<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended January 31, 1994
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 0-15994
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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)
1375 EAST NINTH ST., CLEVELAND, OHIO 44114
- ---------------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 687-0100
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None Name of each exchange on which registered:________
----
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock $.01 par value
----------------
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 31, 1994 was $22,371,317.
The number of shares outstanding of the registrant's Common Stock,
$.01 par value, as of March 31, 1994 was 6,727,457.
Documents Incorporated by Reference
-----------------------------------
Portions of the Registrant's Proxy Statement for use at the Annual Meeting of
Stockholders to be held on a date yet to be determined are incorporated by
reference in Part III hereof.
<PAGE> 2
PART I
ITEM I. BUSINESS
The Company was organized in 1972 as Leasing Dynamics, Inc., an Ohio
Corporation, by Robert S. Kendall, Michael R. Kennedy and Thomas A. Cutter (the
"Founders"). In October 1986, LDI Corporation, a Delaware corporation, became
a holding company for Leasing Dynamics, Inc. and certain of its affiliated
corporations. In April 1991, the Company completed an internal realignment
pursuant to which most of its subsidiaries were merged into the Company
pursuant to applicable parent-subsidiary merger statutes. The principal
purposes of that merger were to reduce administrative and other costs and to
simplify the tax filings of the Company.
During the year ended January 1994, the Board of Directors determined
the need to commence preparation of a new long-term strategic business plan for
the Company. The plan includes the sale or other divestiture of certain
product lines and non-strategic businesses, the consolidation of facilities and
other measures to increase the Company's overall profitability. The plan is
discussed in more detail below, in Management's Discussion and Analysis of
Financial Condition and Results of Operations and in Notes to Consolidated
Financial Statements.
All references herein to the "Company," "LDI" or the "Registrant"
refer to LDI Corporation and its subsidiaries, unless the context otherwise
requires.
GENERAL
Through January 31, 1994, LDI was a broadly based technology
integration company. The Company distributed and remarketed a wide variety of
information processing and communication equipment, including mainframe and
mid-range computers, telecommunications systems, personal computers,
point-of-sale systems, local area networks, medical equipment and selected high
technology and other capital equipment produced by many manufacturers. LDI
also provided a comprehensive range of technical support services associated
with such equipment, including engineering, systems integration, network
design, maintenance, refurbishment and disaster recovery services.
The Company's operations were managed in two groups: the Leasing
Services Group and the Technology Distribution Group. LDI's Leasing Services
Group provided customers with mainframe and mid-range data processing systems,
telecommunications products, and selected high technology and other capital
equipment, through sale and lease transactions, together with technical
services. LDI's Technology Distribution Group engaged in the
distribution and servicing, including systems integration, of personal
computers and related products directly to corporate customers and through its
three computer superstores; and provided computer maintenance.
Following implementation of the strategic plan, LDI's core
business will consist of equipment leasing and the related services of
maintenance and technical support for computers and other high-technology
equipment and short-term personal computer (PC) rentals.
<PAGE> 3
LEASING SERVICES
LDI provides customers with a wide range of new and used mainframe and
mid-range central processing units, peripherals, and telecommunications
equipment produced by a number of major manufacturers, including IBM, Amdahl,
Unisys, DEC, AT&T and Rolm. LDI also provides selected high-technology
equipment, such as medical diagnostic equipment, and other capital equipment.
By emphasizing a full range of products of many manufacturers, LDI maximizes its
leasing and sale opportunities while mitigating its risk through a diversified
lease portfolio.
Ongoing market dynamics, such as the continued decline in demand for
mainframe computer equipment, have prompted a shift to smaller systems,
peripheral equipment, and related services to meet the changing needs of
customers. Recognizing this, LDI over the past several years has forged new
and stronger links in mid-range systems and peripheral devices, integrated
network computing and cross-platform systems integration.
Even though LDI has shifted growth emphasis to other product lines, it
recognizes that the mainframe will continue to be used, sometimes in new and
different roles. In the near term, logic and economics dictate that many
organizations will continue to use mainframe systems for certain
processing-intensive functions. Also, these systems are becoming primary
back-up devices for information storage.
LDI's customers are medium to large corporations and other
organizations that have significant information processing and
telecommunications needs that meet the Company's credit standards. LDI's
principal objective is to selectively engage in lease transactions with
customers whose creditworthiness permits the Company to maximize the use of
long-term nonrecourse financing. No customer accounts for more than 5% of the
Company's total revenues and the Company does not believe that it is dependent
on any single customer.
LDI's equipment lease terms generally range from monthly to seven
years, with information processing and telecommunications equipment leases
typically from two to five years. The majority of the Company's leases are
capital leases. Capital leases have less risk than shorter-term operating
leases, since a higher percentage of the cost of the equipment is returned in
the form of rental receipts during the initial lease. Substantially all leases
are noncancellable and place the risk of damage to the equipment on the lessee.
Approximately one-half of the dollar amount of LDI's lease portfolio is
comprised of small and medium-size transactions ranging from $50,000 to
$200,000. Lessees typically use a significant amount of high-technology
equipment and have multiple capital leases with the Company with varying
expiration dates. The Company intends to be very selective in its marketing
effort for large system transactions with new customers.
Approximately 70% of LDI's lease portfolio turns over prior to
expiration of the initial lease term. This turnover is generally due to
customers' desires to upgrade, add to, relocate or otherwise enhance the
original equipment configuration. Such activity often results in a profitable
opportunity to extend or renew the lease term in a much less competitive
environment.
<PAGE> 4
The Company purchases new equipment directly from the manufacturer and
obtains used equipment from its customer base and from the nationwide secondary
market for used data processing and telecommunications equipment. LDI's active
presence in this secondary market, coupled with its large portfolio of
equipment under lease and its technical capabilities to upgrade and refurbish
used equipment, provide the Company with a competitive advantage. LDI can
quickly and cost-effectively custom tailor systems by combining new and used
equipment configurations at competitive prices. Similarly, the company is
often able to facilitate new lease or sale transactions by either buying,
remarketing, or trading a prospective customer's existing equipment.
Management believes that the Company's ability to fully integrate
high-technology products and services represents a significant competitive
advantage and is a key strength which differentiates it from competitors.
LDI's marketing activities historically have been directed toward the Midwest
and Northeast, although it has equipment on lease throughout the United States.
As of April 30, 1994, LDI employed leasing services sales representatives in
sales offices located in the following metropolitan areas: Boston, Cincinnati,
Cleveland, Columbus, Dallas, Detroit, New York and Syracuse. The sales
representatives market the Company's services primarily through personal or
telephone sales calls, direct mailing and limited advertising.
TECHNICAL SERVICES
LDI provides maintenance and other technical support services for
information processing, personal computers, point-of-sale and
telecommunications equipment produced by many manufacturers. Because LDI can
service and maintain a wide variety of technology equipment it distributes, the
Company believes it has a competitive advantage over equipment service
providers that service the equipment of only one manufacturer. The operation
provides technical services at the customer's facility and from its four
technical centers. The largest of these technical centers is located in
Cleveland, Ohio at LDI's 150,000 square-foot Technical Center. The other
technical centers are located in Columbus and Cincinnati, Ohio; and Detroit,
Michigan. Service programs provided by the Group include on-site contract
maintenance, depot maintenance, and time and materials contracts tailored to
accommodate the needs of particular customers. Qualified technicians and
engineers are available twenty-four hours a day, seven days a week. In
addition, LDI provides advanced engineering services and high-technology
diagnostic and repair services. LDI's strategy is to emphasize its technical
services as part of the broad spectrum of services it can provide to its
customers. Accordingly, LDI continues to integrate its marketing of technical
support services with its sales and leasing activities.
As of January 31, 1994, the Company employed 197 persons as part
of its technical services organization, including 107 field engineers and
service technicians. Certain technicians perform on-site repair and
maintenance services for mainframe central processing units or larger
peripheral equipment. Other technicians perform service functions at the
Company's technical centers on other types of equipment, including personal
computers, telecommunications equipment and point-of-sale equipment. Because
of LDI's active participation in the secondary market for used data processing
equipment, it is often able to supply a customer with replacement equipment
while repairing the customer's equipment, particularly with respect to personal
computers, terminals and peripheral equipment.
<PAGE> 5
LDI refurbishes used information processing, telecommunications and
other electronic equipment in connection with its remarketing activities
and also contracts to refurbish used equipment for others. The refurbishing
activities may include enhancing existing computer equipment by adding features
that make systems more powerful or capable of performing additional computer
applications. The Company believes that these refurbishing capabilities
contribute to LDI's ability to profitably remarket used equipment
and are an important component of LDI's objective of developing long-term
relationships with its customers by meeting their high-technology equipment
needs and differentiates it from competitors.
PERSONAL COMPUTER (PC) RENTALS
LDI provides short and intermediate term rentals of personal computers,
peripherals and software to corporate customers nationwide. LDI rents desktop
and notebook computers sourced from leading manufacturers such as IBM, Compaq,
Dell, AST and Apple. Printers rented include those manufactured by Hewlett
Packard, Epson and Apple. Other products rented include scanners, plotters,
data projection equipment, CD ROM, large screen monitors and external hard
drives. LDI is one of the few computer rental companies authorized to rent
Microsoft software.
LDI provides computer rentals in the following seven locations,
primarily in the Midwest and South: Cleveland, Chicago, Detroit, Dallas,
Atlanta, Cincinnati and Houston. Rentals has adopted a full service strategy
which includes having local inventory and technicians at each office location
thus enabling LDI to provide same day delivery, installation and service. This
full-service strategy differentiates LDI from the majority of its competition
who primarily provide box shipping services.
LDI's customer base is generally within the geographic
area in which it has its rental offices. It's target customers include
rapidly growing companies, service companies such as financial, accounting,
engineering and consulting firms, and companies which have a large installed
base of personal computers. Customers rent personal computers for many reasons
including access to new technology, special projects, peak work loads, training
and minimizing long term capital expenditures. LDI markets its
services primarily through Yellow Pages advertising, telemarketing and outside
sales representatives calling on Fortune 1,000 companies. At January 31, 1994,
the Company employed 40 persons in its personal computer rentals operation.
CORE BUSINESS REVENUES AND ASSETS
<TABLE>
Revenues and assets of LDI's core business of leasing,
maintenance and technical services and personal computer rentals for the year
ended January 31, 1994 are as follows:
<CAPTION>
(In Millions)
--------------
<S> <C> <C>
Revenues $ 199.2 59% (A)
Assets $ 537.0 91% (A)
<FN>
(A) % of Consolidated amounts including discontinued operations.
</TABLE>
<PAGE> 6
BUSINESS RECOVERY SERVICES
Effective May 1, 1993, the Company consummated an agreement forming a
marketing relationship with SunGard Recovery Services Inc. to market business
recovery services nationwide. Under the terms of the Agreement, SunGard
assumed the responsibility for providing business recovery services for the
Company's existing subscribers and operate the Company's two business recovery
centers in Cleveland and Detroit. The association with SunGard permits LDI's
customers to enhance their current services and allows LDI to expand its
recovery offerings on a national level.
COMPETITION
The information processing industry is fragmented and characterized by
many different, but related, markets. The Company competes in a number of these
markets with many different competitors. In the mainframe and mid-range
computer equipment leasing business, the Company competes with equipment
manufacturers, leasing companies and large financial institutions, many of which
are substantially larger than the Company and possess significantly greater
capital. Among those are IBM Credit Corporation, General Electric Capital
Corporation and Comdisco, Inc. In the technical support services marketplace,
the Company competes with equipment manufacturers as well as several large
technical organizations. For computer rentals, primary competition comes from
companies offering computer rentals on a national basis. These include GE
Rental/Lease, AT&T and Personal Computer Rentals (PCR).
DISCONTINUED AND NON-STRATEGIC BUSINESSES
Prior to the strategic realignment LDI also engaged in the distribution
of personal computers and related peripherals through direct sales to corporate
customers and retail sales through its computer superstores and computer outlet
stores.
During 1992 and 1993 the two dominant realities of the PC market were
intense price competition among manufacturers and the rapid move to Intel 486
and similar processor technology. Overall price levels in the PC market have
declined approximately 45% during this period. While gross margin percentages
remained relatively constant, the decrease in margins in absolute dollars put
intense pressure on regional-based distributors such as LDI to maintain sales
volume and profitability levels. The continued price erosion coupled with new
entrants in the retail PC business led the Company to decide that the
financial returns in these marketplaces would not be acceptable.
<PAGE> 7
As a complement to its end user marketing, LDI also engaged in the
direct catalog marketing of telecommunications equipment, components and
accessories related to data communications. LDI also offered small to
medium-sized specialty retailers turnkey PC-based point-of-sale installations
with complete engineering, software system design and technical support
services.
The direct catalog marketing and PC-based point-of-sale businesses
have also been affected by the changes in the PC market in the past two years.
In addition, the limited size and market share of these operations influenced
management's decision to exit these businesses.
The businesses LDI has identified as discontinued or non-strategic are
generally characterized as being transactional in nature, commodity oriented
and not conducive to building long-term customer relationships. These
attributes have translated into low-margin, low- return businesses which do not
match LDI's new strategy. LDI is focusing on a core business emphasizing
exceptional customer service, building long-term relationships with customers
and providing value-added services that can translate into higher margins and
acceptable financial returns. These core business attributes, in conjunction
with the proposed facilities consolidation and other cost saving measures, are
expected to result in higher margins and financial returns after the strategic
plan is completely implemented.
EMPLOYEES
As of January 31, 1994, the Company employed a total of 890 persons.
The ongoing core business expects to have approximately 400 employees
subsequent to completion of the Plan's implementation by the third quarter of
1994.
ITEM 2. PROPERTIES
The Company's executive offices are located in approximately 8,000
square feet of leased space in downtown Cleveland. The Company's principal
leasing and corporate operations occupy approximately 75,000 square feet of
space in an office building located in Westlake, Ohio, a Cleveland suburb.
This property, which was acquired by the Company in August 1989, is held by the
LDI Realty Trust, a trust formed for the benefit of the Company of which LDI
Realty Corp., an Ohio corporation and a wholly owned subsidiary of the Company,
is Trustee. The Company's maintenance and technical support operations are
located in approximately 150,000 square feet of space at the Company's
Technology Center in Cleveland. The Company leases approximately 72,000 square
feet of office and warehouse space in Solon, Ohio, a Cleveland suburb, from
NCP, Ltd., a limited partnership of which the Founders, Jay J. Ross, a Senior
Vice President of the Company and Jerry E. Kish, Executive Vice President of
the Company, are the general partners. This space houses the Company's PC
sales and distribution operations and houses one of the business recovery
centers operated by SunGard Recovery Services Inc. The Company's three "LDI
Computer Superstores" occupy approximately 100,000 square feet of space in
their two suburban Cleveland, Ohio locations and one suburban Pittsburgh
location. The Company also leases or owns other sales offices and maintenance
centers in various locations throughout the United States.
As part of its strategic plan the Company's executive offices
and leasing and corporate operations will be transferred to its Technology
Center. The Company plans to sell its Westlake facility and vacate its leased
downtown Cleveland offices in 1994. All of the Company's operations housed in
its Solon facility, along with the three computer superstores, have been
identified as discontinued or non- strategic businesses. The Company intends
to transfer its lease of the Solon facility to buyers of these operations and
either vacate or sell its computer superstore facilities.
<PAGE> 8
The Company believes that its remaining offices and facilities are
adequately insured and sufficient to service their present purposes.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings which require disclosure
pursuant to Item 103 of Regulation S-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF REGISTRANT
There is hereby incorporated by reference the information with respect
to executive officers of LDI Corporation and its subsidiaries set forth in Item
10 of this Annual Report on Form 10-K.
<PAGE> 9
<TABLE>
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter
market on the NASDAQ National Market System under the symbol LDIC. The
following schedule sets forth, for the periods indicated, the range of the high
and low sales prices on the NASDAQ National Market System.
<CAPTION>
Fiscal Year Ended
January 31, 1993 High Low
- ---------------------------------------- ------ ------
<S> <C> <C>
First Quarter (ended April 30) $15.25 $11.25
Second Quarter (ended July 31) 12.50 9.63
Third Quarter (ended October 31) 10.25 6.00
Fourth Quarter (ended January 31) 9.00 6.50
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended
January 31, 1994 High Low
- ---------------------------------------- ------ ------
<S> <C> <C>
First Quarter (ended April 30) 7.75 6.25
Second Quarter (ended July 31) 8.00 7.00
Third Quarter (ended October 31) 8.25 7.13
Fourth Quarter (ended January 31) 8.13 6.25
</TABLE>
As of April 25, 1994, the Company's common stock was held by 544
stockholders of record.
During the year ended January 31, 1994, the Company paid quarterly cash
dividends on its common stock of $.04 per share.
The Company is subject to restrictions on the payment of cash dividends
under the covenants of certain of its financing agreements. Under these
covenants, there were no retained earnings available at January 31, 1994 for
the future payment of cash dividends.
<PAGE> 10
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
The following schedule sets forth selected consolidated financial data
regarding the Company for the periods indicated, derived from the Company's
consolidated financial statements. The Company's consolidated financial
statements as of and for each of the five years in the period ended January 31,
1994 have been audited by Deloitte & Touche, the Company's independent public
accountants. The information set forth in the following table should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing in Item 7 of this report and the
Company's consolidated financial statements and notes thereto appearing in Item
8 of the report.
<CAPTION>
(Dollars in thousands, except per share data)
Earnings Statement Data: Year Ended January 31
-------------------------------------------------------------------------
1990 1991 1992 1993 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Leasing . . . . . . . . . . . . . . . . $276,681 $292,806 $262,695 $199,113 $156,606
Direct sales . . . . . . . . . . . . . 60,271 57,606 58,456 82,113 94,852
Technical services . . . . . . . . . . . 15,144 17,831 18,864 18,240 16,127
Equity in earnings of 50% owned affiliate - - - 101 733
Other . . . . . . . . . . . . . . . . . 1,986 1,237 1,980 4,098 3,593
-------- -------- -------- -------- --------
TOTAL . . . . . . . . . . . . . . . . . 354,082 369,480 341,995 303,665 271,911
-------- -------- -------- -------- --------
Costs and Expenses:
Leasing . . . . . . . . . . . . . . . . 208,925 209,920 174,676 130,175 121,961
Direct sales . . . . . . . . . . . . . 53,182 48,494 50,441 70,637 82,135
Technical services . . . . . . . . . . . 9,315 11,822 12,274 12,751 11,096
Interest . . . . . . . . . . . . . . . 35,542 49,296 49,746 41,685 33,446
Selling, general and administrative . . 33,472 34,063 38,136 37,406 42,209
Restructuring charges . . . . . . . . . - - - - 6,641
-------- -------- -------- -------- --------
TOTAL . . . . . . . . . . . . . . . . . 340,436 353,595 325,273 292,654 297,488
-------- -------- -------- -------- --------
Earnings (loss) from continuing operations
before income taxes . . . . . . . . . . 13,646 15,885 16,722 11,011 (25,577)
Income tax expense (benefit) . . . . . . . 5,045 5,769 6,185 4,240 (9,532)
-------- -------- -------- -------- --------
Earnings (loss) from continuing operations 8,601 10,116 10,537 6,771 (16,045)
Discontinued operations:
Earnings (loss) from operations, net
of tax . . . . . . . . . . . . . . . 9 (172) (179) 164 (1,395)
Provision for loss on disposal, net of tax - - - - (7,082)
-------- -------- -------- -------- --------
Net earnings (loss) . . . . . . . . . . . . $8,610 $9,944 $10,358 $6,935 $(24,522)
-------- -------- -------- -------- --------
Earnings (loss) per primary share:
Continuing operations . . . . . . . . . $1.39 $1.50 $1.57 $1.01 $(2.39)
Discontinued operations . . . . . . . . - (.02) (.03) .02 (1.26)
Net earnings . . . . . . . . . . . . . $1.39 $1.48 $1.54 $1.03 $(3.65)
Net earnings per share - fully diluted . . $1.39 $1.48 $1.47 $1.01 -
Cash dividends paid per share . . . . . . . . . - - - - $.16
<FN>
Results of operations for all years prior to the year ended January 31, 1994
have been restated to segregate the results of discontinued operations.
</TABLE>
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA (Continued)
<TABLE>
<CAPTION>
(Dollars in thousands)
Balance Sheet Data: January 31
-----------------------------------------------------------------------
1990 1991 1992 1993 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . . $607,440 $745,877 $754,455 $688,023 $593,027
Leased assets:
Sales-type and direct financing leases 460,235 580,785 607,524 512,480 412,561
Operating leases-net of accumulated
depreciation . . . . . . . . . . . 72,022 66,853 40,007 53,092 55,006
Notes payable . . . . . . . . . . . . . . 120,615 164,147 186,031 148,433 148,175
Subordinated notes . . . . . . . . . . . - - 10,000 10,000 10,000
Nonrecourse lease financing . . . . . . . 347,544 426,190 382,443 330,494 296,794
Shareholders' equity . . . . . . . . . . 69,008 77,866 88,565 95,644 70,084
=======================================================================================================================
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED April 30, July 31, Oct. 31, Jan. 31, April 30, July 31, Oct. 31, Jan. 31,
1992 1992 1992 1993 1993 1993 1993 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $72,331 $84,690 $80,887 $65,719 $61,644 $64,487 $74,347 $71,433
Gross Profit (Loss) 23,467 22,311 20,829 19,296 19,233 18,859 18,839 (4,538)
Earnings (loss) from
continuing operations 2,139 2,003 1,443 1,186 1,262 1,512 963 (19,782)
Discontinued Operations
(net of tax) (179) (146) 172 317 (52) (239) (267) (7,919)
Net earnings (loss) $1,960 $1,857 $1,615 $1,503 $1,210 $1,273 $696 $(27,701)
Earnings (loss) per share -
primary
Continuing operations $ .32 $ .30 $ .21 $ .18 $ .19 $ .22 $ .14 $(2.94)
Discontinued operations (.03) (.02) .03 .04 (.01) (.03) (.04) (1.18)
Net earnings $ .29 $ .28 $ .24 $ .22 $ .18 $ .19 $ .10 $(4.12)
Net earnings per share -
fully diluted $ .28 $ .27 $ .24 $ .22 $ .18 $ .19 $ .10 -
Cash dividends paid per share - - - - $ .04 $ .04 $ .04 $ .04
</TABLE>
Results of operations for all quarters prior to the quarter ended January 31,
1994 have been restated to segregate the results of discontinued operations.
Accordingly, amounts for revenues and gross profit pertain only to continuing
operations.
Earnings (loss) from continuing operations for the three months ended
January 31, 1994 includes restructuring charges of $6.6 million ($.62
per share, net of tax).
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Accounting Practices
Refer to Note 1 of the Notes to Consolidated Financial Statements for a
discussion of the Company's significant accounting practices.
Results of Operations
The following schedule presents the amounts and relative percentage of
total revenues represented by major revenue and expense items for each of the
three years in the period ended January 31, 1994.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
- --------------------------------------- 1992 1993 1994
(Dollars in Thousands) Amount Percent Amount Percent Amount Percent
---------------------- ---------------------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Leasing . . . . . . . . . . . . . . $262,695 76.8 $199,113 65.6 $156,606 57.6
Direct sales . . . . . . . . . . . 58,456 17.1 82,113 27.0 94,852 34.9
Technical services . . . . . . . . . 18,864 5.5 18,240 6.0 16,127 5.9
Equity in earnings of 50% owned
affiliate . . . . . . . . . . . 101 733 0.3
Other . . . . . . . . . . . . . . . 1,980 0.6 4,098 1.4 3,593 1.3
-------- ------ -------- ----- -------- -----
TOTAL . . . . . . . . . . . . . . . 341,995 100.0 303,665 100.0 271,911 100.0
-------- ----- -------- ----- -------- -----
Costs and Expenses:
Leasing . . . . . . . . . . . . . . 174,676 51.1 130,175 42.9 121,961 44.9
Direct sales . . . . . . . . . . . . 50,441 14.7 70,637 23.3 82,135 30.2
Technical services . . . . . . . . . 12,274 3.6 12,751 4.2 11,096 4.1
Interest . . . . . . . . . . . . . 49,746 14.5 41,685 13.7 33,446 12.3
Selling, general and administrative 38,136 11.2 37,406 12.3 42,209 15.5
Restructuring charges . . . . . . . 6,641 2.4
-------- ----- -------- ----- -------- -----
TOTAL . . . . . . . . . . . . . . . 325,273 95.1 292,654 96.4 297,488 109.4
-------- ----- -------- ----- -------- -----
Earnings (loss) from continuing
operations before income taxes . . 16,722 4.9 11,011 3.6 (25,577) (9.4)
Income tax expense (benefit) . . . . . 6,185 1.8 4,240 1.4 (9,532) (3.5)
-------- ----- -------- ----- -------- -----
Earnings (loss) from continuing
operations . . . . . . . . . . . . . 10,537 3.1 6,771 2.2 (16,045) (5.9)
Discontinued operations:
Earnings (loss) from operations,
net of tax . . . . . . . . . . (179) (0.1) 164 0.1 (1,395) (0.5)
Provision for loss on disposal, net
of tax . . . . . . . . . . . . . - - - - (7,082) (2.6)
-------- ----- -------- ----- -------- -----
Net earnings (loss) . . . . . . . . . . $10,358 3.0 $ 6,935 2.3 $(24,522) (9.0)
-------- ----- -------- ----- -------- -----
</TABLE>
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LEASING:
A summary of the operating results from leasing for the three years ended
January 31, 1992-1994 is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1992 1993 1994
- ---------------------------------------------- -------------- ------------- ------------
<S> <C> <C> <C>
Leasing Revenues . . . . . . . . . $262,695 $199,113 $156,606
Cost of Leasing . . . . . . . . . . 174,676 130,175 121,961
------------- ------------- ------------
Gross Leasing Margin . . . . . . . $88,019 $68,938 $34,645
Percent of Revenue . . . . . . . . 33.5% 34.6% 22.1%
</TABLE>
For the year ended January 31, 1993, leasing revenues decreased 24% from the
prior year and for the year ended January 31, 1994, such revenues declined 21%.
The principal factor underlying the decline in both years was the ongoing market
dynamics which has resulted in a decrease in the demand for large mainframe
computer systems, resulting in the Company's strategy to concentrate its
marketing activities on mid-range computers and peripherals, communication
technologies, RISC-based computer systems, personal computer networks,
and related capital equipment. As a result, the average lease
transaction size decreased for both years, even though the number of
lease transactions increased in the current year.
For the year ended January 31, 1993, gross leasing margin decreased by 22% from
the prior year due primarily to the lower lease volume. However, the margin as
a percent of revenue improved slightly, primarily as a result of increased
finance income on both sales-type and direct financing leases. Repeat business
from the installed lease base also improved the margin percent.
For the year ended January 31, 1994, gross leasing margin decreased by 50% from
the prior year. This was due primarily to the lower lease volume (in dollars)
and to an increase in asset valuation adjustments for additional off-lease
equipment items being returned rather than leases being renewed. A few large
transactions with below average margins and a decrease of 21% in finance
income, resulting from a decline of 17% in the lease base and the lower
interest rate environment, also contributed to the margin decrease.
Asset valuation writedowns of off-lease equipment can occur when the lessee
elects not to renew, extend, or reconfigure the lease, while lease renewals
tend to maintain the in-place value of leased equipment. Leased equipment is
recorded at the lower of cost or fair market value when equipment is received
from lessees at the end of the lease. During the quarter ended January 31,
1994, several major customers decided not to renew their leases but to
negotiate to purchase or return the equipment. The relatively low interest
rates added to some customers' incentive to purchase equipment rather than
renew their leases. These sales or returns resulted in a $7 million charge. In
addition, equipment that was returned as a result of credit and collection-
related situations with other customers, resulted in $15 million of off-lease
writedowns in the fourth quarter. The majority of these valuation adjustments
were caused by credit deterioration of selected lessees. Lease renewal was
often not an option to the Company and contested repossession of the equipment
resulted in decreased values due to that delayed return of the equipment.
<PAGE> 14
The Company's management believes that the extent of the off-lease
writedowns which occurred in the fourth quarter to be unusual and relating to
specific situations with certain customers. The Company's 1994 business plan,
developed in connection with the overall strategic restructuring plan,
estimates that the leasing margin percent will return to its historical range
of 30% to 35% of revenues.
DIRECT SALES:
A summary of the operating results from direct sales for the three years ended
January 31, 1992-1994 is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1992 1993 1994
- ------------------------------------ ----------- ------------ ------------
<S> <C> <C> <C>
Direct Sales . . . . . . $58,456 $82,113 $94,852
Cost of Direct Sales . . 50,441 70,637 82,135
----------- ------------ ------------
Gross Sales Margin . . . $8,015 $11,476 $12,717
Percent of Sales . . . . 13.7% 14.0% 13.4%
</TABLE>
For the year ended January 31, 1993, direct sales increased 40% from the prior
year, and, for the year ended January 31, 1994, direct sales increased 16%.
The principal factors underlying the increases in both years were sales of
microcomputers and related accessories sold to commercial accounts and sales of
new and used computer equipment to retail users and dealers, resulting from
higher volumes of equipment coming off-lease. Sales of off-lease mainframe
computers were a significant factor in the increased sales of used computer
equipment.
For the years ended January 31, 1993 and 1994, gross sales margin (in dollars)
increased 43% and 11%, respectively, due primarily to the larger direct sales
volume for both years.
TECHNICAL SERVICES:
A summary of the operating results from technical services for the three years
ended January 31, 1992-1994 is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1992 1993 1994
- ------------------------------------ ----------- ------------ ------------
<S> <C> <C> <C>
Services Revenues . . . . $18,864 $18,240 $16,127
Cost of Services . . . . 12,274 12,751 11,096
----------- ------------ ------------
Gross Margin . . . . . . $6,590 $5,489 $5,031
Percent of Revenues . . . 34.9% 30.1% 31.2%
</TABLE>
For the year ended January 31, 1993, technical services revenues decreased 3%
from the prior year. This was due principally to a decline in the customer
base of disaster recovery operations and the sale of Wang maintenance operations
as of August 31, 1992, partially offset by increased depot maintenance activity.
For the year ended January 31, 1994, technical services revenues decreased 12%
from the prior year. This was primarily due to a decline of $3.1 million in
disaster recovery services as a result of 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 into SunGard's operations and are operated by SunGard as
part of the agreement. Increased consulting revenues partially offset the
decline in services revenues.
<PAGE> 15
For the year ended January 31, 1993, gross margin decreased by 17%.
The margin decline resulted principally from the lower revenues, additional
salary and personnel costs relating to consulting activity, and higher fixed
costs of disaster recovery operations. For the year ended January 31, 1994,
the gross margin declined due to lower revenues, while the margin percentage
improvement was due primarily to lower parts costs and increased labor
efficiency in maintenance operations, and the absence, beginning in the second
quarter of 1993, of disaster recovery operations, which bore higher direct
costs per revenue dollar.
INTEREST EXPENSE:
For the years ended January 31, 1993 and 1994, interest expense decreased 16%
and 20%, respectively. This resulted primarily from lower interest rates and
reductions in the average amount of debt outstanding during both years.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
For the year ended January 31, 1993, selling, general, and administrative
expenses decreased by 2%. As a percent of total revenues, such costs increased
from 11.2% to 12.3%. Additional marketing, marketing support and administrative
expenses incurred in connection with the expansion of the personal computer
rental business totaled over $1.8 million. This increase was offset by a
decrease in selling, general and administrative expense attributable to other
consolidated operations of $2.6 million, or 7%.
For the year ended January 31, 1994, selling, general, and administrative
expenses increased by 13%, and, as a percent of total revenues, from 12.3% to
15.5%. The increase was attributable primarily to additional bad debt charges
($4.7 million) resulting from losses for credit and collection-related
situations with several customers. Additional marketing, marketing support and
administrative expenses incurred in connection with continued expansion of
personal computer rental operations also contributed to the increase.
The Company's management believes the facility closing and other cost
reduction measures included in the Company's strategic business plan will
reduce selling, general and administrative expense for the year ending January
31, 1995.
STRATEGIC BUSINESS PLAN:
During the year ended January 31, 1994, the Company initiated a strategic
business plan that includes the sale or other divestiture of certain
product lines and non-core businesses, the closing of facilities,
and other cost reduction measures to improve the Company's profitability.
The Board of Directors approved the retention of corporate advisors to assist
management in the divestiture of non-strategic businesses. The Company expects
to complete these divestitures by the end of the third quarter of 1994.
Prior to implementing the plan, the Company engaged in the
distribution of personal computers and related peripherals through direct
sales to corporate customers and retail sales through its computer superstores
and computer outlet stores.
During 1992 and 1993, the two dominant factors in the PC marketplace were
intense price competition among manufacturers and the rapid move to Intel 486
and similar processor technology. Overall price levels in the PC market
declined, while gross margin percentages remained relatively constant. The
decrease in margins in absolute dollars put intense pressure on regional-based
distributors such as LDI to maintain sales volume and profitability levels.
The continued price erosion coupled with new entrants in the retail PC business
led the Company to decide that the financial returns in these marketplaces
would not be acceptable.
<PAGE> 16
As a complement to its end user marketing, the Company also engaged in the
direct catalog marketing of telecommunications equipment, components and
accessories related to data communications. It also offered to small and
medium-size specialty retailers turnkey PC-based point-of-sale installations
with complete engineering, software system design and technical support
services.
The direct catalog marketing and PC-based point-of-sale businesses have also
been affected by the changes in the PC marketplace during the past two years.
In addition, the limited size and market share of these operations influenced
management's decision to exit these businesses.
The businesses the Company has identified as discontinued or non-strategic can
generally be characterized as transactional in nature, commodity oriented and
not conducive to building long-term customer relationships. These attributes
have translated into low-margin, low-return businesses which do not match the
Company's new strategy of focusing on a core business, emphasizing exceptional
customer service, building long-term relationships with customers and providing
value-added services. These core business attributes, in conjunction with the
proposed facilities closing and other cost saving measures, are expected
to result in higher margins and financial returns after the strategic plan is
completely implemented.
RESTRUCTURING CHARGES:
Under the strategic plan, businesses subject to sale or other divestiture
(other than those included in Discontinued Operations) include (1) LDI Retail
Services, which provides hardware, software, and system integration for retail
chain stores; (2) LDI Computer Systems, which sells microcomputers and
related equipment to commercial accounts; (3) SeaTech Communications, a
ship-to-shore satellite telecommunications venture; and (4) LDI Canada, Ltd., a
leasing subsidiary based in Toronto, Canada.
The estimated cost of implementing the plan is $6.6 million, recorded in the
Company's fourth quarter ($4.1 million after-tax, or $.62 per share). The
estimated cost includes $4.3 million attributable to disposing of the above
businesses, $1.7 million for employee severance and terminations and $0.6
million for closing facilities.
INCOME TAXES:
The effective income tax expense rate for continuing operations increased to
38.5% for the year ended January 31, 1993 compared to 37.0% for the prior
year. The lower rate in the prior year resulted principally from the
utilization of net operating losses of a pooled subsidiary which benefited
that year and previous years.
The Company's effective income tax benefit rate for continuing operations
decreased to 37.3% for the year ended January 31, 1994 from a tax expense rate
of 38.5% for the prior year, giving effect to the tax rate change.
<PAGE> 17
DISCONTINUED OPERATIONS:
Under the restructuring plan, discontinued segments include (1) LDI Computer
Superstores, the retail PC superstores; (2) LDI Computer Outlets, the retail PC
outlet stores; (3) LDI Distribution Supply, a catalog distribution business
selling PC peripheral equipment and modems; and (4) LDI Open Software, a
software distributor company selling UNIX-based systems.
As a result of discontinuing these businesses the Company recorded for its
fourth quarter a charge of $11.7 million ($7.1 million after-tax), consisting
of $10.8 million for estimated losses during the phase-out period and $0.9
million for employee severance and termination costs.
LIQUIDITY AND CAPITAL RESOURCES:
FINANCIAL POLICIES. Through April, 1994, the Company used a combination of
unsecured revolving bank credit, unsecured lines of credit and internally
generated cash flow to finance, on an interim basis, the acquisition of
equipment for lease or sale. As a result of the strategic actions of the
Company, the unsecured revolving bank credit and unsecured lines of credit
have been changed to secured facilities expiring at April 30, 1995.
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 and the Company
limits its risk, if any, to its equity investment in the equipment.
The Company enters into interest rate swap and cap agreements to manage
exposure to changes in interest rates. The swap agreements generally involve
the exchange of fixed or floating rate interest payments without the exchange
of the underlying principal amounts. The notional amount of interest rate
swaps outstanding at January 31, 1994 was $142 million with a weighted average
interest rate of 5.5%. The agreements have maturities from one to four years.
LIQUIDITY. Liquidity is provided primarily by cash generated from operating
activities, which amounted to $227 million and $190 million for the years ended
January 31, 1993 and 1994, respectively. Cash flow from operating activities
for the year ended January 31, 1994 decreased by $37 million from the prior
year due primarily to the reduction in accounts payable balances compared with
an increase in the prior year. Cash flow used in investing activities
increased by $11 million due primarily to additional purchases of equipment for
lease. Cash flow used in financing activities decreased by $54 million due
primarily to an increase in revolving and line of credit facilities in the
current year ($20 million) compared with a substantial decrease in the prior
year ($72 million). This was partially offset by increased cash provided by
nonrecourse lease financings ($27 million). The net results were decreases in
financing requirements of $12 million, $88 million and $35 million for the
years ended January 31, 1992, 1993 and 1994, respectively.
CAPITAL RESOURCES. At January 31, 1994, the Company's revolving and line of
credit facilities consisted of a $130 million revolving credit facility with a
group of banks and $35 million of additional revolving credit facilities
maturing during the year ending January 31, 1995. At January 31, 1994, $130
million was outstanding on these facilities. The revolving credit agreements
provided several borrowing options with varying interest rates depending on
the mix of borrowing options used.
<PAGE> 18
The Company has established nonrecourse securitized lease financing facilities,
consisting of commercial paper and notes, with $135 million of available
funding capacity. As of January 31, 1994, $114 million of this amount was
utilized. Effective May 1, 1994, one of the financial institutions which
issued a $50 million letter of credit for one of the asset-backed financing
programs has not extended its letter of credit for new leases financed under
this program. Leases already funded will continue to amortize under the
existing terms of the agreement. The Company is actively seeking replacement
letters of credit as well as discussing the extension of the letter of credit
with the existing provider. The Company has multiple sources of nonrecourse
financing and does not expect this action to have a material adverse effect on
its ability to finance new lease activity.
As of January 31, 1994, the Company had unsecured installment notes of $12.4
million with a group of insurance companies which mature in 1997 and $38.7
million with banks which mature in 1996.
On May 2, 1994, the $130 million unsecured revolving bank credit facility and
the unsecured amortizing term loan agreement were combined into one $116
million secured reducing revolving credit facility expiring on April 30, 1995.
The Company will reduce the principal outstanding under the prior facilities by
$17 million in May, 1994. The total commitment under the new facility reduces
periodically to $104 million during the term of the facility. The Company's
ability to borrow additional amounts under the revolving facility are based on
a ratio of defined assets to defined recourse debt of the Company.
An additional revolving credit facility with an outstanding balance of $8.3
million at May 2, 1994 was also changed to a secured, amortizing term loan
maturing at April 30, 1995. Unsecured installment notes of $8.5 million were
changed to secured notes with modifications made to the principal repayment
schedule to proportionately match the principal amortization of the new
secured, reducing revolving credit facility. These notes also mature on April
30, 1995. The remaining $2.6 million of unsecured installment notes have been
changed to secured notes and mature on August 31, 1994.
At January 31, 1994, the Company had $455 million of total interest-bearing
obligations, including $254 million of floating rate financings. Of the total
floating rate financings, only $84 million was subject to interest rate
fluctuations, with $142 million of floating-rate financing being converted to
fixed-rate financing through interest rate swap agreements and $28 million of
floating-rate financings subject to interest rate ceilings through interest
rate cap agreements.
EFFECT ON LIQUIDITY OF STRATEGIC PLAN:
Under the strategic restructuring plan, liquidity will be provided by (1) cash
generated from operating activities; (2) cash realized from the sale or
liquidation of discontinued and non-strategic businesses; (3) cash proceeds
from the financing of the present value of future lease rentals and
availability under the new revolving credit facility.
LDI's management believes that it will have sufficient liquidity to meet
principal amortization, and the operating requirements of the core business.
OTHER:
Receivable balances have grown primarily due to additional notes receivable
obtained in connection with tax-oriented lease transactions with investors.
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> 19
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LDI CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants . . . . . . . . . . . .
Consolidated Balance Sheets as of January 31, 1993 and 1994
Statements of Consolidated Earnings for the years ended
January 31, 1992, 1993, and 1994 . . . . . . . . . . . . . .
Statements of Consolidated Cash Flows for the years ended
January 31, 1992, 1993, and 1994 . . . . . . . . . . . . . .
Statements of Consolidated Shareholders' Equity for the years
ended January 31, 1992, 1993, and 1994 . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . .
Financial Statement Schedules:
Schedule II - Amounts Receivable from Related Parties . . . .
Schedule VIII - Valuation and Qualifying Accounts . . . . . .
Schedule IX - Short-Term Borrowings . . . . . . . . . . . . .
<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
LDI CORPORATION:
We have audited the accompanying consolidated balance sheets of LDI Corporation
and its subsidiaries as of January 31, 1993 and 1994, and the related
statements of consolidated earnings, cash flows, and shareholders' equity for
each of the three years in the period ended January 31, 1994. Our audits also
included the financial statement schedules listed in the Index at Item 8.
These financial statements and financial statement schedules are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on the financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of LDI Corporation and
its subsidiaries at January 31, 1993 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1994 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Deloitte & Touche
Cleveland, Ohio
May 2, 1994
<PAGE> 21
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
=========================================================================================================
January 31
-------------------------
ASSETS 1993 1994
-------- ---------
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 4,482 $ 8,972
Receivables--net of allowances for doubtful accounts . . . 35,168 41,831
Inventory held for lease or sale . . . . . . . . . . . . . 24,893 18,336
Leased assets:
Sales-type and direct financing leases . . . . . . . . 512,480 412,561
Operating leases--net of accumulated depreciation . . . 53,092 55,006
Land, buildings, equipment, and furniture--net of
accumulated depreciation of $11,547 and $8,521 . . . . 21,290 16,712
Net assets of discontinued operations . . . . . . . . . . . 16,821 20,868
Other assets . . . . . . . . . . . . . . . . . . . . . . . 19,797 18,741
--------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $688,023 $593,027
======== ========
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 22
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share Data)
<CAPTION>
=======================================================================================================
January 31
------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1993 1994
--------- ---------
<S> <C> <C>
Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . $ 53,388 $ 28,793
Accrued liabilities . . . . . . . . . . . . . . . . . 10,464 9,508
Notes payable . . . . . . . . . . . . . . . . . . . . 148,433 148,175
Subordinated notes . . . . . . . . . . . 10,000 10,000
Deferred income taxes . . . . . . . . . . . . . . . . 31,296 15,941
Nonrecourse lease financing . . . . . . . . . . . . . 330,494 296,794
Reserves and liabilities related to discontinued
operations and restructuring programs . . . . . . -- 7,456
Other liabilities . . . . . . . . . . . . . . . . . . 8,304 6,276
--------- ---------
Total liabilities . . . . . . . . . . . . . . 592,379 522,943
--------- ---------
Shareholders' Equity:
Common stock, par value of $.01 -- 20,000,000
shares authorized, 6,828,984 shares issued . . . 68 68
Additional paid-in capital . . . . . . . . . . . . . 44,884 44,922
Retained earnings . . . . . . . . . . . . . . . . . . 51,952 26,354
Treasury shares at cost -- 101,527 shares . . . . . . (1,260) (1,260)
--------- ---------
Total shareholders' equity . . . . . . . . . . . 95,644 70,084
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . $688,023 $593,027
========= =========
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 23
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
<TABLE>
FOR THE YEARS ENDED JANUARY 31, 1992, 1993, AND 1994
(Dollars in Thousands, Except Per Share Data)
<CAPTION>
1992 1993 1994
____________________________________________________________________________________________________________
<S> <C> <C> <C>
Revenues:
Leasing . . . . . . . . . . . . . . . . . . $262,695 $199,113 $156,606
Direct sales . . . . . . . . . . . . . . . 58,456 82,113 94,852
Technical services . . . . . . . . . . . . 18,864 18,240 16,127
Equity in earnings of 50% owned affiliate . - 101 733
Other . . . . . . . . . . . . . . . . . . . 1,980 4,098 3,593
-------- -------- --------
TOTAL . . . . . . . . . . . . . . . . . . . 341,995 303,665 271,911
-------- -------- --------
Costs and Expenses:
Leasing . . . . . . . . . . . . . . . . . . 174,676 130,175 121,961
Direct sales . . . . . . . . . . . . . . . 50,441 70,637 82,135
Technical services . . . . . . . . . . . . . 12,274 12,751 11,096
Interest . . . . . . . . . . . . . . . . . 49,746 41,685 33,446
Selling, general and administrative . . . . 38,136 37,406 42,209
Restructuring charges . . . . . . . . . . . -- -- 6,641
-------- -------- --------
TOTAL . . . . . . . . . . . . . . . . . . . 325,273 292,654 297,488
-------- -------- --------
Earnings (loss) from continuing operations
before income taxes . . . . . . . . . . . . 16,722 11,011 (25,577)
Income tax expense (benefit) . . . . . . . . . 6,185 4,240 (9,532)
-------- -------- --------
Earnings (loss) from continuing operations . . 10,537 6,771 (16,045)
Discontinued operations:
Earnings (loss) from operations, net of
income tax expense (benefit) of $(105),
$106, and $(907) . . . . . . . . . . . . (179) 164 (1,395)
Provision for loss on disposal, net of income
tax benefit of $4,604 . . . . . . . . . -- -- (7,082)
-------- -------- --------
Net earnings (loss) . . . . . . . . . . . . . . $10,358 $6,935 $(24,522)
======== ======== ========
Earnings (loss) per primary share:
Continuing operations . . . . . . . . . . . $1.57 $1.01 $(2.39)
Discontinued operations . . . . . . . . . . (.03) .02 (1.26)
Net earnings . . . . . . . . . . . . . . . $1.54 $1.03 $(3.65)
Net earnings per share - fully-diluted . . . . $1.47 $1.01 --
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 24
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
FOR THE YEARS ENDED JANUARY 31, 1992, 1993, AND 1994
(Dollars in Thousands)
<CAPTION>
1992 1993 1994
________________________________________________________________________________________________________________________
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net earnings (loss) from continuing operations $ 10,537 $ 6,771 $(16,045)
Adjustments to reconcile net earnings to net cash flow
from operating activities:
Depreciation 22,049 27,274 24,371
Deferred income taxes 5,850 4,534 (9,844)
Additions to sales-type and direct
financing leases (215,552) (117,381) (112,189)
Principal portion of lease rentals received 188,708 211,259 211,610
Purchases of inventory for resale (54,481) (70,584) (75,578)
Sales, transfers, and disposals of inventory and equipment 216,913 169,307 210,009
Restructuring programs 6,641
Change in accounts receivable 6,697 (8,435) (5,898)
Change in accounts payable 5,375 9,564 (24,695)
Change in accrued expenses and other liabilities (729) 2,465 (2,763)
Other 3,639 (4,785) (1,564)
-------- -------- --------
Cash provided by continuing operations 189,006 229,989 204,055
-------- -------- --------
Discontinued Operations:
Net earnings (loss) from discontinued operations (179) 164 (1,395)
Estimated loss on disposal, net of tax (7,082)
Change in assets and liabilities of
discontinued operations (9,538) (3,325) (5,669)
-------- -------- --------
Cash used in discontinued operations (9,717) (3,161) (14,146)
-------- -------- --------
Total 179,289 226,828 189,909
-------- -------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of equipment for lease (157,266) (135,517) (147,426)
Purchases of land, buildings, equipment and furniture (8,860) (4,625) (3,544)
Purchases of companies, net of cash acquired (2,259) (3,328)
Proceeds from sale of companies, equipment and
other assets 166 3,591
-------- -------- --------
Total (168,385) (139,976) (150,707)
-------- -------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from nonrecourse lease financing 131,006 152,853 179,418
Payments on nonrecourse lease financing (174,661) (203,553) (212,621)
Change in revolving and line of credit facilities 36,734 (71,748) 19,842
Proceeds from term loan 50,000
Payments on term loan (11,250)
Payments on installment notes (14,850) (15,850) (8,850)
Proceeds from convertible subordinated notes 10,000
Cash dividends paid (1,076)
Other (631) (170) (175)
-------- -------- --------
Total (12,402) (88,468) (34,712)
-------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents (1,498) (1,616) 4,490
Cash and Cash Equivalents at Beginning of Year 7,596 6,098 4,482
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 6,098 $ 4,482 $ 8,972
======== ======== ========
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 25
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
<TABLE>
FOR THE YEARS ENDED JANUARY 31, 1992, 1993, AND 1994
(Dollars in Thousands)
<CAPTION>
_________________________________________________________________________________________________________________________________
Common Total
Additional stock in share-
Common paid-in Retained treasury holders'
Stock capital earnings - at cost equity
________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
BALANCE AT FEBRUARY 1, 1991 $ 65 $40,031 $39,205 $(1,435) $77,866
Net earnings 10,358 10,358
Employee stock options exercised,
13,230 shares issued 135 135
Issuance of 10,000 shares under a
restricted stock award plan 29 29
Sales of 14,105 treasury shares to
401(k) plan 5 175 180
Stock dividend:
5%, 318,831 shares issued 3 4,540 (4,543)
Cash paid for fractional shares (3) (3)
------- ------- ------- ------- ------
BALANCE AT JANUARY 31, 1992 68 44,740 45,017 (1,260) 88,565
Net earnings 6,935 6,935
Employee stock options exercised,
10,626 shares issued 106
Compensation expense under
stock award plan for shares
issued in a prior year 38 38
------- ------- ------- ------- ------
BALANCE AT JANUARY 31, 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
======= ======= ======= ======== =======
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 26
LDI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Where Indicated)
For the Years Ended January 31, 1992, 1993, and 1994
- ----------------------------------------------------
NOTE 1
Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. An investment
in a 50 percent owned affiliate is accounted for using the equity method.
LEASE ACCOUNTING - The Company's lease transactions are classified as either
sales-type, direct financing, or operating leases at the inception of the lease
in accordance with Statement of Financial Accounting Standards No. 13.
Sales-type and direct financing leases are those leases which transfer
substantially all of the costs and risks of ownership of the equipment to the
lessee. Generally, the Company classifies a lease as a sales-type or direct
financing lease if either (a) the lease term is at least 75 percent of the
estimated economic life of the leased equipment at lease inception or (b) the
present value of the rental payments is at least 90 percent of the fair market
value of the leased equipment at lease inception. Operating leases are those
leases in which substantially all the benefits and risks of ownership of the
equipment are retained by the Company. Generally, the leases that do not meet
conditions (a) or (b) described above are classified as operating leases.
The lease accounting methods used by the Company are:
SALES-TYPE LEASES: At lease inception, the present value of rentals over
the lease term is recorded as leasing revenues. The cost of the equipment less
the present value of the estimated residual value is recorded as leasing costs
and a dealer profit is recognized at the inception. The present values of
future rentals and of the residual are recorded as leased assets. Unearned
interest income, consisting of the excess of the gross rentals and of the
residual over their present values, is amortized to leasing revenues over the
lease term to produce a constant percentage return on the investment.
DIRECT FINANCING LEASES: At lease inception, the present values of future
rentals and of the residual are recorded as leased assets. Unearned interest
income is amortized to leasing revenues over the lease term to produce a
constant percentage return on the investment.
OPERATING LEASES: The monthly rental is recorded as leasing revenue. The
cost of equipment is recorded as leased assets and is depreciated over the
lease term to an estimated residual value.
RESIDUAL VALUES: The estimated residual values used in leases are reviewed
annually and reduced if necessary.
INITIAL DIRECT COSTS: Sales commissions and other direct costs incurred in
producing direct financing and operating leases are deferred and amortized over
the lease term.
<PAGE> 27
NONRECOURSE FINANCING - The Company assigns the rentals under most of its
leases to financial institutions and other lenders on a nonrecourse basis, for
which the Company receives a cash amount equal to a discounted value of the
lease rentals. In the event of a default by a lessee, the lender has a
security interest in the underlying leased equipment but has no recourse
against the Company. Proceeds from refinancing are recorded on the balance
sheet as nonrecourse lease financing. Under sales-type and direct financing
leases, nonrecourse lease financing and leased assets are reduced as lessees
make rental payments under the leases. Under operating leases, leasing revenue
is recorded monthly as lessees are billed. Receivables and nonrecourse lease
financing are reduced as lessees make rental payments.
DIRECT SALES - Revenues and costs of direct sales of equipment are recorded at
the time title to the equipment transfers to the customer.
OTHER REVENUES - Other revenues include fees earned for arranging leases
between unrelated parties and for selling equity interests in lease
transactions. The fees are recognized at the closing of such transactions. In
addition to these fees, the Company also may be entitled at lease termination
to fees equal to a portion of the net proceeds from the subsequent lease or
sale of the equipment. The Company's portion of such net proceeds, if any, is
reported as income at the time of the subsequent lease or sale of the
equipment.
INVENTORY - Inventory is valued at the lower of cost or market, using primarily
a first-in, first-out method.
BUILDINGS, EQUIPMENT, AND FURNITURE - Buildings, equipment, and furniture are
stated at cost. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets.
INCOME TAXES - Deferred income taxes are provided to give effect to temporary
differences between the amount of assets and liabilities for financial reporting
purposes and such amounts as determined by tax laws and regulations. Principal
differences are leases, which are accounted for as sales-type and direct
financing leases for financial reporting purposes and as operating leases for
tax purposes, and certain reserves and liabilities recorded for financial
reporting purposes that are not deductible for tax purposes until paid.
STATEMENT OF CONSOLIDATED CASH FLOWS - For the purposes of this statement, the
Company considers all highly liquid short term investments that have a maturity
of ninety days or less to be cash equivalents.
INTEREST RATE SWAP AGREEMENTS - The Company enters into interest rate swap
agreements to manage exposure to changes in interest rates. The agreements
involve the exchange of fixed or floating rate interest payments without the
exchange of the underlying principal amounts. The differential to be paid or
received is accrued as interest rates change and is recognized over the life of
the agreements as an adjustment to interest expense.
<PAGE> 28
EARNINGS PER SHARE - Primary earnings per share are computed on the basis of
the weighted average number of common shares outstanding during each year. For
the years ended January 31, 1992 and 1993, fully diluted earnings per share
were computed on the basis of the weighted average number of common shares
outstanding and the dilutive effect of the assumed conversion of the
convertible notes from the date of issuance, with related interest expense
reduced accordingly, and the assumed exercise of stock options and warrants.
For the year ended January 31, 1994, fully diluted earnings per share are not
shown since the effect would be anti-dilutive. The number of common shares
used for computing earnings per share are as follows:
<TABLE>
<CAPTION>
Year Ended January 31
1992 1993 1994
----------------------------------------------------------
<S> <C> <C> <C>
Primary 6,702 6,727 6,727
Fully diluted 7,241 7,383 -
</TABLE>
NOTE 2
Restructuring Charges
During the year ended January 31, 1994, the Board of Directors determined the
need to commence a strategic realignment of operations of the Company and to
discontinue certain business segments (See Note 3). The strategic plan
includes the sale or other divestiture 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 is $6.6 million, recorded in the Company's fourth quarter
(after-tax $4.1 million, or $.62 per share).
The estimated costs include $4.3 million attributable to disposing of certain
product lines and businesses, $1.7 million to employee severance and
terminations and $0.6 million to close facilities. In addition to asset
writedowns, reserves and liabilities of $3.6 million were recorded at January
31, 1994 relating to these items.
Summary financial results for the year ended January 31, 1994 and assets and
liabilities as of January 31, 1994 for operations subject to sale or other
divestiture (exclusive of discontinued business segments) were as follows:
<TABLE>
<S> <C>
Revenues . . . . . . . . . . . . $72,681
Operating loss (before
restructuring charges) . . . . . (183)
Assets . . . . . . . . . . . . . 35,129
Liabilities . . . . . . . . . . . 28,963
</TABLE>
<PAGE> 29
NOTE 3
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.
Also, the Board of Directors approved the retention of corporate advisors to
assist management in the planning and divestiture process that is expected to
be completed during the first and second quarters of 1994. The software
distribution segment was sold in March 1994 and all retail outlet stores were
closed in April 1994. The Company has an agreement in principle for the sale
of the catalog distribution segment and expects to complete the liquidation of
the retail computer superstores in May 1994.
As a result of these actions and subsequent implementation of the plan, the
Company recorded for its fourth quarter a charge of $11.7 million(after-tax,
$7.1 million), consisting of $10.8 million for estimated losses during the
phase-out period and $0.9 million for employee severance and termination costs.
In addition to asset writedowns, reserves and liabilities of $3.9 million were
recorded at January 31, 1994 relating to these items.
Combined revenues of the four discontinued segments were $21 million, $40
million, and $65 million for the years ended January 31, 1992, 1993, and 1994,
respectively. Assets of the discontinued operations, consisting primarily of
inventory and accounts receivable at January 31, 1994, 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 year financial statements have
been restated.
NOTE 4
Acquisitions
During the year ended January 31, 1994, the Company acquired the assets of
companies engaged in sales of microcomputers and related equipment to
commercial accounts, short-term rentals of computer equipment, and the
distribution of communications products. The aggregate consideration for these
acquisitions was $3.3 million.
During the year ended January 31, 1992, the Company acquired the assets of
companies engaged in sales of point-of-sale equipment and systems,
short-term rentals of personal computer equipment and computer maintenance. The
aggregate consideration for these acquisitions was $2.3 million. There were
no acquisitions during the year ended January 31, 1993.
These acquisitions have been accounted for using the purchase method and,
accordingly, the results of operations of these companies have been included in
the consolidated results of operations from the dates of acquisition. The
operations of the acquired companies prior to acquisition were not material in
relation to the consolidated amounts.
NOTE 5
Receivables
<TABLE>
<CAPTION>
January 31
- ----------------------------------------------------------------------------------------
1993 1994
-------- --------
<S> <C> <C>
Trade accounts $30,325 $34,441
Trade notes 8,055 13,537
Other 488 153
Allowances for doubtful accounts (3,700) (6,300)
-------- --------
Net receivables $35,168 $41,831
</TABLE>
<PAGE> 30
NOTE 6
Leasing Activities
<TABLE>
The components of assets leased under sales-type and direct financing leases
consist of:
<CAPTION>
January 31
- ---------------------------------------------------------------------------------------
1993 1994
-------- --------
<S> <C> <C>
Future minimum lease rentals $461,299 $388,966
Net estimated residual values of
leased equipment 139,456 98,779
Allowance for impaired lease rentals
and residual values (2,055) (14,105)
Less unearned income (86,220) (61,079)
-------- --------
Total $512,480 $412,561
</TABLE>
Assets leased under operating leases consist of:
<TABLE>
<CAPTION>
January 31
- ---------------------------------------------------------------------------------------
1993 1994
-------- --------
<S> <C> <C>
Equipment at cost $84,773 $78,418
Accumulated depreciation (31,681) (23,412)
-------- --------
Net $53,092 $55,006
</TABLE>
Future minimum lease rentals are:
<TABLE>
<CAPTION>
Sales-type and Direct Non-Cancelable
YEAR ENDING JANUARY 31 Financing Leases Operating Leases
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
1995 $171,657 $13,772
1996 105,459 9,869
1997 60,872 6,315
1998 35,438 777
1999 14,271 337
2000 1,269 -
-------- -------
Total $388,966 $31,070
<FN>
Noncancellable leases are extended automatically on a month-to-month basis for
a minimum of usually 120 days unless the Company or the lessee provides written
notice of termination.
</TABLE>
<PAGE> 31
NOTE 7
Income Taxes
The provision (benefit) for income taxes consists of:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
- ------------------------------------------------------------------------------------------------------
1992 1993 1994
------------- ------------ --------------
<S> <C> <C> <C>
Continuing Operations
- ---------------------
Current:
State, local and other $ 230 $ (188) $312
------------- ------------ --------------
Deferred:
Federal 5,684 3,735 (9,177)
State, local and other 271 693 (1,208)
Federal tax rate adjustment - - 541
------------- ------------ --------------
Total 5,955 4,428 (9,844)
------------- ------------ --------------
Total continuing operations 6,185 4,240 (9,532)
------------- ------------ --------------
Discontinued operations
- -----------------------
Deferred:
Federal (96) 93 (4,896)
State, local and other (9) 13 (615)
------------- ------------ --------------
Total discontinued operations (105) 106 (5,511)
------------- ------------ --------------
Total provision $6,080 $4,346 $(15,043)
------------- ------------ --------------
</TABLE>
A reconciliation between the federal statutory tax rate and the
Company's effective tax rate for continuing operations is:
<TABLE>
<S> <C> <C> <C>
Statutory tax expense (benefit) rate 34.0% 34.0% (35.0%)
Effects of:
State income tax expense (benefit) 4.2 4.2 (4.3)
Federal tax rate adjustment - - 2.1
Other (1.2) 0.3 (0.1)
------------- ----------- -----------
Effective tax expense (benefit) rate 37.0% 38.5% (37.3%)
- ------------------------------------------------------------------------------------------------------
</TABLE>
Income taxes for the years ended January 31, 1993 and 1994 were
determined under Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes", which was adopted effective February 1, 1992.
Deferred taxes for prior years were determined under SFAS No. 96. Adoption of
SFAS No. 109 did not have a material effect on the Company's financial
statements.
Principal components of the deferred income tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31 1993 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets:
Investment tax credit and tax loss
carryforwards $30,573 $36,508
Reserves and liabilities - 10,108
Other - 318
---------- ----------
Total 30,573 46,934
---------- ----------
Deferred income tax liabilities:
Leases 57,556 62,875
Other 4,313 -
---------- ----------
Total 61,869 62,875
---------- ----------
Net deferred income tax liability $31,296 $15,941
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 32
At January 31, 1994, the Company has an investment tax credit carryforward for
income tax purposes of $2.9 million that expires in various amounts beginning
in 1999 and has a tax loss carryforward for income tax purposes of $84.0
million that expires in various amounts beginning in 2003. For financial
reporting purposes, the tax benefit of these carryforwards has been used to
reduce deferred income taxes at January 31, 1994.
The Omnibus Budget Revenue Reconciliation Act of 1993, enacted in August 1993,
included a one percent increase in the Federal tax rate for corporations, which
is effective retroactive to January 1, 1993. Under the provisions of Statement
of Financial Accounting Standards No. 109, the effect on taxes currently
payable and deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date. Accordingly,
deferred tax liabilities as of February 1, 1993 increased by $541,000 as a
result of the new law.
NOTE 8
Accrued and Other Liabilities
Accrued liabilities consist of:
<TABLE>
<CAPTION>
January 31
- ----------------------------------------------------------------------------------------
1993 1994
---------- ------------
<S> <C> <C>
Compensation $4,277 $3,896
Interest 1,793 1,594
Sales tax 1,330 1,022
Miscellaneous 3,064 2,996
---------- ------------
Total $10,464 $9,508
- ----------------------------------------------------------------------------------------
</TABLE>
Other liabilities consist of:
<TABLE>
<CAPTION>
January 31
- ----------------------------------------------------------------------------------------
1993 1994
---------- ------------
<S> <C> <C>
Customer rental prepayments $4,706 $4,035
Deferred revenues 3,228 2,084
Miscellaneous 370 157
---------- ------------
Total $8,304 $6,276
- ----------------------------------------------------------------------------------------
</TABLE>
NOTE 9
Notes Payable
Notes payable, all of which are unsecured, consist of:
<TABLE>
<CAPTION>
January 31
- ----------------------------------------------------------------------------------------
1993 1994
---------- ------------
<S> <C> <C>
Revolving and line of credit facilities $77,233 $97,075
Installment notes 71,200 51,100
---------- ------------
Total $148,433 $148,175
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 33
At January 31, 1994, the Company's revolving credit facilities consisted of a
$130 million revolving credit facility with a group of banks and $35 million
of additional revolving credit facilities maturing during the year ending
January 31, 1995. At January 31, 1994, $130 million was outstanding on these
facilities. The agreements provided several borrowing options with varying
interest rates depending on the mix of borrowing options used. There are no
compensating balances required by the agreements. The Company pays fees ranging
from 1/8 percent to 1/4 percent annually to maintain the committed facilities.
The average interest rate on revolving and line of credit facilities
was 4.3 percent as of January 31, 1993 and 1994, and the average interest rate
for the years then ended was 4.7 percent and 4.3 percent, respectively.
Subsequent to January 31, 1994, $33 million of the borrowings under the line of
credit facilities was refinanced on a nonrecourse basis. Accordingly, the
refinanced amounts have been included in nonrecourse lease financing at January
31, 1994.
In August 1992, the Company borrowed $50 million from a group of banks pursuant
to a four year unsecured amortizing term loan agreement. The agreement
provides for a floating interest rate based on LIBOR plus 1.125 percent. The
proceeds were used to repay debt under the Company's revolving and line of
credit facilities. At January 31, 1994, $39 million was outstanding.
Installment notes other than the term loan consist of fixed rate, fixed term
notes with an average interest rate of 10.0 percent and a balance of $12
million outstanding at January 31, 1994.
Pursuant to agreements with the lenders dated May 2, 1994, the $130 million
unsecured revolving bank credit facility and the unsecured amortizing term loan
have been combined into one secured reducing revolving credit facility of
$116.3 million, expiring on April 30, 1995. The company will reduce the
principal outstanding under the prior facilities by $17 million in May, 1994.
The total commitment under the new facility reduces periodically to $104
million during the term of the facility. Borrowings under the revolving
facility are based on a ratio of defined assets to defined recourse debt of the
Company.r
An additional revolving credit facility with an outstanding balance of $8.3
million at May 2, 1994 was also changed to a secured, amortizing term loan
maturing at April 30, 1995. Unsecured installment notes of $8.5 million were
changed to secured notes with modifications made to the principal repayment
schedule to proportionately match the principal amortization of the new
secured, reducing revolving credit facility. These notes also mature on April
30, 1995. The remaining $2.6 million of unsecured installment notes have been
changed to secured notes and mature on August 31, 1994.
Prior to entering into these new agreements,the Company had 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.
Under the terms of the new loan agreements, the Company is required to maintain
certain liquidity, leverage, and net worth ratios. The convenants also prohibit
the payment of cash dividends and place restrictions on the amount of borrowing
under the facility.
The Company has entered into interest rate swap and cap agreements to convert
the variable interest rate of certain borrowings to fixed interest rates. The
notional amount of the interest rate swaps outstanding at January 31, 1994
applicable to revolving and line of credit facilities and installment notes was
$71 million with an interest rate of 5.4 percent. These agreements, which
mature in 1996, are designed to reduce the risk to the Company of rising
interest rates. The Company is exposed to credit loss in the event of
nonperformance by the other parties to interest rate protection agreements.
However, the Company does not anticipate nonperformance by these parties.
The effective rate of interest on notes payable outstanding, including the
impact of swap agreements, was 5.8 percent and 5.3 percent as of January 31,
1993 and 1994, respectively.
The Company assesses the creditworthiness of counterparties to interest rate
hedging contracts and enters into agreements only with counterparties whose
long term debt is rated at least "A" by Standard & Poor's and Moody's. The
Company continually monitors the ongoing creditworthiness of these
counterparties.
<PAGE> 34
NOTE 10
Nonrecourse Lease Financing
<TABLE>
<CAPTION>
January 31
- ----------------------------------------------------------------------------------------------
1993 1994
------------- ------------
<S> <C> <C>
Nonrecourse discounted lease rentals:
Financial institutions $208,130 $182,713
Commercial paper 122,364 114,081
------------- ------------
Total $330,494 $296,794
- ----------------------------------------------------------------------------------------------
</TABLE>
Nonrecourse discounted lease rentals includes 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 asset, but has no
recourse to the Company in the case of default by the lessee. At January 31,
1994, interest rates on nonrecourse discounted lease rentals ranged from 5.2
percent to 13.0 percent.
The Company has also 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.
In October 1989, the Company developed a program through which it sells lease
receivables to a wholly-owned subsidiary that issues commercial paper backed by
an annually renewing five year $60 million letters of credit. At January 31,
1994, $44 million of commercial paper was outstanding at an average rate of 3.4
percent.
A second securitized program was established in October 1990, providing for the
financing of up to $75 million of lease receivables to an unaffiliated special
purpose corporation which issues nonrecourse commercial paper. This program is
backed by a $75 million surety bond. At January 31, 1994, $70 million of
commercial paper was outstanding at an average rate of 3.3 percent.
The Company has entered into interest rate swap and cap agreements to convert
the variable interest rates of its nonrecourse commercial paper programs to
fixed interest rates. The notional amount of interest rate swaps outstanding
at January 31, 1994 applicable to these programs was $71 million with an
average interest rate of 5.7 percent. Interest rate cap agreements totaled $28
million at January 31, 1994. The agreements have maturities from one to four
years.
<PAGE> 35
Contractual payments of principal and interest required on nonrecourse
lease financings are:
<TABLE>
<CAPTION>
YEAR ENDING JANUARY 31
- ----------------------------------------------------------------------
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . $142,796
1996 . . . . . . . . . . . . . . . . . . . 96,184
1997 . . . . . . . . . . . . . . . . . . . 54,430
1998 . . . . . . . . . . . . . . . . . . . 22,715
1999 . . . . . . . . . . . . . . . . . . . 9,224
2000 and subsequent . . . . . . . . . . . . 4,071
-------------
Total . . . . . . . . . . . . . . . . . 329,420
Less interest . . . . . . . . . . . . . (32,626)
-------------
Principal amount . . . . . . . . . . . $296,794
- ----------------------------------------------------------------------
</TABLE>
The average interest rate on all nonrecourse lease financing was 8.1 percent
and 7.2 percent for the years ended January 31, 1993 and 1994, respectively.
Effective May 1, 1994, one of the financial institutions which issued a $50
million letter of credit for one of the asset-backed financing programs has not
extended its letter of credit for new leases financed under this program.
Leases already funded will continue to amortize under the existing terms of the
agreement.
NOTE 11
Subordinated Notes
In July 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 beginning August 1994, with the premium declining ratably to par in
August 1999.
In conjunction with the transaction, the Company issued 45,496 warrants. Each
warrant is exercisable by the holder for five years into one share of the
Company's common stock. The exercise price is 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 as described in Note 9.
Additionally, the Company and the holder agreed to modify certain other terms
and conditions of the notes.
<PAGE> 36
NOTE 12
Shareholders' Equity
STOCK OPTION PLAN - The Company has a stock option plan for officers and key
employees and has reserved 1,000,000 shares of common stock for distribution
under the plan. Options are exercisable beginning not less than one year after
the date of grant and expire ten years after the date of grant. Options are
granted at market value and become exercisable at the rate of 20 percent per
year. Options granted under the plan may qualify as incentive stock options
under the Internal Revenue Code or may be non-qualified stock options. Options
issued to date have qualified as incentive stock options.
Stock option transactions during the three years ended January 31, 1994 are:
<TABLE>
<CAPTION>
Number of Option Price Range
Shares Per Share
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, February 1, 1991 514,720 $ 8.25 - $10.36
Granted -
Exercised (13,230)
Canceled (17,031)
---------------
Balance, January 31, 1992 484,459 $ 8.25 - $10.36
Granted 5,000 $14.00
Exercised (10,626)
Canceled (58,779)
---------------
Balance, January 31, 1993 420,054 $ 8.25 - $14.00
Granted 298,000 $ 7.13 - $ 7.84
Exercised -
Canceled (35,931)
---------------
Balance, January 31, 1994 682,123 $ 7.13 - $14.00
- ------------------------------------------------------------------------------------------------
</TABLE>
At January 31, 1994, there were 227,294 options available for grant and 280,122
options were exercisable.
The Company also has a restricted stock plan for officers and key employees and
has reserved 30,000 shares of common stock for distribution under the plan in
amounts and at times as subsequently determined by the Board of Directors.
Common stock awarded shall become vested at such time as specified by the
Board. On March 21, 1994, the Board of Directors approved an acceleration of
vesting with respect to the 10,000 shares granted in 1990, which were
originally scheduled to vest at the rate of 5,000 shares each on February 1,
1995 and 1996. The plan shall continue until terminated by the Board.
However, no awards may be granted after January 31, 1999 and all awards shall
vest no later than January 31, 2004.
In June 1991, the shareholders approved grants of stock options to two
non-employee directors totaling 21,000 shares with an option price of $13.81
per share. The options are currently exercisable and expire nine years after
the date of grant.
On February 26, 1994, the Board of Directors approved a grant of stock options
for 20,000 shares to a non-employee director.
<PAGE> 37
RETIREMENT SAVINGS PLAN - The Company has a Section 401 (k) retirement savings
plan for eligible employees and has reserved 275,000 shares of common stock for
distribution under the plan.
STOCK AWARD PLAN - The Company has a stock award plan for employees and has
reserved 45,000 shares of common stock for distribution. Stock awards to
employees are made by the Board of Directors at the Board's discretion.
PREFERRED STOCK - The Board of Directors is authorized to issue 2,000,000
shares of preferred stock, $.01 par value, with terms as may be subsequently
determined by the Board of Directors without further action by the shareholders
of the Company. At January 31, 1994, none of the shares were outstanding.
NOTE 13
Employee Retirement Benefit Plans
The Company has two defined contribution employee retirement benefit plans:
LDI Corporation Pension Plan and Trust and the LDI Corporation Retirement
Savings Plan. These plans provide retirement benefits for eligible employees
who meet certain service requirements. The Company's annual contributions
under the pension plan are determined each year by the Board of Directors. The
Company's contributions under the retirement savings plan are based on various
percentages of the voluntary pretax contributions of the participants, up to a
maximum contribution of 2.75 percent of the participant's annual compensation.
Costs for the plans maintained by the Company for the years ended January 31,
1992, 1993, and 1994 were $1.4 million, $1.4 million, and $1.0 million,
respectively.
NOTE 14
Related Party Transactions
The Company has engaged in certain transactions with two partnerships owned or
controlled by its principal shareholders.
(a) The Company leases office, technical and warehouse facilities from one of
the partnerships under leases expiring in 2000. Rental payments of
$585, $587 and $343 for the years ended January 31, 1992, 1993, and
1994, respectively, were made to this partnership. The Company's
commitment under these leases is approximately $405 per year through the
year ending January 31, 2000.
(b) The Company paid $316, $325, and $156 for the years ended January 31,
1992, 1993, and 1994, respectively, to one of the partnerships for
building maintenance, consulting services, and building management
fees.
(c) The Company leased data processing equipment, which was being subleased
to customers, from one of the partnerships under an operating lease.
Rental payments made during the years ended January 31, 1993 and 1992
were $594 for both years. In January 1993, the Company paid $385 to the
partnership to buy out the remaining term of the lease.
(d) The Company is reimbursed for certain expenses paid on behalf of its 50
percent owned affiliate. At January 31, 1994, accounts receivable
includes $72 due from the affiliate.
<PAGE> 38
NOTE 15
Lease Obligations
In addition to the lease obligations described in Note 14, the Company leases
office, technical, and warehouse facilities from unrelated third parties. Rent
expense for these leases was $915, $941, and $969 for the years ended January
31, 1992, 1993, and 1994, respectively. Annual rentals are subject to
increases for escalation in operating costs.
Additionally, the Company leases data processing equipment under agreements
classified as capital leases (as a lessee) and subleases this equipment to
third parties (as a lessor) under agreements classified as capital or operating
leases. Rent payments for these leases were $914, $156, and $45 for the years
ended January 31, 1992, 1993, and 1994, respectively.
A summary of the Company's commitments with respect to capital and operating
leases is:
<TABLE>
<CAPTION>
YEAR ENDING JANUARY 31
- ------------------------------------------------------------------------------------------------
Obligations Under
Obligations Under Operating Leases
Capital Leases (Facilities)
(Equipment)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 96 $ 812
1996 63 483
1997 12 387
1998 - 202
1999 - 253
------------------- ----------------------
Total 171 2,137
Less interest (14)
------------------- ----------------------
Net amount $157 $2,137
</TABLE>
NOTE 16
Estimated Fair Value of Financial Instruments
The estimated fair value amounts have been determined by the Company, using
current available market information as of each balance sheet date and
appropriate valuation methods. Considerable judgment is necessary in
interpreting market data to develop the estimates of fair value. The use of
different market assumptions and/or methods of estimation may have a material
effect on the estimated fair value amounts. Accordingly, the estimates
presented are not necessarily indicative of the amounts that the Company could
realize in a current market exchange or the value that ultimately will be
realized by the Company upon maturity or disposition.
Generally accepted accounting principles excludes certain items from its
disclosure requirements such as the Company's investment in leased assets.
Accordingly, the aggregate fair value amounts presented are not intended to
represent the underlying value of the net assets of the Company.
The carrying amounts for cash, receivables, accounts payable, accrued
liabilities, and revolving and line of credit notes payable approximate fair
value because of the short maturity of these instruments or, as to trade notes
receivable, bear interest rates that approximate current market rates.
<PAGE> 39
The estimated fair values of the Company's other financial instruments are:
<TABLE>
<CAPTION>
January 31
1993 1994
---------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonrecourse lease financing $330,494 $333,969 $296,794 $297,099
Installment notes payable 71,200 69,377 50,832 51,230
Subordinated notes 10,000 10,081 9,588 10,433
Interest rate hedging contracts - (4,509) - (1,520)
Letter of credit - 2,493 - 2,561
</TABLE>
The fair values of nonrecourse lease financing, installment notes and
subordinated notes are estimated based on market rates of comparable debt for
similar remaining maturities at year end. The fair values of interest rate
hedging contracts including swaps, and the letter of credit are estimated
based on pricing models or formulas using current assumptions.
NOTE 17
Supplemental Disclosures of Cash Flow Information:
<TABLE>
<CAPTION>
1992 1993 1994
--------------- -------------- ------------
<S> <C> <C> <C>
Cash paid for:
Interest $49,211 $41,941 $33,645
Income taxes 132 18 190
Noncash - investing and financing
activities:
Capitalized lease obligation for
equipment acquisitions 216
Acquisitions:
Cash purchase price of fair
value of assets acquired 2,259 3,328
</TABLE>
<PAGE> 40
LDI CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
For the three years ended January 31, 1994
(Amounts in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Balance at Balance
beginning of Amounts at end of
Name of debtor period Additions collected period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the year ended January 31, 1992:
Affiliated entities:
LDI Systems . . . . . . . . . . $546 $ 5 $(546) $ 5
NCP, Ltd . . . . . . . . . . . . 53 30 (67) 16
--------------- ----------- ----------- ------------
Total . . . . . . . . . . . 599 35 (613) 21
--------------- ----------- ----------- ------------
Officers, directors and stockholders:
Others . . . . . . . . . . . . . 2 12 (13) 1
--------------- ----------- ----------- ------------
Total . . . . . . . . . . . 2 12 (13) 1
--------------- ----------- ----------- ------------
Total . . . . . . . . . . . . . . . . . $601 $ 47 $(626) $22
=============== =========== =========== ===========
For the year ended January 31, 1993:
Affiliated entities:
LDI Systems . . . . . . . . . . $ 5 $ 5
NCP, Ltd . . . . . . . . . . . . 16 $ 20 $ (18) 18
Picker Financial Group . . . . . 750 (332) 418
--------------- ----------- ----------- ------------
Total . . . . . . . . . . . 21 770 (350) 441
--------------- ----------- ----------- ------------
Officers, directors and stockholders:
Others . . . . . . . . . . . . . 1 47 (1) 47
--------------- ----------- ----------- ------------
Total . . . . . . . . . . . 1 47 (1) 47
--------------- ----------- ----------- ------------
Total . . . . . . . . . . . . . . . . . $ 22 $817 $(351) $488
=============== =========== =========== ===========
For the year ended January 31, 1994:
Affiliated entities:
LDI Systems . . . . . . . . . . $ 5 $ 5
NCP, Ltd . . . . . . . . . . . . 18 $ 26 $ (19) 25
Picker Financial Group . . . . . 418 1,080 (1,426) 72
--------------- ----------- ----------- ------------
Total . . . . . . . . . . . 441 1,106 (1,445) 102
Officers, directors and stockholders:
Others . . . . . . . . . . . . . 47 8 (5) 50
--------------- ----------- ----------- ------------
Total . . . . . . . . . . . 47 8 (5) 50
--------------- ----------- ----------- ------------
Total . . . . . . . . . . . . . . . . . $488 $1,114 $(1,450) $152
=============== =========== =========== ===========
</TABLE>
<PAGE> 41
LDI CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the three years ended January 31, 1994
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Additions-
Balance at charged to Deductions- Balance at
beginning costs and accounts end of
period expenses written off period
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended January 31, 1992:
Allowance for doubtful accounts (1) $2,890 $2,130 $(1,160) $3,860
============= ============== ============== ==============
Allowance for uncollectible future
lease rentals (2) $1,370 $1,402 0 $2,772
============= ============== ============== ==============
Reserve for inventory valuation (3) 0 $ 529 0 $ 529
============= ============== ============== ==============
Year ended January 31, 1993:
Allowance for doubtful accounts (1) $3,860 $1,230 $(1,390) $3,700
============= ============== ============== ==============
Allowance for uncollectible future
lease rentals (2) $2,772 $ 335 $(1,052) $2,055
============= ============== ============== ==============
Reserve for inventory valuation (3) $ 529 $ 870 $ (21) $1,378
============= ============== ============== ==============
Year ended January 31, 1994:
Allowance for doubtful accounts (1) $3,700 $5,975 $(3,375) $6,300
============= ============== ============== ==============
Allowance for uncollectible future
lease rentals (2) $2,055 $4,590 0 $6,645
============= ============== ============== ==============
Reserve for inventory valuation (3) $1,378 $7,138 $ (746) $7,770
============= ============== ============== ==============
Reserves and liabilities related to
discontinued operations and
restructuring programs (4) 0 $7,456 0 $7,456
============= ============== ============== ==============
Reserve for residual valuation (5) 0 $11,060 $(3,600) $7,460
============= ============== ============== ==============
</TABLE>
(1) The allowance for doubtful accounts is included in the caption
"Receivables" in the accompanying consolidated balance sheet.
(2) The allowance for uncollectible future lease rentals is included in the
caption "Leased Assets - Sales-Type and Direct Financing Leases" in the
accompanying consolidated balance sheet.
(3) The reserve for inventory valuation is included in the caption
"Inventory held for lease or sale" in the accompanying consolidated
balance sheet.
(4) Reserves and liabilities related to discontinued operations and
restructuring programs is included in the "Liabilities" section in the
accompanying consolidated balance sheet.
(5) The reserve for residual valuation is included in the caption "Leased
Assets - Sales-Type and Direct Financing Leases" in the accompanying
consolidated balance sheet.
<PAGE> 42
LDI CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT TERM BORROWINGS
For the three years ended January 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Maximum Average Weighted
Weighted amounts amount average
Balance at average outstanding outstanding interest rate
end of interest during the during the during the
Category of short-term borrowings period rate period period (3) period (4)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended January 31, 1992:
Notes payable to banks (1) $ 160,390 5.34% $ 163,860 $ 139,596 6.77%
Nonrecourse commercial
paper (2) $ 42,985 4.88% $ 46,833 $ 41,803 6.65%
Year ended January 31, 1993:
Notes payable to banks (1) $ 90,730 4.28% $ 168,570 $ 127,702 4.71%
Nonrecourse commercial
paper (2) $ 51,660 3.61% $ 58,346 $ 52,376 4.11%
Year ended January 31, 1994:
Notes payable to banks (1) $ 129,845 4.29% $ 134,940 $ 115,027 4.27%
Nonrecourse commercial
paper (2) $ 43,788 3.41% $ 51,660 $ 45,240 3.54%
</TABLE>
(1) Notes payable to banks represent borrowings under revolving credit and
lines of credit agreements with domestic banks, including $12,000,
$13,750 and $32,770 of amounts subsequently refinanced on a nonrecourse
basis as of January 31, 1992, 1993, and 1994, respectively.
(2) Nonrecourse commercial paper shown above consists of the Company's
program through which it sells lease receivables to a wholly-owned
subsidiary that issues commercial paper backed by an annually renewing
five year $60 million letter of credit. See Note 10 of the Notes to
Consolidated Financial Statements.
(3) The average amount outstanding during the period was computed by
dividing the total of month-end outstanding principal balances by the
number of months.
(4) The weighted average interest rate during the period was computed by
dividing the actual interest expense by the average short-term debt
balance outstanding.
<PAGE> 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The description of the directors of the Registrant is incorporated
hereby by reference from the section of the Proxy Statement for the Annual
Meeting of Stockholders to be held on a date yet to be determined (the "Proxy
Statement"), entitled "Election of Directors," which Proxy Statement will be
available in May 1994.
A description of the executive officers of the Registrant follows:
<TABLE>
<CAPTION>
Offices Held and
Name Age Business Experience
---- --- -------------------
<S> <C> <C>
Robert S. Kendall 55 Chairman and Chief Executive Officer of the Company since February 1989;
President of the Company from June 1986 to February 1989; Treasurer of
the Company from June 1986 to February 1988; President of Leasing
Dynamics, Inc. from 1972 until July 1989, and Chairman from July 1989
until its merger into the Company in April 1991.
Michael R. Kennedy 51 On March 31, 1994 Mr. Kennedy announced his resignation, effective May 31, 1994,
as President and Chief Operating Officer of the Company which he has been
since February 1989; Senior Executive Vice President of the Company from
February 1988 to February 1989; Executive Vice President of the Company from
June 1986 to February 1988 and of Leasing Dynamics, Inc. from 1972 to
February 1988.
Thomas A. Cutter 51 On March 31, 1994 Mr. Cutter announced his resignation, effective May 31, 1994,
as Vice Chairman and Senior Executive Vice President of the Company which he
has been since February 1989; Executive Vice President of the Company from
February 1988 to February 1989; Senior Vice President of the Company from
June 1986 to February 1988; and of Leasing Dynamics, Inc. from December 1983
until its merger into the Company in April 1991.
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
Offices Held and
Name Age Business Experience
---- --- -------------------
<S> <C> <C>
Jerry E. Kish 46 On March 31, 1994 Mr. Kish announced his resignation, effective May 31, 1994, as
Executive Vice President and Chief Financial Officer of the Company, which he
has been since July 1990; Controller of the Company from July 1990 to
December 1992; Assistant Secretary of the Company since June 1989;
Senior Vice President, Finance and Administration of the Company from
February 1989 to December 1990; Senior Vice President of the Company from
February 1988 to February 1989; Secretary of the Company from June 1986 to
April 1989; Vice President-Finance of the Company from June 1986 to February
1988; Vice President of Leasing Dynamics, Inc. from 1983 until its merger into
the Company in April 1991.
Michael T. Joseph 37 On March 31, 1994, Mr. Joseph resigned as Senior Vice President of the Company
a position he held since June 1991; Vice President of the Company from March
1990 to June 1991; President of Leasing Dynamics, Inc. from July 1989 to March
1993; and President of LDI Disaster Recovery Corporation from February 1988
until its merger into the Company in April 1991.
Jay J. Ross 49 Mr Ross, Senior Vice President of the Company since June 1991, resigned
effective April 30, 1994; Vice President of the Company from February 1988 to
June 1991; officer and Director of certain of the Company's subsidiaries
from 1979 until their merger into the Company in April 1991.
Frank G. Skedel 47 Senior Vice President of the Company since June 1991; Treasurer of the
Company since March 1991; Vice President of the Company from April 1989
to June 1991; Treasurer of the Company from February 1988 to January
1990; and President of LDI Financial Services Corp. from July 1989 until
its merger into the Company in April 1991.
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
Offices Held and
Name Age Business Experience
---- --- -------------------
<S> <C> <C>
Walter R. Collins, Jr. 58 Vice President, Financial Reporting of the Company since July 1990;
Corporate Controller of the Company from June 1986 to July 1990; Vice
President of Leasing Dynamics, Inc. from May 1988 until its merger into
the Company in April 1991; Corporate Controller of Leasing Dynamics, Inc.
from July 1985 to July 1989.
Benjamin W. Cannon 49 Vice President since March, 1994; General Counsel and Secretary of the Company
since March 1992. From June 1981 to February 1992 he was employed by
Comdisco, Inc. (lessor of data processing equipment) where he served as
Vice President and General Manager, Venture Group from September 1990
to February 1992; Vice President, Marketing from August 1988 to September
1990; Assistant Vice President and Director, Capital Equipment from
October 1986 to August 1988; President, Comdisco International from November
1982 to October 1986; and Assistant General Counsel from June 1981 to
November 1982.
Mont C. Hollingsworth 46 Vice President and Controller of the Company since December 1992; Vice
President and Controller, Leasing Services Group, from April 1991 to
December 1992; Vice President and Controller of Leasing Dynamics, Inc.
from January 1989 until its merger into the Company in April 1991; and
Director of Corporate Accounting from January 1987 to January 1989.
</TABLE>
ITEM 405 DISCLOSURE
None.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by referenced from the section of the Proxy Statement
entitled "Executive Compensation," which Proxy Statement will be available in
May 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the section of the Proxy Statement
entitled "Security Ownership of Certain Beneficial Owners and Management,
which Proxy Statement will be available in May 1994.
<PAGE> 46
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the section of the Proxy Statement
entitled "Executive Compensation--Certain Transactions," which Proxy Statement
will be available in May 1994.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a)(1) Financial Statements
The following consolidated financial statements and related notes of
the Registrant and its subsidiaries are included herein:
Report of Independent Public Accountants
Consolidated Balance Sheets, as of January 31, 1993 and 1994
Statements of Consolidated Earnings for the Years Ended January 31,
1992, 1993 and 1994
Statements of Consolidated Cash Flows for the Years Ended January 31,
1992, 1993 and 1994
Statements of Consolidated Shareholders' Equity for the Years Ended
January 31, 1992, 1993 and 1994
Notes to Consolidated Financial Statements for the Years Ended January
31, 1992, 1993 and 1994
(a)(2) Financial Statement Schedules:
The following financial statement schedules are included herein:
Schedule II - Amounts Receivable from Related Parties
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short-Term Borrowings
<PAGE> 47
<TABLE>
(a)(3) Exhibits:
<CAPTION>
Exhibit No. Description of Exhibits
-------------- -------------------------
<S> <C>
3.01 Restated Certificate of Incorporation
3.02 By-laws, as amended
4.01 Specimen Stock Certificate
4.02 Note Purchase Agreement dated August 31, 1988, among the Registrant, Northwestern National Life
Insurance Company and the other parties listed in Appendix I thereto
4.03 Amendment dated as of January 31, 1992, to the Note Purchase Agreement dated August 31, 1988,
among the Registrant, Northwestern National Life Insurance Company and the other parties listed in
Appendix I thereto
4.04 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
4.05 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
4.06 Form of Indemnification Agreement
4.07 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
4.08 Amended and Restated Credit Agreement dated as of 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
4.09 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
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
----------- -----------------------
<S> <C>
4.10 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
4.11 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
4.12 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
4.13 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
4.14 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
4.15 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
4.16 Amended and Restated Lease Receivables Transfer Agreement dated February 15, 1994, among the
Registrant, CXC Incorporated and Citicorp North America , Inc.
4.17 Amended and Restated Credit Agreement dated as of December 14, 1992, among the Registrant;
National City Bank; Society National Bank (successor by merger to Ameritrust Company National
Association); Comerica Bank (successor by merger between Manufacturers Bank, N.A., formerly known
as Manufacturers National Bank of Detroit); Michigan National Bank, The Daiwa Bank, Limited; The
Fifth Third Bank; Star Bank, N.A.; First National Bank of Ohio; and The Bank of Tokyo Trust Company
4.18 Open-end Mortgage and Security Agreement dated January 31, 1991, between LDI Realty Corp., as Trustee
under LDI Realty Trust, and Metropolitan Life Insurance Company
4.19 Note Secured by Mortgage dated January 31, 1991, between LDI Realty Corp., as Trustee under LDI
Realty Trust, and Metropolitan Life Insurance Company
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
----------- -----------------------
<S> <C>
4.20 Note Purchase Agreement dated as of July 2, 1991, between Registrant and Olympus Private Placement
Fund, L.P.
4.21 Amended and Restated Promissory Note of the Registrant dated as of July 1, 1993, in favor of
National Westminster Bank USA
4.22 Credit Agreement dated as of August 3, 1992, among Registrant, as the Borrower, certain Commercial
Lending Institutions, as the Lenders, and Continental Bank N.A., as Agent
4.23 Commitment letter dated April 28, 1994 in favor of Registrant by certain banks and National City Bank,
Society National Bank and Continental Bank N.A., as Co-Agents
4.24 Credit Agreement dated as of May 2, 1994 among Registrant, certain commercial lending institutions,
and National City Bank, Society National Bank and Continental Bank N.A., as Co-Agents
4.25 Security Agreement dated as of May 2, 1994 by Registrant in favor of Continental Bank N.A., as
Collateral Agent
4.26 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
10.01 Lease dated March 9, 1989, between LDI Disaster Recovery Corporation and Blue Cross and Blue
Shield of Michigan
10.02 Sublease Agreement dated February 17, 1989, between Savings and Loan Data Corporation, Inc.
and LDI Disaster Recovery Corporation
10.03 Lease dated October 14, 1988, between Lennox I-4 Lakeland Associates and Prompt Computer Group, Inc.
10.04 Lease dated February 1, 1990, between Registrant and Cleveland Center Venture
10.05 Leases dated November 1, 1990, between certain of the Registrant's subsidiaries and NCP, Ltd.
10.06 Lease dated January 1, 1991 between LDI Realty Corp., as Trustee under LDI Realty Trust, and the
Registrant
10.07 Ground Lease dated June 28, 1991, between the Registrant and First Interstate Hawthorne Limited
Partnership
10.08 Lease dated March 22, 1992, between the Registrant and Westlake Center Associates Limited Partnership
10.09 Ground Lease between LDI Computer Systems, Inc. and IKEA Property, Inc. dated August 27, 1993
10.10 Lease dated April 22, 1993, between the Registrant and NCP, LTD.
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
----------- -----------------------
<S> <C>
10.11 Lease dated December 17, 1993, between LDI Computer systems, Inc. and NCP, LTD.
10.12 Amended and Restated Stock Option Plan
10.13 LDI Corporation Retirement Savings Plan
10.14 Employee Stock Award Plan
10.15 LDI Corporation Pension Plan and Trust
10.16 LDI Corporation Restricted Stock Plan
10.17 Agreements dated January 6 and January 14, 1994, among Registrant, LDI Computer Systems, Inc.,
MST Systems, Inc. and NCP, LTD. relating to restructuring of various real estate leases
11.01 Computation of Earnings per Share for the period ended January 31, 1994
22.01 List of Subsidiaries
<FN>
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the last quarter of the
fiscal year covered by this report on Form 10-K.
(c) Exhibits:
The Exhibits listed in Item 14 are included and submitted with this
report.
(d) Financial Statement Schedules:
The financial statement schedules required to be filed with this
report are included in Item 8 of this report.
</TABLE>
<PAGE> 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: May 2 , 1994 By:/s/ Robert S. Kendall
--- -----------------------------------------
Robert s. Kendall, Chairman, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/Robert S. Kendall Chairman, Chief Executive Officer May 2 , 1994
- ----------------------------- and Director (Principal Executive -----
Robert S. Kendall Officer)
/s/Michael R. Kennedy President, Chief Operating Officer May 2 , 1994
- ----------------------------- and Director -----
Michael R. Kennedy
/s/Thomas A. Cutter Vice Chairman, Senior Executive May 2 , 1994
- ----------------------------- Vice President and Director -----
Thomas A. Cutter
/s/Jerry E. Kish Executive Vice President, Chief May 2 , 1994
- ----------------------------- Financial Officer and Director -----
Jerry E. Kish (Principal Financial Officer)
/s/Scott s. Cowen Director May 2 , 1994
- ----------------------------- -----
Scott S. Cowen
/s/Norton W. Rose Director MAY 2 , 1994
- ----------------------------- -----
Norton W. Rose
/s/Mont C. Hollingsworth Vice President and Controller May 2 , 1994
- ----------------------------- (Chief Accounting Officer ) -----
Mont C. Hollingsworth
</TABLE>
<PAGE> 52
<TABLE>
EXHIBIT INDEX
<CAPTION>
Sequential Page No.
Exhibit or Incorporation by
No. Description of Exhibits Reference *
- ------- ----------------------- -------------------
<S> <C> <C>
3.01 Restated Certificate of Incorporation (1)
3.02 By-laws, as amended (11)
4.01 Specimen Stock Certificate (1)
4.02 Note Purchase Agreement dated August 31, 1988, among the Registrant, Northwestern National Life
Insurance Company and the other parties listed in Appendix I thereto (2)
4.03 Amendment dated as of January 31, 1992, to the Note Purchase Agreement dated August 31, 1988,
among the Registrant, Northwestern National Life Insurance Company and the other parties listed in
Appendix I thereto (12)
4.04 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 (5)
4.05 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 (12)
4.06 Form of Indemnification Agreement (1)
4.07 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 (8)
4.08 Amended and Restated Credit Agreement dated as of 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 (11)
4.09 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 (11)
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
Sequential Page No.
Exhibit or Incorporation by
No. Description of Exhibits Reference *
- ------- ----------------------- -------------------
<S> <C> <C>
4.10 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 (11)
4.11 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 (11)
4.12 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 (12)
4.13 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 (14)
4.14 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 (16)
4.15 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 (17)
4.16 Amended and Restated Lease Receivables Transfer Agreement dated February 15, 1994, among the
Registrant, CXC Incorporated and Citicorp North America , Inc.
4.17 Amended and Restated Credit Agreement dated as of December 14, 1992, among the Registrant;
National City Bank; Society National Bank (successor by merger to Ameritrust Company National
Association); Comerica Bank (successor by merger between Manufacturers Bank, N.A., formerly known
as Manufacturers National Bank of Detroit); Michigan National Bank, The Daiwa Bank, Limited; The
Fifth Third Bank; Star Bank, N.A.; First National Bank of Ohio; and The Bank of Tokyo Trust Company (15)
4.18 Open-end Mortgage and Security Agreement dated January 31, 1991, between LDI Realty Corp., as Trustee
under LDI Realty Trust, and Metropolitan Life Insurance Company (8)
4.19 Note Secured by Mortgage dated January 31, 1991, between LDI Realty Corp., as Trustee under LDI
Realty Trust, and Metropolitan Life Insurance Company (8)
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
Sequential Page No.
Exhibit or Incorporation by
No. Description of Exhibits Reference *
- ------- ----------------------- --------------------
<S> <C> <C>
4.20 Note Purchase Agreement dated as of July 2, 1991, between Registrant and Olympus Private Placement
Fund, L.P. (9)
4.21 Amended and Restated Promissory Note of the Registrant dated as of July 1, 1993, in favor of
National Westminster Bank USA (17)
4.22 Credit Agreement dated as of August 3, 1992, among Registrant, as the Borrower, certain Commercial
Lending Institutions, as the Lenders, and Continental Bank N.A., as Agent (11)
4.23 Commitment letter dated May 2, 1994 in favor of Registrant by certain banks and National City
Bank, Society National Bank and Continental Bank N.A., as Co-Agents
4.24 Credit Agreement dated as of May 2, 1994 among Registrant, certain commercial lending institutions,
and National City Bank, Society National Bank and Continental Bank N.A., as Co-Agents
4.25 Security Agreement dated as of May 2, 1994 by Registrant in favor of Continental Bank N.A., as
Collateral Agent
4.26 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
4.27 Amendment dated April 29, 1994 to Note Purchase Agreement dated as of July 2, 1991, between
Registrant and Olympus Private Placement Fund, L.P.
4.28 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
10.01 Lease dated March 9, 1989, between LDI Disaster Recovery Corporation and Blue Cross and Blue
Shield of Michigan (3)
10.02 Sublease Agreement dated February 17, 1989, between Savings and Loan Data Corporation, Inc.
and LDI Disaster Recovery Corporation (3)
10.03 Lease dated October 14, 1988, between Lennox I-4 Lakeland Associates and Prompt Computer Group, Inc. (3)
10.04 Lease dated February 1, 1990, between Registrant and Cleveland Center Venture (8)
10.05 Leases dated November 1, 1990, between certain of the Registrant's subsidiaries and NCP, Ltd. (8)
10.06 Lease dated January 1, 1991 between LDI Realty Corp., as Trustee under LDI Realty Trust, and the
Registrant (8)
10.07 Ground Lease dated June 28, 1991, between the Registrant and First Interstate Hawthorne Limited
Partnership (10)
10.08 Lease dated March 22, 1992, between the Registrant and Westlake Center Associates Limited Partnership (15)
10.09 Ground Lease between LDI Computer Systems, Inc. and IKEA Property, Inc. dated August 27, 1993 (17)
10.10 Lease dated April 22, 1993, between the Registrant and NCP, LTD.
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
Sequential Page No.
Exhibit or Incorporation by
No. Description of Exhibits Reference *
- ------- ----------------------- --------------------
<S> <C> <C>
10.11 Lease dated December 17, 1993, between LDI Computer systems, Inc. and NCP, LTD.
10.12 Amended and Restated Stock Option Plan (8)
10.13 LDI Corporation Retirement Savings Plan (3)
10.14 Employee Stock Award Plan (3)
10.15 LDI Corporation Pension Plan and Trust (11)
10.16 LDI Corporation Restricted Stock Plan (6)
10.17 Agreements dated January 6 and January 14, 1994, among Registrant, LDI Computer Systems, Inc.,
MST Systems, Inc. and NCP, LTD. relating to restructuring of various real estate leases
11.01 Computation of Earnings per Share for the period ended January 31, 1994
22.01 List of Subsidiaries
24.01 Consent of Deloitte & Touche
</TABLE>
<PAGE> 56
- ----------
*Page references are to the one sequentially paginated Annual Report on Form
10-K filed with the Securities and Exchange Commission pursuant to SEC Rule
0-3(b) and (c). No other Annual Reports on Form 10-K are paginated.
(1) Included as an exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-14486) and incorporated herein by reference.
(2) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended October 31, 1988, and incorporated
herein by reference.
(3) Included as an exhibit to the Registrant's Annual Report on Form
10-K (No. 0-15994) for the year ended January 31, 1989, and incorporated
herein by reference.
(4) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended July 31, 1989, and incorporated
herein by reference.
(5) 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.
(6) Included as an exhibit to the Registrant's Annual Report on Form
10-K (No. 0-15994) for the year ended January 31, 1990, and incorporated
herein by reference.
(7) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended October 31, 1990, and incorporated
herein by reference.
(8) 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.
(9) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1991, and incorporated herein by reference.
<PAGE> 57
(10) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1991, and incorporated herein by
reference.
(11) 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.
(12) 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.
(13) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended July 31, 1992, and incorporated
herein by reference.
(14) 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.
(15) Included as an exhibit to the Registrant's Annual Report on Form
10-K (No. 0-15994) for the year ended January 31, 1993, and incorporated
herein by reference.
(16) Included as an exhibit to the Registrant's Annual Report on Form 10-Q
(No. 0-15994) for the year ended April 30, 1993, and incorporated
herein by reference.
(17) 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.
<PAGE> 1
EXECUTION COPY
U.S. $125,000,000
AMENDED AND RESTATED
LEASE RECEIVABLES
TRANSFER AGREEMENT
Dated as of February 15, 1994
Among
LDI CORPORATION
as Transferor
and
CXC INCORPORATED
as Transferee
and
CITICORP NORTH AMERICA, INC.
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section Page
- ------- ----
Preliminary Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.03 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
AMOUNTS AND TERMS OF THE TRANSFERS
2.01 Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.02 Accepting Transfers from the Transferor . . . . . . . . . . . . . . . . . . . 17
2.03 Transfers of Interests in Leases . . . . . . . . . . . . . . . . . . . . . . . 18
2.04 Termination or Reduction of the
Transfer Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.05 Selection of Fixed Periods . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.06 Pre-Termination Date
Settlement Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.07 Liquidation Settlement Procedures . . . . . . . . . . . . . . . . . . . . . . 20
2.08 Other Settlement Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.09 Payments and Computations, Etc. . . . . . . . . . . . . . . . . . . . . . . . 22
2.10 Yield and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.11 Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.12 Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.13 Grant of Security Interest
in Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.14 Perfection of Liens; Further
Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE III
CONDITIONS OF TRANSFERS
3.01 Conditions Precedent to Initial Transfer . . . . . . . . . . . . . . . . . . . 25
3.02 Conditions Precedent to All Transfers . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of the
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V
GENERAL COVENANTS OF THE TRANSFEROR
5.01 Affirmative Covenants of the Transferor . . . . . . . . . . . . . . . . . . . 30
5.02 Reporting Requirements of
the Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.03 Financial Covenants of the Transferor . . . . . . . . . . . . . . . . . . . . 34
5.04 Negative Covenants of the Transferor . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VI
ADMINISTRATION AND COLLECTION
6.01 Designation of Collection Agent . . . . . . . . . . . . . . . . . . . . . . . 38
6.02 Duties of the Collection Agent . . . . . . . . . . . . . . . . . . . . . . . . 39
6.03 Rights of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
6.04 Responsibilities of the Transferor . . . . . . . . . . . . . . . . . . . . . . 41
6.05 Further Action Evidencing Transfers . . . . . . . . . . . . . . . . . . . . . 42
6.06 Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VII
EVENTS OF TERMINATION
7.01 Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII
THE AGENT
8.01 Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.02 Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.03 Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.04 Transferee's Transfer Decision . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE IX
INDEMNIFICATION; SUBSTITUTIONS AND RETRANSFERS
9.01 Indemnities by the Transferor . . . . . . . . . . . . . . . . . . . . . . . . 46
9.02 Substitution and Retransfer of Lease
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE X
MISCELLANEOUS
10.01 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.02 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.03 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.04 Binding Effect; Assignability . . . . . . . . . . . . . . . . . . . . . . . . 52
10.05 Governing Law; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 52
10.06 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.07 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.08 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.09 Execution in Counterparts; Severability . . . . . . . . . . . . . . . . . . . 55
</TABLE>
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<PAGE> 4
AMENDED AND RESTATED
LEASE RECEIVABLES TRANSFER AGREEMENT
Dated as of February 15, 1994
LDI CORPORATION, a Delaware corporation ("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 Transferor, the Transferee and the Agent previously
entered into that certain Lease Receivables Transfer Agreement dated as of
October 5, 1990 (as amended, the "1990 Transfer Agreement"), pursuant to which
the Transferor has made transfers of Lease Receivables to the Transferee.
(3) The parties desire to increase the Transfer Limit and to
amend the 1990 Transfer Agreement in certain other respects.
(4) The Transferor, the Transferee and the Agent have agreed
to enter into this Agreement to amend and restate the 1990 Transfer Agreement
in its entirety, it being the intention of the parties hereto that this
Agreement not effectuate a novation of the obligations of the Transferor which
were evidenced by the 1990 Transfer Agreement, but rather a substitution of
terms governing such obligations.
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 Transferor from a third party.
"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.
"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.
<PAGE> 5
"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
(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, an Obligor, a trustee for the Transferor 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
-2-
<PAGE> 6
connection therewith and all losses, liabilities, costs and expenses
related thereto (including but not limited to reasonable attorneys' fees and
expenses).
"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.
"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 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.
"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
Standard & Poor's Corporation and Moody's Investors Service, Inc., using the
lower 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, if so indicated, Capital 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:
Senior
Obligor Unsecured
Risk Debt Dollar Percentage of
Rating Rating Amount Transfer Limit
- ------ --------- ------ --------------
1 AND >AA-/Aa3 $16,000,000 12.8%
1 AND >A-/A3 [see PROVISO below]
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 $3,000,000 2.4%
5 N/A $2,500,000 2.0%
PROVIDED, that, for any Obligor that has an Obligor Risk Rating of 1 and a
senior unsecured debt rating of greater than A-/A3, but less than AA-/Aa3, the
Concentration Limit at any time shall be the greater of (i) $7,500,000 and (ii)
10% of outstanding Capital at such time.
-3-
<PAGE> 7
"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 5.04(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 aggregate Transferred Lease Receivables Balance at such time MULTIPLIED
BY 10%.
"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 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 any 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 submitted by the
Transferor and which complies with SECTION 5.01 and the provisions set forth on
EXHIBIT M and in 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) .625% per annum
(representing the Program Fee rate hereunder); PROVIDED, that, if the
Transferor 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) .625% per annum; 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
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closest to the Weighted Average Remaining Term as of the immediately preceding
Settlement Date as quoted in the WALL STREET JOURNAL and (B) 1.225% per annum.
"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);
(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 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 Receivable (which shall
not in any event satisfy this clause (xi) if such Lease Receivable has
been
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<PAGE> 9
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 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;
(xviii) which, if included as a Transferrred 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;
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<PAGE> 10
(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;
(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;
(xxiv) no portion of which is payable on account of sales
taxes; and
(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);
(xxvi) which was originated or purchased after __________,
19__ by the Transferor through a Transferor Division (including any
former Subsidiary of the Transferor which has become part of a
Transferor Division); 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 Transferor applies to Lease Receivables originated
by the Transferor; 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 Transferor 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 Poertfolio (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.
"EQUIPMENT" means data processing, telecommunications and
other capital equipment leased by the Transferor 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 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.
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<PAGE> 11
"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.
"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.
"FILING EVENT" means the Transferor's failure to comply with any of the
financial covenants contained in SECTION 5.03(b) or the occurrence of any of
the events described in SECTION 7.01.
"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.
"INTEREST RATE HEDGE ASSIGNMENT" means as assignment in substantially
the form of EXHIBIT C pursuant to which the Transferor assigns to the Agent,
for the benefit of the Transferee, all Interest Rate Hedges obtained by the
Transferor in connection with this Agreement.
"INTEREST RATE HEDGES" means interest rate exchange, collar, cap, swap
or similar agreements entered into by the Transferor with third parties to
provide protection to, or minimize the impact upon, the Transferor of
increasing Transferee Rates.
"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.
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<PAGE> 12
"LEASE" means a lease agreement between the Transferor 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 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 May
13, 1992, 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 Agent and a Lock- Box Bank which agreement
sets forth the rights of the Agent, the Transferor 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 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.
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"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 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.
"ORIGINATION FEE" has the meaning assigned to that term in SECTION 2.10.
"OUTSTANDING BALANCE" of any Lease Receivable at any time means the
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 2.08. 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 the "OUTSTANDING BALANCE" of such Lease Receivable shall be calculated as
of the first day of the calendar month during which the unpaid payment was due,
or if more than one payment is unpaid, the calendar month in which the oldest
payment remains unpaid.
"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 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
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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; or
(d) liens, charges or encumbrances in favor of the Transferee or
the Agent or granted to a Liquidity Provider by the Agent.
"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" has the meaning assigned to that term in SECTION 2.10.
"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 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 May
13, 1992, between the Transferor and CapMAC, as amended, modified or
supplemented from time to time.
"SETTLEMENT DATE" means 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,
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<PAGE> 15
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).
"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 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 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.
"TRANSFEREE 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.
"TRANSFEROR COLLATERAL" has the meaning assigned to that term
in SECTION 2.13.
"TRANSFEROR DIVISION" means any of the following divisions of
the Transferor (or such others as the Transferor, the Transferee and the Agent
shall mutually designate by written agreement): (i) the Leasing Group; and
(ii) the
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portion of the Technology and Distribution Group which enters into point of
sale Leases of Equipment; and "TRANSFEROR DIVISIONS" means, collectively, all
of the foregoing Divisions of the Transferor.
"TRANSFERRED ASSETS" means, at any time, all then outstanding
Transferred Lease Receivables, Related Security with respect to such
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.
"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."
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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 hereof to the Termination Date. Under no
circumstances shall the Transferee make 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 Transferee Report and shall
specify that portion of the transfer price which is immediately payable (as
determined below pursuant to clause (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 Transferor Divisions. 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,
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 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.
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<PAGE> 18
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, nor shall any
of them be obligated to perform any of the obligations of the Transferor or any
Transferor Division 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 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 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:
(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
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<PAGE> 19
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, and THIRD, 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 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 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 Transferee 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
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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 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 date
hereof 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.
(b) From and after the date hereof 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 of even date herewith among the
Transferor, the Transferee and the Agent.
(c) The Transferor shall also pay to the Agent for the
account of the Transferee, an origination fee ("Origination Fee") as described
in the letter agreement of even date herewith between the Transferor and the
Agent.
(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
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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 (g), 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 2.11. 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
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hereunder and other similar agreements or facilities, then, upon demand by
Citibank, CNA or the Agent, the Transferor 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. 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; and
(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;
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 a Filing Event, upon the request of the Agent, the
Transferor
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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 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
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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 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 EFFECTIVENESS. The
effectiveness of this Agreement is 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) A copy of the resolutions of the Board of Directors of
the Transferor approving this Agreement, the Certificate, and the other
documents to be delivered by it hereunder and the transactions contemplated
hereby, certified by its Secretary or Assistant Secretary;
(c) The Certificate of Incorporation of the Transferor
certified by the Secretary of State of Delaware;
(d) Good Standing Certificates for the Transferor issued by
the Secretaries of State of Delaware and Ohio;
(e) 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 and the other
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 (e)) and (ii) a copy of the Transferor's by-laws;
(f) Acknowledgment copies of proper UCC-3 Amendments to the
Financing Statements filed pursuant to the 1990 Transfer Agreement, 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 Receivables and Related Security in which an interest
may be assigned to it hereunder;
(g) Acknowledgment copies of proper Financing Statements
(Form UCC-3), if any, necessary to release all security interests and other
rights of any Person in the Lease Receivables and Related Security previously
granted by the Transferor (other than pursuant to the 1990 Transfer Agreement);
(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 (under its
present name and any previous name) as debtor and which are filed in the
jurisdictions in which
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filings were made pursuant to subsections (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 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) An opinion of Benjamin W. Cannon, General Counsel and
Secretary for the Transferor, in substantially the form of EXHIBIT G and as to
such other matters as the Agent may reasonably request;
(l) An Amendment to the Interest Rate Hedge Assignment dated
October 5, 1990 executed by the Transferor in favor of the Agent;
(m) Amendment No. 1 to the Liquidity Agreement dated as of
May 13, 1992 among the Transferee, the Liquidity Banks and the Liquidity Agent;
(n) Amendment No. 1 to the Security Agreement dated as of
May 13, 1992 among the Transferee and CapMAC, as Collateral Agent;
(o) Amendment No. 1 to the Amended and Restated Insurance
Agreement among CapMAC, Transferee and the Agent; and
(p) The Amended and Restated Surety Bond issued by CapMAC.
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 (other than the initial 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 Transferee 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; (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 2.0);
and (c) the Agent shall have received such other approvals or documents as the
Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF
THE TRANSFEROR. The Transferor represents and warrants as follows:
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(a) 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) The execution, delivery and performance by the Transferor
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 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) 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 or any other agreement, document or instrument
to be delivered hereunder.
(d) This Agreement and the Certificate constitute the legal,
valid and binding obligation of the Transferor enforceable against the
Transferor in accordance with their respective terms.
(e) The consolidated balance sheets of the Transferor and its
consolidated Subsidiaries as at January 31, 1993, and the related statements of
income, retained earnings and cash flows of the Transferor 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 Transferor and its consolidated Subsidiaries as at such date
and the consolidated results of the operations of the Transferor 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, 1993 there has been no material adverse change in any such
condition or operations.
(f) There are no actions, suits or proceedings pending, or to
the knowledge of the Transferor threatened, against or affecting the Transferor
or any of its Subsidiaries, or the property of the Transferor 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 Transferor or the Transferor and its consolidated
Subsidiaries taken as a whole 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. Neither the Transferor
nor any or 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 Transferor or any of its Subsidiaries.
(g) 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.
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(h) 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 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 Related Security and Collections with respect thereto, 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 or the Related Security or Collections 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) No Transferee Report (if prepared by the Transferor, 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) 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 I (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) 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 J (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 5.04(d) and with respect to which all action
required by SECTION 5.04(d) has been taken and completed).
(l) 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) Except as described on EXHIBIT K, the Transferor has no
trade names, fictitious names, assumed names or "doing business as" names.
ARTICLE V
GENERAL COVENANTS OF THE TRANSFEROR
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE TRANSFEROR. From
the date hereof 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. Except as permitted
by SECTION 5.04(e), preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualifications 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.
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(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 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) 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 thereof.
(k) 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.
(l) SECURITY INTEREST IN EQUIPMENT. With respect to each
Lease Receivable that constitutes a Transferred Lease Receivable, comply with
the Obligor UCC Filing Requirement.
(m) 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
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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 as loss payee and additional insured. The
Collection Agent shall remit, or shall cause to be remitted, the proceeds of
any such insurance policy to a Lock-Box Account.
(n) NEW NON-RECOURSE DEBT. For any fiscal year of the
Transferor, obtain at least 15% of the increase in the Transferor's total
"Non-Recourse Debt" (as defined in SECTION 5.03(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, 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 M
shall be satisfactory to the Agent) 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 the Transferor; and
upon the execution of each Interest Rate Hedge 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 date hereof 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, consolidated balance sheets of the Transferor and its consolidated
Subsidiaries as of the end of such quarter, and consolidated statements of
income and retained earnings of the Transferor 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 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 consolidated
balance sheets of the Transferor and its consolidated Subsidiaries as of the
end of such year and the related consolidated 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 after the sending or filing thereof, copies of
all reports which the Transferor sends to any of its security holders and
copies of all reports and registration statements which the Transferor 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 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
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ERISA which the Transferor or any Subsidiary of the Transferor files under
ERISA with the IRS or the PBGC or the DOL or which the Transferor or any
Subsidiary of the Transferor receives from the PBGC;
(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 Transferor (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)
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 Transferor'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 Transferor or any
Subsidiary 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 FINANCIAL COVENANTS OF THE TRANSFEROR.
(a) DEFINED TERMS. As used in Section 5.03(b), the following
terms shall have the following meanings:
"CONSOLIDATED NET EARNINGS" shall mean, for each fiscal year
of the Transferor, the Transferor's and its Subsidiaries' consolidated
net after tax earnings, if any, for such fiscal year.
"CONSOLIDATED NET WORTH" means the aggregate amount of
stockholders' equity in the Transferor and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted
accounting principles consistently applied by the Transferor.
"INCOME AVAILABLE FOR INTEREST EXPENSE" means the actual
income, before income taxes, interest expense and extraordinary gains
and losses, of the Transferor and its Subsidiaries on a consolidated
basis, for the four consecutive fiscal quarters preceding the date of
determination, plus the actual interest expense of the Transferor and
its Subsidiaries deducted in computing such income, less the amount of
such interest expense payable with respect to Non-Recourse Debt.
"INTEREST COVERAGE RATIO" means, with respect to the latest
four consecutive fiscal quarters, the ratio of Income Available for
Interest Expense for such four quarters to the Transferor's and its
Subsidiaries' actual total recourse interest expense for such four
quarters.
"LEVERAGE RATIO" means, as of the last day of any quarter of
the Transferor, the ratio of Recourse Debt to Tangible Net Worth plus
subordinated debt (if such subordinated debt has been approved by the
requisite banks that are parties to any revolving credit facility of
the Transferor) at the end of such quarter.
"LIQUIDITY RATIO" means, with respect to a given fiscal
quarter of the Transferor, the ratio of Selected Assets to Recourse
Debt at the end of such quarter.
"NON-RECOURSE DEBT" means any obligation of the Transferor and
its Subsidiaries for which neither the obligee nor any other Person
has any legal recourse against the Transferor or any of its
Subsidiaries.
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"RECOURSE DEBT" means any obligation of the Transferor and its
Subsidiaries 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 liabilities excluding
Non-Recourse Debt.
"RESIDUAL VALUES" means, with respect to all leases of the
Transferor and its Subsidiaries, the aggregate estimated residual
values of the equipment subject to finance leases plus the net value
of equipment subject to operating leases less the minimum future
rentals of noncancellable operating leases (as each of the foregoing
is set forth in the financial statements delivered by the Transferor
pursuant to SECTIONS 5.02(a) and (b) above).
"RESIDUAL VALUES RATIO" means, as of the end of each fiscal
quarter of the Transferor, the ratio of Residual Values to Tangible
Net Worth plus subordinated debt (if such subordinated debt has been
approved by the requisite banks that are parties to any revolving
credit facility of the Transferor).
"SELECTED ASSETS" means and includes the following assets of
the Transferor and its Subsidiaries (but only to the extent that such
assets are unencumbered): cash and short-term cash investments, net
trade accounts and trade notes receivable, equipment and parts
inventory, net investment in sales-type and direct financing leases,
and the net book value of inventory under operating leases (with the
Transferor or any Subsidiary as lessor); provided that there shall not
be included in Selected Assets the present value of lease receivables
securing the Non-Recourse Debt.
"TANGIBLE NET WORTH" means the aggregate amount of
stockholders' equity in the Transferor and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted
accounting principles consistently applied by the Transferor, less
goodwill.
(b) From the date hereof until the later of the Termination
Date or the Collection Date, the Transferor shall not permit:
(i) The Leverage Ratio to exceed (x) 3.25 to 1.0 for the
fiscal quarter ending January 31 in each fiscal year of the
Transferor; or (y) 3.10 to 1.0 for the fiscal quarters ending
April 30, July 31, and October 31 in each fiscal year of the
Transferor.
(ii) The Interest Coverage Ratio to be less than 1.35 to 1.
(iii) Consolidated Net Worth at any time to fall below the
"current minimum amount required", which "current minimum amount
required" shall be $79,049,801 for Transferor's fiscal year ended
January 31, 1993, and shall be for each subsequent fiscal year an
amount equal to the sum of (a) the "current minimum amount required"
for the previous fiscal year, plus (b) an amount equal to fifty per
cent (50%) of Transferor's Consolidated Net Earnings for its fiscal
year most recently completed, plus (c) any increases in stockholders
equity to the Transferor and its Subsidiaries resulting from the
issuance of equity securities.
(iv) The Liquidity Ratio to be less than 1.15 to 1.
(v) The Residual Values Ratio to exceed 3.10 to 1.
SECTION 5.04. NEGATIVE COVENANTS OF THE TRANSFEROR. From the
date hereof 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
INVENTORY. 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
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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 Equipment related to
a Transferred Lease Receivable.
(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 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 J 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) 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 Transferor to do so, except that
(A) any Subsidiary of Transferor may merge or consolidate with or transfer
assets to or acquire assets from any other Subsidiary of Transferor, (B) any
Subsidiary of Transferor may merge into or transfer assets to the Transferor or
any other Person and (C) the Transferor or any Subsidiary of the Transferor 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 Transferor is a party, the Transferor 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, Transferor delivers to
the Agent such Financing Statements (Form UCC-1 and UCC-3) executed by
Transferor which the Agent may reasonably request to reflect such name change
or use, together with such other documents and instruments that the Agent 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 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, 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
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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
5.04(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).
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.
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 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
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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 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
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due under any and all Transferred Lease Receivables, including, without
limitation, endorsing the Transferor's name on checks and other instruments
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 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.
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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) 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) 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 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
(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 Transferee 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 clause (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 Transferor 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
Transferor 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 clause (f); or
(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
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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, 1993, 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 date hereof, 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) 0.625% 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;
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
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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 agreement executed pursuant 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 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 Transferee Report or any other
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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, 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, 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
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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
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
or (iii) such Lease Receivable has been a Transferred Lease Receivable for more
than 60 months (a Transferred Lease Receivable described in any of clauses (i),
(ii) or (iii) 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 Receivable (i) which is a Defaulted Lease
Receivable, (ii) with respect to which the Obligor thereof has exercised an
option contained in the Lease related thereto to purchase the Equipment which
is subject to such Lease or (iii) for any other reason; 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, 10% 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
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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; PROVIDED,
HOWEVER, if there are any installments under such Transferred Lease Receivable
which remain unpaid after the due date therefor, the Outstanding Balance of
such Transferred Lease Receivable shall be calculated as of the earliest due
date of an unpaid installment thereunder. 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.
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
therefrom, 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. 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
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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 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 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 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
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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 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 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.
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(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 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.
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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 CORPORATION
By___________________________
Title:
1375 East Ninth Street
Cleveland, Ohio 44114
Telecopy No. 216-899-0936
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. 212-758-7245
AGENT: CITICORP NORTH AMERICA, INC.,
as Agent
By__________________________
Vice President
200 South Wacker Drive
Chicago, Illinois 60606
Attention: Corporate
Asset Funding
Department
Telecopy No. 312-993-6730
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<PAGE> 46
<TABLE>
<S> <C>
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 Transferee Report
EXHIBIT G Form of Opinion(s) of Counsel for Transferor
EXHIBIT H Form of Letter to Accompany Forecasts
EXHIBIT I List of Offices of Transferor 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
</TABLE>
<PAGE> 47
EXHIBIT A
CERTIFICATE
Dated as of February 15, 1994
Reference is made to the Amended and Restated Lease Receivables
Transfer Agreement dated as of February 15, 1994 (the "Agreement") among LDI
Corporation (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.
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:
-43-
<PAGE> 48
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
- ----------- --------- ---------- ---------- -----------
-44-
<PAGE> 49
EXHIBIT B
DESCRIPTION OF CREDIT AND COLLECTION POLICY
Attached
<PAGE> 50
EXHIBIT C
FORM OF INTEREST RATE HEDGE ASSIGNMENT
Attached
<PAGE> 51
EXHIBIT D
FORMS OF LEASES
Attached
<PAGE> 52
EXHIBIT E
[Form of Lock-Box Agreement]
_______________________, 19__
[Name and Address of
Lock-Box Bank]
Re: Transferor
Lock-Box No. _______________
Lock-Box Account No. _______
Gentlemen:
We hereby notify you that we have transferred exclusive ownership and control
of the cash receipts (monies, checks, instruments and other items of payment)
related to leases transferred to CXC Incorporated ("Transferred Lock-Box
Receipts") received in our lock-box number _____ (the "Lock-Box") and the
corresponding lock-box account no. _____________ maintained with you (the
"Lock-Box Account") to Citicorp North America, Inc., 450 Mamaroneck Avenue,
Harrison, New York 10528 (the "Agent"). Such transferred leases will be
identified with corresponding identification numbers to you upon each transfer
of new leases to CXC Incorporated.
We hereby irrevocably instruct you to collect the Transferred Lock-Box Receipts
mailed to the Lock-Box or otherwise received by you and deposit into the
Lock-Box Account all such Transferred Lock-Box Receipts (unless otherwise
instructed by the Agent), and to make all payments of Transferred Lock-Box
Receipts to be made by you out of or in connection with the Lock-Box Account
directly to Citibank, N.A., account no. ________ in the name of the Agent, at
450 Mamaroneck Avenue, Harrison, New York 10528, Attention of Corporate Asset
Funding Department, for the account of the Agent, or otherwise in accordance
with the instructions of the Agent.
You hereby further agree that, upon written notification from the Agent, you
will use your best efforts to segregate all Transferred Lock-Box Receipts from
all other funds deposited in the Lock-Box Account, PROVIDED, HOWEVER, that,
unless you otherwise agree with the Agent, your obligation to so segregate
Transferred Lock-Box Receipts shall cease six months from that date of such
written notice.
We also hereby notify you that the Agent shall be irrevocably entitled to
exercise any and all rights in respect of or in connection with the Transferred
Lock-Box Receipts, including without limitation, the right to specify when
payments are to be made out of or in connection with the Lock-Box and the
Lock-Box Account. The Transferred Lock-Box Receipts will not be subject to
deduction, set-off, banker's lien, or any other right in favor of any person
other than the Agent except for pro-rata fees payable to you for Lock-Box
management services.
LDI Corporation ("LDI") hereby agrees to indemnify and hold you harmless
against any loss, liability or expense arising in connection with the existence
or performance of this letter agreement, except to the extent such loss,
liability or expense is due to your own gross negligence or willful misconduct.
Please agree to the terms of, and acknowledge receipt of, this notice by
signing in the space provided below on two copies hereof sent herewith and send
one such signed copy to the Agent, at its address referred to above, Attention
of Corporate
<PAGE> 53
Asset Funding Department, and send the other signed copy to the undersigned at
its address at LDI Plaza, 30033 Clemens Road, Westlake, OH 44145, Attention of
______________.
Very truly yours,
LDI Corporation
By: __________________________
Title: _______________________
Agreed and acknowledged:
[NAME OF BANK]
By: _______________________
Title:
<PAGE> 54
ACKNOWLEDGEMENT AND AUTHORIZATION
Citicorp North America, Inc. (the "Agent") hereby acknowledges
the transfer of exclusive ownership and control of the "Transferred Lock-Box
Receipts" as defined in and pursuant to the foregoing letter (the "Lock-Box
Notice"), executed by [Transferor] and acknowledged by [Lock-Box bank].
Pursuant to the second paragraph of the Lock-Box Notice, the Agent hereby
authorizes [Lock-Box bank] to continue to accept instructions from [Transferor]
for the payment of Transferred Lock-Box Receipts from said Lock-Box and
Lock-Box Account until the Agent notifies [Lock-Box bank] to the contrary.
Very truly yours,
Citicorp North America, Inc.
By:________________________________
Title:
Agreed and Acknowledged:
[Lock-Box bank]
By: _______________________
Title:
<PAGE> 55
EXHIBIT F
FORM OF TRANSFEREE REPORT
Attached
<PAGE> 56
EXHIBIT G
FORM OF OPINION OF COUNSEL FOR TRANSFEROR
(Attached)
<PAGE> 57
February 15, 1994
CXC Incorporated
450 Mamaronek Avenue
Harrison, New York 10528
Citicorp North America, Inc.,
as Agent
200 South Wacker Drive
Chicago, Illinois 60606
Gentlemen:
I have acted as counsel for LDI Corporation, a Delaware corporation (the
"Transferor"), in connection with the execution and delivery of the Amended and
Restated Lease Receivables Transfer Agreement, dated as of February 15, 1994
(the "CXC Agreement"), among the Transferor, CXC Incorporated (the
"Transferee") and Citicorp North America, Inc., as agent (the "Agent"). This
opinion is delivered pursuant to Section 3.01(k) of the CXC Agreement. Unless
otherwise defined herein, capitalized terms used herein have the meanings
assigned to such terms in the CXC Agreement.
In connection with this opinion, I have examined the following:
(a) Executed counterparts of (i) the CXC Agreement, (ii) Amendment No. 1,
dated as of February 15, 1994, to the Interest Rate Hedge Assignment, dated
as of October 5, 1990, from the Transferor to the Agent and (iii) Amendment
No. 1, dated as of February 15, 1994, to the Collateral Custodian Agreement
dated as of November 14, 1992, among the Transferor, the Transferee, the
Agent and The Fifth Third Bank;
(b) An executed counterpart of the Certificate, dated February 15, 1994,
executed by the Transferor pursuant to the CXC Agreement;
(c) An executed counterpart of the Lock-Box Agreement, dated January 26,
1994, among the Transferor, the Agent and Society National Bank;
(d) The Certificate of Incorporation and the By-Laws of the Transferor;
(e) Resolutions of the Board of Directors of the Transferor authorizing and
approving the execution and delivery by the Transferor of the Transferor
Documents (as hereinafter defined), the performance by the Transferor of its
obligations thereunder, and related matters;
<PAGE> 58
February 22, 1994
Page 2
(f) Executed originals of two Form UCC-3 amendments to financing statements
under the Uniform Commercial Code as in effect in the State of Ohio (the
"Ohio UCC") naming the Transferor as debtor and the Agent as secured party to
be filed in the Uniform Commercial Code records of the Office of the
Secretary of State of Ohio and in the Office of the Recorder of Cuyahoga
County, Ohio (collectively, the "Financing Statements"); and
(g) Such statutes, regulations, rulings and other matters as I have deemed
necessary to render this opinion.
The documents described in the foregoing clauses (a) through (c) are sometimes
collectively referred to herein as the "Transferor Documents."
I have assumed, for the purpose of this opinion, without independent
verification or investigation, that (i) the signatures by all parties on all
documents examined by me, other than the signatures of the Transferor on the
Transferor Documents, are genuine, (ii) all documents submitted to me as
originals are authentic, and (iii) all documents submitted to me as copies
conform with the originals.
In rendering the opinions set forth herein, I have assumed the due
authorization, execution and delivery of the Transferor Documents on the part
of all parties thereto other than the Transferor, and the legality, validity,
binding effect on and enforceability of the Transferor Documents against any
and all such other parties thereto. I have also assumed that the Transferred
Lease Receivables and the Related Security (as defined in the CXC Agreement) do
not include goods or fixtures.
In connection with this opinion, I do not purport to be an expert on, or
qualified to express legal conclusions based upon, the laws of any state other
than the laws of the State of Ohio and the United States of America and the
corporation laws of the State of Delaware, and accordingly, I express no
opinion as to the laws of any other state or jurisdiction. I call your
attention to the fact that certain of the Transferor Documents provide that
they are to be governed by and construed in accordance with the laws of the
State of New York. This opinion has been rendered as if all of the Transferor
Documents were governed in all respects by the laws of the State of Ohio,
without giving effect to principles of conflicts of laws, and I have assumed
that there is no New York law, legal decision or regulation of any governmental
body that would render any of the provisions of the Transferor Documents
illegal, invalid, not binding or unenforceable.
Based solely upon the foregoing, and subject to the further
qualifications hereinafter set forth, I am of the opinion that:
1. The Transferor is a corporation duly organized, validly existing
and in good standing as a corporation under the laws of the State of Delaware
and has the corporate power to own its assets. The Transferor is qualified to
do business in the State of Ohio.
2. The Transferor has the corporate power and authority to execute and
deliver the Transferor Documents and to perform its obligations thereunder, and
has taken all necessary corporate action to authorize such execution, delivery
and performance. Except for continuation and financing statements that may be
required to be filed under the Ohio UCC, no approval, authorization or other
action by, and no notice to or filing with, any State of Ohio or federal
governmental authority by the Transferor is required for the execution and
delivery by the Transferor of the Transferor Documents and the performance by
the Transferor of its obligations under the Transferor Documents.
<PAGE> 59
February 22, 1994
Page 3
3. The Transferor Documents have been duly executed and delivered on
behalf of the Transferor. The Transferor Documents constitute legal, valid and
binding obligations of the Transferor, enforceable against the Transferor in
accordance with their respective terms.
4. The execution and delivery by the Transferor of the Transferor
Documents and the performance of its obligations thereunder, and the
transactions contemplated thereby, are within the Transferor s corporate
powers and (a) do not contravene (i) to the best of my knowledge, any law,
rule or regulation applicable to the Transferor, (ii) the Certificate of
Incorporation or the By-Laws of the Transferor, or (iii) to the best of my
knowledge, any material mortgage, indenture, lease, contract or other
agreement or instrument to which the Transferor is a party or by which the
Transferor or any of its assets may be bound, (b) except as contemplated by
the Transferor Documents, do not result in, or require, the creation of any
lien, security interest, charge or encumbrance on any of the Transferor's
properties, and (c) do not require compliance with the Ohio bulk sales act
(Chapter 1306 of the Ohio UCC).
5. To the best of my knowledge, there is no pending or threatened
action, suit or proceeding, or any order, writ, judgment, award, injunction or
decree, against or affecting the Transferor before any court, governmental
agency or arbitrator which may materially adversely affect the financial
condition or operations of the Transferor and its consolidated subsidiaries
taken as a whole or materially adversely affect the ability of the Transferor
to perform its obligations under the Transferor Documents. To the best of my
knowledge, 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 government agencies that are not material to the business or
operations of the Transferor and its consolidated subsidiaries, taken as a
whole.
6. The provisions of the CXC Agreement are sufficient to create in
favor of the Transferee a security interest (as that term is defined in
Section 1301.01 of the Ohio UCC) in all right, title and interest of the
Transferor in and to the Transferred Lease Receivables and the Related Security
(collectively, the "Collateral") in which a security interest may be created
under the Ohio UCC. When the Financing Statements have been filed in the
offices described above, such filings will be sufficient to perfect a security
interest in all right, title and interest of the Transferor in and to the
Collateral in which a security interest may be perfected by the filing of
financing statements under the Ohio UCC.
The foregoing opinions are qualified in the following respects:
(i) I have made no examination of and express no opinion with respect to (A)
the Transferor s right, title or interest in or to the Collateral, (B) the
accuracy or sufficiency of the descriptions of the personal property that
constitutes the Collateral contained in the CXC Agreement and the Financing
Statements (except with respect to the sufficiency for purposes of the Ohio UCC
of the description of the Transferred Lease Receivables), (C) the perfection
(except as set forth in paragraph 6 above) or the priority of any security
interests or other interests created by the CXC Agreement, or (D) the existence
of or freedom from any liens, charges, security interests or other encumbrances
on the Collateral.
(ii) The opinions expressed herein as to the enforceability of any document
are subject to the effect of any bankruptcy, liquidation, insolvency,
arrangement, moratorium, reorganization, fraudulent conveyance or similar laws,
both state and federal, relating to or affecting the rights and remedies of
creditors, and to general principles of equity.
<PAGE> 60
February 22, 1994
Page 4
(iii) Certain of the remedial provisions of the Transferor Documents may be
limited or rendered unenforceable by laws governing the same (for example, (A)
provisions for the recovery of legal fees and expenses in connection with the
enforcement of such remedies may not be enforceable, (B) provisions resulting
in a waiver by the Transferor of certain rights may be limited by legal and
equitable principles and public policy at the time in effect, and (C) the
availability of specific performance, injunctive relief or other equitable
remedies are subject to the discretion of the court before which any proceeding
therefor may be brought).
(iv) Any security interest created in the Collateral will not be effective
until value has been given for any such security interest and the Transferor
has acquired rights therein, and with respect to personal property that is
acquired by the Transferor after the date hereof, Section 552 of the United
States Bankruptcy Code will limit the extent to which property acquired by a
debtor after commencement of a case under the United States Bankruptcy Code may
be subject to a security interest arising from a security agreement entered
into by the debtor before the commencement of such case.
(v) The perfection of any security interest in the Collateral arising from
the filing of the Financing Statements will expire or be ineffective (A) as to
any Collateral transferred to the Transferee by the Transferor more than four
months after the Transferor so changes its name, identity or structure as to
make the Financing Statements misleading, unless new appropriate financing
statements indicating the new name, identity or structure of the Transferor are
properly filed before the expiration of such four-month period, (B) as to any
Collateral with respect to which a continuation statement is not filed within
the period of six months prior to the expiration of five years from the dates
of the original filing of the respective Financing Statements, (C) in
accordance with the provisions of Section 1309.25 of the Ohio UCC (UCC Section
9-306) relating to the proceeds of personal property subject to a perfected
security interest, and (D) four months after the Transferor changes its chief
executive office to a jurisdiction outside the State of Ohio.
(vi) I express no opinion as to whether a court would limit enforcement by
the Transferee and the Agent of their rights and remedies under the Transferor
Documents if the enforcement thereof under the circumstances would violate an
implied covenant of good faith and fair dealing.
(vii) I express no opinion as to whether any provision of the Transferor
Documents may be unenforceable by reason of violation of Section 2905.21(H) of
the Ohio Revised Code concerning criminal usury, which prohibits, inter alia,
the charging of interest "at a rate exceeding twenty-five percent per annum or
the equivalent rate for a longer or shorter period, unless_the rate of interest
is otherwise authorized by law."
This opinion is solely for the benefit of the addressees hereof in their
various capacities under the CXC Agreement. This opinion may not be used or
relied upon for any other purpose or by any other person (other than any
permitted assignee of either addressee under Section 10.04 of the CXC
Agreement) without my prior written consent, and I assume no obligation to
advise any person of any change in this opinion.
Very truly yours,
Benjamin W. Cannon
General Counsel
h:\share\cxcopin.doc
<PAGE> 61
EXHIBIT H
FORM OF LETTER TO ACCOMPANY FORECASTS
Citicorp North America, Inc.,
as Agent
450 Mamaroneck Avenue
Harrison, New York 1O528
Re: Amended and Restated Lease Receivables Transfer Agreement dated as of
February 15, 1994 ("Transfer Agreement")
Gentlemen:
The attached financial forecast of LDI Corporation ("Transferor") 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 the Transfer Agreement. Such forecasts have
been prepared by the management of the Transferor in light of the past business
of the Transferor 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:_________
<PAGE> 62
EXHIBIT I
LIST OF OFFICES OF TRANSFEROR
WHERE RECORDS ARE KEPT
LDI Plaza
30033 Clemens Road
Westlake, Ohio 44145
1375 East Ninth Street
Cleveland, Ohio 44114
<PAGE> 63
EXHIBIT J
LOCK-BOX BANKS
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
Lockbox No. 931043
Lock-Box Account No. 2528781
Society National Bank
900 Euclid Avenue
Cleveland, Ohio 44101
Lockbox No. 70424
Lock-Box Account No. 30545-3791
Society National Bank
900 Euclid Avenue
Cleveland, Ohio 44101
Lockbox No. 901064
Lock-Box Account No. 90005-9971
<PAGE> 64
EXHIBIT K
TRADE NAMES AND ASSUMED NAMES
LDI Corporation
LDI Communications Company
LDI Technologies
Leasing Dynamics
LDI MST Leasing Company
P.O.S. Support, Inc.
[Note: to be further updated]
<PAGE> 65
EXHIBIT L
FORM OF INTEREST RATE HEDGE REPORT
Attached
<PAGE> 66
LOGO LDI CORPORATION
Exhibit M
February 15, 1994
<TABLE>
<S> <C>
Mr. Jeffrey D. Klein Mr. David J. Duncan
Citicorp North America, Inc. Citicorp North America, Inc.
200 South Wacker Drive 200 South Wacker Drive
Chicago, IL 60606 Chicago, IL 60606
</TABLE>
Dear Jeff and Dave:
Below please find the hedging parameters for LDI's CXC lease securitization
program.
- - LDI shall be fully hedged against interest rate risk, with exposure measured
as the face value of outstanding commercial paper less estimated retransfers
(currently estimated at 10%). Due to the dynamic nature of the pool, LDI will
hedge at least 90% of this exposure on an on-going basis, and will be fully
hedged at the end of each calendar quarter.
- - Interest rate swaps and caps will be entered into based on one (1) month
LIBOR with LDI receiving a floating rate and paying a fixed rate. Settlement
will be quarterly in arrears with rate resets on a monthly compounded basis.
- - This interest rate hedge portfolio will be based on a core combination of
amortizing hedging instruments whose amortization schedules match the natural
run-off of the lease receivables in the pool on a quarterly basis. Hedging
instruments will be layered on top as necessary to reflect changes in the pool
over time.
- - An Event of Termination will be tied to matching the average pool discount
rate with the average hedge rate. See Section 7.01 (k) of the Amended and
Restated Lease Receivables Transfer Agreement for details.
If you have any questions please call me at (216) 899-2849.
Sincerely,
Anthony N. Granata
- ------------------------------
Anthony N. Granata
Corporate Finance Associate
cc: Frank Skedel
Rick Greece
LDI PLAZA - 30033 CLEMENS ROAD - WESTLAKE, OHIO 44145 - (216) 899-2900
<PAGE> 1
DRAFT: 4/30/94
April 28, 1994
LDI CORPORATION
One Cleveland Center
1375 East Ninth Street
Suite 700
Cleveland, Ohio 44114
ATTN: Mr. Frank G. Skedel
RE: PROPOSED CREDIT AGREEMENT
Ladies and Gentlemen:
Pursuant to your request, the various financial institutions which are
signatories hereof (the "Banks") are issuing this commitment letter for the
refinance of certain indebtedness owing by the Borrower to the Banks, such
commitment being outlined on the attached term sheet.
The terms summarized herein and in the attached Term Sheet are intended as an
outline of principal terms and conditions of the proposed restructuring and do
not purport to summarize all of the terms, conditions, covenants,
representations, warranties, defaults, closing conditions and other provisions
that will be contained in the definitive legal documentation. Such legal
documentation will include, in addition to the provisions outlined herein and
in the attached Term Sheet provisions customary in such transactions and
otherwise appropriate in the context of the proposed transaction.
Each Bank's commitment hereunder is subject to execution and delivery of
final legal documentation acceptable to each of the Banks and the bank group
counsel, incorporating, without limitation the terms in the Term Sheet. The
Banks will receive appropriate legal opinions satisfactory to them from Baker &
Hostetler and from in-house counsel for LDI (including a non-contravention
opinion with respect to LDI's material agreements, indentures, leases and other
financing arrangements).
To become effective and create a binding commitment by the Banks to provide
the financing set forth in this letter (including the Term Sheet), at or before
5:00 p.m. (Cleveland time) on May 2, 1994, (a) this letter must be accepted by
you and a signed original returned to us, (b) LDI shall have made a mandatory
prepayment in the aggregate amount of Eighteen Million Dollars ($18,000,000) to
the Banks on a ratable basis (based upon the percentages set forth on Annex I
hereto), (c) LDI and its subsidiaries which have entered into guaranties of
LDI's indebtedness to the Banks, shall have (i) granted to the Banks perfected
liens on and security interest
<PAGE> 2
in all of LDI's and such subsidiaries' assets pursuant to security agreements
in form and substance satisfactory to National City Bank ("NCB"), Society
National Bank ("SNB") and Continental Bank N.A. ("Continental"), and (ii)
executed and delivered such UCC-1 financing statements covering the assets
described in such security agreements, as NCB, SNB and Continental deem
necessary or desirable, and (d) LDI shall have executed and delivered the
Credit Agreement attached hereto as Exhibit A ("New Credit Agreement"), and all
related documents and agreements.
Upon the effectiveness of this letter in accordance with the preceding
paragraph, the commitment of the Banks shall terminate on the earliest of (a)
May 31, 1994, (b) NCB's written notice to LDI that (i) LDI has not satisfied or
will not satisfy a condition set forth herein or in the Term Sheet, or (ii) in
the judgment of NCB, SNB and Continental, LDI or any of its business or
properties shall have suffered any material adverse change since January 31,
1994; provided, however, that neither the defaults specifically waived by the
Banks under those certain waiver letters attached hereto as Annex VII, nor the
financial loss experienced by LDI for LDI's first fiscal quarter of 1994 as set
forth in that certain ______________________________ [INSERT NAME OF THE REPORT
DELIVERED TO THE BANKS ON APRIL 16, 1994](collectively, the "Existing Adverse
Conditions") shall constitute material adverse changes, (c) the occurrence of a
default or event of default, or an event which, after notice or lapse of time
or both, would constitute a default or event of default, under any loan
documentation currently existing between or among LDI and any of the Banks
which has not been waived in writing by the applicable Banks, or (d) a petition
for relief is filed by or against LDI under Title 11 of the United States Code.
In the event that LDI and the Banks shall not have entered into loan
documentation which embodies the terms and provisions of this commitment letter
and the attached Term Sheet and which is otherwise acceptable to the Banks on
or before May 31, 1994 (assuming that this commitment letter shall not have
been terminated for any other reason prior to such date), then the New Credit
Agreement shall become effective on June 1, 1994, and shall thereafter remain
in full force until the termination thereof in accordance with the terms
thereof.
2
<PAGE> 3
We look forward to your review and response. If there are any questions,
please do not hesitate to contact Mark Seryak at National City Bank.
Very Truly yours,
<TABLE>
<S> <C>
NATIONAL CITY BANK, COMERICA BANK (successor by
individually and as Co-Agent merger between Manufacturer Bank, N.A., formerly
known as Manufacturers National Bank of Detroit)
By: By:
------------------------- ------------------------
Title: Title:
SOCIETY NATIONAL BANK, FIRST UNION NATIONAL BANK OF NC
individually and as Co-Agent
By:
------------------------
Title:
By:
-------------------------
CONTINENTAL BANK N.A., Title:
individually and as Co-Agent
THE DAIWA BANK, LIMITED
By:
------------------------
Title:
By:
--------------------------
Title:
And by:_______________________
Title:
THE FIFTH THIRD BANK
By:
-------------------------
Title:
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
STAR BANK, N.A.
By:
-------------------------
Title:
FIRST NATIONAL BANK OF OHIO
By:
------------------------
Title:
THE BANK OF TOKYO TRUST COMPANY
By:
-------------------------
Title:
MICHIGAN NATIONAL BANK
By:
-------------------------
Title:
FIRST BANK, N.A.
By:
-------------------------
Title:
PROPOSAL ACCEPTED:
LDI CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
</TABLE>
181\22567CBD.123
4
<PAGE> 5
LDI CORPORATION
TERMS AND CONDITIONS OF COMMITMENT
BORROWER: LDI Corporation ("Borrower")
LENDERS: The Banks listed on Annex I attached hereto ("Banks"). Any Bank
(a) with the written consent of (i) the Borrower, but such
consent shall only be required so long as the indebtedness under
the loan documentation shall not have been accelerated, and (ii)
the Co- Agents, may at any time assign and delegate, and (b)
with notice to the Borrower and the Co-Agents, but without the
consent of the Borrower or the Co-Agents, may assign and
delegate to any of its affiliates or to any other Bank, all or
any fraction of such Bank's total loans and Commitment (as
hereinafter defined). Upon such assignment such lender shall
become a Bank for all purposes under the loan documentation.
Each Bank will have the right, without the Borrower's consent
thereto, to sell participations in its loans and/or Commitment.
CO-AGENTS: National City Bank ("NCB"), Society National Bank ("Society")
and Continental Bank N.A. ("Continental")
ADMINISTRATIVE
AGENT: NCB
COLLATERAL
AGENT: Continental
PURPOSE: To (i) refinance in full all amounts owing under that certain
(a) Credit Agreement, dated as of August 3, 1992, among
Borrower, various financial institutions, and Continental, as
agent for such financial institutions, and (b) Amended and
Restated Credit Agreement, dated as of December 14, 1992, among
Borrower, various financial institutions, and NCB and Society as
co-agents for such financial institutions, and (ii) finance the
ongoing working capital needs of the Borrower.
FACILITY: Reducing Revolving Credit Facility of up to an initial maximum
amount of One Hundred Fifteen Million Dollars ($115,000,000).
The obligation of each Bank to make loans ("Commitment") shall
initially be limited to
1
<PAGE> 6
the amount set opposite such Bank's name under the column headed
"Total Commitment" as set forth on Annex I attached hereto. The
Facility shall be a fully secured facility which shall expire on
April 30, 1995 ("Expiration Date") and which shall include a
letter of credit sub- facility of up to Two Million Dollars
($2,000,000). Each letter of credit shall be issued by the
Administrative Agent, in its reasonable discretion, upon the
Administrative Agent's typical terms and conditions therefor.
Each drawdown of the Facility shall be subject to the
satisfaction of the terms under "Conditions Precedent" and
"Additional Conditions to All Advances" set forth hereinbelow.
The availability of the advances under the Facility will be
subject to, among other things, compliance, on an ongoing basis,
with a Borrowing Base established by the Banks and as more
particularly set forth below.
REDUCTION AND
TERMINATION OF
FACILITY: On the last day of each month ("Mandatory Reduction Date"), the
Total Commitment existing on such Mandatory Reduction Date shall
be permanently reduced on a ratable basis (according to each
Bank's respective percentage as set forth on Annex I attached
hereto) by the amounts set forth on Annex V hereto. Borrower
also may voluntarily reduce the Total Commitment upon terms and
conditions to be set forth in the final loan documentation.
"Total Commitment" means, as at any date, the aggregate amount
of the Commitments existing on such date (taking into account
all reductions in such Commitments occurring on or prior to such
date). The Facility will terminate on the Expiration Date.
SECURITY: The Facility and any letter of credit reimbursement obligation
owing to the Administrative Agent shall be secured by first
priority or pari passu (with those lenders who are parties to
the Intercreditor Agreement), subject to the liens permitted
hereunder, as the case may be, perfected liens on and security
interests in all of the assets (the "Collateral") of the
Borrower and its subsidiaries, including, without limitation:
2
<PAGE> 7
(a) present and future accounts receivable (accounts, license rights,
chattel paper, insurance proceeds, contract rights, tax refunds,
documents, instruments), general intangibles, cash and cash equivalents,
stock of the subsidiaries, inventory, equipment, machinery, fixtures,
intellectual property;
(b) all proceeds and products of the foregoing; and
(c) all other assets thereof of whatever nature (other than real
property), but specifically excluding any such assets which are the
subject of any financing arrangements between Borrower and its
non-recourse lenders.
On or prior to the Closing Date, Borrower and each of its subsidiaries
shall execute and deliver to the Collateral Agent a security agreement (in
form and substance acceptable to the Banks), UCC-1 financing statements
covering the Collateral described in such security agreements and which
are otherwise deemed necessary or desirable by the Banks, and such other
security documents (including, but not limited to, amendments to the
security agreements referred to in the commitment letter) as are deemed
necessary or desirable by the Banks. On or prior to the Closing Date,
such UCC-1 financing statements will be filed in the appropriate
locations.
Upon occurrence of an event of default under the loan documentation, or an
event which, after notice or lapse of time or both, would constitute such
an event of default, or otherwise upon the request of the Collateral
Agent, the Borrower or subsidiary of Borrower, as the case may be, shall
be required to conspicuously mark each document relating to the inventory
and each item of chattel paper and each related contract and each of its
records pertaining to the Collateral with a legend, in form and substance
satisfactory to the Collateral Agent, indicating that such document,
chattel paper, related contract or Collateral is subject to the Collateral
Agent's security interest. Following the occurrence of an event of
default under the loan documentation, or an event which, after notice of
lapse of time or both would
3
<PAGE> 8
constitute such an event of default, (i) all certificates and
chattel paper representing or evidencing any of the Collateral,
shall be delivered to and held by the Collateral Agent, and (ii)
the Collateral Agent shall have the right to transfer to or
register in the name of the Collateral Agent any or all of the
Collateral.
GUARANTY: Each of the Borrower's subsidiaries will guaranty, on a secured
basis, payment of the Borrower's obligations under the loan
documents.
AVAILABILITY: The Borrowing Base Amount available for loans and letters of
credit under the Facility will be determined according to
criteria established by the Required Co-Agents based on the
realizable value of Eligible Collateral. The "Borrowing Base
Amount," as at any time shall be equal to the difference of (i)
the then Total Borrowing Base Assets, minus (b) the then Total
Borrowing Base Liabilities.
"Total Borrowing Base Assets" means, as at any time, an amount
equal to (a) seventy-five percent (75%) of the value of the
Borrower's Regular Eligible Committed Inventory, PLUS (b) the
lesser of (i) seventy-five percent (75%) of the value of the
Borrower's Extended Eligible Committed Inventory, or (ii) Two
Million Dollars ($2,000,000),PLUS (c) fifty percent (50%) of the
value of the Borrower's Eligible Uncommitted Inventory, PLUS (d)
eighty percent (80%) of the net amount of the Borrower's
Eligible Receivables, PLUS (e) ninety- five percent (95%) of the
net amount of the Borrower's Eligible Unbilled One (1) Through
Four (4) Lease Receivables, PLUS (f) the lesser of (i) fifty
percent (50%) of the net amount of the Borrower's Eligible
Unbilled Five (5) Through Nine (9) Lease Receivables, or (ii)
Five Million Dollars ($5,000,000), PLUS (g) the Applicable
Residual Percentage then in effect of the then Eligible Residual
Value Amount. The Regular Eligible Committed Inventory, the
Extended Eligible Committed Inventory and the Eligible
Uncommitted Inventory will be valued at the lower of cost or
market value, determined in accordance with the Borrower's usual
cost accounting system, consistently applied.
4
<PAGE> 9
"Total Borrowing Base Liabilities" means, as at any time, an
amount equal to (a) Accrued Liabilities, plus (b) the sum of all
of the then existing At Risk Mortgage Obligations (without any
offset (e.g., an At Risk Mortgage Obligation with respect to the
Borrower's Westlake, Ohio facility cannot be offset against an
At Risk Mortgage Obligation with respect to the Borrower's
Oakwood, Ohio facility)), plus (c) any Reserve Amount then in
effect.
"Accrued Liabilities" means all indebtedness, obligations and
liabilities of any kind of the Borrower (including contingent
liabilities) other than non-recourse debt, subordinated debt and
the long-term portion of deferred taxes of the Borrower.
"Aircraft Residual Reserve Amount" means an amount equal to
Three Million Dollars ($3,000,000) or such other amount as may
be determined by the Required Co-Agents, in their sole
discretion.
"Applicable Residual Percentage" means (a) ninety percent (90%)
for the period commencing on the Closing Date and ending on July
30, 1994, (b) eighty percent (80%) for the period commencing on
July 31, 1994 and ending on October 30, 1994, (c) seventy
percent (70%) for the period commencing October 31, 1994 and
ending on January 30, 1995, and (d) sixty-five percent (65%) on
January 31, 1995 and at all times thereafter.
"At Risk Mortgage Obligation" means, with respect to (a)
indebtedness of the Borrower and (b) indebtedness guaranteed by
the Borrower, which is secured by a mortgage or a deed of trust
on specific real property as at any time, the extent to which
the then outstanding amount of such indebtedness exceeds the
fair market value of such real property, as determined by the
Required Co-Agents, in their sole discretion.
"Capital Lease" means any arrangement for the leasing of
personal property which, in accordance with GAAP (as defined on
Annex II hereto), is or should be accounted for as a capital
lease.
5
<PAGE> 10
"Eligible Capital Lease Residual Value" means, to the extent
deemed to be eligible by the Required Co-Agents, in their sole
discretion, based on such credit and/or collateral
considerations as they deem appropriate, the estimated residual
value (net of unearned income) of the equipment which is the
subject of a Capital Lease or a direct finance lease between the
Borrower, as lessor, and any Person, as lessee, discounted at
the lease rate under such lease.
"Eligible Operating Lease Residual Value" means, to the extent
deemed to be eligible by the Required Co-Agents, in their sole
discretion, based on such credit and/or collateral
considerations as they deem appropriate, the net book value of
the equipment which is the subject of an operating lease between
the Borrower, as lessor, and any Person, as lessee, as at the
termination of such operating lease.
"Eligible Residual Value Amount" means, as at any time, an
amount equal to the sum of (a) the aggregate Eligible Operating
Lease Residual Value of the equipment under all operating leases
between the Borrower, as lessor, and any Person, as lessee,
existing at such time, plus (b) the aggregate Eligible Capital
Lease Residual Value of the equipment under all Capital Leases
and direct finance leases between the Borrower, as lessor, and
any Person, as lessee, existing at such time, plus (c) the
lesser of (i) the dollar amount of the Borrower's equity
interest in Picker Financial Group, or (ii) Two Million Dollars
($2,000,000). The aggregate Eligible Capital Lease Residual
Value of aircraft under all Capital Leases and direct finance
leases for the lease of such aircraft between the Borrower, as
lessor, and any Person, as lessee, shall be included in this
definition only if such aggregate Eligible Capital Lease
Residual Value is supported by appraisals acceptable to the
Required Co-Agents, in their sole discretion.
"Eligible Unbilled Five (5) Through Nine (9) Lease Receivables"
means, as at any time, the aggregate amount of Eligible Lease
Receivables arising under Five (5) Through Nine (9)
6
<PAGE> 11
Leases, discounted at the lease rates thereunder.
"Eligible Unbilled One (1) Through Four (4) Lease Receivables"
means, as at any time, the aggregate amount of Eligible Lease
Receivables arising under One (1) Through Four (4) Leases,
discounted at the lease rates thereunder.
"Eligible Uncommitted Inventory" means, as at any date, Eligible
Inventory existing on such date which (i) is in the Borrower's
possession and owned by the Borrower, (ii) is not subject to a
written and binding agreement between the Borrower and a Person
to lease or sell such Eligible Inventory to such Person, and
(iii) has not been held for sale or lease by the Borrower for a
period of more than one hundred twenty (120) days.
"Extended Eligible Committed Inventory" means, as at any date,
Eligible Inventory existing on such date which (i) is in the
Borrower's possession, and (ii) is subject to a written and
binding agreement between the Borrower and a Person to lease or
sell such Eligible Inventory to such Person, which agreement
contemplates delivery of such Eligible Inventory to such Person
more than one hundred twenty (120) days after the date of such
agreement.
"Five (5) Through Nine (9) Leases" mean leases of the Borrower
rated five (5), six (6), seven (7), eight (8) or nine (9) under
the Borrower's credit rating system as in effect on January 31,
1994, a written copy of which credit rating system shall have
been delivered to the Co-Agents prior to the Closing Date
(including any such leases held in the "holding tank" as
determined by the Administrative Agent, in its sole discretion).
"One (1) Through Four (4) Leases" mean leases of the Borrower
rated one (1), two (2), three (3) or four (4) under the
Borrower's credit rating system as in effect on January 31,
1994, a written copy of which credit rating system shall have
been delivered to the Co-Agents prior to the Closing Date
(including any such leases held in the "holding tank" as
determined by the Administrative Agent, in its reasonable
discretion).
7
<PAGE> 12
"Person" means any natural person, corporation, partnership,
firm, association, trust, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or
other capacity.
"Regular Eligible Committed Inventory" means, as at any date,
Eligible Inventory existing on such date which (i) is in the
Borrower's possession, (ii) is subject to a written and binding
agreement between the Borrower and a Person to (a) lease such
Eligible Inventory to such Person, the term of which is
scheduled to commence within ninety (90) days after such date,
or (b) sell such Eligible Inventory to such Person, and (iii)
has not been held for sale or lease by the Borrower for a period
of more than one hundred twenty (120) days.
"Required Co-Agents" means, as at any time, any two (2)
Co-Agents, if there shall be three (3) Co-Agents existing at
such time, or the number of Co-Agents existing at such time, if
there shall be less then three (3) Co-Agents existing at such
time.
"Reserve Amount" means an amount determined by the Required
Co-Agents, in their sole discretion, as a reserve against
collateral values and potential or anticipated obligations of
the Borrower, including, without limitation, (i) tax liabilities
and other obligations owing to governmental entities, (ii)
litigation liabilities, (iii) the anticipated costs and expenses
relating to the liquidation of collateral, (iv) unpaid sales
taxes, (v) those reserve amounts as required to be held as
reserves under GAAP (as defined on Annex II hereto), (vi)
liabilities and other obligations owing by the Borrower to any
lessor of real property leased by the Borrower or to any
warehouseman, and (vii) the Aircraft Residual Reserve Amount.
Subject to the last sentence of this definition of "Reserve
Amount," in the event that any Eligible Capital Lease Residual
Value for aircraft is at any time included in the calculation of
Total Borrowing Base Assets, the Reserve Amount shall include
the Aircraft Residual Reserve Amount. Upon delivery of
appraisals acceptable to the Required Co-Agents, in their sole
discretion, the Required Co-Agents may, in their sole
discretion,
8
<PAGE> 13
either (a) exclude the Aircraft Residual Reserve Amount from the
Reserve Amount, or (b) increase or reduce the Aircraft Residual
Reserve Amount to be included in the Reserve Amount.
DETERMINATION
OF
ELIGIBILITY: Eligibility of Collateral for purposes of computing Total
Borrowing Base Assets will be established at the sole discretion
of the Required Co-Agents and the definitions of "Eligible
Inventory," "Eligible Receivable" and "Eligible Lease
Receivable" shall contain the terms which typically appear in
each of the Co-Agents' loan documentation for such loans.
Eligible Collateral must be at least of the value necessary in
the judgment of the Required Co-Agents to support all advances.
COLLECTIONS
AND
PROCEEDS: Subject to the requirements of Borrower's non-recourse lenders,
all money and other funds received by the Borrower, all
collections by the Borrower and all other proceeds of Collateral
shall be transferred to Collateral Agent, by methods acceptable
to the Required Co-Agents. Collateral Agent, for its benefit
and the benefit of the Banks, shall have dominion over all cash.
NEGATIVE
PLEDGE: Liens in favor of Persons other than the Banks, and other than
envisioned under the "Intercreditor Agreement" referenced below,
and as permitted below, shall be prohibited.
INTERCREDITOR
AGREEMENT: Each Bank shall enter into an Intercreditor Agreement with
certain current senior debt lenders in form and substance
satisfactory to the Banks. In addition, each Bank and such
other current senior debt lenders shall enter into such other
Intercreditor Agreements as the Required Co-Agents deem
necessary.
CONDITIONS
PRECEDENT: 1. Approval of the financing contemplated hereby, and
all related transactions by the Board of Directors of the
Borrower.
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<PAGE> 14
2. The Borrower shall have delivered to the Administrative
Agents all consents from the Borrower's other existing lenders
which are required to allow the liens in favor of the Collateral
Agent contemplated hereby to be placed upon the Collateral.
3. No material litigation or claims with respect to this
financing, shall exist. No other material litigation shall
exist except as disclosed to the Co-Agents prior to the date of
this commitment letter and no material adverse change in the
status of any such litigation shall have occurred.
4. The Borrower and its subsidiaries shall grant to the
Collateral Agent a first priority or pari passu, as the case may
be, perfected lien on and security interest in the Collateral.
5. No material adverse change in the condition, financial or
otherwise, properties or prospects of the Borrower and the
subsidiaries or their respective businesses since January 31,
1994, shall have occurred other than the Existing Adverse
Conditions.
6. Resolution of all legal issues to the satisfaction of the
Banks and the bank group counsel, and completion and receipt of
(i) all documentation in connection with this financing, in form
and substance satisfactory to the Banks and the bank group
counsel, and (ii) satisfactory and favorable opinions of counsel
to the Borrower, covering such other matters as are customarily
covered in secured bank financings and leveraged financings.
7. Completion of legal due diligence, the results of which
shall be satisfactory to bank group counsel.
8. All reasonable fees and out-of-pocket expenses of counsel
for each of the Co-Agents in connection with the preparation,
execution and delivery of the financing documentation and the
transactions contemplated thereby shall have been paid.
9. Each Bank shall have received indemnification by the
Borrower and each of its subsidiaries to hold such Bank harmless
10
<PAGE> 15
from and against all claims, damages and liabilities and
expenses which may be incurred by or asserted in connection with
or arising out of any investigation, litigation or proceeding
related to the financing contemplated hereby.
10. Receipt of evidence of insurance with form, amounts,
insurer, loss payee/coinsured endorsements, and notification of
changes/cancellation acceptable to the Co-Agents.
11. The Borrower shall have entered into a new loan agreement
or an amendment to the existing loan agreements with the Persons
set forth on the term sheet attached hereto as Annex VI, upon
the terms outlined on such term sheet and such other terms as
shall be acceptable to the Required Co-Agents.
12. That certain promissory note dated July 1, 1993, executed
by the Borrower in favor of National Westminster Bank USA, in
the original principal amount of $20,000,000, shall have been
amended to change the amortization thereof to the amortization
set forth on Annex VII attached hereto.
13. Such other conditions precedent as deemed necessary by the
Banks, in their sole discretion.
ADDITIONAL
CONDITIONS
TO ALL
ADVANCES: In the case of each advance under the Facility:
(a) the amount of eligible Collateral is sufficient to
support the advances to be outstanding under the Facility after
giving effect to such advance;
(b) no default exists under any of the loan documentation
and the Borrower shall have confirmed its representations and
warranties and the nonexistence of any such defaults; and
(c) the Banks shall have received such additional legal
opinions, documents, instruments and information as the Banks
and the
11
<PAGE> 16
bank group counsel shall have reasonably requested.
COLLATERAL
MONITORING: The Borrower will provide the Co-Agents, on a monthly
or more frequent basis and as otherwise requested, with such
detailed information on Collateral and other matters as the
Co-Agents may deem necessary including, but not limited to,
borrowing base certificates.
INTEREST
RATES: All loans outstanding under the Facility will bear
interest, at the Borrower's election (but subject to a limit of
$20,000,000 for Prime Rate Loans), as follows:
(a) at a rate per annum equal to the rate of interest NCB
announces from time to time as its prime rate ("Prime
Rate"), payable monthly; or
(b) at the LIBOR Fixed Rate for the applicable 30, 60 or 90
day interest period ("Interest Period"), payable monthly
and on the last day of each Interest Period.
Interest and fees shall be computed on the basis of the actual
number of days (including the first day but excluding the last
day) occurring during the period for which such interest or fee
is payable over a year comprised of 360 days.
"Adjusted LIBOR" means a rate per annum equal to the quotient
obtained (rounded upwards, if necessary, to the nearest
one-sixteenth (1/16th) of one percent (1%)) by dividing (a) the
applicable LIBOR rate by (b)(i) one (1.00) minus (ii) the LIBOR
Reserve Percentage.
"LIBOR" means the rate of interest determined by the
Administrative Agent (rounded upward to the nearest
one-sixteenth (1/16th) of one percent (1%)) at which deposits in
U.S. Dollars for the relevant Interest Period are offered based
on information presented on the Telerate Screen as of 11:00 A.M.
(London time) on the day which is two (2) business days prior to
the first day of such Interest Period ("Interest Rate
Determination Date");
12
<PAGE> 17
PROVIDED, HOWEVER, that if at least two (2) such offered rates
appear on the Telerate Screen in respect of such Interest
Period, the arithmetic mean of all such rates (as determined by
the Administrative Agent) will be the rate used; and PROVIDED,
FURTHER that if Telerate ceases to provide LIBOR quotations,
such rate shall be the average rate of interest determined by
the Administrative Agent at which deposits in Dollars are
offered for the relevant Interest Period by the Administrative
Agent (or its successor).
"LIBOR Fixed Rate" means a rate per annum equal to the sum of
Adjusted LIBOR plus two and one-half percent (2.5%) per annum.
"LIBOR Reserve Percentage" means, relative to any Interest
Period for LIBOR Loans, the reserve percentage (expressed as a
decimal) equal to the maximum aggregate reserve requirements
(including all basic, emergency, supplemental, marginal and
other reserves and taking into account any transitional
adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the
federal reserve system board and then applicable to assets or
liabilities consisting of and including "Eurocurrency
Liabilities", as currently defined in Regulation D issued by the
federal reserve system board, having a term approximately equal
or comparable to such Interest Period.
"Telerate Screen" means the display designated as Screen 3750 on
the Telerate System or such other screen on the Telerate System
as shall display the London interbank offered rates for deposits
in U.S. Dollars quoted by selected banks.
LETTER
OF CREDIT
FEES: Two and one-half percent (2-1/2%) per annum, payable
in advance on all outstanding letters of credit plus customary
fees and charges relating thereto.
DEFAULT
RATE: Should there be a default under the loan documentation, a
default rate of (a) two
13
<PAGE> 18
percent (2%) above the Prime Rate then in effect, with respect
to Prime Rate loans and any other amounts due under the loan
documentation, and (b) four percent (4%) above the applicable
LIBOR Fixed Rate then in effect, with respect to LIBOR loans,
will be imposed.
FEES: The following fees will be paid by the Borrower:
Commitment Fee: A commitment fee in the amount of one-half of
one percent (1/2%) per annum shall be charged on the unused
portion of the Facility.
Agent Fees: At the Closing, (i) an administrative agent fee in
the amount of $75,000 shall be paid to the Administrative Agent,
(ii) a co-agent fee of $450,000 ($150,000 to each of the
Co-Agents) shall be paid, and (iii) a collateral agent fee in
the amount of $50,000 shall be paid to the Collateral Agent.
Facility Fee: A facility fee of three-quarters of one percent
(3/4%) of the initial facility amount shall be payable at the
Closing on a ratable basis to the Banks.
REPRESENTATIONS
AND
WARRANTIES: The loan documentation will contain representations and
warranties usually found in the Co-Agents' loan agreements for
leveraged financings and others appropriate to the specific
transaction.
COVENANTS: The loan documentation will contain standard negative,
affirmative and financial covenants usually found in the
Co-Agents' loan agreements for leveraged financings including,
but not limited to, the following:
AFFIRMATIVE COVENANTS:
(a) comply with applicable laws, preserve corporate
existence and permit inspection of property, books and records
of the Borrower by the Co-Agents and each of the Banks;
14
<PAGE> 19
(b) maintain insurance naming the Collateral Agent additional
insured and/or loss payee with insurance companies or
associations acceptable to the Required Co-Agents in such
amounts and covering such risks as are acceptable to the
Required Co-Agents; and
(c) establish procedures for the collection and deposit of
the proceeds of Collateral. Such procedures will be maintained
under such terms and conditions as are customary in the
Collateral Agents' leveraged financings.
(d) the Borrower shall cooperate with Coopers & Lybrand in
its internal review of Borrower and its subsidiaries, verifying
the results of operations of the Borrower and the subsidiaries
through the Closing Date.
NEGATIVE COVENANTS:
(a) maintain financial viability as measured against
financial covenants (see the attached Annex II with respect to
the financial covenants).
(b) not incur or assume any additional debt or contingent
liabilities (or give any guaranties or any other obligations
having the effect of assuring the payment of debt) as further
outlined on Annex III hereto;
(c) not create or suffer to exist any liens or other
encumbrances or preferential arrangements on or with respect to
any of its property as further outlined on Annex IV hereto;
(d) not to make any loans to or investments in affiliates or
any other Person;
(e) not to enter into or modify existing contracts with
affiliates without the prior approval of the Required Co-Agents;
(f) not to make any significant change in accounting
treatment and reporting practices without the prior approval of
the Required Co- Agents;
(g) not enter into any transaction of, or engage in any,
merger, acquisition, dives-
15
<PAGE> 20
titure, sale of assets (other than in the ordinary course of
business), change of business or change of conduct of business
or creation of any new subsidiary; and
(h) not to make any dividend, distribution or mandatory
redemption payments.
FINANCIAL
REPORTING: 1. Monthly and quarterly financial statements and
covenant compliance reports within 45 days of each month
end and 45 days of each fiscal quarter end, respectively.
2. Annual audited financial statements within 90 days of
fiscal year end.
3. Weekly report of the unfunded lease portfolio by Tuesday
of the following week.
4. Rolling 90-day cash flow forecast updated weekly, including
comparisons of past actual cash flows with the forecast.
5. Within two (2) days after the last day of each month, a
monthly borrowing base certificate together with a
certificate signed by Borrower's Chairman, President, Chief
Financial Officer, Chief Accounting Officer or Treasurer
setting forth (in sufficient detail) the calculation of the
Borrowing Base Amount set forth in such Borrowing Base
Certificate.
6. Other reports as may be required.
EVENTS OF
DEFAULT: The loan documentation will include, without limitation,
the standard events of default usually found in the Co-Agents'
loan agreements for leveraged financings, including:
(a) the Borrower shall fail to pay any sum when due in
accordance with the loan documents;
(b) the Borrower or its subsidiaries shall fail to perform or
comply with any covenant in any of the loan documents;
16
<PAGE> 21
(c) any bankruptcy or similar proceeding shall be
instituted by or against any of the Borrower or its subsidiaries;
(d) any of the Borrower or its subsidiaries shall default
under any other financial obligation;
(e) there shall occur any material adverse change in the
financial condition or operations of any of the Borrower, its
subsidiaries as determined by the Required Co-Agents, in their
sole discretion, other than the Existing Adverse Conditions;
(f) any representations or warranties of any of the
Borrower or its subsidiaries in any loan document or any
certificate or financial information delivered pursuant
thereto shall be false in any material respect when made or
confirmed;
(g) any material judgment entered against any of the Borrower
or its subsidiaries shall remain unsatisfied; or
(h) any security document shall cease to be in full force and
effect.
EXPENSES: As an additional condition precedent to closing, on the Closing
Date all reasonable fees and out-of-pocket expenses of each of
the Co-Agents incurred in connection with (i) the preparation of
this term sheet and this commitment letter, (ii) the analysis
and due diligence undertaken with respect to the transactions
contemplated hereby, and (iii) the preparation, execution and
delivery of the loan documentation and transactions contemplated
thereby including all legal, appraisal, audit, insurance, search
fees, filing fees, counsel and local counsel fees and expenses
incurred by each of the Co-Agents and all other expenses, costs
and taxes relating to this financing, shall be paid by the
Borrower. The Borrower's obligations under this paragraph are
independent of all other obligations hereunder and shall survive
the termination or expiration hereof.
181\22567CBD.123
17
<PAGE> 22
Annex I
-------
To
--
Commitment Letter
-----------------
<TABLE>
<CAPTION>
Commitment
Period
Total Expiration
Commitment Percentage Date
---------- ---------- ----------
<S> <C> <C> <C>
NATIONAL CITY BANK $ 16,485,047 14.1700% 4/30/95
SOCIETY NATIONAL BANK $ 16,485,047 14.1700% 4/30/95
CONTINENTAL BANK N.A. $ 15,307,543 13.1579% 4/30/95
COMERICA BANK $ 13,188,038 11.3360% 4/30/95
FIRST UNION NATIONAL BANK OF NC $ 9,184,526 7.8947% 4/30/95
THE DAIWA BANK, LIMITED $ 6,594,018 5.6680% 4/30/95
THE FIFTH THIRD BANK $ 6,594,018 5.6680% 4/30/95
STAR BANK, N.A. $ 6,594,018 5.6680% 4/30/95
FIRST NATIONAL BANK OF OHIO $ 6,594,018 5.6680% 4/30/95
MICHIGAN NATIONAL BANK $ 6,594,018 5.6680% 4/30/95
THE BANK OF TOKYO TRUST COMPANY $ 6,594,018 5.6680% 4/30/95
FIRST BANK, N.A. $ 6,123,017 5.2632% 4/30/95
----------- --------
TOTAL $116,337,326 100.0000%
</TABLE>
181\22567CBD.123
<PAGE> 23
Annex II
--------
To
--
Commitment Letter
-----------------
Financial Covenants
-------------------
The Borrower will not suffer or permit:
(a) Consolidated Tangible Net Worth to be less than (i) Sixty-Seven Million
Dollars ($67,000,000) plus (ii) seventy-five percent (75%) 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 Borrower's Form 10-K or Form 10-Q for each such
Fiscal Quarter plus (iii) the net proceeds received by the Borrower from the
sale of any capital stock of the Borrower after January 31, 1994.
(b) 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.
(c) The ratio of (i) Income Available for Total Interest Expense to (ii)
total interest expense, to be less than 1.1 to 1.0, calculated as at the end of
(A) the Fiscal Quarter ending July 31, 1994 for the immediately preceding two
(2) Fiscal Quarters then ending, (B) the Fiscal Quarter ending October 31, 1994
for the immediately preceding three (3) Fiscal Quarters then ending, (C) the
Fiscal Quarter ending January 31, 1995 and each Fiscal Quarter thereafter, for
the immediately preceding four (4) Fiscal Quarters then ending.
(d) The ratio of (i) Income Available for Recourse Interest Expense to (ii)
total recourse interest expense, to be less than 1.35 to 1.0, calculated as at
the end of (A) the Fiscal Quarter ending July 31, 1994 for the immediately
preceding two (2) Fiscal Quarters then ending, (B) the Fiscal Quarter ending
October 31, 1994 for the immediately preceding three (3) Fiscal Quarters then
ending, (C) the Fiscal Quarter ending January 31, 1995 and each Fiscal Quarter
thereafter, for the immediately preceding four (4) Fiscal Quarters then ending.
(f) The ratio of (i) Residual Values of the Borrower and its subsidiaries
(calculated on a consolidated basis at the end of the Fiscal Quarter in
question) to (ii) (y) Consolidated Tangible Net Worth plus (z) the outstanding
principal amount of all Subordinated Debt (as at the end of the Fiscal Quarter
in question), to exceed 1.5 to 1.0.
(e) The ratio of (i) the sum of (w) Senior Recourse Debt at the end of each
Fiscal Quarter plus (x) indebtedness of the Borrower relating to the real
estate mortgage relating to the
<PAGE> 24
Borrower's Westlake, Ohio facility at the end of such Fiscal Quarter (to the
extent not included in the calculation of Senior Recourse Debt), to (ii) the
sum of (y) Consolidated Tangible Net worth as at the end of such Fiscal
Quarter plus (z) the outstanding principal amount of all Subordinated Debt as
at the end of such Fiscal Quarter, to exceed 3.0 to 1.0 as at the end of each
Fiscal Quarter.
"CONSOLIDATED NET EARNINGS" means, for any Fiscal Quarter of the Borrower,
the consolidated net after tax earnings, if any, of the Borrower and its
subsidiaries for such Fiscal Quarter; provided, however, 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).
"CONSOLIDATED TANGIBLE NET WORTH" means the excess of the net book value
(after deduction of all applicable reserves) of the assets (other than goodwill
and other intangible assets) of the Borrower and its subsidiaries over the
liabilities of the Borrower and its subsidiaries, determined on a consolidated
basis in accordance with GAAP.
"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 Liabilities, but not
including Non-Recourse Debt.
"GAAP" means generally accepted accounting principles applied on a basis
consistent with the financial statements delivered by Borrower to the Banks
prior to the date of this letter.
"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 Borrower 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 at the time
of such Hedging Transaction or (ii) the coupon rate of any Subordinated Debt
outstanding at the time of such Hedging Transaction.
"INCOME AVAILABLE FOR RECOURSE INTEREST EXPENSE" means the actual income,
before income taxes, of the Borrower and its subsidiaries on a consolidated
basis, for each Fiscal Quarter, plus the actual interest expense of the
Borrower and its subsidiaries deducted in computing such income, less the
amount of such interest expense which is payable with respect
<PAGE> 25
to Non-Recourse Debt for such Fiscal Quarter, plus restructuring charges
deducted in computing such income.
"INCOME AVAILABLE FOR TOTAL INTEREST EXPENSE" means the actual income, before
income taxes, of the Borrower and its subsidiaries on a consolidated basis, for
each Fiscal Quarter, plus the actual interest expense of the Borrower and its
subsidiaries deducted in computing such income, plus restructuring charges
deducted in computing such income.
"NET TOTAL UNHEDGED FUNDED DEBT" means all Funded Debt of the Borrower 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 Borrower 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 Borrower and/or its subsidiaries
for which neither the obligee nor any other Person has any legal recourse
against the Borrower or any of its subsidiaries, other than to certain
specified collateral which may have been pledged by the Borrower or its
subsidiaries in connection with the incurrence thereof.
"RESIDUAL VALUES" means the estimated net residual values, determined on a
consolidated basis, of leased equipment under capital leases and/or leveraged
leases of the Borrower and its subsidiaries plus the net book value of
equipment under operating leases of the Borrower and its subsidiaries, less the
minimum future rentals on non-cancelable operating leases of the Borrower and
its subsidiaries.
"SENIOR RECOURSE DEBT" means indebtedness of the Borrower minus Non-Recourse
Debt minus Subordinated Debt minus the long-term portion of deferred taxes of
the Borrower.
"SUBORDINATED DEBT" means the Borrower's 9-3/8% Convertible Subordinated
Notes due August 15, 2000 and any other indebtedness of the Borrower which has
been subordinated (by written terms or agreement being in form and substance
satisfactory to the Banks holding a majority of the debt or Commitments) in
favor of the prior payment in full of Borrower's indebtedness to the Banks.
"UNFUNDED FIXED RATE FUNDING COMMITMENTS" means the written recourse or
non-recourse lending commitments of third parties to the Borrower or any
subsidiary of the Borrower which state that they will bear interest at a fixed
rate and which have not been consummated at the date of determination.
181\22567CBD.123
<PAGE> 26
Annex III
---------
To
--
Commitment Letter
-----------------
Indebtedness
------------
The Borrower will not, and will not permit any of its subsidiaries to,
create, incur, assume or suffer to exist or otherwise become or be liable in
respect of any indebtedness, other than, without duplication, the following:
(a) indebtedness in respect of the loans made by the Banks;
(b) indebtedness existing as of the effective date of the loan
documentation; PROVIDED, HOWEVER, that all such indebtedness (other than such
as is included in the Intercreditor Agreement) shall be repaid in accordance
with its terms with no extension, renewal or other modification;
(c) unsecured indebtedness incurred in the ordinary course of business
(including open accounts extended by suppliers on normal trade terms in
connection with purchases of goods and services, but excluding indebtedness
incurred through the borrowing of money or contingent liabilities);
(d) Funded Debt incurred by the Borrower or any of its subsidiaries or any
of its partnerships or joint ventures after the date hereof, which
constitutes a purchase money obligation or a capital lease liability;
(e) Funded Debt incurred by the Borrower under credit facilities (whether
secured or unsecured) having amortization schedules acceptable to the
Required Co-Agents, in their reasonable discretion; PROVIDED, HOWEVER, that
Funded Debt incurred by Borrower under a secured credit facility shall be
permitted hereunder only if the creditor with respect to such Funded Debt is
or shall become a party to the Intercreditor Agreement;
(f) Subordinated Debt of the Borrower;
(g) any floor plan financing of the Borrower or its subsidiaries or any of
Borrower's or any of its subsidiaries' partnerships or joint ventures; and
(h) any Non-Recourse Debt of the Borrower or any of its subsidiaries or any
non-recourse indebtedness of any of Borrower's or any of its subsidiaries'
partnerships or joint ventures.
<PAGE> 27
Annex IV
--------
To
--
Commitment Letter
-----------------
Liens
-----
The Borrower will not, and will not permit any of its subsidiaries to,
create, incur, assume or suffer to exist any lien upon any of its property,
revenues or assets, whether now owned or hereafter acquired, except:
(a) liens in favor of any of the Banks, the Co-Agents and/or the Collateral
Agent granted in connection with the loan documentation;
(b) liens for taxes or claims which are not yet due or which are being
contested as permitted by the Required Co-Agents;
(c) liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of governmental
insurance or benefits, or to secure performance of tenders, statutory
obligations, leases and contracts (other than for borrowed money) entered
into in the ordinary course of business or to secure obligations on surety or
appeal bonds;
(d) liens on fixed assets securing purchase money obligations or capital
lease liabilities provided (i) the indebtedness secured by such liens does
not exceed ninety percent (90%) of the cost of assets acquired and (ii) such
liens do not encumber any property other than assets acquired subject
thereto;
(e) liens on leases (and related equipment) which have been discounted on a
non-recourse basis in the ordinary course of the business of the Borrower and
its subsidiaries;
(f) liens on equipment leases and related equipment leased thereunder
imposed in the ordinary course of business by vendors of such equipment to
secure the purchase price therefor, provided such liens are released within
sixty (60) days of the later of (i) date of invoice for such equipment or
(ii) the date on which installation of the subject equipment has occurred;
(g) liens securing Non-Recourse Debt issued with respect to any securitized
pool of assets but only to the extent that such liens do not encumber
<PAGE> 28
any assets other than those subject to the pooling arrangement in question;
(h) liens securing floor plan financing and only covering the inventory
being financed; and
(i) liens securing Funded Debt permitted as set forth in paragraph (e) on
Annex III hereto.
181\22567CBD.123
<PAGE> 1
DRAFT: 4/30/94
CREDIT AGREEMENT
dated as of May 2, 1994,
among
LDI CORPORATION,
as the Borrower,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
as the Banks,
and
NATIONAL CITY BANK, SOCIETY NATIONAL BANK
and CONTINENTAL BANK N.A.,
as the Co-Agents for the Banks
<PAGE> 2
TABLE OF CONTENTS
I. DEFINITIONS AND ACCOUNTING TERMS . . . . . . 2
1.1 Defined Terms . . . . . . . . . . . . 2
1.2 Use of Defined Terms . . . . . . . . . . 20
1.3 Cross-References . . . . . . . . . . . . 20
1.4 Accounting and Financial Determinations 20
II. AMOUNT AND TERMS OF CREDIT . . . . . . . . . 21
2.1 Loans . . . . . . . . . . . . . . . . . 21
2.2 Notice of Borrowing . . . . . . . . . 21
2.3 Interest . . . . . . . . . . . . . . . 22
2.4 Continuation and Conversion Elections . 23
2.5 Notes . . . . . . . . . . . . . . . . . 23
2.6 Termination or Reduction of Commitments 24
2.7 Mandatory Reduction in Commitments . . 24
2.8 Prepayment . . . . . . . . . . . . . . 24
2.9 Funding . . . . . . . . . . . . . . . . 25
2.10 Letters of Credit . . . . . . . . . . . 25
III. FEES . . . . . . . . . . . . . . . . . . . . 27
3.1 Unused Facility Fee . . . . . . . . . . 27
3.2 Agent Fees . . . . . . . . . . . . . . 27
3.3 Facility Fee . . . . . . . . . . . . . 27
IV. CERTAIN FIXED RATE AND OTHER PROVISIONS . . 27
4.1 LIBOR Rate Lending Unlawful . . . . . . 27
4.2 Deposits Unavailable . . . . . . . . . 28
4.3 Increased Fixed Rate Loan Costs, etc. . 28
4.4 Funding Losses . . . . . . . . . . . . 29
4.5 Increased Capital Costs . . . . . . . . 29
4.6 Taxes . . . . . . . . . . . . . . . . . 30
4.7 Payments, Computations, etc. . . . . . 31
4.8 Sharing of Payments . . . . . . . . . . 31
4.9 Setoff . . . . . . . . . . . . . . . . 32
4.10 Use of Proceeds . . . . . . . . . . . . 32
V. CONDITIONS TO BORROWING . . . . . . . . . . 33
5.1 Initial Borrowing . . . . . . . . . . . 33
5.2 All Borrowings . . . . . . . . . . . . 34
VI. REPRESENTATIONS AND WARRANTIES . . . . . . . 34
6.1 Organization, etc. . . . . . . . . . . 34
6.2 Due Authorization, Non-Contravention,etc. 35
6.3 Government Approval, Regulation, etc. . 35
6.4 Validity, etc. . . . . . . . . . . . . 35
6.5 Financial Information . . . . . . . . . 36
i
<PAGE> 3
6.6 No Material Adverse Change . . . . . 36
6.7 Litigation, Labor Controversies, etc. 36
6.8 Subsidiaries . . . . . . . . . . . . 36
6.9 Ownership of Properties . . . . . . . 36
6.10 Taxes . . . . . . . . . . . . . . . . 37
6.11 Pension and Welfare Plans . . . . . . 37
6.12 Environmental Warranty . . . . . . . 37
6.13 Regulations G, U and X . . . . . . . 37
6.14 Investment Company Act; Public
Utility Holding Company Act . . . 37
6.15 Solvency . . . . . . . . . . . . . . 38
6.16 No Default . . . . . . . . . . . . . 38
6.17 Adverse Contracts . . . . . . . . . . 38
6.18 Full Disclosure . . . . . . . . . . . 38
VII. COVENANTS . . . . . . . . . . . . . . . . . 39
7.1 Affirmative Covenants . . . . . . . . 39
7.1.1 Financial Information, Reports,
Notices, etc. . . . . . . . . . . 39
7.1.2 Compliance with Laws, etc. . . . . . 42
7.1.3 Maintenance of Properties . . . . . . 42
7.1.4 Insurance . . . . . . . . . . . . . . 42
7.1.5 Books and Records; Annual Review . . 42
7.1.6 Environmental Covenant . . . . . . . 43
7.1.7 Subsidiary Guaranties . . . . . . . . 44
7.1.8 Payment . . . . . . . . . . . . . . . 44
7.1.9 Payment of Taxes and Claims . . . . . 44
7.1.10 Retirement Plans . . . . . . . . . . 45
7.1.11 Deficiency . . . . . . . . . . . . . 45
7.2. Negative Covenants . . . . . . . . . 45
7.2.1 Business Activities . . . . . . . . . 45
7.2.2 Indebtedness . . . . . . . . . . . . 45
7.2.3 Liens . . . . . . . . . . . . . . . . 46
7.2.4 Financial Condition . . . . . . . . . 47
7.2.5 Investments . . . . . . . . . . . . . 48
7.2.6 Restricted Payments, etc. . . . . . . 48
7.2.7 Consolidation, Merger, etc. . . . . . 49
7.2.8 Asset Dispositions, etc. . . . . . . 49
7.2.9 Transactions with Affiliates . . . . 49
7.2.10 Subordination of Claims . . . . . . . 50
7.2.11 Credit Rating System . . . . . . . . 50
VIII. EVENTS OF DEFAULT . . . . . . . . . . . . . 50
8.1 Listing of Events of Default . . . . 50
8.1.1 Non-Payment of Obligations . . . . . 50
8.1.2 Breach of Warranty . . . . . . . . . 50
8.1.3 Non-Performance of Certain Covenants
and Obligations . . . . . . . . . 50
8.1.4 Non-Performance of Other Covenants
and Obligations . . . . . . . . . 50
8.1.5 Default on Other Indebtedness . . . . 51
8.1.6 Judgments . . . . . . . . . . . . . . 51
8.1.7 Pension Plans . . . . . . . . . . . . 51
ii
<PAGE> 4
8.1.8 Bankruptcy, Insolvency, etc., of
Borrower. . . . . . . . . . . . . 51
8.1.9 Bankruptcy, Insolvency, etc., of
Borrower's Subsidiaries . . . . . 52
8.1.10 Material Adverse Change . . . . . . . 52
8.2 Action if Bankruptcy of Borrower . . 52
8.3 Action if Other Event of Default . . 53
8.4 Deposits for Letters of Credit . . . 53
IX. THE CO-AGENTS . . . . . . . . . . . . . . . 54
9.1 Actions . . . . . . . . . . . . . . . 54
9.2 Funding Reliance, etc. . . . . . . . 55
9.3 Exculpation . . . . . . . . . . . . . 55
9.4 Successors . . . . . . . . . . . . . 55
9.5 Loans by Agent Banks . . . . . . . . 56
9.6 Credit Decisions . . . . . . . . . . 56
9.7 Copies, etc. . . . . . . . . . . . . 57
9.8 Note Holders . . . . . . . . . . . . 57
9.9 Knowledge of Default . . . . . . . . 57
9.10 Action by Agent . . . . . . . . . . . 58
9.11 Notices, Default, Etc. . . . . . . . 58
X. MISCELLANEOUS PROVISIONS . . . . . . . . . . 58
10.1 Waivers, Amendments, etc. . . . . . . 58
10.2 Notices . . . . . . . . . . . . . . . 59
10.3 Payment of Costs and Expenses . . . . 60
10.4 Indemnification . . . . . . . . . . . 60
10.5 Survival . . . . . . . . . . . . . . 61
10.6 Severability . . . . . . . . . . . . 61
10.7 Headings . . . . . . . . . . . . . . 62
10.8 Execution in Counterparts,
Effectiveness, etc. . . . . . . . 62
10.9 Governing Law; Entire Agreement . . . 62
10.10 Successors and Assigns . . . . . . . 63
10.11 Sale and Transfer of Loans and Note;
Participation in Loans and Note . 63
10.11.1Assignments . . . . . . . . . . . . . 63
10.11.2Participations . . . . . . . . . . . 65
10.12 Removal of Banks . . . . . . . . . . 65
10.13 Other Transactions . . . . . . . . . 66
10.14 Further Assurances . . . . . . . . . 66
10.15 Expiration of Commitment Period . . . 66
10.16 Waiver of Jury Trial . . . . . . . . 66
iii
<PAGE> 5
ANNEX A - COMMITMENTS
ANNEX B - FACILITY FEE
ANNEX C - WAIVER LETTERS
EXHIBIT A - Form of Note
EXHIBIT B - Form of Security Agreement
EXHIBIT C - Form of Borrowing Base Certificate
EXHIBIT D - Form of Bank Assignment Agreement
EXHIBIT E - Litigation
EXHIBIT F - Subsidiaries
EXHIBIT G - Existing Indebtedness
EXHIBIT H - Existing Investments
iv
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 2, 1994, among LDI
CORPORATION, a Delaware corporation (the "Borrower"), the various financial
institutions as are or may become parties hereto (collectively, the "Banks")
and NATIONAL CITY BANK ("NCB") and SOCIETY NATIONAL BANK ("Society") and
CONTINENTAL BANK N.A. ("Continental"), as Co-Agents for the Banks,
W I T N E S S E T H:
WHEREAS, the Borrower is primarily engaged in the business of
leasing, selling, maintaining, financing and providing technical and
business services related to data processing, communications, computer and
other capital equipment; and
WHEREAS, the Borrower, various financial institutions
("Existing Continental Banks") and Continental, as agent for the Existing
Continental Banks, are parties to a Credit Agreement, dated as of August 3,
1992, as heretofore amended ("Existing Continental Credit Agreement"),
pursuant to which the Existing Continental Banks made certain financial
accommodations to Borrower; and
WHEREAS, the Borrower, various financial institutions
("Existing NCB Banks"), and NCB and Society, as co-agents for the Existing
NCB Banks, are parties to an Amended and Restated Credit Agreement, dated
as of December 14, 1992, as heretofore amended ("Existing NCB Credit
Agreement"), pursuant to which the Existing NCB Banks made certain financial
accommodations to Borrower; and
WHEREAS, the Borrower desires to obtain Loans (as hereinafter
defined) from the Banks; and
WHEREAS, the Borrower desires to use the initial Loans hereunder to
pay in full all amounts outstanding under the Existing Continental Credit
Agreement and the Existing NCB Credit Agreement as of the Closing Date (as
hereinafter defined) (the "Repayment"); and
WHEREAS, the Banks are willing, on the terms and subject to the
conditions hereinafter set forth, to make such Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used for the Repayment
and for the general corporate purposes and working capital purposes of the
Borrower;
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
<PAGE> 7
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular and
plural forms thereof):
"Account Payable" means any money owed by the Borrower to others on
open account and not evidenced by a written contract or a note, instrument,
chattel paper or the like.
"Accrued Liabilities" means all indebtedness, obligations and
liabilities of any kind of the Borrower (including Contingent Liabilities)
other than Non-Recourse Debt, Subordinated Debt and the long-term portion of
deferred taxes of the Borrower.
"Adjusted LIBOR" means a rate per annum equal to the quotient obtained
(rounded upwards, if necessary, to the nearest one-sixteenth (1/16th) of one
percent (1%)) by dividing (a) the applicable LIBOR rate by (b)(i) one
(1.00) MINUS (ii) the LIBOR Reserve Percentage.
"Administrative Agent" means NCB.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility
for administering, any Plan). A Person shall be deemed "controlled by"
any other Person if such other Person possesses, directly or indirectly,
power to vote ten percent (10%) or more of the securities (on a fully
diluted basis) having ordinary voting power for the election of directors
or managing general partner of such Person, or to direct or cause the
direction of the management and policies of such Person, whether by
contract or otherwise.
"Agreement" means, on any date, this Credit Agreement as originally in
effect and as thereafter from time to time amended, supplemented, amended and
restated, or otherwise modified and in effect on such date.
"Aircraft Residual Reserve Amount" means an amount equal to Three
Million Dollars ($3,000,000) or such other amount as may be determined by
the Required Co- Agents, in their sole discretion, after review of
appraisals acceptable to the Required Co-Agents, in their sole discretion.
"Applicable Residual Percentage" means (a) ninety percent (90%) for the
period commencing on the Closing Date and ending on
2
<PAGE> 8
July 30, 1994, (b) eighty percent (80%) for the period commencing on July
31, 1994 and ending on October 30, 1994, (c) seventy percent (70%) for the
period commencing October 31, 1994 and ending on January 30, 1995, and (d)
sixty-five percent (65%) on January 31, 1995 and at all times thereafter.
"Assignee Bank" is defined in SECTION 10.11.1.
"At Risk Mortgage Obligation" means, with respect to (a) Indebtedness
of the Borrower and (b) Indebtedness guaranteed by the Borrower, which is
secured by a mortgage or a deed of trust on specific real property as at any
time, the extent to which the then outstanding amount of such Indebtedness
exceeds the fair market value of such real property, as determined by the
Required Co-Agents, in their sole discretion.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Administrative Agent and the Banks as of the Closing Date.
"Availability Deficiency" means the occurrence, as at any time, of a
condition in which (a) the sum of (i) the then aggregate outstanding
principal amount of all Loans PLUS (ii) the then aggregate face amounts of all
outstanding Letters of Credit exceeds (b) the then Total Commitment.
"Bank Assignment Agreement" means a Bank Assignment Agreement
substantially in the form of EXHIBIT D hereto.
"Banks" is defined in the PREAMBLE.
"Borrower" is defined in the PREAMBLE.
"Borrowing" means the Loans of the same Type and, in the case LIBOR
Loans, having the same Interest Period, made by all Banks on the same
Business Day and pursuant to the request of the Borrower in accordance with
SECTION 2.2.
"Borrowing Base Amount" means, as at any time, an amount equal
to the difference of (a) the then Total Borrowing Base Assets, MINUS (b)
the then Total Borrowing Base Liabilities.
"Borrowing Base Certificate" means a borrowing base certificate
substantially in the form of EXHIBIT C hereto.
"Borrowing Base Deficiency" means the occurrence, as at any time,
of a condition in which (a) the sum of (i) the then Total Borrowing Base
Liabilities PLUS (ii) the then aggregate outstanding principal amount of all
Loans PLUS (iii) the then aggregate face amounts of all outstanding Letters
of Credit, exceeds (b) the then Total Borrowing Base Assets.
3
<PAGE> 9
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed
in Cleveland, Ohio and
(b) relative to the making, continuing, conversion, prepayment
or repayment of any LIBOR Loans, any such banking business
day described in CLAUSE (A) above which is also a day on
which dealings in Dollars are carried on in the relevant
interbank eurodollar market applied to such LIBOR Loans.
"Capital Lease" means any arrangement for the leasing of personal
property which, in accordance with GAAP, is or should be accounted for as a
capital lease.
"Capital Lease Liabilities" means the aggregate amount of all
monetary obligations of the Borrower or any of its Subsidiaries under
Capital Leases, and, for purposes of this Agreement and each other Loan
Document, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP, and the stated maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Closing Date" means June 1, 1994.
"Co-Agents" means NCB, Society and Continental or any of them. Such
term also includes each other Person as shall have subsequently been
appointed as successor Co-Agent pursuant to Section 9.4.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Collateral Agent" means Continental, or such other Person as shall
have been appointed as successor Collateral Agent.
"Commitment" means the obligation hereunder of each Bank to make Loans
to the Borrower during such Bank's Commitment Period up to the amount set
opposite such Bank's name under the column headed "Commitment" as set forth
in ANNEX A (or such lesser amount as shall be determined pursuant to SECTIONS
2.6, 2.7 and 2.10).
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<PAGE> 10
"Commitment Period" means, with respect to any Bank, the period
from the Closing Date to the date set forth opposite such Bank's name under
the column headed "Commitment Period Expiration Date" on ANNEX A hereto, or
such other date as may from time to time be agreed upon by the Borrower
and such Bank and reflected in appropriate amendments to ANNEX A executed by
the Borrower and such Bank.
"Consolidated Net Earnings" means, for any Fiscal Quarter of the
Borrower, the consolidated net after tax earnings, if any, of the Borrower
and its Subsidiaries for such Fiscal Quarter; PROVIDED, HOWEVER, 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).
"Consolidated Tangible Net Worth" means the excess of the net book value
(after deduction of all applicable reserves) of the assets (other than
goodwill and other intangible assets) of the Borrower and its Subsidiaries
over the liabilities of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
"Continental" is defined in the introductory paragraph.
"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 kind or the indebtedness, obligations or any other 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.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or
businesses (whether or not incorporated) under common control which,
together with the Borrower, are treated as a single employer under Section
414(b) or 414(c) of the Code or Section 4001 of ERISA.
"Cumulative Consolidated Net Earnings" means, as of any date, the
excess, if any, of (a) the sum of (i) the amount of consolidated net after
tax earnings, if any, for each complete Fiscal Year of the Borrower ending
after January 31, 1994 plus (ii) the amount of consolidated net after tax
earnings, if any, for any
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<PAGE> 11
completed Fiscal Quarter(s) ending after the end of the most recently
completed Fiscal Year of the Borrower, LESS (b) the sum of (i) the amount of
consolidated net after tax loss, if any, for each complete Fiscal Year of the
Borrower ending after January 31, 1994, PLUS (ii) the amount of consolidated
net after tax loss, if any, for any completed Fiscal Quarter(s) ending
after the end of the most recently completed Fiscal Year of the Borrower,
determined on a cumulative basis.
"Debt" means the total liabilities of the Borrower and its
Subsidiaries as reflected on the consolidated financial statements of the
Borrower.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event
of Default.
"Deficiency" means (collectively or individually) an Availability
Deficiency and a Borrowing Base Deficiency.
"Dollar" and the sign "$" mean lawful money of the United States.
"Eligible Capital Lease Residual Value" means, to the extent deemed
to be eligible by the Required Co-Agents, in their sole discretion, based on
such credit and/or collateral considerations as they deem appropriate, the
estimated residual value (net of unearned income) of the equipment which is
the subject of a Capital Lease or a direct finance lease between the
Borrower, as lessor, and any Person, as lessee, discounted at the lease rate
under such lease.
"Eligible Inventory" means Inventory which the Required Co-Agents, in
their sole discretion, deem Eligible Inventory, based on such credit and
collateral considerations as they deem appropriate. Without limitation on
the foregoing, Inventory meeting all of the following requirements shall
be deemed Eligible Inventory: (i) it is in first class condition, (ii) it
is owned by the Borrower and is not subject to any Lien other than the Lien
created pursuant to the Security Agreement, (iii) it has not been held for
sale or lease by the Borrower for a period of more than one hundred twenty
(120) days (other than Extended Eligible Committed Inventory), (iv) it is
located in the United States, (v) it is located on premises owned by the
Borrower, unless the owner and/or operator of any leased premises of the
Borrower or warehouse where Inventory is located shall have executed
and delivered to the Collateral Agent a landlord, warehouseman or other
similar waiver in form and substance satisfactory to the Collateral Agent, in
its sole discretion, (vi) it is not subject to any trademark, trade name or
licensing arrangement, or any law, rule or regulation that could limit or
impair the ability of the Collateral Agent or any of the Banks to promptly
exercise any of their respective rights with respect thereto, (vii) it is
covered by the insurance required
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<PAGE> 12
under Section 10 of the Security Agreement, (viii) it is not in transit,
(ix) it does not consist of general supplies or maintenance supplies,
or cartons and packaging, (x) it is deemed to be Eligible Inventory by the
Required Co-Agents, in their sole discretion, based on any other credit
and/or collateral considerations as they deem appropriate. Any Inventory
which is at any time Eligible Inventory, but which subsequently fails to
meet any of the foregoing requirements or which the Required Co-Agents, in
their sole discretion, otherwise deem ineligible, shall forthwith cease to
be Eligible Inventory.
"Eligible Lease Receivable" means a Receivable of the Borrower arising out
of a lease of goods which meets each of the following requirements: (i) the
goods which are the subject of the underlying lease have been shipped or
delivered to, and accepted by, the applicable lessee, (ii) it arises out of a
non-cancellable lease of goods which is a valid, legally enforceable
obligation of the lessee thereunder, is in full force and effect, and under
which there exists no event of default or event which might mature into an
event of default, (iii) it is not subject to any offset, counterclaim or
other defense on the part of such lessee or to any claim on the part of such
lessee denying liability thereunder in whole or in part, (iv) it is not
arising from any lease of goods to officers or employees of the Borrower or
to any Affiliate of Borrower, (v) it is not subject to any Lien other than the
Lien created pursuant to the Security Agreement, (vi) it is not in dispute,
(vii) the lessee has not filed or had filed against it a petition in
bankruptcy or for reorganization, made an assignment for the benefit of
creditors, or has not failed, suspended business operations, become
insolvent or had or suffered a receiver or a trustee to be appointed for a
significant portion of its assets or affairs, (viii) the underlying
lease of goods is between the Borrower and a lessee located in the United
States, (ix) the lessee is not the federal or any state government or any
agency or department thereof, unless with respect to such Receivable the
Assignment of Claims Act or comparable state statute or regulation has
been complied with, (x) the underlying lease with respect to such Receivable
does not contain a prohibition of assignment of such Receivable, (xi) the
Receivable is not subject to dispute by the lessee, (xii) the lessee is not
located in New Jersey, unless the Borrower shall have properly qualified to
do business in New Jersey or shall have filed a Notice of Business Activities
Report with the New Jersey Division of Taxation for the then current year,
(xiii) the lessee is not located in Minnesota, unless the Borrower shall
have properly qualified to do business in Minnesota or shall have filed a
Notice of Business Activities Report with the Minnesota Division of Taxation
for the then current year, or (xiv) the Required Co-Agents, in their
sole discretion, believe that the collection of such Receivable is secure, or
deem such Receivable to be an Eligible Lease Receivable based on such
other credit and/or collateral considerations as they deem appropriate.
A Receivable which is at any time an Eligible Lease Receivable, but which
subsequently fails to meet any of the foregoing requirements or
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<PAGE> 13
which the Required Co-Agents, in their sole discretion, otherwise deem
ineligible, shall forthwith cease to be an Eligible Receivable.
"Eligible Operating Lease Residual Value" means, to the extent deemed
to be eligible by the Required Co-Agents, in their sole discretion, based on
such credit and/or collateral considerations as they deem appropriate, the net
book value of the equipment which is the subject of an operating lease
between the Borrower, as lessor, and any Person, as lessee, as at the
termination of such operating lease.
"Eligible Receivable" means a Receivable of the Borrower (other
than a Receivable arising from a lease of goods included in the definition
of "ELIGIBLE LEASE RECEIVABLE" for purposes of calculating the Total Borrowing
Base Assets) which meets each of the following requirements: (i) (a) if it
arises from the sale or lease of goods, such goods have been shipped or
delivered to, and accepted by, the applicable account debtor, and (b) if it
arises from the rendering of services, bona fide services have been
performed, (ii) it is a valid, legally enforceable obligation of the
account debtor thereunder, and is not subject to any offset, counterclaim
or other defense on the part of such account debtor or to any claim on the
part of such account debtor denying liability thereunder in whole or in
part, (iii) it is not subject to any Lien other than the Lien created
pursuant to the Security Agreement, (iv) it is evidenced by an invoice
(dated not later than fourteen (14) days following the date of shipment or
performance and having payment terms acceptable to the Required Co-Agents,
in their sole discretion) rendered to such account debtor, (v) it is not
evidenced by any instrument or chattel paper, (vi) it does not arise from
the sale or lease of goods to officers or employees of the Borrower or to
any Affiliate of the Borrower, (vii) it is not in dispute, (viii) it is
not more than ninety (90) days from the date of invoice thereof, (ix)
the account debtor has not filed or had filed against it a petition
in bankruptcy or for reorganization, made an assignment for the benefit of
creditors, or has not failed, suspended business operations, become
insolvent or had or suffered a receiver or a trustee to be appointed for a
significant portion of its assets or affairs, (x) the account debtor is not
also a supplier to or creditor of Borrower, (xi) the sale or lease is to an
account debtor located in the United States, (xii) the account debtor is
not the federal or any state government or any agency or department thereof,
unless with respect to such Receivable the Assignment of Claims Act or
comparable state statute or regulation has been complied with, (xiii) it
does not consist of finance charges, interest on delinquent accounts,
proceeds of consigned Inventory, employee or officer Receivables, service
charges, or debit memoranda, (xiv) it does not arise from a contract
which contains a prohibition of assignment thereof, (xv) it is not generated
by a sale on approval, a bill and hold sale, a sale on consignment, or other
type of conditional sale, (xvi) the account debtor is not located in New
Jersey, unless the Borrower
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<PAGE> 14
shall have properly qualified to do business in New Jersey or shall have
filed a Notice of Business Activities Report with the New Jersey Division of
Taxation for the then current year, (xvii) the account debtor is not located
in Minnesota, unless Borrower shall have properly qualified to do business
in Minnesota or shall have filed a Notice of Business Activities Report with
the Minnesota Division of Taxation for the then current year, (xviii) it is
not subject to progress billing, (xix) the account debtor has not sold or is
not in the process of selling substantially all of its assets, (xx) the
Required Co-Agents, in their sole discretion, believe that the collection of
such Receivable is secure, or deem such Receivable to be an Eligible
Receivable based on such other credit and/or collateral considerations as
they deem appropriate. A Receivable which is at any time an Eligible
Receivable, but which subsequently fails to meet any of the foregoing
requirements or which the Required Co-Agents, in their sole discretion,
otherwise deem ineligible, shall forthwith cease to be an Eligible
Receivable.
"Eligible Residual Value Amount" means, as at any time, an amount equal
to the sum of (a) the aggregate Eligible Operating Lease Residual Value of
the equipment under all operating leases between the Borrower, as lessor,
and any Person, as lessee, existing at such time, PLUS (b) the
aggregate Eligible Capital Lease Residual Value of the equipment under all
Capital Leases and direct finance leases between the Borrower, as lessor,
and any Person, as lessee, existing at such time, PLUS (c) the lesser of (i)
the dollar amount of the Borrower's equity interest in Picker Financial
Group, or (ii) Two Million Dollars ($2,000,000). The aggregate Eligible
Capital Lease Residual Value of aircraft under all Capital Leases and
direct finance leases for the lease of such aircraft between the
Borrower, as lessor, and any Person, as lessee, shall be included in this
definition only if such aggregate Eligible Capital Lease Residual Value
is supported by appraisals acceptable to the Required Co-Agents, in their
sole discretion.
"Eligible Unbilled Five (5) Through Nine (9) Lease Receivables" means,
as at any time, the aggregate amount of Eligible Lease Receivables arising
under Five (5) Through Nine (9) Leases, discounted at the lease rates
thereunder.
"Eligible Unbilled One (1) Through Four (4) Lease Receivables" means, as
at any time, the aggregate amount of Eligible Lease Receivables arising
under One (1) Through Four (4) Leases, discounted at the lease rates
thereunder.
"Eligible Uncommitted Inventory" means, as at any date, Eligible
Inventory existing on such date which (i) is in the Borrower's possession
and owned by the Borrower, (ii) is not subject to a written and binding
agreement between the Borrower and a Person to lease or sell such Eligible
Inventory to such Person, and (iii) has not been held for sale or lease by the
Borrower for a period of more than one hundred twenty (120) days.
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<PAGE> 15
"Existing Adverse Conditions" means the defaults specifically waived
by the Banks under those certain waiver letters attached hereto as
ANNEX C and the financial loss experienced by LDI for LDI's first fiscal
quarter of 1994 as set forth in that certain ______________________________
[INSERT THE NAME OF THE REPORT DELIVERED TO THE BANKS ON APRIL 16, 1994]
"Extended Eligible Committed Inventory" means, as at any date,
Eligible Inventory existing on such date which (i) is in the Borrower's
possession, and (ii) is subject to a written and binding agreement between the
Borrower and a Person to lease or sell such Eligible Inventory to such
Person, which agreement contemplates delivery of such Eligible Inventory
to such Person more than one hundred twenty (120) days after the date of
such agreement.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public
health and safety and protection of, or the regulation of the
discharge of substances into, the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in SECTION 8.1.
"Expiration Date" means January 31, 1995, or such other date as may
from time to time be agreed upon by the Borrower and the Banks.
"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.
"Five (5) Through Nine (9) Leases" mean leases of the Borrower rated
five (5), six (6), seven (7), eight (8) or nine (9) under the Borrower's
credit rating system as in effect on January 31, 1994, a written copy of
which credit rating system has been delivered to the Co-Agents prior to the
Closing Date (including any such leases held in the "holding tank" as
determined by the Administrative Agent, in its sole discretion).
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"Funded Debt" means any obligation for borrowed money or for the
acquisition of property or assets including guaranties,
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<PAGE> 16
endorsements (other than endorsements of negotiable instruments for
collection or deposit in the ordinary course of business) and other
Contingent Liabilities, but not including Non-Recourse Debt.
"GAAP" is defined in SECTION 1.4.
"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 Borrower 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 at the time of such Hedging Transaction or (ii) the
coupon rate of any Subordinated Indebtedness outstanding at the time of
such Hedging Transaction.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or
such other Loan Document, as the case may be, as a whole and not to
any particular Section, paragraph or provision of this Agreement or such other
Loan Document.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of the Borrower, any qualification or exception to such opinion or
certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item
such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of
which would be to cause the Borrower to be in default of any of
its obligations under SECTION 7.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and
each other Loan Document, the parties hereto agree that the rule of
EJUSDEM GENERIS shall not be applicable to limit a general statement, which
is followed by or referable to an enumeration of specific matters, to
matters similar to the matters specifically mentioned.
"Income Available for Recourse Interest Expense" means the actual
income, before income taxes, of the Borrower and its Subsidiaries on a
consolidated basis, for each Fiscal Quarter, PLUS
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<PAGE> 17
the actual interest expense of the Borrower and its Subsidiaries
deducted in computing such income, 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 income.
"Income Available for Total Interest Expense" means the actual income,
before income taxes, of the Borrower and its Subsidiaries on a consolidated
basis, for each Fiscal Quarter, PLUS the actual interest expense of
the Borrower and its Subsidiaries deducted in computing such income, PLUS
Restructuring Charges deducted in computing such income.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which are,
in accordance with GAAP, recorded as Capital Lease Liabilities;
(d) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such Person
as of the date at which Indebtedness is to be determined;
(e) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest
thereon) secured by a Lien on property owned or being purchased by such
Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have
been assumed by such Person or is limited in recourse; and
(f) all Contingent Liabilities of such Person in respect of any of
the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer, to the extent any such
Indebtedness is recourse to such Person.
"Indemnified Liabilities" is defined in SECTION 10.4.
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<PAGE> 18
"Indemnified Parties" is defined in Section 10.4.
"Intercreditor Agreement" means an Intercreditor Agreement entered into
by the Banks and certain senior debt lenders of the Borrower in form
and substance satisfactory to the Banks.[___***]
"Interest Adjustment Date" means the last day of each Interest Period.
"Interest Period" means, relative to any LIBOR Loan, the period
beginning on (and including) the date on which such LIBOR Loan is made
or continued as, or converted into, a LIBOR Loan pursuant to SECTION 2.2
or 2.4 and ending on (but excluding) the day which numerically corresponds
to such date one (1), two (2) or three (3) months thereafter (or, if such
month has no numerically corresponding day, on the last Business Day of such
month), as the Borrower may select in its relevant notice pursuant to SECTION
2.2 or 2.4; PROVIDED, HOWEVER, that
(a) if such Interest Period would be affected by a reduction
in or termination of a Commitment as provided in SECTION 2.6 hereof, or
prepayment or conversion or continuation rights under SECTION 2.8
and SECTION 2.4, respectively, such period shall be shortened to end on
such date;
(b) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next
following Business Day, unless such next following Business Day is the
first Business Day of a calendar month, in which case such Interest
Period shall end on the Business Day next preceding such numerically
corresponding day; and
(c) no Interest Period with respect to any Bank may extend
beyond the last day of such Bank's Commitment Period.
"Interest Rate Determination Date" is defined in the definition of "LIBOR."
"Inventory" has the meaning given to such term in the Security Agreement.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business); and
(b) any ownership or similar interest held or other investment by
such Person in any other Person.
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<PAGE> 19
"Letter of Credit" means any commercial or standby letter of credit
issued by the Administrative Agent at the request of the Borrower pursuant to
SECTION 2.10.
"LIBOR" means the rate of interest determined by the Administrative
Agent (rounded upward to the nearest one-sixteenth (1/16th) of one percent
(1%)) at which deposits in Dollars for the relevant Interest Period are
offered based on information presented on the Telerate Screen as of 11:00
A.M. (London time) on the day which is two (2) Business Days prior to the
first day of such Interest Period ("Interest Rate Determination Date");
PROVIDED, HOWEVER, that if at least two (2) such offered rates appear on
the Telerate Screen in respect of such Interest Period, the arithmetic
mean of all such rates (as determined by the Administrative Agent) will be
the rate used; and PROVIDED, FURTHER that if Telerate ceases to provide
LIBOR quotations, such rate shall be the average rate of interest determined
by the Administrative Agent at which deposits in Dollars are offered
for the relevant LIBOR Interest Period by the Administrative Agent (or its
successor).
"LIBOR Fixed Rate" means a rate per annum equal to the sum of Adjusted
LIBOR PLUS two and one-half percent (2.5%) per annum.
"LIBOR Loan" means a Loan bearing interest, at all times during a
Interest Period applicable to such Loan, at a fixed rate determined by
reference to the LIBOR Fixed Rate.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBOR Loans, the reserve percentage (expressed as a decimal) equal to
the maximum aggregate reserve requirements (including all basic,
emergency, supplemental, marginal and other reserves and taking into account
any transitional adjustments or other scheduled changes in reserve
requirements) specified under regulations issued from time to time by the
F.R.S. Board and then applicable to assets or liabilities consisting of and
including "Eurocurrency Liabilities", as currently defined in Regulation D
issued by the F.R.S. Board, having a term approximately equal or
comparable to such Interest Period.
"Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory
or otherwise), charge against or interest in property to secure payment of
a debt or performance of an obligation or other priority or preferential
arrangement of any kind or nature whatsoever.
"Loans" means Prime Rate Loans and LIBOR Loans.
"Loan Documents" means this Agreement, the Notes, the Subsidiary
Guaranties, the Security Agreement and all Letter of Credit
applications or agreements. [_____***]
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<PAGE> 20
"Mandatory Reduction Date" means July 31, 1994, October 31, 1994 and
January 31, 1995.
"NCB" is defined in the INTRODUCTORY PARAGRAPH.
"Net Total Unhedged Funded Debt" means all Funded Debt of the Borrower
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
Borrower 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 Borrower and/or its
Subsidiaries for which neither the obligee nor any other Person has any
legal recourse against the Borrower or any of its Subsidiaries, other than
to certain specified collateral which may have been pledged by the Borrower
or its Subsidiaries in connection with the incurrence thereof.
"Note" means a promissory note of the Borrower payable to any Bank, in
the form of EXHIBIT A hereto (as such promissory note may be amended,
endorsed or otherwise modified from time to time), evidencing the aggregate
Indebtedness of the Borrower to such Bank resulting from outstanding Loans,
and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor to the Administrative Agent, the Co-Agents
and/or the Banks arising under or in connection with this Agreement, the
Notes and each other Loan Document.
"Obligor" means the Borrower, each Subsidiary Guarantor or any other
Person (other than the Administrative Agent, either Co-Agent or any Bank)
obligated under any Loan Document.
"One (1) Through Four (4) Leases" mean leases of the Borrower rated
one (1), two (2), three (3) or four (4) under the Borrower's credit rating
system as in effect on January 31, 1994, a written copy of which credit
rating system has been delivered to the Co-Agents prior to the Closing Date
(including any such leases held in the "holding tank" as determined by the
Administrative Agent, in its reasonable discretion).
"Organic Documents" means, relative to any Obligor, its certificate or
articles of incorporation, its by-laws or code of regulations and all
shareholder agreements, voting trusts and similar arrangements applicable to
any of its authorized shares of capital stock.
"Participant" is defined in SECTION 10.11.2.
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<PAGE> 21
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension Plan", as such term is defined in
section 3(2) or ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to
which the Borrower or any corporation, trade or business that is, along
with the Borrower, a member of a Controlled Group, may have liability,
including any liability by reason of having been a substantial employer
within the meaning of section 4063 of ERISA at any time during the preceding
five (5) years, or by reason of being deemed to be a contributing
sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Bank, the percentage set
opposite such Bank's name under the column headed "Percentage" on ANNEX A or
set forth in the Bank Assignment Agreement, as such percentage may be adjusted
from time to time pursuant to Bank Assignment Agreement(s) executed by such
Bank and its Assignee Bank(s) and delivered pursuant to SECTION 10.11.1.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Prime Rate" means the rate of interest which the Bank then
acting as Administrative Agent hereunder announces from time to time as its
prime rate; such Bank may charge interest at rates at, above or below the
Prime Rate. Any change in the Prime Rate shall be effective hereunder
immediately from and after the effective date of change in such rate by such
Bank.
"Prime Rate Loan" means a Loan described in SECTION 2.1 on which the
Borrower shall pay interest at a rate based on the Prime Rate.
"Purchase Money Obligation" means indebtedness incurred in connection
with the acquisition of property, which indebtedness is secured by
security interests or mortgages on the property so acquired.
"Quarterly Mandatory Prepayment" is defined in SECTION 2.7.
"Receivables" has the meaning given to such term in the Security Agreement.
"Recourse Debt" means all Debt of the Borrower and its Subsidiaries
other than (i) Non-Recourse Debt of the Borrower and its Subsidiaries and
(ii) noncurrent, deferred taxes of the Borrower and its Subsidiaries,
determined on a consolidated basis.
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"Recourse Interest Expense" means the total interest expense of the
Borrower and its Subsidiaries MINUS the interest expense attributable to
Non-Recourse Debt, determined on a consolidated basis.
"Regular Eligible Committed Inventory" means, as at any date,
Eligible Inventory existing on such date which (i) is in the Borrower's
possession, (ii) is subject to a written and binding agreement between the
Borrower and a Person to (a) lease such Eligible Inventory to such Person,
the term of which is scheduled to commence within ninety (90) days after
such date, or (b) sell such Eligible Inventory to such Person, and (iii)
has not been held for sale or lease by the Borrower for a period of more
than one hundred twenty (120) days.
"Release" means a "release", as such term is defined in CERCLA.
"Required Banks" means, at any time, Banks holding at least fifty-one
percent (51%) of the then aggregate amount of the Commitments, or, if the
Commitments shall have been terminated, holding Notes evidencing at least
fifty-one percent (51%) of the then aggregate outstanding principal amount of
the Loans.
"Required Co-Agents" means, as at any time, any two (2) Co-Agents, if
there shall be three (3) Co-Agents existing at such time, or the number
of Co-Agents existing at such time, if there shall be less then three (3)
Co-Agents existing at such time.
"Reserve Amount" means an amount determined by the Required Co-Agents, in
their sole discretion, as a reserve against collateral values and potential or
anticipated obligations of the Borrower, including, without limitation, (i)
tax liabilities and other obligations owing to governmental entities, (ii)
litigation liabilities, (iii) the anticipated costs and expenses relating to
the liquidation of collateral, (iv) unpaid sales taxes, (v) those reserve
amounts as required to be held as reserves under GAAP, (vi) liabilities
and other obligations owing by the Borrower to any lessor of real property
leased by the Borrower or to any warehouseman, and (vii) the Aircraft Residual
Reserve Amount. Subject to the last sentence of this definition of "Reserve
Amount," in the event that any Eligible Capital Lease Residual Value for
aircraft is at any time included in the calculation of Total Borrowing Base
Assets, the Reserve Amount shall include the Aircraft Residual Reserve
Amount. Upon delivery of appraisals acceptable to the Required
Co-Agents, in their sole discretion, the Required Co-Agents may, in their
sole discretion, either (a) exclude the Aircraft Residual Reserve Amount
from the Reserve Amount, or (b) increase or reduce the Aircraft Residual
Reserve Amount to be included in the Reserve Amount.
"Residual Values" means the estimated net residual values, determined
on a consolidated basis, of leased equipment under
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capital leases and/or leveraged leases of the Borrower and its Subsidiaries
PLUS the net book value of equipment under operating leases of the
Borrower and its Subsidiaries, less the minimum future rentals on
non-cancelable operating leases of the Borrower and its Subsidiaries.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690, ET SEQ., as in effect
from time to time.
"Restricted Payments" means any payment in cash, property or other
assets upon or in respect of any shares of any class of capital stock
including, without limitation, payments as dividends and payments for
the purpose of redeeming, purchasing, or otherwise acquiring any shares
of any class of its capital stock (except to the extent such redemptions,
repurchases or reacquisitions are offset by the proceeds of any sales of
stock made after the date hereof), or making any other distribution in
respect of any such shares of stock; including in the term "stock" any
warrant or option or other right to purchase such stock; PROVIDED, HOWEVER,
that Restricted Payments shall not include any distribution which may be
payable solely in common stock of the corporation making the distribution.
"Restructuring Charges" mean __________.[_____***]
"Security Agreement" means the Security Agreement executed by the
Borrower in favor of the Collateral Agent, attached hereto as Exhibit B,
as such Security Agreement may be amended, supplemented, restated or
otherwise modified from time to time.
"Senior Recourse Debt" means Indebtedness of the Borrower minus
Non-Recourse Debt minus Subordinated Debt MINUS the long-term portion of
deferred taxes of the Borrower.
"Subordinated Debt" means the Borrower's 9-3/8% Convertible Subordinated
Notes due August 15, 2000 and any other indebtedness of the Borrower
which has been subordinated (by written terms or agreement being in form and
substance satisfactory to the Required Banks) in favor of the prior
payment in full of Borrower's indebtedness to the Banks (it being
understood that the Borrower will notify each Bank and the Administrative
Agent promptly of any other such proposed subordinated indebtedness and that
if the Required Banks do not indicate to the Borrower within fourteen (14)
days after receipt by the Banks and the Administrative Agent of all
information from the Borrower requested by the Administrative Agent or
any Bank pertaining to such subordinated indebtedness, that the subordinated
indebtedness is not in form and substance satisfactory to the Required Banks,
the form and substance of such subordinated indebtedness shall be deemed
acceptable to the Required Banks).
"Society" is defined in the INTRODUCTORY PARAGRAPH.
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"Subsidiary" means, with respect to any Person, any corporation of
which more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether at the time capital stock of
any other class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency) is at the time directly or
indirectly owned by such Person, by such Person and one or more other
Subsidiaries of such Person, or by one or more other Subsidiaries of such
Person.
"Subsidiary Guarantor" means each Subsidiary of the Borrower other than:
(a) LDI Lease Funding Corporation, a Delaware corporation, and LDI
Realty Corp., an Ohio corporation;
(b) any Subsidiary in which the Borrower has not made aggregate
Investments in excess of ten percent (10%) of Borrower's Consolidated
Tangible Net Worth; or
(c) any Subsidiary formed solely for the purpose of issuing Non-
Recourse Debt in connection with asset securitization or similar funding
programs.
"Subsidiary Guaranty" means any guaranty of the Obligations heretofore
executed and delivered by a Subsidiary of the Borrower, or pursuant to SECTION
7.1.7 of this Agreement, in form and substance acceptable to the Required
Co-Agents, in their sole discretion, as such guaranty may be amended,
supplemented, restated or otherwise modified form time to time.
"Taxes" is defined in SECTION 4.6.
"Telerate Screen" means the display designated as Screen 3750 on the
Telerate System or such other screen on the Telerate System as shall
display the London interbank offered rates for deposits in U.S. Dollars quoted
by selected banks.
"Total Borrowing Base Assets" means, as at any time, an amount equal
to (a) seventy-five percent (75%) of the value of the Borrower's Regular
Eligible Committed Inventory, PLUS (b) the lesser of (i) seventy-five percent
(75%) of the value of the Borrower's Extended Eligible Committed Inventory,
or (ii) Two Million Dollars ($2,000,000), PLUS (c) fifty percent (50%) of
the value of the Borrower's Eligible Uncommitted Inventory, PLUS (d) eighty
percent (80%) of the net amount of the Borrower's Eligible Receivables,
PLUS (e) ninety-five percent (95%) of the net amount of the Borrower's
Eligible Unbilled One (1) Through Four (4) Lease Receivables, PLUS (f)
the lesser of (i) fifty percent (50%) of the net amount of the Borrower's
Eligible Unbilled Five (5) Through Nine (9) Lease Receivables, or (ii) Five
Million Dollars ($5,000,000), PLUS (g) the Applicable Residual Percentage
then in
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effect of the then Eligible Residual Value Amount. The Regular Eligible
Committed Inventory, the Extended Eligible Committed Inventory and the
Eligible Uncommitted Inventory will be valued at the lower of cost or
market value, determined in accordance with the Borrower's usual cost
accounting system, consistently applied.
"Total Borrowing Base Liabilities" means, as at any time, an amount
equal to (a) Accrued Liabilities, PLUS (b) the sum of all of the then
existing At Risk Mortgage Obligations (without any offset (e.g., an At Risk
Mortgage Obligation with respect to the Borrower's Westlake, Ohio facility
cannot be offset against an At Risk Mortgage Obligation with respect to
the Borrower's Oakwood, Ohio facility)), PLUS (c) any Reserve Amount then in
effect.
"Total Commitment" means, as at any date, the aggregate amount
of the Commitments existing on such date (taking into account all
reductions in such Commitments occurring on or prior to such date in
accordance with the terms of this Agreement).
"Total Interest Expense" means ____________________.
"Total Recourse Interest Expense" means _________________.
"Type" when used in respect of any Loan or Borrowing, shall refer to
the rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined.
"Unfunded Fixed Rate Funding Commitments" means the written recourse or
non- recourse lending commitments of third parties to the Borrower or any
Subsidiary of the Borrower which state that they will bear interest at a fixed
rate and which have not been consummated at the date of determination.
"United States" or "U.S." means the United States of America, its fifty
(50) States and the District of Columbia.
"Unused Facility Amount" means, for any period, the average daily
amount for such period by which:
(a) the Total Commitment on each day during such period
EXCEEDS
(b) an amount equal to (i) the sum of the aggregate outstanding
principal amount of all Loans on each day during such period
PLUS (ii) the sum of the aggregate face amounts of all
outstanding Letters of Credit on each day during such period.
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
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SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each Note, Loan
Document, notice and other communication delivered from time to time in
connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section
are references to such Article or Section of this Agreement or such other
Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references
to such clause of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Where the
character or amount of any asset or liability or item of income or expense
is required to be determined, or any accounting computation is required to be
made, for the purpose of this Agreement, such determination or calculation
shall, to the extent applicable and except as otherwise specified in this
Agreement, be made in accordance with Generally Accepted Accounting
Principles ("GAAP") applied on a basis consistent with the financial statements
referred to in SECTION 6.5
ARTICLE II
AMOUNT AND TERMS OF CREDIT
SECTION 2.1. Loans. Subject to the terms and conditions of, and relying
upon the representations and warranties set forth in, this Agreement, during
such Bank's Commitment Period, each Bank agrees, severally and not jointly, to
make Loans to the Borrower at such times as the Borrower may from time to
time request in amounts not in excess of the lesser of (a) the Commitment
of such Bank, as the same may be reduced from time to time pursuant to
SECTIONS 2.6 and 2.7, or (b) such Bank's PRO RATA share (based on its
Percentage) of the Borrowing Base Amount then in effect; PROVIDED, HOWEVER,
that no such Bank shall be permitted or required to make a Loan if, after
giving effect thereto, (c) a Deficiency has occurred or will occur, (d)
such Loan would cause the amount of (i) the then outstanding principal amount
of all Loans made by such Bank PLUS (ii) such Bank's PRO RATA share
(based on its Percentage) of the aggregate face amounts of all outstanding
Letters of Credit, to exceed the Commitment of such Bank, as the same may
be reduced from time to time pursuant to SECTION 2.6 and 2.7, or (e) a
Default or an Event of Default has occurred or will occur. Subject to the
provisions of this Agreement, the Borrower may borrow, pay, prepay in whole
or in part and reborrow hereunder from time to time until the Expiration
Date. Each Loan shall be made as part of a Borrowing consisting of
Loans made by the Banks ratably according to their respective
Percentages; PROVIDED, HOWEVER, that the
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failure of any Bank to make any Loan shall not in itself relieve any other
Bank of its obligation to lend hereunder (it being understood, however, that
no Bank shall be responsible for the failure of any other Bank to make any
Loan required to be made by such other Bank). Each Borrowing consisting of
Prime Rate Loans shall be in an aggregate principal amount of One Million
Dollars ($1,000,000) or any larger integral multiple of Five Hundred
Thousand Dollars ($500,000). Each Borrowing consisting of LIBOR Loans
shall be in an aggregate principal amount of Five Million Dollars ($5,000,000)
or any larger multiple of Five Hundred Thousand Dollars ($500,000).
Each Borrowing shall be comprised entirely of Prime Rate Loans or LIBOR Loans,
as the Borrower may request pursuant to SECTION 2.2. All of the Loans shall
mature and be due and payable in full on the Expiration Date.
SECTION 2.2. Notice of Borrowing. In order to request a
Borrowing, the Borrower shall provide to the Administrative Agent a
telephonic, written or telecopy notice (in the case of telephonic notice, such
notice shall be promptly confirmed in writing or by telecopy) of such
Borrowing, specifying (a) the date of the proposed Borrowing (which shall be
a Business Day), (b) the aggregate amount of the requested Borrowing, (c)
whether such Borrowing is to consist of Prime Rate Loans or LIBOR Loans,
and (d) if such a Borrowing is to consist of LIBOR Loans, the initial
Interest Period with respect thereto. Such notice of Borrowing shall be
irrevocable and must be received by the Administrative Agent not later
than (a) 12:00 noon, Cleveland, Ohio, time, on the Business Day of the
proposed Borrowing in the case of Prime Rate Loans, and (b) 10:00 a.m.,
Cleveland, Ohio, time, on the Business Day which is three (3) Business Days
prior to the Business Day of the proposed Borrowing in the case of LIBOR
Loans. If no election as to the Type of Borrowing is specified in any such
notice, then the requested Borrowing shall be Prime Rate Loans. If no
Interest Period with respect to any Borrowing consisting of LIBOR Loans is
specified in any such notice, then the Borrower shall be deemed to have
selected an Interest Period of one (1) month's duration. On the same
Business Day it receives such notice from Borrower, the Administrative
Agent shall notify each Bank of such proposed Borrowing. Each Bank
shall provide to the Administrative Agent by wire transfer, not later than
2:00 p.m., Cleveland, Ohio time, on the specified day of the Borrowing,
federal or other immediately available funds in the amount which
constitutes its Percentage of the Borrowing being made on such day,
and the Administrative Agent shall credit such amounts as of such day to the
general deposit account of the Borrower with the Administrative Agent or, if
a Borrowing shall not occur on such date because any condition precedent
herein specified shall not have been met, return the amounts so received to
the respective Banks. Notwithstanding any other provision of this Agreement,
the Borrower shall not be entitled to request any Borrowing if the Interest
Period requested with respect thereto would end after the Expiration Date.
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SECTION 2.3. Interest. The Borrower shall pay interest on the
unpaid principal amount of the Loans outstanding from time to time from the
date thereof until paid, as follows: (i) with respect to Prime Rate Loans,
at a fluctuating rate per annum equal to the Prime Rate from time to time in
effect PLUS two percent (2%) per annum, payable on the last day of each
month and at the maturity thereof; and (ii) with respect to LIBOR Loans,
during each Interest Period applicable thereto, at a fixed rate per annum
equal to the LIBOR Fixed Rate for such Interest Period PLUS four percent
(4%) per annum, payable on the last day of each month during such
Interest Period and on each Interest Adjustment Date. The applicable LIBOR
Fixed Rate for each Interest Period or day within an Interest Period, as the
case may be, shall be determined by the Administrative Agent, and such
determination shall be presumptively correct absent manifest error.
SECTION 2.4. Continuation and Conversion Elections. By notice
to the Administrative Agent by telephone before 10:00 a.m. (promptly
confirmed by written or telecopy notice), Cleveland, Ohio, time, on any
Business Day, the Borrower may from time to time irrevocably elect, on not
less than two (2) nor more than three (3) Business Days' notice, that all, or
any portion in an aggregate principal amount of One Million Dollars
($1,000,000) or any larger integral multiple of Five Hundred Thousand Dollars
($500,000), of any Loans comprising any Borrowing be converted into, or
continued as, a Borrowing consisting of Prime Rate Loans or LIBOR Loans, as
the case may be (in the absence of such notice by the Borrower to the
Administrative Agent with respect to any Borrowing consisting of LIBOR Loans
at least three (3) Business Days before the Interest Adjustment Date
with respect thereto, such Borrowing shall, on such Interest Adjustment
Date (unless the Loans constituting such Borrowing are repaid in full on
such Interest Adjustment Date), automatically convert to a Borrowing
consisting of Prime Rate Loans); PROVIDED, HOWEVER, that (a) each such
conversion or continuation shall be pro rated among the applicable
outstanding Loans of all Banks, (b) no portion of the outstanding principal
amount of any Borrowing may be continued as, or converted into, a Borrowing
consisting of LIBOR Loans if any Default then exists and (c) any
conversion of a Borrowing consisting of LIBOR Loans into a Prime Rate
Loan shall be permitted only on an Interest Adjustment Date for such Loan.
Each continuation of or conversion into LIBOR Loans, as the case may be,
pursuant to this Section shall be deemed to be a certification and warranty,
as of the date of any such continuation or conversion, by the Borrower
that no Default then exists. Each notice pursuant to this SECTION 2.4
shall be irrevocable and shall refer to this Agreement and specify (w) the
identity and amount of the Borrowing that the Borrower requests to be
converted or continued, (x) whether such Borrowing is to be converted to or
continued as a Borrowing consisting of Prime Rate Loans or a Borrowing
consisting of LIBOR Loans, (y) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day) and (z) if such
Borrowing is to be converted to or continued as a Borrowing consisting of
LIBOR Loans, the Interest
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Period with respect thereto. If no Interest Period is specified in any such
notice with respect to any conversion to or continuation as a Borrowing
consisting of LIBOR Loans, the Borrower shall be deemed to have selected, as
applicable, an Interest Period of one (1) month's duration. The
Administrative Agent shall advise the other Banks of any notice given pursuant
to this SECTION 2.4 and of each Bank's portion of any converted or continued
Borrowing.
SECTION 2.5. Notes. Each Bank's Loans shall be evidenced by a Note
duly executed by an Authorized Officer of the Borrower, payable to the order
of such Bank in a maximum principal amount equal to such Bank's Commitment.
The Borrower hereby irrevocably authorizes each Bank to make (or cause to be
made) appropriate notations either on the grid attached to such Bank's Note
(or on any continuation of such grid) or in its internal records, which
notations, if made, shall evidence, INTER ALIA, the date of, the
outstanding principal of, the interest rate and Interest Period applicable
to, each payment and prepayment of principal of and each payment of
interest on the Loans evidenced thereby. Such notations shall be conclusive
and binding on the Borrower absent manifest error; PROVIDED, HOWEVER, that
the failure of any Bank to make any such notations shall not limit or
otherwise affect any Obligations of the Borrower or any other Obligor.
SECTION 2.6. Termination or Reduction of Commitments. The Borrower may,
upon at least three (3) Business Days' prior irrevocable written or telecopy
notice to the Administrative Agent, permanently terminate at any time, or
ratably (according to each Bank's respective Percentage) reduce permanently
from time to time by an aggregate amount of Five Million Dollars
($5,000,000) or any larger integral multiple thereof, the aggregate amount
of the Commitments in excess of the aggregate outstanding principal amount of
the Loans; PROVIDED, HOWEVER, that, after giving effect to such termination
or any such reduction, the aggregate principal amount of all Loans of any
Bank then outstanding hereunder PLUS such Bank's PRO RATA share (based on
such Bank's Percentage) of the aggregate face amount of all Letters of
Credit then issued shall not exceed the Commitment of such Bank. The
Administrative Agent shall promptly notify each Bank of any such termination
or the amount and type of its Commitment then being reduced and, in
either case, the effective date thereof. The Borrower shall pay to the
Administrative Agent for the account of the Banks, on the date of
termination, the commitment fees under SECTION 3.1, on the amount of the
Commitments so terminated, accrued through the date of such
termination.
SECTION 2.7. Mandatory Reduction in Commitments. On each Mandatory
Reduction Date, the Total Commitment existing on such Mandatory Reduction
Date shall be permanently reduced on a ratable basis (according to
each Bank's respective Percentage) by an amount of Three Million
Five Hundred Thousand Dollars ($3,500,000).
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SECTION 2.8. Prepayment. The Borrower shall have the right at any
time and from time to time to prepay on a pro rata basis all or any part, as
designated by the Borrower, of the principal amount of the Loans of
any Borrowing then outstanding, plus accrued and unpaid interest on the
amount so prepaid to the date of such prepayment. Prior telephonic, written
or telecopy notice (in the case of telephonic notice such notice shall be
promptly confirmed by written or telecopy notice) of such prepayment must
be received by the Administrative Agent not later than (a) 12:00 noon,
Cleveland, Ohio, time, on the Business Day of the prepayment in the case of
Prime Rate Loans, and (b) 3:00 p.m., London time, on the Business Day which
is two (2) Business Days prior to the Business Day of the prepayment in the
case of LIBOR Loans. The Administrative Agent shall promptly upon receipt
of such notice notify each Bank of such proposed prepayment. Any prepayment
of a Borrowing shall be without premium or penalty; PROVIDED, HOWEVER,
that any payment of a Borrowing consisting of LIBOR Loans on a day other
than an Interest Adjustment Date shall be subject to the provisions of
SECTION 4.4. Each notice of a prepayment shall specify the prepayment
date and the amount of each Borrowing (or portion thereof) to be prepaid,
shall be irrevocable and shall commit the Borrower to prepay such Borrowing by
the amount stated therein on the date stated therein.
SECTION 2.9. Funding. Each Bank may, if it so elects, fulfill its
obligation to make, continue or convert LIBOR Loans hereunder by causing one of
its domestic or foreign branches or Affiliates (or an international banking
facility created by such Bank) to make or maintain such LIBOR Loan;
PROVIDED, HOWEVER, that such LIBOR Loan shall nonetheless be deemed to have
been made and to be held by such Bank, and the obligation of the Borrower to
repay such LIBOR Loan shall nevertheless be to such Bank for the account of
such domestic or foreign branch, Affiliate or international banking facility.
Borrowings of more than one Type may be outstanding at the same time. In
addition, the Borrower hereby consents and agrees that, for purposes of any
determination to be made for purposes of SECTIONS 4.1, 4.2, 4.3 or 4.4, it
shall be conclusively assumed that each Bank elected to fund all LIBOR Loans
by purchasing Dollar deposits in the interbank eurodollar market.
SECTION 2.10. Letters of Credit. Prior to the Expiration Date, the
Borrower may request Letters of Credit from the Administrative Agent not
to exceed the aggregate maximum face amount of Two Million Dollars
($2,000,000) at any one time outstanding, subject to the following terms and
conditions:
(a) The Administrative Agent will issue such a requested Letter of
Credit if such a request is approved by the Administrative Agent, in its
sole discretion, and no Default or Event of Default shall then exist
hereunder. Promptly after the issuance of each Letter of Credit, the
Administrative Agent shall notify each Bank
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of such issuance. Upon the request of any Bank, the Administrative Agent
shall deliver a copy of each Letter of Credit issued hereunder to such
requesting Bank.
(b) The Borrower shall pay to the Administrative Agent, for the
ratable benefit of the Banks, a letter of credit fee equal to two and one-
half percent (2-1/2%) per annum for each Letter of Credit issued based
upon the face value thereof. Such fee shall be paid by the Borrower upon
the issuance of any such Letter of Credit and upon any extension, renewal
or amendment of such Letter of Credit. The Borrower shall execute and
deliver to the Administrative Agent its standard form(s) pertaining to the
applications for Letters of Credit and such other documents as the
Administrative Agent in its sole discretion may from time to time require
(in form and substance satisfactory to the Administrative Agent) in
issuing such Letter of Credit.
(c) All fees and commissions received by the Administrative Agent in
issuing the Letters of Credit shall be shared PRO RATA among the Banks in
proportion to their respective Percentages; PROVIDED, HOWEVER, that no
Bank shall have any interest in, or be entitled to receive any part of,
any fee paid to the Administrative Agent in respect of any amendments,
operating costs or administrative costs with respect to the Letters of
Credit.
(d) All obligations of the Administrative Agent under and pursuant to
or arising from the Letters of Credit shall be shared PRO RATA among the
Banks in proportion to their respective Percentages. The Banks agree that
upon the request of the Administrative Agent, they will make Loans to the
Borrower pursuant to SECTION 2.1, to permit or enable the Borrower to
repay its obligations to the Administrative Agent in respect of drawings
under the Letters of Credit.
(e) No (i) Letter of Credit will have an expiry date later than three
(3) days prior to the Expiration Date in effect at the date of issuance of
such Letter of Credit, or (ii) commercial Letter of Credit will have a
term which exceeds the Administrative Agent's standard term for such
Letters of Credit, as determined with reference to the Administrative
Agent's internal practices for commercial Letters of Credit, or (iii)
Letter of Credit will provide for any draft to be paid after the
Expiration Date in effect at the date of issuance of such Letter of
Credit.
(f) If any payment received by the Administrative Agent in respect of
any Letter of Credit is rescinded or
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must otherwise be returned by the Administrative Agent for any reason
whatsoever, and if the Administrative Agent has paid to the Banks their
PRO RATA share thereof, each of the Banks will, upon notice from the
Administrative Agent, forthwith pay over to the Administrative Agent an
amount equal to such Bank's Percentage of the amount which must be so
returned by the Administrative Agent.
(g) All Letters of Credit issued hereunder will, except to the extent
otherwise expressly provided, be governed by the Uniform Customs and
Practice for Documentary Credits (1983 [_____***] Revision), International
Chamber of Commerce Publication No. 500, and any subsequent revisions
thereof.
(h) In no event shall a Letter of Credit be issued hereunder if,
after giving effect to such issuance, a Deficiency has occurred or will
occur.
ARTICLE III
FEES
SECTION 3.1. Unused Facility Fee. The Borrower shall pay
to the Administrative Agent for the ratable account of each Bank, for the
period from and including the Closing Date and continuing until the last
day of the Commitment Period applicable to each such Bank, an unused
facility fee computed at the rate of one-half of one percent (1/2%) per annum
on the Unused Facility Amount, payable for each month (or, in the case of the
first such payment, portion of the calendar month since the Closing Date) by
the Borrower monthly in arrears on the first day of the following calendar
month, commencing with the first such date following the Closing Date and on
the last day of the Commitment Period applicable to each such Bank.
SECTION 3.2. Agent Fees. The Borrower shall pay (i) an administrative
agent fee in the amount of Seventy-Five Thousand Dollars ($75,000) to the
Administrative Agent, for the sole account of the Administrative Agent, (ii)
to each Co-Agent, a co-agent fee in the amount of One Hundred Fifty
Thousand Dollars ($150,000) each, and (iii) a collateral agent fee in the
amount of Fifty Thousand Dollars ($50,000) to Collateral Agent. Such fees
shall be paid by the Borrower on or before the Closing Date.
SECTION 3.3. Facility Fee. On the Closing Date, the Borrower shall pay
to the Administrative Agent a one (1) time facility fee, for the account of
each Bank in accordance with the amounts set forth on ANNEX B hereto, in
an amount equal to _____________________________Dollars ($_______). [ANNEX
AND AMOUNT TO BE PROVIDED BY MARK SERYAK]
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ARTICLE IV
CERTAIN FIXED RATE AND OTHER PROVISIONS
SECTION 4.1. LIBOR Rate Lending Unlawful. If any Bank shall have
determined (which determination shall, upon notice thereof to the Borrower,
the Administrative Agent and the Banks, be conclusive and binding on
the Borrower) that the introduction of or any change in or in the
interpretation of any law makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for such Bank to make,
continue or maintain any Loan as, or to convert any Loan into, a LIBOR Loan,
the obligations of all Banks to make, continue, maintain or convert LIBOR
Loans shall, upon such determination, forthwith be suspended until such
Bank shall notify the Administrative Agent that the circumstances causing
such suspension no longer exist, and all LIBOR Loans shall automatically
convert into Prime Rate Loans at the end of the then current LIBOR Interest
Periods with respect thereto or sooner, if required by such law or assertion.
SECTION 4.2. Deposits Unavailable. If
(a) as to LIBOR Loans, the Administrative Agent shall have determined
that Dollar deposits in the relevant amount and for the relevant Interest
Period are not available to the Administrative Agent in the interbank
eurodollar market; or
(b) by reason of circumstances affecting the Administrative Agent's
interbank eurodollar market or certificate of deposit market, the
Administrative Agent shall have determined that adequate means do not
exist for ascertaining the interest rate applicable hereunder to LIBOR
Loans with Interest Periods of a particular duration; or
(c) the Administrative Agent shall have determined that the rates at
which Dollar deposits are being offered will not adequately and fairly
reflect the cost to the Administrative Agent of making or maintaining
their respective LIBOR Loans during the applicable LIBOR Interest Period;
then, upon notice from the Administrative Agent to the Borrower and the
Banks, the obligations of all Banks under ARTICLE II to make or continue any
Loans as, or to convert any Loans into, LIBOR Loans of such type shall
forthwith be suspended until the Administrative Agent shall notify the
Borrower and the Banks that the circumstances causing such suspension no
longer exist. In the event of any such determination, any request by the
Borrower for a Borrowing consisting of LIBOR Loans pursuant to SECTION 2.2
or 2.4 shall, until the Administrative Agent shall have notified the
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Borrower and the Banks that the circumstances causing such suspension no
longer exist, be deemed to be a request for a Borrowing consisting of Prime
Rate Loans. Each determination by the Administrative Agent or the Required
Bank, as the case may be, hereunder shall be presumptively correct absent
manifest error.
SECTION 4.3. Increased Fixed Rate Loan Costs, etc. The Borrower
agrees to reimburse each Bank for any increase in the cost to such Bank of,
or any reduction in the amount of any sum receivable by such Bank in respect
of, making, continuing or maintaining (or of its obligation to make, continue
or maintain) any Loans as, or of converting (or of its obligation to convert)
any Loans into, LIBOR Loans. Such Bank shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of any
such event, such notice to state, in reasonable detail, the reasons therefor
and the additional amount required fully to compensate such Bank for such
increased cost or reduced amount. Such additional amounts shall be payable by
the Borrower directly to such Bank within five (5) days after its receipt of
such notice, and such notice shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Bank shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Bank to make, continue or maintain any portion of the principal amount of
any Loan as, or to convert any portion of the principal amount of any Loan
into, a LIBOR Loan) as a result of
(a) any conversion or repayment or prepayment of the principal amount
of any LIBOR Loans on a date other than the scheduled Interest Adjustment
Date applicable thereto;
(b) any Loans not being made as LIBOR Loans in accordance with the
request therefor by the Borrower; or
(c) any Loans not being continued as, or converted into, LIBOR Loans
in accordance with the Borrower's request with respect thereto,
then, upon the written notice of such Bank to the Borrower (with a copy
to the Administrative Agent), the Borrower shall, within five (5) days after
its receipt thereof, pay directly to such Bank such amount as will
(in the reasonable determination of such Bank) reimburse such Bank for
such loss or expense. Such written notice (which shall include calculations
in reasonable detail) shall, in the absence of manifest error, be conclusive
and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation,
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reinterpretation or phase-in of, any law or regulation, directive,
guideline, decision or request (whether or not having the force of law) of
any court, central bank, regulator or other governmental authority affects
or would affect the amount of capital required or expected to be
maintained by any Bank or any Person controlling such Bank, and such
Bank determines (in its sole and absolute discretion) that the rate of
return on its or such controlling Person's capital as a consequence of the
Loans made by such Bank is reduced to a level below that which such Bank or
such controlling Person could have achieved but for the occurrence of any
such circumstance, then, in any such case upon notice from time to time by
such Bank to the Borrower, the Borrower shall immediately pay directly to
such Bank additional amounts sufficient to compensate such Bank or such
controlling Person for such reduction in rate of return. A statement of
such Bank as to any such additional amount or amounts (including
calculations thereof in reasonable detail) shall, in the absence of manifest
error, be conclusive and binding on the Borrower. In determining such amount,
such Bank may use any reasonable method of averaging and attribution that it
(in its sole and absolute discretion) shall deem applicable.
SECTION 4.6. Taxes. All payments by the Borrower of principal
of, and interest on, the Loans and all other amounts payable hereunder
shall be made free and clear of and without deduction for any present or
future income, excise, stamp or franchise taxes and other taxes, fees,
duties, withholdings or other charges of any nature whatsoever imposed by any
taxing authority, but excluding franchise taxes and taxes imposed on or
measured by any Bank's net income or receipts (such non- excluded items
being called "TAXES"). In the event that any withholding or deduction
from any payment to be made by the Borrower hereunder is required in
respect of any Taxes pursuant to any applicable law, rule or regulation,
then the Borrower will
(a) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official receipt
or other documentation satisfactory to the Administrative Agent evidencing
such payment to such authority; and
(c) pay to the Administrative Agent for the account of the Banks such
additional amount or amounts as is necessary to ensure that the net amount
actually received by each Bank will equal the full amount such Bank would
have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent
or any Bank with respect to any payment received by the Administrative Agent
or such Bank hereunder, the Administrative Agent or such Bank may pay such
Taxes and the
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Borrower will promptly pay such additional amounts (including any
penalties, interest or expenses) as are necessary in order that the net amount
received by such Person after the payment of such Taxes (including any
Taxes on such additional amount) shall equal the amount such Person would
have received had not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the
account of the respective Banks, the required receipts or other required
documentary evidence, the Borrower shall indemnify the Banks for any
incremental Taxes, interest or penalties that may become payable by any Bank
as a result of any such failure. For purposes of this SECTION 4.6, a
distribution hereunder by the Administrative Agent or any Bank to or for the
account of any Bank shall be deemed a payment by the Borrower.
Upon the request of the Borrower or the Administrative Agent, each Bank
that is organized under the laws of a jurisdiction other than the United
States shall, prior to the due date of any payments under the Notes, execute
and deliver to the Borrower and the Administrative Agent, on January 31 of
each calendar year, one or more (as the Borrower or the Administrative
Agent may reasonably request) United States Internal Revenue Service Forms
4224 or Forms 1001 or such other forms or documents (or successor forms or
documents), appropriately completed, as may be applicable to establish the
extent, if any, to which a payment to such Bank is exempt from
withholding or deduction of Taxes.
SECTION 4.7. Payments, Computations, etc. Unless otherwise
expressly provided, all payments by the Borrower pursuant to this Agreement,
the Notes or any other Loan Document shall be made by the Borrower to the
Administrative Agent for the PRO RATA account of the Banks entitled to
receive such payment. All such payments required to be made to the
Administrative Agent shall be made, without setoff, deduction or
counterclaim, not later than 11:00 a.m., Cleveland, Ohio, time, on the date
due, in same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the
Borrower. Funds received after that time shall be deemed to have been
received by the Administrative Agent on the next succeeding Business Day.
The Administrative Agent shall promptly remit in same day funds to each
Bank its share, if any, of such payments received by the Administrative
Agent for the account of such Bank. All interest and fees shall be
computed on the basis of the actual number of days (including the first
day but excluding the last day) occurring during the period for which such
interest or fee is payable over a year comprised of three hundred sixty (360)
days. Whenever any payment to be made shall otherwise be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be
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included in computing interest and fees, if any, in connection with such
payment.
SECTION 4.8. Sharing of Payments. If any Bank shall obtain any
payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of any Loan (other than
pursuant to the terms of SECTIONS 4.3, 4.4, 4.5 and 4.6) in excess of its
PRO RATA share of payments then or therewith obtained by all Banks, such
Bank shall purchase from the other Banks such participations in Loans
made by them as shall be necessary to cause such purchasing Bank to share
the excess payment or other recovery ratably with each of them;
PROVIDED, HOWEVER, that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing Bank, the
purchase shall be rescinded and each Bank which has sold a participation to
the purchasing Bank shall repay to the purchasing Bank the purchase price
to the ratable extent of such recovery together with an amount equal to
such selling Bank's ratable share (according to the proportion of
(a) the amount of such selling Bank's required repayment to the
purchasing Bank
TO
(b) the total amount so recovered from the purchasing Bank)
of any interest or other amount paid or payable by the purchasing Bank in
respect of the total amount so recovered. The Borrower agrees that any Bank
so purchasing a participation from another Bank pursuant to this Section may,
to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to SECTION 4.9) with respect to such participation as
fully as if such Bank were the direct creditor of the Borrower in the
amount of such participation. If under any applicable bankruptcy,
insolvency or other similar law, any Bank receives a secured claim in lieu
of a setoff to which this Section applies, such Bank shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this Section to share
in the benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Bank shall, upon the occurrence of any
Default or Event of Default described in CLAUSES (A) through (F) of SECTION
8.1.8 or any other Event of Default, have the right to set off against, and to
appropriate and apply to the payment of the Obligations owing to it (whether
or not then due) (i) any and all balances, credits, deposits, accounts or
moneys of the Borrower or any Subsidiary Guarantor then or thereafter
maintained with such Bank and (ii) all other Indebtedness (other than
Non-Recourse Debt) then held or owing by such Bank to or for the credit or
account of the Borrower or any Subsidiary Guarantor; PROVIDED, HOWEVER, that
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any such setoff, appropriation and application shall be subject to the
provisions of SECTION 4.8. Each Bank agrees promptly to notify the
Borrower or Subsidiary Guarantor, as the case may be, and the
Administrative Agent after any such setoff and application made by such Bank;
PROVIDED, HOWEVER, that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Bank under this
Section are in addition to other rights and remedies (including other rights
of setoff under applicable law or otherwise) which such Bank may have.
SECTION 4.10. Use of Proceeds. The Borrower shall use the proceeds
of the Loans for general corporate purposes and working capital purposes;
without limiting the foregoing, no proceeds of any Loan will be used to
purchase or carry any equity security of a class which is registered pursuant
to Section 12 of the Securities Exchange Act of 1934 or any "margin stock",
as defined in F.R.S. Board Regulation U.
ARTICLE V
CONDITIONS TO BORROWING
SECTION 5.1. Initial Borrowing. The effectiveness of this
Agreement is subject to the condition that the Borrower, the Co-Agents and
the Banks shall not have entered into loan documentation which embodies the
terms and provisions of that certain commitment letter agreement, dated April
28, 1994, among the Borrower and the Banks, and which is otherwise in form
and substance satisfactory to the Banks.
SECTION 5.2. All Borrowings. The obligation of each Bank to make a
Loan to the Borrower in connection with each Borrowing (including the
initial Borrowing) hereunder and the obligation of the Administrative Agent
to issue, and of each Bank to share obligations under, any Letter of
Credit, are subject to the prior or concurrent satisfaction of each of the
following conditions:
(a) the Administrative Agent shall have timely received from the
Borrower the notice of Borrowing required by SECTION 2.2 or a request for
a Letter of Credit pursuant to SECTION 2.10;
(b) before and after giving effect to such Borrowing or issuance, no
Default or Event of Default shall exist;
(c) the representations and warranties set forth in ARTICLE VI, in
each of the other Loan Documents and in each Subsidiary Guaranty shall be
true and correct with the same effect as if made on and as of the date of
such borrowing or issuance except to the extent that any thereof expressly
relate to an earlier date; and
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(d) the amount of eligible Collateral is sufficient to support the
Loans outstanding hereunder, after giving effect to such Loan.
Each request for a Borrowing or request for a Letter of Credit by the
Borrower hereunder shall be deemed to be a representation and warranty by the
Borrower as of the date of such Borrowing or issuance of such Letter of Credit
that the statements in CLAUSES (b), (c) and (d) of this Section are true.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks and the Co-Agents to enter into this
Agreement and to make Loans hereunder, the Borrower represents and warrants
unto the Co-Agents and each Bank as set forth in this ARTICLE VI.
SECTION 6.1. Organization, etc. The Borrower and each of its
Subsidiaries is a corporation validly organized and existing and in good
standing under the laws of the state of its incorporation, is duly
qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the nature of its business requires such
qualification, and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and
perform its Obligations under this Agreement, the Notes and each other Loan
Document to which it is a party and to own and hold under lease its property
and to conduct its business as currently conducted by it and as proposed to be
conducted by it.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by the Borrower of this Agreement, the
Notes and each other Loan Document executed or to be executed by it, and
the execution, delivery and performance by each other Obligor of each Loan
Document executed or to be executed by it are within the Borrower's and each
such Obligor's corporate powers, have been duly authorized by all necessary
corporate action, and do not
(a) contravene, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under the Borrower's or any
such Obligor's Organic Documents;
(b) contravene, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under any contractual
restriction, law or governmental regulation or court decree or order
binding on or affecting the Borrower or any such Obligor; or
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(c) result in, or require the creation or imposition of, any Lien on
any of any Obligor's properties.
SECTION 6.3. Governmental Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or filing
with or consent of, any governmental authority or regulatory body or other
Person is required for the due execution, delivery or performance by the
Borrower or any other Obligor of this Agreement, the Notes or any other Loan
Document to which it is a party. Neither the Borrower nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and the
Notes and each other Loan Document executed by the Borrower will, on the
due execution and delivery thereof, constitute, the legal, valid and
binding obligations of the Borrower enforceable in accordance with their
respective terms; and each Loan Document executed pursuant hereto by each
other Obligor will, on the due execution and delivery thereof by such
Obligor, be the legal, valid and binding obligation of such Obligor
enforceable in accordance with its terms.
SECTION 6.5. Financial Information. The balance sheets of the
Borrower and each of its Subsidiaries as at January 31, 1994, and the
related statements of earnings and cash flow of the Borrower and each of its
Subsidiaries, copies of which have been furnished to each Bank, have been
prepared in accordance with GAAP applied on a basis consistent with those
used by Borrower during its immediately preceding Fiscal Year, and present
fairly, in all material respects, the consolidated financial condition of
the corporations covered thereby as at the dates thereof and the results of
their operations for the periods then ended.
SECTION 6.6. No Material Adverse Change. Since the date of the
financial statements described in SECTION 6.5, there has been no material
adverse change in the condition (financial or otherwise), operations, assets,
business, properties or prospects of the Borrower and its Subsidiaries,
other than the Existing Adverse Conditions.
SECTION 6.7. Litigation, Labor Controversies, etc. Exhibit E
hereto sets forth all pending litigation, actions, proceedings and labor
controversies affecting the Borrower or any of its Subsidiaries, or any of
their respective properties, businesses, assets or revenues existing on
the Closing Date, which involves potential damages thereunder in an
amount of Five Hundred Thousand Dollars ($500,000) or more, or which
may otherwise materially and adversely affect the condition (financial or
otherwise), operations, assets, business, properties or prospects of the
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Borrower or any Subsidiary of the Borrower, or which purports to
affect the legality, validity or enforceability of this Agreement, the Notes
or any other Loan Document. There is no pending or, to the knowledge of
the Borrower, threatened litigation, action, proceeding, or labor
controversy affecting the Borrower or any of its Subsidiaries, or any of
their respective properties, businesses, assets or revenues, which (i)
involves a potential award of damages in an amount of Five Hundred
Thousand Dollars ($500,000) or more, except as otherwise set forth on
EXHIBIT E on the Closing Date, (ii) may otherwise materially and adversely
affect the condition (financial or otherwise), operations, assets, business,
properties or prospects of the Borrower or any Subsidiary of the Borrower, or
(iii) which purports to affect the legality, validity or enforceability of
this Agreement, the Notes or any other Loan Document.
SECTION 6.8. Subsidiaries. The Borrower has no Subsidiaries, except
those Subsidiaries which are set forth on EXHIBIT F hereto.
SECTION 6.9. Ownership of Properties. The Borrower and each
of its Subsidiaries owns good and marketable title to all of its
properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, trade names, service marks
and copyrights), free and clear of all Liens, charges or claims (including
infringement claims with respect to patents, trademarks, copyrights and the
like) except as permitted pursuant to SECTION 7.2.3.
SECTION 6.10. Taxes. The Borrower and each of its Subsidiaries has
filed all tax returns and reports required by law to have been filed by it
and has paid all taxes and governmental charges thereby shown to be due and
owing or due and owing pursuant to any assessment received by the Borrower
or any Subsidiary of Borrower, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on
its books.
SECTION 6.11. Pension and Welfare Plans. During the twelve
(12)-consecutive- month period prior to the date of the execution and
delivery of this Agreement, no steps have been taken to terminate any Pension
Plan, and no contribution failure has occurred with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA. No
condition exists or event or transaction has occurred with respect to any
Pension Plan which might result in the incurrence by the Borrower or any
member of the Controlled Group of any material liability, fine or penalty.
Except as disclosed in the Borrower's Annual Report on Form 10-K for the
Fiscal Year ended January 31, 1994, neither the Borrower nor any member
of the Controlled Group has any contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
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SECTION 6.12. Environmental Warranty. All facilities and property
owned, operated or leased by the Borrower and/or any of its Subsidiaries
have been, and continue to be, owned, operated or leased by the Borrower
and/or its Subsidiaries in compliance with all Environmental Laws, and the
Borrower and/or its Subsidiaries have no liability with respect to any
Environmental Laws.
SECTION 6.13. Regulations G, U and X. The Borrower is not engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Loans will be used, directly or
indirectly, for a purpose which violates, or would be inconsistent with,
F.R.S. Board Regulation G, U or X. Terms for which meanings are provided
in F.R.S. Board Regulation G, U or X or any regulations substituted therefor,
as from time to time in effect, are used in this Section with such meanings.
SECTION 6.14 Investment Company Act; Public Utility Holding Company
Act. Neither the Borrower nor any Subsidiary is (a) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act
of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
SECTION 6.15 Solvency. Borrower and each Subsidiary Guarantor has
received consideration which is the reasonable equivalent value of the
obligations and liabilities that Borrower and each such Subsidiary
Guarantor has incurred to the Banks. Neither Borrower nor any Subsidiary
Guarantor is insolvent as defined in any applicable state or federal statute,
nor will Borrower or any Subsidiary Guarantor be rendered insolvent by the
execution and delivery of this Agreement or any Loan Document. Neither
Borrower nor any Subsidiary Guarantor is engaged or about to engage in any
business or transaction for which the assets retained by it shall be an
unreasonably small capital, taking into consideration the obligations incurred
in connection with this Agreement or any other Loan Document. Neither
Borrower nor any Subsidiary Guarantor intends to, nor does it believe that
it will, incur debts beyond its ability to pay them as they mature.
SECTION 6.16 No Default. No event has occurred and is continuing
which constitutes, or which, with the passage of time or the giving of
notice or both, would constitute, a default under or in respect of any
agreement, instrument or undertaking with respect to any Indebtedness (other
than Non-Recourse Debt) to which the Borrower or any Subsidiary of Borrower
is a party or by which the Borrower or any Subsidiary of Borrower or any of
their respective assets are bound, the default under which could have a
material adverse effect on the condition (financial or otherwise),
operations, assets, business, properties or prospects of the Borrower or any
Subsidiary of the Borrower; and no Default exists hereunder, nor will any
begin to exist immediately after the execution and delivery of this
Agreement and the other Loan
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Documents or immediately after the making of any Loan or the issuance of any
Letter of Credit hereunder.
SECTION 6.17 Adverse Contracts. Neither the Borrower nor any
Subsidiary of the Borrower is a party to, nor are any of them or any
of their respective properties subject to or bound by, any long term lease,
forward purchase contract or future contract, covenant not to compete, or
other agreement which restricts its ability to conduct its business, or has
a material adverse effect or could have a material adverse effect on its
financial condition, results of operations or business.
SECTION 6.18 Full Disclosure. This Agreement, the financial
statements delivered in connection herewith, the representations and
warranties set forth herein and in any other Loan Document, do not and
will not contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or
herein, in light of the circumstances under which they were made, not
misleading.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with each Bank
that, until each of the Commitments have expired and until all Obligations
have been paid and performed in full, the Borrower will perform and observe
and will cause each Subsidiary to perform and observe the obligations set
forth in this SECTION 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Bank copies
of the following financial statements, reports, notices and information:
(a) as soon as available and in any event within forty-five
(45) days after the end of each calendar month (beginning with the
month of April 1994), combined and combining (by business segment)
balance sheets of the Borrower and its Subsidiaries as of the end
of such month and combined and combining (by business segment)
statements of earnings of the Borrower and its Subsidiaries and
combined statements of cash flow of the Borrower and its
Subsidiaries, each for such month and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such
month, all in reasonable detail, and certified by the Chairman, the
President, the Treasurer or the Chief Financial Officer of the
Borrower;
(b) as soon as available and in any event within forty-five
(45) days after the end of each of the first three Fiscal Quarters
of each Fiscal Year of the
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Borrower, consolidated and consolidating (by business segment) balance sheets
of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and
consolidated and consolidating (by business segment) statements of earnings
of the Borrower and its Subsidiaries and consolidated statements of cash flow
of the Borrower and its Subsidiaries, each for such Fiscal Quarter and for the
period commencing at the end of the previous Fiscal Year and ending with the
end of such Fiscal Quarter, all in reasonable detail, and certified by the
Chairman, the President, the Treasurer or the Chief Financial Officer of the
Borrower;
(c) as soon as available and in any event within ninety (90) days
after the end of each Fiscal Year of the Borrower, a copy of the annual audit
report for such Fiscal Year for the Borrower and its Subsidiaries, including
therein consolidated and consolidating (by business segment) balance sheets
of the Borrower and its Subsidiaries as of the end of such Fiscal Year and
consolidated and consolidating (by business segment) statements of earnings of
the Borrower and its Subsidiaries and consolidated statements of cash flow of
the Borrower and its Subsidiaries, each for such Fiscal Year and a
consolidated statement of stockholder's equity of the Borrower and its
Subsidiaries reflecting the operations during such Fiscal Year, all in
reasonable detail, and setting forth comparable figures for the same
accounting period in the preceding Fiscal Year, and in each case (except as to
the consolidating balance sheets of the Borrower and its Subsidiaries and the
consolidating statements of earnings of the Borrower and its Subsidiaries)
certified (without any Impermissible Qualification) in a manner acceptable to
the Required Banks by independent public accountants of national standing
acceptable to the Required Co-Agents, in their reasonable discretion,
including, but not limited to, a certification of such accounting firm that
in making its examination upon which the audit report is based, no information
came to its attention which to its knowledge indicated that a Default or an
Event of Default had occurred or specifying any such Default or Event of
Default;
(d) concurrently with the delivery of each of the financial
statements required by CLAUSES (a), (b) and (c) of this SECTION 7.1.1, a
certificate signed by its Chairman, President, Chief Financial Officer,
Chief Accounting Officer or Treasurer, (i) certifying that he or she has
reviewed the provisions of this Agreement,(ii) stating that (A) no Default
or Event of Default has occurred and is continuing, or (B) a Default or
an Event of Default has occurred and is continuing (such statement
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to include a description of (y) the nature of those Default(s) or Event(s)
of Default in detail satisfactory to the Banks, and (z) the action which
Borrower has taken and proposes to take in order to cure the same), or (C)
a Default or Event of Default had occurred and was continuing (since the
end of the period covered by the last financial certificate delivered to
the Banks hereunder), but that such Default or Event of Default no longer
exists (such statement to include a description of (y) the nature of those
Default(s) or Event(s) of Default in detail satisfactory to the Banks, and
(z) the facts or computations on which the Borrower bases its belief that
those Default(s) or Event(s) of Default have been cured), and (iii)
setting forth (in sufficient detail) the information and calculations
required in order to establish whether the Borrower was in compliance with
the financial covenants set forth in SECTION 7.2.4 at the end of the
period covered by the financial statements then being furnished;
(e) within two (2) days after the last day of each month, a monthly
Borrowing Base Certificate together with a certificate signed by
Borrower's Chairman, President, Chief Financial Officer, Chief Accounting
Officer or Treasurer setting forth (in sufficient detail) the calculation
of the Borrowing Base Amount set forth in such Borrowing Base Certificate;
(f) on or before Tuesday of each week, an Unfunded Lease Portfolio
By Credit Grade Report, in reasonable detail, as of Friday of the
preceding week, certified by the Borrower's Chairman, the President, the
Treasurer, any Assistant Treasurer or the Chief Financial Officer;
(g) on or before Friday of each week, a forecast of cash flows for
the ninety (90) day period commencing on the day on which such forecast is
delivered, together with a comparison of actual to forecast cash flows for
all completed months, all in reasonable detail and certified by the
Borrower's Chairman, the President, the Treasurer or the Chief Financial
Officer;
(h) as soon as possible and in any event within three (3) days after
the occurrence of each Default or Event of Default, a statement of the
Chairman, the President, the Treasurer or the Chief Financial Officer of
the Borrower, setting forth details of such Default and the action which
the Borrower has taken and proposes to take with respect thereto;
(i) as soon as possible and in any event within three (3) days after
becoming aware of (y) the occurrence of any adverse development with
respect to any
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litigation, action, proceeding, or labor controversy described in SECTION
6.7 or (z) the commencement of any labor controversy, litigation, action
or proceeding of the type described in SECTION 6.7, notice thereof and
copies of all documentation relating thereto;
(j) promptly after the sending or filing thereof, copies of all proxy
statements, notices and reports which the Borrower sends to any of its
security holders, and all reports, notices and registration statements
which the Borrower or any of its Subsidiaries files with the Securities
and Exchange Commission or any national securities exchange or any other
regulatory agency;
(k) immediately upon becoming aware of the institution of any steps
by the Borrower or any other Person to terminate any Pension Plan, or the
failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien under section 302(f) of
ERISA, or the taking of any action with respect to a Pension Plan which
could result in the requirement that the Borrower furnish a bond or other
security to the PBGC or such Pension Plan, or the occurrence of any event
with respect to any Pension Plan which could result in the incurrence by
the Borrower of any liability, fine or penalty, or any increase in the
contingent liability of the Borrower with respect to any post-retirement
Welfare Plan benefit, notice thereof and copies of all documentation
relating thereto;
(l) promptly after the receipt thereof by the Borrower, copies of any
interim audit of the accounts of the Borrower or any of its Subsidiaries;
(m) immediately upon receipt thereof by the Borrower, copies of all
management letters given to the Borrower by the Borrower's independent
public accountants; and
(n) such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as any
Bank through any of the Co-Agents may from time to time request.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower will, and will
cause each of its Subsidiaries to, comply in all material respects with all
applicable laws, rules, regulations and orders of the United States and of
each state thereof and of each political subdivision thereof and of any
and all other governmental authorities, such compliance to include
(without limitation) the maintenance and preservation of its corporate
existence and qualification and good standing as a foreign corporation in
each
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jurisdiction where the nature of its business requires such qualification.
SECTION 7.1.3. Maintenance of Properties. The Borrower will, and will
cause each of its Subsidiaries to, maintain, preserve, protect and keep its
properties in good repair, working order and condition, and make necessary
and proper repairs, renewals and replacements so that its business carried
on in connection therewith may be properly and advantageously conducted at all
times.
SECTION 7.1.4. Insurance. The Borrower will, and will cause each
of its Subsidiaries to, maintain or cause to be maintained the insurance
with respect to its properties and business required under the Security
Agreement.
SECTION 7.1.5. Books and Records; Annual Review. The Borrower will,
and will cause each of its Subsidiaries to, (a) at all times keep proper books
and records in which full, true and correct entries are made of all of
their respective business affairs and transactions and which are kept in
accordance with reasonable commercial practice and in such a manner as to
permit the preparation therefrom of financial statements in accordance with
GAAP, and (b) permit the Co-Agents and each Bank or any of their respective
representatives, at all times and intervals, to visit all of its offices and
inspect their respective properties and operations, to speak with their
officers, employees and independent public accountant (and the Borrower hereby
authorizes such independent public accountant to discuss the Borrower's
affairs with each Bank or its representatives whether or not any
representative of the Borrower is present) and to examine (and, at the
expense of the Borrower, photocopy extracts from) any of the Borrower's or any
of its Subsidiaries' books or other records. In addition, the Borrower shall
cooperate with Coopers & Lybrand in its internal review of the results of
operations of the Borrower and its Subsidiaries. If a Default or an Event of
Default shall have occurred and be continuing, the Borrower shall pay any
fees of such independent public accountant incurred in connection with the
Co- Agents' or any Bank's exercise of its rights pursuant to this Section.
The Borrower shall continue to pay the fees and expenses of Coopers & Lybrand
in accordance with that certain letter agreement dated March 8, 1994 from
Society to the Borrower. In addition to and not in limitation of any other
right of inspection set forth in this SECTION 7.1.5, upon the request of the
Administrative Agent, the Borrower will, and will cause each of its
Subsidiaries to, permit the Co-Agents, the Banks and their representatives
to audit and review the Borrower's and such Subsidiary's lease
portfolio, accounting and other systems for the identification of recourse
and non- recourse loans and the receipt of any payments thereunder,
policies for the establishment and continuation of credit to its
lessees and any other matter reasonably related to any of the foregoing.
In connection with such audit and review, the Co-Agents and the Banks may
make
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extracts of any information or data supplied or provided by the Borrower
or any Subsidiary and may speak with the Borrower's management and the
management of any of its Subsidiaries. Upon the request of any Bank, the
Co-Agents shall provide such Bank with copies of any such information or data.
SECTION 7.1.6. Environmental Covenant. The Borrower will, and will
cause each of its Subsidiaries to,
(a) (i) use and operate all of its facilities and properties in
compliance with all Environmental Laws, the noncompliance with which could
have a material adverse effect on the business, assets, revenues,
condition (financial or otherwise), operations or prospects of the
Borrower or any of its Subsidiaries, (ii) keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance with all such
permits, approvals, certificates and other authorizations to the extent
that noncompliance thereof would have a material adverse effect on the
business, assets, revenues, condition (financial or otherwise), operations
or prospects of the Borrower or any of its Subsidiaries, and (iii) handle
all Hazardous Materials in compliance with all applicable Environmental
Laws, the noncompliance with which could have a material adverse effect on
the business, assets, revenues, condition (financial or otherwise),
operations or prospects of the Borrower or any of its Subsidiaries;
(b) immediately notify the Co-Agents and provide copies upon receipt
of all written claims, complaints, notices or inquiries relating to the
condition of its facilities and properties or compliance with
Environmental Laws, and shall promptly cure and have dismissed with
prejudice to the satisfaction of the Co-Agents any actions and proceedings
relating to compliance with Environmental Laws; and
(c) provide such information and certifications which either of
the Co- Agents may reasonably request from time to time to evidence
compliance with this SECTION 7.1.6.
SECTION 7.1.7. Subsidiary Guaranties. To the extent any Subsidiary
shall become a Subsidiary Guarantor after the effective date of this
Agreement, the Borrower will cause such Subsidiary Guarantor to deliver on
demand of the Co-Agents a Subsidiary Guaranty plus certified resolutions and a
certificate of incumbency and signatures of the officers of such Subsidiary.
SECTION 7.1.8. Payment. Borrower will duly and punctually pay or cause
to be paid the principal of and interest on the Notes and all other amounts
due hereunder in accordance with the terms
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thereof and will duly and punctually perform or cause to be performed all
things on its part or on the part of any Subsidiary to be done or
performed under this Agreement and the other Loan Documents.
SECTION 7.1.9. Payment of Taxes and Claims. Borrower will pay and cause
each Subsidiary of the Borrower to pay before they become delinquent (a)
all taxes, assessments and governmental charges or levies imposed on
the Borrower, any Subsidiary of the Borrower or upon the property of the
Borrower or any Subsidiary of the Borrower, (b) all claims or demands of
materialman, mechanics, carriers, warehousemen, landlords and other like
persons which, if unpaid, might result in the creation of a lien or charge
upon any property of the Borrower or any Subsidiary of the Borrower; and (c)
all claims, assessments or levies required to be paid by the Borrower or any
Subsidiary of the Borrower pursuant to any agreement, contract, law, ordinance
or governmental rule or regulation governing any pension, retirement,
profit-sharing or any similar plan of the Borrower or any Subsidiary
of the Borrower; PROVIDED, HOWEVER, that the Borrower or such Subsidiary
shall have the right to contest in good faith, by appropriate proceedings
promptly initiated and diligently conducted, the validity, amount or
imposition of any such tax or claim and upon such good faith contest to
delay or refuse payment thereof, if (A) such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor, and (B) such proceedings prevent the forfeiture or sale of any
property of the Borrower or such Subsidiary or any material interference
with the use thereof by the Borrower or such Subsidiary.
SECTION 7.1.10. Retirement Plans. Borrower will cause each Plan
and the documents and instruments governing each such Plan to be conformed
and administered in compliance with those provisions of ERISA, which may,
from time to time, become effective and operative with respect to such Plans;
and if requested by the Banks in writing from time to time, furnish to the
Banks a copy of any annual report with respect to each such Plan that the
Borrower files with the Internal Revenue Service pursuant to ERISA.
SECTION 7.1.11. Deficiency. If at any time a Deficiency shall
occur, the Borrower shall, at the option of the Required Co-Agents either (a)
immediately pay to the Administrative Agent, as a prepayment of the Loans
for the benefit of the Banks, an amount sufficient to eliminate such
Deficiency, or (b) pledge to the Collateral Agent, for its benefit and
for the ratable benefit of the Banks, additional property which is of a
type and quality acceptable to the Required Co- Agents, in their sole
discretion, and which has been assigned a collateral value by the Required
Co-Agents, in their sole discretion, sufficient to increase the value of
the Total Borrowing Base Assets by the amount necessary to eliminate
such Deficiency.
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SECTION 7.2. Negative Covenants. The Borrower agrees with each Bank
that, until each of the Commitments have expired and until all Obligations
have been paid and performed in full, the Borrower will perform the
obligations set forth in this SECTION 7.2.
SECTION 7.2.1. Business Activities. The Borrower will not, and
will not permit any of its Subsidiaries to, engage in any business activity
other than the leasing, selling, maintaining, financing and providing of
technical services related to data processing, communications, computer,
medical diagnostic and other capital equipment and such activities as may be
incidental or related thereto, nor purchase or invest, directly or
indirectly, in any substantial amount of assets or property other than
assets or property useful and to be used in its businesses as presently
conducted.
SECTION 7.2.2. Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Loans and other Obligations;
(b) Indebtedness existing as of the effective date of this Agreement
and set forth on EXHIBIT G hereto; PROVIDED, HOWEVER, that all such
Indebtedness shall be repaid in accordance with its terms with no
extension, renewal or other modification;
(c) unsecured Indebtedness incurred in the ordinary course of
business (including open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, but excluding
Indebtedness incurred through the borrowing of money or Contingent
Liabilities);
(d) Funded Debt incurred by the Borrower or any of its Subsidiaries
or any of its partnerships or joint ventures after the date hereof, which
constitutes a Purchase Money Obligation or a Capital Lease Liability;
(e) Funded Debt incurred by the Borrower under credit facilities
(whether secured or unsecured) having amortization schedules acceptable to
the Required Co-Agents, in their reasonable discretion; PROVIDED, HOWEVER,
that Funded Debt incurred by Borrower under a secured credit facility
shall be permitted hereunder only if the creditor with respect to such
Funded Debt is or shall become a party to the Intercreditor Agreement;
(f) Subordinated Debt of the Borrower;
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(g) any floor plan financing of the Borrower or its Subsidiaries or
any of Borrower's or any of its Subsidiaries' partnerships or joint
ventures; and
(h) any Non-Recourse Debt of the Borrower or any of its Subsidiaries
or any non-recourse Indebtedness of any of Borrower's or any of its
Subsidiaries' partnerships or joint ventures.
SECTION 7.2.3. Liens. The Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its property, revenues or assets, whether now owned or hereafter
acquired, except:
(a) Liens in favor of any of the Banks, the Co-Agents and/or the
Collateral Agent granted in connection herewith;
(b) Liens for taxes or claims of the nature described in SECTION
7.1.9 hereof which are not yet due or which are being contested as
permitted by such section;
(c) Liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(d) Liens on fixed assets securing Purchase Money Obligations or
Capital Lease Liabilities provided (i) the Indebtedness secured by such
Liens does not exceed ninety percent (90%) of the cost of assets acquired
and (ii) such Liens do not encumber any property other than assets
acquired subject thereto;
(e) Liens on leases (and related equipment) which have been
discounted on a non-recourse basis in the ordinary course of the business
of the Borrower and its Subsidiaries;
(f) Liens on equipment leases and related equipment leased thereunder
imposed in the ordinary course of business by vendors of such equipment to
secure the purchase price therefor, provided such Liens are released
within sixty (60) days of the later of (i) date of invoice for such
equipment or (ii) the date on which installation of the subject equipment
has occurred;
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(g) Liens securing Non-Recourse Debt issued with respect to any
securitized pool of assets but only to the extent that such Liens do not
encumber any assets other than those subject to the pooling arrangement in
question;
(h) Liens securing floor plan financing and only covering the
inventory being financed; and
(i) Liens securing Funded Debt permitted under SECTION 7.2.2(e).
SECTION 7.2.4. Financial Condition. The Borrower will not suffer or
permit:
(a) Consolidated Tangible Net Worth to be less than (i) Sixty-Seven
Million Dollars ($67,000,000) PLUS (ii) seventy-five percent (75%) 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 Borrower's Form 10-K or
Form 10-Q for each such Fiscal Quarter PLUS (iii) the net proceeds
received by the Borrower from the sale of any capital stock of the
Borrower after January 31, 1994.
(b) 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.
(c) The ratio of (i) Income Available for Total Interest Expense to
(ii) Total Interest Expense, to be less than 1.1 to 1.0, calculated as at
the end of (A) the Fiscal Quarter ending July 31, 1994 for the immediately
preceding two (2) Fiscal Quarters then ending, (B) the Fiscal Quarter
ending October 31, 1994 for the immediately preceding three (3) Fiscal
Quarters then ending, (C) the Fiscal Quarter ending January 31, 1995 and
each Fiscal Quarter thereafter, for the immediately preceding four (4)
Fiscal Quarters then ending.
(d) The ratio of (i) Income Available for Recourse Interest Expense
to (ii) Total Recourse Interest Expense, to be less than 1.35 to 1.0,
calculated as at the end of (A) the Fiscal Quarter ending July 31, 1994
for the immediately preceding two (2) Fiscal Quarters then ending, (B) the
Fiscal Quarter ending October 31, 1994 for the immediately preceding three
(3) Fiscal Quarters then ending, (C) the Fiscal Quarter ending January 31,
1995 and each Fiscal Quarter thereafter, for the immediately preceding
four (4) Fiscal Quarters then ending.
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(e) The ratio of (i) the sum of (w) Senior Recourse Debt at the end
of each Fiscal Quarter PLUS (x) Indebtedness of the Borrower under the
real estate mortgage relating to the Borrower's Westlake, Ohio facility at
the end of such Fiscal Quarter (to the extent not included in the
calculation of Senior Recourse Debt), to (ii) the sum of (y) Consolidated
Tangible Net worth as at the end of such Fiscal Quarter PLUS (z) the
outstanding principal amount of all Subordinated Indebtedness as at the
end of such Fiscal Quarter, to exceed 3.0 to 1.0 as at the end of each
Fiscal Quarter.
(f) The ratio of (i) Residual Values of the Borrower and its
Subsidiaries (calculated on a consolidated basis at the end of the Fiscal
Quarter in question) to (ii) (y) Consolidated Tangible Net Worth plus (z)
the outstanding principal amount of all Subordinated Debt (as at the end
of the Fiscal Quarter in question), to exceed 1.5 to 1.0.
SECTION 7.2.5. Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume, purchase or suffer or permit
to exist any Investment in any other Person, except Investments existing on
the Closing Date as set forth on EXHIBIT H hereto; PROVIDED, HOWEVER, that
the Borrower or any of its Subsidiaries may hold notes and/or securities
issued to it in settlement of any claim against an insolvent debtor
(including a debtor that is unable to pay its debts as they fall due).
SECTION 7.2.6. Restricted Payments, etc. On and at all times after
the date hereof, Borrower will not, and not permit any of its
Subsidiaries to, make any Restricted Payments, except payments by a Subsidiary
to the Borrower.
SECTION 7.2.7. Consolidation, Merger, etc. The Borrower will not, nor
will it permit any Subsidiary of the Borrower to merge, acquire or
consolidate with or acquire substantially all of the assets or the stock of
any other corporation.
SECTION 7.2.8. Asset Dispositions, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, dispose or grant options, warrants or other
rights with respect to, all or any part of its assets (including
accounts receivable and capital stock of Subsidiaries) to any Person,
other than
(a) sales, transfers, leases, contributions or conveyances of
Inventory or leased assets in the ordinary course of its business;
(b) sales or transfers of assets by a Subsidiary to the Borrower;
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(c) sales of lease Receivables under securitized pools in the
ordinary course of business; and
(d) sales, transfers, leases contribution or conveyances of assets
outside the ordinary course of its business, but only so long as the
Borrower or its Subsidiary, as the case may be, complies with the terms
and provisions of Sections 4 and 6 of the Security Agreement in connection
with any such sale, transfer, lease, contribution or conveyance.
SECTION 7.2.9. Transactions with Affiliates. Except on terms no
less favorable to the Borrower or Subsidiary of the Borrower, as the case
may be, than would be obtainable if no such relationship existed, Borrower
will not, nor will it permit any Subsidiary of the Borrower to, purchase,
acquire or lease any property from, or sell, transfer or lease any property
to, or loan or advance money to, or otherwise deal with (a) any director,
officer or employee of the Borrower or any Subsidiary of the Borrower, or
(b) any person who, directly or indirectly, either individually or together
with members of his immediate family (as defined in Item 404 of Regulation
S-K ("Item 404") promulgated pursuant to the Securities Act of 1933, as
amended), beneficially owns one percent (1%) or more of the voting stock of
the Borrower or (c) any member of the immediate family (as defined in Item
404), of any person listed clause (a) or (b) above, and his or her spouse or
(d) any company in which any person described in clause (a), (b) or (c)
above owns a one percent (1%) or greater equity interest.
SECTION 7.2.10. Subordination of Claims. Other than in the ordinary
course of business, Borrower will not, nor will it permit any Subsidiary of
the Borrower to, subordinate or permit to be subordinated any claim against,
or obligation of another person, firm or corporation held or owned by it
to any other claim against, or obligation of, such other person, firm or
corporation.
SECTION 7.2.11. Credit Rating System. The Borrower will not, and
will not permit any of its Subsidiaries to, modify its credit rating system
with respect to grading leases if, after giving effect to such
modification, such credit rating system is less restrictive and less
rigorous than the credit rating system which the Borrower has in place as of
January 31, 1994, a written copy of which credit rating system has been
delivered to the Co-Agents prior to the Closing Date.
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ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this SECTION 8.1 shall constitute an "EVENT
OF DEFAULT".
SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall default
in the payment when due and payable of any principal of or interest on any
Loan, or any fee or of any other Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty
of the Borrower or any Subsidiary Guarantor made or deemed to be made
hereunder or pursuant hereto or in any other Loan Document executed by it
or any other writing or certificate furnished by or on behalf of the
Borrower or any Subsidiary Guarantor to any of the Co-Agents or any Bank or
pursuant thereto for the purposes of or in connection with this Agreement
or any such other Loan Document is or shall be incorrect when made (or
deemed made) in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower or any of its Subsidiaries shall default in the due
performance and observance of any of its obligations under SECTION 7.1.9,
SECTION 7.1.11 or SECTION 7.2, or under the Security Agreement.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations.
The Borrower or any of its Subsidiaries shall default in the due
performance and observance of any other agreement contained herein (other
than those referred to in SECTIONS 8.1.1, 8.1.2 or 8.1.3 hereof) or in any
other Loan Document other than as referenced in SECTION 8.1.3 executed by
it, and such default shall continue unremedied for a period of ten (10)
days after the occurrence thereof.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Non-Recourse
Debt and Indebtedness described in SECTION 8.1.1) of the Borrower or any
of its Subsidiaries having a principal amount, individually or in the
aggregate, in excess of Five Hundred Thousand Dollars ($500,000), or a
default shall occur in the performance or observance of any obligation or
condition with respect to such Recourse Debt if the effect of such default is
to accelerate the maturity of any such Recourse Debt or to enable (or would
be, with the passage of time or giving of notice or both, to enable) any
holder of any such Recourse Debt to accelerate the maturity of such
Recourse Debt.
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SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money in excess of the lesser of (i) Five Hundred Thousand Dollars ($500,000).
SECTION 8.1.7. Pension Plans. Any of the following events shall
occur with respect to any Pension Plan:
(a) the institution of any steps by the Borrower, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, the Borrower or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan, in excess
of Five Hundred Thousand Dollars ($500,000); or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION 8.1.8. Bankruptcy, Insolvency, etc., of Borrower.
(a) The Borrower shall discontinue business;
(b) The Borrower shall become insolvent or generally fail to pay, or
admit in writing its inability or unwillingness to pay, debts as they
become due;
(c) The Borrower shall apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other custodian for
the Borrower or any property of any thereof, or make a general assignment
for the benefit of creditors;
(d) The Borrower shall in the absence of such application, consent or
acquiescence, permit or suffer to exist any judgment, decree or order for
the appointment of a trustee, receiver, sequestrator or other custodian
for the Borrower or for a substantial part of the property of any thereof;
(e) The Borrower shall permit or suffer to exist the commencement of
any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower;
(f) The Borrower shall take or omit to take any other action
authorizing, or in furtherance of, any of the foregoing.
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SECTION 8.1.9. Bankruptcy, Insolvency, etc., of Borrower's Subsidiaries.
(a) Any of Borrower's Subsidiaries shall become insolvent or
generally fail to pay, or admit in writing its inability or
unwillingness to pay, debts as they become due;
(b) Any of Borrower's Subsidiaries shall apply for, consent
to, or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for such Subsidiary or any property of
any thereof, or make a general assignment for the benefit of creditors;
(c) Any of Borrower's Subsidiaries shall in the absence of
such application, consent or acquiescence, permit or suffer to exist
any judgment, decree or order for the appointment of a trustee,
receiver, sequestrator or other custodian for such Subsidiary or for a
substantial part of the property of any thereof;
(d) Any of Borrower's Subsidiaries shall permit or suffer to
exist the commencement of any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or
insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of such Subsidiary; or
(e) Any of Borrower's Subsidiaries shall take or omit to take any
other action authorizing, or in furtherance of, any of the foregoing.
SECTION 8.1.10 Material Adverse Change. There shall have occurred a
material adverse change in the condition (financial or otherwise),
operations, assets, business, properties or prospects of the Borrower
and its Subsidiaries, as determined by the Required Co-Agents, in their
sole discretion, other than the Existing Adverse Conditions.
SECTION 8.2. Action if Bankruptcy of Borrower. If any Event of
Default described in CLAUSES (A) through (F) of SECTION 8.1.8 shall occur,
(a) all of the Commitments and the credits hereby established shall
automatically and forthwith terminate, if not theretofore terminated, and no
Bank thereafter shall be under any obligation to grant any further Loans
hereunder, and (b) the outstanding principal amount of and interest on all
outstanding Loans and all other Obligations shall automatically be and
become immediately due and payable, all without any presentment,
notice or demand of any kind, all of which are hereby waived by
Borrower.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in CLAUSES (A) through (F) of
Section 8.1.8) shall occur for any reason, whether voluntary or
involuntary, the Required Banks shall have the
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right in their discretion, by a notice given to the Borrower by the
Administrative Agent upon the direction of the Required Banks, to (a)
terminate the Commitments and the credits hereby established, if not
theretofore terminated, and forthwith upon such election the obligations of
the Banks (or any of them) to make any further loans or to issue or
participate in any Letter of Credit hereunder immediately shall be
terminated, and (b) declare all or any portion of the outstanding
principal amount of and interest on Loans and all other Obligations to be
due and payable, whereupon the full unpaid principal amount of and interest
on such Loans and other Obligations which shall be so declared due and
payable shall be and become immediately due and payable in full,
without any further notice, demand or presentment, each of which are
hereby waived by the Borrower.
SECTION 8.4. Deposits for Letters of Credit. Upon any acceleration
of the maturity of the Loans and other Obligations pursuant to SECTION 8.2
or 8.3, so long as any Letter of Credit has not been fully drawn and has
not been cancelled or expired, upon written demand by the Administrative
Agent, the Borrower shall deposit and maintain with the Administrative
Agent, upon the direction of the Required Banks, an account with cash in
an amount equal to the aggregate unpaid face amount of all outstanding
Letters of Credit plus all fees and other amounts due or which may become
due with respect thereto. The Borrower shall have no control over funds in
such cash deposit account, which at the option of the Administrative Agent,
upon the direction of the Required Banks, may be interest bearing. Such
funds shall be promptly applied by the Administrative Agent, upon the
direction of the Required Co- Agents, to reimburse itself for drafts drawn
under the Letters of Credit. Any funds remaining in such cash deposit
account after the cancellation or expiration of all Letters of Credit and
the payment in full of all Letters of Credit and all Obligations
incurred by Borrower under this Agreement shall be promptly paid over to the
Borrower.
ARTICLE IX
THE CO-AGENTS
SECTION 9.1. Actions. Each Bank hereby appoints and authorizes NCB,
and NCB hereby agrees to act as Administrative Agent for the Banks under,
for purposes of and subject to the terms of this Agreement, the Notes and
each other Loan Document. Each Bank authorizes the Administrative Agent
to act as Administrative Agent on behalf of such Bank under this Agreement,
the Notes and each other Loan Document and, in the absence of other written
instructions from the Required Banks received from time to time by the
Administrative Agent (with respect to which the Administrative Agent
agrees that it will comply, except as otherwise provided in this Section
or as otherwise advised by counsel), to exercise such powers hereunder and
thereunder as are specifically delegated to or
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required of the Administrative Agent by the terms hereof and thereof,
together with such powers as may be reasonably incidental thereto. Each
Bank hereby agrees to indemnify (which indemnity shall survive any
termination of this Agreement) the Administrative Agent and each
Co-Agent, PRO RATA according to such Bank's Percentage, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, disbursements or expenses of any kind or
nature whatsoever which may at any time be imposed on, incurred by, or
asserted against the Administrative Agent or any Co-Agent in any way relating
to or arising out of this Agreement, the Notes, the Letters of Credit and
any other Loan Document or any action taken or omitted by the Administrative
Agent and/or such Co- Agent with respect to such documents, including
reasonable attorneys' fees, and as to which the Administrative Agent and/or
such Co-Agent is not reimbursed by the Borrower; PROVIDED, HOWEVER, that no
Bank shall be liable for the payment of the ordinary expenses of
administration of the Administrative Agent or any Co-Agent or of any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, disbursements or expenses
which are determined by a court of competent jurisdiction in a final
proceeding to have resulted solely from the Administrative Agent's or any
Co-Agent's gross negligence or wilful misconduct. Neither the Administrative
Agent nor any Co-Agent shall be required to take any action hereunder,
under the Notes or under any other Loan Document, or to prosecute or defend
any suit in respect of this Agreement, the Notes or any other Loan Document,
unless it is indemnified hereunder to its satisfaction. If any indemnity in
favor of the Administrative Agent or any Co-Agent shall be or become, in
the Administrative Agent's or such Co-Agent's determination, inadequate, the
Administrative Agent or such Co-Agent, as the case may be, may call
for additional indemnification from the Banks and cease to do the acts
indemnified against hereunder until such additional indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Bank by
2:00 p.m., Cleveland, Ohio, time, on the day of a Borrowing that such
Bank will not make available the amount which would constitute its
Percentage of the Borrowing on the date specified therefor, the
Administrative Agent may assume that such Bank has made such amount available
to the Administrative Agent on the date of such Borrowing and, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have made
such amount available to the Administrative Agent, such Bank and the
Borrower severally agree to repay the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each
day from the date the Administrative Agent made such amount available to the
Borrower to the date such amount is repaid to the Administrative Agent, at
the interest rate applicable to the Borrowing in question. If such Bank
shall repay to the Administrative Agent such corresponding amount, such
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amount shall constitute such Bank's Loan as part of such Borrowing for
purposes of this Agreement.
SECTION 9.3 Exculpation. Neither the Administrative Agent nor any of
the Co- Agents nor any of their respective directors, officers, attorneys,
employees or agents shall be liable to any Bank for any action taken or
omitted to be taken by it or them under this Agreement or any other Loan
Document, or in connection herewith or therewith, except for its or their own
wilful misconduct or gross negligence, nor responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan Document,
nor for the creation, perfection or priority of any Liens purported to be
created by any of the Loan Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral security,
nor to make any inquiry respecting the performance by the Borrower of its
obligations hereunder or under any other Loan Document. Any such inquiry
which may be made by the Administrative Agent or any Co-Agent shall not
obligate it to make any further inquiry or to take any action. The
Administrative Agent or any Co-Agent may consult with legal counsel selected
by it with reasonable care and shall be entitled to rely upon the advice of
such legal counsel concerning legal matters and upon any notice, consent,
certificate, statement or writing which the Administrative Agent or such
Co-Agent believes to be genuine and to have been presented by a proper
Person and shall not be liable for any action taken or suffered in good
faith by it in accordance with the opinion of such legal counsel.
SECTION 9.4. Successors. Any Co-Agent may resign as such at any
time by giving thirty (30) days prior written notice thereof to the Borrower
and all Banks unless such Co-Agent is required to resign pursuant to any
law or regulation, directive, guideline, decision or request (whether or
not having the force of law) of any court, central bank, regulator or other
governmental authority, in which case such Co-Agent shall use reasonable
efforts promptly to notify the Borrower and all Banks of such required
resignation. If all Co-Agents at any time shall have resigned, whether
or not on the same date, the Required Banks may appoint another Bank as a
successor which shall thereupon become the Administrative Agent and sole
Co-Agent hereunder. If no successor shall have been so appointed by the
Required Banks, or the Bank so appointed shall not have accepted such
appointment, within thirty (30) days after the retiring Co-Agent's giving
notice of resignation, then the retiring Co-Agent may, on behalf of
the Banks, appoint a successor Administrative Agent and sole Co-Agent,
which shall be one of the Banks or a commercial banking institution
organized under the laws of the U.S. (or any State thereof) or a U.S.
branch or agency of a commercial banking institution, and having a combined
capital and surplus of at least Five Hundred Million Dollars
($500,000,000). Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall be entitled to receive from the retiring
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Administrative Agent such documents of transfer and assignment as such
successor Administrative Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this
Agreement and any liabilities arising in connection herewith. After
any retiring Administrative Agent's resignation hereunder as the
Administrative Agent, the provisions of
(a) this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Administrative Agent
under this Agreement; and
(b) SECTION 10.3 and SECTION 10.4 shall continue to inure to its
benefit.
SECTION 9.5. Loans by Agent Banks. The Administrative Agent and each
Co-Agent shall have the same rights and powers with respect to (y) the Loans
made by it or any of its Affiliates, and (z) the Notes and Letter of Credit
interests held by it or any of its Affiliates as any other Bank and may
exercise the same as if it were not the Administrative Agent or a Co-Agent.
The Administrative Agent, each Co-Agent and their respective Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or Affiliate of the Borrower
as if it were not the Administrative Agent or a Co-Agent hereunder.
SECTION 9.6. Credit Decisions. Each Bank hereby acknowledges and
agrees that (a) the Co-Agents have made no representation or warranty, express
or implied, with respect to the creditworthiness, financial condition, or
any other condition of Borrower or any Subsidiary or with respect to the
statements contained in any information furnished in connection herewith
or in any other oral or written communication between the Co-Agents
and/or the Administrative Agent and such Bank, and (b) it has, independently
of the Co-Agents, the Administrative Agent and each other Bank, and based
on such Bank's review of the financial information of the Borrower, this
Agreement, the other Loan Documents (the terms and provisions of which
being satisfactory to such Bank) and such other documents, information and
investigations as such Bank has deemed appropriate, made its own credit
decision to make its Loans. Each Bank also acknowledges and agrees that it
will, independently of the Co-Agents, the Administrative Agent and each
other Bank, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights
and privileges available to it under this Agreement or any other Loan
Document. Each Bank agrees that neither the Administrative Agent nor the
Co-Agents have the duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other information with
respect
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thereto (other than such notices as may be expressly required to be given
by the Administrative Agent to the Banks hereunder), whether coming into
its possession before the granting of the first Loans or at any time
thereafter.
SECTION 9.7. Copies, etc. The Administrative Agent (or the Co-Agents,
as the case may be) shall give prompt notice to each Bank of each notice
or request required or permitted to be given to the Administrative Agent or
the Co-Agents by the Borrower pursuant to the terms of this Agreement (unless
concurrently delivered to the Banks by the Borrower). The Co-Agents (or the
Administrative Agent, as the case may be) will distribute to each Bank each
document or instrument received for their account and copies of all other
communications received by the Co-Agents (or the Administrative Agent, as the
case may be) from the Borrower for distribution to the Banks by the
Co-Agents (or the Administrative Agent, as the case may be) in accordance
with the terms of this Agreement, as deemed necessary by the Co-Agents (or
the Administrative Agent, as the case may be) or upon the request of such Bank.
SECTION 9.8 Note Holders. The Administrative Agent may treat the
payee of any Note as the holder thereof until written notice of transfer
shall have been filed with it signed by such payee and in form
satisfactory to the Administrative Agent.
SECTION 9.9 Knowledge of Default. It is expressly understood and
agreed that the Administrative Agent shall be entitled to assume that no
Default or Event of Default has occurred and is continuing, unless an Event
of Default under SECTION 8.1.1 has occurred and is continuing or the
Administrative Agent has otherwise been notified by a Bank in writing that such
Bank considers that a Default or an Event of Default has occurred and is
continuing and specifying the nature thereof.
SECTION 9.10 Action by Agent. So long as the Administrative Agent
shall be entitled, pursuant to SECTION 9.9 hereof, to assume that no
Default or Event of Default shall have occurred and be continuing, the
Administrative Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may
be vested in it by, or with respect to taking or refraining from taking any
action or actions which it may be able to take under or in respect of, this
credit agreement. The Administrative Agent shall incur no liability
under or in respect of this Agreement by acting upon any notice,
certificate, warranty or other paper or instrument believed by it to be
genuine or authentic or to be signed by the proper party or parties, or
with respect to anything which it may do or refrain from doing in the
reasonable exercise of its judgment, or which may seem to it to be necessary
or desirable in the premises.
SECTION 9.11 Notices, Default, Etc. In the event that the
Administrative Agent shall have acquired actual knowledge of any
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Default or Event of Default, the Administrative Agent shall promptly
notify the Banks and will take such actions and assert such rights under this
Agreement as set forth in ARTICLE VIII hereof and as the Required Banks (or
the Banks having sixty- seven percent (67%) of the Commitments or
sixty-seven percent (67%) (by amount) of the Notes or all of the Banks, if
required by SECTION 10.1 hereof) shall direct and the Administrative Agent
shall inform the other Banks in writing of the action taken. The
Administrative Agent may take such action and assert such rights as it deems
to be advisable, in its discretion, for the protection of the interests of the
holders of the Notes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in
writing and consented to by the Required Banks and the Borrower;
PROVIDED, HOWEVER, that no such amendment, modification or waiver which
would:
(a) modify any requirement hereunder that any particular action be
taken by all the Banks or by the Required Banks shall be effective unless
consented to by each Bank;
(b) modify this SECTION 10.1, change the definition of "REQUIRED
BANKS", increase the Commitment or the Percentage of any Bank, reduce any
fees described in ARTICLE III, or release any collateral security, except
as otherwise specifically provided in any Loan Document, shall be made
without the consent of each Bank and each holder of a Note;
(c) extend the due date for, or reduce the amount of, any scheduled
repayment or prepayment of principal of or interest on any Loan (or reduce
the principal amount of or rate of interest on any Loan) shall be made
without the consent of the holder of that Note evidencing such Loan;
(d) affect adversely the interests, rights or obligations of the Co-
Agents or the Administrative Agent (in such capacity) shall be made
without consent of the Co-Agents or the Administrative Agent, as the case
may be;
(e) extend the Commitment Period of any Bank shall be made without
the specific consent of such Bank;
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(f) amend, modify, terminate or waive any provision of SECTION 7.2.4
shall be effective unless consented to by Banks holding at least sixty-
seven percent (67%) of the then aggregate amount of the Commitments or, if
the Commitments shall have been terminated, holding Notes evidencing at
least sixty-seven percent (67%) of the then aggregate outstanding
principal amount of the Loans and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose
given; or
(g) extend the Expiration Date unless consented to by each Bank as
to which such extension is applicable.
No failure or delay on the part of the Administrative Agent, the Co-Agents,
any Bank or the holder of any Note in exercising any power or right under
this Agreement or any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. No notice to or demand on the Borrower in any case shall entitle it
to any notice or demand in similar or other circumstances. No waiver or
approval by the Administrative Agent, the Co-Agents, any Bank or the holder
or any Note under this Agreement or any other Loan Document shall, except as
may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require
any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION 10.2. Notices. All notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be
in writing and addressed, delivered or transmitted to such party at its
address set forth below its signature hereto or set forth in the Bank
Assignment Agreement or at such other address as may be designated by such
party in a notice to the other parties. Any notice, if mailed and
properly addressed with postage prepaid or if properly addressed and sent
by pre-paid courier service, shall be deemed given when so mailed or sent,
except that any notice by the Borrower to the Administrative Agent pursuant to
ARTICLE II shall be deemed given only when received.
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to
pay on demand all expenses of the Banks (including the reasonable fees and
out-of-pocket expenses of counsel to the Co-Agents and of local counsel,
if any, who may be retained by counsel to the Co-Agents) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any
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other Loan Document as may from time to time hereafter be required,
(b) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document, and
(c) any inspection, audit or review made pursuant to SECTION 7.1.5.
The Borrower further agrees to pay, and to save the Administrative Agent,
the Co- Agents and the Banks harmless from all liability for, any stamp or
other taxes which may be payable in connection with the execution or delivery
of this Agreement, any Borrowing hereunder, or the issuance of the Notes,
the Letters of Credit or any other Loan Documents. The Borrower also
agrees to reimburse the Administrative Agent, the Co-Agents and each Bank
upon demand for all out-of-pocket expenses (including reasonable
attorneys' fees and legal expenses) incurred by the Administrative
Agent, the Co-Agents or such Bank in connection with (y) the
negotiation of any restructuring or "work-out", whether or not consummated,
of any Obligations and (z) the enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Bank and the making of the Loans, the
Borrower hereby indemnifies, exonerates and holds the Administrative Agent,
each Co-Agent and each Bank and each of their respective officers,
directors, employees and agents (collectively, the "INDEMNIFIED PARTIES")
free and harmless from and against any and all actions, causes of action,
suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party
is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
"INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of
them as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan or any Letter of
Credit;
(b) the entering into and performance of this Agreement and any other
Loan Document by any of the Indemnified Parties;
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any Person,
whether or not the Indemnified Party is party thereto;
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(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the Release by the Borrower or any of its
Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of
any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the control
of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower
hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under
SECTIONS 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Banks
under SECTION 9.1, shall in each case survive any termination of this
Agreement and the payment in full of all Obligations. The representations and
warranties made by each Obligor in this Agreement and in each other Loan
Document shall survive the execution and delivery of this Agreement and each
such other Loan Document.
SECTION 10.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or such Loan Document or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall
not affect the meaning or interpretation of this Agreement or such other
Loan Document or any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts,
each of which shall be deemed to be an original and all of which shall
constitute together but one and the same agreement. This Agreement shall
become effective when counterparts hereof executed on behalf of the Borrower
and each Bank (or notice
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thereof satisfactory to the Administrative Agent) shall have been received
by the Administrative Agent and notice thereof shall have been given by the
Administrative Agent to the Borrower and each Bank. Upon the effectiveness
of this Agreement, the Original Agreement and all amendments thereto shall be
superseded and of no further effect; provided, however, that all liabilities
and obligations accrued under the Original Agreement prior to the date hereof
shall remain unaltered hereby.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO. For
purposes of any action or proceeding involving this Agreement, the Borrower
hereby expressly submits to the nonexclusive jurisdiction of all Federal
and State courts located in the State of Ohio and consents that it may be
served with any process or paper by registered mail or by personal service
within or without the State of Ohio in accordance with applicable law,
provided a reasonable time for appearance is allowed. In addition, by
executing this Agreement, the Notes and each other Loan Document to which it
is a party, the Borrower, on behalf of itself and each of its
Subsidiaries, hereby irrevocably and unconditionally waives any objection
which it may now or hereafter have to the laying of venue or any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement, the Notes or any other Loan Document brought in any of the
aforesaid courts, and hereby further irrevocably and unconditionally
waives and agrees not to plead any claim that any such action or proceeding
brought in any such court has been brought in an inconvenient forum. To the
extent that the Borrower has or hereafter may acquire any immunity
from jurisdiction of any Ohio State or Federal court sitting in
Cleveland, Cuyahoga County, Ohio, in any action or proceeding arising
out of or relating to this Agreement or from any legal process in such
action or proceeding (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, the Borrower hereby irrevocably waives to
the fullest extent permitted by applicable law such immunity in respect of
its obligations under this Agreement. This Agreement, the Notes and the
other Loan Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any
prior agreements, written or oral, with respect thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns; PROVIDED, HOWEVER, that:
(a) the Borrower may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Co-Agents and all
Banks; and
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(b) the rights of sale, assignment and transfer of the Banks are
subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Loans and Note; Participation in
Loans and Note. Each Bank may assign, or sell participations in, its Loans
to one or more other Persons in accordance with this SECTION 10.11.
SECTION 10.11.1. Assignments. Any Bank,
(a) with the written consent of (i) the Borrower, but such consent
shall only be required so long as the Obligations shall not have been
accelerated, and (ii) the Co-Agents (which consent(s) shall not be
unreasonably delayed or withheld and which consents, in the case of the
Borrower, shall be deemed to have been given in the absence of a written
notice delivered by the Borrower to the Co-Agents, on or before the fifth
(5th) Business Day after receipt by the Borrower of such Bank's request
for consent, stating, in reasonable detail, the reasons why the Borrower
proposes to withhold such consent) may at any time assign and delegate to
one or more commercial banks or other financial institutions, and
(b) with notice to the Borrower and the Co-Agents, but without the
consent of the Borrower or the Co-Agents, may assign and delegate to any
of its Affiliates or to any other Bank
(each Person described in either of the foregoing clauses as being the
Person to whom such assignment and delegation is to be made, being
hereinafter referred to as an "ASSIGNEE BANK"), all or any fraction of such
Bank's total Loans and Commitment (which assignment and delegation shall
be of a constant, and not a varying percentage of all the assigning
Bank's Loans and Commitment) in a minimum aggregate amount of Five Million
Dollars ($5,000,000); PROVIDED, HOWEVER, that any such Assignee Bank will
comply, if applicable, with the provisions contained in the last sentence of
SECTION 4.6; and PROVIDED, FURTHER, that the Borrower, each other
Obligor, the Co-Agents and the Administrative Agent shall be entitled to
continue to deal solely and directly with such Bank in connection with the
interests so assigned and delegated to an Assignee Bank until
(c) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to
such Assignee Bank, shall have been given to the Borrower and the Co-
Agents by such Bank and such Assignee Bank,
(d) such Assignee Bank shall have executed and delivered to the
Borrower and the Co-Agents a Bank Assignment Agreement, substantially in
the form of
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Exhibit B hereto and otherwise acceptable to the Co-Agents, and
(e) the processing fees described below shall have been paid.
From and after the date that the Co-Agents accept such Bank Assignment
Agreement, (y) the Assignee Bank thereunder shall be deemed automatically
to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Bank
in connection with such Bank Assignment Agreement, shall have the rights and
obligations of a Bank hereunder and under the other Loan Documents, and (z)
the assignor Bank, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Bank Assignment
Agreement, shall be released from its obligations hereunder and under the
other Loan Documents. Within five (5) Business Days after its receipt of
notice that the Co-Agents have received an executed Bank Assignment
Agreement, the Borrower shall execute and deliver to the Administrative Agent
(for delivery to the relevant Assignee Bank) a new Note evidencing such
Assignee Bank's assigned Loans and Commitment and, if the assignor Bank
has retained Commitment hereunder, a replacement Note in the maximum
principal amount of the Commitment retained by the assignor Bank hereunder
(such Note to be in exchange for, but not in payment of, that Note then
held by such assignor Bank). Each such Note shall be dated the date of the
predecessor Note. The assignor Bank shall mark the predecessor Note
"exchanged" and deliver it to the Borrower. Accrued interest on that part
of the predecessor Note evidenced by the new Note, and accrued fees, shall
be paid as provided in the Bank Assignment Agreement. Accrued interest on
that part of the predecessor Note evidenced by the replacement Note shall
be paid to the assignor Bank. Accrued interest and accrued fees shall be
paid at the same time or times provided in the predecessor Note and in this
Agreement. Such assignor Bank or such Assignee Bank must also pay a
processing fee to the Administrative Agent upon delivery of any Bank
Assignment Agreement in the amount of Two Thousand Five Hundred Dollars
($2,500). Any attempted assignment and delegation not made in accordance
with this SECTION 10.11.1 shall be null and void.
SECTION 10.11.2. Participations. Any Bank may at any time sell to one
or more commercial banks or other Persons (each of such commercial banks and
other Persons being herein called a "PARTICIPANT") participating interests in
any of the Loans or other interests of such Bank hereunder; PROVIDED, HOWEVER,
that
(a) no participation contemplated in this Section 10.11.2 shall
relieve such Bank from its obligations hereunder or under any other Loan
Document,
(b) such Bank shall remain solely responsible for the performance of
such obligations,
64
<PAGE> 70
(c) the Borrower and each other Obligor, the Co-Agents and the
Administrative Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this
Agreement and each of the other Loan Documents,
(d) no Participant, unless such Participant is an Affiliate of such
Bank, or is itself a Bank, shall be entitled to require such Bank to take
or refrain from taking any action hereunder or under any other Loan
Document, except that such Bank may agree with any Participant that such
Bank will not, without such Participant's consent, take any actions of the
type described in CLAUSE (B), (C) or (E) of SECTION 10.1, and
(e) the Borrower shall not be required to pay any amount under
SECTION 4.6 that is greater than the amount which it would have been
required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
SECTIONS 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a
Bank.
SECTION 10.12. Removal of Banks. So long as no Default shall then
exist, the Borrower shall have the right, upon the giving of at least sixty
(60) days' prior written notice, to remove any Bank herefrom. Any such notice
shall be delivered to each of the Banks. The Borrower shall, on the
effective date of any such removal, pay to the Bank so being removed an
amount of money equal to the outstanding principal and interest balance of
its Loans hereunder and any other fees or moneys due it under this Agreement
and that Bank's Commitments hereunder shall immediately terminate. Any such
prepayment shall be subject to the provisions of SECTION 4.4. Concurrently
with the removal of any Bank herefrom, the Borrower may replace such Bank
with another financial institution acceptable to the remaining Banks,
and appropriate amendments satisfactory to the Co-Agents shall be made to this
Agreement to reflect any such replacement.
SECTION 10.13. Other Transactions. Nothing contained herein shall
preclude the Administrative Agent, either Co-Agent or any other Bank from
engaging in any transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Borrower or any of its
Affiliates in which the Borrower or such Affiliate is not restricted hereby
from engaging with any other Person.
SECTION 10.14. Further Assurances. The Borrower hereby agrees that it
will, from time to time at its own expense, promptly execute and deliver
all further agreements, instruments, certificates and other documents and
writings, and take all further action, that may be necessary or appropriate, or
that the
65
<PAGE> 71
Administrative Agent and/or the Banks may reasonably request, in order to
perfect or protect any Lien which may be now or hereafter granted to
enable the Banks, the Administrative Agent and the Co-Agents to exercise
and enforce their rights under this Agreement and the other Loan Documents
and otherwise to carry out the intent of this Agreement and the other Loan
Documents.
SECTION 10.15. Expiration of Commitment Period. Upon the expiration
of a Bank's Commitment Period, such Bank shall no longer be considered a
"Bank" for purposes of this Agreement and shall be released from any
future liabilities and obligations hereunder; PROVIDED, HOWEVER, that in
no event shall such Bank be released from any liabilities or
obligations which arose on or prior to the expiration of such Bank's
Commitment Period.
SECTION 10.16. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE
CO-AGENTS, THE BANKS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT, THE CO-AGENTS, THE BANKS OR THE BORROWER. THE
BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE BANKS ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
66
<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of
the day and year first above written.
<TABLE>
<S> <C> <C>
Address: One Cleveland Center LDI CORPORATION
1375 East 9th Street
Suite 700
Cleveland, Ohio 44114 By:
Attn: Treasurer Title:
Telephone: _____________________ And by:
Telecopy: _____________________ Title:
Address: National City Center NATIONAL CITY BANK,
P. O. Box 5756 individually and as Co-Agent
Cleveland, OH 44101
Attn: Mark T. Seryak
Telephone: ____________________ By:
Telecopy: ____________________ Title:
Address: Society Center SOCIETY NATIONAL BANK,
127 Public Square
Cleveland, OH 44115 individually and as Co-Agent
Attn: Terry Graffis
Telephone: ____________________
Telecopy: ____________________ By:
Title:
Address: 231 South LaSalle St. CONTINENTAL BANK N.A.,
Chicago, Ill. 60697 individually and as Co-Agent
Attn: Mark Hurley
Telephone: ____________________ By:
Telecopy: ____________________ Title:
Address: 211 West Fort Street COMERICA BANK (successor by
Detroit, MI 48275 merger between Manufacturers
Attn: Ian Hogan Bank, N.A., formerly known
Telephone: ___________________ as Manufacturers National
Telecopy: ____________________ Bank of Detroit)
By:
Title:
</TABLE>
67
<PAGE> 73
<TABLE>
<S> <C>
Address: One First Union Center FIRST UNION NATIONAL BANK OF Charlotte, NC 28288
NORTH CAROLINA
Attn: E.Roger Gebhart
Telephone: (704) 374-4855
Telecopy: (704) 374-4092 By:
Title:
Address: 2450 CNG Tower THE DAIWA BANK, LIMITED
625 Liberty Avenue
Pittsburgh, PA 15222
Attn: John Walsh By:
Telephone: _____________________ Title:
Telecopy: _____________________ And by:_______________________
Title:
Address: 1404 East Ninth Street THE FIFTH THIRD BANK
Cleveland, OH 44115
Attn: Deborah Perkins
Telephone: _____________________ By:
Telecopy: _____________________ Title:
Address: 1350 Euclid Avenue STAR BANK, N.A.
Suite 211
Cleveland, OH 44115
Attn: John Barrett
Telephone: _____________________ By:
Telecopy: _____________________ Title:
Address: 106 S. Main Street FIRST NATIONAL BANK OF OHIO
Akron, Ohio 44308
Attn: Ronald Kruse
Telephone: _____________________
Telecopy: _____________________ By:
Title:
</TABLE>
68
<PAGE> 74
<TABLE>
<S> <C>
Address: Cincinnati Commerce Ctr. THE BANK OF TOKYO TRUST COMPANY
600 Vine Street
Suite 1908
Cincinnati, OH 45202 By:
Attn: Stuart McLean Title:
Telephone: _____________________
Telecopy: _____________________
Address: 1533 North Woodward Ave. MICHIGAN NATIONAL BANK
Suite 200
Bloomfield Hills, MI
48304
Attn: Thomas Kuslits
Telephone: ______________________
Telecopy: _______________________ By:
Title:
Address: 601 Second Avenue South FIRST BANK, N.A.
MPFP 1802
Minneapolis, Minn. 55402
Attn: Conrad A. Keech
Telephone: (612) 973-2126
Telecopy: (612) 973-2148 By:
Title:
</TABLE>
181\22567CAE.101
69
<PAGE> 75
ANNEX A
<TABLE>
<CAPTION>
Commitment
Period
Total Expiration
Commitment Percentage Date
<S> <C> <C> <C>
NATIONAL CITY BANK $ 16,485,047 14.1700% 1/31/95
SOCIETY NATIONAL BANK $ 16,485,047 14.1700% 1/31/95
CONTINENTAL BANK N.A. $ 15,307,543 13.1579% 1/31/95
COMERICA BANK $ 13,188,038 11.3360% 1/31/95
FIRST UNION BANK $ 9,184,526 7.8947% 1/31/95
THE DAIWA BANK, LIMITED $ 6,594,018 5.6680% 1/31/95
THE FIFTH THIRD BANK $ 6,594,018 5.6680% 1/31/95
STAR BANK, N.A. $ 6,594,018 5.6680% 1/31/95
FIRST NATIONAL BANK OF OHIO $ 6,594,018 5.6680% 1/31/95
MICHIGAN NATIONAL BANK $ 6,594,018 5.6680% 1/31/95
THE BANK OF TOKYO TRUST
COMPANY $ 6,594,018 5.6680% 1/31/95
FIRST BANK, N.A. $ 6,123,017 5.2632% 1/31/95
TOTAL $116,337,326 100.0000%
</TABLE>
181\22567CAE.101
<PAGE> 76
EXHIBIT A
PROMISSORY NOTE
$
Cleveland, Ohio
, 19
FOR VALUE RECEIVED, the undersigned LDI Corporation, a Delaware
corporation (the "Borrower"),promises to pay to the
order of _____________________________________________ (the "Bank"), on
the last day of the Bank's Commitment Period, the principal sum of
DOLLARS
or the aggregate unpaid principal amount of all Loans evidenced by this Note
made by the Bank to the Borrower pursuant to Section 2.1 of the Credit
Agreement (as hereinafter defined), whichever is less, in lawful money of
the United States of America. Capitalized terms used herein shall have the
meanings ascribed to them in the Credit Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount of each Loan from time to time outstanding from the date of such Loan
until the payment in full thereof at the rates per annum which shall be
determined in accordance with the provisions of Section 2.3 of the Credit
Agreement. Said interest shall be payable on each date provided for in
said Section 2.3; PROVIDED, HOWEVER, that interest on any principal portion
which is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Prime Rate Loans and LIBOR Loans, and payments of principal of any thereof,
will be shown on the grid(s) attached hereto and made a part hereof or the
Bank shall record such information by such other method as the Bank may
generally employ; PROVIDED, HOWEVER, that failure to make any such entry
shall in no way detract from the Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time, by operation of any provisions for
acceleration of maturity contained in the Credit Agreement or otherwise, the
principal hereof and the unpaid interest thereon shall bear interest, until
paid, for Prime Rate Loans at a rate per annum equal to two percent (2%) in
excess of the Prime Rate from time to time in effect, and for LIBOR Loans
at a rate per annum equal to two and three-quarters percent (2-3/4%) in
excess of the LIBOR Fixed Rate applicable thereto at the due date. All
payments of principal of and interest on this Note shall be made in
immediately available funds.
<PAGE> 77
This Note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of the ____ day of __________, 1994, between the
Borrower, the banks named therein and National City Bank, Society National
Bank and Continental Bank N.A., as Co-Agents (as the same may hereafter be
amended, supplemented, amended and restated or otherwise modified from time
to time, the "Credit Agreement"). Reference is made to such Credit
Agreement for a description of the right of the undersigned to anticipate
payments hereof, the right of the holder hereof to declare this Note due
prior to its stated maturity, and other terms and conditions upon which
this Note is issued.
The undersigned hereby authorizes any attorney-at-law to appear
in any court of record in the State of Ohio, or in any other state or
federal district of the United States, at any time or times after the above
sum becomes due, and waive the issuance and service of process and confess
judgment against the undersigned in favor of any holder of this Note, for the
amount then appearing due, together with the costs of suit, and thereupon
to release all errors and waive all rights of appeal and stay of
execution. The foregoing warrant of attorney shall survive any judgment,
and should any judgment be vacated for any reason the Bank may
nevertheless utilize the foregoing warrant of attorney in thereafter
obtaining an additional judgment or judgments against the undersigned. The
Borrower agrees and consents that the attorney confessing judgment on
behalf of Borrower may also be counsel to the Bank, waives any conflict of
interest which might otherwise arise, and consents to the Payee paying such
confessing attorney a reasonable legal fee or allowing such attorney's
reasonable fees to be paid from the proceeds of collection of the amounts due
hereunder.
WARNING: BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST
YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO
COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH
THE AGREEMENT, OR ANY OTHER CAUSE.
LDI CORPORATION
By:_______________________________
Its:______________________________
And by:___________________________
Its:______________________________
181\22567CAE.101
<PAGE> 78
LOANS AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Name of
Amount of Amount of Unpaid Person
Prime Amount of Principal Principal Making
Date Rate Loan LIBOR Loan Prepaid Balance Notation
</TABLE>
181\22567CAE.101
<PAGE> 79
EXHIBIT B
BANK ASSIGNMENT AGREEMENT
To: LDI Corporation
To: National City Bank, Society National Bank and
Continental Bank N.A.,
as the Co-Agents
LDI CORPORATION
Gentlemen and Ladies:
We refer to CLAUSE (D) of SECTION 10.11.1 of the Amended and Restated
Credit Agreement, dated as of December 4, 1992 (as the same may be amended,
supplemented, amended and restated or otherwise modified from time to
time, the "CREDIT AGREEMENT"), among LDI Corporation, a Delaware
corporation (the "BORROWER"), the various financial institutions (the
"BANKS") as are, or shall from time to time become, parties thereto,
and National City Bank, Society National Bank and Continental Bank
N.A., as Co-Agents for the Banks. Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings provided in
the Credit Agreement.
This agreement is delivered to you pursuant to CLAUSE (D) of SECTION
10.11.1 of the Credit Agreement and also constitutes notice to each of you,
pursuant to CLAUSE (C) of SECTION 10.11.1 of the Credit Agreement, of the
assignment and delegation to
(the "Assignee") of % of the Loans
of (the "Assignor") outstanding under
the Credit
Agreement on the date hereof and the same percentage of the Assignor's
Commitment under the Credit Agreement. After giving effect to the
foregoing assignment and delegation, the Assignor's and the Assignee's
Percentages for the purposes of the Credit Agreement are set forth opposite
such Person's name on the signature pages hereof.
[Add paragraph dealing with accrued interest and fees with respect to
Loans assigned.]
The Assignee hereby acknowledges and confirms that it has received a
copy of the Credit Agreement and the exhibits related thereto, together with
copies of the documents which were required to be delivered under the
Credit Agreement as a condition to the making of the Loans thereunder. The
Assignee further confirms and agrees that in becoming a Bank and in making
its Loans under the Credit Agreement, such actions have and will be made
without recourse to, or representation or warranty by either of the
Co-Agents.
Except as otherwise provided in the Credit Agreement, effective as of the
date of acceptance hereof by the Co-Agents
(a) the Assignee
(i) shall be deemed automatically to have become a party to
the Credit Agreement, have all the rights and obligations of a
"Bank" under the Credit Agreement and the other Loan Documents
as if it were an original signatory
<PAGE> 80
thereto to the extent specified in the second paragraph hereof; and
(ii) agrees to be bound by the terms and conditions set
forth in the Credit Agreement and the other Loan Documents as if
it were an original signatory thereto; and
(b) the Assignor shall be released from its obligations under
the Credit Agreement and the other Loan Documents to the extent
specified in the second paragraph hereof.
The Assignor and the Assignee hereby agree that the
[Assignor][Assignee] will pay to the Administrative Agent the processing fee
referred to in SECTION 10.11.1 of the Credit Agreement upon the delivery
hereof.
The Assignee hereby advises each of you of the following administrative
details with respect to the assigned Loans and requests the Co-Agents to
acknowledge receipt of this document:
(A) Address for Notices
(B) Payment Instructions:
The Assignee agrees to furnish the tax form required by the last
sentence of Section 4.6 (if so required) of the Credit Agreement no later
than the date of acceptance hereof by the Co-Agents.
This Agreement may be executed by the Assignor and Assignee in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement.
<TABLE>
<S> <C>
ADJUSTED PERCENTAGE [ASSIGNOR]
By:
-------------------------
Title:
PERCENTAGE [ASSIGNEE]
By:
--------------------------
Title:
Accepted and Acknowledged this
day of , 19
NATIONAL CITY BANK, SOCIETY NATIONAL BANK,
as Co-Agent as Co-Agent
By: By:
----------------------- ---------------------------
Title: Title:
CONTINENTAL BANK N.A.,
individually and as Co-Agent
By: -----------------------
Title:
</TABLE>
44181\22567CAE.101
<PAGE> 1
FORM OF
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made as of ___________, 1994, by LDI CORPORATION,
a Delaware corporation (the "Grantor"), in favor of CONTINENTAL BANK N.A., as
collateral agent (the "Collateral Agent") for the various financial
institutions (the "Lenders"), as are or may become parties to the Credit
Agreements (as hereinafter defined);
PRELIMINARY STATEMENT. Concurrently herewith the Grantor shall execute and
deliver a Credit Agreement, dated as of the date hereof, to be effective as of
June 1, 1994 (the "New Credit Agreement") to National City Bank ("NCB"),
Society National Bank ("Society") and Continental Bank N.A. ("Continental," and
collectively with NCB and Society in their capacities as agents, the
"Co-Agents") and the various financial institutions (the "Banks," and
collectively with the Co-Agents, the "Continental Lenders"), which are parties
to (i) that certain Credit Agreement (the "NCB/Society Credit Agreement"),
dated as of December 14, 1994, among the Grantor, NCB and Society as co-agents
and the various financial institutions which are parties thereto and (ii) that
certain Credit Agreement (the "Continental Credit Agreement"), dated as of
August 3, 1992, among the Grantor, Continental as agent, and the various
financial institutions which are parties thereto. It is a condition precedent
to entering into the New Credit Agreement that the Grantor shall have executed
this Security Agreement and granted the security interests contemplated herein.
WHEREAS, the Grantor currently has loans outstanding under the following
facilities to the following financial institutions: (i) the NCB/Society Credit
Agreement; (ii) the Continental Credit Agreement; (iii) that certain Note
Purchase Agreement (the "1989 Note Purchase Agreement") with Northwestern
National Life Insurance Company ("Northwestern"), Northern Life Insurance
Company ("Northern"), American Investors Life Insurance Company ("American"),
Confederation Life Insurance Company ("Confederation") and Beneficial Standard
Life Insurance Company ("Beneficial," and collectively with Northwestern,
Northern, American and Confederation, the "1989 Lenders"), dated as of August
1, 1989, with respect to $20,000,000 9.96% Senior Notes Due 1995; (iv) that
certain Note Purchase Agreement (the "1988 Note Purchase Agreement," and
together with the 1989 Note Purchase Agreement, the "Northwestern Agreements")
with Northwestern, Confederation, The North Atlantic Life Insurance Company of
America ("North"), Ministers Life - A Mutual Life Insurance Company
("Ministers"), Farm Bureau Life Insurance Company of Michigan ("Farm"), FB
Annuity Company ("FB") and Farm Bureau Mutual Insurance Company of Michigan
("Farm Mutual," and collectively
<PAGE> 2
with the 1989 Lenders, North, Ministers, Farm and FB, the "Northwestern
Lenders"), dated as of August 31, 1988, with respect to $13,000,000 9.97%
Senior Notes Due 1994; and (v) that certain promissory note (the "Nat West
Note"), dated as of July 1, 1993, executed by the Grantor in favor of National
Westminster Bank, USA ("Nat West"). The New Credit Agreement, the NCB/Society
Credit Agreement, the Continental Credit Agreement, the Northwestern Agreements
and the Nat West Note, each as hereafter amended, are collectively referred to
herein as the "Credit Agreements".
NOW, THEREFORE, in consideration of the premises and in order to induce
(i) the Continental Lenders to enter into the New Credit Agreement, (ii) the
Northwestern Lenders to enter into a commitment letter and (iii) Nat West to
enter into an amendment to the terms of the Nat West Note, the Grantor hereby
agrees with the Collateral Agent for its benefit and the ratable benefit of the
Lenders as follows:
SECTION 1. GRANT OF SECURITY. The Grantor hereby assigns and pledges
to the Collateral Agent for its benefit and the ratable benefit of the Lenders
and to the Lenders, and hereby grants to the Collateral Agent for its benefit
and the ratable benefit of the Lenders and to the Lenders a security interest
in, all of the right, title and interest of the Grantor in and to the
following, whether now owned or hereafter acquired (such collateral being the
"Collateral"):
(a) All equipment in all of its forms, wherever located, now or
hereafter existing (including, but not limited to, all Computer Hardware
and Software (as defined below), warehouse racks, fork lifts, store
shelving, displays, cash registers, office and other machinery, vehicles,
furniture, tools and spare parts, and all parts thereof and all
additions, substitutions and replacements thereof wherever located,
together with all components, equipment and accessories installed thereon
or affixed thereto (the "Equipment");
(b) All inventory in all of its forms, wherever located, now or
hereafter existing (including, but not limited to, (i) all goods,
merchandise and other personal property furnished under any contract of
service or intended for sale or lease, including, without limitation, all
raw materials and work in process therefor, finished goods thereof,
Computer Hardware and Software, materials used or consumed in the
manufacture or production thereof, returned or repossessed goods and data
processing, communications, computer, medical diagnostic and other
capital equipment leased by the Grantor, (ii) goods in which the Grantor
has an interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which the Grantor has an
interest or right as consignee), and
<PAGE> 3
(iii) goods that are returned to or repossessed by the Grantor, and all
accessions thereto and products thereof and documents therefor (any and all
such inventory, accessions, products and documents being the "Inventory");
(c) To the extent not covered by CLAUSES (d), (e) OR (f) below, all
accounts, contract rights, chattel paper, instruments, General Intangibles
(including, but not limited to, all tax refunds, corporate or other business
records (including all records relating to Inventory and Receivables),
inventions, designs, blueprints, trade secrets, goodwill, licenses, franchises,
customer lists, rights and claims against carriers and shippers and rights to
indemnification, rights pursuant to warranties, guarantees and insurance
policies, patents, copyrights, trademarks and trade names) and other
obligations of any kind, now or hereafter existing, whether or not arising out
of or in connection with the sale or lease of goods or the rendering of
services and all rights now or hereafter existing in and to all security
agreements, leases and other contract rights, chattel paper, instruments,
General Intangibles (as hereinafter defined) or other obligations (any and all
such accounts, contract rights, chattel paper, instruments, General Intangibles
and obligations being the "Receivables", and any and all such leases, security
agreements and other contracts being the "Related Contracts") (as used herein,
"GENERAL INTANGIBLES" shall mean:
(1) all trademarks, trade names, corporate names, company names, trade
styles, service marks, logos, other source of business identifiers,
prints and labels on which any of the foregoing have appeared or appear,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United
States, any State thereof, including, without limitation, those described
in Schedule IV hereto;
(2) all renewals, reissues, continuations, extensions or the like of
any patents, copyrights, trademarks, service marks and like protection,
including, without limitation, those obtained or permissible under past,
present and future laws and statutes;
-3-
<PAGE> 4
(3) all rights of action on account of past, present and future
unauthorized use of any of said inventions, copyrights, trademarks or
service marks and for infringement of said patents, copyrights,
trademarks or service marks and like protection;
(4) the right to file and prosecute applications for patents,
copyrights, and for registration of trademarks and service marks on any
of said inventions, copyrights, trademarks, service marks or for similar
intellectual property in the United States or any other country or place
anywhere in the world;
(5) the entire goodwill of the businesses of the Grantor connected
with and symbolized by the trademarks, service marks, trade names and the
other general intangibles of the Grantor; and
(6) all of the Grantor's customer lists, trade secrets, corporate and
other business records, license rights, advertising materials, operating
manuals, methods, processes, know-how, sales literature, drawings,
specifications, descriptions, name plates, catalogs, dealer contracts,
supplier contracts, distributor agreements, confidential information,
consulting agreements, engineering contracts, and all other assets which
uniquely reflect the goodwill of the businesses of the Grantor to which
said General Intangibles relate;
(d) All of the following collateral (the "Account Collateral"):
(i) the Cash Collateral Account (as hereinafter defined), all funds
held therein and all certificates and instruments, if any, from time to
time representing or evidencing the Cash Collateral Account;
(ii) all Lockbox Accounts (as hereinafter defined), all funds held
therein, and all certificates and instruments, if any, from time to
time representing or evidencing the Lockbox Accounts;
(iii) all notes, certificates of deposit, checks and other
instruments from time to time hereafter delivered to or otherwise
possessed by the Collateral Agent for or on behalf of the Grantor in
substitution for or in addition to any or all of the then existing
Account Collateral; and
-4-
<PAGE> 5
(iv) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral;
(e) All of the following collateral (the "Security Collateral"):
(i) all shares (the "Pledged Shares") of stock described in
Part I of Schedule I and issued by the corporations named therein and
the certificates representing the Pledged Shares, and all dividends,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(ii) all indebtedness (the "Pledged Debt") described in Part
II of Schedule I and issued by the obligors named therein and the
instruments evidencing the Pledged Debt, and all interest, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
the Pledged Debt;
(iii) all additional shares of stock of any issuer of the
Pledged Shares from time to time acquired by the Grantors in any
manner, and the certificates representing such additional shares, and
all dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all such shares; and
(iv) all additional indebtedness from time to time owed to
the Grantor by any obligor of the Pledged Debt and the instruments
evidencing such indebtedness, and all interest, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
indebtedness; and
(f) All proceeds of any and all of the forgoing Collateral
(including, without limitation, proceeds that constitute property of the types
described in CLAUSES (a), (b), (c), (d) and (e) of this SECTION 1) and, to the
extent not otherwise included, all payments under insurance (whether or not the
Collateral Agent is the loss payee thereof), or any indemnity, warranty or
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guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral.
As used herein, "Computer Hardware and Software" shall mean all computer
hardware and software in all its forms (including, but not limited to, (i) all
computer and other electronic data processing hardware, whether now owned,
licensed or leased or hereafter acquired by the Grantor, integrated computer
systems, central processing units, memory units, display terminals, printers,
features, computer elements, card readers, tape drives, hard and soft disk
drives, cables, electrical supply hardware, mask rights, generators, power
equalizers, accessories and all peripheral devices and other related computer
hardware; (ii) all software programs, whether now owned, licensed or leased or
hereafter acquired by the Grantor, designed for use on the computers and
electronic data processing hardware described in (i) above, including, without
limitation, operating system software, utilities and application programs in
whatsoever form (source code and object code in magnetic tape, disk or hard
copy format or any other listings whatsoever); (iii) all firmware associated
therewith, whether now owned, licensed or leased or hereafter acquired by the
Grantor; and (iv) all documentation for such hardware, software and firmware
described in the preceding CLAUSES (i), (ii) AND (iii), whether now owned,
licensed or leased or hereafter acquired by the Grantor, including, without
limitation, flow charts, logic diagrams, manuals, specifications, training
materials, charts and pseudo codes).
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the
payment of (i) all obligations now or hereafter existing under the Credit
Agreements, (ii) all obligations of the Grantor now or hereafter existing under
this Agreement, and (iii) all obligations under this Agreement, the Credit
Agreements or any document or instrument executed by Grantor in connection
herewith or therewith or in connection with the Credit Agreements
(collectively, the "Collateral Documents" and all such obligations of the
Grantor being the "Obligations").
SECTION 3. GRANTOR TO REMAIN LIABLE. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Collateral Agent
of any of the rights hereunder shall not release the Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral, and (c) neither the Collateral Agent nor any Lender shall have any
obligation or liability under the contracts and agreements
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included in the Collateral by reason of this Agreement, nor shall the
Collateral Agent or any Lender be obligated to perform any of the obligations
or duties of the Grantor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
SECTION 4. THE LOCKBOX ACCOUNTS.
(a) The Grantor presently maintains with certain banks (the
"Lockbox Banks") certain lockboxes and blocked depository accounts listed
on Schedule II attached hereto into which monies, instruments and other
property are deposited from time to time (all such lockboxes and
depository accounts and all monies, instruments and other property
deposited therein being collectively the "Lockbox Accounts") for the
deposit of cash and proceeds of Collateral and in connection with the
collection of Receivables. The Grantor hereby transfers to the
Collateral Agent the exclusive dominion and control of the Lockbox
Accounts and all funds from time to time therein and pledges to the
Collateral Agent and grants to the Collateral Agent a lien on and
security interest in the Lockbox Accounts and all funds from time to time
therein.
(b) The Grantor hereby represents and warrants that (i) it
has no Lockbox Accounts other than those listed on Schedule II hereto,
and (ii) it has delivered to the Collateral Agent fully executed letters,
substantially in the form of Annex I hereto (the "Lockbox Account
Letters"), from each and every Lockbox Bank, and agrees and covenants
that all cash and proceeds of Collateral shall be deposited either in the
Lockbox Accounts listed on said Schedule II or in the Cash Collateral
Account (as hereinafter defined).
(c) The Grantor has instructed all existing Account Debtors
(as hereinafter defined), and shall immediately instruct each new Account
Debtor, to make all payments, or to continue to make all payments as the
case may be, but subject to the terms and conditions hereof, to either
the Lockbox Accounts or to the Cash Collateral Account.
(d) In the event the Grantor or any Lockbox Bank shall, after
the date hereof, terminate an agreement with respect to the maintenance
of a Lockbox Account with any Lockbox Bank for any reason, or if the
Collateral Agent shall demand such termination, the Grantor agrees to
notify all Account Debtors that were making payments to such terminated
Lockbox Account or Lockbox Bank to make all future payments to another
Lockbox Bank with which the Grantor has an agreement with respect to the
mainte-
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nance of a Lockbox Account that has not been terminated by the Grantor, by such
Lockbox Bank or by demand from the Collateral Agent; provided, however, that if
the Collateral Agent shall demand termination of all Lockbox Accounts of any
Grantor with all Lockbox Banks, the Grantor agrees to notify all Account
Debtors to make all future payments to the Collateral Agent, to the Cash
Collateral Account.
(e) The Grantor hereby authorizes the Collateral Agent to notify each
Lockbox Bank of the Collateral Agent's exclusive control of the Lockbox
Accounts at such Bank and to date and deliver to the Lockbox Banks at any time
the Lockbox Letters, thereby transferring to the Collateral Agent the exclusive
control of the Lockbox Accounts at the Lockbox Banks.
SECTION 5. CASH COLLATERAL ACCOUNT.
------------------------
(a) The Collateral Agent shall establish at the office of
___________________________________________, in the name of the Grantor, but
under the sole dominion and control of the Collateral Agent, a certain deposit
account (account number __________) (the "Cash Collateral Account").
(b) The Grantor shall instruct each Lockbox Bank to transfer, and, if
the Grantor fails to so instruct each Lockbox Bank, the Grantor hereby grants
the Collateral Agent the authority to instruct each Lockbox Bank to transfer,
at the end of each Business Day or, in the discretion of the Collateral Agent,
each second Business Day, in same day funds, all deposits in the Lockbox
Accounts in such Lockbox Bank on such day to the Cash Collateral Account.
(c) The Grantor agrees that all proceeds of Collateral (including,
without limitation, money and checks, and whether such cash is held or kept at
a retail location or at a corporate office of the Grantor or elsewhere) shall
be deposited at the end of each day into either the Lockbox Account or the Cash
Collateral Account.
(d) The Grantor hereby agrees that it shall not make or maintain any
deposits in any account with any financial institution other than as provided
on Schedule II hereof or in any Lockbox Letter.
(e) The Grantor agrees that in the event it transfers, sells, leases,
conveys, disposes of or grants any warrants or options (collectively, a
"Transfer") with
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<PAGE> 9
respect to any of the Collateral outside of the ordinary course of business,
it shall (i) in the event the proceeds from such Transfer aggregate in excess
of One Hundred Thousand Dollars ($100,000), require that the transferee of such
Transfer wire such proceeds directly to the Cash Collateral Account or the
Lockbox Account or (ii) in the event the proceeds from such Transfer aggregate
One Hundred Thousand Dollars ($100,000) or less, promptly deposit all such
proceeds (within the time required under SECTION 5(c) above) into the Cash
Collateral Account or the Lockbox Account.
SECTION 6. MARKING AND DELIVERY OF COLLATERAL.
----------------------------------
(a) At any time, upon the request of the Collateral Agent, the Grantor
shall promptly mark conspicuously each document included in the Inventory and
each item of chattel paper included in the Receivables and each related
contract and each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Collateral Agent, indicating that such
document, chattel paper, related contract or Collateral is subject to the
security interest granted hereby.
(b) Following the occurrence of (i) any Event of Default (as defined
in any of the Credit Agreements) or (ii) any event which, after notice or lapse
of time or both, would constitute an Event of Default (a "Default"), upon the
request of the Collateral Agent, all certificates and chattel paper (including,
without limitation, all instruments, contracts, documents and agreements
executed or delivered in connection therewith, including, without limitation,
all equipment schedules, certificates of title, financing statements, insurance
certificates, bills of sale, collateral assignments of leases, purchase
agreement assignments and mortgagee/landlord waivers), representing or
evidencing any of the Collateral, shall be delivered to and held by or on
behalf of the Collateral Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
the Collateral Agent and the Collateral Agent shall have the right, at any time
in its discretion and without notice to the Grantor, to transfer to or to
register in the name of the Collateral Agent or any of its nominees any or all
of the Collateral. In addition, the Collateral Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing the
Collateral for certificates or instruments of smaller or larger denominations.
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SECTION 7. Equalization and Application of Amounts.
----------------------------------------
(a) EQUALIZATION. Upon the occurrence of the earlier of (i) an
acceleration of any of the Obligations or (ii) a Bankruptcy Event (as
hereinafter defined) (such earlier occurring date is hereinafter referred to as
the "Initial Equalization Date") and on a monthly basis thereafter, if any
Lender's Outstandings Percentage is less than such Lender's Exposure
Percentage, then, such Lender shall pay to the Collateral Agent, such amounts
as are necessary to cause such Lender's Outstandings Percentage to equal such
Lender's Exposure Percentage. Upon receipt of such amounts, the Collateral
Agent shall redistribute such amounts to the Lender's so as to cause each
Lender's Outstandings Percentage to equal such Lender's Exposure Percentage.
Pending each such payment to the Collateral Agent, such amounts shall be held
in trust for the Lenders which are entitled to receive a redistribution from
the Collateral Agent in accordance with the immediately preceding sentence of
this SECTION 7(a). Furthermore, to the extent Grantor or the Collateral Agent
makes a payment or payments to any Lender or any Lender receives any payment or
proceeds of the Collateral or any other security for the Grantor's benefit,
which payment(s) or proceeds or any part thereof are subsequently voided,
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid under any bankruptcy act, state or federal, common law or
equitable cause, then, to the extent of such payment or proceeds received, the
Obligations or part thereof intended to be satisfied shall be revived and shall
continue in full force and effect, as if such payment or proceeds had not been
received by the Collateral Agent.
(b) ALLOCATION OF PROCEEDS.
-----------------------
(i) APPLICATION OF FUNDS GENERALLY. Subject to the last
sentence of this SECTION 7, the Collateral Agent shall, prior to the occurrence
of an Event of Default, apply all funds received into the Cash Collateral
Account or the Lockbox Account to the revolving credit facility under the
NCB/Society Credit Agreement or the New Credit Agreement, as the case may be.
Such application shall be effected by the Collateral Agent sending the funds
via wire transfer to ____________________________________________.
Notwithstanding the foregoing, the Collateral Agent will not release any money
from the Cash Collateral Account if an Event of Default has occurred and is
continuing.
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(ii) APPLICATION OF FUNDS FOLLOWING THE INITIAL EQUALIZATION DATE. Upon
the occurrence of the Initial Equalization Date, and monthly thereafter, the
Collateral Agent shall apply all funds received into the Cash Collateral
Account as follows:
(A) FIRST, to the Collateral Agent for
any out of pocket costs and expenses (including legal fees and
disbursements) incurred by it in connection with the
enforcement of or preservation of its rights under this
Agreement;
(B) SECOND, ratably to all amounts of
interest outstanding which constitute Obligations according to
the aggregate amounts thereof owing to each Lender on the date
of such distribution;
(C) THIRD, subject to the provisions of
Section 7(a) hereof, ratably to reduce all amounts of
principal which constitute Obligations; and
(D) FOURTH, after payment of and
provision for all Obligations, to the Grantor or to whomever
else the Collateral Agent may be required to pay by applicable
law.
(iii) BASIS FOR DETERMINATION OF PRO RATA. For the
purposes of this SECTION 7, any pro rata or ratable allocation to the
Obligations shall be based upon each Lender's Exposure Percentage.
(iv) DEFINITIONS. For the purposes of this Section
7, the following terms shall have the following meanings:
(A) "Bankruptcy Event" means the occurrence
of either of the following (1) The Grantor or any of its
subsidiaries which have entered into guaranties with respect
to any of the Obligations (the "Guarantors") shall make an
assignment for the benefit of creditors, or admit in writing
its inability to pay or generally fail to pay its debts as
they mature or become due, or shall petition or apply for the
appointment of a trustee or other custodian, liquidator or
receiver of the Grantor or any of the Guarantors of any
substantial part of their respective assets or shall commence
any case or other proceeding under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction,
now or hereafter in effect, or shall take any action to
authorize or in further-
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ance of any of the foregoing, or if any
such petition or application shall be filed or any such case
or other proceeding shall be commenced against the Grantor or
any of the Guarantors and the Grantor or such Guarantor shall
indicate its approval thereof, consent thereto or acquiescence
therein or (2) a decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating the
Grantor or any of the Guarantors bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or
a decree or order for relief is entered in respect of the
Grantor or any of the Guarantors in an involuntary case under
federal bankruptcy laws as now or hereafter constituted.
(B) "Exposure Percentage" means, with
respect to a particular Lender, the percentage set forth
opposite the Lender's name under the column headed "Exposure
Percentage" on SCHEDULE V hereto.
(C) "Principal Outstandings" means, with
respect to a particular Lender, as at any time, the then
aggregate outstanding principal amount of the Obligations
owing to such Lender.
(D) "Outstandings Percentage" means,
with respect to a particular Lender, as at any time, the
percentage obtained from dividing such Lender's Principal
Outstandings at such time, by the Total Principal Outstandings
at such time.
(E) "Total Principal Outstandings"
means, as at any time, the then aggregate outstanding
principal amount of the Obligations.
SECTION 8. REPRESENTATIONS AND WARRANTIES. The Grantor
represents and warrants as follows:
(a) All of the Equipment and Inventory are located at the
places specified in Schedule III (as updated with respect to Inventory
in accordance with SECTION 10(d) hereof). The chief place of business
and chief executive office of the Grantor and the office where the
Grantor keeps its records concerning the Receivables, and all chattel
paper that evidences Collateral, are located at the address first
specified above for the Grantor. None of the Receivables is evidenced
by a promissory note or other instrument which has not been delivered
to Collateral Agent in accordance with SECTION 9(a)(ii).
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(b) The Pledged Shares have been duly authorized and
validly issued and are fully paid and nonassessable. The Pledged
Shares constitute 100% of the issued and outstanding capital stock of
each issuer thereof, and there are no warrants, options or other
rights to acquire any of the capital stock of any issuer of Pledged
Shares. The Pledged Debt has been duly authorized, authenticated or
issued and delivered, and is the legal, valid and binding obligation
of the issuers thereof, and is not in default.
(c) The Grantor is the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, option,
charge or encumbrance except for the security interest created by this
Agreement or as permitted under the New Credit Agreement. No
effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Collateral
Agent relating to this Agreement or as permitted under the New Credit
Agreement. The Grantor owns each of the patents, trademarks,
copyrights, licenses and other intellectual property set forth in
Schedule ___ to the New Credit Agreement and has the following trade
names: _______________.
(d) The Grantor has exclusive possession and control of
the Equipment and Inventory owned by it other than Inventory subject
to a lease entered into in the ordinary course of business, naming
Grantor as lessor, Inventory in transit and Inventory shipped directly
to Grantor's vendees by Grantor's vendors in the ordinary course of
Grantor's business.
(e) The pledge and delivery of the Pledged Shares and
Pledged Debt pursuant to this Agreement creates a valid and perfected
first priority security interest in the Security Collateral, securing
the payment of the Obligations.
(f) No authorization, approval or other action by, and no
notice to or filing with (other than the filings and deliveries
referred to in SECTION 6(b) above, all of which filings and deliveries
have been made and effected), any governmental authority or regulatory
body is required for either the (i) grant by the Grantor of the
security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor either or (ii) for the
exercise by the Collateral Agent and each Lender of the voting or
other rights provided for in this Agreement or the remedies in respect
of the Pledged Collateral, pursuant to this Agreement (except as
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may be required in connection with such disposition by laws affecting
the offering and sale of securities generally).
SECTION 9. FURTHER ASSURANCES.
(a) The Grantor agrees that from time to time, at the
expense of the Grantor, the Grantor will promptly execute and deliver
all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Collateral Agent may
request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable the Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, the
Grantor will: (i) deliver to Collateral Agent, a
warehouseman's agreement, in form and substance satisfactory to the
Collateral Agent, from each warehouseman holding Inventory from time
to time; (ii) if any Receivable shall be evidenced by a promissory
note or other instrument, deliver and pledge to the Collateral Agent
hereunder such note, instrument duly indorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance satisfactory to the Collateral Agent; and (iii) execute and
file such financing or continuation statements, or amendments thereto,
and such other instruments or notices, as may be necessary or as the
Collateral Agent may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby.
Notwithstanding the foregoing of this SECTION 9(a), no action of the
nature described in the first sentence of SECTION 6(b) hereof shall be
required of the Grantor until the occurrence of an Event of Default.
(b) The Grantor hereby authorizes the Collateral Agent to
file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the
signature of the Grantor where permitted by law. A carbon,
photographic or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) The Grantor will furnish to the Collateral Agent from
time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with
the Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
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SECTION 10. AS TO EQUIPMENT AND INVENTORY. The Grantor shall:
(a) Keep the Equipment at the places specified in SECTION
8(a) hereof and keep the Inventory at the places specified in such
SECTION 8(a) and SECTION 10(d) hereof or, with respect to Equipment,
upon 30 days' prior written notice to the Collateral Agent, at such
other places in a jurisdiction in which all action required by SECTION
9 shall have been taken with respect to the Equipment.
(b) Cause the Equipment to be maintained and preserved in
the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's
manual, and shall forthwith, or in the case of any loss or damage to
any of the Equipment as quickly as practicable after the occurrence
thereof, (i) make or cause to be made all repairs, replacements, and
other improvements in connection therewith that are necessary or
desirable to such end or (ii) deliver any and all proceeds received in
the case of any loss or damage to the Collateral Agent (who shall
deposit the same in the Cash Collateral Account) to be held as cash
security for payment of the Obligations. In the event such loss or
damage is in an amount in excess of __________________ ($__________)
or upon the request of the Collateral Agent, the Grantor shall
promptly furnish to the Collateral Agent a statement respecting any
loss or damage to any of the Equipment.
(c) Pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith as permitted pursuant to the New
Credit Agreement.
(d) Grantor shall update Schedule III of this Agreement
with a written schedule describing the location of all Inventory (i)
prior to the occurrence of a Default, on or prior to the tenth (10th)
day of each calendar month and (ii) following the occurrence of a
Default, on a daily basis. The failure of Grantor to execute and
deliver such schedule shall not affect or limit Collateral Agent's or
any Lender's security interest or other rights in and to the
Inventory.
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SECTION 11. INSURANCE.
(a) The Grantor shall, at its own expense, maintain
insurance with respect to the Equipment and Inventory in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to the Collateral Agent from time to time. Each policy
for (i) liability insurance shall provide for all losses to be paid on
behalf of the Collateral Agent and the Grantor as their respective
interests may appear and (ii) property damage insurance shall provide
for all losses to be paid directly to the Collateral Agent. Each such
policy shall in addition (i) name the Grantor and the Collateral Agent
and Lenders as insured parties thereunder (without any representation
or warranty by or obligation upon the Collateral Agent and Lenders) as
their interests may appear, (ii) contain the agreement by the insurer
that any loss thereunder shall be payable to the Collateral Agent
notwithstanding any action, inaction or breach of representation or
warranty by the Grantor, (iii) provide that there shall be no recourse
against the Collateral Agent and Lenders for payment of premiums or
other amounts with respect thereto and (iv) provide that at least
thirty (30) days' prior written notice of cancellation or of lapse
shall be given to the Collateral Agent by the insurer. The Grantor
shall deliver to the Collateral Agent original or duplicate policies
of such insurance and, as often as the Collateral Agent may reasonably
request, a report of a reputable insurance broker with respect to such
insurance. Further, the Grantor shall, at the request of the
Collateral Agent, duly exercise and deliver instruments of assignment
of such insurance policies to comply with the requirements of SECTION
9 above and cause the insurers to acknowledge notice of such
assignment.
(b) Reimbursement under any liability insurance
maintained by the Grantor pursuant to this SECTION 11 may be paid
directly to the person who shall have incurred liability covered by
such insurance.
(c) Upon the occurrence and during the continuance of any
Event of Default, all insurance payments in respect of such Equipment
or Inventory shall be paid to and applied by the Collateral Agent as
specified in SECTION 18(d) hereof. In all other instances, such
proceeds shall be paid to the Collateral Agent (who shall deposit the
same in the Cash Collateral Account) and applied pursuant to SECTION 7
hereof.
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SECTION 12. AS TO RECEIVABLES.
(a) The Grantor shall keep its chief place of business
and chief executive office and the office where it keeps its records
concerning the Receivables, and the original copies of all chattel
paper that evidences Collateral, at the location therefor specified
in SECTION 8(a) hereof or, upon thirty (30) days' prior written notice
to the Collateral Agent, at such other locations in a jurisdiction in
which all actions required by SECTION 9 above shall have been taken
with respect to the Collateral. The Grantor will hold and preserve
such records and chattel paper and will permit representatives of the
Collateral Agent at any time during normal business hours to inspect
and make abstracts from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b),
the Grantor shall continue to collect, at its own expense, all amounts
due to become due the Grantor under the Receivables. In connection
with such collections, the Grantor may take (and, at the Collateral
Agent's direction, shall take) such action as the Grantor or the
Collateral Agent may deem necessary or advisable to enforce collection
of the Receivables; PROVIDED, HOWEVER, that the Collateral Agent shall
have the right at any time to seek verification from and otherwise
consult with the Account Debtors of Grantor, and upon the occurrence
of a Default to notify the Account Debtors or obligors under any
Receivables of the assignment of such Receivables to the Collateral
Agent and to direct such Account Debtors or obligors to make payment
of all amounts due or to become due to the Grantor thereunder directly
to the Collateral Agent and, upon such notification and at the expense
of the Grantor, to enforce collection of any such Receivables, and to
adjust, settle or compromise the amount or payment thereof, in the
same manner and to the same extent as the Grantor might have done. If
any Default shall have occurred and be continuing, all amounts and
proceeds (including instruments) received by the Grantor in respect of
the Receivables shall be received in trust for the benefit of the
Collateral Agent hereunder, shall be segregated from other funds of
the Grantor and shall be forthwith paid over to the Collateral Agent
in the same form as so received (with any necessary indorsement) to be
held as such collateral and applied as provided by SECTION 18(d)
hereof, and the Grantor shall not adjust, settle or compromise the
amount or payment of any Receivable, or release wholly or partly any
account debtor or obligor thereof, or allow any credit or discount
thereon.
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(c) On or prior to the tenth (10th) day of each calendar
month, Grantor shall provide Collateral Agent with schedules
describing all Receivables created or acquired by it and shall execute
and deliver confirmatory written assignments of such Receivables to
Collateral Agent; provided, however, that the failure of Grantor to
execute and deliver such schedules and/or assignments describing all
Receivables to Collateral Agent shall not affect or limit Collateral
Agent's or any Lender's security interest or other rights in and to
the Receivables. Together with each schedule, Grantor shall furnish,
upon request of Collateral Agent, copies of customers' invoices or the
equivalent, and, upon request therefor, copies of original shipping or
delivery receipts for all merchandise sold and such other documents as
Collateral Agent may require. Grantor will not re-date any invoice or
sale or make sales on extended dating beyond that customary in its
industry. If Grantor becomes aware of anything materially detrimental
to the credit of any of their respective customers, it will promptly
advise Collateral Agent thereof.
SECTION 13. VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Event of Default shall have occurred
and be continuing:
(i) Grantor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the
Security Collateral or any part thereof owned by it for any
purpose not inconsistent with the terms of this Agreement or
the New Credit Agreement; PROVIDED, HOWEVER, that Grantor
shall not exercise or shall refrain from exercising any such
right if, in Collateral Agent's judgment, such action or
inaction would have a material adverse effect on the value of
the Security Collateral or any part thereof, and, PROVIDED,
FURTHER, that Grantor shall give Collateral Agent at least
five (5) days' written notice of the manner in which it
intends to exercise, or the reasons for refraining from
exercising, any such right.
(ii) Collateral Agent shall execute and deliver
(or cause to be executed and delivered) to Grantor all such
proxies and other instruments as Grantor may reasonably
request for the purpose of enabling Grantor to exercise the
voting and other rights that they are entitled to exercise
pursuant to paragraph (i) above.
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(b) Upon the occurrence of an Event of Default, and after
notice to Grantor by Collateral Agent, all rights of Grantor to
exercise the voting and other consensual rights that they would
otherwise be entitled to exercise pursuant to SECTION 13(a)(i) above
shall cease, and all such rights shall thereupon become vested in
Collateral Agent who shall thereupon have the sole right to exercise
such voting and other consensual rights.
SECTION 14. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES.
(a) The Grantor shall not:
(i) sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral,
except Inventory in the ordinary course of business or as
otherwise permitted by this Agreement or the New Credit
Agreement;
(ii) create or suffer to exist any lien, security
interest or other charge or encumbrance upon or with respect
to any of the Collateral to secure Indebtedness of any person
or entity, except for the security interest created by this
Agreement or as otherwise permitted by the New Credit
Agreement; or
(iii) take any action that would directly or
indirectly impair the value of the interest or rights of the
Grantor or the Collateral Agent in such Collateral.
(b) Grantor agrees that it will (i) cause each issuer of
the Pledged Shares not to issue any stock or other securities in
addition to or in substitution for the Pledged Shares issued by the
issuer, except to Grantor, and (ii) pledge hereunder, immediately upon
Grantor's acquisition directly or indirectly thereof, any and all
additional shares of stock or other securities of each issuer of the
Pledged Shares.
SECTION 15. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The
Grantor hereby irrevocably appoints the Collateral Agent the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, from time to time in the Collateral
Agent's discretion, to take any action and to execute any instrument that the
Collateral Agent may deem necessary or advisable to enforce its rights and
remedies hereunder, including, without limitation:
-19-
<PAGE> 20
(a) to obtain and adjust insurance required to be paid to
the Collateral Agent pursuant to Section 11;
(b) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Collateral;
(c) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) or (b) above;
(d) to file any claims or take any action or institute
any proceedings which the Collateral Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Collateral Agent with respect to any of the
Collateral; and
(e) to receive, indorse and collect all instruments made
payable to the Grantor representing any dividend, interest payment or
other distribution in respect of the Security Collateral or any part
thereof and to give full discharge for the same.
SECTION 16. COLLATERAL AGENT MAY PERFORM. If the Grantor
fails to perform any agreement contained herein, the Collateral Agent may
itself perform, or cause performance of, such agreement, and the reasonable
expenses of the Collateral Agent incurred in connection therewith shall be
payable by the Grantor under SECTION 19(b).
SECTION 17. APPOINTMENT; THE COLLATERAL AGENT'S DUTIES.
(a) Each of the Lenders, hereby appoints Continental Bank
N.A. to act as Collateral Agent pursuant to the terms of this
Agreement. The relationship between the Collateral Agent and the
holders of the Obligations is and shall be that of agent and principal
only, and nothing contained in this Agreement shall be construed to
constitute the Collateral Agent as a trustee for any such holder.
(b) The powers conferred on the Collateral Agent
hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except
for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights
-20-
<PAGE> 21
against prior parties or any other rights pertaining to any
Collateral. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Account
Collateral and Security Collateral in its possession if the Account
Collateral and Security Collateral has been accorded treatment
substantially equal to that which the Collateral Agent accords its own
property, it being understood that neither the Collateral Agent nor
any Lender shall have any responsibility or liability for (i)
ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Account Collateral or Security Collateral, whether or not the
Collateral Agent or any Lender has or is deemed to have knowledge of
such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Account Collateral or Security
Collateral, or (iii) the collection of any proceeds of any Collateral
or by reason of any invalidity, lack of value or uncollectability of
any of the payments received by it from Account Debtors or otherwise.
SECTION 18. REMEDIES. If (i) any Lender shall have
accelerated any of the Obligations or (ii) the Grantor shall, within ten (10)
days following the date hereof, fail to furnish to the Collateral Agent a legal
opinion in form and substance satisfactory to Collateral Agent:
(a) the Collateral Agent and Lenders may, without notice
to the Grantor except as required by law and at any time or from time
to time, charge, set-off and otherwise apply all or any part of the
Obligations against the Cash Collateral Account or the Lockbox
Accounts or any part thereof;
(b) the Collateral Agent shall, upon the request of the
Majority Lenders (as defined below in this SUBSECTION (B)), exercise
in respect of the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the Uniform Commercial
Code (the "Code") (whether or not the Code applies to the affected
Collateral) which the Collateral Agent, in its discretion, shall deem
appropriate, and may, in its discretion, (i) exercise any and all
rights and remedies of Grantor in respect of the Collateral, (ii)
require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Collateral Agent forthwith, assemble all
or part of the Collateral as directed by Collateral Agent and make it
available to Collateral Agent at a place to be designated by
Collateral Agent,
-21-
<PAGE> 22
(iii) occupy any premises owned or leased by Grantor where the
Collateral or any part thereof is assembled for a reasonable period in
order to effectuate its rights and remedies hereunder or under law,
without obligation to Grantor in respect of such occupation and
Collateral Agent may exclude Grantor, its agents, employees and
servants therefrom, and having and holding the same may use, operate,
manage and control the Collateral and conduct the business of Grantor
and do any acts which it deems necessary or desirable to preserve the
value, marketability or rentability of the Collateral, or any part
thereof or interest therein, all without prior notice to Grantor,
except as specifically provided in SECTION 18(b)(iv) below with
respect to a formal public or private sale (including, without
limitation, the right: to convert raw materials inventory to
work-in-process inventory; to convert work-in-process inventory to
finished goods inventory; to order, procure and purchase all
materials, goods and other items necessary in connection with any such
conversions; to sell finished goods inventory in the ordinary course
of Grantor's business and otherwise; to complete any goods; to fill
and ship in accordance with then existing purchase orders; to solicit
orders; and to do all such things and acts as Collateral Agent deems
necessary or desirable in order to maximize the value of Grantor's
business or the Collateral) and upon every such entry, Collateral
Agent, at the expense of Grantor, from time to time, either by
purchase, repairs or construction, may maintain and restore
Collateral, may complete the construction of improvements thereon and,
in the course of such completion, may make such changes in the
contemplated improvements and collateral as is deemed desirable and
may insure the same; and likewise, from time to time, at the expense
of Grantor, Collateral Agent may make all necessary or proper repairs,
renewals and replacements and such useful alterations, additions,
betterments and improvements thereto and thereon as may seem
advisable, and in every such case shall have the right to manage and
operate the Collateral and to carry on the business thereof and
exercise all rights and powers of Grantor with respect thereto in the
name or names of any of Grantor or otherwise as is deemed appropriate,
after deducting the expenses of conducting the business thereof and of
all maintenance, repairs, replacements, alterations, additions,
betterments and improvements and amounts necessary to pay for taxes,
assessments, insurance and prior insurance and prior or other property
charges upon the Collateral, Grantor's business or any part thereof,
as well as just and reasonable compensation for its services and for
all attorneys, counsel, agents, clerks, servants and other employees
by it engaged and
-22-
<PAGE> 23
employed, shall apply the moneys arising as aforesaid pursuant to the
provisions of this Agreement (nothing contained herein shall be
construed to impose upon Collateral Agent any obligation to preserve
or protect the Collateral or Grantor's business following the
occurrence of an Event of Default), and (iv) without notice except as
specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Collateral Agent may deem commercially
reasonable. Grantor agrees that, to the extent notice of sale shall
be required by law, at least five (5) days' notice to Grantor of the
time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification.
Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Collateral Agent may
adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so
adjourned. The term "Majority Lenders" shall mean, at any time,
Lenders holding at least fifty-one percent (51%) of the then aggregate
Total Principal Outstandings (as defined in SECTION 7 hereof).
(c) All payments received by Grantor under or in
connection with any Security Collateral or otherwise in respect of the
Collateral shall be received in trust for the benefit of Collateral
Agent and each Lender, shall be segregated from other funds of Grantor
and shall be forthwith paid over to Collateral Agent in the same form
as so received (with any necessary indorsement).
(d) All payments made under or in connection with any
Collateral and all cash held by Collateral Agent as Account Collateral
and all cash proceeds received by Collateral Agent in respect of any
sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of Collateral Agent, be held by
Collateral Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to Collateral
Agent and any Lender pursuant to SECTION 19 hereof) in whole or in part
by Collateral Agent to all or any part of the Obligations, in such
order a Collateral Agent shall elect. Any surplus of such cash or
cash proceeds held by Collateral Agent and remaining after payment in
full of all the Obligations shall be paid over to Borrower or to
whomsoever may be lawfully entitled to receive such surplus.
-23-
<PAGE> 24
(e) All payments made in respect of the Collateral and
all cash held by the Collateral Agent as Account Collateral and all
cash proceeds received by the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Collateral Agent, be held by
the Collateral Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the
Collateral Agent pursuant to SECTION 19) in whole or in part by the
Collateral Agent for the ratable benefit of the Lenders against, all
or any part of the Obligations, in the order as set forth in SECTION 7
hereof.
SECTION 19. INDEMNITY AND EXPENSES.
(a) The Grantor agrees to indemnify the Collateral Agent
and each of the Lenders from and against all any and all claims,
losses and liabilities growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting from the Collateral Agent's
willful misconduct.
(b) The Grantor will, upon demand, pay to the Collateral
Agent the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts
and agents, which the Collateral Agent may incur in connection with
(i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent or the
Lenders hereunder or (iv) the failure by the Grantor to perform or
observe any of the provisions hereof.
SECTION 20. SECURITY INTEREST ABSOLUTE. All rights of the
Collateral Agent and security interests hereunder, and all obligations of the
Grantor hereunder, shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of any of the
Credit Agreements or any of the other Loan Documents (as defined in
the New Credit Agreement) or other agreements or instruments relating
thereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations or any
other amendment or waiver of or any consent to any departure from any
of the Credit Agreements or any of the other Loan Documents;
-24-
<PAGE> 25
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any of the Credit Agreements, the Notes or any of the
Collateral Documents;
(d) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations; or
(e) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Grantor, any
guarantor of the Obligations or any third party grantor of a security
interest.
SECTION 21. REGISTRATION RIGHTS. If Collateral Agent shall
determine to exercise its right to sell all or any of the Pledged Shares
pursuant to SECTION 18, Grantor agrees that, upon request of Collateral Agent,
Grantor will, at its own expense:
(a) execute and deliver, and cause each issuer of the
Pledged Shares contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents,
and do or cause to be done all such other acts and things, as may be
necessary or, in the opinion of Collateral Agent, advisable to
register such Security Collateral under the provisions of the
Securities Act of 1933, as from time to time amended (the "Securities
Act"), and to cause the registration statement relating thereto to
become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectus that,
in the opinion of Collateral Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules
and regulations of the Securities and Exchange Commission applicable
thereto;
(b) use its best efforts to qualify the Security
Collateral under the state securities or "Blue Sky" laws and to obtain
all necessary governmental approvals for the sale of the Security
Collateral, as requested by Collateral Agent;
(c) use its best efforts to cause each such issuer to
make available to its security holders, as soon as practicable, an
earning statement that will satisfy the provisions of Section 11(a) of
the Securities Act; and
-25-
<PAGE> 26
(d) use its best efforts to do or cause to be done all
such other acts and things as may be necessary to make such sale of
the Security Collateral or any part thereof valid and binding and in
compliance with applicable law.
Grantor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by Collateral Agent and each Lender by reason of
the failure by Grantor to perform any of the covenants contained in this
SECTION 21 and, consequently, agree that, if Grantor shall fail to perform any
of such covenants, Grantor shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the Security Collateral on the date
Collateral Agent shall demand compliance with this SECTION 21.
SECTION 22. AMENDMENTS; ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 23. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing and, if to the
Grantor, mailed or delivered to it, addressed to it at _________________
________________________________________, with a copy to _______________,
________________________________, Attention: _______________, and, if to the
Collateral Agent, mailed or delivered to it, addressed to it at 231 South
LaSalle Street, Chicago, Illinois 60697, Attention: Leasing and Financing
Company Division, with a copy to Calfee, Halter & Griswold, 1800 Society
Building, Cleveland, Ohio 44114-2688, Attention: Thomas A. Cicarella, or as to
any party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this SECTION 23. All such notices and other communications shall, upon the
earlier of (i) receipt by the party so notified, or (ii) forty-eight (48) hours
following deposit in the mails addressed as aforesaid.
SECTION 24. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES.
This Agreement shall create a continuing security interest in the Collateral
and shall (i) remain in full force and effect until payment in full of the
Obligations and termination of all of the Credit Agreements, (ii) be binding
upon the Grantor, its successors and assigns and (iii) inure, together with the
rights and remedies of the Collateral Agent hereunder, to the benefit of the
Collateral Agent, the Lenders and their successors, transferees and assigns.
Without limiting the generality of the foregoing
-26-
<PAGE> 27
clause (iii), any Lender may assign or otherwise transfer any note or other
instrument held by it to any other person or entity, and such other person or
entity shall thereupon become vested with all the benefits in respect thereof
granted to such Lender herein or otherwise. Upon the payment in full of the
Obligations, the security interest granted hereby shall terminate and all
rights to the Collateral shall revert to the Grantor. Upon any such
termination, the Collateral Agent will, at the Grantor's expense, execute and
deliver to the Grantor such documents as the Grantor shall reasonably request
to evidence such termination.
SECTION 25. GOVERNING LAW; TERMS; WAIVER. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Ohio, except to the extent that the validity or perfection of the security
interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the State of
Ohio without regard to principles of conflict of law. Unless otherwise defined
herein or in the New Credit Agreement, terms used in Article 9 of the Uniform
Commercial Code in the State of Ohio are used herein as therein defined. Each
of the Lenders hereby waives any Event of Default, default or other violation
under the Credit Agreements to which they are a party to the extent such Event
of Default, default or other violation is caused by the grant of the security
interest hereunder. Each of the Lenders hereby agrees that the Credit
Agreements to which they are a party shall be deemed to be amended to the
extent necessary to permit the grant of the security interest hereunder.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to
be duly executed and delivered by their officers thereunto duly authorized as
of the date first above written.
<TABLE>
<S> <C>
LDI CORPORATION, Grantor CONTINENTAL BANK N.A., as Collateral Agent
By:__________________________
By:______________________ Title:_______________________
Title:___________________
CONTINENTAL BANK N.A., Lender NATIONAL CITY BANK, Lender
By:______________________
Title:___________________ By:__________________________
Title:_______________________
SOCIETY NATIONAL BANK, Lender NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY,
Lender
By:______________________
Title:___________________ By:_________________________
Title:_______________________
</TABLE>
-27-
<PAGE> 28
<TABLE>
<S> <C>
NORTHERN LIFE INSURANCE COMPANY, Lender AMERICAN INVESTORS LIFE INSURANCE COMPANY, Lender
By:______________________ By:__________________________
Title:___________________ Title:_______________________
THE NORTH ATLANTIC LIFE INSURANCE COMPANY OF CONFEDERATION LIFE INSURNACE COMPANY, Lender
AMERICA, Lender
By:______________________ By:__________________________
Title:___________________ Title:_______________________
MINNESOTA MUTUAL LIFE INSURANCE COMPANY, FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN,
Lender Lender
By:______________________ By:__________________________
Title:___________________ Title:_______________________
FB ANNUITY COMPANY, Lender FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN,
Lender
By:______________________ By:__________________________
Title:___________________ Title:_______________________
BENEFICIAL STANDARD LIFE INSURANCE COMPANY, COMERICA BANK, Lender
Lender
By:______________________ By:__________________________
Title:___________________ Title:_______________________
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, THE DAIWA BANK, LIMITED, Lender
Lender
By:__________________________
By:______________________ Title:_______________________
Title:___________________
THE FIFTH THIRD BANK, Lender STAR BANK, N.A., Lender
By:______________________
Title:___________________ By:__________________________
Title:_______________________
FIRST NATIONAL BANK OF OHIO, Lender MICHIGAN NATIONAL BANK, Lender
By:______________________
Title:___________________ By:__________________________
Title:_______________________
</TABLE>
-28-
<PAGE> 29
<TABLE>
<S> <C> <C>
THE BANK OF TOKYO TRUST COMPANY, Lender FIRST BANK, N.A., Lender
By:______________________
Title:___________________ By:__________________________
Title:_______________________
NATIONAL WESTMINSTER BANK, USA, Lender
By:______________________
Title:___________________
352\22567AAD.180
</TABLE>
-29-
<PAGE> 30
<TABLE>
<CAPTION>
SCHEDULE I
----------
TO
--
SECURITY AGREEMENT
------------------
Original Debt Certificate Final Principal
Debt Issuer Description of Debt No(s).- Maturity Amount
- ----------- ------------------- ------- -------- ------
<S> <C> <C> <C> <C>
</TABLE>
352\22567AAD.180
-30-
<PAGE> 31
<TABLE>
<CAPTION>
SCHEDULE II
-----------
TO
--
SECURITY AGREEMENT
------------------
BANK ACCOUNTS
-------------
Name and Address Mailing
of Bank Address of Account Account Number
- ---------------- ------------------ --------------
<S> <C> <C>
LOCKBOX ACCOUNTS
----------------
Name and Address Mailing
of Bank Address of Lockbox Account Number
- ---------------- ------------------ --------------
</TABLE>
352\22567AAD.180
-31-
<PAGE> 32
SCHEDULE III
------------
TO
----
SECURITY AGREEMENT
-------------------
Locations of Equipment:
Locations of Inventory:
352\22567AAD.180
-32-
<PAGE> 33
SCHEDULE IV
------------
TO
--
SECURITY AGREEMENT
-------------------
PATENTS, TRADEMARKS, TRADE NAMES,
----------------------------------
LICENSE AGREEMENTS
------------------
352\22567AAD.180
-33-
<PAGE> 34
SCHEDULE V
-----------
TO
--
SECURITY AGREEMENT
------------------
LIST OF LENDERS AND PERCENTAGES
--------------------------------
352/22567AAD.180
-34-
<PAGE> 1
April 29, 1994
Frank G. Skedel
Treasurer and Senior Vice President
LDI Corporation
1375 E. 9th Street - Suite 700
Cleveland, Ohio 44114
Dear Mr. Skedel:
This will confirm our understanding with respect to the $8,333,333.33 principal
balance owing under the promissory note dated as of July 1, 1993 (in the face
amount of $20,000,000) made be LDI Corporation (the "Company") to the order of
National Westminster Bank USA (the "Bank"). Such balance is now due and
payable in full on September 1, 1994. The Bank will extend the payment thereof
under terms which will require the Company to make payment in 11 monthly
installments of principal as follows:
<TABLE>
<CAPTION>
<S> <C>
Installment Due Date Installment Amount
-------------------- ------------------
May 9, 1994 $1,750,000.00
June 1, 1994 $1,750,000.00
July 1, 1994 $690,000.00
August 1, 1994 $690,000.00
September 1, 1994 $690,000.00
October 1, 1994 $690,000.00
November 1, 1994 $690,000.00
January 31, 1995 $345,833.33
February 28, 1995 $345,833.33
March 31, 1995 $345,833.33
April 30, 1995 $345,833.33
</TABLE>
The foregoing principal balance from time to time unpaid will continue to bear
interest at the Bank's prime rate. Interest will be payable together with
principal on each principal payment date except that interest will also be
payable on December 1, 1994 and January 1, 1995. The Bank will prepare a new
note to be
<PAGE> 2
executed by the Company to conform to the foregoing arrangement which is
subject to receipt by the Bank on May 9, 1994 of the $1,750,000 payment (with
accrued and unpaid interest) due on that date together with an extension fee of
$41,145.83 (.625% Note Balance following payment on May 9). The new note will
contain terms substantially similar to those of the July 1, 1993 note modified,
of course, to reflect the foregoing. It will also contain a provision which
will require that the Bank be secured PARI PASSU with any other institutions to
whom any security interest is given to secure payment of the obligations of the
Company to such institution or institutions.
If the foregoing is in accordance with your understanding, kindly sign and
return the enclosed copy hereof together with amounts specified above by May 2,
1994 as aforesaid.
Very truly yours,
NATIONAL WESTMINSTER BANK USA
By ______________________________
Merily E. McLaughlin
Vice President
ACCEPTED AND AGREED April 29, 1994:
__________________________________
Frank G. Skedel
Treasurer and Senior Vice President
<PAGE> 1
DRAFT OF 4/29/94 AT 3:15 P.M.
April 29, 1994
Olympus Private Placement Fund, L.P.
Metro Center
One Station Place
Stamford, Connecticut 06902
Ladies and Gentlemen:
Reference is made to the Note Purchase Agreement dated July 2,
1991 (the "Agreement") between LDI Corporation (the "Company") and Olympus
Private Placement Fund, L.P. (the "Purchaser"). Capitalized terms used herein
and not otherwise defined have the meanings set forth in the Agreement.
The Company has informed you of certain restructuring and
discontinued operations charges and identified reserves to be incurred by the
Company in connection with its strategic business plan (the "Restructuring
Charges") and of certain changes to be made in the Company's senior debt
agreements as a result thereof. Accordingly, the Company and the Purchaser
(which acknowledges that it is the holder of all of the outstanding Notes under
the Agreement) hereby agree that the Agreement is amended as follows:
1. The definition of "Change in Control Event" in Article I
of the Agreement is hereby amended by deleting clauses (i) and (ii), and by
renumbering clauses (iii) and (iv) to (i) and (ii).
2. For purposes of determining the Company's compliance with
Section 5E of the Agreement, Income Available for Recourse Interest Expense
shall be calculated without regard to the Restructuring Charges.
3. Section 5F of the Agreement is hereby amended by deleting
the date "January 31, 1991" therein and substituting the date "January 31,
1994".
4. The provisions of Section 5S of the Agreement shall not
apply to any sale of assets of the Company to any one or more Affiliates,
officers or directors of the Company effected as a part of the disposition of
certain "non-core businesses" of the Company pursuant to the strategic business
plan referred to in the second paragraph of this letter agreement
(notwithstanding that such sale is not in the ordinary course of the Company's
business), provided that such sale is upon fair and reasonable terms no less
favorable to the Company than it would obtain in a
<PAGE> 2
comparable arm's length transaction with a Person not an Affiliate (as
determined by the Board of Directors of the Company after due consideration and
after consultation with the Company's investment bankers and other advisors).
5. The provisions of Section 5T of the Agreement are hereby
waived to the extent necessary to permit the Company to grant to the holders of
all or a substantial portion of the Senior Indebtedness a security interest in
all assets of the Company that are not subject to the interests of non-recourse
lenders or to certain securitization pools.
6. Article IX of the Agreement is hereby deleted in its
entirety (except to the extent, if any, that such Article IX may be
cross-referenced for definition or similar matters), and the Notes shall not be
convertible under any circumstances.
7. Section 11C-1 of the Agreement is hereby deleted,
effective as of October 31, 1994.
8. Promptly after the effectiveness of this letter agreement,
the Company shall issue and deliver to the Purchaser ________ Warrants
registered in the Purchaser's name. Such Warrants shall be dated May 1, 1994,
and shall have an Exercise Price (as defined in the form of Warrants) of $____
per share. The Warrants shall in all other aspects be in the form of Warrant
attached to the Agreement as Exhibit B. Such additional Warrants and the
shares issuable upon the exercise thereof shall be entitled to the benefits of
Article XI of the Agreement and shall in all other respects be treated as
"Warrants" under the Agreement. Upon the effectiveness of the Agreement, the
Exercise Price of such currently outstanding Warrants shall be changed from
$15.24 to $____.
9. The Notes are hereby renamed "9 3/8% Subordinated Notes
due August 15, 2000" and may be so referred to in the Company's financial
statements and elsewhere, notwithstanding the word "Convertible" appearing in
the Agreement or in the Notes.
10. All of the terms and conditions of the Agreement and the
Notes shall remain in full force and effect as amended and supplemented hereby.
11. This amendment shall become effective when it has been
executed by the Company and the Purchaser. The amendments to the provisions of
Article V of the Agreement effected hereby shall be effective beginning January
31, 1994 and for the year then ended.
<PAGE> 3
Please indicate your agreement with the foregoing by executing
this amendment in the space provided below and returning a signed copy to me.
Very truly yours,
LDI CORPORATION
By: Frank G. Skedel
Senior Vice President and Treasurer
ACCEPTED AND AGREED:
OLYMPUS PRIVATE PLACEMENT FUND, L.P.
By: OGP Partners, L.P.
Its General Partner
By: ___________________________
Title: __________________________
FGS:pj
04269403
<PAGE> 1
May 2, 1994
LDI CORPORATION
One Cleveland Center
1375 East Ninth Street
Suite 700
Cleveland, Ohio 44114
ATTN: Mr. Frank G. Skedel
RE: RESTRUCTURING OF NOTES ISSUED UNDER NOTE PURCHASE AGREEMENT DATED AS OF
AUGUST 31, 1988, AND NOTE PURCHASE AGREEMENT DATED AS OF AUGUST 1, 1989.
Ladies and Gentlemen:
Pursuant to your request, the various insurance companies which are
signatories hereto (the "Insurance Companies") are issuing this commitment
letter for the restructuring of the indebtedness owing by LDI Corporation
("LDI") to the Insurance Companies under the above-captioned Note Purchase
Agreements.
Reference is made to the commitment letter date ________, 1994
(together with the Terms and Conditions attached thereto, the "Bank Commitment
Letter") by National City Bank, Society National Bank and Continental Bank, as
Co-Agents, and the other financial institutions signatory thereto
(collectively, the "Banks").
The Insurance Companies agree to restructure the indebtedness of LDI
owing to them pursuant to the above-captioned Note Purchase Agreements by
participating with the Banks on a PARI PASSU basis in the Revolving Credit
Facility described in the Bank Commitment Letter; provided, however, that such
participation shall be subject to the terms and conditions set forth in the
attached Term Sheet, including those relating to the principal payments and
prepayments and interest rate on the portion of LDI indebtedness held by the
insurance companies.
The terms summarized herein, in the Bank Commitment Letter and in the
attached Term Sheet are intended as an outline of principal terms and
conditions of the proposed restructuring and do not purport to summarize all of
the terms, conditions, covenants, representations, warranties, defaults,
closing conditions and other provisions that will be contained in the
definitive legal documentation. Such legal documentation will include, in
addition to the provisions outlined herein, in the Bank Commitment Letter and
in the attached Term Sheet provisions customary in such transactions and
otherwise appropriate in the context of the proposed transaction.
Each Insurance Company's commitment hereunder is subject to execution
and delivery of final legal documentation acceptable to each of the Insurance
Companies and their counsel,
<PAGE> 2
incorporating, without limitation the terms in the Term Sheet and the Bank
Commitment Letter, and satisfaction of the other conditions set forth in the
Bank Commitment Letter. The Insurance Companies will receive appropriate legal
opinions satisfactory to them from Baker & Hostetler and from in-house counsel
for LDI (including a non-contravention opinion with respect to LDI's material
agreements, indentures, leases and other financing arrangements).
To become effective and create a binding commitment by the Insurance
Companies to restructure the indebtedness under the Note Purchase Agreements as
set forth in this letter (including the Term Sheet) at or before 5:00 p.m.
(Minneapolis time) on May 2, 1994, (a) this letter must be accepted by you and
a signed original returned to us, (b) LDI shall have made a mandatory
prepayment on the Notes (the "1995 Notes") issued under the Note Purchase
Agreement dated as of August 1, 1989 in the aggregate amount of $727,000 plus
the 1995 Notes ratable share with the Banks of the $18,000,000 prepayment
specified in the Bank Commitment letter, and (c) LDI and its subsidiaries which
have entered into guaranties of LDI's indebtedness to the Insurance Companies
perfected liens on and security interests in all of LDI's and such
subsidiaries' assets pursuant to security agreements in form and substance
satisfactory to Insurance Companies and (ii) executed and delivered such UCC-1
financing statements covering the assets described in such security agreements,
as the Insurance Companies deem necessary or desirable.
Upon the effectiveness of this letter in accordance with the preceding
paragraph, the commitment of the Insurance Companies shall terminate on the
earliest of (a) May 31, 1994, (b) written notice to LDI that (i) LDI has not
satisfied or will not satisfy a condition set forth herein or in the Bank
Commitment Letter, or (ii) in the judgment of Insurance Companies, LDI or any
of its business or properties shall have suffered any material adverse change
since January 31, 1994, and (c) the occurrence of a default or event of
default, or an event which, after notice or lapse of time or both, would
constitute a default or event of default, under any loan documentation
currently existing between or among LDI and any of the Insurance Companies
which has not been waived in writing by the applicable Insurance Companies, and
(d) a petition for relief is filed by or against LDI under Title 11 of the
United States Code.
We look forward to your review and response. If there are any
questions, please do not hesitate to contact Mark Jordahl at Washington Square
Capital, Inc.
Very truly yours,
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By: _______________________________
Its _____________________________
2
<PAGE> 3
NORTHERN LIFE INSURANCE COMPANY
By: ________________________________
Its ___________________________
THE NORTH ATLANTIC LIFE
INSURANCE COMPANY OF AMERICA
By: ________________________________
Its ___________________________
CONFEDERATION LIFE INSURANCE
COMPANY
By: ________________________________
Its ___________________________
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By: ________________________________
Its ___________________________
FARM BUREAU LIFE INSURANCE
COMPANY OF MICHIGAN
By: ________________________________
Its ___________________________
FB ANNUITY COMPANY
By: ________________________________
Its ___________________________
FARM BUREAU MUTUAL INSURANCE
COMPANY OF MICHIGAN
3
<PAGE> 4
By: ________________________________
Its ___________________________
BENEFICIAL STANDARD LIFE
INSURANCE COMPANY
By: ________________________________
Its ___________________________
Agreed to and Accepted:
LDI CORPORATION
By: ______________________________
Its ___________________________
4
<PAGE> 5
Notes due August 31, 1994:
- -------------------------
Lenders:
Northwestern National Life Insurance Company-----------$920,000
The North Atlantic Life Insurance Company of America---$400,000
Confederation Life Insurance Company-------------------$580,000
Minnesota Mutual Life Insurance Company----------------$200,000
Farm Bureau Life Insurance Company of Michigan---------$200,000
FB Annuity Company-------------------------------------$200,000
Farm Bureau Mutual Insurance Company of Michigan-------$100,000
Interest Payments:
- -----------------
9.97% payable quarterly, with the first payment due on May 31, 1994 for the
previous quarter and on August 31, 1994. Interest accrues on a 30/360 day
basis.
Principal Payments:
- ------------------
One payment, in the full amount of each Lender's balance is due on
August 31, 1994.
Prepayments:
- -----------
At any time, in full, or in part, at par plus accrued interest.
Collateral:
- ----------
Pari-passu with all Lenders in the new Revolver.
Covenants, Conditions Precedent and Defaults:
- --------------------------------------------
Those which are contained in the new Revolver.
Expenses:
- --------
Faegre & Benson will represent the insurance company Lenders. Their fees and
charges will be the responsibility of LDI.
<PAGE> 6
Notes due August 11, 1995:
- --------------------------
Lenders:
Northwestern National Life Insurance Company -------------$3,825,000
Northern Life Insurance Company --------------------------$2,125,000
Confederation Life Insurance Company ---------------------$1,275,000
Beneficial Standard Life Insurance Company ---------------$1,275,000
Interest Payments:
- ------------------
9.96%, payable in accordance with the terms of the new Revolver.
Lenders Fees:
- -------------
1. Each Lender will be paid at the closing a Facility Fee equal to 0.75% of
the outstanding balance, paid in accordance with the terms of the new
Revolver.
2. Each Lender will be paid, at the closing, its pro-rata share of an Agent
Fee which, in total, will be $25,000.
Required Principal Payments:
- ----------------------------
1. Upon closing of the new Revolver, $727,000 dividend on a pro-rata basis
among the 1995 Noteholders.
2. Upon closing of the new Revolver each Noteholder will receive its pro-rata
share with all Lenders of the ($15) million repayment.
3. On each scheduled (quarterly) repayment date, each lender will receive its
pro-rata share of any prepayment (or, if less than the full amount is then
borrowed by the Company, each lender shall reduce its commitment amount by
an amount equal to its pro-rata share of the scheduled prepayment.)
4. The final maturity date shall be co-terminus with the new Revolver.
Revolving Advances/Payments:
- ----------------------------
A mechanism will be developed to permit the insurance company Lenders to
"settle-up" with the agent bank on a monthly basis so as to equalize all
Lenders' exposure risk.
Prepayments:
- ------------
At any time, in full, or in part, at par plus accrued interest; provided,
however, that any payment made for reasons other than to equalize the
exposure of the insurance lenders relative to the banks shall be a permanent
reduction in the Notes.
Collateral:
- -----------
<PAGE> 7
Pari-passu with all Lenders in the new Revolver.
Covenants, Conditions Precedent and Defaults:
- --------------------------------------------
Those which are contained in the new Revolver
Expenses:
- --------
Faegre & Benson will represent the insurance company Lenders.
Their fees and charges will be the responsibility of LDI.
<PAGE> 1
INDEX TO 30700 CARTER ST., SOLON LEASE
--------------------------------------
BETWEEN
-------
NCP, LTD
--------
AND
---
LDI CORPORATION.
---------------
SECTION PAGE
- ------- ----
1. DEFINITIONS 1
2. LOCATION 2
3. TERM 2
4. RENTAL 2
5. SERVICE 5
6. USE OF PREMISES 6
7. CONSTRUCTION AND ALTERATIONS 7
8. COMMON USAGE 8
9. INDEMNITY AND INSURANCE 8
10. DAMAGES AND NON-LIABILITY 9
11. DESTRUCTION 10
12. EMINENT DOMAIN 10
13. ASSIGNMENT, SUBLETTING AND SUBORDINATION 11
14. BANKRUPTCY 12
15. SURRENDER 12
16. ACCESS BY LANDLORD 13
17. HOLDING OVER 13
18. SIGNS 13
19. TENANT'S POSSESSION 14
<PAGE> 2
SECTION PAGE
- ------- ----
20. BREACH, INSOLVENCY, RE-ENTRY 14
21. MAINTENANCE AND REPAIRS 15
22. RENT DEMAND 16
23. NOTICE 16
24. GENERAL 16
25. LIMITATION OF LANDLORD'S LIABILITY 17
26. SUCCESSORS AND ASSIGNS 17
27. RULES AND REGULATIONS 17
28. SECURITY DEPOSITS 17
29. SHORT FORM LEASE 18
30. BROKER 18
31. ESTOPPEL CERTIFICATE 18
32. INVALIDITY OF PARTICULAR PROVISIONS 19
<PAGE> 3
SOLON LEASE
-----------
RESTATED
--------
THIS RESTATED LEASE is made and entered into this TWENTY-SECOND OF APRIL,
1993, by and between NCP, LTD., and Ohio limited partnership, with its
principal offices located at 30033 Clemons Road, Westlake, Ohio 44145
(hereinafter called "Landlord"), LDI CORPORATION., with its offices located at
1975 E. NINTH ST., CLEVELAND, OHIO 44114, (hereinafter called "tenant"). The
Landlord and Tenant hereby mutually covenant and agree as follows:
Rider X
1. DEFINITIONS.
------------
(A) "Real Property" shall mean the real estate located 30700
Carter St., Solon, as more particularly described in Exhibit A
attached hereto and made a part hereof by reference.
(b) "Improvements" shall mean the buildings and improvements existing
or to be constructed on the Real Property, known as Solon.
(c) "Premises" means that portion of the Improvements to be leased
(consisting of 31,060) to Tenant hereunder, as set forth in red on Exhibit B
attached hereto and made a part hereof by reference.
(d) "Common areas" means the unassigned parking areas, driveways,
halls, stairs, entrances and walks of the Real Property and Improvements as
they may exist from time to time.
(e) "Tenant's Percentage" shall mean the ratio of the area of the
Premises to the area of the rentable space of the Improvements. Except as
otherwise provided herein, for this Lease the Tenant's percentage is 21.3618%.
(f) "Lease Year" shall mean any twelve (12) month period commencing on the
Opening Date (as defined in Section 3 below) or any anniversary thereof,
whether such period is in the Term hereof or the Renewal Term (if exercised).
Page No. 1
<PAGE> 4
2. LOCATION.
---------
For the rent and upon the agreements contained in this Lease, Landlord
leases to Tenant and Tenant rents from Landlord that portion of the
Improvements, shown in red on Exhibit B (the "Premises"), together with the
right to use the Common areas in common with the Landlord and other tenants
of the Improvements as more specifically set forth hereinafter.
3. TERM.
-----
(a) The term of this Lease (the "Term") shall be for a period of 44 months
commencing the 3/1/92 or the first day the Tenant shall take possession of the
Premises. Such earlier date shall be known hereafter as the "Opening Date".
(b) Provided Tenant is not in default of its obligations hereunder, upon
120 days prior written notice Tenant shall have the right and option to renew
this Lease for an additional term (the "Renewal Term") of five years,
commencing on 11/1/95, upon the same terms and conditions contained herein
except that the Basic Annual Rental shall be increased to the current fair
market rental value but no less than the percentage of increase in the Consumer
Price Index. But in no event shall the renewal term base rent be less than the
original base rent.
(c) The Lease will be extended automatically at l50% of current rent for an
additional period (the "Extended Term") unless either the Landlord or the
Tenant provides written notice of its desire not to extend the Lease at least
120 days prior to the end of the Term or any Renewal Term. during the Extended
Term either Lessor or Lessee may terminate the lease at anytime upon at least
30 days prior written notice of termination.
4. RENTAL.
-------
Tenant agrees without demand and without any deduction or set-off to pay to
the Landlord at Landlord's office or such other place as Landlord may from time
to time designate as rent for the Premises during the continuation of this
Lease the Basic Annual Rent and the Common Charges (both as defined
hereinafter):
Page No. 2
<PAGE> 5
(a) The Annual rent shall be the sum of THREE HUNDRED SIX THOUSAND EIGHT
HUNDRED NINETY-NINE DOLLARS AND SEVENTY-SIX CENTS (306,899.76) per year payable
in equal consecutive monthly installments of TWENTY-FIVE THOUSAND FIVE HUNDRED
SEVENTY-FOUR DOLLARS AND NINETY-EIGHT CENTS (25,574.98). each in advance on the
first of every calendar month. Each and any payment not received by the 10th
of the month add 5% to the payment. All balances beyond 30 days will include
interest at 18% per year. The first installment of Basic Annual Rent shall be
due and payable at the time of execution of this Lease. For each day of the
period of time from the Opening Date until the first day of the Term, the
Tenant shall pay the Landlord the sum of $70.07 for the use and occupancy of
the Premises, plus the Common Charges (if any) prorated for such fraction of a
month on the basis of actual number of days in such month, payable on or before
the first day of the Term.
(b) The Common charges shall be the product obtained by multiplying the
Tenant's Percentage times the total of the following (the "Expenses") for each
Lease Year:
(i) The expense of such property insurance as the Landlord shall deem
necessary or appropriate and maintain on the Improvements and Real
Property;
(ii) The expenses of such liability insurance as Landlord shall deem
necessary or appropriate and maintain for its protection from
liability occurring on or about the Improvements and Real Property;
(iii) The expense of maintaining and repairing the Improvements and the
Common Areas, including, without limitation, janitorial services to
the Common areas, cleaning service, cleaning materials and
equipment, supplies, labor, wages and fringe benefits, including
workmen's compensation, disability benefits, insurance, payroll
taxes, welfare benefits, unemployment benefits, mechanical
equipment maintenance, equipment rental, personal property taxes,
fire protection, licenses, permit fees, depreciation of maintenance
equipment, window washing, management, landscaping, rubbish
removal, maintenance of parking areas, removal of snow and ice, the
lighting, security services, policing, lining and repair of parking
areas and sidewalks and other services;
(iv) The expense of all gas, water, electricity, sewage and other utility
charges for utilities servicing or used in the Improvements (other
than those metered separately to any tenant);
(v) The expense of all gas, water, electricity, sewage and other utility
charges for utilities servicing or used in the Common Areas; and
Page No. 3
<PAGE> 6
(vi) "Real Estate Taxes" shall include all real estate taxes, assessments,
water and sewer rents (except water meter charges and sewer rent based
thereon which have been included in the utility charges of (iv) or (v)
of Paragraph (b) above) and other governmental impositions and charges
of every kind and nature whatsoever, extraordinary as well as
ordinary, foreseen and unforeseen, which shall or may, during the Term
or the Renewal Term, be levied, assessed, or imposed, or liens upon or
arising in connection with, the use, occupancy or possession of or
grow due or payable out of, or for, the Real Property or any part
thereof, and all reasonable costs and expenses incurred by Landlord in
contesting or negotiating the same with any governmental authority.
(vii) An amount equal to ten percent (10%) of the sum of the expenses
described in (i) through (v) hereinabove, in full payment of all
administrative costs of Landlord in connection therewith.
(c) On or before the commencement of each Lease Year, Landlord shall make a
good faith estimate of the Expenses for such Lease Year, and shall furnish
Tenant a Statement setting forth the estimated amount of such Expenses. On or
before the commencement of each Lease Year thereafter, Landlord shall furnish
Tenant a statement setting forth the actual amount of the Expenses for the
prior Lease Year, which amount shall serve as the estimated amount of the
Expenses for the current Lease Year. During each Lease Year, Tenant shall pay
along with each installment of the Basic Annual Rent one-twelfth (1/12th) of
the Common Charges based on such estimate. Within thirty (30) days after
Landlord delivers the above statement as to the actual Expenses for any Lease
Year, any deficiencies or overages from the actual amount of such Common
Charges from the estimated Common Charges paid during such prior Lease Year
shall be adjusted between the parties. For any fractional portion of a
calendar year at the commencement or termination of this Lease, any such
deficiency or overage shall be settled and adjusted between the parties at the
end of the Lease Year in the same manner as above but prorated based on the
number of days of the term in such year. Landlord and Tenant hereby
acknowledge and agree that the estimated Expenses for the first Lease Year of
this Lease shall be equal to ____ per square foot of space in the premises.
Page No. 4
<PAGE> 7
[Exhibit B Picture of Floor Plan 31,060 Sq. Ft.]
<PAGE> 8
(e) All rent and other charges not paid after 30 days of the due date shall
bear interest at the rate of eighteen percent (18%) annually from and after the
date said rent and charges become due, and the same shall be regarded as
additional rent hereunder.
(f) If Tenant shall dispute any item or items included by Landlord in
determining the Expenses for any Lease Year, and such dispute is not amicably
settled between Landlord and Tenant within thirty (30) days after the first
statement setting forth the Expenses for such year has been rendered, either
party may, during the 20 days next following the expiration of said 30-day
period, notify the other of its election to arbitrate said dispute and
thereupon such disputed item or items shall be referred by Landlord and Tenant
to an arbitration panel composed of three certified public accountants (one
selected by Landlord, one selected by Tenant, and the third selected by the
other two), and the decision of such panel shall be conclusive and binding upon
Landlord and Tenant. The expense involved in such determination shall be borne
by the party against whom a decision is rendered by said accountants, provided
that if more than one item is disputed and the decision shall be in part
against each party, the expenses shall be fairly apportioned by said
accountants and further provided that if such decision does not decrease
Tenant's liability by at 5%, all of the cost and expense of such arbitration
shall be borne by Tenant. If Tenant shall not dispute any item or items of any
such statement within 30 days after such statement has been rendered, Tenant
shall be conclusively deemed to have approved such statement.
5. SERVICE.
--------
Landlord shall provide the Premises with utilities connections for gas, all
electricity, water and sewers, and shall supply the
Page No. 5
<PAGE> 9
Premises with water for domestic uses. Landlord shall have the right, without
notice to Tenant, to discontinue any service to be provided to Tenant
hereunder, during any period for which payment is overdue from Tenant on
account of rent or other service for which payment is due from Tenant to
Landlord to any public utility agency, or pursuant to any obligation of Tenant
to Landlord hereunder, and rental shall not abate during any such period of
discontinued service. Tenant shall pay for all utilities and services used or
consumed upon the Premises to the extent such are separately metered and shall
pay any charges made for the installation of new or additional connections or
modifications in such services to the Premises required by Tenant and made
during the term hereof. Tenant shall pay for such utilities and services
either directly to the utility or, in the event Landlord shall pay the charges,
to Landlord based on the readings of a submeter and at rates that would have
been payable if such service were directly billed by the utility.
The amount and character of any utilities and services provided by Landlord
shall be solely within the judgment of the Landlord. Landlord shall not be
liable in any way for interruption or failure of any such services from any
cause whatsoever and any such interruption or failure of service shall never be
deemed an eviction or disturbance of the Tenant's use and possession of the
Premises or any part thereof or render the Landlord liable to the Tenant for
damages, or relieve the Tenant from performance of the Tenant's obligations of
this Lease.
6. USE OF PREMISES.
----------------
Tenant shall use and occupy the PREMISES FOR GENERAL SALES OFFICES AND
DISASTER RECOVERY SERVICES and for no other purpose. Tenant shall keep the
Premises (expressly including heating, air conditioning, ventilation, plumbing
and electrical equipment and systems located within or on the roof of the
Premises) at all times in good order, condition and repair (including making
all necessary replacements thereto), and shall also keep the Premises in a
clean, sanitary and safe condition in accordance with laws of the State of
Ohio, and in accordance with all directions, rules and regulations of the
health officer, fire marshall, building inspector or other proper officers of
the governmental agencies having jurisdiction, at the sole cost and expense of
the Tenant, and Tenant shall comply with all requirements of law, ordinance or
otherwise, affecting the Premises. Tenant shall pay on demand for any unusual
use of heat, air conditioning, electricity or water because of any special
needs or practices of the Tenant. Tenant shall permit no waste or nuisance
upon or damage or injury to the Premises or utilities supplied thereto, and at
the expiration of the Tenancy created hereunder, Tenant shall surrender the
Premises in as good condition and repair as they were at the time Tenant took
possession, excepting reasonable wear and tear and loss by fire or other
insured casualty. Tenant agrees that Tenant shall commit no act which will
cause either Tenant or Landlord to be in noncompliance with any and all zoning
ordinance of the city of Westlake.
Page No. 6
<PAGE> 10
7. CONSTRUCTION AND ALTERATIONS.
-----------------------------
(a) Landlord shall cause the construction of the Premises to be completed
as promptly as may be reasonably possible, subject to delays arising as a
result of any (i) strikes, lockouts or labor disputes, (ii) inability to obtain
labor or materials or reasonable substitutes therefor, (iii) acts of God,
governmental action, condemnation, civil commotion, fire or other casualty, or
(iv) other conditions similar to those enumerated to this section beyond the
reasonable control of the Landlord. Unless otherwise agreed by Landlord and
Tenant, such work ("Landlord's Work") shall be done in conformity with the
description of Landlord's Work and outline specifications set forth in Exhibit
C attached hereto, and shall be completed in a good and workmanlike manner;
together with final plans and specifications for Landlord's Work to be prepared
by Landlord and approved by Tenant, provided, however, that if Tenant requires
leasehold finish improvements which cost in excess of the Landlord's Work as
specified on Exhibit C, Tenant shall pay such excess cost. When ready for
Tenant's occupancy or Tenant's improvements, Landlord shall give Tenant written
notice of such availability. Landlord's Work shall be deemed approved by
Tenant in all respects when Tenant takes possession of the Premises except as
to items which are not completed or do not conform to Exhibit C and as to which
Tenant shall give Landlord written notice or Tenant's reasonable disapproval
within fifteen (15) days after Tenant opens for business. Upon receipt of such
notice, such items shall be completed with all reasonable speed.
(b) Tenant will make no alterations in or additions to or improvements to
the Premises without first obtaining the written consent of the Landlord
thereto and then shall make such alterations only between hours and by such
contractors and mechanics as may be approved in writing y Landlord. Within
thirty (30) days after the date of execution of this Lease Tenant, or Tenant's
sole cost and expense, shall cause two (2) sets of preliminary plans and
specifications ("preliminary plans"), prepared in conformity with Exhibit D for
the performance of Tenant's work described in Exhibit D, to be prepared and
delivered to Landlord for Landlord's approval. Within thirty (30) days after
Landlord's approval of preliminary plans Tenant, at Tenant's sole cost and
expense, shall cause two (2) sets of working drawings and specifications
("working drawings"), prepared in conformity with the approved preliminary
plans and with Exhibit D to be prepared and delivered for Landlord's approval.
Landlord shall promptly notify Tenant of the respect, if any, in which said
working drawings fail to conform to the approved preliminary plans and/or the
applicable provisions of Exhibit D or fail to receive the approval of Landlord;
and Tenant shall promptly make any revisions necessary to correct such matters
and obtain such approval. Such approval shall be evidenced by Landlord's
causing one (1) set of such working plans to be initialed on its behalf and
returned to the Tenant. Tenant shall make any such alterations, changes and
improvements in a good and workmanlike manner, shall comply with all applicable
laws and building
Page No. 7
<PAGE> 11
regulations, and shall, prior to the making of said alterations,
changes and improvements, assure Landlord that payment for the same will be
made by Tenant. Tenant hereby completely and fully indemnifies Landlord
against any Mechanic's lien or other lien or claims in connection with the
making of any such alterations, changes and improvements. All alterations,
additions, improvements and replacements made or provided by Landlord or Tenant
upon the Premises, except movable office furniture and trade fixtures provided
at Tenant's expense, shall be the property of Landlord, and shall remain upon
and be surrendered with the Premises upon termination, without molestation or
injury; provided, however, that at Landlord's election, Tenant shall remove all
or such part of any such alterations, additions, improvements or replacements
made by Tenant and repair and restore all damages or harm caused by such
removal at Tenant's expense.
8. COMMON USAGE.
-------------
Landlord hereby grants to Tenant and Tenant's employees, agents, customers,
guests, or invitees, expressly subject, however, to such rules and regulations
as or may from time to time be made by Landlord, the non-exclusive right to use
the Common Areas in common with others entitled to the use thereof. Tenant
agrees to exercise reasonable diligence so that ingress and egress will not be
blocked by any vehicles belonging to its employees, agents, customers, guests
or invitees. Landlord shall maintain, control, manage and operate the Common
areas in a reasonable manner and may from time to time promulgate such
reasonable rules and regulations as Landlord in its sole discretion may deem
appropriate, and Tenant, its agents, employees, customers, guests and invitees
use and occupancy thereof shall be conditioned upon compliance with such rules
and regulations.
9. INDEMNITY AND INSURANCE.
------------------------
(a) Tenant shall defend and save harmless Landlord from and against any and
all loss, cost, damage, or expense, including attorney's fees, of any nature
whatsoever arising out of or connected with the us or occupancy of the Premises
by Tenant, the materials or things maintained or kept by Tenant, its agents,
employees, guests, invitees and contractors, in or on the Premises, the
approaches thereto and the Common Areas, or arising or alleged to have arisen
out of the acts or omissions of Tenant's officers, agents, employees, guest,
invitees and contractors.
(b) At all times during the terms of this Lease, Tenant shall, at Tenant's
own expense, keep in full force and effect public liability insurance in
companies acceptable to Landlord, naming both Landlord and Tenant as insured
parties, with minimum limits of One Million Dollars ($1,000,000.00) on account
of bodily injuries
Page No. 8
<PAGE> 12
or death of one person, One Million Dollars ($1,000,000.00) on account of
bodily injuries or death or more than one person arising out of any one act or
omission, and Two Hundred Fifty Thousand Dollars ($250,000.00) property damage
arising out of any one act or omission. Tenant shall deposit such policy or
policies of insurance, or certificates thereof with Landlord. Tenant shall
further maintain property insurance on its personal property located on the
Real Property to the actual cash value thereof.
(c) Tenant shall not do anything in or about the Premises which will in any
way tend to increase the insurance rates on the Premises, and/or Improvements
or Real Property. Tenant shall pay as additional rent any increase in premiums
for insurance which may be charged during their term of this Lease on the
amount of insurance carried by Landlord on the Improvements and Real Property,
resulting from activities carried on or occupancy of the Premises by Tenant,
whether or not Landlord has consented to the same.
(D) THE FIRE AND EXTENDED COVERAGE INSURANCE POLICIES CARRIED BY THE
LANDLORD TO INSURE THE IMPROVEMENTS AND BY THE TENANT TO INSURE ITS PERSONAL
PROPERTY LOCATED IN THE PREMISES SHALL EACH INCLUDE OR PERMIT A WAIVER OF ALL
RIGHTS OF SUBROGATION AS SET FORTH BELOW. EACH OF THE PARTIES (TO THE EXTENT
OF THE COVERAGE PROVIDED BY THE RESPECTIVE INSURANCE POLIcIES carried by such
party) agrees to and does hereby waive all rights of recovery and causes of
action against the other and all persons claiming through or under such other
party, by way of subrogation or otherwise for any damage to the Premises, or
the personal property, as the case may be, caused by any of the perils covered
by such fire and extended coverage insurance policies (as now or hereafter
constituted), notwithstanding that any such damage or destruction may be due to
the negligence of such other party or of the persons claiming through or under
such other party.
10. DAMAGES AND NON-LIABILITY.
--------------------------
Landlord shall not be liable to the Tenant, its officers, agents or
employees, for any theft, damage or injury occasioned by failure to keep the
Premises heated, cooled or in repair, or for any bodily injury or property
damage done or occasioned by or from structural failure or collapse, fixtures
(whether in place or otherwise), fixture failure, other materials or part of
the Improvements, plumbing, downspout, gas, water, steam or other pipes, or
sewage, or the bursting, leaking, or running of any water outlet, container or
fixture, in above, upon or about the Improvements or Premises,nor for injury or
damage occasioned by wind, water, snow or ice being upon or coming through the
roof, skylight, windows, stairs, doors, parking, road and sidewalk areas, or
otherwise, nor for any injury or damage arising from the omissions of any of
the utilities or service supplied or due to supplied by Landlord hereunder, or
from acts of negligence or willfulness of co-tenants or other occupants of the
Improvements or other contiguous buildings or property.
Page No. 9
<PAGE> 13
11. DESTRUCTION.
-----------
If the Premises hereby leased are damaged or destroyed in part by fire or
other casualty ordinarily insurable under full standard extended coverage
insurance in Ohio during the term hereof, Landlord will repair and restore the
same to good tenantable condition with reasonable dispatch; but in no event
shall Landlord take longer than six (6) months to complete such repair and
restoration. The rent herein provided shall abate entirely in case the entire
Premises are untenantable, and pro rata for any portion rendered untenantable
in case a part only is untenantable, until the same shall be restored to a
tenantable condition; provided, however, that if Tenant, its agent, employees
or guests or invitees shall fail to adjust its own insurance or to remove its
damaged goods, wares, equipment or restoration is delayed by the acts or
omissions of Tenant, there shall be no abatement of rental during the period of
such resulting delay; and provided further that there shall be no abatement of
rental if such fire, or other causes damaging or destroying the Premises shall
result from any willful act or omission of Tenant, its agents, employees or
guests or invitees; and provided further that if Tenant shall use any part of
the Premises for storage or other useful purpose during the period of repair, a
reasonable charge shall be made therefrom against Tenant. In the event the
Premises, or the Improvements shall be destroyed to the extent of more than
thirty percent (30%) of the value thereof, Landlord may at its option terminate
this Lease forthwith by written notice to Tenant. In the event Landlord elects
so to rebuild or repair, this Lease shall not terminate, but rent shall be
abated equitably while the Premises are untenantable. In case Landlord elects
to rebuild or repair as herein provided, the obligation of the Landlord
hereunder shall be limited to the Landlord's original work and only to the
amount of any insurance proceeds actually received by it.
12. EMINENT DOMAIN.
--------------
In the event that the Premises or Common areas or any part thereof shall at
any time after the execution of this Lease by taken for public or quasi-public
use or condemned under eminent domain, Tenant shall not be entitled to claim,
or have paid to the Tenant any compensation or damages whatsoever for or on
account of any loss, injury, damage or taking of any right, interest, or estate
of the Tenant in or to said property, in which event Tenant, upon request of
Landlord so to do, will execute any and all releases or other documents as
shall be required by such public or quasi-public authority. However, nothing
herein contained shall be construed to prevent the Tenant from asserting
against the condemnor any separate and independent claims for damages occurring
by reason of said condemnation including, but not limited to, personal
property, business, goodwill, cost of removing equipment, moving expenses, or
loss of future profits. In the case of any such taking or
Page No. 10
<PAGE> 14
condemnation referred to in this paragraph, then if and when there is an actual
taking of physical possession of the Premises or of any part thereof in excess
of twenty-five percent (25%) of the rentable space thereof, then either the
Landlord or the Tenant may cancel and terminate this Lease as to the whole of
the Premises by giving notice to the other party within ten (10) days after
such an actual taking of physical possession. No such taking of all or any
part of the Common areas shall give rise to any right of termination or rent
abatement for such taking. If this Lease is not terminated as above provided
for following an;y of said actual takings, the Landlord shall repair the
Improvements at its own expense; provided, however, that Landlord's obligation
to repair shall be limited to the amount of award actually received by it for
such taking. In the event of a partial taking of the Premises, a proportionate
allowance shall be made in the Basic Annual Rent based on the proportion of the
Premises remaining as compared to the original premises.
13. ASSIGNMENT, SUBLETTING AND SUBORDINATION.
----------------------------------------
Tenant agrees not to assign or in any manner transfer this Lease or any
estate or interest therein without the previous written consent of Landlord,
and not to sublet the Premises or any part or parts thereof or allow anyone to
use the Premises or to come in with the Tenant, either through or under the
Lease, without like consent. If tenant is a corporation, then any merger,
consolidation or liquidation, or any change in ownership or power to vote of
30% or more of the total partnership interest shall constitute an assignment
for purposes of this Lease. Consent to one or more assignments of this Lease
or subletting of said Premises shall not operate to exhaust or waive Landlord's
rights under this paragraph., Landlord may assign this Lease, or the rentals
paid hereunder, or both, in its sole discretion, as additional security for any
mortgage on the Real Property or otherwise, and Landlord also reserves the
right and Tenant hereby agrees that on request of Landlord this Lease shall be
subordinated to any mortgages which may hereafter be placed upon the Real
Property and to any and all advances to be made thereunder, and to the interest
thereof, and all renewals, replacements, and extensions thereof. Landlord
reserves the right to demand and obtain from the Tenant a Waiver of Priority of
Tenant's rights arising by virtue of the within leasehold estate, thereby
subordinating Tenant's said lien in favor of a mortgage upon the Real Property,
and Tenant upon demand by the Landlord for same, agrees to execute at any and
all times such instrument that may be required by any lending institution or
prospective mortgagee in order to effectuate such Waiver of Priority and
subordination of Tenant's lien. If Tenant within five (5) days after
submission of such instrument fails to execute the same, Landlord is hereby
authorized to execute the same as
Page No. 11
<PAGE> 15
attorney-in-fact for Tenant. If any mortgagee of the Real Property elects to
treat the Lease as a prior lien to its mortgage, then upon due notice to Tenant
to that effect, this Lease shall be deemed prior in lien to the said mortgage
whether or not this Lease is dated prior to or subsequent to the date of said
mortgage.
14. BANKRUPTCY.
----------
Neither this Lease, nor any interest therein, nor any estate thereby created
shall pass to any trustees or receiver or assignee for the benefit of creditors
or otherwise by operation of law. If the estate created hereby shall be taken
or attempted to be taken in execution or by other process of las, or if Tenant
shall be adjudicated insolvent or bankrupt pursuant to the provisions of any
state or federal insolvency or bankruptcy act, or if a receiver or trustee of
the property of Tenant shall be appointed by reason of Tenant's insolvency or
inability to pay its debts, or if any assignment shall be made or attempted to
be made by Tenant's property for the benefit of creditors, then and in any such
event, Tenant will be deemed in default under this Lease. The allowance of any
petition under the bankruptcy law, or the appointment of a trustee or receiver
of Tenant or its assets shall be conclusive evidence that Tenant caused, or
gave cause therefor, in violation of this Lease, unless such allowance of the
petition, or the appointment of a trustee or receiver, is vacated within thirty
(30) days after such allowance or appointment. Any act described in this
Section 14 shall be deemed a material breach of Tenant's obligation hereunder,
and at any time when such a breach exists, Landlord may, at its option, and in
addition to and independent of, any remedy available to Landlord, terminate
this Lease and all rights of Tenant hereunder by giving to Tenant notice in
writing of the election of Landlord so to terminate, and re-enter and repossess
the Premises with or without prior notice.
15. SURRENDER.
---------
On the last day of the Term of this Lease, or on the sooner termination
thereof, Tenant shall peaceable surrender the Premises in good condition and
repair as required by Section 6 hereof. On or before the last day of the Term
of this Lease or the sooner termination thereof, Tenant shall at its expense
remove all of its office furnishings, machinery, equipment, supplies and other
personalty. any property not so removed shall be deemed abandoned. All
improvements, alterations, additions and fixtures, other than Tenant's
personalty as aforesaid, which have been made or installed by either Landlord
or Tenant upon the Premises shall remain as Landlord's property and shall be
surrendered with the Premises as apart thereof. If the Premises are not
surrendered at the end of the term or the sooner termination thereof, Tenant
shall indemnify Landlord against loss or liability resulting from delay by
Tenant in so
Page No. 12
<PAGE> 16
surrendering the Premises, including, but without limitation to, any claims
made by any succeeding tenant founded on such delay. Tenant shall promptly
upon surrender deliver all keys for the premises and Building to Landlord at
the place then fixed for payment of rent.
16. ACCESS BY LANDLORD.
------------------
Landlord shall have the right to enter the Premises at reasonable times
during the term hereof to make any alterations or repairs to the Improvements
which Landlord may deem necessary or appropriate for its safety and
preservation; provided, however, that Landlord shall not unduly or unreasonably
interfere with the conduct of Tenant's business on the Premises. during the
progress of any such work, Landlord may keep and store upon the Premises all
necessary materials, tools and equipment. Landlord shall not in any event be
liable for inconvenience, annoyance, disturbance, loss of business or other
damage to Lessee, provided it be as little as may be reasonably possible in the
circumstances, by reason of the performance of any such work or of bringing
materials, supplies and equipment into or through the Premises during the
course thereof the obligations of Tenant under this Lease shall not be affected
thereby in any manner whatsoever. Tenant agrees to permit Landlord and any
authorized representative of Landlord to enter the Premises at all times during
normal business hours to exhibit the same for the purposes of sale or mortgage
and, during the final six (6) month period Landlord may display on the Premises
in such manner as not to interfere unreasonably with Lessee's business usual
"For Sale" or "To Let" signs or signs of a similar nature.
17. HOLDING OVER.
------------
If Tenant shall remain in possession of all or any part of the Premises after
the expiration of the term of this Lease, then Tenant shall be deemed a Tenant
of the Premises from month to month, subject to all terms and conditions of the
within Lease which are not inconsistent with such month to month tenancy, but
nothing herein shall excuse any unauthorized holding over or waiver any
liability therefor. Unless negotiated otherwise the monthly rent shall
increase by 50%.
18. SIGNS.
-----
Except as expressly provided herein, Tenant covenants and agrees that it will
not permit or cause placed on the outside or inside of the Improvements or
elsewhere on the Real Property, signs, notices or other media of advertising,
except only for those installed by Landlord or as approved in writing in
advance by Landlord. Tenant further covenants and agrees that any signs
erected or maintained by
Page No. 13
<PAGE> 17
Tenant shall comply with the applicable laws and ordinances of the City of
Westlake, Ohio and Tenant, at its expense, shall obtain any permits required
therefor. Any Signs erected by Tenant shall be in accordance with existing
building standards. In accordance with the foregoing, Tenant shallplace erect,
and maintain signs at the entrance to the premises and at the loading dock.
19. TENANT'S POSSESSION.
-------------------
Taking possession of the Premises by Tenant shall be conclusive evidence that
the Premises were in good order and in satisfactory condition when Tenant took
possession. Provided, however, that Landlord hereby covenants and agrees that
if Tenant shall promptly and faithfully perform all of the covenants and
agreements herein stipulated to be performed on Tenant's part, Tenant shall at
all times during said term have the peaceable and quiet enjoyment and
possession of said Premises without hinderance or claim from Landlord or any
persons lawfully claiming said Premises by or under the Landlord.
20. BREACH, INSOLVENCY, RE-ENTRY.
----------------------------
(a) If Tenant shall at any time be in default in the payment of rent or
other sums of money required to be paid by Tenant or in the performance of any
of the covenants, terms, conditions, provisions, rules and regulations of this
Lease and the Tenant shall fail to remedy any such default within a period of
three (3) days, in the event the default is as to payment of rent or other sums
of money, or within fifteen (15) days after receipt of notice thereof from
Landlord, of the default relates to matters other than the payment of rent and
other sums of money (but Tenant shall not be deemed to be in default if Tenant
commences to remedy said defaults other than relating to payment of rent and
other sums of money within said fifteen (15) day period, and proceeds therewith
with due diligence), or if Tenant shall commit waste, shall vacate the
Premises, or if Tenant shall be adjudged bankrupt or shall make an assignment
for the benefit of creditors, or if a receiver of any property of Tenant in or
upon the Premises be appointed in any action, suit or proceeding by or against
Tenant and not removed within thirty (30) days after appointment or if the
interest of Tenant in the Premises shall be offered for sale or sold under
execution or other legal process, Landlord, in addition to all other remidies
given to Landlord in law or in equity, may by written notice to Tenant to
terminate this Lease, or, without terminating this Lease, re-enter the Premises
in accordance with applicable law by summary proceeding or otherwise, and, in
any event, may dispossess the Tenant, with or without process of law, using
such force as may be necessary to remove all persons and chattels therefrom.
Landlord shall not be liable for damages to
Page No. 14
<PAGE> 18
persons or property by reason of any such re-entry or forfeiture which shall in
such event conclusively be deemed a peaceable re-entry to the Landlord's
Premises, and shall be aided and assisted by Tenant, his agents,
representatives, and employees.
In the event of such re-entry, Landlord may relet the Premises without being
olligated so to do and, in the event of a reletting, may apply the rent
therefrom first to the payment of Landlord's expenses, including reasonable
attorneys' fees incurred by reason of Tenant's default, and the expense of
reletting including, but not limited to, the repairs, renovation, or
alterations of the Premises, and then to payment of rent and all other sums due
from Tenant hereunder, Tenant remains liable for any deficiency.
(b) In the event of a default or threatened default by Tenant of any of the
terms, provisions, covenants, conditions, rules and regulations of this Lease,
Landlord shall have the right to injunction and the right to invoke any remedy
permitted to Landlord in law or in equity. All remidies available to Landlord
are declared to be cumulitive and concurrent. No termination of this Lease nor
any taking or recovering of possession of the Premises shall deprive Landlord
of any of its remedies or actions against Tenant for past or future rent, nor
shall the bringing of any actionfor rent or other default be construed as a
waiver of the right to obtain possession of the Premises.
(c) If Tenant shall fail to make any payment or perform any other act on its
part to be performed under this Lease, Landlord may make such payment or
perform such other act to the extent Lessor deems desirable. Any amounts so
paid by Landlord or any expenses so incurred in doing any such act to make up
any default to Tenants part to fulfill Tenant's covenants herein written, are
hereby agreed and declared to be so much additional rent and shall be due and
payable within the next installment due thereafter under this Lease.
21. MAINTENANCE AND REPAIRS.
-----------------------
Landlord shall keep in good repair and condition the foundation, the roof,
the four outer walls and all structural components of the Improvements
(excluding windows and doors inside the Premises) and the Common Areas, but
Landlord shall not be called upon to amake any repairs occasioned by the act or
omission of Tenant, its officers, agents, servents, guests or invitees. Tenant
shall maintain and keep in good repair and condition the Premises and contents
and decoration thereof, including without limitation all pipes and other
plumbing, toilets, sinks, lights and other electrical systems and fixtures, all
glass, floor coverings, and heating ang air conditioning systems. If, after
the notice from Landlord, Tenant fails or refuses to make any repairs or
provide any maintenance required by Tenant hereunder, then Landlord may, but
shall not be obligated to, make or cause such repairs to be made or maintenance
provided, the Tenant agrees that it
Page No. 15
<PAGE> 19
will, in such event, pay the full cost
thereof to Landlord upon demand, as additional rental hereunder, with all
remedies attendant thereon.
22. RENT DEMAND.
-----------
Every demand for rent due whereever and whenever made shall have the same
effect as if made at the time it falls due and at the place of payment and,
after the service of any notice of commencement of any suit, or final judgement
therein, Landlord may receive and collect any rent due, and any such collection
or receipt shall not operate as a waiver of nor affect such notice, suit or
judgement.
23. NOTICE.
------
Any notice required or permitted to be given or served under this Lease, or
in connection with any proceeding or action growing out of this Lease or of the
tenency therefrom, shall be deemed to be sufficiently given or served, if
mailed by registered or certified mail, postage prepaid, and addressed as
follows. If to Landlord, NCP, LTD, 30033 Clemens Road, Westlake, Ohio, 44145,
marked to the attention of NCP, LTD.; and if to Tenant,addressed to it at its
address as set forth on the first page of this Lease. Either party may
designate a different address or a different person for the sending of notice
by complying with the provisions of this Section 23.
24. GENERAL.
-------
Nothing contained herin shall be deemed or construed by the parties hereto,
nor by any third party, as creating the relationship of principal and agent, or
of partnership, or of joint venture between the parties hereto, the sole
relationship being that of Landlord and Tenant. Wherever herein the singular
number is used, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders. One or more waivers of any
covenant or condition by Landlord shall not be construed as a waiver of a
subsequent breach of the same covenant or condition, and the consent or
approval by the Landlord to or of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to waiver or render unnecessary
Landlord's consent ot approval to or of any subsequent similar act by Tenant.
No waiver of any of said terms, provisions, covenants, rules and regulations
shall be valid unless it shall be in writing signed by the Landlord. The
topical headings of the several Sections are for convenience only and do not
define, limit or construe any contents of such Sections or cause therein. All
preliminary negotiations are merged into and incorporated in this Lease. This
Lease can only be modified or amended by an agreement in writing signed by the
parties hereto.
Page No. 16
<PAGE> 20
25. LIMITATION OF LANDLORD'S LIABILITY.
----------------------------------
If Landlord should sell or otherwise transfer Landlord's interest in the Real
Property or the Improvements, and the purchaser or transferee thereof shall
assume or become liable for the Landlord's obligations hereunder, Tenant agrees
that Landlord shall thereafter have no liability to Tenant under this Lease or
any modification or amendment thereof ot extensions or renewals thereof, and
Tenant shall look solely to such purchaser or transferee to satisfy any such
liability. The Landlord shall be liable under this Lease only while it is the
owner of the Real Property and Improvements. If Landlord shall fail to perform
any covenant, term or condition of this Lease upon Landlord's part to be
performed and, as a consequence of such default, Tenant shall recover a money
judgement against Landlord, such judgement shall be satisfied only out of the
proceeds received at a judicial sale upon execution and levy against the right,
title and interest of Landlord in the Real Property and Improvements and in the
rents or other income from such property receivable by Landlord.
26. SUCCESSORS AND ASSIGNS.
----------------------
The terms, covenants and conditions contained in this Lease shall bind and
insure to the benefit of Landlord and Tenant and their respective successors
and, except as otherwise provide herein, their heirs, legal representatives,
distributees and assigns.
27. RULES AND REGULATIONS.
---------------------
A copy of the "Rules and Regulations of West-Wood Centre" may be attached
hereto and made a part hereof as fully as though herein rewritten. Tenant
grants to Landlord the right to make such changes therein from time to time as
in Landlord's judgement may be necessary for the best interest, safety, care
and cleanliness of the premises and the Improvements and for the preservation
of good order therein. Tenant agrees to comply with and abide by all rules and
regulations, including amendments thereof. Landlord agrees that such Rules and
Regulations shall be made applicalbe to all tenants of the Improvements.
28. SECURITY DEPOSITS.
-----------------
The Tenant shall deposit with the Landlord upon the execution of this Lease,
the sum of___________-0-_______________ ($-0-) to be held together with the
prior security deposit heretofor paid to Landlord by Tenant of $__-0-___,
without interest, to secure the faithful performance of all the terms and
conditions of this Lease, and if the same has been faithfully performed, said
deposit shall be refunded at the expiration of this Lease; otherwise such
deposit shall be retained by Landlord and
Page No. 17
<PAGE> 21
applied against all demands suffered by Landlord from any default of the part
of Tenant, and the balance, if any, shall be returned to the Tenant. The
Tenant shall remain liable for any deficiency. Notwithstanding the foregoing,
Landlord hereby agrees that Tenant shall not be required to make the security
deposit required under this Section for so long as Tenant maintaines a minimum
net worth (as shown on Tenant's financial statements) of $1,000,000.
29. SHORT FORM LEASE.
----------------
This Lease shall not be recorded, but a Memorandum of Lease describing the
property herein leased, giving the terms of this Lease and referring to this
Lease shall be executed by the parties upon the demand of either, and may be
recorded by either party of permitted by law.
30. BROKER.
------
Landlord and Tenant acknowledge that _____ none ____________ has acted as
Landlord's agent in connection with this Lease. Tenant represents and warrants
that, except _____ none _______________ and its employees, agents and
representatives, no real estate broker, agent and/or dalesman showed the
Premises to Tenant, and/or introduced Tenant to Landlord, and/or interest
Tenant in or told Tenant about the Premises, and/or procured Tenant as a tenant
for the Premises and/or in any way dealt with Tenant in connection with the
Premises and/or this Lease. Tenant agrees to and does hereby indemnify and
save harmless Landlord from and against any and all claims, demands and/or
causes of action that may be asserted by any real estate broker, agent and/or
salesman in connection with the Premises and/or this Lease (including any
option, exercise thereof and other occupancy as aforesaid) who claims or may
claim to have showed the Premises to Tenant and/or to have introduced Tenant to
Landlord and/or to have interested Tenant in or told Tenant about the Premises
and/or to have procured Tenant as a tenant for the premises and/or to have in
any way dealt with Tenant in connection with the premises and/or this Lease,
and Tenant agrees at its cost to defend Landlord against any and all such
claims, demands and/or causes of action.
31. ESTOPPEL CERTIFICATION.
----------------------
Each party hereto agrees that at nay time, and from time to time, upon not
less than ten (10) days' prior request by the other party, it will execute,
acknowledge and deliver such other party a statement in writing certifying (a)
that this Lease is unmodified and in full force and effect (or if there have
been modifications that the same is in full force and effect as modified, and
identifying the modifications), (b) the dates to which the rent and other
charges have
Page No. 18
<PAGE> 22
been paid, and (c) that, so far as it knows, the other party is not in default
under any provisions of this Lease or, if there has been a default, the nature
of said default. It is intended that any such statement may be relied upon by
any person proposing to aquire an interest in this Lease or any prospective
maotgages of, or assignee of any mortgage upon, such interest.
32. INVALIDITY OF PARTICULAR PROVISIONS.
-----------------------------------
If any covenant, agreement or condition of this Lease or the application
thereof to any person, firm, or corporation, or to any circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Lease, or the
application of such covenant, agreement or condition to persons, firms, or
corporations, or to circumstances other than those as to which it is invalid or
enforceable, shall not be effected thereby. Each covenant, agreement or
condition of this Lease shall be valid and enforceable to the fullest extent
permitted by Law.
IN WITNESS WHEREOF, the parties hereto have executed this West-Wood Centre
Lease as of the day and year first above written.
IN THE PRESENCE OF:
NCP, LTD
--------------------------
Witness as to Landlord: ("Landlord")
/s/Patricia Joyce By:_______________________
- --------------------------
/s/John Baily
- -------------------------- LDI Corporation
--------------------------
Witness as to Tenant: ("Tenant")
/s/Laura Masterson By:_______________________
- --------------------------
/s/
- --------------------------
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA
On this ___ 29 ___ day of __ April 1993__, before me appeared
______Thomas Critter _______ , who acknowledged that the foregoing instrument
was signed on behalf of NCP, LTD., an Ohio partnership, as his
Page No. 19
<PAGE> 23
free act and deed as _____ Partner _________ of said partnership and as the
free act and deed of said partnership.
/s/Laura B. Masterson
----------------------
Notary Public
LAURA B. MASTERSON
Notory Public-State of Ohio
Recorded in Cuyahoga County
My Commission Expires Feb. 2,1998
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
On this 27 day of April 1993 , before me appeared Jerry
Kish , a Chief Finiancial Officer by
_________________________, who acknowledged the the foregoing instrument was
signed on behalf of said LDI Corp. and that said instrument is his
free act and deed and the free act and deed of said Corporation .
/s/ Patricia E. Joyce
----------------------
Notary Public
PATRICIA E. JOYCE
Notary Public-State of Ohio
Recorded in Cuyahoga County
My Commission Expires Feb. 2,1998
Lease version dated 10-23-90
Page No. 20
<PAGE> 24
EXHIBIT "A"
Situated in the City of Solon, County of Cuyahoga and State of Ohio: and know
as being part of Original Solon Township Lot No. 18, Tract 11, and bounded and
described as follows: Beginning at the Southeasterly corner of said Original
Lot No. 18, it being also the Southeasterly corner of land conveyed by The
National City Bank of Cleveland, Trustee, to Larry and Lois J. Davis by deed
dated March 23, 1970 and recorded in volume 12598, Page 77 of Cuyahoga County
Records 1Course 1: Thence due North along the Easterly line of said Original
Lot No. 18, it being also the Easterly line of land conveyed to Larry and Lois
J Davis as aforesaid 753.98 feet to the South line of Carter Street, 70 feet
wide, as shown on dedication plat recorded on Volume 205, Page 6 of Cuyahoga
County Records;
Course II: Thence due West along the South line of said Carter
Street 463.87 feet to a point;
Course III: Thence due South 757.64 feet to the
Southerly line of said Original Lot No. 18, it being also the Southerly line
of land conveyed to Larry and Lois J. Davis as aforesaid;
Course IV: Thence North 89 Degrees 32' 50" East along the South line of land
conveyed to Larry and Lois J. Davis as aforesaid 463.89 feet to the place of
beginning, be the same more or less, but subject to all legal highways.
Page No. 21
<PAGE> 25
RIDER X
WHEREAS, Landlord entered into Lease dated March 1, 1992 (the
"Original Lease") with LDI Disaster Recovery Corp. ("DRC") a subsidiary of
Tenant;
WHEREAS, DRC has been merged with and into Tenant; and
WHEREAS, Landlord and Tenant desire to restate the Original Lease to
reflect the succession of Tenant to all of the rights and obligations of Tenant
thereunder;
NOW, THEREFORE, the parties agree that the Original Lease is amended
and restated to read in its entirety as follows:
<PAGE> 26
SOLON LEASE
-----------
THIS LEASE is made and entered into this 17th day of December
1993, by and between NCP, LTD., an Ohio limited partnership, with
its principal offices located at 30033 Clemens Road, Westlake,
Ohio 44145 (hereinafter referred to as "Landlord") and LDI
Computer Systems, Inc, with its offices located at 30700 Carter
Street, Solon, Ohio 44139 (hereinafter referred to as "Tenant").
The Landlord and Tenant hereby mutually covenant and agree as
follows:
1. DEFINITIONS
-----------
(a) "Real Property" shall mean the real estate located at
30700 Carter Street, Solon, Ohio, as more particularly
described in Exhibit A attached hereto and made a part
hereof by reference.
(b) "Improvements" shall mean the buildings and
improvements existing or to be constructed on the Real
Property, known as LDI Center.
(c) "Premises refers to 147,400 square feet to be leased to
Tenant as set forth in red on Exhibit B attached hereto and
made a part hereof by reference.
2. LOCATION
--------
For the rent and upon the agreements contained in this Lease,
Landlord leases to Tenant and Tenant rents from Landlord that
portion of the Improvements shown in red on Exhibit B (the
"Premises").
3. TERM
----
(a) The term of this Lease (the "Term") shall be for a
period of 66 months commencing on the 1st of February 1994.
(b) Provided Tenant is not in default of its obligations
hereunder, upon 120 days prior written notice Tenant shall
have the right and option to renew this Lease for up to two
three (3) year Renewal Terms. The first Renewal Term will
commence on the 1st of August 1999 and the annual rent will
increase to fair market value, but not less than $3.16 per
square foot per year or more than $3.44 per square foot per
year. The second Renewal Term will commence on the 1st of
August 2002 and the annual rent will increase to fair market
value, but not less than $3.41 per square foot per year or
<PAGE> 27
more than $3.85 per square foot per year.
(c) The Lease will be extended automatically at one hundred
and thirty-five percent (135%) of the then current rent for
an additional period (the "Extended Term") unless either the
Landlord or the Tenant provides written notice of its desire
not to extend the Lease at least 120 days prior to the end
of the Term or any Renewal Term. During the Extended Term
either Lessor or Lessee may terminate the lease at any time
upon at least 30 days prior written notice of termination.
4. RENTAL
------
Tenant agrees without demand and without any deduction or set-off
to pay to the Landlord at Landlord's office or such other place
as Landlord may from time to time designate as rent for the
Premises during the continuation of this Lease the Basic Annual
Rent and the Expenses (both as defined hereinafter):
(a) Tenant will pay the existing rent for November and
December 1993 and January 1994. Landlord will collect the
existing rent from all other tenants until the 31st of
January 1994.
(b) The Annual Rent shall be the sum of four hundred five
thousand, three hundred fifty dollars ($405,350.00) per year
(based on $2.75 times 147,400 square feet) payable in twelve
(12) equal consecutive monthly installments of thirty-three
thousand, seven hundred seventy-nine dollars and seventeen
cents $33,779.17) each in advance on the first of every
calendar month beginning the 1st of February 1994.
(c) Each and any rental payment not received by the 10th of
the month will be subject to a late charge in an amount
equal to four percent (4%) of the payment. In the event of
any rental payment default, commencing on the date of such
default and continuing until such default has been cured to
the satisfaction of Landlord, interest on the rental balance
outstanding hereunder shall be computed, charged and payable
at the rate of thirteen and 7/8ths percent (13.875%) per
annum.
(d) Tenant shall be responsible for and pay the following
expenses directly:
(i) The expenses of such property insurance as the
Landlord shall reasonably deem necessary or appropriate
to maintain on the Improvements and Real Property.
(ii) The expenses of such reasonable liability
insurance as Landlord shall deem necessary or
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<PAGE> 28
appropriate to maintain for its protection from
liability occurring on or about the Improvements and
Real Property.
(iii) The expense of maintaining and repairing the
Improvements including, without limitation, janitorial
services to the Common Areas, cleaning service,
cleaning materials and equipment, supplies, labor,
wages and fringe benefits, including workers'
compensation, disability benefits, insurance, payroll
taxes, welfare benefits, unemployment benefits,
mechanical equipment maintenance, equipment rental,
personal property taxes, fire protection, licenses,
permit fees, depreciation of maintenance equipment,
window washing, landscaping, rubbish removal,
maintenance of parking areas, removal of snow and ice,
lighting, security services, policing, lining and
repair of parking areas and sidewalks and any other
services.
(iv) The expense of all gas, water, electricity,
sewage and other charges for utilities servicing or
used in the Improvements.
(v) "Real Estate Taxes" shall include all real estate
taxes, assessments, water and sewer rents and other
governmental impositions and charges of every kind and
nature whatsoever, extraordinary as well as ordinary,
foreseen and unforeseen, which shall or may, during the
Term or the Renewal Term, be levied, assessed, or
imposed, or liens upon or arising in connection with,
the use, occupancy or possession of or grow due or
payable out of, or for, the Real Property or any part
thereof, and all reasonable costs and expenses incurred
by Landlord or Tenant in contesting or negotiating the
same with any governmental authority.
(vi) Any and all reasonable and necessary expenses
incurred by Landlord for the Real Property,
Improvements and Premises other than mortgages, for any
reason whatsoever unless caused by Landlord's
negligence.
(e) All rent and other charges not paid after 30 days of
the due date shall bear interest at the rate of thirteen and
7/8ths percent (13.875%) annually from and after the date
said rent and charges become due, and the same shall be
regarded as additional rent hereunder.
3
<PAGE> 29
5. SERVICE
-------
Landlord shall provide the Premises with utility connections for
gas, all electricity, water and sewers, and shall supply the
Premises with water for domestic uses. Tenant shall pay for all
utilities and services used or consumed upon the Premises to the
extent such are separately metered and shall pay any charges made
for the installation of new or additional connections or
modifications in such services to the Premises required by Tenant
and made during the term hereof. Tenant shall pay for such
utilities and services directly to the utility.
The amount and character of any utilities and services provided
by Landlord shall be as currently exists in the Premises.
Landlord shall not be liable in any way for interruption or
failure of any such services from any cause whatsoever and any
such interruption or failure of service shall never be deemed an
eviction or disturbance of the Tenant's use and possession of the
Premises or any part thereof or render the Landlord liable to the
Tenant for damages, or relieve the Tenant from performance of the
Tenant's obligations of this Lease, unless the interruption or
failure of any services are caused by the negligence of the
Landlord.
6. USE OF PREMISES
---------------
Tenant shall keep the Premises (expressly including heating, air
conditioning, ventilation, plumbing and electrical equipment and
systems located within or on the roof of the Premises) at all
times in good order, condition and repair (including making all
necessary replacements thereto except as to the repair or
replacement of HVAC units R2 and R3), and shall also keep the
Premises in a clean, sanitary and safe condition in accordance
with laws of the State of Ohio, and in accordance with all
directions, rules and regulations of the health officer, fire
marshall, building inspector or other proper officers of the
governmental agencies having jurisdiction, at the sole cost and
expense of the Tenant, and Tenant shall comply with all
requirements of law, ordinance or otherwise, affecting the
Premises. Tenant shall pay on demand for any unusual use of
heat, air conditioning, electricity or water because of any
special needs or practices of the Tenant. Tenant shall permit no
waste or nuisance upon damage or injury to the Premises or
utilities supplied thereto, and at the expiration of the tenancy
created hereunder, Tenant shall surrender the Premises in as good
condition and repair as they were at the time Tenant took
possession, excepting reasonable wear and tear and loss by fire
or other insured casualty. Tenant agrees that Tenant shall
commit no act which will cause either Tenant or Landlord to be in
noncompliance with any and all zoning ordinance of the City of
Solon.
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<PAGE> 30
7. CONSTRUCTION AND ALTERATIONS
----------------------------
Tenant will make no alterations in or additions to or
improvements to the Premises without first obtaining the written
consent of the Landlord thereto which Landlord will give within
five (5) days or approval is assumed. Tenant, at Tenant's sole
cost and expense, shall cause two (2) sets of preliminary plans
and specifications ("preliminary plans") to be prepared and
delivered to Landlord for Landlord's approval. Such approval
shall be evidenced by Landlord's causing one (1) set of such
working plans to be initialed on its behalf and returned to the
Tenant. Tenant shall make any such alterations, changes and
improvements in a good and workmanlike manner, shall comply with
all applicable laws and building regulations, and shall, prior to
the making of said alterations, changes and improvements, assure
Landlord that payment for the same will be made by Tenant.
Tenant hereby completely and fully indemnifies Landlord against
any Mechanic's lien or other lien or claims in connection with
the making of any such alterations, changes and improvements.
All alterations, additions, improvements and replacements made or
provided by Landlord or Tenant upon the Premises, except movable
office furniture and trade fixtures provided at Tenant's expense,
shall be the property of Landlord, and shall remain upon and be
surrendered with the Premises upon termination, without
molestation or injury.
8. COMMON USAGE
------------
Landlord hereby grants to Tenant and Tenant's employees, agents,
customers, guests, or invitees, expressly subject, however, to
such rules and regulations as or may from time to time be made by
Landlord, the non-exclusive right to use the Common Areas in
common with others entitled to the use thereof. Tenant agrees to
exercise reasonable diligence so that ingress and egress will not
be blocked by any vehicles belonging to its employees, agents,
customers, guests or invitees. Tenant shall maintain, control,
manage and operate the Common Areas in a reasonable manner.
9. INDEMNITY AND INSURANCE
-----------------------
(a) Tenant shall defend and save harmless Landlord from and
against any and all loss, cost, damage, or expense,
including attorney's fees, of any nature whatsoever arising
out of or connected with the use or occupancy of the
Premises by Tenant, the materials or things maintained or
kept by Tenant, its agents, employees, guests, invitees and
contractors, in or on the Premises, the approaches thereto
and the Common Areas, or arising or alleged to have arisen
out of the acts or omissions of Tenant's officers, agents,
5
<PAGE> 31
employees, guests, invitees and contractors unless caused by
Landlord's direct negligence.
(b) At all times during the terms of this Lease, Tenant
shall, at Tenant's own expense, keep in full force and
effect public liability insurance in companies acceptable to
Landlord, naming both Landlord and Tenant as insured
parties, with minimum limits of Two Million Dollars
($2,000,000.00) on account of bodily injuries of death of
one person, Two Million Dollars ($2,000,000.00) on account
of bodily injuries or death of more than one person arising
out of any one act or omission and Five Hundred Thousand
Dollars ($500,000.00) property damage arising out of any one
act or omission. Tenant shall deposit such policy or
policies of insurance, or certificates thereof with
Landlord. Tenant shall further maintain property insurance
on its personal property located on the Real Property to the
actual cash value thereof.
(c) Tenant shall not do anything in or about the Premises
which will in any way tend to increase the insurance rates
on the Premises, and/or Improvements or Real Property.
Tenant shall pay as additional rent any increase in premiums
for insurance which may be charged during the term of this
Lease on the amount of insurance carried by landlord on the
Improvements and Real Property, resulting from activities
carried on or occupancy of the Premises by Tenant, whether
or not landlord has consented to the same.
(d) The fire and extended coverage insurance policies
carried by the Landlord to insure the Improvements and by
the Tenant to insure its personal property tax located in
the Premises shall each include or permit a waiver of all
rights of subrogation as set forth below. Each of the
parties (to the extent of the coverage provided by the
respective insurance policies carried by such party) agrees
to and does hereby waive all rights of recovery and causes
of action against the other and all persons claiming through
or under such other party, by way of subrogation or
otherwise for any damage to the Premises, or the personal
property, as the case may be, caused by any of the perils
covered by such fire and extended coverage insurance
policies (as now or hereafter constituted), not withstanding
that any such damage or destruction may be due to the
negligence of such other party or of the persons claiming
through or under such other party.
10. DAMAGES AND NON-LIABILITY
-------------------------
Landlord shall not be liable to the Tenant, its officers, agents
or employees, for any theft, damage or injury occasioned by
6
<PAGE> 32
failure to keep the Premises heated, cooled or in repair, or for
any bodily injury or property damage done or occasioned by or
from structural failure or collapse, fixtures (whether in place
or otherwise), fixture failure, other materials or part of the
Improvements, plumbing, downspouts, gas, water, steam or other
pipes, or sewage, or the downspouts, gas, water, steam or other
pipes, or sewage, or the bursting, leaking or running of any
water outlet, container or fixture, in above, upon or about the
Improvements or Premises, nor for injury or damage occasioned by
wind, water, snow or ice being upon or coming through the roof,
skylight, windows, stairs, doors, parking, road and sidewalk
areas, or otherwise, nor for any injury or damage arising from
the omissions of any of the utilities or service supplied or due
to be supplied by Landlord hereunder, or from acts of negligence
of willfulness of co-tenants or other occupants of the
Improvements or other contiguous buildings or property.
11. DESTRUCTION
-----------
If the Premises hereby leased are damaged or destroyed in part by
fire or other casualty ordinarily insurable under full standard
extended coverage insurance in Ohio during the term hereof,
Landlord will repair and restore the same to good tenantable
condition with reasonable dispatch, but in no event shall
landlord take longer than five (5) months to complete such repair
and restoration. The rent herein provided shall abate entirely
in case the entire Premises are untenantable, and pro rata for
any portion rendered untenantable in case a part only is
untenantable, until the same shall be restored to a tenantable
condition; provided, however, that if Tenant, its agents,
employees, guests or invitees shall fail to adjust its own
insurance or to remove its damaged goods, wares, equipment or
restoration is delayed by the acts or omissions of Tenant, there
shall be no abatement of rental during the period of such
resulting delay; and provided further that there shall be no
abatement of rental if such fire, or other causes damaging or
destroying the Premises shall result from any willful act or
omission of Tenant, its agents, employees, guests or invitees;
and provided further that if Tenant shall use any part of the
Premises for storage or other useful purpose during the period of
repair, a reasonable charge shall be made therefrom against
Tenant. In the event the Premises, or the Improvements shall be
destroyed to the extent of more than thirty percent (30%) of the
value thereof, Landlord may at its option terminate this Lease
forthwith by written notice to Tenant. In the event Landlord
elects so to rebuild or repair, this Lease shall not terminate,
but rent shall be abated equitably while the Premises are
untenantable. In case Landlord elects to rebuild or repair as
herein provided, the obligation of the Landlord hereunder shall
be limited to the Landlord's original work and only to the amount
of any insurance proceeds actually received by it.
7
<PAGE> 33
12. EMINENT DOMAIN
--------------
In the event that the Premises or Common Areas or any part
thereof shall at any time after the execution of this Lease be
taken for public or quasi-public use or condemned under eminent
domain, Tenant shall not be entitled to claim, or have paid to
the Tenant any compensation or damages whatsoever for or on
account of any loss, injury, damage or taking of any right,
interest, or estate of the Tenant in or to said property, in
which event Tenant, upon request of Landlord so to do, will
execute any and all releases or other documents as shall be
required by such public or quasi-public authority. However,
nothing herein contained shall be construed to prevent the Tenant
from asserting against the condemnor any separate and independent
claims for damages occurring by reason of said condemnation
including, but not limited to, personal property, business, good
will, cost of removing equipment, moving expenses, or loss of
future profits. In the case of any such taking or condemnation
referred to in this paragraph, then if and when there is an
actual taking of physical possession of the Premises or of any
part thereof in excess of twenty-five percent (25%) of the
rentable space thereof, then either the Landlord or the Tenant
may cancel and terminate this Lease as to the whole of the
Premises by giving notice to the other party within ten (10) days
after such an actual taking of physical possession. No such
taking of all or any part of the Common Areas shall give rise to
any right of termination or rent abatement for such taking. If
this Lease is not terminated as above provided for following any
of said actual takings, then the Landlord shall repair the
Improvements at its own expense; provided, however, that
Landlord's obligation to repair shall be limited to the amount of
award actually received by it for such taking. In the event of a
partial taking of the Premises, a proportionate allowance shall
be made in the Basic Annual Rent based on the proportion of the
Premises remaining as compared to the original premises.
13. ASSIGNMENT, SUBLETTING AND SUBORDINATION
----------------------------------------
Tenant agrees not to assign or in any manner transfer this Lease
or any estate or interest therein without the previous written
consent of Landlord which will not be unreasonably withheld and
will be provided within three (3) days or permission is assumed,
and not to sublet the Premises or any part or parts thereof or
allow anyone to use the Premises or to come in with the Tenant,
either through or under the Lease, without Landlord's consent
which shall not be unreasonably withheld. Consent to one or more
assignments of this Lease or subletting of said Premises shall
not operate to exhaust or waive Landlord's rights under this
paragraph. Landlord may assign this Lease, or the rentals paid
hereunder, or both, in its sole discretion, as additional
security for any mortgage on the Real Property or otherwise, and
8
<PAGE> 34
Landlord also reserves the right and Tenant hereby agrees that on
request of Landlord this Lease shall be subordinate to any
mortgages which may hereafter be placed upon the Real Property
and to any and all advances to be made thereunder, and to the
interest thereof, and all renewals, replacements and extensions
thereof. Landlord reserves the right to demand and obtain from
the Tenant a Waiver of Priority of Tenant's rights arising by
virtue of the within leasehold estate, thereby subordinating
Tenant's said lien in favor of a mortgage upon the Real Property,
and Tenant upon demand by the Landlord for same, agrees to
execute at any and all times such instrument that may be required
by any lending institution or prospective mortgagee in order to
effectuate such Waiver of Priority and subordination of Tenant's
lien. If Tenant within five (5) days after submission of such
instrument fails to execute the same as attorney-in-fact for
Tenant. If any mortgagee of the Real Property elects to treat
the Lease as a prior lien to its mortgage, then upon due notice
to Tenant to that effect, this Lease shall be deemed prior in
lien to the said mortgage whether or not this Lease is dated
prior to or subsequent to the date of said mortgage.
14. BANKRUPTCY
----------
Neither this Lease, nor any interest therein, nor any estate
thereby created shall pass to any trustees or receiver or
assignee for the benefit of creditors or otherwise by operation
of law. If the estate created hereby shall be taken or attempted
to be taken in execution or by other process of law, or if Tenant
shall by adjudicated insolvent or bankrupt pursuant to the
provisions of any state or federal insolvency or bankruptcy act,
or if a receiver or trustee of the property of Tenant shall be
appointed by reason of Tenant's insolvency or inability to pay
its debts, or if any assignment shall be made or attempted to be
made by Tenant's property for the benefit of creditors, then and
in any such event, Tenant will be deemed in default under this
Lease. The allowance of any petition under the bankruptcy law,
or the appointment of a trustee or receiver of Tenant or its
assets shall be conclusive evidence that Tenant caused, or gave
cause therefor, in violation of this Lease, unless such allowance
of the petition, or the appointment of trustee or receiver, is
vacated within thirty (30) days after such allowance or
appointment. Any act described in this Section 14 shall be
deemed a material breach of Tenant's obligation hereunder, and at
any time when such a breach exists, Landlord may, at its option,
and in addition to and independent of, any remedy available to
Landlord, terminate this Lease and all rights of Tenant hereunder
by giving to Tenant notice in writing of the election of Landlord
so to terminate, and re-enter and repossess the Premises with or
without prior notice.
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<PAGE> 35
15. SURRENDER
---------
On the last day of the Term of this Lease or the Renewal Terms,
or on the sooner termination thereof, Tenant shall peaceably
surrender the Premises in good condition and repair as required
by Section 6 hereof. On or before the last day of the Term of
this Lease or the Renewal Terms or the sooner termination
thereof, Tenant shall at its expense remove all of its office
furnishings, machinery, equipment, supplies and other personalty.
Any property not so removed shall be deemed abandoned. All
improvements, alterations, additions and fixtures, other than
Tenant's personalty as aforesaid, which have been made or
installed by either Landlord or Tenant upon the Premises shall
remain as Landlord's property and shall be surrendered with the
Premises as a part thereof. If the Premises are not surrendered
at the end of the term or the sooner termination thereof, Tenant
shall indemnify Landlord against reasonable loss or liability
resulting from delay by Tenant in so surrendering the Premises,
including, but without limitation to, any claims made by any
succeeding tenant founded on such delay. Tenant shall promptly
upon surrender deliver all keys for the Premises and Building to
Landlord at the place then fixed for payment of rent.
16. ACCESS BY LANDLORD
------------------
Landlord shall have the right to enter the Premises at reasonable
times during the term hereof to make any alterations or repairs
to the Improvements which Landlord may deem necessary or
appropriate for its safety and preservation; provided, however,
that Landlord shall not unduly or unreasonably interfere with the
conduct of Tenant's business on the Premises. During the
progress of any such work, Landlord may keep and store upon the
Premises all necessary materials, tools and equipment. Landlord
shall not in any event be liable for inconvenience, annoyance,
disturbance, loss of business or other damage to Lessee, provided
it be as little as may be reasonably possible in the
circumstances, by reason of the performance of any such work or
of bringing materials, supplies and equipment into or through the
Premises during the course thereof and the obligations of Tenant
under this Lease shall not be affected thereby in any manner
whatsoever. Tenant agrees to permit Landlord and any authorized
representative of Landlord to enter the Premises at all times
during normal business hours to exhibit the same for the purposes
of sale or mortgage and, during the final six (6) months of the
term of this Lease, for purposes of leasing, during which six (6)
month period Landlord may display on the Premises in such manner
as not to interfere unreasonably with Lessee's business usual
"For Sale" or "To Let" signs or signs of a similar nature.
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<PAGE> 36
17. HOLDING OVER
------------
If Tenant shall remain in possession of all or any part of the
Premises after the expiration of the term of this Lease or
Renewal Terms, then Tenant shall be deemed a Tenant of the
Premises from month to month, subject to all terms and conditions
of the within Lease which are not inconsistent with such month to
month tenancy, but nothing herein shall excuse any unauthorized
holding over or waiver any liability therefor. Unless negotiated
otherwise the monthly rent shall increase by thirty-five percent
(35%).
18. SIGNS
-----
Except as expressly provided herein, Tenant covenants and agrees
that it will not permit or cause placed on the outside or inside
of the Improvements or elsewhere on the Real Property, signs,
notices or other media of advertising, except only for those
installed by Landlord or as approved in writing in advance by
Landlord. Tenant further covenants and agrees that any signs
erected or maintained by Tenant shall comply with the applicable
laws and ordinances of the City of Solon, Ohio, and Tenant, at
its expense, shall obtain any permits required therefor. Any
signs erected by Tenant shall be in accordance with existing
building standards. In accordance with the foregoing, Tenant
shall place erect, and maintain signs at the entrance to the
premises and at the loading dock.
19. TENANT'S POSSESSION
-------------------
Taking possession of the Premises by Tenant shall be conclusive
evidence that the Premises were in good order and in satisfactory
condition when Tenant took possession (except as to HVAC units R2
and R3). Provided, however, that Landlord hereby covenants and
agrees that if Tenant shall promptly and faithfully perform all
of the covenants and agreements herein stipulated to be performed
on Tenant's part, Tenant shall at all times during said term have
the peaceable and quiet enjoyment and possession of said Premises
without hindrance or claim from Landlord or any persons lawfully
claiming said Premises by or under the Landlord.
20. BREACH, INSOLVENCY AND RE-ENTRY
-------------------------------
(a) If Tenant shall at any time be in default in the
payment of rent or other sums of money required to be paid
by Tenant or in the performance of any of the covenants,
terms, conditions, provisions, rules and regulations of this
Lease and the Tenant shall fail to remedy any such default
within a period of three (3) days, in the event the default
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<PAGE> 37
is as to payment of rent or within twenty (20) days after
receipt of notice thereof from Landlord, if the default
relates to matters other than the payment of rent (but
Tenant shall not be deemed to be in default if Tenant
commences to remedy said defaults other than relating to
payment of rent within said twenty (20) day period, and
proceeds therewith with due diligence), or if Tenant shall
commit waste, shall vacate the Premises, or if Tenant shall
be adjudged bankrupt or shall make an assignment for the
benefit of creditors, or if a receiver of any property of
Tenant in or upon the Premises be appointed in any action,
suit or proceeding by or against Tenant and not removed
within thirty (30) days after appointment or if the interest
of Tenant in the Premises shall be offered for sale or sold
under execution or other legal process, Landlord, in
addition to all other remedies given to Landlord in law or
in equity, may by written notice to Tenant to terminate this
Lease, or, without terminating this Lease, re-enter the
Premises in accordance with applicable law by summary
proceedings or otherwise, and, in any event, may dispossess
the Tenant, with process of law.
In the event of such re-entry, Landlord will attempt to
relet the Premises and, in the event of a reletting, may
apply the rent therefrom first to the payment of Landlord's
expenses, including reasonable attorneys' fees incurred by
reason of Tenant's default, and the expense of reletting
including, but not limited to, the repairs, renovation, or
alteration of the Premises, and then to payment of rent and
all other sums due from Tenant hereunder, Tenant remaining
liable for any deficiency.
(b) In the event of a default by Tenant of any of the
terms, provisions, covenants, conditions, rules and
regulations of this Lease, Landlord shall have the right to
injunction and the right to invoke any remedy permitted to
Landlord in the law or in equity. All remedies available to
Landlord are declared to be cumulative and concurrent. No
termination of this Lease nor any taking or recovering of
possession of the Premises shall deprive Landlord of any of
its remedies or actions against Tenant for past or future
rent, nor shall the bringing of any action for rent or other
default be construed as a waiver of the right to obtain
possession of the Premises.
(c) If Tenant shall fail to make any payment or perform any
other act on its part to be performed under this Lease,
Landlord may make such payment or perform such other act to
the extent Lessor deems desirable. Any reasonable amount so
paid by Landlord or any reasonable expenses so incurred in
doing any such act to make up any default to Tenant's part
to fulfill Tenant's covenants herein written, are hereby
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<PAGE> 38
agreed and declared to be so much additional rent and shall
be due and payable with the next installment due thereafter
under this Lease.
21. MAINTENANCE AND REPAIRS
-----------------------
Tenant shall maintain and keep in good repair and condition the
Premises and contents and decoration thereof, including without
limitation the foundation, the roof, the four outer walls, all
structural components of the Improvements, all pipes and other
plumbing, toilets, sinks, lights and other electrical systems and
fixtures, all glass, floor coverings, and heating and air
conditioning systems (except HVAC units R2 and R3). If, after
the notice from Landlord, Tenant fails or refuses to make any
repairs to be made or maintenance required by Tenant hereunder,
then Landlord may, but shall not be obligated to, make or cause
such repairs to be made or maintenance provided, the Tenant
agrees that it will, in such event, pay the full cost thereof to
Landlord upon demand, as additional rental hereunder, with all
remedies attendant thereon.
22. RENT DEMAND
-----------
Every demand for rent due wherever and whenever made shall have
the same effect as if made at the time it falls due and at the
place of payment and, after the service of any notice of
commencement of any suit, or final judgement therein, Landlord
may receive and collect any rent due, and any such collection or
receipt shall not operate as a waiver of nor affect such notice,
suit or judgement.
23. NOTICE
------
Any notice required or permitted to be given or served under this
Lease, or in connection with any proceeding or action growing out
of this Lease or of the tenancy therefrom, shall be deemed to be
sufficiently given or served, if mailed by registered or
certified mail, postage prepaid, and addressed as follows. If to
Landlord, NCP, LTD., 30033 Clemens Road, Westlake, Ohio 44145,
marked to the attention of NCP, LTD.; and if to Tenant, addressed
to it as its address as set forth on the first page of this
Lease. Either party may designate a different address or a
different person for the sending of notice by complying with the
provisions of this Section 23.
24. GENERAL
-------
Nothing contained herein shall be deemed or construed by the
13
<PAGE> 39
parties hereto, nor by any third party, as creating the
relationship of principal and agent, or of partnership, or of
joint venture between the parties hereto, the sole relationship
being that of Landlord and Tenant. Wherever herein the singular
number is used, the same shall include the plural, and the
masculine gender shall include the feminine and neuter genders.
One or more waivers of any covenant or condition by Landlord
shall not be construed as a waiver of a subsequent breach of the
same covenant or condition, and the consent or approval by the
Landlord to or of any act by Tenant requiring Landlord's consent
or approval shall not be deemed to waive or render unnecessary
Landlord's consent or approval to or of any subsequent similar
act by Tenant. No waiver of any of said terms, provisions,
covenants, rules and regulations shall be valid unless it shall
be in writing signed by the Landlord. The topical headings of
the several Sections are for convenience only and do not define,
limit or construe any contents of such Sections or causes
therein. All preliminary negotiations are merged into and
incorporated in this Lease. This Lease can only be modified or
amended by an agreement in writing signed by the parties hereto.
25. LIMITATION OF LANDLORD'S LIABILITY
----------------------------------
If Landlord should sell or otherwise transfer Landlord's interest
in the Real Property or the Improvements, and the purchaser or
transferee thereof shall assume or become liable for the
Landlord's obligations hereunder, Tenant agrees that Landlord
shall thereafter have no liability to Tenant under this Lease or
any modification or amendment thereof or extensions or renewals
thereof, and Tenant shall look solely to such purchaser or
transferee to satisfy any such liability. If Landlord shall fail
to perform any covenant, term or condition of this Lease upon
Landlord's part to be performed and, as a consequence of such
default, Tenant shall recover a money judgement against Landlord,
such judgement shall be satisfied only out of the proceeds
received at a judicial sale upon execution and levy against the
right, title and interest of Landlord in the Real Property and
Improvements and in the rents or other income from such property
receivable by Landlord.
26. SUCCESSORS AND ASSIGNS
----------------------
The terms, covenants and conditions contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their
respective successors and, except as otherwise provided herein,
their heirs, legal representatives, distributees and assigns.
14
<PAGE> 40
27. SECURITY DEPOSITS
-----------------
The Tenant shall deposit with the Landlord upon the execution of
this Lease the sum of -0- to be held together with the prior
security deposit heretofore paid to Landlord by Tenant of -0-,
without interest, to secure the faithful performance of all the
terms and conditions of this Lease, and if the same has been
faithfully performed, said deposit shall be refunded at the
expiration of this Lease; otherwise such deposit shall be
retained by Landlord and applied against all damages suffered by
Landlord from any default on the part of Tenant, and the balance,
if any, shall be returned to the Tenant. The Tenant shall remain
liable for any deficiency.
28. SHORT FORM LEASE
----------------
This Lease shall not recorded, but a Memorandum of Lease
describing the property herein leased, giving the terms of this
Lease and referring to this Lease shall be executed by the
parties upon the demand of either, and may be recorded by either
party if permitted by law.
29. BROKER
------
Landlord and Tenant acknowledge that no outside party has acted
as Landlord's agent in connection with this Lease. Tenant
represents and warrants that no real estate broker, agent and/or
salesman showed the Premises to Tenant, and/or introduced Tenant
to Landlord, and/or interest Tenant in or told Tenant about the
Premises, and/or procured Tenant as a tenant for the Premises
and/or in any way dealt with Tenant in connection with the
Premises and/or this Lease. Tenant agrees to and does hereby
indemnify and save harmless Landlord from and against any and all
claims, demands and/or causes of action that may be asserted by
any real estate broker, agent and/or salesman in connection with
the Premises and/or this Lease (including any option, exercise
thereof and other occupancy as aforesaid) who claims or may claim
to have showed the Premises to Tenant and/or to have introduced
Tenant to Landlord and/or to have interested Tenant in or told
Tenant about the Premises and/or to have procured Tenant as a
tenant for the Premises and/or to have in any way dealt with
Tenant in connection with the Premises and/or this Lease, and
Tenant agrees at its cost to defend Landlord against any and all
such claims, demands and/or causes of action.
30. ESTOPPEL CERTIFICATE
--------------------
Each party hereto agrees that at any time, and from time to time,
upon not less than ten (10) days prior request by the other
15
<PAGE> 41
party, it will execute, acknowledge and deliver to such other
party a statement in writing certifying (a) that this Lease is
unmodified and in full force and effect (or if there have been
modifications that the same is in full force and effect as
modified, and identifying the modifications), (b) the dates to
which the rent and other charges have been paid, and (c) that, so
far as it knows, the other party is not in default under any
provisions of this Lease or, if there has been a default, the
nature of said default. It is intended that any such statement
may be relied upon by any person proposing to acquire an interest
in this Lease or any prospective mortgages of, or assignee of any
mortgage upon, such interest.
31. INVALIDITY OF PARTICULAR PROVISIONS
-----------------------------------
If any covenant, agreement or condition of this Lease or the
application thereof to any person, firm, or corporation, or to
any circumstance, shall to any extent be invalid or
unenforceable, the remainder of this Lease, or the application of
such covenant, agreement or condition to persons, firms, or
corporations, or to circumstances other than those as to which it
is invalid or enforceable, shall not be effected thereby. Each
covenant, agreement or condition of this Lease shall be valid and
enforceable to the fullest extent permitted by Law.
32. ENVIRONMENTAL LAWS
------------------
Landlord and Tenant shall comply with all applicable federal,
state and local environmental laws, ordinances, orders or
regulations affecting the Premises, the operation of Tenant's
business at the Premises or the removal of any substances
therefrom arising out of Tenant's operation of its business at
the Premises. Neither Landlord nor Tenant shall not permit any
on-site disposal of oil, grease or hazardous substances. No
hazardous or industrial wastes, contaminated substances or those
resulting from manufacturing or processing shall be deposited by
either Landlord or Tenant in containers provided for trash
removal. All waste materials (including Tenant's construction or
remodeling wastes) other than ordinary sanitary commercial trash
shall be removed from the Premises and properly disposed of in
compliance with all applicable laws at Tenant's sole cost and
expense. Tenant does hereby indemnify and hold Landlord harmless
of, from and against all claims, actions, liens, demands, costs,
expenses, fines and judgments (including legal costs and
attorney's fees) resulting from or arising by reason of any
spills or contamination of air, soil or water by oil, grease or
hazardous substances at or around the Premises or upon removal
therefrom, or the violation of any other provision of this
Section 32.
16
<PAGE> 42
Landlord does hereby indemnify and hold Tenant harmless of, from
and against all claims, actions, liens, demands, costs, expenses,
fines and judgments (including legal costs and attorney's fees)
resulting from or arising by reason of any spills or
contamination of air, soil or water by oil, grease or hazardous
substances at or around the Premises caused by Landlord or upon
removal therefrom, or the violation of any other provision of
this Section 32.
Upon ten (10) days prior written request from Landlord, Tenant
shall execute, acknowledge and deliver to Landlord a written
statement in from satisfactory to Landlord certifying that Tenant
has not disposed of any oil, grease or hazardous substances at
the Premises and that any such substances used, processed or
generated at the Premises during the term of this Lease (as it
may be extended) have been disposed of in accordance with
applicable law.
17
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed this Solon
Lease as of the day and year first above written.
IN THE PRESENCE OF:
NCP, LTD.
Witness as to Landlord: ("Landlord")
/s/ By: /s/
- ---------------------------- -------------------------------
/s/
- ----------------------------
LDI COMPUTER SYSTEMS, INC
Witness as to Tenant:
/s/ By: /s/
- ---------------------------- -------------------------------
/s/
- ----------------------------
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
On this 14th day of January, 1994, before me appeared
Thomas A. Cutter, who acknowledged that the foregoing instrument was
signed on behalf of said NCP, LTD., an Ohio partnership, as his free
act and deed as Partner of said partnership and as the free act and
deed of said partnership.
My Commission
Expires 12-14-98
/s/ Elizabeth Rose
-------------------------------
Elizabeth Rose
Notary Public
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
On this 13th day of January, 1994, before me appeared Thomas W. Abel, a
Vice-President by LDI Computer Systems, Inc., who acknowledged that the
foregoing instrument was signed on behalf of said LDI Computer Systems, Inc.
and that said instrument is Thomas W. Abel free act and deed and the free act
and deed of said LDI Computer Systems, Inc.
/s/ Diane Gregory
-------------------------------
Notary Public
DIANE GREGORY
NOTARY PUBLIC, STATE OF OHIO
Recorded in Cuyahoga County
My Comm. Expires Feb. 26, 1997
18
<PAGE> 44
EXHIBIT A
---------
Situated in the City of Solon, County of Cuyahoga and State of
Ohio and known as being part of Original Solon Township Lot No.
18, Tract 11, and bounded and described as follows:
Beginning at the Southeasterly corner of said Original Lot No.
18, it being also the Southeasterly corner of land conveyed by
The National City Bank of Cleveland, Trustee, to Larry and Lois
J. Davis by deed dated March 23, 1970 and recorded in Volume
12598, Page 77 of Cuyahoga County Records.
Course I: Thence due North along the Easterly line of said
Original Lot No. 18, it being also the Easterly line of land
conveyed to Larry and Lois J. Davis as aforesaid 753.98 feet to
the South line of Carter Street, 70 feet wide, as shown on
dedication plat recorded in Volume 205, Page 6 of Cuyahoga County
Records;
Course II: Thence due West along the South Line of said Carter
Street 463.87 feet to a point;
Course III: Thence due South 757.64 feet to the Southerly line
of said Original Lot No. 18, it being also the Southerly line of
land conveyed to Larry and Lois J. Davis as aforesaid;
Course IV: Thence North 89 Degrees 32' 50" East along the South
line of land conveyed to Larry and Lois J. Davis as aforesaid
463.89 feet to the place of beginning, be the same more or less,
but subject to all legal highways.
19
<PAGE> 45
NCP, LIMITED
-----------
DATE: January 4, 1994
TO: Michael Kennedy
FROM: John Bailey
RE: Solon Lease
NCP, Limited and LDI Computer Systems, Inc agree to the following:
1. NCP will assign LDI DRC Solon Lease dated March 1992 and
restated April 22, 1993 to LDI Computer Systems, Inc as of
February 1, 1994.
2. NCP agrees to cancel the existing NCP - MST Lease dated
November 1, 1990 as of February 1, 1994.
3. NCP and LDI Computer Systems, Inc agree to enter into a master
lease (guaranteed by LDI Corp) for the entire 30700 Carter
Street facility (147,400 square feet) for 66 months commencing
on February 1, 1994 at $2.75/foot per year triple net and
other such terms as defined in the attached master lease.
4. LDI Corp will pay NCP $328,500.00 upon the execution of said
lease.
5. NCP will continue to receive the existing rent (as of 10/1/93)
from MST and LDI DRC until January 31, 1994.
6. LDI Computer Systems, Inc will pay directly or reimburse NCP
all expenses, as defined in Section 4d of the new lease, for
the 30700 Carter Street facility from November 1, 1993 to
January 31, 1994.
Please sign below to indicate your agreement and acceptance.
Thank you for your prompt attention.
Agreed and accepted by:
/s/ Michael Kennedy 1-7-94
- ------------------------------------------------- ----------
Michael Kennedy Date
LDI Computer Systems, Inc
/s/ Thomas Cutter 1-14-94
- ------------------------------------------------- ----------
Thomas Cutter Date
NCP, LTD.
30033 Clemens Road * Westlake Ohio 44145 *
Phone (216) 899-2909 * Fax (216) 899-2912
<PAGE> 46
TERMINATION AND CANCELLATION OF LEASE
-------------------------------------
THIS TERMINATION AND CANCELLATION OF LEASE is made as of this 6th
day of January, 1994, by and between NCP, LTD., an Ohio limited
partnership ("Lessor") and MST Systems, Inc, an Ohio corporation
("Lessee").
WHEREAS, Lessee previously entered into a lease with Lessor,
dated as of November 1, 1990, as thereafter amended for 40,940
square feet of space in a building located at 30700 Carter
Street, Solon, Ohio (the "Premises");
WHEREAS, Lessor and Lessee desire to terminate and cancel the
Lease, effective February 1, 1994;
NOW, THEREFORE, in consideration of the payment by Lessee to
Lessor of One Dollar ($1.00), Lessor and Lessee hereby agree that
the Lease is hereby terminated and canceled and neither the
Lessor nor the Lessee has any continuing obligation to the other
on or after February 1, 1994 with respect to the Lease.
IN WITNESS WHEREOF, Lessor and Lessee hereby execute this
Termination and Cancellation on the day and year first above
written.
Signed in the presence of:
/s/ John Bailey /s/ Thomas A. Cutter
- ------------------------------ -----------------------------
Thomas A. Cutter
NCP, LTD.
/s/ Shirley Gailock
- ------------------------------
/s/ /s/ Michael R. Kennedy
- ------------------------------ -----------------------------
Michael R. Kennedy
MST Systems, Inc
/s/ John Bailey
- ------------------------------
<PAGE> 47
ASSIGNMENT
----------
WHEREAS, on or about April 22, 1993, a Restated Lease for the
premises known as 30700 Carter Street, Solon, Ohio 44139 was
entered into by and between NCP, LTD., an Ohio limited partnership,
with its principal offices located at 30033 Clemens Road, Westlake,
Ohio 44145 as Landlord and LDI Corporation ("LDIC"), a Delaware
corporation, with offices located at 1975 East Ninth Street,
Cleveland, Ohio 44114 as Tenant; and
WHEREAS, the term of the restated lease is through October 31,
1995, but both NCP, LTD. and LDIC are desirous of allowing the
interests and obligations of NCP, LTD. as Landlord to be assigned
to LDI Computer Systems, Inc ("CSI");
NOW, THEREFORE, the undersigned parties agree that the following
should occur:
(1) Immediately after this document is executed by NCP, LTD.,
LDIC and by CSI, all interest NCP, LTD. has under the Restated
Lease shall be transferred from NCP, LTD. to CSI.
(2) LDIC will not have any ongoing liability to NCP, LTD. for
any rental charges beyond January 31, 1994. As of February 1,
1994, CSI shall assume the rights of NCP, LTD. under the
Restated Lease with LDIC.
ACKNOWLEDGED AND AGREED TO this 14th day of January, 1994.
LDI Corporation, Tenant
/s/ 1-7-94
- ----------------------------------------- ------------
By/Title Date
NCP, LTD., Landlord
/s/ 1-14-94
- ----------------------------------------- ------------
By/Title Date
LDI Computer Systems, Inc as Landlord's Assignee
/s/ 1-13-94
- ----------------------------------------- ------------
By/Title Date
<PAGE> 1
LDI CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
January 31 January 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) (A) (A)
3. Dilutive shares contingently issuable upon
conversion of debentures 656 656 656 656
4. Adjusted average common shares outstanding for
fully diluted computation 7,383 7,383 7,383 7,383
Net Earnings
------------
5. Net earnings (loss) as reported in statements
of consolidated earnings $(27,701) $1,503 $(24,522) $6,935
6. Decrease in interest expense and amortization of
debt issuance costs relating to the convertible
debentures, net of income tax benefit
153 155 607 620
7. Adjusted net earnings $(27,548) $1,658 $(23,915) $7,555
Earnings Per Share
------------------
8. Net earnings (loss) per average common share
outstanding $(4.12) $ .22 $(3.65) $1.03
9. Net earnings per common share on a fully diluted
basis (A) $ .22 (A) $1.01
</TABLE>
(A) Antidilutive
<PAGE> 1
List of Subsidiaries
LDI Computer Systems, Inc.
LDI Computer Rentals, Inc.
LDI Lease Funding Corporation
LDI Realty Corp.
Dunwoode Corporation
Leasing Dynamics Corporation (Shell)
LDI Canada, Inc.
LDI NRO, Inc.
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
LDI Corporation:
We consent to the incorporation by reference in Registration Statements No.
33-17840 and No. 33-26911 of LDI Corporation on Forms S-8 of our report dated
May 2, 1994, appearing in this Annual Report on Form 10-K of LDI Corporation for
the year ended January 31, 1994.
Deloitte & Touche
Cleveland, Ohio
May 2, 1994
