<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1997
Registration No. _________________
-------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT ON
FORM S-4
Under
The Securities Act of 1933
--------------------------
IKON OFFICE SOLUTIONS, INC.
<TABLE>
<S> <C> <C>
Ohio 5044, 7373, 7376 23-0334400
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
P.O. Box 834
Valley Forge, Pennsylvania 19482
(610) 296-8000
KARIN M. KINNEY, ESQUIRE Copies to:
IKON Office Solutions, Inc. RHONDA R. COHEN, ESQUIRE
Corporate Counsel and Secretary Ballard Spahr Andrews & Ingersoll
P.O. Box 834 51st Floor, 1735 Market Street
Valley Forge, Pennsylvania 19482 Philadelphia, PA 19103-7599
(610) 296-8000 (215) 665-8500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to time
after the Registration Statement becomes effective.
---------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TITLE OF AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
SECURITIES TO BE REGISTERED MAXIMUM MAXIMUM REGISTRATION
REGISTERED OFFERING PRICE AGGREGATE FEE
PER UNIT* OFFERING PRICE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, 10,000,000 $31.375 $313,750,000 $95,066.00
no par value
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Estimated solely for the purpose of determining the registration fee pursuant
to Rule 457(c).
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The Prospectus contained herein also relates to 3,534,304 shares of
common stock registered pursuant to Registration Statement No. 333-01743.
<PAGE>
PROSPECTUS APRIL 10, 1997
IKON OFFICE SOLUTIONS, INC.
13,534,304 Shares Common Stock
(No Par Value)
This Prospectus relates to the offer and sale from time to time by IKON
Office Solutions, Inc., an Ohio corporation ("IKON" or the "Company"), or its
subsidiaries of 13,534,304 shares of IKON's common stock, no par value (the
"Common Stock"), in exchange for shares of capital stock of other companies, or
in exchange for assets used in or related to the business of such companies. See
"SECURITIES COVERED BY THIS PROSPECTUS." Common Stock offered hereby may
generally be resold by the person acquiring them without further registration
under the Securities Act of 1933. For further information on resales, see
"RESALES."
The Common Stock is listed and traded on the New York, Philadelphia and
Chicago Stock Exchanges under the symbol "IKN".
-----------------------
The Common Stock offered hereby involves certain risks. See "Risk
Factors" commencing on page 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY IKON. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS
SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY
CHANGE IN THE FACTS SET FORTH OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT OR IN THE AFFAIRS OF IKON SINCE SUCH DATE.
<TABLE>
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TABLE OF CONTENTS
<S> <C>
AVAILABLE INFORMATION.................................................3
DOCUMENTS INCORPORATED BY REFERENCE...................................3
THE COMPANY...........................................................4
RECENT DEVELOPMENTS...................................................4
SECURITIES COVERED BY THIS PROSPECTUS.................................5
RISK FACTORS..........................................................5
FORWARD-LOOKING INFORMATION...........................................6
PLAN OF DISTRIBUTION..................................................7
RESALES...............................................................7
USE OF PROCEEDS.......................................................7
SELECTED FINANCIAL DATA...............................................8
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK......................10
DIVIDEND RIGHTS...................................................10
PREEMPTIVE RIGHTS.................................................10
PREFERRED SHARE PURCHASE RIGHTS...................................11
VOTING RIGHTS.....................................................11
REDEMPTION PROVISIONS AND SINKING FUND............................12
CONVERSION RIGHTS.................................................12
LIQUIDATION RIGHTS................................................13
LIABILITY FOR ASSESSMENT..........................................13
IKON COMMON STOCK: OHIO ANTITAKEOVER PROVISIONS.....................13
LEGAL OPINIONS.......................................................14
EXPERTS..............................................................14
</TABLE>
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<PAGE>
AVAILABLE INFORMATION
IKON is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by IKON with the Commission can be inspected and copied at the
offices of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20547 and at the following Regional Offices of the Commission:
Northeast Regional Office, 7 World Trade Center, New York, New York 10048; and
Midwest Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621. Copies of such material can also be obtained from the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. This Commission
also maintains a Web Site (http\\www.sec.gov) containing reports, proxy
statements and other information about registrants, including IKON. Such
material can also be inspected at the New York, Philadelphia, and Chicago Stock
Exchanges on which IKON's common stock is listed. This Prospectus incorporates
documents by reference which are not presented herein or delivered herewith.
These documents are available upon request from Michael N. Kilpatric, Vice
President Communications, Communications Department, IKON Office Solutions,
Inc., P.O. Box, 834, Valley Forge, PA 19087, telephone (610) 296-8000.
IKON has filed with the Commission a Registration Statement on Form S-4
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933 with respect to the securities to
which this Prospectus relates. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to IKON and such securities, reference is made
to the Registration Statement, which may be examined or copied at the offices of
the Commission. Statements contained in this Prospectus as to the contents of
any contract or any other document filed, or incorporated by reference, as an
exhibit to the Registration Statement, are qualified in all respects by such
reference.
DOCUMENTS INCORPORATED BY REFERENCE
. IKON's annual report on Form 10-K for the fiscal year ended September 30,
1996, its Quarterly Report on Form 10-Q for the quarter ended December 31,
1996, and its Current Report on Form 8-K dated January 30, 1997 are
incorporated herein by reference.
. The description of IKON's common stock contained in a registration
statement filed under the Securities Exchange Act of 1934, including any
amendment or report filed for the purpose of updating such description, is
incorporated herein by reference. IKON's registration statement on Form
8-A, relating to IKON's preferred share purchase rights, is also
incorporated herein by reference.
All documents filed by IKON pursuant to Section 13(a), 13(c), 14, or
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Common Stock shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing such documents. This Prospectus does not contain all information
set forth in the Registration Statement to which reference is made hereby.
IKON will provide without charge to each person, including any
beneficial owner to whom a copy of this Prospectus is delivered, on the written
or oral request of any such person, a copy of any or all of the documents
referred to above which have been incorporated in this Prospectus by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to Michael N. Kilpatric, Vice President Communications, Communications
Department, IKON Office Solutions, Inc., P.O. Box 834 Valley Forge, PA 19087,
telephone number (610) 296-8000.
-3-
<PAGE>
THE COMPANY
IKON Office Solutions, Inc. ("IKON" or the "Company") was incorporated
in Ohio in 1952 and is the successor to a business incorporated in 1928.
Effective June 1, 1997, the address of the Company's principal executive offices
will be 70 Valley Stream Parkway, Malvern, PA 19355 (telephone number (610)
296-8000). Prior to June 1, 1997, the address of the Company's principal
executive offices is P.O. Box 834, Valley Forge, PA 19087 (telephone number
(610)-296-8000).
IKON sells, rents and leases photocopiers, fax machines, digital
printers and other automated office equipment for use in both traditional and
integrated office environments, and provides equipment service and supplies and
equipment financing. IKON has the largest network of independent copier and
office equipment dealers in North America and the United Kingdom. IKON
distributes the products of numerous manufacturers, including Canon, Oce, Ricoh
and Sharp.
Beginning in 1992, IKON extended its business to provide outsourcing
and imaging services, such as reprographic off-site facilities management and
specialized document copying services, turnkey mailroom/copy center on-site
services, legal industry document services, business document services and file
conversion/imaging services. IKON has also recently begun to offer network
consulting and design, computer networking, technology training and software
solutions for the networked office environment, in order to provide one-stop
shopping to customers who seek quality, accessible office productivity
solutions.
IKON has locations throughout the United States and Canada, and in
Europe (primarily in the United Kingdom). IKON competes against numerous
competitors over a wide range of markets, competing on the basis of quality,
customer service, price and product performance. (See Risk Factors -
Competition). IKON's customers include large and small businesses, professional
firms and government agencies. IKON distributes products and provides services
throughout 49 states, seven Canadian provinces, in Europe (primarily in the
United Kingdom) and in Mexico.
In fiscal 1996, IKON generated approximately $4.1 billion in revenues
and $310 million in operating income. Finance subsidiaries contributed 15.1% of
the Company's operating income in fiscal 1996.
During fiscal 1996, IKON acquired 100 companies in the United States,
Canada, and Europe, with an aggregate of approximately $878 million in
annualized revenues. Of the 100 companies acquired in fiscal 1996, 82 were
traditional copier companies, 13 were outsourcing and imaging companies and five
were systems integrators. IKON's international expansion during fiscal 1996
included the acquisition of companies in France and Mexico.
RECENT DEVELOPMENTS
On March 20, 1997, IKON announced that it is accelerating its program
to transform the Company into a streamlined and integrated provider of total
office solutions. Beginning with the quarter ended March 31, 1997, the Company
plans to separately disclose transformation expenses over the next seven
quarters. The Company expects to complete the transformation program in October
1998. The most significant component of the transformation expenses in the
second quarter ended March 31, 1997 will be the write off of the capital costs
from the SAP computer platform. This reflects IKON's decision to base its
information technology platform on the common platform that 75% of its
operations are currently using.
IKON's growth strategy is to transform more than 80 individually
operating copier dealers into an integrated company which provides total office
technology solutions ranging from copiers, digital printers, and document
management services to systems integration, training and other networking
technology services. The transformation involves a variety of activities which
IKON believes will significantly lower administrative costs and improve margins.
These activities include consolidating purchasing, inventory control, logistics,
and other
-4-
<PAGE>
activities into 13 customer service centers in the U.S., establishing a single
financial processing center, building a common information technology system,
adopting a common name, and creating marketplace-focused field operations with
greater attention to customer sales and service.
SECURITIES COVERED BY THIS PROSPECTUS
The shares of Common Stock covered by this Prospectus are available for
use in future acquisitions of other businesses or properties, which may be
similar or dissimilar to IKON's present activities. The consideration offered by
IKON in such acquisitions, in addition to the shares of Common Stock offered
hereby, may include cash, debt or other securities (which may be convertible
into shares of Common Stock covered by this Prospectus), or assumption by IKON
of liabilities of the business being acquired, or a combination thereof. It is
contemplated that the terms of acquisitions will be determined by negotiations
between IKON and the owners of the business or properties to be acquired, with
IKON taking into account the quality of management, the past and potential
earnings power and growth of the business or properties to be acquired, and
other relevant facts, and it is anticipated that shares of Common Stock issued
in acquisitions will be valued at a price reasonably related to the market value
of the Common Stock either at the time the terms of the acquisition are
tentatively agreed upon or at or about the time or times of delivery of the
shares.
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should
consider carefully the following risk factors.
Risks Related to Acquisitions
The Company has increased revenues through significant acquisition
activity. During fiscal 1995, the Company acquired assets or businesses through
102 transactions which added approximately $578 million in annualized revenues.
These acquisitions focused on analog copier and fax distribution and servicing
companies and complementary copying and document management/outsourcing
providers. During fiscal 1996, the Company completed 100 acquisitions, which
added approximately $878 million in annualized revenues. From October 1, 1996
through March 31, 1997, the Company completed 47 acquisitions, which added
approximately $409 million in annualized revenues. Fiscal 1995 and 1996
acquisitions were focused primarily on companies engaged in analog copier and
fax sales and service, and outsourcing services; however, during the third
quarter of fiscal 1996, the Company shifted its acquisition focus to technical
service companies, such as systems integrators, systems consulting companies and
technical training firms, in order to provide an enhanced array of total office
solutions to customers. The Company's recent shift in acquisition emphasis
involves certain risks, including risks of successfully managing an aggressive
program to acquire companies with technical services and products that are
relatively new to the Company, and effectively integrating such new services and
products with the analog copier and fax and outsourcing services and products.
There can be no assurance that future acquisitions will continue at a pace
comparable to that which was achieved through March 31, 1997, fiscal 1996 or
fiscal 1995 or that a comparable level of acquisition candidates will continue
to be available to the Company on favorable terms. Finally, there can be no
assurance that companies or businesses that have been acquired or that may be
acquired in the future will achieve sales and profitability levels that justify
historical investment costs.
-5-
<PAGE>
Competition
The Company's businesses operate within highly competitive markets and
the Company faces certain risks associated with such conditions, in general, and
from significant competition from two principal competitors, in particular. One
competitor has advantages which include substantially greater revenues and
financial resources, a significant market share at the high end segment of the
copier and imaging products market, and certain sourcing advantages associated
with internally manufactured office solutions products. While the Company has a
wider distribution network than its other principal competitor, and access to
comparable products, such competitor has certain sourcing and pricing advantages
related to a strategic alliance with a large office solutions products
manufacturer.
International Expansion
The Company intends to focus future attention and resources on
international expansion, particularly in Europe. Expansion into international
markets involves additional risks relating to currency exchange rates, new and
different legal, regulatory and competitive environments, differences in
business conditions and customs, and difficulties in staffing and managing
foreign operations and other factors.
Antitakeover Provisions
The Company's Articles of Incorporation, which empower the Board of
Directors of the Company to issue Preferred Stock with terms established by the
Board and without share action, the Company's Shareholder's Rights Plan and
provisions within the Ohio General Corporation Law ("Ohio Law"), may have the
effect, either alone or in combination with each other, of making more difficult
or discouraging a tender offer, merger, change of control or takeover attempt
that is opposed by the Company's Board of Directors.
FORWARD-LOOKING INFORMATION
This Prospectus contains, and other materials filed or to be filed by
the Company with the Commission which are incorporated by reference herein, as
well as information included in oral statements or other written statements made
or to be made by the Company, contain or will contain or include, disclosures
which are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1934, as amended (the "Act"), and Section 21E of the Exchange
Act. Such forward-looking statements address, among other things, strategic
initiatives (including plans for transforming the Company's business through new
information technology systems, sales strategies, market growth plans and
acquisition and margin enhancement initiatives, capital expenditure requirements
and financing sources). Such forward-looking information is based upon
management's current plans or expectations and is subject to a number of
uncertainties and risks that could significantly affect current plans,
anticipated actions and the Company's future financial condition and results.
These uncertainties and risks include, but are not limited to, those relating to
conducting operations in a competitive environment; delays, difficulties and
technological changes associated in a large-scale transformation project; debt
service requirements (including sensitivity to fluctuation in interest rates);
and general economic conditions. As a consequence, current plans, anticipated
actions and future financial condition and results may differ from those
expressed in any forward-looking statements made by or on behalf of the Company.
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<PAGE>
PLAN OF DISTRIBUTION
Shares of Common Stock will be offered in connection with IKON's or a
subsidiary's acquisition of other businesses or properties from time to time as
described above. A maximum of 13,534,304 shares of Common Stock may be sold
pursuant to this Prospectus. These shares will ordinarily represent
consideration paid directly upon the acquisition of businesses or properties.
The shares may also include shares to be delivered upon the exercise or
satisfaction of conversion or purchase rights which are created in connection
with acquisitions or which were previously created or assumed by the companies
whose businesses or properties were acquired.
RESALES
Common Stock offered hereby may generally be resold by the person
acquiring such shares without further registration under the Act, unless such
persons are "affiliates" or "underwriters" within the meaning of the Act.
Any person receiving shares offered hereby who is an "affiliate" of
IKON may be subject to certain limitations on resale. An "affiliate" is a person
who directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with the Company. "Control," as used
in the preceding sentence, means the direct or indirect power to direct or cause
the direction of the management and policies of the Company through ownership of
voting securities, contract or otherwise. In the absence of a special
relationship between IKON and a person who receives shares from IKON in an
acquisition transaction (such as election of such person to IKON's Board of
Directors or ownership by such person of a significant percentage of IKON's
outstanding Common Stock), such a person generally would not be considered an
"affiliate" of IKON within the meaning of the Act. Therefore, the limitations on
resale applicable to affiliates would not apply to such person.
Any person receiving shares offered hereby who is an "underwriter" of
IKON may also be subject to certain limitations upon resale. An "underwriter"
includes a person who purchases IKON shares with a view to the distribution of
the shares. Although an "underwriter" may otherwise be subject to certain resale
limitations, if such person complies with the "safe harbor" provisions of rule
145(d), he or she may freely resell shares so long as certain conditions are
met. For example, a person who receives shares of Common Stock from IKON in a
typical acquisition transaction is deemed to be an "underwriter" as defined by
the Act, but such person is generally free to sell such shares at any time by
complying with rule 145(d), which requires that the amount of Common Stock which
may be sold by such person in any three-month period may not exceed the greater
of (i) 1% of the Common Stock outstanding as shown by the most recent report or
statement published by IKON, or (ii) the average weekly trading volume in Common
Stock reported on the NYSE Composite tape during the four calendar weeks
preceding the order to sell. Such sales must also be made in "brokers'
transactions," which are ordinary sales through a broker acting as agent without
special commission arrangements or selling efforts.
In order for affiliates or underwriters not protected by Rule 145(d) to
resell shares offered hereby, IKON would have to agree 1) to provide an opinion
to the effect that an exemption applies to such resale, 2) to amend the
Registration Statement of which this Prospectus is a part to permit such
resales, or 3) to file a new registration statement which includes the shares
proposed to be resold. Unless a written agreement obligates IKON to do so, there
is no assurance that IKON will agree to provide such opinion, amendment or
registration.
USE OF PROCEEDS
The proceeds of the sale of Common Stock offered hereby, to the extent
such proceeds consist of the assets of acquired businesses, will be added to the
assets of IKON or a subsidiary. Cash proceeds included in such assets, if any,
will be added to the general funds of IKON or a subsidiary and may be used for
general corporate purposes, including capital expenditures and working capital
requirements.
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<PAGE>
SELECTED FINANCIAL DATA
The following annual data has been derived from financial statements
audited by Ernst & Young LLP, independent auditors. Consolidated balance sheets
at September 30, 1996 and 1995 and the related consolidated statements of
income, cash flows and changes in shareholders' equity for each of the three
fiscal years in the period ended September 30, 1996, and the related auditor's
report, appear in the Company's 1996 Annual Report to Shareholders, portions of
which are incorporated by reference in the Company's Annual Report on Form 10-K
for the year ended September 30, 1996. Interim data presented are unaudited, but
management believes that all adjustments necessary for a fair presentation have
been made. Operating results for the three months ended December 31, 1996 are
not necessarily indicative of the results that may be expected for subsequent
quarters or for the year ending September 30, 1997. The information set forth
below should be read in conjunction with the financial statements and
management's discussion and analysis included in the Form 10-K and in the Form
10-Q for the quarter ended December 31, 1996 incorporated by reference in this
Prospectus.
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<PAGE>
IKON OFFICE SOLUTIONS
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR ENDED
ENDED DECEMBER 31, SEPTEMBER 30 FISCAL YEAR ENDED SEPTEMBER 30
---------------------- ----------------------- ---------------------------------------
1996 1995 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
REVENUES:
Net sales $ 638,828 $ 515,012 $2,381,151 $1,807,408 $1,397,271 $ 986,274 $ 786,146
Service and rentals 453,860 353,772 1,560,915 1,191,175 927,065 685,629 529,144
Finance income 47,746 31,795 157,707 93,019 66,731 51,149 38,936
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,140,434 900,579 4,099,773 3,091,602 2,391,067 1,723,052 1,354,226
---------- ---------- ---------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of goods sold 404,934 333,226 1,552,183 1,189,533 905,933 633,873 487,741
Service and rental costs 216,107 169,335 743,110 565,131 426,936 310,333 233,776
Finance interest expense 20,011 14,809 68,043 40,216 27,978 23,662 19,523
Selling and administrative 417,970 314,534 1,426,381 1,084,538 853,633 635,895 523,369
Loss from unconsolidated affiliate 117,158 2,538
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,059,022 831,904 3,789,717 2,879,418 2,331,638 1,606,301 1,264,409
---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment Gain, Net 6,683
Operating Income 81,412 68,675 310,056 212,184 59,429 116,751 96,500
Interest Expense 8,201 7,340 37,179 21,672 16,118 15,382 11,400
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from Continuing Operations
Before Taxes and Extraordinary Loss 73,211 61,335 272,877 190,512 43,311 101,369 85,100
Taxes on Income 28,552 24,398 107,984 75,501 41,315 40,093 33,488
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from Continuing Operations
Before Extraordinary Loss 44,659 36,937 164,893 115,011 1,996 61,276 51,612
Discontinued Operations 20,151 26,229 45,848 88,661 74,476 (58,648) 47,533
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before Extraordinary Loss 64,810 63,166 210,741 203,672 76,472 (2) 2,628 99,145
Extraordinary Loss from extinguishment
of debt, net of tax benefit (12,156)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income 52,654 63,166 210,741 203,672 76,472 2,628 99,145
Preferred Dividends 4,885 7,664 22,319 15,209 11,572 9,571
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss) Available to
Common Shareholders $ 47,769 $ 55,502 $ 188,422 $ 188,463 $ 64,900 $ (6,943) $ 99,145
========== ========== ========== ========== ========== ========== ==========
EARNINGS (LOSS) PER SHARE: (3)
Continuing Operations $ 0.30 $ 0.25 $ 1.12 $ 0.86 $ (0.09)(2) $ 0.52 $ 0.52
Discontinued Operations 0.15 0.22 0.36 0.76 0.67 (0.59) 0.49
Extraordinary Loss (0.09)
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 0.36 $ 0.47 $ 1.48 $ 1.62 $ 0.58 $ (0.07) $ 1.01
========== ========== ========== ========== ========== ========== ==========
DIVIDENDS PER COMMON SHARE $ 0.14 $ 0.14 $ 0.56 $ 0.52 $ 0.50 $ 0.48 $ 0.46
BALANCE SHEET DATA
(AT PERIOD END):
Working Capital $ 660,773 $ 469,134 $ 251,168 $ 144,687 $ 171,451 $ 87,223 $ 140,351
Total Assets 4,377,298 4,617,133 5,384,595 4,110,330 2,897,692 2,734,243 1,943,968
Total Debt Excluding
Finance Subsidiaries (1) 595,963 976,277 1,031,386 681,715 484,275 825,749 504,863
Total Debt of Finance Subsidiaries 1,301,034 908,168 1,127,026 817,585 464,882 414,241 300,509
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Debt (1) 1,896,997 1,884,445 2,158,412 1,499,300 949,157 1,239,990 805,372
Shareholders Equity 1,404,457 1,941,746 2,255,504 1,891,362 1,384,473 1,034,687 872,991
</TABLE>
(1) Includes discontinued operations
(2) Includes a pretax charge of $115 million ($95 million net of taxes or
$.085 per share for the fiscal year) for the sale of the Company's
investment in IMM Office Systems GmbH.
(3) Adjusted to give retroactive effect to a two-for-one stock split effected
on November 9, 1995.
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<PAGE>
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
IKON is currently authorized to issue 302,095,628 shares, consisting of
300,000,000 shares of Common Stock of no par value (hereinafter called "Common
Stock") and 2,095,628 shares of Preferred Stock of no par value (hereinafter
called "Serial Preferred Stock"). The Common Stock is subject to the express
terms of the Serial Preferred Stock. One series of Serial Preferred Stock is
outstanding (Series BB Preferred Stock), and additional series may be authorized
by the Board of Directors.
DIVIDEND RIGHTS
Common Stock. Dividends and other distributions of assets may be made
------------
with respect to the Common Stock from time to time by the Board of Directors
within the limits and from the sources permitted by law after payment or
provision for payment of all accrued and unpaid dividends (which are cumulative)
on the Serial Preferred Stock, so long as there is no default in any sinking
fund provisions for the Serial Preferred Stock.
Preferred Stock. The Series BB preferred stock is entitled to payment
---------------
of annual per share dividends of $504.00 ($5.04 per Depository Share).
So long as any shares of Serial Preferred Stock are outstanding, the
Company may not (1) declare or pay any dividends (other than dividends payable
in Common Stock or other shares of IKON ranking junior to the Serial Preferred
Stock) to holders of Common Stock or shares of IKON or any other class ranking
on a parity with or junior to the Serial Preferred Stock, or (b) make any
distributions of assets (directly or indirectly, by purchase, redemption or
otherwise) to the holders of Common Stock or shares of IKON of any other class
ranking on a parity with or junior to the Serial Preferred Stock, except in the
case of shares purchased in compromise of claims, or to prevent loss on doubtful
debts and except in the case of shares purchased out of the proceeds of the sale
of Common Stock or other shares ranking junior to the Serial Preferred Stock
received by IKON:
(a) Unless all accrued and unpaid dividends on shares of Serial Preferred
Stock, including the full dividends for the then quarterly dividend
period, shall have been paid or declared and funds sufficient for
payment thereof set apart; and
(b) Unless there shall be no arrearages with respect to redemption of shares
of Serial Preferred Stock from any sinking fund provided therefor.
No dividends may be paid upon or declared or set apart for any of the Serial
Preferred Stock for any quarterly dividend period unless at the same time a like
proportionate dividend for the same quarterly dividend period, ratably in
proportion to the respective annual dividend rates fixed therefor, shall be paid
upon or declared or set apart for all Serial Preferred Stock of all series then
issued and outstanding and entitled to receive such dividend.
PREEMPTIVE RIGHTS
Common Stock. The holders of Common Stock do not have any preemptive
------------
right to purchase or have offered to them for purchase any shares or other
securities of IKON.
Preferred Stock. The only preemptive right of holders of Serial
---------------
Preferred Stock is to participate in certain distributions, if any were to be
made by IKON, to holders of Common Stock options or rights to acquire Common
Stock, or of evidences of IKON's debt or assets (other than cash).
-10-
<PAGE>
PREFERRED SHARE PURCHASE RIGHTS
The Company's Board of Directors has adopted a Preferred Share Purchase
Rights Plan (the "Purchase Rights Plan") and has declared a dividend of one
right (a "Right") for each outstanding share of IKON Common Stock, which Rights
will attach to and trade with IKON Common Stock, except as described below.
In February, 1988, IKON declared and paid a dividend distribution of
one right for each outstanding share of Common Stock. The Rights become
exercisable ten days (or such later date, not beyond thirty days, as is fixed by
the Board of Directors) after the earlier of: (a) public announcement that an
individual or group has acquired or obtained the right to acquire 20% or more of
IKON's Common Stock or (b) an individual or group commences or announces an
intention to commence a tender or exchange offer that could result in the
acquisition of 30% or more of such securities (the "Separation Date"). When
exercisable, each Right entitles the holder to purchase one one-hundredth of a
share of IKON's Series 12 preferred stock for $75.00 (the "Exercise Price"),
subject to adjustment.
The Purchase Rights Plan further provides that if any person or group
owning 20% or more of IKON's outstanding Common Stock (a) engages in certain
self-dealing practices with IKON, or (b) causes IKON to forgo or reduce
quarterly dividends or take an action which would result in a more than 2%
increase in the other entity's proportionate share of IKON's outstanding shares;
or if any person or group acquires 30% or more of IKON's outstanding stock, each
Right would entitle the holder thereof to acquire for the Exercise Price shares
of Common Stock having a market value equal to twice the Right's exercise price.
If IKON were acquired in a merger or other business combination, or if
more than 50% of its earning power or assets were sold in one transaction or a
series of transactions, each Right would entitle the holder thereof to purchase
shares of the acquiring company's common stock having a market value equal to
twice the Right's Exercise Price. The Rights that are or were held by a person
or group owning 20% or more of IKON's outstanding voting securities become void
if such person or group engages in an event which entitles holders of the Rights
to purchase Common Stock or common stock of the acquiring company having a
market value equal to twice the Right's Exercise Price.
The Rights, which expire on February 10, 1998, are non-voting and may
be redeemed by IKON at a price of $.05 per Right any time prior to ten days
after public announcement that a person has acquired 20% or more of IKON's
outstanding voting securities. Until the Separation Date, the Rights are
transferable with and only with the Common Stock.
VOTING RIGHTS
Common Stock. Subject to certain voting rights of holders of the Serial
------------
Preferred Stock to vote in certain circumstances and with respect to certain
matters as a class, the holders of the Common Stock currently have full voting
rights upon all matters presented for shareholder action. Shareholders do not
have the right to cumulate votes in electing directors.
Preferred Stock. The holders of Serial Preferred Stock are entitled to
---------------
one vote per share, and except as otherwise provided by specific provisions of
IKON's Articles of Incorporation or by Ohio Law, to vote on all matters together
with the holders of Common Stock as one class. The holders of Serial Preferred
Stock are not entitled to cumulate votes in electing directors. IKON's Articles
of Incorporation provide that in the event of default in the payment, in whole
or in part, of six quarterly dividends on the Serial Preferred Stock, whether or
not consecutive, the holders of shares of Serial Preferred Stock will be
entitled to elect two directors, to serve in addition to the directors otherwise
elected. Such right to elect additional directors is in lieu of all other rights
of the holders of the Serial Preferred Stock to vote for directors, and will
remain in effect until no quarterly dividend
-11-
<PAGE>
is in default. It is also provided that the vote or the written consent of at
least two-thirds of the outstanding shares of Serial Preferred Stock voting as a
class is necessary to effect (i) any amendment, alteration or repeal of any of
the provisions of the Articles of Incorporation or the Code of Regulations of
IKON which affects the voting powers, rights or preferences of the holders of
the Serial Preferred Stock, (ii) the authorization or issue of any stock, or any
security convertible into any stock, ranking prior to the Serial Preferred
Stock, (iii) the purchase or redemption of less than all the Serial Preferred
Stock then outstanding (except in accordance with a stock purchase offer made to
all holders of Serial Preferred Stock) when any dividends or sinking fund
obligations on the Serial Preferred Stock are in arrears, or (iv) the sale,
lease or conveyance by IKON of all or substantially all of its property or
business, its voluntary liquidation or dissolution, or its consolidation with or
merger into any other corporation, unless the resulting corporation will have no
shares authorized or outstanding ranking prior to or on a parity with the Serial
Preferred Stock except the same number with the same rights and preferences as
those of IKON authorized and outstanding immediately preceding such
consolidation or merger, and unless each holder of Serial Preferred Stock
immediately prior thereto receives the same number of shares, with the same
rights and preferences, of the resulting corporation. It is further provided
that the vote or written consent of two-thirds of the holders of shares or any
series is necessary to amend the Articles of Incorporation or Code of
Regulations of IKON in such a way as to affect adversely and particularly the
preferences, rights, powers or privileges of such series. No such vote or
consent is required if provision has been made for the redemption of all of the
Serial Preferred Stock or any series thereof.
In addition, IKON may not create additional classes of stock, increase
the authorized number of shares of Serial Preferred Stock or issues series of
preferred stock ranking on a parity with the Serial Preferred Stock with
respect, in each case, to the payment of dividends and amounts upon liquidation,
dissolution and winding up without the vote or written consent of at least a
majority of the outstanding shares of Preferred Stock voting as a class.
REDEMPTION PROVISIONS AND SINKING FUND
Common Stock. The Common Stock is not redeemable.
------------
Preferred Stock. The directors are empowered to determine any
---------------
redemption rights and price of each series of the Serial Preferred Stock. The
Series BB preferred stock and the depository shares representing such stock are
not redeemable.
CONVERSION RIGHTS
Common Stock. The Common Stock is not convertible into any other
------------
security.
Preferred Stock. The directors are empowered to determine whether the
---------------
shares of any series of the Serial Preferred Stock will be convertible into
Common Stock, and if so, the conversion price or prices and the other terms or
provisions of such rights, Series BB preferred shares are convertible at the
option of the holder at a rate of 204.68 shares of common stock per share
(2.0468 shares of Common Stock per depository share) until October 1, 1998, at
which time each share will automatically convert to a number of shares of Common
Stock determined by an exchange rate which will vary based on the market price
of the Common Stock per depository share. The conversion rights with respect to
Serial Preferred Stock are subject to proportionate adjustment if IKON combines
or splits the outstanding shares of Common Stock or pays a dividend in Common
Stock. Shares of Serial Preferred Stock which have been converted must be
retired and may not be reissued.
-12-
<PAGE>
LIQUIDATION RIGHTS
Common Stock. The holders of Common Stock are entitled pro rata to the
------------
assets of IKON in the event of voluntary or involuntary liquidation, subject to
the rights of creditors and the rights of the holders of the Serial Preferred
Stock to receive certain per share amounts plus accrued unpaid dividends.
Preferred Stock. In the event of voluntary or involuntary liquidation,
---------------
the holders of Series BB preferred stock are entitled to receive $7,737.50 per
share ($77.375 per depository share) plus accrued unpaid dividends. The Serial
Preferred Stock has priority over the Common Stock on any liquidation,
dissolution or winding up to the extent of the liquidation price plus any
accrued unpaid dividends. The directors have authority in establishing any
series to determine the liquidation price for each series in the event of any
liquidation, dissolution or winding up.
LIABILITY FOR ASSESSMENT
Outstanding shares of the Common and Serial Preferred Stock are fully
paid and non-assessable.
IKON COMMON STOCK: OHIO ANTITAKEOVER PROVISIONS
Holders of shares of IKON Common Stock are entitled to one vote per
share on all matters to be voted upon by the stockholders and are not entitled
to cumulate votes for the election of directors. Subject to preferences that may
be applicable to any outstanding Preferred Stock, holders of shares of IKON
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the IKON Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
IKON, the holders of shares of IKON Common Stock are entitled to share ratably
in all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock, if any, then outstanding. IKON is
subject to the provisions of Chapter 1704 of the Ohio Law which regulates
transactions by public corporations (such as IKON) involving interested
shareholders. Subject to certain exceptions, Chapter 1704 prohibits a publicly
held Ohio corporation from engaging in a Chapter 1704 Transaction (as
hereinafter defined) with an interested shareholder for a period of three years
after the date of the transaction in which the person became an interested
shareholder. Subject to certain exceptions, an interested shareholder, is a
person who, together with affiliates and associates, owns, or within three years
did own 10% or more of the corporation's voting stock. A Chapter 1704
Transaction includes, but is not limited to, a merger, consolidation,
combination, purchase or sale of assets having an aggregate fair market value in
excess of 5% of either the aggregate market value of the consolidated assets of
the corporation or the aggregate market value of all the outstanding stock of
the corporation, or 10% of the earning power and income of the corporation (on a
consolidated after-tax basis), and certain transactions that would increase the
interested shareholder's proportionate share ownership in the corporation or
which provide the interested shareholder with a financial benefit. These
restrictions do not apply where (i) the Chapter 1704 Transaction or the
transaction in which the shareholder becomes interested is approved by the
corporation's Board of Directors prior to the date the interested shareholder
acquired its shares, or (ii) under certain other circumstances enumerated in
Chapter 1704 of the Ohio Law. The Chapter 1704 Transaction provisions of Chapter
1704 of the Ohio Law may have the effect of deterring merger proposals, tender
offers or other attempts to effect changes in control of the Company that are
not negotiated with and approved by the Board of Directors.
-13-
<PAGE>
LEGAL OPINIONS
The validity of the issuance of the shares of Common Stock offered
hereby is being passed upon for IKON by Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements of IKON Office Solutions, Inc.
incorporated by reference in IKON's Annual Report (Form 10-K) for the year ended
September 30, 1996 and the related financial statement schedule included
therein, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon included or incorporated by reference therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
-14-
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Ohio Law provides that a corporation shall indemnify persons who
incur certain liabilities or expenses in the successful defense of a suit or a
proceeding brought by reason of the fact that such persons are or were directors
or officers of the corporation. Pursuant to Ohio Law, IKON has adopted, as part
of its Code of Regulations, provisions whereby IKON shall indemnify such persons
against expenses (including attorneys' fees) reasonably incurred in connection
with the successful defense of such actions.
If unsuccessful in defense of a third-party civil suit or a criminal
suit, or if such a suit is settled, such a person shall be indemnified under the
Code of Regulations against (1) expenses (including attorneys' fees) and (2)
judgments, fines and amounts paid in settlement if he or she acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of IKON, and with respect to any criminal action, had no
reasonable cause to believe his or her conduct was unlawful.
If unsuccessful in defense of a suit brought by or in the right of
IKON, or if such suit is settled, such a person shall be indemnified under such
law only against expenses (including attorneys' fees) incurred in the defense or
settlement of such suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of IKON
except that if such a person is adjudged to be liable in such a suit for
negligence or misconduct in the performance of his or her duty to IKON, he or
she cannot be indemnified unless specific court approval is obtained.
IKON has purchased liability insurance policies covering its directors
and officers to provide protection where IKON cannot legally indemnify a
director or officer and where a claim arises under the Employee Retirement
Income Security Act of 1974 against a director or officer based upon an alleged
breach of fiduciary duty or other wrongful act.
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as a part of this report (listed by numbers
corresponding to the Exhibit Table of Item 601 in Regulation S-K):
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of IKON, filed as
Exhibit 3.1 to IKON's 1995 Form 10-K, are incorporated herein by
reference. Amendment to Amended and Restated Articles of
Incorporation of IKON, filed as Exhibit 3.1 to IKON's Form 10-Q for
the quarter ended December 31, 1996, is incorporated herein by
reference.
3.2 Code of Regulations of IKON, filed as Exhibit 3.2 to IKON's Form
10-Q for the quarter ended March 31, 1996, is incorporated herein
by reference.
4.1 Credit Agreement, dated December 16, 1996, Among IKON and various
Institutional Lenders, with CoreStates Bank, N.A., as Agent., filed
as Exhibit 4.1 to IKON's 1996 Form 10-K, is incorporated herein by
reference.
4.2 Note Purchase Agreement between IKON and various purchasers, dated
July 15, 1995, for $55 million in 7.15% Notes due November 15,
2005, filed as Exhibit 4.9 to IKON's 1995 Form 10-K, is
incorporated herein by reference.
4.3 Credit Agreement dated as of October 13, 1995 Among IKON Office
Solutions, Inc. (Canada) (formerly IKON Office Systems Canada,
Inc.), Deutsche Bank Canada, Chemical Bank of Canada and Royal Bank
of Canada, filed as Exhibit 4.5 to IKON's 1995 Form 10-K, is
incorporated herein by reference.
4.4 Credit Agreement dated as of August 30, 1996 Among IKON, certain of
its subsidiaries, various banks and Deutsche Bank AG, New York
Branch, as Agent. Amendment No. 1 to Credit Agreement.
4.5 Pursuant to Regulation S-K item 601(b)(iii), IKON agrees to furnish
to the Commission, upon request, a copy of other instruments
defining the rights of holders of long-term debt of IKON and its
subsidiaries.
5 Opinion of Ballard, Spahr, Andrews & Ingersoll
10.1 Funding, Construction Agency, Open End Mortgage and Lease Agreement
dated as of February 14, 1997 between 1997-1 Valley Stream Trust
and IKON.
10.2 Distribution Agreement between IKON and Unisource Worldwide, Inc.
("Unisource"), dated as of November 20, 1996, filed as Exhibit 2.1
to Unisource's Registration Statement on Form 10 (effective
November 26, 1996), is incorporated herein by reference.
10.3 Tax Sharing and Indemnification Agreement between IKON and
Unisource dated as of November 20, 1996, filed as Exhibit 2.1 to
Unisource's Registration Statement on Form 10 (effective November
26, 1996), is incorporated herein by reference.
10.4 Benefits Agreement between IKON and Unisource dated as of November
20, 1996, filed as Exhibit 10.5 to Unisource's Registration
Statement on Form 10 (effective November 26, 1996), is incorporated
herein by reference.
10.5 Support Agreement dated as of October 22, 1996 between IKON and
IKON Capital, Inc. (IKON's leasing subsidiary), filed as Exhibit
10.4 to IKON Capital, Inc.'s Form 8-K dated October 22, 1996, is
incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.6 Receivables Transfer Agreement dated as of September 30, 1996 Among
IKON Funding, Inc., IKON Capital, Inc., Old Line Funding Corp. and
Royal Bank of Canada., filed as Exhibit 10.5 to IKON's Form 10-K
dated December 30, 1996, is incorporated herein by reference.
10.7 Transfer Agreement dated as of September 30, 1996 between IKON
Capital, Inc. and IKON Funding, Inc., filed as Exhibit 10.6 to
IKON's Form 10-K dated December 30, 1996, is incorporated herein by
reference.
10.8 Indenture, dated as of December 11, 1995 between IKON and First
Union Bank, N.A., as Trustee, filed as Exhibit 4 to IKON's
Registration Statement No. 33-64177, is incorporated herein by
reference.
10.9 Indenture dated as of July 1, 1995 between IKON Capital, Inc. and
Chase Manhattan Bank, N.A. (formerly Chemical Bank, N.A.), as
Trustee, filed as Exhibit 10.8 to IKON's Form 10-K dated December
30, 1996, is incorporated herein by reference.
10.10 Distribution Agreement dated as of June 30, 1995 between IKON
Capital, Inc. and various distribution agents, filed as Exhibit
10.21 to IKON's 1995 Form 10-K, is incorporated herein by
reference.
10.11 Amended and Restated Receivables Transfer Agreement Receivables
Transfer Agreement dated as of March 31, 1997 Among IKON Funding,
Inc., IKON Capital, Inc., Twin Towers, Inc. and Deutsche Bank AG,
New York Branch, as Agent.
10.12 First Tier Transfer Agreement dated as of March 31, 1997 between
IKON Capital, Inc. and IKON Funding, Inc.
10.13 Indenture dated as of July 1, 1994 between IKON Capital, Inc. and
The Bank of New York, as Trustee, filed as Exhibit 4 to IKON
Capital, Inc.'s Registration Statement No. 33-53779, is
incorporated herein by reference.
10.14 Distribution Agreement dated July 1, 1994, filed as Exhibit 1 to
IKON Capital Inc.'s Form 10-Q for the quarter ended June 30, 1994,
is incorporated herein by reference.
10.15 Maintenance Agreement, dated as of August 15, 1991 between IKON and
IKON Capital, Inc., filed as Exhibit 10.2 to IKON Capital, Inc.'s
Registration Statement on Form 10 dated May 4, 1994, is
incorporated herein by reference.
10.16 Operating Agreement, dated as of August 15, 1991 between IKON and
IKON Capital, Inc., filed as Exhibit 10.3 to IKON Capital, Inc.'s
Registration Statement on Form 10 dated May 4, 1994, is
incorporated herein by reference.
10.17 Rights Agreement dated as of February 10, 1988 between IKON and
National City Bank, filed on February 11, 1988 as Exhibit 1 to
IKON's Registration Statement on Form 8-A, is incorporated herein
by reference.
10.18 Indenture, dated as of April 1, 1986 between IKON and the Chase
Manhattan Bank, N.A., as Trustee, filed as Exhibit 4.1 to IKON's
Registration Statement No. 30-4829, is incorporated herein by
reference.
10.19 IKON Amended and Restated Long Term Incentive Compensation Plan,
filed as Exhibit 10.1 to IKON's Form 10-Q for the quarter ended
March 31, 1996, is incorporated herein by reference.**
10.20 IKON Annual Bonus Plan, filed as Exhibit 10.3 to IKON's 1994 10-K,
is incorporated herein as reference.**
10.21 IKON Partners' Stock Purchase Plan, filed as Exhibit 10.4 to IKON's
Form 10-Q for the quarter ended March 31, 1996, is incorporated
herein by reference.**
10.22 IKON 1986 Stock Option Plan, filed as Exhibit 10.6 to IKON's 1995
Form 10-K, is incorporated herein by reference.**
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.23 IKON 1995 Stock Option Plan, filed as Exhibit 10.5 to IKON's Form
10-Q for the quarter ended March 31, 1996, is incorporated herein
by reference.**
10.24 IKON 1989 Directors' Stock Option Plan, filed as Exhibit 10.3 to
IKON's 1992 Form 10-K, is incorporated herein by reference.**
10.25 IKON 1993 Directors' Stock Option Plan, filed as Exhibit 10.7 to
IKON's 1993 Form 10-K, is incorporated herein by reference.**
10.26 IKON Retirement Plan for Non-Employee Directors, filed as Exhibit
10.10 to IKON's 1992 Form 10-K, is incorporated herein by
reference.**
10.27 IKON 1980 Deferred Compensation Plan, filed as Exhibit 10.7 to
IKON's 1992 Form 10-K, is incorporated herein by reference.**
10.28 IKON 1985 Deferred Compensation Plan, filed as Exhibit 10.8 to
IKON's 1992 Form 10-K, is incorporated herein by reference.**
10.29 IKON 1991 Deferred Compensation Plan, filed as Exhibit 10.9 to
IKON's 1992 Form 10-K, is incorporated herein by reference.**
10.30 IKON 1994 Deferred Compensation Plan, filed as Exhibit 10.28 to
IKON's 1996 Form 10-K, is incorporated herein by reference.**
10.31 IKON Executive Deferred Compensation Plan, filed as Exhibit 10.29
to IKON's 1996 Form 10-K, is incorporated herein by reference.**
11 Statement re: Computation of earnings per share, filed as Exhibit
11 to IKON's Form 10-Q for the quarter ended December 31, 1996, is
incorporated herein by reference.
21 Subsidiaries of IKON.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
* Copies of the exhibits will be furnished to any security holder of IKON upon
payment of the reasonable cost of reproduction.
** Management contract or compensatory plan or arrangement.
<PAGE>
ITEM 22. UNDERTAKINGS
Item 22. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against policy
as expressed in the Act and will be governed by the final jurisdiction of such
issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are being made, a
post-effective amendment to the registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b), if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
other material change to such information in the registration statement.
(2) That for the purpose of determining any liability under the Act each such
post-effective amendment may be deemed to be a new registration statement
relating to the securities being offered therein and the offering of such
securities at the time may be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities which are being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
<PAGE>
(5) To deliver or cause to be delivered with the Prospectus, to each person to
whom the Prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the Prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under
the Securities Exchange Act of 1934; and where interim financial
information required to be presented by Article 3 of Regulation S-X are not
set forth in the Prospectus, to deliver, or caused to be delivered to each
person to whom the Prospectus is sent or given, the latest quarterly report
that is specifically incorporated by reference in the Prospectus to provide
such interim financial information.
(6) As follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reoffering by persons who may
be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(7) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(8) To respond to requests for information that is incorporated by reference
into the Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form,
within one (1) business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(9) To supply by means of a post-effective amendment, Rule 424(c) supplement or
information incorporated by reference, all information concerning a
material transaction, and the company being acquired involved there, that
was not the subject of and included in the registration statement when it
became effective.
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-4, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Valley Forge, Pennsylvania, on the 10th day of April, 1997.
IKON OFFICE SOLUTIONS, INC.
Date: April 10, 1997 By: /s/ Michael J. Dillon
----------------------------------------
(Michael J. Dillon
Vice President and Controller
Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*JOHN E. STUART Chairman and Chief April 10, 1997
- ------------------------------- Executive Officer
(John E. Stuart) (Principal Executive Officer)
*KURT E. DINKELACKER President, Chief Operating April 10, 1997
- ------------------------------- Officer and a Director
(Kurt E. Dinkelacker)
*ROBERT M. KEARNS Senior Vice President and Chief April 10, 1997
- ------------------------------- Financial Officer
(Robert M. Kearns) (Principal Financial Officer)
*JAMES R. BIRLE Director April 10, 1997
- -------------------------------
(James R. Birle)
*WILLIAM F. DRAKE, JR. Chairman, General Counsel April 10, 1997
- ------------------------------- and Director
(William F. Drake, Jr.)
*FREDERICK S. HAMMER Director April 10, 1997
- -------------------------------
(Frederick S. Hammer)
*BARBARA BARNES HAUPTFUHRER Director April 10, 1997
- -------------------------------
(Barbara Barnes Hauptfuhrer)
*RICHARD A. JALKUT Director April 10, 1997
- -------------------------------
(Richard A. Jalkut)
</TABLE>
*By his signature set forth below, Michael J. Dillon, pursuant to duly
executed Powers of Attorney filed with the Securities and Exchange Commission,
has signed this Registration Statement on behalf of the persons whose signatures
are printed above, in the capacities set forth opposite their respective names.
/s/ Michael J. Dillon April 10, 1997
- -------------------------------
(Michael J. Dillon)
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-4, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Valley Forge, Pennsylvania, on the 10th day of April, 1997.
IKON OFFICE SOLUTIONS, INC.
Date: April 10, 1997 By:
-----------------------------------
(Michael J. Dillon
Vice President and Controller
Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*JOHN E. STUART Chairman and Chief April 10, 1997
- ------------------------------ Executive Officer
(John E. Stuart) (Principal Executive Officer)
*KURT E. DINKELACKER President, Chief Operating April 10, 1997
- ------------------------------ Officer and a Director
(Kurt E. Dinkelacker)
*ROBERT M. KEARNS Senior Vice President and Chief April 10, 1997
- ------------------------------ Financial Officer
(Robert M. Kearns) (Principal Financial Officer)
*JAMES R. BIRLE Director April 10, 1997
- ------------------------------
(James R. Birle)
*WILLIAM F. DRAKE, JR. Chairman, General Counsel April 10, 1997
- ------------------------------ and Director
(William F. Drake, Jr.)
*FREDERICK S. HAMMER Director April 10, 1997
- ------------------------------
(Frederick S. Hammer)
*BARBARA BARNES HAUPTFUHRER Director April 10, 1997
- ------------------------------
(Barbara Barnes Hauptfuhrer)
*RICHARD A. JALKUT Director April 10, 1997
- ------------------------------
(Richard A. Jalkut)
</TABLE>
*By his signature set forth below, Michael J. Dillon, pursuant to duly
executed Powers of Attorney filed with the Securities and Exchange Commission,
has signed this Registration Statement on behalf of the persons whose signatures
are printed above, in the capacities set forth opposite their respective names.
April 10, 1997
- -------------------------------
(Michael J. Dillon)
<PAGE>
EXHIBIT 4.4
AMENDMENT NO. 1 TO THE CREDIT AGREEMENT
---------------------------------------
AMENDMENT NO. 1 TO THE CREDIT AGREEMENT (this "Amendment"), dated
as of April 1, 1997, among IKON Office Solutions, Inc. (formerly known as Alco
Standard Corporation, and referred to herein as the "Company"), IKON Office
Solutions, S.A. (formerly known as Axion, S.A., and referred to herein as "IKON
France"), IKON Office Solutions Europe PLC ("IKON U.K." and, together with the
Company and IKON France, collectively referred to herein as the "Borrowers"),
various banks (the "Banks") and Deutsche Bank AG, New York Branch, as agent
(the "Agent"). All capitalized terms defined in the hereinafter defined Credit
Agreement shall have the same meaning when used herein unless otherwise defined
herein.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrowers, the Banks and the Agent entered into a Credit
Agreement, dated as of August 30, 1996 (as in effect on the date hereof, the
"Credit Agreement");
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
<PAGE>
1. Amendment to the Credit Agreement. The Commitment amount set forth
---------------------------------
opposite Deutsche Bank AG, New York Branch and Cayman Islands Branch, on
Schedule I to the Credit Agreement is hereby amended to $50,000,000.
2. Representations and Warranties. In order to induce the Banks and the
------------------------------
Agent to enter into this Amendment, each Borrower hereby represents and warrants
that:
(a) no Default or Event of Default exists or will exist as
of the date hereof and after giving effect to this Amendment; and
(b) as of the date hereof, after giving effect to this
Amendment, all representations, warranties and agreements of the
Borrower contained in the Credit Agreement will be true and correct
in all material respects.
3. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
4. Agreement Not Otherwise Amended. This Amendment is limited precisely
-------------------------------
as written and shall not be deemed to be an amendment, consent, waiver or
modification of any other term or condition of the Credit Agreement, any other
Credit Document or any of the instruments or agreements referred to therein, or
prejudice any right or rights which the Banks, the Agent or any of them may now
have or may have in the future under or in connection with the Credit Agreement,
any other Credit Document or any of the instruments or agreements referred to
therein. Except as expressly modified hereby, the terms and provisions of the
Credit Agreement shall continue in full force and effect. Whenever the Credit
Agreement is referred to in the Credit Agreement, any other Credit Document or
any of the instruments, agreements or other documents or papers executed and
delivered in connection therewith, it shall be deemed to be a reference to the
Credit Agreement as modified hereby.
5. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the date first above written.
IKON OFFICE SOLUTIONS, INC.
By
-------------------------------
Title:
IKON OFFICE SOLUTIONS, S.A.
By
-------------------------------
Title:
<PAGE>
IKON OFFICE SOLUTIONS EUROPE PLC
By
-------------------------------
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH
AND CAYMAN ISLANDS BRANCH
By
-------------------------------
Title:
By
-------------------------------
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH,
AS AGENT
By
-------------------------------
Title:
By
-------------------------------
Title:
<PAGE>
================================================================================
================================================================================
CREDIT AGREEMENT
AMONG
ALCO STANDARD CORPORATION,
CERTAIN OF ITS SUBSIDIARIES,
VARIOUS BANKS
AND
DEUTSCHE BANK AG, NEW YORK BRANCH,
AS AGENT
----------------------------------
Dated as of August 30, 1996
----------------------------------
================================================================================
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Definitions and Accounting Terms................................... 1
1.01 Defined Terms...................................................... 1
SECTION 2. Amount and Terms of Credit......................................... 11
2.01 The Commitments.................................................... 11
2.02 Minimum Amount of Each Borrowing................................... 11
2.03 Notice of Borrowing................................................ 11
2.04 Disbursement of Funds.............................................. 12
2.05 Notes.............................................................. 13
2.06 Pro Rata Borrowings................................................ 13
2.07 Interest........................................................... 14
2.08 Interest Periods; Terms............................................ 14
2.09 Increased Costs, Illegality, etc................................... 16
2.10 Compensation....................................................... 18
2.11 Change of Lending Office........................................... 19
2.12 Replacement of Banks............................................... 19
SECTION 3. Fees; Reductions of Commitment..................................... 20
3.01 Fees............................................................... 20
3.02 Voluntary Termination or Reduction of Unutilized
Commitments..................................................... 21
3.03 Mandatory Reduction of Commitments................................. 21
SECTION 4. Prepayments; Payments; Taxes....................................... 21
4.01 Voluntary Prepayments.............................................. 21
4.02 Mandatory Repayments and Commitment Reductions..................... 21
4.03 Method and Place of Payment........................................ 23
4.04 Net Payments....................................................... 23
SECTION 5. Conditions Precedent to Loans...................................... 24
5.01 Opinion of Counsel................................................. 24
5.02 Corporate Documents................................................ 24
5.03 Adverse Change, etc................................................ 24
5.04 Litigation......................................................... 25
5.05 Fees, etc.......................................................... 25
5.06 Borrowing Subsidiaries............................................. 25
SECTION 6. Conditions Precedent to All Credit Events.......................... 25
</TABLE>
(i)
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
6.01 No Default; Representations and Warranties......................... 25
6.02 Notice of Borrowing................................................ 26
SECTION 7. Representations, Warranties and Agreements......................... 26
7.01 Organization and Good Standing..................................... 26
7.02 Corporate Power and Authority...................................... 27
7.03 Validity of Agreement and Notes.................................... 27
7.04 Litigation......................................................... 27
7.05 Financial Statements............................................... 27
7.06 ERISA.............................................................. 28
7.07 Regulations G, T, U and X.......................................... 28
7.08 Compliance with Laws............................................... 29
7.09 Taxes and Assessments.............................................. 29
7.10 Investment Company; Public Utility Company......................... 29
7.11 Environmental Matters.............................................. 29
7.12 Liens.............................................................. 30
7.13 Disclosure Generally............................................... 30
7.14 Ownership of Borrowing Subsidiaries................................ 30
SECTION 8. Covenants.......................................................... 30
8.01 Financial Statements and Information............................... 30
8.02 Funded Debt to Capitalization...................................... 32
8.03 Subsidiaries' Debt................................................. 32
8.04 Sale of Assets..................................................... 32
8.05 Mergers and Acquisitions........................................... 33
8.06 Negative Pledge.................................................... 33
8.07 Sale, Discount of Receivables; Sale, Leaseback Transactions........ 34
8.08 Regulations G, T, U and X.......................................... 35
8.09 Corporate Existence................................................ 35
8.10 Books and Records.................................................. 35
8.11 Insurance.......................................................... 35
8.12 Litigation; Event of Default....................................... 35
8.13 Taxes.............................................................. 35
8.14 Compliance with Laws............................................... 36
8.15 Employee Benefit Plans............................................. 36
8.16 Continued Ownership of each Borrowing Subsidiary................... 36
SECTION 9. Events of Default and Acceleration................................. 37
9.01 Events of Default.................................................. 37
9.02 Acceleration by Reason of Default.................................. 39
SECTION 10. The Agent.......................................................... 39
10.01 Appointment........................................................ 39
10.02 Nature of Duties................................................... 40
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.03 Lack of Reliance on the Agent...................................... 40
10.04 Certain Rights of the Agent........................................ 40
10.05 Reliance........................................................... 41
10.06 Indemnification.................................................... 41
10.07 The Agent in its Individual Capacity............................... 41
10.08 Holders............................................................ 41
10.09 Resignation by the Agent........................................... 42
SECTION 11. Guaranty........................................................... 42
11.01 The Guaranty....................................................... 42
11.02 Bankruptcy......................................................... 43
11.03 Nature of Liability................................................ 43
11.04 Independent Obligation............................................. 43
11.05 Subordination...................................................... 43
11.06 Waiver............................................................. 44
11.07 Banks' Rights...................................................... 44
11.08 Guaranty Absolute.................................................. 45
11.09 Guaranty Continuing. ............................................. 45
11.10 Binding Nature of Guaranty......................................... 45
11.11 Limitation on Enforcement.......................................... 45
SECTION 12. Miscellaneous...................................................... 46
12.01 Payment of Expenses, etc........................................... 46
12.02 Right of Setoff.................................................... 47
12.03 Notices............................................................ 47
12.04 Benefit of Agreement............................................... 47
12.05 No Waiver; Remedies Cumulative..................................... 49
12.06 Payments Pro Rata.................................................. 49
12.07 Calculations; Computations......................................... 49
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL...................................... 50
12.09 Counterparts....................................................... 51
12.10 Effectiveness...................................................... 51
12.11 Headings Descriptive............................................... 51
12.12 Amendment or Waiver; etc........................................... 51
12.13 Survival........................................................... 52
12.14 Domicile of Loans.................................................. 52
12.15 Judgment Currency.................................................. 53
</TABLE>
SCHEDULE I Commitments
SCHEDULE II Schedule of Litigation
SCHEDULE III Schedule of Liens
EXHIBIT A Notice of Borrowing
EXHIBIT B Form of Company Note
EXHIBIT C Form of Borrower Subsidiary Note
(iii)
<PAGE>
EXHIBIT D Form of Opinion of Company Counsel
EXHIBIT E Form of Secretary's Certificate
EXHIBIT F Form of Borrowing Subsidiary Agreement
EXHIBIT G Form of Assignment and Assumption Agreement
(iv)
<PAGE>
CREDIT AGREEMENT, dated as of August 30, 1996, among ALCO STANDARD
CORPORATION, an Ohio corporation (the "Company"), certain subsidiaries of the
Company, DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH and the
various lending institutions as are or may become parties from time to time
hereto (each, a "Bank" and collectively, the "Banks") and DEUTSCHE BANK AG,
acting through its New York Branch, as agent for the Banks under this Agreement
(the "Agent").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, subject to the terms and conditions set forth herein, the
Banks are willing to make available to the Borrowers the respective credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Definitions and Accounting Terms
--------------------------------
1.01 Defined Terms. As used in this Agreement, 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):
"Affiliate" shall mean, with respect to any Person, any other Person
(other than an individual) directly or indirectly controlling (including, but
not limited to, all directors and officers of such Person), controlled by, or
under direct or indirect common control with, such Person. A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall have the meaning set forth in the first paragraph of this
Agreement, and shall include any successor to the Agent appointed pursuant to
Section 10.09.
"Agreement" shall mean this Credit Agreement, as modified, supplemented
or amended from time to time.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement, as well as any Person which becomes a "Bank" hereunder pursuant to
12.04(b).
<PAGE>
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing or (ii) a
Bank having notified in writing a Borrower and/or the Agent that it does not
intend to comply with its obligations under Sections 2.01 or 2.04.
"Bankruptcy Code" shall mean Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto,
or any similar Federal, state or foreign law for the relief of debtors.
"Borrower" shall mean the Company and any Borrowing Subsidiary.
"Borrowing" shall mean a borrowing hereunder consisting of Loans made
to the Borrower by the Banks on any Borrowing Date.
"Borrowing Date" shall mean the date on which a borrowing of Loans
hereunder occurs.
"Borrowing Subsidiary" shall mean each Subsidiary of the Company
acceptable to the Agent that has executed a Borrowing Subsidiary Agreement.
"Borrowing Subsidiary Agreement" shall mean that agreement executed
pursuant to Section 5.06 substantially in the form of Exhibit F hereto.
"Business Day" shall mean (i) for all purposes other than as covered by
clauses (ii) and (iii) below, any day except Saturday, Sunday and any day which
shall be in New York a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close, (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, any U.S. Dollar Loan, any day which is a Business Day
described in clause (i) above and which is also a day for trading by and between
banks in U.S. Dollar deposits in the London interbank Eurodollar market and
(iii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, any Loan the Loan Currency of which is
not the U.S. Dollar, any day which is a Business Day described in clause (i)
above and which is also (x) any day except a day which, in the primary trading
market for the Loan Currency, shall be a legal holiday or a day on which banking
institutions are authorized by law or other government action to close and (y) a
day for trading by and between banks in Loan Currency deposits in the interbank
market.
-2-
<PAGE>
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., as the same
-- ----
may be amended from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement, and to any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Commitment" shall mean, with respect to any Bank at any time, the
amount set forth opposite such Bank's name in Schedule I hereto under the
caption "Commitment," as such Schedule may be amended from time to time pursuant
to Section 12.04(b) or reduced pursuant to Section 3.02, 3.03, 4.02 or 9.01.
"Consolidated Net Worth" shall mean, at any time, all amounts which
would be included under shareholders' equity on a consolidated balance sheet of
the Company and its Consolidated Subsidiaries at such time, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Subsidiaries" shall mean, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with generally accepted accounting
principles in the United States.
"Contingent Liabilities" shall mean letters of credit (excluding
commercial documentary letters of credit), unconditional guaranties to banks or
other lenders of indebtedness of another person or entity, and liabilities
associated with interest rate hedging agreements, provided, however, that
-------- -------
Contingent Liabilities shall not be deemed to include any recorded liability
provided for on the Company's consolidated balance sheet.
"Credit Documents" shall mean this Agreement and, after the execution
and delivery thereof pursuant to the terms of this Agreement, each Note and each
Borrowing Subsidiary Agreement.
"Credit Event" shall mean the making of any Loan.
"Debt" shall mean (i) Funded Debt and (ii) any portions of notes
payable and capital lease obligations
-3-
<PAGE>
which are classified as current liabilities.
"DBNY" shall mean Deutsche Bank AG, New York Branch.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Transferee" shall mean and include any commercial bank,
financial institution or other "accredited investor" (as defined in Regulation D
of the Securities Act).
"Employment Benefit Plan" shall have the meaning provided in Section
7.06.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief in connection with alleged injury or threat of injury to
health, safety or the environment due to the presence of Hazardous Materials.
"Environmental Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guideline, legally
binding written policy and rule of common law now or hereafter in effect and in
each case as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, employee health and safety or Hazardous Materials,
including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control
Act, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. (S)
-- ---
2601 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the Safe
-- --- -- ---
-4-
<PAGE>
Drinking Water Act, 42 U.S.C. (S) 3803 et seq.; the Oil Pollution Act of 1990,
-- ---
33 U.S.C. (S) 2701 et seq.; the Emergency Planning and the Community Right-to-
-- ---
Know Act of 1986, 42 U.S.C. (S) 11001 et seq., the Hazardous Material
-- ---
Transportation Act, 49 U.S.C. (S) 1801 et seq. and the Occupational Safety and
-- ---
Health Act, 29 U.S.C. (S) 651 et seq.; and any state and local or foreign
-- ---
counterparts or equivalents, in each case as amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement, and to any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall have the meaning provided in Section 7.06.
"Eurocurrency Loan" shall mean each Loan designated as such by the
applicable Borrower at the time of the incurrence thereof.
"Eurocurrency Rate" shall mean, with respect to any Eurocurrency Loan,
the sum of (a) the LIBOR Rate for such Loan and (b) 0.20%.
"Event of Default" shall have the meaning provided in Section 9.
"Facility Fee" shall have the meaning set forth in Section 3.01(a)
hereof.
"Federal Funds Rate" shall mean for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rates are not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent on such day from three federal funds brokers
of recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to or referred to in
Section 3.01.
"Finance Leasing Subsidiaries" shall mean IKON
-5-
<PAGE>
Capital, Inc., a Delaware corporation, IKON Capital Inc., a Canadian
corporation, and IKON Capital, PLC, an English company, and their respective
successor corporations, and such additional Subsidiaries whose primary business
is the leasing of products distributed by the Company and its Subsidiaries.
"Funded Debt" shall mean any obligation payable more than one year from
the date of the creation thereof which under GAAP is shown on the consolidated
balance sheet as a liability (excluding reserves for deferred income taxes and
other reserves to the extent that such reserves do not constitute obligations
for borrowed money) and including, without limitation, the portion of any such
obligation properly classified as a current liability and capitalized leases.
"Funds Rate" shall mean the rate at which the Agent, in its sole
discretion, can acquire the applicable Loan Currency in the primary trading
market for such Loan Currency from such funding sources as the Agent in its sole
discretion may deem appropriate, through brokers of recognized standing, for a
period and in an amount comparable to the period and amount for which interest
is being calculated, provided that for loans in U.S. Dollars, the Funds Rate
will be the Federal Funds Rate.
"GAAP" shall have the meaning provided in Section 12.07.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous substances," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any Environmental Law; and (c) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any governmental authority.
"Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such
-6-
<PAGE>
Person and all unpaid drawings in respect of such letters of credit, (iii) all
Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi) or
(vii) of this definition secured by any Lien on any property owned by such
Person, whether or not such Indebtedness has been assumed by such Person, (iv)
the aggregate amount required to be capitalized under leases under which such
Person is the lessee, (v) all obligations of such person to pay a specified
purchase price for goods or services, whether or not delivered or accepted,
i.e., take-or-pay and similar obligations, (vi) all obligations of such Person
- ----
guaranteeing or intending to guarantee any Indebtedness of the types described
in clause (i) of this definition and (vii) all amounts payable by such Person
under any Interest Rate Protection Agreement or Other Hedging Agreement or under
any similar type of agreement.
"Initial Borrowing Date" shall mean, with respect to any Borrower, the
date occurring on or after the Effective Date on which the initial borrowing of
Loans by such Borrower hereunder occurs.
"Interest Determination Date" shall mean, with respect to any
Eurocurrency Loan, the second Business Day prior to the commencement of the
Interest Period for such Loan.
"Interest Period" shall have the meaning provided in Section 2.08.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest collar agreement, interest rate
hedging agreement or other similar agreement or arrangement.
"Judgment Currency" shall have the meaning provided in Section 12.15.
"Leaseholds" of any Person means all the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"LIBOR Rate" shall mean, with respect to the Interest Period for any
Eurocurrency Loan in any Loan Currency, the rate of interest per annum that the
Agent would offer to major banks in the London interbank market for deposits in
such Loan Currency for such Interest Period and in an amount approximately equal
to the amount of such Loan at or about 11:00 a.m. (New York time) on the second
Business Day prior to the commencement of such Interest
-7-
<PAGE>
Period.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean an extension of credit by the Banks to a Borrower
under Section 2, and may be a Quoted Rate Loan or a Eurocurrency Loan (each a
"Type" of Loan).
"Loan Currency" shall mean the currency acceptable to the Agent in
which any applicable Loan is made.
"Majority Banks" shall mean the Banks whose Commitments under this
Agreement aggregate greater than 50% of the Total Commitments.
"Material Adverse Effect" shall mean, with respect to any Borrower, a
material adverse effect on the business, properties, assets, liabilities,
condition (financial or otherwise) or prospects of such Borrower or such
Borrower and its Subsidiaries taken as a whole.
"Maturity Date" shall mean August 30, 1999.
"Minimum Borrowing Amount" shall mean U.S. $500,000 or the U.S. Dollar
Equivalent of such amount in the Loan Currency.
"Multiemployer Plan" shall have the meaning provided in Section 7.06.
"Note" shall mean each of the notes executed pursuant to Section 2.05
hereof.
"Notice of Borrowing" shall mean each telephonic notice of borrowing
given pursuant to Section 2.03(a) and each written notice of borrowing given
pursuant to Section 2.03(b).
"Notice Office" shall mean the office of the Agent located at 31 West
52nd Street, New York, New York 10019, Attention: Syndications Department, or
such other office as the Agent may hereafter designate in writing as
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such to the other parties hereto.
"Obligations" shall mean all amounts owing to the Banks pursuant to the
terms of this Agreement or any other Credit Document.
"Other Hedging Agreement" shall mean any foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against the fluctuations in currency values.
"Payment Office" shall mean the office of the Agent located at 31 West
52nd Street, New York, New York 10019 or such other office as the Agent may
hereafter designate in writing as such to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Pension Plan" shall have the meaning provided in Section 7.06.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Prime Lending Rate" shall mean the rate which the Agent announces from
time to time as its prime lending rate in the applicable Loan Currency, the
Prime Lending Rate to change when and as such prime lending rate changes. Prime
Lending Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer. The Agent may make commercial
loans or other loans at rates of interest at, above or below the Prime Lending
Rate.
"Quoted Rate" shall mean the rate at which the Agent, in its sole
discretion, offers to lend to the applicable Borrower the applicable Loan
Currency in the amount and for such period such Borrower selects pursuant to
Sections 2.03 hereof, provided that, the Quoted Rate for Loans denominated in
U.S. Dollars shall mean the Prime Lending Rate.
"Quoted Rate Loan" shall mean each loan designated as such by the
applicable Borrower at the time of the incurrence thereof.
"Quarterly Payment Date" shall mean the last
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Business Day of each March, June, September and December occurring after the
Effective Date.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C.(S) 6901 et seq., as the same may be amended from time to time.
-- ----
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recomputation Date" shall have the meaning provided in Section
4.02(a).
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Required Banks" shall mean non-Defaulting Banks, the sum of whose
Commitments represent an amount equal to or greater than 66-2/3% of the sum of
the Total Commitments.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
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<PAGE>
"Securitization" means the transfer or pledge of assets or interests in
assets to a trust, partnership, corporation or other entity, which transfer or
pledge is funded by such entity in whole or in part by the issuance of
instruments or securities that are paid principally from the cash flow derived
from such assets or interests in assets.
"Significant Subsidiary" shall mean a Subsidiary which is a
"significant subsidiary" as defined in Section 210.1-02(v) of Regulation S-X of
the Securities and Exchange Commission, 17 C.F.R. Part 210, as in effect on the
date hereof.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Total Commitments" shall mean the aggregate of all of the Commitments
of all of the Banks.
"Type" shall have the meaning specified in the definition of "Loan".
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"Unfunded Pension Liabilities" shall have the meaning provided in
Section 7.06.
"United States" and "U.S." shall each mean the United States of
America.
"Unrecognized Retiree Welfare Liability" shall have the meaning
provided in Section 7.06.
"Unutilized Loan Commitment", with respect to any Bank, at any time
shall mean such Bank's Commitment at such time less the U.S. Dollar Equivalent
of the aggregate outstanding principal amount of Loans made by the Bank under
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this Agreement.
"U.S. Dollar" or "U.S.$" shall mean freely transferable lawful money of
the United States.
"U.S. Dollar Equivalent" of any amount of any currency on any date
shall mean the equivalent amount in U.S. Dollars, after giving effect to a
conversion of such amount of such currency to U.S. Dollars at the buy spot rate
quoted for wholesale transactions by DBNY at approximately 11:00 A.M. (New York
time) on such date in accordance with its normal practice.
SECTION 2. Amount and Terms of Credit.
--------------------------
2.01 The Commitments. Subject to and upon the terms and conditions set
---------------
forth herein, each Bank severally agrees, at any time and from time to time on
and after the Effective Date and prior to the Maturity Date, to make a Loan or
Loans to each Borrower, which Loans (a) shall at the option of the Borrower be
Quoted Rate Loans or Eurocurrency Loans, (b) shall bear interest (i) in the case
of Eurocurrency Loans at the Eurocurrency Rate and (ii) in the case of Quoted
Rate Loans at the Quoted Rate, (c) shall be denominated in the applicable Loan
Currency and (d) may be repaid and reborrowed in accordance with the provisions
hereof. In no event shall a Bank be obligated to make a Loan hereunder on any
Borrowing Date if, on such Borrowing Date after giving effect thereto, (A) the
U.S. Dollar Equivalent of such Bank's Loans outstanding on such Borrowing Date
would exceed its Commitment or (B) the U.S. Dollar Equivalent of the aggregate
Loans outstanding on such Borrowing Date would exceed the Total Commitments.
2.02 Minimum Amount of Each Borrowing. The aggregate principal amount
--------------------------------
of each Borrowing shall (a) not be less than the Minimum Borrowing Amount and
(b) be in round lot currency multiples reasonably acceptable to the Agent.
2.03 Notice of Borrowing. (a) Whenever a Borrower desires to make a
-------------------
Borrowing hereunder, it shall give the Agent at its Notice Office by telephone a
Notice of Borrowing (i) in the case of a Quoted Rate Loan not later than 10:00
a.m. (New York time) on the day before such Loan is to be made and (ii) in the
case of a Eurocurrency Loan at least three Business Days prior to the proposed
date of Borrowing, which shall be a Business Day; provided that any such Notice
--------
of Borrowing in respect of a Borrowing shall be deemed to have been given on a
certain day only if given
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<PAGE>
before 12:00 noon (New York time) on such day. Each such Notice of Borrowing,
except as otherwise expressly provided in Section 2.09, shall be irrevocable and
shall specify the Type of Loan to be made pursuant to such Borrowing, the
aggregate principal amount of such Loan, the date of such Borrowing (which shall
be a Business Day), the Loan Currency and, in the case of a Eurocurrency Loan,
the duration of the Interest Period applicable thereto and, in the case of a
Quoted Rate Loan, the term of such Loan. The Agent shall promptly give each Bank
notice of such proposed Borrowing, of such Bank's proportionate share thereof,
and of the other matters required by the immediately preceding sentence to be
specified in the Notice of Borrowing.
(b) Notwithstanding anything to the contrary provided in Section
2.03(a), the Agent may, at any time, request a Borrower to promptly confirm in
writing any telephonic notice given by such Borrower pursuant to Section
2.03(a). Each such confirmation shall be irrevocable and shall be given by such
Borrower in the form of Exhibit A hereto appropriately completed to specify the
same information required pursuant to Section 2.03(a).
(c) Without in any way limiting the obligation of a Borrower to confirm
in writing any telephonic notice permitted to be given hereunder following a
request by the Agent pursuant to Section 2.03(b), the Agent may act without
liability upon the basis of a telephonic Notice of Borrowing, believed by the
Agent in good faith to be from the chairman, the president, the vice
president/finance, the treasurer, any assistant treasurer or the controller of
such Borrower (or any other officer of such Borrower designated in writing to
the Agent by the chairman, the president, the vice president/finance or the
controller as being authorized to give such a Notice of Borrowing under this
Agreement) prior to receipt of written confirmation. In each such case, such
Borrower hereby waives the right to dispute the Agent's record of the terms of
such telephonic Notice of Borrowing absent manifest error.
2.04 Disbursement of Funds. No later than 12:00 noon (New York time) on
---------------------
the date specified in each Notice of Borrowing, each Bank will make available
its pro rata portion of each such Borrowing requested to be made on such date.
--- ----
Each Bank shall make its pro rata portion of each such Borrowing available in
--- ----
the Loan Currency and in immediately available funds at the Payment Office of
the Agent, and the Agent will make available to the applicable Borrower at the
Payment Office the aggregate of the amounts so made available by the Banks.
Unless the Agent shall have been notified by any Bank prior to the date of
Borrowing that
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such Bank does not intend to make available to the Agent such Bank's pro rata
--- ----
portion of any Borrowing to be made on such date, the Agent may assume that such
Bank has made such amount available to the Agent on such date of Borrowing and
the Agent may, in reliance upon such assumption, make available to such Borrower
a corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Bank, the Agent shall be entitled to recover such
corresponding amount on demand from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent shall
promptly notify the applicable Borrower, and such Borrower shall immediately pay
such corresponding amount to the Agent. The Agent shall also be entitled to
recover on demand from such Bank or such Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the applicable Borrower
until the date such corresponding amount is recovered by the Agent, at a rate
per annum equal to (i) if recovered from such Bank, the overnight Funds Rate and
(ii) if recovered from such Borrower, the rate of interest applicable to the
respective Borrowing, as determined pursuant to Section 2.07 (it being
understood that if such Borrower pays such interest to the Agent, no interest on
such amount shall be payable by such Borrower to the respective Bank). Nothing
in this Section 2.04 shall be deemed to relieve any Bank from its obligation to
make Loans hereunder or to prejudice any rights which any Borrower may have
against any Bank as a result of any failure by such Bank to make Loans
hereunder.
2.05 Notes. (a) Each Borrower's obligation to pay the principal of, and
-----
interest on, the Loans made by a Bank to such Borrower shall be evidenced by a
promissory note duly executed and delivered by such Borrower substantially in
the form of Exhibit B hereto, in the case of the Company, and Exhibit C hereto,
in the case of a Borrowing Subsidiary, with blanks appropriately completed in
conformity herewith (each a "Note" and, collectively, the "Notes").
(b) Each Note issued to each Bank shall (i) be executed by the
applicable Borrower, (ii) be payable to the order of such Bank and be dated the
Effective Date, in the case of the Company, and the Initial Borrowing Date, in
the case of a Borrowing Subsidiary, (iii) be in a stated principal amount equal
to the amount of the applicable Loan, (iv) mature on the Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 2.07, (vi) be subject
to voluntary prepayment as provided in Section 4.01, and mandatory repayment as
provided in Section 4.02, and
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(vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(c) Each Bank will note on its internal records and on each Note the
amount of each Loan made by it and each payment in respect thereof. Failure to
make any such notation shall not, however, affect the Borrower's or the
Company's obligations in respect of any Loan.
2.06 Pro Rata Borrowings. All Borrowings of Loans under this Agreement
-------------------
shall be incurred from the Banks pro rata on the basis of their Commitments. It
--- ----
is understood that no Bank shall be responsible for any default by any other
Bank of its obligation to make Loans hereunder and that each Bank shall be
obligated to make the Loans provided to be made by it hereunder, regardless of
the failure of any other Bank to make its Loans hereunder.
2.07 Interest. (a) Each Borrower shall pay interest in respect of the
--------
unpaid principal amount of each Quoted Rate Loan to such Borrower from the date
the proceeds thereof are made available to such Borrower until the maturity
thereof (whether by acceleration or otherwise) at a rate per annum equal to the
Quoted Rate in effect from time to time. Each Borrower shall pay interest in
respect of the unpaid principal amount of each Eurocurrency Loan from the date
the proceeds thereof are made available to such Borrower until the maturity
thereof (whether by acceleration or otherwise) at a rate per annum equal to the
Eurocurrency Rate.
(b) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the rate which
is 2% in excess of the rate of interest then borne by such Loans, in each case
with such interest to be payable on demand.
(c) Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each Quoted Rate Loan, on the date of any prepayment or repayment
thereof (on the amount prepaid or repaid) and monthly in arrears on each monthly
anniversary of the date such Quoted Rate Loan was advanced, and (ii) in respect
of each Eurocurrency Loan, on the date of any prepayment or repayment thereof
(on the amount prepaid or repaid), on the last day of the Interest Period
applicable thereto and, in the case of an Interest Period in excess of three
months, on each date occurring at three month intervals after the first day of
such Interest Period.
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<PAGE>
(d) On the Interest Determination Date in respect of each Eurocurrency
Loan, the Agent shall determine the LIBOR Rate for the Interest Period for such
Loan and shall promptly notify the applicable Borrower and the Banks thereof.
Each such determination shall, absent manifest error, be final and conclusive
and binding on all parties hereto.
2.08 Interest Periods; Terms. (a) At the time it gives any Notice of
-----------------------
Borrowing in respect of any Eurocurrency Loan, the Borrower shall have the right
to elect, by giving the Agent written notice thereof, the interest period (each,
an "Interest Period") applicable to such Eurocurrency Loan, which Interest
Period shall, at the option of the Borrower, be a one, two, three, six or
twelve-month period, provided that with respect to any such Loan:
--------
(i) if the Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall, subject to clause (iv) below,
end on the last Business Day of such calendar month;
(ii) if the Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, however, that if the Interest Period
-------- -------
would otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iii) no Interest Period may be selected at any time when a Default or
Event of Default is then in existence;
(iv) no Interest Period shall be selected which extends beyond the
Maturity Date; and
(v) no Interest Period shall be selected which extends beyond any
date upon which a mandatory repayment of such Loan will be required to be
made under Section 4.02(b) if the aggregate principal amount of Loans which
have Interest Periods or terms which will expire after such date will be in
excess of the aggregate principal amount of Loans then outstanding less the
aggregate amount of such required prepayment.
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<PAGE>
(b) At the time it gives any Notice of Borrowing in respect of any
Quoted Rate Loan, the Borrower shall have the right to elect, by giving the
Agent written notice thereof, the term applicable to such Quoted Rate Loan,
provided that with respect to any such Loan:
- --------
(i) if the term of such Quoted Rate Loan would otherwise expire on a
day which is not a Business Day, such term shall expire on the next
succeeding Business Day;
(ii) no term may be selected at any time when a Default or Event of
Default is then in existence;
(iii) no term shall be selected which extends beyond the Maturity
Date; and
(iv) no term shall be selected which extends beyond any date upon
which a mandatory repayment of such Loan will be required to be made under
Section 4.02(b) if the aggregate principal amount of Loans which have
Interest Periods or terms which will expire after such date will be in
excess of the aggregate principal amount of Loans then outstanding less the
aggregate amount of such required prepayment.
2.09 Increased Costs, Illegality, etc. (a) In the event that any Bank
--------------------------------
shall have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto but, with respect to
clause (i) below, may be made only by the Agent):
(i) on the Interest Determination Date in respect of any Loan that,
by reason of any changes arising after the date of this Agreement affecting
the interbank Eurodollar market or the applicable Loan Currency, adequate
and fair means do not exist for ascertaining the applicable interest rate
on the basis provided for in the definition of LIBOR Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Loan because of (x) any change since the date of this Agreement in any
applicable law or governmental rule, regulation, order, guideline or
request (whether or not having the force of law) or in the interpretation
or administration thereof and including the enactment of any new law or
governmental rule, regulation, order, guideline or request, such as, for
example, but
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not limited to (A) a change in the basis of taxation of payments to any
Bank of the principal of or interest on the Notes or any other amounts
payable hereunder (except for changes in the rate of tax on, or determined
by reference to, the net income or profits of such Bank, or any franchise
tax based on the net income or profits of such Bank, in either case
pursuant to the laws of the jurisdiction in which it is organized or in
which its principal office or applicable lending office is located or any
subdivision thereof or therein), but without duplication of any amounts
payable in respect of Taxes pursuant to Section 4.04(a); or (B) a change in
official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent covered by Section 2.09(c) and/or
(y) other circumstances since the date of this Agreement affecting such
Bank or the interbank Eurodollar market or the applicable eurocurrency
market or the position of such Bank in such market; or
(iii) at any time, that the making or continuance of any Loan has been
made (x) unlawful by any law or governmental rule, regulation or order, (y)
impossible by compliance by such Bank with any governmental request
(whether or not having force of law) or (z) impracticable as a result of a
contingency occurring after the date of this Agreement which materially and
adversely affects the interbank Eurodollar market or the applicable
eurocurrency market;
then, and in any such event, such Bank (or the Agent, in the case of clause (i)
above) shall promptly give notice (by telephone confirmed in writing) to the
applicable Borrower and, except in the case of clause (i) above, to the Agent,
of such determination (which notice the Agent shall promptly transmit to each of
the other Banks). Thereafter (x) in the case of clause (i) above, the affected
Loans shall no longer be available until such time as the Agent notifies such
Borrower and the Banks that the circumstances giving rise to such notice by the
Agent no longer exist, and any Notice of Borrowing given by such Borrower with
respect to such Loans which have not yet been incurred shall be deemed rescinded
by such Borrower, (y) in the case of clause (ii) above, such Borrower shall pay
to such Bank, upon written demand therefor, such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts re-
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<PAGE>
ceived or receivable hereunder (a written notice as to the additional amounts
owed to such Bank, showing the basis for the calculation thereof, submitted to
the applicable Borrower by such Bank shall, absent manifest error, be final and
conclusive and binding on all the parties hereto) and (z) in the case of clause
(iii) above, such Borrower shall take one of the actions specified in Section
2.09(b) as promptly as possible and, in any event, within the time period
required by law.
(b) At any time that any Loan is affected by the circumstances
described in Section 2.09(a)(ii) or (iii), the applicable Borrower may (and in
the case of a Loan affected by the circumstances described in Section
2.09(a)(iii) shall) either (x) if the affected Loan is then being made, cancel
such Borrowing by giving the Agent telephonic notice (confirmed in writing) of
such cancellation on the same date that such Borrower was notified by the
affected Bank or the Agent pursuant to Section 2.09(a)(ii) or (iii) or (y) if
the affected Loan is then outstanding, upon at least three Business Days'
written notice to the Agent, prepay such Loan, provided that, if more than one
--------
Bank is affected at any time by the circumstances described in Section
2.09(a)(ii) or (iii), then all affected Banks must be treated in the same manner
pursuant to this Section 2.09(b).
(c) In the event that any Bank shall determine (which determination
shall, absent manifest error, be final and conclusive and binding on all the
parties hereto) at any time that by reason of Regulation D such Bank is required
to maintain reserves in respect of Eurocurrency liabilities (as defined in
Regulation D) (any such determination, for any Bank, a "Eurocurrency Reserve
Event"), then such Bank shall promptly give notice (by telephone confirmed in
writing) to the Borrowers and to the Agent of such determination (which notice
the Agent shall promptly transmit to each of the other Banks), and the Borrowers
shall directly pay to such Bank additional interest on the unpaid principal
amount of such Bank's Eurocurrency Loans throughout such Eurocurrency Reserve
Event at a rate per annum which shall, during each Interest Period, be the
amount by which (A) the LIBOR Rate for such Interest Period divided (and rounded
upward to the next whole multiple of 1/16 of 1%) by a percentage equal to 100%
minus the then stated maximum rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves) applicable to any member bank of the Federal Reserve System in respect
of Eurocurrency liabilities (as defined in Regulation D) exceeds (B) the LIBOR
Rate for such Interest Period. Additional interest payable pursuant to the
immediately preceding sentence shall be paid by each
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Borrower at the time that it is otherwise required to pay interest in respect of
such Loans or, if later demanded by the Bank, promptly on demand. Each Bank
agrees that, if it gives notice to the Borrowers of the existence of a
Eurocurrency Reserve Event, it shall promptly notify the Borrowers of any
termination thereof, at which time the Borrowers shall cease to be obligated to
pay additional interest to such Bank pursuant to the first sentence of this
Section 2.09(c) until such time, if any, as a subsequent Eurocurrency Reserve
Event shall occur.
(d) If at any time after the date of this Agreement any Bank determines
that the enactment of or any change in any applicable law or governmental rule,
regulation, order, guideline, directive or request (whether or not having the
force of law) concerning capital adequacy, or any change or any change therein,
or any change in interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, has or will have the effect of increasing the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank based on the existence of such Bank's Commitments
hereunder or its obligations hereunder or has or would have the effect of
reducing the rate of return on such Bank's capital or assets as a consequence of
such Bank's Commitments or obligations hereunder to a level below that which
such Bank could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) hereunder, then each Borrower shall pay to such Bank, upon its
written demand therefor, such additional amounts as shall be required to
compensate such Bank or such other corporation for the increased cost to such
Bank or such other corporation or the reduction in the rate of return to the
Bank or such other corporation as a result of such increase of capital. In
determining such additional amounts, each Bank will act reasonably and in good
faith and will use averaging and attribution methods which are reasonable,
provided that such Bank's determination of compensation owing under this Section
- --------
2.09(d) shall, absent manifest error, be final and conclusive and binding on all
the parties hereto. Each Bank, upon determining that any additional amounts will
be payable pursuant to this Section 2.09(d), will give prompt written notice
thereof to the applicable Borrower, which notice shall show the basis for
calculation of such additional amounts, although the failure to give any such
notice shall not release or diminish any of the Borrower's obligations to pay
additional amounts pursuant to this Section 2.09(d).
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2.10 Compensation. Each Borrower shall compensate each Bank, upon its
------------
written request (which request shall set forth the basis for requesting such
compensation and shall absent manifest error, be final and conclusive and
binding on all the parties hereto), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its Loans but excluding any loss of anticipated
profit) which such Bank may sustain: (i) if for any reason (other than a default
by such Bank or the Agent) a Borrowing of any Loan does not occur on a date
specified therefor in a Notice of Borrowing (whether or not withdrawn by the
applicable Borrower or deemed withdrawn pursuant to Section 2.09(a)); (ii) if
any repayment (including any repayment made pursuant to Section 4.01 or 4.02 or
a result of an acceleration of the Loans pursuant to Section 9) of a (a)
Eurocurrency Loan occurs on a date which is not the last day of the Interest
Period with respect thereto, and (b) Quoted Rate Loan occurs on a date which is
not on the last day of the term thereof; (iii) if any prepayment of any of its
Loans is not made on any date specified in a notice of prepayment given by the
Borrower; or (iv) as a consequence of (x) any other default by such Borrower to
repay any Loan when required by the terms of this Agreement or any Note held by
the such Bank or (y) any election made pursuant to Section 2.09(b). Calculation
of all amounts payable to a Bank under this Section 2.10 with respect to any (i)
Eurocurrency Loan shall be made as though that Bank had actually funded its
relevant Loan through the purchase of a Eurocurrency deposit bearing interest at
the relevant Eurocurrency Rate in an amount equal to the amount of such Loan,
having a maturity comparable to the relevant Interest Period, in the relevant
Loan Currency and through the transfer of such Eurocurrency deposit from an
offshore office of such Bank to a domestic office of such Bank in the United
States of America, and (ii) Quoted Rate Loan shall be made as though that Bank
had actually funded its relevant Loan at the Quoted Rate in an amount equal to
the amount of such Loan, having a maturity comparable to the maturity of the
relevant Loan and in the relevant Loan Currency; provided, however, that each
-------- -------
Bank may fund each of its Loans in any manner it sees fit and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this Section 2.10.
0.11 Change of Lending Office. Each Bank agrees that on the occurrence
------------------------
of any event giving rise to the operation of Section 2.09(a)(ii) or (iii),
Section 2.09(c), Section 2.09(d) or Section 4.04 with respect to such Bank, it
will, if requested by the applicable Borrower, use
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reasonable efforts (subject to overall policy considerations of such Bank) to
designate another lending office for any Loans affected by such event, provided
--------
that such designation is made on such terms that such Bank and its lending
office suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of such
Section. Nothing in this Section 2.11 shall affect or postpone any of the
obligations of the applicable Borrower or the right of any Bank provided in
Sections 2.09 and 4.04.
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[BLANK PAGE]
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<PAGE>
0.12 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank
--------------------
or otherwise defaults in its obligations to make Loans as provided hereunder,
(y) upon the occurrence of any event giving rise to the operation of Section
2.09(a)(ii) or (iii), Section 2.09(c), Section 2.09(d) or Section 4.04 with
respect to any Bank which results in such Bank charging to the applicable
Borrower increased costs in excess of those being generally charged by the other
Banks, or (z) as provided in Section 12.12(b) in the case of certain refusals by
a Bank to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Banks, the applicable Borrower shall have the right, if no Default or
Event of Default then exists, to either replace such Bank (the "Replaced Bank")
with one or more other Eligible Transferees, none of whom shall constitute a
Defaulting Bank at the time of such replacement (collectively, the "Replacement
Bank") acceptable to the Agent or at the option of such Borrower, to replace
only the Commitment (and outstanding pursuant thereto) of the Replaced Bank with
an identical Commitment provided by the Replacement Bank, provided that (i) at
--------
the time of any replacement pursuant to this Section 2.12, the Replacement Bank
shall enter into one or more Assignment and Assumption Agreements pursuant to
Section 12.04(b) (and with all fees payable pursuant to said Section 12.04(b) to
be paid by the Replacement Bank) pursuant to which the Replacement Bank shall
acquire all of the Commitments and outstanding Loans of the Replaced Bank and,
in connection therewith, shall pay to (x) the Replaced Bank in respect thereof
an amount equal to the sum of (A) an amount equal to the principal of, and all
accrued interest on, all outstanding Loans of the Replaced Bank, and (B) an
amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced
Bank pursuant to Section 3.01 and (ii) all obligations of such Borrower owing to
the Replaced Bank (other than those specifically described in clause (i) above
in respect of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full to such Replaced Bank concurrently with such
replacement. Upon the execution of the respective Assignment and Assumption
Agreements, the payment of amounts referred to in clauses (i) and (ii) above
and, if so requested by the Replacement Bank, delivery to the Replacement Bank
of the appropriate Note or Notes executed by the respective Borrowers as
provided in Section 2.05, the Replacement Bank shall become a Bank hereunder
and, unless the respective Replaced Bank continues to have outstanding Loans
hereunder, the Replaced Bank shall cease to constitute a Bank hereunder, except
with respect to indemnification provisions under this Agreement, which shall
survive as to such Replaced Bank.
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<PAGE>
SECTION 1. Fees; Reductions of Commitment.
------------------------------
0.01 Fees. (a) The Company shall pay to the Agent for the ratable
----
distribution to each Bank in proportion to its Commitment a facility fee (the
"Facility Fee") for the period from the Effective Date to and including the
Maturity Date (or such earlier date as such Commitment shall have been
terminated), computed at a rate for each day equal to 0.1% per annum of the
Total Commitments. The accrued Facility Fee shall be due and payable semi-
annually in arrears on March 30, 1997, on each September 30 and March 30
thereafter and on the Maturity Date or such earlier date on which the Total
Commitments shall have terminated.
(b) Each Borrower shall pay to the Agent, for its own account, such
other fees as have been agreed to in writing by such Borrower and the Agent.
0.02 Voluntary Termination or Reduction of Unutilized Commitments. Upon
------------------------------------------------------------
at least five Business Days' prior written notice to the Agent at its Notice
Office (which notice the Agent shall promptly transmit to each of the Banks),
the Company shall have the right, at any time or from time to time, without
premium or penalty, to terminate or reduce ratably in part the Unutilized Loan
Commitments of the Banks hereunder (which reduction shall also reduce the Total
Commitments hereunder), provided that any partial reduction pursuant to this
Section 3.02 shall be in the amount of at least U.S. $5,000,000 and in integral
multiples of U.S.$5,000,000 in excess thereof.
0.03 Mandatory Reduction of Commitments. The Total Commitments (and the
----------------------------------
Commitment of each Bank) shall terminate in their entirety on the Maturity Date.
SECTION 1. Prepayments; Payments; Taxes.
----------------------------
1.01 Voluntary Prepayments. Any Borrower shall have the right to prepay
---------------------
its Loans in whole or ratably in part on the following terms and conditions: (i)
such Borrower shall give the Agent prior written notice (or telephonic notice
promptly confirmed in writing at its Notice Office by no later than 11:00 A.M.
(New York time)) of its intent to prepay any Loan (x) at least one Business Day
prior to prepayment in the case of a prepayment of a Quoted Rate Loan and (y) at
least three Business Days prior to prepayment in the case of the prepayment of a
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<PAGE>
Eurocurrency Loan, which notice shall specify the Type or Types of Loan to be
prepaid, the amount of such prepayment (and, subject to clause (iv) of this
Section 4.01, if more than one Type of Loan is to be prepaid, the amount of each
Type of Loan to be prepaid), the Loan Currency of such Loan to be prepaid and
the specific day on which such Loan was made; (ii) each partial prepayment shall
be in an aggregate principal amount of at least U.S. $500,000 or an amount in
the applicable Loan Currency, the U.S. Dollar Equivalent of which is $500,000 or
more, provided that no partial prepayment of Loans made pursuant to any
--------
Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to
an amount less than U.S. $500,000 or an amount in the applicable Loan Currency,
the U.S. Dollar Equivalent of which is $500,000 or more; (iii) concurrently with
such prepayment such Borrower pays all amounts owing pursuant to Section 2.10 as
a result of such prepayment; and (iv) each prepayment in respect of any Type of
Loan made on the same day shall be applied pro rata among such Type of Loan. The
--- ----
Agent shall promptly notify each Bank of each such prepayment of Loans.
1.02 Mandatory Repayments and Commitment Reductions. (a)
----------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, if there
are any Loans outstanding in a Loan Currency other than U.S. Dollars, the Agent
shall recompute, on and as of the last day of each calendar quarter (each such
date, a "Recomputation Date"), the U.S. Dollar Equivalent of such Loans. If
pursuant to such recomputations, the Agent determines that the aggregate
principal amount of the U.S. Dollar-denominated Loans then outstanding plus the
U.S. Dollar Equivalent of the aggregate principal amount of the non-U.S.
Dollar-denominated Loans then outstanding is greater than one hundred ten
percent (110%) of the Total Commitments as then in effect, the Agent shall so
advise the Borrowers, and the Borrowers shall prepay the amount by which the
aggregate principal amount of the U.S. Dollar-dominated Loans then outstanding
plus the U.S. Dollar Equivalent of the aggregate principal amount of the
Non-U.S. Dollar-denominated Loans then outstanding is greater than the Total
Commitments as then in effect, together with accrued interest on the amount so
prepaid, on the last day of each Interest Period applicable to such Loans until
the amount of such excess is prepaid in full.
(b) With respect to each repayment of Loans required by this Section
4.02, the Borrowers may designate the Type or Types of Loans to be repaid, the
Loan Currencies of Loans which are to be repaid and the specific Loan or Loans,
provided that: (i) repayments of Eurocurrency Loans pursuant to this Section
- --------
4.02 may only be made on the last
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<PAGE>
day of the Interest Period applicable thereto unless all Loans made with
Interest Periods ending on such date of required repayment have been paid in
full; (ii) no repayment of Loans made on the same day shall reduce the
outstanding amount of such Loans on such day to an amount less than U.S.
$500,000 or an amount in the applicable Loan Currency, the U.S. Dollar
Equivalent of which is $500,000 or more, unless such Loans shall be paid in
full; (iii) each repayment of any Type of Loan made on the same day shall be
applied pro rata among such Type of Loan and (iv) all payments in respect of a
--- ----
Loan shall be made in the applicable Loan Currency. In the absence of a
designation by the Borrowers as described in the preceding sentence, the Agent
shall, subject to the above, make such designation in its sole discretion.
(c) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, each Loan shall mature on the Maturity Date. Prior thereto, each
Loan shall mature on the last day of the applicable Interest Period therefor.
Subject to the provisions of Section 2.01 and the conditions applicable thereto
set forth in Section 6, when the Borrower is required to pay any Loan on the
maturity thereof, the Borrower shall be entitled to request, pursuant to Section
2.03, that, as of any such maturity date prior to the Maturity Date, Loans be
made in an aggregate principal amount not in excess of the principal amount of
the matured Loans.
(d) If the Banks make Loans hereunder to the Borrower on a day on which
all or any part of outstanding Loans denominated in the same Loan Currency are
to be repaid, each Bank shall apply the proceeds of its new Loan to make such
repayment and only an amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made available by such Bank
to the Agent and by the Agent to the Borrower.
1.03 Method and Place of Payment. Except as otherwise specifically
---------------------------
provided herein, all payments under this Agreement or any Note shall be made to
the Agent for the account of the Bank or Banks entitled thereto not later than
12:00 Noon (New York time) on the date when due and shall be made in the
applicable Loan Currency in immediately available funds at the Payment Office of
the Agent. Whenever any payment to be made hereunder or under any Note shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable at the applicable rate during
such extension.
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<PAGE>
1.04 Net Payments. (a) All payments made by any Borrower hereunder or
------------
under any Note will be made without setoff, counterclaim or other defense. All
such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding, except as provided in the
immediately succeeding sentence, any tax imposed on or measured by the net
income or profits of a Bank, or any franchise tax based on the net income or
profits of a Bank, in either case pursuant to the laws of the jurisdiction in
which it is organized or in which the principal office or applicable lending
office of such Bank is located or any subdivision thereof or therein) and all
interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imports, duties, fees, assessments or other charges
being referred to collectively as "Taxes"). If any amounts are payable in
respect of Taxes pursuant to the preceding sentence, then such Borrower shall
reimburse each Bank, upon the written request of such Bank, for taxes imposed on
or measured by the net income or profits of such Bank, or any franchise tax
based on the net income or profits of a Bank, in either case pursuant to the
laws of the jurisdiction in which the principal office or applicable lending
office of such Bank is located or under the laws of any political subdivision or
taxing authority of any such jurisdiction in which the principal office or
applicable lending office of such Bank is located and for any withholding of
income or similar taxes imposed by the United States as such Bank shall
determine are payable by, or withheld from, such Bank in respect of such amounts
so paid to or on behalf of such Bank pursuant to the preceding sentence and in
respect of any amounts paid to or on behalf of such Bank pursuant to this
sentence. If any Taxes are so levied or imposed, then such Borrower shall pay
the full amount of such Taxes, and such additional amounts as may be necessary
so that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. Each Borrower will furnish
to the Agent within 45 days after the date the payment of any Taxes is due
pursuant to applicable law certified copies of tax receipts evidencing such
payment by such Borrower. Each Borrower shall indemnify and hold harmless each
Bank, and reimburse such Bank upon its written request, for the amount of any
Taxes so levied or imposed and paid by such Bank.
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<PAGE>
(b) Each Bank agrees, to the extent such Bank is entitled at such time
to a total or partial exemption from withholding that is required to be
evidenced by a United States Internal Revenue Service Form 1001 or 4224, to
deliver to the Agent (with a copy to the Borrowers), prior to the Initial
Borrowing Date and from time to time thereafter as requested by the Agent or the
Borrowers, such Form 1001 or 4224 (as applicable) or any successor thereto,
completed in a manner reasonably satisfactory to the Agent and the Borrower.
SECTION 2. Conditions Precedent to Loans. The obligation of each Bank
-----------------------------
to make any Loan hereunder to any Borrower on the Initial Borrowing Date is
subject at the time of the making of such Loan to the satisfaction of the
following conditions:
2.01 Opinion of Counsel. On or prior to the Initial Borrowing Date, the
------------------
Agent shall have received from the General Counsel of the Company an opinion
addressed to the Agent and each of the Banks and dated the Effective Date
covering the matters set forth in Exhibit D hereto, which opinion shall be in
form and substance satisfactory to the Agent and the Required Banks.
2.02 Corporate Documents. On the Initial Borrowing Date, the Agent
-------------------
shall have received from the applicable Borrower, a certificate, dated the
Initial Borrowing Date, signed by the chairman, the president, the vice
president/finance, the treasurer, any assistant treasurer or the controller of
such Borrower, and attested by the secretary or any assistant secretary of such
Borrower, in the form of Exhibit E hereto with appropriate insertions, in each
case together with copies of the relevant charter documents and corporate
authorizations of such Borrower referred to therein.
2.03 Adverse Change, etc. On the Initial Borrowing Date, nothing shall
-------------------
have occurred (and the Banks shall not have become aware of any facts or
conditions not previously known) which the Agent or the Required Banks shall
determine (a) has, or could reasonably be expected to have, a material adverse
effect on the rights or remedies of the Agent or the Banks, or on the ability of
any Borrower to perform its obligations to them hereunder or under any other
Credit Document or (b) has, or could reasonably be expected to have, a Material
Adverse Effect. Notwithstanding the foregoing, the parties hereto acknowledge
that it is the Company's intention to complete a spin off of its wholly owned
subsidiary, Unisource Worldwide, Inc., effective
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<PAGE>
January 1, 1997. The parties have been given an opportunity to ask questions
concerning the spin-off and to review the Unisource Worldwide, Inc. Form 10
related thereto. The parties hereby agree that, so long as the spin-off is
conducted in all material respects in accordance with the description set forth
in the Form 10 (and exhibits thereto), neither the Agent nor any of the Banks
shall assert that such spin-off, or the agreements between the Company and
Unisource Worldwide, Inc. related thereto or any transactions contemplated
thereby, has had or could reasonably have a material adverse effect on the
rights or remedies of the Agent or the Banks, or on the ability of any Borrower
to perform its obligations to them hereunder or under any other Credit Document,
or has, or could reasonably be likely to have, a Material Adverse Effect.
2.04 Litigation. Except as set forth on Schedule II, on the Initial
----------
Borrowing Date, no litigation by any entity (private or governmental) shall be
pending or threatened (a) with respect to this Agreement or any documentation
executed in connection herewith or the transactions contemplated hereby or (b)
which the Agent or the Required Banks shall determine could reasonably be
expected to have (i) a material adverse effect on the rights or remedies of the
Banks or the Agent hereunder or under any other Credit Document or on the
ability of any Borrower to perform its respective obligations to the Banks or
the Agent hereunder or under any other Credit Document or (ii) a Material
Adverse Effect.
2.05 Fees, etc. On the Initial Borrowing Date, the Agent and the Banks
---------
shall have been paid or reimbursed for all costs, fees and expenses (including,
without limitation, legal fees and expenses) payable or reimbursable to the
Agent and the Banks hereunder to the extent then due.
2.06 Borrowing Subsidiaries. On the Initial Borrowing Date of any
----------------------
Borrower other than the Company, the applicable Borrower shall have executed and
delivered a Borrowing Subsidiary Agreement substantially in the form of Exhibit
F hereto.
2.07 Notes. On the Effective Date, there shall have been delivered to
-----
the Agent for the account of each Bank a Note executed by the Company and
appropriately completed in accordance with the provisions of this Agreement. On
each Initial Borrowing Date, there shall have been delivered to the Agent for
the account of each Bank a Note executed by the relevant Borrowing Subsidiary
and appropriately completed in accordance with the provisions of this Agreement.
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<PAGE>
SECTION 3. Conditions Precedent to All Credit Events. The obligation of
-----------------------------------------
each Bank to make any Loan (including any Loan made on the Initial Borrowing
Date) is subject, at the time of each such Credit Event (except as hereinafter
indicated), to the satisfaction of the following conditions:
3.01 No Default; Representations and Warranties. At the time of each
------------------------------------------
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of such Credit Event (it being understood
and agreed that any representation or warranty which by its terms is made as of
a specified date shall be required to be true and correct in all material
respects only as of such specified date).
3.02 Notice of Borrowing. Prior to the making of any Loan, the Agent
-------------------
shall have received a Notice of Borrowing meeting the requirements of Section
2.03.
3.03 Proceedings. Prior to the making of any Loan, all corporate and
-----------
legal proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Credit Documents shall
be satisfactory in form and substance to the Agent and the Required Banks, and
the Agent shall have received all supplemental legal opinions, information and
copies of all documents and papers, including records of corporate proceedings,
governmental approvals, good standing certificates and bring-down telegrams, if
any, which the Agent reasonably may have requested in connection with the
requested Loan, such documents and papers where appropriate to be certified by
proper corporate or governmental authorities.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the applicable Borrower to the Agent and each of
the Banks that all the conditions specified in Section 5 and in this Section 6
and applicable to such Credit Event exist as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Agent at its Notice Office for the account of each of the Banks and,
except for the Notes, in
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<PAGE>
sufficient counterparts for each of the Banks and shall be in form and substance
satisfactory to the Banks.
SECTION 4. Representations, Warranties and Agreements. In order to
------------------------------------------
induce the Banks to enter into this Agreement and to make the Loans, each
Borrower makes the following representations, warranties and agreements, all of
which shall survive the execution and delivery of this Agreement and the Notes
and the making of the Loans, with the occurrence of each Credit Event on or
after each Initial Borrowing Date being deemed to constitute a representation
and warranty that the matters specified in this Section 7 are true and correct
in all material respects on and as of each Initial Borrowing Date and on the
date of each such Credit Event (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date):
4.01 Organization and Good Standing. Such Borrower and each of its
------------------------------
Significant Subsidiaries is a corporation duly organized and in good standing
(where such concept exists) under the laws of the jurisdiction of its
incorporation and has the power to carry on its business as now conducted. Such
Borrower is duly qualified as a foreign corporation in the various jurisdictions
wherein the nature of the business it transacts makes such qualification
necessary. The Company's only Significant Subsidiaries on the date hereof are
IKON Capital, Inc., Alco Standard Acquisition Capital Corporation, IKON Office
Solutions, Inc., IKON Capital, PLC, and IKON Office Solutions (Canada), Inc..
4.02 Corporate Power and Authority. The execution, delivery and
-----------------------------
performance of this Agreement, all other Credit Documents and the Notes are
within the corporate power and authority of such Borrower, have been duly
authorized by proper corporate proceedings, will not contravene any provision of
law or the Certificate or Articles of Incorporation, Memorandum and Articles of
Association or Bylaws or Code of Regulations of such Borrower or constitute a
default under any agreement binding upon such Borrower, and do not require the
consent or approval of, or registration with, any governmental body, agency or
authority.
4.03 Validity of Agreement and Notes. This Agreement and the other
-------------------------------
Credit Documents are legal, valid and binding obligations of such Borrower, and
the Notes when issued will be legal, valid and binding obligations of such
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<PAGE>
Borrower, enforceable in accordance with their respective terms.
4.04 Litigation. Except as set forth on Schedule II there are no suits,
----------
litigation or other proceedings pending, or to the knowledge of any officer of
such Borrower threatened (i) with respect to any Credit Document or (ii) against
or affecting such Borrower or any of its Subsidiaries or any of their respective
properties, before any court, governmental commission, bureau or other
regulatory body, the outcome of which might materially and adversely affect the
financial condition or business of such Borrower or and its Subsidiaries
considered in the aggregate or the ability of such Borrower to perform its
obligations hereunder.
4.05 Financial Statements. Such Borrower has heretofore furnished to
--------------------
the Banks consolidated balance sheets of such Borrower and its Subsidiaries as
at September 30, 1996 and September 30, 1995 and the related consolidated
statements of income and retained earnings, with a report thereon by Ernst &
Young, L.L.P., independent certified public accountants, stating in comparative
form the amounts for the corresponding dates and periods for the previous fiscal
year. Such balance sheets and such statements of income and retained earnings
fairly present the consolidated financial position of such Borrower and its
Consolidated Subsidiaries as of the dates thereof and the results of their
operations for the periods then ended. All such financial statements were
prepared in accordance with GAAP or, in the case of any Borrower incorporated
outside the United States, such other accounting principles as are generally
accepted in such Borrower's country of incorporation. Since September 30, 1996,
there has not been any material adverse change in the financial condition,
business or operations of such Borrower and its Subsidiaries.
4.06 ERISA. Each Employee Benefit Plan of such Borrower and any ERISA
-----
Affiliate of such Borrower is in compliance with ERISA and the Code, where
applicable, in all material respects. As of the date hereof, (i) the amount of
all Unfunded Pension Liabilities under the Pension Plans, (ii) the amount of the
aggregate Unrecognized Retiree Welfare Liability under all applicable Employee
Benefit Plans, and (iii) the aggregate potential annual withdrawal liability
payments, as determined in accordance with Title IV of ERISA, of such Borrower
and any such ERISA Affiliate with respect to all Pension Plans which are
Multiemployer Plans, are, in the aggregate, no more than U.S. $5,000,000. Such
Borrower and each such ERISA Affiliate have complied
-33-
<PAGE>
with the requirements of ERISA Section 515 with respect to each Pension Plan
which is a Multiemployer Plan. Such Borrower and/or any such ERISA Affiliate
has, as of the date hereof, made all contributions or payments to or under each
such Pension Plan required by law or the terms of such Pension Plan or any
contract or agreement. No material liability on a consolidated basis to the PBGC
has been, or is expected by such Borrower or any such ERISA Affiliate.
For purposes of ERISA matters under this Agreement, "Employee Benefit
Plan" means any employee benefit plan within the meaning of ERISA Section 3(3)
maintained, sponsored or contributed to by such Borrower or any such ERISA
Affiliate; "ERISA Affiliate" means any entity that is a member of any group of
organizations within the meaning of Code Sections 414(b), (c), (m) or (o) of
which such Borrower is a member; "Multiemployer Plan" means a pension plan that
is a multiemployer plan as defined in ERISA Section 4001(a)(3); "Pension Plan"
means any Employee Benefit Plan, including a Multiemployer Plan, the funding
requirements of which (under ERISA Section 302 or Code Section 412) are or, at
any time within the six years immediately preceding the time in question, were
in whole or in part, the responsibility of such Borrower or any such ERISA
Affiliate; "Unfunded Pension Liabilities" means, with respect to any Pension
Plan at any time, the amount determined by taking the accumulated benefit
obligation, as disclosed in accordance with Statement of Financial Accounting
Standards number 87, over the fair market value of Pension Plan assets; and
"Unrecognized Retiree Welfare Liability" means, with respect to any Employee
Benefit Plan that provides post-retirement benefits other than pension benefits,
the amount of the transition obligation, as determined in accordance with
Statement of Financial Accounting Standards number 106, as of the most recent
valuation date that has not been recognized as an expense on the income
statement of the Company and its Subsidiaries.
4.07 Regulations G, T, U and X. Except for Partners Securities Company,
-------------------------
neither such Borrower nor any of its Subsidiaries is or will be engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying or trading in any margin stocks
or margin securities (within the meaning of Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System). No part of the proceeds of
any Loan made hereunder will be applied for the purpose of purchasing or
carrying or trading in any such stocks or securities, or of refinancing any
credit previously extended or of extending credit to others for the purpose of
purchasing or carrying or trading in any such
-34-
<PAGE>
margin stocks or margin securities, if and to the extent that such action could
result in such Borrower, any Subsidiary or any Bank having violated or being in
violation of any provision of any Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System.
4.08 Compliance with Laws. Such Borrower and each of its Subsidiaries
--------------------
is in compliance in all material respects with all applicable laws and
regulations, federal, state and local, the violation of which would have a
material adverse effect on such Borrower and its Consolidated Subsidiaries taken
as a whole; such Borrower and each Subsidiary possess all the material
franchises, permits and licenses necessary or required in the conduct of its
business, and the same are valid, binding and enforceable.
4.09 Taxes and Assessments. Such Borrower and each of its Subsidiaries
---------------------
have filed all required tax returns or have filed for extensions of time for the
filing thereof, and have paid all applicable taxes, governmental charges and
similar obligations, including United States federal, state and local taxes,
other than taxes, governmental charges and similar obligations not yet due or
which may be paid hereafter without material penalty; the Internal Revenue
Service has completed audits of tax returns filed through September 30, 1992;
and neither such Borrower nor any of its Subsidiaries has knowledge of any
material deficiency or additional assessment against it in connection with any
applicable taxes not provided for in the financial statements referred to in
Section 7.05 hereof.
7.10 Investment Company; Public Utility Company. (a) Neither such
------------------------------------------
Borrower nor any Subsidiary of a Borrower is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(b) Neither such Borrower nor any of its Subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
7.11 Environmental Matters. Such Borrower and each of its Subsidiaries
---------------------
have received all permits and filed all notifications necessary to carry on
their businesses and are in compliance in all material respects with all
federal, state or local laws and regulations governing the control, removal,
spill, release or discharge of hazardous or toxic wastes, substances and
petroleum products; including,
-35-
<PAGE>
without limitation, as provided in any Environmental Law, and any regulations
thereunder, the effect of which if not received, filed or complied with could
have a material adverse effect on the financial condition, business or
operations of such Borrower and its Subsidiaries. Also, neither such Borrower
nor any of its Subsidiaries has received notice of potential responsibility for
costs associated with responding to the release or threatened release of
Hazardous Materials for any site where such Borrower's potential responsibility
could have a material adverse effect on the financial condition, business or
operations of such Borrower and its Subsidiaries.
7.12 Liens. Except as disclosed on Schedule III hereto, mortgages,
-----
pledges, security interests, encumbrances and other liens upon properties of
such Borrower and its Subsidiaries which are in existence at the date hereof do
not secure indebtedness that is, in the aggregate, material to such Borrower and
its Consolidated Subsidiaries and do not encumber properties which are material
to such Borrower and its Consolidated Subsidiaries.
7.13 Disclosure Generally. The representations and statements made by
--------------------
or on behalf of such Borrower and its Subsidiaries in connection with this
Agreement, the other Credit Documents and each Loan, do not and will not contain
any untrue statement of a material fact or omit to state a material fact or any
fact necessary to make the representations made not materially misleading. No
written information, exhibit, report or financial statement furnished by such
Borrower or any of its Subsidiaries to the Agent or the Banks in connection with
this Agreement, the other Credit Documents or the Loans contains or will contain
any material misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not materially misleading.
7.14 Ownership of Borrowing Subsidiaries. The Company owns, directly or
-----------------------------------
indirectly, all of the issued and outstanding capital stock of each Borrowing
Subsidiary other than qualifying shares held by the directors of such Borrowing
Subsidiary.
Each Notice of Borrowing in respect of any Loan hereunder, and the
acceptance of the proceeds of such Loan, shall constitute a reaffirmation by the
officer making such Notice of Borrowing (to the best of his knowledge and
belief) as of the time thereof and by the Borrower as of the time thereof of the
continuing truth and accuracy of the foregoing representations and warranties.
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<PAGE>
SECTION 5. Covenants. Each Borrower covenants and agrees that on and
---------
after the Effective Date and until the Total Commitments have terminated and the
Loans and Notes, together with interest, Fees and all other obligations incurred
hereunder and thereunder, are paid in full:
5.01 Financial Statements and Information. Such Borrower will furnish
------------------------------------
to each Bank, or to the Agent which will in turn furnish to each Bank:
(a) as soon as available and in any event within 60 days after the
end of the first, second and third quarterly accounting periods in each
fiscal year of such Borrower, copies of a consolidated balance sheet of
such Borrower and its Consolidated Subsidiaries as of the end of such
accounting period and of the related consolidated income and retained
earnings statements of such Borrower and its Consolidated Subsidiaries for
the elapsed portion of the fiscal year ended with the last day of such
accounting period, all in reasonable detail and stating in comparative form
the amounts for the corresponding date and period in the previous fiscal
year, and all prepared in accordance with GAAP, subject to year-end audit
adjustments and certified by an authorized financial officer of such
Borrower, provided that if the Borrower is not incorporated in the United
--------
States, such financial statements shall be prepared in accordance with
accounting principles generally accepted in its country of incorporation.
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of such Borrower, copies of consolidated balance
sheets of such Borrower and its Consolidated Subsidiaries as of the end of
such fiscal year and consolidated statements of income and retained
earnings of such Borrower and its Consolidated Subsidiaries for such fiscal
year, in reasonable detail and stating in comparative form the figures as
of the end of and for the previous fiscal year prepared in accordance with
GAAP and certified by independent public accountants of recognized standing
as may be selected by such Borrower and reasonably satisfactory to the
Agent, provided that, if the Borrower is not incorporated in the United
--------
States, such financial statements shall be prepared in accordance with
accounting principles generally accepted in its country of incorporation
and such financial statements may be unaudited, and provided further, that,
-------- -------
if such Borrower is a
-37-
<PAGE>
Subsidiary of the Company, such financial statements may be unaudited;
(c) concurrently with each of the financial statements furnished
pursuant to the foregoing subsections (a) and (b), a certificate of the
chairman, president, a vice president (whose duties are in the finance
area) or the treasurer or any assistant treasurer of such Borrower, stating
that in the opinion of such officer, based upon a review made under his
supervision, no Event of Default or event which, with the giving of notice
or lapse of time, or both, would constitute an Event of Default, has
occurred and is continuing, and such Borrower has performed and observed
all of, and such Borrower is not in default in the performance or
observance of any of, the terms and covenants hereof or, if such Borrower
shall be in default, specifying all such defaults, and the nature thereof,
of which the signer of such certificate may have knowledge;
(d) concurrently with their being filed, mailed or delivered, as
applicable, copies of all proxy statements, financial statements and
reports which such Borrower shall send or make available generally to its
shareholders, and copies of all reports on Forms 10-K, 10-Q and 8-K and all
other filings and reports specifically requested by the Agent or a Bank
which such Borrower or any of its Subsidiaries may be required to file with
the Securities and Exchange Commission or any similar or corresponding
governmental commission, department or an agency substituted therefor or
with any securities exchange located in the United States of America; and
(e) such other information relating to the business, affairs and
financial condition of the Company and its Subsidiaries as the Agent (when
requested so to do by any Bank) may from time to time reasonably request.
5.02 Funded Debt to Capitalization. Such Borrower will not permit
-----------------------------
Funded Debt of such Borrower and its Consolidated Subsidiaries to exceed 45% of
the sum of (1) Funded Debt of such Borrower and its Consolidated Subsidiaries
plus (2) the consolidated minority interest obligations shown on the
consolidated balance sheet of such Borrower and its Consolidated Subsidiaries
plus (3) the Consolidated Net Worth of such Borrower and its Consolidated
Subsidiaries. For purposes of calculating such ratio with respect to the
Company, Finance Leasing Subsidiaries shall
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<PAGE>
be excluded from the definition of "Consolidated Subsidiaries".
5.03 Subsidiaries' Debt. Such Borrower will not permit, and any of its
------------------
Subsidiaries directly or indirectly to create, incur, assume, suffer to exist,
guarantee or otherwise become, be or remain liable with respect to any Debt
(other than Loans hereunder) in an aggregate amount outstanding at any time in
excess of 20% of Consolidated Net Worth plus the amount of such Debt outstanding
on the date hereof except (i) Debt owing exclusively to the Company or any
Subsidiary thereof, (ii) Debt of a Subsidiary outstanding on the date that such
Borrower acquires such Subsidiary, (iii) Debt with respect to property to be
used by such Borrower or its Subsidiaries, the interest on which Debt is exempt
from federal income tax pursuant to Section 103 of the Internal Revenue Code of
1986, as amended, (iv) Debt of any foreign Subsidiary of such Borrower that is
not guaranteed by the Company or any of its Subsidiaries, (v) Debt of Finance
Leasing Subsidiaries owing to the Company or any of its Consolidated
Subsidiaries, (vi) Debt of Finance Leasing Subsidiaries to a person or persons
other than the Company and its Consolidated Subsidiaries, provided that such
--------
Debt is not guaranteed by the Company or any of its Consolidated Subsidiaries,
and (vii) unsecured Debt of Unisource Worldwide, Inc. in an amount not to exceed
one billion U.S. Dollars.
5.04 Sale of Assets. Such Borrower will not, and will not permit any of
--------------
its Consolidated Subsidiaries to, sell, lease or transfer all or substantially
all of its assets unless (i) immediately after giving effect thereto such
Borrower is in compliance with the covenants and provisions of this Agreement
and (ii) such sale, lease or transfer shall not have any materially adverse
effect upon the financial condition of the Company and its Subsidiaries taken as
a whole or the Company's ability to perform its obligations hereunder. The
parties hereby agree that the Unisource Worldwide, Inc. spin-off, and the
agreements and transactions related thereto (as described in the Unisource
Worldwide, Inc. Form 10) shall not be deemed to have a material adverse effect
upon the financial condition of the Company. Notwithstanding this provision, any
Consolidated Subsidiary that is not a Borrowing Subsidiary may sell, lease or
transfer all or substantially all of its assets to any other Consolidated
Subsidiary or to the Company, and any Borrowing Subsidiary may sell, lease or
transfer all or substantially all of its assets to any other Borrowing
Subsidiary or to the Company.
5.05 Mergers and Acquisitions. Neither the
------------------------
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<PAGE>
Company nor any Borrowing Subsidiary will merge or consolidate with, or
otherwise acquire control of the assets of, any other corporation or other
entity, unless (i) the Company is the surviving or parent corporation of any
merger or other acquisition involving the Company, (ii) a Borrowing Subsidiary
is the surviving or parent corporation of any merger or other acquisition
involving one or more Borrowing Subsidiaries and (iii) the Company and each
Borrowing Subsidiary are in compliance with this Agreement and the other Credit
Documents prior to and after such merger or acquisition; provided, however, that
-------- -------
the provisions of this Section 8.05 shall apply to a Borrowing Subsidiary only
if and so long as such Borrowing Subsidiary has outstanding Loans.
5.06 Negative Pledge. Such Borrower shall not, and such Borrower shall
---------------
not permit any Consolidated Subsidiary to, create, incur, assume or suffer to
exist any mortgage, pledge, security interest, encumbrance or other lien upon
any property, now owned or hereafter acquired, of the Company or any
Consolidated Subsidiary (the sale with recourse of receivables or any sale and
lease back of any fixed assets being deemed to be the giving of a lien thereon
for money borrowed), other than:
(a) liens existing on the date of this Agreement on any property,
provided that the amount secured by any such lien is not greater than the
--------
amount secured thereby on the date of this Agreement;
(b) liens on any property (including, but not limited to, margin
stock (within the meaning of Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System)) hereafter acquired existing at
the time of such acquisition or created within a period of 120 days
following any such acquisition to secure or provide for the payment of any
part of the purchase price thereof or liens to secure indebtedness incurred
to fund or refund any liens within the scope of this subsection (b),
provided that the amount secured by such liens is not greater than the
--------
amount secured thereby on the date of such acquisition or within the 120-
day period, as the case may be;
(c) liens securing indebtedness of a Consolidated Subsidiary
outstanding on the date that the Company acquires such Consolidated
Subsidiary;
(d) liens for taxes, assessments or governmental charges or levies
not yet due and payable or being
<PAGE>
contested in good faith and by appropriate proceedings promptly initiated
and diligently conducted, provided that a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor and no foreclosure, distraint, sale or other similar proceedings
shall have been commenced;
(e) statutory liens of landlords and liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for
sums not yet due or being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, provided that a
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(f) liens incurred or deposits made in the ordinary course of business
in connection with workmen's compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, performance and return-of-
money bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(g) liens created hereafter in connection with borrowing or pledges of
receivables which liens when added to all sales and discounting
transactions contemplated by Section 8.07 do not in the aggregate exceed
10% of Consolidated Net Worth;
(h) liens, security interests and any other encumbrances on any of its
treasury shares; and
(i) liens arising in connection with a Securitization permitted by
Section 8.07, limited in each case to the accounts therein or in any trust
or similar entity utilized to effect such Securitization and to any
equipment giving rise to such accounts.
5.07 Sale, Discount of Receivables; Sale, Leaseback Transactions. Such
-----------------------------------------------------------
Borrower will not, and will not permit its Consolidated Subsidiaries to, enter
into any Securitization which, when added to the aggregate amount of all
Securitizations then outstanding, exceeds the lesser of 15% of Consolidated
Total Assets or $775,000,000. Exclusion of such Securitizations, the Company
will not, and will not permit its Consolidated Subsidiaries to sell or discount
receivables with recourse or sell and lease back fixed assets the aggregate
amount of which when added to all liens permitted by Section 8.06(g) exceed 10%
of Consolidated Net
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<PAGE>
Worth.
5.08 Regulations G, T, U and X. Such Borrower will not, and will not
-------------------------
permit any Subsidiary, to use Borrowings hereunder in any manner which may cause
a violation of or noncompliance with Regulations G, T, U or X of the Board of
Governors of the Federal Reserve Board.
5.09 Corporate Existence. Such Borrower will maintain its existence
-------------------
and, except as otherwise permitted pursuant to Section 8.05, the existence of
each Borrowing Subsidiary in good standing as a business corporation under the
laws of the jurisdiction of its incorporation, and remain qualified and cause
each Borrowing Subsidiary to remain qualified to do business in all
jurisdictions wherein the nature of the business it transacts or the character
of the properties owned by it makes such qualification necessary.
8.10 Books and Records. Such Borrower will keep and maintain, and cause
-----------------
each Subsidiary to keep and maintain, satisfactory and adequate books and
records of account in accordance with GAAP or, if such Borrower is not
incorporated in the United States, such accounting principles as are generally
accepted in its country of incorporation, and make or cause the same to be made
available to the Agent or any Bank or their agents or nominees at any reasonable
time upon reasonable notice for inspection and to make extracts thereof.
8.11 Insurance. Such Borrower will insure and keep insured, and cause
---------
each of its Subsidiary to insure and keep insured, with reputable insurance
companies, so much of their respective properties, to such an extent and against
such risks (including liability and fire) as companies engaged in similar
businesses customarily insure properties of a similar character; or, in lieu
thereof, such Borrower or any one or more of its Subsidiaries will maintain or
cause to be maintained a system or systems of self-insurance which will be in
accord with the approved practices of companies owning or operating properties
of a similar character and maintaining such systems, and, in such cases of self-
insurance, maintain or cause to be maintained an insurance reserve or reserves
in adequate amounts.
8.12 Litigation; Event of Default. Such Borrower will notify the Agent,
----------------------------
which shall notify the Banks, in writing immediately of the institution of any
litigation, the commencement of any administrative proceedings, the happening of
any event or the assertion or threat of any claim which might materially or
adversely affect its and its
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<PAGE>
Subsidiaries' business, operations or financial condition (taken as a whole), or
the occurrence of any Event of Default hereunder or an event which with the
passage of time or the giving of notice or both would constitute an Event of
Default hereunder.
8.13 Taxes. Such Borrower will pay and discharge, and cause each of its
-----
Subsidiaries to pay and discharge, all taxes, assessments or other governmental
charges or levies imposed on it or any of its property or assets prior to the
date on which any material penalty for non-payment or late payment is incurred,
unless the same is currently being contested in good faith by appropriate
proceedings and reserves in accordance with GAAP, or, if such Borrower is not
incorporated in the United States, such accounting principles as are generally
accepted in its country of incorporation are being maintained.
8.14 Compliance with Laws. Such Borrower will comply and cause each of
--------------------
its Subsidiaries to comply in all material respects with all local, state and
federal laws and regulations material to its business and operations, including
but not limited to: (i) all rules and regulations of the Securities and Exchange
Commission, (ii) local, state and federal laws governing the control, removal,
spill, release, or discharge of hazardous or toxic wastes, substances or
petroleum products, including, without limitation, Environmental Laws, and (iii)
the provisions and requirements of all franchises, permits and licenses
applicable to its business, including, but not limited to, those required by the
Environmental Laws. Such Borrower shall notify the Agent, which shall notify the
Banks, promptly in detail of any actual or alleged failure to comply with or
perform, breach, violation or default under any such laws or regulations or if
such Borrower receives notice of potential responsibility for the release or
threatened release of hazardous substances, or of the occurrence or existence of
any facts or circumstances which with the passage of time, the giving of notice
or both or otherwise could create such a breach, violation or default or could
occasion the termination of any of such franchises or grants of authority or the
creation of potential responsibility for releases or threatened releases of
hazardous substances, if any of the foregoing would have a Material Adverse
Effect on such Borrower.
8.15 Employee Benefit Plans. Such Borrower will and will cause each
----------------------
ERISA Affiliate (a) to comply in all material respects with the provisions of
ERISA to the extent applicable to any Employee Benefit Plan maintained by it and
cause all Employee Benefit Plans maintained by it to satisfy
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<PAGE>
the conditions under the Internal Revenue Code for tax qualification of all such
plans intended to be tax qualified; and (b) to avoid (1) any material
accumulated funding deficiency (within the meaning of ERISA section 302 and Code
section 412(a)) (whether or not waived) (2) any act or omission on the basis of
which it or an ERISA Affiliate might incur a material liability to the PBGC
(other than for the payment of required premiums) or to a trust established
under ERISA section 4049; (3) any transaction with a principal purpose described
in ERISA section 4069; and (4) any act or omission that might result in the
assessment by a Multiemployer Plan of withdrawal liability against such Borrower
or any ERISA Affiliate, but only to the extent that the liability arising from a
failure to comply with any covenant set forth in (a) or (b) of this Section 8.15
could reasonably be expected to result in a liability to such Borrower or its
Subsidiaries or an ERISA Affiliate for any one such event in excess of U.S.
$10,000,000.
8.16 Continued Ownership of each Borrowing Subsidiary. The Company
------------------------------------------------
shall continue to own, directly or indirectly, all of the issued and outstanding
capital stock of each Borrowing Subsidiary, other than qualifying shares held by
the directors of such Borrowing Subsidiary; provided, however, that this Section
-------- -------
8.16 shall apply only (a) as a condition to such Borrowing Subsidiary obtaining
a Loan hereunder and (b) if and so long as such Borrowing Subsidiary has
outstanding Loans.
SECTION 6. Events of Default and Acceleration.
----------------------------------
6.01 Events of Default. Any of the following shall constitute an "Event
-----------------
of Default" with respect to this Agreement and the Notes:
(a) Failure of any Borrower to pay any amount payable on account of
the principal of or interest on any Note when due, or the failure to pay
any Fee or other payment due hereunder within 10 days after the same shall
become due;
(b) Failure of any Borrower to observe or perform any term, covenant
or agreement contained in this Agreement, the Notes or any other document
evidencing the Loans (other than that specified in (a) above) and the
continuation of such failure for 30 days after written notice thereof has
been given to such Borrower by the Agent at the request of the holder of
any Note (including but not limited to
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<PAGE>
itself);
(c) Any statement, certificate, report, representation or warranty
made or furnished by any Borrower in this Agreement or in compliance with
the provisions hereof shall prove to have been false or misleading in any
material respect at the time when made;
(d) Any obligation(s) of any Borrower and/or any of its Subsidiaries
in excess of U.S. $15,000,000, individually or in the aggregate (as
principal or guarantor or other surety), to any person other than the Banks
in connection with this Agreement and the Notes for borrowed money (other
than the Notes) shall become or is declared to be due and payable prior to
its stated maturity or any event of default or event which with the passing
of time or notice or both shall have occurred the effect of which permits
payment of any such obligation to be demanded prior to its stated maturity;
(e) If (1) any Employee Benefit Plan shall cease to have "qualified"
status under the Code, (2) the minimum funding standards applicable to any
Employee Benefit Plan shall not be complied with, (3) any excise tax or tax
lien shall be incurred in connection with any Employee Benefit Plan and the
administration thereof, (4) any claim shall be incurred with respect to any
Employee Benefit Plan other than in the ordinary operation of such Plan,
(5) any "prohibited transaction" as defined by the Code or ERISA shall have
occurred, (6) any liability shall be incurred to the PBGC, (7) any
withdrawal liability shall be incurred with respect to a Multiemployer
Plan, (8) any liability shall be incurred in connection with a failure to
make timely reports and filings with respect to Employee Benefit Plans, or
(9) any other thing shall have occurred with respect to any Employee
Benefit Plan, the result of which (in any one of the foregoing clauses (1)
through (8), any combination of said clauses, or otherwise) is that any
Borrower or any of its Subsidiaries, in the reasonable judgment of the
Majority Banks, has or is likely to incur liabilities (whether the
liability is direct or indirect, current or deferred, fixed or contingent)
of U.S. $10,000,000 or more;
(f) Any judgment or judgments against any Borrower and/or any of its
Subsidiaries or any attachments against any of their assets or property in
-45-
<PAGE>
an amount in excess of U.S. $10,000,000 in any one instance or in the
aggregate shall remain unpaid, unstayed on appeal, undischarged, unbonded
or undismissed for a period of 30 days;
(g) If (1) any person or group within the meaning of Section 13(d)(3)
of the Securities Exchange Act and the rules and regulations promulgated
thereunder shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act), directly or indirectly, of
securities of any Borrower (or other securities convertible into such
securities) representing twenty percent (20%) of the combined voting power
of all securities of such Borrower entitled to vote in the election of
directors, other than securities having such power only by reason of the
happening of a contingency (such person hereinafter called a "Controlling
Person"); or (2) a majority of the Board of Directors of any Borrower shall
cease for any reason to consist of (A) individuals who on August 30, 1996
were serving as directors of such Borrower and (B) individuals who
subsequently become members of the Board of Directors of such Borrower if
such individuals' nomination for election or election to the Board of
Directors of such Borrower is recommended or approved by a majority of the
Board of Directors of such Borrower. For purposes of clause (1) above, a
person or group shall not be a Controlling Person if such person or group
holds voting power in good faith and not for the purpose of circumventing
this Section 9.01(g) as an agent, bank, broker, nominee, trustee, or holder
of revocable proxies given in response to a solicitation pursuant to the
Securities Exchange Act, for one or more beneficial owners who do not
individually, or, if they are a group acting in concert, do not as a group
have the voting power specified in clause (1);
(h) Any Borrower and/or any of its Subsidiaries shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator of itself
or of its property, (ii) be unable, or admit in writing inability, to pay
its Debts as they mature, (iii) make a general assignment for the benefit
of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a
voluntary petition in bankruptcy, or a petition or answer seeking
reorganization or an arrangement with creditors to take advantage of any
insolvency law, or an answer admitting the material allegations of a
bankruptcy, reorganization or insolvency petition filed against it, (vi)
take corporate action for the
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<PAGE>
purpose of effecting any of the foregoing, or (vii) have an order for
relief entered against it in any proceeding under the United States
Bankruptcy Code or any other law, domestic or foreign, relating to
bankruptcy, insolvency or reorganization or relief of debtors;
(i) An order, judgment or decree shall be entered, without the
application, approval or consent of any Borrower and/or any of its
Subsidiaries by any court of competent jurisdiction, approving a petition
seeking reorganization of such Borrower or such Subsidiary or appointing a
receiver, trustee or liquidator of such Borrower or such Subsidiary or of
all or a substantial part of its assets, and such order, judgment or decree
shall continue unstayed and in effect for any period of 60 consecutive
days; or
(j) The Company shall fail to continue to maintain its ownership of
each of the Borrowing Subsidiaries to the extent required by Section 8.16.
6.02 Acceleration by Reason of Default. If an Event of Default occurs
---------------------------------
under Section 9.01(a) through Section 9.01(g) or Section 9.01(j) above, the
Agent may, and shall, if requested by the Majority Banks without prejudice to
the rights of the Agent, any Bank or the holder of any Note to enforce its
claims against any Borrower, immediately terminate each Bank's Commitment by
notice in writing to the Borrowers and immediately declare the Notes to be and
they shall thereupon forthwith become due and payable without presentment,
demand, or notice of any kind, all of which are hereby expressly waived.
Simultaneously with the giving of any such notice to the Borrowers, the Agent
shall notify the Banks of any such action. If an Event of Default occurs under
Section 9.01(h) or Section 9.01(i) above, then, forthwith and without any
election or notice, each Bank's Commitment shall terminate and the Notes shall
forthwith become due and payable without presentment, demand or other notice of
any kind, all of which are hereby expressly waived.
SECTION 7. The Agent.
---------
7.01 Appointment. The Banks hereby designate DBNY as Agent hereunder to
-----------
act as such as specified herein and in the other Credit Documents. Each Bank
hereby irrevocably authorizes, and each holder of any Note by the acceptance of
such Note shall be deemed irrevocably to authorize, the Agent to take such
action on its behalf under
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<PAGE>
the provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Agent may perform any of
its duties hereunder by or through its respective officers, directors, agents,
employees or affiliates.
7.02 Nature of Duties. The Agent shall not have any duties or
----------------
responsibilities except those expressly set forth in this Agreement and the
other Credit Documents. Neither the Agent nor any of its respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, unless caused by its or their gross negligence
or willful misconduct. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement
or any other Credit Document a fiduciary relationship in respect of any Bank or
the holder of any Note; and nothing in this Agreement or any other Credit
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement or any other
Credit Document except as expressly set forth herein or therein.
7.03 Lack of Reliance on the Agent. Independently and without reliance
-----------------------------
upon the Agent, each Bank and the holder of each Note, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Company, each
Borrowing Subsidiary and their respective Subsidiaries in connection with the
making and the continuance of the Loans and the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the creditworthiness
of the Company, each Borrowing Subsidiary and their respective Subsidiaries and,
except as expressly provided in this Agreement, the Agent shall not have any
duty or responsibility, either initially or on a continuing basis, to provide
any Bank or the holder of any Note with any credit or other information with
respect thereto, whether coming into its possession before the making of the
Loans or at any time or times thereafter. The Agent shall not be responsible to
any Bank or the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, prior-
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<PAGE>
ity or sufficiency of this Agreement or any other Credit Document or the
financial condition of the Company, each Borrowing Subsidiary and their
respective Subsidiaries or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Credit Document, or the financial condition of the
Company, each Borrowing Subsidiary and their respective Subsidiaries or the
existence or possible existence of any Default or Event of Default.
7.04 Certain Rights of the Agent. If the Agent shall request
---------------------------
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, the Agent shall be entitled to refrain from such act or taking such
action unless and until the Agent shall have received instructions from the
Required Banks; and the Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Bank or the holder of any
Note shall have any right of action whatsoever against the Agent as a result of
the Agent acting or refraining from acting hereunder or under any other Credit
Document in accordance with the instructions of the Required Banks.
7.05 Reliance. The Agent shall be entitled to rely, and shall be fully
--------
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by any Person that
the Agent believed to be the proper Person, and, with respect to all legal
matters pertaining to this Agreement and any other Credit Document and its
duties hereunder and thereunder, upon advice of counsel selected by the Agent.
7.06 Indemnification. To the extent the Agent is not reimbursed and
---------------
indemnified by the Borrowers, the Banks will reimburse and indemnify the Agent,
in proportion to their respective "percentages" as used in determining the
Required Banks, for and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, costs, expenses or disbursements
of whatsoever kind or nature which may be imposed on, asserted against or
incurred by the Agent in performing its respective duties hereunder or under any
other Credit Document, in any way relating to or arising out of this Agreement
or any other Credit Document; provided that no Bank shall be liable for any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expen-
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<PAGE>
ses or disbursements resulting from the Agent's gross negligence or willful
misconduct.
7.07 The Agent in its Individual Capacity. With respect to its
------------------------------------
obligation to make Loans under this Agreement, the Agent shall have the rights
and powers specified herein for a "Bank" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Banks," "Required Banks," "holders of Notes" or any similar terms shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any
Borrower or any Affiliate of any Borrower as if it were not performing the
duties specified herein, and may accept fees and other consideration from any
Borrower for services in connection with this Agreement and otherwise without
having to account for the same to the Banks.
7.08 Holders. The Agent may deem and treat the payee of any Note as the
-------
owner thereof for all purposes hereof unless and until a written notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Agent. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or indorsee, as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.
7.09 Resignation by the Agent. (a) The Agent may resign from the
------------------------
performance of all its functions and duties hereunder and/or under the other
Credit Documents at any time by giving 15 Business Days' prior written notice to
the Borrowers and the Banks. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Banks shall appoint a
successor Agent hereunder or thereunder who shall be a commercial bank or trust
company reasonably acceptable to the Borrowers (it being understood and agreed
that any Bank is deemed to be acceptable to the Borrowers).
(c) If a successor Agent shall not have been so appointed within such
15 Business Day period, the Agent, with the consent of the Borrowers, shall then
appoint a successor Agent who shall serve as Agent hereunder or there-
-51-
<PAGE>
under until such time, if any, as the Banks appoint a successor Agent as
provided above.
(d) If no successor Agent has been appointed pursuant to clause (b) or
(c) above by the 20th Business Day after the date such notice of resignation was
given by the Agent, the Agent's resignation shall become effective and the Banks
shall thereafter perform all the duties of the Agent hereunder and/or under any
other Credit Document until such time, if any, as the Banks appoint a successor
Agent as provided above.
SECTION 8. Guaranty.
--------
8.01 The Guaranty. In order to induce the Banks to enter into this
------------
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by the Company from the proceeds of the Loans, the
Company hereby agrees with the Agent and Banks as follows: the Company hereby
unconditionally and irrevocably guarantees as primary obligor and not merely as
surety the full and prompt payment when due, whether upon maturity, by
acceleration or otherwise, of any and all indebtedness of each Borrowing
Subsidiary to the Agent or the Banks. If any or all of the indebtedness of a
Borrowing Subsidiary to the Agent or the Banks becomes due and payable
hereunder, the Company unconditionally promises to pay such indebtedness to the
Agent or Banks on demand. The word "indebtedness" as used in this Section 11
includes, without limitation, any and all Loans, fees, expenses, obligations and
liabilities of each Borrowing Subsidiary arising in connection with this
Agreement and any other Credit Document, in each case, heretofore, now, or
hereafter made, incurred or created, whether voluntarily or involuntarily,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
whether or not such indebtedness is from time to time reduced, or extinguished
and thereafter increased or incurred, whether such Borrowing Subsidiary may be
liable individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.
8.02 Bankruptcy. Additionally, the Company unconditionally and
----------
irrevocably guarantees the payment of any and all indebtedness of each Borrowing
Subsidiary to the Banks whether or not due or payable by the Borrowing
Subsidiary upon the occurrence in respect of the Borrowing Subsidiary of any of
the events specified in Section 9(h) or (i), and unconditionally, jointly and
severally, promises to
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<PAGE>
pay such indebtedness to the Banks, or order, on demand, in lawful money of the
United States.
8.03 Nature of Liability. The liability of the Company hereunder is
-------------------
exclusive and independent of any security for or other guaranty of the
indebtedness of the Borrowing Subsidiary whether executed by such Company or by
any other party, and the liability of such Company hereunder shall not be
affected or impaired by (a) any direction as to application of payment by the
Borrowing Subsidiary or by any other party, or (b) any other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
indebtedness of the Borrowing Subsidiary, or (c) any payment on or in reduction
of any such other guaranty or undertaking or (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrowing Subsidiary, or (e)
any payment made to the Agent or the Banks on the indebtedness which the Agent
or such Banks repay the Borrowing Subsidiary pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and such Company waives any right to the deferral or modification of
its obligations hereunder by reason of any such proceeding.
8.04 Independent Obligation. The obligations of the Company hereunder
----------------------
are independent of the obligations of each Borrowing Subsidiary, and a separate
action or actions may be brought and prosecuted against the Company whether or
not action is brought against a Borrowing Subsidiary and whether or not the
Borrowing Subsidiary is joined in any such action or actions. The Company
waives, to the fullest extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrowing Subsidiary or other circumstance which operates to toll
any statute of limitations as to the Borrowing Subsidiary shall operate to toll
the statute of limitations as to the Company.
8.05 Subordination. Any indebtedness of any Borrowing Subsidiary now or
-------------
hereafter held by the Company is hereby subordinated to the indebtedness of the
Borrowing Subsidiary to the Agent and the Banks. If the Agent, after an Event of
Default has occurred, so requests, any indebtedness of the Borrowing Subsidiary
to the Company shall be collected, enforced and received by the Company as
trustee for the Agent and the Banks and be paid over to the Agent and the Banks
on account of the indebtedness of the Borrowing Subsidiary to the Agent and the
Banks, but without affecting or impairing in any manner the liability of the
Company under the other provisions of this Section 11.
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<PAGE>
Prior to the transfer by the Company of any note or negotiable instrument
evidencing any indebtedness of such Borrowing Subsidiary to the Company, such
Company shall mark such note or negotiable instrument with a legend that the
same is subject to this subordination.
8.06 Waiver. (a) The Company waives any right (except as shall be
------
required by applicable statute and cannot be waived) to require the Agent or the
Banks to proceed against a Borrowing Subsidiary and any defense based on or
arising out of any defense of such Borrowing Subsidiary other than payment in
full of the indebtedness, including, without limitation, any defense based on or
arising out of the disability of such Borrowing Subsidiary or the
unenforceability of the indebtedness or any part thereof from any cause, or the
cessation from any cause of the liability of such Borrowing Subsidiary other
than payment in full of the indebtedness. Until all indebtedness of each
Borrowing Subsidiary to the Agent and the Banks shall have been paid in full,
the Company shall not have any right of subrogation, and waives any right to
enforce any remedy which the Agent and the Banks now have or may hereafter have
against the Borrowing Subsidiary.
(b) The Company waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notice of protest, notices of dishonor, notices of acceptance of the guaranty
provided by this Section 11, and notices of the existence, creation or incurring
of new or additional indebtedness.
8.07 Banks' Rights. The Company hereby agrees that the Company will
-------------
continue to be obligated under this Section 11 following any amendment pursuant
to the terms of this Agreement which may:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any
indebtedness of the Borrowing Subsidiaries, and the guaranty provided by this
Section 11 shall apply to the indebtedness as so changed, extended, renewed or
altered;
(b) exercise or refrain from exercising any rights against any
Borrowing Subsidiary or otherwise act or refrain from acting;
(c) settle or compromise any indebtedness, and may subordinate the
payment of all or any part thereof to the payment of any liability (whether due
or not) of any Borrowing Subsidiary to creditors of such Borrowing Subsidiary
other than the Banks; or
-53-
<PAGE>
(d) consent to or waive any breach of, any act, omission or default
under, this Agreement or any of the instruments or agreements referred to
herein, or otherwise amend, modify or supplement the Agreement or any of such
other instruments or agreements.
8.08 Guaranty Absolute. No invalidity, irregularity or unenforceability
-----------------
of all or any part of the Credit Documents shall affect, impair or be a defense
to the guaranty provided by this Section 11, and the guaranty provided by this
Section 11 shall be primary, absolute and unconditional notwithstanding the
occurrence of any event or the existence of any other circumstances which might
constitute a legal or equitable discharge of a surety or guarantor except
payment in full of the indebtedness.
8.09 Guaranty Continuing. The guaranty provided by this Section 11, is
-------------------
a continuing one and all liabilities to which it applies or may apply under the
terms hereof shall be conclusively presumed to have been created in reliance
hereon. No failure or delay on the part of any Bank or of any holder of any Note
of any Borrowing Subsidiary in exercising any right, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly specified are cumulative and not
exclusive of any rights or remedies which any Bank or any subsequent holder of a
Note of any Borrowing Subsidiary would otherwise have. No notice to or demand on
the Company in any case shall entitle the Company to any other further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
any Bank or any holder of a note of any Borrowing Subsidiary to any other or
further action in any circumstances without notice or demand.
0.10 Binding Nature of Guaranty. The guaranty provided by this Section
--------------------------
11 shall be binding upon the Company and its successors and assigns and shall
inure to the benefit of the Banks and their respective successors and assigns.
0.11 Limitation on Enforcement. The Banks agree that the terms of this
-------------------------
Section 11 may be enforced only by the action of the Agent and that no Bank
shall have any right individually to seek to enforce or to enforce the terms of
this Section 11, it being understood and agreed that such rights and remedies
may be exercised by the Agent
-54-
<PAGE>
for the benefit of the Banks upon the terms of this Agreement.
-55-
<PAGE>
SECTION 1. Miscellaneous.
-------------
-56-
<PAGE>
12.01 Payment of Expenses, etc. The Company shall: (i) whether or not
------------------------
the transactions herein contemplated are consummated, pay all reasonable out-of-
pocket costs and expenses of the Agent (including, without limitation, the
reasonable fees and disbursements of White & Case) in connection with the
preparation, execution and delivery of this Agreement and the other Credit
Documents and the documents and instruments referred to herein and therein and
any amendment, waiver or consent relating hereto or thereto, of the Agent in
connection with its syndication efforts with respect to this Agreement and of
the Agent and each of the Banks in connection with the enforcement of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Agent and for each of the Banks in
connection with such enforcement); (ii) pay and hold each of the Banks harmless
from and against any and all present and future stamp, excise and other similar
taxes with respect to the foregoing matters and save each of the Banks harmless
from and against any and all liabilities with respect to or resulting from any
delay or omission (other than to the extent attributable to such Bank) to pay
such taxes; and (iii) indemnify the Agent and each Bank, and each of their
respective officers, directors, employees, representatives and agents from and
hold each of them harmless against any and all liabilities, obligations
(including removal or remedial actions), losses, damages, penalties, claims,
actions, judgments, suits, costs, expenses and disbursements (including
reasonable attorneys' and consultants' fees and disbursements) incurred by,
imposed on or assessed against any of them as a result of, or arising out of, or
in any way related to, or by reason of, (a) any investigation, litigation or
other proceeding (whether or not the Agent or any Bank is a party thereto)
related to the entering into and/or performance of this Agreement or any other
Credit Document or use of the proceeds of any Loans hereunder or the
consummation of any transactions contemplated herein or in any other Credit
Document or the exercise of any of their rights or remedies provided herein or
in the other Credit Documents, or (b) the actual or alleged presence of
Hazardous Materials in the air, surface water or groundwater or on the surface
or subsurface of any Real Property owned or at any time operated by any Borrower
or any of its Subsidiaries, the generation, storage, transportation, handling or
disposal of Hazardous Materials at any location, whether or not owned or
operated by such Borrower or any of its Subsidiaries, the non-compliance of any
Real Property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any Real
Property, or any Environmental Claim
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<PAGE>
asserted against such Borrower, any of its Subsidiaries or any Real Property
owned or at any time operated by such Borrower or any of its Subsidiaries,
including, in each case, without limitation, the reasonable fees and
disbursements of counsel and other consultants incurred in connection with any
such investigation, litigation or other proceeding (but excluding any losses,
liabilities, claims, damages or expenses to the extent incurred by reason of (i)
the gross negligence or willful misconduct of the Person to be indemnified or
(ii) a claim by any Borrower against such Person). To the extent that the
undertaking to indemnify, pay or hold harmless the Agent or any Bank set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, each Borrower shall make the maximum contribution to the
payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law.
12.02 Right of Setoff. In addition to any rights now or hereafter
---------------
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and continuance of an Event of Default, each
Bank is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to any Borrower or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held by or owing to the Bank (including, without
limitation, by branches and agencies of such Bank wherever located) to or for
the credit or the account of any Borrower against and on account of the
Obligations and liabilities of such Borrower to such Bank under this Agreement
or under any of the other Credit Documents, and all other claims of any nature
or description arising out of or connected with this Agreement or any other
Credit Document, irrespective of whether or not such Bank shall have made any
demand hereunder and although said Obligations, liabilities or claims, or any of
them, shall be contingent or unmatured.
12.03 Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including telex, telecopier or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered: if to the Company, at the Company's
address specified opposite its signature below, or, if to a Borrowing
Subsidiary, to such Subsidiary's address specified in the Borrowing Subsidiary
Agreement; if to the Agent, at its Notice Office; if to a Bank, at the address
specified opposite its signature below or; as to any Borrower or Bank, at such
other address as
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<PAGE>
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall, when mailed, telexed,
telecopied, or cabled or sent by overnight courier, be effective when deposited
in the mails, delivered to the telegraph company, cable company or overnight
courier, as the case may be, or sent by telex or telecopier, except that notices
and communications to any Bank or Borrower shall not be effective until received
by such Bank or Borrower.
12.04 Benefit of Agreement. (a) This Agreement shall be binding
--------------------
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, however, no Borrower may assign or
-------- -------
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of the Agent and, provided
--------
further, that, although each Bank may, with the prior consent of the applicable
- -------
Borrower, transfer, assign or grant participations in its rights hereunder, such
Bank shall remain the "Bank" for all purposes hereunder (and may not transfer or
assign all or any portion of its Commitment hereunder except as provided in
Section 12.04(b)) and the transferee, assignee or participant, as the case may
be, shall not constitute a "Bank" hereunder and, provided further, that no Bank
----------------
shall transfer or grant any participation under which the participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan or Note in which such participant is
participating, or reduce the rate or extend the time of payment of interest or
Fees thereon (except in connection with a waiver of applicability of any post-
default increase in interest rates) or reduce the principal amount thereof, or
increase the amount of the participant's participation over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of
Default or of a mandatory reduction in the Total Commitments shall not
constitute a change in the terms of such participation, and that an increase in
any Commitment or Loan shall be permitted without the consent of any participant
if the participant's participation is not increased as a result thereof), or
(ii) consent to the assignment or transfer by any Borrower of any of its rights
and obligations under this Agreement. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against any Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto) and all amounts payable by the
applicable
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<PAGE>
Borrower hereunder shall be determined as if such Bank had not sold
such participation.
(b) Notwithstanding the foregoing, each Bank may (x) assign all or a
portion of its Commitment and related outstanding Obligations hereunder to any
affiliate of such Bank which is at least 50% owned by such Bank or its parent
company or (y) assign all, or if less than all, a portion equal to at least U.S.
$5,000,000 in the aggregate for the assigning Bank, of such Commitment and
related outstanding Obligations hereunder to one or more Eligible Transferees,
each of which assignees shall become a party to this Agreement as a Bank by
execution of an Assignment and Assumption Agreement substantially in the form of
Exhibit G hereto, provided that, (i) at such time Schedule I shall be deemed
--------
modified to reflect the Commitments (and/or outstanding Loans, as the case may
be) of such new Bank and of the existing Banks, (ii) new Notes will be issued,
at such Bank's expense, to such new Bank and to the assigning Bank upon the
request of such new Bank or assigning Bank, such new Notes to be in conformity
with the requirements of Section 2.05 (with appropriate modifications) to the
extent needed to reflect the revised Commitments (and/or outstanding Loans, as
the case may be) and (iii) the consent of the applicable Borrower shall be
required in connection with any assignment to an Eligible Transferee pursuant to
clause (y) above. To the extent of any assignment pursuant to this Section
12.04(b), the assigning Bank shall be relieved of its obligations hereunder with
respect to its assigned Commitments.
(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the part
------------------------------
of any Bank or any holder of any Note in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between any Borrower and any Bank or the holder of any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any other
Credit Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which any Bank or the holder of any Note would
otherwise have. No notice to or demand on any Borrower in any case shall entitle
any Borrower to any
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<PAGE>
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any Bank or the holder of any Note to any
other or further action in any circumstances without notice or demand.
12.06 Payments Pro Rata. (a) Except as otherwise provided in this
-----------------
Agreement, the Agent agrees that promptly after its receipt of each payment from
or on behalf of any Borrower in respect of any Obligations hereunder, it shall
distribute such payment to the Banks (other than any Bank that has consented in
writing to waive its pro rata share of any such payment) pro rata based upon
--- ---- --- ----
their respective shares, if any, of the Obligations with respect to which such
payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans or Facility Fee, of a sum which with respect to the related sum or
sums received by other Banks is in a greater proportion than the total amount of
such Obligation then owed and due to such Bank bears to the total amount of such
Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Borrower to such Banks in such amount as shall result in a
proportional participation by all the Banks in such amount; provided that if all
--------
or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
12.07 Calculations; Computations. (a) Unless otherwise specifically
--------------------------
provided herein, the financial statements to be furnished pursuant hereto shall
be made and prepared in accordance with generally accepted accounting principles
("GAAP") in the United States consistently applied throughout the periods
involved (except as set forth in the notes thereto or as otherwise disclosed in
writing by the applicable Borrower to the Agent).
(b) All computations of interest, Facility Fee and Fees hereunder shall
be made on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest, Facility Fee or Fees are payable.
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(c) All computations of Loans outstanding, gains, losses, debts,
liabilities and other amounts (the "Amounts") for purposes of determining
compliance by the Company and/or the Borrowers with the provisions of this
Agreement shall be made by aggregating all U.S. Dollar-denominated Amounts with
the U.S. Dollar Equivalent of all non-U.S. Dollar-denominated Amounts.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
----------------------------------------------------------------
TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
- -----
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
COURTS LACK JURISDICTION OVER SUCH BORROWER AND AGREES NOT TO PLEAD OR CLAIM, IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN ANY OF SUCH AFORESAID COURTS, THAT ANY SUCH COURT
LACKS JURISDICTION OVER SUCH BORROWER. EACH BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS NOTICE ADDRESS, SUCH
SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH BORROWER HEREBY
IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY LEGAL ACTION OR
PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT THAT SERVICE
OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF ANY BANK UNDER THIS AGREEMENT OR THE HOLDER OF ANY NOTE TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE APPLICABLE BORROWER IN ANY OTHER JURISDICTION.
(b) EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH
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<PAGE>
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
12.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Company and the
Agent.
12.10 Effectiveness This Agreement shall become effective on August 30,
-------------
1996 (the "Effective Date").
12.11 Headings Descriptive. The headings of the several sections and
--------------------
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
------------------------
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by each Borrower party thereto and the Required Banks,
provided that no such change, waiver, discharge or termination shall, without
- --------
the consent of each Bank (other than a Defaulting Bank) (with Obligations being
directly affected in the case of following clause (i)), (i) extend the final
scheduled maturity of any Loan or Note beyond the Maturity Date, or reduce the
rate or extend the time of payment of interest or Fees thereon, or reduce the
principal amount thereof, (ii) amend, modify or waive any provision of this
Section 12.12, (iii) reduce the percentage specified in the definition of
Required Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Banks or (iv) consent to the
assignment or transfer by, or discharge or termination of, any Borrower of any
of its rights and obligations under any Credit Document; provided further, that
----------------
no such change, waiver, discharge or termination shall (x) increase the
Commitment of any Bank over the amount thereof then in effect without the
consent of such Bank (it being understood that waivers or modifications of
-63-
<PAGE>
conditions precedent, covenants, Defaults or Events of Default or of a mandatory
reduction in the Total Commitments shall not constitute an increase of the
Commitment of any Bank, and that an increase in the available portion of any
Commitment of any Bank shall not constitute an increase in the Commitment of
such Bank), (y) without the consent of the Agent, amend, modify or waive any
provision of Section 10 as same applies to such Agent or any other provision as
same relates to the rights or obligations of such Agent.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by clause
(a)(i) through (iv), inclusive, of this Section 12.12, the consent of the
Required Banks is obtained but the consent of one or more of such other Banks
whose consent is required is not obtained, then the Borrowers shall have the
right to replace each such non-consenting Bank or Banks (so long as all
non-consenting Banks are so replaced) with one or more Replacement Banks
pursuant to Section 2.12 so long as at the time of such replacement, each such
Replacement Bank consents to the proposed change, waiver, discharge or
termination, provided that the Borrowers shall not have the right to replace a
Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to the second proviso
to Section 12.12(a).
12.13 Survival. All indemnities set forth herein including, without
--------
limitation, in Sections 2.10, 2.11, 4.04 and 12.01 shall survive the execution,
delivery and termination of this Agreement and the Notes and the making and
repayment of the Loans.
12.14 Domicile of Loans. Each Bank may transfer and carry its Loans at,
-----------------
to or for the account of any office, Subsidiary or Affiliate of such Bank.
Notwithstanding anything to the contrary contained herein, to the extent that a
transfer of Loans pursuant to this Section 12.14 would, at the time of such
transfer, result in increased costs under Section 2.10, 2.11 or 4.04 from those
being charged by such Bank prior to such transfer, then the applicable Borrower
shall not be obligated to pay such increased costs (although such Borrower shall
be obligated to pay any other increased costs of the type described above
resulting from changes after the date of the respective transfer).
12.15 Judgment Currency. The obligations of any Borrower in respect of
-----------------
any sum due to the Banks hereunder or under the Notes shall, notwithstanding any
judgment in a currency (the "Judgment Currency") other than the applicable Loan
Currency, be discharged only to the extent that on the
-64-
<PAGE>
Business Day following receipt by the applicable Bank or Banks of any sum
adjudged to be so due in the Judgment Currency, the Bank, in accordance with
normal banking procedures, purchases the applicable Loan Currency with the
Judgment Currency. If the amount of such Loan Currency so purchased is less than
the sum originally due to such Bank or Banks, the applicable Borrower agrees, as
a separate obligation and notwithstanding any such judgment, to indemnify the
applicable Bank or Banks against such loss, and if the amount of Loan Currency
so purchased exceeds the sum originally due to the Bank or Banks, such Bank or
Banks agree to remit such excess to the applicable Borrower.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
- -------- ALCO STANDARD CORPORATION
825 Duportail Road
Wayne, Pennsylvania 19087
Attention: Mr. J.F. Quinn By__________________________________
Title:
Telephone: (610) 296-8000
Facsimile: (610) 640-4056
DEUTSCHE BANK AG, NEW YORK
BRANCH AND CAYMAN ISLANDS
BRANCH
By__________________________________
Title:
By__________________________________
Title:
-65-
<PAGE>
DEUTSCHE BANK AG, NEW YORK
BRANCH, AS AGENT
By__________________________________
Title:
By__________________________________
Title:
-6-
<PAGE>
SCHEDULE I
----------
Bank Commitment
---- ----------
Deutsch Bank AG, $25,000,000
New York Branch and/or
Cayman Islands Branch
<PAGE>
EXHIBIT A
---------
FORM OF NOTICE OF BORROWING
---------------------------
[Date]
Deutsche Bank AG,
New York Branch, as Agent
31 West 52nd Street
New York, NY 10019
Attention:
Ladies and Gentlemen:
The undersigned, ______________________ (the "Borrower"), refers to the
Credit Agreement, dated as of August 30, 1996 (as amended from time to time, the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among Alco Standard Corporation, certain of its Subsidiaries, various
Banks from time to time party thereto (the "Banks"), and you, as Agent for such
Banks, and hereby gives you notice, irrevocably, pursuant to Section 2.03 of the
Credit Agreement, that the undersigned hereby requests a Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by Section
2.03(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is __________, 19__./1/
(ii) The Type of Loan of the Proposed Borrowing is a [Eurocurrency
Loan]/[Quoted Rate Loan].
(iii) The Loan Currency of the Proposed Borrowing is _________________.
(iv) The aggregate principal amount of the Proposed Borrowing is
_________________.
(v) The [Interest Period]/[term] for the Proposed Borrowing is
[month(s)] [year(s) and ______________________
/1/ Shall be a Business Day at least three Business Days after the date
hereof.
<PAGE>
EXHIBIT A
Page 2
days].
- ------
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties of the Borrower set forth in the
Credit Agreement are and will be true and correct in all material respects, both
before and after giving effect to the Proposed Borrowing and to the application
of the proceeds thereof, as though made on such date, unless stated to relate to
a specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date; and
(B) no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Borrowing or from the application of the
proceeds thereof.
Very truly yours,
[BORROWER]
By____________________________________
Title:
<PAGE>
EXHIBIT B
---------
FORM OF NOTE ISSUED BY THE COMPANY
----------------------------------
[Amount] New York, New York
____________, 19__
FOR VALUE RECEIVED, ALCO STANDARD CORPORATION, an Ohio corporation (the
"Borrower"), hereby promises to pay to the order of __________ or its registered
assigns (the "Bank"), in lawful money of the United States of America and/or
other applicable jurisdictions, in immediately available funds, at the office of
Deutsche Bank AG, New York Branch (the "Agent"), located at 31 West 52nd Street,
New York, NY 10019, on the Maturity Date the principal sum of _____________
dollars or its equivalent in U.S. Dollars and/or other applicable Loan Currency,
or, if less, the then unpaid principal amount of the Loans initially evidenced
by this Note and made by the Bank pursuant to the Agreement. The Borrower also
promises to pay interest on the unpaid principal amount hereof in like money at
such office from the date hereof until paid at the rates and at the times
provided in Section 2.07 of the Agreement.
This Note is one of the Notes referred to in the Credit Agreement,
dated as of August 30, 1996, among the Borrower, certain of its Subsidiaries,
the financial institutions from time to time party thereto (including the Bank)
and Deutsche Bank AG, New York Branch (the "Agent") (as amended, modified or
supplemented from time to time, the "Agreement"; capitalized terms used herein
and not otherwise defined herein having the respective meanings given to such
terms in the Agreement), and is entitled to the benefits thereof. As provided in
the Agreement, this Note is subject to voluntary prepayment and mandatory
repayment prior to the Maturity Date, in whole or in part.
In case an Event of Default shall occur and be continuing, the
principal of and accrued interest on this Note may become or be declared to be
due and payable in the manner and with the effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
ALCO STANDARD CORPORATION
<PAGE>
EXHIBIT B
Page 2
By________________________________
Title:
<PAGE>
<TABLE>
<CAPTION>
Principal Date of Repayment Principal Amount
Date of Loan Amount of Loan Loan Currency of Loan of Loan Repaid Notation Made By
- ------------ -------------- ------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT C
---------
FORM OF NOTE ISSUED BY A BORROWING SUBSIDIARY
---------------------------------------------
[Amount] New York, New York
____________, 19__
FOR VALUE RECEIVED, _______________________________________, a
[jurisdiction] corporation (the "Borrower"), hereby promises to pay to the order
of __________ or its registered assigns (the "Bank"), in lawful money of the
United States of America and/or other applicable jurisdictions, in immediately
available funds, at the office of Deutsche Bank AG, New York Branch (the
"Agent"), located at 31 West 52nd Street, New York, NY 10019, on the Maturity
Date the principal sum of _____________ dollars or its equivalent in U.S.
Dollars and/or other applicable Loan Currency, or, if less, the then unpaid
principal amount of the Loans initially evidenced by this Note and made by the
Bank pursuant to the Agreement. The Borrower also promises to pay interest on
the unpaid principal amount hereof in like money at such office from the date
hereof until paid at the rates and at the times provided in Section 2.07 of the
Agreement.
This Note is one of the Notes referred to in the Credit Agreement,
dated as of August 30, 1996, among Alco Standard Corporation (the "Company"),
certain of its Subsidiaries (including the Borrower), the financial institutions
from time to time party thereto (including the Bank) and Deutsche Bank AG, New
York Branch (the "Agent") (as amended, modified or supplemented from time to
time, the "Agreement"; capitalized terms used herein and not otherwise defined
herein having the respective meanings given to such terms in the Agreement), and
is entitled to the benefits thereof, including, without limitation, the guaranty
of the Company provided in Section 11 thereof. As provided in the Agreement,
this Note is subject to voluntary prepayment and mandatory repayment prior to
the Maturity Date, in whole or in part.
In case an Event of Default shall occur and be continuing, the
principal of and accrued interest on this Note may become or be declared to be
due and payable in the manner and with the effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
<PAGE>
EXHIBIT C
Page 2
[BORROWER]
By________________________________
Title:
<PAGE>
<TABLE>
<CAPTION>
Principal Date of Repayment Principal Amount
Date of Loan Amount of Loan Loan Currency of Loan of Loan Repaid Notation Made By
- ------------ -------------- ------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT D
---------
[Letterhead of Alco Standard General Counsel]
[Effective Date]
To the Agent and each of the Banks
party to the Credit Agreement referred to below
Ladies and Gentlemen:
As General Counsel to Alco Standard Corporation, an Ohio corporation
(the "Company"), I have served as counsel to the Company in connection with the
execution and delivery of the Credit Agreement, dated as of August 30, 1996 (the
"Credit Agreement"), among the Alco Standard Corporation, certain of its
Subsidiaries, the Banks from time to time party thereto (the "Banks") and
Deutsche Bank AG, New York Branch, as Agent, and the transactions contemplated
thereby. This opinion is delivered to you at the request of the Company pursuant
to Section 5.01 of the Credit Agreement. Unless otherwise indicated, capitalized
terms used herein but not otherwise defined herein shall have the respective
meanings set forth in the Credit Agreement.
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to my satisfaction, of such documents as I
have deemed necessary or appropriate as a basis for the opinions set forth
herein. In my examination I have assumed the genuineness of all signatures
(other than as to the Company or any of its Subsidiaries), the authenticity of
all documents submitted to me as originals, the conformity to original documents
of all documents submitted to me as certified or photostatic copies and the
authenticity of the originals of such copies. As to questions of fact not
independently verified by me I have relied, to the extent I deemed appropriate,
upon representations and certificates of officers of the Company and each of its
Subsidiaries, public officials and other appropriate persons.
<PAGE>
EXHIBIT D
Page 2
Based upon the foregoing, I am of the opinion that:
1. Each of the Company and each of its Subsidiaries (i) is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction of its organization, (ii) has the corporate power and authority
to own its property and assets and to transact the business in which it is
engaged and presently proposes to engage and (iii) is duly qualified and is
authorized to do business and is in good standing in all jurisdictions where the
failure to be so qualified could reasonably be expected to have a Material
Adverse Effect.
2. The Company has the corporate power and authority to execute,
deliver and carry out the terms and provisions of, and has taken all necessary
corporate action to authorize the execution, delivery and performance of, the
Credit Agreement. The Company has duly executed the Credit Agreement. Each
Borrower Subsidiary has the corporate power and authority to execute, deliver
and carry out the terms and provisions of any Note or Borrower Subsidiary
Agreement subsequently executed by such Borrower Subsidiary.
3. The Credit Agreement constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
4. None of the execution, delivery or performance by the Company of the
Credit Agreement, the compliance by it with the terms and provisions thereof or
the consummation of the transactions contemplated therein, (i) will contravene
any applicable provision of any law, statute, rule or regulation (including,
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System) or any order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of the Company or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, credit
<PAGE>
EXHIBIT D
Page 3
agreement, loan agreement or other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which it or any of its
property or assets are bound or to which it may be subject or (iii) will violate
any provision of any charter document of the Company or any of its Subsidiaries.
5. No order, consent, approval, license, authorization or validation
of, filing, recording or registration with, or exemption by, any foreign or
domestic governmental or public body or authority, or any subdivision thereof,
or any other third party (except as have been obtained or made prior to the date
hereof), is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of the Credit Agreement by the Company or
(ii) the legality, validity, binding effect or enforceability against the
Company of the Credit Agreement.
6. There are no actions, suits or proceedings pending or, to the best
of my knowledge, threatened (i) with respect to the Company or any of its
Subsidiaries that would reasonably be expected to have a Material Adverse Effect
or (ii) against the Company or any of its Subsidiaries with respect to the
Credit Agreement or the transactions contemplated thereby and there does not
exist any judgment, order or injunction prohibiting or imposing any material
adverse condition upon the rights or remedies of any Bank or the Agent under the
Credit Agreement or on the ability of the Company to perform its obligations to
any Bank or the Agent under the Credit Agreement.
7. Neither the Company nor any of its Subsidiaries is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
8. Neither the Company nor any of its Subsidiaries is not a "holding
company", a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
This opinion is being furnished only to the addressees and is solely
for their benefit and the benefit of their participants and assigns in
connection with the above transaction. This opinion may not be relied upon for
any other purpose, or relied upon by any other person, firm or
<PAGE>
EXHIBIT D
Page 4
corporation for any purpose, without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT E
---------
FORM OF SECRETARY'S CERTIFICATE
-------------------------------
I, the undersigned, [Chairman/President/Vice President/Finance/
Controller] of [Borrower], a corporation organized and existing under the laws
of ___________ (the "Borrower"), do hereby certif y on behalf of the Borrower
that:
1. This Certificate is furnished pursuant to the Credit Agreement,
dated as of August 30, 1996, among Alco Standard Corporation, certain of its
Subsidiaries, the Banks from time to time party thereto and Deutsche Bank AG,
New York Branch, as Agent (such Credit Agreement, as in effect on the date of
this Certificate, being herein called the "Credit Agreement"). Unless otherwise
defined herein, capitalized terms used in this Certificate shall have the
meanings set forth in the Credit Agreement.
2. The following named individuals are elected officers of the
Borrower, each holds the office of the Borrower set forth opposite his or her
name and has held such office since __________, 19__./1/ The signature written
opposite the name and title of each such officer is his or her genuine
signature.
<TABLE>
<CAPTION>
Name/1/ Office
-------------------- -------------------- -----------------
Signature
------------------
<S> <C>
------------------ ------------------
-------------------------
------------------ ------------------
-------------------------
------------------ ------------------
-------------------------
</TABLE>
- ---------------------------
/2/ Insert a date prior to the time of any corporate action relating to the
Credit Documents or related documentation.
/3/ Include name, office and signature of each officer who will sign any
Credit Document, including the officer who will sign the certification at the
end of this Certificate or related documentation.
<PAGE>
EXHIBIT E
Page 2
3. Attached hereto as Exhibit A is a certified copy of the Certificate
of Incorporation/1/ of the Borrower, as filed in the Office of the Secretary of
State of __________/1/ on ___________, 19__, together with all amendments
thereto adopted through the date hereof.
4. Attached hereto as Exhibit B is a true and correct copy of the
By-Laws/1/ of the Borrower which were duly adopted, are in full force and
effect on the date hereof, and have been in effect since _____________,
19__./1/
5. Attached hereto as Exhibit C is a true and correct copy of
resolutions which were duly adopted on __________, 19__ [by unanimous written
consent of the Board of Directors of the Borrower] [by a meeting of the Board of
Directors of the Borrower at which a quorum was present and acting
throughout],/1/ and such resolutions have not been rescinded, amended or
modified. Except as attached hereto as Exhibit C, no resolutions have been
adopted by the Board of Directors/1/ of the Borrower which deal with the
- --------------------
/4/ Revise as appropriate for the relevant Borrower.
/5/ Revise as appropriate for the relevant Borrower.
/6/ Revise as appropriate for the relevant Borrower.
/7/ Insert date on or prior to the date of the initial action taken by the
Borrower with respect to any Credit Document.
/8/ Revise as appropriate for the relevant Borrower.
/9/ Revise as appropriate for the relevant Borrower.
<PAGE>
EXHIBIT E
Page 3
execution, delivery or performance of any Credit Document to which the Borrower
is party./1/
6. On the date hereof, all of the applicable conditions set forth in
Sections 5.02, 5.03, 5.04, 5.05 and 6.01 of the Credit Agreement have been
satisfied.
7. On the date hereof, the representations and warranties contained in
the Credit Agreement with respect to the Borrower are true and correct in all
material respects with the same effect as though such representations and
warranties had been made on the date hereof, both before and after giving effect
to the incurrence of Loans on the date hereof and the application of the
proceeds thereof, unless stated to relate to a specific earlier date, in which
case such representations and warranties were true and correct in all material
respects as of such earlier date.
8. On the date hereof, no Default or Event of Default has occurred and
is continuing or would result from the Borrowing to occur on the date hereof or
from the application of the proceeds thereof.
9. As of the date hereof, nothing has occurred which has or could
reasonably be expected to have a material adverse effect on the rights or
remedies of the Agent or any of the Banks under or with respect to the Credit
Agreement.
10. There is no proceeding that has been instituted or is currently
taking place for the dissolution or liquidation of the Borrower or threatening
the existence of the Borrower.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
__________, 19__.
[BORROWER]
- -----------------------------
/10/ Revise this paragraph as appropriate if a form of corporate authorization
other than the adoption of specific authorizing resolutions has been used.
<PAGE>
EXHIBIT E
Page 4
____________________________________
Name:
Title:
I, the undersigned, [Secretary/Assistant Secretary] of the Borrower, do
hereby certify on behalf of the Borrower that:
1. [Name of Person making above certifications] is the duly elected and
qualified [Chairman/President/Vice President/Finance/Controller] of the Borrower
and the signature above is [his] [her] genuine signature.
2. The certifications made by [name of Person making above
certifications] on behalf of the Borrower in Items 2, 3, 4, 5 and 10 above are
true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_________, 19__.
[BORROWER]
____________________________________
Name:
Title:
<PAGE>
EXHIBIT F
---------
FORM OF BORROWING SUBSIDIARY AGREEMENT
--------------------------------------
BORROWING SUBSIDIARY AGREEMENT, dated as of _________, 19__, between
___________, a ________ corporation (the "New Borrower"), and ALCO STANDARD
CORPORATION, an Ohio corporation (the "Company"), in favor of DEUTSCHE BANK AG,
NEW YORK BRANCH, as Agent, for the benefit of the Banks party to the Credit
Agreement (as hereinafter defined). Except as otherwise defined herein, terms
used herein and defined in the Credit Agreement shall be used herein as therein
defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company, certain of its Subsidiaries, various Banks from
time to time party thereto (the "Banks") and Deutsche Bank AG, New York Branch,
as Agent, have entered into a Credit Agreement, dated as of August 30, 1996 (as
in effect from time to time, the "Credit Agreement");
WHEREAS, pursuant to the Credit Agreement, the Banks have agreed, upon
the terms and subject to the conditions therein set forth, to make Loans to the
Company and to Subsidiaries of the Company which execute and deliver to the
Agent a Borrowing Subsidiary Agreement;
WHEREAS, the undersigned Subsidiary and the Company desire for the
undersigned Subsidiary to become a Borrowing Subsidiary;
NOW, THEREFORE, in consideration of the benefits accruing to each of
the undersigned, including, with respect to the New Borrower, being able to
borrow under the Credit Agreement upon the terms and subject to the conditions
set forth therein, the receipt and sufficiency of which are hereby acknowledged,
each of the undersigned covenants and agrees as follows:
1. New Borrower's Obligations. The New Borrower agrees that from and
--------------------------
after the date of this Agreement it will be, and will be liable for the
observance and performance of all obligations of, a Borrowing Subsidiary under
the Credit Agreement (including as a Borrower
<PAGE>
EXHIBIT F
Page 2
thereunder), as the same may be amended from time to time, to the same extent as
if it had been one of the original parties to the Credit Agreement.
2. Company's Obligations. (a) The Company represents to the Banks that
---------------------
the New Borrower is a Subsidiary of the Company.
(b) The Company hereby covenants and agrees with each Bank that, so
long as this Agreement shall remain in effect, the New Borrower shall continue
to be a Subsidiary of the Company.
(c) The Company acknowledges and agrees that from the date hereof the
New Borrower will be a Borrowing Subsidiary under the Credit Agreement and that,
as such, any borrowings made by the New Borrower pursuant to the Credit
Agreement will constitute Borrowings. The Company also acknowledges and agrees
that all Loans and other indebtedness of the New Borrower under the Credit
Agreement shall be guaranteed by the Company pursuant to Section 11 thereof.
3. Miscellaneous. (a) If at any time no Loans are outstanding to the
-------------
New Borrower and no amounts or other obligations are owed to the Agent or any
Bank from the New Borrower, then this Agreement can be terminated by notice from
the Company and the New Borrower to the Agent; otherwise, this Agreement may not
be amended or terminated without the prior written consent of the Agent and the
Required Banks.
(b) Notices to the New Borrower under the Credit Agreement shall be
made as follows:
[Address]
Attention:
-----------------------
Telephone:
-----------------------
Facsimile:
-----------------------
(c) This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized
<PAGE>
EXHIBIT F
Page 3
officers as of the date first appearing above.
[NEW BORROWER]
By
---------------------------------
- --------------
Title:
ALCO STANDARD CORPORATION
By
---------------------------------
- --------------
Title:
Accepted as of the date first
above written:
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Agent
By
----------------------------------------------------
Title:
By
----------------------------------------------------
Title:
<PAGE>
EXHIBIT G
---------
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
-------------------------------------------
Reference is made to the Credit Agreement described in Item 1 of Annex
I hereto (as such Credit Agreement may hereafter be amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"). Unless defined in
Annex I hereto, terms defined in the Credit Agreement are used herein as therein
defined. ___________ (the "Assignor") and __________ (the "Assignee") hereby
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without
recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obligations
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of
the outstanding rights and obligations under the Credit Agreement relating to
the facilities listed in Item 4 of Annex I hereto, including, without
limitation, all rights and obligations with respect to the Assigned Share of the
Assignor's Commitment and of any outstanding Loans. After giving effect to such
sale and assignment, the Assignee's Commitment and the amount of the outstanding
Loans owing to the Assignee will be as set forth in Item 4 of Annex I hereto.
2. The Assignor (a) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (b) makes no representation or
warranty and assumes no responsibility with respect to any statement, warranty
or representation made in or in connection with the Credit Agreement or the
other Credit Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or the other Credit
Documents or any other instrument or document furnished pursuant thereto; and
(c) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company, any other Borrower or any of
their respective Subsidiaries or the performance or observance by the Company,
any other Borrower
<PAGE>
EXHIBIT G
Page 2
or any of their respective Subsidiaries of any of their respective obligations
under the Credit Agreement or the other Credit Documents or any other instrument
or document furnished pursuant thereto.
3. The Assignee (a) confirms that it has received a copy of the Credit
Agreement and the other Credit Documents, together with copies of the financial
statements referred to therein and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Assumption Agreement; (b) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (c) confirms that it is an Eligible
Transferee under Section 12.04(b) of the Credit Agreement; (d) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Credit Agreement and the other Credit Documents as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; [and] (e) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank[; and (f) attaches
the forms prescribed by the Internal Revenue Service of the United States
certifying as to the Assignee's status for purposes of determining exemption
from United States withholding taxes with respect to all payments to be made to
the Assignee under the Credit Agreement or such other documents as are necessary
to indicate that all such payments are subject to such rates at a rate reduced
by an applicable tax treaty]/1/.
4. Following the execution of this Assignment and Assumption Agreement
by the Assignor and the Assignee, an executed original hereof (together with all
attachments) will be delivered to the Agent. The effective date of this
Assignment and Assumption Agreement shall be the date of execution hereof by the
Assignor and the Assignee and the receipt of the consent of the Borrowers to the
extent required by Section 12.04(b) of the Credit Agreement, unless otherwise
specified in Item 5 of Annex I hereto (the "Settlement Date").
- -------------------
/1/ Include if the Assignee is organized under the laws of a jurisdiction
outside of the United States.
<PAGE>
EXHIBIT G
Page 3
5. Upon the delivery of a fully executed original hereof to the Agent,
as of the Settlement Date, (a) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and Assumption
Agreement, have the rights and obligations of a Bank thereunder and under the
other Credit Documents and (b) the Assignor shall, to the extent provided in
this Assignment and Assumption Agreement, relinquish its rights and be released
from its obligations under the Credit Agreement and the other Credit Documents.
6. It is agreed that upon the effectiveness hereof, the Assignee shall
be entitled to (a) all interest on the Assigned Share of the Loans at the rates
specified in Item 6 of Annex I and (b) all Facility Fees (if applicable) on the
Assigned Share of the Commitment at the rate specified in Item 7 of Annex I
hereto, which, in each case, accrue on and after the Settlement Date, such
interest and, if applicable, Facility Fee to be paid by the Agent directly to
the Assignee. It is further agreed that all payments of principal made on the
Assigned Share of the Loans which occur on and after the Settlement Date will be
paid directly by the Agent to the Assignee. Upon the Settlement Date, the
Assignee shall pay to the Assignor an amount specified by the Assignor in
writing which represents the Assigned Share of the principal amount of the
respective Loans made by the Assignor pursuant to the Credit Agreement which are
outstanding on the Settlement Date, net of any closing costs, and which are
being assigned hereunder. The Assignor and the Assignee shall make all
appropriate adjustments in payments under the Credit Agreement for periods prior
to the Settlement Date directly between themselves on the Settlement Date.
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made on
Annex I hereto.
[NAME OF ASSIGNOR],
as Assignor
<PAGE>
EXHIBIT G
Page 4
By
------------------------------------
Title:
[NAME OF ASSIGNEE],
as Assignee
By
------------------------------------
Title:
[Acknowledged and Agreed:
[BORROWER]
By
------------------------------------
Title:
[BORROWER]
By
------------------------------------
Title: ]/1/
ANNEX I
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
1. Name and Date of Credit Agreement:
Credit Agreement, dated as of August 30, 1996, among
- -------------------
/12/ The consents of the Borrowers are required for certain assignments
pursuant to Section 12.04(b) of the Credit Agreement. If required, each
Borrower should execute the Acknowledgement.
<PAGE>
Alco Standard Corporation, certain of its Subsidiaries, the Banks from time
to time party thereto and Deutsche Bank AG, New York Branch, as Agent, as
amended to the date hereof.
2. Borrowers:
------------------------------
------------------------------
------------------------------
3. Date of Assignment and Assumption Agreement:
4. Assigned Share Amounts (as of date of Item #3 above):
<TABLE>
<CAPTION>
Outstanding
Principal of
Total Commitment Loans
---------------- -----
(U.S. $ Equivalent)
- -------------------
<S> <C> <C>
a. Aggregate Amount $__________ $_________
for all Banks
b. Assigned Share __________% _________%
c. Amount of $__________ $_________
Assigned Share
</TABLE>
Assigned Share in Loan Currencies (as of date of Item #3 above):
================================================================================
Borrower Loan Amount Assigned Share
-------- ----------- --------------
(in applicable Loan Currency) (in applicable Loan Currency)
================================================================================
5. Settlement Date:
<PAGE>
EXHIBIT G
Page 6
6. Rate of Interest
to the Assignee: As set forth in Section 2.07 of the
Credit Agreement (unless
otherwise agreed to by the Assignor and
the Assignee)/1/
7. Facility Fee: As set forth in Section 3.01(a)
(unless otherwise agreed to by the
Assignor and the Assignee)/1/
8. Notice:
ASSIGNOR:
---------------------
---------------------
---------------------
---------------------
Attention:
Telephone:
Telecopier:
Reference:
ASSIGNEE:
---------------------
---------------------
---------------------
---------------------
Attention:
Telephone:
Telecopier:
Reference:
- ------------------
/13/ The Borrower and the Agent shall direct the entire amount of the interest
to the Assignee at the rate set forth in Section 2.07 of the Credit Agreement,
with the Assignor and Assignee effecting the agreed upon sharing of the interest
through payments by the Assignee to the Assignor.
/14/ Insert "Not Applicable" in lieu of text if no portion of the Commitment is
being assigned. Otherwise, the Borrowers and the Agent shall direct the entire
amount of the Commitment Commission to the Assignee at the rate set forth in
Section 3.01(a) of the Credit Agreement, with the Assignor and the Assignee
effecting the agreed upon sharing of the Commitment Commission through payment
by the Assignee to the Assignor.
<PAGE>
EXHIBIT G
Page 7
9. Payment Instructions:
ASSIGNOR:
---------------------
---------------------
---------------------
---------------------
Attention:
Reference:
ASSIGNEE:
---------------------
---------------------
---------------------
---------------------
Attention:
Reference:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By By
------------------------------- ------------------------------
Name: Name:
Title: Title:
<PAGE>
EXHIBIT 5
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
April 10, 1997
IKON Office Solutions, Inc.
P.O. Box 834
Valley Forge, PA 19482
Ladies and Gentlemen:
We have acted as counsel to IKON Office Solutions, Inc. ("IKON") in
connection with the filing of a Registration Statement on Form S-4 (the
"Registration Statement") to register under the Securities Act of 1933, as
amended, 10,000,000 shares of its Common Stock (the "Shares") for offering from
time to time in connection with the acquisition of businesses and properties by
IKON and its subsidiaries. The Shares may be presently authorized but unissued
shares or shares held as treasury shares at the time of their delivery. In this
connection we have made such investigation and reviewed such documents as we
deem necessary in the circumstances to render the following opinion.
Based upon such investigation and review, it is our opinion that the
Shares have been duly authorized for issue, and when (i) their issuance is
authorized by the Board of Directors of IKON in transactions of the type and for
the consideration described in the Registration Statement and (ii) they are
issued or delivered upon receipt of such consideration, such Shares will be
legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this opinion and to our firm in
the prospectus included therein.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
<PAGE>
- --------------------------------------------------------------------------------
FUNDING, CONSTRUCTION AGENCY, OPEN END MORTGAGE
AND LEASE AGREEMENT
THIS DOCUMENT SECURES FUTURE ADVANCES
dated as of February 14, 1997
to be effective as of February ___, 1997
between
1997-1 VALLEY STREAM TRUST,
Lessor and mortgagee
and
IKON OFFICE SOLUTIONS, INC.
(f/k/a Alco Standard Corporation)
as Lessee and mortgagor
- --------------------------------------------------------------------------------
Construction Program for an Office Facility
in Chester County, Pennsylvania
- --------------------------------------------------------------------------------
THIS LEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO THE EXTENT, IF ANY,
THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE TRANSFER OR
POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE "ORIGINAL EXECUTED
COUNTERPART NO. 1", WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE
RECEIPT THEREFOR EXECUTED BY LESSOR ON OR FOLLOWING THE SIGNATURE PAGE THEREOF.
SEE SECTION 2.9 FOR THE NATURE OF THIS TRANSACTION AND INTENTION OF THE PARTIES.
THIS COUNTERPART IS [NOT] THE ORIGINAL EXECUTED COUNTERPART NO. 1.
<PAGE>
FUNDING, CONSTRUCTION AGENCY, OPEN END MORTGAGE
AND LEASE AGREEMENT
This FUNDING, CONSTRUCTION AGENCY, OPEN END MORTGAGE AND LEASE AGREEMENT
(as amended and supplemented from time to time, this "Lease") entered into as of
-----
February 14, 1997, to be effective as of February ___, 1997, between 1997-1
VALLEY STREAM TRUST, a Delaware business trust, as lessor ("Lessor") and as
------
mortgagee, and IKON OFFICE SOLUTIONS, INC. (f/k/a Alco Standard Corporation), an
Ohio corporation, as lessee ("Lessee") and as mortgagor.
------
RECITALS
--------
A. On the Initial Advance Date, (i) Seller will transfer to Lessor
Seller's fee simple title in and to the land described on Schedule II attached
-----------
hereto (the "Land"), the office building consisting of approximately 115,000
----
square feet and other buildings, structures, fixtures and improvements
(excluding any trade fixtures) located thereon (the "Facility"), the Appurtenant
--------
Rights and the Personal Property (the Land, the Facility, the Appurtenant Rights
and the Personal Property, together with the Permits in favor of or acquired on
behalf of Lessor, being referred to herein collectively as the "Leased
------
Property"), (ii) Lessor shall advance funds to pay or reimburse the Construction
Agent for the Acquisition Costs, (iii) Lessor shall also advance funds to Lessee
for the purpose of Lessee paying the Transaction Costs and (iv) Lessor shall
lease to Lessee the Leased Property.
B. Subject to the terms and conditions hereof, on each Construction
Advance Date, Lessor shall advance funds to Lessee to reimburse Lessee for costs
incurred by Lessee on Lessor's behalf to construct the Financed Improvements.
NOW, THEREFORE, in consideration of the mutual terms and conditions herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
In this Lease and each other Operative Document, unless the context
otherwise requires:
(a) any term defined below by reference to another instrument or document
shall continue to have the meaning ascribed thereto whether or not such other
instrument or document remains in effect;
<PAGE>
(b) words importing the singular, where appropriate, include the plural
and vice versa;
(c) words importing a gender include any gender;
(d) a reference in any Operative Document to a part, clause, section,
exhibit or schedule without further description is a reference to a part, clause
and section of, and exhibit and schedule to, such Operative Document;
(e) a reference to any statute, regulation, proclamation, ordinance or law
includes all statutes, regulations, proclamations, ordinances or laws amending,
supplementing, supplanting, varying, consolidating or replacing it, and a
reference to a statute includes all regulations, proclamations and ordinances
issued or otherwise applicable under that statute;
(f) a reference to a document includes, unless the context thereof
otherwise requires, any amendment or supplement to, or replacement or novation
of, that document;
(g) a reference to a party to a document includes that party's successors
and permitted assigns; and
(h) a reference to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof a
general statement followed by or referable to an enumeration of specific matters
shall not be limited to matters similar to those specifically mentioned.
Further, each of the parties to the Operative Documents and their counsel
have reviewed and revised the Operative Documents, or requested revisions
thereto, and the usual rule of construction that any ambiguities are to be
resolved against the drafting party shall be inapplicable in construing and
interpreting the Operative Documents.
"Acquisition Costs" shall mean the cost of the acquisition of the Leased
-----------------
Property.
"Advance" shall mean each advance of a Certificate Purchaser Amount by a
-------
Certificate Purchaser.
"Advance Date" shall mean the Initial Advance Date and each Construction
------------
Advance Date.
"Advance Date Notice" shall mean the Initial Advance Date Notice and each
-------------------
Construction Advance Date Notice.
"Affiliate" of any Person shall mean any other Person directly or
---------
indirectly controlling, controlled by or under common control with such Person.
For purposes of this definition, the
-2-
<PAGE>
term "control" (including the correlative meanings of the terms "controlling,"
------- -----------
"controlled by" and "under common control with"), as used with respect to any
------------- -------------------------
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of such Person, whether
through the ownership of voting securities or by contract or otherwise, provided
--------
(but without limiting the foregoing) that no pledge of voting securities of any
Person without the current right to exercise voting rights with respect thereto
shall by itself be deemed to constitute control over such Person.
"Alterations" shall have the meaning provided in Section 5.2(a).
----------- --------------
"Alternate Base Rate" shall mean, for any period, an interest rate per
-------------------
annum equal to the sum of (i) the Federal Funds Effective Rate most recently
determined by Certificate Trustee plus .50% and (ii) the Applicable Margin. If
----
the aforesaid rate changes from time to time after the Documentation Date, the
Alternate Base Rate shall be automatically increased or decreased, if
appropriate and as the case may be, without notice to Lessee or Lessor, as of
the effective time of each change, provided that Certificate Trustee shall
endeavor to notify Lessee of any such change but shall have no liability for any
failure to do so.
"Applicable Facility Fee Rate" shall mean, with respect to each
----------------------------
determination of the Facility Fee, the percentage in the column below marked
"Facility Fee Rate" opposite the senior long-term debt rating of Lessee from S&P
and Moody's on the determination date:
<TABLE>
<CAPTION>
Level Ratings LIBO Facility Applicable
Spread Fee Rate Margin
- ---------------------------------- -------- -------- ----------
<C> <S> <C> <C> <C>
1 A+ or better from S&P 13.0 6.5 19.5
A1 or better from Moody's basis basis basis
points points points
2 A from S&P 14.0 7.0 21.0
A2 from Moody's basis basis basis
points points points
3 A- from S&P 14.5 8.0 22.5
A3 from Moody's basis basis basis
points points points
4 BBB+ or lower from S&P 18.5 9.0 27.5
Baa1 or lower from basis basis basis
Moody's points points points
</TABLE>
If the ratings established by S&P and Moody's fall within different levels, the
Applicable Facility Fee Rate shall be based on the higher of the two ratings.
If the ratings of either S&P or
-3-
<PAGE>
Moody's changes, the Applicable Facility Fee Rate shall adjust, and such
adjustment shall be effective with respect to the first LIBO Calculation Period
commencing after such change in rating is first publicly announced.
"Applicable Law" shall mean all existing and future applicable laws
--------------
(including Environmental Laws), rules, regulations, statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of, and interpretations
by, any Authority, and applicable judgments, decrees, injunctions, writs, orders
or like action of any court, arbitrator or other administrative, judicial or
quasi-judicial tribunal or agency of competent jurisdiction (including those
pertaining to health, safety or the environment) affecting Lessee or any of the
Leased Property.
"Applicable Margin" shall mean, with respect to each determination of the
-----------------
Yield Rate, the percentage in the column below marked "Applicable Margin"
opposite the senior long-term debt rating of Lessee from S&P and Moody's on the
determination date:
-4-
<PAGE>
<TABLE>
<CAPTION>
Level Ratings LIBO Facility Applicable
Spread Fee Rate Margin
- --------------------------------- ------ -------- ----------
<C> <S> <C> <C> <C>
1 A+ or better from S&P 13.0 6.5 19.5
A1 or better from Moody's basis basis basis
points points points
2 A from S&P 14.0 7.0 21.0
A2 from Moody's basis basis basis
points points points
3 A- from S&P 14.5 8.0 22.5
A3 from Moody's basis basis basis
points points points
4 BBB+ or lower from S&P 18.5 9.0 27.5
Baa1 or lower from basis basis basis
Moody's points points points
</TABLE>
If the ratings established by S&P and Moody's fall within different levels, the
Applicable Margin shall be based on the higher of the two ratings. If the
ratings of either S&P or Moody's changes, the Applicable Margin shall adjust,
and such adjustment shall be effective with respect to the first LIBO
Calculation Period commencing after such change in rating is first publicly
announced.
"Applicable Percentage" shall mean (a) for the Basic Term, 80%, and (b) for
---------------------
each Renewal Term, the percentage calculated on or about the date of the
commencement of such Renewal Term in order that such Renewal Term will be
reported as an operating lease for financial accounting purposes.
"Applicable Percentage Amount" shall mean, as of any date of determination,
----------------------------
the product obtained by multiplying the sum of the aggregate original
Certificate Purchaser Amounts of both classes of the Certificates by the
Applicable Percentage.
"Appraisal" shall mean the appraisal of the Leased Property from the
---------
Appraiser received pursuant to Sections 3.1(c) and 9.4 of this Lease.
--------------- ---
"Appraiser" shall mean Joseph Dennis Pasquarella & Co. or such other Person
---------
as may be selected by the Required Certificate Purchasers.
-5-
<PAGE>
"Appurtenant Rights" shall mean (i) all agreements, easements, rights of
------------------
way or use, rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or pertaining
to the Land or the Facility, including, without limitation, the use of any
streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or
contiguous to the Land and (ii) all permits, licenses and rights, whether or not
of record, appurtenant to the Land.
"Architect" shall mean The Ballinger Company or another registered
---------
architect or certified professional engineer for the Construction Agent or
Lessee (which, unless otherwise expressly provided, may be an employee of
Lessee).
"Architect's Agreement" shall mean the agreement dated October 1, 1996
---------------------
between IKON Office Solutions Holding Company (f/k/a IKON Office Solutions,
Inc.), a Delaware corporation, and the Architect for the design of the Financed
Improvements.
"Arrangement Fee" shall mean the fee payable to the Arranger by Lessee
---------------
pursuant to a letter agreement dated January 14, 1997.
"Arranger" shall mean BA Leasing & Capital Corporation.
--------
"Assignment of Purchase Agreement" shall mean an assignment of all of the
--------------------------------
rights of IKON Office Solutions Holding Company (f/k/a IKON Office Solutions,
Inc.), a Delaware corporation, under the Purchase Agreement to Lessor, which
assignment shall be in form and substance satisfactory to Lessor and the
Certificate Purchasers.
"Authority" shall mean any applicable foreign, Federal, state, county,
---------
municipal or other government, quasi-government or regulatory authority, agency,
board, body, commission, instrumentality, court or tribunal, or any political
subdivision of any thereof, or arbitrator or panel of arbitrators.
"Authorized Officer" shall mean any officer in the Corporate Trust
------------------
Administration Department of the Certificate Trustee, including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any other
officer of the Certificate Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Available Commitments" means an amount equal to the excess, if any, of (a)
---------------------
the amount of the Total Commitments over (b) the aggregate original amount of
the Certificate Purchaser Amounts.
-6-
<PAGE>
"Bank" shall mean Wilmington Trust Company, a Delaware banking corporation.
----
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978.
---------------
"Basic Rent" shall mean an amount payable on each Payment Date during the
----------
Basic Term and each Renewal Term equal to the aggregate Yield Amount payable on
such Payment Date on the Certificates.
"Basic Term" shall have the meaning provided in Section 4.2.
---------- -----------
"Basic Term Expiration Date" shall have the meaning provided in Section
-------------------------- -------
4.2.
- ---
"Bill of Sale" shall mean the bill of sale from Seller to Lessor with
------------
respect to the Personal Property, substantially in the form of Exhibit A hereto.
---------
"Board of Directors" shall mean, with respect to a corporation, either the
------------------
board of directors or any duly authorized committee of that board of directors
which, pursuant to the by-laws of such corporation, has the same authority as
that board of directors as to the matter at issue.
"Business Day" shall mean (i) for all purposes other than as covered by
------------
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
- -----------
in the City of San Francisco and the City of Wilmington, Delaware a legal
holiday or a day on which banking institutions are authorized by law or other
government action to close and (ii) with respect to all notices and
determinations in connection with an Advance Date Notice and payments of Rent,
any day which is a Business Day described in clause (i) above and which is also
----------
(a) any day except a day which, in London, shall be a legal holiday or a day on
which banking institutions are authorized by law or other government action to
close and (b) a day for trading by and between banks in deposits of U.S. Dollars
in the interbank market.
"Casualty" shall mean an event of damage or casualty pertaining to any
--------
portion or all of the Leased Property which does not constitute an Event of
Loss.
"Certificates" shall mean those certain Class A Certificates and Class B
------------
Certificates issued to the Certificate Purchasers pursuant to the Trust
Agreement, substantially in the form of Exhibit A and Exhibit B thereto,
respectively, and any and all Certificates issued in replacement or exchange
therefor.
"Certificate Purchaser" shall have the meaning provided in the preamble to
---------------------
the Trust Agreement.
-7-
<PAGE>
"Certificate Purchaser Amount" shall mean, with respect to any Certificate
----------------------------
as of any date of determination, the aggregate unpaid face amount of such
Certificate.
"Certificate Purchaser Commitment" shall mean, as to any Certificate
--------------------------------
Purchaser, its obligation to make amounts available to Lessor from time to time
in an aggregate amount not to exceed the amount set forth opposite such
Certificate Purchaser's name on Schedule I to the Trust Agreement.
"Certificate Purchaser Percentage" shall mean, as to any Certificate
--------------------------------
Purchaser, at a particular time, the percentage of the aggregate Total
Commitments in effect at such time represented by the amount of such Certificate
Purchaser's Certificate Purchaser Commitment, or if there are no Certificate
Purchaser Commitments then in effect, the percentage of the aggregate
Certificate Purchaser Amounts represented by such Certificate Purchaser's
Certificates.
"Certificate Register" shall have the meaning provided in Section 2.8 of
--------------------
the Trust Agreement.
"Certificate Trustee" shall mean Wilmington Trust Company, a Delaware
-------------------
banking corporation, not in its individual capacity but solely as trustee under
the Trust Agreement.
"Claims" shall mean liabilities, obligations, damages, losses, demands,
------
penalties, interest, fines, claims, actions, suits, judgments, settlements,
utility charges, costs, fees, expenses and disbursements (including legal fees
(including allocated time charges of internal counsel) and expenses and costs of
investigation which, in the case of counsel or investigators retained by an
Indemnitee, shall be reasonable) whether any of the foregoing be founded or
unfounded, of any kind and nature whatsoever.
"Class A Certificate" shall have the meaning set forth in the Trust
-------------------
Agreement.
"Class B Certificate" shall have the meaning set forth in the Trust
-------------------
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
----
successor thereto.
-8-
<PAGE>
"Condemnation" shall mean any condemnation, requisition, confiscation,
------------
seizure or other taking or sale of the use, occupancy or title to any portion of
the Leased Property in, by or on account of any actual or threatened eminent
domain proceeding or other action by any Authority or other Person under the
power of eminent domain or otherwise or any transfer in lieu of or in
anticipation thereof, which in any case does not constitute an Event of Taking.
A Condemnation shall be deemed to have "occurred" on the earliest of the dates
that use, occupancy or title is taken.
"Consolidated Net Worth" shall be determined in accordance with GAAP and
----------------------
shall mean the sum (as reflected in the consolidated balance sheet of Lessee and
its Consolidated Subsidiaries) of (i) the stated dollar amount of outstanding
capital stock plus (ii) the stated dollar amount of additional paid in capital,
if any, plus (iii) the amount of surplus and retained earnings minus (iv) the
cost of treasury shares and the excess of redemption value over the stated value
of preferred stock of Lessee and its Consolidated Subsidiaries.
"Consolidated Subsidiaries" shall mean all Subsidiaries.
-------------------------
"Consolidated Total Assets" shall mean the total assets of Lessee and its
-------------------------
Consolidated Subsidiaries computed on a consolidated basis in accordance with
GAAP.
"Construction Advance" shall mean each Advance for all or a portion of the
--------------------
Construction Costs.
"Construction Advance Date" shall mean each date on which Construction
-------------------------
Costs are advanced.
"Construction Advance Date Notice" shall have the meaning provided in
--------------------------------
Section 2.5 hereof.
- -----------
"Construction Agent" shall have the meaning provided in Section 2.4(a).
------------------ --------------
"Construction Certificate" shall have the meaning provided in Section
------------------------ -------
3.2(e).
- ------
"Construction Completion Date" shall mean the earlier of (a) the date
----------------------------
Substantial Completion is first achieved and (b) the later of (i) the Scheduled
Construction Termination Date and (ii) if a Force Majeure Event occurs which
results in a delay in Substantial Completion, one month after the Scheduled
Construction Termination Date.
"Construction Contract" shall mean the general construction contract for
---------------------
the construction of the Financed Improvements between Lessee and the General
Contractor.
-9-
<PAGE>
"Construction Costs" shall mean all capital expenditures, including hard
------------------
and Soft Costs incurred in connection with the construction of the Financed
Improvements.
"Controlling Person" shall have the meaning provided in Section 8.1(m).
------------------ --------------
"Corporate Trust Administration Department" shall mean the principal
-----------------------------------------
corporate trust office of Certificate Trustee, located in Wilmington, Delaware
or at such other office at which the corporate trust business of Certificate
Trustee shall be administered which Certificate Trustee shall have specified by
notice in writing to Lessee, Lessor and each Certificate Purchaser.
"Credit Agreement" shall mean that certain Credit Agreement, dated as of
----------------
December 16, 1996, as amended, supplemented or otherwise modified from time to
time, among Lessee, certain of its Subsidiaries, various financial institutions
and CoreStates Bank, N.A., as agent.
"Debt" shall mean (i) Funded Debt and (ii) any portions of notes payable
----
and capital lease obligations which are classified as current liabilities.
"Deed" shall mean a general warranty deed from Seller in the form of
----
Exhibit B hereto.
- ---------
"Default" shall mean any condition, event or act, which with notice or
-------
lapse of time or both, would become an Event of Default.
"Documentation Date" shall have the meaning provided in Section 2.1(a).
------------------ --------------
"Employee Benefit Plan" shall have the meaning provided in Section 10.1(c).
--------------------- ---------------
"Environmental Audit" shall mean a Phase One environmental site assessment
-------------------
(the scope and performance of which meets or exceeds ASTM Standard Practice
E1527-93 Standard Practice for Environmental Site Assessments: Phase One
Environmental Site Assessment Process ("ASTM Standard")) of the Leased Property
-------------
on or before the Initial Advance Date or of the Leased Property to be sold
pursuant to the Sale Option and any additional environmental assessments
requested by the Required Certificate Purchasers in good faith.
"Environmental Certificate" shall have the meaning provided in Section
------------------------- -------
3.1(g).
- ------
-10-
<PAGE>
"Environmental Engineer" shall mean Professional Service Industries or such
----------------------
other environmental consulting firm as Construction Agent may from time to time
select, subject to the approval of the Required Certificate Purchasers.
"Environmental Indemnity" shall mean the Environmental Indemnity dated as
-----------------------
of the effective date hereof by Lessee.
"Environmental Laws" shall mean and include the Resource Conservation and
------------------
Recovery Act of 1976, (RCRA) 42 U.S.C. (S)(S) 6901-6987, as amended by the
Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. (S)(S) 9601-9657, (CERCLA), the
Hazardous Materials Transportation Act of 1975, 49 U.S.C. (S)(S) 1801-1812, the
Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601-2671, the Clean Air Act, 42
U.S.C. (S)(S) 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. (S)(S) 136 et seq., the Clean Water Act, 33 U.S.C. (S)(S) 1251 et
seq., and all similar Federal, state and local environmental laws, ordinances,
rules, orders, statutes, decrees, judgments, injunctions, codes and regulations,
and any other Federal, state or local laws, ordinances, rules, codes and
regulations relating to the environment, human health or natural resources or
the regulation or control of or imposing liability or standards of conduct
concerning the environment, human health, Hazardous Material or the clean-up,
remediation or response in connection with any of the Leased Property.
"Environmental Permits" shall mean all permits, licenses, authorizations,
---------------------
registrations, certificates and approvals of Authorities required by
Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended, or any successor thereto.
"ERISA Affiliate" shall have the meaning provided in Section 10.1(c).
--------------- ---------------
"ERISA Plan" shall mean an "employee benefit plan" as defined in Section
----------
3(3) of ERISA which is subject to Title I of ERISA, or a "plan" covered by
Section 4975 of the Code.
"Event of Default" shall have the meaning provided in Section 8.1.
---------------- -----------
-11-
<PAGE>
"Event of Loss" shall mean (x) the actual or constructive substantial loss
-------------
of the Facility or damage to the Facility to an extent rendering repair
impractical or uneconomical, in any case as reasonably determined in good faith
by the Board of Directors of Lessee, such determination to be made promptly
after the occurrence of such event and to be evidenced by an Officer's
Certificate of Lessee delivered to Certificate Trustee and each Certificate
Purchaser, (y) damage to the Facility which results in an insurance settlement
on the basis of a total loss or constructive total loss (including title
insurance proceeds) in respect of a total loss of the Facility, or (z) an Event
of Taking.
"Event of Taking" shall mean (A) taking of title to the Leased Property or
---------------
(B) any condemnation (other than a requisition of temporary use) or requisition
of use for a period scheduled to last beyond the end of the Lease Term (or which
in fact is continuing on the Lease Termination Date even if not scheduled to
last beyond the Lease Term), in either case resulting in (i) the loss of use or
possession of substantially all of the Leased Property or (ii) the loss of use
or possession of a material portion of the Leased Property, in either of clause
------
(i) or clause (ii), as reasonably determined in good faith by the Board of
- --- -----------
Directors of Lessee, such determination to be made promptly after the occurrence
of such event and to be evidenced by an Officer's Certificate of Lessee
delivered to Certificate Trustee and each Certificate Purchaser.
"Excluded Amounts" shall mean:
----------------
(a) all indemnity payments and expenses to which Lessor, Certificate
Trustee, Bank or any Certificate Purchaser (or the respective successors,
assigns, agents, officers, directors or employees of any such Person) is
entitled pursuant to the Operative Documents;
(b) any amounts payable under any Operative Document to reimburse
Lessor, Certificate Trustee, Bank or any Certificate Purchaser (including the
reasonable expenses of Lessor, Certificate Trustee, Bank and any Certificate
Purchaser incurred in connection with any such payment) for performing any of
the obligations of Lessee under and as permitted by any Operative Document;
(c) any insurance proceeds (or payments with respect to risks self-
insured or policy deductibles) under liability policies payable to Lessor,
Certificate Trustee, Bank or any Certificate Purchaser (or the respective
successors, assigns, agents, officers, directors or employees of any such
Person);
(d) any insurance proceeds under policies maintained by Lessor,
Certificate Trustee, Bank or any Certificate Purchaser
-12-
<PAGE>
and not required to be maintained by Lessee under this Lease;
(e) any amounts payable to Lessor, Certificate Trustee, Bank or any
Certificate Purchaser pursuant to Section 3.1(k) or Section 8.2(iii)(C),
-------------- -------------------
whether or not such amounts are or can be characterized as Supplemental Rent;
and
(f) any payments of interest on payments referred to in clauses (a)
-----------
through (e) above.
---
"Excluded Debt" shall have the meaning provided in Section 11.1(f).
------------- ---------------
"Facility" shall have the meaning provided in the Recitals.
--------
"Facility Fee" shall have the meaning set forth in Section 2.14 hereof.
------------ ------------
"Facility Period" shall have the meaning set forth in Section 2.14 hereof.
--------------- ------------
"Fair Market Value" shall mean, with respect to the Leased Property or any
-----------------
portion thereof, the retail price a purchaser would pay to purchase the Leased
Property or such portion in an arm's-length transaction between a willing buyer
and a willing seller, neither of them being under any compulsion to buy or sell.
In making any determination of Fair Market Value, the Appraiser may assume the
Leased Property or such portion has been maintained in accordance with the
requirements of this Lease and that the Leased Property or such portion is in
the condition in which it is required to be hereunder as of the date for which
such determination is made (unless such fair market value is being determined
for purposes of Section 9.4, in which case the foregoing assumptions shall not
-----------
be made and the Appraiser shall determine the actual condition of the Leased
Property or such portion). Appraiser shall use such reasonable methods of
appraisal as are chosen by Lessor upon instructions from the Required
Certificate Purchasers.
"Federal Funds Effective Rate" shall mean, for any day, an interest rate
----------------------------
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of quotations for such day on such transaction received by the
Certificate Trustee from three Federal funds brokers of recognized standing
selected by the Certificate Trustee.
"Final Maturity Date" shall have the meaning provided in Section 2.1(a) of
-------------------
the Trust Agreement
-13-
<PAGE>
"Final Rent Payment Date" shall have the meaning provided in
-----------------------
Section 8.2(iii)(B)(1).
- ----------------------
"Financed Improvements" shall mean the improvements to the Facility to be
---------------------
constructed as described in the Plans and Specifications.
"Finance Leasing Subsidiaries" shall mean IKON Capital, Inc., a Delaware
----------------------------
corporation, IKON Capital Inc., a Canadian corporation, IKON Capital, PLC, an
English company, and their respective successor corporations, and such
additional Subsidiaries whose primary business is the leasing of products
distributed by Lessee and its Subsidiaries.
"Force Majeure Event" shall mean any event (the existence of which was not
-------------------
known and would not reasonably have been expected to be discovered through the
exercise of commercially reasonable due diligence by the Lessee or the
Construction Agent, taking into account the contemplated use of the Land and the
construction of the Financed Improvements, prior to the Initial Advance Date)
beyond the control of the Lessee and the Construction Agent, including, but not
limited to, strikes, lockouts, adverse soil conditions, acts of God, adverse
weather conditions, inability to obtain labor or materials, government
activities, civil commotion and enemy action; but excluding any event, cause or
condition that results from the Construction Agent's financial condition or
failure to pay or any event, cause or condition which could have been avoided or
which could be remedied through the exercise of commercially reasonable efforts
or the commercially reasonable expenditure of funds.
"Funded Debt" shall mean any obligation payable more than one year from the
-----------
date of the creation thereof which under GAAP is shown on the consolidated
balance sheet as a liability (excluding reserves for deferred income taxes and
other reserves to the extent that such reserves do not constitute obligations
for borrowed money) and including, without limitation, the portion of any such
obligation properly classified as a current liability and capitalized leases.
"Funding" shall have the meaning provided in Section 2.3(a).
------- --------------
"GAAP" shall mean generally accepted accounting principles applied on a
----
consistent basis.
"General Contractor" shall mean Structuretone, Inc.
------------------
"Government Action" shall mean all applicable permits, authorizations,
-----------------
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, decrees, licenses, exemptions, publications, filings, notices to and
declarations of
-14-
<PAGE>
or with, or required by, any Authority, or required by any Applicable Law.
"Guaranty" shall mean the Guaranty from Lessee to the Certificate
--------
Purchasers dated as of the effective date hereof.
"Hazardous Material" shall mean any substance, waste or material which is
------------------
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous by listing characteristic or definition under
any Environmental Law, including petroleum, crude oil or any fraction thereof,
petroleum derivatives, by-products and other hydrocarbons, asbestos, asbestos
containing materials, urea formaldehyde foam insulation, polychlorinated
biphenyls (PCBs) and radon gas, and is or becomes regulated by any Authority,
including any agency, department, commission, board or instrumentality of the
United States, any state or any political subdivision thereof.
"Indemnitee" shall mean each Certificate Purchaser, Certificate Trustee,
----------
Bank and Lessor, any additional, separate or co-trustee appointed in accordance
with the terms of the Trust Agreement, and the respective Affiliates,
successors, permitted assigns, permitted transferees, invitees, contractors,
servants, employees, officers, directors, shareholders, partners, participants,
representatives and agents of each of the foregoing Persons; provided, however,
-------- -------
that in no event shall Lessee be an Indemnitee.
"Initial Advance Date" shall have the meaning provided in Section 2.2.
-------------------- -----------
"Initial Advance Date Notice" shall have the meaning provided in Section
--------------------------- -------
2.5 hereof.
- ---
"Initial LIBO Calculation Period" shall mean the period from the
-------------------------------
Documentation Date until the last Business Day of the calendar month in which
the Documentation Date occurs.
"Insolvency Event" shall mean, with respect to any Person, any event
----------------
pursuant to which such Person makes an assignment for the benefit of creditors,
files a case or petition in bankruptcy, petitions or applies to any tribunal for
the appointment of a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) for it or for a substantial part of its
property, commences any case or proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, consents or acquiesces in
the filing of any such petition, application, proceeding or appointment of or
taking possession by the custodian, receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of such Person or any substantial part
of its property,
-15-
<PAGE>
or admits its inability to pay its debts generally as they become due, or
authorizes any of the foregoing to be done or taken on behalf of such Person.
"Insurance Requirements" shall mean all terms and conditions of any
----------------------
insurance policy required to be maintained pursuant to this Lease or by the
issuer of any such policy.
"Land" shall have the meaning provided in the Recitals.
----
"Lease" shall have the meaning provided in the introductory paragraph.
-----
"Lease Balance" shall mean, as of any date of determination, the sum total
-------------
of the aggregate unpaid Certificate Purchaser Amounts.
"Lease Commencement Date" shall mean the Initial Advance Date.
-----------------------
"Leased Property" shall have the meaning provided in the Recitals.
---------------
"Lease Term" shall have the meaning provided in Section 4.2.
---------- -----------
"Lease Termination Date" shall mean the expiration of the Lease Term or the
----------------------
earlier of (a) the termination of Lessee's right to possession as set forth at
Section 8 in connection with an Event of Default or (b) in connection with an
- ---------
early termination as set forth at Section 6.1 or Section 9.6.
----------- -----------
"Lessee" shall have the meaning provided in the introductory paragraph.
------
"Lessor" shall have the meaning provided in the introductory paragraph.
------
"Lessor Liens" shall mean Liens on or against the Lease, the Leased
------------
Property, the Trust Estate or any payment of Rent (a) which result from any act
of, or any Claim against, Bank, Lessor, any Certificate Trustee or any
Certificate Purchaser in any case unrelated to the Overall Transaction, or (b)
which result from any Tax owed by any such Person, except for any Tax required
to be paid by Lessee under the Operative Documents, including any Tax for which
Lessee is obligated to indemnify such Person.
"Lessor's Policy" shall have the meaning provided in Section 3.1(f).
--------------- --------------
"LIBO Calculation Period" shall mean (a) the Initial LIBO Calculation
-----------------------
Period, (b) thereafter, each one month period beginning on the last Business Day
of a calendar month, with each
-16-
<PAGE>
such period ending on (but excluding) the last Business Day of the next
succeeding calendar month, and (c) each three month period beginning on and
after the Construction Completion Date, with each such three-month period ending
on (but excluding) the last Business Day of the last calendar month of such
three-month period; provided, however, that no LIBO Calculation Period during
-------- -------
the Basic Term or any Renewal Term may end later than the Lease Termination
Date.
"LIBO Rate" shall mean, with respect to the Lease Balance or any portion
---------
thereof, (a) for the Initial LIBO Calculation Period, 5.70% per annum, and (b)
for any LIBO Calculation Period thereafter:
(i) The interest rate for deposits in U.S. Dollars for a period equal
to that of the LIBO Calculation Period(s) as of 11:00 a.m., London time, on
the second Business Day preceding such LIBO Calculation Period (the
"Interest Setting Date") which appears on the Telerate Page 3750 as of
---------------------
11:00 a.m. (London time) on such date or if such page on such service
ceases to display such information, such other page as may replace it on
that service for the purpose of display of such information (the
"Telerate Rate"). If such rate does not appear on the Telerate, then the
-------------
rate will be determined in accordance with clause (ii) below.
-----------
(ii) If the Certificate Trustee is unable to determine the Telerate
Rate, then on the Interest Setting Date, the Certificate Trustee will
determine the arithmetic mean (rounded if necessary to the nearest
1/16 of 1%) of the interest rate for a period equal to that of the LIBO
Calculation Period to which such Interest Setting Date relates quoted on
Reuters Screen page "LIBO" or (a) if such page on such service ceases to
display such information, such other page as may replace it on that service
for the purpose of displaying such information or (b) if that service
ceases to display such information, such page as displays such information
on such service (or, if more than one, that one approved by the Certificate
Trustee as may replace the Reuters Screen) as of 11:00 a.m. (London time)
on that Interest Setting Date (the rate quoted as aforesaid being the
"LIBOR Screen Rate").
-----------------
If the Certificate Trustee is to make a determination pursuant to this paragraph
and one or more of the LIBO Screen Rates required for such determination shall
be unavailable, the determination shall be made on the basis of those rates
which are available and if no LIBO Screen Rate is then available, the LIBO Rate
shall be determined on the basis of the rate of interest per annum at which
deposits in U.S. Dollars are offered by the Certificate Trustee to leading banks
in the London interbank market at 11:00 a.m. (London time) on the Interest
Setting Date for a period equal to that of
-17-
<PAGE>
the LIBO Calculation Period to which such Interest Setting Date applies.
"Lien" shall mean any lien, mortgage, deed of trust, encumbrance, pledge,
----
charge, lease, easement, servitude, right of others or security interest of any
kind, including any thereof arising under any conditional sale or other title
retention agreement.
"Material Adverse Effect" shall mean, with respect to Lessee, any change or
-----------------------
changes, effect or effects or condition or conditions that individually or in
the aggregate are or are likely to be materially adverse to (i) the assets,
business, operations, income or condition (financial or otherwise) of Lessee and
its Subsidiaries on a consolidated basis, (ii) the Overall Transaction, (iii)
the ability of Lessee to perform its material obligations under the Operative
Documents to which it is a party, or (iv) the validity or enforceability of any
of the Operative Documents or any rights or remedies under any thereof.
"Memorandum of Lease" shall mean the Memorandum of Lease; Open End Mortgage
-------------------
substantially in the form of Exhibit C.
---------
"Moody's" shall mean Moody's Investors Service, Inc.
-------
"Mortgage" shall mean the mortgage from Lessee to the Certificate Trustee
--------
of the Leased Property effective as of the effective date hereof.
"Multiemployer Plan" shall have the meaning provided in Section 10.1(c).
------------------ ---------------
"Net Condemnation Proceeds" shall mean all payments received from any
-------------------------
Authority relating to an Event of Taking after deducting costs incurred by
Lessee, Certificate Trustee or any Certificate Purchaser in respect of receipt
thereof.
"Non-Renewing Certificate Purchaser" shall have the meaning provided in
----------------------------------
Section 4.3(b).
- --------------
"Officer's Certificate" of a Person shall mean a certificate signed by the
---------------------
Chairman of the Board of Directors or the President or any Executive Vice
President or any Senior Vice President or any other Vice President of such
Person signing with the Treasurer or any Assistant Treasurer or the Controller
or any Assistant Controller, Cashier, Assistant Cashier or the Secretary or any
Assistant Secretary of such Person, or by any Vice President who is also
Controller, Treasurer or Cashier signing alone.
"Operative Documents" shall mean this Lease, the Memorandum of Lease, the
-------------------
Certificates, the Trust Agreement, the Guaranty, the Environmental Indemnity and
the Mortgage.
-18-
<PAGE>
"Overall Transaction" shall mean all the transactions and activities
-------------------
referred to in or contemplated by the Operative Documents.
"Overdue Rate" shall mean the lesser of (a) the highest interest rate
------------
permitted by Applicable Law, and (b) an interest rate per annum equal to the
Yield Rate plus 2% per annum.
----
"Payment Dates" shall mean the last day of each Rent Period.
-------------
"Payment Schedule" shall have the meaning provided in Section 2.3 of the
----------------
Trust Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Pension Plan" shall have the meaning provided in Section 10.1(c).
------------ ---------------
"Peril" shall have the meaning provided in Section 6.7(b).
----- --------------
"Permits" shall have the meaning provided in Section 10.1(i).
------- ---------------
"Permitted Contest" shall mean actions taken by a Person to contest in good
-----------------
faith, by appropriate proceedings initiated timely and diligently prosecuted,
the legality, validity or applicability to any of the Leased Property or any
interest therein of any Person of: (a) any law, regulation, rule, judgment,
order, or other legal provision or judicial or administrative requirements; (b)
any term or condition of, or any revocation or amendment of, or other proceeding
relating to, any authorization or other consent, approval or other action by any
Authority; or (c) any Lien or Tax; provided that the initiation and prosecution
--------
of such contest would not: (i) result in, or materially increase the risk of,
the imposition of any criminal liability on any Indemnitee; (ii) materially and
adversely affect the Liens created by the Operative Documents or the right,
title or interest of Lessor in or to any of the Leased Property, or the right of
Lessor or any Certificate Purchaser to receive payment of all or any portion of
Certificate Purchaser Amount or Yield Amount of any Certificate, Rent, Lease
Balance or any other amount payable under the Operative Documents; (iii) permit,
or pose a material risk of, the sale or forfeiture of, or foreclosure on, the
Leased Property or any portion thereof; or (iv) materially and adversely affect
the fair market value, utility or remaining useful life of the Leased Property
or any interest therein or the continued economic operation thereof; and
provided, further, that in any event adequate reserves in accordance with GAAP
- -------- -------
are maintained by such Person against any adverse determination of such contest.
"Permitted Exceptions" shall mean the exceptions set forth in
--------------------
-19-
<PAGE>
Lessor's Policy.
"Permitted Investments" shall mean (i) full faith and credit obligations of
---------------------
the United States of America, or obligations fully guaranteed as to interest and
principal by the full faith and credit of the United States of America, maturing
in not more than one year from the date such investment is made; (ii)
certificates of deposit having a final maturity of not more than one year after
the date of issuance thereof of a Certificate Purchaser, Bank or of any other
commercial bank incorporated under the laws of the United States of America or
any state thereof or the District of Columbia, which bank is a member of the
Federal Reserve System and has a combined capital and surplus of not less than
$500,000,000 and with a senior unsecured debt credit rating of at least "A" by
Moody's Investors Service, Inc. and "A" by Standard & Poor's Ratings Group;
(iii) commercial paper of any Certificate Purchaser or any Affiliate thereof
having a remaining term until maturity of not more than 180 days from the date
such investment is made; (iv) commercial paper of companies, banks, trust
companies or national banking associations (in each case excluding Lessee and
its Affiliates) incorporated or doing business under the laws of the United
States or one of the states thereof, in each case having a remaining term until
maturity of not more than 180 days from the date such investment is made and
rated at least P-1 by Moody's Investors Service, Inc. or at least A-1 by
Standard & Poor's Ratings Group; and (v) repurchase agreements maturing within
one year with any financial institution having combined capital and surplus of
not less than $500,000,000 with any of the obligations described in clauses (i)
-----------
through (iv) as collateral so long as title to the underlying obligations pass
----
to Lessor and such underlying securities shall be segregated in a custodial or
trust account for the benefit of Lessor.
"Permitted Liens" shall mean (i) the respective rights and interests of
---------------
Lessee, the Certificate Purchasers and Certificate Trustee, as provided in the
Operative Documents; (ii) materialmen's, mechanics', workers', artisan's,
repairmen's, employees' or other like Liens securing payment of the price of
goods or services rendered in the ordinary course of business for amounts the
payment of which is not overdue or is being contested pursuant to a Permitted
Contest; (iii) Lessor Liens; (iv) Liens for current Taxes which are not
delinquent or the validity of which is being contested pursuant to a Permitted
Contest; and (v) Permitted Exceptions.
"Person" shall mean an individual, corporation, partnership, joint venture,
------
limited liability company, limited liability partnership, association, joint-
stock company, trust, unincorporated organization or Authority.
"Personal Property" shall mean the property to be conveyed to Lessor
-----------------
pursuant to the Bill of Sale.
-20-
<PAGE>
"Plans and Specifications" means the plans and specifications for the
------------------------
construction of the Financed Improvements, as more particularly described on
Schedule III hereto, as the same may be revised and supplemented from time to
- ------------
time in accordance with the terms hereof.
"Proceeds" shall have the meaning provided in Section 9.1(c).
-------- --------------
"Protective Covenants" shall mean the Protective Covenants For Great Valley
--------------------
Corporate Center dated January 29, 1985 recorded in Misc. Deed Book 674 page
355.
"Purchase Agreement" shall have the meaning provided in Section 10.1(r).
------------------ ---------------
"Purchase Option" shall have the meaning provided in Section 9.1(b).
--------------- --------------
"Purchase Option Exercise Amount" shall mean, as of any date of
-------------------------------
determination, the sum of (a) the Lease Balance as of the date of purchase, plus
----
(b) all accrued but unpaid Rent, plus (c) all other sums then due and payable
----
under the Operative Documents, including any breakage costs pursuant to Section
-------
7.7, by Lessee or any of its Affiliates.
- ---
"Regulated Activity" shall mean the use, Release, generation, treatment,
------------------
storage, recycling, transportation or disposal of Hazardous Material to the
extent such activities are regulated by any Authority.
"Regulations" shall mean the income tax regulations promulgated from time
-----------
to time under and pursuant to the Code.
"Release" shall mean the release, deposit, disposal or leak of any
-------
Hazardous Material into or upon or under any land or water or air, or otherwise
into the environment, including by means of burial, disposal, discharge,
emission, injection, spillage, leakage, seepage, leaching, dumping, pumping,
pouring, escaping, emptying, placement and the like.
"Renewal Option" shall have the meaning provided in Section 9.1(a).
-------------- --------------
"Renewal Request" shall have the meaning provided in Section 4.3(b).
--------------- --------------
"Renewal Term" shall have the meaning provided in Section 4.3.
------------ -----------
"Rent" shall mean Basic Rent and Supplemental Rent, collectively.
----
-21-
<PAGE>
"Rent Period" shall mean each LIBO Calculation Period.
-----------
"Replacement Certificate Purchaser" shall have the meaning provided in
---------------------------------
Section 4.3(b).
- --------------
"Required Certificate Purchasers" shall mean, as of the date of the
-------------------------------
determination, Certificate Purchasers having unpaid Certificate Purchaser
Amounts equal to more than 66 and 2/3% of the aggregate unpaid Certificate
Purchaser Amounts.
"S&P" shall mean Standard & Poor's Ratings Group.
---
"Sale Option" shall have the meaning provided in Section 9.1(c).
----------- --------------
"Sale Recourse Amount" shall have the meaning provided in Section 9.1(c).
-------------------- --------------
"Scheduled Construction Termination Date" shall mean the last Business Day
---------------------------------------
of the ninth calendar month after the Initial Advance Date.
"SEC" shall mean the United States Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933.
--------------
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934.
-----------------------
"Seller" shall mean Commonwealth Bank.
------
"Soft Costs" shall mean all Construction Costs that are incurred by the
----------
Construction Agent for the production of the Plans and Specifications,
architectural and engineering fees, legal fees, permit and license fees and
other such similar costs.
"Subsidiary" shall mean, with respect to any Person, any corporation or
----------
other entity of which such Person directly or indirectly owns or controls at
least a majority of the outstanding stock or other ownership interests having
general voting power, including without limitation the right, under ordinary
circumstances, to vote for the election of a majority of the board of directors
of such corporation or other entity or other Persons performing similar
functions.
"Substantial Completion" means such time as the construction of the
----------------------
Financed Improvements shall have been substantially completed in accordance with
the Plans and Specifications and all Applicable Law, and the Leased Property
(including the Financed Improvements) shall be ready for occupancy and
operation, as
-22-
<PAGE>
evidenced by the issuance by the appropriate Authority of certificates of
occupancy for all portions of the Facility contemplated by the Plans and
Specifications, all in form and substance reasonably satisfactory to Lessor and
the Certificate Purchasers.
"Supplemental Rent" shall mean any and all amounts, liabilities and
-----------------
obligations other than Basic Rent which Lessee assumes or agrees or is otherwise
obligated to pay under this Lease or any other Operative Document (whether or
not designated as Supplemental Rent) to Lessor, any Certificate Purchaser or any
other Person, including, without limitation, amounts owing under Section 7.1(b)
of the Trust Agreement, breakage costs pursuant to Section 7.7 and indemnities
-----------
and damages for breach of any covenants, representations, warranties or
agreements.
"Surviving Entity" shall have the meaning provided in Section 11.1(b).
---------------- ---------------
"Taxes" and "Tax" shall mean any and all fees (including documentation,
----- ---
recording, license and registration fees), taxes (including income (whether net,
gross or adjusted gross), gross receipts, sales, rental, use, turnover, value-
added, property, excise and stamp taxes), levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever, together with any
penalties, fines or interest thereon or additions thereto.
"Title Insurance Company" shall mean Chicago Title Insurance Company.
-----------------------
"Total Commitments" shall mean the aggregate amount of all Certificate
-----------------
Purchaser Commitments.
"Transaction Costs" shall mean all costs and expenses in connection with
-----------------
the preparation, execution and delivery of the Operative Documents and the
Overall Transaction, including: (1) the reasonable fees, expenses and
disbursements of special documentation counsel to the Certificate Purchasers;
(2) the allocated costs of internal counsel to the Certificate Purchasers; (3)
the reasonable fees and expenses of local counsel; (4) costs of title insurance
(including leasehold title insurance and all required endorsements); (5) the
initial and ongoing fees and reasonable expenses of Lessor and its special
counsel; (6) all fees and reasonable expenses payable in connection with the
Appraisal; (7) all recording and filing fees incurred in connection with the
filing of the Memorandum of Lease, all financing statements and any other
documents, including fees and expenses of the Title Insurance Company; (8) all
costs and expenses of each company engaged to survey the Leased Property; and
(9) the Arrangement Fee.
-23-
<PAGE>
"Trust" shall mean the 1997-1 Valley Stream Trust, as established pursuant
-----
to the Trust Agreement.
"Trust Agreement" shall mean the Trust Agreement dated as of the effective
---------------
date hereof between Bank, as Certificate Trustee, and the Certificate
Purchasers, substantially in the form of Exhibit D.
---------
"Trust Estate" shall mean all estate, right, title and interest of Lessor
------------
in, to and under the Trust Agreement, the Lease and all of the other Operative
Documents, including (i) all amounts (other than Excluded Amounts) of Rent and
other payments due or to become due of any kind for or with respect to the
Leased Property or payable under any of the foregoing, (ii) any or all payments
or proceeds received by Lessor after the termination of the Lease with respect
to the Leased Property as the result of the sale, lease or other disposition
thereof, and (iii) proceeds of the investments in the Certificates, together
with any other moneys, proceeds or property at any time received by Lessor under
or in connection with the Operative Documents.
"UCC" shall mean the Uniform Commercial Code of Pennsylvania or any other
---
applicable jurisdiction.
"Unfunded Pension Liabilities" shall have the meaning provided in Section
---------------------------- -------
10.1(c).
- -------
"Unrecognized Retiree Welfare Liability" shall have the meaning provided in
--------------------------------------
Section 10.1(c).
- ---------------
"U.S. Dollars" means lawful currency of the United States of America.
------------
"Yield" shall have the meaning provided in the Trust Agreement.
-----
"Yield Amount" shall mean, for any LIBO Calculation Period, an amount equal
------------
to the sum of (A) Yield on the Class A Certificates and (B) Yield on the Class B
Certificates.
"Yield Rate" shall mean, for any LIBO Calculation Period, the LIBO Rate
----------
plus the Applicable Margin.
SECTION 2. DISBURSEMENT DATE, ADVANCE DATES; FUNDINGS AND LEASE;
GENERAL PROVISIONS.
SECTION 2.1. Documentation Date. The documentation date (the
------------------
"Documentation Date") shall occur on the earliest date on which all of the
- -------------------
following conditions precedent shall have been satisfied:
-24-
<PAGE>
(a) Lease. This Lease, the Guaranty and the Trust Agreement
-----
shall have been duly authorized, executed and delivered by the parties
hereto and thereto and shall be in full force and effect.
(b) Certain Transaction Costs. Counsel for each of Lessor,
-------------------------
Lessee and the Certificate Purchasers shall have received, to the extent
then invoiced, payment in full in cash of all Transaction Costs payable
to such counsel pursuant to this Lease.
SECTION 2.2. Initial Advance Date. The initial Advance Date (the
--------------------
"Initial Advance Date") shall occur on the earliest date on or before February
- ---------------------
28, 1997 on which all the conditions precedent thereto set forth in Section 3.1
-----------
shall have been satisfied or waived by the applicable parties as set forth
therein, and provided that the Arranger shall have received the Arrangement Fee;
provided, however, that if the Initial Advance Date does not occur prior to
- -------- -------
February 28, 1997, then this Lease shall automatically terminate, Lessee shall
pay in full all Transaction Costs not theretofore paid, and each other Operative
Document then executed shall terminate. Lessee, Lessor and the Certificate
Purchasers shall confirm in writing the occurrence of the Initial Advance Date.
SECTION 2.3. Fundings. (a) Fundings by Certificate Purchasers. Subject
-------- ----------------------------------
to the terms and conditions hereinafter set forth, and in reliance on the
representations and warranties of each of the parties hereto contained herein or
made pursuant hereto, upon receipt of an Advance Date Notice, on the applicable
Advance Date each Certificate Purchaser shall acquire an interest in the Trust
Estate by making available to the Certificate Trustee, in accordance with
Section 2.1(b) of the Trust Agreement, an amount in immediately available funds
on such Advance Date equal to such Certificate Purchaser's Certificate Purchaser
Percentage of the aggregate amount of the requested Advance (a "Funding"), and
-------
in the aggregate not more than its Certificate Purchaser Commitment. Each such
amount made available shall be evidenced by a notation on the grid annexed to
the Certificate issued to the related Certificate Purchaser. Each holder of a
Certificate shall be entitled to receive the Yield on the Certificate Purchaser
Amount set forth in its Certificates payable on each Payment Date.
(b) Limitations on Disbursements. The aggregate amount disbursed
----------------------------
by the Certificate Purchasers hereunder shall not exceed (i) in the case of
Acquisition Costs, the lesser of (A) $12,000,000 or (B) the actual Acquisition
Costs, as supported by the Appraisal, (ii) in the case of Construction Costs and
Transaction Costs, the lesser of (A) $6,000,000 or (B) the excess of (x) the as-
built Fair Market Value of the Leased Property, including the Financed
Improvements, over (y) $12,000,000, and
-25-
<PAGE>
(iii) in the case of Soft Costs to be funded prior to the initial Construction
Advance Date, $500,000.
(c) Certificates. Each Certificate shall accrue Yield at the
------------
Yield Rate on the Certificate Purchaser Amount thereof, payable as more fully
set forth in the Trust Agreement.
(d) Obligations Several. The obligations of the parties to any
-------------------
of the Operative Documents under each such Operative Document shall be several
and not joint; and no party shall be liable or responsible for the acts or
defaults of any other party under any Operative Document.
(e) Advances to Lessee. Upon the agreement of all Certificate
------------------
Purchasers, any advance required to be made to Lessee through Lessor pursuant to
any Operative Document may be made directly to Lessee by the Certificate
Purchasers in lieu of the corresponding advance required to be made by the
Certificate Purchasers to Lessee through Lessor pursuant to any Operative
Document. Such advance by the Certificate Purchasers to Lessee shall be deemed
to constitute (i) the required Advance from the Certificate Purchasers to
Lessor, and (ii) the corresponding advance by Lessor to Lessee.
(f) Required Dates. There may not be more than one Advance Date
--------------
in any calendar month and not more than three Construction Advance Dates, in the
aggregate. Each Advance Date specified in an Advance Date Notice shall occur on
the last Business Day of a LIBO Calculation Period.
(g) Final Advance Date. Notwithstanding anything in this Lease
------------------
to the contrary, neither Lessor nor any Certificate Purchaser shall be obligated
to make any Fundings pursuant to this Lease or the Trust Agreement after 5:00
p.m. New York City time on the Construction Completion Date, and no Advance Date
may occur following such date.
SECTION 2.4. Application of Funds; Purchase and Lease of Leased Property.
-----------------------------------------------------------
(a) Subject to the terms and conditions of this Lease, on the Initial Advance
Date, Certificate Trustee shall purchase from Seller the Leased Property and pay
certain Transaction Costs and may reimburse the Construction Agent for
Construction Costs, in each case from funds made available by the Certificate
Purchasers pursuant to Section 2.3(a), whereupon Lessor shall lease to Lessee
--------------
the Leased Property and Lessee shall accept delivery of and lease from Lessor
the Leased Property pursuant to this Lease. Effective on the Initial Advance
Date, Lessee is hereby appointed as Lessor's agent to construct the Financed
Improvements on the terms and conditions set forth herein (Lessee being referred
to in such capacity as the "Construction Agent"). On the Initial Advance Date
------------------
and on each Construction Advance Date, upon the satisfaction of the terms and
conditions of
-26-
<PAGE>
this Lease, Certificate Trustee shall make an Advance from funds made available
by the Certificate Purchasers pursuant to Section 2.3(a) in the amount specified
--------------
in the applicable Construction Advance Date Notice to reimburse Lessee for
Construction Costs incurred by and invoiced to Lessee in its capacity as
Construction Agent.
(b) The proceeds of all amounts paid by the Certificate
Purchasers shall be used solely for the following purposes in amounts not to
exceed those set forth in Section 2.3 (b): (i) the payment of Acquisition Costs
---------------
on the Initial Advance Date; (ii) the payment of Transaction Costs; and (iii)
the payment of Construction Costs.
SECTION 2.5. Advance Date Notices and Closings. At least five (5)
---------------------------------
Business Days prior to each Advance Date, Lessee shall deliver to Certificate
Trustee and each Certificate Purchaser an irrevocable written notice (in the
case of the Initial Advance Date, the "Initial Advance Date Notice" and in the
---------------------------
case of a Construction Advance Date, the "Construction Advance Date Notice")
--------------------------------
substantially in the form of Exhibit E, setting forth:
---------
(i) the proposed Advance Date;
(ii) in the case of Acquisition Costs, a description of such Acquisition
Costs and the amount thereof
(iii) in the case of Transaction Costs, a description of such Transaction
Costs and the amount thereof;
(iv) in the case of Construction Costs, a description of the work so
funded, the identity of the provider thereof and the amount thereof; and
(v) wire transfer instructions for the disbursement of funds.
All documents and instruments required to be delivered on each Advance Date
pursuant to this Lease shall be delivered at the offices of Mayer, Brown &
Platt, 1675 Broadway, New York, New York 10019. On the scheduled Advance Date,
and subject to the terms and conditions of this Lease, and upon receipt of funds
by Certificate Trustee from the Certificate Purchasers sufficient therefor,
Certificate Trustee shall make the requested Advance.
Each Funding and Advance Date shall occur on a Business Day on or after the
date hereof, it being understood that there may be a Funding without an Advance
Date closing if Lessee has postponed the Advance Date pursuant to Section 2.6,
-----------
so long as such Advance Date occurs not later than the third Business Day
following the Funding in respect thereof.
-27-
<PAGE>
SECTION 2.6. Postponement of Advance Date. If any Certificate Purchaser
----------------------------
shall make the Funding requested pursuant to any Advance Date Notice and the
relevant Advance Date shall not occur on the date specified in such Advance Date
Notice, Lessee shall pay Certificate Trustee, as Supplemental Rent, for the
benefit of such Certificate Purchaser, interest on the amount funded by each
Certificate Purchaser at the Yield Rate, less any interest earned on behalf of
the Certificate Purchasers by investing such funded amounts in Permitted
Investments; provided, that this provision shall not be construed to require
--------
Certificate Trustee to invest such funds. Such interest shall be due and
payable by Lessee upon the occurrence of such postponed Advance Date, and such
payment shall be an additional condition precedent to such Advance Date;
provided, however, that no additional Advance Date Notice shall be required to
- -------- -------
be given if an Advance Date is postponed and thereafter timely consummated; and
provided, further, that if such Advance Date shall not have occurred by the
- -------- -------
third (3rd) Business Day following the Funding in respect thereof, then all such
interest shall be due and payable on such date, and Lessor shall refund to each
Certificate Purchaser all amounts funded by such Certificate Purchaser and all
accrued interest allocable to such Certificate Purchaser.
SECTION 2.7. Certificate Purchasers' Instructions to Lessor. Each
----------------------------------------------
Certificate Purchaser agrees that the making of its money available pursuant to
Section 2.3 shall constitute, without further act, authorization and direction
- -----------
by such Certificate Purchaser to Lessor to take the actions specified in Section
1.1 of the Trust Agreement.
SECTION 2.8. Payments to Certificate Purchasers. The parties to this
----------------------------------
Lease hereby agree that any payment required to be made to the Certificate
Purchasers by Lessor pursuant to any Operative Document shall be made directly
to the Certificate Purchasers by Lessee in lieu of the corresponding payment
required to be made by Lessee to Lessor pursuant to any Operative Document. Such
payment by Lessee to the Certificate Purchasers shall be deemed to constitute
(a) the required payment from Lessee to Lessor, and (b) the corresponding
payment by Lessor to the Certificate Purchasers.
SECTION 2.9. Nature of Transaction. (a) It is the intent of the parties
---------------------
that: (i) the transaction contemplated hereby constitutes an operating lease
from Lessor to Lessee for purposes of Lessee's financial reporting only, (ii)
the transaction contemplated hereby establishes an ownership interest in the
Leased Property in Lessee for Federal and state income tax and bankruptcy
purposes, (iii) this Lease grants a Lien in the Leased Property to Lessor and
(iv) the obligations of Lessee to pay deemed principal portion and deemed
interest portion of Rent shall be treated as payments of principal and interest,
respectively,
-28-
<PAGE>
for income tax purposes. Except as specifically provided for herein, Lessor
shall be deemed to have a first prior, perfected security interest in and Lien
on the Leased Property, free and clear of all Liens other than Permitted Liens,
as security for the obligations of Lessee under the Operative Documents (it
being understood and agreed that Lessee does hereby grant a security interest
and Lien, and convey, transfer, assign, mortgage and warrant to Lessor and its
successors and assigns, for the benefit of the Certificate Purchasers and
Lessor, all right, title and interest of Lessee in the Leased Property and any
proceeds or products thereof, to have and hold the same as security for the
payment and performance of the obligations of Lessee under the Operative
Documents). Except as otherwise provided by law or in connection with a
settlement, compromise or adjudication made under the provisions of Section
-------
7.2(b), each of the parties to this Lease agrees that it will not, nor will it
- ------
permit any Affiliate to at any time, take any action or fail to take any action
with respect to the filing of any income tax return, including an amended income
tax return, inconsistent with the intention of the parties expressed in this
Section 2.9.
- -----------
(b) If a court of competent jurisdiction rules that this instrument
constitutes a mortgage, deed of trust or other secured financing as is the
intent of the parties pursuant to Section 2.9(a), this instrument shall be
--------------
deemed to be an Open-End Mortgage as defined in 42 Pa. C.S.A. (S) 8143(f) and,
as such, is entitled to the benefits of Senate Bill 693, 1989 session of the
General Assembly of Pennsylvania (the "Act") as codified at 42 Pa. C.S.A. (S)
---
8143 et seq. The parties to this instrument intend that, in addition to any
-- ---
other debt or obligations secured hereby, this instrument shall secure unpaid
balances of advances made pursuant to the Operative Documents after this
instrument is left for record with the Recorder's Office of the County where the
Leased Property is located, whether such advances are made pursuant to an
obligation of Lessor or otherwise. The maximum principal amount of unpaid
indebtedness secured by this instrument is FORTY MILLION DOLLARS ($40,000,000)
plus interest thereon, which indebtedness may consist of present and future
loans made under the Operative Documents, fees payable pursuant thereto,
advances made with respect to the Leased Property for the payment of, among
other things, taxes, assessments, maintenance charges, insurance premiums and
the like, and costs and expenses, including but not limited to attorney's fees,
incurred for the protection of the Leased Property or the lien and security of
this instrument or by reason of an Event of Default.
SECTION 2.10. Waivers. The Leased Property is leased by Lessor to Lessee
-------
"AS IS" in its present or then condition, as the case may be, subject to (a) any
rights of any parties in possession thereof, (b) the state of the title thereto
existing at the time Lessor acquired its interest in the Leased Property, (c)
any state of facts which an accurate survey or physical inspection
-29-
<PAGE>
might show (including any survey delivered on the Initial Advance Date or the
Construction Completion Date), (d) all Applicable Law, and (e) any violations of
Applicable Law which may exist at the commencement of the Lease Term. Lessee has
examined the Leased Property and (insofar as Lessor is concerned) has found the
same to be satisfactory. NEITHER LESSOR NOR ANY CERTIFICATE PURCHASER HAS MADE
OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE TO
THE LEASED PROPERTY OR TO THE VALUE, MERCHANTABILITY, HABITABILITY, CONDITION,
OR FITNESS FOR USE OF THE LEASED PROPERTY, OR ANY PORTION THEREOF, OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE
LEASED PROPERTY, OR ANY PORTION THEREOF, AND NEITHER LESSOR NOR ANY CERTIFICATE
PURCHASER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR
THE FAILURE OF THE LEASED PROPERTY, OR ANY PORTION THEREOF, TO COMPLY WITH ANY
APPLICABLE LAW, except that Lessor hereby represents and warrants that the
Leased Property is and shall be free of Lessor Liens (such Lessor representation
and warranty being made by (x) Bank with respect to any Lessor Liens
attributable to Bank, and (y) Certificate Trustee with respect to any Lessor
Liens attributable to Certificate Trustee). Lessee has been afforded full
opportunity to inspect the Leased Property, is satisfied with the results of its
inspections and is entering into this Lease solely on the basis of the results
of its own inspections, and all risks incident to the matters discussed in the
preceding sentence, as between Lessor and Certificate Purchasers, on the one
hand, and Lessee, on the other, are to be borne by Lessee. The provisions of
this Section 2.10 have been negotiated, and, except to the extent otherwise
------------
expressly stated, the foregoing provisions are intended to be a complete
exclusion and negation of any representations or warranties by any of Lessor,
Bank or the Certificate Purchasers, express or implied, with respect to the
Leased Property (or any interest therein), that may arise pursuant to any law
now or hereafter in effect or otherwise.
SECTION 2.11. Legal and Tax Representation. Lessee acknowledges and
----------------------------
agrees that neither Lessor nor any Certificate Purchaser has made any
representation or warranty concerning the tax, accounting or legal
characteristics of this Lease or any of the other Operative Documents, and that
Lessee has obtained and relied on such tax, accounting and legal advice
regarding this Lease and the other Operative Documents as it deems appropriate.
Each of Lessor and each Certificate Purchaser acknowledges and agrees that it
has obtained and relied on the Operative Documents and the various items
delivered in connection therewith, and on such tax, accounting and legal advice
regarding this Lease and the other Operative Documents as it deems appropriate.
-30-
<PAGE>
SECTION 2.12. Computations.
------------
(a) Determination of the Rates. All computations of accrued
--------------------------
amounts pursuant to the Operative Documents shall be made on the basis of the
actual number of days (including the first day but excluding the last day)
elapsed during the period for which the computation is being made over a year
comprised of 360 days; provided, however, that the Alternate Base Rate shall be
-------- -------
computed on the basis of the actual number of days elapsed during the period for
which the computation is being made over a year comprised of 365 or 366 days.
(b) Conclusive Determinations. Each determination of the Yield
-------------------------
Amount pursuant to any provision of this Lease or any of the other Operative
Documents shall be conclusive and binding on Lessor, Lessee and the Certificate
Purchasers in the absence of manifest error.
SECTION 2.13. Certificates; Notations. Upon the consummation of each
-----------------------
Advance, each Certificate Purchaser shall make a notation on the grid attached
to such Certificate Purchaser's Certificate(s) indicating the Certificate
Purchaser Amount advanced by such Certificate Purchaser on such Advance Date.
Each Certificate Purchaser is hereby authorized to record the date and amount of
each Advance made by such Certificate Purchaser, each continuation thereof, the
date and amount of each payment or repayment of Certificate Purchaser Amount
thereof and the length of each Rent Period with respect thereto, on the grid
annexed to and constituting a part of each Certificate held by such Certificate
Purchaser, and any such recordation shall constitute prima facie evidence of the
accuracy of the information so recorded, provided, that the failure to make any
--------
such recordation or any error in such recordation shall not affect the
obligation of Certificate Trustee under such instrument or the corresponding
obligation of Lessee to pay Rent.
-31-
<PAGE>
SECTION 2.14. Facility Fee. Lessee shall pay to Lessor a fully-earned,
------------
non-refundable facility fee (the "Facility Fee") equal to the Applicable
------------
Facility Fee Rate on an amount equal to the daily unused portion of the
aggregate Certificate Purchaser Commitments during the period (the "Facility
--------
Period") commencing on the Documentation Date and ending on the earlier of (a)
- ------
the date all Certificate Purchaser Commitments have been advanced pursuant to
the terms of this Lease and (b) the Construction Completion Date, payable in
arrears in quarterly installments on the last Business Day of each March, June,
September and December during the Facility Period and on the last Business Day
of the Facility Period, which Facility Fee shall be calculated by Lessor. Upon
receipt, Lessor will promptly deliver to the Certificate Purchasers their pro
rata portions of such Facility Fee in accordance with their respective
Certificate Purchaser Commitments.
SECTION 3. CONDITIONS PRECEDENT.
SECTION 3.1. Conditions to Initial Advance Date. The effectiveness of
----------------------------------
this Lease and the other Operative Documents, and the obligation of Lessor and
each Certificate Purchaser to perform its respective obligations on the Initial
Advance Date, shall be subject to the occurrence of the Documentation Date and
the fulfillment to the satisfaction of (including, with respect to writings,
such writings being in form and substance reasonably satisfactory to the
addressee or beneficiary thereof), or the waiver in writing by Lessor and each
Certificate Purchaser of, the conditions precedent set forth in this Section 3.1
-----------
(in addition to any other applicable requirements of Section 3.2) on or before
-----------
the Initial Advance Date (except that the obligation of any party hereto shall
not be subject to the performance or compliance of such party or of any of such
party's Affiliates).
(a) Notices. Lessee shall have delivered an Initial Advance Date
-------
Notice conforming with the requirements of Section 2.5 in respect of the
-----------
proposed Initial Advance Date.
(b) Operative Documents. On or before the Initial Advance Date,
-------------------
Lessor and each Certificate Purchaser shall have received a fully executed
counterpart of:
(1) this Lease, provided, however, that only Lessor shall receive
-------- -------
the original counterpart marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART NO. 1";
(2) the Memorandum of Lease;
(3) the Mortgage;
(4) the Environmental Indemnity;
-32-
<PAGE>
(5) the Guaranty;
(6) the Trust Agreement; and
(7) the Assignment of Purchase Agreement.
Each Certificate Purchaser shall have received the original, duly executed Class
A Certificate and Class B Certificate, each registered in such Certificate
Purchaser's name and validly issued pursuant to the Trust Agreement. Each of the
Operative Documents shall have been duly authorized, executed and delivered by
each of the parties thereto, shall be in form and substance satisfactory to each
Certificate Purchaser and shall be in full force and effect.
(c) Initial Appraisal. Not less than two (2) Business Days prior to
-----------------
the Initial Advance Date, each Certificate Purchaser shall have received an
Appraisal, in form and substance reasonably satisfactory to it, containing
reasonably formed opinions of the Appraiser, which will establish (by the use of
reasonable and customary appraisal methods satisfactory to the Certificate
Purchasers) that, as of the Initial Advance Date, the Leased Property will have
a Fair Market Value of not less than $13,000,000. The Appraisal will also
establish the "as-built" Fair Market Value (assuming the completion of the
Financed Improvements) of the Leased Property as of the Construction Completion
Date and the Basic Term. The Appraisal will be prepared in accordance with the
Financial Institutions Reform Recovery and Enforcement Act of 1989.
(d) Deed, Bill of Sale, Assignments and FIRPTA Affidavit. On the
----------------------------------------------------
Initial Advance Date, Lessee shall have caused Seller to deliver to Lessor (i)
the Deed, the Bill of Sale and non-recourse assignments of all intangible
property used or useful in connection with the Leased Property and all existing
assignable licenses, guaranties, permits and warranties issued in connection
with the construction, improvement, alteration or repair of the Land or Facility
and in connection with the purchase or repair of any Personal Property (together
with the original of each such guaranty and warranty in Lessee's possession) and
(ii) a FIRPTA Affidavit in customary form.
(e) Filings and Recordings. All filings or recordings enumerated and
----------------------
described in Exhibit F, as well as all other filings and recordings necessary or
---------
advisable, including precautionary financing statements, in the reasonably
formed opinion of the Certificate Purchasers, to perfect the right, title and
interest of Lessor intended to be created by the Operative Documents shall have
been made, or shall have been arranged to be made promptly thereafter, in the
appropriate places or offices, including any recordings and filings necessary to
create, perfect,
-33-
<PAGE>
preserve and protect Lessor's first prior perfected security interest in and
lien on the Leased Property, subject, in both cases, to Permitted Liens and the
rights of Lessee under the Lease. All recording and filing fees and taxes with
respect to any recordings or filings made pursuant to this Section 3.1(e) shall
--------------
have been paid in full, and any tax forms shall have been executed and
delivered, and satisfactory evidence thereof shall have been delivered to the
Certificate Purchasers, or arrangements for such payment shall have been made to
the reasonable satisfaction of the Certificate Purchasers.
(f) Title Insurance. Lessor shall have received from the Title Insurance
---------------
Company its ALTA 1992 owner's policy of title insurance, reasonably acceptable
in form and substance to counsel to the Certificate Purchasers (the "Lessor's
--------
Policy") (or a final hand-marked original thereof signed by the Title Insurance
- ------
Company containing all of the provisions to be included in such policy by the
Title Insurance Company, in which case Lessor shall receive a clean, final
original of such policy within ten (10) Business Days of the Initial Advance
Date), insuring that Lessor has good and marketable fee simple title to the
Leased Property being purchased by Lessor on the Initial Advance Date, subject
to the Lease and such other exceptions to title as are reasonably acceptable to
the Certificate Purchasers, together with complete, legible copies of all
encumbrances, maps and surveys of record. Lessor's Policy shall (i) be dated as
of the applicable Initial Advance Date, (ii) be in an amount of not less than
$18,000,000.00, (iii) delete all standard exceptions, any broker's lien
exception and any manager's lien exception, (iv) contain affirmative
endorsements as to mechanics' liens, comprehensive coverage for owners,
encroachments, rights of access and survey matters and such other endorsements
requested by counsel to the Certificate Purchasers to the extent available in
the Commonwealth of Pennsylvania, (v) contain a recharacterization endorsement
appropriate for a transaction of this type in form acceptable to the Certificate
Purchasers and (vi) contain such other endorsements reasonably requested by the
Certificate Purchasers.
(g) Environmental Certificate and Audit. Not less than five (5) Business
-----------------------------------
Days prior to the Initial Advance Date, Lessor and each Certificate Purchaser
shall have received an original counterpart Environmental Certificate
substantially in the form of Exhibit G (an "Environmental Certificate") with
--------- -------------------------
respect to the Land, and the Environmental Audit for the Land shall have been
delivered to and approved by the Certificate Purchasers in their sole but
reasonable discretion, together with a letter from the Environmental Engineer
authorizing the reliance on such Environmental Audit by Lessor and each
Certificate Purchaser.
(h) Survey. Not less than two (2) Business Days prior to the Initial
------
Advance Date, Lessee shall have delivered, or shall
-34-
<PAGE>
have caused to be delivered, to Lessor and each Certificate Purchaser an ALTA
1992 Class A (Urban) survey of the Land in a form reasonably satisfactory to the
Title Insurance Company and the Certificate Purchasers, prepared by a licensed
surveyor and meeting the Minimum Standard Detail Requirements for ALTA/ASCM Land
Title Surveys as adopted by the American Land Title Association/American Society
and American Congress on Surveying and Mapping in 1992 and showing no state of
facts unsatisfactory to Certificate Purchasers, which survey shall be certified
to Lessor, the title company and the Certificate Purchasers. The survey shall
also certify that no portion of the Leased Property lies within a flood hazard
area or contains wetlands.
(i) Plans and Specifications and Architect's Agreement;
---------------------------------------------------
Assignment. The Certificate Purchasers shall have received a copy of the Plans
- ----------
and Specifications (in the form existing on the Initial Advance Date) and the
Architect's Agreement, it being understood and agreed that Lessee does hereby
collaterally assign and pledge its rights and interests under such Plans and
Specifications and the Architect's Agreement to Lessor to secure Lessee's
payment and performance under the Operative Documents.
(j) Consents and Approvals. All Government Actions and other
----------------------
approvals and consents required to be taken, given or obtained, as the case may
be, by or from any Authority or another Person, or by or from any trustee or
holder of any indebtedness or obligation of Lessee, that are necessary or, in
the reasonable opinion of the Certificate Purchasers, advisable in connection
with the execution, delivery and performance of the Operative Documents by all
parties hereto, shall have been taken, given or obtained, as the case may be,
shall be in full force and effect and the time for appeal with respect to any
thereof shall have expired (or, if an appeal shall have been taken, the same
shall have been dismissed) and shall not be subject to any pending proceedings
or appeals (administrative, judicial or otherwise) and shall be in form and
substance satisfactory to the Certificate Purchasers.
(k) Transaction Costs; Fees. On or before the Initial Advance
-----------------------
Date, the Transaction Costs shall have been paid in full by Lessee from the
proceeds of the Advance or, at the election of Lessee, by Lessee, to the extent
then invoiced; provided, however, that if Lessee has not received written
invoices therefor prior to such date, such Transaction Costs shall be paid on
the next Advance Date or, if there are no remaining Advance Dates, within ten
Business Days after Lessee has received written invoices therefor. Such payments
shall be made by wire transfer of immediately available funds to the accounts
specified by the parties receiving such payments.
(l) Opinions of Counsel. On or before the Initial
-------------------
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<PAGE>
Advance Date, Lessor, the Certificate Purchasers and their respective counsel
shall have received (i) the opinion of William F. Drake, Jr., Esq., General
Counsel to Lessee, substantially in the form of Exhibit H; (ii) the opinion of
---------
Ballard Spahr Andrews & Ingersoll, as special local counsel, substantially in
the form of Exhibit I; and (iii) the opinion of Richards, Layton & Finger,
---------
special counsel to Certificate Trustee, each in form and scope mutually
satisfactory to Lessor and the Certificate Purchasers. By its execution hereof,
Lessee expressly instructs its counsel to execute and deliver the opinions
referred to in clauses (i) and (ii) above to the Persons designated in the
----------- ----
preceding sentence.
(m) Corporate Status and Proceedings. Lessor and each
--------------------------------
Certificate Purchaser shall have received:
(i) on or before the Initial Advance Date, certificates of
existence and good standing with respect to Lessee from the Secretary of
State of the State of Ohio, and evidence of Lessee's qualification to do
business in Pennsylvania, each dated no earlier than the fifteenth (15th)
day before the Initial Advance Date;
(ii) on or before the Initial Advance Date, an Officer's
Certificate of Lessee substantially in the form of Exhibit J, dated the
---------
Initial Advance Date, with respect to Lessee's governing documents and
resolutions, representations and warranties, absence of defaults and the
effectiveness of, and the compliance by Lessee with, the Operative
Documents; and
(iii) on or before the Initial Advance Date, a certificate of
the Secretary or an Assistant Secretary of Lessee setting forth the name
of the officer or officers of Lessee authorized to sign on behalf of
Lessee this Lease and the other Operative Documents and other documents
and certificates to be delivered by Lessee hereunder, together with the
true signatures of such officer or officers, upon which certificate each
Certificate Purchaser may rely conclusively until they shall have received
a further certificate of the Secretary or an Assistant Secretary of Lessee
amending the prior certificate and submitting the signatures of the
appropriate officers named in such certificate.
(n) Payment of Impositions. All Taxes payable on or before
----------------------
the Initial Advance Date in connection with the execution, delivery, recording
or filing of any of the Operative Documents, the filing of any of the financing
statements and any other documents, and the consummation of any other
transactions contemplated hereby or by any of the other Operative Documents,
shall have been paid in full by Lessee, or arrangements for such payment shall
have been made to the reasonable satisfaction of the
-36-
<PAGE>
Certificate Purchasers.
(o) Insurance. On or before the Initial Advance Date, Lessor and each
---------
Certificate Purchaser shall have received a current certificate by or on behalf
of the underwriters confirming that insurance complying with Section 6.7 is in
-----------
full force and effect, and there shall be no past due premiums in respect of any
such insurance.
(p) Representations and Warranties; Absence of Material Adverse
-----------------------------------------------------------
Effect and Default. Each representation and warranty of Lessee contained herein
- ------------------
or in any other Operative Document shall be true and correct as though made on
and as of such Initial Advance Date, except that any such representation or
warranty which is expressly made only as of a specified date need be true only
as of such date. Since September 30, 1996, no Material Adverse Effect shall have
occurred. No Default or Event of Default shall exist.
(q) Litigation. No action or proceeding shall have been instituted or
----------
threatened nor shall any government action be instituted or threatened before
any Authority, nor shall any order, judgment or decree have been issued or
proposed to be issued by any Authority, to set aside, restrain, enjoin or
prevent the performance of this Lease or any transaction contemplated hereby or
by any other Operative Document or which is likely, in the reasonable opinion of
the Required Certificate Purchasers, to have a Material Adverse Effect.
(r) No Event of Loss. No Casualty and no Event of Loss shall have
----------------
occurred in respect of the Leased Property. No action shall be pending or
threatened by an Authority to initiate a Condemnation or an Event of Taking in
respect of the Leased Property.
(s) Legality, etc. In the opinion of each Certificate Purchaser or
-------------
its counsel, the Overall Transaction does not and shall not violate any
Applicable Law and does not and will not subject Lessor or any Certificate
Purchaser to any materially adverse regulatory prohibitions or constraints, and
no change of law has occurred or been proposed that would make it uneconomic or
illegal for any party to any Operative Document to participate in any of the
transactions contemplated by the Operative Documents or otherwise would prohibit
the consummation of any transaction contemplated by the Operative Documents or
materially expand the duties, obligations and risks of such Certificate
Purchaser.
(t) Officer's Certificate of Lessor and Bank. All Certificate
----------------------------------------
Purchasers shall have received an Officer's Certificate of Lessor in the form of
Exhibit K-1 hereto and an Officer's Certificate of Certificate Trustee in the
- -----------
form of Exhibit K-2 hereto, each dated as of the Initial Advance Date and
-----------
-37-
<PAGE>
stating that (A) it has duly performed and complied with all agreements and
conditions herein and in any other Operative Document required to be performed
or complied with by it on or prior to such Advance Date and (B) each Operative
Document to which it is a party is in full force and effect with respect to it.
On the Initial Advance Date, each Certificate Purchaser shall have also received
(1) an Officer's Certificate of Bank in the form of Exhibit L hereto, dated such
---------
Initial Advance Date, stating that each and every representation and warranty of
Bank contained in the Operative Documents to which it is a party is true and
correct on and as of such Advance Date as though made on and as of such Initial
Advance Date, except to the extent such representations and warranties relate
solely to an earlier date, in which case such representations and warranties
shall have been true and correct as of such earlier date, and (2) a certificate
of the Secretary or Assistant Secretary of Bank, dated the Initial Advance Date,
with respect to Bank's governing documents, resolutions and incumbent officers
and (3) a good standing certificate from the appropriate Authority as to Bank's
good standing.
(u) Performance. Each party to any Operative Document shall have
-----------
performed and complied with all agreements and conditions contained herein and
in any other Operative Document to which it is a party required to be performed
or complied with by it on or prior to the applicable Advance Date. Without
limiting the foregoing, each Certificate Purchaser shall have funded the full
amount to be funded by such Certificate Purchaser on the Initial Advance Date,
as described in Section 2.3.
-----------
(v) Proceedings Satisfactory, etc. All proceedings taken in connection
-----------------------------
with the applicable Advance Date and all documents relating thereto shall be
reasonably satisfactory to Lessor, each Certificate Purchaser and their
respective counsel, and each such Person shall have received copies of such
documents as they may reasonably request in connection therewith, all in form
and substance reasonably satisfactory to each such Person.
(w) Architect's Statement of Professional Opinion. The Certificate
---------------------------------------------
Trustee and the Certificate Purchasers shall have received a statement of
professional opinion from the Architect, in form and scope reasonably
satisfactory to the Certificate Trustee and the Certificate Purchasers,
certifying that (i) the Financed Improvements as constructed in accordance with
the Plans and Specifications and the contemplated use thereof by Lessee will
comply with all Applicable Law (including all zoning and land use laws and
Environmental Laws) and (ii) the Plans and Specifications have been prepared in
accordance with Applicable Law (including applicable Environmental Laws and
building, planning, zoning and fire codes) and upon completion of the Financed
Improvements in accordance with such Plans and Specifications, such Financed
Improvements will not encroach in any manner onto any adjoining
-38-
<PAGE>
SECTION 4.2. Lease Term. Unless earlier terminated, the term of this
----------
Lease shall consist of (a) a basic term (the "Basic Term"), commencing on and
----------
including the Initial Advance Date and ending on (but including) the fifth
anniversary of the Initial Advance Date (the "Basic Term Expiration Date"), and
--------------------------
(b) up to two (2) successive five-year Renewal Terms, if exercised (the Basic
Term and the Renewal Terms being collectively called the "Lease Term"), each
----------
commencing upon the expiration of the Basic Term or the prior Renewal Term, as
the case may be, and ending on (but including) the fifth anniversary of such
commencement date.
SECTION 4.3. Lease Renewal. (a) Lessee may elect to renew this Lease for
-------------
up to two (2) successive five-year renewal terms (each, a "Renewal Term") as
------------
provided for in Section 9.1(a) and in accordance with Section 4.3(b) below.
-------------- --------------
(b) So long as no Default or Event of Default shall have occurred
and be continuing at the time Lessee delivers the Renewal Request and at the
commencement of the Renewal Term, Lessee is entitled, coincident with its
determination during the Base Term or the first Renewal Term, as applicable, to
renew the Lease for a Renewal Term, to request that the Arranger solicit bids
from the Certificate Purchasers to extend the Lease for the Renewal Term (such
request by Lessee is herein called the "Renewal Request"). If Lessee makes such
---------------
request, upon receipt of notice of said request the Arranger shall solicit from
each of the Certificate Purchasers a bid setting forth the terms and conditions
upon which each Certificate Purchaser would agree to extend the Lease for the
requested Renewal Term; provided, that no Certificate Purchaser shall be
--------
required to submit a bid to the Arranger. Within sixty (60) days of solicitation
by the Arranger, each Certificate Purchaser electing to submit a bid shall
transmit the terms and conditions of its bid to the Arranger, which shall send
copies of the bid proposals to Lessee. Any Certificate Purchaser failing to
submit a bid within sixty (60) days of solicitation shall be deemed to have
rejected the Arranger's solicitation. Within thirty (30) days of its receipt of
the bid proposals, Lessee shall inform the Arranger of the bids that are
acceptable to it, if any; provided, that Lessee may, in its sole discretion,
--------
accept or reject any or all bids to extend the Lease for the Renewal Term. If,
with respect to any bid, Lessee shall fail to inform the Arranger within said
30-day period that it has accepted such bid, then Lessee shall be deemed to have
rejected such bid. If any Certificate Purchaser rejects (or is deemed to have
rejected) the Arranger's solicitation to extend the Lease for the Renewal Term,
or if Lessee rejects (or is deemed to have rejected) the bid of any Certificate
Purchaser to extend the Lease for the Renewal Term (such Certificate Purchaser,
in either case, is herein called a "Non-Renewing Certificate Purchaser"), then
----------------------------------
within ten (10) Business Days after the expiration of the aforementioned 30-day
period, Lessee shall be required to take one of the following actions:
(i) Lessee may elect to cancel its Renewal Request, in which event
Lessee shall not have any right to extend the Lease for the Renewal
Term. Lessee shall make such election by written notice delivered to
the Arranger not later than the end of such ten (10) Business Day
period. If Lessee desires then to elect the Sale Option, Lessee
shall make such election in its notice cancelling its Renewal
Request delivered pursuant to the preceding sentence, and failing
such election of the Sale Option,
-38-
<PAGE>
land to the best of the Architect's knowledge based on information received
(except as permitted by express written easements or as insured by appropriate
title insurance). The Plans and Specifications and a complete breakdown of the
estimated costs (prepared by others) of constructing the Financed Improvements
in accordance with such Plans and Specifications, together with evidence of all
matters described in the Architect's statement of professional opinion described
in this Section 3.1(w), shall have been reviewed and approved by the Certificate
--------------
Purchasers.
(x) Vacant Facility. Lessee shall deliver an Officer's Certificate to
---------------
Lessor certifying that, other than Inacom Business Centers, Inc., Seller and all
tenants of the Facility and the Land have vacated the Facility and the Land
prior to the Initial Advance Date and the Facility and the Land are free and
clear of all claims or rights of occupancy in favor of any party other than
Lessee, Lessor and Inacom Business Centers, Inc.
SECTION 3.2. Conditions to Construction Advance Dates for Construction
---------------------------------------------------------
Costs. The obligation of Lessor and each Certificate Purchaser to perform its
- -----
obligations on each Advance Date for the payment of Construction Costs shall be
subject to the fulfillment to the satisfaction of (including, with respect to
writings, such writings being in form and substance reasonably satisfactory to
the addressee or beneficiary thereof), or the waiver in writing by, Lessor and
each Certificate Purchaser of the conditions precedent set forth in this Section
-------
3.2 on or before such Advance Date (except that the obligation of any party
- ---
hereto shall not be subject to the performance or compliance of such party or of
any of such party's Affiliates).
(a) Construction Advance Date Notice. Lessee shall have delivered a
--------------------------------
Construction Advance Date Notice conforming with the requirements of Section 2.5
-----------
in respect of the proposed Advance Date.
(b) Commitment Amount. After giving effect to the applicable Advance, the
-----------------
aggregate amount of all Advances shall not exceed the aggregate of the Total
Commitments.
(c) Cost of Completion. The Certificate Purchasers shall have received a
------------------
certificate from Lessee, in form and scope reasonably satisfactory to each of
them, certifying that after giving effect to the applicable Advance, the
estimated as yet unpaid cost of completing the construction of the Financed
Improvements in accordance with the Plans and Specifications will not exceed the
Available Commitments, and all such construction of the Financed Improvements is
capable of attaining Substantial Completion by the Construction Completion Date.
If, at any time or from time to time, there is unavailable sufficient Available
Commitments to fully pay for the completion of the Financed Improvements,
Lessee, as Construction Agent, shall contribute its
-39-
<PAGE>
own funds to pay the costs of such completion prior to making any further
request for any Advance to pay for such completion until the remaining Available
Commitments are sufficient to fully pay for the completion of the Financed
Improvements without further contribution from Lessee.
(d) Title Policy Endorsement. Lessor and the Certificate Purchasers shall
------------------------
have received on the date of such Advance an endorsement (as of a date not more
than 30 days prior to the date of such Advance) to Lessor's Policy (i)
indicating that since the date of the preceding Advance there has been no change
in the state of title (except changes approved by the Certificate Purchasers),
(ii) updating the title policy to the date of such Advance, and (iii) increasing
the coverage of the title policy by an amount equal to such Advance if the title
policy does not by its own terms provide for such an increase.
(e) Lessee Certification. Lessee shall have furnished Lessor and the
--------------------
Certificate Purchasers with a certification ("Construction Certificate") of
------------------------
Lessee to the effect that:
(i) The representations and warranties of Lessee set forth in Section 10.1
------------
and in any other Operative Document are true and correct as of such Advance
Date except that any such representation or warranty which is expressly made
only as of a specified date need be true only as of such date. Since
September 30, 1996, no Material Adverse Effect shall have occurred. No
Default or Event of Default shall exist. All amounts owing to third parties
for the construction of the Financed Improvements have been paid in full.
(ii) No changes or modifications were made to the Plans and Specifications
after the Initial Advance Date that materially and adversely affect the
value, utility or economic useful life of the Leased Property.
(f) Plans and Specifications and Construction Contract. The Certificate
--------------------------------------------------
Purchasers shall have received a copy of the final Plans and Specifications and
the executed Construction Contract, it being understood and agreed that Lessee
does hereby collaterally assign and pledge its rights and interests under the
Plans and Specifications and the Construction Contract to Lessor to secure
Lessee's payment and performance under the Operative Documents.
(g) Legality, etc. In the opinion of each Certificate Purchaser or its
-------------
counsel, the Overall Transaction shall not violate any Applicable Law and does
not and will not subject Lessor or any Certificate Purchaser to any materially
adverse regulatory prohibitions or constraints, and no change of law has
occurred or been proposed that would make it uneconomic or illegal for any party
to any Operative Document to participate in any of
-40-
<PAGE>
the transactions contemplated by the Operative Documents or otherwise would
prohibit the consummation of any transaction contemplated by the Operative
Documents or materially expand the duties, obligations and risks of such
Certificate Purchaser.
(h) Performance. Each Certificate Purchaser shall have funded the full
-----------
amount to be funded by such Certificate Purchaser on the applicable Advance
Date, as described in Section 2.3.
-----------
(i) Compliance with Restrictive Covenants. Prior to the first
-------------------------------------
Construction Advance, Lessee shall have furnished Lessor and the Certificate
Purchasers with evidence satisfactory to Lessor and the Certificate Purchasers
that (1) the final Plans and Specifications have been submitted and approved (or
deemed approved in accordance with the terms of the Protective Covenants) by the
Great Valley Owners Association in accordance with the provisions of the
Protective Covenants, including, without limitation, Sections III and IV
thereof, (2) the construction contemplated by such final approved Plans and
Specifications will not violate the Protective Covenants, including, without
limitation, Sections III and IV thereof, and (3) the construction contemplated
by such final approved Plans and Specifications will not violate the provisions
of the Easement and Restrictive Covenant Agreement dated September 1, 1978
recorded in Misc. Deed Book 417 page 436, together with a title endorsement
satisfactory to Lessor and Certificate Purchasers with respect to each such
agreement to the extent such endorsement has not previously been delivered.
SECTION 3.3. Conditions to Final Construction Advance. The obligation of
----------------------------------------
Lessor and each Certificate Purchaser for the payment of the final Construction
Advance shall be subject to the fulfillment to the reasonable satisfaction of
(including, with respect to writings, such writings being in form and substance
reasonably satisfactory to the addressee or beneficiary thereof), or the waiver
in writing by, Lessor and each Certificate Purchaser of the conditions precedent
set forth in this Section 3.3 (in addition to the requirements of Section 3.2)
----------- -----------
on or before the date of the final Construction Advance (except that the
obligation of any party hereto shall not be subject to the performance or
compliance of such party or of any of such party's Affiliates).
(a) Architect's Certificate and Construction Agent's Certificate.
------------------------------------------------------------
Construction Agent and Architect shall each have furnished to Lessor and all
Certificate Purchasers a certificate (substantially in the form of Exhibit M)
---------
dated on or before the date of the final Construction Advance and stating that
(i) the construction of the Financed Improvements has attained Substantial
Completion in accordance with the Plans and Specifications and all Applicable
Law, (ii) the Leased Property, as so completed, complies in all material
respects with all Applicable Law, (iii)
-41-
<PAGE>
all licenses, permits and approvals of any Authority affecting the Leased
Property, including, without limitation, any required certificate of occupancy,
have been obtained from the necessary Authorities and approved by Lessor and the
Certificate Purchasers and (iv) attached thereto is a true and correct copy of
the "as built" Plans and Specifications for the Financed Improvements.
(b) Construction Completion. The construction of the Financed
-----------------------
Improvements shall have attained Substantial Completion in accordance with the
Plans and Specifications and all Applicable Law, and the Leased Property, as so
modified by the construction of the Financed Improvements, shall be ready for
occupancy and operation. All fixtures and other property contemplated under the
Plans and Specifications to be incorporated into or installed in such Leased
Property shall have been incorporated or installed free and clear of all Liens
except for Permitted Liens and shall have become subject to Lessor's first prior
perfected security interest in the Leased Property.
(c) As Built Survey. Construction Agent shall have furnished to Lessor
---------------
and each Certificate Purchaser an "as built" survey meeting the requirements of
Section 3.1(h).
- --------------
SECTION 4. LEASE TERM, RENT AND PAYMENT.
SECTION 4.1. Lease of Leased Property. On the Initial Advance Date,
------------------------
subject to satisfaction and waiver of the conditions set forth in Section 3.1,
-----------
Lessor hereby agrees to accept delivery of the Leased Property, and to
simultaneously lease to Lessee for the Lease Term, Lessor's interest in the
Leased Property, together with the Financed Improvements and any other
improvements which thereafter may be constructed thereon pursuant to the terms
of this Lease. Lessee hereby agrees, for the express benefit of Lessor, to
lease from Lessor for the Lease Term, commencing on the Initial Advance Date,
Lessor's interest in such Leased Property as contemplated by this Lease,
together with Lessor's interest in the Financed Improvements and any other
improvements which may thereafter be constructed by Lessee as provided for in
this Lease.
SECTION 4.2. Lease Term. Unless earlier terminated, the term of this
----------
Lease shall consist of (a) a basic term (the "Basic Term"), commencing on and
----------
including the Initial Advance Date and ending on (but including) the fifth
anniversary of the Initial Advance Date (the "Basic Term Expiration Date"), and
--------------------------
(b) up to two (2) successive five-year Renewal Terms, if exercised (the Basic
Term and the Renewal Terms being collectively called the "Lease Term"), each
----------
commencing upon the expiration of the Basic Term or the prior Renewal Term, as
the case may be, and ending on (but including) the fifth anniversary of such
commencement date.
SECTION 4.3. Lease Renewal. (a) Lessee may elect to renew
-------------
-42-
<PAGE>
this Lease for up to two (2) successive five-year renewal terms (each, a
"Renewal Term") as provided for in Section 9.1(a) and in accordance with Section
------------ -------------- -------
4.3(b) below.
- ------
(b) So long as no Default or Event of Default shall have occurred and be
continuing at the time Lessee delivers the Renewal Request and at the
commencement of the Renewal Term, Lessee is entitled, coincident with its
determination during the Base Term or the first Renewal Term, as applicable, to
renew the Lease for a Renewal Term, to request that the Arranger solicit bids
from the Certificate Purchasers to extend the Lease for the Renewal Term (such
request by Lessee is herein called the "Renewal Request"). If Lessee makes such
---------------
request, upon receipt of notice of said request the Arranger shall solicit from
each of the Certificate Purchase*rs a bid setting forth the terms and conditions
upon which each Certificate Purchaser would agree to extend the Lease for the
requested Renewal Term; provided, that no Certificate Purchaser shall be
--------
required to submit a bid to the Arranger. Within sixty (60) days of solicitation
by the Arranger, each Certificate Purchaser electing to submit a bid shall
transmit the terms and conditions of its bid to the Arranger, which shall send
copies of the bid proposals to Lessee. Any Certificate Purchaser failing to
submit a bid within sixty (60) days of solicitation shall be deemed to have
rejected the Arranger's solicitation. Within thirty (30) days of its receipt of
the bid proposals, Lessee shall inform the Arranger of the bids that are
acceptable to it, if any; provided, that Lessee may, in its sole discretion,
--------
accept or reject any or all bids to extend the Lease for the Renewal Term. If,
with respect to any bid, Lessee shall fail to inform the Arranger within said
30-day period that it has accepted such bid, then Lessee shall be deemed to have
rejected such bid. If any Certificate Purchaser rejects (or is deemed to have
rejected) the Arranger's solicitation to extend the Lease for the Renewal Term,
or if Lessee rejects (or is deemed to have rejected) the bid of any Certificate
Purchaser to extend the Lease for the Renewal Term (such Certificate Purchaser,
in either case, is herein called a "Non-Renewing Certificate Purchaser"), then
----------------------------------
within ten (10) Business Days after the expiration of the aforementioned 30-day
period, Lessee shall be required to take one of the following actions:
(i) Lessee may elect to cancel its Renewal Request, in which event Lessee
shall not have any right to extend the Lease for the Renewal Term.
Lessee shall make such election by written notice delivered to the
Arranger not later than the end of such ten (10) Business Day period.
If Lessee desires then to elect the Sale Option, Lessee shall make such
election in its notice cancelling its Renewal Request delivered
pursuant to the preceding sentence, and failing such election of the
Sale Option, Lessee shall be deemed to have irrevocably waived such
Sale Option and elected the
-43-
<PAGE>
Purchase Option.
(ii) Lessee may elect to replace any Non-Renewing Certificate Purchaser
with another Person which will constitute a replacement Certificate
Purchaser (a "Replacement Certificate Purchaser") upon expiration of
---------------------------------
the Basic Term or First Renewal Term, as applicable. Lessee shall make
such election by written notice delivered to the Arranger not later
than the end of such ten (10) Business Day period, which notice shall
identify the Replacement Certificate Purchaser. The date of expiration
of the Basic Term or First Renewal Term, as applicable, shall be
treated as the Final Maturity Date with respect to the Non-Renewing
Certificate Purchaser, and on such date Lessee shall cause the
Replacement Certificate Purchaser to purchase all of the Certificates
then held by the Non-Renewing Certificate Purchaser for cash at a
price equal to the aggregate outstanding Certificate Purchaser Amount
and Yield then outstanding on the Certificates then held by the Non-
Renewing Certificate Purchaser. If Lessee fails (for any reason,
including a default by the Replacement Certificate Purchaser) to cause
the Replacement Certificate Purchaser to pay any such amounts when due
pursuant to the preceding sentence, the Lease shall not be renewed for
the requested Renewal Term, Lessee shall not be entitled to any
Renewal Term, and such date of expiration of the Base Term or First
Renewal Term, as applicable, shall be deemed the Final Maturity Date
with respect to all Certificate Purchasers. Each Replacement
Certificate Purchaser shall be subject to each of the terms and
conditions of this Lease and each of the other Operative Documents
imposed upon Certificate Purchasers, and shall make the
representations, warranties and covenants and perform its obligations
required hereunder and thereunder. Specifically, without limitation, a
Person shall not become a Replacement Certificate Purchaser unless it
shall deliver to the Arranger prior to acquiring any Certificates its
written certificate providing the representations and warranties set
forth in Section 10.2.
------------
If Lessee shall fail to duly elect either of the options under clauses (i) and
-----------
(ii) above within the applicable ten (10) Business Day period, Lessee shall be
- ----
deemed to have made its election under clause (i) above.
----------
If at any time after Lessee shall have made a Renewal Request and prior to
the commencement of the requested Renewal Term, an Event of Default shall have
occurred, then Lessee's rights under
-44-
<PAGE>
this Section 4.3(b) shall automatically terminate and Lessee shall not be
--------------
entitled to the requested Renewal Term.
Any provision in this Section 4.3(b) to the contrary notwithstanding, if
--------------
Lessee accepts bids to renew the Lease for a Renewal Term, then all renewing and
replacement Certificate Purchasers must extend the Lease upon the same terms and
conditions; and if the foregoing condition shall not be satisfied, Lessee shall
not be entitled to the requested Renewal Term.
Lessee hereby agrees to pay all costs and expenses (including reasonable
legal fees and expenses) incurred by the Arranger, the then existing Certificate
Purchasers (including any Non-Renewing Certificate Purchasers) and any
Replacement Certificate Purchasers in connection with the provisions of this
Section 4.3(b); provided, however, that Lessee shall not be responsible for any
- --------------
legal fees and expenses of more than one counsel to the Arranger and the
Certificate Purchasers or for any fees not specifically made part of the
arrangements agreed to by the Certificate Purchasers and Lessee.
Lessee shall have the right to consult with the Certificate Purchasers in
connection with all Renewal Requests.
SECTION 4.4. Rent Payments. On each Payment Date during the Lease Term,
-------------
Lessee shall pay to Lessor, for the benefit of the Certificate Purchasers, Basic
Rent for the Leased Property. All payments to Lessor or a Certificate Purchaser
shall be made in accordance with its payment instructions set forth on Schedule
--------
I.
- -
SECTION 4.5. Supplemental Rent. Lessee shall pay to Lessor, or the
-----------------
Person entitled thereto, any and all Supplemental Rent (including without
limitation amounts determined to be owing pursuant to Section 7.1 of the Trust
Agreement) promptly as the same shall become due and payable. Lessor shall use
reasonable efforts to deliver to Lessee a statement setting forth the items for
which Supplemental Rent is payable, but in no event shall Lessor's failure to
deliver such a statement derogate from Lessee's obligations to make timely
payment of Supplemental Rent. If Lessee fails to pay any Supplemental Rent,
Lessor shall have all rights, powers and remedies provided herein or by law or
in equity or otherwise in the case of nonpayment of Basic Rent. Lessee shall
pay to Lessor as Supplemental Rent, among other things, promptly on demand, to
the extent permitted by Applicable Law, interest at the applicable Overdue Rate
on any installment of Basic Rent not paid when due for the period for which the
same shall be overdue, and on any payment of Supplemental Rent not paid when due
or after demand by Lessor for the period from the due date or the date of any
such demand, as the case may be, until the same shall be paid. The expiration or
other termination of Lessee's obligation to pay Basic Rent hereunder shall not
limit or modify the obligations of Lessee with respect to Supplemental
-45-
<PAGE>
Rent. Unless expressly provided otherwise in this Lease, in the event of any
failure on the part of Lessee to pay and discharge any Supplemental Rent as and
when due, Lessee shall also promptly pay and discharge any fine, penalty,
interest or costs which may be assessed or added under any agreement between
Lessee or any Affiliate and any third party for nonpayment or late payment of
such Supplemental Rent, all of which shall also constitute Supplemental Rent.
SECTION 4.6. Place and Manner of Payment. Rent and all other sums due to
---------------------------
Lessor or any Certificate Purchaser hereunder shall be paid in immediately
available funds, and if payable to Lessor or to a Certificate Purchaser, at the
office of Lessor or such Certificate Purchaser specified on Schedule I, or at
----------
such other office of Lessor or any Certificate Purchaser as such Person may from
time to time specify to Lessee in a notice pursuant to this Lease. All such
payments shall be made so as to be received by Lessor or a Certificate
Purchaser, as applicable, not later than 11:00 a.m., New York City time, on the
date due; funds received after such time shall for all purposes under the
Operative Documents be deemed to have been made, and received by such Person, on
the next succeeding Business Day. Any payments received by Lessor not later
than 11:00 a.m., New York City time, shall be paid by Lessor to the Certificate
Purchasers in immediately available funds no later than 2:00 p.m., New York City
time, on the same day, and any payments received by Lessor from or on behalf of
Lessee after 11:00 a.m., New York City time, shall be paid to the Certificate
Purchasers as soon after receipt as practicable, but not later than 2:00 p.m.,
New York City time, on the next succeeding Business Day.
SECTION 4.7. Utility Charges. Lessee shall pay or cause to be paid all
---------------
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on the Leased Property
during the Lease Term. Lessee shall be entitled to receive any credit or refund
with respect to any utility charge paid by Lessee and received by Lessor on
account thereof, net of the costs and expenses reasonably incurred by Lessor in
obtaining such credit or refund, and, upon receipt by Lessor, such credit or
refund shall be promptly paid over to Lessee. All charges for utilities imposed
with respect to the Leased Property for a billing period during which this Lease
expires or terminates shall be adjusted and prorated on a daily basis between
Lessor and Lessee, and each party shall pay or reimburse the other for each
party's pro rata share thereof.
SECTION 4.8. Enjoyment. Subject to the rights of Lessor contained in the
---------
Operative Documents, Lessor shall not take any affirmative action to interfere
with Lessee's rights regarding the Leased Property for the Lease Term. Lessee's
sole remedy for breach of this Section 4.8 shall be to sue for damages for the
-----------
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<PAGE>
breach hereof, or sue for specific performance hereof, and such breach shall not
affect Lessor's rights to initiate legal action and otherwise enforce the
obligations of Lessee under this Lease.
SECTION 4.9. Net Lease. This Lease shall constitute a net lease. Any
---------
present or future law to the contrary notwithstanding, this Lease shall not
terminate, nor shall Lessee be entitled to any abatement, suspension, deferment,
reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall
the obligations of Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) by
reason of: (i) any defect in the condition, merchantability, design,
construction, quality or fitness for use of the Leased Property or any part
thereof, or the failure of the Leased Property to comply with all Applicable
Law, including any inability to occupy or use the Leased Property by reason of
such non-compliance; (ii) any damage to, removal, abandonment, salvage, loss,
contamination of or Release from, scrapping or destruction of or any requisition
or taking of the Leased Property or any part thereof; (iii) any restriction,
prevention or curtailment of or interference with any use of the Leased Property
or any part thereof, including eviction; (iv) any defect in title to or rights
to the Leased Property or any Lien on such title or rights or on the Leased
Property (other than Lessor Liens); (v) any change, waiver, extension,
indulgence or other action or omission or breach in respect of any obligation or
liability of or by Lessor or any Certificate Purchaser; (vi) to the maximum
extent permitted by law, any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like case or
proceeding relating to Lessee, Lessor, any Certificate Purchaser or any other
Person, or any action taken with respect to this Lease by any trustee or
receiver of Lessee, Lessor, any Certificate Purchaser or any other Person, or by
any court, in any such proceeding; (vii) any claim that Lessee has or might have
against any Person, including Lessor, any vendor, manufacturer, contractor of or
for the Leased Property or any Certificate Purchaser; (viii) any failure on the
part of Lessor to perform or comply with any of the terms of this Lease, of any
other Operative Document or of any other agreement; (ix) any invalidity,
unenforceability, illegality or disaffirmance of this Lease or any other
Operative Document or any provision hereof or thereof; (x) the impossibility or
illegality of performance by Lessee, Lessor or both; (xi) any action by any
court, administrative agency or other Government Authority; (xii) any
restriction, prevention or curtailment of or interference with the construction
on or any use of the Leased Property or any part thereof, including, without
limitation, with regard to the Financed Improvements; or (xiii) any other cause
or circumstances whether similar or dissimilar to the foregoing and whether or
not Lessee shall have notice or knowledge of any of the foregoing. The parties
intend that the obligations of Lessee hereunder shall be covenants and
agreements that are separate and independent from
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<PAGE>
any obligations of Lessor or any Certificate Purchaser hereunder or under any
other Operative Documents and the obligations of Lessee shall continue
unaffected unless such obligations shall have been modified or terminated in
accordance with an express provision of this Lease.
SECTION 4.10. No Termination or Abatement. Lessee shall remain obligated
---------------------------
under this Lease in accordance with its terms and, consistent with the intention
of the parties expressed in Sections 2.9 and 13.1, shall not take any action to
------------ ----
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting Lessor or any Certificate Purchaser, or any action with
respect to this Lease which may be taken by any custodian, receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of such Person.
Lessee hereby waives all right (i) to terminate or surrender this Lease (except
as provided herein) or (ii) to avail itself of any abatement, suspension,
deferment, reduction, setoff, counterclaim or defense with respect to any Rent.
Lessee shall remain obligated under this Lease in accordance with its terms, and
Lessee hereby waives any and all rights now or hereafter conferred by statute or
otherwise to modify or to avoid strict compliance with its obligations under
this Lease. Notwithstanding any such statute or otherwise, Lessee shall be bound
by all of the terms and conditions contained in this Lease.
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SECTION 5. MAINTENANCE AND REPAIR; ALTERATIONS AND
ADDITIONS; LIENS; ASSIGNMENT AND SUBLETTING; EASEMENTS.
SECTION 5.1. Maintenance and Repair; Compliance With Law. Lessee, at its
-------------------------------------------
own expense, shall at all times (a) maintain the Leased Property in good and
safe repair and condition, free from nuisance and in the condition required on
the Construction Completion Date, subject to ordinary wear and tear, and as a
first-class office building; (b) except to the extent Section 5.5 shall apply,
-----------
maintain, manage and monitor the Leased Property in accordance with all
Applicable Law, whether or not such maintenance requires structural
modifications, noncompliance with which (i) would have a material adverse effect
on Lessee's right to use the Leased Property, (ii) would cause any of the
results enumerated in Section 5.2(b) hereof, (iii) would materially adversely
--------------
affect the fair market value, utility, remaining economic useful life or
residual value of the Leased Property, or (iv) would adversely affect Lessor's
interest in the Leased Property; (c) comply with the standards imposed by any
insurance policies required to be maintained hereunder which are in effect at
any time with respect to the Leased Property or any portion thereof; (d)
maintain, manage and monitor the Leased Property in accordance with all
applicable contracts, including service contracts and insurance contracts; (e)
conduct all scheduled maintenance of the Leased Property in conformity with
prudent maintenance and repair guidelines and without discriminating in favor of
similar other property owned or leased by Lessee; (f) cause the Leased Property
to continue to have at all times the capacity and functional ability to be used
for, on a continuing basis (subject to normal interruption in the ordinary
course of business for maintenance, inspection and repair) and in commercial
operation, the purposes for which it was specifically designed; (g) make all
necessary or appropriate repairs, replacements and renewals of the Leased
Property or any portion thereof which may be required to keep the Leased
Property in the condition required by the preceding clauses (a) through (f),
----------- ---
whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen, and including, without limitation,
repairs, replacements and renewals that would constitute capital expenditures
under GAAP if incurred by an owner of property; and (h) procure, maintain and
comply in all material respects with all material licenses, permits, orders,
approvals, consents and other authorizations required for the construction, use,
maintenance and operation, repair and restoration of the Leased Property. Lessee
waives any right that it may now have or hereafter acquire to (x) require Lessor
to maintain, repair, replace, alter, remove or rebuild all or any part of the
Leased Property or (y) make repairs at the expense of Lessor pursuant to any
Applicable Law or other agreements.
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SECTION 5.2. Alterations. (a) At Lessee's own cost and expense, (i)
-----------
Lessee shall make alterations, renovations, improvements and additions to any
portion of the Leased Property and substitutions and replacements therefor
(collectively, but excluding any portion of the Financed Improvements,
"Alterations") so long as such Alterations are (A) made to repair or maintain
- ------------
the Leased Property in the condition required by Section 5.1; (B) necessary in
-----------
order for the Leased Property to be in compliance with Applicable Law; or (C)
necessary or advisable to restore the Leased Property to its condition existing
prior to a Casualty or Condemnation; and (ii) so long as no Event of Default or
Default exists, Lessee may undertake Alterations on the Leased Property so long
as such Alterations comply with Applicable Law and with Section 5.1 and
-----------
subsection (b) of this Section 5.2.
- -------------- -----------
(b) The making of any Alterations must be in compliance with the following
requirements:
(1) No such Alterations with a cost exceeding $1,000,000 shall be made or
undertaken except upon not less than ten (10) Business Days' prior written
notice to Lessor; provided, however, that in the event an Alteration must be
-------- -------
performed immediately to protect any Person or property, Lessee shall give
Lessor such notice as is practicable and in any event shall notify Lessor
promptly upon the commencement of such Alteration.
(2) Lessee shall not make any Alterations in violation of the terms of any
restriction, easement, condition or covenant or other matter affecting title
to the Leased Property.
(3) No Alterations shall be undertaken until Lessee shall have procured
and paid for, so far as the same may be required from time to time, all
permits and authorizations relating to such Alterations of all municipal and
other Authorities having jurisdiction over the Leased Property; and Lessor,
at Lessee's expense, shall join in the application for any such permit or
authorization and execute and deliver any document in connection therewith,
whenever such joinder is necessary or advisable.
(4) The Alterations shall be expeditiously completed in a good and
workmanlike manner and in compliance with all Applicable Law then in effect
and the standards imposed by any insurance policies required to be maintained
hereunder.
(5) All Alterations shall, when completed, be of such a character as to
not materially adversely affect the fair market value, utility, remaining
economic useful life or residual value of the Leased Property from its fair
market
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<PAGE>
value, utility, remaining economic useful life or residual value
immediately prior to the making thereof or, in the case of Alterations being
made by virtue of a Casualty or Condemnation, immediately prior to the
occurrence of such Casualty or Condemnation; and if the cost of such
Alterations is in excess of the amount set forth in subsection (1) above and
if requested by the Required Certificate Purchasers, Lessor shall engage an
appraiser of nationally recognized standing, at Lessee's expense, to
determine (by appraisal methods reasonably satisfactory to the Required
Certificate Purchasers) the projected fair market value of the Leased
Property following the completion of Alterations relating thereto.
(6) Lessee shall have made adequate arrangements for payment of the cost
of all Alterations when due so that the Leased Property shall at all times be
free of Liens for labor and materials supplied or claimed to have been
supplied to the Leased Property, other than Permitted Liens; provided, that
--------
Lessee shall have the right to contest the amount claimed by any such
supplier of labor or materials in accordance with the applicable provisions
of Section 5.5.
-----------
(7) The Alterations must be located solely on the Land.
SECTION 5.3. Title to Alterations. Title to Alterations shall without
--------------------
further act vest in Lessor and shall be deemed to constitute a part of the
Leased Property and be subject to this Lease, including the Lien hereof, in the
following cases:
(a) such Alterations constitute all or any portion of the Leased Property
or shall be in replacement of or in substitution for a portion of the Leased
Property;
(b) such Alterations shall be required to be made pursuant to the terms of
Section 5.1 or Section 5.2(a)(i) hereof;
- ----------- -----------------
(c) such Alterations shall not be readily severable from the Land;
(d) the removal of such Alterations would adversely affect the fair market
value of the Leased Property; or
(e) an Event of Default shall have occurred.
Lessee, at Lessor's request, shall execute and deliver any deeds, bills of
sale, assignments or other documents of conveyance reasonably necessary to
evidence the vesting of title in and to such Alterations to Lessor.
If such Alterations are not within any of the
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categories set forth in clauses (a) through (d) of this Section 5.3 and no Event
----------- --- -----------
of Default has occurred, then title to such Alterations shall vest in Lessee and
such Alterations shall not be deemed to be Alterations which are part of the
Leased Property.
All Alterations to which Lessee shall have title may, so long as removal
thereof shall not result in the violation of any Applicable Law and no Event of
Default or Default exists, be removed at any time by Lessee. Any such
Alterations shall be removed by Lessee at its expense if Lessor shall so request
prior to the return of the Leased Property to Lessor or sale of the Leased
Property in accordance with the provisions of this Lease, and Lessee shall at
its expense repair any damage to the Leased Property caused by the removal of
such Alterations. Lessor (or the purchaser of the Leased Property) may purchase
from Lessee Alterations (if not already owned by Lessor) which Lessee notifies
Lessor that Lessee intends to remove from the Leased Property prior to the
return of the Leased Property to Lessor or the sale of the Leased Property,
which purchase shall be at the Fair Market Value of such Alterations. Title to
any Alterations to which Lessee shall have title shall vest in Lessor (or the
purchaser of the Leased Property) if not removed from the Leased Property by
Lessee prior to the return of the Leased Property to Lessor or the sale of the
Leased Property.
SECTION 5.4. Maintenance and Repair Reports. Lessee shall keep
------------------------------
maintenance and repair reports in sufficient detail consistent with its
customary practice, and as customary for owners of commercial real estate, to
indicate the nature and date of major work done. Such reports shall be kept on
file by Lessee at its offices during the Lease Term and shall be made available
to Lessor upon reasonable request. Promptly after Lessee has knowledge thereof,
Lessee shall give notice to Lessor of any Condemnation or Casualty of which the
cost to restore or repair, or the value of any damage suffered, is reasonably
expected by Lessee to exceed $1,000,000.
SECTION 5.5. Permitted Contests. If, to the extent and for so long as
------------------
(a) a test, challenge, appeal or proceeding for review of any Applicable Law or
any Government Action relating to any portion of the Leased Property or to the
operation or maintenance of any portion of the Leased Property shall be
prosecuted diligently and in good faith in appropriate proceedings by Lessee or
(b) compliance with such Applicable Law or such Government Action shall have
been excused or exempted by a valid nonconforming use permit, waiver, extension
or forbearance, Lessee shall not be required to comply with such Applicable Law
or such Government Action but only if and so long as any such test, challenge,
appeal, proceeding or noncompliance shall constitute in the opinion of the
Required Certificate Purchasers a Permitted Contest.
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Lessor will not be required to join in any proceedings pursuant to this
Section 5.5 unless a provision of any Applicable Law requires, or, in the good
- -----------
faith opinion of Lessee, it is helpful to Lessee, that such proceedings be
brought by or in the name of Lessor; and in such event Lessor will join in the
proceedings or permit them or any part thereof to be brought in its name if and
so long as no Event of Default or Default exists and Lessee pays all related
expenses and indemnifies Lessor and the Certificate Purchasers to the
satisfaction of the respective Indemnitees.
SECTION 5.6. Use. The Leased Property shall be used only as a first-
---
class office building and for related ancillary purposes consistent with
Lessee's business purposes. Lessee shall not use the Leased Property or any
part thereof for any purpose or in any manner that would materially adversely
affect the Fair Market Value, utility, remaining useful life or residual value
of the Leased Property, would create a materially increased risk of
environmental liability or would violate or conflict with, or constitute or
result in a violation or default under, (a) any Applicable Law, whether now or
hereafter existing, except as permitted pursuant to Section 5.5 (b) any
-----------
insurance policies required by Section 6.7, or (c) any Operative Document.
-----------
Lessee shall pay, or cause to be paid, all charges and costs required in
connection with the use of the Leased Property as contemplated by this Lease.
Lessee shall not commit or permit any waste of the Leased Property or any part
thereof or take any act or fail to take any act which would cause or permit a
nuisance to exist or occur upon the Leased Property.
SECTION 5.7. Liens. (a) Lessee will not directly or indirectly create,
-----
incur, assume or suffer to exist any Lien (other than Permitted Liens and Liens
which are the subject of a Permitted Contest) on or with respect to (x) any
portion of the Leased Property, Lessor's title thereto, or any interest therein,
or (y) this Lease or any of Lessor's or any Certificate Purchaser's interests
hereunder. Lessee, at its own expense, will promptly pay, satisfy and otherwise
take such actions as may be necessary to keep this Lease and the Leased Property
free and clear of, and duly to discharge or eliminate or bond in a manner
reasonably satisfactory to Lessor and the Required Certificate Purchasers, any
Lien if the same shall arise at any time. Lessee will notify Lessor and
Certificate Purchasers in writing promptly upon becoming aware of any Tax or
other Lien that shall attach to the Leased Property, and of the full particulars
thereof.
(b) Nothing contained in this Lease shall be construed as constituting the
consent or request of Lessor, expressed or implied, to or for the performance by
any contractor, mechanic, laborer, materialman, supplier or vendor of any labor
or services or for the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to the Leased
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<PAGE>
Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NEITHER LESSOR, THE
CERTIFICATE TRUSTEE NOR THE CERTIFICATE PURCHASERS IS OR SHALL BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO
ANYONE HOLDING THE LEASED PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE,
AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR, THE CERTIFICATE PURCHASERS OR
THE CERTIFICATE TRUSTEE IN AND TO THE LEASED PROPERTY.
SECTION 5.8. Inspection. Upon the request of Lessor or the Required
----------
Certificate Purchasers, Lessee shall at reasonable times and upon reasonable
notice make the Leased Property available to Lessor or any Certificate Purchaser
or their respective agents for inspection and shall also make Lessee's records
pertaining to the Leased Property available for inspection, provided, that from
--------
and after the occurrence of an Event of Default, all costs and expenses of
Lessor or any Certificate Purchaser in connection with such inspection shall be
borne by Lessee.
SECTION 5.9. Assignment and Subletting. Lessee may not assign, mortgage
-------------------------
or pledge, in whole or in part, any of its rights, title or interest in, to or
under this Lease or any portion of the Leased Property to any Person, including
an Affiliate of Lessee, at any time. Any such assignment, mortgage or pledge
shall be void. Except as expressly provided in this Section 5.9, Lessee may not,
-----------
without the prior written consent of Lessor (which may be granted or withheld in
the sole discretion of Lessor) sublease, in whole or in part, any of its right,
title or interest to or under this Lease or any portion of the Leased Property
to any other Person (other than to a Subsidiary of Lessee upon at least ten
Business Days' notice to Lessor), or permit the Leased Property or any portion
thereof to be used or occupied by any other person at any time, and any such
sublease, use or occupancy shall be void. Lessee may enter into a sublease of
space in the Facility provided that the aggregate amount of such subleased space
does not exceed 25% of the aggregate space in the Facility, and provided that
(i) no Event of Default shall have occurred and be continuing, (ii) the proposed
subtenant shall have a financial standing, be of a character, be engaged in a
business, and propose to use the Leased Property in a manner in keeping with the
standards set forth in this Lease, (iii) the character of the business to be
conducted or the proposed use of the Facility by the proposed subtenant shall
not violate any provision or restrictions relating to the use or occupancy of
the Leased Property, (iv) the subletting shall be in writing and expressly
subject to all of the terms, covenants, conditions and obligations on Lessee's
part to be observed and performed under this Lease and the further condition and
restriction that the sublease shall not be assigned, encumbered or otherwise
transferred or the subleased premises further sublet by the subtenant in whole
or in part, or any part thereof suffered or permitted by the subtenant to be
used
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<PAGE>
or occupied by others, without the prior written consent of Lessor in each
instance, which may be withheld in Lessor's sole discretion, (v) the
sublease shall expressly provide that it shall terminate no later than one (1)
day before the Lease Termination Date unless Lessee shall purchase the Leased
Property pursuant to Section 9.1(b), (vi) at no time shall there be more than
--------------
four (4) occupants, including Lessee, in the Facility, and (vii) Lessee shall
deliver notice of any proposed sublease to Lessor at least thirty (30) days
prior to the commencement date thereof. No sublease or other relinquishment of
possession of the Leased Property shall in any way discharge or diminish any of
Lessee's obligations to Lessor hereunder and Lessee shall remain directly and
primarily liable under this Lease with respect to all of the Leased Property.
Any sublease of the Leased Property shall expressly be made subject and
subordinate to this Lease and to the rights of Lessor hereunder and the liens
created hereby, and shall expressly provide for the surrender of the Leased
Property by any sublessee after an Event of Default.
SECTION 5.10. Easements. At the request of Lessee, Lessor shall, from
---------
time to time during the Lease Term and upon at least thirty (30) days' prior
written notice from Lessee, and receipt of the materials specified in the next
succeeding sentence, consent to and join in any (i) grant of easements,
licenses, rights of way, party wall rights and other rights in the nature of
easements, with or without consideration, (ii) release or termination of
easements, licenses, rights of way, party wall rights or other rights in the
nature of easements which are for the benefit of the Land or any portion
thereof, with or without consideration, (iii) dedication or transfer of portions
of the Land, not improved with a building, for road, highway or other public
purposes, with or without consideration, (iv) execution of petitions to have any
portion of the Land annexed to any municipal corporation or utility district,
(v) execution of agreements for the use and maintenance of common areas, for
reciprocal rights of parking, ingress and egress and amendments to any covenants
and restrictions affecting the Land or any portion thereof, with or without
consideration, (vi) request to any Authority for platting or subdivision or
replatting or resubdivision approval with respect to the Land or any portion
thereof or any parcel of land of which the Land or any portion thereof forms a
part or a request for any variance from zoning, (vii) creation of a governmental
special benefit district for public improvements and collection of special
assessments in connection therewith, in lump sum or installments, and (viii)
execution and delivery of any instrument appropriate to confirm or effect such
grant, release, dedication, transfer request or such other matter, document or
proceeding. Lessor's obligations pursuant to the preceding sentence shall be
subject to the requirements that:
(a) any such action shall be at the sole cost and expense of Lessee, and
Lessee shall pay all reasonable out-of-
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pocket costs of Lessor and the Certificate Purchasers in connection therewith
(including, without limitation, the reasonable fees of attorneys (including
allocated costs of internal counsel of Arranger; provided, that Lessee shall not
be responsible for any legal fees and expenses of more than one counsel to
Arranger and the Certificate Purchasers and the allocated internal costs of
internal counsel of Arranger), architects, engineers, planners, appraisers and
other professionals retained by Lessor or the Certificate Purchasers in
connection with any such action);
(b) Lessee shall have delivered to Lessor a certificate of an Authorized
Officer of Lessee stating that:
(1) such action will not cause the Leased Property or any portion
thereof to fail to comply in any respect with the provisions of the Lease
or any other Operative Documents and in any material respect with all
Applicable Law (including, without limitation, all applicable zoning,
planning, building and subdivision ordinances, all applicable restrictive
covenants and all applicable architectural approval requirements);
(2) all governmental consents or approvals required prior to such
action have been obtained, and all filings required prior to such action
have been made;
(3) such action will not result in any material down-zoning of the
Land or any portion thereof or a material reduction in the maximum density
or development rights available to the Land under all Applicable Law;
(4) this Lease and Lessee's obligations hereunder shall continue in
full force and effect, without abatement, suspension, deferment,
diminution, reduction, counterclaim, setoff, defense or deduction;
(5) such action will not materially reduce the Fair Market Value,
utility, remaining economic useful life or residual value of the Leased
Property or Lessor's interest therein; and
(6) such action will not impose or create any liability or obligation
on Lessor;
(c) all consideration received in connection with such action shall be
paid to Lessee; and
(d) no Event of Default shall have occurred and be continuing.
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SECTION 6. RISK OF LOSS; INSURANCE.
SECTION 6.1. Event of Loss; Condemnation or Casualty.
---------------------------------------
(a) If an Event of Loss shall occur, Lessee shall give Lessor and
each Certificate Purchaser prompt written notice of such occurrence and the date
thereof and Lessee shall purchase the Leased Property from Lessor on the next
succeeding Payment Date after the date such Event of Loss shall have occurred
(but in no event earlier than the first to occur of Lessee's receipt of
insurance or condemnation proceeds from such Event of Loss or 90 days from the
occurrence of such Event of Loss) at a purchase price equal to the sum of (i)
the Lease Balance, plus (ii) all accrued but unpaid Rent, plus (iii) all other
sums due and payable by Lessee to Lessor or any Certificate Purchaser under any
of the Operative Documents. In the case of an Event of Taking which is deemed to
have occurred because of a requisition which is not scheduled to last beyond the
Lease Termination Date but which in fact is continuing on the Lease Termination
Date, the foregoing purchase price shall be paid on the Lease Termination Date.
(b) Upon payment in full of all amounts payable pursuant to Section
-------
6.1(a), (i) the Lease Term shall end with respect to the Leased Property and
- ------
(ii) the obligations of Lessee hereunder with respect to the Leased Property
(other than any obligations expressed herein as surviving termination of this
Lease) shall terminate as of the date of such payment.
SECTION 6.2. Application of Payments Relating to an Event of Loss. All
----------------------------------------------------
Net Condemnation Proceeds and property insurance proceeds received at any time
by Lessee from any Authority or other Person with respect to any Event of Loss
shall be promptly remitted to Lessor and, upon the purchase of the Leased
Property by Lessee pursuant to Section 6.1(a), applied against the purchase
------- ------
price payable by Lessee pursuant to Section 6.1(a), and, unless a Default or
------- ------
an Event of Default exists and subject to Section 13.2, any such Net
------------
Condemnation Proceeds and property insurance proceeds remaining thereafter shall
be paid over to, or retained by, Lessee, or paid as Lessee may direct.
SECTION 6.3. Application of Certain Payments Relating to a Condemnation.
----------------------------------------------------------
In case of a requisition for temporary use of all or a portion of the Leased
Property which is not an Event of Taking, this Lease shall remain in full force
and effect, without any abatement or reduction of Rent, and the proceeds
received from any Authority relating to a Condemnation for the affected portion
of the Leased Property shall, so long as no Default or Event of Default exists
and subject to Section 13.2, be paid to Lessee for use by Lessee to the extent
------------
applicable to repair and restore the Leased Property to the condition required
by Section 5.1. Notwithstanding anything herein to the contrary, any portion of
-----------
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such proceeds that is awarded with respect to the time period after the
expiration or termination of the Lease Term (unless Lessee shall have exercised
an option to purchase the Leased Property and consummated such purchase) shall
be paid to Lessor; provided, that if Lessee has paid (i) the Lease Balance, plus
--------
(ii) all accrued but unpaid Rent, plus (iii) all other sums due and payable by
Lessee to Lessor or any Certificate Purchaser under any of the Operative
Documents, such proceeds (or the portion of such proceeds in excess of the
portion thereof applied as set forth above) shall be paid over to Lessee.
SECTION 6.4. Casualty. Upon any Casualty with respect to any portion of
--------
the Leased Property the cost of repair of which would exceed $2,000,000 Lessee
shall immediately give to Lessor written notice thereof. As soon as practicable
after a Casualty, but in any event prior to the Lease Termination Date, Lessee
shall promptly commence and diligently proceed in a commercially reasonable
manner to repair and rebuild the affected portions of the Leased Property
suffering such Casualty (or cause such affected portions to be repaired and
rebuilt) to the condition required to be maintained by Section 5.1 hereof;
-----------
provided, that the value and functional capability of such item as restored is
- --------
at least equivalent to the value and functional capability of such item as in
effect immediately prior to the occurrence of such Casualty. Any insurance
proceeds in excess of $2,000,000 received with respect to any Casualty shall be
paid over to or retained by Lessor until, subject to Section 13.2, Lessee
------------
repairs and rebuilds (or causes to be repaired and rebuilt) the affected
portions of the applicable Leased Property in accordance with the conditions set
forth in this Section 6.4; provided that such proceeds shall be distributed to
----------- --------
Lessee (subject to Section 13.2) from time to time in reimbursement for funds
------------
expended by Lessee in repairing and rebuilding the Facility.
SECTION 6.5. Negotiations. If any part of the Leased Property becomes
------------
subject to condemnation or requisition proceedings, Lessee shall give notice
thereof to Lessor promptly after Lessee has knowledge thereof and, to the extent
permitted by any Applicable Law, Lessee shall control the negotiations with the
relevant Authority unless a Default or Event of Default exists, in which case
Lessor shall control such negotiations; provided, that in any event Lessor may
--------
participate at Lessor's expense (or if a Default or Event of Default exists, at
Lessee's expense) in such negotiations; and provided in all cases, that no
--------
settlement will be made without Lessor's prior written consent, not to be
unreasonably withheld. Lessee shall give to Lessor such information, and copies
of such documents, which relate to such proceedings, or which relate to the
settlement of amounts due under insurance policies required by Section 6.7, and
-----------
are in the possession of Lessee, as are reasonably requested by Lessor. If the
proceedings relate to an Event of Taking, Lessee shall act diligently in
connection therewith.
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SECTION 6.6. No Rent Abatement. Rent shall not abate hereunder by reason
-----------------
of any Casualty, any Event of Loss, any Event of Taking or any Condemnation of
any portion of the Leased Property, and Lessee shall continue to perform and
fulfill all of Lessee's obligations, covenants and agreements hereunder
notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation
until the Lease Termination Date.
SECTION 6.7. Required Coverages. Lessee will keep insured all property
------------------
of a character usually insured by prudent corporations engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such corporations (including
customary deductibles and self-insured retention), and carry such other
insurance as is usually carried by such corporations, provided that in any event
--------
Lessee will maintain:
(a) Comprehensive General Liability Insurance. Combined single limit
-----------------------------------------
insurance against claims for bodily injury, death or third-party property damage
occurring on, in or about the Leased Property in an amount at least equal to
$10,000,000 per occurrence, with a minimum combined single limit of $10,000,000.
(b) Property Insurance. Insurance against loss or damage covering
------------------
the Leased Property or any portion thereof by reason of any Peril (as defined
below) in an amount (subject to such deductibles and/or self-insurance in such
minimum amounts as is carried by prudent corporations owning and/or operating
similar properties) equal to the actual replacement cost of the Leased Property;
provided, however, that at no time shall the amount of such coverage, on a
- -------- -------
replacement cost basis, be less than the then outstanding Lease Balance. The
term "Peril" shall mean, collectively, fire, lightning, flood, windstorm, hail,
-----
explosion, riot and civil commotion, vandalism and malicious mischief, damage
from aircraft, vehicles and smoke and all other perils covered by the "all risk
endorsement" then in use in the Commonwealth of Pennsylvania.
(c) Workers' Compensation Insurance. Lessee shall, in the
-------------------------------
construction of the Financed Improvements or Alterations and the operation of
the Leased Property, comply with the applicable workers' compensation laws of
the Commonwealth of Pennsylvania.
(d) Builder's Risk Insurance. During the construction of the
------------------------
Financed Improvements, any other improvements or any Alteration, Lessee shall
also maintain builders' all-risk insurance in an amount equal to the greater of
the replacement value of the applicable improvements and any Alterations and the
aggregate cost for the construction of same.
(e) Other Insurance. Such other insurance, including
---------------
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<PAGE>
worker's compensation and business interruption insurance, in each case as is
generally carried by owners of similar properties in such amounts and against
such risks as are then customary for properties similar in use.
Such insurance shall be written by reputable insurance companies that are
financially sound and solvent and otherwise reasonably appropriate considering
the amount and type of insurance being provided by such companies. Any
insurance company selected by Lessee shall be rated in A.M. Best's Insurance
Guide or any successor thereto (or if there be none, an organization having a
similar national reputation) and shall have a general policyholder rating of "A"
(or comparable rating for a rating by an organization other than A.M. Best) and
a financial rating of at least "VII" (or comparable rating for a rating by an
organization other than A.M. Best) or be otherwise acceptable to the Required
Certificate Purchasers. In the case of liability insurance maintained by
Lessee, it shall name Lessor (both in its individual capacity and as Certificate
Trustee) and each Certificate Purchaser as additional insureds and, in the case
of property insurance maintained by Lessee, it shall name Lessor as mortgagee
and loss payee subject to the terms of Section 6.4. Each policy referred to in
-----------
this Section 6.7 shall provide that: (i) it will not be cancelled, materially
-----------
modified or its limits reduced, or allowed to lapse without renewal, except
after not less than thirty (30) days' prior written notice to Lessor and each
Certificate Purchaser; (ii) in the case of general liability insurance, the
interests of Lessor or any Certificate Purchaser shall not be invalidated by any
act or negligence of or breach of warranty or representation by Lessee or any
Person having an interest in the Leased Property; (iii) such insurance is
primary with respect to any other insurance carried by or available to Lessor or
any Certificate Purchaser; (iv) the insurer shall waive any right of
subrogation, setoff, counterclaim, or other deduction, whether by attachment or
otherwise, against Lessor and the Certificate Purchasers; and (v) in the case of
general liability insurance, such policy shall contain a cross-liability clause
providing for coverage of Lessor and the Certificate Purchasers as if there were
a separate policy insuring each of them; however, such clause (v) shall in no
----------
way increase the per-occurrence limit set forth in Section 6.7(a) above. Lessor
--------------
and Certificate Purchasers shall not be liable for the payment of any premiums.
Lessee will notify Lessor and the Certificate Purchasers promptly of any policy
cancellation, reduction in policy limits, modification or amendment.
SECTION 6.8. Delivery of Insurance Certificates. On or before the
----------------------------------
Initial Advance Date and thereafter on each subsequent Advance Date, Lessee
shall deliver to Lessor certificates of insurance satisfactory to Lessor and the
Certificate Purchasers evidencing the existence of all insurance required to be
maintained hereunder and setting forth the respective coverages,
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<PAGE>
limits of liability, carrier, policy number and period of coverage. Thereafter,
throughout the Lease Term, at the time each of Lessee's insurance policies is
renewed (but in no event less frequently than once each year), Lessee shall
deliver to Lessor certificates of insurance evidencing that all insurance
required by Section 6.7 to be maintained by Lessee with respect to the Leased
-----------
Property is in effect.
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<PAGE>
SECTION 7. INDEMNITIES.
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<PAGE>
SECTION 7.1. General Indemnification. Lessee agrees, whether or not any
-----------------------
of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless on an
after-tax basis (in accordance with Section 7.5) each Indemnitee from and
-----------
against any and all Claims that may be imposed on, incurred by or asserted
against such Indemnitee (whether because of action or omission, negligent or
otherwise, by such Indemnitee or otherwise), whether or not such Indemnitee
shall also be indemnified as to any such Claim by any other Person and whether
or not such Claim arises or accrues prior to the Initial Advance Date or after
the Lease Termination Date, in any way relating to or arising out of (a) any of
the Operative Documents or any of the transactions contemplated thereby or any
investigation, litigation or proceeding in connection therewith, and any
amendment, modification or waiver in respect thereof; or (b) the Leased Property
or any part thereof or interest therein; or (c) the acquisition, mortgaging,
design, construction, preparation, installation, inspection, delivery, non-
delivery, acceptance, rejection, purchase, ownership, possession, rental, lease,
sublease, repossession, maintenance, repair, alteration, modification, addition
or substitution, storage, transfer of title, redelivery, use, financing,
refinancing, operation, condition, sale (including, without limitation, any sale
pursuant to Section 8.2 or Section 9.1), return or other disposition of all or
----------- -----------
any part of any interest in the Leased Property or the imposition of any Lien
(or incurrence of any liability to refund or pay over any amount as a result of
any Lien) thereon, including, without limitation: (i) Claims or penalties
arising from any violation of Applicable Law or in tort (strict liability or
otherwise), (ii) loss of or damage to the environment (including, without
limitation, investigation costs, clean-up costs, response costs, remediation and
removal costs, costs of corrective action, costs of financial assurance, and all
other damages, costs, fees and expenses, fines and penalties, including natural
resource damages), or death or injury to any Person, and all expenses associated
with the protection of wildlife, aquatic species, vegetation, flora and fauna,
and any mitigative action required by or under Environmental Laws, (iii) latent
or other defects, whether or not discoverable by Lessee or any Indemnitee, (iv)
any Claims resulting from the existence or Release of any Hazardous Materials at
or from the Leased Property and (v) any Claim for patent, trademark, trade name
or copyright infringement, provided, that the matters in this clause (c) shall
-------- ----------
be without duplication of any matter for which indemnification is provided
pursuant to the Environmental Indemnity; (d) the offer, issuance, sale or
delivery of the Certificates; (e) the breach or alleged breach by Lessee of any
representation or warranty made by it or deemed made by it in any Operative
Document; (f) the transactions contemplated hereby or by any other Operative
Document in respect of any Prohibited Transaction; or (g) any other agreement
entered into or assumed by Lessee in connection with the Leased Property
(including, in each
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<PAGE>
case, matters based on or arising from the negligence of any Indemnitee).
Lessee shall not be required to indemnify under this Section 7.1 for (1) as
-----------
to an Indemnitee, any Claim to the extent resulting from the willful misconduct
or gross negligence of such Indemnitee or to the extent resulting from the
breach of representations, warranties or covenants of such Indemnitee
(including, in the case of clause (f) of this Section 7.1, the representation of
---------- -----------
such Certificate Purchaser set forth in Section 10.2(a) and the covenant of such
---------------
Certificate Purchaser set forth in Section 11.6(a)(iii)), (2) any Claims in
--------------------
respect of Taxes (such Claims to be subject to Section 7.2), other than a
-----------
payment necessary to make payments under this Section 7.1 on an after-tax basis,
-----------
provided, that this clause (2) does not apply to any taxes or penalties included
- -------- ----------
in Claims against which the Indemnitee is provided an indemnification under
clause (f) of this Section 7.1, (3) as to an Indemnitee, any Claim resulting
- ---------- -----------
from Lessor Liens which such Indemnitee is responsible for discharging under the
Operative Documents and (4) as to any Indemnitee, any Claim which the Indemnitor
is unable to legally contest as a result of the failure of the Indemnitee to
deliver in a timely manner notice to the Indemnitor of such Claim or proposed
Claim, and (i) such failure directly results in Indemnitor's inability to
contest such Claim and (ii) Indemnitor does not independently have knowledge of
the Claim.
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<PAGE>
SECTION 7.2. General Tax Indemnity.
---------------------
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<PAGE>
(a) Tax Indemnity. Lessee shall pay, defend and, on written demand,
-------------
indemnify and hold harmless on an after-tax basis (in accordance with Section
-------
7.5) each Indemnitee from and against, any and all Taxes, howsoever imposed, on
- ---
or with respect to any Indemnitee, the Leased Property or any portion thereof,
any Operative Document or Lessee or any sublessee or user of the Leased Property
by any Authority in connection with or in any way relating to (i) the
acquisition, mortgaging, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, purchase, ownership,
possession, rental, lease, sublease, repossession, maintenance, repair,
alteration, modification, addition or substitution, storage, transfer of title,
redelivery, use, financing, refinancing, operation, condition, sale (including,
without limitation, any sale pursuant to Section 8.2 or Section 9.1), return or
----------- -----------
other disposition of all or any part of any interest in the Leased Property or
the imposition of any Lien (or incurrence of any liability to refund or pay over
any amount as a result of any Lien) thereon, (ii) Basic Rent or Supplemental
Rent or the receipts or earnings arising from or received with respect to the
Leased Property or any part thereof, or any interest therein or any applications
or dispositions thereof, (iii) any other amount paid or payable pursuant to the
Certificates or any other Operative Documents, the property or the income or
other proceeds with respect to the property held in the Trust Estate, (iv) the
Leased Property or any part thereof or any interest therein, (v) all or any of
the Operative Documents, any other documents contemplated thereby and any
amendments and supplements thereto, and (vi) otherwise with respect to or in
connection with the Overall Transaction; provided, however, that the
-------- -------
indemnification obligation of this Section 7.2(a) shall not apply to (A) Taxes
--------------
which are based upon or measured by the Indemnitee's net income or alternative
minimum taxable income, or which are expressly in substitution for, or relieve
Indemnitee from, any actual Tax based upon or measured by Indemnitee's net
income; (B) Taxes characterized under local law as franchise, net worth, or
shareholder's capital (excluding, however, any value-added, license, property or
similar Taxes); and (C) if no Event of Default exists, Taxes based upon the
voluntary transfer, assignment or disposition by Lessor or any Certificate
Purchaser of any interest in any of the Leased Property (other than transfers
pursuant to the exercise of the Sale Option or Purchase Option, a transfer to
Lessee or otherwise pursuant to the Lease). Notwithstanding the proviso of the
preceding sentence, Lessee shall pay or reimburse, and indemnify and hold
harmless, any Indemnitee (A) from any Tax to the extent such Tax would not have
been imposed if on the Initial Advance Date Lessor had advanced funds directly
to Lessee in the form of a loan secured by the Leased Property in an amount
equal to the aggregate amounts advanced on the Advance Dates with the debt
service for such loan equal to the rents payable pursuant to the Lease and a
principal balance due at the end of the Lease Term in the amount of the Lease
Balance remaining at the end of the Lease Term; and (B)
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<PAGE>
which is not incorporated under the laws of the United States, or a state
thereof, and which has complied with Section 7.3, from any deduction or
-----------
withholding of any United States Federal income tax.
(b) Contests. Lessee shall pay on or before the time or times prescribed
--------
by law any Taxes (except any Taxes excluded by the proviso to Section 7.2(a));
--------------
provided, however, that Lessee shall be under no obligation to pay any such Tax
- -------- -------
so long as the payment of such Tax is not delinquent or is being contested by a
Permitted Contest. If any claim or claims is or are made against any Indemnitee
for any Tax which is subject to indemnification as provided in Section 7.2(a),
--------------
Indemnitee shall, as soon as practicable, but in no event more than twenty (20)
days after receipt of formal written notice of the Tax or proposed Tax, notify
Lessee; provided that the failure to give such notice shall not limit Lessee's
--------
obligations under Section 7.2(a), unless (i) the failure to provide such notice
--------------
directly results in Lessee's inability to contest such Tax and (ii) Lessee does
not independently have knowledge of the Tax or proposed Tax; and if, in the
reasonable opinion of Lessee and (in the case of any Tax which may reasonably be
expected to exceed $100,000 in the aggregate) tax counsel acceptable to the
Indemnitee, there exists a basis to contest such Tax which satisfies the
requirements of ABA Formal Opinion 85-352 (and if the provisos of the definition
--------
of "Permitted Contest" continue to be satisfied and so long as no Event of
Default exists), Lessee at its expense may, to the extent permitted by
Applicable Law, contest such Tax, and subsequently may appeal any adverse
determination, in the appropriate administrative and legal forums, and Lessor
hereby authorizes Lessee to contest, by a Permitted Contest, any real estate
taxes or assessments in the name of Lessor so long as Lessee shall keep Lessor
apprised of the status of such proceedings; provided that in all other
--------
circumstances so long as no Event of Default exists, upon notice from Lessee to
such Indemnitee that there exists a basis to contest any such Tax which
satisfies the requirements of ABA Formal Opinion 85-352 (as supported by an
opinion of tax counsel to Lessee acceptable to the Indemnitee), the Indemnitee,
at Lessee's expense, shall contest any such Tax. Lessee shall pay all expenses
incurred by the Indemnitee in contesting any such Tax (including, without
limitation, all reasonable attorneys' and accountants' fees, including the
allocated costs of internal counsel), upon demand by the Indemnitee. Lessee
shall have the right to participate in the conduct of any proceedings controlled
by the Indemnitee to the extent that such participation by such Person does not
interfere with the Indemnitee's control of such contest and Lessee shall in all
events be kept informed, to the extent practicable, of material developments
relative to such proceedings. The Indemnitee shall have the right to participate
in the conduct of any proceedings controlled by Lessee and the Indemnitee shall
in all events be kept informed, to the extent practicable, of material
developments relative to such proceedings. The Indemnitees agree that a
contested claim for
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<PAGE>
which Lessee would be required to make a reimbursement payment hereunder will
not be settled or compromised without Lessee's prior written consent (which
consent shall neither be unreasonably delayed nor withheld), unless the provisos
--------
of the definition of "Permitted Contest" would not continue to be satisfied and
so long as no Event of Default exists. Indemnitee shall endeavor to settle or
compromise any such contested claim in accordance with written instructions
received from Lessee, provided, that: (x) Lessee, on or before the date the
--------
Indemnitee executes a settlement or compromise, pays the contested Tax to the
extent agreed upon or makes an indemnification payment to the Indemnitee in an
amount acceptable to the Indemnitee; and (y) the settlement or compromise does
not, in the reasonable opinion of the Indemnitee, materially adversely affect
the right of Lessor to receive Rent or the Lease Balance or any other payment
pursuant to the Operative Documents, or involve a material risk of sale,
forfeiture or loss of the Leased Property, any part thereof or any interest
therein or any matter described in the provisos to the definition of "Permitted
--------
Contest". The failure of an Indemnitee to timely contest a claim against it for
any Tax which is subject to indemnification under Section 7.2(a) and for which
--------------
it has an obligation to Lessee to contest under this Section 7.2(b) in the
--------------
manner required by Applicable Law where Lessee has timely requested that such
Indemnitee contest such claim shall relieve Lessee of its obligations to such
Indemnitee under Section 7.2(a) with respect to such claim to the extent such
--------------
failure results in the loss of an effective contest. If Applicable Law requires
the payment of a contested Tax as a condition to, or regardless of, its being
contested, and Lessee chooses to contest such Tax or to direct the Indemnitee to
contest such Tax in accordance with this Section, then Lessee shall provide the
Indemnitee with the funds to pay such Tax, such provision of funds to be deemed
a non-interest bearing loan by Lessee to the Indemnitee to be repaid by any
recovery of such Tax from such contest and any remaining unpaid amount not
recovered to offset Lessee's obligation to indemnify the Indemnitee for such
Tax. Lessee shall indemnify the Indemnitee on an after-tax basis (in accordance
with Section 7.5) for and against any adverse tax consequences of such interest-
-----------
free loan. If the Indemnitee receives a refund (or like adjustment) in respect
of any Tax (including any payments made pursuant to Section 7.5) for which the
-----------
Indemnitee has been reimbursed by Lessee, the Indemnitee shall immediately remit
the amount of such refund (or like adjustment) on an after-tax basis (in
accordance with Section 7.5) to Lessee, net of all costs and expenses incurred
-----------
by such Indemnitee.
(c) Payments. Except as otherwise permitted under Section 7.2(b), any Tax
-------- --------------
indemnifiable under Section 7.2(a) shall be paid directly when due to the
--------------
applicable taxing authority if direct payment is practicable and permitted. If
direct payment to the applicable taxing authority is not permitted or is
otherwise not made, any amount payable to an Indemnitee pursuant to Section
-------
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<PAGE>
7.2(a) shall be paid within thirty (30) days after receipt of a written demand
- ------
therefor from such Indemnitee accompanied by a written statement describing in
reasonable detail the amount so payable. Any payments made pursuant to Section
-------
7.2(a) directly to the Indemnitee entitled thereto or Lessee, as the case may
- ------
be, shall be made in immediately available funds at such bank or to such account
as specified by the payee in written directions to the payor, or, if no such
direction shall have been given, by check of the payor payable to the order of
the payee by certified mail, postage prepaid at its address as set forth in this
Lease. Upon the request of any Indemnitee with respect to a Tax that Lessee is
required to pay, Lessee shall furnish to such Indemnitee the original or a
certified copy of a receipt for Lessee's payment of such Tax or such other
evidence of payment as is reasonably acceptable to such Indemnitee.
(d) Reports. If any report, return or statement is required to be
-------
filed with respect to any Taxes that are subject to indemnification under
Section 7.2(a), Lessee shall, if Lessee is permitted by Applicable Law, timely
- --------------
prepare and file such report, return or statement; provided, however, that if
-------- -------
Lessee is not permitted by Applicable Law to file any such report, Lessee will
promptly so notify the appropriate Indemnitee, in which case the Indemnitee will
file any such report after preparation thereof by Lessee. Lessee will deliver
any such return, together with immediately available funds for payment of any
Tax due, to such Indemnitee at least ten (10) days in advance of the date such
return or payment is due.
SECTION 7.3. Withholding Tax Exemption. At least five (5) Business Days
-------------------------
prior to the first date on which any payment is due under any Certificate for
the account of any Certificate Purchaser not incorporated under the laws of the
United States or a state thereof, such Certificate Purchaser agrees that it will
have delivered to each of Lessee and Certificate Trustee two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, certifying
in either case that such Certificate Purchaser is entitled to receive payments
under the Operative Documents without deduction or withholding of any United
States Federal income taxes. Each Certificate Purchaser which so delivers a Form
1001 or 4224 further undertakes to deliver to each of Lessee and Certificate
Trustee two additional copies of such form (or a successor form) on or before
the date that such form expires (currently, three successive calendar years for
Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the
occurrence of any event requiring a change in the most recent forms so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Lessee or Certificate Trustee, in each case certifying
that such Certificate Purchaser is entitled to receive payments under the
Operative Documents without deduction or withholding of any United States
Federal income taxes, unless an event (including any change
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<PAGE>
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Certificate Purchaser from duly completing and
delivering any such form with respect to it and such Certificate Purchaser
advises Lessee and Certificate Trustee that it is not capable of receiving
payments without any withholding of United States Federal income tax.
SECTION 7.4. Excessive Use Indemnity. If at the end of the Lease Term:
-----------------------
(a) Lessee elects the Sale Option; and (b) after paying to Lessor all amounts
due under Section 9.1, including Proceeds and the aggregate Sale Recourse
-----------
Amount, Lessor does not have sufficient funds to reduce the Lease Balance to
zero, then Lessee shall promptly pay over to Lessor the shortfall unless Lessee
delivers a report from an independent appraiser in form and substance reasonably
satisfactory to the Required Certificate Purchasers which establishes that the
decline in value in the Leased Property from the aggregate amount anticipated
for such date in the Appraiser's report delivered with respect to the Leased
Property on or about the Initial Advance Date was not due to the excessive use
of the Facility or the Leased Property, failure to maintain the Facility or the
Leased Property, modifications or restorations which reduce the value of the
Facility or the Leased Property, any adverse change in the environmental
condition of the Facility or the Leased Property, any easements created on the
Leased Property after the Initial Advance Date which reduce the value of the
Facility or the Leased Property, or any defect or exception to title of the
Facility or the Leased Property or any other cause or condition within the power
of Lessee to control or affect, differing from ordinary wear and tear.
SECTION 7.5. After-Tax Basis. If an Indemnitee shall not be entitled to
---------------
a corresponding and equal deduction or deductions with respect to any payment or
Tax which Lessee is required to pay or reimburse under any other provision of
this Section 7 (each such payment or reimbursement under this Section 7, an
--------- ---------
"original payment") and which original payment constitutes income to such
Indemnitee, then Lessee shall pay to such Indemnitee on demand the amount of
such original payment on a grossed-up basis such that, after subtracting all
Taxes imposed on such Indemnitee with respect to such original payment by Lessee
(including any Taxes otherwise excluded by Section 7.2(b) and assuming for this
--------------
purpose that such Indemnitee was subject to taxation at the highest Federal,
state and local marginal rates applicable to widely held corporations for the
year in which such income is taxable), such payments shall be equal to the
original payment to be received or paid (net of any credits, deductions or other
tax benefits then actually recognized that arise from the payment by such
Indemnitee of any amount, including taxes, for which the payment to be received
is made).
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SECTION 7.6. Proceedings in Respect of Claims. With respect to any
--------------------------------
amount that Lessee is requested by an Indemnitee to pay by reason of Section
-------
7.1, such Indemnitee shall, if so requested by Lessee and prior to any payment,
- ---
submit such additional information to Lessee as Lessee may reasonably request
and which is in the possession of such Indemnitee (or to which Indemnitee can
reasonably gain access without any cost to it) to substantiate properly the
requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee, such Indemnitee shall timely notify Lessee of the commencement
thereof, and Lessee shall be entitled, at its expense, to participate in, and,
to the extent that Lessee desires to, assume and control the defense thereof;
provided, however, that Lessee shall have acknowledged in writing its obligation
- -------- -------
to fully indemnify such Indemnitee in respect of such action, suit or proceeding
and Lessee shall keep such Indemnitee fully apprised of the status of such
action, suit or proceeding and shall provide such Indemnitee with all
information with respect to such action, suit or proceeding as such Indemnitee
shall reasonably request; and provided, further, that Lessee shall not be
-------- -------
entitled to assume and control the defense of any such action, suit or
proceeding if and to the extent that, (A) in the reasonable opinion of such
Indemnitee, (x) such action, suit or proceeding involves any risk of imposition
of criminal liability or any material risk of imposition of material civil
liability on such Indemnitee or will involve a material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than a Permitted Lien)
on the Leased Property or any part thereof unless, in the case of civil
liability, Lessee shall have posted a bond or other security satisfactory to the
relevant Indemnitees in respect to such risk or (y) the control of such action,
suit or proceeding would involve an actual or potential conflict of interest,
(B) such proceeding involves Claims not fully indemnified by Lessee which Lessee
and the Indemnitee have been unable to sever from the indemnified Claim(s), or
(C) an Event of Default under the Lease has occurred and is continuing. The
Indemnitee may participate in a reasonable manner at its own expense and with
its own counsel in any proceeding conducted by Lessee in accordance with the
foregoing. Lessee shall not enter into any settlement or other compromise with
respect to any Claim which is entitled to be indemnified under Section 7.1
-----------
without the prior written consent of the Indemnitee which consent shall not be
unreasonably withheld or delayed in the case of a money settlement not involving
an admission of liability of such Indemnitee.
Each Indemnitee shall supply Lessee with all such information and documents
reasonably requested by Lessee as are necessary or advisable for Lessee to
participate in any action, suit or proceeding to the extent permitted by Section
-------
7.1 and Lessee shall reimburse the Indemnitee for the reasonable out-of-pocket
- ---
expenses
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<PAGE>
of supplying such information and documents. Unless a Lease Event of Default
shall have occurred and be continuing, no Indemnitee shall enter into any
settlement or other compromise with respect to any Claim which is entitled to be
indemnified under Section 7.1 without the prior written consent of Lessee, which
-----------
consent shall not be unreasonably withheld, unless such Indemnitee waives its
right to be indemnified under Section 7.1 with respect to such Claim, does not
-----------
admit any criminal liability or civil liability on behalf of Lessee in
connection with such Claim, and uses reasonable efforts to advise Lessee on the
status of proceedings from time to time during the pendency of such Claim.
Upon payment in full of any Claim by Lessee pursuant to Section 7.1 to or
-----------
on behalf of an Indemnitee, Lessee, without any further action, shall be
subrogated to any and all claims that such Indemnitee may have relating thereto
(other than claims in respect of insurance policies maintained by such
Indemnitee at its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims and payment and
such other documents, instruments and agreements as may be necessary to preserve
any such claims and otherwise cooperate with Lessee and give such further
assurances as are necessary or advisable to enable Lessee vigorously to pursue
such claims.
Subject to Lessee's right to contest any such amount pursuant to the
provisions of Section 7.2(b), any amount payable to an Indemnitee pursuant to
--------------
Section 7.1 shall be paid to such Indemnitee promptly upon receipt of a written
- -----------
demand therefor from such Indemnitee, accompanied by a written statement
describing in reasonable detail the basis for such indemnity and the computation
of the amount so payable.
SECTION 7.7. Funding Losses. For every LIBO Calculation Period, Lessee
--------------
shall reimburse each Certificate Purchaser for any loss, funding cost, loss of
earnings or expense incurred (including any loss, funding cost, loss of earnings
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Certificate Purchaser to make, continue or maintain
any portion of its investment hereunder or any of the other Operative Documents
on a LIBO Rate basis) as a result of (i) failure to prepay an amount for which
notice has previously been delivered, (ii) failure of any Advance Date to occur
on the date specified therefor in the applicable Advance Date Notice or (iii)
any payment of all or any portion of the Lease Balance for any reason on a date
other than a Payment Date. The applicable Certificate Purchaser shall promptly
notify Lessee in writing of the amount of any claim under this Section 7.7, the
-----------
reason or reasons therefor and the additional amount required fully to
compensate such Certificate Purchaser for such loss or expense. Such written
notice (which shall include calculations in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on Lessee.
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SECTION 7.8. Increased Cost.
--------------
(a) If there occurs a change in, or in the interpretation or
reinterpretation of, or a change in the application of, Regulation D of the
Board of Governors of the Federal Reserve System, as the same may be amended or
supplemented from time to time, or a change in, or the introduction, adoption,
effectiveness, interpretation, reinterpretation or phase-in of, or a change in
the application of, any other requirement of law or regulation applicable to any
Certificate Purchaser, including, without limitation, the United States or any
state, county or political subdivision thereof, or any order, decree, request,
guideline, decision or directive (whether or not having the force of law) after
the date hereof from any central bank, regulator, court, monetary authority or
other governmental authority which:
(1) does or shall subject such Certificate Purchaser to any tax of
any kind whatsoever with respect to this Lease or any Advance or its
investment in the Trust, or change the basis of taxation of payments to
such Certificate Purchaser of principal, interest or other amount payable
hereunder (except for changes in the rate of tax on general income and
similar taxes on the overall net income of such Certificate Purchaser in
any jurisdiction); or
(2) does or shall impose, modify or hold applicable or change any
reserve, special deposit, Federal Deposit Insurance Corporation premium,
compulsory loan or similar requirement against assets held by, or deposits
or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office
of such Certificate Purchaser which are not otherwise included in the
determination of the LIBO Rate hereunder; or
(3) does or shall impose on such Certificate Purchaser any other
condition;
and the result of any of the foregoing is to increase the cost to such
Certificate Purchaser of making, renewing, converting or maintaining Advances,
or to reduce any amount receivable in respect of such Advances or its investment
in the Trust then, in any such case, Lessee shall promptly pay to such
Certificate Purchaser such additional amount which will compensate the
Certificate Purchaser for such additional cost or reduced amount receivable
which the Certificate Purchaser deems to be material as determined by the
Certificate Purchaser with respect to this Lease or the Advances hereunder or
its investment in the Trust.
(b) If a change described in subsection (a) above shall occur and
--------------
any Certificate Purchaser shall determine that
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<PAGE>
compliance by such Certificate Purchaser with the affected law, governmental
rule, regulation or order of any jurisdiction applicable to such Certificate
Purchaser (including, without limitation, the United States or any state, county
or political subdivision thereof) regarding capital adequacy of banks or bank
holding companies, or any introduction, interpretation, reinterpretation,
effectiveness, phase-in, change in application or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Certificate
Purchaser with such request or directive regarding capital adequacy (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Certificate
Purchaser's capital as a consequence of such Certificate Purchaser's obligations
hereunder to a level below that which such Certificate Purchaser could have
achieved but for such compliance (taking into consideration such Certificate
Purchaser's policies with respect to capital adequacy immediately before such
compliance and assuming that such Certificate Purchaser's capital was fully
utilized prior to such compliance) by an amount deemed by such Certificate
Purchaser to be material, then, upon demand, Lessee shall immediately pay to
such Certificate Purchasers as are so affected such additional amounts as shall
be sufficient to compensate such Certificate Purchasers for such reduced return,
together with interest on each such amount from four (4) Business Days after the
date demanded until payment in full thereof at the Overdue Rate. In determining
such amount, such Certificate Purchaser may use any reasonable averaging and
attribution methods. No liability or cost pursuant to this Section 7.8(b) shall
--------------
be incurred by Lessee prior to, or relating to any period before, the date that
Lessee receives a demand from a Certificate Purchaser under this Section 7.8(b).
--------------
(c) If a Certificate Purchaser becomes entitled to claim any additional
amounts pursuant to this Section 7.8, it shall promptly notify Lessee thereof.
-----------
A certificate as to any additional amounts payable to the foregoing submitted by
a Certificate Purchaser to Lessee shall be conclusive absent manifest error.
For purposes of the application of this Section 7.8, and in calculating the
amount necessary to compensate such Certificate Purchaser for any imposition of
or increase in capital requirements or taxes hereunder, such Certificate
Purchaser shall determine the applicability of this provision and calculate the
amount payable to it hereunder in a manner consistent with the manner in which
it shall apply and calculate similar compensation payable to it by other
borrowers having provisions in their credit agreements comparable to this
Section 7.8.
- -----------
(d) If any Certificate Purchaser shall have exercised its rights under
this Section 7.8 and Lessee shall have paid all
-----------
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<PAGE>
amounts owed to such Certificate Purchaser hereunder, then Lessee shall have the
right, at its own expense, to notify Certificate Trustee to require such
Certificate Purchaser, as of the end of any LIBO Calculation Period, to (i)
terminate its Certificate Purchaser Commitment or (ii) transfer and assign
without recourse (in accordance with and subject to the restrictions contained
in Section 11.6) all or a portion of its Certificate(s) to another financial
-------------
institution which shall assume the obligations thereunder; provided, that (A) no
--------
such termination or assignment shall conflict with any law, rule, regulation or
order of any Authority and (B) the Lessee or the assignee, as the case may be,
shall pay to the affected Certificate Purchaser in immediately available funds
on the date of such termination or assignment the principal of and Yield accrued
to the date of payment on the Certificate Purchaser Amount and all other amounts
accrued for its account or owed to it under the Operative Documents.
SECTION 7.9. LIBO Rate Illegal, Unavailable or Impracticable.
-----------------------------------------------
(a) If any Certificate Purchaser shall reasonably determine in good
faith (which determination shall, upon written notice thereof to Lessee, be
conclusive and binding on Lessee) that
(i) any requirement of law, regulation, order or decree of any
jurisdiction applicable to any Certificate Purchaser (including the United
States or any state, county or political subdivision thereof (or any
change therein or in the interpretation or application thereof) makes it
unlawful, or the central bank or other Authority asserts that it is
unlawful, for such Certificate Purchaser to make, continue or maintain any
amount of such Certificate Purchaser's investment in the Trust on a LIBO
Rate basis;
(ii) deposits in U.S. Dollars (in the applicable amounts) are not
being offered to such Certificate Purchaser or Lessor in the relevant
market for the applicable LIBO Calculation Period under this Lease, or
that by reason of circumstances affecting the interbank eurodollar market
adequate and reasonable means do not exist for ascertaining the applicable
LIBO Rate; or
(iii) the LIBO Rate will not adequately and fairly reflect the cost
to such Certificate Purchaser of maintaining or funding its investments in
the Trust for the applicable LIBO Calculation Period, or that the making
or funding of such Certificate Purchaser's investment or Advances on a
LIBO Rate basis has become impracticable as a result of an event occurring
after the date of this Lease which in the opinion of such Certificate
Purchaser materially changes such investment,
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<PAGE>
then, in the circumstances described in clause (i) or clause (ii), the
---------- -----------
obligations of such Certificate Purchaser to make, continue or maintain any such
investment or loan on a LIBO Rate basis shall, upon such determination,
forthwith be suspended until such Certificate Purchaser shall notify Lessee that
such circumstances no longer exist (which notice shall be delivered promptly
after such Certificate Purchaser has actual knowledge that such circumstances no
longer exist), and the Yield Rate shall automatically be determined as provided
for under the Operative Documents by reference to the Alternate Base Rate
beginning on the next immediately succeeding Payment Date with respect thereto
or sooner, if required by such law, assertion or determination or, in the
circumstances covered by clause (iii), following notice to Lessee, which notice
------------
sets forth in detail the reasons for the giving of such notice, and following
the consent of Lessee, which consent shall not be unreasonably withheld, the
obligations of such Certificate Purchaser to make, continue or maintain any such
investment or loan on a LIBO Rate basis shall, following such consent, forthwith
be suspended until such Certificate Purchaser shall notify Lessee that such
circumstances no longer exist, and the Yield Rate shall be determined as
provided for under the Operative Documents by reference to the Alternate Base
Rate beginning on the next immediately succeeding payment date or otherwise as
the parties may agree.
(b) If any Certificate Purchaser shall have exercised its rights under
this Section 7.9 and Lessee shall have paid all amounts owed to such Certificate
-----------
Purchaser hereunder, then Lessee shall have the right, at its own expense, to
notify Certificate Trustee to require such Certificate Purchaser, as of the end
of any LIBO Calculation Period, to (i) terminate its Certificate Purchaser
Commitment or (ii) transfer and assign without recourse (in accordance with and
subject to the restrictions contained in Section 11.6) all or a portion of its
------------
Certificate(s) to another financial institution which shall assume the
obligations thereunder; provided, that (A) no such termination or assignment
--------
shall conflict with any law, rule, regulation or order of any Authority and (B)
the Lessee or the assignee, as the case may be, shall pay to the affected
Certificate Purchaser in immediately available funds on the date of such
termination or assignment the principal of and Yield accrued to the date of
payment on the Certificate Purchaser Amount and all other amounts accrued for
its account or owed to it under the Operative Documents.
SECTION 7.10. Indemnity Payments in Addition to Lease Obligations.
---------------------------------------------------
Lessee acknowledges and agrees that Lessee's obligations to make indemnity
payments under this Section 7 are separate from, in addition to, and do not
---------
reduce, Lessee's obligation to pay under the Lease the Lease Balance.
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<PAGE>
SECTION 8. EVENTS OF DEFAULT; REMEDIES.
SECTION 8.1. Events of Default. The following shall constitute events of
-----------------
default of Lessee (each an "Event of Default") hereunder:
----------------
(a) Lessee shall fail to make payment of (i) any Rent when due and
such failure shall continue for a period of five (5) days, or (ii) any Purchase
Option Exercise Amount or Lease Balance;
(b) Lessee shall fail to make any payment of any other amount payable
under this Lease or any other Operative Document when due and payable and such
failure shall continue for a period of ten (10) days after such amount becomes
due and payable;
(c) Lessee shall fail to maintain insurance as required by
subsections (a), (b), (c) and (d) of Section 6.7 of this Lease;
- --------------- --- --- --- -----------
(d) any statement, certificate, report, representation or warranty
made or furnished by Lessee in this Lease or in compliance with the provisions
hereof is incorrect, incomplete or misleading in any material respect when made,
deemed made or reaffirmed, as the case may be;
(e) Lessee defaults in the performance or observance of any term,
covenant, condition or agreement on its part to be performed or observed under
Section 5.9, Section 9, or Section 11.1(b);
- ----------- --------- ---------------
(f) Lessee defaults in the performance or observance of any other
term, covenant, condition or agreement on its part to be performed or observed
hereunder or under any other Operative Document (and not constituting an Event
of Default under any other clause of this Section 8.1), and such default
-----------
continues unremedied for a period of thirty (30) days after the earlier to occur
of (i) written notice thereof by Lessor or any Certificate Purchaser to Lessee,
or (ii) any officer of Lessee has knowledge thereof; provided, however, that if
such failure is capable of cure but cannot be cured by payment of money or
cannot be cured by diligent efforts within such 30-day period but such diligent
efforts shall be properly commenced within the cure period and Lessee is
diligently pursuing, and shall continue to pursue diligently, remedy of such
failure, the cure period shall be extended for an additional period of time as
may be necessary to cure not to exceed an additional thirty (30) days or the
Lease Termination Date.
(g) (i) Lessee and/or any Affiliate generally fails to pay, or admits
in writing its inability to pay, its debts as they
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<PAGE>
become due, or voluntarily commences any case or proceeding or files any
petition under any bankruptcy, insolvency or similar law or seeking dissolution,
liquidation or reorganization or the appointment of a receiver, agent,
custodian, liquidator, trustee or any similar Person for itself or a substantial
portion of its property, assets or business or to effect a plan or other
arrangement with its creditors, or files any answer admitting the jurisdiction
of the court and the material allegations of any involuntary petition filed
against it in any bankruptcy, insolvency or similar case or proceeding, or is
adjudicated bankrupt or insolvent, or makes a general assignment for the benefit
of creditors, or consents to, or acquiesces in the appointment of, a receiver,
agent, custodian, liquidator, trustee or any similar Person for itself or a
substantial portion of its property, assets or business, or (ii) corporate
action is taken by Lessee for the purpose of effectuating, authorizing or
furthering any of the foregoing or (iii) Lessee and/or any Affiliate has an
order for relief entered against it in any proceeding under the Bankruptcy Code;
(h) involuntary proceedings or an involuntary petition are commenced or
filed against Lessee and/or any Affiliate under any bankruptcy, insolvency or
similar law or seeking the dissolution, liquidation or reorganization of Lessee
and/or any Affiliate or the appointment of a receiver, agent, custodian,
liquidator, trustee or other similar Person for Lessee and/or any Affiliate or
of a substantial part of the property, assets or business of Lessee and/or any
Affiliate, or any writ, judgment, warrant of attachment, execution or similar
process is issued or levied against a substantial part of the property, assets
or business of Lessee and/or any Affiliate, and such proceedings or petition are
not dismissed or stayed, or such writ, judgment, warrant of attachment,
execution or similar process is not released, vacated or fully bonded, within
sixty (60) days after commencement, filing or levy, as the case may be;
(i) if (1) any Employee Benefit Plan shall cease to have "qualified"
---------
status under Section 401(a) of the Code, (2) the minimum funding standards
applicable to any Employee Benefit Plan under Section 412 of the Code or Section
302 of ERISA shall not be complied with, (3) any excise tax or tax lien shall be
incurred in connection with any Employee Benefit Plan and the administration
thereof, (4) any claim shall be incurred with respect to any Employee Benefit
Plan other than in the ordinary operation of such plan, (5) any "prohibited
----------
transaction" as defined by Section 4975 of the Code or Section 406 of ERISA
- -----------
shall have occurred, (6) any liability (other than for the payment of required
premiums) shall be incurred to the PBGC, (7) any withdrawal liability shall be
incurred with respect to a Multiemployer Plan, (8) any liability shall be
incurred in connection with a failure to make timely reports and filings with
respect to Employee Benefit Plans, or (9) any other thing shall have occurred
with respect to any Employee
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<PAGE>
Benefit Plan, the result of which (in any one of the foregoing clauses (1)
-----------
through (8), any combination of said clauses or otherwise) is that Lessee or
---
any Subsidiary, in the reasonable judgment of the Required Certificate
Purchasers, has or is likely to incur liabilities (whether the liability is
direct or indirect, current or deferred, fixed or contingent) of $10,000,000 or
more;
(j) any Operative Document or the security interest and lien granted under
this Lease (except in accordance with its terms), in whole or in material part,
terminates, ceases to be effective or ceases to be the legally valid, binding
and enforceable obligation of Lessee, or Lessee or any of its Affiliates,
directly or indirectly, contests in any manner in any court the effectiveness,
validity, binding nature or enforceability thereof; or the security interest and
lien securing Lessee's obligations under the Operative Documents, in whole or in
part, ceases to be a perfected first priority security interest and lien;
(k) an event of default shall occur with respect to any obligation(s) of
Lessee and/or any Subsidiary in excess of $15,000,000, individually or in the
aggregate (as principal or guarantor or other surety), to any person for
borrowed money;
(l) a judgment or judgments for the payment of money are entered by a
court or courts of competent jurisdiction against Lessee or any of its
Affiliates or any attachments against any of their assets or property shall
exist, and such judgment, judgments or attachments remain undischarged or
unstayed or unpaid or undismissed or unbonded for a period (during which
execution shall not be effectively stayed) of thirty (30) days; provided, that
--------
the aggregate of all such judgments and attachments exceeds $10,000,000 the
extent such judgments are not covered by valid and collectible insurance from
solvent, unaffiliated insurers);
(m) if (1) any person or group within the meaning of (S)13(d)(3) of the
Securities Exchange Act and the rules and regulations promulgated thereunder
shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of
the Securities Exchange Act), directly or indirectly, of securities of Lessee
(or other securities convertible into such securities) representing twenty
percent (20%) of the combined voting power of all securities of Lessee entitled
to vote in the election of directors, other than securities having such power
only by reason of the happening of a contingency (hereinafter called a
"Controlling Person"); or (2) a majority of the Board of Directors of Lessee
------------------
shall cease for any reason to consist of (A) individuals who on the date of this
Lease were serving as directors of Lessee and (B) individuals who subsequently
become members of the Board of Directors if such individuals' nomination for
election or election to the Board of Directors is recommended or approved by a
majority of the Board of Directors of Lessee. For purposes of
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<PAGE>
clause (1) above, a person or group shall not be a Controlling Person if such
- ----------
person or group holds voting power in good faith and not for the purpose of
circumventing this Section 8.1(m) as an agent, bank, broker, nominee, trustee,
--------------
or holder of revocable proxies given in response to a solicitation pursuant to
the Securities Exchange Act, for one or more beneficial owners who do not
individually, or, if they are a group acting in concert, as a group have the
voting power specified in clause (1);
----------
(n) the construction of the Financed Improvements does not attain
Substantial Completion on or before the Construction Completion Date; and
(o) there shall be any tenant or occupant of any part of the Land
or the Facility (other than Lessee or any permitted subtenant pursuant to
Section 5.9); provided that the occupancy of a portion of the Facility by
- ----------- --------
Inacom Business Centers, Inc. shall not be an Event of Default provided Inacom
Business Centers, Inc. vacates the Facility on or before March 31, 1997.
SECTION 8.2. Remedies. Upon the occurrence of an Event of Default, at
--------
Lessor's option and without limiting Lessor in the exercise of any other right
or remedy Lessor may have on account of such default (including, without
limitation, the obligation of Lessee to purchase the Leased Property as set
forth below), and without any further demand or notice, Lessor may cause the
following to occur:
(i) By notice to Lessee, Lessor may terminate Lessee's right to
possession of the Leased Property. A notice given in connection with
unlawful detainer proceedings specifying a time within which to cure a
default shall terminate Lessee's right to possession if Lessee fails to
cure the default within the time specified in the notice.
(ii) Upon termination of Lessee's right to possession and without
further demand or notice, Lessee shall surrender possession and vacate the
Leased Property and deliver possession thereof, and Lessor may re-enter the
Leased Property and remove any Persons in possession thereof.
(iii) Lessor may terminate this Lease and declare the aggregate
outstanding Lease Balance to be immediately due and payable, and Lessor
shall be entitled to (x) recover from Lessee the following amounts and (y)
take the following actions:
(A) Lessee shall pay all accrued and unpaid Rent hereunder
(including, without limitation, Basic Rent and Supplemental Rent)
through the Final Rent Payment Date;
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<PAGE>
(B) Lessor may elect either of the following:
(1) Lessor may demand, by written notice to Lessee
specifying a Payment Date (the "Final Rent Payment Date") not
-----------------------
earlier than ten (10) days after the date of such notice, that
Lessee pay to Lessor, and Lessee shall pay to Lessor, on the
Final Rent Payment Date (in lieu of Basic Rent due after the
Final Rent Payment Date), an amount equal to the sum of (A) the
Lease Balance computed as of the Final Rent Payment Date, plus
(B) all accrued and unpaid Rent due and unpaid to and including
the Final Rent Payment Date, and upon payment of such amount, and
the amount of all other sums due and payable by Lessee under this
Lease and the other Operative Documents (and interest at the
Overdue Rate on the amounts payable under this clause (B)(1) from
-------------
the Final Rent Payment Date to the date of actual payment),
Lessor shall transfer by special warranty deed to Lessee all of
Lessor's right, title and interest in and to the Leased Property
without recourse or warranty, but free and clear of Lessor Liens;
or
(2) Lessor may sell its interest in the Leased Property, in
which event Lessee shall pay to Lessor an amount equal to the
excess, if any, of (x) all amounts due Lessor under clause (B)(1)
-------------
above over (y) the net sale proceeds received by Lessor from the
foregoing sale (provided, that in calculating such net sale
proceeds, all expenses and taxes incurred by Lessor or any of the
Certificate Purchasers in connection with such sale, including,
without limitation, legal fees, shall be deducted from such sales
proceeds);
(C) Any other amount reasonably necessary to compensate Lessor
for all the detriment proximately caused by Lessee's failure to
perform Lessee's obligation under this Lease or which in the ordinary
course of things would be likely to result therefrom, including, but
not limited to, the costs and expenses (including without limitation,
reasonable attorneys' fees, advertising costs and brokers'
commissions) of recovering possession of the Leased Property, removing
Persons or property therefrom, placing the Leased Property in good
order, condition, and repair, preparing and altering the Leased
Property for reletting, and all other costs and expenses of reletting;
and
(D) Such other reasonable amounts in addition to
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or in lieu of the foregoing as may be permitted from time to time by
Applicable Law.
(iv) Lessor may enforce the Lien given hereunder pursuant to Section
13.1 hereof, the UCC or any other law.
(v) If Lessee has breached this Lease, this Lease shall continue in
effect for so long as Lessor does not terminate this Lease, and Lessor may
enforce all of Lessor's rights and remedies under this Lease, including the
right to recover the Rent hereunder (including, without limitation, Basic
Rent and Supplemental Rent) as it becomes due under this Lease. Lessee's
right to possession shall not be deemed to have been terminated by Lessor
except pursuant to clause (i) or clause (iii) above. The following do not
---------- ------------
constitute a termination of this Lease:
(A) Acts of maintenance or preservation or efforts to relet the
Leased Property;
(B) The appointment of a receiver upon the initiative of Lessor
to protect Lessor's interest under this Lease;
(C) Withholding of consent to an assignment or subletting, or
terminating a subletting or assignment by Lessee.
(vi) If Lessor elects to continue this Lease in full force and effect
following the termination of Lessee's right of possession, Lessor, to the
maximum extent permitted by Applicable Law, may enforce all its rights and
remedies under this Lease, including, but not limited to, the right to
recover Rent hereunder as it becomes due. During the continuance of an
Event of Default or following the termination of Lessee's right to
possession, Lessor may enter the Leased Property in accordance with
Applicable Law without terminating this Lease and sublet all or any part of
the Leased Property for Lessee's account to any Person, for such term
(which may be a period beyond the remaining Lease Term), at such rents and
on such other terms and conditions as are commercially reasonable. In the
event of any such subletting, rents received by Lessor from such subletting
shall be applied (A) first, to the payment of the costs incurred by Lessor
in maintaining, preserving, altering and preparing the Leased Property for
subletting and other costs of subletting, including, but not limited to,
brokers' commissions and attorneys' fee; (B) second, to the payment of Rent
hereunder then due and payable; (C) third, to the payment of future Rent
hereunder as the same may become due and payable hereunder; (D) fourth, to
the payment of all other obligations of Lessee hereunder, and (E) fifth,
the
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balance, if any, shall be paid to Lessee upon (but not before) expiration
of the Lease Term. If the rents received by Lessor from such subletting,
after application as provided above, are insufficient in any period to pay
the Rent due and payable hereunder for such period, Lessee shall pay such
deficiency to Lessor upon demand. Notwithstanding any such subletting for
Lessee's account without termination, Lessor may at any time thereafter, by
written notice to Lessee, elect to terminate this Lease.
(vii) Lessor may, with or without entering upon and taking possession
of the Leased Property, (A) direct, or cause Lessee to direct, all tenants
or other obligors under all leases to pay all rents directly to Lessor, (B)
collect all rents as the same become due and payable, (C) take such action
as Lessor shall deem necessary or desirable in order to enforce the
provisions of any lease and (D) amend, modify, extend, enter into or
terminate any lease or waive performance by any tenant or other obligor
thereunder of any provision thereof, in the name of Lessee or otherwise.
(viii) Lessor may exercise any other right or remedy that may be
available to it under Applicable Law or in equity, or proceed by
appropriate court action (legal or equitable) to enforce the terms or to
recover damages for the breach hereof. Separate suits may be brought to
collect any such damages for any Rent installment period(s), and such suits
shall not in any manner prejudice Lessor's right to collect any such
damages for any subsequent Rent installment period(s), or Lessor may defer
any such suit until after the expiration of the Basic Term or any Renewal
Term, in which event such suit shall be deemed not to have accrued until
the expiration of the Basic Term or such Renewal Term.
(ix) Lessor may retain and apply against Lessor's damages all sums
which Lessor would, absent such Event of Default, be required to pay to, or
turn over to, Lessee pursuant to the terms of this Lease.
SECTION 8.3. Proceeds of Sale; Deficiency. All payments received and
----------------------------
amounts held or realized by Lessor at any time when an Event of Default shall
exist and after the Lease Balance shall have been accelerated pursuant to
Section 8 as well as all payments or amounts then held or thereafter received
- ---------
by Lessor (except for rents received by Lessor from subletting pursuant to
Section 8.2(vi), which shall be distributed as set forth therein) and the
- ---------------
proceeds of sale pursuant to this Section 8.3, shall be distributed forthwith
-----------
upon receipt by Lessor in accordance with Article III of the Trust Agreement.
SECTION 8.4. Grant and Foreclosure on Lessee's Estate. Without limiting
----------------------------------------
any other remedies set forth in this Lease, if a
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court of competent jurisdiction rules that this Lease constitutes a mortgage or
other secured financing as is the intent of the parties, the following shall
apply:
(i) Lessor and Lessee agree that upon the occurrence of an Event of
Default, Lessor may proceed by a suit or suits in equity or at law, whether for
a foreclosure hereunder or against Lessee on a recourse basis for the Lease
Balance and all other amounts due from Lessee hereunder, or for the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for the appointment of a receiver
pending any foreclosure hereunder or for the enforcement of any other
appropriate legal or equitable remedy, and at any foreclosure sale Lessor may
become the purchaser, and in such case for the purpose of making settlement for
or payment of the purchase price, shall be entitled to offset any claims for the
indebtedness hereunder and under the Operative Documents in order that they may
be credited as paid on the purchase price;
(ii) This instrument will be deemed given to secure not only existing
indebtedness, but also future advances, whether such advances are obligatory or
to be made at the option of Lessor or the Certificate Purchasers or otherwise,
to the same extent as if such future advances were made on the date of execution
of this instrument. To the fullest extent permitted by law, the Lien of this
instrument shall be valid as to all such indebtedness, including all future
advances, from the time this instrument is recorded. Notwithstanding anything
in this instrument to the contrary, the maximum principal amount of indebtedness
secured by this instrument at any one time shall not exceed Forty Million and
No/100 Dollars ($40,000,000), plus all costs of enforcement and collection of
this instrument, the Certificates and the other Operative Documents, plus the
total amount of any advances made pursuant thereto to protect the collateral and
the security interest and Lien created hereby, together with interest on all of
the foregoing as provided in the Operative Documents.
(iii) Without in any way limiting or restricting any of Lessor's
rights, remedies, powers and authorities under this instrument, and in addition
to all of such rights, remedies, powers, and authorities, Lessor shall also have
and may exercise any and all rights, remedies, powers and authorities which the
holder of a mortgage is permitted to have or exercise under the provisions of
Pennsylvania Procedural Rules 1141 to 1148, both inclusive (herein, as amended
and as it may hereafter be amended from time to time, called the "Act"). Without
---
limiting the generality of the foregoing, all expenses incurred by Lessor to the
extent reimbursable under any provision of the Act, whether incurred before or
after any decree or judgment of foreclosure, and whether or not enumerated in
any other provision of this instrument, shall be added to the indebtedness
secured by this instrument and by the judgment of foreclosure.
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(iv) Lessee, on behalf of itself and all Persons now or hereafter
interested in the Leased Property, voluntarily and knowingly hereby:
acknowledges that the transaction of which this Lease is a part is a transaction
which does not include either agricultural real estate (as defined in the Act),
or residential real estate (as defined in the Act); waives to the fullest extent
permitted by applicable law any and all rights to reinstatement or redemption
and any and all other rights under all present and future appraisement,
homestead, moratorium, valuation, exemption, stay, extension, and redemption
statutes, laws or equities now or hereafter existing, and hereby further waives
the pleading of any statute of limitations as a defense to any and all
indebtedness secured by this instrument, and Lessee agrees that no defense,
claim or right based on any thereof will be asserted, or may be enforced, in any
action enforcing or relating to this instrument. Without limiting the generality
of the preceding sentence, Lessee, on its own behalf and on behalf of each and
every Person acquiring any interest in or title to the Leased Property
subsequent to the date of this instrument, hereby irrevocably waives any and all
rights of reinstatement or redemption from sale under any order, judgment or
decree of foreclosure of this instrument or under any power contained herein or
under any sale pursuant to any statute, order, judgment or decree of foreclosure
of any court.
SECTION 8.5. Remedies Cumulative; No Waiver; Consents. To the extent
----------------------------------------
permitted by, and subject to the mandatory requirements of, Applicable Law, each
and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
Lessor, and the exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any right, power or remedy. No delay or omission by Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of Lessee or be an acquiescence therein. Lessor's consent to
any request made by Lessee shall not be deemed to constitute or preclude the
necessity for obtaining Lessor's consent, in the future, to all similar
requests. No express or implied waiver by Lessor of any Event of Default shall
in any way be, or be construed to be, a waiver of any future or subsequent
Default or Event of Default. To the extent permitted by Applicable Law, Lessee
hereby waives any rights now or hereafter conferred by statute or otherwise that
may require Lessor to sell, lease or otherwise use the Leased Property or any
part thereof in
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mitigation of Lessor's damages upon the occurrence of an Event of Default or
that may otherwise limit or modify any of Lessor's rights or remedies under
this Section 8.
---------
SECTION 8.6. Power of Attorney. Lessee unconditionally and irrevocably
-----------------
appoints Lessor as its true and lawful attorney-in-fact, with full power of
substitution, to the extent permitted by Applicable Law, in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery hereunder, if an Event of Default occurs, whether pursuant
to foreclosure or power of sale or otherwise, and in connection therewith to
execute and deliver all such deeds, bills of sale, assignments, releases
(including releases of this Lease on the records of any Authority) and other
proper instruments as Lessor may reasonably consider necessary or appropriate.
Lessee ratifies and confirms all that such attorney or any substitute shall
lawfully do by virtue hereof. If requested by Lessor or any purchaser, Lessee
shall ratify and confirm any such lawful sale, assignment, transfer or delivery
by executing and delivering to Lessor or such purchaser all deeds, bills of
sale, assignments, releases and other proper instruments to effect such
ratification and confirmation as may be designated in any such request.
SECTION 9. LEASE TERMINATION.
SECTION 9.1. End of Term Options. At least 270 days before the last day
-------------------
of the Basic Term or the first Renewal Term, if effective, Lessee shall, by
delivery of written notice to Lessor and the Certificate Purchasers, exercise
one of the following options:
(a) subject to Section 4.3(b), renew this Lease with respect to all,
--------------
but not less than all, of the Leased Property then subject hereto for an
additional five-year Renewal Term (the "Renewal Option") on the terms and
--------------
conditions set forth herein and in the other Operative Documents, including
Lessee's obligation to pay Rent, including Basic Rent, during the Renewal Term
on each Payment Date occurring during such Renewal Term; however, such Renewal
-------
Option shall not be available at the end of the second Renewal Term; or
--
(b) purchase for cash for the Purchase Option Exercise Amount all,
but not less than all, of the Leased Property then subject to this Lease on the
last day of the Basic Term or Renewal Term, as applicable (the "Purchase
--------
Option"); and if Lessee shall have elected to purchase the Leased Property,
- ------
Lessor shall, upon the payment to Lessor of the Purchase Option Exercise Amount
then due and payable by Lessee under the Operative Documents, transfer by
special warranty deed all of Lessor's right, title and interest in and to the
Leased Property to Lessee or its designee, without recourse or warranty (except
as to the absence of Lessor Liens and
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such other matters contained in the special warranty deed); or
--
(c) subject to the satisfaction of the conditions set forth in
Section 9.5 and if no Default or Event of Default exists on or prior to the
- -----------
Lease Termination Date, sell on behalf of Lessor for cash to a purchaser not in
any way affiliated with Lessee all, but not less than all, of the Leased
Property then subject to this Lease on the last day of the Basic Term or Renewal
Term, as applicable (the "Sale Option"). Simultaneously with a sale pursuant to
-----------
the Sale Option, Lessee shall pay to Lessor (i) all accrued and unpaid Rent, if
any, plus all other amounts, fees and expenses then due and payable under the
Operative Documents (other than the Lease Balance) and (ii) as Supplemental
Rent, from the gross proceeds of the sale of the Leased Property, without
deductions or expense reimbursements (the "Proceeds"), the aggregate outstanding
--------
Lease Balance as of the Lease Termination Date. If the Proceeds exceed the
aggregate outstanding Lease Balance and such other amounts are paid, Lessee will
retain the portion of the Proceeds in excess thereof. If the Proceeds are less
than the aggregate outstanding Lease Balance, Lessee will pay or will cause to
be paid to Lessor, as Supplemental Rent, on the Lease Termination Date, in
addition to the Proceeds and the other amounts referred to in clause (i) above,
----------
the Sale Recourse Amount, it being understood, however, that the amount payable
pursuant to this Section 9.1(c) shall in no event be construed to limit any
--------------
other obligation of Lessee under the Operative Documents, including, without
limitation, pursuant to Section 6, Section 7.7, Section 9.5 and Section 14.1.
--------- ----------- ----------- -------------
The "Sale Recourse Amount" shall be the lesser of (i) the Applicable Percentage
Amount and (ii) the excess of the aggregate outstanding Lease Balance over
Proceeds. The obligation of Lessee to pay the amounts provided in this Section
-------
9.1(c) shall be a recourse obligation of Lessee and shall be payable on the
- ------
Lease Termination Date.
SECTION 9.2. Election of Options. To the extent that the Renewal Option
-------------------
is available, unless Lessee shall have affirmatively elected in accordance
herewith the Purchase Option or the Sale Option, Lessee shall be deemed to have
elected the Renewal Option. To the extent that the Renewal Option is not
available, unless Lessee shall have affirmatively elected the Sale Option,
Lessee shall be deemed to have elected the Purchase Option. Lessee's
election of the Purchase Option shall be irrevocable at the time made. In
addition, Lessee may not elect the Sale Option if there exists on the date the
election is made a Default or an Event of Default and the Sale Option shall
automatically be revoked if there exists a Default or Event of Default at any
time after the Sale Option is properly elected and Lessor shall be entitled to
exercise all rights and remedies provided in Section 8.
---------
SECTION 9.3. Sale Option Procedures. If Lessee elects the Sale Option,
----------------------
Lessee shall use its best efforts as nonexclusive
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agent for Lessor to obtain the highest all cash purchase price for the purchase
of the Leased Property, and if Lessee receives any bid, Lessee shall within five
(5) Business Days after receipt thereof, and at least twenty (20) Business Days
prior to the Lease Termination Date, certify to Lessor in writing the amount and
terms of such bid, the name and address of the party or parties (who shall not
be Lessee or any Affiliate of Lessee or any Person with whom Lessee has an
understanding or arrangement regarding the future use of the Leased Property by
Lessee or any Affiliate or Subsidiary thereof, but who may be Lessor, any
Certificate Purchaser, any Affiliate thereof, or any Person contacted by
Certificate Purchaser) submitting such bid. Lessee shall bear its own expenses
and pay, as Supplemental Rent, the expenses of Lessor and each Certificate
Purchaser in connection with any such bidding and sale process pursuant to this
Section 9.3 as well as all costs and expenses incurred by any party (including a
- -----------
buyer or potential buyer) to place the Leased Property in the condition required
by Section 5.1 and costs of repair and alterations for improvements desired by
-----------
such buyer. None of the foregoing costs or expenses shall be deducted from
Proceeds. After Lessee shall have certified to Lessor all bids received, any
Certificate Purchaser, any Affiliate thereof, or any Person contacted by any
Certificate Purchaser may submit a further bid or bids to Lessee not later than
five (5) Business Days prior to the Lease Termination Date. On or before the
Lease Termination Date, so long as no Event of Default or Default exists: (i)
Lessee shall transfer all of Lessee's right, title and interest in the Leased
Property, or cause the Leased Property to be so transferred, to the bidder(s),
if any, which shall have submitted the highest bid therefor at least twenty (20)
(or in the case of a Certificate Purchaser, any Affiliate thereof or Person
contacted by a Certificate Purchaser, five (5)) Business Days prior to such
Lease Termination Date, in the condition required and otherwise in accordance
with all of the terms of this Lease; (ii) subject to the prior or current
payment by Lessee of all amounts due under clause (iii) of this sentence, Lessor
------------
shall transfer by special warranty deed (without recourse or warranty, except as
to the absence of Lessor Liens and such other matters contained in the special
warranty deed) Lessor's right, title and interest in and to the Leased Property
for cash to such bidders; and (iii) Lessee shall simultaneously pay to Lessor
all of the amounts contemplated in Section 9.1(c). All costs related to such
--------------
sale and delivery, including the cost of sales agents, removal of the
improvements, delivery of documents, filing and documentary transfer fees, title
insurance, certification and testing of the Leased Property, legal costs, costs
of notices, any advertisement or other similar costs, or other information and
of any parts, configurations, repairs or modifications desired by a buyer or
prospective buyer shall be borne entirely by Lessee, without regard to whether
such costs were incurred by Lessor, Lessee or any potentially qualified buyer,
and shall in no event be paid from any of the Proceeds. Neither Lessor nor any
Certificate Purchaser shall have any
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responsibility for procuring any purchaser.
SECTION 9.4. Appraisals. If Lessee exercises the Sale Option and any
----------
Certificate Purchaser reasonably expects that the Proceeds from the sale of the
Leased Property will be less than 30% of the outstanding Lease Balance at the
Lease Termination Date, Lessor (upon direction from any Certificate Purchaser)
shall engage the Appraiser, at Lessee's expense, to determine (by appraisal
methods satisfactory to the Required Certificate Purchasers) the Fair Market
Value of the Leased Property then subject to this Lease as of the Lease
Termination Date. In addition, if the Appraiser concludes that the Fair Market
Value of such Leased Property as of the Lease Termination Date was in excess of
the aggregate Proceeds from the sale of Leased Property, Lessee shall promptly
pay to Lessor, as Supplemental Rent, such excess, which together with such
Proceeds and the Sale Recourse Amount so paid to Lessor shall not exceed the
Lease Balance determined immediately before the application of the foregoing
amounts.
SECTION 9.5. Return of Leased Property. Unless the Leased Property shall
-------------------------
have been transferred to Lessee pursuant to Section 9.1(b), Lessee shall, on the
--------------
Lease Termination Date and at its own expense, transfer the Leased Property to
the independent purchaser thereof pursuant to Section 9.3, free and clear of all
-----------
Liens other than Permitted Exceptions and Lessor Liens, in the condition
required by Section 5 and in any event in as good a condition as it was on the
---------
Initial Advance Date and on the date of Substantial Completion of the Financed
Improvements to the Facility (as modified by the Financed Improvements and any
other Alterations permitted by this Lease), ordinary wear and tear excepted, and
in compliance with all Applicable Law (determined immediately prior to such
transfer; and in any event without (x) any asbestos installed or maintained in
any part of the Leased Property, (y) any polychlorinated biphenyls (PCBs) in, on
or used, stored or located at the Leased Property, and (z) any other Hazardous
Materials). Lessee shall cooperate with the independent purchaser of the Leased
Property in order to facilitate the ownership and operation by such purchaser of
the Leased Property after the Lease Termination Date, including providing all
books, reports and records regarding the maintenance, repair and ownership of
the Leased Property and all know-how, data and technical information relating
thereto, granting or assigning all licenses necessary for the operation and
maintenance of the Leased Property and cooperating in seeking and obtaining all
necessary Government Action. Lessee also shall have paid the total cost for the
completion of the Financed Improvements and of all Alterations commenced prior
to the Lease Termination Date, and the construction of the Financed Improvements
and all Alterations shall have been completed prior to such date. Lessee shall
have completed all restoration and repair work in compliance with Section 6.4
-----------
and Section 5.1 prior to the Lease Termination Date.
-----------
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The obligations of Lessee under this Section 9.5 shall survive the expiration or
-----------
termination of this Lease. Unless Lessee shall have exercised or been deemed to
have exercised its option to purchase the Leased Property, not less than 270
days prior to the Lease Termination Date, Lessor shall at Lessee's expense be
entitled to perform such investigation, including obtaining reports of engineers
and other experts as to the condition and state of repair and maintenance
required by this Section 9.5 and as to the compliance with Environmental Laws of
-----------
the Leased Property, as it deems appropriate. Lessee, at its sole cost and
expense, shall cause the repair or other remediation of any discrepancies
between the actual condition of the Leased Property and the condition required
under this Lease, such repair or remediation to be completed not later than the
Lease Termination Date.
SECTION 9.6. Early Termination. On any Payment Date after the eighth
-----------------
(8th) scheduled Payment Date, Lessee may, upon at least sixty (60) days' prior
written notice to Lessor and the Certificate Purchasers, purchase all of the
Leased Property by paying to Lessor on such Payment Date the aggregate
outstanding Lease Balance, together with all accrued unpaid Rent to the date of
repayment and all other amounts then due and payable under the Operative
Documents. Upon receipt of such amounts, Lessor shall transfer by special
warranty deed all of Lessor's right, title and interest in and to the Leased
Property to Lessee or its designee, without recourse or warranty (except as to
the absence of Lessor Liens and such other matters contained in the special
warranty deed).
SECTION 10. REPRESENTATIONS AND WARRANTIES.
SECTION 10.1. Representations and Warranties of Lessee. As of the date
----------------------------------------
hereof, the Lease Commencement Date and each Advance Date, Lessee makes the
representations and warranties set forth in this Section 10.1 to Lessor, Bank
------------
and each Certificate Purchaser.
(a) General Matters. Lessee hereby represents and warrants that:
---------------
(i) Lessee is a corporation duly organized, validly existing and in
good standing under the laws of Ohio, and is qualified to do business in,
and is in good standing in, Pennsylvania and each other state or other
jurisdiction in which the nature of its business or activities makes such
qualification necessary.
(ii) Lessee has the corporate power and authority to conduct its
business as presently conducted and as presently proposed to be conducted,
to own or hold under lease its properties, to execute, deliver and perform
this Lease and each other Operative Document and each other agreement,
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instrument and document to be executed and delivered by it in connection
therewith, and to lease the Leased Property from Lessor under this Lease,
and no such transaction will violate any Applicable Law.
(iii) the leasing of the Leased Property by Lessee from Lessor under
this Lease, the execution and delivery of each Operative Document and other
related instruments, documents and agreements, and the compliance by Lessee
with the terms hereof and thereof, and the payments and performance by
Lessee of all of its obligations hereunder and thereunder (A) have been
duly and legally authorized by proper corporate proceedings (including any
necessary shareholder action) on its part; (B) are not in contravention of,
and will not result in a violation or breach of, any of the terms of
Lessee's corporate charter or by-laws; (C) do not and will not violate or
constitute a breach of any material provision of Applicable Law, and do not
and will not violate, conflict with or constitute (with or without notice
or lapse of time or both) a default under any indenture, agreement, lease
or other instrument to which Lessee is a party or by or under which Lessee
or any of Lessee's property is bound or affected; (D) do not and will not
result in the creation or imposition of any Lien upon any of Lessee's
property or assets; and (E) do not and will not require any Government
Action by any Authority, except for (x) the filings and recordings listed
on Exhibit F to perfect the rights of Lessor intended to be created by the
---------
Operative Documents, and (y) those Government Actions required with respect
to Lessee or any of its Affiliates listed on Exhibit N, each of which have
---------
been duly effected and are, or on the Initial Advance Date will be, in full
force and effect; and Lessee is not in default under or in violation of its
charter or by-laws.
(iv) this Lease and the other Operative Documents have been, or when
delivered in accordance with the terms hereof and thereof will have been,
executed by the duly authorized officer or officers of Lessee and delivered
to Lessor and the Certificate Purchasers and constitute, or will
constitute, the legal, valid and binding obligations of Lessee, enforceable
against Lessee in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity.
(v) neither the execution and delivery of any Operative Document by
Lessee, nor the payment and performance by Lessee of its obligations
hereunder and thereunder, requires the consent or approval of, the giving
of notice to, or the registration, filing or recording with, or the taking
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of any other action in respect of, any Authority or any other Person other
than as the same may be required herein.
(vi) neither Lessee nor any of its Affiliates has granted, nor will
they grant, any Lien on any of the Leased Property or this Lease, to any
Person other than Lessor, and no Lien, other than the Lien granted to
Lessor hereunder (and any Lien hereafter granted by Lessor) and Permitted
Liens, has attached to any of the Leased Property or this Lease, or in any
manner has affected adversely Lessor's rights and security interest
therein.
(vii) except as described in Exhibit O hereof, there is no action,
---------
proceeding or investigation pending or, to the best of Lessee's knowledge,
threatened which questions the validity of the Operative Documents to
which Lessee is a party or any action taken or to be taken pursuant to the
Operative Documents to which Lessee is a party or with respect to the
Leased Property or any present or intended future use thereof, which
violations and instances of non-compliance described in Exhibit O could
---------
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and Lessee is not aware of any circumstances
which could give rise to the commencement of any such action, proceeding
or investigation, or issuance of any notice, complaint or order, and there
is no action, proceeding, notice, complaint, order of violation or non-
compliance, or investigation pending or, to the best of Lessee's
knowledge, threatened against or affecting Lessee in any court or before
any regulatory commission, board or other administrative Authority which,
if decided adversely to Lessee, would have a Material Adverse Effect.
(viii) Lessee has heretofore furnished to the Certificate Purchasers
(a) consolidated balance sheets of Lessee and its Subsidiaries as at
September 30, 1996 and September 30, 1995 and the related consolidated
statements of income and retained earnings, with a report thereon by Ernst
& Young, independent certified public accountants, stating in comparative
form the amounts for the corresponding dates and periods for the previous
fiscal year. Such balance sheets and such statements of income and
retained earnings fairly present the consolidated financial condition of
Lessee and its Consolidated Subsidiaries as of the dates thereof and the
results of their operations for the periods then ended, and (b) the pro
forma consolidated balance sheets of Lessee and its Subsidiaries as of
September 30, 1996 and the related statements of income and retained
earnings, assuming the spin-off of Unisource Worldwide, Inc. to the
shareholders of Lessee as of such date.
All such financial statements were prepared in
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accordance with GAAP. Since September 30, 1996, there has not been any
Material Adverse Effect with respect to the financial condition, business
or operations of Lessee and its Subsidiaries.
(ix) Lessee is not an "investment company," or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(x) Lessee is not subject to regulation as a "holding company," an
"affiliate" of a "holding company," or a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(xi) Lessee has not offered any interest in this Lease, the Rent,
the Leased Property or any security similar thereto for sale to, or
solicited offers to buy any thereof from, or otherwise approached or
negotiated with respect thereto with, any prospective purchaser other than
Lessor.
(xii) neither Lessee nor anyone authorized to act on its behalf has,
directly or indirectly, in violation of Section 5 of the Securities Act or
any state securities laws, offered or sold any interest in the
Certificates, the Leased Property or this Lease, or in any security or
lease the offering of which, for purposes of the Securities Act or any
state securities laws, would be deemed to be part of the same offering as
the offering of the aforementioned items, or solicited any offer to
acquire any of the aforementioned items.
(xiii) Lessee and each Affiliate is in compliance in all material
respects with all applicable laws and regulations, Federal, state and
local, the violation of which would have a material adverse effect on
Lessee and its Affiliates taken as a whole; Lessee and each Affiliate each
possess all the material franchises, permits and licenses necessary or
required in the conduct of its business, and the same are valid, binding
and enforceable.
(b) Perfection of Lien and Security Interest. Upon the filing of an
----------------------------------------
appropriate UCC financing statement with the Secretary of State of the
Commonwealth of Pennsylvania and the recording of an appropriate UCC Financing
Statement and the Memorandum of Lease with the office of the Recorder of Deeds
of Chester County, Pennsylvania, Lessor will have an enforceable, perfected
first priority security interest and Lien of record in the Leased Property as
against all Persons, including Lessee and its creditors.
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(c) ERISA. Each Employee Benefit Plan of Lessee and any ERISA
-----
Affiliate is in compliance with ERISA and the Code, where applicable, in all
material respects. As of the date hereof, (i) the amount of all Unfunded Pension
Liabilities under the Pension Plans, (ii) the amount of the aggregate
Unrecognized Retiree Welfare Liability under all applicable Employee Benefit
Plans, and (iii) the aggregate potential annual withdrawal liability payments,
as determined in accordance with Title IV of ERISA, of Lessee and any ERISA
Affiliate with respect to all Pension Plans which are Multiemployer Plans, are,
in the aggregate, no more than $5,000,000. Lessee and each ERISA Affiliate have
complied with the requirements of ERISA Section 515 with respect to each Pension
Plan which is a Multiemployer Plan. Lessee and/or any ERISA Affiliate has, as of
the date hereof, made all contributions or payments to or under each such
Pension Plan required by law or the terms of such Pension Plan or any contract
or agreement. No material liability on a consolidated basis to the PBGC has been
incurred, or is expected, by Lessee or any ERISA Affiliate. Based upon and
assuming that the representation of each Certificate Purchaser in Section
10.2(a) is accurate, none of the transactions contemplated in the Operative
Documents will constitute or result in a nonexempt prohibited transaction under
Section 4975 of the Code or Section 406(a) of ERISA.
For purposes of ERISA matters under this Lease, "Employee Benefit Plan"
---------------------
means any employee benefit plan within the meaning of ERISA Section 3(3)
maintained, sponsored or contributed to by the Lessee or any ERISA Affiliate;
"ERISA Affiliate" means any entity that is a member of any group of
- ----------------
organizations within the meaning of Code Sections 414(b), (c), (m) or (o) of
which Lessee is a member; "Multiemployer Plan" means a pension plan that is a
------------------
multiemployer plan as defined in ERISA Section 4001(a)(3); "Pension Plan" means
------------
any Employee Benefit Plan, including a Multiemployer Plan, the funding
requirements of which (under ERISA Section 302 or Code Section 412) are or, at
any time within the six years immediately preceding the time in question, were
in whole or in part, the responsibility of Lessee or any ERISA Affiliate;
"Unfunded Pension Liabilities" means, with respect to any Pension Plan at any
- -----------------------------
time, the amount determined by taking the accumulated benefit obligation, as
disclosed in accordance with FAS number 87, over the fair market value of
Pension Plan assets; and "Unrecognized Retiree Welfare Liability" means, with
--------------------------------------
respect to any Employee Benefit Plan that provides post-retirement benefits
other than pension benefits, the amount of the transition obligation, as
determined in accordance with FAS number 106, as of the most recent valuation
date that has not been recognized as an expense on the income statement of
Lessee and its Subsidiaries.
(d) Taxes. Lessee and each Affiliate have filed all required tax
-----
returns or have filed for extensions of time for the filing thereof, and have
paid all applicable taxes, governmental
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charges, assessments and similar obligations, including United States Federal,
state and local taxes, other than taxes, governmental charges and similar
obligations not yet due or which may be paid hereafter without material penalty;
to the extent (if any) that such taxes are not due and payable, Lessee has
established reserves that are adequate for the payment thereof in accordance
with GAAP; the Internal Revenue Service has completed audits of tax returns
filed through September 30, 1992; and neither Lessee nor any Affiliate has
knowledge of any material deficiency or additional assessment against it in
connection with any applicable taxes not provided for in the financial
statements referred to in Section 10.1(a)(viii) hereof.
---------------------
(e) Rights in Respect of the Leased Property. Lessee is not a party
----------------------------------------
to any contract or agreement with respect to the sale by Lessee of any interest
in any of the Leased Property other than pursuant to this Lease.
(f) Defaults, Casualties, etc. No Default, Event of Default, Event
-------------------------
of Loss or Casualty exists; there is no action pending or, to the best of
Lessee's knowledge, threatened by any Authority to initiate an Event of Taking;
no condition exists that constitutes, or with the giving of notice or lapse of
time or both would constitute, an event of default by Lessee under any material
indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales
contract, loan, credit arrangement or other material agreement or instrument to
which it is a party or by which it or any of its properties may be bound which
individually or in the aggregate with all such events of default could
reasonably be expected to have a Material Adverse Effect.
(g) Chief Executive Office of Lessee. The principal place of
--------------------------------
business and chief executive office, as such terms are used in Section 9-103(3)
of the UCC, of Lessee are each located at 825 Duportail Road, Wayne,
Pennsylvania 19087; provided that upon notice to Lessor and each Certificate
--------
Purchaser delivered in accordance with Section 14.5 hereof, Lessee may relocate
------------
such principal place of business and chief executive office to the Facility,
having an address at 70 Valley Stream Parkway, Malvern, Pennsylvania.
(h) Compliance With Law. The Land and the Facility and the current
-------------------
use and operation thereof and thereon do not, and the Financed Improvements when
completed will not, violate any provision of Applicable Law in any material
respect, including any thereof relating to occupational safety and health or
Environmental Laws. The Leased Property and the use thereof by Lessee and its
agents, assignees, employees, invitees, lessees, licensees and tenants complies
in all material respects with Applicable Law (including, without limitation, all
zoning, land use laws and Environmental Laws) and Insurance Requirements. The
Facility does not, and the Financed Improvements will not,
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encroach in any manner onto any adjoining land (except as permitted by express
written easements or as insured by appropriate title insurance). The Plans and
Specifications have been prepared in accordance with Applicable Law (including,
without limitation, applicable Environmental Laws and building, planning,
zoning, subdivision and fire codes, laws, rules and regulations). There are no
underground storage tanks at the Leased Property, and Lessee shall not cause or
permit any underground storage tanks to be constructed or located at the Leased
Property.
(i) Licenses, Registrations and Permits. All material licenses,
-----------------------------------
approvals, authorizations, consents, permits (including building, demolition and
environmental permits, licenses, approvals, authorizations and consents),
easements and rights-of-way, including proof and dedication, required for (i)
the use, treatment, storage, transport, disposal or disposition of any Hazardous
Material on, at, under or from the Land and all improvements located on the
Land, (ii) the lawful use and operation of the Land and all Leased Property
(including a certificate or certificates of occupancy for the Leased Property or
other legally equivalent permission to occupy the Leased Property); (iii)
construction of the Financed Improvements in accordance with the Plans and
Specifications therefor and the terms of this Lease; and (iv) the lawful
intended use and operation of all presently intended utilities, driveways, roads
and other means of egress and ingress to and from the same have been (or will
before the time required by Applicable Law be) obtained from the appropriate
Authorities having jurisdiction or from private parties, as the case may be
(collectively, the "Permits"), and are (or will be, upon being obtained) in full
-------
force and effect, and Lessee has no actual knowledge of any pending modification
or cancellation (or, with respect to those not yet obtained, any likely
unavailability) of any of the same. Lessee has delivered to Certificate Trustee
and each Certificate Purchaser true, correct and complete copies of all Permits
issued prior to the date that this representation is made or remade, as the case
may be. Lessee, as Construction Agent, and its contractors have assigned to
Lessor all of their respective interests in all such Permits, whether heretofore
or hereafter issued. The present condition and use of the Leased Property
conforms in all material respects with all conditions or requirements of all
existing Permits and approvals issued with respect to the Leased Property, and
the present use of the Leased Property and Lessee's future intended use of the
Leased Property under the Lease does not and will not, in any material respect,
violate any Applicable Law. The use of the Leased Property does not (and the
intended use of the Leased Property by Lessee under this Lease will not) depend
on any variance, special exception or other approval, permit, license or consent
of any Authority that has not been obtained for its continuing legal use; all
required building and use related permits, approvals, licenses and consents
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material to the construction, use and operation of the Leased Property will have
been issued and be in full force and effect on or prior to the date such
permits, approvals, licenses and consents are or become necessary.
(j) Federal Reserve Regulations. Neither Lessee nor any Affiliate
---------------------------
of Lessee will, directly or indirectly, use any of the proceeds of the Advances
or the issuance of the Certificates for the purpose of purchasing or carrying
any "margin security" or "margin stock" within the meaning of Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, respectively, or
for the purpose of reducing or retiring any indebtedness originally incurred to
purchase or carry a margin security or margin stock or for any other purpose
which might cause any of the transactions contemplated by this Lease or any
other Operative Document to constitute a "purpose credit" within the meaning of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System,
or for the purpose of purchasing or carrying any security, and neither Lessee
nor any Affiliate of Lessee has taken or will otherwise take or permit any
action by Lessee or any of its Affiliates in connection with any of the
transactions contemplated by any of the Operative Documents that would involve a
violation of Regulation G, T, U or X, or any other regulation of the Board of
Governors of the Federal Reserve System. Except for Partners Securities Company,
neither Lessee nor any of its Affiliates is or will be engaged principally or as
one of its important activities in the business of extending credit for the
purpose of purchasing or carrying or trading in any margin stocks or margin
securities (within the meaning of Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System).
(k) Disclosure. The representations and statements made by or on
----------
behalf of Lessee and its Affiliates (or any Person authorized or employed by any
such Person as agent or otherwise) to Lessor or any Certificate Purchaser in
connection with the negotiation of the Operative Documents and the Overall
Transaction do not and will not contain any untrue statement of a material fact
or omit to state a material fact or any fact necessary to make the statements
herein or therein, in light of the circumstances under which they were made,
misleading. No written information, exhibit, report or financial statement
furnished by Lessee or any Affiliate to the Certificate Purchasers in connection
with this Lease or the Operative Documents contains or will contain any material
misstatement of fact or omit to state a material fact or any fact necessary to
make the statements contained therein not materially misleading. There is no
particular fact of which Lessee or any of its Affiliates has knowledge that has
not been disclosed by Lessee or any of its Affiliates (or by any Person
authorized or employed by Lessee or any of its Affiliates as agent or otherwise)
in writing to Lessor and all of the Certificate Purchasers that, as far as
Lessee or
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any of its Affiliates can reasonably foresee, is reasonably likely to have a
Material Adverse Effect.
(l) Appraisal Data. The information provided by Lessee and its
--------------
Affiliates to the Appraiser and forming the basis for the conclusions set forth
in each Appraisal, taken as a whole, was true and correct in all material
respects and did not omit any information known and available to Lessee
necessary to make the information provided not materially misleading.
(m) Subjection to Government Regulation.
-----------------------------------
(i) Lessee is not subject to regulation under the Federal Power Act,
the Interstate Commerce Act (as any of the preceding acts have been
amended) or any other law which regulates the incurring by Lessee of
indebtedness or the entering into the transactions described herein,
including laws relating to common contract carriers or the sale of
electricity, gas, steam, water or other public utility services.
(ii) No Certificate Purchaser will become (A) solely by reason of
entering into the Operative Documents or consummation of the Overall
Transaction (other than upon exercise of remedies under the Lease or upon
the expiration thereof) subject to ongoing regulation of its operations by
any Authority having jurisdiction solely by reason of Lessee's business
activities or the nature of the Leased Property; or (B) except for
regulation the applicability of which depends upon the existence of facts
in addition to the ownership of, or the holding of any interest in, the
Leased Property or any interest therein upon the exercise of remedies
under this Lease or upon the expiration thereof, subject to ongoing
regulation of its operations by any Authority having jurisdiction solely
by reason of Lessee's business activities or the nature of the Leased
Property.
(n) Solvency. The consummation by Lessee of the Overall Transaction
--------
does not and will not render Lessee insolvent, nor were the Operative Documents
entered into in contemplation of Lessee's insolvency; the value of the assets
and properties of Lessee at fair valuation and at their then present fair
salable value is, and after such transactions will be, greater than Lessee's
total liabilities, including contingent liabilities, as they become due; the
property remaining in the hands of Lessee is not and will not be an unreasonably
small amount of capital.
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(o) Utility Services.
----------------
(i) The Leased Property has available all material services of
public facilities and other utilities necessary for use and operation of
the Facility thereon for its primary intended purposes, including, without
limitation, adequate water, gas and electrical supply, storm and sanitary
sewerage facilities, telephone, other required public utilities and means
of access between the Facility and public highways for pedestrians and
motor vehicles. All utilities serving the Leased Property, or proposed to
serve the Leased Property in accordance with the Plans and Specifications
are located in, and vehicular access to the Facility on such Property is
provided by, either public rights-of-way abutting the Leased Property or
by Appurtenant Rights.
(ii) Upon Substantial Completion of the Financed Improvements in
accordance with the Plans and Specifications, (A) there will be no
material defects to the Facility, including, without limitation, the
plumbing, heating, air conditioning and electrical systems thereof and (B)
all water, sewer, electric, gas, telephone and drainage facilities and all
other utilities required to adequately service the Facility for its
intended use will be available pursuant to adequate Permits (including any
that may be required under applicable Environmental Laws).
(p) Title. Neither Lessee nor any of its Affiliates has taken or
-----
caused to be taken any action which would have an adverse effect on Lessor's
title to the Leased Property from that indicated in Lessor's Policy.
(q) Zoning. The Leased Property complies in all material respects
------
with all applicable zoning and subdivision laws, ordinances, regulations and
restrictive covenants, and all requirements thereof necessary for the use,
occupancy and operation of the Leased Property have been satisfied and the
current use and intended use under this Lease of the Leased Property is a
conforming use.
(r) Attached hereto as Exhibit Q is a true, correct and complete
---------
copy of the Agreement of Sale dated December 11, 1996 between Seller and Lessee
with respect to Lessee's acquisition of the Leased Property, and all amendments
and modifications thereto, if any (collectively, the "Purchase Agreement"). The
------------------
Purchase Agreement is presently in full force and effect. There are no
understandings, contracts, agreements or commitments of any kind whatsoever with
respect to the Purchase Agreement except as expressly provided in the Purchase
Agreement.
SECTION 10.2. Representations and Warranties of each
---------------------------------------
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Certificate Purchaser. Each Certificate Purchaser, by its acceptance of this
- ---------------------
Lease, represents and warrants, severally and only as to itself, to each other
Certificate Purchaser, Bank, Lessee and Lessor as follows:
(a) ERISA. Either (i) it is not and will not be purchasing its
----- ------
Certificate with the assets of an ERISA Plan, or (ii) the acquisition and
--
holding of any of its Certificates with the assets of one or more ERISA Plans
will not result in a nonexempt prohibited transaction as defined by Section 4975
of the Code or Section 406(a) of ERISA.
(b) Investment in Certificates. In the case of each Certificate
--------------------------
Purchaser, it is acquiring its Certificate for its own account for investment
and not with a view to any distribution (as such term is used in Section 2(11)
of the Securities Act) thereof, and if in the future it should decide to dispose
of its Certificate, it understands that it may do so only in compliance with the
Securities Act and the rules and regulations of the SEC thereunder and any
applicable state securities laws. Neither it nor anyone authorized to act on
its behalf has taken or will take any action which would subject the issuance of
any Certificate or any interest in the Leased Property, the Trust Estate or this
Lease to the registration requirements of Section 5 of the Securities Act. No
representation or warranty contained in this Section 10.2(b) shall include or
---------------
cover any action or inaction of Lessee or any Affiliate thereof whether or not
purportedly on behalf of any Certificate Purchaser or Lessor or any of their
respective Affiliates. Subject to the foregoing, and subject to the provisions
of Article V of the Trust Agreement and Section 11.6 hereof, it is understood
------------
among the parties that the disposition of such Certificate Purchaser's property
shall be at all times within its control.
(c) Withholding of Income Taxes. If any Certificate Purchaser is
---------------------------
not incorporated under the laws of the United States or a state thereof, such
Certificate Purchaser is entitled to receive payments under the Operative
Documents without deduction or withholding of any United States Federal income
taxes.
SECTION 10.3. Representations and Warranties of Lessor. Lessor represents
----------------------------------------
and warrants to each of the Certificate Purchasers and Lessee as follows:
(a) Organization and Authority. Lessor is duly organized, validly
--------------------------
existing and in good standing under the laws of the jurisdiction of its
organization, and has full power and authority to enter into and perform its
obligations in its individual capacity under this Lease and each other Operative
Document to which it is or will be a party as Lessor.
(b) Authorization. This Lease and each other
-------------
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<PAGE>
Operative Document to which Lessor is or will be a party have been or will be
duly authorized, executed and delivered by or on behalf of Lessor.
(c) Non-Contravention. Neither the execution and delivery by
-----------------
Lessor of each Operative Document to which it is or will be a party, nor
compliance with the terms and provisions thereof, contravenes, results in a
violation or breach of, conflicts with or constitutes a default under (with or
without notice or lapse of time or both) any of the terms, conditions or
provisions of (i) the Trust Agreement; (ii) any bond, debenture, note, mortgage,
indenture, agreement, lease or other instrument to which Lessor is now a party
or by or under which it or any of its property is bound or affected; or (iii) or
any of the terms, conditions or provisions of any law, rule, regulation, order,
injunction or decree of any Authority applicable to its business.
(d) No Approvals, etc. The execution and delivery by Lessor of any
------------------
of the Operative Documents to which it is a party does not require the consent
or approval of, or the giving of notice to or registration with, or the taking
of any other action in respect of, any Authority or other body governing its
banking practices.
(e) Litigation. To its knowledge, there is no action, proceeding or
----------
investigation pending or threatened against Lessor which questions the validity
of the Operative Documents, and, to its knowledge, there is no action,
proceeding or investigation pending or threatened which is likely to result,
either in any case or in the aggregate, in any material adverse change in the
ability of Lessor to perform its obligations under the Operative Documents to
which it is a party.
(f) Lessor Liens. The Leased Property is free and clear of all
------------
Lessor Liens attributable to Lessor.
(g) Funding of Acquisition Costs. Lessor has not borrowed, either
----------------------------
from the Certificate Purchasers in connection with the capitalization of the
Lessor or otherwise, any sums to pay all or any portion of the Acquisition Costs
for the Leased Property.
(h) Securities Act. Neither Lessor nor anyone authorized to act on
--------------
its behalf has, directly or indirectly, in violation of Section 5 of the
Securities Act or any state securities laws, offered or sold any interest in the
Certificates, the Leased Property or this Lease, or in any security or lease the
offering of which, for purposes of the Securities Act or any state securities
laws, would be deemed to be part of the same offering as the offering of the
aforementioned items, or solicited any offer to acquire any of the
aforementioned items.
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<PAGE>
SECTION 10.4. Representations and Warranties of Bank. Bank hereby
--------------------------------------
represents and warrants to Lessor, Lessee and each Certificate Purchaser as
follows:
(a) Chief Executive Office. Bank's chief executive office and
----------------------
principal place of business and the place where the documents, accounts and
records relating to the Overall Transaction are kept is located in Wilmington,
Delaware.
(b) Organization and Authority. Bank is duly organized, validly
--------------------------
existing and in good standing under the laws of the jurisdiction of its
organization, and has full power and authority to enter into and perform its
obligations (i) in its individual capacity under such of the Operative Documents
to which it is or will be a party in its individual capacity, and (ii) acting as
Certificate Trustee under the Trust Agreement.
(c) Non-Contravention. Neither the execution and delivery by Bank
-----------------
of the Operative Documents to which it is or will be a party, individually or as
Certificate Trustee, nor compliance with the terms and provisions thereof,
contravenes, results in a violation or breach of, conflicts with or constitutes
a default under (with or without notice or lapse of time or both) any of the
terms, conditions or provisions of: (i) the corporate charter or by-laws of
Bank; (ii) any bond, debenture, note, mortgage, indenture, agreement, lease or
other instrument to which Bank is now a party or by or under which it or any of
its property is bound or affected; or (iii) any of the terms, conditions or
provisions of any law, rule, regulation, order, injunction or decree of the
State of Delaware or of the United States of America governing the banking or
trust powers of Bank applicable to it.
(d) Litigation. There is no action, proceeding or investigation
----------
pending or, to the best knowledge of Bank, threatened against it which would be
reasonably likely materially and adversely to affect Bank's ability to perform
its obligations, individually or as Certificate Trustee, under the Operative
Documents to which it is or will be a party.
(e) Lessor Liens. The Leased Property is free and clear of all
------------
Lessor Liens attributable to Bank.
(f) Securities Act. Neither Bank nor anyone authorized to act on
--------------
its behalf has, directly or indirectly, in violation of Section 5 of the
Securities Act or any state securities laws, offered or sold any interest in the
Certificates, the Leased Property or this Lease, or in any security or lease the
offering of which, for purposes of the Securities Act or any state securities
laws, would be deemed to be part of the same offering as the offering of the
aforementioned items, or solicited any offer to acquire any of the
aforementioned items.
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<PAGE>
SECTION 10.5. Representations and Warranties of Certificate Trustee.
-----------------------------------------------------
Certificate Trustee represents and warrants to each of the Certificate
Purchasers and Lessee as follows:
(a) Organization and Authority. Certificate Trustee is duly
--------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has full power and authority to enter into
and perform its obligations in its individual capacity under the Trust
Agreement.
(b) Authorization. Each Operative Document to which Certificate
-------------
Trustee is or will be a party have been or will be duly authorized, executed and
delivered by or on behalf of Certificate Trustee.
(c) Non-Contravention. Neither the execution and delivery by (x)
-----------------
Certificate Trustee of the Trust Agreement and (y) Certificate Trustee of each
Operative Document to which it is or will be a party, nor compliance with the
terms and provisions thereof, contravenes, results in a violation or breach of,
conflicts with or constitutes a default under (with or without notice or lapse
of time or both) any of the terms, conditions or provisions of: (i) the
corporate charter or by-laws of Certificate Trustee; (ii) any bond, debenture,
note, mortgage, indenture, agreement, lease or other instrument to which it is
now a party or by or under which it or any of its property is bound or affected;
or (iii) any of the terms, conditions or provisions of any law, rule,
regulation, order, injunction or decree of any Authority applicable to its
banking business.
(d) No Approvals, etc. The execution and delivery by Certificate
------------------
Trustee (assuming the due authorization, execution and delivery of the Trust
Agreement by each Certificate Purchaser) of any of the Operative Documents to
which it is a party does not require the consent or approval of, or the giving
of notice to or registration with, or the taking of any other action in respect
of, any Authority or other body governing its banking practices.
(e) Litigation. To its knowledge, there is no action, proceeding or
----------
investigation pending or threatened against Certificate Trustee which questions
the validity of the Operative Documents, and, to its knowledge, there is no
action, proceeding or investigation pending or threatened which is likely to
result, either in any case or in the aggregate, in any material adverse change
in the ability of Certificate Trustee to perform its obligations under the
Operative Documents to which it is a party.
(f) Lessor Liens. The Leased Property is free and clear of all
------------
Lessor Liens attributable to Certificate Trustee.
(g) Securities Act. Neither Certificate Trustee nor anyone
--------------
authorized to act on its behalf has, directly or
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<PAGE>
indirectly, in violation of Section 5 of the Securities Act or any state
securities laws, offered or sold any interest in the Certificates, the Leased
Property or this Lease, or in any security or lease the offering of which, for
purposes of the Securities Act or any state securities laws, would be deemed to
be part of the same offering as the offering of the aforementioned items, or
solicited any offer to acquire any of the aforementioned items.
SECTION 10.6. Representations of Lessee with Respect to Each Advance.
------------------------------------------------------
Lessee represents and warrants to Lessor and each Certificate Purchaser as of
each Advance Date on which an Advance is made as follows:
(a) Representations. No Default or Event of Default by Lessee under
---------------
any Operative Document to which Lessee is a party will occur as a result
of, or after giving effect to, the Advance requested by the Advance Date
Notice on such date.
(b) Improvements. The construction of the Financed Improvements to
------------
date has been performed in a good and workmanlike manner, substantially in
accordance with the Plans and Specifications and in compliance with all
Insurance Requirements and Applicable Law, and will be completed prior to
the occurrence of the Construction Completion Date.
(c) Liens. Lessee has not permitted any Lien to be placed against the
-----
Leased Property or against Lessee's fee ownership interest in the Land
since the recordation of the Mortgage other than Permitted Liens.
(d) Advance. If such Advance is a Construction Advance, the amount of
-------
the Construction Advance requested represents amounts owed by Lessee or
Construction Agent to third parties in respect of Construction Costs
incurred prior to the date of such Construction Advance and for which
Lessee has not previously been reimbursed by an Advance. The conditions
precedent to such Construction Advance and the related Certificate
Purchaser Amount set forth in Article III have been satisfied.
-----------
SECTION 11. COVENANTS.
SECTION 11.1. Covenants of Lessee. Lessee covenants with Lessor and each
-------------------
of the Certificate Purchasers as follows:
(a) Corporate Existence, etc. Subject to Section 11.1(b) and any
------------------------ ---------------
merger permitted thereby pursuant to which Lessee ceases to exist (in which case
this subsection (a) shall apply to the surviving corporation of such merger),
--------------
Lessee shall do or
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<PAGE>
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and powers and franchises and its power
and authority to perform its obligations under the Operative Documents,
including any necessary qualification or licensing in any foreign jurisdiction.
(b) Mergers, etc. Lessee shall not (whether in one transaction or a
------------
series of transactions), without the prior written consent of Lessor and the
Required Certificate Purchasers, sell, transfer or dispose of all or
substantially all of its assets or property, or consolidate or merge with any
other Person, unless (i) Lessee is the surviving or parent corporation of any
merger or other acquisition including Lessee (the "Surviving Entity") and is a
----------------
corporation organized under the laws of the United States or a jurisdiction
thereof, (ii) no Default or Event of Default exists before or as a result of
such transaction, (iii) the tangible net worth of the Surviving Entity is no
less than the tangible net worth of Lessee immediately prior to the transaction
and (iv) immediately after such transaction, Lessor shall have an enforceable,
perfected first priority security interest of record in all Leased Property then
subject hereto, free and clear of all Liens other than Permitted Liens. Lessee
shall not sell, assign, transfer or otherwise dispose of its rights or delegate
its obligations under this Lease to any other Person, except as permitted by
Section 5.9 or this Section 11.1(b).
- ----------- ---------------
(c) Change of Name or Location. Lessee shall furnish to Lessor and
--------------------------
each Certificate Purchaser notice on or before the thirtieth (30th) day before
any relocation of its chief executive office, principal place of business or the
office where it keeps its records concerning its accounts, the Leased Property,
or change of its name, corporate structure or identity.
(d) Financial Information. Lessee shall keep and maintain, and cause
---------------------
each Subsidiary to keep and maintain, satisfactory and adequate books and
records in accordance with GAAP (including the inclusion of footnotes on the
financial statements hereinafter described). Lessee agrees to furnish to Lessor
and each of the Certificate Purchasers (i) as soon as available and in any event
within sixty (60) days after the end of each of the first, second and third
quarterly accounting periods in each fiscal year of Lessee, copies of a
consolidated balance sheet of Lessee and its Consolidated Subsidiaries as of the
end of such accounting period and of the related consolidated income and
retained earnings statements of Lessee and its Consolidated Subsidiaries for the
elapsed portion of Lessee's fiscal year ended with the last day of such
accounting period, all in reasonable detail and stating in comparative form the
amounts for the corresponding date and period in the previous fiscal year, and
all prepared in accordance with GAAP, subject to year end audit adjustments and
certified by an authorized financial officer of Lessee, together with an
officer's certificate that no Default or
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Event of Default exists hereunder; (ii) as soon as available and in any event
within 120 days after the end of each fiscal year of Lessee, copies of
consolidated balance sheets of Lessee and its Consolidated Subsidiaries as of
the end of such fiscal year and consolidated statements of income and retained
earnings of Lessee and its Consolidated Subsidiaries for such fiscal year, in
reasonable detail and stating in comparative form the figures as of the end of
and for the previous fiscal year prepared in accordance with GAAP and certified
by independent public accountants of recognized standing as may be selected by
Lessee and reasonably satisfactory to the Required Certificate Purchasers; (iii)
concurrently with each of the financial statements furnished pursuant to the
foregoing subsections (i) and (ii), a certificate of the Chairman of the Board,
President, a Vice President (whose duties are in the finance area) or Financial
Officer, stating that in the opinion of the signer, based upon a review made
under their supervision, no Event of Default or Default or Casualty has occurred
and is continuing under any of the Operative Documents, and Lessee has performed
and observed all of, and Lessee is not in default in the performance or
observance of any of, the terms and covenants hereof or, if Lessee shall be in
default or a Casualty shall exist, specifying all such defaults and Casualties,
and the nature thereof, of which the signer of such certificate may have
knowledge; (iv) concurrently with their being filed, mailed or delivered, as
applicable, copies of all proxy statements, financial statements and reports
which Lessee shall send or make available generally to its shareholders, and
copies of all reports on Forms 10-K, 10-Q and 8-K and all other filings and
reports specifically requested by a Certificate Purchaser which Lessee or any
Subsidiary may be required to file with the Securities and Exchange Commission
or any similar or corresponding governmental commission, department or an agency
substituted therefor or with any securities exchange located in the United
States of America; and (v) such other information relating to the business,
affairs and financial condition of Lessee and its Subsidiaries as the
Certificate Purchasers may from time to time reasonably request.
(e) Funded Debt to Total Capitalization Ratio. Lessee will not permit
-----------------------------------------
Funded Debt of Lessee and its Consolidated Subsidiaries to exceed 45% of the sum
of (1) Funded Debt of Lessee and its Consolidated Subsidiaries plus (2) the
consolidated minority interest obligations shown on the consolidated balance
sheet of Lessee and its Consolidated Subsidiaries plus (3) the Consolidated Net
Worth of Lessee and its Consolidated Subsidiaries. For purposes of calculating
such ratio, Finance Leasing Subsidiaries shall be excluded from the definition
of "Consolidated Subsidiaries".
(f) Subsidiaries' Debt. Lessee will not permit any of its
------------------
Subsidiaries directly or indirectly to create, incur, assume, suffer to exist,
guarantee or otherwise become, be or remain
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<PAGE>
liable with respect to any Debt (other than Excluded Debt, as defined below) in
an aggregate amount outstanding (as to all Subsidiaries) at any time in excess
of 20% of Consolidated Net Worth plus the amount of Debt outstanding on the date
hereof (other than Excluded Debt outstanding on the date hereof). For the
purposes of this Agreement, "Excluded Debt" shall mean: (i) Debt owing
-------------
exclusively to Lessee or another Subsidiary, (ii) Debt of a Subsidiary
outstanding on the date that Lessee acquires such Subsidiary, (iii) Debt with
respect to property to be used by Lessee or its Subsidiaries, the interest on
which Debt is exempt from Federal income tax pursuant to (S)103 of the Code,
(iv) Debt of any foreign Subsidiary that is not guaranteed by Lessee or any
other Subsidiary, (v) Debt of Finance Leasing Subsidiaries owing to Lessee or
any of its Consolidated Subsidiaries, (vi) Debt of Finance Leasing Subsidiaries
to a person or persons other than Lessee and its Consolidated Subsidiaries
provided that such Debt is not guaranteed by Lessee or any of its Consolidated
Subsidiaries or (vii) Debt under the Credit Agreement.
(g) Sale of Assets. Lessee will not, and will not permit any
--------------
consolidated Subsidiary to, sell, lease or transfer all or substantially all of
its assets unless (i) immediately after giving effect thereto Lessee is in
compliance with the covenants and provisions of this Lease and (ii) such sale,
lease or transfer shall not have any materially adverse effect upon the
financial condition of Lessee and its Subsidiaries taken as a whole or Lessee's
ability to perform its obligations hereunder. Notwithstanding this provision,
any consolidated Subsidiary that is not a Subsidiary Borrower (as defined in the
Credit Agreement) may sell, lease or transfer all or substantially all of its
assets to any other consolidated Subsidiary or to Lessee, and any Subsidiary
Borrower may sell, lease or transfer all or substantially all of its assets to
any other Subsidiary Borrower or to Lessee.
(h) Notice of Defaults. Promptly upon, but in no event later than
------------------
three (3) Business Days after Lessee shall have obtained knowledge thereof,
Lessee shall notify Lessor and each Certificate Purchaser in writing of the
existence of a Default, Event of Default or any other matter (including, without
limitation, the institution of any litigation, the commencement of any
administrative proceedings, the happening of any event or the assertion or
threat of any claim) which has resulted in or might have a Material Adverse
Effect with respect to Lessee, its Subsidiaries or the Leased Property, which
notice shall describe the nature of such Default, Event of Default or other
matter and the action Lessee is taking or proposes to take with respect thereto.
(i) Notice of Proceedings. Promptly upon Lessee's becoming aware of
---------------------
(i) any proposed or pending investigation of Lessee or any of its Subsidiaries
by any Authority, (ii) any court
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<PAGE>
or administrative proceeding involving any Person described in the foregoing
clause (i), or (iii) any notice, claim or demand from any Authority which
- ----------
alleges that any such Person is in violation of any law or has failed to comply
with any order issued pursuant to any Federal, state or local statute regulating
its operation and business, which individually or in the aggregate is reasonably
likely to result in a Material Adverse Effect, Lessee shall notify Lessor and
each Certificate Purchaser specifying its nature and the action Lessee is taking
with respect thereto.
(j) Inspection. Lessor or any Certificate Purchaser may designate any
----------
Person in writing who is an officer, employee or agent of Lessor or such
Certificate Purchaser, as the case may be, to visit and inspect the properties
(including the Land and improvements) of Lessee, and to the extent reasonable
under the circumstances, examine the books of record and accounts of Lessee and
each Subsidiary (including Lessee's records pertaining to the Land and
improvements), and discuss its affairs, finances and accounts with its officers,
and, with notice to Lessee so that it may have an officer present if it so
reasonably requests, the accountants of Lessee, all at such reasonable times as
Lessor or such Certificate Purchaser may reasonably request and, upon such
request, Lessee shall make such properties and such books of record and
accounts, or cause them to be made, available to Lessor or the requesting
Certificate Purchaser, as the case may be, for inspection; provided, however,
-------- -------
that, with respect to the properties of Lessee other than the Leased Property,
and the records of Lessee and each Subsidiary other than those pertaining
thereto, Lessee's obligations hereunder shall arise only while a Default or
Event of Default exists, except that, upon receipt of reasonable notice, Lessee
shall permit Lessor and each Certificate Purchaser to discuss the affairs,
finances and accounts of Lessee with a financial officer of Lessee. So long as
any Default or Event of Default exists, Lessee will pay the reasonable expenses
of Lessor and each Certificate Purchaser incurred in the exercise of the rights
granted pursuant to this Section 11.1(j).
---------------
(k) Rule 144A Information. At any time when Lessee is not subject to
---------------------
Section 13 or Section 15(d) of the Exchange Act, if Lessor or any Certificate
Purchaser requests that Lessee deliver to Lessor or such Certificate Purchaser
information with respect to Lessee that meets the requirements of Rule
144A(d)(4)(i) of the Exchange Act (or any successor provision), then: (x)
promptly following the receipt by Lessee of that request, Lessee shall deliver
such information to Lessor or such requesting Certificate Purchaser, and (y)
such information shall, at the time of such delivery, be as of a date so as to
be entitled to the presumption that such information is "reasonably current"
within the meaning of Rule 144A(d)(4)(i) of the Exchange Act (or any successor
provision).
(l) Reports to Lessor and the Certificate Purchasers.
------------------------------------------------
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<PAGE>
Lessee shall, concurrently with any notice, delivery or other communication to
Lessor pursuant to any Operative Document, deliver a copy of such notice,
delivery or other communication to each Certificate Purchaser at its respective
current address.
(m) Further Assurances. Lessee, at its own cost and expense, will
------------------
cause to be promptly and duly taken, executed, acknowledged and delivered all
such further acts, documents and assurances as Lessor or any Certificate
Purchaser may reasonably request from time to time in order to carry out more
effectively the intent and purposes of this Lease and the other Operative
Documents and the Overall Transaction. Lessee, at its own cost and expense, will
cause all financing statements (including precautionary financing statements),
fixture filings and other documents, to be recorded or filed at such places and
times in such manner, and will take all such other actions or cause such actions
to be taken, as may be necessary or as may be reasonably requested by Lessor or
any Certificate Purchaser in order to establish, continue, preserve, protect and
perfect the title of Lessor to the Leased Property and Lessor's rights under
this Lease and the other Operative Documents and to perfect, continue, preserve
and protect the first and prior Lien of Lessor on the Leased Property. To the
extent permitted by Applicable Law, Lessee hereby authorizes any such financing
statement and fixture filings to be filed without the necessity of the signature
of Lessee.
(n) Construction Matters.
--------------------
(i) Lessee shall complete or cause the completion of the design,
identification, acquisition, construction, installation, testing and
placement into service in commercial operation of all items of the Financed
Improvements and shall have satisfied each of the conditions set forth at
Sections 3.2 and 3.3 on or before the Construction Completion Date pursuant
------------ ---
to the Plans and Specifications and in accordance with good industry,
engineering and construction practices. Lessee's obligation under this
Section 11.1(n)(i) shall be absolute and unconditional, notwithstanding any
------------------
excess of the cost of construction of any item of the Financed Improvements
over the amounts to be advanced by Lessor pursuant to Section 2, the
---------
payment of which excess shall be the recourse obligation of Lessee.
(ii) Lessee may execute, without any consent of the Certificate
Purchasers, any change order, modification or addition to the design and
specifications for any item of the Financed Improvements before its
completion, so long as such change order, modification or addition does not
materially and adversely affect the fair market value and utility of such
item and the Facility, as built and installed, in accordance with the
original Plans and Specifications that
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were reviewed by the Appraiser in connection with the initial Appraisal. If
requested by Lessor at the direction of the Required Certificate
Purchasers, Lessee shall engage an appraiser of nationally recognized
standing, at Lessee's expense, to determine, by appraisal methods
satisfactory to the Required Certificate Purchasers, whether any such
change, modification or addition will adversely affect the fair market
value of the Facility.
(o) Environmental Matters. Lessee shall (i) use and operate, and
---------------------
cause its Subsidiaries to use and operate, the Leased Property in compliance in
all material respects with all Environmental Laws, keep all necessary Permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance therewith, and
handle all Hazardous Material in compliance in all material respects with all
applicable Environmental Laws; (ii) immediately notify Lessor and the
Certificate Purchasers in detail (and provide copies upon receipt, if
applicable) of all actual or alleged failures to comply with or perform, breach,
violation or default under Environmental Laws, and any claims, complaints,
notices or inquiries relating to the condition of the Leased Property or
compliance with Environmental Laws, and of all notices of potential
responsibility for the release or threatened release of Hazardous Material and
of the occurrence or existence of any facts or circumstances which with the
passage of time, the giving of notice or both or otherwise could create such a
breach, violation or default or could occasion the creation of potential
responsibility for releases or threatened releases of Hazardous Material and
promptly commence and diligently pursue the cure and dismissal with prejudice to
the reasonable satisfaction of the Required Certificate Purchasers of any
actions and proceedings relating to compliance with Environmental Laws;
provided, however, that Lessee may contest in good faith by appropriate
- -------- -------
proceedings any such actions or proceedings if (A) adequate reserves are kept on
the books of Lessee in accordance with GAAP with respect thereto, (B) no
penalties or criminal sanctions are or may be assessed against Bank, Lessor or
any Certificate Purchaser as a result thereof and (C) no danger of or material
risk to any of the Leased Property arises or may arise as a result thereof; and
(iii) provide such information and certifications which Lessor or any
Certificate Purchaser may reasonably request from time to time to evidence
compliance with this Section 11.1(o).
---------------
(p) Securities. Lessee shall not, nor shall it permit anyone
----------
authorized to act on its behalf to, take any action which would subject the
issuance or sale of the Certificates, any of the Leased Property or the Lease,
or any security or lease the offering of which, for purposes of the Securities
Act or any state securities laws, would be deemed to be part of the same
offering as the offering of the aforementioned items, to the registration
requirements of Section 5 of the Securities Act or any state
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securities laws.
(q) No Disposition of the Leased Property. Lessee shall not sell,
-------------------------------------
contract to sell, assign, lease, transfer, convey or otherwise dispose of, or
permit to be sold, assigned, leased, transferred, conveyed or otherwise disposed
of, the Leased Property or any part thereof.
(r) Delivery of Permits, etc. To the extent not previously delivered
------------------------
to Lessor, upon request of Lessor at any time an Event of Default exists, Lessee
shall forthwith deliver to Lessor all permits for the acquisition, construction,
installation, testing and placement into service of the Leased Property,
together with all of the Plans and Specifications for the Leased Property
(including the Financed Improvements).
(s) Sale, Discount of Receivables; Sale, Leaseback Transactions.
-----------------------------------------------------------
Lessee will not, and will not permit its Consolidated Subsidiaries to, enter
into any Securitization (as defined in the Credit Agreement) which, when added
to the aggregate amount of all Securitizations then outstanding, exceeds the
lesser of 15% of Consolidated Total Assets or $775,000,000. Exclusive of such
Securitizations, Lessee will not, and will not permit its Consolidated
Subsidiaries to, sell or discount receivables with recourse or sell and lease
back fixed assets the aggregate amount of which when added to all liens arising
in connection with a Securitization permitted by Section 7 of the Credit
Agreement (limited in each case to the accounts therein or in any trust or
similar entity utilized to effect such Securitizations and to any equipment
giving rise to such accounts) exceed 10% of Consolidated Net Worth.
(t) Regulations G, T, U and X. Lessee will not, and will not permit
-------------------------
any Subsidiary to, use Advances hereunder in any manner which may cause a
violation of or non-compliance with Regulations G, T, U or X of the Board of
Governors of the Federal Reserve Board.
(u) Force Majeure Event. Lessee shall deliver to Lessor notice of the
-------------------
occurrence of any Force Majeure Event that results or may result in the
extension of the Scheduled Construction Termination Date. If Lessee desires to
extend the Scheduled Construction Termination Date as a result of a Force
Majeure Event, it shall deliver notice thereof to Lessor no less than twenty
(20) days prior to the Scheduled Construction Termination Date.
(v) Qualification. Promptly after the date hereof, Lessee shall do or
-------------
cause to be done all things necessary to qualify Lessor to do business in
Pennsylvania.
(w) Notification of Rating Changes. Lessee shall
------------------------------
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<PAGE>
promptly notify Certificate Trustee of any change in the senior long-term debt
rating of Lessee from S&P or Moody's.
SECTION 11.2. Taxes. Lessee will pay and discharge, and cause each
-----
Subsidiary to pay and discharge, all taxes, assessments or other governmental
charges or levies imposed on it or any of its property or assets prior to the
date on which any material penalty for non-payment or late payment is incurred,
unless the same is currently being contested in good faith by appropriate
proceedings and reserves in accordance with GAAP are being maintained.
SECTION 11.3. Compliance with Laws. Lessee will comply and cause each
--------------------
Subsidiary to comply in all respects with all Applicable Law in respect of its
business and operations and the ownership of its properties, except for such
instances of non-compliance which would not have, individually or in the
aggregate, a Material Adverse Effect, including but not limited to: (i) all
rules and regulations of the SEC and (ii) the provisions and requirements of all
franchises, permits and licenses applicable to its business, including, but not
limited to, those required by Environmental Laws. Lessee shall notify the Banks
promptly in detail of any actual or alleged failure to comply with or perform,
breach, violation or default under any such laws or regulations or of the
occurrence or existence of any facts or circumstances which with the passage of
time, the giving of notice or both or otherwise could create such a breach,
violation or default or could occasion the termination of any of such franchises
or grants of authority, if any of the foregoing would have a Material Adverse
Effect on Lessee and its Subsidiaries taken as a whole.
SECTION 11.4. Employee Benefit Plans. Lessee will, and will cause each
----------------------
ERISA Affiliate to, (a) comply in all material respects with the provisions of
ERISA to the extent applicable to any Employee Benefit Plan maintained by it and
cause all Employee Benefit Plans maintained by it to satisfy the conditions
under the Code for tax qualification of all such plans intended to be tax
qualified; and (b) avoid (1) any material accumulated funding deficiency (within
the meaning of ERISA section 302 and Code section 412(a)) (whether or not
waived) (2) any act or omission on the basis of which it or an ERISA Affiliate
might incur a material liability to the PBGC (other than for the payment of
required premiums) or to a trust established under ERISA section 4049; (3) any
transaction with a principal purpose described in ERISA section 4069; and (4)
any act or omission that might result in the assessment by a Multiemployer Plan
of withdrawal liability against Lessee or any ERISA Affiliate, but only to the
extent that the liability arising from a failure to comply with any covenant set
forth in (a) or (b) of this Section 11.4 could reasonably be expected to result
------------
in a liability to Lessee or a Subsidiary or an ERISA Affiliate for any one such
event in excess of $10,000,000.
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<PAGE>
SECTION 11.5. Covenants of Lessor and Certificate Purchasers. Each of
----------------------------------------------
Lessor and the Certificate Purchasers covenants as to itself, and not jointly
with any other Person, with Lessee and Lessor and each Certificate Purchaser (as
applicable) as follows:
(a) Cooperation with Lessee. Lessor and each Certificate Purchaser
-----------------------
shall, to the extent reasonably requested by Lessee (but without assuming
additional liability on account thereof), at Lessee's expense, cooperate to
allow Lessee to (a) perform its covenants contained in Section 11.1, including
------------
at any time and from time to time, upon the reasonable request of Lessee,
promptly and duly to execute and deliver any and all such further instruments,
documents and financing statements (and continuation statements related thereto)
as Lessee may request in order to perform such covenants, and (b) further
Lessee's requirements as lessee of the Leased Property, including the filing of
any statement with respect to any tax abatements or other requirements.
(b) Discharge of Liens. Each of the Certificate Purchasers covenants
------------------
as to itself, and not jointly with any other Certificate Purchaser, that it will
not create or permit to exist at any time, and will, at its own cost and
expense, promptly take such action as may be necessary duly to discharge, or to
cause to be discharged, all Lessor Liens attributable to it, and will cause
restitution to be made to the Trust Estate in the amount of any diminution of
the value thereof as a result of its failure to comply with its obligations
under this Section 11.5(b). Lessor will not create or permit to exist at any
---------------
time, and will promptly take such action as may be necessary duly to discharge,
or to cause to be discharged, all Lessor Liens attributable to it, and will
cause restitution to be made to the Trust Estate in the amount of any diminution
of the value thereof as a result of its failure to comply with its obligations
under this Section 11.5(b). Notwithstanding the foregoing, neither Lessor nor
---------------
any of the Certificate Purchasers, as the case may be, shall be required to so
discharge any such Lessor Lien while the same is being contested in good faith
by appropriate proceedings diligently prosecuted so long as such proceedings
shall not involve any meaningful danger of the impairment of any Lien on the
Leased Property in favor of Lessor or of the sale, forfeiture or loss of, and
shall not interfere with the use or disposition of, any portion of the Leased
Property, the Lease or the Trust Estate or title thereto or any interest therein
or the payment of Rent; provided, however, that Lessor and each Certificate
-------- -------
Purchaser shall discharge any such Lessor Lien attributable to it, whether or
not subject to contest as provided above, upon the purchase of the Leased
Property by Lessee pursuant to this Lease.
(c) Trust Agreement. Without prejudice to any right of Certificate
---------------
Trustee under the Trust Agreement to resign as
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<PAGE>
Certificate Trustee, or the right of the Certificate Purchasers under the Trust
Agreement to remove Certificate Trustee as Certificate Trustee, each of the
Certificate Purchasers and Lessor hereby agrees with Lessee not to terminate or
revoke the trust created by the Trust Agreement except as permitted by Article
VI of the Trust Agreement before the later of the Lease Termination Date or the
payment in full of the obligations under the Certificates.
(d) Successor Certificate Trustee. Certificate Trustee or any
-----------------------------
successor may resign or be removed by the Certificate Purchasers as Certificate
Trustee, a successor Certificate Trustee may be appointed, and a corporation may
become Certificate Trustee under the Trust Agreement, only in accordance with
the provisions of Section 4.10 of the Trust Agreement.
(e) Indebtedness; Other Business. Lessor shall not contract for,
----------------------------
create, incur or assume any indebtedness, or enter into any business or other
activity, other than pursuant to or under the Operative Documents.
(f) Change of Principal Place of Business. Lessor shall give prompt
-------------------------------------
notice to the Certificate Purchasers and Lessee if Lessor's principal place of
business or chief executive office, or the office where the records concerning
the accounts or contract rights relating to the Leased Property or the Overall
Transaction are kept, shall cease to be located in Wilmington, Delaware or if it
shall change its name, identity or structure.
(g) Depreciation. Before the Lease Termination Date, neither Lessor
------------
nor any Certificate Purchaser shall claim any Federal or state tax attributes or
benefits (including depreciation) relating to the Leased Property unless
required to do so by an appropriate taxing authority or after a clearly
applicable change in Applicable Law or as a protective response to a proposed
adjustment by an Authority; provided, however, that if an appropriate taxing
-------- -------
authority requires Lessor or any Certificate Purchaser to claim any such Federal
or state tax attributes or benefits, such Person shall promptly notify Lessee
thereof and shall permit Lessee to contest such requirement in a manner similar
to the contest rights provided in, and subject to any applicable limitation to a
contest contained in, Section 7.2(b).
--------------
(h) Election of Taxation. Lessor shall not elect to be classified as
--------------------
a business entity taxable as a corporation for United States Federal income tax
purposes under 26 C.F.R. (S) 301.7701-3 nor take or refrain from taking any
other action which would cause it to be so classified.
(i) No Transfers. Notwithstanding anything to the contrary contained
------------
in the Operative Documents, Lessor shall not pledge, hypothecate, convey,
assign, encumber or otherwise
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<PAGE>
transfer (by operation of law or otherwise) any interest of Lessor in and to the
Leased Property or this Lease (including any right to receive Rent or other sums
from Lessee), except as expressly contemplated by the Operative Documents, and
any such pledge, hypothecation, conveyance, assignment, encumbrance or other
transfer not expressly authorized in accordance with the Operative Documents
shall be void ab initio and of no force and effect.
-- ------
SECTION 11.6. Restrictions on and Effect of Transfer. (a) No Certificate
--------------------------------------
Purchaser shall assign, convey or otherwise transfer all or any portion of its
right, title or interest in, to or under any of the Operative Documents or any
Certificate, except that without the prior written consent of Lessee, (x) any
bank or similar financial or commercial lending institution may pledge its
Certificate in the ordinary course of its business without the consent of
Lessee, provided, that no transfer upon a foreclosure pursuant to such a pledge
--------
may occur unless the other provisions of this Section 11.6 are complied with,
------------
(y) any Certificate Purchaser may transfer all or any portion of its Certificate
to an Affiliate or to any other existing Certificate Purchaser and (z) any
Certificate Purchaser may transfer any or all of its Certificate upon the
satisfaction of each of the following conditions:
(i) Required Notice and Effective Date. Any Certificate Purchaser
----------------------------------
desiring to effect a transfer of its interest shall give written notice of
each such transfer to Lessee, Certificate Trustee and each other
Certificate Purchaser promptly upon such transfer, setting forth the name
of the transferee, the percentage or interest to be retained by such
Certificate Purchaser, if any, and the date on which such transfer is
proposed to become effective. All reasonable out-of-pocket costs incurred
by Certificate Trustee in connection with any such disposition by a
Certificate Purchaser under this Section 11.6 shall be borne by such
------------
Certificate Purchaser. In the event of a transfer under this Section 11.6,
------------
any expenses incurred by the transferee in connection with its review of
the Operative Documents and its investigation of the Overall Transaction
shall be borne by such transferee or the relevant Certificate Purchaser, as
they may determine, but shall not be considered costs and expenses which
Lessee is obligated to pay or reimburse under Section 14.1.
------------
(ii) Assumption of Obligations. Any transferee pursuant to this
-------------------------
Section 11.6 shall have executed and delivered to Certificate Trustee a
------------
letter in substantially the form of the Investor's Letter attached hereto
as Exhibit P, and thereupon the obligations of the transferring Certificate
---------
Purchaser under the Operative Documents shall be proportionately released
and reduced to the extent of such transfer. Upon any such transfer as above
provided, the transferee shall be deemed to be bound by all obligations
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(whether or not yet accrued) under, and to have become a party to, all
Operative Documents to which its transferor was a party, shall be deemed
the pertinent "Certificate Purchaser" for all purposes of the Operative
Documents and shall be deemed to have made that portion of the payments
pursuant to this Lease previously made or deemed to have been made by the
transferor represented by the interest being conveyed; and each reference
herein and in the other Operative Documents to the pertinent "Certificate
Purchaser" shall thereafter be deemed a reference to the transferee, to the
extent of such transfer, for all purposes. Upon any such transfer, Lessor
shall deliver to each Certificate Purchaser and Lessee new Schedules I to
-----------
this Lease and the Trust Agreement, revised to reflect the relevant
information for such new Certificate Purchaser and the Commitment of such
new Certificate Purchaser (and the revised Commitment of the transferor
Certificate Purchaser if it shall not have transferred its entire
interest).
(iii) Representations and Warranties. Notwithstanding anything to
------------------------------
the contrary set forth above, no Certificate Purchaser may assign, convey
or transfer its interest to any Person, unless such Person shall have
delivered to Certificate Trustee and Lessee a certificate confirming the
accuracy of the representations and warranties set forth in Section 10.2
------------
with respect to such Person as of the date of the assignment.
(iv) Financial Condition of Transferee. No transfer by a Certificate
---------------------------------
Purchaser shall be effective against the other parties to this Lease unless
the transferee is (i) an "accredited investor" which is a bank or other
financial institution with a combined capital, surplus and undivided
profits (or its equivalent) of at least $50,000,000, or (ii) any subsidiary
--
of any such bank or financial institution, provided, that such bank or
--------
financial institution furnishes a guaranty with respect to the transferee's
obligations as a Certificate Purchaser (as the case may be), or (iii) any
--
other entity, provided, the transferee's obligations as a Certificate
--------
Purchaser (as the case may be) are guaranteed by the transferor Certificate
Purchaser.
(v) Amounts. Any transfer of Certificates shall be in a face
-------
principal amount which is (A) equal to or greater than $1,000,000.00, or
(B) the entire amount of the Certificate being transferred.
(vi) Effect. From and after the registration of transfer of its
------
Certificates, the transferring Certificate Purchaser shall be released, to
the extent assumed by the transferee, from its liability and obligations
hereunder and
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<PAGE>
under the other Operative Documents relating to the Leased Property to
which such transferor is a party in respect of obligations to be performed
on or after the date of such transfer. Upon any registration of transfer by
a Certificate Purchaser as above provided, any such transferee shall be
deemed a "Certificate Purchaser" (as the case may be) for all purposes of
such documents, and each reference herein to a Certificate Purchaser shall
thereafter be deemed a reference to such transferee for all purposes,
except as the context may otherwise require. Notwithstanding any transfer
as provided in this Section 11.6, the transferor shall be entitled to all
------------
benefits accrued and all rights vested prior to such transfer, including,
without limitation, rights to indemnification under this Lease or any other
Operative Document.
(b) Each Certificate Purchaser may grant participations in its
Certificate(s) to any Person. Each Person who purchases a participation in a
Certificate shall be entitled to the benefits of Sections 7.1, 7.2, 7.5, 7.7,
------------ --- --- ---
7.8 and 7.9 with respect to its participation in such Certificate. No
- --- ---
participation contemplated in this Section 11.6(b) shall relieve any Certificate
---------------
Purchaser from its Certificate Purchaser Commitment or its other obligations
hereunder or under any other Operative Documents, and such Certificate Purchaser
shall remain solely responsible for the performance of its Certificate Purchaser
Commitment and such other obligations. Lessee shall continue to deal solely and
directly with the Certificate Purchasers in connection with their rights and
obligations under this Lease and each of the other Operative Documents.
SECTION 11.7. Future Certificate Purchasers. Each Certificate Purchaser,
-----------------------------
by its acceptance of its Certificate or Certificates, shall be deemed to be
bound by and, upon compliance with the requirements of Section 11.6, will be
------------
entitled to all of the benefits of the provisions of this Lease.
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SECTION 11.8. Covenants of Bank. Bank covenants with Lessee and each of
-----------------
the Certificate Purchasers as follows:
(a) No Liens. Bank will not create or permit to exist at any time,
--------
and will, at its own cost and expense, promptly take such action as may be
necessary duly to discharge, or to cause to be discharged, all Lessor Liens
attributable to it solely in its individual capacity, and will cause restitution
to be made to the Trust Estate in the amount of any diminution of the value
thereof as a result of its failure to comply with its obligations under this
Section 11.8(a). Notwithstanding the foregoing, Bank shall not be required so to
- ---------------
discharge any such Lessor Lien while the same is being contested in good faith
by appropriate proceedings diligently prosecuted so long as such proceedings
shall not involve any meaningful danger of the impairment of any Lien on the
Leased Property in favor of Lessor or of the sale, forfeiture or loss of, and
shall not interfere with the use or disposition of, any portion of the Leased
Property, this Lease or the Trust Estate or title thereto or any interest
therein or the payment of Rent; provided, however, that Bank shall discharge any
-------- -------
such Lessor Lien attributable to it solely in its individual capacity, whether
or not subject to contest as provided above, upon the purchase of the Leased
Property by Lessee pursuant to this Lease.
(b) Application of Funds. Bank shall apply funds held by it
--------------------
hereunder as required by this Lease and the other Operative Documents.
SECTION 12. ASSIGNMENT BY LESSOR.
All or any of the right, title or interest and obligations of Lessor in and
to this Lease and the rights, benefits, advantages and obligations of Lessor
hereunder, including the rights to receive payment of rental or any other
payment hereunder, and the rights, titles and interests in and to the Leased
Property, may be assigned or transferred by Certificate Trustee at any time in
accordance with the provisions set forth in the Trust Agreement.
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<PAGE>
SECTION 13. GRANT OF SECURITY INTEREST.
SECTION 13.1. Grant of Security Interest. Lessee hereby assigns, grants,
--------------------------
pledges, mortgages and warrants to Lessor for the benefit of the Certificate
Purchasers a security interest in and Lien against all of Lessee's right, title
and interest, whether now or hereafter existing or acquired, in the Leased
Property and proceeds therefrom, including insurance proceeds, to secure the
payment and performance of all obligations of Lessee now or hereafter existing
under this Lease or any other Operative Document, until such time as Lessee
shall have fulfilled all of its obligations hereunder and under such other
Operative Documents. Upon Lessee's request, Lessor shall at such time as all of
the obligations of Lessee under this Lease or any other Operative Documents have
been indefeasibly paid or performed in full (other than Lessee's contingent
obligations, if any, under Section 7) execute and deliver termination statements
---------
and other appropriate documentation reasonably requested by Lessee, all at
Lessee's expense, to evidence Lessor's release of its Lien against the Leased
Property. If Lessee pays or causes to be paid to Lessor all obligations of
Lessee under this Lease or any other Operative Documents, at the times and in
the manner specified, without deduction, fraud or delay, and Lessee performs and
complies with all the agreements herein and in the other Operative Documents,
then this instrument and the estate herein granted shall cease and become void.
SECTION 13.2. Retention of Proceeds. If Lessee would be entitled to any
---------------------
amount or title to any portion of the Leased Property hereunder but for the
existence of any Event of Default or Default, Lessor shall hold such amount and
such portion of the Leased Property and shall be entitled to apply such amounts
against any amounts due hereunder; provided that Lessor shall distribute such
--------
amount or transfer such portion of the Leased Property in accordance with the
other terms of this Lease if and when no Event of Default or Default exists.
-119-
<PAGE>
SECTION 14. MISCELLANEOUS PROVISIONS.
SECTION 14.1. Payment of Transaction Costs and Other Costs. Whether or
--------------------------------------------
not the Overall Transaction is consummated, Lessee shall pay all Transaction
Costs in accordance with Section 3.1(k) and all other fees, expenses and costs
--------------
in accordance with the Operative Documents. If the Overall Transaction does not
close, Lessee shall pay such Transaction Costs and such other costs promptly
upon receipt of invoices therefor. In addition, Lessee shall pay or reimburse
Bank, Lessor and the Certificate Purchasers for all other out-of-pocket costs
and expenses (including allocated fees of internal counsel) reasonably incurred
in connection with: (a) the entering into, or the giving or withholding of, any
future amendments, supplements, waivers or consents with respect to the
Operative Documents; (b) any Casualty or termination of the Lease or any other
Operative Document; (c) the negotiation and documentation of any restructuring
or "workout", whether or not consummated, of any Operative Document; (d) the
enforcement of the rights or remedies under the Operative Documents; (e) further
assurances requested pursuant to Section 11.1(m) or any similar provision in
---------------
other Operative Documents; (f) any transfer by Lessor or any Certificate
Purchaser of any interest in the Operative Documents during the continuance of
an Event of Default; and (g) the ongoing fees and expenses for which Lessee is
obligated under the Operative Documents (including, without limitation, the fees
and expenses of Certificate Trustee).
SECTION 14.2. Survival of Agreements, etc. All representations,
---------------------------
warranties, covenants, indemnities and agreements of the parties provided for in
the Operative Documents, and the obligations of the parties under any and all
thereof, shall survive the execution and delivery and the termination or
expiration of this Lease and any of the other Operative Documents, the transfer
of the interest in the Leased Property to or by Lessor as provided herein or in
any of the other Operative Documents (and shall not be merged into any
conveyance or transfer document), any disposition of any interest of Lessor in
the Leased Property, the purchase and sale of the Certificates, payment therefor
and any disposition thereof, and shall be and continue in effect notwithstanding
any investigation made by any party hereto or to any of the other Operative
Documents and the fact that any such party may waive compliance with any of the
other terms, provisions or conditions of any of the Operative Documents. If any
right or option of Lessee provided in this Lease would, in the absence of the
limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule of law relating to
the vesting of an interest in or the suspension of the power of alienation of
property, then such right or option shall be exercisable only during the period
which shall end twenty-one (21) years after the
-120-
<PAGE>
date of death of the last survivor of the descendants of Franklin D. Roosevelt,
the former President of the United States, Henry Ford, the deceased automobile
manufacturer, and John D. Rockefeller, the founder of the Standard Oil Company,
known to be alive on the date of the execution, acknowledgement and delivery of
this Lease.
SECTION 14.3. Applicable Law. THIS LEASE AND THE RIGHTS AND OBLIGATIONS
--------------
OF THE PARTIES UNDER THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT EXCLUDING ALL OTHER
CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE (EXCEPT THAT MATTERS
RELATING TO THE VALIDITY OF THE LIEN CREATED HEREBY AND THE EXERCISE OF REMEDIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA).
SECTION 14.4. Effect and Modification of Lease and Other Operative
----------------------------------------------------
Documents. This Lease exclusively and completely states the rights of Lessor
- ---------
and Lessee with respect to the leasing during the term of this Lease of the
Leased Property and supersedes all prior agreements, oral or written, with
respect thereto. Neither this Lease nor any of the other Operative Documents
nor any of the terms hereof or thereof may be terminated, amended, supplemented,
waived or modified orally, but only by an instrument in writing signed by the
party against which the enforcement of the termination, amendment, supplement,
waiver or modification shall be sought; and no such termination, amendment,
supplement, waiver or modification shall be effective unless a signed copy
thereof shall have been delivered to Lessor, the Certificate Purchasers and
Lessee. Lessor and Lessee shall not amend, modify or supplement the Lease
without the written consent of the Required Certificate Purchasers; and without
the prior written consent of each Certificate Purchaser, Lessor shall not:
(a) modify any of the provisions of this Section 14.4 or change the
------------
definition of "Required Certificate Purchasers", or modify or waive any
provision of any Operative Document requiring action by all of the Certificate
Purchasers, or release any collateral (except as otherwise specifically provided
in any Operative Document);
(b) reduce the amount or change the time of payment of any
Certificate Purchaser Amount or any Yield Amount owing or payable on any
Certificate, as applicable, or modify any of the provisions of Article III of
the Trust Agreement;
(c) modify, amend, waive or supplement any of the provisions of
Sections 2, 9, 11.1 or 11.6;
- ---------- - ---- ----
-121-
<PAGE>
(d) reduce, modify, amend or waive any indemnities in favor of any
Certificate Purchaser;
(e) reduce the amount or change the time of payment of Rent or the
Lease Balance;
(f) consent to any assignment of the Lease releasing Lessee from its
obligations to pay Rent or the Lease Balance or changing the absolute and
unconditional character of such obligations; or
(g) permit the creation of any interest in or Lien on the Trust
Estate or any part thereof except as contemplated by the Operative Documents, or
deprive any Certificate Purchaser of the benefit of the Lien secured by the
Trust Estate.
SECTION 14.5. Notices. Unless otherwise specified herein, all notices,
-------
requests, demands or other communications to or upon the respective parties
hereto shall be by letter, facsimile (with telephonic confirmation of receipt)
or bank wire and shall be deemed to have been given (i) in the case of notice by
letter addressed as provided on Schedule I delivered (a) by hand or by overnight
----------
courier, the earlier of when delivered to the addressee if delivered on a
Business Day and, if not delivered on a Business Day, the first Business Day
thereafter or (b) by registered or certified mail, postage prepaid, return
receipt requested, on the date of receipt thereof, as evidenced by the return
receipt, and (ii) in the case of notice by facsimile or bank wire, when
transmitted during business hours on a Business Day and, if not transmitted
during business hours on a Business Day, the first Business Day thereafter,
addressed as provided on Schedule I, or to such other address as any of the
----------
parties hereto may designate by ten (10) days' prior written notice. Copies of
all notices given by facsimile or bank wire shall be contemporaneously sent by
overnight courier.
SECTION 14.6. Counterparts. This Lease has been executed in several
------------
counterparts. One counterpart has been prominently marked "THIS COUNTERPART IS
ORIGINAL EXECUTED COUNTERPART NO. 1". Only the counterpart marked "THIS
COUNTERPART IS ORIGINAL EXECUTED COUNTERPART NO. 1" shall evidence a monetary
obligation of Lessee or shall be deemed to be an original or to be chattel paper
for purposes of the UCC, and such copy shall be held by Lessor.
SECTION 14.7. Severability. Whenever possible, each provision of this
------------
Lease shall be interpreted in such manner as to be effective and valid under
Applicable Law; but if any provision of this Lease shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Lease.
-122-
<PAGE>
SECTION 14.8. Successors and Assigns. This Lease shall be binding upon
----------------------
the parties hereto and their respective successors and permitted assigns and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
SECTION 14.9. Parties in Interest. Except as expressly provided herein,
-------------------
none of the provisions of this Lease is intended for the benefit of any Person
except the parties hereto, their successors and permitted assigns; provided,
--------
that each of Lessor and Lessee agrees that the Certificate Purchasers shall
benefit from all of the provisions of this Lease applicable to them.
SECTION 14.10. Brokers. Lessee, each Certificate Purchaser and Lessor
-------
represents to the others that it has not retained or employed any broker, finder
or financial advisor other than Corporate National Realty, Inc. to act on its
behalf in connection with this Lease, nor has it authorized any other broker,
finder or financial adviser retained or employed by any other Person so to act,
nor has it incurred any fees or commissions to which Lessor or any Certificate
Purchaser might be subjected by virtue of their entering into the Overall
Transaction. The sole compensation of Corporate National Realty, Inc. for
acting hereunder is the receipt of the amounts, including reimbursement of
expenses, provided for or described in the Operative Documents. Any Person who
is in breach of this representation shall indemnify and hold the other Persons
harmless from and against any liability arising out of such breach of this
representation.
SECTION 14.11. Limitation of Liability. It is expressly understood and
-----------------------
agreed by the parties hereto that (a) except as otherwise expressly provided
herein, this Lease is executed and delivered by Bank, not individually or
personally but solely as Certificate Trustee of the Trust, as Lessor, in the
exercise of the power and authority conferred and vested in it under the Trust
Agreement; (b) except as otherwise expressly provided herein, each of the
representations, undertakings and agreements herein made on the part of Lessor
is made and intended not as personal representations, undertakings and
agreements by Bank but is made and intended for the purpose for binding only
Lessor; (c) nothing herein contained shall be construed as creating any
liability on Bank, individually or personally (except to the extent specifically
agreed in its individual capacity), to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived by
the parties hereto, the Certificate Purchasers and by any other Person claiming
by, through or under this Lease; and (d) under no circumstances shall Bank be
personally liable for the payment of any indebtedness or expenses of Lessor or
be liable for the breach or failure of any obligation, representation, warranty
or covenant made or undertaken by Lessor under this Lease or any of the other
Operative Documents.
-123-
<PAGE>
SECTION 14.12. Liabilities of the Certificate Purchasers. No Certificate
-----------------------------------------
Purchaser shall have any obligation to any other Certificate Purchaser or to
Lessee or Lessor with respect to the Overall Transaction except those
obligations of such Certificate Purchaser expressly set forth in the Operative
Documents or as set forth in the instruments delivered in connection therewith,
and no Certificate Purchaser shall be liable for performance by any other Person
of such other Person's obligations under the Operative Documents except as
otherwise so set forth.
SECTION 14.13. Reproduction of Documents. This Lease and all other
-------------------------
Operative Documents, all documents constituting Schedules or Exhibits hereto or
thereto, and all documents relating hereto or thereto received by Lessee, Lessor
or any Certificate Purchaser, including: (a) consents, waivers and
modifications that may hereafter be executed; (b) documents received by the
Certificate Purchasers or Lessor in connection with the receipt and/or
acquisition of the Leased Property; and (c) financial statements, certificates,
and other information previously or hereafter furnished to Lessor or any
Certificate Purchaser may be reproduced by the party receiving the same by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. Each of Lessee, Lessor and each Certificate Purchaser
agrees and stipulates that, to the extent permitted by law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such party in the
regular course of business) and that, to the extent permitted by law, any
enlargement, facsimile, or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 14.14. Consideration for Consents to Waivers and Amendments.
----------------------------------------------------
Lessee hereby agrees that it will not, and that it will not permit any of its
Affiliates to, offer or give any consideration or benefit of any kind whatsoever
to any Certificate Purchaser in connection with, in exchange for, or as an
inducement to, such Certificate Purchaser's consent to any waiver in respect of,
any modification or amendment of, any supplement to, or any other consent or
approval under, any Operative Document unless such consideration or benefit is
offered ratably to all Certificate Purchasers.
SECTION 14.15. SUBMISSION TO JURISDICTION. LESSEE, EACH CERTIFICATE
--------------------------
PURCHASER AND THE CERTIFICATE TRUSTEE HEREBY SUBMIT TO THE FULLEST EXTENT
PERMITTED BY LAW TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA AND OF ANY COURT OF THE STATE OF
-124-
<PAGE>
NEW YORK OR THE COMMONWEALTH OF PENNSYLVANIA FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THE OPERATIVE DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY. LESSEE, EACH CERTIFICATE PURCHASER AND THE
CERTIFICATE TRUSTEE IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH ANY OF THE FOREGOING MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
SECTION 14.16. Jury Trial. EACH OF LESSEE, LESSOR AND EACH CERTIFICATE
----------
PURCHASER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS LEASE OR ANY
OTHER OPERATIVE DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION
WITH THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT AND AGREES THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 14.17. No Merger. There shall be no merger of this Lease or of
---------
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, in whole or in part, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate, (b) the fee or ground leasehold estate in the Leased
Property, except as may expressly be stated in a written instrument duly
executed and delivered by the appropriate Person or (c) a beneficial interest in
Lessor. If the fee simple interest in the Leased Property and the leasehold
interest therein shall be held by the same party, the interest of Lessee in the
Lease shall not terminate or be merged and the Lease shall remain in full force
and effect.
SECTION 14.18. Captions; Table of Contents. Section captions and the
---------------------------
table of contents used in this Lease (including the Schedules, Exhibits and
Annexes hereto) are for convenience of reference only and shall not affect the
construction of this Lease.
SECTION 14.19. Schedules and Exhibits. The Schedules and Exhibits
----------------------
hereto, along with all attachments referenced in any of such items, are
incorporated herein by reference and made a part hereof.
[Signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement as
of the day and year first above written.
[Seal] 1997-1 VALLEY STREAM TRUST
By: Wilmington Trust Company, not in
its individual capacity except as
expressly stated herein but solely
as Certificate Trustee, as Lessor
Attest:
By:
- ------------------------- ----------------------------------
Name:
--------------------------------
Title:
-------------------------------
[Seal] IKON OFFICE SOLUTIONS, INC.
(f/k/a Alco Standard Corporation),
as Lessee
Attest:
By:
- ------------------------- ----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Certificate of Residence
------------------------
I hereby certify that the precise and complete post office address of the
within named mortgagee is 1997-1 Valley Stream Trust, c/o Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration.
1997-1 VALLEY STREAM TRUST
By: Wilmington Trust Company, not
in its individual capacity but
solely as Certificate Trustee
Attest:
By:
- ------------------------- ----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
The undersigned Certificate Purchaser hereby (a) acknowledges its receipt of a
copy of this Lease, (b) agrees to accept all of the provisions thereof that are
for its benefit as a Certificate Purchaser, (c) agrees to comply with all of the
obligations set forth therein as its obligations as a Certificate Purchaser, (d)
adopts and ratifies all of the representations, warranties, covenants and other
agreements set forth therein as being made by it, and (e) otherwise agrees to be
bound by all of the terms and provisions thereof as fully as if it were a party
thereto.
Dated: as of February ___, 1997
SECURITY PACIFIC LEASING CORPORATION
By:
------------------------------------
Name: Gareld R. Gray II
Title: Vice President
<PAGE>
The undersigned Certificate Purchaser hereby (a) acknowledges its receipt of a
copy of this Lease, (b) agrees to accept all of the provisions thereof that are
for its benefit as a Certificate Purchaser, (c) agrees to comply with all of the
obligations set forth therein as its obligations as a Certificate Purchaser, (d)
adopts and ratifies all of the representations, warranties, covenants and other
agreements set forth therein as being made by it, and (e) otherwise agrees to be
bound by all of the terms and provisions thereof as fully as if it were a party
thereto.
Dated: as of February ___, 1997
SUN TRUST BANKS, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
The undersigned Certificate Purchaser hereby (a) acknowledges its receipt of a
copy of this Lease, (b) agrees to accept all of the provisions thereof that are
for its benefit as a Certificate Purchaser, (c) agrees to comply with all of the
obligations set forth therein as its obligations as a Certificate Purchaser, (d)
adopts and ratifies all of the representations, warranties, covenants and other
agreements set forth therein as being made by it, and (e) otherwise agrees to be
bound by all of the terms and provisions thereof as fully as if it were a party
thereto.
Dated: as of February ___, 1997
TORONTO DOMINION BANK
By:
---------------------------
Name: Debbie A. Greene
Title: Manager, Credit
Administration
<PAGE>
STATE OF )
---------- ) ss.:
COUNTY OF )
---------
On the ___ day of February, 1997, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared
________________________________, who acknowledged himself to be the
___________________________ of WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not in its individual capacity, but solely as Certificate Trustee
of 1997-1 Valley Stream Trust, as Lessor, and that he, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as such officer.
WITNESS my hand and seal the day and year aforesaid.
----------------------------
Notary Public
My commission expires:
--------------
<PAGE>
COMMONWEALTH OF )
----------------- ) ss.:
COUNTY OF )
------------------
On the ___ day of February, 1997, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared
________________________________, who acknowledged himself to be the
___________________________ of IKON OFFICE SOLUTIONS, INC., an Ohio
corporation, and that he, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by himself as such officer.
WITNESS my hand and seal the day and year aforesaid.
----------------------------
Notary Public
My commission expires:
--------------
<PAGE>
SCHEDULE I TO LEASE AGREEMENT
1. Lessor
------
Address for all communications (except wire transfers):
1997-1 Valley Stream Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Telephone: (302) 651-8282
Facsimile: (302) 651-8882
Address for wire transfers:
Bank: Wilmington Trust Company, Wilmington, Delaware
ABA Routing #: 031100092
Account #: 41429-0
Notify: Corporate Trust Administration, Attn: Lori Clayton
Reference: 1997-1 Valley Stream Trust
2. Lessee
------
Address for all communications (except wire transfers):
IKON Office Solutions, Inc.
Treasury Department
825 Duportail Road
Wayne, PA 19087
Attn: J.F. (Jack) Quinn,
Assistant Treasurer
Telephone: (610) 993-3684
Facsimile: (610) 296-3248
<PAGE>
3. Certificate Purchasers
----------------------
A. SECURITY PACIFIC LEASING CORPORATION
Address for all communications (except wire transfers):
Security Pacific Leasing Corporation
555 California Street
4th Floor
San Francisco, California 94104
Attn: Kim Lee
Telephone: (415) 765-7407
Facsimile: (415) 765-7373
Address for wire transfers:
Bank: Bank of America NT & SA, San Francisco Main Branch,
San Francisco, CA
ABA Routing #: 121 000 358
Account #: 14995-50439
Notify: Richard Walter
Reference: Security Pacific Leasing Corporation
B. SUN TRUST BANKS, INC.
Address for all communications (except wire transfers):
Sun Trust Banks, Inc.
711 Fifth Avenue
16th Floor
New York, New York 10022
Attn: Maria C. Mamilovich,
Vice President
Telephone: (212) 583-2602
Facsimile: (212) 371-9386
Address for wire transfers:
Bank: Sun Trust Bank, Atlanta
ABA Routing #: 061000104
Account #: 970100112
Notify: Kara King, Tel:(404)230-5413, Fax:(404)658-4905
Reference: IKON Office Solutions, Inc., Attn: Alma Sellars
<PAGE>
C. TORONTO DOMINION BANK
Address for all communications (except wire transfers):
For credit related matters
--------------------------
The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Attn: Douglas J. Weir,
Manager-Corporate Finance
Telephone: (212) 468-0575
Facsimile: (212) 262-1926
For administrative matters (rate settings, fundings, payments, etc)
-------------------------------------------------------------------
The Toronto-Dominion Bank
909 Fannin Street, 17th Floor
Houston, Texas 77379
Attn: Debbie A. Greene
Manager, Credit Administration
Telephone: (713) 653-8245
Facsimile: (713) 951-9921
Address for wire transfers:
Bank: Bank of America National Trust and Savings Association,
New York, New York
ABA Routing #: 026009593
Account #: Toronto Dominion Bank, Houston
Notify: 6550-6-52270
Reference: 1997-1 Valley Stream Trust
<PAGE>
SCHEDULE II TO LEASE AGREEMENT
Description of the Land
-----------------------
<PAGE>
SCHEDULE III TO LEASE AGREEMENT
Plans and Specifications
------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS ................................................ 1
SECTION 2. DISBURSEMENT DATE, ADVANCE DATES; FUNDINGS
AND LEASE; GENERAL PROVISIONS.............................. 24
SECTION 2.1. Documentation Date........................................... 24
SECTION 2.2. Initial Advance Date......................................... 24
SECTION 2.3. Fundings..................................................... 24
SECTION 2.4. Application of Funds; Purchase and Lease
of Leased Property......................................... 25
SECTION 2.5. Advance Date Notices and Closings............................ 26
SECTION 2.6. Postponement of Advance Date................................. 27
SECTION 2.7. Certificate Purchasers' Instructions to Lessor............... 27
SECTION 2.8. Payments to Certificate Purchasers........................... 27
SECTION 2.9. Nature of Transaction........................................ 28
SECTION 2.10. Waivers...................................................... 29
SECTION 2.11. Legal and Tax Representation................................. 29
SECTION 2.12. Computations................................................. 30
SECTION 2.13. Certificates; Notations...................................... 30
SECTION 2.14. Commitment Fee............................................... 30
SECTION 3. CONDITIONS PRECEDENT......................................... 31
SECTION 3.1. Conditions to Initial Advance Date........................... 31
SECTION 3.2. Conditions to Construction Advance Dates
for Construction Costs..................................... 38
SECTION 3.3. Conditions to Final Construction Advance..................... 40
SECTION 4. LEASE TERM, RENT AND PAYMENT................................. 41
SECTION 4.1. Lease of Leased Property..................................... 41
SECTION 4.2. Lease Term................................................... 41
SECTION 4.3. Lease Renewal................................................ 41
SECTION 4.4. Rent Payments................................................ 44
SECTION 4.5. Supplemental Rent............................................ 44
SECTION 4.6. Place and Manner of Payment.................................. 45
SECTION 4.7. Utility Charges.............................................. 45
SECTION 4.8. Enjoyment.................................................... 45
SECTION 4.9. Net Lease.................................................... 45
SECTION 4.10. No Termination or Abatement.................................. 47
SECTION 5. MAINTENANCE AND REPAIR; ALTERATIONS AND
ADDITIONS; LIENS; ASSIGNMENT AND
SUBLETTING; EASEMENTS...................................... 47
SECTION 5.1. Maintenance and Repair; Compliance With Law.................. 47
SECTION 5.2. Alterations.................................................. 48
SECTION 5.3. Title to Alterations......................................... 49
SECTION 5.4. Maintenance and Repair Reports............................... 50
SECTION 5.5. Permitted Contests........................................... 51
SECTION 5.6. Use.......................................................... 51
SECTION 5.7. Liens........................................................ 52
SECTION 5.8. Inspection................................................... 52
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
-----------------
(cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.9. Assignment and Subletting.................................... 52
SECTION 5.10. Easements.................................................... 53
SECTION 6. RISK OF LOSS; INSURANCE...................................... 55
SECTION 6.1. Event of Loss; Condemnation or Casualty...................... 55
SECTION 6.2. Application of Payments Relating to an
Event of Loss.............................................. 56
SECTION 6.3. Application of Certain Payments Relating
to a Condemnation.......................................... 56
SECTION 6.4. Casualty..................................................... 56
SECTION 6.5. Negotiations................................................. 57
SECTION 6.6. No Rent Abatement............................................ 57
SECTION 6.7. Required Coverages........................................... 57
SECTION 6.8. Delivery of Insurance Certificates........................... 59
SECTION 7. INDEMNITIES ................................................ 59
SECTION 7.1. General Indemnification...................................... 59
SECTION 7.2. General Tax Indemnity........................................ 61
SECTION 7.3. Withholding Tax Exemption.................................... 64
SECTION 7.4. Excessive Use Indemnity...................................... 65
SECTION 7.5. After-Tax Basis.............................................. 65
SECTION 7.6. Proceedings in Respect of Claims............................. 66
SECTION 7.7. Funding Losses............................................... 67
SECTION 7.8. Increased Cost............................................... 68
SECTION 7.9. LIBO Rate Illegal, Unavailable or Impracticable.............. 70
SECTION 7.10. Indemnity Payments in Addition to Lease
Obligations................................................ 72
SECTION 8. EVENTS OF DEFAULT; REMEDIES.................................. 72
SECTION 8.1. Events of Default............................................ 72
SECTION 8.2. Remedies..................................................... 75
SECTION 8.3. Proceeds of Sale; Deficiency................................. 78
SECTION 8.4. Grant and Foreclosure on Lessee's Estate..................... 79
SECTION 8.5. Remedies Cumulative; No Waiver; Consents..................... 80
SECTION 8.6. Power of Attorney............................................ 80
SECTION 9. LEASE TERMINATION............................................ 81
SECTION 9.1. End of Term Options.......................................... 81
SECTION 9.2. Election of Options.......................................... 82
SECTION 9.3. Sale Option Procedures....................................... 83
SECTION 9.4. Appraisals................................................... 84
SECTION 9.5. Return of Leased Property.................................... 84
SECTION 9.6. Early Termination............................................ 85
SECTION 10. REPRESENTATIONS AND WARRANTIES............................... 85
SECTION 10.1. Representations and Warranties of Lessee..................... 85
SECTION 10.2. Representations and Warranties of each
Certificate Purchaser...................................... 95
SECTION 10.3. Representations and Warranties of Lessor..................... 95
SECTION 10.4. Representations and Warranties of Bank....................... 97
</TABLE>
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TABLE OF CONTENTS
-----------------
(cont'd)
<TABLE>
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<S> <C> <C>
SECTION 10.5. Representations and Warranties of
Certificate Trustee..................................... 98
SECTION 10.6. Representations of Lessee with Respect to
Each Advance............................................ 99
SECTION 11. COVENANTS................................................. 100
SECTION 11.1. Covenants of Lessee....................................... 100
SECTION 11.2. Taxes..................................................... 107
SECTION 11.3. Compliance with Laws...................................... 107
SECTION 11.4. Employee Benefit Plans.................................... 108
SECTION 11.5. Covenants of Lessor and Certificate Purchasers............ 108
SECTION 11.6. Restrictions on and Effect of Transfer.................... 110
SECTION 11.7. Future Certificate Purchasers............................. 113
SECTION 11.8. Covenants of Bank......................................... 113
SECTION 12. ASSIGNMENT BY LESSOR...................................... 113
SECTION 13. GRANT OF SECURITY INTEREST................................ 114
SECTION 13.1. Grant of Security Interest................................ 114
SECTION 13.2. Retention of Proceeds..................................... 114
SECTION 14. MISCELLANEOUS PROVISIONS.................................. 114
SECTION 14.1. Payment of Transaction Costs and Other Costs.............. 114
SECTION 14.2. Survival of Agreements, etc............................... 115
SECTION 14.3. Applicable Law............................................ 115
SECTION 14.4. Effect and Modification of Lease and
Other Operative Documents............................... 116
SECTION 14.5. Notices................................................... 117
SECTION 14.6. Counterparts.............................................. 117
SECTION 14.7. Severability.............................................. 117
SECTION 14.8. Successors and Assigns.................................... 117
SECTION 14.9. Parties in Interest....................................... 117
SECTION 14.10. Brokers................................................... 117
SECTION 14.11. Limitation of Liability................................... 118
SECTION 14.12. Liabilities of the Certificate Purchasers................. 118
SECTION 14.13. Reproduction of Documents................................. 118
SECTION 14.14. Consideration for Consents to Waivers and
Amendments.............................................. 119
SECTION 14.15. SUBMISSION TO JURISDICTION................................ 119
SECTION 14.16. Jury Trial................................................ 119
SECTION 14.17. POWER TO CONFESS JUDGMENT................................. 120
SECTION 14.18. POWER TO EXECUTE ON A JUDGMENT WITHOUT HEARING............ 120
SECTION 14.19. No Merger................................................. 120
SECTION 14.20. Captions; Table of Contents............................... 120
SECTION 14.21. Schedules and Exhibits.................................... 120
</TABLE>
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<TABLE>
<S> <C>
Schedule I Addresses for Payment and Other Communications to
all Parties
Schedule II Description of the Land
Schedule III Plans and Specifications
Exhibit A Form of Bill of Sale
Exhibit B Form of Deed
Exhibit C Form of Memorandum of Lease
Exhibit D Form of Trust Agreement
Exhibit E Form of [Initial] [Completion] Advance Date Notice
Exhibit F Schedule of Filings and Recordings
Exhibit G Form of Environmental Certificate
Exhibit H Form of Opinion of General Counsel to Lessee
Exhibit I Form of Opinion of Local Counsel
Exhibit J Form of Officer's Certificate of Lessee
Exhibit K-1 Form of Officer's Certificate of Lessor
Exhibit K-2 Form of Officer's Certificate of Certificate Trustee
Exhibit L Form of Officer's Certificate of Bank
Exhibit M Form of Architect's Certificate
Exhibit N Schedule of Government Actions
Exhibit O Schedule of Pending Investigations
Exhibit P Form of Investor's Letter
Exhibit Q Purchase Agreement
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT
Dated as of March 31, 1997
Among
IKON FUNDING, INC.
as Transferor
-------------
and
IKON CAPITAL, INC.
as initial Servicer
-------------------
and
TWIN TOWERS INC.
as Transferee
-------------
and
DEUTSCHE BANK AG, NEW YORK BRANCH
as Agent
--------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
THE COMMITMENT............................. 2
1.01. Commitment........................................................ 2
1.02. Limits on Commitment.............................................. 3
1.03. Transfer Procedure................................................ 3
1.04. Commitment Termination Date....................................... 3
1.05. Voluntary Termination of Commitment or Reduction of Maximum
Investment........................................................ 4
ARTICLE II
TRANSFEREE'S INTEREST.......................... 4
2.01. Assignment of Transferee's Interest............................... 4
2.02. Transferee's Percentage........................................... 4
2.03. Rate Tranches; Selection of Yield Periods......................... 5
ARTICLE III
SETTLEMENT................................ 6
3.01. Non-Pay Out Settlement Procedures for Collections................. 6
3.02. Pay Out Settlement Procedures for Collections..................... 9
3.03. Dilutions......................................................... 11
3.04. Optional Reduction of Transferee's Investment..................... 12
3.05. Reporting by Servicer............................................. 13
3.06. Delivery of Deemed Collections; Collections Held in Trust......... 13
ARTICLE IV
PAYMENT PROCEDURES; FEES AND YIELD PROTECTION.............. 14
4.01. Payments and Computations......................................... 14
4.02. Interest on Overdue Amounts....................................... 14
4.03. Fees.............................................................. 14
4.04. Yield Protection.................................................. 15
4.05. Interest Rate Hedging Agreements.................................. 17
ARTICLE V
CONDITIONS PRECEDENT.......................... 18
5.01. Conditions Precedent to Amendment and Restatement................. 18
5.02. Conditions Precedent to All Transfers and Reinvestments........... 20
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES...................... 21
6.01. Representations and Warranties of the Transferor.................. 21
6.02. Representations and Warranties of IKON Capital.................... 25
ARTICLE VII
GENERAL COVENANTS............................ 28
7.01. Affirmative Covenants............................................. 28
7.02. Reporting Requirements............................................ 30
7.03. Negative Covenants................................................ 31
7.04. Separate Corporate Existence...................................... 33
ARTICLE VIII
ADMINISTRATION AND COLLECTION....................... 35
8.01. Designation of Servicer........................................... 35
8.02. Duties of Servicer................................................ 36
8.03. Rights of the Agent............................................... 38
8.04. Responsibilities of Transferor.................................... 39
8.05. Further Action Evidencing Transfers............................... 39
8.06. Application of Obligors' Payments................................. 41
ARTICLE IX
SECURITY INTEREST............................. 41
9.01. Grant of Security Interest........................................ 41
9.02. Further Assurances................................................ 41
9.03. Remedies.......................................................... 41
ARTICLE X
TERMINATION EVENTS............................ 42
10.01. Termination Events................................................ 42
10.02. Remedies.......................................................... 44
ARTICLE XI
THE AGENT................................. 45
11.01. Authorization and Action.......................................... 45
11.02. Agent's Reliance, Etc............................................. 45
11.03. Agent and Affiliates.............................................. 46
ARTICLE XII
ASSIGNMENTS............................... 46
12.01. Restrictions on Assignments....................................... 46
12.02. Documentation; Notice of Assignment............................... 47
</TABLE>
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<TABLE>
<S> <C> <C>
12.03. Rights of Assignee................................................ 47
12.04. Allocation of Payments............................................ 48
12.05. Calculation of Earned Discount After Assignment................... 48
12.06. Rights of Collateral Agent........................................ 48
ARTICLE XIII
INDEMNIFICATION.............................. 49
13.01. Indemnities by the Transferor..................................... 49
ARTICLE XIV
MISCELLANEOUS............................. 52
14.01. Amendments, Etc................................................... 52
14.02. Notices, Etc...................................................... 52
14.03. No Waiver; Remedies............................................... 52
14.04. Binding Effect; Survival.......................................... 53
14.05. Costs, Expenses and Taxes......................................... 53
14.06. No Proceedings.................................................... 54
14.07. Confidentiality of Transferor Information......................... 54
14.08. Confidentiality of Program Information............................ 56
14.09. No Recourse Against Other Parties................................. 59
14.10. Definitions; Other Terms.......................................... 59
14.11. Captions and Cross References..................................... 59
14.12. Integration....................................................... 59
14.13. Governing Law..................................................... 59
14.14. Waiver Of Jury Trial.............................................. 60
14.15. Consent To Jurisdiction; Waiver Of Immunities..................... 60
14.16. Execution in Counterparts......................................... 60
14.17. Syndication of Liquidity.......................................... 60
14.18. Tax Treatment..................................................... 60
APPENDIX A DEFINITIONS.................................................. A-1
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<CAPTION>
APPENDIX
<S> <C>
APPENDIX A Definitions
SCHEDULES
SCHEDULE 5.01(f) Filing Jurisdictions
SCHEDULE 6.01(m) List of Offices of Transferor where Records Are Kept
SCHEDULE 6.01(n) List of Designated Account Banks and Post Office Boxes
SCHEDULE 6.01(o)-1 Forms of Contracts
SCHEDULE 6.01(o)-2 Description of Credit and Collection Policy
SCHEDULE 6.02(i) Description of Material Adverse Changes
SCHEDULE 14.02 Addresses for Notice
SCHEDULE A-1 Marketplaces
EXHIBITS
EXHIBIT 1.03 Form of Transfer Request
EXHIBIT 3.05(a) Form of Periodic Report
EXHIBIT 5.01(f) Form of UCC Financing Statement
EXHIBIT 5.01(h) Form of Designated Account Agreement
EXHIBIT 5.01(i) Form of Opinion of Counsel for Transferor
EXHIBIT 5.01(j) Form of Opinion of Counsel for Agent
EXHIBIT 5.01(k) Form of UCC Financing Statement - Dealer
EXHIBIT 5.01(l) Form of Power of Attorney
EXHIBIT 5.01(o) Form of IKON Office Letter
EXHIBIT A Form of Post Office Box Agreement
</TABLE>
-iv-
<PAGE>
AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT
AMENDED AND RESTATED RECEIVABLES TRANSFER AGREEMENT, dated as of March 31,
1997, among IKON FUNDING, INC., a Delaware corporation (the "Transferor"), as
----------
transferor, IKON CAPITAL, INC. (formerly Alco Capital Resource, Inc.), a
Delaware corporation ("IKON Capital"), as initial Servicer (as defined herein),
------------
TWIN TOWERS INC., a Delaware corporation (the "Transferee"), as transferee, and
----------
DEUTSCHE BANK AG, a banking corporation organized under the laws of the Federal
Republic of Germany ("Deutsche Bank"), acting through its NEW YORK BRANCH
-------------
("DBNY"), as agent for the Transferee (in such capacity, the "Agent"). Unless
---- -----
otherwise indicated, capitalized terms used in this Agreement are defined in
Appendix A.
- ----------
Background
----------
1. IKON Capital, Transferee and the Agent entered into a Receivables
Transfer Agreement, dated as of September 23, 1994 (as heretofore amended, the
"Original Receivables Agreement").
------------------------------
2. Transferor, IKON Capital, Transferee and the Agent desire to amend and
restate the Original Receivables Agreement in its entirety as set forth herein
in order to, among other things, provide for the substitution of IKON Funding,
Inc., as Transferor.
3. The Transferor has, and expects to have, Pool Receivables in which the
Transferor intends to transfer an undivided interest. The Transferor has
requested the Transferee, and the Transferee has agreed, subject to the terms
and conditions contained in this Agreement, to acquire from the Transferor such
undivided interest, herein referred to as the Transferee's Interest, in one or
more Transfers from time to time during the Reinvestment Period.
4. The Transferor and the Transferee also desire that, subject to the
terms and conditions of this Agreement, certain of the daily Collections in
respect of the Transferee's Interest be reinvested in Pool Receivables so that
the Transferee may maintain its Transferee's Investment fully invested in
uncollected Pool Receivables.
5. The Transferee expects generally to fund its Transfers and
Reinvestments through the issuance of Commercial Paper Notes. The Transferee has
entered into a Liquidity Agreement providing for the making by the Liquidity
Banks of loans secured by the Transferee's Interest in the event the Transferee
is unable to fund its Transfers or Reinvestments pursuant to this Agreement by
<PAGE>
the issuance of Commercial Paper Notes or otherwise prefers to fund such
Transfers or Reinvestments under the Liquidity Agreement rather than by the
issuance of Commercial Paper Notes, or is unable to pay such Commercial Paper
Notes at maturity from its share of collections on Pool Receivables. The
Transferee has also entered into an Enhancement Agreement with the Enhancement
Bank providing for the issuance of a letter of credit to a trustee for the
holders of Commercial Paper Notes, and for the making of loans to the
Transferee, to provide funds for the payment of Commercial Paper Notes in the
circumstances described above when funding is not available under the Liquidity
Agreement.
6. The Transferee has appointed DBNY as its agent to perform certain
administrative duties for the Transferee, including, among other things, the
arrangement of the transactions provided for hereunder, the administration of
the funding of such transactions and the making of certain determinations
hereunder and in connection herewith.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto hereby amend and restate the Original
Receivables Agreement in its entirety and hereby agree as follows:
ARTICLE I
THE COMMITMENT
SECTION 1.01. Commitment. On the terms and subject to the conditions set
----------
forth in this Agreement (including Article V):
---------
(a) Transfers. Pursuant to Section 1.03, from time to time during
--------- ------------
the Reinvestment Period, upon request by the Transferor, the Transferee
shall acquire from the Transferor, in one or more transactions, an
undivided interest in the Pool Receivables and Related Property. Each of
the initial acquisitions of the Transferee's Interest hereunder and each
subsequent acquisition increasing the Transferee's Interest is herein
called a "Transfer".
--------
(b) Reinvestments. Pursuant to Section 3.01, during the Reinvestment
------------- ------------
Period, the Transferee shall permit the Servicer to cause certain of the
Collections in respect of the Transferee's Interest to be paid to
Transferor for reinvestment in the Pool Receivables and Related Property.
Each such payment is herein called a "Reinvestment".
------------
The Transferee's obligation to make such Transfers and
2
<PAGE>
Reinvestments is herein called the "Commitment".
----------
SECTION 1.02. Limits on Commitment. Under no circumstances shall the
--------------------
Transferee accept any Transfer to the extent that, after giving effect to such
Transfer:
(a) the Transferee's Investment would exceed the Maximum Investment;
or
(b) the Unadjusted Transferee's Percentage would exceed the Maximum
Percentage.
SECTION 1.03. Transfer Procedure. (a) Transfer Request. Each Transfer from
------------------ ----------------
the Transferor by the Transferee shall be made on written request by the
Transferor to the Transferee and the Agent, substantially in the form of
Exhibit 1.03 (a "Transfer Request"), received by the Agent not later than 11:00
- ------------ ----------------
a.m. (New York City time) on the second Business Day preceding the date of such
proposed Transfer. Each such request shall specify the desired amount and date
of such Transfer.
(b) Amount of Transfer Price. The amount of the transfer price paid by the
------------------------
Transferee for each Transfer shall be equal to the lesser of (x) the amount
proposed by the Transferor pursuant to Section 1.03(a) and (y) the maximum
---------------
amount permitted under Section 1.02.
------------
(c) Funding of Transfer. On the date of each Transfer, the Transferee
-------------------
shall, upon satisfaction of the applicable conditions set forth in Article V,
---------
make available to the Agent in immediately available funds, at its office at
31 West 52nd Street, New York, New York 10019, the amount of the transfer price
to be paid for such Transfer (determined pursuant to Section 1.03(b)) and after
---------------
receipt by the Agent of such funds, the Agent will make such funds immediately
available to the Transferor at such office.
SECTION 1.04. Commitment Termination Date. (a) The "Commitment Termination
--------------------------- ----------------------
Date" shall be the earlier to occur of (i) March 30, 1998 (herein, as the same
- ----
may be extended, called the "Scheduled Commitment Termination Date"), and
-------------------------------------
(ii) the date of termination of the Commitment pursuant to Section 1.04(c), 1.05
--------------- ----
or 10.02.
-----
(b) The Scheduled Commitment Termination Date may be extended from time to
time by delivery of a written request for such extension to the Transferee and
the Agent not less than 60 days prior to the then Scheduled Commitment
Termination Date. Within 30 days prior to the then Scheduled Commitment
Termination Date, the Transferee and the Agent shall notify the
3
<PAGE>
Transferor as to whether they have given their consent to such extension (which
consent may be given or withheld by either such party in its sole discretion).
As a condition to any such extension, the Transferor and the Servicer shall
deliver such certificates, opinions of counsel or other documents as the
Transferee or the Agent may require. If such extension is approved, the
Scheduled Commitment Termination Date shall be extended for 364 days from the
effective date of such consent.
(c) The Commitment shall terminate, and the Transferee shall have no
obligation to accept any further Transfers or make any further Reinvestments
hereunder, on the scheduled date of termination of either (A) the Liquidity
Banks' commitments under the Liquidity Agreement or (B) the Enhancement Bank's
commitment under the Enhancement Agreement. The Transferee agrees to give the
Transferor at least 30 days' prior written notice of the termination of the
Commitment pursuant to the foregoing sentence, but no failure to give or delay
in giving such notice shall prevent or delay such termination.
SECTION 1.05. Voluntary Termination of Commitment or Reduction of Maximum
-----------------------------------------------------------
Investment. The Transferor may, upon at least ten Business Days' notice to the
- ----------
Agent, terminate the Commitment in whole or reduce in part the unused portion of
the Maximum Investment; provided, however, that (a) each partial reduction shall
-------- -------
be in an amount equal to $5,000,000 or an integral multiple thereof and (b)
after giving effect to such reduction, the remaining Maximum Investment will not
be less than $25,000,000.
ARTICLE II
TRANSFEREE'S INTEREST
SECTION 2.01. Assignment of Transferee's Interest. The Transferor hereby
-----------------------------------
assigns and transfers to the Transferee, effective on and as of the date of the
initial Transfer hereunder and, with respect to any increase in the Transferee's
Interest effected by an additional Transfer hereunder, on the date of such
additional Transfer, an undivided ownership interest, in a percentage equal to
the Transferee's Percentage as determined from time to time in accordance with
Section 2.02, in all Pool Receivables and Related Property, whether now existing
- ------------
or hereafter arising or acquired by the Transferor from time to time. Such
undivided ownership interest as in effect from time to time is herein called the
"Transferee's Interest".
---------------------
SECTION 2.02. Transferee's Percentage. The Transferee's Interest shall be
-----------------------
in a percentage (the "Transferee's Percentage")
-----------------------
4
<PAGE>
equal at any time to the quotient obtained by dividing
(a) the sum of (i) the Transferee's Investment, (ii) the Discount
Factor, (iii) the Default and Dilution Reserve and (iv) the Servicer's Fee
Reserve (such sum being herein sometimes called the "Transferee's
------------
Allocation"), by
---------- --
(b) the Net Pool Balance,
as most recently computed in accordance with this Section 2.02 (such quotient,
------------
expressed as a percentage, before giving effect to the following provison, being
--------
the "Unadjusted Transferee's Percentage"); provided, however,
---------------------------------- -------- -------
(1) the Transferee's Percentage shall not be greater than 100%;
(2) during the Pay Out Period, the Transferee's Percentage shall
be the greater of (x) the Transferee's Percentage in effect
immediately before the commencement of the Pay Out Period and (y) the
Transferee's Percentage as otherwise determined in accordance with
this Section 2.02; and
------------
(3) the Transferee's Percentage shall become zero at such time
as (A) the Transferee shall have received the accrued Earned Discount,
shall have recovered the Transferee's Investment and shall have
received all other amounts payable to the Transferee pursuant to this
Agreement and (B) the Servicer shall have received the accrued
Servicer's Fee.
The Transferee's Percentage shall initially be computed by the Servicer as of
the opening of business of the Servicer on the date of each Transfer, as of the
most recent Month End Date, and shall be recomputed in each Periodic Report and
each Pay Out Statement; provided, however, the Agent may from time to time
-------- -------
request the Servicer to deliver a Periodic Report for the purpose of
recalculating the Transferee's Percentage, and the Servicer shall deliver such
Periodic Report within 10 Business Days after its receipt of such request. The
Transferee's Percentage shall remain constant from the time as of which any such
computation or recomputation is made until the time as of which the next such
recomputation, if any, shall be made.
SECTION 2.03. Rate Tranches; Selection of Yield Periods. (a) From time to
-----------------------------------------
time, for purposes of determining the Yield Periods applicable to different
portions of the Transferee's Interest, and of calculating the Earned Discount
and Servicer's Fee with respect thereto, the Agent shall allocate the
5
<PAGE>
Transferee's Interest to one or more tranches (each a "Rate Tranche"), each
------------
representing a portion of the Transferee's Investment (with respect to each Rate
Tranche, the "Transferee's Tranche Investment"). At any time, each Rate Tranche
-------------------------------
shall have only one Yield Period and one Transferee Rate applicable for purposes
of calculating Earned Discount, and shall be funded by (i) an issue of
Commercial Paper Notes, (ii) a Funding Advance, (iii) a borrowing of Liquidity
Loans funded by the Liquidity Banks ratably and having the same Yield Period, or
(iv) an Enhancement Draw, but not by more than one of the foregoing at the same
time.
(b) The Agent shall select the duration of the initial, and each
subsequent, Yield Period for each Rate Tranche in its discretion; provided that,
--------
so long as no Termination Event shall have occurred and be continuing, the Agent
shall use reasonable efforts, taking into account market conditions, to
accommodate the Transferor's preferences.
(c) From time to time the Agent shall notify the Servicer of the number of
Rate Tranches, the Transferee's Tranche Investment of each Rate Tranche, the
Transferee Rate for such Rate Tranche and the duration of the current Yield
Period selected by it for each Rate Tranche.
ARTICLE III
SETTLEMENT
SECTION 3.01. Non-Pay Out Settlement Procedures for Collections. (a) Daily
------------------------------------------------- -----
Procedure. On each day during the Reinvestment Period, the Servicer shall deem
- ---------
an amount equal to the Transferee's Share of Collections of Pool Receivables
received or deemed received on such day to be received in respect of the
Transferee's Interest, and, out of the Transferee's Share of such Collections,
shall:
(i) hold in trust for the benefit of the Transferee an amount equal
to (A) the aggregate of the aggregate Earned Discount and Servicer's Fee
accrued through such day, less (B) the amount, if any, theretofore set
----
aside and then so held for the benefit of the Transferee in respect of such
Earned Discount and Servicer's Fee;
(ii) set aside and hold in trust for the Transferee an amount equal
to the excess, if any, of
(A) the greatest of
6
<PAGE>
(I) if the Transferor shall have elected to reduce the
Transferee's Investment under Section 3.04, the amount of the
------------
proposed reduction,
(II) if the Transferee's Investment shall exceed the
Maximum Investment, the amount of such excess,
(III) if the Unadjusted Transferee's Percentage shall
exceed the Maximum Percentage, an amount equal to the minimum
reduction of the Transferee's Investment which (based on the
Transferee Rates currently in effect, and assuming that such
reduction will be applied to reduce the Transferee's Tranche
Investments of the Rate Tranches having the shortest remaining
Yield Periods first) would result in the Transferee's Percentage
being no greater than the Maximum Percentage, and
(IV) if any of the conditions precedent to Reinvestment
set forth in Section 5.02 shall not be met, the Transferee's
------------
Investment, over
----
(B) the aggregate of the amounts theretofore set aside and
then so held for the benefit of the Transferee pursuant to this
clause (ii); and
-----------
(iii) subject to Section 5.02, pay the remainder, if any, of such
------------
Collections to the Transferor for application to Reinvestment, for the
benefit of the Transferee, in the Transferee's Interest in accordance with
Section 1.01(b).
---------------
The Servicer shall first, apply the Transferor's Share of such Collections to
-----
any other amounts (other than Earned Discount and Transferee's Investment) then
due to Transferee or the Agent and second, pay any remaining portion of the
------
Transferor's Share of such Collections to the Transferor.
(b) Settlement Date Procedure. Prior to the Pay Out Period, on each
-------------------------
Settlement Date, the Servicer shall deposit to the Agent's Account:
(i) out of the amounts set aside pursuant to clause (i) of
----------
Section 3.01(a), an amount equal to the Earned Discount and Servicer's Fee
---------------
accrued during the related Yield Period with respect to the related Rate
Tranche; and
(ii) out of the amount, if any, set aside pursuant to clause (ii) of
-----------
Section 3.01(a) and not theretofore
---------------
7
<PAGE>
reinvested in accordance with Section 3.01(d) or deposited to the Agent's
---------------
Account pursuant to this Section 3.01(b), an amount equal to the lesser of
---------------
such amount and the Transferee's Tranche Investment of the related Rate
Tranche;
provided, however, that if the Agent gives its consent (which consent may be
- -------- -------
revoked at any time), the Servicer may retain amounts which would otherwise be
deposited in respect of Servicer's Fee, in which case no distribution shall be
made in respect of Servicer's Fee under clause (c) below.
----------
In addition, if, on such Settlement Date, after reducing the Transferee's
Tranche Investment of the related Rate Tranche by the amount deposited pursuant
to clause (ii) above, the Transferee's Investment would be greater than the
-----------
Maximum Investment or the Unadjusted Transferee's Percentage would be greater
than the Maximum Percentage, then the Transferor shall pay to the Servicer, and
the Servicer shall deposit to the Agent's Account, an amount equal to the least
of (x) the minimum reduction of the Transferee's Investment which would result
in the Unadjusted Transferee's Investment not exceeding the Maximum Investment
and the Unadjusted Transferee's Percentage not exceeding the Maximum Percentage,
(y) the Transferee's Tranche Investment of the related Rate Tranche and (z) the
Transferor's Collection Amount.
(c) Order of Application. Upon receipt by the Agent of funds deposited
--------------------
pursuant to subsection (b) on a Settlement Date for any Rate Tranche, the Agent
--------------
shall distribute them to the Persons, for the purposes and in the order of
priority set forth below:
(i) to the Transferee in payment of the accrued and unpaid Earned
Discount for such Rate Tranche;
(ii) to the Servicer in payment of the accrued and unpaid Servicer's
Fee payable with respect to such Rate Tranche; and
(iii) to the Transferee in reduction of the Transferee's Tranche
Investment of such Rate Tranche.
(d) Unreinvested Collections. During the Reinvestment Period, if on any
------------------------
date the amount of Collections theretofore set aside and then held by the
Servicer for the benefit of the Transferee pursuant to clause (ii) of
-----------
Section 3.01(a) shall exceed the maximum amount then required to be set aside
- ---------------
and so held pursuant to such clause (ii), then, subject to the applicable
-----------
conditions precedent set forth in Section 5.02, the Servicer shall pay to the
------------
Transferor the amount of such excess
8
<PAGE>
Collections, for application to Reinvestment in accordance with Section 1.01(b).
---------------
To the extent and for so long as such Collections may not be so reinvested, the
Servicer shall hold such Collections in trust for the benefit of the Transferee
in a separate deposit account containing only such Collections and no other
funds. On each Settlement Date with respect to any Rate Tranche, the Servicer
shall pay to the Agent for the account of the Transferee, in reduction of the
Transferee's Investment, the amount of Collections then held in trust pursuant
to the next preceding sentence or, if less, the Transferee's Tranche Investment
of such Rate Tranche; any such amounts remaining after such application shall
continue to be held in trust pursuant to this paragraph (d) and shall be applied
-------------
on the next successive Settlement Dates until such amount has been reduced to
zero. The Transferee's Investment shall not be deemed reduced by any amount held
in trust pursuant to this subsection (d) unless and until, and then only to the
--------------
extent that, such amount is finally paid to the Agent in accordance with the
next preceding sentence.
SECTION 3.02. Pay Out Settlement Procedures for Collections. (a) Daily
--------------------------------------------- -----
Procedure. During the Pay Out Period, on each day, the Servicer shall (i) set
- ---------
aside and hold in trust for the Transferee the Transferee's Share of the
Collections of Pool Receivables received by the Servicer, and (ii) first, apply
-----
the Transferor's Share of such Collections to any other amounts (other than
Earned Discount and Transferee's Investment) then due to Transferee or the Agent
and second, pay any remaining portion of the Transferor's Share of such
------
Collections to the Transferor.
(b) Settlement Date Procedure. During the Pay Out Period, on each
-------------------------
Settlement Date for any Rate Tranche, subject to Section 3.02(d), the Servicer
---------------
shall deposit to the Agent's Account the amounts set aside pursuant to
Section 3.02(a), but not to exceed the sum of (i) the accrued and unpaid Earned
- ---------------
Discount with respect to such Rate Tranche, (ii) the Transferee's Tranche
Investment of such Rate Tranche, (iii) the aggregate of other amounts (other
than the Transferee's Investment, Earned Discount and Servicer's Fee) owed
hereunder by the Transferor to the Transferee or the Agent, and (iv) the accrued
Servicer's Fee payable with respect to such Rate Tranche. Any amounts in excess
of the amount required to be deposited in the Agent's Account pursuant to the
previous sentence shall continue to be set aside and held in trust by the
Servicer for application on the next succeeding Settlement Date(s).
(c) Order of Application. Upon receipt of funds deposited to the Agent's
--------------------
account pursuant to Section 3.02(b), subject to Section 3.02(d), the Agent shall
--------------- ---------------
distribute them to the Persons, for the purposes and in the order of priority
set forth below:
9
<PAGE>
(i) to the Transferee in payment of the accrued and unpaid
Earned Discount for such Rate Tranche;
(ii) if the Servicer is a Person other than IKON Capital or an
Affiliate of IKON Capital, to the Servicer in payment of the accrued
and unpaid Servicer's Fee with respect to such Rate Tranche;
(iii) to the Transferee in reduction of the Transferee's Tranche
Investment with respect to such Rate Tranche;
(iv) to the Transferee or the Agent (as the case may be) in
payment of any other amounts owed by the Transferor hereunder to the
Transferee or the Agent (other than the Transferee's Investment,
Earned Discount and Servicer's Fee); and
(v) to the Servicer in payment of the accrued Servicer's Fee
payable with respect to such Rate Tranche, to the extent not paid
pursuant to clause (ii) above.
-----------
(d) Priorities in Event of Funding Advances, Liquidity Loans or
-----------------------------------------------------------
Enhancement Draw. If on any day during the Pay Out Period any Rate Tranche is
- ----------------
funded by a Funding Advance, a borrowing of Liquidity Loans or an Enhancement
Draw, then:
(i) if the aggregate amount of Collections set aside and held in
trust pursuant to Section 3.02(a) is less than the aggregate accrued and
---------------
unpaid Earned Discount with respect to all Rate Tranches, then such
Collections shall be allocated first to accrued and unpaid Earned Discount
-----
on Rate Tranches funded by Funding Advances, second to accrued and unpaid
------
Earned Discount on Rate Tranches funded by Liquidity Loans, third to
-----
accrued and unpaid Earned Discount on Rate Tranches funded by Commercial
Paper Notes, and fourth to accrued and unpaid Earned Discount on Rate
------
Tranches funded by Enhancement Draws, and, in the case of each of clauses
-------
first, second, third and fourth above, first to the Rate Tranches having
----- ------ ----- ------
the shortest remaining Yield Periods, to the extent that funds have not
been set aside or deposited with the Agent in respect thereof; and
(ii) no Collections shall be deposited in the Agent's Account (unless
requested by the Agent for later distribution in accordance with this
Section 3.02(d)) or distributed by the Agent to the Transferee (A) in
---------------
respect of the Transferee's Tranche Investment of any Rate Tranche funded
by Liquidity Loans unless the Transferee's Tranche
10
<PAGE>
Investments of all Rate Tranches funded by Funding Advances shall have
been reduced to zero, or Collections equal to such Transferee's Tranche
Investments shall have been deposited in the Agent's Account for
distribution to the Transferee in reduction of such Transferee's
Tranche Investments, (B) in respect of the Transferee's Tranche
Investment of any Rate Tranche funded by Commercial Paper Notes unless
the Transferee's Tranche Investments of all Rate Tranches funded by
Funding Advances or Liquidity Loans shall have been reduced to zero, or
Collections equal to such Transferee's Tranche Investments shall have
been deposited in the Agent's Account for distribution to the
Transferee in reduction of such Transferee's Tranche Investments, or
(C) in respect of the Transferee's Tranche Investment of any Rate
Tranche funded by any Enhancement Draw unless the Transferee's Tranche
Investments of all Rate Tranches funded by Funding Advances, Liquidity
Loans or Commercial Paper Notes shall have been reduced to zero, or
Collections equal to such Transferee's Tranche Investments shall have
been deposited in the Agent's Account for distribution to the
Transferee in reduction of such Transferee's Tranche Investments.
SECTION 3.03. Dilutions. (a) If on any day the Unpaid Balance of any
---------
Pool Receivable is
(i) reduced as a result of any defective, rejected or
returned merchandise or services, any cash discount, any allowances or
billing errors, any trade-in or trade-up, or any adjustment by the
Transferor, any Affiliate of the Transferor or by the Servicer or any
early termination, refinancing, prepayment, consolidation or
replacement of the Contract related to such Pool Receivable,
(ii) reduced or cancelled as a result of a setoff in respect
of any claim or dispute by the Obligor thereof against the Transferor
or any Affiliate of the Transferor (individually or as Servicer) or any
other Person (whether such claim arises out of the same or a related or
an unrelated transaction),
(iii) reduced on account of the obligation of the Transferor
or an Affiliate of the Transferor (individually or as Servicer) to pay
to the related Obligor any rebate or refund, or
(iv) determined by the Agent, the Servicer or the Transferor
to have been less than the Unpaid Balance of such Receivable used in
calculating the Net Pool Balance for purposes of the most recent
Periodic Report or Settlement
11
<PAGE>
Statement,
then, on such day, the Transferor shall be deemed to have received a Collection
of such Pool Receivable in the amount of such reduction or cancellation or, in
the case of clause (iv) above, by the amount of the difference between the
-----------
actual Unpaid Balance and the Unpaid Balance as so reported.
(b) If on any day (i) any of the representations or warranties of the
Transferor set forth in Section 6.01(k) or (o) shall not be true with respect to
--------------- ---
a Pool Receivable (other than solely by reason of such Pool Receivable's being a
Defaulted Receivable), or (ii) when the Servicer or the Transferor delivers any
Periodic Report or Settlement Statement, any Pool Receivable the Unpaid Balance
of which is included in the computation of the Net Pool Balance therein shall
not be an Eligible Receivable, then, on such day, the Transferor shall be deemed
to have received a Collection of such Pool Receivable in the amount of the
Unpaid Balance of such Pool Receivable.
SECTION 3.04. Optional Reduction of Transferee's Investment. The
---------------------------------------------
Transferor may at any time elect to cause the reduction of the Transferee's
Investment as follows:
(a) the Transferor shall give the Agent at least 10 Business
Days' prior written notice of such reduction (including the amount of
such proposed reduction and the proposed date on which such reduction
will commence);
(b) on the proposed date of commencement of such reduction and
on each day thereafter, the Servicer shall set aside Collections and
hold them in trust for the Transferee under clause (ii) of Section
----------- -------
3.01(a) until the amount so set aside shall equal the desired amount of
-------
reduction; and
(c) the Servicer shall set aside and hold such Collections for
the benefit of the Transferee and, on each Settlement Date with respect
to any Rate Tranche, shall pay to the Agent for the benefit of the
Transferee, in reduction of the Transferee's Investment, the amount of
such Collections so held or, if less, the Transferee's Tranche
Investment of such Rate Tranche (it being understood that the
Transferee's Investment shall not be deemed reduced by any amount set
aside or held pursuant to this Section 3.04 unless and until, and then
------------
only to the extent that, such amount is finally paid to the Agent as
aforesaid);
provided that,
- --------
(i) the amount of any such reduction shall be not less
12
<PAGE>
than $5,000,000 and shall be an integral multiple of $1,000,000, and
the Transferee's Investment after giving effect to such reduction shall
be not less than $10,000,000 (unless the Transferee's Investment shall
thereby be reduced to zero),
(ii) the Transferor shall use reasonable efforts to attempt
to choose a reduction amount, and the date of commencement thereof, so
that such reduction shall commence and conclude in a single Yield
Period with respect to a Rate Tranche, and
(iii) such proposed reduction shall be applied, unless the
Agent shall consent otherwise, to the Rate Tranche with the shortest
remaining Yield Period.
SECTION 3.05. Reporting by Servicer. (a) On or prior to the 15th day
---------------------
(or if such day is not a Business Day, on the next Business Day) of each month,
the Servicer shall prepare and forward to the Agent a Periodic Report, executed
by an Authorized Servicing Officer, relating to the Transferee's Interest as of
the close of business of the Servicer on the next preceding Month End Date. In
addition, if at any time the Agent shall so request, then, within 10 Business
Days after the later of (i) the date of such request and (ii) such other date as
the Agent may designate in such request as the effective date of the requested
report, the Servicer shall prepare and deliver to the Agent a Periodic Report,
executed by an Authorized Servicing Officer, relating to the Transferee's
Interest as of the close of business on the date of such request or such other
effective date, as applicable.
(b) During the Pay Out Period, on the Settlement Date of each
Settlement Period for each Rate Tranche, the Servicer shall prepare and forward
to the Agent a Pay Out Statement as of the close of business of the Servicer on
such Settlement Date.
SECTION 3.06. Delivery of Deemed Collections; Collections Held in
---------------------------------------------------
Trust. (a) Whenever the Transferor is deemed to receive Collections pursuant to
- -----
Section 3.03, the Transferor shall forthwith deliver to the Servicer the amount
- ------------
of such deemed Collections, and the Servicer shall set aside and hold or
distribute such Collections as and to the same extent as if such Collections had
actually been received on the date of such delivery to Servicer. If Collections
are then being paid to the Agent, or lock boxes or accounts directly or
indirectly owned or controlled by the Agent, the Servicer shall forthwith cause
such deemed Collections to be paid to the Agent or to such lock boxes or
accounts, as applicable.
13
<PAGE>
(b) So long as the Transferor shall hold any Collections or deemed
Collections required to be paid to the Servicer 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.
ARTICLE IV
PAYMENT PROCEDURES; FEES AND YIELD PROTECTION
SECTION 4.01. Payments and Computations. (a) All amounts to be paid or
-------------------------
deposited by the Transferor or the Servicer to or for the account of the
Transferee or the Agent hereunder shall be paid or deposited in accordance with
the terms hereof no later than 11:00 a.m. (New York City time) on the day when
due in lawful money of the United States of America in immediately available
funds to account #104636460008 or such other account as the Agent may designate
(the "Agent's Account") at DBNY's office at 31 West 52nd Street, New York, New
---------------
York 10019 or at such other place in New York City as the Agent may designate.
(b) All computations of interest, Earned Discount, Negative Spread Fee
and any other fees hereunder shall be made on the basis of a year of 360 days
for the actual number of days (including the first day but excluding the last
day) elapsed.
SECTION 4.02. Interest on Overdue Amounts. The Transferor or Servicer,
---------------------------
as applicable, shall, to the extent permitted by law, pay to the Agent interest
on all amounts not paid or deposited when due hereunder at 1% per annum above
--- -----
the Alternate Base Rate, payable on demand, provided, however, that such
-------- -------
interest rate shall not at any time exceed the maximum rate permitted by
applicable law.
SECTION 4.03. Fees. (a) Certain Fees. The Transferor shall pay to the
---- ------------
Agent and the Transferee the fees in the amounts and at the times set forth in
the letter from the Agent to the Transferor, dated as of the date hereof (as
amended from time to time, the "Fee Letter").
----------
(b) Note Fee. From the date hereof until the Final Pay Out Date, the
--------
Transferor shall pay to the Agent for the account of the Transferee a commercial
paper transaction fee ("Note Fee") in an amount equal to the product of (x) the
--------
amount of the per-trade fee paid or payable by the Transferee to the Depository
Trust Company (or any other or successor clearing corporation through which the
Commercial Paper Notes may be issued) in connection with the issuance, payment
or redemption of Commercial Paper Notes, as notified by the Agent to the
Transferor and the
14
<PAGE>
Servicer from time to time, times (y) the number of transactions in Commercial
-----
Paper Notes issued by the Transferee to fund the Transferee's Interest hereunder
during the period for which such Note Fee is payable and to which such per-trade
fee applies, as notified by the Agent to the Transferor and the Servicer. Such
Note Fee shall be paid in arrears on the last Business Day of each February of
each calendar year and on the Final Pay Out Date for the number of Commercial
Paper Note trades that were consummated, to fund the Transferee's Interest
hereunder during the twelve month period ending on the last day of the
immediately preceding December, or in the case of the Final Pay Out Date, other
period then ending and for which no Note Fee shall have theretofore been paid.
The Agent shall notify the Transferor and the Servicer on or prior to the last
day of each January of the Note Fee due on the last Business Day of the
following February.
SECTION 4.04. Yield Protection. (a) If (i) Regulation D or (ii) any
----------------
Regulatory Change occurring after the date hereof
(A) shall subject an Affected Party to any tax, duty or other
charge with respect to the Transferee's Interest or any portion
thereof, or any obligations or right to accept or make Transfers or
Reinvestments or to provide funding therefor, or shall change the basis
of taxation of payments to the Affected Party of any of the
Transferee's Investment or Earned Discount owned by, owed to or funded
by it or any other amounts due under this Agreement in respect of the
Transferee's Interest or any portion thereof or its obligations or
rights, if any, to accept or make Transfers or Reinvestments or to
provide funding therefor (except for changes in the rate of tax on the
overall net income of such Affected Party imposed by the United States
of America, by the jurisdiction in which such Affected Party's
principal executive office is located and, if such Affected Party's
principal executive office is not in the United States of America, by
the jurisdiction where such Affected Party's principal office in the
United States is located); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Federal
Reserve Board, but excluding any reserve included in the determination
of Earned Discount), special deposit or similar requirement against
assets of any Affected Party, deposits or obligations with or for the
account of any Affected Party or with or for the account of any
affiliate (or entity deemed by the Federal Reserve Board to be an
affiliate) of any Affected Party, or credit extended by any Affected
Party; or
(C) shall change the amount of capital maintained or
15
<PAGE>
required or requested or directed to be maintained by any Affected
Party; or
(D) shall impose any other condition affecting the
Transferee's Interest or any portion thereof owned or funded by any
Affected Party, or its obligations or rights, if any, to accept or make
Transfers or Reinvestments or to provide funding therefor; or
(E) shall change the rate for, or the manner in which the
Federal Deposit Insurance Corporation (or any successor thereto)
assesses, deposit insurance premiums or similar charges, or shall
impose on any Affected Party a requirement to maintain deposit
insurance;
and the result of any of the foregoing is or would be
(x) to increase the cost or to impose a cost on (I) an
Affected Party accepting or funding or making or maintaining any
Transfers or Reinvestments, any loans or other extensions of credit
under the Liquidity Agreement, or any Enhancement Draw, or any
commitment of such Affected Party with respect to any of the foregoing,
or (II) the Agent for continuing its or the Transferor's relationship
with the Transferee,
(y) to reduce the amount of any sum received or receivable by
an Affected Party under this Agreement or any other Transaction
Document, or under the Liquidity Agreement or the Enhancement Agreement
with respect thereto, or
(z) in the sole determination of such Affected Party, to
reduce the rate of return on the capital of an Affected Party as a
consequence of its obligations hereunder or arising in connection
herewith to a level below that which such Affected Party could
otherwise have achieved (taking into consideration the policies of such
Affected Party with respect to capital adequacy) by an amount deemed by
such Affected Party to be material,
then, within thirty days after demand by such Affected Party (which demand shall
be accompanied by a statement setting forth the basis of such demand), the
Transferor shall pay directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party for such additional or increased
cost or such reduction.
(b) Each Affected Party will promptly notify the Transferor and the
Agent of any event of which it has knowledge which occurs after the date hereof
and will entitle such Affected Party to
16
<PAGE>
compensation pursuant to this Section 4.04; provided, however, no failure to
------------ -------- -------
give or delay in giving such notification shall adversely affect the rights of
any Affected Party to such compensation.
(c) In determining any amount provided for or referred to in this
Section 4.04, an Affected Party may use any reasonable averaging and attribution
- ------------
methods that it (in its sole discretion) shall deem applicable. Any Affected
Party when making a claim under this Section 4.04 shall submit to the Transferor
------------
a statement as to such increased cost or reduced return (including calculation
thereof in reasonable detail), which statement shall, in the absence of manifest
error, be conclusive and binding upon the Transferor.
SECTION 4.05. Interest Rate Hedging Agreements. Promptly after the
--------------------------------
Commitment Termination Date, the Transferee will enter into, and will maintain
throughout the Pay Out Period, one or more interest rate swap agreements,
interest rate collars, interest rate caps or other interest rate hedging
arrangements, with one or more financial institutions, including the Agent,
whose long-term unsecured debt obligations are rated at least Aaa by Moody's or
AAA by S&P, with an amortizing notional amount equal to Transferee's good faith
determination of its outstanding Transferee's Investment from time to time
during the Pay Out Period (the "Hedging Arrangements"). Such Hedging
--------------------
Arrangements shall protect Transferee from differences between a fixed interest
rate equal to the interpolated yield to maturity of the Treasury security with a
maturity equal to the then Average Maturity and a floating interest rate equal
to the Commercial Paper Rate or Eurodollar Rate (Reserve Adjusted). The Agent
and the Transferee agree to use their reasonable efforts to obtain such Hedging
Arrangements at a commercially reasonable cost, in light of the circumstances of
such transaction. The Agent will consult in good faith with the Servicer, and
the Servicer agrees to cooperate with the Agent (including providing information
on the historical amortization of the portfolio) in order for the Agent to
promptly determine an amortization schedule for the Hedging Arrangements.
Transferor and IKON Capital, jointly and severally, hereby agree to pay, or to
reimburse Transferee for, on demand, any and all costs, expenses and liabilities
of Transferee incurred in connection with such Hedging Arrangements (other than
periodic net payments of fixed rate interest due to the counterparty thereof),
including any arrangement fees, legal costs and early termination payments with
respect thereto; provided, that, to the extent that the notional amount of such
--------
Hedging Arrangements exceeds the then Transferee's Investment, Transferee shall
assign to IKON Capital, and IKON Capital shall accept, the portion of such
Hedging Arrangement related to such excess, in which event, IKON Capital shall
be responsible for all
17
<PAGE>
obligations, and be entitled to all benefits, associated with such portion of
the Hedging Arrangements. Notwithstanding the foregoing, if (i) the unsecured
short term obligations of IKON Capital are rated at least A-1+ by S&P and P-1 by
Moody's, (ii) Transferor has requested that the Transferee accept Transferor's
recourse obligation for Earned Discount and IKON Capital's guaranty of such
recourse obligation and (iii) Transferor has executed and delivered to the
Transferee and the Agent an agreement pursuant to which Transferor agrees to
pay, on a recourse basis, Earned Discount as and when due, and IKON Capital has
executed and delivered to the Transferee and the Agent a guaranty, reasonably
satisfactory to the Agent, of such obligation, then, for so long as IKON Capital
maintains the ratings described in the foregoing clause (i), the Transferee
----------
shall accept such agreement in place of maintaining Hedging Arrangements.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to Amendment and Restatement. The
-------------------------------------------------
amendment and restatement of the Original Receivables Agreement hereby is
subject to the condition precedent that the Agent shall have received the
following, each (unless otherwise indicated) dated (or dated as of) the date
this amendment and restatement shall become effective and in form and substance
satisfactory to the Agent:
(a) This Agreement, duly executed by the Transferor and the
initial Servicer;
(b) A copy of the resolutions of the Board of Directors of
the Transferor approving this Agreement, and the other Transaction
Documents to be delivered by it and the transactions contemplated
hereby and thereby, certified by its Secretary or Assistant Secretary;
a copy of the resolutions of the Board of Directors of IKON Capital
approving this Agreement, and the other Transaction Documents to be
delivered by it and the transactions contemplated hereby and thereby,
certified by its Secretary or Assistant Secretary; a copy of the
resolutions of the Board of Directors of IKON Office approving the
Support Agreement, certified by its Secretary or Assistant Secretary;
(c) Good standing certificates for IKON Office issued by the
Secretaries of State of Pennsylvania and Ohio; good standing
certificates for the Transferor issued by the
18
<PAGE>
Secretary of State of Delaware; good standing certificates for IKON
Capital issued by the Secretaries of State of Delaware, Georgia,
Washington, Minnesota, Michigan, Texas and Colorado, in each case dated
as of a recent date acceptable to the Agent;
(d) A certificate of the Secretary or an Assistant Secretary
of each of the Transferor and IKON Capital certifying the names and
true signatures of the officers authorized on its behalf to sign this
Agreement and the other Transaction Documents to be delivered by it (on
which certificate the Agent and the Transferee may conclusively rely
until such time as the Agent shall receive from the Transferor a
revised certificate meeting the requirements of this subsection (d));
--------------
(e) The Articles of Incorporation of the Transferor, IKON
Capital and IKON Office, duly certified by the Secretary of State of
Delaware and the Secretary of State of Ohio, as applicable, as of a
recent date acceptable to Agent, together with a copy of the By-laws of
the Transferor, IKON Capital and IKON Office, duly certified by the
Secretary or an Assistant Secretary of the Transferor, IKON Capital or
IKON Office, as the case may be;
(f) Acknowledgment copies of proper Financing Statements
(Form UCC-1), substantially in the forms attached hereto as Exhibit
-------
5.01(f) (with such modifications, if any, as may be necessary or
-------
appropriate to conform to the law, customary practice or standard forms
of a particular jurisdiction), filed on or prior to the date of this
amendment and restatement, naming (i) the Transferor as the debtor and
transferor of Pool Receivables or an undivided interest therein and the
Transferee as the secured party and transferee and (ii) IKON Capital as
debtor and transferor of Pool Receivables, Transferor as the secured
party and transferee and Transferee as assignee, or other, similar
instruments or documents, as may be necessary or, in the opinion of the
Agent, desirable under the UCC or any comparable law of all appropriate
jurisdictions (including those jurisdictions listed on Schedule 5.01(f)
----------------
hereto) to perfect the Transferee's Interest and the security interest
granted to the Transferee under Article IX hereof;
----------
(g) A search report or reports provided in writing to the
Agent by LEXIS Document Services, Inc. as of a recent date (or dates)
acceptable to the Agent, listing all effective financing statements
that name the Transferor or IKON Capital (including any prior names of
such Persons) as debtor and that are filed in the jurisdictions in
which
19
<PAGE>
filings were made pursuant to subsection (f) above and in such other
--------------
jurisdictions that the Agent shall reasonably request, together with
copies of such financing statements (none of which shall cover any Pool
Receivables or Contracts related thereto or interests therein or
Collections or proceeds of any thereof);
(h) Duly executed copies of Designated Account Agreements
with each of the Designated Account Banks; duly executed copies of Post
Office Box Agreements with respect to each Post Office Box;
(i) A favorable opinion of Karin M. Kinney, counsel to the
Transferor, IKON Capital and IKON Office, in substantially the form of
Exhibit 5.01(i);
---------------
(j) A favorable opinion of Mayer, Brown & Platt, counsel for
the Agent, substantially in the form of Exhibit 5.01(j);
---------------
(k) Acknowledgment copies of proper Financing Statements
(Form UCC-1), substantially in the form attached hereto as Exhibit
-------
5.01(k) (with such modifications, if any, as may be necessary or
-------
appropriate to conform to the law, customary practice or standard forms
of a particular jurisdiction), filed on or prior to the date of the
amendment and restatement in the jurisdictions of the principal places
of business of the dealers listed on Schedule A-1, naming such dealers,
------------
respectively, as debtors and transferors of Receivables, IKON Capital
as the secured party and transferee and Transferee as the assignee, or
other, similar instruments or documents, as may be necessary or, in the
opinion of the Agent, desirable under the UCC or any comparable law of
all appropriate jurisdictions to perfect IKON Capital's interest in the
Receivables;
(l) Such powers of attorney as the Agent shall reasonably
request to enable the Agent to collect all amounts due under any and
all Pool Receivables, which powers of attorney shall be substantially
in the form of Exhibit 5.01(l) or in such other form as the Agent may
---------------
reasonably request;
(m) A Periodic Report as of the most recent Month End Date
(in which the Transferee's Interest and the components thereof shall be
calculated after giving effect to the amendment and restatement);
(n) A copy of the Support Agreement, certified as true,
correct and complete by an officer of IKON Office;
20
<PAGE>
(o) A letter executed by IKON Office substantially in the
form of Exhibit 5.01(o);
----------------
(p) An amendment to the interest rate protection agreement
between Transferor and DBNY, and an assignment agreement related
thereto; and
(q) The Transfer Agreement duly executed by IKON Capital and
the Transferor.
SECTION 5.02. Conditions Precedent to All Transfers and Reinvestments.
-------------------------------------------------------
Each Transfer (including the initial Transfer) and each Reinvestment hereunder
shall be subject to the further conditions precedent that on the date of such
Transfer or Reinvestment the following statements shall be true (and the
Transferor by accepting the amount of such Transfer or by receiving the proceeds
of such Reinvestment shall be deemed to have certified that):
(a) The representations and warranties contained in Article
-------
VI are correct on and as of such day as though made on and as of such
--
day and shall be deemed to have been made on such day,
(b) No event has occurred and is continuing, or would result
from such Transfer or Reinvestment, that constitutes a Termination
Event or Unmatured Termination Event,
(c) In the case of a Reinvestment, the amount of the
Reinvestment will not exceed the amount available therefor under
Section 3.01, and in the case of a Transfer, after giving effect
------------
thereto, the Transferee's Investment will not exceed the Maximum
Investment and the Unadjusted Transferee's Percentage will not exceed
the Maximum Percentage, and
(d) The Commitment Termination Date shall not have occurred;
provided, however, the absence of the occurrence and continuance of an Unmatured
- -----------------
Termination Event shall not be a condition precedent to any Reinvestment or to
any Transfer on any day which does not cause the Transferee's Investment, after
giving effect to such Transfer, to exceed the Transferee's Investment as of the
opening of business on such day.
21
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of the Transferor. The
------------------------------------------------
Transferor represents and warrants as follows:
(a) Organization and Good Standing. The Transferor has been
------------------------------
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with power and
authority to own its properties and to conduct its business as such
properties are presently owned and such business is presently
conducted, and had at all relevant times, and now has, all necessary
power, authority, and legal right to acquire and own the Pool
Receivables.
(b) Due Qualification. The Transferor is duly qualified to do
-----------------
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business requires
such qualification, licenses or approvals.
(c) Power and Authority; Due Authorization. The Transferor (i)
--------------------------------------
has all necessary power, authority and legal right to execute and
deliver this Agreement and the other Transaction Documents, to carry
out the terms of the Transaction Documents and to transfer and assign
the Transferee's Interest on the terms and conditions herein provided,
and (ii) has duly authorized by all necessary corporate action the
execution, delivery and performance of this Agreement and the other
Transaction Documents and the transfer and assignment of the
Transferee's Interest on the terms and conditions herein provided.
(d) Valid Transfer; Binding Obligations. This Agreement
-----------------------------------
constitutes a valid transfer and assignment of the Transferee's
Interest to the Transferee, enforceable against creditors of, and
purchasers from, the Transferor and IKON Capital; and this Agreement
constitutes, and each other Transaction Document to be signed by the
Transferor when duly executed and delivered will constitute, a legal,
valid and binding obligation of the Transferor enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws affecting
the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
22
<PAGE>
(e) No Violation. The execution, delivery and performance by
------------
the Transferor of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and
thereby will not (i) conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
of time or both) a default under, the articles of incorporation or
by-laws of the Transferor, or any indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or other
agreement or instrument to which the Transferor is a party or by which
it or any of its properties is bound, (ii) result in the creation or
imposition of any Lien upon any of the Transferor's properties pursuant
to the terms of any such indenture, loan agreement, receivables
purchase agreement, mortgage, deed of trust, or other agreement or
instrument, other than this Agreement, or (iii) violate any law or any
order, rule, or regulation applicable to the Transferor of any court or
of any federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over the
Transferor or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending, or threatened, before, and there has been no injunction,
decree or other decision issued or made by, any court, regulatory body,
administrative agency, or other tribunal or governmental agency or
instrumentality (i) asserting the invalidity of this Agreement or any
other Transaction Document, (ii) seeking to prevent the transfer and
assignment of the Transferee's Interest or any portion thereof or the
consummation of any of the other transactions contemplated by this
Agreement or any other Transaction Document, (iii) seeking any
determination or ruling that might have a Material Adverse Effect or
(iv) seeking to adversely affect the federal income tax attributes of
the Transfers hereunder.
(g) Bulk Sales Act. No transaction contemplated hereby
--------------
requires compliance with any bulk sales act or similar law.
(h) Government Approvals. 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 this Agreement or any
other Transaction Document, except for the filing of the UCC Financing
------
Statements referred to in Article V, all of which, at the time required
---------
in Article V, shall have been duly made and
---------
23
<PAGE>
shall be in full force and effect.
(i) Financial Condition. (x) The balance sheets of the
-------------------
Transferor as at December 31, 1996, and the related statements of
income, cash flows and shareholders' equity of the Transferor for the
fiscal year then ended, certified by the Transferor's chief financial
officer, copies of which have been furnished to the Agent, fairly
present the financial condition, business, business prospects and
operations of the Transferor as at such dates and the results of the
operations of the Transferor for the period ended on such dates, all in
accordance with generally accepted accounting principles consistently
applied, and (y) since December 31, 1996 there has been no material
adverse change in any such condition, business, business prospects or
operations.
(j) Margin Regulations. The use of all funds obtained by the
------------------
Transferor under this Agreement will not conflict with or contravene
any of Regulations G, T, U and X promulgated by the Board of Governors
of the Federal Reserve System from time to time.
(k) Quality of Title. (i) Each Pool Receivable, together with
----------------
the Related Property, is owned by the Transferor free and clear of any
Lien (other than any Lien arising solely as the result of any action
taken by the Transferee (or any assignee thereof) or by the Agent)
except as created hereby; (ii) each Pool Receivable, together with the
Related Property, was transferred by Transferor from IKON Capital
pursuant to the Transfer Agreement, which transfer is enforceable
against all creditors of, and purchasers from, IKON Capital, and,
Transferor took all steps necessary to perfect its interest in such
Pool Receivable, together with the Related Property, against IKON
Capital; (iii) when the Transferee accepts a Transfer, it shall have
acquired and shall at all times thereafter continuously maintain a
valid and perfected first priority undivided percentage ownership
interest, in a percentage equal to the Transferee's Percentage in
effect from time to time, in each Pool Receivable and in the Related
Property, free and clear of any Lien (other than any Lien arising
solely as the result of any action taken by the Transferee (or any
assignee thereof) or by the Agent); and (iv) no effective financing
statement or other instrument similar in effect covering any Pool
Receivable, any interest therein or any of the Related Property is on
file in any recording office except such as may be filed (A) in favor
of IKON Capital in accordance with the Contracts or against the
dealers, (B) in favor of Transferor in accordance with the
24
<PAGE>
terms of the Transfer Agreement, (C) in favor of the Transferee or the
Agent in accordance with this Agreement or in connection with any Lien
arising solely as the result of any action taken by the Transferee (or
any assignee thereof) or by the Agent, or (D) in favor of DBNY, as
Collateral Agent, or any successor in such capacity, as described in
Section 12.01.
-------------
(l) Accurate Reports. No Periodic Report or Pay Out Statement
----------------
(if prepared by the Transferor, or to the extent that information
contained therein was supplied by the Transferor) or other information,
exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Transferor to the Agent or the
Transferee in connection with this Agreement was or will be inaccurate
in any material respect as of the date it was or will be dated or
(except as otherwise disclosed to the Agent or the Transferee, as the
case may be, at such time) as of the date so furnished, or contained or
will contain any material misstatement of fact or omitted or will omit
to state a material fact or any fact necessary to make the statements
contained therein not materially misleading.
(m) Offices. The chief place of business and chief executive
-------
office of the Transferor are located at the address of the Transferor
referred to in Section 14.02, and the offices where the Transferor
-------------
keeps all its books, records and documents evidencing or included in
the Pool Receivables and Related Property are located at the addresses
specified in Schedule 6.01(m) (or at such other locations, notified to
----------------
the Agent in accordance with Section 7.01(f), in jurisdictions where
---------------
all action required by Section 8.05 has been taken and completed).
------------
(n) Designated Accounts; Post Office Boxes. The names and
--------------------------------------
addresses of all the Designated Accounts Banks, together with the
account numbers of the Designated Accounts of the Transferor at such
Designated Account Banks, are specified in Schedule 6.01(n) (or have
----------------
been notified to the Agent in accordance with Section 7.03(d)). The
---------------
addresses and numbers of all Post Office Boxes are specified in
Schedule 6.01(n) (as have been notified to the Agent in accordance with
----------------
Section 7.03(d)).
---------------
(o) Eligible Receivables. Each Receivable included in the Net
--------------------
Pool Balance as an Eligible Receivable on any date shall be an Eligible
Receivable on such date.
SECTION 6.02. Representations and Warranties of IKON Capital. IKON
----------------------------------------------
Capital represents and warrants as follows:
25
<PAGE>
(a) Organization and Good Standing. IKON Capital has been duly
------------------------------
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority to
own its properties and to conduct its business as such properties are
presently owned and such business is presently conducted.
(b) Due Qualification. IKON Capital is duly qualified to do
-----------------
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business requires
such qualification, licenses or approvals.
(c) Power and Authority; Due Authorization. IKON Capital (i)
--------------------------------------
has all necessary power, authority and legal right to execute and
deliver this Agreement and the other Transaction Documents, to carry
out the terms of the Transaction Documents and (ii) has duly authorized
by all necessary corporate action the execution, delivery and
performance of this Agreement and the other Transaction Documents.
(d) Valid and Binding Obligations. This Agreement constitutes,
-----------------------------
and each other Transaction Document to be signed by IKON Capital when
duly executed and delivered will constitute, a legal, valid and binding
obligation of IKON Capital enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding
in equity or at law.
(e) No Violation. The execution, delivery and performance by
------------
IKON Capital of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby
will not (i) conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of
time or both) a default under, the articles of incorporation or by-laws
of IKON Capital, or any indenture, loan agreement, receivables purchase
agreement, mortgage, deed of trust, or other agreement or instrument to
which IKON Capital is a party or by which it or any of its properties
is bound, (ii) result in the creation or imposition of any Lien upon
any of IKON Capital's properties pursuant to the terms of any such
indenture, loan agreement,
26
<PAGE>
receivables purchase agreement, mortgage, deed of trust, or other
agreement or instrument, other than the Transfer Agreement, or (iii)
violate any law or any order, rule, or regulation applicable to IKON
Capital of any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over IKON Capital or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending, or threatened, before, and there has been no injunction,
decree or other decision issued or made by, any court, regulatory body,
administrative agency, or other tribunal or governmental agency or
instrumentality (i) asserting the invalidity of this Agreement or any
other Transaction Document and (ii) seeking any determination or ruling
that might have a Material Adverse Effect.
(g) Bulk Sales Act. No transaction contemplated hereby
--------------
requires compliance with any bulk sales act or similar law.
(h) Government Approvals. 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 IKON Capital of this Agreement or any other
Transaction Document, except for the filing of the UCC Financing
------
Statements referred to in Article V, all of which, at the time required
---------
in Article V, shall have been duly made and shall be in full force and
---------
effect.
(i) Financial Condition. (x) The consolidated balance sheets
-------------------
of IKON Capital and its consolidated subsidiaries as at September 30,
1996, and the related statements of income, cash flows and
shareholders' equity of IKON Capital and its consolidated subsidiaries
for the fiscal year then ended, certified by Ernst & Young, independent
certified public accountants, and the consolidated balance sheets of
IKON Capital and its consolidated subsidiaries as at December 31, 1996,
and the related statements of income, cash flows and shareholders'
equity of IKON Capital and its consolidated subsidiaries for the
periods then ended, in each case, copies of which have been furnished
to the Agent, fairly present the consolidated financial condition,
business, business prospects and operations of IKON Capital and its
consolidated subsidiaries as at such dates and the consolidated results
of the operations of IKON Capital and its consolidated subsidiaries for
the period ended on such dates, all in accordance with generally
accepted accounting principles consistently applied, and (y) since
September 30,
27
<PAGE>
1996 there has been no material adverse change in any such condition,
business, business prospects or operations except as described in
Schedule 6.02(i).
----------------
(j) Accurate Reports. No Periodic Report or Pay Out Statement
----------------
(if prepared by IKON Capital, or to the extent that information
contained therein was supplied by IKON Capital) or other information,
exhibit, financial statement, document, book, record or report
furnished or to be furnished by IKON Capital to the Agent or the
Transferee in connection with this Agreement was or will be inaccurate
in any material respect as of the date it was or will be dated or
(except as otherwise disclosed to the Agent or the Transferee, as the
case may be, at such time) as of the date so furnished, or contained or
will contain any material misstatement of fact or omitted or will omit
to state a material fact or any fact necessary to make the statements
contained therein not materially misleading.
(k) Offices. The chief place of business and chief executive
-------
office of IKON Capital are located at the address of IKON Capital
referred to in Section 14.02, and the offices where IKON Capital keeps
-------------
all its books, records and documents evidencing or included in the Pool
Receivables and Related Property are located at the addresses specified
in Schedule 6.01(m) (or at such other locations, notified to the Agent
----------------
in accordance with Section 7.01(f), in jurisdictions where all action
---------------
required by Section 8.05 has been taken and completed).
------------
(l) Servicing Programs. Any and all programs used by IKON
------------------
Capital in the servicing of the Receivables Pool are owned by it and
not leased or licensed, except for all licensed IBM operating system
software. No license or approval is required for the Agent's use of any
program used by the Servicer in the administration of the Receivables,
other than those which have been obtained and are in full force and
effect.
ARTICLE VII
GENERAL COVENANTS
SECTION 7.01. Affirmative Covenants. From the date hereof until the
---------------------
Final Pay Out Date, each of IKON Capital and the Transferor will, unless the
Agent shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material
-------------------------
28
<PAGE>
respects with all applicable laws, rules, regulations and orders
applicable to it, including those with respect to the Pool Receivables
and related Contracts.
(b) Preservation of Corporate Existence. Subject to Section
----------------------------------- -------
7.03(e), preserve and maintain its corporate existence, rights,
-------
franchises and privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign corporation
in each jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification would have
a Material Adverse Effect.
(c) Audits. (i) At any time and from time to time during
------
regular business hours, upon reasonable notice, permit the Agent, or
its agents or representatives, (A) to examine and make copies of and
abstracts from all books, records and documents (including, without
limitation, computer tapes and disks) in the possession or under its
control relating to Pool Receivables, including, without limitation,
the related Contracts and purchase orders and other agreements, and (B)
to visit its offices and properties for the purpose of examining such
materials described in clause (i)(A) next above, and to discuss matters
-------------
relating to Pool Receivables or its performance hereunder or under any
other Transaction Document with any of its officers or employees having
knowledge of such matters; and (ii) without limiting the provisions of
clause (i) next above, from time to time on request of the Agent given
----------
not more than once in each calendar year so long as no Termination
Event or Unmatured Termination Event shall have occurred and be
continuing, permit certified public accountants or other auditors,
selected by it and reasonably acceptable to the Agent, to conduct, at
its expense, a review of its books and records with respect to the Pool
Receivables.
(d) Keeping of Records and Books of Account. Maintain and
---------------------------------------
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Pool Receivables
in the event of the destruction of the originals thereof), and keep and
maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all Pool
Receivables (including, without limitation, records adequate to permit
the daily identification of each new Pool Receivable and all
Collections of and adjustments to each existing Pool Receivable).
29
<PAGE>
(e) Performance and Compliance with Receivables and Contracts.
---------------------------------------------------------
At IKON Capital's expense timely and fully perform and comply with all
material provisions, covenants and other promises required to be
observed by it under the Contracts related to the Pool Receivables and
all purchase orders and other agreements related to such Pool
Receivables.
(f) Location of Records. Keep its chief place of business and
-------------------
chief executive office, and the offices where it keeps its records
concerning the Pool Receivables, all related Contracts and all purchase
orders and other agreements related to such Pool Receivables (and all
original documents relating thereto), at its address(es) referred to in
Section 6.01(m) or, upon 30 days' prior written notice to the Agent, at
---------------
such other locations in jurisdictions where all action required by
Section 8.05 shall have been taken and completed.
------------
(g) Credit and Collection Policies. Comply in all material
------------------------------
respects with its Credit and Collection Policy in regard to each Pool
Receivable and the related Contract.
(h) Collections. Instruct all Obligors to cause all
-----------
Collections of Pool Receivables to be sent directly to a Post Office
Box, and deposit all Collections received into a Designated Account.
SECTION 7.02. Reporting Requirements. From the date hereof until the
----------------------
Final Pay Out Date, IKON Capital and the Transferor will, unless the Agent shall
otherwise consent in writing, furnish to the Agent:
(a) Quarterly Financial Statements. As soon as available and
------------------------------
in any event within 60 days after the end of each of the first three
quarters of each fiscal year of each of IKON Office, IKON Capital and
the Transferor, copies of the financial statements of the Transferor,
IKON Capital and its Subsidiaries and IKON Office and its Subsidiaries,
in each case, prepared on a consolidated basis, in conformity with
generally accepted accounting principles, duly certified by the chief
financial officer, any vice-president, the treasurer or the controller
of IKON Capital, the Transferor or IKON Office, as the case may be;
(b) Annual Financial Statements. As soon as available and in
---------------------------
any event within 90 days after the end of each fiscal year of the
Transferor, IKON Capital and IKON Office copies of the financial
statements of the Transferor, IKON Capital and its Subsidiaries and
IKON Office and its Subsidiaries,
30
<PAGE>
in each case prepared on a consolidated basis, in conformity with
generally accepted accounting principles, duly certified by independent
certified public accountants of recognized standing selected by the
Transferor, IKON Capital or IKON Office, as the case may be;
(c) Reports to Holders and Exchanges. Copies of any reports or
--------------------------------
registration statements that the Transferor, IKON Capital or IKON
Office files with the Securities and Exchange Commission or any
national securities exchange other than registration statements
relating to employee benefit plans and registrations of securities for
selling security holders and statements filed on Form S-1 or S-4;
(d) ERISA. Promptly after the filing or receiving thereof,
-----
copies of all reports and notices with respect to any Reportable Event
defined in Article IV of ERISA as to which the Pension Benefit Guaranty
Corporation has not waived the 30-day notice requirement which the
Transferor, IKON Capital or IKON Office files under ERISA with the
Internal Revenue Service, the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or which the Transferor, IKON Capital or
IKON Office receives from the Pension Benefit Guaranty Corporation;
(e) Termination Events. As soon as possible and in any event
------------------
within five days after the occurrence of each Termination Event and
each Unmatured Termination Event, a written statement of the chief
financial officer or chief accounting officer of the IKON Capital and
Transferor setting forth details of such event and the action that IKON
Capital and the Transferor propose to take with respect thereto;
(f) Litigation. As soon as possible and in any event within
----------
three Business Days of its knowledge thereof, notice of (i) any
litigation, investigation or proceeding which may exist at any time
which could have a Material Adverse Effect and (ii) any material
adverse development in previously disclosed litigation; and
(g) Other. 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, IKON Office or IKON Capital as the Agent may from time to
time reasonably request in order to protect the interests of the Agent
or the Transferee under or as contemplated by this Agreement.
SECTION 7.03. Negative Covenants. From the date hereof
------------------
31
<PAGE>
until the Final Pay Out Date, each of IKON Capital and the Transferor will not,
without the prior written consent of the Agent (provided that it is agreed
clauses (h), (i) and (j) of this Section 7.03 shall only apply to the
- ----------- --- --- ------------
Transferor):
(a) Sales, Liens, Etc. Except as otherwise provided herein,
-----------------
sell, assign (by operation of law or otherwise) or otherwise dispose
of, or create or suffer to exist any Lien upon or with respect to, any
Pool Receivable or Related Property, or any interest therein, or any
post office box or account to which any Collections of any Pool
Receivable are sent, or any right to receive income from or in respect
of any of the foregoing.
(b) Extension or Amendment of Receivables. Except as otherwise
-------------------------------------
permitted in Section 8.02, extend, amend, terminate or otherwise modify
the terms of any Pool Receivable, or amend, modify, terminate or waive
any term or condition of any Contract related thereto.
(c) Change in Business or Credit and Collection Policy. Make
--------------------------------------------------
any change in the character of its business or in the Credit and
Collection Policy, which change would, in either case, impair the
collectibility of the Pool Receivables (other than an immaterial
portion thereof) or otherwise adversely affect the interests, rights or
remedies of the Transferee under this Agreement or any other
Transaction Document.
(d) Change in Payment Instructions to Obligors. Add or
------------------------------------------
terminate any Post Office Box from those listed in Schedule 6.01(o) or
----------------
make any change in its instructions to Obligors regarding payments to
be made to the Transferor or the Servicer or payments to be made to any
Post Office Box unless the Agent shall have received (i) notice of such
addition, termination or change and (ii) duly executed copies of Post
Office Box Agreements with respect to each new Post Office Box. Deposit
or transfer any Collections received in any Post Office Box or
otherwise to any account other than a Designated Account.
(e) Mergers, Acquisitions, Sales, etc. Be a party to any
---------------------------------
merger or consolidation, or purchase or otherwise acquire all or
substantially all of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person, or, except
in the ordinary course of its business, sell, transfer, convey or lease
all or any substantial part of its assets, or permit any Subsidiary to
do any of the foregoing, except for any such merger or consolidation,
sale, transfer, conveyance, lease
32
<PAGE>
or assignment with respect to IKON Capital (i) of or by any wholly-
owned Subsidiary (other than Transferor) into IKON Capital or into,
with or to any other wholly-owned Subsidiary, (ii) any such purchase or
other acquisition by IKON Capital or any wholly-owned Subsidiary (other
than the Transferor) of the assets or stock of any wholly-owned
Subsidiary and (iii) pursuant to which IKON Capital is the survivor,
provided that no Termination Event or Unmatured Termination Event has
occurred and is continuing or would result therefrom.
(f) Support Agreement. Amend, modify or terminate the Support
-----------------
Agreement.
(g) Transfer Agreement. Amend, waive, terminate or modify the
------------------
Transfer Agreement or the Company Note or amend the Transferor's
articles of incorporation.
(h) Incurrence of Indebtedness. Incur or suffer to exist any
--------------------------
Indebtedness other than its obligations to Servicer, the Transferee and
the Agent hereunder, its obligations under the Old Line Agreement and
its obligations to IKON Capital under the Transfer Agreement.
(i) Restricted Payments. (i) Declare or pay any dividends,
-------------------
(ii) lend or advance any funds or (iii) repay any loans or advances to,
for or from IKON Capital or any other Affiliated Party (including
making any payment pursuant to the Transfer Agreement) (all of the
foregoing, "Restricted Payments"), provided that Transferor may make
------------------- --------
payments under the Transfer Agreement in accordance with its terms and
pay dividends, in each case, from Collections paid or released to
Transferor pursuant to Section 3.01 or 3.02, so long as no Termination
------------ ----
Event or Unmatured Termination Event has occurred and is continuing or
would result therefrom, and after giving effect thereto, the
Transferor's Tangible Net Worth is not less than $10,000,000.
(j) Change of Name. Change its corporate name or the name
--------------
under or by which it does business unless Transferor shall have given
the Agent at least 30 days' prior written notice thereof and unless,
prior to any such change, Transferor shall have filed, or caused to be
filed, such financing statements or amendments as the Agent determines
may be necessary to continue the perfection of Transferee's interest in
the Pool Receivables and Related Property.
Section 7.04. Separate Corporate Existence. Transferor and IKON
----------------------------
Capital hereby acknowledge that the Transferee and the Agent are entering into
the transactions contemplated by this Agreement
33
<PAGE>
in reliance upon the Transferor's identity as a legal entity separate from the
other Affiliated Parties. Therefore, Transferor and IKON Capital shall take the
steps described in this Section 7.04 and any other steps that the Agent
------------
reasonably requests to continue the Transferor's identity as such a separate
legal entity and to make it apparent to third Persons that the Transferor is an
entity with assets and liabilities distinct from those of the other Affiliated
Parties and those of any other Person, and not a division of the other
Affiliated Parties or any other Person:
(a) The Transferor will be a limited purpose corporation whose
primary activities are restricted in its articles of incorporation to
accepting transferred Receivables from IKON Capital, entering into
agreements for the servicing of such Receivables, transferring
undivided interests in the Receivables, and conducting such other
activities as it reasonably deems necessary or appropriate to carry out
its primary activities and entering into similar arrangements with
other Persons;
(b) No director or officer of the Transferor shall at any time
serve as a trustee in bankruptcy for any other Affiliated Party;
(c) Any employee, consultant or agent of the Transferor will
be paid by the Manager for services provided to the Transferor, which
payment shall be charged to Transferor's account, except as provided in
this Agreement in respect of the Servicing Fee and in the Old Line
Agreement for the servicing fee paid thereunder. The Transferor will
engage no agents other than a Servicer for the Receivables, which
Servicer (if an Affiliated Party) will be fully compensated for its
services to the Transferor by payment of the Servicing Fee and the
servicing fee paid under the Old Line Agreement, and the Manager
pursuant to the Management Agreement, which Manager's fees shall not
exceed $10,000 in any calendar year;
(d) The Transferor's operating expenses will not be paid by
any other Affiliated Party;
(e) The Transferor will have its own separate mailing address,
stationery and, if used, bank checks and, if it uses premises leased,
owned or occupied by any other Affiliated Party, its portion of such
premises will be defined and separately identified;
(f) The Transferor's books and records will be maintained
separately from those of every other Affiliated
34
<PAGE>
Party;
(g) Any financial statements of any other Affiliated Party
which are consolidated to include the Transferor will contain detailed
notes clearly stating that (A) all of the Transferor's assets are owned
by the Transferor, and (B) the Transferor is a separate corporate
entity with its own separate creditors which will be entitled to be
satisfied out of the Transferor's assets prior to any value in the
Transferor becoming available to the Transferor's equity holders;
(h) The assets of the Transferor will be maintained in a
manner that facilitates their identification and segregation from those
of any other Affiliated Party;
(i) The Transferor will strictly observe corporate formalities
in its dealings with each other Affiliated Party, and funds or other
assets of the Transferor will not be commingled or pooled with those of
any other Affiliated Party;
(j) The Transferor shall not maintain joint bank accounts with
any other Affiliated Party or other depository accounts to which any
other Affiliated Party (other than IKON Capital in its capacity as
Servicer) has independent access;
(k) The Transferor shall not, directly or indirectly, be named
and shall not enter into any agreement to be named as a direct or
contingent beneficiary or loss payee on any insurance policy covering
the property of any other Affiliated Party;
(l) The Transferor will maintain arm's length relationships
with each other Affiliated Party. Any other Affiliated Party which
renders or otherwise furnishes services or merchandise to the
Transferor will be compensated by the Transferor at market rates for
such services or merchandise; and
(m) Neither the Transferor, on the one hand, nor any other
Affiliated Party, on the other hand, will be or will hold itself out to
be responsible for the debts of the other or the decisions or actions
respecting the daily business and affairs of the other.
35
<PAGE>
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer. (a) IKON Capital as Initial
----------------------- -----------------------
Servicer. The servicing, administering and collection of the Pool Receivables
- --------
shall be conducted by the Person designated as the servicer hereunder (the
"Servicer") from time to time in accordance with this Section 8.01. Until the
-------- ------------
Agent gives to IKON Capital a notice designating a new Servicer (as provided in
Section 8.01(b)), IKON Capital is hereby designated as, and hereby agrees to
- ---------------
perform the duties and obligations of, the Servicer pursuant to the terms
hereof.
(b) Designation of New Servicer. Upon IKON Capital's receipt of a
---------------------------
notice from the Agent of the Agent's designation of a new Servicer, IKON Capital
agrees that it will terminate its activities as the Servicer hereunder in a
manner that the Agent believes will facilitate the transition of the performance
of such activities to the new Servicer, and the Agent (or, its designee) shall
assume each and all of IKON Capital's said obligations to service and administer
the Pool Receivables, on the terms and subject to the conditions herein set
forth, and IKON Capital shall use its best efforts to assist the Agent (or its
designee) in assuming such obligations. The Agent agrees not to give such notice
until after the occurrence of (i) any Termination Event, (ii) any default by the
Servicer of the type described in Section 10.01(a) (whether or not IKON Capital
----------------
or an Affiliate of IKON Capital is the Servicer), or (iii) any event which, in
the reasonable opinion of the Agent, could have a material adverse effect on
IKON Capital's ability to perform its obligations as the Servicer hereunder, in
which case such notice may be given at any time in the Agent's discretion. If
IKON Capital disputes the occurrence of a Termination Event or other event
described above, IKON Capital may take appropriate action to resolve such
dispute; provided that IKON Capital must terminate its activities hereunder as
--------
the Servicer and allow the newly designated Servicer to perform such activities
on the date provided by the Agent as described above, notwithstanding the
commencement or continuation of any proceeding to resolve the aforementioned
dispute.
(c) Subcontracts. The Servicer may, with the prior written consent of
------------
the Agent, subcontract with any other person for servicing, administering or
collecting the Pool Receivables; provided that the Servicer shall remain liable
for the performance of the duties and obligations of the Servicer pursuant to
the terms hereof; and provided, further, that any funds received by any
subcontractor pursuant to the subcontract shall be deemed to have been received
by the Servicer.
36
<PAGE>
SECTION 8.02. Duties of Servicer. (a) Appointment; Duties in General.
------------------ ------------------------------
Each of the Transferor, the Transferee and the Agent hereby appoints as its
agent the Servicer, as from time to time designated pursuant to Section 8.01,
------------
(i) to enforce its rights and interests in and under the Pool Receivables, the
Contracts and other Related Property, (ii) to take or cause to be taken all such
actions as may be necessary or advisable to collect each Pool Receivable 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, and (iii) to take such other actions and exercise such other
powers on behalf of the Transferee and the Agent under this Agreement as are
delegated to the Servicer by the terms hereof.
(b) Allocation of Collections; Segregation. The Servicer shall set
--------------------------------------
aside and hold in trust for the account of the Transferor and the Transferee
their respective allocable shares of the Collections of Pool Receivables in
accordance with Sections 3.01 and 3.02, but shall not be required (unless
------------- ----
otherwise requested by the Agent) to segregate the funds constituting such
portions of such Collections prior to the remittance thereof in accordance with
said Sections. If instructed by the Agent, the Servicer shall segregate and
deposit with a bank designated by the Agent such allocable shares of Collections
of Pool Receivables, set aside for the Transferee and any assignee from the
Transferee of the Transferee's Interest (or any portion thereof), on the first
Business Day following receipt by the Servicer of such Collections in
immediately available funds.
(c) Modification of Receivables. So long as no Termination Event or
---------------------------
Unmatured Termination Event shall have occurred and be continuing, IKON Capital,
while it is Servicer, may, in accordance with the Credit and Collection Policy,
(i) extend the maturity or adjust the Unpaid Balance of any Defaulted Receivable
as IKON Capital may determine to be appropriate to maximize Collections thereof;
provided that, no such extension shall be for more than 30 days and, after
- -------- ----
giving effect to such extension of maturity or such adjustment, the Unadjusted
Transferee's Percentage will not exceed the Maximum Percentage, and (ii) adjust
the Unpaid Balance of any Receivable to reflect the reductions or cancellations
described in Section 3.03(a). IKON Capital will not terminate, nor allow the
---------------
prepayment of, any Contract related to a Pool Receivable unless, after giving
effect to such termination or prepayment, any payment of a deemed Collection as
a result of such termination or prepayment pursuant to Section 3.03 and the
------------
inclusion of any new Eligible Receivables in the Receivables Pool, the
Unadjusted Transferee's Percentage, as of such date, does not exceed the Maximum
Percentage.
37
<PAGE>
(d) Documents and Records. IKON Capital shall deliver to the Servicer,
---------------------
and the Servicer shall hold in trust for the Transferor and the Transferee in
accordance with their respective interests, all documents, instruments and
records (including, without limitation, computer tapes or disks) that evidence
or relate to Pool Receivables.
(e) Power of Attorney. The Transferor hereby grants to the Servicer an
-----------------
irrevocable power of attorney, with full power of substitution, coupled with an
interest, to take in the name of the Transferor all steps which are necessary or
advisable to endorse, negotiate or otherwise realize on any writing or other
right of any kind held or transmitted by the Transferor or transmitted or
received by the Transferee (whether or not from the Transferor) in connection
with any Receivable.
(f) Certain Duties to the Transferor. The Servicer shall, as soon as
--------------------------------
practicable following receipt, turn over to the Transferor (i) that portion of
Collections of Pool Receivables representing its undivided interest therein,
less, the sum of (a) in the event IKON Capital is no longer the Servicer, all
reasonable and appropriate out-of-pocket costs and expenses of the Servicer of
servicing, collecting and administering the Pool Receivables to the extent not
covered by the Servicer's Fee received by it and (b) any amounts, other than
Transferee's Investment and Earned Discount, then due to the Transferee or the
Agent, and (ii) the Collections of any Receivable that is not a Pool Receivable.
The Servicer, if other than IKON Capital, shall, at the Transferor's expense, as
soon as practicable upon demand, deliver to the Transferor all documents,
instruments and records in its possession that evidence or relate to Receivables
of the Transferor other than Pool Receivables, and copies of documents,
instruments and records in its possession that evidence or relate to Pool
Receivables.
(g) Termination. The Servicer's authorization under this Agreement
-----------
shall terminate on the Final Pay Out Date.
SECTION 8.03. Rights of the Agent. (a) Notice to Obligors;
------------------- -------------------
Segregation. At any time when a Termination Event or an Unmatured Termination
- -----------
Event shall have occurred, the Agent may notify the Obligors of Pool
Receivables, or any of them, of the ownership of the Transferee's Interest by
the Transferee. At any time the Agent may require the Transferor to establish a
new Designated Account into which no funds are deposited other than Collections,
and to deposit, or cause to be deposited, all Collections into such new
Designated Account.
(b) Notice to Post Office Boxes and Designated Banks. At
------------------------------------------------
38
<PAGE>
any time when a Termination Event or an Unmatured Termination Event shall have
occurred, (i) the Agent is hereby authorized to give notice, as provided in the
Post Office Box Agreements, of the transfer to the Agent of dominion and control
over the Post Office Boxes to which the Obligors of Pool Receivables make
payments, (ii) the Agent is hereby authorized to give notice to the Designated
Account Banks, as provided in the Designated Account Agreements, of the transfer
to the Agent of dominion and control over the Designated Accounts and (iii) the
Agent may notify, or may require the Servicer to notify, the Obligors to send
their payments to a lock-box located at DBNY or other bank approved by the
Agent, under the dominion and control of the Agent.
(c) Rights on Designation of New Servicer. At any time following the
-------------------------------------
designation of a Servicer other than IKON Capital pursuant to Section 8.01:
------------
(i) The Agent may direct the Obligors of Pool Receivables, or
any of them, to pay all amounts payable under any Pool Receivable
directly to the Agent or its designee.
(ii) IKON Capital shall, at the Agent's request and at IKON
Capital's expense, give notice of such ownership to each said Obligor
and direct that payments be made directly to the Agent or its designee.
(iii) Each of the Transferor and IKON Capital shall, at the
Agent's request, (A) assemble all of the documents, instruments and
other records (including, without limitation, computer programs, tapes
and disks) which evidence the Pool Receivables and Related Property, or
which are otherwise necessary or desirable to collect such Pool
Receivables, and 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 of Pool 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.
(d) Authorization and Power of Attorney. Each of the Transferor and
-----------------------------------
the Transferee hereby authorizes the Agent and hereby appoints the Agent as its
attorney-in-fact (which appointment is coupled with an interest and is
irrevocable), from time to time upon and after the designation of a successor
Servicer in accordance with Section 8.01, to take any and all steps in the
------------
Transferor's name and on behalf of the Transferor
39
<PAGE>
and the Transferee which are necessary or desirable, in the determination of the
Agent, to collect all amounts due under any and all Pool Receivables and Related
Property, including, without limitation, endorsing the Transferor's name on
checks and other instruments representing Collections and enforcing such Pool
Receivables and the related Contracts.
SECTION 8.04. Responsibilities of Transferor. Anything herein to the
------------------------------
contrary notwithstanding:
(a) The Transferor shall perform (or cause IKON Capital to
perform under the Transfer Agreement) all of its obligations under the
Contracts related to the Pool Receivables and under the related
purchase orders and other agreements to the same extent as if the
Transferee's Interest had not been transferred hereunder and the
exercise by the Agent of its rights hereunder shall not relieve the
Transferor from such obligations.
(b) Neither the Agent nor the Transferee shall have any
obligation or liability with respect to any Pool Receivables, Contracts
related thereto or any other related purchase orders or other
agreements, nor shall any of them be obligated to perform any of the
obligations of the Transferor thereunder.
SECTION 8.05. Further Action Evidencing Transfers. (a) The Transferor
-----------------------------------
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action that
the Agent may reasonably request in order to perfect, protect or more fully
evidence the Transfers hereunder and the resulting Transferee's Interest, or to
enable the Transferee or the Agent to exercise or enforce any of their
respective rights hereunder or under the other Transaction Documents. Without
limiting the generality of the foregoing, the Transferor will upon the request
of the Agent:
(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;
(ii) mark conspicuously each Contract evidencing each Pool
Receivable with a legend, acceptable to the Agent, evidencing the
transfer of the Transferee's Interest; and
(iii) mark its master data processing records evidencing such
Pool Receivables and related Contracts with such legend.
40
<PAGE>
(b) The Transferor hereby authorizes the Agent to file in the name of
the Transferor, to the extent permitted by applicable law, one or more financing
or continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Pool Receivables and Related Property now existing
or hereafter arising. If the Transferor fails to perform any of its agreements
or obligations under this Agreement, 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 by
the Transferor as provided in Section 13.01.
-------------
(c) Without limiting the generality of subsection (a), the Transferor
--------------
will, not earlier than six (6) months and not later than three (3) months from
the fifth anniversary of the date of filing of the financing statements referred
to in Sections 5.01(f) and 5.01(k) or any other financing statement filed
---------------- -------
pursuant to this Agreement or in connection with any Transfer hereunder, unless
the Final Pay Out Date shall have occurred:
(i) execute and deliver and file or cause to be filed an
appropriate continuation statement with respect to each such financing
statement; and
(ii) deliver or cause to be delivered to the Agent an opinion
of the counsel for the Transferor referred to in Section 5.01(i) (or
---------------
other counsel for the Transferor reasonably satisfactory to the Agent),
in form and substance reasonably satisfactory to the Agent, confirming
and updating the opinion delivered pursuant to Section 5.01(i) with
---------------
respect to perfection issues and otherwise to the effect that the
Transferee's Interest hereunder continues to be a valid and perfected
interest subject to no Liens of record except as provided herein or
otherwise permitted hereunder.
SECTION 8.06. Application of Obligors' Payments. (a) Any payment by an
---------------------------------
Obligor in respect of any indebtedness owed by it to the Transferor or IKON
Capital shall, except as otherwise specified by such Obligor or otherwise
required by contract or law and unless the Agent instructs otherwise, be applied
as a Collection of any Pool Receivable or Receivables of such Obligor to the
extent of any amounts then due and payable thereunder before such payment is
applied to any other indebtedness of such Obligor.
(b) Except or as otherwise required by law or the underlying Contract,
all Collections received from an Obligor of
41
<PAGE>
any Receivable shall be applied to Pool Receivables then outstanding of such
Obligor in the order of the age of such Pool Receivables, starting with the
oldest such Pool Receivable; provided, however, that, if payment is designated
-------- -------
by such Obligor for application to specific Receivables, it shall be applied to
such specified Receivables.
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. Grant of Security Interest. To secure all obligations of
--------------------------
the Transferor arising in connection with this Agreement and each other
Transaction Document, whether now or hereafter existing, due or to become due,
direct or indirect, or absolute or contingent, including, without limitation,
Indemnified Amounts, payments on account of Collections received or deemed to be
received, fees and Earned Discount, in each case pro rata according to the
--- ----
respective amounts thereof, the Transferor hereby assigns and grants to the
Transferee, for its benefit and the benefit of the Agent, the Affected Parties
and the Indemnified Parties, a security interest in all of the Transferor's
right, title and interest (including specifically any undivided interest
retained by the Transferor hereunder) now or hereafter existing in, to and under
all the Pool Receivables and Related Property.
SECTION 9.02. Further Assurances. The provisions of Section 8.05 shall
------------------ ------------
apply to the security interest granted under Section 9.01 as well as to the
------------
Transfers and the Transferee's Interest hereunder.
SECTION 9.03. Remedies. Upon the occurrence of a Termination Event, the
--------
Transferee, for its own benefit and for the benefit of the Agent, the Affected
Parties and the Indemnified Parties, shall have, with respect to the collateral
granted pursuant to Section 9.01, and in addition to all other rights and
------------
remedies available to the Transferee, the Agent, the Affected Parties or the
Indemnified Parties under this Agreement or other applicable law, all the rights
and remedies of a secured party upon default under the UCC.
42
<PAGE>
ARTICLE X
TERMINATION EVENTS
SECTION 10.01. Termination Events. Each of the following events shall
------------------
be a "Termination Event":
-----------------
(a) (i) The Servicer (if IKON Capital or an Affiliate of
IKON Capital is the Servicer) shall fail to perform or observe any
term, covenant or agreement hereunder (other than as referred to in
clause (ii) next following) and such failure shall remain unremedied
-----------
for three Business Days or (ii) the Servicer (if IKON Capital or an
Affiliate of IKON Capital is the Servicer) or the Transferor shall fail
to make any payment or deposit to be made by it hereunder when due; or
(b) Any representation or warranty made or deemed to be made
by the Transferor or IKON Capital (or any of its officers) under or in
connection with this Agreement, any other Transaction Document or any
Periodic Report or Pay Out Statement or other information or report
delivered pursuant hereto shall prove to have been false or incorrect
in any material respect when made; or
(c) The Transferor or IKON Capital shall fail to perform or
observe any other term, covenant or agreement contained in this
Agreement or any other Transaction Document on its part to be performed
or observed and any such failure shall remain unremedied for ten
Business Days after written notice thereof shall have been given by the
Agent to the Transferor or IKON Capital, as the case may be; or
(d) A default shall have occurred and be continuing under any
instrument or agreement evidencing, securing or providing for the
issuance of indebtedness for borrowed money of, or guaranteed by, IKON
Capital, the Transferor or any Affiliate thereof (provided, that in the
case of IKON Office, such indebtedness is in excess of $5,000,000),
which default is a payment default or if unremedied, uncured, or
unwaived (with or without the passage of time or the giving of notice
or both) would permit acceleration of the maturity of such indebtedness
and such default shall have continued unremedied, uncured or unwaived
for a period long enough to permit such acceleration and any notice of
default required to permit acceleration shall have been given; or any
default under any agreement or instrument relating to the purchase or
transfer of receivables of IKON Capital or the Transferor, or any other
event, shall occur and shall
43
<PAGE>
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default is to terminate,
or permit the termination of, the commitment of any party to such
agreement or instrument to purchase or acquire receivables or the right
of the IKON Capital or Transferor to reinvest in receivables the
principal amount paid by any party to such agreement or instrument for
an interest in receivables; or
(e) An Event of Bankruptcy shall have occurred and remained
continuing with respect to IKON Capital, the Transferor or any
Affiliate thereof; or
(f) (i) Any litigation (including, without limitation,
derivative actions), arbitration proceedings or governmental
proceedings not disclosed in writing by IKON Capital or the Transferor
to the Agent and the Transferee prior to the date of execution and
delivery of this Agreement is pending against IKON Capital, the
Transferor or any Affiliate thereof, or (ii) any material development
not so disclosed has occurred in any litigation (including, without
limitation, derivative actions), arbitration proceedings or
governmental proceedings so disclosed, which, in the case of
clause (i) or (ii), in the opinion of the Agent, is likely to have a
---------- ----
Material Adverse Effect; or
(g) The Internal Revenue Service shall file notice of a lien
pursuant to Section 6323 of the Internal Revenue Code with regard to
any of the assets of IKON Capital or the Transferor and such lien shall
not have been released within 5 days, or the Pension Benefit Guaranty
Corporation shall, or shall indicate its intention to, file notice of a
lien pursuant to Section 4068 of the Employee Retirement Income
Security Act of 1974 with regard to any of the assets of IKON Capital,
the Transferor or IKON Office; or
(h) There shall have occurred or shall exist any event or
condition which has, or would have a material possibility of causing,
a Material Adverse Effect; or the warranty in Section 6.01(i)(y) or
------------------
6.02(i)(y) shall not be true at any time; or
----------
(i) the Unadjusted Transferee's Percentage shall exceed the
Maximum Percentage, and such event shall continue for more than 5
Business Days; or
(j) The Losses to Liquidations Ratio (1) for any one month
period exceeds 9% or (2) for any six consecutive month period exceeds
7.5%; or
44
<PAGE>
(k) The average of the Delinquency Ratios for any three
consecutive calendar months exceeds 5% or the average of the Default
Ratios for any three consecutive calendar months exceeds 4%; or
(l) a default shall occur under the Support Agreement, or the
Support Agreement shall terminate or cease to be in effect for any
reason; or
(m) There shall have been entered against IKON Capital or the
Transferor one or more judgments, awards or decrees which, in the case
of IKON Capital, exceed $2,500,000 at any one time outstanding,
excluding judgments, awards or decrees for which there is full
insurance and with respect to which the insurer has assumed a
responsibility in writing; or
(n) IKON Capital ceases to have a long term unsecured debt
rating of at least BBB- from S&P and Baa3 from Moody's; or
(o) Transferee shall cease to have a valid, perfected first
priority ownership interest in the Receivables and the Related Property
for any reason; or
(p) Transfer Termination Event shall occur under the Transfer
Agreement.
SECTION 10.02. Remedies. (a) Optional Termination. Upon the occurrence
-------- --------------------
of a Termination Event (other than a Termination Event described in
subsection (e) or (i) of Section 10.01), the Agent shall, at the request, or may
- -------------- --- -------------
with the consent, of the Transferee, by notice to the Transferor declare the
Commitment Termination Date to have occurred.
(b) Automatic Termination. Upon the occurrence of a Termination Event
---------------------
described in subsection (e) or (i) of Section 10.01, the Commitment Termination
-------------- --- -------------
Date shall be deemed to have occurred automatically upon the occurrence of such
event; provided that, if the Commitment Termination Date shall have occurred by
--------
reason of a Termination Event described in subsection (i) and subsequent to such
--------------
date the Unadjusted Transferee's Percentage shall not exceed the Maximum
Percentage, upon written notice by the Agent to the Transferor, the Commitment
shall be reinstated.
(c) Additional Remedies. Upon any termination of the Commitment
-------------------
pursuant to this Section 10.02, the Agent and the Transferee shall have, in
-------------
addition to all other rights and remedies under this Agreement or otherwise, all
other rights and remedies provided under the UCC of each applicable jurisdiction
45
<PAGE>
and other applicable laws, which rights shall be cumulative. Without limiting
the foregoing or the general applicability of Article XIII hereof, (i) the
------------
occurrence of a Termination Event shall not deny to the Transferee any remedy in
addition to termination of the Commitment to which the Transferee may be
otherwise appropriately entitled, whether at law or in equity, and (ii)
following the occurrence of any Termination Event the Transferee may elect to
assign to any Person the Transferee's Interest, or any portion thereof.
ARTICLE XI
THE AGENT
SECTION 11.01. Authorization and Action. The Transferee has appointed
------------------------
the Agent as its agent pursuant to a Servicing Agreement between the Transferee
and DBNY, and hereby authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Agent by the terms hereof and of said Servicing Agreement, together with such
powers as are reasonably incidental thereto.
SECTION 11.02. Agent's Reliance, Etc. Neither the Agent nor any of its
---------------------
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or the Agent under or in connection with this
Agreement (including, without limitation, the servicing, administering or
collecting Pool Receivables as the Servicer pursuant to Section 8.01), except
------------
for its or their own gross negligence or willful misconduct, and except for any
breach by the Servicing Agent of its obligations to the Transferee expressly set
forth in the Servicing Agreement referred to in Section 11.01. Without limiting
-------------
the generality of the foregoing, the Agent: (a) may consult with legal counsel
(including counsel for the Transferor or IKON Capital), independent certified
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (b) makes no warranty or
representation to the Transferee or any other holder of any interest in Pool
Receivables and shall not be responsible to the Transferee or any such other
holder for any statements, warranties or representations made by any Person
(other than the Servicing Agent) in or in connection with this Agreement; (c)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement on the
part of the Transferor or IKON Capital or to inspect the property (including the
books and records) of the Transferor or IKON Capital, except for its duties to
the
46
<PAGE>
Transferee as set forth in the Servicing Agreement referred to above; (d)
shall not be responsible to the Transferee (except for any breach by the
Servicing Agent of its duties set forth in the Servicing Agreement referred to
above) or to any other holder of any interest in Pool Receivables for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other Transaction Document; and (e) shall incur no
liability under or in respect of this Agreement by acting upon any notice
(including notice by telephone), consent, certificate or other instrument or
writing (which may be by facsimile or telex) believed by it to be genuine and
signed or sent by the proper party or parties.
SECTION 11.03. Agent and Affiliates. Deutsche Bank and its Affiliates
--------------------
may generally engage in any kind of business with IKON Capital, the Transferor
or any Obligor, any of their respective Affiliates and any Person who may do
business with or own securities of IKON Capital, the Transferor or any Obligor
or any of their respective Affiliates, all as if Deutsche Bank were not the
Agent and without any duty to account therefor to the Transferee or any other
holder of an interest in Pool Receivables.
ARTICLE XII
ASSIGNMENTS
SECTION 12.01. Restrictions on Assignments. (a) None of IKON Capital,
---------------------------
the Transferor or the Transferee may assign its rights hereunder or any interest
herein without the prior written consent of the Agent, and the Transferee may
not assign the Transferee's Interest (or any portion thereof) to any Person
without the prior written consent of the Transferor, which consent shall not be
unreasonably withheld; provided, however, that
-------- -------
(i) the Transferee may assign, or grant a security interest
in, the Transferee's Interest (or any portion thereof) to Deutsche
Bank, the Liquidity Banks (or any successor of any thereof by merger,
consolidation or otherwise), or any Affiliate of Deutsche Bank or any
of the Liquidity Banks (which may then assign the Transferee's Interest
(or any portion thereof so assigned) or any interest therein to such
party or parties as it may choose); and
(ii) the Transferee may assign and grant a security interest
in the Transferee's Interest and the Transferee's rights and interests
in, to and under this Agreement and the
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other Transaction Documents to DBNY, as Collateral Agent, and any
successor in such capacity, to secure the Transferee's obligations
under or in connection with the Commercial Paper Notes, the Liquidity
Agreement, the Enhancement Agreement and any letter of credit issued
thereunder, and certain other obligations of the Transferee incurred in
connection with the funding of the Transfers and Reinvestments
hereunder, which assignment and grant of a security interest shall not
be considered an "assignment" for purposes of Section 12.01(b),
----------------
Section 12.03 or 12.04 or, prior to the enforcement of such security
------------- -----
interest, for purposes of any other provision of this Agreement.
(b) The Transferor agrees to advise the Agent within five Business Days
after notice to the Transferor of any proposed assignment by the Transferee of
the Transferee's Interest (or any portion thereof), not otherwise permitted
under subsection (a), of the Transferor's consent or non-consent to such
--------------
assignment. If the Transferor does not consent to such assignment, the
Transferee may immediately assign the Transferee's Interest (or such portion) to
Deutsche Bank, any of the Liquidity Banks or any Affiliate of Deutsche Bank or
any of the Liquidity Banks. All of the aforementioned assignments shall be upon
such terms and conditions as the Transferee and the assignee may mutually agree.
SECTION 12.02. Documentation; Notice of Assignment. (a) Any assignment
-----------------------------------
of the Transferee's Interest (or any portion thereof) to any Person may be
evidenced by such instruments or documents as may be satisfactory to the
Transferee, the Agent and the assignee.
(b) The Transferee shall provide notice to the Transferor of any
assignment of the Transferee's Interest (or any portion thereof) by the
Transferee to any assignee (other than the assignment and grant of a security
interest referred to in Section 12.01(a)(ii)).
--------------------
SECTION 12.03. Rights of Assignee. Upon the assignment by the
------------------
Transferee of the Transferee's Interest (or any portion thereof) in accordance
with this Article XII, the assignee receiving such assignment shall have all
-----------
of the rights of the Transferee hereunder with respect to the Transferee's
Interest (or the portion thereof so assigned); subject, however, to
------- -------
Sections 12.04 and 12.05.
- -------------- -----
SECTION 12.04. Allocation of Payments. If on any date there are
----------------------
sufficient funds in the Agent's Account to distribute a portion, but not all,
of the amounts payable pursuant to subsection (c)(i) of either Section 3.01
----------------- ------------
or Section 3.02 and, due to any assignment of the Transferee's Interest (or
------------
any portion
48
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thereof), such amounts are payable to more than one Person, then, unless
otherwise agreed between such Persons, and subject to Section 3.02(d), the Agent
---------------
shall distribute funds to such Persons pro rata based upon the amounts so
--- ----
payable to such Persons.
SECTION 12.05. Calculation of Earned Discount After Assignment. Upon
-----------------------------------------------
and after the assignment of the Transferee's Interest (or any portion thereof)
pursuant to this Article XII, the Transferee Rate used to calculate Earned
-----------
Discount from time to time with respect to the Transferee's Interest (or the
portion thereof so assigned) for each applicable Yield Period beginning after
the effective date of such assignment shall be the Bank Rate, unless the
Transferee, the Transferor and the assignee may agree in writing upon to use a
different Transferee Rate for calculating such Earned Discount. If (i) the
Transferor fails to consent to any assignment of the Transferee's Interest (or
any portion thereof) proposed by the Transferee, (ii) the Transferee makes an
assignment of the Transferee's Interest (or such portion) to Deutsche Bank or
any Affiliate of Deutsche Bank as permitted under Section 12.01(b), and (iii) in
----------------
the opinion of the Agent, the Transferee was required by applicable law,
regulation or directive from any governmental authority to make such assignment,
then the Earned Discount with respect to the Transferee's Interest (or the
portion thereof so assigned) shall immediately begin to accrue at the Bank Rate
for the remainder of any then applicable Yield Period.
SECTION 12.06. Rights of Collateral Agent. Each of IKON Capital and the
--------------------------
Transferor hereby agrees that, upon notice to the Transferor, the Collateral
Agent referred to in Section 12.01 may exercise all the rights of the Agent
-------------
hereunder with respect to the Transferee's Interest (or all portions thereof,
and Collections with respect thereto, which are owned by the Transferee), and
all other rights and interests of the Transferee in, to or under this Agreement
or any other Transaction Document. Without limiting the foregoing, upon such
notice such Collateral Agent may request the Servicer to segregate the
Transferee's allocable share of Collections from the Transferor's allocable
share in accordance with Section 8.02(a), may give a notice designating a new
---------------
Servicer pursuant to Section 8.01(a), may give or require the Agent to give
---------------
notice to the Post Office Boxes and Designated Account Banks as referred to in
Section 8.03(a), and may direct the Obligors of Pool Receivables to make
- ---------------
payments in respect thereof directly to an account or lockbox designated by it,
in each case, to the same extent as the Transferee or the Agent might have done.
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ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. Indemnities by the Transferor. (a) General Indemnity.
----------------------------- -----------------
Without limiting any other rights which any such Person may have hereunder or
under applicable law, the Transferor hereby agrees to indemnify each of the
Agent, the Transferee, the Liquidity Banks, the Enhancement Bank, Deutsche Bank,
each of their respective Affiliates, successors, transferees, participants and
assigns and all officers, directors, shareholders, controlling persons,
employees and agents of any of the foregoing (each an "Indemnified Party"),
-----------------
forthwith on demand, from and against any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them arising out of
-------------------
or relating to this Agreement or the ownership or funding of the Transferee's
Interest (or any portion thereof) or in respect of any Receivable or any
Contract, excluding, however, (a) Indemnified Amounts to the extent resulting
--------- -------
from gross negligence or willful misconduct on the part of the Agent, the
Transferee or such Indemnified Party or (b) recourse (except as otherwise
specifically provided in this Agreement) for Defaulted Receivables. Without
limiting the foregoing, and subject to the foregoing exclusions, the Transferor
shall indemnify each Indemnified Party for Indemnified Amounts arising out of or
relating to:
(i) the transfer by the Transferor of any interest in any
Receivable other than the transfer of the Transferee's Interest to the
Transferee pursuant to this Agreement and the grant of a security
interest to the Transferee pursuant to Section 9.01;
------------
(ii) the breach of any representation or warranty made by the
Transferor (or any of its officers) under or in connection with this
Agreement, any Periodic Report or Pay Out Statement or any other
information or report delivered by the Transferor or the Servicer
pursuant hereto, which shall have been false or incorrect in any
material respect when made or deemed made;
(iii) the failure by the Transferor to comply with any
applicable law, rule or regulation with respect to any Pool Receivable
or the related Contract, or the nonconformity of any Pool Receivable or
the related Contract with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the
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Transferee an undivided percentage ownership interest, to the extent of
the Transferee's Interest, in the Receivables in, or purporting to be
in, the Receivables Pool, together with all Related Property, free and
clear of any Lien, other than an Lien arising solely as a result of an
act of the Transferee or the Agent, whether existing at the time of any
Transfer or Reinvestment or at any time thereafter;
(v) the failure to file, 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 Pool Receivables or Related Property, whether at the time of any
Transfer or Reinvestment or at any time thereafter;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool (including,
without limitation, a defense based on such Receivable or the related
Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or services
related to such Receivable or the furnishing or failure to furnish such
merchandise or services;
(vii) any failure of the Transferor to perform its duties or
obligations in accordance with the provisions of this Agreement;
(viii) any products liability claim arising out of or in
connection with merchandise or services that are the subject of any
Pool Receivable; or
(ix) any tax or governmental fee or charge (but not
including taxes upon or measured by net income), all interest and
penalties thereon or with respect thereto, and all out-of-pocket costs
and expenses, including the reasonable fees and expenses of counsel in
defending against the same, which may arise by reason of the transfer
or ownership of the Transferee's Interest, any portion thereof or any
other interest in the Pool Receivables or Related Property or in any
goods which secure any such Pool Receivables.
(b) Indemnities by Servicer. Without limiting any other rights which
-----------------------
any such Person may have hereunder or under applicable law, Servicer hereby
agrees to indemnify each of the Indemnified Parties, forthwith on demand, from
and against any and all Indemnified Amounts awarded against or incurred by any
of
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them arising out or related to:
(i) the fact that any representation or warranty made by
the Servicer (or any of its officers) under or in connection with this
Agreement, any Periodic Report or any other information or report
delivered by the Servicer pursuant hereto shall have been false or
incorrect in any material respect when made or deemed made;
(ii) the failure by the Servicer to comply with any
applicable law, rule or regulation with respect to the servicing or
collection of any Pool Receivable or the related Contract;
(iii) the failure of the Servicer or any subservicer to
perform its duties or obligations in accordance with the provisions of
this Agreement; and
(iv) any dispute, claim, offset or defense of the Obligor to
the payment of any Pool Receivable by reason of the action or inaction
of the Servicer or any subservicer of the Servicer.
(c) Contest of Tax Claim; After-Tax Basis. If any Indemnified Party
-------------------------------------
shall have notice of any attempt to impose or collect any tax or governmental
fee or charge for which indemnification will be sought from the Transferor under
Section 13.01(a)(ix), such Indemnified Party shall give prompt and timely notice
- --------------------
of such attempt to the Transferor and the Transferor shall have the right, at
its expense, to participate in any proceedings resisting or objecting to the
imposition or collection of any such tax, governmental fee or charge.
Indemnification hereunder shall be in an amount necessary to make the
Indemnified Party whole after taking into account any tax consequences to the
Indemnified Party of the payment of any of the aforesaid taxes and the receipt
of the indemnity provided hereunder or of any refund of any such tax previously
indemnified hereunder, including the effect of such tax or refund on the amount
of tax measured by net income or profits which is or was payable by the
Indemnified Party.
(d) Contribution. If for any reason the indemnification provided above
------------
in this Section 13.01 is unavailable to an Indemnified Party or is insufficient
-------------
to hold an Indemnified Party harmless, then the Transferor or IKON Capital, as
the case may be, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by such Indemnified Party on the one hand and the Transferor or IKON Capital, as
the case may
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be, on the other hand but also the relative fault of such Indemnified Party as
well as any other relevant equitable considerations.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Agreement nor consent to any departure by the Transferor or IKON Capital
therefrom shall in any event be effective unless the same shall be in writing
and signed by (a) the Transferor, IKON Capital, the Agent and the Transferee
(with respect to an amendment) or (b) the Agent and the Transferee (with respect
to a waiver or consent by them) or the Transferor or IKON Capital (with respect
to a waiver or consent by the Transferor or IKON Capital), as the case may be,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 14.02. Notices, Etc. All notices and other communications
------------
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
express mail or courier, or by certified mail, postage prepaid, or by facsimile,
to the intended party at the address or facsimile number of such party set forth
in Schedule 14.02 hereto or at such other address or facsimile number as shall
--------------
be designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective, (a) if personally delivered
or sent by express mail or courier, when received, (b) if sent by certified
mail, three Business Days after having been deposited in the mail, postage
prepaid, and (c) if transmitted by facsimile, when sent, receipt confirmed by
telephone or electronic means, except that notices and communications pursuant
to Article I shall not be effective until received.
---------
SECTION 14.03. No Waiver; Remedies. No failure on the part of the
-------------------
Agent, any Affected Party, any Indemnified Party, the Transferee or any assignee
of the Transferee's Interest or any portion thereof 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 remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Without limiting the foregoing, Deutsche Bank is hereby authorized by the
Transferor at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits
53
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(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by Deutsche Bank to or for the credit or
the account of the Transferor, now or hereafter existing under this Agreement,
to the Agent, any Affected Party, any Indemnified Party or the Transferee, or
their respective successors and assigns.
SECTION 14.04. Binding Effect; Survival. This Agreement shall be
------------------------
binding upon and inure to the benefit of the Transferor, IKON Capital, the
Agent, the Transferee and their respective successors and assigns, and the
provisions of Section 4.04 and Article XIII shall inure to the benefit of the
------------ ------------
Affected Parties and the Indemnified Parties, respectively, and their respective
successors and assigns; provided, however, nothing in the foregoing shall be
-------- -------
deemed to authorize any assignment not permitted by Section 12.01. This
-------------
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until such time as the Final Pay Out Date shall have occurred. The rights and
remedies with respect to any breach of any representation and warranty made by
the Transferor or IKON Capital pursuant to Article VI and the provisions of
----------
Article XIII, Section 4.04 and Sections 14.05 through 14.09 shall be continuing
- ------------ ------------ -------------- -----
and shall survive any termination of this Agreement.
SECTION 14.05. Costs, Expenses and Taxes. In addition to its
-------------------------
obligations under Article XIII, the Transferor and IKON Capital jointly and
------------
severally agree to pay on demand:
(a) all costs and expenses incurred by the Agent, the
Transferee, Deutsche Bank and their respective Affiliates in connection
with the negotiation, preparation, execution and delivery, the
administration (including periodic auditing) or the enforcement of, or
any actual or claimed breach of, this Agreement and the other
Transaction Documents, including, without limitation (i) the reasonable
fees and expenses of counsel to any of such Persons incurred in
connection with any of the foregoing or in advising such Persons as to
their respective rights and remedies under any of the Transaction
Documents, and (ii) all reasonable out-of-pocket expenses (including
reasonable fees and expenses of independent accountants) incurred in
connection with any review of the Transferor's or IKON Capital's books
and records either prior to the execution and delivery hereof or
pursuant to Section 7.01(c); and
---------------
(b) all stamp and other taxes and fees payable or determined
to be payable in connection with the execution, delivery, filing and
recording of this Agreement or any or
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the other Transaction Documents (and the Transferor agrees to indemnify
each Indemnified Party against any liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and
fees).
Transferor also agrees to pay a pro rata share of Transferee's general operating
costs and expenses, including, but not limited to, rating agency fees,
management fees and the fees and expenses of counsel, which pro rata share shall
be determined by dividing the daily average annual Transferee's Investment by
the daily average Commercial Paper Notes issued by Transferee, provided,
--------
however, that in no event shall such pro rata share exceed .01% per annum of the
- -------
average annual Transferee's Investment. Such fee shall be payable on the last
day of each February for the calendar year ending on the immediately preceding
December 31.
SECTION 14.06. No Proceedings. The Transferor, IKON Capital and
--------------
Deutsche Bank, individually and as Agent, each hereby agrees that it will not
institute against or join any other Person in instituting against, the
Transferee, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding under any Federal or state
bankruptcy or similar law, for one year and a day after the latest maturing
Commercial Paper Note is paid. The foregoing shall not limit the Transferor's or
IKON Capital's right to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted by any Person other
than the Transferor or IKON Capital.
SECTION 14.07. Confidentiality of Transferor Information. (a)
-----------------------------------------
Confidential Information. Each of the Transferee and the Agent acknowledges that
- ------------------------
certain of the information provided to such party by or on behalf of the
Transferor or IKON Capital in connection with this Agreement and the
transactions contemplated hereby is or may be confidential, and each such party
severally agrees that, unless the Transferor or IKON Capital shall otherwise
agree in writing, and except as provided in subsection (b), such party will not
--------------
disclose to any other person or entity:
(i) any information regarding, or copies of, any Periodic
Reports, Pay Out Statements, and any non-public financial statements,
reports and other information, furnished by the Transferor or IKON
Capital to the Transferee or the Agent pursuant to this Agreement, or
(ii) any other information regarding the Transferor or IKON
Capital which is designated by the Transferor or IKON Capital to such
party in writing or otherwise as confidential;
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the information referred to in clauses (i) and (ii) above, is collectively
--------------------
referred to as the "Transferor Information"; provided, however, "Transferor
---------------------- -------- ------- ----------
Information" shall not include
- -----------
(A) any information which is or becomes generally
available to the general public or to such party on a
nonconfidential basis from a source other than the Transferor
or IKON Capital or which was known to such party on a
nonconfidential basis prior to its disclosure by the
Transferor or IKON Capital, or
(B) general information regarding the nature of this
Agreement, the basic terms hereof (including without
limitation the amount and nature of the Commitment and the
Transferee's Investments hereunder and of the recourse or
other credit enhancement provided by hereunder), the nature,
amount and status of the Pool Receivables, and the current
and/or historical ratios of losses to liquidations and/or
outstandings with respect to the Receivables Pool, and the
identity of the Transferor and IKON Capital.
(b) Disclosure. Notwithstanding subsection (a), each party may
---------- --------------
disclose any Transferor Information:
(i) to any of such party's attorneys, consultants and
auditors, and to such of the Liquidity Banks, the Enhancement Bank, any
dealer or placement agent for the Transferee's commercial paper, and
any actual or potential assignees of, or participants in, any of the
rights or obligations of the Transferee, the Liquidity Banks, the
Enhancement Bank or Deutsche Bank under or in connection with this
Agreement, who (A) are informed by such party of the confidential
nature of the Transferor Information and the terms of this Section
-------
14.07, and (B) are subject to confidentiality restrictions generally
-----
consistent with this Section 14.07,
-------------
(ii) to any rating agency that maintains a rating for the
Transferee's commercial paper or is considering the issuance of such a
rating, for the purposes of reviewing the credit of the Transferee in
connection with such rating,
(iii) to any other party to this Agreement, for the purposes
contemplated hereby,
(iv) to any Person whom any dealer or placement agent for the
Transferee shall have identified as an actual or potential investor in
Commercial Paper Notes, and who shall have agreed with Deutsche Bank in
writing to keep such
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information confidential and use it only in connection with considering
or monitoring such investments, subject to applicable legal
requirements (it being understood that such Person may also receive the
information excluded from the definition of "Transferor Information"
pursuant to clause (B) of subsection (a)),
---------- --------------
(v) as may be required by any municipal, state, federal or
other regulatory body having or claiming to have jurisdiction over such
party, in order to comply with any law, order, regulation, regulatory
request or ruling applicable to such party, or
(vi) subject to subsection (c), in the event such party is
--------------
legally compelled (by interrogatories, requests for information or
copies, subpoena, civil investigative demand or similar process) to
disclose such Transferor Information.
(c) Legal Compulsion. In the event that any party hereto (other than
----------------
the Transferor or IKON Capital) or any of its representatives is requested or
becomes legally compelled (by interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process) to disclose
any of the Transferor Information, such party will (or will cause its
representatives to)
(i) provide the Transferor or IKON Capital with prompt
written notice of such request or legal compulsion; and
(ii) at IKON Capital's expense, use its reasonable efforts to
cooperate with the Transferor and IKON Capital in making an appropriate
objection to disclosure, seeking a protective order or taking such
other actions as may be lawful and appropriate in order to maintain the
confidentiality of such Transferor Information.
(d) Survival. This Section 14.07 shall survive termination of this
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Agreement.
SECTION 14.08. Confidentiality of Program Information. (a) Program
-------------------------------------- -------
Information. Each party hereto (other than DBNY) acknowledges that DBNY regards
- -----------
the structure of the transactions contemplated by this Agreement, and by the
Liquidity Agreement, the Enhancement Agreement and the other Program Documents
referred to therein, to be proprietary, and each such party severally agrees
that:
(i) unless DBNY shall otherwise agree in writing, and except
as provided in subsection (b), such party will not disclose to any
--------------
other person or entity:
57
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(A) any information regarding, or copies of, this Agreement
or any transaction contemplated hereby,
(B) any information regarding, or copies of, the Liquidity
Agreement, the Enhancement Agreement, any of the other Program
Documents referred to therein, or any transaction contemplated
thereby,
(C) any information regarding the organization or business
of the Transferee generally, or
(D) any information regarding Deutsche Bank which is
designated by DBNY to such party in writing or otherwise as
confidential or not otherwise available to the general public
(the information referred to in clauses (A), (B), (C) and (D) above, whether
----------- --- --- ---
furnished by the Transferee, DBNY, any Liquidity Bank, the Enhancement Bank, any
assignee of or participant in any rights or obligations of the Transferee, any
Liquidity Bank or the Enhancement Bank, or any attorney for or other
representative of any of the foregoing (each a "Program Information Provider"),
----------------------------
is collectively referred to as the "Program Information"; provided, however,
------------------- -------- -------
"Program Information" shall not include any information which is or becomes
-------------------
generally available to the general public or to such party on a nonconfidential
basis from a source other than DBNY or any other Program Information Provider,
or which was known to such party on a nonconfidential basis prior to its
disclosure by DBNY or any other Program Information Provider);
(ii) such party will make the Program Information available to
only such of its officers, directors, employees and agents who (A) in
the good faith belief of such party, have a need to know such Program
Information, (B) are informed by such party of the confidential nature
of the Program Information and the terms of this Section 14.08, and (C)
-------------
are subject to confidentiality restrictions consistent with this
Section 14.08;
-------------
(iii) such party will use the Program Information solely for the
purposes of evaluating, administering and enforcing the transactions
contemplated by this Agreement and making any necessary business
judgments with respect thereto; and
(iv) such party will, upon demand, return (and cause each of
its officers, directors, employees, agents, attorneys, consultants or
auditors (collectively,
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"representatives") to return) to DBNY, or to such other Program
---------------
Information Provider as shall have furnished it with any Program
Information, all documents or other written material received from DBNY
or such other Program Information Provider which constitute or contain
any Information described in subclause (B), (C), or (D) of clause (i)
------------- --- --- ----------
above and all copies of such documents or other material in its
possession or in the possession of any of its representatives, and will
not retain any copy, summary or extract thereof on any storage medium
whatsoever.
(b) Disclosure. Notwithstanding clause (i) of subsection (a), each
---------- ---------- --------------
party may disclose any Program Information:
(i) to its attorneys, consultants and auditors who (A) in the
good faith belief of such party, have a need to know such Program
Information, (B) are informed by such party of the confidential nature
of the Program Information and the terms of this Section 14.08, and (C)
-------------
are subject to confidentiality restrictions consistent with this
Section 14.08,
-------------
(ii) to any other party to this Agreement, for the purposes
contemplated hereby,
(iii) as may be required by any municipal, state, federal or
other regulatory body having or claiming to have jurisdiction over such
party, in order to comply with any law, order, regulation, regulatory
request or ruling applicable to such party (provided that prior to
--------
making any required filing of this agreement with the Securities and
Exchange Commission, Transferor and IKON Capital shall apply for
confidential treatment and shall expurgate those provisions requested
by the Agent), or
(iv) subject to subsection (c), in the event such party is
--------------
legally compelled (by interrogatories, requests for information or
copies, subpoena, civil investigative demand or similar process) to
disclose such Program Information.
(c) Legal Compulsion. In the event that any party hereto (other than
----------------
DBNY) or any one to whom such party or its representatives transmits the Program
Information is requested or becomes legally compelled (by interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process) to disclose any of the Program Information, such party will (or
will cause its representatives to)
(i) provide DBNY with prompt written notice of such request or
legal compulsion;
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(ii) unless DBNY agrees that such Program Information may be
disclosed, make a timely objection to the request or compulsion to
provide such Program Information on the basis that such Program
Information is confidential and subject to the agreements contained in
this Section 14.08; and
-------------
(iii) at the expense of DBNY or any other Program Information
Provider, take any action as DBNY or such other Program Information
Provider may reasonably request to seek a protective order or other
appropriate remedy and otherwise to maintain the confidentiality of
such Program Information.
(d) Survival. This Section 14.08 shall survive termination of this
-------- -------------
Agreement.
SECTION 14.09. No Recourse Against Other Parties. No recourse under any
---------------------------------
obligation, covenant or agreement of the Transferee contained in this Agreement
shall be had against any stockholder, employee, officer, director, or
incorporator of the Transferee, provided, however, that nothing in this Section
-------- ------- -------
14.09 shall relieve any of the foregoing Persons from any liability which such
- -----
Person may otherwise have for such Person's gross intentional misrepresentation
or willful misconduct.
SECTION 14.10. Definitions; Other Terms. Unless otherwise defined
------------------------
herein, all capitalized terms used in this Agreement shall have the meanings set
forth in Appendix A attached to this Agreement and by this reference made a part
----------
hereof. 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 New York, and not specifically defined
herein, are used herein as defined in such Article 9.
SECTION 14.11. Captions and Cross References. The various captions
-----------------------------
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Appendix, Schedule or Exhibit are
to such Section of or Appendix, Schedule or Exhibit to this Agreement, as the
case may be, and references in any Section, subsection, or clause to any
subsection, clause or subclause are to such subsection, clause or subclause of
such Section, subsection or clause.
SECTION 14.12. Integration. This Agreement and the other Transaction
-----------
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the
60
<PAGE>
subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof, superseding all prior
oral or written understandings.
SECTION 14.13. Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND
DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
PERFECTION (AND THE EFFECT OF PERFECTION OR NONPERFECTION) OF THE INTERESTS OF
THE TRANSFEREE IN THE RECEIVABLES OR THE RELATED PROPERTY IS GOVERNED BY THE
LAWS OF THE JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 14.14. Waiver Of Jury Trial. EACH OF THE TRANSFEROR AND IKON
CAPITAL HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER
TRANSACTION DOCUMENT OR ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH
MAY BE IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY
BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT A JURY.
SECTION 14.15. Consent To Jurisdiction; Waiver Of Immunities. EACH OF
---------------------------------------------
THE TRANSFEROR, IKON CAPITAL AND TRANSFEREE HEREBY ACKNOWLEDGES AND AGREES THAT:
(a) IT IRREVOCABLY (i) SUBMITS TO THE JURISDICTION, FIRST, OF
ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL JURISDICTION IS
NOT AVAILABLE, OF ANY NEW YORK STATE COURT, IN EITHER CASE SITTING IN
NEW YORK CITY, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, (ii) AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED ONLY IN SUCH NEW
YORK STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT, AND (iii)
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF
AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
(b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID TO EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER OR IN CONNECTION WITH THIS AGREEMENT.
SECTION 14.16. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when
61
<PAGE>
so executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same Agreement.
SECTION 14.17. Syndication of Liquidity. Each of IKON Capital and the
------------------------
Transferor agrees to cooperate with DBNY in connection with the syndication of
the Liquidity Agreement.
SECTION 14.18. Tax Treatment. It is the intent of Transferor and
-------------
Transferee that, for federal, state and local income and franchise tax purposes,
the Transferee's Interest will be treated as evidence of indebtedness secured by
the Receivables, Related Security and Collections and other proceeds thereof.
Transferor, by entering into this Agreement, and Transferee agree to treat the
Transferee's Interest for federal, state and local income and franchise tax
purposes as indebtedness. The provisions of this Agreement and all related
Transaction Documents shall be construed to further such intentions of the
parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
62
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
TWIN TOWERS INC.,
as Transferee
By
--------------------------------------
Name Printed:
-------------------------
Title:
--------------------------------
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Agent
By
--------------------------------------
Name Printed: Robert M. Lupoli
Title: Attorney-in-Fact
IKON FUNDING, INC.,
as Transferor
By
--------------------------------------
Name Printed:
-------------------------
Title:
--------------------------------
IKON CAPITAL, INC.,
as Servicer
By
--------------------------------------
Name Printed:
-------------------------
Title:
--------------------------------
S-1
<PAGE>
APPENDIX A
DEFINITIONS
This is Appendix A to the Amended and Restated Receivables Transfer
----------
Agreement, dated as of March 31, 1997, among IKON Funding, Inc., IKON Capital,
Inc., as initial Servicer, Twin Towers Inc. and Deutsche Bank AG, New York
Branch, as Agent (as amended, supplemented or otherwise modified from time to
time, this "Agreement"). Each reference in this Appendix A to any Section,
--------- ----------
Appendix or Exhibit refers to such Section of or Appendix or Exhibit to this
Agreement.
As used in this Agreement, unless the context requires a different
meaning, the following terms have the meanings indicated hereinbelow:
"Adjusted Average Maturity" means, on any day, the sum of (a) 45 days
------------------------- ---
plus (b) the Average Maturity for such day.
- ----
"Affected Party" means each of the Transferee, the Liquidity Banks, the
--------------
Enhancement Bank, any permitted assignee of the Transferee, any assignee of or
participant in any of the Transferee's obligations to the Liquidity Banks or the
Enhancement Bank, Deutsche Bank (including any branch or agency thereof) and any
successor to Deutsche Bank or DBNY as the Agent.
"Affiliate" when used with respect to a Person means any other Person
---------
controlling, controlled by, or under common control with, such Person.
"Affiliated Party" means each of IKON Capital and each of its
----------------
Affiliates.
"Agent" has the meaning set forth in the preamble.
----- --------
"Agent's Account" has the meaning set forth in Section 4.01(a).
--------------- ---------------
"Alternate Base Rate" means, on any date, a fluctuating rate of
-------------------
interest per annum equal to the higher of
--- -----
(a) 1.00% above the rate of interest most recently announced
by Deutsche Bank as its prime lending rate for unsecured commercial
loans within the United States; and
(b) 1.00% above the rate per annum at which DBNY, as a branch
--- -----
of a foreign bank, in its sole discretion, can
A-1
<PAGE>
acquire federal funds in the interbank overnight federal funds market,
including through brokers of recognized standing.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by Deutsche Bank or DBNY in connection with extensions of
credit.
"Authorized Servicing Officer" means (i) chief financial officer, chief
----------------------------
accounting officer, controller or president, if IKON Capital is the Servicer and
(ii) such other officer as the Agent may agree to, if IKON Capital is not the
Servicer.
"Average Maturity" means, on any day, that time period (expressed in
----------------
days) equal to the weighted average maturity of the Pool Receivables as shall be
calculated by the Servicer, as set forth in the most recent Periodic Report in
accordance with the provisions thereof. If the Agent shall disagree with any
such calculation, the Agent may recalculate the Average Maturity for such day,
which calculation shall, absent manifest error, be binding upon the Servicer,
the Transferor and the Transferee.
"Bank Rate" for any Yield Period for any Rate Tranche means a rate per
--------- ---
annum equal to the sum of (a) .30% per annum, plus (b) the Eurodollar Rate
- ----- --------- ----
(Reserve Adjusted) for such Yield Period; provided, however, that if (i) it
-------- -------
shall become unlawful for the Agent, any Liquidity Bank or the Enhancement Bank
to obtain funds in the London interbank market in order to fund any Transfer or
to maintain any Rate Tranche, or if such funds shall not be reasonably available
to the Agent, any Liquidity Bank or the Enhancement Bank, or (ii) there shall
not be time prior to the commencement of an applicable Yield Period to determine
a Eurodollar Rate in accordance with its terms, then the "Bank Rate" for any
---------
Yield Period for such Rate Tranche shall be equal to a rate of (x) .425% per
---
annum, plus (y) the Domestic CD Rate (Adjusted) for such Yield Period.
- ----- ----
"Business Day" means a day on which both (a) the Agent at its principal
------------
office in New York City, New York is open for business and (b) commercial banks
in New York City are not authorized or required to be closed for business.
"Collections" means, with respect to any Receivable, all funds which
-----------
either (a) are received by IKON Capital, the Transferor or the Servicer from or
on behalf of the related Obligors in payment of any amounts owed (including,
without limitation, purchase prices, finance charges, interest and all other
charges) in respect of such Receivable, or applied to such amounts owed by such
Obligors (including, without limitation, insurance payments that IKON Capital,
the Transferor or Servicer
A-2
<PAGE>
applies in the ordinary course of its business to amounts owed in respect of
such Receivable and net proceeds of sale or other disposition of repossessed or
returned Equipment or other collateral or property of the Obligor or any other
party directly or indirectly liable for payment of such Receivable and available
to be applied thereon), (b) are received by IKON Capital, the Transferor or the
Servicer in payment of the purchase price of such Receivable or recourse
obligations of any Person related to such Receivable, whether pursuant to
arrangements with the dealers or otherwise, or (c) are deemed to have been
received by IKON Capital, the Transferor or any other Person as a Collection
pursuant to Section 3.03; provided that, so long as IKON Capital or an Affiliate
------------ -------- ----
of IKON Capital is the Servicer, late payment charges, collection fees and
extension fees shall not be deemed to be Collections.
"Commercial Paper Notes" means short-term promissory notes issued or to
----------------------
be issued by the Transferee to fund its investments in accounts receivable or
other financial assets.
"Commercial Paper Rate" for any Yield Period for any Rate Tranche means
---------------------
a rate per annum equal to the sum of (i) the rate or, if more than one rate, the
--- -----
weighted average of the rates, determined by converting to an interest-bearing
equivalent rate per annum the discount rate (or rates) at which Commercial Paper
--- -----
Notes having a term equal to such Yield Period and to be issued to fund the
Transfer of or to maintain such Rate Tranche by the Transferee (including,
without limitation, the Transferee's Tranche Investment and accrued and unpaid
Earned Discount) may be sold by any placement agent or commercial paper dealer
selected by the Agent, as agreed between each such agent or dealer and the
Agent, plus (ii) the commissions and charges charged by such 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.
--- -----
"Commitment" has the meaning set forth in Section 1.01.
---------- ------------
"Commitment Termination Date" has the meaning set forth in
---------------------------
Section 1.04.
- ------------
"Company Note" has the meaning set forth in the Transfer Agreement.
------------
"Concentration Limit" for any Obligor at any time means the greater of
-------------------
(a) the Special Concentration Limit, if any, for such Obligor and (b) 2.0% of
the Transferee's Investment at such time.
"Contingent Obligation" as to any Person means any
---------------------
A-3
<PAGE>
obligation of such Person guaranteeing or in effect guaranteeing any
indebtedness, leases, dividends or other contractual obligations ("primary
-------
obligations") of any other Person (the "primary obligor") in any manner, whether
- ----------- ---------------
directly or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent, (a) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (d) otherwise
to assure or hold harmless the owner of such primary obligation against loss in
respect thereof; provided, however, that the term Contingent Obligation shall
-------- -------
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.
"Contract" means a lease, conditional sale agreement or other contract
--------
between IKON Capital and any Person pursuant to or under which such Person shall
be obligated to make payments to IKON Capital from time to time.
"Credit and Collection Policy" means those credit and collection
----------------------------
policies and practices relating to Contracts and Receivables described in
Schedule 6.01(o)-2, as modified without violating Section 7.03(c).
- ------------------ ---------------
"DBNY" has the meaning set forth in the preamble.
---- --------
"Dealer Terminations" means Pool Receivables that have been terminated
-------------------
or prepaid in connection with a trade in or trade up or any other reason (other
than a default under such Pool Receivable) in a circumstance where the Obligor
did not make a cash payment to the Transferor in an amount at least equal to the
Unpaid Balance of such Pool Receivable.
"Dealer Termination Ratio" means the ratio (expressed as a percentage)
------------------------
computed as of the last day of each month by dividing (x) the aggregate amount
of the Unpaid Balance of all Dealer Terminations that were terminated or prepaid
during such month by (y) the Collections of Pool Receivables during such month.
A-4
<PAGE>
"Default Ratio" means the ratio (expressed as a percentage) computed as
-------------
of the last day of each month by dividing (x) the aggregate Unpaid Balance of
all Pool Receivables that are Defaulted Receivables as of such date by (y) the
aggregate Unpaid Balance of all Pool Receivables on such date.
"Default and Dilution Reserve" on any day means an amount equal to the
----------------------------
product of (a) the Reserve Percentage at the close of business of the Transferee
on such day, times (b) the sum of (i) the Transferee's Investment at the opening
-----
of business of the Transferee on such day plus (ii) the Discount Factor on such
----
day; provided that from and after the Commitment Termination Date, the Default
--------
and Dilution Reserve shall be the greater of (1) the foregoing amount and (2)
6.5% of the sum described in the foregoing clause (b), calculated as of the
----------
Month End Date immediately preceding such Commitment Termination Date.
"Default Reserve Percentage" means, on any day, the greater of (a) 2.75
--------------------------
times the highest average of the sum of the Delinquency Ratio plus the Default
Ratio for three consecutive months during the 12 calendar months preceding or
ending on such day, and (b) four times the highest Losses-to-Liquidations Ratio
on the last day of any of the 12 calendar months preceding or ending on such
day.
"Defaulted Receivable" means a Receivable: (a) as to which any payment,
--------------------
or part thereof, remains unpaid for 90 or more days from the original due date
for such payment, (b) as to which the Obligor thereof is the Obligor on any
other Defaulted Receivable, (c) as to which an Event of Bankruptcy has occurred
and remains continuing with respect to the Obligor thereunder, (d) as to which
payments have been extended, or the terms of payment thereof rewritten, without
the Agent's consent, except as set forth herein or (e) which, consistent with
the Credit and Collection Policy, would be written off the Transferor's or IKON
Capital's books as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage)
-----------------
computed as of the last day of each month by dividing (x) the aggregate Unpaid
Balance of all Pool Receivables that were Delinquent Receivables at the end of
such month by (y) the aggregate Unpaid Balance of all Pool Receivables on such
date.
"Delinquent Receivable" means a Receivable that is not a Defaulted
---------------------
Receivable and: (a) as to which any payment, or part thereof, remains unpaid for
60 days or more from the original due date for such payment; or (b) which,
consistent with the Credit and Collection Policy, would be classified as
delinquent by IKON Capital.
A-5
<PAGE>
"Designated Account" means any bank account into which collections from
------------------
Pool Receivables are deposited.
"Designated Account Agreement" means a letter agreement, in
----------------------------
substantially the form of Exhibit 5.01(h), among the Transferor, IKON Capital
---------------
and any Designated Account Bank.
"Designated Account Bank" means any of the banks holding one or more
-----------------------
Designated Accounts.
"Designated Obligor" means, at any time, all Obligors except any
------------------
Obligor as to which the Agent has, at least three Business Days prior to the
date of determination, given notice to the Transferor that such Obligor shall
not be considered a Designated Obligor.
"Deutsche Bank" has the meaning set forth in the preamble.
------------- --------
"Dilution Percentage" means, for any day, 15% times the highest Dealer
-------------------
Termination Ratio occurring for the immediately preceding three months.
"Dilution Reserve Percentage" means, for any day, the sum of the
---------------------------
Dilution Percentages for each of the 12 months ending on or preceding such day
divided by 12.
"Discount Amount" at any time means an amount equal to (i) the
---------------
aggregate Unpaid Balance of all Eligible Receivables at such time minus (ii) the
-----
aggregate Present Value of all Eligible Receivables at such time.
"Discount Factor" at any time means an amount equal to the sum of the
---------------
aggregate accrued and unpaid Earned Discount with respect to all Rate Tranches
at such time.
"Dollars" means dollars in lawful money of the United States of
-------
America.
"Domestic CD Rate (Adjusted)" for any Yield Period for any Rate Tranche
---------------------------
means a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
---------
1%) determined pursuant to the following formula:
Domestic CD Rate = Domestic CD Rate + Assessment
----------------
(Adjusted) 1-Reserve Rate
Requirement
where:
- -----
A-6
<PAGE>
"Domestic CD Rate" means, with respect to any Yield Period for any Rate
----------------
Tranche, a rate of interest equal to the average of the secondary
market morning offering rates in the United States for time
certificates of deposit of major United States money market banks for a
period approximately equal to such Yield Period in an amount
substantially equal to the Transferee's Tranche Investment of such Rate
Tranche, as such offering rate is quoted to the Agent by the Federal
Reserve Bank of New York during the morning of the first day of such
Yield Period; provided, however, that if the Agent shall not receive
-------- -------
any such quote by the Federal Reserve Bank of New York by 11:00 a.m.,
New York City time, on the morning of the first day of any Yield
Period, then "Domestic CD Rate" shall mean, with respect to such Yield
----------------
Period, the rate of interest determined by the Agent to be the average
(rounded upwards, if necessary, to the nearest 1/100 of 1%) of the bid
rates quoted to the Agent in the secondary market at approximately
11:00 a.m., New York City time (or as soon thereafter as practicable),
on the first day of such Yield Period by two certificate of deposit
dealers in New York or New York City of recognized standing selected by
the Agent in its sole discretion for the purchase from the Agent at
face value of certificates of deposit issued by the Agent in an amount
approximately equal or comparable to such Transferee's Tranche
Investment and having a maturity equal to such Yield Period.
"Assessment Rate" for any Yield Period means the annual assessment rate
---------------
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
applicable to the Agent on its insured deposits, on the Business Day
immediately preceding the first day of such Yield Period, under the
Federal Deposit Insurance Act, determined by annualizing the most
recent assessment levied on the Agent by the Federal Deposit Insurance
Corporation (together with any successor, the "FDIC") with respect to
----
such deposits after giving effect to the most recent rebate granted to
the Agent by the FDIC with respect to deposit insurance as well as the
loss to the Agent (determined in the good faith judgment of the Agent)
of the use of such rebate prior to the date a credit is taken by the
Agent with respect to such rebate.
"Reserve Requirement" means, with respect to any Yield Period, a
-------------------
percentage (expressed as a decimal) equal to the daily average during
such Yield Period of the aggregate reserve requirement (including all
basic,
A-7
<PAGE>
supplemental, marginal and other reserves and taking into
account any transitional adjustments or other scheduled
changes in reserve requirements during such period) specified
under Regulation D, as applicable to the class of banks of
which the Agent is a member, on deposits of the types used as
a reference in determining the Domestic CD Rate and having a
maturity approximately equal to such Yield Period.
"Earned Discount" for any Rate Tranche for each day in a Yield Period
---------------
applicable to such Rate Tranche means an amount equal to the sum of (a) the
product of (i) the Transferee's Tranche Investment of such Rate Tranche on such
day, times (ii) the Transferee Rate for such Rate Tranche on such day, times
----- -----
(iii) 1/360, plus (b) the Negative Spread Fee, if any, for such Rate Tranche on
----
such day. No provision of the Agreement shall require the payment or permit the
collection of Earned Discount in excess of the maximum permitted by applicable
law. Earned Discount for any Rate Tranche shall not be considered paid by any
distribution if at any time such distribution is rescinded or must otherwise be
returned for any reason.
"Eligible Contract" means a Contract in one of the forms set forth in
-----------------
Schedule 6.01(o)-1, with such variations as IKON Capital shall approve in its
- ------------------
reasonable business judgment and as shall not result in materially lesser rights
for IKON Capital as such forms, or otherwise approved by the Agent.
"Eligible Receivable" means, at any time, a Receivable:
-------------------
(a) generated by IKON Capital in the ordinary course of its business
that was transferred to the Transferor pursuant to the Transfer Agreement;
(b) which constitutes an account, chattel paper or general
intangible as defined in the Uniform Commercial Code as in effect in the
jurisdiction that governs the perfection of the Transferee's undivided ownership
interest in such Receivable;
(c) the Obligor of which is a United States resident, is not an
Affiliate of IKON Capital, and is not a government or a governmental subdivision
or agency;
(d) which is denominated and payable only in Dollars in the United
States;
(e) the Obligor of which is a Designated Obligor;
(f) which arises under a Contract (i) in respect of which the
related Equipment has been delivered and unconditionally
A-8
<PAGE>
accepted by the Obligor, (ii) under which the Obligor has made at least one
regularly scheduled payment and (iii) which is not cancelable by the Obligor
before the end of its scheduled termination date;
(g) which is not a Defaulted Receivable;
(h) with regard to which the warranty of the Transferor in Section
-------
6.01(l) is true and correct;
- -------
(i) the transfer of an undivided interest in which does not
contravene or conflict with any law or require the consent or approval of, or
notice to, any Person, including the Obligor;
(j) which arises under an Eligible Contract that has been duly
authorized and that, 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;
(k) 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, truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and with respect
to which no party to the Contract related thereto is in violation of any such
law, rule or regulation in any material respect if such violation would impair
the collectibility of such Receivable;
(l) which (i) satisfies all applicable requirements of the Credit
and Collection Policy and (ii) complies with such other criteria and
requirements (other than those relating to the collectibility of such
Receivable) as the Agent may from time to time specify to the Transferor
following thirty days' notice;
(m) which is an account receivable, chattel paper or general
intangible representing all or part of the sales price of merchandise, insurance
and services within the meaning of section 3(c)(5) of the Investment Company Act
of 1940, as amended;
(n) which arises out of a current transaction, or the proceeds of
which have been or are to be used for current transactions, within the meaning
of section 3(a)(3) of the Securities Act of 1933, as amended;
A-9
<PAGE>
(o) which arises under a Contract (i) requiring payment within 30
days of billing therefor, and (ii) providing for periodic payments in
substantially equal amounts over the scheduled term of the Contract that fully
amortize the initial lease or principal balance;
(p) which is evidenced by a Contract that constitutes either (i) a
true lease pursuant to which the Transferor owns the Equipment free of any Liens
other than such Contract and the Transferee's Interest or (ii) a conditional
sale contract pursuant to which the Transferor has a first priority, perfected
security interest in the related Equipment; and
(q) as to which the Agent has not notified the Transferor that the
Agent has determined, in its sole discretion, that such Receivable (or class of
Receivables) is not acceptable for purchase hereunder.
"Enhancement Agreement" means and includes (a) the Enhancement
---------------------
Agreement dated as of September 14, 1993 among the Transferee, the Agent and
DBNY and (b) any other agreement (other than the Liquidity Agreement or another
agreement of the type described in clause (b) of the definition thereof)
----------
hereafter entered into by the Transferee providing for the issuance of one or
more letters of credit for the account of the Transferee, the making of loans to
the Transferee or any other extensions of credit to or for the account of the
Transferee to support all or any part of the Transferee's payment obligations
under its Commercial Paper Notes or to provide an alternate means of funding the
Transferee's investments in accounts receivable or other financial assets, in
each case, as amended, supplemented or otherwise modified from time to time.
"Enhancement Bank" means and includes DBNY as lender to the Transferee
----------------
and issuer of a letter of credit for the Transferee's account under the
Enhancement Agreement, and any other or additional bank or other financial
institution now or hereafter extending credit or having a commitment to extend
credit to or for the account of the Transferee under the Enhancement Agreement.
"Enhancement Draw" means a drawing under a letter of credit issued
----------------
pursuant to the Enhancement Agreement for the account of the Transferee, a loan
to the Transferee under the Enhancement Agreement or any other advance or
disbursement of funds to the Transferee or for the Transferee's account pursuant
to the Enhancement Agreement or any such letter of credit, in each case to the
extent such drawing, loan, advance or disbursement has not been repaid or
reimbursed to the Enhancement Bank in accordance with the Enhancement Agreement.
A-10
<PAGE>
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
-----
as amended from time to time.
"Equipment" means office equipment.
---------
"Eurodollar Rate (Reserve Adjusted)" means, with respect to any Yield
----------------------------------
Period for any Rate Tranche, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) -----------------
1-Eurodollar
Reserve Percentage
where:
- -----
"Eurodollar Rate" means, with respect to any Yield Period for
---------------
any Rate Tranche, the rate per annum at which Dollar deposits
in immediately available funds are offered to the Eurodollar
Office of the Agent two Eurodollar Business Days prior to the
beginning of such period by prime banks in the interbank
eurodollar market at or about 11:00 a.m., New York City time
for delivery on the first day of such Yield Period, for the
number of days comprised therein and in an amount equal or
comparable to the amount of the Transferee's Tranche
Investment of such Rate Tranche.
"Eurodollar Business Day" means a day of the year on which
-----------------------
dealings are carried on in the eurodollar interbank market of
the Agent's Eurodollar Office and banks are open for business
in London and are not required or authorized to close in New
York City.
"Eurodollar Office" shall mean the Cayman Islands office of
-----------------
the Agent or such other office or offices of the Agent (as
designated from time to time by notice from the Agent to the
Transferor) or such other office or offices through which the
Agent determines the Eurodollar Rate. A Eurodollar Office of
the Agent may be, at the option of the Agent, either a
domestic or foreign office.
"Eurodollar Reserve Percentage" means, with respect to any
-----------------------------
Yield Period, the then applicable percentage (expressed as a
decimal) prescribed by the Federal Reserve Board for
determining reserve requirements applicable to "Eurocurrency
Liabilities" pursuant to Regulation D.
A-11
<PAGE>
"Event of Bankruptcy" shall be deemed to have occurred with respect to
-------------------
a Person if either:
(a) a case or other proceeding shall be commenced, without
the application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up,
or composition or readjustment of debts of such Person, the appointment
of a trustee, receiver, custodian, liquidator, assignee, sequestrator
or the like for such Person or all or substantially all of its assets,
or any similar action with respect to such Person under any law
relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 30
consecutive days; or an order for relief in respect of such Person
shall be entered in an involuntary case under the federal bankruptcy
laws or other similar laws now or hereafter in effect; or
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency, reorganization,
debt arrangement, dissolution or other similar law now or hereafter in
effect, or shall consent to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator (or
other similar official) for, such Person or for any substantial part of
its property, or shall make any general assignment for the benefit of
creditors, or shall fail to, or admit in writing its inability to, pay
its debts generally as they become due, or, if a corporation or similar
entity, its board of directors shall vote to implement any of the
foregoing.
"Federal Reserve Board" means the Board of Governors of the Federal
---------------------
Reserve System, or any successor thereto or to the functions thereof.
"Fee Letter" has the meaning set forth in Schedule 4.03(a).
---------- ----------------
"Final Pay Out Date" means the date, after the Commitment Termination
------------------
Date, when the Transferee's Percentage has been reduced to zero in accordance
with clause (3) of Section 2.02.
---------- ------------
"Financing Lease(s)" shall mean (a) any lease of property, real or
------------------
personal, the then present value of the minimum rental commitment of which
should, in accordance with general accepted accounting principles, be
capitalized on a balance sheet of the lessee, and (b) any other such lease the
obligations under which
A-12
<PAGE>
are capitalized on a consolidated balance sheet of IKON Capital and its
Subsidiaries.
"Funding Advance" means an advance (other than a daylight overdraft
---------------
advance) made by the Agent, in its sole discretion, to the Transferee for the
purpose of funding the Transferee's acquisition or maintenance of the
Transferee's Interest or a portion thereof.
"Funding Advance Rate" on any day means a rate per annum equal to the
-------------------- ---------
Alternate Base Rate in effect on such day, provided that, with respect to any
--------
Funding Advance made in an amount less than $5,000 to fund the "tag end" of any
Rate Tranche funded by the issuance of Commercial Paper Notes, the Funding
Advance Rate shall mean the Commercial Paper Rate for such Rate Tranche.
"IKON Capital" has the meaning set forth in the preamble.
------------
"IKON Office" means IKON Office Solutions, Inc., an Ohio corporation
-----------
(formerly Alco Standard Corporation).
"Indemnified Amounts" has the meaning set forth in Section 13.01.
------------------- -------------
"Indebtedness" of a Person, at a particular date, means any of the
------------
following at such date, without duplication, (a) indebtedness of such Person for
borrowed money or evidenced by notes, bonds, debentures or like instruments, (b)
indebtedness of such Person for the deferred purchase price of property or
services, except current accounts payable and accrued expenses arising in the
ordinary course of business, (c) obligations of such Person under any Financing
Lease, (d) indebtedness of such Person arising under acceptance facilities, (e)
unreimbursed draws on letters of credit and (f) Contingent Obligations.
"Indemnified Party" has the meaning set forth in Section 13.01.
----------------- -------------
"Lien" means a lien, security interest, charge, or encumbrance, or
----
other right or claim of any Person other than (a) a potential claim or right
(that has not yet been asserted) of a trustee appointed for an Obligor in
connection with any Event of Bankruptcy or (b) an unfiled lien for taxes accrued
but not yet payable.
"Liquidity Agreement" means and includes (a) the Amended and Restated
-------------------
Liquidity Loan Agreement dated as of March 31, 1997 among the Transferee, as
borrower, the Agent, DBNY, as lender, and DBNY, as agent for such lender, and
(b) any other agreement hereafter entered into by the Transferee providing for
the making
A-13
<PAGE>
of loans or other extensions of credit to the Transferee secured by a security
interest in the Transferee's Interest (or any portion thereof), to support all
or part of the Transferee's payment obligations under the Commercial Paper Notes
or to provide an alternate means of funding the Transferee's Interest, and under
which the amount available from such loans or other extensions of credit is
limited to an amount calculated by reference to the value or unpaid balance of
the Pool Receivables or any portion or category thereof or the level of credit
enhancement available with respect thereto, in each case as amended,
supplemented or otherwise modified from time to time.
"Liquidity Bank" means and includes DBNY as lender under the Liquidity
--------------
Agreement, and any other or additional bank or other financial institution
hereafter extending credit to or for the account of the Transferee under the
Liquidity Agreement.
"Liquidity Loan" means a loan made by a Liquidity Bank to the
--------------
Transferee pursuant to the Liquidity Agreement.
"Losses" means the aggregate Unpaid Balance of Pool Receivables (a) as
------
to which any payment, or part thereof, remains unpaid for 120 or more days from
the original due date for such payment or (b) as to which the Obligor thereof is
subject to a proceeding under Chapter 7 of the Bankruptcy Reform Act of 1978, 11
U.S.C. 101 et seq., as amended.
-- ---
"Losses to Liquidations Ratio" means the percentage that (x) the
----------------------------
aggregate Losses recognized during the one or six, as applicable, month period
ending on the most recent Month End Date was of (y) Collections of Pool
Receivables during such period.
"Management Agreement" means the Management Agreement, dated as of
--------------------
March 31, 1997, between IKON Capital and the Transferor, as it may be amended,
supplemented or otherwise modified from time to time.
"Manager" means IKON Capital, in its capacity as manager pursuant to
-------
the Management Agreement.
"Material Adverse Effect" means, with respect to any event, condition
-----------------------
or circumstance, a material adverse effect on:
(i) the business, assets, financial condition, operations
or prospects of the Transferor, IKON Capital or the Servicer;
(ii) the ability of the Servicer, IKON Capital or the
Transferor to perform its obligations under this Agreement or any other
Transaction Document;
A-14
<PAGE>
(iii) the validity, enforceability or collectibility of this
Agreement, any other Transaction Document, the Receivables or the
related Contracts;
(iv) the status, existence, perfection, priority or
enforceability of the Transferee's Interest; or
(v) the collectibility of the Pool Receivables.
"Maximum Investment" means $125,000,000, as such amount may be reduced
------------------
at the option of the Transferor pursuant to Section 1.05.
------------
"Maximum Percentage" means 100%.
------------------
"Month End Date" means the last day of each calendar month.
--------------
"Moody's" means Moody's Investors Service, Inc.
-------
"Negative Spread Fee" means, for any Rate Tranche on any day in a Yield
-------------------
Period applicable to such Rate Tranche (computed without regard to clause (C) of
----------
the proviso to the definition of "Yield Period"), the sum of:
-------
(a) if such day occurs during a period in which a downgraded
Liquidity Bank shall have placed funds in escrow pursuant to the
Liquidity Agreement, an amount designated by the Agent to enable, when
taken together with other amounts similarly designated with respect to
other Rate Tranches, the Transferee to compensate such Liquidity Bank
for the excess, if any, of (x) the Earned Discount which would have
accrued on funds in such escrow account at the Bank Rate if such funds
had been designated as a Liquidity Loan over (y) the income actually
earned by investing such funds, plus
----
(b) if all or any part of such Yield Period falls in the Pay
Out Period, the amount, if any, by which:
(i) the additional Earned Discount (calculated
without taking into account any Negative Spread Fee) which
would have accrued on the reductions of the Transferee's
Tranche Investment of such Rate Tranche during such Yield
Period if such reductions had remained as the Transferee's
Investment, exceeds
-------
(ii) the income, if any, received by the Transferee
from investing the proceeds of such reductions of the
Transferee's Investment.
A-15
<PAGE>
"Net Pool Balance" at any time means an amount equal to
----------------
(a) the aggregate Present Value of the Eligible Receivables
in the Receivables Pool at such time, minus
-----
(b) the aggregate (for all Obligors) of the amounts by
which (i) the Unpaid Balance of all Pool Receivables of each Obligor
exceeds (ii) the Concentration Limit for such Obligor at such time,
minus
-----
(c) the aggregate amount of security deposits and prepaid
rents related to the Pool Receivables.
"Obligor" means a Person obligated to make payments with respect to a
-------
Receivable. In the case of an Obligor which is an Affiliate of any other
Obligor, the Concentration Limit, the Special Concentration Limit, if any, and
the aggregate Unpaid Balance of Pool Receivables of such Obligors shall be
calculated as if such Obligors were one Obligor.
"Old Line Agreement" means the Receivables Transfer Agreement, dated as
------------------
of September 30, 1996, among the Transferor, IKON Capital, Old Line Funding
Corp. and Royal Bank of Canada, as it may be amended, supplemented or otherwise
modified from time to time.
"Original Receivable Agreement" has the meaning set forth in the
-----------------------------
Background.
"Pay Out Period" means the period from and including the Commitment
--------------
Termination Date and to and including the Final Pay Out Date.
"Pay Out Servicer's Fee" at any time means an amount equal to the
----------------------
product of
(a) the Transferee's Investment at such time, times
-----
(b) (i) the percentage per annum set forth in clause (a) (x)
--- ----- --------------
of the definition of the "Servicer's Fee", or (ii) if the Servicer's
Fee is calculated pursuant to clause (b) of such definition, the
----------
percentage per annum determined for each day by dividing the amount of
--- -----
the Servicer's Fee accrued for such day by the Transferee's Investment
at the close of business on such day, multiplying the quotient by 360
and expressing the product as a percentage, times
-----
(c) a fraction, the numerator of which is the then Adjusted
Average Maturity of the Receivables Pool and the
A-16
<PAGE>
denominator of which is 360.
"Pay Out Statement" means a statement substantially in such form as
-----------------
shall be proposed by the Agent and agreed to by the Transferor, such agreement
not to be unreasonably withheld.
"Periodic Report" means a report in substantially the form of Exhibit
--------------- -------
3.05(a).
- -------
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association, joint
venture, government or any agency or political subdivision thereof or any other
entity.
"Pool Receivable" means a Receivable in the Receivables Pool.
---------------
"Post Office Box" means any U.S. post office box to which the Obligors
---------------
are directed to, or do, send payments under the Pool Receivables.
"Post Office Box Agreement" means an executed and undated notice, in
-------------------------
substantially the form of Exhibit A from the Transferor and IKON Capital to the
---------
applicable U.S. postal office.
"Present Value" of any Receivable means, at any time, the present value
-------------
of the Unpaid Balance thereof, discounted to the date of determination, at a
rate equal to (i) 2.50% plus (ii) the greater of (a) the one month Eurodollar
----
Rate (Reserve Adjusted) and (b) the interpolated yield to maturity of the
Treasury security with a maturity equal to the then Average Maturity; provided
--------
that if the Transferee has entered into (1) an interest rate swap agreement, the
rate for purposes of this clause (ii) will be the fixed interest rate that the
-----------
Transferee is obligated to pay pursuant to such agreement or (2) an interest
rate cap, the rate for purposes of this clause (ii) will be the strike price of
-----------
such cap.
"Program Fee" has the meaning set forth in Fee Letter.
-----------
"Program Fee Rate" has the meaning set forth in the Fee Letter.
----------------
"Program Information" has the meaning set forth in Section 14.08.
------------------- -------------
"Program Information Provider" has the meaning set forth in Section
---------------------------- -------
14.08.
- -----
"Rate Tranche" has the meaning set forth in Section 2.03.
------------ ------------
A-17
<PAGE>
"Receivable" means any right to payment from a Person, whether
----------
constituting an account, chattel paper, instrument or general intangible,
arising from the sale or lease by IKON Capital (or by a dealer on behalf of IKON
Capital) of Equipment, and includes the right to payment of any interest or
finance charges and other obligations of such Person with respect thereto.
"Receivables Pool" means at any time all then outstanding Receivables
----------------
which (a) were or are generated at any time in any of the marketplaces listed on
Schedule A-1, (as such list may be amended from time to time with the written
- ------------
consent of IKON Capital, the Transferor and the Agent) and such other
marketplaces as designated from time to time by IKON Capital and Transferor and
approved in writing by the Agent, and (b) as to which the Obligors thereunder
are Designated Obligors.
"Regulation D" means Regulation D of the Federal Reserve Board, or any
------------
other regulation of the Federal Reserve Board that prescribes reserve
requirements applicable to nonpersonal time deposits or "Eurocurrency
Liabilities" as presently defined in Regulation D, as in effect from time to
time.
"Regulatory Change" means, relative to any Affected Party
-----------------
(a) any change in (or the adoption, implementation, phase-in
or commencement of effectiveness of) any
(i) United States federal or state law or foreign law
applicable to such Affected Party;
(ii) regulation, interpretation, directive, requirement or
request (whether or not having the force of law) applicable to
such Affected Party of (A) any court, government authority
charged with the interpretation or administration of any law
referred to in clause (a)(i) or of (B) any fiscal, monetary or
-------------
other authority having jurisdiction over such Affected Party;
or
(iii) generally accepted accounting principles or
regulatory accounting principles applicable to such Affected
Party and affecting the application to such Affected Party of
any law, regulation, interpretation, directive, requirement or
request referred to in clause (a)(i) or (a)(ii) above; or
------------- -------
(b) any change in the application to such Affected Party of
any existing law, regulation, interpretation,
A-18
<PAGE>
directive, requirement, request or accounting principles referred to in
clause (a)(i), (a)(ii) or (a)(iii) above; or
------ ------- --------
(c) the issuance, publication or release of any regulation,
interpretation, directive, requirement or request of a type described
in clause (a)(ii) above to the effect that the obligations of a
--------------
Liquidity Bank under the Liquidity Agreement are not entitled to be
included in the zero percent category of off-balance sheet assets for
purposes of any risk-weighted capital guidelines applicable to such
Liquidity Bank or any related Affected Party.
"Reinvestment" has the meaning set forth in Section 1.01.
------------ ------------
"Reinvestment Period" means the period from and including the date
-------------------
hereof to but excluding the Commitment Termination Date.
"Related Property" means, with respect to any Pool Receivable: (a) all
----------------
of the Transferor's and IKON Capital's right, title and interest in and to all
Contracts, purchase orders or other agreements or documents that evidence,
secure or otherwise relate to such Pool Receivable; (b) all of the Transferor's
and IKON Capital's interest in the Equipment (including returned Equipment), the
sale or lease of which gave rise to such Pool Receivable; (c) all Liens from
time to time purporting to secure payment of such Pool Receivable, whether
pursuant to the Contract related to such Pool Receivable or otherwise, and all
property subject to such Liens; (d) all UCC financing statements covering any
collateral securing payment of such Pool Receivable (to the extent of the
interest of the Transferee in the related Pool Receivable); (e) all guarantees
and other agreements or arrangements of whatever character from time to time
supporting or securing payment of such Pool Receivable whether pursuant to the
Contract related to such Pool Receivable or otherwise; (f) all of Transferor's
rights and claims under the Transfer Agreement; (g) all books and records
evidencing or otherwise relating to any Pool Receivables or any of the
foregoing; (h) all lock-boxes, post office boxes and accounts to which
Collections are sent or deposited, to the extent of such Collections and (i) all
Collections with respect to, and other proceeds of, such Pool Receivables and
any of the property described above.
"Reserve Percentage" means, on any day the greater of (a) the sum of
------------------
the Default Reserve Percentage plus the Dilution Reserve Percentage and (b) 15%.
"Scheduled Commitment Termination Date" has the meaning set forth in
-------------------------------------
Section 1.04.
- ------------
A-19
<PAGE>
"Servicer" has the meaning set forth in Section 8.01.
-------- ------------
"Servicer's Fee" accrued for any day means
--------------
(a) an amount equal to (x) .75% per annum, times (y) the
--- ----- -----
amount of the Transferee's Investment at the close of business on such
day, times (z) 1/360; or
-----
(b) on and after the Servicer's reasonable request made at any
time when IKON Capital shall no longer be the Servicer, an alternative
amount specified by Servicer not exceeding (x) 115% of the Servicer's
cost and expenses of performing its obligations under the Agreement
during the Yield Period when such day occurs, divided by (y) the number
of days in such Yield Period.
With respect to any Rate Tranche, the Servicer's Fee allocable thereto shall be
equal to the Servicer's Fee determined as set forth above times a fraction, the
-----
numerator of which is the Transferee's Tranche Investment of such Rate Tranche
and the denominator of which is the Transferee's Investment.
"Servicer's Fee Reserve" at any time means an amount equal to the sum
----------------------
of (a) the aggregate accrued and unpaid Servicer's Fee (with respect to all Rate
Tranches), plus (b) the Pay Out Servicer's Fee at such time.
----
"Settlement Date" means the last day of each Settlement Period.
---------------
"Settlement Period" for any Rate Tranche means
-----------------
(a) each period commencing on the first day of each Yield
Period for such Rate Tranche and ending on the last day of such Yield
Period; and
(b) on and after the Commitment Termination Date, such period
(including, without limitation, a period of one day) as shall be
selected from time to time by the Agent or, in absence of any such
selection, each period of thirty days from the next preceding
Settlement Date;
provided, however, that
- -------- -------
(i) with respect to any Yield Period of one day, the related
Settlement Period shall be the first day following such Yield Period;
(ii) any Settlement Period which would otherwise end on a day
which is not a Business Day shall be extended to
A-20
<PAGE>
the next succeeding Business Day; and
(iii) the last Settlement Period shall end on the Final Pay
Out Date.
"S&P" means Standard & Poor's Ratings Group.
---
"Special Concentration Limit" for any Obligor at any time means the
---------------------------
amount, if any, most recently designated by the Agent in a writing delivered to
the Transferor as the Special Concentration Limit for such Obligor.
"Subsidiary" means a corporation of which IKON Capital and/or its other
----------
Subsidiaries own, directly or indirectly, such number of outstanding shares as
have more than 50% of the ordinary voting power for the election of directors.
"Support Agreement" means the Amended and Restated 1996 Support
-----------------
Agreement, dated as of October 22, 1996, between IKON Capital and IKON Office,
as it may be amended, supplemented or otherwise modified from time to time.
"Tangible Net Worth" means tangible net worth as determined in
------------------
accordance with generally accepted accounting principles.
"Termination Event" has the meaning set forth in Section 10.01.
----------------- -------------
"Transaction Documents" means this Agreement, the Transfer Agreement,
---------------------
the Company Note and the other documents to be executed and delivered in
connection herewith or therewith.
"Transfer" has the meaning set forth in Section 1.01(a).
-------- ---------------
"Transfer Agreement" means the First Tier Transfer Agreement, dated as
------------------
of March 31, 1997, between IKON Capital and Transferor, as the same may be
amended, supplemented or otherwise modified from time to time.
"Transfer Request" has the meaning set forth in Section 1.03.
---------------- ------------
"Transferee" has the meaning set forth in the preamble.
---------- --------
"Transferee Rate" for any Yield Period for any Rate Tranche means:
---------------
(a) in the case of a Rate Tranche other than one referred to
in clause (b) or (c) of this definition, the Commercial Paper Rate for
------ --- ---
such Rate Tranche for such Yield
A-21
<PAGE>
Period;
(b) in the case of a Rate Tranche funded by a Funding Advance,
a rate per annum equal for each day in such Yield Period to the Funding
--- -----
Advance Rate in effect on such day; and
(c) in the case of a Rate Tranche funded pursuant to the
Liquidity Agreement or by an Enhancement Draw, the Bank Rate for such
Rate Tranche for such Yield Period;
provided, however, that on any day when any Termination Event shall have
- -------- -------
occurred and be continuing, the Transferee Rate shall mean a rate per annum
--- -----
equal to the sum of the applicable rate pursuant to clause (a), (b) or (c) above
---------- --- ---
on such day plus .70% per annum.
--- -----
"Transferee's Allocation" has the meaning set forth in Section 2.02.
----------------------- ------------
"Transferee's Interest" has the meaning set forth in Section 2.01.
--------------------- ------------
"Transferee's Investment" at any time means an amount equal to
-----------------------
(a) the aggregate of the amounts theretofore paid to the
Transferor for the acquisition of the Transferee's Interest by Transfer
pursuant to Sections 1.01(a) and 1.03, less
---------------- ---- ----
(b) the aggregate amount of Collections theretofore received
by the Servicer and actually distributed to the Agent for the account
of the Transferee on account of such Transferee's Investment pursuant
to Sections 3.01 and 3.02;
------------- ----
provided, however, the Transferee's Investment shall not be considered reduced
- -------- -------
by any distribution of any portion of Collections if at any time such
distribution is rescinded or must otherwise be returned for any reason.
"Transferee's Percentage" has the meaning set forth in Section 2.02.
----------------------- ------------
"Transferee's Share" of any Collections means a portion of such
------------------
Collections in an amount equal to the product of (a) the amount of such
Collections, times (b) the Transferee's Percentage as in effect on the date of
-----
determination.
"Transferee's Tranche Investment" has the meaning set forth
-------------------------------
A-22
<PAGE>
in Section 2.03.
------------
"Transferor" has the meaning set forth in the preamble.
---------- --------
"Transferor Information" has the meaning set forth in Section 14.07.
---------------------- -------------
"Transferor's Collection Amount" at any time means an amount equal to
------------------------------
the excess, if any, if (a) the aggregate of the amounts theretofore paid by the
Servicer to the Transferor for Reinvestment pursuant to Section 3.01(a)(iii),
--------------------
over (b) the aggregate of the amounts, if any, theretofore paid by the
- ----
Transferor to the Servicer pursuant to the last sentence of Section 3.01(b).
---------------
"Transferor's Share" of any Collections means a portion of such
------------------
Collections equal to the amount of such Collections less the Transferee's Share
----
thereof.
"UCC" means the Uniform Commercial Code as from time to time in effect
---
in the applicable jurisdiction or jurisdictions.
"Unadjusted Transferee's Percentage" has the meaning set forth in
----------------------------------
Section 2.02.
- ------------
"Unmatured Termination Event" means any event which, with the giving of
---------------------------
notice or lapse of time or both, would, unless cured or waived, become a
Termination Event.
"Unpaid Balance" of any Receivable means at any time the aggregate
--------------
scheduled lease or debt service payments that the Obligor is obligated to make
thereunder during the period from the date such Receivable is included in the
Receivables Pool to the date that is 60 months thereafter, but excluding all
---------
late payment charges, delinquency charges, extension or collection fees and
sales tax payments.
"Yield Period" means with respect to any Rate Tranche, each period
------------
(a) commencing on, and including, the date of creation of such
Rate Tranche pursuant to Section 2.03, or the last day of the
------------
immediately preceding Yield Period for such Rate Tranche (whichever is
later); and
(b) ending on, and excluding, the date that falls
(i) in the case of a Rate Tranche funded by the
issuance of Commercial Paper Notes, except as provided in
clause (iii) below, such number of days (not to
------------
A-23
<PAGE>
exceed 180 days or, after the occurrence and during the
continuance of any Termination Event, 60 days) thereafter as
the Agent shall select, after consultation with the
Transferor;
(ii) in the case of a Rate Tranche funded by
Liquidity Loans or by an Enhancement Draw, (A) if the
Transferee Rate for such Yield Period is based on the Domestic
CD Rate (Adjusted), 1, 7, 14, 30, 60 or 90 days thereafter,
and (B) if the Transferee Rate for such Yield Period is based
on the Eurodollar Rate (Reserve Adjusted), one day, one week,
one month, two months or three months thereafter (or, if such
month has no numerically corresponding day, on the last
Business Day of such month), in either case as the Agent may
select; and
(iii) in the case of (A) any Rate Tranche funded by a
Funding Advance, and (B) any other Rate Tranche, if the
Transferee Rate for such Yield Period is based on the
Alternate Base Rate, such number of days thereafter as the
Agent may select in its sole discretion;
provided, however, that
- -------- -------
(A) any Yield Period (other than a Yield Period consisting of
one day) which would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day (unless the
Transferee Rate for the related Rate Tranche for such Yield Period
shall be based on the Eurodollar Rate (Reserve Adjusted), in which case
if such succeeding Business Day is in a different calendar month, such
Yield Period shall instead be shortened to the next preceding Business
Day);
(B) any Yield Period of one day for any Rate Tranche, (I) if
such Yield Period is the initial Yield Period for a new Rate Tranche
created in connection with a Transfer, shall be the day of the Transfer
of such Rate Tranche, and (II) if such Yield Period is not the initial
Yield Period for such Rate Tranche (or, in the case of a Rate Tranche
created by division or combination pursuant to Section 2.03, any
------------
predecessor Rate Tranche), (x) if the immediately preceding Yield
Period is more than one day, shall be the last day of such immediately
preceding Yield Period, and (y) if the immediately preceding Yield
Period is one day, shall be the next day following such immediately
preceding Yield Period;
A-24
<PAGE>
(C) any Yield Period which commences before the Commitment
Termination Date and would otherwise end after the Commitment
Termination Date shall end on the Commitment Termination Date; and
(D) subject to clause (ii) above, each Yield Period which
-----------
commences on or after the Commitment Termination Date shall be of such
duration as the Agent may select in its sole discretion.
The "related" Yield Period for any Rate Tranche at any time means the Yield
-------
Period pursuant to which Earned Discount is then accruing for such Rate Tranche.
A-25
<PAGE>
FIRST TIER TRANSFER AGREEMENT
Dated as of March 31, 1997
between
IKON CAPITAL, INC.
and
IKON FUNDING, INC.
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TABLE OF CONTENTS
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<TABLE>
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PAGE
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ARTICLE I
DEFINITIONS AND RELATED MATTERS
<S> <C> <C>
1.1. Defined Terms........................................................ 1
1.2. Other Interpretive Matters........................................... 1
ARTICLE II
CONTRIBUTION OF POOL RECEIVABLES; AGREEMENT TO
TRANSFER; TRANSFER PRICE
2.1. Contribution of Pool Receivables..................................... 2
2.2. Agreement to Transfer................................................ 2
2.3. Timing of Purchases and Contributions................................ 2
2.4. Transfer Price for Pool Receivables Transferred by Originator........ 3
2.5. Transfer Termination Date............................................ 4
2.6. No Recourse or Assumption of Obligations............................. 4
2.7. Intention of the Parties............................................. 4
2.8. Advances by the Company to Originator................................ 5
ARTICLE III
ADMINISTRATION AND COLLECTION
3.1. Originator to Act as Servicer........................................ 5
3.2. Deemed Collections................................................... 5
3.3. Actions Evidencing Purchases......................................... 6
3.4. Application of Collections........................................... 7
3.5. Rights of the Company................................................ 7
3.6. Responsibilities of Originator....................................... 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ORIGINATOR
4.1. Organization and Good Standing....................................... 8
4.2. Due Qualification.................................................... 8
4.3. Power and Authority; Due Authorization............................... 8
4.4. Valid Transfer or Contribution; Binding Obligations.................. 8
4.5. No Violation......................................................... 8
4.6. No Proceedings....................................................... 9
4.7. Bulk Sales Act....................................................... 9
4.8. Government Approvals................................................. 9
4.9. Financial Condition.................................................. 9
4.10. Litigation........................................................... 10
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TABLE OF CONTENTS
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(continued)
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4.11. Margin Regulations................................................... 10
4.13. Accuracy of Information.............................................. 10
4.14. Offices.............................................................. 11
4.15. Trade Names.......................................................... 11
4.16. Compliance with Applicable Laws...................................... 11
4.17. Solvency............................................................. 11
4.18. Eligibility of Pool Receivables...................................... 11
ARTICLE V
COVENANTS OF ORIGINATOR
5.1. Affirmative Covenants................................................ 12
5.2. Reporting Requirements............................................... 13
5.3. Negative Covenants................................................... 13
ARTICLE VI
TRANSFER TERMINATION EVENTS
6.1. Transfer Termination Events.......................................... 15
6.2. Remedies............................................................. 15
ARTICLE VII
INDEMNIFICATION
7.1. Indemnities by Originator............................................ 16
ARTICLE VIII
MISCELLANEOUS
8.1. Amendments, Waivers, etc............................................. 18
8.2. Notices, etc......................................................... 18
8.3. Binding Effect; Assignability........................................ 18
8.4. Survival............................................................. 19
8.5. Governing Law........................................................ 19
8.6. Costs, Expenses and Taxes............................................ 19
8.7. No Proceedings....................................................... 19
8.8. Waiver of Jury Trial................................................. 19
8.9. Execution in Counterparts............................................ 19
</TABLE>
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<PAGE>
SCHEDULES
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SCHEDULE 4.14 Office Locations
SCHEDULE 4.15 Trade Names
EXHIBITS
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EXHIBIT A Form of Transfer Report
EXHIBIT B Form of Company Note
EXHIBIT C Closing Date Report
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<PAGE>
FIRST TIER TRANSFER AGREEMENT
THIS FIRST TIER TRANSFER AGREEMENT (as amended, supplemented or modified
from time to time, this "Agreement"), dated as of March 31, 1997, is between
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IKON CAPITAL, INC., a Delaware corporation ("Originator"), as transferor and
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contributor, and IKON FUNDING, INC., a Delaware corporation (the "Company"), as
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transferee and contributee.
Background
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1. On the Closing Date, Originator is transferring certain Pool
Receivables and Related Property to the Company as a capital contribution to the
Company. From time to time Originator may transfer additional Pool Receivables
and Related Property to the Company as a capital contribution to the Company.
2. In order to finance its business, Originator wishes to transfer
certain Pool Receivables and Related Property from time to time to the Company,
and the Company is willing, on the terms and subject to the conditions set forth
herein, to accept such Pool Receivables and Related Property from Originator.
3. The Company intends to obtain a Commitment from the Transferee
pursuant to the Receivables Transfer Agreement in order to finance the transfers
of Pool Receivables and Related Property hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND RELATED MATTERS
I.1. Defined Terms. Unless otherwise indicated, certain terms that are
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capitalized and used throughout this Agreement are defined in Appendix A to the
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Amended and Restated Receivables Transfer Agreement of even date herewith (as
amended, supplemented or otherwise modified from time to time, the "Receivables
-----------
Transfer Agreement"), among the Company, as Seller, the Originator, as Servicer,
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Twin Towers Inc., as Transferee, and Deutsche Bank AG, acting through its New
York Branch, as agent for the Transferee (the "Agent").
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I.2. Other Interpretive Matters. In this Agreement, unless otherwise
--------------------------
specified: (a) references to any Section or Annex refer to such Section of, or
Annex to, this Agreement, and references in any Section or definition to any
subsection or clause refer to
<PAGE>
such subsection or clause of such Section or definition; (b) "herein", "hereof",
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"hereto", "hereunder" and similar terms refer to this Agreement as a whole and
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not to any particular provision of this Agreement; (c) "including" means
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"including without limitation", and other forms of the verb "to include" have
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correlative meanings; (d) the word "or" is not exclusive; and (e) captions are
--
solely for convenience of reference and shall not affect the meaning of this
Agreement;
ARTICLE II
CONTRIBUTION OF POOL RECEIVABLES; AGREEMENT TO
TRANSFER; TRANSFER PRICE
II.1. Contribution of Pool Receivables. On the Closing Date, Originator
--------------------------------
hereby assigns and transfers to the Company, as a contribution of capital, Pool
Receivables and Related Property with respect thereto consisting of each Pool
Receivable of Originator that existed and was owing to Originator on the Closing
Date, beginning with the oldest of such Pool Receivables and continuing
chronologically thereafter, and all or an undivided interest in the most recent
of such Pool Receivables such that the aggregate Fair Market Value (as defined
below) of all such Pool Receivables shall be equal to the amount set forth on
Exhibit C. In addition, from time to time Originator may assign and transfer to
the Company, as a contribution of capital, Pool Receivables and Related Property
with respect thereto as designated by Originator.
II.2. Agreement to Transfer. On the terms and subject to the conditions
---------------------
set forth in this Agreement, Originator hereby transfers and assigns to the
Company, and the Company hereby accepts from Originator, all of Originator's
right, title and interest in and to the Pool Receivables, the Related Property
and all proceeds of the foregoing, other than those Pool Receivables and Related
Property contributed to the Company pursuant to Section 2.1.
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II.3. Timing of Purchases and Contributions. Originator's entire right,
-------------------------------------
title and interest in each Pool Receivable that existed and was owing to
Originator as of the close of Originator's business on March 28, 1997 (the
"Closing Date") shall be deemed to have been transferred and/or contributed to
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the Company on such date. After the Closing Date, each Pool Receivable created
or purchased by Originator shall be transferred to and owned by the Company
(without any further action) upon the creation of such Pool Receivable or the
purchase thereof by the Originator. The Related Property with respect to each
Pool Receivable (and proceeds of such Pool Receivable and Related Property)
shall be transferred and/or contributed at the same time
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<PAGE>
as such Pool Receivable, whether such Related Property (or proceeds) exist at
such time or arise or are acquired thereafter.
II.4. Transfer Price for Pool Receivables Transferred by Originator.
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(a) Calculation of Transfer Price. The transfer price for each Pool Receivable
-----------------------------
and the Related Property with respect thereto transferred to the Company shall
equal the Fair Market Value of such Pool Receivable at the time of transfer. The
"Fair Market Value" of a Pool Receivable shall equal (i) the aggregate unpaid
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scheduled debt service or lease payments that the Obligor is obligated to make
thereunder, but excluding unearned finance charges, minus (ii) that portion of
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Originator's loss contingency reserve on the date of transfer which is allocable
to such Pool Receivable.
(b) Initial Transfer Price Payment. On the terms and subject to the
------------------------------
conditions set forth in this Agreement, the Company agrees to pay to Originator
the transfer price for the Pool Receivables to be transferred to the Company on
the Closing Date (i) by taking such Pool Receivables subject to the Lien of the
Original Receivables Agreement and assuming Originator's obligations thereunder,
(ii) in cash, to the extent of funds obtained by the Company on such date under
the Receivables Transfer Agreement, and (iii) by issuing to Originator a
subordinated promissory note in the form of Exhibit B (as such promissory note
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may be amended, supplemented, endorsed or otherwise modified from time to time,
together with all promissory notes issued from time to time in substitution
therefor or renewal thereof, the "Company Note") in an initial principal amount
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equal to the transfer price for such Pool Receivables minus the amount paid
under clauses (i) and (ii) above. The initial purchase price for the Pool
----------- ----
Receivables and Related Property with respect thereto transferred to the Company
on the Closing Date shall be set forth on Exhibit C.
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(c) Subsequent Transfer Price Payments. On each Business Day falling
----------------------------------
after the Closing Date and on or prior to the Transfer Termination Date, on the
terms and subject to the conditions set forth in this Agreement, the Company
shall pay to Originator the transfer price for the Pool Receivables transferred
by Originator to the Company on such Business Day, in cash, to the extent of any
funds made available to the Company for such purpose under Section 3.01 of the
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Receivables Transfer Agreement after satisfying the Company's obligations under
the Receivables Transfer Agreement and after netting any amounts owed to the
Company by the Originator hereunder (including amounts owed under Section 3.2 to
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the extent permitted thereby), and to the extent any of such transfer price
remains unpaid, such remaining portion of such transfer price shall be paid by
increasing the outstanding principal amount of
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the Company Note.
(d) Transfer Reports. On or prior to the 15th day (or if such day is not
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a Business Day, the next Business Day) of each month (the "Reporting Date"),
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Originator agrees to prepare and deliver to the Company a signed report, in
substantially in the form of Exhibit A or in such other form as the parties may
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agree on from time to time with the written approval of the Agent (each, a
"Transfer Report"). Each Transfer Report shall set forth a summary of
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information as to the Pool Receivables transferred hereunder, collections on
Pool Receivables and other charges or credits as may be required by this
Agreement during the month ending on the preceding Month End Date.
(e) Company Note. Servicer shall make all appropriate record keeping
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entries with respect to the Company Note or otherwise to reflect the foregoing
payments and adjustments pursuant to Section 3.2, and Servicer's books and
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records shall constitute rebuttable presumptive evidence of the principal amount
of and accrued interest on the Company Note at any time. Furthermore, Servicer
shall hold the Company Note for the benefit of Originator, and all payments
under the Company Note shall be made to the Servicer for the account of the
applicable payee thereof. Originator hereby irrevocably authorizes Servicer to
mark the Company Note "CANCELLED" and to return the Company Note to the Company
upon the final payment thereof after the occurrence of the Transfer Termination
Date.
II.5. Transfer Termination Date. The "Transfer Termination Date" means the
------------------------- -------------------------
earliest of (a) the date of termination of this Agreement pursuant to
Section 6.2(i) or (ii), (b) the Final Pay Out Date and (c) the date of any Event
- -------------- ----
of Bankruptcy with respect to the Company.
II.6. No Recourse or Assumption of Obligations. Except as specifically
----------------------------------------
provided in this Agreement, the transfer of Pool Receivables and Related
Property under this Agreement shall be without recourse to Originator.
Originator and the Company intend the transactions hereunder to constitute true
absolute transfers and true contributions of Pool Receivables and the Related
Property by Originator to the Company, providing the Company with the full risks
and benefits of ownership of the Pool Receivables and Related Property (such
that the Pool Receivables and the Related Property would not be property of
Originator's estate in the event of Originator's bankruptcy).
The Company shall not have any obligation or liability with respect to any
Pool Receivables or Related Property, nor shall the Company have any obligation
or liability to any Obligor or other
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<PAGE>
customer or client of Originator (including any obligation to perform any of the
obligations of Originator under any Pool Receivables or Related Property).
II.7. Intention of the Parties. It is the express intent of the parties
------------------------
hereto that the transfers of the Pool Receivables and Related Property by
Originator to the Company as contemplated by this Agreement be, and be treated
as, absolute transfers and capital contributions, respectively, and not as
secured loans secured by the Pool Receivables and Related Property. If, however,
notwithstanding the intent of the parties, such transactions are deemed to be
loans, Originator hereby grants to the Company a security interest in all of the
Originator's right, title and interest in and to the Pool Receivables and the
Related Property now existing and hereafter created, and all proceeds thereof,
to secure all of Originator's obligations hereunder.
II.8. Advances by the Company to Originator. The Company may make
-------------------------------------
advances to Originator from time to time if so agreed between such parties and
to the extent the Company has funds available for that purpose after satisfying
its obligations under this Agreement and the Receivables Transfer Agreement. Any
such advances shall be payable upon demand and the Company may net any payments
to be made to Originator hereunder against any such outstanding advances.
ARTICLE III
ADMINISTRATION AND COLLECTION
III.1. Originator to Act as Servicer. Notwithstanding the transfer of
-----------------------------
Pool Receivables pursuant to this Agreement, Originator shall continue to be
responsible for the servicing, administration and collection of the Pool
Receivables, all on the terms set out in (and subject to any rights to terminate
Originator as servicer pursuant to) the Receivables Transfer Agreement.
III.2. Deemed Collections. (a) If on any day the Unpaid Balance of any
------------------
Pool Receivable is (i) reduced as a result of any defective, rejected or
returned merchandise or services, any cash discount, any allowances or billing
errors, any trade-in or trade-up, any adjustment by Originator or any Affiliate
of Originator or any early termination, refinancing, prepayment, consolidation
or replacement of the Contract related to such Pool Receivable, (ii) reduced or
cancelled as a result of a setoff in respect of any claim or dispute by the
Obligor thereof against Originator or any
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<PAGE>
Affiliate of Originator or any other Person (whether such claim arises out of
the same or a related or an unrelated transaction), or (iii) reduced on account
of the obligation of Originator or an Affiliate of Originator to pay to the
related Obligor any rebate or refund, then, on such day, Originator shall be
deemed to have received a Collection of such Pool Receivable in an amount equal
to such reduction or cancellation.
(b) If on any day it is determined that any of the representations or
warranties of Originator set forth in Section 4.4, 4.12 or 4.19 are not true as
------- --- ---- ----
to any Pool Receivable, Originator shall be deemed to have received a Collection
of such Pool Receivable in the amount of the Unpaid Balance of such Pool
Receivable. To the extent that the Company subsequently receives Collections
with respect to any such Pool Receivable, the Company shall pay Originator an
amount equal to the amount so collected.
(c) Not later than the first Business Day after Originator is deemed,
pursuant to this Section 3.2, to have received any Collections, the amount of
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any such Collections shall be applied as a credit for the account of the Company
against the transfer price of Pool Receivables subsequently transferred to the
Company from the Originator hereunder; provided, however, if the transfer price
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for such subsequent transfers of Pool Receivables is less than the amount of
such credit, the amount of such credit (i) shall be paid in cash to the Company
by Originator, or (ii) shall be deducted from the principal amount outstanding
under the Company Note; provided further, however, that at any time (y) on or
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after a Termination Event under the Receivables Transfer Agreement or (z) on or
after the Transfer Termination Date, the amount of any such credit shall be paid
by Originator to the Company by deposit in immediately available funds into such
account as is designated by the Company or the Agent for application by Servicer
to the same extent as if Collections of the applicable Pool Receivable in such
amount had actually been received on such date.
(d) Each Transfer Report shall include a calculation of the aggregate
reductions described in Section 3.2(a) or (b) relating to the Pool Receivables
------------- ---
since the last Transfer Report delivered hereunder.
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III.3. Actions Evidencing Purchases. (a) On or prior to the Closing
----------------------------
Date, Originator shall mark its master data processing records evidencing Pool
Receivables and Contracts with a legend, acceptable to the Company, evidencing
that the Pool Receivables have been transferred and contributed in accordance
with this Agreement. In addition, Originator agrees that from time to time, at
its expense, it shall promptly execute and deliver all further instruments and
documents, and take all further action, that the Company or its assigns may
reasonably request in order to perfect, protect or more fully evidence the
transfers and contributions hereunder, or to enable the Company or its assigns
to exercise or enforce any of their respective rights with respect to the Pool
Receivables and the Related Property. Without limiting the generality of the
foregoing, Originator shall upon the request of the Company or the Agent: (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) mark conspicuously each Contract evidencing
each Pool Receivable with a legend, acceptable to the Company, evidencing that
the related Pool Receivables have been transferred in accordance with this
Agreement.
(b) Originator hereby authorizes the Company or the Agent (i) to file
one or more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Pool Receivables and the
Related Property now existing or hereafter arising in the name of Originator and
(ii) to the extent permitted by the Receivables Transfer Agreement, to notify
Obligors of the assignment of the Pool Receivables and the Related Property.
(c) Without limiting the generality of Section 3.3(a), Originator
-------------
shall, not earlier than six months and not later than three months prior to the
fifth anniversary of the date of filing of the financing statements filed in
connection with the Closing Date or any other financing statement filed pursuant
to this Agreement: (i) execute and deliver and file or cause to be filed
appropriate continuation statements; and (ii) deliver or cause to be delivered
to Agent an opinion of counsel reasonably satisfactory to the Company and the
Agent, in form and substance reasonably satisfactory to the Company and the
Agent, confirming and updating the opinion delivered in connection with the
Closing Date relating to the validity, perfection and priority of the Company's
interests in the Pool Receivables.
III.4. Application of Collections. Any payment by an Obligor in respect
--------------------------
of any indebtedness owed by it to Originator shall, except as otherwise
specified by such Obligor or otherwise required by the related Contract or law,
be applied first, as a
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<PAGE>
Collection of any Pool Receivables of such Obligor, in the order of the age of
such Pool Receivables, starting with the oldest of such Pool Receivables
(provided that if payment is designated by such Obligor for application to
--------
specific Receivables, it shall be applied to such specified Receivables), and
second, to any other indebtedness of such Obligor to Originator.
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III.5. Rights of the Company. Originator hereby authorizes the Company
---------------------
and the Servicer (if other than Originator) or their respective designees to
take any and all steps in Originator's name necessary or desirable, in their
respective determination, to collect all amounts due under any and all Pool
Receivables and Related Property, including endorsing Originator's name on
checks and other instruments representing Collections and enforcing such Pool
Receivables and the provisions of the related Contracts that concern payment
and/or enforcement of rights to payment.
III.6. Responsibilities of Originator. Anything herein to the contrary
------------------------------
notwithstanding, Originator shall repurchase from the Company all merchandise
repossessed by the Company (or the Servicer on its behalf) with respect to Pool
Receivables in default, at a price equal to the price at which such merchandise
is resold to a dealer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ORIGINATOR
Originator, in its capacity as transferor and/or contributor under this
Agreement, hereby makes the representations and warranties set forth in this
Article IV.
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IV.1. Organization and Good Standing. Originator has been duly
------------------------------
organized and is validly existing as a corporation in good standing under the
laws of the State of Delaware, with power and authority to own its properties
and to conduct its business as such properties are presently owned and such
business is presently conducted.
IV.2. Due Qualification. Originator is duly qualified to do business
-----------------
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
its property or the conduct of its business requires such qualification,
licenses or approvals and where the failure to have such qualification, license
or approval would have a Material Adverse Effect.
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<PAGE>
IV.3. Power and Authority; Due Authorization. Originator (a) has all
--------------------------------------
necessary power, authority and legal right (i) to execute and deliver, and
perform its obligations under, each Transaction Document to which it is a party,
and (ii) to generate, own, transfer, contribute and assign Pool Receivables and
Related Property on the terms and subject to the conditions herein provided; and
(b) has duly authorized such execution, delivery and, performance of such
obligations by all necessary corporate action.
IV.4. Valid Transfer or Contribution; Binding Obligations. Each
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transfer or contribution, as the case may be, of Pool Receivables and Related
Property made by Originator pursuant to this Agreement shall constitute a valid
transfer and assignment or contribution, as the case may be, thereof to the
Company, enforceable against creditors of, and purchasers from, Originator; and
this Agreement constitutes, and each other Transaction Document to be signed by
Originator, when duly executed and delivered, will constitute, a legal, valid,
and binding obligation of Originator, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
IV.5. No Violation. The execution, delivery and performance by
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Originator of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated thereby will not (a) conflict
with, result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under (i)
Originator's articles of incorporation or by-laws, or (ii) any indenture, loan
agreement, receivables purchase agreement, mortgage, deed of trust, or other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (b) result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture, loan
agreement, receivables purchase agreement, mortgage, deed of trust, or other
agreement or instrument, other than the Transaction Documents, or (c) violate
any law or any order, rule, or regulation applicable to it of any court or of
any federal, state or foreign regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over it or any of its
properties.
IV.6. No Proceedings. There are no proceedings or investigations
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pending, or threatened, before, and there has been no injunction, decree or
other decision issued or made by, any
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<PAGE>
court, regulatory body, administrative agency, or other tribunal or governmental
agency or instrumentality (i) asserting the invalidity of this Agreement or any
other Transaction Document, (ii) seeking to prevent the transfer or contribution
of the Pool Receivables and Related Property to the Company or any portion
thereof or the consummation of any of the other transactions contemplated by
this Agreement or any other Transaction Document or (iii) seeking any
determination or ruling that might have a Material Adverse Effect.
IV.7. Bulk Sales Act. No transaction contemplated hereby or by any
--------------
other Transaction Documents requires compliance with any bulk sales act or
similar law.
IV.8. Government Approvals. No authorization or approval or other
--------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for Originator's due execution, delivery and
performance of any Transaction Document to which it is a party, except for the
filing of certain UCC financing statements, all of which shall have been duly
made and shall be in full force and effect.
IV.9. Financial Condition. (x) The audited consolidated balance sheets
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of Originator and its consolidated subsidiaries as at September 30, 1996, and
the related statements of income, cash flows and shareholders' equity of
Originator and its consolidated subsidiaries for the fiscal year then ended,
certified by Ernst & Young, independent certified public accountants, and the
consolidated balance sheets of Originator and its consolidated subsidiaries as
at December 31, 1996, and the related statements of income, cash flows and
shareholders' equity of Originator and its consolidated subsidiaries for the
period then ended, copies of each of which have been furnished to the Agent,
fairly present the consolidated financial condition, business, business
prospects and operations of Originator and its consolidated subsidiaries as at
such dates and the consolidated results of the operations of Originator and its
consolidated subsidiaries for the period ended on such dates, all in accordance
with generally accepted accounting principles consistently applied, and (y)
since September 30, 1996 there has been no material adverse change in any such
condition, business, business prospects or operations except as described in
Schedule 6.02(i) to the Receivables Transfer Agreement.
IV.10. Litigation. No injunction, decree or other decision has been
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issued or made by any court, governmental agency or instrumentality thereof that
prevents, and no threat by any person has been made to attempt to obtain any
such decision that would prevent, Originator from conducting a significant part
of
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<PAGE>
its business operations.
IV.11. Margin Regulations. No use of any funds obtained by Originator
------------------
under this Agreement will conflict with or contravene any of Regulations G, T, U
and X promulgated by the Board of Governors of the Federal Reserve System from
time to time.
IV.12. Quality of Title.
----------------
(a) Each Pool Receivable (together with the Related Property) which is
to be transferred or contributed to the Company hereunder is or shall be owned
by Originator, free and clear of any Lien. Whenever the Company or accepts a
transfer or a contribution hereunder, it shall have acquired a valid and
perfected ownership interest (free and clear of any Lien) in all Pool
Receivables generated by Originator and all Collections related thereto, and in
Originator's entire right, title and interest in and to the other Related
Property with respect thereto.
(b) No effective financing statement or other instrument similar in
effect covering any Pool Receivable, any interest therein or any of the Related
Property is on file in any recording office except such as may be filed in favor
of the Company or Originator, as the case may be, in accordance with this
Agreement or in favor of the Transferee (or any assignee thereof) or the Agent
in accordance with the Receivables Transfer Agreement.
IV.13. Accuracy of Information. No information furnished or to be
-----------------------
furnished in writing by Originator to the Company, the Agent or the Transferee
for purposes of or in connection with any Transaction Document will be
inaccurate in any material respect as of the date it was furnished or will be
furnished or (except as otherwise disclosed to the Company, the Agent or the
Transferee at or prior to such time) as of the date as of which such information
is dated, or contained or will contain any material misstatement of fact or
omitted or will omit to state any material fact necessary to make such
information contained therein was made, not materially misleading.
IV.14. Offices. Originator's principal place of business and chief
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executive office is located at the address set forth on Schedule 4.14, and the
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offices where Originator keeps all its books, records and documents evidencing
or included in the Pool Receivables are located at the addresses specified on
Schedule 4.14 (or at such other locations, notified to Servicer (if other than
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Originator) and the Agent in accordance with Section 5.3(d), in jurisdictions
-------------
where all action required by Section 5.3(d) has
--------------
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been taken and completed).
IV.15. Trade Names. Except as disclosed on Schedule 4.15, Originator
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does not use any trade name other than its actual corporate name. From and after
the date that fell five (5) years before the date hereof, Originator has not
been known by any legal name other than its corporate name as of the date
hereof, nor has Originator been the subject of any merger or other corporate
reorganization except as disclosed on Schedule 4.15.
-------------
IV.16. Compliance with Applicable Laws. Originator is in compliance, in
-------------------------------
all material respects, with the requirements of all applicable laws, rules,
regulations, and orders of all governmental authorities (including Regulation Z,
laws, rules and regulations relating to usury, truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt collection
practices and privacy and all other consumer laws applicable to the Pool
Receivables and related Contracts).
IV.17. Solvency. Originator is not insolvent, does not have
--------
unreasonably small capital with which to carry on its business and is able to
pay its debts generally as they become due and payable, and its liabilities do
not exceed its assets.
IV.18. Eligibility of Pool Receivables. Unless otherwise identified to
-------------------------------
the Company on the date of the contribution and/or transfer hereunder, each Pool
Receivable contributed and/or transferred hereunder is on the date of
contribution and/or transfer an Eligible Receivable and, so long as Originator
is the Servicer, each Pool Receivable included as an Eligible Receivable in the
calculation of Net Pool Balance is an Eligible Receivable as of the date of such
calculation.
ARTICLE V
COVENANTS OF ORIGINATOR
V.1. Affirmative Covenants. From the date hereof until the Final Pay
----------------------
Out Date, Originator will, unless the Company and the Agent shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with
--------------------------
all applicable laws, rules, regulations and orders, including those with respect
to the Pool Receivables and the related Contracts.
(b) Preservation of Corporate Existence. Preserve and maintain its
-----------------------------------
corporate existence, rights, franchises and privileges
-12-
<PAGE>
in the jurisdiction of its incorporation, and qualify and remain qualified in
good standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification could reasonably be expected to have a Material Adverse Effect.
(c) Audits. (i) At any time and from time to time during regular
------
business hours, upon reasonable notice, permit the Agent, or its agents or
representatives, (A) to examine and make copies of and abstracts from all books,
records and documents (including computer tapes and disks) in the possession or
under the control of such party relating to Pool Receivables, including the
related Contracts and purchase orders and other agreements, and (B) to visit the
offices and properties of Originator for the purpose of examining such
materials, and to discuss matters relating to Pool Receivables or Originator's
performance hereunder with any of the officers or employees of such party having
knowledge of such matters; and (ii) without limiting the provisions of clause
------
(i) next above, from time to time on request of the Agent (given not more than
- ---
once in each calendar year so long as no Termination Event or Unmatured
Termination Event shall have occurred and be continuing under the Receivables
Transfer Agreement), permit certified public accountants or other auditors
acceptable to the Agent to conduct, at Originator's expense, a review of the
Originator's books and records with respect to the Pool Receivables.
(d) Keeping of Records and Books of Account. Maintain and implement
---------------------------------------
administrative and operating procedures (including an ability to recreate
records evidencing Pool Receivables in the event of the destruction of the
originals thereof), and keep and maintain, all documents, books, records and
other information reasonably necessary or advisable for the collection of all
Pool Receivables (including records adequate to permit the daily identification
of each new Pool Receivable and all Collections of and adjustments to each
existing Pool Receivable).
(e) Performance and Compliance with Pool Receivables and Contracts. 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 Contracts
related to the Pool Receivables and all purchase orders and all other agreements
related to such Pool Receivables.
(f) Location of Records. Keep its chief place of business and chief
-------------------
executive office, and the offices where it keeps its records concerning or
related to Pool Receivables and all purchase orders and other agreements related
to the Pool Receivables, all related Contracts and all required documents
relating thereto), at
-13-
<PAGE>
the address(es) referred to in Schedule 4.14 or, upon 30 days' prior written
-------------
notice to the Company and the Agent, at such other locations in jurisdictions
where all action required by the Servicer or the Agent to continue the
perfection of the Company's and the Transferee's interests in the Pool
Receivables and the Related Property have been taken.
(g) Credit and Collection Policies. Comply in all material respects
------------------------------
with its Credit and Collection Policy in regard to each Pool Receivable and the
related Contract.
(h) Collections. Instruct all Obligors to cause all Collections of
-----------
Pool Receivables to be sent directly to a Post Office Box, and deposit all
Collections received into a Designated Account within one Business Day after
receipt.
(i) Transaction Documents. Perform and comply in all material respects
---------------------
with all of its covenants and agreements set forth in the Transaction Documents
to which it is a party.
V.2. Reporting Requirements. From the date hereof until the first day
----------------------
following the Final Pay Out Date, Originator shall, unless the Agent and the
Company shall otherwise consent in writing, furnish to the Company and the Agent
the information set forth in Section 7.02 of the Receivables Transfer Agreement
------------
(to the extent such information relates to Originator).
V.3. Negative Covenants. From the date hereof until the Final Pay Out
------------------
Date, unless the Agent and the Company shall otherwise consent in writing, it
shall not:
(a) Sales, Liens, Etc. Except as otherwise provided herein, sell,
-----------------
assign (by operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Lien upon or with respect to, any Pool Receivable or Related
Property, or any interest therein, or any post office box or account to which
any Collections of any Pool Receivables are sent, or any right to receive income
from or in respect thereof, or the Company Note or any shares of capital stock
of the Company.
(b) Extension or Amendment of Pool Receivables. Extend, amend,
------------------------------------------
terminate or otherwise modify the terms of any Pool Receivable, or amend,
modify, terminate or waive any term or condition of any Contract related
thereto, unless permitted pursuant to Section 8.02 of the Receivables Transfer
Agreement.
(c) Change in Business or Credit and Collection Policy. Make any change
--------------------------------------------------
in the character of its business or in its Credit and Collection Policy, which
change would, in either case, impair
-14-
<PAGE>
the collectibility of any Pool Receivable (other than an immaterial portion
thereof) or otherwise adversely affect the interests, rights or remedies of the
Company or the Transferee under any Transaction Document.
(d) Change in Name. Change its corporate name or the name under or by
--------------
which it does business, unless Originator shall have given the Company and the
Agent at least 30 days' prior written notice thereof and unless, prior to any
such change in name, Originator shall have filed (or shall have caused to be
filed) such financing statements or amendments as the Servicer or the Agent
determines may be necessary to continue the perfection of the Company's and the
Transferee's interest in the Pool Receivables and Related Property.
(e) Negative Pledges. Enter into or assume any agreement (other than
----------------
this Agreement and the other Transaction Documents) prohibiting the creation or
assumption of any Lien upon any Pool Receivables or Related Property, whether
now owned or hereafter acquired by Originator, as contemplated by the
Transaction Documents, or otherwise prohibiting or restricting any transaction
contemplated hereby or by the other Transaction Documents.
(f) Mergers, Acquisitions, Sales, etc. Be a party to any merger or
---------------------------------
consolidation, or purchase or otherwise acquire all or substantially all of the
assets or any stock of any class of, or any partnership or joint venture
interest in, any other Person, or, except in the ordinary course of its
business, sell, transfer, convey or lease all or any substantial part of its
assets, or permit any Subsidiary to do any of the foregoing except for any such
merger or consolidation, sale, transfer, conveyance, lease or assignment of or
by any wholly-owned Subsidiary (other than the Company) into Originator or into,
with or to any other wholly-owned Subsidiary, any such purchase or other
acquisition by Originator or any wholly-owned Subsidiary (other than the
Company) of the assets or stock of any wholly-owned Subsidiary and pursuant to
which Originator is the survivor, provided that no Termination Event or
Unmatured Termination Event has occurred and is continuing or would result
therefrom.
(g) Corporate Separateness. Take any action that is inconsistent with
----------------------
the terms of Section 7.04 of the Receivables Transfer Agreement.
-15-
<PAGE>
ARTICLE VI
TRANSFER TERMINATION EVENTS
VI.1. Transfer Termination Events. Each of the following events or
---------------------------
occurrences described in this Section 6.1 shall constitute a "Transfer
Termination Event":
(a) A Termination Event shall have occurred under the Receivables
Transfer Agreement and the Agent shall have declared the Commitment Termination
Date to have occurred; or
(b) Originator shall fail to make any payment or deposit to be made by
it hereunder when due and such failure shall remain unremedied for one Business
Day; or
(c) Any representation or warranty made or deemed to be made by
Originator (or any of its officers) under or in connection with this Agreement,
any other Transaction Document or any other information or report delivered
pursuant hereto or thereto shall prove to have been false or incorrect in any
material respect when made or deemed made and, if such breach of representation
or warranty is capable of cure, it shall have continued for thirty days after
written notice thereof shall have been given by the Servicer, the Agent or the
Company to Originator; or
(d) Originator shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and any such failure shall remain unremedied for thirty days after
written notice thereof shall have been given by Servicer, the Agent or the
Company to Originator; or
(e) An Event of Bankruptcy shall have occurred and remained continuing
with respect to Originator.
VI.2. Remedies.
--------
(i) Automatic Termination. The agreement of the Originator to transfer
---------------------
Pool Receivables hereunder, and the agreement of the Company to accept Pool
Receivables from the Originator hereunder, shall terminate automatically (and
the Transfer Termination Date shall be deemed to have occurred) on the
occurrence of a Transfer Termination Event of the type described in Section
6.1(e).
(ii) Optional Termination. Upon the occurrence of a Transfer
--------------------
Termination Event, the Company, with the consent of the
-16-
<PAGE>
Agent, shall have the option by notice to Originator (with a copy to the Agent)
to declare the Transfer Termination Date to have occurred.
(iii) Remedies Cumulative. Upon any termination pursuant to this
-------------------
Section 6.2, the Company shall have, in addition to all other rights and
- -----------
remedies under this Agreement or otherwise, all other rights and remedies
provided under the UCC of each applicable jurisdiction and other applicable
laws, which rights shall be cumulative.
ARTICLE VII
INDEMNIFICATION
VII.1. Indemnities by Originator. Without limiting any other rights
-------------------------
that any such Person may have hereunder or under applicable law, Originator
hereby agrees to indemnify the Company and each of its successors, transferees
and assigns and all officers, directors, shareholders, controlling persons,
employees and agents of any of the foregoing (each of the foregoing Persons
being individually called a "First Tier Indemnified Party"), forthwith on
----------------------------
demand, from and against any and all damages, losses, claims, judgments,
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements (collectively, the "First Tier Indemnified Amounts") awarded
------------------------------
against or incurred by any of them arising out of or as a result of the
following:
(a) the transfer by Originator of an interest in any Pool Receivable or
Related Property to any Person other than the Company;
(b) the breach of any representation or warranty made by Originator
pursuant to this Agreement, or any information or report delivered by Originator
pursuant hereto or thereto which shall have been false or incorrect in any
respect when made or deemed made;
(c) the failure by Originator to comply with any applicable law, rule
or regulation with respect to any Pool Receivable or the related Contract, or
the nonconformity of any Pool Receivable or the related Contract with any such
applicable law, rule or regulation;
(d) the failure to vest and maintain vested in the Company an ownership
interest in the Pool Receivables generated by Originator and Related Property
free and clear of any Lien, other
-17-
<PAGE>
than a Lien arising solely as a result of an act of the Company, whether
existing at the time of the transfer or contribution of such Pool Receivables or
at any time thereafter;
(e) any claim resulting from the sale of the merchandise or services
related to any Pool Receivable or the furnishing or failure to furnish such
merchandise or services; or any products liability claim arising out of or in
connection with merchandise or services that are the subject of any Pool
Receivable;
(f) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of transfers hereunder or the ownership of, or
in respect of, any Pool Receivables, Related Property or Contract;
(g) any tax or governmental fee or charge (other than any tax band upon
or measured by net income), all interest and penalties thereon or with respect
thereto, and all out-of-pocket costs and expenses, including the reasonable fees
and expenses of counsel in defending against the same, which may arise by reason
of the transfer, contribution or ownership of the Pool Receivables or any
Related Property connected with any such Pool Receivables;
(h) any failure of Originator to perform its duties or obligations in
accordance with the provisions of this Agreement; and
(i) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of the Obligor to the payment of any Pool Receivable (including,
without limitation, a defense based on such Pool Receivable or the related
Contract not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms);
excluding, however, (i) First Tier Indemnified Amounts to the extent resulting
- --------- -------
from gross negligence or willful misconduct on the part of a First Tier
Indemnified Party and (ii) any indemnification which has the effect of recourse
to Originator for non-payment of the Pool Receivables due to credit reasons
(except as otherwise specifically provided in this Agreement).
If for any reason the indemnification provided above in this Section
-------
7.1 is unavailable to a First Tier Indemnified Party or is insufficient to hold
- ---
such First Tier Indemnified Party harmless, then Originator shall contribute to
the amount paid or payable by such First Tier Indemnified Party as a result of
such loss, claim, damage or liability to the maximum extent permitted under
applicable law.
-18-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
VIII.1. Amendments, Waivers, etc. No amendment of this Agreement or
------------------------
waiver of any provision hereof or consent to any departure by either party
therefrom shall be effective without the written consent of the party that is
sought to be bound. Any such waiver or consent shall be effective only in the
specific instance given. No failure or delay on the part of either party 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 remedies herein provided are cumulative and not exclusive of any
remedies provided by law. Originator acknowledges that institutions providing
financing (by way of accepting transfers of Pool Receivables or interests
therein) pursuant to the Receivables Transfer Agreement may rely upon the terms
of this Agreement, and the terms of this Agreement may not be amended, nor any
material waiver of those terms be granted, without the consent of the Agent.
VIII.2. Notices, etc. All notices and other communications provided for
------------
hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by express
mail or courier or by certified mail, postage-prepaid, or by facsimile, to the
intended party at the address or facsimile number of such party set forth under
its name on the signature pages hereof or at such other address or facsimile
number as shall be designated by such party in a written notice to the other
parties hereto. All such notices and communications shall be effective, (i) if
personally delivered or sent by express mail or courier or if sent by certified
mail, when received, (ii) if sent by certified mail, three Business Days after
having been deposited in the mail, postage prepaid and (iii) if transmitted by
facsimile, when sent, receipt confirmed by telephone or electronic means.
VIII.3. Binding Effect; Assignability. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns and shall also, to the extent provided herein, inure to
the benefit of the parties to the Receivables Transfer Agreement. Originator may
not assign its rights hereunder or any interest herein without the prior consent
of the Company and the Agent. Originator acknowledges that the Company's rights
under this Agreement may be assigned to
-19-
<PAGE>
the Transferee under the Receivables Transfer Agreement and consents to such
assignment and to the exercise of those rights directly by the Transferee or the
Agent on its behalf.
VIII.4. Survival. The rights and remedies with respect to any breach of
--------
any representation and warranty made by Originator or the Company pursuant to
Article IV and the indemnification and payment provisions of Article VII and
- ---------- -----------
Section 8.6 shall be continuing and shall survive any termination of this
- -----------
Agreement.
VIII.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF NEW YORK.
VIII.6. Costs, Expenses and Taxes. In addition to its obligations under
-------------------------
Article VII, Originator agrees to pay on demand (a) all costs and expenses
- -----------
incurred by the Company and its assigns in connection with the enforcement of,
or any actual or claimed breach of, this Agreement, including the reasonable
fees and expenses of counsel to any of such Persons incurred in connection with
any of the foregoing or in advising such Persons as to their respective rights
and remedies under this Agreement in connection with any of the foregoing and
(b) all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement.
VIII.7. No Proceedings. Originator agrees, for the benefit of the
--------------
parties to the Receivables Transfer Agreement, that it will not institute
against the Company or the Transferee, or join any other Person in instituting
against the Company or the Transferee, any Event of Bankruptcy until one year
and one day after the Final Pay Out Date (in relation to the Company) or for one
year and one day after the date when the latest maturing Commercial Paper Note
is paid (in relation to the Transferee). In addition, all amounts payable by the
Company to Originator pursuant to this Agreement shall be payable solely from
funds available for that purpose (after the Company has satisfied all
obligations then due and owing under the Receivables Transfer Agreement).
VIII.8. Waiver of Jury Trial. EACH PARTY HERETO EXPRESSLY WAIVES ANY
--------------------
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT.
VIII.9. Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts and by different parties in separate 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.
-20-
<PAGE>
-21-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
IKON CAPITAL, INC.
By:
-------------------------------------------
Name:
Title:
1738 Bass Road
Macon, Georgia 31210
Attention: Harry C. Kozee
Telephone: (912) 471-2306
Facsimile: (912) 471-2369
with a copy to:
IKON Office Solutions, Inc.
825 Duportail Road
Wayne, Pennsylvania 19087
Attention: Jack Quinn
Facsimile: (610) 296-3248
IKON FUNDING, INC.
By:
-------------------------------------------
Name:
Title:
501 Silverside Road, Suite 28
Wilmington, Delaware 19809
Attention: Robert McLain
Facsimile: (302) 798-2779
S-1
<PAGE>
Acknowledged and consented by:
IKON CAPITAL, INC., as Servicer
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
1738 Bass Road
Macon, Georgia 31210
Attention: Harry C. Kozee
Telephone: (912) 471-2306
Facsimile: (912) 471-2369
with a copy to:
IKON Office Solutions, Inc.
825 Duportail Road
Wayne, Pennsylvania 19087
Attention: Jack Quinn
Facsimile: (610) 296-3248
S-2
<PAGE>
SCHEDULE 4.14
OFFICE LOCATIONS
IKON Capital, Inc.
1738 Bass Road
Macon, Georgia 31210
<PAGE>
SCHEDULE 4.15
TRADE NAMES
None.
<PAGE>
EXHIBIT A
FORM OF TRANSFER REPORT
(See attached)
<PAGE>
EXHIBIT B
FORM OF COMPANY NOTE
(See attached)
<PAGE>
EXHIBIT C
CLOSING DATE REPORT
I. Calculation of Fair Market Value of Pool Receivables transferred on
Closing Date:
(i) aggregate unpaid scheduled debt service or lease payments (excluding
financing charges): $_______________, minus
-----
(ii) allocated loss contingency reserve: $_____________
Total Fair Market Value: $_______________
II. Fair Market Value of contributed Pool Receivables: $______________
Fair Market Value of transferred Pool Receivables: ____________
(i) Outstanding Transferee's Investment under Original Receivables
Agreement: $______________
(ii) Cash transfer price: $______________
(iii) Initial principal amount of Company Note: $_____________
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
The registrant is IKON Office Solutions, Inc., an Ohio corporation, which has no
parent. The following sets forth information with respect to IKON's subsidiaries
as of February 15, 1997
<TABLE>
<CAPTION>
State or other
jurisdiction of
% Voting Securities Incorporation or
Subsidiary Owned (by whom) organization
- ---------- --------------- ------------
<S> <C> <C>
Alco Cash Management, Inc. 100% IKON Delaware
Alco Standard Acquisition Capital Corporation 100% IKON Delaware
Alco Venture Capital Company 100% IKON Delaware
BCS Integration, Inc. (USConnect Salt Lake) 100% IKON Utah
Chesterbrook Insurance Limited 100% IKON Bermuda
ColourComp Corporation 100% IKON Arizona
The Computer Group, Inc. (USConnect South Carolina) 100% IKON South Carolina
Connectivity, Inc. (USConnect Portland) 100% IKON Oregon
Executive Automation Consultants, Inc. (USConnect Kansas) 100% IKON Kansas
HBM Technology Group, Inc. 100% IKON Connecticut
IKON, Inc. 100% IKON Delaware
IKON Office Solutions Foundation, Inc. 100% IKON Pennsylvania
Innerset, Inc. (USConnect Detroit) 100% IKON Michigan
Integra Technology International, Inc. 100% IKON Arizona
Integra Techsoft Ltd. 100% INTEGRA India
Kenwood Associates, Inc. (USConnect Chicago) 100% IKON Illinois
MDR Management Corporation 100% IKON Delaware
Partners Securities Company 100% IKON Delaware
Real World Systems, Inc. (USConnect Philadelphia) 100% IKON Pennsylvania
Strategy One, Inc. (USConnect Pittsburgh) 100% IKON Pennsylvania
Sunrise Computer Systems, Inc. (USConnect Atlanta) 100% IKON Georgia
Thaylor Company 100% IKON
Universal Networks, Inc. 100% IKON Illinois
Upshur Coals Corporation 100% IKON West Virginia
Mon-Wal, Inc. d/b/a The Waldec Group 100% IKON Florida
IKON Office Solutions Holding Company (IOSHC) 100% IKON Delaware
Alco Office Products Group, Inc. (AOPG). 100% IOSHC Delaware & U.K.
IKON Office Solutions Group PLC (IOSG) 100% AOPG England
IKON Office Solutions Europe PLC (IOSE) 100% IOSG England
IKON Office Solutions PLC (IOSPLC) 100% IOSE England
IKON Capital PLC Ltd. 100% IOSPLC England
Kafevend PLC 100% IOSPLC England
Photostatic (EMG) Ltd. 100% IOSPLC England
Ultimate Office Products 100% IOSPLC England
Advance Reprographics Limited 100% IOSPLC England
Fronk Burosysteme GmbH 100% IOSPLC Germany
Depot Internacional, Inc. 100% IOSHC Florida
Erskine House Group, Inc. 100% IOSHC Delaware
IKON-Baja (U.S.) Corporation 100% IOSHC Delaware
IKON Baja, S.A. DE C.V. 49.99% IKNA/.01% IKON Mexico
IKON Brands, Inc. 100% IOSHC Delaware
IKON Capital, Inc.(IKCAP) 100% IOSHC Delaware
IKON Funding, Inc. 100% IKCAP Delaware
IKON Capital, Inc.(Canada) 100% IOSHC Canada
IKON Denmark (ID) 100% IOSHC Denmark
IKON Capital, Inc. 100% ID Denmark
</TABLE>
<PAGE>
Page - 2 -
<TABLE>
<S> <C> <C>
IKON North America, Inc. (IKNA) 100% IOSHC Delaware
IKON Office Solutions Australia Pty Ltd 100% IKNA Australia
IKON Office Solutions, Inc./Bureau-Tech IKON, Inc. 100% IKNA Canada
Alco Dulin Limited 100% IOSC Ireland
CGS Microtechnologies (USConnect Montreal) 100% IOSC Canada
Canadian Legal Copies, Inc. (CLC) 100% CGS Canada
Montreal Legal Copies 100% CLC Canada
Toronto Legal Copies 100% CLC Canada
Connections Plus (USConnect Vancouver) (CP) 100% IOSC Canada
429840 B.C. Ltd. 100% CP Canada
Golf Pro Ltd. 100% CP Canada
KNARF Holdings, Ltd. d/b/a NTI, Inc. 100% IOSC Canada
M.A.C Distributors Limited 100% IOSC Canada
Paul's Business Machine Service, Ltd. 100% IOSC Canada
Prime Copy Office Systems Ltd. 100% IOSC Canada
Proterm Data Systems Limited (USConnect Ottawa) 100% IOSC Canada
Proterm Toronto, Inc. (USConnect Toronto) 100% PDSL Canada
Sunstar Office Equipment Ltd. 100% PDSL Canada
Superior Machines De Bureau 100% PDSL Canada
IKON de Mexico, S.A. de C.V. (IDM) 49.99% IKNA/.01% IKON Mexico
IKON Servicos, S.A. de C.V. (IS) 49.99% IDM/.01% IKNA Mexico
IKON Copiroyal, S.A. de C.V. 49.99% IDM/.01% IS Mexico
IKON Inmuebles 49.99% IDM/.01% IS Mexico
Pimeau B.V. 100% IKNA France
IKON Office Solutions (Holdings) Francs 100% PIMEAU France
Bureautique & Systemes Technoloq:ques S.A. 100% IOSF France
Bureautique Systemes S.A. 100% IOSF France
IKON Office Solutions SudQuest S.A. 100% IOSF France
IKON Office Solutions STR S.A. 100% IOSSQ France
STR Adour S.A. 100% IOSSQ France
SOMEREP S.A. 100% IOSF France
SOMEREP 30 100% SOMEREP S.A. France
SOMEREP 84 100% SOMEREP S.A. France
IMPACT 100% IOSF France
IRIS 100% IMPACT France
Occasion Bureautique 100% IMPACT France
IKON Realty, Inc. 100% IOSHC Delaware
Office Group, Inc. 100% IOSHC Delaware
Office Products, Inc. 100% IOSHC Delaware
Office World Trade, Inc. 100% IOSHC Florida
</TABLE>
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the references to our firm under the captions "Experts" and
"Selected Financial Data" in the Registration Statement (Form S-4) and related
Prospectus of IKON Office Solutions, Inc. (formerly Alco Standard Corporation)
for the registration of 10,000,000 shares of its common stock and to the
incorporation by reference therein of our reports dated October 16, 1996 (except
for Note 2, as to which the date is November 20, 1996), with respect to the
consolidated financial statements of IKON Office Solutions, Inc., incorporated
by reference in its Annual Report (Form 10-K) for the year ended September 30,
1996 and the related financial statement schedule included therein, filed with
the Securities and Exchange Commission.
Philadelphia, Pennsylvania /s/ Ernst&Young LLP
April 4, 1997 -------------------------------
Ernst & Young
<PAGE>
Exhibit 24
CERTIFICATION
I, Karin M. Kinney, Secretary of IKON Office Solutions, Inc., do hereby certify
that the following resolutions were duly passed by the Board of Directors of the
Corporation on November 7, 1996 and that such resolutions are, as of the date
hereof, in full force and effect:
RESOLVED, that each of the officers and directors of the corporation is
hereby authorized to appoint William F. Drake, Jr., Karin M. Kinney and
Michael J. Dillon as his or her attorneys-in-fact on behalf of each of
them each attorney-in-fact with the power of substitution, to execute
on such officer's or director's behalf, one or more registration
statements and annual reports of the corporation for filing with the
Securities and Exchange Commission ("SEC"), and any and all amendments
to said documents which said attorney may deem necessary or desirable
to enable the corporation to register the offering of (i) serial
preferred stock; (ii) common stock; (iii) debt securities; and/or (iv)
participation interest in employee benefit plans under the Federal
securities law, and to further enable the corporation to file such
reports as are necessary under Section 13 or 15(d) of the Securities
Exchange Act of 1934 and such other documents as are necessary to
comply with all rules, regulations or requirements of the SEC in
respect thereto; and
FURTHER RESOLVED, that any officer of the corporation is hereby
authorized to do and perform, or cause to be done or performed, any and
all things and to execute and deliver any and all agreements,
certificates, undertakings, documents or instruments necessary or
appropriate in order to carry out the purpose and intent of the
foregoing resolutions, it to be conclusively presumed from the taking
of any such action or execution of any such document that it has been
authorized hereby.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of April, 1997.
/s/ Karin M. Kinney
--------------------------------
Karin M. Kinney
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of IKON Office
Solutions, Inc. ("IKON").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf, the foregoing registration statement on
Form S-4, and any and all amendments thereto, for filing with the Securities and
Exchange Commission ("SEC"), and to do all such other acts and execute all such
other documents which said attorney may deem necessary or desirable.
Dated this 10th day of April, 1997
/s/ JOHN E. STUART
-----------------------------
John E. Stuart
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of IKON Office
Solutions, Inc. ("IKON").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf, the foregoing registration statement on
Form S-4, and any and all amendments thereto, for filing with the Securities and
Exchange Commission ("SEC"), and to do all such other acts and execute all such
other documents which said attorney may deem necessary or desirable.
Dated this 10th day of April, 1997
/s/ KURT E. DINKELACKER
-------------------------------
Kurt E. Dinkelacker
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of IKON Office
Solutions, Inc. ("IKON").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf, the foregoing registration statement on
Form S-4, and any and all amendments thereto, for filing with the Securities and
Exchange Commission ("SEC"), and to do all such other acts and execute all such
other documents which said attorney may deem necessary or desirable.
Dated this 10th day of April, 1997
/s/ JAMES R. BIRLE
-----------------------------
James R. Birle
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of IKON Office
Solutions, Inc. ("IKON").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf, the foregoing registration statement on
Form S-4, and any and all amendments thereto, for filing with the Securities and
Exchange Commission ("SEC"), and to do all such other acts and execute all such
other documents which said attorney may deem necessary or desirable.
Dated this 10th day of April, 1997
/s/ WILLIAM F. DRAKE, JR.
--------------------------------
William F. Drake, Jr.
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of IKON Office
Solutions, Inc. ("IKON").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf, the foregoing registration statement on
Form S-4, and any and all amendments thereto, for filing with the Securities and
Exchange Commission ("SEC"), and to do all such other acts and execute all such
other documents which said attorney may deem necessary or desirable.
Dated this 10th day of April, 1997
/s/ FREDERICK S. HAMMER
-----------------------------
Frederick S. Hammer
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that she is a Director of IKON Office
Solutions, Inc. ("IKON").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney and Michael J. Dillon as her attorneys-in-fact, each with the power of
substitution, to execute, on her behalf, the foregoing registration statement on
Form S-4, and any and all amendments thereto, for filing with the Securities and
Exchange Commission ("SEC"), and to do all such other acts and execute all such
other documents which said attorney may deem necessary or desirable.
Dated this 10th day of April, 1997
/s/ BARBARA BARNES HAUPTFUHRER
------------------------------------
Barbara Barnes Hauptfuhrer
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of IKON Office
Solutions, Inc. ("IKON").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf, the foregoing registration statement on
Form S-4, and any and all amendments thereto, for filing with the Securities and
Exchange Commission ("SEC"), and to do all such other acts and execute all such
other documents which said attorney may deem necessary or desirable.
Dated this 10th day of April, 1997
/s/ RICHARD A. JALKUT
-----------------------------
Richard A. Jalkut
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of IKON Office Solutions, Inc. and
subsidiaries and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 61,423,000
<SECURITIES> 0
<RECEIVABLES> 628,139,000
<ALLOWANCES> 41,043,000
<INVENTORY> 433,533,000
<CURRENT-ASSETS> 1,805,430,000
<PP&E> 638,090,000<F1>
<DEPRECIATION> 343,887,000<F2>
<TOTAL-ASSETS> 4,377,298,000
<CURRENT-LIABILITIES> 1,144,657,000
<BONDS> 1,464,559,000
0
290,170,000
<COMMON> 597,118,000
<OTHER-SE> 517,169,000
<TOTAL-LIABILITY-AND-EQUITY> 4,377,298,000
<SALES> 638,828,000
<TOTAL-REVENUES> 1,140,434,000
<CGS> 404,934,000
<TOTAL-COSTS> 641,052,000<F3>
<OTHER-EXPENSES> 417,970,000<F4>
<LOSS-PROVISION> 7,430,000<F5>
<INTEREST-EXPENSE> 8,201,000
<INCOME-PRETAX> 73,211,000
<INCOME-TAX> 28,552,000
<INCOME-CONTINUING> 44,659,000
<DISCONTINUED> 20,151,000
<EXTRAORDINARY> (12,156,000)
<CHANGES> 0
<NET-INCOME> 52,654,000
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
<FN>
<F1>Includes equipment on operating leases, at cost, of $262,353,000
<F2>Includes accumulated depreciation for equipment on operating leases of
$166,527,000
<F3>Inculdes Finance Subsidiaries interest of $20,011,000
<F4>Represents selling, general and administrative expenses.
<F5>Continuing operations only.
</FN>
</TABLE>
