2004 EXTENSION AND FUNDING AGREEMENT

 

                                                                    Exhibit 10.1

 

                                                                  EXECUTION COPY

 

                      2004 EXTENSION AND FUNDING AGREEMENT

 

         This 2004  Extension  and Funding  Agreement  (the "2004  Extension and

Funding  Agreement"  or  "Agreement")  is  entered  into  as of the  8th  day of

September,  2004, by and among:  (1) Dell  Financial  Services  L.P., a Delaware

limited partnership  ("DFS"); (2) Dell Credit Company L.L.C., a Delaware limited

liability  company  ("General  Partner");  (3) DFS-SPV L.P., a Delaware  limited

partnership  ("DFS-SPV");  (4) DFS-GP, Inc., a Delaware corporation  ("DFS-GP");

(5) Dell Inc. , a Delaware  corporation  ("Dell");  (6) Dell Gen.  P.  Corp.,  a

Delaware  corporation  ("Dell Gen.  P."); (7) Dell DFS  Corporation,  a Delaware

corporation  ("Dell DFS"); (8) CIT Group Inc., a Delaware  corporation  ("CIT");

(9) CIT Financial USA, Inc., a Delaware corporation ("CIT Financial");  (10) CIT

DCC Inc.,  a Delaware  corporation  ("CIT  DCC");  (11) CIT DFS Inc., a Delaware

corporation ("CIT DFS"); (12) CIT Communications Finance Corporation, a Delaware

corporation  ("CIT  Communications");  and (13) CIT  Credit  Group USA  Inc.,  a

Delaware  corporation  ("CIT  USA")  (collectively  referred  to  herein  as the

"Parties").

 

                                    RECITALS:

 

         WHEREAS,  the Parties wish to extend the term of the DFS  Agreement (as

defined below) and amend the provisions thereof in certain respects; and

 

         WHEREAS,  the Parties  desire to amend and modify certain other related

agreements as set forth herein.

 

         NOW,  THEREFORE,  in  consideration  of the mutual  promises  contained

herein  and  for  other  good  and  valuable  consideration,   the  receipt  and

sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

 

 

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         1.  Definitions.  Unless otherwise  provided herein,  capitalized terms

shall have the  meanings  set forth below or in the  provisions  and recitals of

this Agreement:

 

      "Affiliate" has the meaning set forth in the DFS Agreement.

 

      "Ancillary  Agreements"  has the meaning  set forth in the DFS  Agreement,

excluding this Agreement.

 

      "Business Day" has the meaning set forth in the DFS Agreement.

 

      "CIT Aggregate Interest" has the meaning set forth in the DFS Agreement.

 

      "CIT Bank" means CIT Bank N.A., a Utah industrial loan corporation  having

its principal location in Salt Lake City, Utah.

 

      "CIT Funding  Payment(s)" means the Quarterly CIT Funding Payments and the

Dell  Initiated  Lump Sum  Funding  Payment,  as  applicable,  as such terms are

defined in Section 3 of this Agreement.

 

      "CIT Termination Event" has the meaning set forth in the DFS Agreement.

 

      "Dell Purchase Option" has the meaning set forth in the DFS Agreement.

 

      "Dell's Public  Segment"  means that portion of the Dell business  segment

(howsoever  described or  organized in the future) that offers Dell  products to

federal, state and local governments.

 

      "Financing" or "Financing Services" means the offering or providing of

financings of the sale or the provision of products to customers, including,

without limitation, by means of leases, installment sales contracts, and

conditional sales contracts and loans (whether secured or unsecured).

 

      "Fiscal Year" has the meaning set forth in the DFS Agreement.

 

      "Funding  Mix" means the  allocation  of  Gain-Generated  Funding  between

various  customers,  based upon (i) the Dell customer  segment,  and (ii) credit

profile.

 

      "Funding  Termination  Factor" means a percentage to be agreed upon by the

Parties.

 

      "Gain-Generated  Funding" means any Transaction  funded through an RPU (as

defined in the Reserve Administration Agreement).

 

      "IDC" means International Data Corporation, or its successor entity.

 

      "Limited  Liability Company Agreement" means the Limited Liability Company

Agreement of Dell Credit  Company  L.L.C.,  dated April 12, 1997, by and between

Dell Gen P. Corp and CIT DCC Inc., as amended.

 

      "PCs" means desktops, notebooks, ultra portables, and X86 servers.

 

      "Omnibus Agreement" has the meaning set forth in the DFS Agreement.

 

 

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      "Operating  and  Purchase  Agreement"  has the  meaning  set  forth in the

Omnibus  Agreement,  as such  Operating and Purchase  Agreement has been amended

from time to time.

 

      "Reserve  Administration   Agreement"  means  the  Reserve  Administration

Agreement,  entered into as of the 8th day of  September,  2004,  by and between

Dell and CIT and the other parties thereto.

 

      "Transactions" means leases and loans booked on the DFS system of record.

 

         2.  Amendment and  Restatement  of Agreement of Limited  Partnership of

DFS. The Agreement of Limited Partnership of DFS, dated as of April 14, 1997, as

amended, shall be amended and restated in the form attached hereto as Exhibit A,

and such  agreement,  as amended and  restated is referred to herein as the "DFS

Agreement."

 

         3. Funding Arrangements.

 

         (a) Funding Rights. Subject to the provisions below, CIT shall have the

         right to  purchase  Gain-Generated  Funding in each  Fiscal  Year in an

         amount equal to the percentage of DFS total  Gain-Generated  Funding as

         set forth on  Schedule A (such  right will be referred to herein as the

         "CIT Minimum Funding  Right").  In addition,  subject to the provisions

         below, Dell shall have the right to purchase  Gain-Generated Funding in

         each Fiscal  Year to the extent not covered by the CIT Minimum  Funding

         Right  (such   right,   expressed   as  a   percentage   of  DFS  total

         Gain-Generated  Funding will be referred to herein as the "Dell Funding

         Right";  and the Dell Funding  Right and the CIT Minimum  Funding Right

         are  collectively  referred  to  herein  as  the  "Funding  Rights"  or

         individually as a "Funding Right").

 

         (b) Funding  Term.  The term of the CIT Minimum  Funding Right and Dell

         Funding  Right shall  commence at the beginning of Fiscal Year 2006 and

         terminate at the end of Fiscal Year 2010 (the "Funding Term"). Upon the

         purchase of the CIT Aggregate Interest by Dell, the CIT Minimum Funding

         Right shall remain in effect through the expiration of the Funding Term

         unless Dell  exercises  the Funding  Termination  Option (as defined in

         Section 3(g)  hereof).  From the date Dell  acquires the CIT  Aggregate

         Interest, pursuant to the DFS Agreement, through the end of the Funding

         Term,  Dell  covenants as to itself and its  Affiliates to (A) preserve

         the  DFS and  DFS-SPV  business  structure,  operate  DFS and  DFS-SPV,

         respectively,  as separate  legal  entities and not merge,  sell assets

         (outside the ordinary course of business),  dissolve or otherwise alter

         the legal structure of DFS and DFS-SPV (except that Dell may seek CIT's

         consent to do any of the aforementioned  actions and such consent shall

         not be  unreasonably  withheld as long as such  actions will not have a

         negative  effect,  financial  or  otherwise,  on  CIT  or  any  of  its

         Affiliates);  and (B)  cause  the  business  of DFS and  DFS-SPV  to be

         conducted in good faith and in the ordinary course consistent with past

         practice in a manner  such that Dell does not take any action  designed

         to enhance Dell's  profitability  at the financial  detriment of CIT or

         its Affiliates.  Notwithstanding the provisions of any of the Ancillary

         Agreements,  none  of  the  Ancillary  Agreements  shall  automatically

         terminate  upon  the  purchase  by Dell of the CIT  Aggregate  Interest

         pursuant to the terms of the DFS Agreement, but instead such agreements

         (including this Agreement) shall remain in

 

 

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         effect to the  extent  necessary  to  enable  CIT to  exercise  its CIT

         Minimum  Funding Right on the same terms and conditions as contemplated

         in this Agreement.

 

         (c) Dell Incremental  Funding Right. If Dell (including any assignee of

         Dell pursuant to Section 3(d) of this  Agreement) does not exercise its

         full Dell Funding  Right in a given Fiscal Year,  it shall be permitted

         to purchase in the next Fiscal  Year an  incremental  amount  above its

         Dell Funding Right for such Fiscal Year up to the amount (not to exceed

         in dollar value 5% of DFS total Gain-Generated  Funding in the previous

         Fiscal Year) by which Dell did not achieve its full Dell Funding  Right

         in the previous Fiscal Year. Conversely,  Dell (including any assignees

         of Dell  pursuant to Section  3(d) of this  Agreement)  may purchase an

         amount of  Gain-Generated  Funding  in excess of its full Dell  Funding

         Right in a given  Fiscal  Year  (other  than  Fiscal Year 2010) (not to

         exceed in dollar value 5% of DFS's total Gain-Generated Funding in such

         Fiscal Year) (the "Incremental  Funding Right"), and to the extent Dell

         exercises its Incremental  Funding Right, the CIT Minimum Funding Right

         in such Fiscal Year shall be  accordingly  reduced;  provided  that the

         Dell Funding Right for the subsequent Fiscal Year shall be reduced by a

         like  dollar  amount,  and  CIT  shall  have  the  right,  but  not the

         obligation,  to purchase  any portion of such amount of  Gain-Generated

         Fundings in such subsequent  Fiscal Year in addition to the CIT Minimum

         Funding  Right in such  subsequent  Fiscal Year (the "CIT Funding Right

         Adjustment") and the Dell Funding Right in such subsequent  Fiscal Year

         shall be accordingly  reduced. By way of example, if Dell purchased 19%

         of DFS total  Gain-Generated  Funding in Fiscal Year 2006,  it would be

         permitted   to  purchase  in  Fiscal  Year  2007,   35%  of  DFS  total

         Gain-Generated  Funding for Fiscal Year 2007 plus an additional  amount

         of DFS total  Gain-Generated  Funding  for Fiscal Year 2007 equal to 5%

         (and not 6%, as the Dell  Incremental  Funding is limited to 5%) of DFS

         total Gain-Generated  Funding for Fiscal Year 2006. Similarly,  if Dell

         purchased 29% of DFS total Gain-Generated  Funding in Fiscal Year 2006,

         it would be  permitted to purchase in Fiscal Year 2007 up to 35% of DFS

         total Gain-Generated Funding for Fiscal Year 2007 less an amount of DFS

         total Gain-Generated  Funding for Fiscal Year 2007 equal to 4% of total

         Gain-Generated  Funding  for Fiscal  Year 2006  (with  such  subtracted

         dollar amount equaling the CIT Funding Right Adjustment for Fiscal Year

         2007).

 

         (d) Assignment of Funding Right.

 

            (i) Dell,  at its sole  discretion,  shall  have the right to assign

            some or all of its Dell Funding Right  (including  its right to make

            incremental purchases pursuant to Section 3(c) of this Agreement) in

            any given Fiscal Year to a third party; provided,  however, that CIT

            will have a right to match the terms  offered  to Dell by such third

            party and  substitute  such third party as the  assignee of the Dell

            Funding Right.

 

               (A) Prior to assigning  its Dell Funding  Right to a third party,

               Dell shall provide to CIT, in writing,  the terms and  conditions

               upon which such third party will provide funding,

 

 

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               and any other  information  as CIT may  reasonably  request  (the

               "Dell  Funding  Notice").  CIT shall have seven (7) Business Days

               (the "Evaluation Period") upon receipt of the Dell Funding Notice

               to agree to provide such funding on the same terms and conditions

               as described in the Dell Funding Notice; provided,  however, that

               if CIT accepts such terms and  conditions  within the  Evaluation

               Period,  Dell shall be obligated to assign its Dell Funding Right

               to CIT in connection with the  transaction  described in the Dell

               Funding  Notice and provided  further that Dell shall not solicit

               bids from  third  parties or accept  unsolicited  bids from third

               parties  in  connection  with such  transaction.  If CIT does not

               agree in  writing,  prior  to the  expiration  of the  Evaluation

               Period,  to provide  funding on the same terms and  conditions as

               set forth in the Dell  Funding  Notice,  Dell may assign its Dell

               Funding  Right  to  such  third  party  on  the  same  terms  and

               conditions described in the Dell Funding Notice.

 

               (B) If CIT elects to accept the  funding  described  above,  such

               funding  will be  considered  a Dell  funding  for the purpose of

               calculating  the Dell Funding  Right and the CIT Minimum  Funding

               Right.

 

            (ii) Except with respect to CIT's match right in connection  with an

            assignment by Dell of its Dell Funding Right (as described in clause

            (i) above),  Dell shall have the sole right to determine whether CIT

            may purchase  receivables in excess of its CIT Minimum Funding Right

            and CIT Funding Right Adjustment (where applicable).

 

 

         (e) Transaction Allocation and Funding Mix.

 

            (i) During the Funding  Term,  each of the Dell  Funding Mix and the

            CIT Funding Mix shall be consistent  with the total DFS Funding Mix,

            unless otherwise agreed to by Dell and CIT.

 

 

            (ii)  Subject  to  the  foregoing  provisions,   the  allocation  of

            Transactions  between  Dell and CIT (the  "Transaction  Allocation")

            shall be  random.  Neither  party  shall have  preference  as to the

            Transactions to be allocated to it.

 

               (A)  On  a  monthly  basis,  DFS  shall  determine   whether  the

               Transaction  Allocation resulted in (a) a Funding Mix for each of

               Dell and CIT that reflects the DFS Funding Mix and (b) funding by

               Dell

 

 

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               and CIT equal to the relevant  Funding Right as exercised by Dell

               and CIT respectively.

 

               (B)  Notwithstanding  the first  sentence of Section  3(e)(ii) of

               this  Agreement,  if the Transaction  Allocation  after any given

               month (on a  cumulative  basis)  does not  result in the  correct

               Funding  Mix  between  Dell and CIT,  then in the next  month DFS

               shall provide the party that  experienced a Funding Mix shortfall

               with  an   allocation  of   Transactions   that  is  designed  to

               prospectively offset such shortfall (a "Funding Mix Correction").

               The process by which such Funding Mix Corrections  occur shall be

               set forth in a policy (which shall be  consistent  with the terms

               of  this  provision)  to be  adopted  by  the  Parties  and to be

               administered by DFS.

 

               (C)  Notwithstanding  the first  sentence of Section  3(e)(ii) of

               this  Agreement,  if the Transaction  Allocation  after any given

               month (on a cumulative basis) does not match the relevant Funding

               Right as exercised by Dell and CIT respectively, then in the next

               month DFS shall  provide  the party  that  experienced  a Funding

               Right  shortfall  with  an  allocation  of  Transactions  that is

               designed to prospectively offset such shortfall (a "Funding Right

               Correction");   provided,   however,  that  if  it  is  CIT  that

               experiences  the  shortfall  and CIT does not have a CIT  Funding

               Right  Adjustment in that Fiscal Year, and Dell has not exercised

               its  Incremental  Funding  Right in that Fiscal Year,  no Funding

               Right Correction shall be made,  unless the shortfall  exceeds 5%

               of the DFS total  Gain-Generated  Funding at the end of the month

               (on a  cumulative  basis)  and then  only to the  extent  of such

               excess.  Any  such  shortfall  for CIT up to 5% of the DFS  total

               Gain-Generated Funding, where no Funding Right Correction is made

               by DFS on behalf of CIT, pursuant to the previous sentence, shall

               be  deemed  to be an  exercise  by Dell of its  Dell  Incremental

               Funding   Right.   The  process  by  which  such  Funding   Right

               Corrections  occur shall be set forth in a policy (which shall be

               consistent with the terms of this provision) to be adopted by the

               Parties and to be administered by DFS.

 

         (f) Dell's Right to Enter into Receivables Purchase Agreements. Dell or

         any subsidiary thereof,  shall have the right to enter into receivables

         purchase  agreements and related  agreements with DFS,  DFS-SPV and CIT

         Bank  under  the  same  terms  and  conditions  as the CIT  Receivables

         Purchase  Agreement,  as amended;  the Commercial  Loan CIT Receivables

         Purchase Agreement, as amended; the DPA Receivables Purchase Agreement,

         as amended;  the DPA Servicing  Agreement,  as amended; and the DPA Sub

         Servicing Agreement, as amended; and any other

 

 

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         agreements as are necessary to effectuate  the terms and  conditions of

         this Agreement.

 

         (g) Termination of CIT Minimum Funding Right.  Upon the occurrence of a

         CIT Termination  Event pursuant to Section  8.1(a)(vi) (a CIT Change of

         Control)  of the DFS  Agreement,  and the  exercise by Dell of its Dell

         Purchase Option pursuant to the terms of the DFS Agreement,  Dell shall

         have the right  through the  duration of the Funding  Term to terminate

         the CIT  Minimum  Funding  Right  theretofore  unexercised  by CIT (the

         "Funding  Termination  Option");  provided,  however,  that Dell  shall

         provide  CIT six (6)  months  prior  written  notice  of its  intent to

         exercise  the  Funding  Termination  Option  and  will  pay CIT the CIT

         Funding Payment(s) as defined below. The date on which Dell effectively

         exercises its Funding Termination Option shall be referred to herein as

         the "Funding Termination Date."

 

               (A)  CIT  Funding  Payment(s).  If  Dell  exercises  the  Funding

               Termination  Option in accordance with this Agreement,  then Dell

               shall pay to CIT the Quarterly  CIT Funding  Payments (as defined

               below);  provided,  however,  that after  February 1, 2008,  Dell

               shall pay to CIT the Dell Lump Sum  Funding  Payment  (as defined

               below) (the Quarterly CIT Funding  Payments and the Dell Lump Sum

               Funding  Payment are referred to herein  collectively as the "CIT

               Funding Payment(s)").

 

               (B) The "Quarterly CIT Funding  Payments"  shall be payments made

               within 15  Business  Days after the end of each  Fiscal  Quarter,

               beginning from the end of the Fiscal Quarter in which the Funding

               Termination  Date occurs  through  the end of the  Funding  Term,

               equal to the maximum  amount of  Gain-Generated  Funding that CIT

               could have  purchased  pursuant to the CIT Minimum  Funding Right

               for  the  relevant  Fiscal  Year if Dell  had not  exercised  its

               Funding  Termination Option, and calculated on a quarterly basis,

               multiplied by the Funding Termination Factor. The first Quarterly

               CIT Funding  Payment  shall be  calculated on a pro rata basis to

               account for the time within the relevant  Fiscal Quarter in which

               the Funding Termination Date occurred.

 

               (C) The "Dell Lump Sum Funding  Payment" shall be an amount equal

               to the present value of the total unexercised  amounts of the CIT

               Minimum  Funding  Right as of the later of either (i) the Funding

               Termination  Date, or (ii) the end of the last Fiscal Quarter for

               which Dell made a Quarterly  CIT Funding  Payment,  (the later of

               either  such date  referred  to  herein as the "Lump Sum  Payment

               Date"),  through the end of the Funding Term (based in good faith

               upon the actual DFS business  plan and the Dell volume  forecast,

               both  as  available  at that  time),  multiplied  by the  Funding

               Termination  Factor,  and then discounted to the Lump Sum Payment

               Date at 8.5% per annum.

 

 

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         4. Exclusivity.

 

         (a) Section 4 of the Master  Agreement,  as amended by Section  7(d) of

         the Omnibus  Agreement,  is hereby deleted in its entirety and replaced

         with the following:

 

            "4. CIT's Exclusivity Covenants.

 

               (a)  Until the  earlier  of (i)  February  1,  2008,  or (ii) the

               occurrence  of a  CIT  Termination  Event  described  in  Section

               8.1(a)(vi) (a CIT Change of Control) of the DFS Agreement and the

               exercise by Dell of the Dell Purchase Option,  CIT shall not, and

               shall  cause  each  of  its  Affiliates   not  to,   directly  or

               indirectly,  enter  into  any  new  agreements,  arrangements  or

               understandings  relating to the provision in the United States of

               financings of the sale or the provision of products, including by

               means of leases,  installment sales contracts,  conditional sales

               contracts,  loans  (whether  secured or  unsecured)  and  related

               financial  services  (including  asset  management,  tracking and

               recovery services, refurbishing, remarketing and rental programs)

               (a "Competitive  Business") (such financing referred to herein as

               "Financing Services") to any Dell Competitor.

 

               (b) For purposes hereof, "Dell Competitor" is defined as follows: