-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JfVM8Ejhw+SicsCy8r/o4cUyoy1Fj20umjpcdCdyWsFSt8ivFy7EeJ75a8meGVaA 6ocRNayVqK86Ud+I8DBN1g== 0000950109-97-002901.txt : 19970411 0000950109-97-002901.hdr.sgml : 19970411 ACCESSION NUMBER: 0000950109-97-002901 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19970410 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALCO STANDARD CORP CENTRAL INDEX KEY: 0000003370 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PAPER AND PAPER PRODUCTS [5110] IRS NUMBER: 230334400 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-24931 FILM NUMBER: 97578229 BUSINESS ADDRESS: STREET 1: P O BOX 834 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 2152968000 MAIL ADDRESS: STREET 1: BOX 834 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: ALCO CHEMICAL CORP DATE OF NAME CHANGE: 19680218 S-4 1 S-4 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. 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)
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
- ---------------------------------------------------------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------------------------------------------------------- Common stock, 10,000,000 $31.375 $313,750,000 $95,066.00 no par value - ----------------------------------------------------------------------------------------------------------------------------
*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. 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. 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 OF CONTENTS 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
-2- 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- 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- 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- 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. -6- 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. -7- 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. -8- IKON OFFICE SOLUTIONS SELECTED FINANCIAL DATA
THREE MONTHS FISCAL YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30 FISCAL YEAR ENDED SEPTEMBER 30 ---------------------- ----------------------- --------------------------------------- 1996 1995 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- ---------- ---------- (unaudited) 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
(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. -9- 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- 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- 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- 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- 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- 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. 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):
Exhibit Number Description - ------ ----------- 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.
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.**
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.
* 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. 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. (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. 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.
Signature Title Date - --------- ----- ---- *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)
*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) 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.
Signature Title Date - --------- ----- ---- *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)
*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) EX-4.4 2 AMENDMENT 1 TO THE CREDIT AGREEMENT; CREDIT AGREEMENT 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: 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. 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: 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: ================================================================================ ================================================================================ 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 ---------------------------------- ================================================================================ ================================================================================ TABLE OF CONTENTS -----------------
Page ---- 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
(i) Page ---- 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
(ii)
Page ---- 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
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) 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) 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). "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- "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- 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- 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- 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- 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- 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 -8- 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 -9- 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. -10- "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 -11- 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 -12- 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 -13- 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 -14- (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. -15- (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. -16- (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 -17- 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- -18- 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 -19- 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). -20- 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 -21- 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. -22- [BLANK PAGE] -23- 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. -24- 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 -25- 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 -26- 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. -27- 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. -28- (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 -29- 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. -30- 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 -31- 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 -32- 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- 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- 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- 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. -36- 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- 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 -38- 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 ------------------------ -39- 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 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 -41- 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 -42- 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 -43- 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 -44- 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- 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 -46- 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 -47- 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- -48- 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- -49- 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- 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 -51- 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. -52- 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- (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- for the benefit of the Banks upon the terms of this Agreement. -55- SECTION 1. Miscellaneous. ------------- -56- 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 -57- 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 -58- 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 -59- 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 -60- 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. -61- (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 -62- 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- 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- 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- DEUTSCHE BANK AG, NEW YORK BRANCH, AS AGENT By__________________________________ Title: By__________________________________ Title: -6- SCHEDULE I ---------- Bank Commitment ---- ---------- Deutsch Bank AG, $25,000,000 New York Branch and/or Cayman Islands Branch 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. 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: 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 EXHIBIT B Page 2 By________________________________ Title:
Principal Date of Repayment Principal Amount Date of Loan Amount of Loan Loan Currency of Loan of Loan Repaid Notation Made By - ------------ -------------- ------------- ----------------- ---------------- ---------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------
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. EXHIBIT C Page 2 [BORROWER] By________________________________ Title:
Principal Date of Repayment Principal Amount Date of Loan Amount of Loan Loan Currency of Loan of Loan Repaid Notation Made By - ------------ -------------- ------------- ----------------- ---------------- ---------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
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. 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 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 EXHIBIT D Page 4 corporation for any purpose, without our prior written consent. Very truly yours, 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.
Name/1/ Office -------------------- -------------------- ----------------- Signature ------------------ ------------------ ------------------ ------------------------- ------------------ ------------------ ------------------------- ------------------ ------------------ -------------------------
- --------------------------- /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. 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. 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. 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: 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 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 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: 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 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. 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 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. 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):
Outstanding Principal of Total Commitment Loans ---------------- ----- (U.S. $ Equivalent) - ------------------- a. Aggregate Amount $__________ $_________ for all Banks b. Assigned Share __________% _________% c. Amount of $__________ $_________ Assigned Share
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: 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. 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: EX-5 3 OPINION OF COUNSEL 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 EX-10.1 4 OPEN END MORTGAGE & LEASE AGREEMENT - -------------------------------------------------------------------------------- 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. 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; (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- 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:
Level Ratings LIBO Facility Applicable Spread Fee Rate Margin - ---------------------------------- -------- -------- ---------- 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
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- 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-
Level Ratings LIBO Facility Applicable Spread Fee Rate Margin - --------------------------------- ------ -------- ---------- 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
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- "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- "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- "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- "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- "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- "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- "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- 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- "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- 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- 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- 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- 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- "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- 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- "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- "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- 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- "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- (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- (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- 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- 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- 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- 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- 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- 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- (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- 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- 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 ------------------- -35- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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 ----------- -46- 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 -47- 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. -48- 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. -49- 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 -50- 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 -51- 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. -52- 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 -53- 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 -54- 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- -55- 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. -56- 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 ----------- -57- 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. -58- 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 --------------- -59- 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, -60- 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. -61- SECTION 7. INDEMNITIES. -62- 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 -63- 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. -64- SECTION 7.2. General Tax Indemnity. --------------------- -65- (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) -66- 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 -67- 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 ------- -68- 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 -69- 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). -70- 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 -71- 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. -72- 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 -73- 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 ----------- -74- 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, -75- 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. -76- 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 -77- 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 -78- 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 -79- 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; -80- (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 -81- 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 -82- 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 -83- 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. -84- (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 -85- 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 -86- 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 -87- 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 -88- 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. ----------- -89- 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, -90- 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 -91- 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 -92- 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. -93- (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 -94- 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, -95- 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 -96- 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 -97- 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. -98- (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 --------------------------------------- -99- 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 ------------- -100- 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. -101- 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. -102- 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 -103- 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 -104- 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 -105- 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 -106- 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 -107- 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. ------------------------------------------------ -108- 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 -109- 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 -110- 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 ------------------------------ -111- 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. -112- 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 -113- 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 -114- 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 -115- (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 -116- 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. -117- 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. -118- 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- 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- 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- (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- 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- 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- 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] -125- 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: ------------------------------- 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 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: ------------------------ 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 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: -------------- 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: -------------- 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 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 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 SCHEDULE II TO LEASE AGREEMENT Description of the Land ----------------------- SCHEDULE III TO LEASE AGREEMENT Plans and Specifications ------------------------ TABLE OF CONTENTS -----------------
Page ---- 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
i TABLE OF CONTENTS ----------------- (cont'd)
Page ---- 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
ii TABLE OF CONTENTS ----------------- (cont'd)
Page ---- 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
iii 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
iv EX-10.11 5 TRANSFER AGREEMENT 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 -------- TABLE OF CONTENTS
Section Page - ------- ---- 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
-i- 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
-ii- 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
-iii-
APPENDIX 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
-iv- 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 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 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 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 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 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 (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 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 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 (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 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 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 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 (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 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 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 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 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 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 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 (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 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 (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 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 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 (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 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 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 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 (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 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 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 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 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 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 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 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 (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 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 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 (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 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 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 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 (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 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 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 47 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 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. 49 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 50 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 51 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 52 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 (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 54 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; 55 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 56 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 -------- ------------- 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 (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, 58 "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; 59 (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 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 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 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 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 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 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 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 "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 "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 "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 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 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 (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 "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 "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 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 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 (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 "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 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 "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 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 "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 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 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 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 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 (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 EX-10.12 6 FIRST TIER TRANSFER AGREEMENT FIRST TIER TRANSFER AGREEMENT Dated as of March 31, 1997 between IKON CAPITAL, INC. and IKON FUNDING, INC. TABLE OF CONTENTS -----------------
PAGE ---- ARTICLE I DEFINITIONS AND RELATED MATTERS 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
-i- TABLE OF CONTENTS ----------------- (continued)
PAGE ---- 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
-ii- SCHEDULES --------- SCHEDULE 4.14 Office Locations SCHEDULE 4.15 Trade Names EXHIBITS -------- EXHIBIT A Form of Transfer Report EXHIBIT B Form of Company Note EXHIBIT C Closing Date Report -iii- 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 --------- IKON CAPITAL, INC., a Delaware corporation ("Originator"), as transferor and ---------- contributor, and IKON FUNDING, INC., a Delaware corporation (the "Company"), as ------- transferee and contributee. Background ---------- 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 ------------- capitalized and used throughout this Agreement are defined in Appendix A to the ---------- 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, - ------------------ Twin Towers Inc., as Transferee, and Deutsche Bank AG, acting through its New York Branch, as agent for the Transferee (the "Agent"). ----- 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 such subsection or clause of such Section or definition; (b) "herein", "hereof", ------ ------ "hereto", "hereunder" and similar terms refer to this Agreement as a whole and ------ --------- not to any particular provision of this Agreement; (c) "including" means --------- "including without limitation", and other forms of the verb "to include" have ---------------------------- ---------- 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. ----------- 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 ------------ 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 -2- 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. ------------------------------------------------------------- (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 ----------------- scheduled debt service or lease payments that the Obligor is obligated to make thereunder, but excluding unearned finance charges, minus (ii) that portion of ----- 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 --------- 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 ------------ 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. --------- (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 ------------ 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 ----------- 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 -3- the Company Note. (d) Transfer Reports. On or prior to the 15th day (or if such day is not ---------------- a Business Day, the next Business Day) of each month (the "Reporting Date"), -------------- 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 --------- 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 --------------- 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 ------------ 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 ----------- 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 -4- 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 -5- 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 ----------- 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 -------- ------- 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 -------- ------- ------- 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. -6- 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 ----- -7- 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. - ------ 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. - ---------- 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. -8- 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 --------------------------------------------------- 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 ------------ 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 -------------- pending, or threatened, before, and there has been no injunction, decree or other decision issued or made by, any -9- 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 ------------------- 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 ---------- 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 -10- 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 ------- executive office is located at the address set forth on Schedule 4.14, and the ------------- 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 - ------------- Originator) and the Agent in accordance with Section 5.3(d), in jurisdictions ------------- where all action required by Section 5.3(d) has -------------- -11- been taken and completed). IV.15. Trade Names. Except as disclosed on Schedule 4.15, Originator ----------- ------------- 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- 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- 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- 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- 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- 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- 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- 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- 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- -21- 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 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 SCHEDULE 4.14 OFFICE LOCATIONS IKON Capital, Inc. 1738 Bass Road Macon, Georgia 31210 SCHEDULE 4.15 TRADE NAMES None. EXHIBIT A FORM OF TRANSFER REPORT (See attached) EXHIBIT B FORM OF COMPANY NOTE (See attached) 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: $_____________ EX-21 7 SUBSIDIARIES 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
State or other jurisdiction of % Voting Securities Incorporation or Subsidiary Owned (by whom) organization - ---------- --------------- ------------ 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
Page - 2 - 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
EX-23 8 CONSENT OF AUDITORS 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 EX-24 9 CERTIFICATION 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 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 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 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 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. 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 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 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 EX-27 10 FINANCIAL DATA SCHEDULE
5 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. 3-MOS SEP-30-1997 DEC-31-1996 61,423,000 0 628,139,000 41,043,000 433,533,000 1,805,430,000 638,090,000 343,887,000 4,377,298,000 1,144,657,000 1,464,559,000 0 290,170,000 597,118,000 517,169,000 4,377,298,000 638,828,000 1,140,434,000 404,934,000 641,052,000 417,970,000 7,430,000 8,201,000 73,211,000 28,552,000 44,659,000 20,151,000 (12,156,000) 0 52,654,000 0.36 0.36 Includes equipment on operating leases, at cost, of $262,353,000 Includes accumulated depreciation for equipment on operating leases of $166,527,000 Inculdes Finance Subsidiaries interest of $20,011,000 Represents selling, general and administrative expenses. Continuing operations only.
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