Exhibit 10.1
EXECUTION COPY
2004 EXTENSION AND FUNDING AGREEMENT
This 2004 Extension and Funding Agreement (the "2004 Extension and
Funding Agreement" or "Agreement") is entered into as of the 8th day of
September, 2004, by and among: (1) Dell Financial Services L.P., a Delaware
limited partnership ("DFS"); (2) Dell Credit Company L.L.C., a Delaware limited
liability company ("General Partner"); (3) DFS-SPV L.P., a Delaware limited
partnership ("DFS-SPV"); (4) DFS-GP, Inc., a Delaware corporation ("DFS-GP");
(5) Dell Inc. , a Delaware corporation ("Dell"); (6) Dell Gen. P. Corp., a
Delaware corporation ("Dell Gen. P."); (7) Dell DFS Corporation, a Delaware
corporation ("Dell DFS"); (8) CIT Group Inc., a Delaware corporation ("CIT");
(9) CIT Financial USA, Inc., a Delaware corporation ("CIT Financial"); (10) CIT
DCC Inc., a Delaware corporation ("CIT DCC"); (11) CIT DFS Inc., a Delaware
corporation ("CIT DFS"); (12) CIT Communications Finance Corporation, a Delaware
corporation ("CIT Communications"); and (13) CIT Credit Group USA Inc., a
Delaware corporation ("CIT USA") (collectively referred to herein as the
"Parties").
RECITALS:
WHEREAS, the Parties wish to extend the term of the DFS Agreement (as
defined below) and amend the provisions thereof in certain respects; and
WHEREAS, the Parties desire to amend and modify certain other related
agreements as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Definitions. Unless otherwise provided herein, capitalized terms
shall have the meanings set forth below or in the provisions and recitals of
this Agreement:
"Affiliate" has the meaning set forth in the DFS Agreement.
"Ancillary Agreements" has the meaning set forth in the DFS Agreement,
excluding this Agreement.
"Business Day" has the meaning set forth in the DFS Agreement.
"CIT Aggregate Interest" has the meaning set forth in the DFS Agreement.
"CIT Bank" means CIT Bank N.A., a Utah industrial loan corporation having
its principal location in Salt Lake City, Utah.
"CIT Funding Payment(s)" means the Quarterly CIT Funding Payments and the
Dell Initiated Lump Sum Funding Payment, as applicable, as such terms are
defined in Section 3 of this Agreement.
"CIT Termination Event" has the meaning set forth in the DFS Agreement.
"Dell Purchase Option" has the meaning set forth in the DFS Agreement.
"Dell's Public Segment" means that portion of the Dell business segment
(howsoever described or organized in the future) that offers Dell products to
federal, state and local governments.
"Financing" or "Financing Services" means the offering or providing of
financings of the sale or the provision of products to customers, including,
without limitation, by means of leases, installment sales contracts, and
conditional sales contracts and loans (whether secured or unsecured).
"Fiscal Year" has the meaning set forth in the DFS Agreement.
"Funding Mix" means the allocation of Gain-Generated Funding between
various customers, based upon (i) the Dell customer segment, and (ii) credit
profile.
"Funding Termination Factor" means a percentage to be agreed upon by the
Parties.
"Gain-Generated Funding" means any Transaction funded through an RPU (as
defined in the Reserve Administration Agreement).
"IDC" means International Data Corporation, or its successor entity.
"Limited Liability Company Agreement" means the Limited Liability Company
Agreement of Dell Credit Company L.L.C., dated April 12, 1997, by and between
Dell Gen P. Corp and CIT DCC Inc., as amended.
"PCs" means desktops, notebooks, ultra portables, and X86 servers.
"Omnibus Agreement" has the meaning set forth in the DFS Agreement.
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"Operating and Purchase Agreement" has the meaning set forth in the
Omnibus Agreement, as such Operating and Purchase Agreement has been amended
from time to time.
"Reserve Administration Agreement" means the Reserve Administration
Agreement, entered into as of the 8th day of September, 2004, by and between
Dell and CIT and the other parties thereto.
"Transactions" means leases and loans booked on the DFS system of record.
2. Amendment and Restatement of Agreement of Limited Partnership of
DFS. The Agreement of Limited Partnership of DFS, dated as of April 14, 1997, as
amended, shall be amended and restated in the form attached hereto as Exhibit A,
and such agreement, as amended and restated is referred to herein as the "DFS
Agreement."
3. Funding Arrangements.
(a) Funding Rights. Subject to the provisions below, CIT shall have the
right to purchase Gain-Generated Funding in each Fiscal Year in an
amount equal to the percentage of DFS total Gain-Generated Funding as
set forth on Schedule A (such right will be referred to herein as the
"CIT Minimum Funding Right"). In addition, subject to the provisions
below, Dell shall have the right to purchase Gain-Generated Funding in
each Fiscal Year to the extent not covered by the CIT Minimum Funding
Right (such right, expressed as a percentage of DFS total
Gain-Generated Funding will be referred to herein as the "Dell Funding
Right"; and the Dell Funding Right and the CIT Minimum Funding Right
are collectively referred to herein as the "Funding Rights" or
individually as a "Funding Right").
(b) Funding Term. The term of the CIT Minimum Funding Right and Dell
Funding Right shall commence at the beginning of Fiscal Year 2006 and
terminate at the end of Fiscal Year 2010 (the "Funding Term"). Upon the
purchase of the CIT Aggregate Interest by Dell, the CIT Minimum Funding
Right shall remain in effect through the expiration of the Funding Term
unless Dell exercises the Funding Termination Option (as defined in
Section 3(g) hereof). From the date Dell acquires the CIT Aggregate
Interest, pursuant to the DFS Agreement, through the end of the Funding
Term, Dell covenants as to itself and its Affiliates to (A) preserve
the DFS and DFS-SPV business structure, operate DFS and DFS-SPV,
respectively, as separate legal entities and not merge, sell assets
(outside the ordinary course of business), dissolve or otherwise alter
the legal structure of DFS and DFS-SPV (except that Dell may seek CIT's
consent to do any of the aforementioned actions and such consent shall
not be unreasonably withheld as long as such actions will not have a
negative effect, financial or otherwise, on CIT or any of its
Affiliates); and (B) cause the business of DFS and DFS-SPV to be
conducted in good faith and in the ordinary course consistent with past
practice in a manner such that Dell does not take any action designed
to enhance Dell's profitability at the financial detriment of CIT or
its Affiliates. Notwithstanding the provisions of any of the Ancillary
Agreements, none of the Ancillary Agreements shall automatically
terminate upon the purchase by Dell of the CIT Aggregate Interest
pursuant to the terms of the DFS Agreement, but instead such agreements
(including this Agreement) shall remain in
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effect to the extent necessary to enable CIT to exercise its CIT
Minimum Funding Right on the same terms and conditions as contemplated
in this Agreement.
(c) Dell Incremental Funding Right. If Dell (including any assignee of
Dell pursuant to Section 3(d) of this Agreement) does not exercise its
full Dell Funding Right in a given Fiscal Year, it shall be permitted
to purchase in the next Fiscal Year an incremental amount above its
Dell Funding Right for such Fiscal Year up to the amount (not to exceed
in dollar value 5% of DFS total Gain-Generated Funding in the previous
Fiscal Year) by which Dell did not achieve its full Dell Funding Right
in the previous Fiscal Year. Conversely, Dell (including any assignees
of Dell pursuant to Section 3(d) of this Agreement) may purchase an
amount of Gain-Generated Funding in excess of its full Dell Funding
Right in a given Fiscal Year (other than Fiscal Year 2010) (not to
exceed in dollar value 5% of DFS's total Gain-Generated Funding in such
Fiscal Year) (the "Incremental Funding Right"), and to the extent Dell
exercises its Incremental Funding Right, the CIT Minimum Funding Right
in such Fiscal Year shall be accordingly reduced; provided that the
Dell Funding Right for the subsequent Fiscal Year shall be reduced by a
like dollar amount, and CIT shall have the right, but not the
obligation, to purchase any portion of such amount of Gain-Generated
Fundings in such subsequent Fiscal Year in addition to the CIT Minimum
Funding Right in such subsequent Fiscal Year (the "CIT Funding Right
Adjustment") and the Dell Funding Right in such subsequent Fiscal Year
shall be accordingly reduced. By way of example, if Dell purchased 19%
of DFS total Gain-Generated Funding in Fiscal Year 2006, it would be
permitted to purchase in Fiscal Year 2007, 35% of DFS total
Gain-Generated Funding for Fiscal Year 2007 plus an additional amount
of DFS total Gain-Generated Funding for Fiscal Year 2007 equal to 5%
(and not 6%, as the Dell Incremental Funding is limited to 5%) of DFS
total Gain-Generated Funding for Fiscal Year 2006. Similarly, if Dell
purchased 29% of DFS total Gain-Generated Funding in Fiscal Year 2006,
it would be permitted to purchase in Fiscal Year 2007 up to 35% of DFS
total Gain-Generated Funding for Fiscal Year 2007 less an amount of DFS
total Gain-Generated Funding for Fiscal Year 2007 equal to 4% of total
Gain-Generated Funding for Fiscal Year 2006 (with such subtracted
dollar amount equaling the CIT Funding Right Adjustment for Fiscal Year
2007).
(d) Assignment of Funding Right.
(i) Dell, at its sole discretion, shall have the right to assign
some or all of its Dell Funding Right (including its right to make
incremental purchases pursuant to Section 3(c) of this Agreement) in
any given Fiscal Year to a third party; provided, however, that CIT
will have a right to match the terms offered to Dell by such third
party and substitute such third party as the assignee of the Dell
Funding Right.
(A) Prior to assigning its Dell Funding Right to a third party,
Dell shall provide to CIT, in writing, the terms and conditions
upon which such third party will provide funding,
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and any other information as CIT may reasonably request (the
"Dell Funding Notice"). CIT shall have seven (7) Business Days
(the "Evaluation Period") upon receipt of the Dell Funding Notice
to agree to provide such funding on the same terms and conditions
as described in the Dell Funding Notice; provided, however, that
if CIT accepts such terms and conditions within the Evaluation
Period, Dell shall be obligated to assign its Dell Funding Right
to CIT in connection with the transaction described in the Dell
Funding Notice and provided further that Dell shall not solicit
bids from third parties or accept unsolicited bids from third
parties in connection with such transaction. If CIT does not
agree in writing, prior to the expiration of the Evaluation
Period, to provide funding on the same terms and conditions as
set forth in the Dell Funding Notice, Dell may assign its Dell
Funding Right to such third party on the same terms and
conditions described in the Dell Funding Notice.
(B) If CIT elects to accept the funding described above, such
funding will be considered a Dell funding for the purpose of
calculating the Dell Funding Right and the CIT Minimum Funding
Right.
(ii) Except with respect to CIT's match right in connection with an
assignment by Dell of its Dell Funding Right (as described in clause
(i) above), Dell shall have the sole right to determine whether CIT
may purchase receivables in excess of its CIT Minimum Funding Right
and CIT Funding Right Adjustment (where applicable).
(e) Transaction Allocation and Funding Mix.
(i) During the Funding Term, each of the Dell Funding Mix and the
CIT Funding Mix shall be consistent with the total DFS Funding Mix,
unless otherwise agreed to by Dell and CIT.
(ii) Subject to the foregoing provisions, the allocation of
Transactions between Dell and CIT (the "Transaction Allocation")
shall be random. Neither party shall have preference as to the
Transactions to be allocated to it.
(A) On a monthly basis, DFS shall determine whether the
Transaction Allocation resulted in (a) a Funding Mix for each of
Dell and CIT that reflects the DFS Funding Mix and (b) funding by
Dell
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and CIT equal to the relevant Funding Right as exercised by Dell
and CIT respectively.
(B) Notwithstanding the first sentence of Section 3(e)(ii) of
this Agreement, if the Transaction Allocation after any given
month (on a cumulative basis) does not result in the correct
Funding Mix between Dell and CIT, then in the next month DFS
shall provide the party that experienced a Funding Mix shortfall
with an allocation of Transactions that is designed to
prospectively offset such shortfall (a "Funding Mix Correction").
The process by which such Funding Mix Corrections occur shall be
set forth in a policy (which shall be consistent with the terms
of this provision) to be adopted by the Parties and to be
administered by DFS.
(C) Notwithstanding the first sentence of Section 3(e)(ii) of
this Agreement, if the Transaction Allocation after any given
month (on a cumulative basis) does not match the relevant Funding
Right as exercised by Dell and CIT respectively, then in the next
month DFS shall provide the party that experienced a Funding
Right shortfall with an allocation of Transactions that is
designed to prospectively offset such shortfall (a "Funding Right
Correction"); provided, however, that if it is CIT that
experiences the shortfall and CIT does not have a CIT Funding
Right Adjustment in that Fiscal Year, and Dell has not exercised
its Incremental Funding Right in that Fiscal Year, no Funding
Right Correction shall be made, unless the shortfall exceeds 5%
of the DFS total Gain-Generated Funding at the end of the month
(on a cumulative basis) and then only to the extent of such
excess. Any such shortfall for CIT up to 5% of the DFS total
Gain-Generated Funding, where no Funding Right Correction is made
by DFS on behalf of CIT, pursuant to the previous sentence, shall
be deemed to be an exercise by Dell of its Dell Incremental
Funding Right. The process by which such Funding Right
Corrections occur shall be set forth in a policy (which shall be
consistent with the terms of this provision) to be adopted by the
Parties and to be administered by DFS.
(f) Dell's Right to Enter into Receivables Purchase Agreements. Dell or
any subsidiary thereof, shall have the right to enter into receivables
purchase agreements and related agreements with DFS, DFS-SPV and CIT
Bank under the same terms and conditions as the CIT Receivables
Purchase Agreement, as amended; the Commercial Loan CIT Receivables
Purchase Agreement, as amended; the DPA Receivables Purchase Agreement,
as amended; the DPA Servicing Agreement, as amended; and the DPA Sub
Servicing Agreement, as amended; and any other
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agreements as are necessary to effectuate the terms and conditions of
this Agreement.
(g) Termination of CIT Minimum Funding Right. Upon the occurrence of a
CIT Termination Event pursuant to Section 8.1(a)(vi) (a CIT Change of
Control) of the DFS Agreement, and the exercise by Dell of its Dell
Purchase Option pursuant to the terms of the DFS Agreement, Dell shall
have the right through the duration of the Funding Term to terminate
the CIT Minimum Funding Right theretofore unexercised by CIT (the
"Funding Termination Option"); provided, however, that Dell shall
provide CIT six (6) months prior written notice of its intent to
exercise the Funding Termination Option and will pay CIT the CIT
Funding Payment(s) as defined below. The date on which Dell effectively
exercises its Funding Termination Option shall be referred to herein as
the "Funding Termination Date."
(A) CIT Funding Payment(s). If Dell exercises the Funding
Termination Option in accordance with this Agreement, then Dell
shall pay to CIT the Quarterly CIT Funding Payments (as defined
below); provided, however, that after February 1, 2008, Dell
shall pay to CIT the Dell Lump Sum Funding Payment (as defined
below) (the Quarterly CIT Funding Payments and the Dell Lump Sum
Funding Payment are referred to herein collectively as the "CIT
Funding Payment(s)").
(B) The "Quarterly CIT Funding Payments" shall be payments made
within 15 Business Days after the end of each Fiscal Quarter,
beginning from the end of the Fiscal Quarter in which the Funding
Termination Date occurs through the end of the Funding Term,
equal to the maximum amount of Gain-Generated Funding that CIT
could have purchased pursuant to the CIT Minimum Funding Right
for the relevant Fiscal Year if Dell had not exercised its
Funding Termination Option, and calculated on a quarterly basis,
multiplied by the Funding Termination Factor. The first Quarterly
CIT Funding Payment shall be calculated on a pro rata basis to
account for the time within the relevant Fiscal Quarter in which
the Funding Termination Date occurred.
(C) The "Dell Lump Sum Funding Payment" shall be an amount equal
to the present value of the total unexercised amounts of the CIT
Minimum Funding Right as of the later of either (i) the Funding
Termination Date, or (ii) the end of the last Fiscal Quarter for
which Dell made a Quarterly CIT Funding Payment, (the later of
either such date referred to herein as the "Lump Sum Payment
Date"), through the end of the Funding Term (based in good faith
upon the actual DFS business plan and the Dell volume forecast,
both as available at that time), multiplied by the Funding
Termination Factor, and then discounted to the Lump Sum Payment
Date at 8.5% per annum.
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4. Exclusivity.
(a) Section 4 of the Master Agreement, as amended by Section 7(d) of
the Omnibus Agreement, is hereby deleted in its entirety and replaced
with the following:
"4. CIT's Exclusivity Covenants.
(a) Until the earlier of (i) February 1, 2008, or (ii) the
occurrence of a CIT Termination Event described in Section
8.1(a)(vi) (a CIT Change of Control) of the DFS Agreement and the
exercise by Dell of the Dell Purchase Option, CIT shall not, and
shall cause each of its Affiliates not to, directly or
indirectly, enter into any new agreements, arrangements or
understandings relating to the provision in the United States of
financings of the sale or the provision of products, including by
means of leases, installment sales contracts, conditional sales
contracts, loans (whether secured or unsecured) and related
financial services (including asset management, tracking and
recovery services, refurbishing, remarketing and rental programs)
(a "Competitive Business") (such financing referred to herein as
"Financing Services") to any Dell Competitor.
(b) For purposes hereof, "Dell Competitor" is defined as follows:
(1) Until February 2, 2007, the following companies
reflected on the "PC Tracker Report" published by IDC
(or if such PC Tracker Report does not exist at such
time, the nearest equivalent list as determined jointly
by Dell and CIT at such time (the "Substitute List")):
(i) "Top Ten Vendors, Worldwide PC Shipments"; and (ii)
"Top Ten Vendors, USA PC Shipments." Notwithstanding the
foregoing, none of Toshiba, Apple and Acer shall be
considered a Dell Competitor.
(2) Subsequent to February 2, 2007, the following
companies reflected on the "PC Tracker Report" published
by IDC (or if such PC Tracker Report does not exist at
such time, the Substitute List): (i) the top five
vendors listed on "Top Ten Vendors, Worldwide PC
Shipments"; and (ii) the top five vendors listed on "Top
Ten Vendors, USA PC Shipments." Notwithstanding the
foregoing, none of Toshiba, Apple and Acer shall be
considered a Dell Competitor.
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(3) If, at any time, CIT provides Financing Services to
a party that is not at that time a Dell Competitor, then
that party will not be considered to be a Dell
Competitor at any time in the future even if such party
subsequently appears on any of the lists described
above.
(4) Dell covenants that it will provide to CIT, promptly
after they become available, copies of and access to the
PC Tracker Report or the Substitute List; provided that
until CIT receives an updated PC Tracker Report or
Substitute List, CIT shall rightfully rely on the last
PC Tracker Report or Substitute List provided by Dell.
(c) Notwithstanding the foregoing, the restrictions set forth in
this Section 4 shall not impair, affect or interfere with the
ability of CIT or any of its Affiliates to:
(1) provide Financing Services to any Dell Competitor,
provided that CIT or the CIT Affiliates does not: (i)
provide pricing terms that are better than those
provided to DFS or DFS-SPV as applicable; (ii) provide
financing on a private label basis; and/or (iii) provide
residual financing to the Dell Competitors;
(2) effect any fundings or the purchase of any
transactions originated outside the United States;
(3) provide Financing Services in accordance with
Section 6(c) of the Operating and Purchase Agreement; or
(4) provide Financing Services to a Dell Competitor
without restriction for the purpose of financing
products other than desktops, notebooks, ultra
portables, and X86 servers."
(ii) Section 7(e) of the Omnibus Agreement is hereby deleted in it
entirety.
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5. Transition Expenses. Beginning at the Effective Date, DFS shall pay
for all Transition Expenses (as defined below) and Dell shall promptly reimburse
DFS for any costs incurred by DFS that are commercially unreasonable and not
reasonably required in order to transition DFS to a more integrated financing
entity (the "Transition"); provided, however, that until such a time as Dell
purchases the CIT Aggregate Interest, all Transition Expenses in excess of
$100,000, individually or in the aggregate, shall require a Supermajority Vote
(as defined in the Limited Liability Company Agreement). For the purposes
hereof, a "Transition Expense" is any dollar expense amount that (i) would not
have been incurred by DFS absent the Transition; and (ii) is reasonably
necessary in order to carry out such Transition.
6. Governance of DFS.
(a) Section 1.1 of the Limited Liability Company Agreement (entitled
Definitions) shall be amended by:
(i) adding the following definition in the proper alphabetical order:
"Dell's Public Segment" means that portion of the Dell business segment
(howsoever described or organized in the future) that offers Dell products to
federal, state and local governments.
"Operating and Purchase Agreement" means the Operating and Purchase
Agreement, dated April 17, 1997, by and between Dell Inc. and DFS, as amended.
"DFS-SPV Credit Agreement" means the Credit Agreement, effective
October 31, 1998, between DFS-SPV (as Borrower) and CIT DFS (as Lender), as
amended.
(ii) deleting the definition of "Ancillary Agreement" and replacing it
with the following:
"Ancillary Agreement" has the meaning set forth in the DFS Limited
Partnership Agreement and includes the DFS Limited Partnership Agreement.
(iii) deleting the definition of "DFS Limited Partnership Agreement"
and replacing it with:
"DFS Limited Partnership Agreement" means the Amended and Restated
Limited Partnership Agreement of Dell Financial Services L.P., dated September
8, 2004, by and between the Company, Dell DFS Corporation and CIT DFS Inc., as
amended from time to time.
(v) deleting the following defined terms in their entirety: "Credit
Agreement"; Master Agreement"; "Receivables Purchase Agreement";
(b) Deleting any reference in the Limited Liability Company Agreement
to Newcourt DCC Inc. and replacing it with CIT DCC Inc. (which shall be defined
therein as "CIT") and correspondingly replacing the term Newcourt Directors with
CIT Directors.
(c) Section 5.8 of the Limited Liability Company Agreement (entitled
Decisions of the Board) shall be deleted in its entirety and replaced with the
following:
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"5.8 Decisions of the Board.
(a) Normal Decisions. Subject to the provisions of Section 5.8(b),
(c) and (d), any decision or action of the Board shall require a Normal Vote.
(b) Decisions Requiring Supermajority Vote.
(i) Actions of the Company as General Partner of DFS.
Notwithstanding the provisions of Section 5.8(a), the Company in its capacity as
General Partner of DFS shall not take, and shall not cause DFS to take, any of
the following actions without a Supermajority Vote:
(A) Authorizing, approving or making a pledge, hypothecation,
encumbrance or other voluntary grant or conveyance of a security
interest in any of DFS's assets other than pursuant to the terms and
provisions of any of the Ancillary Agreements;
(B) Authorizing, approving or making a Transfer (whether by
sale, assignment, merger, consolidation, reorganization,
recapitalization or otherwise) of all or substantially all of DFS's
assets other than pursuant to the terms and provisions of any of the
Ancillary Agreements;
(C) Except as provided in Section 5.8(d)(ii)(B), authorizing,
approving or making an amendment, supplement or modification to or
termination or waiver of any of the terms, conditions or provisions
of any Ancillary Agreement;
(D) Authorizing or approving a "Partner Loan" (as defined in
the DFS Limited Partnership Agreement) other than pursuant to the
terms and provisions of any of the Ancillary Agreements;
(E) Authorizing, approving or making a "Distribution" (as
defined in the DFS Limited Partnership Agreement) to any Partner
other than in the manner set forth in the DFS Limited Partnership
Agreement or authorizing or approving the suspension, reduction or
other restriction of a "Distribution" (as defined in the DFS Limited
Partnership Agreement) pursuant to Section 4.2(c) of the DFS Limited
Partnership Agreement;
(F) Authorizing, approving or making a material change in the
DFS Businesses;
(G) Authorizing, approving or making a material acquisition by
DFS of assets or capital stock or other ownership interest in
another Person;
(H) Authorizing or approving the admission of, or admitting,
additional Partners to DFS other than the admission of a Substitute
Partner pursuant to the terms, conditions and provisions of the DFS
Limited Partnership Agreement;
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(I) Authorizing or approving a dissolution of DFS or a
DFS Liquidation other than pursuant to the terms of the DFS Limited
Partnership Agreement;
(J) Selecting from time to time the independent auditors
for DFS;
(K) Authorizing or approving any modification to the
Funding Administrative Fee Percentages (as such term is defined in
the DFS Limited Partnership Agreement) for each Fiscal Quarter;
provided that any such modification must be approved prior to the
end of each Fiscal Quarter and no approved modification shall have
retroactive effect to the prior Fiscal Quarter;
(L) Authorizing or approving any modification to the
Bonus Referral Fee (as such term is defined in the Operating and
Purchase Agreement) for each Fiscal Quarter; provided that any such
modification must be approved prior to the end of each Fiscal
Quarter and no approved modification shall have retroactive effect
to the prior Fiscal Quarter; or
(M) The adoption, implementation and maintenance of
administrative and accounting software systems for DFS;
(O) Authorizing or approving any modification or
amendment with respect to the past accounting practices, policies
and procedures of DFS;
(P) Authorizing or approving any modification or
amendment to the past practices, policies and procedures of DFS with
respect to late fees on consumer and commercial accounts, including
those relating to assessment, application and collection of late
fees, unless such modifications or amendments are required by law;
or
(Q) The adoption, implementation, management and
suspension of any collections or repossession policies, procedures
or activities of DFS.
(ii) Other Actions. Notwithstanding the provisions of Section
5.8(a), the Company shall not take, and the Board shall not cause the Company to
take, any of the following actions without a Supermajority Vote:
(A) Authorizing, approving or making a pledge,
hypothecation, encumbrance or other voluntary grant or conveyance of
a security interest in any of the Company's Property;
(B) Authorizing, approving or making a Transfer (whether
by sale, assignment, merger, consolidation, reorganization,
recapitalization or otherwise) of substantially all of the Property
of the Company;
(C) Authorizing or approving a Member Loan;
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(D) Authorizing, approving or making Distributions other
than in the manner provided in Section 4.2 or authorizing or
approving the withholding of a Distribution pursuant to Section
4.2(c);
(E) Authorizing, approving or making a material change
in the Business;
(F) Authorizing, approving or making a material
acquisition of assets or capital stock or other ownership interest
in another Person;
(G) Authorizing or approving the admission of, or
admitting, additional Members to the Company other than the
admission of a Substitute Member pursuant to the terms, conditions
and provisions of Section 7.2;
(H) Authorizing or approving a dissolution or
Liquidation of the Company other than pursuant to the terms of this
Agreement; or
(I) Selecting from time to time the independent auditors
for the Company.
(c) Decisions Requiring Approval of Only Dell Directors.
Notwithstanding the provisions of Section 5.8(a), the following actions
of the Company shall require only the approval of the Voting Block
consisting of the Dell Directors:
(i) Organizing, or causing the organization of, the DFS
Business into segments and arranging, rearranging or reorganizing
such segments, or adding or deleting segments, from time to time in
order to reflect the organization and division of Dell Inc's
marketing and sales efforts; and
(ii) Authorizing or approving the purchase of, and
causing DFS to purchase, residual value insurance.
(iii) Authorizing or approving actions that reasonably
relate to the transition of DFS to a more integrated financing
entity (the "Transition"), including, but not limited to, actions
relating to DFS's operational funding capabilities, systems
transitions, IT decisions, organizational structure and human
resources decisions (including all decisions regarding senior
management); provided, however, that until such a time as Dell
purchases the CIT Aggregate Interest (as defined in the DFS Limited
Partnership Agreement), any Transition Expense (whether reasonable
or commercially unreasonable) in excess of $100,000, individually or
in the aggregate, shall require a Supermajority Vote. For the
purposes hereof, a "Transition Expense" is any expense that (i)
would not have been incurred by DFS absent the Transition; and (ii)
is reasonably necessary in order to carry out the Transition.
(iv) Causing DFS to enter into one or more agreements
with financial services vendors to allow DFS to offer financial
services to customers in Dell's Public Segment; provided, however,
that any exclusive arrangement between DFS and any such
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vendor entered into during the Funding Term (as defined in the 2004
Extension and Funding Agreement) shall require a Supermajority
vote."
(d) Decisions Requiring Approval of Only CIT Directors.
Notwithstanding the provisions of Section 5.8(a), until February 2,
2007, the following actions of the Company shall require only the
approval of the Voting Block consisting of the CIT Directors; provided,
however, that after February 2, 2007 and until such a time as Dell has
purchased the CIT Aggregate Interest pursuant to the DFS Limited
Partnership Agreement the following actions of the Company shall
require a Supermajority Vote:
(i) The adoption, implementation, management and
supervision of any credit policies, procedures or activities of DFS;
(ii) Any changes to the residual policies of DFS or
DFS-SPV, including setting the estimated book value of Equipment in
order to determine the Residual Investment (as defined in the
DFS-SPV Credit Agreement). Although the CIT Directors may use their
absolute discretion in setting the book value of a piece of
Equipment in order to determine the Residual Investment, unless the
CIT Directors otherwise mandate, the book value of Equipment used to
determine the Residual Investment shall automatically be adjusted as
follows:
(A) If the actual residual realization on all
Equipment for the past four Fiscal Quarters of DFS-SPV (using a
weighting of 40% for the most recent Fiscal Quarter, 30% for the
second most recent Fiscal Quarter, 20% for the third most recent
Fiscal Quarter and 10% for the fourth most recent Fiscal Quarter)
is less than the anticipated residual realization (as established
at the time of inception) on all Equipment for the past four
Fiscal Quarters of DFS-SPV (using the same weighting
percentages), the difference being the "Residual Realization
Shortfall", then the book value of Equipment used to determine
the future Residual Investment shall automatically be adjusted
downward from its then current levels by an amount determined by
multiplying the Residual Realization Shortfall by 1.2; and
(B) If the actual residual realization on all
Equipment for the past four Fiscal Quarters of DFS-SPV (using the
same weighting percentages from above) is greater than the
anticipated residual realization (as established at the time of
inception) on all Equipment for the past four Fiscal Quarters of
DFS-SPV (using the same weighting percentages from above) the
difference being the "Residual Realization Overage", than the
book value of Equipment used to determine the future Residual
Investment shall automatically be adjusted upward from its then
current levels by an amount determined by multiplying the
Residual Realization Overage by .8. Notwithstanding the automatic
residual adjustments, if in the sole discretion of the CIT
Directors additional or contradictory changes are required, then
the CIT Directors may ignore the automatic adjustments and make
any adjustments that the CIT Directors deem necessary."
14
7. Consumer Lending. If requested by Dell, CIT shall reasonably assist
DFS in its efforts to create a consumer and small business lending platform. CIT
shall use its best efforts, subject to federal, state or local law, statute,
ordinance, rule, regulation, judgment, order, injunction, decree, agency
requirement, license or permit of any governmental entity, to cause CIT Bank,
throughout the Funding Term, to continue to provide the banking services it
currently provides to DFS and DFS-SPV on substantially the same terms and
conditions; provided, however, that (i) Dell shall be permitted to cause DFS to
discontinue such services and terminate any related agreement if Dell
establishes a consumer and small business lending platform; and (ii) the pricing
for such services shall be market-based and reevaluated on an annual basis.
8. Right to Systems and Data. CIT shall grant Dell (and its
subsidiaries) and DFS the right to purchase or license at fair value the
systems, processes and, to the extent assignable, licenses owned or held by CIT
that may be needed by Dell and DFS to enable DFS to conduct its business as a
more integrated financing entity. Subject to applicable consumer privacy laws
and regulations, CIT shall grant Dell (and its Affiliates) and DFS the right to
access and use all CIT portfolio data related to DFS that Dell (and its
Affiliates) and DFS may reasonably require in order to operate DFS as a more
integrated financing entity (particularly such data and other information as is
needed to allow Dell to purchase and sell receivables). Notwithstanding the
foregoing, CIT may restrict Dell's and DFS's access to information that CIT, at
its sole reasonable discretion, designates as either "confidential" or
"competitive".
9. International Agreements.
(a) CIT and Dell shall in good faith negotiate an extension of the term
of that certain Program Agreement entered into between Dell and CIT (or
their Affiliates) with respect to the provisions of Financing Services
to Dell's customers in Canada, to be coterminous with the term of the
DFS Agreement.
(b) CIT and Dell shall in good faith negotiate an extension of the
UK/Ireland vendor relationship and existing vendor relationship
agreements in other European countries to be coterminous with the term
of the DFS Agreement.
(c) CIT and Dell shall in good faith negotiate the establishment of
exclusive vendor agreements in New Zealand, Australia and parts of
Asia.
(d) All decisions regarding the above international agreements are
subject to the affirmative consent of the local Dell business leaders
and such decision-making process is not subject to the foregoing good
faith negotiation process.
(e) Section 8 of the Omnibus Agreement is hereby deleted in its
entirety.
10. Effect of Amendment. Except as specifically set forth in this
Agreement and the DFS Agreement, the terms and conditions of the Ancillary
Agreements shall control the rights and obligations of the Parties relating to
all aspects of the program. In the event of a conflict between the provisions of
this Agreement or the DFS Agreement and any of the Ancillary Agreements, the
provisions of this Agreement and the DFS Agreement shall control; provided,
15
however, that to the extent not explicitly amended by the terms of this
Agreement or the DFS Agreement, all of the remaining terms, conditions and
provisions of the Ancillary Agreements shall remain in full force and effect and
shall be read and interpreted as though the terms, conditions and provisions of
this Agreement and the DFS Agreement had been included in the Ancillary
Agreements effective as of the date of this Agreement.
11. Further Assurances. The Parties agree that they will take such
further actions and make such further amendments to the Ancillary Agreements
(and related agreements, as applicable) as are necessary or appropriate to fully
carry out and implement the intent of the various amendments included in this
Agreement and the DFS Agreement.
12. Multiple Counterparts and Facsimile. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute one and the same
agreement, and shall become binding when one or more counterparts have been
executed and delivered by each of the Parties. Facsimile signatures shall
constitute original signatures for purposes of this Agreement.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
14. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by both
Dell and CIT. No waiver by any Party of any provision of this Agreement or any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such default, misrepresentation, or breach of warranty or
covenant.
15. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
16. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered personally to the recipient, (ii) 1 business day after being sent to
the recipient by reputable overnight courier service (charges prepaid), (iii)
one business day after being sent to the recipient by facsimile transmission or
electronic mail, receipt confirmed, or (iv) four (4) Business Days after being
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid, and addressed to the intended recipient as set
forth below:
If to Dell or any Dell Affiliate:
One Dell Way
Round Rock, Texas 78682
Attention: Treasurer:
Fax: (512) 283-9501
16
with a copy to:
Dell Inc.
One Dell Way
Round Rock, Texas 78682
Attention: General Corporate Counsel
Fax: (512) 728-3773
If to CIT
1 CIT Drive
Livingston, NJ 07039
Attention: Heidi H. Smith
Vice President
Associate Chief Counsel
Fax: 973-740-5087
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Trevor S. Norwitz, Esq.
Fax: 212-403-2000
If to DFS:
J. Kevin Nater, CEO and President
Dell Financial Services L.P.
One Dell Way
Round Rock, Texas 78682
Facsimile: (512) 728-8252
With a copy to:
General Counsel at the same address
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
17. Specific Performance. Each Party acknowledges and agrees that the
other Parties would be damaged irreparably in the event any provision of this
Agreement is not performed in accordance with its specific terms or otherwise is
breached, so that a Party shall be entitled to injunctive relief to prevent
breaches of this Agreement and to enforce specifically this
17
Agreement and the terms and provisions hereof in addition to any other remedy to
which such Party may be entitled, at law or in equity. In particular, the
Parties acknowledge that the business of DFS and its Affiliates is unique and
recognize and affirm that in the event Dell or CIT breach this Agreement, money
damages would be inadequate and Dell or CIT would have no adequate remedy at
law, so that Dell and CIT shall have the right, in addition to any other rights
and remedies existing in their respective favor, to enforce their rights and the
other Parties' obligations hereunder not only by action for damages but also by
action for specific performance, injunctive, and/or other equitable relief.
18. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Delaware in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto. Any Party may make service on any other Party by sending or delivering
a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in this Agreement. Nothing in this Agreement,
however, shall affect the right of any Party to bring any action or proceeding
arising out of or relating to this Agreement in any other court or to serve
legal process in any other manner permitted by law or at equity. Each Party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.
DELL FINANCIAL SERVICES L.P.,
a Delaware limited partnership
By: /s/ J. Kevin Nater
----------------------------------------
Name: J. Kevin Nater
Title: CEO and President
DELL CREDIT COMPANY L.L.C.,
a Delaware limited liability company
By: /s/ J. Kevin Nater
----------------------------------------
Name: J. Kevin Nater
Title: Chairman of the Board
DFS-SPV L.P., a Delaware limited partnership
By: DFS-GP, Inc.
Its: General Partner
By: /s/ J. Kevin Nater
----------------------------------------
Name: J. Kevin Nater
Title: CEO and President
DFS-GP, INC., a Delaware corporation
By: /s/ J. Kevin Nater
----------------------------------------
Name: J. Kevin Nater
Title: CEO and President
DELL INC.,
a Delaware corporation
By: /s/ Brian P. MacDonald
----------------------------------------
Name: Brian P. MacDonald
Title: Vice President and Treasurer
19
DELL GEN. P. CORP.,
a Delaware corporation
By: /s/ Brian P. MacDonald
----------------------------------------
Name: Brian P. MacDonald
Title: Vice President and Treasurer
DELL DFS CORPORATION,
a Delaware corporation
By: /s/ Brian P. MacDonald
----------------------------------------
Name: Brian P. MacDonald
Title: Vice President and Treasurer
CIT GROUP INC.,
a Delaware corporation
By: /s/ Thomas B. Hallman
----------------------------------------
Name: Thomas B. Hallman
Title: Vice Chairman
CIT FINANCIAL USA, INC., a Delaware
corporation
By: /s/ Jeffrey D. Simon
----------------------------------------
Name: Jeffrey D. Simon
Title: President-Vendor Technology Group
CIT DCC INC., a Delaware corporation
By: /s/ Jeffrey D. Simon
----------------------------------------
Name: Jeffrey D. Simon
Title: President
CIT DFS INC., a Delaware corporation
By: /s/ Jeffrey D. Simon
----------------------------------------
Name: Jeffrey D. Simon
Title: President
20
CIT COMMUNICATIONS FINANCE
CORPORATION, a Delaware corporation
By: /s/ Jeffrey D. Simon
----------------------------------------
Name: Jeffrey D. Simon
Title: President
CIT CREDIT GROUP USA INC., a Delaware
corporation
By: /s/ Jeffrey D. Simon
----------------------------------------
Name: Jeffrey D. Simon
Title: Executive Vice President
21
Exhibit A
Amended and Restated DFS Limited Partnership Agreement
(Attached as Exhibit 10.2 to Form 8-K dated September 8, 2004.)
22
Schedule A
CIT Minimum Funding Right
CIT Minimum Funding Right Table
- --------------------------------------------------------------------------
Fiscal Year CIT Minimum Funding Right Percentage
- --------------------------------------------------------------------------
2006 75%
- --------------------------------------------------------------------------
2007 65%
- --------------------------------------------------------------------------
2008 50%
- --------------------------------------------------------------------------
2009 35%
- --------------------------------------------------------------------------
2010 25%
- --------------------------------------------------------------------------
23