SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 31, 1998
OSICOM TECHNOLOGIES, INC.
(Exact name of Registrant as specified in charter)
Commission File number: 1-15810
New Jersey 22-2367234
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2800 28th Street, Suite 100
Santa Monica, California 90405
(Address of principal executive offices) (Zip Code)
(310) 581-4030
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS
Transamerica Vendor Financial Corporation ("Transamerica"), a division of the
NYSE-listed financial services firm, entered into an agreement to provide the
Registrant's customers lease financing for purchases of its transmission and
network access products. Leases will be offered by the newly-formed Osicom
Finance, LLC, a joint venture between Osicom and Dovertower Capital, LLC, a New
York based merchant investment banking firm, with financing provided by
Transamerica. Transamerica has the option to acquire up to one-third of OsiFin.
The five year agreement provides for a $25 million credit facility subject to
customer credit approval by Transamerica. Transamerica has the right of first
refusal to increase the total facility to $200 million. The agreement may be
renewed for an additional five years at the end of the initial term.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10.10 Program Agreement dated July 31, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OSICOM TECHNOLOGIES, INC.
(registrant)
DATE: August 5, 1998 By: /s/ John H. Gorman
---------------------------
John H. Gorman
Chief Financial Officer,
Secretary
EXHIBIT 10.10
PROGRAM AGREEMENT
Agreement made to be effective as of the 31st day of July, 1998 (the
"Agreement"), by and between Osicom Technologies, Inc., 2800 28th Street, Suite
100, Santa Monica, California 90405 (hereinafter referred to as "Vendor") and
Transamerica Vendor Financial Services Corporation located at 1701 Golf Road,
Rolling Meadows, Illinois 60008 (hereinafter referred to as "TVFS").
WHEREAS, Vendor is a provider of high technology equipment
("Equipment") and services to commercial, federal and municipal customers
("Customers"); and
WHEREAS, some of the Customers would prefer to lease as opposed to
purchase said Equipment; and
WHEREAS, Vendor is willing to promote the lease of the Equipment to
Customers as further outlined herein, and Osicom Finance LLC ("OsiFin") is
willing to provide such leasing alternative to said Customers and TVFS is
willing to provide lease financing.
NOW THEREFORE, in consideration of the above premises and for other
good and valuable consideration, the receipt and sufficiency of which is
acknowledged, the parties agree as follows:
1. EXCLUSIVE PROVIDER. Vendor agrees to use, promote, and introduce
TVFS as its exclusive source of financing for all their potential Customers,
including offering TVFS the first right of refusal to provide Lease financing to
its Customers. TVFS shall have the exclusive right to provide lease financing
for the initial $25 million credit facility for all Vendor manufactured
equipment, which may include complementary products and services, and will agree
to provide such financing for such transactions except for credit reasons. TVFS
will also have the first right of refusal to expand the facility up to $200
million and shall notify Vendor of its intent to expand the facility within
sixty (60) days after $15 million in fundings.
2. VENDOR SERVICES. Vendor has agreed to offer to TVFS the right of
first refusal to provide lease financing to its Customers. As may be required by
TVFS, with respect to certain Leases and Customers whom Vendor refers to TVFS
for lease financing, Vendor will perform the following services:
A. Arranging the transaction and introducing TVFS to the Customer and
promoting TVFS as Vendor's primary source of lease financing;
B. Assist TVFS in the planning, structuring and implementation of the
acquisition and lease of the Equipment;
C. Assist in the administration of the closing of the transaction,
including obtaining all documentation which TVFS may require to purchase the
Equipment and to lease it to the Customer; and
D. Provide TVFS certain information regarding the transaction, the
Customer, and the Equipment.
3. CONDITIONS OF APPROVAL. Upon referral of a potential Customer, TVFS
shall have the right (prior to any other person or entity) to enter into a Lease
with that Customer. Vendor agrees that the Customers who are referred to TVFS
will need to meet certain credit criteria that TVFS has established to determine
whether a Customer will be categorized as a "rated" or "non-rated" credit. TVFS
is under no obligation and will not be required to enter into all of the Leases
that are offered. However, TVFS will notify Vendor of TVFS' decision, in
writing, within three (3) business days after TVFS has received all the credit
and financial information reasonably needed regarding a Customer. If TVFS
decides not to accept a particular Customer, or Lease that has been referred, or
if TVFS does not respond with an approval or reasonable request for additional
information within three (3) business days, then Vendor will be free to refer
the Customer or Lease to another source. TVFS will, in cooperation with OSIFIN
and Vendor, establish a credit policy. The credit policy may be revised from
time to time as portfolio experience and market conditions dictate.
4. FUNDING. TVFS will fund the purchase price to Vendor when TVFS
receives the following, all of which need to be in a form that is acceptable to
TVFS: (i) the executed original Master Lease document, with any add-on schedule,
substantially in the form attached hereto as Exhibit A (copy of lease schedule);
(ii) the invoice with a detailed description of the Equipment, to TVFS; (iii)
the Customer's written acceptance of the Lease with an accompanying description
of the Equipment; and (iv) any other documents which TVFS may reasonably require
under the terms of its approval of a Customer.
From time to time, Vendor may request in writing that TVFS fund a Lease and
purchase the Equipment for lease from Vendor without the benefit of TVFS'
standard written confirmation of delivery and acceptance by a Customer. When
Vendor makes such request and TVFS funds a Lease without receiving a written
delivery and acceptance confirmation from the Customer, Vendor agrees that
Vendor will purchase the Lease from TVFS upon TVFS' request in the event the
Customer does not accept the Equipment or defaults on its payment obligations to
TVFS.
5. ORIGINATION FEE. Vendor understands that OsiFin will use TVFS as its
sole funding source. In consideration of the above services rendered by Vendor,
OsiFin agrees that Vendor may, on a case by case basis, include in the lease
pricing an amount that would be paid to the Vendor as a Commission by OsiFin.
TVFS shall have no deemed or actual obligation to pay Vendor any Commission
for any other transactions (such as renewals) entered into, either (a) by any
Lessee under a Lease for which a Commission has already been paid; or (b) any
subsequent Lessee of the Equipment which is also the subject of any Lease,
except as may be specifically agreed to in writing by TVFS and Vendor.
6. STANDARD RATES. TVFS, along with OsiFin will provide Vendor's sales
force with Standard Rates. These Rates will be indexed to like-term U.S
Treasuries plus seventy-five (75) basis points unless TVFS notifies Vendor of a
change. OsiFin has reserved the right, with written notification and consent by
TVFS, to modify the Standard Rates as may be necessary. TVFS may also approve
pricing a proposed Transaction at a rate which differs from the then current
Standard Rate. TVFS will honor the Standard Rates (and non-Standard Rates
previously approved by TVFS in writing) for all purchase orders received by
OsiFin which predate the effective date of a new Standard Rate, provided that:
(i) such purchase order reflects the Standard Rate (or non-Standard Rate) in
effect for the period in which it was quoted: and (ii) the Final Document
Package is received by TVFS within ninety (90) days after the date of such
purchase order.
TVFS acknowledges that from time to time Vendor may request that TVFS enter
into a Lease at a Lease Rate lower than the Lease Rate then in effect for this
program according to Exhibit B (example of Sheet Rate). If TVFS agrees to
approve and fund a Lease at a reduced rate at Vendor's request, Vendor agrees
that TVFS shall not be liable to pay Vendor the Commission.
7. GUARANTEED RESIDUAL VALUE. The Standard Rates offered by TVFS for
Transactions which constitute Leases are based in part upon the residual values
booked by TVFS for the Equipment that TVFS is willing to assume with respect to
each item of Equipment (the "Base Residual Value"). If Vendor requests TVFS to
book a residual value for the Equipment which exceeds the Base Residual Value
and in consideration of TVFS' agreement to do so, Vendor will agree to pay TVFS
a guaranteed residual value for the Equipment (the "Guaranteed Residual Value")
which is equal to the difference between the booked residual value and the Base
Residual Value. The Guaranteed Residual Value will remain in effect for all
Transactions which constitute Leases until either Vendor or TVFS notifies the
other party of a change in the Guaranteed Residual Value or the Base Residual
Value, as the case may be. The Guaranteed Residual Value assumed by TVFS with
respect to any funded transaction shall not change throughout the term thereof.
8. TRANSACTION DEFAULT AND REMARKETING
I. RATED CREDITS
In the event of a transaction default for Rated Credit, TVFS will give
Vendor written notice thereof and of the guarantied residual of the defaulted
transaction which TVFS will be entitled to and Vendor will pay. Vendor will
engage in all remarketing efforts as described in section 8 (c through e).
Including using their best commercial efforts to make the Equipment legally
available for possession by TVFS.
II. NON-RATED CREDITS
A. In the event of a Transaction Default, TVFS will give Vendor written
notice thereof and of the Net Book Value of the defaulted Transaction. Vendor
will, at it's option, elect to either (i) cure the Transaction Default by paying
to TVFS an amount equal to the accrued and unpaid amount due under such
Transaction as of the date of default (each a "Cure Payment") or (ii) comply
with the provision of subparagraphs (b) through (e) of this Section or (iii)
comply with the provisions of subparagraph (f) of this Section. Vendor may elect
to make up to three (3) Cure Payments during the Term of any Transaction, or
such greater number as the parties shall mutually agree upon. Any Cure Payment
received by TVFS from a Customer following TVFS' receipt of a Cure Payment from
Vendor shall be remitted to Vendor.
B. In the event that Vendor elects not to cure a Transaction Default,
Vendor will promptly pay TVFS an amount equal to the Guaranteed Residual Value
of the applicable Equipment. With regard to Transaction Defaults for Customers
which have been classified by TVFS as a "C" credit, pursuant to the Credit
Classification Guidelines described in Exhibit C (copy of Credit Criteria
sheet), TVFS will (i) first apply the security deposit to the Transaction
Default, and (ii) to the extent that there is a positive Loss Pool Balance,
Vendor will also promptly pay TVFS an amount (the "Transaction Default
Differential Payment") equal to the lesser of (a) the applicable Transaction
Default Amount (less the Guaranteed Residual Value previously paid) or (b) the
then current Loss Pool Balance; and (ii) to the extent there is a positive
balance in the Blind Discount Pool, an amount equal to the lessor of (a)
remaining Default amount, or (b) all of the Blind Discount Pool. The Loss Pool
Balance will be reduced by the Transaction Default Differential Payment. To the
extent that the Loss Pool Balance is less than the applicable Transaction
Default Amount (less the Guaranteed Residual Value previously paid), TVFS will
be entitled to (and Vendor will pay) the unpaid portion of such Transaction
Default Amount out of any Transaction Default Differential payment distributed
to Vendor under Section 8(e) with respect to the remarketing of Equipment under
any other Transaction which defaults within the same Loss Pool Annual Period as
the Transaction in question. Following receipt of payment, OsiFin will use its
reasonable commercial efforts to make the Equipment legally available for
possession and will, at the request of Vendor take such actions as Vendor may
reasonably request in connection with regaining possession of the Equipment;
provided however that OsiFin shall have no liability for its inability to make
the Equipment legally available for possession unless the inability was caused
by the negligent or willful acts or omissions of OsiFin.
C. Once the equipment is legally available, Vendor will obtain possession
of the Equipment and will repair, refurbish, insure, store and use its
reasonable commercial efforts to remarket the Equipment on a non-discriminatory
basis during the Remarketing Period. For purposes of this Agreement, reasonable
commercial efforts to remarket the Equipment on a non-discriminatory basis
during the Remarketing Period shall require only the following: (i) Vendor
maintaining a current inventory of used Equipment available for resale; (ii)
Vendor posting available inventory information regarding used Equipment on
Vendor's internal web site to allow Vendor's worldwide sales force to offer
discounts on used Equipment at levels greater than Vendor's new Equipment.
Vendor's reasonable and customary costs of repossession, repair, refurbishment,
storage, insurance and outside counsel's legal fees will constitute
"Out-of-Pocket Costs". Vendor agrees to provide TVFS with written documentation
in support of al Out-of -Pocket Costs. Out-of -Pocket Costs for purposes of
Section 8 will be capped at ten percent (10%) of the Purchase Price of the
applicable original Equipment Hardware. Any costs which exceed five percent (5%)
of the Purchase Price of the applicable Equipment will not be considered
Out-of-Pocket Costs unless previously agreed to by TVFS in writing. In the event
Vendor determines, in its good faith judgment, that the value of the Equipment
after repair and refurbishment is reasonably expected to be less than the
Out-of-Pocket Costs, Vendor shall promptly notify TVFS of such determination and
provide documentation reasonably acceptable to TVFS in support of such
determination. TVFS reserves the right to remarket any and all such Equipment
shall repair and refurbish such Equipment upon the request of TVFS and may
charge TVFS only for its standard repair and refurbishment costs. Vendor shall
convey to TVFS marketable title to such Equipment in AS IS/WHERE IS condition
and without representation or warranty of any kind whatsoever and relinquish any
rights on interests which Vendor may have in or to the Equipment.
D. In performing its remarketing responsibilities hereunder:
(i) Vendor will not discriminate between the Equipment and equipment owned
by another party to whom Vendor may be bound to provide remarketing assistance.
(ii) Vendor will make available warranty and maintenance service to TVFS at
rates equal to or better than those available to its most favored customers and
at Vendor's discretion, to any subsequent purchaser or lessee of Equipment at
Vendor's then current market rates.
(iii) Vendor has no right, title or interest in any Equipment being
remarketed, will not permit any lien, encumbrance or claim to or upon the
Equipment which may arise in connection with its remarketing services.
(iv) Vendor will not agree to a sales price or lease payment structure
without the approval of TVFS unless it is within guidelines provided by OsiFin
(which approval will not be unreasonably withheld, conditioned or delayed, and
which lease or sale shall be treated as a new lease or sale subject to a
commission payable to Vendor).
E. If Vendor is able to sell or lease the Equipment to a third party during
the Remarketing Period, the remarketing Proceeds will be distributed in the
following manner: (i) first, to Vendor, an amount equal to its Out-of -Pocket
Costs; (ii) second, to TVFS an amount equal to the applicable Transaction
Default Amount, less the Guaranteed Residual Value and Transaction Default
Differential Amount previously paid to TVFS; (iii) third, to Vendor, an amount
equal to any Out-of-Pocket Costs incurred in remarketing the Equipment not
previously reimbursed pursuant to subsection (i); (iv) fourth, to Vendor, an
amount equal to the Guaranteed Residual Value of the applicable Equipment; and
(v) fifth, to Vendor, the Transaction Default Differential Amount.
F. If Vendor is unable to remarket the Equipment during the Remarketing
Period, an independent appraiser jointly selected by TVFS and Vendor (whose fee
will be split equally by TVFS and Vendor) will determine the Equipment's Fair
Market Value. Upon determination of the Equipment's Fair Market Value, an amount
equal to the Equipment's Fair Market Value will be distributed by Vendor in the
following manner: (i) first, to Vendor, am amount equal to it's Out-of-Pocket
Costs; (ii) second, to TVFS an amount equal to the applicable Transaction
Default Amount, less the Guaranteed Residual Value and Transaction Default
Differential Amount previously paid to TVFS; (iii) third, to Vendor, an amount
equal to any out-of-pocket cost incurred in remarketing the Equipment not
previously reimbursed pursuant to subsection (i); (iv) fourth, to Vendor, an
amount equal to the Guaranteed Residual Value of the applicable Equipment; and
(v) fifth, to Vendor, the Transaction Default Differential Amount. The Loss Pool
Account will be credited with an amount equal to the Transaction Default
Differential Amount received by Vendor pursuant to subsection (v) above. Upon
receipt of the amount specified in subsection (ii), TVFS will transfer all of
its right, title and interest in and to the Transaction and related Equipment
Vendor an AS-IS/WHERE-IS basis, without representation or warranty, except that
neither TVFS nor any agent of TVFS' shall have encumbered the applicable
Equipment.
G. Notwithstanding anything to the contrary contained in this Agreement, in
the event of a Transaction Default, Vendor may propose to TVFS a leasing
Transaction with respect to the Equipment with a different Customer, and so long
as such leasing Transaction meets the Standard Rates, TVFS shall review and in
its sole discretion shall determine if it will fund the Transaction and act as
Lessor thereunder.
9. END OF TERM REMARKETING
A. Upon the expiration of the term of any Transaction, provided that no
Transaction Default shall have occurred, Vendor, along with OsiFin, shall use
reasonable commercial efforts to sell or lease the Equipment to the existing
lessee or debtor or to a third party in accordance with Section 8(c) through
(d), as applicable. TVFS has the right to approve the sale price of any
remarketed equipment; such approval not to be unreasonably withheld. If Vendor
is able to sell or lease the Equipment during the Remarketing Period, the
Remarketing Proceeds will be distributed in the following manner; (i) first, to
Vendor, an amount equal to its Out-of -Pocket Costs; (ii) second, to TVFS an
amount equal to the Guaranteed Residual Value of the Equipment; (iii)third, to
TVFS, an amount equal to the Base Residual Value of the applicable Equipment;
(iv)fourth, to the extent that any excess Remarketing Proceeds remain, they will
be disbursed 2/3 to OsiFin and 1/3 to TVFS. In the event TVFS exercises its
option to purchase, all subsequent excess residual gains will be split according
to the ownership interest in OsiFin.
10. VENDOR'S REPRESENTATIONS
A. THE LEASE DOCUMENT. Vendor represents and warrants with respect to each
Lease as of the date of funding, that:
1. Each Lease is valid, binding, and genuine and TVFS is able to fully
enforce it against the Customer.
2. The content of the Lease document is true, accurate and complete, and it
is the entire Agreement between Osifin and the Customer as to the Equipment
covered by the Lease.
3. It is free from any offsets, defenses and/or counterclaims which the
Customer may attempt to use against TVFS.
4. Where TVFS standard forms are used, no modifications will be made
without TVFS' written approval.
5. The amount(s) stated as due in the Lease are in fact due and payable at
the time(s) set forth in the Lease, and TVFS will be entitled to collect all of
those amounts unless Vendor discloses to TVFS otherwise in writing, in which
case the purchase price from Vendor and the Commission will be adjusted.
B. THE CUSTOMER. Vendor represents and warrants to TVFS with respect to
each Customer as of the date of funding that:
1. If Vendor has a direct relationship with a Customer, then Vendor
represents and warrants that (i) the Customer has the legal capacity to enter
into Lease Agreement and cannot cancel the Lease, and (ii) the Customer's
signature and any guarantor's signature, if applicable, are genuine in all
respects. In the event Vendor's relationship with a Customer is through a
Value-added Reseller or an intermediary party., then Vendor shall obtain from
that party its representation and warranty of (i) and (ii) above. Vendor agrees
to be responsible for the acts or omissions of its respective employees, agents,
and representatives in obtaining signatures on Leases.
2. The Customer has not made any down payment directly to Vendor.
3. The Equipment has been shipped to Customer, and Customer acknowledges
the terms of the Lease Agreement.
4. At the time TVFS enters into the Lease and purchases the Equipment, the
Customer has had no dispute or claim pending against Vendor.
5. To the best of Vendor's knowledge, the Customer will use the Equipment
solely for business or commercial purposes, and will not use it for personal,
family or household purposes unless previously approved by TVFS in writing.
C. THE EQUIPMENT. Vendor represents and warrants to TVFS with respect to
each item of Equipment which TVFS purchases that:
1. The Equipment is fully described in the Lease document.
2. Unless disclosed otherwise in writing, the Equipment is new and unused.
3. Vendor has done nothing to cause or allow any other person or entity to
be entitled to claim any interest in the Equipment.
D. VENDOR. Vendor hereby represents and warrants to TVFS that:
1. Vendor is validly organized, existing and in good standing in its state
of incorporation, is duly qualified to do business in the states where the
failure to do so would have a material adverse effect on its operations or the
enforceability of the Leases.
2. Vendor has the power and authority to enter into and perform this
agreement with TVFS.
3. Vendor will when and as required fulfill all of its obligations to the
Customers.
4. Vendor has not entered into any agreement with the Customers which would
change the terms and conditions of the Leases, or in any way interfere with
TVFS' right to collect the amounts due under the Leases.
5. That Vendor has not received and will not receive any compensation,
directly or indirectly, from any source other than TVFS as a result of TVFS'
acquisition of any Equipment or the Lease of any Equipment to the Customer under
a Lease.
6. That Vendor has not made any promises, statements, or commitments to
Customers purportedly on TVFS' behalf without prior express approval, and that
Vendor has not taken any action that may affect TVFS' ability to fully enforce
any Lease transaction.
7. Vendor has disclosed to TVFS, in writing, all material information
regarding the Customer, and the Equipment which is available to Vendor with
respect to each Lease.
11. REPURCHASE OF LEASE AND EQUIPMENT
A. If Vendor has made any untrue or incorrect representations or warranties
to TVFS in this Agreement relating to a Lease, a Customer, the Equipment, or if
Vendor breaches any such representation or warranty, Vendor agrees that Vendor
will, within 10 days of notice, purchase from TVFS the applicable Lease and the
Equipment covered thereby, and pay to TVFS the purchase price set forth in
Section B below. If any representation or warranty which is not true may be made
true, or a breach of any representation or warranty may be cured, Vendor shall
have a reasonable period of time, not to exceed thirty (30) days after TVFS'
notice of breach to Vendor, to make such representation or warranty true or cure
such breach.
B. The purchase price shall be an amount equal to the sum of (i) the then
unpaid balance of the rentals that are and shall become due under such Lease
(including the assumed residual value of the Equipment), as well as the unpaid
service/maintenance payments if TVFS funded those in advance to Vendor,
discounted to the present value of the date of demand at a discount rate of 3%;
plus (ii) any additional and outstanding charges or assessments then due and
payable to TVFS by the Customer, including but not limited to out-of-pocket
expenses incurred by TVFS in connection with collection of such lease, including
reasonable attorney's fees and litigation costs.
12. EARLY TERMINATION OF LEASES
A. In the event a Customer requests an early termination of
its Lease, unless otherwise agreed to by the parties in writing, OsiFin, in its
sole discretion, may permit such termination, but only with the prior agreement
of TVFS, provided, that TVFS is paid by the Customer, the sum of (i) the then
unpaid balance of the rentals that are to become due under such Lease (including
the assumed residual value of the Equipment), as well as the balance of any
service/maintenance payments if TVFS funded those in advance to Vendor,
discounted to the present value of the date of demand at 3%; plus (ii) any
accrued and unpaid balance of rentals that are due under such Lease, and, if
applicable, any unpaid service/maintenance payments if TVFS funded those in
advance to Vendor; plus (iii) any additional and outstanding charges or
assessments then due and payable to TVFS by the Customer, including but not
limited to out-of-pocket expenses incurred by TVFS in connection with collection
of such Lease, reasonable attorney's fees and litigation costs (collectively (i)
- - (iii) are termed the "Termination Amount"), plus four (4%) percent of the
Termination Amount and the difference between the fair market value of the
Equipment and the Booked Residual Amount.
B. In the event a Customer requests an early termination of a
Lease in order to upgrade/substitute the Equipment subject thereto, TVFS shall,
unless otherwise agreed to by the parties in writing, permit such termination,
provided that (i) TVFS is allowed to purchase the upgraded Equipment for lease
to the Customer and (ii) TVFS is paid by the Customer or Vendor, at its option,
the sum of (a) the then unpaid balance of the rentals that are to become due
under such Lease (including the assumed residual value of the Equipment), as
well as the balance of any service/maintenance payments if TVFS funded those in
advance to Vendor, discounted to the present value to the date of demand at a
discount rate of 3%; plus (b) any accrued and unpaid balance of rentals that are
due under such lease, and unpaid service/maintenance payments if TVFS funded
those in advance to TVFS; plus (c) any additional and outstanding charges or
assessments then due and payable to TVFS by the Customer, including but not
limited to out-of-pocket expenses incurred by us in connection with collection
of such Lease, reasonable attorney's fees and litigation costs. In the event a
new lease is written, TVFS shall have the first right of refusal to provide
financing.
C. Upon TVFS' receipt of the purchase price with respect to
any Lease, all of TVFS' right, title and interest in such Lease, the related
Equipment and related items shall be sold and assigned by TVFS to a Customer or
Vendor, as the case may be, without recourse or warranty of any kind, except
TVFS warrants that such Lease, the related equipment and related items shall be
free and clear of all defenses, setoffs, counterclaims, security interests,
liens and encumbrances of any kind or nature created by TVFS.
13. LEASE LOSS RESERVE AND ULTIMATE NET LOSS POOL, AND DISTRIBUTION OF
LEASE PAYMENT PROCEEDS
A. TVFS agrees to establish a Lease Loss Reserve for Non-Rated credits that
will be funded with amounts received from five (5%) percent security deposits by
Lessees with Non-Rated credits. In addition, TVFS will establish a Transaction
Spread Pool.
B. The difference between lease payments received by TVFS and
the debt servicing payments paid to TVFS for specific transactions shall be
retained by TVFS during the initial six (6) months of the term of this Program
Agreement. Said funds will be used to satisfy past due payments and other losses
related to funded leases if the lease loss reserves and UNLP are not adequate to
cover the specific transactions for Non-Rated credits. Following the initial six
(6) month period, any net lease payments (net retained payments not required to
cover past due payments or lease defaults) will be distributed net of agreed to
expenses. Such amounts will be reviewed every six (6) month period. The net
distributions shall be one-third (1/3) to TVFS with the remaining two-thirds
(2/3) to be retained or distributed by OsiFin. If TVFS shall exercise its option
to acquire an equity interest in OsiFin, TVFS shall thereafter receive such
distributions under this Section 11(B) prorata with the percentage of its equity
ownership.
C. A transaction spread is the difference between Rent
Payments received, less Newco's Management Fee and any Processing Fees paid to
TVFS. These reserves will be held by TVFS as a security deposit against any loss
in accordance with the loss priority listed below for Non-Rated credits (the
"Transaction Spread Pool"). In the event the reserve funded by the spread on the
lease rental payments is not used in payment of a customer's default, it will be
returned to Newco per the "Loss Pool Distribution" section.
D. Vendor will pay a blind discount for Non-Rated credits, an
amount equal to five percent (5%) of the selling price of the Equipment, to a
"Blind Discount Pool" held by Vendor. Vendor will establish a "Stand-by Letter
of Credit" (LOC) with TVFS as sole, irrevocable Beneficiary. The amount of the
LOC will be adjusted periodically to reflect net changes in the Blind Discount
Pool, which is determined by the amount of Equipment purchased by TVFS from
Vendor. This Pool will be used, first, as protection against any losses, in
accordance with the loss priority as listed below, or, second, as an amount
available to TVFS based upon certain conditions being met. In the event Vendor
is unable to obtain the LOC, the Blind Discount Pool will be held by TVFS.
E. In consideration of TVFS providing an initial $25 million
credit facility for Vendor, Vendor will establish an unfunded contingent
liability for Non-Rated credits on its balance sheet of eight percent (8%) of
the funded credit facility the Ultimate Net Loss Pool ("UNLP"). This amount will
be applied to transactions that are funded through OsiFin. Vendor may elect to
support this liability with either (a) a Letter of Credit, or (b) with covenant
violations requiring the posting of letter of credits similar to existing bank
covenants and subordinated debt covenants. In the event the unfunded liability
pool is not used in payment of a customer's default and is in excess of the
eight percent (8%), it may be reduced by Vendor with TVFS' approval, at the end
of the lease term.
14. SCOPE OF AGREEMENT
The terms of this Agreement apply to all Vendor equipment that
is priced to the customer using TVFS' Standard Lease Rates. The terms of this
Agreement will be negotiated separately for any transactions requiring
non-standard pricing.
15. TVFS OBLIGATIONS. TVFS will be responsible for all credit decisions
on all lease applications submitted through OsiFin. TVFS will:
(a) Notify OsiFin of the credit decision
(b) Provide documentation, respond to inquiries
(c) Compliance with all documentation requirements as established by TVFS
during the credit review process
(d) Record transactions on TVFS' lease/loan accounting system
(e) Respond to customer inquiries
(f) Bill and collect from customers
(g) Report on portfolio condition, assets and residuals as appropriate
(h) Bill, collect and account for taxes
TVFS has primary responsibility for collections. Upon
notification by TVFS, Vendor will cooperate with TVFS in collection activities.
Vendor will take all appropriate action to recover equipment which may include,
but is not limited to, refusal to provide maintenance and support service to
delinquent customers, withdrawing customer capabilities to use Vendor products
by "turning them off", and providing TVFS with information on the location of
the delinquent customer and the equipment under lease, unless Vendor has a
reasonable belief that such action will be contrary to applicable law and would
expose Vendor to liability.
16. LICENSE TO USE NAME
OsiFin, Vendor and Dovertower have the right to use
"Transamerica Vendor Financial Services" in connection with any marketing
program so long as the Vendor Leasing Program is in effect. OsiFin and Vendor
will be bound in the usage of any Transamerica name and logo to Transamerica's
standards in use of its name and logo.
17. EQUIPMENT TITLE AND WARRANTIES
A. In the case of Transactions which constitutes Leases,
Vendor hereby (i) consents to the assignment to TVFS of any purchase order for,
and all warranty rights in connection with, the Equipment related to such
Transaction; (ii) agrees that, upon the acceptance of such Equipment by the
applicable Customer on behalf of TVFS, and payment of the Purchase Price of
Equipment following its acceptance by the Customer, it will deliver to TVFS an
invoice or bill of sale showing that notwithstanding any provisions of a
purchase order, title to such Equipment has passed to TVFS at the time of
delivery to the Customer, free and clear of all liens, claims and encumbrances;
and (iii) agrees that TVFS will not be liable for any obligations of the
Customer thereunder except the obligation to pay the Purchase Price of such
Equipment following its acceptance by the Customer. In the case of Financing
Transactions, Vendor hereby (i) acknowledges that it has transferred to the
applicable Customer all warranty rights in connection with the Equipment related
to such Transaction; (ii) agrees that, upon the payment of the Purchase Price of
such Equipment, it will deliver to TVFS a copy of an invoice or bill of sales
evidencing that title to such Equipment has passed to the Customer, free and
clear of all liens and encumbrances at the time of delivery to the Customer; and
(iii) agrees that TVFS will not be liable for any obligations of the Customer
thereunder, except the obligation to pay the Purchase Price of the applicable
Equipment following its acceptance by the Customer. Vendor agrees that the
acceptance of the Equipment by the Customer and the payment of the Purchase
Price of such Equipment by TVFS will extinguish any lien or security interest in
the Equipment.
B. All risk of loss to the Equipment shall be borne as agreed
to between Customer and Vendor, but in no event shall risk of loss be placed
with TVFS.
18. CONFIDENTIALITY
Each party agrees to maintain all Confidential Information of
the other party in confidence to the same extent that it protects its own
similar Confidential Information and to use such Confidential Information only
as permitted under this Agreement. For purposes of the Agreement "Confidential
Information:" shall include, but is not limited to, computer programs, code,
algorithms, names and expertise of employees, formulas, processes, ideas,
inventions (whether patentable or not), schematics, and other technical,
business, financial and product development plans, forecasts, strategies and
information marked "Confidential" or if disclosed verbally identified as
Confidential. Each party agrees to take all reasonable precautions to prevent
any unauthorized disclosure or use of Confidential Information including,
without limitation, disclosing Confidential Information only to its employees
(a) with a need to know to further permitted uses of Confidential Information;
(b) who are parties to appropriate agreements to comply with the restrictions in
this Agreement and (c) who are informed of the non-disclosure obligations
imposed. The foregoing restrictions of confidentiality and disclosure shall
survive the termination of the Agreement for a period of three (3) years
following the disclosure of each item of Confidential Information.
For purposes of the Agreement, "Confidential Information"
shall not include information which: (a) was or becomes publicly known through
no fault of the receiving party; (b) was rightfully known or becomes rightfully
known to the receiving party without confidential or proprietary restriction
from a source other than the disclosing party; (c) is independently developed by
the receiving party without the participation of individuals who had access to
the Confidential Information; (d) is approved by the disclosing party for
disclosure without restriction in a written document which is signed by a duly
authorized officer of such disclosing party; (e) is disclosed by the disclosing
party to a third party without restriction on disclosure and (f) the receiving
party is legally compelled to disclose, provided that the receiving party
provides sufficient notice to the disclosing party to allow the disclosing party
an opportunity to oppose any court order compelling such disclosure.
19. INDEMNIFICATION
A. Vendor agrees to defend, indemnify, and hold TVFS harmless
from and against (i) any claims based upon any misrepresentation or fraud by
Vendor or its agents, employees or representatives, or (ii) any claims based on
an allegation that Vendor has breached any warranty, promise, or guaranty with
respect to the Equipment or the financing therefor or (iii) claims based on the
improper use of the Transamerica name or logo. Vendor shall reimburse TVFS for
any costs, expenses, reasonable attorneys' fees, damages, and other losses which
TVFS may incur as a result of any claim made against TVFS arising out of the
foregoing, or out of any other wrongful act or representation attributable to
Vendor or respective employees or representatives.
Vendor agrees to indemnify TVFS up to the full extent of loss
incurred by TVFS including lost interest and fees (including legal fees) for any
fraud, misrepresentation, mis-quote of lease rates, errors on the application
for credit that may result in a positive credit decision that may not have been
made if correct information was provided, miscommunication of credit decisions
or documentation that results in a loss to TVFS and any other miscommunication
of lease terms and conditions to customers that results in a loss to TVFS.
B. TVFS shall indemnify and hold Vendor harmless from and
against any demand, claim, action, cost, loss, liability, damage or expense of
any kind, including, without limitation, reasonable attorney's fees, arising out
of or in connection with TVFS' breach of any representation, warranty or
covenant contained herein.
20. GENERAL PROVISIONS
A. ENTIRE AGREEMENT; MODIFICATION; TERMINATION. This Agreement
shall be effective through June 30, 2003. TVFS and Vendor have the mutual option
to renew for an additional 5-year term. This Agreement supersedes all prior
agreements, oral or written, between the parties. This Agreement may only be
modified in writing, signed by the officers of TVFS and Vendor, and specifically
referencing this Agreement, and with the written consent of TVFS. This Agreement
may be terminated by mutual agreement of the parties. Any party will have the
right to terminate in the event of bankruptcy, sale, liquidation, dissolution,
or a material default in the terms of this agreement upon giving five (5) days
written notice.
B. NOTICES. All notices shall be in writing and sent to the
following addresses, or such other address as a party shall specify by notice
given as herein provided.
TO TVFS: TO OSICOM TECHNOLOGIES, INC.:
Transamerica Vendor Financial Services 2800 28th Street, Suite 100
Two Continental Towers Santa Monica, CA 90405
1701 Golf Road Attn: John Gorman
Rolling Meadows, IL 60008
Attn: Kevin Collins
C. ASSIGNMENT. This Agreement shall be for the benefit of and
binding upon the parties, as well as their successors-in-interest and assigns.
However, Vendor agrees that it cannot assign its rights and/or obligations under
this Agreement to anyone else without TVFS' prior written consents.
D. GOVERNING LAW. This Agreement shall be governed by and
interpreted under the laws of the State of Illinois.
E. SEVERABILITY. Each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law.
If any provision of this Agreement is construed to be prohibited or invalid
under such law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, and without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
F. INDEPENDENT CONTRACTORS. The parties acknowledge that the
relationship intended by this Agreement is one of independent contractor, and
that no partnership or agency relationship is contemplated or is, in fact, in
existence.
TRANSAMERICA VENDOR FINANCIAL OSICOM TECHNOLOGIES, INC.
SERVICES CORPORATION
By: /s/ Ted Brandt By: /s/ John H. Gorman
-------------------------- --------------------------------------
Title: Managing Director Title: Chief Financial Officer, Secretary
----------------------- -----------------------------------
Date: August 4, 1998 Date: August 4, 1998
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