EXHIBIT 10.9
RECEIVABLES TRANSFER AGREEMENT
Dated As Of December 1, 1998
Among
IKON FUNDING-1, LLC,
As Transferor,
IOS CAPITAL, INC.,
As Originator and Collection Agent,
MARKET STREET FUNDING CORPORATION,
As Issuer,
PNC BANK, NATIONAL ASSOCIATION
As Agent
TABLE OF CONTENTS
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Page
ARTICLE I
AMOUNTS AND TERMS OF TRANSFER
SECTION 1.01. Facility 1
SECTION 1.02. Consideration and Terms 1
SECTION 1.03. Settlement Procedures 2
SECTION 1.04. Payment of Fees and Yield. 5
SECTION 1.05. Payments and Computations, Etc. 6
SECTION 1.06. Increased Costs 6
SECTION 1.07. Additional Yield on Receivables Bearing a Eurodollar Rate 7
SECTION 1.08. Requirements of Law 7
SECTION 1.09. Inability to Determine Eurodollar Rate 8
SECTION 1.10. Additional Yield for Liquidity and Credit Enhancement 8
SECTION 1.11. Breakage Costs 9
SECTION 1.12. Retransfer of Receivables 9
SECTION 1.13. Security Interest 10
ARTICLE II
REPRESENTATIONS AND WARRANTIES;
COVENANTS; TRIGGER EVENTS 11
SECTION 2.01. Representations and Warranties; Covenants 11
SECTION 2.02. Trigger Events 11
ARTICLE III
INDEMNIFICATION, REPURCHASE, ETC. 11
SECTION 3.01. Indemnities by the Transferor 11
SECTION 3.02. Recourse for Yield 13
SECTION 3.03. Repurchase of Ineligible and Certain Other Receivables 13
ARTICLE IV
ADMINISTRATION AND COLLECTION
OF RECEIVABLES 14
SECTION 4.01. Designation of Collection Agent 14
SECTION 4.02. Duties of Collection Agent 14
SECTION 4.03. Certain Rights of the Agent 15
SECTION 4.04. Rights and Remedies 16
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SECTION 4.05. Further Actions Evidencing Transfers 16
SECTION 4.06. Covenants of the Collection Agent and the Originator 16
SECTION 4.07. Indemnities by the Collection Agent 17
ARTICLE V
MISCELLANEOUS 18
SECTION 5.01. Amendments, Etc. 18
SECTION 5.02. Notices, Etc 19
SECTION 5.03. Assignability 20
SECTION 5.04. Costs, Expenses and Taxes 21
SECTION 5.05. No Proceedings 21
SECTION 5.06. Confidentiality 22
SECTION 5.07. GOVERNING LAW 22
SECTION 5.08. Execution in Counterparts 22
SECTION 5.09. Termination 23
SECTION 5.10. Tax Treatment 23
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EXHIBITS
EXHIBIT I -- Definitions
EXHIBIT II -- Conditions of the Transfer
EXHIBIT III -- Representations and Warranties
EXHIBIT IV -- Covenants
EXHIBIT V -- Trigger Events
EXHIBIT VI -- List of Marketplaces
EXHIBIT VII -- Principal Place of Business and Location of Records
ANNEXES
ANNEX A -- Form of Contract
ANNEX B -- Form of Transferor Report
ANNEX C -- Form of Opinion
SCHEDULES
SCHEDULE I -- Credit and Collection Policy
SCHEDULE II -- Receivables||
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RECEIVABLES TRANSFER AGREEMENT
Dated as of December 1, 1998
IKON FUNDING-1, LLC, a Delaware limited liability company (the
"Transferor"), IOS CAPITAL, INC., a Delaware corporation (the "Originator" and
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in its capacity as Collection Agent, the "Collection Agent"), MARKET STREET
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FUNDING CORPORATION, a Delaware corporation (the "Issuer"), and PNC BANK,
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NATIONAL ASSOCIATION ("PNC"), as agent (in such capacity, the "Agent") for the
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Transferees, agree as follows:
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I to this Agreement. References
in Exhibits to "the Agreement" refer to this Agreement, as amended, modified or
supplemented from time to time.
The Transferor has Receivables and Related Security that it wishes to
transfer to the Issuer, and the Issuer is prepared to accept such transfer of
Receivables and Related Security on the terms set forth herein. Accordingly, the
parties agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF TRANSFER
SECTION 1.01. Facility. (a) Upon the satisfaction of the terms and
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conditions hereinafter set forth, the Agent shall, on behalf of the Issuer,
accept Receivables from time to time (each, a "Transfer") during the period from
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the date hereof to the Facility Termination Date. Each Transfer of Receivables
shall include the transfer to the Agent of the Related Security and Collections
with respect thereto. Under no circumstances shall the Agent accept any Transfer
if, after giving effect to such Transfer, the aggregate outstanding Capital
would exceed the Transfer Limit.
(b) The Transferor may, upon at least 30 days' notice to the Agent,
terminate this facility in whole or, from time to time, reduce in part the
unused portion of the Transfer Limit; provided that each partial reduction shall
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be in the amount of at least $10,000,000 or an integral multiple thereof and
that, unless terminated in whole, the Transfer Limit shall in no event be
reduced below $50,000,000.
SECTION 1.02. Consideration and Terms. (a) The initial Transfer shall be
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made on at least two Business Days' notice from the Transferor to the Agent in
an amount equal to the Transfer Limit. On each Settlement Date thereafter
occurring prior to the Facility Termination Date, unless the Transferor has
given written notice to the Agent to the contrary not less than two Business
Days prior to such Settlement Date (or, in the case of any notice to the
contrary which
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would result in the excess of the Transfer Limit over the Capital on the
applicable Settlement Date (after giving effect to all payments to be made on
such date) exceeding $10,000,000, ten Business Days' notice), the Transferor
shall be deemed to have requested a Transfer in an amount equal to the excess of
the Transfer Limit over the Capital as of such Settlement Date (after giving
effect to all payments to be made on such date). The amount to be paid by the
Issuer in respect of each Transfer shall be equal to the Aggregate Adjusted
Outstanding Balance of the Related Contracts for the Receivables included in
such Transfer (the "Consideration" for such Receivables); provided that with
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respect to each Transfer other than the Initial Transfer, such amount shall not
exceed the amount of the Transfer requested in the preceding sentence. Not less
than two Business Days prior to the date of each Transfer (each, a "Transfer
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Date"), the Transferor shall deliver to the Agent a written notice specifying
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detailed information regarding such Receivables, including an addendum to or
revised version of Schedule II hereto.
(b) Promptly upon receipt of such notice, the Agent shall deliver a
copy thereof to the Issuer. Each Transfer other than the initial Transfer shall
be made only on a Settlement Date or as otherwise mutually agreed by the
Transferor and the Agent. On each Transfer Date, upon satisfaction of the
applicable conditions set forth in Exhibit II hereto, (x) the Issuer shall make
available to the Agent the Consideration in respect of such Transfer by deposit
of such amount in same day funds to the Agent's Account and, after the receipt
by the Agent of such funds, the Agent will cause such Consideration to be paid
to the Transferor in immediately available funds prior to 2:00 P.M. (New York
City time) to the Transferor's account no. 5603258724 at PNC Bank, Delaware
(ABA#031100089); provided, however, that in the case of each Transfer other
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than the initial Transfer, the applicable Consideration may be netted against
amounts to be deposited in the Agent's Account on such date by the Collection
Agent pursuant to Section 1.03 and (y) the Transferor does hereby (effective on
the date of each Transfer automatically and without any further documentation)
transfer to the Agent for the benefit of the Issuer and other Transferees all of
the related Receivables, the Related Contracts, the Related Security (other than
the Equipment) and the Collections in respect thereof. The Issuer shall on the
last day of each Settlement Period, notify the Agent, and the Agent shall notify
the Transferor, of the Yield accrued for such Settlement Period or portion
thereof.
SECTION 1.03. Settlement Procedures. (a) Collection of the
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Receivables shall be administered by the Collection Agent, in accordance with
the terms of this Agreement. The Transferor shall provide to the Collection
Agent on a timely basis all information needed for such administration.
(b) The Collection Agent shall, on each day on which Collections are
received by it, set aside and hold in trust for the Transferees such Collections
and shall deposit into the Agent's Account,
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(i) on each Settlement Date, from such Collections, an amount equal
to accrued and unpaid Yield and any other amounts then owed by the
Transferor to any Transferee or the Agent hereunder (including any fees
owed to the Agent pursuant to Section 1.04(a) but excluding any such
amounts owed in respect of Capital);
(ii) on each Settlement Date, an amount equal to the Collection
Agent Fee accrued but unpaid during the preceding Settlement Period; and
(iii) on each Settlement Date, from such Collections, an amount equal
to the portion of Collections received during the preceding Settlement
Period remaining after application pursuant to the preceding clauses (i)
and (ii); provided that prior to the Facility Termination Date, the amount
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to be deposited pursuant to this clause (iii) will not exceed the product
of (A) a fraction, the numerator of which is the Required Balance and the
denominator of which is the aggregate Outstanding Balance of the Related
Contracts and (B) the amount of such Collections;
provided, however, that the aggregate amount deposited pursuant to this
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subsection (b) shall not exceed the sum of the Capital of, and accrued Yield and
Collection Agent Fee on, the Receivables plus the aggregate of any other amounts
then owed by the Transferor to any Transferee or the Agent hereunder.
Notwithstanding the foregoing, unless a Special Event has occurred, for so
long as the Originator is the Collection Agent, the Collection Agent shall not
be required to set aside Collections, but may commingle the Collections with its
own funds and make the deposits required to the Agent's Account pursuant to this
paragraph (b) on the dates required. For so long as the Originator is the
Collection Agent, the Collection Agent shall not be required to deposit the
Collection Agent Fee to the Agent's Account as required by clause (ii) of this
paragraph (b) but may retain such fee from the Collections remaining after the
deposits required pursuant to clause (i) of this paragraph (b).
(c) (i) Upon receipt of funds deposited into the Agent's Account
pursuant to subsection (b)(i) or (b)(ii) above, the Agent shall distribute
such funds as follows: first, pro rata to each Transferee in payment of
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accrued but unpaid Yield on the Capital of such Transferee and to the Agent
in respect of any fees owed pursuant to Section 1.04(a), and second, to the
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Agent for the account of the Transferees or the Agent in payment of any
other amounts owed by the Transferor hereunder.
(ii) Upon receipt of funds deposited into the Agent's Account
pursuant to subsection (b)(ii) above, the Agent shall distribute such
funds, in an amount equal to the accrued but unpaid Collection Agent Fee,
to the Collection Agent on account of the Collection Agent Fee.
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(iii) Upon receipt of funds deposited into the Agent's Account
pursuant to subsection (b)(iii) above, the Agent shall distribute such
funds as follows: first, to the Agent for pro rata distribution to each
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Transferee in reduction to zero of all Capital, second, to the Agent for
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the account of the Transferees or the Agent in payment of any other amounts
owed by the Transferor hereunder, and third, to the Transferor for its own
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account.
(d) For the purposes of this Section 1.03:
(i) if on any day the amount of any Receivable is reduced or
adjusted as a result of (A) early termination of the related Contract, or
(B) any defective, rejected, returned, or repossessed Equipment or
services, or (C) any cash discount, customer concession, trade-in or other
adjustment made by the Transferor or the Originator, or (D) any set-off, or
(E) any loss or damage with respect to any Equipment, the Transferor shall
be deemed to have received on such day a Collection in full of such
Receivable and all other Receivables relating to the same Contract, in the
amount of the Outstanding Balance of such Contract plus Yield thereon to
the end of the then current Settlement Period, and the amount of each such
Collection shall be applied as provided in this Section 1.03;
(ii) if on any day any of the representations or warranties in
paragraph (h) of Exhibit III is no longer true with respect to any
Receivable or the Related Security, the Transferor shall be deemed to have
received on such day a Collection in full of such Receivable and all other
Receivables relating to the same Contract, in the amount of the Outstanding
Balance of such Contract plus Yield thereon to the end of the then current
Settlement Period, and the amount of each such Collection shall be applied
as provided in this Section 1.03; and
(iii) if and to the extent the Agent or any Transferee shall be
required for any reason to pay over to an Obligor any amount received on
its behalf hereunder, such amount shall be deemed not to have been so
received but rather to have been retained by the Transferor and,
accordingly, the Agent or such Transferee, as the case may be, shall have a
claim against the Transferor for such amount, payable when and to the
extent that any distribution from or on behalf of such Obligor is made in
respect thereof.
(e) Except as provided in paragraph (i) or (ii) of Section 1.03(d), or as
otherwise required by applicable law or the relevant Contract, all Collections
received from an Obligor of any Receivables shall be applied to the Receivables
of such Obligor in the order of the age of the due but unpaid amounts with
respect to such Receivables, starting with the oldest such due but unpaid
amount, unless such Obligor designates its payment for application to specific
Receivables.
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(f) The Transferor shall forthwith deliver to the Collection Agent an
amount equal to all Collections deemed received by the Transferor pursuant to
Section 1.03(d)(i) or (ii) above and the Collection Agent shall hold or
distribute such Collections in accordance with Section 1.03(b). If Collections
are then being paid to the Agent, the Collection Agent shall forthwith cause
such deemed Collections to be paid to the Agent. If a Special Event has
occurred, so long as the Transferor shall hold any Collections or deemed
Collections required to be paid to the Collection Agent or the Agent, it shall
hold such Collections in trust and separate and apart from its own funds and
shall clearly mark its records to reflect such trust.
SECTION 1.04. Payment of Fees and Yield. (a) Fees. The Transferor shall
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pay to the Agent certain fees in the amounts and on the dates set forth in a
separate fee agreement of even date herewith (as amended, supplemented or
otherwise modified, the "Fee Letter") between the Transferor and the Agent.
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(b) Yield. Yield for any Transferee for any Settlement Period (or portion
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thereof) on that portion of the Capital which such Transferee will fund or
maintain through the issuance of commercial paper notes is calculated (pursuant
to a formula set forth in the definition of "Yield") based on the Transferee
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Rate for such Settlement Period. Yield for any Transferee for any Settlement
Period (or portion thereof) on that portion of the Capital which such Transferee
will not be funding or maintaining through the issuance of commercial paper
notes is calculated (pursuant to a formula set forth in the definition of
"Yield") based on the Assignee Rate for such Settlement Period, which (subject
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to the provisos set forth in the definition of "Assignee Rate") is equal to
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1.50% per annum plus the Eurodollar Rate for such Settlement Period.
(c) Collection Agent Fee The Collection Agent shall be entitled to receive
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a fee (the "Collection Agent Fee") of 1.50% per annum on the average daily
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Capital from the date of the first Transfer of Receivables until the date on
which such Capital is reduced to zero, payable on each Settlement Date. With
the prior written consent of the Agent, the Collection Agent (if not the
Originator, the Transferor or its designee or an Affiliate of the Transferor)
may elect to be paid, as such fee, another percentage per annum on the average
daily Capital, but in no event in excess of 110% of the reasonable costs and
expenses of the Collection Agent in administering and collecting the
Receivables. The Collection Agent Fee shall be payable solely from Collections
pursuant to, and subject to the priority of payment set forth in, Section 1.03.
So long as the Originator is acting as the Collection Agent hereunder, amounts
paid as the Collection Agent Fee pursuant to this Section 1.04(c) shall reduce
on a dollar-for-dollar basis, the obligation of the Transferor to pay the
"Collection Agent Fee" pursuant to Section 6.03 of the Transfer Agreement;
provided that such obligation of the Transferor shall in no event be reduced
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below zero.
SECTION 1.05. Payments and Computations, Etc. (a) All amounts to be paid
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or deposited by the Transferor or the Collection Agent hereunder to or for the
account of the Agent, the Issuer or any other Transferee shall be paid or
deposited no later than 11:00 A.M. (New York
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City time) on the day when due in same day funds to the Agent's Account. Upon
receipt of funds deposited into the Agent's Account, the Agent shall distribute
such funds to the Persons entitled thereto in accordance with the provisions of
this Agreement or retain such funds for its own account, as appropriate. Where
this Agreement provides for pro rata distribution of funds to the Transferees,
the Agent shall make such distribution in accordance with each Transferee's
percentage interest in the Receivables.
(b) The Transferor shall, to the extent permitted by law, pay interest on
any amount not paid or deposited by the Transferor (whether as Collection Agent
or otherwise) when due hereunder, at an interest rate per annum equal to 2% per
annum above the Alternate Base Rate, payable on demand.
(c) All computations of interest under subsection (b) above and all
computations of Yield, fees, and other amounts hereunder shall be made on the
basis of a year of 360 days for the actual number of days elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
SECTION 1.06. Increased Costs. (a) If PNC, the Agent, the Issuer, a
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Transferee, any entity which enters into a commitment to acquire Receivables or
interests therein, any entity which provides credit enhancement or any of their
respective Affiliates (each an "Affected Person") determines that compliance
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with any law or regulation or any guideline or request from any central bank or
other governmental authority (whether or not having the force of law) affects or
would affect the amount of capital required or expected to be maintained by such
Affected Person and such Affected Person determines that the amount of such
capital is increased by or based upon the existence of any commitment to accept
transfers of or otherwise to maintain the investment in Receivables or interests
therein hereunder or under any commitments to a Transferee related to this
Agreement or to the funding thereof or any related liquidity facility or credit
enhancement facility (or any participation therein) and other commitments of the
same type, then, upon demand by such Affected Person (with a copy to the Agent),
the Transferor shall immediately pay to the Agent, for the account of such
Affected Person (as a third-party beneficiary), from time to time as specified
by such Affected Person, additional amounts sufficient to compensate such
Affected Person in the light of such circumstances, to the extent that such
Affected Person reasonably determines such increase in capital to be allocable
to the existence of any of such commitments. A certificate as to such amounts
submitted to the Transferor and the Agent by such Affected Person shall be
conclusive and binding for all purposes, absent manifest error.
(b) If, due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve requirements) in or in
the interpretation of any law or regulation or (ii) compliance with any
guideline or request from any central bank or other
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governmental authority (whether or not having the force of law), there shall be
any increase in the cost to a Transferee of agreeing to accept the Transfer of
or accepting such Transfers, or maintaining the ownership of the Receivables or
interests therein in respect of which Yield is computed by reference to the
Eurodollar Rate, then upon demand by such Transferee (with a copy to the Agent),
the Transferor shall immediately pay to the Agent, for the account of such
Transferee (as a third-party beneficiary), from time to time as specified by
such Transferee, additional amounts sufficient to compensate such Transferee for
such increased costs. A certificate as to such amounts submitted to the
Transferor and the Agent by a Transferee shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 1.07. Additional Yield on Receivables Bearing a Eurodollar Rate.
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The Transferor shall pay to each Transferee, so long as such Transferee shall be
required under regulations of the Board of Governors of the Federal Reserve
System to maintain reserves with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities, additional Yield on the unpaid Capital of
such Transferee during each Settlement Period in respect of which Yield is
computed by reference to the Eurodollar Rate, for such Settlement Period, at a
rate per annum equal at all times during such Settlement Period to the remainder
obtained by subtracting (i) the Eurodollar Rate for such Settlement Period from
(ii) the rate obtained by dividing such Eurodollar Rate referred to in clause
(i) above by that percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of such Transferee for such Settlement Period, payable on each date
on which Yield is payable on such Receivables. Such additional Yield shall be
determined by such Transferee and notice thereof given to the Transferor through
the Agent within 60 days after any Yield payment is made with respect to which
such additional Yield is requested. A certificate as to such additional Yield
submitted to the Transferor and the Agent by such Transferee shall be conclusive
and binding for all purposes, absent manifest error.
SECTION 1.08. Requirements of Law. In the event that any requirement of
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law or any change therein or in the interpretation or application thereof by the
relevant governmental authority to a Transferee after the date hereof or
compliance by a Transferee with any request or directive (whether or not having
the force of law) from any central bank or other governmental authority:
(i) does or shall subject such Transferee to any tax of any kind
whatsoever with respect to this Agreement or change the basis of taxation
of payments to such Transferee on account of Collections, Yield or any
other amounts payable hereunder (excluding taxes imposed on the income of
such Transferee, and franchise taxes imposed on such Transferee, by the
jurisdiction under the laws of which such Transferee is organized or a
political subdivision thereof); or
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, or deposits or other liabilities in or for the account of, purchases,
advances or loans by, or other credit
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extended by, or any other acquisition of funds by, any office of such
Transferee which are not otherwise included in the determination of the
Eurodollar Rate or the Alternate Base Rate hereunder;
and the result of any of the foregoing is to increase the cost to such
Transferee of maintaining an interest in Receivables or to reduce any amount
receivable hereunder, then, in any such case, the Transferor shall pay such
Transferee, upon its demand, any additional amounts necessary to compensate such
Transferee for such additional cost or reduced amount receivable with regard to
such Transferee's Receivables. All such amounts shall be payable as incurred.
A certificate from such Transferee or the Agent, as the case may be, to the
Transferor certifying, in reasonably specific detail, the basis for, calculation
of, and amount of such additional costs shall be conclusive in the absence of
manifest error.
SECTION 1.09. Inability to Determine Eurodollar Rate. In the event that
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the Agent shall have determined prior to the first day of any Settlement Period
(which determination shall be conclusive and binding upon the parties hereto) by
reason of circumstances affecting the interbank Eurodollar market, either (a)
dollar deposits in the relevant amounts and for the relevant Settlement Period
are not available, (b) adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Settlement Period or (c) the
Eurodollar Rate determined pursuant hereto does not accurately reflect the cost
to the Transferees (as conclusively determined by the Agent) of maintaining
Receivables during such Settlement Period, the Agent shall promptly give
telephonic notice of such determination, confirmed in writing, to the Transferor
prior to the first day of such Settlement Period. If such notice is given, the
Assignee Rate shall be determined without reference to the Eurodollar Rate.
SECTION 1.10. [Reserved]
SECTION 1.11. Breakage Costs. If (a) any payment of Capital as to which
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Yield is computed by reference to the Eurodollar Rate or the Transferee Rate is
made by the Transferor to or for the account of any Transferee other than on the
last day of a Settlement Period, as a result of a payment pursuant to Sections
1.03, 1.12 or 3.03 or for any other reason, or (b) the Termination Date shall
occur during any Settlement Period, or (c) any payment of Capital is made by the
Transferor to a Transferee or an Affected Person other than on the last day of a
Settlement Period upon a purchase and assumption of rights and obligations under
this Agreement as a result of a demand by the Transferor, the Transferor shall,
upon demand by such Transferee or Affected Person (with a copy to the Agent),
immediately pay to the Agent for the account of such Transferee or Affected
Person (as a third-party beneficiary) any amounts required to compensate such
Transferee or Affected Person for any additional losses, costs or expenses which
it may reasonably incur as a result of such payment, including, without
limitation, any loss (including loss of anticipated profits), costs or expenses
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Transferee or Affected Person to fund or maintain its interest
in the Receivables. A certificate as to such
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amounts submitted to the Transferor and the Agent by such Transferee or Affected
Person shall be conclusive and binding for all purposes, absent manifest error.
SECTION 1.12. Retransfer of Receivables. At any time after Capital is
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reduced to less than 10% of the highest amount of Capital outstanding on or
prior to the Facility Termination Date, the Transferor may, at its option, upon
not less than thirty days notice to the Agent, accept the retransfer from the
Agent on the Settlement Date next succeeding such thirty day period or on such
other date as shall be mutually agreed to by the Agent and the Transferor (the
"Retransfer Date"), of all of the Receivables and the Related Security then held
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by the Agent for an amount equal to the Capital outstanding as at the Retransfer
Date (after application of all Collections received on or prior to such date)
plus any accrued and unpaid Yield as at such date plus any other amounts then
owed by the Transferor under this Agreement. The Transferor shall be entitled
to all Collections from the Receivables retransferred to the Transferor in
accordance with this Section 1.12 which are received after the Retransfer Date
and the Collection Agent shall set aside and hold in trust for, and shall pay
forthwith to, the Transferor all such Collections. The terms and provisions of
this Agreement shall continue to be effective or be reinstated, as the case may
be, if any such payment is rescinded or must otherwise be returned to the
Transferor upon the insolvency, bankruptcy or reorganization of the Transferor
or an Obligor or otherwise, all as though such payment had never been made. On
the Retransfer Date:
(i) all of the Receivables and Related Security shall be
retransferred to the Transferor without any representation or warranty
other than that they are free and clear of any Adverse Claims created by or
through the Transferees or the Agent, and
(ii) the Agent shall deliver to the Transferor executed UCC-3
Termination Statements, terminating the interest of the Agent in all such
Receivables and Related Security,
thereupon the Transferor shall be vested with all right, title and interest in
such Receivables and Related Security, and the Agent and the Transferees shall
no longer hold any interest in any of such Receivables or Related Security.
SECTION 1.13. Security Interest. As collateral security for the
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performance by the Transferor of all the terms, covenants and agreements on the
part of the Transferor (whether as Transferor or otherwise) to be performed
under this Agreement or any document delivered in connection with this Agreement
in accordance with the terms thereof, including the punctual payment when due of
all obligations of the Transferor hereunder or thereunder, whether for
indemnification payments, fees, expenses or otherwise, the Transferor hereby
assigns to the Agent for its benefit and the ratable benefit of the Transferees,
and hereby grants to the Agent for its benefit and the ratable benefit of the
Transferees, a security interest in, all of the Transferor's right, title and
interest in and to:
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(a) the Transfer Agreement, including, without limitation, (i) all rights
of the Transferor to receive moneys due or to become due under or pursuant to
the Transfer Agreement, (ii) all security interests and property subject thereto
from time to time purporting to secure payment of monies due or to become due
under or pursuant to the Transfer Agreement, (iii) all rights of the Transferor
to receive proceeds of any insurance, indemnity, warranty or guaranty with
respect to the Transfer Agreement (except any rights that might arise under the
Support Agreement), (iv) claims of the Transferor for damages arising out of or
for breach of or default under the Transfer Agreement, and (v) the right of the
Transferor to compel performance and otherwise exercise all remedies thereunder,
(b) all Receivables, the Related Security with respect thereto and the
Collections and all receivables originated by Dealers and owned by the
Transferor and not otherwise transferred or scheduled to be transferred under
this Agreement and all related collateral with respect thereto, and
(c) to the extent not included in the foregoing, all proceeds of any and
all of the foregoing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES;
COVENANTS; TRIGGER EVENTS
SECTION 2.01. Representations and Warranties; Covenants. The Transferor
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hereby makes the representations and warranties, and hereby agrees to perform
and observe the covenants, set forth in Exhibits III and IV, respectively,
hereto.
SECTION 2.02. Trigger Events. If any of the Trigger Events set forth in
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Exhibit V hereto shall occur and be continuing, the Agent may, by notice to the
Transferor, take either or both of the following actions: (x) declare the
Termination Date to have occurred, and (y) designate another Person to succeed
the Originator as the Collection Agent; provided, that, automatically upon the
--------
occurrence of any event (without any requirement for the passage of time or the
giving of notice) described in paragraph (h) of Exhibit V, the Termination Date
shall occur, the Originator (if it is then serving as the Collection Agent)
shall cease to be the Collection Agent, and the Agent or its designee shall
become the Collection Agent. Upon any such declaration or designation or upon
any such automatic termination, the Transferees and the Agent shall have, in
addition to the rights and remedies which they may have under this Agreement,
all other rights and remedies provided after default under the UCC of the
appropriate
10
jurisdiction or jurisdictions and under other applicable law, which rights and
remedies shall be cumulative.
ARTICLE III
INDEMNIFICATION, REPURCHASE, ETC.
SECTION 3.01. Indemnities by the Transferor. Without limiting any other
-----------------------------
rights that the Agent or any Transferee or any of their respective Affiliates or
its agents (each, an "Indemnified Party") may have hereunder or under applicable
-----------------
law, the Transferor hereby agrees to indemnify each Indemnified Party from and
against any and all claims, losses and liabilities (including reasonable
attorneys' fees) (all of the foregoing being collectively referred to as
"Indemnified Amounts") arising out of or resulting from this Agreement or the
- --------------------
use of proceeds of any Transfer or the acceptance of the transfer of the
Receivables or in respect of any Receivable, Related Contract or Related
Security, excluding, however, (a) Indemnified Amounts to the extent resulting
--------- -------
from gross negligence or willful misconduct on the part of such Indemnified
Party, (b) recourse (except as otherwise specifically provided in this
Agreement) for uncollectible Receivables or (c) any income taxes or franchise
taxes imposed on such Indemnified Party by the jurisdiction under the laws of
which such Indemnified Party is organized or any political subdivision thereof,
arising out of or as a result of this Agreement or the acceptance of the
transfer of the Receivables or in respect of any Receivable, Related Contract or
Related Security. Without limiting or being limited by the foregoing, the
Transferor shall pay on demand to each Indemnified Party any and all amounts
necessary to indemnify such Indemnified Party from and against any and all
Indemnified Amounts relating to or resulting from any of the following:
(i) any representation or warranty or statement made by the
Transferor (or any of its officers) under or in connection with this
Agreement and the other Transaction Documents which shall have been
incorrect in any material respect when made;
(ii) the failure by the Transferor to comply with any applicable
law, rule or regulation (including, without limitation, usury or consumer
law) with respect to any Receivable, the related Contract or the Related
Security; or the failure of any Receivable or the related Contract to
conform to any such applicable law, rule or regulation;
(iii) the failure of the Agent (for the benefit of the Transferees)
to acquire a valid and perfected security interest in the Receivables and
the Related Security and Collections in respect thereof under Article 9 of
the UCC of any applicable jurisdiction, free and clear of any Adverse
Claim;
11
(iv) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any
Receivables or the Related Security and Collections in respect thereof,
whether at the time of the transfer of an interest therein or at any
subsequent time;
(v) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any other
claim resulting from the lease or sale of the related Equipment or services
related to such Receivable or the furnishing or failure to furnish such
Equipment or other services or alleging violation by the Transferor of any
laws in connection with such lease or sale activities;
(vi) any failure of the Transferor to perform its duties or
obligations in accordance with the provisions hereof or to perform its
duties or obligations under the Related Contracts;
(vii) any products or personal liability claim arising out of or in
connection with any Equipment or other merchandise, services or activities
which are the subject of any Related Contract;
(viii) the commingling by the Transferor or any of its Affiliates
(including without limitation the Originator in its capacity as Collection
Agent) of Collections of Receivables at any time with other funds;
(ix) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of any Transfer or the acceptance of the
transfer of Receivables or in respect of any Receivable, Related Security
or Related Contract; or
(x) any fine, penalty, tax or other charge asserted against any
Indemnified Party by any governmental authority or agency or any other
Person resulting from any Obligor's use, possession or ownership of any
Equipment.
SECTION 3.02. Recourse for Yield. The Transferor hereby agrees to pay to
------------------
the Agent, for pro rata distribution to each Transferee, (a) on the last day of
each Settlement Period, any deficiency between (i) Collections applied to
payment of accrued but unpaid Yield on such last day pursuant to Section
1.03(b)(i), and (ii) the amount of accrued but unpaid Yield on such last day on
the Capital.
12
SECTION 3.03. Repurchase of Ineligible and Certain Other Receivables.
------------------------------------------------------
(a) The Transferor shall, upon not less than two Business Days' notice from the
Agent, repurchase (at the repurchase price specified in Section 3.03(b) below)
on the next succeeding Settlement Date:
(i) any Receivable that was not an Eligible Receivable at the time
of the related Transfer;
(ii) any Receivable that ceases to be an Eligible Receivable (other
than by reason of having become a Chargeback Receivable) after the time of
the related Transfer; and
(iii) any Receivable as to which the Agent (for the benefit of the
Transferees) does not have a first priority perfected interest free and
clear of any Adverse Claim.
(b) Each repurchase of a Receivable under Section 3.03(a) above shall
include the repurchase of all other Receivables relating to the same Contract.
The repurchase price shall be an amount equal to the Outstanding Balance of the
related Contract plus accrued but unpaid Yield allocable thereto to the date of
repurchase. The proceeds of any such repurchase shall be deemed to be a
Collection in respect of such Receivables received during the Settlement Period
preceding such Settlement Date and the amount of each such Collection shall be
applied as provided in Section 1.03.
ARTICLE IV
ADMINISTRATION AND COLLECTION
OF RECEIVABLES
SECTION 4.01. Designation of Collection Agent. The servicing,
-------------------------------
administration and collection of the Receivables shall be conducted by the
Collection Agent so designated hereunder from time to time. Until the Agent
gives notice to the Transferor of the designation of a new Collection Agent, the
Originator is hereby designated as, and hereby agrees to perform the duties and
obligations of, the Collection Agent pursuant to the terms hereof. The Agent at
any time may designate as Collection Agent any Person (including itself) to
succeed the Originator or any successor Collection Agent, if such Person shall
consent and agree to the terms hereof. The Collection Agent may, with the prior
consent of the Agent, subcontract with any other Person for the servicing,
administration or collection of the Receivables. Any such subcontract shall not
affect the Collection Agent's liability for performance of its duties and
obligations pursuant to the terms hereof.
SECTION 4.02. Duties of Collection Agent. (a) The Collection Agent shall
--------------------------
take or cause to be taken all such actions as may be necessary or advisable to
collect each Receivable
13
from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy. The Transferor and the Agent hereby appoint the
Collection Agent, from time to time designated pursuant to Section 4.01, as
agent for themselves and for the Transferees to enforce their respective rights
and interests in the Receivables, the Related Security and the related
Contracts. In performing its duties as Collection Agent, the Collection Agent
shall exercise the same care and apply the same policies as it would exercise
and apply if it owned such Receivables and shall act in the best interests of
the Transferor and the Transferees.
(b) The Collection Agent shall administer the Collections in accordance
with the procedures described in Section 1.03.
(c) If no Special Event shall have occurred and be continuing, the
Originator, while it is the Collection Agent, may, in accordance with the Credit
and Collection Policy, extend the maturity or adjust the Outstanding Balance of
any Receivable as the Originator deems appropriate to maximize Collections
thereof.
(d) The Collection Agent shall hold in trust for the Transferor and each
Transferee, in accordance with their respective interests, all documents,
instruments and records (including, without limitation, computer tapes or disks)
which evidence or relate to Receivables.
(e) The Collection Agent shall, as soon as practicable following receipt,
turn over to the Transferor any cash collections or other cash proceeds received
with respect to receivables not transferred to the Agent and the Transferees
pursuant to this Agreement.
(f) The Collection Agent shall, from time to time at the request of the
Agent, furnish to the Agent (promptly after any such request) a calculation of
the amounts set aside for the Agent and the Transferees pursuant to Section
1.03.
(g) Prior to the 13th calendar day of each month, the Collection Agent
shall prepare and forward to the Agent a Transferor Report relating to the
Receivables outstanding on the last day of the immediately preceding month.
SECTION 4.03. Certain Rights of the Agent.
---------------------------
Following the occurrence of a Special Event,
(a) The Agent may direct the Obligors that all payments under the
Related Contracts be made directly to the Agent or its designee.
14
(b) At the Agent's request and at the Transferor's expense, the
Transferor shall notify each Obligor of the interest of the Agent in the
Receivables under this Agreement and direct that payments be made directly
to the Agent or its designee.
(c) At the Agent's request and at the Transferor's expense, the
Transferor and the Collection Agent shall (A) assemble all of the
documents, instruments and other records (including, without limitation,
computer tapes and disks) that evidence or relate to the Receivables and
the Related Contracts and Related Security, or that are otherwise necessary
or desirable to collect the Receivables, and shall make the same available
to the Agent at a place selected by the Agent or its designee, and (B)
segregate all cash, checks and other instruments received by it from time
to time constituting Collections in a manner acceptable to the Agent and,
promptly upon receipt, remit all such cash, checks and instruments, duly
indorsed or with duly executed instruments of transfer, to the Agent or its
designee.
(d) The Transferor authorizes the Agent to take any and all steps in
the Transferor's name and on behalf of the Transferor that are necessary or
desirable, in the determination of the Agent, to collect amounts due under
the Receivables, including, without limitation, endorsing the Transferor's
name on checks and other instruments representing Collections and enforcing
the Receivables and the Related Security and related Contracts.
SECTION 4.04. Rights and Remedies. (a) If the Collection Agent fails to
-------------------
perform any of its obligations under this Agreement, the Agent may (but shall
not be required to) itself perform, or cause performance of, such obligation;
and the Agent's costs and expenses incurred in connection therewith shall be
payable by the Transferor (if the Collection Agent that fails to so perform is
the Transferor or its designee).
(b) The Transferor and the Originator shall perform their respective
obligations under the Related Contracts to the same extent as if the Receivables
had not been transferred and the exercise by the Agent on behalf of the
Transferees of their rights under this Agreement shall not release the
Collection Agent or the Transferor from any of their duties or obligations with
respect to any Receivables or Related Contracts. Neither the Agent nor the
Transferees shall have any obligation or liability with respect to any
Receivables or Related Contracts, nor shall any of them be obligated to perform
the obligations of the Transferor thereunder.
(c) In the event of any conflict between the provisions of Article IV of
this Agreement and Article VI of the Transfer Agreement, the provisions of this
Agreement shall control.
SECTION 4.05. Further Actions Evidencing Transfers. The Originator
------------------------------------
agrees from time to time, at its expense, to promptly execute and deliver all
further instruments and documents, and to take all further actions, that may be
reasonably necessary or desirable, or that
15
the Agent may reasonably request, to perfect, protect or more fully evidence the
Receivables transferred hereunder, or to enable the Transferees or the Agent to
exercise and enforce their respective rights and remedies hereunder. Without
limiting the foregoing, the Originator will upon the request of the Agent (i)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments and documents, that may be reasonably
necessary or desirable, or that the Agent may reasonably request, to perfect,
protect or evidence such interests in Receivables; (ii) mark conspicuously each
invoice evidencing each Receivable and the Related Contract with a legend,
acceptable to the Agent, evidencing that such Receivables have been transferred;
and (iii) mark its master data processing records evidencing such Receivables
and the Related Contracts with such a legend.
SECTION 4.06. Covenants of the Collection Agent and the Originator. (a)
----------------------------------------------------
Audits. The Collection Agent will, from time to time during regular business
- ------
hours as requested by the Agent, permit the Agent, or its agents or
representatives (including independent public accountants, which may be the
Collection Agent's independent public accountants), (i) to conduct periodic
audits of the Receivables, the Related Security and the related books and
records and collections systems of the Collection Agent, (ii) to examine and
make copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under the
control of the Collection Agent relating to the Receivables and the Related
Security, including, without limitation, the Contracts, and (iii) to visit the
offices and properties of the Collection Agent for the purpose of examining such
materials described in clause (ii) above, and to discuss matters relating to the
Receivables and the Related Security or the Collection Agent's performance
hereunder with any of the officers or employees of the Collection Agent having
knowledge of such matters.
(b) Change in Credit and Collection Policy. The Originator will not make
--------------------------------------
any change in the Credit and Collection Policy that would impair the
collectibility of any Receivable or the ability of the Originator (if it is
acting as Collection Agent) to perform its obligations under this Agreement.
SECTION 4.07. Indemnities by the Collection Agent. Without limiting any
-----------------------------------
other rights that the Agent, any Transferee or any of their respective
Affiliates (each, a "Special Indemnified Party") may have hereunder or under
-------------------------
applicable law, and in consideration of its appointment as Collection Agent, the
Collection Agent hereby agrees to indemnify each Special Indemnified Party from
and against any and all claims, losses and liabilities (including reasonable
attorneys' fees) (all of the foregoing being collectively referred to as
"Special Indemnified Amounts") arising out of or resulting from any of the
- ----------------------------
following (excluding, however, (a) Special Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of such
Special Indemnified Party, (b) recourse for uncollectible Receivables or (c) any
income taxes or any other tax or fee measured by income incurred by such Special
Indemnified Party arising out of or as a result of this Agreement or the
ownership of interests in the Receivables or in respect of any Receivable or any
Contract):
16
(i) any representation or warranty or statement made or deemed made
by the Collection Agent under or in connection with this Agreement which
shall have been incorrect in any material respect when made;
(ii) the failure by the Collection Agent to comply with any
applicable law, rule or regulation with respect to any Receivable or
Contract; or the failure of any Receivable or Contract to conform to any
such applicable law, rule or regulation;
(iii) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any
Receivables, the Contracts and the Related Security and Collections in
respect thereof, whether at the time of any purchase or reinvestment or at
any subsequent time;
(iv) any failure of the Collection Agent to perform its duties or
obligations in accordance with the provisions of this Agreement;
(v) the commingling of Collections at any time by the Collection
Agent with other funds;
(vi) any action or omission by the Collection Agent reducing or
impairing the rights of the Transferees with respect to any Receivable or
the value of any Receivable;
(vii) any Collection Agent Fees or other costs and expenses payable
to any replacement Collection Agent, to the extent in excess of the
Collection Agent Fees payable to the Collection Agent hereunder; or
(viii) any claim brought by any Person other than a Special
Indemnified Party arising from any activity by the Collection Agent or its
Affiliates in servicing, administering or collecting any Receivable.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Agreement and no consent to any departure by the Transferor therefrom
shall be effective unless in a writing signed by the Agent, as agent for the
Transferees and, in the case of any amendment, also signed by the Transferor,
and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
--------
however,
- -------
17
that no such material amendment shall be effective until both Moody's and S&P
have notified the Agent in writing that such action will not result in a
reduction or withdrawal of the rating of any of the Issuer's commercial paper
notes. No failure on the part of any Transferee or the Agent to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The Agent shall
provide each Rating Agency with a copy of each amendment to or waiver or consent
under this Agreement promptly following the effective date thereof.
SECTION 5.02. Notices, Etc. All notices, demands and other
------------
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (which shall include electronic transmission), shall be personally
delivered, express couriered, electronically transmitted (in which case a hard
copy shall also be sent by regular mail) or mailed by registered or certified
mail and shall, unless otherwise expressly provided herein, be effective when
received at the address specified below for the listed parties or at such other
address as shall be specified in a written notice furnished to the other parties
hereunder.
If to the Transferor:
IKON FUNDING-1, LLC
501 Silverside Road, Suite 28
Wilmington, Delaware 19809
Attention: Robert McLain
If to the Originator or Collection Agent:
IOS CAPITAL, INC.
1738 Bass Road
Macon, Georgia 31210
Attention: Harry G. Kozee
Tel. No.: (912) 471-2306
Facsimile No.: (912) 471-2388
with a copy to:
IKON OFFICE SOLUTIONS, INC.
70 Valley Stream Parkway
Malvern, Pennsylvania 19355
Attention: Jack Quinn
Tel. No.: (610) 408-7165
Facsimile No.: (610) 408-7022
18
If to the Agent:
PNC BANK, NATIONAL ASSOCIATION
One PNC Plaza, 26th Floor
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Attention: John Smathers
Tel. No.: (412) 762-6440
Facsimile No.: (412) 762-9184
If to the Issuer:
MARKET STREET FUNDING CORPORATION
c/o AMACAR Group, L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Attention: Julianna Johnson
Tel. No.: (704) 365-0569
Facsimile No.: (704) 365-1362
SECTION 5.03. Assignability. (a) This Agreement and each Transferee's
-------------
rights and obligations herein (including rights in the Receivables) shall be
assignable by each Transferee and its successors and assigns if the Agent shall
have received confirmation from each of Moody's and S&P that such assignment
will not result in the withdrawal or downgrade of the then-current ratings of
the Issuer's outstanding commercial paper notes; provided, that no such
--------
confirmation shall be required if such assignment is made by the Issuer to a
Transferee that is a party to a liquidity facility supporting the commercial
paper notes of the Issuer. Each assignor of Receivables or any interest therein
shall notify the Agent and the Transferor of any such assignment; provided, that
--------
no such notice shall be required if such assignment is made by the Issuer to a
Transferee that is a party to a liquidity facility supporting the commercial
paper notes of the Issuer. Each assignor of Receivables may, in connection with
the assignment or participation, disclose to the assignee or participant any
information, relating to the Transferor or the Receivables, which was furnished
to such assignor by or on behalf of the Transferor or by the Agent; provided
--------
that, prior to any such disclosure, the assignee or participant agrees to
preserve the confidentiality of any confidential information relating to the
Transferor received by it from any of the foregoing entities.
(b) This Agreement and the rights and obligations of the Agent herein shall
be assignable by the Agent and its successors and assigns; provided that any
--------
costs incurred by the Agent in connection with such assignment shall be for the
account of the Agent.
19
(c) The Transferor may not assign its rights or obligations hereunder or
any interest herein without the prior written consent of the Agent, which
consent will not be unreasonably withheld.
(d) Without limiting any other rights that may be available under
applicable law, the rights of the Transferees may be enforced through them or by
their agents.
SECTION 5.04. Costs, Expenses and Taxes. (a) In addition to the rights of
-------------------------
indemnification granted under Section 3.01 hereof, the Transferor agrees to pay
on demand all costs and expenses of the Agent and the Issuer and their
respective Affiliates in connection with the preparation, execution, delivery,
amendment and administration (including periodic auditing of Receivables) of
this Agreement, any transfer agreement or similar agreement relating to the
transfer of interests in Receivables and the other documents and agreements to
be delivered hereunder and thereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent, the Issuer
and their respective Affiliates and agents with respect thereto and with respect
to advising the Agent, the Issuer and their respective Affiliates and agents as
to their rights and remedies under this Agreement and all costs and expenses, if
any (including reasonable counsel fees and expenses) of the Agent, the
Transferees and their respective Affiliates and agents, in connection with the
enforcement of this Agreement, and the other documents and agreements to be
delivered hereunder.
(b) The Transferor shall pay any and all stamp and other taxes and fees
payable in connection with the execution, delivery, filing and recording of this
Agreement or the other documents or agreements to be delivered hereunder. The
Transferor agrees to save each Indemnified Party harmless from and against any
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees, any and all stamp and other taxes and fees payable in
connection with the execution, delivery, filing and recording of this Agreement
or the other documents or agreements to be delivered hereunder. The Transferor
agrees to save each Indemnified Party harmless from and against any liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes and fees.
SECTION 5.05. No Proceedings; Limitation on Payments. (a) Each of the
--------------------------------------
Originator, the Transferor, the Agent, each Transferee, each assignee of a
Receivable or any interest therein and each entity which enters into a
commitment to acquire Receivables or interests therein hereby agrees that it
will not institute against, or join any other person in instituting against, the
Issuer any proceeding of the type referred to in paragraph (h) of Exhibit V so
long as any commercial paper issued by the Issuer shall be outstanding and there
shall not have elapsed one year plus one day since the last day on which any
such commercial paper shall have been outstanding.
(b) Notwithstanding anything in this Agreement or any other Transaction
Document to the contrary, the Issuer shall have no obligation to pay any amount
required to be paid by it
20
hereunder or thereunder in excess of any amount available to the Issuer after
paying or making provision for the payment of its commercial paper notes. All
payment obligations of the Issuer hereunder are contingent on the availability
of funds in excess of the amounts necessary to pay its commercial paper notes;
and each of the Transferor, the Collection Agent, the Agent and the Transferees
agree that they shall not have a claim under Section 101(5) of the Bankruptcy
Code if and to the extent that any such payment obligation exceeds the amount
available to the Issuer to pay such amount after paying or making provision for
the payment of its commercial paper notes.
(c) The provisions of this Section 5.05 shall survive any termination of
------------
this Agreement.
SECTION 5.06. Confidentiality. Unless otherwise required by applicable
---------------
law, the Transferor agrees to maintain the confidentiality of this Agreement
(and all drafts thereof) in communications with third parties and otherwise;
provided, that this Agreement may be disclosed to (a) third parties to the
- --------
extent such disclosure is made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to the Agent, and
(b) the Transferor's legal counsel and auditors if they agree to hold it
confidential.
SECTION 5.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF PENNSYLVANIA (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT
THAT THE PERFECTION OF THE INTERESTS OF THE TRANSFEREES IN THE RECEIVABLES OR
REMEDIES HEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF PENNSYLVANIA.
SECTION 5.08. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 5.09. Termination. (a) Except as provided in subsection (b)
-----------
below, this Agreement shall terminate on the Termination Date. Upon the
occurrence of the Termination Date, the Agent will, at the Transferor's cost and
expense, take such actions as are reasonably requested to terminate this
Agreement and the Transfer contemplated thereby (including, without limitation,
executing UCC termination statements).
(b) The provisions of Sections 1.06, 1.08, 1.09, 1.10, 1.11, 3.01, 4.07,
5.04, 5.05 and 5.06 shall survive any termination of this Agreement.
21
SECTION 5.10. Tax Treatment. It is the intention of the Transferor and
-------------
the Agent that for federal, state and local income and franchise tax purposes,
the Capital will be treated as evidence of indebtedness of the Transferor
secured by the Receivables, the Related Security and Collections and other
proceeds thereof. The Transferor, the Agent and the Issuer, by entering into
this Agreement, intend to treat the Capital as indebtedness.
The provisions of this Agreement and all related Transaction Documents
shall be construed to further such intentions of the parties hereto.
22
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
TRANSFEROR: IKON FUNDING-1, LLC
By: IKON FUNDING, INC.
By: /s/ Robert K., McLain
-------------------------------------
Name: Robert K., McLain
Title: President
1
ORIGINATOR IOS CAPITAL, INC.
AND
COLLECTION
AGENT: By: /s/ Jack Quinn
--------------------------------
Name: Jack Quinn
Title:
2
ISSUER: MARKET STREET FUNDING CORPORATION
By: /s/ Signature
--------------------------------
Name:
Title:
3
AGENT: PNC BANK, NATIONAL ASSOCIATION
By: /s/ Signature
--------------------------------
Name:
Title:
4
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits), the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Adverse Claim" means a lien, security interest or other charge or
-------------
encumbrance, or any other type of preferential arrangement.
"Affected Person" has the meaning set forth in Section 1.06.
---------------
"Affiliate" means, as to any Person, any other Person that, directly or
---------
indirectly, is in control of, is controlled by or is under common control with
such Person or is a director or officer of such Person.
"Agent's Account" means the special account (account number 1002-422-076;
---------------
ABA number 04300096) of the Agent.
"Aggregate Adjusted Outstanding Balance" means, with respect to any
--------------------------------------
Receivables to be transferred pursuant to Section 1.02, the aggregate
Outstanding Balance of the Contracts related to such Receivables less the
Discount with respect to such Receivables.
"Agreement" means this Receivables Transfer Agreement, as it may be
---------
amended, supplemented or otherwise modified from time to time.
"Alternate Base Rate" means a fluctuating interest rate per annum as shall
-------------------
be in effect from time to time, which rate shall be at all times equal to the
greater of:
(a) the rate of interest announced publicly by PNC from time to time
as its base commercial lending rate; and
(b) the Federal Funds Rate plus 0.50%.
"Applicable Percentage" means, with respect to the Consideration payable
---------------------
with respect to Receivables, a percentage equal to the greater of (i) 12.0% or
(ii) the product of (a) four, (b) the weighted average life of such Receivables
expressed in years and fractions thereof and as reported in the most recent
Transferor Report and (c) the product of (i) average of the Chargeback Ratios
for the twelve months preceding the related Transfer Date and (ii) 12.
1
"Assignee Rate" for any Settlement Period means an interest rate per annum
-------------
equal to 1 1/2% per annum above the Eurodollar Rate for such Settlement Period;
provided, however, that in the case of
- -------- -------
(i) any Settlement Period on or prior to the first day of which any
Transferee shall have notified the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that
it is unlawful, for such Transferee to fund the Transfer or the maintenance
of its interest in the Receivables at the Assignee Rate set forth above
(and such Transferee shall not have subsequently notified the Agent that
such circumstances no longer exist),
(ii) any Settlement Period of one to (and including) 29 days,
(iii) any Settlement Period as to which the Agent does not receive
notice, by no later than 12:00 noon (New York City time) on the third
Business Day preceding the first day of such Settlement Period that the
Receivables will not be funded by issuance of commercial paper,
(iv) any Settlement Period for which any Transferee's interest in
the Capital allocated thereto is less than $250,000, or
(v) at any time when a Trigger Event has occurred and is
continuing,
the "Assignee Rate" for each such Settlement Period shall be an interest rate
-------------
per annum equal to 1 1/2% per annum above the Alternate Base Rate in effect on
the first day of such Settlement Period.
"BBA" means the British Bankers' Association.
---
"Business Day" means any day on which (i) banks are not authorized or
------------
required to close in New York City or Pittsburgh, Pennsylvania and (ii) if this
definition of "Business Day" is utilized in connection with the Eurodollar Rate,
dealings are carried out on the London interbank market.
"Capital" means the aggregate Consideration for all Transfers that have
-------
occurred on or prior to such date, reduced from time to time by Collections
distributed on account of Receivables and applied to reduce Capital pursuant to
Section 1.03(c)(iii) of the Agreement; provided, that if such Capital shall have
--------
been reduced by any distribution and thereafter all or a portion of such
distribution is rescinded or must otherwise be returned for any reason, such
Capital shall be increased by the amount of such rescinded or returned
distribution, as though it had not been made.
2
"Chargeback Ratio" means the ratio (expressed as a percentage) computed as
----------------
of the last day of each calendar month by dividing (i) the aggregate amount of
all Related Contracts having one or more Receivables that were Chargeback
Receivables on such day or that would have been Chargeback Receivables on such
day had they not been written off the books of the Transferor during such month
by (ii) the aggregate amount of all Related Contracts on such day.
"Chargeback Receivable" means a Receivable:
---------------------
(i) as to which any payment, or part thereof, remains unpaid for
180 or more days from the original due date for such payment;
(ii) as to which the Obligor thereof or any other Person obligated
thereon or owning any Related Security in respect thereof has taken any
action, or suffered any event to occur, of the type described in paragraph
(h) of Exhibit V; or
(iii) which, consistent with the Credit and Collection Policy, would
be retransferred to the related Dealer as uncollectible.
"Collection Agent" means at any time the Person then authorized pursuant to
----------------
Section 4.01 of the Agreement to administer and collect Receivables.
"Collection Agent Fee" has the meaning specified in Section 1.04(c) of the
--------------------
Agreement.
"Collections" means, with respect to any Receivable, (i) all cash
-----------
collections and other cash proceeds of such Receivable, including, without
limitation, any proceeds resulting from the repurchase of such Receivable by
IKON Office Solutions, Inc. and all cash proceeds of Related Security with
respect to such Receivable (including, without limitation, payments under the
related Contract due upon or in connection with (a) Obligor's default under the
Contract, (b) loss, theft or damage to the related Equipment, or (c) renewal of
the Contract), provided, that Collections shall not include collections which
--------
represent the payment of (x) maintenance charges or (y) insurance premiums, and
(ii) any Collection of such Receivable deemed to have been received pursuant to
the Agreement.
"Consideration" has the meaning set forth in Section 1.02(a) of the
-------------
Agreement.
"Contract" means a closed-end lease agreement between the Originator and an
--------
Obligor having an original lease/loan term not exceeding 72 months, in
substantially the form of one of the forms of written contract set forth in
Annex A hereto or otherwise approved by the Agent, which has been sold to
Transferor pursuant to the Transfer Agreement, pursuant to or under which such
Obligor shall be obligated to pay for the lease of Equipment.
3
"Credit and Collection Policy" means those receivables collection policies
----------------------------
and practices of the Originator in effect on the date of the Agreement and
described in Schedule I hereto, as modified in compliance with the Agreement.
"Dealer " means any Person originating Receivables relating to Equipment
------
located in an Eligible Marketplace.
"Debt" means (i) indebtedness for borrowed money, (ii) obligations
----
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property or services, (iv)
obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, (v) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above, and (vi) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Default Ratio" means the ratio (expressed as a percentage) computed as of
-------------
the last day of each calendar month by dividing (i) the aggregate amount of all
Related Contracts having one or more Receivables that were Defaulted Receivables
on such day or that would have been Defaulted Receivables on such day had they
not been written off the books of the Transferor during such month by (ii) the
aggregate amount of all Related Contracts on such day.
"Defaulted Receivable" means a Receivable as to which any payment, or part
--------------------
thereof, remains unpaid for more than 120 days and less than 179 days from the
original due date for such payment.
"Delinquency Ratio" means the ratio (expressed as a percentage) computed as
-----------------
of the last day of each calendar month by dividing (i) the aggregate amount of
all Related Contracts having one or more Receivables that were Delinquent
Receivables on such day by (ii) the aggregate amount of all Related Contracts on
such day.
"Delinquent Receivable" means a Receivable:
---------------------
(i) as to which any payment, or part thereof, remains unpaid for 30
or more days from the original due date for such payment; or
(ii) which, consistent with the Credit and Collection Policy, would
be classified as delinquent by the Originator or the Transferor.
4
"Designated Account" means an account in the name of and owned by the
------------------
Agent, designated by the Agent in a writing delivered to the Transferor, for the
purpose of receiving Collections of Receivables.
"Discount" means, with respect to any group of Receivables, the product of
--------
(a) the aggregate Outstanding Balance of the Related Contracts relating to such
Receivables and (b) the Applicable Percentage in respect of such Receivables.
"Eligible Marketplace" means any of the marketplaces set forth on Exhibit
--------------------
VI hereto, as such Exhibit may be amended from time to time by the Transferor
with the consent of the Agent.
"Eligible Receivable" means, at any time, a Receivable:
-------------------
(i) the Obligor of which is (a) a United States resident, (b) is
not the Transferor or any Affiliate thereof, and (c) is not a Governmental
Obligor; provided, that Obligors with respect to Contracts having an
--------
aggregate Outstanding Balance of not greater than 5% of the aggregate
Outstanding Balance of all Eligible Receivables may be Governmental
Obligors;
(ii) the Obligor of which has not been disapproved by the Agent on
or prior to the date of the Transfer and which, at the time of the
Transfer, is not the Obligor of any Chargeback Receivables;
(iii) which is not a Chargeback Receivable;
(iv) (a) which arises under a Contract with a remaining term of not
more than 60 months; provided, that Contracts having an aggregate
--------
Outstanding Balance of not greater than 5% of the aggregate
Outstanding Balance of all Eligible Receivables may have a remaining
term of up to 72 months;
and
(b) which, according to such Contract, consists of
substantially equal monthly Periodic Payments which are required to be
paid within 30 days of the billing date therefor; provided, that
--------
Contracts having an aggregate Outstanding Balance of not greater than
4% of the aggregate Outstanding Balance of all Eligible Receivables
may have payments which are not substantially equal monthly payments;
(v) which arose pursuant to a Contract which is "chattel paper"
within the meaning of Section 9-105 of the UCC of the applicable
jurisdictions governing the perfection of the interest created in the
Receivables;
5
(vi) which is denominated and payable in United States dollars in
the United States;
(vii) which arises under a Contract (a) which has been duly
authorized and which, together with such Receivable, is in full force and
effect and constitutes the legal, valid and binding obligation of the
Obligor of such Receivable enforceable against such Obligor in accordance
with its terms and is not subject to any dispute, offset, counterclaim or
defense whatsoever (except as limited by applicable bankruptcy law), (b) in
respect of which, prior to the date it is transferred hereunder, the
Equipment has been delivered and accepted, (c) which pursuant to its terms
is not cancellable by the lessee before the end of its stated term (other
than, in the case of Contracts related to Governmental Obligors, by reason
of nonrenewal of appropriations) and (d) which, if related to a
Governmental Obligor, has not been canceled before the end of its stated
term by reason of nonrenewal of appropriations;
(viii) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, consumer protection, truth in lending,
consumer leasing, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with respect
to which none of the Transferor, the Originator or the related Obligor is
in violation of any such law, rule or regulation in any material respect;
(ix) with regard to which there exists only one executed original
Contract, which is in the possession of Transferor on the Transfer Date of
such Receivable;
(x) which represents payments due to the Originator and does not
represent any payments payable for the account of any Person other than the
Originator under the Contract relating to such Receivable or any sales or
use tax payable under such Contract;
(xi) which satisfies all applicable requirements of the Credit and
Collection Policy;
(xii) which, after giving effect to the acquisition thereof, would
not result in the aggregate Outstanding Balance of Related Contracts of any
single Obligor exceeding 2% of the aggregate Outstanding Balance of all
Related Contracts;
(xiii) as to which, at or prior to the time of the Transfer, the Agent
has not notified the Transferor that such Receivable (or class of
Receivables) is not acceptable for transfer to the Issuer hereunder;
6
(xiv) the transfer or assignment of which does not contravene any
applicable law, rule or regulation;
(xv) which was originated in an Eligible Marketplace; and
(xvi) which, after giving effect to the acquisition thereof, would
not result in the aggregate Outstanding Balance of Related Contracts of
Obligors located in any single state exceeding 15% (or, in the case of
Indiana and Texas, 20%) of the aggregate Outstanding Balance of all Related
Contracts.
"Equipment" with respect to any Receivable means office, business or other
---------
equipment leased or sold to an Obligor by the Originator pursuant to a Contract
(including any modifications or substitutions of equipment pursuant to the
original Contract giving rise to such Receivable).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" means, for any Settlement Period, the interest rate per
---------------
annum determined by the Agent by dividing (the resulting quotient rounded
upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of
interest determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the average of
the London interbank market offered rates for U.S. dollars quoted by the BBA as
set forth on Dow Jones Markets Service (formerly known as Telerate) (or
appropriate successor or its successor ceases to provide display page 3750 (or
such other display page on the Dow Jones Markets Service system as may replace
display page 3750) at or about 11:00 a.m. (London time) on the Business Day
which is two (2) Business Days prior to the first day of such Settlement Period
for an amount comparable to the Capital to be funded at the Assignee Rate and
based upon the Eurodollar Rate during such Settlement Period by (ii) a number
equal to 1.00 minus the Euro-Rate Reserve Percentage. The Eurodollar Rate may
also be expressed by the following formula:
Average of London interbank offered rates quoted by BBA
as shown on Dow Jones Markets Service display page 3750
or appropriate successor
Eurodollar Rate =
1.00 - Euro-Rate Reserve Percentage
7
where "Euro-Rate Reserve Percentage" means, the maximum effective percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including without limitation, supplemental, marginal, and emergency reserve
requirements) with respect to eurocurrency funding liabilities (currently
referred to as "Eurocurrency Liabilities"). The Eurodollar Rate shall be
adjusted with respect to any Capital funded at the Assignee Rate and based upon
the Eurodollar Rate that is outstanding on the effective date of any change in
the Euro-Rate Reserve Percentage as of such effective date. The Agent shall give
prompt notice to the Transferor of the Eurodollar Rate as determined or adjusted
in accordance herewith (which determination shall be conclusive absent manifest
error).
"Facility Termination Date" means the earlier of the Scheduled Termination
-------------------------
Date, or the Termination Date.
"Federal Funds Rate" means, with respect to any day, the rate set forth in
------------------
H.15(519) for that day opposite the caption "Federal Funds (Effective)."
If on any date of determination, such rate is not published in H.15(519),
such rate will be the rate set forth in Composite 3:30 P.M. Quotations for U.S.
Government Securities for that day under the caption "Federal Funds/Effective
Rate". If on any date of determination, the appropriate rate is not published
in either H.15(519) or Composite 3:30 P.M. Quotations for U.S. Government
Securities, such rate will be the arithmetic mean of the rates for the last
transaction in overnight federal funds arranged by three leading brokers of
federal funds transactions in New York City prior to 9:00 a.m., New York City
time, on that day.
"Fee Letter" has the meaning set forth in Section 1.04.
----------
"Governmental Obligor" means an Obligor that is the federal government, the
--------------------
government of any state or governmental subdivision or any agency of the federal
government or the government of any state.
"IKON Group" means, collectively, the Transferor, the Originator and the
----------
Parent.
"Indemnified Amounts" has the meaning specified in Section 3.01 of the
-------------------
Agreement.
"Indemnified Party" has the meaning specified in Section 3.01 of the
-----------------
Agreement.
"Investment Grade" means, with respect to any entity's long-term public
----------------
senior debt securities, a rating of at least "BBB-" by S& P and of at least
"Baa3" by Moody's.
8
"Issuer" means Market Street Funding Corporation and any successor or
------
assign of the Issuer that is a receivables investment company which in the
ordinary course of its business issues commercial paper or other securities to
fund its acquisition and maintenance of receivables.
"Liquidity Agreement" means the Liquidity Asset Purchase Agreement, dated
-------------------
as of December 1, 1998 between the purchasers from time to time party thereto,
the Issuer and PNC, as Administrator and liquidity agent, as the same may be
further amended, supplemented or otherwise modified from time to time.
"Material Adverse Change" means any set of circumstances or events which
-----------------------
(a) has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of the Agreement or any other
Transaction Document, (b) is or could reasonably be expected to be material and
adverse to the business, properties, assets, financial condition, results of
operations or prospects of the Transferor, the Collection Agent or the
Originator or any of their successors or assigns (the "Seller Parties"), (c)
impairs materially or could reasonably be expected to impair materially the
ability of the Seller Parties to duly and punctually pay or perform their
respective obligations under the Agreement or any other Transaction Document, or
(d) impairs materially or could reasonably be expected to impair materially the
ability of the Agent or any Transferee, to the extent permitted, to enforce
their legal remedies pursuant to the Agreement or any other Transaction
Document.
"Moody's" means Moody's Investors Service, Inc. and any successor thereto.
-------
"Obligor" means a Person obligated to make payments pursuant to a Contract;
-------
provided that in the event that any payments in respect of a Contract are made
- --------
by any other Person, such other Person shall be deemed to be an Obligor.
"Other Corporations" means the Parent, the Originator and all of the
------------------
Parent's Subsidiaries except the Transferor.
"Originator" means IOS Capital, Inc., a Delaware corporation, in its
----------
capacity as originator under the Transfer Agreement.
"Outstanding Balance" of any Contract or Receivables with respect thereto
-------------------
at any date means the net present value of the total Periodic Payments due to
Transferor over the remaining term of the Contract (net of any security deposits
or advance rental payments received by Transferor) and not yet paid by the
Collection Agent pursuant to the provisions of Section 1.03(b), discounted at
the implied interest rate used by the Originator or the applicable Dealer in
originating such Contract, as determined by subtracting all amounts representing
unearned interest from the aggregate amount of such Periodic Payments.
9
"Parent" means IKON Office Solutions, Inc., an Ohio corporation.
------
"Periodic Payments" means the aggregate base rental amounts coming due on a
-----------------
periodic basis pursuant to the Contracts giving rise to Receivables, excluding
any maintenance charges or, with respect to Contracts covering photocopiers, any
per copy charges.
"Person" means an individual, partnership, corporation (including a
------
business trust), limited liability company, limited liability partnership, joint
stock company, trust, unincorporated association, joint venture or other entity,
or a government or any political subdivision or agency thereof.
"Program Fee" is defined in the Fee Letter.
-----------
"Qualified Hedge Agreement" means an interest rate cap or other hedging
-------------------------
arrangement the payments due from the counterparty of which are for the
exclusive benefit of the Agent, and which meets each of the following
qualifications: (i) such hedging arrangement has a notional amount at least
equal to the aggregate Outstanding Balance of the Related Contracts, (ii) such
hedging arrangement has a counterparty the long-term debt obligations of which
are rated at least "AA-" by S&P and "Aa3" by Moody's, (iii) such hedging
arrangement in satisfactory to the Agent in its sole discretion, and (iv) the
Agent shall have received confirmation from each of Moody's and S&P that entry
into such hedging agreement will not result in the withdrawal or downgrade of
the then-current ratings of the Issuer's outstanding commercial paper notes.
"Receivable" means the obligations of any Obligor under a Related Contract,
----------
and includes monies received subsequent to the related Transfer Date with
respect to (i) all Periodic Payments and (ii) all obligations of such Obligor
to pay interest or finance charges and other obligations of such Obligor (other
than obligations in respect of taxes or insurance or similar escrow arrangements
of any kind) with respect thereto, and all other payments (other than in respect
of taxes or insurance or similar escrow arrangements of any kind) received by
the Transferor pursuant to such Contract. A Receivable arising under a Related
Contract for which the Outstanding Balance has been collected shall no longer
constitute a "Receivable" outstanding hereunder.
"Related Contract" means a Contract included in the List of Contracts
----------------
delivered to the Agent pursuant to paragraph (j) of Exhibit IV hereof; provided,
--------
that after the Outstanding Balance of such Contract has been collected, it shall
no longer constitute a "Related Contract" hereunder.
"Related Security" means with respect to any Receivable:
----------------
(i) all other security interests or liens and property subject
thereto (other than Equipment) from time to time purporting to secure
payment of such Receivable, whether
10
pursuant to the Contract related to such Receivable or otherwise, together
with all financing statements signed by an Obligor describing any
collateral securing such Receivable;
(ii) all guaranties (other than the Support Agreement), insurance
and other agreements or arrangements of whatever character from time to
time supporting or securing payment of such Receivable (or insuring for
loss or liability with respect to the related Equipment), whether pursuant
to the Contract related to such Receivable or otherwise and all of the
Transferor's rights (if any) to recourse, repurchase or indemnity against
any dealer, including any Dealer, or other Person with respect to such
Receivable; and
(iii) the related Contract and all other books, records and other
information (including, without limitation, computer programs, tapes,
discs, punch cards, data processing software and related property and
rights) relating to such Receivable and the related Obligor.
"Required Balance" means, with respect to any Settlement Date, an amount
----------------
equal to (a) the Capital on such Settlement Date divided by (b) (i) one minus
(ii) the Applicable Percentage.
"S&P" means Standard & Poor's Ratings Group, a division of the McGraw-Hill
---
Companies, Inc. and any successor thereto.
"Scheduled Termination Date" shall mean November 30, 2001;
--------------------------
"Settlement Date" means the fifteenth day of each calendar month, or, if
---------------
such day is not a Business Day, the next succeeding Business Day.
"Settlement Period" means: (a) with respect to any Receivables funded by
-----------------
the issuance of commercial paper, (i) initially the period commencing on (and
including) the date of the initial purchase or funding of such Receivables and
ending on (and including) the next succeeding day that is the fourteenth day of
a calendar month, and (ii) thereafter, each period commencing on (and including)
the first day after the last day of the immediately preceding Settlement Period
and ending on (and including) the next succeeding day that is the fourteenth day
of a calendar month; and (b) with respect to any Receivables not funded by the
issuance of commercial paper, (i) initially the period commencing on (and
including) the date of the initial purchase or funding of such Receivables and
ending on (but excluding) the next following Settlement Date, and (ii)
thereafter, each period commencing on a Settlement Date and ending on (but
excluding) the next following Settlement Date; provided, that
--------
11
(i) any Settlement Period (other than of one day) which would
otherwise end on a day which is not a Business Day shall be extended
to the next succeeding Business Day;
(ii) in the case of any Settlement Period which commences before
the Facility Termination Date and would otherwise end on a date
occurring after the Facility Termination Date, such Settlement Period
shall end on such Facility Termination Date and the duration of each
Settlement Period which commences on or after the Facility Termination
Date shall be of such duration as shall be selected by the Agent; and
(iii) any Settlement Period in respect of which Yield is
computed by reference to the Transferee Rate may be terminated at the
election of, and upon notice thereof to the Transferee, by the Agent
at any time, in which case the Receivables allocated to such
terminated Settlement Period shall be allocated to a new Settlement
Period commencing on (and including) the date of such termination and
ending on (but excluding) the next following Settlement Date, and
shall accrue Yield at the Assignee Rate.
"Special Event" means a Trigger Event or an event that but for notice or
-------------
lapse of time or both would constitute a Trigger Event.
"Special Indemnified Amounts" has the meaning specified in Section 5.07 of
---------------------------
the Agreement.
"Special Indemnified Party" has the meaning specified in Section 5.07 of
-------------------------
the Agreement.
"Subsidiary" means any corporation or other entity of which securities
----------
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by the Transferor, the Originator or the Parent, as the case
may be, or one or more Subsidiaries, or by the Transferor, the Originator or the
Parent, as the case may be, and one or more Subsidiaries.
"Support Agreement" means the operating agreement dated October 22, 1996
-----------------
between the Originator and the Parent, as such agreement may be amended or
supplemented from time to time.
"Termination Date" means the earliest of (a) the date specified pursuant to
----------------
Section 2.02 of the Agreement, (b) the date on which each Transferee receives an
amount equal to its pro rata portion of the Capital plus accrued Yield thereon
plus all other amounts due to it under the Agreement and the Agent receives all
amounts due to it under the Agreement and (c) the date the commitments of the
"Purchasers" under the Liquidity Agreement terminate.
12
"Transaction Document" means any of the Agreement, the Transfer Agreement
--------------------
and all other agreements and documents delivered and/or related hereto or
thereto.
"Transfer" has the meaning specified in Section 1.01 of the Agreement.
--------
"Transfer Agreement" means the Transfer Agreement dated as of the date
------------------
hereof between the Transferor and the Originator, as such agreement may be
amended from time to time.
"Transfer Date" has the meaning specified in Section 1.02(a) of the
-------------
Agreement.
"Transfer Limit" means $250,000,000.
--------------
"Transferee" means the Issuer and all other owners by assignment or
----------
otherwise of Receivables or any interest therein and, to the extent of the
undivided interests so purchased, shall include any participants.
"Transferee Rate" for any Settlement Period means a rate calculated by the
---------------
Agent equal to (a) the rate (or if more than one rate, the weighted average of
the rates) of the commercial paper notes of the Issuer that are allocated, in
whole or in part, by the Administrator during such Settlement Period to fund the
Capital; provided, that if such rate(s) is a (are) discount rate(s), then the
--------
Transferee Rate shall be the rate (or if more than one rate, the weighted
average of the rates) resulting from converting such discount rate(s) to an
interest-bearing equivalent rate per annum plus (b) the commissions and charges
charged by any placement agent or commercial paper dealer with respect to such
commercial paper notes, expressed as a percentage of the face amount of such
commercial paper notes and converted to an interest-bearing equivalent rate per
annum.
"Transferor Report" means a report, in substantially the form of Annex B
-----------------
hereto, furnished by the Collection Agent to the Agent pursuant to Section 4.02
of the Agreement.
"Trigger Event" has the meaning specified in Exhibit V.
-------------
"UCC" means the Uniform Commercial Code as from time to time in effect in
---
the specified jurisdiction.
"Yield" means:
-----
(i) for any Settlement Period to the extent the Issuer will be
funding the Transfer or the maintenance of its interest in the Receivables
during such Settlement Period through the issuance of commercial paper,
13
TR x C x ED
--
360
(ii) for any Settlement Period to the extent a Transferee will not be
funding the Transfer or the maintenance of its interest in the Receivables
during such Settlement Period through the issuance of commercial paper,
AR x C x ED
--
360
where:
AR = the Assignee Rate for such Settlement Period;
C = Capital during such Settlement Period;
TR = the Transferee Rate for the Issuer for such
Settlement Period;
ED = the actual number of days elapsed during such
Settlement Period;
provided, that no provision of the Agreement shall require the payment or permit
- --------
the collection of Yield in excess of the maximum permitted by applicable law;
and provided, further, that Yield shall not be considered paid by any
-------- -------
distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
- - - - - -
Other Terms. All accounting terms not specifically defined herein shall be
-----------
construed in accordance with generally accepted accounting principles. All
terms used in Article 9 of the UCC in the State of Pennsylvania, and not
specifically defined herein, are used herein as defined in such Article 9.
14
EXHIBIT II
CONDITIONS OF TRANSFERS
1. Conditions Precedent to the Initial Transfer. The initial Transfer is
--------------------------------------------
subject to the conditions precedent that the Agent shall have received on or
before the date of such Transfer the following, each (unless otherwise
indicated) dated such date, in form and substance satisfactory to the Agent:
(a) Certified copies of the resolutions of the Board of Directors of the
Transferor approving the Transaction Documents and all related actions, and
certified copies of all documents evidencing other necessary limited liability
company action and governmental approvals, if any, with respect to the
Transaction Documents and such actions.
(b) Certified copies of the resolutions of the Board of Directors of the
Originator approving the Transaction Documents and all related actions, and
certified copies of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to the Transaction Documents
and such actions.
(c) A certificate of the Secretary or Assistant Secretary of the
Transferor certifying the names and true signatures of the officers of the
Transferor, authorized to sign the Transaction Documents and the other documents
to be delivered by it thereunder.
(d) A certificate of the Secretary or Assistant Secretary of the
Originator certifying the names and true signatures of the officers of the
Originator authorized to sign the Transaction Documents and the other documents
to be delivered by it thereunder.
(e) A copy of the organizational documents of the Transferor, and a
certificate as to the good standing of the Transferor from such Secretary of
State or other official, dated as of a recent date.
(f) Acknowledgment copies or time stamped receipt copies of proper
financing statements, duly filed on or before the Initial Transfer under the UCC
of all jurisdictions that the Agent may deem necessary or desirable in order to
perfect the interests contemplated by the Agreement.
(g) Acknowledgment copies or time stamped receipt copies of proper
financing statements, if any, necessary to release all security interests and
other rights of any Person in the (i) Receivables, Related Contracts or Related
Security previously granted by the Transferor and the Originator and (ii) the
collateral security referred to in Section 1.13.
1
(h) Completed requests for information, listing the financing statements
referred to in subsection (f) above and all other effective financing statements
filed in the jurisdictions referred to in subsection (f) above that name the
Transferor as debtor, together with copies of such other financing statements
(none of which shall cover any Receivables, Related Contracts, Related Security
or the collateral security referred to in Section 1.13).
(i) A favorable opinion of Ballard Spahr Andrews & Ingersoll, LLP, counsel
for the Transferor and the Originator, substantially in the form of Annex C
hereto and as to such other matters as the Agent may reasonably request.
(j) The Fee Letter duly executed by all parties thereto.
(k) The Transfer Agreement, duly executed by all parties thereto.
(l) Satisfactory results of a review and audit by the Agent of the
Originator's collection, operating and reporting systems, Credit and Collection
Policy, historical receivables data and accounts.
(m) A Pro Forma Transferor Report.
Payment of the Consideration for the initial Transfer hereunder shall
constitute acknowledgment by the Agent that all of the conditions set forth have
been fulfilled or waived.
2. Additional Conditions Precedent. Each Transfer shall be subject to
-------------------------------
the further conditions precedent that
(a) on or prior to the date of such Transfer, the Collection Agent shall
have delivered to the Agent, in form and substance satisfactory to the Agent, a
completed Transferor Report dated within 30 days prior to the date of the
Transfer together with a listing by Obligor of all Receivables and such
additional information as may reasonably be requested by the Agent;
(b) on the date of the Transfer the following statements shall be true
(and acceptance of the proceeds of the Transfer shall be deemed a representation
and warranty by the Transferor that such statements are then true):
(i) The representations and warranties of the Transferor contained
in Exhibit III are correct on and as of the date of the Transfer as though
made on and as of such date;
(ii) No event has occurred and is continuing, or would result from
the Transfer, that constitutes a Special Event;
2
(iii) The representations and warranties of the Originator contained
in the Transaction Documents are correct on and as of the date of the
Transfer as though made on and as of such date; and
(iv) All of the Originator's long-term public senior debt securities
are rated Investment Grade;
(c) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request; and
(d) the Agent shall have received the list of the Related Contracts to be
included in such Transfer that is required to be delivered pursuant to paragraph
(j) of Exhibit IV hereof.
3
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
The Transferor represents and warrants as follows:
(a) The Transferor is a limited liability company duly formed, validly
existing and in good standing under the laws of Delaware, and is duly qualified
to do business, and is in good standing, in every jurisdiction where the nature
of its business requires it to be so qualified.
(b) The execution, delivery and performance by the Transferor of the
Transaction Documents (i) are within the Transferor's limited liability company
powers, (ii) have been duly authorized by all necessary limited liability
company action, (iii) do not contravene (1) the Transferor's organizational
documents, (2) any law, rule or regulation applicable to the Transferor, (3) any
contractual restriction binding on or affecting the Transferor or its property
or (4) any order, writ, judgment, award, injunction or decree binding on or
affecting the Transferor or its property, and (iv) do not result in or require
the creation of any lien, security interest or other charge or encumbrance upon
or with respect to any of its properties (other than those created pursuant to
the Transaction Documents); and no transaction contemplated by the Agreement
requires compliance with any bulk sales act or similar law. Each of the
Transaction Documents has been duly executed and delivered by the Transferor.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Transferor of the Transaction
Documents, except for the filing of the UCC financing statements which are
referred to therein.
(d) Each of the Transaction Documents constitutes the legal, valid and
binding obligation of the Transferor enforceable against the Transferor in
accordance with its terms.
(e) The balance sheets of the Originator and its Subsidiaries as at
September 30, 1997 and June 30, 1998 and the related statements of income and
retained earnings of the Originator and its Subsidiaries for the fiscal year
then ended, copies of which have been furnished to the Agent, fairly present the
financial condition of the Originator and its Subsidiaries as at such date and
the results of the operations of Originator and its Subsidiaries for the period
ended on such date, all in accordance with generally accepted accounting
principles consistently applied, and since June 30, 1998 there has been no
material adverse change in the business, operations, property or financial or
other condition of the Originator. Since the date of its incorporation, there
has not been a material adverse change in the business, operations, property or
financial or other condition of the Transferor.
1
(f) There is no pending or threatened action or proceeding affecting the
Originator or any of its Subsidiaries before any court, governmental agency or
arbitrator which may materially adversely affect the financial condition or
operations of the Originator or any of its Subsidiaries or the ability of the
Transferor or the Originator to perform their respective obligations under the
Transaction Documents, or which purports to affect the legality, validity or
enforceability of the Transaction Documents; neither the Originator nor any
Subsidiary is in default with respect to any order of any court, arbitration or
governmental body.
(g) No proceeds of any Transfer will be used to acquire any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended.
(h) The Transferor has the right to transfer each Receivable and all
Related Security together with the Contract related thereto, free and clear of
any Adverse Claim, other than the effect of the Agreement and the transactions
contemplated hereby. Upon the Transfer, the Agent (for the benefit of the
Transferees) will acquire a valid and perfected first priority interest in each
Receivable and in the Related Security (except to the extent noted above) and
Collections with respect thereto. No effective financing statement or other
instrument similar in effect covering any Related Contract or any Receivable or
the Related Security or Collections with respect thereto is on file in any
recording office except for those filed in favor of the Agent relating to the
Agreement and those filed by the Transferor pursuant to the Transfer Agreement.
(i) Each Transferor Report (if prepared by the Originator or one of its
Affiliates, or to the extent that information contained therein is supplied by
the Transferor, the Originator or any Affiliate thereof), information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished at any time by or on behalf of the Transferor or the Originator to the
Agent or any Transferee in connection with the Agreement is or will be accurate
in all material respects as of its date or (except as otherwise disclosed to the
Agent or the Transferees, as the case may be, at such time) as of the date so
furnished, and no such document contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
(j) The principal place of business and chief executive office of the
Transferor and the office where the Transferor keeps its records concerning the
Receivables are located at the respective addresses identified on Exhibit VII.
(k) The Outstanding Balance with respect to each Receivable, as of the
date of Transfer of such Receivable, is correctly set forth on Schedule II (as
supplemented pursuant to Section 1.02(a)).
2
(l) Schedule II (as supplemented pursuant to Section 1.02(a)) sets forth
accurately and completely in all material respects, as of the date of Transfer
of each Receivable, the information with respect to each such Receivable
transferred on such date.
(m) Each Contract giving rise to a Receivable provides for Periodic
Payments that will fully amortize such Receivable over the term of the Contract
related thereto and, except in accordance with the Credit and Collection Policy,
the Transferor has not extended or amended, modified or waived the terms of any
Receivable or any Contract relating to any Receivable.
(n) The Transferor is not known by and does not use any tradename or
doing-business-as name.
(o) The Transferor was formed on December 10, 1998. The Transferor has no
Subsidiaries.
(p) (i) The fair value of the property of the Transferor is greater than
the total amount of liabilities, including contingent liabilities, of the
Transferor, (ii) the present fair salable value of the assets of the Transferor
is not less than the amount that will be required to pay all probable
liabilities of the Transferor on its debts as they become absolute and matured,
(iii) the Transferor does not intend to, and does not believe that it will,
incur debts or liabilities beyond the Transferor's abilities to pay such debts
and liabilities as they mature and (iv) the Transferor is not engaged in a
business or a transaction, and is not about to engage in a business or a
transaction, for which the Transferor's property would constitute unreasonably
small capital.
(q) With respect to each Receivable, the Transferor shall have received
such Receivable from the Originator in exchange for payment (made by the
Transferor to the Originator in accordance with the provisions of the Transfer
Agreement) of cash in an amount which constitutes fair consideration and
reasonably equivalent value. Each such transfer referred to in the preceding
sentence shall not have been made for or on account of an antecedent debt owed
by the Originator to the Transferor and no such transfer is or may be voidable
or subject to avoidance under any section of the Federal Bankruptcy Code.
(r) With respect to each Receivable transferred hereunder, such
Receivable is representative of all of the Receivables owned by the Transferor.
(s) The Collection Agent has reviewed the areas within its business and
operations which could be adversely affected by, and has developed or is
developing a program to address on a timely basis, the risk that certain
computer applications used by the Collection Agent may be unable to recognize
and perform properly date-sensitive functions involving dates prior to and after
December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not
result in any Material Adverse Change.
3
EXHIBIT IV
COVENANTS
Until the Termination Date, unless the Agent shall otherwise consent in
writing:
(a) Compliance with Laws, Etc. The Transferor will comply in all material
-------------------------
respects with all applicable laws, rules, regulations and orders and preserve
and maintain its limited liability company existence, rights, franchises,
qualifications and privileges except to the extent that the failure so to comply
with such laws, rules and regulations or the failure so to preserve and maintain
such existence, rights, franchises, qualifications and privileges would not
materially adversely affect the collectibility of the Receivables or the ability
of the Transferor to perform its obligations under the Transaction Documents.
(b) Offices, Records and Books of Account. The Transferor will keep its
-------------------------------------
principal place of business and chief executive office and the office where it
keeps its records concerning the Receivables (and all original documents
relating thereto) at the respective addresses set forth on Exhibit VII of the
Agreement or, upon 30 days' prior written notice to the Agent, at any other
locations in jurisdictions where all actions reasonably requested by the Agent
to protect and perfect the interest in the Receivables have been taken and
completed. The Transferor also will maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables and Related Contracts in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of each Receivable and all Collections of and
adjustments to each Receivable).
(c) Performance and Compliance with Related Contracts and Credit and
----------------------------------------------------------------
Collection Policy. The Transferor will, at its expense, timely and fully
- -----------------
perform and comply with all material provisions, covenants and other promises
required to be observed by it under the Related Contracts, and timely and fully
comply in all material respects with the Credit and Collection Policy in regard
to each Receivable and the Related Contract.
(d) Sales, Liens, Etc. The Transferor will not sell, assign (by operation
-----------------
of law or otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to, its interest in any Receivable
transferred to the Agent or the Transferees under the Agreement or any Related
Security, Related Contract or Collections, or assign any right to receive income
in respect thereof.
(e) Extension or Amendment of the Receivables. Except as provided in
-----------------------------------------
Article IV of the Agreement, the Transferor will not, and will not permit the
Collection Agent to, extend the
1
maturity or adjust the Outstanding Balance or otherwise modify the terms of any
Receivable, or amend, modify or waive any term or condition of any Related
Contract.
(f) Change in Business or Credit and Collection Policy. (i) The Transferor
--------------------------------------------------
will not make any change in the character of its business, and (ii) the
Transferor will not make, and will not permit the Originator to make, any change
in the Credit and Collection Policy that would, in either case, materially
adversely affect the collectibility of the Receivables or the ability of the
Transferor or the Originator to perform their respective obligations under the
Transaction Documents.
(g) Change in Payment Instructions to Obligors. The Transferor will not
------------------------------------------
make any change in its instructions to Obligors of Related Contracts regarding
payments to be made to the Transferor unless the Agent shall have received
notice of and agreed to such addition, termination or change.
(h) Further Action Evidencing the Transfer. The Transferor will from time
--------------------------------------
to time, execute and deliver all further instruments and documents and take all
further action that the Agent may reasonably request in order to perfect,
protect or more fully evidence the interest in the Receivables transferred to
the Agent (for the benefit of the Transferees) under the Agreement or to enable
the Agent or any Transferee to exercise or enforce any of its rights under the
Transaction Documents. Without limiting the generality of the foregoing, the
Transferor will, or will cause the Collection Agent to, (i) execute and file
such financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate; and (ii) upon the occurrence of a Special Event, (x) mark
conspicuously each Related Contract with a legend, acceptable to the Agent,
evidencing that an interest in the Receivable has been transferred to the Agent
(for the benefit of the Transferees) under the Agreement; and (y) code the
Collection Agent's master data processing records evidencing Receivables and
Related Contracts to the foregoing effect. The Transferor hereby authorizes the
Agent to file one or more financing or continuation statements, and amendments
thereto and assignments thereof, relative to all or any of the Receivables and
the Related Security without the signature of the Transferor where permitted by
law. A photocopy or other reproduction of this Agreement shall be sufficient as
a financing statement where permitted by law. If the Transferor fails after
notice to perform any of its agreements or obligations under the Transaction
Documents, the Agent may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the expenses of the Agent
incurred in connection therewith shall be payable as provided in the Agreement.
(i) Assembly of Documents. The Transferor will, or will cause the
---------------------
Collection Agent to, at the Agent's request following the occurrence of a
Special Event, (A) assemble all documents, instruments and other records
(including, without limitation, computer tapes and disks) which evidence or
relate to the Receivables, and the Related Contracts and Related Security, or
which are otherwise necessary or desirable to collect the Receivables, and make
the same available to the Agent at a place selected by the Agent or its
designee, and (B) segregate all
2
cash, checks and other instruments received by it or the Collection Agent from
time to time constituting Collections of Receivables in a manner acceptable to
the Agent and shall, promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to the
Agent or its designee.
(j) Delivery of List of Related Contracts. The Transferor will on or
-------------------------------------
prior to the date of each Transfer, deliver to the Agent a complete and accurate
list of each Related Contract, together with the contract number, the name of
the Obligor and the Outstanding Balance thereof.
(k) Reporting Requirements. The Transferor will provide to the Agent (in
----------------------
multiple copies, if requested by the Agent) the following:
(i) as soon as available and in any event within 60 days after the
end of the first three quarters of each fiscal year of the Originator,
balance sheets of the Originator and its Subsidiaries as of the end of such
quarter and statements of income and retained earnings of the Originator
and its Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, certified by the chief
financial officer of the Originator;
(ii) as soon as available and in any event within 120 days after the
end of each fiscal year of the Originator, a copy of the annual report for
such year for the Parent and the Annual Report on Form 10-K for the
Originator and its Subsidiaries, containing financial statements for such
year audited by Ernst & Young, LLP, or other independent public accountants
acceptable to the Agent;
(iii) as soon as possible and in any event within five days after the
occurrence of each Special Event, a statement of the chief financial
officer of the Transferor setting forth details of such Special Event and
the action that the Transferor has taken and proposes to take with respect
thereto;
(iv) promptly after the sending or filing thereof, copies of all
reports that the Originator sends to any of its securityholders, and copies
of all reports and registration statements that the Originator or any
Subsidiary files with the Securities and Exchange Commission or any
national securities exchange;
(v) promptly after the filing or receiving thereof, copies of all
reports and notices that the Originator, the Transferor or any Affiliate of
either thereof files under ERISA with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation or the U.S. Department of Labor or
that the Originator, the Transferor or any Affiliate of either thereof
receives from any of the foregoing or from any multiemployer plan (within
the meaning of Section 4001(a)(3) of ERISA) to which the Originator, the
Transferor or any Affiliate of either thereof is or was, within the
preceding five years, a contributing employer, in each case in respect of
the assessment of withdrawal liability or an event or
3
condition which could, in the aggregate, result in the imposition of
liability on the Originator, the Transferor and/or any such Affiliate in
excess of $5,000,000;
(vi) at least ten Business Days prior to any change in the
Transferor's or Originator's name, a notice setting forth the new name and
the effective date thereof;
(vii) promptly, from time to time, such other information, documents,
records or reports respecting the Receivables or the condition or
operations, financial or otherwise, of the Transferor, the Originator or
any of its subsidiaries as the Agent may from time to time reasonably
request;
(viii) promptly after the Transferor obtains knowledge thereof, notice
of any (a) litigation, investigation or proceeding which may exist at any
time between the Transferor or the Originator and any governmental
authority which, in either case, if not cured or if adversely determined,
as the case may be, would have a material adverse effect on the business,
operations, property or financial or other condition of the Transferor or
the Originator; (b) litigation or proceeding adversely affecting the
Transferor's ability to perform its obligations under the Transaction
Documents or the Originator's ability to perform their obligations under
the Transaction Documents or (c) litigation or proceeding adversely
affecting the Transferor or the Originator in which in the case of the
Originator, the amount involved is $10,000,000 or more and not covered by
insurance or in which injunctive or similar relief is sought;
(ix) promptly after the occurrence thereof, notice of a material
adverse change in the business, operations, property or financial or other
condition of the Transferor or the Originator;
(x) promptly after the Transferor obtains knowledge thereof, notice
of any "Event of Termination", "Incipient Event of Termination" or
"Facility Termination Date" under the Transfer Agreement;
(xi) so long as any Capital shall be outstanding, as soon as
possible and in any event no later than the day of occurrence thereof,
notice that the Originator has stopped selling or contributing to the
Transferor, pursuant to the Transfer Agreement, newly arising Receivables;
(xii) at the time of the delivery of the financial statements
provided for in clauses (i) and (ii) of this paragraph, a certificate of
the chief financial officer or the treasurer of the Transferor to the
effect that, to the best of such officer's knowledge, no Special Event has
occurred and is continuing or, if any such Special Event has occurred and
is continuing, specifying the nature and extent thereof; and
4
(xiii) promptly after receipt thereof, copies of all notices received
by the Transferor from the Originator under the Transfer Agreement.
(l) Separateness. (i) The Transferor shall at all times be managed by an
------------
entity which has at least one independent director, who (x) is not currently
and has not been during the five years preceding the date of the Agreement an
officer, director or employee of an Affiliate of the Originator or any Other
Corporation, (y) is not a current or former officer or employee of the
Originator and (z) is not a stockholder of any Other Corporation or any of their
respective Affiliates.
(ii) The Transferor shall not direct or participate in the
management of any of the Other Corporations' operations.
(iii) The Transferor shall conduct its business from an office
separate from that of the Other Corporations (but which may be located in
the same facility as one or more of the Other Corporations). The Transferor
shall have stationery and other business forms and a mailing address and a
telephone number separate from that of the Other Corporations.
(iv) The Transferor shall at all times be adequately capitalized in
light of its contemplated business.
(v) The Transferor shall at all times provide for its own operating
expenses and liabilities from its own funds.
(vi) The Transferor shall maintain its assets and transactions
separately from those of the Other Corporations and reflect such assets and
transactions in financial statements separate and distinct from those of
the Other Corporations and evidence such assets and transactions by
appropriate entries in books and records separate and distinct from those
of the Other Corporations. The Transferor shall hold itself out to the
public under the Transferor's own name as a legal entity separate and
distinct from the Other Corporations. The Transferor shall not hold itself
out as having agreed to pay, or as being liable, primarily or secondarily,
for, any obligations of the Other Corporations.
(vii) The Transferor shall not become liable as a guarantor or
otherwise with respect to any Debt or contractual obligation of any Other
Corporation.
(viii) The Transferor shall not make any payment or distribution of
assets with respect to any obligation of any Other Corporation or grant an
Adverse Claim on any of its assets to secure any obligation of any Other
Corporation.
5
(ix) The Transferor shall not make loans, advances or otherwise
extend credit to any of the Other Corporations.
(x) Each of the Transferor's sole member and manager shall hold
regular duly noticed meetings of its respective Board of Directors and make
and retain minutes of such meetings.
(xi) The Transferor shall have bills of sale (or similar instruments
of assignment) and, if appropriate, UCC-1 financing statements, with
respect to all assets purchased from any of the Other Corporations.
(xii) The Transferor shall not engage in any transaction with any of
the Other Corporations, except as permitted by its organizational
documents.
(m) Transfer Agreement. The Transferor will not amend, waive or modify
------------------
any provision of the Transfer Agreement or waive the occurrence of any "Event of
Termination" under the Transfer Agreement, without in each case the prior
written consent of the Agent. The Transferor will perform all of its obligations
under the Transfer Agreement in all material respects and will enforce the
Transfer Agreement in accordance with its terms in all material respects.
(n) Nature of Business. The Transferor will not engage in any business
------------------
other than the purchase of Receivables, Related Security and Collections from
the Originator and the transactions contemplated by this Agreement. The
Transferor will not create or form any Subsidiary.
(o) Mergers, Etc. The Transferor will not merge with or into or
------------
consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions), all or
substantially all of its assets (whether now owned or hereafter acquired) to, or
acquire all or substantially all of the assets or capital stock or other
ownership interest of, or enter into any joint venture or partnership agreement
with, any Person, other than as contemplated by the Agreement and the Transfer
Agreement.
(p) Distributions, Etc. The Transferor will not declare or make any
------------------
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any membership interest in the
Transferor, or return any capital to its members as such, or purchase, retire,
defease, redeem or otherwise acquire for value or make any payment in respect of
any membership interest in the Transferor or any warrants, rights or options to
acquire any such shares, now or hereafter outstanding; provided, however, that
-------- -------
the Transferor may declare and pay cash distributions on its membership
interests to its members so long as (i) no Special Event shall then exist or
would occur as a result thereof, (ii) such distributions are in compliance with
all
6
applicable law including the law of the state of Delaware, and (iii) such
distribution have been approved by all necessary and appropriate action of the
Transferor.
(q) Debt. The Transferor will not incur any Debt, other than any Debt
----
incurred pursuant to the Agreement and the Transfer Agreement.
(r) Limited Liability Company Agreement. The Transferor will not amend or
-----------------------------------
delete Section 5.1 or 5.5 of its Limited Liability Company Agreement.
(s) Covenant of the Transferor and the Originator. Until the latest of
---------------------------------------------
the Facility Termination Date, the date on which no Capital of or Yield on any
Receivable shall be outstanding or the date all other amounts owed by the
Transferor hereunder to the Transferees or the Agent are paid in full, each of
the Transferor and the Originator will, at their respective expense, from time
to time during regular business hours as requested by the Agent, permit the
Agent or its agents or representatives (including independent public
accountants, which may be the Transferor's or the Originator's independent
public accountants), (i) to conduct periodic audits of the Receivables, the
Related Security and the related books and records and collections systems of
the Transferor or the Originator, as the case may be, (ii) to examine and make
copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under the
control of the Transferor or the Originator, as the case may be, relating to
Receivables and the Related Security, including, without limitation, the
Contracts, and (iii) to visit the offices and properties of the Transferor or
the Originator, as the case may be, for the purpose of examining such materials
described in clause (ii) above, and to discuss matters relating to the
Receivables and the Related Security or the Transferor's or the Originator's
performance under the Transaction Documents or under the Contracts with any of
the officers or employees of the Transferor or the Originator, as the case may
be, having knowledge of such matters. In addition, upon the Agent's request at
least once per year, the Transferor will, at its expense, appoint independent
public accountants (which may, with the consent of the Agent, be the
Transferor's regular independent public accountants), or utilize the Agent's
representatives or auditors, to prepare and deliver to the Agent a written
report with respect to the Receivables and the Credit and Collection Policy
(including, in each case, the systems, procedures and records relating thereto)
on a scope and in a form reasonably requested by the Agent .
(t) Hedge Agreement. Within fifteen Business Days of the earlier of (i)
---------------
the date on which (a) Yield as of the most recent Settlement Period exceeds (b)
the implied interest rate used by the Originator in originating Contracts minus
the sum of the Program Fee and the Collection Agent Fee or (ii) the occurrence
of a Special Event, the Transferor shall obtain a Qualified Hedge Agreement.
7
(u) Collections. At all times following the designation by the Agent of
-----------
any Designated Account, the Transferor will deposit, or cause to be deposited,
all Collections to such Designated Account.
(v) Deposits to Designated Accounts. The Transferor and the Collection
-------------------------------
Agent will not deposit or otherwise credit, or cause or permit to be so
deposited or credited, to any Designated Account cash or cash proceeds other
than Collections of Receivables.
(w) Changes in Implied Interest Rate. The Transferor shall notify the
--------------------------------
Agent promptly upon any change in the implied interest rate used by the
Originator or any Dealer in originating Contracts.
(x) Amendment of Transaction Documents. The Transferor agrees to amend
----------------------------------
the Transaction Documents or enter into additional agreements in connection with
the Transaction Documents in a manner reasonably satisfactory to the Agent, and
to deliver all opinions and other documents reasonably requested by the Agent in
connection therewith, by not later than June 1, 1999, such that either:
(i) the Originator will transfer ownership of the Equipment to the
Transferor pursuant to the Transfer Agreement, as amended; or
(ii) the Originator will transfer ownership of the Equipment to
another special-purpose, bankruptcy-remote Affiliate of the Originator,
which Affiliate will pledge the Equipment to the Transferor or the Issuer.
8
EXHIBIT V
TRIGGER EVENTS
Each of the following, unless waived in writing by the Agent (other than as
set forth in clause (h) which cannot be waived), shall be a "Trigger Event":
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(a) The Collection Agent (if the Originator or any of its Affiliates) (i)
shall fail to perform or observe any term, covenant or agreement under this
Agreement (other than as referred to in clause (ii) of this paragraph (a)) and
such failure shall remain unremedied for three Business Days or (ii) shall fail
to make when due any payment or deposit to be made by it under this Agreement;
or
(b) The Transferor or the Originator shall fail (i) to transfer to the
Agent when requested any rights pursuant to the Agreement which the Transferor
or the Originator then has as Collection Agent or otherwise or (ii) to make any
payment required under Section 1.03, 3.02, 3.03 or 3.04 of the Agreement; or
(c) Any representation or warranty made by the Transferor or the
Originator (or any of their respective officers) under the Transaction
Documents, or any information or report delivered by the Transferor or the
Originator pursuant to the Transaction Documents shall prove to have been
incorrect or untrue in any material respect when made or delivered; or
(d) The Transferor shall fail to perform or observe any other term,
covenant or agreement contained in the Transaction Documents on its part to be
performed or observed and any such failure shall remain unremedied for ten days
after written notice thereof shall have been given to the Transferor by the
Agent; or
(e) The Originator shall fail to perform or observe any term, covenant or
agreement contained in the Transaction Documents on its part to be performed or
observed and any such failure shall remain unremedied for ten days after written
notice thereof shall have been given to the Originator by the Agent (or, with
respect to a failure to deliver the Transferor Report pursuant to Section 4.02
of the Agreement such failure shall remain unremedied for three days, without a
requirement for notice); or
(f) Any member of the IKON Group or any Subsidiary thereof shall fail to
pay any principal of or premium or interest on any of its Debt which is
outstanding in a principal amount of at least $10,000,000 in the aggregate when
the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or condition
shall exist under any agreement
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or instrument relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to repay, redeem,
purchase or defease such Debt shall be required to be made, in each case prior
to the stated maturity thereof; or
(g) The Transfer shall for any reason cease to create, or the interest of
the Agent (for the benefit of the Transferees) in any Receivable shall for any
reason cease to be, a valid and perfected first priority interest in each
Receivable and the Related Security and Collections with respect thereto; or the
security interest created pursuant to Section 1.13 shall for any reason cease to
be a valid first priority security interest in the collateral security referred
to in such Section; or
(h) Any member of the IKON Group or any Subsidiary thereof shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against any
such member or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur; or
any member of the IKON Group or any of its Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this paragraph (h); or
(i) As of the last day of any calendar month: (i) the Chargeback Ratio
averaged over the three-month period ending on such day exceeds 0.75%, (ii) the
Default Ratio averaged over the three-month period ending on such day exceeds
1.00% or (iii) the Delinquency Ratio averaged over the three-month period ending
on such day exceeds 18.00%; or
(j) There shall have occurred any material adverse change in the business,
operations, property or financial or other condition of the Originator since
June 30, 1998 or the Transferor since the date of its formation; or there shall
have occurred any event which may materially adversely affect the collectibility
of the Receivables, the ability of the Collection Agent or the Transferor to
collect the Receivables or the ability of the Originator or the Transferor to
perform its respective obligations under the Transaction Documents; or
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(k) Any rating of the long-term debt obligations of the Originator are
withdrawn or reduced below Investment Grade; or
(l) An "Event of Termination" or "Facility Termination Date" shall occur
under the Transfer Agreement, or the Transfer Agreement shall cease to be in
full force and effect; or
(m) All of the members' interests of the Transferor shall cease to be
owned, directly or indirectly, by the Originator; or
(n) On the last day of any calendar month, (a) the aggregate Outstanding
Balance of all Eligible Receivables is less than (b) the Required Balance.
(o) The Transferor shall fail to comply with the covenant contained in
clause (x) of Exhibit IV.
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EXHIBIT VI
MARKETPLACES
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EXHIBIT VII
The principal place of business and chief executive offices of the
Transferor are located at:
IKON FUNDING-1, LLC
501 Silverside Road, Suite 28
Wilmington, Delaware 19809
The original records concerning the Receivables (and all original documents
related thereto) are located at the offices of the Collection Agent at:
IOS CAPITAL, INC.
1738 Bass Road
Macon, Georgia 31210
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