EXHIBIT 10(a) Form 10-Q
For the Quarter Ended
March 31, 1996
Fiscal Year Ending December 31, 1996
LUCENT TECHNOLOGIES
OPERATING AGREEMENT
Dated as of April 2, 1996
Between
LUCENT TECHNOLOGIES, INC.
a Delaware corporation,
And
AT&T CAPITAL CORPORATION,
a Delaware corporation
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS.............................................................. 2
ARTICLE II
FINANCING RELATED SERVICES TO BE PROVIDED BY CAPITAL..................... 11
2.1 Financing Related Services - Objectives and Commitments ....... 11
2.2 Training of Company Personnel ................................. 13
2.3 Providing Company with Information as to
Financings and Finance Markets .............................. 14
2.4 Subsidized and Guaranteed Financings and
Ancillary Services .......................................... 14
2.5 Advisory Services ............................................. 15
2.6 No Obligation or Commitment ................................... 15
2.7 Alternative Financing and Recourse Arrangements ............... 16
ARTICLE III
PREFERRED PROVIDER STATUS................................................ 17
3.1. Support of the Capital Entities................................ 17
3.2. Preferred Provider Status...................................... 18
3.3. Right to Choose Alternative Providers.......................... 20
3.4. Finance Marketing Support...................................... 21
3.5. Personnel Support.............................................. 21
3.6. Information Support............................................ 22
3.7. Activities of the Company Entities............................. 22
ARTICLE IV
NON-COMPETITION.......................................................... 22
4.1. Covenant Not to Compete........................................ 22
4.2. Use of a Permitted Captive Financing Source.................... 25
4.3. Financing Operations of Acquired Entities...................... 26
ARTICLE V
PROTOCOLS AND PROCEDURES AND RELATED MATTERS............................. 28
5.1. Protocols and Procedures; Pilot Programs....................... 28
5.2. Systems Interface.............................................. 29
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ARTICLE VI
REMARKETING OF PRODUCTS.................................................. 30
6.1. In General..................................................... 30
6.2. Deinstallation, Refurbishment and Re-Certification
of Remarketed Products....................................... 31
6.3. Rights to Use Software......................................... 32
ARTICLE VII
CERTAIN ALLOCATIONS OF RISK; LITIGATION AND REPOSSESSION................. 32
7.1. Representations, Warranties and Covenants...................... 32
7.2. Allocation of Certain Risks.................................... 34
7.3. Collection and Repossession Actions............................ 36
7.4. Actions Against Significant Accounts........................... 36
ARTICLE VIII
SCOPE OF APPLICATION OF AGREEMENT........................................ 37
8.1. Attribution of Actions of Subsidiaries to Their Parents........ 37
8.2. Application of Agreement to Certain Joint Ventures and Other
Minority Investments of the Company.......................... 38
8.3. Sale, Public Offering or Spin-Off of a Significant
Products Entity ............................................. 38
8.4. New Products and Company Entities.............................. 39
8.5. Geographic Scope of Agreement.................................. 40
ARTICLE IX INDEMNIFICATION................................. 41
9.1. Capital Indemnity.............................................. 41
9.2. Company Indemnity.............................................. 41
9.3. Procedure...................................................... 42
ARTICLE X
DISPUTE RESOLUTION....................................................... 43
10.1. Resolution of Disputes......................................... 43
10.2. Resolution of Disputes Using Best Efforts...................... 43
10.3. Arbitration.................................................... 44
10.4. Continuity of Service and Performance.......................... 46
10.5. Disputes as to Sales Site Protocols and Procedures............. 46
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ARTICLE XI
TERM AND TERMINATION..................................................... 46
11.1. Initial Term and Renewal....................................... 46
11.2. Termination.................................................... 47
11.3. Effect of Termination.......................................... 48
ARTICLE XII
CONFIDENTIALITY.......................................................... 49
ARTICLE XIII
MISCELLANEOUS............................................................ 50
13.1. Variation of Terms; Amendments................................. 50
13.2. No Partnership................................................. 50
13.3. Successors and Assigns; Third Parties.......................... 50
13.4. Severability................................................... 50
13.5. Notices........................................................ 51
13.6. Governing Law.................................................. 52
13.7. Headings....................................................... 52
13.8. Counterparts................................................... 52
SCHEDULES AND EXHIBITS
Schedule A-- Description of the Business of the Divisions
Schedule B-- Location Support Agreement
Schedule C-- Description of Certain Past Practices of the Divisions
Relating to Interim Financings
Schedule D-- Description of Certain Past Practices of AT&T Paradyne
Schedule E-- Description of Certain Equipment, Systems and Services
Provided by Network Systems
Schedule F-- Description of Certain Past Practices of the Divisions
Relating to the Rental of Products on a Periodic Basis
Schedule G-- General Allocation of Responsibilities
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LUCENT TECHNOLOGIES
OPERATING AGREEMENT
LUCENT TECHNOLOGIES OPERATING AGREEMENT dated as of
April 2, 1996 (this "Agreement") between LUCENT TECHNOLOGIES INC., a
Delaware corporation (the "Company"), and AT&T CAPITAL CORPORATION, a Delaware
corporation ("Capital").
W I T N E S S E T H:
WHEREAS, the Board of Directors of AT&T Corp.("AT&T") has
determined that it is in the best interest of AT&T to separate AT&T's existing
businesses into three independent businesses;
WHEREAS, as part of the foregoing, NCR Corporation ("NCR") and
the Company will enter into a Separation and Distribution Agreement with AT&T
which provides, among other things, for the separation of the Company assets and
the Company liabilities;
WHEREAS, in order to consummate a spin-off of the Company, (i)
AT&T will contribute or otherwise convey or cause to be conveyed the assets, or
certain assets, of the Divisions (as defined herein) to the Company, a recently
formed wholly-owned Subsidiary of AT&T, (ii) the Company will sell to the
public, pursuant to an initial public offering (the "IPO"), approximately 15% of
its common equity and (iii) in a separate transaction following the IPO, AT&T
will spin-off its entire interest in the Company to its shareholders (such
transactions are collectively referred to as the "Spin-Off Transactions");
WHEREAS, Capital entered into an Operating Agreement dated as of
June 25, 1993 (as amended from time to time, the "AT&T Operating Agreement")
with AT&T;
WHEREAS, pursuant to Section 8.3 of the AT&T Operating Agreement,
Capital has requested AT&T to cause the Company to enter into a Comparable
Operating Agreement (as defined in Section 8.3 of the AT&T Operating Agreement)
relating to the businesses of the Divisions that is substantially similar in
scope and terms to the AT&T Operating Agreement;
WHEREAS, AT&T and Capital have entered into an Agreement dated as
of January 5, 1996 pursuant to which AT&T has agreed to use its best efforts to
cause the Company to enter into this Agreement by January 31, 1996 (but in any
event no later than the date required pursuant to Section 8.3 of the AT&T
Operating Agreement);
WHEREAS, it is the intention of the parties hereto that (i) this
Agreement constitute a Comparable Operating Agreement relating to the businesses
of the Divisions and (ii) this Agreement shall govern the relationship between
the Company and
its Subsidiaries, on the one hand, and Capital and its Subsidiaries, on the
other hand, after the consummation of the Spin-Off Transactions as to the
matters set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and subject to the conditions and
upon the terms hereof, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms will have the
following meanings, applicable both to the singular and the plural forms of the
terms defined:
"AAA" has the meaning ascribed thereto in Section 10.3(g).
"Acquired Entity" has the meaning ascribed thereto in Section
4.3.
"Acquired Entity Financing Source" has the meaning ascribed
thereto in Section 4.3.
"Active Service Area" has the meaning ascribed thereto in Section
8.5.
"Adjusted Financeable Product Sales" means, with respect to any
calendar year, the aggregate purchase price (net of any discounts) paid by
Customers, Authorized Dealers or the Capital Entities (or, with respect to
periods prior to March 31, 1993, Capital Holdings and its Subsidiaries) to the
Company Entities, together with any related sales taxes and installation and
similar costs, for Financeable Products sold by the Company Entities during such
calendar year and each of the two preceding calendar years. In the event that
during any three-year period for which Adjusted Financeable Product Sales is
calculated, there has occurred a disposition, termination or phase-out by any
Company Entity of any significant Financeable Product line, the Adjusted
Financeable Product Sales amount with respect to such three-year period shall be
reduced by the amounts attributable to sales of such Financeable Products during
such three-year period and any related sales taxes and installation and similar
costs. In the event that during any three-year period for which Adjusted
Financeable Products Sales is calculated, there has been introduced or has
occurred a phase-in or an acquisition by any Company Entity of any significant
Financeable Product line, the Adjusted Financeable Product Sales amount with
respect to such three-year period shall be adjusted such that the aggregate
purchase price (net of discounts) of and any related sales taxes
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and installation and similar costs for such significant Financeable Product line
shall be (x) with respect to each full calendar year within such three-year
period during which such Financeable Product line has been sold by the Company
Entities (each such year, a "Full Sales Year"), the actual aggregate purchase
price (net of discounts) of and any related sales taxes and installation and
similar costs for Financeable Products constituting part of such Financeable
Products line that are sold within such Full Sales Year and (y) with respect to
each calendar year within such three-year period during or prior to which such
Financeable Product line was introduced, phased-in or acquired (each such year,
a "Partial Sales Year"), an assumed amount equal to the amount calculated
pursuant to clause (x) above for the first Full Sales Year following such
Partial Sales Year. Notwithstanding the foregoing, there shall be excluded from
the foregoing calculations (i) Financeable Product lines sold by AT&T Paradyne
or Network Systems for which AT&T Paradyne or Network Systems, as the case may
be, provide financing pursuant to Section 4.1(b) and (ii) Financeable Product
lines the introduction, phase-in or acquisition of which was effected in the
calendar year with respect to which Adjusted Financeable Products Sales is being
calculated together with, in each case, any related sales taxes and installation
and similar costs. The foregoing adjustments to Adjusted Financeable Product
Sales for any period shall be calculated on a basis that is consistent with the
basis on which adjustments to Adjusted Financing Amount for such period are
calculated.
"Adjusted Financing Amount" means, with respect to any calendar
year, the aggregate amount of Financings provided by the Capital Entities (or,
with respect to periods prior to March 31, 1993, Capital Holdings and its
Subsidiaries) for Financeable Products sold by the Company Entities during such
calendar year and each of the two preceding calendar years, together with the
aggregate amount of Financings of any related sales taxes and installation and
similar costs. In the event that during any three-year period for which Adjusted
Financing Amount is calculated, there has occurred a disposition, termination or
phase-out by any Company Entity of any significant Financeable Product line, the
Adjusted Financing Amount with respect to such three-year period shall be
reduced by the amount attributable to Financings of Financeable Products
constituting part of such Financeable Product line during such three-year period
or to Financings of any related sales taxes and installation and similar costs.
In the event that during any three-year period for which Adjusted Financing
Amount is calculated, there has been introduced or has occurred a phase-in or an
acquisition by any Company Entity of any significant Financeable Product line,
the Adjusted Financing Amount with respect to such three year period shall be
adjusted such that the amount of Financings for such significant Financeable
Product line shall be (x) with respect to each Full Sales Year (as defined in
the definition of "Adjusted Financeable Product Sales"), the aggregate amount of
such Financings (together with the aggregate amount of Financings of
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any related sales tax and installation and similar costs) for Financeable
Products constituting part of such Financeable Product line that are sold within
such Full Sales Year and (y) with respect to any Partial Sales Year (as defined
in the definition of "Adjusted Financeable Product Sales"), an assumed amount
equal to the amount calculated pursuant to clause (x) above for the first Full
Sales Year following such Partial Sales Year. Notwithstanding the foregoing,
there shall be excluded from the foregoing calculations (i) Financings provided
by the Capital Entities for Financeable Product lines sold by AT&T Paradyne or
Network Systems for which AT&T Paradyne or Network Systems, as the case may be,
provide financing pursuant to Section 4.1(b) and (ii) Financings provided by the
Capital Entities for Financeable Products lines the introduction, phase-in or
acquisition of which was effected in the calendar year with respect to which
Adjusted Financing Amount is being calculated together with, in each case,
Financings of any related sales taxes and installation and similar costs.
"Advisory Services" has the meaning ascribed thereto in Section
2.5.
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as applied to any Person, means the possession, directly or indirectly,
of the power to vote a majority of the securities having voting power for the
election of directors (or other Persons acting in similar capacities) of such
Person or otherwise to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
"After-Tax Basis" means, with respect to any payment to be
received or accrued by any Person, the amount of such payment supplemented by a
further payment or payments (which shall be payable either simultaneously with
the initial payment or, in the event that taxes resulting from the receipt or
accrual of such initial payment are not payable in the year of receipt or
accrual, at the time or times such taxes become payable) so that the sum of all
such initial and supplemental payments, after deduction of all taxes imposed by
any taxing authority (after taking into account any credits or deductions or
other tax benefits arising therefrom to the extent such are currently utilized)
resulting from the receipt or accrual of such payments (whether or not such
taxes are payable in the year of receipt or accrual) will be equal to the
initial payment to be so received or accrued.
"Agreement" has the meaning ascribed thereto in the preamble
hereto, as such agreement is amended and supplemented from time to time in
accordance with its terms.
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"Alternative Ancillary Services" means Ancillary Services offered
or provided to the Company Entities, Customers or Authorized Dealers by an
Alternative Provider.
"Alternative Financing Program" means a Financing program offered
or provided to the Company Entities, Customers or Authorized Dealers by an
Alternative Provider.
"Alternative Provider" means a Person (other than an Affiliate of
the Company or Capital) that offers financings or other services competitive
with Financings or Ancillary Services offered by the Capital Entities hereunder.
"Ancillary Services" means (i) the provision of property,
casualty or similar types of insurance with respect to Products, (ii) asset
monitoring, recovery and remarketing services of a type provided by the Capital
Entities to the Company Entities or their Customers or Authorized Dealers on or
prior to the date hereof and (iii) any other value-added services relating to
Products or Financings offered by the Capital Entities from time to time and
agreed to by the parties to be treated as Ancillary Services for purposes of
this Agreement.
"AT&T" has the meaning ascribed thereto in the preamble.
"AT&T Entities" means AT&T and all Persons that constitute
Subsidiaries of AT&T (other than Subsidiaries that constitute Capital Entities)
from time to time.
"AT&T Microelectronics" means the SBU of AT&T commonly referred
to as "AT&T Microelectronics", a general description of the business of which
(including a description of its Products, customers and markets) is set forth on
Schedule A attached hereto and made a part hereof.
"AT&T Operating Agreement" has the meaning ascribed thereto in
the preamble.
"AT&T Paradyne" means AT&T Paradyne Corporation, a wholly-owned
Subsidiary of AT&T, a general description of the business of which (including a
description of its Products, customers and markets) is set forth on Schedule A
attached hereto and made a part hereof.
"Authorized Dealer" means any Person that is authorized or
permitted by any Company Entity to acquire Products directly from such Company
Entity for resale on a wholesale or retail basis.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banking institutions in New Jersey are authorized or required
by law to be closed.
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"Capital" means AT&T Capital Corporation, a Delaware corporation,
and its successors and permitted assigns.
"Capital Entities" means Capital and all Persons that constitute
Subsidiaries of Capital from time to time.
"Capital Entities' Financing Penetration Rate" means, as of the
end of any calendar year, the Adjusted Financing Amount for such year and the
two preceding calendar years expressed as a percentage of the Adjusted
Financeable Product Sales for such year and the two preceding calendar years.
"Capital Holdings" means AT&T Capital Holdings, Inc., a
Delaware corporation.
"Captive Financing Trigger Event" has the meaning ascribed
thereto in Section 4.2.
"Company" has the meaning ascribed thereto in the preamble.
"Company Entities" means the Company and all Persons that
constitute Subsidiaries of the Company from time to time; provided, however, in
respect of the business activities and performance of the Company Entities at
any time prior to the Spin-Off Date, "Company Entities" shall refer to the
businesses and assets of the Divisions.
"Company Responsibility" has the meaning ascribed thereto in
Section 7.2(b).
"Comparable Operating Agreement" has the meaning ascribed thereto
in Section 8.3.
"Consumer Products" means the SBU of AT&T commonly referred to as
"Consumer Products", a general description of the business of which (including a
description of its Products, customers and markets) is set forth on Schedule A
attached hereto and made a part hereof.
"Credit" means AT&T Credit Corporation, a Delaware corporation
that is a wholly-owned Subsidiary of Capital and was previously named "AT&T
Captive Finance, Inc.".
"Credit Holdings" means AT&T Credit Holdings, Inc., a Delaware
corporation that is a wholly-owned Subsidiary of Capital Holdings and was
previously named "AT&T Credit Corporation".
"Credit Receivables Agreement" means the Operating Agreement
dated as of January 1, 1985, among AT&T and Credit Holdings and certain of their
Affiliates, as such agreement is amended and supplemented from time to time in
accordance with its terms.
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"Customer" means any Person that is an actual (or, if the context
so indicates, potential) acquirer or user of Products, other than an Authorized
Dealer.
"Customer Financing" means any direct or indirect financing of
the sale, lease or other furnishing of Products by any Company Entity (or
Authorized Dealer) to Customers, and will include, without limitation, (i)
entering into leases, secured loans, installment sales contracts or conditional
sales contracts directly with such Customers, (ii) the purchase or financing of
receivables arising from such sales, leases or other furnishings of Products by
any Company Entity (or Authorized Dealer), and (iii) the issuance of charge or
credit cards (such as Capital's Products Plus Card) primarily intended for the
financing of purchases of Products.
"Customer Outsourcing Program" means any program of the Company
Entities for the acquisition, maintenance and/or operation by the Company
Entities of telecommunications, computer, data and/or information networks or
operations for Customers under what is generally referred to in the industry as
an outsourcing or network management contract ("Outsourcing Contract") between
the applicable Customer and the applicable Company Entities, under which program
financing of the products and other equipment and software (which may include,
but are not necessarily limited to, Products) used in connection with the
Outsourcing Contract is provided by a financing source other than the internal
or budgeted funds of the Company Entities offering such program.
"Dealer Financing" means any direct or indirect (i) financing of
the purchase or lease by Authorized Dealers of Products from the Company
Entities for resale or re-lease to Customers, including, without limitation,
floor planning loans and other forms of inventory financing and (ii) provision
of other types of secured loans to such Authorized Dealers.
"Divisions" means, collectively, AT&T Microelectronics, Network
Systems, AT&T Paradyne, Consumer Products, Global Business Communications
Systems and any other SBU of AT&T that becomes an SBU or a part of an SBU of the
Company or any of the Company's Subsidiaries in connection with the Spin-Off
Transactions. Any reference to a Division relating to a period after the
Spin-Off Date shall refer to the relevant SBU (or part of such SBU) of the
Company or the Company's Subsidiaries conducting the business of such Division
after the Spin-Off Date.
"Dollars" and "$" mean the lawful money of the United States.
"Financeable Products" means all Products (other than Products
constituting consumables or maintenance, service or similar contracts) sold by
the Company Entities to Customers or Authorized Dealers within the Active
Service Areas that (i) have
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been Financed by the Capital Entities or (ii) are types of Products for which it
is customary in the equipment finance industry within the Active Service Areas
for third-party, "non-captive" equipment financing companies to provide
Financing.
"Financed Products" means Products with respect to which
Financing has been provided.
"Finance Marketing Support" has the meaning ascribed thereto in
Section 3.1(i).
"Financing" means Customer Financing, Dealer Financing or
Outsource Financing.
"First Tier Transfer of Control" means a transaction or series of
transactions that has the effect of reducing AT&T's direct or indirect ownership
interest of Capital's voting securities, such that Capital is no longer a
Subsidiary of AT&T.
"Global Business Communications Systems" means the SBU of AT&T
commonly referred to as "Global Business Communications Systems", a general
description of the business of which (including a description of its Products,
customers and markets) is set forth on Schedule A attached hereto and made a
part hereof.
"Information Support" has the meaning ascribed thereto in Section
3.1(v).
"Initial Term" has the meaning ascribed thereto in Section 11.1.
"IPO" has the meaning ascribed thereto in the preamble.
"Location Support" has the meaning ascribed thereto in Section
3.1(iii).
"Location Support Agreement" has the meaning ascribed thereto in
Section 3.1(iii).
"Network Systems" means the SBU of AT&T commonly referred to as
"Network Systems", a general description of the business of which (including a
description of its Products, customers and markets) is set forth on Schedule A
attached hereto and made a part hereof.
"Outsource Financing" means any direct or indirect financing
(including, without limitation, through secured loans and leases) of or with
respect to any Customer Outsourcing Program.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization,
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government (and any department or agency thereof) or other entity.
"Personnel Support" has the meaning ascribed thereto in Section
3.1(ii).
"Products" means any products (including, without limitation,
Software, but not including any real estate) and related installation and
maintenance services provided, furnished, manufactured, sold or marketed, as the
case may be, by the Company Entities from time to time.
"Products Capacity" means the capacity of a Significant Products
Entity to manufacture, market or provide Products (including, to the extent
appropriate, the related manufacturing capacity, distribution and marketing
capacity and Product development and support systems).
"Protocols and Procedures" has the meaning ascribed thereto in
Section 5.1(a).
"Protocol Standards" has the meaning ascribed thereto in Section
5.1(a).
"Renewal Period" has the meaning ascribed thereto in Section
11.1.
"Sales Site" means any site, office or location from which any
Company Entity or SBU conducts the sale or marketing of Products.
"SBU" means a division of AT&T, prior to the Spin-Off Date, or of
a Company Entity, from and after the Spin-Off Date, involved in the manufacture,
sale, provision or marketing of Products, including, without limitation, each of
the Divisions.
"Significant Account" means a customer (which may be an
Authorized Dealer or a Customer) of a Company Entity (i) which has acquired
Products with an aggregate purchase price exceeding $10,000,000 in the most
recent calendar year or which can reasonably be expected to acquire Products
with an aggregate purchase price exceeding such amount in the current calendar
year and (ii) has been designated by such Company Entity as a "Significant
Account" by written notice to Capital.
"Significant Products Entity" means a Company Entity or SBU (x)
which is in the business of manufacturing, marketing or providing Products and
(y) which has annual sales revenues in excess of $200,000,000 for the calendar
year immediately preceding the calendar year during which the applicable
transaction referred to in Section 8.3 is proposed or effected.
"Software" means any intellectual property commonly or
generically known as software, together with related storage
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disks and instructional and other documents, the acquisition or use of which
by any Person is customarily financed by the Capital Entities or relates to
or is used in connection with equipment financed by the Capital Entities.
"Spin-Off Date" means the date of the consummation of the
Spin-Off Transactions.
"Spin-Off Transactions" has the meaning ascribed thereto in the
preamble.
"Standard Documents" means standardized forms of documents
prepared (and from time to time revised) by the Capital Entities in connection
with the offering of various types of Financings and Ancillary Services,
including forms of leases, loan agreements, security agreements, guarantees,
financing statements and other documents necessary or appropriate for the
conducting of the Capital Entities' business of providing Financing and
Ancillary Services.
"Subsequent Transfers of Control" means any transaction or series
of events or transactions, in which Capital becomes a Subsidiary of any Person
other than the Person (or an Affiliate of the Person) which acquired Capital in
the First Tier Transfer of Control.
"Subsidiary" means, with respect to any Person, any other Person
which is directly or indirectly controlled by such Person. For purposes of this
definition, "control", as applied to any Person, means the possession, directly
or indirectly, of the power to vote a majority of the securities having voting
power for the election of directors (or other Persons acting in similar
capacities) of such Person or otherwise to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Systems Support" has the meaning ascribed thereto in Section
3.1(iv).
Unless the context indicates otherwise, references to Articles,
Sections and Schedule will refer to the corresponding articles and sections in
and schedule to this Agreement and references to the parties shall mean the
parties to this Agreement. Capitalized terms used herein without definition
(such as "Financed") that have correlative defined terms (such as "Financing")
will have a meaning correlative to the defined term. References to "consistent
with past practice" shall refer to the past practices of the Capital Entities
and the businesses of the Divisions prior to June 25, 1993.
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ARTICLE II
FINANCING RELATED SERVICES TO BE PROVIDED BY CAPITAL
Section 2.1. Financing Related Services-Objectives and Commitments.
(a) It is the mutual objective of the parties to this Agreement that Capital
will, during the term of this Agreement and within the Active Service Areas,
either directly or through its Subsidiaries:
(i) make available to Customers of the Company Entities and
Authorized Dealers appropriate forms of Customer Financings for the
purchase, lease or other acquisition of Products (such as, but not
necessarily including with respect to each type of Product, leases,
secured loans, installment sales contracts and conditional sales
contracts), and otherwise provide the Company Entities and Authorized
Dealers with Customer Financing in the form of purchases or financings
of receivables arising from the sale, lease or other furnishing by the
Company Entities or Authorized Dealers of Products to Customers;
(ii) make available to Authorized Dealers appropriate forms
of Dealer Financing and make available to the Company Entities
appropriate forms of Outsource Financing; and
(iii) make available to the Company Entities, Customers and
Authorized Dealers, where appropriate, various types of Ancillary
Services offered from time to time by Capital and its Subsidiaries.
(b) In furtherance of the objectives described in paragraph (a)
above, Capital shall, during the term of this Agreement and within the Active
Service Areas, either directly or through its Subsidiaries:
(i) generally continue the Financing and Ancillary Services
programs under which Capital Holdings and its Subsidiaries (and, as
successors to the "captive" financing businesses thereof, Capital and
its Subsidiaries) have heretofore been providing Financings and
Ancillary Services to the Company Entities, Customers and Authorized
Dealers (subject to Capital's right to modify, revise or terminate
particular programs as appropriate to accommodate changes in market
conditions or the marketing requirements of the Company Entities,
Customers and Authorized Dealers and other relevant developments);
(ii) as the Company Entities introduce new Products, use its good
faith efforts, in cooperation with the Company, to modify existing or
devise new Financing and Ancillary Service programs, where appropriate,
to support the sale, lease or other furnishings of such Products;
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(iii) make any new Ancillary Services offered by the Capital
Entities available to the Company Entities, Customers and Authorized
Dealers, as appropriate;
(iv) cooperate with the Company Entities and Authorized Dealers
in promoting and advertising the availability of the Financings and
Ancillary Services to Customers, including providing their sales and
marketing personnel with information with respect to such Financings and
Ancillary Services and by generally responding to inquiries made by
Customers or the employees of such Company Entities or Authorized
Dealers with respect to such Financings and Ancillary Services;
(v) jointly with the Company, establish and implement and, where
appropriate, revise from time to time Protocols and Procedures for the
furnishing of such Financings and Ancillary Services in accordance with
the provisions of Section 5.1;
(vi) prepare Standard Documents for use in connection with
standardized types of Financings and maintain the capacity to (A) modify
such Standard Documents in order to document particular Financings and
Ancillary Services and (B) prepare appropriate documentation for any
customized Financings and Ancillary Services that Capital may offer to
particular Customers or Authorized Dealers pursuant to this Agreement;
(vii) cooperate with the Company Entities and Authorized Dealers
to facilitate Financings (including, where appropriate, extensions,
renewals or modifications of existing Financings) of replacements or
upgrades of Financed Products or additions of Products to previously
Financed Products (subject to adequate protection of the interests of
the Capital Entities in any Financings that would be affected thereby);
(viii) maintain the capacity to, and employ (or have ready access
to) personnel having the requisite financial, legal and other skills to,
respond to requests of Customers or Authorized Dealers with respect to
unusual, specialized or complex Financings and Ancillary Services;
(ix) endeavor to maintain good relations with Customers and
Authorized Dealers and, by offering courteous, efficient and informed
Financing services and Ancillary Services, promote and support the
efforts of the Company Entities and Authorized Dealers to sell,
distribute and market the Products;
(x) keep appropriate employees of the Capital Entities informed
of business developments at the Company Entities, the characteristics of
Products and their usages,
-12-
developments of new Products, Product migration and marketing strategies
and the Product-related business plans of the Company Entities by
disseminating the information provided to the Capital Entities by the
Company Entities pursuant to Section 3.6;
(xi) generally keep informed of developments in the equipment
financing industry and of the development of new types of financings;
and
(xii) at appropriate intervals, review the types of Financings
and Ancillary Services offered and provided for the Products, the types
of Financings and Ancillary Services requested by the Company Entities,
Customers and Authorized Dealers and other available information so as
to assess the responsiveness of the Financings and Ancillary Services
offered by the Capital Entities to the financing and related needs of
such Company Entities, Customers and Authorized Dealers, and use its
good faith efforts to develop new Financing techniques or products and
new types of Ancillary Services that would enhance or facilitate the
sale, lease or other furnishings of Products to Customers and Authorized
Dealers.
(c) In connection with the activities described in paragraph (b)
above, Capital shall, during the term of this Agreement and within the Active
Service Areas, either directly or through its Subsidiaries:
(i) employ and train appropriate personnel and maintain, adapt
and upgrade its telecommunications, information-processing and
record-keeping systems as it deems necessary or appropriate for the
purpose of carrying out such activities; and
(ii) obtain and maintain such franchises, licenses and permits as
it deems necessary or appropriate for the purpose of carrying out such
activities.
Section 2.2. Training of Company Personnel. The Capital Entities
shall, consistent with past practice, conduct training programs for attendance
by appropriate sales personnel employed by the Company Entities and Authorized
Dealers at which such individuals shall be trained in the proper documentation
of Financings, the techniques of using Financings and Ancillary Services offered
by the Capital Entities as sales tools and the particulars of such Financings
and Ancillary Services. The Capital Entities shall also provide appropriate
training and assistance, consistent with past practice, to the Company Entities'
operational and office support personnel with respect to the implementation of
the Protocols and Procedures (including, without limitation, processing of
applications for and documentation of Financings and Ancillary Services), the
-13-
electronic systems interfaces between the Company Entities' and Capital
Entities' computer systems and related matters.
Section 2.3. Providing the Company with Information as to
Financings and Finance Markets. The Capital Entities shall, consistent with
past practice, provide to the appropriate Company Entities on a periodic basis
information concerning levels of applications for and approvals of Financings
and Ancillary Services, turn-around times for processing applications for
Financings and Ancillary Services, levels of completed and outstanding
Financings and, where requested, payment and delinquency histories with respect
to Financings and Ancillary Services, and other appropriate information with
respect to Financings and Ancillary Services provided under this Agreement. Upon
request and to the extent permitted by applicable law, the Capital Entities
shall also provide to the Company Entities appropriate information within the
possession or control of such Capital Entities that is relevant to an analysis
of the credit standing of any Customer or Authorized Dealer that has directly or
indirectly received or applied for Financing or Ancillary Services from the
Capital Entities. The Capital Entities shall also provide to the Company
Entities, (i) on a periodic basis, appropriate information concerning
competitive lease and other financing products and market conditions for
financing products, and (ii) on a regular and timely basis, the development and
marketing plans and strategies of the Capital Entities with regard to Financings
and Ancillary Services. The Capital Entities shall, in a manner consistent with
past practice, comply with all reasonable requests of the Company Entities for
information with respect to the Capital Entities' business plans and results and
programs for financings and ancillary services that are relevant to the
activities contemplated under this Agreement (whether or not relating to the
Active Service Areas.)
Section 2.4. Subsidized and Guaranteed Financings and Ancillary
Services. In the event that any Company Entity at any time desires that a
Capital Entity provide a proposed Financing or Ancillary Service that has
previously been rejected by or is otherwise unacceptable to such Capital Entity
because of the level of credit, residual or other risk proposed to be borne by
such Capital Entity in the provision of such Financing or Ancillary Service, or
if any Company Entity at any time desires that a Capital Entity provide
Financing or an Ancillary Service to a Customer or Authorized Dealer at a yield
rate or price that is more favorable to such Customer or Authorized Dealer than
the rate or price such Capital Entity is otherwise willing to offer, Capital
shall use its best efforts to work out arrangements with such Company Entity
such that the Company might, directly or indirectly, (x) subsidize such
Financing or Ancillary Service (for instance, by agreeing to pay supplemental
rent, premiums or interest or accepting a greater than usual discount) and/or
(y) provide credit support with respect to such Financing or Ancillary Service
(for instance, by guaranteeing payments due and/or the residual under a lease)
so as to permit such Capital
-14-
Entity to offer such Financing or Ancillary Service to the Customer or
Authorized Dealer on the terms contemplated by such Company Entity. Capital
shall use its best efforts to (x) respond in a timely manner to any proposal by
any Company Entity with respect to the subsidization or guarantee of any such
Financing or Ancillary Service and (y) identify to the Company Entities in
advance, where it is reasonably practicable to do so, the types of Financings
and Ancillary Services that Capital would be willing to provide on a subsidized
or guaranteed basis. It is understood by Capital that the provision by the
Company of any guarantee or subsidy with respect to any Financing or Ancillary
Service is in the sole discretion of the Company.
Section 2.5. Advisory Services. Capital shall (to the extent it
is permitted to do so under applicable laws without the requirement of obtaining
regulatory approvals or licenses in addition to those the Capital Entities may
possess at the relevant time) use its good faith best efforts to provide, either
directly or through its Subsidiaries, the Company Entities with financial
advisory and syndication services ("Advisory Services") upon request in areas in
which the Capital Entities have expertise, such as the structuring of Financings
for certain Products not covered by the Capital Entities' general Financing
programs (e.g., switching systems marketed by the Company Entities in certain
less developed countries) and the arranging of securitizations of financial
assets (other than financial assets subject to Financings by Capital). Such
Advisory Services shall be provided by Capital pursuant to commercially
reasonable arrangements to be agreed upon by the Company and Capital and will
involve the payment to the relevant Capital Entities of advisory fees in an
amount to be agreed upon. The utilization by the Company Entities of the Capital
Entities for provision of such Advisory Services shall be in the sole discretion
of the Company Entities.
Section 2.6. No Obligation or Commitment. (a) The Capital Entities
shall use their good faith efforts to provide Financings and Ancillary Services
for sales, leases and other furnishings of Products by the Company Entities
within the Active Service Areas, subject to compliance with Capital's credit and
documentation standards and the availability of funding sources. However, the
provisions of this Agreement are not intended to and will not be interpreted so
as to obligate or commit the Capital Entities to provide Financings or Ancillary
Services with respect to any particular Company Entity, Customer, Authorized
Dealer or Product, and the Capital Entities will retain full discretion with
respect to the circumstances in which it will provide, and the terms of, such
Financings and Ancillary Services.
(b) Although the Capital Entities are entitled, in their
discretion, to modify or discontinue programs for Financings and Ancillary
Services, the Capital Entities shall, consistent with past practice, prior to
discontinuing or making a significant modification of any such program, inform
the SBUs
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that would be affected by such discontinuance or modification and use reasonable
efforts, in consultation with such SBUs, to minimize, as far as practicably
possible, any disruptive effect of such discontinuance or modification on such
SBU's sale, lease or other furnishings of Products.
Section 2.7. Alternative Financing and Recourse Arrangements.
(a) The Company Entities and Capital Entities may, in their discretion, choose
to enter into arrangements or programs from time to time with respect to
Financings and Ancillary Services that have terms and conditions that vary from
those contemplated in this Agreement. Any such alternative arrangements and
programs will not be construed to amend this Agreement, which may be amended
solely in accordance with the terms of Section 13.1. The parties further
acknowledge and agree that, except to the extent otherwise provided herein, (i)
any recourse or other similar arrangements with respect to Financings or
Ancillary Services (whether written or oral) in effect on the date of this
Agreement between any Capital Entity (as successor to Capital Holdings or any
Subsidiary thereof or otherwise), on the one hand, and any AT&T Entity, on the
other hand, will remain in effect in accordance with their terms and (ii) on the
Spin-Off Date the Company will succeed to the right, and assume the obligations,
of the AT&T Entities, in accordance with Section 8.1(a) (it being understood
that no AT&T Entity shall be released from its obligations under any such
recourse or similar arrangements entered into prior to the Spin-Off Date).
(b) The Company acknowledges and agrees, on behalf of itself and
the other Company Entities that are parties to the Credit Receivables Agreement,
and Capital acknowledges and agrees, on behalf of the Capital Entities that are
parties to the Credit Receivables Agreement, that (i) Credit has succeeded to
the rights and assumed the obligations of Credit Holdings in and under the
Credit Receivables Agreement, (ii) the Credit Receivables Agreement shall
continue in full force and effect except that (A) the term "Affiliates" (as such
term is used therein), as it applies to affiliates of the Company, shall include
all the Company Entities but shall not include the Capital Entities and (B) the
rights and obligations of Credit thereunder may be exercised or performed by any
Capital Entity and (iii) the terms and conditions of this Agreement shall apply
to the transactions contemplated in or effected pursuant to the Credit
Receivables Agreement to the extent that such terms and conditions are not
inconsistent with the terms and conditions of the Credit Receivables Agreement
and, to the extent of any such inconsistency, the terms and conditions set forth
in the Credit Receivables Agreement shall apply and be controlling with respect
to the transactions contemplated in or effected pursuant to the Credit
Receivables Agreement. Any disputes arising under the Credit Receivables
Agreement shall be resolved pursuant to the provisions of Article X.
-16-
ARTICLE III
PREFERRED PROVIDER STATUS
Section 3.1. Support of the Capital Entities. The Company agrees
that during the term of this Agreement the Company Entities shall, within the
Active Service Areas, in connection with the offering or provision of Financings
or Ancillary Services by the Capital Entities:
(i) promote the utilization by Customers and Authorized Dealers
of Customer Financings and Dealer Financings, as appropriate, and
Ancillary Services made available by the Capital Entities (which type of
support is described more fully in Section 3.4 and is referred to herein
as "Finance Marketing Support");
(ii) (A) support the efforts of the Capital Entities to make
available Customer Financings and Dealer Financings, as appropriate, and
Ancillary Services to Customers and Authorized Dealers and (B)
consistent with past practice, provide training to appropriate personnel
employed by the Capital Entities with respect to the Products and the
sales and marketing thereof (which type of support is described more
fully in Section 3.5 and is referred to herein as "Personnel Support");
(iii) provide appropriate personnel of the Capital Entities with
office space at Sales Sites and appropriate office support services on
the terms and conditions set forth in Schedule B attached hereto and
made a part hereof (the "Location Support Agreement") (which type of
support is referred to herein as "Location Support");
(iv) permit and facilitate linkages between the Capital Entities'
and the Company Entities' computer and telecommunications systems for
the purpose of retrieving and transmitting between the systems
information and documentation in connection with the offering,
documentation and monitoring of Financings and Ancillary Services and
otherwise facilitating the efficient implementation of the relationships
and activities contemplated in this Agreement (which type of support is
described more fully in Section 5.2 and is referred to herein as
"Systems Support"); and
(v) provide to the Capital Entities information with respect to
the Company Entities' product development and marketing plans,
consistent with past practice, for the purposes of permitting the
Capital Entities to more effectively design appropriate programs for
Financings and Ancillary Services and to determine the likely residual
values of Products (which type of support is described more fully in
Section 3.6 and is referred to herein as "Information Support").
-17-
In addition to the foregoing, the Company Entities shall provide
to the Capital Entities such assistance as the Capital Entities may reasonably
request in order to facilitate the Capital Entities' financing activities
relating to the provision of Financings and Ancillary Services. Such assistance
may include matters such as structuring and documenting arrangements (including
purchase, payment and invoicing arrangements) between the Company Entities and
the Capital Entities or between the Company Entities and Customers and
Authorized Dealers for purposes of facilitating receivables financings, leases
and other financing transactions effected by the Capital Entities.
Section 3.2 Preferred Provider Status. (a) The Company Entities
shall provide the Capital Entities with an opportunity to propose a Financing
program or Financings and, where applicable, Ancillary Services, with respect
to all sales, leases or other furnishings of Products directly by Company
Entities to Customers and Authorized Dealers and all Customer Outsourcing
Programs within the Active Service Areas. However, the Company Entities shall
have the right to utilize or promote an Alternative Financing Program or
Alternative Ancillary Services with respect to particular sales, leases or
other furnishings of Products or Customer Outsourcing Programs subject to
the following conditions:
(i) the Company Entities shall not utilize any Alternative
Financing Program or Alternative Ancillary Services if the Capital
Entities have offered to provide Financings or Ancillary Services on the
same or better terms, conditions and standards of service overall as
those offered by the Alternative Provider (it being understood, however,
that the Company Entities will not be obligated to provide the Capital
Entities with a "last look" with respect to the terms, conditions and
standards of service offered by such Alternative Provider, provided that
they do not provide any such Alternative Provider with information
concerning the terms, conditions and standards of service offered by the
Capital Entities);
(ii) the Company Entities shall not provide to any such
Alternative Provider any benefits, inducements or information in
connection with any proposed Alternative Financing Program or
Alternative Ancillary Services unless the same or comparable benefits,
inducements or information have been offered or provided to the Capital
Entities, and shall not give any Alternative Provider preferential
treatment in any respect with respect to any Alternative Financing
Program or Alternative Ancillary Services; and
(iii) the Company Entities shall not provide to any such
Alternative Provider, for purposes of facilitating or promoting any
Alternative Financing Program or Alternative Ancillary Services: (A) any
confidential information with
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respect to any Products (including, without limitation, information
relating to Product development and marketing plans, but excluding any
specific technical information with respect to the Products being
financed necessary for the implementation of the Alternative Financing
Program), (B) any commitments to repurchase or remarket Products, (C)
the right to directly or indirectly provide incentive compensation to
any sales or other personnel employed by the Company Entities, (D) any
computer or other technological systems interfaces between the Company
Entities (on the one hand) and such Alternative Provider (on the other
hand) or (E) the opportunity or right to base or locate any Alternative
Provider personnel at any Sales Site.
(b) Except as provided in this Section 3.2, the Company Entities
shall not provide any support similar to the Finance Marketing Support, Location
Support or Systems Support to any Alternative Provider that provides or proposes
to provide, in any Active Service Area, Alternative Financing Programs or
Alternative Ancillary Services to the Company Entities, Customers or Authorized
Dealers.
(c) In the event that (i) the Capital Entities decline (or do not
bid) to provide, in any Active Service Area, any particular type of Financings
or Ancillary Services or Financings or Ancillary Services for any particular
line of new Products or Products for which the Capital Entities do not have
programs for the provision of Financings or Ancillary Services, in each such
case on such conditions and specifications as are communicated by a Company
Entity to the Capital Entities and any Alternative Provider, and (ii) such
Company Entity makes an arrangement with any such Alternative Provider to
provide an Alternative Financing Program or Alternative Ancillary Services with
respect to such particular type of Financings or Ancillary Services or
Financings or Ancillary Services for such particular line of Products on the
conditions and specifications so communicated to the Capital Entities and such
Alternative Provider, the provisions of paragraphs (a) and (b) above shall not
apply solely with respect to such Alternative Financing Program or Alternative
Ancillary Services. It is understood by the parties that the provisions of this
paragraph (c) are intended solely to permit the Company to extend the benefits
set forth in paragraphs (a) and (b) above to Alternative Providers in
circumstances in which the Capital Entities do not provide or offer to provide
certain Financings or Ancillary Services.
(d) Notwithstanding the other provisions of this Article III, the
Company Entities may but shall not be required to provide to the Capital
Entities any (i) Finance Marketing Support in connection with any Customer
Outsourcing Program, (ii) Location Support or Systems Support in connection with
any Customer Outsourcing Program in addition to that currently provided by the
Company Entities, and (iii) Information Support in connection with any Customer
Outsourcing Program except that
-19-
the Company Entities shall provide information to the Capital Entities relating
to the specific Products being Financed by the Capital Entities in connection
with any Customer Outsourcing Program. In addition to the foregoing, the Company
Entities may, in connection with any Customer Outsourcing Program with any
Customer, without providing a right to bid thereon to the Capital Entities, (x)
guarantee or assume the payment obligations of such Customer under financings
for products provided to such Customer by any financing source that is
unaffiliated to the Company Entities or Capital Entities to the extent that such
financings are in effect at the time that the Company Entities enter into such
Customer Outsourcing Program with such Customer and (y) finance, through the
financing program or arrangement in effect with such alternative financing
source, upgrades or add-ons to the products that have been so financed through
such alternative financing program or arrangement.
(e) In the event that a Company Entity reasonably believes that
any Financings and Ancillary Services provided by the Capital Entities at any
Sales Site are not being provided substantially and generally in accordance with
the applicable Protocols and Procedures, such Company Entity shall provide
notice thereof to the appropriate Capital Entities (which notice shall set forth
in reasonable detail the basis of such belief of the Company Entity). The
Capital Entities shall have 60 days after receipt of such notice to cure such
deficiencies and provide Financing and Ancillary Services substantially and
generally in accordance with the applicable Protocols and Procedures. If the
Capital Entities fail to cure such deficiencies within such 60 day period, the
Company Entities may, notwithstanding the provisions of Section 3.1 and this
Section 3.2, make arrangements with an Alternative Provider to provide at such
Sales Site Alternative Financing Programs and/or Alternative Ancillary Programs
of the type not being provided by the Capital Entities at such Sales Site
substantially and generally in accordance with the applicable Protocols and
Procedures.
Section 3.3. Right to Choose Alternative Providers. Capital
acknowledges that Customers and Authorized Dealers are entitled to choose not to
Finance the acquisition or use of Products or to choose to make arrangements for
obtaining Financings for the acquisition or use of Products or Ancillary
Services from Alternative Providers. Capital further acknowledges that the
provisions of this Agreement (including the Company's commitment in Section 3.2
to promote the use of Financings and Ancillary Services offered by the Capital
Entities) do not require the Company Entities to condition the sale or
furnishing of Products on the choice by Customers or Authorized Dealers of
Financings or Ancillary Services offered by the Capital Entities or otherwise
require Customers or Authorized Dealers to utilize such Financings or Ancillary
Services. Nothing set forth in this Agreement will be construed so as to
prohibit any sales representative of any Company Entity from cooperating with a
Customer or Authorized Dealer in obtaining
-20-
Financing or Ancillary Services from an Alternative Provider where the Customer
or Authorized Dealer has independently decided not to obtain such Financing or
Ancillary Services from Capital; provided, however, that the ability of such
Company Entities to cooperate with such Alternative Provider will be subject to
the limitations set forth in Section 3.2(a) and Section 3.2(b).
Section 3.4. Finance Marketing Support . The Company Entities'
sales representatives engaged in the sale or marketing of Products of a type for
which the Capital Entities offer Customer Financings or Dealer Financings or
Ancillary Services shall be provided by the Company Entities with promotional
and informational literature concerning such Financings and Ancillary Services
and, where appropriate, Standard Documents that are in each case provided by the
Capital Entities to the Company Entities. Such sales representatives shall make
the Financing options offered by the Capital Entities known to Customers and
Authorized Dealers interested in Financing the purchase, lease or other
acquisition of Products and, where appropriate, shall make the Ancillary
Services offered by the Capital Entities known to such Customers and Authorized
Dealers. In addition, such sales representatives shall generally use their good
faith best efforts to promote the use of such Financings and Ancillary Services
by such Customers and Authorized Dealers.
Section 3.5. Personnel Support. (a) Consistent with past
practice, the Company Entities shall, in a manner deemed appropriate by the
Company in its discretion, make available employees of such Company Entities
with the requisite position, knowledge, skill and experience to coordinate the
Company Entities' marketing and sales strategies with the Capital Entities'
marketing and Financing and Ancillary Services strategies, to coordinate the
actual marketing and sale of Products by such Company Entities with the offering
and documentation of Financings and Ancillary Services by the Capital Entities,
to receive and disseminate within each SBU within each such Company Entity and
provide timely responses to communications, requests and information from the
Capital Entities to such SBU, to coordinate cash management, accounting and
systems interfaces between the Company Entities and the Capital Entities and to
otherwise comply with such Company Entities' obligations to Capital hereunder.
(b) The Company Entities shall provide training to appropriate
personnel of the Capital Entities with respect to Products and their
characteristics and usages, the interrelationships among Product lines, the
potential for Product upgrades and add-ons, the products of other manufacturers
competitive with the Products, Product marketing and sales strategies and
similar technical or marketing matters that could be of use to such personnel in
designing and pricing appropriate types of Financings and Ancillary Services,
including the determination of appropriate residual values.
-21-
Section 3.6. Information Support. The Company Entities shall, in
a manner consistent with past practice, comply with all reasonable requests of
the Capital Entities for information with respect to the Company Entities'
business plans and results and Products that are relevant to the activities
contemplated under this Agreement (whether or not relating to the Active Service
Areas). Without limiting the foregoing, the Company Entities shall keep the
Capital Entities informed on a regular and timely basis of their Product
development and marketing plans and results to the extent relevant to the
activities contemplated under this Agreement. The Company Entities shall also
provide the Capital Entities appropriate information within the possession or
control of such Company Entities that is relevant to an analysis of the credit
standing of any Customer or Authorized Dealer proposed to directly or indirectly
receive Financing or Ancillary Services from the Capital Entities, and shall
provide the Capital Entities such Product information as may be useful in
connection with the pricing of Financings and Ancillary Services and the
determination of appropriate residual values (such as information as to Product
remarketing prices, Product pricing analyses, Product aging and replacement
reports and analyses and Product migration strategies).
Section 3.7. Activities of the Company Entities. The "preferred
provider" rights and benefits conferred on the Capital Entities and the
obligations of the Company Entities under this Article III shall not be
applicable to or restrict or limit the rights of the Company Entities to engage
in Financing and Ancillary Service activities to the extent the Company Entities
are expressly permitted to engage in such activities pursuant to Article IV;
provided, however, that the Company Entities shall not transfer or assign
(except to other Company Entities) such rights to any other Person.
ARTICLE IV
NON-COMPETITION
Section 4.1. Covenant Not to Compete. (a) In furtherance of
the "preferred provider" status accorded by the Company to the Capital
Entities under Section 3.2, the Company covenants and agrees that the Company
shall not, and shall not permit the other Company Entities to, directly or
indirectly, at any time during the term of this Agreement (whether as
stockholder, principal, agent, independent contractor, partner or otherwise)
maintain an ownership interest in, manage, operate, control or participate in a
business involving (i) the Financing of Products or the offering of Ancillary
Services anywhere within any Active Service Area (which activities the parties
agree shall be deemed to be in direct competition with the Capital Entities),
or (ii) the financing of products or services manufactured, sold, furnished
provided or marketed by Persons that are not Company Entities, or the offering
of ancillary services similar to the
-22-
Ancillary Services with respect to such products or services, or the providing
of secured financing to any Person (whether or not such competition relates to
the services offered by the Capital Entities under this Agreement) anywhere
within any Active Service Area (it being acknowledged that the prohibited
activities are not limited to any particular region within the Active Service
Areas because the prohibited activities may be engaged in effectively in
competition with the Capital Entities' business from any location within the
United States or within any other Active Service Area), except as provided in
paragraph (b) below and Section 4.2.
(b) Notwithstanding the provisions of paragraph (a) above:
(i) the Company Entities may acquire and own, individually or
collectively, in the aggregate, (A) except as provided in clause (ii)
below, not in excess of 5% of any class of stock of any financial
institution if such stock is publicly traded and listed on any national
or regional stock exchange or reported on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) and (B) ownership
interests in any company that has an equipment leasing subsidiary or
division to the extent that by ownership of such equity interests or
otherwise the Company Entities do not "control" (as described in the
definition of Subsidiary) such company, provided that the Company
Entities shall not assist such equipment leasing subsidiary or division
in competing with the Capital Entities and shall not provide such
subsidiary or division with any "preferred provider" rights of the type
set forth in Section 3.2;
(ii) the Company Entities may acquire or establish and own a
bank, insurance company, savings and loan association or similar
financial institution that does not (or, following such acquisition,
ceases to) offer programs for equipment leasing or other types of
equipment Financing with respect to Products, asset remarketing or
Finance-related equipment insurance in connection with Products that
compete with programs for such services offered by the Capital Entities;
(iii) the Company Entities may issue credit cards; provided that
the Company Entities shall not use such credit cards to offer programs
for equipment leasing or other types of equipment Financing with respect
to Products, asset remarketing or Finance-related equipment insurance in
connection with Products that compete with programs for such services
offered by the Capital Entities (it being understood that for purposes
of this clause (iii) "Products" shall include Products (as defined in
the AT&T Operating Agreement or any Comparable Operating Agreement
entered into pursuant to, and as defined in, the AT&T Operating
Agreement);
-23-
(iv) the Company Entities may, in a manner consistent with past
practice (such past practice being more fully described on Schedule C
attached hereto and made a part hereof) or as otherwise agreed by the
Company and Capital from time to time, provide interim Financings for
Products in the form of sales-type leases, installment sales contracts
or conditional sales contracts to Customers or Authorized Dealers to
Finance the acquisition by them of Products; provided that the Company
Entities shall offer to the Capital Entities an opportunity to purchase
the receivables resulting from such Financings on terms consistent with
past practice and, where applicable, subject to the terms of the Credit
Receivables Agreement;
(v) AT&T Paradyne may, consistent with past practice (such past
practice being more fully described on Schedule D attached hereto and
made a part hereof) provide Financings to its Customers and Authorized
Dealers in the form of sales-type leases, installment sales contracts or
conditional sales contracts and AT&T Paradyne may retain or sell the
interests in such Financings; provided that AT&T Paradyne shall, in
connection with any sale or other disposition of any interests in such
Financings or the related receivables, generally provide to Capital a
right of first refusal to purchase or otherwise acquire such interests
and to match any bids by other Persons for the purchase or other
acquisition of such interests, and, in the event that Capital makes a
bid for such purchase or other acquisition and the terms of such bid,
taken as a whole, are at least as favorable to AT&T Paradyne as the
terms of any other bid, taken as a whole, AT&T Paradyne shall sell or
otherwise dispose of such interests to Capital;
(vi) Network Systems and any Acquired Entity Financing Source (as
defined in Section 4.3(a) hereinbelow), for so long as such Acquired
Entity Financing Source is a Subsidiary of the Company or a division of
any Company Entity, may provide Financings and financial advisory and
syndication services with respect to equipment, systems and services of
the type traditionally manufactured or marketed by Network Systems as of
June 25, 1993 (such equipment, systems and services being more fully
described on Schedule E attached hereto and made a part hereof)
(together with equipment and systems manufactured by other Persons that
are integrated with equipment manufactured and Financed by Network
Systems) to Customers such as telephone companies and other providers of
communication services; provided that Network Systems and such Acquired
Entity Financing Source shall (A) not retain any interests in such
Financings other than interests in a limited amount of such Financings
and (B) provide the Capital Entities with the same opportunities to bid
on the provision of Financings and advisory and syndication services as
are provided to any unaffiliated financing source anywhere in the world;
-24-
(vii) the Company Entities may, consistent with past practice
(such past practice being more fully described on Schedule F attached
hereto and made a part hereof), rent Products to Customers on a daily,
weekly, monthly or other periodic basis, or otherwise, with no
obligation to advise Capital or any Capital Entity;
(viii) the Company Entities may finance the sale or other
disposition of real estate owned by the Company Entities from time to
time;
(ix) Acquired Entity Financing Sources may conduct the financing
activities that such entities are permitted to conduct under Section
4.3;
(x) the Company Entities may provide short-term trade credits to
Customers and Authorized Dealers in connection with the acquisition of
Products by such Customers and Authorized Dealers; and
(xi) the Company Entities may provide services to lessees
involving (A) inspection of leased equipment and analysis of related
leases with a view towards reducing ongoing lease expenses, (B)
provision of recommendations to reduce current and future costs related
to equipment and the related leases or (C) negotiation with lessors with
respect to matters such as credits for returned equipment, purchase by
lessees of equipment and consolidation of equipment leases.
It is the intent and understanding of the parties hereto that if,
in any action before any court, agency or tribunal legally empowered to enforce
this Section 4.1, any term, restriction, covenant or promise in this Section 4.1
is found to be invalid, illegal or unenforceable, then such term, restriction,
covenant or promise will be deemed modified to the extent necessary to make it
valid, legal or enforceable by such court, agency or tribunal.
Section 4.2. Use of a Permitted Captive Financing Source. If at
any time a Captive Financing Trigger Event (as defined below) occurs, the
Company may, upon at least 120 days' prior notice to Capital given not later
than 30 days after the date of the determination that such Captive Financing
Trigger Event exists, elect to (i) provide, or to cause another Company Entity
to provide Financings with respect to future sales, leases or other furnishings
of Products and related Ancillary Services and (ii) terminate the "preferred
provider" rights and benefits provided to the Capital Entities pursuant to
Section 3.2.
A "Captive Financing Trigger Event" shall be deemed to have
occurred if, and only if, the Capital Entities' Financing Penetration Rate as of
the end of any calendar year declines by ten (10) percentage points or more
relative to the Capital
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Entities' Financing Penetration Rate as of the end of the preceding calendar
year (for instance, the requirements of this clause (ii) shall be satisfied for
calendar year 1997 in the event that the Capital Entities' Financing Penetration
Rate for calendar year 1997 were 44% and the Capital Entities' Financing
Penetration Rate for calendar year 1996 were 55% since such 1996 Financing
Penetration Rate would have exceeded such 1997 Financing Penetration Rate by 11
percentage points); provided that any decline in such Financing Penetration Rate
as of the end of any calendar year that is attributable to a breach or violation
by a Company Entity or an employee of a Company Entity of this Agreement
(whether or not such breach or violation gives rise to a right of termination of
this Agreement) shall be excluded from the calculation of such Capital Entities'
Financing Penetration Rate. In comparing the Capital Entities' Financing
Penetration Rate for any two three-year periods, the adjustments to the Adjusted
Financing Amount and Adjusted Financeable Product Sales contemplated in the
definitions thereof for calculation of such Capital Entities' Financing
Penetration Rates shall be effected on a consistent basis (for instance, if the
Adjusted Financing Amount and Adjusted Financeable Product Sales for calendar
year 1997 are adjusted downwards to reflect a phase-out in calendar year 1997 of
a significant Products line, the Adjusted Financing Amount and Adjusted
Financeable Products Sales for calendar year 1996 shall also be correspondingly
adjusted downwards as if the phase-out of the significant Products line occurred
in calendar year 1996).
The Company and Capital shall, as part of the Protocols and Procedures,
establish procedures and parameters for determining whether or not a Captive
Financing Trigger Event has occurred as of the end of any calendar year.
Section 4.3. Financing Operations of Acquired Entities. (a) In
the event that the Company Entities at any time acquire equity interests in or
the assets of any Person or business (such entity or the entity holding such
acquired assets being sometimes referred to herein as an "Acquired Entity") that
thereby becomes a Subsidiary of the Company or a division of any Company Entity
and which engages, directly or through an Affiliate, in the financing of
products or services manufactured, marketed or provided by such Acquired Entity
(the division or Affiliate that provides such financing being sometimes referred
to herein as an "Acquired Entity Financing Source"), except as described in
Section 4.3(c) below, the Company shall use reasonable efforts to facilitate one
or more of the following transactions by Capital, in Capital's discretion: (i)
acquisition by Capital of the capital stock or substantially all the assets of
such Acquired Entity Financing Source for an amount equal to the fair market
value thereof (not to exceed the portion of the total consideration paid by the
Company Entities for the acquired equity interests or assets that is allocable
to such assets or stock of such Acquired Entity Financing Source); (ii)
acquisition by Capital of the capital stock or substantially all of the
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assets of such Acquired Entity Financing Source, other than its portfolio of
existing financings, for an amount equal to the fair market value of such
acquired assets (subject to the same limiting principle as in the preceding
clause (i)) and execution by Capital of an exclusive agreement with such
Acquired Entity Financing Source for Capital to service such existing portfolio
(including any future additions to such portfolio) for a reasonable,
market-based fee; or (iii) without the acquisition of such capital stock or
assets or portfolio, the execution by Capital of an exclusive agreement with
such Acquired Entity Financing Source for Capital to service such portfolio
(including any future additions to such portfolio) for a reasonable,
market-based fee.
(b) In the event that Capital does not acquire the capital stock
or substantially all the assets of any such Acquired Entity Financing Source as
provided in paragraph (a) above or Section 4.3(c) below, such Acquired Entity
Financing Source may, so long as it continues to be, or continues to be a
division or unit of, a direct or indirect Subsidiary of the Company, continue to
provide financing for: (A) products or related services manufactured, marketed,
furnished or provided by the related Acquired Entity as of the date of the
acquisition thereof by the Company Entities, together with any new generations
of such products or services (subject, however, to the limitations and
restrictions set forth in Section 4.1(b)(vi) above with respect to an Acquired
Entity Financing Source described in Section 4.3(c) below); provided, that such
products and services will nonetheless be deemed to be "Products" for the
purposes of this Agreement and Capital will also have a right to offer
Financings and Ancillary Services with respect to such Products in accordance
with the terms of Article III (except that the "preferred provider" provisions
of Section 3.2 shall not restrict the Company Entities from providing any rights
or benefits to such Acquired Entity Financing Source with respect to such
Products); and (B) products or related services manufactured, marketed or
provided by Persons that do not constitute Company Entities (subject, however,
to the limitations and restrictions set forth in Section 4.1(b)(vi) above with
respect to an Acquired Entity Financing Source described in Section 4.3(c)
below) so long as the scope and nature of such financing activities are
restricted to the scope and nature of such financing activities of such Acquired
Entity Financing Source as of the date of the acquisition thereof by the Company
Entities (it being understood and agreed that such Acquired Entity Financing
Source shall not provide Financings for Products (other than the Products
permitted to be Financed pursuant to clause (A) above) except to the extent that
such other Products are incorporated in or integral to the products and services
permitted to be financed pursuant to this clause (B) and which do not constitute
more than 40% of the value of such products or services and such Financings of
Products do not occur as a course of dealing with respect to any Customer or
Customer segment). At the request of either party, the parties shall set forth
in
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writing the specific scope, nature and extent of the financing activities of any
such Acquired Entity Financing Source that are permitted under the terms of this
Section 4.3.
(c) Notwithstanding anything in Section 4.3(a) to the contrary,
to the extent an Acquired Entity Financing Source is engaged in the provision of
Financing and financial advisory and syndication services with respect to
equipment, systems, and services of the type traditionally manufactured or
marketed by Network Systems as of June 25, 1993, and as described on Schedule E
attached hereto, Capital shall have no right to require the Company to use
reasonable efforts to facilitate the transactions described in Section 4.3(a)(i)
or (ii) with respect to such Acquired Entity Financing Source; provided, that
the Company shall use reasonable efforts to facilitate, in Capital's discretion
(1) a transaction whereby Capital would acquire substantially all of such
Acquired Entity Financing Source's portfolio of existing financing for an amount
equal to the fair market value of such acquired assets (subject to the same
limiting principle in Section 4.3(a)(i))or (2) the same type of transaction
described in Section 4.3(a)(iii).
ARTICLE V
PROTOCOLS AND PROCEDURES AND RELATED MATTERS
Section 5.1. Protocols and Procedures; Pilot Programs. (a) The
Company and Capital acknowledge that there are presently in effect certain
protocols and procedures governing certain aspects of the business relationship
between the Capital Entities (or their predecessors) and the Company Entities
(collectively, "Protocols and Procedures") that were agreed to between such
Company Entities and Capital Entities (or their predecessors) for the purposes
of (A) on the one hand, promoting efficiency in the identification,
communication and processing of requirements of Customers and Authorized Dealers
for Financings and Ancillary Services and the provision and monitoring of such
Financings and Ancillary Services and (B) on the other hand, improving the
Capital Entities' Financing Penetration Rate while maintaining the profitability
to the Capital Entities of the provision of Financings and Ancillary Services
(the "Protocol Standards"). Such Protocols and Procedures will continue to
remain in effect between the appropriate Company Entities and Capital Entities,
and the Company Entities and Capital Entities shall conduct the activities
contemplated in the Protocols and Procedures to be conducted by the Company
Entities and Capital Entities, as the case may be, substantially and generally
in accordance with the terms thereof (it being understood that complete and
consistent compliance by the parties with the Protocols and Procedures is not
practical). It is the intention of the parties that the
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Protocols and Procedures will not supersede or modify the agreements of the
parties set forth in the Location Support Agreement or other written agreements
between the parties relating to the provision of products or services by one
party to the other party.
(b) The appropriate Company Entities and Capital Entities shall
review the Protocols and Procedures on a periodic basis to determine if it would
be appropriate or necessary to modify or supplement the Protocols and Procedures
in order for the Protocols and Procedures to comport more closely with the
Protocol Standards or for the Protocols and Procedures to take into account new
types of Financings or Ancillary Services or other changes in circumstances in a
manner consistent with the Protocol Standards. The appropriate Company Entities
and Capital Entities may also suggest modifications or supplements to the
Protocols and Procedures at any time and from time to time that are consistent
with the Protocol Standards. The Company Entities may, consistent with past
practice, in determining whether the Protocols and Procedures are to be modified
or updated, take into account relevant benchmarking and other methods of
evaluating the Financing programs offered by the Capital Entities whereunder
such programs would be compared to substantially similar (as to scope and
nature) financing programs offered by other financing sources for equipment and
products that do not constitute Products. Where applicable, the appropriate
Company Entities and Capital Entities shall, in any such circumstances,
negotiate in good faith to appropriately modify or supplement the Protocols and
Procedures.
(c) The Capital Entities and the Company Entities shall,
consistent with past practice, cooperate with each other to institute pilot
Financing programs by the Capital Entities which are mutually satisfactory to
the Company Entities and the Capital Entities.
Section 5.2. Systems Interface. (a) The Company and Capital
agree to maintain in effect the existing telecommunications and computer
linkages (including, without limitation, telecommunications and computer
linkages relating to voice messaging, electronic written messaging, remote
terminal document retrieval, and data storage and retrieval) between the Company
Entities and Capital Entities that facilitate (x) the accessing by the Capital
Entities of information with respect to Customer and Authorized Dealer
locations, Product delivery, location, installation and servicing, SBU sales
force performance and related matters, (y) the accessing by the Company Entities
and the SBUs of information with respect to terms of or rates for Financings and
Ancillary Services, acceptance, billing and payment status and credit and
collection information and, to the extent such information is available to the
Capital Entities, information with respect to Customer and Authorized Dealer
locations and Product delivery, location, installation and servicing, and (z)
the integration of funds transfers between the
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Company Entities and Capital Entities with their respective invoicing and
accounting systems in connection with the provision by the Capital Entities of
Financings and Ancillary Services with respect to Products.
(b) The appropriate Company Entities and Capital Entities shall
review the foregoing telecommunications and computer linkages on a periodic
basis to determine if it would be appropriate or necessary to improve, expand,
modify or supplement such linkages in order to comply with the Protocols and
Procedures, integrate more efficient technology, improve and expand data
retrieval and usage and improve the sales of Products and the utilization of
Financings and Ancillary Services offered by the Capital Entities or to take
into account new types of Financings or Ancillary Services or other changes in
circumstances. The appropriate Company Entities and Capital Entities may also
suggest improvements, expansions, modifications or supplements to such
telecommunications and computer linkages at any time and from time to time that
are consistent with the foregoing standards. If necessary or appropriate, the
appropriate Company Entities and Capital Entities shall, in any such
circumstances, take appropriate actions to effect such improvements, expansions,
modifications or supplements to such telecommunications and computer linkages.
(c) The Company Entities shall bear the costs of maintaining and
improving, expanding, modifying or supplementing the computer and
telecommunications systems owned by them and the costs of telecommunication and
other services utilized by them. The Capital Entities shall bear the costs of
maintaining and improving, expanding, modifying or supplementing the computer
and telecommunication systems owned by them and the costs of telecommunication
and other services utilized by them. The costs of designing and implementing the
interfaces between the Company Entities' and Capital Entities' computer and
telecommunications systems and the costs of related telecommunications and other
services shall be shared equally between the Company and Capital.
ARTICLE VI
REMARKETING OF PRODUCTS
Section 6.1. In General. (a) The Company Entities and the
Capital Entities and the SBUs shall, in a manner consistent with past practice
but subject to the terms hereof, coordinate their strategies with respect to the
disposition or re-lease (whether by extension of the existing lease or by a new
lease to a third party) of leased Products (whether at the end of the lease term
or upon the return or repossession of the leased Product prior to the end of
such term), with the objective of both maintaining the relevant Customers and
Authorized Dealers as purchasers and users of Products, on the one hand, and
protecting the Capital Entities' reasonable expectations concerning the
realization of profits from end of term residuals, on the other
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hand. Unless otherwise agreed to by the Capital Entities in connection with
particular Financings or Financing programs, Capital will not be restricted in
terms of its right to sell, re-lease or otherwise dispose of returned or
repossessed Products (including Products that have been leased by or subject to
security interests or other claims in favor of any Capital Entity). Except as
otherwise agreed in writing, the Company Entities shall not be deemed to have
represented or warranted to the Capital Entities that the Capital Entities will
obtain any minimum proceeds or rate of return upon the resale, re-lease or other
disposition of returned or repossessed Products.
(b) The Company Entities and Capital Entities may from time to
time enter into agreements with respect to the disposition or re-lease of
Products. The Company acknowledges and agrees, on behalf of itself and the other
Company Entities parties thereto, and Capital acknowledges and agrees, on behalf
of itself and other Capital Entities parties thereto, that (i) Credit has
succeeded to the rights and assumed the obligations of Credit Holdings under
each and any agreement in effect on the date hereof between any AT&T Entity and
Credit Holdings with respect to the disposition or re-lease of Products and (ii)
on the Spin-Off Date the Company shall succeed to the rights and assume the
obligations of the AT&T Entities in accordance with Section 8.1(a) under each
and any agreement in effect on the date hereof between any AT&T Entity and any
Capital Entity with respect to the disposition or re-lease of Products shall
remain in full force and effect (it being understood that no AT&T Entity shall
be released from its obligations under any such agreement entered into prior to
the Spin-Off Date). The terms and conditions of this Agreement shall apply to
the disposition or re-lease of any Products with respect to which an agreement
of the type referred to in this paragraph (b) is in effect at any time to the
extent that such terms and conditions are not inconsistent with the terms and
conditions of any such agreement and, to the extent of any such inconsistency,
the terms and conditions set forth in such agreement shall apply and be
controlling.
Section 6.2. Deinstallation, Refurbishment and Re-Certification
of Remarketed Products. In the event that any Product subject to a Financing is
returned to a Capital Entity (or the right to possession of such Product
otherwise reverts to a Capital Entity), at the request of such Capital Entity,
the Company shall cause the relevant Company Entity to deinstall, refurbish,
recertify, store and/or redeliver such Product in accordance with the reasonable
instructions of such Capital Entity. Such Capital Entity shall pay such Company
Entity for such services at the most competitive rates customarily charged by
such Company Entity to Authorized Dealers and other Product dealers for such
services. Nothing contained herein shall be construed as limiting in any way the
right of the Capital Entities to obtain any of the foregoing services from
Persons other than Company Entities.
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Section 6.3. Rights to Use Software. The Company hereby grants,
on behalf of itself and any other applicable Company Entity, a license to the
Capital Entities to use any and all Software, which license shall with respect
to any such Software be effective automatically and immediately upon Financing
by the Capital Entities of such Software or any other Products in connection
with which such Software is to be used. Except as provided herein, the scope of
the license granted to the Capital Entities shall be consistent with the scope
of the license granted by the applicable Company Entity in its standard form of
license agreement with respect to such Software. The Capital Entities shall (i)
not be required to pay any license fee for such Software or otherwise comply
with the terms of any applicable license agreement for so long as the Capital
Entities are merely providing Financing for such Software or any related
Products or have foreclosed on or otherwise repossessed or re-acquired such
Software in connection with a default under or expiration or termination of the
related Financing but are not using such Software (except for purposes of
testing or demonstrating such Software in connection with any proposed
disposition of such Software) and (ii) be entitled to assign their license to
any other Person, provided that if such Person is not a Capital Entity and the
applicable Company Entity's standard form of license agreement for such Software
requires the prior consent of a Company Entity to assign such license, the
Capital Entities shall assign such license only upon execution and delivery by
the assignee of the applicable Company Entity's standard form of license
agreement for such Software and agreement by such assignee to pay, at the
then-prevailing rate, any fees required to be paid by a licensee of such
Software to the applicable Company Entity pursuant to the terms of such license
agreement.
ARTICLE VII
CERTAIN ALLOCATIONS OF RISK; LITIGATION AND REPOSSESSION
Section 7.1. Representations, Warrants and Covenants. (a) Unless
otherwise agreed with respect to particular Financings or Ancillary Services or
programs with respect thereto, the Company and any other appropriate Company
Entity will be deemed to make the following representations, warranties and
covenants to Capital and any other appropriate Capital Entity each time that a
Capital Entity provides, extends or renews a Financing or Ancillary Service with
respect to a Product (to the extent such representations, warranties or
covenants are applicable to the particular Financing or Ancillary Service):
(i) the appropriate Capital Entity will, upon payment of the
purchase price of any Product that is being Financed by such Capital
Entity pursuant to a lease or other arrangement in which such Capital
Entity retains title to the Product, receive (A) title to the Product
(other than
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Products constituting Software) free and clear of any lien or charge
thereon created by or through any Company Entity and (B) to the extent
any portion of such Product is not manufactured or developed by a
Company Entity and with respect to which a Company Entity has received a
warranty or indemnity from another Person, an assignment by such Company
Entity of any such applicable warranty, express or implied, and
indemnity rights applicable to such Product to the extent that such
warranty and indemnity rights are by their terms assignable (and if any
such warranty or indemnity rights are not by their terms so assignable,
such Company Entity will hold any such warranty and indemnity rights for
the benefit of such Capital Entity and will, at the direction and
expense of such Capital Entity, take all such actions as such Capital
Entity may reasonably request to enforce all or any part of such
warranty and indemnity rights);
(ii) neither any Company Entity nor any employees or agents of
any such Company Entity will knowingly participate in, or fail to
disclose to the appropriate Capital Entity any knowledge of, any
fraudulent or illegal act in connection with the Financing or Ancillary
Service;
(iii) the Product Financed by the Capital Entity will be
delivered to the Customer or Authorized Dealer named in the applicable
Financing application and installed at the location indicated in the
applicable Financing application in accordance with such Company
Entity's normal operating practices and the terms of the contract with
the Customer or Authorized Dealer, and the appropriate Company Entity
will honor all express and implied warranties and agreements,
representations and/or assurances made by such Company Entity to any
Customer or Authorized Dealer with respect to any such Product; and
(iv) the Company Entities and their employees will not, without
the appropriate Capital Entity's express consent, make any
representation, warranty or covenant on behalf of such Capital Entity to
a Customer or Authorized Dealer with respect to the Financing, the
Standard Documents or other documents provided by the Capital Entities,
the Ancillary Service or the Financed Product.
(b) Unless otherwise agreed with respect to particular
Financings, Ancillary Services or programs with respect thereto, Capital and any
other appropriate Capital Entity will be deemed to make the following
representations, warranties and covenants to the Company and any other
appropriate Company Entity each time that a Capital Entity resells a Financed
Product to a Company Entity or a Capital Entity provides, extends or renews a
Financing or Ancillary Service with respect to a Product (to the extent such
representations, warranties or covenants are applicable to the particular
Financing or Ancillary Service):
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(i) the appropriate Company Entity will, upon payment of the
purchase price of any Financed Product that is sold by the appropriate
Capital Entity to such Company Entity, receive (A) title to the Product
free and clear of any lien or charge thereon created by or through any
Capital Entity and (B) to the extent any portion of such Product is not
manufactured or developed by a Company Entity and with respect to which
any Capital Entity has received a warranty or indemnity from a Person
other than a Company Entity, an assignment by such Capital Entity of any
such applicable warranty, express or implied, and indemnity rights
applicable to such Product to the extent that such warranty and
indemnity rights are by their terms assignable (and if any such warranty
or indemnity rights are not by their terms so assignable, such Capital
Entity will hold any such warranty and indemnity rights for the benefit
of such Company Entity and will, at the direction and expense of such
Company Entity, take all such actions as such Company Entity reasonably
will request to enforce all or any part of such warranty and indemnity
rights);
(ii) neither any Capital Entity nor any employees or agents of
such Capital Entity will knowingly participate in, or fail to disclose
to the appropriate Company Entity any knowledge of, any fraudulent or
illegal act in connection with the Financing or Ancillary Service; and
(iii) the Capital Entities and their employees will not, without
the appropriate Company Entity's express consent, make any
representation, warranty or covenant on behalf of a Company Entity to a
Customer or Authorized Dealer with respect to the Financing, Ancillary
Service or Financed Product.
Section 7.2. The Capital Entities shall assume responsibility
for and bear the risks of delinquency, default and non-payment under any
Financings provided by them unless (i) the relevant Company Entity and the
relevant Capital Entity agree or have agreed otherwise, (ii) a Company Entity
has provided the relevant Capital Entity with a full or partial guaranty or
indemnity pursuant to Section 2.4 or Section 2.7, (iii) Capital is entitled to
indemnification for such risks pursuant to the terms of Article IX or (iv) such
delinquency, default or non-payment is attributable to a Company Responsibility,
as defined below (in which event such risks will be borne in accordance with
this Section 7.2).
(b) A "Company Responsibility" means a delinquency, default or
non-payment by a Customer or an Authorized Dealer under any Financing provided
by a Capital Entity of a Product in circumstances where such delinquency,
default or non-payment is a result of:
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(i) failure by any Company Entity to deliver, install or service,
as the case may be, such Product in accordance with such Company
Entity's contractual or legal obligation to deliver, install or service
such Product;
(ii) failure of such Product to comply with any contractual
representation, warranty or covenant provided by any Company Entity with
respect to such Product or with any warranty applicable to such Product
by operation of law;
(iii) any offset or counterclaim by the relevant Customer or
Authorized Dealer against the amounts due by it under the Financing on
the basis of disputes between such Customer or Authorized Dealer and any
Company Entity (or on the basis of amounts owing by any Company Entity
to such Customer or Authorized Dealer) under any business dealings
between such Customer or Authorized Dealer and any Company Entity,
whether or not related to such Product or such Financing; or
(iv) breach or violation by any Company Entity or any employee of
a Company Entity of the provisions of Section 7.1(a) (whether or not
such breach or violation gives rise to a right of termination of this
Agreement).
In addition, a "Company Responsibility" will be deemed to exist if, as a matter
of law or equity, any Company Entity is found to be responsible for the
Customer's or Authorized Dealer's failure to honor its obligations under a
Financing or such Customer or Authorized Dealer is able to avail itself of a
defense to any claim asserted by the relevant Capital Entity with respect to
such Financing based on non-performance by any Company Entity of any obligations
of any such Company Entity (whether or not related to the Financed Product) or
any breach by a Company Entity of any warranty (at contract or at law) with
respect to any Product. The application of the term "Company Responsibility" is
further described in the General Allocation of Responsibilities set forth on
Schedule G.
(c) The Company and Capital agree that in any situation in which
there arises the potential for a delinquency, default or non-payment with
respect to a Financing which may be a result of a Company Responsibility
(including any such situation in which a Customer or Authorized Dealer has
refused to perform its obligations thereunder based on the alleged existence of
a circumstance that would constitute a Company Responsibility), the billing,
collection and enforcement activities and any losses with respect to such
Financing will be allocated to the relevant Capital Entities or SBUs in
accordance with the General Allocation of Responsibilities set forth on Schedule
G.
(d) The parties hereby acknowledge and agree that the provisions
of this Section 7.2 and Schedule G are intended to supersede the General
Allocation of Responsibilities dated as of
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August 5, 1988 and that such provisions will be deemed to retroactively apply to
any Financings currently subject to such General Allocation of Responsibilities.
In addition, the provisions of this Section 7.2 and Schedule G shall apply to
Financings provided at any time by any Capital Entities, including Capital
Entities to which the General Allocation of Responsibilities of August 5, 1988
did not apply.
Section 7.3. Collection and Repossession Actions . Except as
provided in Sections 7.2 and 7.4, Capital will be entitled, in its discretion,
to take (or determine not to take) any and all actions to collect amounts due
and unpaid or otherwise enforce its rights upon the occurrence and continuation
of a default by a Customer or Authorized Dealer under a Financing including,
without limitation, to make demand for payment or performance, institute an
action for payment of amounts due or for specific performance, institute
collection proceedings, effect acceleration or termination of the Financing,
foreclose upon or take possession of security (which may include the Financed
Product) provided by or on behalf of the Customer or Authorized Dealer or
enforce remedies to take possession and control of the Product. In no event will
the Capital Entities engage in unlawful collection practices or refer matters
for collection to any collection agencies or attorneys who are known by the
Capital Entities to engage in unlawful collection practices.
Section 7.4. Actions Against Significant Accounts . (a) Capital
shall, to the extent reasonable and practicable, provide advance notice to the
relevant SBUs of any legal proceeding or repossession action to be initiated by
any Capital Entity against a Significant Account. If circumstances require the
immediate commencement of such an action in order to reasonably protect the
interests of the Capital Entities under any Financing or Ancillary Service or in
the related Financed Products, the Capital Entities may take such action, but
shall notify the relevant SBUs of the situation as soon as practicable after
initiating such action.
(b) In the event that any Capital Entity initiates or proposes to
initiate any legal proceeding or repossession action against a Significant
Account, such Capital Entity shall delay or refrain from pursuing or initiating
such action in the event that the Company either (A) agrees to purchase, without
recourse or warranty (except as to title and as provided herein or otherwise
agreed), all of the interest of such Capital Entity in such Financing, Ancillary
Service and the related Financed Products for a purchase price calculated in
accordance with the General Allocation of Responsibilities set forth on Schedule
G or (B) gives such Capital Entity other legal undertakings reasonably
satisfactory to such Capital Entity to induce it to delay or refrain from taking
such action.
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ARTICLE VIII
SCOPE OF APPLICATION OF AGREEMENT
Section 8.1. Attribution of Actions of Subsidiaries to Their
Parents . (a) The Company agrees and acknowledges that the Company shall be
responsible for, and hereby guarantees, the due and punctual payment and
performance, in accordance with their terms, of the obligations hereunder
applicable to any Company Entity (other than the Company) or any SBU or division
within any Company Entity or in any other agreement or commitment (including,
without limitation, any lease agreement) of any such Company Entity or SBU or
division within any Company Entity entered into at any time and from time to
time (whether before or after the Spin-Off Date) with or for the benefit of any
Capital Entity or any strategic business unit or division within any Capital
Entity (it being understood that no AT&T Entity shall be released from any of
its obligations under the AT&T Operating Agreement). The Company further
acknowledges and agrees that the foregoing undertaking and guarantee shall
extend for the benefit of any permitted assignee of any Capital Entity's or such
strategic business unit's or division's rights and benefits with respect to any
such agreement or commitment and, if reasonably requested by Capital, the
Company shall affirm such undertaking and guarantee for the benefit of any such
assignee. Capital agrees that any obligation of the Company hereunder or
thereunder that is paid or performed by a Company Entity (other than the
Company) shall be deemed to be paid or performed, as the case may be, by the
Company. The Company hereby represents and warrants to Capital that it has the
requisite authority to commit and bind the other Company Entities to the
applicable terms of this Agreement.
(b) Capital agrees and acknowledges that Capital shall be
responsible for, and hereby guarantees, the due and punctual payment and
performance, in accordance with their terms, of the obligations hereunder
applicable to any Capital Entity (other than Capital) or any strategic business
unit or division of any Capital Entity or in any other agreement or commitment
(including, without limitation, any lease agreement) of such Capital Entity or
any strategic business unit or division within any Capital Entity entered into
at any time and from time to time (whether before or after the Spin-Off Date)
with or for the benefit of any Company Entity or SBU or division within any
Company Entity. Capital further acknowledges and agrees that the foregoing
undertaking and guarantee shall extend to the benefit of any permitted assignee
of any Company Entity's, SBU's or division's rights and benefits with respect to
any such agreement or commitment and, if reasonably requested by the Company,
Capital shall affirm such undertaking and guarantee for the benefit of any such
assignee. The Company agrees that any obligation of Capital hereunder or
thereunder that is paid or performed by a Capital Entity (other than Capital)
shall be deemed to be paid or performed, as the case may be, by Capital. Capital
hereby represents and warrants to the Company that it has
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the requisite authority to commit and bind the other Capital Entities to the
applicable terms of this Agreement.
Section 8.2. Application of Agreement to Certain Joint Ventures
and Other Minority Investments of the Company. (a) To the extent that
the Company Entities presently have or hereafter acquire equity
interests in any joint venture or other Person that is not deemed to be
a "Subsidiary" for the purposes of this Agreement, the Company Entities
shall nonetheless use reasonable efforts, upon request of Capital, to
assist Capital in negotiating and entering into an agreement with such
Person pursuant to which Capital would become a "preferred provider" of
financing for the products and services sold, marketed or distributed by
such Person and its Subsidiaries (if any) in accordance with the terms
and principles set forth in Section 3.2.
(b) The Company agrees to provide Capital with reasonably prompt
notice of any acquisition by any Company Entity of any equity interest in any
joint venture or other Person to which the provisions of this Section 8.2 would
apply and to provide Capital with such information concerning such Person as
Capital may reasonably request.
Section 8.3. Sale, Public Offering or Spin-Off of a Significant
Products Entity . In the event that (x) any Company Entity at any time proposes
to (i) sell in a public offering or spin-off to its shareholders a controlling
block of the equity of any Significant Products Entity or (ii) sell, directly or
indirectly, in an assets or stock sale or through a merger or other form of
business combination, a Significant Products Entity or a major portion of the
Products Capacity thereof to one or more Persons in a negotiated transaction
(including a sale or transfer in connection with a transaction referred to in
Section 8.2) and (y) the effect of such transaction would be that such
Significant Products Entity or such major portion of the Products Capacity
thereof would no longer constitute or form a part of a "Company Entity" for the
purposes of this Agreement, the Company shall:
(i) at the time that the Company formulates the general intention
to spin-off, offer publicly or seek potential purchasers for such
Significant Products Entity or portion of the Products Capacity thereof,
provide Capital with notice of such intention, and in connection with
any specific proposed spin-off, public offering or sale transaction,
provide Capital with notice of the same as far in advance of such sale
as is reasonably practicable in the circumstances; and
(ii) in the case of a spin-off or public offering, as a condition
precedent to the consummation of such transaction, if so requested by
Capital, first cause such Significant Products Entity or the entity
holding such portion of the
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Products Capacity thereof to be spun-off or offered publicly to enter
into an agreement with Capital under which Capital would continue to
provide Financing and Ancillary Services with respect to the Products of
such Significant Products Entity or other entity following such spin-off
or public offering that is substantially similar in scope and terms to
this Agreement and that has a term substantially equivalent to the then
remaining term of this Agreement (a "Comparable Operating Agreement");
(iii) in the case of a negotiated sale transaction (including a
sale or transfer in connection with a transaction referred to in Section
8.2), if so requested by Capital, use reasonable efforts to facilitate
negotiations between Capital and the purchasers of such Significant
Products Entity or major portion of the Products Capacity thereof (or an
appropriate Affiliate) with respect to the execution by such parties of
a Comparable Operating Agreement with respect to the Products of such
Significant Products Entity or major portion of the Products Capacity
thereof; and
(iv) whether or not the Capital Entities obtain any rights to
provide Financings or Ancillary Services in the circumstances
contemplated in this Section 8.3, reimburse the Capital Entities for any
reasonable costs and charges incurred by the Capital Entities in
connection with any reduction in the scope or nature of the Capital
Entities' operations for the provision of Financings or Ancillary
Services that results from the sale or other disposition of any
Significant Products Entity or any major portion of the Products
Capacity thereof (including, without limitation, costs relating to
severance or redeployment of employees and costs relating to unutilized
or underutilized real estate or other assets); provided that to the
extent that the incurrence of such costs and expenses is reasonably
determinable to be under Capital's control, the Company shall be
responsible for reimbursement thereof only to the extent it has
consented to the incurrence of such costs and expenses, such consent not
to be unreasonably withheld (an example of such costs and expenses would
be severance obligations incurred by Capital in connection with a
severance package specifically designed for employees that are rendered
redundant as a result of the sale or other disposition of any
Significant Products Entity or any major portion of the Products
Capacity thereof).
Section 8.4. New Products and Company Entities . Capital's
commitments with respect to the provision of Financings and Ancillary Services
(including those set forth in Article II), the Company's commitments to support
Capital (including those set forth in Articles III and IV) and the other
provisions of this Agreement shall apply to existing and future lines of
Products and existing and future Company Entities (including Acquired
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Entities that do not, at the time of acquisition by the Company of such
entities, own an Acquired Entity Financing Source), subject in each case to the
requirements of Article II and Article III and the limitations and exceptions
set forth in this Agreement (including, without limitation, those set forth in
Article IV and this Article VIII).
Section 8.5. Geographic Scope of Agreement . (a) The Capital
Entities have the present capability to provide Financings and Ancillary
Services with respect to sales, leases or other furnishings of Products sold or
marketed by the Company Entities within the United States of America, Canada,
France, Germany and the United Kingdom (each an "Active Service Area"). As the
Capital Entities are able to expand their capabilities to provide such
Financings or Ancillary Services in other countries or regions (or specific
markets therein) being served by the Company Entities, Capital may from time to
time request the Company that, and the Company may, in its sole discretion,
decide to agree that such countries or regions (or specific markets therein) be
designated as "Active Service Areas" with respect to the Company Entities
generally or with respect to one or more Company Entities or SBUs for purposes
of this Agreement, in which event the obligations of the parties hereunder shall
apply with respect to such countries or regions (or specific markets therein) to
the same extent as they would to any other Active Service Areas with respect to
sales, leases or other furnishings of Products by such Company Entities or SBUs
within such Active Service Areas.
(b) Without limiting the provisions of paragraph (a) above, in
the event that the Company Entities desire to provide, in connection with the
provision of Financings or Ancillary Services in any country or region that is
not an Active Service Area, to any Alternative Provider a "preferred provider"
status with respect to such Financings or Ancillary Services reasonably similar
to the "preferred provider" status provided to the Capital Entities pursuant to
Section 3.2, the Company Entities shall provide the Capital Entities with an
opportunity to bid to provide in such country or region the Financings or
Ancillary Services and any related programs proposed to be provided in such
country or region by such Alternative Provider. In the event that any such bid
by the Capital Entities, considered as a whole, is at least as favorable to the
Company Entities as the bid of any Alternative Provider, the Company Entities
shall accept the bid of the Capital Entities and the country or region in which
such Financings or Ancillary Services and any related programs are to be
provided shall for all purposes of this Agreement (including Article III and
Article IV) be considered to be an Active Service Area.
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ARTICLE IX
INDEMNIFICATION
Section 9.1. Capital Indemnity . Capital agrees to save, protect,
indemnify and hold harmless, on an After-Tax Basis, the Company Entities and the
employees, officers, directors, agents and representatives of each of the
foregoing from and against all liabilities, costs (including attorney's fees and
disbursements), claims and charges arising from or relating to: (i) the breach
by any Capital Entity of any representations, warranties or covenants of such
Capital Entity contained in or delivered pursuant to this Agreement or any other
agreement of any Capital Entity relating to Products, Financings or Ancillary
Services; or (ii) any violation by any Capital Entity or any employee or agent
thereof of any law applicable to the sale, lease or other furnishing of Products
or to any related Financings or Ancillary Services (including, without
limitation, any law relating to the reporting of or extension or denial of
credit, the collection of debt or the repossession or disposition of products);
provided that in the event that a Company Entity and a Capital Entity separately
agree to indemnification (or waiver thereof) with respect to a matter that would
otherwise be subject to indemnification pursuant to this Section 9.1, such other
agreement will apply with respect to such matter and this Section 9.1 will not
so apply. The foregoing indemnity shall not apply in respect of liabilities,
costs, claims or charges to the extent arising from or relating to (i) any
action, sufferance or omission by a Company Entity or an employee of a Company
Entity that is effected in bad faith or represents gross negligence or willful
misconduct, (ii) any action, sufferance or omission by a Capital Entity or
employee of a Capital Entity pursuant to the express instructions of a Company
Entity or employee of a Company Entity (in the case of such employee, if such
instructions are provided by such employee in his or her capacity as such) or
(iii) any breach or violation by a Company Entity or any employee of a Company
Entity of the provisions of this Agreement or any other applicable agreement
between a Company Entity and a Capital Entity (whether or not such breach or
violation gives rise to a right of termination of this Agreement or such other
agreement).
Section 9.2. Company Indemnity . The Company agrees to save,
protect, indemnify and hold harmless, on an After-Tax Basis, the Capital
Entities and the employees, officers, directors, agents and representatives of
each of the foregoing from and against all liabilities, costs (including
attorney's fees and disbursements), claims and charges arising from or relating
to: (i) breach by any Company Entity of any representations, warranties or
covenants of such Company Entity contained in or delivered pursuant to this
Agreement or any other agreement of any Company Entity relating to Products,
Financings or Ancillary Services; (ii) any products, environmental or other
similar liability relating to the Products (such as claims for personal injury
or property damage); (iii) any misrepresentation made by any employee or agent
of any Company Entity to any
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Customer or Authorized Dealer as to the commitment of any Capital Entity to
provide any Financings or Ancillary Services to such Customer or Authorized
Dealer or the likely availability thereof; and (iv) any violation by any Company
Entity or any employee or agent thereof of any law applicable to the sale, lease
or other furnishing of Products or to any related Financings or Ancillary
Services; provided that in the event that any Company Entity and a Capital
Entity separately agree to indemnification (or waiver thereof) with respect to a
matter that would otherwise be subject to indemnification pursuant to this
Section 9.2, such other agreement will apply with respect to such matter and
this Section 9.2 will not so apply. To the extent that a Company Entity performs
its obligations under Section 7.2 with respect to an actual or potential Company
Responsibility, the Capital Entities and related indemnified parties will not be
separately entitled to indemnification under this Section 9.2 with respect to
any loss or cost relating to such Company Responsibility that would otherwise be
indemnifiable under this Section 9.2. The foregoing indemnity shall not apply in
respect of liabilities, costs, claims or charges to the extent arising from or
relating to (i) any action, sufferance or omission by a Capital Entity or an
employee of a Capital Entity that is effected in bad faith or represents gross
negligence or willful misconduct, (ii) any action, sufferance or omission by a
Company Entity or employee of a Company Entity pursuant to the express
instructions of a Capital Entity or employee of a Capital Entity (in the case of
such employee, if such instructions are provided by such employee in his or her
capacity as such) or (iii) any breach or violation by a Capital Entity or any
employee of a Capital Entity of the provisions of this Agreement or any other
applicable agreement between a Company Entity and a Capital Entity (whether or
not such breach or violation gives rise to a right of termination of this
Agreement or such other agreement).
Section 9.3. Procedure . Each indemnified party under Section 9.1
or Section 9.2 shall, promptly after receipt of notice of a claim or action
against such indemnified party in respect of which indemnity may be sought
hereunder notify the indemnifying party in writing of the claim or action;
provided, that the failure to notify the indemnifying party will not relieve it
from any liability which it may have to an indemnified party on account of the
indemnity agreement contained in Section 9.1 or Section 9.2 unless, and only to
the extent that, the indemnifying party was prejudiced by such failure, and in
no event will such failure relieve the indemnifying party from any other
liability which it may have to such indemnified party. If any such claim or
action shall be brought against an indemnified party, and it shall have notified
the indemnifying party thereof, the indemnifying party will be entitled to
participate therein, and, to the extent that it wishes, to assume the defense
thereof with counsel satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of any claim or action, the indemnifying party will not be liable to the
indemnified party
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under Section 9.1 or Section 9.2 for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, that the indemnified party
will have the right to employ separate counsel to represent it if, in the
reasonable judgment of such indemnified party, it is advisable for it to be
represented by separate counsel, and in such event the fees and expenses of such
separate counsel will be paid by such indemnified party. The indemnifying party
may not without the prior written consent of the indemnified party agree to any
settlement of any claim or action as the result of which any remedy or relief,
other than solely for monetary damages for which the indemnifying party will be
responsible hereunder, will be applied to or against the indemnified party. In
any action hereunder as to which the indemnifying party has assumed the defense
thereof with counsel satisfactory to the indemnified party, the indemnified
party will continue to be entitled to participate in the defense thereof, with
counsel of its own choice, but the indemnifying party will not be obligated
hereunder to reimburse the indemnified party for the costs thereof.
ARTICLE X
DISPUTE RESOLUTION
Section 10.1. Resolution of Disputes . Except as otherwise
provided in this Article X, the procedures for discussion, negotiation and
arbitration set forth in this Article X will apply to all disputes solely
between the parties under this Agreement; provided that arbitration will not
apply or be required in the case of any dispute challenging the validity of any
provision of this Agreement or any breach of the provisions of Section 4.1
unless the parties so agree in writing.
Section 10.2. Resolution of Disputes Using Best Efforts . (a) The
parties hereto agree and acknowledge that (i) this Agreement is intended to
provide a flexible framework for a cooperative and mutually beneficial
arrangement for the provision of Financings and Ancillary Services by the
Capital Entities and the treatment by the Company Entities of Capital Entities
as the preferred providers of Financings and Ancillary Services to Customers and
Authorized Dealers and (ii) the parties shall use good faith best efforts to
resolve all differences and disputes between the parties with respect to the
matters covered hereby that may arise from time to time at the level of the
appropriate Capital Entity and Company Entity (or the appropriate SBU within
such Company Entity) and, to the extent resolution is not achieved at such
level, at the level of management of the Company and Capital. Consistent with
the foregoing principles, the parties shall not refer the resolution of such
differences and disputes to the arbitration proceedings specified herein except
to the extent that after good faith best efforts the parties cannot resolve such
differences and disputes without so
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escalating such resolution. Any agenda, location or procedures for such
discussions or negotiations between the parties may be established by the
parties from time to time or as the occasion warrants.
(b) The parties may, by mutual consent, retain a mediator to aid
the parties in their discussions and negotiations by informally providing advice
to the parties. Any opinion expressed by the mediator shall be strictly advisory
and shall not be binding on the parties, nor will any opinion expressed by the
mediator be admissible in any arbitration proceeding. The mediator may be chosen
from a list of mediators previously selected by the parties or by other
agreement of the parties. Costs of mediation shall be borne one-half by the
Company and one-half by Capital, except that each party shall be responsible for
its own expenses. Mediation is not a prerequisite to a demand for arbitration
under Section 10.3.
Section 10.3. Arbitration. (a) If any dispute (other than a
dispute which challenges the validity of any provision of this Agreement and
other than a breach of Section 4.1) referred to the management of the Company
and Capital has not been resolved within forty-five (45) days after referral to
such management, either party may demand that the dispute be resolved by binding
arbitration. Notice of the demand for arbitration by one party will be given in
writing to the other party to this Agreement. Upon such demand, the dispute will
be decided by a sole arbitrator in accordance with the rules set forth in this
Section 10.3.
(b) The parties shall attempt to select, within 15 days after
such notice of demand for arbitration is given, a sole arbitrator satisfactory
to both parties.
(c) In the event that the parties are not able to jointly select
a sole arbitrator within such 15 day period, the parties shall each appoint an
arbitrator within 30 days after provision of the notice referred to in paragraph
(a) above. If one party appoints an arbitrator within such time period and the
other party fails to appoint an arbitrator within such time period, the
arbitrator appointed by the one party shall be the sole arbitrator of the
dispute.
(d) In the event that a sole arbitrator is not selected pursuant
to paragraph (b) or (c) above, and, instead, two arbitrators are selected
pursuant to paragraph (c) above, the two arbitrators will, within thirty (30)
days after the appointment of the later of them to be appointed, select a third
arbitrator who will act as the sole arbitrator of the dispute. After selection
of such sole arbitrator, the two initial arbitrators shall have no further role
with respect to the dispute. In the event that the arbitrators so appointed do
not, within thirty (30) days after the appointment of the later of them to be
appointed, agree on the selection of the sole
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arbitrator, either party may apply to any court having jurisdiction over the
parties and the controversy to select the sole arbitrator.
(e) The sole arbitrator selected pursuant to paragraph (b), (c)
or (d) above will set a time for the hearing of the dispute which will not be
later than sixty (60) days after the date of appointment of the sole arbitrator
pursuant to paragraph (b), (c) or (d) above, and the final decision of such
arbitrator will be rendered in writing to the parties not later than sixty (60)
days after the last hearing date, unless otherwise agreed by the parties in
writing.
(f) The place of any arbitration hereunder will be New York, New
York, or at such other place as agreed to by the parties.
(g) Except as otherwise set forth herein, any arbitration
hereunder will be conducted in accordance with the rules of the American
Arbitration Association ("AAA") then prevailing, and the decision of the
arbitrator will be final and binding on the parties, and will be enforceable in
any court having jurisdiction over the parties. Compliance with the provisions
of this Agreement concerning arbitration of disputes is a condition precedent to
the commencement of any suit, action or proceeding in any federal, state or
local court with respect to any controversy or dispute under this Agreement,
except a suit, action or proceeding which challenges the validity of any
provision of this Agreement or a breach of Section 4.1.
(h) Any party may send out requests to compel document
production from the other party. Disputes concerning the scope of document
production and enforcement of the document production requests will be
determined by written agreement of the parties or, failing such agreement, will
be referred to the arbitrator for resolution. All discovery requests will be
subject to the proprietary rights and rights of privilege of the parties, and
the arbitrator will adopt procedures to protect such rights. Except where
contrary to the provisions set forth in this Agreement, the rules of the AAA for
commercial arbitration will be applied to all matters of procedure, including
discovery; provided, however, that the arbitration will not be conducted under
the auspices of the AAA and the fee schedule of the AAA will not apply. The
arbitrator may obtain independent legal counsel to aid in his or her resolution
of legal questions presented in the course of arbitration, to the extent he or
she considers that such counsel is appropriate or necessary for a fair
resolution of the dispute, and to the extent that it is economical to do so
considering financial consequences of the dispute. The arbitrator will be
limited to interpreting or construing the applicable provisions of this
Agreement, and will have no authority or power to alter, amend, modify, revoke
or suspend any condition or provision of this Agreement; it being understood,
however, that the arbitrator will have full authority
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to implement the provisions of this Agreement, including provisions requiring
further agreement of the parties hereunder, and to fashion appropriate remedies
for breaches of this Agreement; provided that the arbitrator shall not (i) have
any authority in excess of the authority a court having jurisdiction over the
parties and the controversy or dispute would have absent these arbitration
provisions and (ii) have any right or power to award punitive damages.
(i) If a party fails or refuses to appear at and participate in
an arbitration hearing after due notice, the arbitrator may hear and determine
the controversy upon evidence produced by the appearing party.
(j) Arbitration costs will be borne one-half by the Company and
one-half by Capital, except that each party will be responsible for its own
expenses and the costs of witnesses selected by such party.
Section 10.4. Continuity of Service and Performance . Unless
otherwise agreed in writing, the parties will continue to provide service and
honor all other commitments under this Agreement during the course of dispute
resolution pursuant to the provisions of this Article X.
Section 10.5. Disputes as to Sales Site Protocols and Procedures
. Notwithstanding the provisions of Section 10.3(c) and Section 10.3(d), if the
Company Entities and the Capital Entities have a dispute under Section 3.2(f)
regarding compliance by the Capital Entities with applicable Protocols and
Procedures with respect to any Financings or Ancillary Services provided at a
Sales Site (or whether the Capital Entities have cured any deficiencies within
the applicable period set forth in Section 3.2(e)), and the parties are not able
to agree upon the selection of the sole arbitrator pursuant to Section 10.3(b),
either party may immediately refer the matter to the AAA and request that the
AAA select an arbitrator within 15 days of such request, and such selection by
the AAA shall be binding upon both parties.
ARTICLE XI
TERM AND TERMINATION
Section 11.1. Initial Term and Renewal . (a) Subject to Section
11.2, this Agreement shall become effective on the Spin-Off Date and shall
remain in effect until, and shall terminate on, August 4, 2000 (the "Initial
Term"). This Agreement shall automatically be renewed and remain in effect for
an indefinite number of successive periods of two years (each such period, a
"Renewal Period"), the first such Renewal Period commencing upon the expiration
of the Initial Term and each successive Renewal Period commencing upon the
expiration of the preceding Renewal Period, unless either party elects not to
extend the term of this Agreement beyond the Initial Term or any
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Renewal Period by giving the other party notice of such election at least one
year prior to the expiration of the Initial Term or Renewal Term then in effect
(it being understood that failure to give timely notice of non-renewal will be
deemed to constitute an election by the parties to renew the term of this
Agreement as provided herein).
(b) Prior to the Spin-Off Date, Capital shall have no obligation
under this Agreement to the Company, the Divisions or any AT&T Entity, it being
understood that the relationship between the Capital Entities and the Divisions
with respect to the subject matter hereof shall continue to be governed by the
AT&T Operating Agreement prior to the consummation of the Spin-Off Transactions.
Section 11.2. Termination. (a) This Agreement may be terminated
in its entirety prior to the expiration of the Initial Term or any Renewal Term
in effect:
(i) at any time, by the mutual written consent of Capital and the
Company;
(ii) at the election of the Company (after the Spin-Off Date), by
at least 180 days' prior notice to Capital, in the event of a Subsequent
Transfer of Control unless (a) prior to any such transfer, Capital
requests the Company's approval thereof and (b) the Company consents to
such transfer (it being understood that such consent shall not be
unreasonably withheld or delayed);
(iii) in the event one party (the "defaulting party") has
materially defaulted on its obligations under this Agreement, the other
party (the "non-defaulting party") may give notice of default to the
defaulting party and, in the event the defaulting party does not cure
the default within 60 days of such notice of default, the non-defaulting
party may, within 60 days after the expiration of such 60 day period,
give notice of termination to the defaulting party and specify in such
notice the date of termination of this Agreement (which date shall be a
date not less than 30 days following the date of such termination
notice), in which event this Agreement shall terminate on the date
specified in the termination notice;
(iv) at the election of the Company, by notice to Capital, in the
event that Capital commences a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy or similar law or statute or
makes an assignment of its property or any substantial portion thereof
for the benefit of creditors and such proceeding or assignment is
continuing or in effect at the time of such notice;
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(v) at the election of the Company, by notice to Capital, in the
event that there is commenced against Capital an involuntary proceeding
seeking to have Capital declared a bankrupt or seeking to have a
receiver appointed with respect to a substantial portion of its property
which is not dismissed within sixty (60) days of commencement, or there
is entered an order declaring Capital a bankrupt or appointing a
receiver with respect to a substantial portion of its property and such
proceeding or order is continuing or in effect at the time of such
notice;
(vi) at the election of Capital, by notice to the Company, in the
event that the Company commences a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy or similar law or statute or
makes an assignment of its property or any substantial portion thereof
for the benefit of creditors and such proceeding or assignment is
continuing or in effect at the time of such notice; or
(vii) at the election of Capital, by notice to the Company, in
the event that there is commenced against the Company an involuntary
proceeding seeking to have the Company declared a bankrupt or seeking to
have a receiver appointed with respect to a substantial portion of its
property which is not dismissed within sixty (60) days of commencement,
or there is entered an order declaring the Company a bankrupt or
appointing a receiver with respect to a substantial portion of its
property and such proceeding or order is continuing or in effect at the
time of such notice.
Notwithstanding anything in this Agreement to the contrary, it is specifically
understood and agreed that the Company shall not have any right to terminate
this Agreement because of the occurrence of a First Tier Transfer of Control.
Section 11.3. Effect of Termination . Upon the termination of
this Agreement as provided in this Article XI, all obligations of the parties
hereto with respect to any future Financings and Ancillary Services under this
Agreement will cease; provided, however, that the obligations of the parties set
forth herein as they relate to completed Financings and Ancillary Services
(including the obligations set forth in Articles II, III, V, VI, and VII) and
the provisions herein as to indemnification, dispute resolution, confidentiality
and miscellaneous matters (Articles IX, X, XII and XIII) will continue in full
force and effect.
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ARTICLE XII
CONFIDENTIALITY
Capital and the Company each understand and agree that the terms
of this Agreement, including the schedule hereto, may be publicly disclosed,
including in any public filing made by the Company or Capital or any Affiliate
thereof with the Securities and Exchange Commission. However, Capital and the
Company each covenants and agrees that it shall, and shall cause its
Subsidiaries to, treat any information provided by any Company Entity to any
Capital Entity (in the case of Capital's obligations hereunder) or by any
Capital Entity to any Company Entity (in the case of the Company's obligations
hereunder) pursuant to this Agreement (including, without limitation, the
Protocols and Procedures or any proprietary information otherwise acquired
hereunder) as privileged and confidential and to hold such information and to
use it solely for purposes of this Agreement and will not, without the prior
consent of the other party hereto, disclose, or cause to be disclosed, such
information to any Person, except that any such information may be disclosed (a)
to Capital's or the Company's agents, directors, officers, employees,
representatives, accountants, counsel or special counsel who have a need to know
or have access to such information and who have been instructed or have a duty
to keep such information confidential in accordance with the terms hereof, (b)
to the Affiliates of Capital and the Company, and such Affiliates' agents,
directors, officers, employees, representatives, accountants, counsel or special
counsel who have a need to know or have access to such information and who have
been instructed or have a duty to keep such information confidential and to use
it in accordance with the terms hereof, (c) to such other Persons who are
reasonably deemed necessary by Capital and the Company, as the case may be, in
connection with the enforcement of their rights under this Agreement, (d) to the
extent required pursuant to applicable law or any governmental authority
(including, but not limited to, the National Association of Insurance
Commissioners, Internal Revenue Service auditors, state taxing or communications
authorities or federal or state judicial authorities), (e) to the extent
required or appropriate to be disclosed in response to a reasonable request by
rating agencies, underwriters, or creditors in connection with financing
transactions undertaken by Capital or the Company or their Affiliates, who agree
or are under a duty to hold such information confidential in accordance with the
terms hereof, (f) to the extent that prior to such disclosure, such information
is in the public domain (it being understood and agreed that any document or
information that is filed as a matter of public record with any state, federal
or foreign governmental authority or is generally available to the public at the
time of disclosure (other than as a result of disclosure by such Person) will
for the purposes hereof be deemed to be in the public domain) or (g) to Persons
involved in potential acquisitions of, mergers with, or purchase of all or
substantially all of the assets of Capital (or any other Capital Entity) or the
Company (or any other
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Company Entity) who, in each case, agree in writing to hold such information
confidential in accordance with the terms hereof. Capital and the Company
Entities will take such action as may be reasonably necessary to ensure that the
competitors of the other party do not acquire such information.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Variation of Terms; Amendments. Any Capital Entity
and Company Entity may by mutual consent from time to time vary the terms of
this Agreement as it applies to such Capital Entity and either such Company
Entity or one or more SBUs within such Company Entity. In such event, such
varied terms will be deemed to amend this Agreement as it applies to such
Capital Entity and such Company Entity (or such SBUs) for such period of time as
such variance is agreed to by such Capital Entity and such Company Entity.
Notwithstanding any such variance, this Agreement will continue to apply to all
other Capital Entities and Company Entities (or, if applicable, all SBUs within
the Company Entity that consents to such variance that are not made subject to
such variance) as if such variance had not been effected. Notwithstanding the
foregoing, this Agreement cannot be amended or terminated orally, but only by a
writing duly executed by or on behalf of the parties hereto (or by the
applicable Company Entity and Capital Entity).
Section 13.2. No Partnership. Nothing contained in this
Agreement will be construed in any manner to constitute the creation of a
partnership between the Company Entities and the Capital Entities nor to
characterize the Company Entities and the Capital Entities as joint venturers.
The Company Entities and the Capital Entities will at all times be and remain
independent contractors with respect to the subject matter of this Agreement.
Section 13.3. Successors and Assigns; Third Parties. (a) This
Agreement will be binding upon and inure to the benefit of the parties hereto
and their successors and assigns.
(b) Except as set forth in Article IX, nothing in this Agreement,
expressed or implied, is intended or will be construed to confer upon any Person
(including Customers and Authorized Dealers) other than the parties (and the
Company Entities and Capital Entities) and their successors and assigns any
right, remedy or claim under or by reason of this Agreement.
Section 13.4. Severability. If any provision of this Agreement
or the application of any such provision to any party or circumstances will be
determined by any court of competent jurisdiction or duly authorized arbitration
tribunal to be invalid, illegal or unenforceable to any extent, the remainder of
this Agreement or such provision or the application of such provision to such
party or circumstances, other than those to
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which it is so determined to be invalid, illegal or unenforceable, will remain
in full force and effect to the fullest extent permitted by law and will not be
affected thereby, unless such a construction would be unreasonable.
Section 13.5. Notices. All notices, consents, deliveries,
demands, requests, approvals and other communications which are required or may
be given hereunder will be in writing and will be deemed to have been duly given
if personally delivered (including courier service), telecopied or mailed
certified first class mail, postage prepaid, addressed as follows:
(a) if to the Company, to:
LUCENT TECHNOLOGIES INC.
Attn: General Counsel
At such address as is
specified by such
General Counsel from
time to time pursuant
to this Section 13.5
Telecopier Number: (to be specified by such
General Counsel)
Confirmation Number: (to be specified by such
General Counsel)
with a copy to:
the same address
Attn: Pamela Craven, Esq.
(b) If to Capital, to:
AT&T Capital Corporation
44 Whippany Road
Morristown, New Jersey 07960
Telecopier Number: 201-397-3220
Confirmation Number: 201-397-3187
Attention: Chairman and CEO
with a copy to:
AT&T Capital Corporation
44 Whippany Road
Morristown, New Jersey 07960
Telecopier Number: 201-397-3220
Confirmation Number: 201-397-3187
Attention: Senior Vice President, General
Counsel, Secretary and Chief Risk
Management Officer
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Section 13.6. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to the choice of law provisions of its conflicts of law rules.
Section 13.7. Headings. The article headings and the section
headings and subheadings contained in this Agreement are intended solely for the
convenience of reference and will not affect in any manner the meaning or
interpretation of this Agreement.
Section 13.8. Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed an original instrument,
but all of which together will constitute one and the same agreement, and will
become binding when one or more counterparts have been executed and delivered by
each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the date first above written.
LUCENT TECHNOLOGIES INC.
By: Richard J. Rawson
_______________________
Name: Richard J. Rawson
Title: Sr. Vice President and General Counsel
AT&T CAPITAL CORPORATION
By: Thomas C. Wajnert
______________________
Name: Thomas C. Wajnert
Title: Chairman of the Board & CEO
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SCHEDULE A
I. NETWORK SYSTEMS
A. PRODUCTS
Central office switching equipment and associated software.
Transmission systems.
Mobile switching centers, radio base stations, mini/microcells,
fixed-loop systems, wireless data products.
Optical fiber, electronic wire and cable products.
Wired and wireless terminal equipment.
B. CUSTOMERS/MARKETS EQUIPMENT
Local and long distance service providers in the US and
internationally.
US government.
Private communications network operators.
Cable television companies.
Wireless service providers.
Competitive access providers.
II. CONSUMER PRODUCTS
A. PRODUCTS
Corded and cordless telephones, cellular phones, .
answering systems and telephone accessories, including intercoms, fax
line adapters, modular headsets, specialty products and tone/bell
ringers.
Communications systems for disabled persons.
VideoPhones.
Smart Cards.
Personal communicators.
Personal computers, copiers and printers of third party vendors.
B. CUSTOMERS/MARKETS
Consumers.
Small businesses that acquire the products through AT&T Phone Center
stores.
III. GLOBAL BUSINESS COMMUNICATIONS SYSTEMS
A. PRODUCTS
Customer-premises communications, video, voice processing and computer -
telephone integration systems, including, but, not limited to:
Communications systems (e.g., Definity(C), Partner(R) and Merlin(R)
Communications Systems)
Multimedia Call Exchanges (MMCX)
Products that link private branch exchanges (PBXs) to computers for
customer service and telemarketing applications.
Multimedia messaging and response systems (e.g., AT&T Intuity(TM)
System; Audix(R) Voice Messaging Systems; Conversant(R) Voice
Information System Ovation voice processing system; Message
Manager(TM)system; and AT&T Group Video System).
Video conferencing systems.
Voice and data terminals.
Computer equipment.
Wire and wiring.
Installation and maintenance services.
System design and integration services.
Routers, brouters, hubs, switches, computers, workstations and other
products manufactured by affiliates and third parties.
Computer-telephony applications and software.
Data/muiltimedia communications, wireless and professional services.
Microcells and wireless communications products.
B. CUSTOMERS MARKETS
End-user Business customers worldwide.
Private communications network operators.
Systems integrators.
US, State and Local Governments and related entities.
Not-for-profit entities.
AT&T affiliates.
IV. AT&T PARADYNE
A. PRODUCTS
Consumer and commercial modems.
VideoSpan'TM' multimedia technology.
Network management systems and network access products, such as
Acculink(R) and Comsphere(R) multiplexers and CSU/DSUs.
Data service units/channel service units.
Channel extension products.
Globespan receivers.
B. CUSTOMERS/MARKETS
Business customers.
V. AT&T MICROELECTRONICS
A. PRODUCTS
Digital signal processors.
Integrated circuits.
Optoelectronic components.
Printed circuit boards and power systems.
Semiconductors.
Videoconferencing microchips.
Telecommunications microchips.
B. CUSTOMERS/MARKETS
AT&T Corp. and other high-technolcgy companies worldwide.
Schedule B
LOCATION SUPPORT AGREEMENT
LOCATION SUPPORT AGREEMENT dated as of __________________, 1996
to (this "Agreement") between LUCENT TECHNOLOGIES INC., a Delaware corporation
(the "Company") and AT&T CAPITAL CORPORATION, a Delaware corporation
("Capital").
W I T N E S S E T H:
WHEREAS, Capital has requested and the Company has agreed on
behalf of itself and the Company Entities and SBUs (each as hereinafter defined)
to permit (to the extent provided in, and subject to the terms and conditions
of, this Agreement) Capital and the Capital Entities (as hereinafter defined) to
base appropriate employees of the Capital Entities ("Capital Entities
Employees") in designated space in any site or location (a "Sales Site") from
which the sale and marketing of products and services (collectively, as defined
below, "Products") is conducted by the Company or by any Company Entity or SBU;
WHEREAS, in consideration of the provision of such office space
within the Sales Sites, Capital and the Capital Entities have agreed to make
reimbursement to the Company Entities and SBUs for the costs of providing such
office space; and
WHEREAS, the parties hereto mutually desire to establish certain
other terms and conditions of the Capital Entities' utilization of such office
space to be made available to them for such purpose;
NOW, THEREFORE, in consideration of the mutual promises herein
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and subject to the conditions and
upon the terms hereof, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms will have the
following meanings, applicable both to the singular and the plural forms of the
terms defined:
"Agreement Term" has the meaning ascribed thereto in Section 3.1.
"Ancillary Services" has the meaning ascribed thereto in the
Operating Agreement.
"Company Entities" has the meaning ascribed thereto in the
Operating Agreement, subject to the provisions of Section 2.7 hereof.
"Capital Entities" has the meaning ascribed thereto in the
Operating Agreement.
1
"Capital Entities Personnel" has the meaning ascribed thereto in
the Preamble.
"Financing" has the meaning ascribed thereto in the Operating
Agreement.
"Letter Supplement" has the meaning ascribed thereto in
Section 13.1.
"Operating Agreement" means the Lucent Technologies Operating
Agreement dated as of __________________, 1996 between the Company and Capital,
as such agreement is amended and supplemented from time to time in accordance
with its terms.
"Products" has the meaning ascribed thereto in the Operating
Agreement.
"Sales Site" has the meaning ascribed thereto in the Operating
Agreement.
"Sales Site Owner" has the meaning ascribed thereto in Section
9.1.
"SBU" has the meaning ascribed thereto in the Operating
Agreement.
"Support Space" has the meaning ascribed thereto in Section 2.1.
"Support Space Term" has the meaning ascribed thereto in
Section 3.2.
All capitalized terms not otherwise defined herein but defined in the Operating
Agreement shall have the meanings ascribed thereto in the Operating Agreement.
ARTICLE II
PROVISION OF SUPPORT SPACE
Section 2.1. Support Space. Subject to the availability of space
(including storage space) in each Sales Site (such availability of space to be
determined by the affected Company Entity or SBU in its reasonable discretion),
the Company agrees to cause each of the Company Entities and SBUs to provide in
each Sales Site, to one or more of the appropriate Capital Entities intended
under the Operating Agreement to provide various Financings and Ancillary
Services to a Company Entity or SBU, (i) furnished office space (individually a
"Support Space", and collectively, "Support Spaces") which Support Space may or
may not have separately demised walls as the parties may agree to, or as may fit
the character of the location, or as may be deemed feasible in the reasonable
determination of the Company Entity or SBU, and (ii) basic office support
services for such Support Space during regular business hours (namely, cleaning,
relamping and, when so requested, telephone lines). Provision at any particular
Sales Site of one or more additional office support services, if any, such as
document duplicating, document processing, file storage, secretarial, mailroom
and similar services shall be subject to separate agreement at each Sales Site
to be concluded by the Company Entity or SBU and the Capital Entity in question,
shall not be required by the terms of this Agreement, and shall be limited in
any event to the additional office support services which are regularly
available at such Sales Site. The Company further agrees, where space is
available, to cause the Company Entities and SBUs to use reasonable efforts to
permit the Support Space for the
2
Capital Entity in question to be located reasonably near the sales personnel of
the Company Entity or SBU in question.
Section 2.2. Capital Entities Employees. With respect to each
Support Space the Capital Entity in question shall advise the Company Entity or
SBU in question of the number and type (manager, secretary, etc.) of Capital
Entities Employees reasonably believed to be required to be based at the related
Sales Site in connection with the provision of Financings and Ancillary Services
with respect to the Products sold or leased through such Sales Site, in order
that the parties may reach agreement on the amount, availability, adequacy and
suitability of the space proposed by the Company Entity or SBU to be identified
and designated as Support Space for such Sales Site.
Section 2.3. Sales Site Amenities. With regard to building
occupant amenities and services at any Sales Site (parking, dining facilities
and similar services as agreed to by the parties), it is the intention of the
parties hereto that, to the extent such amenities or services are available to
the Company Entity or SBU in question and/or to the employees thereof, such
amenities or services shall also be available, on the same basis and at the same
cost or charge, if any, to the Capital Entity and/or its employees (subject to
any necessary consent of the landlord where the Company Entity or SBU is not the
Sales Site Owner), provided always that the Capital Entity in question shall be
liable for its proportionate share of any costs assessed or charges imposed
generally in connection with such building occupant amenity or service, and
shall be liable for the entirety of any costs or charges arising from services
rendered solely to the Capital Entity or to the Support Space.
Section 2.4. Landlord Consent. In the event that any Sales Site
shall be leased, and not owned, by a Company Entity or SBU, and the lease in
question does not by its terms permit the tenant thereunder to make a Support
Space available to a Capital Entity in the manner contemplated by this
Agreement, the Company agrees that the Company Entity or SBU in question shall
use its reasonable efforts to procure any requisite consent. Capital shall cause
the Capital Entity in question to reimburse the Company Entity or SBU in
question for any out-of-pocket costs incurred in procuring such consent (which
shall not include any payment for such consent demanded by landlord unless
agreed in advance by the Capital Entity). In the event that such landlord
consent is not forthcoming, the Company and the Company Entity or SBU in
question shall have no further obligation to provide Support Space at such Sales
Site for the Capital Entity in question, and such Capital Entity agrees that,
with respect to any Sales Site in which such Capital Entity is in occupancy on
the date of this Agreement, such Capital Entity shall promptly vacate such
leased Sales Site as to which such landlord consent has been refused.
Section 2.5. Relocation of Company Entity or SBU Sales Site. In
the event that any Sales Site having a Support Space shall be voluntarily or
involuntarily relocated by the Company Entity or SBU in question to another
location serving the same (or new or reconfigured) geographical marketing area,
or in the event a new Sales Site is established, the Company agrees to cause
such Company Entity or SBU to use reasonable efforts to provide a new Support
Space in the new Sales Site on the terms and conditions set forth herein, unless
the Capital Entity in question shall elect not to accompany the relocation and
occupy the new Sales Site. In no event (including, but not limited to, events
such as a breach by any Company Entity of its obligations, if any, under this
Section) shall the Capital Entity located at any Sales Site remain thereat
beyond the date the Company Entity or SBU in question vacates such
3
Sales Site, and Capital agrees (i) to cause such Capital Entity to vacate the
Sales Site in question on or before the date the Company Entity or SBU shall so
vacate same and (ii) to indemnify and hold harmless the Company and the Company
Entity or SBU at the Sales Site in question from any and all claims, costs, loss
or damage arising from such holding over beyond such date.
Section 2.6. Occupancy In Conformity With Rules and Regulations and
Leases. Capital agrees that each Capital Entity shall occupy its respective
Support Space in accordance with the rules and regulations and general office
business practices for the Sales Site in question, whether such Sales Site is
owned by the Company Entity or SBU in question, or whether the occupancy by same
of such Sales Site shall be by way of a lease of all or a portion of the Sales
Site. The Company Entity or SBU hosting the Support Space shall provide the
Capital Entity with a copy of such rules and regulations, if available, and
advise such Capital Entity regarding any other general office business practices
to permit the Capital Entity in question to fulfil its obligations hereunder.
The Capital Entities' occupancy of any leased or subleased sales sites shall be
in compliance with any existing or future leases (or subleases) with third
parties.
Section 2.7. Excluded Company Entity and SBU. This Location
Support Agreement shall not be deemed to apply to the Company Entity known as
AT&T PARADYNE Corporation or to the SBU known as AT&T Consumer Products, unless
and until one or both of such entities shall elect to become a party hereto, as
evidenced by a written notice of election satisfactory in form and substance to
both the present parties.
ARTICLE III
TERM
Section 3.1. Term of Agreement. The term of this Agreement (the
"Agreement Term") shall be co-terminous with the term of the Operating
Agreement, subject to the provisions of Section 14.1 respecting amendment
hereof.
Section 3.2. Term of Occupancy of Individual Support Space. The
term of occupancy (the "Support Space Term") for each Support Space identified
by the parties shall commence, for those Support Spaces occupied by Capital
Entities personnel on the effective date of this Agreement, on such date
(subject to consent of the landlord at any leased Sales Site as required under
Section 2.4 hereof), and shall commence for each Support Space hereafter
identified and established pursuant to the terms of this Agreement on the date
the Capital Entity in question shall first occupy such Support Space. The
Support Space Term for any given Support Space shall expire and terminate on the
earliest to occur of (i) the date of expiration or termination of the Operating
Agreement (provided however, that the expiration or termination of the Operating
Agreement shall not be deemed to prevent the continued occupancy of such Support
Space by the Capital Entity in question, subject to the consent of the Company
Entity or SBU in question in its sole discretion, and to any necessary consent
of the landlord of such Sales Site, on the same terms and conditions as existed
prior to the date of expiration or termination, or upon such other terms as may
be agreed upon by the Capital Entity and the Company Entity or SBU in question),
(ii) the date the Sales Site containing the Support Space is vacated for any
reason by the Company Entity or SBU having the primary occupancy thereof (unless
the Capital Entity shall elect to stay to provide Financing and/or Ancillary
Services to another Company Entity remaining at such location, in which case the
4
expiration date for purposes of this clause (ii) shall be such remaining Company
Entity's date of vacation of such Sales Site and the Capital Entity shall have
Support Space to provide said services for the remaining Company Entity in
accordance with and subject to Article II), or (iii) the date which is ninety
(90) days from the date of written notice of termination given by the occupying
Capital Entity to the Sale Site Company Entity or SBU, or (iv) if the Sales Site
is leased, the day prior to the date of expiration or earlier termination of
such lease in accordance with its terms.
ARTICLE IV
Reimbursement
Section 4.1. Reimbursement for Support Space. Capital covenants
and agrees to reimburse (or to cause the respective Capital Entities occupying
each Support Space to reimburse) the Company Entity or SBU owning or occupying
the Sales Site in question, for the proportional costs of provision of the
Support Space and of such Support Space's allocable share of the costs of any
common areas of the Sales Site, including, but not limited to, (i) building
operating expenses (if the Sales Site in question is owned) or reasonable
estimates for anticipated tax and/or operating expense escalation rent (if the
Sales Site is leased, it being the intent of the parties that the Capital Entity
shall be charged and paying on a current basis for tax and operating cost
escalation charge increases which are reasonably anticipated by the Company
Entity or SBU under the lease, but which charges will not be billed to same by
landlord until some period after the period for which the Capital Entity is
making payment), (ii) utility user charges (at actual cost for dedicated
utilities and as appropriately apportioned or otherwise measured if not so
dedicated to the Capital Entity) and (iii) fixed general charges for building
amenities or services which are not charged on a per-use basis (collectively,
the "Reimbursement Cost"). The Reimbursement Cost for each Support Space (i)
shall be mutually agreed on an annualized basis by the Company and Capital
(and/or by the applicable Company Entities or SBUs and Capital Entities with
respect to the Support Space in question), such agreement on particular Support
Space and Reimbursement Cost to be evidenced by letter agreement between the
affected entities intended to supplement this Agreement from time to time with
respect to such Support Space (a "Letter Supplement", as more fully described in
Section 13.1 hereof), and (ii) shall be paid by Capital or the Capital Entity,
without requiring any prior invoice or statement therefor from the Company
Entity or SBU so long as the Letter Supplement shall establish a monthly or
other periodic payment amount with respect to the Reimbursement Cost, in equal
monthly installments in advance on the first day of each calendar month in the
Support Space Term (or with such other frequency or in such other manner as may
be specified in the relevant Letter Supplement) to the Company or to the Company
Entity or SBU identified in the Letter Supplement. Capital further covenants and
agrees to pay or reimburse (or to cause the respective Capital Entities
occupying each Support Space to pay or reimburse) the Company Entity or SBU
owning or occupying the Sales Site in question (i) for the basic office support
services (if same have not previously been included in the Reimbursement Cost),
and (ii) any additional office support services as may be agreed in accordance
with the provisions of Section 2.1 hereof, and (iii) for any specially-ordered
building services during normal business hours and for any overtime charges
incurred at the Sales Site with respect to the use and occupancy of the Support
Space by the Capital Entity outside normal business hours, where such
specially-ordered and/or overtime services are charged on a per-use basis (or
such other reasonable basis), for which all such payments should be due within
30 days of receipt of a periodic statement for such user and/or office service
charges. The Company agrees for itself and the Company Entity or SBU at a Sales
Site to render all
5
statements for any calendar year in a Support Space Term following the close of
such calendar year, and the respective Capital Entity's obligation to pay
statements so rendered shall survive the Support Space Term in question. The
Reimbursement Cost payable on account of any partial calendar month, if any,
during a Support Space Term shall be prorated on a per diem basis.
ARTICLE V
USE
Section 5.1. Permitted Use. Capital for itself and the Capital
Entities agrees that each Support Space shall be used only for the purpose for
which the Sales Site is utilized by the Company Entity or SBU.
ARTICLE VI
DISPUTE RESOLUTION
Section 6.1. Resolution of Disputes. Resolution of disputes
regarding the terms or operation of this Agreement, either generally or with
respect to any particular Support Space or Letter Supplement, shall be effected
in accordance with the provisions of Operating Agreement Article X (Dispute
Resolution).
ARTICLE VII
AT END OF TERM
Section 7.1. At End of Support Space Term. Upon the expiration of
the Support Space Term in accordance with the terms of this Agreement (as
supplemented by any Letter Supplement with respect to the Support Space in
question) or other termination of occupancy of any Support Space by a Capital
Entity, such Capital Entity (i) shall vacate and surrender the Support Space to
the Company Entity or SBU owning or controlling the Sales Site, "broom clean"
and in good order, condition and repair, ordinary wear, tear and damage by the
elements, fire or other casualty excepted, (ii) shall on or prior to such date,
at the Capital Entity's sole cost and expense, remove from the Support Space any
alterations and restore the Support Space as may be required under Section 8.1
hereof, (iii) shall also remove all of the Capital Entity's personal property,
including but not limited to files and other business records and its owned
furniture and business equipment, if any, (iv) shall remove and replace any
hardware installed in accordance with the provisions of Section 9.3 hereof, and
(v) shall repair or pay the cost of repairing all damages to the Support Space
and/or the Sales Site caused by all such removals. Any personal property which
shall remain in the Support Space at a date which is unreasonably beyond the
date the space was vacated, may, at the option of the Company Entity or SBU, be
deemed to have been abandoned and in such case may be retained or otherwise
treated by the Company Entity or SBU as its property or may be disposed of,
without accountability, in such manner as the Company Entity or SBU may
determine, at the Capital Entity's expense, which expense shall be reimbursed to
the Company Entity or SBU within ten (10) business days after demand.
6
ARTICLE VIII
ALTERATIONS; FURNISHINGS AND EQUIPMENT
Section 8.1. Alterations. Alterations to any Support Space shall
be made only with the prior consent of the Company Entity or SBU, and, if
required, the consent of the landlord of such Company Entity or SBU at a leased
Sales Site. Any permitted alterations shall be made solely in conformity with
the building maintenance and management requirements of the Support Space
building owner or landlord, as the case may be, and shall be performed at the
sole cost and expense of the Capital Entity. Any and all permitted alterations
in the Support Space shall be removed, and the Support Space restored to its
pre-alteration condition, at the Capital Entity's sole cost and expense, on or
prior to the end of the Support Space Term, unless the Company Entity or SBU for
such Support Space (and in buildings under lease thereto, the landlord under
such lease) shall agree in writing that the alteration(s) in question need not
be so removed. The Capital Entity's obligations to remove and restore hereunder
shall survive the expiration or earlier termination of the Support Space Term,
provided that, in the event the Capital Entity shall default in any obligation
to effect such removal and restoration, the Company Entity or SBU shall give
notice of such default not later than 180 days following such date of expiration
or earlier termination.
Section 8.2. Furnishings and Equipment. In the event the Capital
Entity in question wishes to furnish its Support Space with office furnishings
different than the standard office furnishing fitout provided to the Company
Entities/SBU personnel at the Sales Site, the Capital Entity must first obtain
the written permission of the Company Entity or SBU to do so, which permission
shall not be unreasonably withheld, provided, however, that (i) such furnishings
are purchased or leased by the Capital Entity, (ii) such furnishings are
installed and at term's end removed at the Capital Entity's sole cost and
expense and (iii) all such furnishings are reasonably consistent in style and
quality with the furnishings in the Sales Site used by the Company Entity or SBU
at such Sales Site. If such installation is reasonably necessary for the conduct
of the Capital Entity's business at the Sales Site, the Capital Entity in
question shall further be permitted to install business machinery and equipment
in the Support Space, subject to the electrical capacity thereof (provided same
are installed in conformity with the requirements of law and the requirements of
the underlying space lease, if any), provided same shall be removed at the
Support Space Term's end in accordance with the provisions of Section 7.1
hereof. Company Entities shall have no obligation to provide any additional or
special electrical capacity or extra heating or air-conditioning with respect to
any Capital Entity's business machinery or equipment referred to in the
preceding sentence.
ARTICLE IX
ACCESS TO SUPPORT SPACE PREMISES
Section 9.1. Sales Site Owner Access. With respect to any Support
Space, the Company Entity or SBU and/or any building landlord thereof (each, a
"Sales Site Owner") shall be and is hereby permitted access into the Support
Space under the terms of this Agreement and/or of any space lease, ground lease
or mortgage applicable to the Sales Site. Each Capital Entity occupying such
Support Space shall have the right to secure its own business files and other
proprietary information. The Company Entity or SBU in question shall have no
responsibility for the security, maintenance or preservation of such Capital
Entity business files and proprietary information.
7
Section 9.2. Capital Entity Access. The Company, for itself and
each of the Company Entities and SBUs providing Support Spaces, covenants and
agrees that each Capital Entity and its employees shall be provided access to
its particular Support Space on the same basis as access is permitted to the
Sales Site generally to the personnel of the Company Entity or SBU occupying the
Sales Site in question. In the event that a restricted access Sales Site
features a lobby guard, sign-in or pass system for such building access (whether
within office hours on business days, or outside such time periods), Capital,
for itself and each of the Capital Entities occupying such Support Space,
covenants and agrees to conform to the building rules and regulations governing
such access system from time to time.
Section 9.3. Securing Support Space. Subject to the provisions of
Sections 2.1 and 9.1 hereof, and subject to any more restrictive provisions of
an underlying space lease with a Sales Site Owner, in which case the provisions
of such space lease shall control, the Capital Entity shall be permitted to
secure its separately demised Support Space with locking door hardware, provided
always that (i) if the Support Space is not delivered with locking hardware, the
cost of installation of locking hardware of the same general model and (at the
Support Space Term's end) the cost of removal and replacement thereof shall be
borne solely by the Capital Entity, and (ii) duplicate keys to such locks shall
be delivered to all affected Sales Site Owners (Company Entity or SBU and the
landlord, if any) at the Sales Site.
ARTICLE X
NO LEASE; NO CO-TENANCY; NO SUBLEASE
Section 10.1. No Lease; No Co-tenancy; No Sublease. This
Agreement is intended by the parties hereto to provide only for so-called
"location support" or "desk space" for the provision of Financings and Ancillary
Services by the Capital Entities to the Company Entities and SBUs. The Capital
Entities, with respect to the Support Spaces occupied or to be occupied by each
in the Sales Sites, do not purport or intend to be and are not to be deemed by
the Company, by the Company Entities or the SBUs or their respective landlords,
or by any third party, to be space or occupancy tenants, co-tenants or
subtenants or lease assignees of any of the Support Spaces, and Capital and the
Capital Entities shall have no rights or obligations with respect to such
Support Spaces except as specifically provided for herein and in the applicable
Letter Supplement(s). Nothing contained in this Agreement shall be construed in
any manner to constitute this Agreement as an occupancy lease respecting the
Support Space, or as a co-tenancy agreement with respect to any Sales Site
(whether owned in fee or occupied under lease by the Company Entity or SBU in
question), or as an occupancy sublease arising under any lease of a Sales Site
by an Company Entity or SBU, or as an assignment to a Capital Entity of any
lease or sublease of a Sales Site under which the Company Entity or SBU is
tenant. Capital for itself and for all Capital Entities hereby waives, with
respect to any Support Space provided hereunder, any and all rights appertaining
to, or claims which might be made by, a tenant or co-tenant or subtenant or
lease assignee of such premises. In the event that, at any Sales Site which is
under lease or sublease to an Company Entity or SBU, the landlord thereof shall
by notice or otherwise raise objection to the occupancy of the Support Space by
a Capital Entity or the conduct of its business at the Sales Site, and such
objection cannot be resolved, the affected Company Entity or SBU shall have the
right to terminate the Support Space Term by written notice to the Capital
Entity, which shall promptly pay any monies due the Company Entity or SBU for
use of the Support Space and promptly vacate said
8
Support Space in accordance with the provisions of Section 7.1; provided
however, that in the event such landlord is willing to consider a negotiated
resolution of such objection (which resolution shall in no event require the
payment of money or the increase in any obligation of the Company Entity or SBU
under the lease), the Capital Entity shall be afforded the opportunity to reach
such resolution with landlord prior to the service of any notice of termination
hereunder.
ARTICLE XI
INDEMNIFICATION
Section 11.1. Indemnification by Capital and Capital Entity.
Capital and the Capital Entity occupying the Support Space in question each
agrees to defend, indemnify and hold harmless each of the Company and the
Company Entity or SBU controlling the Sales Site hosting the Support Space, and
their respective directors, officers, agents and employees from and against any
and all claims, demands, liability, loss, damage, costs and expenses (including
reasonable attorneys' fees and disbursements) arising from or in connection
with: (i) the conduct or management of the Support Space or of any business
therein, or any work or act whatsoever done, or any condition created (other
than by or at the direction of the Company, the Company Entity or SBU at the
Sales Site, or any director, officer, agent or employee of any of the foregoing)
in or about the Support Space or the Sales Site during the Support Space Term,
or during any period of holdover occupancy after the expiration or earlier
termination of this Agreement and/or any Letter Supplement with respect to such
Support Space, by or at the direction of Capital or the Capital Entity; (ii) any
act, omission or negligence of Capital or of the Capital Entity or of any of
their respective directors, officers, agents, invitees, employees or contractors
(but not business visitors to the Capital Entity which are directors, officers
or employees of the hosting Company Entity or SBU); (iii) any accident, injury
or damage whatsoever (unless caused by the gross negligence or willful
misconduct of the Company or of the hosting Company Entity or SBU, or of any of
their respective directors, officers, agents, third parties invitees or
employees) occurring in or about the Support Space or the Sales Site caused by
Capital or the Capital Entity, or any director, officer, agent or employee of
either of the foregoing; and (iv) the holding over by the Capital Entity beyond
the Support Space Term as to any particular Support Space.
Section 11.2. Indemnification by the Company and the Company
Entity or SBU. The Company and the Company Entity or SBU controlling the Support
Space in question each agrees to defend, indemnify and hold harmless Capital and
the Capital Entity occupying the Support Space, and their respective directors,
officers, agents and employees from and against any and all claims, demands,
liability, loss, damage, costs and expenses (including reasonable attorneys'
fees and disbursements) arising from or in connection with: (i) the conduct or
management of the Sales Site excluding the Support Space, or of any business
therein, or any work or act whatsoever done, or any condition created (other
than by or at the direction of Capital or the Capital Entity occupying the
Support Space, or any director, officer, agent or employee of any of the
foregoing) in or about the Sales Site or the Support Space during the Support
Space Term, by or at the direction of the Company or the Company Entity or SBU;
(ii) any act, omission or negligence of the Company and/or the Company Entity or
SBU or of any of their respective directors, officers, agents, invitees,
employees or contractors (but not business visitors to the Company Entity or SBU
which are directors, officers or employees of the Capital Entity); and (iii) any
accident, injury or damage whatsoever (unless caused by the gross negligence or
willful misconduct of Capital or of the Capital Entity or of any of their
respective
9
directors, officers, agents or employees) occurring in or about the Support
Space or the Sales Site caused by the Company or the Company Entity or SBU, or
any director, officer, agent, third parties invitees or employee of any of the
foregoing.
Section 11.3. Indemnification Claim Procedure. Each indemnified
party under Section 11.1 or 11.2 hereof with respect to any claim to be made
hereunder shall follow the procedure set forth in Section 9.3 of the Operating
Agreement.
Section 11.4. Survival of Indemnities. The indemnity agreements
set forth in this Article 11 shall survive the expiration or any earlier
termination of this Agreement and/or of any Letter Supplement with respect to
any Support Space or Sale Site as to which indemnification is sought or claimed.
ARTICLE XII
NOTICES
Section 12.1. Notices. A. All notices, consents, deliveries,
demands, requests, approvals and other communications which are required or may
be given hereunder and which affect more than one Support Space shall be in
writing and shall be deemed to have been duly given if personally delivered
(including courier service), telecopied or mailed certified first class mail,
postage prepaid, addressed as follows:
(a) if to the Company, to:
_______________________________________
_______________________________________
_______________________________________
Telecopier Number:_____________________
Confirmation Number:___________________
Attention:
with a copy to:
_______________________________________
_______________________________________
_______________________________________
Telecopier Number:_____________________
Confirmation Number:___________________
Attention:
10
(b) If to Capital, to:
AT&T Capital Corporation
44 Whippany Road
Morristown, New Jersey 07960
Telecopier Number: 201-397-3220
Confirmation Number: 201-397-3187
Attention: Chief Executive Officer
with a copy to:
AT&T Capital Corporation
44 Whippany Road
Morristown, New Jersey 07960
Telecopier Number: 201-397-3220
Confirmation Number: 201-397-3187
Attention: General Counsel
B. All notices, consents, deliveries, demands, requests,
approvals or other communications which are required or may be given hereunder
and which affect only a particular Support Space shall be in writing and shall
be deemed to have been duly given if personally delivered (including courier
service), telecopied or mailed certified first class mail, postage prepaid,
addressed to the Company Entity or SBU, or to the Capital Entity, as the case
may be, at the address and to the attention of the person identified in the
last-dated Letter Supplement delivered by the affected parties in connection
with such Support Space.
ARTICLE XIII
AGREEMENT INCORPORATION AT SUPPORT SPACES; DISTRIBUTION
Section 13.1. Letter Supplement Delivery and Agreement
Incorporation. The Company and Capital agree that, upon identification from time
to time of any Support Space to be occupied by a Capital Entity in a Sales Site,
a Letter Supplement shall be prepared executed and delivered in counterparts
between the affected Company Entity or SBU and the Capital Entity occupying or
about to occupy such Support Space, setting forth (i) the floor or suite
location thereof, (ii) the annualized Reimbursement Cost therefor and other
office equipment or service charge rates, if any, (iii) the name and address for
notices under Section 12.1 hereof, and (iv) such other Sales Site-specific
provisions for such occupancy not otherwise covered hereby. The parties hereto
further agree that this Agreement is intended to be incorporated by reference
into the Letter Supplement except to the extent that certain terms hereof are
explicitly stated to be overridden by differing provisions set forth in such
Letter Supplement, and in the event of any other conflict between the terms of
this Agreement and the terms of a Letter Supplement, the terms of this Agreement
shall govern and be deemed to prevail. Notwithstanding the foregoing, it is
further understood and agreed that, with respect to Capital Entities personnel
presently situated in Sales Sites as at the date hereof, they shall be permitted
to remain in place whether under the terms of such client commitment letters
11
between the affected entities as may be applicable, or otherwise, and the
Company and Capital agree that they will cooperate in good faith to prepare,
execute and deliver a Letter Supplement with respect to the Support Space for
such Sales Sites. In no event shall such Capital Entities personnel be permitted
to remain in place in a Sales Site under lease to an Company Entity or SBU for
which landlord's consent has not been forthcoming as required under Section 2.4
hereof, and failure to vacate such Support Site promptly following notice that
such landlord's consent has not been obtained shall be subject to
indemnification for any costs or damages resulting therefrom under Section 11.1
hereof. The parties' agreement to cooperate in good faith to prepare, execute
and deliver Letter Supplements shall not in any event delay the effective date
of this Agreement as to any Sales Site, and all Sales Sites shall be governed by
this Agreement from its effective date, notwithstanding the failure to have a
Letter Supplement agreed by such date.
ARTICLE XIV
MISCELLANEOUS
Section 14.1. Amendments. Any Capital Entity and Company Entity
may by mutual consent from time to time vary the terms of this Agreement as it
applies to such Capital Entity and either such Company Entity or one or more
SBUs within such Company Entity. In such event, such varied terms will be deemed
to amend this Agreement as it applies to such Capital Entity and such Company
Entity (or such SBUs) for such period of time as such variance is agreed to by
such Capital Entity and such Company Entity; provided that the variance(s) (i)
are in writing, (ii) specifically reference this Agreement, and (iii) expressly
state the intention of the parties thereto to vary the terms of this Agreement,
which varied terms shall be identified with specificity. The parties hereto
agree that a Letter Supplement containing the information described in clauses
(i) through (iv) in Section 13.1 hereof, without reference to any variance from
specific provisions of this Agreement, shall not be deemed a variance for
amendment to this Agreement. Notwithstanding any such variance, this Agreement
will continue to apply to all other Company Entities and Capital Entities (or,
if applicable, all SBUs within the Company Entity that consents to such variance
that are not made subject to such variance) as if such variance had not been
effected. Notwithstanding the foregoing, this Agreement cannot be amended or
terminated orally, but only by a writing duly executed by or on behalf of the
parties hereto (or by the applicable Company Entity and Capital Entity).
Section 14.2. Successors and Assigns; Third Parties.
(a) This Agreement will be binding upon and inure to the benefit
of the parties hereto and their successors and assigns.
(b) Except as set forth in Article XI, nothing in this Agreement,
expressed or implied, is intended or will be construed to confer upon any Person
(including Customers and Authorized Dealers, as such three capitalized terms are
defined in the Operating Agreement) other than the parties (and the Company
Entities and Capital Entities) and their successors and assigns any right,
remedy or claim under or by reason of this Agreement.
(c) The Company hereby represents and warrants to Capital that it
has the requisite authority to commit and bind the other Company Entities to the
applicable terms of this Agreement.
12
(d) Capital hereby represents and warrants to the Company that it
has the requisite authority to commit and bind the other Capital Entities to the
applicable terms of this Agreement.
Section 14.3. Sales Sites Under Lease. In the event that any
Sales Site is now or hereafter under lease to an Company Entity or SBU, the
execution and delivery of this Agreement, and/or of any Letter Supplement with
respect to Support Space at such Sales Site, shall not be deemed to amend or
modify or otherwise affect any such lease, and in the event of any conflict with
regard to the use and occupancy of the Support Space at such Sales Site between
the provisions of this Agreement or such Letter Supplement and the provisions of
the applicable lease, the provisions of such lease shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the date first above written.
LUCENT TECHNOLOGIES INC.
BY:______________________________
NAME:
TITLE:
AT&T CAPITAL CORPORATION
BY:_______________________________
NAME:
TITLE
13
SCHEDULE C
The Company Entities traditionally have provided only the following types of
interim Financings to Finance the acquisition of Products by Customers or
Authorized Dealers:
1. Consumer Products offers an installment billing program to Customers. The
installment sale product is only offered to Customers (both business and
consumer) who acquire Product at a Consumer Products' Phone Center store. The
Financing is a no interest financing - the Customer pays the purchase price in
equal monthly installments over a term of 4, 8 or 12 months. The Customer also
must pay a fixed application fee, which is based on the length of the term. (For
example, the application fee for a 4 month installment sale is Fifteen Dollars,
for an 8 month installment sale is Thirty Dollars, and for a 12 month
installment sale is Forty-Five Dollars.). The gross receivable stream from such
Financings is approximately $25 Million to $35 Million per year. Additionally,
Consumer Products has discontinued its offer of 8 and 12 month installment sales
in selected stores where it is trialing a replacement program offered by one of
the Capital Entities.
2. Consumer Products offers 30 day payment terms to qualifying business
Customers for purchases of Product acquired at a Consumer Products' Phone Center
store. This Financing is only offered with respect to the types of equipment
traditionally sold by Consumer Products to small businesses.
3. Consumer Products offers interim Financing to SNET and Rochester Telephone
with respect to traditional consumer telephone equipment sold by Consumer
Products and provided by the local telephone companies to consumers who obtain
their local telephone service from them. Under this offering, Consumer Products
provides such equipment to SNET and Rochester Telephone at $3.00 per unit for 24
months or $2.00 per unit for 36 months. Consumer Products provides approximately
50,000 phones per year to these entities.
SCHEDULE D
AT&T Paradyne traditionally has provided rental or service contracts (i.e., full
pay-out financings with maintenance and service included) at a fixed monthly
amount for terms of 12 months or greater with respect to data equipment
manufactured by it. Such equipment consists of modems, VideoSpan(TM) multimedia
technology, mulitplexers, CSU/DSUs, data service and channel service units, and
channel extension products. Such Financing has been provided to Customers who
acquire the Products directly from AT&T Paradyne and its Authorized Dealers,
which typically are not Authorized Dealers of Products of other AT&T Entities.
SCHEDULE E
Network Systems traditionally has manufactured or marketed the following types
of telecommunications equipment and systems, as well as associated installation
and maintenance services, for incorporation into land-based and wireless
telecommunication networks operated by public and private sellers of
telecommunications services:
Central office switching equipment and associated software, transmission
systems, mobile switching centers, radio base stations, mini- and
micro-cells, fixed-loop systems, wireless data products, optical fiber,
electronic wire and cable products, wired and wireless terminal equipment.
SCHEDULE F
The following constitute the past practices of the Company Entities regarding
their rental of Products to Customers on a daily, weekly, monthly or other
periodic basis:
1. Consumer Products rents specific AT&T brand home telephones
(i.e., Trimline(R), Princess(R), traditional, feature and cordless telephones,
and answering systems) at a fixed monthly payment to Customers who are
consumers. This is a true rental, and not a lease or sale, although Consumer
Products markets this product as the "AT&T Lease Service Program". The rental is
on a month-to-month basis. The Customer can obtain a replacement for free at any
time and for any reason (i.e., "no questions asked") if the Customer delivers
the telephone to a Consumer Products' Phone Center store or one of approximately
700 "AT&T authorized Service Agencies" in the United States. The replacement set
generally is a refurbished set of the same model. In 1993, the gross revenues
from the this rental product was approximately $740 Million, and these revenues
are declining at a rate of approximately 15% per year.
2. Global Business Communications Systems (GBCS) offers its direct Customers
a rental product known, interchangeable, as a "Term Plan" or "service contract."
Under the Term Plan, GBCS offers selected telecommunications equipment (prior
to 1993, key systems and Horizon(R) and Dimension(R) PBXs and key systems;
after 1993, only Partner(R) and Legend(R) communications systems) to business
Customers in the United States at fixed monthly payments on a month-to-month
basis or for a specified period of time "Commitment Period"). The Commitment
Periods offered by GBCS are 12, 24 and 48 months. If neither party terminates
the Term Plan 30 days prior to the end of the Commitment Period, it is
automatically renewed for the shortest Commitment Period then available at the
price and terms then in effect. Except for the Partner and Legend systems rented
under Term Plans, the only Terms Plans that remain on the books of GBCS are
those that are in automatic renewal. In a Term Plan, GBCS retains title to the
equipment, bears the risk of loss (except for loss caused by the Customer),
and maintains the equipment at no additional charge. Term plans are not
available to Customers who acquire the Product through an Authorized Dealer.
SCHEDULE G
GENERAL ALLOCATION OF
RESPONSIBILITIES
BETWEEN THE
CAPITAL ENTITIES
AND
THE COMPANY ENTITIES
TABLE OF CONTENTS
SECTION SUBJECT MATTER
ONE General Allocation of Responsibilities.
TWO Methods and Procedures.
ATTACHMENTS
A. - Listing of Company Responsibilities.
B. - Suggested Operational Procedures.
C. - Remarketing Procedures.
D. - Repurchase Calculation Methodology.
E. - Calculating Net Book Value.
F. - Post-Repurchase Allocation of Repurchase Monies.
2
GENERAL ALLOCATION OF RESPONSIBILITIES REGARDING
TRANSACTIONS WHERE A CAPITAL ENTITY
PROVIDES FINANCING
Since 1985 Credit Holdings has been providing Financing to
Customers and Authorized Dealers. Such services are now provided by the Capital
Entities, including AT&T Credit. While the Company Entities and Capital Entities
benefit from the provision of such Financings, it is recognized that the Company
Entities and Capital Entities will not receive the full benefits of such
Financings unless Customers and Authorized Dealers fulfill their related payment
obligations.
Because the revenue stream resulting from such Financings is
adversely affected by the subsequent failure of Customers or Authorized Dealers
to pay, it is appropriate to allocate the responsibility for subsequent billing,
collection and account enforcement activity when such situations occur.
Therefore, as between the Company Entities and the Capital
Entities, the entities capable of controlling a particular risk or covering a
particular risk in its pricing (Product or Financing), shall be responsible for
subsequent billing, collection, and account enforcement activity relating to the
Financing shortfall. For example, should a Financing shortfall occur as a result
of a Customer's or Authorized Dealer's inability to pay, or failure to pay for
reasons which are not related to a Company Responsibility, or should the Capital
Entities, anticipated residual value for the Product not be attained -- the
Capital Entities would be responsible.
Should a Financing shortfall occur as a result of a Company
Responsibility, then the SBU that markets or provides the related Product would
be responsible for subsequent billing,-collection, and account enforcement
activity.
In order to implement this allocation policy, the attached
Methods and Procedures, which are made a part of this General Allocation of
Responsibilities, shall apply. Such Methods and Procedures are intended to
further define and amplify the responsibilities of the Company Entities
(including their SBUs) and Capital Entities and to establish procedures that
will facilitate the expeditious resolution of issues between the Company
Entities and the Capital Entities. Except as set forth in the attached Methods
and Procedures, this General Allocation of Responsibilities will not apply in
situations where the Product warranty has expired and the Customer or Authorized
Dealer has
3
chosen not to avail itself of the various maintenance service contracts offered
by the SBUs.
This General Allocation of Responsibilities will not affect those
programs or transactions where the Capital Entities and Company Entities agree
(or have previously agreed), in writing, to different apportionment
responsibilities or procedures. In order to provide continued flexibility for
the future, the Capital Entities and Company Entities may modify this General
Allocation of Responsibilities as they may mutually agree in writing. Moreover,
this General Allocation of Responsibilities will apply to any successors of the
parties subject to this allocation policy.
It is understood and agreed that this General Allocation of
Responsibilities refers in various contexts to obligations or agreements of SBUs
(which may or may not be legal entities) because as a practical matter, the
relevant obligation will be performed by a SBU or the relevant agreement will be
entered into by personnel serving a SBU. In all events, any such obligations or
agreements shall, in the case of SBUs that are not Company Entities, constitute
obligations or agreements of the Company Entities of which such SBUs constitute
a division or business grouping.
NOTHING WITHIN THIS DOCUMENT PURPORTS TO EXTEND ADDITIONAL REPRESENTATIONS,
WARRANTIES OR RIGHTS TO A CUSTOMER OR AUTHORIZED DEALER ABOVE AND BEYOND THOSE
REPRESENTATIONS, WARRANTIES AND RIGHTS CONTAINED IN THE CONTRACT BETWEEN SUCH
CUSTOMER OR AUTHORIZED DEALER AND THE RELEVANT COMPANY ENTITIES.
4
METHODS AND PROCEDURES REGARDING
GENERAL ALLOCATION OF RESPONSIBILITIES
OVERVIEW AND GENERAL STATEMENT
The foregoing General Allocation of Responsibilities is intended to broadly
define the circumstances in which responsibility for billing, collection and
account enforcement activity is allocated to either a Capital Entity or the SBUs
in situations where a Capital Entity provides Financing for a Customer or
Authorized Dealer. The purpose of these Methods and Procedures is to further
define and amplify the General Allocation of Responsibilities, and to establish
procedures that will facilitate the resolution of issues between the Company
Entities and the Capital Entities. These Methods and Procedures are comprised of
the following:
Attachment A - is a specific listing of circumstances wherein
SBUs will assume responsibility for billing, collection, and
account enforcement activity.
Attachment B - sets forth the procedures to be followed when
dealing with transactions that require SBUs to assume
responsibility for billing, collection, and account
enforcement activity.
Attachment C - sets forth certain equipment remarketing
procedures.
Attachment D - sets forth the general repurchase calculation
methodologies that will apply when SBUs assume the
responsibility for billing, collection, and account
enforcement activity.
Attachment E - sets forth the procedures to be utilized in
calculating net book value.
In preparing these Methods and Procedures, the assumption is made
that every possible action had' been taken, in accordance with the terms and
conditions of the contract between the Customer or Authorized Dealer and the
relevant Company Entities, to resolve issues raised by the Customer or
Authorized Dealer relating to the Product or related service provided by the
Company Entities, and that such actions have not caused the Customer or
Authorized Dealer to honor its financial obligations relative to its Financing
contract with the appropriate Capital Entity.
5
Any exception to these Methods and Procedures requires the
consent of all parties to the foregoing General Allocation of Responsibilities
affected by such change.
6
Attachment A
LISTING OF COMPANY RESPONSIBILITIES
The appropriate SBU will assume responsibility for billing,
collection, and account enforcement activity of shortfall in a Financing
provided by a Capital Entity when the customer or Authorized Dealer asserts that
its failure to honor its financial obligation under the Financing contract with
the Capital Entity is a result of one or more of circumstances constituting a
Company Responsibility, provided, however, that customer assertions are subject
to the review procedures set forth in Attachment B.
SBU personnel may, on a case by case basis, conclude that
enforcing the terms and conditions of the Financing contract between the
Customer or Authorized Dealer and the appropriate Capital Entities, or the
contract between the Customer or Authorized Dealer and the appropriate Company
Entities, would be inappropriate. When this occurs, the transaction will be
treated as a Company Responsibility.
SBUs shall not be responsible for Financing shortfalls in
situations where a Capital Entity provides Customer Financing that is arranged
through an Authorized Dealer (but not including situations in which a Capital
Entity provides Dealer Financing or customer Financing arranged directly by a
Capital Entity or through a Company Entity), except in the following
circumstances: (x) the Financing shortfall is caused by clause (iii) of the
definition of "Company Responsibility" set forth in Section 7.2 of the
Agreement; (y) the Product does not work or perform in accordance with any
accompanying representation or warranty by a Company Entity; or (z) as a matter
of law or equity the Company Entities are found to be responsible for the
Customer's failure to honor its financial obligation to a Capital Entity.
Except for the matters covered by clause (iii) of the definition
of "Company Responsibility" set forth in Section 7.2 of the Agreement as well as
the immediately preceding paragraphs, a Company Responsibility will only apply
to matters that occur during the term of the warranty and during the term of any
maintenance or service contract of a Company Entity.
NOTHING WITHIN THIS DOCUMENT PURPORTS TO EXTEND ADDITIONAL
REPRESENTATIONS, WARRANTIES OR RIGHTS TO A CUSTOMER OR AUTHORIZED DEALER ABOVE
AND BEYOND THOSE REPRESENTATIONS, WARRANTIES OR RIGHTS CONTAINED IN THE CONTRACT
BETWEEN SUCH CUSTOMER OR AUTHORIZED DEALER AND THE RELEVANT COMPANY ENTITIES.
7
Attachment B
SUGGESTED OPERATIONAL PROCEDURES
Within 10 business days of receipt of information of Customer or
Authorized Dealer dissatisfaction and the actual withholding of, or notice from
a Customer or Authorized Dealer of their intention to withhold, payment to the
Capital Entity, the SBU or Capital Entity in receipt of such information will
complete the Initial Equipment Problem Report ("Initial Report") appended hereto
as Exhibit 1, and forward it to the other party.
The SBU will then investigate the merits of any such Customer or
Authorized Dealer assertions and will inform the Capital Entity, within 30
days of the Initial Report Date, if the SBU believes that (1) a Company
Responsibility does exist or (2) further time is needed to investigate the
Customer or Authorized Dealer's assertion. The SBU will advise the Capital
Entity of the course of action it plans to pursue by completing the
Investigatory Response section of the Initial Report, and by returning it to
the Capital Entity within the 30 day time frame noted above. Thereafter, the
Capital Entity and SBU will follow the Action Timetable appended hereto as
Exhibit 2, whereby the SBU will provide the Capital Entity with a Status
Report (Exhibit 3) in intervals of approximately 30 days. IN NO EVENT WILL
SBU'S INVESTIGATION OF A CUSTOMER OR AUTHORIZED DEALER COMPLAINT BE DEEMED AN
ACKNOWLEDGMENT THAT A COMPANY ENTITY OR SBU BEARS ANY RESPONSIBILITY
WHATSOEVER FOR THE ALLEGED PROBLEM.
If the SBU determines that a Company Responsibility exists
("Repurchase Determination"), the SBU will assume the responsibility for
subsequent billing, collection and account enforcement by repurchasing the
Financing contract from the Capital Entity pursuant to the reimbursement
methodology set forth in Attachment D, and in accordance with the timetable
outlined in Exhibit 2. The SBU will make its Repurchase Determination within
120 days of the date of the Initial Report, unless the SBU and the Capital
Entity mutually agree to extend such date. Moreover, the SBU will make its
Repurchase Determination at such earlier date as may be warranted by the
situation, and will thereafter promptly repurchase the Financing contract from
the Capital Entity pursuant to the reimbursement methodology set forth in
Attachment D.
8
In instances where an Company Responsibility has, in the SBU's
opinion, been corrected, but the Customer or Authorized Dealer continues to
refuse to make Financing payments to the Capital Entity for the period that
such Company Responsibility existed, in lieu of repurchasing the financing
contract as set forth above, the SBU and the Capital Entity may implement some
other mutually agreeable mechanism to compensate the Capital Entity for the
cost of carrying the non-performing asset during the non-performance period.
In the event that the SBU believes that an Company Responsibility
does not exist, and the Capital Entity initiates enforcement action against the
Customer or Authorized Dealer, and the Capital Entity is unsuccessful in
attempting to enforce its Financing contract because of a determination by a
court, arbitrator or other tribunal that there was an Company Responsibility,
then the SBU will bear responsibility for future billing, collection, and
account enforcement activity.
While a particular case is under review by the SBU as set forth
above, the Capital Entity will not initiate legal action against the Customer or
Authorized Dealer unless it is necessary to preserve the Capital Entity's rights
(in which case the Capital Entity will consult with the SBU before initiating
such legal action).
In the event that the Capital Entity believes that the SBU's
decision as to whether an Company Responsibility exists is in error, the Capital
Entity and the SBU will escalate the issue within their respective
organizations. All inquiries's regarding such matters should be forwarded to
the appropriate individuals within the respective organizations.
In the unusual event that the designated SBU and the Capital
Entity representatives cannot come to agreement as to how to allocate the
responsibility for subsequent billing, collection, and account enforcement
activity on a particular transaction, then such representatives will escalate
the issue to the appropriate level of senior management of the applicable SBU
and Capital Entity for resolution. Any unresolved disputes shall be resolved
pursuant to the arbitration provisions set forth in Article X of the Agreement.
Should a SBU sustain any loss resulting from an offset due to a
genuine breach by a Capital Entity of its Financing contract with the Customer
or Authorized Dealer, the Capital Entity will compensate the SBU for such loss
pursuant to procedures specified herein.
9
The responsible SBU may request that the Capital Entity provide post-repurchase
administrative services on transactions that fall under the terms of the General
Allocation of Responsibilities. The Capital Entities shall perform such services
at such terms as are mutually agreeable to both the Capital Entity and SBU.
10
Attachment C
REMARKETING PROCEDURES
In those instances where a Company Responsibility exists, the
cost of deinstallation and remarketing the Financed Product falls to the SBU
without contribution from the Capital Entity. In those instances where a Company
Responsibility does not exist, the cost of deinstallation, refurbishment, and
remarketing the Financed Product falls to the Capital Entity.
The SBU shall have the first right of purchase for Financed
Products that come into the possession of the Capital Entity for potential
remarketing, at a price that is mutually agreed to by the parties. This right is
contingent upon the establishment of mutually agreeable mechanisms, methods and
procedures as to how the right of first offer will be implemented and managed on
an ongoing basis.
11
Attachment D
REPURCHASE CALCULATION METHODOLOGY
As previously stated, the Capital Entities and Company Entities
do not obtain the full benefit of a customer or Authorized Dealer Financing
unless the Customer or Authorized Dealer fulfills its financial obligation under
its Financing contract with the Capital Entity. Unless otherwise agreed to by an
Company Entity or SBU and Capital Entity with respect to particular types of
Financings, when a Company Responsibility exists, all of the Capital Entity's
right, title and interest in, to and under the Financing and Financed Product
will be repurchased by the SBU from the Capital Entity utilizing the following
methodology to calculate the appropriate price to be paid to the Capital Entity:
(a) Principal Balance Reimbursement:
The Capital Entity shall be compensated for the entire original
amount funded in the event that the Customer or Authorized Dealer made no
payments under the Financing contract, or in cases where the Capital Entity
received payments but is returning the payments to the Customer or Authorized
Dealer as part of a negotiated settlement.
The Capital Entity shall be compensated for the remaining unpaid
principal balance for those transactions where Customer or Authorized Dealer
payments were received and retained by the Capital Entity.
The method to be used to amortize the Customer or Authorized
Dealer transaction to arrive at the remaining unpaid principal balance, at any
given point in time, is the Mortgage Method Adjusted.
(b) Interest Reimbursement:
The Capital Entity shall be compensated for the cost of funds
expense that it incurred to fund a particular transaction. Therefore, for each
transaction where the SBU repurchases a Product from the Capital Entity under
the terms of this Agreement, the following procedures for calculating interest
reimbursement will apply:
12
The cost of-funds rate is derived through the cost of funds
report of the Capital Entity for the corresponding week during which the
transaction was originally funded. The appropriate cost of funds rate can be
determined by locating the term of the Financing under the applicable Financing
contract, then locating the appropriate rate for the stated term.
Assuming that there are no Customer or Authorized Dealer
payments, or that whatever payment stream that was made to the Capital Entity is
being returned to the Customer or Authorized Dealer, the Capital Entity shall
receive compound interest for the number of interest periods from the date of
funding to the anticipated date of repurchase by the SBU.
In the event that Customer or Authorized Dealer payments are
retained by the Capital Entity, interest reimbursement at the cost of funds rate
should be calculated from the first interest period after the Capital Entity
receives its final Customer or Authorized Dealer remittance, up to and including
the interest period in which the SBU repurchases the Financing contract from the
Capital Entity.
Late charge income, as a method of compensating for the delay in the originally
anticipated cash flow to the Capital Entity, will not apply to transactions that
fall under the terms of this Schedule.
(c) Sundry Expenses:
The Capital Entity shall be compensated by the SBU for verifiable
out of pocket expenses incurred for transactions that fall under the terms of
this Schedule. This includes such things as litigation expense (where outside
counsel is being retained), costs of collection such as on-sight asset
inspection/inventory, collection agency expense, and deinstallation expense (if
paid by the Capital Entity).
The SBU will not be responsible for soft costs, such as
reimbursement for the time and effort of the Capital Entity employees,
consultants, or temporary employees in resolving such situations.
(d) Other:
It is agreed that, for all transactions that fall under the terms
of this Schedule, the Capital Entity will in no event receive a repurchase price
that is less than its
13
net book value, which is calculated in accordance with the description
hereinafter contained.
In some instances a Company Responsibility can be resolved by
unwinding only a portion of the transaction, as opposed to a complete repurchase
of the account by the responsible SBU. When this occurs the Capital Entity and
SBU shall apply the methodologies contained in this Schedule on that percentage
of the transaction that is being unwound, in order to arrive at the appropriate
amount to be paid to the Capital Entity by the SBU.
14
Attachment E
CALCULATING NET BOOK VALUE
Net Book Value (NBV) is the remaining net investment in the lease
recorded in accordance with generally accepted accounting principles as defined
by the Financial Accounting Standards Board (FASB No. 13). More specifically,
the methodologies utilized in the calculation of NBV vary depending upon the
type of Financing being contemplated. The following is a description of the
calculation methodologies by type of Financing:
(a) Direct Finance Lease:
NBV is calculated via Mortgage Method Adjusted amortization from
the original amount Financed (less any advance Customer or Authorized Dealer
payments), down to the accounting residual value, or the term of the Financing,
at the true implicit rate (which is the internal rate of return of the
anticipated accounting revenue stream).
(b) Operating Lease:
NBV is calculated by straight line depreciation, depreciating
from the original Product cost down to the accounting residual value at the end
of the firm term.
Transactions for which no Customer or Authorized Dealer payments
have been made will have a NBV as of Period 0. Transactions for which Customer
or Authorized Dealer payments have been received and retained by the Capital
Entity will have a NBV as of the period number which is equal to the total
number of payments received and retained (i.e., if four (4) payments ire made
and retained, NBV as of Period 4). Transactions for which Customer or Authorized
Dealer payments have been made but will be returned to the Customer or
Authorized Dealer by the Capital Entity will have a NBV as of the period number
which is equal to the total number of payments made. In addition, the Capital
Entity will be reimbursed for Customer or Authorized Dealer payments returned to
the Customer or Authorized Dealer.
The Capital Entities reserve the right to alter the methodology
for calculation of NBV and income recognition as required by the Financial
Accounting Standards Board and shall provide advance written notice to the
appropriate SBU prior to the implementation of-any contemplated change.
15
Attachment F
POST-REPURCHASE ALLOCATION OF REPURCHASE MONIES
The General Allocation of Responsibilities defines, among other
things, circumstances under which the SBUs will assume responsibility for the
billing, collection, and account enforcement, which is accomplished via the
repurchase of the Financing from the Capital Entity for transactions that are
Company Responsibilities. The SBUs recognize that the assumption of the
referenced responsibilities may result from problems under their direct control,
or from problems under the direct control of some other SBU (i.e., selling SBU
differs from Product-owning SBU).
The SBUs shall negotiate, within a reasonable time frame after the date hereof,
the methods and procedures necessary to allocate the repurchase price paid to
the Capital Entity by the SBU which has been deemed to be responsible for the
Financing shortfall.
16
Exhibit 1
PRODUCT / SERVICE PROBLEM REPORT
FOR CAPITAL ENTITY FINANCED TRANSACTION
*****INITIAL REPORT*****
- ---------------------------------------------------------------------------------------------------------------------------
Initial Report Originator: [ ] Company Entity [ ] Capital Entity Date:
(Name): Room
Address: Branch Code (Company Entity)
Address: Telephone:
- -----------------------------------------------------------------------------------------------------------
Customer/Authorized Dealer Bill
Name: Units:
Address: Contact:
Address: Telephone:
Original Date Funded: Amount Funded:
- -----------------------------------------------------------------------------------------------------------
PROBLEM TYPE:
[ ] Product [ ] Service [ ] Warranty [ ]Other
Date First Notified of Problem: By Whom:
A Brief Description of Problem:
Resolution/Recommendation/Comments:
- -----------------------------------------------------------------------------------------------------------
INVESTIGATORY RESPONSE; Date:
By (Name): Room
Address: Branch Code (Company Entity)
Address: Telephone:
17
Resolution/Recommendation/Comments:
18
Exhibit 2
- ---------------------------------------------------------------------------------------------------------------
ACTION TIMETABLE
- ---------------------------------------------------------------------------------------------------------------
- ----------- ---------------------------------- ---------------------------------- -----------------------------
CASE DAYS CAPITAL ENTITY ACTION SBU ACTION REQUIRED ACTION DAYS
- ----------- ---------------------------------- ---------------------------------- -----------------------------
0 1) Becomes aware of alleged 1) Completion of Initial Report The Initial Report to be
Product/service related if problem surfaces through c). prepared and forwarded
problem, through: within 10 days of learning
a) Collection efforts of the alleged problem.
b) Customer or Authorized
Dealer contact
c) Contacted by SBU
2) Completion of Initial Report
(Exhibit 1) if problem
---------
surfaces through a) or b)
above.
- ----------- ---------------------------------- ---------------------------------- -----------------------------
- ----------- ---------------------------------- ---------------------------------- -----------------------------
1-30 Continue billing and collection Status Report to Capital Entity Within 30 days of first
activity, unless otherwise via the Investigator Response Case Day.
agreed. section of the Initial Report.
- ----------- ---------------------------------- ---------------------------------- -----------------------------
- ----------- ---------------------------------- ---------------------------------- -----------------------------
31-60 Continue billing and collection Status Report to Capital Entity Within 60 days of first
activity, unless otherwise if not resolved by day 60. Case Day.
agreed.
- ----------- ---------------------------------- ---------------------------------- -----------------------------
- ----------- ---------------------------------- ---------------------------------- -----------------------------
61-90 Continue billing and collection Status Report to Capital Entity Within 90 days of first
activity, unless otherwise if not resolved by day 90. Case Day.
agreed.
- ----------- ---------------------------------- ---------------------------------- -----------------------------
- ----------- ---------------------------------- ---------------------------------- -----------------------------
91-120 Continue billing and collection (1) Status Report to Capital Within 120 days of first
activity pending SBU decision. Entity if not resolved by Case Day.
Case Day 120.
(2) By Case Day 120 SBU will
advise Capital Entity that is
taking one of the following
courses of action:
a) continue problem resolution
but SBU will assume the
responsibility for billing,
collection, and account
enforcement until problem is
resolved.
b) SBU will assume the
responsibilities stated in (a)
above and will deal directly
with the customer.
c) inform Capital Entity that
the
19
SBU has performed its
obligations, and that an AT&T
Responsibility does not exist.
- ----------- ---------------------------------- ---------------------------------- -----------------------------
- ----------- ---------------------------------- ---------------------------------- -----------------------------
121-150 1) If SBU opts for a) or b) Within 150 days of first
above, Capital Entity will Case Day.
prepare a repurchase calculation
worksheet and forward it to the
SBU for payment processing
(along with repurchase
calculation backup and invoice).
2) If SBU chooses c) above,
Capital Entity may take whatever
action it deems appropriate,
including enforcement action
against the customer.
- ----------- ---------------------------------- ---------------------------------- -----------------------------
- ----------- ---------------------------------- ---------------------------------- -----------------------------
151-180 If SBU has decided to assume the If SBU is to assume Within 180 days of first
responsibility for billing, responsibility for billing, Case Day.
collection, and account collection, and account
enforcement activity, Capital enforcement, it will verify that
Entity will close billing and the repurchase price is properly
collection efforts upon receipt calculated, obtain necessary
of the repurchase amount or 180 internal approvals and paperwork
days from the first Case Day to generate the repurchase
whichever occurs earlier. check, and forward the check to
Capital Entity.
- ----------- ---------------------------------- ---------------------------------- -----------------------------
- ----------- ---------------------------------- ---------------------------------- -----------------------------
181-120 Upon receipt of SBU repurchase Retain Capital Entity documents Within 15 days of receipt
check: for future use, if any. of repurchase check.
(1) send all original documents
to SBU;
(2) execute an assignment form,
transferring all right, title,
and interest to SBU; and
(3) execute the appropriate
UCC documents to assign an
perfected security interest to
SBU.
- ----------- ---------------------------------- ---------------------------------- -----------------------------
20
Exhibit 3
*****Status Report *****
********************************************************************************************************************************
Initial Report Originator: ( ) Company Entity ( ) Capital Entity Date:______________________
By (Name): ______________________________________________________ Room #: _____________________________________________
Address: ______________________________________________________ Branch Code (Company Entity): __________________________
Address: ______________________________________________________ Telephone: _____________________________________________
********************************************************************************************************************************
CUSTOMER/AUTHORIZED DEALER INFORMATION:
Customer/Authorized Dealer Bill
Name: _______________________________________________________ Units: ________________________________________________
Address: _______________________________________________________ Contact:________________________________________________
Address: _______________________________________________________ Telephone:______________________________________________
********************************************************************************************************************************
FOLLOWUP INFORMATION:
( ) Problem Resolved ( ) No Problem Exists ( ) Problem Not Resolved
( ) Problem Resolution Expected By: ______________________________________________________________________________________
Brief Description of Current Efforts: ______________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
Resolution/Recombination/Comments: _____________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
********************************************************************************************************************************
RECEIVERS RESPONSE (IF ANY): Date: ________________________________________________________
By (Name): _____________________________________________ Room #:________________________________________________________
Address: _____________________________________________ Branch Code (Company Entity):__________________________________
Address: _____________________________________________ Telephone:_____________________________________________________
Resolution/Recombination/Comments: _____________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
********************************************************************************************************************************