<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-21370
LEASING SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0116801
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 ALMADEN BOULEVARD, SUITE 1500, SAN JOSE, CALIFORNIA 95113
(Address of principal executive offices) (Zip Code)
(408) 995-6565
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
The number of shares of Registrant's common stock outstanding at June 30, 1996
was 8,099,082 shares.
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
Page
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets
June 30, 1996 and December 31, 1995 2
Consolidated Condensed Income Statements
Three month and six month periods ended June 30, 1996 and 1995 3
Consolidated Condensed Statements of Cash Flows
Six month periods ended June 30, 1996 and 1995 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information 11
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures 13
1
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ----------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents......................... $ 8,152 $ 8,423
Accounts receivable............................... 11,589 4,068
Investment in direct finance leases - net......... 19,255 18,461
Investment in operating leases - net.............. 272,089 190,022
Property and equipment - net...................... 1,715 1,527
Other assets...................................... 2,017 1,601
-------- --------
TOTAL ASSETS................................... $314,817 $224,102
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable -- equipment purchases........... $ 1,846 $ 19,376
Accrued and other liabilities..................... 8,484 5,709
Income taxes payable.............................. 75 553
Recourse debt..................................... 118,728 71,681
Non-recourse debt................................. 123,264 93,354
Capital lease obligations......................... -- 143
Deferred income taxes............................. 4,697 2,374
-------- --------
TOTAL LIABILITIES............................ 257,094 193,190
-------- --------
SHAREHOLDERS' EQUITY
Common stock, authorized 20,000,000
shares; issued and outstanding:
8,099,082 and 6,263,930 shares................ 37,342 14,661
Retained earnings................................. 20,361 16,251
Accumulated translation adjustment................ 20 --
-------- --------
TOTAL SHAREHOLDERS' EQUITY................... 57,723 30,912
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..... $314,817 $224,102
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
2
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED INCOME STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 (Unaudited)
(In Thousands, Except Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Operating lease revenue............... $32,098 $18,666 $58,014 $34,752
Earned lease income................... 583 698 1,146 1,513
Gain on sale of equipment............. 48 114 88 206
Interest income....................... 212 117 327 237
Other................................. 286 3 289 5
------- ------- ------- -------
TOTAL REVENUES................. 33,227 19,598 59,864 36,713
------- ------- ------- -------
COSTS AND EXPENSES:
Depreciation - operating leases....... 21,732 12,683 39,035 23,557
Selling, general and administrative... 2,975 2,156 5,419 4,077
Interest.............................. 4,072 2,402 7,738 4,506
Other................................. 454 148 716 279
------- ------- ------- -------
TOTAL COSTS AND EXPENSES....... 29,233 17,389 52,908 32,419
------- ------- ------- -------
INCOME BEFORE INCOME TAXES............... 3,994 2,209 6,956 4,294
PROVISION FOR INCOME TAXES............... 1,661 884 2,846 1,718
------- ------- ------- -------
NET INCOME............................... $ 2,333 $ 1,325 $ 4,110 $ 2,576
======= ======= ======= =======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE............... $.28 $.21 $.53 $.41
======= ======= ======= =======
COMMON AND COMMON
EQUIVALENT SHARES..................... 8,239 6,328 7,727 6,241
======= ======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
3
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1996 1995
--------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES............. $ 22,658 $ 18,474
--------- --------
INVESTING ACTIVITIES:
Cost of equipment acquired for lease............. (127,853) (45,968)
Cash received over revenue recognized on leases.. 5,932 6,153
Property and equipment purchases................. (503) (144)
--------- --------
Net cash used for investing activities........... (122,424) (39,959)
--------- --------
FINANCING ACTIVITIES:
Borrowings:
Non-recourse.................................... 63,466 20,848
Recourse........................................ 160,493 42,982
Repayments:
Non-recourse.................................... (33,556) (28,524)
Recourse........................................ (113,446) (18,152)
Issuance of common stock......................... 22,681 166
Repayment of capital lease obligations........... (143) (46)
--------- --------
Net cash provided by financing activities........ 99,495 17,274
--------- --------
DECREASE IN CASH AND CASH EQUIVALENTS................. (271) (4,211)
CASH AND CASH EQUIVALENTS:
Beginning of period.............................. 8,423 11,706
--------- --------
End of period.................................... $ 8,152 $ 7,495
========= ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
4
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
and the rules and regulations of the Securities and Exchange Commission for
interim financial statements. Accordingly, the interim statements do not
include all of the information and disclosures required for annual
financial statements. In the opinion of the Company's management, all
adjustments (consisting solely of adjustments of a normal recurring nature)
necessary for a fair presentation of these interim results have been
included. Intercompany accounts and transactions have been eliminated.
These financial statements and related notes should be read in conjunction
with the audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
The balance sheet at December 31, 1995 has been derived from the audited
financial statements included in the Annual Report on Form 10-K. The
results for the interim period ended June 30, 1996 are not necessarily
indicative of the results to be expected for the entire year.
2. PUBLIC OFFERING OF COMMON STOCK
-------------------------------
On February 28, 1996, the Company closed a public stock offering of
1,800,000 shares of its Common Stock. The Company received net proceeds of
$22,493,000 from the offering.
3. CASH AND CASH EQUIVALENTS
-------------------------
Cash equivalents are comprised of highly liquid debt instruments with
maturities of six months or less. At June 30, 1996, $5,060,000 of such
amount was restricted solely for repayment of the debt securities of
Leasing Solutions Receivables, Inc., the Company's wholly-owned subsidiary,
issued in public offerings in 1994 and as collateral therefor, and was not
available to other creditors or for other uses.
4. INVESTMENT IN LEASES
--------------------
The components of the net investment in direct finance leases and in
operating leases as of June 30, 1996 and December 31, 1995 are shown below
(in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
<S> <C> <C>
Direct finance leases:
Minimum lease payments receivable $ 20,386 $ 19,832
Estimated unguaranteed residual values 1,658 1,372
Initial direct costs - net 30 73
Unearned lease income (2,819) (2,816)
--------- ---------
Investment in direct finance leases - net $ 19,255 $ 18,461
========= =========
Operating leases:
Equipment under operating leases $ 417,583 $ 301,255
Initial direct costs - net 2,324 1,664
Accumulated depreciation (147,680) (112,784)
Allowance for doubtful accounts (138) (113)
--------- ---------
Investment in operating leases - net $ 272,089 $ 190,022
========= =========
</TABLE>
A substantial portion of the increase in investment in leases was financed
with non-recourse and recourse debt.
5
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
5. UNITED KINGDOM ACQUISITION
--------------------------
In late April 1996, the Company acquired all of the stock of a Company,
located in the United Kingdom, in the equipment leasing business. The
purchase price in the acquisition was U.S. $1,100,000, $150,000 of which
was held back at closing as security for the seller's performance of
certain of its obligations and representations and warranties in the
purchase agreement. The acquisition was accounted for as a purchase.
6
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED
JUNE 30, 1996.
RESULTS OF OPERATIONS
Total revenues increased 70% to $33,227,000 and 63% to $59,864,000, for the
three and six month periods ended June 30, 1996, compared with the corresponding
prior year period. Operating lease revenue increased 72% to $32,098,000 and 67%
to $58,014,000, for the three and six month periods ended June 30, 1996,
compared with the corresponding prior year period. The increases in operating
lease revenue reflect a higher average investment in operating leases, resulting
from increases in operating leases originated by the Company over the past year,
and a significant increase in interim rents received, in the first three and
six months of 1996, compared to the same periods of 1995.
Earned lease income decreased 16% to $583,000 and 24% to $1,146,000, for the
three and six month periods ended June 30, 1996, compared with the corresponding
prior year period. The decrease is a result of outstanding direct finance leases
being paid down and of the Company and its customers continuing to focus their
leasing activity in 1996 on operating leases.
Depreciation expense for operating leases increased 71% to $21,732,000 and 66%
to $39,035,000, for the three and six month periods ended June 30, 1996,
compared with the corresponding prior year period. The increase is due to the
increase in the operating lease base, resulting from increases in operating
leases originated by the Company over the past year.
Selling, general and administrative expenses increased 38% to $2,975,000 and 33%
to $5,419,000, for the three and six month periods ended June 30, 1996, compared
with the corresponding prior year period. The increase is primarily
attributable to increased compensation and benefit costs as a result of an
increase in the number of employees, increases in travel costs associated with
increased leasing activity and the commencement of the Company's operations in
Europe, and increased occupancy costs resulting from an expansion of the
Company's headquarters and the commencement of the Company's operations in
the United Kingdom.
Interest expense increased 70% to $4,072,000 and 72% to $7,738,000, for the
three and six month periods ended June 30, 1996, compared with the corresponding
prior year period. The increase is due to higher average recourse and non-
recourse debt outstanding, which resulted from additional borrowings to fund the
growth in the Company's lease portfolio.
The provision for income taxes increased to 42% for the quarter ended June 30,
1996, compared to the Company's actual 41% rate for the corresponding prior year
period. The increase is due to an increase in the new leases with customers
located in states with higher than average income tax rates.
Net income increased 76% to $2,333,000 and 60% to $4,110,000, for the three and
six month periods ended June 30, 1996, compared with the corresponding prior
year period, as a result of the increases in the components of total revenues
specifically described above. Earnings per share increases 33% to $.28 and 29%
to $.53 for the three and six month periods. Net income increased faster than
earnings per share principally due to the effect of the issuance of additional
shares of Common Stock in the Company's public offering in February 1996.
7
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash flow from operations of $22,658,000 during the six
month period ended June 30, 1996, compared to net income of $4,110,000 for the
same period. Cash flow from operations was higher than net income primarily as a
result of non-cash expenses such as depreciation and amortization of $39,350,000
offset by uses of cash in operations, including resulting changes in accounts
payable, income taxes payable, and other assets and liabilities, totaling
$20,802,000. Investing activities, which are primarily related to investments in
equipment for lease, used $122,424,000 during the six month period. Financing
activities in the six month period generated $99,495,000 from the Company's new
borrowings of recourse and non-recourse debt ($223,959,000) and the Company's
issuance of common stock in its public offering in February 1996 and upon
exercise of options ($22,681,000), aggregating $246,640,000, offset by repayment
of capital lease obligations, and recourse and non-recourse borrowings
aggregating $147,145,000. The net result of the above activity for the six month
period was a decrease in cash and cash equivalents of $271,000.
The financing necessary to support the Company's leasing activities has
principally been provided from nonrecourse and recourse borrowings.
Historically, the Company has obtained recourse and nonrecourse borrowings from
money center banks, regional banks, insurance companies, finance companies and
financial intermediaries. In 1994, the Company, through its wholly-owned
subsidiary, Leasing Solutions Receivables, Inc. (the "Subsidiary"), began
obtaining long-term financing for a substantial portion of its leasing activity
through the public issuance of secured, nonrecourse debt securities (a
"securitization"). Borrowings under the securitizations are secured by lease
receivables and the underlying equipment financed under such arrangements.
Prior to the permanent financing of its leases, interim financing has been
obtained through short-term, secured, recourse facilities. The Company's
available credit under these short-term, recourse facilities currently totals
$156.5 million. A brief description of each of those facilities presently in
place follows.
1) a $127,500,000 facility syndicated with seven banks, expiring September
13, 1996. Borrowings under the facility bear an interest rate, at the
Company's option, of the agent bank's prime rate or LIBOR plus 125
basis points.
2) a $15,000,000 facility with one bank, with borrowings available through
January 31, 1997 and repayments due 240 days after borrowing.
Borrowings under the facility bear interest at LIBOR plus 250 basis
points.
3) a $3,000,000 revolving facility with one bank, expiring November 15,
1996. Borrowings under the facility bear interest at the bank's prime
rate plus 75 basis points. In addition to interim financing of lease
transactions, proceeds borrowed under this facility are available for
general corporate purposes.
4) an $11,000,000 revolving facility with one bank, expiring November 15,
1996. Borrowings under the facility bear interest at the bank's prime
rate plus 100 basis points. In addition to interim financing of lease
transactions, proceeds under this facility are available for general
corporate purposes.
In addition, during the second quarter, the Company entered into a $15,000,000
revolving facility with one bank, expiring October 15, 1996. Borrowings under
the facility bear interest at the bank's prime rate. The proceeds of borrowings
under this line are used exclusively to fund certain accounts payable to one of
the Company's vendors resulting from the purchase of equipment for lease to one
significant customer of the Company.
8
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
The Company also has a $100 million non-recourse Lease Receivables Purchase
Facility with an affiliate of Citicorp Securities that it entered into in March
1996. This is a revolving facility, with a term of one year, and borrowings
under the facility bear interest at a rate of 125 basis points over average life
treasuries at the time of borrowing. To date, the Company has refinanced
approximately $46,000,000 of borrowings under its other short-term facilities
through this new facility, at interest rates of 6.77% and 7.42%. The Company
intends to refinance, from time to time, under this new facility, additional
borrowings under its other short-term facilities in order to fix the interest
rate for these borrowings. The Company expects to refinance, on a long-term
basis, leases financed under this new facility under a new securitization
facility, with another affiliate of Citicorp, at the same interest rate provided
by this new facility. Although the Company expects that such securitization
facility will become effective during the third quarter, no assurances can be
given.
Borrowings under the above-described lines of credit are generally secured by
lease receivables and the underlying equipment financed under the facility.
Payments under the Company's borrowings and the maturities of its long-term
borrowings are typically structured to match the payments due under the leases
securing the borrowings. At June 30, 1996, the aggregate outstanding balance
under these lines of credit was $155,293,000, with a weighted average interest
rate of 7.8% per annum. The agreements for the lines of credit contain covenants
regarding leverage (a recourse liabilities-to-equity ratio of not more than 4.5
to 1), interest coverage, minimum net worth and profitability and a limitation
on the payment of dividends. At June 30, 1996, the Company had a recourse
liabilities-to-equity ratio of 2.3 to 1.
Occasionally, the Company will obtain long-term, non-recourse financing for
individual significant lease transactions at the time or shortly after it
purchases the related equipment. The Company borrowed an aggregate of
$43,807,000 in 1995, and $33,618,000 in the six month period ended June 30,
1996, under such arrangements. An aggregate of $56,439,000, ($6,496,000 of which
is recourse), with a weighted average interest rate of 8.3% per annum, remained
outstanding under all such arrangements as of June 30, 1996.
The Company's debt financing activities typically provide approximately 80% to
90% of the purchase price of the equipment purchased by the Company for lease to
its customers. The 10% to 20% balance of the purchase price (the Company's
equity investment in equipment) must generally be financed by cash flow from its
operations, the proceeds of subordinated debt, or its equivalent, or recourse
debt, or common stock or convertible debt sold by the Company. In February 1996,
the Company closed a public stock offering of 1,800,000 shares of its common
stock, under which the Company received net proceeds of $22,493,000. Debt
financing for the Company's equity investment is not readily available in the
marketplace and normally requires an interest rate materially higher than is
required by the Company's conventional debt financing. Although the Company
expects that the credit quality of its lessees and its residual return history
will continue to allow it to obtain such financing, no assurances can be given
that such financing will be available, at acceptable terms or at all.
The Company's current lines of credit, if renewed or replaced, its expected
access to the public and private securities markets, both debt and equity,
anticipated new lines of credit (both short-term and long-term and recourse and
non-recourse), anticipated long-term financing of individual significant lease
transactions, and its estimated cash flow from operations are anticipated to
provide adequate capital to fund the Company's operations, including
acquisitions and financings under its vendor programs, for the next twelve
months. Although no assurances can be given, the Company expects to be able to
renew or timely replace its existing lines of credit, to continue to have access
to the public and private securities markets, both debt and equity, and to be
able to, as required, enter into anticipated new lines of credit and individual
financing transactions.
9
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's future quarterly operating results and the market price of its
stock may fluctuate. In the event the Company's revenues or earnings for any
quarter are less than the level expected by securities analysts or the market in
general, such shortfall could have an immediate and significant adverse impact
on the market price of the Company's stock. Any such adverse impact could be
greater if any such shortfall occurs near the time of any material decrease in
any widely followed stock index or in the market price of the stock of one or
more public equipment leasing companies or major customers or vendors of the
Company.
The Company's quarterly results of operations are susceptible to fluctuations
for a number of reasons, including, without limitation, as a result of sales by
the Company of equipment it leases to its customers. Such sales of equipment,
which are an ordinary but not predictable part of the Company's business, will
have the effect of increasing revenues, and, to the extent sales proceeds exceed
net book value, net income, during the quarter in which the sale occurs.
Furthermore, any such sale may result in the reduction of revenue, and net
income, otherwise expected in subsequent quarters, as the Company will not
receive lease revenue from the sold equipment in those quarters.
Given the possibility of such fluctuations, the Company believes that
comparisons of the results of its operations to immediately succeeding quarters
are not necessarily meaningful and that such results for one quarter should not
be relied upon as an indication of future performance.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The Company issued and sold 1,800,000 shares of its Common Stock, in February
1996, in a public offering subject to its Registration Statement, dated January
29, 1996, as amended. That Registration Statement and the Prospectus, dated
February 22, 1996, which is a part of it (the "Prospectus"), include a section
entitled "Risk Factors," which describes certain factors that may affect future
operating results of the Company. That section is hereby incorporated by
reference in this Report. Those factors should be considered carefully in
evaluating an investment in the Company's Common Stock. If you do not have a
copy of the Prospectus, you may obtain one by requesting it from the Company's
Investor Relations Department by phone, at (408) 995-6565, or by mail at Leasing
Solutions, Inc., 10 Almaden Boulevard, Suite 1500, San Jose, California 95113.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The statements contained in this Report which are not historical facts may be
deemed to contain forward-looking statements with respect to events, the
occurrence of which involve risks and uncertainties, including, without
limitation, demand and competition for the Company's lease financing services
and the products to be leased by the Company, the continued availability to the
Company of adequate financing, risks and uncertainties of doing business in
Europe, the ability of the Company to recover its investment in equipment
through remarketing, the ability of the Company to manage its growth, and other
risks or uncertainties detailed in the Company's Securities and Exchange
Commission filings, including the Prospectus.
10
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Under Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on
May 30, 1996.
(b) See (c) 1 below
The Company has no other Directors
(c) At the 1996 Annual Meeting, the shareholders took the following
actions:
1. Elected four directors to serve until the next Annual
Meeting of Shareholders and until their successors are
elected and qualified; and
In the election of directors, no candidates were nominated for
election as a director other than the nominees of the Board of
Directors whose names were set forth in the Company's proxy
statement dated April 29, 1996. Set forth below is a tabulation
of the votes cast in the election of Directors with respect to
each nominee for office.
Votes Cast Votes
Name of Nominee For Election Withheld
---------------------------------- ------------ --------
Hal J Krauter 7,450,302 56,140
Louis R. Adimare 7,450,077 56,365
George L. Bragg 7,450,697 55,745
James C. Castle 7,450,452 55,990
Abstentions N/A N/A
Broker Non-votes N/A N/A
2. Approved the ratification of the amendment of the Company's
Articles of Incorporation to increase the authorized shares
of Common Stock from 10,000,000 to 20,000,000.
On the matter of the ratification of the amendment of the
Company's Articles of Incorporation, the votes were cast as
follows:
For 7,330,997
Against 163,880
Abstain 10,065
Broker Non-votes 1,500
11
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION (CONTINUED)
3. Approved the ratification of the amendment to the Company's
1995 Stock Option and Incentive Plan to increase the number
of shares of Common Stock subject to the plan from 400,000
to 800,000.
On the matter of the ratification of the amendment of the
Company's 1995 Stock Option and Incentive Plan, the votes
cast were as follows:
For 6,977,149
Against 514,898
Abstain 12,895
Broker Non-votes 1,500
(d) Not Applicable.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit No. Document
----------- --------
10.56.4 Amendment, dated February 29, 1996, to Warehousing
Loan and Security Agreement with Nations Banc
Leasing Corporation.
10.69 Credit Agreement and Security Agreement between
Leasing Solutions, Inc. and Wells Fargo Bank,
National Association, dated May 30, 1996.
10.70 Second Amendment to Amended and Restated Credit
Agreement and Security Agreement between Leasing
Solutions, Inc. and the First National Bank of
Boston, as Agent, dated May 31, 1996.
27 Financial Data Schedule.
12
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
LEASING SOLUTIONS, INC.
By: /s/ Hal J Krauter
-----------------
Hal J Krauter
President and Chief Executive Officer
By: /s/ Robert J. Kearns, III
-------------------------
Robert J. Kearns, III
Vice President, Finance and Chief Financial Officer
(Principal Financial Officer)
DATE: August 2, 1996
13
<PAGE>
EXHIBIT 10.56.4
AMENDMENT NO. 2 TO WAREHOUSING LOAN AND SECURITY AGREEMENT
This Amendment is entered into as of February 29, 1996, between Leasing
Solutions, Inc. ("Borrower") and NationsBanc Leasing Corporation ("Lender").
Borrower and Lender are party to a May 31, 1994 Warehousing Loan and
Security Agreement (the "Agreement"), as amended by an Amendment dated as of
April 30, 1995 ("Amendment No. 1"). The Agreement, as amended by Amendment No.
1, is the "Amended Agreement".
Borrower and Lender agree as follows:
1. Line Increases. The line is hereby increased to $15 million by changing
--------------
"$10,000,000" to "$15,000,000" on the cover page of the Amendment Agreement and
in the definition of "Commitment" in (S) 1.01 of the Amended Agreement.
2. Interest Rate. The interest rate on future Advances is changed from
-------------
Federal Funds plus 2.4% to LIBOR plus 2.5%, by changing the definition of
"Interest Rate" in (S) 1.01 of the Amended Agreement to read as follows:
"Interest Rate": (a) for Advances made on or before February 14,
1996, a floating interest rate equal to the Index Rate plus 2.40% per
annum, and (b) for Advances made on or after February 15, 1996, a floating
interest rate equal to LIBOR plus 2.50% per annum, in either case computed
on the basis of actual days elapsed and a 360-day year.
and the following definition is added:
"LIBOR": a floating rate, set for each Advance as of its Funding Date
and reset as of each monthly "anniversary" thereof (or the following Business
Day, if that anniversary date is not a Business Day), equal to the interest rate
per annum (rounded upward to the nearest 1/100 of 1%), as quoted to Lender, at
which NationsBank, N.A. (or its affiliate) is able, in accordance with its
normal practice, to acquire dollar deposits, of a size comparable to that
Advance, in the London interbank market at approximately 11:00 a.m. (London
time) on the date which is two Business Days before such Advance date or monthly
anniversary date, for one-month deposits, as adjusted by Lender in good faith to
account for reserve requirements applicable to ""Eurocurrency liabilities" for
Federal Reserve member banks and any increased funding or loan maintenance costs
which result from such requirements (the foregoing quotation and adjustment, if
made in good faith, shall be conclusive and binding on all parties).
<PAGE>
and the following is added:
4.08 Breakage. Upon any prepayment of a LIBOR-based Advance on any
--------
date other than a monthly "anniversary" thereof, Borrower shall pay to
Lender, on demand, all breakage costs and similar charges attributable to
the prepayment, as computed by Lender in good faith (which computation, if
made in good faith, shall be conclusive and binding on all parties).
3. Amount Financed. The amount financed for each Lease is changed from
---------------
the present value of rents to Equipment Cost, by changing the definition of
"Financed Amount" in (S) 1.01 of the Amended Agreement to read as follows:
"Financed Amount" for a Lease: (a) for Advances made on or before
February 14, 1996, the present value (discounted at the Interest Rate on
its Funding Date) of the scheduled rental payments due under that Lease
after the Funding Date for the related Advance, but not to exceed the
Equipment Cost for that Lease, and (b) for Advances made on or after
February 15, 1996, the Equipment Cost for that Lease (but not to exceed, as
to all such outstanding post - 2/15/96 Advances (including the proposed new
Advance), 125% of the present value (discounted at the then-prevailing
Interest Rate for such Advances) of the scheduled rental payments then
remaining due under the related Leases).
4. Monthly Principal Reductions. The present value of the remaining
----------------------------
rental stream for advanced-upon leases is to be maintained at or above the level
required for loans. The following is hereby added to the end of (S) 4.03 of the
Amended Agreement:
In addition, on the 20th day of each month, (a) for each Advance made on or
before February 14, 1996, Borrower shall prepay that Advance to the extent
necessary to reduce the outstanding principal of that Advance to 100% of
the present value (discounted at the then-prevailing Interest Rate
therefor) of the rental payments then remaining due under the related
Lease, and (b) for Advances made on or after February 15, 1996, Borrower
shall prepay the Advances to the extent necessary to reduce the principal
of all such Advances to 125% of the present value (discounted at the then-
prevailing Interest Rate therefor) of the rental payments then remaining
due under the related Leases.
5. Term of Funding Commitment. Lender's commitment to make advances under
--------------------------
the Amended Agreement shall extend to January 31, 1997, and "June 30, 1996" is
hereby changed to "January 31, 1997" in (S) 2.01 of the Amended Agreement.
2
<PAGE>
6. Representations, etc. Borrower represents, covenants, and warrants
--------------------
that no default under the Amended Agreement exists and no status or condition
exists which with the giving of notice or the passage of time or both would
constitute a default under the Amended Agreement, and that the Obligations are
owing without defense, offset, recoupment right, or counterclaim.
7. Fees and Expenses. Borrower shall reimburse NationsBank for
-----------------
NationsBank's expenses in connection with this Amendment, including attorney's
fees, in accordance with (S) 10.03 of the Amended Agreement.
8. Agreement. Except as specifically amended hereby, the Amended
---------
Agreement shall remain unchanged and continue in full force and effect in
accordance with its terms. From and after the date of this Amendment, each
reference in the Amended Agreement (including all Exhibits and Schedules
thereto) to "this Agreement", "hereto", "hereof", and terms of similar import
shall refer to the Agreement as amended by Amendment No. 1 and this Amendment,
and all references to the Agreement in any document, instrument, certificate,
note, or other agreement executed in connection therewith shall be deemed to
refer to the Agreement as so amended.
9. Applicable Law. This Amendment shall be governed by and construed in
--------------
accordance with the laws of Georgia.
10. Headings. Section headings in this Amendment are for convenience only,
--------
and are not a substantive part of this Amendment.
11. Counterparts. This Amendment may be executed separately in
------------
counterparts.
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Amendment No. 2
to Warehousing Loan and Security Agreement.
[Seal] LEASING SOLUTIONS, INC.
Attest: By: /s/ Tim Laehy
------------------------------------
/s/ Glenda Allen Title: Vice President and Corporate
- ------------------------------ Finance & Treasurer
Title: Vice President
NATIONSBANC LEASING CORPORATION
By: /s/ Jack Rives
------------------------------------
Title: Vice President
4
<PAGE>
EXHIBIT 10.69
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of May 30, 1996, by and between LEASING
SOLUTIONS, INC., a California corporation ("Borrower") and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Bank").
RECITAL
-------
Borrower has requested from Bank the credit accommodation described below,
and Bank has agreed to provide said credit accommodation to Borrower on the
terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
1. Certain Definitions and Index to Definitions.
--------------------------------------------
1.1 Accounting Terms. Unless otherwise specified herein, all accounting
----------------
terms used herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with generally accepted accounting principles
and practices consistently applied; provided, however, all Financial Statements,
--------
other than annual audited financial statements, shall be subject to year-end
audit adjustments and need not include footnotes.
1.2 Definitions. The following terms shall have the following respective
-----------
meanings:
"Advance" - see Section hereof.
-------
"Bankruptcy Code" - see Section hereof.
---------------
<PAGE>
"Citicorp Facility" - the Lease Receivables Purchase Agreement, dated
-----------------
as of March 29, 1996, by and among CXC Incorporated, Citicorp North America,
Inc. and Borrower, as such agreement is in effect on the date hereof.
"Collateral" - as defined in the Security Agreement.
----------
"Dell" - Dell Computer Corporation, a Delaware corporation.
----
"Dell Products" - Dell Products, L.P., a Texas limited partnership.
-------------
"Dell Products Letter Agreement" - the letter agreement, dated March
------------------------------
15, 1996, by and between Borrower and Dell Products.
"Eligible Inventory" - Inventory of Dell purchased by Borrower from
------------------
Dell and which has been shipped directly by Dell to Borrower's prospective
lessees.
"ERISA" - see Section hereof.
-----
"Event of Default" - see Section hereof.
----------------
"Existing Loan Agreements" - the Syndicated Line; the Revolving Loan
------------------------
Agreement, dated September 21, 1995, by and between Borrower and Silicon Valley
Bank; the First Amended and Restated Revolving Loan Agreement, dated July 26,
1995, by and between Borrower and Silicon Valley Bank; the Citicorp Facility;
and the Warehousing Loan and Security Agreement, dated as of May 31, 1994, by
and between Borrower and NationsBanc Leasing Corporation, as each is in effect
of the date hereof.
"Existing Loan Agreement Availability" - the availability under those
------------------------------------
Existing Loan Agreements which are not scheduled to terminate pursuant to their
terms prior to the date which is sixty-five (65) days from the date of the
applicable Advance.
"Line of Credit" - see Section hereof.
--------------
"Line of Credit Note" - see Section hereof.
-------------------
2
<PAGE>
"Loan Documents" - this Agreement, the Security Agreement, and each
--------------
other document, contract and instrument required hereby or at any other time
hereafter delivered to Bank in connection herewith.
"Material Adverse Effect" - a material adverse effect on (a) the
-----------------------
business, assets, operations, prospects or financial or other condition of
Borrower, (b) Borrower's ability to pay its obligations in accordance with the
terms of the Loan Documents, or (c) the Collateral (as such term is defined in
the Security Agreement) or Bank's liens in the Collateral or the priority of any
such liens.
"Maximum Credit" - at any time, the lesser of (a) the aggregate
--------------
principal amount of Fifteen Million Dollars ($15,000,000), and (b) eighty (80%)
percent of Borrower's cost of all Eligible Inventory, as set forth on the
invoices which accompany all Notices For Borrowing which have been submitted to
Bank pursuant to the terms hereof as of such time.
"Notice of Borrowing" - a request by Borrower for an Advance,
-------------------
substantially in the form of Exhibit A hereto, accompanied by the following:
---------
(a) a schedule of invoices covering Eligible Inventory, which
includes: (i) the cost of such Eligible Inventory, (ii) the name of the lessee
to whom such Eligible Inventory has been shipped, and (iii) the location where
such Eligible Inventory has been shipped; and
(b) original execution copies of forms UCC-1 covering Eligible
Inventory, which have been executed by Borrower.
"Plan" - see Section hereof.
----
"Prime Rate" - at any time the rate of interest most recently
----------
announced within Bank at its principal office in San Francisco as its Prime
Rate, with the understanding that the Prime Rate is one of Bank's base rates and
serves as the basis upon which effective rates of interest are calculated
3
<PAGE>
for those loans making reference thereto, and is evidenced by the recording
thereof in such internal publication or publications as Bank may designate. Each
change in the rate of interest shall become effective on the date each Prime
Rate change is announced within Bank.
"Projected Outstanding Balance" - the unpaid balance of Advances to be
-----------------------------
outstanding, based on the assumption that each outstanding Advance will be
repaid on the due date thereof.
"Security Agreement" - the Security Agreement, dated as of even date
------------------
herewith, by and between Borrower and Bank.
"Syndicated Line" - the Amended and Restated Warehousing Credit
---------------
Agreement, dated September 15, 1995, by and among Borrower, the Lenders named
therein and The First Bank of Boston, as Agent, as such agreement is in
existence on the date hereof.
"Termination Date" - October 15, 1996.
----------------
1.3 Other Defined Terms. All terms used herein which are defined in the
-------------------
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement.
2. The Credit
----------
2.1 Line of Credit.
--------------
2.1.1 Line of Credit. Subject to the terms and conditions of this
--------------
Agreement, Bank hereby agrees to make advances (each, an "Advance") to Borrower
from time to time up to and including the Termination Date, not to exceed at any
time the Maximum Credit (the "Line of Credit"). Borrower's obligation to repay
each Advance under the Line of Credit shall be evidenced by a promissory note
substantially in the form of Exhibit B attached hereto (each, a "Line of Credit
---------
Note"), all terms of which are incorporated herein by this reference.
4
<PAGE>
2.1.2 Borrowing and Repayment.
-----------------------
2.1.2.1 Borrower shall not request any Advance in an amount
less than $500,000.
2.1.2.2 In connection with each Advance requested by Borrower
hereunder, Borrower shall submit to Bank a Notice of Borrowing, together with
all documents, instruments and agreements required to be delivered to Bank in
connection therewith.
2.1.2.3 Each Advance made by Bank to Borrower hereunder shall
be due in payable not later than sixty five (65) days from the date of such
Advance.
2.2 Interest and Fees.
-----------------
2.2.1 Interest. The outstanding principal balance of the Line of
--------
Credit shall bear interest at the Prime Rate in effect from time to time.
Interest shall be computed on the basis of a 360-day year, actual days elapsed,
and shall be due and payable monthly on the last day of each month, (a) if an
Advance is made hereunder on or before the twentieth (20th) day of any month,
commencing on the last day of the month in which such Advance is made, and (b)
if an Advance is made hereunder after the twentieth (20th) day of any month,
commencing on the last day of the next month after the month in which such
Advance is made.
2.2.2 Commitment Fee. Borrower shall pay to Bank a non-refundable
--------------
commitment fee for the Line of Credit equal to Fifteen Thousand Six Hundred
Twenty-Five Dollars ($15,625.00), which fee shall be due and payable in full on
the date hereof.
5
<PAGE>
3. Representations and Warranties. Borrower makes the following
------------------------------
representations and warranties to Bank, which representations and warranties
shall survive the execution of this Agreement and shall continue in full force
and effect until the full and final payment, and satisfaction and discharge, of
all obligations of Borrower to Bank subject to this Agreement.
3.1 Legal Status. Borrower is a corporation duly organized and existing
------------
and in good standing under the laws of the State of California, and is qualified
or licensed to do business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed could have a
Material Adverse Effect.
3.2 Authorization and Validity. The Loan Documents have been duly
--------------------------
authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower, enforceable in accordance with their respective terms.
3.3 No Violation. The execution, delivery and performance by Borrower of
------------
each of the Loan Documents do not violate any provision of any applicable law or
regulation in effect as of the date hereof, or contravene any provision of the
Articles of Incorporation or By-Laws of Borrower, or result in any breach of or
default under any contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower may be bound, the violation,
contravention or breach of which, or the default under which, could have a
Material Adverse Effect.
3.4 Litigation. There are no pending, or to the best of Borrower's
----------
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative
6
<PAGE>
agency which could have a Material Adverse Effect other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
3.5 Correctness of Financial Statement. The financial statement of
----------------------------------
Borrower dated March 31, 1996, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) presents fairly the financial
condition of Borrower, (b) discloses all material liabilities of Borrower that
are required to be reflected or reserved against under generally accepted
accounting principles, whether liquidated or unliquidated, fixed or contingent,
and (c) has been prepared in accordance with generally accepted accounting
principles consistently applied. Since the date of such financial statement
there has been no material adverse change in the financial condition of
Borrower.
3.6 Income Tax Returns. Borrower has no knowledge of any pending
------------------
assessments or adjustments of its income tax payable with respect to any year,
the payment of which could have a Material Adverse Effect.
3.7 No Subordination. There is no agreement, indenture, contract or
----------------
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this Agreement to any other obligation of Borrower.
3.8 Permits, Franchises. Borrower possesses, and will hereafter possess,
-------------------
all permits, franchises and licenses required, and rights to all trademarks,
trade names, patents, and fictitious names, if any, necessary, to enable it to
conduct the business in which it is now engaged in compliance with applicable
law, the failure of which to obtain could have a Material Adverse Effect.
3.9 ERISA. Borrower is in compliance in all material respects with all
-----
applicable provisions of the Employee Retirement Income Security Act of
7
<PAGE>
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
3.10 Other Obligations. Borrower is not in default on any obligation for
-----------------
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation, a default with respect to or
under which could have a Material Adverse Effect.
3.11 Existing Loan Agreements. Except as disclosed to Bank in writing
------------------------
prior to the date hereof, Borrower is not a party, as of the date hereof, to any
other recourse loan agreement for borrowed funds, Borrower's obligations under
which, with respect to principal, could exceed $1,000,000, other than the
Existing Loan Agreements.
3.12 Existing Loan Agreement Availability. The Existing Loan Agreement
------------------------------------
Availability is not less than the Projected Outstanding Balance.
3.14 Time Line. The timeline attached hereto as Exhibit C generally
--------- ---------
describes the process of the Dell Products Letter Agreement in all material
respects.
4. Conditions.
----------
4.1 Conditions of Initial Extension of Credit. The obligation of Bank to
-----------------------------------------
extend any credit contemplated by this Agreement is subject to the fulfillment
to Bank's satisfaction of all of the following conditions:
8
<PAGE>
4.1.1 Approval of Bank Counsel. All legal matters incidental to the
------------------------
extension of credit by Bank shall be satisfactory to Bank's counsel.
4.1.2 Documentation. Bank shall have received, in form and substance
-------------
satisfactory to Bank, each of the following, duly executed:
4.1.2.1 This Agreement;
4.1.2.2 The Security Agreement; and
4.1.2.3 Such other documents as Bank may require under any
other Section of this Agreement.
4.1.3 Financial Condition. There shall have been no material adverse
-------------------
changes, as determined by Bank, in the financial condition of Borrower.
4.2 Conditions of Each Extension of Credit. The obligation of Bank to
--------------------------------------
make each Advance shall be subject to the fulfillment to Bank's satisfaction of
each of the following conditions:
4.2.1 Compliance. The representations and warranties contained
----------
herein and in each of the other Loan Documents shall be true on and as of the
date of the signing of this Agreement and, except with respect to those
representations and warranties that are given with respect to a specific date or
time, on the date of each extension of credit by Bank pursuant hereto, with the
same effect as though such representations and warranties had been made on and
as of each such date, and on each such date, no Event of Default as defined
herein, and no condition, event or act which with the giving of notice or the
passage of time or both would constitute such an Event of Default, shall have
occurred and be continuing or shall exist.
4.2.2 Documentation. Bank shall have received all additional
-------------
documents which may be reasonably required in connection with such extension
of credit.
9
<PAGE>
5. Affirmative Covenants. Borrower covenants that so long as Bank remains
---------------------
committed to extend credit to Borrower pursuant hereto, or any liabilities
(whether direct or contingent, liquidated or unliquidated) of Borrower to Bank
under any of the Loan Documents remain outstanding, and until payment in full of
all obligations of Borrower subject hereto, Borrower shall, unless Bank
otherwise consents in writing:
5.1 Punctual Payments. Punctually pay all principal, interest, fees or
-----------------
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein, and, immediately upon demand by Bank, the
amount by which the outstanding principal balance of the Line of Credit at any
time exceeds the Maximum Credit.
5.2 Accounting Records. Maintain adequate books and records in accordance
------------------
with generally accepted accounting principles consistently applied, and permit
any representative of Bank, at any reasonable time, and, if no Event of Default
exists, with advance notice of at least one (1) business day, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
5.3 Financial Statements. Provide to Bank all of the following, in form
--------------------
and detail satisfactory to Bank:
5.3.1 not later than one hundred twenty (120) days after the end of
each fiscal year, a complete copy of Borrower's financial statements with
respect to such fiscal year, including but not limited to (a) the management
letter, if any, provided to its audit committee by its auditors (b) the balance
sheet as of the close of the fiscal year, and (c) the income statement for such
year, together with a statement of cash flows, audited by certified public
accountants of nationally recognized reputation selected by Borrower;
10
<PAGE>
5.3.2 not later than sixty (60) days after the end of each quarter,
Borrower's balance sheet as of the close of such quarter and its income
statement for that portion of the then current fiscal year through the end of
such quarter, certified by Borrower's chief financial officer as fairly
presenting its financial condition and results of operations.
5.4 Compliance. Preserve and maintain all licenses, permits, governmental
----------
approvals, rights, privileges and franchises necessary for the conduct of its
business, the preservation and maintenance of which could have a Material
Adverse Effect; and comply with the provisions of all documents pursuant to
which Borrower is organized and/or which govern Borrower's continued existence
and with the requirements of all laws, rules, regulations and orders of any
governmental authority applicable to Borrower and/or its business, the failure
with which to comply could have a Material Adverse Effect.
5.5 Insurance. Maintain and keep in force insurance of the types and in
---------
amounts customarily carried in lines of business similar to that of Borrower,
including but not limited to fire, extended coverage, public liability, flood,
property damage and workers' compensation.
5.6 Taxes and Other Liabilities. Pay and discharge when due any and all
---------------------------
indebtedness, obligations, assessments and taxes, both real or personal,
including, without limitation, Federal and state income taxes and state and
local property taxes and assessments, except such (a) as Borrower may in good
faith contest or as to which a bona fide dispute may arise, and (b) with respect
to which adequate reserves have been established and are being maintained in
accordance with generally accepted accounting principles and practices
consistently applied.
11
<PAGE>
5.7 Litigation. Promptly give notice in writing to Bank of any
----------
litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of Borrower, threatened, against Borrower, that, if adversely
determined, could result in a forfeiture of all or any substantial part of the
property of Borrower or could otherwise have a Material Adverse Effect.
5.8 Notice to Bank. Promptly (but in no event more than five (5) business
--------------
days after the occurrence of each such event or matter) give written notice to
Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property in
excess of an aggregate of $1,000,000.
5.9 Guarantee by Dell. Obtain, either (a) an unconditional guarantee from
-----------------
Dell or any of its affiliates as Bank shall require, in its sole discretion, of
Dell Products' obligations under the Dell Products Letter Agreement, or (b) an
irrevocable standby letter of credit from a bank satisfactory to Bank, in its
sole discretion, securing Dell Products' obligations under the Dell Products
Letter Agreement, if any of the following events occur:
5.9.1 Dell's senior unsecured debt rating drops below B+ on the
Standard and Poor's rating scale; or
12
<PAGE>
5.9.2 Dell does not have a net profit after taxes at the end of any
fiscal year; or
5.9.3 Dell reports a net loss after taxes for any two (2) consecutive
quarters.
5.10 Financial Covenants. Borrower is and shall be in compliance with the
-------------------
financial covenants set forth in Section 7 of the Syndicated Line.
6. Negative Covenants. Borrower further covenants that so long as Bank
------------------
remains committed to extend credit to Borrower pursuant hereto, or any
liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding, and until
payment in full of all obligations of Borrower subject hereto, Borrower will not
without Bank's prior written consent, except as permitted in, or not limited by,
the Syndicated Line:
6.1 Merger, Consolidation, Transfer of Assets. Merge into or consolidate
-----------------------------------------
with any other entity if Borrower shall not be the continuing or surviving
corporation; make any substantial change in the nature of Borrower's business as
conducted as of the date hereof; nor sell, lease, transfer or otherwise dispose
of all or a substantial or material portion of Borrower's assets except in the
ordinary course of its business.
6.2 Guaranties. Guarantee or become liable in any way as surety, endorser
----------
(other than as endorser of negotiable instruments for deposit or collection in
the ordinary course of business), accommodation endorser or otherwise for, nor
pledge or hypothecate any assets of Borrower as security for, any liabilities or
obligations of any other person or entity other than any of its direct or
indirect wholly-owned subsidiaries (so long as the obligation being guaranteed
is in the ordinary course of such subsidiary's
13
<PAGE>
business), except any of the foregoing (a) in favor of Bank, or (b) existing as
of, and disclosed to Bank prior to, the date hereof.
6.3 Loans, Advances, Investments. Make any loans or advances to or
----------------------------
investments in any person or entity, except any of the foregoing existing as of,
and disclosed to Bank prior to, the date hereof, and except: (a) loans or other
advances of money to any officer or employee of Borrower during the term of this
Agreement as follows: (i) reimbursable advances incurred in the ordinary course
of Borrower's business, (ii) promissory notes issued upon the exercise of stock
options, and (iii) loans not to exceed $1,000,000 in the aggregate amount at any
time outstanding to such officers or employees, and (b) intercompany loans or
advances to and investments in subsidiaries of Borrower.
6.4 Dividends, Distributions. Declare or pay any dividend or distribution
------------------------
either in cash or any other property on Borrower's stock now or hereafter
outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of
any class of Borrower's stock now or hereafter outstanding.
6.5 Eligible Accounts. Allow more than twenty five (25%) percent of
-----------------
Borrower's Eligible Inventory to be in the possession of potential lessees other
than Ernst & Young.
7. Events of Default.
-----------------
7.1 The occurrence of any of the following shall constitute an "Event of
Default" under this Agreement:
7.1.1 Borrower shall fail to pay (a) any principal payable under any
of the Loan Documents on the due date thereof, or (b) any interest, fees or
other amounts payable under any of the Loan Documents within five (5) calendar
days of the due date thereof.
14
<PAGE>
7.1.2 Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.
7.1.3 Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections and above), and the same
has not been cured to Bank's satisfaction within ten (10) calendar days after
the earlier of the date on or by which (i) Borrower has become aware thereof,
whether by written notice from Bank or otherwise, or (ii) Borrower should have
reasonably become aware thereof upon the exercise of reasonable due diligence.
7.1.4 Borrower defaults on the payment of any principal of or any
interest on any recourse indebtedness or indebtedness under which the lender
acquires recourse for any reason, including, without limitation, the Citicorp
Facility, or breaches any term of any evidence of such recourse indebtedness or
of any loan agreement, mortgage, indenture or other agreement relating thereto
if (a) the amount of such indebtedness exceeds $1,000,000 in principal amount,
and (b) the effect of such breach is to permit acceleration under the applicable
instrument, and such breach is neither waived by the note holder or obligee nor
cured, in each case within five (5) calendar days of the date of such breach, or
there is an acceleration under the applicable instrument.
7.1.5 There shall be a money judgment, writ or warrant of attachment
or similar process entered or filed against Borrower which is not fully covered
by insurance in accordance with Section hereof or remains unvacated, unbonded,
unstayed or unpaid or undischarged for more than sixty (60) days (whether or not
consecutive) or in any event later than five (5)
15
<PAGE>
calendar days prior to the date of any proposed sale thereunder, which, together
with all such other judgments or attachments against Borrower exceeds in the
aggregate $1,000,000.
7.1.6 Borrower shall become insolvent; or admit in writing its
inability to pay its debts as they mature; or make an assignment for the benefit
of creditors; or apply for or consent to the appointment of a receiver,
liquidator, custodian or trustee for it or for a substantial part of its
property or business, or such a receiver, liquidator, custodian or trustee or
otherwise shall be appointed and shall not be discharged within sixty (60) days
after such appointment; Borrower shall file a voluntary petition in bankruptcy,
or seeking reorganization, in order to effect a plan or other arrangement with
creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended or recodified from time to time ("Bankruptcy
Code"), or under any state or Federal law granting relief to debtors, whether
now or hereafter in effect; or any involuntary petition or proceeding pursuant
to the Bankruptcy Code or any other applicable state or Federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower and such petition shall not have been dismissed within sixty
(60) days after it is filed, or Borrower shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower shall be adjudicated a bankrupt, or an order for relief
shall be entered against Borrower by any court of competent jurisdiction under
the Bankruptcy Code or any other applicable state or Federal law relating to
bankruptcy, reorganization or other relief for debtors. Bank shall not be
obligated to make Advances during either of the sixty (60) day periods set forth
in this Section.
16
<PAGE>
7.1.7 There shall have been a change in the assets, liabilities,
financial condition, operations, or business of Borrower, other than changes in
the ordinary course of business, which in the reasonable determination of Bank
has, either individually or in the aggregate, had a Material Adverse Effect.
7.1.8 The dissolution or liquidation of Borrower; or Borrower, or any
of its directors or stockholders, shall take action seeking to effect the
dissolution or liquidation of Borrower.
7.1.9 Any amendment, without Bank's prior written approval, or
termination of the terms of the Dell Products Letter Agreement.
7.2 Remedies. Upon the occurrence of any Event of Default, other than in
--------
connection with Section hereof: (a) all indebtedness of Borrower under each of
the Loan Documents, any term thereof to the contrary notwithstanding, shall at
Bank's option and without notice with respect to an Event of Default under
Section hereof and upon written notice with respect to any other Event of
Default become immediately due and payable, without presentment, demand, protest
or notice of dishonor, all of which are hereby expressly waived by Borrower; (b)
the obligation, if any, of Bank to extend any further credit under any of the
Loan Documents shall immediately cease and terminate; and (c) Bank shall have
all rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including, without limitation, the right to resort to any or
all Collateral for any credit accommodation from Bank subject hereto and to
exercise any or all of the rights of a beneficiary or secured party pursuant to
applicable law. All rights, powers and remedies of Bank may be exercised at any
time by Bank and from time to time after the occurrence of an Event of Default,
are cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or
17
<PAGE>
equity. Upon the occurrence of an Event of Default based on Borrower's failure
to comply with the terms of Section hereof, the obligation, if any, of Bank to
extend any further credit under any of the Loan Documents shall immediately
cease and terminate.
8. Miscellaneous.
-------------
8.1 No Waiver. No delay, failure or discontinuance of Bank in exercising
---------
any right, power or remedy under any of the Loan Documents shall affect or
operate as a waiver of such right, power or remedy; nor shall any single or
partial exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other right,
power or remedy. Any waiver, permit, consent or approval of any kind by Bank of
any breach of or default under any of the Loan Documents must be in writing and
shall be effective only to the extent set forth in such writing.
8.2 Notices. All notices, requests and demands which any party is
-------
required or may desire to give to any other party under any provision of this
Agreement or the Security Agreement must be in writing delivered to each party
at the following address:
BORROWER: LEASING SOLUTIONS, INC.
10 Almaden Blvd., Suite 1500
San Jose, CA 95113-2238
Attention: President and General Counsel
Fax: (408) 295-0639
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
Commercial Banking Group
121 Park Center Drive
San Jose, CA 95115
Fax: (408) 277-6158
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
18
<PAGE>
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or five (5) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
8.3 Costs, Expenses and Attorneys' Fees. Borrower shall pay to Bank the
-----------------------------------
full amount of all out-of-pocket costs and expenses, including reasonable
attorneys' fees (to include outside counsel fees and all allocated costs of
Bank's in-house counsel), incurred by Bank in connection with (a) within thirty
(30) days of the date of an invoice submitted to Borrower, the negotiation and
preparation of this Agreement and the other Loan Documents, and the preparation
of any amendments and waivers hereto and thereto, (b) on demand, the enforcement
of Bank's rights and/or the collection of any amounts which become due to Bank
under any of the Loan Documents, and (c) on demand the prosecution or defense of
any action in any way related to any of the Loan Documents, including, without
limitation, any action for declaratory relief, and including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to
Borrower.
8.4 Successors, Assignment. This Agreement shall be binding upon and
----------------------
inure to the benefit of the administrators, legal representatives, successors
and assigns of the parties; provided, however, that Borrower may not assign or
--------
transfer its interest hereunder without Bank's prior written consent. Bank
reserves the right to sell, assign, transfer, negotiate or grant participations
in all or any part of, or any interest in, Bank's rights and benefits under each
of the Loan Documents,subject to Borrower's prior written approval, which shall
not be unreasonably withheld or delayed. In connection therewith, Bank may
disclose all documents and information which Bank now has
19
<PAGE>
or may hereafter acquire relating to any credit extended by Bank to Borrower,
Borrower or its business, or any collateral required hereunder.
8.5 Entire Agreement; Amendment. This Agreement and the other Loan
---------------------------
Documents constitute the entire agreement between Borrower and Bank with respect
to any extension of credit by Bank subject hereto and supersede all prior
negotiations, communications, discussions and correspondence concerning the
subject matter hereof. This Agreement may be amended or modified only by a
written instrument executed by each party hereto.
8.6 No Third Party Beneficiaries. This Agreement is made and entered into
----------------------------
for the sole protection and benefit of the parties hereto and their respective
permitted successors and assigns, and no other person or entity shall be a third
party beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any other of the Loan Documents to which it
is not a party.
8.7 Time. Time is of the essence of each and every provision of this
----
Agreement and each other of the Loan Documents.
8.8 Severability of Provisions. If any provision of this Agreement shall
--------------------------
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
8.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, except to the extent Bank
has greater rights or remedies under Federal law, whether as a national bank or
otherwise, in which case such choice of California law shall not be deemed to
deprive Bank of any such rights and remedies as may be available under Federal
law.
20
<PAGE>
8.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
LEASING SOLUTIONS, INC. WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ Robert J. Kearns III By: /s/ Wendy Hibberd
------------------------ ------------------------
Title: Chief Financial Officer Title: Vice President
------------------------ ----------------------
21
<PAGE>
EXHIBIT A
---------
FORM OF NOTICE OF BORROWING
TO: Wells Fargo Bank, National Association
FROM: Leasing Solutions, Inc.
DATE: _______________________
Re: Notice of Borrowing
-------------------
The undersigned hereby requests that you make an Advance to us pursuant to
the terms of the Credit Agreement, dated as of May __, 1996, by and between you
and us (the "Credit Agreement"), in the amount of $_________________.
Pursuant to the terms of the Credit Agreement, in connection with this
Notice of Borrowing, we hereby represent and warrant to you, and acknowledge and
agree with the following:
1. we are not in default under the terms of the Credit Agreement;
2. all representations and warranties made by us under the terms of
the Credit Agreement are true and correct as of the date hereof;
3. upon filing of the forms UCC-1 which accompany this Notice of
Borrowing, you will have a first perfected security interest in Eligible
Inventory having a cost at least equal to eighty (80%) percent of the total cost
of Eligible Inventory described in this Notice of Borrowing and all previous
Notices of Borrowing, the borrowings under which have not been repaid;
4. the Existing Loan Agreement Availability is not less than the
Projected Outstanding Balance; and
5. None of the events set forth in Section of the Credit Agreement
have occurred as of the date hereof.
Pursuant to the terms of the Credit Agreement, attached hereto are the
following:
(a) a schedule of invoices covering Eligible Inventory, which includes:
(i) the cost of such Eligible Inventory, (ii) the name of the lessee to whom
such Eligible Inventory has been shipped, and (iii) the location where such
Eligible Inventory has been shipped; and
(b) original execution copies of forms UCC-1 covering Eligible
Inventory, which have been executed by Borrower.
All terms not otherwise defined herein shall have the meanings given to them
under the terms of the Credit Agreement.
LEASING SOLUTIONS, INC.
By: _____________________
Title: ___________________
22
<PAGE>
EXHIBIT B
---------
[Wells Fargo to attach form of Note]
<PAGE>
EXHIBIT C
---------
TIME LINE
<TABLE>
<C> <S>
DAY 1 -Lease order placed with Leasing Solutions, Inc.
- ----- -Dell equipment shipped to Ernst & Young
or other Dell customer
NEXT 15 BUSINESS DAYS -Ernst & Young or other Dell customers receive
- --------------------- equipment
-Leasing Solutions, Inc. provides lease documentation
to Ernst & Young or other Dell customers
(supplemental lease documents to a master lease)
DAY 25-35 -Leasing Solutions, Inc. decides to make payment to
- --------- Dell (net 30 days terms)
-Leasing Solutions, Inc. makes request for advance
to Wells Fargo Bank
-Wells Fargo Bank makes advance to Leasing Solutions,
Inc.
DAY 35-70 -Leasing Solutions, Inc.
- --------- receives lease documentation\acceptance certificate from
Ernst or Young or other Dell customers
-Advances on warehouse line; proceeds of which are used to
repay Wells Fargo Bank
DAY 70-80 -If acceptance certificate is
- --------- not received by Leasing Solutions, Inc.
within 45 days from when Leasing Solutions,
Inc. paid Dell, Dell will reimburse Leasing
Solutions within 5 days of written request;
proceeds of which will repay Wells Fargo Bank
</TABLE>
<PAGE>
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is entered into as of May
30, 1996, by and between LEASING SOLUTIONS, INC., a California corporation
("Debtor"), having its principal place of business at 10 Almaden Boulevard,
Suite 1500, San Jose, California 95113, and WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Secured Party").
1. Definitions:
-----------
"Collateral" - all Debtor's right, title, and interest in and to the
----------
following property and interests in property, now owned and hereafter acquired:
(a) all inventory purchased by Debtor from Dell Computer
Corporation, as described in any invoice which is scheduled in any Notice Of
Borrowing (as defined in the Credit Agreement) under the Credit Agreement,
wherever located ("Inventory"); and
(b) all documents of title relating to the Inventory, all cash
and non-cash proceeds thereof, all insurance proceeds thereof, all claims which
Debtor may now or hereafter have against any vendor of any goods which
constitute Inventory, and all claims and other rights to payment now or
hereafter owed to Debtor by any insurance carrier arising out of any casualty
insurance covering Inventory, whether or not such claims represent the proceeds
of any of the foregoing; and
(c) all books and records relating to any of the above,
including, but not limited to, all computer programs, printed output and
computer readable data in the possession or control of Debtor, any computer
services bureau or other third party;
(d) all Debtor's rights under the Dell Products Letter Agreement;
and
(e) all products and proceeds of the foregoing, in whatever form
and wherever located.
"Credit Agreement" - the Credit Agreement, dated as of even date
----------------
herewith, by and between Debtor and Secured Party.
"Dell Products Letter Agreement" - that certain letter agreement,
------------------------------
dated March 15, 1996, by and between Debtor and Dell Products, L.P., a copy of
which is attached hereto as Exhibit A
---------
"Loan Documents" - This Agreement, the Credit Agreement, and each
--------------
other document, contract and instrument required by the Credit Agreement or at
any other time hereafter delivered to Secured Party in connection herewith or
therewith.
"Obligations" - all present and future obligations of Debtor to
-----------
Secured Party arising under or in connection with the Credit Agreement or this
Agreement, whether absolute or contingent, joint or several, matured or
unmatured, direct or indirect, primary or secondary, including, without
limitation, all costs and expenses and attorneys' fees for which Debtor is
obligated under the Credit Agreement.
Any other term not expressly defined herein shall have the meaning
ascribed thereto in the Credit Agreement.
1
<PAGE>
2. Grant of Security Interest.
--------------------------
2.1 As security for the performance of the Obligations, Debtor grants
to Secured Party a continuing general lien and security interest in the
Collateral.
2.2 Upon payment if full of an Advance and all accrued interest with
respect to such Advance, and no Event of Default or condition or event which,
after notice or lapse of time or both, would constitute an Event of Default
having occurred and be continuing, the security interest in the Eligible
Inventory subject to the Notice of Borrowing for such Advance shall terminate
and such Eligible Inventory shall cease to be Collateral. Upon any such
termination, Secured Party shall promptly execute, and deliver to Debtor, such
documents as Debtor shall reasonably request to evidence such termination.
3. Debtor's Warranties and Representations. Debtor warrants, agrees
---------------------------------------
and represents each of the following:
3.1 The Collateral is and shall be maintained at the shipped to
addresses as set forth in the Notices of Borrowing provided to Secured Party by
Debtor pursuant to the terms of the Credit Agreement; and
3.2 Debtor will take all steps as Secured Party may reasonably
request, including but not limited to those set forth in the Credit Agreement,
to create and maintain in Secured Party's favor a perfected security interest in
all Collateral; and
3.3 As of the date of this Agreement, the Collateral is free and
clear of any liens, security interest, mortgages, and any other encumbrances,
and Debtor is the absolute owner thereof; and
3.4 Debtor will defend Secured Party's security interest in the
Collateral against any claims or demands of third parties; and
3.5 Debtor will promptly pay, when due, all taxes or assessments
levied on account of the Collateral, other than income taxes of Secured Party.
4. Covenants.
---------
4.1 Notice to Secured Party. Debtor will immediately give written
----------------------- -----------
notice to Secured Party of each of the following:
4.1.1 Any change in the location of any portion of the
Collateral; and
4.1.2 Any change in Debtor's name or form of business
organization.
4.2 Protection of Collateral. Debtor agrees to maintain books and
------------------------
records pertaining to the Collateral in such detail, form and scope as Secured
Party shall reasonably require.
4.3 Notification to Dell Products, L.P. Secured Party shall have the
----------------------------------
right to notify Dell Products, L.P. at any time after the occurrence of an Event
of Default under the Credit Agreement that the Secured Party has been granted a
security interest in the Dell Products Letter Agreement, and directing that all
payments on account thereof must be paid by Dell Products, L.P. to the Secured
Party and not to the Debtor.
4.4 Appointment of Secured Party as Attorney-in-Fact. Debtor hereby
------------------------------------------------
appoints Secured Party as Debtor's attorney-in-fact and at Debtor's cost and
expense at any time after the occurrence of an Event of Default under the
2
<PAGE>
Credit Agreement to receive, take, endorse, assign and deliver in Secured
Party's or Debtor's name any and all checks, notes, drafts and other instruments
relating to Collateral, and authorizes Secured Party to execute on Debtor's
behalf any documents necessary to enable Debtor and\or Secured Party to
effectuate payment from Dell in connection with the Dell Products Letter
Agreement. Neither Secured Party nor its attorneys will be liable for any acts
of commission or omission, nor for any error of judgment or mistake of fact or
law. This power, being coupled with an interest, is irrevocable so long as any
Obligation remains unpaid.
4.5 Negative Pledge.
---------------
4.5.1 Until each Advance is paid in full, subsequent to the date
hereof, Debtor shall not pledge, assign or grant a security interest in the
Collateral constituting, or relating to the Eligible Inventory which is the
subject of such Advance to any other party.
4.5.2 Subsequent to the date hereof, Debtor shall not pledge,
assign or grant a security interest in any Collateral to any other party other
than as set forth in Section hereof.
4.6 Maintenance of Perfection. Debtor hereby authorizes Secured
-------------------------
Party to sign Debtor's name to any Uniform Commercial Code Financing Statements
or other documents reasonably deemed necessary by Secured Party to obtain or
maintain perfection by Secured Party of its security interest granted herein.
4.7 Continuation of Secured Party's Rights.
--------------------------------------
4.7.1 The rights granted to Secured Party herein are to
continue in full force and effect, notwithstanding the termination of this
Agreement, until the final and indefeasible payment in full of all Obligations
together with interest thereon.
4.7.2 Secured Party's delay or omission to exercise any rights
shall not be deemed a waiver thereof or of any other right, unless such waiver
is in writing.
4.7.3 A waiver on one occasion shall not be construed as a
waiver of any rights or remedies on any further occasion.
5. Default.
-------
5.1 Disposition of Collateral. Debtor agrees that commercial
-------------------------
reasonableness and good faith require Secured Party to give Debtor no more than
------------
five (5) business days prior written notice, of the time and place of any public
- -------------------------------------------
disposition or sale of Collateral or of the time after which any private
disposition or sale or any other intended disposition is to be made.
5.2 Application of Proceeds. The proceeds from any sale or other
-----------------------
disposition of Collateral by Secured Party shall first be applied to any out-of-
pocket costs and expenses (including, without, limitation, in-house and outside
attorneys' fees and expenses) incurred in securing possession of the Collateral,
storing and repairing the Collateral for sale, and to any out-of-pocket expenses
in connection with the sale. The balance, if any, will be applied toward the
payment of any Obligations in any manner deemed appropriate by Secured Party in
its sole discretion, including the order in which such proceeds are applied to
interest and principal. Any deficiency will be paid to Secured Party upon
demand. Any surplus will be paid promptly to Debtor. The foregoing rights are
not intended to be exhaustive and the exercise of any rights shall not preclude
the exercise of any other rights, all of which shall be cumulative.
3
<PAGE>
5.3 Rights Against Third Parties. To the extent that any Obligations
----------------------------
are now or hereafter secured by property other than the Collateral, or by a
guarantee, endorsement or any property of any other entity, then Secured Party
shall have the right to proceed against such other property, guarantee or
endorsement upon the occurrence of an Event of Default under the Credit
Agreement, and Secured Party shall have the right in Secured Party's sole
discretion to determine which rights, security, liens, security interest or
remedies Secured Party shall at any time pursue, relinquish, subordinate, modify
or take any other action with respect thereto, without in any way modifying or
affecting any of them or any of Secured Party's rights or the Obligations.
6. Miscellaneous.
-------------
6.1 No Waiver. No delay, failure or discontinuance of Secured Party
---------
in exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Secured Party of any breach of or default under any of the Loan
Documents must be in writing and shall be effective only to the extent set forth
in such writing.
6.2 Notices. All notices, requests and demands which any party is
-------
required or may desire to give to any other party under any provision of this
Agreement or the Security Agreement must be in writing delivered to each party
at the following address:
Debtor: LEASING SOLUTIONS, INC.
10 Almaden Blvd., Suite 1500
San Jose, CA 95113-2238
Attention: President and General Counsel
Fax: (408) 295-0639
Secured Party: WELLS FARGO Secured Party, NATIONAL ASSOCIATION
Commercial Secured Partying Group
121 Park Center Drive
San Jose, CA 95115
Fax: (408) 277-6158
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or five (5) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
6.3 Successors, Assignment. This Agreement shall be binding upon and
----------------------
inure to the benefit of the administrators, legal representatives, successors
and assigns of the parties; provided, however, that Debtor may not assign or
--------
transfer its obligations hereunder without Secured Party's prior written
consent. Secured Party reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in, Secured
Party's rights and benefits under each of the Loan Documents,subject to Debtor's
prior written approval, which shall not be unreasonably withheld or delayed. In
connection therewith, Secured Party may disclose all documents and information
which Secured Party now has or may hereafter acquire relating to any credit
extended by Secured Party to Debtor, Debtor or its business, or any collateral
required hereunder.
6.4 Entire Agreement; Amendment. This Agreement and the other Loan
---------------------------
Documents constitute the entire agreement between Debtor and Secured Party with
4
<PAGE>
respect to any extension of credit by Secured Party subject to the Credit
Agreement and supersede all prior negotiations, communications, discussions and
correspondence concerning the subject matter hereof. This Agreement may be
amended or modified only by a written instrument executed by each party hereto.
6.5 No Third Party Beneficiaries. This Agreement is made and entered
----------------------------
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other Loan Documents to which
it is not a party.
6.6 Time. Time is of the essence of each and every provision of this
----
Agreement and each other of the Loan Documents.
6.7 Severability of Provisions. If any provision of this Agreement
--------------------------
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
6.8 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California, except to the extent
Secured Party has greater rights or remedies under Federal law, whether as a
national bank or otherwise, in which case such choice of California law shall
not be deemed to deprive Secured Party of any such rights and remedies as may be
available under Federal law.
6.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and effective as of the date and year first written above.
LEASING SOLUTIONS, INC.
By: Robert J. Kearns, III
----------------------
Title: Chief Financial Officer
-----------------------
5
<PAGE>
EXHIBIT 10.70
LEASING SOLUTIONS, INC.
SECOND AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
AND
SECURITY AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND
SECURITY AGREEMENT (this "Amendment") is dated as of May 31, 1996, and entered
into among LEASING SOLUTIONS, INC., a California corporation (the "Borrower"),
the financial institutions named on the signature pages hereof (each a "Lender"
and collectively, the "Lenders"), THE FIRST NATIONAL BANK OF BOSTON, in its
capacity as swingline lender (the "Swingline Lender") and THE FIRST NATIONAL
BANK OF BOSTON, as agent for the Lenders (the "Agent").
RECITALS
A. Borrower, the Lenders, the Swingline Lender, and Agent, are parties to
that certain Amended and Restated Warehousing Credit Agreement dated as of
September 15, 1995, as previously amended as of December 15, 1995 (the "Credit
Agreement"). All capitalized terms used herein without definition shall have
the meaning ascribed to them in the Credit Agreement.
B. First Interstate Bank of California has been acquired by Wells Fargo
Bank, N.A.
C. Union Bank has been acquired by The Bank of California, N.A., which has
been renamed Union Bank of California, N.A.
D. NatWest Bank N.A. has been acquired by Fleet Bank of New York, N.A.,
with the resulting bank title being Fleet Bank, N.A.
E. Under this Amendment, the parties desire to amend the definition of
"Rate Spread."
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT.
1.1 CHANGE IN COMMITMENTS. Schedule 1 to the Credit Agreement is hereby
amended and replaced in its entirety by a new Schedule 1 as set forth in EXHIBIT
A to this Amendment.
1.2 CHANGE IN DEFINITION OF RATE SPREAD. The definition of Rate Spread
in SECTION 1 of the Credit Agreement is hereby amended and replaced in its
entirety by a new definition as set forth below:
"'Rate Spread' means:
(a) in the case of a Revolving Credit Loan which is a Base Rate
Loan, zero percent (0%);
(b) in the case of a Revolving Credit Loan which is a LIBOR Loan,
one and twenty-five hundredths percent (1.25%); and
1.
<PAGE>
(c) in the case of a Swingline Loan which is a Base Rate Loan, zero
percent (0%)."
Notwithstanding anything herein to the contrary, the above amendment to the
definition of Rate Spread shall be effective only as to LIBOR Loans made by the
Lenders after the Second Amendment Effective Date.
2. CONDITIONS TO EFFECTIVENESS.
SECTION 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions, which shall be specified in a notice from Agent
to the parties hereto, being referred to herein as the "Second Amendment
----------------
Effective Date"):
- --------------
2.1 On or before the Second Amendment Effective Date, the aggregate
amount outstanding under the Credit Agreement shall be less than or equal to the
aggregate amount of the Commitments set forth in EXHIBIT A hereto.
2.2 On or before the Second Amendment Effective Date, Agent shall have
received for each Lender counterparts hereof duly executed on behalf of
Borrower, Agent, Swingline Lender, and each of the Lenders.
2.3 On or before the Second Amendment Effective Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby shall be satisfactory in form and substance to Agent and its
counsel and Agent and such counsel shall have received all such copies of such
agreements and other documents as Agent may reasonably request.
3. BORROWER'S REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Borrower represents and
warrants to each Lender that the following statements are true, and correct and
complete:
3.1 AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Credit Agreement, as amended, have been
duly authorized by all necessary corporate action on the part of Borrower.
3.2 INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in SECTION 4 of the
Credit Agreement are and will be true and correct in all material respects on
and as of the Second Amendment Effective Date to the same extent as though made
on and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true and correct
in all material respects on and as of such earlier date, provided that the
representations and warranties set forth in SECTION 4.6 of the Credit Agreement
shall be deemed to be made with respect to the financial statements most
recently delivered to Lenders.
3.3 ABSENCE OF DEFAULT. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute a Default under the Credit Agreement.
4. MISCELLANEOUS.
4.1 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND OTHER LOAN
AGREEMENTS.
2.
<PAGE>
4.1.1 On and after the Second Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Credit Agreement, and each
reference in the other Loan Agreements to the "Credit Agreement", "thereunder,"
"thereof" or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement, as amended by this Amendment.
4.1.2 Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Agreements shall remain in full force and effect
and are hereby ratified and confirmed.
4.1.3. The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of Agent or
any Lender under, the Credit Agreement or any of the other Loan Agreements.
4.2 HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
4.3 APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
4.4 COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
3.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER LEASING SOLUTIONS, INC.
By: /s/ Timothy P. Laehy
--------------------
Name: Timothy P. Laehy
Title: Treasurer
AGENT THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Debra E. Delvecchio
-----------------------
Name: Debra E. Delveddhio
Title: Vice President
SWINGLINE LENDER THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Debra E. Delvecchio
-----------------------
Name: Debra E. Delveddhio
Title: Vice President
LENDERS THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Debra E. Delvecchio
-----------------------
Name: Debra E. Delveddhio
Title: Vice President
FLEET BANK, N.A.
By: /s/ Maureen Brody
-----------------
Name: Maureen Brody
Title: Vice President
THE SUMITOMO BANK OF CALIFORNIA
By: /s/ Arne F. Olson
-----------------
Name: Arne F. Olson
Title: Vice Predisent
BANK HAPOALIM B.M.
By: /s/ Bruce Wetter
----------------
Name: Bruce Wetter
Title: Vice President
4.
<PAGE>
By: /s/ David Cohen
---------------
Name: David Cohen
Title: E. V. P. & Mgr
CORESTATES BANK N.A.
By: /s/ Hugh Connelly
-----------------
Name: Hugh Connelly
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Wendy Hibberd
-----------------
Name: Wendy Hibberd
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Robert John Vernagallo
--------------------------
Name: Robert John Vernagallo
Title: Vice President
5.
<PAGE>
EXHIBIT A TO SECOND AMENDMENT
SCHEDULE 1 TO CREDIT AGREEMENT
<TABLE>
<CAPTION>
COMMITMENT COMMITMENT PERCENTAGE
<S> <C> <C>
The First National Bank of Boston $15,000,000 15/92.5 x 100%
Fleet Bank, N.A. $12,500,000 12.5/92.5 x 100%
Bank Hapoalim B.M. $12,500,000 12.5/92.5 x 100%
CoreStates Bank, N.A. $10,000,000 10/92.5 x 100%
The Sumitomo Bank of California $10,000,000 10/92.5 x 100%
Wells Fargo Bank, N.A. $12,500,000 12.5/92.5 x 100%
Union Bank of California, N.A. $20,000,000 20/92.5 x 100%
Total $92,500,000 100.00000000%
</TABLE>
6.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,152
<SECURITIES> 0
<RECEIVABLES> 11,589
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,715
<DEPRECIATION> 0
<TOTAL-ASSETS> 314,817
<CURRENT-LIABILITIES> 10,330
<BONDS> 241,992
0
0
<COMMON> 37,342
<OTHER-SE> 20,381
<TOTAL-LIABILITY-AND-EQUITY> 314,817
<SALES> 0
<TOTAL-REVENUES> 59,864
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 45,170
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,738
<INCOME-PRETAX> 6,956
<INCOME-TAX> 2,846
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,110
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
