<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended SEPTEMBER 30, 1996 Commission File Number 1-5620
------------------ ------
SAFEGUARD SCIENTIFICS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1609753
- --------------------------------------------------------------------------------
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
800 THE SAFEGUARD BUILDING, 435 DEVON PARK DRIVE WAYNE, PA 19087
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 293-0600
--------------
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 and 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
-------- ----------
Number of shares outstanding as of NOVEMBER 12, 1996
Common Stock 30,528,725
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
QUARTERLY REPORT FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements:
Consolidated Balance Sheets -
September 30, 1996 (unaudited) and December 31, 1995 . . . . . . . . . .3
Consolidated Statements of Operations (unaudited)-
Three and Nine Months Ended September 30, 1996 and 1995. . . . . . . . .5
Consolidated Statements of Cash Flows (unaudited)-
Nine Months Ended September 30, 1996 and 1995. . . . . . . . . . . . . .7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . .8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . 10
PART II - OTHER INFORMATION
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED BALANCE SHEETS
(000 omitted)
September 30 December 31
1996 1995
------------ -----------
ASSETS (UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $ 32,955 $ 7,267
Receivables less allowances
($2,676-1996; $2,644-1995) 358,809 285,684
Inventories 254,976 197,948
Other current assets 7,448 7,376
---------- ----------
Total current assets 654,188 498,275
PROPERTY, PLANT AND EQUIPMENT 111,299 80,235
Less accumulated depreciation and amortization (36,483) (36,960)
---------- ----------
74,816 43,275
COMMERCIAL REAL ESTATE 25,810
Less accumulated depreciation (8,023)
----------
17,787
OTHER ASSETS
Investments 135,190 132,860
Notes and other receivables 9,983 5,882
Excess of cost over net assets of
businesses acquired 28,650 28,830
Other 21,383 15,965
---------- ----------
195,206 183,537
---------- ----------
$ 924,210 $ 742,874
---------- ----------
---------- ----------
See Notes to Consolidated Financial Statements.
3
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED BALANCE SHEETS
(000 omitted except shares)
September 30 December 31
1996 1995
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED)
CURRENT LIABILITIES
Current debt obligations $ 5,618 $ 9,382
Current commercial real estate debt 3,103
Accounts payable 223,974 192,919
Accrued expenses 73,858 66,212
---------- ----------
Total current liabilities 303,450 271,616
LONG TERM DEBT 242,807 204,431
COMMERCIAL REAL ESTATE DEBT 17,380
DEFERRED TAXES 22,293 28,449
MINORITY INTEREST AND OTHER 78,213 66,689
CONVERTIBLE SUBORDINATED NOTES 115,000
SHAREHOLDERS' EQUITY
Common stock, par value $.10 a share
Authorized 100,000,000 shares
Issued 32,799,342 shares 3,280 3,280
Additional paid-in capital 20,571 20,709
Retained earnings 124,176 110,043
Treasury stock, at cost
2,812,660 shares-1996; 3,434,828 shares-1995 (8,986) (10,471)
Net unrealized appreciation on investments 23,406 30,748
---------- ----------
162,447 154,309
---------- ----------
$ 924,210 $ 742,874
---------- ----------
---------- ----------
See Notes to Consolidated Financial Statements.
4
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(000 omitted except per share data)
Three Months Ended
September 30
---------------------------
1996 1995
------------ ------------
(UNAUDITED)
REVENUES
Net Sales
Product $ 459,379 $ 330,193
Services 55,959 36,152
---------- ----------
Total net sales 515,338 366,345
Gains on sales of securities, net 8,137 6,020
Other income 2,591 1,841
---------- ----------
Total revenues 526,066 374,206
COSTS AND EXPENSES
Cost of sales- product 408,622 292,343
Cost of sales- services 38,281 24,516
Selling 34,266 23,878
General and administrative 21,442 13,866
Depreciation and amortization 5,035 4,148
Interest 6,398 4,882
(Income) loss from equity investments 258 (146)
---------- ----------
Total costs and expenses 514,302 363,487
---------- ----------
EARNINGS BEFORE MINORITY INTEREST AND TAXES 11,764 10,719
Minority interest (3,856) (2,877)
---------- ----------
EARNINGS BEFORE TAXES ON INCOME 7,908 7,842
Provision for taxes on income 3,163 3,137
---------- ----------
NET EARNINGS $ 4,745 $ 4,705
---------- ----------
---------- ----------
EARNINGS PER SHARE
Primary $ .15 $ .15
Fully diluted $ .15 $ .13
AVERAGE COMMON SHARES OUTSTANDING
Primary 31,284 30,844
Fully diluted 31,358 30,954
See Notes to Consolidated Financial Statements.
5
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(000 omitted except per share data)
Nine Months Ended
September 30
---------------------------
1996 1995
------------ ------------
(UNAUDITED)
REVENUES
Net Sales
Product $ 1,326,516 $ 981,595
Services 146,361 98,481
------------ -----------
Total net sales 1,472,877 1,080,076
Gains on sales of securities, net 20,096 12,619
Other income 6,429 6,890
------------ -----------
Total revenues 1,499,402 1,099,585
COSTS AND EXPENSES
Cost of sales- product 1,179,057 867,764
Cost of sales- services 98,307 65,711
Selling 93,567 67,366
General and administrative 60,302 43,558
Depreciation and amortization 14,519 12,321
Interest 17,556 14,996
Income from equity investments (1,708) (1,712)
------------ -----------
Total costs and expenses 1,461,600 1,070,004
------------ -----------
EARNINGS BEFORE MINORITY INTEREST AND TAXES 37,802 29,581
Minority interest (14,247) (7,904)
------------ -----------
EARNINGS BEFORE TAXES ON INCOME 23,555 21,677
Provision for taxes on income 9,422 8,670
------------ -----------
NET EARNINGS $ 14,133 $ 13,007
------------ -----------
------------ -----------
EARNINGS PER SHARE
Primary $ .43 $ .41
Fully diluted $ .43 $ .37
AVERAGE COMMON SHARES OUTSTANDING
Primary 31,245 30,596
Fully diluted 31,343 30,872
See Notes to Consolidated Financial Statements.
6
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 omitted)
Nine Months Ended
September 30
---------------------------
1996 1995
------------ ------------
(UNAUDITED)
OPERATING ACTIVITIES
Net earnings $ 14,133 $ 13,007
Adjustments to reconcile net earnings to cash
from operating activities
Depreciation and amortization 14,519 12,321
Deferred income taxes (395) 2,073
Income from equity investments (1,708) (1,712)
Gains on sales of securities, net (20,096) (12,619)
Minority interest, net 8,458 4,743
------------ -----------
14,911 17,813
Cash provided (used) by changes in working
capital items
Receivables (73,227) 11,237
Inventories (57,135) (16,511)
Accrued liabilities and other 34,130 2,992
------------ -----------
(96,232) (2,282)
------------ -----------
Cash provided (used) by operating activities (81,321) 15,531
Proceeds from sales of securities, net 45,220 15,873
------------ -----------
Cash provided (used) by operating activities
and sales of securities, net (36,101) 31,404
OTHER INVESTING ACTIVITIES
Investments and notes acquired, net (36,197) (11,678)
Capital expenditures (42,779) (8,154)
Business acquisitions, net of cash acquired (5,972) (2,874)
Other, net (6,313) (6,673)
------------ -----------
Cash (used) by other investing activities (91,261) (29,379)
FINANCING ACTIVITIES
Issuance of subordinated notes, net 112,109
Net borrowings (repayments) on revolving
credit facilities 22,114 (13,996)
Net borrowings on term debt 16,223 6,995
Issuance of Company and subsidiary stock 2,604 3,520
------------ -----------
Cash provided (used) by financing activities 153,050 (3,481)
------------ -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25,688 (1,456)
Cash and Cash Equivalents - Beginning of year 7,267 7,860
------------ -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 32,955 $ 6,404
------------ -----------
------------ -----------
See Notes to Consolidated Financial Statements.
7
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. The accompanying unaudited interim consolidated financial statements were
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The Summary of Accounting
Policies and Notes to Consolidated Financial Statements included in the
1995 Form 10-K should be read in conjunction with the accompanying
statements. These statements include all adjustments (consisting only of
normal recurring adjustments) which the Company believes are necessary for
a fair presentation of the statements. The interim operating results are
not necessarily indicative of the results for a full year.
2. In February 1996, the Company issued $115 million of 6% Convertible
Subordinated Notes due February 1, 2006. The Notes are convertible into
the Company's Common Stock at $28.985 per share. In November 1996,
approximately $12.9 million of notes were converted into 443,988 shares
of the Company's Common Stock. The Company used approximately $67 million
of the net proceeds from the Notes to repay all of the Company's
outstanding indebtedness under its revolving credit facility at that date.
3. In September 1996, the Company amended its revolving credit facility to
extend the maturity to May 2000. All other significant terms of the
facility remained essentially the same.
4. During September 1996, CompuCom amended its August 1993 Financing and
Security Agreement ("Credit Facility") increasing the amount of the
Credit Facility to $225 million from $175 million and extending the
maturity date to September 25, 1999. The $225 million Credit Facility
is comprised of two elements: a $200 million working capital facility
and a $25 million facility to be used solely to purchase real property
intended to be utilized as CompuCom's corporate headquarters. Initial
pricing on the $200 million component is LIBOR plus 1% while initial
pricing on the $25 million component is LIBOR plus 1.25%. All pricing
on the expanded Credit Facility is subject to adjustment based on
certain performance criteria. CompuCom had previously amended the
Credit Facility in April 1996, extending the maturity and making it
substantially all LIBOR-based. In addition, CompuCom executed
amendments to its April 1996 receivable securitization, whereby a
portion of trade receivables are pledged to a third party as
collateral, increasing the amount from $75 million to $100 million and
extending its maturity to September 17, 1999, subject to certain
conditions. The interest rate applicable to the receivable
securitization is based upon the bank's commercial paper rate (which at
September 30, 1996 was 5.33%) plus 55 basis points.
8
<PAGE>
5. In August 1996, the Company sold its commercial real estate operations to
Brandywine Operating Partnership, LP ("BOP"), a subsidiary of Brandywine
Realty Trust ("BRT"), a publicly traded REIT. The Company received
approximately 400,000 ownership units in BOP, each unit being convertible
to one share of BRT upon the occurrence of certain events. In connection
with the sale, the Company agreed to loan BOP up to $1.5 million for
closing costs, capital improvements and future working capital needs. In
addition, a portion of the units received have been escrowed pending
resolution of contingencies. Accordingly, any potential gain associated
with the transaction has been deferred until the resolution of these
contingencies and termination of the Company's funding arrangement.
6. All share and per share data and related data have been retroactively
adjusted to reflect the two-for-one split of the Company's common shares
effective July 17, 1996.
7. Certain amounts in the 1995 consolidated financial statements have been
reclassified to conform with the 1996 presentation, the most significant of
which is the reclassification of direct expenses related to services
revenue from operating expenses to cost of sales. These reclassifications
had no effect on previously reported net earnings or shareholders' equity.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's business strategy is the development of advanced
technology-oriented, entrepreneurially-driven partnership companies to achieve
maximum returns for its shareholders. The Company provides to its partnership
companies and associated venture funds active strategic management, operating
guidance, acquisition and disposition assistance, board and management
recruitment and innovative financing. The Company offers its shareholders,
through the rights offering process, the opportunity to acquire direct ownership
in selected partnership companies which are ready for public ownership.
If the Company significantly increases or reduces its investment in any of
the partnership companies, the Company's consolidated net sales and earnings may
fluctuate primarily due to the applicable accounting methods used for
recognizing its participation in the operating results of those companies.
The net sales and related costs and expenses of a partnership company are
included in the Company's consolidated operating results if the Company owns
more than 50% of the outstanding voting securities of the partnership company.
Participation of shareholders other than the Company in the earnings or losses
of the partnership company is reflected in the caption "Minority interest" in
the Consolidated Statement of Operations which adjusts consolidated earnings to
reflect only the Company's share of the earnings or losses of the partnership
company.
Investments in companies in which the Company owns 50% or less of the
outstanding voting securities, in which significant influence is exercised, are
accounted for on the equity method of accounting. Under this method, the
partnership company's net sales and related costs and expenses are not included
in the Company's consolidated operating results; however, the Company's share of
the earnings or losses of the partnership company are reflected under the
caption "Income (loss) from equity investments" in the Consolidated Statement of
Operations. Under either consolidation accounting or the equity method of
accounting, only the Company's share of the earnings or losses of the
partnership company is included in the Consolidated Statement of Operations.
OPERATIONS OVERVIEW
Net sales for the quarter and nine months ended September 30, 1996
increased to $515.3 million and $1.47 billion from $366.3 million and $1.08
billion for the same periods in 1995, respectively. Net earnings for the
quarter ended September 30, 1996 were $4.75 million, or $.15 a share, compared
to $4.71 million, or $.15 a share, for the same period in 1995. Net earnings
for the nine months ended September 30, 1996 were $14.1 million, or $.43 a
share, compared to $13 million, or $.41 a share, for the same period in 1995.
CompuCom represented 96% and 95% of the Company's total net sales for the first
nine months of 1996 and 1995, respectively. As a
10
<PAGE>
result of the relative significance of CompuCom in the consolidated results,
fluctuations in other business units have tended to have a minimal impact.
The 41% and 36% net sales increase for the three and nine months ended
September 30, 1996 primarily reflects the 43% and 39% increase at CompuCom.
CompuCom's product revenue for the three and nine months ended September 30,
1996 increased 41% and 37%, respectively. This increase in product revenue
reflects higher demand for personal computers, particularly related to the
current Pentium upgrade cycle occurring in large corporations, as well as
increased demand for laptops. The strong product results also reflect the
advancements CompuCom has made in customer procurement systems, data warehouse
queries and web-based order statusing, reducing the customers' overall
procurement cost. Although product revenues continued to exceed prior year,
CompuCom experienced a slight decline in product revenues when compared to the
second quarter of 1996, which CompuCom believes can be attributed to the timing
of shipments to certain large customers and product availability from certain
manufacturers. CompuCom's services revenue for the three and nine months ended
September 30, 1996 increased 73% and 65%, respectively. The increase in
services revenue reflects CompuCom's continued focus on expanding its network
and technology services at competitive prices to meet increased customer demand
for CompuCom's value-added PC network services, as well as the impact of
various small service acquisitions.
CompuCom's net earnings, excluding a non-recurring gain from the sale of
securities in the second quarter of 1996, increased 2% and 32% for the three and
nine months ended September 30, 1996, respectively, which reflects CompuCom's
growth in sales partially offset by the significant costs related to the
overall growth of the business, especially the company's continued investment in
the service business and information systems resources as well as its decision
to make additional investments to exploit opportunities with customers and new
market segments. The Company's share of CompuCom's operating earnings, after
allocation to minority interest, decreased 17% for the three months ended
September 30, 1996 and increased 6% for the nine months ended September 30,
1996. The difference between the change in CompuCom's operating earnings and
the change in the Company's share of such earnings is due to the decrease in the
Company's ownership of CompuCom from approximately 62% in the first nine months
of 1995 to approximately 50% in the comparable period of 1996 which resulted
primarily from CompuCom's conversion in October 1995 of $18.5 million of
convertible subordinated notes into common stock. The Company continues to hold
up to a 60% voting interest in CompuCom as a result of voting rights associated
with the Company's ownership of CompuCom's Series B cumulative convertible
preferred stock.
The Company's increased net earnings in the three months ended September
30, 1996 over the comparable period of 1995 resulted primarily from higher
securities gains, partially offset by the Company's decreased share of
CompuCom's earnings, increased corporate interest expense resulting primarily
from the issuance of the Company's convertible subordinated notes and additional
corporate expenses incurred to support the growing activities of the partnership
companies. The Company's increased net earnings in the nine months ended
September 30, 1996 over the comparable period of 1995 resulted primarily from
the increase in CompuCom's net earnings and higher securities gains, partially
offset by lower earnings in the Company's
11
<PAGE>
Information Solutions segment, increased corporate interest expense and
additional corporate expenses.
Securities gains for the three and nine months ended September 30, 1996
included gains from the open market sales of a portion of the Company's interest
in Coherent ($1.8 million and $11.1 million, respectively) and Cambridge ($8.3
million and $18 million, respectively). Included in year to date 1996 securities
gains is $4.4 million which represents the Company's share of CompuCom's second
quarter gain from the sale of substantially all of their holdings in PC Service
Source, Inc. Partially offsetting these gains were a $4.5 million write-down of
the Company's holdings in Sybase, Inc. in the second quarter due to the other
than temporary decline in the market price of that stock and provisions recorded
for other investments and notes. Securities gains in 1995 consisted primarily of
gains from the open market sales of a portion of the Company's interest in
Coherent and the Company's remaining interest in Novell.
Earnings in the Company's Information Solutions segment were lower in
the nine months ended September 30, 1996 compared to the same period in 1995
primarily due to losses incurred by Premier Solutions Ltd. in its MAXIMIS
product line that resulted from a downturn in sales activity for that
product. Premier completed the development of the Windows based version of
its Global Plus-Registered Trademark- software in the second quarter of 1996
which improved sales for this product line compared to 1995. Premier expects
to complete the UNIX version of the Global Plus-Registered Trademark-
software for beta testing by year end 1996. Tangram Enterprise Solutions,
Inc.'s revenue from AM:PM-Registered Trademark- and related products
decreased as a result of the ongoing reallocation of resources and launch of
the new Asset Insight-TM-product. Sales of Asset Insight-TM- have not yet
replaced the decrease in the traditional AM:PM-Registered Trademark- revenue
stream.
Income or loss from equity investments fluctuates with the Company's
ownership percentage and the operating results of investees accounted for on the
equity method. The Company's public equity investments accounted for under the
equity method in 1996 include Cambridge Technology Partners, Coherent
Communications, USDATA Corporation and Integrated Systems Consulting Group
(ISCG).
Cambridge reported increased earnings of 67% on a 56% revenue increase for
the third quarter of 1996, as it continues to see strong demand for its services
both domestically and internationally. European operations represented 22% of
revenues in the third quarter and the Company recently announced an acquisition
to strengthen its position in Europe. In addition, Cambridge sees significant
opportunity in Latin America and during the quarter it conducted business in
Mexico and formed a company in Brazil. Safeguard owns approximately 19% of
Cambridge's common stock at September 30, 1996.
Coherent reported increased earnings of 31% on a 28% sales increase for the
third quarter of 1996. Coherent continues to build significant alliances with
major worldwide partners. Those announced recently include an OEM relationship
with Newbridge Networks Corporation; an expansion of the relationship with
NORTEL to cover worldwide sales of Coherent products; a contract with Omnipoint
to utilize Coherent's echo cancellers equipped with Audio Plus software in its
launch of a PCS network; and a contract with Ameritech to supply echo cancellers
for its
12
<PAGE>
cellular services. In addition, Coherent announced its first contract with a
Chinese provincial PTT shortly after quarter end, representing Coherent's
initial entry into the potentially lucrative Chinese market. Safeguard owns
approximately 34% of Coherent's common stock at September 30, 1996.
USDATA reported disappointing results as sales were down 9% compared to the
third quarter of 1995. The majority of the decrease was in the higher margin
software products which, combined with lower hardware systems margins, resulted
in a net loss of $1.6 million for the quarter. The transition from its old
products to the new FactoryLink ECS product has taken longer than anticipated as
the ECS product is part of an enterprise-wide solution versus a departmental
sale, resulting in a longer decision making process. Safeguard owns
approximately 20% of USDATA's common stock at September 30, 1996.
ISCG reported increased earnings of 23% on a 38% sales increase for the
quarter ended September 30, 1996. During the second quarter of 1996, the
Company completed the rights offering of ISCG common stock to the Company's
shareholders. As a result of the rights offering, the Company owns less than
10% of ISCG's common stock at September 30, 1996 and discontinued accounting for
its investment in ISCG on the equity method in the second quarter.
The Company's overall gross margin was 13.3% for the three and nine
months ended September 30, 1996, compared to 13.5% and 13.6% for the
comparable periods in 1995. CompuCom's product gross margin for the three and
nine months ended September 30, 1996 was 10.2% and 10.1%, respectively,
compared to 10.4% for the same periods in 1995 . The lower product margin at
CompuCom is principally due to pricing to win new business and increased
pricing pressures from competitors. Future product margins at CompuCom will
be influenced by manufacturers' pricing strategies together with competitive
pressures from other resellers in the industry. CompuCom's services gross
margin for the three and nine months ended September 30, 1996 improved to
31.1% and 32.4%, respectively, from the comparable periods in 1995 of 30.6%
and 30.7%, respectively, primarily due to an increase in higher-end, higher
margin services performed for customers. Future improved profitability at
CompuCom will depend on its ability to retain and hire quality service
personnel, increased focus on providing technical service and support to
customers, competition, manufacturer product pricing changes, product
availability, effective utilization of vendor programs, and control of
operating expenses. CompuCom participates in certain manufacturer-sponsored
programs designed to increase sales of specific products. These programs,
excluding volume rebates, are not material when compared to CompuCom's
overall financial results.
Selling and general and administrative expense, in absolute dollars,
increased significantly in 1996 primarily due to the costs to manage and
expand the growing services business and maintain the overall infrastructure
at CompuCom and increased corporate expenses incurred to support the growing
activities of the partnership companies. Selling and general and
administrative expense, as a percentage of net sales, increased only slightly
as the increased costs were spread over higher sales volume. CompuCom's
general and administrative expenses are reported net of reimbursements by
certain manufacturers for specific training, promotional and marketing
programs. These reimbursements offset the expenses incurred by CompuCom.
13
<PAGE>
Interest expense increased in the three and nine months ended September 30,
l996 compared to the same periods in 1995 primarily as a result of the issuance
of the Company's convertible subordinated notes and higher working capital
required to support the revenue growth at CompuCom. These increases were
partially offset by the repayment of all of the outstanding indebtedness under
the Company's revolving credit facility, the lower interest rate on the
Company's convertible subordinated notes compared to the bank credit facility,
CompuCom's lower effective interest rate resulting from the 1996 amendments to
their credit facility and the redemption in October 1995 of $18.5 million of
convertible subordinated notes by CompuCom.
In August 1996, the Company sold its commercial real estate operations
which is more fully described in Note 5 of the accompanying Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
In February 1996, the Company issued $115 million of 6% Convertible
Subordinated Notes (the "Notes") due February 1, 2006. The Notes are
convertible into the Company's Common Stock at $28.985 per share. In
November 1996, approximately $12.9 million of notes were converted into
443,988 shares of the Company's Common Stock. The Company used approximately
$67 million of the net proceeds to repay all of the outstanding indebtedness
under its $100 million revolving credit facility, which continues to be
maintained and against which there were no outstanding borrowings at
September 30, 1996. The credit facility was amended in September 1996 to
extend the maturity of the facility to May 2000. All other significant terms
of the facility remained essentially the same and it continues to be secured
by the equity securities the Company holds of its publicly traded partnership
companies, including CompuCom. The value of these securities significantly
exceeds the total availability under the bank credit facility.
As of September 30, 1996 the Company held approximately $27 million of
temporary cash investments in institutional money market accounts. Existing
cash resources, availability under the Company's $100 million revolving credit
facility, proceeds from the sales from time to time of selected minority-owned
publicly traded securities and other internal sources of cash flow should be
sufficient to fund the Company's cash requirements through 1997, including
investments in new or existing partnership companies and general corporate
requirements.
CompuCom and Premier maintain separate, independent bank credit facilities,
which are nonrecourse to the Company and are secured by substantially all of the
assets of the applicable borrower. CompuCom's financing capability is $325
million, consisting of a $225 million credit facility, which prohibits the
payment of common stock dividends by CompuCom while its credit line remains
outstanding, and a $100 million receivables securitization agreement. At
September 30, 1996, approximately $154 million was outstanding under the credit
facility and approximately $75 million was outstanding under the receivables
securitization. Premier has approximately $3.4 million outstanding on its $4.5
million master demand note at September 30, 1996. The note is payable on demand
within five days of notice, and bears interest at the prime rate plus 0.5%.
14
<PAGE>
During recent years, CompuCom has utilized operating earnings, the bank
credit facilities, equity financing and long-term subordinated notes to fund its
significant revenue growth and related operating asset requirements. During
1996, CompuCom amended its credit facilities which is more fully described in
Note 4 of the accompanying Consolidated Financial Statements. Cash used in
operating activities for the nine months ended September 30, 1996 resulted
primarily from the increase in working capital. Working capital increased in
1996 primarily as a result of the net cash proceeds from the issuance of the
Company's convertible subordinated notes, after repayment of all borrowings
under the Company's revolving credit facility, and higher levels of inventory
allocated to specific customers and higher accounts receivable at CompuCom,
partially offset by an increase in accounts payable. The Company's operations
are not capital intensive. Capital additions are generally funded through
internally generated funds or other financing sources. During the third quarter
of 1996, CompuCom purchased real property intended to be utilized as a new
corporate headquarters campus for approximately $26 million which was funded on
an interim basis through its amended bank credit facility pending permanent
mortgage financing. There were no material asset purchase commitments at
September 30, 1996.
15
<PAGE>
Item 5. OTHER INFORMATION
A Rights Offering to the Company's shareholders of 2,875,000 shares of
Integrated Systems Consulting Group (ISCG) Common Stock was completed on
May 31, 1996. The Company, which sold 350,000 shares of ISCG stock as part
of the offering, beneficially owns less than 10% of ISCG's Common Stock
at September 30, 1996.
Sanchez Computer Associates (Sanchez) filed a registration statement
with the Securities and Exchange Commission on September 27, 1996 for a
Rights Offering to Safeguard's shareholders of approximately 3,030,000
shares of Sanchez Common Stock. Safeguard and Sanchez anticipate that
the rights will have an exercise price of between $5.00 and $6.00 per
share. The offering is expected to become effective on November 13,
1996. Safeguard shareholders will receive Rights, exercisable for
approximately 35 days after issuance, to purchase one share of Sanchez
Common Stock for every ten shares of Safeguard Common Stock owned.
Rights holders will not be able to exercise Rights for fewer than 50
shares of Sanchez Common Stock. Holders of less than 50 Rights will
have the option of selling their Rights, letting them expire, or
acquiring sufficient Rights to reach 50. The offering will be made only
by means of a prospectus, subject to the effectiveness of the
registration statement. The timing of the offering will be subject to
change depending on the length of the SEC review process. In addition,
any material adverse change in the operations or financial condition of
Sanchez could cause a delay in the offering.
16
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
10.1 Credit Agreement, dated as of September 13, 1996,
between Safeguard Scientifics, Inc., Safeguard
Scientifics (Delaware), Inc. and PNC Bank, N.A.
(exhibits omitted)
10.2 Credit Agreement, dated as of September 26, 1996,
between NationsBank of Texas, N.A. and CompuCom
Systems, Inc. (exhibits and schedules omitted)
10.3 First Amendment to Master Security and Administration
Agreement, dated as of September 25, 1996, among
CompuCom Systems, Inc., NationsBank of Texas, N.A., CSI
Funding, Inc. and Enterprise Funding Corporation.
(exhibits omitted)
10.4 First Amendment to Receivables Purchase Agreement,
dated as of September, 25, 1996, between CompuCom
Systems, Inc. and CSI Funding, Inc. (exhibits omitted)
10.5 First Amendment to Transfer and Administration
Agreement, dated as of September 25, 1996, among CSI
Funding, Inc., CompuCom Systems, Inc., Enterprise
Funding Corporation and NationsBank, N.A. (exhibits
omitted)
11 Computation of Per Share Earnings
27 Financial Data Schedule (electronic filing only)
(b) No reports on Form 8-K have been filed by the Registrant during the
quarter ended September 30, 1996.
17
<PAGE>
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.
SAFEGUARD SCIENTIFICS, INC.
(Registrant)
Date: November 12, 1996 /s/ Warren V. Musser
---------------------------------------
Warren V. Musser
Chairman and Chief Executive Officer
Date: November 12, 1996 /s/ Gerald M. Wilk
---------------------------------------
Gerald M. Wilk
Senior Vice President
(Principal Financial and
Principal Accounting Officer)
18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
AMONG
SAFEGUARD SCIENTIFICS, INC.
SAFEGUARD SCIENTIFICS (DELAWARE) INC.
AND
PNC BANK, NATIONAL ASSOCIATION
AND
THE OTHER LENDERS NOW OR
HEREAFTER A PARTY HERETO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
Article 1. DEFINITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 TERMS DEFINED. . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 DIRECTLY OR INDIRECTLY.. . . . . . . . . . . . . . . . . 8
Section 1.3 ACCOUNTING TERMS; TEST GROUP.. . . . . . . . . . . . . . 8
Article 2. AMOUNT AND TERMS OF LOAN; COLLATERAL. . . . . . . . . . . . . 9
Section 2.1 REVOLVING LOAN.. . . . . . . . . . . . . . . . . . . . . 9
Section 2.2 CHANGES IN REVOLVING LOAN COMMITMENT.. . . . . . . . . . 14
Section 2.3 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.4 FEES.. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.5 BORROWINGS.. . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.6 USE OF PROCEEDS OF LOAN. . . . . . . . . . . . . . . . . 16
Section 2.7 PAYMENT OF LOAN. . . . . . . . . . . . . . . . . . . . . 16
Section 2.8 INTEREST.. . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.9 NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.10 COMPUTATIONS; APPLICATION OF PAYMENTS. . . . . . . . . . 21
Section 2.11 MINIMUM AMOUNTS OF BORROWINGS. . . . . . . . . . . . . . 22
Section 2.12 SET-OFF. . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.13 PREPAYMENT.. . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.14 COLLATERAL.. . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.15 VALUATION OF COLLATERAL COVERAGE
SECURITIES; SALE.. . . . . . . . . . . . . . . . . . . . 23
Article 3. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . 23
Section 3.1 ORGANIZATION.. . . . . . . . . . . . . . . . . . . . . . 23
Section 3.2 POWER, AUTHORITY, CONSENTS.. . . . . . . . . . . . . . . 24
Section 3.3 NO VIOLATION OF LAW OR AGREEMENTS. . . . . . . . . . . . 24
Section 3.4 DUE EXECUTION, VALIDITY, ENFORCEABILITY. . . . . . . . . 25
Section 3.5 PROPERTIES, PRIORITY OF LIENS. . . . . . . . . . . . . . 25
Section 3.6 JUDGMENTS, ACTIONS, PROCEEDINGS. . . . . . . . . . . . . 25
Section 3.7 NO DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.8 BURDENSOME DOCUMENTS.. . . . . . . . . . . . . . . . . . 26
Section 3.9 FINANCIAL STATEMENTS.. . . . . . . . . . . . . . . . . . 26
Section 3.10 TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.11 INTANGIBLE ASSETS. . . . . . . . . . . . . . . . . . . . 27
Section 3.12 NAME CHANGES.. . . . . . . . . . . . . . . . . . . . . . 27
Section 3.13 FULL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . 27
Section 3.14 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.15 EMPLOYEE GRIEVANCES. . . . . . . . . . . . . . . . . . . 29
Section 3.16 INDEBTEDNESS.. . . . . . . . . . . . . . . . . . . . . . 29
Section 3.17 INVESTMENT COMPANY.. . . . . . . . . . . . . . . . . . . 30
Article 4. THE CLOSINGS; CONDITIONS TO THE LOAN. . . . . . . . . . . . . 30
Section 4.1 THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . 30
-i-
<PAGE>
Section 4.2 CONDITIONS TO INITIAL ADVANCE. . . . . . . . . . . . . . 30
Section 4.3 CONDITIONS TO SUBSEQUENT ADVANCES. . . . . . . . . . . . 32
Article 5. DELIVERY OF FINANCIAL REPORTS, DOCUMENTS
AND OTHER INFORMATION.. . . . . . . . . . . . . . . . . . . . 32
Section 5.1 ANNUAL FINANCIAL STATEMENTS. . . . . . . . . . . . . . . 32
Section 5.2 QUARTERLY FINANCIAL STATEMENTS.. . . . . . . . . . . . . 33
Section 5.3 ADDITIONAL INFORMATION.. . . . . . . . . . . . . . . . . 33
Section 5.4 NO DEFAULT CERTIFICATE.. . . . . . . . . . . . . . . . . 34
Section 5.5 COPIES OF OTHER REPORTS. . . . . . . . . . . . . . . . . 34
Section 5.6 COPIES OF DOCUMENTS. . . . . . . . . . . . . . . . . . . 34
Section 5.7 NOTICE OF DEFAULTS.. . . . . . . . . . . . . . . . . . . 34
Section 5.8 ERISA NOTICES. . . . . . . . . . . . . . . . . . . . . . 35
Article 6. COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.1 PAYMENT OF TAXES AND CLAIMS. . . . . . . . . . . . . . . 35
Section 6.2 MAINTENANCE OF PROPERTIES, INSURANCE, RECORDS AND
CORPORATE EXISTENCE; INSPECTIONS AND AUDITS; ETC.. . . . 36
Section 6.3 INDEBTEDNESS.. . . . . . . . . . . . . . . . . . . . . . 37
Section 6.4 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.5 GUARANTIES.. . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.6 INVESTMENTS AND LOANS. . . . . . . . . . . . . . . . . . 40
Section 6.7 CONSOLIDATION AND MERGER.. . . . . . . . . . . . . . . . 40
Section 6.8 TANGIBLE NET WORTH.. . . . . . . . . . . . . . . . . . . 40
Section 6.9 FUNDED DEBT TO TANGIBLE NET WORTH. . . . . . . . . . . . 41
Section 6.10 INTEREST COVERAGE RATIO. . . . . . . . . . . . . . . . . 41
Section 6.11 CHANGE OF BUSINESS; SALE OF ASSETS.. . . . . . . . . . . 41
Section 6.12 LEASES.. . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.13 ISSUANCE OF STOCK. . . . . . . . . . . . . . . . . . . . 41
Section 6.14 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.15 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . 42
Section 6.16 ERISA COMPLIANCE; OBLIGATIONS. . . . . . . . . . . . . . 42
Section 6.17 PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.18 GUARANTEES OF NEWLY ACQUIRED SUBSIDIARIES. . . . . . . . 43
Section 6.19 LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 43
Section 6.20 DISPOSITIONS.. . . . . . . . . . . . . . . . . . . . . . 43
Article 7. EVENTS OF DEFAULT; REMEDIES.. . . . . . . . . . . . . . . . . 43
Section 7.1 PAYMENTS.. . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.2 COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.3 OTHER COVENANTS. . . . . . . . . . . . . . . . . . . . . 44
Section 7.4 OTHER DEFAULTS.. . . . . . . . . . . . . . . . . . . . . 44
Section 7.5 REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . 45
Section 7.6 BANKRUPTCY.. . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.7 JUDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.8 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.9 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.10 OWNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.11 REMEDIES.. . . . . . . . . . . . . . . . . . . . . . . . 46
-2-
<PAGE>
Article 8. THE AGENT.. . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1 APPOINTMENT AND AUTHORIZATION . . . . . . . . . . . . . . . . 48
8.2 GENERAL IMMUNITY. . . . . . . . . . . . . . . . . . . . . . . 48
8.3 CONSULTATION WITH COUNSEL . . . . . . . . . . . . . . . . . . 48
8.4 DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.5 RIGHTS AS A LENDER. . . . . . . . . . . . . . . . . . . . . . 49
8.6 RESPONSIBILITY OF AGENT . . . . . . . . . . . . . . . . . . . 49
8.7 COLLECTIONS AND DISBURSEMENTS . . . . . . . . . . . . . . . . 49
8.8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 50
8.9 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.10 NO RELIANCE . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.11 REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.12 REMOVAL OF AGENT. . . . . . . . . . . . . . . . . . . . . . . 52
8.13 ACTION ON INSTRUCTIONS OF LENDERS . . . . . . . . . . . . . . 52
8.14 SEVERAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 52
8.15 CONSENT OF LENDERS. . . . . . . . . . . . . . . . . . . . . . 52
8.16 PARTICIPATION AND ASSIGNMENTS . . . . . . . . . . . . . . . . 54
8.17 OTHER CREDIT FACILITIES OF LENDERS. . . . . . . . . . . . . . 54
Article 9. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . 55
Section 9.1 FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . 55
Section 9.2 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.3 PAYMENTS.. . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.4 SURVIVAL OF AGREEMENTS AND REPRESENTATIONS; WAIVER OF
TRIAL BY JURY. . . . . . . . . . . . . . . . . . . . . . 57
Section 9.5 LIEN ON AND SET-OFF OF DEPOSITS. . . . . . . . . . . . . 57
Section 9.6 MODIFICATIONS, CONSENTS AND WAIVERS;
ENTIRE AGREEMENT.. . . . . . . . . . . . . . . . . . . . 57
Section 9.7 REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . . . . 58
Section 9.8 FURTHER ASSURANCES.. . . . . . . . . . . . . . . . . . . 58
Section 9.9 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.10 COUNTERPARTS.. . . . . . . . . . . . . . . . . . . . . . 61
Section 9.11 CONSTRUCTION; GOVERNING LAW; JURISDICTION. . . . . . . . 61
Section 9.12 SEVERABILITY.. . . . . . . . . . . . . . . . . . . . . . 61
Section 9.13 BINDING EFFECT; NO ASSIGNMENT OR DELEGATION. . . . . . . 62
Section 9.14 JOINT AND SEVERAL OBLIGATIONS. . . . . . . . . . . . . . 62
Section 9.15 THIRD PARTY. . . . . . . . . . . . . . . . . . . . . . . 63
-3-
<PAGE>
CREDIT AGREEMENT
AGREEMENT made as of this 13th day of September, 1996, by and among
SAFEGUARD SCIENTIFICS, INC., a Pennsylvania corporation ("SSI" or a "Borrower"),
and SAFEGUARD SCIENTIFICS (DELAWARE) INC., a Delaware corporation ("SSD" or a
"Borrower" and, collectively with SSI, the "Borrowers"), PNC BANK, NATIONAL
ASSOCIATION and the other lending institutions listed from time to time on
Schedule A attached hereto and incorporated herein that are parties to this
Agreement (collectively, "Lenders" and singly, a "Lender"), PNC BANK, NATIONAL
ASSOCIATION, a national banking association, as issuer of letters of credit
hereunder (in such capacity, "Issuer"), and PNC BANK, NATIONAL ASSOCIATION, as
administrative and collateral agent for the Issuer and Lenders hereunder (in
such capacity, "Agent").
The Borrowers have requested Lenders to establish a certain secured credit
facility, and Lenders are willing to do so under and subject to the terms
hereof.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
Article 1. DEFINITIONS.
Section 1.1 TERMS DEFINED.
As used in this Agreement, the following terms shall have the following
respective meanings set forth below or set forth in the section referred to
following such term:
"Advance" - as defined in Section 2.1 hereof.
"Business Day" - any day other than Saturday, Sunday or any other day on
which commercial banks in Pennsylvania are authorized or required to close under
the laws of the Commonwealth of Pennsylvania or by executive order.
"Capitalized Lease Obligations" - as to any Person, any obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under generally accepted accounting principles. For
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with generally accepted
accounting principles.
<PAGE>
"Certificate" - a certificate executed either by the president, the
treasurer or controller or any vice president of any Borrower.
"Closing" - the transactions provided for in Sections 4.1 and 4.2 hereof.
"Collateral" - the collateral provided for herein and in the Security
Documents.
"Collateral Coverage Base" - a dollar amount equal to the following
percentages of the value of the Collateral Coverage Securities, in no event,
however, to exceed the lesser of (i) as to Collateral Coverage Securities which
constitute "margin stock" pursuant to Regulation U of the Board of Governors of
the Federal Reserve System, 12 C.F.R. 221 et seq. ("Regulation U"), 50% (or the
then maximum "loan value" for margin stock pursuant to Regulation U) of the
value of such Collateral Coverage Securities, and (ii) the following dollar
maximum specified for each type of Collateral Coverage Securities, provided that
the following dollar maximum for such Collateral Coverage Securities will be
inapplicable at such time as Borrowers own (directly or indirectly) less than
15% of the following corporation's securities which have ordinary voting power
for the election of directors:
Securities % Maximum $
---------- ----------- ---------
CompuCom 33.33% $40 Million
Cambridge 50% $50 Million
Sybase 50% N/A
Coherent 50% $50 Million
Tangram 25% $5 Million
USDATA 33.33% $25 Million
National Media 33.33% $25 Million
ISCG 33.33% $25 Million
New Public 25% $25 Million
Companies
"Collateral Coverage Securities" - Pledged Securities consisting of common
stock issued by one or more of the following corporations but only as long as
(A) such securities are traded on a recognized national securities exchange, on
the NASDAQ national or small-cap market or on the over-the-counter market and
(B) such securities are not Restricted Securities;
(i) CompuCom Systems, Inc. ("CompuCom")
(ii) Cambridge Technology Partners, Inc.
("Cambridge")
-2-
<PAGE>
(iii) Sybase, Inc. ("Sybase")
(iv) Integrated Systems Consulting Group, Inc. ("ISCG")
(v) Coherent Communications Systems Corporation ("Coherent")
(vi) Tangram Enterprise Solutions, Inc. ("Tangram")
(vii) USDATA Corporation ("USDATA")
(viii) National Media Corporation ("National Media")
(ix) New Public Companies
"Commitment Termination Date" - May 31, 2000.
"Compliance Certificate" - as defined in Section 4.2(g) hereof.
"Debt Instrument" - as defined in Section 7.4(a) hereof.
"Default" - an event which with notice or the lapse of time or both would
constitute an Event of Default.
"Dollars" and "$" - lawful money of the
United States of America.
"ERISA" - as defined in Section 3.14 hereof.
"Event of Default" - as defined in Article 7 hereof.
"Fed Funds Rate" - The daily rate of interest announced from time to time
by the Board of Governors of the Federal Reserve System in publication H.15, or
any successor publication, as the "Federal Funds Rate".
"Financial Statements" -
(a) The audited balance sheets of SSI, and its Subsidiaries
(including, without limitation, SSD) at December 31, 1995, and the related
audited consolidated statements of operations, shareholder's equity and cash
flows, and the notes thereto, of SSI, SSD and Subsidiaries for the above
mentioned year certified without qualification or explanatory paragraphs by
independent certified public accountants satisfactory to the Agent;
(b) The unaudited consolidating balance sheets of SSI and its
Subsidiaries (including without limitation, SSD), as at March 31, 1996, and the
unaudited internal consolidating statement of operations and cash flows, of SSI
and its Subsidiaries (including, without limitation, SSD) for the three months
then ended; and
-3-
<PAGE>
(c) The unaudited consolidated balance sheets of SSI and its
Subsidiaries (including, without limitation, SSD) as at March 31, 1996 and the
related unaudited consolidated statement of operations and cash flows, and the
notes thereto, of SSI and its Subsidiaries for the three months then ended.
"Funded Debt" - as of any date, without duplication, all Indebtedness for
borrowed money, including without limitation outstanding Advances (including the
face amount of outstanding Letters of Credit) and unreimbursed draws on Letters
of Credit, but excluding the Subordinated Debenture.
"Guarantors" - as defined in Section 4.2 hereof.
"Included Subsidiaries" - all Subsidiaries of SSI or of SSD at any time,
except for Compucom Systems, Inc., a Delaware corporation ("Compucom"), and its
successors and Subsidiaries.
"Indebtedness" - with respect to any Person, all (i) liabilities or
obligations which in accordance with generally accepted accounting principles
would be included in determining total liabilities as shown on the liability
side of a balance sheet of such Person at the date as of which Indebtedness is
to be determined, including, without limitation, Capitalized Lease Obligations
of such Person; and (ii) liabilities or obligations secured by Liens on any
assets of such Person, whether or not such liabilities or obligations shall have
been assumed by it.
"Interest Coverage Ratio" - as of any date, the ratio of (a) Pre Tax
Earnings plus cash interest expense for the 12 months ending on such date to (b)
the cash interest expense for such 12 month period.
"Investments" - any loans, advances or extensions of credit (other than
guaranties) or any purchase of any debt or equity security, including without
limitation, capital stock, bonds, debentures, notes, general partnership
interests, limited partnership interests, warrants or other rights, all whether
certificated or uncertificated.
"IRS" - as defined in Section 3.14 hereof.
"Leases" - leases and subleases (other than the leases or subleases the
obligation to pay rent or other amounts under which is a Capitalized Lease
Obligation), licenses, easements, grants, pole attachment and conduit or trench
agreements and other attachment rights and similar instruments under which any
Borrower or any of its Included Subsidiaries has the right to use real or
personal property or rights of way.
-4-
<PAGE>
"Lending Office" - Valley Forge Regional Lending Center, 1000 Westlakes
Drive, Suite 200, Berwyn, PA 19312 or such other office as the Agent may from
time to time specify to the Borrowers as the office at which Advances are to be
made.
"Letters of Credit" - as defined in Section 2.1 hereof.
"Liabilities" - for the purposes of calculating Indebtedness to Tangible
Net Worth and for the purposes of determining "Liabilities" of Borrowers hereof,
Liabilities shall not include minority shareholder interest which may appear on
a balance sheet of SSI, prepared in accordance with generally accepted
accounting principles, consistently applied.
"Lien" - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting Property. For the
purpose of this Agreement, any Borrower or Subsidiary shall be deemed to be the
owner of any Property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the Property has
been retained by or vested in some other person for security purposes.
"Loan Documents" - this Agreement, the Notes, the Security Documents and
all other documents executed and delivered in connection herewith or therewith,
including all amendments, modifications and supplements of or to all such
documents.
"Loan" - the Revolving Loan.
"Majority Lenders" - at any time, Lenders holding Pro Rata Percentages
aggregating at least 66.7% at such time.
"Material Adverse Effect" - any specified event, condition or occurrence as
to any Borrower or Subsidiary, as applicable, which individually or in the
aggregate with any other such event, condition or occurrence and whether through
the effect on such Borrower's or Subsidiary's business, property, prospects,
profits or condition (financial or otherwise) or otherwise could reasonably be
expected to result in, to the extent not fully covered by insurance, any
liability, loss, forfeiture, penalty, costs, fine, expense, payment or other
monetary obligation or loss of property in excess of $5,000,000.00 as to any
Borrower or
-5-
<PAGE>
Subsidiary or as to all Borrowers and Subsidiaries taken as a whole.
"New Public Companies" - corporations in which a Borrower hereafter
acquires common stock.
"Notes" - the Revolving Loan Notes.
"Obligations" - as defined in Section 2.14 hereof.
"Person" - an individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
"Pledge Agreement" - The Pledge Agreement between Agent and Borrowers dated
the date hereof, as the same may hereafter be amended from time to time.
"Pledged Securities" - Securities owned by the Borrowers pledged as
collateral from time to time for the performance of the Borrowers' obligations
hereunder and under the Notes.
"Post-Default Rate" - in respect of any amounts not paid when due (whether
at stated maturity, by acceleration or otherwise), a rate per annum during the
period commencing on the due date until such amounts are paid in full equal to
2% per annum above the rate(s) otherwise applicable to such amounts as provided
for in Section 2.8 hereof.
"Pre-Tax Earnings" shall mean gross revenues and other proper income
credits, plus any cash proceeds realized on the sale of securities, less all
proper income charges other than taxes on income, all determined on a
consolidated basis and in accordance with generally accepted accounting
principles; PROVIDED that there shall not be included in such revenues or
charges (a) any gains resulting from the write-up of assets; (b) any proceeds of
any life insurance policy; (c) earnings (or losses) from minority interests of
the Borrowers and their Included Subsidiaries; (d) earnings (or losses) from
equity investments carried on an equity basis to the extent not received by the
Borrowers or any Included Subsidiary; (e) any gain or loss, other than a gain or
loss on the sale of stock, which is classified as "extraordinary" in accordance
with generally accepted accounting principles; or (f) any book gain (or loss) on
the sale of securities. Pre-Tax Earnings can be less than zero for all purposes
of this Agreement.
"Prime Rate" - the interest rate which Agent announces from time to time at
its Principal Office as its prime rate. Each change in any interest rate
provided for herein based upon the
-6-
<PAGE>
Prime Rate resulting from a change in the Prime Rate shall take effect at the
time of such change in the Prime Rate. The Borrowers acknowledge that such Prime
Rate is not tied to an external rate of interest or index and does not
necessarily reflect the lowest rate of interest actually charged by the Agent to
any particular class or category of customer.
"Principal Office" - Agent's principal office presently located at Valley
Forge Regional Lending Center, 1000 Westlakes Drive, Suite 200, Berwyn, PA
19312.
"Pro Rata Percentage" - The percentage set forth opposite each Lender's
name on Schedule A.
"Property" - any interest in any kind of property or asset, whether real,
personal or mixed or tangible or intangible.
"Quarterly Dates" - the last Business Day of each March, June, September
and December.
"Restricted Securities" - securities now or hereafter owned by a Borrower
which such Borrower is, or Agent or any Lender if acquired from Borrowers as
pledgor would be, prohibited under applicable federal or state law or
regulations, or pursuant to private contract, from publicly offering or selling
in open market transactions throughout the United States. For this purpose
securities which can lawfully be sold pursuant to Rule 144 of the Securities Act
of 1933, as amended, subject only to volume limitations set forth in Rule 144(e)
are not "Restricted Securities" solely by reason of such volume limitations.
"Revolving Credit Period" - as defined in Section 2.1(a) hereof.
"Revolving Loan" - as defined in Section 2.1 hereof.
"Revolving Loan Commitment" - $100,000,000, as the same may be reduced
pursuant to Section 2.2 hereof.
"Revolving Loan Notes" - as defined in Section 2.9 hereof.
"Security Documents" - as defined in Section 2.14 hereof.
"Subordinated Debenture" - that certain 6% convertible subordinated
debenture in the face amount of $115,000,000 dated January 31, 1996 issued by
SSI.
"Subsidiary" - any corporation at least a majority (meaning in excess of
50%) of the securities of which having ordinary voting power for the election of
directors (other than securities
-7-
<PAGE>
having such power only by reason of the occurrence of a contingency) are at the
time owned, directly or indirectly, by either of the Borrowers, by one or more
of their Subsidiaries, or by the Borrowers and one or more of their
subsidiaries.
"Tangible Net Worth" - the excess of total assets over the sum of total
liabilities (excluding the Subordinated Debenture) and minority shareholder
interests, to be determined in accordance with generally accepted accounting
principles consistent with those applied in the preparation of the Financial
Statements, excluding, however, from the determination of total assets (a) all
assets which would be classified as intangible assets under generally accepted
accounting principles, including, without limitation, goodwill (whether
representing the excess of cost over book value of assets acquired or
otherwise), patents, trademarks, trade names, copyrights, franchises, and
deferred charges (including, without limitation, unamortized debt discount and
expense, organization costs and research and development costs); (b) treasury
stock; (c) cash set apart and held in sinking or other analogous funds
established for the purpose of redemption or other retirement of capital stock;
(d) to the extent not already deducted from total assets, reserves for
depreciation, depletion, obsolescence and/or amortization of properties and all
other reserves or appropriations of retained earnings which, in accordance with
generally accepted accounting principles, should be established in connection
with the businesses conducted by the Borrowers and their Subsidiaries; (e) to
the extent not provided for in clause (a) or (d) above, the amount, if any, by
which the value of any assets or business hereafter acquired at the time of the
acquisition thereof unreasonably exceeds the book value thereof on the books of
the person from whom such assets or business were so acquired (before any write-
up of such book value by such Person in contemplation of such acquisition if
such write-up shall have occurred within nine (9) months prior to the date of
signing of any contract relating to such acquisition); and (f) loans to
employees for purchasing stock of the Borrowers or any Subsidiaries.
Section 1.2 DIRECTLY OR INDIRECTLY.
Where any provision in this Agreement refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provisions shall be
applicable whether such action is taken directly or indirectly by such Person.
Section 1.3 ACCOUNTING TERMS; TEST GROUP.
(a) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given thereto in
accordance with generally accepted accounting
-8-
<PAGE>
principles. If the generally accepted accounting principles in effect on the
date hereof shall change, the terms calculated herein under such principles
shall be changed accordingly.
(b) Except where specifically otherwise provided herein, the
financial covenants set forth in Sections 6.8, 6.9 and 6.10 hereof shall be
computed on a consolidated basis, excluding, however, all Subsidiaries other
than Included Subsidiaries.
Article 2. AMOUNT AND TERMS OF LOAN; COLLATERAL.
Section 2.1 REVOLVING LOAN.
(a)(i) Subject to the terms and conditions of this Agreement, each
Lender hereby establishes for Borrowers a revolving credit facility
(collectively, the "Revolving Loan") pursuant to which Lenders will make cash
loans and Issuer will issue Letters of Credit hereinafter provided for in this
Section 2.1 (individually, an "Advance" and, collectively, the "Advances") to or
for the account of the Borrowers, at any time and from time to time during the
period (the "Revolving Credit Period") from the date hereof to and including the
Commitment Termination Date, in an aggregate principal amount at any one time
outstanding (including, without duplication, the face amount of all outstanding
Letters of Credit and unreimbursed draws on Letters of Credit) up to but not
exceeding the lesser of the Revolving Loan Commitment as then in effect or the
Collateral Coverage Base. Subject to the terms of this Agreement, during the
Revolving Credit Period the Borrowers may borrow, repay and reborrow (all as
provided herein).
(ii) On or before the last Business Day of each week, Borrowers
shall execute a Borrowing Base Certificate ("Borrowing Base Certificate")
prepared by Borrowers setting forth the present values of the Collateral and
Borrowers' compliance with the Collateral Coverage Base.
(iii) Each Lender agrees severally to make cash Advances to
Borrowers, as a part of the Revolving Loan, subject to the terms of this
Agreement, up to such Lender's Pro Rata Percentage of the Revolving Loan, as
more fully set forth in Section 2.5 hereof.
(b)(i) During the Revolving Credit Period, Borrowers may obtain
letters of credit (each a "Letter of Credit" and, collectively, "Letters of
Credit") from the Issuer, on behalf of all Lenders, in an aggregate amount not
to exceed $20,000,000 (measured by the face amount thereof) at any time
outstanding, upon prior approval of the Issuer, on such terms (including
-9-
<PAGE>
without limitation the expiry date, which Borrowers agree will in no event be
twelve (12) months beyond the Commitment Termination Date) as the Issuer may
require and with such documentation, including Issuer's then standard Letter of
Credit Application and Security Agreement, as shall be satisfactory in form and
substance to the Issuer. Borrowers will pay to Agent, for the account of each
Lender in accordance with their Pro Rata Percentages, a letter of credit fee for
each Letter of Credit issued hereunder in the amount of 1% per annum of the face
amount of such Letter of Credit, payable quarterly in arrears (measured from the
date of issuance) (the "L/C Fee"). Borrowers will pay to Issuer, for its own
account, all issuance, negotiation, draw and other administrative fees from time
to time assessed by Issuer in accordance with Issuer's then standard fee
schedule for the issuance and administration of letters of credit.
(ii) (A) Immediately upon the issuance of any Letter of Credit,
Issuer is deemed to have granted to each other Lender, and each other Lender is
hereby deemed to have acquired, an undivided participating interest (without
recourse to or warranty by Issuer), in accordance with each such other Lender's
respective Pro Rata Percentage, in all of Issuer's rights and liabilities with
respect to such Letter of Credit. Each Lender shall be directly and
unconditionally obligated to Issuer, according to its Pro Rata Percentage, to
reimburse Issuer for any draws not reimbursed by Borrowers in accordance with
the terms hereof, made at any time without regard to the occurrence of a Default
or Event of Default (including, without limitation, any draw made following the
commencement of any bankruptcy, reorganization, receivership, liquidation or
dissolution proceeding with respect to any Borrower) under any Letter of Credit
outstanding under the Revolving Loan.
(B) Each Letter of Credit issued from time to time under
the Revolving Loan which remains undrawn (and the amounts of draws on Letters of
Credit prior to payment as hereinafter set forth), shall reduce dollar for
dollar the amount available to be borrowed by Borrowers under the Revolving
Loan.
(C) In the event of any request for drawing under any
Letter of Credit by the beneficiary thereof, Issuer shall promptly notify
Borrowers and Borrowers shall immediately reimburse Issuer on the day when such
drawing is honored, including by way of a cash Advance under the Revolving Loan
if otherwise available pursuant to this Agreement. Borrowers' reimbursement
obligation for draws under Letters of Credit shall herein be referred to
collectively as Borrowers' "Reimbursement Obligations". All of Borrowers'
Reimbursement Obligations hereunder with respect to Letters of Credit shall
apply unconditionally and absolutely to, and shall be joint and several
-10-
<PAGE>
with respect to, Letters of Credit issued hereunder on behalf of Borrowers.
(D) (1) In the event that Borrowers shall fail to
reimburse Issuer as provided in subpart (C) above in an amount equal to the
amount of the drawing honored by Issuer under a Letter of Credit, Issuer shall
promptly notify each Lender of the unreimbursed amount of such drawing and of
such Lender's participation therein based on such Lender's Pro Rata Percentage.
Each Lender shall make available to Issuer an amount equal to its respective
participation in same day funds, at the office of Issuer specified in such
notice, not later than 1:00 p.m. (Philadelphia time) on the Business Day after
the date notified by Issuer. In the event that any Lender fails to make
available to such Issuer the amount of such Lender's participation based on such
Lender's Pro Rata Percentage in such Letter of Credit, as provided in this
Section 2.1(b), Issuer shall be entitled to recover such amount on demand from
such Lender together with interest at the Fed Funds Rate for one (1) Business
Day and thereafter at two (2) percentage points above the Agent's Prime Rate.
Issuer shall distribute to each other Lender which has paid all amounts payable
by it under this Section with respect to any Letter of Credit, such other
Lender's share, based on such Lender's Pro Rata Percentage, of all payments
received by Issuer from Borrowers in reimbursement of drawings honored by Issuer
under such Letter of Credit, when such payments are received. Nothing in this
Section shall be deemed to relieve any Lender from its obligation to pay all
amounts payable by it under this Section with respect to any Letter of Credit
issued by Issuer or to prejudice any rights that Issuer may have against a
Lender as a result of any default by such Lender hereunder and no Lender shall
be responsible for the failure of any other Lender to pay its respective
participation, based on its Pro Rata Percentage, payable under this Section.
(2) In connection with the failure of any Lender to
make available to Issuer the amount of such Lender's participation in any Letter
of Credit, such Lender hereby agrees to protect, indemnify, pay and save Issuer
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including, without limitation, reasonable
attorneys' fees, allocated costs of internal counsel and the costs (including
judgments) in connection with any related litigation) which Issuer may incur or
be subject to as a consequence, direct or indirect, of the failure of such
Lender to make available its participation in such Letter of Credit.
Notwithstanding anything to the contrary contained in this Section, no Lender
failing to provide its participation in any Letter of Credit shall have any
obligation to indemnify Issuer in respect of any liability incurred by
-11-
<PAGE>
Issuer arising solely out of the gross negligence or willful misconduct of
Issuer.
(E) The obligation of Borrowers to reimburse Issuer for
drawings made (or Lenders for cash Advances made to cover drawings made) under
the Letters of Credit and the obligations of Lenders to Issuer under Section
2.1(b)(ii)(D) shall be unconditional and irrevocable and shall be paid strictly
in accordance with the terms of this Agreement under all circumstances
including, without limitation, the following circumstances:
(1) any lack of validity or enforceability of any
Letter of Credit;
(2) the existence of any claim, setoff, defense or
other right that Borrowers or any other Person may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any persons or
entities for whom any such beneficiary or transferee may be acting), Issuer,
Agent, any Lender or any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction;
(3) any draft, demand, certificate or any other
document presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(4) payment by Issuer under any Letter of Credit
against presentation of a demand, draft or certificate or other document that
does not comply with the terms of such Letter of Credit unless Issuer shall have
acted with willful misconduct or gross negligence in issuing such payment; or
(5) the fact that a Default or Event of Default shall
have occurred and be continuing.
(F) (1) In addition to amounts payable as elsewhere
provided in this Section, without duplication, Borrowers hereby agree to
protect, indemnify, pay and save Issuer, Agent and Lenders harmless from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees) which Issuer may
incur or be subject to as a consequence, direct or indirect, of (A) the issuance
of the Letters of Credit or (B) the failure of Issuer to honor a drawing under
any Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future DE JURE or DE FACTO government or
governmental
-12-
<PAGE>
authority (all such acts or omissions herein called "Government Acts").
(2) As between Borrowers and Issuer, Agent and
Lenders, Borrowers assume all risks of the acts and omissions of, or misuse of
the Letters of Credit issued by Issuer by, the respective beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the foregoing,
Issuer shall not be responsible: (a) for the form, validity, sufficiency,
accuracy, genuineness or legal effects of any document submitted by any party in
connection with the application for and issuance of such Letters of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (b) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, that may prove to be invalid or ineffective for any reason;
(c) for failure of the beneficiary of any such Letter of Credit to comply fully
with conditions required in order to draw upon such Letter of Credit so long as
Issuer acts in good faith and without gross negligence or willful misconduct;
(d) for errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, whether or not
they are in cipher, unless any of the foregoing are caused by Issuer's gross
negligence or willful misconduct; (e) for errors in interpretation of technical
terms; (f) for any loss or delay in the transmission of any document required in
order to make a drawing under any such Letter of Credit or of the proceeds
thereof, unless caused by Issuer's gross negligence or willful misconduct;
(g) for the misapplication by the beneficiary of any such Letter of Credit of
the proceeds of any drawing under such Letter of Credit; and (h) for any
consequences arising from causes beyond the control of Issuer, including,
without limitation, any Government Acts. None of the above shall affect,
impair, or prevent the vesting of any of Issuer's rights or powers hereunder.
(3) In furtherance and extension and not in limitation
of the specific provisions hereinabove set forth, any action taken or omitted by
Issuer in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not create any liability
on the part of Issuer to Borrowers.
(4) The term "Lender" shall, unless the context
otherwise indicates, include the Issuer in its individual capacity as a Lender.
-13-
<PAGE>
(c) Borrower and each Lender acknowledge that Midlantic Bank, N.A.
("Midlantic") has previously issued for the Borrowers' account certain letters
of credit which remain outstanding on the date hereof and which are more fully
described in Exhibit 2.1 hereto (the "Midlantic Letters of Credit") and that
Issuer has agreed to put Midlantic in immediately available funds at the time of
and in order to honor each draw under the Midlanitc Letters of Credit. Borrower
and each Lender agree that Issuer's obligations to Midlantic as aforesaid shall
be deemed for all purposes hereof, including for purposes of Sections 2.1(b)(i)
and (ii) hereof, to constitute the issuance by Issuer of a Letter of Credit
hereunder, and each Lender is hereby deemed to have purchased an undivided
participation interest in such obligation in accordance with each such Lender's
Pro Rata Percentage.
Section 2.2 CHANGES IN REVOLVING LOAN COMMITMENT.
The Borrowers shall be entitled to terminate or reduce the Revolving Loan
Commitment, provided that the Borrowers shall give notice of each such
termination or reduction to the Agent as provided in Section 2.3 hereof and that
any partial reduction of the Revolving Loan Commitment shall be in an aggregate
amount equal to $100,000 or an integral multiple thereof. Any such termination
or reduction shall be permanent and irrevocable.
Section 2.3 NOTICES.
SSI, as agent hereunder for the Borrowers, shall give the Agent telephonic
and written notice of each termination or reduction of the Revolving Loan
Commitment, each borrowing, and repayment of the Revolving Loan. All requests
for borrowings shall be made, subject to the terms and conditions of this
Agreement, by telephonic or telegraphic request of any Borrower. Agent may rely
upon any and all telephonic, telegraphic and written requests purported to be
made by either Borrower through any of its officers. Each such written notice
shall be irrevocable and shall be effective only if received by the Agent not
later than 1:00 p.m., Philadelphia time, on the date which is: (a) in the case
of each notice of termination one Business Day prior to the date of the related
termination, and (b) in the case of a notice of borrowing or reduction, the
Business Day on which the requested borrowing or reduction is to be made,
subject, as to borrowings for which the LIBOR Rate is being selected, to the
provisions of Section 2.8(c) hereof.
Section 2.4 FEES. (a) The Borrowers shall pay to the Agent, for the
account of each Lender in accordance with their Pro Rata Percentages, a
commitment fee at the rate of one-quarter of one percent (1/4%) per annum on the
daily average unused
-14-
<PAGE>
amount of the Revolving Loan Commitment (which shall be calculated as the
Revolving Loan Commitment minus all outstanding cash advances on the date of
such calculation) during each calendar quarter for the period from the date
hereof to and including the earlier of the date on which the Revolving Loan
Commitment is terminated or the Commitment Termination Date. The commitment fee
shall be payable quarterly in arrears on the Quarterly Dates and on the earlier
of the date the Revolving Loan Commitment is terminated or the Commitment
Termination Date.
(b) The Borrowers shall concurrently with the execution hereof, pay
to the Agent, for the account of each Lender in accordance with their Pro Rata
Percentages, an amendment fee in the amount of $50,000.
(c) The Borrowers shall pay to Agent, for its own account, on April 1
of each year, commencing April 1, 1997, a non-refundable Agent Fee (the "Agent
Fee") in the amount of $75,000.
Section 2.5 BORROWINGS.
(a) Upon receiving a request for a cash Advance in accordance with
Section 2.3 hereof, Agent shall prior to 2:00 p.m. or as soon as reasonably
practical thereafter notify all Lenders of the request. Each Lender shall
advance its applicable Pro Rata Percentage of the requested Advance to Agent by
remitting federal funds, immediately available, to Agent pursuant to Agent's
instructions prior to 3:00 p.m. Philadelphia time or as soon as is reasonably
practicable thereafter on the date of such notice. Subject to the satisfaction
of the terms and conditions hereof, and receipt by the Agent of all required
funds from the other Lenders, Agent shall make the requested Advance available
to the Borrowers by crediting such amount to SSI's operating account with Agent
as soon as is reasonably practicable thereafter on the day on which such Advance
was requested. In lieu of the foregoing, Agent may, in its discretion (and
without any obligation to do so or continue to do so), fund the Pro Rata
Percentage of an Advance (including any cash Advance to reimburse Issuer for
unreimbursed draws under a Letter of Credit) on behalf of any one or more
Lenders (unconditionally and absolutely obliging such affected Lender to
reimburse Agent in full without deduction or setoffs for its portion of such
Advance) with a settlement among Lenders on the following Business Day or under
such other settlement procedures as Agent and Lenders may mutually agree upon
from time to time.
(b) Neither Agent nor any other Lender shall be obligated, for any
reason whatsoever, to advance the share of any other Lender. If such
corresponding amount is not made available
-15-
<PAGE>
to Agent by such Lender on the date the Advance is to be made and Agent elects
(at its discretion, without any obligation to do so) to make such Lender's share
of the Advance (including any cash Advance to reimburse Issuer for unreimbursed
draws under a Letter of Credit), Agent shall be entitled to recover such amount
on demand from such Lender, together with interest in respect of each day during
the period commencing on the date such amount was made available to the
Borrowers (or on that date Agent required such funds to be advanced pursuant to
the settlement procedures established by Agent) and ending on (but excluding)
the date Agent recovers such amount, at a per annum rate equal to the Fed Funds
Rate for the first Business Day and thereafter at two (2) percentage points
above the Agent's Prime Rate. Agent shall also be entitled to recover any and
all losses and damages (including without limitation, attorneys' fees) from any
Lender failing to so advance upon demand of Agent. Agent may set off the
obligations of a Lender under this paragraph against any distributions or
payments of the Obligations which Agent would otherwise make available to such
Lender. To the extent any Lender fails to provide or delays providing its
respective Pro Rata Percentage of any requested Advance, such Lender's Pro Rata
Percentage of all payments of the Obligations (but not its Pro Rata Percentage
of Advances required to be funded by such Lender) shall decrease to reflect the
actual percentage which its actual outstanding Advances bears to the total
outstanding Advances of all Lenders.
Section 2.6 USE OF PROCEEDS OF LOAN.
The proceeds of the Revolving Loan shall be used solely for general
corporate purposes, including for Investments subject to the limitations set
forth in Section 6.6 hereof.
Section 2.7 PAYMENT OF LOAN. (a) Unless sooner accelerated pursuant
to the terms hereof, the Revolving Loan shall be due and payable on the
Commitment Termination Date. Borrowers will, on the Commitment Termination
Date, provide Bank with cash collateral in an amount equal to 105% of the face
amount of all issued and outstanding Letters of Credit issued under this
Agreement.
(b) Except to the extent otherwise set forth in this Agreement, all
payments of principal and of interest on the Revolving Loan, and all other fees
and charges and any other Obligations of Borrowers hereunder, shall be made to
Agent at its Principal Office, in United States dollars, in immediately
available funds, not later than 12:00 noon Philadelphia time on the date on
which such payment is due. Agent and each Lender, on behalf of all Lenders,
shall have the unconditional right and discretion to charge any Borrower's
operating account with any
-16-
<PAGE>
such respective institution for all of Borrowers' Obligations as they become due
from time to time under this Agreement including without limitation, interest,
principal, fees and reimbursement of expenses. Alternatively, Agent may in its
discretion (and Borrowers hereby authorize Agent to) direct the Lenders to make
a cash Advance under the Revolving Loan (subject to the terms and provisions of
this Agreement) in a sum sufficient to pay all interest accrued and payable on
the Obligations during the immediately preceding month and to pay all costs,
fees and expenses owing hereunder.
Section 2.8 INTEREST.
(a) Subject to the provisions of subsection (c) hereof, the Borrowers
shall pay interest on the unpaid principal amount of each Advance for the period
commencing on the date of such Advance until such Advance shall be paid in full,
at a rate per annum equal to Agent's Prime Rate. Notwithstanding the foregoing,
the Borrowers shall pay interest on any Advance, and on any other amount payable
by the Borrowers hereunder (including, to the extent permitted by law, interest)
which shall not be paid in full when due (whether at stated maturity, by
acceleration or otherwise, and including all reimbursement obligations on
Letters of Credit which are not immediately repaid from an Advance or otherwise)
for the period commencing on the due date thereof until the payment in full at
the Post-Default Rate. Except as provided in the next sentence, accrued
interest on the Loan shall be payable (i) monthly in arrears within 10 days of
Borrowers' receipt of a bill therefor, and (ii) on the earlier of the date the
Revolving Loan Commitment is terminated or the Commitment Termination Date.
Interest payable at the Post-Default Rate shall be payable from time to time on
demand of the Bank. Interest shall continue to accrue and be paid at the
applicable rate provided herein even after Default, an Event of Default, entry
of judgment against either or both of the Borrowers or the commencement of any
bankruptcy, reorganization or insolvency proceeding.
(b) Notwithstanding any provision herein or in the Notes, the total
liability for payments of interest, or in the nature of interest, shall not
exceed the limits imposed by any applicable laws. If the terms of this
Agreement or the Security Documents, the Notes, or any other agreement or
instrument entered into in connection herewith require or shall require
Borrowers to pay interest in excess of amounts allowed by law, the rate of
interest payable shall be reduced immediately, without action by Lenders or
Agent, to the applicable maximum rate, and any excess payment made by Borrowers
at any time shall be immediately and automatically applied to the unpaid balance
of the outstanding principal due hereunder and not to the payment of
-17-
<PAGE>
interest. In the event of acceleration of sums due hereunder, the total charges
for interest and in the nature of interest shall not exceed the maximum allowed
by law, and any excess portions of such charges which may have been prepaid and
cannot be applied to repayment of principal shall be refunded to Borrowers.
Borrowers agree that in determining whether or not any interest payable under
this Agreement, the Notes or the Security Documents exceeds the highest
applicable rate permitted by law, any non-principal payment including, without
limitation, fees, costs, Post-Default Rate and late charges, shall be deemed to
the extent permitted by law to be an expense, fee or penalty not deemed interest
by law.
(c) (i) As used in this Section 2.8(c), the following terms shall
have the following meanings:
(A) "GOOD BUSINESS DAY" means any day when both Agent and
banks in London, England are open for business.
(B) "LIBOR RATE" means for any day during each Rate Period
(a) the per annum rate of interest (computed on a basis of a year of 360 days
and actual days elapsed) determined by Agent as being the composite rate
available to Agent at approximately 11:00 a.m. London time in the London
Interbank Market, as referenced by Telerate (page 3750), in accordance with the
usual practice in such market, for the Rate Period elected by Borrowers, in
effect two (2) Good Business Days prior to the funding date for a requested
LIBOR Rate advance for deposits of dollars in amounts equal (as nearly as may be
estimated) to the amount of the LIBOR Rate advance which shall then be loaned by
the Lenders to Borrowers as of the time of such determination, as such rate (the
"Base Rate") may be adjusted by the reserve percentage applicable during the
Rate Period in effect (or if more than one such percentage shall be applicable,
the daily average of such percentages for those days in such Rate Period during
which any such percentage shall be so applicable) under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for the Agent with respect to liabilities or assets consisting of or including
"Eurocurrency Liabilities" as such term is defined in Regulation D of the Board
of Governors of the Federal Reserve System, as in effect from time to time,
having a term equal to such Rate Period ("Eurocurrency Reserve Requirement"),
plus (b) 1.75 percentage points. Such reserve adjustment shall be effectuated
by calculating, and the LIBOR Rate shall be equal to, (a) the quotient of
(i) the Base Rate divided by (ii) one minus the Eurocurrency Reserve
Requirement, plus (b) 1.75 percentage points.
-18-
<PAGE>
(C) "NOTIFICATION" means telephonic notice (which shall be
irrevocable) by Borrowers to Agent that Borrowers have requested that the LIBOR
Rate, as quoted by Agent from time to time upon Borrower's request for quotation
made not less than one (1) Business Day prior to the requested date of
quotation, shall apply to some portion of the principal amount of the Revolving
Loan in accordance with the provisions of this Section 2.8(c), which notice
shall be given no later than 11:00 a.m. Philadelphia time, on the day which is
at least 2 Business Days prior to the Business Day on which such election is to
become effective, which notice shall specify (i) that the LIBOR Rate option is
being selected; (ii) the principal amount of cash advances under the Loan to be
subject to such rate; (iii) whether such amount is a new advance, a renewal of a
previous request of such rate, a conversion from one interest rate to another,
or a combination thereof; (iv) the Rate Period(s) selected; and (v) the date on
which such request is to become effective (which date shall be a date selected
in accordance with Section 2.8(c)(ii) hereof).
(D) "RATE PERIOD" means for any portion of principal under
the Loan for which Borrowers elect the LIBOR Rate the period of time for which
such rate shall apply to such principal portion. Rate periods for principal
earning interest at the LIBOR Rate shall be for periods of 30, 60, 90 or 180
days and for no other length of time, provided, that, no Rate Period may end on
other than a Business Day or after the Commitment Termination Date.
(E) "REPAYMENT PREMIUM" means the amount which Borrowers
shall pay to Agent, for the account of Lenders, as a premium in connection with
a repayment of outstanding principal of the Loan earning interest at the LIBOR
Rate at the time of repayment, which amount shall be the amount determined by
Agent (which determination shall be conclusive absent manifest error) to be the
difference between (a) the present value of the interest payments that would
have been paid for the balance of the Rate Period by Borrowers on such repaid
portion of principal accruing at the LIBOR Rate but for such repayment, and (b)
the present value of the interest payments that would be paid for the balance of
the Rate Period at the United States Treasury Rate if on or about the date of
repayment Agent made a hypothetical investment of the repaid portion of
principal accruing at a fixed rate of interest in United States Treasury
securities maturing on or about the last date of the corresponding Rate Period
and bearing interest accruing from the date of repayment.
(F) "UNITED STATES TREASURY RATE" means a rate of interest
per annum, equal to (rounded downward to the nearest 1/100 of 1%) the annual
yield Agent could obtain by
-19-
<PAGE>
purchasing on the date of repayment of a LIBOR Rate Loan United States Treasury
Securities with semi-annual interest payments, maturing on or about the last
date of the corresponding Rate Period, in amounts approximately equal to that
amount of the repaid portion which was applied to principal earning interest at
the LIBOR Rate at the time of repayment.
(ii) (A) Subject to the terms of this Section 2.8(c)(ii), by
giving Notification, Borrowers may request to have all or a portion of the
outstanding principal of cash Advances under the Loan as hereinafter permitted
earn interest at the LIBOR Rate as follows: (1) with respect to the principal
amount of any cash Advance under the Loan, from the date of such Advance until
the end of the Rate Period specified in the Notification; and/or (2) with
respect to the principal amount of any portion of cash Advances under the Loan
outstanding and earning interest at the LIBOR Rate at the time of the
Notification related to such principal amount, from the expiration of the then
current Rate Period related to such principal amount until the end of the Rate
Period specified in the Notification; and/or (3) with respect to all or any
portion of the principal amount of cash Advances under the Loan outstanding and
earning interest at the Prime Rate at the time of Notification, from the date
set forth in the Notification until the end of the Rate Period specified in the
Notification.
(B) Borrowers understand and agree: (1) that subject to the
provisions of this Agreement, the Prime Rate and the LIBOR Rate may apply
simultaneously to different parts of the outstanding principal of cash Advances
under the Loan, (2) that the LIBOR Rate applicable to any portion of outstanding
principal may be different from the LIBOR Rate applicable to any other portion
of outstanding principal, (3) that no more than 5 portions of principal of cash
Advances under the Loan bearing interest at the LIBOR Rate may be outstanding at
any one time, (4) that the minimum amount of principal for which any LIBOR Rate
election may be made shall be $5,000,000, and (5) that Agent shall have the
right to terminate any Rate Period, and the interest rate applicable thereto,
prior to maturity of such Rate Period, if Agent determines in good faith (which
determination shall be conclusive) that continuance of such interest rate has
been made unlawful by any Law to which any Lender may be subject, in which event
the principal to which such terminated Rate Period relates thereafter shall earn
interest at the Prime Rate.
(C) After expiration of any Rate Period, any principal
portion corresponding to such Rate Period which has not been converted or
renewed in accordance with this Section 2.8(c)(ii) shall earn interest
automatically at the Prime Rate from the date of expiration of such Rate Period
until paid in
-20-
<PAGE>
full, unless and until the Borrowers request and Agent approves a conversion to
the LIBOR Rate in accordance with this Section 2.8. With respect to any cash
Advances (whether an advance of new funds or an already outstanding amount), if
Borrowers fail to request the LIBOR Rate option by giving Bank a Notification,
or if Agent fails to approve such request when made, such principal amount shall
earn interest at the Prime Rate.
(D) Borrowers shall indemnify Lenders against any and all
loss or expense (including loss of margin) which any Lender has sustained or
incurred as a consequence of: (a) any payment of any principal amount earning
interest at the LIBOR Rate on a day other than the last day of the corresponding
Rate Period (whether or not any such payment is made pursuant to acceleration
upon or after an Event of Default, demand by Agent otherwise made under this
Agreement, by reason of an application of proceeds incident to an insured loss
or condemnation of property, or for any other reason, and whether or not any
such payment is consented to by Agent, unless Agent shall have expressly waived
such indemnity in writing); (2) any attempt by a Borrower to revoke in whole or
part any Notification given pursuant to this Agreement; (3) any attempt by
Borrowers to convert or renew any principal amount earning interest at the LIBOR
Rate on a day other than the last day of the corresponding Rate Period (whether
or not such conversion or renewal is consented to by Agent, unless Agent shall
have expressly waived such indemnity in writing); or (4) any breach of or
default by any Borrower.
Section 2.9 NOTES.
Contemporaneously herewith, Borrowers shall execute and deliver to each
Lender their Note in the principal amount of such Lender's Pro Rata Share of the
Revolving Loan (each a "Revolving Loan Note"), evidencing Borrowers'
unconditional joint and several obligations to repay such Lender's Pro Rata
Percentage of the Revolving Loan.
Section 2.10 COMPUTATIONS; APPLICATION OF PAYMENTS.
(a) Interest on the Revolving Loan and commitment fees shall be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last) in the period for which payable;
(b) Each payment of principal and interest made by either Borrower
hereunder shall be applied first on account of due and unpaid interest and the
balance, if any, toward reduction of the unpaid principal balance of the
Revolving Loan.
-21-
<PAGE>
Section 2.11 MINIMUM AMOUNTS OF BORROWINGS.
Except for borrowings which exhaust the full remaining amount of the
Revolving Loan Commitment, each cash Advance under the Revolving Loan shall be
in the amount of $100,000 or an integral multiple thereof.
Section 2.12 SET-OFF.
Each of the Borrowers hereby agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim any Lender
may otherwise have, each Lender and any affiliate of any Lender or any such
participant shall be entitled, at its option, and for the ratable benefit of all
Lenders, to offset balances held by it at any of its offices against any
principal of or interest on the Revolving Loan hereunder which is not paid when
due (regardless of whether such balances are then due to such Borrower), in
which case it shall promptly notify such Borrower thereof, provided that its
failure to give such notice shall not affect the validity of any such offset.
Section 2.13 PREPAYMENT.
The Revolving Loan may be prepaid in whole or in part and from time to
time, provided that in the event that such of the principal of the Revolving
Loan earning interest at the LIBOR Rate at the time of repayment is repaid prior
to the last day of the applicable Rate Period (whether or not any such repayment
is made pursuant to acceleration upon or after an Event of Default, demand by
Agent otherwise made under this Agreement, by reason of an application of
proceeds incident to an insured loss or condemnation of property, or for any
other reason), Borrowers shall, together with such repayment, pay to Agent, for
the account of Lenders, a Repayment Premium on the amount so repaid.
Section 2.14 COLLATERAL.
(a) Borrowers hereby agree that their grant of a security interest in
the Collateral contained in the Pledge Agreement, in other security and
collateral agreements of Borrowers and of the Guarantors and all other
agreements executed in connection herewith and all collateral, liens, security
interests and pledges created by Borrowers and the Guarantors described therein
cover and secure all of Borrowers' existing and future obligations and
liabilities to Agent and Lenders, including without limitation, Borrowers'
liabilities on the Revolving Loan (collectively, the "Obligations").
-22-
<PAGE>
(b) The Pledge Agreement, and the aforesaid agreements, instruments
and documents, are sometimes hereinafter referred to collectively as the
"Security Documents."
Section 2.15 VALUATION OF COLLATERAL COVERAGE
SECURITIES; SALE.
The value of the Collateral Coverage Securities shall be based on market
value as determined on a recognized national securities exchange or by the
NASDAQ national or small-cap market, or on the over-the-counter market, all as
of the close of the last previous trading day. Any determination of the value
of the Collateral Coverage Securities by the Agent through its brokerage
services shall be conclusive and binding on Borrowers absent manifest error.
Borrowers may sell Collateral Coverage Securities in accordance with the terms
of the Pledge Agreement so long as after giving effect to any such sale,
Borrowers are not in violation of the Collateral Coverage Base and the proceeds
thereof shall be paid over to Agent as provided in the Pledge Agreement.
Article 3. REPRESENTATIONS AND WARRANTIES.
The Borrowers hereby represent and warrant to each Lender that:
Section 3.1 ORGANIZATION.
(a) Each Borrower is a corporation duly organized, validly existing
and in good standing under the laws of its respective state of incorporation, as
set forth in Exhibit 3.1 hereto, and each of their Included Subsidiaries is duly
organized, validly existing and in good standing under the laws of its
respective state of incorporation, as set forth in Exhibit 3.1 hereto; each such
Borrower and Included Subsidiary has the power to own its assets and to transact
the business in which it is presently engaged and in which it proposes to be
engaged. The authorized and outstanding shares of capital stock of each such
corporation, and the number of outstanding shares of capital stock of each such
corporation (other than SSI) owned by each of the Borrowers or any Included
Subsidiary thereof and the business in which each of such corporations is
engaged is accurately and completely listed in Exhibit 3.1. All such shares
which are issued and outstanding have been duly and validly issued and are fully
paid and nonassessable, are owned by the persons referred to on Exhibit 3.1,
free and clear of any mortgage, pledge, lien or encumbrance. Except as set
forth in Exhibit 3.1, there are not outstanding any warrants, options, contracts
or commitments of any kind entitling any person to purchase or otherwise acquire
any shares of capital stock owned by either Borrower or any
-23-
<PAGE>
Included Subsidiary of SSD or SSI, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of capital stock of
SSD or any Included Subsidiary of SSD or SSI. Except as set forth on Exhibit
3.1, no Borrower has any Subsidiary.
(b) There are no jurisdictions other than as set forth on Exhibit 3.1
hereto in which the character of the properties owned or proposed to be owned by
the Borrowers or any Included Subsidiary or in which the transaction of the
business of any of the Borrowers or any Included Subsidiary of the Borrowers as
now conducted or as proposed to be conducted requires or will require any
Borrower or any Included Subsidiary of the Borrowers to qualify to do business
in any such other jurisdiction where the failure to do so would have a material
adverse effect on such Borrower or Included Subsidiary.
Section 3.2 POWER, AUTHORITY, CONSENTS.
Each Borrower has the power to execute, deliver and perform this Agreement,
the Notes and the Security Documents to be executed by it, and to borrow
hereunder. Each Borrower has taken all necessary action to authorize (i) the
borrowing hereunder on the terms and conditions of this Agreement, (ii) the
execution, delivery and performance of this Agreement, the Notes, the Security
Documents to be executed by it and all other agreements, instruments and
documents provided for herein or therein. No consent or approval of any person
(including, without limitation, any stockholder of the Borrowers), no consent or
approval of any landlord or mortgagee, no waiver of any lien or right of
distraint or other similar right and no consent, license, approval,
authorization or declaration of any governmental authority, bureau or agency, is
or will be required in connection with the execution, delivery or performance by
any Borrower, as the case may be, or the validity, enforcement or priority of,
this Agreement, the Notes, the Security Documents (or any Lien created and
granted thereunder) or any other agreements, instruments or documents to be
executed or delivered pursuant hereto or thereto, except as set forth on Exhibit
3.2 annexed hereto, each of which either will have been duly and validly
obtained on or prior to the date hereof and will then be in full force and
effect, or is designated on Exhibit 3.2 as waived by the Agent.
Section 3.3 NO VIOLATION OF LAW OR AGREEMENTS.
The execution and delivery by each Borrower of this Agreement, the Notes
and the Security Documents executed by it and any other agreements, instruments
or documents to be executed and delivered by it hereunder, and performance by it
hereunder
-24-
<PAGE>
and thereunder will not, if the same would have a Material Adverse Effect,
violate any provision of law or conflict with or result in a breach of any
order, writ, injunction, ordinance, resolution, decree, or other similar
document or instrument of any court or governmental authority, bureau or agency,
domestic or foreign, or certificate of incorporation or by-laws of any Borrower
or create (with or without the giving of notice or lapse of time, or both) a
default under or breach of any agreement, bond, note or indenture to which any
Borrower is a party, or by which it is bound or any of its properties or assets
is affected, or result in the imposition of any Lien of any nature whatsoever
upon any of the properties or assets owned by or used in connection with the
business of such Borrower, except for the liens and security interests created
and granted pursuant to the Security Documents.
Section 3.4 DUE EXECUTION, VALIDITY, ENFORCEABILITY.
This Agreement has been duly executed and delivered by each Borrower and
constitutes, and the Notes and each of the Security Documents to be executed by
a Borrower, upon execution and delivery by such Borrower in accordance with the
terms hereof, will constitute, the valid and legally binding obligation and
agreement of such Borrower, as the case may be, enforceable in accordance with
its terms.
Section 3.5 PROPERTIES, PRIORITY OF LIENS.
All of the Collateral is owned by Borrowers, free and clear of any Lien of
any nature whatsoever, except as provided for in the Security Documents to be
executed and delivered pursuant hereto. The Liens which will be created and
granted by the Security Documents upon their execution and delivery by the
parties thereto, will thereupon and thereafter constitute valid first Liens on
the properties and assets covered by the Security Documents, subject to no Lien
other than in favor of the Lenders.
Section 3.6 JUDGMENTS, ACTIONS, PROCEEDINGS.
There are no outstanding judgments, and no actions, suits or proceedings
pending or threatened before any court, governmental authority, bureau,
commission, board, instrumentality or agency, with respect to or affecting any
Borrower or any Included Subsidiary of any Borrower or any of their Properties,
which would have a Material Adverse Effect, nor is there any reasonable basis
for the institution of any such action, suit or proceeding, whether or not
covered by insurance, nor are there any such actions or proceedings in which any
Borrower or any Included Subsidiary of any Borrower is a plaintiff or
complainant, except as set forth on Exhibit 3.6 annexed hereto.
-25-
<PAGE>
Section 3.7 NO DEFAULTS.
None of the Borrowers nor any Included Subsidiary of any Borrower is in
default under any agreement, ordinance, resolution, decree, bond, note,
indenture, order or judgment to which it is a party or by which it is bound, or
any other agreement or other instrument by which any of the properties or assets
owned by it or used in the conduct of its business is affected, and each
Borrower and each Included Subsidiary of each Borrower has complied and is in
compliance with all applicable laws, ordinances and regulations applicable to
them, where any of the foregoing would have a Material Adverse Effect.
Section 3.8 BURDENSOME DOCUMENTS.
Except as set forth on Exhibit 3.8 annexed hereto, none of the Borrowers or
any Included Subsidiary of the Borrowers is a party to or bound by, nor are any
of the properties or assets owned by any of the Borrowers or any Included
Subsidiary of the Borrowers or used in the conduct of their respective
businesses affected by, any agreement, ordinance, resolution, decree, bond,
note, indenture, order or judgment, or subject to any restriction, which would
have a Material Adverse Effect.
Section 3.9 FINANCIAL STATEMENTS.
The Borrowers have delivered to each Lender the Financial Statements. Each
of the Financial Statements is true and complete and presents fairly in all
material respects the consolidated financial position of SSI and its
Subsidiaries, including, without limitation, SSD, and the results of their
respective operations and changes in cash flows, as at the dates and for the
period referred to therein; and has been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with that of the
prior period (except as disclosed therein or in the notes thereto, and with
respect to the unaudited financial statements as of March 31, 1996 and for the
period then ended, subject to normal year-end audit adjustments). There has been
no material adverse change in the financial position or operations of any
Borrower or Subsidiary since March 31, 1996 except as set forth in Exhibit 3.9
hereto. No Borrower or any Subsidiary of a Borrower has any material
obligation, liability or commitment, direct or contingent, which is not
reflected in the Financial Statements.
Section 3.10 TAX RETURNS.
Each of the Borrowers and their Included Subsidiaries has filed all
federal, state and local tax returns required to be
-26-
<PAGE>
filed by it and has not failed to pay any taxes, or interest and penalties
relating thereto, on or before the due dates thereof. There are no waivers or
agreements by any Borrower or any of their Included Subsidiaries for the
extension of time for the assessment of any tax. Except for tax liabilities not
in excess of $1,000,000 in the aggregate with respect to the Borrowers and all
Included Subsidiaries and except to the extent that reserves therefor are
reflected in the Financial Statements, (a) there are no material federal, state
or local tax liabilities of any Borrower or any Included Subsidiary thereof due
or to become due for any tax year ended on or prior to December 31, 1995 whether
incurred in respect of or measured by the income of such Borrower or any
Included Subsidiary thereof, which are not properly reflected in the Financial
Statements, and (b) there are no material claims pending or, to the knowledge of
any Borrower, proposed or threatened against the Borrower or any Included
Subsidiary thereof for past federal, state or local taxes, except those, if any,
as to which proper reserves are reflected in the Financial Statements.
Section 3.11 INTANGIBLE ASSETS.
Except as set forth in Exhibit 3.11 hereto, to Borrower's knowledge, each
of the Borrowers and their Included Subsidiaries possesses all necessary
franchises, patents, licenses, trademarks, trademark rights, trade names, trade
name rights and copyrights to conduct its business as now conducted and as
proposed to be conducted, without any conflict with the franchises, patents,
licenses, trademark rights, trade names, trade name rights and copyrights of
others.
Section 3.12 NAME CHANGES.
Except as described in Exhibit 3.12 attached hereto and made a part hereof,
none of the Borrowers or Included Subsidiaries has within the six-year period
immediately preceding the date of this Agreement, changed its name, been the
surviving entity of a merger or consolidation, or acquired all or substantially
all of the assets of any Person.
Section 3.13 FULL DISCLOSURE.
None of the Financial Statements, nor any certificate, opinion, or any
other statement made or furnished in writing to any Lender by or on behalf of
any of the Borrowers in connection with this Agreement or the transactions
contemplated herein, contains any untrue statement of a material fact, or omits
to state a material fact necessary in order to make the statements contained
therein or herein not misleading, as of the date such statement was made. There
is no fact known to any Borrower which
-27-
<PAGE>
has, or would in the now foreseeable future have, a Material Adverse Effect,
which fact has not been set forth herein, in any of the Financial Statements or
any certificate, opinion, or other written statement so made or furnished to any
Lender.
Section 3.14 ERISA.
(a) The Borrowers and their Included Subsidiaries have no pension or
other employee benefit plans which are subject to the provisions of Title IV of
ERISA (any such plans which have been or may hereafter be adopted or assumed by
the Borrowers and their Included Subsidiaries are hereinafter referred to
individually as a "Plan" and, collectively, as the "Plans"), the application of
which could give rise to direct or contingent liabilities of the Borrowers and
their Included Subsidiaries to the Pension Benefit Guaranty Corporation
("PBGC"), the Department of Labor or the Internal Revenue Service ("IRS"). None
of the Borrowers nor any of their Included Subsidiaries is a participating
employer in any Plan under which more than one employer makes contributions as
described in Sections 4063 and 4064 of ERISA. The Borrowers and their Included
Subsidiaries have no withdrawal liability to any multiemployer plan and no
withdrawal from any multiemployer plan is contemplated or pending by any of the
Borrowers or their Included Subsidiaries.
(b) The Borrowers and their Included Subsidiaries are and have at all
times been in full compliance with all applicable provisions of ERISA.
(c) With respect to any of the Plans, Borrowers and their Included
Subsidiaries have no knowledge of any Reportable Event, as described in Section
4043 of ERISA, except that there has or may have occurred (1) a reduction in the
number of active participants as described in Section 4043(b) (3) of ERISA; (2)
a termination or partial termination; or (3) a merger or consolidation with, or
transfer of assets to, another plan. The Borrowers and their Included
Subsidiaries have no outstanding liability to the PBGC for reason of any such
Reportable Event, and the Borrowers and their Included Subsidiaries have not
received any notice from the PBGC that any of the Plans should be terminated or
from the Secretary of the Treasury that any partial or full termination of any
of the Plans has occurred.
(d) No termination proceedings with respect to any of the Plans have
been commenced and have not yet been concluded.
(e) With respect to any of the Plans, there has not occurred any
prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of
the Internal Revenue Code) for which a prohibited transaction exemption has not
been provided by statute
-28-
<PAGE>
or regulation, ruling or opinion issued by the Department of Labor or Internal
Revenue Service and which may result in the imposition upon the Borrowers or
their Included Subsidiaries of any prohibited transaction excise tax or civil
liability under Section 502(i) of ERISA.
(f) The Borrowers and their Included Subsidiaries have made all
required contributions under the Plans for all periods through and including the
date hereof or adequate accruals therefor have been provided for as shown in the
Financial Statements. No "accumulated funding deficiency" (as defined in
section 302 of ERISA) has occurred with respect to any of the Plans.
For purposes of this Agreement, all references to "ERISA" shall be deemed to
refer to the Employee Retirement Income Security Act of 1974 (including any
sections of the Internal Revenue Code of 1986 amended by it), as heretofore
amended and as it may hereafter be amended or modified, and all regulations
promulgated thereunder, and all references to the Borrowers and their Included
Subsidiaries in this Section 3.14, or in any other Section of this Agreement
relating to ERISA, shall be deemed to refer to the Borrowers and their Included
Subsidiaries, and all other entities which are part of a controlled or
affiliated group or under common control with the Borrowers and their Included
Subsidiaries within the meaning of Sections 414(b), 414(c) and 415(h) of the
Internal Revenue Code of 1986, as amended, and Section 4001(a) (2) of ERISA.
Section 3.15 EMPLOYEE GRIEVANCES.
There are no actions or proceedings pending or, to the best of any
Borrower's knowledge, threatened against any Borrower or any Included Subsidiary
thereof, by or on behalf of or with respect to its employees, which would have a
Material Adverse Effect.
Section 3.16 INDEBTEDNESS.
There is set forth on Exhibit 3.16 annexed hereto a true and complete
schedule of all Indebtedness for borrowed money (including guaranties of
borrowed money) and Capitalized Lease Obligations of the Borrowers and each
Included Subsidiary thereof in existence as of the date of this Agreement,
setting forth with respect to all such indebtedness, the holders, the payment
schedules and the interest or other charges payable.
-29-
<PAGE>
Section 3.17 INVESTMENT COMPANY.
No Borrower is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, nor is any
Borrower controlled by such a company.
Article 4. THE CLOSINGS; CONDITIONS TO THE LOAN.
Section 4.1 THE CLOSING.
Subject to the satisfaction of the conditions precedent set forth in
Section 4.2 hereof, the Closing shall take place at the offices of Blank Rome
Comisky & McCauley, counsel to the Agent, simultaneously with the execution and
delivery of this Agreement.
Section 4.2 CONDITIONS TO INITIAL ADVANCE.
The obligation of Lenders to lend the initial Advance shall be subject to
the fulfillment (to the satisfaction of the Agent) of the following conditions
precedent:
(a) Each Borrower shall have executed and delivered to Agent the
Notes.
(b) SSI and SSD shall have executed and delivered to Agent the Pledge
Agreement as required by Section 2.14 hereof.
(c) All Subsidiaries of SSI of which the Borrowers own at least 80%
of the issued and outstanding common stock (except for Premier Solutions Ltd.)
(the "80% Subsidiaries" or the "Guarantors"), shall have each executed and
delivered to Agent their respective unconditional absolute guaranties of the
obligations of the Borrowers hereunder and under the Notes substantially in the
form of Exhibit "4.2(c)" hereto, Provided, that with respect to 80% Subsidiaries
of which the Borrowers own less than 100% of the issued and outstanding common
stock, their guaranties shall be limited in amount to the amount of Borrowers'
loans from time to time outstanding to such 80% Subsidiaries.
(d) Counsel to the Borrowers and counsel for guarantors shall have
delivered to Agent their opinions, in form and substance satisfactory to Agent.
(e) Agent shall have received copies of the following:
(i) All of the consents, approvals and waivers referred to
on Exhibit 3.2 hereto, except only those which, as stated on Exhibit 3.2, shall
not be delivered and each
-30-
<PAGE>
such consent, waiver and approval so delivered shall be in form and substance
satisfactory to Lenders;
(ii) The certificates of incorporation of each Borrower, and
each company that serves as a guarantor of Borrowers' obligations, certified by
the Secretary of State of its respective state of incorporation;
(iii) By-laws of each Borrower and any other guarantor
certified by its respective secretary;
(iv) Copies of all corporate action (including, without
limitation, directors' resolutions and stockholders' consents) taken by each
Borrower and of Pioneer and any other guarantor to authorize the execution,
delivery and performance of any agreement, instruments and documents to which it
is a party pursuant hereto or in connection herewith, and an incumbency
certificate with respect to each such corporation in each case, certified by its
respective secretary;
(v) Good standing certificates or telegrams as of dates not
more than twenty (20) days prior to the date of the Closing, with respect to
each Borrower and each Subsidiary thereof from the Secretary of State of its
state of incorporation;
(vi) Such other documents, including UCC-1 Financing
Statement and UCC-3 Amendment Statements (or other document necessary to grant
or perfect a lien on personal property or real estate under the applicable law
of a particular jurisdiction) as any Lender may require;
(f) (A) The Borrowers shall have complied and shall then be in
compliance with all of the terms, covenants and conditions of this Agreement;
(B) There shall exist no Event of Default or Default; and
(C) The representations and warranties contained in Article 3
hereof shall be true in all material respects;
(g) Agent shall have received a Certificate (a "Compliance
Certificate") of the president, a vice president, the treasurer or the corporate
controller of each Borrower dated the date of the Closing certifying that the
conditions set forth in Subsection 4.2(f) hereof are satisfied on such date;
-31-
<PAGE>
(h) The Borrowers shall have delivered to Agent, initialled by SSI
and SSD for identification, copies of the Financial Statements; and
(i) All legal matters incident to the transactions contemplated
hereby shall be satisfactory to counsel to each Lender.
Section 4.3 CONDITIONS TO SUBSEQUENT ADVANCES.
The obligation of Lenders to make each Advance subsequent to the initial
Advance shall be subject to the fulfillment (to the satisfaction of Agent) of
the following conditions precedent:
(a) Agent shall have received a request for a borrowing as provided
for in subsection 2.3 hereof.
(b) Agent shall have received a Borrowing Base Certificate as
required by Section 2.1(a)(ii) hereof, and the matters contained in Section
4.2(f) hereof shall be true as of such date.
(c) All legal matters incident to such advance shall be satisfactory
to counsel for Agent.
Article 5. DELIVERY OF FINANCIAL REPORTS, DOCUMENTS
AND OTHER INFORMATION.
While the Revolving Loan Commitment or any Advance remains outstanding, so
long as any Borrower is indebted to the Lenders and until payment in full of the
Notes and full and complete performance of all of their other obligations
arising hereunder, the Borrowers shall deliver to Agent and to each Lender:
Section 5.1 ANNUAL FINANCIAL STATEMENTS.
(a) Annually, as soon as available, but in any event within 100 days
after the last day of each of its fiscal years, a Consolidated Balance Sheet of
SSI and its Subsidiaries as at such last day of the fiscal year, and
Consolidated Statements of operations, shareholders' equity and cash flows of
SSI and its Subsidiaries for such fiscal year, each prepared in accordance with
generally accepted accounting principles consistently applied, each to be in
reasonable detail and certified without qualification or explanatory paragraphs
by KPMG Peat Marwick or another firm of independent certified public accountants
satisfactory to Agent.
(b) Annually, as soon as available, but in any event within 120 days
after the last day of each of its fiscal years,
-32-
<PAGE>
unaudited Consolidating Balance Sheets of SSI and its Subsidiaries as at such
last day of the fiscal year, and unaudited Consolidating Statements of
operations and cash flows of SSI and its Subsidiaries, each to be in reasonable
detail.
(c) Annually, as soon as available, but in any event within 120 days
after the last day of each of its fiscal years, an unaudited Consolidated
Balance Sheet of SSI and its Included Subsidiaries and a schedule showing the
calculation of the covenants in Section 6.8, 6.9 and 6.10 of this Credit
Agreement each to be in reasonable detail.
Section 5.2 QUARTERLY FINANCIAL STATEMENTS.
(a) As soon as available, but in any event within 45 days after the
end of the first three fiscal quarterly periods of each fiscal year, an
unaudited Consolidated Balance Sheet of SSI and its Subsidiaries, as at such
last day of the fiscal quarter, and an unaudited Consolidated Statement of
Operations of SSI and its Subsidiaries for such fiscal quarter, and with respect
to the second and third fiscal quarters such statements shall also include
statements of operations and cash flows for the period from the commencement of
the then current fiscal year to the end of such quarter, each to be in
reasonable detail and certified by the chief financial officer of the Borrowers
as having been prepared in accordance with generally accepted accounting
principles consistently applied, subject to year-end audit adjustments.
(b) As soon as available, but in any event within 45 days after the
end of the first three fiscal quarterly periods of each fiscal year, unaudited
Consolidating Balance Sheets of SSI and its subsidiaries as at such last day of
the fiscal quarter, and unaudited consolidating statements of Operations of SSI
and its Subsidiaries, for such fiscal quarter, and with respect to the second
and third fiscal quarters such statements shall also include consolidating
statements of operations and cash flows for the period from the commencement of
the current fiscal year to the end of such quarter, each to be in reasonable
detail.
(c) As soon as available, but in any event within 45 days after the
end of the first three fiscal quarterly periods of each fiscal year, an
unaudited Consolidated Balance Sheet of SSI and its Included Subsidiaries and a
schedule showing a calculation of the covenants in Sections 6.8, 6.9 and 6.10 of
this Credit Agreement each to be in reasonable detail.
Section 5.3 ADDITIONAL INFORMATION.
-33-
<PAGE>
Promptly after a written request therefor, such other financial data or
information evidencing compliance with the requirements of this Agreement, the
Note and the Security Documents, as Agent may reasonably request from time to
time.
Section 5.4 NO DEFAULT CERTIFICATE.
At the same time as it delivers the financial statements required under the
provisions of Sections 5.1 and 5.2, a Certificate of the president, treasurer,
corporate controller or any vice president of SSI, to the effect that no Event
of Default hereunder, or Default, has occurred and is continuing, or, if such
cannot be so certified, specifying in reasonable detail the exceptions, if any,
to such statement. Such certificate shall be accompanied by a detailed
calculation indicating compliance with the covenants contained in Sections 6.8,
6.9 and 6.10 hereof.
Section 5.5 COPIES OF OTHER REPORTS.
Promptly upon receipt thereof, copies of all other final reports submitted
to the Borrowers by its independent accountants in connection with any annual or
interim audit of the books of the Borrowers made by such accountants.
Section 5.6 COPIES OF DOCUMENTS.
Promptly upon their becoming available, copies of any
(a) financial statements, notices (other than routine correspondence), requests
for waivers and proxy statements delivered by any Borrower or any Subsidiary
thereof to any other lending institution or to its stockholders (as such); (b)
material non-routine correspondence or material official notices received by any
Borrower or any Subsidiary thereof from any federal, state or local governmental
authority which regulates the operations of such Borrower; (c) registration
statements and any amendments and supplements thereto, and any regular and
periodic reports, if any, filed by any Borrower or any Subsidiary thereof with
any securities exchange or with the Securities and Exchange Commission or any
governmental authority succeeding to any or all of the functions of the said
Commission (including without limitation form 10-K not later than 90 days after
the last day of each fiscal year of SSI and form 10-Q not later than 45 days
after the last day of each fiscal quarter of SSI); (d) all form 8-Ks not later
than 15 days after filing; and (e) letters of comment or material non-routine
correspondence sent to any Borrower or any Subsidiary thereof by any such
securities exchange or such Commission in relation to such corporation and its
affairs.
Section 5.7 NOTICE OF DEFAULTS.
-34-
<PAGE>
Promptly, notice of the occurrence of an Event of Default hereunder, or
Default which would constitute or cause a material adverse change in the
condition, financial or otherwise, or the operations of any Borrower or
Subsidiary thereof.
Section 5.8 ERISA NOTICES.
(a) Concurrently with such filing, a copy of each annual report which
is filed with respect to each Plan with the Secretary of Labor or the PBGC; and
(b) promptly, upon their becoming available, copies of: (i) all non-
routine correspondence with the PBGC, the Secretary of Labor or any
representative of the IRS with respect to any Plan; (ii) copies of all reports
received by any Borrower or Subsidiary from its actuary with respect to any
Plan; and (iii) copies of any notices of Plan termination filed by any Plan
Administrator (as those terms are used in ERISA) with the PBGC and of any
notices from the PBGC to any Borrower or Subsidiary with respect to the intent
of the PBGC to institute involuntary termination proceedings; and (iv) copies of
all non-routine correspondence with the plan sponsor with respect to any
multiemployer plan.
Article 6. COVENANTS.
While the Revolving Loan Commitment or any Advance remains outstanding, so
long as any Borrower is indebted to the Lenders and until payment in full of the
Notes and full and complete performance of all of its other obligations arising
hereunder:
Section 6.1 PAYMENT OF TAXES AND CLAIMS.
The Borrowers will pay and discharge, and will cause the
Included Subsidiaries to pay and discharge, before they become delinquent:
(a) all taxes, assessments, and governmental charges or levies
imposed upon each such corporation, its income or its Property;
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons which, if unpaid, might result in
the creation of a Lien upon any such corporation's Property;
(c) all claims, assessments, or levies required to be paid by any
such entity pursuant to any agreement, contract, law, ordinance, or governmental
rule or regulation governing any
-35-
<PAGE>
pension, retirement, profit-sharing or any similar plan of any such corporation;
and
(d) all other obligations and liabilities of each such corporation;
where in any such case the failure to pay or discharge would have a Material
Adverse Effect; provided, that items of the foregoing description need not be
paid while being contested in good faith and by appropriate proceedings and
provided further that a bond is filed in cases where the filing of a bond is
necessary to avoid the creation of a Lien against the Collateral.
Section 6.2 MAINTENANCE OF PROPERTIES, INSURANCE, RECORDS AND CORPORATE
EXISTENCE; INSPECTIONS AND AUDITS; ETC.
The Borrowers will, and will cause their Included Subsidiaries (or, with
respect to subpart (e) hereof, their 80% Subsidiaries) to:
(a) PROPERTY. Maintain their respective Properties in good
condition, working order and repair, subject to normal wear and tear.
(b) INSURANCE.
(i) Maintain, with financially sound and reputable
insurers, insurance with respect to their respective Properties and businesses
against such casualties and contingencies of such types and in such amounts as
is customary in the case of corporations of established reputations engaged in
the same or a similar business and file with Agent upon its request a detailed
list of the insurance then in effect, stating the names of the insurance
companies, the amounts and rates of insurance, dates of the expiration thereof
and the properties and risks covered thereby.
(ii) Pay all premiums to the PBGC as may be required for the
plan termination and insolvency insurance provided by the PBGC.
(c) FINANCIAL RECORDS. Keep proper books of record and account in a
manner satisfactory to Agent in which full, true and correct entries in
accordance with generally accepted accounting principles shall be made of all
dealings or transactions in relation to its business activities.
(d) MAINTENANCE OF EXISTENCE. Subject to the terms of Section 6.7
hereof, do or cause to be done all things necessary
-36-
<PAGE>
to preserve and keep in full force and effect its and each Included Subsidiary's
corporate existence and all franchises, rights and privileges necessary for the
proper conduct of its and their respective businesses, continue to engage, and
cause each Subsidiary to continue to engage, in the same type of business as it
and they, respectively, are presently engaged.
(e) DELIVERY OF AMENDMENTS. Promptly deliver to Agent copies of any
amendments or modifications to its and each 80% Subsidiary's and Additional 80%
Subsidiary's (as defined in Section 6.18 hereof) certificate of incorporation or
by-laws, certified, with respect to the certificate of incorporation, by the
Secretary of State of its jurisdiction of incorporation and, with respect to the
by-laws, by the Secretary of the corporation.
(f) NOTICE OF DISPUTES. Promptly notify Agent in writing of any
litigation, legal proceeding or dispute which might result in liability in
excess of $5,000,000 whether or not fully covered by insurance.
(g) COMPLIANCE WITH LAW. Comply with all laws, ordinances,
governmental rules and regulations to which such entity is subject (including,
without limitation, ERISA and environmental laws) and obtain any licenses,
permits, franchises, or other governmental authorizations necessary to the
ownership of their respective Properties or to the conduct of their respective
businesses, where in any such event the failure to do so would have a Material
Adverse Effect.
(h) INSPECTIONS AND AUDITS. Permit each Lender to make or cause to
be made, at the Borrowers' expense (which expense shall be limited to a
reasonable amount prior to any Default), inspections and audits of any books,
records and papers of each Borrower and Included Subsidiary and to make extracts
therefrom, or to make inspections and examinations of any properties and
facilities of any Borrower or Included Subsidiary on reasonable notice, at all
such reasonable times and as often as any Lender may require.
Section 6.3 INDEBTEDNESS.
The Borrowers shall not, and shall not permit any Included Subsidiary to,
create, incur, permit to exist or have outstanding any Indebtedness, except:
(a) Indebtedness of the Borrowers to the Bank under this Agreement
and the Notes and Indebtedness of Included Subsidiaries to the Borrowers arising
from loans and intercompany advances as and to the extent permitted under
Section 6.6 hereof;
-37-
<PAGE>
(b) Taxes, assessments and governmental charges, current trade
accounts payable, accrued expenses, customer payments received in advance and
deferred liabilities other than for borrowed money (e.g., deferred compensation
and deferred taxes), in each case incurred and continuing in the ordinary course
of business;
(c) Existing Indebtedness for borrowed money set forth on Exhibit
3.16 annexed hereto;
(d) Purchase money Indebtedness (including Capitalized Lease
Obligations) hereafter incurred for equipment or real estate in an amount not to
exceed $3,000,000 at any time outstanding in the aggregate for the Borrowers and
the Included Subsidiaries;
(e) Indebtedness of Borrowers owing to their 80% Subsidiaries or to
Persons in which Investments have been or hereafter are made (as permitted in
Section 6.6 hereof) in an aggregate amount not to exceed $20,000,000 at any time
outstanding; and
(f) Indebtedness for borrowed money of the Included Subsidiaries in
an aggregate amount not to exceed $8,000,000 at any time outstanding for all
Included Subsidiaries.
Section 6.4 LIENS.
No Borrower will, nor will the Borrowers permit any Included Subsidiary to,
cause or permit in the future (upon the happening of a contingency or otherwise)
any of their respective Properties, whether now owned or hereafter acquired, to
be subject to a Lien except:
(a) Liens created by the Security Documents;
(b) Liens for taxes or other governmental charges which are not
delinquent or which are being contested in good faith and for which a reserve
shall have been established as required in accordance with generally accepted
accounting principles;
(c) Pledges or deposits to secure obligations under workmen's
compensation laws or similar legislation; pledges or deposits to secure
performance in connection with bids, tenders, contracts (other than contracts
for the payment of money) or leases to which either of the Borrowers or any
Included Subsidiary is a party; deposits to secure public or statutory
obligations; materialmen's, mechanics', carriers', workmen's, repairmen's or
other like liens, or deposits to obtain the
-38-
<PAGE>
release of such liens, in an aggregate amount with respect to the Borrowers and
all Included Subsidiaries not exceeding $500,000 at any one time outstanding;
and deposits to secure surety, appeal or customs bonds on which either of the
Borrowers or any Included Subsidiary is the principal; as to all of the
foregoing, however, only to the extent arising and continuing in the ordinary
course of business;
(d) Existing Liens set forth on Exhibit 3.16 annexed hereto;
(e) Purchase Money Liens on equipment and real estate to secure
purchase money Indebtedness permitted by Section 6.3(d) hereof; and
(f) Liens on assets of the Included Subsidiaries to secured
Indebtedness permitted by Section 6.3(e) hereof.
Section 6.5 GUARANTIES.
The Borrowers and their Included Subsidiaries shall not assume, endorse, be
or become liable for, or guarantee, the obligation of any Person, except:
(a) by the endorsement of negotiable instruments for deposit or
collection in the ordinary course of business;
(b) guaranties existing on the date hereof as set forth on Exhibit
3.16 hereto;
(c) future guaranties to the extent that, after giving effect to such
future guaranties, the aggregate amount of all guaranties by the Borrowers and
their Included Subsidiaries (including those referred to in Paragraph (b) hereof
and excluding those referred to in Paragraph (a) hereof) would not exceed Thirty
Five Million ($35,000,000.00) at any time outstanding, provided that in no event
will any such guaranty(ies) heretofore or hereafter issued for the indebtedness
or obligations of any one Person exceed $10,000,000 in the aggregate at any time
outstanding.
For the purposes hereof, the term "guaranties" shall mean any obligation to pay
money on behalf of or in regard to another Person, including without limitation
any obligation as guarantor, surety, purchaser, indemnitor, lessee, repurchaser,
investor, contributor, subscriber, lender or otherwise. It is intended that the
term "guaranties" be interpreted in the broadest sense possible and the examples
in the foregoing sentence are illustrations and not limitations.
-39-
<PAGE>
Furthermore, reimbursement obligations with respect to Letters of Credit shall
not be "guaranties" for purposes of this Section 6.5.
Section 6.6 INVESTMENTS AND LOANS.
The Borrowers and their Included Subsidiaries may make Investments in other
Persons, in addition to Investments existing on the date of Closing and
disclosed in Exhibit "6.6" hereto, subject to the following limitations:
(a) (i) The aggregate of all Investments may not exceed
$200,000,000 in the aggregate for Borrowers' fiscal years 1996 and 1997 and may
not exceed $50,000,000 for each fiscal year thereafter.
(ii) Subject to the overall limit in subsection (a)(i)
Borrowers may only invest in any fiscal year, whether as further Investment in a
Person in which an Investment has previously been made or as a new Investment in
a new Person, $30,000,000 per Investment for up to two such Investments and
$20,000,000 per Investment for other Investments.
(b) Borrowers shall notify Agent of any Investment in any Person in
which no previous Investment has been made by any Borrower, within a reasonable
period after making such Investment, and shall provide Agent with full
information on the Investment, including without limitation, balance sheets,
statements of income, statements of stockholders equity and such other
information as Agent may request.
Section 6.7 CONSOLIDATION AND MERGER.
No Borrower will, nor will the Borrowers permit any Included Subsidiary to,
consolidate with or merge into any other Person (including, without limitation,
either Borrower or any Subsidiary) or permit any other Person to consolidate
with or merge into any Borrower or Included Subsidiary except that SSD may merge
with and into SSI.
Section 6.8 TANGIBLE NET WORTH.
The Borrowers shall not permit Tangible Net Worth at any time to be less
than $161,000,000 plus 75% of after tax earnings for all periods after December
31, 1995 (determined on a cumulative basis), tested as set forth in Section 1.3
hereof.
-40-
<PAGE>
Section 6.9 FUNDED DEBT TO TANGIBLE NET WORTH.
The Borrowers shall not permit the ratio of Funded Debt to Tangible Net
Worth at any time to be greater than 0.70 to 1, tested as set forth in Section
1.3 hereof.
Section 6.10 INTEREST COVERAGE RATIO.
The Borrowers shall not permit the Interest Coverage Ratio to be less than
1.25 to 1 at any time, tested as set forth in Section 1.3 hereof.
Section 6.11 CHANGE OF BUSINESS; SALE OF ASSETS.
The Borrowers shall not, and shall not permit any Included Subsidiary, to
make any material change in its business or in the nature of its operations or
liquidate or dissolve itself (or suffer any liquidation or dissolution) or
convey, sell, lease, or otherwise dispose of any of its Properties, assets or
business, except in the ordinary course of business for a fair consideration, or
dispose of any shares of stock or any Indebtedness of others owing to either
Borrower or any Included Subsidiary whether now owned or hereafter acquired;
provided, however, that nothing contained in this Section 6.11 shall prohibit
(i) the sale of any Investment, the stock of which Investment is not a part of
the Pledged Securities, so long as Bank has consented to the sale of such
Investment, in writing, or (ii) the making of any Investment permitted under
Section 6.6 hereof, or (iii) sales of Pledged Securities in the ordinary course
of either Borrower's business provided that Borrowers are at all times in
compliance with the Collateral Coverage Ratio and subject to the terms of
Section 4(c) of the Pledge Agreement.
Section 6.12 LEASES.
The Borrowers shall not, and shall not permit their Included Subsidiaries
to, enter into any leases (other than leases giving rise to Capitalized Lease
Obligations) to the extent that, after giving effect to any such lease, the
aggregate amount of rental payments and all other payments by the Borrowers and
their Included Subsidiaries under such leases in any fiscal year of SSI would
exceed $5,000,000.
Section 6.13 ISSUANCE OF STOCK.
The Borrowers will not permit SSD, or any Person who has guaranteed
Borrowers' obligations to the Bank pursuant to Sections 4.2(c) or 6.18 hereof,
to, issue, sell or dispose of any shares of stock of any class, excluding stock
hereafter issued
-41-
<PAGE>
pursuant to outstanding warrants, options, option plans, contracts or
commitments listed in Exhibit 3.1.
Section 6.14 FISCAL YEAR.
The Borrowers and their Included Subsidiaries shall not change their fiscal
year.
Section 6.15 [INTENTIONALLY OMITTED]
Section 6.16 ERISA COMPLIANCE; OBLIGATIONS.
(a) The Borrowers and their Included Subsidiaries shall:
(i) comply in all material respects with all applicable
provisions of ERISA now or hereafter in effect;
(ii) promptly notify the Bank in writing of the occurrence
of any Reportable Event, as defined in ERISA together with a description of such
Reportable Event and a statement of the action that any such Borrower or
Included Subsidiary intends to take with respect thereto, together with a copy
of the notice (if any) thereof given to the PBGC; and
(iii) promptly notify Agent in writing of any proposed
withdrawal from a multiemployer plan.
(b) The Borrowers and their Included Subsidiaries will not:
(i) be or become obligated to the PBGC or any multiemployer
plan in excess of $500,000; or
(ii) be or become obligated to the IRS with respect to
excise or other penalty taxes provided for in those provisions of the Internal
Revenue Code which were enacted pursuant to ERISA, as now in effect or hereafter
amended or supplemented, in excess of $500,000.
Section 6.17 PREPAYMENTS.
None of the Borrowers or any Included Subsidiary thereof will make any
voluntary or optional prepayment of any Indebtedness for borrowed money incurred
or permitted to exist under the terms of this Agreement, other than Indebtedness
evidenced by the Notes, subject to the prepayment terms hereof, and other than
with respect to the Subordinated Debenture.
-42-
<PAGE>
Section 6.18 GUARANTEES OF NEWLY ACQUIRED SUBSIDIARIES.
If Borrowers should acquire any additional Subsidiaries, SSI will not
disburse any of the proceeds of the Loan to any such Subsidiary unless and
until, as to any Subsidiary in which any Borrower owns more than 80% of the
issued and outstanding common stock of such Subsidiary ("Additional 80%
Subsidiaries" or "Guarantors"), such Additional 80% Subsidiary shall have
delivered to each Lender an absolute unconditional guarantee of such Lender's
Pro Rata Percentage of the Loan and the obligations of the Borrowers hereunder
and under the Notes (limited, however, in amount, with respect to Additional 80%
Subsidiaries in which Borrowers own less than 100% of the issued and outstanding
common stock, to the amount of Borrowers' loans from time to time outstanding to
such Additional 80% Subsidiaries) substantially in the form of Exhibit "6.18",
together with (i) the certificate of incorporation of such corporation certified
by its secretary, (ii) the by-laws of such corporation certified by its
secretary, (iii) copies of all corporate action (including, without limitation,
directors' resolutions and stockholders' consents) to authorize the execution,
delivery and performance of such guarantee, (iv) a certificate of incumbency of
the officer executing such guarantee certified by such corporation's secretary,
and (v) a certificate of good standing or telegram from the Secretary of State
of such corporation dated not more than ten (10) days prior to the date of the
delivery of such guarantee.
Section 6.19 LETTERS OF CREDIT.
Neither the Borrowers nor any Included Subsidiary shall obtain any letters
of credit or enter into any agreements or execute any obligations with respect
to letters of credit except with respect to Letters of Credit issued by Issuer
pursuant hereto.
Section 6.20 DISPOSITIONS.
The Borrowers shall notify Agent of the disposition of the capital stock or
other ownership interest in any Person by telephone at the latest
contemporaneously therewith followed promptly by written notice. In the event
of the disposition of Pledged Securities written notice shall not be later than
twenty-four (24) hours after the time when Agent is to deliver such Pledged
Securities. The proceeds of the sale of any Collateral shall be applied as set
forth in Section 4(c) of the Pledge Agreement.
Article 7. EVENTS OF DEFAULT; REMEDIES.
-43-
<PAGE>
Any one or more of the following events shall constitute an Event of
Default:
Section 7.1 PAYMENTS.
(a) Failure to make any payment of principal or interest upon the
Note, or to make any payment of the commitment fee, within seven (7) days after
the date upon which any such payment is due; or
(b) Should the principal balance (including the face amount of
outstanding Letters of Credit and unreimbursed draws under Letters of Credit)
outstanding under the Loan at any time exceed the Collateral Coverage Base; or
Section 7.2 COVENANTS.
Failure by any Borrower or Subsidiary (or Included Subsidiary, as
applicable) to perform or observe any of their respective agreements contained
in Article 6 hereof (except Sections 6.1, 6.2, 6.8, 6.9, 6.10 or 6.16(a) of
Article 6); or
Section 7.3 OTHER COVENANTS.
Failure by any Borrower or any Subsidiary (or Included Subsidiary, as
applicable) to perform or observe any other term, condition or covenant of this
Agreement not described in Section 7.2 above, the Notes, the Security Documents,
or any other agreement or document delivered pursuant hereto or thereto which
shall remain unremedied for a period of thirty (30) days after notice thereof
shall have been given by Agent to SSI; or
Section 7.4 OTHER DEFAULTS.
(a) Failure by any Borrower or Included Subsidiary to perform or
observe any term, condition or covenant of any bond, note, debenture, loan
agreement, indenture, guaranty, trust agreement, mortgage or similar instrument
(including, without limitation, any debt which is subordinated to the
obligations created pursuant to this Agreement) to which any Borrower or
Included Subsidiary is a party or by which it is bound, or by which any of its
Properties or assets may be affected (a "Debt Instrument"), and, as a result
thereof (assuming the giving of appropriate notice thereof, if required),
Indebtedness in excess of $3,000,000 which is included therein or secured or
covered thereby shall have been declared due and payable prior to the date on
which such Indebtedness would otherwise become due and payable; or
-44-
<PAGE>
(b) Any event or condition referred to in any Debt Instrument shall
have occurred or failed to occur, and, as a result thereof, Indebtedness in
excess of $3,000,000 which is included therein or secured or covered thereby
shall have been declared due and payable prior to the date on which such
Indebtedness would otherwise become due and payable; or
(c) Failure to pay any Indebtedness for borrowed money in excess of
$3,000,000 due at final maturity or pursuant to demand under any Debt
Instrument.
Section 7.5 REPRESENTATIONS AND WARRANTIES.
Any representation or warranty made in writing to Agent or any Lender in
any of the Loan Documents or in connection with the making of the Loan, or any
certificate, statement or report made or delivered in compliance with this
Agreement, shall have been false or misleading in any material respect when made
or delivered; or
Section 7.6 BANKRUPTCY.
(a) Any Borrower or Subsidiary shall make an assignment for the
benefit of creditors, file a petition in bankruptcy, be adjudicated insolvent or
bankrupt, suffer an order for relief under any federal bankruptcy law, petition
or apply to any tribunal for the appointment of a receiver, custodian, or any
trustee for it or a substantial part of its assets, or shall commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect; or there shall have been filed any such petition or
application, or any such proceeding shall have been commenced against it, which
remains undismissed for a period of sixty (60) days or more; or any order for
relief shall be entered in any such proceeding; or any Borrower or Subsidiary by
any act or omission shall indicate its consent to, approval of or acquiesced in
any such petition, application or proceeding or the appointment of a custodian,
receiver or any trustee for it or any substantial part of any of its properties,
or shall suffer any custodianship, receivership or trusteeship to continue
undischarged for a period of sixty (60) days or more; or
(b) Any Borrower or Subsidiary shall generally not pay its debts as
such debts become due; or
(c) Any Borrower or Subsidiary shall have concealed, removed, or
permitted to be concealed or removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its
-45-
<PAGE>
property which may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or shall have made any transfer of its property to or for the
benefit of a creditor at a time when other creditors similarly situated have not
been paid; or shall have suffered or permitted, while insolvent, any creditor to
obtain a lien upon any of its property through legal proceedings or distraint
which is not vacated within sixty (60) days from the date thereof; or
Section 7.7 JUDGMENTS.
Any judgment against any Borrower or Subsidiary or any attachment, levy of
execution against any of their respective properties for any amount in excess of
$3,000,000 shall remain unpaid, unstayed on appeal, undischarged, unbonded or
undismissed for a period of sixty (60) days or more; or
Section 7.8 ERISA.
(a) The termination of any Plan or the institution by the PBGC of
proceedings for the involuntary termination of any Plan, in either case, with a
vested unfunded liability in excess of $3,000,000; or
(b) Failure by any Borrower or Subsidiary to fund, in accordance with
the applicable provisions of ERISA, each of the Plans hereafter established or
assumed by it provided, that such failure to fund shall not constitute an Event
of Default hereunder unless such failure shall continue for 5 days after the
date on which such funding was required; or
(c) The withdrawal by any Borrower or Subsidiary from any
multiemployer plan giving rise to a withdrawal liability in excess of
$3,000,000; or
Section 7.9 LIENS.
Any of the Liens created and granted to the Lenders under the Security
Documents shall at any time fail to be valid, first, perfected Liens, subject to
no prior or equal Lien; or
Section 7.10 OWNERSHIP.
Any Person shall acquire more than 30 percent of the issued and
outstanding capital stock of SSI.
Section 7.11 REMEDIES.
(a) In addition to all other rights, options and remedies granted or
available to Agent or Lenders under this
-46-
<PAGE>
Agreement or the other Loan Documents or otherwise available at law or in
equity, upon or at any time after the occurrence and during the continuance of a
Default or an Event of Default, all obligations of Lenders to make further
Advances shall, at Agent's discretion (but subject to Section 8.15 hereof),
cease.
(b) In addition to all other rights, options and remedies granted or
available to Agent under this Agreement or the other Loan Documents, Agent may,
in its discretion (but subject to Section 8.15 hereof), upon or at any time
after the occurrence and during the continuance of an Event of Default,
terminate the Revolving Loan and declare the Obligations immediately due and
payable, all without demand, notice, presentment or protest or further action of
any kind (it also being understood that the occurrence of any of the events or
conditions set forth in Section 7.6 shall automatically cause an acceleration of
the Obligations).
(c) In addition to all other rights, options and remedies granted or
available to Agent, under this Agreement or the other Loan Documents, upon or at
any time after the occurrence and during the continuance of an Event of Default,
Borrowers shall be obligated to deliver and pledge to Agent, on behalf of all
Lenders, cash collateral in the amount of all outstanding Letters of Credit.
(d) In addition to all other rights, options and remedies granted or
available to Agent under this Agreement or the other Loan Documents, Agent may
in its discretion (but subject to Section 8.15 hereof), upon or at any time
after the acceleration of the Obligations following occurrence of an Event of
Default, exercise all rights under the UCC and any other applicable law or in
equity, and under all Loan Documents permitted to be exercised after the
occurrence of an Event of Default.
(e) All rights and remedies granted Agent hereunder and under the
other Loan Documents, or otherwise available at law or in equity, shall be
deemed concurrent and cumulative, and not alternative remedies, and Agent may
proceed with any number of remedies at the same time until all Obligations are
satisfied in full. The exercise of any one right or remedy shall not be deemed
a waiver or release of any other right or remedy, and Agent, upon or at any time
after the occurrence of an Event of Default, may proceed against any Borrower,
at any time, under any agreement, with any available remedy and in any order.
Article 8. THE AGENT.
-47-
<PAGE>
As between Agent, on one hand, and Lenders, on the other hand, Agent and
each Lender, who are now or shall become parties to this Agreement, agree as
follows:
8.1 APPOINTMENT AND AUTHORIZATION. Each Lender, and each subsequent
holder of any of the Notes by its acceptance thereof, hereby irrevocably
appoints and authorizes Agent to take such action on its behalf and to exercise
such powers under this Agreement as are delegated to Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. Subject to the
provisions of this Agreement, Agent will handle all transactions relating to the
Loans and all other Obligations, including, without limitation, all transactions
with respect to Letters of Credit, this Agreement, the Loan Documents and all
related documents in accordance with its usual banking practices. Except as
otherwise expressly provided herein, Borrowers are hereby authorized by Lenders
to deal solely with Agent in all transactions which affect Lenders under this
Agreement and the Loan Documents. The rights, privileges and remedies accorded
to Agent hereunder shall be exercised by Agent on behalf of all of Lenders.
8.2 GENERAL IMMUNITY. In performing its duties as Agent hereunder, Agent
will take the same care as it takes in connection with loans in which it alone
is interested. Subject to Section 8.6 of this Agreement, neither Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them hereunder or in connection herewith
except as such action or omission are caused solely from its or their own gross
negligence or willful misconduct unless such action was taken or omitted to be
taken by Agent at the direction of Majority Lenders.
8.3 CONSULTATION WITH COUNSEL. Agent may consult with legal counsel and
any other professional advisors or consultants deemed necessary or appropriate
and selected by Agent and shall not be liable for any action taken or suffered
in good faith by it in accordance with the advice of such counsel.
8.4 DOCUMENTS. Agent shall not be under a duty to examine into or pass
upon the effectiveness, genuineness or validity of this Agreement or any of the
Notes or any other instrument or document furnished pursuant hereto or in
connection herewith, and Agent shall be entitled to assume that the same are
valid, effective and genuine and what they purport to be. In addition Agent
shall not be liable for failing to make any inquiry concerning the accuracy,
performance or observance of any of the terms, provisions or conditions of such
instrument or document. Agent shall furnish to Lenders copies of all notices
and financial statements received from Borrowers hereunder.
-48-
<PAGE>
8.5 RIGHTS AS A LENDER. With respect to its applicable Pro Rata
Percentage of the Loan, Agent shall have the same rights and powers hereunder as
any other Lender and may exercise the same as though it were not Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include Agent in its individual capacity as a "Lender". Subject to the
provisions of this Agreement, Agent may accept deposits from, lend money to and
generally engage in any kind of banking or trust business with Borrowers and
their affiliates and Subsidiaries as if it were not Agent.
8.6 RESPONSIBILITY OF AGENT. It is expressly understood and agreed that
the obligations of Agent hereunder are only those expressly set forth in this
Agreement and that Agent shall be entitled to assume that no Default or Event of
Default has occurred and is continuing, unless Agent has actual knowledge of
such fact. Except to the extent Agent is required by Lenders pursuant to the
express terms hereof to take a specific action, Agent shall be entitled to use
its discretion with respect to exercising or refraining from exercising any
rights which may be vested in it by, or with respect to taking or refraining
from taking any action or actions that it may be able to take under or in
respect of, this Agreement and the Loan Documents. Agent shall incur no
liability under or in respect of this Agreement and the Loan Documents by acting
upon any notice, consent, certificate, warranty or other paper or instrument
believed by it to be genuine or authentic or to be signed by the proper party or
parties, or with respect to anything that it may do or refrain from doing in the
reasonable exercise of its judgment, or that may seem to it to be necessary or
desirable under the circumstances. It is agreed among Agent and Lenders that
Agent shall have no responsibility to carry out audits or otherwise examine the
books and records or properties of Borrowers, except as Agent in its sole
discretion deems appropriate or as otherwise expressly required hereunder. The
relationship between Agent and each Lender is and shall be that of agent and
principal only and nothing herein shall be construed to constitute Agent a joint
venturer with any Lender, a trustee or fiduciary for any of Lenders or for the
holder of a participation therein nor impose on Agent duties and obligations
other than those set forth herein.
8.7 COLLECTIONS AND DISBURSEMENTS.
(a) Agent will have the right to collect and receive all payments of
the Obligations, and to collect and receive all reimbursements for draws made
under the Letters of Credit, together with all fees, charges or other amounts
due under this Agreement and the Loan Documents, and Agent will remit to each
Lender, according to its applicable Pro Rata Percentage, all such
-49-
<PAGE>
payments actually received by Agent (subject to any required clearance
procedures) in accordance with the settlement procedures established by Agent
from time to time, provided that each Lender acknowledges that the Agent Fee and
issuance and other administrative fees for Letters of Credit may be retained by
Agent for its own account.
(b) If any such payment received by Agent is rescinded or otherwise
required to be returned for any reason at any time, whether before or after
termination of this Agreement and the Loan Documents, each Lender will, upon
written notice from Agent, promptly pay over to Agent its Pro Rata Percentage of
the amount so rescinded or returned, together with interest and other fees
thereon if also required to be rescinded or returned.
(c) All payments by Agent and Lenders to each other hereunder shall
be in immediately available funds. Agent will at all times maintain proper
books of account and records reflecting the interest of each Lender in the
Revolving Loan, in a manner customary to Agent's keeping of such records, which
books and records shall be available for inspection by each Lender at reasonable
times during normal business hours, at such Lender's sole expense. Agent may
treat the payees of any Revolving Loan Note as the holder thereof until written
notice of the transfer thereof shall have been received by Agent. In the event
that any Lender shall receive any payments in reduction of the Revolving Loan in
an amount greater than its applicable Pro Rata Percentage in respect of
indebtedness to Lenders evidenced hereby (including, without limitation amounts
obtained by reason of setoffs), such Lender shall hold such excess IN TRUST for
Agent (on behalf of all other Lenders) and shall promptly remit to Agent such
excess amount so that the amounts received by each Lender hereunder shall at all
times be in accordance with its applicable Pro Rata Percentage. To the extent
necessary for each Lender's actual percentage of all outstanding Advances to
equal its applicable Pro Rata Percentage, any Lender having a greater share of
any payment(s) than its applicable Pro Rata Percentage shall acquire a
participation in the applicable Pro Rata Percentage of the other Lenders as
determined by Agent.
8.8 INDEMNIFICATION. Lenders hereby each indemnify Agent (and Issuer with
respect to Letters of Credit) ratably according to each Lender's Pro Rata
Percentage, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever that may be imposed on, incurred by or asserted
against Agent (or Issuer, as the case may be) in any way relating to or arising
out of this Agreement or any other Loan Document or any action taken or omitted
by Agent (or Issuer, as the case may be) under or related to this Agreement,
provided
-50-
<PAGE>
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from Agent's (or Issuer's, as the case may be)
gross negligence or willful misconduct unless such action was taken or omitted
by Agent (or Issuer, as the case may be) at the direction of the Majority
Lenders. Agent shall have the right to deduct, from any amounts to be paid by
Agent to any Lender hereunder, any amounts owing to Agent by such Lender by
virtue of this paragraph.
8.9 EXPENSES.
(a) All out-of-pocket costs and out-of-pocket expenses incurred by
Agent and not reimbursed on demand by Borrowers, in connection with the
amendment, administration, termination, work-out, forbearance and enforcement of
the Revolving Loan (including, without limitation, audit expenses, counsel fees
and expenditures to protect, preserve and defend Agent's and each Lender's
rights and interest under the Loan Documents) shall be shared and paid on demand
by Lenders pro rata based on their applicable Pro Rata Percentage.
(b) Agent may deduct from payments or distributions to be made to
Lenders such funds as may be necessary to pay or reimburse Agent for such costs
or expenses.
8.10 NO RELIANCE. By execution of or joining in this Agreement, each
Lender acknowledges that it has entered into this Agreement and the Loan
Documents solely upon its own independent investigation and is not relying upon
any information supplied by or any representations made by Agent. Each Lender
shall continue to make its own analysis and evaluation of Borrowers. Agent
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any Borrower, any obligor or any account debtor of
any Borrower; the accuracy, sufficiency or currency of any information
concerning the financial condition, prospects or results of operations of any
Borrower; or for sufficiency, authenticity, legal effect, validity or
enforceability of the Loan Documents. Agent assumes no responsibility or
liability with respect to the collectibility of the Obligations or the
performance by Borrowers of any obligation under the Loan Documents.
8.11 REPORTING. During the term of this Agreement, Agent will, to the
extent not required to be delivered by Borrowers to each Lender pursuant to the
other terms of this Agreement, promptly furnish each Lender with copies of all
financial statements of Borrowers to be delivered to or obtained by Agent
hereunder. Agent will immediately notify Lenders when it
-51-
<PAGE>
receives actual knowledge of any Event of Default under the Loan Documents.
8.12 REMOVAL OF AGENT. Agent may resign at any time upon giving thirty
(30) days prior written notice thereof to Lenders and Borrowers. Agent may be
removed as Agent hereunder upon the written consent of all Lenders exclusive of
Agent upon the following: (i) wilful misconduct in the performance of Agent's
duties or responsibilities under this Agreement; or (ii) if a receiver, trustee
or conservator is appointed for Agent or any state or federal regulatory
authority assumes management or control of Agent or if, under applicable law,
the administrative or discretionary duties and responsibilities of Agent
hereunder become controlled by or subject to the approval of any state or
federal regulatory authority. Upon any resignation or permitted removal of
Agent, the Lenders (exclusive of Agent) shall have the right to appoint a
successor Agent by majority vote of the other Lenders (based upon the Pro Rata
Percentages of the other Lenders). Upon the acceptance of the appointment as a
successor Agent hereunder by such successor Agent, such successor Agent shall
thereupon succeed to and become vested with all rights, powers, obligations and
duties of the retiring Agent and the retiring Agent shall be discharged from its
duties and obligations hereunder.
8.13 ACTION ON INSTRUCTIONS OF LENDERS. With respect to any provision of
this Agreement, or any issue arising thereunder, concerning which Agent is
authorized to act or withhold action by direction of Lenders (including the
Majority Lenders), Agent shall in all cases be fully protected in so acting, or
in so refraining from acting, hereunder in accordance with written instructions
signed by such Lenders. Such instructions and any action taken or failure to
act pursuant thereto shall be binding on all Lenders and on all holders of the
Revolving Loan Notes.
8.14 SEVERAL OBLIGATIONS. The obligation of each Lender is several, and
neither Agent nor any other Lender shall be responsible for the obligation and
commitment of any other Lender.
8.15 CONSENT OF LENDERS.
(a) Except as expressly provided herein, Agent shall have the sole
and exclusive right to service, administer and monitor the Revolving Loan and
the Loan Documents, including without limitation, the right to exercise or
refrain from exercising all rights, remedies, privileges and options under the
Loan Documents, including without limitation the credit judgment with respect to
the making of Advances and the determination as
-52-
<PAGE>
to the basis on which and extent to which Advances may be made and the
determination as to whether draws should be honored for Letters of Credit, and
the right to modify, waive or alter the terms of the Loan Documents and grant
such indulgences, forbearances and other waivers as it shall determine.
(b) Notwithstanding anything to the contrary contained in
subparagraph (a) above, Agent shall not, without the prior written consent of
all Lenders: (i) extend any payment date under the Revolving Loan Notes or the
Commitment Termination Date, (ii) reduce any interest rate applicable to the
Revolving Loan, any fee (other than the Agent Fee and issuance and other
administrative fees for Letters of Credit) payable hereunder, (iii) increase the
Revolving Loan Commitment or change the definition of the Collateral Coverage
Base, (iv) release any obligor from the Obligations except in connection with
termination of the Revolving Loan and full payment and satisfaction of all
Obligations, (v) amend the definition of Majority Lenders, (vi) amend this
Section 8.15, (vii) knowingly waive for a period in excess of three (3) Business
Days the requirement that Borrower deliver a Borrowing Base Certificate in
accordance with Section 2.1(a)(ii) hereof, or (viii) release any of the
Collateral except upon a sale thereof by Borrowers to the extent permitted by
and subject to the terms of the Pledge Agreement.
(c) Notwithstanding anything to the contrary contained in
subparagraph (a) above, Agent shall not, without the prior written consent of
the Majority Lenders: (i) modify or amend the financial covenants ("Financial
Covenants") set forth in Sections 6.8, 6.9 and 6.10 hereof, (ii) fail to provide
Borrowers, within 20 days after Agent's obtaining actual knowledge thereof, with
notice of noncompliance by Borrowers with any of the Financial Covenants, (iii)
knowingly waive or fail to enforce any Event of Default incident to
noncompliance by Borrowers with the Financial Covenants or an Event of Default
under Section 7.1 hereof, or (iv) fail to terminate all obligations of Lenders
to make any further loans or other credit extensions under the Revolving Loan at
any time after the declaration by Agent of an Event of Default incident to
noncompliance by Borrowers with any of the Financial Covenants or of an Event of
Default under Section 7.1 hereof.
(d) Except to the extent provided in subpart (c) above, after an
acceleration of the Obligations, Agent shall have the sole and exclusive right,
after consultation (to the extent reasonably practicable under the
circumstances) with all Lenders, to exercise or refrain from exercising any and
all rights, remedies, privileges and options under the Loan Documents and
available at law or in equity, including, without limitation, instituting and
pursuing all legal actions brought against any
-53-
<PAGE>
Borrower or to collect the Obligations, or defending any and all actions brought
by any Borrower or other Person; or incurring expenses or otherwise making
expenditures to protect the Revolving Loan, the Collateral or Lenders' rights or
remedies.
(e) To the extent Agent is required to obtain or otherwise elects to
seek the consent of Lenders to an action Agent desires to take or omit to take,
if any Lender fails to notify Agent, in writing, of its consent or dissent to
any request of Agent hereunder within ten (10) days of such Lender's receipt of
such request, such Lender shall be deemed to have given its consent thereto.
8.16 PARTICIPATION AND ASSIGNMENTS: No Lender shall, voluntarily (other
than to a successor in interest by operation of law or pursuant to a transfer of
assets in connection with a business combination) or involuntarily transfer,
assign, participate or otherwise set over all or any part of its share in the
Revolving Loan other than to an affiliate, without the prior written consent of
Agent, which consent shall not be unreasonably withheld.
8.17 OTHER CREDIT FACILITIES OF LENDERS: (a) Each Lender other than PNC
Bank, National Association ("PNC") acknowledges that Midlantic Bank, N.A.
("Midlantic"), PNC's predecessor in interest and which is deemed for all
purposes hereof to be PNC, has heretofore made a mortgage loan to C/N Whiteland
Limited Partnership I, which was assumed by SSI as evidenced by Mortgage Note
dated March 28, 1985 in the original principal amount of $3,000,000, as amended
to date (including by Note and Mortgage Modification Agreement dated April 24,
1992 between SSI and Midlantic) and secured by a mortgage and security interest
in (A) certain real estate ("Realty") situate at 110-14 Summit Drive, West
Whiteland Township, Chester County, PA, (B) all machinery, equipment, furniture
and fixtures now or hereafter owned by SSI which are now or hereafter located at
the Realty, and (C) all leases now or hereafter entered into with respect to all
or any portion of the Realty and all rents related thereto (collectively, "PNC's
Collateral"). Each such other Lender agrees that any amount at any time
realized by PNC from or on account of PNC's Collateral may be retained by PNC
for its own account and for application against the said mortgage loan
(including any renewal or refinance of the balance thereof), and any lien which
PNC now or hereafter obtains against the PNC Collateral in connection with or in
the enforcement of the Revolving Loan shall be junior in lien and priority to
any lien therein now existing or hereafter granted to or obtained by PNC in
connection with said mortgage loan.
-54-
<PAGE>
(b) Each Lender further acknowledges that PNC has heretofore established
for XL Vision, Inc. ("XL") a $6,000,000 revolving line of credit ("XL Revolver")
secured by, inter alia, the guaranties of each Borrower. The parties further
acknowledge that Borrowers may now have or hereafter establish with PNC or an
affiliate of PNC one or more deposit or custodian accounts. PNC and each such
other Lender agree that any amounts at any time realized by PNC, or an affiliate
thereof, on behalf of PNC, by virtue of any set-off exercised at any time
against or in the enforcement of any lien at any time obtained on said deposit
or custodian accounts shall, notwithstanding in what capacity as against the
Borrowers any such set-off is exercised or lien obtained, be first applied
against the Revolving Loan and all other Obligations of Borrowers hereunder
until paid in full before any thereof shall be applied against the principal
balance of the mortgage loan referred to in subpart (a) above, or the XL
Revolver.
Article 9. MISCELLANEOUS PROVISIONS.
Section 9.1 FEES AND EXPENSES.
The Borrowers, jointly and severally, will promptly (and in any event
within 30 days after receipt of an invoice or statement therefor) pay all
reasonable costs of preparing and complying with this Agreement and of the
performance by all of the Borrowers of and compliance by all of them with all
agreements and conditions contained herein and in the other Loan Documents on
their part to be performed or complied with (including, without limitation, all
costs of filing or recording any assignment, financing statements and other
documents), and the reasonable fees and expenses and disbursements of counsel to
the Agent in connection with the preparation, execution and delivery,
administration, interpretation, work-out and enforcement of this Agreement, the
Notes, the Security Documents, the other Loan Documents and all other
agreements, obligations, instruments and documents relating to this transaction.
The Borrowers, jointly and severally, shall at all times protect, indemnify,
defend and save harmless the Agent and each Lender from and against any and all
claims, actions, suits and other legal proceedings (commenced or asserted by or
against them), and liabilities, damages, costs, interest, charges, counsel fees
and other expenses and penalties which any of them may, at any time, sustain or
incur by reason of or in consequence of or arising out of the execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby, the breach by Borrowers of any of their covenants contained herein
and/or the enforcement by Agent of its rights and remedies herein and/or in the
other Loan Documents, except and to the extent that Borrowers prove that such
claim, action, suit, liability, etc. was caused by the gross negligence
-55-
<PAGE>
or willful misconduct or manifest bad faith of the Lender or Agent in question.
The provisions of this Section 9.1 shall survive the payment of the Notes or any
disposition thereof by any Lender and the termination of this Agreement.
Section 9.2 TAXES.
If, under any law in effect on the date of the closing of the Loan
hereunder, or under any retroactive provision of any law subsequently enacted,
it shall be determined that any Federal, state or local tax is payable in
respect of the issuance of the Notes, or in connection with the filing or
recording of any assignment, financing statements, or other documents (whether
measured by the amount of indebtedness secured or otherwise) as contemplated by
this Agreement, then the Borrowers will pay any such tax and all interest and
penalties, if any, and will indemnify each Lender against and save it harmless
from any loss or damage resulting from or arising out of the nonpayment or delay
in payment of any such tax. If any such tax or taxes shall be assessed or
levied against any Lender, such Lender may notify the Borrowers and make
immediate payment thereof, together with interest or penalties in connection
therewith, and shall thereupon be entitled to and shall receive immediate
reimbursement therefor from the Borrowers. Notwithstanding any other provision
contained in this Agreement, the covenants and agreements of the Borrowers in
this Section 9.2 shall survive payment of the Notes and the termination of this
Agreement.
Section 9.3 PAYMENTS.
All payments by the Borrowers on account of principal, interest and other
charges (including any indemnities) shall be made to Agent at its Principal
Office, in lawful money of the United States of America in immediately available
funds, by wire transfer or otherwise, not later than 12:00 noon Philadelphia
time on the date such payment is due. Any such payment made on such date but
after such time shall, if the amount paid bears interest, be deemed to have been
made on and interest shall continue to accrue and be payable thereon until the
next succeeding Business Day. If any payment of principal or interest becomes
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension shall be included in computing
interest in connection with such payment. All payments hereunder and under the
Notes shall be made without set-off or counterclaim and in such amounts as may
be necessary in order that all such payments shall not be less than the amounts
otherwise specified to be paid under this Agreement and the Notes (after
withholding for or on account of (i) any present or future taxes, levies,
imposts, duties or other similar charges of whatever nature imposed by any
government or
-56-
<PAGE>
any political subdivision or taxing authority thereof, other than any tax
(except those referred to in clause (ii) below) on or measured by the net income
of the Bank pursuant to applicable federal, state and local income tax laws, and
(ii) deduction of an amount equal to the taxes on or measured by the net income
of any Lender payable by such Lender with respect to the amount by which the
payments required to be made under this sentence exceed the amounts otherwise
specified to be paid in this Agreement and the Notes.
Section 9.4 SURVIVAL OF AGREEMENTS AND REPRESENTATIONS; WAIVER OF TRIAL
BY JURY.
All agreements, representations and warranties made herein shall survive
the delivery of this Agreement and the Notes. EACH BORROWER AND LENDER
IRREVOCABLY WAIVES TRIAL BY JURY AND THE RIGHT THERETO IN ANY LITIGATION IN ANY
COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS AGREEMENT,
THE NOTES, THE SECURITY DOCUMENTS, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY
INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT, OR THE VALIDITY,
PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
Section 9.5 LIEN ON AND SET-OFF OF DEPOSITS.
As security for the due payment and performance of all the Obligations,
each Borrower hereby grants to each Lender a lien on and security interest in
any and all deposits or other sums at any time credited by or due from such
Lender to such Borrower, whether in regular or special depository accounts or
otherwise, and any and all monies, securities and other property of such
Borrower, and the proceeds thereof, now or hereinafter held or received by or in
transit to such Lender from or for such Borrower, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and any such deposits,
sums, monies, securities and other property, may at any time be set-off,
appropriated and applied by Lenders against any of the obligations, indebtedness
or liabilities hereunder, under the Notes and under the Security Documents, in
each case for the ratable benefit of all Lenders, whether or not any of such
obligation is then due or is secured by any collateral, or, if it is so secured,
whether or not the collateral is considered to be adequate.
Section 9.6 MODIFICATIONS, CONSENTS AND WAIVERS;
ENTIRE AGREEMENT.
No modification, amendment or waiver of or with respect to any provision of
this Agreement, the Notes, the Security Documents, or any of the other Loan
Documents and all other
-57-
<PAGE>
agreements, instruments and documents delivered pursuant hereto or thereto, nor
consent to any departure by any Borrower or Subsidiary from any of the terms or
conditions thereof, shall in any event be effective unless it shall be in
writing and signed by the Agent and then any such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
consent to or demand on any Borrower or Subsidiary in any case shall, of itself,
entitle it to any other or further notice or demand in similar or other
circumstances. This Agreement embodies the entire agreement and understanding
among the parties hereto and supersedes all prior agreements and understandings
relating to the subject matter hereof.
Section 9.7 REMEDIES CUMULATIVE.
Each and every right granted to the Agent hereunder or under any other
document delivered hereunder or in connection herewith, or allowed it by law or
equity, shall be cumulative and may be exercised from time to time. No failure
on the part of the Agent to exercise, and no delay in exercising, any right
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right preclude any other or future exercise thereof or the exercise of any
other right. The due payment and performance of any Borrower's indebtedness,
liabilities and obligations under the Notes and this Agreement shall be without
regard to any counterclaim, right of offset or any other claim whatsoever which
such Borrower may have against any Lender and without regard to any other
obligation of any nature whatsoever which any Lender may have to such Borrower
and no such counter-claim or offset shall be asserted by such Borrower in any
action, suit or proceeding instituted by Agent for payment or performance of
such Borrower's indebtedness, liabilities or obligation under the Notes, this
Agreement, the Security Documents or otherwise.
Section 9.8 FURTHER ASSURANCES.
At any time and from time to time, upon the request of the Agent, the
Borrowers shall execute, deliver and acknowledge or cause to be executed,
delivered and acknowledged, such further documents and instruments and do such
other acts and things as the Agent may reasonably request in order to fully
effect the purposes of this Agreement, the Notes, the Security Documents, the
other Loan Documents and any other agreements, instruments and documents
delivered pursuant hereto or in connection with the Loan.
Section 9.9 NOTICES.
-58-
<PAGE>
(a) All notices, requests, reports and other communications pursuant
to this Agreement shall be in writing, either by letter (delivered by hand or
sent by Certified mail, return receipt requested, except for routine reports
which shall be by ordinary first class mail) or by telegram or telecopy, and,
addressed as follows:
(i) If to any Borrower:
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Attention: Michael W. Miles,
Vice President/Controller
Telecopy No.: (610) 293-0601
-59-
<PAGE>
(ii) If to Agent or any Lender:
c/o PNC Bank, National Association
Valley Forge Regional Banking Center
1000 Westlakes Drive, Suite 200
Berwyn, PA 19312
Attention: Mark E. Bevilacqua,
Vice President
Telecopy No.: (610) 725-5799
With copies to:
Blank Rome Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attention: Bradley D. O'Brien, Esquire
Telecopy No.: (215) 569-5555
PNC Bank, National Association
One PNC Plaza, 4th Floor
Multi-Bank Loan Administration
249 5th Avenue
Pittsburgh, PA 15222
Attention: Arlene Ohler
Telecopy No.: (412) 762-8672
Any notice, request or communication hereunder shall be deemed to have been
given on the day on which it is delivered by hand to such party at its address
specified above, or, if sent by mail, on the third Business Day after the day
deposited in the mail, postage prepaid, or in the case of telegraphic notice,
when delivered to the telegraph company, addressed as aforesaid, or, if by
telecopy, when transmitted. Any party may change the person or address to whom
or which notices are to be given hereunder, by notice duly given hereunder;
provided, however, that any such notice shall be deemed to have been given
hereunder only when actually received by the party to which it is addressed.
(b) Each of the Borrowers hereby revocably appoints SSI as its agent
to give and receive any notice, request, report and other communication pursuant
to this Agreement, and for such other purposes as are provided for herein. Each
of the Borrowers agrees that the Agent may rely and act upon, without any
investigation or inquiry as to the authority or power to give, or accuracy or
reasonableness of, and each of the Borrowers will be unconditionally and
irrevocably bound and obligated by any
-60-
<PAGE>
instructions, notice, request, report or other communications given by SSI to
the Bank.
Section 9.10 COUNTERPARTS.
This Agreement may be signed in any number of counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
Section 9.11 CONSTRUCTION; GOVERNING LAW; JURISDICTION.
The headings used in this Agreement are for convenience only and shall not
be deemed to constitute a part hereof. All uses herein of the masculine gender
or of the feminine or neuter gender or plural or singular terms includes the
other as the context may require. This Agreement, the Notes, the Security
Documents, the other Loan Documents and all other documents and instruments
executed and delivered in connection herewith and therewith, shall be governed
by, and construed and interpreted in accordance with, the laws of the
Commonwealth of Pennsylvania applicable to contracts executed and to be
performed therein. The Borrowers and each Lender hereby irrevocably consent to
the jurisdiction of the Courts of Common Pleas of the Commonwealth of
Pennsylvania and of the United States District Court for the Eastern District of
Pennsylvania in any and all actions and proceedings in connection with this
Agreement, the Notes or the Security Documents and irrevocably consent, in
addition to any method of service of process permissible under applicable law,
to service of process by certified mail, return receipt requested to the
addresses of Borrowers as set forth herein and the address of Lenders set forth
on the signature page hereto. The Borrowers and Lenders agree that in any
action or proceeding brought by them in connection with this Agreement or the
transactions contemplated hereby, exclusive jurisdiction shall be in the courts
of the Courts of Common Pleas of the Commonwealth of Pennsylvania, and the
United States District Court for the Eastern District of Pennsylvania.
Section 9.12 SEVERABILITY.
The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision in this Agreement in any jurisdiction. Each of the
covenants, agreements and conditions contained in this Agreement is independent
and compliance by any Borrower with
-61-
<PAGE>
any of them shall not excuse non-compliance by any Borrower with any other.
Section 9.13 BINDING EFFECT; NO ASSIGNMENT OR DELEGATION.
This Agreement shall be binding upon and inure to the benefit of each
Borrower, Agent and each Lender, and its successors and permitted assignees.
The rights and obligations of each Borrower under this Agreement shall not be
assigned or delegated without the prior written consent of all Lenders, and any
purported assignment or delegation without such consent shall be void.
Section 9.14 JOINT AND SEVERAL OBLIGATIONS.
(a) All of the indebtedness, liabilities and obligations of the
Borrowers under this Agreement and the Loan Documents shall be the joint and
several obligations of the Borrowers.
(b) Each Borrower agrees that the Agent may, in its discretion,
without affecting or modifying the joint and several obligations of each
Borrower for all of the Indebtedness, liabilities and obligations under this
Agreement and the Loan Documents including, without limitation, the Obligations,
(i) release, discharge, compromise or settle with, or grant indulgences to,
refuse to proceed or take action against, any one or more of the Borrowers with
respect to their respective obligations under this Agreement, including, without
limitation, the Obligations, (ii) release, surrender, modify, impair, exchange,
substitute or extend the period or duration of time for the performance,
discharge or payment of, refuse to enforce, compromise or settle its Lien
against, any and all deposits and other property or assets on which the Agent or
any Lender, may have a Lien or which secures any of the Indebtedness,
liabilities and obligations, including without limitation, the Obligations of
any Borrower under this Agreement, (iii) amend, modify, alter or restate, in
accordance with their respective terms, this Agreement or any of the Loan
Documents or otherwise, accept deposits or other property from, or enter into
transactions of any kind or nature with, any one or more of the Borrowers, and
(iv) disburse all or part of the proceeds of the Loan as instructed by SSI as
agent for all of the Borrowers, without inquiry or investigation of any kind by
the Bank as to the use of such proceeds (each Borrower confirms that it will be
directly or indirectly benefitted by each and every Revolving Loan Advance and
any and all other advances under this Agreement or any of the Loan Documents).
-62-
<PAGE>
Section 9.15 THIRD PARTY.
No rights are intended to be created hereunder for the benefit of any Third
Party donee, creditor or incidental beneficiary.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PNC BANK, NATIONAL ASSOCIATION, as Agent,
Lender and Issuer
By: /s/ Mark E. Bevilacqua
-------------------------------
Vice President
CORESTATES BANK, N.A.
By: /s/ Michael R. Bailey
-------------------------------
Vice President
Address: Great Valley Corporate Center
55 Valley Stream Parkway, Suite 200
Malvern, PA 19355
Attn: Michael Bailey
Vice President
Facsimile No: 610-251-5929
FIRST BANK, NATIONAL ASSOCIATION
By: /s/ Mark N. Olmon
-------------------------------
Vice President
Address: 1st Bank Place
601 2nd Avenue South, 7th Avenue
Minneapolis, MN 55402-4302
Attn: Mark Olmon,
Vice President
Facsimile No: 612-973-0825
[Signatures continued on next page]
-63-
<PAGE>
[Signatures continued from previous page]
MELLON BANK, N.A.
By: /s/ Ronald J. Bucci
---------------------------
Address: Mellon Bank Center
Corporate Banking, 7th Floor
1735 Market Street
Philadelphia, PA 19106
Attn: Ronald J. Bucci
Facsimile No: (215) 553-4899
SAFEGUARD SCIENTIFICS, INC., a
Pennsylvania corporation
By: /s/ Michael W. Miles
-------------------------------
VP/Corporate Controller
Attest: /s/ Deirdre Blackburn
---------------------------
Assistant Secretary
SAFEGUARD SCIENTIFICS (DELAWARE) INC., a
Delaware corporation
By: /s/ Michael W. Miles
-------------------------------
Assistant Treasurer
Attest: /s/ Deirdre Blackburn
---------------------------
Assistant Secretary
-64-
<PAGE>
Exhibit 10.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$225,000,000
CREDIT AGREEMENT
AMONG
COMPUCOM SYSTEMS, INC.
CERTAIN LENDERS PARTY HERETO
AND
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE LENDER
September 26, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINED TERMS............................................ 1
Section 1.2 AMENDMENTS AND RENEWALS.................................. 25
Section 1.3 CONSTRUCTION............................................. 26
ARTICLE 2
ADVANCES
Section 2.1 THE ADVANCES............................................. 26
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT..................... 27
Section 2.3 INTEREST................................................. 29
Section 2.4 FEES..................................................... 31
Section 2.5 PREPAYMENTS.............................................. 32
Section 2.6 REDUCTION OF COMMITMENTS................................. 33
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE LENDER........ 33
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES......................... 34
Section 2.9 REIMBURSEMENT............................................ 34
Section 2.10 MANNER OF PAYMENT........................................ 35
Section 2.11 LIBOR LENDING OFFICES.................................... 36
Section 2.12 SHARING OF PAYMENTS...................................... 36
Section 2.13 CALCULATION OF LIBOR RATE................................ 36
Section 2.14 TAXES.................................................... 36
Section 2.15 LETTERS OF CREDIT........................................ 40
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND THE INITIAL
ISSUANCE OF LETTERS OF CREDIT..................................... 45
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT 47
Section 3.3 CONDITIONS PRECEDENT TO CONVERSIONS AND CONTINUATIONS.... 48
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
<PAGE>
Section 4.1 REPRESENTATIONS AND WARRANTIES........................... 49
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.......... 56
ARTICLE 5
GENERAL COVENANTS
Section 5.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS............ 56
Section 5.2 BUSINESS; COMPLIANCE WITH APPLICABLE LAW................. 57
Section 5.3 MAINTENANCE OF PROPERTIES................................ 57
Section 5.4 ACCOUNTING METHODS AND FINANCIAL RECORDS................. 57
Section 5.5 INSURANCE................................................ 57
Section 5.6 PAYMENT OF TAXES AND CLAIMS.............................. 57
Section 5.7 VISITS AND INSPECTIONS................................... 57
Section 5.8 USE OF PROCEEDS.......................................... 58
SECTION 5.9 INDEMNITY................................................ 58
Section 5.10 ENVIRONMENTAL LAW COMPLIANCE............................. 59
Section 5.11 FURTHER ASSURANCES....................................... 60
Section 5.12 SUBSIDIARIES............................................. 60
Section 5.13 REAL PROPERTY............................................ 61
Section 5.14 AGREEMENTS IN RESPECT OF RPA AND TAA..................... 61
ARTICLE 6
INFORMATION COVENANTS
Section 6.1 BORROWING BASE REPORT.................................... 62
Section 6.3 ANNUAL FINANCIAL STATEMENTS AND INFORMATION; CERTIFICATE
OF NO DEFAULT .......................................... 62
Section 6.4 COMPLIANCE CERTIFICATE................................... 62
Section 6.5 COPIES OF OTHER REPORTS AND NOTICES...................... 63
Section 6.6 NOTICE OF LITIGATION, DEFAULT AND OTHER MATTERS.......... 64
Section 6.7 ERISA REPORTING REQUIREMENTS............................. 64
Section 6.8 RPA AND TAA REPORTING REQUIREMENTS....................... 65
ARTICLE 7
NEGATIVE COVENANTS
Section 7.1 INDEBTEDNESS............................................. 66
Section 7.2 LIENS.................................................... 67
Section 7.3 INVESTMENTS.............................................. 67
Section 7.4 LIQUIDATION, MERGER...................................... 68
Section 7.5 SALES OF ASSETS.......................................... 68
- ii -
<PAGE>
Section 7.6 ACQUISITIONS............................................. 69
Section 7.7 CAPITAL EXPENDITURES..................................... 69
Section 7.8 RESTRICTED PAYMENTS...................................... 69
Section 7.9 AFFILIATE TRANSACTIONS................................... 70
Section 7.10 COMPLIANCE WITH ERISA.................................... 70
Section 7.11 MAXIMUM LEVERAGE RATIO................................... 70
Section 7.12 MINIMUM FIXED CHARGE COVERAGE RATIO...................... 70
Section 7.13 MINIMUM TANGIBLE NET WORTH............................... 70
Section 7.14 MINIMUM ASSET COVERAGE RATIO............................. 71
Section 7.15 MAXIMUM FUNDED DEBT TO CAPITAL........................... 71
Section 7.16 SALE AND LEASEBACK....................................... 71
Section 7.17 SALE OR DISCOUNT OF RECEIVABLES.......................... 71
Section 7.18 CAPITAL STOCK............................................ 71
Section 7.19 BUSINESS................................................. 71
Section 7.20 FISCAL YEAR.............................................. 71
Section 7.21 AMENDMENT OF ORGANIZATIONAL DOCUMENTS.................... 71
Section 7.22 AMENDMENTS AND WAIVERS OF SUBORDINATED DEBT.............. 72
Section 7.23 OPERATING LEASES......................................... 72
ARTICLE 8
DEFAULT
Section 8.1 EVENTS OF DEFAULT........................................ 72
Section 8.2 REMEDIES................................................. 75
ARTICLE 9
CHANGES IN CIRCUMSTANCES
Section 9.1 LIBOR BASIS DETERMINATION INADEQUATE..................... 76
Section 9.2 ILLEGALITY............................................... 76
Section 9.3 INCREASED COSTS.......................................... 77
Section 9.4 EFFECT ON BASE RATE ADVANCES............................. 78
Section 9.5 CAPITAL ADEQUACY......................................... 78
Section 9.6 REPLACEMENT LENDER....................................... 79
ARTICLE 10
AGREEMENT AMONG LENDERS
Section 10.1 AGREEMENT AMONG LENDERS.................................. 79
Section 10.2 LENDER CREDIT DECISION................................... 82
Section 10.3 BENEFITS OF ARTICLE...................................... 82
- iii -
<PAGE>
ARTICLE 11
MISCELLANEOUS
Section 11.1 NOTICES.................................................. 83
Section 11.2 EXPENSES................................................. 83
Section 11.3 WAIVERS.................................................. 84
Section 11.4 CALCULATION BY THE LENDERS CONCLUSIVE AND BINDING........ 84
Section 11.5 SET-OFF.................................................. 84
Section 11.6 ASSIGNMENT............................................... 85
Section 11.7 COUNTERPARTS............................................. 87
Section 11.8 SEVERABILITY............................................. 87
Section 11.9 INTEREST AND CHARGES..................................... 87
Section 11.10 HEADINGS................................................. 88
Section 11.11 AMENDMENT AND WAIVER..................................... 88
Section 11.12 EXCEPTION TO COVENANTS................................... 89
Section 11.13 NO LIABILITY OF ISSUING BANK............................. 89
Section 11.14 CONFIDENTIALITY.......................................... 89
Section 11.15 AMENDMENT, RESTATEMENT, EXTENSION, RENEWAL AND INCREASE.. 90
SECTION 11.16 GOVERNING LAW............................................ 90
SECTION 11.17 WAIVER OF JURY TRIAL..................................... 90
SECTION 11.18 ENTIRE AGREEMENT......................................... 91
- iv -
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1: LIBOR Lending Offices
Schedule 2: Existing Liens
Schedule 3: Existing Litigation and Material Liabilities
Schedule 4: Subsidiaries
Schedule 5: Existing Investments
Schedule 6: Existing Indebtedness
Schedule 7: Qualification and Good Standing
Schedule 8: Labor Relations
Schedule 9: Permitted Real Estate Expenditures
Exhibit A: Facility A Note
Exhibit B: Facility B Note
Exhibit C: Swing Line Note
Exhibit D: Security Agreement
Exhibit E: Borrowing Base Report
Exhibit F: Pledge Agreement
Exhibit G: Compliance Certificate
Exhibit H: Assignment Agreement
Exhibit I: Subsidiary Guaranty
Exhibit J: Notice of Borrowing
- v -
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of September 26, 1996, among COMPUCOM
SYSTEMS, INC., a Delaware corporation (the "BORROWER"), the Lenders from time to
time party hereto, and NATIONSBANK OF TEXAS, N.A., a national banking
association, as administrative agent for the Lenders.
BACKGROUND
The Lenders have been requested to provide the Borrower the funds required
to (i) refinance existing debt of the Borrower outstanding to NationsBank of
Texas, N.A. pursuant to the terms of that certain Financing and Security
Agreement, dated as of August 4, 1993, as amended, modified, supplemented and
restated from time to time (the "EXISTING CREDIT AGREEMENT"), (ii) finance
acquisitions permitted hereunder, (iii) finance the ongoing working capital and
general corporate requirements of the Borrower and its Subsidiaries (as
hereinafter defined) and (iv) finance the purchase of certain real estate. The
Lenders have agreed to provide such financing, subject to the terms and
conditions set forth below.
In consideration of the mutual covenants and agreements contained herein,
and other good and valuable consideration hereby acknowledged, the parties
hereto agree that the Existing Credit Agreement shall be amended, restated and
superseded as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINED TERMS. For purposes of this Agreement:
"ACCOUNT" has the meaning assigned to such term in the UCC.
"ACQUISITION" means any transaction pursuant to which the Borrower or any
of its Subsidiaries, (i) whether by means of a capital contribution or purchase
or other acquisition of stock or other securities or other equity participation
or interest, (A) acquires more than 50% of the equity interest in any Person
pursuant to a solicitation by the Borrower or such Subsidiary of tenders of
equity securities of such Person, or through one or more negotiated block,
market, private or other transactions, or a combination of any of the foregoing,
or (B) makes any corporation a Subsidiary of the Borrower or such Subsidiary, or
causes any corporation, other than a Subsidiary of the Borrower or such
Subsidiary, to be merged into the Borrower or such Subsidiary (or agrees to be
merged into any other corporation other than a wholly-owned Subsidiary
(excluding directors' qualifying shares) of the Borrower or such Subsidiary), or
(ii) purchases all or substantially all of the business or assets of any Person
or of any operating division of any Person.
<PAGE>
"ADMINISTRATIVE LENDER" means NationsBank of Texas, N.A., a national
banking association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to SECTION 10.1(B) hereof.
"ADMINISTRATIVE LENDER FEE LETTER" has the meaning specified in
SECTION 2.4(C) hereof.
"ADVANCE" means a Facility A Advance, a Facility B Advance or a Swing Line
Advance and "ADVANCES" means Facility A Advances, Facility B Advances and Swing
Line Advances.
"AFFILIATE" means, as applied to any Person, any other Person that,
directly or indirectly, through one or more Persons, Controls or is Controlled
By or Under Common Control with, that Person.
"AGREEMENT" means this Credit Agreement, as amended, modified, supplemented
or restated from time to time.
"AGREEMENT DATE" means the date of this Agreement.
"APPLICABLE ENVIRONMENTAL LAWS" means applicable laws pertaining to health
or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, "RCRA").
"APPLICABLE LAW" means (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "APPLICABLE LAW" shall mean
the laws of the United States of America, including without limitation 12 USC
SECTIONS 85 and 86, as amended from time to time, and any other statute of the
United States of America now or at any time hereafter prescribing the maximum
rates of interest on loans and extensions of credit, and the laws of the State
of Texas, including, without limitation, Article 5069-1.04, Title 79, Revised
Civil Statutes of Texas, 1925, as amended ("ART. 1.04"), and any other statute
of the State of Texas; provided that the parties hereto agree that the
provisions of Chapter 15, Title 79, Revised Civil Statutes of Texas, 1925, as
amended, shall not apply to Advances, this Agreement, the Notes or any other
Loan Documents.
"APPLICABLE LIBOR RATE MARGIN" means the following per annum percentages,
applicable in the following situations:
- 2 -
<PAGE>
APPLICABILITY FACILITY A FACILITY B
(a) INITIAL PRICING PERIOD 1.000% 1.250%
(b) SUBSEQUENT PRICING PERIOD
(1) The Fixed Charge Coverage Ratio is greater 0.750% 1.000%
than or equal to 2.50 to 1
(2) The Fixed Charge Coverage Ratio is less 0.875% 1.125%
than 2.50 to 1 but greater than or equal to
2.00 to 1
(3) The Fixed Charge Coverage Ratio is less 1.000% 1.250%
than 2.00 to 1 but greater than or equal to
1.50 to 1
(4) The Fixed Charge Coverage Ratio is less 1.250% 1.500%
than 1.50 to 1
The Applicable LIBOR Rate Margin payable by the Borrower on the LIBOR Advances
outstanding hereunder shall be subject to reduction or increase, as applicable
and as set forth in the table above, on a quarterly basis according to the
performance of the Borrower as tested by using the Fixed Charge Coverage Ratio
calculated as of the end of each fiscal quarter during the Subsequent Pricing
Period; PROVIDED, that each adjustment in the LIBOR Basis shall be effective
with respect to LIBOR Advances (i) made following receipt by the Administrative
Lender of the financial statements required to be delivered pursuant to
SECTION 6.2 or 6.3 hereof, as applicable, for each such fiscal quarter, and the
corresponding Compliance Certificate required pursuant to SECTION 6.4 hereof, on
the date of making such LIBOR Advance and (ii) outstanding on the date of
receipt of such financial statements and Compliance Certificate referred to in
clause (i) immediately preceding, on the date which is two Business Days
following the date of receipt of such financial statements and Compliance
Certificate. If such financial statements and Compliance Certificate are not
received by the Administrative Lender by the date required, effective as of the
first Business Day following notification thereof from the Administrative Lender
to the Borrower, the Applicable LIBOR Rate Margin shall be determined as if the
Fixed Charge Coverage Ratio is less than 1.50 to 1 until such time as such
financial statements and Compliance Certificate are received.
"ASSET COVERAGE RATIO" means, for the Borrower and its Subsidiaries
determined in accordance with GAAP on a consolidated basis, at the time in
question, the ratio of (a) the sum of (i) Cash and Cash Equivalents, plus
(ii) Accounts, plus (iii) Inventory to (b) the sum of (i) outstanding
obligations in respect of Facility A and Swing Line Advances, Reimbursement
Obligations and other Indebtedness, plus (ii) the Net Exposure Under
Securitization, plus (iii) accounts payable and accrued liabilities in the
ordinary course of business.
"ASSIGNEES" means any assignee of a Lender pursuant to an Assignment
Agreement and shall have the meaning ascribed thereto in SECTION 11.6 hereof.
- 3 -
<PAGE>
"ASSIGNMENT AGREEMENT" has the meaning specified in SECTION 11.6 hereof.
"AUTHORIZED SIGNATORY" means such senior personnel of the Borrower as may
be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower, and to request
Advances and Letters of Credit hereunder.
"BASE RATE ADVANCE" means any Advance bearing interest at the Base Rate
Basis.
"BASE RATE BASIS" means, for any day, a per annum interest rate equal to
the higher of (a) the sum of (i) 0.50% plus (ii) the Federal Funds Rate on such
day or (b) the Prime Rate on such day. The Base Rate Basis shall be adjusted
automatically without notice as of the opening of business on the effective date
of each change in the Prime Rate to account for such change.
"BORROWER" has the meaning specified in the introductory provision hereof.
"BORROWING BASE" means, at the time in question, an amount equal to the sum
of (i) 85% of the net amount of the Borrower's and its Subsidiaries (other than
CFI) ownership interest in Eligible Accounts, plus (ii) an amount equal to 50%
of Eligible Inventory.
"BORROWING BASE REPORT" means a report, signed by an Authorized Signatory,
in substantially the form of EXHIBIT E, appropriately completed.
"BUSINESS DAY" means a day on which commercial banks are open (a) for the
transaction of business in Dallas, Texas, and, (b) with respect to any LIBOR
Advance, for the transaction of international business (including dealings in
U.S. dollar deposits) in London, England.
"CAPITAL" means, for any date of calculation, for the Borrower and its
Subsidiaries, on a consolidated basis determined in accordance with GAAP, the
sum of (a) Funded Debt plus (b) Net Worth.
"CAPITAL EXPENDITURES" means, for any period, expenditures made by the
Borrower and its Subsidiaries to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements during such period
and the aggregate amount of items leased or acquired under Capitalized Lease
Obligations at the cost of the item, but excluding capital expenditures made
with insurance proceeds to the extent used to replace or repair damaged fixed
assets, plant and equipment) computed in accordance with GAAP, consistently
applied.
"CAPITAL STOCK" means, as to any Person, the equity interests in such
Person, including, without limitation, the shares of each class of capital stock
in any Person that is a corporation, and each class of partnership interest
(including, without limitation, general, limited and preference units) in any
Person that is a partnership.
- 4 -
<PAGE>
"CAPITALIZED LEASE OBLIGATIONS" means that portion of any obligation of the
Borrower or any Subsidiary of the Borrower as lessee under a lease which at the
time are recorded as capitalized lease obligations on the balance sheet of the
Borrower or such Subsidiary prepared in accordance with GAAP.
"CASH AND CASH EQUIVALENTS" means with respect to the Borrower and each
Subsidiary of the Borrower (i) cash (which, after the occurrence of an Event of
Default, shall exclude any cash proceeds of Accounts), (ii) securities issued or
directly and fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof having maturities of not more than six months
from the date of acquisition, (iii) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any Lender or with any domestic commercial bank
having capital and surplus in excess of $500,000,000, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above,
(v) commercial paper issued by any Lender or the parent corporation of any
Lender, and commercial paper rated A-1 or the equivalent thereof by Standard &
Poor's Ratings Group, a Division of McGraw-Hill, Inc., a New York corporation,
or P-1 or the equivalent thereof by Moody's Investors Service, Inc., and in each
case maturing within six months after the date of acquisition, and (vi) a
readily redeemable "money market mutual fund" advised by a bank described in
clause (iii) hereof, or an investment advisor registered under Section 203 of
the Investment Advisors Act of 1940, that has and maintains an investment policy
limiting its investments primarily to instruments of the types described in
clauses (i) through (v) hereof and having on the date of such Investment total
assets of at least One Hundred Million Dollars ($100,000,000.00).
"CFI" means CSI Funding, Inc., a Delaware corporation and wholly-owned
Subsidiary of the Borrower, as purchaser under the RPA.
"CFI NOTE" means the "Subordinated Note" as defined by the RPA, and any and
all renewals, extensions, modifications, amendments, supplements or restatements
thereof.
"CHANGE OF CONTROL" means the occurrence of any of the following events
after the Agreement Date: (a) any Person or any Persons acting together which
would constitute a "group" (a "GROUP") for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or any
successor provision thereto, other than the Group whose nominees constituted a
majority of the board of directors of the Borrower as of the close of business
on the Agreement Date, together with any Affiliates or Related Persons thereof,
shall beneficially own (as defined in Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act or any successor provision thereto) at least
30% of the aggregate voting power of all classes of Capital Stock of the
Borrower entitled to vote generally in the election of directors of the
Borrower; or (b) any Person or Group, other than any Person or Group whose
nominees constituted a majority of the board of directors of the Borrower as of
the close of business on the Agreement Date, together with any Affiliates or
Related Persons thereof, shall succeed in having sufficient of its or their
nominees elected to the Board of Directors of the
- 5 -
<PAGE>
Borrower, such that such nominees, when added to any existing director remaining
on the Board of Directors of the Borrower after such election who is an
Affiliate or Related Person of such Group, shall constitute a majority of the
Board of Directors of the Borrower.
"CLIENTLINK NOTE" means that certain promissory note, dated September 5,
1996, in the original principal amount of $2,500,000 executed and delivered by
ClientLink, Inc. and payable to the order of the Borrower, and any and all
renewals, extensions, modifications, amendments, supplements or restatements
thereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means any collateral hereafter granted by any Person to the
Administrative Lender for the benefit of the Lenders to secure the Obligations.
"COLLATERAL DOCUMENT" means any document under which Collateral is granted
and any document related thereto.
"COMMITMENT FEE" has the meaning specified in SECTION 2.4(a) hereof.
"COMMITMENTS" means, collectively, the Facility A Commitment and the
Facility B Commitment, as reduced from time to time pursuant to SECTION 2.6
hereof.
"COMPLIANCE CERTIFICATE" means a certificate, signed by an Authorized
Signatory, in substantially the form of EXHIBIT G, appropriately completed.
"CONTROL" or "CONTROLLED BY" or "UNDER COMMON CONTROL" means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); provided, however, that in any event any Person which beneficially
owns, directly or indirectly, 10% or more (in number of votes) of the securities
having ordinary voting power for the election of directors of a corporation
shall be conclusively presumed to control such corporation.
"CONTROLLED GROUP" means as of the applicable date, as to any Person not an
individual, all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) which are under common control with
such Person and which, together with such Person, are treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code; provided, however,
that the Subsidiaries of the Borrower shall be deemed to be members of the
Borrower's Controlled Group.
"CREDITOR" means a creditor of the Borrower or any Subsidiary of the
Borrower and shall not include any Affiliate of any such creditor.
"CURRENT MATURITIES" means, with respect to any Person, the principal
portion payable by such Person on Long Term Debt during the twelve-month period
immediately succeeding the date of determination.
- 6 -
<PAGE>
"DEBTOR RELIEF LAWS" means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
debtor relief Laws affecting the rights of creditors generally from time to time
in effect.
"DEED OF TRUST" means any Deed of Trust or Mortgage, as applicable,
relating to the real property of the Borrower purchased with the proceeds of the
Facility B Advances, in a form acceptable to the Administrative Lender, as
amended, modified, renewed, supplemented or restated from time to time.
"DEFAULT" means an Event of Default and/or any of the events specified in
SECTION 8.1, regardless of whether there shall have occurred any passage of time
or giving of notice that would be necessary in order to constitute such event an
Event of Default.
"DEFAULT RATE" means a simple per annum interest rate equal to (a) with
respect to Base Rate Advances the lesser of (i) the Highest Lawful Rate or
(ii) the Prime Rate plus 2.00% or (b) with respect to LIBOR Advances, the lesser
of (i) the Highest Lawful Rate or (ii) the LIBOR Basis plus 2% in excess of the
Applicable Rate Margin then in effect.
"DETERMINING LENDERS" means, on any date of determination, any combination
of the Lenders having at least 66-2/3% of the aggregate amount of the Advances
(which for purposes of the calculation shall include for each Lender an amount
equal to the product of such Lender's Specified Percentage multiplied by the
aggregate principal amount of Swing Line Advances outstanding) then outstanding;
provided, however, that if there are no Advances outstanding hereunder,
"DETERMINING LENDERS" shall mean any combination of Lenders whose Specified
Percentages aggregate at least 66-2/3%.
"DIVIDEND" means, as to any Person, (a) any declaration or payment of any
dividend (other than a stock dividend) on, or the making of any distribution on
account of, any shares of Capital Stock of, or other similar interest in, such
Person and (b) any purchase, redemption, or other acquisition or retirement for
value of any shares of Capital Stock of, or similar interest in, such Person.
"DOLLAR" or "$" means the lawful currency of the United States of America.
"DOMESTIC SUBSIDIARY" means any Subsidiary of the Borrower other than a
Foreign Subsidiary.
"EBIT" means, for any period, determined in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, the sum of (a) Pretax
Net Income (excluding therefrom, to the extent included in determining Pretax
Net Income, any items of extraordinary gain, including net gains on the sale of
assets other than asset sales in the ordinary course of business, and adding
thereto, to the extent included in determining Pretax Net Income, any items of
extraordinary loss, including net losses on the sale of assets other than asset
sales in the ordinary course of business), plus (b) interest expense.
- 7 -
<PAGE>
"EBITDA" means, for any period, determined in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, the sum of (a) EBIT
plus (b) depreciation, amortization and other non-cash charges (to the extent
included in determining EBIT).
"EFC" means Enterprise Funding Corporation, a Delaware corporation, as
purchaser of a portion of the RPA Interest as provided by the TAA.
"ELIGIBLE ACCOUNTS" means at the time of any determination thereof, the net
amount of the Accounts of the Obligors which are reasonably acceptable to the
Determining Lenders in their discretion for the purposes of determining the
Borrowing Base and as to which the following requirements have been fulfilled,
less any reserves against such Eligible Accounts as the Determining Lenders may,
from time to time in their sole discretion without prior notice, deem to be
necessary or appropriate:
(i) An Obligor has lawful and absolute (subject to the RPA Interest)
title to such Account;
(ii) Such Account is a valid, legally enforceable obligation of the Person
who is obligated under such Account (the "ACCOUNT DEBTOR") for goods or services
that have been delivered or that have been rendered to such Person;
(iii) If such Account and other Accounts are owed by a Creditor of the
Borrower or any Subsidiary of the Borrower, the amount of all such Accounts
included as Eligible Accounts shall be the amount by which all such Accounts
exceeds the aggregate accounts payable owed by the Borrower or such Subsidiary
to such Creditor;
(iv) There has been excluded from such Account any portion that is
subject to any asserted dispute, offset, discount, counterclaim or other claim
or defense on the part of the account debtor or to any asserted claim on the
part of the account debtor denying liability under such Account;
(v) The applicable Obligor(s) have full and unqualified right to
assign and grant a security interest in such Account (or the applicable
Obligor's ownership interest in such Account) to Administrative Lender as
security for the Obligations;
(vi) Such Account is not evidenced by chattel paper, promissory note or
other instrument payable to any Obligor;
(vii) Such Account has not been due and payable for more than 120 days
from the invoice date; provided, that, unless Determining Lenders agree
otherwise, no Accounts from an account debtor shall constitute Eligible Accounts
if 50% or more of the aggregate dollar amount of all Accounts owed to the
Borrower or any Subsidiary of the Borrower by such account debtor have been due
and payable for 120 days or more from their respective invoice dates;
- 8 -
<PAGE>
(viii) No account debtor in respect of such Account is (a) primarily
conducting business in and organized under the laws of any jurisdiction located
outside the United States of America, (b) the subject of a proceeding under any
Debtor Relief Laws or (c) a Tribunal;
(ix) No account debtor in respect of such Account is (a) an Affiliate
of the Borrower or any Subsidiary or (b) an employee of the Borrower or any
Subsidiary of the Borrower;
(x) The interest of the applicable Obligor(s) in such Account is
(a) subject to a fully perfected first priority (subject, in the case of the
Borrower, to Liens in favor of the Administrative Secured Party under the MSAA)
security interest in favor of Administrative Lender pursuant to the Loan
Documents, prior to the rights of, and enforceable as such against, any other
Person (including holders of a purchase money security interest) and (b) not
subject to any Lien in favor of any other Person except for Liens in favor of
the Administrative Secured Party under the MSAA.
(xi) Such Account was generated in the ordinary course of the
Borrower's business, represents amounts payable in respect of goods that have
been delivered or services that have been performed and is denominated and
payable only in United States dollars in the United States; and
(xii) Such Account is required to be paid in full not more than 30 days
after the original invoice date and satisfies all applicable requirements of the
Borrower's credit and collection policies and practices, as in effect from time
to time.
"ELIGIBLE INVENTORY" means, at the time of any determination thereof, each
item of the Obligors' Inventory (excluding work-in-process, obsolete Inventory,
Inventory on consignment and Inventory used for demonstrations and display)
valued at the lower of cost or market value (allocated on a first-in, first-out
basis), which is reasonably acceptable to the Determining Lenders in their
discretion for purposes of determining the Borrowing Base and as to which the
following requirements have been fulfilled to the satisfaction of the
Determining Lenders, less any reserves against such Eligible Inventory as the
Determining Lenders may, from time to time in their sole discretion without
prior notice, deem to be necessary or appropriate:
(i) An Obligor has lawful and absolute title to such Inventory;
(ii) Such Inventory is not defective or unmerchantable goods;
(iii) Such Inventory is located in the United States of America;
- 9 -
<PAGE>
(iv) Such Inventory is (a) subject to a fully perfected first priority
security interest in favor of Administrative Lender pursuant to the Loan
Documents, prior to the rights of, and enforceable as such against, any other
Person (including holders of a purchase money security interest) and (b) not
subject to any Lien in favor of any other Person;
(v) The sale of such Inventory by Administrative Lender (or its
successors or assigns) upon an Event of Default is not subject to any Necessary
Authorization, restriction or limitation;
(vi) Such Inventory was not supplied (directly or through an agent or
bailee) to the Borrower or any Subsidiary of the Borrower by Compaq Computer
Corporation and such Inventory has not been, and will not be, attached to,
integrated into or installed on any such Inventory supplied by Compaq Computer
Corporation while such Inventory is owned by the Borrower or any Subsidiary of
the Borrower;
(vii) Such Inventory was not manufactured by, or provided to the
Borrower or any Subsidiary of the Borrower by, Hewlett-Packard Company and such
Inventory has not been, and will not be, attached to, integrated into or
installed on any such Inventory manufactured or provided by Hewlett-Packard
Company while such Inventory is owned by the Borrower or any Subsidiary of the
Borrower;
(viii) Such Inventory was not manufactured by, or sold or provided to
the Borrower or any Subsidiary of the Borrower by, Apple Computer, Inc. or any
company affiliated with Apple Computer, Inc. and such Inventory has not been,
and will not be, attached to, integrated into or installed on any such Inventory
manufactured, sold or provided by Apple Computer, Inc. or any company affiliated
with Apple Computer, Inc. while such Inventory is owned by the Borrower or any
Subsidiary of the Borrower;
(ix) Such Inventory was not manufactured by, or sold to the Borrower
or any Subsidiary of the Borrower by, International Business Machines
Corporation or any of its affiliates or Lexmark International, Inc.
(collectively, the "IBM PARTIES"), such Inventory does not bear the trademark,
trade name or label of any of the IBM Parties and such Inventory has not been,
and will not be, attached to, integrated into or installed on any such Inventory
manufactured by, sold by or bearing the trademark, trade name or label of any of
the IBM Parties while such Inventory is owned by the Borrower or any Subsidiary
of the Borrower;
(x) Such Inventory is not included in the items classified as "Other
Accessories" in the Borrower's monthly DIMS Valuation Report; and
(xi) Such Inventory is not included in the items classified as "SIMS
Inventory" in the Borrower's monthly SIMS Valuation Report.
- 10 -
<PAGE>
Provided, however, that until November 25, 1996, the failure of the
Borrower to deliver Landlord's Waivers to the Administrative Lender shall not
preclude the Borrower from including in "Eligible Inventory" any of its
inventory that otherwise satisfies the foregoing requirements. Provided
further, however, that if, on or before November 25, 1996, the Borrower has not
delivered to the Administrative Lender Landlord's Waivers covering the
Borrower's Eastern Distribution Center warehouse in Paulsboro, New Jersey, the
Borrower's Western Distribution Center warehouse in Stockton, California, the
Borrower's RMA location on Lombardy Lane in Dallas, Texas and the Borrower's SLC
location in Coppell, Texas, none of the Borrower's Inventory shall thereafter
constitute "Eligible Inventory", or otherwise be included in the calculation of
the Borrowing Base, until all of such Landlord's Waivers have been delivered to
the Administrative Lender.
"EQUIPMENT" has the meaning assigned to such term in the UCC.
"EQUITY" means shares of capital stock or partnership, profits, capital or
member interest, or options, warrants or any other right to subscribe for or
otherwise acquire capital stock or a partnership, profits, capital or member
interest, of the Borrower or any Subsidiary of the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA EVENT" means, with respect to the Borrower and its Subsidiaries,
(a) a Reportable Event (other than a Reportable Event not subject to the
provision for 30-day notice to the PBGC pursuant to regulations issued under
Section 4043 of ERISA), (b) the withdrawal of any such Person or any member of
its Controlled Group from a Plan subject to Title IV of ERISA during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (c) the filing of a notice of intent to terminate under Section 4041(c)
of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC,
(e) the failure to make required contributions which could result in the
imposition of a lien under Section 412 of the Code or Section 302 of ERISA, or
(f) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan or the imposition of any
liability under Title IV of ERISA other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"EVENT OF DEFAULT" means any of the events specified in SECTION 8.1,
provided that any requirement for notice or lapse of time has been satisfied.
"EXISTING CREDIT AGREEMENT" has the meaning specified in the Background
provision hereof.
"FACILITY A ADVANCE" means an Advance made pursuant to SECTION 2.1(a)
hereof.
"FACILITY A COMMITMENT" means $200,000,000.00, as reduced pursuant to
SECTION 2.6 hereof.
- 11 -
<PAGE>
"FACILITY A MATURITY DATE" means September 25, 1999, or the earlier date of
termination in whole of the Facility A Commitment pursuant to SECTION 2.6 or 8.2
hereof.
"FACILITY A NOTES" means the promissory notes of Borrower evidencing
Facility A Advances hereunder, substantially in the form of EXHIBIT A hereto,
together with any extension, renewal, or amendment thereof, or substitution
therefor.
"FACILITY B ADVANCE" means an Advance made pursuant to SECTION 2.1(b)
hereof.
"FACILITY B COMMITMENT" means $25,000,000.00, as reduced from time to time
pursuant to SECTION 2.6 hereof.
"FACILITY B COMMITMENT TERMINATION" means the earlier of (a) September 24,
1997 or (b) the date on which the Facility B Advances are made.
"FACILITY B MATURITY DATE" means September 25, 1999, or the earlier date of
termination in whole of the Facility B Commitment pursuant to SECTION 2.6 or 8.2
hereof.
"FACILITY B NOTES" means the promissory notes of Borrower evidencing
Facility B Advances hereunder, substantially in the form of EXHIBIT B hereto,
together with any extension, renewal, or amendment thereof, or substitution
therefor.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average of the quotations for
the day for such transactions received by the Administrative Lender from three
Federal funds brokers of recognized standing selected by it.
"FIXED CHARGES" means, for any date of calculation, calculated for Borrower
and its Subsidiaries on a consolidated basis, the sum of, without duplication,
(a) the greater of (i) Current Maturities and (ii) 10% of Funded Debt, plus
(b) interest expense (including interest expense pursuant to Capitalized Lease
Obligations).
"FIXED CHARGE COVERAGE RATIO" means the ratio of EBITDA to Fixed Charges,
calculated for the four consecutive fiscal quarters immediately preceding the
date of calculation.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Borrower which is not
organized under the laws of any state of the United States of America or the
District of Columbia.
- 12 -
<PAGE>
"FUNDED DEBT" means, as of any date of determination, determined for the
Borrower and its Subsidiaries on a consolidated basis, (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations to pay the deferred purchase price of
property or services other than trade payables incurred in the ordinary course
of business, (iv) Capitalized Lease Obligations and (v) Net Exposure Under
Securitization.
"GAAP" means generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants, or their successors
which are applicable in the circumstances as of the date in question. The
requirement that such principles be applied on a consistent basis shall mean
that the accounting principles applied in a current period are comparable in all
material respects to those applied in a preceding period.
"GUARANTIES" means, collectively, the Parent Guaranty and the Subsidiary
Guaranty.
"GUARANTOR" means each direct and indirect Subsidiary of the Borrower that
executes and delivers a Subsidiary Guaranty hereunder.
"GUARANTY" or "GUARANTEED", as applied to an obligation of another Person,
means (a) a guaranty, direct or indirect, in any manner, of any part or all of
such obligation, and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such obligation, including, without limiting the foregoing, any
reimbursement obligations with respect to amounts which may be drawn by
beneficiaries of outstanding letters of credit; provided, however, Guaranty does
not mean (i) the endorsement of instruments for collection or deposit in the
ordinary course of business and (ii) customary indemnities given in connection
with asset sales in the ordinary course of business.
"HEDGE AGREEMENTS" means any and all agreements, devices or arrangements
designed to protect at least one of the parties thereto from the fluctuations of
interest rates, exchange rates or forward rates applicable to such party's
assets, liabilities or exchange transactions, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap, swap or collar protection
agreements, and forward rate currency or interest rate options, as the same may
be amended or modified and in effect from time to time, and any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"HIGHEST LAWFUL RATE" means at the particular time in question the maximum
rate of interest which, under Applicable Law, the Lenders are then permitted to
charge on the Obligations. If the maximum rate of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrower.
- 13 -
<PAGE>
"INDEBTEDNESS" means, with respect to any Person, without duplication,
(a) all obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations under conditional
sale or other title retention agreements relating to property or assets
purchased by such Person, (d) all obligations issued or assumed as the deferred
purchase price of property or services, (e) all obligations secured by any Lien
on any property or asset owned by such Person (other than accounts payable
arising in the ordinary course of business), whether or not the obligation
secured thereby shall have been assumed (provided that, unless such obligations
shall have been assumed, for purposes of this definition the amount of such
Indebtedness at any time shall be deemed to equal the fair market value of such
property or asset at such time), (f) to the extent not otherwise included, all
Capitalized Lease Obligations of such Person, all obligations in respect of
letters of credit, bankers' acceptances and similar instruments, and all
obligations under Hedge Agreements, (g) any Guaranty of such Person of any
obligation of another Person constituting obligations of a type set forth above
and (h) the Net Exposure Under Securitization.
"INDEMNIFIED MATTERS" has the meaning specified in SECTION 5.9(a) hereof.
"INDEMNITEES" has the meaning specified in SECTION 5.9(a) hereof.
"INITIAL PRICING PERIOD" means the period from and including the Agreement
Date to and including the Rate Adjustment Date.
"INTANGIBLE ASSETS" means those assets which are treated as intangible
pursuant to GAAP, and in any event including, without limitation:
(i) obligations, if any, owing by Affiliates to the Borrower or any Subsidiary
of the Borrower, (ii) the amount, if any, by which inventory exceeds the lower
of cost or market value thereof, (iii) the value of any inventory which is
obsolete or damaged or is otherwise deemed by the Administrative Lender not to
be of a marketable quality commensurate with the inventory of the Borrower and
its Subsidiaries as a whole; (iv) accounts receivable which are deemed by the
Borrower, any of its Subsidiaries or the Administrative Lender to be
uncollectible or which should be subject to a reserve for bad debts in
accordance with GAAP or which are subject to claims or setoffs; (v) leases and
leasehold improvements; (vi) any asset which is intangible or lacks intrinsic
and marketable value or collectibility, including without limitation goodwill,
noncompetition agreements, patents, copyrights, trademarks, franchises or
organization or research and development costs; (vii) organizational and
experimental expense; and (viii) unamortized debt discount and expense.
"INTERCREDITOR AGREEMENTS" collectively means the following certain
agreements: (i) Amended and Restated Intercreditor Agreement dated effective as
of April 1, 1996 among NationsBank of Texas, N.A., in its capacity as a lender,
the Borrower, IBM Credit Corporation and NationsBank of Texas, N.A. in its
capacity as Administrative Secured Party under the MSAA, (ii) Subordination
Agreement dated August 22, 1994 among NationsBank of Texas, N.A., in its
capacity as a lender, the Borrower, IBM Credit Corporation and Hewlett-Packard
Company, (iii) Intercreditor Agreement dated December 27, 1993 among NationsBank
of Texas, N.A., in its capacity as a lender, the Borrower and Compaq Computer
Corporation, and (iv) any other intercreditor agreement hereafter entered into
among NationsBank of Texas, N.A., in its
- 14 -
<PAGE>
capacity as the Administrative Lender, the Borrower and any Person that is a
vendor to the Borrower of Inventory, as any of the foregoing may be renewed,
extended, modified, amended, supplemented or restated from time to time.
"INTEREST PERIOD" means the period beginning on the day any LIBOR Advance
is made and ending one, two, three or six months thereafter (as the Borrower
shall select); PROVIDED, HOWEVER, that all of the foregoing provisions are
subject to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day, unless, with respect to a LIBOR Advance, the result of such
extension would be to extend such Interest Period into another calendar month,
in which event such Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period with respect to a LIBOR Advance that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(iii) the Borrower may not select any Interest Period which ends after the
date of a scheduled principal payment on the Advances unless, after giving
effect to such selection, the aggregate unpaid principal amount of the LIBOR
Advances for which Interest Periods end after such scheduled principal payment
shall be equal to or less than the principal amount to which the Advances or
Facility B Commitment are required to be reduced after such scheduled principal
payment is made.
"INVENTORY" has the meaning assigned to such term in the UCC.
"INVESTMENT" means any acquisition of all or substantially all assets of
any Person, or any direct or indirect purchase or other acquisition of, or
beneficial interest in, capital stock or other securities of any other Person,
or any direct or indirect loan, advance (other than loans or advances to
employees for moving and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution to, or
investment in any other Person, including without limitation the purchase of
accounts receivable of any other Person that are not current assets or do not
arise in the ordinary course of business.
"ISSUING BANK" means NationsBank of Texas, N.A., a national banking
association, in its capacity as issuer of the Letters of Credit.
"LANDLORD'S WAIVER" means an agreement in form and substance satisfactory
to the Administrative Lender pursuant to which the landlord of any leased
location where any Collateral is located shall waive its rights, if any, to the
Collateral and shall grant to the Administrative Lender rights to enter upon the
premises to inspect, remove or dispose of the Collateral.
- 15 -
<PAGE>
"LAW" means any statute, law, ordinance, regulation, rule, order, writ,
injunction, or decree of any Tribunal.
"LENDER" means each financial institution shown on the signature pages
hereof so long as such financial institution maintains a portion of the
Commitments or is owed any part of the Obligations (including the Administrative
Lender in its individual capacity), and each Assignee that hereafter becomes a
party hereto pursuant to SECTION 11.6 hereof, subject to the limitations set
forth therein.
"L/C RELATED DOCUMENTS" has the meaning specified in SECTION 2.15(e)
hereof.
"LETTER OF CREDIT" has the meaning specified in SECTION 2.15(a) hereof.
"LETTER OF CREDIT AGREEMENT" has the meaning specified in SECTION 2.15(b)
hereof.
"LETTER OF CREDIT FACILITY" has the meaning specified in SECTION 2.15(a)
hereof.
"LEVERAGE RATIO" means, for any date of calculation, the ratio of Funded
Debt as of the date of determination to EBITDA calculated for the four
consecutive fiscal quarters immediately preceding the date of calculation.
"LIBOR ADVANCE" means an Advance which the Borrower requests to be made as
a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance with
the provisions of SECTION 2.2 hereof.
"LIBOR BASIS" means a simple per annum interest rate equal to the lesser of
(a) the Highest Lawful Rate, or (b) the sum of the LIBOR Rate plus the
Applicable LIBOR Rate Margin. The LIBOR Basis shall, with respect to LIBOR
Advances subject to reserve or deposit requirements, be subject to premiums for
such reserve or deposit requirements assessed by each Lender to the extent
incurred by such Lender, which are payable directly to each Lender. Once
determined, the LIBOR Basis shall remain unchanged during the applicable
Interest Period.
"LIBOR LENDING OFFICE" means, with respect to a Lender, the office
designated as its LIBOR Lending Office on SCHEDULE 1 attached hereto, and such
other office of the Lender or any of its Affiliates hereafter designated by
notice to the Borrower and the Administrative Lender.
"LIBOR RATE" means, for any LIBOR Advance for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR RATE" shall mean, for any LIBOR Advance for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in
- 16 -
<PAGE>
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period;
PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates.
"LIEN" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other similar
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"LITIGATION" means any proceeding, claim, lawsuit, arbitration, and/or
investigation by or before any Tribunal, including, without limitation,
proceedings, claims, lawsuits, and/or investigations under or pursuant to any
environmental, occupational, safety and health, antitrust, unfair competition,
securities, Tax or other Law, or under or pursuant to any contract, agreement or
other instrument.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security Agreement,
the Pledge Agreement, the Subsidiary Guaranty, any other Collateral Document,
the Administrative Lender Fee Letter, the Upfront Fee Letter, any Hedge
Agreements entered into with any Lender, and any other document or agreement
executed or delivered from time to time by the Borrower, any Subsidiary of the
Borrower or any other Person in connection herewith or as security for the
Obligations.
"LONG TERM DEBT" means any obligation which is due one year or more from
the date of creation thereof which under GAAP is shown as a liability, plus
(without duplication) amounts equal to the aggregate net rentals (after making
allowances for any interest, taxes or other expenses included therein) payable
more than one year from the date of creation thereof under Capitalized Lease
Obligations.
"MATERIAL ADVERSE EFFECT" means any act or circumstance or event that
(a) could reasonably be expected to be material and adverse to the business,
financial condition, results of operations, or business prospects of the
Borrower and its Subsidiaries taken as a whole, or (b) in any manner whatsoever
does or could reasonably be expected to materially and adversely affect the
validity or enforceability of any Loan Document.
"MSAA" means the certain Master Security and Administration Agreement,
dated as of April 1, 1996, among the Borrower, NationsBank of Texas, N.A. in its
capacity as the original Administrative Secured Party thereunder, NationsBank of
Texas, N.A., in its capacity as a lender, CFI and EFC, as the same may be
renewed, extended, modified, amended or restated from time to time.
"MULTIEMPLOYER PLAN" means, as to any Person, at any time, a "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA and to which such Person
or any member of its Controlled Group is making, or is obligated to make
contributions or has made, or been obligated to make, contributions.
- 17 -
<PAGE>
"NATIONSBANK" means NationsBank of Texas, N.A., a national
banking association, in its capacity as a Lender hereunder.
"NCGI NOTE" means that certain subordinated convertible
note, dated October 31, 1995, in the original principal amount of
$3,000,000, executed and delivered by the Borrower and payable to
the order of Network Compatibility Group, Inc.
"NECESSARY AUTHORIZATION" means any right, franchise,
license, permit, consent, approval or authorization from, or any
filing or registration with, any Tribunal or any Person necessary
or appropriate to enable the Borrower or any Subsidiary of the
Borrower to maintain and operate its business and properties,
including the sale of any Inventory.
"NET CASH PROCEEDS" means, with respect to any sale, lease,
transfer or other disposition of any asset by any Person, the
amount of cash received by such Person in connection with such
transaction (including cash proceeds of any property received in
consideration of any such sale, lease, transfer or other
disposition) after deducting therefrom the aggregate, without
duplication, of the following amounts to the extent properly
attributable to such transaction or to the asset that is the
subject thereof: (i) reasonable brokerage commissions, legal
fees, finder's fees, financial advisory fees, accounting fees,
underwriting fees, investment banking fees and other similar
commissions and fees, in each case, to the extent paid or payable
by such Person; (ii) filing, recording or registration fees or
charges or similar fees or charges paid by such Person;
(iii) taxes paid or payable by such Person or any shareholder,
partner or member of such Person to governmental taxing
authorities as a result of such sale or other disposition; and
(iv) payment of the outstanding principal amount of, premium or
penalty, if any, and interest on any Indebtedness that is secured
by a Lien on the asset in question and that is required to be
repaid under the terms thereof as a result of such asset sale.
"NET EXPOSURE UNDER SECURITIZATION" means, for any date of
calculation, the sum of the following (without duplication): (i)
the "Net Investment" (as such term is defined in the TAA) as of
such date of calculation and (ii) any and all obligations and
liabilities of the Borrower, CFI or any other Subsidiary of
Borrower under, or in connection with, the Securitization, as of
such date of calculation, to the extent that same constitute
liabilities of the Borrower of any Subsidiary of the Borrower
under GAAP or would, under GAAP, constitute liabilities of the
Borrower or of any Subsidiary of the Borrower if the
Securitization was treated as an on balance sheet transaction.
"NET INCOME" means, with respect to any Person for any
period, the net income (loss) of such Person, after provisions
for taxes and extraordinary items, determined in accordance with
GAAP.
"NET WORTH" means, as of any date of calculation, for the
Borrower and its Subsidiaries, on a consolidated basis,
determined in accordance with GAAP, the consolidated total
stockholders' equity of the Borrower and its Subsidiaries.
-18-
<PAGE>
"NOTES" means, collectively, the Facility A Notes, the
Facility B Notes and the Swing Line Note.
"NOTICE OF BORROWING" has the meaning specified in
SECTION 2.2(a) hereof.
"NOTICE OF ISSUANCE" has the meaning specified in
SECTION 2.15(b) hereof.
"OBLIGATIONS" means (a) all obligations of any nature
(whether matured or unmatured, fixed or contingent, including the
Reimbursement Obligations) of the Borrower or any other Obligor
to any Lender or the Administrative Lender under any of the Loan
Documents as they may be amended from time to time, and (b) all
obligations of the Borrower or any other Obligor for losses,
damages, expenses or any other liabilities of any kind that any
Lender may suffer by reason of a breach by the Borrower or any
other Obligor of any obligation, covenant or undertaking with
respect to any Loan Document payable by the Borrower or any other
Obligor under any Loan Document.
"OBLIGOR" means the Borrower and each Guarantor.
"OPERATING LEASE" means any operating lease, as defined in
the Financial Accounting Standard Board Statement of Financial
Accounting Standards No. 13, dated November, 1976 or otherwise in
accordance with GAAP.
"PARTICIPANT" has the meaning specified in SECTION 11.6(c)
hereof.
"PARTICIPATION" has the meaning specified in SECTION 11.6(c)
hereof.
"PAYMENT DATE" means the last day of the Interest Period for
any LIBOR Advance.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITTED LIENS" means, as applied to any Person:
(a) Any Lien in favor of the Lenders to secure the
Obligations hereunder;
(b) (i) Liens on real estate for ad valorem taxes not yet
delinquent, and (ii) Liens for taxes, assessments, governmental
charges, levies or claims that are not yet delinquent or that are
being diligently contested in good faith by appropriate
proceedings in accordance with SECTION 5.6 hereof and for which
adequate reserves shall have been set aside on such Person's
books, but only so long as no foreclosure, restraint, sale or
similar proceedings have been commenced with respect thereto;
-19-
<PAGE>
(c) Liens of carriers, warehousemen, mechanics, laborers
and materialmen incurred in the ordinary course of business for
sums not yet due or being contested in good faith, if such
reserve or appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(d) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or
similar legislation;
(e) Easements, right-of-way, restrictions and other similar
encumbrances on the use of real property which do not interfere
in any material respect with the ordinary conduct of the business
of such Person;
(f) Liens created to secure the purchase price of assets
acquired (or existing on property at the time such property is
acquired) by such Person or created to secure Indebtedness
permitted by SECTION 7.1(c) or 7.1(d) hereof, which is incurred
solely for the purpose of financing the acquisition of such
assets and incurred at the time of acquisition or which exists
against such assets at the time of acquisition thereof, so long
as each such Lien shall at all times be confined solely to the
asset or assets so acquired (and proceeds thereof), and
refinancings thereof so long as any such Lien remains solely on
the asset or assets acquired and the amount of Indebtedness
related thereto is not increased;
(g) Liens in respect of judgments or awards for which
appeals or proceedings for review are being prosecuted and in
respect of which a stay of execution upon any such appeal or
proceeding for review shall have been secured, provided that
(i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully
insured (subject to customary deductibles) and the insurer shall
not have denied coverage, or (iii) such judgments or awards shall
have been bonded to the satisfaction of the Determining Lenders;
(h) Any Liens which are described on SCHEDULE 2 hereto, and
Liens resulting from the refinancing of the related Indebtedness,
provided that the Indebtedness secured thereby shall not be
increased and the Liens shall not cover additional assets of the
Borrower;
(i) Liens arising from filing Uniform Commercial Code
financing statements for precautionary purposes relating solely
to true leases of personal property permitted by this Agreement
under which the Borrower or any of its Subsidiaries is a lessee;
(j) Any zoning or similar law or right reserved to or
vested in any Tribunal to control or regulate the use of any real
property;
(k) Any other title exception with respect to real property
assets disclosed by any preliminary title report, title
commitment report or other search of title provided to the
Administrative Lender in accordance with this Agreement unless
disapproved by the Administrative Lender prior to the Agreement
Date;
-20-
<PAGE>
(l) Any Lien in favor of any Lender to secure any
obligations owed to such Lender in respect of any Hedge
Agreement;
(m) Liens incurred or deposits made to secure the
performance of bids, trade contracts (other than for
Indebtedness), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(n) Liens securing Indebtedness or other obligations of the
Borrower or a Subsidiary of the Borrower owing to the Borrower or
a Subsidiary;
(o) Liens to the extent allowed under the MSAA or the
Intercreditor Agreements;
(p) any replacements or renewals of Liens (but no increases
in the Indebtedness secured thereby) permitted by clauses (f),
(h), (i), (j), (m) and (o) hereof; and
(q) Liens securing Indebtedness permitted by SECTION 7.1(K)
hereof, to the extent only that such Liens cover Inventory
manufactured by, purchased from or acquired from the holder of
such Indebtedness and any renewals thereof.
"PERMITTED REAL ESTATE EXPENDITURES" means those Capital
Expenditures in respect of real estate described on SCHEDULE 9
hereto.
"PERSON" means an individual, corporation, partnership,
trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
"PLAN" means an employee benefit plan as defined in Section
3(3) of ERISA (including a Multiemployer Plan) pursuant to which
any employees of the Borrower, its Subsidiaries or any member of
their Controlled Group participate.
"PLEDGE AGREEMENT" means the pledge agreement, substantially
in the form of EXHIBIT F hereto, as amended, modified, renewed,
supplemented or restated from time to time, executed by the
Borrower.
"PRETAX NET INCOME" means net profit (or loss) before taxes
of the Borrower and its Subsidiaries, on a consolidated basis,
determined in accordance with GAAP.
"PRIME RATE" means, at any time, the prime interest rate
announced or published by the Reference Lender from time to time
as its reference rate for the determination of interest rates for
loans of varying maturities in United States dollars to United
States residents of varying degrees of creditworthiness and being
quoted at such time by the Reference Lender as its "prime rate;"
it being understood that such rate may not be the lowest rate of
interest charged by the Reference Lender.
-21-
<PAGE>
"PROJECTED UNUSED AVAILABILITY" means, as of any date of
determination, the amount, if any, by which the lesser of (i) the
Borrowing Base or (ii) the Facility A Commitment, exceeds the sum
of outstanding Facility A Advances, Swing Line Advances and
Reimbursement Obligations, plus the amount of pending Facility A
Advances, Swing Line Advances and Letters of Credit to be made or
issued on such date (calculated after giving effect to any
proposed increase in the RPA Interest as of such date).
"QUARTERLY DATE" means the last day of each March, June,
September and December, beginning December 31, 1996.
"RATE ADJUSTMENT DATE" means the date which is two Business
Days following the date that the Lenders receive the financial
statements for the fiscal year ending December 31, 1996, required
to be delivered pursuant to SECTION 6.2 hereof.
"RECEIVABLES" means all of the Obligors' present and future
accounts, contract rights and accounts receivable, whether now or
hereafter owned, held, or acquired by any Obligor and includes,
without limitation, all of the following insofar as same
constitute, result from or are attributable to any of the
foregoing: all of the Obligors' chattel paper, documents,
instruments, deposit accounts, general intangibles and accounts
receivable, including all rights to payment for goods sold or
leased or for services rendered, whether or not earned by
performance (and in any case where an account arises from the
sale of goods, the interest of the Obligor(s) in such goods);
lease receivables; license receivables; notes receivable; all
other rights to receive payments of money from any Person; the
Obligors' right, title and interest under equipment leases; the
Obligors' rights under any service, lease rental, consulting or
similar agreements; rights or claims under contracts; books of
account, customer lists and other records relating in any way to
any of the foregoing.
"REFERENCE LENDER" means NationsBank; provided that if the
NationsBank Commitments shall terminate and it shall have no
Advances and Letters of Credit outstanding hereunder, NationsBank
shall cease to be the Reference Lender, and Administrative Lender
(after consultation with Borrower) shall, with notice to Borrower
and Lenders, designate another Lender as the Reference Lender.
"REIMBURSEMENT OBLIGATIONS" means, in respect of any Letter
of Credit as at any date of determination, the sum of (a) the
maximum aggregate amount which is then available to be drawn
under such Letter of Credit plus (b) the aggregate amount of all
drawings under such Letter of Credit not theretofore reimbursed
by the Borrower.
"RELATED PERSON" means (a) any Affiliate of the Borrower,
(b) any individual or entity who directly or indirectly holds 10%
or more of any class of Capital Stock of the Borrower, (c) any
relative of such individual by blood, marriage or adoption not
more remote than first cousin and (d) any officer or director of
the Borrower.
-22-
<PAGE>
"RELEASE DATE" means the date on which the Notes have been
paid, all other Obligations due and owing have been paid and
performed in full, and the Commitments have been terminated.
"REPORTABLE EVENT" has the meaning set forth in Section
4043(b) of ERISA.
"RESTRICTED PAYMENTS" means, collectively, (i) Dividends and
(ii) any (A) payment or prepayment of principal, premium or
penalty on any Subordinated Debt of the Borrower or any
Subsidiary of the Borrower or any defeasance, redemption,
purchase, repurchase or other acquisition or retirement for
value, in whole or in part, of any Subordinated Debt (including,
without limitation, the setting aside of assets or the deposit of
funds therefor) and (B) prepayment of interest on any
Subordinated Debt.
"RIGHTS" means rights, remedies, powers and privileges.
"RPA" means the certain Receivables Purchase Agreement,
dated as of April 1, 1996, between the Borrower and CFI providing
for the sale by the Borrower to CFI and the purchase by CFI from
the Borrower (subject to the terms of the MSAA) of an undivided
fractional ownership interest in all Receivables now owned and
hereafter acquired and arising from time to time prior to
termination of the RPA, on the terms provided therein, as the
same may be renewed, extended, modified, amended or restated from
time to time.
"RPA INTEREST" means, at any time, the undivided fractional
ownership interest in the Receivables sold and transferred by the
Borrower to CFI pursuant to the RPA.
"SECURITIZATION" means, collectively, the transactions
evidenced and governed by the Securitization Documents.
"SECURITIZATION DOCUMENTS" means, collectively, the MSAA,
the RPA and the TAA and any other agreements or documents
executed or delivered by any Person in connection therewith.
"SECURITY AGREEMENT" means the security agreement relating
to all Receivables, Inventory and Equipment (and all computer
programs, applications, disks, plans, manuals, specifications,
files and other records pertaining thereto) of the Borrower and
its Subsidiaries, substantially in the form of EXHIBIT D hereto,
as amended, modified, renewed, supplemented or restated from time
to time.
"SOLVENT" means, with respect to any Person, that the fair
value of the assets of such Person (both at fair valuation and at
present fair saleable value) is, on the date of determination,
greater than the total amount of liabilities (including
contingent and unliquidated liabilities) of such Person as of
such date and that, as of such date, such Person is able to pay
all liabilities of such Person as such liabilities mature and
such Person does not have unreasonably small capital with which
to carry on its business. In computing the amount of contingent
or unliquidated liabilities at any time, such liabilities will be
computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can
-23-
<PAGE>
reasonably be expected to become an actual or matured liability discounted to
present value at rates believed to be reasonable by such Person.
"SPECIAL COUNSEL" means the law firm of Donohoe, Jameson &
Carroll, P.C., or such other legal counsel as the Administrative
Lender may select.
"SPECIFIED PERCENTAGE" means, as to any Lender, the
percentage indicated beside its name on the signature pages
hereof, or if applicable, specified in its most recent Assignment
Agreement.
"SUBORDINATED DEBT" means (i) the NCGI Note and (ii) any
other Indebtedness of the Borrower or any Subsidiary of the
Borrower having maturities and terms, and which is subordinated
to payment of the Obligations in a manner, approved in writing by
the Administrative Lender and the Determining Lenders, with only
such changes or amendments as are not prohibited by SECTION 7.22
hereof.
"SUBSEQUENT PRICING PERIOD" means the period from and
including the date which is the first day following the end of
the Initial Pricing Period to and including the Facility A
Maturity Date or Facility B Maturity Date, whichever is later.
"SUBSIDIARY" of any Person means any corporation,
partnership, joint venture, trust or estate or other Person of
which (or in which) more than 50% of:
(a) the outstanding capital stock having voting power
to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital
stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any
contingency),
(b) the interest in the capital or profits of such
partnership or joint venture,
(c) the beneficial interest of such trust or estate, or
(d) the equity interest of such other Person,
is at the time directly or indirectly owned by such Person,
by such Person and one or more of its Subsidiaries or by one
or more of such Person's Subsidiaries; provided, however,
that no Person shall be deemed to be a Subsidiary of the
Borrower solely by virtue of the fact that certain shares of
the stock of such Person have been pledged to the Borrower.
"SUBSIDIARY GUARANTY" means a guaranty, substantially in the
form of EXHIBIT I hereto, executed and delivered by each
Guarantor, as such guaranty(ies) may be amended, supplemented,
modified, renewed or otherwise restated from time to time.
"SWING LINE ADVANCE" means an Advance made pursuant to
SECTION 2.1(c) hereof.
-24-
<PAGE>
"SWING LINE BANK" means NationsBank of Texas, N.A. and any
successor thereto appointed in accordance with SECTION 10.1(b)
hereof.
"SWING LINE FACILITY" has the meaning specified in
SECTION 2.1(c) hereof.
"SWING LINE NOTE" means the Swing Line Note of the Borrower
payable to the order of the Swing Line Bank, substantially in the
form of EXHIBIT C hereto, together with any extension, renewal,
or amendment thereof, or substitution therefor.
"TAA" means the certain Transfer and Administration
Agreement, dated as of April 1, 1996, between the Borrower, CFI,
EFC and NationsBank, N.A. in its capacity as Agent and a Bank
Investor thereunder, providing for the transfer by CFI to EFC and
the acceptance by EFC from CFI of a portion of the RPA Interest,
from time to time, on the terms provided therein, as the same may
be renewed, extended, modified, amended or restated from time to
time.
"TANGIBLE NET WORTH" means the sum of the following for the
Borrower and its Subsidiaries, on a consolidated basis,
determined in accordance with GAAP, (a) Net Worth minus (b) the
sum of the following (without duplication in respect of items
already deducted in arriving at Net Worth): Intangible Assets,
and any write-up in the book value of assets resulting from
revaluation thereof subsequent to December 31, 1995.
"TAXES" has the meaning specified in SECTION 2.14 hereof.
"TRIBUNAL" means any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision,
agency, department, commission, board, bureau, or instrumentality
of a governmental or other regulatory or public body or
authority.
"UCC" means the Uniform Commercial Code of Texas, as amended
from time to time, and the Uniform Commercial Code applicable in
such other states as any Collateral may be located.
"UNUSED PORTION" means an amount equal to the result of
(a) the sum of (i) the Facility A Commitment plus (ii) the
Facility B Commitment minus (b) the sum of (i) the outstanding
Facility A Advances plus (ii) the outstanding Facility B Advances
plus (iii) the outstanding Reimbursement Obligations in respect
of the Letters of Credit.
"UPFRONT FEE LETTER" has the meaning specified in SECTION
2.4(b) hereof.
Section 1.2 AMENDMENTS AND RENEWALS. Each definition of
an agreement in this ARTICLE 1 shall include such agreement as
amended to date, and as amended or renewed from time to time in
accordance with its terms, but only with the prior written
consent of the Determining Lenders or all the Lenders as required
pursuant to SECTION 11.11 hereof.
-25-
<PAGE>
Section 1.3 CONSTRUCTION. The terms defined in this
Article 1 (except as otherwise expressly provided in this
Agreement) for all purposes shall have the meanings set forth in
SECTION 1.1 hereof, and the singular shall include the plural,
and vice versa, unless otherwise specifically required by the
context. All accounting terms used in this Agreement which are
not otherwise defined herein shall be construed in accordance
with GAAP on a consolidated basis for the Borrower and its
Subsidiaries, unless otherwise expressly stated herein.
ARTICLE 2
ADVANCES
Section 2.1 THE ADVANCES.
(a) FACILITY A ADVANCES. Each Lender severally agrees,
upon the terms and subject to the conditions of this Agreement,
to make Facility A Advances to the Borrower from time to time
until the Facility A Maturity Date in an aggregate amount not to
exceed its Specified Percentage of the Facility A Commitment less
its Specified Percentage of the aggregate amount of all
Reimbursement Obligations then outstanding (assuming compliance
with all conditions to drawing), for the purposes set forth in
SECTION 5.8(a) hereof. Subject to SECTION 2.9 hereof, Facility A
Advances may be repaid and then reborrowed. Notwithstanding any
provision in any Loan Document to the contrary, in no event shall
the principal amount of all outstanding Facility A Advances
exceed the lesser of (i) the result of (A) the Borrowing Base
minus (B) the aggregate outstanding Reimbursement Obligations and
Swing Line Advances and (ii) the Facility A Commitment.
(b) FACILITY B ADVANCES. Each Lender severally agrees,
upon the terms and subject to the conditions of this Agreement,
to make a one-time Facility B Advance to the Borrower prior to or
on the Facility B Commitment Termination Date in an amount not to
exceed its Specified Percentage of the Facility B Commitment for
the purposes set forth in SECTION 5.8(b) hereof. Notwithstanding
any provision in any Loan Document to the contrary, in no event
shall the principal amount of all outstanding Facility B Advances
exceed the Facility B Commitment. Facility B Advances may not be
repaid and then reborrowed.
(c) THE SWING LINE LOANS. The Borrower may request Swing
Line Bank to make, and Swing Line Bank agrees to make, on the
terms and conditions hereinafter set forth, advances ("SWING LINE
ADVANCES") to the Borrower from time to time on any Business Day
during the period from the date hereof until the Facility A
Maturity Date in an aggregate amount not to exceed at any time
outstanding the lesser of (i) $5,000,000, and (ii) the Borrowing
Base, less the sum of (A) the aggregate principal amount of
Facility A Advances then outstanding PLUS (B) the aggregate
principal amount of all Reimbursement Obligations then
outstanding (assuming compliance with all conditions to drawing)
(the "SWING LINE FACILITY"). Each Swing Line Advance shall be in
an amount not less than $100,000 and in multiples thereof. Each
Swing Line Advance shall be a Base Rate Advance. Within the
limits of the Swing Line Facility, Swing Line Advances may be
repaid and then reborrowed.
-26-
<PAGE>
(d) Any Advance shall, at the option of the Borrower as
provided in SECTION 2.2 hereof (and, in the case of LIBOR
Advances, subject to the provisions of ARTICLE 9 hereof), be made
as a Base Rate Advance or a LIBOR Advance; provided that there
shall not be outstanding, at any one time, more than ten LIBOR
Advances.
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT.
(a) In the case of Base Rate Advances, the Borrower,
through an Authorized Signatory, shall give the Administrative
Lender prior to 11:00 a.m., Dallas, Texas time, on the date of
any proposed Base Rate Advance irrevocable written notice, or
irrevocable telephonic notice followed immediately by written
notice, in substantially the form of EXHIBIT J hereto (a "NOTICE
OF BORROWING") (provided, however, that the Borrower's failure to
confirm any telephonic notice in writing shall not invalidate any
notice so given), of its intention to borrow a Base Rate Advance
hereunder. Such notice of borrowing shall specify the requested
funding date, which shall be a Business Day, and the amount of
the proposed aggregate Base Rate Advances to be made by Lenders.
(b) In the case of LIBOR Advances, the Borrower, through an
Authorized Signatory, shall give the Administrative Lender at
least two Business Days' irrevocable written notice, or
irrevocable telephonic notice followed immediately by written
notice (provided, however, that the Borrower's failure to confirm
any telephonic notice in writing shall not invalidate any notice
so given) pursuant to a Notice of Borrowing, of its intention to
borrow a LIBOR Advance hereunder. Notice shall be given to the
Administrative Lender prior to 11:00 a.m., Dallas, Texas time, in
order for such Business Day to count toward the minimum number of
Business Days required. LIBOR Advances shall in all cases be
subject to ARTICLE 9 hereof. For LIBOR Advances, the notice of
borrowing shall specify the requested funding date, which shall
be a Business Day, the amount of the proposed aggregate LIBOR
Advances to be made by Lenders and the Interest Period selected
by the Borrower, provided that no such Interest Period shall
extend past the Facility A Maturity Date or the Facility B
Maturity Date, as appropriate, or prohibit or impair the
Borrower's ability to comply with SECTION 2.5 or 2.8 hereof.
(c) In the case of Swing Line Advances, the Borrower,
through an Authorized Signatory, shall give the Swing Line Bank
and the Administrative Lender prior to 12:00 noon, Dallas, Texas
time, on the date of any proposed Swing Line Advance irrevocable
written notice or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the
Borrower's failure to confirm any telephonic notice in writing
shall not invalidate any notice so given), of its intention to
borrow or reborrow a Swing Line Advance. Such notice of
borrowing shall specify the requested funding date, which shall
be a Business Day, and the amount of the proposed Swing Line
Advance.
(d) Subject to SECTIONS 2.1 and 2.9 hereof, the Borrower
shall have the option (i) to convert at any time all or any part
(subject to the requirements contained herein as to the minimum
amounts of LIBOR Advances) of the outstanding Base Rate Advances
to LIBOR Advances and all or any part of the outstanding LIBOR
Advances to Base Rate Advances or (ii) upon expiration of any
Interest Period applicable to a LIBOR Advance, to continue all or
-27-
<PAGE>
any portion of such LIBOR Advance equal to $5,000,000 and
integral multiples of $1,000,000 in excess of that amount as a
LIBOR Advance and the succeeding Interest Period(s) of such
continued LIBOR Advance shall commence on the last day of the
Interest Period of the LIBOR Advance to be continued; provided,
however, (a) LIBOR Advances may only be converted into Base Rate
Advances on the expiration date of the Interest Period applicable
thereto and (b) notwithstanding anything in this Agreement to the
contrary, no outstanding Advance may be continued as, or
converted into, a LIBOR Advance when any Default or Event of
Default has occurred and is continuing. At least two Business
Days prior to a proposed conversion/continuation date, the
Borrower, through an Authorized Signatory, shall give the
Administrative Lender irrevocable written notice, or irrevocable
telephonic notice followed immediately by written notice
(provided, however, that the Borrower's failure to confirm any
telephonic notice in writing shall not invalidate any notice so
given), stating (i) the proposed conversion/continuation date
(which shall be a Business Day), (ii) the amount of the Advance
to be converted/continued, (iii) in the case of a conversion to,
or a continuation of, a LIBOR Advance, the requested Interest
Period, and (iv) in the case of a conversion of a Base Rate
Advance to a LIBOR Advance or continuation of a LIBOR Advance,
stating that no Default or Event of Default has occurred and is
continuing. If the Borrower shall fail to give any notice in
accordance with this SECTION 2.2(d), the Borrower shall be deemed
irrevocably to have requested that such LIBOR Advance be
converted to a Base Rate Advance in the same principal amount.
Notice shall be given to the Administrative Lender prior to 11:00
a.m., Dallas, Texas time, in order for such Business Day to count
toward the minimum number of Business Days required.
(e) The aggregate amount of Base Rate Advances to be made
by the Lenders on any day shall be in a principal amount which is
at least $3,000,000 and which is an integral multiple of
$500,000; provided, however, that such amount may equal the
unused amount of the applicable Commitment. The aggregate amount
of LIBOR Advances having the same Interest Period and to be made
by the Lenders on any day shall be in a principal amount which is
at least $5,000,000 and which is an integral multiple of
$1,000,000.
(f) The Administrative Lender shall promptly notify the
Lenders of each notice (other than with respect to a Swing Line
Advance) received from the Borrower pursuant to this Section.
Each Lender shall, not later than 2:00 p.m., Dallas, Texas time,
on the date of any Advance, deliver to the Administrative Lender,
at its address set forth herein, such Lender's Specified
Percentage of such Advance in immediately available funds in
accordance with the Administrative Lender's instructions. Prior
to 2:30 p.m., Dallas, Texas time, on the date of any Advance
hereunder, the Administrative Lender shall, subject to
satisfaction of the conditions set forth in ARTICLE 3, disburse
the amounts made available to the Administrative Lender by the
Lenders by (i) transferring such amounts by wire transfer
pursuant to the Borrower's instructions, or (ii) in the absence
of such instructions, crediting such amounts to the account of
the Borrower maintained with the Administrative Lender. All
Advances shall be made by each Lender according to its Specified
Percentage.
-28-
<PAGE>
(g) The Swing Line Bank shall, not later than 1:30 p.m.,
Dallas, Texas time, on the date of any Swing Line Advance,
deliver to the Administrative Lender at its address set forth
herein, the amount of such Swing Line Advance in immediately
available funds in accordance with the Administrative Lender's
instructions. Prior to 2:00 p.m., Dallas, Texas time, on the
date of any Swing Line Advance, the Administrative Lender shall,
subject to the conditions set forth in ARTICLE 3, disburse the
amount made available to the Administrative Lender by the Swing
Line Bank by (i) transferring such amounts by wire transfer
pursuant to the Borrower's instruction or (ii) in the absence of
such instructions, crediting such amounts to the account of the
Borrower maintained with the Administrative Lender. Forthwith
upon demand by the Swing Line Bank and in any event upon the
making of the request or the granting of the consent specified by
SECTION 8.2 to authorize the Administrative Lender to declare the
Advances due and payable pursuant to the provisions of
SECTION 8.2, each Lender, including the Swing Line Bank,
notwithstanding the failure of the Borrower at such time to
satisfy each condition specified in Article 3, shall make by
12:00 noon (Dallas, Texas time) on the first Business Day
following receipt by such Lender of notice from the Swing Line
Bank, a Facility A Advance which is a Base Rate Advance in an
amount equal to the product of (i) the Specified Percentage of
such Lender times (ii) the aggregate outstanding principal amount
of the Swing Line Advances. The proceeds of such Facility A
Advances shall be applied by the Administrative Lender to repay
the outstanding Swing Line Advance.
Section 2.3 INTEREST.
(a) ON BASE RATE ADVANCES.
(i) The Borrower shall pay interest on the outstanding
unpaid principal amount of the Base Rate Advances
outstanding from time to time, until such Base Rate Advances
are due (whether at maturity, by reason of acceleration, by
scheduled reduction, or otherwise) or repaid at a simple
interest rate per annum equal to the Base Rate Basis for the
Base Rate Advances as in effect from time to time. If at
any time the Base Rate Basis would exceed the Highest Lawful
Rate, interest payable on the Base Rate Advances shall be
limited to the Highest Lawful Rate, but the Base Rate Basis
shall not thereafter be reduced below the Highest Lawful
Rate until the total amount of interest accrued on the Base
Rate Advances equals the amount of interest that would have
accrued if the Base Rate Basis had been in effect at all
times.
(ii) Interest on the Base Rate Advances shall be
computed on the basis of a year of 365 or 366 days, as
appropriate, for the actual number of days elapsed, and
shall be payable in arrears on each Quarterly Date and on
the Facility A Maturity Date or the Facility B Maturity
Date, as appropriate.
-29-
<PAGE>
(b) ON LIBOR ADVANCES.
(i) The Borrower shall pay interest on the unpaid
principal amount of each LIBOR Advance, from the date such
Advance is made until it is due (whether at maturity, by
reason of acceleration, by scheduled reduction, or
otherwise) or repaid, at a rate per annum equal to the LIBOR
Basis for such LIBOR Advance. The Administrative Lender,
whose determination shall be controlling in the absence of
manifest error, shall determine the LIBOR Basis on the
second Business Day prior to the applicable funding date and
shall notify the Borrower and the Lenders of such LIBOR
Basis.
(ii) Subject to SECTION 11.9 hereof, interest on each
LIBOR Advance shall be computed on the basis of a 360-day
year for the actual number of days elapsed, and shall be
payable in arrears on the applicable Payment Date and on the
Facility A Maturity Date and the Facility B Maturity Date,
as appropriate; provided, however, that if the Interest
Period for such LIBOR Advance exceeds three months, interest
shall also be due and payable in arrears on each three-month
anniversary of the commencement of such Interest Period
during such Interest Period.
(c) ON SWING LINE ADVANCES.
(i) The Borrower shall pay interest on the outstanding
principal amount of each Swing Line Advance, from the date
each Swing Line Advance is made until it is due (whether at
maturity, by acceleration or otherwise) or repaid, at a rate
per annum equal to the Base Rate Basis in effect from time
to time. If at any time the Base Rate Basis would exceed
the Highest Lawful Rate, interest payable on the Swing Line
Advances shall be limited to the Highest Lawful Rate, but
the Base Rate Basis shall not thereafter be reduced below
the Highest Lawful Rate until the total amount of interest
accrued on the Swing Line Advances equals the amount of
interest that would have accrued if the Base Rate Basis had
been in effect at all times.
(ii) Interest on each Swing Line Advance shall be
computed on the basis of a year of 365 or 366 days, as
applicable, for the number of days elapsed, and shall be
payable quarterly in arrears on each Quarterly Date and on
the Facility A Maturity Date.
(d) INTEREST AFTER AN EVENT OF DEFAULT. (i) After an Event
of Default (other than an Event of Default specified in
SECTION 8.1(f) or (g) hereof) and during any continuance thereof,
at the option of Determining Lenders and provided that the
Administrative Lender has given notice of the decision to charge
interest at the Default Rate, and (ii) after an Event of Default
specified in SECTION 8.1(f) or (g) hereof and during any
continuance thereof, automatically and without any action or
notice by the Administrative Lender or any Lender, the
Obligations shall bear interest at a rate per annum equal to the
Default Rate. Such interest shall be payable on the earlier of
demand or the Facility A Maturity Date or the Facility B Maturity
Date, as appropriate, and shall accrue until the earlier of
(i) waiver or cure (to the satisfaction of the Determining
Lenders) of the applicable Event of Default, (ii) agreement by
the Lenders to
-30-
<PAGE>
rescind the charging of interest at the Default Rate, or (iii) payment in
full of the Obligations. The Lenders shall not be required to accelerate the
maturity of the Advances, to exercise any other rights or remedies under the
Loan Documents, or to give notice to the Borrower of the decision to charge
interest at the Default Rate.
Section 2.4 FEES.
(a) COMMITMENT FEE. Subject to SECTION 11.9 hereof, the
Borrower agrees to pay to the Administrative Lender, for the
ratable account of the Lenders, a commitment fee (the "COMMITMENT
FEE") on the daily average Unused Portion during the period
commencing on the Agreement Date and ending on the Facility A
Maturity Date, at the following per annum percentages, applicable
in the following situations:
Applicability Percentage
------------- ----------
(a) INITIAL PRICING PERIOD 0.300%
(b) SUBSEQUENT PRICING PERIOD
(1) The Fixed Charge Coverage Ratio is
greater than or equal to 2.50 to 1 0.225%
(2) The Fixed Charge Coverage Ratio is
less than 2.50 to 1 but greater
than or equal to 2.00 to 1 0.250%
(3) The Fixed Charge Coverage Ratio is
less than 2.00 to 1 but greater
than or equal to 1.50 to 1 0.300%
(4) The Fixed Charge Coverage Ratio is
less than 1.50 to 1 0.375%
The Commitment Fee shall be subject to reduction or increase, as
applicable and as set forth in the table above, on a quarterly
basis according to the performance of the Borrower as tested by
using the Fixed Charge Coverage Ratio calculated as of the end of
each fiscal quarter during the Subsequent Pricing Period;
PROVIDED, that each adjustment in the Commitment Fee shall be
effective on the date which is two Business Days following the
date of receipt of the financial statements required to be
furnished pursuant to SECTION 6.2 or 6.3 hereof, as applicable,
and the corresponding Compliance Certificate required pursuant to
SECTION 6.4 hereof. If such financial statements are not
received by the Administrative Lender by the date required,
effective as of the first Business Day following notification
thereof from the Administrative Lender to the Borrower the
Commitment Fee shall be determined as if the Fixed Charge
Coverage Ratio is less than 1.50 to 1 until such time as such
financial statements and Compliance Certificate are received.
The fee shall be (i) payable in arrears on each Quarterly Date
and on the Facility A Maturity Date, (ii) fully earned when due
and, subject to SECTION 11.9 hereof, nonrefundable when paid and
(iii) subject to SECTION 11.9 hereof, computed on the basis of a
year of 365 or 366 days, as appropriate, for the actual number of
days elapsed.
-31-
<PAGE>
(b) UPFRONT FEE. Subject to SECTION 11.9 hereof, the
Borrower agrees to pay to the Administrative Lender, for the
account of the Lenders (other than the Administrative Lender) the
fees on the dates and in the amounts specified in the letter
agreement, dated July 26, 1996, between the Borrower and the
Administrative Lender and the term sheet attached thereto
(collectively, the "Upfront Fee Letter").
(c) OTHER FEES. Subject to SECTION 11.9 hereof, the
Borrower agrees to pay to the Administrative Lender, for the
account of the Administrative Lender, the fees on the dates and
in the amounts specified in the letter agreement (the
"ADMINISTRATIVE LENDER FEE LETTER"), dated as of the Agreement
Date, between the Borrower and the Administrative Lender.
Section 2.5 PREPAYMENTS.
(a) VOLUNTARY LIBOR ADVANCE PREPAYMENTS. Upon three
Business Days' prior telephonic notice (to be promptly followed
by written notice) by an Authorized Signatory to the
Administrative Lender, LIBOR Advances may be voluntarily prepaid
but only so long as the Borrower concurrently reimburses the
Lenders in accordance with SECTION 2.9 hereof. Any notice of
prepayment shall be irrevocable.
(b) MANDATORY PREPAYMENT. On or before the date of any
reduction of the Facility A Commitment, the Borrower shall prepay
applicable outstanding Facility A Advances in an amount necessary
to reduce the sum of outstanding Facility A Advances, Swing Line
Advances and Reimbursement Obligations to an amount less than or
equal to the Facility A Commitment as so reduced. On any date
that the aggregate principal amount of outstanding Facility A
Advances, Swing Line Advances and Reimbursement Obligations
(other than such Reimbursement Obligations which are fully
secured by funds in the L/C Cash Collateral Account pursuant to
SECTION 2.15(g) hereof) exceed the Borrowing Base, the Borrower
shall immediately prepay Facility A Advances in an amount equal
to such excess amount and all interest attributable to such
excess amount. To the extent required by the immediately
preceding two sentences, the Borrower shall first prepay all Base
Rate Advances, second prepay all Swing Line Advances and shall
thereafter prepay LIBOR Advances. To the extent that any
prepayment requires that a LIBOR Advance be repaid on a date
other than the last day of its Interest Period, the Borrower
shall reimburse each Lender in accordance with SECTION 2.9
hereof. To the extent that outstanding Facility A and Swing Line
Advances exceed the Facility A Commitment after any reduction
thereof, the Borrower shall repay any such excess amount and all
accrued interest attributable to such excess Facility A Advances
on the date of such reduction.
(c) PREPAYMENT FROM SALES OF EQUITY/ISSUANCE OF INDEBTEDNESS.
Concurrently with receipt of Net Cash Proceeds from (i) the issuance of any
Indebtedness the proceeds of which are used to purchase or refinance
Indebtedness with respect to real property or (ii) the sale or disposition by
the Borrower of any Equity, the Borrower shall prepay Facility B Advances in
an aggregate principal amount equal to 100% of the aggregate Net Cash
Proceeds received by the Borrower from such issuance, sale or disposition of
Equity or Indebtedness. Any such prepayments shall be applied in the inverse
order of maturity to the scheduled payments of the Facility B Advances
required pursuant to SECTION 2.6(c).
-32-
<PAGE>
(d) PAYMENTS, GENERALLY. Any prepayment of any LIBOR
Advance shall be accompanied by interest accrued on the principal
amount being prepaid. Any voluntary partial payment of a Base
Rate Advance shall be in a principal amount which is at least
$3,000,000 and which is an integral multiple of $500,000. Any
voluntary partial payment of a LIBOR Advance shall be in a
principal amount which is at least $5,000,000 and which is an
integral multiple of $1,000,000, and to the extent that any
prepayment of a LIBOR Advance is made on a date other than the
last day of its Interest Period, the Borrower shall reimburse
each Lender in accordance with SECTION 2.9 hereof. Any voluntary
partial payment of a Swing Line Advance shall be in a principal
amount which is at least $100,000 or an integral multiple
thereof.
Section 2.6 REDUCTION OF COMMITMENTS.
(a) VOLUNTARY REDUCTION. The Borrower shall have the
right, upon not less than ten Business Days' notice by an
Authorized Signatory to the Administrative Lender (if telephonic,
to be confirmed by telex or in writing on or before the date of
reduction or termination), which shall promptly notify the
Lenders, to terminate or reduce either the Facility A Commitment
or the Facility B Commitment, in whole or in part, without
premium or penalty except as provided in the next sentence. Each
partial termination shall be in an aggregate amount which is at
least $5,000,000 and which is an integral multiple of $1,000,000,
and no voluntary reduction of the Facility A Commitment shall
cause any LIBOR Advance to be repaid prior to the last day of its
Interest Period unless the Borrower shall reimburse each Lender
in accordance with SECTION 2.9 hereof.
(b) MANDATORY REDUCTION. The Facility A Commitment shall
be automatically reduced to zero on the Facility A Maturity Date.
The Facility B Commitment shall be automatically reduced to zero
on the Facility B Commitment Termination Date.
(c) AMORTIZATION. An amount equal to 50% of the principal
amount of the Facility B Advances outstanding on the Facility B
Commitment Termination shall be payable on (i) September 25, 1998
and (ii) the Facility B Maturity Date.
(d) GENERAL REQUIREMENTS. Upon any reduction of a
Commitment pursuant to this Section, the Borrower shall
immediately make a repayment of applicable Advances in accordance
with SECTION 2.5(b) hereof. The Borrower shall reimburse each
Lender in connection with any such payment in accordance with
SECTION 2.9 hereof to the extent applicable. The Borrower shall
not have any right to rescind any termination or reduction. Once
reduced, the Commitments may not be increased or reinstated.
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE LENDER.
Unless the Administrative Lender shall have been notified by a Lender prior
to the date of any proposed Advance (other than a Swing Line Advance) that
such Lender does not intend to make the proceeds of such Advance available to
the Administrative Lender, the Administrative Lender may assume that such
Lender has made such proceeds available to the Administrative Lender on such
date, and the Administrative Lender may in reliance upon such assumption (but
shall not be required to) make available to the Borrower a corresponding
amount. If such
-33-
<PAGE>
corresponding amount is not in fact made available to the Administrative
Lender by such Lender, the Administrative Lender shall be entitled to recover
such amount on demand from such Lender (or, if such Lender fails to pay such
amount forthwith upon such demand, from the Borrower) together with interest
thereon in respect of each day during the period commencing on the date such
amount was available to the Borrower and ending on (but excluding) the date
the Administrative Lender receives such amount from (a) the Lender, at a per
annum rate equal to the lesser of (i) the Highest Lawful Rate or (ii) the
Federal Funds Rate or (b) the Borrower, at the per annum rate applicable at
the time to such Advance. No Lender shall be liable for any other Lender's
failure to fund an Advance hereunder.
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES. To the extent not
otherwise required to be paid earlier as provided herein, the principal
amount of the Facility A Advances, all accrued interest and fees thereon, and
all other Obligations related thereto, shall be due and payable in full on
the Facility A Maturity Date. To the extent not otherwise required to be
paid earlier as provided herein, the principal amount of the Facility B
Advances, all accrued interest and fees thereon, and all other Obligations
related thereto, shall be due and payable in full on the Facility B Maturity
Date. To the extent not otherwise required to be paid earlier as provided
herein, the principal amount of each Swing Line Advance, all accrued interest
and fees thereon, and all other Obligations related thereto, shall be due and
payable in full on the seventh Business Day following the making of such
Swing Line Advance.
Section 2.9 REIMBURSEMENT. Whenever any Lender shall sustain or
incur (other than through a default by that Lender) any losses (inclusive of
any such losses attributable to change(s) in the LIBOR Rate during the
applicable period(s), but exclusive of any losses of any other anticipated
profits on the part of such Lender) or reasonable out-of-pocket expenses
actually incurred in connection with (a) failure by the Borrower to borrow
any LIBOR Advance after having given notice of its intention to borrow in
accordance with SECTION 2.2 hereof (whether by reason of the Borrower's
election not to proceed or the non-fulfillment of any of the conditions set
forth in Article 3 hereof) or (b) any prepayment for any reason of any LIBOR
Advance in whole or in part (including a prepayment pursuant to SECTION
9.3(b) hereof) on other than the last day of an Interest Period applicable to
such LIBOR Advance, the Borrower agrees to pay to any such Lender, within 30
days after demand by such Lender, an amount sufficient to compensate such
Lender for all such losses (inclusive of any such losses attributable to
change(s) in the LIBOR Rate during the applicable period(s), but exclusive of
any losses of any other anticipated profits on the part of such Lender) and
out-of-pocket expenses, subject to SECTION 11.9 hereof. Such losses shall
include, without limiting the generality of the foregoing, reasonable
expenses incurred by such Lender in connection with the re-employment of
funds prepaid, repaid, converted or not borrowed, converted or paid, as the
case may be. A certificate as to any amounts payable to any Lender under
this SECTION 2.9 submitted to the Borrower by such Lender shall certify that
such amounts were actually incurred by such Lender and shall show in
reasonable detail an accounting of the amount payable and the calculations
used to determine in good faith such amount and shall be conclusive absent
manifest or demonstrable error. Nothing in this SECTION 2.9 shall provide
the Borrower or any Subsidiary of the Borrower the right to inspect the
records, files or books of any Lender.
-34-
<PAGE>
Section 2.10 MANNER OF PAYMENT.
(a) Each payment (including prepayments) by the Borrower of the
principal of or interest on the Advances, fees, and any other amount owed
under this Agreement or any other Loan Document shall be made not later than
12:00 noon (Dallas, Texas time) on the date specified for payment under this
Agreement to the Administrative Lender at the Administrative Lender's office,
in lawful money of the United States of America constituting immediately
available funds.
(b) If any payment under this Agreement or any other Loan Document
shall be specified to be made upon a day which is not a Business Day, it
shall be made on the next succeeding day which is a Business Day, unless,
with respect to a payment due in respect of a LIBOR Advance, such Business
Day falls in another calendar month, in which case payment shall be made on
the preceding Business Day. Any extension of time shall in such case be
included in computing interest and fees, if any, in connection with such
payment.
(c) Without waiving any other rights or recourse that the Borrower may
otherwise have against any Lender for such Lender's breach of its obligations
hereunder, the Borrower agrees to pay principal, interest, fees and all other
amounts due under the Loan Documents without deduction for set-off or
counterclaim or any deduction whatsoever.
(d) If some but less than all amounts due from the Borrower are
received by the Administrative Lender, the Administrative Lender shall apply
such amounts in the following order of priority: (i) to the payment of the
Administrative Lender's expenses incurred on behalf of the Lenders then due
and payable, if any; (ii) to the payment of all other fees then due and
payable; (iii) to the payment of interest then due and payable on the
Advances; (iv) to the payment of all other amounts not otherwise referred to
in this clause (d) then due and payable under the Loan Documents; and (v) to
the payment of principal then due and payable on the Advances.
(e) Each payment by the Borrower in respect of obligations relating to
the Facility A Advances, Facility B Advances and the Letters of Credit
(whether for principal, interest, fees or otherwise) shall be made to the
Administrative Lender for the account of the Lenders pro rata in accordance
with their respective Specified Percentages. Each payment by the Borrower in
respect of obligations relating to Swing Line Advances (whether for
principal, interest, fees or otherwise) shall be made to the Administrative
Lender for the account of the Swing Line Bank. Notwithstanding anything in
this SECTION 2.10(e) or any other provision of this Agreement or any other
Loan Document to the contrary, any payment by the Borrower in respect of any
Advances after acceleration of the Advances pursuant to SECTION 8.2 or any
monies received by the Administrative Lender as a result of the exercise of
remedies under any Loan Documents after acceleration of the Advances pursuant
to SECTION 8.2 shall be distributed pro rata to each Lender based on the
percentage that the outstanding Advances and Reimbursement Obligations owed
to such Lender bears to the aggregate Advances and Reimbursement Obligations
owed to all Lenders.
-35-
<PAGE>
Section 2.11 LIBOR LENDING OFFICES. Each Lender's initial LIBOR
Lending Office is set forth opposite its name in SCHEDULE 1 attached hereto.
Each Lender shall have the right at any time and from time to time to
designate a different office of itself or of any Affiliate of such Lender as
such Lender's LIBOR Lending Office, and to transfer any outstanding LIBOR
Advance to such LIBOR Lending Office. No such designation or transfer shall
result in any liability on the part of the Borrower for increased costs or
expenses resulting solely from such designation or transfer (except any such
transfer which is made by a Lender pursuant to SECTION 9.2 or 9.3 hereof, or
otherwise for the purpose of complying with Applicable Law, to the extent
that Applicable Law, or any relevant construction or interpretation thereof,
changes after the Agreement Date). Increased costs for expenses resulting
from a change in law occurring subsequent to any such designation or transfer
shall be deemed not to result solely from such designation or transfer.
Section 2.12 SHARING OF PAYMENTS. Any Lender obtaining a payment
(whether voluntary or involuntary, due to the exercise of any right of
set-off, or otherwise) on account of its Facility A Advances, Facility B
Advances or its participation in the Letters of Credit (other than pursuant
to SECTIONS 2.4(b), 2.14, 2.15(d), 9.3 or 9.5) in excess of its Specified
Percentage of all payments made by the Borrower with respect to Facility A
Advances, Facility B Advances and the Letters of Credit shall purchase from
each other Lender such participation in the Facility A Advances and Facility
B Advances made by such other Lender or its participation in the Letters of
Credit as shall be necessary to cause such purchasing Lender to share the
excess payment pro rata according to Specified Percentages with each other
Lender; provided, however, that if all or any portion of such excess payment
is thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section, to the fullest
extent permitted by law, may exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such
participation.
Section 2.13 CALCULATION OF LIBOR RATE. The provisions of this
Agreement relating to calculation of the LIBOR Rate are included only for the
purpose of determining the rate of interest or other amounts to be paid
hereunder that are based upon such rate, it being understood that each Lender
shall be entitled to fund and maintain its funding of all or any part of a
LIBOR Advance as it sees fit.
Section 2.14 TAXES.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with SECTION 2.10, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges and
withholdings, and all liabilities with respect thereto, EXCLUDING, in the
case of each Lender and the Administrative Lender, (i) taxes imposed on,
based upon or measured by its overall net income, net worth or capital, and
franchise taxes, doing business taxes or minimum taxes imposed on it, (A) by
the jurisdiction under the laws of which such Lender or the Administrative
Lender (as the case may be) is organized or in which
-36-
<PAGE>
it has its applicable lending office or any political subdivision thereof; or
(B) by any other jurisdiction, or any political subdivision thereof, other
than those imposed by reason of (1) an asserted relation of such jurisdiction
to the transactions contemplated by this Agreement, (2) the activities of the
Borrower in such jurisdiction or (3) the activities in connection with the
transactions contemplated by this Agreement of a Lender or the Administrative
Lender; (ii) taxes imposed by reason of failure by the Lender or the
Administrative Lender to comply with the requirements of paragraph (e) of
this SECTION 2.14; and (iii) in the case of any Lender, any Taxes in the
nature of transfer, stamp, recording or documentary taxes resulting from a
transfer (other than as a result of foreclosure) by such Lender of all or any
portion of its interest in this Agreement, the Notes or any other Loan
Documents; (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"TAXES"). If the Borrower shall be required by Law to deduct or withhold any
Taxes from or in respect of any sum payable hereunder to any Lender or the
Administrative Lender, (x) the sum payable shall be increased as may be
necessary so that after making all required deductions for Taxes (including
deductions applicable to additional sums payable under this SECTION 2.14)
such Lender or the Administrative Lender (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been
made, (y) the Borrower shall make such deductions and (z) the Borrower shall
pay the full amount of Taxes deducted to the relevant taxation authority or
other authority in accordance with Applicable Law.
(b) In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges
and similar levies (other than Taxes described in clause (iii) of the first
sentence of SECTION 2.14(a)) that arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or any other Loan Document (hereinafter referred to as
"OTHER TAXES").
(c) The Borrower will indemnify each Lender and the Administrative
Lender for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this SECTION 2.14) paid by such Lender or the Administrative
Lender (as the case may be) and all liabilities (including penalties,
additions to tax, interest and reasonable expenses) arising therefrom or with
respect thereto whether or not such Taxes or Other Taxes were correctly or
legally asserted, other than penalties, additions to tax, interest and
expenses arising as a result of gross negligence or wilful misconduct on the
part of such Lender or the Administrative Lender, PROVIDED, HOWEVER, that the
Borrower shall have no obligation to indemnify such Lender or the
Administrative Lender unless and until such Lender or the Administrative
Lender shall have delivered to the Borrower a certificate certifying that
such Taxes or Other Taxes (and/or penalties, additions to tax, interest and
reasonable expenses) were actually incurred by such Lender or the
Administrative Lender and showing in reasonable detail an accounting of the
amount payable and the calculations used to determine in good faith such
amount, which certificate shall be conclusive absent manifest or demonstrable
error. Nothing in this SECTION 2.14 shall provide the Borrower or any
Subsidiary of the Borrower the right to inspect the records, files or books
of any Lender or the Administrative Lender. This indemnification shall be
made within 30 days from the date such Lender or the Administrative Lender
(as the case may be) makes written demand therefor.
-37-
<PAGE>
(d) As soon as practicable after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Lender the original or a
certified copy of a receipt evidencing payment thereof. For purposes of this
SECTION 2.14 the terms "UNITED STATES" and "UNITED STATES PERSON" shall have
the meanings set forth in Section 7701 of the Code.
(e) Each Lender which is not a United States Person hereby
agrees that:
(i) it shall, no later than the Agreement Date (or, in
the case of a Lender which becomes a party hereto pursuant
to SECTION 11.6 after the Agreement Date, the date upon
which such Lender becomes a party hereto) and at such times
as necessary in the reasonable determination of the
Borrower, deliver to the Borrower through the Administrative
Lender, with a copy to the Administrative Lender:
(A) if any lending office is located in the United
States of America, two (2) accurate and complete
signed originals of Internal Revenue Service Form
4224 or any successor thereto ("FORM 4224"),
(B) if any lending office is located outside the
United States of America, two (2) accurate and
complete signed originals of Internal Revenue
Service Form 1001 or any successor thereto ("FORM
1001"),
in each case indicating that such Lender is on the date of
delivery thereof entitled to receive payments of principal,
interest and fees for the account of such lending office or
lending offices under this Agreement free from withholding
of United States Federal income tax;
(ii) if at any time such Lender changes its lending
office or lending offices or selects an additional lending
office it shall, at the same time or reasonably promptly
thereafter but only to the extent the forms previously
delivered by it hereunder are no longer effective, deliver
to the Borrower through the Administrative Lender, with a
copy to the Administrative Lender, in replacement for the
forms previously delivered by it hereunder:
(A) if such changed or additional lending office is
located in the United States of America, two (2)
accurate and complete signed originals of Form
4224; or
(B) otherwise, two (2) accurate and complete signed
originals of Form 1001,
in each case indicating that such Lender is on the date of
delivery thereof entitled to receive payments of principal,
interest and fees for the account of such changed or
additional lending office under this Agreement free from
withholding of United States Federal income tax;
-38-
<PAGE>
(iii) it shall, before or promptly after the
occurrence of any event (including the passing of time but
excluding any event mentioned in clause (ii) above)
requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Lender and if the delivery of
the same be lawful, deliver to the Borrower through the
Administrative Lender with a copy to the Administrative
Lender, two (2) accurate and complete original signed copies
of Form 4224 or Form 1001 in replacement for the forms
previously delivered by such Lender;
(iv) it shall, promptly upon the request of the
Borrower to that effect, deliver to the Borrower such other
forms or similar documentation as may be required from time
to time by any applicable law, treaty, rule or regulation in
order to establish such Lender's tax status for withholding
purposes; and
(v) it shall notify the Borrower after any event
(including an amendment to, or a change in any applicable
law or regulation or in the written interpretation thereof
by any regulatory authority or any judicial authority, or by
ruling applicable to such Lender of any governmental
authority charged with the interpretation or administration
of any law) shall occur that results in such Lender no
longer being capable of receiving payments under this
Agreement without any deduction or withholding of United
States federal income tax.
(f) Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and
obligations of the Borrower contained in this SECTION 2.14 shall
survive the payment in full of principal and interest hereunder.
(g) Each Lender (and the Administrative Lender with respect to payments
to the Administrative Lender for its own account) agrees that (i) it will
take all reasonable actions by all usual means to maintain all exemptions, if
any, available to it from United States withholding taxes (whether available
by treaty, existing administrative waiver or by virtue of the location of any
Lender's lending office), (ii) it will use reasonable best efforts
(consistent with its internal policy and legal and regulatory restrictions)
to change the jurisdiction of its lending office, if the making of such a
change would avoid the need for, or reduce the amount of, any such additional
amounts which may thereafter accrue and would not, in the reasonable judgment
of such Lender, be materially disadvantageous to such Lender, and (iii)
otherwise cooperate with the Borrower to minimize amounts payable by the
Borrower under this SECTION 2.14; PROVIDED, HOWEVER, the Lenders and the
Administrative Lender shall not be obligated by reason of this SECTION
2.14(g) to contest the payment of any Taxes or Other Taxes or to disclose any
information regarding its tax affairs or tax computations or reorder its tax
or other affairs or tax or other planning. Subject to the foregoing, to the
extent the Borrower pays sums pursuant to this SECTION 2.14 and the Lender or
the Administrative Lender receives a refund of any or all of such sums, such
refund shall be applied to reduce any amounts then due and owing under this
Agreement or, to the extent that no amounts are due and owing under this
Agreement at the time such refunds are received, the party receiving such
refund shall promptly pay over all such refunded sums to the Borrower,
provided that (i) no Event of Default is in existence at such time or (ii)
all of the Obligations have been fully and finally paid or satisfied. At
such time, if any, that such Default
-39-
<PAGE>
or Event of Default is cured or waived, the party receiving such refund shall
promptly pay over all such refunded sums to the Borrower.
(h) If the Borrower becomes obligated to pay additional amounts
described in this SECTION 2.14 to any Lender, the Borrower may designate a
financial institution reasonably acceptable to the Administrative Lender to
replace such Lender by purchasing for cash and receiving an assignment of
such Lender's pro rata share of the Commitments and the Rights of such Lender
under the Loan Documents without recourse to or warranty by, or expense to,
such Lender, for a purchase price equal to the outstanding amounts owed to
such Lender (including such additional amounts owing to such Lender pursuant
to this SECTION 2.14). Upon execution of an Assignment Agreement, such other
financial institution shall be deemed to be a "Lender" for all purposes of
this Agreement as set forth in SECTION 11.6 hereof.
Section 2.15 LETTERS OF CREDIT.
(a) THE LETTER OF CREDIT FACILITY. The Borrower may request the
Issuing Bank, on the terms and conditions hereinafter set forth, to issue,
and the Issuing Bank shall, if so requested, issue, letters of credit (the
"LETTERS OF CREDIT") for the account of the Borrower from time to time on any
Business Day from the date of the initial Advance until the Facility A
Maturity Date in an aggregate maximum amount (assuming compliance with all
conditions to drawing) not to exceed, at any time outstanding, the lesser of
(i) $5,000,000 (the "LETTER OF CREDIT FACILITY") and (ii) the Borrowing Base,
less the sum of (A) the aggregate principal amount of Facility A Advances
then outstanding plus (B) the aggregate principal amount of Swing Line
Advances outstanding. No Letter of Credit shall have an expiration date
(including all rights of renewal) later than the earlier of (i) the Facility
A Maturity Date or (ii) one year after the date of issuance thereof.
Immediately upon the issuance of each Letter of Credit, the Issuing Bank
shall be deemed to have sold and transferred to each Lender, and each Lender
shall be deemed to have purchased and received from the Issuing Bank, in each
case irrevocably and without any further action by any party, an undivided
interest and participation in such Letter of Credit, each drawing thereunder
and the obligations of the Borrower under this Agreement in respect thereof
in an amount equal to the product of (x) such Lender's Specified Percentage
times (y) the maximum amount available to be drawn under such Letter of
Credit (assuming compliance with all conditions to drawing). Within the
limits of the Letter of Credit Facility, and subject to the limits referred
to above, the Borrower may request the issuance of Letters of Credit under
this SECTION 2.15(a), repay any Facility A Advances resulting from drawings
thereunder pursuant to SECTION 2.15(c) and request the issuance of additional
Letters of Credit under this SECTION 2.15(a).
(b) REQUEST FOR ISSUANCE. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 a.m. (Dallas, Texas time) on the fourth
Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to the Issuing Bank. Each Letter of Credit shall be
issued upon notice given in accordance with the terms of any separate
agreement between the Borrower and the Issuing Bank in form and substance
reasonably satisfactory to the Borrower and the Issuing Bank providing for
the issuance of Letters of Credit pursuant to this Agreement and containing
terms and conditions not inconsistent with this
-40-
<PAGE>
Agreement (a "LETTER OF CREDIT AGREEMENT"), PROVIDED that if any such terms
and conditions are inconsistent with this Agreement, this Agreement shall
control. Each such notice of issuance of a Letter of Credit by the Borrower
(a "NOTICE OF ISSUANCE") shall be by telecopier, specifying therein, in the
case of a Letter of Credit, the requested (A) date of such issuance (which
shall be a Business Day), (B) maximum amount of such Letter of Credit, (C)
expiration date of such Letter of Credit, (D) name and address of the
beneficiary of such Letter of Credit, and (E) form of such Letter of Credit
and specifying such other information as shall be required pursuant to the
relevant Letter of Credit Agreement. If the requested terms of such Letter
of Credit are acceptable to the Issuing Bank in its reasonable discretion,
the Issuing Bank will, upon fulfillment of the applicable conditions set
forth in ARTICLE 3 hereof, make such Letter of Credit available to the
Borrower at its office referred to in SECTION 11.1 or as otherwise agreed
with the Borrower in connection with such issuance.
(c) DRAWING AND REIMBURSEMENT. The payment by the Issuing Bank of a
draft drawn under any Letter of Credit shall constitute for all purposes of
this Agreement the making by the Issuing Bank of a Facility A Advance, which
shall bear interest at the Base Rate Basis, in the amount of such draft (but
without any requirement for compliance with the conditions set forth in
ARTICLE 3 hereof). In the event that a drawing under any Letter of Credit is
not reimbursed by the Borrower by 11:00 a.m. (Dallas, Texas time) on the
first Business Day after such drawing, the Issuing Bank shall promptly notify
Administrative Lender and each other Lender. Each such Lender shall, on the
first Business Day following such notification, make a Facility A Advance,
which shall bear interest at the Base Rate Basis, and shall be used to repay
the applicable portion of the Issuing Bank's Advance with respect to such
Letter of Credit, in an amount equal to the amount of its participation in
such drawing for application to reimburse the Issuing Bank (but without any
requirement for compliance with the applicable conditions set forth in
ARTICLE 3 hereof) and shall make available to the Administrative Lender for
the account of the Issuing Bank, by deposit at the Administrative Lender's
office, in same day funds, the amount of such Advance. In the event that any
Lender fails to make available to the Administrative Lender for the account
of the Issuing Bank the amount of such Advance, the Issuing Bank shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at a rate per annum equal to the lesser of (i) the Highest
Lawful Rate or (ii) the Federal Funds Rate.
(d) INCREASED COSTS. If after the Agreement Date any change in any Law
or in the interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof shall either
(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against letters of credit or guarantees issued by, or assets held
by, or deposits in or for the account of, the Issuing Bank or any Lender or
any corporation controlling the Issuing Bank or any Lender or (ii) impose on
the Issuing Bank or any Lender or any corporation controlling the Issuing
Bank or any Lender any other condition regarding this Agreement or any Letter
of Credit, and the result of any event referred to in the preceding clause
(i) or (ii) shall be to increase the cost to the Issuing Bank or any
corporation controlling the Issuing Bank of issuing or maintaining any Letter
of Credit or to any Lender or any corporation controlling such Lender of
purchasing any participation therein or making any Advance pursuant to
SECTION 2.15(c), then, within 30 days after demand by the Issuing Bank or
-41-
<PAGE>
such Lender (which demand shall be made not later than one year after the
Issuing Bank or applicable Lender receives notice of the relevant change),
the Borrower shall, subject to SECTION 11.9 hereof, pay to the Issuing Bank
or such Lender, from time to time as specified by the Issuing Bank or such
Lender, additional amounts that shall be sufficient to compensate the Issuing
Bank or such Lender or any corporation controlling such Lender for such
increased cost. A certificate as to the amount of such increased cost,
submitted to the Borrower by the Issuing Bank or such Lender, shall certify
that such increased costs were actually incurred by the Issuing Bank or such
Lender and shall show in reasonable detail an accounting of the amount
payable and the calculation used to determine in good faith such amount and
shall be conclusive absent manifest or demonstrable error. In determining
such amount, the Issuing Bank or such Lender may use any reasonable averaging
or attribution method. Nothing in this SECTION 2.15(d) shall provide the
Borrower or any Subsidiary of the Borrower the right to inspect the records,
files or books of the Issuing Bank or any Lender. If the Borrower becomes
obligated to pay additional amounts described in this SECTION 2.15(d) to any
Lender, the Borrower may designate a financial institution reasonably
acceptable to the Administrative Lender to replace such Lender by purchasing
for cash and receiving an assignment of such Lender's pro rata share of the
Commitments and the Rights of such Lender under the Loan Documents without
recourse to or warranty by, or expenses to, such Lender, for a purchase price
equal to the outstanding amounts owing to such Lender (including such
additional amounts owing to such Lender pursuant to this SECTION 2.15(d).
Upon execution of an Assignment Agreement, such other financial institution
shall be deemed to be a "Lender" for all purposes of this Agreement as set
forth in SECTION 11.6 hereof. The obligations of the Borrower under this
SECTION 2.15(d) shall survive termination of this Agreement. The Issuing
Bank or any Lender claiming any additional compensation under this SECTION
2.15(d) shall use reasonable efforts (consistent with legal and regulatory
restrictions) to reduce or eliminate any such additional compensation which
may thereafter accrue and which efforts would not, in the reasonable judgment
of the Issuing Bank or such Lender, be otherwise disadvantageous.
(e) OBLIGATIONS ABSOLUTE. Except in the case of gross negligence or
wilful misconduct on the part of the Issuing Bank, the obligations of the
Borrower under this Agreement with respect to any Letter of Credit, any
Letter of Credit Agreement and any other agreement or instrument relating to
any Letter of Credit or any Facility A Advance pursuant to SECTION 2.15(c)
shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement, such Letter of Credit Agreement
and such other agreement or instrument under all circumstances, including,
without limitation, the following circumstances:
(i) any lack of validity or enforceability of this
Agreement, any other Loan Document, any Letter of Credit
Agreement, any Letter of Credit or any other agreement or
instrument relating thereto (collectively, the "L/C RELATED
DOCUMENTS");
(ii) (A) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations of the Borrower in respect of the Letters of
Credit or any Facility A Advance pursuant to SECTION 2.15(c)
or (B) any other amendment or waiver of or any consent to
departure from all or any of the L/C Related Documents;
-42-
<PAGE>
(iii) the existence of any claim, set-off, defense
or other right that the Borrower may have at any time
against any beneficiary or any transferee of a Letter of
Credit (or any Persons for whom any such beneficiary or any
such transferee may be acting), the Issuing Bank, any Lender
or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by the
L/C Related Documents or any unrelated transaction;
(iv) any statement or any other document presented
under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or certificate that
does not comply with the terms of the Letter of Credit;
(vi) any exchange, release or non-perfection of any
Collateral, or any release or amendment or waiver of or
consent to departure from any guarantee, for all or any of
the Obligations of the Borrower in respect of the Letters of
Credit or any Revolving Credit Advance pursuant to
SECTION 2.15(c); or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing,
including, without limitation, any other circumstance that
might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor.
(f) COMPENSATION FOR LETTERS OF CREDIT.
(i) CREDIT FEE. Subject to SECTION 11.9 hereof, the
Borrower shall pay to the Administrative Lender for the
ratable account of each Lender a fee (which shall be payable
quarterly in arrears on each Quarterly Date and on the
Facility A Maturity Date) equal to a rate per annum equal to
the product of the Applicable LIBOR Rate Margin in effect
from time to time multiplied by the average daily amount
available for drawing under all outstanding Letters of
Credit. Subject to SECTION 11.9 hereof, such fee shall be
computed on the basis of a 360-day year for the actual
number of days elapsed.
(ii) ISSUANCE FEE. Subject to SECTION 11.9 hereof, the
Borrower shall pay to the Administrative Lender for the
account of the Issuing Bank an issuance fee (which shall be
payable on the date of issuance of each Letter of Credit) in
an amount equal to the greater of (a) $250 or (b) the
product of (x) 0.125% times (y) the face amount of the
Letter of Credit being issued.
(iii) OTHER FEES. Subject to SECTION 11.9 hereof,
the Borrower shall pay, with respect to each amendment,
renewal or transfer of each Letter of Credit and each
drawing made thereunder, reasonable documentary and
processing charges in accordance with the Issuing Bank's
standard schedule for such charges in effect at the time of
such amendment, renewal, transfer or drawing, as the case
may be.
-43-
<PAGE>
(g) L/C CASH COLLATERAL ACCOUNT.
(i) Upon the Facility A Maturity Date or the
occurrence, and during the continuance, of an Event of
Default and demand by the Administrative Lender pursuant to
SECTION 8.2(c), the Borrower will promptly pay to the
Administrative Lender in immediately available funds an
amount equal to the maximum amount then available to be
drawn under the Letters of Credit then outstanding. Any
amounts so received by the Administrative Lender shall be
deposited by the Administrative Lender in a deposit account
maintained by the Issuing Bank (the "L/C CASH COLLATERAL
ACCOUNT").
(ii) As security for the payment of all Reimbursement
Obligations and for any other Obligations, the Borrower
hereby grants, conveys, assigns, pledges, sets over and
transfers to the Administrative Lender (for the benefit of
the Issuing Bank and Lenders), and creates in the
Administrative Lender's favor (for the benefit of the
Issuing Bank and Lenders) a Lien in, all money, instruments
and securities at any time held in or acquired in connection
with the L/C Cash Collateral Account, together with all
proceeds thereof. The L/C Cash Collateral Account shall be
under the sole dominion and control of the Administrative
Lender and the Borrower shall have no right to withdraw or
to cause the Administrative Lender to withdraw any funds
deposited in the L/C Cash Collateral Account. At any time
and from time to time, upon the Administrative Lender's
request, the Borrower promptly shall execute and deliver any
and all such further instruments and documents, including
UCC financing statements, as may be necessary, appropriate
or desirable in the Administrative Lender's judgment to
obtain the full benefits (including perfection and priority)
of the security interest created or intended to be created
by this paragraph (ii) and of the rights and powers herein
granted. The Borrower shall not create or suffer to exist
any Lien on any amounts or investments held in the L/C Cash
Collateral Account other than the Lien granted under this
paragraph (ii).
(iii) The Administrative Lender shall (A) apply any
funds in the L/C Cash Collateral Account on account of
Reimbursement Obligations when the same become due and
payable, (B) after the Facility A Maturity Date, apply any
proceeds remaining in the L/C Cash Collateral Account FIRST
to pay any unpaid Obligations then outstanding hereunder and
THEN to refund any remaining amount to the Borrower.
(iv) The Borrower, no more than once in any calendar
month, may direct the Administrative Lender to invest the
funds held in the L/C Cash Collateral Account (so long as
the aggregate amount of such funds exceeds any relevant
minimum investment requirement) in (A) Cash and Cash
Equivalents or direct obligations of the United States or
any agency thereof, or obligations guaranteed by the United
States or any agency thereof and (B) one or more other types
of investments permitted by the Determining Lenders, in each
case with such maturities as the Borrower, with the consent
of the Determining Lenders, may specify, pending application
of such funds on account of Reimbursement Obligations or on
account of other Obligations, as the case may be. In the
absence of any such direction from the Borrower, the
Administrative Lender shall invest the funds held in the L/C
Cash Collateral Account (so long as the aggregate
-44-
<PAGE>
amount of such funds exceeds any relevant minimum investment
requirement) in one or more types of investments with the consent of
the Determining Lenders with such maturities as the Borrower, with the
consent of the Determining Lenders, may specify, pending application of
such funds on account of Reimbursement Obligations or on account of
other Obligations, as the case may be. All such investments shall be
made in the Administrative Lender's name for the account of the
Lenders, subject to the ownership interest therein of the Borrower.
The Borrower recognizes that any losses or taxes with respect to such
investments shall be borne solely by the Borrower, and the Borrower
agrees to hold the Administrative Lender and the Lenders harmless from
any and all such losses and taxes, except to the extent that such
losses or taxes are finally judicially determined by a court of
competent jurisdiction to be the result of gross negligence or wilful
misconduct of the Administrative Lender. Administrative Lender may
liquidate any investment held in the L/C Cash Collateral Account in
order to apply the proceeds of such investment on account of the
Reimbursement Obligations as provided in SECTION 2.15(g)(iii) hereof
(or on account of any other Obligation then due and payable, as the
case may be) without regard to whether such investment has matured and
without liability for any penalty or other fee incurred (with respect
to which the Borrower hereby agrees to reimburse the dAministrative
Lender) as a result of such application.
(v) After the establishment of the L/C Cash Collateral
Account pursuant to SECTION 2.15(g)(i) hereof, the Borrower
shall pay to the Administrative Lender the fees customarily
charged by the Issuing Bank with respect to the maintenance
of accounts similar to the L/C Cash Collateral Account.
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND THE
INITIAL ISSUANCE OF LETTERS OF CREDIT. The obligation of each Lender to make
any Advance and the obligation of the Issuing Bank to issue Letters of Credit
is subject to (i) receipt by the Administrative Lender of the following items
which are to be delivered, in form and substance satisfactory to each Lender,
with a copy (except for the Notes and this Agreement) for each Lender, and
(ii) satisfaction of the following conditions which are to be satisfied:
(a) A loan certificate of each Obligor certifying as to the accuracy of
its representations and warranties in the Loan Documents, certifying that no
Default has occurred, and including a certificate of incumbency with respect
to each Authorized Signatory, and including (i) a copy of the articles or
certificate of incorporation of such Obligor, certified to be true, complete
and correct by the secretary of state of its state of organization, and (ii)
a copy of a certificate of good standing and a certificate of existence for
its state of organization and, with respect to the Borrower, the States of
Texas, California and New Jersey;
-45-
<PAGE>
(b) a duly executed Facility A Note and Facility B Note payable to the
order of each Lender and in an amount for each Lender equal to its Specified
Percentage of each Commitment, respectively;
(c) UCC searches in appropriate jurisdictions where Collateral is
located;
(d) opinions of counsel to each Obligor addressed to the Lenders and in
form and substance satisfactory to the Lenders, dated the Agreement Date, and
covering certain of the matters set forth in SECTIONS 4.1(a), (b), (c), (e),
(f), (h), (m), (n), (o) and (p) and such other matters incident to the
transactions contemplated hereby as the Administrative Lender or Special
Counsel may reasonably request;
(e) reimbursement for the Administrative Lender for Special Counsel's
reasonable and customary fees (on an hourly basis) and expenses rendered
through the date hereof, to the extent invoiced;
(f) evidence that all proceedings of each Obligor taken in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be reasonably satisfactory in form and substance to the
Lenders and Special Counsel; and the Lenders shall have received copies of
all documents or other evidence which the Administrative Lender, Special
Counsel or any Lender may reasonably request in connection with such
transactions;
(g) any fees or expenses required to be paid on or before the Agreement
Date pursuant to the Administrative Lender Fee Letter and/or the Upfront Fee
Letter;
(h) duly executed and completed Security Agreements, dated as of the
Agreement Date, granting a Lien, in all Collateral covered thereby, together
with related financing statements, the CFI Note and the ClientLink Note duly
endorsed, and insurance certificates listing Administrative Lender as loss
payee and additional insured and otherwise in a form required by the
Collateral Documents;
(i) the duly executed Swing Line Note payable to the order of the Swing
Line Bank in the aggregate principal amount of $5,000,000;
(j) a duly executed completed Pledge Agreement, dated as of the
Agreement Date, granting a Lien in all Collateral covered thereby, together
with related financing statements, stock powers and stock certificates
evidencing ownership of CFI;
(k) simultaneously with the making of the initial Advance, executed
UCC-3 Termination Statements to be filed in appropriate jurisdictions to
terminate all Liens against assets of the Borrower and its Subsidiaries other
than Permitted Liens;
-46-
<PAGE>
(l) all Securitization Documents, which shall be on terms and
conditions acceptable to the Administrative Lender, including any amendments
and modifications thereto as the Administrative Lender determines are
necessary as a result of the transactions contemplated by this Agreement and
the other Loan Documents;
(m) there shall have occurred no material adverse change in the
business, assets or financial condition of the Borrower and its Subsidiaries,
taken as a whole, since the date of the financial statements referred to in
SECTION 4.1(j)(i) hereof;
(n) each of the Guaranties, duly executed by the Guarantor party
thereto;
(o) all Indebtedness of the Borrower under the Existing Credit
Agreement shall have been (or shall simultaneously therewith be) refinanced
in full pursuant to the terms hereof;
(p) in form and substance reasonably satisfactory to the Lenders and
Special Counsel, such other documents, instruments and certificates as the
Administrative Lender or any Lender may reasonably require in connection with
the transactions contemplated hereby, including without limitation, evidence
of the status, organization or authority of the Borrower or any Subsidiary of
the Borrower, and the enforceability of the Obligations; and
(q) The Borrower shall have delivered a Borrowing Base Report
reflecting Eligible Accounts and Eligible Inventory as of August 31, 1996,
but reflecting the RPA Interest as of the Agreement Date.
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF
CREDIT. The obligation of each Lender to make each Advance hereunder
(including the initial Advance) and the obligation of the Issuing Bank to
issue each Letter of Credit (including the initial Letter of Credit) is
subject to fulfillment of the following conditions immediately prior to or
contemporaneously with each such Advance or issuance:
(a) With respect to each Advance and each issuance of a Letter of
Credit, all of the representations and warranties of each Obligor under the
Loan Documents, which, pursuant to SECTION 4.2 hereof, are made at and as of
the time of each such Advance or issuance, shall be true and correct at such
time in all material respects, both before and after giving effect to the
application of the proceeds of the Advance or Letter of Credit.
(b) The incumbency of the Authorized Signatories shall be as stated in
the certificate of incumbency delivered in the Borrower's loan certificate
pursuant to SECTION 3.1(a) or as subsequently modified and reflected in a
certificate of incumbency delivered to the Administrative Lender. The
Lenders may, without waiving this condition, consider it fulfilled and a
representation by the Borrower made to such effect if no written notice to
the contrary, dated on or before the date of such Advance or Letter of
Credit, is received by the Administrative Lender from the Borrower prior to
the making of such Advance or issuance of such Letter of Credit;
-47-
<PAGE>
(c) There shall not exist a Default or Event of Default hereunder that
has not been waived;
(d) The aggregate Advances and Letters of Credit, after giving effect
to such proposed Advance or Letter of Credit, shall not exceed the maximum
principal amount then permitted to be outstanding hereunder;
(e) No order, judgment, injunction or decree of any Tribunal shall
purport to enjoin or restrain any Lender or the Issuing Bank from making any
Advance or issuing any Letter of Credit;
(f) There shall not be pending, or to the knowledge of the Borrower,
threatened any Litigation against or affecting the Borrower or any Subsidiary
of the Borrower or any property of the Borrower or any Subsidiary of the
Borrower that has not been disclosed in writing by the Borrower pursuant to
SECTION 4.1(h) or 6.6(a) prior to the making of the last preceding Advance or
the issuance of the last preceding Letter of Credit (or in the case of the
initial Advances and Letters of Credit, prior to the Agreement Date) and
there shall have occurred no development not so disclosed in any such
Litigation that, in either event, could reasonably be expected to have a
Material Adverse Effect; and
(g) There shall have occurred no material adverse change in the
business, financial condition, results of operations or business prospects of
the Borrower and its Subsidiaries, taken as a whole, since December 31, 1995.
Notwithstanding anything herein to the contrary, the obligation of each
Lender to make a Facility A Advance, pursuant to SECTION 2.2(g) and 2.15(c)
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, (i) the occurrence of any
Default or Event of Default, (ii) the failure of the Borrower to satisfy any
condition set forth in this SECTION 3.2 or (iii) any other circumstance,
happening or event whatsoever.
Section 3.3 CONDITIONS PRECEDENT TO CONVERSIONS AND CONTINUATIONS.
The obligation of the Lenders to convert any existing Base Rate Advance into
a LIBOR Advance or to continue any existing LIBOR Advance is subject to the
condition precedent that on the date of such conversion or continuation no
Default or Event of Default shall have occurred and be continuing or would
result from the making of such conversion or continuation. The acceptance of
the benefits of each such conversion and continuation shall constitute a
representation and warranty by the Borrower to each of the Lenders that no
Default or Event of Default shall have occurred and be continuing or would
result from the making of such conversion or continuation.
-48-
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to each Lender as follows:
(a) ORGANIZATION; POWER; QUALIFICATION. The respective jurisdiction of
organization or incorporation and percentage ownership by the Borrower of the
Subsidiaries listed on SCHEDULE 4 are true and correct as of the Agreement
Date. SCHEDULE 4 is a complete and accurate listing as of the Agreement Date,
showing with respect to the Borrower and each Subsidiary of the Borrower (a)
its mailing address, which is its principal place of business, (b) the
classes of its Capital Stock and the number and amount of its Capital Stock
authorized and outstanding, (c) each record and beneficial owner of 5% or
more of its outstanding Capital Stock, and (d) all outstanding options,
rights, rights of conversion, redemption, purchase or repurchase, rights of
first refusal and similar rights relating to the Capital Stock. All of the
outstanding Capital Stock of the Borrower and each Subsidiary of the Borrower
is validly issued, fully paid and non-assessable. Each of the Borrower and
its Subsidiaries is a corporation or other legal Person duly organized,
validly existing and in good standing under the laws of its state of
incorporation or organization. Each of the Borrower and its Subsidiaries has
the legal power and authority to own its properties and to carry on its
business as now being and hereafter proposed to be conducted. Each of the
Borrower and its Subsidiaries is authorized to do business, duly qualified
and in good standing as set forth in SCHEDULE 7 and no qualification or
authorization is necessary in any other jurisdictions in which the character
of its properties or the nature of its business requires such qualification
or authorization, except where the failure to be so qualified or authorized
could not reasonably be expected to have a Material Adverse Effect.
(b) AUTHORIZATION. The Borrower has legal power and has taken all
necessary legal action to authorize it to borrow and request Letters of
Credit hereunder. Each of the Borrower and its Subsidiaries has legal power
and has taken all necessary legal action to execute, deliver and perform the
Loan Documents to which it is party in accordance with the terms thereof, and
to consummate the transactions contemplated thereby. Each Loan Document has
been duly executed and delivered by the Borrower or the Subsidiary of the
Borrower executing it. Each of the Loan Documents to which the Borrower or
any of its Subsidiaries is a party is a legal, valid and binding obligation
of the Borrower or such Subsidiary, as applicable, enforceable in accordance
with its terms, subject, to enforcement of remedies, to the following
qualifications: (i) equitable principles generally, and (ii) Debtor Relief
Laws (insofar as any such law relates to the bankruptcy, insolvency or
similar event of the Borrower or any Subsidiary of the Borrower).
(c) COMPLIANCE WITH OTHER LOAN DOCUMENTS AND CONTEMPLATED TRANSACTIONS.
The execution, delivery and performance by the Borrower and its Subsidiaries
of the Loan Documents to which they are respectively a party, and the
consummation of the transactions contemplated thereby, do not and will not
(i) require any consent or approval necessary on or
-49-
<PAGE>
prior to the Agreement Date not already obtained, except to the extent that
the failure to obtain any such consent or approval could not reasonably be
expected to have a Material Adverse Effect, (ii) violate any Applicable Law,
(iii) conflict with, result in a breach of, or constitute a default under the
certificate of incorporation or by-laws of the Borrower or any Subsidiary of
the Borrower, (iv) conflict with, result in a breach of, or constitute a
default under any Necessary Authorization, indenture, agreement or other
instrument, to which the Borrower or any Subsidiary of the Borrower is a
party or by which they or their respective properties may be bound, the
result of which could reasonably be expected to have a Material Adverse
Effect, or (v) result in or require the creation or imposition of any Lien
(other than Liens in favor of the Lenders to secure the Obligations
hereunder) upon or with respect to any property now owned or hereafter
acquired by the Borrower or any Subsidiary of the Borrower.
(d) BUSINESS. The Borrower and its Subsidiaries are engaged primarily
in the business of providing distributed desktop computer-related products
and network integration services for large corporate customers worldwide and
providing related services, including LAN/WAN projects and consulting,
network management, help desk, field engineering configuration, distribution
and procurement and activities directly related thereto.
(e) LICENSES, ETC. All Necessary Authorizations have been duly
obtained, and are in full force and effect without any known conflict with
the rights of others and free from any unduly burdensome restrictions, unless
the failure to obtain or have in effect such Necessary Authorizations could
not reasonably be expected to result in a Material Adverse Effect. The
Borrower and its Subsidiaries are and will continue to be in compliance in
all material respects with all provisions thereof. No circumstance exists
which could reasonably be expected to impair the utility of the Necessary
Authorization or the right to renew such Necessary Authorization the effect
of which could reasonably be expected to have a Material Adverse Effect. No
Necessary Authorization is the subject of any pending or, to the best of the
Borrower's knowledge, threatened challenge, suspension, cancellation or
revocation, the effect of which could reasonably be expected to have a
Material Adverse Effect.
(f) COMPLIANCE WITH LAW. The Borrower and its Subsidiaries are in
compliance in all respects with all Applicable Laws, except where the failure
to so comply could not reasonably be expected to have a Material Adverse
Effect.
(g) TITLE TO PROPERTIES. The Borrower and its Subsidiaries have good
and indefeasible title to, or a valid leasehold interest in, all of their
material assets. None of their assets are subject to any Liens, except
Permitted Liens. No financing statement or other Lien filing (except
relating to Permitted Liens) is on file in any state or jurisdiction that
names the Borrower or any of its Subsidiaries as debtor or covers (or
purports to cover) any assets of the Borrower or any of its Subsidiaries.
The Borrower and its Subsidiaries have not signed any such financing
statement or filing, nor any security agreement authorizing any Person to
file any such financing statement or filing (except relating to Permitted
Liens).
-50-
<PAGE>
(h) LITIGATION. Except as reflected on SCHEDULE 3 hereto, as of the
Agreement Date there is no Litigation pending against, or, to the Borrower's
current actual knowledge, threatened against the Borrower, or in any other
manner relating directly and adversely to the Borrower or any of its
Subsidiaries, or any of their respective properties, in any court or before
any arbitrator of any kind or before or by any governmental body in which the
amount claimed (in excess of applicable insurance) exceeds $100,000.
(i) TAXES. All material federal, state and other tax returns of the
Borrower and its Subsidiaries required by law to be filed have been duly
filed or extensions have been timely filed, and all material federal, state
and other Taxes upon the Borrower, its Subsidiaries or any of their
properties, income, profits and assets, which are due and payable, have been
paid, unless the same are being diligently contested in accordance with
SECTION 5.6 hereof. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of their Taxes are, in the
reasonable judgment of the Borrower, adequate.
(j) FINANCIAL STATEMENTS; MATERIAL LIABILITIES.
(i) The Borrower has heretofore delivered to Lenders
(a) the audited consolidated balance sheets of the Borrower
and its Subsidiaries as at December 31, 1995, and the
related statements of earnings and changes in investment and
statement of cash flows for the twelve-month period then
ended, and (b) unaudited consolidated balance sheets of the
Borrower and its Subsidiaries as at June 30, 1996, and the
related statements of earnings and changes in investment and
statement of cash flows for the six-month period then ended.
Such financial statements were prepared in conformity with
GAAP (except for the absence of footnotes) and fairly
present, in all material respects, the financial position of
the Borrower and its Subsidiaries as at the date thereof and
the combined results of operations and cash flows for the
period covered thereby.
(ii) The projected financial statements of the Borrower
and its Subsidiaries delivered to the Lenders prior to or on
the Agreement Date were prepared in good faith and
management of the Borrower believes them to be based on
reasonable assumptions (which assumptions have been included
in the most recent projections furnished to the Lenders
prior to the Agreement Date) and to fairly present in all
material respects the projected financial condition of the
Borrower and its Subsidiaries and the projected results of
operations as of the dates and for the periods shown for the
Borrower and its Subsidiaries, it being recognized by the
Lenders that such projections as to future events are not to
be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from
the projected results.
(iii) The financial statements of the Borrower and
its Subsidiaries delivered to the Lenders pursuant to
SECTION 6.1, 6.2 and 6.3 hereof fairly present in all
material respects their respective financial condition and
their respective results of operations as of the dates and
for the periods shown, all in accordance with GAAP, subject
to normal year-end adjustments. The latest of such
financial statements reflects all material liabilities,
direct and contingent, of the Borrower and each Subsidiary
of the Borrower
-51-
<PAGE>
that are required to be disclosed in accordance with GAAP. As of the
date of the latest of such financial statements, there were no
Guaranties, liabilities for Taxes, forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments that
are substantial in amount that are required to be reflected but that
are not reflected on such financial statements.
(k) NO ADVERSE CHANGE. Since December 31, 1995, no event or
circumstance has occurred or arisen which is reasonably likely to have a
Material Adverse Effect.
(l) ERISA. None of the Borrower or its Controlled Group maintains or
contributes to any Plan subject to Title IV of ERISA other than those
disclosed to the Administrative Lender in writing. Each such Plan (other
than any Multiemployer Plan) is in compliance in all material respects with
the applicable provisions of ERISA, the Code, and any other applicable Law,
except to the extent that failure to so comply would not reasonably be
expected to have a Material Adverse Effect. With respect to each Plan (other
than any Multiemployer Plan) of the Borrower and each member of its
Controlled Group, all reports required under ERISA or any other Applicable
Law to be filed with any Tribunal, the failure of which to file could
reasonably be expected to result in liability of the Borrower or any member
of its Controlled Group in excess of $100,000, have been duly filed. All such
reports are true and correct in all material respects as of the date given.
No Plan of the Borrower or any member of its Controlled Group has been
terminated under Section 4041(c) of ERISA nor has any accumulated funding
deficiency (as defined in Section 412(a) of the Code) been incurred (without
regard to any waiver granted under Section 412 of the Code), nor has any
funding waiver from the Internal Revenue Service been received or requested
the result of which could reasonably be expected to have a Material Adverse
Effect. None of the Borrower or any member of its Controlled Group has
failed to make any contribution or pay any amount due or owing as required
under the terms of any such Plan, or by Section 412 of the Code or Section
302 of ERISA by the due date under Section 412 of the Code and Section 302 of
ERISA, the result of which could reasonably be expected to have a Material
Adverse Effect. There has been no ERISA Event or any event requiring
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to
any Plan or its related trust of the Borrower or any member of its Controlled
Group since the effective date of ERISA. The present value of the benefit
liabilities, as defined in Title IV of ERISA, of each Plan subject to Title
IV of ERISA (other than a Multiemployer Plan) of the Borrower and each member
of its Controlled Group does not exceed by more than $500,000 the present
value of the assets of each such Plan as of the most recent valuation date
using each such Plan's actuarial assumptions at such date. There are no
pending, or to the Borrower's knowledge threatened, claims, lawsuits or
actions (other than routine claims for benefits in the ordinary course)
asserted or instituted against, and neither the Borrower nor any member of
its Controlled Group has knowledge of any threatened litigation or claims
against, the assets of any Plan or its related trust or against any fiduciary
of a Plan with respect to the operation of such Plan, the result of which
could reasonably be expected to have a Material Adverse Effect. None of the
Borrower or, to the Borrower's knowledge, any member of its Controlled Group
has engaged in any prohibited transactions, within the meaning of Section 406
of ERISA or Section 4975 of the Code, in connection with any Plan the result
of which could reasonably be expected to have a Material Adverse Effect.
None of the Borrower or any member of its Controlled
-52-
<PAGE>
Group has withdrawn from any Multiemployer Plan, nor has incurred or
reasonably expects to incur (A) any liability under Title IV of ERISA (other
than premiums due under Section 4007 of ERISA to the PBGC), (B) any
withdrawal liability (and no event has occurred which with the giving of
notice under Section 4219 of ERISA would result in such liability) under
Section 4201 of ERISA as a result of a complete or partial withdrawal (within
the meaning of Section 4203 or 4205 of ERISA) from a Multiemployer Plan, or
(C) any liability under Section 4062 of ERISA to the PBGC or to a trustee
appointed under Section 4042 of ERISA. None of the Borrower, any member of
its Controlled Group, or any organization to which the Borrower or any member
of its Controlled Group is a successor or parent corporation within the
meaning of ERISA Section 4069(b), has engaged in a transaction within the
meaning of ERISA Section 4069, the result of which could reasonably be
expected to have a Material Adverse Effect. None of the Borrower or any
member of its Controlled Group maintains or has established any Plan, which
is a welfare benefit plan within the meaning of Section 3(1) of ERISA and
which provides for continuing benefits or coverage for any participant or any
beneficiary of any participant after such participant's termination of
employment, except as may be required by any Applicable Law, the result of
which could reasonably be expected to have a Material Adverse Effect. Each
of Borrower and its Controlled Group which maintains a Plan which is a
welfare benefit plan within the meaning of Section 3(1) of ERISA has complied
in all material respects with any applicable notice and continuation
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, and the regulations thereunder. None of the Borrower or any
member of its Controlled Group maintains, has established, or has ever
participated in a multiemployer welfare benefit arrangement within the
meaning of Section 3(40)(A) of ERISA.
(m) COMPLIANCE WITH REGULATIONS G, T, U AND X. The Borrower is not
engaged principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System, and no part of the proceeds of the Advances or
Letters of Credit will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. No more than 25% of the assets of the Borrower and its Subsidiaries
are margin stock. None of the Borrower and its Subsidiaries nor any agent
acting on their behalf, have taken or will knowingly take any action which
would cause this Agreement or any other Loan Documents to violate any
regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, in each case as in effect now or
as the same may hereafter be in effect.
(n) AUTHORIZATION. The Borrower and its Subsidiaries are not required
to obtain any Necessary Authorization on or prior to the Agreement Date that
has not already been obtained from, or effect any material filing or
registration that has not already been effected with, any Tribunal in
connection with the execution and delivery of this Agreement or any other
Loan Document, or the performance thereof, in accordance with their
respective terms, including any borrowings hereunder, except for the filing
of financing statements (and other similar notices) containing a description
of the Collateral with certain Tribunals, including the United States
Trademark and Copyright Offices.
-53-
<PAGE>
(o) ABSENCE OF DEFAULT. The Borrower and its Subsidiaries are in
compliance in all material respects with all of the provisions of their
certificate of incorporation and by-laws, and no event has occurred or failed
to occur, which has not been remedied or waived, the occurrence or
non-occurrence of which constitutes, or which with the passage of time or
giving of notice or both would constitute, (i) an Event of Default or (ii) a
default by the Borrower or any of its Subsidiaries under any material
indenture, agreement or other instrument, or any judgment, decree or order to
which the Borrower or any of its Subsidiaries or by which they or any of
their respective properties is bound, except to the extent that such default
could not reasonably be expected to have a Material Adverse Effect.
(p) GOVERNMENTAL REGULATION. Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or
the Investment Company Act of 1940. Neither the entering into or performance
by the Borrower of this Agreement nor the issuance of the Notes violates any
provision of such act or requires any consent, approval, or authorization of,
or registration with, the Securities and Exchange Commission or any other
Tribunal pursuant to any provisions of such act.
(q) ENVIRONMENTAL MATTERS. Neither the Borrower nor any Subsidiary has
any current actual knowledge that any substance deemed hazardous by any
Applicable Environmental Law, has been installed (i) on any real property fee
title to which is now owned by the Borrower or any of its Subsidiaries or
(ii) by Borrower or any of its Subsidiaries on any real property leased by
the Borrower or any of its Subsidiaries, in either case in a manner which
does not comply with Applicable Environmental Laws, except to the extent that
the failure to so comply could not reasonably be expected to have a Material
Adverse Effect. The Borrower and its Subsidiaries are not in violation of or
subject to any existing, pending or, to the best of the Borrower's knowledge,
threatened investigation or inquiry by any Tribunal or to any remedial
obligations under any Applicable Environmental Laws, the effect of which
could reasonably be expected to have a Material Adverse Effect. The Borrower
and its Subsidiaries have not obtained and are not required to obtain any
permits, licenses or similar authorizations other than certificates of
occupancy and building permits and other authorizations that have been
obtained to construct, occupy, operate or use any buildings, improvements,
fixtures, and equipment forming a part of any real property owned or leased
by the Borrower or any Subsidiary of the Borrower by reason of any Applicable
Environmental Laws, except to the extent that the failure to so obtain could
not reasonably be expected to have a Material Adverse Effect. The Borrower
and its Subsidiaries undertook, at the time of acquisition of fee title to
any real property, reasonable inquiry into the previous ownership and uses of
such real property consistent with good commercial or customary practice.
The Borrower and its Subsidiaries have taken reasonable steps to determine,
and the Borrower and its Subsidiaries have no current actual knowledge, that
any hazardous substances or solid wastes have been disposed of or otherwise
released (i) on or to the real property fee title to which is owned by the
Borrower or any of its Subsidiaries or (ii) by Borrower or any of its
Subsidiaries on or to any real property leased by Borrower or any of its
Subsidiaries, all within the meaning of the Applicable Environmental Laws,
the effect of which could reasonably be expected to have a Material Adverse
Effect. The Borrower and its Subsidiaries have disposed of all hazardous
substances and solid wastes (if
-54-
<PAGE>
any), all within the meaning of the Applicable Environmental Laws, generated
in their respective businesses in compliance with all Applicable
Environmental Laws, except to the extent that the failure to so comply could
not reasonably be expected to have a Material Adverse Effect.
(r) CERTAIN FEES. No broker's, finder's or other fee or commission
will be payable by the Borrower (other than to the Lenders hereunder) with
respect to the making of the Commitments or the Advances hereunder. The
Borrower agrees to indemnify and hold harmless the Administrative Lender and
each Lender from and against any claims, demand, liability, proceedings,
costs or expenses asserted with respect to or arising in connection with any
such fees or commissions.
(s) PATENTS, ETC. The Borrower and its Subsidiaries have collectively
obtained or applied for all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions,
that are necessary for the operation of their business as presently conducted
and as proposed to be conducted, except to the extent that the failure to so
obtain or apply could not reasonably be expected to have a Material Adverse
Effect. Nothing has come to the current actual knowledge of the Borrower or
any of its Subsidiaries to the effect that (i) any process, method, part or
other material presently contemplated to be employed by the Borrower or any
Subsidiary of the Borrower may infringe any patent, trademark, service mark,
trade name, copyright, license or other right owned by any other Person, or
(ii) there is pending or overtly threatened any claim or litigation against
or affecting the Borrower or any Subsidiary of the Borrower contesting its
right to sell or use any such process, method, part or other material, which
could reasonably be expected to have a Material Adverse Effect.
(t) DISCLOSURE. All factual information furnished by the Borrower or
any of its Subsidiaries in writing to the Administrative Lender or any Lender
in connection with this Agreement, the other Loan Documents or any
transaction contemplated herein or therein is, and all other factual
information hereafter furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to the Administrative Lender or any Lender will be,
true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading at
such time in light of the circumstances under which such information was
provided. There is no fact known to the Borrower and not known to the public
generally that could reasonably be expected to have a Material Adverse
Effect, which has not been set forth in this Agreement or in the documents,
certificates and statements furnished to the Lenders by or on behalf of the
Borrower prior to the date hereof in connection with the transaction
contemplated hereby.
(u) SOLVENCY. The Borrower is, and Borrower and its Subsidiaries on a
consolidated basis are, Solvent.
(v) LABOR RELATIONS. Except as provided on SCHEDULE 8, neither the
Borrower nor any Subsidiary is a party to a collective bargaining agreement
or similar agreement, and the Borrower and each Subsidiary is in compliance
in all material respects with all Laws respecting employment and employment
practices, terms and conditions of employment, wages and hours
-55-
<PAGE>
and other laws related to the employment of its employees, except where the
failure to comply could not reasonably be expected to result in a Material
Adverse Effect, and there are no arrears in the payment of wages, withholding
or social security taxes, unemployment insurance premiums or other similar
obligations of the Borrower or any Subsidiary or for which the Borrower or
any Subsidiary may be responsible other than in the ordinary course of
business, except for such unpaid or unwithheld arrears which could not
reasonably be expected to result in a Material Adverse Effect. There is no
strike, work stoppage or labor dispute with any union or group of employees
pending or overtly threatened involving Borrower or any Subsidiary that could
reasonably be expected to have a Material Adverse Effect.
(w) CONSOLIDATED BUSINESS ENTITY. The Borrower and its Material
Subsidiaries are operated as a part of one consolidated business entity and
are directly or indirectly dependent upon each other for and in connection
with their respective business activities.
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be made at and as of the Agreement Date and at
and as of the date of each Advance and the date of issuance of each Letter of
Credit, and each shall be true and correct in all material respects when
made, except to the extent (a) previously fulfilled in accordance with the
terms hereof or (b) previously waived in writing by the Determining Lenders
with respect to any particular factual circumstance or permitted by the terms
of this Agreement. All such representations and warranties shall survive,
and not be waived by, the execution hereof by any Lender, any investigation
or inquiry by any Lender, or by the making of any Advance or the issuance of
any Letter of Credit under this Agreement.
ARTICLE 5
GENERAL COVENANTS
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have
been or can be fulfilled):
Section 5.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. The
Borrower shall, and shall cause each Subsidiary of the Borrower to:
(a) except as otherwise permitted pursuant to SECTION 7.4 hereof,
preserve and maintain, or timely obtain and thereafter preserve and maintain,
its existence, rights, franchises, licenses, authorizations, consents,
privileges and all other Necessary Authorizations from any Tribunal, the loss
of which could reasonably be expected to have a Material Adverse Effect; and
(b) except as otherwise permitted pursuant to SECTION 7.4 hereof,
qualify and remain qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, unless the failure to
do so could not reasonably be expected to have a Material Adverse Effect.
-56-
<PAGE>
Section 5.2 BUSINESS; COMPLIANCE WITH APPLICABLE LAW. The Borrower
and its Subsidiaries shall (a) engage primarily in the businesses set forth
in SECTION 4.1(d) hereof, and (b) comply in all respects with the
requirements of all Applicable Law, except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect.
Section 5.3 MAINTENANCE OF PROPERTIES. The Borrower shall, and shall
cause each Subsidiary of the Borrower to, maintain or cause to be maintained
all its properties (whether owned or held under lease) in reasonably good
repair, working order and condition, taken as a whole, and from time to time
make or cause to be made all appropriate (in the reasonable judgment of the
Borrower) repairs, renewals, replacements, additions, betterments and
improvements thereto, except where the failure to so maintain, repair, renew,
replace or improve could not reasonably be expected to have a Material
Adverse Effect.
Section 5.4 ACCOUNTING METHODS AND FINANCIAL RECORDS. The Borrower
shall, and shall cause each Subsidiary of the Borrower to, maintain a system
of accounting established and administered in accordance with GAAP, keep
adequate records and books of account in which complete entries will be made
and all transactions reflected in accordance with GAAP, and keep accurate and
complete records of its respective assets. Except with respect to a change
in the fiscal year of any Subsidiary to conform to the fiscal year of the
Borrower, the Borrower and each of its Subsidiaries shall maintain its fiscal
year in the manner in existence on the Agreement Date.
Section 5.5 INSURANCE. The Borrower shall, and shall cause each
Subsidiary of the Borrower to, maintain insurance from responsible companies
in such amounts and against such risks as shall be customary and usual in the
industry for companies of similar size and capability. Each insurance policy
shall (a) provide for at least 30 days' prior notice to the Administrative
Lender of any proposed termination or cancellation of such policy, whether on
account of default or otherwise and (b) otherwise contain the requirements
for insurance set forth in the Security Agreements.
Section 5.6 PAYMENT OF TAXES AND CLAIMS. The Borrower shall, and
shall cause each Subsidiary of the Borrower to, pay and discharge all
material Taxes to which they are subject prior to the date on which penalties
attach thereto, and all lawful material claims for labor, materials and
supplies which, if unpaid, might become a Lien upon any of its properties;
except that no such Tax or claim need be paid which is being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on the appropriate books, but only so long
as no Lien shall attach with respect thereto and no foreclosure, distraint,
sale or similar proceedings shall have been commenced. The Borrower shall,
and shall cause each Subsidiary of the Borrower to, timely file all
information returns (or extensions of such filing deadlines) required by
federal, state or local tax authorities.
Section 5.7 VISITS AND INSPECTIONS. The Borrower shall, and shall
cause each Subsidiary of the Borrower to, promptly permit representatives of
the Administrative Lender or any Lender from time to time after reasonable
notice by the Administrative Lender or any Lender to (a) visit and inspect
the properties of the Borrower and its Subsidiaries as often as the
-57-
<PAGE>
Administrative Lender or any Lender shall reasonably deem advisable, (b)
audit, inspect and make extracts from and copies of the Borrower's and each
such Subsidiary's books and records, and (c) discuss with the Borrower's and
each such Subsidiary's appropriate directors, officers, employees and
auditors its business, assets, liabilities, financial positions, results of
operations and business prospects, PROVIDED that such representatives of the
Administrative Lender or any Lender shall keep confidential all information
obtained pursuant to this SECTION 5.7 to the extent required by SECTION
11.14. The Borrower shall pay the reasonable expenses related to inspections
and audits performed by the Administrative Lender. Prior to the occurrence
of an Event of Default, all such visits and inspections shall be conducted
during normal business hours. Following the occurrence and during the
continuance of an Event of Default, such visits and inspections shall be
conducted at any time requested by the Administrative Lender or any Lender
without any requirement for reasonable notice.
Section 5.8 USE OF PROCEEDS. The proceeds of (a) the Facility A
Advances and the Letters of Credit shall be used by the Borrower for
refinancing of Indebtedness of the Borrower, Capital Expenditures,
Acquisitions permitted under SECTION 7.6 hereof and for working capital and
for other general corporate purposes and (b) the Facility B Advances shall be
used solely to purchase real property to be utilized as the corporate
headquarters for the Borrower.
SECTION 5.9 INDEMNITY.
(a) THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS
THE ADMINISTRATIVE LENDER, EACH LENDER, EACH OF THEIR RESPECTIVE AFFILIATES,
AND EACH OF THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES') OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS AND CONSULTANTS (INCLUDING, WITHOUT
LIMITATION, THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED
SATISFACTION OF ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE
FOREGOING (COLLECTIVELY, "INDEMNITEES") FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, CLAIMS, REASONABLE COSTS, REASONABLE EXPENSES AND REASONABLE
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL FOR SUCH
INDEMNITEES IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL
PROCEEDING, WHETHER OR NOT SUCH INDEMNITEES SHALL BE DESIGNATED A PARTY
THERETO), IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH INDEMNITEES
(WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL AND WHETHER BASED ON ANY FEDERAL,
STATE, OR LOCAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT EQUITABLE CAUSE,
OR ON CONTRACT, TORT OR OTHERWISE, ARISING FROM OR CONNECTED WITH THE PAST,
PRESENT OR FUTURE OPERATIONS OF THE BORROWER, ITS SUBSIDIARIES OR THEIR
RESPECTIVE PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR FUTURE
ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWER OR ITS SUBSIDIARIES),
RELATING TO OR ARISING OUT OF
-58-
<PAGE>
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY ACT, EVENT OR TRANSACTION OR
ALLEGED ACT, EVENT OR TRANSACTION RELATING OR ATTENDANT THERETO, THE
MANAGEMENT OF THE ADVANCES OR LETTERS OF CREDIT, INCLUDING IN CONNECTION
WITH, OR AS A RESULT, IN WHOLE OR IN PART, OF ANY ORDINARY OR MERE NEGLIGENCE
OF ADMINISTRATIVE LENDER OR ANY LENDER (OTHER THAN THOSE MATTERS RAISED
EXCLUSIVELY BY A PARTICIPANT AGAINST THE ADMINISTRATIVE LENDER OR ANY LENDER
AND NOT THE BORROWER OR ANY OF ITS SUBSIDIARIES), OR THE USE OR INTENDED USE
OF THE PROCEEDS OF THE ADVANCES OR LETTERS OF CREDIT HEREUNDER, OR IN
CONNECTION WITH ANY INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY, BUT
EXCLUDING (i) ANY CLAIM OR LIABILITY THAT ARISES AS THE RESULT OF THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT OF ANY INDEMNITEE, AS FINALLY JUDICIALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION, AND (ii) MATTERS RAISED BY
ONE LENDER AGAINST ANOTHER LENDER OR BY ANY SHAREHOLDERS OF A LENDER AGAINST
A LENDER OR ITS MANAGEMENT (COLLECTIVELY, "INDEMNIFIED MATTERS"). TO THE
EXTENT THAT ANY INDEMNIFIED MATTER INVOLVES ONE OR MORE INDEMNITEES, SUCH
INDEMNITEES SHALL USE THE SAME LEGAL COUNSEL UNLESS ANY INDEMNITEE IN ITS
REASONABLE DISCRETION DETERMINES THAT CONFLICTS EXIST OR MAY ARISE IN
CONNECTION WITH SUCH REPRESENTATION.
(b) WITHOUT DUPLICATION, THE BORROWER SHALL PERIODICALLY, UPON REQUEST,
REIMBURSE EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL
REASONABLE EXPENSES (INCLUDING THE REASONABLE COST OF ANY INVESTIGATION AND
PREPARATION) INCURRED IN CONNECTION WITH ANY INDEMNIFIED MATTER. THE
REIMBURSEMENT, INDEMNITY AND CONTRIBUTION OBLIGATIONS UNDER THIS SECTION
SHALL BE IN ADDITION TO ANY LIABILITY WHICH THE BORROWER MAY OTHERWISE HAVE,
SHALL EXTEND UPON THE SAME TERMS AND CONDITIONS TO EACH INDEMNITEE, AND SHALL
BE BINDING UPON AND INURE TO THE BENEFIT OF ANY SUCCESSORS, ASSIGNS, HEIRS
AND PERSONAL REPRESENTATIVES OF THE BORROWER, THE ADMINISTRATIVE LENDER, THE
LENDERS AND ALL OTHER INDEMNITEES. THIS SECTION SHALL SURVIVE ANY TERMINATION
OF THIS AGREEMENT AND PAYMENT OF THE OBLIGATIONS.
Section 5.10 ENVIRONMENTAL LAW COMPLIANCE. The use which the Borrower
or any Subsidiary of the Borrower intends to make of any real property which
is owned or leased by it will not result in the disposal or other release of
any hazardous substance or solid waste on or to such real property which is
in violation of Applicable Environmental Laws, the effect of which could
reasonably be expected to have a Material Adverse Effect. As used herein,
the terms "hazardous substance" and "release" as used in this Section shall
have the meanings specified in CERCLA (as defined in the definition of
Applicable Environmental Laws), and the terms "solid waste" and "disposal"
shall have the meanings specified in RCRA (as defined in the definition of
Applicable Environmental Laws); provided, however, that if CERCLA or
-59-
<PAGE>
RCRA is amended so as to broaden or lessen the meaning of any term defined
thereby, such broader or lesser meaning shall apply subsequent to the
effective date of such amendment; and provided further, to the extent that
any other law applicable to the Borrower, any Subsidiary or any of their
properties establishes a meaning for "hazardous substance," "release," "solid
waste," or "disposal" which is broader or lesser than that specified in
either CERCLA or RCRA, such broader or lesser meaning shall apply. The
Borrower agrees to indemnify and hold the Administrative Lender and each
Lender harmless from and against, and to reimburse them with respect to, any
and all claims, demands, causes of action, loss, damage, liabilities,
reasonable costs and reasonable expenses (including reasonable attorneys'
fees and courts costs) of any kind or character, known or unknown, fixed or
contingent, asserted against or incurred by any of them at any time and from
time to time by reason of or arising out of (a) the failure of the Borrower
or any Subsidiary to perform any of their obligations hereunder regarding
asbestos or Applicable Environmental Laws, (b) any violation on or before the
Release Date of any Applicable Environmental Law in effect on or before the
Release Date, and (c) any act, omission, event or circumstance existing or
occurring on or prior to the Release Date (including without limitation the
presence on such real property or release from such real property of
hazardous substances or solid wastes disposed of or otherwise released on or
prior to the Release Date), resulting from or in connection with the
ownership of the real property, regardless of whether the act, omission,
event or circumstance constituted a violation of any Applicable Environmental
Law at the time of its existence or occurrence; provided that, the Borrower
shall not be under any obligation to indemnify the Administrative Lender or
any Lender to the extent that any such liability arises as the result of the
gross negligence or wilful misconduct of such Person, as finally judicially
determined by a court of competent jurisdiction. The provisions of this
paragraph shall survive the Release Date and shall continue thereafter in
full force and effect.
Section 5.11 FURTHER ASSURANCES. At any time or from time to time
upon request by the Administrative Lender, the Borrower or any Subsidiary of
the Borrower shall execute and deliver such further documents and do such
other acts and things as the Administrative Lender may reasonably request in
order to effect fully the purposes of this Agreement and the other Loan
Documents and to provide for payment of the Obligations in accordance with
the terms of this Agreement and the other Loan Documents. Without limiting
the generality of the foregoing, the Borrower agrees to (a) update and
deliver to the Administrative Lender SCHEDULES 3 AND 4 hereto at the time of
delivery of the financial statements set forth in SECTIONS 6.1 and 6.2 hereof
if the information provided therein is not complete and correct, and (b)
update and deliver to the Administrative Lender SCHEDULE 1 to the Security
Agreements promptly upon discovery if the information provided therein is not
complete and correct.
Section 5.12 SUBSIDIARIES. At any time that any Person becomes a
Subsidiary other than pursuant to SECTION 7.3(f) hereof, (a) such Subsidiary
shall execute a Subsidiary Guaranty of the Obligations and a Security
Agreement granting a first priority Lien in all its assets of the types or
classes included in the Collateral, except, to the extent applicable, for
Liens permitted in clause (f) of the definition of Permitted Liens, to secure
the Obligations and (b) the Lenders shall receive such board resolutions,
officer's certificates and opinions of counsel as the
-60-
<PAGE>
Administrative Lender shall reasonably request in connection with the actions
described in clause (a) above.
Section 5.13 REAL PROPERTY. At any time that the Borrower acquires
any real property with the proceeds of a Facility B Advance, the Borrower
shall (a) execute a Deed of Trust granting a first priority Lien in the real
property acquired with such proceeds, (b) deliver to the Administrative
Lender a title insurance policy with respect to such real property, in form
and substance acceptable to the Administrative Lender, (c) deliver to the
Administrative Lender an environmental site assessment with respect to such
real property, in form and substance acceptable to the Administrative Lender,
prepared by a Person acceptable to the Administrative Lender, (d) deliver to
the Administrative Lender surveys with respect to such real property, in form
and substance acceptable to the Administrative Lender, and (e) the Lenders
shall receive such board resolutions, officer's certificates and opinions of
counsel as the Administrative Lender shall reasonably request with respect
thereto.
Section 5.14 AGREEMENTS IN RESPECT OF RPA AND TAA. With respect to
the RPA and the TAA, respectively, (a) unless otherwise agreed by the
Administrative Lender, the Borrower at all times shall have and maintain the
sole and exclusive right to service, administer and collect the Receivables,
SUBJECT AT ALL TIMES, HOWEVER, to the Loan Documents and the MSAA, (b) the
Borrower will not in any event effect an increase in the RPA Interest
Percentage (as defined by the MSAA) if as of the proposed time of the
effectiveness of any such increase (i) any Default or Event of Default is in
existence, or would exist upon such effectiveness or (ii) Projected Unused
Availability is less than zero dollars ($0.00), (c) contemporaneously upon
effecting any increase in the RPA Interest Percentage (as defined by the
MSAA) the Borrower shall deliver to the Administrative Lender a current
Borrowing Base Report, dated as of the effective date of any such increase,
(d) at all times after the occurrence and during the continuance of any
Default or Event of Default, the Borrower shall cause all proceeds of any
increase in the Net Investment (as defined by the TAA) received by CFI and
paid to the Borrower in payment of any RPA Interest under the RPA to be paid
directly to the Administrative Lender for application to the Obligations, (e)
the Borrower will not effect any increase in the Maximum Net Investment (as
defined by the TAA) without the prior written consent of the Administrative
Lender and (f) the Borrower will not enter into any agreement to amend the
RPA without the prior written consent of the Determining Lenders if such
agreement, or the amendment to the RPA contemplated thereby, would have a
material adverse effect upon any of the Lenders or the Administrative Lender.
ARTICLE 6
INFORMATION COVENANTS
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have
been or can be fulfilled), the Borrower shall furnish or cause to be
furnished to each Lender or shall notify each Lender of the following events:
-61-
<PAGE>
Section 6.1 BORROWING BASE REPORT. Within 15 days after the end of
each month of each fiscal year and contemporaneously with any change in the
RPA Interest or any change in the Administrative Lender's beneficial interest
under the MSAA, the Borrowing Base Report setting forth a certification of
Eligible Accounts and Eligible Inventory, and calculation of the Borrowing
Base. Each Borrowing Base Report shall certify the CompuCom Interest
Percentage and the RPA Interest Percentage (each as defined in the MSAA)
outstanding as of the effective date thereof.
Section 6.2 QUARTERLY FINANCIAL STATEMENTS AND INFORMATION. Within
45 days after the end of each fiscal quarter of each fiscal year, the
consolidated balance sheets of the Borrower and its Subsidiaries as at the
end of such fiscal quarter and the related consolidated statements of income
for such fiscal quarter and for the elapsed portion of the year ended with
the last day of such fiscal quarter, and consolidated statements of cash flow
for the elapsed portion of the year ended with the last day of such fiscal
quarter, all of which shall be certified by the president, chief financial
officer, treasurer or controller of the Borrower, to, in his or her opinion
acting solely in his or her capacity as an officer of the Borrower, present
fairly in all material respects, in accordance with GAAP (except for the
absence of footnotes), the financial position and results of operations of
the Borrower and its Subsidiaries as at the end of and for such fiscal
quarter, and for the elapsed portion of the year ended with the last day of
such fiscal quarter, subject only to normal year-end adjustments.
Section 6.3 ANNUAL FINANCIAL STATEMENTS AND INFORMATION;
CERTIFICATE OF NO DEFAULT.
(a) Within 120 days after the end of each fiscal year, a copy of (i)
the consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries, as of the end of the current and prior fiscal years and (ii)
the consolidated and consolidating statements of earnings and consolidated
statements of changes in shareholders' equity, and statements of cash flow as
of and through the end of such Fiscal Year, all of which are prepared in
accordance with GAAP, and certified by independent certified public
accountants reasonably acceptable to the Lenders (provided, however, any big
six public accounting firm shall be acceptable to the Lenders), whose opinion
shall be in scope and substance in accordance with generally accepted
auditing standards and shall be unqualified as to scope of audit and going
concern.
(b) As soon as available, but in any event within 30 days after
December 31, 1997 and within 30 days after the end of each fiscal year
thereafter, a copy of the annual consolidated financial projections
(including proforma income statements, balance sheets and statements of cash
flow) of the Borrower and its Subsidiaries for the succeeding three fiscal
years.
Section 6.4 COMPLIANCE CERTIFICATE. At the time financial statements
are furnished pursuant to SECTIONS 6.2 and 6.3 hereof, the Compliance
Certificate, completed as provided therein, executed by the Chief Financial
Officer, Treasurer or Vice President of Finance of the Borrower.
-62-
<PAGE>
Section 6.5 COPIES OF OTHER REPORTS AND NOTICES.
(a) Promptly upon their becoming available, a copy of (i) all material
final reports or letters submitted to the Borrower or any Subsidiary of the
Borrower by accountants in connection with any annual, interim or special
audit, including without limitation any final report prepared in connection
with the annual audit referred to in SECTION 6.2 hereof, and, if requested by
the Administrative Lender, any other comment letter submitted to management
in connection with any such audit, (ii) each financial statement, report,
notice or proxy statement sent by the Borrower to stockholders generally,
(iii) each regular, periodic or other report and any registration statement
(other than statements on Form S-8) or prospectus (or material written
communication in respect of any thereof) filed by the Borrower or any
Subsidiary of the Borrower with any securities exchange, with the Securities
and Exchange Commission or any successor agency, and (iv) all press releases
concerning material financial aspects of the Borrower or any Subsidiary of
the Borrower;
(b) Promptly upon becoming aware that (i) the holder(s) of any note(s)
or other evidence of indebtedness or other security of the Borrower or any
Subsidiary of the Borrower in excess of $500,000 in the aggregate has given
notice or taken any action with respect to a breach, failure to perform,
claimed default or event of default thereunder, (ii) any occurrence or
non-occurrence of any event which constitutes or which with the passage of
time or giving of notice or both could constitute a material breach by the
Borrower or any Subsidiary of the Borrower under any material agreement or
instrument other than this Agreement to which the Borrower or any Subsidiary
of the Borrower is a party or by which any of their properties may be bound,
or (iii) any event, circumstance or condition which could reasonably be
expected to be classified as a Material Adverse Effect, a written notice
specifying the details thereof (or the nature of any claimed default or event
of default) and what action is being taken or is proposed to be taken with
respect thereto;
(c) Promptly upon becoming aware that any party to any Capitalized
Lease Obligations or Operating Lease, in each case, in excess of $500,000,
has given notice or taken any action with respect to a breach, failure to
perform, claimed default or event of default thereunder, a written notice
specifying the details thereof (or the nature of any claimed default or event
of default) and what action is being taken or is proposed to be taken with
respect thereto;
(d) Promptly upon receipt thereof, information with respect to and
copies of any notices received from any Tribunal relating to any order,
ruling, law, information or policy that relates to a breach of or
noncompliance with any Law, or could reasonably be expected to result in the
payment of money by the Borrower or any Subsidiary of the Borrower in an
amount of $500,000 or more in the aggregate, or otherwise have a Material
Adverse Effect, or result in the loss or suspension of any Necessary
Authorization where such loss could reasonably be expected to have a Material
Adverse Effect; and
-63-
<PAGE>
(e) From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information regarding
the assets, business, liabilities, financial position, projections, results
of operations or business prospects of the Borrower and its Subsidiaries, as
the Administrative Lender or any Lender may reasonably request.
Section 6.6 NOTICE OF LITIGATION, DEFAULT AND OTHER MATTERS. Prompt
notice of the following events after the Borrower has knowledge or notice
thereof:
(a) The commencement of all Litigation and investigations by or before
any Tribunal, and all actions and proceedings in any court or before any
arbitrator involving claims for damages (including punitive damages) in
excess of $500,000 (after deducting the amount with respect to the Borrower
or any Subsidiary of the Borrower is insured), against or in any other way
relating directly to the Borrower, any Subsidiary of the Borrower, or any of
their respective properties or businesses; and
(b) Promptly upon the happening of any condition or event of which the
Borrower has current actual knowledge which constitutes a Default, a written
notice specifying the nature and period of existence thereof and what action
is being taken or is proposed to be taken with respect thereto.
Section 6.7 ERISA REPORTING REQUIREMENTS.
(a) Promptly and in any event (i) within 30 days after the Borrower or
any member of its Controlled Group has current actual knowledge that any
ERISA Event described in clause (a) of the definition of ERISA Event or any
event described in Section 4063(a) of ERISA with respect to any Plan of the
Borrower or any member of its Controlled Group has occurred, and (ii) within
10 days after the Borrower or any member of its Controlled Group has current
actual knowledge that any other ERISA Event with respect to any Plan of the
Borrower or any member of its Controlled Group has occurred or a request for
a minimum funding waiver under Section 412 of the Code has been made with
respect to any Plan of the Borrower or any member of its Controlled Group, a
written notice describing such event and describing what action is being
taken or is proposed to be taken with respect thereto, together with a copy
of any notice of such event that is given to the PBGC;
(b) Promptly and in any event within three Business Days after receipt
thereof by the Borrower or any member of its Controlled Group from the PBGC,
copies of each notice received by the Borrower or any member of its
Controlled Group of the PBGC's intention to terminate any Plan or to have a
trustee appointed to administer any Plan;
(c) Promptly and in any event within 30 days after the filing thereof
by the Borrower or any member of its Controlled Group with the United States
Department of Labor or the Internal Revenue Service, copies of each annual
report (including Schedule B thereto, if applicable) with respect to each
Plan subject to Title IV of ERISA of which Borrower or any member of its
Controlled Group is the "plan sponsor";
-64-
<PAGE>
(d) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence the Borrower or any member of its
Controlled Group receives from the Plan Sponsor (as defined by Section
4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability
pursuant to Section 4219 or 4202 of ERISA, and a statement from the chief
financial officer of the Borrower or such member of its Controlled Group
setting forth details as to the events giving rise to such potential
withdrawal liability and the action which the Borrower or such member of its
Controlled Group is taking or proposes to take with respect thereto;
(e) Notification within 30 days of any material increases in the
benefits provided under any existing Plan which is not a Multiemployer Plan,
or the establishment of any new Plans, or the commencement of contributions
to any Plan to which the Borrower or any member of its Controlled Group was
not previously contributing, which could reasonably be expected in any such
case to result in an additional material liability to the Borrower;
(f) Notification within three Business Days after the Borrower or any
member of its Controlled Group knows that the Borrower or any such member of
its Controlled Group has filed or intends to file a notice of intent to
terminate any Plan under a distress termination within the meaning of Section
4041(c) of ERISA and a copy of such notice; and
(g) Within three Business Days after receipt of written notice of
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower or any member of
its Controlled Group with respect to any Plan, except those which, in the
aggregate, if adversely determined could not reasonably be expected to have a
Material Adverse Effect.
Section 6.8 RPA AND TAA REPORTING REQUIREMENTS.
(a) (i) At such times as the Administrative Lender may request, the
amount of the RPA Interest Percentage (as defined by the MSAA) and the
Maximum Net Investment (as defined by the TAA), (ii) at least one (1)
Business Day before effecting any change in the RPA Interest under the terms
of the RPA, as provided in Section 2.2(b) of the MSAA, (iii) promptly upon
any termination of the RPA or the TAA, or upon receiving or sending any
notice of intended or pending or potential termination of the RPA or the TAA,
(iv) promptly at any time when the "Percentage Factor" exceeds the "Maximum
Percentage Factor" (as those terms are defined by the TAA); (v) promptly upon
becoming aware of any assignment by EFC, or any request by CFI for an
assignment by EFC, of EFC's interest under the TAA to any "Bank Investor" (as
defined in the TAA) pursuant to Section 9.7 of the TAA and (vi) promptly upon
becoming aware of any "Termination Event" or "Potential Termination Event"
(as those terms are defined in the TAA) under the TAA.
(b) A true and correct copy of (i) at Administrative Lender's request,
each report delivered by the Borrower to CFI and/or EFC under the RPA and/or
the TAA; (ii) each notice, if any, at any time given by CFI pursuant to
Section 5.1(b)(i) of the TAA (notifications in
-65
<PAGE>
respect of any "Termination Event" or "Potential Termination Event", as those
terms are defined by the TAA) and (iii) any notice (or copy of any such
notice) of termination, or of intended, pending or potential termination of
the RPA or the TAA sent or received by the Borrower or CFI.
ARTICLE 7
NEGATIVE COVENANTS
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have
been or can be fulfilled):
Section 7.1 INDEBTEDNESS. The Borrower shall not, and shall not
permit any Subsidiary of the Borrower to, create, assume, incur or otherwise
become or remain obligated in respect of, or permit to be outstanding, or
suffer to exist any Indebtedness, except:
(a) Indebtedness under the Loan Documents;
(b) Accounts payable and accrued liabilities incurred in the ordinary
course of business;
(c) Indebtedness, including in respect of Capitalized Lease
Obligations, incurred to purchase, or to finance the purchase of, assets
which constitute property, plant and equipment, in an aggregate principal
amount not in excess of $10,000,000 outstanding at any time;
(d) Indebtedness incurred or assumed in respect of Acquisitions
permitted pursuant to SECTION 7.6 hereof in an aggregate principal amount not
in excess of $20,000,000 per calendar year;
(e) Hedging obligations under Agreements entered into with any Lender;
(f) Indebtedness existing on the Agreement Date which is described on
SCHEDULE 6 hereto, including renewals, replacements and refinancings (but no
increases) thereof;
(g) Indebtedness in respect of endorsement of negotiable instruments in
the ordinary course of business;
(h) Indebtedness owing to the Borrower or any Guarantor by any
Subsidiary or the Borrower, which Indebtedness is evidenced by an entry on
the financial records of the Borrower and any such Subsidiary of the Borrower;
(i) Indebtedness of ClientLink, Inc. not to exceed $3,000,000 for
working capital;
-66-
<PAGE>
(j) Guaranties by the Borrower or by Subsidiaries of the Borrower of
Indebtedness of the Borrower or Subsidiaries of the Borrower, to the extent
such underlying Indebtedness is permitted hereunder;
(k) Trade accounts payable owing by the Borrower or any of its
Subsidiaries to any of (i) IBM Credit Corporation, (ii) Compaq Computer
Corporation, (iii) Hewlett-Packard Company or (iv) Apple Computer, Inc. for
goods furnished by any of such Persons to any of the Obligors;
(l) Unsecured trade accounts payable, incurred in the ordinary course
of the business of Borrower or any of its Subsidiaries; and
(m) Indebtedness of CFI to the Borrower evidenced by the CFI Note if,
and to the extent that, the Administrative Lender has a valid, perfected
first priority Lien in, and physical possession of, the CFI Note, together
with any and all necessary or appropriate endorsements to such CFI Note.
(n) Unsecured Indebtedness not otherwise permitted pursuant to clauses
(a) through (m) above not to exceed $50,000,000 (less any and all
Indebtedness under Subsections (c), (d) and/or (i) of this SECTION 7.1) in
the aggregate principal amount outstanding at any time.
Section 7.2 LIENS. The Borrower shall not, and shall not permit any
Subsidiary of Borrower to, create, assume, incur, permit or suffer to exist,
directly or indirectly, any Lien on any of its assets, whether now owned or
hereafter acquired, except Permitted Liens. The Borrower shall not, and
shall not permit any Subsidiary to, agree with any other Person that it shall
not create, assume, incur, permit or suffer to exist or to be created,
assumed, incurred or permitted to exist, directly or indirectly, any Lien on
any of its assets other than in respect of Indebtedness permitted by SECTIONS
7.1(c), (d), (f) and (k), provided that such agreement relates only to the
assets purchased or acquired.
Section 7.3 INVESTMENTS. The Borrower shall not, and shall not
permit any Subsidiary of Borrower to, make any Investment, except that the
Borrower and any Subsidiary of the Borrower may purchase or otherwise acquire
and own:
(a) Cash and Cash Equivalents;
(b) Accounts receivable that arise in the ordinary course of business
and are payable on standard terms;
(c) Investments in existence on the Agreement Date which are described
on SCHEDULE 5 hereto;
(d) Investments which are Acquisitions permitted pursuant to SECTION
7.6 hereof;
(e) Investments in the form of Hedge Agreements permitted by SECTION
7.1(e) hereof;
-67-
<PAGE>
(f) Investments (excluding accounts receivable from Subsidiaries of the
Borrower created in the ordinary course of business) in, and expenditures in
respect of Acquisitions of, Subsidiaries which are not Guarantors by the
Borrower in an aggregate amount not to exceed (calculated immediately prior
to the date of each such Investment or Acquisition) 5% of Net Worth at any
time outstanding;
(g) Investments in Subsidiaries of the Borrower (i) which have executed
a Subsidiary Guaranty and a Security Agreement granting a first priority Lien
in all its assets of the types or classes included in the Collateral to
secure the Obligations and (ii) which have delivered to the Lenders such
board resolutions, officer's certificates and opinions of counsel as the
Administrative Lender shall reasonably request;
(h) Guaranties permitted under SECTION 7.1(j) hereof;
(i) Investments arising from transactions by the Borrower or any of its
Subsidiaries with customers or suppliers in the ordinary course of business,
including endorsements of negotiable instruments, debt obligations and other
investments received in connection with the bankruptcy or reorganization of
customers and suppliers and in settlement of delinquent obligations of, and
other disputes with, customers and suppliers; and
(j) Other Investments not to exceed $5,000,000 in aggregate amount
outstanding at any time.
Section 7.4 LIQUIDATION, MERGER. The Borrower shall not, and shall
not permit any Subsidiary of Borrower to, at any time:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up, except that a Subsidiary of the Borrower
may liquidate or dissolve into the Borrower or a Subsidiary of the Borrower;
or
(b) enter into any merger or consolidation unless (i) with respect to a
merger or consolidation involving the Borrower, the Borrower shall be the
surviving corporation, or if the merger or consolidation involves a
Subsidiary of the Borrower and not the Borrower, such Subsidiary shall be the
surviving corporation, (ii) such transaction shall not be utilized to
circumvent compliance with any term or provision herein and (iii) no Default
or Event of Default shall then be in existence or occur as a result of such
transaction.
Section 7.5 SALES OF ASSETS. The Borrower shall not, and shall not
permit any Subsidiary of the Borrower to, sell, lease, transfer or otherwise
dispose of, any of its assets except (a) inventory in the ordinary course of
business, (b) obsolete or worn-out assets, (c) asset sales in which the Net
Cash Proceeds from the disposition thereof are reinvested, within 90 days
before or after such disposition, in productive tangible assets of a similar
nature of the Borrower and its Subsidiaries, (d) asset sales between
Obligors, (e) sales of interests in Accounts pursuant to the Securitization
and (f) other asset sales not to exceed $100,000 in the aggregate amount
during any one fiscal year.
-68-
<PAGE>
Section 7.6 ACQUISITIONS. The Borrower shall not, and shall not
permit any Subsidiary of Borrower to, make any Acquisitions; provided,
however, if immediately prior to and after giving effect to the proposed
Acquisition there shall not exist a Default or Event of Default, the Borrower
or any Subsidiary of the Borrower may make Acquisitions so long as (i) such
Acquisition shall not be opposed by the board of the directors of the Person
being acquired, (ii) Lenders shall have received written notice at least 15
Business Days prior to the date of such Acquisition, (iii) the Administrative
Lender shall have received at least 10 Business Days prior to the date of
such Acquisition a Compliance Certificate setting forth the covenant
calculations both immediately prior to and after giving effect to the
proposed Acquisition, (iv) the assets, property or business acquired shall be
in the business described in SECTION 4.1(d) hereof and the Administrative
Lender for the benefit of the Lenders shall have a first priority Lien in
such assets except for Liens permitted in clause (f) of the definition of
Permitted Liens, (v) the aggregate consideration (exclusive of Equity in the
Borrower or any Subsidiary of the Borrower, but inclusive of any Indebtedness
incurred or assumed by the Borrower or any Subsidiary of the Borrower) paid
or given by the Borrower and/or Borrower's Subsidiaries during any calendar
year in connection with Acquisitions shall not exceed $20,000,000 and (vi) at
the Borrower's option, (A) such Subsidiary shall execute a Subsidiary
Guaranty of the Obligations and a Security Agreement granting a first
priority Lien in all its assets of the types or classes included in the
Collateral, except for Liens permitted in clause (f) of the definition of
Permitted Liens, to secure the Obligations and (B) the Lenders receive such
board resolutions, officer's certificates and opinions of counsel as the
Administrative Lender shall reasonably request in connection with the actions
described in clause (A) above. Notwithstanding anything in this SECTION 7.6
or any other provision of this Agreement to the contrary, the aggregate
amount of expenditures in respect of Acquisitions of, and Investments in,
Subsidiaries of the Borrower that are not Obligors shall not exceed
(calculated immediately prior to the date of each such Investment or
Acquisition) 5% of Net Worth at any time outstanding.
Section 7.7 CAPITAL EXPENDITURES. The Borrower shall not, and shall
not permit any Subsidiary of the Borrower to, make or commit to make any
Capital Expenditures (excluding Permitted Real Estate Expenditures) during
any fiscal year in an aggregate amount in excess of $15,000,000.
Section 7.8 RESTRICTED PAYMENTS. The Borrower shall not, and shall
not permit any Subsidiary of the Borrower to, directly or indirectly declare,
pay or make any Restricted Payments except (a) Dividends payable by a
Subsidiary to the Borrower or to a Guarantor, (b) scheduled payments of
principal and interest on the Subordinated Debt, (c) Dividends payable on
"Series B Cumulative Preferred Stock" of the Borrower to Safeguard
Scientifics, Inc. in an aggregate amount for any fiscal year not to exceed
$2,000,000, (d) purchases by the Borrower of treasury stock of the Borrower
in an aggregate amount per fiscal year not to exceed 25% of the Net Income of
the Borrower and its Subsidiaries for the immediately preceding fiscal year
and (e) payments to the Borrower under the CFI Note; provided, however, the
Borrower shall not, and shall not permit any Subsidiary of the Borrower to,
declare, pay or make any Restricted Payments permitted by this SECTION 7.8
unless there shall exist no Default or Event of Default prior to or after
giving effect to any such proposed Restricted Payment.
-69-
<PAGE>
Section 7.9 AFFILIATE TRANSACTIONS. The Borrower shall not, and
shall not permit any Subsidiary of the Borrower to, at any time engage in any
transaction with an Affiliate (other than as evidenced by the RPA or the TAA)
other than in the ordinary course of business and on terms not materially
less advantageous to the Borrower or such Subsidiary than would be the case
if such transaction had been effected with a non-Affiliate. The Borrower
shall not, and shall not permit any Subsidiary of the Borrower to, incur or
suffer to exist any Indebtedness or Guaranty in favor of any Affiliate,
unless such Affiliate shall (i) subordinate the payment and performance
thereof to the Obligations on terms, conditions and documentation
satisfactory to the Determining Lenders or (ii) pledge the applicable
Indebtedness to the Administrative Lender pursuant to documentation
acceptable to the Administrative Lender.
Section 7.10 COMPLIANCE WITH ERISA. The Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly, or permit any member of
its Controlled Group to directly or indirectly, (a) terminate any Plan so as
likely to result in any material (in the reasonable opinion of the
Determining Lenders) liability to the Borrower or any member of its
Controlled Group taken as a whole, (b) permit to exist any ERISA Event, or
any other event or condition with respect to a Plan which could reasonably be
expected to have a Material Adverse Effect, (c) make a complete or partial
withdrawal (within the meaning of Section 4201 of ERISA) from any
Multiemployer Plan so as likely to result in any material (in the reasonable
opinion of the Determining Lenders) liability to the Borrower or any member
of its Controlled Group taken as a whole, (d) enter into any new Plan or
modify any existing Plan so as to increase its obligations thereunder which
could reasonably be expected to have a Material Adverse Effect, or (e) permit
the present value of all benefit liabilities, as defined in Title IV of
ERISA, under any Plan (other than a Multiemployer Plan) of the Borrower or
any member of its Controlled Group that is subject to Title IV of ERISA
(using the actuarial assumptions utilized by each such Plan) to exceed the
fair market value of Plan assets allocable to such benefits by more than
$500,000, all determined as of the most recent valuation date for such Plan.
Section 7.11 MAXIMUM LEVERAGE RATIO. The Borrower shall not permit
the Leverage Ratio to be greater than (a) 4.75 to 1 at the end of any fiscal
quarter ending prior to and including December 31, 1997 and (b) 4.25 to 1 at
the end of any fiscal quarter thereafter.
Section 7.12 MINIMUM FIXED CHARGE COVERAGE RATIO. The Borrower shall
not permit the Fixed Charge Coverage Ratio to be less than 1.25 to 1 at the
end of any fiscal quarter.
Section 7.13 MINIMUM TANGIBLE NET WORTH. The Borrower shall not
permit the Tangible Net Worth to be less than an amount equal to the sum of
(a) $110,000,000, plus (b) 75% of cumulative Net Income for the period from,
but not including, June 30, 1996 through the date of calculation (but
excluding from the calculation of such cumulative Net Income the effect, if
any, of any fiscal quarter (or portion of a fiscal quarter not then ended) of
the Borrower for which Net Income was a negative number), plus (c) 75% of the
Net Cash Proceeds received by the Borrower as a result of any offering of
Equity or pursuant to any conversion or exchange of convertible Indebtedness
or preferred Capital Stock into common Capital Stock of the Borrower, plus
(d) an amount equal to the net worth of any Person that
-70-
<PAGE>
becomes a Subsidiary of the Borrower or is merged into or consolidated with
the Borrower or any Subsidiary of the Borrower or substantially all of the
assets of which are acquired by the Borrower or any Subsidiary of the
Borrower to the extent the purchase price paid therefor is paid in equity
securities of the Borrower or any Subsidiary of the Borrower.
Section 7.14 MINIMUM ASSET COVERAGE RATIO. The Borrower shall not
permit the Asset Coverage Ratio to be less than 1.10 to 1 at the end of any
fiscal quarter.
Section 7.15 MAXIMUM FUNDED DEBT TO CAPITAL. The Borrower shall not
permit the ratio of Funded Debt to Capital to exceed 0.65 to 1 at the end of
any fiscal quarter.
Section 7.16 SALE AND LEASEBACK. The Borrower shall not, and shall
not permit any Subsidiary of the Borrower to, enter into any arrangement
whereby it sells or transfers any of its assets, and thereafter rents or
leases such assets.
Section 7.17 SALE OR DISCOUNT OF RECEIVABLES. The Borrower shall not,
and shall not permit any Subsidiary of the Borrower to, directly or
indirectly, sell, with or without recourse, for discount or otherwise, any
notes or Accounts other than pursuant to the Securitization.
Section 7.18 CAPITAL STOCK. The Borrower shall not, and shall not
permit any Subsidiary of the Borrower to, issue, sell or otherwise dispose of
any Capital Stock in the Borrower or any Subsidiary of the Borrower or any
options or any rights to acquire such Capital Stock, except (i) to the extent
that the Net Cash Proceeds thereof during any fiscal year do not exceed
$3,000,000 and the Net Cash Proceeds thereof are, within 90 days after
receipt by the Borrower or the applicable Subsidiary of the Borrower,
reinvested in productive tangible assets of the Borrower and its
Subsidiaries, (ii) to the extent that the Net Cash Proceeds thereof are
applied as provided in SECTION 2.5(c) hereof, (iii) any Subsidiary of the
Borrower may issue Capital Stock to the Borrower or to any Guarantor which is
the parent of such Subsidiary and (iv) the issuance or disposition of Capital
Stock in the Borrower attributable to the conversion of the NCGI Note into
Equity in the Borrower in accordance with the terms of the NCGI Note.
Section 7.19 BUSINESS. Neither the Borrower nor any Subsidiary of the
Borrower shall conduct any business other than the business described in
SECTION 4.1(d) hereof.
Section 7.20 FISCAL YEAR. Except with respect to a change in the
fiscal year of any Subsidiary to conform to the fiscal year of the Borrower,
neither the Borrower nor any Subsidiary of the Borrower shall change its
fiscal year.
Section 7.21 AMENDMENT OF ORGANIZATIONAL DOCUMENTS. The Borrower
shall not, and shall not permit any Subsidiary of the Borrower to, amend its
articles of incorporation or bylaws in any manner that could reasonably be
expected to (a) result in a Material Adverse Effect or (b) impair or affect
the Rights of the Administrative Lender or any Lender under any Loan
Documents or in respect of any Collateral.
-71-
<PAGE>
Section 7.22 AMENDMENTS AND WAIVERS OF SUBORDINATED DEBT. The Borrower
shall not, and shall not permit any Subsidiary to, change or amend (or take
any action or fail to take any action the result of which is an effective
amendment or change) or accept any waiver or consent with respect to, any
document, instrument or agreement relating to any Subordinated Debt that
would result in (a) an increase in the principal, interest, overdue interest,
fees or other amounts payable under the Subordinated Debt, (b) an
acceleration in any date fixed for payment or prepayment of principal,
interest, fees or other amounts payable under the Subordinated Debt
(including, without limitation, as a result of any redemption), (c) a
reduction in any percentage of holders of the Subordinated Debt required
under the terms of the Subordinated Debt to take (or refrain from taking) any
action under the Subordinated Debt, (d) a change in any financial covenant
under the Subordinated Debt making such financial covenant more restrictive,
(e) a change in any default or event of default (however designated) under
the Subordinated Debt which makes such default or event of default more
restrictive, (f) a change in the definition of "Change of Control" as
provided in the Subordinated Debt which would result in such definition being
more restrictive than such definition in this Agreement, (g) a change in any
of the subordination provisions of the Subordinated Debt, (h) a change in any
covenant, term or provision in the Subordinated Debt which would result in
such term or provision being more restrictive than the terms of this
Agreement and the other Loan Documents or (i) a change in any term or
provision of the Subordinated Debt that could have, in any material respect,
an adverse effect on the interest of the Lenders.
Section 7.23 OPERATING LEASES. The Borrower shall not, and shall not
permit any Subsidiary of the Borrower to, enter into any Operating Leases
except for Operating Leases entered into in the ordinary course of business
in a manner and to an extent consistent with past practice; provided,
however, that the total rent per annum for all Operating Leases of the
Borrower and its Subsidiaries shall not exceed $12,000,000 in aggregate
amount for any fiscal year.
ARTICLE 8
DEFAULT
Section 8.1 EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default, whatever the reason for such event, and
whether voluntary, involuntary, or effected by operation of law or pursuant
to any judgment or order of any court or any order, rule or regulation of any
governmental or non-governmental body:
(a) Any representation or warranty made under any Loan Document shall
prove to have been incorrect or misleading in any material respect when made;
(b) The Borrower shall fail to pay any (i) principal under any Note
when due or (ii) interest under any Note or any fees payable hereunder or any
other costs, fees, expenses or other amounts payable hereunder or under any
other Loan Document within two Business Days after the date due;
-72-
<PAGE>
(c) The Borrower or any Subsidiary of the Borrower shall default in the
performance or observance of any agreement or covenant contained in SECTION
5.1 or ARTICLE 7;
(d) The Borrower or any Subsidiary of the Borrower shall default in the
performance or observance of any other agreement or covenant contained in
this Agreement not specifically referred to elsewhere in this SECTION 8.1,
and such default shall not be cured within a period of fifteen days after the
earlier of notice from the Administrative Lender thereof or actual notice
thereof by the Borrower or such Subsidiary;
(e) There shall occur any default or breach in the performance or
observance of any agreement or covenant in any of the Loan Documents (other
than this Agreement) and such default shall not be cured within a period of
thirty days after the earlier of notice from the Administrative Lender
thereof or actual notice thereof by an officer of any Obligor;
(f) There shall be entered a decree or order by a court having
jurisdiction in the premises constituting an order for relief in respect of
any Obligor under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable Federal, state or foreign
bankruptcy law or other similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or similar official of any
Obligor, or of any substantial part of their respective properties, or
ordering the winding-up or liquidation of the affairs of any Obligor, and any
such decree or order shall continue unstayed and in effect for a period of
thirty consecutive days;
(g) Any Obligor shall file a petition, answer or consent seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable Federal, state or foreign bankruptcy law or
other similar law, or any Obligor shall consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment or taking of possession of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of any Obligor or
of substantially all of its properties, or any Obligor shall take any
corporate action in furtherance of any such action;
(h) A final judgment or judgments shall be entered by any court against
any Obligor for the payment of money which exceeds $500,000 in the aggregate,
or a warrant of attachment or execution or similar process shall be issued or
levied against property of any Obligor which, together with all other such
property of the Borrower and its Subsidiaries subject to other such process,
exceeds in value $500,000 in the aggregate, and if such judgment or award is
not insured or, within 30 days after the entry, issue or levy thereof, such
judgment, warrant or process shall not have been paid or discharged or stayed
pending appeal, or if, after the expiration of any such stay, such judgment,
warrant or process shall not have been paid or discharged;
(i) With respect to any Plan of the Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other
party-in-interest or disqualified person (other than any Lender) shall engage
in transactions which in the aggregate would reasonably be expected to result
in a direct or indirect liability to the Borrower or any member of its
-73-
<PAGE>
Controlled Group under Section 409 or 502 of ERISA or Section 4975 of the
Code; (ii) the Borrower or any member of its Controlled Group shall incur any
accumulated funding deficiency, as defined in Section 412 of the Code, or
request a funding waiver from the Internal Revenue Service for contributions;
(iii) the Borrower or any member of its Controlled Group shall incur any
withdrawal liability as a result of a complete or partial withdrawal within
the meaning of Section 4203 or 4205 of ERISA, or any other liability with
respect to a Plan, unless the amount of such liability has been funded within
the Plan or pursuant to one or more insurance contracts; (iv) the Borrower or
any member of its Controlled Group shall fail to make a required contribution
by the due date under Section 412 of the Code or Section 302 of ERISA which
would result in the imposition of a lien under Section 412 of the Code or
Section 302 of ERISA; (v) the Borrower, any member of its Controlled Group or
any Plan sponsor shall notify the PBGC of an intent to terminate, or the PBGC
shall institute proceedings to terminate, or the PBGC shall institute
proceedings to terminate, any Plan subject to Title IV of ERISA; (vi) a
Reportable Event shall occur with respect to a Plan subject to Title IV of
ERISA, and within 15 days after the reporting of such Reportable Event to the
Administrative Lender, the Administrative Lender shall have notified the
Borrower in writing that the Determining Lenders have made a determination
that, on the basis of such Reportable Event, there are reasonable grounds for
the termination of such Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such Plan
and as a result thereof an Event of Default shall have occurred hereunder;
(vii) a trustee shall be appointed by a court of competent jurisdiction to
administer any Plan or the assets thereof; or (viii) any ERISA Event with
respect to a Plan subject to Title IV of ERISA shall have occurred, and 30
days thereafter (A) such ERISA Event, other than such event described in
clause (f) of the definition of ERISA Event herein, (if correctable) shall
not have been corrected and (B) the then present value of such Plan's benefit
liabilities, as defined in Title IV of ERISA, shall exceed the then current
value of assets accumulated in such Plan; PROVIDED, HOWEVER, that the events
listed in subsections (i) - (viii) above shall constitute Events of Default
only if the maximum aggregate liability which the Borrower or any member of
its Controlled Group has a reasonable likelihood of incurring under the
applicable provisions of ERISA resulting from an event or events exceeds
$100,000.
(j) The Borrower or any Subsidiary of the Borrower shall default in the
payment of any Indebtedness or any lease obligations in an aggregate amount
of $1,000,000 or more beyond any grace period provided with respect thereto,
or any other event or condition shall exist under any agreement or instrument
under which such Indebtedness is created or evidenced beyond any applicable
grace period, if the effect of such event or condition is to permit or cause
the holder of such Indebtedness (or a trustee on behalf of any such holder)
to (i) cause such Indebtedness to be prepaid or to become due prior to its
date of maturity or (ii) require the Borrower or any Subsidiary of the
Borrower to purchase such Indebtedness;
(k) Any lease where the Borrower or any Subsidiary of the Borrower is
the lessee shall terminate or cease to be effective, and termination or
cessation thereof, together with all other leases, if any, which have been
terminated or cease to be effective, could reasonably be expected to have a
Material Adverse Effect; provided, however, that termination or cessation
-74-
<PAGE>
of a lease shall not constitute an Event of Default if another lease
reasonably satisfactory to the Determining Lenders is contemporaneously
substituted therefor;
(l) Any material provision of any Loan Document shall for any reason
cease to be valid and binding on or enforceable against any party to it
(other than the Administrative Lender or any Lender) other than in accordance
with its terms, or any such party (other than the Administrative Lender or
any Lender) shall so assert in writing and any such event or circumstance
shall continue for seven days following notification of the occurrence or
existence thereof from the Administrative Lender to the Borrower; provided,
however, that such notice, grace and cure period shall not apply to any event
or circumstance evidenced or represented by any assertion in writing by the
Borrower or any Affiliate of the Borrower;
(m) Any Collateral Document shall for any reason (other than pursuant
to the terms thereof) cease to create a valid and perfected first priority
Lien in Collateral having a value in an aggregate amount in excess of
$100,000;
(n) A Change of Control shall occur; or
(o) The Borrower, CFI or EFC shall breach or be in default of any
obligations under the MSAA and such breach or default continues beyond any
applicable grace and/or cure period contained therein; or there shall occur a
material impairment of the enforceability of the rights and benefits intended
for the benefit of NationsBank as a Beneficial Secured Party (as such term is
defined in the MSAA) under the MSAA or the taking of any action by any Person
to challenge same; or the Borrower, CFI or EFC shall breach or be in default
of any obligations under the RPA and such breach or default continues beyond
any applicable grace and/or cure period contained therein; or there shall
occur any "Termination Event" or "Potential Termination Event" as those terms
are defined by the TAA.
Section 8.2 REMEDIES. If an Event of Default shall have occurred and
shall be continuing:
(a) With the exception of an Event of Default specified in SECTION
8.1(f) or (g) hereof, the Administrative Lender shall, upon the direction of
the Determining Lenders, terminate the Commitments and/or declare the
principal of and interest on the Advances and all Obligations and other
amounts owed under the Loan Documents to be forthwith due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, anything in the Loan Documents to the contrary
notwithstanding.
(b) Upon the occurrence of an Event of Default specified in SECTION
8.1(f) or (g) hereof, such principal, interest and other amounts shall
thereupon and concurrently therewith become due and payable and the
Commitments shall forthwith terminate, all without any action by the
Administrative Lender, any Lender or any holders of the Notes and without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in the Loan Documents to the contrary
notwithstanding.
-75-
<PAGE>
(c) If any Letter of Credit shall be then outstanding, the
Administrative Lender may, and upon the direction of the Determining Lenders
shall, demand upon the Borrower to, and forthwith upon such demand, the
Borrower shall, pay to the Administrative Lender in same day funds at the
office of the Administrative Lender for deposit in the L/C Cash Collateral
Account, an amount equal to the maximum amount available to be drawn under
the Letters of Credit then outstanding.
(d) The Administrative Lender and the Lenders may exercise all of the
Rights granted to them under the Loan Documents or under Applicable Law.
(e) The Rights of the Administrative Lender and the Lenders hereunder
shall be cumulative, and not exclusive.
ARTICLE 9
CHANGES IN CIRCUMSTANCES
Section 9.1 LIBOR BASIS DETERMINATION INADEQUATE. If with respect to
any proposed LIBOR Advance for any Interest Period, (i) any Lender determines
that deposits in dollars (in the applicable amount) are not being offered to
that Lender in the relevant market for such Interest Period or (ii) the
Determining Lenders determine that the LIBOR Rate for such proposed LIBOR
Advance does not adequately cover the cost to such Lender of making and
maintaining such proposed LIBOR Advance for such Interest Period, such Lender
or Determining Lenders, as the case may be, shall forthwith give notice
thereof to the Borrower, whereupon until such Lender or Determining Lenders,
as the case may be, notify the Borrower that the circumstances giving rise to
such situation no longer exist, the obligation of such Lender to make LIBOR
Advances shall be suspended; PROVIDED, HOWEVER, such Lender or the
Determining Lenders, as the case may be, shall promptly notify the Borrower
if the circumstances giving rise to such situation no longer exist.
Section 9.2 ILLEGALITY. If any change in applicable law, rule or
regulation, or adoption thereof, or any change in any interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by any Lender (or its LIBOR Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency, shall make it unlawful or impossible for
such Lender (or its LIBOR Lending Office) to make, maintain or fund its LIBOR
Advances, such Lender shall so notify the Borrower and the Administrative
Lender. Before giving any notice to the Borrower pursuant to this Section,
the notifying Lender shall designate a different LIBOR Lending Office or
other lending office if such designation will avoid the need for giving such
notice and will not, in the sole judgment of the Lender, be materially
disadvantageous to the Lender. Upon receipt of such notice, notwithstanding
anything contained in ARTICLE 2 hereof, the Borrower shall repay in full the
then outstanding principal amount of each LIBOR Advance owing to the
notifying Lender,
-76-
<PAGE>
together with accrued interest thereon and any reimbursement required under
SECTION 2.9 hereof, on either (a) the last day of the Interest Period
applicable to such Advance, if the Lender may lawfully continue to maintain
and fund such Advance to such day, or (b) immediately, if the Lender may not
lawfully continue to fund and maintain such Advance to such day or if the
Borrower so elects. Concurrently with repaying each affected LIBOR Advance
owing to such Lender if the Borrower does not terminate this Agreement,
notwithstanding anything contained in ARTICLE 2 hereof, the Borrower may,
without any requirement to satisfy the conditions precedent set forth in
SECTION 3.1, 3.2 or 3.3, borrow a Base Rate Advance from such Lender, and
such Lender shall make such Base Rate Advance, in an amount such that the
outstanding principal amount of the Advances owing to such Lender shall equal
the outstanding principal amount of the Advances owing immediately prior to
such repayment.
Section 9.3 INCREASED COSTS.
(a) If after the Agreement Date any change in or adoption of any law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof or compliance by
any Lender (or its LIBOR Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank
or compatible agency:
(i) shall subject a Lender (or its LIBOR Lending Office) to any
Tax (net of any tax benefit engendered thereby) with respect to its
LIBOR Advances or its obligation to make such Advances, or shall change
the basis of taxation of payments to a Lender (or to its LIBOR Lending
Office) of the principal of or interest on its LIBOR Advances or in
respect of any other amounts due under this Agreement, as the case may
be, or its obligation to make such Advances (except for changes in the
rate of tax on the overall net income, net worth or capital of the
Lender and franchise taxes, doing business taxes or minimum taxes
imposed upon such Lender); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, a Lender's LIBOR Lending Office or shall impose on the
Lender (or its LIBOR Lending Office) or on the London interbank market
any other condition affecting its LIBOR Advances or its obligation to
make such Advances (but excluding any reserves or deposits that are
included in the calculation of LIBOR Basis);
and the result of any of the foregoing is to increase the cost to a Lender
(or its LIBOR Lending Office) of making or maintaining any LIBOR Advances, or
to reduce the amount of any sum received or receivable by a Lender (or its
LIBOR Lending Office) with respect thereto, by an amount deemed by a Lender
to be material, then, within 30 days after demand by a Lender, the Borrower
agrees to pay to such Lender such additional amount as will compensate such
Lender for such increased costs or reduced amounts, subject to SECTION 11.9
hereof. The affected
-77-
<PAGE>
Lender will as soon as practicable notify the Borrower of any event of which
it has knowledge, occurring after the date hereof, which will entitle such
Lender to compensation pursuant to this Section and will designate a
different LIBOR Lending Office or other lending office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the reasonable judgment of the affected Lender made in good faith, be
disadvantageous to such Lender.
(b) A certificate of any Lender claiming compensation under this
Section and setting forth the additional amounts to be paid to it hereunder
shall certify that such amounts or costs were actually incurred by such
Lender and shall show in reasonable detail an accounting of the amount
payable and the calculations used to determine in good faith such amount and
shall be conclusive absent manifest or demonstrable error. In determining
such amount, a Lender may use any reasonable averaging and attribution
methods. Nothing in this SECTION 9.3 shall provide the Borrower or any
Subsidiary of the Borrower the right to inspect the records, files or books
of any Lender. If a Lender demands compensation under this Section, the
Borrower may at any time, upon at least five Business Days' prior notice to
the Lender, after reimbursement to the Lender by the Borrower in accordance
with this Section of all costs incurred, prepay in full the then outstanding
LIBOR Advances of the Lender, together with accrued interest thereon to the
date of prepayment, along with any reimbursement required under SECTION 2.9
hereof. Concurrently with prepaying such LIBOR Advances, the Borrower may
borrow a Base Rate Advance from the Lender, and the Lender shall make such
Base Rate Advance, in an amount such that the outstanding principal amount of
the Advances owing to such Lender shall equal the outstanding principal
amount of the Advances owing immediately prior to such prepayment.
Section 9.4 EFFECT ON BASE RATE ADVANCES. If notice has been given
pursuant to SECTION 9.1, 9.2 or 9.3 hereof suspending the obligation of a
Lender to make LIBOR Advances, or requiring LIBOR Advances of a Lender to be
repaid or prepaid, then, unless and until the Lender notifies the Borrower
that the circumstances giving rise to such repayment no longer apply, all
Advances which would otherwise be made by such Lender as LIBOR Advances shall
be made instead as Base Rate Advances.
Section 9.5 CAPITAL ADEQUACY. If after the Agreement Date, (a) the
introduction of or any change in or in the interpretation of any law, rule or
regulation or (b) compliance by a Lender with any law, rule or regulation or
any guideline or request from any central bank or other governmental
authority (whether or not having the force of law) adopted or promulgated
after the Agreement Date affects or would affect the amount of capital
required or expected to be maintained by a Lender or any corporation
controlling such Lender, and such Lender determines that the amount of such
capital is increased by or based upon the existence of such Lender's
commitment or Advances hereunder and other commitments or advances of such
Lender of this type, then, within 30 days after demand by such Lender,
subject to SECTION 11.9, the Borrower shall immediately pay to such Lender,
from time to time as specified by such Lender, additional amounts sufficient
to compensate such Lender with respect to such circumstances, to the extent
that such Lender reasonably determines in good faith such increase in capital
to be allocable to the existence of such Lender's Commitments hereunder. A
-78-
<PAGE>
certificate as to any additional amounts payable to any Lender under this
SECTION 9.5 submitted to the Borrower by such Lender shall certify that such
amounts were actually incurred by such Lender or corporation controlling such
Lender and shall show in reasonable detail an accounting of the amount
payable and the calculations used to determine in good faith such amount and
shall be conclusive absent manifest or demonstrable error. In determining
such amount, such Lender or a corporation controlling such Lender may use any
reasonable averaging and attribution methods. Notwithstanding the foregoing,
nothing in this SECTION 9.5 shall provide the Borrower or any Subsidiary of
the Borrower the right to inspect the records, files or books of any Lender
or any corporation controlling such Lender.
Section 9.6 REPLACEMENT LENDER. If (i) any Lender is unable or
unwilling to make, maintain or fund any LIBOR Advance pursuant to SECTION 9.1
or 9.2 or (ii) the Borrower becomes obligated to pay additional amounts to
any Lender described in SECTION 9.3 or 9.5, the Borrower may designate a
financial institution reasonably acceptable to the Administrative Lender to
replace such Lender by purchasing for cash and receiving an assignment of
such Lender's pro rata share of such Lender's Commitment and the Rights of
such Lender under the Loan Documents without recourse to or warranty by, or
expense to, such Lender, for a purchase price equal to the outstanding
amounts owing to such Lender (including such additional amounts owing to such
Lender pursuant to SECTION 9.2, 9.3 or 9.5). Upon execution of an Assignment
Agreement, such other financial institution shall be deemed to be a "Lender"
for all purposes of this Agreement as set forth in SECTION 11.6 hereof.
ARTICLE 10
AGREEMENT AMONG LENDERS
Section 10.1 AGREEMENT AMONG LENDERS. The Lenders agree among
themselves that:
(a) ADMINISTRATIVE LENDER. Each Lender hereby appoints the
Administrative Lender as its nominee in its name and on its behalf, to
receive all documents and items to be furnished hereunder; to act as nominee
for and on behalf of all Lenders under the Loan Documents; to, except as
otherwise expressly set forth herein, take such action as may be requested by
the Determining Lenders, provided that, (i) unless and until the
Administrative Lender shall have received such requests, the Administrative
Lender may take such administrative action, or refrain from taking such
administrative action, as it may deem advisable and in the best interests of
the Lenders, and (ii) the Administrative Lender shall not be required to take
any action that exposes the Administrative Lender to personal liability or
that is contrary to any Loan Document or Applicable Law; to arrange the means
whereby the proceeds of the Advances of the Lenders are to be made available
to the Borrower; to distribute promptly to each Lender information, requests
and documents received from the Borrower hereunder and not otherwise provided
to such Lender by the Borrower or any other Person, and each payment (in like
funds received) with respect to any of such Lender's Advances, or the ratable
amount of fees or other amounts; and to deliver to the Borrower requests,
demands, approvals and consents received from the
-79-
<PAGE>
Lenders. Administrative Lender agrees to promptly distribute to each Lender,
at such Lender's address set forth below information, requests, documents and
payments received from the Borrower and not otherwise provided to such Lender
by the Borrower or any other Person. The Administrative Lender shall have no
fiduciary relationship in respect of any Lender by reason of this Agreement
or any other Loan Document. The Administrative Lender shall have no duties
or responsibilities except those expressly set forth in this Agreement. The
duties of the Administrative Lender are mechanical and administrative in
nature.
(b) REPLACEMENT OF ADMINISTRATIVE LENDER. Should the Administrative
Lender or any successor Administrative Lender ever cease to be a Lender
hereunder, or should the Administrative Lender or any successor
Administrative Lender ever resign as Administrative Lender, or should the
Administrative Lender or any successor Administrative Lender ever be removed
with cause or without cause by the action of all Lenders (other than the
Administrative Lender), then the Lender appointed by the other Lenders (with
the consent of the Borrower, which consent shall not be unreasonably
withheld) shall forthwith become the Administrative Lender, and the Borrower
and the Lenders shall execute such documents as any Lender may reasonably
request to reflect such change. If the Administrative Lender also then
serves in the capacity of the Swing Line Bank or the Issuing Bank, such
resignation or removal shall constitute resignation or removal of the Swing
Line Bank and the Issuing Bank. Any resignation or removal of the
Administrative Lender or any successor Administrative Lender shall become
effective upon the appointment by the Lenders of a successor Administrative
Lender; provided, however, if no successor Administrative Lender shall have
been so appointed and shall have accepted such appointment within 30 days
after the retiring Administrative Lender's giving of notice of resignation or
the Lenders' removal of the retiring Administrative Lender, then the retiring
Administrative Lender may, on behalf of the Lenders, appoint a successor
Administrative Lender, which shall be a commercial bank organized under the
Laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as the Administrative Lender hereunder by a successor
Administrative Lender, such successor Administrative Lender shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Administrative Lender, and the retiring Administrative Lender shall be
discharged from its duties and obligations under the Loan Documents, provided
that if the retiring or removed Administrative Lender is unable to appoint a
successor Administrative Lender, the Administrative Lender shall, after the
expiration of a 60 day period from the date of notice, be relieved of all
obligations as Administrative Lender hereunder. Notwithstanding any
Administrative Lender's resignation or removal hereunder, the provisions of
this Article shall continue to inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Administrative Lender under
this Agreement.
(c) EXPENSES. Each Lender shall pay its pro rata share, based on its
Specified Percentage, of any expenses paid by the Administrative Lender
directly and solely in connection with any of the Loan Documents and/or the
Securitization Documents if Administrative Lender does not receive
reimbursement therefor from other sources within 60 days after the date
incurred. Any amount so paid by the Lenders to the Administrative Lender
shall be returned
-80-
<PAGE>
by the Administrative Lender pro rata to each paying Lender to the extent
later paid by the Borrower or any other Person on the Borrower's behalf to
the Administrative Lender.
(d) DELEGATION OF DUTIES. The Administrative Lender may execute any of
its duties hereunder by or through officers, directors, employees, attorneys
or agents, and shall be entitled to (and shall be protected in relying upon)
advice of counsel concerning all matters pertaining to its duties hereunder.
(e) RELIANCE BY ADMINISTRATIVE LENDER. The Administrative Lender and
its officers, directors, employees, attorneys and agents shall be entitled to
rely and shall be fully protected in relying on any writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telex
or teletype message, statement, order, or other document or conversation
reasonably believed by it or them in good faith to be genuine and correct and
to have been signed or made by the proper Person and, with respect to legal
matters, upon opinions of counsel selected by the Administrative Lender. The
Administrative Lender may, in its reasonable judgment, deem and treat the
payee of any Note as the owner thereof for all purposes hereof.
(f) LIMITATION OF ADMINISTRATIVE LENDER'S LIABILITY. Neither the
Administrative Lender nor any of its officers, directors, employees,
attorneys or agents shall be liable for any action taken or omitted to be
taken by it or them hereunder in good faith and believed by it or them to be
within the discretion or power conferred to it or them by the Loan Documents
or be responsible for the consequences of any error of judgment, except for
its or their own gross negligence or wilful misconduct. Except as aforesaid,
the Administrative Lender shall be under no duty to enforce any rights with
respect to any of the Advances, or any security therefor. The Administrative
Lender shall not be compelled to do any act hereunder or to take any action
towards the execution or enforcement of the powers hereby created or to
prosecute or defend any suit in respect hereof, unless indemnified to its
reasonable satisfaction against loss, cost, liability and expense unless
expressly provided to the contrary herein. The Administrative Lender shall
not be responsible in any manner to any Lender for the effectiveness,
enforceability, genuineness, validity or due execution of any of the Loan
Documents, or for any representation, warranty, document, certificate, report
or statement made herein or furnished in connection with any Loan Documents,
or be under any obligation to any Lender to ascertain or to inquire as to the
performance or observation of any of the terms, covenants or conditions of
any Loan Documents on the part of the Borrower. TO THE EXTENT NOT REIMBURSED
BY THE BORROWER, EACH LENDER HEREBY SEVERALLY INDEMNIFIES AND HOLDS HARMLESS
THE ADMINISTRATIVE LENDER, PRO RATA ACCORDING TO ITS SPECIFIED PERCENTAGE,
FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND/OR DISBURSEMENTS OF
ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR
INCURRED BY THE ADMINISTRATIVE LENDER (IN SUCH CAPACITY) IN ANY WAY WITH
RESPECT TO ANY LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY THE
ADMINISTRATIVE LENDER UNDER THE LOAN DOCUMENTS (INCLUDING ANY
-81-
<PAGE>
NEGLIGENT ACTION OF THE ADMINISTRATIVE LENDER), EXCEPT TO THE EXTENT THE SAME
ARE FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION TO RESULT FROM
GROSS NEGLIGENCE OR WILFUL MISCONDUCT BY THE ADMINISTRATIVE LENDER. THE
INDEMNITY PROVIDED IN THIS SECTION 10.1(f) SHALL SURVIVE TERMINATION OF THIS
AGREEMENT.
(g) LIABILITY AMONG LENDERS. No Lender shall incur any liability
(other than the sharing of expenses and other matters specifically set forth
herein and in the other Loan Documents) to any other Lender, except for acts
or omissions in bad faith.
(h) RIGHTS AS LENDER. With respect to its commitment hereunder, the
Advances made by it and the Notes issued to it, the Administrative Lender
shall have the same rights as a Lender and may exercise the same as though it
were not the Administrative Lender, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Lender in
its individual capacity. The Administrative Lender or any Lender may accept
deposits from, act as trustee under indentures of, and generally engage in
any kind of business with, the Borrower and any of its Affiliates, and any
Person who may do business with or own securities of the Borrower or any of
its Affiliates, all as if the Administrative Lender were not the
Administrative Lender hereunder and without any duty to account therefor to
the Lenders.
Section 10.2 LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Lender or any
other Lender and based upon the financial statements referred to in SECTIONS
4.1(j), 6.1, and 6.2 hereof, and such other documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Lender or any
other Lender and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under this Agreement and the other Loan Documents. Each
Lender also acknowledges that its decision to fund the initial Advances shall
constitute evidence to the Administrative Lender that such Lender has deemed
all of the conditions set forth in Section 3.1 to have been satisfied.
Section 10.3 BENEFITS OF ARTICLE. None of the provisions of this
Article shall inure to the benefit of any Person other than Lenders and, with
respect to SECTION 10.1(b), the Borrower; consequently, no such other Person
shall be entitled to rely upon, or to raise as a defense, in any manner
whatsoever, the failure of the Administrative Lender or any Lender to comply
with such provisions.
-82-
<PAGE>
ARTICLE 11
MISCELLANEOUS
Section 11.1 NOTICES.
(a) All notices and other communications under this Agreement shall be
in writing (except in those cases where giving notice by telephone is
expressly permitted) and shall be deemed to have been given on the date
personally delivered or sent by telecopy (answerback received), or three days
after deposit in the mail, designated as certified mail, return receipt
requested, postage-prepaid, or one day after being entrusted to a reputable
commercial overnight delivery service, addressed to the party to which such
notice is directed at its address determined as provided in this Section.
All notices and other communications under this Agreement shall be given to
the parties hereto at the following addresses:
(i) If to the Borrower, at:
CompuCom Systems, Inc.
10100 North Central Expressway
Dallas, Texas 75231
Attn: Robert J. Boutin
Senior Vice President, Finance and Chief Financial Officer
(ii) If to the Administrative Lender, at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Brent W. Mellow
Vice President
(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.
(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other
parties.
Section 11.2 EXPENSES. The Borrower shall promptly pay:
(a) all reasonable out-of-pocket expenses of the Administrative Lender
in connection with the preparation, negotiation, execution and delivery of
this Agreement and the other Loan Documents, the transactions contemplated
hereunder and thereunder, and the making of
-83-
<PAGE>
Advances hereunder, including without limitation the reasonable fees and
disbursements of Special Counsel;
(b) all reasonable out-of-pocket expenses and reasonable attorneys'
fees of the Administrative Lender in connection with the administration of
the transactions contemplated in this Agreement and the other Loan Documents
and the preparation, negotiation, execution and delivery of any waiver,
amendment or consent by the Administrative Lender relating to this Agreement
or the other Loan Documents; and
(c) all reasonable costs, out-of-pocket expenses and reasonable
attorneys' fees of the Administrative Lender and each Lender incurred for
enforcement, collection, restructuring, refinancing and "work-out", or
otherwise incurred in obtaining performance under the Loan Documents, which
in each case shall include without limitation fees and expenses of
consultants, counsel for the Administrative Lender and any Lender, and
administrative fees for the Administrative Lender.
Section 11.3 WAIVERS. The rights and remedies of the Lenders under
this Agreement and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies which they would otherwise have. No
failure or delay by the Administrative Lender or any Lender in exercising any
right shall operate as a waiver of such right. The Lenders expressly reserve
the right to require strict compliance with the terms of this Agreement in
connection with any funding of a request for an Advance or issuance of a
Letter of Credit. In the event that any Lender decides to fund an Advance at
a time when the Borrower is not in strict compliance with the terms of this
Agreement, such decision by such Lender shall not be deemed to constitute an
undertaking by the Lender to fund any further requests for Advances or
preclude the Lenders from exercising any rights available under the Loan
Documents or at law or equity. Any waiver or indulgence granted by the
Lenders shall not constitute a modification of this Agreement, except to the
extent expressly provided in such waiver or indulgence, or constitute a
course of dealing by the Lenders at variance with the terms of the Agreement
such as to require further notice by the Lenders of the Lenders' intent to
require strict adherence to the terms of the Agreement in the future. Any
such actions shall not in any way affect the ability of the Administrative
Lender or the Lenders, in their discretion, to exercise any rights available
to them under this Agreement or under any other agreement, whether or not the
Administrative Lender or any of the Lenders are a party thereto, relating to
the Borrower.
Section 11.4 CALCULATION BY THE LENDERS CONCLUSIVE AND BINDING. Any
mathematical calculation required or expressly permitted to be made by the
Administrative Lender or any Lender under this Agreement shall be made in its
reasonable judgment and in good faith, and shall when made, absent manifest
error, be controlling.
Section 11.5 SET-OFF. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon the occurrence and during the continuation of an Event of Default, each
Lender and any subsequent holder of any Note, and any assignee of any Note is
hereby authorized by the Borrower at any time or from time to
-84-
<PAGE>
time, without notice to the Borrower or any other Person, any such notice
being hereby expressly waived, to set-off, appropriate and apply any deposits
(general or special (except trust and escrow accounts), time or demand,
including without limitation Indebtedness evidenced by certificates of
deposit, in each case whether matured or unmatured) and any other
Indebtedness at any time held or owing by such Lender or holder to or for the
credit or the account of the Borrower, against and on account of the
Obligations and other liabilities of the Borrower to such Lender or holder,
irrespective of whether or not (a) the Lender or holder shall have made any
demand hereunder, or (b) the Lender or holder shall have declared the
principal of and interest on the Advances and other amounts due hereunder to
be due and payable as permitted by SECTION 8.2. Any sums obtained by any
Lender or by any assignee or subsequent holder of any Note shall be subject
to pro rata treatment of all Obligations and other liabilities hereunder.
Any Lender exercising any Rights under this SECTION 11.5 shall give the
Borrower prompt notice thereof after such exercise.
Section 11.6 ASSIGNMENT.
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder or under the other Loan Documents without the prior
written consent of the Lenders.
(b) No Lender shall be entitled to assign or grant a participation in
its interest in this Agreement, its Notes or its Advances, except as
hereinafter set forth.
(c) Without the consent of the Borrower, any Lender may at any time
sell participations in all or any part of its Advances and Reimbursement
Obligations (collectively, "PARTICIPATIONS") to any banks or other financial
institutions ("PARTICIPANTS") provided that neither such Participation nor
any agreement relating thereto shall confer on any Person (other than the
parties hereto) any right to vote on, approve or sign amendments or waivers,
or any other independent benefit or any legal or equitable right, remedy or
other claim under this Agreement or any other Loan Documents, other than the
right to vote on, approve, or sign amendments or waivers or consents with
respect to items that would result in (i) any increase in the commitment of
any Participant; or (ii)(A) the extension of the date of maturity of, or (B)
the extension of the due date for any payment of principal, interest or fees
respecting, or (C) the reduction of the amount of any installment of
principal or interest on or the change or reduction of any mandatory
reduction required hereunder, or (D) a reduction of the rate of interest on,
the Advances, the Letters of Credit, or the Reimbursement Obligations to
which such Participant is entitled; or (iii) the release of security for the
Obligations, including without limitation any guarantee, except pursuant to
this Agreement or the other Loan Documents; or (iv) the reduction of any fees
payable hereunder to which such Participant is entitled. Notwithstanding the
foregoing, the Borrower agrees that the Participants shall be entitled to the
benefits of ARTICLE 9 hereof as though they were Lenders and the Lenders may,
subject to SECTION 11.14 hereof, provide copies of all financial information
received from the Borrower to such Participants.
-85-
<PAGE>
(d) Each Lender may assign to one or more financial institutions
organized under the laws of the United States, or any state thereof, or under
the laws of any other country that is a member of the Organization for
Economic Cooperation and Development, or a political subdivision of any such
country, which is engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business (each, an "ASSIGNEE")
its rights and obligations under this Agreement and the other Loan Documents;
PROVIDED, HOWEVER, that (i) each such assignment shall be subject to the
prior written consent of the Administrative Lender and Borrower, which
consent shall not be unreasonably withheld (PROVIDED, HOWEVER,
notwithstanding anything herein to the contrary, no consent of the Borrower
is required for any assignment during any time that an Event of Default has
occurred and is continuing), (ii) no such assignment shall be in an amount of
Commitments less than $10,000,000 unless such lesser amount represents the
entirety of the Commitments of the applicable Lender, (iii) the applicable
Lender, Administrative Lender and applicable Assignee shall execute and
deliver to the Administrative Lender an Assignment and Acceptance Agreement
(an "ASSIGNMENT AGREEMENT") in substantially the form of EXHIBIT H hereto,
together with the Notes subject to such assignment, (iv) the Assignee
executing the Assignment, shall deliver to the Administrative Lender a
processing fee of $3,000 and (v) each such assignment shall be a constant,
not a varying, percentage of the assigning Lender's Rights and obligations in
respect of the Facility A Advances and the Facility B Advances. Upon such
execution, delivery and acceptance from and after the effective date
specified in each Assignment, which effective date shall be at least three
Business Days after the execution thereof, (A) the Assignee thereunder shall
be party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment, have the rights and
obligations of a Lender hereunder and (B) the applicable Lender shall, to the
extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment, relinquish such rights and be released from such
obligations under this Agreement.
(e) Notwithstanding anything in clause (d) above to the contrary, any
Lender may assign and pledge all or any portion of its Advances and Notes to
any Federal Reserve Bank as collateral security pursuant to Regulation A of
F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank;
provided, however, that no such assignment under this clause (e) shall
release the assignor Lender from its obligations hereunder.
(f) Upon its receipt of an Assignment Agreement executed by a Lender
and an Assignee, and any Note or Notes subject to such assignment, the
Borrower shall, within five Business Days after its receipt of such
Assignment Agreement, at no expense to the Borrower, execute and deliver to
the Administrative Lender in exchange for the surrendered Notes new Notes to
the order of such Assignee in an amount equal to the portion of the Advances
and Commitments assigned to it pursuant to such Assignment Agreement and new
Notes to the order of the assignor Lender in an amount equal to the portion
of the Advances and Commitments retained by it hereunder. Such new Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Notes, shall be dated the effective date of such
Assignment Agreement and shall otherwise be in substantially the form of
EXHIBIT A or B hereto, as applicable.
-86-
<PAGE>
(g) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this SECTION 11.6,
disclose to the assignee or Participant or proposed assignee or participant,
any information relating to the Borrower furnished to such Lender by or on
behalf of the Borrower, provided such Person agrees in writing to handle such
information in accordance with the standards set forth in SECTION 11.14
hereof.
(h) Except as specifically set forth in this SECTION 11.6, nothing in
this Agreement or any other Loan Documents, expressed or implied, is intended
to or shall confer on any Person other than the respective parties hereto and
thereto and their successors and assignees permitted hereunder and thereunder
any benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan Documents.
(i) Notwithstanding anything in this SECTION 11.6 to the contrary, no
Assignee or Participant (nor the assigning or participating Lender) shall be
entitled to receive (whether individually or collectively) any greater
payment under SECTION 2.14 or SECTION 9.3 or SECTION 9.5 than such assigning
or participating Lender would have been entitled to receive with respect to
the interest assigned or participated to such Assignee or Participant.
Section 11.7 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all such separate counterparts shall together constitute but one and the same
instrument.
Section 11.8 SEVERABILITY. Any provision of this Agreement which is
for any reason prohibited or found or held invalid or unenforceable by any
court or governmental agency shall be ineffective to the extent of such
prohibition or invalidity or unenforceability without invalidating the
remaining provisions hereof in such jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 11.9 INTEREST AND CHARGES. It is not the intention of any
parties to this Agreement to make an agreement in violation of the laws of
any applicable jurisdiction relating to usury. Regardless of any provision
in any Loan Documents, no Lender shall ever be entitled to receive, collect
or apply, as interest on the Obligations, any amount in excess of the Highest
Lawful Amount. If any Lender or participant ever receives, collects or
applies, as interest, any such excess, such amount which would be excessive
interest shall be deemed a partial repayment of principal and treated
hereunder as such; and if principal is paid in full, any remaining excess
shall be paid to the Borrower. In determining whether or not the interest
paid or payable, under any specific contingency, exceeds the Highest Lawful
Rate, the Borrower and the Lenders shall, to the maximum extent permitted
under Applicable Law, (a) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effect thereof, and (c) amortize, prorate, allocate and
spread in equal parts, the total amount of interest throughout the entire
contemplated term of the Obligations so that the interest rate is uniform
throughout the entire term of the Obligations; provided, however, that if the
Obligations are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period
of existence thereof exceeds the
-87-
<PAGE>
Highest Lawful Rate, the Lenders shall refund to the Borrower the amount of
such excess or credit the amount of such excess against the total principal
amount of the Obligations owing, and, in such event, the Lenders shall not be
subject to any penalties provided by any laws for contracting for, charging
or receiving interest in excess of the Highest Lawful Rate. This Section
shall control every other provision of all agreements pertaining to the
transactions contemplated by or contained in the Loan Documents.
Section 11.10 HEADINGS. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation
of any provision hereof.
Section 11.11 AMENDMENT AND WAIVER. The provisions of this Agreement
may not be amended, modified or waived except by the written agreement of the
Borrower and the Determining Lenders; provided, however, that no such
amendment, modification or waiver shall be made (a) without the consent of
all Lenders, if it would (i) increase the Specified Percentage or commitment
of any Lender, or (ii) extend or postpone the date of maturity of, extend the
due date for any payment of principal or interest on, reduce the amount of
any installment of principal or interest on, or reduce the rate of interest
on, any Advance, the Reimbursement Obligations or other amount owing under
any Loan Documents to which such Lender is entitled, or (iii) release any
security for or guaranty of the Obligations (except pursuant to this
Agreement or the other Loan Documents), or (iv) reduce the fees payable
hereunder to which such Lender is entitled, or (v) revise this SECTION 11.11,
or (vi) waive the date for payment of any principal, interest or fees
hereunder or (vii) amend the definition of Determining Lenders; (b) without
the consent of the Swing Line Bank, if it would alter the rights, duties or
obligations of the Swing Line Bank; (c) without the consent of the
Administrative Lender, if it would alter the rights, duties or obligations of
the Administrative Lender; or (d) without the consent of the Issuing Bank, if
it would alter the rights, duties or obligations of the Issuing Bank.
Neither this Agreement nor any term hereof may be amended orally, nor may any
provision hereof be waived orally but only by an instrument in writing signed
by the Administrative Lender and, in the case of an amendment, by the
Borrower. Notwithstanding the foregoing, each Lender (in its capacity as a
Lender hereunder and, if applicable, in its capacity as a "Participant" under
the Existing Credit Agreement) hereby consents to, and authorizes, the
release by the Administrative Lender of any and all Liens insofar as same (i)
arose under the Existing Credit Agreement and (ii) cover property other than
the Borrower's Receivables, the Borrower's Inventory, the CFI Note, the
ClientLink Note, the Equity interest of the Borrower in CFI, the rights of
CompuCom Properties, Inc. under that certain Trademark License Agreement,
dated as of October 25, 1991, between CompuCom Properties, Inc., as licensor,
and the Borrower, as licensee, and/or any proceeds, products, amendments,
modifications and/or restatements of or to any of the foregoing property.
Furthermore, each Lender which is a "Participant" (as such term is defined in
the Existing Credit Agreement) hereby consents to, and authorizes, the sale
and transfer of the Existing Credit Agreement and the indebtedness, Liens and
other rights thereunder or in connection therewith to the Administrative
Lender, for the ratable benefit of the Lenders hereunder.
-88-
<PAGE>
Section 11.12 EXCEPTION TO COVENANTS. Neither the Borrower nor any
Subsidiary of the Borrower shall be deemed to be permitted to take any action
or fail to take any action which is permitted as an exception to any of the
covenants contained herein or which is within the permissible limits of any
of the covenants contained herein if such action or omission would result in
the breach of any other covenant contained herein.
Section 11.13 NO LIABILITY OF ISSUING BANK. The Borrower assumes all
risks of the acts or omissions of any beneficiary or transferee of any Letter
of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank nor any Lender nor any of their respective officers or directors
shall be liable or responsible for: (a) the use that may be made of any
Letter of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents should prove
to be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by the Issuing Bank against presentation of documents that do not
comply with the terms of a Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of
Credit, except for any payment made upon the Issuing Bank's gross negligence
or wilful misconduct; or (d) any other circumstances whatsoever in making or
failing to make payment under any Letter of Credit, EXCEPT that the Borrower
shall have a claim against the Issuing Bank, and the Issuing Bank shall be
liable to the Borrower, to the extent of any direct, but not consequential,
damages suffered by the Borrower that a court of competent jurisdiction
determines were caused by (i) the Issuing Bank's wilful misconduct or gross
negligence or (ii) the Issuing Bank's wilful failure to make lawful payment
under a Letter of Credit after the presentation to it of a draft and
certificates strictly complying with the terms and conditions of the Letter
of Credit. In furtherance and not in limitation of the foregoing, the
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
Section 11.14 CONFIDENTIALITY. Each Lender and the Administrative
Lender agrees (on behalf of itself and each of its Affiliates, directors,
officers, employees and representatives) to use reasonable precautions to
keep confidential, in accordance with customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, any non-public information supplied to it by the Borrower
pursuant to this Agreement which is identified by the Borrower as being
confidential at the time the same is delivered to the Lenders or the
Administrative Lender, provided that nothing herein shall limit the
disclosure of any such information (a) to the extent required by statute,
rule, regulation or judicial process, (b) to counsel for any Lender or the
Administrative Lender, (c) to bank examiners, auditors or accountants of any
Lender, (d) to the Administrative Lender or any other Lender, (e) in
connection with any Litigation to which any one or more of Lenders is a
party, provided, further, that, unless specifically prohibited by Applicable
Law or court order, each Lender shall, prior to disclosure thereof, notify
Borrower of any request for disclosure of any such non-public information (i)
by any Tribunal or representative thereof (other than any such request in
connection with an examination of such Lender's financial condition by such
governmental agency) or (ii) pursuant to legal process, or (f) to any
Assignee or Participant (or prospective Assignee or Participant) so long as
such Assignee or Participant (or prospective Assignee or
-89-
<PAGE>
Participant) agrees in writing to handle such information in accordance with
the provisions of this SECTION 11.14.
Section 11.15 AMENDMENT, RESTATEMENT, EXTENSION, RENEWAL AND INCREASE.
This Agreement is a renewal, extension, amendment, increase and restatement
of the Existing Credit Agreement, and is not a novation of the "Obligations"
(as defined in the Existing Credit Agreement) thereunder. On the Agreement
Date, the "Revolving Note" (as defined in the Existing Credit Agreement), all
of the outstanding indebtedness of the Borrower under the Existing Credit
Agreement and all of the liens, security interests and other rights and
interests of NationsBank of Texas, N.A. under the Existing Credit Agreement
and under the other Loan Documents (as defined in the Existing Credit
Agreement) shall be acquired by the Administrative Lender for the ratable
benefit of the Lenders in their respective Specified Percentages. On the
Agreement Date, the outstanding indebtedness of the Borrower under the
Revolving Note shall be renewed, extended, modified and restated by the
Facility A Notes. The Borrower hereby consents to the acquisition by the
Administrative Lender of the indebtedness, rights and interests described
above. All terms and provisions of this Agreement supersede in their
entirety the Existing Credit Agreement. All Liens covering the Collateral,
or any part thereof, under the collateral documents executed in connection
with the Existing Credit Agreement shall remain valid, binding and
enforceable Liens against the Persons which granted such Liens.
SECTION 11.16 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF TEXAS (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS)
AND THE UNITED STATES OF AMERICA. THE LOAN DOCUMENTS ARE PERFORMABLE IN
DALLAS, TEXAS, AND BORROWER AND EACH SURETY, GUARANTOR, ENDORSER AND ANY
OTHER PARTY EVER LIABLE FOR PAYMENT OF ANY MONEY PAYABLE WITH RESPECT TO THE
LOAN DOCUMENTS, JOINTLY AND SEVERALLY WAIVE THE RIGHT TO BE SUED ELSEWHERE.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWER, THE ADMINISTRATIVE
LENDER AND EACH LENDER EACH AGREES THAT THE STATE AND FEDERAL COURTS OF TEXAS
LOCATED IN DALLAS, TEXAS, SHALL HAVE JURISDICTION OVER PROCEEDINGS IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND HEREBY
SUBMITS WITH RESPECT TO ITSELF AND ITS PROPERTY TO THE JURISDICTION OF ANY
SUCH COURT FOR THE PURPOSE OF ANY SUIT, ACTION, PROCEEDING OR JUDGMENT
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
SECTION 11.17 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE LENDER AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY,
IRREVOCABLY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW,
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF
OR RELATED TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
-90-
<PAGE>
THEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING
INTO THIS AGREEMENT AND MAKING ANY ADVANCES HEREUNDER.
SECTION 11.18 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH
THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
REGARDING THE SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
-91-
<PAGE>
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date
first set forth above.
BORROWER: COMPUCOM SYSTEMS, INC.
By: /S/ ROBERT J. BOUTIN
-----------------------------------------
Name: Robert J. Boutin
Title: Senior Vice President, Finance and
Chief Financial Officer
-92-
<PAGE>
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A., as Administrative
Lender
By: /S/ DONALD L. HARRISON, JR.
------------------------------------------
Name: Donald L. Harrison
Title: Senior Vice President
-93-
<PAGE>
LENDERS: NATIONSBANK OF TEXAS, N.A., as a Lender, Swing
Line Bank and Issuing Bank
Specified Percentage:
14.222222223%
By: /S/ DONALD L. HARRISON, JR.
------------------------------------------
Name: Donald L. Harrison
Title: Senior Vice President
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Brent W. Mellow
Vice President
-94-
<PAGE>
Specified Percentage: SANWA BUSINESS CREDIT CORPORATION
10.666666667%
By: /S/ JOHN P. THACKER
-------------------------------------------
Name: John P. Tacker
-----------------------------------------
Title: Vice President
----------------------------------------
1 South Wacker Drive, Suite 2800
Chicago, Illinois 60606
-95-
<PAGE>
Specified Percentage: CORESTATES BANK, N.A.
8.888888889% By: /S/ KRISTEN V. METZGER
-------------------------------------------
Name: Kristen V. Metzger
-----------------------------------------
Title: Commercial Officer
----------------------------------------
1339 Chestnut Street, FC 1-8-3-14
Philadelphia, Pennsylvania 19107
-96-
<PAGE>
Specified Percentage: NATIONAL CITY BANK OF KENTUCKY
8.888888889% By: /S/ JOHN Z. BARR
-------------------------------------------
Name: John Z. Barr
Title: Senior Vice President
101 South Fifth Street, 8th Floor
Louisville, Kentucky 40202
-97-
<PAGE>
Specified Percentage: PNC BANK, NATIONAL ASSOCIATION,
successor-by-merger to Midlantic Bank, N.A.
8.888888889%
By: /S/ DANIEL R. REAGLE
-------------------------------------------
Name: Daniel R. Reagle
-----------------------------------------
Title: Banking Officer
----------------------------------------
1600 Market Street
Philadelphia, Pennsylvania 19103
-98-
<PAGE>
Specified Percentage: CREDIT LYONNAIS NEW YORK BRANCH
8.888888889% By: /S/ JACQUES-YVES MULLIEZ
------------------------------------------
Name: Jacques-Yves Mulliez
-----------------------------------------
Title: Senior Vice President
----------------------------------------
1301 Avenue of the Americas
New York, New York 10019
-99-
<PAGE>
Specified Percentage: UNION BANK OF CALIFORNIA, N.A.
8.888888889% By: /S/ STEPHEN SWEENEY
-------------------------------------------
Name: Stephen Sweeney
Title: Vice President
By: /S/ STEVEN BIERMAN
-------------------------------------------
Name: Steven Bierman
Title: Vice President
70 South Lake Avenue, Suite 900
Pasadena, California 91109
-100-
<PAGE>
Specified Percentage: NATIONAL BANK OF CANADA
8.000000000%
By: /S/ DOUG CLARK
-------------------------------------------
Name: Doug Clark
-----------------------------------------
Title: Vice President
----------------------------------------
By: /S/ WILLIAM W. HANDLEY
-------------------------------------------
Name: William W. Handley
-----------------------------------------
Title: Vice President
----------------------------------------
2121 San Jacinto
Dallas, Texas 75201
-101-
<PAGE>
Specified Percentage: THE SUMITOMO BANK, LIMITED
6.666666666% By: /S/ KIRK L. STITES
-------------------------------------------
Name: Kirk L. Stites
-----------------------------------------
Title: Vice President & Manger
----------------------------------------
By: /S/ JULIE A. SCHELL
-------------------------------------------
Name: Julie A. Schell
-----------------------------------------
Title: Vice President
----------------------------------------
1601 Elm Street, Suite 4250
Dallas, Texas 75201
102
<PAGE>
Specified Percentage: BARNETT BANK, N.A.
5.333333333% By: /S/ KIMBERLY A. BRUCE
-------------------------------------------
Name: Kimberly A. Bruce
Title: Assistant Vice President
101 East Kennedy Boulevard
Tampa, Florida 33602
-103-
<PAGE>
Specified Percentage: COMERICA BANK
5.333333333% By: /S/ REGINALD M. GOLDSMITH, III
-------------------------------------------
Name: Reginald M. Goldsmith, III
-----------------------------------------
Title: Vice President
----------------------------------------
500 Woodward Avenue
9th Floor
Mail Code 3281
Detroit, Michigan 48226
-104-
<PAGE>
Specified Percentage: FLEET NATIONAL BANK
5.333333333% By: /S/ FRANK H. BENESH III
-------------------------------------------
Name: Frank H. Benesh III
-----------------------------------------
Title: Vice President
----------------------------------------
MA-OF-0323
One Federal Street
Boston, Massachusetts 02211
-105-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED MASTER
SECURITY AND ADMINISTRATION AGREEMENT
COMPUCOM SYSTEMS, INC.
NATIONSBANK OF TEXAS, N.A.,
IN ITS CAPACITY AS
ADMINISTRATIVE SECURED PARTY
NATIONSBANK OF TEXAS, N.A.,
IN ITS CAPACITY AS
ADMINISTRATIVE LENDER
CSI FUNDING, INC.
ENTERPRISE FUNDING CORPORATION
DATED AS OF SEPTEMBER 25, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
GRANT OF SECURITY INTEREST;
APPOINTMENT OF ADMINISTRATOR; COLLATERAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 11
1.1 Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.2 Administrative Secured Party Appointed as Administrator . . . . . . . . . . . . . . . 12
1.3 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.4 Adjustment and Compromise of Receivables. . . . . . . . . . . . . . . . . . . . . . . 13
1.5 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.6 Perfection and Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.7 Examinations; Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.8 Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.9 Preservation of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.10 Special Rights; Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE II.
COLLECTIONS ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1 Administration of Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2 Certification of RPA Interest and CompuCom Interest . . . . . . . . . . . . . . . . . 18
2.3 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III.
CLOSING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1 Items to be Delivered by CompuCom . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV.
REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 Corporate Name; Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Chief Executive Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Corporate Power and Authority; Validity . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 No Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.7 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.9 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.10 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.11 Representations and Warranties Cumulative . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE V.
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.4 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Monthly Receivables Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Notices, Information in Respect of RPA and TAA. . . . . . . . . . . . . . . . . . . . 24
5.7 Copies in Respect of RPA and TAA. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.8 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.9 Notification of Material Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.10 Notification Regarding Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.11 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.12 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.13 Waivers and Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.14 Restriction on Disposition of Collateral. . . . . . . . . . . . . . . . . . . . . . . 26
5.15 Prohibition Against Liens on Collateral . . . . . . . . . . . . . . . . . . . . . . . 26
5.16 Covenants Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI.
EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.1 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII.
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Cash Collateral; Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Application of Proceeds; Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.6 Performance by Administrative Secured Party . . . . . . . . . . . . . . . . . . . . . 30
7.7 Non-waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII.
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX.
ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.1 Equal Dignity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Pro-Rata Treatment Among Beneficial Secured Parties . . . . . . . . . . . . . . . . . 40
9.3 Subordination of Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.4 Other Rights; Waiver of Marshaling. . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6 Payments by Administrative Secured Party. . . . . . . . . . . . . . . . . . . . . . . 44
9.7 Notices, Consents, Agreements Regarding EFC . . . . . . . . . . . . . . . . . . . . . 45
9.8 Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE X.
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1 Effective Date; Term; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.2 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.4 Benefit to CompuCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.5 Administrative Secured Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.6 Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.7 Administrative Secured Party's Records; Account Statements. . . . . . . . . . . . . . 48
10.8 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.9 Interest Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.10 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.11 Acceptance and Performance; Venue . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.12 WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.13 Copies Valid as Financing Statements. . . . . . . . . . . . . . . . . . . . . . . . . 51
10.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.15 Entirety and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.16 Parties Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.17 Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.18 Descriptive Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.19 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.20 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.21 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.22 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
iii
<PAGE>
EXHIBIT 10.3
AMENDED AND RESTATED MASTER
SECURITY AND ADMINISTRATION AGREEMENT
This Amended and Restated Master Security and Administration Agreement is
executed and entered into by and among COMPUCOM SYSTEMS, INC., a Delaware
corporation, NATIONSBANK OF TEXAS, N.A., a national bank, in its capacity as
Administrative Secured Party under this Agreement, NATIONSBANK OF TEXAS,
N.A., a national bank, in its individual corporate capacity, CSI FUNDING,
INC., a Delaware corporation, and ENTERPRISE FUNDING CORPORATION, a Delaware
corporation, effective as of September 25, 1996, as follows:
DEFINITIONS
The following definitions shall apply throughout this Agreement:
"ACCOUNT DEBTOR" means a Person that is obligated for payment of a
Receivable.
"ADMINISTRATION DOCUMENTS" means this Agreement, the Concentration Account
Agreement, any Lockbox Agreement, the NationsBank Account, the CompuCom
Account and the CFI Account, respectively, all financing statements in
respect of this Agreement, and any and all renewals, extensions,
modifications, amendments or restatements of any of the foregoing.
"ADMINISTRATIVE LENDER" means NationsBank of Texas, N.A., as
administrative lender for the ratable benefit of the Lenders under the
Credit Agreement, and its successors and assigns in such capacity.
"ADMINISTRATIVE SECURED PARTY" means NATIONSBANK OF TEXAS, N.A., a
national bank, in its capacity as Administrative Secured Party under this
Agreement, whose principal place of business is located at 901 Main
Street, Dallas, Dallas County, Texas 75202. When used throughout this
Agreement, "Administrative Secured Party" also includes Administrative
Secured Party's successors and any party to whom Administrative Secured
Party, or its successors, assigns its rights and interests under this
Agreement as allowed by, and pursuant to, paragraph 8.1(h).
"AGREEMENT" means this Master Security and Administration Agreement and
all exhibits and addenda, and any renewal, extension, amendment,
modification or restatement thereof.
<PAGE>
"BENEFICIAL SECURED PARTY" means each of (i) NationsBank (until full
payment of all NationsBank Secured Obligations and termination of the
Credit Agreement, but not thereafter) and (ii) CFI (until termination of
the RPA and collection, or write-off by CFI, of all Receivables in which
an RPA Interest was transferred under the RPA, but not thereafter) and,
until termination of the TAA (but not thereafter), EFC as assignee of the
CFI Secured Obligations and a portion of the RPA Interest, as its interest
therein appears pursuant to the TAA, and its permitted assigns and any
Bank Investors (as defined therein); and in each case their legal
successors, respectively.
"BOOKS AND RECORDS" means all books, records, books or records of account,
files, journals, ledgers, correspondence, bank statements, registers,
logs, customer lists and related customer credit information, address or
telephone number lists, records of sales and payments made and received,
computer programs, discs, tapes, cards, software, printouts, systems and
other records, in whatever form, relating in any way to any of the
foregoing, and all other tangible and intangible media created, generated,
received, kept or otherwise used for recording actions, transactions and
other facts relating or pertaining to the Collateral.
"BUSINESS DAY" means any calendar day except Saturday, Sunday and those
days on which Administrative Secured Party is closed for business or which
are legal public holidays specified in 5 U.S.C. Section 6103(a), as may be
amended from time to time.
"CFI" means CSI Funding, Inc., a Delaware corporation and wholly owned
subsidiary of CompuCom, whose chief executive office and principal place
of business is located at 10100 Central Expressway, Dallas, Texas 75321.
"CFI ACCOUNT" means account No. 1291795475 maintained by CFI at
NationsBank or any other demand deposit account maintained by CFI and
designated to Administrative Secured Party in writing as an account for
deposits by Administrative Secured Party pursuant to paragraph 2.1(c)(1).
"CFI SECURED OBLIGATIONS" means all obligations now or hereafter owing by
CompuCom to or for the benefit of CFI (or EFC as transferee of a portion
of the RPA Interest under the TAA) under the RPA, the TAA or this
Agreement, whether pursuant to their respective terms or as may otherwise
be determined by applicable law (in all events including, without
limitation, CompuCom's obligation to deliver, or cause to be delivered, to
Administrative Secured Party all
2
<PAGE>
Collections for the benefit of the Beneficial Secured Parties as required
by this Agreement and the RPA and also including, to the extent (if any)
that the transactions under the RPA are recharacterized by a court of
competent jurisdiction to be a financing transaction, CompuCom's
obligations to repay any loans deemed made to it by CFI thereunder), and
all renewals, extensions, amendments, modifications or restatements
thereof.
"COLLATERAL" means collectively all Receivables, Related Security, and
Books and Records now owned and hereafter acquired by CompuCom, and all
proceeds thereof at any time arising.
"COLLATERAL ACCESS AND WAIVER AGREEMENT" means an agreement in form and
substance satisfactory to Administrative Secured Party pursuant to which,
among other things, the owner and landlord of any real property leased by
CompuCom where any Books and Records are located shall waive its rights,
if any, thereto and allow Administrative Secured Party to enter upon the
premises to inspect, use, copy, or remove same.
"COLLECTIONS" means all proceeds of Receivables in whatever form,
including without limitation money, electronic funds transfers or checks,
drafts, notes, or other instruments in payment of Receivables or otherwise
constituting proceeds of Receivables.
"COMPUCOM" means COMPUCOM SYSTEMS, INC., a Delaware corporation, with its
chief executive office located at 10100 Central Expressway, Dallas, Texas
75321.
"COMPUCOM ACCOUNT" means account No. 0187100969 maintained by CompuCom at
NationsBank, or any other demand deposit account maintained by CompuCom
and designated to the Administrative Secured Party in writing as an
account for deposits by Administrative Secured Party pursuant to paragraph
2.1.
"COMPUCOM INTEREST" means, at any time, the undivided fractional ownership
interest in the Receivables other than the RPA Interest, which together
with the RPA Interest constitutes a one hundred percent (100%) ownership
interest.
3
<PAGE>
"COMPUCOM INTEREST PERCENTAGE" means, at any time, the CompuCom Interest
expressed as a percentage of the sum of the CompuCom Interest and the RPA
Interest, which percentage at any time shall be as most recently certified
to Administrative Secured Party by CompuCom and CFI pursuant to paragraph
2.2(a) or paragraph 2.2(b), subject however, to paragraph 2.2(c) and
paragraph 2.2(d).
"CONCENTRATION ACCOUNT" means account No. 0187101017 maintained by
CompuCom at NationsBank, over which Administrative Secured Party alone has
power of withdrawal or transfer, for the direct deposit of Collections
and/or the transfer of Collections made to the Lockbox pursuant to the Con-
centration Account Agreement as prescribed by this Agreement.
"CONCENTRATION ACCOUNT AGREEMENT" means the agreement by and among
CompuCom, Administrative Secured Party and a depository bank acceptable to
Administrative Secured Party and the Beneficial Secured Parties under
which the Concentration Account is established and maintained with such
depository bank, in form and substance satisfactory to Administrative
Secured Party and containing such provisions as Administrative Secured
Party may require, including without limitation the following: (a) such
depository bank agrees to hold all funds from time to time deposited to
the Concentration Account as bailee for Administrative Secured Party; (b)
following an Event of Default hereunder and notice by the Administrative
Secured Party to such depository bank, CompuCom and such depository bank
agree that they shall have no power of withdrawal over the funds in the
Concentration Account; (c) such depository bank waives any right, claim or
interest in the Concentration Account, and funds on deposit therein, and
agrees that it shall neither claim nor exercise any right of offset,
banker's lien or other rights against such funds; (d) CompuCom agrees to
pay directly all costs and expenses of such depository bank associated
with the Concentration Account; and (e) CompuCom and such depository bank
agree that CompuCom may not terminate the Concentration Account or the
Concentration Account Agreement, without the prior written consent of
Administrative Secured Party.
"CONTRACT TERM" means the period beginning on the Effective Date and
ending on the earlier of (1) both (i) termination of the RPA and the TAA
and certification thereof to Administrative Secured Party by CompuCom and
the RPA Interest Owner and (ii) full payment and performance of the
NationsBank Secured Obligations and termination of the Credit Agreement,
and certification thereof to Administrative Secured Party by CompuCom and
NationsBank or (2) mutual
4
<PAGE>
agreement in writing signed by CompuCom, Administrative Secured Party
and each of the Beneficial Secured Parties.
"CREDIT AGREEMENT" means that certain Credit Agreement, dated September
25, 1996, between NationsBank and CompuCom, as the same may from time to
time be amended, supplemented or otherwise modified and in effect, which
Credit Agreement amends and restates that certain Financing and Security
Agreement dated effective as of August 4, 1993 between NationsBank and
CompuCom, as itself amended by the following: (i) the First Amendment to
Financing and Security Agreement dated effective as of March 31, 1994,
(ii) the Second Amendment to Financing and Security Agreement dated
effective as of December 12, 1994, (iii) the Third Amendment to Financing
and Security Agreement dated effective as of April 26, 1995, (iv) the
Fourth Amendment to Financing and Security Agreement dated effective as of
October 1, 1995, (v) Amendment 4A to Financing and Security Agreement dated
effective as of March 22, 1996 and (v) the Fifth Amendment to Financing
and Security Agreement dated as of April 1, 1996.
"EFC" means Enterprise Funding Corporation, a Delaware corporation.
"EFFECTIVE DATE" means the effective date specified in the preamble of
this Agreement.
"INDEMNIFIED CLAIMS" means any and all claims, demands, actions, causes of
action, judgments, obligations, liabilities, losses, damages and
consequential damages, penalties, fines, costs, fees, expenses and
disbursements (including without limitation, reasonable fees and expenses
of attorneys and other professional consultants and experts in connection
with investigation or defense) of every kind, known or unknown, existing
or hereafter arising, foreseeable or unforeseeable, which may be imposed
upon, threatened or asserted against, or incurred or paid by, any
Indemnified Person at any time and from time to time, because of,
resulting from, in connection with, or arising out of any transaction,
act, omission, event or circumstance in any way connected with the
Collateral or the Administration Documents (including enforcement, defense
or protection of any rights of Administrative Secured Party or the
Beneficial Secured Parties thereunder), including but not limited to
economic loss or property damage in connection with any act performed or
omitted to be performed under any Administration Documents, any breach by
CompuCom of any representation, warranty, covenant, agreement or condition
contained in any Administration Documents or any Event of Default as
defined in this Agreement. THE FOREGOING INCLUDES CLAIMS
5
<PAGE>
BASED UPON OR ARISING FROM ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PERSON
BUT EXCLUDES CLAIMS BASED UPON OR ARISING FROM GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY INDEMNIFIED PERSON.
"INDEMNIFIED PERSONS" collectively means Administrative Secured Party and
each of the Beneficial Secured Parties, and their respective officers,
directors, shareholders, employees, agents, attorneys and representatives,
and any person owned or controlled by, or which owns or controls or is
under common control or is otherwise affiliated with, any of them,
respectively, and any other person, if any, who acquires a portion of the
Collateral in any manner through exercise of rights and remedies under the
Administration Documents.
"LENDER" means any Person executing the Credit Agreement and named as a
lender thereunder, and its successors and assigns in such capacity.
"LOCKBOX" means a United States Post Office Box designated for the receipt
of Collections pursuant to a Lockbox Agreement.
"LOCKBOX AGREEMENT" means an agreement between Administrative Secured
Party and CompuCom designating a Lockbox for the receipt, deposit and
collection of Collections, in form and substance satisfactory to
Administrative Secured Party and containing provisions for the receipt of
Collections and daily deposit of same to the Concentration Account, and
such other provisions as Administrative Secured Party may require.
"MATERIAL ADVERSE EFFECT" means (i) a materially adverse effect on the
business, assets, operations, prospects or condition, financial or
otherwise, of CompuCom or (ii) material impairment of the ability of
CompuCom to perform any obligations under the Administration Documents or
(iii) material impairment of the enforceability of the rights and remedies
intended to be provided to Administrative Secured Party and the Beneficial
Secured Parties by this Agreement.
"MAXIMUM RATE" means the greater of (i) the "monthly ceiling" as referred
to and in effect from time to time under the provisions of Tex. Rev. Civ.
Stat. Ann. art. 5069-1.04(c), as amended, or (ii) the maximum rate of
interest permitted from day to day by any other applicable state or
federal law.
6
<PAGE>
"NATIONSBANK" means NationsBank of Texas, N.A., a national bank, in its
capacity as Administrative Lender for the ratable benefit of the several
Lenders named in the Credit Agreement, whose chief executive office and
principal place of business is located at 901 Main Street, Dallas, Dallas
County, Texas 75202, and its respective successors and assigns, including
specifically any party to whom NationsBank or its successors or assigns
may assign its rights and interests in any NationsBank Secured Obligations.
"NATIONSBANK SECURED OBLIGATIONS" means all "Obligations" defined in the
Credit Agreement (which definition is incorporated herein by reference,
and includes without limitation, all obligations and indebtedness now or
hereafter owing by CompuCom to the Administrative Lender and/or the
Lenders under or in connection with the Credit Agreement and all other
obligations and indebtedness from time to time owing by CompuCom to the
Administrative Lender and/or the Lenders), and all renewals, extensions,
amendments, modifications or restatements thereof.
"OWNERSHIP CERTIFICATION" means a written certification of the RPA
Interest Percentage and the CompuCom Interest Percentage, respectively,
jointly signed by the president, chief financial officer, treasurer or
controller of CompuCom and CFI, respectively, in form as appears in
Exhibit 2.2 or otherwise satisfactory to Administrative Secured Party,
delivered by CompuCom pursuant to paragraph 2.2.
"PERMITTED SUBORDINATED INTERESTS" means all interests in the Collateral
evidenced by (i) each of the Credit Agreement, the RPA and the TAA, in
each case, however, subject to the provisions of this Agreement as
provided by paragraph 9.3, and (ii) interests of IBM Credit Corporation
pursuant to the certain Agreement for Wholesale Financing dated August 27,
1991 between IBM Credit Corporation and CompuCom, as amended from time to
time, subject at all times, however, to the certain Amended and Restated
Intercreditor Agreement of even date herewith (the "IBM INTERCREDITOR
AGREEMENT") among IBM Credit Corporation, CompuCom, Administrative Secured
Party and NationsBank, as amended from time to time.
"PERSON" means any individual, corporation, joint venture, general or
limited partnership, trust, unincorporated organization or governmental
entity or agency.
7
<PAGE>
"PRO RATA PERCENTAGE" means, with respect to any Receivable, a percentage
of such Receivable equal to (i) the CompuCom Interest Percentage in the
case of CompuCom or NationsBank, and (ii) the RPA Interest Percentage in
the case of CFI, or until termination of the TAA (but not thereafter), CFI
and EFC, collectively (as their respective interests in the RPA Interest
appear pursuant to the TAA).
"RECEIVABLES" means all of CompuCom's rights to payment from time to time
owing to CompuCom in connection with the sale of inventory or other goods,
or performance of services, by CompuCom (including without limitation,
accounts, chattel paper, instruments, contract rights and general
intangibles).
"RELATED SECURITY" means all security interests or liens, and all property
subject thereto, from time to time securing payment and performance of any
Receivable, and all guarantees, insurance or other agreements or
arrangements of any kind from time to time supporting or securing payment
of any Receivable and all returned goods the sale of which gave rise to
any Receivable (subject to the provisions of Section 9-306 of the Uniform
Commercial Code and the IBM Intercreditor Agreement).
"RPA" means the certain Receivables Purchase Agreement of even date
herewith between CompuCom and CFI providing for the sale by CompuCom to CFI
and the purchase by CFI from CompuCom (subject to the interests and rights
of the Administrative Secured Party under this Agreement) of an undivided
fractional ownership interest in all Receivables now owned and hereafter
acquired and arising from time to time prior to termination thereof, on
the terms provided therein, as the same may be renewed, extended,
modified, amended or restated from time to time.
"RPA INTEREST" means the undivided fractional ownership interest in the
Receivables that has been sold and transferred, and alternatively, in which
a security interest has been granted, by CompuCom to CFI pursuant to, and
which is the subject of, the RPA.
"RPA INTEREST OWNER" means CFI, and until termination of the TAA (but not
thereafter) also includes EFC, and its permitted assigns, as purchaser and
assignee of a portion of the RPA Interest pursuant to the TAA, as its
interest therein appears pursuant to the RPA.
8
<PAGE>
"RPA INTEREST PERCENTAGE" means the RPA Interest expressed as a percentage
of the sum of the CompuCom Interest and the RPA Interest, which percentage
at any time shall be as most recently certified to Administrative Secured
Party by CompuCom and CFI pursuant to paragraph 2.2(a) or paragraph
2.2(b), subject however, to paragraph 2.2(c) and paragraph 2.2(d).
"SECURED OBLIGATIONS" collectively means (i) all obligations from time to
time owing by CompuCom to Administrative Secured Party under this
Agreement, (ii) the NationsBank Secured Obligations and (iii) the CFI
Secured Obligations, and any and all renewals or extensions thereof,
respectively.
"TAA" means the certain Transfer and Administration Agreement of even date
herewith among CFI, EFC, CompuCom and NationsBank, N.A. in its capacity as
Agent and a Bank Investor thereunder, providing for the transfer by CFI to
EFC and the acceptance by EFC from CFI of a portion of the RPA Interest,
from time to time, on the terms provided therein, as the same may be
renewed, extended, modified, amended or restated from time to time.
"TEXAS UCC" means the Texas Uniform Commercial Code as in effect on the
date of this Agreement and as it may hereafter be amended from time to
time.
All words and phrases used herein which are expressly defined in Section
1.201 or in Chapter 9 of the Texas UCC shall have the meaning provided for
therein. Other such words and phrases defined elsewhere in the Texas UCC
shall have the meanings specified therein except to the extent such meaning
is inconsistent with a definition in Section 1.201 or Chapter 9 thereof.
RECITALS
CompuCom, the Lenders and NationsBank are parties to the
Credit Agreement which provides for a credit facility for
loans by NationsBank and the Lenders to CompuCom, from time
to time, secured by (among other collateral) all of CompuCom's
Receivables now owned and hereafter acquired, on the terms
provided therein.
CFI is a special purpose, bankruptcy remote, wholly owned
subsidiary of CompuCom, formed and operating for the sole purpose
of entering into and performing (i) this
9
<PAGE>
Agreement, (ii) the RPA, pursuant to which CompuCom will sell to
CFI and CFI will purchase from CompuCom, from time to time, the RPA
Interest, (iii) the TAA, pursuant to which CFI will transfer to
EFC and EFC will accept from CFI, from time to time, a portion of
the RPA Interest, and (iv) various related agreements.
CompuCom, NationsBank, CFI and EFC wish to establish a means
by which CompuCom may utilize its Receivables to access working
capital sources VIA both the Credit Agreement and the RPA, as
CompuCom shall determine in accordance with this Agreement, the
Credit Agreement and the RPA, and contemporaneous means by which
the interests of the Beneficial Secured Parties may be administered
on terms, and in a manner, mutually agreeable to Administrative
Secured Party, CompuCom and the Beneficial Secured Parties.
CompuCom and CFI intend that the transaction contemplated by
the RPA create an absolute transfer to CFI from CompuCom of the
RPA Interest in effect from time to time. In that regard, CFI has
entered into this Agreement to provide a means for administration
of the Receivables, the Related Security and Collections in a manner
consistent with its rights therein and the rights of NationsBank
therein. This agreement provides for the grant by CompuCom to
Administrative Secured Party, for the benefit of the Beneficial
Secured Parties as provided herein, of a security interest in the
Collateral as a whole (and not just the portion thereof as might
separately secure the NationsBank Secured Obligations) because CFI
has requested that, in the event of any possible recharacterization
by a court of competent jurisdiction of the transactions contemplated
by the RPA not as an absolute transfer to CFI of the RPA Interest
but rather as a financing (despite the expressed intent of CompuCom
and CFI), CFI have the equivalent benefit of a security interest in
that portion of the Receivables, the Related Security and the
Collections as might separately secure the payment to CFI of any loan
deemed to have been made to CompuCom
10
<PAGE>
by CFI pursuant to any such recharacterization. As a means to
address administrative impracticabilities caused by the nature
of trade accounts receivable and intercreditor matters regarding
the rights of NationsBank on the one hand and CFI on the other, this
Agreement provides for the grant by CompuCom to Administrative
Secured Party, for the benefit of the Beneficial Secured Parties,
of a security interest in all of the Receivables, the Related
Security and the Collections, to secure both the CFI Secured
Obligations and the NationsBank Secured Obligations as well as to
provide for the administration of the Collateral in a manner which
is acceptable to all parties, consistent with CFI's rights therein
and the rights of NationsBank therein.
Therefore, the undersigned parties have determined to enter
into certain agreements and arrangements according to the terms
and provisions as set forth hereinbelow.
THEREFORE, for value received and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and in consideration of the
mutual benefits provided herein, the undersigned parties hereby agree as
follows:
ARTICLE I.
GRANT OF SECURITY INTEREST;
APPOINTMENT OF ADMINISTRATOR; COLLATERAL COVENANTS
I.1 SECURITY INTEREST.
a. GRANT OF SECURITY INTEREST. CompuCom hereby
grants to Administrative Secured Party, for the benefit of the
Beneficial Secured Parties according to their respective Pro
Rata Percentages, a continuing security interest, collateral
assignment and lien in and to the Collateral to secure full
payment and performance of the Secured Obligations.
b. PRIORITY. Subject to paragraph 9.3, the security
interest, collateral assignment and lien in the Collateral
granted to Administrative Secured Party for the benefit of
Beneficial Secured Parties under this Agreement at all times
shall be and remain first, prior and senior to any other
interests in the Collateral. CompuCom represents to
Administrative
11
<PAGE>
Secured Party that no other security interests, liens, financing
statements or other encumbrances exist or shall be allowed to
exist with respect to any of the Collateral, except the
Permitted Subordinated Interests and perfected rights, if any,
in returned inventory in favor of any Person who is a seller of
inventory to CompuCom, existing as of the Effective Date.
I.2 ADMINISTRATIVE SECURED PARTY APPOINTED AS ADMINISTRATOR. The
Beneficial Secured Parties hereby appoint Administrative Secured Party as
administrator to collect, receive and administer all Collections, on the
Beneficial Secured Parties' joint behalf, as provided by Article II and in
accordance with the other provisions of this Agreement. Until termination of
this Agreement (i) each Beneficial Secured Party irrevocably appoints
Administrative Secured Party as its nominee and attorney in fact with full
power coupled with an interest, to exercise and enforce any and all rights or
remedies in respect of its interests in the Receivables, whether under this
Agreement, the FSA (in the case of NationsBank), the RPA (in the case of
CFI), the TAA (in the case of CFI or EFC), or otherwise. Administrative
Secured Party may exercise or refrain from exercising any and all such rights
or remedies as it may determine in its discretion as provided, and subject
to, the provisions of Article VIII, subject to all other terms of this
Agreement, and all Collections received by Administrative Secured Party in
the exercise of any such rights or remedies shall be deemed received for the
benefit of the Beneficial Secured Parties according to their respective Pro
Rata Percentages as of the time of receipt thereof and administered according
to the provisions of Article II and the other provisions of this Agreement.
The rights delegated and appointed to Administrative Secured Party under this
paragraph 1.2 are separate, distinct and independent of Administrative
Secured Party's rights as a secured party arising under paragraph 1.1(a).
I.3 RECEIVABLES. CompuCom hereby represents, warrants and agrees
as follows (such representations, warranties and covenants being deemed made
daily by CompuCom to Administrative Secured Party for the benefit of the
Beneficial Secured Parties until this Agreement has been terminated): (a)
CompuCom is the sole owner of and has full unrestricted power and right to
grant to Administrative Secured Party a continuing security interest,
collateral assignment and pledge of all Receivables free from any lien,
security interest or encumbrance, other than Permitted Subordinated
Interests; (b) each Receivable is in existence, unconditional and valid, and
arose from a bona fide outright sale of inventory or performance of services
in the ordinary course of business, for liquidated amounts and maturing as
set forth on its face and such inventory has been shipped to, or such
services have been performed for, the respective Account Debtors; (c) no
Receivable is or will be subject to any sale, assignment, claim or security
interest of any character, other than the Permitted Subordinated Interests,
and CompuCom will not make any sale or other assignment thereof or create any
other security interest
12
<PAGE>
therein; (d) except as disclosed to Administrative Secured Party in writing,
CompuCom has no knowledge that any Receivable is subject to any claim for
credit, deduction, allowance or adjustment by an Account Debtor, or to any
defense, dispute, setoff or counterclaim, and no extension or indulgence has
been granted by CompuCom with respect thereto; and (e) CompuCom believes and
expects that each Receivable will be paid in full at maturity. CompuCom
represents, warrants and confirms that the existing security interest in
certain inventory previously granted by CompuCom to each of Apple Computer,
Inc. and Compaq Computer Corporation, respectively, in each case, is limited
by agreement such that the security interest in proceeds of such inventory is
limited only to cash proceeds and insurance proceeds and excludes all other
proceeds (it being understood that CompuCom has, prior to the date hereof,
delivered to Administrative Secured Party a written statement from each such
secured party confirming that its security interest in proceeds of such
inventory is so limited), and CompuCom agrees that, for so long as this
Agreement is in full force and effect, it will not enter into any inventory
agreement with any Person unless, prior to the effectiveness of such
inventory agreement, CompuCom limits the interest of such Person in the
proceeds of inventory in the manner specified in this sentence.
I.4 ADJUSTMENT AND COMPROMISE OF RECEIVABLES. CompuCom agrees
that it will not settle, adjust, compromise, discharge or extend the time for
payment of any Receivable except in compliance with CompuCom's credit policy
and involving an amount not in excess of $2,000,000.00, without
Administrative Secured Party's consent.
I.5 BOOKS AND RECORDS. CompuCom represents and warrants to
Administrative Secured Party that all Books and Records are located at
CompuCom's chief executive office designated for CompuCom in the
"Definitions" of this Agreement, and at such other locations, if any, as may
be specified in Exhibit 1.5. CompuCom agrees that it will not maintain any
Books and Records at any location other than as designated in Exhibit 1.5
unless it gives Administrative Secured Party at least 30 days prior written
notice and first executes such financing statements and other documents as
Administrative Secured Party may request in connection therewith, PROVIDED
that, if any such location is a leased location CompuCom shall first cause
each owner or landlord thereof to execute and deliver to Administrative
Secured Party a Collateral Access and Waiver Agreement. CompuCom shall
immediately notify Administrative Secured Party upon receipt of any notice
from any Person claiming past due rent, fees or other charges in respect of
any material location where any Books and Records are located. CompuCom will
not deliver possession of any Books and Records to any Person (other than
pursuant to valid judicial process) without the prior written consent of
Administrative Secured Party.
13
<PAGE>
I.6 PERFECTION AND PROTECTION. CompuCom shall perform, at its
expense, all action requested by Administrative Secured Party at any time to
perfect, maintain, protect, and enforce Administrative Secured Party's
security interests in the Collateral, including without limitation executing
and filing financing statements and amendments thereof, in form and substance
satisfactory to Administrative Secured Party; delivering to Administrative
Secured Party any proceeds of Collateral the possession of which is required
for continued perfection of Administrative Secured Party's security
interests, duly endorsed or assigned to Administrative Secured Party without
restriction, as may be required for such purpose; placing notations on books
of account to disclose Administrative Secured Party's security interests; and
such other steps as are deemed necessary by Administrative Secured Party to
maintain its security interests. So long as this Agreement is in effect and
until all Secured Obligations have been fully satisfied, Administrative
Secured Party's security interest and lien hereunder shall continue in full
force and effect in all Collateral.
I.7 EXAMINATIONS; INSPECTIONS. Administrative Secured Party or
its designee shall have the right, upon at least two (2) days' prior notice,
without hindrance or delay and during normal business hours, to examine and
inspect the Collateral. Administrative Secured Party is authorized to
discuss CompuCom's affairs with any employees of CompuCom, as Administrative
Secured Party may deem necessary in relation to the Collateral. CompuCom
agrees to pay Administrative Secured Party's customary fees and disbursements
relating to any such examinations or inspections. Administrative Secured
Party shall have full access to all records available to CompuCom from any
credit reporting service, bureau or similar service and shall have the right
to examine and make copies of any such records. Administrative Secured Party
may exhibit a copy of this Agreement to such service and such service shall
be entitled to rely on the provisions hereof in providing access to
Administrative Secured Party as provided herein.
I.8 RIGHT TO CURE. Administrative Secured Party in its sole
discretion may pay any amount or take any action in order to preserve,
protect and maintain the Collateral and Administrative Secured Party's
security interest therein, including without limitation, payment of any
landlord's claim or other encumbrance or claim asserted against the
Collateral (PROVIDED that with respect to any payment or obligation owing by
CompuCom to any Person other than Administrative Party, CompuCom shall have
first had the opportunity to make any such payment or perform any such
obligation). All such payments and all out-of-pocket costs and expenses made
or incurred by Administrative Secured Party shall be payable by CompuCom to
Administrative Secured Party on demand. Any payment made or other action
taken by Administrative Secured Party under this paragraph shall be without
prejudice to any right to assert an Event of Default or exercise any other
remedy hereunder.
14
<PAGE>
I.9 PRESERVATION OF RIGHTS. To the extent allowed by law, neither
Administrative Secured Party nor any of its officers, directors, employees,
and agents shall be liable or responsible in any way for the safekeeping of
any Collateral or for any act or failure to act with respect to the
Collateral, or for any loss or damage thereto or any diminution in the value
thereof, or for any act by any other Person. In the case of any instruments
and chattel paper included within any proceeds of the Collateral,
Administrative Secured Party shall have no duty or obligation to preserve
rights against prior parties. The Secured Obligations shall not be affected
by any failure of Administrative Secured Party to take any steps to perfect
its security interests or to collect or realize upon the Collateral, nor
shall loss of or damage to the Collateral release CompuCom from any of the
Secured Obligations. Unless otherwise expressly agreed by Administrative
Secured Party and the Beneficial Secured Parties, no (i) modification or
amendment of the terms of any Administration Documents, (ii) compromise,
forbearance or grant of renewals, extensions, indulgences or releases with
respect to any Administration Documents, the Collateral or the Secured
Obligations or (iii) other action with respect to the Collateral or any
Person directly or indirectly obligated in connection therewith shall impair
the Secured Obligations, or Administrative Secured Party's or the Beneficial
Secured Parties' interests in the Collateral or any rights under the
Administration Documents.
I.10 SPECIAL RIGHTS; POWER OF ATTORNEY. CompuCom hereby
irrevocably appoints Administrative Secured Party as CompuCom's agent and
attorney-in-fact, for the benefit of the Beneficial Secured Parties, from
time to time in Administrative Secured Party's discretion, to take any action
necessary to preserve and protect the Collateral and Administrative Secured
Party's interests under the Administration Documents. CompuCom hereby
authorizes and appoints Administrative Secured Party as attorney in fact to
sign and file any financing statement or other document necessary to perfect
Administrative Secured Party's security interest in the Collateral.
Administrative Secured Party shall have the right at any time to take any of
the following actions, in its own name or in the name of CompuCom, if an
Event of Default is in existence: (i) make written or verbal requests for
verification of amounts owing on Receivables from any or all Persons which
Administrative Secured Party believes may be an Account Debtor; (ii) take
possession and control of Collections; (iii) redirect the deposit and
disposition of Collections; (iv) endorse the name of CompuCom on checks,
instruments constituting Collections; (v) prepare, sign and file, on behalf
of CompuCom in CompuCom's name or in Administrative Secured Party's name as
assignee, any notice of lien, or any proof of claim or other document in any
bankruptcy proceedings of any Account Debtor; (vi) access, copy or utilize
any information recorded or contained in any computer or data processing
equipment or system in respect of the Receivables maintained by CompuCom
15
<PAGE>
or any affiliate, or to which CompuCom has access; (vii) enter onto
CompuCom's premises and discuss CompuCom's affairs with CompuCom's personnel
as may be reasonably necessary in connection with maintaining or enforcing
Administrative Secured Party's rights under the Administration Documents;
(viii) access and utilize the information recorded on or contained in any
data processing equipment and computer hardware and software relating to the
Receivables or other Collateral to which CompuCom has access; and (ix) take
all other action allowed by law as may be necessary to carry out the
Administration Documents and give effect to Administrative Secured Party's
rights thereunder. In addition, Administrative Secured Party shall have the
right to take any of the following actions, in its own name or in the name of
CompuCom, at any time when any Event of Default is in existence, whether or
not Administrative Secured Party has taken any action to exercise any
remedies under the Administration Documents: (x) notify any Person which
Administrative Secured Party believes may be an Account Debtor to make
payments directly to Administrative Secured Party; (xi) settle, adjust,
compromise or discharge Receivables or extend time of payment upon such terms
as Administrative Secured Party may determine; (xii) take action in
Administrative Secured Party's name or CompuCom's name to enforce collection
of Receivables; (xiii) open mail addressed to CompuCom to take possession of
and dispose of checks or other proceeds of Receivables in accordance with
this Agreement; and (xiv) direct the U.S. Postal service to change the
address to which CompuCom's mail is delivered. Should Administrative Secured
Party at any time elect to exercise its right of verification or notification
with respect to the Receivables as provided in clause (i) or clause (x)
above, respectively, Administrative Secured Party shall have the right in its
sole discretion to direct such request for verification, or notification, as
the case may be, to all Persons which Administrative Secured Party believes
may have transacted business with CompuCom at any time, whether or not such
Persons are then indebted to CompuCom, and Administrative Secured Party is
hereby released and discharged from any liability by reason of any such
request for verification or notification. Costs and expenses incurred by
Administrative Secured Party in connection with any of such actions by
Administrative Secured Party, including reasonable attorneys' fees and
out-of-pocket expenses, shall be reimbursed by CompuCom to Administrative
Secured Party on demand.
16
<PAGE>
ARTICLE II.
COLLECTIONS ADMINISTRATION
II.1 ADMINISTRATION OF COLLECTIONS. Unless otherwise expressly
agreed in writing by Administrative Secured Party and the Beneficial Secured
Parties:
(a) CompuCom will instruct each Account Debtor to address
all remittances in payment of Receivables to the Lockbox or the
Concentration Account and will cause all invoices evidencing
Receivables to be noted with a legend stating that payment thereon
is to be made to CompuCom at the Lockbox or the Concentration Account.
(b) All Collections received in the Lockbox shall be deposited
daily to the Concentration Account.
(c) Unless and until agreed otherwise by Administrative
Secured Party and the Beneficial Secured Parties, all deposits to the
Concentration Account shall be disbursed simultaneously by
Administrative Secured Party as follows (subject to prior payment of
Secured Obligations due and payable by CompuCom to Administrative
Secured Party as provided by the Administration Documents):
If no Event of Default has occurred:
(1) If CFI elects not to reduce the Net Investment
under the TAA, or if the Net Investment under the TAA is not
otherwise required to be reduced pursuant to the terms thereof,
a percentage of each dollar thereof equal to the product of
the Purchase Discount (as defined in the RPA) and the RPA
Interest Percentage as of the time of disbursement shall
be deposited to the CFI Account; and
(2) If CFI elects not to reduce the Net Investment
under the TAA, or if the Net Investment under the TAA is not
otherwise required to be reduced pursuant to the terms thereof,
a percentage of each dollar thereof equal to one minus the
product of the Purchase Discount (as defined in the RPA) and the
RPA Interest Percentage as of the time of disbursement shall be
deposited to the CompuCom Account for the benefit of CFI in
satisfaction of certain of its obligations under the RPA.
17
<PAGE>
(3) If CFI elects to reduce the Net Investment under
the TAA, or if the Net Investment under the TAA is otherwise
required to be reduced pursuant to the terms thereof, a
percentage of each dollar thereof as designated by CFI (up to
a maximum percentage equal to the RPA Percentage) at the time
of disbursement shall be deposited to the CFI Account and
(ii) after giving effect to the deposit described in clause
(i), a percentage of each dollar equal to one minus such
percentage at the time of disbursement shall be deposited to
the CompuCom Account for the benefit of CFI in satisfaction of
certain of its obligations under the RPA.
If an Event of Default has occurred and is continuing:
(1) A percentage of each dollar thereof equal to the
RPA Interest Percentage as of the time of disbursement shall
be deposited to the CFI Account; and
(2) A percentage of each dollar thereof equal to the
CompuCom Interest Percentage as of the time of disbursement
shall be deposited to the CompuCom Account; PROVIDED that at
all times following receipt by the Administrative Secured
Party of written instructions from the Administrative Lender,
all such funds described in this paragraph 2 shall be disbursed
by the Administrative Secured Party in accordance with such
written instructions.
(a) All Collections at all times shall be subject to an
express trust in favor of Administrative Secured Party for the
benefit of the Beneficial Secured Parties. Following an Event
of Default, CompuCom will not use, dispose of, withhold or
otherwise exercise dominion over any Collections. CompuCom agrees
that it will not commingle proceeds of Collections with any
other funds, and that no deposits will be made to the Lockbox or the
Concentration Account other than Collections. All amounts from time
to time deposited to the Lockbox or the Concentration Account are
for the benefit of the Beneficial Secured Parties and shall remain
subject to Administrative Secured Party's interests under this
Agreement.
18
<PAGE>
.1 Certification of RPA Interest and CompuCom Interest.
(a) INITIAL CERTIFICATION. On or after the
Effective Date CompuCom shall deliver to Administrative Secured
Party an Ownership Certification, dated effective as of a
specified Business Day (which shall be on or after the date of
delivery thereof) therein certifying the RPA Interest Percentage
and the CompuCom Interest Percentage, respectively, as of such
day. On and after the specified effective date of such initial
Ownership Certification, the RPA Interest Percentage and the
CompuCom Interest Percentage each shall be deemed to be as
specified in such Ownership Certification, and Administrative
Secured Party shall be entitled to rely thereon in connection
with its administration of this Agreement until such time, if
any, as any subsequent Ownership Certification is actually
delivered to Administrative Secured Party and becomes effective
as provided in paragraph 2.2(b).
(b) AFTER THE EFFECTIVE DATE. Subject to at
least two Business Days' prior written notice to Administrative
Secured Party of its intention to do so (unless otherwise agreed
by the Administrative Secured Party after consultation with EFC),
CompuCom may effect a change in the RPA Interest Percentage and
the CompuCom Interest Percentage, for purposes of this Agreement,
by delivering to Administrative Secured Party an Ownership
Certification, dated as of a Business Day subsequent to
expiration of such notice period, therein certifying the RPA
Interest Percentage and the CompuCom Interest Percentage,
respectively, as of such day. Provided that no Event of Default
is then in existence and PROVIDED FURTHER, that any such change
in the CompuCom Interest Percentage and the RPA Interest
Percentage to be effected thereby does not create an Event of
Default, such Ownership Certification shall become effective as
of the day in the future specified therein (which shall be on or
after the beginning of the third Business Day following the
Business Day of Administrative Secured Party's receipt of the
foregoing notice), whereupon the RPA Interest Percentage and the
CompuCom Interest Percentage each shall be deemed to be as
specified therein, and Administrative Secured Party shall be
entitled to rely thereon in connection with its administration of
this Agreement until such time, if any, as any subsequent
Ownership Certification is actually delivered to Administrative
Secured Party and becomes effective as provided in this paragraph
2.2(b).
(c) UPON AND FOLLOWING TERMINATION OF RPA.
Notwithstanding any Ownership Certification, the RPA Interest
Percentage in all Receivables created on or after the effective
date of any termination of the RPA automatically shall be
19
<PAGE>
zero percent (0.00%) and the CompuCom Interest Percentage therein
shall be one hundred percent (100.00%). At Administrative
Secured Party's option in its sole discretion, Administrative
Secured Party may cause all Collections received in respect of
Receivables created on or after the effective date of termination
of the RPA to be segregated and deposited to a separate account
for collection and transfer to the NationsBank Account in
accordance with paragraph 2.1(c)(2). It is understood and agreed
that the RPA Interest Percentage in effect at the time of any
such termination of the RPA shall remain in effect as to all
Receivables created prior to the effective time of any such
termination of the RPA.
(d) RECEIVABLES SUBJECT TO RECONVEYANCE.
Notwithstanding any Ownership Certification, the RPA Interest
Percentage in Receivables, if any, with respect to which the RPA
Interest is reconveyed in full by CFI to CompuCom pursuant to the
RPA, at any time, shall be zero percent (0.0%) and the CompuCom
Percentage Interest therein shall be one hundred percent
(100.0%). CompuCom and CFI shall notify Administrative Secured
Party and NationsBank in writing prior to effecting any such
reconveyance, therein describing the Receivable(s) which are to
be the subject thereof. At Administrative Secured Party's
request, CompuCom will assist Administrative Secured Party in
identifying Collections in respect of such Receivables and, at
Administrative Secured Party's option in its discretion,
Administrative Secured Party may cause all Collections at any
time received in respect of such Receivables to be segregated and
deposited to a separate account for collection and transfer to
the NationsBank account in accordance with paragraph 2.1(c)(2).
20
<PAGE>
.2 FEES.
In order to compensate Administrative Secured
Party for its administration of the Administration Documents,
CompuCom agrees to pay to Administrative Secured Party, for its
own account, an administration fee of $37,500 per year payable
monthly in advance on the last Business Day of each month.
ARTICLE I.
CLOSING REQUIREMENTS
I.1 ITEMS TO BE DELIVERED BY COMPUCOM. Prior to or
simultaneously with execution and delivery hereof, CompuCom shall
deliver, or cause to be delivered, to Administrative Secured
Party the following:
(a) SECRETARY'S CERTIFICATE. A certificate in form
satisfactory to Administrative Secured Party, signed by the
corporate secretary of CompuCom and authenticated by the
president of CompuCom, attaching and certifying the following:
1. ARTICLES OF INCORPORATION AND CERTIFICATE
OF EXISTENCE. A copy of the articles of incorporation, and all
amendments thereto, of CompuCom, accompanied by the certificate
of the Secretary of State of Delaware and bearing a date no more
than thirty (30) days prior to the date hereof, to the effect
that such copy is correct and complete and that CompuCom is a
corporation duly incorporated and validly existing in such state.
2. GOOD STANDING. A certification by the appropriate
official of the State of Delaware bearing a date no more than thirty
(30) days prior to the date hereof, to the effect that CompuCom is in
good standing in such state with respect to payment of franchise and
similar taxes, and a certification by the Comptroller of Public Accounts
of the State of Texas bearing a date no more than thirty (30) days
prior to the date hereof confirming that CompuCom is duly qualified to
transact business in the State of Texas, bearing a date no more
than thirty (30) days prior to the date hereof confirming that
CompuCom is duly qualified to transact business in such state.
21
<PAGE>
3. BYLAWS. A correct and complete copy of the bylaws
of CompuCom, and all amendments thereto.
4. INCUMBENCY. Certification of the name and signature
of all incumbent corporate officers of CompuCom authorized to act on
behalf of CompuCom in respect of the Administration Documents.
5. RESOLUTIONS. A copy of corporate resolutions of
CompuCom approving the Administration Documents and authorizing the
transactions contemplated hereby, and authorizing and directing a named
officer or officers to sign and deliver all Administration Documents to
be executed by CompuCom, duly adopted by its board of directors, including
the certificate of CompuCom's corporate secretary, dated the date hereof,
that such copy is a true and complete copy of resolutions duly adopted by
the board of directors, and that such resolutions have not been amended,
modified, or revoked in any respect and are in full force and effect as of
the date hereof.
(b) ADMINISTRATION DOCUMENTS. This Agreement and all other
Administration Documents, duly executed.
(c) FINANCING STATEMENTS. All financing statements required by
Administrative Secured Party in connection with perfection of Administrative
Secured Party's security interests in the Collateral.
(d) COLLATERAL ACCESS AND WAIVER AGREEMENTS. All Collateral
Access and Waiver Agreements, if any, as may be required by Administrative
Secured Party pursuant to paragraph 1.5.
(e) OPINION OF COMPUCOM'S COUNSEL. An opinion of counsel for
CompuCom in form and substance satisfactory to Administrative Secured Party,
addressing such matters in connection with this Agreement as Administrative
Secured Party may request.
(f) OTHER DOCUMENTS. Such other items as Administrative Secured
Party may request in order to perfect or protect its interests and rights
under the Administration Documents.
22
<PAGE>
ARTICLE II.
REPRESENTATIONS
II.1 CORPORATE NAME; TRADE NAMES. CompuCom is conducting,
transacting, and carrying on its business under the name shown
for CompuCom in the Definitions of this Agreement, and such other
names, if any, as may be specified in Exhibit 4.1, and is not
engaged in business under any other name. Except as provided in
Exhibit 4.1, during the past five (5) years CompuCom has not (i)
done business under any other name, (ii) been party to a merger
or consolidation or (iii) acquired any of the property included
within the Collateral from any other Person.
II.2 CHIEF EXECUTIVE OFFICE. CompuCom's chief executive
office is located at the address specified for CompuCom in the
Definitions of this Agreement.
II.3 CORPORATE EXISTENCE. CompuCom is a corporation, duly
incorporated, validly existing, and in good standing under the
laws of the State of Delaware, and is duly qualified or licensed
to transact business in all jurisdictions the laws of which
require it to be so qualified or licensed, except for those
jurisdictions, if any, where the failure to be so qualified or
licensed would not cause a Material Adverse Effect.
II.4 CORPORATE POWER AND AUTHORITY; VALIDITY. CompuCom
possesses all requisite authority and power and authority to
conduct to own, lease and operate its properties and to carry on
its business as now conducted and proposed to be conducted and to
execute, deliver, and comply with the Administration Documents.
Each of the Administration Documents has been duly authorized by
all necessary corporate action and duly executed and delivered by
CompuCom, and evidences valid and binding obligations enforceable
in accordance with its respective terms.
II.5 NO CONFLICTING AGREEMENTS. CompuCom represents that
the execution, delivery and performance of the Administration
Documents will not violate its articles of incorporation or
bylaws, nor constitute a default under, or result in a breach of,
any material contract, agreement, or other instrument to which it
is a party or which is applicable to its property.
II.6 COMPLIANCE WITH LAWS. CompuCom represents that it is
not in violation of any laws, regulations and orders in any
respect which will result in or cause, or reasonably would be
expected to result in or cause, a Material Adverse Effect.
23
<PAGE>
II.7 JUDGMENTS. There are no outstanding or unpaid material
judgments or assessments against CompuCom, except for tax and
similar assessments in the ordinary course of business which are
not delinquent.
II.8 TAXES. All tax returns or filings required to be filed
by CompuCom have been filed and taxes imposed upon CompuCom which
are due and payable have been paid.
II.9 TITLE TO PROPERTY. CompuCom has good and indefeasible
title to all Collateral.
II.10 CONSENTS. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in
connection with the execution, delivery and performance of the
Administration Documents other than financing statements required
by Administrative Secured Party under the Texas UCC. CompuCom
has all required governmental permits and licenses, if any, on
account of its operations and activities and is in full
compliance with the terms and conditions thereof, and all such
permits and licenses are in full force and effect.
II.11 REPRESENTATIONS AND WARRANTIES CUMULATIVE. The
representations and warranties contained in this Article IV are
in addition to all other representations and warranties provided
in the Administration Documents.
24
<PAGE>
ARTICLE III.
COVENANTS
Throughout the Contract Term, CompuCom agrees as follows
(unless otherwise allowed by prior written consent of
Administrative Secured Party):
III.1 COMPLIANCE CERTIFICATE. Within forty five (45)
days following the end of each fiscal quarter of CompuCom,
CompuCom shall deliver to Administrative Secured Party a
certificate signed by the president or chief financial officer,
controller or treasurer of CompuCom certifying to Administrative
Secured Party that, except as may be expressly identified and
described in such certificate, CompuCom is in compliance with its
obligations under this Agreement and that no event or condition
that would be the subject of a required notice under paragraph
5.7, paragraph 5.8 or paragraph 5.9 is in existence as of the
date of such certificate. Such certificate shall be deemed to be
a continuing representation and warranty pending any subsequent
certification or notification by CompuCom respecting its
compliance or non-compliance with this Agreement.
III.2 AUTHORITY. Immediately following any effective
change thereof (and at such other times, from time to time, at
the request of Administrative Secured Party) CompuCom shall
certify to Administrative Secured Party the names and signatures
of all Persons authorized to execute and deliver to
Administrative Secured Party any documentation contemplated by or
relating to any Administration Documents.
III.3 BOOKS AND RECORDS. CompuCom shall keep and
maintain proper, complete and consistent books of record and
account respecting the Collateral and CompuCom's affairs in
accordance with GAAP.
III.4 CORPORATE EXISTENCE. CompuCom shall preserve and
maintain its corporate existence, good standing and authority to
transact business in all jurisdictions where necessary for the
proper conduct of its business, and shall maintain all of its
properties, rights, privileges and franchises necessary or
desirable in the normal conduct of its business.
III.5 MONTHLY RECEIVABLES REPORT. Within 15 days after
the end of each calendar month, CompuCom shall furnish to
Administrative Secured Party and the Beneficial Secured Parties a
listing and analysis of all Receivables substantially in the form
attached as Exhibit E to the TAA.
25
<PAGE>
III.6 NOTICES, INFORMATION IN RESPECT OF RPA AND TAA.
CompuCom and CFI will notify Administrative Secured Party and the
Beneficial Secured Parties in writing (i) at least two (2)
Business Days before effecting any change in the RPA Interest
under the terms of the RPA, as provided in paragraph 2.2(b),
(ii) promptly upon any termination of the RPA or the TAA, or upon
receiving or sending any notice of intended, pending or potential
termination of the RPA or the TAA, (iii) promptly at any time
when the Percentage Factor exceeds the Maximum Percentage Factor
(as those terms are defined by the TAA); (iv) promptly upon any
assignment by EFC, or any request by CFI for an assignment by
EFC, of EFC's interest under the TAA to any Bank Investor
pursuant to Section 9.7 of the TAA.
III.7 COPIES IN RESPECT OF RPA AND TAA. Promptly upon
execution, CompuCom will deliver to Administrative Secured Party
and the Beneficial Secured Parties a true and correct copy of the
RPA and the TAA, respectively, and all other agreements,
certifications, opinions and other documentation in connection
therewith. CompuCom will provide Administrative Secured Party
and the Beneficial Secured Parties with a true and correct copy
of (i) each Ownership Certification delivered to Administrative
Secured Party, (ii) each monthly report delivered by CompuCom to
CFI under the RPA; (iii) each Investor Report delivered by
CompuCom to EFC under the TAA; (iv) each notice, if any, at any
time given by CFI pursuant to Section 5.1(b)(i) of the TAA
(notifications in respect of Termination Events or Potential
Termination Events, as those terms are defined by the TAA) and
(v) any notice of termination, or of intended, pending or
potential termination of the RPA or the TAA sent or received by
CompuCom or CFI.
III.8 ADDITIONAL INFORMATION. In addition to
information and items specifically required by the Administration
Documents, CompuCom shall promptly furnish to Administrative
Secured Party such other information or documentation respecting
the Collateral, and its business affairs in connection therewith,
as Administrative Secured Party may reasonably request.
III.9 NOTIFICATION OF MATERIAL CHANGES. CompuCom shall
promptly notify Administrative Secured Party of any change in any
other material fact or circumstance represented or warranted in
any of the Administration Documents. Without limitation,
CompuCom will notify Administrative Secured Party in writing at
least thirty (30) days prior to the occurrence of any of the
following: (i) change of CompuCom's name, (ii) change of the
location of CompuCom's chief executive office, or (iii) use of
any trade name, fictitious name or other assumed name not
disclosed to Administrative Secured Party at the time of
execution of this Agreement.
26
<PAGE>
III.10 NOTIFICATION REGARDING DEFAULT. CompuCom shall
immediately notify Administrative Secured Party and the
Beneficial Secured Parties in writing upon becoming aware of the
existence of any condition or event which constitutes an Event of
Default or any condition or event which, after notice or lapse of
time, or both, would constitute an Event of Default, therein
specifying the nature and period of existence thereof and what
action CompuCom is taking or proposes to take with respect to
such condition or event. CompuCom shall immediately notify
Administrative Secured Party and the Beneficial Secured Parties
in writing if it knows, or reasonably expects, that an Event of
Default will occur, therein specifying the nature of the
anticipated Event of Default. CompuCom will immediately notify
Administrative Secured Party and the Beneficial Secured Parties
if CompuCom is aware that any covenant under this Agreement has
been breached, or reasonably expects that any such covenant will
be breached, or if CompuCom's board of directors authorizes the
filing by CompuCom of a petition in bankruptcy.
III.11 COMPLIANCE WITH LAWS. CompuCom shall comply with
all applicable laws, regulations and orders applicable to it or
its property, a violation of which would reasonably be expected
to result in a Material Adverse Effect.
III.12 PAYMENT OF TAXES. CompuCom shall promptly pay, or
cause to be paid, when due, all assessments, taxes, governmental
charges and levies imposed upon CompuCom or its income or
profits, the non payment of which could give rise to any notice
of tax lien, levy or other lien or process against any of the
Collateral, except such as may be contested in good faith by
appropriate proceedings, PROVIDED, that adequate reserves shall
be maintained as are appropriate according to GAAP. CompuCom
shall promptly pay any amounts adjudged to be due pursuant to any
such contest, with all costs, penalties, and interest thereon,
before such judgment becomes final or any writ or order is issued
under which the Collateral, or any portion thereof, may become
subject to any lien or encumbrance. Promptly upon Administrative
Secured Party's request, CompuCom will furnish to Administrative
Secured Party evidence of payment of all such contested amounts
and will authorize the appropriate governmental official to
deliver to Administrative Secured Party at any time a written
statement of any taxes or other such amounts owing by CompuCom.
III.13 WAIVERS AND CONSENTS. CompuCom shall furnish to
Administrative Secured Party such waivers and consents as may
reasonably be requested by Administrative Secured Party with
respect to Administrative Secured Party's security interests and
liens in the Collateral.
27
<PAGE>
III.14 RESTRICTION ON DISPOSITION OF COLLATERAL.
CompuCom will not sell or dispose of any interest in the
Collateral except pursuant to the RPA.
III.15 PROHIBITION AGAINST LIENS ON COLLATERAL. CompuCom
will not grant, create or allow to exist any security interest,
lien, financing statement or other encumbrance on any Collateral
other than (i) under this Agreement, or (ii) the Permitted
Subordinated Interests. CompuCom will take prompt action as may
be necessary to discharge or dismiss any tax lien notice,
judgment, levy, attachment or other process filed or levied
against any of the Collateral.
III.16 COVENANTS CUMULATIVE. The covenants contained in
this Article V are in addition to all other covenants provided in
the Administration Documents.
ARTICLE IV.
EVENT OF DEFAULT
IV.1 EVENT OF DEFAULT. Each of the following shall
constitute an Event of Default on any day under this Agreement:
(a) Any Event of Default defined by the Credit
Agreement;
(b) Any default or breach by CompuCom of any
obligation under the RPA;
(c) Any Termination Event defined by the TAA;
(d) Any violation, breach or default of any
covenant, agreement or other obligation under the Administration
Documents which shall not have been cured or otherwise waived in
accordance with the terms of the Administration Documents;
(e) Any representation or warranty made by CompuCom in
the Administration Documents was false in any material respect at
the time when made, and such representation and warranty shall
not have been cured or waived in accordance with the terms of the
Administration Documents;
(f) Material impairment of the enforceability of
the interests, rights or remedies granted to Administrative
Secured Party or the Beneficial Secured
28
<PAGE>
Parties under this Agreement, or the taking of any action by any
party to this Agreement to repudiate or challenge same.
29
<PAGE>
ARTICLE V.
REMEDIES
30
<PAGE>
V.1 REMEDIES. Should an Event of Default occur at any
time, Administrative Secured Party may at its option take any or
all of the following actions: (a) notify Account Debtors to make
all payments on Receivables directly to Administrative Secured
Party at such address as Administrative Secured Party shall
designate; (b) make demand for payment on Account Debtors and
take action (including without limitation, filing suit) to
enforce payment of Receivables, in the name of Administrative
Secured Party (on behalf of the Beneficial Secured Parties) or
CompuCom, as Administrative Secured Party shall determine in its
discretion; (c) take any other action to enforce the collection
rights of a secured party under the Texas UCC; and (d) exercise,
enforce and avail itself of any and all other rights or remedies
as may be available under this Agreement or any other
Administration Documents or as otherwise may be available under
the Texas UCC or other applicable law. Administrative Secured
Party at all times shall have the collection rights and all other
rights and remedies of a secured party under the Texas UCC,
including but not limited to the right to take possession of
Collections and enforce direct payment of Receivables. To the
extent necessary to protect and enforce its rights under the
Administration Documents, Administrative Secured Party is
expressly authorized to receive, open, and dispose of mail
addressed to CompuCom and endorse notes, checks, drafts, money
orders, or other evidences of payment, on behalf of and in the
name of CompuCom. Administrative Secured Party may demand,
collect, receipt for, settle, compromise, adjust, sue for,
foreclose or otherwise realize upon the Receivables as
Administrative Secured Party may determine in its discretion. In
collecting or pursuing collection of Receivables, Administrative
Secured Party may utilize CompuCom's books and records, premises,
telephones, telecopiers, copiers, and other facilities, or the
services of CompuCom's personnel, at CompuCom's cost and expense,
as may be necessary for prompt and expedient collection.
CompuCom agrees that Administrative Secured Party's use of such
facilities or personnel is a commercially reasonable method of
pursuing timely collection and enforcement of Receivables and
that, in taking any such action, Administrative Secured Party is
acting solely in its capacity as a secured party under the Texas
UCC and as attorney in fact and administrator, as provided by
this Agreement. Administrative Secured Party may give verbal or
written notice to any Person who Administrative Secured Party
reasonably believes is or may be an Account Debtor on Receivables
and thereby demand payment of all amounts which may be or become
due by such Person on Receivables. In taking possession of any
Collateral, Administrative Secured Party is authorized to enter
upon any premises owned or leased by CompuCom where any
Collateral is located. At its option, Administrative Secured
Party may require CompuCom to assemble the Collateral and make it
available to Administrative Secured Party at a place to be
designated by Administrative Secured Party which is reasonably
convenient to both Administrative Secured Party and CompuCom.
CompuCom agrees that Administrative Secured Party shall be
entitled to collect or dispose of any Collateral on CompuCom's
premises. Unless the Collateral is perishable
31
<PAGE>
or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Administrative Secured
Party will give CompuCom reasonable notice of the time and place
of any public sale of Collateral or of the time after which any
private sale or any other intended disposition thereof is to be
made. For this purpose, it is agreed that at least five (5)
days notice of the time of sale or other intended disposition of
Collateral delivered in accordance with paragraph 10.3 shall be
deemed to be reasonable notice in conformity with the Texas UCC.
Administrative Secured Party may adjourn or otherwise reschedule
any public sale by announcement at the time and place specified
in the notice of such public sale, and such sale may be made at
the time and place as so announced without necessity of further
notice. Administrative Secured Party shall not be obligated to
sell or dispose of any Collateral, or to pursue any particular
manner of collection or disposition, notwithstanding any prior
notice of intended disposition. With respect to any instruments
or chattel paper at any time included within the Collateral,
Administrative Secured Party shall not have any duty or
obligation to take steps to preserve rights against prior
parties.
V.2 CASH COLLATERAL; INJUNCTIVE RELIEF. All cash proceeds
of Collateral from time to time existing, including without
limitation all Collections, at all times shall be and remain
subject to Administrative Secured Party's continuing security
interest, lien and administration under this Agreement, and shall
be subject to an express trust for the benefit of Administrative
Secured Party, for the benefit of the Beneficial Secured Parties.
Except as may be specifically allowed otherwise by this
Agreement, and following an Event of Default, CompuCom is
expressly prohibited from using, spending, retaining or otherwise
exercising any dominion over such proceeds, and all such proceeds
shall be promptly turned over to Administrative Secured Party in
the form in which they are received by CompuCom, either by
mailing or delivering the same to Administrative Secured Party
not later than the Business Day following receipt thereof by
CompuCom. CompuCom acknowledges and agrees that an action for
damages against CompuCom for any breach of the prohibitions and
obligations of this paragraph shall not be an adequate remedy at
law. In the event of any such breach, CompuCom agrees, to the
fullest extent allowed by law, that Administrative Secured Party
shall be entitled to injunctive relief to restrain such breach
and require compliance with the requirements of this Agreement.
V.3 APPLICATION OF PROCEEDS; DEFICIENCY. After deducting
all costs, fees and expenses of collection and enforcement for
which CompuCom is obligated to Administrative Secured Party
pursuant to the Administration Documents or applicable law, any
remaining Collections or other proceeds of collection, sale or
disposition of the Collateral shall be deposited to the
Concentration Account and administered according to paragraph
2.1(c), and the excess, if any, remaining after expiration of the
Contract Term shall be held or disbursed by Administrative
Secured Party by mutual agreement among
32
<PAGE>
CompuCom, Administrative Secured Party and the Beneficial Secured
Parties or, in the absence of such mutual agreement, in accordance
with applicable law. CompuCom expressly agrees that it shall
remain liable for all Secured Obligations, if any, remaining after
liquidation or other disposition of the Collateral (PROVIDED, that
the foregoing shall not be construed to create any liability of
CompuCom under the RPA except as expressly provided therein).
V.4 WAIVER OF NOTICES. CompuCom expressly waives any
notices from Administrative Secured Party or the Beneficial
Secured Parties except as otherwise expressly provided for and
required by this Agreement.
V.5 SETOFF. CompuCom irrevocably authorizes Administrative
Secured Party to charge any account of CompuCom maintained with
Administrative Secured Party with such amount as may be necessary
from time to time to pay any Secured Obligations. CompuCom
agrees that Administrative Secured Party shall have a contractual
right to setoff any and all deposits or other sums at any time
credited by or due from Administrative Secured Party to CompuCom
against any part of the Secured Obligations. Such right of
setoff may be exercised at any time by Administrative Secured
Party without prior notice, irrespective of whether an Event of
Default exists or whether the Secured Obligations have fully
matured; PROVIDED that the Administrative Secured Party shall
promptly notify CompuCom following any such setoff of funds.
Upon the occurrence of an Event of Default and for so long as the
same shall remain in existence and is not cured or waived,
Administrative Secured Party shall be entitled in its discretion,
without prior notice, to hold any such deposits or other sums
(and return checks or other items presented for payment against
same, and otherwise deny access to same) pending acceleration of
any Secured Obligations. All amounts, if any, charged or set off
by Administrative Secured Party against any Collections shall be
deposited to the Concentration Account and administered as
provided by paragraph 2.1(c).
V.6 PERFORMANCE BY ADMINISTRATIVE SECURED PARTY. Should
CompuCom fail to perform any covenant, duty, or agreement
required by the Administration Documents (including without
limitation, payment and discharge of any taxes, liens or
encumbrances affecting or potentially affecting the Collateral)
Administrative Secured Party may in its sole discretion perform
or attempt to perform or cause performance of same on behalf of
CompuCom at CompuCom's reasonable cost and expense, PROVIDED that
Administrative Secured Party shall have no obligation or duty to
take any such action. CompuCom agrees to reimburse
Administrative Secured Party for such reasonable out-of-pocket
costs and expenses on demand and until paid.
33
<PAGE>
V.7 NON-WAIVER. Forbearance or indulgence by
Administrative Secured Party of any Event of Default or any other
event or condition which is or would be the subject of a required
notice under paragraph 5.10, at any time from time to time, shall
not be deemed a waiver of any rights of Administrative Secured
Party under the Administration Documents. The acceptance by
Administrative Secured Party or the Beneficial Secured Parties,
at any time and from time to time, of any partial payment of the
Secured Obligations shall not be deemed to be a waiver of any
Event of Default then existing. No delay or omission by
Administrative Secured Party in exercising any right or remedy
shall impair such right or remedy, or be construed as a waiver
thereof, nor shall any single or partial exercise of any such
rights or remedies preclude other or further exercise thereof.
Administrative Secured Party shall not be required or obligated
to file suit or otherwise pursue any Account Debtor or other
Person for enforcement or collection of any Receivables or to
otherwise take any action to realize upon any of the Collateral.
V.8 REMEDIES CUMULATIVE. The remedies specified in this
Article VII are cumulative with and in addition to all other
rights and remedies provided by this Agreement and the other
Administration Documents, or by applicable law.
34
<PAGE>
ARTICLE VI.
ADMINISTRATION
VI.1 ADMINISTRATION. Administrative Secured Party, each of
the Beneficial Secured Parties and CompuCom each agrees as
follows:
35
<PAGE>
(a) ADMINISTRATIVE SECURED PARTY: APPOINTMENT;
POWERS. Subject to the terms of this Agreement, each of the
Beneficial Secured Parties hereby irrevocably appoints and
authorizes Administrative Secured Party to act as nominee on
behalf of itself and any of the other Beneficial Secured Parties,
in the name of Administrative Secured Party, the Beneficial
Secured Parties or any of them, to take any one or more of the
following actions: Administer the Administration Documents in
accordance with their terms, and act or refrain from acting under
the Administration Documents in accordance with powers delegated
to Administrative Secured Party under the Administration
Documents and such other powers as are reasonably incidental
thereto; execute and enter into the Administration Documents;
hold the Administration Documents; hold and enforce the security
interests and liens in the Collateral granted under the
Administration Documents; exercise and enforce rights and
remedies in respect of the Receivables as attorney-in-fact and
administrator as provided by paragraph 1.2; receive all
documents, certifications, opinions and other items furnished by
CompuCom under the Administration Documents; take actions as may
be requested or instructed by the Beneficial Secured Parties
(PROVIDED, that unless the Administration Documents specifically
require or permit direction or consent by the Beneficial Secured
Parties and, in such event, unless further assurance of
indemnification (if requested by Administrative Secured Party) is
furnished as provided by paragraph 8.1(g), Administrative Secured
Party shall not be obligated to comply with any such
instructions); collect, receive and administer Collections as
provided by this Agreement; distribute to the Beneficial Secured
Parties such information, requests and documents received from
CompuCom pursuant to the Administration Documents; and deliver to
CompuCom requests, demands, approvals and consents as required or
allowed under the Administration Documents. Except as otherwise
expressly provided by the Administration Documents, each of the
Beneficial Secured Parties irrevocably authorizes Administrative
Secured Party to take or refrain from taking such actions on the
Beneficial Secured Parties' behalf as Administrative Secured
Party in its discretion determines necessary or appropriate in
administering the Administration Documents. Except as otherwise
provided by this Agreement, Administrative Secured Party may take
such action, or refrain from taking such action, in respect of
the Collateral, or in respect of administration of the
Administration Documents, as it may deem in its discretion to be
advisable in the performance of its obligations under this
Agreement. Unless otherwise agreed by Administrative Secured
Party, any action taken by Administrative Secured Party with the
consent or at the direction of the Beneficial Secured Parties
shall be deemed to have been taken for and on behalf of each of
the Beneficial Secured Parties. Administrative Secured Party
shall not be required to take action or exercise any remedy
except to the
36
<PAGE>
extent expressly required by this Agreement upon
direction of the Beneficial Secured Parties, PROVIDED, that
Administrative Secured Party shall not be required to take any
action which Administrative Secured Party believes would expose
it or any of the Beneficial Secured Parties to personal
liability, or which Administrative Secured Party believes is
contrary to any of the Administration Documents or applicable
law. Administrative Secured Party may perform any of its duties
under the Administration Documents by or through officers,
directors, employees, attorneys or agents, and shall be entitled
to employ and consult with legal counsel, independent public
accountants, and other experts or consultants and shall not be
liable for any action taken or omitted to be taken in good faith
in accordance with the advice of such counsel, accountants,
experts or consultants, and may rely and act upon any resolution,
notice, consent, certificate, affidavit, letter or other document
or instrument or writing, or any telecopy, fax, telegram, telex
or teletype, or any court order, or any conversation, which it
believes to be genuine and correct and to have been signed or
made by the proper Person. Administrative Secured Party shall be
fully protected in acting, or in refraining from acting, under
the Administration Documents in accordance with instructions
signed by the Beneficial Secured Parties, and such instructions
and any action or inaction by Administrative Secured Party
pursuant thereto shall be binding on each of the Beneficial
Secured Parties. Neither Administrative Secured Party nor its
affiliates, officers, directors, employees, attorneys, or agents
shall be liable for any action taken or omitted to be taken in
connection with the Administration Documents except for gross
negligence or willful misconduct.
(b) LIMITATION OF SCOPE. Administrative Secured
Party's appointment hereunder is expressly limited as provided in
this Agreement. Administrative Secured Party accepts such
appointment solely as a secured party under the Texas UCC, and as
attorney-in-fact and administrator, on the terms provided by this
Agreement. The duties and responsibilities of Administrative
Secured Party under this Agreement are ministerial and
administrative in nature, and it is expressly agreed that
Administrative Secured Party shall not be a fiduciary or trustee
on behalf of any Person. Administrative Secured Party shall have
no duties or obligations, express or implied, except as expressly
set forth in this Agreement.
(c) AVAILABILITY OF INFORMATION. Administrative
Secured Party will forward to the Beneficial Secured Parties
copies of all reports of a material nature which are furnished by
CompuCom to Administrative Secured Party, other than those, if
any, which by the terms of this Agreement are to be delivered by
CompuCom directly to the Beneficial Secured Parties, PROVIDED,
that
37
<PAGE>
Administrative Secured Party shall not have any liability to
any Beneficial Secured Party for failure to do so.
Administrative Secured Party shall promptly notify the Beneficial
Secured Parties upon becoming aware of any Event of Default,
PROVIDED, that in the absence of gross negligence or intentional
misconduct Administrative Secured Party shall not have any
liability to any of the Beneficial Secured Parties for failure to
do so, and PROVIDED FURTHER, that Administrative Secured Party
shall not be deemed to have knowledge or notice of any Event of
Default (other than breaches by CompuCom, of which Administrative
Secured Party has actual knowledge, of CompuCom's obligations
under paragraph 2.1, or failure of timely payment to
Administrative Secured Party of any costs or fees as required by
the Administration Documents) unless it receives written notice
from CompuCom or any Beneficial Secured Party specifying an event
or condition and designating the same as an Event of Default.
Upon request, Administrative Secured Party will make available to
any Beneficial Secured Party any documents, reports or other
items from time to time received from CompuCom and remaining in
Administrative Secured Party's possession.
(d) REQUIRED CONSENT OF BENEFICIAL SECURED
PARTIES. Notwithstanding the authority granted to Administrative
Secured Party elsewhere in this Agreement:
1. The written consent of Administrative
Secured Party and all Beneficial Secured Parties shall be
required as a condition to the effectiveness of any of the
following actions: (i) extend the Contract Term; (ii) release any
security interest or lien in any Collateral; (iii) agree to
waive, modify or amend any covenants, agreements or other
provisions contained in Article I ("Security Interest and
Collateral Covenants"), Article II ("Collections Administration")
or Article V ("Covenants"), Article VI ("Event of Default" or
Article VII ("Remedies"), Article VIII ("Administration"),
Article IX ("Additional Agreements") or Article X
("Miscellaneous") of this Agreement; (iv) consent to allow any
security interests, liens or encumbrances on any Collateral
(other than the Permitted Subordinated Interests), or consent to
allow the disposition of any Collateral other than as expressly
provided by the Administration Documents; (v) grant any consent
or make any agreement which is expressly subject to the consent
of the Beneficial Secured Parties pursuant to this Agreement;
(vi) exercise any remedies under this Agreement to sell or
otherwise dispose of Receivables; (vii) file, or join with any
other Person in filing, any petition against CFI for an order of
relief under the United States Bankruptcy Code or for
receivership or similar relief under
38
<PAGE>
any other applicable law; (viii) agreement to amend this subparagraph (1)
of this paragraph 8.1(d).
2. Subject to paragraph 8.1(a), Administrative
Secured Party agrees to take any of the following actions upon written
direction of each and all of the Beneficial Secured Parties, PROVIDED,
that in each instance, such written direction references this paragraph
8.1(d) and specifically identifies the requested action: (i) request or
direct CompuCom to take any action which may be requested or directed by
Administrative Secured Party under the Administration Documents;
(ii) pursue any remedies provided by the Administration
Documents; or (iii) perform or take any action which may be taken
by Administrative Secured Party under the Administration Documents.
3. Subject to paragraph 8.1(a), Administrative Secured
Party agrees to take any of the following actions upon written direction
of any Beneficial Secured Party, PROVIDED, that in each instance, such
written direction references this paragraph 8.1(d) and specifically
identifies the requested action: (i) request information from CompuCom
which may be requested by Administrative Secured Party under the
Administration Documents or (ii) report requested information
regarding Collections administration under Article II.
Notwithstanding the foregoing, no consent shall be
required with respect to any action if Administrative Secured
Party is required to take any such action by court order or
applicable law. Otherwise, except as provided or referenced
above, Administrative Secured Party may amend, modify or waive
any of the terms of the Administration Documents, consent to any
action or failure to act by CompuCom, or exercise or refrain from
exercising any powers or rights which it may have under the
Administration Documents or as a matter of law, without the
requirement of prior notice to or consent of the Beneficial
Secured Parties. Any consent requested by Administrative Secured
Party from any Beneficial Secured Party, and any directive,
consent or refusal of consent given to Administrative Secured
Party by any Beneficial Secured Party, shall be communicated as
provided in paragraph 10.3. In the event any consent requested
by Administrative Secured Party is not granted or refused within
ten (10) days after it is requested by Administrative Secured
Party, the same shall be deemed to have been granted.
(e) LIMITATION OF ADMINISTRATIVE SECURED PARTY'S
LIABILITY. Neither Administrative Secured Party nor any of its
officers, directors, employees, at-
39
<PAGE>
torneys or agents shall be liable for any action taken or omitted
to be taken in connection with the Administration Documents in
conformity with instructions or consents of any Beneficial Secured
Party, or based upon its belief that such action or inaction is
within the discretion or power conferred to Administrative Secured
Party under the Administration Documents, nor shall Administrative
Secured Party or any of such officers, directors, employees, attorneys or
agents be liable for the consequences of any error of judgment,
except for gross negligence or wilful misconduct. Administrative
Secured Party shall not be responsible to the Beneficial Secured
Parties for the due execution, validity, effectiveness,
enforceability, or sufficiency of this Agreement or any of the
other Administration Documents, or for any recitals,
representations or warranties, reports, statements contained in
the Administration Documents or furnished in connection
therewith, or for the perfection or value of any Collateral or
for any failure by any other Person to perform any obligations
under the Administration Documents. Administrative Secured Party
shall have no liability to any Beneficial Secured Party with
respect to ascertaining or confirming performance or observation
by CompuCom of any terms, covenants or conditions of any
Administration Documents.
(f) EXPENSES. Each Beneficial Secured Party
severally agrees to reimburse Administrative Secured Party
promptly upon demand for its Pro Rata Percentage share of any and
all out-of-pocket expenses (including reasonable attorneys' fees)
incurred by Administrative Secured Party in connection with the
preparation, execution, delivery, administration, modification,
amendment or enforcement of the Administration Documents, and
legal advice in respect of rights or obligations thereunder
(whether in connection with negotiations, legal proceedings, or
otherwise) to the extent that any such expenses are not paid or
reimbursed to Administrative Secured Party by CompuCom or from
other sources within 60 days after request for payment or
reimbursement is made to CompuCom (PROVIDED that any such payment
by any Beneficial Secured Party to Administrative Secured Party
shall be without prejudice to the right to contest such
Beneficial Secured Party's obligation to make such payment, AND
PROVIDED FURTHER, that EFC shall make any such reimbursement only
to the extent that it has received sufficient funds from all
sellers of accounts to it in excess of the amount necessary to
pay matured and maturing commercial paper). To the extent any
such expenses are recovered by Administrative Secured Party from
CompuCom or other sources after any such amounts have been paid
to Administrative Secured Party by any Beneficial Secured
Party(ies), the amount so recovered shall be refunded by
Administrative Secured Party to each such paying Beneficial
Secured Party ratably according to its respective payments.
40
<PAGE>
(g) INDEMNIFICATION. Each Beneficial Secured Party hereby severally
indemnifies, in accordance with its Pro Rata Percentage, and holds harmless
Administrative Secured Party from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and/or disbursements of any kind or nature whatsoever which may be
imposed on, asserted against, or incurred by Administrative Secured Party in
any way with respect to any Administration Documents (including without
limitation as may arise as a result of any order of a court of competent
jurisdiction pursuant to which Administrative Secured Party is required to
refund, repay or otherwise return any Collections to any other Person) or any
action taken or omitted by Administrative Secured Party under the
Administration Documents, except to the extent the same is caused by gross
negligence or wilful misconduct by Administrative Secured Party (IT BEING
ACKNOWLEDGED THAT IT IS THE EXPRESS INTENTION OF ADMINISTRATIVE SECURED PARTY
AND THE BENEFICIAL SECURED PARTIES THAT SUCH INDEMNIFICATION AND HOLD
HARMLESS OBLIGATIONS SHALL INCLUDE ANY SUCH ACTIONS OR INACTIONS WHICH ARE A
RESULT OF NEGLIGENCE OTHER THAN GROSS NEGLIGENCE), PROVIDED, that EFC's
obligation to make payment under the foregoing indemnity is limited to the
extent that it has received sufficient funds from all sellers of accounts to
it in excess of the amount necessary to pay matured and maturing commercial
paper). Prior to compliance with any instructions by the Beneficial Secured
Parties under the Administration Documents, Administrative Secured Party
shall be entitled to request further assurance of any such indemnification in
form satisfactory to Administrative Secured Party, and unless and until such
further assurance is provided to Administrative Secured Party, Administrative
Secured Party shall have no obligation to comply with such instructions and
may disregard same.
41
<PAGE>
(h) REPLACEMENT OF ADMINISTRATIVE SECURED PARTY. Subject to the
following, Administrative Secured Party may resign as Administrative Secured
Party at any time by giving written notice of such resignation to the
Beneficial Secured Parties and CompuCom, and Administrative Secured Party may
be removed upon written notice by unanimous consent of the Beneficial Secured
Parties. Should Administrative Secured Party give any such notice of its
resignation as Administrative Secured Party, or should the Beneficial Secured
Parties give any such notice of removal, then the Beneficial Secured Parties
collectively shall forthwith appoint another Person, acceptable to them and
to CompuCom (such acceptance not to be unreasonably withheld or delayed), to
become Administrative Secured Party, whereupon such newly appointed Person
shall thereafter be Administrative Secured Party and CompuCom and the
Beneficial Secured Parties shall execute such documents as any Beneficial
Secured Party may reasonably request to reflect such change. Any resignation
or removal of Administrative Secured Party shall become effective upon the
appointment of a successor Administrative Secured Party (PROVIDED, that if
the Beneficial Secured Parties fail for any reason to appoint a successor
within sixty (60) days after written notice of such resignation or removal,
Administrative Secured Party shall thereafter have no obligation to act as
Administrative Secured Party hereunder). Any Person appointed as successor
Administrative Secured Party as provided above shall be deemed to accept such
appointment, and such successor Administrative Secured Party shall thereupon
succeed to and become vested with all rights, powers, privileges, immunities,
and duties of the resigning or removed Administrative Secured Party, and the
resigning or removed Administrative Secured Party shall be discharged from
its duties and obligations under this Agreement and the other Administration
Documents. After any Administrative Secured Party's resignation or removal
as Administrative Secured Party, the provisions of this Article VIII shall
continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was Administrative Secured Party.
NationsBank has been appointed as Administrative Secured Party, and has
accepted such appointment, subject to the terms of this Agreement, as of the
Effective Date. As of the Effective Date, NationsBank has delegated
administration of its functions as Administrative Secured Party hereunder to
its affiliate, NationsBank, N.A., headquartered in Charlotte, North Carolina,
and at EFC's request hereby agrees that it will not transfer such
administration to any other division unless such division is acceptable to
Beneficial Secured Parties (such acceptance not to be unreasonably withheld
or delayed).
42
<PAGE>
(i) RIGHTS OF ADMINISTRATIVE SECURED PARTY AS BENEFICIAL SECURED PARTY.
Any Beneficial Secured Party who serves as Administrative Secured Party
shall nonetheless continue to have the same rights as a Beneficial Secured
Party, in its individual corporate capacity as a Beneficial Secured Party, as
any other Beneficial Secured Party and may exercise the same as though it
were not acting as Administrative Secured Party, and unless the context
indicates otherwise, to the extent that Administrative Secured Party in its
individual capacity is a Beneficial Secured Party, the term "Beneficial
Secured Party" or "Beneficial Secured Parties," wherever used in the
Administration Documents shall include the Administrative Secured Party in
its individual corporate capacity as a Beneficial Secured Party.
(j) INDEPENDENT CREDIT DECISIONS. Each Beneficial Secured Party
represents, warrants and agrees that it has made its own underwriting analysis
of CompuCom and its own evaluation and valuation of the Collateral and has made
its own decision to enter into this Agreement independently and without reliance
on Administrative Secured Party or any other Beneficial Secured Party and based
on such documents and information as it has deemed appropriate. Each Beneficial
Secured Party further acknowledges and agrees that it will continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or any of the other Administration Documents, independently and without reliance
upon Administrative Secured Party or any other Beneficial Secured Party and
based upon such documents and information as it shall deem appropriate at the
time. Each Beneficial Secured Party acknowledges that it shall have no right to
rely upon Administrative Secured Party to inform it of the financial conditions
or creditworthiness of CompuCom or the condition, value, marketability or other
conditions in respect of the Collateral. Upon written request by any Beneficial
Secured Party, Administrative Secured Party will make any documents, reports or
other information received by Administrative Secured Party from CompuCom and
designated in such request available to such Beneficial Secured Party.
Otherwise, except as specifically provided in this Agreement, Administrative
Secured Party shall not have any duty or responsibility to provide any
Beneficial Secured Party with any credit or other financial information
concerning the affairs, financial condition or business of CompuCom or any of
its subsidiaries or affiliates.
(k) SEVERAL COMMITMENTS. Administrative Secured Party shall not be
liable to CompuCom or any Beneficial Secured Party for any act or omission by
any Beneficial Secured Party, and no Beneficial Secured Party shall be
responsible
43
<PAGE>
to CompuCom or any other Beneficial Secured Party for any act or omission of
any other Beneficial Secured Party.
(l) COLLECTION ADMINISTRATION: LOCKBOX; CONCENTRATION ACCOUNT.
On and after the Effective Date and continuing through the end of the Contact
Term, for so long as NationsBank is serving in the capacity as Administrative
Secured Party, it is agreed that (i) the lockbox presently established and
operating in connection with the Credit Agreement shall be deemed to be the
Lockbox and (ii) the concentration account presently established and operating
in connection with the Credit Agreement shall be deemed to be the Concentration
Account, and all Collections during any such period, from time to time, received
or deposited thereto, respectively, shall be deemed to have been received by
Administrative Secured Party solely pursuant, and subject to, the terms of this
Agreement.
(m) BENEFITS. CompuCom expressly acknowledges and agrees to the
provisions of this Article VIII, PROVIDED, that none of the provisions of this
Article shall inure to the benefit of CompuCom or any Person other than
Administrative Secured Party and the Beneficial Secured Parties. CompuCom shall
not be entitled to rely upon, or to raise as a defense, any failure of
Administrative Secured Party or any Beneficial Secured Party to comply with such
provisions. Subject to the requirements of paragraph 8.1(d)1, CompuCom shall be
entitled to rely on actions, agreements and consents of Administrative Secured
Party in connection with administering the Administration Documents as the
actions, agreements and consents of all Beneficial Secured Parties.
ARTICLE VII.
ADDITIONAL AGREEMENTS
In consideration of the mutual benefits under this Agreement,
Administrative Secured Party and the Beneficial Secured Parties each agrees
among themselves as follows:
VII.1 EQUAL DIGNITY. The rights and interests pertaining to the
CompuCom Interest and the RPA Interest, under this Agreement or otherwise, are
of equal dignity and neither shall enjoy or be entitled to any right or benefit
in priority or preference over the other. All such rights and interests, and
all proceeds thereof, shall be shared by the Beneficial Secured Parties
according to their respective Pro Rata Percentage.
44
<PAGE>
VII.2 PRO-RATA TREATMENT AMONG BENEFICIAL SECURED PARTIES. All
Collections and other proceeds of Receivables at any time received by
Administrative Secured Party shall be for the account of the Beneficial
Secured Parties in accordance with their respective Pro Rata Percentage as of
the time of Administrative Secured Party's receipt thereof.
VII.3 SUBORDINATION OF INTERESTS.
a. As among Administrative Secured Party and the Beneficial
Secured Parties only and subject to paragraph 9.3(e), NationsBank agrees
that all valid and perfected rights and interests pertaining to the
CompuCom Interest and the RPA Interest under this Agreement are and shall
be first, senior and prior to any other rights now or hereafter claimed
therein by NationsBank, whether under the Credit Agreement or otherwise,
and all security interests, collateral assignments, pledges, liens,
mortgages, rights or other interests now or hereafter claimed by
NationsBank with respect to the Collateral (other than its interest as a
Beneficial Secured Party under this Agreement) shall be and hereby are
expressly subordinated and made junior to all such valid and perfected
rights and interests pertaining to the CompuCom Interest and the RPA
Interest under this Agreement.
b. All sales and transfers of the RPA Interest under the RPA are
expressly subject to the interests granted or delegated to Administrative
Secured Party under this Agreement. As among Administrative Secured Party
and the Beneficial Secured Parties only and subject to paragraph 9.3(e),
CFI agrees that all valid and perfected rights and interests pertaining to
the CompuCom Interest and the RPA Interest under this Agreement are and
shall be first, senior and prior to any other rights now or hereafter
claimed therein by CFI, whether under the RPA, the TAA or otherwise, and
any and all security interests, collateral assignments, pledges, liens,
mortgages, rights or other interests now or hereafter claimed by CFI with
respect to the Collateral (other than its interest as a Beneficial Secured
Party under this Agreement) shall be and hereby are expressly subordinated
and made junior to all such valid and perfected rights and interests
pertaining to the CompuCom Interest and the RPA Interest under this
Agreement. CFI agrees that it will not sell or transfer any RPA Interest
to any Person except EFC pursuant to the TAA subject to the rights of
Administrative Secured Party and the Beneficial Secured Parties under this
Agreement.
45
<PAGE>
c. All sales and transfers of any portion of the RPA Interest
under the TAA are expressly subject to the interests granted to
Administrative Secured Party under this Agreement. As among Administrative
Secured Party and the Beneficial Secured Parties only, and subject to
paragraph 9.3(e), EFC agrees that all valid and perfected rights and
interests pertaining to the CompuCom Interest and the RPA Interest under
this Agreement are and shall be first, senior and prior to any rights now
or hereafter claimed therein by EFC (or any assignee of EFC under the TAA),
whether under the TAA or otherwise and any and all security interests,
collateral assignments, pledges, liens, mortgages, rights or other
interests now or hereafter claimed by EFC (or any assignee of EFC under
the TAA) with respect to the Collateral (other than EFC's interest as a
Beneficial Secured Party under this Agreement) shall be and hereby are
expressly subordinated and made junior to all such valid and perfected
rights and interests pertaining to the CompuCom Interest and the RPA
Interest under this Agreement. CompuCom, CFI and EFC each agree that the
RPA and the TAA at all times will contain provisions expressly providing
that all rights and interests in the RPA Interest conveyed or claimed
thereunder are subject to the rights and interests of Administrative
Secured Party under this Agreement. EFC agrees that it will not sell or
transfer any portion of the RPA Interest to any Person (except assignments
of EFC's rights therein to the limited extent provided by the TAA as of
the Effective Date, PROVIDED that any such portions of the RPA Interests
assigned pursuant to any such assignments shall at all times be and remain
subject to the rights of Administrative Secured Party under the
Administration Documents).
d. The Beneficial Secured Parties each agrees, among themselves,
that until termination of this Agreement, if it from time to time comes
into possession of any Collections other than as provided by paragraph
2.1(c) this Agreement, all of such amounts shall be received in trust for
the benefit of the Beneficial Secured Parties according to their respective
Pro Rata Percentages and shall be paid forthwith to Administrative Secured
Party, for the account of the Beneficial Secured Parties, for deposit to
the Concentration Account and administration under paragraph 2.1(c) of this
Agreement. In the event any Beneficial Secured Party is required to
deliver to Administrative Secured Party any amounts received by such
Beneficial Secured Party in respect of Collections as required by this
paragraph 9.3(d) then, for purposes of this paragraph 9.3(d) and clause (1)
of the definition of "Contract Term" in the Definitions of this Agreement,
such Beneficial Secured Party shall be deemed to have received payment in
respect of such Collections only to the extent that it actually receives
46
<PAGE>
payment of its Pro Rata Percentage thereof from Administrative Secured
Party pursuant to this paragraph 9.3(d).
e. As among Administrative Secured Party and the Beneficial
Secured Parties only, the subordinations, priorities and agreements
specified in paragraph 9.3(a), paragraph 9.3(b) and paragraph 9.3(c) are
applicable irrespective of the time or order of filing of financing
statements with respect thereto, PROVIDED, that such subordinations,
priorities and agreements are SOLELY for the respective benefit of
Administrative Secured Party and the Beneficial Secured Parties, as a
separate contractual agreement among themselves only, and shall not in any
event operate, entitle or be construed to allow any other Person
(specifically including without limitation any trustee in bankruptcy) to
any rights or priority over Administrative Secured Party or the Beneficial
Secured Parties, or any of them. The subordinations, priorities and
agreements specified in paragraph 9.3(a), paragraph 9.3(b) and
paragraph 9.3(c) shall not be effective to the extent, if any, that any
rights or interests pertaining to the CompuCom Interest or the RPA Interest
for any reason are determined by a court of competent jurisdiction to be
invalid, unenforceable, unperfected or avoidable, or subordinate to any
Person other than Administrative Secured Party and the Beneficial Secured
Parties.
f. Each of the Beneficial Secured Parties may release any Person
now or hereafter liable to such Beneficial Secured Party upon any of the
Secured Obligations, or permit substitutions, or renew, increase, extend or
accept partial payments upon any of the Secured Obligations, or amend or
modify the terms of any instrument or agreement evidencing or otherwise
securing same, or any part thereof, in such manner and at such times from
time to time, as it may determine in its sole discretion, without notice
to or consent from the other, and without in any manner impairing the
rights and obligations under this Agreement (PROVIDED, that the foregoing
shall not impair any condition or requirement imposed upon CompuCom by any
Beneficial Secured Party pursuant to the FSA, the RPA or the TAA,
respectively).
g. Until termination of this Agreement each of NationsBank, CFI
and EFC each agrees, for itself and its successors and assigns, that it
will not take any action to foreclose, repossess, marshal, control, or
exercise remedies or other rights with respect to any Collateral, whether
pursuant to the Credit Agreement, the RPA or the TAA, respectively, or
otherwise (subject to NationsBank's prior rights in respect of returned
inventory under the FSA as provided in paragraph 9.3(h)), PROVIDED, that
the foregoing shall not prohibit or restrict NationsBank, CFI or EFC from
asserting and protecting their respective interests in the
47
<PAGE>
Collateral in any bankruptcy proceeding, SUBJECT AT ALL TIMES HOWEVER, to
all other terms and provisions of this Agreement.
h. Notwithstanding any other provisions in this Agreement regarding
rights and relative priorities of interests among Administrative Secured
Party and the Beneficial Secured Parties, it is agreed that all rights
and interests, if any, of Administrative Secured Party, CFI and EFC,
respectively, at any time arising in returned inventory shall be subject
to the prior rights and interests of NationsBank in returned inventory
under the FSA and perfected rights, if any, in returned inventory in favor
of any Person who is a seller of inventory to CompuCom, existing as of the
Effective Date.
i. Notwithstanding the sale and transfer by CompuCom to CFI of
the RPA Interest pursuant to the RPA, and any contemporaneous or subsequent
transfer of a portion thereof by CFI to EFC, from time to time, and
notwithstanding anything to the contrary contained in the RPA or the TAA,
for so long as CompuCom is owner of the CompuCom Interest and until
termination of this Agreement, CFI and EFC each agrees, for itself and its
successors and assigns, that (i) for so long as no Event of Default is in
existence and continuing, CompuCom shall have the sole and exclusive right
to service, administer and collect the Receivables, SUBJECT AT ALL TIMES,
HOWEVER, to the administration of Collections as provided in Article II and
all other rights, interests and remedies of Administrative Secured Party
under the terms and provisions of this Agreement, and no notice or action
under the RPA or TAA shall be effective to limit or preclude such rights
of CompuCom or grant rights to any Person which are inconsistent or in
conflict therewith, (ii) following the occurrence and during the existence
of any Event of Default, any Person other than CompuCom who is appointed to
service Receivables under the RPA or who is appointed as "Collection Agent"
under the TAA shall be a Person that is acceptable to Administrative
Secured Party and the Beneficial Secured Parties, and (iii) without the
prior written consent of Administrative Secured Party, no party to this
Agreement shall (A) exercise any dominion and control over the Collateral
except as expressly provided herein and (B) following an Event of Default,
notify any Account Debtor of CompuCom's transfer to CFI of the RPA Interest
or of CFI's transfer of a portion thereof to EFC.
j. Except as expressly provided in this Agreement, nothing in this
Agreement shall limit or restrict (i) NationsBank in the exercise of rights
and remedies under the Credit Agreement, (ii) CFI in the exercise of rights
and reme-
48
<PAGE>
dies under the RPA or (iii) EFC in the exercise of rights and remedies
under the TAA or, as assignee of CFI, the exercise of rights and remedies
under the RPA.
k. In the event of any bankruptcy of CompuCom or CFI, until
termination of this Agreement Administrative Secured Party shall have the
right, and hereby is irrevocably authorized by the Beneficial Secured
Parties, to assert Administrative Secured Party's rights, on behalf of the
Beneficial Secured Parties, to receive, collect and administer the
Receivables in accordance with the provisions of the Administration
Documents.
l. The agreements in this paragraph 9.3 are irrevocable and
continuing, and the Beneficial Secured Parties may continue to rely upon
same in making financial accommodations to or for the account of CompuCom,
without notice to the other except as otherwise provided in this Agreement.
VII.4 OTHER RIGHTS; WAIVER OF MARSHALING. Each of NationsBank, CFI and
EFC waives marshaling as to the other, and agrees that each shall be entitled to
pursue rights and remedies against CompuCom or in respect of property of
CompuCom other than the Collateral as may be provided by any other agreement.
VII.5 ACCESS TO INFORMATION. In consideration of the mutual benefits
of this Agreement, each of NationsBank, CFI and EFC agrees that, upon request,
it will provide to Administrative Secured Party any information available to it
in respect of CompuCom or the Collateral for the purpose of assisting
Administrative Secured Party in administering this Agreement or enforcing and
collecting Receivables. CompuCom expressly agrees and consents to the providing
of any such information for such purpose.
VII.6 PAYMENTS BY ADMINISTRATIVE SECURED PARTY. Administrative Secured
Party shall have no further duty or obligations in respect of any Collections
following administration and transfer thereof in compliance with the
requirements of paragraph 2.1. Each Beneficial Secured Party, severally
according to its respective Pro Rata Percentage, agrees to promptly reimburse
Administrative Secured Party for any checks or items deposited to the
Concentration Account and transferred to such Beneficial Secured Party pursuant
to paragraph 2.1 which are returned unpaid for any reason, PROVIDED, that EFC
shall make any such reimbursement only to the extent that it has received
sufficient funds from all sellers of accounts to it in excess of the amount
necessary to pay matured and maturing commercial paper. In the event EFC, CFI,
or any Person claiming through or under either of them, including any assignee
under the TAA, at any time makes demand upon Administrative Secured Party for
payment of any amount in respect of Collections
49
<PAGE>
relative to the RPA Interest, Administrative Secured Party shall be fully
protected in depositing such amount to the CFI Account or, at Administrative
Secured Party's option in its sole discretion, making such payment jointly
payable to CFI and any such claimant and delivering same to an officer of CFI
or such claimant, and in either of such instances, Administrative Secured
Party shall be fully released and discharged from further duty or obligation
in respect of such amount.
VII.7 NOTICES, CONSENTS, AGREEMENTS REGARDING EFC. Any notice, consent
or agreement to or by EFC or any of its permitted assigns pursuant to or in
connection with the Administration Documents shall be effective for all purposes
if given or made to or by the Person serving in the capacity as "Agent" under
the TAA, and the same shall be deemed valid and binding for all purposes of this
Agreement as having been given or made to or by EFC.
VII.8 LIMITATION. CompuCom expressly acknowledges and agrees to the
provisions of this Article IX, PROVIDED, that none of the provisions of this
Article IX shall inure to the benefit of CompuCom. CompuCom shall not be
entitled to rely upon, or to raise as a defense, any matters contained in this
Article IX. Notwithstanding anything in this Agreement to the contrary,
NationsBank, CFI and EFC may amend or modify any agreement contained in this
Article IX by mutual agreement in writing among themselves without necessity of
joinder or consent by any other Person.
ARTICLE VIII.
MISCELLANEOUS
VIII.1 EFFECTIVE DATE; TERM; TERMINATION. This Agreement shall become
effective upon acceptance by Administrative Secured Party, as of the Effective
Date and shall continue in full force and effect through the end of the Contract
Term.
VIII.2 PAYMENTS. All Collections received to the Concentration Account
after the time for closing business on any Business Day as internally
established by applicable depository bank, or otherwise received by
Administrative Secured Party after its internally established time for closing
business on any Business Day, shall be deemed received as of the next succeeding
Business Day.
VIII.3 NOTICES. Any consent, approval, notice, request, or demand from
one party to another must be made in writing to be effective, and shall be
deemed to have been given on the third Business Day after its deposit in the
United States mail, postage
50
<PAGE>
prepaid and properly addressed, by certified or registered mail, return
receipt requested, or on the Business Day on which it is actually delivered
by messenger delivery, telecopy or other electronic transmission, whichever
is earlier. The address of each party for the purposes hereof is as follows:
IF TO COMPUCOM:
CompuCom Systems, Inc.
10100 North Central Expressway
Dallas, Texas 75231
Attention: Mr. Dan Celoni, Treasurer
Telecopy: 214-265-5449
IF TO THE ADMINISTRATIVE LENDER:
NationsBank of Texas, N.A.,
MESSENGER DELIVERY: NationsBank Plaza, 67th Floor
901 Main Street
Dallas, Texas 75202
Attention: Brent W. Mellow
Vice President
Telecopy: (214) 508-0980
IF TO THE ADMINISTRATIVE SECURED PARTY:
NationsBank, N.A.
MESSENGER DELIVERY: NationsBank Corporate Center
100 North Tryon Street
10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath, Structured Finance
Telecopy: (704) 388-9169
IF TO CFI:
CSI Funding, Inc.
10100 North Central Expressway
Dallas, Texas 75231
Attention: Mr. Dan Lane, Vice President and Secretary
Telecopy: 214-265-5449
51
<PAGE>
IF TO EFC:
Enterprise Funding Corporation
c/o Merrill Lynch Money Markets, Inc.
World Financial Center--South Tower
225 Liberty Street
New York, New York 10281
Telecopy: 212-236-7584
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center, 10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath, Investment Banking
Telecopy: 704-388-9169
or such other address as may hereafter be designated and delivered in writing.
VIII.4 BENEFIT TO COMPUCOM. This Agreement is executed at the request
of CompuCom for the purpose of establishing a means by which CompuCom may
utilize its Receivables to access working capital sources VIA the Credit
Agreement and the RPA, as CompuCom shall determine. CompuCom acknowledges that
it has and will continue to receive direct equivalent value for the interests
granted pursuant to this Agreement. CompuCom acknowledges and agrees that (i)
Administrative Secured Party's agreement to serve in such capacity and perform
its duties under the Administration Documents, (ii) NationsBank's agreements
under the Credit Agreement and (iii) CFI's agreements under the RPA and EFC's
agreements under the TAA, respectively, each separately and also collectively
together, constitutes value given to CompuCom for purposes of Section
9.203(a)(2) of the Texas UCC.
VIII.5 ADMINISTRATIVE SECURED PARTY. CompuCom and the Beneficial
Secured Parties have designated NationsBank, in its capacity as Administrative
Secured Party, to serve as Administrative Secured Party as provided by this
Agreement. Each party to this Agreement, for itself and its successors and
assigns, acknowledges that (i) NationsBank is a creditor of CompuCom and that
CFI is a wholly owned subsidiary of CompuCom, (ii) NationsBank, N.A., which is
an affiliate of NationsBank, is a party to the TAA as Agent thereunder, and also
is a Bank Investor, the Liquidity Support Provider and the Credit Support
Provider, as such terms are defined, and as provided, thereunder, (iii)
52
<PAGE>
appointment of NationsBank to serve as Administrative Secured Party is not a
condition or prerequisite to execution or performance of this Agreement, and
each of CompuCom, NationsBank, CFI and EFC has indicated its willingness to
enter into this Agreement with the Administrative Secured Party being a Person
other than NationsBank, PROVIDED that any such Person otherwise is acceptable to
all parties.
VIII.6 EXERCISE OF RIGHTS. The Beneficial Secured Parties shall not at
any time be required to institute suit or exercise or exhaust remedies against
any Person obligated to pay any of the Secured Obligations, or against any other
property or other security of the payment of same, prior to exercise by
Administrative Secured Party of the rights under this Agreement.
VIII.7 ADMINISTRATIVE SECURED PARTY'S RECORDS; ACCOUNT STATEMENTS.
Administrative Secured Party's records in respect of Collections administered
under this Agreement shall be deemed conclusive absent demonstration of error
and all statements of account rendered by Administrative Secured Party to
CompuCom relating same shall be presumed to be correct and accurate unless,
within thirty (30) days after receipt thereof, CompuCom shall notify
Administrative Secured Party in writing of any claimed error therein.
VIII.8 INDEMNITY.
(a) THIRD PARTY CLAIMS. Any Indemnified Person shall notify
CompuCom promptly after such Indemnified Person's receipt of notice, or
such Indemnified Person otherwise becoming aware, of any third-party claims
with respect to which indemnification may be sought under this Section;
PROVIDED THAT, the failure of any Indemnified Person so to notify CompuCom
shall not relieve CompuCom of any liability (x) under any provision hereof,
(y) to such Indemnified Person by reason of this Section unless such
Indemnified Person's failure to so notify CompuCom materially prejudices
CompuCom's ability to contest the third-party claim, or (z) to any other
Indemnified Person under this Section or any other provision hereof. In
case any such action is brought against any Indemnified Person and it
notifies CompuCom of the commencement thereof, CompuCom shall be entitled
to participate therein and, to the extent that it may wish to assume the
defense thereof, with counsel reasonably satisfactory to such Indemnified
Person, and after notice from CompuCom to such Indemnified Person of its
election to assume the defense thereof, CompuCom will not be liable to such
Indemnified Person under this Subsection for any legal fees and expenses
subsequently incurred by such Indemnified Person in connection with the
defense thereof. Any one or more of the Indemnified Persons shall have
the right to
53
<PAGE>
employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person or Indemnified Persons unless (i) the
employment of such has been specifically authorized in writing by CompuCom
or (ii) representation of both CompuCom and such Indemnified Person or
Indemnified Persons by the same counsel would be inappropriate due to
actual or potential differing interests between them. CompuCom shall not
be liable for any settlement of any such action effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff in any such action with or without consent,
CompuCom agrees to indemnify and hold harmless the Indemnified Persons
from and against any loss or liability by reason of such settlement or
final judgment. CompuCom shall not, without the prior written consent of
the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been
a party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liabilities and claims that are the subject
matter of such proceeding. Any indemnification will be paid promptly upon
demand therefor.
(b) CONTRIBUTION. If for any reason the indemnification
provided above in this Section is unavailable to an Indemnified Person or
is insufficient to hold an Indemnified Person harmless, then CompuCom shall
contribute to the amount paid or payable by such Indemnified Person as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by such
Indemnified Person on the one hand and CompuCom on the other hand but also
the relative fault of such Indemnified Person, as well as any other
relevant equitable considerations.
VIII.9 INTEREST LIMITATION. CompuCom expressly agrees that any
provision contained in the Credit Agreement, the RPA, the TAA or any other
agreement between CompuCom and NationsBank, CFI or EFC, respectively,
pertaining to limitations on the maximum rate of interest that may be
contracted, charged or received in connection therewith shall be deemed
applicable to any payments, rights or benefits paid or accrued to such party
under the Administration Documents.
VIII.10 COSTS AND EXPENSES. CompuCom agrees to pay all costs and
expenses incurred by Administrative Secured Party in connection with the
Administration Documents, including without limitation: (i) negotiation,
preparation and closing of the Administration Documents, including attorneys
fees and disbursements, search fees, filing and recording fees, (ii) ongoing
administration of the Administration Documents,
54
<PAGE>
including without limitation, fees and costs incurred in consultation with
attorneys, (iii) negotiation, preparation and closing of any amendment,
waiver or consent relating to the Administration Documents, including
attorneys fees and disbursements, search fees, filing and recording fees, and
(iv) enforcing any provision of the Administration Documents, collection and
pursuit of collection and enforcement of Receivables, taking possession,
exercising any rights or remedies or pursuing or defending any claim arising
out of, or in any way relating to the Administration Documents, including
without limitation fees and costs of attorneys, experts or other consultants
retained by Administrative Secured Party in connection therewith and any
other costs, fees or expenses for which CompuCom is obligated pursuant to any
other provision of the Administration Documents. CompuCom will pay any
applicable stamp, registration, recordation and similar taxes, fees and
charges in respect of the Collateral or perfection or maintenance of
Administrative Secured Party's rights under the Administration Documents, and
agrees to indemnify Administrative Secured Party against any liabilities
resulting from any delay, deferral or omission in payment of any such taxes,
fees or charges. All fees, costs and expenses for which CompuCom is
obligated under the Administration Documents shall be payable to
Administrative Secured Party on demand.
VIII.11 ACCEPTANCE AND PERFORMANCE. This Agreement shall become
effective only upon acceptance by Administrative Secured Party at its offices in
Dallas, Dallas County, Texas. This Agreement is performable at Administrative
Secured Party's offices in Dallas, Dallas County, Texas, such acceptance to be
conclusively established by execution of this Agreement by Administrative
Secured Party. CompuCom and Administrative Secured Party each agree that Dallas
County, Texas shall be the exclusive venue for litigation of any dispute or
claim arising under or relating to the Administration Documents, and that such
county is a convenient forum in which to decide any such dispute. CompuCom and
Administrative Secured Party each consents to the personal jurisdiction of the
state and federal courts located in Dallas County, Texas for the litigation of
any such dispute or claim.
55
<PAGE>
VIII.12 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO AGREE THAT NO PARTY
SHALL REQUEST A TRIAL BY JURY IN THE EVENT OF LITIGATION BETWEEN THEM CONCERNING
THE LOAN DOCUMENTS OR ANY CLAIMS OR TRANSACTIONS IN CONNECTION THEREWITH, IN
EITHER A STATE OR FEDERAL COURT, THE RIGHT TO TRIAL BY JURY BEING EXPRESSLY
WAIVED. ADMINISTRATIVE SECURED PARTY, COMPUCOM, AND BENEFICIAL SECURED PARTIES
EACH ACKNOWLEDGE THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING
OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF
ADVICE OF COUNSEL OF ITS CHOOSING.
VIII.13 COPIES VALID AS FINANCING STATEMENTS. CompuCom grants to
Administrative Secured Party a special power of attorney to sign CompuCom's
name, on behalf of CompuCom, to any financing statement describing the
Collateral, or any part thereof, or to any amendment of any financing statement
filed pursuant to this Agreement, and to file such financing statement or
amendment in any jurisdiction deemed necessary by Administrative Secured Party
to perfect Administrative Secured Party's interests under this Agreement. A
carbon, photographic or other reproduction, including photocopy, telecopy or
electronic transmission, of this Agreement or any financing statement shall be
sufficient as a financing statement and may be filed as an original.
VIII.14 GOVERNING LAW. THIS AGREEMENT, AND ALL DOCUMENTS AND INSTRUMENTS
EXECUTED IN CONNECTION HEREWITH, SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF TEXAS, PROVIDED, THAT TO THE EXTENT FEDERAL LAW WOULD
ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE ALLOWED BY THE LAWS OF THE STATE
OF TEXAS, THEN WITH RESPECT TO THE PROVISIONS OF ANY LAW WHICH PURPORTS TO LIMIT
THE AMOUNT OF INTEREST THAT MAY BE CONTRACTED FOR, CHARGED OR RECEIVED IN
CONNECTION WITH ANY OF THE OBLIGATIONS, SUCH FEDERAL LAW SHALL APPLY.
VIII.15 ENTIRETY AND AMENDMENTS. This Agreement embodies the entire
agreement between the parties relating to the subject matter hereof, and may be
modified or amended only by an instrument in writing executed by an authorized
officer of each of Administrative Secured Party, each of the Beneficial Secured
Parties and CompuCom. It is expressly agreed that no conversations, statements,
negotiations or other verbal communications between Administrative Secured Party
and CompuCom, nor any purported modification or amendment, or waiver, shall be
binding unless the same is evidenced in writing executed by an authorized
officer of each of Administrative Secured Party, each of the Beneficial Secured
Parties and CompuCom.
56
<PAGE>
VIII.16 PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of CompuCom, Administrative Secured Party and the Beneficial Secured
Parties, and their respective successors in interest. CompuCom may not assign
any right, power, duty, or obligation under this Agreement, or any document or
instrument executed in connection herewith, without the prior written consent of
Administrative Secured Party and each Beneficial Secured Party. Neither CFI nor
EFC may assign any right, power, duty, or obligation under this Agreement, or
any document or instrument executed in connection herewith, without the prior
written consent of Administrative Secured Party (except assignments to the
limited extent provided in the RPA and TAA as of the Effective Date, PROVIDED
that any such portions of the RPA Interests assigned pursuant to any such
assignments at all times shall be and remain subject to Administrative Secured
Party's rights and interests under this Agreement). This Agreement is intended
for the benefit of CompuCom, Administrative Secured Party, the Beneficial
Secured Parties (and any Person properly claiming through any of them as an
assignee to the limited extent otherwise permitted by this Agreement), and may
not be relied upon by any other Person.
VIII.17 EXHIBITS. All exhibits referenced herein, and attached hereto,
are incorporated in this Agreement and made a part hereof for all purposes.
VIII.18 DESCRIPTIVE TITLES. The descriptive titles "Administrative
Secured Party" and "Beneficial Secured Party" are for convenience only and shall
not themselves be construed to limit the rights and powers granted to
Administrative Secured Party or Beneficial Secured Parties under this Agreement.
VIII.19 CUMULATIVE RIGHTS. All rights and remedies of Administrative
Secured Party under the Administration Documents are cumulative, and are in
addition to rights and remedies available to Administrative Secured Party by
applicable law. Such rights and remedies may be exercised concurrently or
successively, at such times as Administrative Secured Party may determine in its
discretion. CompuCom waives any right to require marshaling. If Administrative
Secured Party, in its individual corporate capacity, and CompuCom are parties to
any prior agreement, either written or oral, relating to the Collateral, the
terms of this Agreement shall supersede the terms of such prior agreements as to
transactions respecting the Collateral on or after the Effective Date, but all
security agreements, financing statements, guaranties, other contracts and
notices for the benefit of Administrative Secured Party, in its individual
corporate capacity, in connection with any such prior agreement shall continue
in full force and effect (subject to the terms of this Agreement) to secure all
obligations under the terms
57
<PAGE>
thereof unless Administrative Secured Party specifically releases its rights
thereunder by separate release in writing executed by Administrative Secured
Party.
VIII.20 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future laws effective
during the Contract Term, such provisions shall be fully severable, and this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement. In such
case, the remaining provisions of the Agreement shall remain in full force and
effect and shall not be effected thereby.
VIII.21 MULTIPLE COUNTERPARTS. This Agreement may be executed
simultaneously in one or more multiple originals, each of which shall be deemed
an original, but all of which together shall constitute one and the same
Agreement.
VIII.22 SURVIVAL. All covenants, agreements, representations, and
warranties made by CompuCom herein shall survive the execution, delivery, and
closing of this Agreement, and all documents executed in connection herewith,
and shall not be affected by any investigation made by any party.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
[Remainder of page intentionally left blank]
58
<PAGE>
EXECUTED as of the effective date specified in the preamble.
COMPUCOM SYSTEMS, INC.
By: /S/ ROBERT J. BOUTIN
--------------------------------------
Authorized Signatory
NATIONSBANK OF TEXAS, N.A.,
IN ITS CAPACITY AS ADMINISTRATIVE SECURED PARTY
By: /S/ MICHELE M. HEATH
--------------------------------------
Authorized Signatory
NATIONSBANK OF TEXAS, N.A.,
IN ITS CAPACITY AS ADMINISTRATIVE LENDER
ON BEHALF OF THE LENDERS
By: /S/ DONALD L. HARRISON
--------------------------------------
Authorized Signatory
CSI FUNDING, INC.
By: /S/ ROBERT J. BOUTIN
--------------------------------------
Authorized Signatory
ENTERPRISE FUNDING CORPORATION
By: /S/ STEWART L. CUTLER
--------------------------------------
Authorized Signatory
59
<PAGE>
Exhibit 10.4
AMENDMENT NO. 1 TO RECEIVABLES PURCHASE AGREEMENT
AMENDMENT NO. 1 (this "AMENDMENT"), dated as of September 25, 1996,
TO RECEIVABLES PURCHASE AGREEMENT dated as of April 1, 1996, between CSI
FUNDING INC., a Delaware corporation (hereinafter, together with its
successors and assigns, called the "PURCHASER") and COMPUCOM SYSTEMS, INC., a
Delaware corporation (hereinafter, together with its successors and assigns,
called the "SELLER").
W I T N E S S E T H :
WHEREAS, the Purchaser and the Seller have entered into a
Receivables Purchase Agreement, dated as of April 1, 1996 (the "AGREEMENT");
and
WHEREAS, the parties hereto wish to amend the Agreement as
hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1. DEFINED TERMS. Unless otherwise defined herein, the
terms used herein shall have the meanings assigned to such terms in, or
incorporated by reference into, the Agreement.
SECTION 2. AMENDMENTS TO AGREEMENT. The Agreement is hereby
amended, effective on the Effective Date, as follows:
(a) Section 2.1(b) of the Agreement shall be amended in the
eleventh line thereof by deleting the comma and by replacing it with the
words "and/or".
(b) Section 5.1(j) of the Agreement shall be amended in the
thirteenth line thereof after the word "UCC" and before the parenthesis by
inserting the words "and/or the Inventory Financing Agreements".
SECTION 3. EFFECTIVENESS. This Amendment shall become effective
on the first date on which (i) the parties hereto shall have executed and
delivered one or more counterparts to this Amendment and each shall have
received one or more counterparts of this amendment executed by the others
and (ii) Enterprise Funding Corporation and NationsBank, N.A. shall have
received such certificates, opinions of counsel and other documents with
respect to this Amendment, the Agreement and the transactions contemplated
hereby and thereby as each may reasonably request.
SECTION 4. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Amendment.
2
<PAGE>
SECTION 5. CONSENTS; BINDING EFFECT. The execution and delivery
by the Seller and the Purchaser of this Amendment shall constitute the
written consent of each of them to this Amendment. This Amendment shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
SECTION 6. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. SEVERABILITY OF PROVISIONS. Any provision of this
Amendment which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 8. CAPTIONS. The captions in this Amendment are for
convenience of reference only and shall not define or limit any of the terms
or provisions hereof.
SECTION 9. AGREEMENT TO REMAIN IN FULL FORCE AND EFFECT. Except
as amended hereby, the Agreement shall remain in full force and effect and is
hereby ratified, adopted and confirmed in all respects. This Amendment
shall be deemed to be an amendment to the Agreement. All references in the
Agreement to "this Agreement", "hereunder", "hereof", "herein", or words of
like import, and all references to the Agreement in any other agreement or
document shall hereafter be deemed to refer to the Agreement as amended
hereby.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to Receivables Purchase Agreement to be executed as of the date and
year first above written.
CSI FUNDING INC., as Purchaser
By /S/ ROBERT J. BOUTIN
-------------------------------------------------
Name: Robert J. Boutin
Title: President
COMPUCOM SYSTEMS, INC.,
as Seller
By /S/ ROBERT J. BOUTIN
-------------------------------------------------
Name: Robert J. Boutin
Title: Senior Vice President,
Finance and Chief Financial Officer
Acknowledged and agreed as of
the date first above written:
ENTERPRISE FUNDING CORPORATION
By: /S/ STEWART L. CUTLER
----------------------------
Name: Stewart L. Curtler
Title: Officer
NATIONSBANK, N.A.
By: /S/ MICHELE M. HEATH
----------------------------
Name: Michele M. Heath
Title: Vice President
4
<PAGE>
Exhibit 10.5
AMENDMENT NO. 1 TO TRANSFER AND ADMINISTRATION AGREEMENT
AMENDMENT NO. 1 (this "AMENDMENT"), dated as of September 25, 1996,
TO TRANSFER AND ADMINISTRATION AGREEMENT dated as of April 1, 1996, by and
among CSI FUNDING INC., a Delaware corporation, as transferor (hereinafter,
together with its successors and assigns in such capacity, called the
"TRANSFEROR"), COMPUCOM SYSTEMS, INC., a Delaware corporation, as collection
agent (hereinafter, together with its successors and assigns in such
capacity, called the "COLLECTION AGENT"), ENTERPRISE FUNDING CORPORATION, a
Delaware corporation (hereinafter, together with its successors and assigns,
called the "COMPANY") and NATIONSBANK, N.A., a national banking association,
as agent for the benefit of the Company and the Bank Investors (hereinafter,
together with its successors and assigns in such capacity, called the
"AGENT").
W I T N E S S E T H :
WHEREAS, the Transferor, the Collection Agent, the Company and the
Agent have entered into a Transfer and Administration Agreement, dated as of
April 1, 1996 (the "AGREEMENT"); and
WHEREAS, the parties hereto wish to amend the Agreement as
hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1. DEFINED TERMS. Unless otherwise defined herein, the
terms used herein shall have the meanings assigned to such terms in, or
incorporated by reference into, the Agreement.
SECTION 2. AMENDMENTS TO AGREEMENT. The Agreement is hereby
amended, effective on the Effective Date, as follows:
(a) Section 1.1 of the Agreement shall be amended in the
definition of "Loss Reserve" by deleting the reference to "$7,500,000" and by
replacing it with "$10,000,000".
(b) Section 1.1 of the Agreement shall be amended in the
definition of "Maximum Net Investment" by deleting the reference to
"$75,000,000" and by replacing it with "$100,000,000".
(c) Section 1.1 of the Agreement shall be amended in the
definition of "Related Security" after the word "UCC" and before the
parenthesis by inserting the words "and/or the Inventory Financing
Agreements".
(d) Section 1.1 of the Agreement shall be amended in the
definition of "Termination Date" by deleting the reference to "April 1, 1998"
in clause (v) thereof and by replacing it with "September 17, 1999".
(e) Section 5.1(e) of the Agreement shall be amended in the
seventeenth line thereof by deleting the words "any of the" and by replacing
them with the words "the appropriate".
2
<PAGE>
(f) Pursuant to the terms of Section 5.1(j) of the Agreement, the
Agent hereby consents to the making by the Transferor of dividends or
distributions in respect of its common stock; PROVIDED that no such dividend
or distribution shall be made by the Transferor if, after giving effect
thereto, the Transferor would become insolvent or would otherwise have a
material adverse effect on the Transferor or its financial condition.
(g) Section 6.2 (c) shall be amended in the fourth and fifth lines
by deleting the words "a firm of independent public accountants" and by
inserting the words "either the Business Credit Field Exam Group of
NationsBank of Texas, N.A. or such other Person as may be approved by the
Agent".
(h) Section 8.1(b) of the Agreement shall be amended in the third
and sixth lines thereof after the word "applicable" and before the words
"law, rule or regulation" by inserting the words "and material".
(i) Section 7.1(t) of the Agreement shall be amended in the sixth
line thereof by deleting the words "any Person, and such Person shall
commence" and by replacing them with the words "any Person (other than
NationsBank of Texas, N.A., as Administrative Lender on behalf of the several
Lenders named in the Credit Agreement)(as such terms are defined in the
Master Security and Administration Agreement), and NationsBank of Texas, N.A.
or any such other Person shall commence".
3
<PAGE>
SECTION 3. EFFECTIVENESS. This Amendment shall become effective
on the first date on which (i) the parties hereto shall have executed and
delivered one or more counterparts to this Amendment and each shall have
received one or more counterparts of this amendment executed by the others
and (ii) the Company and the Agent shall have received such certificates,
opinions of counsel and other documents with respect to this Amendment, the
Agreement and the transactions contemplated hereby and thereby as each may
reasonably request.
SECTION 4. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Amendment.
SECTION 5. CONSENTS; BINDING EFFECT. The execution and delivery
by the Seller and the Purchaser of this Amendment shall constitute the
written consent of each of them to this Amendment. This Amendment shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
SECTION 6. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. SEVERABILITY OF PROVISIONS. Any provision of this
Amendment which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
4
<PAGE>
SECTION 8. CAPTIONS. The captions in this Amendment are for
convenience of reference only and shall not define or limit any of the terms
or provisions hereof.
SECTION 9. AGREEMENT TO REMAIN IN FULL FORCE AND EFFECT. Except
as amended hereby, the Agreement shall remain in full force and effect and is
hereby ratified, adopted and confirmed in all respects. This Amendment shall
be deemed to be an amendment to the Agreement. All references in the
Agreement to "this Agreement", "hereunder", "hereof", "herein", or words of
like import, and all references to the Agreement in any other agreement or
document shall hereafter be deemed to refer to the Agreement as amended
hereby.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to Transfer and Administration Agreement to be executed as of the date
and year first above written.
ENTERPRISE FUNDING CORPORATION,
as Company
By /S/ STEWART L. CUTLER
-------------------------------------------------
Name: Stewart L. Cutler
Title: Officer
CSI FUNDING INC., as Transferor
By /S/ ROBERT J. BOUTIN
-------------------------------------------------
Name: Robert J. Boutin
Title: President
COMPUCOM SYSTEMS, INC.,
as Collection Agent
By /S/ ROBERT J. BOUTIN
-------------------------------------------------
Name: Robert J. Boutin
Title: Senior Vice President, Finance and
Chief Financial Officer
NATIONSBANK, N.A., as Agent
and as Bank Investor
Commitment: By: /S/ MICHELE M. HEATH
$100,000,000 ------------------------------------------------
Name: Michele M. Heath
Title: Vice President
6
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
(000 omitted except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- ------------------------
1996 1995 1996 1995
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary earnings per common share
- ---------------------------------
Net earnings $4,745 $4,705 $14,133 $13,007
Adjustment (132) (216) (643) (526)
-------- -------- -------- --------
$4,613 $4,489 $13,490 $12,481
-------- -------- -------- --------
-------- -------- -------- --------
Average common shares outstanding 29,971 29,252 29,744 28,962
Average common share equivalents 1,313 1,592 1,501 1,634
-------- -------- -------- --------
Average number of common shares and
common share equivalents outstanding 31,284 30,844 31,245 30,596
-------- -------- -------- --------
-------- -------- -------- --------
Primary earnings per common share $0.15 $0.15 $0.43 $0.41
-------- -------- -------- --------
-------- -------- -------- --------
Fully diluted earnings per common share
- ---------------------------------------
Primary net earnings $4,745 $4,705 $14,133 $13,007
Adjustment (141) (585) (643) (1,648)
-------- -------- -------- --------
$4,604 $4,120 $13,490 $11,359
-------- -------- -------- --------
-------- -------- -------- --------
Average common shares outstanding 29,971 29,252 29,744 28,962
Average common share equivalents 1,387 1,702 1,599 1,910
-------- -------- -------- --------
Average number of common shares
assuming full dilution 31,358 30,954 31,343 30,872
-------- -------- -------- --------
-------- -------- -------- --------
Fully diluted earnings per common share $0.15 $0.13 $0.43 $0.37
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
(1) Net earnings are adjusted for the dilutive effect of public subsidiary
common stock equivalents (primary) and convertible securities (fully
diluted).
Share and per share data have been retroactively adjusted to reflect the
two-for-one split of the Company's common shares effective July 17, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 32955
<SECURITIES> 0
<RECEIVABLES> 361485
<ALLOWANCES> 2676
<INVENTORY> 254976
<CURRENT-ASSETS> 654188
<PP&E> 111299
<DEPRECIATION> 36483
<TOTAL-ASSETS> 924210
<CURRENT-LIABILITIES> 303450
<BONDS> 357807
0
0
<COMMON> 3280
<OTHER-SE> 159167
<TOTAL-LIABILITY-AND-EQUITY> 924210
<SALES> 1326516
<TOTAL-REVENUES> 1499402
<CGS> 1179057
<TOTAL-COSTS> 1277364
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17556
<INCOME-PRETAX> 36094
<INCOME-TAX> 9422
<INCOME-CONTINUING> 14133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14133
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
