<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1994
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
For the Quarter Ended: October 31, 1994 Commission File Number: 0-15994
---------------- -------
LDI CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 31-1179824
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4770 Hinckley Industrial Parkway, Cleveland, Ohio 44109-6096
(Address of principal executive offices)
Registrant's telephone number, including area code (216) 661-5400
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
6,727,457 shares of Common Stock, $.01 par value,
as of November 30, 1994
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LDI CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED OCTOBER 31, 1994 AND 1993
(Amounts in Thousands, Except Per Share Data)
=====================================================================================================
<S> <C> <C>
1994 1993
--------------- ---------------
REVENUES:
Leasing . . . . . . . . . . . . . . . . . . . . $ 26,441 $ 50,173
Direct sales . . . . . . . . . . . . . . . . . . 18,583 19,226
Technical services . . . . . . . . . . . . . . . 3,929 3,883
Equity in earnings of 50% owned affiliate . . . 462 145
Other . . . . . . . . . . . . . . . . . . . . . 265 1,001
----------------- -----------------
Total . . . . . . . . . . . . . . . . . . . . . 49,680 74,428
----------------- -----------------
COSTS AND EXPENSES:
Leasing . . . . . . . . . . . . . . . . . . . . 16,731 35,701
Direct sales . . . . . . . . . . . . . . . . . . 15,891 16,509
Technical services . . . . . . . . . . . . . . . 2,171 2,234
Interest . . . . . . . . . . . . . . . . . . . . 7,046 8,241
Debt financing fees . . . . . . . . . . . . . . 1,089 413
Selling, general, and administrative . . . . . . 6,417 8,790
----------------- -----------------
Total . . . . . . . . . . . . . . . . . . . . . 49,345 71,888
----------------- -----------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES . . . . . . . . . . . . . . . . 335 2,540
Income Tax Expense . . . . . . . . . . . . . . . . . 127 1,578
----------------- -----------------
EARNINGS FROM CONTINUING OPERATIONS . . . . . . . . . 208 962
Loss From Discontinued Operations, Net of Income
Tax Benefit of $180 . . . . . . . . . . . . . . . - (266)
----------------- -----------------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . $ 208 $ 696
================= =================
EARNINGS (LOSS) PER SHARE:
Continuing operations . . . . . . . . . . . . . $ .03 $ .14
Discontinued operations . . . . . . . . . . . . - (.04)
----------------- -----------------
Net earnings . . . . . . . . . . . . . . . . . . $ .03 $ .10
================= =================
Average Shares Outstanding . . . . . . . . . . . . . 6,727 6,727
================= =================
Cash Dividends Paid Per Share . . . . . . . . . . . . - $ .04
================= =================
</TABLE>
See the accompanying notes to consolidated financial statements.
Page 2
<PAGE> 3
LDI CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED EARNINGS (UNAUDITED)
FOR THE NINE MONTHS ENDED OCTOBER 31, 1994 AND 1993
(Amounts in Thousands, Except Per Share Data)
==============================================================================================
1994 1993
-------------- --------------
<S> <C> <C>
REVENUES:
Leasing . . . . . . . . . . . . . . . . . . . . $ 78,233 $ 122,912
Direct sales . . . . . . . . . . . . . . . . . 55,012 61,683
Technical services . . . . . . . . . . . . . . 11,814 12,201
Equity in earnings of 50% owned affiliate . . . 841 393
Other . . . . . . . . . . . . . . . . . . . . . 728 3,444
-------------- --------------
Total . . . . . . . . . . . . . . . . . . . 146,628 200,633
-------------- --------------
COSTS AND EXPENSES:
Leasing . . . . . . . . . . . . . . . . . . . . 47,263 79,555
Direct sales . . . . . . . . . . . . . . . . . 47,280 52,949
Technical services . . . . . . . . . . . . . . 6,512 7,361
Interest . . . . . . . . . . . . . . . . . . . 21,879 25,681
Debt financing fees . . . . . . . . . . . . . . 2,237 1,331
Selling, general, and administrative . . . . . 21,115 26,693
-------------- --------------
Total . . . . . . . . . . . . . . . . . . . 146,286 193,570
-------------- --------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES . . . . . . . . . . . . . . . 342 7,063
Income Tax Expense . . . . . . . . . . . . . . . . . 130 3,327
-------------- --------------
EARNINGS FROM CONTINUING OPERATIONS . . . . . . . . . 212 3,736
Loss From Discontinued Operations, Net of Income
Tax Benefit of $1,888 and $363 . . . . . . . . . . (3,081) (557)
-------------- --------------
NET EARNINGS (LOSS) . . . . . . . . . . . . . . . . .
$ (2,869) $ 3,179
============== =============
EARNINGS (LOSS) PER SHARE:
Continuing operations . . . . . . . . . . . . . $ .03 $ .55
Discontinued operations . . . . . . . . . . . . (.46) (.08)
-------------- --------------
Net earnings . . . . . . . . . . . . . . . . . $ (.43) $ .47
============== =============
Average Shares Outstanding . . . . . . . . . . . . . 6,727 6,727
============== ==============
Cash Dividends Paid Per Share . . . . . . . . . . . . - $ .12
============== ==============
</TABLE>
See the accompanying notes to consolidated financial statements.
Page 3
<PAGE> 4
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1994 (Unaudited) AND JANUARY 31, 1994
(Dollars in Thousands)
===============================================================================================================
<CAPTION>
October 31, January 31,
1994 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 2,328 $ 8,972
Receivables - net of allowance for doubtful accounts . . . . . . 28,254 41,831
Inventory held for lease or sale . . . . . . . . . . . . . . . . 11,160 18,336
Leased assets:
Sales-type and direct financing leases . . . . . . . . . . . . 347,207 412,561
Operating leases - net of accumulated depreciation of $21,800
and $23,412 . . . . . . . . . . . . . . . . . . . . . . . . . . 43,386 55,006
Land, buildings, equipment and furniture - net of accumulated
depreciation of $8,807 and $8,521 . . . . . . . . . . . . . . . 15,144 16,712
Net assets of discontinued operations . . . . . . . . . . . . . . 3,485 20,868
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 19,435 18,741
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $470,399 $593,027
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 19,797 $ 28,793
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 4,308 9,508
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 105,288 148,175
Subordinated notes . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 13,382 15,941
Nonrecourse lease financing . . . . . . . . . . . . . . . . . . . 242,202 296,794
Reserves and liabilities related to discontinued operations and
restructuring programs . . . . . . . . . . . . . . . . . . . . 2,203 7,456
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 5,962 6,276
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 403,142 522,943
-------- --------
SHAREHOLDERS' EQUITY:
Common stock, par value of $.01 - 20,000,000 shares
authorized; 6,828,984 shares issued . . . . . . . . . . . . . . 68 68
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 44,964 44,922
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 23,485 26,354
Treasury shares at cost - 101,527 shares . . . . . . . . . . . . (1,260) (1,260)
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . . . . 67,257 70,084
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $470,399 $593,027
======== ========
<FN>
NOTE: The balance sheet at January 31, 1994 has been derived from the audited financial statements at that
date but does not include all of the information and notes required by generally accepted accounting
principles for complete financial statements.
</TABLE>
See the accompanying notes to consolidated financial statements.
Page 4
<PAGE> 5
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED OCTOBER 31, 1994 AND 1993
(Dollars in Thousands)
==========================================================================================================
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net earnings from continuing operations . . . . . . . . . . . $ 212 $ 3,736
Adjustments to reconcile net earnings to net cash flow from
continuing operations:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 15,633 18,938
Deferred income taxes . . . . . . . . . . . . . . . . . . . . (2,152) 3,005
Additions to sales-type and direct financing leases . . . . . (71,596) (99,642)
Principal portion of lease rentals received . . . . . . . . . 126,424 139,033
Purchases of inventory for resale . . . . . . . . . . . . . . (45,975) (57,739)
Sales, transfers, and disposals of inventory and equipment . 107,173 141,547
Change in reserves related to restructuring programs . . . . (2,588) -
Change in accounts receivable . . . . . . . . . . . . . . . . 6,351 (4,950)
Change in accounts payable . . . . . . . . . . . . . . . . . (2,487) (18,615)
Change in accrued expenses and other liabilities . . . . . . (4,982) 1,435
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (820) (1,874)
-------------- --------------
Cash provided by continuing operations . . . . . . . . . . . . 125,193 124,874
-------------- --------------
Discontinued operations:
Net loss from discontinued operations . . . . . . . . . . . . (3,081) (557)
Change in assets and liabilities (except reserves) of
discontinued operations . . . . . . . . . . . . . . . . . . 16,782 (7,053)
Change in reserves . . . . . . . . . . . . . . . . . . . . . (2,665) -
-------------- --------------
Cash provided by (used in) discontinued operations . . . . . . 11,036 (7,610)
-------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,229 117,264
-------------- --------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of equipment for lease . . . . . . . . . . . . . . . (59,520) (99,814)
Purchases of land, buildings, equipment and furniture . . . . (2,000) (2,580)
Purchase of company . . . . . . . . . . . . . . . . . . . . . - (2,314)
Proceeds from sale of contracts, equipment and other assets . - 3,591
Proceeds from disposal of non-core businesses . . . . . . . . 8,226 -
-------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . (53,294) (101,117)
-------------- --------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from nonrecourse lease financing . . . . . . . . . . 90,479 96,852
Payments on nonrecourse lease financing . . . . . . . . . . . (137,079) (145,044)
Borrowings (payments) on recourse notes and credit facilities (42,887) 35,636
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . - (807)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92) (1,611)
-------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . (89,579) (14,974)
-------------- --------------
Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . (6,644) 1,173
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . 8,972 4,482
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . $ 2,328 $ 5,655
============== ==============
</TABLE>
See the accompanying notes to consolidated financial statements.
Page 5
<PAGE> 6
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED OCTOBER 31, 1994 (UNAUDITED) AND
FOR THE YEAR ENDED JANUARY 31, 1994
(Dollars in Thousands, Except Per Share Data)
==================================================================================================================
<CAPTION>
Common
Additional stock in Total
Common paid-in Retained treasury shareholders'
stock capital earnings at cost equity
---------- ------------ ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE AT FEBRUARY 1, 1993 $68 $44,884 $51,952 $(1,260) $95,644
Net loss . . . . . . . . . (24,522) (24,522)
Cash dividends - $.16 per
share . . . . . . . . . . (1,076) (1,076)
Compensation expense
under stock award plan for
shares issued in a prior
year . . . . . . . . . . . 38 38
---------- ---------- ---------- ----------- -----------
BALANCE AT JANUARY 31, 1994 68 44,922 26,354 (1,260) 70,084
Net loss . . . . . . . . . (2,869) (2,869)
Compensation expense
under stock award plan for
shares issued in a prior
year . . . . . . . . . . . 42 42
---------- ---------- ---------- ----------- -----------
BALANCE AT OCTOBER 31, 1994 $68 $44,964 $23,485 $(1,260) $67,257
========== ========== ========== =========== ===========
</TABLE>
See the accompanying notes to consolidated financial statements.
Page 6
<PAGE> 7
LDI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in Thousands, Except Where Indicated)
===============================================================================
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals, except as otherwise disclosed)
considered necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended January
31, 1994.
2. Receivables
<TABLE>
<CAPTION>
October 31, January 31,
1994 1994
------- -------
<S> <C> <C>
Trade accounts . . . . . . . . . . . . $19,074 $34,441
Trade notes . . . . . . . . . . . . . . 15,230 13,537
Other . . . . . . . . . . . . . . . . . 66 153
Allowance for doubtful accounts . . . . (6,116) (6,300)
------- -------
Net Receivables . . . . . . . . . $28,254 $41,831
======= =======
</TABLE>
3. Accrued and Other Liabilities
<TABLE>
<CAPTION>
October 31, January 31,
1994 1994
------- -------
<S> <C> <C>
Accrued liabilities consist of:
Compensation . . . . . . . . . . . . . $ 942 $ 3,896
Interest . . . . . . . . . . . . . . . 756 1,594
Sales tax . . . . . . . . . . . . . . . 420 1,022
Other . . . . . . . . . . . . . . . . . 2,190 2,996
------- -------
Total . . . . . . . . . . . . . . $4,308 $ 9,508
======= ========
Other liabilities consist of:
Customer rental prepayments . . . . . . $4,127 $4,035
Deferred revenues . . . . . . . . . . . 1,749 2,084
Other . . . . . . . . . . . . . . . . . 86 157
------- -------
Total . . . . . . . . . . . . . . $5,962 $6,276
======= =======
</TABLE>
Page 7
<PAGE> 8
4. Notes Payable
<TABLE>
<CAPTION>
October 31, January 31,
1994 1994
--------- ---------
<S> <C> <C>
Revolving and line of credit facilities $ 96,885 $ 97,075
Installment and term notes . . . . . . 8,403 51,100
--------- ---------
Total . . . . . . . . . . . . . . $ 105,288 $ 148,175
========= =========
</TABLE>
As of October 31, 1994, the Company had a $108.3 million secured amortizing
revolving credit facility with a group of banks. This facility resulted from
the consolidation of an unsecured revolving credit facility and a four year
unsecured term loan on May 2, 1994. The facility amortizes to $105 million at
maturity on April 30, 1995. This credit agreement provides for a floating
interest rate based on either LIBOR or the prime rate.
Subsequent to October 31, 1994, $7.5 million of the borrowings under the
secured amortizing revolving credit facility were financed on a nonrecourse
basis. Accordingly, these amounts have been included in nonrecourse lease
financing at October 31, 1994.
The Company also had an $8.3 million revolving credit facility which was
converted, on May 2, 1994, to a secured amortizing term loan. This facility
had an outstanding balance of $2.1 million on October 31, 1994, and a scheduled
maturity of April 30, 1995.
On May 2, 1994, unsecured installment notes of $8.5 million were changed to
secured notes with modification made to the principal repayment schedule to
proportionately match the principal amortization of the secured amortizing
revolving credit facility. These notes aggregated $6.3 million at October 31,
1994, and mature on April 30, 1995. Additionally, $2.6 million of unsecured
installment notes were changed to secured notes, and paid in full, as
originally scheduled, on August 31, 1994.
The installment notes consist of fixed rate notes with interest rates
ranging from 9.7 percent to 10.0 percent.
Prior to entering into these new agreements, the Company obtained waivers
from the lenders for any potential loan covenant violations, such as asset
sales or financial ratio requirements, that may have resulted from
implementation of the Company's strategic plan as discussed in Notes 7 and 8.
A charge of $0.2 million associated with the write-off of unamortized debt
financing fees relating to various borrowing agreements was recorded in the
second quarter. Financing fees of $2.4 million were incurred in connection
with the new borrowing agreements which were effective August 1, 1994. Such
agreements had terms substantially equivalent to the prior financing
agreements. During the third quarter $0.8 million of these costs were
amortized as debt financing fee expense. The remaining $1.6 million will be
amortized over the next two quarters.
Under the terms of the loan agreements, the Company is required to maintain
certain liquidity, leverage, and net worth ratios. The covenants also prohibit
the payment of cash dividends and place restrictions on the amount of
borrowings under the facility. The loan agreements are secured by receivables,
inventories and substantially all other unpledged assets of the Company.
Page 8
<PAGE> 9
5. Nonrecourse Lease Financing
<TABLE>
<CAPTION>
October 31, January 31,
1994 1994
-------- --------
<S> <C> <C>
Nonrecourse discounted lease rentals:
Financial institutions . . . . . . . . . $137,466 $182,713
Commercial paper . . . . . . . . . . . . 104,736 114,081
-------- --------
Total . . . . . . . . . . . . . . . . $242,202 $296,794
======== ========
</TABLE>
Nonrecourse discounted lease rentals consist of fixed rate capital obtained
from financial institutions on a nonrecourse basis. The lender has a security
interest in the lease rental stream and the underlying assets, but has no
recourse to the Company in the case of default by the lessee.
The Company established two asset-backed financing programs to fund lease
transactions on a nonrecourse basis through the use of commercial paper
securitized by lease rental receivables. Both programs are rated A-1 by
Standard & Poor's or P-1 by Moody's.
Under one of the programs, the Company sold lease receivables to a
wholly owned special purpose corporation that issues commercial paper backed by
an annually renewing five year letter of credit. At October 31, 1994, $32.1
million of commercial paper was outstanding under this program. Effective May
1, 1994, the letter of credit under this program was not extended, however,
leases funded previously continue to amortize under the terms of the existing
agreement.
A second securitized program provides for the financing of lease receivables
through an independent special purpose corporation which issues commercial
paper. This program is backed by a surety bond. On June 3, 1994, the Company
executed a letter agreement to increase the availability to finance under this
program from $75 million to $125 million in two steps. The first $25 million
of additional capacity became available on September 9, 1994, and the remaining
$25 million became available December 1, 1994. Effective with the December
increase, the program began operating through a wholly owned subsidiary of the
Company to which the company sells lease receivables and transfers the related
equipment. The subsidiary then transfers the receivables to the independent
corporation to support the issuance of commercial paper, which is nonrecourse
to the Company. At October 31, 1994, $72.6 million of commercial paper was
outstanding under this program.
6. Subordinated Notes
In 1991, the Company issued $10 million of 9.375 percent convertible
subordinated notes, with interest payable semiannually, maturing in August
2000. Prior to May 1994, the notes were convertible into shares of the
Company's common stock. The notes require annual repayments of $2.5 million
beginning in August 1997. The notes are callable by the Company at a premium
of 109 3/8, with the premium declining ratably to par in August 1999.
In conjunction with the initial transaction, the Company issued 45,496
warrants. Each warrant was exercisable by the holder for five years, for one
share of the Company's common stock. The exercise price was subject to
adjustment for stock dividends, splits and certain other issuances of common
stock.
On May 2, 1994, the notes were amended to eliminate the conversion feature,
to adjust the exercise price of the outstanding warrants to $6.35 per share,
and to issue 1,529,307 additional warrants with the same exercise price, terms,
and expiration date as the previously-issued warrants.
In exchange, the holder of the notes agreed to permit the Company to grant
security interests to its recourse lenders. Additionally, the Company and the
holder of the notes agreed to modify certain other terms and conditions of the
notes.
Page 9
<PAGE> 10
7. Restructuring Charges
During the year ended January 31, 1994, management and the Board of
Directors commenced a plan to strategically realign the operations of the
Company, including the discontinuance of certain business segments. The
strategic plan included the sales or other divestitures of certain product
lines and non-strategic businesses, the closing of facilities, and other
measures to improve the Company's overall profitability. The estimated cost of
implementing the plan, $6.6 million (after tax $4.1 million), was recorded in
the Company's fourth quarter ended January 31, 1994.
During the nine-month period ended October 31, 1994, the Company (1) sold
substantially all the assets of its personal computer distribution and direct
sales business to a company controlled by a principal shareholder of the
Company; (2) completed the sale of the stock of the Company's Canadian leasing
subsidiary; and (3) sold certain assets of its point-of-sale equipment
businesses.
8. Discontinued Operations
During the year ended January 31, 1994, management of the Company initiated
a comprehensive plan to exit the retail computer superstores, retail PC outlet
stores, catalog distribution, and software distribution business segments. As
a result of these actions, the Company recorded a fourth quarter pre-tax charge
of $11.7 million (after-tax $7.1 million).
Assets of the discontinued operations consist primarily of accounts and
notes receivable and are reported on the balance sheets as net assets of
discontinued operations. The consolidated financial statements disclose the
operating results of discontinued operations separately from continuing
operations. Prior period financial statements have been restated.
During the nine months ended October 31, 1994, the Company (1) completed the
liquidation and closing of its retail computer superstores; (2) completed the
liquidation and closing of its retail PC outlet stores; (3) sold certain assets
of its software distribution business to a company controlled by a principal
shareholder of the Company; and (4) sold certain assets and transferred certain
liabilities of its catalog distribution business to a company controlled by a
principal shareholder of the Company.
An additional loss from discontinued operations of $5.0 million (after tax
$3.1 million) was recorded in the second quarter of the current fiscal year.
This loss was related to the liquidation and closing of the Company's retail
computer superstores and retail PC outlets.
9. Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
OCTOBER 31,
1994 1993
---------- ----------
<S> <C> <C>
Cash paid for:
Interest . . . . . . . . . . . . . . $23,016 $26,343
Income taxes . . . . . . . . . . . . . $293 $8
</TABLE>
Page 10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LDI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Nine Months Ended October 31, 1994
==============================================================================
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is provided by (1) cash generated from continuing operating
activities, (2) cash proceeds from the financing of the present value of future
lease rentals, and (3) borrowings under the secured amortizing revolving credit
facility.
FINANCIAL POLICIES
The Company uses a combination of secured revolving bank credit, secured
lines of credit and internally generated funds to finance, on an interim basis,
the acquisition of equipment for lease or sale.
The Company generally finances the present value of the future lease rentals
by the assignment of such rentals to banks, insurance companies, or other
lenders on a discounted, nonrecourse basis. In this manner, a substantial
portion of the equipment cost is financed on a long-term basis.
LIQUIDITY
Cash generated from operating activities, including discontinued operations,
amounted to $136 million and $117 million for the nine months ended October 31,
1994 and 1993, respectively. This increase is attributable primarily to the
receipt of proceeds from liquidation and sales of discontinued business units.
Cash generated from continuing operations was comparable to prior year amounts.
Cash flow used in investing activities decreased by $48 million, due primarily
to lower purchases of equipment for lease and proceeds from sales of assets of
restructured operations.
During the nine months ended October 31, 1994, cash flow of $90 million was
used in financing activities. Payments of $43 million were made in conjunction
with the restructuring of the Company's recourse debt agreements. Additional
net payments of $47 million were made on nonrecourse debt during the period.
The Company, as described in Note 4 to the financial statements, currently
has over $100 million in secured revolving and line of credit facilities
maturing on April 30, 1995. Management is actively pursuing financing
programs, including renewal of existing facilities, with various financial
institutions. Specific terms will not be known until definitive agreements are
in place. However, management currently believes similar credit facilities
will be available at that time with no significant adverse changes in credit
availability, terms, costs or conditions, subject to the potential effect of
changes in market interest rates. If less favorable terms were to be
negotiated, the Company's interest costs could increase and/or the ability to
originate new equipment leases could be restricted by changes in
collateralization requirements.
CAPITAL RESOURCES
As of October 31, 1994, the Company had a $108.3 million secured amortizing
revolving credit facility with a group of banks. This facility amortizes to
$105 million at maturity on April 30, 1995. The Company also had $8.4 million
of secured amortizing term debt at October 31, 1994, which amortizes to $6.5
million at maturity on April 30, 1995. Additionally, $2.6 million of secured
installment notes were paid in full, as originally scheduled, on August 31,
1994.
Page 11
<PAGE> 12
The Company has two asset-backed financing programs to fund lease
transactions on a nonrecourse basis through the use of commercial paper as
described in Note 5.
At October 31, 1994, the Company had a total of $357 million of recourse
and nonrecourse interest-bearing obligations, of which $211 million were on a
floating rate basis. Of the total floating rate financings, $137 million were
converted to fixed rate financing through interest rate swap agreements and $9
million were subject to interest rate ceilings through interest rate cap
agreements.
OTHER
Net assets of discontinued operations decreased from January 31, 1994 to
October 31, 1994 due primarily to sales of inventory and collections of
accounts receivable of the retail computer superstores and the retail PC
outlets and the sale of certain assets of the Company's catalog distribution
and software distribution businesses.
Inventories decreased from January 31, 1994, to October 31, 1994, by
approximately $7.2 million primarily due to the sale of inventories of
non-strategic business units.
Accounts receivable decreased from January 31, 1994 to October 31, 1994 by
approximately $13.6 million due primarily to the sale of receivables of
non-strategic business units.
The Company does not have any material commitments for capital expenditures.
The Company believes that inflation has not been a significant factor in its
business.
Page 12
<PAGE> 13
LDI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Three Months Ended October 31, 1994 as
Compared to the Three Months Ended October 31, 1993
==============================================================================
LEASING:
A summary of the operating results from leasing for the three months ended
October 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1994 1993
- - ------------------------------------------------------------
<S> <C> <C>
Leasing Revenues $ 26,441 $ 50,173
Cost of Leasing 16,731 35,701
-------- --------
Gross Leasing Margin $ 9,710 $ 14,472
======== ========
Percent of Revenue 36.7% 28.8%
</TABLE>
A summary of new leasing activity, which is a measure of business volume, for
the three months ended October 31, 1994, and 1993, is as follows:
<TABLE>
<CAPTION>
Cost of Leased Number of Lease
Equipment Transactions
--------- ------------
(Dollars in Millions) 1994 1993 1994 1993
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales-Type Leases $11.5 $24.7 181 285
Direct Financing Leases 14.0 6.4 73 36
Operating Leases 1.3 0.8 28 9
----- ----- ----- -----
New Equipment Leases 26.8 31.9 282 330
Re-Leased Equipment 3.5 11.1 33 100
----- ----- ----- -----
Total $30.3 $43.0 315 430
===== ===== ===== =====
</TABLE>
For the three months ended October 31, 1994, leasing revenues declined 47% from
the comparable period in the prior year. The decline can be attributed to the
continued change from a lease mix highly weighted to sales-type leases, which
recognize the major portion of lease revenue at lease commencement, to a lease
mix that is comprised of a higher proportion of direct-financing leases, which
spread revenue recognition over the term of the lease. During the quarter
ended October 31, 1994, the percent of equipment cost for sales-type leases was
43% of new equipment leases as contrasted to 77% in the comparable prior year
period. The cost of new equipment leased declined $5.1 million from the prior
year, however, the average transaction size remained approximately the same
between the periods.
The decline in leasing revenues and transactions was also the result of the
disruption to the Company and its employees caused by implementation of the
strategic plan, including headcount reduction, sales of non-strategic
businesses and facilities consolidation. These activities were substantially
completed by the end of the third quarter.
While the gross leasing margin percentage increased as compared to that of the
prior year's quarter, gross leasing margin (in dollars) decreased by 33% from
the prior year's quarter due primarily to the lower lease volume and the mix of
lease transactions.
Page 13
<PAGE> 14
DIRECT SALES:
A summary of the operating results from direct sales for the three months
ended October 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Restructured Reported
Core Operations(1) Operations(2) Operations(2)
------------------ ------------- -------------
(Dollars in Thousands) 1994 1993 1994 1993 1994 1993
- - ---------------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Direct Sales $18,583 $5,152 - $14,074 $18,583 $19,226
Cost of Direct Sales 15,891 4,136 - 12,373 15,891 16,509
------------------ ---------------- -----------------
Gross Sales Margins $ 2,692 $1,016 - $ 1,701 $2,692 $ 2,717
================== ================ =================
Percent of Sales 14.5% 19.7% - 12.1% 14.5% 14.1%
</TABLE>
(1) Core operations include: Leasing Services, Technology Services,
and PC Rentals which were identified in the strategic plan as those
product lines that constitute the ongoing business of the Company.
(2) Restructured operations include the results of business units which
are, for financial statement presentation purposes only, considered
to be a part of reported operations. As discussed in Note 7, the
restructured operations were determined to be non-strategic to the
future operations of the Company and as such, were either sold or
substantially liquidated during the first half of the current fiscal
year.
Core operations' direct sales for the three months ended October 31, 1994
increased approximately $13 million (260%) from the prior year's quarter.
Approximately $7.5 million of the increase was attributable to a single
transaction. The gross sales margin percentage for the current period was
comparable to historic averages, while in contrast the prior periods results
were above historic levels due to the mix of products sold.
TECHNICAL SERVICES:
A summary of the operating results from technical services for the three
months ended October 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1994 1993
- - -----------------------------------------------
<S> <C> <C>
Services Revenues $ 3,929 $ 3,883
Cost of Services 2,171 2,234
------- -------
Gross Margin $ 1,758 $ 1,649
======= =======
Percent of Revenues 44.7% 42.5%
</TABLE>
For the three months ended October 31, 1994, technical services revenues
increased by 1% from the prior year's third quarter, due primarily to an
increase in equipment maintenance and related services as compared to the prior
year's quarter.
Gross margin (in dollars) increased by 7%, reflecting the increase in equipment
maintenance revenues which typically have higher gross margins.
Page 14
<PAGE> 15
INTEREST EXPENSE:
For the three months ended October 31, 1994, interest expense decreased by
15% from the prior year's quarter, primarily as a result of a reduction in the
average amount of outstanding debt.
DEBT FINANCING FEES:
Debt financing fees increased during the quarter ended October 31, 1994
primarily due to amortization of fees associated with the new borrowing
agreements discussed in Note 4.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
For the three months ended October 31, 1994, selling, general and
administrative expenses declined by 27% from the comparable quarter in the
prior year. The reduction was due primarily to the effect of the sale of
non-strategic businesses and cost reduction programs implemented as part of the
strategic plan. Additionally, the proportional increase in new direct finance
and operating leases has resulted in higher amounts of initial direct costs
being capitalized which also reduced selling, general, and administrative
expenses.
INCOME TAXES:
The effective income tax rate for continuing operations decreased to 38.0%
for the three months ended October 31, 1994 compared to a rate of 40.8% for the
comparable prior year period, reflecting a decrease in the Company's estimate
of the annual effective tax rate for the year ending January 31, 1995. The
prior year effective tax rate of 40.8% excludes an adjustment of $541,000 which
was recorded in the prior year to reflect the federal tax increase enacted in
August 1993.
Page 15
<PAGE> 16
LDI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Nine Months Ended October 31, 1994 as
Compared to the Nine Months Ended October 31, 1993
==============================================================================
LEASING:
A summary of the operating results from leasing for the nine months ended
October 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1994 1993
- - ----------------------------------------------------------------
<S> <C> <C>
Leasing Revenues $78,233 $122,912
Cost of Leasing 47,263 79,555
------- --------
Gross Leasing Margin $30,970 $43,357
======= ========
Percent of Revenue 39.6% 35.3%
</TABLE>
A summary of new leasing activity, which is a measure of business volume, for
the nine months ended October 31, 1994, and 1993, is as follows:
<TABLE>
<CAPTION>
Cost of Leased Number of Lease
Equipment Transactions
--------- ------------
(Dollars in Millions) 1994 1993 1994 1993
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales-Type Leases $25.9 $50.4 544 889
Direct Financing Leases 30.5 34.1 158 72
Operating Leases 4.3 8.1 58 62
----- ------ ---- -----
New Equipment Leases 60.7 92.6 760 1,023
Re-Leased Equipment 10.6 17.1 151 282
----- ------ ---- -----
Total $71.3 $109.7 911 1,305
===== ====== ==== =====
</TABLE>
For the nine months ended October 31, 1994, leasing revenues declined 36% from
the comparable period in the prior year. The decline can be attributed to the
continued change from a lease mix highly weighted to sales-type leases, which
recognize the major portion of lease revenue at lease commencement, to a lease
mix that is comprised of a higher proportion of direct-financing leases, which
spread revenue recognition over the term of the lease. During the nine months
ended October 31, 1994, the percent of equipment cost for sales type leases was
43% of new equipment leases as contrasted to 54% in the comparable prior
period.
The decline in leasing revenues and transactions was also the result of the
disruption to the Company and its employees caused by the implementation of the
strategic plan, including headcount reduction, sales of non-strategic
businesses and facilities consolidation. These activities were substantially
completed by the end of the third quarter.
Gross leasing margin (in dollars) decreased by 29% as compared to the nine
months ended October 31, 1993, due primarily to the lower lease volume.
However, the margin as a percent of revenues improved, primarily as a result of
the change in mix of the revenue components, with finance income constituting a
larger proportion of total revenues and gross margin for the nine months ended
October 31, 1994 as compared with the corresponding period of the prior year.
Page 16
<PAGE> 17
DIRECT SALES:
A summary of the operating results from direct sales for the nine-month
period ended October 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Restructured Reported
Core Operations(1) Operations(2) Operations(2)
------------------ ------------- -------------
(Dollars in Thousands) 1994 1993 1994 1993 1994 1993
- - --------------------------- --------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Direct Sales $36,190 $20,740 $18,822 $40,943 $55,012 $61,683
Cost of Direct Sales 31,098 17,741 16,182 35,208 47,280 52,949
--------------------- ---------------------- ---------------------
Gross Sales Margins $ 5,092 $ 2,999 $ 2,640 $ 5,735 $ 7,732 $ 8,734
Percent of Sales 14.1% 14.5% 14.0% 14.0% 14.1% 14.2%
===================== ====================== =====================
</TABLE>
(1) Core operations include: Leasing Services, Technology Services, and
PC Rentals which were identified in the strategic plan as those
product lines that constitute the ongoing business of the Company.
(2) Restructured operations include the results of business units which
are, for financial statement presentation purposes only, considered to
be a part of reported operations. As discussed in Note 7, the
restructured operations were determined to be non-strategic to the
future operations of the Company and as such, were either sold or
substantially liquidated during the nine months ended October 31, 1994.
For the nine months ended October 31, 1994, direct sales from core operations
increased approximately $15 million (75%) as compared to the prior year period.
The current nine month's results reflect a significant transaction of
approximately $7.5 million or 50% of the increase in core operations' direct
sales. Average gross sales margin percentages remained comparable to historic
levels.
Restructured operations reflect the decrease of sales and achieved gross
margins associated with the disposition of these business operations during the
first half of the current year.
TECHNICAL SERVICES:
A summary of the operating results from technical services for the nine
months ended October 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1994 1993
- - ------------------------------------------------------
<S> <C> <C>
Services Revenues $11,814 $12,201
Cost of Services 6,512 7,361
---------- ----------
Gross Margin $ 5,302 $ 4,840
========== ==========
Percent of Revenues 44.9% 39.7%
</TABLE>
For the period ended October 31, 1994, technical services revenues decreased by
3% from the prior year's comparable period. This was due primarily to a
decline of $944,000 in disaster recovery services revenues which resulted from
an agreement, effective May 1, 1993, to form a strategic marketing relationship
with SunGard Recovery Services, Inc. The Company's base of business recovery
customers and two "hot site" recovery centers were merged with those of
SunGard's and are operated by SunGard as part of the agreement.
Page 17
<PAGE> 18
Gross margin (in dollars) increased by 10%, and the margin percentage also
increased primarily due to the absence, beginning in May 1993, of disaster
recovery operations, which carried higher direct costs per revenue dollar, as
well as reduced direct labor costs in the Technical Services operations.
INTEREST EXPENSE:
For the nine months ended October 31, 1994, interest expense decreased by
15% from the prior year's comparable period. This decrease was primarily due
to the significant reduction in the average amount of debt outstanding.
DEBT FINANCING FEES:
Debt financing fees increased during the nine months ended October 31, 1994
primarily due to amortization of fees associated with the new borrowing
agreements discussed in Note 4.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
For the nine months ended October 31, 1994, selling, general and
administrative expenses declined by 21% from the comparable period in the prior
year. The reduction is primarily due to the effect of the sales of
non-strategic businesses and cost reduction programs implemented as a part of
the strategic plan.
Considering prior fiscal year financial results, the Company did not make a
contribution to its profit sharing plan. Consequently, amounts accrued during
the prior year were reversed in the quarter ended July 31, 1994, which reduced
expenses by approximately $400,000. Additionally, the proportional increase in
new direct finance and operating leases has resulted in higher amounts of
initial direct costs being capitalized, which also reduced selling, general,
and administrative expenses.
INCOME TAXES:
The effective income tax rate for continuing operations decreased to 38.0%
for the nine months ended October 31, 1994 compared to a rate of 39.4% for the
prior period, reflecting a slight decrease in the Company's estimate of the
annual effective tax rate for the year ending January 31, 1995. The prior year
effective tax rate of 39.4% excludes an adjustment of $541,000 which was
recorded in the prior year to reflect the federal tax increase enacted in
August 1993.
DISCONTINUED OPERATIONS:
Under the strategic plan, certain businesses were identified as Discontinued
Operations. The impact on the financial statements is discussed in Note 8.
Page 18
<PAGE> 19
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following exhibits required by Item 601 of Regulation
S-K are furnished herewith:
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
- - ----------- -----------------------
<S> <C>
2.01 Asset Acquisition Agreement dated May 31, 1994, between LDI
Corporation and LDI Computer Systems, Inc., as Sellers, and
MRK Computer Systems, Inc., as Buyer (Included as an
exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended July 31, 1994, and
incorporated herein by reference.)
3.01 Restated Certificate of Incorporation (Included as an
exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-14486) and incorporated herein by reference.)
3.02 By-laws, as amended
4.01 Specimen Stock Certificate (Included as an exhibit to the
Registrant's Registration Statement on Form S-1 (No
33-14486) and incorporated herein by reference.)
4.02 Note Purchase Agreement dated as of July 2, 1991, between
Registrant and Olympus Private Placement Fund, L.P.
(Included as an exhibit to the Registrant's Quarterly
Report on Form-Q (No. 0-15994) for the quarter ended July
31, 1991, and incorporated herein by reference.)
4.03 Amendment dated April 29, 1994 to Note Purchase Agreement
dated as of July 2, 1991, between Registrant and Olympus
Private Placement Fund, L.P. (Included as an exhibit to
the Registrant's Quarterly Report on Form 10-Q (No. 0-15994)
for the quarter ended April 30, 1994, and incorporated herein
by reference.)
4.04 Form of Indemnification Agreement (Included as an
exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-14486) and incorporated herein by reference.)
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
- - ----------- -----------------------
<S> <C>
4.05 Stockholders' Agreement dated May 22, 1987, among the
Registrant, Robert S. Kendall, Michael R. Kennedy, Thomas
A. Cutter, Ronald M. Lipson, Jay J. Ross, Primus Capital
Fund and National City Venture Corporation, as amended
(Included as an exhibit to the Registrant's Annual Report
on Form 10-K (No. 0-15994) for the year ended January 31,
1991, and incorporated herein by reference.)
4.06 Amended and Restated Credit Agreement dated November
16, 1990, between LDI Lease Funding Corporation and the
Dai-Ichi Kangyo Bank Ltd., Chicago Branch, and specimen
Nonrecourse Promissory Note of LDI Lease Funding Corporation
(Included as an exhibit to the Registrant's Annual Report on
Form 10-K (No. 0-15994) for the year ended January
31, 1992, and incorporated herein by reference.)
4.07 First Amendment dated August 1, 1991, to Amended and
Restated Credit Agreement dated November 16, 1990, between
LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank
Ltd., Chicago Branch (Included as an exhibit to the
Registrant's Annual Report on Form 10-K (No. 0-15994) for
the year ended January 31, 1992, and incorporated herein by
reference.)
4.08 Second Amendment dated November 15, 1991, to Amended and
Restated Credit Agreement dated November 16, 1990, between
LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank
Ltd., Chicago Branch (Included as an exhibit to the
Registrant's Annual Report on Form 10-K (No. 0-15994) for
the year ended January 31, 1992, and incorporated herein by
reference.)
4.09 Third Amendment dated January 15, 1992, to Amended and
Restated Credit Agreement dated November 16, 1990, between
LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank
Ltd., Chicago Branch (Included as an exhibit to the
Registrant's Annual Report on Form 10-K (No. 0-15994) for
the year ended January 31, 1992, and incorporated herein by
reference.)
4.10 Fourth Amendment dated April 29, 1992, to Amended and
Restated Credit Agreement dated November 16, 1990, between
LDI Lease Funding Corporation and the Dai-Ichi Kangyo
Bank Ltd., Chicago Branch (Included as an exhibit to the
Registrant's Quarterly Report on Form 10-Q (No. 0-15994)
for the quarter ended April 30, 1992, and incorporated
herein by reference.)
4.11 Fifth Amendment dated October 1, 1992, to Amended and
Restated Credit Agreement dated November 16, 1990, between
LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank
Limited, Chicago Branch (Included as an exhibit to the
Registrant's Quarterly Report on Form 10-Q (No. 0-15994)
for the quarter ended October 31, 1992, and incorporated
herein by reference.)
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
- - ----------- -----------------------
<S> <C>
4.12 Sixth Amendment dated July 15, 1993, to Amended and
Restated Credit Agreement dated November 16, 1990, between
LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank
Limited, Chicago Branch (Included as an exhibit to the
Registrant's Annual Report on Form 10-Q (No. 0-15994) for
the quarter ended August 31, 1993, and incorporated herein by
reference.)
4.13 Seventh Amendment dated October 1, 1993, to Amended and
Restated Credit Agreement dated November 16, 1990, between
LDI Lease Funding Corporation and the Dai-Ichi Kangyo
Bank Limited, Chicago Branch (Included as an exhibit to the
Registrant's Annual Report on Form 10-Q (No. 0-15994) for
the quarter ended October 31, 1993, and incorporated herein
by reference.)
4.14 Lease Receivables Transfer Agreement dated as of October
7, 1994, among LDI Lease Receivables Funding Corp., CXC
Incorporated and Citicorp North America, Inc.
4.15 Lease Receivables Purchase and Contribution Agreement
dated as of October 7, 1994, between LDI Lease Receivables
Funding Corp. and Registrant
4.16 Note Purchase Agreement dated as of August 1, 1989, among
the Registrant, Northwestern National Life Insurance Company
and the other parties listed in Appendix I thereto (Included
as an exhibit to the Registrant's Quarterly Report on Form
10-Q (No. 0-15994) for the quarter ended October 31, 1989,
and incorporated herein by reference.)
4.17 Amendment dated as of January 31, 1992, to the Note
Purchase Agreement dated August 31, 1989, among the
Registrant, Northwestern National Life Insurance Company and
the other parties listed in Appendix I thereto (Included as
an exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended April 30, 1992, and
incorporated herein by reference.)
4.18 Amendment dated May 2, 1994 to Note Purchase Agreement
dated August 31, 1989, among Registrant, Northwestern
National Life Insurance Company and the other parties
listed in Appendix I thereto (Included as an exhibit to the
Registrant's Annual Report on Form 10-K (No. 0-15994) for
the year ended January 31, 1994, and incorporated herein by
reference.)
4.19 Letter Amendment dated July 29, 1994, to Note Purchase
Agreement dated August 31, 1989, among Registrant,
Northwestern National Life Insurance Company and the other
parties listed in Appendix I thereto (Included as an
exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended July 31, 1994, and
incorporated herein by reference.)
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
- - ----------- -----------------------
<S> <C>
4.20 Amended and Restated Promissory Note of the Registrant
dated as of July 1, 1993, in favor of National
Westminster Bank USA (Included as an exhibit to the
Registrant's Quarterly Report on Form 10-Q (No. 0-15994) for
the quarter ended October 31, 1993, and incorporated herein
by reference.)
4.21 Amendment dated April 29, 1994 to Amended and Restated
Promissory Note of Registrant dated as of July 1, 1993 in
favor of National Westminster Bank USA (Included as an
exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended April 30, 1994, and
incorporated herein by reference.)
4.22 Second Amended and Restated Credit Agreement dated July
29, 1994, among Registrant, certain Commercial Lending
Institutions, and National City Bank, Society National
Bank and Continental Bank N.A., as co-agents (Included as
an exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended July 31, 1994, and
incorporated herein by reference.)
11.01 Computation of Earnings Per Share for the period ended
October 31, 1994
27.01 Financial Data Schedules as required under the Securities &
Exchange Commission EDGAR rule release effective for EDGAR
filings submitted on or after September 1, 1994
</TABLE>
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LDI CORPORATION
Date: December 14, 1994 By: /s/ Frank G. Skedel
-------------------------
Frank G. Skedel, Executive Vice President,
Chief Financial Officer, Treasurer and
Secretary
Page 20
<PAGE> 24
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
- - ----------- -----------------------
<S> <C>
3.02 By-laws, as amended
4.14 Lease Receivables Transfer Agreement dated as of October
7, 1994, among LDI Lease Receivables Funding Corp., CXC
Incorporated and Citicorp North America, Inc.
4.15 Lease Receivables Purchase and Contribution Agreement dated
as of October 7, 1994, between LDI Lease Receivables
Funding Corp. and Registrant
11.01 Computation of Earnings Per Share for the period ended
October 31, 1994
27.01 Financial Data Schedules as required under the Securities &
Exchange Commission EDGAR rule release effective for EDGAR
filings submitted on or after September 1, 1994
</TABLE>
<PAGE> 1
EXHIBIT 3.02
BY-LAWS
OF
LDI CORPORATION
ARTICLE I
STOCKHOLDERS
------------
Section 1. MEETINGS OF STOCKHOLDERS.
(a) ANNUAL MEETING. The annual meeting of the
stockholders of the Corporation for the election of directors and the
receiving of reports shall be held at such date and time as shall be
determined by the Board of Directors. Upon due notice, there may also
be considered and acted upon at an annual meeting any matter which
could properly be considered and acted upon at a special meeting.
(b) SPECIAL MEETINGS. Special meetings of the
stockholders of the Corporation for any purpose may be held on any
business day when called at any time by the Board of Directors, the
Chairman of the Board or by a committee of the Board of Directors
which has been duly designated by the Board of Directors and whose
powers and authority, as provided in are solution of the Board of
Directors, include the power to call such meetings, but special
meetings may not be called by any other person or persons or by any
stockholder.
(c) PLACE OF MEETINGS. Any meeting of the stockholders
may be held at such place within or without the State of Delaware as
may be determined by the Board of Directors and stated in the notice
of said meeting.
(d) NOTICE OF MEETING AND WAIVER OF NOTICE.
(1) NOTICE. Written notice of the place, date
and hour of every meeting of the stockholders, whether annual
or special, shall be given to each stockholder of record
entitled to vote at the meeting not less than 10 nor more than
60 days before the date of the meeting. Every notice of a
special meeting shall state the purpose or purposes thereof.
Such notice shall be given in writing to each stockholder
entitled thereto by mail, addressed to the stockholder at his
address as it appears on the records of the Corporation.
Notice shall be deemed to have been given at the time when it
was deposited in the mail.
(2) RECORD HOLDER OF SHARES. The Corporation
shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any
equitable or other claims to or interest in such share or
shares on the part of any other person,
<PAGE> 2
whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
(3) WAIVER. Whenever any written notice is
required to be given under the provisions of the
Certificate of Incorporation, these By-laws, or by statute, a
waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at nor the
purpose of any meeting of the stockholders need be specified
in any written waiver of notice of such meeting.
Attendance of a person, either in person or by proxy,
at any meeting, shall constitute a waiver of notice of such
meeting, except where a person attends a meeting for the
express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or
convened.
(e) QUORUM, MANNER OF ACTING AND ADJOURNMENT. The holders of
record of shares entitled to cast a majority of the voting power
entitled to vote at any meeting, present in person or represented by
proxy, shall constitute a quorum for the transaction of business
thereat except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-laws. Whether or not a quorum is
present, the holders of shares entitled to cast a majority of the
votes present in person or represented by proxy at the meeting shall
have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be
present or represented. At any such adjourned meeting, at which a
quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally
notified. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting. When a quorum is present
at any meeting, the vote of a majority of the votes entitled to be
cast by the holders of all issued and outstanding shares present in
person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which, by express
provision of the applicable statute or the Certificate of
Incorporation or these By-laws, a different vote is required, in which
case such express provision shall govern. Except upon those questions
governed by the aforesaid express provisions, the stockholders present
in person or by proxy at a duly organized meeting can continue to do
business until adjournment, notwithstanding withdrawal of enough
stockholders to leave less than a quorum.
(f) ORGANIZATION OF MEETINGS.
(1) PRESIDING OFFICER. Any "executive officer" of
the Corporation, as that term is defined in section 3(i) of
Article III of these By-laws, may call all meetings of the
stockholders to order and act as Chairman thereof.
- 2 -
<PAGE> 3
(2) MINUTES. The Secretary of the Corporation, or,
in his absence or by his designation, an Assistant Secretary,
or, in the absence of both, a person appointed by the Chairman
of the meeting, shall act as Secretary of the meeting and shall
make and keep a record of the proceedings thereat.
(3) STOCKHOLDERS' LIST. The officer who has
charge of the stock ledger of the Corporation shall prepare
and make, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to
vote at the meeting. The list shall be arranged in
alphabetical order showing the address of each stockholder and
the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder for any purpose germane to the meeting, during
ordinary business hours, for a period of at least 10 days
prior to the meeting either at a place within the city where
the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any
stockholder who is present.
(4) INSPECTORS. The Board shall appoint
inspectors of election to act as judges of the voting and to
determine those entitled to vote at any meeting of
stockholders, or any adjournment thereof, in advance of such
meeting, but if the Board fails to make such appointments or
if an appointee fails to serve, the Chairman of the
stockholders' meeting may appoint substitute inspectors.
(5) ORDER OF BUSINESS. Unless otherwise
determined by the Board prior to the meeting, the Chairman of
any meeting of stockholders shall determine the order of
business and shall have the authority in his discretion to
regulate the conduct of any such meeting, including, without
limitation, by imposing restrictions on the persons (other
than stockholders of the Corporation or their duly appointed
proxies) who may attend any such meeting of stockholders,
whether any stockholder or his proxy may be excluded from any
stockholders' meeting based upon any determination by the
Chairman, in his sole discretion, that any such person has
unduly disrupted or is likely to disrupt the proceedings
thereat, and the circumstances in which any person may make a
statement or ask questions at any meeting of stockholders.
(g) VOTING. Except as otherwise provided by statute or the
Certificate of Incorporation, every stockholder entitled to vote shall
been titled to cast the vote per share to which such share is
entitled, in person or by proxy, on each proposal submitted to the
meeting for each share held of record by him on the record date for the
determination of the stockholders entitled to vote at the meeting.
At any meeting at which a quorum is present, all questions and business
which may come before the meeting shall be determined by a majority of
votes cast, except when a greater proportion is required by law, the
Certificate of Incorporation, or these By-laws.
- 3 -
<PAGE> 4
(h) PROXIES. A person who is entitled to attend a
stockholders' meeting, to vote thereat, and execute consents, waivers
and releases, may be represented at such meeting or vote thereat, and
execute consents, waivers and releases and exercise any of his rights
by proxy or proxies appointed by a legally sufficient writing signed
by such person, or by his duly authorized attorney, as provided by the
laws of the State of Delaware.
Section 2. DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than 60 or
less than 10 days before the date of such meeting, or more than 60
days prior to any other action.
If no record date is fixed:
(1) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders
or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful
action shall be at the close of business on the day next
preceding the day on which notice is given.
(2) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date
for the adjourned meeting.
ARTICLE II
DIRECTORS
---------
Section 1. GENERAL POWERS.
The business and affairs, power, and authority of this
Corporation shall be exercised, conducted, and controlled by the Board
of Directors, except where the law, the Certificate of Incorporation,
or these By-laws require any power or action to be authorized or taken
by the stockholders. In addition to the powers and authorities
expressly conferred by these By-laws, the Board may do all such lawful
things and acts as are not by statute, the Certificate of
Incorporation or these By-laws directed or required to be done by the
stockholders.
- 4 -
<PAGE> 5
Section 2. NUMBER, NOMINATION, AND ELECTION OF DIRECTORS.
(a) NUMBER. The Board of Directors shall consist of
not less than 3 nor more than 15 members. The Board of Directors shall
be divided into three classes as nearly equal in number as possible,
to be known as Class I, Class II and Class III. Each class shall be
elected to staggered terms. The Board of Directors may increase or
decrease the number of the members of the Board of Directors within
the above limitation of 3 to 15 members. No reduction in the number of
directors shall of itself have the effect of shortening the term of any
incumbent director. In case of any increase in the number of
directors, the additional directors shall be distributed among the
several classes as nearly equally as possible.
(b) ELECTION. The directors shall be elected by
written ballot at the annual meeting of stockholders, or if not
so elected, at a special meeting of stockholders called for that
purpose. At any meeting of stockholders at which directors are to be
elected, only persons nominated as candidates shall be eligible for
election, and the candidates receiving the greatest number of
votes entitled to be cast shall be elected.
(c) NOMINATIONS.
(1) QUALIFICATION. Directors of the Corporation
need not be stockholders or residents of Delaware. No person
shall be appointed or elected a director of the Corporation
unless:
(A) such person is elected to fill a vacancy
in the Board of Directors pursuant to section 3 (d)
of this Article II; or
(B) such person is nominated for election as a
director of the Corporation in accordance with this
section.
(2) ELIGIBILITY TO MAKE NOMINATIONS. Nominations
of candidates for election as directors at any meeting of
stockholders called for election of directors (an "Election
Meeting") may be made by the Board or a committee thereof.
(3) PROCEDURE FOR NOMINATIONS. Nominations shall
be made not fewer than 30 days prior to the date of an Election
Meeting. At the request of the Secretary, each proposed
nominee shall provide the Corporation with such information
concerning himself as is required under the rules of the
Securities and Exchange Commission (the "Commission"), to be
included in the Corporation's proxy statement soliciting
proxies for the election of such nominee as a director.
(4) SUBSTITUTION OF NOMINEES. In the event that
a person is validly designated as a nominee in accordance with
these By-laws and shall thereafter become unable or unwilling
to stand for election to the Board of Directors, the Board of
Directors or a committee thereof may designate a substitute
nominee upon delivery, not fewer than five days prior to the
date of an Election Meeting, of a written notice to the
Secretary setting forth
- 5 -
<PAGE> 6
such information regarding such substitute nominee as
would have been required to be delivered to the Secretary
pursuant to these By-laws had such substitute nominee been
initially proposed as a nominee. Such notice shall include a
signed consent to serve as a director of the Corporation, if
elected, of each such substitute nominee.
(5) COMPLIANCE WITH PROCEDURES. If the Chairman of
the Election Meeting determines that a nomination of any
candidate for election as a director was not made in
accordance with the applicable provisions of these By-laws he
shall so declare to the meeting and such nomination shall be
void.
Section 3. TERM OF OFFICE OF DIRECTORS.
(a) TERM. The term of office of directors shall be three years
and the members of one class of directors shall be elected annually to
serve for such term; except that, whenever necessary a director may be
elected for a shorter term in order to provide for a proper rotation
of directors. Pursuant to a written action by all stockholders of the
Corporation dated May 20, 1987, Class I directors shall initially be
elected for a term expiring at the 1988 annual meeting of
stockholders, Class II directors shall initially be elected for a term
expiring at the 1989 annual meeting of stockholders and Class III
directors shall be elected for a term expiring at the 1990 annual
meeting of stockholders. A director shall hold office until the annual
meeting of stockholders coinciding with the termination of the term of
the class of directors to which he was elected and until his successor
shall be elected and qualified or until his earlier resignation,
removal from office or death.
(b) REMOVAL. Any director or the entire Board of Directors may
be removed only for cause, by a vote of a majority of the votes
entitled to be cast at any meeting of stockholders properly called for
that purpose.
(c) RESIGNATION. Any director of the Corporation may resign at
any time by giving written notice to the Chairman of the Board of
Directors or to the President or the Secretary of the Corporation. A
resignation from the Board of Directors shall be deemed to take effect
immediately or at such other time as the director may specify.
(d) VACANCY. If there shall be any vacancy in the Board of
Directors for any reason, including, but not limited to, death,
resignation, or as provided by law, the Certificate of Incorporation,
or these By-laws (including any increase in the authorized number of
directors), the remaining directors shall constitute the Board of
Directors until such vacancy is filled. The remaining directors may
fill any vacancy in the Board for the unexpired term.
Section 4. MEETINGS OF DIRECTORS.
(a) MEETINGS. Meetings of the Board of Directors may be held
at any time upon call by the Chairman of the Board, or by the
President, or by any Vice President, or by any two directors. Unless
otherwise indicated in the notice thereof, any business may be
transacted at any such meeting.
- 6 -
<PAGE> 7
(b) PLACE OF MEETING. Any meeting of directors may be
held at such place within or without the State of Delaware as may be
designated in the notice of said meeting.
(c) NOTICE OF MEETING AND WAIVER OF NOTICE. No notice of
regular meetings of the Board need be given. Special meetings of the
Board may be called by the Chairman of the Board or the President on
notice to each director, given either in person or by mail, telephone,
telegram, telex or similar medium of communication; special meetings
shall be called on like notice by the Chairman of the Board, the
President or the Secretary, on the written request of three directors.
At least 24 hours' notice of special meetings shall be given to each
director.
Section 5. QUORUM AND VOTING.
Except as otherwise provided in the Certificate of
Incorporation, at any meeting of directors, not less than one-half
(1/2) of the directors then in office (or, in the event that the
directors then in office are an uneven number, the nearest full number
of directors less than one-half (1/2) of such number) is necessary
to constitute a quorum for such meeting, except that any meeting duly
called, whether a quorum is present or otherwise, may, by vote of
a majority of the directors present, be adjourned from time to time. At
any meeting at which a quorum is present, all acts, questions and
business which may come before the meeting shall be determined by a
majority of votes cast by the directors present at such meeting,
unless the vote of a greater number is required by statute, the
Certificate of Incorporation or By-laws.
Section 6. ACTION OF BOARD OF DIRECTORS WITHOUT A MEETING.
Any action which may be authorized or taken at a meeting of the
Board of Directors may be authorized or taken without a meeting if
approved and authorized by a writing or writings, signed by all the
directors, which are filed with the minutes of proceedings of the
Board.
Section 7. COMPENSATION.
The Board of Directors is authorized to fix a reasonable salary
for directors or a reasonable fee for attendance at any meeting of the
Board, the Executive or Audit Committee, or other committees appointed
by the Board of Directors, or any combination of salary and attendance
fee. In addition, directors may be reimbursed for any expenses
incurred by them in traveling to and from such meetings.
Section 8. Committees.
(a) APPOINTMENT. The Board, by resolution passed by a
majority of the whole Board, may from time to time, appoint one or
more of its members to act as a committee of the Board of Directors.
A committee shall have and exercise the powers of the Board in the
direction of the management of the business and affairs of the
Corporation to the extent provided in the resolution appointing such
committee. Each committee shall have such name as may be determined
by the Board. A committee shall keep minutes of its proceedings, and
shall report its proceedings to the Board when required
- 7 -
<PAGE> 8
or when requested by a director to do so. Each such committee
and each member thereof shall serve at the pleasure of the Board.
Vacancies occurring in any such committee may be filled by the Board
of Directors.
(b) EXECUTIVE COMMITTEES. In particular, the Board of
Directors may create from its membership an Executive Committee, the
members of which shall hold office during the pleasure of the Board of
Directors, and may be removed at any time, with or without cause, by
action thereof. During the intervals between meetings of the Board of
Directors, the Executive Committee shall possess and may exercise all
of the powers and authority of the Board of Directors in the
management and control of the business and affairs of the Corporation
to the extent permitted by law. All action taken by the Executive
Committee shall be reported to the Board of Directors.
(c) COMMITTEE ACTION. Unless otherwise provided by the
Board of Directors, a majority of the members of any committee
appointed by the Board of Directors pursuant to this section shall
constitute a quorum at any meeting thereof and the act of a majority
of the members present at a meeting at which a quorum is present shall
be the act of such committee. Action may also be taken by any such
committee without a meeting by a writing or writings, signed by all
its members, which is filed with the minutes of proceedings of the
committee. Any such committee shall appoint one of its own number as
Chairman (provided that the Chairman of the Board or the President, if
there is no chairman of the Board, shall be the Chairman of any
Executive Committee), who shall preside at all meetings and may
appoint a Secretary (who need not be a member of the committee) who
shall hold office during the pleasure of such committee. Meetings of
any such committee may be held without notice of the time, place or
purposes thereof and may be held at such times and places within or
without the State of Delaware, as the committee may from time to time
determine, at the call of the Chairman or any two members thereof.
Any such committee may prescribe such other rules as it shall
determine for calling and holding meetings and its method of
procedure, subject to any rules prescribed by the Board of Directors.
Section 9. CONFERENCE TELEPHONE MEETINGS.
One or more directors may participate in a meeting of the
Board, or of a committee of the Board, by means of conference
telephone or similar communications equipment enabling all persons
participating in the meeting to hear each other. Participation in a
meeting pursuant to this section shall constitute presence in person
at such meeting.
ARTICLE III
OFFICERS
--------
Section 1. GENERAL PROVISIONS.
The Board of Directors, at such time as it determines, may
elect such executive officers, as defined in section 3(i) of this
Article III, as the Board deems necessary. The
- 8 -
<PAGE> 9
Chairman of the Board, President and Vice Chairman of the Board
shall each be, but the other executive officers may, but need not be,
chosen from the members of the Board. Any two or more executive
offices may be held by the same person. Other officers may be
appointed in the manner provided for in these By-laws. The election or
appointment of an officer for a given term, or a general provision in
the Certificate of Incorporation or in the By-laws with respect to
term of office, shall not be deemed to create any contract rights.
Section 2. TERM OF OFFICE, REMOVAL, AND VACANCIES.
(a) TERM. Each executive officer of the Corporation
shall hold office during the pleasure of the Board of Directors and
until his successor is elected and qualified, unless he sooner dies or
resigns or is removed by the Board of Directors or the Chairman.
(b) REMOVAL. The Board of Directors by a majority vote
of the members present at a meeting at which a quorum is present may
remove any executive officer at any time, with or without cause.
(c) VACANCIES. Any vacancy in any executive office may
be filled by the Board of Directors or by the Chairman.
Section 3. POWERS AND DUTIES.
(a) IN GENERAL. All officers, as between themselves
and the Corporation, shall respectively have such authority and
perform such duties as are customarily incident to their respective
offices, and as may be specified from time to time by the Board of
Directors, regardless of whether such authority and duties are
customarily incident to such office. In the absence of any officer of
the Corporation, or for any other reason the Board of Directors may
deem sufficient, the Board of Directors may delegate from time to time
the powers or duties of such officer, or any of them, to any other
officer or to any Director.
(b) CHAIRMAN OF THE BOARD. The Chairman of the Board
shall, subject to the provisions of these By-laws, preside at
all meetings of the stockholders, of the Board of Directors, and of the
Executive Committee.
(c) PRESIDENT. The President shall be the chief
operating officer of the Corporation and shall have full authority to
execute all authorized deeds, mortgages, bonds, contracts and other
obligations in the name of the Corporation in connection with the
performance of his duties as chief operating officer. The President
shall also perform all duties usually incident to such office, subject
to the direction of the Board of Directors. In the case of the absence
or disability of the Chairman of the Board or when circumstances
prevent the Chairman of the Board from acting, the President shall
perform the duties of the Chairman of the Board, except as those
duties are specifically delegated hereby to the Vice Chairman of the
Board.
(d) CHIEF EXECUTIVE OFFICER. Either the Chairman of the
Board or the President, as designated by the Board of Directors, shall
be the chief executive officer of the Corporation and shall have
general supervision over its property, business and affairs, and
perform all the duties usually incident to such office, subject to the
direction of the Board of Directors. He may execute all authorized
deeds, mortgages, bonds, contracts,
- 9 -
<PAGE> 10
and other obligations, in the name of the Corporation and shall
have such other powers and duties as may be prescribed by the Board of
Directors.
(e) VICE CHAIRMAN OF THE BOARD. In the absence of the
Chairman of the Board, and subject to the provisions of these By-laws,
the Vice Chairman of the Board shall preside at all meetings of the
stockholders, and in the absence of both the Chairman of the Board and
the President, the Vice Chairman of the Board shall be the chief
executive officer of the Corporation and shall perform all duties
usually incident to such offices, subject to the direction of the
Board of Directors. He shall also perform such other powers and
duties as may be prescribed by the Board of Directors. In case of the
absence or disability of both the Chairman of the Board and the
President, or when circumstances prevent both the Chairman of the
Board and the President from acting, the Vice Chairman of the Board
shall perform the duties of the Chairman of the Board.
(f) VICE PRESIDENTS. The Vice Presidents shall have such
powers, duties and titles as may be prescribed by the Board of
Directors or as may be delegated by the Chairman of the Board or by
the President.
(g) SECRETARY. The Secretary shall attend and shall keep
the minutes of all meetings of the stockholders and the Board of
Directors (and perform similar duties for the committees of the Board
when required). He shall keep such books as may be required by the
Board of Directors, shall have charge of the seal, if any, of the
Corporation and shall be permitted, subject to the provisions of these
By-laws, to give notices of stockholders' and directors' meetings
required by law or by these By-laws, or otherwise, and have such other
powers and duties as may be prescribed by the Board of Directors or
the Chairman of the Board.
(h) TREASURER. The Treasurer shall receive and have
charge of all money, bills, notes, bonds, stock in other corporations
and similar property belonging to the Corporation, and shall do with
the same as shall be ordered by the Board of Directors. He shall
disburse the funds and pledge the credit to the Corporation as may be
directed by the Board. He shall keep accurate financial accounts, and
hold the same open for inspection and examination by the directors.
On the expiration of his term of office, he shall turn over to his
successors, or the Board of Directors, all property, books, papers,
and money of the Corporation in his hands, and shall possess such
other powers and duties as may be prescribed by the Board of Directors
of the Chairman of the Board.
(i) EXECUTIVE OFFICERS. The officers referred to in
subparagraphs (b), (c), (d), (e), (f), (g) and (h) of this section and
such other officers as the Board of Directors may by resolution
identify shall be executive officers of the Corporation and may be
referred to as such.
(j) OTHER OFFICERS. Any Divisional President, Vice
President or Corporate or Divisional Assistant Vice President,
Assistant Secretary or Assistant Treasurer, or any other subordinate
officer shall be appointed and removed by the Chief Executive Officer,
at whose pleasure each shall serve and shall have such powers and
duties as the Chief Executive Officer may prescribe.
- 10 -
<PAGE> 11
Section 4. COMPENSATION.
The Board of Directors is authorized to determine or to provide
the method of determining the compensation of all Executive Officers.
Section 5. BONDS.
If required by the Board, any and every officer or agent shall
give the Corporation a bond in a sum and with one or more sureties
satisfactory to the Board for the faithful performance of the duties
of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the Corporation.
ARTICLE IV
SECURITIES HELD BY CORPORATION
------------------------------
Section 1. TRANSFER OF SECURITIES OWNED BY THE CORPORATION.
All endorsements, assignments, transfers, share powers or other
instruments of transfer of securities standing in the name of the
Corporation shall be executed for and in the name of the Corporation
by the Chairman of the Board, or by the President, or by any Vice
President, or by the Secretary or Treasurer or by any additional person
or persons as may be thereunto authorized by the Board of Directors.
Section 2. VOTING SECURITIES HELD BY THE CORPORATION.
The Chairman of the Board, or the President, or any Vice
President, or the Secretary or Treasurer, in person or by another
person thereunto authorized by the Board of Directors, in person or by
proxy or proxies appointed by him, shall have full power and authority
on behalf of the Corporation to vote, act and execute consents,
waivers and releases with respect to any securities issued by other
corporations which the Corporation may own.
ARTICLE V
SHARE CERTIFICATES
------------------
Section 1. TRANSFER AND REGISTRATION OF CERTIFICATES.
The Board of Directors shall have authority to make such rules
and regulations, not inconsistent with law, the Certificate of
Incorporation or these By-laws, as it deems expedient concerning the
issuance, transfer and registration of certificates for shares and the
shares represented thereby.
- 11 -
<PAGE> 12
Section 2. CERTIFICATES FOR SHARES.
Each holder of shares is entitled to one or more
certificates for shares of the Corporation in such form not
inconsistent with law and the Certificate of Incorporation as shall be
approved by the Board of Directors. Each such certificate shall be
signed by the Chairman of the Board or the President or any Vice
President, and by the Secretary, and Assistant Secretary, the
Treasurer, or an Assistant Treasurer of the Corporation, which
certificate shall certify the number and class of shares held by each
stockholder in the Corporation, but no certificates for shares shall
be executed or delivered until such shares are fully paid. Any of or
all the signatures upon such certificate may be a facsimile, engraved
or printed. In case any officer, transfer agent or registrar who has
signed, or whose facsimile signature has been placed upon, any share
certificate shall have ceased to be such officer, transfer agent or
registrar, before the certificate is issued, it may be issued with the
same effect as if he were such officer, transfer agent or registrar at
the date of its issue.
Section 3. TRANSFER AGENTS, REGISTRARS AND DIVIDEND
DISBURSING AGENTS.
The Board of Directors may from time to time by resolution
appoint one or more incorporated transfer agents and registrars (which
may or may not be the same corporation) for the shares of the
Corporation, and the Board of Directors from time to time by
resolutions may appoint a dividend disbursing agent to disburse any
and all dividends authorized by the Board of Directors payable upon
the shares of the Corporation.
Section 4. TRANSFERS.
Subject to restrictions on the transfer of stock, upon surrender
to the Corporation or the duly appointed transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied
by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate
and record the transaction upon its books. No transfer shall be made
which would be inconsistent with the provisions of Article 8, Title 6
of the Delaware Uniform Commercial Code--Investment Securities.
Section 5. LOST, STOLEN OR DESTROYED CERTIFICATES.
The Corporation may issue a new certificate for shares in place
of any certificate or certificates heretofore issued by the
Corporation alleged to have been lost, stolen or destroyed upon the
making of an affidavit of that fact by the person claiming the
certificate of stock to have been lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board
of Directors or any duly authorized executive officer may, in its or
his discretion, and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representatives, to attest the same in such
manner as it shall require and to indemnify the Corporation, its
directors, officers, employees, agents and representatives, and in
connection therewith to give the Corporation a bond in such sum and
containing such terms as the Board or such officer may direct, against
any claim that may be made against
- 12 -
<PAGE> 13
the Corporation with respect to the certificate or certificates
alleged to have been lost, stolen, or destroyed or the issuance of the
new certificate.
Section 6. PROTECTION OF CORPORATION.
The Corporation may treat a fiduciary as having capacity and
authority to exercise all rights of ownership in respect to shares of
record in the name of the decedent holder, person, firm or corporation
in conservation, receivership or bankruptcy, minor, incompetent
person, or person under disability, as the case may be, for whom he is
acting, or a fiduciary acting as such, and the Corporation, its
transfer agent and registrar, upon presentation of evidence of
appointment of such fiduciary shall be under no duty to inquire as to
the powers of such fiduciary and shall not be liable to any firm,
person, or corporation for loss caused by any act done or omitted to
be done by the Corporation or its transfer agent or registrar in
reliance thereon.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, AND OTHER AUTHORIZED REPRESENTATIVES
----------------------------------------------------------------------------
Section 1. INDEMNIFICATION OF AUTHORIZED REPRESENTATIVES IN
THIRD PARTY PROCEEDINGS.
The Corporation shall indemnify any person who was or is
an "authorized representative" of the Corporation (which shall mean
for purposes of this Article a director or officer of the Corporation,
or a person serving at the request of the Corporation as a director,
officer, or trustee, of another corporation, partnership, joint
venture, trust or other enterprise) and who was or is a "party" (which
shall include for purposes of this Article the giving of testimony or
similar involvement) or is threatened to be made a party to any "third
party proceeding" (which shall mean for purposes of this Article any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, or investigative, other than an action
by or in the right of the Corporation) by reason of the fact that such
person was or is an authorized representative of the Corporation,
against expenses (which shall include for purposes of this Article
attorneys' fees), judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such third party proceeding if such person acted in
good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect
to any criminal third party proceedings (which could or does lead to a
criminal third party proceeding) had no reasonable cause to believe
such conduct was unlawful. The termination of any third party
proceeding by judgment, order, settlement, indictment, conviction or
upon a plea of nolo contendere or its equivalent, shall not of itself
create a presumption that the authorized representative did not act in
good faith and in a manner which said person reasonably believed to be
in, or not opposed to, the best interests of the Corporation, and,
with respect to any criminal third party proceeding, had reasonable
cause to believe that such conduct was unlawful.
- 13 -
<PAGE> 14
Section 2. INDEMNIFICATION OF AUTHORIZED REPRESENTATIVES IN
CORPORATE PROCEEDINGS.
The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation and who was or is a party
or is threatened to be made a party to any "corporate proceeding"
(which shall mean for purposes of this Article any threatened, pending
or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor or investigative proceeding by the
Corporation) by reason of the fact that such person was or is an
authorized representative of the Corporation, against expenses
actually and reasonably incurred by such person in connection with the
defense or settlement of such corporate action if such person acted in
good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery
or the court in which such corporate proceeding was pending shall
determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such authorized
representative is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem
proper.
Section 3. MANDATORY INDEMNIFICATION OF AUTHORIZED
REPRESENTATIVES.
To the extent that an authorized representative of the
Corporation has been successful on the merits or otherwise in defense
of any third party or corporate proceedings or in defense of any
claim, issue or matter therein, such person shall be indemnified
against expenses actually and reasonably incurred by such person in
connection therewith.
Section 4. DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
Any indemnification under section 1, 2, or 3 of this Article
(unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the authorized representative is proper in the
circumstances because such person has either met the applicable
standard of conduct set forth in section 1 or 2 or has been successful
on the merits or otherwise set forth in section 3 and that the amount
requested has been actually and reasonably incurred. Such
determination shall be made:
(1) by the Board of Directors by a majority of a
quorum consisting of directors who were not parties to such
third party or corporate proceedings; or
(2) if such a quorum is not obtainable, or, even if
obtainable, a majority vote of such a quorum so directs, by
independent legal counsel in a written opinion; or
(3) by the stockholders.
- 14 -
<PAGE> 15
Section 5. ADVANCING EXPENSES.
Expenses actually and reasonably incurred in defending a third
party or corporate proceeding shall be paid on behalf of an authorized
representative by the Corporation in advance of the final disposition
of such third party or corporate proceeding upon receipt of an
undertaking by or on behalf of the authorized representative to repay
such amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the Corporation as authorized in this
Article.
Section 6. EMPLOYEES BENEFIT PLANS.
For purposes of this Article, the Corporation shall be deemed to
have requested an authorized representative to serve an employee
benefit plan where the performance by such person of duties to the
Corporation also imposes duties on, or otherwise involves services by,
such person to the plan or participants or beneficiaries of the plan;
excise taxes assessed on an authorized representative with respect to
an employee benefit plan pursuant to applicable law shall be deemed
"fines"; and action take nor omitted by such person with respect to an
employee benefit plan in the performance of duties for a purpose
reasonably believed to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is
not opposed to the best interests of the Corporation.
Section 7. SCOPE OF ARTICLE.
The indemnification of and the advancement of expenses to
authorized representatives, provided by, or granted pursuant to this
Article, shall (1) not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may
been titled under any statute, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in an official
capacity and as to action in other capacities, (2) continue as to a
person who has ceased to be an authorized representative, and (3)
inure to the benefit of the heirs, executors, and administrators of
such a person.
Section 8. RELIANCE ON PROVISIONS.
Each person who shall act as an authorized representative of the
Corporation shall be deemed to be doing so in reliance upon rights of
indemnification provided by this Article.
Section 9. INSURANCE.
The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee, trustee or agent of or for the Corporation, or is or was
serving at the request or with the prior approval of the Corporation as
a director, officer, employee, trustee or agent of another
corporation, trust or enterprise, against any liability asserted
against him and incurred by him in any capacity or arising out of his
status as such whether or not the Corporation would have the power
to indemnify him against such liability under the provisions of these
By-laws.
- 15 -
<PAGE> 16
ARTICLE VII
GENERAL
-------
Section 1. CONTRACTS, CHECKS, ETC.
All Contracts, agreements, checks, drafts, notes, bonds, bills
of exchange and orders for the payment of money shall be signed or
endorsed by the persons whom the Board prescribes therefor.
Section 2. FISCAL YEAR.
The fiscal year of the Corporation shall commence on February 1
of each year and end on January 31 of the following year, unless
otherwise determined by the Board.
Section 3. ANNUAL STATEMENT.
The Board shall cause an independent public accountant, selected
from time to time by the Board, to examine in accordance with
generally accepted auditing standards, prior to the annual meeting of
the stockholders in each year, the books and records of the
Corporation and the financial statements for the preceding fiscal
year, which statements shall set forth the financial position as of
the close of, and the results of operations of the Corporation for,
the preceding fiscal year, and the Board shall cause such accountant
or firm of accountants to render to the Board its opinion with respect
thereto. The Board shall cause copies of the financial statements
together with the opinion to be sent to all stockholders entitled to
vote at the annual meeting in the year succeeding the year to which
the financial statements apply and to be available to stockholders
attending the annual meeting.
Section 4. FORM OF NOTICES.
Whenever notice is required to be given to any director or
officer or stockholder, such notice may be given either in person or
by mail, telephone or telegram, telex or similar medium of
communication, except as expressly provided otherwise in these
By-laws. Except as provided in Article II, Section 4(c), if mailed,
the notice will be deemed given when deposited in the United States
mail, postage prepaid, addressed to the stockholder, officer or
director at such address as appears on the books of the Corporation.
If given in person or by telephone, notice will be deemed given when
communicated. If given by telegram, telex or similar medium of
communication, notice will be deemed given when properly dispatched.
Section 5. SEAL.
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise. The
Secretary shall have custody of the corporate seal of the Company and
shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by the Secretary's signature.
The Board of Directors may give general authority
- 16 -
<PAGE> 17
to any other officer to affix the seal of the Company and to attest
the affixing by his signature.
Section 6. CONSISTENCY WITH CERTIFICATE OF INCORPORATION.
If any provision of these By-laws shall be inconsistent with
the Corporation's Certificate of Incorporation (and as it may be
amended from time to time), the Certificate of Incorporation (as so
amended at the time) shall govern.
ARTICLE VIII
AMENDMENTS
----------
Except as otherwise provided in the Certificate of
Incorporation, these By-laws may be altered, amended, or repealed or
new By-laws may be adopted by the affirmative vote of the directors of
the Company or by the affirmative vote of the holders of a majority of
the shares of the Company entitled to vote in the election of
directors, voting as one class at any regular meeting of the
stockholders or of the Board of Directors or at any special meeting of
the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new By-laws be contained
in the notice of such special meeting.
[As amended July 13, 1994]
- 17 -
<PAGE> 1
EXHIBIT 4.14
Execution Copy
U.S. $125,000,000
LEASE RECEIVABLES
TRANSFER AGREEMENT
Dated as of October 7, 1994
Among
LDI LEASE RECEIVABLES FUNDING CORP.
as Transferor
-------------
and
CXC INCORPORATED
as Transferee
-------------
and
CITICORP NORTH AMERICA, INC.
as Agent
--------
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Section Page
- - ------- ----
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 1.03. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE II
AMOUNTS AND TERMS OF THE TRANSFERS
SECTION 2.01. Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.02. Accepting Transfers from the Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.03. Transfers of Interests in Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.04. Termination or Reduction of the Transfer
Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.05. Selection of Fixed Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.06. Pre-Termination Date Settlement
Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.07. Liquidation Settlement Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.08. Other Settlement Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.09. Payments and Computations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.10. Yield and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.11. Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.12. Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.13. Grant of Security Interest in Equipment
and Related Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.14. Perfection of Liens; Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE III
CONDITIONS OF TRANSFERS
SECTION 3.01. Conditions Precedent to Initial
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.02. Conditions Precedent to All Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of
the Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C>
ARTICLE V
GENERAL COVENANTS OF THE TRANSFEROR
SECTION 5.01. Affirmative Covenants of the Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.02. Reporting Requirements of the
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.03. Negative Covenants of the Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.02. Duties of the Collection Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.03. Rights of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.04. Responsibilities of the Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.05. Further Action Evidencing Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.06. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.02. Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.03. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.04. Transferee's Transfer Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE IX
INDEMNIFICATION; SUBSTITUTIONS AND RETRANSFERS
SECTION 9.01. Indemnities by the Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 9.02. Substitution and Retransfer of Lease
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 10.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 10.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 10.04. Binding Effect; Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 10.05. GOVERNING LAW; WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 10.06. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.07. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.08. No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.09. Execution in Counterparts;
Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
-ii-
<PAGE> 4
LIST OF EXHIBITS
----------------
EXHIBIT A Form of Certificate to CNA as Agent for the Transferee
EXHIBIT B Description of Credit and Collection Policy
EXHIBIT C Form of Interest Rate Hedge Assignment
EXHIBIT D Form of Leases
EXHIBIT E Form of Lock-Box Agreement
EXHIBIT F Form of Settlement Report
EXHIBIT G Form of Opinion(s) of Counsel for Transferor
EXHIBIT H List of Offices of Transferor where Records Are Kept
EXHIBIT I List of Lock-Box Banks
EXHIBIT J Form of Interest Rate Hedge Report
EXHIBIT K Interest Rate Hedging Parameters
-iii-
<PAGE> 5
LEASE RECEIVABLES TRANSFER AGREEMENT
Dated as of October 7, 1994
LDI LEASE RECEIVABLES FUNDING CORP., a Delaware corporation (the
"Transferor"), CXC INCORPORATED, a Delaware corporation (the "Transferee"), and
CITICORP NORTH AMERICA, INC., a Delaware corporation ("CNA"), as agent for the
Transferee (the "Agent"), agree as follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are capitalized and used
throughout this Agreement (in addition to those defined above) are defined in
Article I of this Agreement.
(2) The Originator is in the business of procuring, trading in, leasing,
distributing, financing, and providing associated services with respect to,
equipment, including computer equipment;
(3) The Transferor is a special-purpose Subsidiary of the Originator
established to purchase and otherwise acquire Lease Receivables and related
assets;
(4) The Transferor wishes from time to time to offer to transfer to the
Transferee Lease Receivables and related assets; and
(5) The Transferee desires to procure such receivables from the Transferor;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACQUIRED LEASE RECEIVABLE" means a Lease Receivable arising under a Lease
that was acquired by the Originator from a third party other than the
Transferee.
"ACQUIRED LEASE PORTFOLIO" means a group of Acquired Lease Receivables which
were acquired in a single transaction (or a series of related transactions) and
which includes Lease Receivables owing by two or more Obligors that are not
Affiliated Obligors.
"ADVERSE CLAIM" means a lien, security interest, charge, encumbrance or
other right or claim of any Person other than Permitted Encumbrances.
<PAGE> 6
"AFFECTED PARTY" means the Transferee, CNA, individually and in its capacity
as Agent, and each of their respective affiliates.
"AFFILIATE" means, with respect to any Person, a Person: (i) that directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such Person; (ii) that beneficially owns or
holds 5% or more of any class of the voting stock (or, in the case of a Person
that is not a corporation, 5% or more of the equity interest) of such Person;
or (iii) 5% or more of the voting stock (or, in the case of a Person that is
not a corporation, 5% or more of the equity interest) of which is beneficially
owned or held, directly or indirectly, by such Person; PROVIDED, HOWEVER, that
neither the Agent nor the Transferee shall be deemed to be an Affiliate of the
Transferor. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting stock or an equity interest,
by contract, or otherwise.
"AFFILIATED OBLIGOR" means any Obligor which is an Affiliate of another
Obligor.
"AGGREGATE TRANSFER PRICE" means, at any time, the sum of the outstanding
Capital at such time and the Deferred Transfer Price at such time.
"ALTERNATE BASE RATE" means a fluctuating interest rate per annum as shall
be in effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by Citibank in New York, New
York, from time to time as Citibank's base rate; or
(b) 1/2 of one percent above the latest three-week moving average of
secondary market morning offering rates in the United States for three-month
certificates of deposit of major United States money market banks, such
three-week moving average being determined weekly on each Monday (or, if any
such day is not a Business Day on the next succeeding Business Day) for the
three-week period ending on the previous Friday by Citibank on the basis of
such rates reported by certificate of deposit dealers to and published by the
Federal Reserve Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates received by Citibank
from three New York certificate of deposit dealers of recognized standing
selected by Citibank, in either case adjusted to the nearest 1/4 of one
percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4
of one percent; or
-2-
<PAGE> 7
(c) 1/2 of one percent per annum above the Federal Funds Rate.
"ASSIGNEE RATE" for any Fixed Period means an interest rate per annum equal
to the LIBO Rate plus 1.25%; PROVIDED, HOWEVER, that (i) in the case of any
Fixed Period of less than one month, the "ASSIGNEE RATE" for such Fixed Period
shall be the Alternate Base Rate in effect during such Fixed Period unless the
Agent and the Transferor agree in writing to a different rate; (ii) if it shall
become unlawful for Citibank to obtain funds in the London interbank market in
order to make, fund or maintain any Transfer hereunder or deposits in dollars
(in the applicable amounts) are not being offered by Citibank in the London
interbank market then the "ASSIGNEE RATE" for any Fixed Period shall be
calculated using an interest rate per annum equal to the Alternate Base Rate;
and (iii) following the occurrence of an Event of Termination, the "ASSIGNEE
RATE" for each Fixed Period shall be the sum of the applicable interest rate
per annum determined pursuant to provisions set forth above plus 1% per annum.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Section 101 ET SEQ.), as amended from time to time, or any successor statute.
"BENEFIT PLAN" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) in respect of which the Transferor or
any ERISA Affiliate is, or at any time within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"BUSINESS DAY" means any day other than a Saturday, Sunday or public holiday
or the equivalent for banks in New York City PROVIDED, HOWEVER, if the term
"Business Day" is used in connection with the LIBO Rate, "Business Day" means a
LIBO Business Day.
"CAPITAL" means the sum of the amounts paid to the Transferor for each
Capital Transfer pursuant to SECTION 2.02, reduced from time to time by
Collections received and distributed on account of such Capital pursuant to
SECTIONS 2.06 and 2.07 below. If the Transferee or the Agent is required (or
believes in good faith that it is required) by law to repay (as a preference or
otherwise, and to the Transferor, the Originator, an Obligor, a trustee for the
Transferor, the Originator or any Obligor, a court or any other Person) any
amount which previously caused a reduction in Capital, then Capital shall be
reinstated by the amount of such repayment and the Transferor will indemnify
and hold the Transferee or the Agent harmless for the amount of such repayment,
interest thereon required (or believed in good faith by the Transferee or the
Agent to be required) to be paid in connection therewith and all losses,
liabilities, costs and expenses related thereto (including but not limited to
reasonable attorneys' fees and expenses).
-3-
<PAGE> 8
"CAPITAL TRANSFER" means any Transfer which, pursuant to SECTION 2.02,
causes the aggregate outstanding Capital hereunder to increase.
"CAPMAC" means Capital Markets Assurance Corporation, a New York stock
insurance company.
"CERTIFICATE" means a certificate of assignment, in the form of EXHIBIT A
evidencing the assignment by the Transferor to the Transferee of the
Transferred Assets.
"CITIBANK" means Citibank, N.A., a national banking association.
"COLLATERAL CUSTODIAN" means the "Collateral Custodian" as defined in that
certain Collateral Custodian Agreement dated as of the Initial Transfer Date
among the Transferor, the Originator, the Transferee, the Agent and The Fifth
Third Bank, as Collateral Custodian.
"COLLECTION AGENT" means at any time the Person(s) then authorized pursuant
to Article VI to service, administer and collect Lease Receivables.
"COLLECTION AGENT FEE" has the meaning assigned to that term in SECTION 2.10.
"COLLECTION DATE" means the date following the Termination Date on which the
aggregate outstanding Capital has been reduced to zero and the Transferee has
received all Yield, Interest Rate Hedging Obligations and other amounts payable
to the Transferee under this Agreement or any other agreement executed pursuant
hereto.
"COLLECTIONS" means, with respect to any Transferred Lease Receivable, all
cash collections and other cash proceeds of such Transferred Lease Receivable,
including, without limitation, all cash proceeds of Related Security with
respect to such Transferred Lease Receivable, and any Collection of such
Transferred Lease Receivable deemed to have been received pursuant to SECTION
2.08 or SECTION 9.02 (it being understood that the Transferor shall pay all
such deemed Collection amounts to the Collection Agent), and shall also include
any amounts earned as a result of the investment of the Collections held by the
Agent pursuant to SECTION 2.07.
"COMPANY DOCUMENT" shall mean the Expense and Tax-Sharing Agreement dated as
of the Initial Transfer Date between the Originator and the Transferor.
"CONCENTRATION LIMIT" for any Obligor means at any time the lesser of (i)
the dollar amount set forth below for such Obligor's Risk Rating (and, if
indicated, such Obligor's senior unsecured debt rating by both Rating Agencies,
using the lower
-4-
<PAGE> 9
rating category in the event of a split rating) or (ii) the amount obtained by
multiplying the percentage set forth below for such Obligor's Risk Rating by
the Transfer Limit at such time, or such higher amount ("Special Concentration
Limit") for any Obligor designated by Agent in a writing delivered to the
Transferor from time to time; PROVIDED, HOWEVER, that in the case of an Obligor
with any Affiliated Obligors, the Concentration Limit and the Lease Receivables
related thereto shall be calculated as if such Obligor and such one or more
Affiliated Obligors were one Obligor:
<TABLE>
<CAPTION>
Senior
Obligor Unsecured
Risk Debt Dollar Percentage of
Rating Rating Amount Transfer Limit
------ ------ ------ --------------
<S> <C> <C> <C>
1 AND >AA-/Aa3 $16,000,000 12.8%
1 AND >A-/A3 $12,500,000 10.0%
1 N/A $7,500,000 6.0%
2 N/A $5,000,000 4.0%
3 N/A $3,750,000 3.0%
4 N/A $2,000,000 1.6%
5 N/A $1,500,000 1.2%
</TABLE>
"CONTRIBUTION" has the meaning assigned to that term in the Originator
Agreement.
"CREDIT AND COLLECTION POLICY" means those credit and collection policies
and practices relating to Leases and Lease Receivables described in EXHIBIT B,
as modified in compliance with SECTION 5.03(C).
"DEFAULTED LEASE RECEIVABLE" means a Lease Receivable at any time: (i) as
to which any two of the immediately preceding six scheduled payments (other
than payments for freight charges or administrative fees), or parts thereof,
remain unpaid for more than 90 days from the original due date for such
payment, (ii) as to which the Obligor thereof has taken any action, or suffered
any event to occur, of the type described in SECTION 7.01(G) or (iii) which,
consistent with the Credit and Collection Policy, has been or should be written
off the Transferor's books as uncollectible.
"DEFERRED TRANSFER PRICE" means, at any time, an amount equal to the sum of
(i) the Interest Rate Hedge Reserve and (ii) an amount equal to the greater of
(A) the aggregate Transferred Lease Receivables Balance at such time MULTIPLIED
BY 5% and (B) the sum of the products of (x) the Outstanding Balance of
Transferred Lease Receivables of all Obligors with the same Risk
-5-
<PAGE> 10
Rating MULTIPLIED BY (y) the percentage set forth below for such Obligors' Risk
Rating:
OBLIGOR RISK RATING DEFERRED TRANSFER PERCENTAGE
------------------- ----------------------------
1 0%
2 5%
3 10%
4 15%
5 20%
"DELINQUENT LEASE RECEIVABLE" means a Lease Receivable that is not a
Defaulted Lease Receivable and (i) as to which any payment, or part thereof,
remains unpaid for more than 30 days from the original due date for such
payment or (ii) which, consistent with the Credit and Collection Policy, has
been or should be classified as delinquent by the Transferor.
"DESIGNATED OBLIGOR" means, at any time, any Obligor of the Transferor
unless the Agent has, following three Business Days' notice, advised the
Transferor that such Obligor shall not be considered a Designated Obligor.
"DILUTION FACTORS" means with respect to the Transferred Lease Receivables,
any credits, rebates, freight charges, cash discounts, store opening discounts,
volume discounts, cooperative advertising expenses, royalty payments,
warranties, cost of parts required to be maintained by agreement (whether
express or implied), allowances, disputes, chargebacks, returned or repossessed
goods, inventory transfers, allowances for early payments and other allowances
that are made or coordinated with the Transferor's and the Originator's usual
practices.
"DISCOUNT RATE" means, with respect to any Lease Receivable, the discount
rate used to calculate the present value of the Periodic Installments of Rent
payable under the related Lease as of the last day of the month immediately
preceding the month in which such Lease Receivable became a Transferred Lease
Receivable. The Discount Rate for the Lease Receivables transferred on the
initial Settlement Date that were re-acquired by the Originator pursuant to the
Termination and Reassignment Agreement and subsequently transferred to the
Transferor shall be the "Discount Rate" for such Lease Receivables under the
Original LRTA and, on any other Settlement Date, shall be a rate equal to the
sum of (i) the interest rate per annum quoted to the Transferor by a nationally
recognized financial institution rated A or better by Standard & Poor's
Corporation (or the equivalent rating by Moody's Investors Service, Inc.) as
the rate at which such financial institution is willing to enter into an
Interest Rate Hedge pursuant to which the Transferor will pay an interest rate
calculated in conjunction with an Interest Rate Hedge amortization prepared by
the Transferor and which complies with SECTION 5.01 and the provisions set
forth on EXHIBIT K and in
-6-
<PAGE> 11
return shall receive a floating interest rate (calculated against the same
principal amount) approximately equal to the one month LIBO Rate PLUS (ii) .60%
per annum (representing the interest rate spread on "LIBOR Advances" under the
Liquidity Agreement) PLUS (iii) the applicable Program Fee Rate at such time;
PROVIDED, that, if the Transferee or the Originator is not entering into an
Interest Rate Hedge at the time such Lease Receivable becomes a Transferred
Lease Receivable, the Discount Rate shall be equal to the sum of (i) a
non-amortizing one month LIBO Rate-based Interest Rate Hedge with a term equal
to the "Weighted Average Remaining Term" (as defined below) of the Transferred
Lease Receivables PLUS six months PLUS (ii) .60% per annum PLUS (iii) the
applicable Program Fee Rate at such time; PROVIDED, FURTHER, that the
Transferor may, at its option, with respect to the Lease Receivables
transferred on any Settlement Date, designate a rate which is higher than the
rates calculated above to be the "Discount Rate" for such Lease Receivables.
For purposes of the foregoing, "Weighted Average Remaining Term" shall mean (i)
the Outstanding Balance of each Transferred Lease Receivable TIMES the
remaining term of such Transferred Lease Receivable, DIVIDED BY (ii) the
Transferred Lease Receivables Balance; PROVIDED, that, for purposes of making
such calculation, the Outstanding Balance of the Lease Receivables to be
transferred on the applicable Settlement Date shall be included as Transferred
Lease Receivables and the Outstanding Balance thereof used in such calculation
shall be determined using an assumed Discount Rate equal to the sum of (A) the
rate applicable to U.S. Treasury bills having a maturity closest to the
Weighted Average Remaining Term as of the immediately preceding Settlement Date
as quoted in the WALL STREET JOURNAL PLUS (B) .60% per annum PLUS (C) the
applicable Program Fee Rate at such time.
"DISCOUNTED VALUE" means, with respect to any Lease Receivable, the present
value of the aggregate amount of the remaining Periodic Installments of Rent
under the related Lease, with such aggregate amount discounted to present value
using the Discount Rate for such Lease Receivable and a payment schedule of the
first day of each month commencing with the first day of the month in which the
Discounted Value is calculated.
"DOL" means the United States Department of Labor and any successor
department or agency.
"ELIGIBLE LEASE RECEIVABLE" means, at any time, a Lease Receivable:
(i) the Obligor of which is not an Affiliate of any of the parties
hereto;
(ii) the Obligor of which is a Designated Obligor, is a United States
resident and has a Risk Rating of 1 to 5 (inclusive);
-7-
<PAGE> 12
(iii) the Obligor of which (A) if such Obligor has a Risk Rating of 3, 4
or 5, is not the Obligor of any Defaulted Lease Receivables and (B) if such
Obligor has a Risk Rating of 1 or 2, is not the Obligor of (x) any Defaulted
Lease Receivable unless, in the reasonable judgment of the Transferor, such
Lease Receivable became a Defaulted Lease Receivable for reasons other than a
negative change in such Obligor's creditworthiness or ability to make
payments on such Lease Receivable or (y) Defaulted Receivables having an
aggregate Outstanding Balance greater than 50% of the aggregate Outstanding
Balance of all Lease Receivables owing by such Obligor;
(iv) which is not a Delinquent Lease Receivable or a Defaulted Lease
Receivable;
(v) which, according to the Lease under which such Lease Receivable
arises, is required to be paid in full within 60 months of the original
commencement date of such Lease;
(vi) which arises under a Lease pursuant to which the Equipment related
thereto has been installed and accepted by the related Obligor (such
acceptance having been evidenced by an acceptance certificate executed by
such Obligor) and all obligations required to be performed thereunder prior
to the date such Lease Receivable is described in a notice delivered pursuant
to SECTION 2.02 have been performed by the Originator, the Transferor and by
all parties other than the Obligor, without dispute, offset, defense or
counterclaim, and which Lease Receivable is fully assignable;
(vii) the Outstanding Balance of which, when added to the Outstanding
Balance of all other Lease Receivables owing by the same Obligor and which
constitute Transferred Lease Receivables hereunder, does not exceed the
Concentration Limit;
(viii) the acquisition of which with the proceeds of notes would
constitute a "current transaction" within the meaning of Section 3(a)(3) of
the Securities Act of 1933, as amended;
(ix) which is "chattel paper", an "account" or a "general intangible"
within the meaning of the UCC of all applicable jurisdictions;
(x) which is denominated and payable only in United States dollars in
the United States;
(xi) which arises under a Lease which has been duly authorized and
which, together with such Lease
-8-
<PAGE> 13
Receivable (which shall not in any event satisfy this clause (xi) if such
Lease Receivable has been paid in full by the Obligor thereof), is in full
force and effect and constitutes the legal, valid and binding obligation of
the Obligor of such Lease Receivable enforceable against such Obligor in
accordance with its terms and is not subject (at the time each determination
of eligibility is made hereunder) to any dispute, offset or counterclaim
whatsoever;
(xii) which, together with the Lease related thereto, does not contravene
in any material respect any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating to truth
in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with respect to
which no party to the Lease related thereto is in violation of any such law,
rule or regulation applicable to such Lease in any material respect;
(xiii) which, has not been compromised, adjusted or modified (including by
extension of time for payment or the granting of any discounts, allowances or
credits) for any reason relating to a negative change in the related
Obligor's creditworthiness or inability to make any payment under the related
Lease;
(xiv) which (A) satisfies all applicable requirements of the Credit and
Collection Policy, (B) complies with such other criteria and requirements as
the Agent may from time to time specify to the Transferor following thirty
days' notice and (C) is freely transferable to the Transferee;
(xv) with respect to which the Transferor (A) is the owner of, or,
subject to the Obligor UCC Filing Requirement, has a perfected security
interest in, each item of Equipment subject to such Lease, free and clear of
any Adverse Claim, except for the rights of the Obligor in the Equipment
under such Lease and (B) subject to the provisions set forth in SECTION 2.14,
has granted a first priority perfected security interest in such Equipment to
the Agent;
(xvi) which arises under a Lease, none of the parties to which have done
or failed to do anything which would or might permit any other party thereto
to terminate such Lease or to suspend or reduce any payments or obligations
due or to become due thereunder;
(xvii) which arises under a Lease which requires the Obligor to maintain
insurance (or, if such Obligor has a Risk Rating of 1, 2 or 3, to self insure
if permitted by the
-9-
<PAGE> 14
Credit and Collection Policy as applied to such Obligor) against loss or
damage to the Equipment subject to such Lease under an insurance policy which
names the Transferor as loss payee or which names the Originator as loss
payee and which interest as loss payee the Originator has transferred to the
Transferor pursuant to the Originator Agreement;
(xviii) which, if included as a Transferred Lease Receivable, would not
cause a breach of the Obligor UCC Filing Requirement;
(xix) which arises under a Lease, no portion of which has been, or is
subject to rejection, early termination or non-assumption, prior to the
original term of such Lease, PROVIDED, that Lease Receivables having an
aggregate Outstanding Balance not exceeding 10% of outstanding Capital shall
satisfy this clause (xix) if the related Lease is subject to early
termination pursuant to a provision therein which requires the applicable
Obligor to pay to the Transferor upon termination an amount equal to the then
Outstanding Balance of such Lease Receivable (it being agreed that any such
payment upon early termination shall constitute a Collection with respect to
such Lease Receivable);
(xx) which is fully enforceable against the Obligor of such Lease
Receivable, notwithstanding the residual value of the Equipment subject to
the related Lease as determined at any time during the term of such Lease;
(xxi) which arises under a Lease that requires payments to be made on a
regular periodic basis and which does not represent the payment of interim
rents;
(xxii) the Obligor of which is in possession of the Equipment subject to
the related Lease and is not subleasing such Equipment to any other Person;
PROVIDED, that Lease Receivables having an aggregate Outstanding Balance not
exceeding 5% of outstanding Capital shall satisfy this clause (xxii) if the
related Equipment is subleased to an Affiliate of an Obligor and (A) the
applicable Obligor remains primarily liable for payment of such Lease
Receivable notwithstanding such sublease and (B) the applicable sublessee is
in possession of such Equipment;
(xxiii) if the Obligor thereof has a Risk Rating of 4 or 5 (a "4/5 Lease
Receivable"), the Outstanding Balance of which, when added to the Outstanding
Balance of all other Transferred Lease Receivables which are 4/5 Lease
Receivables, does not exceed 35% of the Transferred Lease Receivables
Balance;
-10-
<PAGE> 15
(xxiv) no portion of which is payable on account of sales taxes;
(xxv) as to which the Agent has not notified the Transferor that the
Agent has determined, in its sole discretion, that such Lease Receivable (or
class of Lease Receivables) is not acceptable for transfer hereunder (which
notice shall state the reason(s) the Agent has elected to make such
determination); and
(xxvi) which was originated or purchased by the Originator; provided,
however, if such Lease Receivable was an Acquired Lease Receivable, such
Lease Receivable was acquired in the ordinary course of business and
satisfied the credit criteria and standards that the Originator applies to
Lease Receivables originated by the Originator; provided, further, that, with
respect to an Acquired Lease Receivable included in an Acquired Lease
Portfolio, such Acquired Lease Receivable shall only be an Eligible
Receivable if (A) with respect to an Acquired Lease Receivable which, as of
the date of determination, was acquired by the Originator less than 90 days
prior to such date, (a "Newly Acquired Lease Receivable"), the Outstanding
Balance of such newly Acquired Lease Receivable, when added to the
Outstanding Balance of Transferred Lease Receivables which were included in
an Acquired Lease Portfolio and continue to constitute Newly Acquired Lease
Receivables, does not exceed 10% of the Transferred Lease Receivables Balance
and (B) the Outstanding Balance of such Acquired Lease Receivable, when added
to the Outstanding Balance of all other Transferred Lease Receivables which
were included in an Acquired Lease Portfolio (including Newly Acquired Lease
Receivables), does not exceed 25% of the Transferred Lease Receivables
Balance; provided, further, that, at any time, the Transferor may request the
Agent (together with CapMAC) to review any Lease Receivable included in an
Acquired Lease Portfolio (whether constituting a Transferred Lease
Receivable, a Lease Receivable which the Transferor desires to become a
Transferred Lease Receivable or a lease receivable which the Transferor
desires to acquire) and to agree that such Acquired Lease Receivable shall
not (or shall no longer) be designated as an Acquired Lease Receivables for
purposes of the limitations described in this clause (xxvi), it being agreed
by the Agent that in response to any such request, it will use its best
efforts to commence such review within seven Business Days of such request
and to promptly notify the Transferor whether the Agent has agreed to such
request.
-11-
<PAGE> 16
"EQUIPMENT" means data processing, telecommunications and other capital
equipment leased by the Transferor as lessor (as assignee of the Originator or
otherwise).
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" means any (i) corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
IRC) as the Transferor; (ii) partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of Section 414(c) of
the IRC) with the Transferor or (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of the IRC) as the Transferor, any
corporation described in clause (i) above or any partnership or other trade or
business described in clause (ii) above.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"EURODOLLAR RESERVE PERCENTAGE" for any Fixed Period means the reserve
percentage applicable to Citibank during such Fixed Period under regulations
issued from time to time by the Board of Governors of the Federal Reserve
System (or any successor) (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such Fixed
Period during which any such percentage shall be so applicable) under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for Citibank in respect of liabilities or
assets consisting of or including Eurocurrency Liabilities having a term equal
to such Fixed Period.
"EVENT OF TERMINATION" has the meaning assigned to that term in SECTION 7.01.
"FACILITY DOCUMENTS" shall mean collectively, this Agreement, the Originator
Agreement, the Lock-Box Agreements, the Termination and Reassignment Agreement,
the Company Document, and all other agreements, documents and instruments
delivered pursuant thereto or in connection therewith.
"FEDERAL FUNDS RATE" means, for any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day
-12-
<PAGE> 17
which is a Business Day, the average of the quotations for such day for such
transactions received by Citibank from three Federal funds brokers of
recognized standing selected by it.
"FIXED PERIOD" means a period of 1 to 180 days, except when used in
connection with the LIBO Rate, in which case "Fixed Period" means a period of
one month. Each Fixed Period shall be determined in accordance with the
procedures described in SECTION 2.05.
"INDEBTEDNESS" of any Person means (i) indebtedness of such Person for
borrowed money, (ii) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) obligations of such Person to pay the
deferred purchase price of property or services, (iv) obligations of such
Person as lessee under leases which shall have been or should be, in accordance
with generally accepted accounting principles, recorded as capital leases, (v)
obligations secured by any lien or other charge upon property or assets owned
by such Person, even though such Person has not assumed or become liable for
the payment of such obligations, (vi) obligations of such Person in connection
with any letter of credit issued for the account of such Person and (vii)
obligations of such Person under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (vi)
above.
"INITIAL TRANSFER DATE" means the date the first Transfer is made pursuant
to this Agreement.
"INTANGIBLE TRANSFEROR COLLATERAL" means the Transferor Collateral described
in SECTION 2.13(C) and (D).
"INTEREST RATE HEDGES" means interest rate exchange, collar, cap, swap or
similar agreements entered into by the Originator pursuant to the Originator
Agreement or by the Transferee at the request of the Transferor in connection
herewith to provide protection to, or minimize the impact upon, the Transferor
and the Transferee of increasing Transferee Rates.
"INTEREST RATE HEDGE ASSIGNMENT" means an assignment in substantially the
form of EXHIBIT C pursuant to which the Transferor assigns to the Transferee,
all Interest Rate Hedges obtained by the Originator in connection with the
Originator Agreement other than Interest Rate Hedges entered into with Citibank
which are assigned to, and assumed by, the Transferee.
"INTEREST RATE HEDGE RESERVE" means, on any date, an amount equal to the
product of (i) 1.25 MULTIPLIED BY (ii) the cost of buying an Interest Rate
Hedge at such time that will evenly match the unhedged portion of Capital on an
amortizing basis such that the "Weighted Average Discount Rate" (as defined
-13-
<PAGE> 18
in SECTION 7.01(K)) is greater than or equal to the sum of (i) the "Weighted
Average Hedge Rate" (as defined in SECTION 7.01(K) PLUS (ii) 0.60% PLUS (iii)
the applicable Program Fee Rate based on a quote from Citibank at current
market rates for such Interest Rate Hedge, which amount (together with all
calculations) shall be set forth in each Settlement Report; provided, that, if
at such time (x) such amount is less than $350,000 and (y) the unhedged portion
of Capital on an amortizing basis is less than 19% at any one time and 10% at
each quarter, the Interest Rate Hedge Reserve shall equal zero at such time.
"INTEREST RATE HEDGING OBLIGATIONS" has the meaning assigned to that term in
SECTION 2.10(C).
"IRC" means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.
"IRS" means the Internal Revenue Service of the United States of America.
"LEASE" means a lease agreement between the Transferor (as assignee of the
Originator or otherwise) and an Obligor, having payment and enforcement terms
substantially as favorable to the Transferor as those contained in one of the
forms of written contract set forth in EXHIBIT D or otherwise approved by the
Agent, pursuant to which the Transferor leases Equipment to such Obligor.
"LEASE RECEIVABLE" means, with respect to any Lease at any time, all
Periodic Installments of Rent then or thereafter payable by the Obligor under
such Lease, together with all supplemental or additional payments required by
the terms of such Lease with respect to insurance, maintenance, ancillary
products and services and other specific charges, excluding any such payments
or charges which constitute sales or other taxes or the price for a purchase
option.
"LIBO BUSINESS DAY" means a day of the year on which dealings are carried on
in the London interbank market and banks are open for business in London and
are not required or authorized to close in New York City.
"LIBO RATE" for any Fixed Period means the rate of interest per annum at
which deposits in U.S. Dollars are offered by the principal office of Citibank
in London, England to prime banks in the London interbank market at 11:00 a.m.
(London time) two Business Days before the first day of such Fixed Period in an
amount approximately equal or comparable to the Capital allocated to such Fixed
Period and for a period equal to such Fixed Period.
"LIQUIDATION FEE" means, for the Capital allocated to any Fixed Period
(computed without regard to the maturity of a Fixed Period occurring as a
result of the occurrence of the Termination Date) during which such Capital is
reduced, the
-14-
<PAGE> 19
amount, if any, by which (i) the additional Yield (calculated without taking
into account any LIQUIDATION FEE) which would have accrued on the reductions of
such Capital during such Fixed Period (as so computed) if such reductions had
remained as Capital exceeds (ii) the income, if any, received by the Transferee
from the Transferee's investing the proceeds of such reductions of Capital
(which investment the Transferee will use reasonable efforts to make under the
then applicable conditions and circumstances).
"LIQUIDITY AGREEMENT" means the Liquidity Agreement, dated as of the Initial
Transfer Date, among the Transferee, the Liquidity Banks and the Liquidity
Agent, as amended, modified or supplemented from time to time.
"LIQUIDITY AGENT" means Citibank, N.A., as agent for the Liquidity Banks
under the Liquidity Agreement, and any successor Liquidity Agent.
"LIQUIDITY BANKS" means the institutions from time to time party to the
Liquidity Agreement as Liquidity Banks.
"LIQUIDITY PROVIDER" means each Liquidity Bank, any Eligible Assignee (as
defined in the Liquidity Agreement) and CapMAC.
"LOCK-BOX ACCOUNT" means an account maintained at a Lock-Box Bank for the
purpose of receiving Collections.
"LOCK-BOX AGREEMENT" means an agreement, in substantially the form of
EXHIBIT E, among the Transferor, the Originator, the Agent and a Lock-Box Bank
which agreement sets forth the rights of the Agent, the Transferor, the
Originator and the Lock-Box Bank with respect to the disposition and
application of the Collections received into the applicable Lock-Box Account,
including, without limitation, the right of the Agent to direct the Lock-Box
Bank to remit all Collections of Transferred Lease Receivables directly to the
Agent pursuant to SECTION 6.03.
"LOCK-BOX BANK" means any of the banks holding one or more lock-box accounts
for receiving Collections from Transferred Lease Receivables.
"LOSS/LIQUIDATION RATIO" means, with respect to any month, the ratio
(expressed as a percentage) computed by dividing (i) the aggregate Outstanding
Balance of all Transferred Lease Receivables written off by the Transferor
during such month plus the aggregate Outstanding Balance of all Transferred
Lease Receivables written off by the Transferor during each of the immediately
preceding 11 months by (ii) the average daily aggregate outstanding Capital
during the 12-month period ending on the date such ratio is calculated.
-15-
<PAGE> 20
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either the Transferor or any ERISA Affiliate.
"OBLIGOR" means a Person obligated to make payments on a Lease Receivable
pursuant to a Lease.
"OBLIGOR UCC FILING REQUIREMENT" means, with respect to any Transferred
Lease, that the Transferor (as assignee of the Originator or otherwise) has
obtained appropriate UCC financing statements (Form UCC-1) executed by the
Obligor of such Lease which UCC financing statements have been filed in all
applicable jurisdictions, so that if a court or other Person were to determine
that such Lease transferred an ownership (rather than a leasehold) interest in
the Equipment subject thereto to the Obligor, the Transferor would have a
perfected security interest in such Equipment, free and clear of any Adverse
Claims except those held by the Agent hereunder; PROVIDED, HOWEVER, that,
except as required by SECTION 2.14, the actual filing of such UCC financing
statements shall not be applicable with respect to any Lease if the Outstanding
Balance of the Lease Receivable related thereto plus the Outstanding Balance of
all other Transferred Lease Receivables of the related Obligor arising under
Leases pursuant to which the Equipment is located in the same UCC filing
jurisdiction is less than $100,000; PROVIDED, FURTHER, that, notwithstanding
the foregoing PROVISO, at all times, such UCC financing statements shall be
filed with respect to Equipment such that the aggregate Outstanding Balance of
the Lease Receivables related to such Equipment equals or exceeds 75% of the
Transferred Lease Receivables Balance.
"ORDINARY COURSE EXPENSES" shall mean the expenses of the Transferor for
employee salaries, benefits, directors' fees, office lease payments, office
supplies, amounts owed under the Company Document, fees owed to the Lock-Box
Banks, Federal, state and local taxes and similar expenses incurred in the
ordinary course of its business.
"ORIGINAL LRTA" means that certain Amended and Restated Lease Receivables
Purchase Agreement dated as of February 15, 1994 among the Originator, the
Transferee and the Agent.
"ORIGINATOR" means LDI Corporation, a Delaware Corporation.
"ORIGINATOR AGREEMENT" means that certain Lease Receivables Purchase and
Contribution Agreement dated as of the date hereof between the Originator and
the Transferor as such agreement may be amended, supplemented or modified from
time to time.
"OUTSTANDING BALANCE" of any Lease Receivable at any time means the Discounted
Value of the remaining Periodic
-16-
<PAGE> 21
Installments of Rent under the related Lease, as such amounts are adjusted as a
result of any of the events described in the first sentence of SECTION 2.08.
Notwithstanding anything to the contrary contained in this Agreement, if any
payment under a Lease Receivable was not paid when due and if such payment
remains unpaid at the time the Outstanding Balance of that Lease Receivable is
calculated for any purpose, then for purposes of calculating the "OUTSTANDING
BALANCE" of such Lease Receivable the Discounted Value of any such unpaid
payment shall be equal to such unpaid payment.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"PERIODIC INSTALLMENTS OF RENT" means, with respect to any Lease, the
aggregate amount of rent installments payable by the Obligor under such Lease,
excluding however, all supplemental or additional payments required by the
terms of such Lease with respect to taxes, insurance, maintenance, ancillary
products and services and other specific charges.
"PERMITTED ENCUMBRANCE" means any of the following:
(a) liens, charges or other encumbrances for taxes and assessments which
are not yet due and payable;
(b) liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in respect
of which the Transferor and/or the Originator shall at any time in good faith
be prosecuting an appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review shall have been
secured, PROVIDED, that the interest transferred hereunder or any portion
thereof transferred or intended to be transferred hereunder is not, in the
reasonable opinion of the Agent, unreasonably jeopardized thereby;
(c) liens, charges or other encumbrances or priority claims incidental to
the conduct of business or the ownership of properties and assets (including
warehousemen's and attorneys' liens and statutory landlords' liens) and
deposits, pledges or liens to secure statutory obligations, surety or appeal
bonds or other liens of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money, PROVIDED in each
case, the obligation secured is not overdue or, if overdue, is being contested
in good faith by appropriate actions or proceedings, and PROVIDED, FURTHER,
that the transferred interest hereunder or any portion thereof transferred or
intended to be transferred hereunder is not, in the reasonable opinion of the
Agent, jeopardized thereby;
(d) liens, charges or encumbrances in favor of the Transferee or the Agent
or granted to a Liquidity Provider by the Agent; or
-17-
<PAGE> 22
(e) with respect to Equipment, the interest of an Obligor in such
Equipment under the related Lease.
"PERMITTED INVESTMENTS" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities on or before the first Settlement
Date after the date of acquisition; (ii) time deposits and certificates of
deposit having maturities on or before the first Settlement Date after the date
of acquisition, maintained with or issued by any commercial bank having capital
and surplus in excess of $500,000,000 and having the highest commercial paper
rating available by both Rating Agencies; (iii) money market funds which have
the highest applicable rating available by both Rating Agencies; (iv)
repurchase agreements having maturities on or before the first Settlement Date
after the date of acquisition for underlying securities of the types described
in clauses (i) and (ii) above or clause (v) below with any institution with the
highest long term debt rating and commercial paper rating available by both
Rating Agencies; and (v) commercial paper maturing on or before the first
Settlement Date after the date of acquisition and having the highest commercial
paper rating available by both Rating Agencies.
"PERSON" means an individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture,
government (or any agency or political subdivision thereof) or other entity.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA in
respect of which the Transferor or any ERISA Affiliate is, or within the
immediately preceding six years was, an "employer" as defined in Section 3(5)
of ERISA.
"PROGRAM FEE RATE" has the meaning assigned to that term in the fee letter
agreement dated as of the Initial Transfer Date among the Transferor, the Agent
and CapMAC.
"PURCHASE" has the meaning assigned to that term in the Originator Agreement.
"PURCHASED/CONTRIBUTED ASSETS" has the meaning assigned to that term in the
Originator Agreement.
"RATING AGENCIES" means Standard & Poor's Corporation and Moody's Investors
Service, Inc. or their respective successors.
"RECORDS" means all Leases and other documents, books, records and other
information (including without limitation, computer programs, tapes, discs,
punch cards, data processing software and related property and rights)
maintained with respect to Leases and the related Obligors.
-18-
<PAGE> 23
"RELATED SECURITY" means with respect to any Lease:
(i) all security interests or liens and property subject thereto from time
to time purporting to secure payment of the Lease Receivable arising under
such Lease, whether pursuant to such Lease or otherwise;
(ii) the assignment to the Agent, for the benefit of the Transferee, of all
UCC financing statements covering any collateral securing payment of the
Lease Receivable arising under such Lease;
(iii) all guarantees, indemnities, warranties, letters of credit, insurance
policies and proceeds and premium refunds thereof and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of the Lease Receivable arising under such Lease whether pursuant to
the Lease related to such Lease Receivable or otherwise;
(iv) all of the Transferor's right, title and interest in, to and under any
Lease of Equipment which was repossessed from an Obligor of a Transferred
Lease Receivable to the extent that the Outstanding Balance of such
Transferred Lease Receivable remains unpaid;
(v) all Records; and
(vi) all proceeds of the foregoing.
"REPORTABLE EVENT" means any of the events described in Section 4043 of
ERISA.
"RISK RATING" means a credit rating on a scale of 1 through 10 given to each
Obligor pursuant to the Credit and Collection Policy (with 1 being the best
credit rating).
"SECURITY AGREEMENT" means the Security Agreement, dated as of the Initial
Transfer Date between the Transferee and CapMAC, as amended, modified or
supplemented from time to time.
"SETTLEMENT DATE" means the Initial Transfer Date and thereafter, the 15th
day of each month; PROVIDED, that if in any month such day is not a Business
Day, the "SETTLEMENT DATE" for such month shall be the first Business Day to
occur after such 15th day; PROVIDED, FURTHER, that (i) the Transferor may, in
its discretion, by notice to the Agent, request that Settlement Dates occur
more frequently than monthly and (ii) the Agent may, in its discretion, by
notice to the Transferor, require that Settlement Dates occur more frequently
than monthly (but, prior to the Termination Date, no more frequently than twice
each month).
-19-
<PAGE> 24
"SETTLEMENT REPORT" means a report, in substantially the form of EXHIBIT F,
furnished by the Collection Agent to the Agent for the Transferee pursuant to
SECTION 2.08.
"SUB-SERVICER" has the meaning assigned to that term in the Originator
Agreement.
"SUBSIDIARY" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the Board of Directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"TAXES" has the meaning assigned to that term in SECTION 2.15(A).
"TERMINATION AND REASSIGNMENT AGREEMENT" means that certain Termination and
Reassignment Agreement dated as of the Initial Transfer Date executed by the
Originator, the Transferee and the Agent pursuant to which certain receivables
transferred to the Transferee pursuant to the Original LRTA shall be reacquired
by the Originator and the Original LRTA is terminated in accordance with its
terms.
"TERMINATION DATE" means the earliest of (i) that Business Day which the
Transferor designates as the Termination Date by notice to the Agent at least
five Business Days prior to such Business Day, (ii) that Business Day which the
Agent designates as the Termination Date by notice to the Transferor at least
five Business Days prior to such Business Day (except with respect to notice
provided pursuant to Section 5.04 of the Liquidity Agreement, in which case the
Business Day next succeeding the "Liquidation Date" under the Liquidity
Agreement shall be the Termination Date), (iii) the date of the reduction of
the Transfer Limit to zero pursuant to SECTION 2.04 or the declaration or
automatic occurrence of the Termination Date pursuant to SECTION 7.01 and (iv)
February 1, 1997.
"TRANSFER" means a transfer by the Transferor of Transferred Assets to the
Transferee pursuant to SECTIONS 2.01 and 2.02.
"TRANSFER LIMIT" means at any time $125,000,000, as such amount may be
reduced pursuant to SECTION 2.04; PROVIDED, HOWEVER, that at all times on and
after the Termination Date, the "TRANSFER LIMIT" shall mean the aggregate
outstanding Capital.
"TRANSFEREE RATE" means, for any Fixed Period for all Capital allocated to
such Fixed Period:
(i) the rate equivalent to the rate (or if more than one rate, the weighted
average of the rates) at which commercial paper notes of the Transferee
having a term equal to such Fixed Period and to be issued to
-20-
<PAGE> 25
fund the applicable Transfer may be sold by any placement agent or commercial
paper dealer selected by the Transferee, as agreed between each such agent or
dealer and the Transferee and notified by the Transferee to the Agent and the
Collection Agent; PROVIDED, HOWEVER, if the rate (or rates) as agreed between
any such agent or dealer and the Transferee with regard to any Fixed Period
is a discount rate (or rates), the "TRANSFEREE RATE" for such Fixed Period
shall be the rate (or if more than one rate, the weighted average of the
rates) resulting from converting such discount rate (or rates) to an
interest-bearing equivalent rate (or rates) per annum, or
(ii) if the Transferee elects in its sole discretion not to fund, or is not
able to fund, the applicable Transfer for such Fixed Period by its issuing
commercial paper, or if such Fixed Period is one day, or if the Transferee
has assigned its rights under this Agreement to another Person pursuant to
SECTION 10.04, a rate equal to the Assignee Rate for such Fixed Period or
such other rate as the Agent and the Transferor shall agree to in writing.
"TRANSFEROR COLLATERAL" has the meaning assigned to that term in SECTION
2.13.
"TRANSFERRED ASSETS" means, at any time, all then outstanding Transferred
Lease Receivables, Related Security with respect to such Transferred Lease
Receivables, Interest Rate Hedges covering Transferred Lease Receivables and
Collections with respect to, and other proceeds of, such Transferred Lease
Receivables, including, without limitation, all Collections of Transferred
Lease Receivables relating to payments due thereunder at any time during the
month in which such Lease Receivable became a Transferred Lease Receivable.
"TRANSFERRED LEASE RECEIVABLE" means any Lease Receivable which appears on
any list of Lease Receivables at any time hereafter submitted to and accepted
by the Agent pursuant to SECTION 2.02. Once a Lease Receivable appears on any
such list it shall remain a Transferred Lease Receivable; PROVIDED, HOWEVER,
that "TRANSFERRED LEASE RECEIVABLE" shall include any Lease Receivable which is
substituted pursuant to SECTION 9.02 for any existing Transferred Lease
Receivable; PROVIDED, FURTHER, that with respect to any Lease Receivable that
is retransferred to the Transferor pursuant to SECTION 9.02, following the
Agent's receipt of the retransfer price for such Lease Receivable, "TRANSFERRED
LEASE RECEIVABLE" shall not include the Lease Receivable so retransferred.
"TRANSFERRED LEASE RECEIVABLES BALANCE" means, at any time, the aggregate
Outstanding Balance of the Transferred Lease Receivables.
-21-
<PAGE> 26
"TRANSFERRED LEASE RECEIVABLE DEFAULT RATIO" means the ratio (expressed as a
percentage) computed as of the last day of each month by dividing (i) the
aggregate Outstanding Balance of all Transferred Lease Receivables that became
Defaulted Lease Receivables or were written off the books of the Transferor at
any time during such month by (ii) the aggregate outstanding Capital on such
date.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the specified jurisdiction.
"YIELD" means for all Capital allocated to any Fixed Period during any such
Fixed Period, the product of
TR x C x ED
--
360
where:
C = the Capital allocated to such Fixed Period.
TR = the Transferee Rate for such Fixed Period.
ED = the actual number of days elapsed during such Fixed Period.
PROVIDED, HOWEVER that (i) no provision of this Agreement or the Certificate
shall require the payment or permit the collection of Yield in excess of the
maximum permitted by applicable law and (ii) Yield shall not be considered paid
by any distribution if at any time such distribution is rescinded or must
otherwise be returned for any reason.
SECTION 1.02. OTHER TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles. All terms used in Article 9 of the UCC in the State of New York,
and not specifically defined herein, are used herein as defined in such Article
9.
SECTION 1.03. COMPUTATION OF TIME PERIODS. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
-22-
<PAGE> 27
ARTICLE II
AMOUNTS AND TERMS OF THE TRANSFERS
SECTION 2.01. FACILITY. On the terms and conditions hereinafter set forth,
the Transferee may, in its sole discretion, accept Transfers of Transferred
Assets from the Transferor from time to time during the period from the date
the condition precedent in SECTION 3.01 is satisfied to the Termination Date.
Under no circumstances shall the Transferee accept a Capital Transfer, if,
after giving effect to such Transfer, the aggregate outstanding Capital
hereunder would exceed the Transfer Limit. Nothing in this Agreement shall be
deemed to be or construed as a commitment by the Transferee to accept Transfers
of any Transferred Assets at any time. If at any time a court characterizes
the Transfers hereunder as loans by the Transferee to the Transferor, then the
Transferor hereby pledges, grants a security interest in and assigns to the
Agent, for the benefit of the Transferee, all of the right and title to and
interest in the Transferred Lease Receivables and the Related Security and
Collections related thereto as security for such loans and for the payment and
performance of all obligations of the Transferor hereunder.
SECTION 2.02. ACCEPTING TRANSFERS FROM THE TRANSFEROR.
(a) TRANSFERS. Each Transfer shall be made on a Settlement Date, provided,
that a notice requesting such Transfer is received by the Agent at least one
Business Day before such Settlement Date, PROVIDED, HOWEVER, if Yield with
respect to the initial Fixed Period applicable to such Transfer is to be
calculated by reference to the LIBO Rate, such notice must be received by the
Agent at least three Business Days before such Settlement Date. Each such
notice of a proposed Transfer shall accompany a Settlement Report and shall
specify that portion of the transfer price which is immediately payable (as
determined below pursuant to subsection (b) of this SECTION 2.02) for the
Transferred Assets to be transferred, a list of all Eligible Lease Receivables
that the Transferor agrees will constitute Transferred Lease Receivables, a
list of Related Security with respect to such Lease Receivables (upon the
request of the Agent) and, if such Transfer is a Capital Transfer, the duration
of the initial Fixed Period for the Capital arising as a result of such
Transfer. Such notice shall be accompanied by a certification from the
Transferor that, after giving effect to the Transfer proposed in such notice,
the Transferred Lease Receivables hereunder arise under Leases of Equipment
which constitute a representative sample of the types of Equipment subject to
Leases entered into by the Originator. The Agent shall promptly thereafter
notify the Transferor whether the Transferee has determined to make such
Transfer and, if such Transfer is a Capital Transfer, the Agent shall also
notify the Transferor whether the duration of the initial Fixed Period
described in such notice is acceptable. On the date of each Capital Transfer,
-23-
<PAGE> 28
the Transferee shall, upon satisfaction of the applicable conditions set forth
in Article III, make available to the Agent at its address referred to in
SECTION 2.09 the immediately payable portion of the transfer price referred to
above in same day funds, and after receipt by the Agent of such funds, the
Agent will make such funds immediately available to the Transferor at
Citibank's address at 399 Park Avenue, New York, New York.
(b) TRANSFER PRICE; DEFERRED TRANSFER PRICE. The transfer price for the
Transferred Assets subject to any Transfer hereunder shall be composed of an
immediate payment to Transferor (such immediate payment is reflected in the
definition of Capital) PLUS the Deferred Transfer Price (or an increase thereto
for any Transfers following the initial Transfer). The portion of the transfer
price immediately payable with respect to any Transfer shall be an amount
selected by the Transferor so that immediately following such Transfer, the
Transferred Lease Receivables Balance shall equal the Aggregate Transfer Price.
The Deferred Transfer Price as determined on the Settlement Date immediately
preceding the Termination Date shall be payable to the Transferor only out of
the remaining Collections, if any, of Transferred Assets after the Transferee
has recovered all Capital, Yield, Interest Rate Hedging Obligations and other
amounts owing under this Agreement and the other agreements executed pursuant
hereto. After the Collection Date has occurred, the Transferee shall, in full
satisfaction of the Deferred Transfer Price, at its option either pay to the
Transferor the Deferred Transfer Price owing to the Transferor or assign and
transfer to the Transferor, its remaining interest in the Transferred Assets
and any remaining Collections pursuant to SECTION 2.07 without any
representation or warranty, express or implied.
SECTION 2.03. TRANSFERS OF INTERESTS IN LEASES. Notwithstanding anything
to the contrary contained in this Agreement, neither the Agent nor the
Transferee shall have any obligation or liability with respect to any
Transferred Lease Receivables or related Leases or any other Transferred Assets
(including without limitation, any Interest Rate Hedges assigned to the
Transferee pursuant to and Interest Rate Hedge Assignment), nor shall any of
them be obligated to perform any of the obligations of the Transferor or the
Originator thereunder.
SECTION 2.04. TERMINATION OR REDUCTION OF THE TRANSFER LIMIT. The
Transferor may, upon at least five Business Days' notice to the Agent,
terminate in whole or reduce in part the unused portion of the Transfer Limit;
PROVIDED, HOWEVER, that each partial reduction shall be in an amount equal to
$1,000,000 or an integral multiple thereof.
SECTION 2.05. SELECTION OF FIXED PERIODS. At all times hereafter, but
prior to the Termination Date, the Transferor shall, subject to the limitations
described below, propose the duration of Fixed Periods and the portion of the
-24-
<PAGE> 29
outstanding Capital to be allocated to each Fixed Period, so that all
outstanding Capital is allocated to one or more Fixed Periods, and the Agent
shall select such Fixed Periods following its review of the Transferor's
proposal (it being understood that if the Transferor does not make the
foregoing proposal for any Fixed Period, the Agent shall select such Fixed
Period in its discretion). The proposal of the Fixed Period(s) to be
applicable to the Capital arising as a result of any Capital Transfer shall be
specified in the notice relating to such Transfer described in SECTION 2.02(A).
Each other Fixed Period shall commence on the last day of a then existing Fixed
Period and shall end such number of days (not to exceed 180 days) thereafter as
the Transferor shall propose and the Agent shall select on notice by the
Transferor received by the Agent (including notice by telephone, confirmed in
writing) not later than 11:00 A.M. (New York City time) on such last day. Any
Fixed Period which would otherwise end on a day which is not a Business Day
shall be extended to the next succeeding Business Day. Any Fixed Period which
commences before the Termination Date and would otherwise end on a date
occurring after such Termination Date shall end on such Termination Date and
the duration of any Fixed Period which commences on or after the Termination
Date shall be of such duration as shall be selected by the Agent. On and after
the Termination Date, the Agent shall have the right to allocate outstanding
Capital to Fixed Periods to ensure that all Capital is allocated to a Fixed
Period. The Transferee shall, on the first day of each Fixed Period, notify
the Agent of the Transferee Rate for the Capital allocated to such Fixed
Period. Notwithstanding the foregoing, for any Fixed Period with respect to
which Yield is to be calculated by reference to the LIBO Rate (i) any notice
from the Transferor to the Agent shall be given at least three Business Days
prior to the last day of the immediately preceding Fixed Period, (ii) such
Fixed Period shall have a duration of one month and (iii) if an extension of
such Fixed Period (because the scheduled last day of such Fixed Period is not a
Business Day) would cause the last day of such Fixed Period to occur in the
next following month, the last day of such Fixed Period shall be deemed to
occur on the Business Day immediately preceding the originally scheduled last
day.
SECTION 2.06. PRE-TERMINATION DATE SETTLEMENT PROCEDURES. On each day
prior to the Termination Date, the Collection Agent shall set aside and hold in
trust for the Transferee, the Collections of Transferred Lease Receivables
received on such day (the aggregate Collections so set aside since the
immediately preceding Settlement Date being referred to as the "Received
Collections"). On the first Settlement Date to occur during each month prior
to the Termination Date, the Transferor shall calculate the Transferred Lease
Receivables Balance and the Interest Rate Hedge Reserve as of the last day of
the immediately preceding month and, if the Transferred Lease Receivables
Balance as of such day is less than the Aggregate Transfer Price as of such
day, the Transferor shall, at its option, either:
-25-
<PAGE> 30
(i) make a Transfer of sufficient additional Eligible Lease Receivables to
the Transferee in accordance with the procedures and subject to the
conditions set forth in SECTION 2.02 such that, immediately following such
Transfer, the Transferred Lease Receivables Balance equals the Aggregate
Transfer Price; or
(ii) out of the Received Collections, direct the Collection Agent to
deposit to the Agent's account on the Business Day immediately succeeding
such Settlement Date, as described in SECTION 2.09, an amount of such
Collections such that, following the application of such Collections to
outstanding Capital, the Transferred Lease Receivables Balance equals the
Aggregate Transfer Price.
If the Transferor selects the option described in clause (i) above, the
immediately payable portion of the transfer price for the Transferred Assets
subject to such Transfer shall be paid to the Transferor by the Collection
Agent out of the Received Collections. Following the payment to the Transferor
of the amount described in clause (i) above or the payment to the Agent of the
amount described in clause (ii) above, as the case may be, any remaining
Received Collections shall be remitted by the Collection Agent to the
Transferor.
SECTION 2.07. LIQUIDATION SETTLEMENT PROCEDURES.
(a) To the extent the Agent has not exercised its right under SECTION
6.03(A) to require the Lock-Box Banks to remit all Collections of Transferred
Lease Receivables deposited in the applicable Lock-Box Accounts directly to the
Agent, on the Termination Date and on each day thereafter, the Collection Agent
shall set aside and hold in trust for the Transferee, the Collections of
Transferred Lease Receivables received on such day. Any Collections of
Transferred Lease Receivables received (or deemed to have been received) by the
Transferor shall be remitted directly to the Agent within one Business Day of
Transferor's receipt. On each Settlement Date, the Collection Agent shall
deposit to the Agent's account, as described in SECTION 2.09, the amount of
such Collections so set aside since the immediately preceding Settlement Date.
(b) On the last day of each Fixed Period to occur on or after the
Termination Date, the Agent shall distribute to the Transferee the Collections
of Transferred Lease Receivables received by the Agent pursuant to SECTION
2.07(A) ("Received Amount") but not to exceed the sum of (i) the amount of
Capital allocated to such Fixed Period and (ii) the aggregate amount of all
other amounts owed hereunder by Transferor to the Transferee (collectively,
such Capital and other amounts are referred to as the "Outstanding Amount").
If the Outstanding Amount exceeds the Received Amount, the Agent shall
distribute funds, FIRST, in reduction of Capital, SECOND, in payment of any
accrued but unpaid Yield, THIRD, in payment of any unpaid Interest Rate
-26-
<PAGE> 31
Hedging Obligations and FOURTH, in payment of other amounts payable to the
Transferee and the remaining Capital shall be allocated to a new Fixed Period
selected by the Agent. If the Received Amount exceeds the Outstanding Amount,
then such excess shall be held by the Agent until the last day of the next
Fixed Period to end, at which time the procedure described above shall be
repeated with respect to the then maturing Fixed Period. Following the
Collection Date, the Agent shall pay to the Transferor any remaining
Collections received by the Agent pursuant to SECTION 2.07(A).
SECTION 2.08. OTHER SETTLEMENT PROCEDURES.
(a) If on any day the Outstanding Balance of any Transferred Lease
Receivable is either (i) reduced or adjusted as a result of any defective,
rejected, returned, repossessed or foreclosed merchandise, any defective or
rejected services, any cash discount or any other adjustment made or performed
by the Transferor, the Originator or any other Person (including, without
limitation, those described in the definition of "DILUTION FACTORS"), or (ii)
reduced or cancelled as a result of a setoff in respect of any claim by the
Obligor thereof against the Transferor, the Originator or any other Person
(whether such claim arises out of the same or a related transaction or an
unrelated transaction), the Transferor shall be deemed to have received on such
day a Collection of such Transferred Lease Receivable in the amount of such
reduction, cancellation or adjustment. If on any day any of the
representations or warranties in the first sentence of SECTION 4.01(H) is no
longer true with respect to a Transferred Lease Receivable, the Transferor
shall be deemed to have received on such day a Collection of such Transferred
Lease Receivable in full. Prior to the 15th day of each month (or if such day
is not a Business Day, the immediately succeeding Business Day), the Collection
Agent shall prepare and forward to the Agent for the Transferee, a Settlement
Report, as of the close of business of the Collection Agent on the last day of
the immediately preceding month.
(b) If the Transferor (or its successor in interest, including a trustee
appointed under the Bankruptcy Code) terminates, rejects or does not assume a
Lease which has a Transferred Lease Receivable arising thereunder, in whole or
in part, prior to the expiration of the original term of such Lease, whether
such rejection, termination or non-assumption is made pursuant to an equitable
cause, statute, regulation, judicial proceeding or other applicable law
(including, without limitation, Section 365 of the Bankruptcy Code), then the
Transferor shall be deemed to have received Collections with respect to such
Transferred Lease Receivable in an amount equal to the amount of the
Outstanding Balance thereof that has not been, or may not be paid as a result
of such rejection, termination or non-assumption. If, prior to the Termination
Date, any Obligor under a Lease which has a Transferred Lease
-27-
<PAGE> 32
Receivable arising thereunder exercises any purchase option provided
thereunder, then the Transferor shall be deemed to have received Collections
equal to the Outstanding Balance that would be payable under such Transferred
Lease Receivable had such option not been exercised. If any Obligor under a
Lease which has a Transferred Lease Receivable arising thereunder shall default
in the payment of monies due thereunder, or commits any other default, the
Transferor will not terminate or reject such Lease without the Agent's prior
written consent thereto, and, if the Agent does so consent, the Transferee and
the Agent shall be entitled to receive all amounts received from the Obligor in
any enforcement proceeding and all amounts realized from the subsequent
disposition of the related Equipment or other Related Security; PROVIDED,
HOWEVER, that, prior to the Termination Date, the Transferor may terminate or
reject any such Lease if the Transferor substitutes a new Lease Receivable for
the Lease Receivable which arose under such Lease or accepts a retransfer of
such Lease Receivable, in either case, in accordance with the provisions of
SECTION 9.02.
SECTION 2.09. PAYMENTS AND COMPUTATIONS, ETC. All amounts to be paid or
deposited by the Transferor or the Collection Agent hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 A.M. (New
York City time) on the day when due in lawful money of the United States of
America in immediately available funds to a special account (account number
4051-1411) in the name of Agent and maintained at Citibank's office at 399 Park
Avenue in New York City. The Transferor shall, to the extent permitted by law,
pay to the Agent interest on all amounts not paid or deposited when due
hereunder (whether owing by the Transferor individually or as Collection Agent)
at 2% per annum above the Alternate Base Rate, payable on demand; PROVIDED,
HOWEVER, that such interest rate shall not at any time exceed the maximum rate
permitted by applicable law. Such interest shall be retained by the Agent
except to the extent that such failure to make a timely payment or deposit has
continued beyond the date for distribution by the Agent of such overdue amount
to the Transferee, in which case such interest accruing after such date shall
be for the account of, and distributed by the Agent to the Transferee. All
computations of interest and all computations of Yield, Liquidation Fee and
other fees hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding the last day) elapsed.
SECTION 2.10. YIELD AND FEES. (a) From and after the Initial Transfer
Date until the later of the Termination Date or the Collection Date, the
Transferor shall on the last day of each Fixed Period, pay to the Agent for the
account of the Transferee: (i) an amount equal to the accrued Yield for the
Capital allocated to such Fixed Period and (ii) an amount equal to the
Liquidation Fee (if any) for the Capital allocated to such Fixed Period. The
Transferee agrees to apply amounts received by the
-28-
<PAGE> 33
Transferee pursuant to Interest Rate Hedges which it has entered into with
Citibank toward the payment of accrued Yield hereunder.
(b) From and after the Initial Transfer Date until the later of the
Termination Date or the Collection Date, the Transferor shall pay to the Agent
the fees described in the letter agreement dated as of the Initial Transfer
Date among the Transferor, the Agent and CapMAC.
(c) From and after the Initial Transfer Date until the later of the
Termination Date or the Collection Date, the Transferor shall pay to the Agent
any amounts owed by the Transferee pursuant to any Interest Rate Hedge
("Interest Rate Hedging Obligations") when due under such Interest Rate Hedge.
(d) As part of the consideration for the Transfers hereunder, the
Transferor agrees to perform the duties of the Collection Agent hereunder until
the Agent designates a new Collection Agent as described in SECTION 6.01. If
at any time the Transferor is not the Collection Agent, the Transferor shall
pay for the account of the Collection Agent, upon the Agent's demand, a fee
(the "Collection Agent Fee") equal to 110% of the reasonable costs and expenses
of the Collection Agent of servicing, collecting and administering the Lease
Receivables, which costs and expenses shall be invoiced to the Transferor in
reasonable detail.
(e) The Transferor shall also pay to the Agent a fee (the "Liquidity Fee")
equal to the product of (i) the average daily amount of the Transfer Limit and
(ii) the per annum rate of .25%. The Liquidity Fee is payable in arrears
monthly on the last day of each month during the term of this Agreement and on
the later of the Termination Date or the Collection Date.
(f) With respect to any outstanding Capital allocated to a Fixed Period
during which Yield is calculated by reference to the LIBO Rate, the Transferor
shall pay to the Agent for the account of the Transferee, so long as Citibank
shall be required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional Yield on such
outstanding Capital for each day during such Fixed Period, at a rate per annum
equal at all times to the remainder obtained by subtracting (i) the LIBO Rate
for such Fixed Period from (ii) the rate obtained by dividing such LIBO Rate by
the percentage equal to 100% minus the Eurodollar Reserve Percentage for such
Fixed Period. If as a result of any event or circumstances similar to those
described in this subsection (f), any Affected Party is required to compensate
a Liquidity Provider in connection with this Agreement or the funding or
maintenance of the transfer of Transferred Assets hereunder, then within ten
days after demand by such Affected Party, the Transferor shall pay to such
Affected Party such additional amount or amounts as may be necessary to pay
such Liquidity Provider the amounts due
-29-
<PAGE> 34
or to otherwise reimburse such Affected Party for any amounts paid by it.
SECTION 2.11. YIELD PROTECTION. (a) If due to either: (a) the
introduction of or any change (including, without limitation, any change by way
of imposition or increase of reserve requirements) in or in the interpretation
of any law or regulation (other than laws or regulations relating to income
taxes) or (b) the compliance by the Transferee or CNA with any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law), (i) there shall be an increase in the cost to the
Transferee of accepting, funding or maintaining any Transfer hereunder, (ii)
there shall be a reduction in the amount receivable with regard to any
Transferred Lease Receivable or (iii) the Transferee shall be required to make
a payment calculated by reference to the Transferred Lease Receivables
transferred to it or Yield received by it, then the Transferor shall, from time
to time, upon demand by the Agent, pay the Agent for the account of the
Transferee, that portion of such increased costs incurred, amounts not received
or required payment made or to be made, which the Agent determines is
attributable to accepting, funding and maintaining any Transfer hereunder. In
determining such amount, the Agent may use any reasonable averaging and
attribution methods. The Transferee shall submit to Transferor a certificate
as to such increased costs incurred, amounts not received or receivable or
required payment made or to be made, which certificate shall, in the absence of
manifest error, be conclusive and binding for all purposes.
(b) If as a result of any event or circumstances similar to those described
in subsection (a) above, any Affected Party is required to compensate a
Liquidity Provider in connection with this Agreement or the funding or
maintenance of the transfer of Transferred Assets hereunder, then within ten
days after demand by such Affected Party, the Transferor shall pay to such
Affected Party such additional amount or amounts as may be necessary to pay
such Liquidity Provider the amounts due or to otherwise reimburse such Affected
Party for any amounts paid by it.
SECTION 2.12. INCREASED CAPITAL. (a) If either (i) the introduction of or
any change in or in the interpretation of any law or regulation or (ii)
compliance by the Transferee, CNA or Citibank with any guideline or request
from any central bank or other governmental authority (whether or not having
the force of law) affects or would affect the amount of capital required or
expected to be maintained by Citibank, CNA or any corporation controlling
Citibank or CNA and Citibank, CNA or the Agent on behalf of Citibank or CNA
determines that the amount of such capital is increased by or based upon the
existence of the Transferee's agreement, in its discretion, to accept or
maintain Transfers hereunder and other similar agreements or facilities, then,
upon demand by Citibank, CNA or the Agent, the Transferor
-30-
<PAGE> 35
shall immediately pay to Citibank, CNA or the Agent for the account of Citibank
or CNA from time to time, as specified by Citibank, CNA or the Agent,
additional amounts sufficient to compensate Citibank or CNA in light of such
circumstances, to the extent that Citibank, CNA or the Agent on behalf of
Citibank or CNA reasonably determines such increase in capital to be allocable
to the existence of the Transferee's agreements hereunder. A certificate as to
such amounts submitted to the Transferor by Citibank, CNA or the Agent, shall,
in the absence of manifest error, be conclusive and binding for all purposes.
(b) If as a result of any event or circumstances similar to those described
in subsection (a) above, any Affected Party is required to compensate a
Liquidity Provider in connection with this Agreement or the funding or
maintenance of the transfer of Transferred Assets hereunder, then within ten
days after demand by such Affected Party, the Transferor shall pay to such
Affected Party such additional amount or amounts as may be necessary to pay
such Liquidity Provider the amounts due or to otherwise reimburse such Affected
Party for any amounts paid by it.
(c) If either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) compliance by CapMAC with any
guideline or request from any insurance regulatory authority or other
governmental authority or rating agency (whether or not having the force of
law) affects the amount of capital required to be maintained by CapMAC based
upon CapMAC's issuance of a surety bond to the Transferee for the purposes of
guarantying the collection of the Transferred Lease Receivables acquired by the
Transferee under this Agreement, then, upon written demand by CapMAC (with a
copy to the Agent), the Transferor shall pay to CapMAC from time to time, as
specified by CapMAC, additional amounts sufficient to compensate CapMAC for
such increased capital costs. A certificate as to such amounts submitted to
the Transferor by CapMAC shall, in the absence of manifest error, be conclusive
and binding for all purposes. Notwithstanding the foregoing, prior to the
presentation of a certificate described above, CapMAC will inform the
Transferor of the amendments to this Agreement which CapMAC reasonably
believes, if accepted by the parties hereto, would enable CapMAC to avoid or
reduce the capital charges which would otherwise be covered by such
certificate. If such amendments are executed within a reasonable time after
CapMAC's proposal, CapMAC will not submit the contemplated certificate. If
such amendments are unacceptable to the parties hereto, CapMAC will also
propose an on-going fee to be paid by the Transferor to CapMAC in lieu of the
compensation for capital charges to be set forth in the certificate described
above.
SECTION 2.13. GRANT OF SECURITY INTEREST IN EQUIPMENT
-31-
<PAGE> 36
AND RELATED ASSETS. As security for the payment and performance of all of the
obligations of the Transferor hereunder, the Transferor hereby grants to the
Agent for the benefit of the Transferee, a security interest in all of the
Transferor's right, title and interest in and to the following, whether now
owned or hereafter acquired and whether now existing or hereafter arising (the
"Transferor Collateral"):
(a) All Equipment which is the subject of any Transferred Lease Receivable
and products and proceeds thereof, including, without limitation, all payments
under insurance or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to such Equipment;
(b) All documents, books, records and other information (including, without
limitation, computer programs, tapes, discs, punch cards, data processing
software and related property and rights) maintained with respect to such
Equipment;
(c) all right, title and interest of the Transferor in, to and under the
Originator Agreement, including, without limitation, all monies due and to
become due to the Transferor from the Originator under or in connection
therewith, whether as Lease Receivables or fees, expenses, costs, indemnities,
insurance recoveries, damages for breach or otherwise, and all rights,
remedies, powers, privileges and claims of the Transferor against the
Originator under or with respect to the Originator Agreement (whether arising
pursuant to the terms of the Originator Agreement or otherwise available at law
or in equity), including, without limitation, (i) the right at any time to
appoint a successor to the Originator as Sub-Servicer as set forth therein to
the extent that the Agent would have the right to appoint such successor to the
Originator as the successor to the Transferor as Collection Agent hereunder,
and (ii) all licenses granted to the Transferor by the Originator in connection
with the administration and collection of the Purchased/Contributed Assets;
(d) all right, title and interest of the Transferor in, to and under each of
the other Facility Documents (excluding this Agreement) (whether as an original
party thereto, as assignee or otherwise), including, without limitation, all
monies due and to become due to the Transferor under or in connection with such
other Facility Documents, and all rights, remedies, powers, privileges,
benefits and claims of the Transferor under or with respect to such other
Facility Documents (whether arising pursuant to the terms of such Facility
Documents or otherwise available at law or in equity); and
(e) all substitutions for and proceeds of any of the foregoing and, to the
extent not otherwise included, all payments under insurance (whether or not the
Agent is the loss payee thereof) or any indemnity, warranty or guaranty,
payable by
-32-
<PAGE> 37
reason of loss or damage to or otherwise with respect to any of the foregoing;
PROVIDED, HOWEVER, that, following the payment in full of a Transferred Lease
Receivable, the security interest granted to the Agent for the benefit of the
Transferee in the Transferor Collateral related to such Transferred Lease
Receivable shall automatically be released without the necessity of any further
action on the part of the Transferee or the Agent.
SECTION 2.14. PERFECTION OF LIENS; FURTHER ASSURANCES. Following the
occurrence of an Event of Termination, upon the request of the Agent, the
Transferor shall, at its expense, promptly execute and deliver all further
instruments and documents, and take all further action (including, without
limitation, the execution and filing of such financing or continuation
statements, or amendments thereto or assignments thereof), that may be
necessary or desirable, or that the Agent may request, in order to (i) assure
compliance with the Obligor UCC Filing Requirement (without giving effect to
the PROVISO clauses of the definition of "OBLIGOR UCC FILING REQUIREMENT") and
(ii) perfect and protect any security interest granted or purported to be
granted to the Agent hereunder or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Transferor Collateral;
PROVIDED, HOWEVER, that the Transferor shall not be required to take the
actions described in clauses (i) and (ii) above with respect to any Lease which
is scheduled to expire by its terms within six months from the date of the
Agent's request or with respect to which the Lease Receivable arising
thereunder has an Outstanding Balance of less than $10,000. The Transferor
hereby authorizes the Agent to file one or more financing or continuation
statements, and amendments thereto and assignments thereof, relative to all or
any part of the Transferor Collateral now existing or hereafter arising without
the signature of the Transferor where permitted by law. A carbon, photographic
or other reproduction of this Agreement or any financing statement covering the
Transferor Collateral or any part thereof shall be sufficient as a financing
statement. The Transferor will furnish to the Agent from time to time
statements and schedules further identifying and describing the Transferor
Collateral and such other reports in connection with the Transferor Collateral
as the Agent may reasonably request, all in reasonable detail.
SECTION 2.15. TAXES. (a) Any and all payments to an Affected Party
hereunder shall be made, in accordance with SECTION 2.09, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
EXCLUDING, in the case of an Affected Party, net income taxes that are imposed
by the United States and franchise taxes and net income taxes that are imposed
on such Affected Party by the state or foreign jurisdiction under the laws of
which such Affected Party is organized or in which it is otherwise doing
business or
-33-
<PAGE> 38
any political subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Transferor or the Collection Agent shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Affected Party, (i) the Transferor shall make an additional
payment to such Affected Party, in an amount sufficient so that, after making
all required deductions (including deductions applicable to additional sums
payable under this SECTION 2.15), such Affected Party receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Transferor or the Collection Agent, as the case may be, shall make such
deductions and (iii) the Transferor or the Collection Agent, as the case may
be, shall pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law.
(b) The Transferor will indemnify each Affected Party for the full amount of
Taxes (including, without limitation, any Taxes imposed by any jurisdiction on
amounts payable under this SECTION 2.15) paid by such Affected Party and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto to the extent caused by the Transferor's actions or
failure to act; PROVIDED that an Affected Party, making a demand for indemnity
payment shall provide the Transferor, at its address referred to in SECTION
10.02, with a certificate from the relevant taxing authority or from a
responsible officer of such Affected Party stating or otherwise evidencing that
such Affected Party has made payment of such Taxes and, within 30 days
thereafter, will provide a copy of or extract from documentation, if available,
furnished by such taxing authority evidencing assertion or payment of such
Taxes. This indemnification shall be made within ten days from the date such
Affected Party makes written demand therefor.
(c) Within 30 days after the date of any payment of Taxes, the Transferor
will furnish to the Agent, at its address referred to in SECTION 10.02,
appropriate evidence of payment thereof.
(d) Within 30 days of the written request of the Transferor therefor, each
Affected Party shall execute and deliver to the Transferor such certificates,
forms or other documents which can be furnished consistent with the facts and
which are reasonably necessary to assist the Transferor in applying for refunds
of taxes remitted hereunder.
(e) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to the
Transferee in connection with this Agreement or the funding or maintenance of
purchases of Transferred Lease Receivables hereunder, any Affected Party is
required to compensate a Liquidity Provider in respect of taxes under
circumstances similar to those described in this SECTION 2.15 then within ten
days after demand by such Affected Party, the
-34-
<PAGE> 39
Transferor shall pay to such Affected Party such additional amount or amounts
as may be necessary to pay such Liquidity Provider the amounts due or to
otherwise reimburse such Transferee for any amounts paid by it. The Transferee
shall promptly provide copies of certificates furnished to it pursuant to
SECTION 2.13 of the Liquidity Agreement to the Transferor.
(f) Without prejudice to the survival of any other agreement of the
Transferor hereunder, the agreements and obligations of the Transferor
contained in this SECTION 2.15 shall survive the termination of this Agreement.
ARTICLE III
CONDITIONS OF TRANSFERS
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL TRANSFER. The initial
Transfer shall be subject to the condition precedent that the Agent shall have
received the following, each in form and substance satisfactory to the Agent:
(a) The Certificate for the Transferee;
(b) The Company Document executed by the Transferor and the Originator;
(c) A copy of the resolutions of the Board of Directors of the Transferor
approving this Agreement, the Certificate, the Originator Agreement and the
other Facility Documents to be delivered by it hereunder and the transactions
contemplated hereby, certified by its Secretary or Assistant Secretary;
(d) The Certificate of Incorporation of the Transferor certified by the
Secretary of State of Delaware;
(e) Good Standing Certificates for the Transferor issued by the Secretaries
of State of Delaware and Ohio;
(f) A certificate of the Secretary or Assistant Secretary of the Transferor
certifying (i) the names and true signatures of the officers authorized on its
behalf to sign this Agreement, the Certificate, the Originator Agreement and
the other Facility Documents to be delivered by it hereunder (on which
certificate the Agent and the Transferee may conclusively rely until such time
as the Agent shall receive from the Transferor a revised certificate meeting
the requirements of this subsection (f)) and (ii) a copy of the Transferor's
by-laws;
(g) Acknowledgment copies of proper UCC-1 Financing Statements (executed by
the Originator and/or Transferor, as applicable), as may be necessary or, in
the opinion of the Agent, desirable under the UCC of all appropriate
jurisdictions or any comparable law to perfect the Transferee's interests in
all Lease
-35-
<PAGE> 40
Receivables and Related Security in which an interest may be assigned to it
hereunder;
(h) Certified copies of Requests for Information or Copies (Form UCC-11)
(or a similar search report certified by a party acceptable to the Agent),
dated a date reasonably near to the date of the initial Transfer, listing all
effective financing statements which name the Transferor or the Originator
(under their respective present names and any previous names) as debtor and
which are filed in the jurisdictions in which filings were made pursuant to
subsection (f) of this SECTION 3.01, together with copies of such financing
statements;
(i) The Lock-Box Agreements with the Lock-Box Banks in each case, executed
by the Transferor and the Originator and acknowledged and agreed to by the
applicable Lock-Box Bank together with an acknowledgment and authorization
executed by CNA, as the Agent, and acknowledged and agreed to by the applicable
Lock-Box Bank;
(j) Copies of all written agreements, if any, between each Lock-Box Bank
and Transferor with respect to the opening or operation of the Lock-Box
Accounts;
(k) The Originator Agreement, executed by the Transferor and the Originator;
(l) The Termination and Reassignment Agreement dated as of the Initial
Transfer Date, executed by each of the Originator, the Agent and the
Transferree;
(m) A copy of the resolutions of the Board of Directors of the Originator
approving the Originator Agreement, the Company Document, the Termination and
Reassignment Agreement and the other Facility Documents to be delivered by it
hereunder and the transactions contemplated hereby, certified by its Secretary
or Assistant Secretary;
(n) The Certificate of Incorporation of the Originator certified by the
Secretary of State of Delaware;
(o) Good Standing Certificates for the Originator issued by the Secretaries
of State of Delaware and Ohio;
(p) A certificate of the Secretary or Assistant Secretary of the Originator
certifying (i) the names and true signatures of the officers authorized on its
behalf to sign the Originator Agreement, the Company Document, the Termination
and Reassignment Agreement and the other Facility Documents to be delivered by
it hereunder (on which certificate the Agent and the Transferee may
conclusively rely until such time as the Agent shall receive from the
Originator a revised certificate meeting the requirements of this subsection
(p)) and (ii) a copy of the Originator's by-laws;
-36-
<PAGE> 41
(q) An opinion of Benjamin W. Cannon, General Counsel of the Transferor, in
substantially the form of EXHIBIT G and as to such other matters as the Agent
may reasonably request; and
(r) An opinion of Baker & Hostetler, special counsel for the Transferor, in
substantially the form of EXHIBIT G and as to such other matters as the Agent
may reasonably request.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL TRANSFERS. Each Transfer
(including the initial Transfer) from the Transferor to the Transferee shall be
subject to the further conditions precedent that (a) with respect to any such
Transfer, on or prior to the date of such Transfer, the Collection Agent shall
have delivered to the Agent, in form and substance satisfactory to the Agent, a
completed Settlement Report dated within twenty days prior to the date of such
Transfer and containing such additional information as may be reasonably
requested by the Agent and an executed release executed by the agent for the
banks party to the Originator's revolving credit facility releasing all
security interests and other rights of such Persons in the Lease Receivables to
be included in such Transfer, together with the Related Security and (ii) to
the Collateral Custodian the original copy of each Lease under which the Lease
Receivables to be included in such Transfer arose and; (b) on the date of such
Transfer the following statements shall be true and the Transferor by accepting
the immediately payable portion of the transfer price for a Capital Transfer or
by receiving the proceeds of Collections in consideration for a Transfer
pursuant to SECTION 2.06 shall be deemed to have certified that:
(i) The representations and warranties contained in SECTION 4.01 are
correct on and as of such day as though made on and as of such date,
(ii) No event has occurred and is continuing, or would result from such
Transfer which constitutes an Event of Termination or would constitute an
Event of Termination but for the requirement that notice be given or time
elapse or both, and
(iii) The Agent shall not have delivered to the Transferor a notice stating
that the Transferee shall not make any further Transfers hereunder (including
any Transfers the consideration for which is the proceeds of Collections
pursuant to SECTION 2.06);
and (c) the Agent shall have received such other approvals or documents as the
Agent may reasonably request.
-37-
<PAGE> 42
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The
Transferor represents and warrants as follows:
(a) DUE INCORPORATION AND GOOD STANDING. The Transferor is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction named at the beginning hereof and is duly qualified to do
business, and is in good standing, in every jurisdiction in which the nature of
its business requires it to be so qualified, except where the failure to be so
qualified would materially adversely affect (i) the interests hereunder of the
Agent or of the Transferee, (ii) the collectibility of any Transferred Lease
Receivable or (iii) the ability of the Transferor or the Collection Agent to
perform their respective obligations hereunder.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery and
performance by the Transferor of this Agreement, the Certificate, the
Originator Agreement and all other agreements, instruments and documents to be
delivered hereunder, and the transactions contemplated hereby and thereby, are
within the Transferor's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (i) the Transferor's charter or
by-laws, (ii) any law, rule or regulation applicable to the Transferor, (iii)
any contractual restriction contained in any material indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note, or other agreement
or instrument binding on or affecting the Transferor or its property or (iv)
any order, writ, judgment, award, injunction or decree binding on or affecting
the Transferor or its property, and do not result in or require the creation of
any Adverse Claim upon or with respect to any of its properties (other than in
favor of the Agent on behalf of the Transferee as contemplated hereunder); and
no transaction contemplated hereby requires compliance with any bulk sales act
or similar law. This Agreement and the Certificate have been duly executed and
delivered on behalf of the Transferor.
(c) GOVERNMENTAL CONSENT. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Transferor
of this Agreement, the Certificate, the Originator Agreement or any other
agreement, document or instrument to be delivered hereunder.
(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement, the Certificate
and each other Facility Document to be delivered by the Transferor in
connection herewith constitute the legal, valid and binding obligation of the
Transferor enforceable
-38-
<PAGE> 43
against the Transferor in accordance with their respective terms.
(e) FINANCIAL STATEMENTS. The consolidated balance sheets of the
Originator and its consolidated Subsidiaries as at January 31, 1994, and the
related statements of income, retained earnings and cash flows of the
Originator and its consolidated Subsidiaries for the fiscal year then ended,
certified by Deloitte & Touche, independent public accountants, copies of which
have been furnished to the Agent, fairly present in all material respects the
consolidated financial condition of the Originator and its consolidated
Subsidiaries as at such date and the consolidated results of the operations of
the Originator and its consolidated Subsidiaries for the period ended on such
date, all in accordance with generally accepted accounting principles
consistently applied, and since January 31, 1994 there has been no material
adverse change in any such condition or operations other than as disclosed to
the Agent in writing in the consolidated balance sheets of the Originator and
its consolidated Subsidiaries as at April 30, 1994 and July 31, 1994, and the
related statements of income, retained earnings and cash flows of the
Originator and its consolidated Subsidiaries for the fiscal quarter then ended,
in each case including the notes thereto.
(f) NO LITIGATION. There are no actions, suits or proceedings pending, or
to the knowledge of the Transferor threatened, against or affecting the
Transferor, or the property of the Transferor, in any court, or before any
arbitrator of any kind, or before or by any governmental body, which may
materially adversely affect (i) the financial condition of the Transferor or
(ii) the ability of the Transferor to perform its obligations under this
Agreement or the Certificate or (iii) the collectibility of the Transferred
Lease Receivables. The Transferor is not in default with respect to any order
of any court, arbitrator or governmental body except for defaults with respect
to orders of governmental agencies which defaults are not material to the
business or operations of the Transferor.
(g) USE OF PROCEEDS. No proceeds of any Transfer will be used by the
Transferor to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(h) PERFECTION OF INTEREST IN TRANSFERRED LEASE RECEIVABLES. Each
Transferred Lease Receivable shall, together with the Lease related thereto, at
all times, be owned by the Transferor free and clear of any Adverse Claim
except as provided herein and the Transferee shall have a valid first priority
security interest in the Transferor Collateral which security interest shall be
perfected in the Intangible Transferor Collateral and upon each Transfer, the
Transferee shall acquire a valid and perfected first priority interest in each
Transferred Lease Receivable then existing or thereafter arising and in the
-39-
<PAGE> 44
Related Security and Collections with respect thereto, in each case free and
clear of any Adverse Claim except as provided herein; and no effective
financing statement or other instrument similar in effect covering any
Transferred Lease Receivable, the Related Security, Collections or the
Transferor Collateral with respect thereto shall at any time be on file in any
recording office except such as may be filed in favor of the Agent in
accordance with this Agreement.
(i) ACCURACY OF INFORMATION. No Settlement Report (if prepared by the
Transferor or the Sub-Servicer, or to the extent that information contained
therein is supplied by the Transferor), information, exhibit, financial
statement, document, book, record or report (other than forecasts required to
be delivered by the Transferor hereunder) furnished or to be furnished by the
Transferor to the Agent or the Transferee in connection with this Agreement is
or shall be inaccurate in any material respect as of the date it is or shall be
dated or (except as otherwise disclosed to the Agent or the Transferee, as the
case may be, at such time) as of the date so furnished, or contains or shall
contain any material misstatement of fact or omits or shall omit to state a
material fact or any fact necessary to make the statements contained therein
not materially misleading.
(j) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The chief place of
business and chief executive office of the Transferor are located at the
address of the Transferor referred to in SECTION 10.02 hereof and the locations
of the offices where the Transferor keeps all the Records are listed on EXHIBIT
H (or at such other locations, notified to the Agent in accordance with SECTION
5.01(F), in jurisdictions where all action required by SECTION 6.05 has been
taken and completed).
(k) LOCK-BOX BANK INFORMATION. The names and addresses of all the Lock-Box
Banks, together with the account numbers of the Lock-Box Accounts of the
Transferor at such Lock-Box Banks, are specified in EXHIBIT I (or at such other
Lock-Box Banks and/or with such other Lock-Box Accounts as have been notified
to the Agent in accordance with SECTION 5.03(D) and with respect to which all
action required by SECTION 5.03(D) has been taken and completed).
(l) "CURRENT TRANSACTION". Each Transfer of Transferred Lease Receivables
hereunder (including a Transfer the consideration for which is the proceeds of
Collections paid pursuant to SECTION 2.06) will constitute a "current
transaction" within the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended.
(m) NO TRADE NAMES. The Transferor has no trade names, fictitious names,
assumed names or "doing business as" names.
-40-
<PAGE> 45
(n) SEPARATE CORPORATE EXISTENCE. The Transferor is operated as an entity
with assets and liabilities distinct from those of the Originator and any other
Affiliates of the Transferor, and the Transferor hereby acknowledges that the
Agent and the Transferee are entering into the transactions contemplated by
this Agreement in reliance upon the Transferor's identity as a separate legal
entity from the Originator and each such Affiliate. Since its incorporation,
the Transferor has been (and will be) operated in such a manner as to comply
with the covenants set forth in SECTION 5.01(N).
(o) INVESTMENTS. The Transferor does not own or hold, directly or
indirectly, any capital stock or equity security of, or any equity interest in,
any Person.
(p) FACILITY DOCUMENTS. The Originator Agreement is the only agreement
pursuant to which the Transferor purchases and receives contributions of
Leases, Lease Receivables or any other accounts receivable, and the Facility
Documents delivered to the Agent represent all material agreements between the
Originator, on the one hand, and the Transferor on the other. The Transferor
has furnished to the Agent true, correct and complete copies of each Facility
Document to which the Transferor is a party, each of which is in full force and
effect. Neither the Transferor nor any Affiliate party thereto is in default
of any of its obligations thereunder in any material respect. Upon the
Purchase and/or Contribution of each Lease Receivable pursuant to the
Originator Agreement, the Transferor shall be the lawful owner of, and have
good title to, such Lease Receivable and all Purchased/Contributed Assets
relating thereto, free and clear of any Adverse Claims (except for Adverse
Claims created hereunder and Permitted Encumbrances). All such
Purchased/Contributed Assets are transferred without recourse to the Originator
except as described in the Originator Agreement. The Purchases of
Purchased/Contributed Assets by the Transferor constitute valid and true sales
for consideration (and not merely a pledge of such Purchased/Contributed Assets
for security purposes) and the Contributions of the Purchased/Contributed
Assets received by the Transferor constitute valid and true transfers for
consideration, each enforceable against creditors of the Originator, and no
Purchased/Contributed Assets shall constitute property of the Originator.
(q) BUSINESS. Since its incorporation, the Transferor has conducted no
business other than the Purchase and receipt of Lease Receivables and related
assets from the Originator under the Originator Agreement, the Transfer of
Transferred Assets under this Agreement to finance any such Purchases, and such
other activities as are incidental to the foregoing.
(r) OWNERSHIP OF THE TRANSFEROR. One hundred percent (100%) of the
outstanding capital stock of the Transferor is directly owned (both
beneficially and of record) by the Originator. Such stock is validly issued,
fully paid and
-41-
<PAGE> 46
nonassessable and there are no options, warrants or other rights to acquire
capital stock from the Transferor.
(s) TAXES. The Transferor has filed or caused to be filed all Federal,
state and local tax returns which are required to be filed by it, and has paid
or caused to be paid all taxes shown to be due and payable on such returns or
on any assessments received by it, other than any taxes or assessments, the
validity of which are being contested in good faith by appropriate proceedings
and with respect to which the Transferor has set aside adequate reserves on its
books in accordance with generally accepted accounting principles and which
have not given rise to any Adverse Claims.
(t) SOLVENCY. The Transferor: (i) is not "insolvent" (as such term is
defined in Section 101(32)(A) of the Bankruptcy Code, (ii) is able to pay its
debts as they mature; and (iii) does not have unreasonably small capital for
the business in which it is engaged or for any business or transaction in which
it is about to engage.
(u) SOFTWARE. Except as set forth in the Originator Agreement, each of the
Transferor and the Collection Agent, as assignee of the Transferor, has (or
will have, concurrently with the effectiveness hereof) an enforceable right
(whether by license, sublicense or assignment) to use all of the computer
software used to account for the Transferred Lease Receivables to the extent
necessary to administer the Transferred Lease Receivables.
ARTICLE V
GENERAL COVENANTS OF THE TRANSFEROR
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE TRANSFEROR. From the Initial
Transfer Date until the later of the Termination Date or the Collection Date,
the Transferor will, unless the Agent shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with all
applicable laws, rules, regulations and orders with respect to it, its business
and properties and all Lease Receivables and related Leases.
(b) PRESERVATION OF CORPORATE EXISTENCE. Observe all corporate procedures
required by its Certificate of Incorporation and By-Laws and preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualifications would materially adversely affect (i) the interests hereunder of
the Agent or of the Transferee,
-42-
<PAGE> 47
(ii) the collectibility of any Transferred Lease Receivable or (iii) the
ability of the Transferor or the Collection Agent to perform their respective
obligations hereunder.
(c) AUDITS. At any time and from time to time upon prior written notice
to the Transferor and during regular business hours, permit the Agent, or its
agents or representatives, (i) to examine and make copies of and abstracts from
all Records, and (ii) to visit the offices and properties of the Transferor for
the purpose of examining such Records, and to discuss matters relating to the
Lease Receivables or the Transferor's performance hereunder with any of the
officers or employees of the Transferor having knowledge of such matters.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Lease Receivables in the event of
the destruction of the originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Lease Receivables (including, without limitation, records
adequate to permit the daily identification of all Collections of and
adjustments to each Transferred Lease Receivable).
(e) PERFORMANCE AND COMPLIANCE WITH LEASE RECEIVABLES AND LEASES. At its
expense timely and fully perform and comply, in all material respects, with all
material provisions, covenants and other promises required to be observed by it
under the Leases related to the Transferred Lease Receivables.
(f) LOCATION OF RECORDS. Keep its chief place of business and chief
executive office, and the offices where it keeps the Records, at the
address(es) of the Transferor referred to in SECTION 4.01(J), or, in any such
case, upon 30 days' prior written notice to the Agent, at such other locations
within the United States where all action required by SECTION 6.05 shall have
been taken and completed.
(g) CREDIT AND COLLECTION POLICIES. Comply in all material respects with
its Credit and Collection Policy in regard to each Transferred Lease Receivable
and the related Lease.
(h) COLLECTIONS. Instruct all Obligors to cause all Collections to be
deposited directly to a Lock-Box Account and if the Transferor shall receive
any Collections (including, without limitation, any Collections deemed to have
been received pursuant to SECTION 2.08), Transferor shall remit such
Collections to the Collection Agent (or to the Agent, following the exercise by
the Agent of its rights under SECTION 6.03(A)) within one Business Day
following Transferor's receipt thereof.
(i) POSTING OF COLLECTIONS AND LEASE RECEIVABLES. Apply all Collections to
the applicable Lease Receivables
-43-
<PAGE> 48
pursuant to the terms of SECTION 6.06 and modify its general trial balance to
reflect such Collections, in each case, within one Business Day following the
Transferor's receipt of information in respect of such Collections but in no
event more than three Business Days after the earliest date on which such
Collections are deposited with a Lock-Box Bank or otherwise received by the
Collection Agent or the Transferor.
(j) COMPLIANCE WITH ERISA. Establish, maintain and operate all Plans to
comply in all material respects with the provisions of ERISA, the IRC, and all
other applicable laws, and the regulations and interpretations thereunder.
(k) SECURITY INTEREST IN EQUIPMENT. With respect to each Lease Receivable
that constitutes a Transferred Lease Receivable, comply with the Obligor UCC
Filing Requirement.
(l) MAINTENANCE OF INSURANCE. Maintain, or cause each Obligor to maintain,
with respect to the Leases related to the Transferred Lease Receivables and the
Equipment related thereto, casualty and general liability insurance which
provide at least the same coverage as a fire and extended coverage insurance
policy, issued by a company authorized to issue such policies in the State of
Ohio; PROVIDED, HOWEVER, that the foregoing covenant shall be satisfied with
respect to Obligors which have a Risk Rating of 1, 2 or 3 which self-insure on
a basis consistent with the Credit and Collection Policy. Such insurance
policies (and self-insurance where permitted) shall be maintained in an amount
which is not less than the aggregate Outstanding Balance of all Transferred
Lease Receivables. Each such casualty and liability policy if maintained by an
Obligor, shall name the Transferor or the Originator as loss payee and
additional insured and the Originator shall have assigned any such interest to
the Transferor. The Collection Agent shall remit, or shall cause to be
remitted, the proceeds of any such insurance policy to a Lock-Box Account.
(m) FACILITY DOCUMENTS. Comply in all material respects with the terms of
and employ the procedures outlined in and enforce the obligations of the
Originator under the Originator Agreement, and all of the other Facility
Documents to which it is a party, take all such action to such end as may be
from time to time reasonably requested by the Agent, maintain all such Facility
Documents in full force and effect and make to any party to the Originator
Agreement such reasonable demands and requests for information and reports or
for action as the Transferor is entitled to make thereunder and as may be from
time to time reasonably requested by the Agent.
(n) SEPARATE CORPORATE EXISTENCE. Take all reasonable steps (including,
without limitation, all steps that the Agent may from time to time reasonably
request) to maintain the Transferor's identity as a separate legal entity from
the Originator and to make it manifest to third parties that the
-44-
<PAGE> 49
Transferor is an entity with assets and liabilities distinct from those of the
Originator and each other Affiliate thereof. Without limiting the generality
of the foregoing and in addition to and consistent with the covenants set forth
in SECTIONS 5.01(B) and 5.01(M), the Transferor shall:
(i) conduct all of its business, and make all communications to third
parties (including all invoices (if any), letters, checks and other
instruments) solely in its own name (and not as a division of any other
Person), and require that all employees of the Transferor when conducting the
business of the Transferor identify themselves as such and not as employees
of any other Affiliate of the Transferor (including, without limitation, by
means of providing appropriate employees with business or identification
cards identifying such employees as the Transferor's employees);
(ii) compensate all employees, consultants and agents directly or
indirectly through reimbursement of the Originator each calendar quarter,
from the Transferor's bank accounts, for services provided to the Transferor
by such employees, consultants and agents and, to the extent any employee,
consultant or agent of the Transferor is also an employee, consultant or
agent of any Affiliate of the Transferor, allocate the compensation of such
employee, consultant or agent between the Transferor and such Affiliate on a
basis which reflects the services rendered to the Transferor and such
Affiliate;
(iii) pay its own operating expenses and liabilities from its own funds,
allocate all overhead expenses (including, without limitation, telephone and
other utility charges) for items shared between the Transferor and any
Affiliate on the basis of actual use to the extent practicable and, to the
extent such allocation is not practicable, on a basis reasonably related to
actual use and allocate taxes on the basis set forth in the Company Document;
(iv) at all times have at least one "Independent Director" and at least
one "Independent Officer" each as defined in and as required under the
Transferor's Certificate of Incorporation and have at least one officer
responsible for managing its day-to-day business and manage such business by
or under the direction of its board of directors;
(v) maintain the Transferor's books and records separate from those of
any Affiliate;
(vi) prepare its financial statements separately from those of its other
Affiliates and insure that any consolidated financial statements of the
Originator that
-45-
<PAGE> 50
include the Transferor have notes to the effect that the Transferor is a
separate corporate entity and that the Transferor's creditors have a claim on
its assets prior to those assets becoming available to any creditors of the
Originator;
(vii) use its best efforts not to commingle funds or other assets of the
Transferor with those of any other Affiliate, and not to hold its assets in
any manner that would create an appearance that such assets belong to any
other Affiliate, and will not maintain bank accounts or other depository
accounts to which any Affiliate is an account party, into which any Affiliate
makes deposits or from which any Affiliate has the power to make withdrawals;
(viii) not permit any Affiliate to pay any of the Transferor's operating
expenses (except pursuant to allocation arrangements that comply with the
requirements of SUBSECTION (III) of this SECTION 5.01(N) or pursuant to the
terms of the Originator Agreement);
(ix) not guarantee any obligation of any Affiliate nor (to the extent
that the Transferor has the legal power to prevent such) have any of its
obligations guaranteed by any such Affiliate, (either directly or by seeking
credit based on the assets of such Affiliate) or otherwise hold itself out as
responsible for the debts of any Affiliate;
(x) maintain at all times stationery and a telephone number separate from
that of any Affiliate and which telephone number will be answered in its own
name, and have all its officers and employees conduct all of its business
solely in its own name;
(xi) hold regular meetings of its board of directors in accordance with
the provisions of the Transferor's Certificate of Incorporation;
(xii) maintain a separate office from the offices of any of its
Affiliates and identify such office by a sign in its own name;
(xiii) pay dividends only if (A) no other dividend has been paid during
the month in which such dividend is paid, (B) such dividend has been duly
authorized by its board of directors in accordance with applicable law and
(C) the net worth of the Transferor, determined immediately after giving
effect to such dividend is at least $1,000,000.
(xiv) take such other actions as are necessary on its part to ensure that
the facts and assumptions set forth in the opinion described in Section
3.01(r) remain true and correct at all times.
-46-
<PAGE> 51
(o) INTEREST RATE HEDGES. Maintain, at all times, Interest Rate Hedges
satisfactory to the Agent (it being agreed that the maintenance of Interest
Rate Hedges in compliance with the parameters set forth on EXHIBIT K shall be
satisfactory to the Agent; provided, that on the Termination Date the
Transferor (or the Transferee on behalf of the Transferor) shall obtain
Interest Rate Hedges for the unhedged portion of the Transferred Lease
Receivables) and, prior to the purchase of any Interest Rate Hedge from any
Person other than Citibank, offer to Citibank the opportunity to quote terms
for such Interest Rate Hedge to be offered to the Transferee at the
Transferor's request; and upon the execution of each Interest Rate Hedge for
which the Transferee is not the counterparty, deliver to the Agent a
certificate executed by the counterparty to such Interest Rate Hedge in
substantially the form of EXHIBIT A to the Interest Rate Hedge Assignment.
SECTION 5.02. REPORTING REQUIREMENTS OF THE TRANSFEROR. From the Initial
Transfer Date until the later of the Termination Date or the Collection Date,
the Transferor will, unless the Agent shall otherwise consent in writing,
furnish to the Agent and to CapMAC:
(a) as soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of the Transferor, balance
sheets of the Transferor as of the end of such quarter, and statements of
income and retained earnings of the Transferor for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter,
certified by the chief financial officer, chief accounting officer or treasurer
of the Transferor;
(b) as soon as available and in any event within 105 days after the end of
each fiscal year of the Transferor, a copy of the balance sheet of the
Transferor as of the end of such year and the related statements of income and
retained earnings of the Transferor and its consolidated Subsidiaries for such
year each reported on by nationally recognized independent public accountants
acceptable to the Agent (the Agent acknowledges that any of the "Big 5"
accounting firms will be acceptable to the Agent), and, upon the request of the
Agent, the foregoing shall also include consolidating balance sheets and
statements by business segment as prepared by the management of the Transferor;
(c) promptly upon receipt thereof, copies of (i) all annual and quarterly
financial statements delivered to the Transferor by the Originator pursuant to
the Originator Agreement, (ii) the forecast for the next succeeding five fiscal
years of the Originator (except that after the Termination Date such forecast
shall only be required for the number of fiscal years between the Termination
Date and one year after the expected maturity of the Transferred Lease
Receivables) delivered by the Originator pursuant to the Originator Agreement
to be delivered no later than February 28 of each year, and (iii) all
-47-
<PAGE> 52
other reports and other written information not specified above which are
required to be delivered by the Originator (individually, or as Sub-Servicer)
to the Transferor pursuant to the terms of the Originator Agreement;
(d) as soon as possible and in any event within five Business Days after
the occurrence of each Event of Termination or each event which, with the
giving of notice or lapse of time or both, would constitute an Event of
Termination, the statement of the chief financial officer, chief accounting
officer or treasurer of the Transferor setting forth details of such Event of
Termination or event and the action which the Transferor proposes to take with
respect thereto;
(e) promptly after the filing or receiving thereof, copies of all reports
and notices with respect to any Reportable Event defined in Article IV of ERISA
which the Transferor files under ERISA with the IRS or the PBGC or the DOL or
which the Transferor receives from the PBGC;
(f) on or before the 15th day of each month (or if such day is not a
Business Day, the immediately succeeding Business Day), a report summarizing
the portfolio of Interest Rate Hedges as of such day, setting forth the
information contained in, and substantially in the form of, the report attached
hereto as EXHIBIT J; and
(g) promptly, from time to time, such other information, documents, records
or reports respecting the Lease Receivables or the conditions or operations,
financial or otherwise, of the Transferor as the Agent may from time to time
reasonably request in order to protect the interests of the Agent or of the
Transferee under or as contemplated by this Agreement.
SECTION 5.03. NEGATIVE COVENANTS OF THE TRANSFEROR. From the Initial
Transfer Date until the later of the Termination Date or the Collection Date,
the Transferor will not, without the written consent of the Agent:
(a) SALES, LIENS, ETC. AGAINST LEASE RECEIVABLES AND RELATED ASSETS.
Except as otherwise provided herein, (i) sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist, any Adverse
Claim upon or with respect to, any Transferred Lease Receivable, Related
Security or Collections, or any related Lease, or upon or with respect to any
Lock-Box Account to which any Collections of any Lease Receivable are sent, or
assign any right to receive income in respect thereof, or (ii) create or suffer
to exist, any prior Adverse Claim upon or with respect to any Transferor
Collateral.
(b) EXTENSION OR AMENDMENT OF LEASE RECEIVABLES. Except as otherwise
permitted in SECTION 6.02, extend, amend or otherwise modify, the terms of any
Transferred Lease Receivable, or amend, modify or waive, any term or condition
of any Lease
-48-
<PAGE> 53
related thereto, in either case, for any reason relating to a negative change
in the related Obligor's creditworthiness or inability to make any payment
under the related Lease.
(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make any change in
the character of its business or in the Credit and Collection Policy, which
change would, in either case, impair the collectibility of any Transferred
Lease Receivable.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Add or terminate any bank
as a Lock-Box Bank from those listed in EXHIBIT I or make any change in its
instructions to Obligors regarding payments to be made to the Transferor or
payments to be made to any Lock-Box Bank, unless the Agent shall have received
(i) ten Business Days' prior notice of such addition, termination or change and
(ii) prior to the effective date of such addition, termination or change, (x)
executed copies of Lock-Box Agreements executed by each new Lock-Box Bank and
Transferor and (y) copies of all agreements and documents signed by either
Transferor or the respective Lock-Box Bank with respect to any new Lock-Box
Account.
(e) STOCK, MERGER, CONSOLIDATION, ETC. Sell any shares of any class of its
capital stock to any Person (other than the Originator) or consolidate with or
merge into or with any other corporation, or purchase or otherwise acquire all
or substantially all of the assets or capital stock, or other ownership
interest of, any Person or sell, transfer, lease or otherwise dispose of all or
substantially all of its assets to any Person, except as expressly permitted
under the terms of this Agreement.
(f) CHANGE IN CORPORATE NAME. Make any change to its corporate name or use
any trade names, fictitious names, assumed names or "doing business as" names.
(g) ERISA MATTERS. (i) Engage or permit any ERISA Affiliate to engage in
any prohibited transaction for which an exemption is not available or has not
previously been obtained from the DOL; (ii) permit to exist any accumulated
funding deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of
the IRC, or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan
that the Transferor or any ERISA Affiliate may be required to make under the
agreement relating to such Multiemployer Plan or any law pertaining thereto;
(iv) terminate any Benefit Plan so as to result in any liability; or (v) permit
to exist any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability of the Transferor or any ERISA
Affiliate under ERISA or the IRC; PROVIDED, HOWEVER, the Transferor and its
ERISA Affiliates may take or allow such prohibited transactions, accumulated
funding deficiencies,
-49-
<PAGE> 54
payments, terminations and reportable events described in clauses (i) through
(iv) above so long as such events occurring within any fiscal year of the
Transferor, in the aggregate, involve a payment of money by or an incurrence of
liability of the Transferor or any ERISA Affiliate (collectively, "ERISA
Liabilities") in an amount which does not exceed $5,000,000.
(h) TERMINATE OR REJECT LEASES. Without limiting SECTION 5.03(B),
terminate or reject any Lease under which a Transferred Lease Receivable has
arisen prior to the term of such Lease, whether such rejection or early
termination is made pursuant to an equitable cause, statute, regulation,
judicial proceeding or other applicable law (including, without limitation,
Section 365 of the Bankruptcy Code), unless prior to such termination or
rejection, the Transferor pays the Agent, for the benefit of the Transferee, an
amount equal to the aggregate Outstanding Balance with respect thereto (such
Outstanding Balance to be calculated assuming that the Lease is in effect for
its full term).
(i) INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness except for (i) Indebtedness to the Agent, the Transferee, any
Affected Party, or any Liquidity Provider expressly contemplated hereunder,
(ii) Ordinary Course Expenses (to the extent, if any, that such Ordinary Course
Expenses constitute Indebtedness) in an aggregate amount outstanding at any
time not to exceed $10,000 (exclusive of taxes) and (iii) Indebtedness to the
Originator pursuant to the Originator Agreement.
(j) GUARANTEES. Guarantee, endorse or otherwise be or become contingently
liable (including by agreement to maintain balance sheet tests) in connection
with the obligations of any other Person, except endorsements of negotiable
instruments for collection in the ordinary course of business and reimbursement
or indemnification obligations in favor of the Agent, the Transferee, any
Affected Party or any Liquidity Provider as provided for under this Agreement.
(k) LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into, or be a party
to any transaction with any Affiliate of the Transferor, except for:
(i) the transactions contemplated by the Originator Agreement; and
(ii) the transactions contemplated by the Company Document; and
(iii) to the extent not otherwise prohibited under this Agreement, other
transactions in the nature of employment contracts and directors' fees, upon
fair and reasonable terms materially no less favorable to the Transferor than
would be obtained in a comparable
-50-
<PAGE> 55
arm's-length transaction with a Person not an Affiliate.
(l) FACILITY DOCUMENTS. Except as otherwise permitted under SECTION 10.01,
(a) terminate, amend or otherwise modify any Facility Document to which it is a
party, or grant any waiver or consent thereunder, (b) without the prior consent
of the Agent, exercise any discretionary rights granted to the Transferor under
the Originator Agreement pursuant to provisions thereof providing for certain
actions to be taken "with the consent of the Buyer", "acceptable to the Buyer"
as "specified by the Buyer", "in the reasonable judgment of the Buyer" or
similar provisions (it being understood that inaction by the Transferor shall
not be considered to be an exercise of such discretionary rights) or (c)
without the prior written consent of the Agent, consent to any amendment or
modification of the Credit and Collection Policy; except that the Transferor
may, with prior written notice to the Agent, but without any prior written
consent, amend any Company Document, provided that any such amendment shall be
on fair and reasonable terms materially no less favorable to the Transferor
than would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate and such amendment shall not be prohibited by, or otherwise
adversely affect the Transferor's ability to comply with, SECTION 5.01(N).
(m) CHARTER AND BY-LAWS. Amend or otherwise modify its Certificate of
Incorporation or By-laws in any manner which requires the consent of the
"Independent Director" (as defined in the Transferor's Certificate of
Incorporation) without the prior written consent of the Agent and delivery of
an opinion of counsel that such amendment shall not alter the conclusions set
forth in the legal opinion described in Section 3.01(r).
(n) LINES OF BUSINESS. Conduct any business other than that described in
SECTION 4.01(Q), or enter into any transaction with any Person which is not
contemplated by or incidental to the performance of its obligations under the
Facility Documents.
(o) ACCOUNTING TREATMENT. Prepare any financial statements or other
statements (including any tax filings which are not consolidated with those of
the Originator) which shall account for the transactions contemplated by the
Originator Agreement in any manner other than as the sale of, or a capital
contribution of, the Purchased/Contributed Assets (as defined in the Originator
Agreement) by the Originator to the Transferor.
(p) LIMITATION ON INVESTMENTS. Make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Affiliate or any other Person except for Permitted
Investments and the purchase of Lease Receivables and
-51-
<PAGE> 56
related Purchased/Contributed Assets pursuant to the terms of the Originator
Agreement.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. DESIGNATION OF COLLECTION AGENT. The servicing,
administering and collection of the Lease Receivables shall be conducted by the
Person (the "Collection Agent") so designated from time to time in accordance
with this SECTION 6.01. Until the Agent gives notice to the Transferor of the
designation of a new Collection Agent, the Transferor is hereby designated as,
and hereby agrees to perform the duties and obligations of, the Collection
Agent pursuant to the terms hereof. The Agent may at any time, upon ten
Business Days prior written notice, designate as Collection Agent any Affiliate
of Citicorp and, following the occurrence of an Event of Termination, any other
Person to succeed the Transferor or any successor Collection Agent, on the
condition in each case that any such Person so designated shall agree to
perform the duties and obligations of the Collection Agent pursuant to the
terms hereof. The Collection Agent may, with the prior consent of the Agent,
subcontract with any other Person for servicing, administering or collecting
the Transferred Lease Receivables, provided that the Collection Agent shall
remain liable for the performance of the duties and obligations of the
Collection Agent pursuant to the terms hereof. The Agent hereby consents to
the appointment by the Collection Agent of the Originator as the Sub-Servicer
pursuant to the Originator Agreement.
SECTION 6.02. DUTIES OF THE COLLECTION AGENT. (a) The Collection Agent
shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Transferred Lease Receivable from time to time, all
in accordance with applicable laws, rules and regulations, with reasonable care
and diligence, and in accordance with the Credit and Collection Policy. Each
of the Transferor, the Transferee and the Agent hereby appoints as its agent
the Collection Agent, from time to time designated pursuant to SECTION 6.01, to
enforce its respective rights and interests in and under the Transferred Lease
Receivables, the Related Security and the related Leases. The Transferor (so
long as it is Collection Agent) will at all times apply the same standards and
follow the same procedures with respect to the decision to commence, and in
prosecuting and litigating with respect to Transferred Lease Receivables as it
applies and follows with respect to Lease Receivables which are not Transferred
Lease Receivables. In no event shall the Collection Agent be entitled to make
the Agent or the Transferee a party to any litigation without the Agent's
express prior written consent. The Collection Agent shall set aside for the
account of the Transferee the Collections of Transferred Lease Receivables in
accordance with SECTIONS 2.06 and 2.07 but shall
-52-
<PAGE> 57
not be required (unless otherwise requested by the Agent following the
occurrence of an Event of Termination) to segregate the funds constituting such
portion of such Collections prior to the remittance thereof in accordance with
said Sections. If instructed by the Agent following the occurrence of an Event
of Termination, the Collection Agent shall segregate and deposit with a bank
(which may be Citibank) selected by the Collection Agent and approved by the
Agent the Collections of Transferred Lease Receivables, set aside for the
Transferee, on the first Business Day following receipt by the Collection Agent
of such Collections and will, if so requested by the Agent, provide payment
instructions to such bank as directed by the Agent. Provided that the
Termination Date shall not have occurred, the Transferor, while it is
Collection Agent, may, in accordance with the Credit and Collection Policy, (i)
amend, modify or waive any term or condition of any Lease unless such
amendment, modification or waiver relates to a negative change in the related
Obligor's creditworthiness or inability to make any payment under the related
Lease and (ii) adjust the Outstanding Balance of any Transferred Lease
Receivable to reflect the reductions, adjustments or cancellations described in
the first sentence of SECTION 2.08. The Transferor shall deliver to the
Collection Agent, and the Collection Agent shall hold in trust for the
Transferor and the Transferee in accordance with their respective interests,
all Records. Notwithstanding anything to the contrary contained herein,
following the occurrence of an Event of Termination, the Agent shall have the
absolute and unlimited right to direct the Collection Agent (whether the
Collection Agent is the Transferor or otherwise) to commence or settle any
legal action to enforce collection of any Transferred Lease Receivable or to
foreclose upon or repossess any Related Security.
(b) The Collection Agent shall as soon as practicable following receipt
turn over to the Transferor the Collections of any Lease Receivable which is
not a Transferred Lease Receivable less, in the event the Transferor is not the
Collection Agent, all reasonable and appropriate out-of-pocket costs and
expenses of such Collection Agent of servicing, collecting and administering
the Lease Receivables to the extent not covered by the Collection Agent Fee
received by it. The Collection Agent, if other than the Transferor, shall as
soon as practicable upon demand deliver to the Transferor all Records in its
possession relating to Lease Receivables of the Transferor other than
Transferred Lease Receivables, and copies of Records in its possession relating
to Transferred Lease Receivables. The Collection Agent's authorization under
this Agreement shall terminate after the Termination Date on the Collection
Date.
(c) Notwithstanding anything to the contrary contained in this Article VI,
the Collection Agent, if the Agent or its designee, shall have no obligation to
collect, enforce or take any other action described in this Article VI with
respect to any Lease Receivable that is not a Transferred Lease Receivable
other
-53-
<PAGE> 58
than to deliver to the Transferor the Collections and documents with respect to
any such Lease Receivable that is not a Transferred Lease Receivable as
described in the first two sentences of SECTION 6.02(B) and to exercise the
same degree of care with respect to Collections and documents in its possession
as it would with respect to its own property.
SECTION 6.03. RIGHTS OF THE AGENT. (a) The Agent is hereby authorized at
any time to notify any or all of the Lock-Box Banks to remit all Collections of
Transferred Lease Receivables deposited in the applicable Lock-Box Accounts
directly to the Agent.
(b) At any time following the designation of a Collection Agent other than
the Transferor pursuant to SECTION 6.01:
(i) The Agent may notify at any time the Obligors of Transferred Lease
Receivables, or any of them, of the Transferee's interest in Transferred
Assets and direct such Obligors, or any of them, that payment of all amounts
payable under any Transferred Lease Receivable be made directly to the Agent
or its designee.
(ii) The Transferor shall, at the Agent's request and at the Transferor's
expense, give notice of the Transferee's interest in Transferred Lease
Receivables to each Obligor and direct that payments be made directly to the
Agent or its designee.
(iii) The Transferor shall, at the Agent's request, (A) assemble all
Records which the Agent reasonably believes are necessary or appropriate for
the administration and enforcement of the Transferred Lease Receivables, and
shall make the same available to the Agent at a place selected by the Agent
or its designee, and (B) segregate all cash, checks and other instruments
received by it from time to time constituting Collections of Transferred
Lease Receivables in a manner acceptable to the Agent and shall, promptly
upon receipt, remit all such cash, checks and instruments, duly endorsed or
with duly executed instruments of transfer, to the Agent or its designee.
(iv) Each of the Transferor and the Transferee hereby authorizes the Agent
to take any and all steps in the Transferor's name and on behalf of the
Transferor and the Transferee necessary or desirable, in the determination of
the Agent, to collect all amounts due under any and all Transferred Lease
Receivables, including, without limitation, endorsing the Transferor's name
on checks and other instruments
-54-
<PAGE> 59
representing Collections and enforcing such Lease Receivables and the related
Leases.
SECTION 6.04. RESPONSIBILITIES OF THE TRANSFEROR. Anything herein to the
contrary notwithstanding, the Transferor shall (i) perform all of its
obligations under the Leases related to the Transferred Lease Receivables to
the same extent as if Transferred Assets had not been transferred hereunder and
the exercise by Agent of its rights hereunder shall not relieve Transferor from
such obligations and (ii) pay when due any taxes, including without limitation,
sales, excise and personal property taxes payable in connection with the
Transferred Lease Receivables, unless the Transferor is contesting the payment
of such taxes in good faith and by appropriate proceedings.
SECTION 6.05. FURTHER ACTION EVIDENCING TRANSFERS. The Transferor agrees
that from time to time, at its expense, it will promptly execute and deliver
all further instruments and documents, and take all further action that the
Agent may reasonably request in order to perfect, protect or more fully
evidence the Transferred Assets, or to enable the Transferee or the Agent to
exercise or enforce any of their respective rights hereunder or under the
Certificate. Without limiting the generality of the foregoing, the Transferor
will mark its master data processing records evidencing such Transferred Lease
Receivables and related Leases with a legend, acceptable to the Agent,
evidencing that the Transferee has acquired an interest therein as provided in
this Agreement and, upon the request of the Agent (subject to the provisions of
SECTION 2.14 and the Obligor UCC Filing Requirement) will execute and file such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate or as the Agent may reasonably request. In addition, at any time,
the Agent may request the Transferor to deliver, and promptly thereafter, the
Transferor will deliver to the Agent, the original copy of each Lease under
which a Transferred Lease Receivable has arisen. In the event the Agent takes
possession of the original copies of the Leases, the Agent agrees (i) to
maintain such possession at its (or an Affiliate's or agent's) office in
Cleveland, Ohio, (ii) to exercise the same degree of care with respect to the
possession of such Leases as it would if such Leases were the property of the
Agent and (iii) to return the original copy of such Lease to the Transferor
within two Business Days of the Transferor's request therefor to the extent the
Transferor requires such original copy to conduct further business with, or
take enforcement action against, the Obligor of such Lease. The Transferor
agrees that until the Agent requests the Transferor to deliver the original
copies of the Leases as provided above, the Transferor shall maintain
possession of such original copies in a segregated storage area in trust for
the Transferee. The Transferor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Transferred
-55-
<PAGE> 60
Lease Receivables and the Related Security now existing or hereafter arising
without the signature of the Transferor where permitted by law. A carbon,
photographic or other reproduction of this Agreement or any financing statement
covering the Transferred Lease Receivable, or any part thereof, shall be
sufficient as a financing statement. If the Transferor fails to perform any of
its agreements or obligations under this Agreement, the Agent may (but shall
not be required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection therewith
shall be payable by the Transferor upon the Agent's demand therefor; PROVIDED,
HOWEVER, prior to taking any such action, the Agent shall give notice of such
intention to the Transferor and provide the Transferor with a reasonable
opportunity to take such action itself.
SECTION 6.06. APPLICATION OF PAYMENTS. To the extent the Collection Agent
receives a payment from an Obligor of a Transferred Lease Receivable with
respect to which the Obligor has not identified the Lease Receivable to which
such payment should be applied (a payment in the exact amount of an outstanding
invoice being sufficient identification), the Collection Agent shall use its
best efforts to contact such Obligor to confirm the Lease Receivable to which
such Obligor intended that such payment be applied.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. EVENTS OF TERMINATION. If any of the following events
("Events of Termination") shall occur:
(a) (i) The Collection Agent (if the Transferor, the Originator or any
Affiliate of the Transferor) shall fail to perform or observe any term,
covenant or agreement hereunder (other than as referred to in clause (ii) of
this SECTION 7.01(A)) and such failure shall remain unremedied for three
Business Days after written notice from the Agent or (ii) either the Collection
Agent (if the Transferor, the Originator or any Affiliate of the Transferor) or
the Transferor shall fail to make any payment or deposit to be made by it
hereunder when due and with respect to such payments which do not relate to the
payment of Yield, Capital, Interest Rate Hedging Obligations or the remittance
of Collections, such failure shall remain unremedied for three Business Days
after written notice from the Agent; or
(b) The Transferor shall fail to perform or observe any term, covenant or
agreement contained in Article VI and any such failure shall remain unremedied
for five Business Days after written notice from the Agent; or
-56-
<PAGE> 61
(c) Any representation or warranty made or deemed to be made by the
Transferor (or any of its officers) under or in connection with this Agreement,
any Settlement Report or other information or report delivered pursuant hereto
shall prove to have been false or incorrect in any material respect when made;
PROVIDED, HOWEVER, that (i) to the extent any breach of any such representation
or warranty may be cured within ten Business Days, the Transferor shall have
ten Business Days after learning of such breach to make such representation and
warranty true and correct and (ii) if any such representation or warranty
relates to a Lease Receivable which is retransferred to the Transferor pursuant
to SECTION 9.02 hereof, then the breach of such representation or warranty
shall not give rise to an Event of Termination under this subsection (c); or
(d) The Transferor shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed
or observed and any such failure shall remain unremedied for ten Business Days
after written notice from the Agent; or
(e) The Originator shall fail to pay any principal of or premium or
interest on any Indebtedness having a principal amount of $2,000,000 or
greater, when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Indebtedness; or any other default under any
agreement or instrument relating to any such Indebtedness of the Originator or
any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument if the effect of such
default or event is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness; or any such Indebtedness shall be declared to be
due and payable or required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof; or
(f) Any Transfer of Transferred Assets shall for any reason, except to the
extent permitted by the terms hereof, cease to create a valid and perfected
first priority interest in each Transferred Lease Receivable and the Related
Security (subject to the Obligor UCC Filing Requirement) and Collections with
respect thereto or the Certificate delivered hereunder shall for any reason
cease to evidence the transfer to the Transferee of a valid and perfected first
priority interest in Transferred Lease Receivables, the Related Security
(subject to the Obligor UCC Filing Requirement) and Collections evidenced by
such Certificate; PROVIDED, HOWEVER, if any such failure relates to a Lease
Receivable which is retransferred to the Transferor pursuant to SECTION 9.02
hereof, then such failure shall not give rise to an Event of Termination under
this subsection (f); or
-57-
<PAGE> 62
(g) (i) The Transferor shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Transferor
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official for
it or for any substantial part of its property; or (ii) the Transferor shall
take any corporate action to authorize any of the actions set forth in clause
(i) above in this subsection (g); or
(h) The Transferred Lease Receivable Default Ratio for any month shall
exceed 3% or the Loss/Liquidation Ratio shall exceed 1%; or
(i) As of the close of business on any Settlement Date, the Transferred
Lease Receivables Balance shall be less than the Aggregate Transfer Price; or
(j) There shall have been any material adverse change in the financial
condition or operations of the Transferor since January 31, 1994 except as
disclosed in the financial statements as at April 30, 1994 and July 31, 1994
delivered to the Agent and described in SECTION 4.01(E), or there shall have
occurred any event which materially adversely affects the collectibility of the
Lease Receivables generally or there shall have occurred any other event which
materially adversely affects the ability of the Transferor to collect Lease
Receivables generally or the ability of the Transferor to perform hereunder; or
(k) at any time following 90 days after the Initial Transfer Date, as of
the last day of any month the "Weighted Average Discount Rate" (as defined
below) is less than the sum of (i) the "Weighted Average Hedge Rate" (as
defined below) PLUS (ii) 0.60% PLUS (iii) the applicable Program Fee Rate at
such time and such deficiency is not eliminated within 60 days after such
deficiency arises; PROVIDED, that such 60-day period shall be reduced to 20
days with respect to a second occurrence of such deficiency within any
six-month period; for purposes of the foregoing, "Weighted Average Discount
Rate" means a percentage calculated as of the last day of each month by
dividing (1) the sum of (x) the product of the Outstanding Balance of each
Transferred Lease Receivable TIMES (y) the Discount Rate applicable to each
such Transferred Lease Receivable by (2) the sum of the Outstanding Balances of
all Transferred Lease Receivables and "Weighted Average Hedge Rate" means a
percentage calculated as of the last day of each month by dividing (1) the sum
of the product of (x) the current notional amount of each Interest Rate Hedge
TIMES (y) the ceiling or fixed rate applicable under such Interest Rate Hedge
by (2) the sum of the current notional amounts of all Interest Rate Hedges;
-58-
<PAGE> 63
(l) An "Event of Termination" or any other default shall occur under the
Originator Agreement or any provision thereof shall for any reason cease to be
valid and binding on the Transferor or the Originator, as applicable, or the
Transferor or the Originator, as applicable;
(m) The Originator shall cease to directly own 100% of the outstanding
capital stock of the Transferor;
then, and in any such event, the Agent shall, at the request, or may with the
consent, of the Transferee, by notice to the Transferor declare the Termination
Date to have occurred, EXCEPT that, in the case of any event described in
clause (i) of subsection (g), above, the Termination Date shall be deemed to
have occurred automatically upon the occurrence of such event. Upon any such
declaration or automatic occurrence, the Agent and the Transferee shall have,
in addition to all other rights and remedies under this Agreement or otherwise,
all other rights and remedies provided under the UCC of the applicable
jurisdiction and other applicable laws, which rights shall be cumulative.
ARTICLE VIII
THE AGENT
SECTION 8.01. AUTHORIZATION AND ACTION. The Transferee hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto,
including without limitation, the power and authority to hold and to perfect
any ownership interest or security interest created pursuant hereto or in
connection herewith on behalf of the Transferee.
SECTION 8.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them as Agent under or in connection with this
Agreement (including, without limitation, any action taken or omitted to be
taken by it or them if the Agent is designated as Collection Agent pursuant to
SECTION 6.01) or any other agreement executed pursuant hereto, except for its
or their own gross negligence or willful misconduct. Without limiting the
foregoing, the Agent: (i) may consult with legal counsel (including counsel
for the Transferor), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (ii) makes no warranty or representation to the Transferee and shall
not be responsible to the Transferee for any statements, warranties or
representations made in or in connection with this Agreement or in connection
with any of the other agreements executed pursuant
-59-
<PAGE> 64
hereto; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Transferor or to inspect the property (including
the books and records) of the Transferor; (iv) shall not be responsible to the
Transferee for the due execution, legality, validity, enforceability,
genuineness or sufficiency of value of this Agreement, the Certificates or any
other agreement, instrument or document furnished pursuant hereto; and (v)
shall incur no liability under or in respect of this Agreement or any other
agreement executed pursuant hereto, by acting upon any notice (including notice
by telephone), consent, certificate or other instrument or writing (which may
be by telex or facsimile) believed by it to be genuine and signed or sent by
the proper party or parties.
SECTION 8.03. AGENT AND AFFILIATES. With respect to any Certificate which
may be assigned by the Transferee to CNA pursuant to SECTION 10.04, CNA shall
have the same rights and powers under this Agreement as would the Transferee if
it were holding such Certificate and may exercise the same as though it were
not the Agent. CNA and its Affiliates may generally engage in any kind of
business with the Transferor or any Obligor, any of their respective Affiliates
and any Person who may do business with or own securities of the Transferor or
any Obligor or any of their respective Affiliates, all as if CNA were not the
Agent and without any duty to account therefor to the Transferee.
SECTION 8.04. TRANSFEREE'S TRANSFER DECISION. The Transferee acknowledges
that it has, independently and without reliance upon the Agent, CNA or any
Affiliate of CNA, and based on such documents and information as it has deemed
appropriate, made its own evaluation and decision to enter into this Agreement
and, if it so determines, to purchase the Transferred Assets hereunder. The
Transferee also acknowledges that it will, independently and without reliance
upon the Agent, CNA or any Affiliate of CNA, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
decisions in taking or not taking action under this Agreement.
ARTICLE IX
INDEMNIFICATION; SUBSTITUTIONS AND RETRANSFERS
SECTION 9.01. INDEMNITIES BY THE TRANSFEROR. (a) Without limiting any
other rights which any Affected Party may have hereunder or under applicable
law, the Transferor hereby agrees to indemnify each Affected Party, from and
against any and all damages, losses, claims, liabilities and related costs and
expenses, including reasonable attorneys' fees and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
against or incurred by such Affected Party arising out of or as a result of
this Agreement or the ownership of the Transferred Assets or in respect of any
-60-
<PAGE> 65
Lease Receivable or any Lease, excluding, however, (i) Indemnified Amounts to
the extent resulting from gross negligence or willful misconduct on the part of
any Affected Party or (ii) recourse (except with respect to payment and
performance obligations provided for in this Agreement) for uncollectible
Transferred Lease Receivables. Without limiting the foregoing, Transferor
shall indemnify each Affected Party for Indemnified Amounts relating to or
resulting from:
(i) the transfer of any Lease Receivable other than an Eligible Lease
Receivable;
(ii) reliance on any representation or warranty made or deemed made by the
Transferor (or any of its officers) under or in connection with this
Agreement, any Settlement Report or any other information or report delivered
by the Transferor pursuant hereto, which shall have been false or incorrect
in any material respect when made or deemed made or delivered;
(iii) the failure by the Transferor (individually or as Collection Agent)
to comply with any term, provision or covenant contained in this Agreement,
the Originator Agreement or any agreement executed in connection with this
Agreement or with any applicable law, rule or regulation with respect to any
Lease Receivable, the related Lease or the Related Security, or the
nonconformity of any Lease Receivable, the related Lease or the Related
Security with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Transferee or to
transfer to the Transferee an interest in the Lease Receivables which are, or
are purported to be, Transferred Lease Receivables, together with all
Collections and Related Security, free and clear of any Adverse Claim
(including, without limitation, free and clear of any Permitted Encumbrance
except in favor of any Affected Party) whether existing at the time of the
Transfer of such Lease Receivable or at any time thereafter;
(v) the failure of the Transferred Lease Receivables Balance to equal the
Aggregate Transfer Price on or prior to the Termination Date as of the close
of business on any Settlement Date;
(vi) the failure to file, or any delay in filing (other than solely as a
result of the action or inaction of any Affected Party), financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws against the Transferor with respect to
any Lease Receivables which are, or are purported to be,
-61-
<PAGE> 66
Transferred Lease Receivables, whether at the time of any Transfer or at any
subsequent time;
(vii) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Lease
Receivable which is, or is purported to be, a Transferred Lease Receivable
(including, without limitation, a defense based on such Lease Receivable or
the related Lease not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any other
claim resulting from the sale or lease of the goods, merchandise and/or
services related to such Lease Receivable or the furnishing or failure to
furnish such goods, merchandise and/or services;
(viii) any failure of the Transferor, as Collection Agent or otherwise, to
perform its duties or obligations in accordance with the provisions of
Article VI;
(ix) any products liability claim or personal injury or property damage
suit or other similar or related claim or action of whatever sort arising out
of or in connection with goods, merchandise and/or services which are the
subject of any Lease Receivable or Lease;
(x) the failure to pay when due any taxes, including, without limitation,
sales, excise or personal property taxes payable in connection with the
Transferred Lease Receivables;
(xi) the termination, rejection or non-assumption by the Transferor of any
Lease under which a Transferred Lease Receivable has arisen prior to the
original term of such Lease, whether such rejection, early termination or
non-assumption is made pursuant to an equitable cause, statute, regulation,
judicial proceeding or other applicable laws (including, without limitation,
Section 365 of the Bankruptcy Code); and
(xii) the failure of the Transferor and the Obligors of Transferred Lease
Receivables to maintain casualty and liability insurance for the Equipment
related to the Transferred Lease Receivables in an amount at least equal to
the Transferred Lease Receivables Balance (the foregoing indemnity shall
include any portion of a Transferred Lease Receivable which is not paid
following damage to or destruction of the Equipment related thereto (A) as a
result of any deductible under any insurance policy covering such Equipment
or (B) if an insurer under an insurance policy shall deny coverage (in any
such case prior to termination thereof as a result of the payment by such
insurer of an
-62-
<PAGE> 67
aggregate amount equal to its maximum liability under such insurance policy),
or shall refuse to honor a claim under any such insurance policy with respect
to a Lease related to any Transferred Lease Receivable or the related
Equipment, and if such denial or refusal resulted from the Transferor's
failure to comply with the requirements of such insurance policy or the
requirements of such insurer).
Any amounts subject to the indemnification provisions of this SECTION 9.01
shall be paid by Transfer to the Agent within two Business Days following
Agent's demand therefor.
(b) If any Affected Party is required to compensate a Liquidity Provider as
a result of any event or circumstances similar to those described in (i)
through (xii) above, then within ten days after demand by such Affected Party,
the Transferor shall pay to such Affected Party such additional amount or
amounts as may be necessary to pay such Liquidity Provider the amounts due or
to otherwise reimburse such Affected Party for any amounts paid by it.
SECTION 9.02. SUBSTITUTION AND RETRANSFER OF LEASE RECEIVABLES. The
following rights are in addition to and not in limitation of any other rights
or remedies that the Transferee or the Agent may have hereunder.
(a) If, with respect to any Transferred Lease Receivable, (i) such Lease
Receivable did not constitute an Eligible Lease Receivable on the date such
Lease Receivable became a Transferred Lease Receivable (or if, within three
Business Days of any Transfer, the Agent notifies the Transferor that any Lease
Receivable which became a Transferred Lease Receivable on the date of such
Transfer is not an Eligible Lease Receivable) or the Transferor shall have
breached any representation or warranty made hereunder with respect to such
Lease Receivable including without limitation, any of the representations and
warranties contained in SECTION 4.01(H) or (ii) the Transferor shall at any
time breach any covenant made herein with respect to any such Lease Receivable
(a Transferred Lease Receivable described in either of clauses (i) or (ii)
above being referred to as an "Ineligible Transferred Lease Receivable"), then
the Transferor shall on the next succeeding Settlement Date, upon the Agent's
demand, at the Transferor's option either substitute for such Ineligible
Transferred Lease Receivable a new Lease Receivable in the manner specified in
subsection (b) of this SECTION 9.02 or accept a retransfer of such Ineligible
Transferred Lease Receivable for the retransfer price specified in subsection
(c) of this SECTION 9.02; PROVIDED, HOWEVER, that following the Termination
Date, the Transferor shall not have the option to substitute for Ineligible
Transferred Lease Receivables, but must accept retransfers of such Ineligible
Transferred Lease Receivables. In addition, the Transferor may, at any time,
notify the Agent of its intent to substitute for or accept a retransfer of any
Transferred Lease
-63-
<PAGE> 68
Receivable (i) which is a Defaulted Lease Receivable or (ii) in connection with
the rewriting and/or restructuring of the related Lease as an accommodation to,
and at the request of, the Obligor thereunder (other than for reasons relating
to a decline in the creditworthiness of the Obligor thereof); PROVIDED,
HOWEVER, that the aggregate Outstanding Balance of all Transferred Lease
Receivables subject to substitution or retransfer pursuant to this clause (iii)
shall not exceed (A) for any three-month period, 15% of the outstanding Capital
as of the date of such retransfer or substitution and (B) for any twelve-month
period, 25% of the outstanding Capital as of the date of such retransfer or
substitution. On the Settlement Date next succeeding any such notice, the
Transferor shall either substitute for such Defaulted Lease Receivable a new
Lease Receivable in the manner specified in subsection (b) of this SECTION 9.02
or accept a retransfer of such Defaulted Lease Receivable for the retransfer
price specified in subsection (c) of this SECTION 9.02.
(b) If the Transferor substitutes a new Lease Receivable for a Transferred
Lease Receivable pursuant to this SECTION 9.02, such new Lease Receivable shall
(i) on the date of substitution, be an Eligible Lease Receivable, and shall be
certified as such by the Transferor, (ii) have an Outstanding Balance at least
equal to the Outstanding Balance of the Transferred Lease Receivable for which
it is being substituted, (iii) have a remaining term that is no longer than the
remaining term of the Transferred Lease Receivable for which it is being
substituted and (iv) have a Risk Rating equal to or better than the Transferred
Lease Receivable for which it is being substituted. On the date of such
substitution, such new Eligible Lease Receivable shall become a Transferred
Lease Receivable and the Lease Receivable so replaced shall cease to be a
Transferred Lease Receivable.
(c) In the case of a retransfer by the Transferee to the Transferor of a
Transferred Lease Receivable pursuant to this SECTION 9.02, the Transferor
shall, on the Settlement Date coinciding with such retransfer pay to the Agent
as a reduction of Capital an amount equal to the Outstanding Balance of such
Transferred Lease Receivable as of such Settlement Date. The proceeds of any
such retransfer shall be deemed to be Collections of such Lease Receivable
received by the Transferor, and the amount of each such Collection shall be
applied as provided in SECTIONS 2.06 or 2.07, as applicable. The retransfer
of any Ineligible Transferred Lease Receivable or Defaulted Lease Receivable
shall not relieve the Transferor of the obligation to pay Yield on the Capital
outstanding with respect to such Ineligible Transferred Lease Receivable
through the date of such retransfer. Any such retransfer shall be made without
recourse or warranty, express or implied.
-64-
<PAGE> 69
ARTICLE X
MISCELLANEOUS
SECTION 10.01. AMENDMENTS, ETC. No amendment to or waiver of any provision
of this Agreement nor consent to any departure by the Transferor, shall in any
event be effective unless the same shall be in writing and signed by (i) the
Transferor, the Agent and the Transferee (with respect to an amendment) or (ii)
the Agent and the Transferee (with respect to a waiver or consent by them) or
the Transferor (with respect to a waiver or consent by it), as the case may be,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; PROVIDED, HOWEVER, that
no such amendment, modification or waiver shall affect the rights or duties of
the Collection Agent hereunder without the prior written consent of the
Collection Agent. This Agreement contains a final and complete integration of
all prior expressions by the parties hereto with respect to the subject matter
hereof and shall constitute the entire agreement (together with the exhibits
hereto) among the parties hereto with respect to the subject matter hereof,
superseding all prior oral or written understandings.
SECTION 10.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, upon receipt,
or in the case of delivery by mail, five days after being deposited in the
mails, or, in the case of notice by telex, when telexed against receipt of
answer back, or in the case of notice by facsimile copy, when verbal
communication of receipt is obtained, in each case addressed as aforesaid,
except that notices and communications pursuant to Article II shall not be
effective until received.
SECTION 10.03. NO WAIVER; REMEDIES. No failure on the part of the Agent or
the Transferee to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law. Without limiting the foregoing,
the Agent is hereby authorized by the Transferor at any time and from time to
time, to the fullest extent permitted by law, to instruct Citibank or any
Affiliate of Citibank to set off and apply any and all deposits (whether
general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by Citibank or such Affiliate to or for
the credit or the account of the
-65-
<PAGE> 70
Transferor against any and all of the obligations of Transferor, now or
hereafter existing under this Agreement or under any agreement executed
pursuant hereto, to the Agent or the Transferee or their respective successors
and assigns irrespective of whether or not demand therefor shall have been made
under this Agreement or under any agreement executed pursuant hereto. The
Transferor acknowledges that the rights of the Agent and the Transferee or any
of their respective successors and assigns described in this paragraph are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) such parties may have.
SECTION 10.04. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be
binding upon and inure to the benefit of the Transferor, the Collection Agent,
the Agent, the Transferee and their respective successors and permitted assigns
(which successors of the Transferor shall include a trustee in bankruptcy).
The Transferor may not assign any of its rights and obligations hereunder or
any interest herein without the prior written consent of the Transferee and the
Agent. The Transferee may, without the consent of the Transferor, assign at
any time any of its rights and obligations hereunder or interest herein to any
Person, except that if such Person is not CapMAC, any Person managed by CapMAC,
CNA, Citibank or any other affiliate of Citicorp, the Transferee shall acquire
the prior written consent of the Agent and the Transferor to any such
assignment. Any permitted assignee of the Transferee as described in the
preceding sentence may further assign at any time its rights and obligations
hereunder or interests herein with the consent of the Agent and the Transferor
to the extent required in the preceding sentence. The Agent is hereby
authorized, and the Agent hereby agrees, that it shall annotate the Certificate
to reflect any assignments made pursuant to this SECTION 10.04. The Agent may
assign at any time its rights and obligations hereunder and interests herein to
CNA, Citibank or any other affiliate of Citicorp without the consent of either
the Transferee or the Transferor. Furthermore, the Transferee and its
permitted assigns may, at any time, without the consent of the Transferor, sell
undivided participation interests in all or any part of their respective
rights, obligations and interests (including, without limitation, Transferred
Assets) hereunder. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall
remain in full force and effect until such time, after the Termination Date, as
the Collection Date shall occur; PROVIDED, HOWEVER, that the rights and
remedies with respect to any breach of any representation and warranty made by
the Transferor pursuant to Article IV and the indemnification and payment
provisions of Article IX and Article X shall be continuing and shall survive
any termination of this Agreement.
SECTION 10.05. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF NEW YORK, EXCEPT TO THE
-66-
<PAGE> 71
EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS OF THE TRANSFEREE IN
THE TRANSFERRED ASSETS OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF,
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
THE TRANSFEROR HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL COURT LOCATED
WITHIN THE STATE OF NEW YORK, AND WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
REGISTERED MAIL DIRECTED TO THE TRANSFEROR AT THE ADDRESS SET FORTH ON THE
SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE
(5) DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE
PREPAID, OR, AT THE AGENT'S OPTION, BY SERVICE UPON CT CORPORATION SYSTEM, 1633
BROADWAY, NEW YORK, NEW YORK 10019, WHICH THE TRANSFEROR HEREBY IRREVOCABLY
APPOINTS AS ITS AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS. THE
TRANSFEROR HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
TRANSFEROR AND THE TRANSFEREE OR THE AGENT ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY. WITH RESPECT TO THE FOREGOING CONSENT TO
JURISDICTION, THE TRANSFEROR HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 10.05 SHALL AFFECT THE RIGHT
OF THE TRANSFEREE OR THE AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE TRANSFEREE OR THE AGENT TO BRING
ANY ACTION OR PROCEEDING AGAINST THE TRANSFEROR OR ITS PROPERTY IN THE COURTS
OF ANY OTHER JURISDICTION.
SECTION 10.06. COSTS, EXPENSES AND TAXES. (a) In addition to the rights
of indemnification under Article IX hereof, the Transferor agrees to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic auditing and any
requested amendments, waivers or consents) of this Agreement, the Certificate,
and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent and the Transferee with respect thereto and with respect to advising the
Agent and the Transferee as to their respective rights and remedies under this
Agreement, and the other agreements executed pursuant hereto and all costs and
expenses, if any (including reasonable counsel fees and expenses), in
connection with the enforcement of this Agreement, the Certificate, and the
other agreements and documents to be delivered hereunder.
(b) In addition, the Transferor shall pay any and all commissions of
placement agents and commercial paper dealers and commercial paper note
issuance costs in respect of commercial paper notes of the Transferee issued to
fund the Transfer of
-67-
<PAGE> 72
Transferred Assets and any and all stamp, sales, excise and other taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement, the Certificate or the other
agreements and documents to be delivered hereunder, and agrees to indemnify the
Agent and the Transferee against any liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
(c) In addition, the Transferor shall pay on demand all other costs and
expenses incurred by the Transferee or any general or limited partner or
shareholder of the Transferee ("Other Costs"), including, without limitation,
the cost of auditing the Transferee's books by certified public accountants,
the cost of rating the Transferee's commercial paper by independent financial
rating agencies and the reasonable fees and out-of-pocket expenses of counsel
for the Transferee or any counsel for any general or limited partner or
shareholder of the Transferee with respect to (i) advising the Transferee or
such general or limited partner or shareholder as to its rights and remedies
under this Agreement, (ii) the enforcement of this Agreement, the Certificate,
and the other documents to be delivered hereunder or (iii) advising the
Transferee or such general or limited partner or shareholder as to matters
relating to the Transferee's operations; PROVIDED, HOWEVER, that if the
Transferee enters into agreements for the purchase of receivables from one or
more other Persons ("Other Transferors"), the Transferor and such Other
Transferors shall each be liable for such Other Costs ratably in accordance
with the usage under the respective facilities of the Transferee to purchase
receivables from the Transferor and each Other Transferor; and PROVIDED,
FURTHER, that if such Other Costs are attributable to the Transferor and not
attributable to any Other Transferor, the Transferor shall be solely liable for
such Other Costs.
SECTION 10.07. CONFIDENTIALITY. (a) Except to the extent otherwise
required by applicable law or unless the Agent shall otherwise consent in
writing, the Transferor agrees (a) to maintain the confidentiality of this
Agreement (and all drafts hereof) in its communications with third parties and
otherwise and (b) not to disclose, deliver or otherwise make available to any
third party the original or any copy of all or any part of this Agreement (or
any draft hereof); PROVIDED, HOWEVER, that the Agreement may be disclosed to
third parties to the extent such disclosure is (i) required in connection with
the sale of securities of the Transferor, (ii) made solely to Persons who are
legal counsel for the purchaser or underwriter of such securities, (iii)
limited in scope to the provisions of Articles V, VII, VIII and to the extent
the defined terms are used in such Articles, such terms defined in Article I of
this Agreement and (iv) made pursuant to a written agreement of confidentiality
in form and substance reasonably satisfactory to the Agent; PROVIDED FURTHER,
HOWEVER, that the Agreement may be disclosed to the Transferor's legal counsel,
auditors and accountants; and PROVIDED FURTHER, HOWEVER, that Transferor shall
have no
-68-
<PAGE> 73
obligation of confidentiality in respect of any information which may be
generally available to the public or becomes available to the public through no
fault of the Transferor.
(b) Each of the Transferee and the Agent shall hold all non-public and
proprietary information obtained pursuant to the requirements of this Agreement
in accordance with its customary procedures for handing confidential
information of this nature and in accordance with safe and sound banking
practices and will use such information only in connection with the
transactions contemplated by this Agreement; PROVIDED that the foregoing shall
not apply to (i) any information which is generally available to the public,
(ii) the providing of any information to any regulatory agency which the
Transferee or the Agent reasonably believes is required to be revealed by law
or any governmental regulation, including, without limitation, applicable
Federal and state banking and securities laws and regulations, (iii) any
information otherwise available to the Transferee and the Agent upon a
non-confidential basis prior to its disclosure hereunder, (iv) any information
which becomes available to the Transferee and the Agent on a non-confidential
basis from a source other than the Transferor, provided that such source is not
known by the Transferee and the Agent their respective agents to be under an
obligation of confidentiality, (v) any information which in the reasonable
opinion of counsel to the Transferee and the Agent is appropriate to be
revealed in any litigation matter, (vi) the providing of any information to the
attorneys or accountants of the Transferee and the Agent, (vii) the providing
of any information to any actual or prospective participant in or assignee of
the Transferee's rights hereunder if such participant or assignee agrees in
writing to be bound to the terms of this SECTION 10.07, or (viii) any
information which is required or appropriate to be disclosed in connection with
the enforcement of any rights against the Obligor of a Defaulted Lease
Receivable or the Equipment or Lease related thereto. Notwithstanding the
foregoing, the Transferee or its representative may provide such information to
each Liquidity Provider (and any bank or other financial institution evaluating
a participation or an assignment with respect to the Liquidity Agreement) upon
the execution by it of a confidentiality agreement reasonably satisfactory to
the Transferor.
SECTION 10.08. NO PROCEEDINGS. The Transferor and the Agent each hereby
agrees that it will not institute against the Transferee any proceeding of the
type referred to in clause (i) of SECTION 7.01(G) so long as any commercial
paper issued by the Transferee shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such commercial
paper shall have been outstanding.
SECTION 10.09. EXECUTION IN COUNTERPARTS; SEVERABILITY. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original
-69-
<PAGE> 74
and all of which when taken together shall constitute one and the same
agreement. In case any provision in or obligation under this Agreement or the
Certificate shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
-70-
<PAGE> 75
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
TRANSFEROR: LDI LEASE RECEIVABLES FUNDING CORP.
By___________________________
Title:
4770 Hinckley Industrial Parkway
Room No. 51
Cleveland, Ohio 44109
Telecopy No. 216-485-4922
TRANSFEREE: CXC INCORPORATED
By Citicorp North America,
Inc., as Attorney-in-Fact
By___________________________
Vice President
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Attention: President
(Telex No. 127001 Route
to Citiswitch Terminal
NYEQF)
Telecopy No. 914-899-7015
AGENT: CITICORP NORTH AMERICA, INC.,
as Agent
By__________________________
Vice President
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Attention: Corporate
Asset Funding
Department
(Telex No. 127001 Route
to Citiswitch Terminal
NYEQF)
Telecopy No. 914-899-7015
-71-
<PAGE> 76
EXHIBIT A
CERTIFICATE
Dated as of [Initial Transfer Date]
Reference is made to the Lease Receivables Transfer Agreement dated as of
October 7, 1994 (the "Agreement") among LDI Lease Receivables Funding Corp.
(the "Transferor"), CXC Incorporated (the "Transferee"), and Citicorp North
America, Inc., as Agent. The terms defined in the Agreement are used herein as
therein defined.
The Transferor hereby transfers and assigns to the Agent for the account of
the Transferee the Transferred Assets acquired in each Transfer from the
Transferor by the Transferee under the Agreement.
Each Capital Transfer made by the Transferee from the Transferor shall be
endorsed by the Agent for the Transferee on the grid attached hereto which is
part of this Certificate, and such endorsement shall evidence the interest of
the Transferee in the Transferred Assets transferred with respect to such
Capital Transfer.
This Certificate is made without recourse except as otherwise provided in
the Agreement.
Without the prior written consent of the Agent, neither this Certificate nor
any of the Transferred Assets evidenced hereby may be sold, assigned or
otherwise transferred by the Transferee except to Citicorp North America, Inc.,
Citibank, N.A. or any other Affiliate of Citicorp North America, Inc. Each
such permitted assignment by the Transferee of Transferred Assets evidenced
hereby shall be endorsed by the Agent for the Transferee on the grid attached
hereto which is part of this Certificate, and such endorsement shall evidence
the assignment by the Transferee of such Transferred Assets.
Also, each reduction in Capital in respect of the Transferred Assets
evidenced hereby shall be endorsed by the Agent for the Transferee on the grid
attached hereto which is part of this Certificate.
This Certificate shall be governed by and construed in accordance with the
laws of the State of New York.
<PAGE> 77
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly
executed and delivered by its duly authorized officer as of the date first
written above.
LDI LEASE RECEIVABLES FUNDING CORP.
By___________________________
Title:
-2-
<PAGE> 78
DATES AND AMOUNTS OF CAPITAL TRANSFERS,
REDUCTIONS IN CAPITAL AND ASSIGNMENTS
Date of
Capital
Transfer or Amount of Amount of Aggregate
Reduction or Capital Reduction Amount of Capital
Assignment Transfer In Capital Assignment Outstanding
- - ----------- --------- ---------- ---------- -----------
-3-
<PAGE> 79
EXHIBIT B
DESCRIPTION OF CREDIT AND COLLECTION POLICY
Attached
<PAGE> 80
EXHIBIT C
FORM OF INTEREST RATE HEDGE ASSIGNMENT
Attached
<PAGE> 81
EXHIBIT D
FORMS OF LEASES
Attached
<PAGE> 82
EXHIBIT E
FORM OF LOCK-BOX AGREEMENT
Attached
<PAGE> 83
EXHIBIT F
FORM OF SETTLEMENT REPORT
Attached
<PAGE> 84
EXHIBIT G
FORM OF OPINIONS OF COUNSEL FOR TRANSFEROR
(Attached)
<PAGE> 85
EXHIBIT H
LIST OF OFFICES OF TRANSFEROR
WHERE RECORDS ARE KEPT
4770 Hinckley Industrial Parkway
Cleveland, Ohio 44109
Telecopy No. 216-485-4922
<PAGE> 86
EXHIBIT I
LOCK-BOX BANKS
Bank One, Cleveland, N.A.
600 Superior Avenue
Cleveland, Ohio 44114
Lock-Box No. 75114
Lock-Box Account No. 801937916
<PAGE> 87
EXHIBIT J
FORM OF INTEREST RATE HEDGE REPORT
Attached
<PAGE> 88
EXHIBIT K
INTEREST RATE HEDGING PARAMETERS
Attached
<PAGE> 1
EXHIBIT 4.15
Execution Copy
LEASE RECEIVABLES
PURCHASE AND CONTRIBUTION AGREEMENT
Dated as of October 7, 1994
Between
LDI Lease Receivables Funding Corp.
as the Buyer
------------
and
LDI CORPORATION
as the Originator and the Sub-Servicer
--------------------------------------
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Section Page
- - ------- ----
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 1.03. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.02. Purchases from the Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.03. Purchases of Interests in Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.04. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.05. General Settlement Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.06. Payments and Computations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.07. Contribution of Equipment and Other
Assets to the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.08. Transfer of Records to the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.09. Perfection of Liens; Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial
Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.02. Conditions Precedent to All Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.03. Effect of Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V
GENERAL COVENANTS OF THE ORIGINATOR
SECTION 5.01. Affirmative Covenants of the Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.02. Reporting Requirements of the
Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.03. Negative Covenants of the Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.04. Financial Covenants of the Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C>
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Sub-Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.02. Rights of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.03. Further Action Evidencing Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII
INDEMNIFICATION; SUBSTITUTIONS AND RETRANSFERS
SECTION 8.01. Indemnities by the Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.02. Substitution and Retransfer of Lease
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.04. Binding Effect; Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.05. GOVERNING LAW; WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.06. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.07. Execution in Counterparts; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
-ii-
<PAGE> 4
LIST OF EXHIBITS
----------------
EXHIBIT A Form of Certificate to Buyer
EXHIBIT B Description of Credit and Collection Policy
EXHIBIT C Form of Interest Rate Hedge Assignment
EXHIBIT D Form of Leases
EXHIBIT E Form of Lock-Box Agreement
EXHIBIT F Form of Settlement Report
EXHIBIT G Form of Opinion(s) of Counsel for Originator
EXHIBIT H Form of Letter to Accompany Forecasts
EXHIBIT I List of Offices of Originator where Records Are Kept
EXHIBIT J List of Lock-Box Banks
EXHIBIT K Trade Names and Assumed Names
EXHIBIT L Form of Interest Rate Hedge Report
EXHIBIT M Interest Rate Hedging Parameters
-iii-
<PAGE> 5
LEASE RECEIVABLES PURCHASE AND CONTRIBUTION AGREEMENT
Dated as of October 7, 1994
LDI LEASE RECEIVABLES FUNDING CORP., a Delaware corporation (the "Buyer"),
and LDI CORPORATION, a Delaware corporation as the "Originator" and the
"Sub-Servicer," agree as follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are capitalized and used
throughout this Agreement (in addition to those defined above) are defined in
Article I of this Agreement.
(2) The Originator is in the business of procuring, trading in, leasing,
distributing, financing, and providing associated services with respect to,
equipment, including computer equipment;
(3) The Buyer is a special-purpose Subsidiary of the Originator established
to purchase and otherwise acquire Lease Receivables and related
Purchased/Contributed Assets;
(4) The Originator wishes from time to time to offer to sell or contribute
as capital to the Buyer Lease Receivables and related Purchased/Contributed
Assets; and
(5) The Buyer desires to procure such Lease Receivables and related
Purchased/Contributed Assets from the Originator;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADVERSE CLAIM" means a lien, security interest, charge, encumbrance or
other right or claim of any Person other than Permitted Encumbrances.
"AFFILIATE" means, with respect to any Person, a Person: (i) that directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such Person; (ii) that beneficially owns or
holds 5% or more of any class of the voting stock (or, in the case of a Person
that is not a corporation, 5% or more of the equity interest) of such Person;
or (iii) 5% or more of the voting stock (or, in the case of a Person that is
not a corporation, 5% or more of the equity interest) of which is beneficially
owned or held, directly or indirectly, by such Person; PROVIDED, HOWEVER, that
neither the Agent nor CXC shall be deemed to be an Affiliate
<PAGE> 6
of the Originator. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting stock or an
equity interest, by contract, or otherwise.
"AFFILIATED OBLIGOR" means any Obligor which is an Affiliate of another
Obligor.
"AGENT" has the meaning assigned to that term in the CXC Agreement.
"ALTERNATE BASE RATE" means a fluctuating interest rate per annum as shall
be in effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by Citibank in New York, New
York, from time to time as Citibank's base rate; or
(b) 1/2 of one percent above the latest three-week moving average of
secondary market morning offering rates in the United States for three-month
certificates of deposit of major United States money market banks, such
three-week moving average being determined weekly on each Monday (or, if any
such day is not a Business Day on the next succeeding Business Day) for the
three-week period ending on the previous Friday by Citibank on the basis of
such rates reported by certificate of deposit dealers to and published by the
Federal Reserve Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates received by Citibank
from three New York certificate of deposit dealers of recognized standing
selected by Citibank, in either case adjusted to the nearest 1/4 of one
percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4
of one percent; or
(c) 1/2 of one percent per annum above the Federal Funds Rate.
"BANK SECURITY AGREEMENT" means the Amended and Restated Security Agreement
dated as of July 29, 1994, by and between the Originator, as the Grantor, and
Continental Bank, in its capacity as the Collateral Agent with respect thereto.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Section 101 ET SEQ.), as amended from time to time, or any successor statute.
"BENEFIT PLAN" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) in respect of which the Originator or
any ERISA Affiliate is, or at
-2-
<PAGE> 7
any time within the immediately preceding six (6) years was, an "employer" as
defined in Section 3(5) of ERISA.
"BUSINESS DAY" means any day other than a Saturday, Sunday or public holiday
or the equivalent for banks in New York City.
"CAPITAL" has the meaning assigned to that term in the CXC Agreement.
"CERTIFICATE" means a certificate of assignment, in the form of EXHIBIT A
evidencing the assignment by the Originator to the Buyer of the
Purchased/Contributed Assets.
"CITIBANK" means Citibank, N.A., a national banking association.
"COLLATERAL CUSTODIAN" means the "Collateral Custodian" as defined in that
certain Collateral Custodian Agreement dated as of the Initial Purchase Date
among the Buyer, the Originator, CXC, the Agent and the Fifth Third Bank, as
Collateral Custodian.
"COLLECTION AGENT" means at any time the Person(s) then authorized pursuant
to Article VI of the CXC Agreement to service, administer and collect Lease
Receivables.
"COLLECTION AGENT FEE" has the meaning assigned to that term in SECTION 6.01.
"COLLECTION DATE" has the meaning assigned to that term in the CXC Agreement.
"COLLECTIONS" means, with respect to any Purchased Lease Receivable, all
cash collections and other cash proceeds of such Purchased Lease Receivable,
including, without limitation, all cash proceeds of Related Security and other
related Purchased/Contributed Assets with respect to such Purchased Lease
Receivable, and any Collection of such Purchased Lease Receivable deemed to
have been received pursuant to SECTION 2.05 or SECTION 8.02 (it being
understood that the Originator shall pay all such deemed Collection amounts to
the Buyer by depositing the amount thereof into the Lock-box Account.
"COMPANY DOCUMENT" shall mean the Expense and Tax-Sharing Agreement dated as
of the Initial Purchase Date herewith together with any other agreements
between the Originator and the Buyer.
"CONTRIBUTED EQUIPMENT" has the meaning assigned to that term in SECTION
2.07.
"CREDIT AGREEMENT" means the Second Amended and Restated Credit Agreement
dated as of July 29, 1994, by and between the Originator, as the Borrower, the
various financial
-3-
<PAGE> 8
institutions party thereto as "Banks" and National City Bank, Society National
Bank and Continental Bank, as Co-Agents for the Banks.
"CREDIT AND COLLECTION POLICY" means those credit and collection policies
and practices relating to Leases and Lease Receivables described in EXHIBIT B,
as modified in compliance with SECTION 5.03(C).
"CXC" means CXC Incorporated, a Delaware corporation.
"CXC AGREEMENT" means that certain Lease Receivables Transfer Agreement
dated as of the date hereof between CXC, Citicorp North America, Inc.,
individually and as the Agent, and the Buyer as such agreement may be amended,
supplemented or modified from time to time.
"CXC DISCOUNT RATE" has the meaning assigned to the term "Discount Rate" in
the CXC Agreement.
"CXC DISCOUNTED VALUE" means, with respect to any Lease Receivable, the
present value of the aggregate amount of the remaining Periodic Installments of
Rent under the related Lease, with such aggregate amount discounted to present
value using the CXC Discount Rate for such Lease Receivable and a payment
schedule of the first day of each month commencing with the first day of the
month in which the CXC Discounted Value is calculated.
"DEFAULTED LEASE RECEIVABLE" means a Lease Receivable at any time: (i) as
to which any two of the immediately preceding six scheduled payments (other
than payments for freight charges or administrative fees), or parts thereof,
remain unpaid for more than 90 days from the original due date for such
payment, (ii) as to which the Obligor thereof has taken any action, or suffered
any event to occur, of the type described in SECTION 7.01(G) or (iii) which,
consistent with the Credit and Collection Policy, has been or should be written
off the Originator's books as uncollectible.
"DELINQUENT LEASE RECEIVABLE" means a Lease Receivable that is not a
Defaulted Lease Receivable and (i) as to which any payment, or part thereof,
remains unpaid for more than 30 days from the original due date for such
payment or (ii) which, consistent with the Credit and Collection Policy, has
been or should be classified as delinquent by the Originator.
"DESIGNATED OBLIGOR" means, at any time, any Obligor of the Originator
unless the Buyer has, following three Business Days' notice, advised the
Originator that such Obligor shall not be considered a Designated Obligor.
"DILUTION FACTORS" means with respect to the Purchased Lease Receivables,
any credits, rebates, freight charges, cash discounts, store opening discounts,
volume discounts, cooperative
-4-
<PAGE> 9
advertising expenses, royalty payments, warranties, cost of parts required to
be maintained by agreement (whether express or implied), allowances, disputes,
chargebacks, returned or repossessed goods, inventory transfers, allowances for
early payments and other allowances that are made or coordinated with the
Originator's usual practices.
"DOL" means the United States Department of Labor and any successor
department or agency.
"ELIGIBLE LEASE RECEIVABLE" means, at any time, a Lease Receivable which
would be an "Eligible Lease Receivable" under the CXC Agreement.
"EQUIPMENT" means data processing, telecommunications and other capital
equipment leased by the Originator as lessor.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" means any (i) corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
IRC) as the Originator; (ii) partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of Section 414(c) of
the IRC) with the Originator or (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of the IRC) as the Originator, any
corporation described in clause (i) above or any partnership or other trade or
business described in clause (ii) above.
"EVENT OF TERMINATION" has the meaning assigned to that term in SECTION 7.01.
"FACILITY DOCUMENTS" shall mean collectively, this Agreement, the CXC
Agreement, the Lock-Box Agreements, the Termination and Reassignment Agreement,
the Company Document, and all other agreements, documents and instruments
delivered pursuant thereto or in connection therewith.
"FEDERAL FUNDS RATE" means, for any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for such day for such transactions received by
Citibank from three Federal funds brokers of recognized standing selected by
it.
"INITIAL PURCHASE DATE" means the date the first Purchase is made pursuant
to this Agreement.
-5-
<PAGE> 10
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement dated as of July
29, 1994 among the Originator, the Agent, CXC and Bank of America Illinois
(formerly Continental Bank), as Collateral Agent.
"INDEBTEDNESS" of any Person means (i) indebtedness of such Person for
borrowed money, (ii) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) obligations of such Person to pay the
deferred purchase price of property or services, (iv) obligations of such
Person as lessee under leases which shall have been or should be, in accordance
with generally accepted accounting principles, recorded as capital leases, (v)
obligations secured by any lien or other charge upon property or assets owned
by such Person, even though such Person has not assumed or become liable for
the payment of such obligations, (vi) obligations of such Person in connection
with any letter of credit issued for the account of such Person and (vii)
obligations of such Person under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (vi)
above.
"INTEREST RATE HEDGE ASSIGNMENT" means an assignment in substantially the
form of EXHIBIT C pursuant to which the Originator assigns to the Buyer (and
subsequently to the Agent), all Interest Rate Hedges obtained by the Originator
in connection with this Agreement other than Interest Rate Hedges entered into
by the Originator with Citibank which have been assigned to, and assumed by,
CXC.
"INTEREST RATE HEDGES" means interest rate exchange, collar, cap, swap or
similar agreements entered into by the Originator with third parties to provide
protection to, or minimize the impact upon, the Buyer and CXC of increasing
Transferee Rates (as defined in the CXC Agreement).
"IRC" means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.
"IRS" means the Internal Revenue Service of the United States of America.
"LEASE" means a lease agreement between the Originator and an Obligor,
having payment and enforcement terms substantially as favorable to the
Originator as those contained in one of the forms of written contract set forth
in EXHIBIT D or otherwise approved by the Buyer, pursuant to which the
Originator leases Equipment to such Obligor.
"LEASE RECEIVABLE" means, with respect to any Lease at any time, all
Periodic Installments of Rent then or thereafter payable by the Obligor under
such Lease, together with all
-6-
<PAGE> 11
supplemental or additional payments required by the terms of such Lease with
respect to insurance, maintenance, ancillary products and services and other
specific charges, excluding any such payments or charges which constitute sales
or other taxes or the price for a purchase option.
"LOCK-BOX ACCOUNT" means an account maintained at a Lock-Box Bank for the
purpose of receiving Collections.
"LOCK-BOX AGREEMENT" means an agreement, in substantially the form of
EXHIBIT E, among the Originator, the Buyer and a Lock-Box Bank which agreement
sets forth the rights of the Agent, the Originator, the Buyer and the Lock-Box
Bank with respect to the disposition and application of the Collections
received into the applicable Lock-Box Account, including, without limitation,
the right of the Agent to direct the Lock-Box Bank to remit all Collections of
Transferred Lease Receivables (as defined in the CXC Agreement) directly to the
Agent pursuant to SECTION 6.03 of the CXC Agreement.
"LOCK-BOX BANK" means any of the banks holding one or more lock-box accounts
for receiving Collections from Purchased Lease Receivables.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either the Originator or any ERISA Affiliate.
"OBLIGOR" means a Person obligated to make payments on a Lease Receivable
pursuant to a Lease.
"OBLIGOR UCC FILING REQUIREMENT" means, with respect to any Purchased Lease
Receivable, that the Originator has obtained appropriate UCC financing
statements (Form UCC-1) executed by the Obligor of such Lease which UCC
financing statements have been filed in all applicable jurisdictions, so that
if a court or other Person were to determine that such Lease transferred an
ownership (rather than a leasehold) interest in the Equipment subject thereto
to the Obligor, the Originator would have a perfected security interest in such
Equipment, free and clear of any Adverse Claims except those held by the Buyer
hereunder (or any assignee thereof pursuant to other Facility Documents);
PROVIDED, HOWEVER, that, except as required by SECTION 2.09, the actual filing
of such UCC financing statements shall not be applicable with respect to any
Lease if the Outstanding Balance of the Lease Receivable related thereto plus
the Outstanding Balance of all other Purchased Lease Receivables of the related
Obligor arising under Leases pursuant to which the Equipment is located in the
same UCC filing jurisdiction is less than $100,000; PROVIDED, FURTHER, that,
notwithstanding the foregoing PROVISO, at all times, such UCC financing
statements shall be filed with respect to Equipment such that the aggregate
Outstanding Balance of the Lease Receivables related to such
-7-
<PAGE> 12
Equipment equals or exceeds 75% of the Purchased Lease Receivables Balance.
"OUTSTANDING BALANCE" of any Lease Receivable at any time means the CXC
Discounted Value of the remaining Periodic Installments of Rent under the
related Lease, as such amounts are adjusted as a result of any of the events
described in the first sentence of SECTION 2.05. Notwithstanding anything to
the contrary contained in this Agreement, if any payment under a Lease
Receivable was not paid when due and if such payment remains unpaid at the time
the Outstanding Balance of that Lease Receivable is calculated for any purpose,
then for purposes of calculating the "OUTSTANDING BALANCE" of such Lease
Receivable the CXC Discounted Value of any such unpaid payment shall be equal
to such unpaid payment.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"PERIODIC INSTALLMENTS OF RENT" means, with respect to any Lease, the
aggregate amount of rent installments payable by the Obligor under such Lease,
excluding however, all supplemental or additional payments required by the
terms of such Lease with respect to taxes, insurance, maintenance, ancillary
products and services and other specific charges.
"PERMITTED ENCUMBRANCE" means any of the following:
(a) liens, charges or other encumbrances for taxes and assessments which
are not yet due and payable;
(b) liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in respect
of which the Originator shall at any time in good faith be prosecuting an
appeal or proceeding for a review and in respect of which a stay of execution
pending such appeal or proceeding for review shall have been secured, PROVIDED,
that the interest transferred hereunder or any portion thereof transferred or
intended to be transferred hereunder is not, in the reasonable opinion of the
Buyer, unreasonably jeopardized thereby;
(c) liens, charges or other encumbrances or priority claims incidental to
the conduct of business or the ownership of properties and assets (including
warehousemen's and attorneys' liens and statutory landlords' liens) and
deposits, pledges or liens to secure statutory obligations, surety or appeal
bonds or other liens of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money, PROVIDED in each
case, the obligation secured is not overdue or, if overdue, is being contested
in good faith by appropriate actions or proceedings, and PROVIDED, FURTHER,
that the transferred interest hereunder or any portion thereof
-8-
<PAGE> 13
transferred or intended to be transferred hereunder is not, in the reasonable
opinion of the Buyer, jeopardized thereby;
(d) liens, charges or encumbrances in favor of the Buyer or the Agent or
granted to a Liquidity Provider (as defined in the CXC Agreement) by the Agent;
or
(e) with respect to Equipment, the interest of an Obligor in such
Equipment under the related Lease.
"PERSON" means an individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture,
government (or any agency or political subdivision thereof) or other entity.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA in
respect of which the Originator or any ERISA Affiliate is, or within the
immediately preceding six years was, an "employer" as defined in Section 3(5)
of ERISA.
"PURCHASE" means a purchase of Purchased Lease Receivables, Leases with
respect to such Purchased Lease Receivables, Related Security with respect to
such Purchased Lease Receivables and Collections with respect thereto by the
Buyer from the Originator pursuant to SECTIONS 2.01 and 2.02.
"PURCHASED/CONTRIBUTED ASSETS" means, at any time, all then outstanding
Purchased Lease Receivables, Related Security with respect to such Purchased
Lease Receivables, Contributed Equipment with respect to such Purchased Lease
Receivables, Leases with respect to such Purchased Lease Receivables, Interest
Rate Hedges covering Purchased Lease Receivables and Collections with respect
to, and other proceeds of, such Purchased Lease Receivables, including, without
limitation, all Collections of Purchased Lease Receivables relating to payments
due thereunder at any time during the month in which such Lease Receivable
became a Purchased Lease Receivable.
"PURCHASED LEASE RECEIVABLE" means any Lease Receivable which appears on any
list of Lease Receivables at any time hereafter submitted to and accepted by
the Buyer pursuant to SECTION 2.02, whether purchased by the Buyer or
contributed to the capital of the Buyer. Once a Lease Receivable appears on
any such list it shall remain a Purchased Lease Receivable; PROVIDED, HOWEVER,
that "PURCHASED LEASE RECEIVABLE" shall include any Lease Receivable which is
substituted pursuant to SECTION 8.02 for any existing Purchased Lease
Receivable; PROVIDED FURTHER, HOWEVER, that with respect to any Lease
Receivable that is retransferred to the Originator pursuant to SECTION 8.02,
following the Buyer's receipt of the retransfer price for such Lease
Receivable, "PURCHASED LEASE RECEIVABLE" shall not include the Lease Receivable
so retransferred.
-9-
<PAGE> 14
"PURCHASED LEASE RECEIVABLES BALANCE" means, at any time, the aggregate
Outstanding Balance of the Purchased Lease Receivables.
"RECORDS" means all Leases and other documents, books, records and other
information (including without limitation, computer programs, tapes, discs,
punch cards, data processing software and related property and rights)
maintained with respect to Leases and the related Obligors.
"RELATED SECURITY" means with respect to any Lease:
(i) all security interests or liens and property subject thereto from time
to time purporting to secure payment of the Lease Receivable arising under
such Lease, whether pursuant to such Lease or otherwise;
(ii) the assignment to the Buyer, of all UCC financing statements covering
any collateral securing payment of the Lease Receivable arising under such
Lease;
(iii) all guarantees, indemnities, warranties, letters of credit, insurance
policies and proceeds and premium refunds thereof and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of the Lease Receivable arising under such Lease whether pursuant to
the Lease related to such Lease Receivable or otherwise;
(iv) all of the Originator's right, title and interest in, to and under any
Lease of Equipment which was repossessed from an Obligor of a Purchased Lease
Receivable to the extent that the Outstanding Balance of such Purchased Lease
Receivable remains unpaid;
(v) all Records; and
(vi) all proceeds of the foregoing.
"REPORTABLE EVENT" means any of the events described in Section 4043 of
ERISA.
"RISK RATING" means a credit rating on a scale of 1 through 10 given to each
Obligor pursuant to the Credit and Collection Policy (with 1 being the best
credit rating).
"SETTLEMENT DATE" means the Initial Purchase Date and thereafter, the 15th
day of each month; PROVIDED, that if in any month such day is not a Business
Day, the "SETTLEMENT DATE" for such month shall be the first Business Day to
occur after such 15th day; PROVIDED, FURTHER, that (i) the Originator may, in
its discretion, by notice to the Buyer, request that Settlement Dates occur
more frequently than monthly and (ii) the Buyer may, in its
-10-
<PAGE> 15
discretion, by notice to the Originator, require that Settlement Dates occur
more frequently than monthly (but, prior to the Termination Date, no more
frequently than twice each month).
"SETTLEMENT REPORT" means a report, in substantially the form of EXHIBIT F,
furnished by the Originator to the Buyer pursuant to SECTION 2.05.
"SUB-SERVICER" has the meaning assigned to that term in SECTION 6.01.
"SUBSIDIARY" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the Board of Directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"TERMINATION AND REASSIGNMENT AGREEMENT" means that certain Termination and
Reassignment Agreement dated as of the Initial Purchase Date executed by the
Originator, CXC and the Agent pursuant to which certain receivables transferred
to CXC pursuant to the Amended and Restated Lease Receivables Purchase
Agreement dated as of February 15, 1994 among the Originator, the Transferee
and the Agent shall be reacquired by the Originator and such agreement is
terminated in accordance with its terms.
"TERMINATION DATE" means the earliest of (i) that Business Day which the
Originator designates as the Termination Date by notice to the Buyer at least
five Business Days prior to such Business Day, (ii) that Business Day which the
Buyer designates as the Termination Date by notice to the Originator at least
five Business Days prior to such Business Day, (iii) the date of the
declaration or automatic occurrence of the Termination Date pursuant to SECTION
7.01, (iv) the occurrence of the Termination Date under the CXC Agreement and
(v) February 1, 1997.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the specified jurisdiction.
SECTION 1.02. OTHER TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles. All terms used in Article 9 of the UCC in the State of New York,
and not specifically defined herein, are used herein as defined in such Article
9.
SECTION 1.03. COMPUTATION OF TIME PERIODS. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
-11-
<PAGE> 16
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. FACILITY. (a) On the terms and conditions hereinafter set
forth, the Buyer may in its sole discretion, purchase Purchased Lease
Receivables, Leases with respect to such Purchased Lease Receivables, Related
Security with respect to such Purchased Lease Receivables and Collections with
respect thereto from the Originator from time to time during the period from
the date the condition precedent to the initial Purchase in SECTION 3.01 is
satisfied to the Termination Date. Nothing in this Agreement shall be deemed
to be or construed as a commitment by the Buyer to purchase any
Purchased/Contributed Assets at any time.
(b) It is the intention of the parties hereto that each Purchase of Lease
Receivables and related Lease, Related Security and Collections made hereunder
shall constitute a "sale of chattel paper," as such term is used in Article 9
of the UCC, which sales are absolute and irrevocable and provide the Buyer with
the full benefits of ownership of the Purchased Lease Receivables and such
related Purchased/Contributed Assets. Neither the Originator nor the Buyer
intends the transactions contemplated hereunder to be, or for any purpose to be
characterized as, loans from the Buyer to the Originator secured by such
assets. If at any time a court characterizes the Purchases hereunder as loans
by the Buyer to the Originator, then the Originator hereby pledges, grants a
security interest in and assigns to the Buyer, all of the Originator's right
and title to and interest in the Purchased Lease Receivables, the Related
Security, the other Purchased/Contributed Assets and Collections related
thereto as security for such loans and for the payment and performance of all
obligations of the Originator hereunder. In view of the intention of the
parties hereto that the Purchases of Lease Receivables and related Leases made
hereunder shall constitute sales of such Lease Receivables and related Leases
rather than a loan secured by such Lease Receivables and related Leases, the
Originator agrees to note on its financial statements that such Lease
Receivables and related Leases have been sold to the Buyer.
SECTION 2.02. PURCHASES FROM THE ORIGINATOR.
(a) Each Purchase shall be made on a Settlement Date, provided, that a
notice requesting such Purchase is received by the Buyer at least one Business
Day before such Settlement Date. Each such notice of a proposed Purchase
shall accompany a Settlement Report and shall specify that portion of the
Purchase Price which is payable in cash for the Purchased/Contributed Assets to
be transferred, a list of all Eligible Lease Receivables that the Originator
agrees will constitute Purchased Lease Receivables and a list of Related
Security with respect to such Lease Receivables (upon the request of the
Buyer). Such
-12-
<PAGE> 17
notice shall be accompanied by a certification from the Originator that, after
giving effect to the Purchase proposed in such notice, the Purchased Lease
Receivables hereunder arise under Leases of Equipment which constitute a
representative sample of the types of Equipment subject to Leases entered into
by the Originator. The Buyer shall promptly thereafter notify the Originator
whether the Buyer has determined to make such Purchase.
(b) The purchase price (the "PURCHASE PRICE") for the new Lease
Receivables noted on a Settlement Report (together with the related
Purchased/Contributed Assets) payable on any Settlement Date shall be an amount
equal to the aggregate present values of the aggregate amount of the remaining
Periodic Installments of Rent under each related Lease, with such aggregate
amount discounted to present value using the Purchase Price Discount Rate for
such Lease Receivable and a payment schedule of the first day of each month
commencing with the first day of the month in which the Purchase Price is
calculated. "PURCHASE PRICE DISCOUNT RATE" means, for purposes of the
foregoing calculation, a rate equal to the CXC Discount Rate with respect to
such Lease Receivable applicable to such Lease Receivable under the CXC
Agreement on such Settlement Date.
(c) Except as otherwise provided below in this SECTION 2.02, the Purchase
Price for the Purchased/Contributed Assets sold by the Originator under this
Agreement shall be payable in full in cash by the Buyer, in each case on the
date of each such Purchase, except that the Buyer may, with respect to any
Purchase, offset against such Purchase Price any amounts owed by the Originator
to the Buyer hereunder and which remain unpaid. On the date of each Purchase,
the Buyer shall, upon satisfaction of the applicable conditions set forth in
Article III, make available to the Originator the portion of the Purchase Price
payable in cash referred to above in same day funds.
(d) If, on any Settlement Date, the Buyer has insufficient funds to pay in
full the Purchase Price owed on such day, then the Originator shall be deemed
to have contributed to the capital of the Buyer Lease Receivables having a
Purchase Price equal to the otherwise unpaid portion of the total Purchase
Price otherwise owed on such day.
SECTION 2.03. PURCHASES OF INTERESTS IN LEASES. Although the Buyer has
Purchased the Leases that constitute Purchased/Contributed Assets, the
Originator shall, in its capacity as Sub-Servicer (i) perform all of the
obligations of the lessor under the Leases related to the Purchased Lease
Receivables and the exercise by Buyer of any of its rights thereunder or
hereunder shall not relieve Originator from such obligations and (ii) pay or
cause the Obligor to pay when due any taxes, including without limitation,
sales, excise and personal property taxes payable in connection with the
Purchased Lease Receivables, unless the Originator is contesting the payment of
-13-
<PAGE> 18
such taxes in good faith and by appropriate proceedings; PROVIDED, THAT, the
Buyer shall have the right to exercise any of the rights of the lessor under
any such Lease and the Buyer shall perform (and hereby authorizes the
Sub-Servicer to perform on its behalf) the obligation of the lessor under any
such Lease to sell the Contributed Equipment covered by such Lease to the
Obligor under such Lease in the event such Obligor exercises its purchase
option under such Lease. Notwithstanding anything to the contrary contained in
this Agreement, the Buyer shall not have any obligation or liability with
respect to any Interest Rate Hedges nor shall the Buyer be obligated to perform
any of the obligations of the Originator thereunder. The Originator shall
perform all of its obligations under the Interest Rate Hedges to the same
extent as if Purchased/Contributed Assets had not been transferred hereunder
and the exercise by Buyer of any of its rights hereunder shall not relieve
Originator from such obligations.
SECTION 2.04. COLLECTIONS. Any Collections of Purchased Lease Receivables
received (or deemed to have been received) by the Originator shall be remitted
directly to the Buyer by depositing such Collections in the Lock-box Account
within one Business Day of Originator's receipt.
SECTION 2.05. GENERAL SETTLEMENT PROCEDURES.
(a) If on any day the Outstanding Balance of any Purchased Lease Receivable
is either (i) reduced or adjusted as a result of any defective, rejected,
returned, repossessed or foreclosed merchandise, any defective or rejected
services, any cash discount or any other adjustment made or performed by the
Originator or any other Person (including, without limitation, those described
in the definition of "DILUTION FACTORS"), or (ii) reduced or cancelled as a
result of a setoff in respect of any claim by the Obligor thereof against the
Originator or any other Person (whether such claim arises out of the same or a
related transaction or an unrelated transaction), the Originator shall be
deemed to have received on such day a Collection of such Purchased Lease
Receivable in the amount of such reduction, cancellation or adjustment. If on
any day any of the representations or warranties in the first sentence of
SECTION 4.01(H) is no longer true with respect to a Purchased Lease Receivable,
the Originator shall be deemed to have received on such day a Collection of
such Purchased Lease Receivable in full. Prior to the 15th day of each month
(or if such day is not a Business Day, the immediately succeeding Business
Day), the Originator shall prepare and forward to the Buyer, a Settlement
Report, as of the close of business of the Originator on the last day of the
immediately preceding month.
(b) Although the Originator and the Buyer agree that the Originator shall
have no right to so terminate, reject or not assume a Lease which has a
Purchased Lease Receivable arising thereunder (except to the limited extent in
the Originator's
-14-
<PAGE> 19
capacity as Sub-Servicer as provided in this SECTION 2.05(B), if the Originator
(or its successor in interest, including a trustee appointed under the
Bankruptcy Code) terminates, rejects or does not assume a Lease which has a
Purchased Lease Receivable arising thereunder, in whole or in part, prior to
the expiration of the original term of such Lease, whether such rejection,
termination or non-assumption is made pursuant to an equitable cause, statute,
regulation, judicial proceeding or other applicable law (including, without
limitation, Section 365 of the Bankruptcy Code), then the Originator shall be
deemed to have received Collections with respect to such Purchased Lease
Receivable in an amount equal to the amount of the Outstanding Balance thereof
that has not been, or may not be paid as a result of such rejection,
termination or non-assumption. If, prior to the Termination Date, any
Obligor under a Lease which has a Purchased Lease Receivable arising thereunder
exercises any purchase option provided thereunder, then the Originator shall be
deemed to have received Collections equal to the Outstanding Balance that would
be payable under such Purchased Lease Receivable had such option not been
exercised. If any Obligor under a Lease which has a Purchased Lease Receivable
arising thereunder shall default in the payment of monies due thereunder, or
commits any other default, the Originator, as Sub-Servicer, will not terminate
or reject such Lease without the Buyer's prior written consent thereto, and, if
the Buyer does so consent, the Buyer shall be entitled to receive all amounts
received from the Obligor in any enforcement proceeding and all amounts
realized from the subsequent disposition of the related Equipment or other
Related Security; PROVIDED, HOWEVER, that, prior to the Termination Date, the
Originator, as Sub-Servicer, may terminate or reject any such Lease if the
Originator substitutes a new Lease Receivable for the Lease Receivable which
arose under such Lease or accepts a retransfer of such Lease Receivable, in
either case, in accordance with the provisions of SECTION 8.02.
SECTION 2.06. PAYMENTS AND COMPUTATIONS, ETC. Except as otherwise provided
herein, all amounts to be paid or deposited by the Originator hereunder shall
be paid or deposited in accordance with the terms hereof no later than 11:00
A.M. (New York City time) on the day when due in lawful money of the United
States of America in immediately available funds to a special account in the
name of Buyer and maintained at Bank One, Cleveland, N.A.. The Originator
shall, to the extent permitted by law, pay to the Buyer interest on all amounts
not paid or deposited when due hereunder (whether owing by the Originator
individually or as Sub-Servicer) at 2% per annum above the Alternate Base Rate,
payable on demand; PROVIDED, HOWEVER, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. All computations of
interest and other fees hereunder shall be made on the basis of a year of 360
days for the actual number of days (including the first but excluding the last
day) elapsed.
-15-
<PAGE> 20
SECTION 2.07. CONTRIBUTION OF EQUIPMENT AND OTHER ASSETS TO THE BUYER. The
Originator hereby contributes to the capital of the Buyer and transfers,
assigns and otherwise conveys to the Buyer all of the Originator's right and
title to and interest in:
(a) the following property (the "Contributed Equipment"):
(i) All Equipment which is the subject of any Purchased Lease Receivable
and products and proceeds thereof, including, without limitation, all
payments under insurance or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to such Equipment;
(ii) All documents, books, records and other information (including,
without limitation, computer programs, tapes, discs, punch cards, data
processing software and related property and rights) maintained with respect
to such Equipment; and
(b) the rights under any Interest Rate Hedge assigned to the Buyer pursuant
to an Interest Rate Hedge Assignment.
The contribution of the Contributed Equipment shall be made automatically
upon the Purchase or acquisition by the Buyer of new Purchased Lease
Receivables without the need for any further documentation and upon the
execution of each Interest Rate Hedge, the Originator will deliver to the Agent
a certificate (with a copy to the Buyer) executed by the counterparty to such
Interest Rate Hedge in substantially the form of EXHIBIT A to the Interest Rate
Hedge Assignment.
SECTION 2.08. TRANSFER OF RECORDS TO THE BUYER.
(a) In connection with the Purchases of Lease Receivables hereunder, the
Originator hereby sells, transfers, assigns and otherwise conveys to the Buyer
all of the Originator's right and title to and interest in the Records relating
to all Lease Receivables included in the Purchased/Contributed Assets, without
the need for any further documentation in connection with any Purchase. In
connection with such transfer, the Originator hereby grants to the Buyer and
the Collection Agent an irrevocable, non-exclusive license to use, without
royalty or payment of any kind, all software used by the Originator to account
for the Purchased Lease Receivables, to the extent necessary to administer the
Purchased Lease Receivables, whether such software is owned by the Originator
or is owned by others and used by the Originator under license agreements with
respect thereto. The license granted hereby shall be irrevocable, and shall
terminate on the Collection Date.
-16-
<PAGE> 21
(b) The Originator shall take such action requested by the Buyer and/or
the Collection Agent, from time to time hereafter, that may be necessary or
appropriate to ensure that Buyer has (i) an enforceable ownership interest in
the Records relating to the Purchased Lease Receivables and (ii) an enforceable
right (whether by license or sublicense or otherwise) to use all of the
computer software used to account for the Purchased Lease Receivables and/or to
recreate such Records.
SECTION 2.09. PERFECTION OF LIENS; FURTHER ASSURANCES. Following the
occurrence of an Event of Termination, upon the request of the Buyer, the
Originator shall, at its expense, promptly execute and deliver all further
instruments and documents, and take all further action (including, without
limitation, the execution and filing of such financing or continuation
statements, or amendments thereto or assignments thereof), that may be
necessary or desirable, or that the Buyer may request, in order to (i) assure
compliance with the Obligor UCC Filing Requirement (without giving effect to
the PROVISO clauses of the definition of "OBLIGOR UCC FILING REQUIREMENT") and
(ii) perfect and protect any ownership or security interest granted or
purported to be granted to the Buyer hereunder or to enable the Buyer to
exercise and enforce its rights and remedies hereunder with respect to any
Purchased/Contributed Assets; PROVIDED, HOWEVER, that the Originator shall not
be required to take the actions described in clauses (i) and (ii) above with
respect to any Lease which is scheduled to expire by its terms within six
months from the date of the Buyer's request or with respect to which the Lease
Receivable arising thereunder has an Outstanding Balance of less than $10,000.
The Originator hereby authorizes the Buyer to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any part of the Purchased/Contributed Assets now existing or
hereafter arising without the signature of the Originator where permitted by
law. A carbon, photographic or other reproduction of this Agreement or any
financing statement covering the Purchased/Contributed Assets or any part
thereof shall be sufficient as a financing statement. The Originator will
furnish to the Buyer from time to time statements and schedules further
identifying and describing the Purchased/Contributed Assets and such other
reports in connection with the Purchased/Contributed Assets as the Buyer may
reasonably request, all in reasonable detail.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial
Purchase shall be subject to the condition precedent that the Buyer shall have
received the following, each in form and substance satisfactory to the Buyer:
-17-
<PAGE> 22
(a) The Certificate for the Buyer;
(b) The Company Document executed by the Buyer and the Originator;
(c) Acknowledgment copies of proper UCC-1 Financing Statements executed by
the Originator, as may be necessary or, in the opinion of the Buyer, desirable
under the UCC of all appropriate jurisdictions or any comparable law to perfect
the Buyer's interests in all Lease Receivables and Related Security in which an
interest may be assigned to it hereunder;
(d) Certified copies of Requests for Information or Copies (Form UCC-11)
(or a similar search report certified by a party acceptable to the Buyer),
dated a date reasonably near to the date hereof, listing all effective
financing statements which name the Originator (under its present name and any
previous names) as debtor and which are filed in the jurisdictions in which
filings were made pursuant to subsection (c) of this SECTION 3.01, together
with copies of such financing statements;
(e) The Termination and Reassignment Agreement dated as of the Initial
Purchase Date, executed by each of the Originator, the Agent and CXC, pursuant
to which certain lease receivables and related assets are transferred by CXC to
the Originator;
(f) A copy of the resolutions of the Board of Directors of the Originator
approving this Agreement, the Company Document, the Termination and
Reassignment Agreement and the other Facility Documents to be delivered by it
hereunder and the transactions contemplated hereby, certified by its Secretary
or Assistant Secretary;
(g) The Certificate of Incorporation of the Originator certified by the
Secretary of State of Delaware;
(h) Good Standing Certificates for the Originator issued by the Secretaries
of State of Delaware and Ohio;
(i) A certificate of the Secretary or Assistant Secretary of the Originator
certifying (i) the names and true signatures of the officers authorized on its
behalf to sign this Agreement, the Company Document, the Termination and
Reassignment Agreement and the other Facility Documents to be delivered by it
hereunder (on which certificate the Buyer (and the Agent) may conclusively rely
until such time as the Buyer (and the Agent) shall receive from the Originator
a revised certificate meeting the requirements of this subsection (j)) and (ii)
a copy of the Originator's by-laws;
(j) The Lock-Box Agreements with the Lock-Box Banks in each case, executed
by the Originator and the Buyer and acknowledged and agreed to by the
applicable Lock-Box Bank
-18-
<PAGE> 23
together with an acknowledgment and authorization executed by the Agent, and
acknowledged and agreed to by the applicable Lock-Box Bank;
(k) Copies of all written agreements, if any, between each Lock-Box Bank
and Originator with respect to the opening or operation of the Lock-Box
Accounts;
(l) An opinion of Benjamin W. Cannon, General Counsel of the Originator, in
substantially the form of EXHIBIT G and as to such other matters as the Buyer
may reasonably request; and
(m) An opinion of Baker & Hostetler, special counsel for the Originator, in
substantially the form of EXHIBIT G and as to such other matters as the Buyer
may reasonably request.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL PURCHASES. Each Purchase
(including the initial Purchase) by the Buyer from the Originator shall be
subject to the further conditions precedent that (a) with respect to any such
Purchase, on or prior to the date of such Purchase, the Originator shall have
delivered (i) to the Buyer, in form and substance satisfactory to the Buyer, a
completed Settlement Report dated within twenty days prior to the date of such
Purchase and containing such additional information as may be reasonably
requested by the Buyer and (ii) to the Agent a release executed by the
"Collateral Agent" under the Intercreditor Agreement and (iii) to the
Collateral Custodian the original copy of each Lease under which the Lease
Receivables to be included in such Purchase arose and (b) on the date of such
Purchase the following statements shall be true and the Originator by accepting
the cash portion of the Purchase Price shall be deemed to have certified that:
(i) The representations and warranties contained in SECTION 4.01 are
correct on and as of such day as though made on and as of such date,
(ii) No event has occurred and is continuing, or would result from such
Purchase which constitutes an Event of Termination or would constitute an
Event of Termination but for the requirement that notice be given or time
elapse or both, and
(iii) The Buyer shall not have delivered to the Originator a notice stating
that the Buyer shall not make any further Purchases hereunder (it being
understood that the Buyer may in its sole discretion refuse to make any
Purchase whether or not such notice has been delivered);
and (c) the Buyer shall have received such other approvals or documents as the
Buyer may reasonably request.
-19-
<PAGE> 24
SECTION 3.03. EFFECT OF PAYMENT OF PURCHASE PRICE. Upon the payment of the
Purchase Price for any Purchase, (whether in cash or through a capital
contribution), title to the Purchased Lease Receivables and the related
Purchased/Contributed Assets shall vest in the Buyer, whether or not the
conditions precedent to such Purchase were in fact satisfied; PROVIDED,
HOWEVER, that the Buyer shall not be deemed to have waived any claim it may
have under this Agreement for the failure by the Originator in fact to satisfy
any such condition precedent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR. The
Originator represents and warrants as follows:
(a) DUE INCORPORATION AND GOOD STANDING. The Originator is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction named at the beginning hereof and is duly qualified to do
business, and is in good standing, in every jurisdiction in which the nature of
its business requires it to be so qualified, except where the failure to be so
qualified would materially adversely affect (i) the interests hereunder of the
Buyer, (ii) the collectibility of any Purchased Lease Receivable or (iii) the
ability of the Originator or the Sub-Servicer to perform their respective
obligations hereunder.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery and
performance by the Originator of this Agreement, the Certificate, and all other
agreements, instruments and documents to be delivered hereunder, and the
transactions contemplated hereby and thereby, are within the Originator's
corporate powers, have been duly authorized by all necessary corporate action,
do not contravene (i) the Originator's charter or by-laws, (ii) any law, rule
or regulation applicable to the Originator, (iii) any contractual restriction
contained in any material indenture, loan or credit agreement, lease, mortgage,
security agreement, bond, note, or other agreement or instrument binding on or
affecting the Originator or its property or (iv) any order, writ, judgment,
award, injunction or decree binding on or affecting the Originator or its
property, and do not result in or require the creation of any Adverse Claim
upon or with respect to any of its properties (other than in favor of the Buyer
as contemplated hereunder); and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law. This Agreement and the
Certificate have been duly executed and delivered on behalf of the Originator.
(c) GOVERNMENTAL CONSENT. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due
-20-
<PAGE> 25
execution, delivery and performance by the Originator of this Agreement, the
Certificate or any other agreement, document or instrument to be delivered
hereunder.
(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement, the Certificate
and each other Facility Documents to be delivered by the Originator in
connection herewith constitute the legal, valid and binding obligation of the
Originator enforceable against the Originator in accordance with their
respective terms.
(e) FINANCIAL STATEMENTS. (i) The consolidated balance sheets of the
Originator and its consolidated Subsidiaries as at January 31, 1994, and the
related statements of income, retained earnings and cash flows of the
Originator and its consolidated Subsidiaries for the fiscal year then ended,
certified by Deloitte & Touche, independent public accountants, fairly present
in all material respects the consolidated financial condition of the Originator
and its consolidated Subsidiaries as at such date and the consolidated results
of the operations of the Originator and its consolidated Subsidiaries for the
period ended on such date, all in accordance with generally accepted accounting
principles consistently applied, and since January 31, 1994 there has been no
material adverse change in any such condition or operations other than as
disclosed in the consolidated balance sheets of the Originator and its
consolidated Subsidiaries as at April 30, 1994 and July 31, 1994, and the
related statements of income, retained earnings and cash flows of the
Originator and its consolidated Subsidiaries for the fiscal quarter then ended,
in each case including the notes thereto.
(f) NO LITIGATION. There are no actions, suits or proceedings pending, or
to the knowledge of the Originator threatened, against or affecting the
Originator or any of its Subsidiaries, or the property of the Originator or any
of its Subsidiaries, in any court, or before any arbitrator of any kind, or
before or by any governmental body, which may materially adversely affect (i)
the financial condition of the Originator or the Originator and its
consolidated Subsidiaries taken as a whole or (ii) the ability of the
Originator to perform its obligations under this Agreement or the Certificate
or (iii) the collectibility of the Purchased Lease Receivables. Neither the
Originator nor any of its Subsidiaries is in default with respect to any order
of any court, arbitrator or governmental body except for defaults with respect
to orders of governmental agencies which defaults are not material to the
business or operations of the Originator or any of its Subsidiaries.
(g) USE OF PROCEEDS. No proceeds of any Purchase will be used by the
Originator to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
-21-
<PAGE> 26
(h) PERFECTION OF INTEREST IN PURCHASED LEASE RECEIVABLES. Prior to the
Buyer's Purchase and/or acquisition of each Purchased/Contributed Asset
hereunder, the Originator is or will be the lawful owner of, and have good
title to, such Purchased/Contributed Asset free and clear of any Adverse Claim
and upon each Purchase and/or acquisition by the Buyer of Purchased/Contributed
Assets hereunder, the Buyer shall acquire a valid and perfected first priority
ownership interest in each Purchased Lease Receivable then existing or
thereafter arising and in the Related Security, the other Acquired Assets and
Collections and with respect thereto, in each case free and clear of any
Adverse Claim all such Purchases of Purchased Lease Receivables and related
Purchased/Contributed Assets constitute true and valid sales, and all such
Purchases and contributions of Purchased Lease Receivables and related
Purchased/Contributed Assets constitute true and valid transfers and
assignments of all of Originator's right, title and interest in, to and under
such Purchased/Contributed Assets (and not merely a pledge of such Purchased
Lease Receivables and related Purchased/Contributed Assets for security
purposes), enforceable against creditors of the Originator and no such
Purchased/Contributed Assets shall constitute property of the Originator; and
no effective financing statement or other instrument similar in effect covering
any Purchased Lease Receivable, the Related Security, Collections or the other
Purchased/Contributed Assets (other than any financing statement in favor of
the Collateral Agent under the Bank Security Agreement shall at any time be on
file in any recording office except such as may be filed in favor of the Buyer
(or its assignees) in accordance with this Agreement.
(i) ACCURACY OF INFORMATION. No Settlement Report (if prepared by the
Originator, or to the extent that information contained therein is supplied by
the Originator), information, exhibit, financial statement, document, book,
record or report (other than forecasts required to be delivered by the
Originator hereunder) furnished or to be furnished by the Originator to the
Buyer in connection with this Agreement is or shall be inaccurate in any
material respect as of the date it is or shall be dated or (except as otherwise
disclosed to the Buyer, as the case may be, at such time) as of the date so
furnished, or contains or shall contain any material misstatement of fact or
omits or shall omit to state a material fact or any fact necessary to make the
statements contained therein not materially misleading.
(j) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The chief place of
business and chief executive office of the Originator are located at the
address of the Originator referred to in SECTION 9.02 hereof and the locations
of the offices where the Originator keeps all the Records are listed on EXHIBIT
I (or at such other locations, notified to the Buyer in accordance with SECTION
5.01(F), in jurisdictions where all action required by SECTION 6.03 has been
taken and completed).
-22-
<PAGE> 27
(k) LOCK-BOX ACCOUNTS. Each Obligor of a Purchased Lease Receivable has
been instructed to remit payment on the Purchased Lease Receivables to the
Lock-Box Accounts. From and after the Initial Purchase Date, the Originator
will have no right, title and/or interest to any of the Lock-Box Accounts and
will maintain no lock-box accounts in its own name for the collection of such
Purchased Lease Receivables. The account numbers of all Lock-Box Accounts,
together with the names and addresses of all the Lock-Box Banks maintaining
such Lock-Box Accounts, are specified in EXHIBIT J.
(l) NO TRADE NAMES. Except as described in EXHIBIT K, the Originator has
no trade names, fictitious names, assumed names or "doing business as" names.
(m) SEPARATE CORPORATE EXISTENCE. The Originator is entering into the
transactions contemplated by this Agreement in reliance on the Buyer's identity
as a separate legal entity from the Originator and each of its Affiliates other
than the Buyer, and acknowledges that the Buyer and the other parties to the
Facility Documents are similarly entering into the transactions contemplated by
the other Facility Documents in reliance on the Buyer's identity as a separate
legal entity from the Originator and each such other Affiliate.
(n) TAXES. The Originator has filed or caused to be filed all Federal,
state and local tax returns which are required to be filed by it, and has paid
or caused to be paid all taxes shown to be due and payable on such returns or
on any assessments received by it, other than any taxes or assessments, the
validity of which are being contested in good faith by appropriate proceedings
and with respect to which the Originator has set aside adequate reserves on its
books in accordance with generally accepted accounting principles and which
have not given rise to any Adverse Claims.
(o) SOLVENCY. The Originator: (i) is not "insolvent" (as such term is
defined in Section 101(32)(A) of the Bankruptcy Code, (ii) is able to pay its
debts as they mature; and (iii) does not have unreasonably small capital for
the business in which it is engaged or for any business or transaction in which
it is about to engage.
(p) NO FRAUDULENT CONVEYANCE. The transactions contemplated by this
Agreement and by each of the Facility Documents are being consummated by the
Originator in furtherance of the Originator's ordinary business, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. By its receipt of the Purchase Prices
hereunder and its ownership of the capital stock of the Buyer, the Originator
shall have received reasonably equivalent value for the Lease Receivables sold
or otherwise conveyed to the Buyer under this Agreement.
-23-
<PAGE> 28
(q) SOFTWARE. Each of the Buyer and the Collection Agent, as assignee of
the Buyer, has (or will have, concurrently with the effectiveness hereof) an
enforceable right (whether by license, sublicense or assignment) to use all of
the computer software used to account for the Purchased Lease Receivables to
the extent necessary to administer the Purchased Lease Receivables.
ARTICLE V
GENERAL COVENANTS OF THE ORIGINATOR
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE ORIGINATOR. From the Initial
Purchase Date until the later of the Termination Date or the Collection Date,
the Originator will, unless the Buyer shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with all
applicable laws, rules, regulations and orders with respect to it, its business
and properties and all Lease Receivables and related Leases.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualifications
would materially adversely affect (i) the interests hereunder of the Buyer,
(ii) the collectibility of any Purchased Lease Receivable or (iii) the ability
of the Originator or the Sub-Servicer to perform their respective obligations
hereunder.
(c) AUDITS. At any time and from time to time upon prior written notice
to the Originator and during regular business hours, permit the Buyer, or its
agents or representatives, (i) to examine and make copies of and abstracts from
all Records, and (ii) to visit the offices and properties of the Originator for
the purpose of examining such Records, and to discuss matters relating to the
Lease Receivables or the Originator's performance hereunder with any of the
officers or employees of the Originator having knowledge of such matters.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Lease Receivables in the event of
the destruction of the originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Lease Receivables (including, without limitation, records
adequate to permit the daily identification of all Collections of and
adjustments to each Purchased Lease Receivable).
-24-
<PAGE> 29
(e) PERFORMANCE AND COMPLIANCE WITH LEASE RECEIVABLES AND LEASES. At its
expense timely and fully perform and comply, in all material respects, with all
material provisions, covenants and other promises required to be observed by it
under the Leases related to the Purchased Lease Receivables.
(f) LOCATION OF RECORDS. Keep its chief place of business and chief
executive office, and the offices where it keeps the Records, at the
address(es) of the Originator referred to in SECTION 4.01(J), or, in any such
case, upon 30 days' prior written notice to the Buyer, at such other locations
within the United States where all action required by SECTION 6.03 shall have
been taken and completed.
(g) CREDIT AND COLLECTION POLICIES. Comply in all material respects with
its Credit and Collection Policy in regard to each Purchased Lease Receivable
and the related Lease.
(h) COLLECTIONS. Instruct all Obligors to cause all Collections to be
deposited directly to a Lock-Box Account and if the Originator shall receive
any Collections (including, without limitation, any Collections deemed to have
been received pursuant to SECTION 2.05), Originator shall hold such Collections
in trust for the benefit of the Buyer and remit such Collections to the Buyer
by depositing such Collections into the Lock-Box Account within one Business
Day following Originator's receipt thereof.
(i) NATURE OF BUSINESS. Engage principally in, directly or indirectly
through the ownership of its Subsidiaries, the business of the distribution of
data processing, telecommunications and other capital equipment and the
servicing and short-term rental thereof.
(j) COMPLIANCE WITH ERISA. Establish, maintain and operate all Plans to
comply in all material respects with the provisions of ERISA, the IRC, and all
other applicable laws, and the regulations and interpretations thereunder.
(k) OBLIGOR UCC FILING REQUIREMENT. With respect to each Lease Receivable
that constitutes a Purchased Lease Receivable, comply with the Obligor UCC
Filing Requirement.
(l) MAINTENANCE OF INSURANCE. Maintain, or cause each Obligor to maintain,
with respect to the Leases related to the Purchased Lease Receivables and the
Equipment related thereto, casualty and general liability insurance which
provide at least the same coverage as a fire and extended coverage insurance
policy, issued by a company authorized to issue such policies in the State of
Ohio; PROVIDED, HOWEVER, that the foregoing covenant shall be satisfied with
respect to Obligors which have a Risk Rating of 1, 2 or 3 which self-insure on
a basis consistent with the Credit and Collection Policy. Such insurance
policies (and self-insurance where permitted) shall be maintained in an amount
which is not less than the aggregate Outstanding Balance of all
-25-
<PAGE> 30
Purchased Lease Receivables. Each such casualty and liability policy if
maintained by an Obligor, shall name the Originator or the Buyer as loss payee
and additional insured. The Originator shall remit, or shall cause to be
remitted, the proceeds of any such insurance policy to a Lock-Box Account.
(m) SEPARATE IDENTITY. Take all actions required to maintain the Buyer's
status as a separate legal entity, including, without limitation, (i) not
holding the Buyer out to third parties as other than an entity with assets and
liabilities distinct from the Originator and the Originator's other
Subsidiaries; (ii) not holding itself out to be responsible for the debts of
the Buyer or, other than by reason of owning capital stock of the Buyer, for
any decisions or actions relating to the business and affairs of the Buyer;
(iii) cause any financial statements consolidated with those of the Buyer to
state that the Buyer is a separate corporate entity with its own separate
creditors who, in any liquidation of the Buyer, will be entitled to be
satisfied out of the Buyer's assets prior to any value in the Buyer becoming
available to the Buyer's equity holders; (iv) taking such other actions as are
necessary on its part to ensure that all corporate procedures required by its
and the Buyer's respective certificates of incorporation and by-laws are duly
and validly taken; (v) keeping correct and complete records and books of
account and corporate minutes; (vi) not acting in any other matter that could
foreseeably mislead others with respect to the Buyer's separate identity; and
(vii) taking such other actions as may be necessary on its part to ensure that
the Buyer is in compliance at all times with SECTION 4.01(N) and SECTION
5.01(N) of the CXC Agreement.
(n) NEW NON-RECOURSE DEBT. For any fiscal year of the Originator, obtain
at least 15% of the increase in the Originator's total "Non-Recourse Debt" (as
defined in SECTION 5.04(A)) for such fiscal year in the form of "Non-Recourse
Lease Rentals" (as defined in the notes to the financial statements referred to
in SECTION 4.01(E)).
(o) INTEREST RATE HEDGES. Maintain Interest Rate Hedges satisfactory to
the Buyer (it being agreed that the maintenance of Interest Rate Hedges in
compliance with the parameters set forth on EXHIBIT M shall be satisfactory to
the Buyer) which the Buyer requests and which the Buyer requires in order to
comply with its obligations under the CXC Agreement. Prior to the purchase of
any such requested Interest Rate Hedge from any Person other than Citibank, the
Originator will offer to Citibank the opportunity to quote terms for such
Interest Rate Hedge to the Originator.
-26-
<PAGE> 31
SECTION 5.02. REPORTING REQUIREMENTS OF THE ORIGINATOR. From the Initial
Purchase Date until the later of the Termination Date or the Collection Date,
the Originator will, unless the Buyer shall otherwise consent in writing,
furnish to the Buyer:
(a) as soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of the Originator,
consolidated balance sheets of the Originator and its consolidated Subsidiaries
as of the end of such quarter, and consolidated statements of income and
retained earnings of the Originator and its consolidated Subsidiaries each for
the period commencing at the end of the previous fiscal year and ending with
the end of such quarter, certified by the chief financial officer, chief
accounting officer or treasurer of the Originator;
(b) as soon as available and in any event within 105 days after the end of
each fiscal year of the Originator, a copy of the consolidated balance sheets
of the Originator and its consolidated Subsidiaries as of the end of such year
and the related consolidated statements of income and retained earnings of the
Originator and its consolidated Subsidiaries for such year each reported on by
nationally recognized independent public accountants acceptable to the Buyer
(the Buyer acknowledges that any of the "Big 5" accounting firms will be
acceptable to the Buyer), and, upon the request of the Buyer, the foregoing
shall also include consolidating balance sheets and statements by business
segment as prepared by the management of the Originator;
(c) promptly after the sending or filing thereof, copies of all reports
which the Originator sends to any of its security holders and copies of all
reports and registration statements which the Originator files with the
Securities and Exchange Commission or any national securities exchange other
than registration statements relating to employee benefit plans and to
registrations of securities for selling security holders;
(d) as soon as possible and in any event within five Business Days after
the occurrence of each Event of Termination or each event which, with the
giving of notice or lapse of time or both, would constitute an Event of
Termination, the statement of the chief financial officer, chief accounting
officer or treasurer of the Originator setting forth details of such Event of
Termination or event and the action which the Originator proposes to take with
respect thereto;
(e) promptly after the filing or receiving thereof, copies of all reports
and notices with respect to any Reportable Event defined in Article IV of ERISA
which the Originator or any Subsidiary of the Originator files under ERISA with
the IRS or the PBGC or the DOL or which the Originator or any Subsidiary of the
Originator receives from the PBGC;
-27-
<PAGE> 32
(f) as soon as available and in any event not later than February 28 of
each year, a forecast for the next succeeding five fiscal years of the
Originator (except that after the Termination Date such forecast shall only be
required for the number of fiscal years between the Termination Date and one
year after the expected maturity of the Purchased Lease Receivables) in
substantially the form of forecast previously provided to the Agent, and
accompanied by a letter substantially similar to the letter attached hereto as
EXHIBIT H;
(g) on or before the 15th day of each month (or if such day is not a
Business Day, the immediately succeeding Business Day), a report summarizing
the Originator's Interest Rate Hedge portfolio as of such day, setting forth
the information contained in, and substantially in the form of, the report
attached hereto as EXHIBIT L; and
(h) promptly, from time to time, such other information, documents, records
or reports respecting the Lease Receivables or the conditions or operations,
financial or otherwise, of the Originator or any Subsidiary of the Originator
as the Buyer may from time to time reasonably request in order to protect the
interests of the Buyer under or as contemplated by this Agreement.
SECTION 5.03. NEGATIVE COVENANTS OF THE ORIGINATOR. From the Initial
Purchase Date until the later of the Termination Date or the Collection Date,
the Originator will not, without the written consent of the Buyer:
(a) SALES, LIENS, ETC. AGAINST LEASE RECEIVABLES AND RELATED ASSETS.
Except as otherwise provided herein, (i) sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist, any Adverse
Claim upon or with respect to, any Purchased Lease Receivable, Related Security
or Collections, or any related Lease, or upon or with respect to any Lock-Box
Account to which any Collections of any Lease Receivable are sent, or assign
any right to receive income in respect thereof, or (ii) create or suffer to
exist, any prior Adverse Claim upon or with respect to any Contributed
Equipment or Interest Rate Hedges.
(b) EXTENSION OR AMENDMENT OF LEASE RECEIVABLES. Except to the extent
permitted in SECTION 6.02 of the CXC Agreement in its capacity as Sub-Servicer
hereunder, extend, amend or otherwise modify, the terms of any Purchased Lease
Receivable, or amend, modify or waive, any term or condition of any Lease
related thereto, in either case, for any reason relating to a negative change
in the related Obligor's creditworthiness or inability to make any payment
under the related Lease.
(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make any change in
the character of its business or in
-28-
<PAGE> 33
the Credit and Collection Policy, which change would, in either case, impair
the collectibility of any Purchased Lease Receivable.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Make any change in its
instructions to Obligors regarding payments to be made to the Originator or
payments to be made to any Lock-Box Bank.
(e) MERGER ETC. (i) Merge with or into or consolidate with or into or
convey, transfer, lease or otherwise dispose or (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) or acquire all or substantially all of the
assets or capital stock or other ownership interest of, any Person, or permit
any Subsidiary of Originator to do so, except that (A) any Subsidiary of
Originator may merge or consolidate with or transfer assets to or acquire
assets from any other Subsidiary of Originator, (B) any Subsidiary of
Originator may merge into or transfer assets to the Originator or any other
Person and (C) the Originator or any Subsidiary of the Originator may acquire
the capital stock or assets of any other Person, provided in each case that
immediately after giving effect to such proposed transaction, no Event of
Termination or event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Termination, would exist, and in the case of
any such merger to which the Originator is a party, the Originator is the
surviving corporation.
(f) CHANGE IN CORPORATE NAME. Make any change to its corporate name or use
any trade names, fictitious names, assumed names or "doing business as" names
other than those described in EXHIBIT K, unless prior to the effective date of
any such name change or use, Originator delivers to the Buyer such Financing
Statements (Form UCC-1 and UCC-3) executed by Originator which the Buyer may
reasonably request to reflect such name change or use, together with such other
documents and instruments that the Buyer may request in connection therewith.
(g) ERISA MATTERS. (i) Engage or permit any ERISA Affiliate to engage in
any prohibited transaction for which an exemption is not available or has not
previously been obtained from the DOL; (ii) permit to exist any accumulated
funding deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of
the IRC, or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan
that the Originator or any ERISA Affiliate may be required to make under the
agreement relating to such Multiemployer Plan or any law pertaining thereto;
(iv) terminate any Benefit Plan so as to result in any liability; or (v) permit
to exist any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability of the Originator or any ERISA
Affiliate under ERISA or the IRC; PROVIDED, HOWEVER, the
-29-
<PAGE> 34
Originator and its ERISA Affiliates may take or allow such prohibited
transactions, accumulated funding deficiencies, payments, terminations and
reportable events described in clauses (i) through (iv) above so long as such
events occurring within any fiscal year of the Originator, in the aggregate,
involve a payment of money by or an incurrence of liability of the Originator
or any ERISA Affiliate (collectively, "ERISA Liabilities") in an amount which
does not exceed $5,000,000.
(h) TERMINATE OR REJECT LEASES. Without limiting SECTION 5.03(B) and
except as otherwise expressly permitted pursuant to SECTION 2.05, terminate or
reject any Lease under which a Purchased Lease Receivable has arisen prior to
the term of such Lease, whether such rejection or early termination is made
pursuant to an equitable cause, statute, regulation, judicial proceeding or
other applicable law (including, without limitation, Section 365 of the
Bankruptcy Code).
(i) ACCOUNTING TREATMENT. Prepare any financial statements or other
statements which shall account for the transactions contemplated by this
Agreement in any manner other than as the sale of, or a capital contribution
of, the Purchased/Contributed Assets by the Originator to the Buyer.
(j) CERTIFICATE OF INCORPORATION. Cause the Buyer to amend its Certificate
of Incorporation or By-laws in any manner which would require the consent of
the Buyer's independent director or directors, without the Agent's prior
written consent.
SECTION 5.04. FINANCIAL COVENANTS OF THE ORIGINATOR.
(a) DEFINED TERMS. As used in Section 5.04(b), the following terms shall
have the following meanings:
"AT RISK MORTGAGE OBLIGATION" means, as at any date, One Million Nine
Hundred Thousand Dollars ($1,900,000) MINUS the aggregate principal payments
made by LDI Realty Corp., an Ohio corporation ("LDI Realty"), since the
effective date of the Credit Agreement under that certain Note Secured by
Mortgage, dated January 31, 1991, executed by LDI Realty in favor of
Metropolitan Life Insurance Company, a New York corporation, in the original
principal amount of Five Million Eight Hundred Thousand Dollars ($5,800,000).
"CONSOLIDATED NET EARNINGS" means, for any Fiscal Quarter of the Originator,
the consolidated net after tax earnings, if any, of the Originator and its
Subsidiaries for such Fiscal Quarter; PROVIDED, HOWEVER, for purposes of
determining the Originator's compliance with SECTION 5.04(B)(I), that if such
consolidated net after tax earnings are less than zero (0) for any Fiscal
Quarter, Consolidated Net Earnings for such Fiscal Quarter shall be zero (0).
-30-
<PAGE> 35
"CONSOLIDATED TANGIBLE NET WORTH" means the excess of the net book value
(after deduction of all applicable reserves) of the assets (other than
goodwill) of the Originator and its Subsidiaries over the liabilities of the
Originator and its Subsidiaries, determined on a consolidated basis in
accordance with generally accepted accounting principles.
"CONTINGENT LIABILITY" means any agreement, undertaking, arrangement,
condition or circumstance by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor against
loss) any indebtedness, obligations or liabilities of any Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. The amount of any Person's obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
indebtedness, or obligation or other liability guaranteed thereby.
"DEBT" means the total liabilities of the Originator and its Subsidiaries as
reflected on the consolidated financial statements of the Originator.
"FISCAL QUARTER" means any period of three (3) consecutive calendar months
ending on April 30, July 31, October 31 or January 31 of a Fiscal Year.
"FISCAL YEAR" means any period of twelve (12) consecutive calendar months
ending on January 31.
"FUNDED DEBT" means any obligation for borrowed money or for the acquisition
of property or assets including guaranties, endorsements (other than
endorsements of negotiable instruments for collection or deposit in the
ordinary course of business) and other Contingent Labilities, but not including
Non-Recourse Debt.
"HEDGING TRANSACTION" means any interest rate swap, rate cap, rate floor or
rate collar transaction, or other exchange or rate protection transaction, or
any combination of such transactions or agreements entered into by any one (1)
or more of the Originator and/or its Subsidiaries; PROVIDED, HOWEVER, that the
net maximum interest rate of the underlying transaction relating to each
Hedging Transaction (as a result of the Hedging Transaction) shall not exceed a
rate per annum three percent (3%) in excess of (i) the "Prime Rate" under the
Credit Agreement at the time of such Hedging Transaction or (ii) the coupon
rate of any Subordinated Debt outstanding at the time of such Hedging
Transaction.
-31-
<PAGE> 36
"INCOME AVAILABLE FOR RECOURSE INTEREST EXPENSE" means the Consolidated Net
Earnings, before income taxes, of the Originator and its Subsidiaries, for each
Fiscal Quarter, PLUS the actual interest expense of the Originator and its
Subsidiaries deducted in computing such Consolidated Net Earnings, LESS the
amount of such interest expense which is payable with respect to Non-Recourse
Debt for such Fiscal Quarter, PLUS Restructuring Charges deducted in computing
such Consolidated Net Earnings, PLUS to the extent not included in the
definition of "RESTRUCTURING CHARGES," financing fees incurred by the
Originator since March 25, 1994, relating to the Originator's refinance and
restructure transactions with the Existing Lenders (as defined in the Bank
Security Agreement) which have been amortized or written off by the Originator
and which have otherwise been deducted by the Originator in computing such
Consolidated Net Earnings.
"INCOME AVAILABLE FOR TOTAL INTEREST EXPENSE" means the Consolidated Net
Earnings, before income taxes, of the Originator and its Subsidiaries on a
consolidated basis, for each Fiscal Quarter, PLUS the actual interest expense
of the Originator and its Subsidiaries deducted in computing such Consolidated
Net Earnings, PLUS Restructuring Charges deducted in computing such
Consolidated Net Earnings, PLUS to the extent not included in the definition of
"RESTRUCTURING CHARGES," financing fees incurred by the Originator since March
25, 1994, relating to the Originator's refinance and restructure transactions
with the Existing Lenders (as defined in the Bank Security Agreement) which
have been amortized or written off by the Originator and which have otherwise
been deducted by the Originator in computing such Consolidated Net Earnings.
"NET TOTAL UNHEDGED FUNDED DEBT" means all Funded Debt of the Originator and
its Subsidiaries bearing interest at fluctuating interest rates and having
original stated maturity dates which are at least sixty (60) days after the
date(s) such Funded Debt was incurred, LESS all assets of the Originator and
its Subsidiaries bearing interest at fluctuating interest rates, LESS all
outstanding Hedging Transactions and LESS any Unfunded Fixed Rate Funding
Commitments.
"NON-RECOURSE DEBT" means any Debt of the Originator and/or its Subsidiaries
for which neither the obligee nor any other Person has any legal recourse
against the Originator or any of its Subsidiaries, other than to certain
specified collateral which shall have been pledged by the Originator or its
Subsidiaries in connection with the incurrence thereof.
"RECOURSE INTEREST EXPENSE" means, for each Fiscal Quarter, the actual
interest expense of the Originator and its Subsidiaries deducted in computing
Consolidated Net Earnings for such Fiscal Quarter, LESS the amount of such
interest expense which is payable with respect to Non-Recourse Debt for such
Fiscal Quarter, PLUS, to the extent not included in the
-32-
<PAGE> 37
definition of "RESTRUCTURING CHARGES," financing fees incurred by the
Originator since March 25, 1994, relating to the Originator's refinance and
restructure transactions with the Existing Lenders (as defined in the Bank
Security Agreement) which have been amortized or written off by the Originator
and which have otherwise been deducted by the Originator in computing such
Consolidated Net Earnings.
"RESIDUAL VALUES" means the estimated net residual values (net of (i) the
amount of the "Aircraft Residual Reserve Amount" (as defined in the Credit
Agreement) included in the calculation of "Residual Values" under the Credit
Agreement, and (ii) any other reserves and unearned income), determined on a
consolidated basis, of leased equipment under capital leases and/or leveraged
leases of the Originator and its Subsidiaries PLUS the net book value of
equipment under operating leases of the Originator and its Subsidiaries,
determined as at the termination of such operating leases.
"RESTRUCTURING CHARGES" means the net (after tax) amounts set forth in
Originator's financial statements previously delivered and to be delivered in
accordance with the terms hereof, to the "Banks" under the Credit Agreement to
accurately reflect the valuation adjustments of receivables, inventory, and/or
net investments in leases, as well as charges against earnings related to
consolidations of Originator's facilities, discontinuation of specific business
lines, and severance of employees engaged in those business lines, all as
identified in the Originator's Strategic Plan delivered to the "Banks" under
the Credit Agreement on April 15, 1994.
"SENIOR SECURED DEBT" means all principal and interest owing by the
Originator under (i) the Credit Agreement, (ii) that certain Note Purchase
Agreement, as amended, with Northwestern National Life Insurance Company
("Northwestern"), Northern Life Insurance Company, American Investors Life
Insurance Company, Confederation Life Insurance Company ("Confederation") and
Beneficial Standard Life Insurance Company, dated as of August 1, 1989, with
respect to $20,000,000 9.96% Senior Notes Due 1995; (iii) that certain
promissory note, as amended, dated as of July 1, 1993, executed by the
Originator as the Grantor in favor of National Westminster Bank, USA, and (iv)
those Subject Facilities (as such term is defined in the "Intercreditor
Agreement" (as defined in the Credit Agreement)), other than those referred to
in CLAUSES (I), (II) and (III) of this definition.
"SUBORDINATED DEBT" means the Originator's 9-3/8% Convertible Subordinated
Notes due August 15, 2000 and any other indebtedness of the Originator which
has been subordinated in favor of the prior payment in full of Originator's
indebtedness to the Banks in accordance with the Credit Agreement.
-33-
<PAGE> 38
"TOTAL INTEREST EXPENSE" means, for each Fiscal Quarter, the actual interest
expense of the Originator and its Subsidiaries deducted in computing
Consolidated Net Earnings for such Fiscal Quarter, PLUS, to the extent not
included in the definition of "RESTRUCTURING CHARGES," financing fees incurred
by the Originator since March 25, 1994, relating to the Originator's refinance
and restructure transactions with the Existing Lenders (as defined in the Bank
Security Agreement) which have been amortized or written off by the Originator
and which have otherwise been deducted by the Originator in computing such
Consolidated Net Earnings.
"UNFUNDED FIXED RATE FUNDING COMMITMENTS" means the legally binding written
recourse or non-recourse lending commitments of third parties to the Originator
or any Subsidiary of the Originator which state that they will bear interest at
a fixed rate and which have not been consummated at the date of determination.
(b) From the Initial Purchase Date until the later of the Termination Date
or the Collection Date, the Originator will not suffer or permit:
(i) Consolidated Tangible Net Worth to be less than (A) Sixty-five
Million Seven Hundred Thousand Dollars ($65,700,000) PLUS (B) one hundred
percent (100%) of Consolidated Net Earnings of each Fiscal Quarter ending on
and after January 31, 1994, as reported in the financial statements delivered
to the Securities Exchange Commission in connection with Originator's Form
10-K or Form 10-Q for each such Fiscal Quarter PLUS (C) the net proceeds
received by the Originator from the sale of any capital stock of the
Originator after January 31, 1994.
(ii) Net Total Unhedged Funded Debt at the end of any Fiscal Quarter to
exceed eighty-five percent (85%) of Consolidated Tangible Net Worth at the
end of such Fiscal Quarter.
(iii) The ratio of (A) Income Available for Total Interest Expense to (B)
Total Interest Expense, to be less than (1) 1.0 to 1.0, calculated as at the
end of the Fiscal Quarter ending October 31, 1994, for the immediately
preceding two (2) Fiscal Quarters then ending, (2) 1.10 to 1.0, calculated as
at the end of the Fiscal Quarter ending January 31, 1995, for the immediately
preceding three (3) Fiscal Quarters then ending, and (3) 1.10 to 1,
calculated as at the end of each Fiscal Quarter thereafter, for the
immediately preceding four (4) Fiscal Quarters then ending.
(iv) The ratio of (A) Income Available for Recourse Interest Expense to
(B) Recourse Interest Expense, to be less than (1) 1.05 to 1.0, calculated as
at the end of the Fiscal Quarter ending October 31, 1994, for the immediately
-34-
<PAGE> 39
preceding two (2) Fiscal Quarters then ending, (2) 1.35 to 1.0, calculated as
at the end of the Fiscal Quarter ending January 31, 1995, for the immediately
preceding three (3) Fiscal Quarters then ending, and (3) 1.35 to 1,
calculated as at the end of each Fiscal Quarter thereafter, for the
immediately preceding four (4) Fiscal Quarters then ending.
(v) The ratio of (A) the sum of (1) the Senior Secured Debt at the end
of each Fiscal Quarter PLUS (2) the At Risk Mortgage Obligation to (B) the sum
of (1) Consolidated Tangible Net Worth as at the end of such Fiscal Quarter
PLUS (2) the outstanding principal amount of all Subordinated Debt as at the
end of such Fiscal Quarter, to exceed 2.0 to 1.0 as at the end of each Fiscal
Quarter.
(vi) The ratio of (A) Residual Values of the Originator and its
Subsidiaries (calculated on a consolidated basis at the end of the Fiscal
Quarter in question commencing with the Fiscal Quarter ending October 31,
1994) to (B) (1) Consolidated Tangible Net Worth PLUS (2) the outstanding
principal amount of all Subordinated Debt (as at the end of the Fiscal
Quarter in question and which has a maturity of more than twelve (12) months
from the date of calculation), to exceed 1.35 to 1.0.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. DESIGNATION OF SUB-SERVICER. Consistent with the Buyer's
ownership of the Purchased Lease Receivables and the other
Purchased/Contributed Assets, the Buyer shall have the sole right to service,
administer and collect the Lease Receivables, to assign such right and to
delegate such right to the Collection Agent. Pursuant to the CXC Agreement,
the Buyer has been appointed by the Agent and CXC as the Collection Agent
thereunder and the Buyer has accepted such appointment thereunder. In
addition, the Buyer, in such capacity as Collection Agent, appoints the
Originator as the "Sub-Servicer" and delegates duties as Agent to service,
administer and collect the Lease Receivables under the CXC Agreement; it being
understood that, except as otherwise agreed to by the Buyer under the other
Facility Documents, the Buyer will retain responsibility for withdrawing all
amounts remitted to the Lock-box Accounts. As part of the consideration for
the Purchases hereunder, the Originator hereby consents to appointment as
Sub-Servicer and agrees to perform the each of the duties and obligations of
the Collection Agent pursuant to the terms of the CXC Agreement and each of the
duties and obligations of the Sub-Servicer pursuant to SECTION 2.03 hereof and
to bear the cost of any replacement Sub-Servicer as described in the following
sentence. If at any time the Originator is not the Sub-Servicer, the
Originator shall pay for the account of the Buyer, upon the
-35-
<PAGE> 40
Buyer's demand, a fee (the "Collection Agent Fee") equal to 110% of the
reasonable costs and expenses of the Collection Agent of servicing, collecting
and administering the Lease Receivables, which costs and expenses shall be
invoiced to the Originator in reasonable detail. The Originator's appointment
as Sub-Servicer hereunder shall continue until the Collection Agent or a
successor Collection Agent notifies the Originator that such appointment has
been terminated. The Collection Agent may at any time designate any other
Person to perform any or all of the duties of the Sub-Servicer delegated by the
Collection Agent hereunder. The Originator shall deliver to the Collection
Agent (unless the Originator is acting as Sub-Servicer), and the Collection
Agent shall hold in trust for the Buyer and the Agent in accordance with their
respective interests, all Records. The Sub-Servicer's authorization under
this Agreement shall terminate after the Termination Date on the Collection
Date.
SECTION 6.02. RIGHTS OF THE BUYER. At any time:
(a) The Buyer may notify the Obligors of Purchased Lease Receivables, or
any of them, of the Buyer's ownership interest in Purchased/Contributed
Assets and direct such Obligors, or any of them, that payment of all amounts
payable under any Purchased Lease Receivable be made directly to the Buyer or
its designee (including, without limitation, the Agent).
(b) The Originator shall, at the Collection Agent's or Buyer's request and
at the Originator's expense, give notice of the Buyer's interest in Purchased
Lease Receivables to each Obligor and direct that payments be made directly
to the Buyer or its designee (including, without limitation, the Agent).
(c) The Originator shall, at the Buyer's request, assemble all Records
which the Buyer reasonably believes are necessary or appropriate for the
administration and enforcement of the Purchased Lease Receivables, and shall
make the same available to the Buyer at a place selected by the Buyer or its
designee.
(d) The Originator hereby authorizes the Buyer and the Collection Agent to
take any and all steps in the Originator's name and on behalf of the
Originator necessary or desirable, in the determination of the Buyer and/or
the Collection Agent, to collect all amounts due under any and all Purchased
Lease Receivables, including, without limitation, endorsing the Originator's
name on checks and other instruments representing Collections and enforcing
such Lease Receivables and the related Leases.
SECTION 6.03. FURTHER ACTION EVIDENCING TRANSFERS. The Originator agrees
that from time to time, at its expense, it
-36-
<PAGE> 41
will promptly execute and deliver all further instruments and documents, and
take all further action that the Buyer may reasonably request in order to
perfect, protect or more fully evidence the Buyer's interest in the
Purchased/Contributed Assets, or to enable the Buyer to exercise or enforce any
of its rights hereunder or under the Certificate. Without limiting the
generality of the foregoing, the Originator will mark its master data
processing records evidencing such Purchased Lease Receivables and related
Leases with a legend, acceptable to the Buyer, evidencing that the Buyer has
acquired an ownership interest therein as provided in this Agreement and, upon
the request of the Buyer (subject to the provisions of SECTION 2.09 and the
Obligor UCC Filing Requirement) will execute and file such financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate or as the
Buyer may reasonably request. The Originator hereby authorizes the Buyer to
file one or more financing or continuation statements, and amendments thereto
and assignments thereof, relative to all or any of the Purchased Lease
Receivables and the Purchased/Contributed Assets now existing or hereafter
arising without the signature of the Originator where permitted by law. A
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Purchased Lease Receivables and the other
Purchased/Contributed Assets, or any part thereof, shall be sufficient as a
financing statement. If the Originator fails to perform any of its agreements
or obligations under this Agreement, the Buyer may (but shall not be required
to) itself perform, or cause performance of, such agreement or obligation, and
the expenses of the Buyer incurred in connection therewith shall be payable by
the Originator upon the Buyer's demand therefor; PROVIDED, HOWEVER, prior to
taking any such action, the Buyer shall give notice of such intention to the
Originator and provide the Originator with a reasonable opportunity to take
such action itself.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. EVENTS OF TERMINATION. If any of the following events
("Events of Termination") shall occur:
(a) (i) The Sub-Servicer (if the Originator or any Affiliate of the
Originator) shall fail to perform or observe any term, covenant or agreement
hereunder (other than as referred to in clause (ii) of this SECTION 7.01(A))
and such failure shall remain unremedied for three Business Days after written
notice from the Buyer or (ii) either the Sub-Servicer (if the Originator or any
Affiliate of the Originator) or the Originator shall fail to make any payment
or deposit to be made by it hereunder when due and with respect to such
payments which do not relate to the
-37-
<PAGE> 42
remittance of Collections, such failure shall remain unremedied for three
Business Days after written notice from the Buyer; or
(b) The Originator shall fail to perform or observe any term, covenant or
agreement contained in Article VI and any such failure shall remain unremedied
for five Business Days after written notice from the Buyer; or
(c) Any representation or warranty made or deemed to be made by the
Originator (or any of its officers) under or in connection with this Agreement,
any Settlement Report or other information or report delivered pursuant hereto
shall prove to have been false or incorrect in any material respect when made;
PROVIDED, HOWEVER, that (i) to the extent any breach of any such representation
or warranty may be cured within ten Business Days, the Originator shall have
ten Business Days after learning of such breach to make such representation and
warranty true and correct and (ii) if any such representation or warranty
relates to a Lease Receivable which is retransferred to the Originator pursuant
to SECTION 8.02 hereof, then the breach of such representation or warranty
shall not give rise to an Event of Termination under this subsection (c); or
(d) The Originator shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed
or observed and any such failure shall remain unremedied for ten Business Days
after written notice from the Buyer; or
(e) The Originator shall fail to pay any principal of or premium or
interest on any Indebtedness having a principal amount of $2,000,000 or
greater, when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Indebtedness; or any other default under any
agreement or instrument relating to any such Indebtedness of the Originator or
any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument if the effect of such
default or event is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness; or any such Indebtedness shall be declared to be
due and payable or required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof; or
(f) Any Purchase or acquisition by the Buyer of Purchased/Contributed
Assets shall for any reason, except to the extent permitted by the terms
hereof, cease to create a valid and perfected first priority interest in each
Purchased Lease Receivable, the Related Security and the Contributed Equipment
(subject to the Obligor UCC Filing Requirement), Interest Rate Hedges and
Collections with respect thereto or the Certificate delivered hereunder shall
for any reason cease to evidence the
-38-
<PAGE> 43
transfer to the Buyer of a valid and perfected first priority interest in
Purchased Lease Receivables, the Related Security and the Contributed Equipment
(subject to the Obligor UCC Filing Requirement), Interest Rate Hedges and
Collections evidenced by such Certificate; PROVIDED, HOWEVER, if any such
failure relates to a Lease Receivable which is retransferred to the Originator
pursuant to SECTION 8.02 hereof, then such failure shall not give rise to an
Event of Termination under this subsection (f); or
(g) (i) The Originator shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Originator
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official for
it or for any substantial part of its property; or (ii) the Originator shall
take any corporate action to authorize any of the actions set forth in clause
(i) above in this subsection (g); or
(h) There shall have been any material adverse change in the financial
condition or operations of the Originator since January 31, 1994 except as
disclosed in the financial statements as at April 30, 1994 and July 31, 1994
described in SECTION 4.01(E), or there shall have occurred any event which
materially adversely affects the collectibility of the Lease Receivables
generally or there shall have occurred any other event which materially
adversely affects the ability of the Originator to collect Lease Receivables
generally or the ability of the Originator to perform hereunder; or
(i) An "Event of Termination" shall occur under the CXC Agreement;
then, and in any such event, the Buyer may by notice to the Originator declare
the Termination Date to have occurred, EXCEPT that, in the case of any event
described in clause (i) of subsection (g), above, the Termination Date shall be
deemed to have occurred automatically upon the occurrence of such event. Upon
any such declaration or automatic occurrence, the Buyer shall have, in addition
to all other rights and remedies under this Agreement or otherwise, all other
rights and remedies provided under the UCC of the applicable jurisdiction and
other applicable laws, which rights shall be cumulative.
-39-
<PAGE> 44
ARTICLE VIII
INDEMNIFICATION; SUBSTITUTIONS AND RETRANSFERS
SECTION 8.01. INDEMNITIES BY THE ORIGINATOR. (a) Without limiting any
other rights which the Buyer may have hereunder or under applicable law, the
Originator hereby agrees to indemnify the Buyer, from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by the Buyer relating to or resulting from any of the following (excluding,
however, (i) Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of the Buyer or (ii) recourse (except with
respect to payment and performance obligations provided for in this Agreement)
for uncollectible Purchased Lease Receivables):
(i) the transfer of any Lease Receivable other than an Eligible Lease
Receivable;
(ii) reliance on any representation or warranty made or deemed made by the
Originator (or any of its officers) under or in connection with this
Agreement, any Settlement Report or any other information or report delivered
by the Originator pursuant hereto, which shall have been false or incorrect
in any material respect when made or deemed made or delivered;
(iii) the failure by the Originator (individually or as Sub-Servicer) to
comply with any term, provision or covenant contained in this Agreement, or
any agreement executed in connection with this Agreement or with any
applicable law, rule or regulation with respect to any Lease Receivable, the
related Lease, the Related Security or the other Purchased/Contributed
Assets, or the nonconformity of any Lease Receivable, the related Lease, the
Related Security or the other Purchased/Contributed Assets with any such
applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Buyer or to transfer to
the Buyer an interest in the Lease Receivables which are, or are purported to
be, Purchased Lease Receivables, together with all Collections, Related
Security and the other Purchased/Contributed Assets, free and clear of any
Adverse Claim (including, without limitation, free and clear of any Permitted
Encumbrance except in favor of the Buyer or its assignees) whether existing
at the time of the Purchase of such Lease Receivable or at any time
thereafter;
-40-
<PAGE> 45
(v) the failure to file, or any delay in filing (other than solely as a
result of the action or inaction of the Buyer), financing statements or other
similar instruments or documents under the UCC of any applicable jurisdiction
or other applicable laws against the Originator with respect to any Lease or
Lease Receivables which are, or are purported to be, Purchased/Contributed
Assets, whether at the time of any Purchase or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Lease
Receivable which is, or is purported to be, a Purchased Lease Receivable
(including, without limitation, a defense based on such Lease Receivable or
the related Lease not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any other
claim resulting from the sale or lease of the goods, merchandise and/or
services related to such Lease Receivable or the furnishing or failure to
furnish such goods, merchandise and/or services;
(vii) any failure of the Originator, as Sub-Servicer or otherwise, to
perform its duties or obligations in accordance with the provisions of
Article VI;
(viii) any products liability claim or personal injury or property damage
suit or other similar or related claim or action of whatever sort arising out
of or in connection with goods, merchandise and/or services which are the
subject of any Lease Receivable or Lease;
(ix) the failure to pay when due any taxes, including, without limitation,
sales, excise or personal property taxes payable in connection with the
Purchased Lease Receivables;
(x) the termination, rejection or non-assumption by the Originator of any
Lease under which a Purchased Lease Receivable has arisen prior to the
original term of such Lease, whether such rejection, early termination or
non-assumption is made pursuant to an equitable cause, statute, regulation,
judicial proceeding or other applicable laws (including, without limitation,
Section 365 of the Bankruptcy Code); and
(xi) the failure of the Originator and the Obligors of Purchased Lease
Receivables to maintain casualty and liability insurance for the Equipment
related to the Purchased Lease Receivables in an amount at least equal to the
Purchased Lease Receivables Balance (the foregoing indemnity shall include
any portion of a Purchased Lease
-41-
<PAGE> 46
Receivable which is not paid following damage to or destruction of the
Equipment related thereto (A) as a result of any deductible under any
insurance policy covering such Equipment or (B) if an insurer under an
insurance policy shall deny coverage (in any such case prior to termination
thereof as a result of the payment by such insurer of an aggregate amount
equal to its maximum liability under such insurance policy), or shall refuse
to honor a claim under any such insurance policy with respect to a Lease
related to any Purchased Lease Receivable or the related Equipment, and if
such denial or refusal resulted from the Originator's failure to comply with
the requirements of such insurance policy or the requirements of such
insurer).
Any amounts subject to the indemnification provisions of this SECTION 8.01
shall be paid by the Originator to the Buyer within two Business Days following
Buyer's demand therefor.
SECTION 8.02. SUBSTITUTION AND RETRANSFER OF LEASE RECEIVABLES. The
following rights are in addition to and not in limitation of any other rights
or remedies that the Buyer may have hereunder.
(a) If, with respect to any Purchased Lease Receivable, (i) such Lease
Receivable did not constitute an Eligible Lease Receivable on the date such
Lease Receivable became a Purchased Lease Receivable (or if, within three
Business Days of any Purchase, the Buyer notifies the Originator that any Lease
Receivable which became a Purchased Lease Receivable on the date of such
Purchase is not an Eligible Lease Receivable) or the Originator shall have
breached any representation or warranty made hereunder with respect to such
Lease Receivable including without limitation, any of the representations and
warranties contained in SECTION 4.01(H) or (ii) the Originator shall at any
time breach any covenant made herein with respect to any such Lease Receivable
(a Purchased Lease Receivable described in either of clauses (i) or (ii) above
being referred to as an "Ineligible Purchased Lease Receivable"), then the
Originator shall on the next succeeding Settlement Date, upon the Buyer's
demand, at the Originator's option either substitute for such Ineligible
Purchased Lease Receivable a new Lease Receivable in the manner specified in
subsection (b) of this SECTION 8.02 or accept a retransfer of such Ineligible
Purchased Lease Receivable for the retransfer price specified in subsection (c)
of this SECTION 8.02; PROVIDED, HOWEVER, that following the Termination Date,
the Originator shall not have the option to substitute for Ineligible Purchased
Lease Receivables, but must accept retransfers of such Ineligible Purchased
Lease Receivables. In addition, the Originator may, at any time, notify the
Buyer of its intent to substitute for or accept a retransfer of any Purchased
Lease Receivable (i) which is a Defaulted Lease Receivable or (ii) in
-42-
<PAGE> 47
connection with the rewriting and/or restructuring of the related Lease as an
accommodation to, and at the request of, the Obligor thereunder (other than for
reasons relating to a decline in the creditworthiness of the Obligor thereof);
PROVIDED, HOWEVER, that the aggregate Outstanding Balance of all Purchased
Lease Receivables subject to substitution or retransfer pursuant to this clause
(iii) shall not exceed (A) for any three-month period, 15% of the outstanding
Capital as of the date of such retransfer or substitution and (B) for any
twelve-month period, 25% of the outstanding Capital as of the date of such
retransfer or substitution. On the Settlement Date next succeeding any such
notice, the Originator shall either substitute for such Defaulted Lease
Receivable a new Lease Receivable in the manner specified in subsection (b) of
this SECTION 8.02 or accept a retransfer of such Defaulted Lease Receivable for
the retransfer price specified in subsection (c) of this SECTION 8.02.
(b) If the Originator substitutes a new Lease Receivable for a Purchased
Lease Receivable pursuant to this SECTION 8.02, such new Lease Receivable shall
(i) on the date of substitution, be an Eligible Lease Receivable, and shall be
certified as such by the Originator, (ii) have an Outstanding Balance at least
equal to the Outstanding Balance of the Purchased Lease Receivable for which it
is being substituted, (iii) have a remaining term that is no longer than the
remaining term of the Purchased Lease Receivable for which it is being
substituted and (iv) have a Risk Rating equal to or better than the Purchased
Lease Receivable for which it is being substituted. On the date of such
substitution, such new Eligible Lease Receivable shall become a Purchased Lease
Receivable and the Lease Receivable so replaced shall cease to be a Purchased
Lease Receivable.
(c) In the case of a retransfer by the Buyer to the Originator of a
Purchased Lease Receivable pursuant to this SECTION 8.02, the Originator shall,
on the Settlement Date coinciding with such retransfer pay to the Buyer an
amount equal to the Outstanding Balance of such Purchased Lease Receivable as
of such Settlement Date. The proceeds of any such retransfer shall be deemed
to be Collections of such Lease Receivable received by the Originator. Any
such retransfer shall be made without recourse or warranty, express or implied.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. AMENDMENTS, ETC. No amendment to or waiver of any provision
of this Agreement nor consent to any departure by the Originator, shall in any
event be effective unless the same shall be in writing and signed by (i) the
Originator and the Buyer (with respect to an amendment) or (ii) the Buyer (with
respect to a waiver or consent by it) or the
-43-
<PAGE> 48
Originator (with respect to a waiver or consent by it), as the case may be, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. This Agreement contains a final
and complete integration of all prior expressions by the parties hereto with
respect to the subject matter hereof and shall constitute the entire agreement
(together with the exhibits hereto) among the parties hereto with respect to
the subject matter hereof, superseding all prior oral or written
understandings.
SECTION 9.02. NOTICES, ETC. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
telex communication and communication by facsimile copy) and mailed, telexed,
transmitted or delivered, as to each party hereto, at its address set forth
under its name on the signature pages hereof or at such other address as shall
be designated by such party in a written notice to the other parties hereto.
All such notices and communications shall be effective, upon receipt, or in the
case of delivery by mail, five days after being deposited in the mails, or, in
the case of notice by telex, when telexed against receipt of answer back, or in
the case of notice by facsimile copy, when verbal communication of receipt is
obtained, in each case addressed as aforesaid, except that notices and
communications pursuant to Article II shall not be effective until received.
SECTION 9.03. NO WAIVER; REMEDIES. No failure on the part of the Buyer to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 9.04. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be
binding upon and inure to the benefit of the Originator, the Buyer and their
respective successors and permitted assigns (which successors of the Originator
shall include a trustee in bankruptcy). The Originator may not assign any of
its rights and obligations hereunder or any interest herein without the prior
written consent of the Buyer and the Agent. The Originator acknowledges that
the Buyer shall assign to the Agent, for the benefit of CXC, as collateral
security for its obligations under the CXC Agreement, all of its rights,
remedies, powers and privileges hereunder and that CXC may further assign such
rights, remedies, powers and privileges to the extent permitted in the CXC
Agreement. The Originator agrees that the Agent, as the assignee of the Buyer,
shall, subject to the terms of the CXC Agreement, have the right to enforce
this Agreement and to exercise directly all of the Buyer's rights and remedies
under this Agreement (including, without limitation, the rights and remedies
under SECTIONS 6.01, 6.02, 8.01 and 8.02, and the Originator agrees to
cooperate fully with the Agent and the Collection Agent in the exercise of such
rights and remedies.
-44-
<PAGE> 49
Without limitation by the foregoing, the Originator hereby acknowledges that
the Buyer and the Collection Agent have agreed pursuant to the CXC Agreement
and certain related agreements that, subject to the restrictions set forth
therein, the Agent, certain parties providing credit enhancements in connection
with the CXC Agreement and, in some circumstances, certain parties providing
liquidity for CXC shall be entitled to exercise the Buyer's rights under this
Agreement. The Originator hereby consents to the foregoing and agrees to
cooperate with any such Person electing to exercise the Buyer's rights under
this Agreement. The Buyer is hereby authorized, and the Buyer hereby agrees,
that it shall annotate the Certificate to reflect any assignments made pursuant
to this SECTION 9.04. The Buyer may assign at any time its rights and
obligations hereunder and interests herein to any other Person without the
consent of the Originator. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until such time, after the Termination
Date, as the Collection Date shall occur; PROVIDED, HOWEVER, that the rights
and remedies with respect to any breach of any representation and warranty made
by the Originator pursuant to Article IV and the indemnification and payment
provisions of Article VIII and Article X shall be continuing and shall survive
any termination of this Agreement.
SECTION 9.05. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
INTERESTS OF THE BUYER IN THE PURCHASED/CONTRIBUTED ASSETS OR REMEDIES
HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THE ORIGINATOR HEREBY AGREES TO
THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK, AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ORIGINATOR
AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN
DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID, OR, AT THE BUYER'S OPTION, BY
SERVICE UPON CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK 10019,
WHICH THE ORIGINATOR HEREBY IRREVOCABLY APPOINTS AS ITS AGENT FOR THE PURPOSE
OF ACCEPTING SERVICE OF PROCESS. THE ORIGINATOR HEREBY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN THE ORIGINATOR AND THE BUYER ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY. WITH RESPECT TO THE FOREGOING
CONSENT TO JURISDICTION, THE ORIGINATOR HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 9.05 SHALL
-45-
<PAGE> 50
AFFECT THE RIGHT OF THE BUYER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BUYER TO BRING ANY ACTION OR
PROCEEDING AGAINST THE ORIGINATOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
SECTION 9.06. COSTS, EXPENSES AND TAXES. (a) In addition to the rights of
indemnification under Article VIII hereof, the Originator agrees to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic auditing and any
requested amendments, waivers or consents) of this Agreement, the Certificate,
and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Buyer (and the Agent) with respect thereto and with respect to advising the
Buyer (and the Agent) as to its rights and remedies under this Agreement, and
the other agreements executed pursuant hereto and all costs and expenses, if
any (including reasonable counsel fees and expenses), in connection with the
enforcement of this Agreement, the Certificate, and the other agreements and
documents to be delivered hereunder.
(b) In addition, the Originator shall pay any and all stamp, sales, excise
and other taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing and recording of this Agreement, the
Certificate or the other agreements and documents to be delivered hereunder,
and agrees to indemnify the Buyer and its assignees against any liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes and fees.
SECTION 9.07. EXECUTION IN COUNTERPARTS; SEVERABILITY. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. In case any provision in or obligation under this Agreement or the
Certificate shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
-46-
<PAGE> 51
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
BUYER: LDI LEASE RECEIVABLES FUNDING CORP.
By___________________________
Title:
4770 Hinckley Industrial Parkway
Room No. 51
Cleveland, Ohio 44109
Telecopy No. 216-485-4922
ORIGINATOR: LDI CORPORATION
By___________________________
Title:
4770 Hinckley Industrial Parkway
Cleveland, Ohio 44109
Telecopy No. 216-485-4922
-47-
<PAGE> 52
EXHIBIT A
CERTIFICATE
Dated as of [the Initial Purchase Date]
Reference is made to the Lease Receivables Purchase and Contribution
Agreement dated as of October 7, 1994 (the "Agreement") among LDI Corporation
(the "Originator") and LDI Lease Receivables Funding Corp. (the "Buyer"). The
terms defined in the Agreement are used herein as therein defined.
The Originator hereby sells, transfers and assigns to the Buyer for the
account of the Buyer the Purchased/Contributed Assets acquired in each Purchase
by the Buyer from the Originator under the Agreement.
Each Purchase made by the Buyer from the Originator shall be further
evidenced by attaching a list of the Lease Receivables and Leases included in
such Purchase which attachment is part of this Certificate, and such attachment
shall evidence the interest of the Buyer in the Purchased/Contributed Assets
transferred with respect to such Purchase]
This Certificate is made without recourse except as otherwise provided in
the Agreement.
Without the prior written consent of the Buyer, neither this Certificate nor
any of the Purchased/Contributed Assets evidenced hereby may be sold, assigned
or otherwise transferred by the Buyer except to CXC, Citicorp North America,
Inc., Citibank, N.A. or any other Affiliate of Citicorp North America, Inc.
Each such permitted assignment by the Buyer of Purchased/Contributed Assets
evidenced hereby shall be endorsed by the Buyer on the attachment hereto which
is part of this Certificate, and such endorsement shall evidence the assignment
by the Buyer of such Purchased/Contributed Assets.
This Certificate shall be governed by and construed in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly
executed and delivered by its duly authorized officer as of the date first
written above.
LDI CORPORATION
By___________________________
Title:
<PAGE> 53
DATES AND AMOUNTS OF PURCHASES AND LIST OF LEASES/LEASE RECEIVABLES
-2-
<PAGE> 54
EXHIBIT B
DESCRIPTION OF CREDIT AND COLLECTION POLICY
Attached
<PAGE> 55
EXHIBIT C
FORM OF INTEREST RATE HEDGE ASSIGNMENT
Attached
<PAGE> 56
EXHIBIT D
FORMS OF LEASES
Attached
<PAGE> 57
EXHIBIT E
FORM OF LOCK-BOX AGREEMENT
Attached
<PAGE> 58
EXHIBIT F
FORM OF SETTLEMENT REPORT
Attached
<PAGE> 59
EXHIBIT G
FORM OF OPINIONS OF COUNSEL FOR ORIGINATOR
(Attached)
<PAGE> 60
EXHIBIT H
FORM OF LETTER TO ACCOMPANY FORECASTS
LDI Lease Receivables Funding Corp.
4770 Hinckley Industrial Parkway
Room No. 51
Cleveland, Ohio 44109
Telecopy No. 216-485-4922
Citicorp North America, Inc.,
as Agent
450 Mamaroneck Avenue
Harrison, New York 10528
Re: Lease Receivables Purchase and Contribution Agreement dated as of October
7, 1994 ("Purchase Agreement") and Lease Receivables Transfer Agreement
dated as of October 7, 1994 ("Transfer Agreement")
Gentlemen:
The attached financial forecast of LDI Corporation ("Originator") consisting
of, among other things, consolidated balance sheets and income statements on an
annual basis for a period of five years after January 31, 199_, are delivered
pursuant to Section 5.02(f) of Purchase Agreement and Section 5.02(c) of the
Transfer Agreement. Such forecasts have been prepared by the management of the
Originator in light of the past business of the Originator and on the basis of
the assumptions set forth therein and are consistent in all material respects
with the forecasts previously delivered to the Agent.
LDI CORPORATION
By__________________
Title:_________
-1-
<PAGE> 61
EXHIBIT I
LIST OF OFFICES OF ORIGINATOR
WHERE RECORDS ARE KEPT
4770 Hinckley Industrial Parkway
Cleveland, Ohio 44109
<PAGE> 62
EXHIBIT J
LOCK-BOX BANKS
Bank One, Cleveland, N.A.
600 Superior Avenue
Cleveland, Ohio 44114
Lock-Box No. 75114
Lock-Box Account No. 801937916
<PAGE> 63
EXHIBIT K
TRADE NAMES AND ASSUMED NAMES
LDI Corporation
LDI Technologies
Leasing Dynamics
Sea-Tech Communications
<PAGE> 64
EXHIBIT L
FORM OF INTEREST RATE HEDGE REPORT
Attached
<PAGE> 65
EXHIBIT M
INTEREST RATE HEDGING PARAMETERS
Attached
<PAGE> 1
EXHIBIT 11.01
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in Thousands, Except Per Share Data)
<CAPTION>
THREE NINE
MONTHS ENDED MONTHS ENDED
OCTOBER 31 OCTOBER 31
1994 1993 1994 1993
-------------------- ------------------
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1. Average common shares outstanding 6,727 6,727 6,727 6,727
2. Net additional shares outstanding
assuming stock options exercised and
proceeds used to purchase treasury stock (A) - (A) -
3. Dilutive shares contingently issuable
upon conversion of debentures (See Note
6 of the Notes to Consolidated Financial (A) 656 (A) 656
Statements)
4. Adjusted average common shares
outstanding for fully diluted computation 6,727 7,383 6,727 7,383
NET EARNINGS
5. Net earnings (loss) as reported in
statements of consolidated earnings $208 $696 $(2,869) $3,179
6. Decrease in interest expense and
amortization of debt issuance costs relating to
the subordinated debentures, net of - 152 - 412
income tax benefit
7. Adjusted net earnings (loss) $208 $848 $(2,869) $3,591
EARNINGS PER SHARE
8. Net earnings (loss) per average common share
outstanding $.03 $ .10 $(.43) $ .47
9. Net earnings per common share on a fully
diluted basis (A) (B)$.12 (A) (B)$.49
</TABLE>
(A) Antidilutive
(B) Fully diluted earnings per share is not presented, as the dilutive effect
antidilutive.
Page 19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> OCT-31-1994
<CASH> 2,328
<SECURITIES> 0
<RECEIVABLES> 34,370
<ALLOWANCES> 6,116
<INVENTORY> 11,160
<CURRENT-ASSETS> 41,742
<PP&E> 23,951
<DEPRECIATION> 8,807
<TOTAL-ASSETS> 470,399
<CURRENT-LIABILITIES> 137,558
<BONDS> 265,584
<COMMON> 68
0
0
<OTHER-SE> 67,189
<TOTAL-LIABILITY-AND-EQUITY> 470,399
<SALES> 18,583
<TOTAL-REVENUES> 49,680
<CGS> 15,891
<TOTAL-COSTS> 34,793
<OTHER-EXPENSES> 6,417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,135
<INCOME-PRETAX> 335
<INCOME-TAX> 127
<INCOME-CONTINUING> 208
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 208
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
