Series 1999-1 Principal
Collection Sub-subaccount in respect of such Dilution Factors and Ineligible
Receivables since the preceding Business Day and (ii) the product of (A) the
Invested Percentage and (B) the Unpaid Balance of Receivables in the Trust which
became Defaulted Receivables since the preceding Business Day (but in no event
greater than the amount on deposit in the Series 1999-1 Principal Collection
Subordinated Sub-subaccount).
(f) The allocations to be made pursuant to this Section 4.04 are subject to
------------
the provisions of Sections 2.04(c), 2.04(d), 12.01 and 12.02 of this Agreement.
---------------- ------- ----- -----
Section 4.05 is modified in its entirety to read as follows:
------------
Section 4.05 Determination of Interest. (a) The Monthly Interest Amount
-------------------------
shall be distributable with respect to the Series 1999-1 Investor Certificates
on each Payment Date pursuant to Section 4.07.
------------
(b) On each Payment Date, the Servicer shall determine the excess, if any
(the "Payment Date Interest Shortfall"), of (A) the applicable Monthly Interest
-------------------------------
Amount, over (B) the amount distributed to the Series 1999-1 Certificateholders
----
on such Payment Date in respect thereof. If the Payment Date Interest Shortfall
with respect to any Payment Date is greater than zero, an additional amount
("Additional Interest") equal to the product, for the period beginning on such
- ---------------------
Payment Date until such Payment Date Interest Shortfall is repaid, of (A) a rate
per annum equal to the Alternate Base Rate from time to time in effect during
such period, (B) such Payment Date Interest Shortfall (or the portion thereof
which has not been paid to the Series 1999-1 Certificateholders) and (C) the
actual number of days in such period divided by 365, shall be payable as
------- --
provided herein with respect to the Series 1999-1 Investor Certificates on each
Payment Date following such Payment Date to and including the Payment Date on
which such Payment Date Interest Shortfall is paid in full to the Series 1999-1
Certificateholders.
Section 4.06 is modified in its entirety to read as follows:
------------
Section 4.06 Determination of Series 1999-1 Principal. The amount
----------------------------------------
distributable from the Series 1999-1 Principal Collection Sub-subaccount on each
Payment Date during the Early Amortization Period shall be equal to the amount
retained on deposit in such subaccount in accordance with Section 4.04(c)(ii) as
-------------------
of the last day of the related Settlement Period (such amount being the "Series
------
1999-1 Monthly Principal Payment" for such Payment Date); provided, that the
- -------------------------------- --------
Series 1999-1 Monthly Principal Payment on any Payment Date shall not exceed the
Series 1999-1 Aggregate Invested Amount on such Payment Date.
11
<PAGE>
Section 4.07 is modified in its entirety to read as follows:
------------
Section 4.07 Distributions. (a) On each Payment Date, the Servicer shall
-------------
direct the Trustee to distribute (and the Trustee shall distribute) to the
Series 1999-1 Certificateholders, from amounts on deposit in the Series 1999-1
Accrued Interest Sub-subaccount to the extent funds are available, an amount
equal to the sum of (i) the Monthly Interest Amount payable on such Payment
Date, plus (ii) the amount of any Monthly Interest Amount previously due but not
----
distributed to the Series 1999-1 Certificateholders on a prior Payment Date,
plus (iii) the amount of any Additional Interest for such Payment Date and any
- ----
Additional Interest previously due but not distributed to the Series 1999-1
Certificateholders on a prior Payment Date; provided, however, that during the
-------- -------
Early Amortization Period, no amounts will be distributed pursuant to clause
------
(iii) until repayment in full of the Series 1999-1 Aggregate Invested Amount and
- -----
all Monthly Interest Amounts have been paid.
(b) On each Payment Date, the Servicer shall direct the Trustee to apply
(and the Trustee shall apply) funds on deposit in the Series 1999-1 Non-
Principal Collection Sub-subaccount after the distributions referred to in
Section 4.07(a) on such Payment Date in the following order of priority to the
- ---------------
extent funds are available:
(i) an amount equal to the Monthly Trustee Fee shall be paid to the
Trustee;
(ii) an amount equal to the Servicing Fee for the Accrual Period
ending on such Payment Date shall be paid to the Servicer (less any amount
payable to the Trustee pursuant to this Agreement or to a Lock-Box Bank or
Wire Transfer Receipt Account Bank on account of customary fees and
returned items which shall be paid to the Trustee or any Lock-Box Bank or
Wire Transfer Receipt Account Bank); provided, that if CompuCom is the
--------
Servicer, the amounts required to be paid pursuant to clauses (iii) through
-------------
(v) below shall be paid prior to the Servicing Fee;
---
(iii) an amount equal to the Program Fee for the Accrual Period
ending on such Payment Date, plus any portion of the Program Fee previously
due but not distributed to the Agent, shall be paid to the Agent;
(iv) an amount equal to the Commitment Fee for the Accrual Period
ending on such Payment Date, plus any portion of the Commitment Fee
previously due but not distributed to the Agent, shall be paid to the
Agent; and
(v) an amount equal to the Transition Costs shall be paid to any
Successor Servicer.
Any remaining amount on deposit in the Series 1999-1 Non-Principal
Collection Sub-subaccount not applied pursuant to clauses (i) through (v) above
----------- ---
shall be deposited
12
<PAGE>
in the Transferor Collection Subaccount; provided, however, that during the
-------- -------
Early Amortization Period, such remaining amounts shall be deposited in the
Series 1999-1 Principal Collection Sub-subaccount for distribution in accordance
with Section 4.07(c)(ii) below.
-------------------
(c)(i) On each Payment Date during the Revolving Period, the Servicer
shall direct the Trustee to apply (and the Trustee shall apply) amounts on
deposit in the Series 1999-1 Principal Collection Sub-subaccount in accordance
with Section 4.04(c)(i);
------------------
(ii) On each Payment Date during the Early Amortization Period, the
Trustee will apply amounts retained on deposit in the Series 1999-1 Principal
Collection Sub-subaccount pursuant to Section 4.04(c)(ii) as of the last day of
-------------------
the related Settlement Period in the following order of priority:
(1) an amount equal to the Additional Servicing Fee, if any, due and
arising shall be distributed to the Successor Servicer;
(2) an amount equal to the Series 1999-1 Monthly Principal Payment for
such Payment Date shall be distributed to the Series 1999-1
Certificateholders; and
(3) the remaining amount on deposit in the Series 1999-1 Principal
Collection Sub-subaccount as of the last day of the related Settlement
Period shall be applied in accordance with clauses (B) through (E) of
----------- ---
Section 4.04(c)(i).
------------------
13
<PAGE>
Article III is amended by adding the following section at the end thereof:
-----------
Section 7.04 Liabilities. The Transferor agrees to pay, directly to the
-----------
injured party, subject to the next sentence, the entire amount of any losses,
claims, damages or liabilities (other than those incurred by a 1999-1
Certificateholder as a result of defaults on the Receivables and other than any
losses, claims, damages or liabilities arising out of the imposition by any
taxing authority of any federal, state or local income or franchise taxes or any
other taxes imposed on or measured by income (including any interest, penalties
or additions with respect thereto) upon the Series 1999-1 Certificateholders
including other Affected Parties (including any liabilities, costs or expenses
with respect thereto) with respect to the Receivables not specifically
indemnified or represented to hereunder) arising out of or based on the
arrangements created by this Agreement or the actions of the Servicer taken
pursuant to this Agreement or any Supplement. The Transferor agrees to pay,
indemnify and hold harmless each Series 1999-1 Certificateholder, the Agent and
the Trustee (and its officers, directors, employees and agents) against and from
any and all such losses, claims, damages and liabilities except to the extent
that they arise from the gross negligence or willful misconduct of the Trustee,
the Agent or such Series 1999-1 Certificateholder. The provisions of this
Section 7.04 shall survive the termination of this Supplement.
- ------------
Section 8.02 is amended by deleting the period at the end of paragraph (ii)
thereof and substituting therefor "; and" and by adding a new paragraph (iii) as
follows:
(iii) the Series 1999-1 Certificateholders shall have consented
thereto.
Article IV is further amended by adding the following section:
----------
Section 4.09 Transferor's or Servicer's Failure to Make a Deposit or
-------------------------------------------------------
Payment. (a) If the Servicer or the Transferor fails to make, or give
- -------
instructions to make, any payment or deposit (other than as required by Section
-------
2.04(d)) required to be made or given by the Servicer or Transferor,
- -------
respectively, at the time specified in the Agreement (including applicable grace
periods), the Trustee shall make such payment or deposit from the applicable
Trust Account without instruction from the Servicer or Transferor. The Trustee
shall be required to make any such payment or deposit hereunder only to the
extent that the Trustee has sufficient information in a Daily Report, a
Settlement Statement or other writing furnished by the Servicer or the Agent to
allow the Trustee to determine the amount thereof. The Servicer shall, upon
request of the Trustee, promptly provide the Trustee with all information
necessary to allow the Trustee to make such payment or deposit. Such funds or
the proceeds of such withdrawal shall be applied by the Trustee in the manner in
which such payment or deposit should have been made by the Transferor or the
Servicer, as the case may be.
14
<PAGE>
Article IX is hereby modified as follows:
----------
The following new subparagraphs are hereby inserted in Section 9.01:
------------
(ix) the average of the Sales-Based Dilution Ratios as of the three
most recent Determination Dates shall exceed 7%;
(x) the Series 1999-1 Allocated Receivables Amount is less than the
Series 1999-1 Target Receivables Amount;
(xi) CompuCom shall cease to own all of the outstanding capital
stock of the Transferor, free and clear of all Liens, other than a Lien
arising under the Credit Agreement;
(xii) the Series 1999-1 Aggregate Invested Amount is not paid in full
on the Scheduled Maturity Date;
(xiii) the average of the Sales-Based Default Ratios as of the three
most recent Determination Dates shall exceed 7%;
(xiv) a Purchase Termination Event shall occur and be continuing;
(xv) any event that has had, or could reasonably be expected to
have, a Material Adverse Effect shall occur and, solely in the case of a
material adverse effect described in clause (i) of the definition thereof
----------
with respect to CompuCom, such circumstance has continued for more than 90
days;
(xvi) the Series 1999-1 Certificates are not rated at least "AA" by
S&P on or before June 30, 1999; or
(xvii) the Delinquency Ratio as of any Cut-Off Date shall exceed 10%;
provided, however, that if the Series 1999-1 Allocated Receivables Amount
-------- -------
is at least 142% of the Series 1999-1 Aggregate Invested Amount on such
Cut-Off Date, the circumstance described in this subparagraph (xvii) for
such Cut-Off Date shall not constitute an Early Amortization Event; or
(xviii) the average of the Delinquency Ratios as of the three most
recent Determination Dates shall not exceed 15%.
In clause (a) of Section 9.01, the phrase "subparagraphs (i), (ii) or
---------- ------------ ----------------- ----
(iii)" is deleted and the phrase "subparagraphs (i), (ii), (iii), (ix), (x),
- ----- ----------------- ---- ----- ---- ---
(xi), (xiii), (xiv) and (xvii)" is substituted therefor.
- ---- ------ ----- ------
The following new clause (c) is hereby added to Section 9.01:
---------- ------------
15
<PAGE>
(c) in the case of any event described in subparagraph (xii), an Early
------------------
Amortization Event with respect to Series 1999-1 shall occur without any notice
or other action on the part of any Control Party or any Certificateholder
immediately upon the occurrence of such event.
Article X is hereby modified as follows:
---------
Section 10.01 is hereby modified by deleting "or" after the semicolon at
-------------
the end of clause (c), and adding the following new clauses (e) , (f) and (g):
---------- ------------= ====---
(e) if, while CompuCom is the Servicer, at the end of the most recent
fiscal quarter of CompuCom its Tangible Net Worth is less than the sum of
(a) $120,000,000, plus (b) 75% of cumulative Consolidated Net Income for
the period beginning on the Closing Date for the Series 1999-1 and ending
on the date of calculation (provided that if Consolidated Net Income is
less than zero for any Fiscal Year, or for the completed portion of the
then-current Fiscal Year, Consolidated Net Income for such Fiscal Year or
portion shall be deemed to be zero) plus (c) 100% of the net cash proceeds
received by CompuCom after the Closing Date for the Series 1999-1 as a
result of any offering of equity securities (or securities convertible into
or exchangeable for equity securities) plus (d) an amount equal to the
Tangible Net Worth of any Person that becomes a Subsidiary of CompuCom
after the Closing Date for the Series 1999-1 or any Person (other than
CompuCom or a Subsidiary) is merged with or consolidated with or into
CompuCom or any Subsidiary after the Closing Date for the Series 1999-1 or
any Person substantially all of the assets of which were acquired by
CompuCom or any Subsidiary after the Closing Date for the Series 1999-1, in
each case to the extent the purchase price paid therefor by CompuCom or the
applicable Subsidiary is paid in equity securities of CompuCom or any
Subsidiary.
(f) A default shall have occurred and be continuing under the Credit
Agreement or any instrument or agreement evidencing, securing or providing
for the issuance of indebtedness for borrowed money in excess of $1,000,000
of, or guaranteed by, CompuCom or any Subsidiary thereof, which default is
a payment default or if unremedied, uncured, or unwaived (with or without
the passage of time or the giving of notice or both) would permit
acceleration of the maturity of such indebtedness and such default shall
have continued unremedied, uncured or unwaived for a period long enough to
permit such acceleration; or any default under any agreement or instrument
relating to the purchase of receivables of CompuCom or any Subsidiary
thereof (other than this Agreement), if the effect of such default is to
terminate, or permit the termination of, the commitment of any party to
such agreement or instrument to purchase receivables or the right of
CompuCom or such Subsidiary to reinvest
16
<PAGE>
in receivables the principal amount paid by any party to such agreement or
instrument for an interest in receivables.
(g) if CompuCom breaches the covenants of Section 8.16 hereof.
=== ==========================================================
Section 10.01 is further modified to add the following after the last
-------------
paragraph thereof:
Notwithstanding anything to the contrary in this Agreement, during the
continuance of an Early Amortization Event, the Control Party shall have the
right (i) to deliver a Termination Notice and designate as a Successor Servicer
a party of the Control Party's choice, which Successor Servicer shall be
approved by the Trustee, which approval shall not be unreasonably withheld, and
(ii) to instruct the Trustee to take other actions acceptable to the Control
Party in respect to the servicing of the Receivables, including (x) notification
of Obligors, in substantially the form attached hereto as Exhibit B, and (y)
---------
after consultation with CompuCom, initiation of lawsuits against Obligors solely
with respect to Receivables which have not been paid for at least 90 days after
the Due Date for such Receivables.
ARTICLE III
DISTRIBUTIONS AND REPORTS
SECTION 3.1 Distributions. The Trustee shall distribute to the Agent by
-------------
wire transfer an amount equal to the amount to be distributed to the Series
1999-1 Certificateholders as contemplated by Section 5.01 of the Agreement by
------------
11:00 a.m. (New York City time) on each Payment Date in accordance with Section
-------
8.4 hereof.
- ---
SECTION 3.2 Reports, Statements and Notices. In addition to their
-------------------------------
obligations under the Agreement, the Transferor and the Servicer agree as
follows:
(a) Daily Reports. The Servicer shall provide the Agent with a Daily
-------------
Report on the same day that it provides the same to the Trustee in
accordance with Section 3.04(b)(ii) of the Agreement. The Agent shall make
-------------------
copies of the Daily Report available to the Series 1999-1
Certificateholders at their reasonable request at the Agent's office in
Pittsburgh, Pennsylvania.
(b) Monthly Settlement Statements. The Servicer shall provide the
-----------------------------
Agent with a Settlement Statement on the same day that it provides the same
to the Trustee in accordance with Section 3.04(c) of the Agreement. The
---------------
Agent shall forward a copy of each Settlement Statement to any Series 1999-
1 Certificateholder upon request by such Series 1999-1 Certificateholder.
(c) Early Amortization Event/Distribution of Principal Notices. Upon
----------------------------------------------------------
the occurrence of an Early Amortization Event with respect to Series
17
<PAGE>
1999-1, the Transferor or the Servicer, as the case may be, shall give
prompt written notice thereof to the Trustee and the Agent within one
Business Day of obtaining knowledge thereof. As promptly as reasonably
practicable after its receipt of notice of the occurrence of any Early
Amortization Event with respect to Series 1999-1, the Agent shall give
notice thereof to each Series 1999-1 Certificateholder. In addition, two
Business Days preceding each day on which a distribution of principal is to
be made during the Early Amortization Period, the Servicer shall provide to
the Agent and shall direct the Agent to send notice to each Series 1999-1
Certificateholder, which notice shall set forth the amount of principal to
be distributed on the related date to the Series 1999-1 Certificateholders
with respect to the outstanding Series 1999-1 Certificates.
(d) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within 46 days after the end of each of the first three quarters of
each fiscal year CompuCom will furnish to the Agent and the Trustee (unless
the following information is readily available on-line, in which case no
copies need to be delivered unless requested by the Agent or the Trustee)
copies of the financial statements of CompuCom and its Subsidiaries
prepared on a consolidated basis, consisting of at least a balance sheet as
at the close of such quarter and statements of earnings for such quarter
and for the period from the beginning of the fiscal year to the close of
such quarter, in each case in conformity with GAAP (except for footnote
disclosures) and fairly presenting the consolidated financial position and
results of operations of CompuCom and its Subsidiaries for such period,
duly certified by the principal financial officer of CompuCom.
(e) Annual Financial Statements. As soon as available and in any
---------------------------
event within 91 days after the end of each fiscal year CompuCom will
furnish to the Agent and the Trustee (unless the following information is
readily available on-line, in which case no copies need to be delivered
unless requested by the Agent or the Trustee) copies of the audited
financial statements of CompuCom and its Subsidiaries prepared on a
consolidated basis, consisting of at least a balance sheet of CompuCom and
its Subsidiaries for such year and statements of earnings for such fiscal
year, in each case in conformity with GAAP and fairly presenting the
consolidated financial position and results of operations of CompuCom and
its Subsidiaries for such period, together with the report of its
independent auditors on such financial statements.
(f) Annual Holders' Tax Statement. On or before January 31 of each
-----------------------------
calendar year, beginning with calendar year 2000, the Trustee shall deliver
to the Paying Agent, which shall thereupon furnish to each Person who at
any time during the preceding calendar year was a Series 1999-1
Certificateholder, a statement prepared by the Servicer containing the
information as specified in Section 5.02(b) of the Agreement.
---------------
18
<PAGE>
(g) Litigation. Each of Transferor and CompuCom will furnish to the
----------
Agent, as soon as possible and in any event within three Business Days of
Transferor's or CompuCom's actual knowledge thereof, notice of (i) any
litigation, investigation or proceeding which may exist at any time which
could be reasonably expected to have a Material Adverse Effect and (ii) any
material adverse development in previously disclosed litigation.
(h) Change in Credit and Collection Policy. Each of the Transferor
--------------------------------------
and CompuCom will furnish to the Agent, prior to its effective date, notice
of any material change in the Credit and Collection Policy.
(i) Other Information. Each of Transferor and CompuCom will furnish
-----------------
to the Agent copies of all other notices, requests and information
furnished to the Trustee under the Agreement and such other information
respecting the Receivables or the condition or operations, financial or
otherwise, of CompuCom or the Transferor or any of its Affiliates as the
Agent may from time to time reasonably request.
ARTICLE IV
CHANGE IN CIRCUMSTANCES
SECTION 4.1 Requirements of Law. (a) Notwithstanding any other provision
-------------------
herein, if after the Issuance Date the adoption of or any change in any law or
in the interpretation or application thereof or compliance by any Series 1999-1
Certificateholder or other Affected Party with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof:
(i) shall subject any Series 1999-1 Certificateholder or other
Affected Party to any tax of any kind whatsoever with respect to the
Transaction Documents or change the basis of taxation of payments to any
Series 1999-1 Certificateholder or other Affected Party in respect thereof
(except for Non-Excluded Taxes covered by Section 4.2 of this Supplement
-----------
and changes in the rate of taxes on the overall or branch net income of
such Series 1999-1 Certificateholder or franchise taxes assessed in lieu of
a tax on overall or branch net income of such Series 1999-1
Certificateholder);
(ii) shall impose, modify or deem applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Series 1999-1 Certificateholder or other Affected Party;
19
<PAGE>
and the result of any of the foregoing is to increase the cost to such Series
1999-1 Certificateholder or other Affected Party by an amount which such Series
1999-1 Certificateholder or other Affected Party deems to be material, of
making, converting into, continuing or maintaining any portion of the Invested
Amount, or providing funding or any commitment under any Program Support
Agreement or to reduce any amount receivable hereunder or under any Program
Support Agreement in respect thereof, then, in any such case, the Trustee will
pay to such Series 1999-1 Certificateholder or such other Affected Party, as the
case may be, upon written demand, from amounts otherwise distributable to the
Transferor pursuant to Section 4.03(a)(ii) of the Agreement or pursuant to
-------------------
Section 4.04(c)(i) of this Supplement, such additional amount or amounts as will
- ------------------
compensate such Series 1999-1 Certificateholder or such other Affected Party, as
the case may be, for such additional costs incurred or reduced amount
receivable.
(b) If any Series 1999-1 Certificateholder or other Affected Party shall
have determined after the Issuance Date that the adoption of or any change in
any law, rule, regulation or guideline regarding capital adequacy or in the
interpretation, administration or application thereof, or compliance by such
Series 1999-1 Certificateholder or other Affected Party or any corporation
controlling such Series 1999-1 Certificateholder or other Affected Party with
any request or directive regarding capital adequacy (whether or not having the
force of law) from any Governmental Authority made subsequent to the date hereof
shall or would have the effect of reducing the rate of return on such Series
1999-1 Certificateholder's, such other Affected Party's or such corporation's
capital as a consequence of its obligations hereunder or under any Program
Support Agreement to a level below that which such Series 1999-1
Certificateholder, such other Affected Party or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Series 1999-1 Certificateholder's, such other Affected Party's or such
corporation's policies with respect to capital adequacy) by an amount deemed by
such Series 1999-1 Certificateholder or such other Affected Party to be
material, then from time to time, the Trustee shall promptly pay to such Series
1999-1 Certificateholder or such other Affected Party, as the case may be, upon
written demand, from amounts otherwise distributable to the Transferor pursuant
to Section 4.03(a)(ii) of the Agreement or pursuant to Section 4.04(c)(i) of
------------------- ------------------
this Supplement, such additional amount or amounts as will compensate such
Series 1999-1 Certificateholder or such other Affected Party, as the case may
be, for such reduction.
(c) If any Series 1999-1 Certificateholder or other Affected Party becomes
entitled to claim any additional amounts pursuant to Section 4.1(a) or (b)
-------------- ---
above, it shall promptly notify the Transferor (with a copy to the Agent) of the
event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this Section 4.1 submitted by such Series
-----------
1999-1 Certificateholder or such other Affected Party to the Transferor (with a
copy to the Agent and the Trustee) shall be conclusive in the absence of
manifest error. The agreements in this Section 4.1 shall
-----------
20
<PAGE>
survive the termination of this Supplement and the Agreement and the payment of
all amounts payable hereunder.
(d) Failure or delay on the part of any Series 1999-1 Certificateholder or
other Affected Party to demand compensation for any increased costs or reduction
in amounts receivable or reduction in return on capital shall not constitute a
waiver of such Person's right to demand such compensation. The protection of
this Section 4.1 shall be available to each Series 1999-1 Certificateholder and
-----------
each other Affected Party regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, agreement, guideline
or other change or conditions which shall have occurred or been imposed.
SECTION 4.2 Taxes. (a) All payments under this Supplement to the Agent
-----
or to any Series 1999-1 Certificateholder shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority ("Taxes"), excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on the Agent or
any Series 1999-1 Certificateholder as a result of a present or former
connection between the Agent or such Series 1999-1 Certificateholder and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Agent or such Series 1999-1 Certificateholder
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Supplement). If any such non-excluded Taxes ("Non-
---
Excluded Taxes") are required to be withheld from any amounts payable to the
- --------------
Agent or any Series 1999-1 Certificateholder hereunder, the amounts so payable
to the Agent or such Series 1999-1 Certificateholder shall be increased by the
Transferor to the extent necessary to yield to the Agent or such Series 1999-1
Certificateholder (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in this
Supplement; provided, however, that the Transferor shall not be required to
-------- -------
increase any such amounts payable to any Series 1999-1 Certificateholder that is
not created in or organized under the laws of the United States of America or a
state thereof if such Series 1999-1 Certificateholder fails to comply with the
requirements of paragraph (c) of this Section 4.2. Whenever any Non-Excluded
------------- -----------
Taxes are paid by the Transferor as promptly as possible thereafter the
Transferor shall send to the Agent for its own account or for the account of
such Series 1999-1 Certificateholder, as the case may be, a certified copy of an
original official receipt received by the Transferor showing payment thereof.
If the Transferor fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Transferor shall indemnify
the Agent and the Series 1999-1 Certificateholders for any incremental taxes,
interest or penalties that may become payable by the Agent or any Series 1999-1
Certificateholder as a result of any such failure; such indemnification shall be
paid promptly by the Transferor upon receipt of a written demand from the
21
<PAGE>
Agent or any such Series 1999-1 Certificateholder from amounts otherwise
distributable to the Transferor pursuant to Section 4.03(a)(ii) of the Agreement
-------------------
or pursuant to Section 4.04(c)(i) of this Supplement. The agreements in this
------------------
Section 4.2 shall survive the termination of this Supplement and the payment of
- -----------
the Series 1999-1 Aggregate Invested Amount and all other amounts payable
hereunder.
(b) The Transferor will indemnify the Agent or any Series 1999-1
Certificateholder for the full amount of Non-Excluded Taxes (including any Non-
Excluded Taxes imposed on amounts payable under this Section 4.2, but excluding
-----------
any Non-Excluded Taxes imposed with respect to any Series 1999-1
Certificateholder not organized under the laws of the United States of America
or a state thereof if such Series 1999-1 Certificateholder fails to comply with
the requirement of paragraph (c) of this Section 4.2) paid by the Agent or such
-----------
Series 1999-1 Certificateholder and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto; such indemnification
shall be paid promptly by the Trustee upon receipt of a written demand therefor
from the Agent or any such Series 1999-1 Certificateholder from amounts
otherwise distributable to the Transferor pursuant to Section 4.03(a)(ii) of the
-------------------
Agreement or pursuant to Section 4.04(c)(i) of this Supplement.
------------------
(c) Each Series 1999-1 Certificateholder will, prior to the date on which
the first interest payment on the Series 1999-1 Certificate is due to such
holder:
(i) deliver to the Transferor and the Agent (A) if such Series 1999-
1 Certificateholder is created in or organized under the laws of a
jurisdiction outside the United States, two duly completed copies of United
States Internal Revenue Service Form 1001 or new Form W-8BEN or Internal
Revenue Service Form 4224 or new Form W-8ECI, or successor applicable form,
as the case may be, and (B) an Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be, before the first Interest
=========================
Payment Date (or in the case of an Acquiring Series 1999-1
============
Certificateholder or an Initial Assignee, the date on which it acquires its
======================
interest);
(ii) deliver to the Transferor and the Agent two further copies of
any such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the Transferor; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Transferor or
the Agent or as may be required to confirm the availability of any
applicable exemption from United States Federal, state or local withholding
taxes;
unless in any such case any change in treaty, law or regulation) has occurred
prior to the date on which any such delivery would otherwise be required which
renders all such
22
<PAGE>
forms inapplicable or which would prevent such Series 1999-1 Certificateholder
from duly completing and delivering any such form with respect to it and such
Series 1999-1 Certificateholder so advises the Transferor and the Agent. Each
Series 1999-1 Certificateholder so organized or incorporated shall be deemed to
have certified at the time it first becomes a Series 1999-1 Certificateholder,
and thereafter to the extent provided by law, (i) in the case of a Form 1001 or
new Form W-8BEN or Form 4224 or new Form W-8ECI, that it is entitled to receive
payments under the Agreement and this Supplement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Series 1999-1 Certificateholder
or a Participant pursuant to Section 8.9 of this Supplement shall, upon the
-----------
effectiveness of the related transfer, be required to provide all of the forms
and statements required pursuant to this Section 4.2, provided that in the case
-----------
of a Participant such Participant shall furnish all such required forms and
statements to the Series 1999-1 Certificateholder from which the related
participation shall have been purchased.
(d) Notwithstanding anything to the contrary herein, each of the Agent,
Servicer, Transferor or transferring Series 1999-1 Certificateholder shall be
entitled to withhold any amount that it determines in its sole discretion is
required to be withheld pursuant to Section 1446 of the Code and such amount
shall be deemed to have been paid for all purposes of the Agreement.
(e) Each Series 1999-1 Certificateholder and each beneficial owner of
Series 1999-1 Certificates agrees that, with respect to all taxes set forth in
Section 3.07 of the Agreement, it will report its interest in the Series 1999-1
- ------------
Certificates in a manner consistent with the intended characterization as debt
referred to in Section 3.07 of the Agreement.
------------
(f) Each Participant which has complied with the provisions of Section
-------
8.9(c) hereof shall be deemed to be a Series 1999-1 Certificateholder for
- ------
purposes of this Section 4.2.
-----------
SECTION 4.3 Indemnity. The Transferor and the Servicer severally agree to
---------
indemnify each Series 1999-1 Certificateholder and each other Affected Party and
to hold each Series 1999-1 Certificateholder and each other Affected Party
harmless from any loss or expense which such Series 1999-1 Certificateholder or
such other Affected Party may sustain or incur as a consequence of (a) default
by the Transferor in drawing down the Increase Amount after the Transferor has
given irrevocable notice requesting the same in accordance with the provisions
of this Supplement or (b) default by the Transferor in making any prepayment in
connection with a Decrease after the Transferor has given irrevocable notice
thereof in accordance with the provisions of Section 1.6 of this Supplement or
-----------
(c) the making of a prepayment of any portion of the Series 1999-1 Aggregate
Invested Amount on any day other than a Payment Date regardless of cause
(including commencement of the Early Amortization Period or
23
<PAGE>
issuance of a Series subsequent to Series 1999-1). Such indemnification may
include an amount equal to the amount of interest which would have accrued on
the amount so prepaid or not so borrowed for the period from the date of such
prepayment or of such failure to borrow to the last day of the Accrual Period in
each case at the applicable rate of interest provided for herein; provided that
--------
any payments made by the transferor pursuant to this Section shall be made the
Trustee promptly upon receipt of a written demand from such Series 1999-1
Certificateholder) or other Affected Person from amounts otherwise distributable
to the Transferor pursuant to Section 4.03(a)(ii) of the Agreement or pursuant
-------------------
to Section 4.04(c)(i) of this Supplement; provided, further that to the extent
------------------ --------
that any Series 1999-1 Certificateholder actually earns interest on the amount
so prepaid during such Accrual Period and the Transferor pays the foregoing
amount, such Series 1999-1 Certificateholder shall turn over such earned
interest to the Transferor. This covenant shall survive the termination of this
Supplement and the payment of all amounts payable hereunder. A certificate as to
any additional amounts payable pursuant to the foregoing sentence submitted by
any Series 1999-1 Certificateholder or other Affected Person to the Transferor,
the Servicer, the Agent and the Trustee shall be conclusive absent manifest
error.
SECTION 4.4 Limitation. The obligations of the Transferor under this
----------
Article IV shall be limited by Section 8.12 of this Supplement.
- ---------- ------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Transferor and the
--------------------------------------------------------
Servicer. The Transferor and the Servicer each hereby represents and warrants
- --------
to the Trustee, the Agent and each of the Series 1999-1 Certificateholders that
each and every of their respective representations and warranties contained in
the Agreement is true and correct in all material respects as of the Issuance
Date and as of the date of each Increase, it being understood and agreed that,
notwithstanding any other provision hereof, any limitation of remedies set forth
in the Agreement with respect to any breach of any such representations and
warranties are incorporated by reference herein.
SECTION 5.2 Obligations Unaffected. The obligations of the Transferor and
----------------------
the Servicer to the Agent and the Series 1999-1 Certificateholders under this
Supplement shall not be affected by reason of any invalidity, illegality or
irregularity of any of the Receivables or any sale of any of the Receivables.
24
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions Precedent to Effectiveness of Supplement. This
---------------------------------------------------
Supplement will become effective on the date (the "Effective Date") on which the
--------------
following conditions precedent have been satisfied:
(a) Documents. The Agent shall have received (i) an original
---------
counterpart of this Supplement executed by the other parties hereto and
(ii) a photocopy of the other Transaction Documents executed by the parties
thereto.
(b) Corporate Documents; Corporate Proceedings of the Transferor and
----------------------------------------------------------------
Servicer. The Agent shall have received from the Transferor and the
--------
Servicer complete copies of:
(i) the certificate of incorporation including all amendments
thereto, of such Person, certified as of a recent date by the
Secretary of State of Delaware;
(ii) a certificate of the Secretary or Assistant Secretary of
such Person dated the Issuance Date and certifying (A) that attached
thereto is a true and complete copy of the by-laws of such Person, as
in effect on the Issuance Date and at all times since a date prior to
the date of the resolutions described in clause (B) below, (B) that
----------
attached thereto is a true and complete copy of the resolutions in
form and substance reasonably satisfactory to the Agent, of the Board
of Directors of such Person or committees thereof authorizing the
execution, delivery and performance of the Transaction Documents to
which it is a party and the transactions contemplated thereby, and
that such resolutions have not been amended, modified, revoked or
rescinded and are in full force and effect, (C) that the certificate
of incorporation of such Person has not been amended since the date of
the last amendment thereto shown on the certificate of good standing
(or its equivalent) furnished pursuant to clause (c) below and (D) as
----------
to the incumbency and specimen signature of each officer executing
this Supplement or any other document delivered in connection herewith
on behalf of such Person; and
(iii) a certificate of another officer as the incumbency and
specimen signature of the Secretary or Assistant Secretary executing
the certificate pursuant to clause (ii) above.
-----------
(c) Good Standing Certificates. The Agent shall have received copies
--------------------------
of certificates of good standing, dated as of a recent date from the
25
<PAGE>
Secretary of State or other appropriate authority, with respect to each of
the Transferor and the Servicer in Delaware and Texas.
(d) Filings, Registrations and Recordings. Any documents (including,
-------------------------------------
without limitation, financing statements) required to be filed in order (i)
to perfect the sale of the Receivables by CompuCom to the Transferor
pursuant to the Receivables Contribution and Sale Agreement and (ii) to
create, in favor of the Trustee, a perfected ownership/security interest in
the Trust Assets under the Agreement with respect to which an
ownership/security interest may be perfected by a filing under the UCC or
other comparable statute shall, in each case, have been properly prepared
and executed for immediate filing or have been filed in each necessary
public office and such filings are the only filings required in order to
perfect the sale of the Receivables to the Transferor under the Receivables
Contribution and Sale Agreement or to the Trust under the Agreement, as the
case may be, in such jurisdictions. The Agent shall have received evidence
reasonably satisfactory to it of each such filing, registration or
recordation and reasonably satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto.
(e) Lien Searches. The Agent shall have received the results of a
-------------
recent search by a Person satisfactory to the Agent, of UCC and other
filings with respect to the Transferor and CompuCom.
(f) Legal Opinions. The Agent shall have received opinions of counsel
--------------
to the Transferor and the Servicer, dated the Issuance Date, as to
corporate, tax, bankruptcy, perfection and other matters in form and
substance reasonably acceptable to the Agent and its counsel.
(g) Fee Letter. The Agent shall have received the Fee Letter duly
----------
executed by the Transferor and CompuCom, and any fees required to be paid
on or before the Issuance Date shall have been paid in full.
(h) Liquidity Agreement. The Liquidity Loan Agreement shall have been
-------------------
duly executed and delivered by the parties thereto.
(i) Settlement Statement. A Settlement Statement as of April 30,
--------------------
1999, or the most recently available if April 30, 1999 data is not reasonably
=======
available.
(j) Terminations. Executed terminations/reconveyances evidencing
------------
release/relinquishment of all prior creditors and Enterprise Funding Corp. of
all interest in the Receivables and other Trust Assets.
26
<PAGE>
ARTICLE VII
THE AGENT
SECTION 7.1 Appointment. Each Series 1999-1 Certificateholder hereby
-----------
irrevocably designates and appoints the Agent as the agent of such Series 1999-1
Certificateholder under this Supplement and each such Series 1999-1
Certificateholder irrevocably authorizes the Agent, in such capacity, to take
such action on its behalf under the provisions of this Supplement and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Supplement, together with such other powers as are
reasonably incidental thereto. Each Series 1999-1 Certificateholder hereby
irrevocably designates and appoints the Agent to receive any payments relating
to the Series 1999-1 Certificates on its behalf. Notwithstanding any provision
to the contrary elsewhere in this Supplement, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Series 1999-1 Certificateholder, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Supplement or otherwise exist against the Agent.
SECTION 7.2 Delegation of Duties. The Agent may execute any of its duties
--------------------
under this Supplement by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel (who may be counsel for the Transferor or the
Servicer), independent public accountants and other experts selected by it
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION 7.3 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with the Agreement or this Supplement (x) with the
consent or at the request of the Majority Series 1999-1 Certificateholders or
(y) in the absence of its own gross negligence or willful misconduct or (ii)
responsible in any manner to any of the Series 1999-1 Certificateholders for any
statements, representations or warranties made by the Transferor, CompuCom, the
Servicer or any officer thereof contained in this Supplement or any other
Transaction Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in connection
with, this Supplement or any other Transaction Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Supplement or any other Transaction Document or for any failure of the
Transferor, CompuCom or the Servicer to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Series 1999-1
Certificateholder to ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of, this Supplement or any
other Transaction Document, or to inspect the properties, books or records of
the Transferor, CompuCom or the Servicer.
27
<PAGE>
SECTION 7.4 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any Certificate, writing, resolution,
notice, consent, certificate, affidavit, letter, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Transferor or the Servicer), independent accountants
and other experts selected by the Agent and shall not be liable for any action
taken or omitted to be taken by it in good faith in accordance with the advice
of such counsel, accountants or experts. The Agent may deem and treat the payee
of any Certificate as the owner thereof for all purposes unless a written notice
of assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Supplement or any other Transaction Document unless it shall
first receive such advice or concurrence of the Majority Series 1999-1
Certificateholders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Series 1999-1 Certificateholders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Supplement and the
other Transaction Documents in accordance with a request of the Majority Series
1999-1 Certificateholders, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Series 1999-1
Certificateholders.
SECTION 7.5 Notice of Servicer Default or Early Amortization Event or
---------------------------------------------------------
Prospective Early Amortization Event. The Agent shall not be deemed to have
- ------------------------------------
knowledge or notice of the occurrence of any Servicer Default with respect to
the Servicer or any Early Amortization Event or Prospective Early Amortization
Event hereunder unless the Agent has received written notice from a Series 1999-
1 Certificateholder, the Transferor or the Servicer referring to the Agreement
or this Supplement, describing such Servicer Default or Early Amortization Event
or Prospective Early Amortization Event and stating that such notice is a
"notice of a Servicer Default with respect to the Servicer" or a "notice of an
Early Amortization Event or Prospective Early Amortization Event", as the case
may be. In the event that the Agent receives such a notice, the Agent shall
give notice thereof to the Series 1999-1 Certificateholders, the Trustee, the
Transferor and the Servicer. Subject to the provisions of the Agreement, the
Agent shall take such action with respect to such Servicer Default or Early
Amortization Event or Prospective Early Amortization Event as shall be
reasonably directed by the Majority Series 1999-1 Certificateholders, provided
--------
that unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Servicer Default or Early Amortization Event
or Prospective Early Amortization Event as it shall deem advisable in the best
interests of the Series 1999-1 Certificateholders.
28
<PAGE>
SECTION 7.6 Non-Reliance on Agent and Other Series 1999-1
---------------------------------------------
Certificateholders. Each Series 1999-1 Certificateholder expressly
- ------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Transferor, CompuCom or the Servicer, shall be
deemed to constitute any representation or warranty by the Agent to any Series
1999-1 Certificateholder. Each Series 1999-1 Certificateholder represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Series 1999-1 Certificateholder, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Transferor, CompuCom and the Servicer and
made its own decision to enter into this Supplement. Each Series 1999-1
Certificateholder also represents that it will, independently and without
reliance upon the Agent or any other Series 1999-1 Certificateholder, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Supplement and the other Transaction Documents, and
to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Transferor, CompuCom and the Servicer. Except for
notices, reports and other documents expressly required to be furnished to the
Series 1999-1 Certificateholders by the Agent hereunder, the Agent shall not
have any duty or responsibility to provide any Series 1999-1 Certificateholder
with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Transferor, CompuCom or the Servicer which may come into the possession of
the Agent or any of its officers, directors, employees, agents, attorneys-in-
fact or Affiliates.
SECTION 7.7 Indemnification. The Series 1999-1 Certificateholders agree
---------------
to indemnify the Agent in its capacity as such (to the extent not reimbursed by
the Transferor and the Servicer and without limiting the obligation of the
Transferor and the Servicer to do so), ratably according to their respective
Commitment Percentages in effect on the date on which indemnification is sought
(or, if indemnification is sought after the Commitment Termination Date, ratably
in accordance with their Commitment Percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of, the Commitments,
this Supplement any of the other Transaction Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Series 1999-1
--------
Certificateholder shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements
29
<PAGE>
resulting solely from the Agent's gross negligence or willful misconduct. The
agreements in this Section shall survive the payment of all amounts payable
hereunder.
SECTION 7.8 Agent in Its Individual Capacity. The Agent and its
--------------------------------
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Transferor, the Servicer, CompuCom or any of their
Affiliates as though the Agent were not the Agent hereunder. With respect to
any Series 1999-1 Certificate held by the Agent, the Agent shall have the same
rights and powers under this Supplement and the other Transaction Documents as
any Series 1999-1 Certificateholder and may exercise the same as though it were
not the Agent, and the terms "Series 1999-1 Certificateholder" and "Series 1999-
1 Certificateholders" shall include the Agent in its individual capacity.
SECTION 7.9 Successor Agent. The Agent may resign as Agent upon 10 days'
---------------
notice to the Series 1999-1 Certificateholders. If the Agent shall resign as
Agent under this Supplement, then the Majority Series 1999-1 Certificateholders
shall appoint from among the Series 1999-1 Certificateholders a successor agent
for the Series 1999-1 Certificateholders, which successor agent shall be
approved by the Transferor, the Control Party and the Servicer (which approval
shall not be unreasonably withheld). Each such successor agent shall succeed to
the rights, powers and duties of the Agent, and the term "Agent" means such
successor agent effective upon such appointment and approval, and the former
Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any other
Person. After any retiring Agent's resignation as Agent, the provisions of this
Article VII shall inure to its benefit as to any actions taken or omitted to be
- -----------
taken by it while it was Agent under this Supplement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Ratification of Agreement. As supplemented by this
-------------------------
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
SECTION 8.2 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO ITS CONFLICT OF LAWS PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
30
<PAGE>
SECTION 8.3 Further Assurances. Each of the Transferor, the Servicer and
------------------
the Trustee agrees, from time to time, to do and perform any and all acts and to
execute any and all further instruments reasonably requested by the Agent (i)
===
more fully to effect the purposes of this Supplement, including in the case of
the Transferor and the Servicer, the execution of any UCC financing statements
or similar documents or notices or continuation statements relating to the
Receivables and the other Trust Assets for filing under the provisions of the
UCC of any applicable jurisdiction; and (ii) to facilitate the transfer of the
============================================
Series 1999-1 Certificate by the Initial Certificateholder to Market Street
===========================================================================
Funding Corporation, and the confirmation of outstanding commercial paper
=========================================================================
ratings by the Rating Agencies, including, in the case of the Transferor and the
================================================================================
Servicer, the execution and delivery of such opinions, certificates or other
============================================================================
documents as may reasonably by requested by the Initial Certificateholder.
=========================================================================
SECTION 8.4 Payments. Each payment to be made hereunder to the Agent
--------
shall be made on the required payment date in lawful money of the United States
and in immediately available funds to such account or accounts as the Agent
shall designate in writing to the Trustee. On each Payment Date or other date
specified herein, the Agent shall remit in like funds to each Series 1999-1
Certificateholder its applicable pro rata share (based on each such Series 1999-
--- ----
1 Certificateholder's Invested Amount) of each such payment received by the
Agent for the account of the Series 1999-1 Certificateholders (it being
understood that pursuant to the Agreement as set forth in this Supplement,
certain payments may be made to a particular Series 1999-1 Certificateholder
rather than pro rata to all Series 1999-1 Certificateholders).
SECTION 8.5 Costs and Expenses. The Transferor and the Servicer agree
------------------
severally to pay all reasonable out-of-pocket costs and expenses of the Agent
(including, without limitation, reasonable fees and disbursements of counsel to
the Agent) in connection with (i) the preparation, execution and delivery of
this Supplement and amendments or waivers of any Transaction Documents and (ii)
the enforcement by the Agent of the obligations and liabilities of the
Transferor and the Servicer under the Agreement or this Supplement (unless such
enforcement is finally denied on the merits by a court having jurisdiction over
such matter); provided that any payments made by the Transferor pursuant to this
--------
Section shall be made solely from funds available to the Transferor which are
not otherwise needed to be applied to the payment of any amounts pursuant to the
Agreement or any Supplement and shall not constitute a claim against the
Transferor to the extent that insufficient funds exist to make such payment.
SECTION 8.6 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Trustee, the Agent or any Series 1999-1
Certificateholder, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges
31
<PAGE>
herein provided are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.
SECTION 8.7 Severability. If any provision hereof is void or
------------
unenforceable in any jurisdiction, such voidness or unenforceability shall not
affect the validity or enforceability of (i) such provision in any other
jurisdiction or (ii) any other provision hereof in such or any other
jurisdiction.
SECTION 8.8 Notices. (a) All notices, requests and demands to or upon
-------
any party hereto to be effective shall be given (i) in the case of the
Transferor, the Servicer and the Trustee, in the manner set forth in Section
-------
13.05 of the Agreement and (ii) in the case of the Agent and each Series 1999-1
- -----
Certificateholder, in writing (including a confirmed transmission by telecopy),
and, unless otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered by hand or three days after being deposited in
the mail, postage prepaid, one Business Day after being sent by overnight
courier or, in the case of telecopy notice, when received, (A) in the case of
the Agent and the Initial Series 1999-1 Certificateholder, at their respective
addresses set forth in Schedule 8.8; or (B) to such other address as may be
------------
hereafter notified by the respective parties hereto.
(b) All instructions given by the Servicer to the Trustee pursuant to this
Supplement shall be in writing, and may be included in a Daily Report or
Settlement Statement.
SECTION 8.9 Successors and Assigns. (a) This Supplement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that neither the Transferor nor the Servicer may
assign or transfer any of its rights under this Supplement without the prior
written consent of the Control Party.
(b) Any Series 1999-1 Certificateholder may, upon the satisfaction of all
applicable requirements under the Agreement (including Section 6.03), in the
------------
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more financial institutions or other entities
("Participants") participations in its Series 1999-1 Certificate and its rights
------------
hereunder pursuant to documentation in form and substance satisfactory to such
Series 1999-1 Certificateholder and the Participant. In the event of any such
sale by a Series 1999-1 Certificateholder to a Participant, such Series 1999-1
Certificateholder's obligations under this Supplement shall remain unchanged and
such Series 1999-1 Certificateholder shall remain solely responsible for the
performance thereof. The Transferor agrees that each Series 1999-1
Certificateholder is entitled, in its own name, to enforce for the benefit of,
or as agent for, any Participant any and all rights, claims and interest of such
Participant in respect of the Trust and the Transferor's obligations under this
Supplement. A Participant shall have the right to receive Article IV Costs
(other than amounts payable under Section 4.2 of this Supplement) but only to
-----------
the extent that the related selling Series 1999-1
32
<PAGE>
Certificateholder would have had such right absent the sale of the related
participation. The Trustee shall have no liability with respect to any
Participant.
(c) The Initial Series 1999-1 Certificateholder may freely assign or
transfer its Certificate to Market Street Funding Corporation or any other CP
Conduit (an "Initial Assignee") of which an affiliate of PNC Bank Corp. serves
======================= =====
as agent or administrator without regard to any restrictions in this Agreement.
Any Series 1999-1 Certificateholder may, upon satisfaction of all applicable
requirements of the Agreement (including Section 6.03, provided that, in the
------------ --------
case of any assignment to a Program Support Provider, no Opinion of Counsel or
representation letter shall be required to be delivered) as amended by this
Supplement, in the ordinary course of its business and in accordance with
applicable law, at any time sell all or any part of its rights and obligations
under this Supplement and the related Series 1999-1 Certificate to (i) its
Affiliates or to any other Series 1999-1 Certificateholder, (ii) upon prior
written notice to the Agent, one or more of its Program Support Providers and
(iii) with the prior written consent of the Agent and, unless an Early
Amortization Event has occurred and is continuing, the Transferor, which consent
shall not be unreasonably withheld, one or more banks or other entities (an
"Acquiring Series 1999-1 Certificateholder"), in each case (other than an
- ------------------------------------------
assignment to a Program Support Provider) pursuant to a commitment transfer
supplement, substantially in the form of Exhibit C to this Supplement (the
---------
"Commitment Transfer Supplement"), executed by such Acquiring Series 1999-1
- -------------------------------
Certificateholder, such assigning Series 1999-1 Certificateholder, the Agent
and, in the case of clause (iii) above, the Transferor (if the Transferor's
------------
consent is required), and delivered to the Agent for its acceptance and
recording in the Register. Upon such execution, delivery, acceptance and
recording, from and after the Transfer Issuance Date determined pursuant to such
Commitment Transfer Supplement, (x) the Acquiring Series 1999-1
Certificateholder thereunder shall be deemed to be a party hereto and, to the
extent provided in such Commitment Transfer Supplement, have the rights and
obligations of a Series 1999-1 Certificateholder hereunder with a Commitment as
set forth therein and (y) the transferring Series 1999-1 Certificateholder
thereunder shall, to the extent provided in such Commitment Transfer Supplement,
be released from its obligations under this Supplement. Such Commitment
Transfer Supplement shall be deemed to amend this Supplement (including Schedule
--------
1 attached hereto) to the extent, and only to the extent, necessary to reflect
- -
the addition of such Acquiring Series 1999-1 Certificateholder as a "Series
1999-1 Certificateholder" party to this Supplement and the resulting adjustment
of Commitment Percentages arising from the purchase by such Acquiring Series
1999-1 Certificateholder of all or a portion of the rights and obligations of
such transferring Series 1999-1 Certificateholder under this Supplement and the
Series 1999-1 Certificates. Any Series 1999-1 Certificateholder may pledge, or
grant a security interest in, its rights hereunder to, or for the benefit of,
any Program Support Provider.
(d) The Agent shall maintain at its address referred to in Section 8.8 of
-----------
this Supplement a copy of each Commitment Transfer Supplement delivered to it.
33
<PAGE>
(e) Upon its receipt of a Commitment Transfer Supplement executed by a
transferring Series 1999-1 Certificateholder and an Acquiring Series 1999-1
Certificateholder, the Agent shall (i) promptly accept such Commitment Transfer
Supplement, (ii) on the Transfer Issuance Date determined pursuant thereto
record the information contained therein in the Register and give notice of such
acceptance and recordation to the Series 1999-1 Certificateholders, the
Servicer, the Transferor and the Trustee and (iii) prepare a revised Schedule 1
----------
to this Supplement in order to reflect the reduced Commitment of the applicable
transferring Series 1999-1 Certificateholder and the new or increased Commitment
of the applicable Acquiring Series 1999-1 Certificateholder, and Schedule 1 of
----------
this Supplement shall be deemed to be automatically superseded by such revised
Schedule 1 and the Agent shall distribute such revised Schedule 1 promptly to
- ---------- ----------
the Transferor, the Servicer, the Trustee and each Series 1999-1
Certificateholder.
(f) The Transferor and the Servicer each authorizes each Series 1999-1
Certificateholder to disclose to any Participant or Acquiring Series 1999-1
Certificateholder (each, a "Transferee") and any prospective Transferee any and
----------
all financial information in such Series 1999-1 Certificateholder's possession
concerning the Transferor, the Servicer or the Receivables which has been
delivered to such Series 1999-1 Certificateholder by the Transferor or the
Servicer pursuant to this Supplement or which has been delivered to such Series
1999-1 Certificateholder by or on behalf of the Transferor in connection with
such Series 1999-1 Certificateholder's credit evaluation of the Transferor, the
Servicer, the Trust and the Trust Assets prior to becoming a party to this
Supplement; provided, however, if any such information is subject to a
-------- -------
confidentiality agreement between such Series 1999-1 Certificateholder and the
Transferor or the Servicer, the Transferee or prospective Transferee shall have
agreed to be bound by the terms and conditions of such confidentiality agreement
and, if the Transferor's consent is required pursuant to paragraph (c) above,
-------------
the Transferor has so consented to such Acquiring Series 1999-1
Certificateholders.
(g) If, pursuant to this Section, any interest in this Supplement or the
Series 1999-1 Certificates is transferred to any Transferee which is created in
or organized under the laws of any jurisdiction other than the United States or
any State thereof, the transferring Series 1999-1 Certificateholder shall cause
such Transferee, concurrently with the effectiveness of such transfer, (i) to
represent to the transferring Series 1999-1 Certificateholder (for the benefit
of the transferring Series 1999-1 Certificateholder, the Agent, the Transferor
and the Servicer) that under applicable law and treaties no taxes will be
required to be withheld by the Agent, the Transferor, the Servicer or the
transferring Series 1999-1 Certificateholder with respect to any payments to be
made to such Transferee in respect of the Series 1999-1 Certificates, (ii) to
furnish to the transferring Series 1999-1 Certificateholder (and, in the case of
any Acquiring Series 1999-1 Certificateholder not registered in the Register,
the Agent and the Transferor) either U.S. Internal Revenue Service Form 4224 or
new Form W-8ECI or U.S. Internal Revenue Service Form 1001 or new Form W-8BEN
(wherein such Transferee claims entitlement to complete exemption from U.S.
federal withholding tax on all interest
34
<PAGE>
payments hereunder), (iii) to agree (for the benefit of the transferring Series
1999-1 Certificateholder, the Agent, the Transferor and the Servicer) to provide
the transferring Series 1999-1 Certificateholder (and, in the case of any
Acquiring Series 1999-1 Certificateholder not registered in the Register, the
Agent, the Transferor and the Servicer) a new Form 4224 or Form W-8ECI or Form
1001 or Form W-8BEN upon the expiration or obsolescence of any previously
delivered form and comparable statements in accordance with applicable U.S. laws
and regulations and amendments duly executed and completed by such Transferee,
and to comply from time to time with all applicable U.S. laws and regulations
with regard to such withholding tax exemption unless any change in treaty, law
or regulation has occurred prior to the date on which any such delivery would
otherwise be required which renders such forms inapplicable or which would
prevent such Participant from duly completing and delivering any such form with
respect to it and such Participant so advises that transferring Series 1999-1
Certificateholder, the Transferor and the Agent; provided, that such failure to
--------
provide such forms does not have a material adverse effect on the Transferor,
the Servicer or the Trust.
SECTION 8.10 Counterparts. This Supplement may be executed in any number
------------
of counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original, and all of
which taken together shall constitute one and the same agreement.
SECTION 8.11 Adjustments. If any Series 1999-1 Certificateholder (a
-----------
"Benefitted Series 1999-1 Certificateholder") shall at any time receive in
- -------------------------------------------
respect of its Invested Amount any distribution of principal, interest,
Commitment Fees, Program Fees or other fees, or any interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by set-
off, or otherwise) in a greater proportion than any such distribution received
by any other Series 1999-1 Certificateholder, if any, in respect of such other
Series 1999-1 Certificateholder's Invested Amount, or interest thereon, such
Benefitted Series 1999-1 Certificateholder shall purchase for cash from the
other Series 1999-1 Certificateholders such portion of each such other Series
1999-1 Certificateholder's interest in the Series 1999-1 Certificates, or shall
provide such other Series 1999-1 Certificateholders with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause such
Benefitted Series 1999-1 Certificateholder to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Series 1999-1
Certificateholders; provided, however, that if all or any portion of such excess
-------- -------
payment or benefits is thereafter recovered from such Benefitted Series 1999-1
Certificateholder, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Transferor agrees that each Series 1999-1 Certificateholder so purchasing a
portion of the Series 1999-1 Certificateholders' Interest may exercise all
rights of payment (including rights of set-off) with respect to such portion as
fully as if such Series 1999-1 Certificateholder were the direct holder of such
portion.
35
<PAGE>
SECTION 8.12 Limitation of Payments by Transferor. Notwithstanding any
------------------------------------
other provision of the Agreement or this Supplement (but subject to Section 7.04
------------
of the Agreement), the Transferor's obligations under the Agreement and this
Supplement shall be limited to the funds available to the Transferor which have
been properly distributed to the Transferor pursuant to the Agreement and any
Supplement and neither the Agent nor any Series 1999-1 Certificateholder shall
have any actionable claim against the Transferor for failure to satisfy such
obligation because it does not have funds available therefor from amounts
properly distributed.
SECTION 8.13 No Bankruptcy Petition. The Agent and each Series 1999-1
----------------------
Certificateholder hereby covenants and agrees that, prior to the date which is
one year and one day after the later of (i) the last day of the Early
Amortization Period and (ii) the last day of the amortization period or early
amortization period of any other outstanding Series, it will not institute
against, or join any other Person in instituting against, the Transferor or the
Trust any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other similar proceedings under any federal or state bankruptcy
or similar law. Each of the Transferor, the Servicer, the Agent and the Trustee
hereby covenants and agrees that, prior to the date that is one year and one day
after all indebtedness of the Initial Series 1999-1 Certificateholder or any
Series 1999-1 Certificateholder that is a CP Conduit is paid in full, it will
not institute against, or join any other Person in instituting against, the
Initial Series 1999-1 Certificateholder or such CP Conduit any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under any federal or state bankruptcy or similar law. The
Initial Series 1999-1 Certificateholder and each other Series 1999-1
Certificateholder that is a CP Conduit, shall have no obligation to pay any
amounts payable by it hereunder or under any other Transaction Document
(collectively, "Expense Claims"), and such Expense Claims shall not constitute a
claim, as defined in (S)101 of the United States Bankruptcy Reform Act of 1978
(11 U.S.C. (S)101, et seq.), as amended against such Series 1999-1
Certificateholder unless or until such Series 1999-1 Certificateholder has
received amounts sufficient to pay such Expense Claims and such amounts are
available to pay such Expense Claims pursuant to such Series 1999-1
Certificateholder's program documentation.
SECTION 8.14 The Trustee. The Trustee shall not be responsible in any
-----------
manner whatsoever for or in respect of the validity or sufficiency of this
Supplement or for or in respect of the Preliminary Statement contained herein,
which Preliminary Statement is made solely by the Transferor.
SECTION 8.15 Consent to Jurisdiction . EACH OF THE SERVICER AND THE
-----------------------
TRANSFEROR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY LITIGATION BASED HEREON OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THE AGREEMENT OR THIS SUPPLEMENT AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
36
<PAGE>
CONNECTION WITH SUCH LITIGATION. EACH OF THE SERVICER AND THE TRANSFEROR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH OF
THE SERVICER AND THE TRANSFEROR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT EITHER THE SERVICER OR THE TRANSFEROR HAS
OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, EACH OF THE TRANSFEROR AND THE SERVICER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE AGREEMENT OR THIS SUPPLEMENT.
SECTION 8.16 Credit Agreements. CompuCom agrees that it shall not enter
==============-----------------
into any credit facility or similar agreement (including the Credit Agreement or
any amendment to any of them) with any lender unless (i) the Agent shall have
informed CompuCom that such agreement is reasonably acceptable to the Agent and
(ii) such credit facility or similar agreement does not provide for or result in
any lien on behalf of, or interest in favor of, the lenders thereunder or any
other Person in the Trust Assets.
ARTICLE IX
DEFINITIONS
SECTION 9.1 Definitions. The following words and phrases shall have the
-----------
following meanings with respect to Series 1999-1 and the definitions of such
terms are applicable to the singular as well as the plural form of such terms
and to the masculine as well as the feminine and neuter genders of such terms:
"Accrual Period" means the period from and including a Payment Date to but
--------------
excluding the next Payment Date; provided that the first Accrual Period will be
--------
the period from and including the Issuance Date to but excluding the next
Payment Date.
"Accrued Expense Amount" means, for each Business Day during an Accrual
----------------------
Period, the sum of (i) the portion of the Monthly Interest Amount allocable to
such Business Day, (ii) one-fifth of the Servicing Fee due on the succeeding
Payment Date
37
<PAGE>
(in the aggregate up to such Servicing Fee), (iii) the Program Fee for such
Business Day, (iv) the portion of the Monthly Trustee Fee and Transition Costs
allocable to such Business Day and (v) the Commitment Fee for such Business Day;
provided, however, that if by the fifth Business Day of an Accrual Period, the
- -------- -------
entire amount of (A) the Monthly Interest Amount, (B) the Servicing Fee, (C) the
Program Fee, (D) the Monthly Trustee Fee and Transitions Cost and (E) the
Commitment Fee, in each case for such Accrual Period, shall not have been
transferred to the Series 1999-1 Non-Principal Collection Sub-subaccount, the
Accrued Expense Amount for such Business Day (and each Business Day thereafter
until paid) shall also include the amount of such shortfall.
"Acquiring Series 1999-1 Certificateholder" shall have the meaning assigned
-----------------------------------------
in Section 8.9(c) of this Supplement.
--------------
"Additional Interest" has the meaning specified in Section 4.05(b) of the
------------------- ---------------
Agreement as set forth in this Supplement.
"Additional Servicing Fee" for each Accrual Period means, if CompuCom is
------------------------
not the Servicer and the Servicing Fee Percentage exceeds 0.50%, the excess of
(a) the Servicing Fee (calculated as if clause (ii) of the definition of
-----------
Servicing Fee did not include the words "as in effect on the Issuance Date")
over (b) the Servicing Fee (calculated without changing clause (ii) of the
-----------
definition of Servicing Fee).
"Adjusted Invested Amount" means, on any day the Series 1999-1 Aggregate
------------------------
Invested Amount at the close of business on such day minus the amount on deposit
-----
in the Series 1999-1 Principal Collection Sub-subaccount (after giving effect to
any withdrawal therefrom).
"Affected Party" means each Series 1999-1 Certificateholder, each Program
--------------
Support Provider, any assignee or Participant of any Series 1999-1
Certificateholder or any Program Support Provider, the Agent and any successor
thereto and sub-agent thereof.
"Aggregate Allocated Receivables Amount" means the sum of the Series 1999-1
--------------------------------------
Allocated Receivables Amount plus the series allocated receivables amounts
specified in the Supplements for any outstanding Series other than Series 1999-
1.
"Aggregate Commitment Amount" means, with respect to any Business Day, the
---------------------------
aggregate amount of the Commitments of all Series 1999-1 Certificateholders on
such date, as reduced from time to time pursuant to Section 1.7 of this
-----------
Supplement.
"Agreement" has the meaning specified in the preamble to this Supplement.
---------
"Alternate Base Rate" means, on any date, a fluctuating rate of interest
-------------------
per annum equal to the higher of
- --- -----
38
<PAGE>
(a) the rate of interest most recently announced by the Agent in
Pittsburgh, Pennsylvania, as its prime rate; and
(b) the Federal Funds Rate most recently determined by the Agent plus
0.50% per annum.
--- -----
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the Agent in connection with extensions of credit.
"Amortization Period Commencement Date" for the Series 1999-1 Certificates
-------------------------------------
shall mean the Commitment Termination Date.
"Article IV Costs" means any amounts due pursuant to Article IV of this
---------------- ----------
Supplement.
"Available Commitment" means, with respect to any Business Day, the (i)
--------------------
Aggregate Commitment Amount on such Business Day minus (ii) the Series 1999-1
-----
Aggregate Invested Amount on such Business Day.
"Benefitted Series 1999-1 Certificateholder" shall have the meaning
------------------------------------------
assigned in Section 8.11 of this Supplement.
------------
"Board" means the Board of Governors of the Federal Reserve System of the
-----
United States and any successor thereto.
"Business Day" shall mean any day other than (a) a Saturday or a Sunday,
------------
(b) any other day on which the Servicer is closed, as specified on the list
furnished by the Servicer pursuant to Section 3.03(n) of the Agreement, (c) any
---------------
other day on which banking institutions or trust companies in the State of New
York generally or the City of New York, New York, the Commonwealth of
===================
Pennsylvania generally or the City of Pittsburgh, Pennsylvania, or the State of
======================
Minnesota generally or the City of Minneapolis, Minnesota are authorized or
========= =========
obligated by law, executive order or governmental decree to be closed, or (d)
any other day on which The Depository Trust Company is closed.
"Certificate Rate" for any Accrual Period (i) in the case of any Invested
---------------- ========
Amount of the Series 1999-1 Aggregate Invested Amount funded by a Liquidity
======
Funding through a Liquidity Agreement entered into by the Initial Series 1999-1
Certificateholder, the sum of the Eurodollar Rate for such Accrual Period, plus
==========
1.75%, (ii) in the case of any portion of the Series 1999-1 Aggregate Invested
Amount funded by any other Liquidity Funding, the sum of the Eurodollar Rate
==========
for such Accrual Period, plus 3.00% and (iii) in the case of any portion of the
----
Series 1999-1 Aggregate Invested Amount funded by Commercial Paper Notes, the CP
Rate for such Accrual Period; provided, however, that on any day during an
-------- -------
Accrual Period when any Early Amortization Event or Prospective Early
Amortization Event has occurred
39
<PAGE>
and is continuing, the Certificate Rate shall mean the Alternative Base Rate in
effect on such day plus 3.50%.
----
"Commercial Paper Notes" means short term promissory notes issued or to be
----------------------
issued by a Series 1999-1 Certificateholder, or the proceeds of which are loaned
to a Series 1999-1 Certificateholder, to fund its investments in accounts
receivable or other financial assets.
"Commitment" means, as to any Series 1999-1 Certificateholder, its
----------
obligation to maintain and, subject to certain conditions, increase, its
Invested Amount, in an aggregate amount not to exceed at any one time
outstanding the amount set forth opposite such Series 1999-1 Certificateholder's
name on Schedule 1 to this Supplement (as such Schedule 1 may be revised from
---------- ----------
time to time in accordance with this Supplement) under the caption "Commitment",
as such amount may be reduced from time to time as provided herein;
collectively, as to all Series 1999-1 Certificateholders, the "Commitments".
"Commitment Fee" shall have the meaning assigned in Section 1.7(b) of this
-------------- --------------
Supplement.
"Commitment Fee Percentage" shall have the meaning set forth in the Fee
-------------------------
Letter.
"Commitment Percentage" means, as to any Series 1999-1 Certificateholder
---------------------
and as of any date, the percentage equivalent of a fraction, the numerator of
which is such Series 1999-1 Certificateholder's Commitment as set forth on
Schedule 1 to this Supplement (as such Schedule 1 may be revised from time to
- ---------- ----------
time in accordance with this Supplement) and the denominator of which is the
Aggregate Commitment Amount as of such date.
"Commitment Reduction" shall have the meaning assigned in Section 1.6(a) of
-------------------- --------------
this Supplement.
"Commitment Termination Date" means the earliest of (a) the Scheduled
---------------------------
Maturity Date, (b) the date on which the Commitments are terminated in whole
pursuant to Section 1.6 of this Supplement and (c) the date of termination
-----------
(whether by scheduled expiration, termination or default or otherwise) of any
Program Support Provider's commitment under any Program Support Agreement.
"Commitment Transfer Supplement" shall have the meaning assigned in Section
------------------------------ -------
8.9(c) of this Supplement.
- ------
"Consolidated Net Income" means, with respect to CompuCom and its
-----------------------
Subsidiaries for any period, the net income (or loss) of CompuCom and its
Subsidiaries for such period, plus restructuring charges incurred in CompuCom
1998 Fiscal Year, excluding any gains from asset sales otherwise than in the
ordinary course of business,
40
<PAGE>
any extraordinary gains and any gains from discontinued operations and any items
of extraordinary loss, including net loss on any asset sales otherwise than in
the ordinary course of business.
"Consolidated Subsidiaries" means at any date any Subsidiary or other
-------------------------
entity the accounts of which would be consolidated with those of CompuCom in its
consolidated financial statements if such statements were prepared as of such
date.
"Control Party" with respect to the Series 1999-1 Certificates means the
-------------
Majority Series 1999-1 Certificateholders.
"CP Conduit" means Market Street Funding Corporation or a special purpose
----------
entity that is in the business of issuing commercial paper.
"CP Rate" means, for any period means the sum of (i) the rate equivalent to
-------
the rate (or if more than one rate, the weighted average of rates) at which
Commercial Paper Notes outstanding during such period and to be issued to fund
or maintain the Invested Amount may be sold by any placement agent or commercial
paper dealer selected by the Initial Series 1999-1 Certificateholder or a
Program Support Provider, as agreed between each such agent or dealer and the
Initial Series 1999-1 Certificateholder or such Program Support Provider and
notified by the Initial Series 1999-1 Certificateholder to the Agent and the
Servicer; provided, however, if the rate (or rates) as agreed between any such
-------- -------
agent or dealer and the Initial Series 1999-1 Certificateholder with regard to
any period is a discount rate (or rates), the "CP Rate" for such period shall be
-------
the rate (or if more than one rate, the weighted average of the rates) resulting
from converting such discount rate (or rates) to an interest-bearing equivalent
rate (or rates) per annum, plus (ii), without duplication, the commissions and
----
charges charged as a percentage of such face amount and converted to an
interest-bearing equivalent rate per anum.
"CP Rate Tranche" means a portion of the Series 1999-1 Aggregate Invested
---------------
Amount for which the interest is calculated by reference to the CP Rate.
"Credit Agreement" means the Inventory and Working Capital Financing
----------------
Agreement, dated as of May 7, 1999, among CompuCom, the various financial
institutions party thereto and IBM Credit Corporation, as it may be amended,
supplemented or otherwise modified from time to time.
"Cut-Off Date" means the last day of each calendar month.
------------
"Debt" of any Person means at any date, without duplication, (i) all
----
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property,
except accounts payable arising in the ordinary course of business, (iv) all
obligations of such Person as lessee under
41
<PAGE>
capital leases, (v) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, (vi) all Debt of
others guaranteed by such Person, and (vii) all non-contingent obligations of
such Person to reimburse or prepay any Person in respect of amounts paid under a
letter of credit, banker's acceptance or similar instrument.
"Determination Date" means, with respect to a Payment Date, the third
------------------
Business Day prior to such Payment Date.
"Delinquency Ratio" means, as of any Cut-Off Date, the ratio, expressed as
-----------------
a percentage, of (i) the aggregate Unpaid Balance of all Delinquent Receivables
on such Cut-Off Date divided by (ii) the aggregate Unpaid Balance of all
------- --
Eligible Receivables on such Cut-Off Date.
"Dilution Reserve Percentage" as measured on any date means the greater of
----------------------------
(i) 2% and (ii) a percentage determined in accordance with the following
formula:
[(SF x ED) + ((DS-ED) x DS/ED)] x DHR where:
SF = the Stress Factor, which shall be 2.5;
ED = the "Expected Dilution", which shall be equal to the twelve-
-----------------
month rolling average Sales-Based Dilution Ratio, expressed
as a percentage;
DS = the "Dilution Spike", which shall be equal to the highest
--------------
one month Sales-Based Dilution Ratio over the immediately
preceding twelve months, expressed as a percentage; and
DHR = the "Dilution Horizon Ratio", which shall be equal to the
----------------------
sales for the month ending on the related Cut-Off Date
divided by the aggregate Unpaid Balance of the Eligible
Receivables as of the such Cut-Off Date.
"Dynamic Loss Reserve Percentage" shall be measured as an amount calculated
-------------------------------
pursuant to the following formula:
DLRP = LR x LH x SF
where:
-----
DLRP = the Dynamic Loss Reserve Percentage;
42
<PAGE>
LR = the Loss Ratio, which shall be equal to the highest
average of the Sales-Based Default Ratios for any three
consecutive calendar months during the previous twelve calendar
months;
LH = the Loss Horizon, which shall be equal to the cumulative sales
over the previous three months divided by the Series 1999-1
----------
Allocated Receivables Amount as of the most recent Cut-Off Date;
and
SF = the Stress Factor, which shall be 2.5.
Notwithstanding the foregoing, for the first 10 Cut-Off Dates following the
Closing Date for the Series 1999-1 Certificates, the Dynamic Loss Reserve
Percentage shall be measured as an amount calculated pursuant to the following
formula:
DLRP = DR X ISF
where:
------
DLRP = the Dynamic Loss Reserve Percentage;
DR = the highest average of the three Delinquency Ratios for
any three consecutive calendar months during the
=====
previous twelve calendar months; and
======
ISF = the Initial Stress Factor, which shall be 1.5.
"Early Amortization Period" means, with respect to Series 1999-1, the
-------------------------
period from the declaration or occurrence of an Early Amortization Event or the
Commitment Termination Date to the earlier of (i) the date on which the Invested
Amount of Series 1999-1 (and all interest thereon) has been paid in full and
(ii) the Series Termination Date.
"Effective Date" shall have the meaning assigned in Section 6.1 of this
-------------- -----------
Supplement.
"Eurodollar Rate" means, for any Accrual Period, an interest rate per annum
---------------
(rounded upward to the nearest 1/16th of 1%) determined pursuant to the
following formula:
LIBOR
------------------------------
100% - Eurodollar Rate Reserve Percentage
43
<PAGE>
where "Eurodollar Rate Reserve Percentage" means, for any Accrual Period, the
maximum reserve percentage (expressed as a decimal, rounded upward to the
nearest 1/100th of 1%) in effect on the date LIBOR for such Accrual Period is
determined under regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
"Eurocurrency" funding (currently referred to as "Eurocurrency liabilities)
having a term comparable to such Accrual Period.
"Federal Funds Effective Rate" means, for any day, the weighted average of
----------------------------
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of Cleveland, or, if such
=========
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from three
federal funds brokers of recognized standing selected by it. If for any reason
the Agent shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds Effective Rate,
including the inability or failure of the Agent to obtain sufficient quotations
in accordance with the terms thereof, the Federal Funds Effective Rate shall
mean the rate most recently determined in accordance with the preceding
sentence, until the circumstances giving rise to such inability no longer exist.
"Fee Letter" means the fee letter, dated as of May 7, 1999, among CompuCom
----------
and the Agent, as it may be amended or supplemented from time to time.
"Fiscal Year" means the fiscal year of CompuCom and its Subsidiaries, which
-----------
period shall be the 12-month period ending on December 31 of each year.
References to a Fiscal Year with a number corresponding to any calendar year
(e.g., "Fiscal Year 1998") refer to the Fiscal Year ending on December 31 of
such calendar year.
"Increase" shall have the meaning assigned in Section 1.5(a) of this
-------- --------------
Supplement.
"Increase Amount" shall have the meaning assigned in Section 1.5(a) of this
--------------- --------------
Supplement.
"Increase Date" shall have the meaning assigned in Section 1.5(a) of this
------------- --------------
Supplement.
"Initial Invested Amount" means the amount set forth on Schedule 3 to this
----------------------- ----------
Supplement.
"Initial Series 1999-1 Certificateholder" shall have the meaning specified
---------------------------------------
in the preamble to this Supplement.
44
<PAGE>
"Invested Amount" means on any date of determination, an amount equal to
---------------
(a) (i) with respect to the Initial Series 1999-1 Certificateholder, the Initial
Invested Amount or (ii) with respect to any Acquiring Series 1999-1
Certificateholder, the portion of the transferring Series 1999-1
Certificateholder's Invested Amount purchased by such Acquiring Series 1999-1
Certificateholder, plus (b) the aggregate amount of any increases in such Series
----
1999-1 Certificateholder's Invested Amount pursuant to Section 1.5 of this
-----------
Supplement, minus (c) the aggregate amount of any distributions to such Series
-----
1999-1 Certificateholder pursuant to Section 4.07(c) of the Agreement as set
---------------
forth in this Supplement.
"Invested Percentage" means, on any Business Day, the percentage (A) during
-------------------
the Revolving Period, obtained by dividing (i) the Series 1999-1 Allocated
Receivables Amount as of the end of the immediately preceding Business Day, by
(ii) the Aggregate Eligible Unpaid Balance as of the end of the immediately
preceding Business Day (provided, that if during the Revolving Period an early
--------
amortization period or amortization period shall exist with respect to any
Series other than Series 1999-1, then the amount in this clause (ii) shall be
-----------
the greater of (1) the Aggregate Eligible Unpaid Balance as of the end of the
immediately preceding Business Day and (2) the sum of the numerators used to
calculate the Invested Percentages for all outstanding Series on the Business
Day for which such percentage is determined) and (B) during the Early
Amortization Period, obtained by dividing (x) the Series 1999-1 Allocated
Receivables Amount on the last day of the Revolving Period (provided, that if
--------
during the Early Amortization Period, the early amortization periods of all
other outstanding Series which were outstanding prior to the commencement of the
Early Amortization Period commence, then, from and after the date on which the
last of such Series commences its early amortization period, the amount of this
clause (x) shall be the Series 1999-1 Allocated Receivables Amount on such date)
- ----------
by (y) the greater of (1) the Aggregate Eligible Unpaid Balance as of the end of
the immediately preceding Business Day and (2) the sum of the numerators used to
calculate the Invested Percentages for all outstanding Series on the Business
Day for which such percentage is determined; provided that for purposes of this
--------
definition, the Adjusted Invested Amount shall be calculated assuming that the
amount on deposit in the Series 1999-1 Principal Collection Sub-subaccount is
zero.
"Issuance Date" means May 7, 1999, which is the Series Issuance Date for
------------- =====
Series 1999-1.
"Issuer" means the Initial Series 1999-1 Certificateholder.
------
"Issuer CP" means commercial paper notes issued to fund the Issuer's
---------
Invested Amount.
"LIBOR" means the rate of interest per annum determined by the Agent to be
-----
the arithmetic mean (rounded upward to the nearest 1/16th of 1%) of the rates of
interest per annum notified to the Agent by each Reference Bank as the rate of
interest
45
<PAGE>
at which dollar deposits in the approximate amount of the Invested Amount to be
funded at the Eurodollar Rate during such Accrual Period would be offered by
major banks in the London interbank market to such Reference Bank at its request
at or abut 11:00 a.m. (London time) on the second Business Day before the
commencement of such Accrual Period.
"LIBOR Rate Tranche" means a portion of the Series 1999-1 Aggregate
-------------------
Invested Amount for which the interest is calculated by reference to LIBOR.
=====
"Liquidity Agreement" means either the Liquidity Agreement, dated as of May
-------------------
7, 1999, among Market Street Funding Corporation, the financial institutions
from time to time parties thereto as Liquidity Lenders, and PNC Bank, National
=======
Association as the Liquidity Agent, as it may be amended or supplemented from
time to time or (ii) the Liquidity Loan Agreement among the Issuer, the
===
Liquidity Lenders from time to time parties thereto and PNC Bank, National
=======
Association as Administrator, dated as of May 7, 1999.
=====
"Liquidity Banks" means the financial institutions party to the Liquidity
---------------
Agreement as liquidity institutions.
"Liquidity Commitment Amount" means, at any time, the then aggregate amount
---------------------------
of the Liquidity Banks' commitments under the Liquidity Agreement.
"Liquidity Funding" means a funding pursuant to one or more Liquidity
------------------
Agreements.
"Majority Series 1999-1 Certificateholders" means, on any day, Series 1999-
------------------------------------------
1 Certificateholders having, in the aggregate, more than 50% of the Aggregate
Commitment Amount.
"Maximum Commitment Amount" means on any date one hundred seventy-five
-------------------------
million dollars ($175,000,000) minus the aggregate amount of reductions in the
-----
Commitments pursuant to Section 1.7 of this Supplement.
-----------
"Miscellaneous Deficiency and Expense Amount" means on any Business Day,
-------------------------------------------
with respect to Series 1999-1, the sum of (i) (if CompuCom is not the Servicer)
all Program Costs which have been accrued and unpaid since the preceding
Business Day; (ii) any Commitment Fees and Program Fees due and payable pursuant
to this Supplement; and (iii) any Article IV Costs due and payable pursuant to
this Supplement.
"Monthly Interest Amount" for any Accrual Period means (i) the daily
-----------------------
average Series 1999-1 Aggregate Invested Amount during such Accrual Period,
times (ii) the
- -----
46
<PAGE>
Certificate Rate for such Accrual Period, times (iii) a fraction, the numerator
-----
of which is the number of days in such Accrual Period and the denominator of
which is 360.
"Monthly Trustee Fee" for any Accrual Period means an amount equal to
-------------------
$2,000 plus the reasonable out-of-pocket costs incurred by the Trustee during
such Accrual Period in the performance of its duties under this Agreement.
"Net Worth" means, as to any Person at any time, the excess of the total
---------
assets of such Person and its Subsidiaries at such time over the total
liabilities of such Person and its Subsidiaries at such time.
"Non-Excluded Taxes" shall have the meaning assigned in Section 4.2(a) of
------------------ --------------
this Supplement.
"Overconcentration Amount" means, at any date with respect to an Obligor,
------------------------
the excess of the aggregate Unpaid Balance of Eligible Receivables due from such
Obligor on such date over the Overconcentration Obligor Basis for such Obligor
on such date. In addition, with respect to Obligors that are Governmental
Authorities, the Overconcentration Amount means the excess of the aggregate
Unpaid Balance of Eligible Receivables due from such Obligors on such date over
====
10% of the Aggregate Eligible Unpaid Balance on such date.
=========================================================
"Overconcentration Obligor Basis" for an Obligor means the percentage of
-------------------------------
the Aggregate Eligible Unpaid Balance at such date set forth below for the
applicable category of that Obligor (expressed as a dollar amount):
<TABLE>
<CAPTION>
Minimum Long-Term or Short-Term
Unsecured Debt Rating
- ----------------------------
S&P Moody's Percentage*
- ---------------------------- ---------------- -----------
<S> <C> <C>
A-1 or A+ P-1 or A1 10%
A-2 or BBB+ P-2 or Baa1 5%
A-3 or BBB- P-3 or Baa3 3%
Less than A-3 or Less than P-3 or
BBB-/Unrated Baa3/Unrated 2%
</TABLE>
provided, however, that all Obligors that are affiliates of each other having
- -------- -------
identical long-term and short-term debt ratings (or whose long-term or short-
term senior unsecured debt are unrated) shall be deemed to be a single Obligor.
47
<PAGE>
The percentage applicable to any Obligor (or Obligor group, if applicable)
will be the percentage associated with the lower of such Obligor's (or Obligor
group's) short-term or long-term senior unsecured debt ratings (with "unrated"
being lowest) issued by S&P or Moody's. The ratings specified in the table are
minimums for each percentage category, so that a rating of an Obligor not shown
in the table falls in the category associated with the highest rating shown in
the table that is lower than such rating.
"Participants" shall have the meaning assigned in Section 8.9 of this
------------ -----------
Supplement.
"Past Due Receivable" means a Receivable that remains unpaid for more than
-------------------
150 days but not more than 180 days from the original invoice date for such
payment, or that has been charged off before it has become 151 days past
invoice.
"Payment Date" means the fourteenth day of each month (or, if such day is
------------
not a Business Day, the next succeeding Business Day).
"Payment Date Interest Shortfall" has the meaning specified in Section
------------------------------- -------
4.05(b) of the Agreement as set forth in this Supplement.
- -------
"Payment Date Shortfall" has the meaning set forth in Section 3.11 of the
---------------------- ------------
Agreement as set forth in this Supplement.
"Prime Rate Tranche" means that portion of the Series 1999-1 Aggregate
------------------
Invested Amount not allocated to a CP/LIBOR Rate Tranche and for which interest
is calculated by reference to the Alternate Base Rate.
"Program Costs" means, for any Business Day, the sum of (a) the product of
-------------
(i) all unpaid fees and expenses due and payable to counsel to, and independent
auditors of, the Transferor (other than fees and expenses payable on or in
connection with the closing of the issuance of the Series 1999-1 Investor
Certificates) on such Business Day and (ii) a fraction, the numerator of which
is the Series 1999-1 Aggregate Invested Amount on such Business Day and the
denominator of which is the sum of (1) the Aggregate Invested Amount on such
Business Day (except with respect to any Series of variable funding
certificates) and (2) the aggregate commitment amount (which, in the case of
Series 1999-1, is the Maximum Commitment Amount) with respect to any Series of
variable funding certificates on such Business Day, and if CompuCom is not the
Servicer, amounts otherwise payable by the Servicer for the Trustee's fees and
expenses pursuant to the Agreement.
"Program Fee" shall have the meaning set forth in Section 1.7(c) of this
----------- --------------
Supplement.
"Program Fee Percentage" shall have the meaning set forth in the Fee
----------------------
Letter.
48
<PAGE>
"Program Support Agreement" means each Liquidity Agreement, each agreement
-------------------------
pursuant to which the Issuer obtains funding, through the issuance of Commercial
Paper Notes or otherwise, and each other agreement entered into by the Issuer in
connection with its securitization program.
"Program Support Provider" means each of each entity that issues Commercial
------------------------
Paper Notes, each Liquidity Bank and the Agent.
"Record Date" means with respect to any Payment Date, the last Business Day
-----------
of the immediately preceding Settlement Period.
"Reference Bank" means PNC Bank, National Association.
---------------
"Register" means a register maintained by the Agent for recording transfers
---------
of the Series 1999-1 Certificates.
"Sales-Based Default Ratio" means, as of any Cut-Off Date, the ratio,
-------------------------
expressed as a percentage, of (i) the aggregate Unpaid Balance of all Past Due
Receivables for the three successive months ending on such Cut-Off Date, divided
-------
by (ii) the aggregate billings for the fifth, sixth and seventh preceding
- --
months. For example, as of April 30, the numerator of the Sales-Based Default
Ratio would be the aggregate Unpaid Balance of all Receivables that were Past
Due Receivables as of February 28, March 31 and April 30; the denominator of the
Sales-Based Default Ratio would be the aggregate billings for the months of
September, October and November.
"Sales-Based Dilution Ratio" as of any Cut-Off Date means (a) the aggregate
--------------------------
reduction attributable to Dilutions occurring in the Unpaid Balance of Pool
Receivables which Dilutions were granted during the month ending on such Cut-Off
Date; divided by (b) the aggregate amount of billings for the month immediately
------- --
preceding the month ending as of such Cut-Off Date.
"Scheduled Maturity Date", with respect to the Series 1999-1 Investor
-----------------------
Certificates, means the Payment Date in April 2002, as such date may be extended
pursuant to a written agreement executed by all of the Series 1999-1
Certificateholders, a copy of which shall be provided by the Agent to the
Trustee.
"Series 1999-1" means the Variable Funding Accounts Receivable Trust
-------------
Certificates, Series 1999-1, the principal terms of which are set forth in this
Supplement.
"Series 1999-1 Accrued Interest Sub-subaccount" has the meaning specified
---------------------------------------------
in Section 4.02(d)(i) of the Agreement as set forth in this Supplement.
------------------
49
<PAGE>
"Series 1999-1 Aggregate Invested Amount" means, as of any date of
---------------------------------------
determination, the sum of the Invested Amounts of all Series 1999-1
Certificateholders at the close of business on such date.
"Series 1999-1 Allocated Receivables Amount" means, for any day, the lesser
------------------------------------------
of (a) the Series 1999-1 Target Receivables Amount on such day and (b) the
Aggregate Eligible Unpaid Balance on such day times the percentage equivalent of
a fraction the numerator of which is the Series 1999-1 Target Receivables Amount
on such day and the denominator of which is the Aggregate Target Receivables
Amount on such day.
"Series 1999-1 Certificateholder" or "Series 1999-1 Investor
------------------------------- ----------------------
Certificateholder" means any Holder of a Series 1999-1 Investor Certificate, it
- -----------------
being understood that, subject to Section 9.1 of this Supplement, no Person
-----------
shall be a Series 1999-1 Certificateholder unless such Person is the Initial
Series 1999-1 Certificateholder or an Acquiring Series 1999-1 Certificateholder.
"Series 1999-1 Certificateholders' Interest" has the meaning specified in
------------------------------------------
Section 1.2 of this Supplement.
- -----------
"Series 1999-1 Collection Subaccount" has the meaning specified in Section
----------------------------------- -------
4.02(d)(i) of the Agreement as set forth in this Supplement.
- ----------
"Series 1999-1 Investor Certificate" or "Series 1999-1 Certificate" means a
---------------------------------- -------------------------
Variable Funding Accounts Receivable Trust Certificate, Series 1999-1, executed
by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit D to this Supplement.
---------
"Series 1999-1 Monthly Principal Payment" has the meaning specified in
---------------------------------------
Section 4.06(a) of the Agreement as set forth in this Supplement.
- ---------------
"Series 1999-1 Non-Principal Collection Sub-subaccount" has the meaning
-----------------------------------------------------
specified in Section 4.02(d)(i) of the Agreement as set forth in this
------------------
Supplement.
"Series 1999-1 Principal Collection Sub-subaccount" has the meaning
-------------------------------------------------
specified in Section 4.02(d)(i) of the Agreement as set forth in this
------------------
Supplement.
"Series 1999-1 Principal Collection Subordinated Sub-subaccount" has the
--------------------------------------------------------------
meaning specified in Section 4.02(d)(i) of the Agreement as set forth in this
------------------
Supplement.
"Series 1999-1 Required Reserved Percentage" as of any day means the sum of
-------------------------------------------
(i) the Dilution Reserve Percentage, (ii) the greater of (A) 10% and (B) the
Dynamic
50
<PAGE>
Loss Reserve Percentage and (iii) the Yield Reserve Percentage, in each case as
most recently calculated.
"Series 1999-1 Required Subordinated Amount" means, (i) on any day during
-------------------------------------------
the Revolving Period, the product of (1) the Adjusted Invested Amount and (2)
the percentage equivalent of a fraction the numerator of which is the Series
=================================================================
1999-1 Required Reserved Percentage and the denominator of which is one minus
===========
the Series 1999-1 Required Reserved Percentage, and (ii) on any day during the
Early Amortization Period, an amount equal to the Series 1999-1 Required
Subordinated Amount, in each case, on the last Business Day of the Revolving
Period.
"Series 1999-1 Subordinated Percentage" means the percentage equivalent of
-------------------------------------
a fraction the numerator of which is the Series 1999-1 Required Subordinated
Amount on the last Business Day of the Revolving Period and the denominator of
which is the sum of the Adjusted Invested Amount and Series 1999-1 Required
Subordinated Amount, in each case on the last day of the Revolving Period.
"Series 1999-1 Target Deficiency Amount" means for any day, the excess, if
--------------------------------------
any, of the Series 1999-1 Target Receivables Amount over the Series 1999-1
Allocated Receivables Amount. The Series 1999-1 Target Deficiency Amount is the
"Target Deficiency Amount" for purposes of Series 1999-1.
"Series 1999-1 Target Receivables Amount" means, on any day the sum of (i)
---------------------------------------
the Adjusted Invested Amount on such day and (ii) the Series 1999-1 Required
Subordinated Amount on such day. The Series 1999-1 Target Receivables Amount is
the "Target Receivables Amount" for purposes of Series 1999-1.
"Series Termination Date", with respect to Series 1999-1, means the Payment
-----------------------
Date in April 200__. [This term is used in the definition of "Early
================================================
Amortization Period" herein and in Sections 12.02 and 12.03 of the Pooling and
==============================================================================
Servicing Agreement.]
=====================
"Servicing Fee" for each Accrual Period means an amount equal to the
--------------
product of (i) one-twelfth, (ii) the Servicing Fee Percentage as in effect on
the Issuance Date and (iii) the Series 1999-1 Aggregate Invested Amount on the
first day of such Accrual Period.
"Servicing Fee Percentage", with respect to Series 1999-1, means 0.50%,
------------------------
subject to any increase pursuant to Section 3.02(b) of the Agreement.
---------------
"Specified Principal Terms" means, with respect to any Series, the
-------------------------
following Principal Terms: (a) the floating allocation percentage contained in
the Supplement with respect to such Series; (b) any amendments to the
definitions of Eligible Accounts
51
<PAGE>
or Eligible Receivables contained in the Supplement with respect to such Series;
(c) any Early Amortization Events; (d) any amendment to the definition of the
Control Party contained in the Supplement with respect to such Series; (e) any
Servicer Defaults contained in the Supplement with respect to such Series; (f)
the method for allocating principal and interest to Certificateholders of such
Series; (g) the level of subordination provided by the Transferor's Interest
with respect to such Series; and (h) the date on which such Series will begin
its amortization or accumulation period, if any, and the related terms thereof.
"Statutory Reserve" means a fraction (expressed as a decimal), the
-----------------
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Agent or, if the Agent is not a bank, the Liquidity Agent (as such
term is defined in the Liquidity Agreement) (including any branch, Affiliate, or
other fronting office thereof) is subject, with respect to the Eurodollar Rate,
==========
for Eurocurrency Liabilities (as defined in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Each LIBOR Rate Tranche shall be deemed to constitute Eurocurrency Liabilities
and to be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Holder under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Supplement" has the meaning specified in the preamble hereto.
----------
"Tangible Net Worth means, as to any Person at any time, Net Worth of such
------------------
Person minus the value of goodwill, trademarks, trade names, copyrights,
patents, licenses, organizational expenses, research and development expenses
and similar intangibles and, with respect to Tangible Net Worth of CompuCom, any
write-up on the book value of any asset resulting from a revaluation thereof
subsequent to December 31, 1998.
"Transfer Issuance Date" has the meaning specified in the related
-----------------------
Commitment Transfer Supplement.
"Transferee" has the meaning specified in Section 8.9(f) of this
---------- --------------
Supplement.
"Transaction Documents" means, collectively, the Agreement, the Receivables
---------------------
Contribution and Sale Agreement, this Supplement and the Series 1999-1 Investor
Certificates.
52
<PAGE>
"Transition Costs" means any documented expenses and allocated costs of
----------------
personnel reasonably incurred by any Successor Servicer in connection with a
transfer of servicing from the Servicer to such Successor Servicer.
"Trust Accounts" has the meaning specified in Section 4.02(d)(i) of the
-------------- ------------------
Agreement as set forth in this Supplement.
"Turnover Rate" means, as of any Cut-Off Date, the ratio (expressed as a
-------------
percentage) of (i) the aggregate Unpaid Balance of the Receivables as of such
Cut-Off Date, divided by (ii) the aggregate Collections for the month ending on
-------
such Cut-Off Date.
"Yield Reserve" means, at any time, an amount equal to the product of (i)
-------------
the Series 1999-1 Allocated Receivables Amount on such day, times (ii) the Yield
-----
Reserve Percentage, divided by (iii) 12, times (iv) the most recently calculated
------- -- -----
Turnover Rate.
"Yield Reserve Percentage" means, at any time, the sum of (i) 1.5 times the
------------------------ -----
Eurodollar Rate for the current Accrual Period, plus (ii) 3.00%, plus (iii) the
==========
Servicing Fee Percentage.
Unless the context otherwise requires, any reference to the Early
Amortization Period or the Revolving Period in this Supplement (including in the
amendments to the Agreement contained in Section 2.1 of this Supplement) shall
-----------
refer only to such periods as they relate to the Series 1999-1 Investor
Certificates.
In the event that any term or provision contained herein shall conflict
with or be inconsistent with any term or provision contained in the Agreement,
the terms and provisions of this Supplement shall govern. All capitalized terms
not otherwise defined herein are defined in the Agreement. All Article or
Section references herein means Articles or Sections of the Agreement as
modified by this Supplement, except as otherwise provided herein. Unless
otherwise stated herein, as the context otherwise requires or if such term is
otherwise defined in the Agreement, each capitalized term used herein shall
relate only to the Series 1999-1 Investor Certificates and no other Series of
Investor Certificates. The words "hereof," "herein" and "hereunder" and words
------ ------ ---------
of similar import when used in this Supplement shall refer to this Supplement or
the Agreement as a whole and not to any particular provision of this Supplement
or the Agreement, as the case may be; the word "including" (and with correlative
---------
meaning "include") means including without limiting the generality of any
-------
description preceding such term; the word "or" is not exclusive; and Section,
--
Schedule and Exhibit references contained in this Agreement or this Supplement
are references to Sections, Schedules and Exhibits in or to this Supplement
unless otherwise specified.
Unless otherwise specified in this Supplement, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered hereunder shall be
prepared in accordance
53
<PAGE>
with generally accepted accounting principles as in effect from time to time,
applied on a basis consistent (except for immaterial changes or changes
concurred in by the independent public accountants of CompuCom) with the most
recent audited consolidated financial statements of CompuCom and its
Consolidated Subsidiaries delivered to the Agent.
[SIGNATURES FOLLOW]
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
------------------------------------------------------------------------
duly executed by their respective officers thereunto duly authorized as of the
- ------------------------------------------------------------------------------
date first above written.
- -------------------------
CSI FUNDING, INC.,
as Transferor
By:
Name:
Title:
COMPUCOM SYSTEMS, INC.,
as Servicer
By:
Name:
Title:
55
<PAGE>
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
By:
Name: Bruce C. Wandersee
Title: Assistant Vice President
56
<PAGE>
PNC BANK, NATIONAL ASSOCIATION,
as Agent
By:
Name:
Title:
57
<PAGE>
MARKET STREET CAPITAL CORPORATION, as the
Initial Series 1999-1 Certificateholder
By:
Name:
Title:
58
<PAGE>
SCHEDULE 1
to
Series 1999-1 Supplement
Commitments
-----------
Series 1999-1 Certificateholder Commitment
- ------------------------------- ----------
Market Street Capital Corporation $175,000,000
59
<PAGE>
SCHEDULE 2
to
Series 1999-1 Supplement
Trust Accounts
--------------
60
<PAGE>
SCHEDULE 3
to
Series 1999-1 Supplement
Initial Invested Amount
-----------------------
61
<PAGE>
EXHIBIT 10.3
COMPUCOM SYSTEMS, INC.
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Section 1. DEFINITIONS; ATTACHMENTS 1
1.1. Special Definitions 1
1.2. Other Defined Terms 8
1.3. Attachments 8
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES 8
2.1. Credit Line 8
2.2. Product Advances 8
2.3. A/R Advances 9
2.4. Finance and Other Charges 10
2.5. Customer Account Statements 11
2.6. Shortfall 11
2.7. Application of Payments 11
2.8. Prepayment and Reborrowing By Customer 11
Section 3. CREDIT LINE ADDITIONAL PROVISIONS 12
3.1. Ineligible Accounts 12
3.2. Reimbursement for Charges 13
3.3. Lockbox and Special Account 13
3.4. Collections 13
3.5. Application of Remittances and Credits 14
3.6. Power of Attorney 14
3.7. Concentration Accounts 15
Section 4. SECURITY -- COLLATERAL 15
4.1. Grant 15
4.2 Release of Liens and Security Interests; Forbearance from Exercise of Remedies 16
4.3. Further Assurances 16
Section 5. CONDITIONS PRECEDENT 16
5.1. Conditions Precedent to the Effectiveness of this Agreement 16
5.2. Conditions Precedent to Each Advance 18
Section 6. REPRESENTATIONS AND WARRANTIES 18
6.1. Organization and Qualifications 18
6.2. Rights in Collateral; Priority of Liens 18
6.3. No Conflicts 18
6.4. Enforceability 19
6.5. Locations of Offices, Records and Inventory 19
6.6. Fictitious Business Names 19
6.7. Organization 19
6.8. No Judgments or Litigation 19
6.9. No Defaults 19
6.10. Labor Matters 19
6.11. Compliance with Law 19
6.12. ERISA 19
6.13. Compliance with Environmental Laws 20
6.14. Intellectual Property 20
6.15. Licenses and Permits 20
6.16. Investment Company 20
6.17. Taxes and Tax Returns 21
6.18. Status of Accounts 21
6.19. Affiliate/Subsidiary Transactions 21
6.20. Accuracy and Completeness of Information 21
6.21. Recording Taxes 21
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.22. Indebtedness 21
Section 7. AFFIRMATIVE COVENANTS 21
7.1. Financial and Other Information 21
7.2. Location of Collateral 23
7.3. Changes in Customer 23
7.4. Corporate Existence 23
7.5. ERISA 23
7.6. Environmental Matters 23
7.7. Collateral Books and Records/Collateral Audit 24
7.8. Insurance; Casualty Loss 24
7.9. Taxes 25
7.10. Compliance With Laws 25
7.11. Fiscal Year 25
7.12. Intellectual Property 25
7.13. Maintenance of Property 25
7.14. Collateral 25
7.15. Subsidiaries 26
7.16. Financial Covenants; Additional Covenants 26
Section 8. NEGATIVE COVENANTS 26
8.1. Liens 26
8.2. Disposition of Assets 26
8.3. Corporate Changes 26
8.4. Guaranties 27
8.5. Restricted Payments 27
8.6. Investments 27
8.7. Affiliate/Subsidiary Transactions 27
8.8. ERISA 27
8.9. Additional Negative Pledges 28
8.10. Storage of Collateral with Bailees and Warehousemen 28
8.11. Use of Proceeds 28
8.12. Accounts 28
8.13. Indebtedness 28
8.14. Loans 28
8.15 Transaction Documents 28
Section 9. DEFAULT 28
9.1. Event of Default 28
9.2. Acceleration 30
9.3. Remedies 30
9.4. Waiver 31
Section 10. MISCELLANEOUS 31
10.1. Term; Termination 31
10.2. Indemnification 31
10.3. Additional Obligations 32
10.4. LIMITATION OF LIABILITY 32
10.5. Alteration/Waiver 32
10.6. Severability 32
10.7. One Loan 32
10.8. Additional Collateral 33
10.9. No Merger or Novations 33
10.10. Paragraph Titles 33
10.11. Binding Effect; Assignment 33
10.12. Notices; E-Business Acknowledgment 33
10.13. Counterparts 34
10.14. ATTACHMENT A MODIFICATIONS 34
10.15. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW 35
10.16. JURY TRIAL WAIVER 35
</TABLE>
ii
<PAGE>
INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
This INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "Agreement") amends
and restates that certain Agreement for Inventory Financing dated September 20,
1996 (as amended from time to time, the "Financing Agreement") and is hereby
made this eleventh day of May, 1999 by and between IBM Credit Corporation, a
Delaware corporation with a place of business at 1500 RiverEdge Parkway,
Atlanta, GA 30328 ("IBM Credit"), and CompuCom Systems, Inc., a Delaware
corporation with a place of business at 7171 Forest Lane, Dallas, TX 75230
("Customer").
WITNESSETH
WHEREAS, IBM Credit and Customer are parties to that certain Financing
Agreement pursuant to which IBM Credit finances Customer's acquisition of
inventory and equipment;
WHEREAS, in the course of Customer's operations, Customer intends to
purchase from Persons approved in writing by IBM Credit for the purposes of this
Agreement (the "Authorized Suppliers") computer hardware and software products
manufactured or distributed by or bearing any trademark or trade name of such
Authorized Suppliers (the "Products") (as of the date hereof the Authorized
Suppliers are as set forth on Attachment E hereto);
WHEREAS, Customer has requested that IBM Credit finance its purchase of
Products from such Authorized Suppliers and its working capital requirements,
and IBM Credit is willing to provide such financing to Customer subject to the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree that the Financing Agreement is hereby
amended and restated in its entirety as follows:
Section 1. DEFINITIONS; ATTACHMENTS
1.1. Special Definitions. The following terms shall have the following
respective meaning in this Agreement:
"A/R Advance": any loan or advance of funds made by IBM Credit to or on behalf
of Customer pursuant to Section 2.3 of this Agreement, including, as the context
may require, a WCO Advance, a PRO Advance and a Takeout Advance.
"A/R Advance Date": the Business Day on which IBM Credit makes an A/R Advance
under this Agreement.
"A/R Advance Term": shall be the collective or individual reference, as the
context may require, to a PRO Advance Term and a WCO Advance Term.
"A/R Finance Charges": as defined on Attachment A.
"Accounts": as defined in the U.C.C.
"Advance": any loan or other extension of credit by IBM Credit to or on behalf
of Customer pursuant to this Agreement including, without limitation, (i)
Product Advances and (ii) A/R Advances.
1
<PAGE>
"Affiliate": with respect to the Customer, any Person (the "Affiliate"),
excluding Safeguard Scientifics, Inc., E-Certify, Inc. and Global Serve Computer
Services, Ltd., meeting one of the following: (i) at least 10% of the
Affiliate's equity is owned, directly or indirectly, by such Person; (ii) at
least 10% of such Person's equity is owned, directly or indirectly, by the
Affiliate; or (iii) at least 10% of such Person's equity and at least 10% of the
Affiliate's equity is owned, directly or indirectly, by the same Person or
Persons. All of Customer's officers, directors, joint venturers, and partners
shall also be deemed to be Affiliates of Customer for purposes of this
Agreement.
"Agreement": as defined in the caption.
"Auditors": a nationally recognized firm of independent certified public
accountants selected by Customer and satisfactory to IBM Credit.
"Available Credit": at any time, (1) the Maximum Advance Amount less (2) the
Outstanding Advances at such time.
"Average Daily Balance": for each Advance for a given period of time, the sum
of the unpaid principal of such Advance as of each day during such period of
time, divided by the number of days in such period of time.
"Bloomberg": the on-line service provided by Bloomberg Financial Services.
"Borrowing Base": as defined in Attachment A.
"Business Day": any day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are generally closed or on which IBM
Credit is closed.
"Closing Date": the date on which the conditions precedent to the effectiveness
of this Agreement set forth in Section 5.1 hereof are satisfied or waived in
writing by IBM Credit.
"Code": the Internal Revenue Code of 1986, as amended or any successor statute.
"Collateral": as defined in Section 4.1.
"Collateral Management Report": a report to be delivered by Customer to IBM
Credit from time to time, as provided herein, signed by the chief executive
officer, chief financial officer, Treasurer or Controller of Customer,
substantially in the form and detail of Attachment F hereto, detailing and
certifying, among other items: a summary of Customer's inventory on hand
financed by IBM Credit and Customer's Eligible Accounts, the amounts and aging
of all of Customer's Accounts, Customer's inventory on hand financed by IBM
Credit by quantity, type, model, Authorized Supplier's invoice price to Customer
and the total of the line item values for all inventory listed on the report all
of Customer's IBM Credit borrowing activity during a specified period and the
total amount of Customer's Borrowing Base as well as Customer's Outstanding A/R
Advances, Outstanding Product Advances, Available Credit and any Shortfall
Amount as of a specified date.
"Common Due Date": (1) the fifth day of a calendar month if the Product
Financing Period or A/R Advance Term, whichever is applicable, expires on the
first through tenth of such calendar month; (2) the fifteenth day of a calendar
month if the Product Financing Period or A/R Advance Term, whichever is
applicable, expires on the eleventh through twentieth of such calendar month;
and (3) the twenty-fifth day of a calendar month if the Product Financing Period
or A/R Advance Term, whichever is applicable, expires on the twenty-first
through the last day of such calendar month.
2
<PAGE>
"Compliance Certificate": a certificate substantially in the form of Attachment
C.
"Concentration Accounts": shall mean an Eligible Account that, individually, or
when aggregated with all other outstanding Accounts of the same Account debtor
and such Account debtor's Affiliates, constitute more than five percent (5%) of
the net outstanding balance of all Eligible Accounts of the Customer then
outstanding for all Account debtors.
"Concentration Account Debtor": shall mean, at any time, any Account debtor
obligated to Customer with respect to, or on account of, a Concentration
Account.
"Credit Facilities": as defined in Section 2.1.
"Customer": as defined in the caption.
"Default": either (1) an Event of Default or (2) any event or condition which,
but for the requirement that notice be given or time lapse or both, would be an
Event of Default.
"Delinquency Fee Rate": as defined on Attachment A.
"Eligible Accounts": as defined in Section 3.1.
"Environmental Laws": all statutes, laws, judicial decisions, regulations,
ordinances, and other governmental restrictions relating to pollution, the
protection of the environment, occupational health and safety, or to emissions,
discharges or release of pollutants, contaminants, hazardous substances or
wastes into the environment.
"Environmental Liability": any claim, demand, obligation, cause of action,
allegation, order, violation, injury, judgment, penalty or fine, cost or
expense, resulting from the violation or alleged violation of any Environmental
Laws or the imposition of any Lien pursuant to any Environmental Laws.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended, or
any successor statutes.
"Event of Default": as defined in Section 9.1.
"Final Trust Termination Date": as defined in Section 12.01 of the Pooling and
Servicing Agreement.
"Financial Statements": the consolidated balance sheet (including, without
limitation, securities such as stocks and investment bonds), statements of
operations, statements of cash flows and statements of changes in shareholder's
equity of Customer and its Subsidiaries for the period specified, prepared in
accordance with GAAP and consistent with prior practices.
"Floor Plan Lender": any Person who now or hereinafter provides inventory
financing to Customer, provided that such Person executes an Intercreditor
Agreement (as defined in Section 5.1 of this Agreement) or a subordination
agreement with IBM Credit in form and substance satisfactory to IBM Credit.
"Free Financing Period": for each Product Advance, the period, if any, in which
IBM Credit does not charge Customer a financing charge. IBM Credit shall
calculate the Customer's Free Financing Period utilizing a methodology that is
consistent with the methodologies used for similarly situated customers of IBM
Credit. The Customer understands that IBM Credit may not offer, may change or
may cease to offer a Free Financing Period for the Customer's purchases of
Products.
3
<PAGE>
"Free Financing Period Exclusion Fee": as defined in Attachment A.
"GAAP": generally accepted accounting principles in the United States as in
effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing.
"Hazardous Substances": all substances, wastes or materials, to the extent
subject to regulation as "hazardous substances" or "hazardous waste" under any
Environmental Laws.
"IBM Credit": as defined in the caption.
"Indebtedness": with respect to any Person, (1) all obligations of such Person
for borrowed money or for the deferred purchase price of property or services
(other than trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices) or which is evidenced by a note,
bond, debenture or similar instrument, (2) all obligations of such Person under
capital leases (including obligations under any leases Customer may enter into,
now or in the future, with IBM Credit), (3) all obligations of such Person in
respect of letters of credit, banker's acceptances or similar obligations issued
or created for the account of such Person, (4) liabilities arising under any
interest rate protection, future, option swap, cap or hedge agreement or
arrangement under which such Person is a party or beneficiary, (5) all
obligations under guaranties of such Person and (6) all liabilities secured by
any Lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.
"Investment": with respect to any Person (the "Investor"), (1) any investment
by the Investor in any other Person, whether by means of share purchase, capital
contribution, purchase or other acquisition of a partnership or joint venture
interest, loan, time deposit, demand deposit or otherwise, and (2) any guaranty
by the Investor of any Indebtedness or other obligation of any other Person.
"Lien(s)": any lien, claim, charge, pledge, security interest, deed of trust,
mortgage, other encumbrance or other arrangement having the practical effect of
the foregoing, including the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"LIBOR": as of the date of determination, the thirty-day average of the one-
month (01M) London Interbank Offering Rate as published in Bloomberg for the
previous calendar month.
"Material Adverse Effect": a material adverse effect (1) on the business,
operations, results of operations, assets, or financial condition of the
Customer, (2) on the aggregate value of the Collateral or the aggregate amount
which IBM Credit would be likely to receive (after giving consideration to
reasonably likely delays in payment and reasonable costs of enforcement) in the
liquidation of such Collateral to recover the Obligations in full, or (3) on the
rights and remedies of IBM Credit under this Agreement.
"Maximum Advance Amount": at any time, the lesser of (1) the Credit Facilities
and (2) the Borrowing Base at such time.
"Note": the promissory note made by CSI Funding, Inc. pursuant to the
Receivables Contribution and Sale Agreement in favor of CompuCom Systems, Inc.
dated May 7, 1999 in the original principal amount of $_______________.
4
<PAGE>
"Notice": as defined in Section 5.1(M) of this Agreement.
"Obligations": all covenants, agreements, warranties, duties, representations,
loans, advances, interest (including interest accruing on or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to Customer, whether or not a claim
for post-filing or post-petition interest is allowed in such proceeding), fees,
reasonable expenses, indemnities, liabilities and Indebtedness of any kind and
nature whatsoever now or hereafter arising, owing, due or payable from Customer
to IBM Credit.
"Other Documents": all security agreements, mortgages, leases, instruments,
documents, guarantees, schedules of assignment, contracts and similar agreements
executed by Customer and delivered to IBM Credit, pursuant to this Agreement or
otherwise, and all amendments, supplements and other modifications to the
foregoing from time to time.
"Other Charges": as set forth in Attachment A.
"Outstanding Advances": at any time of determination, the sum of (1) the unpaid
principal amount of all Advances made by IBM Credit under this Agreement, and
(2) the unpaid amount of any finance charge, fee, expense or other amount
related to Advances charged to Customer's account with IBM Credit pursuant to
this Agreement.
"Outstanding A/R Advances": at any time of determination, the sum of (1) the
unpaid principal amount of all A/R Advances made by IBM Credit under this
Agreement; and (2) the unpaid amount of any finance charge, fee, expense or
other amount related to A/R Advances charged to Customer's account with IBM
Credit pursuant to this Agreement.
"Outstanding Product Advances": at any time of determination, the sum of (1)
the unpaid principal amount of all Product Advances made by IBM Credit under
this Agreement; and (2) the unpaid amount of any finance charge, fee, expense or
other amount related to Product Advances charged to Customer's account with IBM
Credit pursuant to this Agreement.
"Permitted Indebtedness": any of the following:
(1) Indebtedness to IBM Credit;
(2) Indebtedness described in Section VII of Attachment B;
(3) Indebtedness to any Floor Plan Lender;
(4) Purchase Money Indebtedness;
(5) guaranties in favor of IBM Credit; and
(6) other Indebtedness consented to by IBM Credit in writing prior to incurring
such Indebtedness.
"Permitted Investments": as set forth in Attachment A.
"Permitted Liens": any of the following:
(1) Liens which are the subject of an Intercreditor Agreement, in effect from
time to time between IBM Credit and any other secured creditor;
5
<PAGE>
(2) Purchase Money Security Interests;
(3) Liens described in Section I of Attachment B;
(4) Liens of warehousemen, mechanics, materialmen, workers, repairmen, common
carriers, landlords and other similar Liens arising by operation of law or
otherwise, not waived in connection herewith, for amounts that are not yet due
and payable or being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted if an adequate reserve or other appropriate
provisions shall have been made therefor as required to be in conformity with
GAAP and an adverse determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(5) attachment or judgment Liens individually or in the aggregate not in excess
of $3,000,000 (exclusive of (A) any amounts that are duly bonded to the
satisfaction of IBM Credit or (B) any amount fully covered by insurance as to
which the insurance company has acknowledged its obligation to pay such judgment
in full);
(6) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of Customer;
(7) extensions and renewals of the foregoing Permitted Liens; provided that (A)
the aggregate amount of such extended or renewed Liens do not exceed the
original principal amount of the Indebtedness which it secures, (B) such Liens
do not extend to any property other than property already previously subject to
the Lien and (C) such extended or renewed Liens are on terms and conditions no
more restrictive than the terms and conditions of the Liens being extended or
renewed;
(8) Liens arising from deposits or pledges to secure bids, tenders, contracts,
leases, surety and appeal bonds and other obligations of like nature arising in
the ordinary course of the Customer's business;
(9) Liens for taxes, assessments or governmental charges not delinquent or
being contested, in good faith, by appropriate proceedings promptly instituted
and diligently conducted if an adequate reserve or other appropriate provisions
shall have been made therefor as required in order to be in conformity with GAAP
and an adverse determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(10) Liens arising out of deposits in connection with workers' compensation,
unemployment insurance or other social security or similar legislation;
(11) Liens arising pursuant to this Agreement; and
(12) other Liens consented to by IBM Credit in writing prior to incurring such
Lien.
"Person": any individual, association, firm, corporation, partnership, trust,
unincorporated organization or other entity whatsoever.
"Policies": all policies of insurance required to be maintained by Customer
under this Agreement or any of the Other Documents.
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"Pooling and Servicing Agreement" : that certain Pooling and Servicing
Agreement, as amended, modified or supplemented from time to time, by and among
CompuCom Systems, Inc., CSI Funding, Inc. and Norwest Bank Minnesota, National
Association, dated as of May 7, 1999.
"Prepayment Fee": as defined in Attachment A.
"Prime Rate": as of the date of determination, the average of the rates of
interest announced by Citibank, N.A., Chase Manhattan Bank and Bank of America
National Trust & Savings Association (or any other bank which IBM Credit uses in
its normal course of business of determining Prime Rate) as their prime or base
rate, as of the last Business Day of the calendar month immediately preceding
the date of determination, whether or not such announced rates are the actual
rates charged by such banking institutions to their most creditworthy borrowers.
"PRO Advance": an A/R Advance, with a PRO Advance Term, made by IBM Credit to
itself on behalf of Customer to repay all or a portion of a Product Advance that
is due and payable.
"PRO Advance Term": for each PRO Advance, a period, in increments of ten days
as specified by Customer in the Request for A/R Advance with respect to such PRO
Advance, but in no event in excess of thirty days, commencing on the A/R Advance
Date for such PRO Advance.
"Product Advance": any advance of funds made or committed to be made by IBM
Credit for the account of Customer to an Authorized Supplier in respect of an
invoice delivered or to be delivered by such Authorized Supplier to IBM Credit
describing Products purchased by Customer, including any such advance made or
committed to be made as of the date hereof pursuant to the Financing Agreement.
"Product Financing Charge": as defined on Attachment A.
"Product Financing Period": for each Product Advance, a period of days equal to
that set forth in Attachment A from time to time, commencing on the invoice date
of such Product Advance.
"Purchase Money Indebtedness": any Indebtedness (including capital leases)
incurred to finance the acquisition of assets (other than assets manufactured or
distributed by or bearing any trademark or trade name of any Authorized
Supplier) to be used in the Customer's business not to exceed the lesser of (1)
the purchase price or acquisition cost of such asset and (2) the fair market
value of such asset.
"Purchase Money Security Interest": any security interest securing Purchase
Money Indebtedness, which security interest applies solely to the particular
asset acquired with the Purchase Money Indebtedness.
"Receivables": as defined in Annex X to the Pooling and Servicing Agreement.
"Receivables Facility": the transactions evidenced and/or effectuated by the
Transaction Documents.
"Receivables Contribution and Sale Agreement": that certain Receivables
Contribution and Sale Agreement, as amended, modified or supplemented from time
to time, among CompuCom Systems, Inc., as Seller and initial Servicer, and CSI
Funding, Inc., as Buyer, dated as of May 7, 1999.
"Related Rights": as defined in the Receivables Contribution and Sale
Agreement.
"Released Liens": as defined in Section 4.2 of this Agreement.
"Request for A/R Advance": as defined in Section 2.3.
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"Requirement of Law": as to any Person, the articles of incorporation and by-
laws of such Person, and any law, treaty, rule or regulation or determination of
an arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"Securities and Note Pledge Agreement": that certain Securities and Note Pledge
Agreement by and between IBM Credit and Customer delivered to IBM Credit in
accordance with Section 5.1(O) of this Agreement.
"Servicing Fee": as defined in Section 3.02 of the Pooling and Servicing
Agreement.
"Shortfall Amount": as defined in Section 2.6.
"Shortfall Transaction Fee": as defined in Attachment A.
"Subsidiary": with respect to any Person, any corporation excluding Safeguard
Scientifics, Inc. or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Takeout Advance": upon request by Customer, an A/R Advance made, only on the
Closing Date, to existing creditors of Customer on behalf of Customer, in an
amount sufficient to discharge Customer's indebtedness to such creditor.
"Transaction Documents": as defined in Annex X to the Pooling and Servicing
Agreement including, without limitation, the Pooling and Servicing Agreement,
any supplement thereto, and the Receivables Contribution and Sale Agreement.
"Transferor Collection Subaccount": as defined in Section 4.02(a) of the
Pooling and Servicing Agreement.
"Trust Assets": as defined in Section 2.01 of the Pooling and Servicing
Agreement.
"Termination Date": shall mean the first anniversary of the date of this
Agreement or such other date as IBM Credit and Customer may agree to from time
to time.
"Unused Facility Fee": as defined in Attachment A.
"Voting Stock": securities, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect the corporate directors (or persons
performing similar functions).
"WCO Advance": an A/R Advance, with a WCO Advance Term.
"WCO Advance Term": for each WCO Advance, a period of one hundred eighty (180)
days commencing on the A/R Advance Date for such WCO Advance.
1.2. Other Defined Terms. Terms not otherwise defined in this Agreement which
are defined in the Uniform Commercial Code as in effect in the State of New York
(the "U.C.C.") shall have the meanings assigned to them therein.
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1.3. Attachments. All attachments, exhibits, schedules and other addenda
hereto, including, without limitation, Attachment A and Attachment B, are
specifically incorporated herein and made a part of this Agreement.
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES
2.1. Credit Facilities. Subject to the terms and conditions set forth in this
Agreement, on and after the Closing Date to but not including the date that is
the earlier of (x) the date on which this Agreement is terminated pursuant to
Section 10. and (y) the date on which IBM Credit terminates the Credit
Facilities pursuant to Section 9., IBM Credit agrees to extend to the Customer
credit lines ("Credit Facilities") in the amounts set forth in Attachment A
pursuant to which IBM Credit will make to the Customer, from time to time,
Advances in an aggregate amount at any one time outstanding not to exceed the
Maximum Advance Amount. Notwithstanding any other term or provision of this
Agreement, IBM Credit may, at any time and from time to time, in its sole
discretion (x) temporarily increase the amount of the Credit Facilities above
the amounts set forth in Attachment A and decrease the amount of the Credit
Facilities back to the amount of the Credit Facilities set forth in Attachment
A, in each case upon written notice to the Customer and (y) make Advances
pursuant to this Agreement upon the request of Customer in an aggregate amount
at any one time outstanding in excess of the Credit Facilities.
2.2. Product Advances. (A) Subject to the terms and conditions of this
Agreement, IBM Credit shall make Product Advances in connection with Customer's
purchase of Products from Authorized Suppliers (as defined under WITNESSETH).
Customer hereby authorizes and directs IBM Credit to pay the proceeds of Product
Advances directly to the applicable Authorized Supplier in respect of invoices
delivered to IBM Credit for such Products by such Authorized Supplier and
acknowledges that (i) any delivery to IBM Credit of an invoice by an Authorized
Supplier shall be deemed as a request for a Product Advance by Customer, and
(ii) each such Product Advance constitutes a loan by IBM Credit to Customer
pursuant to this Agreement as if the Customer received the proceeds of the
Product Advance directly from IBM Credit. IBM Credit may, upon written notice
to Customer such notice to be given as soon as possible after IBM Credit decides
not to include such supplier as an Authorized Supplier, cease to include a
supplier as an Authorized Supplier.
(B) No finance charge shall accrue on any Product Advance during the Free
Financing Period, if any, applicable to such Product Advance. Each Product
Advance shall be due and payable on the Common Due Date for such Product
Advance. Customer may, at its option, repay each Product Advance by requesting
IBM Credit to apply all or any part of the principal amount of an A/R Advance to
the Outstanding Product Advances. Customer's request for such application shall
be made in accordance with Section 2. When so requested and subject to the
terms and conditions of this Agreement, IBM Credit shall apply the amount so
requested to the amounts due in respect of the Outstanding Product Advances.
Nothing contained herein shall relieve Customer of its obligation to repay
Product Advances when due. Each Product Advance shall accrue a finance charge
on the Average Daily Balance thereof from and including the first (1st) day
following the end of the Free Financing Period, if any, for such Product
Advance, or if no such Free Financing Period shall be in effect, from and
including the date of invoice for such Product Advance, in each case, to and
including the date such Product Advance shall become due and payable in
accordance with the terms of this Agreement, at a per annum rate equal to the
lesser of (a) the finance charge set forth in Attachment A to this Agreement as
the "Product Financing Charge" and (b) the highest rate from time to time
permitted by applicable law.
In addition, for any Product Advance with respect to which a Free Financing
Period shall not be in effect, Customer shall pay a Free Financing Period
Exclusion Fee. Such fee shall be due and payable on the Common Due Date for such
Product Advance. If it is determined that amounts received from Customer were
in excess of the highest rate permitted by law, then the amount representing
such excess shall be considered reductions to principal of Advances.
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(C) Customer acknowledges that IBM Credit does not warrant the Collateral.
Customer shall be obligated to pay IBM Credit in full even if the Collateral is
defective or fails to conform to the warranties extended by the Authorized
Supplier. The Obligations of Customer shall not be affected by any dispute
Customer may have with any manufacturer, distributor or Authorized Supplier.
Customer will not assert any claim or defense which it may have against any
manufacturer, distributor or Authorized Supplier against IBM Credit.
(D) Customer hereby authorizes IBM Credit to collect directly from any
Authorized Supplier any credits, rebates, bonuses or discounts owed by such
Authorized Supplier to Customer ("Supplier Credits"). Any Supplier Credits
received by IBM Credit may be applied by IBM Credit to the Outstanding Advances.
Any Supplier Credits collected by IBM Credit shall in no way reduce Customer's
debt to IBM Credit in respect of the Outstanding Advances until such Supplier
Credits are applied by IBM Credit which application by IBM Credit shall not be
unreasonably withheld.
(E) IBM Credit may apply any payments and Supplier Credits received by IBM
Credit to reduce finance charges first and then to principal amounts of Advances
owed by Customer. IBM Credit may apply principal payments to the oldest
(earliest) invoices (and related Product Advances) first, but, in any case, all
principal payments will be applied in respect of the Outstanding Product
Advances made for Products which have been sold, lost, stolen, destroyed,
damaged or otherwise disposed of prior to any other application thereof.
(F) Customer will indemnify and hold IBM Credit harmless from and against
any claims or demands asserted by any Person relating to or arising from the
Collateral for any reason whatsoever, including, without limitation, the
condition of the Collateral, any misrepresentation made about the Collateral by
any representative of Customer, or any act or failure to act by Customer except
to the extent such claims or demands are directly attributable to IBM Credit's
gross negligence or willful misconduct. Nothing contained in the foregoing
shall impair any rights or claims which the Customer may have against any
manufacturer, distributor or Authorized Supplier.
2.3. A/R Advances. (A) Whenever Customer shall desire IBM Credit to provide
an A/R Advance, Customer shall deliver to IBM Credit written notice of
Customer's request for such an Advance ("Request for A/R Advance"). For any
requested A/R Advance pursuant to which monies will be disbursed to Customer or
any Person other than IBM Credit, a Request for A/R Advance shall be delivered
to IBM Credit on or prior to 12:00 p.m. (eastern time) on the Business Day of
the requested A/R Advance Date. The Request for A/R Advance shall specify (i)
the requested A/R Advance Date; (ii) the amount of the requested A/R Advance;
(iii) whether such A/R Advance is a WCO Advance or a PRO Advance; (iv) if
applicable, the PRO Advance Term for such A/R Advance; (v) for each PRO Advance,
the month, day and year of the Common Due Date, as set forth in Customer's
applicable billing statement from IBM Credit, for the Product Advance to which
the PRO Advance is to be applied; and (vi) if applicable, the amount of the
requested A/R Advance that should be applied to the Outstanding Product Advances
(provided that all PRO Advances shall be applied to Outstanding Product
Advances). Customer may deliver a Request for A/R Advance via facsimile. Any
Request for A/R Advance delivered to IBM Credit shall be irrevocable.
Notwithstanding any other provision of this Agreement, Customer shall not (i)
request more than one PRO Advance in respect of any Product Advance; and (ii)
request a PRO Advance for any Common Due Date on which Customer will take a
discount offered by IBM Credit for invoice amounts paid in full within fifteen
days of the invoice date under IBM Credit's High Turnover Option ("HTO")
Program.
(B) Subject to the terms and conditions of this Agreement, on the A/R
Advance Date specified in a Request for A/R Advance, IBM Credit shall make the
principal amount of each A/R Advance available to the Customer in immediately
available funds to an account maintained by Customer (or in the case of a
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Takeout Advance, as directed by Customer). If IBM Credit is making an A/R
Advance hereunder on a day on which Customer is to repay all or any part of an
Outstanding Advance (or any other amount owing hereunder), IBM Credit shall
apply the proceeds of the A/R Advance to such repayment and only an amount equal
to the difference, if any, between the amount of the A/R Advance and the amount
being repaid shall be made available to Customer as provided in the immediately
preceding sentence.
(C) Each A/R Advance shall accrue a finance charge on the Average Daily
Balance thereof, from and including the date of each A/R Advance to and
including the date such A/R Advance is due and payable in accordance with the
terms of this Agreement, at a per annum rate equal to the lesser of (a) the
finance charge set forth in Attachment A to this Agreement under the caption
"A/R Finance Charge" for such type of A/R Advance, and (b) the highest rate from
time to time permitted by applicable law. If it is determined that amounts
received from the Customer were in excess of such highest rate, then the amount
representing such excess shall be considered reductions to principal of
Advances.
(D) Unless otherwise due and payable at an earlier date, the unpaid
principal amount of each A/R Advance, other than a Takeout Advance, shall be due
and payable on the applicable Common Due Date. Unless otherwise notified by
Customer in writing prior to the day the principal amount of any WCO Advance
becomes due and payable, the Customer shall be deemed to have provided IBM
Credit with a Request for A/R Advance requesting a WCO Advance on the day such
principal amount is due and payable in an amount equal to the unpaid principal
amount of the WCO Advance so due. Subject to the terms and conditions of this
Agreement, the principal amount of such WCO Advance shall automatically renew
for an additional WCO Advance Term. Notwithstanding any other provision of this
Agreement, a Takeout Advance may only be requested on the Closing Date and such
Takeout Advance shall be limited to an amount sufficient to discharge the
indebtedness that is the subject of a Takeout Advance.
Unless otherwise agreed in writing, a Takeout Advance shall be due pursuant to
the Schedule of Repayments in Attachment D to this Agreement.
2.4. Finance and Other Charges. (A) Finance charges for an Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the applicable
Product Financing Charge or A/R Finance Charge multiplied by (ii) the Average
Daily Balance of such Advance for the period when such finance charge accrues
during such calendar month multiplied by (iii) the actual number of days during
such calendar month when such finance charge accrues divided by (iv) thirty
(30).
Late charges pursuant to subsection (D) of this Section 2.4 for an Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the Delinquency Fee
Rate multiplied by (ii) the Average Daily Balance of such Advance for the period
when such Advance is past due during such calendar month multiplied by (iii) the
actual number of days during such calendar month when such Advance is past due
divided by (iv) thirty (30).
(B) The Customer hereby agrees to pay to IBM Credit the charges set forth
as "Other Charges" in Attachment A. The Customer also agrees to pay IBM Credit
additional charges for any returned items of payment received by IBM Credit.
The Customer hereby acknowledges that any such charges are not interest but that
such charges, if unpaid, will constitute part of the Outstanding Advances.
(C) The finance charges and Other Charges owed under this Agreement, and
any charges hereafter agreed to in writing by the parties, are payable monthly
on receipt of IBM Credit's bill or statement therefor or IBM Credit may, in its
sole discretion, add unpaid finance charges and Other Charges to the Customer's
Outstanding Advances.
(D) If any amount owed under this Agreement, including, without limitation,
any Advance, is not paid when due (whether at maturity, by acceleration or
otherwise), the unpaid amount thereof will bear
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a late charge from and including the day after such Advance was due and payable
to and including the date IBM Credit receives payment thereof, at a per annum
rate equal to the lesser of (a) the amount set forth in Attachment A to this
Agreement as the "Delinquency Fee Rate" and (b) the highest rate from time to
time permitted by applicable law. In addition, if any Shortfall Amount shall not
be paid when due pursuant to Section 2.6 hereof, Customer shall pay IBM Credit a
Shortfall Transaction Fee. If it is determined that amounts received from
Customer were in excess of such highest rate, then the amount representing such
excess shall be considered reductions to principal of Advances.
2.5. Customer Account Statements. IBM Credit will send statements of each
transaction hereunder as well as monthly billing statements to Customer with
respect to Advances and other charges due on Customer's account with IBM Credit.
Each statement of transaction and monthly billing statement shall be deemed,
absent manifest error, to be correct and shall constitute an account stated with
respect to each transaction or amount described therein unless within seven (7)
Business Days after such statement of transaction or billing statement is
received by Customer, Customer provides IBM Credit written notice objecting that
such amount or transaction is incorrectly described therein and specifying the
error(s), if any, contained therein. IBM Credit may at any time adjust such
statements of transaction or billing statements to comply with applicable law
and this Agreement.
2.6. Shortfall. If, on any date, the Outstanding Advances shall exceed the
Maximum Advance Amount (such excess, the "Shortfall Amount"), then the Customer
shall on such date prepay the Outstanding Advances in an amount equal to such
Shortfall Amount.
2.7. Application of Payments. The Customer hereby agrees that all checks and
other instruments delivered to IBM Credit on account of Customer's Obligations
shall constitute conditional payment until such items are actually collected by
IBM Credit. Upon the occurrence of an Event of Default which is neither waived
nor cured within the times specified herein, Customer waives the right to direct
the application of any and all payments at any time or times hereafter received
by IBM Credit on account of the Customer's Obligations. Customer agrees that
IBM Credit shall have the continuing exclusive right to apply and reapply any
and all such payments to Customer's Obligations in such manner as IBM Credit may
deem advisable notwithstanding any entry by IBM Credit upon any of its books and
records. The Obligations of Customer shall not be affected by any dispute
Customer may have with any manufacturer, distributor or Authorized Supplier.
Notwithstanding the immediately preceding sentence, any delay in payment
resulting from Customer's using a process, approved by IBM Credit and in effect
at the time of such delayed payment, for requesting an adjustment related to an
invoice for Products, shall be governed by such approved process.
2.8. Prepayment and Reborrowing By Customer. (A) Customer may at any time
prepay, without notice or penalty, in whole or in part amounts owed under this
Agreement. IBM Credit may apply payments made to it (whether by the Customer or
otherwise) to pay finance charges and other amounts owing under this Agreement
first and then to the principal amount owed by the Customer.
(B) Subject to the terms and conditions of this Agreement, any amount
prepaid or repaid to IBM Credit in respect to the Outstanding Advances may be
reborrowed by Customer in accordance with the provisions of this Agreement.
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Section 3. CREDIT LINE ADDITIONAL PROVISIONS
3.1. Ineligible Accounts. IBM Credit and Customer agree that IBM Credit shall
have the sole right to determine eligibility of Accounts from an Account debtor
for purposes of determining the Borrowing Base; however, without limiting such
right, the following Accounts will be deemed to be ineligible for purposes of
determining the Borrowing Base:
(A) Accounts created from the sale of goods and/or performance of services
on non-standard terms or that allow for payment to be made more than thirty (30)
days from the date of such sale or performance of services;
(B) Accounts unpaid more than ninety (90) days from date of invoice;
(C) Accounts payable by an Account debtor if fifty percent (50%) or more of
the aggregate outstanding balance of all such Accounts remain unpaid for more
than ninety (90) days from the date of invoice;
(D) Accounts payable by an Account debtor that is an Affiliate of Customer,
or an officer, employee, agent, guarantor, stockholder of Customer or an
Affiliate of Customer, or is related to or has common shareholders, officers or
directors with Customer;
(E) Accounts arising from consignment sales;
(F) Except for state, local and United States government institutions and
public educational institutions, Accounts with respect to which the payment by
the Account debtor is or may be conditional;
(G) Except for state, local and United States government institutions and
public educational institutions, Accounts with respect to which:
(i) the Account debtor is not a commercial entity, or
(ii) the Account debtor is not a resident of the United States;
(H) Accounts payable by any Account debtor to the extent Customer is liable
for goods sold or services rendered by such Account debtor to Customer;
(I) Accounts arising from the sale or lease of goods purchased for a
personal, family or household purpose;
(J) Accounts arising from the sale or other disposition of goods that have
been used for demonstration purposes or loaned or leased by the Customer to
another party;
(K) Accounts which are progress payment accounts or contra accounts;
(L) Accounts upon which IBM Credit does not have a valid, perfected, first
priority security interest;
(M) Accounts payable by an Account debtor that is or Customer knows will
become, subject to proceedings under United States Bankruptcy Law or other law
for the relief of debtors;
(N) Accounts that are not payable in US dollars;
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(O) Accounts payable by any Account debtor that is a remarketer of computer
hardware and software products and whose purchases of such products from
Customer have been financed by another person, other than IBM Credit, who pays
the proceeds of such financing directly to Customer on behalf of such debtor
("Third Party Financer") unless (i) such Third Party Financer does not have a
separate financing relationship with Customer or (ii) such Third Party Financer
has a separate financing relationship with Customer and has waived its right to
set off its obligations to Customer;
(P) Accounts arising from the sale or lease of goods which are billed to
any Account debtor but have not yet been shipped by Customer unless there is (i)
written evidence that such Account debtor has agreed to pay for the goods and
requested that Customer retain goods in its possession and (ii) such goods are
kept segregated from all other goods in Customer's possession;
(Q) Accounts with respect to which Customer has permitted or agreed to any
extension, compromise or settlement, or made any change or modification of any
kind or nature, including, but not limited to, any change or modification to the
terms relating thereto;
(R) Accounts that do not arise from undisputed bona fide transactions
completed in accordance with the terms and conditions contained in the invoices,
purchase orders and contracts relating thereto;
(S) Accounts that are discounted for the full payment term specified in
Customer's terms and conditions with its Account debtors, or for any longer
period of time;
(T) Accounts on cash on delivery (C.O.D.) terms;
(U) Accounts arising from maintenance or service contracts that are billed
in advance of full performance of service;
(V) Accounts arising from bartered transactions;
(W) Accounts arising from incentive payments, rebates, discounts, credits,
warranty claims, and refunds from a supplier; and
(X) Any and all other Accounts that IBM Credit deems, in its reasonable and
good faith credit judgment consistent with its normal business practice, to be
ineligible.
The aggregate of all Accounts that are not ineligible Accounts shall hereinafter
be referred to as "Eligible Accounts".
3.2. Reimbursement for Charges. Customer agrees to pay for all costs and
expenses of Customer's bank in respect to collection of checks and other items
of payment, all fees relating to the use and maintenance of the Lockbox and the
Special Account (each as defined in Section 3.3) and with respect to remittances
of proceeds of the Advances hereunder.
3.3. Lockbox and Special Account. Customer shall establish and maintain
lockbox(es) (each, a "Lockbox") at the address(es) set forth in Attachment A
with the financial institution(s) listed in Attachment A (each, a "Bank")
pursuant to an agreement between the Customer and each Bank in form and
substance satisfactory to IBM Credit. Customer shall also establish and
maintain a deposit account which shall contain only proceeds of Customer's
Accounts ("Special Account") with each Bank. Customer shall enter into and
maintain a contingent blocked account agreement with each Bank for the benefit
of IBM Credit in form and substance satisfactory to IBM Credit pursuant to
which, among other things, such Bank
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shall agree that, upon notice from IBM Credit, which IBM Credit shall be
entitled to give only if a continuing Event of Default is in existence,
disbursements from the Special Account shall be made only as IBM Credit shall
direct.
3.4. Collections. (A) Customer agrees that (i) all payments due from Account
debtors with respect to Accounts not conveyed by Customer to CSI Funding, Inc.
pursuant to the Receivables Contribution and Sale Agreement, (ii) any and all
distributions or transfers of cash due from CSI Funding, Inc., (iii) incentive
payments, rebates, discounts, credits, warranty claims and refunds from
suppliers, (iv) Servicing Fee, and (v) any and all amounts paid from the
Transferor Collection Subaccount shall be remitted directly to a Lockbox,
provided however, that to the extent any amount paid from the Transferor
Collection Subaccount is allocable to CSI Funding, Inc., upon the occurrence of
an Event of Default, such amount shall be applied first to the payment of the
Note and the balance, if any, shall be paid to CSI Funding, Inc. Customer shall
instruct all Persons responsible for payment of any of the foregoing to remit
payments directly to a Lockbox. In addition, Customer shall have such
instruction printed in conspicuous type on all invoices. Customer shall
instruct such Bank to deposit all remittances to such Bank's Lockbox into its
Special Account. Customer further agrees that it shall not deposit or permit any
deposits of funds other than remittances paid in respect of the foregoing into
the Special Account(s) or permit any commingling of funds with such remittances
in any Lockbox or Special Account.
(B) Without limiting the Customer's foregoing obligations, if, at any time,
Customer receives a remittance of the kind described in Section 3.4(A), then
Customer shall make entries on its books and records in a manner that shall
reasonably identify such remittances and shall keep a separate account on its
record books of all remittances so received and deposit the same into a Special
Account. Until so deposited into the Special Account, Customer shall keep all
remittances received of the kind described in Section 3.4(A), separate and apart
from Customer's other property so that they are capable of identification as the
proceeds of Accounts in which IBM Credit has a security interest.
(C) Customer agrees that on and after the Final Trust Termination Date, IBM
Credit shall be a third-party beneficiary of any and all Lock-Box Agreements (as
such term is defined in Section 3.01(i)(D) of the Pooling and Servicing
Agreement, and shall cause the Transaction Documents to be amended to reflect
IBM Credit's status as a third-party beneficiary of such Lock-Box Agreements.
3.5. Application of Remittances and Credits. Customer shall apply all
remittances against the aggregate of Customer's outstanding Accounts no later
than the end of the Business Day on which such remittances are deposited into
the Special Account. Customer also agrees to apply each remittance against its
respective Account no later than three (3) Business Days from the date such
remittance is deposited into the Special Account. In addition, Customer shall
promptly apply any credits owing in respect to any Account when due.
3.6. Power of Attorney. Customer hereby irrevocably appoints IBM Credit, with
full power of substitution, as its true and lawful attorney-in-fact with full
power, in good faith and in compliance with commercially reasonable standards,
in the discretion of IBM Credit, to:
(A) sign the name of Customer on any document or instrument that IBM Credit
shall deem necessary or appropriate to perfect and maintain perfected the
security interest in the Collateral contemplated under this Agreement and the
Other Documents;
(B) endorse the name of Customer upon any of the items of payment of
proceeds and deposit the same in the account of IBM Credit for application to
the Obligations; and
upon the occurrence and during the continuance of an Event of Default as defined
in Section 9.1 hereof:
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(C) demand payment, enforce payment and otherwise exercise all Customer's
rights and remedies with respect to the collection of any Accounts;
(D) settle, adjust, compromise, extend or renew any Accounts;
(E) settle, adjust or compromise any legal proceedings brought to collect
any Accounts;
(F) sell or assign any Accounts upon such terms, for such amounts and at
such time or times as IBM Credit may deem advisable;
(G) discharge and release any Accounts;
(H) prepare, file and sign Customer's name on any Proof of Claim in
Bankruptcy or similar document against any Account debtor;
(I) prepare, file and sign Customer's name on any notice of lien, claim of
mechanic's lien, assignment or satisfaction of lien or mechanic's lien, or
similar document in connection with any Accounts;
(J) endorse the name of Customer upon any chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar document or
agreement relating to any Account or goods pertaining thereto;
(K) endorse the name of Customer upon any of the items of payment of
proceeds and deposit the same in the account of IBM Credit for application to
the Obligation;
(L) sign the name of Customer to requests for verification of Accounts and
notices thereof to Account debtors;
(M) sign the name of Customer on any document or instrument that IBM Credit
shall deem necessary or appropriate to enforce any and all remedies it may have
under this Agreement, at law or otherwise;
(N) make, settle and adjust claims under the Policies with respect to the
Collateral and endorse Customer's name on any check, draft, instrument or other
item of payment of the proceeds of the Policies with respect to the Collateral;
and
(O) take control in any manner of any term of payment or proceeds and for
such purpose to notify the postal authorities to change the address for delivery
of mail addressed to Customer to such address as IBM Credit may designate.
The power of attorney granted by this Section is for value and coupled with an
interest and is irrevocable so long as this Agreement is in effect or any
Obligations remain outstanding. Nothing done by IBM Credit pursuant to such
power of attorney will reduce any of Customer's Obligations other than
Customer's payment Obligations to the extent IBM Credit has received monies.
3.7. Concentration Accounts. Without limiting IBM Credit's other rights, IBM
Credit reserves the right to, from time to time in its reasonable and good faith
credit judgment consistent with normal business practice, modify the percentage
of the amount of Customer's Concentration Accounts used in calculating
Customer's Borrowing Base or eliminate Concentration Accounts in calculating
Customer's Borrowing Base.
Section 4. SECURITY -- COLLATERAL
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4.1. Grant. To secure Customer's full and punctual payment and performance of
the Obligations (including obligations under any leases Customer may enter into,
now or in the future, with IBM Credit) when due (whether at the stated maturity,
by acceleration or otherwise), Customer hereby grants IBM Credit a security
interest in all of Customer's right, title and interest in and to the following
property, whether now owned or hereafter acquired or existing and wherever
located:
(A) all inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(B) all accounts, contract rights, chattel paper, instruments, deposit
accounts, obligations of any kind owing to Customer, whether or not arising out
of or in connection with the sale or lease of goods or the rendering of services
and all books, invoices, documents and other records in any form evidencing or
relating to any of the foregoing;
(C) general intangibles;
(D) all rights now or hereafter existing in and to all mortgages, security
agreements, leases or other contracts securing or otherwise relating to any of
the foregoing; and
(E) all substitutions and replacements for all of the foregoing, all
proceeds of all of the foregoing and, to the extent not otherwise included, all
payments under insurance or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing.
All of the above assets shall be collectively defined herein as the
"Collateral". Customer covenants and agrees with IBM Credit that: (a) the
security constituted to by this Agreement is in addition to any other security
from time to time held by IBM Credit and (b) the security hereby created is a
continuing security interest and will cover and secure the payment of all
Obligations both present and future of Customer to IBM Credit.
4.2 Release of Liens and Security Interests; Forbearance from Exercise of
Remedies. Notwithstanding anything to the contrary herein, and only until the
Final Trust Termination Date, IBM Credit hereby releases and discharges its
liens and security interests, now or hereafter arising, insofar as such liens
and/or security interests cover Trust Assets (collectively, such released liens
and security interests, the "Released Liens"). Except for the Released Liens
described above being released herein, the liens and security interests created
and described herein shall remain in full force and effect as to all other
property encumbered hereby, and after the Final Trust Termination Date, the
property covered by the Released Liens shall be subject to the liens and
security interests created hereby, and IBM Credit may file any UCC-1 financing
statement or similar documents to evidence and/or effectuate such liens and
security interests.
Until the Final Trust Termination Date, the term "Collateral" as defined in
Section 4.1 hereof shall not include the Trust Assets. IBM Credit covenants and
agrees that it will not exercise any of its rights under the Securities and Note
Pledge Agreement prior to the Final Trust Termination Date. IBM Credit further
covenants and agrees that prior to the date which is one year and one day after
all Investor Certificates (as such term is defined in the Pooling and Servicing
Agreement) are paid in full it will not institute against, or join any other
Person in instituting against, CSI Funding, Inc. or the Trust (as such term is
defined in the Pooling and Servicing Agreement) any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States. IBM
Credit further covenants and agrees that it will not file any UCC-1 financing
statements or other similar documents to evidence any interest in the Trust
Assets until the Final
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Trust Termination Date and that it will hereafter execute and deliver any and
all other or additional documents, instruments or other papers (including
without limitation Uniform Commercial Code filings) as Customer, or its
successors and assigns, may reasonably request in order to further evidence
and/or effectuate the release of liens and security interest covering the Trust
Assets.
4.3. Further Assurances. Customer shall, from time to time upon the request
of IBM Credit, execute and deliver to IBM Credit, or cause to be executed and
delivered, at such time or times as IBM Credit may reasonably request such other
and further documents, certificates and instruments that IBM Credit may deem
necessary to perfect and maintain perfected IBM Credit's security interests in
the Collateral and in order to fully consummate all of the transactions
contemplated under this Agreement and the Other Documents. Customer shall make
appropriate entries on its books and records disclosing IBM Credit's security
interests in the Collateral.
Section 5. CONDITIONS PRECEDENT
5.1. Conditions Precedent to the Effectiveness of this Agreement. The
effectiveness of this Agreement is subject to the receipt by IBM Credit of, or
waiver in writing by IBM Credit of compliance with, the following conditions
precedent:
(A) this Agreement executed and delivered by Customer and IBM Credit;
(B) a favorable opinion of counsel for Customer in substantially the form
of Attachment H;
(C) a certificate of the secretary or an assistant secretary of Customer,
substantially in the form and substance of Attachment I hereto, certifying that,
among other items, (i) Customer is a corporation organized under the laws of the
State of its incorporation and has its principal place of business as stated
therein, (ii) Customer is registered to conduct business in specified states and
localities, (iii) true and complete copies of the articles of incorporation and
by-laws of Customer are delivered therewith, together with all amendments and
addenda thereto as in effect on the date thereof, (iv) the resolution as stated
in the certificate is a true, accurate and compared copy of the resolution
adopted by the Customer's Board of Directors authorizing the execution, delivery
and performance of this Agreement and each Other Document executed and delivered
in connection herewith, and (v) the names and true signatures of the officers of
Customer authorized to sign this Agreement and the Other Documents;
(D) certificates dated as of a recent date from the Secretary of State or
other appropriate authority evidencing the good standing of Customer in the
jurisdiction of its organization and in each other jurisdiction where the
ownership or lease of its property or the conduct of its business requires it to
qualify to do business except where the failure to qualify would not reasonably
be expected to cause a Material Adverse Effect;
(E) copies of all approvals and consents from any Person, in each case in
form and substance satisfactory to IBM Credit, which are required to enable
Customer to authorize, or required in connection with, (a) the execution,
delivery or performance of this Agreement and each of the Other Documents, and
(b) the legality, validity, binding effect or enforceability of this Agreement
and each of the Other Documents;
(F) a lockbox agreement executed by Customer and each Bank, in form and
substance satisfactory to IBM Credit;
(G) a contingent blocked account agreement executed by Customer and each
Bank in form and substance satisfactory to IBM Credit;
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(H) intercreditor agreements ("Intercreditor Agreement"), in form and
substance satisfactory to IBM Credit, executed by each other secured creditor of
Customer as set forth in Attachment A;
(I) UCC-1 financing statements for each jurisdiction reasonably requested
by IBM Credit executed by Customer and each guarantor whose guaranty to IBM
Credit is intended to be secured by a pledge of its assets;
(J) the statements, certificates, documents, instruments, financing
statements, agreements and information set forth in Attachment A and Attachment
B;
(K) certified copies of the Transaction Documents and any other principal
documents executed in connection with the Receivables Facility provided however
that the certified copies of the Transaction Documents may be delivered to IBM
Credit on or before May 21, 1999;
(L) copies of the opinion(s) delivered by Morgan Lewis & Bockius on May
___ 1999 in connection with the Receivables Facility and a letter from Morgan
Lewis & Bockius permitting IBM Credit to rely on such opinions as if IBM Credit
was an original addressee thereof;
(M) a notice in form and substance satisfactory to IBM Credit signed by
Customer and CSI Funding, Inc. to the Norwest Bank Minnesota, National
Association, as Trustee, which notice shall provide that, effective one Business
Day after delivery of such notice, the Customer shall cease selling and CSI
Funding shall cease buying the Receivables and the Related Rights pursuant to
Article I of Receivables Contribution and Sale Agreement (the "Notice");
(N) the Securities and Note Pledge Agreement executed and delivered by
Customer to IBM Credit: and
(O) all such other statements, certificates, documents, instruments,
financing statements, agreements and other information with respect to the
matters contemplated by this Agreement as IBM Credit shall have reasonably
requested.
5.2. Conditions Precedent to Each Advance. No Advance will be required to be
made or renewed by IBM Credit under this Agreement unless, on and as of the date
of such Advance, the following statements shall be true to the satisfaction of
IBM Credit:
(A) The representations and warranties contained in this Agreement or in
any document, instrument or agreement executed in connection herewith are true
and correct in all material respects on and as of the date of such Advance as
though made on and as of such date, except those representations and warranties
which are stated to be as of a specific date;
(B) No event has occurred and is continuing or after giving effect to such
Advance or the application of the proceeds thereof would result in or would
constitute a Default;
(C) No event has occurred and is continuing which could reasonably be
expected to have a Material Adverse Effect;
(D) Both before and after giving effect to the making of such Advance, no
Shortfall Amount exists.
Except as Customer has otherwise disclosed to IBM Credit in writing prior to
each request, each request (or deemed request pursuant to Section 2.2 (A) or 2.3
(D)) for an Advance hereunder and the receipt (or deemed receipt) by the
Customer of the proceeds of any Advance hereunder shall be deemed to be a
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representation and warranty by Customer that, as of and on the date of such
Advance, the statements set forth in (A) through (D) above are true statements.
No such disclosures by Customer to IBM Credit shall in any manner be deemed to
satisfy the conditions precedent to each Advance that are set forth in this
Section 5.2.
Section 6. REPRESENTATIONS AND WARRANTIES
To induce IBM Credit to enter into this Agreement, Customer represents and
warrants to IBM Credit as follows:
6.1. Organization and Qualifications. Customer and each of its Subsidiaries
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) has the power and
authority to own its properties and assets and to transact the businesses in
which it presently is engaged and (iii) is duly qualified and is authorized to
do business and is in good standing in each jurisdiction where it presently is
engaged in business and is required to be so qualified.
6.2. Rights in Collateral; Priority of Liens. Customer and each of its
Subsidiaries owns the property granted by it respectively as Collateral to IBM
Credit, free and clear of any and all Liens in favor of third parties except for
the Liens otherwise permitted pursuant to Section 8.1. The Liens granted by the
Customer and each of its Subsidiaries pursuant to this Agreement, the Guaranties
and the Other Documents in the Collateral constitute the valid and enforceable
first, prior and perfected Liens on the Collateral, except to the extent any
Liens that are prior to IBM Credit's Liens are (i) the subject of an
Intercreditor Agreement or (ii) Purchase Money Security Interests in product of
a brand that is not financed by IBM Credit.
6.3. No Conflicts. The execution, delivery and performance by Customer of
this Agreement and each of the Other Documents (i) are within its corporate
power; (ii) are duly authorized by all necessary corporate action; (iii) are not
in contravention in any respect of any Requirement of Law or any indenture,
contract, lease, agreement, instrument or other commitment to which it is a
party or by which it or any of its properties are bound; (iv) do not require the
consent, registration or approval of any Governmental Authority or any other
Person (except such as have been duly obtained, made or given, and are in full
force and effect); and (v) will not, except as contemplated herein, result in
the imposition of any Liens upon any of its properties.
6.4. Enforceability. This Agreement and all of the other documents executed
and delivered by the Customer in connection herewith are the legal, valid and
binding obligations of Customer, and are enforceable in accordance with their
terms, except as such enforceability may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors' rights generally or the general
equitable principles relating thereto.
6.5. Locations of Offices, Records and Inventory. The address of the
principal place of business and chief executive office of Customer is as set
forth on Attachment B or on any notice provided by Customer to IBM Credit
pursuant to Section 7.7(C) of this Agreement. The books and records of
Customer, and all of its chattel paper (other than the chattel paper delivered
to IBM Credit pursuant to Section 7.14(E)) and records of Accounts, are
maintained exclusively at such location.
There is no jurisdiction in which Customer has any assets, equipment or
inventory (except for vehicles and inventory in transit for processing) other
than those jurisdictions identified on Attachment B or on any notice provided by
Customer to IBM Credit pursuant to Section 7.7(C) of this Agreement. Attachment
B, as amended from time to time by any notice provided by Customer to IBM Credit
in accordance with Section 7.7(C) of this Agreement, also contains a complete
list of the legal names and addresses of each warehouse at which the Customer's
inventory is stored. None of the receipts received by Customer from
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any warehouseman states that the goods covered thereby are to be delivered to
bearer or to the order of a named person or to a named person and such named
person's assigns.
6.6. Fictitious Business Names. Customer has not used any corporate or
fictitious name during the five (5) years preceding the date of this Agreement,
other than those listed on Attachment B.
6.7. Organization. All of the outstanding capital stock of Customer has been
validly issued, is fully paid and nonassessable.
6.8. No Judgments or Litigation. Except as set forth on Attachment B, no
judgments, orders, writs or decrees are outstanding against Customer nor is
there now pending or, to the best of Customer's knowledge after due inquiry,
threatened, any litigation, contested claim, investigation, arbitration, or
governmental proceeding by or against Customer which, in Customer's judgment,
would reasonably be expected to cause a Material Adverse Effect.
6.9. No Defaults. The Customer is not in default under any term of any
indenture, contract, lease, agreement, instrument or other commitment to which
it is a party or by which it, or any of its properties are bound. Customer has
no knowledge of any dispute regarding any such indenture, contract, lease,
agreement, instrument or other commitment. No Default or Event of Default has
occurred and is continuing which, in Customer's judgment, would reasonably be
expected to cause a Material Adverse Effect.
6.10. Labor Matters. Except as set forth on any notice provided by Customer
to IBM Credit pursuant to Section 7.1(G) of this Agreement, the Customer is not
a party to any labor dispute. There are no strikes or walkouts or labor
controversies pending or threatened against the Customer which could reasonably
be expected to have a Material Adverse Effect.
6.11. Compliance with Law. Customer has not violated or failed to comply in
any material respect with any Requirement of Law or any requirement of any self
regulatory organization.
6.12. ERISA. To the best of Customer's knowledge each "employee benefit
plan", "employee pension benefit plan", "defined benefit plan", or "multi-
employer benefit plan", which Customer has established, maintained, or to which
it is required to contribute (collectively, the "Plans") is in compliance with
all applicable provisions of ERISA and the Code and the rules and regulations
thereunder as well as the Plan's terms and conditions. There have been no
"prohibited transactions" and no "reportable event" has occurred within the last
60 months with respect to any Plan. Customer has no "multi- employer benefit
plan".
As used in this Agreement the terms "employee benefit plan", "employee pension
benefit plan", "defined benefit plan", and "multi-employer benefit plan" have
the respective meanings assigned to them in Section 3 of ERISA and any
applicable rules and regulations thereunder. The Customer has not incurred any
"accumulated funding deficiency" within the meaning of ERISA or incurred any
liability to the Pension Benefit Guaranty Corporation (the "PBGC") in connection
with a Plan (other than for premiums due in the ordinary course).
6.13. Compliance with Environmental Laws. Except as otherwise disclosed in
Attachment B and to the best of Customer's knowledge:
(A) The Customer has obtained all government approvals required with
respect to the operation of their businesses under any Environmental Law.
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(B) (i) the Customer has not generated, transported or disposed of any
Hazardous Substances; (ii) the Customer is not currently generating,
transporting or disposing of any Hazardous Substances; (iii) the Customer has no
knowledge that (a) any of its real property (whether owned, leased, or otherwise
directly or indirectly controlled) has been used for the disposal of or has been
contaminated by any Hazardous Substances, or (b) any of its business operations
have contaminated lands or waters of others with any Hazardous Substances; (iv)
the Customer and its respective assets are not subject to any Environmental
Liability and, to the best of the Customer's knowledge, any threatened
Environmental Liability; (v) the Customer has not received any notice of or
otherwise learned of any governmental investigation evaluating whether any
remedial action is necessary to respond to a release or threatened release of
any Hazardous Substances for which the Customer may be liable; (vi) the Customer
is not in violation of any Environmental Law; (vii) there are no proceedings or
investigations pending against Customer with respect to any violation or alleged
violation of any Environmental Law; provided however, that the parties
acknowledge that any generation, transportation, use, storage and disposal of
certain such Hazardous Substances in Customer's or its Subsidiaries' business
shall be excluded from representations (i) and (ii) above, provided, further,
that Customer is at all times generating, transporting, utilizing, storing and
disposing such Hazardous Substances in accordance with all applicable
Environmental Laws and in a manner designed to minimize the risk of any spill,
contamination, release or discharge of Hazardous Substances other than as
authorized by Environmental Laws.
6.14. Intellectual Property. To the best of Customer's knowledge, Customer
possesses such assets, licenses, patents, patent applications, copyrights,
service marks, trademarks, trade names and trade secrets and all rights and
other property relating thereto or arising therefrom ("Intellectual Property")
as are necessary or advisable to continue to conduct its present and proposed
business activities.
6.15. Licenses and Permits. To the best of Customer's knowledge, Customer has
obtained and holds in full force and effect all franchises, licenses, leases,
permits, certificates, authorizations, qualifications, easements, rights of way
and other rights and approvals which are necessary for the operation of its
businesses as presently conducted. Customer is not in violation of the terms of
any such franchise, license, lease, permit, certificate, authorization,
qualification, easement, right of way, right or approval.
6.16. Investment Company. The Customer is not (i) an investment company or a
company controlled by an investment company within the meaning of the Investment
Company Act of 1940, as amended, (ii) a holding company or a subsidiary of a
holding company, or an Affiliate of a holding company or of a subsidiary of a
holding company, within the meaning of the Public Utility Holding Company Act of
1935, as amended, or (iii) subject to any other law which purports to regulate
or restrict its ability to borrow money or to consummate the transactions
contemplated by this Agreement or the Other Documents or to perform its
obligations hereunder or thereunder.
6.17. Taxes and Tax Returns. To the best of Customer's knowledge, Customer
has timely filed all federal, state, and local tax returns and other reports
which it is required by law to file, and has either duly paid all taxes, fees
and other governmental charges indicated to be due on the basis of such reports
and returns or pursuant to any assessment received by the Customer, or made
provision for the payment thereof in accordance with GAAP. The charges and
reserves on the books of the Customer in respect of taxes or other governmental
charges are in accordance with GAAP. No tax liens have been filed against
Customer or any of its property.
6.18. Status of Accounts. Each Account is based on an actual and bona fide
sale and delivery of goods or rendition of services to customers, made by
Customer, in the ordinary course of its business; the goods and inventory being
sold and the Accounts created are its exclusive property and are not and shall
not be subject to any Lien, consignment arrangement, encumbrance, security
interest or financing statement whatsoever (other than Permitted Liens). The
Customer's customers have accepted goods or services and owe and are obligated
to pay the full amounts stated in the invoices according to their terms.
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There are no proceedings or actions known to Customer which are pending or
threatened against any Material Account Debtor (as defined in Section 7.14(B) of
this Agreement) of any of the Accounts which could reasonably be expected to
result in a Material Adverse Effect on the debtor's ability to pay the full
amounts due to Customer.
6.19. Affiliate/Subsidiary Transactions. Customer is not a party to or bound
by any agreement or arrangement (whether oral or written) to which any Affiliate
or Subsidiary of the Customer is a party except (i) in the ordinary course of
and pursuant to the reasonable requirements of Customer's business and (ii) upon
fair and reasonable terms no less favorable to Customer than it could obtain in
a comparable arm's-length transaction with an unaffiliated Person.
6.20. Accuracy and Completeness of Information. All factual information
furnished by or on behalf of the Customer to IBM Credit or the Auditors for
purposes of or in connection with this Agreement or any Other Document, or any
transaction contemplated hereby or thereby is or 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 material fact necessary to
make such information not misleading at such time.
6.21. Recording Taxes. All recording taxes, recording fees, filing fees and
other charges payable in connection with the filing and recording of this
Agreement have either been paid in full by Customer or arrangements for the
payment of such amounts by Customer have been made to the satisfaction of IBM
Credit.
6.22. Indebtedness. Customer (i) has no Indebtedness, other than Permitted
Indebtedness; and (ii) has not guaranteed the obligations of any other Person
(except as permitted by Section 8.4).
Section 7. AFFIRMATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations:
7.1. Financial and Other Information. Customer shall cause the following
information to be made available to IBM Credit within the following time
periods:
(A) as soon as available and in any event within ninety-one (91) days after
the end of each fiscal year of Customer (i) audited Financial Statements as of
the close of the fiscal year and for the fiscal year, together with a comparison
to the Financial Statements for the prior year, in each case accompanied by (a)
either an opinion of the Auditors without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit or, if so qualified, an opinion which shall be in scope and substance
reasonably satisfactory to IBM Credit, (b) such Auditors' "Management Letter" to
Customer, if any, and (ii) a Compliance Certificate along with a schedule, in
substantially the form of Attachment C hereto, of the calculations used in
determining, as of the end of such fiscal year, whether Customer is in
compliance with the financial covenants set forth in Attachment A;
(B) as soon as available and in any event within forty-six (46) days after
the end of each fiscal quarter of Customer (i) Financial Statements as of the
end of such period and for the fiscal year to date, together with a comparison
to the Financial Statements for the same periods in the prior year, all in
reasonable detail and duly certified (subject to normal year-end audit
adjustments and except for the absence of footnotes) by the chief executive
officer, chief financial officer, Treasurer or Controller of Customer as having
been prepared in accordance with GAAP; and (ii) a Compliance Certificate along
with a schedule, in substantially the form of Attachment C hereto, of the
calculations used in determining, as of the end of such fiscal quarter, whether
Customer is in compliance with the financial covenants set forth in Attachment
A;
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(C) as soon as available and in any event within sixty (60) days after the
end of each fiscal year of Customer (i) projected Financial Statements, broken
down by quarter, for the current and following fiscal year; and (ii) if
composed, a narrative discussion relating to such projected Financial
Statements;
(D) promptly after Customer obtains knowledge of (i) the occurrence of a
Default or Event of Default, or (ii) the existence of any condition or event
which would result in the Customer's failure to satisfy the conditions precedent
to Advances set forth in Section 5, a certificate of the chief executive
officer, chief financial officer, Treasurer or Controller of Customer specifying
the nature thereof and the Customer's proposed response thereto, each in
reasonable detail;
(E) promptly after Customer obtains knowledge of (i) any proceeding(s)
being instituted or threatened to be instituted by or against Customer in any
federal, state, local or foreign court or before any commission or other
regulatory body (federal, state, local or foreign), or (ii) any actual or
prospective change, development or event which, in any such case, has had or
could reasonably be expected to have a Material Adverse Effect, a certificate of
the chief executive officer, chief financial officer, Treasurer or Controller of
Customer specifying the nature thereof and the Customer's proposed response
thereto, each in reasonable detail;
(F) promptly after Customer obtains knowledge that (i) any order, judgment
or decree in excess of $3,000,000 shall have been entered against Customer or
any of its properties or assets, or (ii) it has received any notification of a
material violation of any Requirement of Law from any Governmental Authority, a
certificate of the chief executive officer, chief financial officer, Treasurer
or Controller of Customer specifying the nature thereof and the Customer's
proposed response thereto, each in reasonable detail;
(G) promptly after Customer learns of any material labor dispute to which
Customer may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
Customer is a party or by which it is bound, a certificate of the chief
executive officer, chief financial officer, Treasurer or Controller of Customer
specifying the nature thereof and the Customer's proposed response thereto, each
in reasonable detail;
(H) within five (5) Business Days after request by IBM Credit, any written
certificates, schedules and reports together with all supporting documents as
IBM Credit may reasonably request relating to the Collateral or the Customer's
or any guarantor's business affairs and financial condition;
(I) by the fifth (5th) day of each month, or as otherwise agreed in
writing, a Collateral Management Report as of a date no earlier than the last
day of the immediately preceding month;
(J) within five (5) days after the same are sent, copies of all Financial
Statements and reports which Customer sends to its stockholders, and within five
(5) days after the same are filed, copies of all Financial Statements and
reports which Customer may make to, or file with, the Securities and Exchange
Commission or any successor or analogous governmental authority; and
(K) immediately upon issuance or receipt, as the case may be, copies of all
notices, reports, certificates or schedules issued or received by Customer or
CSI Funding, Inc. in accordance with the Transaction Documents.
Each certificate, schedule and report provided by Customer to IBM Credit shall
be signed by an authorized officer of Customer, and which signature shall be
deemed a representation and warranty that the information contained in such
certificate, schedule or report is true and accurate in all material respects on
the date as of which such certificate, schedule or report is made and does not
omit to state a material fact necessary in order to make the statements
contained therein not misleading at such time. Each Financial
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Statement delivered pursuant to this Section 7.1 shall be prepared in accordance
with GAAP applied consistently throughout the periods reflected therein and with
prior periods.
7.2. Location of Collateral. The inventory, equipment and other tangible
Collateral shall be kept or sold at the addresses as set forth on Attachment B
or on any notice provided by Customer to IBM Credit in accordance with Section
7.7(C). Such locations shall be certified quarterly to IBM Credit substantially
in the form of Attachment G.
7.3. Changes in Customer. Customer shall provide thirty (30) days prior
written notice to IBM Credit of any change in Customer's name, chief executive
office and principal place of business, organization, form of ownership or
corporate structure; provided, however, that Customer's compliance with this
covenant shall not relieve it of any of its other obligations or any other
provisions under this Agreement or any Other Document limiting actions of the
type described in this Section.
7.4. Corporate Existence. Customer shall (A) maintain its corporate
existence, maintain in full force and effect all licenses, bonds, franchises,
leases and qualifications to do business, and all contracts and other rights
necessary to the profitable conduct of its business, (B) continue in, and limit
its operations to those in the information technology industry unless otherwise
permitted in writing by IBM Credit and (C) comply with all Requirements of Law.
7.5. ERISA. Customer shall promptly notify IBM Credit in writing after it
learns of the occurrence of any event which would constitute a "reportable
event" under ERISA or any regulations thereunder with respect to any Plan, or
that the PBGC (as defined in Section 6.12 of this Agreement) has instituted or
will institute proceedings to terminate any Plan. Notwithstanding the
foregoing, the Customer shall have no obligation to notify IBM Credit as to any
"reportable event" as to which the 30-day notice requirement of Section 4043(b)
has been waived by the PBGC, until such time as such Customer is required to
notify the PBGC of such reportable event.
Such notification shall include a certificate of the chief financial officer,
Treasurer or Controller of Customer setting forth details as to such "reportable
event" and the action which Customer proposes to take with respect thereto,
together with a copy of any notice of such "reportable event" which may be
required to be filed with the PBGC, or any notice delivered by the PBGC
evidencing its intent to institute such proceedings. Upon request of IBM
Credit, Customer shall furnish, or cause the plan administrator to furnish, to
IBM Credit the most recently filed annual report for each Plan.
7.6. Environmental Matters. (A) Customer and any other Person under
Customer's control (including, without limitation, agents and Affiliates under
such control) shall (i) comply with all Environmental Laws in all material
respects, and (ii) undertake to use commercially reasonable efforts to prevent
any unlawful release of any Hazardous Substance by Customer or such Person into,
upon, over or under any property now or hereinafter owned, leased or otherwise
controlled (directly or indirectly) by Customer.
(B) Customer shall notify IBM Credit, promptly upon its obtaining knowledge
of (i) any non-routine proceeding or investigation by any Governmental Authority
with respect to the presence of any Hazardous Substances on or in any property
now or hereinafter owned, leased or otherwise controlled (directly or
indirectly) by Customer, (ii) all claims made or threatened by any Person or
Governmental Authority against Customer or any of Customer's assets relating to
any loss or injury resulting from any Hazardous Substance, (iii) Customer's
discovery of evidence of unlawful disposal of or environmental contamination by
any Hazardous Substance on any property now or hereinafter owned, leased or
otherwise controlled (directly or indirectly) by Customer, and (iv) any
occurrence or condition which could constitute a violation of any Environmental
Law.
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7.7. Collateral Books and Records/Collateral Audit. (A) Customer agrees to
maintain books and records pertaining to the Collateral in such detail, form and
scope as is consistent with good business practice, and agrees that such books
and records will reflect IBM Credit's interest in the Accounts.
(B) Customer agrees that IBM Credit or its agents may enter upon the
premises of Customer at any time and from time to time, during normal business
hours and upon reasonable notice under the circumstances, and at any time at all
on and after the occurrence and during the continuance of an Event of Default
for the purposes of (i) inspecting the Collateral, (ii) as reasonable and
appropriate given the particular circumstances existing at the time, inspecting
and/or copying (at Customer's expense) any and all records pertaining thereto,
(iii) as reasonable and appropriate given the particular circumstances existing
at the time, discussing the affairs, finances and business of Customer with any
officers, employees and directors of Customer or with the Auditors and (iv)
verifying Eligible Accounts and other Collateral. Customer also agrees to
provide IBM Credit with such reasonable information and documentation that IBM
Credit deems necessary to conduct the foregoing activities, including, without
limitation, reasonably requested samplings of purchase orders, invoices and
evidences of delivery or other performance.
Upon the occurrence and during the continuance of an Event of Default which has
not been waived by IBM Credit in writing, IBM Credit may conduct any of the
foregoing activities in any manner that IBM Credit deems reasonably necessary.
(C) Customer shall give IBM Credit thirty (30) days prior written notice of
any change in the location of any Collateral, the location of its books and
records or in the location of its chief executive office or place of business
from the locations specified in Attachment B, and will execute in advance of
such change and cause to be filed and/or delivered to IBM Credit any financing
statements, landlord or other lien waivers, or other documents reasonably
required by IBM Credit, all in form and substance reasonably satisfactory to IBM
Credit.
(D) Customer agrees to advise IBM Credit promptly, in reasonably sufficient
detail, of any substantial change relating to the type, quantity or quality of
the Collateral, or any event which could reasonably be expected to have a
Material Adverse Effect on the value of the Collateral or on the security
interests granted to IBM Credit therein.
7.8. Insurance; Casualty Loss. (A) Customer agrees to maintain with
financially sound and reputable insurance companies: (i) insurance on its
properties, (ii) public liability insurance against claims for personal injury
or death as a result of the use of any products sold by it and (iii) insurance
coverage against other business risks, in each case, in at least such amounts
and against at least such risks as are usually and prudently insured against in
the same general geographical area by companies of established repute engaged in
the same or a similar business. Customer will furnish to IBM Credit, upon its
written request, the insurance certificates with respect to such insurance. In
addition, all Policies so maintained are to name IBM Credit as an additional
insured as its interest may appear.
(B) Without limiting the generality of the foregoing, Customer shall keep
and maintain, at its sole expense, the Collateral insured for an amount not less
than the amount set forth on Attachment A from time to time opposite the caption
"Collateral Insurance Amount" against all loss or damage under an "all risk"
Policy with companies mutually acceptable to IBM Credit and Customer, with a
lender's loss payable endorsement or mortgagee clause in form and substance
reasonably satisfactory to IBM Credit designating that any loss payable
thereunder with respect to such Collateral shall be payable to IBM Credit. Upon
receipt of proceeds by IBM Credit the same shall be applied on account of the
Customer's Outstanding Product Advances first, then to the Outstanding A/R
Advances. Customer agrees to instruct each insurer to give IBM Credit, by
endorsement upon the Policy issued by it or by independent instruments furnished
to IBM Credit, at least ten (10) days written notice before any Policy shall be
altered
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or cancelled and that no act or default of Customer or any other person shall
affect the right of IBM Credit to recover under the Policies. Customer hereby
agrees to direct all insurers under the Policies to pay all proceeds with
respect to the Collateral directly to IBM Credit.
If Customer fails to pay any cost, charges or premiums, or if Customer fails to
insure the Collateral, IBM Credit may pay such costs, charges or premiums. Any
such amounts paid by IBM Credit hereunder shall be considered an additional debt
owed by Customer to IBM Credit and are due and payable immediately upon receipt
of an invoice by IBM Credit.
7.9. Taxes. Customer agrees to pay, when due, all taxes lawfully levied or
assessed against Customer or any of the Collateral before any penalty or
interest accrues thereon unless such taxes are being contested, in good faith,
by appropriate proceedings promptly instituted and diligently conducted and an
adequate reserve or other appropriate provisions have been made therefor as
required in order to be in conformity with GAAP and an adverse determination in
such proceedings could not reasonably be expected to have a Material Adverse
Effect.
7.10. Compliance With Laws. Customer agrees to comply in all material
respects with all Requirements of Law applicable to the Collateral or any part
thereof, or to the operation of its business.
7.11. Fiscal Year. Customer agrees to maintain its fiscal year as a year
ending December 31 unless Customer provides IBM Credit at least thirty (30) days
prior written notice of any change thereof.
7.12. Intellectual Property. Customer shall do and cause to be done all
things necessary to preserve and keep in full force and effect all registrations
of Intellectual Property which the failure to do or cause to be done could
reasonably be expected to have a Material Adverse Effect.
7.13. Maintenance of Property. Customer shall maintain all of its material
properties (business and otherwise) in good condition and repair (ordinary wear
and tear excepted) and pay and discharge all costs of repair and maintenance
thereof and all rental and mortgage payments and related charges pertaining
thereto and not commit or permit any waste with respect to any of its material
properties.
7.14. Collateral. Customer shall:
(A) from time to time upon request of IBM Credit, provide IBM Credit with
access to copies of all invoices, delivery evidences and other such documents
relating to each Account;
(B) promptly upon Customer's obtaining knowledge thereof, furnish to and
inform IBM Credit of all material adverse information relating to the financial
condition of any Account debtor whose outstanding obligations to Customer
constitute two percent (2%) or more of the Accounts at such time (a "Material
Account Debtor");
(C) promptly upon Customer's learning thereof, notify IBM Credit in writing
of any event which would cause any obligation of a Material Account Debtor to
become an Ineligible Account;
(D) keep all goods rejected or returned by any Account debtor and all goods
repossessed or stopped in transit by Customer from any Account debtor segregated
from other property of Customer, holding the same in trust for IBM Credit until
Customer applies a credit against such Account debtor's outstanding obligations
to Customer or sells such goods in the ordinary course of business, whichever
occurs earlier;
(E) stamp or otherwise mark chattel paper and instruments now owned or
hereafter acquired by it in conspicuous type to show that the same are subject
to IBM Credit's security interest and
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immediately thereafter deliver or cause such chattel paper and instruments to be
delivered to IBM Credit or any agent designated by IBM Credit with appropriate
endorsements and assignments to vest title and possession in IBM Credit;
(F) use commercially reasonable efforts to collect all Accounts owed;
(G) promptly notify IBM Credit of any material loss, theft or destruction
of or damage to any of the Collateral. Customer shall diligently file and
prosecute its claim for any award or payment in connection with any such loss,
theft, destruction of or damage to Collateral. Customer shall, upon demand of
IBM Credit, make, execute and deliver any assignments and other instruments
sufficient for the purpose of assigning any such award or payment to IBM Credit,
free of any encumbrances of any kind whatsoever;
(H) consistent with reasonable commercial practice, observe and perform all
matters and things necessary or expedient to be observed or performed under or
by virtue of any lease, license, concession or franchise forming part of the
Collateral in order to preserve, protect and maintain all the rights of IBM
Credit thereunder;
(I) consistent with reasonable commercial practice, maintain, use and
operate the Collateral and carry on and conduct its business in a proper and
efficient manner so as to preserve and protect the Collateral and the earnings,
incomes, rents, issues and profits thereof; and
(J) at any time and from time to time, upon the request of IBM Credit, and
at the sole expense of Customer, Customer will promptly and duly execute and
deliver such further instruments and documents and take such further action as
IBM Credit may reasonably request for the purpose of obtaining or preserving the
full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any jurisdiction with
respect to the security interests granted herein and the payment of any and all
recording taxes and filing fees in connection therewith.
7.15. Subsidiaries. IBM Credit may require that any Subsidiaries of Customer
become parties to this Agreement or any other agreement executed in connection
with this Agreement as guarantors or sureties. Customer will comply, and cause
all such Subsidiaries of Customer to comply with Sections 7 and 8 of this
Agreement, as if such sections applied directly to such Subsidiaries.
7.16. Financial Covenants; Additional Covenants. Customer acknowledges and
agrees that Customer shall maintain the financial covenants and other covenants
set forth in the attachments, exhibits and other addenda incorporated in this
Agreement.
Section 8. NEGATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations hereunder:
8.1. Liens. The Customer will not, directly or indirectly mortgage, assign,
pledge, transfer, create, incur, assume, permit to exist or otherwise permit any
Lien or judgment to exist on any of its property, assets, revenues or goods,
whether real, personal or mixed, whether now owned or hereafter acquired, except
for Permitted Liens.
8.2. Disposition of Assets. The Customer will not, directly or indirectly,
sell, lease, assign, transfer or otherwise dispose of any assets other than (i)
sales of inventory in the ordinary course of business and short term rental of
inventory as demonstrations in amounts not material to Customer, and (ii)
voluntary
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dispositions of individual assets and obsolete or worn out property in the
ordinary course of business, provided, that the aggregate book value of all such
assets and property so sold or disposed of under this section 8.2 (ii) in any
fiscal year shall not exceed 5% of the consolidated assets of the Customer as of
the beginning of such fiscal year.
8.3. Corporate Changes. The Customer will not, without the prior written
consent of IBM Credit, directly or indirectly, merge, consolidate, liquidate,
dissolve or enter into or engage in any operation or activity materially
different from that presently being conducted by Customer.
8.4. Guaranties. The Customer will not, directly or indirectly, assume,
guaranty, endorse, or otherwise become liable upon the obligations of any other
Person, except (i) by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business, (ii) by
the giving of indemnities in connection with the sale of inventory or other
asset dispositions permitted hereunder, and (iii) for guaranties in favor of IBM
Credit.
8.5. Restricted Payments. The Customer will not, directly or indirectly: (i)
declare or pay any dividend (other than dividends payable solely in common stock
of Customer) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of capital stock of
Customer or any warrants, options or rights to purchase any such capital stock,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Customer; or (ii) make any optional payment or prepayment on or
redemption (including, without limitation, by making payments to a sinking or
analogous fund) or repurchase of any Indebtedness (other than the Obligations)
provided, however that Customer may declare and pay regularly scheduled
dividends on it preferred stock held by Safeguard Scientifics, Inc. further
provided that such declaration or payment shall not create an Event of Default .
8.6. Investments. Other than Permitted Investments. Customer will not,
directly or indirectly, make, maintain or acquire any Investment in any Person
other than:
(A) interest bearing deposit accounts (including certificates of deposit)
which are insured by the Federal Deposit Insurance Corporation ("FDIC") or a
similar federal insurance program;
(B) direct obligations of the government of the United States of America or
any agency or instrumentality thereof or obligations guaranteed as to principal
and interest by the United States of America or any agency thereof;
(C) stock or obligations issued to Customer in settlement of claims against
others by reason of an event of bankruptcy or a composition or the readjustment
of debt or a reorganization of any debtor of Customer; and
(D) commercial paper of any corporation organized under the laws of any
State of the United States or any bank organized or licensed to conduct a
banking business under the laws of the United States or any State thereof having
the short-term highest rating then given by Moody's Investor's Services, Inc. or
Standard & Poor's Corporation.
8.7. Affiliate/Subsidiary Transactions. The Customer will not, directly or
indirectly, enter into any transaction with any Affiliate or Subsidiary,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service to any Affiliate or Subsidiary of Customer except in
the ordinary course of business and pursuant to the reasonable requirements of
Customer's business upon fair and reasonable terms no less favorable to Customer
than could be obtained in a comparable arm's-length transaction with an
unaffiliated Person.
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8.8. ERISA. The Customer will not (A) terminate any Plan so as to incur a
material liability to the PBGC (as defined in Section 6.12 of this Agreement),
(B) permit any "prohibited transaction" involving any Plan (other than a "multi-
employer benefit plan") which would subject the Customer to a material tax or
penalty on "prohibited transactions" under the Code or ERISA, (C) fail to pay to
any Plan any contribution which they are obligated to pay under the terms of
such Plan, if such failure would result in a material "accumulated funding
deficiency", whether or not waived, (D) allow or suffer to exist any occurrence
of a "reportable event" or any other event or condition, which presents a
material risk of termination by the PBGC of any Plan (other than a "multi-
employer benefit plan"), or (E) fail to notify IBM Credit as required in Section
7.5. As used in this Agreement, the terms "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
the Code and ERISA. For purposes of this Section 8.8, the terms "material
liability", "tax", "penalty", "accumulated funding deficiency" and "risk of
termination" shall mean a liability, tax, penalty, accumulated funding
deficiency or risk of termination which could reasonably be expected to have a
Material Adverse Effect.
8.9. Additional Negative Pledges. Customer will not, directly or indirectly,
create or otherwise cause or permit to exist or become effective any contractual
obligation which may restrict or inhibit IBM Credit's rights or ability to sell
or otherwise dispose of the Collateral or any part thereof after the occurrence
and during the continuance of an Event of Default.
8.10. Storage of Collateral with Bailees and Warehousemen. Collateral shall
not be stored with a bailee, warehouseman or similar party without the prior
written consent of IBM Credit unless Customer will, concurrently with the
delivery of such Collateral to such party, cause such party to issue and deliver
to IBM Credit, warehouse receipts in the name of IBM Credit evidencing the
storage of such Collateral.
8.11. Use of Proceeds. Without the prior written consent of IBM Credit which
consent shall not be unreasonably withheld or delayed, the Customer shall not
use any portion of the proceeds of any Advances other than to acquire Products
from Authorized Suppliers and for its general working capital requirements and
capital expenditures which shall not exceed the aggregate amount of $15,000,000
in any single fiscal year.
8.12. Accounts. The Customer shall not permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account, including any of the terms relating thereto,
which would affect IBM Credit's ability to collect payment on any Account in
whole or in part, except for such extensions, compromises or settlements made by
Customer in the ordinary course of its business, provided, however, that the
aggregate amount of such extensions, compromises or settlements does not exceed
five percent (5%) of the Customer's Accounts at any time.
8.13. Indebtedness. The Customer will not create, incur, assume or permit to
exist any Indebtedness, except for Permitted Indebtedness.
8.14. Loans. The Customer will not make any loans, advances, contributions or
payments of money or goods to any Subsidiary, Affiliate or parent corporation or
to any officer, director or stockholder of Customer or of any such corporation
(except for compensation for personal services actually rendered), except for
transactions expressly authorized in this Agreement, provided, however, that
Customer may make loans to officers and further provided that the aggregate loan
amount outstanding shall at no time exceed $7,000,000.
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8.15 Transaction Documents. The Customer shall not amend, modify or supplement
any of the Transaction Documents or enter into any new agreement with respect to
the Receivables Facility without the prior written consent of IBM Credit, which
consent shall not be unreasonably withheld.
Section 9. DEFAULT
9.1. Event of Default. Any one or more of the following events shall
constitute an Event of Default by the Customer under this Agreement and the
Other Documents:
(A) The failure to make timely payment of the Obligations or any part
thereof when due and payable if such failure shall remain unremedied for five
(5) days after written notice thereof shall have been given to Customer by IBM
Credit or ten (10) days after such payment is due, whichever is earlier, during
which period Customer shall be charged the Delinquency Fee rate set forth in
Attachment A beginning on the day after the date payment was due and including
the date payment is received;
(B) Customer fails to comply with or observe any term, covenant or
agreement contained in this Agreement or any Other Documents which could
reasonably be expected to have a Material Adverse effect if such failure shall
remain unremedied for five (5) days or such other period of time as IBM Credit
may agree to in writing;
(C) Any representation, warranty, statement, report or certificate made or
delivered by or on behalf of Customer or any of its officers, employees or
agents or by or on behalf of any guarantor to IBM Credit was false in any
material respect at the time when made or deemed made;
(D) The occurrence of any event or circumstance which could reasonably be
expected to have a Material Adverse Effect;
(E) Customer, any Subsidiary or any guarantor shall generally not pay its
debts as such debts become due, become or otherwise declare itself insolvent,
file a voluntary petition for bankruptcy protection, have filed against it any
involuntary bankruptcy petition, cease to do business as a going concern, make
any assignment for the benefit of creditors, or a custodian, receiver, trustee,
liquidator, administrator or person with similar powers shall be appointed for
Customer, any Subsidiary or any guarantor or any of its respective properties or
have any of its respective properties seized or attached, or take any action to
authorize, or for the purpose of effectuating, the foregoing, provided, however,
that Customer, any Subsidiary or any guarantor shall have a period of sixty (60)
days within which to discharge any involuntary petition for bankruptcy or
similar proceeding;
(F) The use of any funds borrowed from IBM Credit under this Agreement for
any purpose other than as provided in this Agreement;
(G) The entry of any judgment against Customer or any guarantor in an
amount in excess of $3,000,000 and such judgment is not satisfied, dismissed,
stayed or superseded by bond within thirty (30) days after the day of entry
thereof (and in the event of a stay or supersedeas bond, such judgment is not
discharged within thirty (30) days after termination of any such stay or bond)
or such judgment is not fully covered by insurance as to which the insurance
company has acknowledged its obligation to pay such judgment in full;
(H) The dissolution or liquidation of Customer, any Subsidiary or any
guarantor, or Customer or any guarantor or its directors or stockholders shall
take any action to dissolve or liquidate Customer or any guarantor;
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(I) Any "going concern" or like qualification or exception, or
qualification arising out of the scope of an audit by an Auditor of its opinion
relative to any Financial Statement delivered to IBM Credit under this
Agreement;
(J) There issues a warrant of distress for any rent or taxes with respect
to any premises occupied by Customer in or upon which the Collateral, or any
part thereof, may at any time be situated and such warrant shall continue for a
period of ten (10) Business Days from the date such warrant is issued;
(K) Customer suspends business;
(L) The occurrence of any event or condition that permits the holder of any
material Indebtedness arising in one or more related or unrelated transactions
to accelerate the maturity thereof or the failure of Customer to pay when due
any such Indebtedness;
(M) Any guaranty of any or all of the Customer's Obligations executed by
any guarantor in favor of IBM Credit, shall at any time for any reason cease to
be in full force and effect or shall be declared to be null and void by a court
of competent jurisdiction or the validity or enforceability thereof shall be
contested or denied by any such guarantor, or any such guarantor shall deny that
it has any further liability or obligation thereunder or any such guarantor
shall fail to comply with or observe any of the terms, provisions or conditions
contained in any such guaranty;
(N) Customer is in default under the material terms of any of the Other
Documents after the expiration of any applicable cure periods;
(O) There shall occur a "reportable event" with respect to any Plan, or any
Plan shall be subject to termination proceedings (whether voluntary or
involuntary) and there shall result from such "reportable event" or termination
proceedings a liability of Customer to the PBGC which in the reasonable opinion
of IBM Credit will have a Material Adverse Effect;
(P) Any "person" (as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) other than Safeguard Scientifics, Inc. acquires a
beneficial interest in 50% or more of the Voting Stock of Customer;
(Q) the occurrence of an Early Amortization Event as defined in the Pooling
and Servicing Agreement.
9.2. Acceleration. Upon the occurrence and during the continuance of an Event
of Default which has not been waived in writing by IBM Credit, IBM Credit may,
in its sole discretion, take any or all of the following actions, without
prejudice to any other rights it may have at law or under this Agreement to
enforce its claims against the Customer: (a) declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 9.1(E) hereof, in which case all Obligations shall
automatically become immediately due and payable without the necessity of any
notice or other demand) without presentment, demand, protest or any other action
or obligation of IBM Credit; and (b) immediately terminate the Credit Facilities
hereunder.
9.3. Remedies. (A) Upon the occurrence and during the continuance of any
Event of Default which has not been waived in writing by IBM Credit, IBM Credit
may exercise all rights and remedies of a secured party under the U.C.C.
Without limiting the generality of the foregoing, IBM Credit may: (i) remove
from any premises where same may be located any and all documents, instruments,
files and records (including the copying of any computer records), and any
receptacles or cabinets containing same, relating to the Accounts, or IBM Credit
may use (at the expense of the Customer) such of the
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supplies or space of the Customer at Customer's place of business or otherwise,
as may be necessary to properly administer and control the Accounts or the
handling of collections and realizations thereon; (ii) bring suit, in the name
of the Customer or IBM Credit and generally shall have all other rights
respecting said Accounts, including without limitation the right to accelerate
or extend the time of payment, settle, compromise, release in whole or in part
any amounts owing on any Accounts and issue credits in the name of the Customer
or IBM Credit; (iii) sell, assign and deliver the Accounts and any returned,
reclaimed or repossessed merchandise, with or without advertisement, at public
or private sale, for cash, on credit or otherwise, at IBM Credit's sole option
and discretion, and IBM Credit may bid or become a purchaser at any such sale;
and (iv) foreclose the security interests created pursuant to this Agreement by
any available judicial procedure, or to take possession of any or all of the
Collateral without judicial process and to enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same; and (v) deliver the Notice to Norwest Bank Minnesota, as Trustee.
(B) Upon the occurrence and during the continuance of any Event of Default
which has not been waived in writing by IBM Credit, IBM Credit shall have the
right to sell, lease, or otherwise dispose of all or any part of the Collateral,
whether in its then condition or after further preparation or processing, in the
name of Customer or IBM Credit, or in the name of such other party as IBM Credit
may designate, either at public or private sale or at any broker's board, in
lots or in bulk, for cash or for credit, with or without warranties or
representations, and upon such other terms and conditions as IBM Credit in its
sole discretion may deem advisable, and IBM Credit shall have the right to
purchase at any such sale.
If IBM Credit, in its reasonable discretion determines that any of the
Collateral requires rebuilding, repairing, maintenance or preparation, IBM
Credit shall have the right, at its option, to do such of the aforesaid as it
deems necessary for the purpose of putting such Collateral in such saleable form
as IBM Credit shall deem appropriate. The Customer hereby agrees that any
disposition by IBM Credit of any Collateral pursuant to and in accordance with
the terms of a repurchase agreement between IBM Credit and the manufacturer or
any supplier (including any Authorized Supplier) of such Collateral constitutes
a commercially reasonable sale. The Customer agrees, at the request of IBM
Credit, to assemble the Collateral and to make it available to IBM Credit at
places which IBM Credit shall select, whether at the premises of the Customer or
elsewhere, and to make available to IBM Credit the premises and facilities of
the Customer for the purpose of IBM Credit's taking possession of, removing or
putting such Collateral in saleable form. If notice of intended disposition of
any Collateral is required by law, it is agreed that ten (10) Business Days
notice shall constitute reasonable notification.
(C) Unless expressly prohibited by the licensor thereof, if any, IBM Credit
is hereby granted, upon the occurrence and during the continuance of any Event
of Default which has not been waived in writing by IBM Credit, an irrevocable,
non-exclusive license to use, assign, license or sublicense all computer
software programs, data bases, processes and materials used by the Customer in
its businesses or in connection with any of the Collateral.
(D) The net cash proceeds resulting from IBM Credit's exercise of any of
the foregoing rights (after deducting all charges, costs and expenses, including
reasonable attorneys' fees) shall be applied by IBM Credit to the payment of
Customer's Obligations, whether due or to become due, in such order as IBM
Credit may in it sole discretion elect. Customer shall remain liable to IBM
Credit for any deficiencies, and IBM Credit in turn agrees to remit to Customer
or its successors or assigns, any surplus resulting therefrom.
(E) The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative.
9.4. Waiver. If IBM Credit seeks to take possession of any of the Collateral
by any court process Customer hereby irrevocably waives to the extent permitted
by applicable law any bonds, surety and
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security relating thereto required by any statute, court rule or otherwise as an
incident to such possession and any demand for possession of the Collateral
prior to the commencement of any suit or action to recover possession thereof.
In addition, Customer waives to the extent permitted by applicable law all
rights of set-off it may have against IBM Credit. Customer further waives to the
extent permitted by applicable law presentment, demand and protest, and notices
of non-payment, non-performance, any right of contribution, dishonor, and any
other demands, and notices required by law.
Section 10. MISCELLANEOUS
10.1. Term; Termination. (A) This Agreement shall remain in force until the
earlier of (i) the Termination Date, (ii) the date specified in a written notice
by the Customer that it intends to terminate this Agreement which date shall be
no less than thirty (30) days following the receipt by IBM Credit of such
written notice, and (iii) termination by IBM Credit after the occurrence and
during the continuance of an Event of Default. Upon the date that this
Agreement is terminated, all of Customer's Obligations shall be immediately due
and payable in their entirety, even if they are not yet due under their terms.
(B) Until the indefeasible payment in full of all of Customer's
Obligations, no termination of this Agreement or any of the Other Documents
shall in any way affect or impair (i) Customer's Obligations to IBM Credit
including, without limitation, any transaction or event occurring prior to and
after such termination, or (ii) IBM Credit's rights hereunder, including,
without limitation IBM Credit's security interest in the Collateral. On and
after a Termination Date IBM Credit may, but shall not be obligated to, upon the
request of Customer, continue to provide Advances hereunder.
10.2. Indemnification. The Customer hereby agrees to indemnify and hold
harmless IBM Credit and each of its officers, directors, agents and assigns
(collectively, the "Indemnified Persons") against all losses, claims, damages,
liabilities or other expenses (including reasonable attorneys' fees and court
costs now or hereinafter arising from the enforcement of this Agreement, the
"Losses") to which any of them may become subject insofar as such Losses arise
out of or are based upon any event, circumstance or condition (a) occurring or
existing on or before the date of this Agreement relating to any financing
arrangements IBM Credit may from time to time have with (i) Customer, (ii) any
Person that shall be acquired by Customer or (iii) any Person that Customer may
acquire all or substantially all of the assets of, or (b) directly or
indirectly, relating to the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby or thereby or to any
of the Collateral or to any act or omission of the Customer in connection
therewith. Notwithstanding the foregoing, the Customer shall not be obligated
to indemnify IBM Credit for any Losses incurred by IBM Credit which are a result
of IBM Credit's gross negligence or willful misconduct. The indemnity provided
herein shall survive the termination of this Agreement.
10.3. Additional Obligations. IBM Credit, without waiving or releasing any
Obligation or Default of the Customer, may perform any Obligations of the
Customer that the Customer shall fail or refuse to perform and IBM Credit may,
at any time or times hereafter, but shall be under no obligation to do so, pay,
acquire or accept any assignment of any security interest, lien, encumbrance or
claim against the Collateral asserted by any person. All sums paid by IBM
Credit in performing in satisfaction or on account of the foregoing and any
expenses, including reasonable attorney's fees, court costs, and other charges
relating thereto, shall be a part of the Obligations, payable on demand and
secured by the Collateral.
10.4. LIMITATION OF LIABILITY. NEITHER IBM CREDIT NOR ANY OTHER INDEMNIFIED
PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES SUFFERED BY CUSTOMER IN CONNECTION WITH THIS AGREEMENT,
ANY OTHER AGREEMENT, ANY DELAY, OMISSION OR ERROR IN THE ELECTRONIC TRANSMISSION
OR RECEIPT OF ANY E-DOCUMENT, OR ANY CLAIMS IN ANY MANNER RELATED THERETO. NOR
SHALL IBM CREDIT OR ANY OTHER INDEMNIFIED PERSON HAVE ANY LIABILITY TO CUSTOMER
OR ANY OTHER PERSON FOR ANY ACTION
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TAKEN OR OMITTED TO BE TAKEN BY IT OR THEM HEREUNDER, EXCEPT FOR ITS OR THEIR
OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE EVENT CUSTOMER REQUESTS IBM
CREDIT TO EFFECT A WITHDRAWAL OR DEBIT OF FUNDS FROM AN ACCOUNT OF CUSTOMER,
THEN IN NO EVENT SHALL IBM CREDIT BE LIABLE FOR ANY AMOUNT IN EXCESS OF ANY
AMOUNT INCORRECTLY DEBITED, EXCEPT IN THE EVENT OF IBM CREDIT'S GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. NO PARTY SHALL BE LIABLE FOR ANY FAILURE TO PERFORM ITS
OBLIGATIONS IN CONNECTION WITH ANY E-DOCUMENT, WHERE SUCH FAILURE RESULTS FROM
ANY ACT OF GOD OR OTHER CAUSE BEYOND SUCH PARTY'S REASONABLE CONTROL (INCLUDING,
WITHOUT LIMITATION, ANY MECHANICAL, ELECTRONIC OR COMMUNICATIONS FAILURE) WHICH
PREVENTS SUCH PARTY FROM TRANSMITTING OR RECEIVING E-DOCUMENTS.
10.5. Alteration/Waiver. This Agreement and the Other Documents may not be
altered or amended except by an agreement in writing signed by the Customer and
by IBM Credit. No delay or omission of IBM Credit to exercise any right or
remedy hereunder, whether before or after the occurrence of any Event of
Default, shall impair any such right or remedy or shall operate as a waiver
thereof or as a waiver of any such Event of Default. In the event that IBM
Credit at any time or from time to time dispenses with any one or more of the
requirements specified in this Agreement or any of the Other Documents, such
dispensation may be revoked by IBM Credit at any time and shall not be deemed to
constitute a waiver of any such requirement subsequent thereto. IBM Credit's
failure at any time or times to require strict compliance and performance by the
Customer of any undertakings, agreements, covenants, warranties and
representations of this Agreement or any Other Document shall not waive, affect
or diminish any right of IBM Credit thereafter to demand strict compliance and
performance thereof. Any waiver by IBM Credit of any Default by the Customer
under this Agreement or any of the Other Documents shall not waive or affect any
other Default by the Customer under this Agreement or any of the Other
Documents, whether such Default is prior or subsequent to such other Default and
whether of the same or a different type. None of the undertakings, agreements,
warranties, covenants, and representations of the Customer contained in this
Agreement or the Other Documents and no Default by the Customer shall be deemed
waived by IBM Credit unless such waiver is in writing signed by an authorized
representative of IBM Credit.
10.6. Severability. If any provision of this Agreement or the Other Documents
or the application thereof to any Person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Documents and the
application of such provision to other Persons or circumstances will not be
affected thereby, the provisions of this Agreement and the Other Documents being
severable in any such instance.
10.7. One Loan. All Advances heretofore, now or at any time or times
hereafter made by IBM Credit to the Customer under this Agreement or the Other
Documents shall constitute one loan secured by IBM Credit's security interests
in the Collateral and by all other security interests, liens and encumbrances
heretofore, now or from time to time hereafter granted by the Customer to IBM
Credit or any assignor of IBM Credit.
10.8. Additional Collateral. All monies, reserves and proceeds received or
collected by IBM Credit with respect to Accounts and other property of the
Customer in possession of IBM Credit at any time or times hereafter are hereby
pledged by Customer to IBM Credit as security for the payment of Customer's
Obligations and shall be applied promptly by IBM Credit on account of the
Customer's Obligations; provided, however, IBM Credit may release to the
Customer such portions of such monies, reserves and proceeds as IBM Credit may
from time to time determine, in its sole discretion.
10.9. No Merger or Novations. (A) Notwithstanding anything contained in
any document to the contrary, it is understood and agreed by the Customer and
IBM Credit that the claims of IBM Credit arising hereunder and existing as of
the date hereof constitute continuing claims arising out of the Obligations of
Customer under the Financing Agreement and any Other Document. Customer
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acknowledges and agrees that such Obligations outstanding as of the date hereof
have not been satisfied or discharged and that this Agreement is not intended to
effect a novation of the Customer's Obligations under the Financing Agreement or
any Other Document.
(B) Neither the obtaining of any judgment nor the exercise of any power of
seizure or sale shall operate to extinguish the Obligations of the Customer to
IBM Credit secured by this Agreement and shall not operate as a merger of any
covenant in this Agreement, and the acceptance of any payment or alternate
security shall not constitute or create a novation and the obtaining of a
judgment or judgments under a covenant herein contained shall not operate as a
merger of that covenant or affect IBM Credit's rights under this Agreement.
10.10. Paragraph Titles. The Section titles used in this Agreement and the
Other Documents are for convenience only and do not define or limit the contents
of any Section.
10.11. Binding Effect; Assignment. This Agreement and the Other Documents
shall be binding upon and inure to the benefit of IBM Credit and the Customer
and their respective successors and assigns; provided, that the Customer shall
have no right to assign this Agreement or any of the Other Documents without the
prior written consent of IBM Credit.
10.12. Notices; E-Business Acknowledgment. (A) Except as otherwise expressly
provided in this Agreement, any notice required or desired to be served, given
or delivered hereunder shall be in writing, and shall be deemed to have been
validly served, given or delivered (i) upon receipt if deposited in the United
States mails, first class mail, with proper postage prepaid, (ii) upon receipt
of confirmation or answerback if sent by telecopy, or other similar facsimile
transmission, (iii) one Business Day after deposit with a reputable overnight
courier with all charges prepaid, or (iv) when delivered, if hand-delivered by
messenger, all of which shall be properly addressed to the party to be notified
and sent to the address or number indicated as follows:
(i) If to IBM Credit at: (ii) If to Customer at:
IBM Credit Corporation CompuCom Systems, Inc.
1500 RiverEdge Parkway 7171 Forest Lane
Atlanta, GA 30328 Dallas, TX 75230
Attention: Region Loan Manager Attention: Treasurer or Controller
Facsimile: 770 / 644 - 4826 Facsimile: 972 / 856 - 5395
or to such other address or number as each party designates to the other in the
manner prescribed herein.
(B) (i) Each party may electronically transmit to or receive from the other
party certain documents set forth in Attachment J ("E-Documents") via the
Internet or electronic data interchange ("EDI"). Any transmission of data which
is not an E-Document shall have no force or effect between the parties. EDI
transmissions may be sent directly or through any third party service provider
("Provider") with which either party may contract. Each party shall be liable
for the acts or omissions of its Provider while handling E-Documents for such
party, provided, that if both parties use the same Provider, the originating
party shall be liable for the acts or omissions of such Provider as to such E-
Document. Some information to be made available to Customer will be specific to
Customer and will require Customer's registration with IBM Credit before access
is provided. After IBM Credit has approved the registration submitted by
Customer, IBM Credit shall provide an ID and password(s) to an individual
designated by Customer ("Customer Recipient"). Customer accepts responsibility
for the designated individual's distribution of the ID and password(s) within
its organization and Customer will take reasonable measures to ensure that
passwords are not shared or disclosed to unauthorized individuals. Customer
will conduct
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an annual review of all IDs and passwords to ensure they are accurate and
properly authorized. IBM CREDIT MAY CHANGE OR DISCONTINUE USE OF AN ID OR
PASSWORD AT ITS DISCRETION AT ANY TIME. E-Documents shall not be deemed to have
been properly received, and no E-Document shall give rise to any obligation,
until accessible to the receiving party at such party's receipt computer at the
address specified herein. Upon proper receipt of an E-Document, the receiving
party shall promptly transmit a functional acknowledgment in return. A
functional acknowledgment shall constitute conclusive evidence that an E-
Document has been properly received. If any transmitted E-Document is received
in an unintelligible or garbled form, the receiving party shall promptly notify
the originating party in a reasonable manner. In the absence of such a notice,
the originating party's records of the contents of such E-Document shall
control.
(ii) Each party shall use those security procedures which are reasonably
sufficient to ensure that all transmissions of E-Documents are authorized and to
protect its business records and data from improper access. Any E-Document
received pursuant to this Section 10.12 shall have the same effect as if the
contents of the E-Document had been sent in paper rather than electronic form.
The conduct of the parties pursuant to this Section 10.12 shall, for all legal
purposes, evidence a course of dealing and a course of performance accepted by
the parties. The parties agree not to contest the validity or enforceability of
E-Documents under the provisions of any applicable law relating to whether
certain agreements are to be in writing or signed by the party to be bound
thereby. The parties agree, as to any E-Document accompanied by the Customer's
ID, that IBM Credit can reasonably rely on the fact that such E-Document is
properly authorized by Customer. E-Documents, if introduced as evidence on
paper in any judicial, arbitration, mediation or administrative proceedings,
will be admissible as between the parties to the same extent and under the same
conditions as other business records originated and maintained in documentary
form. Neither party shall contest the admissibility of copies of E-Documents
under either the business records exception to the hearsay rule or the best
evidence rule on the basis that the E-Documents were not originated or
maintained in documentary form.
CUSTOMER RECIPIENT INFORMATION for Internet transmissions:
(PLEASE PRINT)
Name of Customer's Designated Central Contact Authorized to Receive IDs and
Passwords:
________________________________________________________________________________
e-mail Address: ________________________________________________________________
Phone Number: __________________________________________________________________
10.13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto were upon the same instrument.
10.14. ATTACHMENT A MODIFICATIONS. IBM Credit may modify the Product
Financing Period set forth in Attachment A from time to time if on at least two
occasions during any three-month period a Shortfall Amount has become due and
payable and may modify the Collateral Insurance Amount set forth in Attachment A
from time to time, in each case, by providing Customer with a new Attachment A.
Any such new Attachment A shall be effective as of the date specified in the new
Attachment A.
10.15. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. TO INDUCE
IBM CREDIT TO ACCEPT THIS AGREEMENT AND THE OTHER DOCUMENTS, THE CUSTOMER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AND ANY OTHER DOCUMENT, OR FOR THE RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND ANY FEDERAL DISTRICT
COURT IN NEW YORK.
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(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREINAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME.
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE
EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO CUSTOMER AT ITS ADDRESS
SET FORTH IN SECTION 10.13 OR AT SUCH OTHER ADDRESS OF WHICH IBM CREDIT SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO;
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN
ANY OTHER JURISDICTION.
(E) AGREES THAT THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS (WITHOUT GIVING EFFECT TO CONFLICT OF
LAW PROVISIONS) OF THE STATE OF NEW YORK.
10.16. JURY TRIAL WAIVER. EACH OF IBM CREDIT AND THE CUSTOMER HEREBY
IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
(INCLUDING ANY COUNTERCLAIM) OF ANY TYPE IN WHICH IBM CREDIT AND THE CUSTOMER
ARE PARTIES AS TO ALL MATTERS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
AGREEMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION
HEREWITH.
IN WITNESS WHEREOF, the Customer has read this entire Agreement, and has
caused its authorized representatives to execute this Agreement and has caused
its corporate seal to be affixed hereto as of the date first written above.
<TABLE>
<CAPTION>
IBM CREDIT CORPORATION CompuCom Systems, Inc.
<S> <C>
By: _____________________________________ By: _____________________________________
Print Name: ______________________________ Print Name: ______________________________
Title: ____________________________________ Title: ____________________________________
</TABLE>
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EXHIBIT 10.4
ATTACHMENT A, EFFECTIVE DATE MAY 11, 1999 ("IWCF ATTACHMENT A")
TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
DATED MAY 11, 1999
Customer: CompuCom Systems, Inc.
I. Fees, Rates and Repayment Terms:
(A) Credit Facilities: The aggregate of the following:
Inventory Financing Availability of Seventy-Five Million Dollars
($75,000,000) plus
Working Capital Financing ("Revolver") Availability of Two
Hundred Twenty-Five Million Dollars ($225,000,000) which amount shall
reduce to Two Hundred Million Dollars ($200,000,000) one hundred and
twenty (120) days after the date hereof and shall further reduce to
One Hundred and Seventy-Five Million ($175,000,000) on the first
anniversary hereof;
(B) Borrowing Base:
(ia) effective through and including 150 days form the date hereof;
70% of the amount equal to the amount of Customer's Eligible Accounts
other than Concentration Accounts as of the date of determination as
reflected in the Customer's most recent Collateral Management Report
minus the outstanding amount of the Series 1999-1 Certificateholders'
Interest and any other outstanding interest in the Trust as of the
same date;
(ib) effective on and after 151 days from the date hereof: 50% of the
amount equal to the amount of Customer's Eligible Accounts other than
Concentration Accounts as of the date of determination as reflected in
the Customer's most recent Collateral Management Report minus the
outstanding amount of the Series 1999-1 Certificateholders' Interest
and any other outstanding interest in the Trust as of the same date;
(ii) a percentage, determined from time to time by IBM Credit in its
sole discretion, of the amount of Customer's Concentration Accounts
for a specific Concentration Account Debtor as of the date of
determination as reflected in the Customer's most recent Collateral
Management Report; unless otherwise notified by IBM Credit, in
writing, the percentage for Concentration Accounts for a specific
Concentration Account Debtor shall be the same as the percentage set
forth in paragraph (IA) or (ibi) as applicable of the Borrowing Base;
Notwithstanding the terms of Section 3.1(W) of the Agreement, Accounts
arising from incentive payments, rebates, discounts and refunds which are
(i) verifiable by Authorized Suppliers, and (ii) payable by Authorized
Suppliers by check to the Lockbox will be deemed to be Eligible Accounts.
(iii) 100% of verifiable receivables due from IBM and IBM Credit which
are less than 90 days from the date of invoice;
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(iv) 100% of the Customer's inventory in the Customer's possession as
of the date of determination as reflected in the Customer's most
recent Collateral Management Report constituting Products (other than
service parts) financed through a Product Advance by IBM Credit,
provided, however, IBM Credit has a first priority security interest
in such Products and such Products are in new and in un-opened boxes.
The value to be assigned to such inventory shall be based upon the
Authorized Supplier's invoice price to Customer for Products net of
all applicable price reduction credits;
(v) 40% of eligible inventory not financed by IBM Credit and
unencumbered by liens;
(vi) 85% of verifiable vendor credits from Hewlett-Packard Company and
Compaq Computer Corporation which credits shall be payable in cash
through Customer's Loackbox, not subject to offset. and shall be less
than 90 days from date of invoice; and
(vii) 20% of unencumbered fixed assets net of leasehold improvements
thereon.
(C) Collateral Insurance Amount: Two Hundred and Fifty Million Dollars
($250,000,000.00)
(D) A/R Finance Charge:
(i) PRO Advance Charge: LIBOR Rate plus 1.75%
(ii) WCO Advance Charge: LIBOR Rate plus 1.75%
(iii) Takeout Advance Charge: LIBOR Rate plus 1.75%
(E) Delinquency Fee Rate: Prime Rate plus 6.500%
(F) Shortfall Transaction Fee: Shortfall Amount multiplied by 0.30%
(G) Free Financing Period Exclusion Fee: For each Product Advance
made by IBM Credit pursuant to Customer's financing plan where there
is no Free Financing Period associated with such Product Advance there
will be a fee equal to the Free Financing Period Exclusion Fee. For a
30 day payment plan when Prime Rate is 7.75% the Free Financing Period
Exclusion Fee is 1.0675% of the invoice amount. This fee will vary by
.0125% with each .25% change in Prime Rate (e.g. Prime Rate of 7.25%,
the charge is 1.0425% of the invoice amount). The fee accrues as of
the Date of the Note and is payable as stated in the billing
Statement.
(H) Other Charges:
(i) Unused Facility Fee: 0.25% on the daily average unused
portion of the Revolver payable
quarterly in arrears.
(ii) Annual Facility Fee: $ 50,000.00
(iii) Closing Fee: $1,075,000.00
(iv) Commitment Fee: $ 50,000.00
(v) Prepayment Fee: In the event that the Customer in its
sole discretion terminates the Revolver prior to the third anniversary
of the closing date, a fee in an amount equal to the amount of the
Revolver in effect as of the date of notice of termination, multiplied
by (x) from the closing date to the first anniversary thereof, one
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percent (1.00%), (y) from the first anniversary thereof to the second
anniversary thereof, one half percent (0.50%), and (z) thereafter, one
quarter of one percent (0.25%).
II. Bank Account
A) Customer's Lockbox(es) and Special Account(s) will be maintained at the
following Bank(s):
Name of Bank: ___________________________________________________________
Address: ________________________________________________________________
_________________________________________________________________________
Phone: _________________________________________________________________
Lockbox Address: ________________________________________________________
Special Account #: ______________________________________________________
Name of Bank: ___________________________________________________________
Address: ________________________________________________________________
_________________________________________________________________________
Phone: ________________________________________________________________
Lockbox Address: ________________________________________________________
Special Account #: ______________________________________________________
III. Financial Covenants:
Definitions: The following terms shall have the following respective meanings in
this Attachment A. All amounts shall be determined in accordance with generally
accepted accounting principles (GAAP).
"Current" shall mean within the on-going twelve month period.
"Current Assets" shall mean assets that are cash or expected to become cash
within the on-going twelve months.
"EBITDA" for any period shall mean Net Profit after Tax adjusted by adding
thereto the amount of Interest Charges and all amortization of intangibles,
taxes, depreciation, extraordinary losses, and other non-cash charges that
were deducted in arriving at Net Income for such period and deducting any
extraordinary gains that were included in arriving at Net Income after Tax.
"Current Liabilities" shall mean payment obligations resulting from past or
current transactions that require settlement within the on-going twelve
month period. All indebtedness to IBM Credit other
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than amounts outstanding pursuant to the Revolver shall be considered a
Current Liability for purposes of determining compliance with the Financial
Covenants.
"Long Term" shall mean beyond the on-going twelve month period.
"Long Term Assets" shall mean assets that take longer than a year to be
converted to cash. They are divided into four categories: tangible assets,
investments, intangibles and other.
"Long Term Debt" shall mean payment obligations of indebtedness which
mature more than twelve months from the date of determination, or mature
within twelve months from such date but are renewable or extendible at the
option of the debtor to a date more than twelve months from the date of
determination and specifically including all amounts outstanding to IBM
Credit pursuant to the Revolver.
"Net Profit after Tax" shall mean Revenue plus all other income, minus all
costs, including applicable taxes.
"Revenue" shall mean the monetary expression of the aggregate of products
or services transferred by an enterprise to its customers for which said
customers have paid or are obligated to pay, plus other income as allowed.
"Subordinated Debt" shall mean Customer's indebtedness to third parties
which in accordance with its terms shall rank junior in priority to the
indebtedness of Customer to IBM Credit.
"Tangible Net Worth" shall mean:
Total Net Worth minus;
(a) goodwill, organizational expenses, pre-paid expenses,
deferred charges, research and development expenses, software
development costs, leasehold expenses, trademarks, trade names,
copyrights, patents, patent applications, privileges, franchises,
licenses and rights in any thereof, and other similar intangibles (but
not including contract rights) and other current and non-current
assets as identified in Customer's financial statements; and
(b) all accounts receivable from employees, officers, directors,
stockholders and affiliates; and
(c) all callable/redeemable preferred stock.
"Total Assets" shall mean the total of Current Assets and Long Term Assets.
"Total Liabilities" shall mean the Current Liabilities and Long Term Debt
less Subordinated Debt, resulting from past or current transactions, that
require settlement in the future.
"Total Net Worth" (the amount of owner's or stockholder's ownership in an
enterprise) is equal to Total Assets minus Total Liabilities plus
Subordinated Debt.
"Working Capital" shall mean Current Assets minus Current Liabilities.
Customer will be required to maintain the following financial ratios,
percentages and amounts as of the last day of the fiscal quarter under review by
IBM Credit:
(a) Current Assets to Current Liabilities ratio equal to or greater than
1.7:1.0;
(b) Net Profit after Tax to Revenue percentage equal to or greater than:
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0.0% for the fiscal quarter from April 1, 1999 to June 30, 1999;
0.2% for the fiscal year to date period ending September 30, 1999;
0.5% for the fiscal year from January 1, 1999 to December 31, 1999;
0.7% for each reportable fiscal quarter thereafter on a trailing
four quarter basis provided that the Net Profit after Tax to
Revenue percentage for each of those four quarters shall be equal
to or greater than 0.0%
(c) Funded Indebtedness to EBITDA ratio equal to or less than 4.5:1.0;
(d) Tangible Net Worth equal to or greater than $110 Million Dollars plus
75% of Net Profit after Tax plus 100% of the proceeds received from the
placement of additional equity;
(e) Loans to officers shall at no time exceed the aggregate amount of
$7,000,000;
(f) Capital expenditures shall not exceed the aggregate amount of
$15,000,000 in any one fiscal year; and
(g) Permitted Investments shall not exceed from the date hereof the
aggregate amount of $5,000,000 plus equity investments held by Customer
as of the date hereof in; E-Certify, Inc., Global Serve Computer
Services, Ltd., and Gateway______.
IV. Additional Conditions Precedent Pursuant to Section 5.1 (K) of the
Agreement:
Executed Contingent Blocked Account Amendment;
Executed Blocked Account Amendment;
Executed Waiver of Landlord Lien for all premises in which a landlord has
the right of levy for rent;
Fiscal year-end financial statements of Customer as of end of Customer's
prior fiscal year audited by an independent certified public accountant;
A Certificate of Location of Collateral whereby the Customer certifies
where Customer presently keeps or sells inventory, equipment and other
tangible Collateral;
Subordination or Intercreditor Agreements from all creditors having a lien
which is superior to IBM Credit in any assets that IBM Credit relies on to
satisfy Customer's obligations to IBM Credit;
Listing of all creditors providing accounts receivable financing to
Customer;
A Collateral Management Report in the form of Attachment F as of the
Closing Date;
A Compliance Certificate as to Customer's compliance with the financial
covenants set forth in Attachment A as of the last fiscal month of Customer
for which financial statements have been published;
An Opinion of Counsel substantially in the form and substance of Attachment
H whereby the Customer's counsel states his or her opinion about the
execution, delivery and performance of the Agreement and other documents by
the Customer;
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A Corporate Secretary's Certificate substantially in the form and substance
of Attachment I certifying to, among other items, the resolutions of
Customer's Board of Directors authorizing borrowing by Customer;
Termination or release of Uniform Commercial Code filing by another
creditor as required by IBM Credit;
A copy of an all-risk insurance certificate pursuant to Section 7.8 (B) of
the Agreement;
Executed Letter of Direction;
Executed Letter of Notification;
Executed Acknowledgement of Payment and Termination from NationsBank;
IWCF ATTACHMENT B TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
Customer: CompuCom Systems, Inc.
I. Liens.
II. Locations of Offices, Records and Inventory.
(A) Principal Place of Business and Chief Executive Office
(B) Locations of Assets, Inventory and Equipment (including warehouses)
- -----------------------------------------------------------------------
Location Leased (Y/N)
- -----------------------------------------------------------------------
III. Fictitious Names.
IV. Organization.
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(A) Subsidiaries
Name Jurisdiction Owner Percent
Owned
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(B) Affiliates
Name Capacity
V. Judgments or Litigation.
VI. Environmental Matters.
VII. Indebtedness.
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IWCF ATTACHMENT C
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
COMPLIANCE CERTIFICATE
TO: IBM CREDIT CORPORATION
1500 RiverEdge Parkway
Atlanta, Georgia 30328
The undersigned authorized officers of CompuCom Systems, Inc.
("CompuCom") hereby certify on behalf of the Customer, with respect to the
Inventory and Working Capital Financing Agreement executed by and between
CompuCom and IBM Credit Corporation ("IBM Credit") on ______________, 19__, as
amended from time to time (the "Agreement"), that (A) CompuCom has been in
compliance for the period from ______________, 19__ to _________ ____, 19__ with
the financial covenants set forth in Attachment A to the Agreement, as
demonstrated below, and (B) no Default has occurred and is continuing as of the
date hereof, except, in either case, as set forth below. All capitalized terms
used herein and not otherwise defined shall have the meanings assigned to them
in the Agreement.
I. Financial Covenants.
FINANCIAL COVENANTS REQUIRED ACTUAL
- ------------------- -------- ------
Current Assets to Current Liabilities
Net Profit After Tax to Revenue
Funded Indebtedness to EBITDA
Minimum Tangible Net Worth Dollars
II. Calculation of Tangible Net Worth.
Total Assets MINUS Total Liabilities
_______________________
LESS:
goodwill _______________________
organizational expenses _______________________
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pre-paid expenses _______________________
deferred charges, etc. _______________________
leasehold expenses _______________________
all other _______________________
callable/redeemable
preferred stock _______________________
officer, employee, director,
stockholder and affiliate
receivables _______________________
Total Tangible Net Worth
=======================
Attached hereto are Financial Statements as of and for the end of the
fiscal _____________ ended on the applicable date, as required by Section 7.1 of
the Inventory and Working Capital Financing Agreement.
Submitted by:
CompuCom Systems, Inc.
By:______________________________________
Print Name:______________________________
Title:___________________________________
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IWCF ATTACHMENT D TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT')
Takeout Advance Option
IWCF TAKEOUT ADVANCE Schedule of Repayments for CompuCom Systems, Inc.
Not Applicable at this time.
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IWCF ATTACHMENT E TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
Customer: CompuCom Systems, Inc.
AUTHORIZED SUPPLIERS
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IWCF ATTACHMENT F TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT')
CompuCom Systems, Inc.
Collateral Management Report (CMR)
Accounts as of: (Date)
COLLATERAL STATUS
<TABLE>
<CAPTION>
Sub. Coll Gross Advance Net
Values Collateral % Collateral
--------------------------------- ------------------------------
<S> <C> <C> <C> <C>
1. Previous assigned A/R balance: $ _____________
(previous CMR line 4) Date: __/__/__
2. Additions to A/R (2A+B): $ ___________________________________________
A. New Billings $
B. Adjustments $
3. Deductions from A/R (3A+B+C): ($ _____)_____________________
A. Cash Receipts $
B. Credits $
C. Adjustments $
4. New Assigned A/R balance (1+2-3): $
5. A/R Aging Report (Date: __/__/__) $
* * New Assigned A/R Balance and A/R Aging Report (Lines 4 and 5) must equal each other* *
==================================================================================================================
6. Less Adjustments: $
A. Unapplied Cash $
B. Other $
7. Adj. assigned A/R balance (4-6): $
8. Less Ineligible A/R: $
A. A/R Over 90 Days $
B. 50% Rule $
C. Contra Accts (A/P Offset) $
D. Other $
E. __________________ $
F. __________________ $
G. __________________ $
H. __________________ $
I. Securitization A/R $
9. Total A/R Eligible Collateral: $_______________%______$
(Line 7 - Line 8 X Advance Rate)
10. Other A/R Collateral
A. __________________ $_______________%______$
B. __________________ $_______________%______$
11. Inventory Collateral $_______________%______$
A. IBM Credit Financed Eligible Inventory $_______________%______$
B. __________________ $_______________%______$
C. __________________ $_______________%______$
12. Other Collateral
A. RMA $_______________%______$
B. Price Protection $_______________%______$
C. __________________ $_______________%______$
D. __________________ $_______________%______$
13. Total Net Eligible Collateral (9+10+11+12) $
</TABLE>
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LOAN STATUS
<TABLE>
<CAPTION>
Sub Value Gross Value Net Value
-------------------------------------------------------------------
<S> <C> <C> <C>
1. Net IBM Credit Outstandings
(1A-B-C-D-E-F-G-H-I+J) $
A. Gross IBM Credit
Outstandings (RFS) $
Less:
B. Suspense ($______________________)
C. Disputes ($______________________)
D. In Transit (___ Days) ($______________________)
E. QSL / QLA ($______________________)
F. Other ($______________________)
G. _________________ ($______________________)
H. _________________ ($______________________)
I. _________________ ($______________________)
Plus:
J. Product Received Not
Billed (RNB) $
2. Funds in Lockbox (2A+B) $
A. Cleared Funds
(transferred not posted) $
B. Unavailable Funds (float) $
3. Loan Balance (Line1 - Line 2) $
4. Collateral Excess / Shortfall
Collateral line 13 - Loan line 3):
(Loan balance available) $
5. Advances from IBM Credit to Customer
(5A+B+C) $___________
A. Cash Adv. from Lockbox $
B. Cash Adv. from IBM Credit $
C. WCO Cash Advance $
6. New Adjusted O/S Balance (3+5) $
7. Remaining Credit Line Availability
(Collateral line 13 - Loan line 6) $
8. WCO Payment Advance $
Signatures:
</TABLE>
______________________________________________
Authorized Customer Signature (Date)
______________________________________________
IBM Credit Corporation (Date)
The above officer or delegated individual of CompuCom Systems, Inc. certifies
that he/she is authorized to provide this information on behalf of CompuCom
Systems, Inc. and agrees that to the best of his/her knowledge the information
is accurate.
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IWCF ATTACHMENT G TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT')
CERTIFICATE OF LOCATION OF COLLATERAL
The undersigned, the (insert title of office held) of CompuCom Systems,
Inc. ("CompuCom"), hereby certifies with reference to the Inventory and Working
Capital Financing Agreement, dated (insert date Agreement signed), between
CompuCom and IBM Credit Corporation as follows:
(a) The following are all the locations where CompuCom presently keeps
or sells inventory, equipment or other tangible Collateral:
LOCATION LEASE (YES/NO)
IN WITNESS WHEREOF, I have hereunto set my hand this day
of______________________, 19__ .
CompuCom Systems, Inc.
By:__________________________
Title:_______________________
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ATTACHMENT H
{LETTERHEAD OF CUSTOMER'S COUNSEL}
(DATE}
IBM Credit Corporation
1500 RiverEdge Parkway
Atlanta, Georgia 30328
Re: CompuCom Systems, Inc.
Ladies and Gentlemen:
We have acted as counsel for CompuCom Systems, Inc., a ____________
corporation (the "Borrower") in connection with (A) the execution and delivery
of that certain Inventory and Working Capital Financing Agreement, dated as of
________________, 19___ (the "Financing Agreement"), by and among the Borrower
and IBM Credit Corporation ("IBM Credit"), and (B) the other agreements,
instruments, and documents executed and delivered by the Borrower in connection
with the Financing Agreement. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Financing
Agreement.
In this connection, we have examined the following documents:
(i) The Certificate of Incorporation and the By-laws of the Borrower,
each as amended to date;
(ii) The records of the proceedings taken by the Board of Directors of
the Borrower in connection with the execution, delivery, and performance of the
Financing Documents to which they are a party (as defined below);
(iii) The Financing Agreement;
(iv) The Contingent Blocked Account Amendment;
(v) Acknowledgement copies of the UCC-1 Financing Statements listed
on Exhibit A hereto (the "Financing Statements") executed by the Borrower naming
it as Debtor and IBM Credit as Secured Party and filed in the offices set forth
on Exhibit A;
(vi) {Additional Documents if necessary}
The documents referred to in clauses (iii) through (vi) above are
hereinafter referred to as the Financing Documents.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents, and, regarding documents
executed by parties other than the Borrower,
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that those parties had the power and the capacity to enter into, execute,
deliver and perform all obligations under such documents, the due authorization
of all requisite action with respect to such documents, and the validity and
binding effect of such documents upon such other parties.
As to any facts material to this opinion, we have relied upon the
representations and warranties of the Borrower contained in each of the
Financing Documents, and in certificates delivered by the Borrower pursuant to
each of the Financing Documents, statements, and representations of officers and
other representatives of the Borrower, and, as to the matters addressed therein,
certificates or correspondence from public officials. For purposes of the
opinion set forth in Paragraph 4, the term "Material Contracts" means the
agreements and instruments to which the Borrower is subject which have been
identified to us by officers of the Borrower and set forth on Exhibit B hereto
as the agreements and instruments which are material to the business or
financial condition of the Borrower; and the term "Material Orders" means those
orders and decrees to which the Borrower is subject which have been identified
to us by officers of the Borrower and set forth in Exhibit C hereto as the
orders and decrees, agreements, and instruments which are material to the
business or financial condition of the Borrower.
As used herein, the term "UCC" refers to the Uniform Commercial Code as
in effect in the State of New York.
We are members of the bar in the State of ______________ and express no
opinion as to the laws of any other jurisdiction except the General Corporation
Law of the State of ____________ and the federal laws of the United States of
America.
Based on the foregoing, and subject to the assumptions and
qualifications set forth herein, we are of the opinion that:
1. Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and is
duly qualified and authorized to do business and in good standing as a foreign
corporation in each jurisdiction where, to our knowledge, it presently is
engaged in business and is required to be qualified.
2. Borrower has all requisite corporate power and authority (a) to own,
lease, and operate its properties and assets and to carry on its business as now
being conducted; and (b) to execute, delivery, and performance of the Financing
Documents to which it is a party.
3. All corporate action on the part of the Borrower requisite for the
execution, delivery, and performance of the Financing Documents to which it is a
party has been duly taken.
4. The execution, delivery, and performance by the Borrower of the
Financing Documents to which it is a party will not (a) violate, be in conflict
with, result in the breach of, or constitute (with due notice or lapse of time,
or both) a default under (i) the Certificate of Incorporation or By-laws of
Borrower or any resolution of its Board of Directors or any committee thereof,
(ii) any Material Contract, or (iii) any federal or state law (including,
without limitation, environmental or occupational health, and safety law),
regulation, rule, Material Order, or legal requirement of any federal, state, or
public authority or agency applicable to Borrower; or (b) result in the creation
or imposition of a lien of any nature whatsoever upon any of the Borrower's
property or assets other than as represented by the Financing Documents.
5. Borrower has obtained any and all consents, approvals, or other
authorizations required to be obtained pursuant to its Certificate of
Incorporation and By-laws in connection with the execution, delivery, and
performance of the Financing Documents. No consent, approval, or authorization
of or by any court, administrative agency, other governmental authority, or any
other Person is required in connection with
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the execution, delivery, and performance by the Borrower of the Financing
Documents that has not already been obtained.
6. To our knowledge, there are no actions, proceedings, or
investigations pending or threatened against the Borrower which question the
validity of the Financing Documents to which it is a party or relating to the
transactions contemplated thereby.
7. Each of the Financing Documents has been duly executed and delivered
by duly authorized officer of the Borrower and constitutes the legal, valid, and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, except that, in each case, (i) enforcement may be
subject to and limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws now or hereafter in effect relating to creditors'
rights generally, (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought, and
(iii) certain of the remedial provisions including waivers with respect to the
exercise of remedies against the Collateral contained in the Financing Documents
may be unenforceable in whole or in part, but the inclusion of such provisions
does not affect the validity of the Financing Documents, each taken as a whole
and, the Financing Documents, each taken as a whole, contain adequate remedial
provisions for the practical realization of the security purported to be
afforded thereby.
8. The Financing Agreement is effective to create in favor of IBM
Credit a valid security interest within the meaning of the UCC in the Collateral
as security for the obligations purported to be secured thereby; and (ii) the
Financing Statements are in appropriate form and upon filing in the state where
Customer's principal place of business and chief executive office is located
will result in a perfected security interest (as such term is defined in Section
9-303 of the UCC) of IBM Credit in the Collateral in which security interests to
which Article 9 of the UCC applies.
9. Borrower is not an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1940, as amended.
This opinion is rendered solely to and for the benefit of IBM Credit in
connection with the execution and delivery of the Financing Documents and may
not be relied upon by any other person, firm, or corporation without our prior
written consent, except that it may be furnished to any prospective purchaser of
a participation in the rights of IBM Credit and may be furnished to and relied
upon by any Person which hereafter acquires such a participation.
This opinion is limited to laws as currently in effect on the date
hereto and to the facts as they currently exist. We assume no obligation to
revise, supplement or otherwise update this opinion.
Very truly yours,
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EXHIBIT A
UCC-1 FINANCING STATEMENT
19
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EXHIBIT B
MATERIAL CONTRACTS
20
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EXHIBIT C
MATERIAL ORDERS
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ATTACHMENT I
CORPORATE SECRETARY'S CERTIFICATE AS TO RESOLUTIONS
AUTHORIZING BORROWING BY CORPORATION
IBM CREDIT CORPORATION
1500 RiverEdge Parkway
Atlanta, Georgia 30328
I, ______________________, certify that I am the Secretary of CompuCom
Systems, Inc. ("Customer") and that I am custodian of the Customer's
organizational books and records, including the minutes of the meetings of the
Customer's Board of Directors. I further certify as follows:
1. Customer is a corporation organized under the laws of the State of
_________________, and has its principal place of business at
_______________________________________________________
________________________________________________________________________.
2. Customer is registered to conduct business or as otherwise required
in the following states and localities:
_______________________________________________________________________
_______________________________________________________________________
3. True and complete copies of the Customer's Articles of Incorporation
and By-laws ("Governing Documents") are delivered herewith, together with all
amendments and addenda thereto as in effect on the date hereof.
4. The following is a true, accurate and compared copy of a Resolution
(the "Resolution") adopted by the Customer's Board of Directors at a special
meeting thereof held on due notice at which there was present a quorum
authorized to adopt the Resolution and the entire proceedings of which were
proper and in accordance with the Customer's Governing Documents. The Resolution
was duly made, seconded and unanimously adopted, remains in full force and
effect and has not been revoked, annulled, amended or modified in any manner
whatsoever, and each authorization and empowerment contained in the Resolution
is permitted and proper under the Customer's Governing Documents:
"Resolved, that:
(a) Each executive or managing officer and agent of the Company (each
an "Authorized Person") is and shall be authorized and empowered, separately or
collectively, to obtain financing from IBM Credit Corporation, a Delaware
corporation ("IBM Credit") on behalf of the Company, from time to time, in
amounts and upon terms and conditions as such Authorized Person deems proper,
and for that purpose: (1) to execute notes, financing statements and other
evidences of the Company's indebtedness with respect thereto; (2) to enter into
financing agreements, loan agreements, security agreements, pledge agreements
and any other agreements with IBM Credit and third parties relating to the terms
and conditions upon which any such financing may be obtained and to the security
to be furnished by the Company thereof; (3) to enter into, as lessor or lessee,
or to assign or sell any interest Company may have in, any lease or similar
rental agreement; (4) to modify, supplement or amend any such agreements, any
such terms or conditions in such agreements and any such security therefor; (5)
to grant powers of attorney, (6) to pledge, assign, guarantee, mortgage,
consign, grant security interest in and otherwise transfer to IBM Credit as
collateral security for any and all debts and obligations of the Company to IBM
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Credit or its affiliates, whenever and however arising, any assets of this
Company; (7) to execute and deliver any and all assignments, schedules,
transfers, endorsements, contracts, guarantees, agreements, designations,
consignments, deeds of trust, mortgages, instruments of pledge or other
instruments in respect thereof and to make remittances and payments in respect
thereof by checks, drafts or otherwise; and (8) to do and perform all other acts
and things deemed by such Authorized Person to be necessary, convenient or
proper to carry out any of the foregoing.
(b) The authorization contained herein shall apply whether or not
proceeds of any loans or advances made at the request of any Authorized Person
shall be paid or credited by IBM Credit to the Company or shall be paid or
credited to the individual order of any affiliates of the Company or other third
party, and IBM Credit shall be under no obligation to inquire as to the
application or disposition of the proceeds of any such loan or advance.
(c) Hereby ratified, approved, confirmed and consented to are all that
any Authorized Person has done or may do in the premises."
5. Appearing below are the names, titles and specimen signatures of at
least two Authorized Persons, as defined in the Resolution cited in the
preceding paragraph, (list at least three such Authorized Persons):
Authorized Person(s) Title Signature
(print) (print)
______________________ ___________________ _______________________
______________________ ___________________ _______________________
______________________ ___________________ _______________________
______________________ ___________________ _______________________
The foregoing is not intended to be a comprehensive or exclusive list
of the Customer's Authorized Persons. Upon request, Customer will promptly
provide to IBM Credit additional certificates containing the name, title and
specimen signature of other Authorized Persons, and IBM Credit may now and in
the future rely on the signature of any Authorized Person whether or not listed
on this or any other certificate or on the signature page(s) hereof.
Nevertheless, it is hereby certified that each name, title and signature
appearing above or on the signature page(s) hereof, is consistent with the books
and records of the Customer.
IN WITNESS WHEREOF, I have signed this certificate this ________ day of
____________, 19___.
_______________________________
Name: _______________________________
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ATTACHMENT J
E-BUSINESS SCHEDULE A (?SCHEDULE A?)
CUSTOMER NAME: CompuCom Systems, Inc.
EFFECTIVE DATE OF THIS SCHEDULE A: ___________________________________
E-DOCUMENTS AVAILABLE TO SUPPLIERS:
Invoices
Payment Report / Remittance Advisor
E-DOCUMENTS AVAILABLE TO CUSTOMER:
Invoices
Remittance Advisor
Transactional Approval
Billing Statement
Payment Planner
Auto Cash
Statements of Transaction
Common Dispute Form
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EXHIBIT 10.5
RECEIVABLES CONTRIBUTION AND SALE AGREEMENT
among
COMPUCOM SYSTEMS, INC.,
as Seller and initial Servicer,
and
CSI FUNDING, INC.,
as the Buyer
Dated as of May 7, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES -4-
SECTION 1.1. Agreement to Purchase and Sell -4-
SECTION 1.2. Timing of Purchases -5-
SECTION 1.3. No Recourse -6-
SECTION 1.4. True Sales -6-
SECTION 1.5. Consideration for Purchases. -6-
SECTION 1.6. Buyer Agreement to Make
Demand Loans -7-
ARTICLE II CALCULATION OF PURCHASE PRICE -7-
SECTION 2.1. Calculation of Purchase Price. -7-
ARTICLE III PAYMENT OF PURCHASE PRICE -9-
SECTION 3.1. The Initial Purchase Price Payment. -9-
SECTION 3.2. Purchase Price Payments. -10-
SECTION 3.3. Deemed Collections, Etc. -11-
SECTION 3.4. Payments and Computations, Etc. -12-
ARTICLE IV CONDITIONS TO PURCHASES -13-
SECTION 4.1. Conditions Precedent to Initial Purchase. -13-
SECTION 4.2. Conditions Precedent to All Purchases. -15-
SECTION 4.3. Certification as to Representations and
Warranties. -15-
SECTION 4.4. Effect of Payment of Purchase Price. -15-
ARTICLE V REPRESENTATIONS AND WARRANTIES -16-
SECTION 5.1. Representations and Warranties. -16-
ARTICLE VI COVENANTS -19-
SECTION 6.1. Affirmative Covenants. -19-
SECTION 6.2. Negative Covenants. -21-
SECTION 6.3. Separate Existence -22-
ARTICLE VII INDEMNIFICATION -22-
SECTION 7.1. Indemnities by COMPUCOM. -22-
SECTION 7.2. Contribution -25-
ARTICLE VIII ADMINISTRATION AND COLLECTIONS; ADDITIONAL
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RIGHTS AND OBLIGATIONS IN RESPECT OF THE
RECEIVABLES -25-
SECTION 8.1. Servicing of Receivables and
Related Rights. -25-
SECTION 8.2. Rights of the Buyer;
Enforcement Rights. -26-
SECTION 8.3. Responsibilities of COMPUCOM -27-
SECTION 8.4. Further Action Evidencing Purchases -28-
SECTION 8.5. Purchase Termination Event -28-
ARTICLE IX MISCELLANEOUS -29-
SECTION 9.1. Amendments, Etc. -29-
SECTION 9.2. Notices, Etc. -29-
SECTION 9.3. Acknowledgment and Consent -29-
SECTION 9.4. Binding Effect; Assignability -30-
SECTION 9.5. Costs, Expenses and Taxes -31-
SECTION 9.6. No Proceedings; Limitation on Payments -31-
SECTION 9.7. GOVERNING LAW AND JURISDICTION -32-
SECTION 9.8. Execution in Counterparts -32-
SECTION 9.9. Survival of Termination -32-
SECTION 9.10. WAIVER OF JURY TRIAL -32-
SECTION 9.11. Entire Agreement -33-
SECTION 9.12. Headings -33-
SCHEDULE I LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
EXHIBIT A FORM OF PURCHASE REPORT
EXHIBIT B FORM OF BUYER NOTE
<PAGE>
RECEIVABLES CONTRIBUTION AND SALE AGREEMENT
This RECEIVABLES CONTRIBUTION AND SALE AGREEMENT (as amended, supplemented
or otherwise modified from time to time, this "Agreement") is entered into as of
---------
May 7, 1999, between COMPUCOM SYSTEMS, INC., a Delaware corporation ("COMPUCOM"
--------
or the "Seller"), as seller and as initial Servicer, and CSI FUNDING, INC., a
------
Delaware corporation, as Buyer (the "Buyer").
-----
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, certain
terms that are used throughout this Agreement (including the Exhibits hereto)
are defined in Annex X to the Pooling and Servicing Agreement, dated as of even
date herewith, among the Buyer, as Transferor, COMPUCOM, as the initial
Servicer, and Norwest Bank Minnesota, National Association, as Trustee (as the
same may be amended, modified or supplemented from time to time, the "Pooling
-------
and Servicing Agreement"). Any reference to "this Agreement" or "the
- -----------------------
Receivables Contribution and Sale Agreement", including any such reference in
any Exhibit hereto, shall mean this Agreement in its entirety, including the
Exhibits and other attachments hereto, as amended, modified or supplemented from
time to time in accordance with the terms hereof.
Available Funds shall have the meaning assigned to such term in Section 3.2
--------------- -----------
hereof.
Buyer Note shall have the meaning assigned to such term in Section 3.1
---------- -----------
hereof.
Contributed Receivables shall have the meaning assigned to such term in
-----------------------
Section 1.2 hereof.
- -----------
Fair Market Value Discount Factor shall have the meaning assigned to such
---------------------------------
term in Section 2.1 hereof.
-----------
Ineligible Receivable shall have the meaning assigned to such term in
---------------------
Section 3.3(a) hereof.
- --------------
Initial Cut-Off Date means the Business Day immediately preceding the
--------------------
Initial Closing Date.
LIBO Rate means the offered rate per annum (rounded upwards, if necessary,
---------
to the nearest 1/16th of one percent) appearing in The Wall Street Journal for
--- ---- ------ -------
three month LIBOR loans on the date of determination.
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Original Purchase Agreement shall have the meaning assigned to such term in
---------------------------
the Preliminary Statements.
Payment Day means (i) the date hereof and (ii) each Business Day thereafter
-----------
that COMPUCOM is open for business.
Purchase Price shall have the meaning assigned to such term in Section 2.1
-------------- -----------
hereof.
Purchase Report shall have the meaning assigned to such term in Section 2.1
--------------- -----------
hereof.
Related Rights shall have the meaning assigned to such term in Section
-------------- -------
1.1(a) hereof.
- ------
Related Security with respect to any Receivable means all Related Property
----------------
related thereto other than the Related Property described in clause (a) of the
definition thereof.
Sale Indemnified Amounts shall have the meaning assigned to such term in
------------------------
Section 7.1 hereof.
- -----------
Sale Indemnified Party shall have the meaning assigned to such term in
----------------------
Section 7.1 hereof.
- -----------
Sale Termination Date shall be the date on which an Early Amortization
---------------------
Event with respect to all Series shall have occurred and be continuing.
Seller Material Adverse Effect means, with respect to any event or
------------------------------
circumstance:
(i) a material adverse effect on the assets, business, financial
condition, prospects or operations of COMPUCOM;
(ii) a material adverse effect on the ability of COMPUCOM to perform
its obligations under this Agreement or any other Transaction Document to
which COMPUCOM, as seller, in its capacity as such, is a party;
(iii) a material adverse effect on the validity or enforceability as
against COMPUCOM of this Agreement or any other Transaction Document to
which COMPUCOM, as seller, in its capacity as such, is a party;
(iv) a material adverse effect on the status, existence, perfection,
priority or enforceability of the Buyer's interest in the Receivables and
the Related Rights; or
2
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(v) a material adverse effect on the validity, enforceability or
collectibility of a material portion of the Receivables Pool.
PRELIMINARY STATEMENTS
1. The Buyer is a limited purpose corporation, all of the issued and
outstanding shares of capital stock of which are wholly owned by COMPUCOM.
2. COMPUCOM wishes to sell Receivables that it now owns and from time to
time hereafter will own to the Buyer, and the Buyer is willing, on the terms and
subject to the conditions contained in this Agreement, to purchase such
Receivables from COMPUCOM at such time.
3. The Buyer has entered into the Pooling and Servicing Agreement,
pursuant to which, among other things, the Buyer may sell to the
Certificateholders Certificates representing undivided ownership interests in
the Receivables and certain Related Rights.
4. Buyer and Seller previously entered into that certain Receivables
Purchase Agreement, dated as of April 1, 1996 and amended and restated as of
November 3, 1997 (the "Original Purchase Agreement"), which agreement shall be
---------------------------
replaced and superseded in its entirety by this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. Agreement to Purchase and Sell.
------------------------------
(a) Each Receivable that existed as of the Business Day prior to the date
of this Agreement (the "Existing Receivables") was sold to the Buyer pursuant to
--------------------
the Original Purchase Agreement. On the terms and conditions hereinafter set
forth, and in consideration of the Purchase Price, COMPUCOM agrees to sell to
the Buyer, and the Buyer agrees to purchase from COMPUCOM, at the times set
forth in Section 1.2, but prior to the Sale Termination Date, all of COMPUCOM's
-----------
right, title, and interest in and to:
(i) each Receivable (other than Contributed Receivables) created or
originated by COMPUCOM from the close of COMPUCOM's business on the
3
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Business Day prior to the date of this Agreement to and including the Sale
Termination Date;
(ii) all rights to, but not the obligations under, all related
Contracts and all Related Security with respect thereto;
(iii) all monies due or to become due with respect to the foregoing;
and
(iv) all Collections in respect of, and other proceeds of,
Receivables or any other of the foregoing (as defined in the UCC)
including, without limitation, all funds which either are received by
COMPUCOM, the Buyer or the Servicer from or on behalf of the Obligors in
payment of any amounts owed (including, without limitation, finance
charges, interest and all other charges) in respect of Receivables, or are
applied to such amounts owed by the Obligors (including, without
limitation, insurance payments, if any, that COMPUCOM or the Servicer (if
other than COMPUCOM) applies in the ordinary course of its business to
amounts owed in respect of any Receivable and net proceeds of sale or other
disposition of goods or other collateral or property of the Obligors or any
other party directly or indirectly liable for payment of such Receivable
and available to be applied thereon, excluding, however, proceeds of
returned inventory).
All purchases and capital contributions hereunder shall be made without
recourse, but shall be made pursuant to and in reliance upon the
representations, warranties and covenants of COMPUCOM, in its capacity as
seller, set forth in each Transaction Document. The proceeds and rights
described in subsections (ii), (iii) and (iv) of this Section 1.1(a) are herein
---------------- ----- ---- --------------
collectively called the "Related Rights".
--------------
(b) Contribution. COMPUCOM does hereby contribute to Buyer, and Buyer
------------
hereby accepts all other Contributed Receivables, if any.
SECTION 1.2. Timing of Purchases. On and after the date hereof, and
-------------------
continuing until the Sale Termination Date, each Receivable described in Section
-------
1.1(a)(i) hereof, and all the Related Rights with respect thereto, created or
- ---------
originated by COMPUCOM shall be sold or contributed by COMPUCOM to the Buyer
(without any further action) upon the creation or origination of such
Receivable. All such Receivables, other than those Receivables indicated on a
Purchase Report as having been contributed by COMPUCOM to the Buyer (such other
Receivables, the "Contributed Receivables"), shall be sold to the Buyer on such
-----------------------
date; all Contributed Receivables shall be contributed by COMPUCOM to the Buyer
on such date.
SECTION 1.3. No Recourse. Except as specifically provided in this
-----------
Agreement, the purchase and sale of Receivables and Related Rights under this
Agreement shall be without recourse to COMPUCOM; provided that COMPUCOM shall be
--------
liable to the Buyer for all representations, warranties, covenants and
indemnities made by COMPUCOM pursuant to the terms of this Agreement, it being
understood that such
4
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obligation of COMPUCOM will not arise on account of the failure of the Obligor
for credit reasons to make any payment in respect of a Receivable.
SECTION 1.4. True Sales.
----------
(a) Each of COMPUCOM and the Buyer intend the transactions hereunder to
constitute true sales (or in the case of Contributed Receivables, absolute
conveyances in the form of capital contributions) of Receivables and the Related
Rights by COMPUCOM to the Buyer providing the Buyer with the full benefits of
ownership thereof, and no party hereto intends the transactions contemplated
hereunder to be, or for any purpose to be characterized as, a loan from the
Buyer to COMPUCOM.
(b) In the event (but only to the extent) that the conveyance of
Receivables and Related Rights hereunder is characterized by a court or other
governmental authority as a loan rather than a sale or contribution, COMPUCOM
shall be deemed hereunder to have granted to the Buyer, and COMPUCOM hereby
grants to the Buyer, a security interest in all of COMPUCOM's right, title and
interest in, to and under all of the Receivables and Related Rights, whether now
or hereafter owned, existing or arising. Such security interest shall secure all
of COMPUCOM's obligations (monetary or otherwise) under this Agreement and the
other Transaction Documents to which it is a party, whether now or hereafter
existing or arising, due or to become due, direct or indirect, absolute or
contingent. The Buyer shall have, with respect to the property described in
this Section 1.4(b), and in addition to all the other rights and remedies
--------------
available to the Buyer under this Agreement and applicable law, all the rights
and remedies of a secured party under the UCC, and this Agreement shall
constitute a security agreement under applicable law.
SECTION 1.5. Consideration for Purchases. On the terms and subject to the
---------------------------
conditions set forth in this Agreement, the Buyer agrees to make all Purchase
Price payments to COMPUCOM in accordance with Article III.
-----------
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1. Calculation of Purchase Price. On each Determination Date
-----------------------------
(commencing with the first Determination Date following the date hereof), the
Servicer shall deliver to the Buyer, the Trustee and COMPUCOM (if the Servicer
is other than COMPUCOM) a report in substantially the form of Exhibit A (each
---------
such report being herein called a "Purchase Report") with respect to the Buyer's
---------------
purchases of Receivables from COMPUCOM
(a) that arose on or prior to the Initial Cut-Off Date (in the case
of the first Purchase Report to be delivered hereunder) and
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(b) that arose during the Settlement Period immediately preceding
such Determination Date (in the case of each successive Purchase Report).
Each Purchase Report shall designate the amount of such Receivables that were
Eligible Receivables on the date of origination (or, in the case of Receivables
transferred or contributed on or prior to the Initial Closing Date, on the
Initial Closing Date).
The "Purchase Price" (to be paid to COMPUCOM in accordance with the terms of
--------------
Article III) for the Receivables and the Related Rights shall be determined in
- -----------
accordance with the following formula:
PP = AUB X FMVD
where:
-----
PP = Purchase Price (to be paid to COMPUCOM in accordance
with the terms of Article III) as calculated on the relevant
-----------
Determination Date;
AUB = For purposes of calculating the Purchase Price for Receivables on
each Determination Date, the aggregate Unpaid Balance of the
Receivables described in Section 1.1(a)(i) hereof that were
-----------------
generated by COMPUCOM during the immediately preceding Settlement
Period, less an amount equal to the sum of the aggregate Unpaid
----
Balance of all Contributed Receivables, if any, indicated on the
related Purchase Report; and
FMVD = "Fair Market Value Discount Factor" on the
---------------------------------
determination date, which shall equal 97.79%.
ARTICLE III
PAYMENT OF PURCHASE PRICE
SECTION 3.1. The Initial Purchase Price Payment.
----------------------------------
(a) Buyer paid a portion of the purchase price for Receivables sold under
the Original Purchase Agreement by the issuance of a subordinated note
thereunder (the "Original Subordinated Note"), the principal balance of which as
--------------------------
of the date hereof is $116,749,117. Such Original Subordinated Note shall be
replaced by a promissory note in the form of Exhibit B to this Agreement payable
---------
to the order of COMPUCOM in the initial principal amount equal to the
outstanding principal balance of the Original Subordinated Note as of the date
hereof (such promissory note, as it may be amended, supplemented, endorsed or
otherwise modified from time to time, together with any
6
<PAGE>
promissory notes issued from time to time in substitution therefor or renewal
thereof in accordance with the Transaction Documents, being called an "Buyer
-----
Note"), which Buyer Note shall, in accordance with its terms, be subordinated to
- ----
all interests in Receivables and Related Rights and all obligations of the
Buyer, of any nature, whether now or hereafter arising under or in connection
with the Pooling and Servicing Agreement.
(b) The Servicer shall hold the Buyer Note for the benefit of COMPUCOM,
and shall make all appropriate record-keeping entries with respect to the Buyer
Note or otherwise to reflect payments on and adjustments of the Buyer Note;
provided that the failure to make such notation shall not be construed to reduce
- --------
the amount owing under such Buyer Note. The Servicer's books and records shall
constitute rebuttable presumptive evidence of the principal amount of and
accrued and unpaid interest on the Buyer Note at any time. COMPUCOM hereby
irrevocably authorizes the Servicer to mark its Buyer Note "CANCELED" and to
return such Buyer Note to the Buyer upon the full and final payment thereof
after the Sale Termination Date.
(c) The Buyer Note shall bear interest at a rate equal to the LIBO Rate
plus 1.5%. Such rate shall be readjusted on each six month anniversary of the
date hereof.
SECTION 3.2. Purchase Price Payments. On each Business Day falling on or
-----------------------
after the date hereof until the termination of this Agreement pursuant to
Section 9.4, on the terms and subject to the conditions of this Agreement, the
- -----------
Buyer shall pay to COMPUCOM the Purchase Price for the Receivables and Related
Rights purchased from COMPUCOM during the immediately preceding Settlement
Period as follows:
(i) First, by paying to COMPUCOM a portion of the Purchase Price
-----
due pursuant to Section 2.1 by depositing into such account as COMPUCOM
-----------
shall specify immediately available funds from monies held by or on behalf
of the Buyer solely to the extent that such monies are available to be
distributed to the Buyer pursuant to the Pooling and Servicing Agreement
(such available monies, the "Available Funds");
---------------
(ii) Second, to the extent any portion of the Purchase Price remains
------
unpaid, the principal amount outstanding under the Buyer Note issued to
COMPUCOM automatically shall be increased in an amount equal to such
remaining Purchase Price.
To the extent that (x) the amount paid to CompuCom during such Settlement Period
pursuant to the foregoing sentences with respect to all Receivables created or
originated by COMPUCOM that arose during the corresponding Settlement Period
exceeds (y) the amount due pursuant to Section 2.1 for such Receivables, such
-----------
excess shall be treated as a reduction in the principal amount of the Buyer
Note, effective as of the last day of the related Settlement Period; provided,
--------
however, that if at any time the unpaid principal
- -------
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<PAGE>
amount of the Buyer Note has been reduced to zero, COMPUCOM shall pay the Buyer
the remainder owed with respect thereto in immediately available funds.
SECTION 3.3. Ineligible Receivables, Etc.
----------------------------
(a) If on any day any of the representations or warranties in Section 5.1
-----------
(i) or (u) hereto is not true with respect to any Receivable (each such
- --- ---
Receivable, an "Ineligible Receivable"), COMPUCOM shall deliver to the Servicer
---------------------
in same day funds an amount equal to the Unpaid Balance of such Receivable for
application by the Servicer to the same extent as if Collections of such Unpaid
Balance had actually been received on such date;
(b) except as provided in paragraph (a) of this Section 3.3, or as
------------- -----------
otherwise required by applicable law or the relevant Contract, all Collections
received from an Obligor of any Receivables shall be applied to the Receivables
of such Obligor in the order of the age of such Receivables, starting with the
oldest such Receivable, unless such Obligor designates in writing its payment
for application to specific Receivables;
(c) if and to the extent that the Buyer shall be required for any reason
to pay over to an Obligor (or any trustee, receiver, custodian or similar
official in any Event of Bankruptcy) any amount received by it under this
Section 3.3, such amount shall be deemed not to have been so received but rather
- -----------
to have been retained by COMPUCOM and, accordingly, the Buyer shall have a claim
against COMPUCOM for such amount, payable when and to the extent that any
distribution from or on behalf of such Obligor is made in respect thereof; and
(d) in the event that COMPUCOM has paid (by effecting a Purchase Price
reduction or otherwise) to the Buyer the full Unpaid Balance of any Receivable
pursuant to this Section 3.3, the Buyer shall reconvey such Receivable and all
-----------
Related Rights with respect thereto to COMPUCOM, without recourse,
representation or warranty, but free and clear of all Liens created by the
Buyer; such reconveyed Receivables and all Related Rights shall no longer be
subject to the terms of this Agreement (including any obligation to turn over
Collections with respect thereto).
SECTION 3.4. Payments and Computations, Etc.
------------------------------
(a) All amounts to be paid or deposited by COMPUCOM or the Servicer
hereunder shall be paid or deposited no later than 12:00 p.m. (New York time)
on the day when due in same day funds. All amounts received after 12:00 p.m.
(New York time) will be deemed to have been received on the immediately
succeeding Business Day.
(b) COMPUCOM shall, to the extent permitted by law, pay interest on any
amount not paid or deposited by COMPUCOM (whether as Servicer, or otherwise)
when due hereunder, at an interest rate equal to 2.0% per annum above the
--- -----
Alternate Base Rate, payable on demand.
8
<PAGE>
(c) All computations of interest under Section 3.4(b) and all computations
--------------
of the Purchase Price, fees, and other amounts hereunder shall be made on the
basis of a 360-day year and actual days elapsed. Whenever any payment or
deposit to be made hereunder shall be due on a day other than a Business Day,
such payment or deposit shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of such payment or
deposit.
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1. Conditions Precedent to Initial Purchase. The initial
----------------------------------------
Purchase under this Agreement is subject to the condition precedent that the
Buyer shall have received each of the following (with copies to the Trustee), on
or before the date of such purchase, each in form and substance (including the
date thereof) satisfactory to the Buyer and the Trustee:
(a) The Pooling and Servicing Agreement and the Series 1999-1
Supplement thereto, duly executed by the parties thereto, together with
evidence reasonably satisfactory to the Buyer that all conditions precedent
to the sale of the 1999-1 Series Certificate to the Initial Series 1999-1
Certificateholder thereunder (other than any condition relating to the
effectiveness of the purchase commitment under this Agreement) shall have
been met;
(b) A certificate of the Secretary of COMPUCOM certifying (i) a copy
of the resolutions of its Board of Directors approving this Agreement and
the other Transaction Documents to be delivered by it hereunder and the
transactions contemplated hereby; (ii) the names and true signatures of the
officers authorized on its behalf to sign this Agreement and the other
Transaction Documents to be delivered by it hereunder (on which certificate
the Trustee, the Certificateholders and Buyer may conclusively rely until
such time as the Trustee shall receive from COMPUCOM, as the case may be, a
revised certificate meeting the requirements of this subsection (b)); (iii)
--------------
a copy of its by-laws; and (iv) all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to this
Agreement and the other Transaction Documents;
(c) The Articles of Incorporation of COMPUCOM, duly certified by the
Secretary of State of Delaware, as of a recent date;
(d) Acknowledgment copies or time stamped receipt copies, of the
proper financing statements (Form UCC-1) that have been duly executed and
name COMPUCOM as the debtor and seller and the Buyer as the secured party
and purchaser (and the Trustee, for the benefit of the Certificateholders,
as
9
<PAGE>
assignee of the Buyer) of the Receivables and the Related Rights or other,
similar instruments or documents, as may be necessary or, in Servicer's or
the Trustee's opinion, desirable under the UCC or any comparable law of all
appropriate jurisdictions to perfect the Buyer's ownership interest in all
Receivables and Related Rights in which an ownership interest may be
assigned to it hereunder;
(e) A search report provided in writing to the Trustee, listing all
effective financing statements that name COMPUCOM as debtor or assignor and
that are filed in the jurisdictions in which filings were made pursuant to
subsection (d) above and in such other jurisdictions that Trustee shall
--------------
reasonably request, together with copies of such financing statements (none
of which shall cover any Trust Assets), and tax and judgment lien search
reports from a Person satisfactory to Servicer and the Trustee showing no
evidence of such liens filed against COMPUCOM;
(f) An opinion of Morgan, Lewis & Bockius, special counsel to
COMPUCOM, in the form reasonably acceptable to the Agent;
(g) A pro forma Purchase Report, prepared in respect of the proposed
--- -----
initial Purchase, assuming an Initial Cut-Off Date of March 31, 1999;
(h) The Buyer Note in favor of COMPUCOM, duly executed by the Buyer;
(i) A certificate from an officer of COMPUCOM to the effect that
Servicer and COMPUCOM have placed on the most recent, and have taken all
steps reasonably necessary to ensure that there shall be placed on
subsequent, summary master control data processing reports the following
legend (or the substantive equivalent thereof):
THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO CSI FUNDING, INC.
PURSUANT TO A RECEIVABLES CONTRIBUTION SALE AGREEMENT, DATED AS OF
May 7, 1999, AS AMENDED FROM TIME TO TIME, BETWEEN COMPUCOM SYSTEMS,
INC. AND CSI FUNDING, INC.; AND AN OWNERSHIP AND SECURITY INTEREST IN
THE RECEIVABLES DESCRIBED HEREIN HAS BEEN GRANTED AND ASSIGNED TO
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, AS TRUSTEE, PURSUANT TO
A POOLING AND SERVICING AGREEMENT, DATED AS OF May 7, 1999, AMONG
COMPUCOM SYSTEMS, INC., CSI FUNDING, INC., AND NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, AS TRUSTEE; and
10
<PAGE>
(j) Such other agreements, instruments, UCC financing statements,
certificates, opinions and other documents as the Buyer, the Trustee or the
Agent may reasonably request.
SECTION 4.2. Conditions Precedent to All Purchases. Each purchase under
-------------------------------------
this Agreement is subject to the condition precedent that the agreement of
COMPUCOM to sell Receivables and Related Rights, and the agreement of the Buyer
to purchase Receivables and Related Rights, shall not have terminated pursuant
to Section 9.4 of this Agreement, and shall be subject further to the conditions
-----------
precedent that:
(a) in the case of each purchase, the Servicer shall have delivered
to the Buyer on or prior to such purchase, a completed Purchase Report with
respect to the immediately preceding calendar month, together with such
additional information as may be reasonably requested by the Buyer; and
(b) the representations and warranties contained in Article V are
---------
correct on and as of such day as though made on and as of such day and
shall be deemed to have been made on such day (except that any such
representation or warranty that is expressly stated as being made only as
of a specified earlier date shall be true and correct in all material
respects as of such earlier date).
SECTION 4.3. Certification as to Representations and Warranties.
--------------------------------------------------
COMPUCOM, by accepting the Purchase Price (whether in cash or by an increase in
the principal amount outstanding under the Buyer Note) paid for each purchase of
Receivables and Related Rights on any day, shall be deemed to have certified
that its representations and warranties contained in Article V are true and
---------
correct on and as of such day, with the same effect as though made on and as of
such day.
SECTION 4.4. Effect of Payment of Purchase Price. Upon the payment of the
-----------------------------------
Purchase Price (whether in cash or by an increase in the principal amount
outstanding under the Buyer Note) for any purchase of Receivables and Related
Rights, title to such Receivables and Related Rights shall vest in the Buyer,
whether or not the conditions precedent to such purchase were in fact satisfied;
provided that the Buyer shall not be deemed to have waived any claim it may have
- --------
under this Agreement for the failure by COMPUCOM in fact to satisfy any such
condition precedent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1. Representations and Warranties. In order to induce the Buyer
------------------------------
to enter into this Agreement and to make purchases thereunder, COMPUCOM hereby
represents and warrants as follows:
11
<PAGE>
(a) Organization and Good Standing. COMPUCOM has been duly organized
------------------------------
and is validly existing as a corporation in good standing under the laws of
the State of Delaware, with power and authority to own its properties and
to conduct its business as such properties are presently owned and such
business is presently conducted.
(b) Due Qualification. COMPUCOM is duly qualified to do business as
-----------------
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires such
qualification, licenses or approvals except where the failure to so qualify
or have such licenses or approvals could not reasonably be expected to have
a Seller Material Adverse Effect.
(c) Power and Authority; Due Authorization. COMPUCOM (i) has all
--------------------------------------
necessary power, authority and legal right to (A) execute and deliver this
Agreement and the other Transaction Documents to which it is a party, (B)
carry out the terms of the Transaction Documents to which it is a party,
and (C) sell and assign the Receivables and Related Rights on the terms and
conditions herein provided and (ii) has duly authorized by all necessary
corporate action the execution, delivery and performance of this Agreement
and the other Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each other
-------------------
Transaction Document to be signed by COMPUCOM when duly executed and
delivered will constitute, a legal, valid and binding obligation of
COMPUCOM enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated
------------
by this Agreement and the other Transaction Documents to which COMPUCOM is
a party and the fulfillment of the terms hereof and thereof will not (i)
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default
under COMPUCOM's articles of incorporation or by-laws or any loan or
credit agreement, other agreement, indenture, lease or instrument of
COMPUCOM, or by which it or its properties may be bound (ii) result in the
creation or imposition of any Lien upon any of COMPUCOM's properties
pursuant to the terms of any such loan or credit agreement, other
agreement, indenture, lease or instrument, other than the Transaction
Documents, or (iii) violate any Requirements of Law.
(f) No Proceedings. There is no litigation, proceedings or
--------------
investigations pending or, to the best of COMPUCOM's knowledge, threatened,
12
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before any Governmental Authority or arbitrator (i) asserting the
invalidity of this Agreement or any other Transaction Document to which
COMPUCOM is a party, (ii) seeking to prevent the sale and assignment of the
Receivables and Related Rights, the collectibility of the Receivables or
the consummation of any of the other transactions contemplated by this
Agreement or any other Transaction Document, or (iii) seeking any
determination or ruling that could reasonably be expected to have a Seller
Material Adverse Effect.
(g) Government Approvals. No Governmental Action is required for the
--------------------
due execution, delivery and performance by COMPUCOM of this Agreement or
any other Transaction Document to which it is a party.
(h) Securities Exchange Act. No proceeds of any purchase will be
-----------------------
used to acquire any equity security of a class which is registered pursuant
to Section 12 of the Securities Exchange Act of 1934.
(i) Quality of Title; Valid Sale; Etc. Upon its creation and prior
---------------------------------
to its sale or contribution to the Buyer under this Agreement, it is the
legal and beneficial owner of each of the Receivables and the Related
Rights free and clear of any Lien; and upon each purchase or contribution
the Buyer shall acquire a valid and enforceable ownership interest in each
Receivable then existing or thereafter arising and in the Related Rights
with respect thereto, free and clear of any Lien. Each Receivable
constitutes an "account" as such term is defined in the UCC. No effective
financing statement or other instrument similar in effect covering any
Receivable or Related Rights with respect thereto is on file in any
recording office, except those filed in favor of the Buyer pursuant to this
Agreement and in favor of the Trustee pursuant to the Pooling and Servicing
Agreement.
(j) Accuracy of Information. Each report, information, exhibit,
-----------------------
financial statement, document, book, record or report furnished or to be
furnished at any time by or on behalf of it to the Buyer or the Trustee in
connection with this Agreement is or will be accurate in all material
respects as of its date or (except as otherwise disclosed to the Trustee at
such time) as of the date so furnished, and no such item contains or will
contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained
therein, in the light of the circumstances under which they were made, not
materially misleading.
(k) Offices. The principal place of business and chief executive
-------
office of COMPUCOM are located at the address of COMPUCOM referred to in
Section 9.2, and the offices where COMPUCOM keeps all its books, records
-----------
and documents evidencing or relating to Receivables are located at the
address of COMPUCOM referred to in Section 9.2 (or at such other locations,
-----------
notified to the Trustee in accordance with Section 6.1(e), in jurisdictions
--------------
where all action required by Section 8.4 has been taken and completed).
-----------
13
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(l) Bulk Sales Act. No transaction contemplated hereby requires
--------------
compliance with any bulk sales act or similar law.
(m) Margin Regulations. The use of all funds obtained by COMPUCOM
------------------
under this Agreement will not conflict with or contravene any of Regulation
T, U or X promulgated by the Federal Reserve Board from time to time.
(n) No Purchase Termination Events. No event has occurred and is
------------------------------
continuing, or would result from a purchase, in respect of the Receivables
or Related Rights or from the application of the proceeds therefrom, which
constitutes a Purchase Termination Event.
(o) Maintenance of Books and Records. It has accounted for each sale
--------------------------------
of Receivables and Related Rights in its books and financial statements as
sales, consistent with generally accepted accounting principles.
(p) Credit and Collection Policy. It has complied in all material
----------------------------
respects with the Credit and Collection Policy with regard to each
Receivable.
(q) Solvency. It is solvent; and at the time of (and immediately
--------
after) each sale pursuant to this Agreement it shall be solvent.
(r) Compliance with Transaction Documents. It, as Servicer or
-------------------------------------
Seller, has complied with all of the terms, covenants and agreements
contained in this Agreement and the other Transaction Documents applicable
to it.
(s) Corporate Name. COMPUCOM's complete corporate name is set forth
--------------
in the preamble to this Agreement, and COMPUCOM does not use and has not
during the last six years used any other corporate name, trade name, doing
business name or fictitious name, other than NC Group (used in Ohio only)
and PCSave.
(t) Investment Company Act. It is not, and is not controlled by, an
----------------------
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended.
(u) Eligible Receivables. Each Receivable sold or contributed by it
--------------------
to the Buyer under the Original Purchase Agreement that is designated as an
Eligible Receivable on the initial Purchase Report or Settlement Statement
is in fact an Eligible Receivable. Each Receivable sold or contributed by
it to the Buyer hereunder that is designated as an Eligible Receivable on a
Purchase Report or Settlement Statement is in fact an Eligible Receivable.
14
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ARTICLE VI
COVENANTS
SECTION 6.1. Affirmative Covenants. From the date hereof until the Final
---------------------
Trust Termination Date:
(a) Compliance with Laws, Etc. COMPUCOM will comply in all material
-------------------------
respects with all Requirements of Law, including those with respect to the
Receivables and the related Contracts, except where noncompliance could not
reasonably be expected to have a Seller Material Adverse Effect.
(b) Preservation of Corporate Existence. COMPUCOM will preserve and
-----------------------------------
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its formation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification could reasonably be expected to have a Seller Material
Adverse Effect.
(c) Audits. (i) COMPUCOM will at any time and from time to time
------
during regular business hours, permit the Trustee or any of its agents or
representatives, (A) to examine and make copies of and abstracts from all
books, records and documents (including, without limitation, computer tapes
and disks) in its possession or under its control relating to Receivables,
(B) to visit its offices and properties for the purpose of examining such
materials described in clause (i)(A) above, and to discuss matters relating
-------------
to Receivables or its performance hereunder with any of its officers or
employees having knowledge of such matters, and (C) to verify the existence
and amount of the Receivables; and (ii) without limiting the provisions of
clause (i) above, from time to time on request of the Trustee, permit
----------
certified public accountants or other auditors acceptable to the Trustee to
conduct, at COMPUCOM's expense, a review of its books and records with
respect to the Receivables.
(d) Keeping of Records and Books of Account. COMPUCOM will maintain
---------------------------------------
and implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and keep and maintain
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the daily identification of each new
Receivable and all Collections of and adjustments to each existing
Receivable).
(e) Location of Records. COMPUCOM will keep its principal place
-------------------
of business and chief executive office, and the
15
<PAGE>
offices where it keeps its records concerning the Receivables and all
related Contracts and all other agreements related to such Receivables (and
all original documents relating thereto), at its address(es) referred to in
Section 9.2 or, upon 30 days' prior written notice to the Trustee, at such
-----------
other locations in jurisdictions where all action required by Section 8.4
-----------
shall have been taken and completed.
(f) Credit and Collection Policies. COMPUCOM, at its own expense,
------------------------------
will timely and fully perform and comply in all material respects with the
Credit and Collection Policy in regard to each Receivable and the related
Contracts.
(g) Collections. COMPUCOM will instruct all Obligors to cause all
-----------
Collections to be sent to a Post Office Box or a Wire Transfer Receipt
Account. In the event that COMPUCOM receives Collections directly from any
Obligor, COMPUCOM shall deposit such Collections into the Concentration
Account within one Business Day of receipt thereof.
SECTION 6.2. Negative Covenants. From the date hereof until the Final
------------------
Trust Termination Date:
(a) Sales, Liens, Etc. COMPUCOM will not, except as otherwise
------------------
provided herein or in any other Transaction Document, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer
to exist any Lien upon or with respect to, any Receivable or any interest
therein.
(b) Extension or Amendment of Receivables. COMPUCOM will not, except
-------------------------------------
as otherwise permitted in any other Transaction Document, extend, amend or
otherwise modify, or permit Servicer to extend, amend or otherwise modify,
the terms of any Receivable; or amend, modify or waive, or permit Servicer
to amend, modify or waive, any term or condition of any Contract related to
a Receivable.
(c) Change in Business or Credit and Collection Policy. COMPUCOM
--------------------------------------------------
will not make any change in the character of its business or in the Credit
and Collection Policy, which change could impair the collectibility of any
Receivable or otherwise adversely affect the interests or remedies of the
Buyer under this Agreement or any other Transaction Document or any
Certificateholder.
(d) Change in Payment Instructions to Obligors. COMPUCOM will not
------------------------------------------
make any change, or permit Servicer to make any change, in its instructions
to Obligors regarding payments to be made to a Post Office Box or a Wire
Transfer Receipt Account.
16
<PAGE>
(e) Deposits to Special Accounts. COMPUCOM will not deposit or
----------------------------
otherwise credit, or cause or permit to be so deposited or credited, to any
Lock-Box Account or the Concentration Account cash or cash proceeds other
than Collections of Receivables.
SECTION 6.3. Separate Existence. COMPUCOM hereby acknowledges that the
------------------
Investor Certificateholders are entering into the transactions contemplated by
the other Transaction Documents in reliance upon the Buyer's identity as a legal
entity separate from COMPUCOM. Therefore, from and after the date hereof,
COMPUCOM shall take all steps specifically required by the Transaction Documents
or by the Buyer or the Trustee to continue the Buyer's identity as a separate
legal entity and to make it apparent to third Persons that the Buyer is an
entity with assets and liabilities distinct from those of COMPUCOM and any other
Person, and is not a division of COMPUCOM or any other Person.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Indemnities by COMPUCOM. Without limiting any other rights
-----------------------
which the Buyer and each of its permitted assigns, officers, directors,
employees and agents (each of the foregoing Persons being individually called a
"Sale Indemnified Party") may have hereunder or under applicable law, COMPUCOM
----------------------
hereby agrees to indemnify the Buyer and each Sale Indemnified Party from and
against any and all damages, losses, claims, judgments, liabilities and related
costs and expenses, including reasonable attorneys' fees and disbursements (all
of the foregoing collectively being called "Sale Indemnified Amounts") arising
------------------------
out of or resulting from this Agreement (whether directly or indirectly) or the
use of proceeds of purchases or the ownership of any Receivable or Related
Rights, excluding, however, (a) Sale Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of the Buyer or such
Sale Indemnified Party, (b) Sale Indemnified Amounts to the extent the same
includes losses in respect of Receivables and reimbursement therefor that would
constitute credit recourse to COMPUCOM for the amount of any Receivable or
Related Rights not paid by the related Obligor for credit reasons, or (c) any
net income taxes or franchise taxes imposed on the Buyer or such Sale
Indemnified Party . Without limiting or being limited by the foregoing, but
subject to the exclusions set forth in the immediately preceding sentence,
COMPUCOM shall pay on demand to the Buyer and each Sale Indemnified Party any
and all amounts necessary to indemnify the Buyer and such Sale Indemnified Party
from and against any and all Sale Indemnified Amounts relating to or resulting
from any of the following:
(i) the transfer by COMPUCOM of an interest in any Receivable or
Related Rights to any Person other than the Buyer;
17
<PAGE>
(ii) the failure of any information provided by COMPUCOM, as
Servicer or otherwise, to the Buyer, the Trustee or the Servicer with
respect to Receivables or this Agreement to be true, correct and complete;
(iii) the failure of any representation or warranty or statement
made or deemed made by COMPUCOM (or any of its officers), under or in
connection with this Agreement to have been true and correct when made;
(iv) the failure by COMPUCOM to comply with any Requirements of Law
with respect to any Receivable or Related Rights or otherwise; or the
failure of any Receivable or Related Rights to conform to any such
Requirement of Law;
(v) the failure to vest and maintain vested in the Buyer a valid
and enforceable ownership interest in each Receivable at any time existing
and the Related Rights with respect thereto, free and clear of any Lien,
other than a Lien arising solely as a result of an act of the Buyer or the
Trustee, whether existing as the time of purchase of such Receivable or at
any time thereafter;
(vi) the failure of COMPUCOM to have filed, or any delay in filing,
financing statements or other similar instruments or documents under the
UCC of any applicable jurisdiction or other applicable laws with respect to
any Receivables and the Related Rights in respect thereof, whether at the
time of any purchase or at any subsequent time;
(vii) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of the Obligor to the payment of any Receivable (including,
without limitation, a defense based on such Receivable or the related
Contract not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other claim
resulting from the sale of the goods or services related to such Receivable
or the furnishing or failure to furnish such goods or services;
(viii) any failure of COMPUCOM to perform its duties or obligations
in accordance with the provisions hereof or to perform its duties or
obligations under the Contracts;
(ix) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with merchandise,
insurance or services which are the subject of any Contract;
(x) the commingling of Collections of Receivables at any time with
other funds;
18
<PAGE>
(xi) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of purchases or the ownership of any
Receivable or Related Rights;
(xii) any tax or governmental fee or charge (but not including taxes
upon or measured by net income or representing a franchise or doing
business tax on such Sale Indemnified Party), all interest and penalties
thereon or with respect thereto, and all out-of-pocket costs and expenses,
including the reasonable fees and expenses of counsel in defending against
the same, which may arise by reason of the purchase or ownership of the
Receivables generated by COMPUCOM or any Related Rights connected with any
such Receivables; or
(xiii) any requirement that all or a portion of the distributions
made to the Buyer pursuant to this Agreement shall be rescinded or
otherwise must be returned to COMPUCOM for any reason.
ARTICLE VIII
ADMINISTRATION AND COLLECTIONS; ADDITIONAL RIGHTS
AND OBLIGATIONS IN RESPECT OF THE RECEIVABLES
SECTION 8.1. Servicing of Receivables and Related Rights. Consistent with
-------------------------------------------
the Buyer's ownership of the Receivables and the Related Rights, the Buyer shall
have the sole right to service, administer and collect the Receivables, to
assign such right and to delegate such right to others. In consideration of the
Buyer's purchase of the Receivables and the Related Rights, COMPUCOM agrees to
cooperate fully with the Buyer to facilitate the full and proper performance of
such duties and obligations for the benefit of the Buyer, the Trust and the
Certificateholders. To the extent that the Buyer, individually or through the
Servicer, has granted or grants powers of attorney to the Servicer or the
Trustee under the Pooling and Servicing Agreement, COMPUCOM hereby grants a
corresponding power of attorney on the same terms to the Buyer. COMPUCOM hereby
acknowledges and agrees that the Buyer, in all of its capacities, shall assign
to the Trustee for the benefit of the Certificateholders such powers of attorney
and other rights and interests granted by COMPUCOM to the Buyer hereunder, and
agrees to cooperate fully with the Trustee in the exercise of such rights.
SECTION 8.2. Rights of the Buyer; Enforcement Rights.
---------------------------------------
(a) The Buyer shall have no obligation to account for, to replace, to
substitute or to return any Receivables and Related Rights to COMPUCOM. The
Buyer shall have no obligation to account for, or to return to COMPUCOM,
Collections, or any interest or other finance charge collected pursuant thereto,
without regard to whether such Collections and charges are in excess of the
Purchase Price for such Receivables and Related Rights.
19
<PAGE>
(b) The Buyer shall have the unrestricted right to further assign,
transfer, deliver, hypothecate, subdivide or otherwise deal with the Receivables
and Related Rights, and all of the Buyer's right, title and interest in, to and
under this Agreement, on whatever terms the Buyer shall determine, pursuant to
the Pooling and Servicing Agreement or otherwise.
(c) The Buyer shall have the sole right to retain any gains or profits
created by buying, selling or holding the Receivables and Related Rights and,
except as expressly set forth in the Transaction Documents, shall have the sole
risk of and responsibility for losses or damages created by such buying, selling
or holding.
(d) COMPUCOM hereby authorizes the Buyer, and irrevocably appoints the
Buyer as its attorney-in-fact with full power of substitution and with full
authority in the place and stead of COMPUCOM, which appointment is coupled with
an interest, to take any and all steps in the name of COMPUCOM and on behalf of
COMPUCOM necessary or desirable, in the determination of the Buyer, to collect
any and all amounts or portions thereof due under any and all Receivables or
Related Rights, including, without limitation, endorsing the name of COMPUCOM on
checks and other instruments representing Collections and enforcing such
Receivables and Related Rights.
SECTION 8.3. Responsibilities of COMPUCOM. Anything herein to the
----------------------------
contrary notwithstanding:
(a) COMPUCOM agrees to deliver directly to the Servicer (for the Buyer's
account), within one Business Day of receipt thereof, any Collections that it
receives, in the form so received, and agrees that all Collections shall be
deemed to be received in trust for the Buyer and shall be maintained and
segregated separate and apart from all other funds and moneys of COMPUCOM until
delivery of the Collections to the Servicer;
(b) COMPUCOM agrees to instruct all Obligors to cause all Collections to
be sent to a Post Office Box that is the subject of a Lock-Box Agreement or a
Wire Transfer Receipt Account that is subject to a Wire Transfer Receipt Account
Agreement; and
(c) COMPUCOM shall (i) perform all of its obligations hereunder and under
the Contracts related to the Receivables and Related Rights to the same extent
as if the Receivables and Related Rights had not been sold hereunder, and the
exercise by the Buyer or its designee or assignee of the Buyer's rights
hereunder or in connection herewith shall not relieve COMPUCOM from such
obligations and (ii) pay when due any taxes, including, without limitation, any
sales taxes payable in connection with the Receivables and their creation and
satisfaction. Notwithstanding anything to the contrary in this Agreement, none
of the Buyer, the Trustee or any Certificateholder shall have any obligation or
liability with respect to any Receivable or Related Rights nor shall any of
20
<PAGE>
them be obligated to perform any of the obligations of COMPUCOM under any of the
foregoing.
SECTION 8.4. Further Action Evidencing Purchases. COMPUCOM agrees that
-----------------------------------
from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action, in order to
perfect, protect or more fully evidence the purchase of the Receivables and the
Related Rights by the Buyer hereunder, or to enable the Buyer to exercise or
enforce any of its rights hereunder or under any other Transaction Document.
COMPUCOM further agrees from time to time, at its expense, promptly to take all
action that the Buyer, the Servicer or the Trustee may reasonably request in
order to perfect, protect or more fully evidence such purchase of the
Receivables and the Related Rights or to enable the Buyer or the Trustee (as
assignee of the Buyer) to exercise or enforce any of its or their respective
rights hereunder or under any other Transaction Document in respect of the
Receivables and the Related Rights. Without limiting the generality of the
foregoing COMPUCOM will:
(a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as the Buyer or the Trustee may reasonably determine to be necessary or
appropriate; and
(b) mark the master data processing records evidencing the Receivables
and, if requested by the Buyer or the Trustee, to the extent reasonably
practicable, legend the related Contracts, to reflect the sale of the
Receivables and Related Rights pursuant to this Agreement and the Pooling and
Servicing Agreement.
COMPUCOM hereby authorizes the Buyer or its designee or assignee to file
one or more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Receivables and Related
Rights of COMPUCOM, in each case whether now existing or hereafter generated.
If COMPUCOM fails to perform any of its agreements or obligations under this
Agreement, the Buyer or its designee or assignee may (but shall not be required
to) itself perform, or cause performance of, such agreement or obligation, and
the reasonable expenses of the Buyer or its designee or assignee incurred in
connection therewith shall be payable by COMPUCOM under Section 7.1.
-----------
SECTION 8.5. Purchase Termination Event. Either (i) an election by the
---------------------------
Seller to no longer sell Receivables and Related Rights to the Buyer hereunder
by delivery to the Buyer of a notice to that effect or (ii) an election by the
Buyer to no longer purchase Receivables and Related Rights from the Seller
hereunder by delivery to the Seller of a notice to that effect; such notice to
take effect on the Business Day after the day of receipt by the recipient of
such notice.
21
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Amendments, Etc. No amendment or waiver of any provision of
----------------
this Agreement or consent to any departure by COMPUCOM therefrom shall be
effective unless in a writing signed by the Buyer, and consented to in writing
by the Trustee in accordance with the Pooling and Servicing Agreement, and any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No failure on the part of the Buyer or
the Trustee to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right.
SECTION 9.2. Notices, Etc. All notices and other communications provided
-------------
for hereunder shall, unless otherwise expressly stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
certified mail, postage prepaid, or by facsimile, to the intended party at the
address or facsimile number of such party set forth under its name on Schedule
--------
9.2 hereto or at such other address or facsimile number as shall be designated
- ---
by such party in a written notice to the other parties hereto. All such notices
and communications shall be effective, (a) if personally delivered, when
received, (b) if sent by certified mail, three (3) Business Days after having
been deposited in the mail, postage prepaid, (c) if sent by overnight courier,
one (1) Business Day after having been given to such courier, and (d) if
transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means.
SECTION 9.3. Acknowledgment and Consent.
--------------------------
(a) COMPUCOM, as Seller and as initial Servicer, acknowledges that,
contemporaneously herewith or at any time hereafter, the Buyer is assigning or
will assign to the Trustee, for the benefit of the Certificateholders, pursuant
to the Pooling and Servicing Agreement, all of the Buyer's rights, title and
interest in, to and under the Receivables and Related Rights, and all of the
Buyer's right, title and interest in, to and under this Agreement, it being
--------
understood that such assignment shall not relieve any party hereto from (or
- ----------
require the Trustee or any Certificateholder to undertake) the performance of
any term, covenant or agreement on the part of any party hereto to be performed
or observed under or in connection with this Agreement. COMPUCOM, as Seller and
as initial Servicer, hereby consents to such assignments, including, without
limitation, the assignment by the Buyer of (i) the right of the Buyer, at any
time, to enforce this Agreement against COMPUCOM and the obligations of COMPUCOM
hereunder, (ii) the right to appoint a successor to the Servicer as set forth in
the Pooling and Servicing Agreement, (iii) the right, at any time, to give or
withhold any and all consents, requests, notices, directions, approvals,
demands, extensions or waivers under or with respect to this Agreement, any
other Transaction Document or the obligations in respect of COMPUCOM thereunder
to the same extent as the Buyer may do, and (iv) all
22
<PAGE>
of the Buyer's rights, remedies, powers and privileges, and all claims of the
Buyer against COMPUCOM, under or with respect to this Agreement and the other
Transaction Documents (whether arising pursuant to the terms of this Agreement
or otherwise available at law or in equity). Each of the parties hereto
acknowledges and agrees that the Trustee and the Investor Certificateholders are
third party beneficiaries of the rights of the Buyer arising hereunder and under
the other Transaction Documents to which COMPUCOM is a party.
(b) COMPUCOM hereby agrees to execute all agreements, instruments and
documents, and to take all other action, that the Buyer or the Trustee
determines is necessary or reasonably desirable to evidence its consent
described in Section 9.3(a).
--------------
(c) COMPUCOM hereby acknowledges that its obligations to the Trustee and
the Investor Certificateholders as assignees of the Buyer are and shall be, to
the extent permitted by applicable law or not prohibited by any order of any
court or administrative or regulatory authority, absolute and unconditional
under any and all circumstances and shall be unaffected by any claims, offsets
or other defenses COMPUCOM may have against the Buyer, and COMPUCOM agrees that
it shall not assert or interpose any such claims, offsets or defenses as a
defense to its performance of its obligations under the Transaction Documents to
which it is a party.
SECTION 9.4. Binding Effect; Assignability. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the Buyer, COMPUCOM and its respective
successors and permitted assigns. COMPUCOM may not assign its rights hereunder
or any interest herein without the prior written consent of the Buyer and each
Contract Party, subject to Section 9.3, the Buyer may not assign its rights
-----------
hereunder or any interest herein without the prior written consent of COMPUCOM
and each Control Party. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until the date after the Sale Termination
Date on which COMPUCOM has received payment in full for all Receivables and
Related Rights conveyed pursuant to Section 1.1 hereof and has paid and
-----------
performed all of its obligations hereunder in full. The rights and remedies
with respect to any breach of any representation and warranty made by COMPUCOM
pursuant to Article V shall be continuing and shall survive any termination of
---------
this Agreement.
SECTION 9.5. Costs, Expenses and Taxes. In addition to the rights of
-------------------------
indemnification granted under Article , COMPUCOM agrees to pay on demand all
--------
costs and expenses, if any (including, without limitation, attorneys' fees), of
the Trustee, the Buyer, the Investor Certificateholders and their respective
Affiliates and agents, in connection with the enforcement of this
Agreement(unless such enforcement is finally denied on the merits by a court
with proper jurisdiction).
23
<PAGE>
SECTION 9.6. No Proceedings; Limitation on Payments.
--------------------------------------
(a) COMPUCOM hereby agrees that it will not institute against, or join any
other Person in instituting against, the Buyer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under any
federal or state bankruptcy or similar law, for one year and one day after the
Final Trust Termination Date. The foregoing shall not limit COMPUCOM's right to
file any claim in or otherwise take any action with respect to any insolvency
proceeding that was instituted by any Person other than COMPUCOM.
(b) Notwithstanding any provisions contained in this Agreement to the
contrary, the Buyer shall not, and shall not be obligated to, pay any amount
pursuant to this Agreement unless the Buyer has excess cash flow from operations
or has received funds with respect to such obligation which may be used to make
such payment and, in each case, such payment is permitted by the Pooling and
Servicing Agreement.
SECTION 9.7. GOVERNING LAW AND JURISDICTION.
------------------------------
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE EFFECT OF
PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF THE BUYER IN THE RECEIVABLES
AND THE RELATED RIGHTS IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY UNITED STATES FEDERAL
COURT, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES
HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY TRANSACTION DOCUMENT. EACH
PARTY HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 9.8. Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts, each of which when so executed shall be deemed to be
an
24
<PAGE>
original and all of which when taken together shall constitute one and the same
agreement.
SECTION 9.9. Survival of Termination. The provisions of Section 1.4,
----------------------- -----------
Article , Section 9.3, Section 9.5, Section 9.6, Section 9.7, Section 9.10 and
- -------- ----------- ----------- ----------- ----------- ------------
this Section 9.9 shall survive any termination of this Agreement.
-----------
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ITS
--------------------
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. EACH PARTY HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,
EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
SECTION 9.11. Entire Agreement. This Agreement and the other Transaction
----------------
Documents embodies the entire agreement and understanding of the parties hereto,
and supersedes all prior or contemporaneous agreements and understandings of
such Persons, verbal or written, relating to the subject matter hereof and
thereof. The Exhibits, Schedules and Annexes to this Agreement shall be deemed
incorporated by reference into this Agreement as if set forth herein.
SECTION 9.12. Headings. The captions and headings of this Agreement and
--------
in any Exhibit hereto are for convenience of reference only and shall not affect
the interpretation hereof or thereof.
25
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
COMPUCOM SYSTEMS, INC., as Seller and as initial
Servicer
By:
--------------------------------------------
Name:
Title:
CSI FUNDING, INC., as Buyer
By:
--------------------------------------------
Name:
Title:
26
<PAGE>
EXHIBIT A
FORM OF PURCHASE REPORT
PURCHASE REPORT
COMPUCOM SYSTEMS, INC.
CSI FUNDING, INC.
As of ___________________________________
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Cut-Off Date
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Receivables UPB $ - Input
Contributed Receivables $ 1,000,000 Fixed
Aggregate Unpaid Balance of Receivables AUB $ (1,000,000) Calculated
LIBOR 0.0000% Input
Days Sales Outstanding TD 0 Input
12 Month Losses $ - Input
12 Month Collections $ - Input
- --------------------------------------------------------------------------------------------------------
Cost Rate (LIBOR +1.50%) CR 150.0000% Calculated
- --------------------------------------------------------------------------------------------------------
Cost Discount (TD/360)*CR CD 0 Calculated
- --------------------------------------------------------------------------------------------------------
Loss Discount (12 Month Losses/12 Month Coll) LD #DIV/0! Calculated
- --------------------------------------------------------------------------------------------------------
Fair Market Value Discount (LD+CD) FMVD #DIV/0! Calculated
- --------------------------------------------------------------------------------------------------------
Purchase Price (AUB-(AUB*FMVD)) PP #DIV/0! Calculated
- --------------------------------------------------------------------------------------------------------
Eligible Receivables $ - Input
- --------------------------------------------------------------------------------------------------------
Ineligible Receivables $ - Input
- --------------------------------------------------------------------------------------------------------
</TABLE>
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet as of June 30, 1999 and the Condensed
Consolidated Statement of Operations for the six months ended June 30, 1999 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,516
<SECURITIES> 0
<RECEIVABLES> 418,285
<ALLOWANCES> 2,675
<INVENTORY> 213,101
<CURRENT-ASSETS> 636,787
<PP&E> 82,963
<DEPRECIATION> 39,592
<TOTAL-ASSETS> 775,871
<CURRENT-LIABILITIES> 407,754
<BONDS> 157,391
0
15,000
<COMMON> 477
<OTHER-SE> 195,249
<TOTAL-LIABILITY-AND-EQUITY> 775,871
<SALES> 1,149,335
<TOTAL-REVENUES> 1,295,915
<CGS> 1,059,250
<TOTAL-COSTS> 1,155,552
<OTHER-EXPENSES> 129,438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,537
<INCOME-PRETAX> 388
<INCOME-TAX> 155
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 233
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
