<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1994
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- ---------------------
For the Quarter Ended: July 31, 1994 Commission File Number: 0-15994
-------------
LDI CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 31-1179824
- - ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4770 Hinckley Industrial Parkway, Cleveland, Ohio 44109-6096
- - ------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (216) 661-5400
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ______
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
6,727,457 shares of Common Stock, $.01 par value,
as of August 31, 1994
Page 1
<PAGE> 2
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED JULY 31, 1994 AND 1993
(Amounts in Thousands, Except Per Share Data)
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
REVENUES:
Leasing . . . . . . . . . . . . . . . . . . . . $31,117 $38,637
Direct sales . . . . . . . . . . . . . . . . . 12,380 20,813
Technical services . . . . . . . . . . . . . . 3,962 3,561
Equity in earnings of 50% owned affiliate . . . 172 193
Other . . . . . . . . . . . . . . . . . . . . . 280 1,357
------- -------
Total . . . . . . . . . . . . . . . . . . . 47,911 64,561
------- -------
COSTS AND EXPENSES:
Leasing . . . . . . . . . . . . . . . . . . . . 19,589 24,411
Direct sales . . . . . . . . . . . . . . . . . 11,969 17,653
Technical services . . . . . . . . . . . . . . 2,077 2,087
Interest . . . . . . . . . . . . . . . . . . . 7,414 8,383
Selling, general, and administrative . . . . . 5,260 9,559
Restructuring charges . . . . . . . . . . . . . 245 -
------- -------
Total . . . . . . . . . . . . . . . . . . . 46,554 62,093
------- -------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES . . . . . . . . . . . . . . . 1,357 2,468
Income Tax Expense . . . . . . . . . . . . . . . . . 516 956
------- -------
EARNINGS FROM CONTINUING OPERATIONS . . . . . . . . . 841 1,512
Loss From Discontinued Operations, Net of Income Tax
Benefit of $1,888 and $151 Respectively . . . . . (3,081) (239)
------- -------
NET EARNINGS (LOSS) . . . . . . . . . . . . . . . . . $(2,240) $ 1,273
======= =======
EARNINGS (LOSS) PER SHARE:
Continuing operations . . . . . . . . . . . . . $ .12 $ .22
Discontinued operations . . . . . . . . . . . . (.46) (.03)
------- -------
Net earnings . . . . . . . . . . . . . . . . . $ (.34) $ .19
======= =======
Average Shares Outstanding . . . . . . . . . . . . . 6,727 6,727
======= =======
Cash Dividends Paid Per Share . . . . . . . . . . . . - $ .04
======= =======
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
Page 2
<PAGE> 3
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS (UNAUDITED)
FOR THE SIX MONTHS ENDED JULY 31, 1994 AND 1993
(Amounts in Thousands, Except Per Share Data)
=================================================================================================================================
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
REVENUES:
Leasing . . . . . . . . . . . . . . . . . . . . $ 51,792 $ 72,739
Direct sales . . . . . . . . . . . . . . . . . 36,429 42,457
Technical services . . . . . . . . . . . . . . 7,885 8,318
Equity in earnings of 50% owned affiliate . . . 379 248
Other . . . . . . . . . . . . . . . . . . . . . 463 2,443
-------- --------
Total . . . . . . . . . . . . . . . . . . . 96,948 126,205
-------- --------
COSTS AND EXPENSES:
Leasing . . . . . . . . . . . . . . . . . . . . 30,532 43,854
Direct sales . . . . . . . . . . . . . . . . . 32,546 36,440
Technical services . . . . . . . . . . . . . . 4,341 5,127
Interest . . . . . . . . . . . . . . . . . . . 14,833 17,440
Selling, general, and administrative . . . . . 14,444 18,821
Restructuring charges . . . . . . . . . . . . . 245 -
-------- --------
Total . . . . . . . . . . . . . . . . . . . 96,941 121,682
-------- --------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES . . . . . . . . . . . . . . . 7 4,523
Income Tax Expense . . . . . . . . . . . . . . . . . 3 1,749
-------- --------
EARNINGS FROM CONTINUING OPERATIONS . . . . . . . . . 4 2,774
Loss From Discontinued Operations, Net of Income
Tax Benefit of $1,888 and $183 Respectively . . . (3,081) (291)
-------- --------
NET EARNINGS (LOSS) . . . . . . . . . . . . . . . . .
$ (3,077) $ 2,483
======== ========
EARNINGS (LOSS) PER SHARE:
Continuing operations . . . . . . . . . . . . . - $ .41
Discontinued operations . . . . . . . . . . . . $ (.46) (.04)
-------- --------
Net earnings . . . . . . . . . . . . . . . . . $ (.46) $ .37
======== ========
Average Shares Outstanding . . . . . . . . . . . . . 6,727 6,727
======== ========
Cash Dividends Paid Per Share . . . . . . . . . . . . - $ .08
======== ========
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
Page 3
<PAGE> 4
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1994 (Unaudited) AND JANUARY 31, 1994
(Dollars in Thousands)
================================================================================================================================
<CAPTION>
July 31, January 31,
1994 1994
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 9,803 $ 8,972
Receivables--net of allowance for doubtful accounts . . . . . . . 29,199 41,831
Inventory held for lease or sale . . . . . . . . . . . . . . . . 10,951 18,336
Leased assets:
Sales-type and direct financing leases . . . . . . . . . . . . 361,487 412,561
Operating leases--net of accumulated depreciation of $25,708
at July 31, 1994 and $23,412 at January 31, 1994 . . . . . . 47,248 55,006
Land, buildings, equipment and furniture--net of accumulated . .
depreciation of $8,554 at July 31, 1994 and $8,521 at . . . .
January 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 14,638 16,712
Net assets of discontinued operations . . . . . . . . . . . . . . 6,616 20,868
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 19,080 18,741
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $499,022 $593,027
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 12,540 $ 28,793
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 7,724 9,508
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 112,975 148,175
Subordinated notes . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 13,255 15,941
Nonrecourse lease financing . . . . . . . . . . . . . . . . . . . 266,734 296,794
Reserves and liabilities related to discontinued operations and
restructuring programs . . . . . . . . . . . . . . . . . . . . 3,015 7,456
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 5,735 6,276
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . 431,978 522,943
-------- --------
SHAREHOLDERS' EQUITY:
Common stock, par value of $.01-- 20,000,000 shares . . . . . .
authorized; 6,828,984 shares issued . . . . . . . . . . . . . 68 68
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 44,959 44,922
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 23,277 26,354
Treasury shares at cost--101,527 shares . . . . . . . . . . . . . (1,260) (1,260)
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . . 67,044 70,084
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . $499,022 $593,027
======== ========
<FN>
NOTE: The balance sheet at January 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements.
See the accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> 5
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JULY 31, 1994 AND 1993
(Dollars in Thousands)
===================================================================================================================================
<CAPTION>
1994 1993
----------- ------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net earnings from continuing operations . . . . . . . . . . . $ 4 $ 2,774
Adjustments to reconcile net earnings to net cash flow from
continuing operations:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 10,837 12,312
Deferred income taxes . . . . . . . . . . . . . . . . . . . . (2,280) 1,654
Additions to sales-type and direct financing leases . . . . . (49,276) (43,533)
Principal portion of lease rentals received . . . . . . . . . 89,824 70,804
Purchases of inventory for resale . . . . . . . . . . . . . . (30,886) (41,778)
Sales, transfers, and disposals of inventory and equipment . 84,591 104,506
Change in reserves related to restructuring programs . . . . (2,451) -
Change in accounts receivable . . . . . . . . . . . . . . . . 5,407 1,074
Change in accounts payable . . . . . . . . . . . . . . . . . (9,744) (9,658)
Change in accrued expenses and other liabilities . . . . . . (1,816) 2,579
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (462) (1,125)
---------------- -------------
Cash provided by continuing operations . . . . . . . . . . . . 93,748 99,609
---------------- -------------
Discontinued operations:
Net loss from discontinued operations . . . . . . . . . . . . (3,081) (291)
Change in assets and liabilities (except reserves) of
discontinued operations . . . . . . . . . . . . . . . . . . 13,650 (4,709)
Change in reserves . . . . . . . . . . . . . . . . . . . . . (1,990) -
---------------- -------------
Cash provided by (used in) discontinued operations . . . . . . 8,579 (5,000)
---------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,327 94,609
---------------- --------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of equipment for lease . . . . . . . . . . . . . . . (51,528) (69,213)
Purchases of land, building, equipment and furniture . . . . . (852) (1,560)
Purchase of company . . . . . . . . . . . . . . . . . . . . . - (720)
Proceeds from sale of contracts, equipment and other assets . - 3,591
Proceeds from disposal of non-core businesses . . . . . . . . 8,226 -
---------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,154) (67,902)
---------------- --------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from nonrecourse lease financing . . . . . . . . . . 60,591 51,788
Payments on nonrecourse lease financing . . . . . . . . . . . (82,661) (90,777)
Borrowings (payments) on recourse notes and credit facilities (35,200) 15,914
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . - (538)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72) (1,086)
--------------- ---------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,342) (24,699)
--------------- ---------------
Increase in Cash and Cash Equivalents . . . . . . . . . . . . . . 831 2,008
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . 8,972 4,482
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . $ 9,803 $ 6,490
============== ===============
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 31, 1994 (UNAUDITED) AND
FOR THE YEAR ENDED JANUARY 31, 1994
(Dollars in Thousands, Except Per Share Data)
====================================================================================================================================
<CAPTION>
Common
Additional stock in Total
Common paid-in Retained treasury shareholders'
stock capital earnings at cost equity
----------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
BALANCE AT FEBRUARY 1, 1993 . $68 $44,884 $51,952 $(1,260) $95,644
Net loss . . . . . . . . . (24,522) (24,522)
Cash dividends - $.16 per
share . . . . . . . . . (1,076) (1,076)
Compensation expense
under stock award plan for
shares issued in a prior
year . . . . . . . . . . 38 38
----------- -------------- -------------- -------------- ------------------
BALANCE AT JANUARY 31, 1994 . 68 44,922 26,354 (1,260) 70,084
Net loss . . . . . . . . . (3,077) (3,077)
Compensation expense
under stock award plan for
shares issued in a prior
year . . . . . . . . . . 37 37
------------ ------------- -------------- -------------- -----------------
BALANCE AT JULY 31, 1994 . . $68 $44,959 $23,277 $(1,260) $67,044
============ ============= ============== ============== =================
<FN>
See the accompanying notes to consolidated financial statements.
</TABLE>
Page 6
<PAGE> 7
LDI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in Thousands, Except Where Indicated)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals, except as otherwise disclosed)
considered necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended January
31, 1994.
<TABLE>
2. Receivables
<CAPTION>
July 31, January 31,
1994 1994
--------------- -----------------
<S> <C> <C> <C>
Trade accounts . . . . . . . . . . . . $21,232 $34,441
Trade notes . . . . . . . . . . . . . . 14,026 13,537
Other . . . . . . . . . . . . . . . . . 64 153
Allowance for doubtful accounts . . . . (6,123) (6,300)
-------------- -----------------
Net Receivables . . . . . . . . . $29,199 $41,831
============== =================
3. Accrued and Other Liabilities
July 31, January 31,
1994 1994
-------------- -----------------
Accrued liabilities consist of:
Compensation . . . . . . . . . . . . . $1,400 $ 3,896
Interest . . . . . . . . . . . . . . . 1,376 1,594
Sales tax . . . . . . . . . . . . . . . 804 1,022
Other . . . . . . . . . . . . . . . . . 4,144 2,996
------------- -----------------
Total . . . . . . . . . . . . . . $7,724 $9,508
============= =================
Other liabilities consist of:
Customer rental prepayments . . . . . . $3,560 $4,035
Deferred revenues . . . . . . . . . . . 2,017 2,084
Other . . . . . . . . . . . . . . . . . 158 157
------------- -----------------
Total . . . . . . . . . . . . . . $5,735 $6,276
============= =================
</TABLE>
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4. Notes Payable
<TABLE>
<CAPTION>
July 31, January 31,
1994 1994
------------- -------------------
<S> <C> <C>
Revolving and line of credit facilities $ 99,639 $ 97,075
Installment and term notes . . . . . . 13,336 51,100
------------- --------------------
Total . . . . . . . . . . . . . . $112,975 $148,175
============= ====================
</TABLE>
As of July 31, 1994, the Company had a $112.8 million secured amortizing
revolving credit facility with a group of banks. This facility is the result
of combining an existing unsecured revolving credit facility and a four year
unsecured term loan on May 2, 1994. The facility amortizes to $105 million, at
maturity on April 30, 1995. This credit agreement provides for a floating
interest rate based on either LIBOR or the prime rate.
The Company also had an $8.3 million revolving credit facility which was
converted, on May 2, 1994, to a secured amortizing term loan. This facility
had an outstanding balance of $4.1 million on July 31, 1994, and a scheduled
maturity of April 30, 1995.
Subsequent to July 31, 1994, $13.7 million of the borrowings under the
secured amortizing revolving credit facility were financed on a nonrecourse
basis. Accordingly, these amounts have been included in nonrecourse lease
financing at July 31, 1994.
On May 2, 1994, unsecured installment notes of $8.5 million were changed to
secured notes with modification made to the principal repayment schedule to
proportionately match the principal amortization of the secured amortizing
revolving credit facility. These notes aggregated $6.6 million at July 31,
1994, and mature on April 30, 1995. Additionally, $2.6 million of unsecured
installment notes were changed to secured notes on July 31, 1994, and paid in
full, as originally scheduled, on August 31, 1994.
The installment notes consist of fixed rate notes with interest rates
ranging from 9.7 percent to 10.0 percent.
Prior to entering into these new agreements, the Company obtained waivers
from the lenders for any potential loan covenant violations, such as asset
sales or financial ratio requirements, that may have resulted from
implementation of the Company's strategic plan as discussed in Notes 7 and 8.
Under the terms of the loan agreements, the Company is required to maintain
certain liquidity, leverage, and net worth ratios. The covenants also prohibit
the payment of cash dividends and place restrictions on the amount of
borrowings under the facility. The loan agreements are currently secured by
receivables, inventories and substantially all unpledged assets of the Company.
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<PAGE> 9
5. Nonrecourse Lease Financing
<TABLE>
<CAPTION>
July 31, January 31,
1994 1994
-------------- -----------------
<S> <C> <C>
Nonrecourse discounted lease rentals:
Financial institutions . . . . . . . . . $157,531 $182,713
Commercial paper . . . . . . . . . . . . 109,203 114,081
--------------- -----------------
Total . . . . . . . . . . . . . . . . $266,734 $296,794
=============== =================
</TABLE>
Nonrecourse discounted lease rentals consist of fixed rate capital obtained
from financial institutions on a nonrecourse basis. The lender has a security
interest in the lease rental stream and the underlying assets, but has no
recourse to the Company in the case of default by the lessee.
The Company established two asset-backed financing programs to fund lease
transactions on a nonrecourse basis through the use of commercial paper
securitized by lease rental receivables. Both programs are rated A-1 by
Standard & Poor's or P-1 by Moody's.
Under one of the programs, the Company sold lease receivables to a
wholly-owned subsidiary that issued commercial paper backed by an annually
renewing five year $60 million letter of credit. At July 31, 1994, $37.5
million of commercial paper was outstanding under this program. Effective May
1, 1994, the letter of credit under this program was not extended. Leases
funded previously will continue to amortize under the terms of the existing
agreement.
A second securitized program provides for the financing of up to $75 million
of lease receivables through an unaffiliated special purpose corporation which
issues nonrecourse commercial paper. This program is backed by a surety bond.
At July 31, 1994, $71.7 million of commercial paper was outstanding under this
program. On June 3, 1994, the Company executed a letter agreement to increase
this program to $125 million. The $50 million increase becomes available in
two steps. The first $25 million of additional capacity became available on
September 9, 1994, and the remaining $25 million is expected to become
available in the third quarter.
6. Subordinated Notes
In 1991, the Company issued $10 million of 9.375 percent convertible
subordinated notes, with interest payable semiannually, maturing in August
2000. Prior to May 1994, the notes were convertible into shares of the
Company's common stock. The notes require annual repayments of $2.5 million
beginning in August 1997. The notes are callable by the Company at a premium
of 109 3/8 beginning in August 1994, with the premium declining ratably to par
in August 1999.
In conjunction with the initial transaction, the Company issued 45,496
warrants. Each warrant was exercisable by the holder for five years, for one
share of the Company's common stock. The exercise price was subject to
adjustment for stock dividends, splits and certain other issuances of common
stock.
On May 2, 1994, the notes were amended to eliminate the conversion feature,
to adjust the exercise price of the outstanding warrants to $6.35 per share,
and to issue 1,529,307 additional warrants with the same exercise price, terms,
and expiration date as the previously-issued warrants.
In exchange, the holder of the notes agreed to permit the Company to grant
security interests to its recourse lenders. Additionally, the Company and the
holder of the notes agreed to modify certain other terms and conditions of the
notes.
Page 9
<PAGE> 10
7. Restructuring Charges
During the year ended January 31, 1994, management and the Board of
Directors commenced a plan to strategically realign the operations of the
Company that included the discontinuance of certain business segments. The
strategic plan includes the sales or other divestitures of certain product
lines and non-strategic businesses, the closing of facilities, and other
measures to improve the Company's overall profitability. The estimated cost of
implementing the plan, $6.6 million (after tax $4.1 million), was recorded in
the Company's fourth quarter ended January 31, 1994.
During the six-month period ended July 31, 1994, the Company (1) sold its
personal computer distribution and direct sales business under an asset
purchase agreement with a company controlled by a principal shareholder of the
Company; (2) completed the sale of the stock of the Company's Canadian leasing
subsidiary; and (3) sold certain assets of its point-of-sale equipment
businesses. An additional restructuring charge of $0.2 million associated with
the write-off of unamortized financing fees relating to various restructured
borrowing agreements was also recorded. (See Note 4)
8. Discontinued Operations
During the year ended January 31, 1994, management of the Company initiated
a comprehensive plan to exit the retail computer superstores, retail PC outlet
stores, catalog distribution, and software distribution business segments. As
a result of these actions, the Company recorded a fourth quarter pre-tax charge
of $11.7 million (after-tax $7.1 million).
Assets of the discontinued operations consist primarily of accounts and
notes receivable and are reported on the balance sheets as net assets of
discontinued operations. The consolidated financial statements disclose the
operating results of discontinued operations separately from continuing
operations. Prior period financial statements have been restated.
During the six months ended July 31, 1994, the Company (1) completed the
liquidation and closing of its retail computer superstores; (2) completed the
liquidation and closing of its retail PC outlet stores; (3) sold certain assets
of its software distribution business to a company controlled by a principal
shareholder of the Company; and (4) sold certain assets and transferred certain
liabilities of its catalog distribution business to a company controlled by a
principal shareholder of the Company. An additional loss from discontinued
operations of $5.0 million (after tax $3.1 million) was recorded in the second
quarter. This loss was related to the liquidation and closing of the Company's
retail computer superstores and retail PC outlets.
<TABLE>
9. Supplemental Disclosures of Cash Flow Information
FOR THE SIX MONTHS ENDED
JULY 31,
<CAPTION>
1994 1993
----------- --------------
<S> <C> <C>
Cash paid for:
Interest . . . . . . . . . . . . . . $15,050 $17,767
Income taxes . . . . . . . . . . . . . $ 35 $4
</TABLE>
Page 10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LDI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Six Months Ended July 31, 1994
===============================================================================
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is provided by (1) cash generated from continuing operating
activities, (2) cash proceeds from the financing of the present value of future
lease rentals, and (3) availability under the secured amortizing revolving
credit facility.
FINANCIAL POLICIES
The Company uses a combination of secured revolving bank credit, secured
lines of credit and internally generated funds to finance, on an interim basis,
the acquisition of equipment for lease or sale.
The Company generally finances the present value of the future lease rentals
by the assignment of such rentals to banks, insurance companies, or other
lenders on a discounted, nonrecourse basis. In this manner, a substantial
portion of the equipment cost is financed on a long-term basis.
LIQUIDITY
Cash generated from continuing operating activities amounted to $94 million
and $100 million for the six months ended July 31, 1994 and 1993, respectively.
Cash flow from continuing operating activities for the six months ended July
31, 1994 decreased by $6 million from the comparable period in the prior year
due primarily to lower earnings from continuing operations. Cash flow provided
from discontinued operations increased by $13.6 million, due primarily to the
receipt of proceeds from liquidation and sales of discontinued business units.
Cash flow used in investing activities decreased by $23 million, due primarily
to lower purchases of equipment for lease and proceeds from sales of assets of
restructured operations.
Compared to the prior year, cash flow used in financing activities increased
by $33 million in the six months ended July 31, 1994. This increase was due
primarily to payments of $51 million made in conjunction with the restructuring
of the Company's recourse debt agreements compared to increases in borrowing
under these recourse agreements in the prior year. This increase was offset by
lower net payments of $17 million on nonrecourse lease financing in the current
year.
CAPITAL RESOURCES
As of July 31, 1994, the Company had a $112.8 million secured amortizing
revolving credit facility with a group of banks. This facility amortizes to
$105 million at maturity on April 30, 1995. The Company also had $10.7 million
of secured amortizing term debt at July 31, 1994, which amortizes to $6.5
million at maturity on April 30, 1995. Additionally, $2.6 million of secured
installment notes were paid in full, as originally scheduled, on August 31,
1994.
Page 11
<PAGE> 12
The Company has two asset-backed financing programs to fund lease
transactions on a nonrecourse basis through the use of commercial paper as
described in Note 5.
At July 31, 1994, the Company had a total of $399 million of recourse and
nonrecourse interest-bearing obligations, of which $226 million were on a
floating rate basis. Of the total floating rate financings, $144 million were
converted to fixed rate financing through interest rate swap agreements and $13
million were subject to interest rate ceilings through interest rate cap
agreements.
OTHER
Net assets of discontinued operations decreased from January 31, 1994 to
July 31, 1994 due primarily to sales of inventory and collections of accounts
receivable of the retail computer superstores and the retail PC outlets and the
sale of certain assets of the Company's catalog distribution and software
distribution businesses.
Inventories decreased from January 31, 1994, to July 31, 1994, by
approximately $7.4 million primarily due to the sale of inventories of
non-strategic business units.
Accounts receivable decreased from January 31, 1994 to July 31, 1994 by
approximately $12.6 million due primarily to the sale of receivables of
non-strategic business units.
The Company does not have any material commitments for capital expenditures.
The Company believes that inflation has not been a significant factor in its
business.
Page 12
<PAGE> 13
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Three Months Ended July 31, 1994 as
Compared to the Three Months Ended July 31, 1993
LEASING:
A summary of the operating results from leasing for the three months ended
July 31, 1994 and 1993 is as follows:
<CAPTION>
(Dollars in Thousands) 1994 1993
- - -----------------------------------------------------------------------------------------------
<S> <C> <C>
Leasing Revenues $ 31,117 $ 38,637
Cost of Leasing 19,589 24,411
-------------- ------------------
Gross Leasing Margin $ 11,528 $ 14,226
============== ==================
Percent of Revenue 37.0% 36.8%
A summary of new leasing activity, which is a measure of business volume, for
the three months ended July 31, 1994, and 1993, is as follows:
Cost of Newly Leased Number of Lease
Equipment Transactions
--------- ------------
(Dollars in Millions) 1994 1993 1994 1993
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales-Type Leases $14.2 $18.4 203 382
Direct Financing Leases 10.0 3.3 86 21
Operating Leases 1.4 5.6 23 43
----------- ----------- -------------- --------------
Total $25.6 $27.3 312 446
=========== =========== ============== ==============
</TABLE>
For the three months ended July 31, 1994, leasing revenues declined by 19% from
the comparable period in the prior year. During the quarter ended July 31,
1994, the Company experienced a 30% decrease in the number of lease
transactions in comparison with the second quarter of 1993; however, the cost
of equipment leased was down only 6%, reflecting an increase in the average
transaction size.
A change also occurred in the mix of leases recorded in the second quarter of
1994 versus the second quarter of 1993. The number of direct financing leases,
which spread revenue recognition over the term of the lease, increased by over
300%, while the number of sales-type leases, which recognize a substantial
portion of total lease revenue at lease commencement, declined by 47%.
The decline in leasing revenues and transactions was also the result of the
disruption to the Company and its employees caused by implementation of the
strategic plan, including headcount reduction, sales of non-strategic
businesses and facilities consolidation. These activities are expected to be
completed during the third quarter.
Gross leasing margin (in dollars) also decreased by 19% from the prior year's
quarter due primarily to the lower lease volume and composition of lease
transactions.
Page 13
<PAGE> 14
<TABLE>
DIRECT SALES:
A summary of the operating results from direct sales for the three months
ended July 31, 1994 and 1993 is as follows:
<CAPTION>
RESTRUCTURED CONTINUING
CORE OPERATIONS (1) OPERATIONS (2) OPERATIONS
------------------- -------------- ----------
(Dollars in Thousands) 1994 1993 1994 1993 1994 1993
- - --------------------------------------------- -------------------------- ----------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Direct Sales $9,114 $7,795 $3,266 $13,018 $12,380 $20,813
Cost of Direct Sales 7,960 6,613 4,009 11,040 11,969 17,653
------------------------- ----------------------- ----------------------------
Gross Sales Margins $1,154 $1,182 $ (743) 1,978 $ 411 $ 3,160
========================= ======================= ============================
Percent of Sales 12.7% 15.2% (22.7)% 15.2% 3.3% 15.2%
<FN>
(1) Core operations include: Leasing Services, Technology Services and PC Rentals which were identified in the strategic plan as
those product lines that will be the ongoing business of the Company.
(2) Restructured operations include the results of business units which for financial statement presentation purposes are
considered to be a part of continuing operations. As discussed in Note 7, the restructured operations were determined to be
non-strategic to the future operations of the Company and as such, have either been sold or were in the process of being
sold or liquidated during the period.
</TABLE>
For the three months ended July 31, 1994, direct sales decreased 40% in
comparison with the second quarter of 1993. The decrease is primarily
attributable to sales related to the corporate personal computer distribution
business, which was sold on May 31, 1994. Therefore, sales for the quarter
ended July 31, 1994, reflect only one month's activity while results for the
comparable prior year's quarter included three months. The increase in core
business direct sales reflected the Company's emphasis on selling off-lease
inventories during the period.
Gross sales margin (in dollars) declined by 87%, reflecting the decrease in
sales and realized gross margins of restructured operations, with certain
inventories liquidated below cost.
TECHNICAL SERVICES:
A summary of the operating results from technical services for the three
months ended July 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1994 1993
- - ----------------------------------------------------------------------
<S> <C> <C>
Services Revenues $ 3,962 $ 3,561
Cost of Services 2,077 2,087
-------------- --------------
Gross Margin $ 1,885 $ 1,474
============== ==============
Percent of Revenues 47.6% 41.4%
</TABLE>
For the three months ended July 31, 1994, technical services revenues increased
by 11% from the prior year's second quarter, due primarily to an increase in
consulting and related services as compared to the prior year's quarter.
Gross margin (in dollars) increased by 28%, reflecting the increase in revenues
and a reduction in cost, primarily due to reduced direct labor charges.
Page 14
<PAGE> 15
INTEREST EXPENSE:
For the three months ended July 31, 1994, interest expense decreased by 11%
from the prior year's quarter, primarily as a result of a reduction in the
average amount of outstanding debt.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
For the three months ended July 31, 1994, selling, general and
administrative expenses declined by 45% from the comparable quarter in the
prior year. The reduction was due primarily to the effect of the sale of
non-strategic businesses and cost reduction programs implemented as part of the
strategic plan.
Considering prior year financial results, the Company will not make a
contribution to its Pension Plan. Consequently, amounts accrued during
the prior year were reversed in the quarter ended July 31, 1994, which reduced
expenses. Additionally, the proportional increase in new direct finance and
operating leases has resulted in higher amounts of initial direct costs being
capitalized which also reduced selling, general, and administrative expenses.
RESTRUCTURING CHARGES:
Under the strategic plan, certain businesses (other than those included in
Discontinued Operations) were identified as being subject to sale or other
divestiture. The impact on the financial statements is discussed in Note 7.
INCOME TAXES:
The effective income tax rate for continuing operations decreased to 38.0%
for the three months ended July 31, 1994 compared to a rate of 38.8% for the
comparable prior year period, reflecting a slight decrease in the Company's
estimate of the annual effective tax rate for the year ending January 31, 1995.
DISCONTINUED OPERATIONS:
Under the strategic plan, certain businesses were identified as Discontinued
Operations. The impact on the financial statements is discussed in Note 8.
Page 15
<PAGE> 16
<TABLE>
LDI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Six Months Ended July 31, 1994 as
Compared to the Six Months Ended July 31, 1993
=================================================================================================================================
LEASING:
A summary of the operating results from leasing for the six months
ended July 31, 1994 and 1993 is as follows:
<CAPTION>
(In Thousands) 1994 1993
- - ------------------------------------------------------------------
<S> <C> <C>
Leasing Revenues $51,792 $72,739
Cost of Leasing 30,532 43,854
--------------- -------------
Gross Leasing Margin $21,260 $28,885
=============== =============
Percent of Revenue 41.0% 39.7%
</TABLE>
A summary of new leasing activity, which is a measure of business
volume, for the six months ended July 31, 1994, and 1993, is as follows:
<TABLE>
<CAPTION>
Cost of Newly Leased Number of Lease
Equipment Transactions
--------- ------------
(Dollars in Millions) 1994 1993 1994 1993
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales-Type Leases $15.5 $31.1 384 769
Direct Financing Leases 20.3 27.7 162 36
Operating Leases 5.2 7.9 50 70
----------- -------------- ------------ ------------
Total $41.0 $66.7 596 875
=========== ============== ============ ============
</TABLE>
For the six months ended July 31, 1994, leasing revenues declined by 29% from
the comparable period in the prior year. During the period, the Company
experienced a decrease in the number of lease transactions in comparison with
the six months ended July 31, 1993. The average lease transaction also
decreased in size (dollars).
A change also occurred in the mix of leases recorded in the six months ended
July 31, 1994, versus the six months ended July 31, 1993. The number of direct
financing leases, which spread revenue recognition over the term of the lease,
increased by over 350%, while the number of sales-type leases, which recognize
a substantial portion of total lease revenue at lease commencement, declined by
50%.
The decline in leasing revenues and transactions was also the result of the
disruption to the Company and its employees caused by the implementation of the
strategic plan, including headcount reduction, sales of non-strategic
businesses and facilities consolidation. These activities are expected to be
completed during the third quarter.
Gross leasing margin (in dollars) decreased by 26% from the six months ended
July 31, 1993, due primarily to the lower lease volume. However, the margin as
a percent of revenues improved, primarily as a result of the change in mix of
the revenue components, with finance income constituting a larger proportion of
total revenues and gross margin for the six months ended July 31, 1994 compared
with the corresponding period of the prior year.
Page 16
<PAGE> 17
<TABLE>
DIRECT SALES:
A summary of the operating results from direct sales for the six-month period ended July 31, 1994 and 1993 is as follows:
<CAPTION>
RESTRUCTURED CONTINUING
CORE OPERATIONS OPERATIONS OPERATIONS
--------------- ---------- ----------
(Dollars in Thousands) 1994 1993 1994 1993 1994 1993
- - ---------------------------- --------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Direct Sales $17,607 $15,588 $18,822 $26,869 $36,429 $42,457
Cost of Direct Sales 15,207 13,605 17,339 22,835 32,546 36,440
--------------------- ---------------------- ----------------------
Gross Sales Margins $ 2,400 $ 1,983 $ 1,483 $ 4,034 $ 3,883 $ 6,017
===================== ====================== ======================
Percent of Sales 13.6% 12.7% 7.9% 15.0% 10.7% 14.2%
<FN>
(1) Core operations include: Leasing Services, Technology Services and PC Rentals which were identified in the strategic plan as
those product lines that will be the ongoing business of the Company.
(2) Restructured operations include the results of business units which for financial statement presentation purposes are
considered to be a part of continuing operations. As discussed in Note 7, the restructured operations were determined to be
non-strategic to the future operations of the Company and as such, have either been sold or were in the process of being
sold or liquidated during the period.
</TABLE>
For the six months ended July 31, 1994, direct sales from continuing operations
decreased 14% in comparison with the same period in 1993. The decrease was due
to the sale or liquidation of the Company's restructured business operations
during the current period.
Gross sales margins (in dollars) from continuing operations declined 35%, due
principally to the sales of inventories of restructured operations at or near
book value.
<TABLE>
TECHNICAL SERVICES:
A summary of the operating results from technical services for the six months ended July 31, 1994 and 1993 is as follows:
(In Thousands) 1994 1993
- - -----------------------------------------------------------
<S> <C> <C>
Services Revenues $7,885 $8,318
Cost of Services 4,341 5,127
----------- ------------
Gross Margin 3,544 3,191
=========== ============
Percent of Revenues 44.9% 38.4%
</TABLE>
For the period ended July 31, 1994, technical services revenues decreased by 5%
from the prior year's comparable period. This was due primarily to a decline
of $944,000 in disaster recovery services revenues which resulted from an
agreement, effective May 1, 1993, to form a strategic marketing relationship
with SunGard Recovery Services, Inc. The Company's base of business recovery
customers and two "hot site" recovery centers were merged with those of
SunGard's and are operated by SunGard as part of the agreement.
Gross margin (in dollars) increased by 11%, and the margin percentage also
increased primarily due to the absence, beginning in May 1993, of disaster
recovery operations, which carried higher direct costs per revenue dollar, as
well as reduced direct labor costs in the Technical Services operations.
Page 17
<PAGE> 18
INTEREST EXPENSE:
For the six months ended July 31, 1994, interest expense decreased by 15%
from the prior year's comparable period due primarily to a reduction in the
average amount of debt outstanding.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
For the six months ended July 31, 1994, selling, general and administrative
expenses declined by 23% from the comparable period in the prior year. The
reduction is primarily due to the effect of the sales of non-strategic
businesses and cost reduction programs implemented as a part of the strategic
plan.
Considering prior year financial results, the Company will not make a
contribution to its Pension Plan. Consequently, amounts accrued during
the prior year were reversed in the quarter ended July 31, 1994, which reduced
expenses. Additionally, the proportional increase in new direct finance and
operating leases has resulted in higher amounts of initial direct costs being
capitalized, which also reduced selling, general, and administrative expenses.
RESTRUCTURING CHARGES:
Under the strategic plan, certain businesses (other than those included in
Discontinued Operations) were identified as being subject to sale or other
divestiture. The impact on the financial statements is discussed in Note 7.
INCOME TAXES:
The effective income tax rate for continuing operations decreased to 38.0%
for the six months ended July 31, 1994 compared to a rate of 38.8% for the
comparable prior year period, reflecting a slight decrease in the Company's
estimate of the annual effective tax rate for the year ending January 31, 1995.
DISCONTINUED OPERATIONS:
Under the strategic plan, certain businesses were identified as Discontinued
Operations. The impact on the financial statements is discussed in Note 8.
Page 18
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LDI CORPORATION
Date: September 14, 1994 By: /s/ Frank G. Skedel
---------------------------
Frank G. Skedel, Executive Vice President,
Chief Financial Officer and Treasurer
Page 19
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LDI CORPORATION
Date: September 14, 1994 By:
--------------------------------------
Frank G. Skedel, Executive Vice President,
Chief Financial Officer and Treasurer
Page 20
<PAGE> 21
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following exhibits required by Item 601 of Regulation S-K
are furnished herewith:
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
----------- -----------------------
<S> <C>
2.01 Asset Acquisition Agreement dated May 31, 1994, between LDI Corporation and LDI Computer Systems, Inc.,
as Sellers, and MRK Computer Systems, Inc., as Buyer
3.01 Restated Certificate of Incorporation (Included as an exhibit to the Registrant's Registration Statement
on Form S-1 (No. 33-14486) and incorporated herein by reference.)
3.02 By-laws, as amended (Included as an exhibit to the Registrant's Annual Report on form 10-K (No. 0-15994)
for the year ended January 31, 1992, and incorporated herein by reference.)
4.01 Specimen Stock Certificate (Included as an exhibit to the Registrant's Registration Statement
on Form S-1 (No. 33-14486) and incorporated herein by reference.)
4.02 Note Purchase Agreement dated as of August 1, 1989, among the Registrant, Northwestern National
Life Insurance Company and the other parties listed in Appendix I thereto (Included as an exhibit to the
Registrant's Quarterly Report on Form 10-Q (No. 0-15994) for the quarter ended October 31, 1989, and
incorporated herein by reference.)
4.03 Amendment dated as of January 31, 1992, to the Note Purchase Agreement dated August 31, 1989,
among the Registrant, Northwestern National Life Insurance Company and the other parties listed in
Appendix I thereto (Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
(No. 0-15994) for the quarter ended April 30, 1992, and incorporated herein by reference.)
4.04 Form of Indemnification Agreement (Included as an exhibit to the Registrant's Registration Statement
on Form S-1 (No. 33-14486) and incorporated herein by reference.)
4.05 Stockholders' Agreement dated May 22, 1987, among the Registrant, Robert S. Kendall, Michael R.
Kennedy, Thomas A. Cutter, Ronald M. Lipson, Jay J. Ross, Primus Capital Fund and National City
Venture Corporation, as amended (Included as an exhibit to the Registrant's Annual Report on Form 10-K
(No. 0-15994) for the year ended January 31, 1991, and incorporated herein by reference.)
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
----------- -----------------------
<S> <C>
4.06 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 (Included as an exhibit to the Registrant's Annual Report on Form
10-K (No. 0-15994) for the year ended January 31, 1992, and incorporated herein by reference.)
4.07 First Amendment dated August 1, 1991, to Amended and Restated Credit Agreement dated November 16,
1990, between LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank Ltd., Chicago Branch (Included
as an exhibit to the Registrant's Annual Report on Form 10-K (No. 0-15994) for the year ended January
31, 1992, and incorporated herein by reference.)
4.08 Second Amendment dated November 15, 1991, to Amended and Restated Credit Agreement dated November 16,
1990, between LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank Ltd., Chicago Branch (Included
as an exhibit to the Registrant's Annual Report on Form 10-K (No. 0-15994) for the year ended January
31, 1992, and incorporated herein by reference.)
4.09 Third Amendment dated January 15, 1992, to Amended and Restated Credit Agreement dated November 16,
1990, between LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank Ltd., Chicago Branch (Included
as an exhibit to the Registrant's Annual Report on Form 10-K (No. 0-15994) for the year ended January
31, 1992, and incorporated herein by reference.)
4.10 Fourth Amendment dated April 29, 1992, to Amended and Restated Credit Agreement dated November 16,
1990, between LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank Ltd., Chicago Branch (Included
as an exhibit to the Registrant's Quarterly Report on Form 10-Q (No. 0-15994) for the quarter ended
April 30, 1992, and incorporated herein by reference.)
4.11 Fifth Amendment dated October 1, 1992, to Amended and Restated Credit Agreement dated November 16,
1990, between LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank Limited, Chicago Branch
(Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q (No. 0-15994) for the quarter
ended October 31, 1992, and incorporated herein by reference.)
4.12 Sixth Amendment dated July 15, 1993, to Amended and Restated Credit Agreement dated November 16,
1990, between LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank Limited, Chicago Branch
(Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q (No. 0-15994) for the quarter
ended April 30, 1993, and incorporated herein by reference.)
4.13 Seventh Amendment dated October 1, 1993, to Amended and Restated Credit Agreement dated November
16, 1990, between LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank Limited, Chicago (Included
as an exhibit to the Registrant's Annual Report on Form 10-Q (No. 0-15994) for the quarter ended
October 31, 1993, and incorporated herein by reference.)
4.14 Amended and Restated Lease Receivables Transfer Agreement dated February 15, 1994, among the
Registrant, CXC Incorporated and Citicorp North America , Inc. (Included as an exhibit to the
Registrant's Annual Report on Form 10-K (No. 0-15994) for the year ended January 31, 1994, and
incorporated herein by reference.)
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
----------- -----------------------
<S> <C>
4.15 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 (Included as an exhibit to the
Registrant's Annual Report on Form 10-K (No. 0-15994) for the year ended January 31, 1991, and
incorporated herein by reference.)
4.16 Note Secured by Mortgage dated January 31, 1991, between LDI Realty Corp., as Trustee under
LDI Realty Trust, and Metropolitan Life Insurance Company (Included as an exhibit to the Registrant's
Annual Report on Form 10-K (No. 0-15994) for the year ended January 31, 1991, and incorporated herein by
reference.)
4.17 Note Purchase Agreement dated as of July 2, 1991, between Registrant and Olympus Private
Placement Fund, L.P. (Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q (No.
0-15994) for the quarter ended July 31, 1991, and incorporated herein by reference.)
4.18 Amended and Restated Promissory Note of the Registrant dated as of July 1, 1993, in favor of
National Westminster Bank USA (Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q (No. 0-15994) for the quarter ended October 31, 1993, and incorporated herein by reference.)
4.19 Amendment dated April 29, 1994 to Amended and Restated Promissory Note of Registrant dated as of
July 1, 1993 in favor of National Westminster Bank USA (Included as an exhibit to the Registrant's
Annual Report on Form 10-K (No. 0-15994) for the year ended January 31, 1994, and incorporated herein by
reference.)
4.20 Amendment dated April 29, 1994 to Note Purchase Agreement dated as of July 2, 1991, between
Registrant and Olympus Private Placement Fund, L.P. (Included as an exhibit to the Registrant's
Annual Report on Form 10-K (No. 0-15994) for the year ended January 31, 1994, and incorporated
herein by reference.)
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
----------- -----------------------
<S> <C>
4.21 Amendment dated May 2, 1994 to Note Purchase Agreement dated August 31, 1989, among
Registrant, Northwestern National Life Insurance Company and the other parties listed in Appendix I
thereto (Included as an exhibit to the Registrant's Annual Report on Form 10-K (No. 0-15994) for the
year ended January 31, 1994, and incorporated herein by reference.)
4.22 Second Amended and Restated Credit Agreement dated July 29, 1994, among Registrant, certain
Commercial Lending Institutions, and National City Bank, Society National Bank and Continental Bank
N.A., as co-agents
4.23 Letter Amendment dated July 29, 1994, to Note Purchase Agreement dated August 31, 1989, among
Registrant, Northwestern National Life Insurance Company and the other parties listed in Appendix I
thereto
10.01 Employment Contract dated August 1, 1994, between the Company and Floyd S. Robinson, President
and Chief Executive Officer
11.01 Computation of Earnings Per Share for the period ended July 31, 1994
27.01 Financial Data Schedules as required under the Securities & Exchange Commission EDGAR rule
release effective for EDGAR filings submitted on or after September 1, 1994
</TABLE>
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
----------- -----------------------
<S> <C>
2.01 Asset Acquisition Agreement dated May 31, 1994, between LDI Corporation
and LDI Computer Systems, Inc., as Sellers, and MRK Computer Systems, Inc.,
as Buyer
4.22 Second Amended and Restated Credit Agreement dated July 29, 1994, among
Registrant, certain Commercial Lending Institutions, and National City Bank,
Society National Bank and Continental Bank N.A., as co-agents
4.23 Letter Amendment dated July 29, 1994, to Note Purchase Agreement dated August
31, 1989, among Registrant, Northwestern National Life Insurance Company and the
other parties listed in Appendix I thereto
10.01 Employment Contract dated August 1, 1994, between the Company and Floyd S.
Robinson, President and Chief Executive Officer
11.01 Computation of Earnings Per Share for the period ended July 31, 1994
27.01 Financial Data Schedules as required under the Securities & Exchange Commission
EDGAR rule release effective for EDGAR filings submitted on or after September 1,
1994
</TABLE>
<PAGE> 1
EXHIBIT 2.01
ASSET ACQUISITION AGREEMENT
---------------------------
PARTIES: LDI Corporation ("LDI")
a Delaware corporation
1375 East Ninth Street
Cleveland, Ohio 44114
LDI Computer Systems, Inc. ("CSI")
an Ohio corporation
30700 Carter Street
Solon, OH 44139
Hereinafter jointly referred to as ("Seller")
MRK Computer Systems, Inc.
an Ohio corporation ("Buyer")
30700 Carter Street
Solon, OH 44139
DATED AS OF: May 31, 1994
BACKGROUND LDI, through its subsidiary, CSI and its division, MST
Distribution ("MST") is in the business of, among other things, selling
computer systems and software and related equipment, wide area and local area
network connectivity products, and related other services (the "Business").
The parties desire that Seller sells and Buyer buys certain assets of CSI and
MST subject to the terms and conditions of this Agreement. The term "the
Business" does not include any of the other businesses of Seller and Buyer is
not buying any assets of Seller not used in the Business.
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual
agreements stated below, the parties agree as follows:
SECTION 1: DEFINED TERMS
Certain defined terms used herein and not specifically defined in
context are defined in this Section 1, as follows:
"AGREEMENT" means this Asset Acquisition Agreement and related
agreements to be executed and delivered hereunder.
"CONSENT" means any consent, approval, order or authorization of, or
any declaration, filing or registration with, or any application or report to,
or any waiver by, or any other action (whether similar or dissimilar to any or
the foregoing) of, by or with, any Person, which is necessary in order to take
a specified action or actions in a specified manner and/or to achieve a
specified result.
8/24/94, 11:48 pm
1
<PAGE> 2
"CONTRACT" means any written contract, agreement, instrument, order,
arrangement, commitment or understanding of any nature, including, but not
limited to, sales orders, purchase orders, leases, subleases, data processing
agreements, maintenance agreements, license agreements, sublicense agreements,
loan agreements, promissory notes, security agreements, pledge agreements,
deeds, mortgages, guaranties, indemnities, warranties, consulting agreements,
employment agreements (which, for purposes of this Agreement, includes all
non-competition agreements of current LDI and CSI employees engaged in the
Business as well as all former LDI and CSI employees engaged in the Business
that have separated their employment within the past two years), sales
representative agreements, joint venture agreements, buy-sell agreements,
options or warrants, and any agency agreement entered into on or before the
Effective Date by MST or CSI, whether or not such agreement is in writing.
"CONTRACT RIGHT" means any right, power or remedy under any Contract,
including, but not limited to, rights to receive property or services or
otherwise derive benefits from the payment, satisfaction or performance of
another party's Obligations, rights to demand that another party accept
property or services or take any other actions, and rights to pursue or
exercise remedies or options.
"EFFECTIVE DATE" has the meaning specified in Section 6.1.
"EMPLOYEE BENEFIT PLAN" means (i) any employee benefit plan, as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or (ii) any other employee benefit plan or any employee
benefit or fringe benefit arrangement of any nature, including, but not limited
to, bonus plans, incentive compensation plans, severance pay plans, vacation
pay plans, deferred compensation plans, pension plans, profit sharing plans,
retirement plans, payroll savings plans, stock option plans, stock purchase
plans, stock ownership plans, hospitalization plans, medical plans, dental
plans, disability plans, sick pay plans, group insurance plans, death benefit
plans or employee welfare plans; but not including employment Contracts with
individual employees.
"ENCUMBRANCE" means any lien, security interest, pledge, mortgage,
easement, covenant, restriction, reservation, conditional sale, prior
assignment, or other encumbrance, claim, burden or charge of any nature.
"HAZARDOUS SUBSTANCES" means any substance, waste, contaminant,
pollutant or material that has been determined by any United States federal
government authority, or any state or local government authority having
jurisdiction over Seller's Real Property, to be capable of posing a risk of
injury or damage to health, safety, property or the environment, including, but
not limited to, (a) all substances, wastes, contaminants, pollutants and
materials defined or designated as hazardous, dangerous or toxic pursuant to
any Law of any state in which any of Seller's Real Property is located or any
United States Law, and (b) asbestos, polychlorinated biphenyls (PCB's) and
petroleum.
"INSURANCE POLICY" means any public liability, product liability,
general liability, comprehensive, property damage, vehicle, life, hospital,
medical, dental, disability, worker's compensation, key man, fidelity bond,
theft, forgery, errors and omissions, directors' and officers' liability, or
other insurance policy of any nature.
"INTANGIBLE" means any name, corporate name, fictitious name,
trademark, trademark application, service mark, service mark application, trade
name, brand name, product name,
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slogan, trade secret, know-how, patent, patent application, copyright,
copyright application, design, logo, formula, invention, product right or other
intangible asset of any nature, whether in use, under development or design, or
inactive.
"JUDGMENT" means any order, writ, injunction, citation, award, decree
or other judgment of any nature of any foreign, federal, state or local court,
government body, administrative agency, regulatory authority or arbitration
tribunal.
"LAW" means any provision of any foreign, federal, state or local law,
statute, ordinance charter, constitution, treaty, rule or regulation.
"MATERIAL CONSENTS" means written consents from (i) NCP, Ltd.
regarding the lease or sublease of the Solon, Ohio facility ("Solon Facility"),
and (ii) all lenders, lessors, vendors, and other Persons necessary to permit
the transactions contemplated by this Agreement to be consummated without
violating any of the Contracts included in the Assets to be assigned to Buyer
in accordance with this Agreement.
"OBLIGATION" means any debt, liability or obligation or any nature,
whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated,
accrued, absolute, fixed, contingent, ascertained, unascertained, known,
unknown or otherwise.
"PERMIT" means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature, granted, issued, approved or
allowed by any foreign, federal, state or local governmental body,
administrative agency or regulatory authority.
"PERSON" means any individual, sole proprietorship, joint venture,
partnership, corporation, association, cooperative, trust estate, governmental
body, administrative agency, regulatory authority or other entity of any
nature.
"PROCEEDING" means any demand, claim, suit, action, litigation,
investigation, arbitration, administrative hearing or other proceeding of any
nature.
"REAL PROPERTY" means any real estate, land, building, condominium,
townhouse, structure or other real property of any nature, all shares of stock
or other ownership interest in cooperative or condominium associations or other
forms of ownership interest through which interest in real estate may be held,
and all appurtenant and ancillary rights thereto, including but not limited to,
easements, covenants, water rights, sewer rights and utility rights.
"SOFTWARE" means any computer program, operating system, applications
system, firmware or software of any nature, whether operational, under
development or inactive, including all object codes, source codes, technical
manuals, user manuals and other documentation therefor, whether in
machine-readable form, programming language or any other language or symbols,
and whether stored, encoded, recorded or written on disk, tape, film memory
device, paper or other media of any nature.
"SPECIFIED LIABILITIES" has the meaning specified in Section 2.5.
"TANGIBLE PROPERTY" means any furniture, fixtures, leasehold
improvements, vehicles, office equipment, computer equipment, other equipment,
machinery, tools, forms, supplies or other tangible personal property of any
nature.
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"TAX" means (a) any foreign, federal, state or local income, earnings,
profits, gross receipts, franchise, capital stock, net worth, sales, use, value
added, occupancy, general property, real property, personal property,
intangible property, transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security or other tax of any nature, (b) any foreign,
federal, state or local organization fee, qualification fee, annual report fee,
filing fee, occupation fee, assessment, sewer rent or other fee or charge of
any nature, or (c) any deficiency, interest or penalty imposed with respect to
any of the above.
SECTION 2: SALE AND PURCHASE OF SELLER'S ASSETS USED IN THE BUSINESS AND
SPECIFIED LIABILITIES
2.1 SALE AND PURCHASE OF ASSETS. On the Closing Date, effective
as of the Effective Date, and subject to the other terms and conditions of this
Agreement, Seller hereby sells, transfers, assigns and conveys to Buyer, and
Buyer hereby purchases from Seller, all right, title and interest in and to the
Assets as defined in Section 2.2, and Seller hereby assigns to Buyer, and Buyer
hereby assumes the Specified Liabilities.
2.2 DEFINITION OF ASSETS. "Assets" means all of Seller's assets
relating to the Business, including, but not limited to, the following assets,
but excluding the Excluded Assets as defined in Section 2.3:
2.2.1 All of Seller's inventories of raw materials, work in
progress, supplies, finished products and merchandise used in the
Business (the "Inventory").
2.2.2 All of Seller's right and interest in the accounts
receivable (excluding any amounts due from Seller or any affiliate of
Seller) (the "Accounts Receivable") and any security held therefor.
2.2.3 All of Seller's Contract Rights relating to the
Business, including, but not limited to, customer Contracts, customer
files including credit files, Contracts with vendors and resellers and
distributor agreements and authorizations and transferable internal
use Software licenses, including those set forth on Schedule 2.2.3,
and contracts relating to employment and non-competition agreements.
2.2.4 All rights under all Permits granted or issued to
Seller relating to or for the benefit of the Business, to the extent
such rights are transferable.
2.2.5 All of Seller's right, title and interest to the
Intangibles used in the Business including, but not limited to,
telephone numbers, telephone directory listings and advertisements,
goodwill, lock boxes and concentration accounts (excluding any cash
balances therein) and the trade names: "ARCO", "American
Technologies", "MST Systems", "MST Distribution", "Opus Computer",
"LDI Computer Systems", "LDI Network Resources Group", "Caswell
Associates", and any variation thereof (the "Trade Names"). Seller
may utilize the Trade Names solely for the purpose of winding up.
Seller shall, as soon as practicable, after the Closing Date change
the name of CSI to a name not similar to the Trade Names.
2.2.6 All of Seller's customer, prospect and supplier lists
(PROVIDED that to the extent that any Person named on any such list is
also a customer, prospect or supplier of
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any of the other businesses of Seller, other than the Business, Seller
shall retain all of its rights pertaining to such Person with respect
to such other businesses), data bases and computer media (PROVIDED
that to the extent that any data bases or computer media relating to
the Business also relate to any of the other businesses of Seller,
other than the Business, Seller shall retain all of its rights
pertaining to such data bases and computer media with respect to such
other businesses), sales and marketing materials, correspondence and
files relating to the Business and Seller's personnel records and
related employment related agreements of the employees listed on
Exhibit 2.7.
2.2.7 All of Seller's claims, causes of action and other
legal rights and remedies, whether or not known as of the Effective
Date, relating to Seller's ownership of the Assets and/or the
operation of the Business, but excluding causes of action and other
legal rights and remedies (a) against Buyer with respect to the
transactions contemplated by this Agreement, or (b) relating
exclusively to Seller's assets not included in the Assets or to
Seller's liabilities not included in the Specified Liabilities.
2.2.8 The exclusive right to use the name LDI as part of
the Trade Names in the conduct of the Business for a period not to
exceed twelve months after the Effective Date. In connection
therewith, Buyer (a) will not take any action that might adversely
affect Seller's intangible property rights in the name "LDI" (alone or
in combination) or the value thereof, (b) will use its reasonable
efforts to replace, in due course during such twelve months, all
brochures, catalogs and other sales and promotional materials with a
name not including "LDI" and (c) will not hold itself or the Business
out as being a division or subsidiary of LDI.
2.2.9 The prepaid expenses, deposits and other items
described on Schedule 2.2.9 (the "Prepaid Expenses").
2.3 DEFINITION OF EXCLUDED ASSETS. "Excluded Assets" means (a)
all of Seller's assets relating to the Computer SuperStores, Rentals, Outlets,
Retail Services and Brokerage businesses, (b) the Tangible Property which is
the subject of the lease referenced in Section 2.4, (c) the Tangible Property
which is described in Schedule 2.3(c), and (d) the prepaid expenses, deposits
and other items described in Schedule 2.3(d).
2.4 LEASE. At the Closing Date, Buyer and LDI shall enter into a
lease of the Tangible Property of the Business in substantially the form
attached as Exhibit 2.4.
2.5 DEFINITION OF SPECIFIED LIABILITIES. "Specified Liabilities"
means:
2.5.1 Trade payables, other payables and accrued
liabilities, (excluding amounts due to Seller or any affiliate of
Seller and excluding the liabilities described in Schedule 2.5.1(a) as
described in Schedule 2.5.1(b) (the "Liabilities").
2.5.2 The liabilities of Seller under the Contracts
assigned to Buyer as a part of the Assets, but only to the extent such
liabilities arise or relate to the period after the Effective Date
under the terms of such Contracts and are not due to any breach or
default by Seller under any of such Contracts. The liabilities under
this subsection include, but are not limited to, the obligation of
Seller for future earn-out payments due under the Asset Acquisition
Agreements with American Technologies, Inc. and Caswell Associates,
Ltd.
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2.5.3 Notwithstanding the foregoing, Buyer shall not assume
any Liability arising or relating to the period prior to the Effective
Date for which Buyer was not given credit in the Report on Net Asset
Value as described in Section 3.1.2.
2.6 NO OTHER LIABILITIES. Notwithstanding any other provisions of
this Agreement, Buyer shall not purchase the Assets subject to, and Buyer shall
not in any manner assume or be liable or responsible for, any Obligations of
Seller other than the Specified Liabilities. Without limiting the generality
of the foregoing, Buyer shall not purchase the Assets subject to, nor shall
Buyer in any manner assume or be liable or responsible for, the following
Obligations or Encumbrances of Seller:
2.6.1 Any Obligation to any subsidiary or to any current or
former shareholder, director or controlling Person of Seller or any
subsidiary (or any of their respective predecessors), or to any other
Person affiliated with Seller or any of its subsidiaries (or any of
their respective predecessors) including, but not limited to, any
obligation for dividends declared but not paid and any intercompany
liabilities except such, if any, as are listed in Schedule 2.5.1(b).
2.6.2 Any Obligation for any Tax, including, but not
limited to, (a) any Tax payable by Seller or any subsidiary with
respect to Seller's business operations, or Seller's operation of the
Business on or before the Effective Date, (b) any Tax owed by Seller
or any subsidiary with respect to the ownership, possession, purchase,
lease, sale, disposition or use of any of Seller's assets, including
without limitation, the Assets, at any time on or before the Effective
Date, (c) any liability for deferred Taxes and, (d) any liability
associated with the Tax Abatement Agreement for the Solon Facility.
2.6.3 Any Obligation to any or all employees of Seller,
including, but not limited to, Obligations under Seller's Employee
Benefit Plans, and Obligations for severance pay and other separation
benefits.
2.6.4 Any Obligation of Seller that is incurred or arises
after the Effective Date, or that relates to any Proceeding or other
events that occur or circumstances that exist after the Effective
Date, except that the Buyer shall be responsible for all Obligations
that are incurred or arise after the Effective Date as a result of
Buyer's operation of the Business after the Effective Date.
2.6.5 Any Obligation that was or is incurred in connection
with the negotiation, execution or performance of this Agreement and
any other Contracts entered into between Seller and Buyer, or among
Seller, Buyer and other parties, in connection with the transactions
contemplated by this Agreement.
2.6.6 Any Obligation, the incurrence or existence of which
constitutes or will constitute a breach or failure of, or a default
under, any representation, warranty, covenant or other provision of
this Agreement, including, but not limited to, any Obligation, whether
or not known to Seller, that has not been disclosed to Buyer in
writing in this Agreement or the Exhibits and Schedules hereto.
2.6.7 Any Encumbrance on or affecting Seller's assets
including, without limitation, the Assets.
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2.6.8 Any Obligation arising in connection with or related
to Seller's infringement or alleged infringement of any Software or
intangible of any Person.
2.7 SELLER'S EMPLOYEES. Exhibit 2.7 is a list of employees of
Seller that will be offered employment by Buyer detailing (a) their titles or
responsibilities, and (b) their social security numbers. Such employment will
be on an "at will" basis. Buyer does not assume, and Seller shall be fully
responsible for the payment of, any severance or other benefits related to or
payable upon the separation of any of its employees who are not offered
employment by Buyer and any employees offered employment by Buyer who fail to
accept such employment. For a period of ninety (90) days after the Effective
Date, Seller shall cooperate with Buyer's efforts to employ and retain any such
employees. Within thirty (30) days after the Effective Date, Seller shall
provide to Buyer copies of the personnel records of the Business employees
hired by Buyer.
SECTION 3: PURCHASE PRICE AND OTHER FINANCIAL MATTERS
3.1 COMPUTATION OF PURCHASE PRICE. The total purchase price for
the Assets (the "Purchase Price") shall be equal to the sum of (a) the Net
Asset Value (as hereinafter defined) and (b) the sum of $2,500,000.
3.1.1 The term "Net Asset Value", as used in this
Agreement, shall mean the value of the following items as shown on the
Report on Net Asset Value as of the Effective Date:
3.1.1.1 The Accounts Receivable, net of any related
allowance for doubtful accounts required to reduce the value
to net realizable value whether recorded in the accounts of
CSI and MST or elsewhere in the accounts of Seller; plus
3.1.1.2 The Inventory, valued at the First-in,
First-out weighted average cost, net of any valuation reserves
required to reduce the value to the lower of cost or market;
plus
3.1.1.3 The Prepaid Expenses, valued at the amount
of their expected future cash outflow savings; less,
3.1.1.4 Liabilities assumed as described in Section
2.5.
3.1.2 The term "Report on Net Asset Value", as used in
this Agreement, shall mean the report containing the calculation of
the Net Asset Value as agreed to by both parties.
3.2 PAYMENT OF PURCHASE PRICE. The purchase price shall be paid
in the following manner:
3.2.1 At the Closing, Buyer will pay to Seller, on account
of the Purchase Price, the sum of $500,000 and Seller shall authorize
the release to Buyer of 40,000 shares of LDI stock held on deposit.
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3.2.2 At the Closing, Buyer will execute and deliver to
Seller, on account of the Purchase Price, a promissory note in the
principal amount of $2,000,000 in substantially the form attached
hereto as Exhibit 3.2.2(a) (the "Subordinated Note"). The
Subordinated Note will be guaranteed by Michael R. Kennedy (the
"Shareholder") as provided in a Guaranty in substantially the form
attached hereto as Exhibit 3.2.2(b) (the "Guaranty"). The obligations
of Shareholder under the Guaranty will be secured as provided in the
Pledge Agreement in substantially the form attached hereto as Exhibit
3.2.2(c) (the "Pledge Agreement").
3.2.3 At the Closing, Buyer will also execute and deliver
to Seller, on account of the Purchase Price, two promissory notes,
each in the principal amount of $2,500,000, in substantially the forms
attached hereto as Exhibits 3.2.3(a) and 3.2.3(b) (the "Section 3.2.3
Notes"). The Section 3.2.3 Notes, as well as all amounts payable by
Buyer pursuant to Sections 3.2.4, 3.2.5 and 3.2.6, will be guaranteed
by the Shareholder pursuant to the Guaranty, and such obligations will
be secured as provided in the Security Agreement substantially in the
form attached hereto as Exhibit 3.2.3(c) (the "Security Agreement").
3.2.4 In the event that the Report on Net Asset Value is
not agreed to by August 31, 1994, Buyer will pay to Seller on August
31, 1994, on account of the Purchase Price, the lesser of (a)
$2,000,000 or (b) Seller's position as to the excess, if any, of the
Net Asset Value over $5,000,000 .on August 31, 1994.
3.2.5 In the event that the Report on Net Asset Value is
agreed to by August 31, 1994, Buyer will pay to Seller on August 31,
1994, on account of the Purchase Price, the lesser of (a) $2,000,000
or (b) the excess, if any, of the Net Asset Value over $5,000,000.
3.2.6 Settlement of the final Purchase Price will be made
on the date (the "Settlement Date") which is the later of (a) five (5)
business days following the agreement by Buyer and Seller on the
Report on Net Asset Value or (b) September 30, 1994. On the
Settlement Date, if the Net Asset Value exceeds the sum of the amounts
paid by Buyer under the Section 3.2.3 Notes, Section 3.2.4 and 3.2.5,
then Buyer shall pay to Seller, on account of the Purchase Price, an
amount equal to such excess, and if the sum of such amounts exceeds
the Net Asset Value, then Seller shall refund to Buyer, on account of
the Purchase Price, an amount equal to such excess. Notwithstanding
the foregoing provisions of this Section 3.2.6, the aggregate amount
payable under Section 3.2.3 through 3.2.6 shall not exceed
$10,000,000.
3.3 CURRENCY AND METHOD OF PAYMENT. All dollar amounts stated in
this Agreement are stated in United States currency, and all payments required
under this Agreement shall be paid in United States currency. All payments
required under this Agreement shall be made by ordinary check, except as
otherwise provided for.
3.4 ALLOCATION OF PURCHASE PRICE. Buyer and Seller acknowledge
that the Purchase Price will be paid to LDI, but will be for the respective
accounts of LDI and CSI as their interests may appear. As soon as practicable
after agreement on the Report on Net Asset Value, Buyer
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will advise Seller of the allocation of the Purchase Price among the assets
acquired. Both Buyer and Seller shall prepare and submit all tax returns
consistent therewith.
SECTION 4: REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
Knowing that the Buyer is relying thereon, Seller represents and
warrants to Buyer, and covenants with the Buyer, as follows:
4.1 CORPORATE ORGANIZATION. LDI is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
CSI is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Ohio. Seller possesses the full corporate power
and authority to own its assets, conduct its business as and where presently
conducted, and enter into and perform this Agreement. As to LDI, Seller is
duly qualified as a foreign corporation in Ohio; As to CSI, Seller is duly
qualified as a foreign corporation in Pennsylvania and Texas and Seller, with
respect to the Business, is not required to be qualified as a foreign
corporation in any other jurisdiction except where the failure to be so
qualified is not and would not be material to the Business of the Seller
generally.
4.2 EFFECT OF AGREEMENT. The execution, delivery and performance
of this Agreement by Seller, and the consummation by Seller of the transactions
contemplated hereby, (a) have been duly authorized by all necessary corporate
actions by Seller's board of directors, (b) do not constitute a breach or
violation of, or a default under, Seller's Certificate of Incorporation or
bylaws or, any Contract to which Seller is a party or by which Seller is bound,
(c) do not constitute a violation of any Law applicable to Seller or to the
business or assets of the Business, (d) do not require the Consent of any
Person except for the Material Consents, and (e) will not result in the
creation of any Encumbrance upon, or give to any other Person any interest in,
any of the business or assets of the Business. This Agreement constitutes the
valid and legally binding agreement of Seller, enforceable against Seller in
accordance with its terms.
4.3 FINANCIAL AND CORPORATE RECORDS. Seller has properly prepared
and maintained files, records and billing systems of the Business in form and
substance consistent with commercially reasonable practices for similar
businesses. Seller has heretofore delivered to Buyer the unaudited accrual
basis balance sheet of the Business as of January 31, 1994, and unaudited
accrual basis statement of income for the year then ended. The balance sheet
described in this Section presents fairly in all material respects the
financial position of the Business as of the date thereof, and the income
statement described in this Section presents fairly in all material respects
the results of operations of the Business for the period it purports to cover,
all in conformity with generally accepted accounting principles applied on a
basis consistent with that of prior periods except for the absence of
footnotes. The Report oncalculation of the Net Asset Value will accurately
presents the Net Asset Value on the basis described in Section 3.1.
4.4 COMPLIANCE WITH LAW. The operations of the Business, the
conduct of the Business as and where such business has been or presently is
conducted, and the assets of Seller used in the Business and their uses comply
in all material respects with all Laws applicable to the Business and its
operations. Seller has obtained and holds all Permits required for the lawful
operation of the Business as and where such business is presently conducted.
All Permits held by the Seller with respect to the Business are listed on
Schedule 4.4, and copies of such Permits have been made available to Buyer.
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4.5 TITLE. Seller has good and marketable title to the Assets,
and will transfer the same to Buyer free and clear of any Encumbrances.
4.6 ACCURACY OF INFORMATION. No representation or warranty by the
Seller contained in this Agreement or in any Schedule hereto, or in any other
document or certificate delivered to Buyer in connection with the transactions
contemplated hereby, contains, or will contain as of the date such
representation or warranty is made or such document is or will be furnished,
any untrue statement of a material fact, or omits, or will omit to state as of
the date such representation is made or document is furnished, any material
fact which is necessary to make the statements contained therein not
misleading.
4.7 REAL PROPERTY. Except for the Solon Facility and the three
Texas locations and the Penn Center site in Pennsylvania there is no Real
Property owned or leased by Seller used in the Business. To the best of
Seller's knowledge, none of the Real Property, nor the occupancy, maintenance
or use thereof by Seller, is in violation of any Contract or Law and no notice
from any lessor, governmental body or other Person has been received by Seller
claiming any violation of any Contract or Law. Seller has not placed or caused
to be placed, and Seller has no knowledge or belief that there were or are any
Hazardous Substances on or under any of the Real Property.
4.8 SOFTWARE AND INTANGIBLES. Set forth on Schedule 4.8 is a list
and description of all Software (other than applications software and operating
systems software provided by third parties that is generally available to the
public) and Intangibles used in the Business. As of the Effective Date, Buyer
will have the right to use such Software in the operation of the Business
subject to the receipt of any necessary Consents. The Business' assets,
business and operations do not infringe upon any Software or Intangible of any
Person, and the software Intangibles are free of any adverse claim or lien.
4.9 CONTRACTS. Seller represents and warrants that said Contracts
on Schedule 2.2.3 are legally binding and enforceable in accordance with their
terms, that no material breach thereof by Seller or, to the best knowledge of
Seller, any other party thereto has occurred, and that there exists thereunder
no default or event of default by Seller or, to the best knowledge of Seller,
any other party thereto.
4.10 EMPLOYEES AND INDEPENDENT CONTRACTORS. No non-employee sales
representatives or independent contractors under contract are engaged by Seller
with respect to the Business. Except as limited by any employment Contracts
listed on Schedule 2.7 and except for any limitations of general application
which may be imposed under applicable employment Laws, Seller has the right to
terminate the employment of each of its employees involved in the Business at
will and without incurring any penalty or liability. Seller is, to the best of
its knowledge in compliance in all material respects with all Laws respecting
employment practices relating to its employees in the Business. Seller has
never been a party to or bound by any union or collective bargaining Contract
covering its employees involved in the Business, nor is any such Contract
currently in effect or being negotiated by or on behalf of Seller.
4.11 TAXES. Seller has properly withheld from payments to all
employees, contractors, salesmen, agents, representatives, vendors and other
Persons involved in the Business all amounts required by Law to be withheld,
and Seller has timely filed all informational returns and reports required to
be filed by it with respect to such withholding. No audit or other Proceeding
is pending or threatened against Seller with respect to the Business,
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and no notice of deficiency or adjustment, has been received by Seller, by or
from any governmental taxing authority, with respect to any Taxes.
4.12 PROCEEDINGS AND JUDGMENTS. No Proceeding involving or
relating to the Business is currently pending, nor to the best knowledge of
Seller has been threatened. No Judgment involving or relating to the Business
or Assets is currently outstanding. No breach of contract, breach of warranty,
tort, negligence, infringement, product liability, discrimination, wrongful
discharge or other material claim of any nature is pending by or against Seller
involving or relating to the Business or the Assets.
4.13 BROKERAGE FEES. No Person acting on behalf of Seller is or
shall be entitled to any brokerage or finder's fee in connection with the
transactions contemplated by this Agreement.
4.14 INSURANCE. All of Seller's Insurance Policies, other than
Fiduciary or Directors and Officers coverage relating to the Business or the
Assets are or were on an "occurrence" rather than a "claims made" basis, and
Buyer will not be responsible for any claims pending under any of such
Insurance Policies at the Closing Date.
SECTION 5: REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Knowing that Seller is relying thereon, Buyer represents and warrants
to Seller, and covenants with Seller, as follows:
5.1 CORPORATE ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Ohio. Buyer possesses the full corporate power and authority to own its
assets, conduct its business as and where presently conducted, and enter into
and perform this Agreement. Buyer is duly qualified as a corporation in the
State of Ohio.
5.2 EFFECT OF AGREEMENT. The execution, delivery and performance
of this Agreement by Buyer, and the consummation by Buyer of the transactions
contemplated hereby, (a) have been, or shall have been by the Closing Date,
duly authorized by all necessary corporate actions by Buyer's shareholder(s)
and board of directors, (b) do not constitute a breach or violation of, or a
default under, Buyer's Articles of Incorporation or Code of Regulations or any
Contract to which Buyer is a party or by which Buyer is bound, (c) do not
constitute a violation of any Law applicable to Buyer, and (d) do not require
the Consent of any Person. This Agreement constitutes the valid and legally
binding agreement of Buyer, enforceable against Buyer in accordance with its
terms.
5.3 BROKERAGE FEES. No Person acting on behalf of Buyer is or
shall be entitled to any brokerage or finder's fee in connection with the
transactions contemplated by this Agreement.
5.4 SPECIFIED LIABILITIES. From and after the Effective Date,
Buyer shall perform the Specified Liabilities in the ordinary course of
business. Anything in this Section 5.4 to the contrary notwithstanding, Buyer
shall not be liable to Seller for any failure to perform the Specified
Liabilities if prevented from doing so by a cause or causes beyond its control,
including without limitation, acts of God or the public enemy, fires, floods,
storms, earthquakes,
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riots, war, restraints of government or other cause or causes which would not
with reasonable diligence be controlled or prevented by Buyer.
SECTION 6: CLOSING
6.1 CLOSING. The closing of the sale of the Assets by Seller to
Buyer and the other transactions contemplated by this Agreement ("Closing")
shall be held at 10:00 A.M. local time on May 31, 1994 or such other time and
date as is agreed upon by Seller and Buyer ("Closing Date"). The Closing shall
be held at Seller's offices in Solon, Ohio or such other location as is agreed
upon by Seller and Buyer. Except to the extent prohibited by Law, and
regardless of the actual Closing date, the Closing shall be considered
effective as of the close of business on May 31, 1994 or such other effective
date as is agreed upon in writing by Seller and Buyer ("Effective Date").
6.2 OBLIGATIONS OF SELLER AT CLOSING. At the Closing, Seller
shall deliver to Buyer the following:
6.2.1 ASSETS. Ownership and control of the Business, all
of the Assets and the Solon, the three Texas, and the Penn Center
Facilities, including, but not limited to, all applicable keys, access
cards and other entry devices.
6.2.2 DOCUMENTS OF TRANSFER. Such bills of sale,
assignments, endorsements, affidavits, and other instruments and
documents of sale, transfer, assignment and conveyance as Buyer may
reasonably require, in order to lawfully and effectively sell,
transfer, assign and convey to Buyer all right, title and interest in
and to all of the Assets, in form acceptable to Seller and Buyer,
dated as of the Effective Date, and duly executed by Seller; and the
original copies of all of the Material Consents theretofore obtained.
6.2.3 RESOLUTIONS. Copies of the resolutions duly adopted
by Seller's board of directors authorizing Seller to enter into and
perform this Agreement, certified by proper officers as in full force
and effect on and as of the Effective Date.
6.2.4 OTHER AGREEMENTS. (a) A Lease Agreement for the
Solon Facility, in the form attached hereto as Exhibit 6.2.4(a), by
LDI Computer Systems, Inc. and/or by the owner, NCP Ltd. duly executed
by lessor. (b) A Personal Computer Sourcing Agreement by and between
Seller and Buyer with mutually agreeable terms substantially in the
form set forth on Exhibit 6.2.4(b). (c) An Agreement to Source
Maintenance Services by and between Seller and Buyer with terms
substantially in the form set forth in Exhibit 6.2.4(c). (d) An
Agreement concerningterms under which a A Shared Services Agreement
will be entered into restrictions placed upon Seller's right to
provide networking and related services by and between Seller and
Buyer with terms substantially in the form set forth in Exhibit
6.2.4(d). (e) An Agency Agreement providing Buyer with the right to
be the marketing agent for Seller with respect to leasing
transactions, with terms substantially as set forth in Exhibit
6.2.4(e).
6.2.5 OTHER DOCUMENTS. All other agreements, certificates,
instruments and documents reasonably requested by Buyer in order to
fully consummate the transactions contemplated by this Agreement and
carry out the purposes and intent of this Agreement.
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6.2.6 LEGAL OPINION. Seller shall provide Buyer with an
opinion of counsel substantially as set forth on Schedule 6.2.6.
6.2.7 INCUMBENCY CERTIFICATE. A certificate, dated the
Effective Date, executed by the Secretary or Assistant Secretary of
Seller, certifying the names, titles and signatures of all the
Seller's officers who execute this Agreement and other documents on
behalf of Seller, and the authority of such officers to do so, in form
and substance acceptable to Buyer.
6.3 OBLIGATIONS OF BUYER AT CLOSING. At the Closing,
Buyer shall deliver to Seller the following:
6.3.1 RESOLUTIONS. Copies of the resolutions duly adopted
by the shareholder(s) and the board of directors of Buyer, authorizing
Buyer to enter into and perform this Agreement, certified by proper
officers as in full force and effect on and as of the Effective Date.
6.3.2 INCUMBENCY CERTIFICATE. A certificate, dated the
Effective Date, executed by the Secretary or Assistant Secretary of
Buyer, certifying the names, titles and signatures of all of Buyer's
officers who execute this Agreement and other documents on behalf of
Buyer, and the authority of such officers to do so, in form and
substance acceptable to Seller.
6.3.3 OTHER AGREEMENTS. Every agreement described in
Section 6.2.4 duly executed by Buyer.
6.3.4 SEVERANCE WAIVERS. An agreement, in form and
substance satisfactory to Seller, from each of the employees listed on
Exhibit 2.7 who would otherwise be entitled to severance payments of
any kind from Seller upon termination of employment, stating that such
employee agrees to waive all such payments from Seller.
6.3.5 OTHER DOCUMENTS. All other agreements, certificates,
instruments and documents reasonably requested by Seller in order to
fully consummate the transactions contemplated by this Agreement and
carry out the purposes and intent of this Agreement.
6.3.6 BUYER'S OPINION OF COUNSEL. Buyer shall provide
Seller with an Opinion of Counsel substantially as set forth on
Schedule 6.3.6.
6.3.7 SECTION 3 DOCUMENTS. The Notes, the Guaranty, the
Pledge Agreement and the Security Agreement referred to in Section 3,
duly executed by all necessary parties.
SECTION 7: CERTAIN OBLIGATIONS OF SELLER AND BUYER AFTER CLOSING
7.1 COOPERATION WITH BUYER. From and after the Effective Date,
(a) Seller shall fully cooperate to place Buyer in full possession and
enjoyment of all of the Assets and to transfer to Buyer the full control and
benefits of the Business, including without limitation using its reasonable
efforts to obtain all Material Consents; (b) Seller shall not undertake any
action, directly or indirectly, alone or together with any other Person, which
obstructs or impairs the
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smooth assumption by Buyer of the Business; and (c) all correspondence,
papers, documents and similar items and materials received by Seller relating
to the Assets, or otherwise relating to the continuing conduct of the Business,
shall be immediately forwarded to Buyer.
7.2 FURTHER ASSURANCES. At any time and from time to time after
the date of this Agreement, at Buyer's request and expense, and without further
consideration, Seller shall promptly execute and deliver all such further
agreements, certificates, instruments and documents, and perform such further
actions, as Buyer may reasonably request in order to fully consummate the
transactions contemplated hereby and carry out the purposes and intent of this
Agreement. Without limiting the generality of the foregoing, Seller shall
timely file all Tax returns and reports required to be filed with respect to
the assets, business and operations of the Business for all periods ending on
or before the Effective Date.
7.3 NONDISCLOSURE. At all times after the Effective Date, except
with Buyer's express prior written consent, Seller shall not, directly or
indirectly (through subsidiaries or affiliates), communicate, disclose or
divulge to any Person, or use for the benefit of any Person, any confidential
or proprietary knowledge or information, no matter when or how acquired,
concerning the Assets or the conduct and details of the Business, including,
but not limited to, (a) the identity of customers, prospects and suppliers, (b)
names, addresses and telephone numbers of individual contacts at customers and
prospects, (c) fees, renewal dates, and other details of customer contracts and
proposals, (d) pricing policies, marketing strategies, product strategies,
technical know-how, trade secrets, and methods of operations, (e) consulting
and educational manuals, plans, and other materials, (f) software manuals,
security systems, control systems, and equipment designs, (g) software designs
and concepts, (h) budgets and other nonpublic financial information, and (i)
expansion plans, management policies, and other business strategies and
policies; PROVIDED, HOWEVER, that Seller may use the knowledge or information
described in clauses a), (b) and (d) above in its business operations provided
that such use does not otherwise violate the provisions of Section 7.4, and
PROVIDED FURTHER, that Seller may disclose the transactions contemplated by
this Agreement as required by generally accepted accounting principles in its
consolidated financial statements or as required by law or by SEC, NASD, or
similar regulations. For purposes of this Section 7.3, confidential
information shall not include any information that is now known by the general
public or becomes known by the general public other than as a result of any
improper act or omission of Seller.
7.4 SELLER NONCOMPETITION. Seller acknowledges that the sale of
computers and software and related equipment, and networking and other services
businesses to be conducted by Buyer through the Business is highly competitive,
and that the services and products involved are complex and sophisticated,
require substantial and continuous expenditures of money and the time of
skilled experts to develop, market and support, and are marketed on a worldwide
basis. Accordingly, for a period of twenty-four months after the Effective
Date, except with Buyer's express prior written consent, Seller shall not,
directly or indirectly, in any capacity, for the benefit of any Person, at any
location worldwide:
7.4.1 Engage in the business of reselling (the "Restricted
Reselling"), new personal computers and related equipment and
software, wide area and local area network connectivity products (the
"Restricted Products"). Specifically, this restriction includes, but
is not limited to, maintaining a reseller authorization of any kind
relating to the saleof the Restricted Products.
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7.4.2 Engage in the business of selling, providing or
offering to provide any networking or related services, including, but
not limited to, help desk services, under any circumstances to the
accounts set forth on Schedule 7.4.2 (the "Restricted Services").
7.4.3 Engage in the sale of the Restricted Products to end
users and resellers within the territory described in Schedule 7.4.3
except as specified therein.
7.4.4 Establish, own, finance, manage, operate or control,
or participate in the establishment, ownership, financing, management,
operation or control of, any Person that conducts a business which, if
engaged in by Seller, would violate the provisions of Section 7.4.1,
7.4.2, or 7.4.3.
7.4.5 Communicate with or solicit any Person who is or
during which period becomes a customer, prospect or supplier of Buyer
in any manner which interferes or might interfere with such
relationship between such Person and the Business as it relates to the
Restricted Reselling, the Restricted Products and/or the Restricted
Services, or in an effort to obtain such Person as a customer,
prospect or supplier of any Person that conducts a business
competitive with or similar to all or any material part of the
Business as it relates to the Restricted Reselling, the Restricted
Products and/or the Restricted Services.
7.4.6 Communicate with or solicit any Person who is or
during which period becomes an employee, salesman, agent, consultant
or representative of Buyer in any manner which interferes or might
interfere with such relationship between such Person and the Business,
or in an effort to obtain such Person as an employee, salesman, agent,
consultant or representative of any Person that conducts a business
competitive with or similar to all or any material part of the
Business. In the event a network engineer retained in any capacity by
Buyer separates his or her relationship with Buyer, then Seller shall
be prohibited from soliciting or hiring such person, until the earlier
of one year thereafter or twenty-four months after the Effective Date,
either directly or indirectly. As it relates to employees, salesmen,
agents, consultants or representatives of Seller, Buyer agrees to
refrain from soliciting and hiring, either directly or indirectly, any
such Person for a period of 90 days from the Effective Date. In the
event Buyer retains the services of any Person who did or would
receive from Seller severance pay or other termination benefits in
excess of three months' salary, then Buyer agrees to obtain a waiver
for any remaining severance pay or shall reimburse Seller for any
severance payments remaining at the date of hire of such Person by
Buyer. Both parties acknowledge that certain employees of the other
party are subject to non-competition agreements and that neither the
provisions of this Section 7.4.6 nor the hiring of any such Person by
either party (whether or not permitted by this Section) will affect
such Person's obligations under such non-competition agreement. The
restrictive covenants in this Section 7.4.6 are hereinafter referred
to as the "Solicitation Covenants". The provisions of this Section
7.4.6 shall not apply to the solicitation or employment by Buyer of
the employees listed in Schedule 2.7.
7.4.7 Seller Expressly acknowledges that (a) the
restrictive covenants of this Section 7.4 ("Seller Covenants") are a
material part of the consideration bargained for by Buyer, and (b)
without the agreement of Seller to be bound by the Covenants, Buyer
would not have agreed to enter into this Agreement and consummate the
transactions
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contemplated hereby and (c) the Seller Covenants shall bind any
of Seller's successors or, where all or substantially all of Seller's
assets are purchased, its assigns.
7.4.8 The acquisition by Seller of the stock or assets of a
Person which conducts a business that competes with the Business and
would otherwise violate the Seller Covenants shall not constitute a
breach or violation of the Seller Covenants, provided that (a) such
competing business is not the principal part of the acquired Person's
business and was not the reason for the acquisition, (b) Seller sells
or otherwise disposes of such competing business, simultaneously with
or as soon as practicable after the closing of the acquisition, (c)
Seller gives notice of the acquisition to Buyer promptly after a
public announcement of the acquisition is made, and (d) if feasible
under the circumstances, as determined by Seller reasonably and in
good faith, Seller allows Buyer a reasonable opportunitoppotunity to
offer to acquire such competing business.
7.5 BUYER NONCOMPETITION. For a period of twenty-four months
after the Effective Date, except with Seller's express prior written consent,
Buyer shall not, directly or indirectly in any capacity, for the benefit of any
Person, at any location worldwide, become a reseller of IBM Terminals, Pennant
Printers, IPL Memory or EMC Memory (except as the same relate to the Restricted
Products and peripherals for RISC based products). The restricted covenants in
this Section 7.5 are hereinafter referred to as "Buyer Covenants".
7.6 ENFORCEMENT. Both parties expressly acknowledge that any
breach by it (the "breaching party") of any of the Seller Covenants, the Buyer
Covenants or the Solicitation Covenants (together, the "Covenants") will result
in irreparable injury to the other party (the "non-breaching party") for which
money damages could not adequately compensate. If there is such a breach, the
non-breaching party shall be entitled, in addition to all other rights and
remedies it may have at law or in equity, to have an injunction issued by any
competent court enjoining and restraining the breaching party and all other
Persons involved therein from continuing such breach. The existence of any
claim or cause of action which the breaching party or any such other Person may
have against the non-breaching party shall not constitute a defense or bar to
the enforcement of any of the Covenants. If the non-breaching party must
resort to litigation to enforce any of the Covenants that has a fixed term,
then such term shall be extended for a period of time equal to the period
during which a breach of such Covenant was occurring, beginning on the date of
a final court order (without further right of appeal) holding that such a
breach occurred or, if later, the last day of the original fixed term of such
Covenant.
7.7 SCOPE. If any portion of any Covenant or its application is
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable
without regard thereto. If any of the Covenants is determined to be
unenforceable due to its scope, duration, geographical area or similar factor,
then the court making such determination shall have the power to reduce or
limit such scope, duration, area or other factor, and such Covenant shall then
be enforceable in its reduced or limited form.
SECTION 8: INDEMNIFICATION AND SETOFF
8.1 INDEMNIFICATION OBLIGATIONS OF SELLER. From and after the
Closing Date, Seller shall indemnify and hold harmless Buyer, and its
successors and assigns, from and against any and all Proceedings, Judgments,
Obligations, losses, damages, deficiencies, settlements, assessments, charges,
costs and expenses (including, but not limited to, reasonable attorneys'
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fees, investigation expenses, court costs, interest and penalties) arising out
of or in connection with, or caused by, directly or indirectly, any or all of
the following:
8.1.1 Any misrepresentation, breach or failure of any
warranty or representation made by Seller in this Agreement.
8.1.2 Any failure or refusal by Seller to satisfy or
perform any covenant, term or condition of this Agreement required to
be satisfied or performed by it.
8.1.3 Any Obligation of Seller other than the Specified
Liabilities, including, but not limited to, (a) the Obligations
specifically described in Section 2.6; or (b) any Obligation that may
be imposed directly upon Buyer as a result of the failure by Seller to
comply with any so-called "bulk sales law" or "bulk transfers law" of
any jurisdiction that may be applicable to the transactions
contemplated by this Agreement (it being understood that Buyer waives
such compliance by Seller).
8.1.4 Any Obligation of Seller for any Tax or under any
Employee Benefit Plan of Seller imposed directly upon Buyer (or the
consolidated group of which Buyer is a member) as a result of any Law
under which Buyer may have successor liability for any Tax or under
any Employee Benefit Plan of Seller.
8.1.5 Any Proceeding against Buyer by or on behalf of any
employee of Seller involved in the Business who is not hired by
Buyer.
8.1.6 Any proceeding against Buyer by any Person (other
than Seller) based on any act or omission occurring prior to the
Effective Date relating to or arising in connection with Seller's
operation of the Business.
8.2 INDEMNIFICATION OBLIGATIONS OF BUYER. From and after the
Closing Date, Buyer shall indemnify and hold harmless Seller, and its
successors and assigns, from and against any and all Proceedings, Judgments,
Obligations, losses, damages, deficiencies, settlements, assessments, charges,
costs and expenses (including , but not limited to, reasonable attorney's fees,
investigation expenses, court costs, interest and penalties) arising out of or
in connection with, or caused by, directly or indirectly, any or all of the
following:
8.2.1 Any misrepresentation, breach or failure of any
warranty or representation made by Buyer in this Agreement.
8.2.2 Any failure or refusal by Buyer to satisfy or perform
any covenant, term or condition of this Agreement required to be
satisfied or performed by it.
8.2.3 The payment or nonpayment and performance or
nonperformance by Buyer of the Specified Liabilities.
8.2.4 Any Proceeding against Seller by any Person (other
than Buyer) based on any act or omission occurring after the Effective
Date relating to or arising in connection with Buyer's operation of
the Business.
8.3 INDEMNIFICATION NOTICE. With respect to each event,
occurrence or matter ("Indemnification Matter") as to which Buyer on the one
hand, or Seller on the other hand
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(referred to as the "Indemnitee"), is entitled to indemnification from the
other (referred to as the "Indemnitor") under this Section 8, within ten days
after the Indemnitee receives any written documents underlying the
Indemnification Matter, or, if the Indemnification Matter does not involve a
third party action, suit, claim or demand, promptly after the Indemnitee first
has actual knowledge of the Indemnification Matter, the Indemnitee shall give
notice to the Indemnitor of the nature of the Indemnification Matter and the
amount demanded or claimed in connection therewith ("Indemnification Notice").
8.4 DEFENSE OF INDEMNIFICATION MATTERS. If an Indemnification
Matter involves a third party action, suit, claim or demand, then, upon receipt
of the Indemnification Notice, the Indemnitor shall, at its expense and through
counsel of its choice, promptly assume and have sole control of the litigation,
defense or settlement of the Indemnification Matter (referred to as the
"Defense"), except that:
8.4.1 The Indemnitee may, at its option and expense and
through counsel of its choice, participate in (but not control) the
Defense;
8.4.2 If the Indemnitee reasonably believes that the
handling of the Defense by the Indemnitor may have a material adverse
affect on the Indemnitee's business or its relationship with any
customer, supplier, employee, contractor, salesman, agent or
representative, then the Indemnitee may, at its option and expense and
through counsel of its choice, assume control of the Defense; PROVIDED
that the Indemnitor shall continue to be obligated to indemnify the
Indemnitee with respect thereto and shall be entitled to participate
in the Defense at its expense and through counsel of its choice; and
PROVIDED FURTHER, that in such event the Indemnitee shall not consent
to any Judgment or agree to any settlement without the
Indemnitor'see's prior written consent, which consent shall not be
unreasonably withheld;
8.4.3 The Indemnitor shall not consent to any Judgment or
agree to any settlement without the Indemnitee's prior written
consent, which consent shall not be unreasonably withheld;
8.4.4 If the Indemnitor does not promptly assume control
over the Defense or, after doing so, does not continue to prosecute
the Defense in good faith, the Indemnitee may, at its option and
through counsel of its choice, but at the Indemnitor's expense,
assume control over the Defense; provided that the Indemnitor shall
continue to be obligated to indemnify the Indemnitee with respect
thereto; and
8.4.5 In any event, the Indemnitor and the Indemnitee shall
fully cooperate with each other in connection with the Defense,
including, but not limited to, furnishing all available documentary or
other evidence as is reasonably requested by the other.
8.5 INDEMNIFICATION PAYMENTS. All amounts owed by the Indemnitor
to the Indemnitee (if any) shall be paid in full within three business days
after a final settlement or agreement as to the amount owed is reached, or
after a final Judgment (without further right of appeal) determining the amount
owed is rendered or after a final settlement or agreement as to the amount owed
is executed.
8.6 SETOFF. In addition to all other rights and remedies that the
Indemnitee may have, the Indemnitee shall have the right to set off, against
any monies due to the Indemnitor
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(whether under this Agreement or otherwise), any sums for which the Indemnitee
is entitled to payment of indemnification in accordance with Section 8.5 or any
other sums which the Indemnitor may owe to the Indemnitee (whether under this
Agreement or otherwise). The Indemnitee's rights to Indemnification under this
Section 8 shall under no circumstances be in any manner limited by this right
of setoff. Notwithstanding anything herein to the contrary, Buyer shall not
have the right to setoff against any amounts payable under the lease described
in Section 2.4.
SECTION 9: OTHER PROVISIONS
9.1 PUBLICITY. All voluntary public announcements concerning the
transactions contemplated by this Agreement shall be mutually acceptable to
both Buyer and Seller.
9.2 EXPENSES. Each party shall pay all of the costs and expenses
incurred by it in negotiating and preparing this Agreement (and all other
agreements, certificates, instruments and documents executed in connection
herewith), in performing its obligations under this Agreement, and in otherwise
consummating the transactions contemplated by this Agreement.
9.3 NOTICES. All notices, consents or other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when delivered personally, (b)
three business days after being mailed by first class certified mail, return
receipt requested, postage prepaid, or (c) one business day after being sent by
a reputable overnight delivery service, postage or delivery charges prepaid, to
the parties at their respective addresses stated on the first page of this
Agreement, in the case of the Seller to the attention of the General Counsel
with a copy to 4770 Hinckley Industrial Parkway, Cleveland, Ohio 44109, Attn:
General Counsel and in the case of the Buyer to the attention of the President.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding sentence. Either
party may change its address for notices by giving notice of the new address to
the other party in accordance with this Section 9.3, except that any such
change of address notice shall not be effective unless and until received.
9.4 SURVIVAL OF REPRESENTATIONS. All representations, warranties
and covenants made in or pursuant to this Agreement shall survive the date
hereof, the Effective Date and the consummation of the transactions
contemplated hereby.
9.5 ENTIRE UNDERSTANDING. This Agreement, together with the
Exhibits hereto, states the entire understanding among the parties with respect
to the subject matter hereof, and supersedes all prior oral and written
communications and agreements, and all contemporaneous oral communications and
agreements, with respect to the subject matter hereof. No amendment or
modification of this Agreement shall be effective unless in writing and signed
by Seller and Buyer. This Agreement may not be terminated except in a written
document signed by Buyer and Seller.
9.6 PARTIES IN INTEREST. This Agreement shall bind, benefit, and
be enforceable by and against each party hereto and its successors and assigns.
No party shall in any manner assign any of its rights or obligations under this
Agreement without the express prior written consent of the other party, which
consent shall not be unreasonably withheld.
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9.7 NO WAIVERS. No waiver with respect to this Agreement shall be
enforceable unless in writing and signed by the party against whom enforcement
is sought. Except as otherwise expressly provided herein, no failure to
exercise, delay in exercising, or single or partial exercise of any right,
power or remedy by any party, and no course of dealing between or among any of
the parties, shall constitute a waiver of, or shall preclude any other or
further exercise of, the same or any other right, power or remedy.
9.8 SEVERABILITY. If any provision of this Agreement is construed
to be invalid, illegal or unenforceable, then the remaining provisions hereof
shall not be affected thereby and shall be enforceable without regard thereto.
9.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall constitute an
original hereof, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one original counterpart hereof.
9.10 SECTION HEADINGS. The section and subsection headings in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement, and shall not affect its interpretation.
9.11 REFERENCES. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
Unless a particular context clearly provides otherwise, the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection hereof.
9.12 CONTROLLING LAW. This Agreement is made under, and shall be
construed and enforced in accordance with, the laws of the State of Ohio
applicable to agreements made and to be performed solely therein, without
giving effect to principles of conflicts of law.
9.13 NO THIRD PARTY BENEFICIARIES. No provision of this Agreement
is intended to or shall be construed to grant or confer any right to enforce
this Agreement, or any remedy for breach of this Agreement, to or upon any
Person other than the parties hereto, including, but not limited to, any
customer, prospect, supplier, employee, contractor, salesman, agent or
representative of Seller.
9.14 JURISDICTION AND PROCESS. In any action between the parties,
whether arising out of this Agreement or otherwise, (a) each party consents to
the jurisdiction and venue of the federal and state courts located in Cuyahoga
County, Ohio, (b) each party irrevocably waives its right to trial by jury, and
(c) each party irrevocably consents to service of process by first class
certified mail, return receipt requested, postage paid, to the address at which
such party is to receive notice in accordance with Section 9.3. In any and all
actions between the parties, whether arising hereunder or otherwise, the
prevailing party shall be entitled to recover its reasonable attorneys' fees
and legal expenses from the other party.
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9.15 RELIANCE BY BUYER. Notwithstanding the right of Buyer to
investigate the Business, the Assets and the financial condition of the
Business, Buyer has the unqualified right to rely, and has relied, upon the
representations and warranties of Seller made in this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be
executed on its behalf by it duly authorized officer, as of the date first
above written.
LDI Corporation MRK Computer Systems, Inc.
By: By:
------------------------ ---------------------------
Name: Name:
---------------------- -------------------------
Title: Title:
--------------------- ------------------------
LDI Computer Systems, Inc.
By:
------------------------
Name:
----------------------
Title:
---------------------
8/24/94, 11:48 pm
21
<PAGE> 22
<TABLE>
Asset Acquisition Agreement dated May 31, 1994 between LDI
Corporation and LDI Computer Systems, Inc., as Sellers, and
MRK Computer Systems, Inc., as Buyer
List of Schedules and Exhibits
------------------------------
<CAPTION>
Asset Agreement
<S> <C>
Schedule 2.2.3 Contracts
Schedule 2.3(c) Excluded Tangible Property
Schedule 2.3(d) Excluded Prepaid Expenses
Exhibit 2.4 Form of Lease (Tangible Property)
Schedule 2.5.1(a) Excluded Liabilities
Schedule 2.5.1(b) Included Liabilities
Exhibit 2.7 Employees Being Offered Employment
Exhibit 3.2.2(a) Form of Subordinated Note
Exhibit 3.2.2(b) Form of Guaranty
Exhibit 3.2.2(c) Form of Pledge Agreement
Exhibit 3.2.3(a) Form of Section 3.2.3 Note (1st)
Exhibit 3.2.3(b) Form of Section 3.2.3 Note (2nd)
Exhibit 3.2.3(c) Forms of Security Agreement
Schedule 4.4 Permits
Schedule 4.8 Software and Intangibles
Exhibit 6.2.4(a) Form of Real Property Lease
Exhibit 6.2.4(b) Form of PC Sourcing Agreement
Exhibit 6.2.4(c) Form of Agreement for Maintenance Services
Exhibit 6.2.4(d) Form of Shared Services Agreement
Exhibit 6.2.4(e) Form of Leasing Agency Agreement
Schedule 6.2.6 Form of Opinion of Seller's Counsel
Schedule 6.3.6 Form of Opinion of Buyer's Counsel
Schedule 7.4.2 Restricted Networking Accounts
Schedule 7.4.3 Restricted PC Sales Territory
<FN>
The schedule and exhibits listed above are not included but will be furnished
supplementally to the commission upon request.
</TABLE>
<PAGE> 1
Exhibit 4.22
AMENDED AND RESTATED
SECURITY AGREEMENT
dated as of July 29, 1994,
by and between
LDI CORPORATION,
AS THE GRANTOR
and
CONTINENTAL BANK,
in its capacity as the Collateral Agent
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C> <C>
SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----------
SECTION 2 CONFIRMATION AND GRANT OF SECURITY INTEREST; COLLATERAL; EXCLUDED COLLATERAL . . . . . . . . 18
----------------------------------------------------------------------------
(a) Confirmation of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . 18
---------------------------------
(b) Grant of Security Interest; Collateral . . . . . . . . . . . . . . . . . . . . . . 18
--------------------------------------
(c) Excluded Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-------------------
SECTION 3 THE GRANTOR TO REMAIN LIABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
----------------------------
SECTION 4 BANK ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-------------
(a) Types of Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
----------------------
(b) Collateral Lockboxes and Collateral Lockbox Accounts . . . . . . . . . . . . . . . 24
----------------------------------------------------
(c) Location of Mandatory Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . 26
-----------------------------------
(d) Non-Recourse Debt Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
----------------------------
(e) Collateral Agent Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-----------------------
(f) Bank Accounts; Collateral Lockbox Account Letters . . . . . . . . . . . . . . . . . 26
-------------------------------------------------
(g) Account Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------
(h) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------------
(i) Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------------
SECTION 5 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-----------------------
SECTION 6 NON-RECOURSE FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
----------------------
(a) CXC Accounts and Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
----------------------
(b) Other Non-Recourse Accounts and Funds . . . . . . . . . . . . . . . . . . . . . . . 28
-------------------------------------
(c) Notice and Release of Collateral For Non-Recourse Debt Transaction . . . . . . . . 28
------------------------------------------------------------------
SECTION 7 MARKING AND DELIVERY OF COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
----------------------------------
(a) Marking of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
---------------------
(b) Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
---------------------
SECTION 8 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
------------------------------
(a) Location of Business and Collateral. . . . . . . . . . . . . . . . . . . . . . . . 30
-----------------------------------
(b) Pledged Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--------------
(c) Ownership/Title to Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
-----------------------------
(d) Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
----------
(e) Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
----------
(f) Approval; Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
------------------
(g) Accounts, Accounts Receivables and General Intangibles. . . . . . . . . . . . . . . 32
------------------------------------------------------
(h) Authorization; Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------------------------
(i) Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--------
</TABLE>
50026F70.1E
17122-008
<PAGE> 3
<TABLE>
<S> <C> <C>
(j) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------
(k) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
---------
(l) Third Party Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-----------------
SECTION 9 GENERAL COVENANTS REGARDING COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . 35
--------------------------------------
(a) Financing Statements, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------------------------
(b) Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
------------------
(c) Statements and Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
------------------------
(d) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--------------------
(e) Identification of Leases and Chattel Paper . . . . . . . . . . . . . . . . . . 37
------------------------------------------
SECTION 10 COVENANTS REGARDING COLLATERAL EQUIPMENT AND COLLATERAL INVENTORY . . . . . . . . . . . 38
------------------------------------------------------------------
(a) Location of Collateral Equipment. . . . . . . . . . . . . . . . . . . . . . . . 38
--------------------------------
(b) Maintenance of Collateral Equipment and Collateral Inventory. . . . . . . . . . 38
------------------------------------------------------------
(c) Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
----------------
(d) Location of Collateral Inventory. . . . . . . . . . . . . . . . . . . . . . . . 38
--------------------------------
SECTION 11 COVENANTS REGARDING INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
-----------------------------
(a) Maintenance of Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
------------------------
(b) Grantor to Take Required Action . . . . . . . . . . . . . . . . . . . . . . . . 39
-------------------------------
(c) Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
----------------
(d) Deposit of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-------------------
(e) Settlement of Claims and Release of Proceeds . . . . . . . . . . . . . . . . . 40
--------------------------------------------
(f) Aircraft Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
------------------
SECTION 12 COVENANTS REGARDING ACCOUNTS AND ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . 40
----------------------------------------------------
(a) Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-------
(b) Notice to Account Debtors. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
-------------------------
(c) Verifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
-------------
(d) Limitations on Modifications of Accounts. . . . . . . . . . . . . . . . . . . . 41
----------------------------------------
(e) Schedule of Accounts and Accounts Receivable. . . . . . . . . . . . . . . . . . 41
--------------------------------------------
SECTION 13 ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--------------------
(a) No Transfer of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-------------------------
(b) Proceeds of Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
----------------
(c) Pledged Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--------------
(d) Payment of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
----------------------
(e) Limitation of Liens on Collateral. . . . . . . . . . . . . . . . . . . . . . . 43
---------------------------------
(f) Compliance With Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
---------------------
(g) Third Party Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-----------------
(h) Further Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-----------------------
(i) Maintenance of Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
----------------------
(j) Special Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
------------------
(k) Performance by the Collateral Agent of the Grantor's Obligation. . . . . . . . 44
---------------------------------------------------------------
(l) Maintenance and Repairs of Aircraft. . . . . . . . . . . . . . . . . . . . . . 44
-----------------------------------
(m) Aircraft Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
---------------------
</TABLE>
50026F70.1E
17122-008 -ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 14 VOTING RIGHTS; DIVIDENDS; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
-----------------------------
(a) Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
---------------------
(b) After Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
----------------------
SECTION 15 COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT . . . . . . . . . . . . . . . . . . . . . . . . 48
-------------------------------------------
(a) Appointment of Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 48
-------------------------------
(b) Ratification of Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-----------------------
(c) Duties of Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
--------------------------
(d) Additional Authority Upon Event of Default. . . . . . . . . . . . . . . . . . . . . 49
------------------------------------------
SECTION 16 THE COLLATERAL AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
--------------------
(a) Appointment of the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . 49
-----------------------------------
(b) Responsibility Disclaimed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-------------------------
(c) Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
----------------------
(d) Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
--------------------
(e) Limitations on Responsibility of the Collateral Agent and Other Matters . . . . . . 52
-----------------------------------------------------------------------
(f) Action on Instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
----------------------
(g) Advance of Funds by the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . 53
----------------------------------------
(h) Continental and Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
--------------------------
(i) Notice to Holder of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
-------------------------
(j) Reliance by the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 54
--------------------------------
(k) Termination of the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . 54
-----------------------------------
(l) Resignation of the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . 55
-----------------------------------
(m) Notice of Successor Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . 55
------------------------------------
(n) Status of Successors to the Collateral Agent. . . . . . . . . . . . . . . . . . . . 56
--------------------------------------------
(o) Merger of the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
------------------------------
SECTION 17 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-----------------
SECTION 18 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
--------
(a) Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-------
(b) Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-------------------
(c) Treatment of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
---------------------
(d) Disposition of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
-----------------------
SECTION 19 INDEMNITY AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
----------------------
(a) Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
---------------
(b) Reimbursement of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
-------------------------
SECTION 20 SECURITY INTEREST ABSOLUTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
--------------------------
SECTION 21 REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
-------------------
SECTION 22 AMENDMENTS; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
---------------
SECTION 23 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-------
SECTION 24 CONTINUING SECURITY INTEREST; TRANSFER OF NOTES . . . . . . . . . . . . . . . . . . . . . . 63
-----------------------------------------------
SECTION 25 GOVERNING LAW; TERMS; WAIVER OF DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . 63
----------------------------------------
</TABLE>
50026F70.1E
17122-008 -iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 26 REINSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
-------------
SECTION 27 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
--------------
(a) Incorporation of Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
-------------------------
(b) Headings; Language. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
------------------
(c) Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
------------
(d) No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . 64
------------------------------
(e) Conflicts or Inconsistency . . . . . . . . . . . . . . . . . . . . . . . . . . 65
--------------------------
(f) Execution in Counterparts; Amendment and Restatement . . . . . . . . . . . . . 65
----------------------------------------------------
SECTION 28 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
--------------------
SECTION 29 RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
-------
SECTION 30 IBM SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
---------------------
</TABLE>
50026F70.1E
17122-008 -iv-
<PAGE> 6
SCHEDULES
SCHEDULE I MANDATORY BANK ACCOUNTS
SCHEDULE II PERMITTED BANK ACCOUNTS
SCHEDULE III SPECIAL PERMITTED BANK ACCOUNTS
SCHEDULE IV INTELLECTUAL PROPERTY
SCHEDULE V PLEDGED SHARES/PLEDGED DEBT
SCHEDULE VI BANK ACCOUNTS
SCHEDULE VII GRANTOR'S LOCATIONS
SCHEDULE VIII LOCATION OF COLLATERAL
SCHEDULE IX LEASES
SCHEDULE X AIRCRAFT AND ENGINES
SCHEDULE XI AIRCRAFT INSURANCE
SCHEDULE XII SPECIFIED COLLATERAL
EXHIBITS
EXHIBIT I FORM OF COLLATERAL LOCKBOX ACCOUNT LETTER
EXHIBIT II FORM OF NOTICE TO RELEASE CXC FUNDS
EXHIBIT III FORM OF NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS
EXHIBIT IV FORM OF NOTICE OF NON-RECOURSE FINANCING
EXHIBIT V FORM OF NON-RECOURSE DEBT RELEASE
EXHIBIT VI [Intentionally Omitted]
EXHIBIT VII FORM OF SUBORDINATION AGREEMENT
EXHIBIT VIII FORM OF SWEEP AGREEMENT
50026F70.1E
17122-008
-v-
<PAGE> 7
AMENDED AND RESTATED
SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT ("AGREEMENT")
is made as of July 29, 1994 (the "AGREEMENT DATE") by LDI CORPORATION,
a Delaware Corporation (the "GRANTOR"), in favor of CONTINENTAL BANK, in its
capacity as collateral agent as hereinafter provided (the "COLLATERAL AGENT")
and amends and restates in its entirety the Security Agreement, dated as
of May 2, 1994 (the "EXISTING SECURITY AGREEMENT"), executed by the Grantor
in favor of the Collateral Agent and the various financial institutions
identified therein.
RECITALS:
- The Grantor has previously executed the following
agreements: (i) that certain Amended and Restated Credit Agreement (the
"NCB/SOCIETY CREDIT AGREEMENT"), dated as of December 14, 1992, among the
Grantor, National City Bank ("NCB") and Society National Bank ("SOCIETY") as
co-agents and the various financial institutions which are parties thereto;
(ii) that certain Credit Agreement (the "CONTINENTAL CREDIT AGREEMENT"), dated
as of August 3, 1992, as amended, among the Grantor, Continental Bank
as agent, and the various financial institutions which are parties thereto;
(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 ATLANTIC"), The Minnesota Mutual Life Insurance Company
(successor by merger to Ministers Life - A Mutual Life Insurance Company)
("MINNESOTA MUTUAL"), Farm Bureau Life Insurance Company of Michigan
("FARM"), FB Annuity Company ("FB") and Farm Bureau Mutual Insurance Company
of Michigan ("FARM MUTUAL," and collectively with the 1989 Lenders, North
Atlantic, Minnesota Mutual, 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").
50026F70.1E
17122-008
<PAGE> 8
A. Each of NCB, Society and Continental, each in
their capacity as lender, and each of the various other financial
institutions which are lenders under each of the NCB/Society Credit Agreement
and the Continental Credit Agreement are herein referred to as the "EXISTING
BANK LENDERS."
B. The Northwestern Lenders and Nat West are herein
referred to as the "EXISTING TERM LENDERS."
C. The Existing Bank Lenders and the Existing Term
Lenders are herein referred to collectively as the "EXISTING LENDERS."
D. The Grantor has previously executed and delivered
a Credit Agreement, dated as of May 2, 1994, as amended, by and among NCB,
Society and Continental, as co-agents, and the Existing Bank Lenders to be
effective as of July 29, 1994 only upon the terms and conditions set forth
therein (the "NEW CREDIT AGREEMENT").
E. The NCB/Society Credit Agreement, the Continental
Credit Agreement, the Northwestern Agreements, the Nat West Note, and the
New Credit Agreement, as each may hereafter be amended, modified,
supplemented or restated in conformity with the terms of the Intercreditor
Agreement (as hereinafter defined), are herein referred to collectively as the
"EXISTING CREDIT AGREEMENTS."
F. At the request of the Grantor and in consideration
of, among other things, the execution and delivery by the Grantor of the
Existing Security Agreement, each of the Existing Bank Lenders which is a
party to the NCB/Society Credit Agreement executed a waiver dated May 2, 1994
of certain defaults thereunder and each of the Existing Bank Lenders which
is a party to the Continental Credit Agreement executed and delivered to the
Grantor a waiver dated April 29, 1994 of certain defaults thereunder (each a
"WAIVER").
G. Each Waiver was originally for a period ending on
May 31, 1994 and, at the request of the Grantor, the Existing Bank Lenders
executed and delivered to the Grantor extensions of each of the Waivers to July
29, 1994 (each such extension, a "WAIVER EXTENSION").
H. At the request of the Grantor, each of the
Existing Bank Lenders and the Grantor entered into that certain letter
agreement Re: Proposed Credit Agreement, dated April 28, 1994, as amended (the
"EXISTING BANK LENDERS COMMITMENT LETTER").
I. Pursuant to the terms of the Existing Bank Lenders
Commitment Letter and concurrently with the execution and delivery hereof, the
Grantor is executing and delivering a Second Amended and Restated Credit
Agreement, dated as of the date hereof (the
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"AMENDED AND RESTATED CREDIT AGREEMENT"), by and among the Grantor and
NCB, Society and Continental, each in its capacity as agent
(individually, in such capacity, a "CO-AGENT" and collectively, in such
capacities, the "CO-AGENTS") and the Existing Bank Lenders (collectively
with the Co-Agents, the "AMENDED AND RESTATED CREDIT AGREEMENT LENDERS").
J. At the request of the Grantor, each of the
Northwestern Lenders and the Grantor entered into that certain letter
agreement, 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, dated May 2, 1994, as amended (the "NORTHWESTERN COMMITMENT LETTER"),
and pursuant to the terms of the Northwestern Commitment Letter and
concurrently with the execution and delivery hereof, the Grantor shall
execute and deliver a letter amendment to the 1988 Note Purchase Agreement
and a letter amendment to the 1989 Note Purchase Agreement (as so amended, the
"AMENDED NORTHWESTERN AGREEMENTS").
K. The Grantor has previously executed and delivered to
Nat West an amendment of the Nat West Note, dated as of April 29, 1994 (the
"AMENDED NAT WEST NOTE").
L. The Amended and Restated Credit Agreement, the
Amended Northwestern Agreements and the Amended Nat West Note, and each of the
Subject Facility Documents (as defined in the Intercreditor Agreement) as
may hereafter exist, as each may hereafter be amended, modified,
supplemented or restated in conformity with the terms of the Intercreditor
Agreement, are herein referred to collectively as the "CREDIT AGREEMENTS."
M. The Grantor previously executed and delivered the
Existing Security Agreement pursuant to which the Grantor granted in favor of
the Collateral Agent a first priority, perfected security interest in and
Lien upon certain assets of the Grantor, and it is a condition precedent to
the effectiveness of the Amended and Restated Credit Agreement and the Amended
Northwestern Agreements that the Grantor execute and deliver this Agreement
in order to, among other things, reaffirm, ratify, confirm, continue the
security interests, pledge and Liens granted pursuant to the terms of the
Existing Security Agreement and to amend and restate the Existing Security
Agreement.
N. LDI of Ohio, Inc., f/k/a LDI Computer Systems,
Inc., a wholly-owned subsidiary of the Grantor ("COMPUTER SYSTEMS"),
previously executed and delivered (i) to the Existing Lenders which are
party to the Continental Credit Agreement, that certain Guaranty of Payment
of Debt dated as of ______________, 1994, and to the Existing Lenders which are
party to the NCB/Society Credit Agreement, that certain Guaranty of Payment
of Debt, dated ________________, (collectively, the "SUBSIDIARY GUARANTIES"),
and (ii) that certain Security Agreement, dated as of May 2, 1994, in
favor of the Collateral Agent for the benefit of the Existing Lenders
(the "EXISTING SUBSIDIARY SECURITY AGREEMENT"), pursuant
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to which Computer Systems granted the Collateral Agent a first priority,
perfected security interest in and Lien upon certain assets of Computer
Systems.
O. Concurrently with the execution and delivery of this
Agreement, the Credit Agreements and the Intercreditor Agreement, Computer
Systems is executing and delivering (i) a certain Amended and Restated
Guaranty dated of even date herewith in favor of ____________, (ii) a certain
Guaranty dated of even date herewith in favor of the Northwestern Lenders, and
(iii) an Amended and Restated Security Agreement in favor of the Collateral
Agent for the benefit of the Collateral Agent and the Co-Agents and the
ratable benefit of the Intercreditor Lenders (the "AMENDED AND RESTATED
SUBSIDIARY SECURITY AGREEMENT").
P. Concurrently with the execution and delivery of
this Agreement, the Collateral Agent, the Grantor, Computer Systems and the
Existing Lenders (together with each of the other financial institutions
which are or may become parties thereto, the "INTERCREDITOR LENDERS") are
executing and delivering an Intercreditor Agreement, dated the date hereof (as
such agreement may hereafter be amended, modified, supplemented or restated,
the "INTERCREDITOR AGREEMENT"), pursuant to which the Intercreditor Lenders
shall, among other things, define certain of their rights and remedies with
respect to the Credit Agreements and this Agreement.
Q. Concurrently with the execution and delivery of this
Agreement, the Collateral Agent, the Grantor and Citicorp North America,
Inc., as agent (the "CXC AGENT") for CXC Incorporated, a Delaware corporation
("CXC"), are executing and delivering an Intercreditor Agreement, dated the
date hereof (as such agreement may hereafter be amended, modified,
supplemented or restated, the "CXC INTERCREDITOR AGREEMENT").
R. The Existing Lenders appointed Continental as
Collateral Agent under the Existing Security Agreement and are hereby
reaffirming their appointment of Continental as Collateral Agent thereunder and
hereunder.
S. Concurrently with the execution and delivery of
this Agreement and pursuant to the terms of the Intercreditor Agreement,
the Intercreditor Lenders are acknowledging the previous appointment of
Continental as Collateral Agent and are appointing Continental as
Collateral Agent thereunder and hereunder.
T. Concurrently with the execution and delivery of this
Agreement and pursuant to the terms of the Intercreditor Agreement, the
Intercreditor Lenders have agreed that notwithstanding the fact that each
Intercreditor Lender is a party to the Existing Security Agreement, from
the date hereof and continuing thereafter, this Agreement shall be by and
between the Grantor and the Collateral Agent only.
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NOW, THEREFORE, in consideration of the Recitals and of the
mutual covenants herein contained and in order to induce the Intercreditor
Lenders to enter into the Credit Agreements and the Intercreditor Agreement,
the Grantor hereby agrees with the Collateral Agent for the benefit of the
Collateral Agent and the Co-Agents and the ratable benefit of the
Intercreditor Lenders that the Existing Security Agreement be, and the same
hereby is, amended and restated in its entirety to read as set forth above and
as follows:
SECTION 1 DEFINITIONS.
In addition to the terms defined elsewhere herein, the following
terms, shall be a part of this Agreement, and except where the context
otherwise requires, shall have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
"ACCOUNT" shall mean any "account" as such term is defined in
Section 1309.01(A)(15) of the UCC.
"ACCOUNT COLLATERAL" shall have the meaning ascribed to such
term in SECTION 2(B) hereof.
"ACCOUNT DEBTOR" shall mean any "account debtor" as such term
is defined in Section 1309.01(A)(1) of the UCC.
"ACCOUNT RECEIVABLE" shall mean any right to payment arising
out of, or relating to, or in connection with (a) any Account, (b)
the use, sale, lease or disposition of Inventory or goods (including,
without limitation, all Accounts, accounts receivable, other
receivables, Contract Rights, Chattel Paper, Instruments, Documents,
notes, and other forms of obligations now owned or hereinafter
received or acquired by or belonging or owing to the Grantor, whether
arising out of the sale, rental or lease of Inventory or goods); (c)
any amount payable by any person to the Grantor in connection with
the Grantor's purchase, acquisition or leasing of Inventory; (d) any
amounts payable under any of the General Intangibles; and (e) any
or all of the Grantor's rights in, to and under all purchase orders
or receipts now owned or hereinafter acquired by it and all of the
Grantor's rights to any goods represented by any of foregoing
(including, without limitation, unpaid seller's rights of
rescission, replevin, reclamation and stoppage in transit and
rights to returned, reclaimed or repossessed goods), including,
without limitation, the right to receive the proceeds of said
purchase orders and contracts, and all collateral security and
guarantees of any kind given by any person with respect to any of the
foregoing.
"AGREEMENT DATE" shall have the meaning ascribed to such term
in the preamble hereof.
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"AIRCRAFT" shall mean (a) the Airframes; (b) the Engines;
and (c) any and all manuals, logbooks, flight records, maintenance
records, and other historical records or information of the Grantor
relating to the foregoing item (a) and/or item (b).
"AIRFRAME" shall mean those certain airframes identified
on SCHEDULE X attached hereto and incorporated herein by this
reference, together with any and all parts, appliances, components,
instruments, accessories, accessions, attachments, equipment, or
avionics (including, without limitation, radio, radar, navigation
systems, or other electronic equipment) installed in, appurtenant to,
or delivered with or in respect of such airframes.
"AMENDED AND RESTATED CREDIT AGREEMENT" shall have the meaning
ascribed to such term in Paragraph J of the Recitals.
"AMENDED AND RESTATED CREDIT AGREEMENT LENDERS" shall have the
meaning ascribed to such term in Paragraph J of the Recitals.
"AMENDED NAT WEST NOTE" shall have the meaning ascribed to
such term in Paragraph L of the Recitals.
"AMENDED NORTHWESTERN AGREEMENTS" shall have the meaning
ascribed to such terms in Paragraph K of the Recitals.
"AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT" shall
have the meaning ascribed to such term in Paragraph P of the
Recitals.
"APPLICABLE LAW" shall mean, in respect of any person, all
provisions of constitutions, statutes, rules, regulations and orders
of governmental bodies or regulatory agencies applicable to such
person, now in effect or as hereafter amended, modified, enacted
or in effect, and all orders and decrees of all courts and
arbitrators in proceedings or actions to which the person in
question is a party or by which it or any of its property is bound
from time to time.
"AUTHORIZED SIGNATORY" shall mean the president, the chief
financial officer and such other specified officers or other senior
personnel of the Grantor as may be duly authorized and designated in
writing by resolution of the board of directors of the Grantor to
execute documents, agreements, certificates and instruments on behalf
of the Grantor.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy
Code, 11 U.S.C. Section 101 ET SEQ., as amended from time to time.
"BUSINESS DAY" shall have the meaning ascribed to such term in
the Amended and Restated Credit Agreement.
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"CASH EQUIVALENT INVESTMENT" shall mean overnight
investment of funds in a manner and in amounts satisfactory to
the Collateral Agent and the Required Lenders.
"CHATTEL PAPER" shall mean any "chattel paper" as
such term is defined in Section 1309.01(A)(2) of the UCC.
"CO-AGENTS" shall have the meaning ascribed to such term in
Paragraph J of the Recitals, and includes each successor who shall act
as a Co-Agent.
"COLLATERAL" shall have the meaning ascribed to such term in
SECTION 2(B) hereof.
"COLLATERAL AGENT" shall have the meaning ascribed to such
term in the preamble hereto, and includes each successor who shall
act as Collateral Agent.
"COLLATERAL INSURANCE CLAIM" shall mean any claim which
relates to reimbursement for damage to or loss of the Collateral and
arises under the insurance policies required by this Agreement or the
other Subject Facility Documents.
"COLLATERAL LOCKBOX" shall mean a Lockbox maintained by a
Collateral Lockbox Bank for the purpose of receiving payments of
proceeds of Collateral, or such other post office box or mailing
location utilized for a similar purpose as the Grantor and a
Collateral Lockbox Bank may agree upon from time to time.
"COLLATERAL LOCKBOX ACCOUNT" shall mean each account (i)
designated by the Collateral Agent from time to time; (ii) maintained
with a Collateral Lockbox Bank for the purposes described in this
Agreement, including without limitation, the purposes set forth in
SECTION 4 hereof, (iii) in which the Collateral Agent has a first
priority perfected Lien; (iv) over which the Collateral Agent has
exclusive control and dominion; and (v) with respect to which the
Grantor has no right to withdraw funds.
"COLLATERAL LOCKBOX ACCOUNT LETTERS" shall mean the letters
in the form and content of EXHIBIT I attached hereto and as more
fully described in SECTION 4(F) hereof.
"COLLATERAL LOCKBOX BANK" shall mean each and every
Intercreditor Lender which maintains a Collateral Lockbox Account.
"COMPUTER HARDWARE AND SOFTWARE" shall mean all computer
hardware and software in all its forms (including, but not limited
to, (a) all computer and other electronic data processing hardware,
whether now owned, licensed or leased or hereafter acquired by the
Grantor, integrated computer
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<PAGE> 14
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; (b) 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 clause (a) 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); (c) all firmware associated therewith, whether now
owned, licensed or leased or hereafter acquired by the Grantor; and
(d) all documentation for such hardware, software and firmware
described in the preceding CLAUSES (A), (B) AND (C), 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).
"COMPUTER SYSTEMS" shall mean LDI of Ohio, Inc., f/k/a LDI
Computer Systems, Inc., an Ohio corporation and a wholly-owned
subsidiary of the Grantor, and any successor thereto.
"CONTINENTAL" shall mean Continental Bank, in its individual
capacity.
"CONTINENTAL CREDIT AGREEMENT" shall have the meaning ascribed
to such term in Paragraph A of the Recitals.
"CONTRACTS" shall mean (a) all contracts, undertakings or
other agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) relating to the Collateral, and (b) all
"contract rights," as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction, relating to the
Collateral.
"CREDIT AGREEMENTS" shall have the meaning ascribed to such
term in Paragraph M of the Recitals.
"CXC" shall have the meaning ascribed to such term in
Paragraph R of the Recitals, together with its permitted successors
and assigns pursuant to the terms of the Lease Receivables Transfer
Agreement.
"CXC AGENT" shall have the meaning ascribed to such term
in Paragraph R of the Recitals, together with its permitted
successors and assigns pursuant to the terms of the Lease Receivables
Transfer Agreement.
"CXC EQUIPMENT COLLATERAL" shall have the meaning ascribed to
such term in the CXC Intercreditor Agreement.
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<PAGE> 15
"CXC INTERCREDITOR AGREEMENT" shall have the meaning ascribed
to such term in Paragraph R of the Recitals.
"CXC FUNDS" shall have the meaning ascribed to such term in
SECTION 6(A) hereof.
"CXC LOCKBOX" shall mean a Lockbox maintained by a CXC
Lockbox Bank for the purpose of receiving payments made by Obligors
of Transferred Lease Receivables for subsequent deposit into a
related CXC Lockbox Account, or such other post office box or
mailing location utilized for a similar purpose as the Grantor and
the CXC Agent may agree upon from time to time pursuant to the
Lease Receivable Transfer Agreement.
"CXC LOCKBOX ACCOUNT" shall mean a Lockbox Account
maintained with a CXC Lockbox Bank for the purpose of depositing
payments made by the Obligors of Transferred Lease Receivables in
connection with the CXC Transaction, or such other account or
accounts utilized for a similar purpose as the Grantor and the CXC
Agent may agree upon from time to time pursuant to the Lease
Receivables Transfer Agreement.
"CXC LOCKBOX BANK" shall mean a Lockbox Bank at which a CXC
Lockbox Account is maintained, or such other bank or financial
institution or entity utilized for a similar purpose as the Grantor
and the CXC Agent may agree upon from time to time pursuant to the
Lease Receivables Transfer Agreement.
"CXC RESTRUCTURED FACILITY" shall mean the transactions
contemplated by a lease receivables transfer facility to be entered
into among the Grantor, LDI Funding and CXC in order to replace the
facility evidenced by the Lease Receivables Transfer Agreement in
effect on the date hereof pursuant to which (a) all Transferred
Assets existing on the date such replacement facility becomes
effective will be (i) reconveyed by CXC to the Grantor, (ii) sold to
and/or contributed to the capital of LDI Funding by the Grantor and
(iii) transferred by LDI Funding to CXC pursuant to a new lease
receivables transfer agreement and (b) certain Collateral may
thereafter be sold to an/or contributed to the capital of LDI
Funding by the Grantor and become Transferred Assets in accordance
with the terms of this Agreement and the CXC Intercreditor Agreement.
The terms and conditions of the portion of the CXC Restructured
Facility evidenced by the lease receivables transfer agreement
between LDI Funding and CXC shall be substantially similar to
terms and conditions contained in the Lease Receivables Transfer
Agreement in effect on the date hereof.
"CXC TRANSACTION" shall mean the transactions contemplated
by the Lease Receivables Transfer Agreement and, following the
effective date thereof, the transactions contemplated by the CXC
Restructured Facility.
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"DEBT DOCUMENTS" shall mean each and every of the following:
this Agreement, the Amended and Restated Credit Agreement, the
Amended and Restated Nat West Note, the Amended Northwestern
Agreements, the Amended and Restated Subsidiary Security Agreement,
the CXC Intercreditor Agreement, Subsidiary Guaranties, the Amended
and Restated Guaranties, the Loan Documents (as defined in the
Amended and Restated Credit Agreement), the Security Documents (as
defined in the Intercreditor Agreement), the Subject Facility
Documents, and the Intercreditor Documents (as defined in the
Intercreditor Agreement).
"DEFAULT" shall mean any event, act or condition which,
with the passage of time or the giving of notice, or both, would
constitute an Event of Default.
"DEPOSIT ACCOUNTS" shall mean any "deposit account" as such
term is defined in Section 1309.01(A)(5) of the UCC.
"DOCUMENTS" shall mean any "document" as such term is defined
in Section 1309.01(A)(6) of the UCC.
"EQUIPMENT" shall mean any "equipment" as such term is
defined in Section 1309.07(B) of the UCC, and include, without
limitation, all machinery, equipment, furnishings, fixtures, and
computers and other electronic data processing and other office
equipment and any and all additions, substitutions and
replacements of any of the foregoing, wherever located, together
with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
"ENGINES" shall mean those certain aircraft engines
identified on SCHEDULE X attached hereto and incorporated herein by
this reference, and any other aircraft engines which either now or
in the future are installed on, appurtenant to, or delivered with or
in respect of any Airframe, together with any and all parts,
appliances, components, accessories, accessions, attachments or
equipment installed on, appurtenant to, or delivered with or in
respect of such engines. The term "Engines" shall also refer to any
replacement aircraft engine which the Grantor is required or
permitted, under this Agreement, to install upon any Airframe and
as to which the Grantor complies with each of the applicable
requirements contained in this Agreement.
"EVENT OF DEFAULT" shall have the meaning ascribed to such
term in SECTION 17 hereof.
"EXCLUDED COLLATERAL" shall have the meaning ascribed to such
term in SECTION 2(C) hereof.
"EXISTING BANK LENDERS" shall have the meaning ascribed to
such term in Paragraph B of the Recitals.
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<PAGE> 17
"EXISTING BANK LENDERS COMMITMENT LETTER" shall have the
meaning ascribed to such term in Paragraph I of the Recitals.
"EXISTING CREDIT AGREEMENTS" shall have the meaning ascribed
to such term in Paragraph F of the Recitals.
"EXISTING LENDERS" shall have the meaning ascribed to such
term in Paragraph D of the Recitals.
"EXISTING SECURITY AGREEMENT" shall mean that certain
Security Agreement dated as of May 2, 1994, executed by the Grantor
in favor of the Collateral Agent and the various financial
institutions identified therein.
"EXISTING SUBSIDIARY SECURITY AGREEMENT" shall have the
meaning ascribed to such term in Paragraph O of the Recitals.
"EXISTING TERM LENDERS" shall have the meaning ascribed to
such term in Paragraph C of the Recitals.
"FAA" shall mean the United States Federal Aviation
Administration, or any successor or replacement administration or
governmental agency having the same or similar authority and
responsibilities.
"FIXTURES" shall mean any "fixture" as such term is defined in
Section 1309.32 of the UCC.
"GENERAL INTANGIBLES" shall mean any "general intangible" as
such term is defined in Section 1309.01(A)(16) of the UCC.
"GENERAL NON-RECOURSE LENDER ACCOUNT" shall mean an account
in which the Collateral Agent has no Lien and which is maintained at
NCB for the purpose of receiving CXC Funds and Non-Recourse Lender
Funds as more fully described in SECTION 6 hereof, PROVIDED, HOWEVER,
that (a) the only deposits into any such account are Excluded
Collateral or the Proceeds of Excluded Collateral, and (b) the
deposits made into any such account shall not consist of any
Collateral nor any Proceeds of Collateral nor the proceeds of any
loans, advances or other credit facilities made by any Intercreditor
Lender under any of the Subject Facility Documents.
"GENEVA CONVENTION" shall mean the Convention on the
International Recognition of Rights in Aircraft made at Geneva,
Switzerland on June 19, 1948 (effective 17 September 1953), together
with the necessary enacting rules and regulations promulgated by any
particular signatory country.
"GRANTOR" shall mean LDI Corporation, a Delaware corporation.
"HEREBY," "HEREIN," "HEREOF", "HEREUNDER" and words of similar
import refer to this Agreement as a whole and not
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<PAGE> 18
merely to the specific section, paragraph or clause in which the
respective word appears.
"INSTRUMENTS" shall mean any "instrument" as such term is
defined in Section 1309.01(A)(9) of the UCC, other than instruments
or writings that constitute, or are part of a group of instruments or
writings that constitute, Chattel Paper.
"INTERCREDITOR AGREEMENT" shall have the meaning ascribed to
such term in Paragraph Q of the Recitals.
"INTERCREDITOR LENDERS" shall have the meaning ascribed to
such term in Paragraph Q of the Recitals.
"INVENTORY" shall mean any "inventory" as such term is defined
in Section 1309.07(D) of the UCC.
"LDI FUNDING" shall mean LDI Lease Funding Corporation, a
Delaware corporation and a wholly-owned subsidiary of the Grantor.
"LEASE" shall mean a lease agreement between the Grantor and
any Obligor for the lease of any Equipment.
"LEASE COLLATERAL" shall have the meaning ascribed to such
term in SECTION 8(J) hereof.
"LEASE RECEIVABLE" shall mean 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 occurring at the end of the term of such Lease.
"LEASE RECEIVABLES TRANSFER AGREEMENT" shall mean the Amended
and Restated Lease Receivables Transfer Agreement, dated as of
February 15, 1994, by and among the Grantor, CXC and the CXC Agent
as amended, modified or supplemented from time to time and, after the
effective date of the CXC Restructured Facility, shall mean the
documents executed pursuant to the CXC Restructured Facility which
evidence the sale and/or contribution of Transferred Assets by the
Grantor to LDI Funding and the transfer of such Transferred Assets
by LDI Funding to CXC.
"LESSEE COLLATERAL" shall mean all security interests or
liens, and property subject to such security interests or liens, and
all guarantees, indemnities, warranties, letters of credit,
insurance policies and proceeds and premium refunds thereof and
other agreements or arrangements from time to time
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<PAGE> 19
granted by or entered into by the lessees or any other person
(other than the Grantor) under the Transferred Leases to secure or
support the payment of the lessees' obligations under the
Transferred Leases, including all UCC financing statements covering
the Lessee Collateral.
"LIEN" shall mean, with respect to any property, any
mortgage, lien, pledge, assignment, charge, security interest,
title retention agreement, levy, execution, seizure, attachment,
garnishment or other encumbrance of any kind in respect of such
property, whether or not choate, vested or perfected.
"LOCKBOX" means a post office box or other mailing location
maintained by a Lockbox Bank for the purpose of receiving payments
made by obligors for subsequent deposit into a related Lockbox
Account.
"LOCKBOX ACCOUNT" means a demand deposit account or other
collection account maintained with a Lockbox Bank or Collateral
Lockbox Bank, as the case may be, for the purpose of depositing
payments made by the obligors.
"LOCKBOX BANK" means a bank or credit union at which a Lockbox
Account is maintained.
"MANDATORY BANK ACCOUNT" shall mean each deposit account or
other account: (a) which is maintained by the Grantor at a bank or
other financial institution which is an Intercreditor Lender; (b)
with respect to which the Grantor has executed and delivered to the
Collateral Agent a duly executed Sweep Agreement; and (c) which is
either (i) in the case of those deposit or other accounts identified
on SCHEDULE I attached hereto, a deposit account or other account in
which the Collateral Agent has a first priority Lien, or (ii) in the
case of each other deposit account or other account, a deposit
account or other account in which the Collateral Agent has a first
priority perfected Lien.
"MRK SECURED NOTE" shall mean that certain Secured
Subordinated Promissory Note dated May 31, 1994 in the original
principal amount of Two Million Dollars ($2,000,000) executed by MRK
Computer Systems, Inc. an Ohio corporation (MRK"), and payable to the
order of the Grantor.
"NAT WEST NOTE" shall have the meaning ascribed to such term
in Paragraph A of the Recitals.
"NCB" shall mean National City Bank, in its individual
capacity.
"NCB/SOCIETY CREDIT AGREEMENT" shall have the meaning ascribed
to such term in Paragraph A of the Recitals.
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"NEW CREDIT AGREEMENT" shall have the meaning ascribed to such
term in Paragraph E of the Recitals.
"1988 NOTE PURCHASE AGREEMENT" shall have the meaning ascribed
to such term in Paragraph A of the Recitals.
"1989 LENDERS" shall have the meaning ascribed to such term in
Paragraph A of the Recitals.
"1989 NOTE PURCHASE AGREEMENT" shall have the meaning ascribed
to such term in Paragraph A of the Recitals.
"NON-RECOURSE DEBT" shall mean any debt of the Grantor for
which neither the obligee nor any other person has any legal
recourse against the Grantor, other than to certain specified
collateral which was pledged by the Grantor in connection with the
incurrence thereof.
"NON-RECOURSE LENDER" shall mean a lender of Non-Recourse Debt.
"NON-RECOURSE LENDER FUNDS" shall have the meaning ascribed to
such term in SECTION 6(B) hereof.
"NON-RECOURSE LOCKBOX" shall mean a Lockbox maintained by a
Non-Recourse Lockbox Bank for the purpose of receiving payments made
by Obligors of Transferred Lease Receivable for subsequent deposit
into a related Non-Recourse Lockbox Account, or such other post
office box or mailing location utilized for a similar purpose as the
Grantor and the agent for the applicable Non-Recourse Lenders may
agree upon from time to time.
"NON-RECOURSE LOCKBOX ACCOUNT" shall mean a Lockbox Account
maintained with a Non-Recourse Lockbox Bank for the purpose of
depositing payments made by the Obligors of Transferred Lease
Receivables, or such other account or accounts utilized for a
similar purpose as the Grantor and the agent for the applicable
Non-Recourse Lenders may agree upon from time to time.
"NON-RECOURSE LOCKBOX BANK" shall mean a Lockbox Bank at
which a Non-Recourse Lockbox Account is maintained, or such other
bank or financial institution or entity utilized for a similar
purpose as the Grantor and the agent for the applicable
Non-Recourse Lenders may agree upon from time to time.
"NON-RECOURSE OBLIGOR" shall mean any Non-Recourse Lender
obligated in respect of a Lease Receivable pursuant to a Lease
other than the Lessor or vendor of the Inventory or Equipment covered
thereby.
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<PAGE> 21
"NORTHWESTERN AGREEMENTS" shall have the meaning ascribed to
such term in Paragraph A of the Recitals.
"NORTHWESTERN COMMITMENT LETTER" shall have the meaning
ascribed to such terms in Paragraph K of the Recitals.
"NORTHWESTERN LENDERS" shall have the meaning ascribed to such
term in Paragraph A of the Recitals.
"NOTE" shall mean each promissory note executed by the
Grantor pursuant to the terms of the Amended and Restated Credit
Agreement, the Amended Northwestern Agreements, and each of the other
Subject Facility Documents.
"NOTICE TO RELEASE CXC FUNDS" shall have the meaning ascribed
to such term in SECTION 6(A) hereof.
"NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS" shall have the
meaning ascribed to such term in SECTION 6(B) hereof.
"OBLIGATIONS" shall mean any and all existing and future
liabilities, indebtedness and obligations (including without
limitation, all Debt Obligations (as defined in the Intercreditor
Agreement) and all Obligations (as defined in the Intercreditor
Agreement)), and other payment obligations of the Grantor owing from
time to time to each and every present or future Intercreditor
Lender, Co-Agent or the Collateral Agent under any Debt Document and
under the Intercreditor Agreement, and to the present or future
Collateral Agent under any of the Loan Documents (as defined in
the Amended and Restated Credit Agreement), including without
limitation, all fees, costs, expenses, court costs, attorneys' fees
and expenses, and the like covered by any of the foregoing.
"OBLIGOR" shall mean any party obligated in respect of a
Lease Receivable pursuant to a Lease other than the lessor or vendor
of the Inventory or Equipment covered thereby.
"PERMITTED BANK ACCOUNT" shall mean each deposit account or
other account: (a) which is maintained by the Grantor at a bank or
other financial institution which is not an Intercreditor Lender; (b)
with respect to which the Grantor has executed and delivered to the
Collateral Agent a duly executed Sweep Agreement; (c) which is
existing on the Agreement Date; and (d) which is either (i) in the
case of those deposit accounts or other accounts identified on SCHEDULE
II attached hereto, a deposit account or other account in which the
Collateral Agent has a first priority Lien, or (ii) in the case of
each other deposit account or other account, a deposit account or
other account in which the Collateral Agent has a first priority
perfected Lien.
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"PERMITTED LIEN" shall mean a Lien permitted by Section 7.2.3
of the Amended and Restated Credit Agreement.
"PERMITTED NON-RECOURSE BANK ACCOUNT" shall mean a deposit
or other account maintained by the Grantor at a bank or other
financial institution and in which the Collateral Agent has no
Lien; PROVIDED, HOWEVER, that (a) the only deposits into any such
account are Excluded Collateral or the Proceeds of Excluded
Collateral, and (b) the deposits made into any such account shall
not consist of any Collateral nor any Proceeds of Collateral nor the
proceeds of any loans, advances or other credit facilities made by any
Intercreditor Lender under any of the Subject Facility Documents.
"PICKER" shall mean Picker Financial Group, an Ohio general
partnership.
"PICKER NOTE" shall mean that certain promissory note dated
April 28, 1994 in the original principal amount of Three Million
Five Hundred Thousand Dollars ($3,500,000) executed by Picker and
payable to the order of the Grantor.
"PLEDGED DEBT" shall have the meaning ascribed to such term in
SECTION 2(B) hereof.
"PLEDGED SHARES" shall have the meaning ascribed to such term
in SECTION 2(B) hereof.
"PROCEEDS" shall mean any "proceeds" as such term is defined
in Section 1309.25 of the UCC, and, in any event, shall have the
broadest meaning permissible under the Ohio Uniform Commercial Code,
and the Uniform Commercial Code of any other state which is deemed
applicable, and shall include, without limitation, (a) any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to
the Grantor from time to time with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person acting under color of
governmental authority), and (c) any and all other amounts from time
to time paid or payable, whether as rents, fees, lease payments or
otherwise, under or in connection with any of the Collateral.
"REQUIRED LENDERS" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"SECURITY COLLATERAL" shall have the meaning ascribed to such
term in SECTION 2(B) hereof.
"SOCIETY" shall mean Society National Bank, in its individual
capacity.
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"SPECIAL PERMITTED BANK ACCOUNT" shall mean those accounts
(e.g., trust accounts) listed on SCHEDULE III attached hereto.
"SUBJECT FACILITY DOCUMENTS" shall have the meaning ascribed
to such term in the Intercreditor Agreement.
"SUBSIDIARY GUARANTIES" shall have the meaning ascribed to
such term in Paragraph O of the Recitals.
"SWEEP AGREEMENT" shall mean an agreement between the Grantor
and any depositary institution for the benefit of the Collateral
Agent substantially in the form of EXHIBIT VIII attached hereto.
"THIRD PARTY NOTES" shall mean, collectively, the Picker Note
and the MRK Secured Note.
"TRANSFERRED ASSETS" shall have the meaning ascribed to such
term in the CXC Intercreditor Agreement.
"TRANSFERRED LEASE RECEIVABLE" shall mean (a) with respect to
the CXC Transaction, any Lease Receivable which is offered for
transfer by the Grantor and in which CXC has acquired an interest
pursuant to the Lease Receivables Transfer Agreement; and (b) with
respect to all other Non-Recourse Debt transactions, Lease Receivables
transferred (including, without limitation, by way of a grant of a
security interest) by the Grantor to a Non-Recourse Lender in
connection with the incurrence of Non-Recourse Debt.
"TRANSFERRED LEASE" shall mean each Lease transferred by
the Grantor to a Non-Recourse Lender in connection with the
incurrence of Non-Recourse Debt.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of Ohio; PROVIDED,
HOWEVER, in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of the
Collateral Agent's, or any of the Intercreditor Lenders' security
interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of Ohio, the term
"UCC" shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
"UNIDENTIFIED CHECK" shall mean a check held in a Collateral
Lockbox Account with respect to which the Grantor is unable to
identify whether all or any portion of such check constitutes either
CXC Funds or Non-Recourse Lender Funds.
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"WAIVER" shall have the meaning ascribed to such term in
Paragraph G of the Recitals.
"WAIVER EXTENSION" shall have the meaning ascribed to such
term in Paragraph H of the Recitals.
SECTION 2 CONFIRMATION AND GRANT OF SECURITY INTEREST;
COLLATERAL; EXCLUDED COLLATERAL.
(a) CONFIRMATION OF SECURITY INTEREST. The Grantor
hereby ratifies and confirms that pursuant to the Existing Security
Agreement, on the date thereof, the Grantor assigned and pledged to the
Collateral Agent for its benefit and for the benefit of the Existing Lenders
and to the Existing Lenders, and granted to the Collateral Agent for its
benefit and for the ratable benefit of the Existing Lenders and to the
Existing Lenders, a continuing security interest in and Lien upon all of
the Collateral (as defined in the Existing Security Agreement). The parties
hereto hereby ratify, reaffirm and restate such assignment, pledge and grant of
security interest and Lien.
(b) GRANT OF SECURITY INTEREST; COLLATERAL. As
security for the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all of the
Obligations, the Grantor hereby grants to the Collateral Agent for the benefit
of the Collateral Agent and each of the Co-Agents and for the ratable
benefit of the Intercreditor Lenders a continuing security interest in,
and Lien upon, all of the Grantor's right, title and interest in, to and
under the following property, whether now existing or owned or hereafter
existing, acquired or arising, and wherever located (all of which are herein
referred to collectively as the "COLLATERAL"):
(i) all Accounts and Accounts Receivable;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Deposit Accounts (other than the CXC Lockbox
Accounts and the Non-Recourse Lockbox Accounts);
(v) all Documents;
(vi) all Equipment;
(vii) all Fixtures;
(viii) all General Intangibles;
(ix) all Instruments;
(x) all Inventory;
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<PAGE> 25
(xi) the Third Party Notes;
(xii) immediately upon the occurrence of any of the
following events: (a) the Lien in favor of First Security Bank of
Utah, National Association, as indenture trustee ("FSB") on the
Aircraft and the Engines is released, or should be released by FSB,
(b) the Aircraft or Engines are returned to or repossessed by the
Grantor by way of substitution or replacement, as a result of
expiration of the lease to which the Aircraft and the Engines are
subject or otherwise, or (c) FSB no longer has any outstanding and
unpaid amounts owing to FSB, the Aircraft, the Engines and all right,
title and interest of the Grantor in and to any lease, rental
agreement, charter agreement, or other agreement(s) respecting the
Aircraft and/or any of the Engines, including, but not limited
to, the Grantor's right to receive, either directly or indirectly,
from any party or person, any rents or other payments due under
such agreement(s);
(xiii) all right, title and interest of the Grantor in,
to and under that certain Asset Acquisition Agreement dated as of May
31, 1994 by and among the Grantor, Computer Systems and MRK,
including, without limitation, all rights to any and all amounts due
or to become due the Grantor and any all payments made to the Grantor
thereunder and all proceeds of any of the above;
(xiv) all of the following: all Computer Hardware and
Software, each and every item of property which is subject to a
Lease, 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 (collectively, all of the items in this CLAUSE
(XIV), together with the Equipment, are hereinafter referred to as the
"COLLATERAL EQUIPMENT");
(xv) all of the following: 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 and other goods leased by the Grantor, each
and every item of property subject to a Lease, 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), goods that are
returned to or repossessed by the Grantor, and all accessions thereto
and products thereof and documents
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<PAGE> 26
therefor (collectively, all of the items in this CLAUSE (XV),
together with the Inventory, are hereinafter referred to as the
"COLLATERAL INVENTORY");
(xvi) all of the following: all tax refunds,
corporate or other business records (including all records relating
to Inventory, Accounts and Accounts Receivable), 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 owing to the Grantor 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 (including, but not limited to, each Lease) and other
contract rights, Chattel Paper, instruments, General Intangibles or
other obligations;
(xvii) all of the following:
(A) 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;
(B) 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;
(C) 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;
(D) 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;
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<PAGE> 27
(E) 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
(F) 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;
(xviii) all of the following:
(A) all deposit accounts of the Grantor
(other than CXC Lockbox Accounts, the General Non-Recourse
Lender Account, Non-Recourse Lockbox Accounts, Permitted
Non-Recourse Bank Accounts and the Special Permitted Bank
Accounts), each Lockbox Account, each Permitted Bank
Account, each Mandatory Bank Account and each Collateral
Lockbox Account, all cash, funds, monies and amounts
required to be deposited, or deposited in, the Grantor's
deposit accounts, each Collateral Lockbox Account, each
Permitted Bank Account, or each Mandatory Bank Account and
all certificates and instruments, if any, from time to time
representing or evidencing the foregoing deposit accounts,
each Collateral Lockbox Account, each Permitted Bank
Account or each Mandatory Bank Account;
(B) 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;
(C) 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;
(D) all deposits of cash, funds or monies at any
bank (other than deposits in the CXC Lockbox Accounts and
the Non-Recourse Lockbox Accounts); and
(E) all cash, checks, drafts, chattel paper,
notes and other instruments or writings for the payment of
money received by the Grantor in respect of the
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<PAGE> 28
property and interests in property described in this
SECTION 2(B) and all investments from time to time made
pursuant to SECTION 4 hereof (collectively, all of items in
this clause (xviii) are hereinafter referred to as the
"ACCOUNT COLLATERAL");
(xix) all of the following:
(A) all shares (the "PLEDGED SHARES") of stock
described in Part I of SCHEDULE V 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;
(B) all indebtedness (the "PLEDGED DEBT")
described in Part II of SCHEDULE V 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;
(C) all additional shares of stock of any issuer
of the Pledged Shares from time to time acquired by the
Grantor 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
(D) 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
(collectively, all of the foregoing is hereinafter referred to
as the "SECURITY COLLATERAL");
(xx) any item of the Grantor's property which ceases to
be Excluded Collateral;
(xxi) all of Grantor's books and records (including,
without limitation, all computerized books and records, all
computer programs or other devices related thereto, printouts,
computer discs, minute books, journals, ledgers, work papers,
financial statements, orders, receipts, and any correspondence and
other data relating to the Grantor's business or to any
transactions the Grantor has entered into, no matter how or where
such records may be maintained, generated or stored) as the foregoing
relates to any of the property and interests in property described in
this SECTION 2(B); and
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<PAGE> 29
(xxii) all Proceeds of each of the foregoing property
and interests in property, and all accessories to, substitutions and
replacements for, and rents, profits and products of each of the
foregoing.
(c) EXCLUDED COLLATERAL. Notwithstanding anything
contained herein to the contrary, and subject to the proviso at the end of
this SECTION 2(C), the term "COLLATERAL" shall not include any of the following
(the "EXCLUDED COLLATERAL"):
(i) in the case of each Non-Recourse Debt
transaction other than the CXC Transaction, all Transferred
Lease Receivables, Transferred Leases and Lessee Collateral
together with all of the Grantor's right, title and interest in
the data processing, telecommunications, and other capital equipment
leased by the Grantor as lessor which is subject to the Transferred
Leases, and all Proceeds of the foregoing transferred to a
Non-Recourse Lender as of the Agreement Date, and the following
assets which become Transferred Lease Receivables, Transferred
Leases or Lessee Collateral pursuant to the release procedures set
forth in SECTION 6(C) hereof or which are transferred by the Grantor
to a Non-Recourse Lender pursuant to the release procedures set
forth in SECTION 6(C) hereof:
(A) Transferred Lease Receivables and
Transferred Leases;
(B) any Lessee Collateral;
(C) all of the Grantor's right, title and
interest in the data processing, telecommunications, and
other capital equipment leased by the Grantor as lessor which
is subject to the Transferred Leases; and
(D) all Proceeds of the Excluded Collateral
described in clauses (A) through (C) above; and
(ii) in the case of the CXC Transaction, all
Transferred Assets and CXC Equipment Collateral as of the Agreement
Date, together with all Collateral that becomes Transferred Assets
and CXC Equipment Collateral pursuant to the release procedures
described in the CXC Intercreditor Agreement;
PROVIDED, HOWEVER, that with respect to each item which constitutes Excluded
Collateral which is or should be released by the CXC Agent in accordance
with the terms of the CXC Intercreditor Agreement (it being understood that
none of the Excluded Collateral subject to the CXC Transaction immediately
preceding the effective date of the CXC Restructured Facility shall cease to
be Excluded Collateral as a result of the consummation of the CXC Restructured
Facility), or which is returned to or repossessed by the Grantor by way of
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<PAGE> 30
substitution, replacement, as a result of expiration of the Lease to which
each such item is subject or otherwise, or with respect to which the applicable
Non-Recourse Lender no longer has any outstanding and unpaid amounts owing
to such Non-Recourse Lender, each such item shall, immediately upon the
cessation of the applicable Non-Recourse Lender's interest therein, (x)
cease to be Excluded Collateral and (y) automatically be Collateral for all
purposes hereunder.
SECTION 3 THE GRANTOR TO REMAIN LIABLE.
Notwithstanding anything contained herein to the contrary, (a) the
Grantor shall remain liable under each of the Contracts and agreements
included in the Collateral to observe and perform all of its duties and
obligations thereunder and the Grantor shall perform all of its duties and
obligations thereunder, (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 any of the Contracts and agreements included in the
Collateral, and (c) neither the Collateral Agent nor any Intercreditor
Lender shall have any obligation or liability under the Contracts and
agreements included in the Collateral by reason of this Agreement or the
granting to the Collateral Agent of any Lien or the receipt by the Collateral
Agent of any payment relating to any contract or agreement included in the
Collateral. Neither the Collateral Agent nor any Intercreditor Lender shall
be obligated in any manner to perform or fulfill any of the obligations or
duties of the Grantor under any of the Contracts or agreements included in
the Collateral, to make any payment thereunder or to make any inquiry as to
the nature or sufficiency of any payment received by the Collateral Agent or
the sufficiency of any performance by any party to such Contracts or
agreements, or to take any action to collect or enforce any performance or
the payment of any amounts or any claim for payment which may have been
assigned to the Collateral Agent or to which the Collateral Agent may be
entitled at any time or times.
SECTION 4 BANK ACCOUNTS.
(a) TYPES OF BANK ACCOUNTS. Until all Obligations
have been paid and performed in full, the Grantor shall establish and maintain
only Collateral Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank
Accounts, Permitted Non-Recourse Bank Accounts and Special Permitted Bank
Accounts and the General Non-Recourse Lender Account.
(b) COLLATERAL LOCKBOXES AND COLLATERAL LOCKBOX
ACCOUNTS. The Grantor shall establish and maintain Collateral Lockboxes
and Collateral Lockbox Accounts at one or more Collateral Lockbox Banks
designated by the Collateral Agent from time to time, into which the Grantor
shall forthwith, upon receipt, transmit and deliver for deposit in a
Collateral Lockbox Account, in the form received, all cash, checks, drafts,
Chattel Paper and other Instruments or writings for the payment of money (other
than any
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<PAGE> 31
items which constitute Excluded Collateral), properly endorsed, where
required, so that such items may be collected by the Collateral Agent, which
may be received by the Grantor at any time. The Grantor shall have no right
to withdraw any funds deposited in the Collateral Lockbox Accounts. Except as
otherwise provided below in this paragraph, the Collateral Agent shall apply,
or cause to be applied, all or any of the then balance, representing
collected funds, in each of the Collateral Lockbox Accounts, toward payment of
the Obligations, whether or not then due, in such amounts and in such order of
application as set forth in the Intercreditor Agreement; PROVIDED, HOWEVER,
that for the time period commencing on the date of this Agreement and ending
on a date ninety (90) days thereafter, the Collateral Agent shall apply, or
cause to be applied on a daily basis, all or any of the then balance
representing collected funds in each of the Collateral Lockbox Accounts,
other than (i) funds which satisfy the requirements set forth in SECTION 6
hereof and which are funds identified as Non-Recourse Lender Funds or CXC Funds
pursuant to a Notice to Release Non-Recourse Lender Funds or Notice to
Release CXC Funds, plus (ii) an amount equal to the lesser of (A)
$3,000,000, (B) an amount equal to the sum of: (I) Unidentified Checks
held in a Collateral Lockbox Account for less than seventeen (17) Business
Days after receipt of each such Unidentified Check by the Grantor or the
Collateral Agent, as applicable and (II) funds which have not been identified
as CXC Funds or Non-Recourse Lender Funds as described above and which have
been held in a Collateral Lockbox Account for seven (7) Business Days or
less, and (C) an amount identified by the Grantor as funds not to be
applied. The Collateral Agent is authorized to endorse, in the name of the
Grantor, any item, however received by the Collateral Agent, representing any
payment on or other proceeds of any of the Collateral. Except as otherwise
set forth below in paragraph (d) of this Section, any such items which
constitute Collateral which may be received by the Grantor shall not be
commingled with any other funds or property, but will be held in express
trust for the benefit of the Collateral Agent separate and apart from the
Grantor's own funds or property until delivery is made to the Collateral
Agent. The Collateral Agent is hereby entitled to notify each financial
institution at which any of the Grantor's Collateral Lockbox Accounts,
Mandatory Bank Accounts, Permitted Bank Accounts, or deposit accounts are
located and on which the Collateral Agent has a Lien, to immediately remit
the balance in such accounts to the Collateral Agent to be deposited in a
Collateral Lockbox Account as directed by the Collateral Agent.
(i) The Collateral Agent may invest or reinvest, or cause to be
invested or reinvested, to the extent practicable, monies on
deposit in any or all Collateral Lockbox Accounts in a Cash Equivalent
Investment.
(ii) The Collateral Agent shall have no liability for any loss of
principal or failure to achieve any minimum return, absent gross
negligence or willful misconduct on the part of the Collateral Agent.
Any interest or other income earned on
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<PAGE> 32
amounts in any Collateral Lockbox Account shall be held by the
Collateral Agent as Collateral to secure the Obligations, including
without limitation, the Grantor's Obligations and shall be applied in
accordance with SECTION 4(B) hereof. Income tax on all interest
earned on amounts in the Collateral Lockbox Account shall be payable
solely by the Grantor.
(c) LOCATION OF MANDATORY BANK ACCOUNTS. Each
Mandatory Bank Account shall be maintained with an Intercreditor Lender.
(d) NON-RECOURSE DEBT TRANSITION. For the time
period commencing on the Agreement Date and ending on a date ninety (90)
days thereafter, funds representing Excluded Collateral may be remitted to the
Collateral Lockboxes and Collateral Lockbox Accounts. The Grantor hereby
agrees to deliver to the Collateral Agent, no less frequently than once a
day, a written certification duly executed by the Grantor setting forth the
dollar amount of funds representing Excluded Collateral received in each of
the Collateral Lockboxes and each of the Collateral Lockbox Accounts for the
time period specified and identifying the applicable Non-Recourse Lender(s)
entitled to receive such funds and the amount due each such Non-Recourse
Lender. The Grantor agrees to effectuate a transition to the CXC Lockboxes,
CXC Lockbox Accounts, the Non-Recourse Lockboxes, and the Non-Recourse Lockbox
Accounts as described in SECTION 6 below to be completed no later than a date
which is ninety (90) days after the Agreement Date.
(e) COLLATERAL AGENT POWERS. The Grantor hereby
transfers to the Collateral Agent the exclusive dominion and control of each
of the Collateral Lockbox Accounts and all funds from time to time therein.
(f) BANK ACCOUNTS; COLLATERAL LOCKBOX ACCOUNT LETTERS.
With respect to each Mandatory Bank Account and each Permitted Bank Account in
existence on the Agreement Date, other than those listed on SCHEDULES I AND II
attached hereto, the Grantor has taken and has caused to be taken, all actions
necessary or as requested by the Collateral Agent to create and maintain in
each such account a first priority perfected Lien in favor of the Collateral
Agent and the Grantor has executed and delivered or will execute and deliver
to the Collateral Agent no later than five (5) Business Days after the
Agreement Date a duly executed Sweep Agreement with respect to each such
Mandatory Bank Account and Permitted Bank Account. With respect to each
Mandatory Bank Account and Permitted Bank Account listed on SCHEDULES I AND
II attached hereto, the Grantor has taken and has caused to be taken, all
actions necessary or as requested by the Collateral Agent to create and
maintain in each such account a first priority Lien in favor of the
Collateral Agent and the Grantor has executed and delivered or will execute
and deliver to the Collateral Agent no later than five (5) Business Days
after the Agreement Date a duly executed Sweep Agreement with respect to each
such Mandatory Bank Account and Permitted Bank Account. With respect to each
and every other Mandatory Bank
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Account, the Grantor agrees to take, and cause to be taken, all actions
necessary or as requested by the Collateral Agent to create and maintain in
each such Mandatory Bank Account a first priority perfected Lien in favor of
the Collateral Agent and to execute and deliver to the Collateral Agent a duly
executed Sweep Agreement with respect to each such account prior to the
creation of each such account. With respect to each Collateral Lockbox
Account in existence on the Agreement Date maintained at a financial
institution other than the Collateral Agent, the Grantor has delivered to the
Collateral Agent duly executed Collateral Lockbox Account Letters in the form
of EXHIBIT I attached hereto (the "COLLATERAL LOCKBOX ACCOUNT LETTERS").
The Grantor agrees to execute and deliver, and cause to be executed and
delivered, such additional Collateral Lockbox Account Letters as the Collateral
Agent may request.
(g) ACCOUNT DEBTORS. The Grantor has instructed each
and every existing Account Debtor, and hereby agrees to, at the Grantor's
expense, immediately instruct each new Account Debtor, to make all payments due
or to become due, or to continue to make all payments due or to become due, as
the case may be, subject to the terms and conditions hereof, to the Collateral
Lockboxes for deposit in the Collateral Lockbox Accounts.
(h) AUTHORIZATION. The Grantor hereby authorizes the
Collateral Agent to notify each Collateral Lockbox Bank of the Collateral
Agent's exclusive control of and dominion over the Collateral Lockbox
Accounts maintained at such Collateral Lockbox Bank and the Grantor agrees
to execute and deliver from time to time to the Collateral Lockbox Banks
such documents, agreements and writings as the Collateral Agent may
reasonably request including, without limitation, Collateral Lockbox Account
Letters.
(i) BANK ACCOUNTS. Attached hereto as SCHEDULE VI
is a true, complete, correct and accurate listing of each of the Grantor's
Lockboxes, Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank
Accounts, Permitted Non-Recourse Bank Accounts, Deposit Accounts, deposit
accounts, CXC Lockboxes, CXC Lockbox Accounts, Non-Recourse Lockbox
Accounts, Collateral Lockboxes, Collateral Lockbox Accounts, Special
Permitted Bank Accounts and other deposit accounts and other accounts existing
as of the Agreement Date.
SECTION 5 [INTENTIONALLY OMITTED].
SECTION 6 NON-RECOURSE FINANCING.
(a) CXC ACCOUNTS AND FUNDS. With respect to the
CXC Transaction, the Grantor hereby agrees to continue to make or redirect,
as the case may be, within ninety (90) days after the Agreement Date, all
payments due from Obligors of the Transferred Lease Receivables to new
Lockboxes and Lockbox Accounts thereby creating CXC Lockboxes and CXC Lockbox
Accounts for the benefit of the CXC Agent and CXC. In the event that the
Collateral Agent
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receives a written notice and certification in the form of EXHIBIT II
attached hereto ("NOTICE TO RELEASE CXC FUNDS") duly executed by an
Authorized Signatory stating, among other things, that the Collateral Agent
previously received monies or monies were deposited into the Collateral
Lockbox Account which constitute Collections (as defined in the CXC
Intercreditor Agreement) or proceeds of any Transferred Lease Receivable,
Related Security (as defined in the CXC Intercreditor Agreement) or CXC
Equipment Collateral with respect thereto, and provided that such monies
constitute collected funds (collectively, "CXC Funds"), which are either (i)
held in a Collateral Lockbox Account, or (ii) funds previously applied in
reduction of the Obligations and to the extent that new funds were not
subsequently advanced to the Grantor, the Collateral Agent shall promptly
deliver such monies (A) prior to the occurrence of an Event of Default, to the
Grantor for delivery to the CXC Agent by depositing such monies into the
General Non-Recourse Lender Account, and (B) after the occurrence of an Event
of Default which has not been waived in accordance with the terms of the
Intercreditor Agreement, to the CXC Agent.
(b) OTHER NON-RECOURSE ACCOUNTS AND FUNDS. With
respect to all other Non-Recourse Debt, the Grantor hereby agrees to continue
to make or redirect, as the case may be, all payments due from Non-Recourse
Obligors of the Transferred Lease Receivables to existing or new, as the
case may be, Lockboxes and Lockbox Accounts (to be established within ninety
(90) days after the Agreement Date) which, in either case, shall constitute
Non-Recourse Lockboxes and Non-Recourse Lockbox Accounts for the benefit of
the Non-Recourse Lenders (other than CXC). In the event that the Collateral
Agent receives a written notice and certification in the form of EXHIBIT III
attached hereto ("NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS") duly
executed by an Authorized Signatory stating, among other things, that the
Collateral Agent previously received monies or monies were deposited into the
Collateral Lockbox Account which constitute Excluded Collateral, and provided
that such monies constitute collected funds (collectively, "Non-Recourse
Lender Funds"), which are either (i) held in a Collateral Lockbox Account, or
(ii) funds previously applied in reduction of the Obligations and to the
extent that new funds were not subsequently advanced to the Grantor, the
Collateral Agent shall promptly deliver such monies (A) prior to the
occurrence of an Event of Default, to the Grantor for delivery to the
appropriate Non-Recourse Lender by depositing such monies into the General
Non-Recourse Lender Account, and (B) after the occurrence of an Event of
Default which has not been waived in accordance with the terms of the
Intercreditor Agreement, to the applicable Non-Recourse Lender.
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(c) NOTICE AND RELEASE OF COLLATERAL FOR
NON-RECOURSE DEBT TRANSACTION.
(i) In the ordinary course of its business, the
Grantor and LDI Funding may carry-out the CXC Transaction and may
otherwise sell and/or finance Leases and related Collateral and,
in connection therewith, incur Non-Recourse Debt. At least one
Business Day prior to the proposed sale or financing, the Grantor
shall provide to the Collateral Agent a written notice in the form of
EXHIBIT IV attached hereto ("NOTICE OF NON-RECOURSE FINANCING"),
duly executed by an Authorized Signatory, of any proposed sale or
financing of Leases and related Collateral and the incurrence of
Non-Recourse Debt.
(ii) The Grantor may request that the Collateral
Agent release or subordinate its Lien on that portion of the
Collateral which is the subject of the proposed Non-Recourse Debt
transaction (other than pursuant to the CXC Transaction) by
submitting to the Collateral Agent a release in the form of EXHIBIT V
attached hereto ("NON-RECOURSE DEBT RELEASE") duly executed by an
Authorized Signatory, or a subordination agreement in the form of
EXHIBIT VII, attached hereto ("SUBORDINATION AGREEMENT"), duly
executed by an Authorized Signatory, as applicable.
(iii) Subject to the terms and conditions of the
Intercreditor Agreement, upon receipt of such Notice of Non-Recourse
Financing and such Non-Recourse Debt Release, CXC Release or
Subordination Agreement, as the case may be, the Collateral Agent
shall forthwith execute and deliver to the Grantor such Non-Recourse
Debt Release or Subordination Agreement, as applicable, unless,
after the occurrence of an Event of Default, the Required Lenders and,
if required pursuant to the terms of the Intercreditor Agreement,
each Affected Subject Lender (as defined in the Intercreditor
Agreement) have directed otherwise. The Non-Recourse Debt
Release or Subordination Agreement, as the case may be, will become
effective only upon consummation of the proposed Non-Recourse Debt
Transaction described in the applicable Notice of Non-Recourse
Financing, and receipt by the Collateral Agent of the full proceeds
of such other Non-Recourse Debt transaction minus the amount
specified by the Grantor in the Notice of Non-Recourse Financing to
be paid to third parties. Upon the effectiveness of the
Non-Recourse Debt Release the Collateral which is described therein
shall, for all purposes hereof, cease to be Collateral and will be
deemed to be Excluded Collateral.
(iv) Subject to the terms and conditions of the
Intercreditor Agreement, the Collateral Agent shall release its Lien
on Collateral in connection with the CXC Transaction in accordance
with the terms and procedures of Section 3 of the CXC Intercreditor
Agreement and, upon such release, such
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Collateral shall, for all purposes hereof, cease to be Collateral and
will constitute Excluded Collateral.
(v) Except as otherwise specifically provided in this
Section 6, the Collateral Agent shall not release or subordinate its
Lien on any Collateral unless specifically authorized and directed by
the Required Lenders and, if required pursuant to the terms of the
Intercreditor Agreement, the Affected Subject Lenders (as defined in
the Intercreditor Agreement).
SECTION 7 MARKING AND DELIVERY OF COLLATERAL.
(a) MARKING OF COLLATERAL. The Grantor shall:
(i) promptly mark conspicuously each document included in the Inventory
and each item of Chattel Paper and each Contract and each of its records
pertaining to the Collateral with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to a first priority
security interest of Continental Bank, as the Collateral Agent" (or an
abbreviation thereof satisfactory to the Collateral Agent), and (ii) ensure
that each item of Chattel Paper is evidenced by one and only one, if any,
executed original document.
(b) UPON EVENT OF DEFAULT. Following the occurrence
of any Event of 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.
SECTION 8 REPRESENTATIONS AND WARRANTIES.
The Grantor represents and warrants to the Collateral Agent
as follows:
(a) LOCATION OF BUSINESS AND COLLATERAL.
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(i) The Grantor's principal place of business and
chief executive office is located at 1375 East Ninth Street,
Cleveland, Ohio 44114. The Grantor's books and records are
located, at 30033 Clemens Road, Westlake, Ohio 44145. The
Grantor's principal place of business and its books and records will
be moved, effective on or about August 31, 1994, to 4770 Hinckley
Industrial Parkway, Cleveland, Ohio 44109. As of the Agreement Date,
each of the Grantor's offices, warehouses (whether owned or leased)
and each other of the Grantor's locations are identified on SCHEDULE
VII attached hereto. Except for the transfer to the Hinckley
facility, the Grantor will not change such principal place of
business, chief executive office or the location of its books and
records relating to the Collateral. In no event shall the books
and records relating to the Collateral be relocated to anywhere
outside the continental United States. In addition to its actual
name, the Grantor also uses the following trade names: Leasing
Dynamics and Sea-Tech. After the Agreement Date, Grantor will not do
business under any other trade name, unless it has given twenty (20)
days' prior written notice thereof to the Collateral Agent and taken
such action as is necessary and as is reasonably requested by the
Collateral Agent or any Intercreditor Lender to cause the Lien of the
Collateral Agent in the Collateral to continue to be perfected.
(ii) All of the Collateral Equipment and Collateral
Inventory are located at the places specified on SCHEDULE VIII (as
updated in accordance with SECTION 10(D) hereof). For the time
period commencing on the date of this Agreement and ending on the
date of the move to the Hinckley facility referred to in clause (i)
above, but in any event, no later than October 15, 1994, the office
where the Grantor keeps its records concerning the Accounts,
Accounts Receivable and all Chattel Paper that evidences Collateral,
is located at 30033 Clemens Road, Westlake, Ohio 44145.
Thereafter, the office where the Grantor keeps its records
concerning the Accounts, Accounts Receivable and all Chattel Paper
that evidences Collateral, will be located at 4770 Hinckley
Industrial Parkway, Cleveland, Ohio 44109. No Account in excess of
One Thousand Dollars ($1,000) or in the aggregate amount of Fifty
Thousand Dollars ($50,000) and no Account Receivable in excess of
One Thousand Dollars ($1,000) or in the aggregate amount of Fifty
Thousand Dollars ($50,000) is evidenced by a promissory note or other
instrument which has not been delivered to the Collateral Agent in
accordance with SECTION 9(B) hereof.
(b) PLEDGED SHARES. The Pledged Shares have been
duly authorized and validly issued and are fully paid and nonassessable.
The Pledged Shares constitute one hundred percent (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
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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) OWNERSHIP/TITLE TO COLLATERAL. 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 Permitted Liens
and the security interest created by this 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 Amended and Restated Credit Agreement. The Grantor owns
each of the patents, trademarks, copyrights, licenses and other intellectual
property included in the Collateral.
(d) POSSESSION. The Grantor has exclusive possession
and control of the Collateral Equipment and Collateral Inventory owned by it
other than Collateral Inventory subject to a Lease entered into in the
ordinary course of business, naming the Grantor as lessor, Collateral
Inventory in transit and Collateral Inventory shipped directly to the
Grantor's vendees or lessees by the Grantor's vendors in the ordinary course
of the Grantor's business.
(e) COLLATERAL. The pledge and delivery of the
Pledged Shares and Pledged Debt pursuant to this Agreement creates a valid,
continuing, and perfected first priority Lien upon the Security Collateral in
favor of the Collateral Agent. This Agreement creates and maintains a valid
and continuing Lien upon the Collateral in favor of the Collateral Agent
which is, except for those accounts and deposit accounts set forth on
SCHEDULES I AND II, a perfected Lien and which is, except as set forth on
SCHEDULE XII which the Grantor agrees to deliver no later than five (5)
Business Days after the Agreement Date to be attached hereto, a first
priority Lien. Appropriate financing statements have been filed in all
jurisdictions necessary to create and maintain a first priority Lien which is,
except for those accounts and deposit accounts set forth on SCHEDULES I AND II,
a perfected security interest and Lien.
(f) APPROVAL; CONSENTS. No authorization, approval
or other action by, and no notice to or filing with (other than the filings
and deliveries referred to in this Agreement) any governmental authority or
regulatory body is required for the (i) creation or perfection by the
Grantor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by the Grantor or (ii) for the
exercise by the Collateral Agent 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 may be required in connection with such
disposition by laws affecting the offering and sale of securities generally).
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(g) ACCOUNTS, ACCOUNTS RECEIVABLES AND GENERAL
INTANGIBLES. With respect to each of the Accounts, the Accounts
Receivable and the General Intangibles, and the Documents evidencing the
underlying obligations, the Collateral Agent may rely on all statements or
representations made by the Grantor on or with respect to any schedule of
accounts furnished to the Collateral Agent by the Grantor and, unless
otherwise indicated in writing by the Grantor, that:
(i) They are genuine, are in all material respects
what they purport to be, are not evidenced by a judgment and are
evidenced by one and only one, if any, executed original Instrument,
which has been delivered to the Collateral Agent;
(ii) Except for disputes in the ordinary course of
business, they represent undisputed, bona fide transactions
completed in accordance with the terms and provisions contained in any
documents related thereto;
(iii) The face amounts shown on any such schedule of
accounts provided to the Collateral Agent and all invoices and
statements delivered to the Collateral Agent with respect to any
Account, Account Receivable and the General Intangibles are actually
and absolutely owing to the Grantor and are not contingent for any
reason, except for disputes and non-material errors arising in the
ordinary course of business;
(iv) To the best of the Grantor's knowledge, there are
no set-offs, counterclaims or disputes existing or asserted with
respect thereto and the Grantor has not made any agreement with
any Account Debtor thereunder for any deduction therefrom, except
discounts or allowances allowed by the Grantor in the ordinary
course of its business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face amount of the
invoices to which such discounts or allowances relate;
(v) To the best of the Grantor's knowledge, there
are no facts, events or occurrences which in any way impair the
validity or enforcement thereof or tend to reduce the amount payable
thereunder from the invoice face amount shown on any schedule of
Accounts, Accounts Receivable and General Intangibles furnished to
the Collateral Agent and on all contracts, invoices and statements
delivered to the Collateral Agent with respect thereto;
(vi) Such Accounts, Accounts Receivable and the
General Intangibles are not subject to any Lien, except those of
the Collateral Agent and Permitted Liens;
(vii) The Collateral giving rise to the Accounts,
Accounts Receivable and the General Intangibles is not, and was not at
the time of the sale thereof, subject to any Lien
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or claim, except the Lien of the Collateral Agent and Permitted Liens;
(viii) To the best of the Grantor's knowledge, there
is no fact or circumstances which would impair the validity or
collectability of any Account or any Account Receivable;
(ix) To the best of the Grantor's knowledge, there
are no proceedings or actions which are threatened or pending
against any Account Debtor thereunder which might result in any
materially adverse effect upon the Grantor; and
(x) No Collateral is under consignment to or from any
person.
(h) AUTHORIZATION; ENFORCEABILITY. This Agreement,
the Intercreditor Agreement and each of the Debt Documents to which the
Grantor is a party, when executed and delivered, will constitute the legal,
valid and binding obligations of the Grantor, enforceable against the Grantor
in accordance with its respective terms, except as enforcement may be
limited by bankruptcy, insolvency or any other similar laws of general
application affecting enforcement of creditors rights or by general principles
of equity limiting the availability of equitable remedies.
(i) SOLVENCY. The Grantor is now, and after
consummation of the transactions contemplated by this Agreement, the
Intercreditor Agreement and each Debt Document (i) will be solvent and able to
pay its debts as they mature; (ii) will be the owner of assets the fair
saleable value of which is greater than the amount necessary to repay the
obligations thereunder, and (iii) will have capital which is not unreasonably
small in relation to its business. The Grantor is not insolvent (as that term
is defined in the Bankruptcy Code) and will not be rendered insolvent by the
execution, delivery or performance of this Agreement or, the other Debt
Documents, or the consummation of the transactions contemplated hereby and
thereby. The Grantor has not made a general assignment for the benefit of
its creditors. No proceeding has been instituted by or against the Grantor
alleging that the Grantor is insolvent or unable to pay its debts as they
mature. The Grantor does not presently contemplate the commencement of a
general assignment for the benefit of creditors nor the filing of any
proceeding under any provisions of the Bankruptcy Code.
(j) LEASES. Attached hereto as SCHEDULE IX, is a
true, correct, complete and accurate list of each of the Leases and all
Chattel Paper subject to the Collateral Agent's Lien (collectively, each
Lease and all Chattel Paper subject to the Collateral Agent's Lien, "LEASE
COLLATERAL") in effect as of the Agreement Date, each of which is in full force
and effect. The Grantor shall promptly notify the Collateral Agent if it
believes or has been notified by any person that any Lease Collateral is no
longer in full force and effect, except for the expiration or termination of a
Lease in accordance with its stated terms. With
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respect to the Lease Collateral in existence from time to time: (i) each item
of Lease Collateral is valid, enforceable in accordance with its terms and in
full force and effect; (ii) the Grantor is the sole holder of the rights and
interests ascribed to the Grantor under each item of Lease Collateral and has
full power and authority to assign, transfer and set over the same and to
grant to and confer upon the Collateral Agent the rights, interests, powers
and authorities granted and conferred under this Agreement to the Collateral
Agent; (iii) the Grantor has observed and performed all covenants and
obligations under each item of Lease Collateral, required to be performed
by the Grantor and the Grantor shall observe and perform all of the
covenants under each item of Lease Collateral; (iv) all representations and
warranties of the Grantor contained in each item of Lease Collateral are
true, complete, correct and accurate in all material respects; (v) the
Grantor has no knowledge of any facts which impair the validity or
enforceability of any item of Lease Collateral; (vi) the Grantor will not
modify, waive or amend in a manner adverse to the Grantor, nor consent to
such modification, waiver or amendment of, any item of Lease Collateral,
without the Collateral Agent's prior written consent; and (vii) each item of
Lease Collateral originated by the Grantor is not and does not have the
potential of being, subject to any offset, counterclaim or other defense on
the part of the applicable lessee or to any claim on the part of such lessee
denying liability thereunder in whole or in part: with respect to each item of
Lease Collateral not originated by the Grantor, the Grantor agrees to use its
best efforts to ensure that each item of Lease Collateral is not, and does not
have the potential of being, subject to any offset, counterclaim or other
defense on the part of the applicable lessee or to any claim on the part of
such lessee denying liability thereunder in whole or in part.
(k) INVENTORY. With respect to the Collateral
Inventory:
(i) Each item of Inventory is classified as Inventory
under the UCC;
(ii) Each item of Collateral Inventory certified by
the Grantor in any Borrowing Base Certificate (as such term is
defined in the Amended and Restated Credit Agreement) was either new
when purchased or acquired by the Grantor or is designated as used
equipment in the Borrowing Base Certificate; and
(iii) Except for necessary repairs and servicing, each
item of Collateral Inventory which is not leased is located only at
the location for such item of Inventory set forth herein.
(l) THIRD PARTY NOTES. Each of the Third Party Notes
(i) constitutes the valid and binding obligation of the maker thereof and is
enforceable in accordance with its terms, and (ii) has not been modified or
amended. The Grantor has no knowledge of
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<PAGE> 42
any facts which would impair the validity or enforceability of any of the
Third Party Notes. As of the date hereof, there remains owing under the
Picker Note and the MRK Secured Note, the sum of $3,500,000 and $2,000,000,
respectively, in principal, plus accrued and accruing interest.
SECTION 9 GENERAL COVENANTS REGARDING COLLATERAL.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) FINANCING STATEMENTS, ETC.. Concurrently with the
execution and delivery of this Agreement, and from time to time thereafter
promptly following the request of the Collateral Agent, the Grantor shall
take any and all actions necessary and as reasonably requested by the
Collateral Agent or any of the Intercreditor Lenders to maintain the first
priority perfected security interest and Lien on the Collateral in favor of
the Collateral Agent, including, without limitation, recording, registering
and filing this Agreement and all necessary and/or requested notices,
financing statements and/or other documents or instruments with the FAA in
Oklahoma City, Oklahoma, United States of America, and the Grantor agrees to
execute and deliver to the Collateral Agent such documents as may be
necessary to perfect and maintain perfected the Collateral Agent's first
priority continuing security interest in and Lien thereon and on the
Collateral. The Grantor will join with the Collateral Agent in the execution
and filing of such financing statement or statements and the like, in the form
and content reasonably required by the Collateral Agent. The Grantor will
execute and file in the appropriate jurisdictions such financing statements and
other documents necessary and as reasonably requested by the Collateral Agent
or any Intercreditor Lender to create and maintain the Grantor's first priority
perfected security interest in and Lien on all property subject to a Lease.
The Grantor will pay all costs of filing any financing, continuation or
termination statements, or other filings with respect to the Liens created
by this Agreement, together with all costs and expenses of any Lien search
reasonably required by the Collateral Agent during the term hereof.
(b) FURTHER ASSURANCES. At any time and from time to
time, upon the written request of the Collateral Agent, and at the sole
expense of the Grantor, the Grantor will promptly and duly execute and
deliver any and all such further instruments and documents and take such
further action as the Collateral Agent may reasonably deem desirable to obtain
the full benefits of this Agreement and of the rights and powers herein
granted, including, without limitation, using its reasonable efforts to
secure all consents and approvals necessary or appropriate for the
assignment to the Collateral Agent of any Lease or Contract held by the Grantor
or in which the Grantor has any rights not heretofore assigned, the filing of
any financing or continuation statements under the UCC with respect to the
Liens granted hereby,
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transferring Collateral to the Collateral Agent's possession (if a Lien in
such Collateral can be perfected by possession), and complying with or
remaining subject to the Geneva Convention, the laws and regulations of the
FAA, or the laws and regulations of any of the various states or countries in
which the Aircraft is or may fly over, operate in, or become located in. The
Grantor also hereby authorizes the Collateral Agent to file any such financing
or continuation statement without the signature of the Grantor to the extent
permitted by applicable law.
(c) STATEMENTS AND SCHEDULES. The Grantor will
furnish to the Collateral Agent from time to time statements, schedules
and any other information further identifying and describing the Collateral
and such reports in connection with the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail.
(d) COMPLIANCE WITH LAWS. The Grantor will neither
use the Collateral, nor permit the Collateral to be used, for any unlawful
purpose or contrary to any statute, law, ordinance or regulation relating
to the registration, use, operation or control of the Collateral. The
Grantor will comply with, or cause to be complied with, at all times and
in all material respects, all statutes, laws, ordinances and regulations of
the United States (including, without limitation, the FAA), the State of
Ohio, and of all other governmental, regulatory, or judicial bodies applicable
to the use, operation, maintenance, overhauling, or condition of the
Collateral, or any part thereof, and with all requirements under any licenses,
permits, or certificates relating to the use or operation of the Collateral
which are issued to the Grantor or to any other person having operational
control of the Collateral; PROVIDED, HOWEVER, that the Grantor may, in good
faith and by appropriate legal or other proceedings, contest the validity of
any such statutes, laws, ordinances or regulations, or the requirements of any
such licenses, permits, or certificates, and pending the determination of such
contest may postpone compliance therewith, unless the rights of the Collateral
Agent hereunder are or may be materially adversely affected thereby.
Without limiting the generality of the foregoing, the
Grantor agrees that at no time during the effectiveness of this Agreement
shall the Aircraft be operated in, located in, or relocated to, by the Grantor
or any other person or entity, any jurisdiction unless the Geneva Convention,
together with the necessary enacting rules and regulations therefor (or some
like treaty and regulations satisfactory to the Collateral Agent and the
Required Lenders) shall be in effect in such jurisdiction and any notices,
financing statements, documents, or instruments necessary or required, in the
opinion of counsel for the Collateral Agent, to be filed in such jurisdiction
shall have been filed and file stamped copies thereof shall have been
furnished to the Collateral Agent. The foregoing authority to use the Aircraft
to the contrary notwithstanding, at no time shall the Aircraft be operated in
or over any area which may expose the Collateral Agent to any penalty,
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fine, sanction or other liability, whether civil or criminal, under any
applicable law, rule, treaty or convention, nor may the Aircraft be used in
any manner which is or is declared to be illegal and which may thereby render
the Aircraft liable to confiscation, seizure, detention or destruction.
(e) IDENTIFICATION OF LEASES AND CHATTEL PAPER.
The Grantor shall deliver to the Collateral Agent a revised SCHEDULE IX
(i) prior to the occurrence of an Event of Default, on or prior to the tenth
(10th) day of each calendar month, and (ii) following the occurrence of an
Event of Default, as requested by the Collateral Agent or any Intercreditor
Lender but no less frequently than once a month, on or prior to the tenth
(10th) Business Day of each calendar month. The failure of the Grantor to
execute and deliver such schedule shall not affect or limit the Collateral
Agent's Lien or other rights in and to the Lease Collateral.
SECTION 10 COVENANTS REGARDING COLLATERAL EQUIPMENT AND
COLLATERAL INVENTORY.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) LOCATION OF COLLATERAL EQUIPMENT. The Grantor
shall keep the Collateral Equipment at the places specified in SECTION 8(A)
hereof and keep the Collateral Inventory at the places specified in such
SECTION 8(A) and SECTION 10(D) hereof or, with respect to Collateral Equipment,
upon thirty (30) days' prior written notice to the Collateral Agent, at such
other places in a jurisdiction in which all action required by SECTION 9
hereof shall have been taken with respect to the Collateral Equipment.
(b) MAINTENANCE OF COLLATERAL EQUIPMENT AND COLLATERAL
INVENTORY. The Grantor shall cause each item of the Collateral Equipment and
Collateral Inventory to be maintained and preserved or cause the lessee
thereof to maintain and preserve the Collateral Equipment 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, (i)
make or cause to be made all repairs, replacements, and other improvements
thereto that are necessary or desirable to such end only by qualified
personnel who are trained in the repair and maintenance of such item, and (ii)
deliver any and all proceeds, subject to the terms of the lease, received in
the case of any loss or damage to the Collateral Agent (who shall deposit
the same in a Collateral Lockbox Account). In addition to the provisions
set forth in SECTION 11 hereof, 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 Collateral Equipment.
(c) PAYMENT OF TAXES. The Grantor shall pay
promptly when due or cause the lessee to pay promptly when due all
property and other taxes, assessments and governmental charges or levies
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imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Collateral Equipment and Collateral Inventory, except
to the extent the validity thereof is being contested in good faith as
permitted pursuant to the Credit Agreements.
(d) LOCATION OF COLLATERAL INVENTORY. The Grantor
shall update SCHEDULE VIII of this Agreement with a written schedule
describing the location of all Collateral Inventory (i) prior to the
occurrence of an Event of Default, on or prior to the tenth (10th) day of
each calendar month, and (ii) following the occurrence of an Event of
Default, as requested by the Collateral Agent or any Intercreditor Lender
but no less frequently than once a month, on or prior to the tenth (10th)
Business Day of each calendar month. The failure of the Grantor to execute
and deliver such schedule shall not affect or limit the Collateral Agent's
security interest or Lien or other rights in and to the Collateral Inventory.
SECTION 11 COVENANTS REGARDING INSURANCE.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) MAINTENANCE OF INSURANCE. The Grantor shall,
at its own expense, maintain insurance, or cause any lessee to insure, with
respect to the Collateral in such amounts, against such risks, in such form
and with such insurers, as shall be satisfactory to the Collateral Agent and
the Required Lenders from time to time. Each such policy shall in addition
(i) name the Collateral Agent as an additional insured party and loss payee
thereunder (without any representation or warranty by or obligation upon the
Collateral Agent) pursuant to certificates in form and substance satisfactory
to the Required Lenders, (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 for payment of premiums or other amounts with respect thereto, (iv) with
respect to insurance maintained by the Grantor, provide that at least thirty
(30) days' prior written notice of any proposed termination, cancellation,
lapse or nonrenewal shall be given to the Collateral Agent by the insurer,
and (v) with respect to insurance maintained by a lessee of the Grantor,
the Grantor shall use its best efforts to comply with the preceding clause
(iv). The Grantor shall deliver to the Collateral Agent original or
duplicate policies of such insurance and certificates of insurance and, as
often as the Collateral Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. The Grantor shall deliver to
the Collateral Agent from time to time, as the Collateral Agent may
reasonably request, schedules setting forth all insurance maintained by the
Grantor then in effect.
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(b) GRANTOR TO TAKE REQUIRED ACTION. The Grantor
shall, at the request of the Collateral Agent, duly execute and deliver
instruments of assignment of the insurance policies described in paragraph
(a) in order to comply with the requirements of SECTION 9 above and shall
cause the insurer(s) to acknowledge notice of such assignment. The Grantor
shall take all such action as the insurer(s) providing such insurance shall
require if the failure to do so would cause the insurance policy(ies) to be
cancelled or the coverage thereunder adversely modified.
(c) NOTICE OF CLAIMS. The Grantor shall notify the
Collateral Agent of any single Collateral Insurance Claim known or which
should have been known to the Grantor which exceeds One Hundred Thousand
Dollars ($100,000) or any Collateral Insurance Claims known or which should
have been known to the Grantor which, in the aggregate, exceed Two Hundred
Fifty Thousand Dollars ($250,000) in any one (1) calendar year.
(d) DEPOSIT OF PROCEEDS. All amounts paid with
respect to any Collateral Insurance Claim shall be deemed to constitute
Proceeds and shall be deposited only in the Collateral Lockbox Accounts. In
the event that the applicable lease agreement requires that amounts paid with
respect to Collateral Insurance Claims be used to purchase replacement
Collateral Equipment, upon the request of the Grantor and receipt by the
Collateral Agent of evidence satisfactory to the Collateral Agent that such
purchase is so required, the Collateral Agent, prior to the occurrence of an
Event of Default, may release such Proceeds in order to purchase such
replacement Collateral Equipment.
(e) SETTLEMENT OF CLAIMS AND RELEASE OF PROCEEDS.
At any time prior to the occurrence or existence of an Event of Default, the
Grantor shall have the right to negotiate and settle only those Collateral
Insurance Claims less than Two Hundred Fifty Thousand Dollars ($250,000); with
respect to all other Collateral Insurance Claims and at any time from and
after the occurrence or existence of an Event of Default, the Collateral
Agent shall have full right and power (pursuant to the power of attorney
contained herein) to negotiate, settle and compromise any Collateral Insurance
Claim, at the direction of the Required Lenders. Except as set forth in
clause (d) above, all policy proceeds paid by the insurer(s) relating to any
such Collateral Insurance Claim shall be deposited into a Collateral Lockbox
Account.
(f) AIRCRAFT INSURANCE. The Grantor will at all
times, at its own cost and expense, maintain, or cause to be maintained, a
policy or policies of insurance with respect to the Aircraft covering such
risks, including, without limitation, insurance on the Aircraft for actual
usage, including all risk, ground and flight aircraft hull insurance, fire and
explosion coverage, including lightning and electrical damage, and public
liability and property damage insurance in the amounts and of the types
and with insurers as set forth on SCHEDULE XI attached hereto
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or as otherwise satisfactory to the Collateral Agent and the Required Lenders
from time to time.
SECTION 12 COVENANTS REGARDING ACCOUNTS AND ACCOUNTS
RECEIVABLE.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) RECORDS. The Grantor shall keep its chief place
of business and chief executive office and the office where it keeps its
books and records concerning the Accounts and Accounts Receivable, and the
original copies of all Chattel Paper that evidences Collateral, at the
location therefor specified on SCHEDULE VIII attached hereto or, upon
twenty (20) 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.
(b) NOTICE TO ACCOUNT DEBTORS. The Grantor hereby
authorizes the Collateral Agent, at any time or times after an Event of
Default, to notify, any or all Account Debtors that the Accounts and Accounts
Receivable have been assigned to the Collateral Agent, and that the Collateral
Agent has a Lien therein and to direct such Account Debtors to make all
payments due or to become due from them to the Grantor directly to a
Collateral Lockbox Account designated by the Collateral Agent from time to
time. Any such notice, in the Collateral Agent's sole discretion, may be
sent on the Grantor's stationery, in which event the Grantor shall co-sign
such notice with the Collateral Agent.
(c) VERIFICATIONS. The Collateral Agent shall have
the right to make test verifications of the Accounts and Accounts Receivable
and physical verifications of the Collateral in any manner and through
any commercially reasonable medium that it considers advisable, and the
Grantor agrees to furnish all such assistance and information as the
Collateral Agent may require in connection therewith. Prior to an Event of
Default, the Collateral Agent shall give reasonable advance notice of any
such verification (which shall be during business hours to the extent
possible) if such activities include a visit to any of the Grantor's business
locations. At any time after an Event of Default, the Grantor at its
expense will cause certified independent public accountants satisfactory to
the Collateral Agent to prepare and deliver to the Collateral Agent at
any time and from time to time promptly upon the Collateral Agent's
request in form and substance satisfactory to the Collateral Agent such
information pertaining to the Accounts and Accounts Receivable, including
statements and schedules further identifying and describing the Collateral
and such other reports (in addition to all reports required by the
Credit Agreements) in connection with the Collateral as the Collateral Agent
may reasonably request from time to time, all in reasonable detail.
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(d) LIMITATIONS ON MODIFICATIONS OF ACCOUNTS.
Until such time as the Collateral Agent, at the direction of the Required
Lenders, shall notify the Grantor of the revocation of such power and
authority, the Grantor may grant any extension of the time of payment of any
of the Accounts, Accounts Receivable, Chattel Paper or Instruments,
compromise, compound or settle the same for less than the full amount
thereof, release, wholly or partly, any person liable for the payment thereof,
and allow any credit or discount.
(e) SCHEDULE OF ACCOUNTS AND ACCOUNTS RECEIVABLE.
On or prior to the tenth (10th) day of each calendar month, the Grantor
shall provide the Collateral Agent with schedules describing all Accounts and
Accounts Receivable created or acquired by it and shall execute and deliver
confirmatory written assignments of such Accounts and Accounts Receivable to
the Collateral Agent; PROVIDED, HOWEVER, that the failure of the Grantor to
execute and deliver such schedules and/or assignments describing all
Accounts and Accounts Receivable to the Collateral Agent shall not affect or
limit the Collateral Agent's or any Intercreditor Lender's security interest
or other rights in and to the Accounts and Accounts Receivable. Together with
each schedule, the Grantor shall furnish, upon request of the Collateral
Agent, following the occurrence of a Default or an Event of Default, 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 the Collateral Agent may require. The Grantor will not re-date
any invoice or sale or make sales on extended dating beyond that customary
in its industry. If the Grantor becomes aware of anything materially
detrimental to the material credit of any of its customers in the possession
of material Collateral, it will promptly advise the Collateral Agent thereof.
SECTION 13 ADDITIONAL COVENANTS.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) NO TRANSFER OF COLLATERAL. The Grantor shall not:
(i) sell, assign (by operation of law or otherwise)
or otherwise dispose of any of the Collateral, or attempt to
contract to do so, except (A) Collateral Inventory and that portion
of Collateral Equipment consisting of property subject to a Lease, in
the ordinary course of business (and provided that the Proceeds
thereof are promptly deposited into a Collateral Lockbox Account
designated by the Collateral Agent from time to time), (B) as
permitted under the Amended and Restated Credit Agreement and (C)
pursuant to the CXC Transaction; or
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<PAGE> 49
(ii) 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) PROCEEDS OF SALE. With respect to the sale,
assignment or other disposition of any of the Collateral pursuant to clause
(a)(i)(B) above, the Grantor covenants and agrees that the proceeds of
such sale, assignment or other disposition shall be immediately deposited
into a Collateral Lockbox Account designated by the Collateral Agent from time
to time.
(c) PLEDGED SHARES. The Grantor 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 the Grantor, and (ii) pledge hereunder, immediately upon the
Grantor's acquisition directly or indirectly thereof, any and all additional
shares of stock or other securities of each issuer of the Pledged Shares.
(d) PAYMENT OF OBLIGATIONS. The Grantor will pay
promptly when due all charges imposed upon the Collateral or in respect of
its income or profits therefrom and all claims of any kind (including,
without limitation, claims for labor, materials and supplies), unless the
same are being diligently contested in good faith and for which reserves or
appropriate provision, if any, as shall be required by generally accepted
accounting principles, shall have been made therefor.
(e) LIMITATION OF LIENS ON COLLATERAL. The Grantor
will not create, permit or suffer to exist, and will defend the Collateral
against, and take such other action as is necessary to remove, any Lien on the
Collateral except Permitted Liens and will defend the right, title and
interest of the Collateral Agent in and to any of the Grantor's rights in
or under the Collateral against the claims and demands of all persons
whomsoever.
(f) COMPLIANCE WITH TERMS. The Grantor will
perform and comply with all obligations in respect of the Accounts,
Accounts Receivable, Chattel Paper, Contracts and all other agreements to which
it is a party or by which it is bound.
(g) THIRD PARTY NOTES. The Grantor shall irrevocably
instruct, respectively, (i) MRK to make all payments under that certain Asset
Acquisition Agreement dated May 31, 1994 by and among the Grantor, Computer
Systems and MRK, including, without limitation, payments in connection with
the MRK Secured Note, and (ii) Picker to make all payments in connection
with the Picker Note, directly into a Collateral Lockbox Account designated
by the Collateral Agent from time to time. The Grantor agrees that it shall
not amend, modify or waive any provision of any of the Third Party Notes
without the prior written consent of the Required Lenders and that upon a
default under the Third Party Notes, the Grantor shall promptly take all steps
necessary to enforce the same.
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(h) FURTHER INDEMNIFICATION. The Grantor agrees to
pay, and to save the Collateral Agent and the Intercreditor Lenders
harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all excise, sales or other similar taxes which
may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated by
this Agreement.
(i) MAINTENANCE OF RECORDS. The Grantor will keep
and maintain at its own cost and expense satisfactory and complete records of
the Collateral in the ordinary course of business, including, without
limitation, a record of all payments received and all credits granted with
respect to the Collateral and all other dealings with the Collateral. The
Grantor will mark its books and records pertaining to the Collateral to
evidence this Agreement and the Liens granted hereby. The Grantor agrees
that the Collateral Agent shall have the right, upon the occurrence of an
Event of Default, without prior notice, to require the Grantor to turn over
physical possession of, or to make available any such books and records to
the Collateral Agent or to its representatives on demand of the Collateral
Agent. Prior to the occurrence of an Event of Default, the Grantor shall
permit any representative of the Collateral Agent to inspect such books and
records during normal business hours at reasonable times and will provide
photocopies thereof to the Collateral Agent and such clerical and other
assistance as may be reasonably requested with regard thereto. Upon
reasonable notice and during regular business hours, the Collateral Agent and
its representatives shall also have the right to enter into and upon any
premises where any of the Collateral is located for the purpose of
inspecting the same, observing its use or otherwise protecting its interests
therein.
(j) SPECIAL COLLATERAL. Promptly upon the Grantor's
receipt of that portion of the Collateral (other than Chattel Paper) which
is or becomes evidenced by an agreement, writing, Instrument and/or
Document, including, without limitation, promissory notes, trade acceptances,
documents of title and warehouse receipts, but excluding Leases which are or
become Chattel Paper, the Grantor shall deliver the original thereof to the
Collateral Agent, together with appropriate endorsements or other specific
evidence (in form and substance acceptable to the Collateral Agent) of
assignment thereof to the Collateral Agent; PROVIDED, HOWEVER, that the
Grantor may deposit such Instruments only in a Collateral Lockbox Account
designated by the Collateral Agent from time to time.
(k) PERFORMANCE BY THE COLLATERAL AGENT OF THE
GRANTOR'S OBLIGATION. If the Grantor fails to perform or comply with any of
its covenants or agreements contained herein and the Collateral Agent, as
provided for by the terms of this Agreement, shall itself perform or comply,
or otherwise cause performance or compliance, with such covenants or
agreements, the reasonable expenses of the Collateral Agent incurred in
connection with such
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performance or compliance, together with interest thereon from the date paid
or incurred by the Collateral Agent until paid in full at the interest rate
determined in accordance with Section 2.3(b) of the Amended and Restated
Credit Agreement then in effect in respect of the Loans (as defined in the
Amended and Restated Credit Agreement), shall be payable by the Grantor to
the Collateral Agent on demand and shall constitute Obligations secured
hereby.
(l) MAINTENANCE AND REPAIRS OF AIRCRAFT.
(i) During the effectiveness of this Agreement, the
Grantor shall, at its expense, do or cause to be done each and all of
the following:
(A) Maintain and keep the Aircraft in as good
condition and repair as it is on the date of this
Agreement, ordinary wear and tear excepted;
(B) Maintain and keep the Aircraft in good order
and repair and airworthy condition in
accordance with the requirements of each of the
manufacturers' manuals and mandatory service
bulletins and each of the manufacturers'
nonmandatory service bulletins which relate to
airworthiness;
(C) Replace in or on the Airframe, any and all
Engines, parts, appliances, instruments or
accessories which may be worn out, lost,
destroyed or otherwise rendered unfit for use; and
(D) Without limiting the foregoing, cause to be
performed, on all parts of the Aircraft, all
applicable mandatory Airworthiness Directives,
Federal Aviation Regulations, Special Federal
Aviation Regulations, and manufacturers' service
bulletins relating to airworthiness, the
compliance date of which shall occur during the
term of this Agreement.
(ii) The Grantor shall be responsible for all required
inspections of the Aircraft and licensing or re-licensing of the
Aircraft in accordance with all applicable FAA and other
governmental requirements. The Grantor shall at all times cause the
Aircraft to have, on board and in a conspicuous location, a current
Certificate of Airworthiness issued by the FAA.
(iii) All inspections, maintenance, modifications,
repairs, and overhauls of the Aircraft (including those performed on
the Airframe, the Engines, and/or any components, appliances,
accessories, instruments, or equipment) shall be performed by
personnel authorized by the FAA to perform such services.
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(iv) If any Engine, component, appliance, accessory,
instrument, equipment or part of the Aircraft shall reach such a
condition as to require overhaul, repair or replacement, for any
cause whatever, in order to comply with the standards for maintenance
and other provisions set forth in this Agreement, the Grantor may:
(A) Install on the Aircraft such items of
substantially the same type in temporary
replacement of those then installed on the
Aircraft, pending overhaul or repair of the
unsatisfactory item; PROVIDED, HOWEVER, that such
replacement items must be in such a condition as
to be permissible for use upon the Aircraft in
accordance with the standards for maintenance and
other provisions set forth in this Agreement;
PROVIDED FURTHER, HOWEVER, that the Grantor
must, at all times, retain unencumbered title to
any and all items temporarily removed; or
(B) Install on the Aircraft such items of
substantially the same type in permanent
replacement of those then installed on the
Aircraft; PROVIDED, HOWEVER, that such
replacement items must be in such condition as to
be permissible for use upon the Aircraft in
accordance with the standards for maintenance
and other provisions set forth in this
Agreement; PROVIDED FURTHER, HOWEVER, that the
Grantor must first comply with each of the
requirements of clause (v) hereinbelow.
(v) In the event that during the effectiveness of
this Agreement, the Grantor shall be required or permitted to
install upon the Airframe or any Engine, components, appliances,
accessories, instruments, engines, equipment or parts in permanent
replacement of those then installed on the Airframe or such Engine,
the Grantor may do so provided that, in addition to any other
requirements provided for in this Agreement:
(A) The Collateral Agent is not divested of its
security interest in and Lien upon any item
removed from the Aircraft and that no such removed
item shall be or become subject to the lien or
claim of any person, unless and until such item is
replaced by an item of the type and condition
required by this Agreement, title to which, upon
its being installed or attached to the Airframe,
is validly vested in the Grantor, free and
clear of any liens and/or claims, of any kind or
nature, of any person other than the Collateral
Agent;
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<PAGE> 53
(B) The Grantor's title to every substituted item
shall immediately be and become subject to the
security interest and Lien of the Collateral
Agent, and each of the provisions of this
Agreement, and each such item shall remain so
encumbered and so subject unless it is, in turn,
replaced by a substitute item in the manner
permitted herein;
(C) If an item is removed from the Aircraft and
replaced in accordance with the requirements of
this Agreement, and if the substituted item
satisfies the requirements of this Agreement,
including the terms and conditions of clauses (A)
and (B) hereinabove, then the item which is
removed shall thereupon, and only thereupon, be
free and clear of the security interest and Lien
of the Collateral Agent.
(vi) In the event that any Engine, component,
appliance, accessory, instrument, equipment or part is installed upon
the Airframe, and is not in substitution for or in replacement of
an existing item, such additional item shall be considered as an
accession to the Airframe.
(m) AIRCRAFT REGISTRATION. The Grantor is the
registered owner of the Aircraft pursuant to a proper registration under the
Federal Aviation Act of 1958, as amended (the "Act"), and the Grantor
qualifies in all respects as a "citizen of the United States" as defined in
Section 101(16) of the Act and the Grantor shall, so long as this Agreement
remains in full force and effect, maintain the registration of the Aircraft
with the FAA in its name and shall remain a "citizen of the United States" as
defined in Section 101(16) of the Act.
SECTION 14 VOTING RIGHTS; DIVIDENDS; ETC.
(a) UPON EVENT OF DEFAULT. So long as no Event of
Default shall have occurred which has not been waived in accordance with the
provisions of the Intercreditor Agreement:
(i) the 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, the
Credit Agreements (as each is in effect on the Agreement Date) or the
Intercreditor Agreement; PROVIDED, HOWEVER, that the Grantor shall
not exercise or shall refrain from exercising any such right if, in
the 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 the Grantor shall give
the Collateral Agent at least five (5) days' written notice of the
manner in
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<PAGE> 54
which it intends to exercise, or the reasons for refraining from
exercising, any such right; and
(ii) the Collateral Agent shall execute and deliver
(or cause to be executed and delivered) to the Grantor all such
proxies and other instruments as the Grantor may reasonably request
for the purpose of enabling the Grantor to exercise the voting and
other rights that they are entitled to exercise pursuant to paragraph
(i) above.
(b) AFTER EVENT OF DEFAULT. Upon the occurrence of
an Event of Default, and after notice to the Grantor by the Collateral
Agent, all rights of the Grantor to exercise the voting and other consensual
rights that it would otherwise be entitled to exercise pursuant to SECTION
14(A)(I) above shall cease, and all such rights shall thereupon become vested
in the Collateral Agent who shall thereupon have the sole right to exercise
such voting and other consensual rights.
SECTION 15 COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
(a) APPOINTMENT OF COLLATERAL AGENT. The Grantor
hereby irrevocably appoints the Collateral Agent and any officer or agent
thereof, with full power of substitution, as the Grantor's attorney-in-fact,
with full irrevocable power and 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:
(i) to obtain and adjust insurance required to be paid
to the Collateral Agent pursuant to SECTION 11 hereof;
(ii) 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;
(iii) to receive, indorse, and collect any drafts or
other instruments, documents and Chattel Paper, in connection with
CLAUSES (I) OR (II)above;
(iv) following the occurrence of an Event of
Default, 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;
(v) to receive, indorse and collect all instruments
made payable to the Grantor representing any dividend, interest
payment or other distribution in respect of the
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Security Collateral or any part thereof and to give full discharge for
the same;
(vi) to pay or discharge taxes, liens, security
interests or other encumbrances levied or placed on or threatened
against the Collateral;
(vii) to defend any suit, action or proceeding brought
against the Grantor with respect to any Collateral and to settle,
compromise or adjust any suit, action or proceeding described in this
Section 15 and, in connection therewith, to give such discharges or
releases as the Collateral Agent may deem appropriate; and
(viii) to make any agreement with respect to or
otherwise deal with, including, without limitation, leasing or
chartering the Aircraft, and, after the occurrence of an Event of
Default, to sell, transfer, or pledge, any of the Collateral as
fully and completely as though the Collateral Agent were the absolute
owner thereof for all purposes and to do, at the Collateral Agent's
option and the Grantor's expense, at any time, or from time to time,
all acts and things which the Collateral Agent reasonably deems
necessary to protect, preserve or realize upon the Collateral and the
Collateral Agent's security interests and liens therein, in order to
effect the intent of this Agreement, all as fully and effectively as
the Grantor might do.
(b) RATIFICATION OF ACTIONS. The Grantor hereby
ratifies, to the extent permitted by law, all that said attorneys shall
lawfully do or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Section 15 is a power coupled with an interest and
shall be irrevocable until the Obligations are indefeasibly paid in full.
(c) DUTIES OF COLLATERAL AGENT. The powers
conferred on the Collateral Agent hereunder are solely to protect the
Collateral Agent's interests in the Collateral and shall not impose any duty
upon it to exercise any such powers. The Collateral Agent shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers and neither it nor any of its past, present or
future officers, directors, employees or agents shall be responsible to the
Grantor for any act or failure to act, except for its own gross negligence or
willful misconduct.
(d) ADDITIONAL AUTHORITY UPON EVENT OF DEFAULT. The
Grantor also authorizes the Collateral Agent, at any time or times after
the occurrence of an Event of Default, (i) to communicate in its own name
with any party to any Contract with regard to the assignment of the right,
title and interest of the Grantor in and under the Contracts hereunder and
other matters relating thereto, and (ii) to execute, in connection with the
sale provided for in SECTION 18 hereof, any endorsements, assignments or other
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instruments of conveyance or transfer with respect to the Collateral.
SECTION 16 THE COLLATERAL AGENT.
(a) APPOINTMENT OF THE COLLATERAL AGENT.
(i) Under the Existing Security Agreement, the
Existing Lenders appointed Continental as Collateral Agent.
Concurrently herewith, the Intercreditor Lenders, pursuant to the
terms of the Intercreditor Agreement, have appointed Continental as
the Collateral Agent under this Agreement to act under this
Agreement. The Collateral Agent acts with the authorization of and
at the direction of the Required Lenders and, if required pursuant
to the terms of the Intercreditor Agreement, the Affected Subject
Lenders (as defined in the Intercreditor Agreement), as more fully
described in the Intercreditor Agreement. Except as set forth
in SECTION 6 hereof, the Collateral Agent shall only release its
Lien on Collateral as authorized and directed in writing by (A)
the Required Lenders, and (B) the Required Banks (as defined in the
Amended and Restated Credit Agreement.
(ii) 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 and,
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 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 Collateral if its possession of
the 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
Intercreditor Lender shall have any responsibility or liability
for (A) ascertaining or taking action with respect to calls,
conversations, exchanges, maturities, tenders or other matters
relative to any Collateral whether or not the Collateral Agent or
any Intercreditor Lender has or is deemed to have knowledge of such
matters, or (B) taking any necessary steps to preserve rights against
any parties with respect to any Collateral, or (C) the collection of
any proceeds of any Collateral or, by reason of any invalidity, the
lack of value of any of the payments received by it from Account
Debtors or otherwise or the uncollectability of any of the Collateral.
(b) RESPONSIBILITY DISCLAIMED. The Collateral Agent
shall be under no liability or responsibility whatsoever as the Collateral
Agent to the Grantor or any other person as a consequence of any failure
or delay in performance by or any breach by, any Intercreditor Lender or
Intercreditor Lenders of any of its
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or their obligations under this Agreement, the Intercreditor Agreement or any
of the Debt Documents.
(c) EXCULPATORY PROVISIONS.
(i) The Collateral Agent shall not be responsible
in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties contained herein or in the
Intercreditor Agreement or in any of the Debt Documents, except for
those made by the Collateral Agent. The Collateral Agent makes no
representations as to the title of the Grantor or as to the
security afforded by this Agreement (including the perfection and
relative priority of such security) and the Collateral Agent shall
incur no liability or responsibility in respect of any such matters.
The Collateral Agent shall not be responsible for the attachment,
perfection, priority or enforceability of any Lien created or
purported to be created by this Agreement or the value of any
Collateral granted hereunder from time to time.
(ii) Except as otherwise provided herein, the
Collateral Agent shall not be required to ascertain or inquire as to
the performance by the Grantor of any of the covenants or agreements
contained in this Agreement, the Intercreditor Agreement or any of
the Debt Documents. Whenever it is necessary, or in the opinion of
the Collateral Agent advisable, for the Collateral Agent to
ascertain the principal amount outstanding for which the Grantor is
obligated to any Intercreditor Lender, the Collateral Agent may rely
on a certificate of such Intercreditor Lender.
(iii) Neither the Collateral Agent nor any of its
past, present or future directors, agents, officers, employees or
attorneys shall be liable for any acts, omissions, errors of judgment
or mistakes of fact or law made, taken or omitted to be made or
taken in accordance with this Agreement, the Intercreditor
Agreement or any Debt Documents (including, without limitation,
acts, omissions, errors or mistakes with respect to the Collateral),
except for those arising out of or in connection with gross
negligence or willful misconduct. Without limiting the foregoing,
neither the Collateral Agent nor any of its past, present or future
directors, officers, agents, employees or attorneys shall be
responsible for, or have any duty to examine, ascertain, or inquire
about (A) the genuineness, execution, validity, effectiveness,
enforceability, value or sufficiency of (x) this Agreement, or (y)
any document or instrument furnished pursuant to or in connection
with this Agreement, including the Grantor's books and records,
(B) the collectability of any amounts owed by the Grantor, (C) any
recitals or statements or representations or warranties in connection
with this Agreement, the Intercreditor Agreement or any of the
Debt Documents, (D) any failure of any party to this Agreement,
the Intercreditor Agreement or any Debt Documents or any Intercreditor
Lender
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to receive any communication sent to the notice address specified
in SECTION 23 hereof, or (E) the assets, liabilities, financial
condition, result of operations, business or creditworthiness of the
Grantor.
(iv) The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of
the Collateral in its possession if it takes such action for that
purpose as the Grantor requests in writing, but failure of the
Collateral Agent to comply with any such request shall not of itself
be deemed a failure to exercise reasonable care, and no failure of
the Collateral Agent to preserve or protect any rights with respect
to such Collateral against prior parties, or to do any act with
respect to the preservation of such Collateral not so requested by
the Grantor, shall be deemed a failure to exercise reasonable care in
the custody or preservation of such Collateral.
(d) DELEGATION OF DUTIES. The Collateral Agent may
execute any of the powers hereof and perform any duty hereunder including,
without limitation, establishment and maintenance of Collateral Lockbox
Accounts at banks or other financial institutions other than the Collateral
Agent, either directly or by or through agents, nominees or
attorneys-in-fact, which may include employees or officers of the Grantor,
provided that the Collateral Agent shall obtain a written acknowledgement
from such agents, nominees or attorneys-in-fact that they shall be liable to
any person for losses or damages incurred by any person as a result of such
agents', nominees' or attorneys'-in-fact gross negligence or willful
misconduct as and to the extent the Collateral Agent would be liable for
such losses or damages if the actions or omissions of such agents, nominees
or attorneys-in-fact constituting such gross negligence or willful misconduct
had been actions or omissions of the Collateral Agent. The Collateral Agent
shall be entitled to rely on advice of counsel concerning all matters
pertaining to such trusts, powers and duties. The Collateral Agent shall not
be responsible for any negligence or misconduct of any agents, nominees or
attorneys-in-fact selected by the Collateral Agent.
(e) LIMITATIONS ON RESPONSIBILITY OF THE COLLATERAL
AGENT AND OTHER MATTERS.
(i) The Collateral Agent shall have no duties or
responsibilities other than those expressly set forth in this
Agreement. Such duties and liabilities shall be subject to the
limitations and qualifications set forth in this Section 16. No
implied duties or obligations shall be read into this Agreement
against the Collateral Agent.
(ii) The Collateral Agent shall be entitled to act,
and shall be fully protected in acting upon, any communication in
whatever form believed by the Collateral Agent in good faith to be
genuine and correct and to have been signed or sent or
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made by a proper person or persons. The Collateral Agent shall
not be bound to investigate any facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order or other communication
which it believes to be genuine, and may rely on the facts or matters
so stated; but the Collateral Agent, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
deem fit.
(iii) The Collateral Agent shall not have any duty (A)
to review the financial condition or operations of the Grantor or make
any determination with respect to an adverse change therein, (B) to
ascertain or inquire as to the performance or observance of any
covenants of the Grantor or any Intercreditor Lender, or (C) to
qualify to do business in any jurisdiction in which it is not
already so qualified.
(f) ACTION ON INSTRUCTIONS. The Collateral Agent
shall be entitled to act or refrain from acting, and in all cases shall be
fully protected in acting or refraining from acting, under this Agreement in
accordance with instructions in writing from the Required Lenders, or, if
required pursuant to the terms of the Intercreditor Agreement, all
Intercreditor Lenders and additionally, if required pursuant to the terms of
the Intercreditor Agreement, each Affected Subject Lender (as defined in the
Intercreditor Agreement), as the case may be; PROVIDED, HOWEVER, the
Collateral Agent shall not be required to take or refrain from taking
any particular action in accordance with instructions from the Required
Lenders, an Affected Subject Lender, if required pursuant to the terms of the
Intercreditor Agreement, or all Intercreditor Lenders, as the case may be,
pursuant to this Agreement, and no provision of this Agreement shall be
deemed to impose a duty on the same to take or refrain from taking any
particular action, if the Collateral Agent shall have received an opinion of
independent counsel that the Collateral Agent's taking or refraining from
taking such action would violate the terms hereof or thereof or Applicable Law.
(g) ADVANCE OF FUNDS BY THE COLLATERAL AGENT. The
Collateral Agent shall not be required to advance any of its own funds or to
take any action hereunder to enforce any Obligation (or any note substituted
therefor in connection with the refinancing thereof) or to take any action at
the request or direction of the Intercreditor Lenders unless it shall
previously have been furnished with an indemnity in form and substance
satisfactory to it against any losses or expenses or liabilities which it may
sustain or incur in making such advance or in taking such action.
(h) CONTINENTAL AND AFFILIATES. With respect to
Obligations owed to Continental under this Agreement, the Intercreditor
Agreement, or any Debt Document, Continental shall have the same rights,
powers, duties and obligations under this Agreement as any other Intercreditor
Lender and may exercise the same as though it were not the Collateral Agent.
Continental and
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its affiliates may accept deposits from, lend money to, and generally engage,
and continue to engage, in any kind of business with the Grantor as if
Continental were not the Collateral Agent. If Continental is removed as the
Collateral Agent, it will not affect Continental's rights and interests as an
Intercreditor Lender or as an Amended and Restated Credit Agreement Lender.
(i) NOTICE TO HOLDER OF NOTES. The Collateral Agent
may deem and treat the payees of any note issued pursuant to any Subject
Facility Document as the owners thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof has been filed with the
Collateral Agent. Any request, authority or consent of any holder of any
note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such note.
(j) RELIANCE BY THE COLLATERAL AGENT. The Collateral
Agent shall have the following privileges and immunities in the exercise of
the rights and powers vested in it by this Agreement:
(i) it may accept a copy of a resolution of the
board of directors of the Grantor certified by the Secretary or an
Assistant Secretary thereof as conclusive evidence that such
resolution has been duly adopted by said board and is in full force
and effect, provided such acceptance is in good faith;
(ii) as to any other fact or matter the manner of
ascertainment of which is not specifically set forth herein, it may
for all purposes hereof rely on a certificate of an officer of the
person making such claim as to such fact or matter, and such
certificate shall constitute full protection to it for any action
reasonably taken, suffered or omitted to be taken by it in good faith
in reliance thereon;
(iii) may consult with independent counsel and
accountants, and the Collateral Agent shall not be liable for any
action reasonably taken, suffered or omitted to be taken by any such
agent or attorney selected by it with due care or by it in good faith
in reliance on the advice or opinion of any such counsel or
accountants selected by it with due care;
(iv) it may, from time to time, request direction
from the Required Lenders with respect to the performance of its
powers and duties hereunder, and it shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Required Lenders relating to
the time, method and place of conducting any proceeding for any
remedy available to the Collateral Agent, or exercising any power
conferred upon the Collateral Agent under this Agreement; and
(v) no provision of this Agreement shall require the
Collateral Agent to extend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
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duties hereunder or thereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(k) TERMINATION OF THE COLLATERAL AGENT. The
Required Lenders shall have the right to terminate the agency of the
Collateral Agent hereunder by giving the Collateral Agent thirty (30) days'
notice of such termination and, upon giving such notice, shall have the right
to appoint a successor Collateral Agent. Notwithstanding any other
provision herein contained, the Collateral Agent shall be discharged of all
of its duties and obligations hereunder, and its agency shall terminate, upon
payment in full of all outstanding Obligations secured by Collateral held by
the Collateral Agent pursuant to the terms of this Agreement and disbursement
of all funds held by the Collateral Agent pursuant to this Agreement.
(l) RESIGNATION OF THE COLLATERAL AGENT. The
Collateral Agent may resign at any time by giving sixty (60) days' prior
written notice to each Intercreditor Lender then holding any Obligations;
provided, however, that such resignation shall not become effective until a
successor Collateral Agent has been appointed and qualified. Upon receipt
of notice of such resignation, the Required Lenders shall have the right to
appoint a successor Collateral Agent. If no successor Collateral Agent shall
have been appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring the Collateral Agent's
notice of resignation, then the retiring the Collateral Agent may, but shall
not be required to, on behalf of the Intercreditor Lenders, appoint a
successor Collateral Agent. In the event no successor Collateral Agent shall
have been appointed by either the Required Lenders or the retiring the
Collateral Agent pursuant to this Section 16(l) by the 60th day after the
notice of resignation was given by the retiring the Collateral Agent, then,
subject to SECTION 16(N) hereof, the Collateral Agent or any Intercreditor
Lender may apply to any court of competent jurisdiction for the appointment
of a successor Collateral Agent, which appointment shall be binding upon all
Intercreditor Lenders. No Collateral Agent shall be discharged from its
duties or obligations hereunder until all Collateral and documents then held
by such Collateral Agent shall have been delivered to the successor
Collateral Agent, and until such retiring Collateral Agent shall have
executed and delivered to the successor Collateral Agent appropriate
instruments substituting such successor Collateral Agent as attorney-in-fact
of the Grantor as necessary for the purposes of this Agreement. Each such
successor Collateral Agent shall provide the Grantor with its address to be
sued for the purposes of SECTION 23 hereof, in a notice complying with the
terms of such Section.
(m) NOTICE OF SUCCESSOR COLLATERAL AGENT. The
Required Lenders appointing a successor Collateral Agent pursuant
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to SECTIONS 16(K) or 16(L) hereof shall make such appointment by written
notice to all parties to this Agreement and to such successor Collateral
Agent. Following receipt of such notice, such successor Collateral Agent,
if it consents to such appointment, shall execute, acknowledge and deliver
to its predecessor Collateral Agent, the Grantor and each Intercreditor
Lender, an instrument in writing accepting such appointment hereunder and
thereupon, without any further act, deed or conveyance, succeed to all rights
and obligations of the Collateral Agent hereunder, effective immediately upon
the expiration of the thirty (30) day period provided for in SECTION 16(K)
hereof or the sixty (60) day period provided for in SECTION 16(L) hereof.
Any Collateral Agent ceasing to act shall, notwithstanding anything herein
to the contrary, retain, a Lien, upon all Collateral and all Proceeds of
Collateral held or collected by such Collateral Agent to secure any amounts
then due it pursuant to the provisions of this Agreement.
(n) STATUS OF SUCCESSORS TO THE COLLATERAL AGENT.
Every successor to the Collateral Agent appointed pursuant to SECTIONS 16(K)
or 16(L) hereof shall be a bank or trust company in good standing and having
power so to act, incorporated under the laws of the United States of any state
(other than Florida) thereof or the District of Columbia, and having its
principal corporate trust office within the forty-eight (48) contiguous
states, and shall also have capital, surplus and undivided profits of not
less than Five Hundred Million Dollars ($500,000,000).
(o) MERGER OF THE COLLATERAL AGENT. Any corporation
into which the Collateral Agent shall be merged, or with which it shall be
consolidated, or any corporation resulting from any merger or consolidation to
which the Collateral Agent shall be a party, shall be the Collateral Agent
under this Agreement without the execution or filing of any document or any
further act on the part of the parties hereto.
SECTION 17 EVENTS OF DEFAULT.
The occurrence of one or more of the following events shall constitute
an "EVENT OF DEFAULT" hereunder:
(a) the Grantor shall fail or neglect to perform,
keep or observe any of its agreements, covenants or obligations hereunder
and such failure or neglect shall continue for ten (10) days after such
performance or observance is due hereunder;
(b) any statement, representation or warranty made
by the Grantor is not true, correct, complete and accurate in any material
respect when made;
(c) an Event of Default as defined in the
Intercreditor Agreement or any of the Debt Documents shall have occurred; or
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(d) the Grantor shall fail to deliver to the
Collateral Agent (i) the Sweep Agreements required pursuant to SECTION 4(F)
hereof, (ii) SCHEDULE XII required pursuant to SECTION 8(E) hereof, or (iii)
the evidence required pursuant to SECTION 30 hereof, within the respective
time periods specified in each such section.
SECTION 18 REMEDIES.
After the occurrence of an Event of Default which has not been waived
in accordance with the terms of the Intercreditor Agreement:
(a) SET-OFF.
(i) As additional security for the payment and
performance of the Obligations, the Collateral Agent shall have a
general right of set-off and banker's lien under applicable law
against all of the Grantor's respective property and interests in
property now or from time to time hereafter in the possession,
custody or control of Continental in any capacity or any of the Co-
Agents including without limitation, the Mandatory Bank Accounts, or
any other Deposit Account of any type maintained from time to time by
the Grantor with the Collateral Agent or any other Intercreditor
Lender. The Collateral Agent may, and is hereby authorized by the
Grantor to, at any time and from time to time, to the fullest extent
permitted by Applicable Law, without advance notice to the Grantor
(any such notice being expressly waived by the Grantor), set off and
apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and any other indebtedness at
any time owing by the Collateral Agent or any Intercreditor Lender to
or for the credit or the account of the Grantor against any or all
of the Obligations of the Grantor now or hereafter existing whether
or not such Obligations have matured and irrespective of whether or
not Collateral Agent has exercised any other rights that it has or may
have with respect to such Obligations, including, without limitation,
any acceleration rights.
(ii) Notwithstanding the introduction to this SECTION
18 to the contrary, both before and after an Event of Default, the
Grantor agrees to immediately notify the Collateral Agent whenever
any third party obtains or asserts any interest in any Collateral
Lockbox Account, Mandatory Bank Account or Permitted Bank Account.
(iii) The Collateral Agent agrees to promptly notify
the Grantor after any such set-off and application, provided that
the failure to give such notice shall not affect the validity of
such set-off and application. The Collateral Agent shall not be
liable to any Person for failure to give any such notice. The rights
of the Collateral Agent under this Section 18(a) are in addition to
the other rights and remedies
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(including, without limitation, other rights of set-off) which the
Collateral Agent may have.
(b) RIGHTS AND REMEDIES. The Collateral Agent shall,
in addition to other rights and remedies provided for herein or otherwise
available to it, have all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral), and may, upon direction of the Required Lenders, (i) exercise any
and all rights and remedies of the Grantor in respect of the Collateral
PROVIDED, HOWEVER, that with respect to that portion of the Collateral
consisting of books and records, such exercise shall be consistent with the
terms of the CXC Intercreditor Agreement, (ii) require the Grantor to, and the
Grantor hereby agrees that it will at its expense and upon request of the
Collateral Agent forthwith, assemble all or part of the Collateral as directed
by the Collateral Agent and make it available to the Collateral Agent at a
place to be designated by the Collateral Agent, (iii) occupy any premises
owned or leased by the 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 the Grantor in respect
of such occupation and the Collateral Agent may exclude the 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
the 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 the 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 the 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 the Collateral Agent deems
necessary or desirable in order to maximize the value of the Grantor's
business or the Collateral) and upon every such entry, the Collateral Agent,
at the expense of the 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 the Grantor, the 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 the Grantor with respect thereto in the name or names of any of
the Grantor or otherwise as is
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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, the 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
employed, shall apply the moneys arising as aforesaid pursuant to the
provisions of this Agreement (nothing contained herein shall be construed to
impose upon the Collateral Agent any obligation to preserve or protect the
Collateral or the 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 the Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Collateral
Agent may deem commercially reasonable. The Grantor agrees that, to the extent
notice of sale shall be required by law, at least five (5) days' notice to the
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. The Collateral Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The 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.
(c) TREATMENT OF PAYMENTS. All payments received by
the Grantor in connection with any Collateral or otherwise in respect of the
Collateral shall be received in trust for the benefit of the Collateral Agent,
and shall be segregated from other funds of the Grantor and shall be
forthwith deposited into a Collateral Lockbox Account designated by the
Collateral Agent from time to time in the same form as so received (with any
necessary indorsement).
(d) DISPOSITION OF PAYMENTS. Any surplus of such
cash or cash proceeds held by the Collateral Agent and remaining after
payment in full of all the Obligations and termination in writing by the
Intercreditor Lenders of each of the Intercreditor Agreement and each of the
Debt Documents shall be paid over to the Grantor or to whomsoever may be
lawfully entitled to receive such surplus.
SECTION 19 INDEMNITY AND EXPENSES.
(a) INDEMNIFICATION. The Grantor agrees to
indemnify the Collateral Agent, the Co-Agents and each of the
Intercreditor Lenders from and against any and all claims, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses,
disbursements and liabilities of any kind or nature whatsoever arising out of,
relating to or resulting from this Agreement
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(including, without limitation, enforcement of this Agreement and the
establishment and maintenance from time to time of Collateral Lockbox
Accounts at banks other than the Collateral Agent) or any action taken or
omitted by any such indemnified person in connection herewith, except claims,
losses or liabilities resulting from the Collateral Agent's gross negligence or
willful misconduct.
(b) REIMBURSEMENT OF EXPENSES. The Grantor shall
reimburse the Collateral Agent on demand for all costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
incurred by the Collateral Agent in connection with the preparation,
execution, administration or enforcement of, or legal advice in respect
of rights or responsibilities under this Agreement and the Intercreditor
Agreement, regardless of whether any suit is filed, including, without
limitation, all costs and expenses incurred in checking, retaking, holding,
handling, preparing for sale and selling or otherwise disposing of any and
all Collateral and the establishment and maintenance from time to time of
Collateral Lockbox Accounts at banks other than the Collateral Agent's bank.
The Grantor's reimbursement obligations hereunder shall be part of the
Obligations, shall bear interest at the Prime Rate (as defined in the Amended
and Restated Credit Agreement) from the date incurred until paid in full,
and shall be secured by the Collateral and enjoy the benefits of this
Agreement, notwithstanding that such obligations may cause the principal
balance of the unpaid Loans (as defined in the Amended and Restated Credit
Agreement) and the Notes to exceed the face amount of the Notes. In the event
the Grantor shall fail to pay all amounts reimbursable hereunder within ten
(10) days after demand therefor, the same shall constitute an Event of
Default, and, from and including the tenth (10th) day after demand for
payment, the amount owing under this paragraph (b) shall bear interest at the
interest rate determined in accordance with Section 2.3(b) of the Amended and
Restated Credit Agreement. The Grantor's reimbursement obligations
hereunder shall survive the repayment of the Obligations.
All obligations provided for in this Section 19 shall
survive termination of this Agreement and the replacement of the Collateral
Agent under SECTION 16(K) or SECTION 16(L) 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 terms of this Agreement, the Intercreditor Agreement or any of the Debt
Documents or other agreements, writings, documents or instruments relating
thereto;
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(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
terms of this Agreement, the Intercreditor Agreement or any of the Debt
Documents;
(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 terms of this Agreement, the Intercreditor
Agreement or any of the Debt 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, including, without limitation, the Subsidiary
Guaranty, for any or all 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 the Collateral Agent shall determine to exercise its right to sell
all or any of the Pledged Shares pursuant to SECTION 18 hereof, the Grantor
agrees that, upon request of the Collateral Agent, the 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 the 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
the 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 the Collateral Agent;
(c) use its best efforts to cause each such issuer to
make available to its security holders, as soon as practicable, an
50026F70.1E
17122-008 -61-
<PAGE> 68
earning statement that will satisfy the provisions of Section 11(a) of the
Securities Act; and
(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.
The Grantor further acknowledges the impossibility of ascertaining the amount
of damages that would be suffered by the Collateral Agent and each
Intercreditor Lender by reason of the failure by the Grantor to perform
any of the covenants contained in this Section 21 and, consequently, agree
that, if the Grantor shall fail to perform any of such covenants, the Grantor
shall pay, as liquidated damages and not as a penalty, an amount equal to the
value of the Security Collateral on the date the Collateral Agent shall demand
compliance with this Section 21 in addition to any other amounts otherwise
payable to the Collateral Agent pursuant to the terms of this Agreement.
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 upon
the direction of the Required Lenders and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 23 NOTICES.
Except as otherwise provided herein, whenever it is provided herein
that any notice, demand, request, consent, approval, declaration or other
communication (a "NOTICE") shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party a Notice with respect to this Agreement, each
such Notice shall be in writing and shall be delivered in person with
receipt acknowledged, sent by nationwide commercial courier service (such as
Federal Express), or telecopied (with a copy also mailed by registered or
certified mail), or mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to the Grantor, to it at:
LDI Corporation
One Cleveland Center
1375 East Ninth Street
Cleveland, Ohio 44114
Telecopier: (216) 566-8955
Attention: Chief Financial Officer
50026F70.1E
17122-008 -62-
<PAGE> 69
with a copy to:
LDI Corporation
One Cleveland Center
1375 East Ninth Street
Cleveland, Ohio 44114
Telecopier: (216) 566-8955
Attention: General Counsel
(b) If to the Collateral Agent, to it at:
Continental Bank
231 South LaSalle Street
10th Floor
Chicago, IL 60697
Telecopier: (312) 828-1997
Attention: Vice President
Leasing and Finance Co. Division
with a copy to:
Keck, Mahin & Cate
77 West Wacker Drive
49th Floor
Chicago, IL 60601
Telecopier: (312) 634-5000
Attention: Janet L. Tracy, Esq.
(c) If to the Intercreditor Lenders, to them at their
respective addresses in accordance with Section 6.4
of the Intercreditor Agreement.
or at such other address as may substituted by Notice given as herein
provided. The giving of any Notice required hereunder may be waived in
writing by the party entitled to receive such Notice. Every Notice hereunder
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or upon receipt by the
party to whom the Notice is addressed, if sent by telecopy transmission, or
three (3) business days after the same shall have been deposited in the
United States mail, or the first business day after timely delivery to the
courier service, if sent by nationwide commercial courier service. Failure or
delay in delivering copies of any Notice to the persons designated above to
receive copies thereof shall in no way adversely affect the effectiveness of
such Notice.
SECTION 24 CONTINUING SECURITY INTEREST; TRANSFER OF NOTES.
This Agreement has created and continues to create a continuing
security interest in the Collateral and shall (a) remain in full force and
effect until payment in full of the Obligations and termination of the
Intercreditor Agreement and all of the Debt
50026F70.1E
17122-008 -63-
<PAGE> 70
Documents as evidenced by written statements of the Intercreditor Lenders,
(b) be binding upon the Grantor, its successors and assigns and (c) inure,
together with the rights and remedies of the Collateral Agent hereunder, to
the benefit of the Collateral Agent for the benefit of the Intercreditor
Lenders and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing CLAUSE (C), any Intercreditor 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
Intercreditor Lender herein or otherwise. Upon the payment in full of the
Obligations and termination of the Intercreditor Agreement and each of the
Debt Documents as evidenced by written statements of the Intercreditor
Lenders, 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 OF DEFAULTS.
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. This Agreement is submitted to the Grantor in Cleveland,
Ohio, and shall be deemed to have been delivered thereat. Unless otherwise
defined herein, terms used in Article 9 of the Uniform Commercial Code as in
effect in the State of Ohio are used herein as therein defined.
SECTION 26 REINSTATEMENT.
This Agreement shall remain in full force and effect and continue
to be effective should any petition be filed by or against the Grantor for
liquidation or reorganization, should the Grantor become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee by
appointed for all or any significant part of the Grantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any part thereof, is, pursuant
to Applicable Law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Obligations, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment,
or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid
and not so rescinded, reduced, restored or returned.
SECTION 27 INTERPRETATION.
50026F70.1E
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<PAGE> 71
(a) INCORPORATION OF RECITALS. The preamble and each of
the Recitals hereto shall be considered as part of this Agreement and,
accordingly, each is hereby incorporated herein.
(b) HEADINGS; LANGUAGE. The section and paragraph
headings contained in this Agreement are solely for the purpose of reference
and shall not affect the meaning or interpretation of this Agreement. The
language used in this Agreement shall be deemed to be the language chosen by
the parties hereto to express their common intent and no rule of strict
construction shall be applied against any of the parties.
(c) SEVERABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
(d) NO WAIVER; CUMULATIVE REMEDIES. Neither the
Collateral Agent nor any Intercreditor Lender shall by any act, delay,
omission or otherwise be deemed to have waived any of its rights or
remedies hereunder. A waiver by the Collateral Agent of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Collateral Agent would otherwise have had on any future
occasion. No failure to exercise nor any delay in exercising on the part of
the Collateral Agent, any right, power or privilege hereunder, shall operate as
a waiver thereof, nor shall any single or partial exercise or any right, power
or privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law.
(e) CONFLICTS OR INCONSISTENCY. A conflict or
inconsistency, if any, between the terms and provisions of this Agreement and
the terms and provisions of any of the Credit Agreements shall be controlled by
the terms and provisions of this Agreement to the extent of such conflict or
inconsistency; PROVIDED, HOWEVER, that in the event of any conflict or
inconsistency between the terms and provisions of this Agreement and the
Intercreditor Agreement, the terms and provisions of the Intercreditor
Agreement shall control to the extent of such conflict or inconsistency.
(f) EXECUTION IN COUNTERPARTS; AMENDMENT AND
RESTATEMENT. This Agreement may be executed by the parties hereto in several
counterparts, each of which, when so executed shall be deemed an original
but all such counterparts shall constitute one and the same instrument.
This Agreement is an amendment and restatement of the Existing Security
Agreement and is intended to,
50026F70.1E
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<PAGE> 72
and does, continue unimpaired and uninterrupted all Liens and security
interests granted by the Grantor thereunder.
SECTION 28 WAIVER OF JURY TRIAL.
THE COLLATERAL AGENT, EACH OF THE CO-AGENTS, EACH OF THE
INTERCREDITOR LENDERS AND THE GRANTOR 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, THE INTERCREDITOR AGREEMENT OR ANY DEBT DOCUMENT OR
ANY COURSES OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF THE COLLATERAL AGENT, EACH OF THE CO-AGENTS, THE
INTERCREDITOR LENDERS OR THE GRANTOR. THE GRANTOR WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON THE GRANTOR AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO
THE GRANTOR AT THE ADDRESSES PROVIDED IN SECTION 23 ABOVE AND SERVICE SO
MADE SHALL BE DEEMED TO BE COMPLETED THREE (3) BUSINESS DAYS AFTER THE SAME
SHALL HAVE BEEN DEPOSITED IN THE UNITED STATES MAIL, POSTAGE PREPAID. THE
GRANTOR HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEM AS THE GRANTOR'S
AGENT FOR THE PURPOSE OF ACCEPTING THE SERVICE OF ANY PROCESS RELATING TO
THIS AGREEMENT, THE INTERCREDITOR AGREEMENT OR ANY OF THE DEBT DOCUMENTS WITHIN
THE STATE OF OHIO. THE GRANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION
OF THIS AGREEMENT, THE INTERCREDITOR AGREEMENT AND EACH DEBT DOCUMENT TO WHICH
IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
COLLATERAL AGENT, EACH OF THE CO-AGENTS AND EACH OF THE INTERCREDITOR LENDERS
ENTERING INTO THIS AGREEMENT, THE INTERCREDITOR AGREEMENT AND EACH DEBT
DOCUMENT.
SECTION 29 RELEASE.
The Grantor does hereby release and discharge the Collateral Agent,
the Co-Agents and each of them, the Intercreditor Lenders and each of them,
the Existing Lenders and each of them, each agent under each of the
Existing Credit Agreements, and each of their respective shareholders,
agents, servants, employees, directors, officers, attorneys, affiliates,
subsidiaries, successors and assigns and all persons, firms, corporations and
organizations acting on its behalf ("RELEASE PARTIES") of and from all
damages, losses, claims, demands, liabilities, obligations, actions and causes
of actions whatsoever, that the Grantor has, had or will have, or claims to
have, against any of the Release Parties as of the date the Grantor executes
this Agreement and whether known or unknown at the time of this release, and
of every nature and extent whatsoever on account of or in any way, direct or
indirect, touching, concerning, arising out of or founded upon this
Agreement, the Existing Credit Agreements, the Existing Security Agreement,
the Existing Subsidiary Security Agreement, the Intercreditor Agreement, any
of the Credit Agreements, or any Debt Document.
50026F70.1E
17122-008 -66-
<PAGE> 73
SECTION 30 IBM SECURITY INTEREST.
The Grantor will deliver to the Collateral Agent, no later than five
(5) Business Days after the Agreement Date, evidence satisfactory to the
Collateral Agent that all actions necessary to amend any and all financing
statements in favor of International Business Machines Corporation ("IBM")
have been filed and all actions necessary to amend the security agreement
in favor of IBM have been taken so that the Grantor is in compliance will all
of the terms of this Agreement and the Amended and Restated Credit Agreement,
including without limitation, Section 7.2.3(d) thereof.
[Signature pages to follow]
50026F70.1E
17122-008 -67-
<PAGE> 74
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their officers thereunto
duly authorized as of the date first above written.
LDI CORPORATION, Grantor
By:_____________________________________
Title:__________________________________
CONTINENTAL BANK, as Collateral Agent
By:_____________________________________
Title:__________________________________
<PAGE> 75
SCHEDULE I
MANDATORY BANK ACCOUNTS
50026F70.1E
17122-008 SCH. I-1
<PAGE> 76
SCHEDULE II
PERMITTED BANK ACCOUNTS
50026F70.1E
17122-008 SCH. II-1
<PAGE> 77
SCHEDULE III
SPECIAL PERMITTED BANK ACCOUNTS
50026F70.1E
17122-008 SCH. III-1
<PAGE> 78
SCHEDULE IV
INTELLECTUAL PROPERTY
50026F70.1E
17122-008 SCH. IV-1
<PAGE> 79
SCHEDULE V
PLEDGED SHARES/PLEDGED DEBT
50026F70.1E
17122-008 SCH. V-1
<PAGE> 80
SCHEDULE VI
BANK ACCOUNTS
<TABLE>
<S> <C> <C> <C>
Name and Address Mailing Address Type of
of Bank of Account Account Number Account
- - --------------- --------------- -------------- -------
</TABLE>
50026F70.1E
17122-008 SCH. VI-1
<PAGE> 81
SCHEDULE VII
GRANTOR'S LOCATIONS
50026F70.1E
17122-008 SCH. VII-1
<PAGE> 82
SCHEDULE VIII
LOCATION OF COLLATERAL
All of the Collateral is located at the locations identified on
Schedules VII & IX attached hereto and incorporated hereby.
LOCATION OF EQUIPMENT:
LOCATION OF INVENTORY:
50026F70.1E
17122-008 SCH. VII-1
<PAGE> 83
SCHEDULE IX
LEASES
50026F70.1E
17122-008 SCH. VIII-1
<PAGE> 84
SCHEDULE X
AIRCRAFT AND ENGINES
AIRFRAMES
The following aircraft:
<TABLE>
<CAPTION>
MANUFACTURER'S UNITED STATES
MANUFACTURER MODEL SERIAL NO. REGISTRATION NO.
- - ------------ ----- -------------- ---------------
<S> <C> <C> <C>
McDonnell Douglas DC-9-32 47281 N 17533
McDonnell Douglas DC-9-32 47218 N 12538
</TABLE>
ENGINES
The following engines, each engine having 750 or more rated takeoff horsepower
or the equivalent thereof:
<TABLE>
Caption>
MANUFACTURER'S
MANUFACTURER MODEL SERIAL NO.
- - ------------ ----- ----------
<S> <C> <C> <C>
1. Pratt & Whitney JT8D-9A 666960
2. Pratt & Whitney JT8D-9A 657191
3. Pratt & Whitney JT8D-9A 666693
4. Pratt & Whitney JT8D-9A 656906
</TABLE>
50026F70.1E
17122-008 SCH. IX-1
<PAGE> 85
SCHEDULE XI
AIRCRAFT INSURANCE
50026F70.1E
17122-008 SCH. X-1
<PAGE> 86
SCHEDULE XII
SPECIFIED COLLATERAL
50026F70.1E
17122-008 SCH. XI-1
<PAGE> 87
EXHIBIT I
FORM OF COLLATERAL LOCKBOX ACCOUNT LETTER
July 29, 1994
Continental Bank, in its capacity
as Collateral Agent
231 South LaSalle Street
6th Floor
Chicago, IL 60697
Gentlemen:
1. The undersigned, ______________________ ("Bank"),
recognizes that Continental Bank is the collateral agent (the "Collateral
Agent") under that certain Amended and Restated Security Agreement, dated
as of July 29, 1994, as the same may be amended, modified, supplemented
or restated (the "Security Agreement"), by and between, LDI Corporation,
a Delaware corporation (the "Grantor"), and the Collateral Agent.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to them in the Security Agreement.
2. Grantor has requested that, as an accommodation to
Grantor, certain of the Collateral Lockbox Accounts be established and
maintained at [Bank]. The Collateral Agent and [Bank] are willing to grant
such request provided that the Grantor, [Bank] and Collateral Agent agree to
the terms set forth herein and execute this Agreement. The Collateral Agent
hereby appoints [Bank] as Collateral Agent's agent and pledgee-in-possession
for the Account and all funds, monies, accounts, cash and other items from
time to time deposited in such Account and [Bank] by its execution and
delivery of this Collateral Lockbox Letter accepts such appointment.
3. [Bank] hereby confirms and acknowledges to the
Collateral Agent that (i) the Collateral Lockbox Account bearing account
number ____________ (the "Account") has been established at [Bank], (ii) the
Account is in the name of the Collateral Agent and the Collateral Agent has
the exclusive dominion and control over the Account and all funds and monies
from time to time therein, (iii) to the best of [Bank's] knowledge, no party
other than the Collateral Agent claims a Lien on the Account, and (iv) [Bank]
has marked its books and records to indicate the Collateral Agent's exclusive
dominion and control over the Account and all funds and monies from time to
time therein, and (v) the Account is a "Collateral Lockbox Account" as defined
in the Security Agreement.
50026F70.1E
17122-008 EX. I-1
<PAGE> 88
4. [Bank] hereby confirms and acknowledges that [Bank] has no
rights with respect to the Account and [Bank] agrees not to take any action
with respect to the Account except as specifically directed in writing by the
Collateral Agent.
5. [Bank] further agrees that it will not exercise or claim
any right of offset against the Account and hereby waives and assigns to
the Collateral Agent any and all liens, claims, demand or rights of setoff or
offset of any kind whatsoever which [Bank] may now or hereafter have in any of
the monies and/or funds deposited in the Account.
6. The Collateral Agent shall at all times have full and
irrevocable right, power and authority, to demand, collect, withdraw, receipt
for or sue for all amounts due or to become due and payable under the Account
and, at the Collateral Agent's discretion, to take any other action, including
the transfer of the Account to any institution designated by the Collateral
Agent.
7. In accordance with Section 16(d) of the Security
Agreement, [Bank] hereby acknowledges that it shall be liable to any person
for losses or damages incurred by any person as a result of its or its
agents', nominees' or attorneys'-in-fact gross negligence or willful
misconduct with respect to this Agreement or with respect to the Account as
and to the extent the Collateral Agent would be liable for such losses or
damages if the actions or omissions of such agents, nominees or
attorneys-in-fact constituting such gross negligence or willful misconduct had
been actions or omissions of the Collateral Agent.
8. The Grantor hereby agrees to indemnify and hold harmless
each of [Bank] and the Collateral Agent from and against any and all claims,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, disbursements and liabilities of any kind or nature whatsoever and
agrees to reimburse each of [Bank] and the Collateral Agent for any
costs, fees and expenses (including, without limitation, reasonable
attorneys' fees and expenses) against any and all such claims or liability
arising out of or in any way relating to the establishment and/or maintenance
of the Account at [Bank].
9. The Collateral Agent agrees to pay [Bank's] fees, costs
and expenses in connection with the establishment and maintenance of the
Account.
10. Notwithstanding any other provision in this Agreement,
[Bank] shall not be required to take any action with respect to the Account
(including the transfer of funds) to the extent such action is then
prohibited by statute, regulation or legal process binding on [Bank].
11. This Agreement may not be amended or modified or
supplemented without the prior written consent of all parties.
50026F70.1E
17122-008 EX. I-2
<PAGE> 89
[BANK]
By:_______________________________
Its:______________________________
LDI CORPORATION
By: _______________________________
Its:_______________________________
LDI OF OHIO, INC.
By: _______________________________
Its:_______________________________
The foregoing is hereby accepted
and agreed to:
CONTINENTAL BANK,
in its capacity as Collateral Agent
By:___________________________________
Its:__________________________________
50026F70.1E
17122-008 EX. I-3
<PAGE> 90
EXHIBIT II
FORM OF NOTICE TO RELEASE CXC FUNDS
[LDI CORPORATION LETTERHEAD]
NOTICE TO RELEASE CXC FUNDS
This Notice to Release CXC Funds ("Notice") is delivered pursuant to
that certain Amended and Restated Security Agreement dated as of July 29,
1994, by and between Continental Bank, in its capacity as Collateral Agent
thereunder, and LDI CORPORATION, defined as the Grantor thereunder (the
"Security Agreement"). All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.
Pursuant to Section 6(a) of the Security Agreement, this Notice will
serve as the written notice and certification by the Grantor to the
Collateral Agent that the Collateral Agent previously received monies or
monies were deposited into a Collateral Lockbox Account constituting
Collections (as defined in the CXC Intercreditor Agreement) or proceeds of any
Transferred Lease Receivable, Related Security (as defined in the CXC
Intercreditor Agreement) or CXC Equipment Collateral, and such monies
constitute collected funds which either (i) are held in a Collateral Lockbox
Account, or (ii) have been applied in reduction of the Obligations and to
the extent new funds have not been subsequently advanced to the Grantor, as
follows:
Collections: $______________________________________________
Proceeds of Transferred Lease Receivable: $_________________
Proceeds of Related Security: $_____________________________
Proceeds of CXC Equipment Collateral: $_____________________
The Grantor hereby authorizes and directs the Collateral Agent to
deliver such monies to the CXC Agent.
The undersigned, ______________________________, hereby certifies that
[s]he is an Authorized Signatory.
WITNESS MY HAND this __ day of __________, 1994.
LDI CORPORATION, as Grantor
BY: ______________________________
TITLE: ___________________________
Acknowledged and Agreed
LDI OF OHIO, INC.
BY: __________________________
TITLE: _______________________
50026F70.1E
17122-008 EX. II-1
<PAGE> 91
EXHIBIT III
FORM OF NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS
[LDI CORPORATION LETTERHEAD]
NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS
This Notice to Release Non-Recourse Funds ("Notice") is delivered
pursuant to that certain Amended and Restated Security Agreement dated as of
July 29, 1994, by and between Continental Bank, in its capacity as Collateral
Agent thereunder, and LDI CORPORATION, defined as the Grantor thereunder (the
"Security Agreement"). All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.
Pursuant to Section 6(b) of the Security Agreement, this Notice will
serve as the written notice and certification by the Grantor to the
Collateral Agent that the Collateral Agent previously received monies or
monies were deposited into a Collateral Lockbox Account which constitute
Excluded Collateral and such monies constitute collected funds which either
(i) are held in a Collateral Lockbox Account, or (ii) have been applied in
reduction of the Obligations and to the extent new funds have not been
subsequently advanced to the Grantor, as follows:
Description of Excluded Collateral: _________________________________
Amount: $____________________________________________________________
Non-Recourse Lender: ________________________________________________
The Grantor hereby authorizes and directs the Collateral Agent to
deliver such monies to [Non-Recourse Lender].
The undersigned, ______________________________, hereby certifies that
[s]he is an Authorized Signatory.
WITNESS MY HAND this __ day of __________, 1994.
LDI CORPORATION, as Grantor
BY: ______________________________
TITLE: ___________________________
Acknowledged and Agreed
LDI OF OHIO, INC.
BY: ___________________________
TITLE: ________________________
50026F70.1E
17122-008 EX. III-1
<PAGE> 92
EXHIBIT IV
FORM OF
NOTICE OF NON-RECOURSE
FINANCING
[LDI CORPORATION LETTERHEAD]
NOTICE OF NON-RECOURSE FINANCING
This Notice of Non-Recourse Financing ("NOTICE") is delivered pursuant
to that certain Amended and Restated Security Agreement dated as of July 29,
1994 by and between Continental Bank, in its capacity as Collateral Agent
thereunder, and LDI CORPORATION, defined as the Grantor thereunder (the
"SECURITY AGREEMENT"). All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.
In the ordinary course of its business, the Grantor desires to
sell and/or finance the Leases and related Collateral more fully described
below and, in connection therewith, incur the Non-Recourse Debt more fully
described below.
Pursuant to Section 6 of the Security Agreement, this Notice will
serve as the written notice to the Collateral Agent of the proposed sale
and/or financing, and the proposed incurrence of Non-Recourse Debt, described
more fully below. This Notice is being delivered to the Collateral Agent at
least one Business Day prior to the proposed incurrence of Non-Recourse Debt.
Description of Lease and Schedules: (SEE ATTACHED ANNEX I)
----------------------
Length of Lease: (SEE ATTACHED ANNEX I)
----------------------
Description of Underlying Inventory or Equipment: (SEE ATTACHED ANNEX I)
-----------------------
Name of Non-Recourse Lender:
--------------------------------------------
Address of Non-Recourse Lender:
-----------------------------------------
Estimated Amount of Non-Recourse Funding $
-------------------------------
The Grantor hereby requests that the Collateral Agent execute the
accompanying [Release] [Subordination Agreement] which sets forth a complete
description of the Collateral to be [released] [subordinated].
50026F70.1E
17122-008 EX. IV-1
<PAGE> 93
The undersigned, _____________________________________, hereby
certifies that [s]he is an Authorized Signatory. The Grantor certifies to
the Collateral Agent and the Intercreditor Lenders that the proposed
transaction described above constitutes Non-Recourse Debt, as defined in the
Security Agreement. The Grantor further certifies that, as of the date
hereof, no Event of Default or Default has occurred or will occur as a result
of the consummation of the transactions contemplated herein.
WITNESS MY HAND this __ day of ____________, 1994.
LDI CORPORATION, as Grantor
BY:___________________________
TITLE:________________________
Acknowledged and Agreed
LDI OF OHIO, INC.
BY:____________________________
TITLE:_________________________
50026F70.1E
17122-008 EX. IV-2
<PAGE> 94
EXHIBIT V
FORM OF NON-RECOURSE DEBT RELEASE
This Release, dated ________________, 1994 is delivered pursuant to
that certain Amended and Restated Security Agreement dated as of July 29,
1994, by and between Continental Bank, in its capacity as Collateral Agent
thereunder, and LDI CORPORATION, defined as the Grantor thereunder (the
"SECURITY AGREEMENT"). All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.
The Collateral Agent has previously received a Notice of Non-Recourse
Financing dated ________________ from the Grantor stating that in the ordinary
course of its business the Grantor desires to sell and/or finance the Leases
and related Collateral more fully described below and, in connection
therewith, incur the Non-Recourse Debt more fully described below. In
connection therewith, the Grantor has requested that the Collateral Agent
release its Lien on the Released Collateral, as defined below.
Description of Lease and Schedules: (SEE ATTACHED ANNEX I)
----------------------
Length of Lease: (SEE ATTACHED ANNEX I)
----------------------
Description of Underlying Inventory or Equipment: (SEE ATTACHED ANNEX I)
----------------------
Name of Non-Recourse Lender:
-------------------------------------------
Address of Non-Recourse Lender:
-----------------------------------------
Estimated Amount of Non-Recourse Debt Financing: $
-----------------------
Estimated Amount of Non-Recourse Debt Financing to be Received by
Grantor: $
---------------------------------------------------------------
Estimated Amount of Non-Recourse Debt Financing to be Paid to
Third Parties: $
--------------------------------------------------------
Subject to the terms set forth in this Release and the Security
Agreement, the Collateral Agent hereby releases the Lien of the Collateral
Agent on the following described Collateral (collectively, the "RELEASED
COLLATERAL"):
(i) the Lease[s], described above, transferred by the
Grantor to the Non-Recourse Lender, described above, on or about
the date hereof (the "TRANSFERRED LEASE[S]") and the Grantor's
interest in the Transferred Lease[s];
(ii) all security interests or liens, and property subject
to such security interests or liens, and all guarantees, indemnities,
warranties, letters of credit, insurance policies and proceeds and
premium refunds thereof and other agreements or arrangements from
time to time granted by or entered into by the lessees or any other
person (other than the Grantor) under the Transferred Lease[s] to
secure or support the payment of the lessees' obligations under the
Transferred Lease[s] including all UCC financing statements covering
the Lessee Collateral;
50026F70.1E
17122-008 EX. V-1
<PAGE> 95
(iii) all of the Grantor's right, title and interest in the
data processing, telecommunications, and other capital equipment
leased by the Grantor as lessor which is subject to the Transferred
Lease[s]; and
(iv) all Proceeds of the foregoing.
This Release will become effective only upon receipt by the
Collateral Agent of the full proceeds of the Non-Recourse Debt described
above, minus the amount specified by the Grantor above to be paid to third
parties, and (ii) consummation of the proposed incurrence of Non- Recourse
Debt, within ten (10) days following the date of this Release, on the
terms set forth in this Release and all annexes attached thereto.
The Grantor hereby certifies that as of the date of this Release and
as of the date that this Release becomes effective, no Default or Event of
Default has occurred or will occur as a result of the consummation of the
transactions contemplated herein.
CONTINENTAL BANK, LDI CORPORATION,
as Collateral Agent as Grantor
BY:___________________________ BY:___________________________
TITLE:________________________ TITLE:________________________
Acknowledged and Agreed
LDI OF OHIO, INC.
BY:____________________________
TITLE:_________________________
EX. V-2
<PAGE> 96
EXHIBIT VI
[Intentionally Omitted]
50026F70.1E
17122-008 EX. VI-1
<PAGE> 97
EXHIBIT VII
FORM OF SUBORDINATION AGREEMENT
This Subordination Agreement ("Agreement") is entered into as of
______________, 1994, by and between the parties hereto in order to induce
______________________________ ("Lender") to make loans or extend credit to LDI
Corporation, a Delaware corporation ("Borrower").
Continental Bank, in its capacity as Collateral Agent for various
financial institutions ("Collateral Agent"), hereby agrees for the benefit
of, and covenants to, Lender as follows:
1. The Borrower desires to obtain loans or credit from Lender
in the amount and on the terms set forth in Exhibit A attached hereto (all
obligations owing under the documents set forth in such EXHIBIT A being
hereinafter referred to as "Secured Obligations"). Collateral Agent hereby
acknowledges that Lender will not make loans or extend credit to Borrower
unless Lender has a lien on or security interest in the property described
on EXHIBIT B hereto, all replacements, additions or substitutions thereto
and all proceeds (including, without limitation, any goods, chattel paper,
documents, instruments or contract rights which constitute proceeds) thereof
(collectively, the "Collateral"), which lien or security interest is prior
in right to any lien or security interest granted to or held by Collateral
Agent as provided in this Agreement.
2. Subject to SECTION 11 hereof, all understandings, agreements,
representations and warranties contained herein are solely for the benefit of
the parties hereto, and there are no other parties (including, without
limitation, Borrower) who are intended to be benefitted in any way by this
Agreement.
3. Nothing contained herein is intended to affect or limit in
any way the lien or security interest that Lender or Collateral Agent has in
any assets of Borrower, whether tangible or intangible, insofar as Borrower
and third parties are concerned, and the parties hereto reserve all of their
respective liens, security interests, rights, remedies and priorities as
against Borrower and any such third party.
4. Subject to SECTION 8 hereof, (a) Collateral Agent hereby
subordinates any and all liens and security interests which it now has or
may hereafter acquire in the Collateral to the liens and security interests
Lender now has or may hereafter acquire in the Collateral; (b) Collateral
Agent agrees that, so long as Lender has any Secured Obligations outstanding
secured by the Collateral, Collateral Agent will not take any action to
enforce its lien on or security interest in the Collateral, including, without
limitation, giving notice of foreclosure, effecting foreclosure,
50026F70.1E
17122-008 EX. VII-1
<PAGE> 98
taking possession of the Collateral or giving notice to obligors with respect
to the Collateral of its lien or security interest thereon; (c) Collateral
Agent agrees not to oppose, interfere with or otherwise attempt to prevent
Lender from enforcing its lien on and security interest in the Collateral or
otherwise realizing on the Collateral; and (d) at the request of Lender,
Collateral Agent shall release any lien and security interest it has on the
Collateral to facilitate the transfer or sale of the Collateral so long as
the proceeds thereof are applied against Borrower's Secured Obligations to
Lender which are secured by the Collateral and any excess is applied against
indebtedness or other obligations secured by Collateral Agent's security
interest in the Collateral.
5. Subject to SECTION 8 hereof, (a) Collateral Agent agrees that
Lender is entitled to all payments from the Collateral and all proceeds of
the Collateral (including, without limitation, any payment by any lessee under
any lease which is part of the Collateral) prior to payment thereof to the
Collateral Agent, and (b) Collateral Agent agrees that until all Secured
Obligations of Borrower to Lender which are secured by the Collateral are paid
in full, Collateral Agent shall not knowingly receive, accept or retain any
direct or indirect payment from the Collateral or the proceeds thereof and if
Collateral Agent receives any such payment at any time prior to the payment
in full of the Secured Obligations (including, without limitation, any
obligations accruing after any bankruptcy, insolvency or similar proceeding
involving Borrower), Collateral Agent will promptly upon request by Lender (so
long as such request is received within 60 days after such receipt of such
payment by Collateral Agent) deliver such payment (or funds in the amount of
such payment) to Lender.
6. The subordination set forth herein shall remain in full force
and effect, regardless of whether Lender or Collateral Agent (or any party
for which Collateral Agent acts as agent) amends, extends, waives,
supplements or otherwise modifies any of its agreements with Borrower. Lender
may exercise or refrain from exercising any right or remedy against Borrower
without affecting the subordination set forth herein.
7. The subordination set forth herein is applicable irrespective
of the time or order of attachment or perfection of any lien or security
interest referred to herein, the time or order of filing of any financing
statement, the acquisition of purchase money or other priority with respect
to any such lien or security interest or the time of giving or the failure to
give notice of the acquisition or expected acquisition of a purchase money or
other security interest.
8. The subordination provisions set forth herein shall be of
no force or effect if and to the extent that Lender's lien on or security
interest in the Collateral is finally determined to be avoidable in any
bankruptcy, insolvency or similar proceeding involving Borrower.
50026F70.1E
17122-008 EX. VII-2
<PAGE> 99
9. This Agreement is governed by, and shall be construed in
accordance with, the laws of the State of Illinois.
10. This Agreement may not be amended or otherwise modified except
in a writing signed by Collateral Agent and Lender.
11. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assignees of Lender and
Collateral Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their duly authorized officers as of the
date first written above.
_____________________, as Lender
By: ____________________________
Its: ___________________________
CONTINENTAL BANK, in its capacity
as Collateral Agent
By: _____________________________
Its: ____________________________
Acknowledged and Agreed
LDI CORPORATION
By:___________________________
Its:__________________________
50026F70.1E
17122-008 EX. VII-3
<PAGE> 100
EXHIBIT A
[Insert term sheet]
50026F70.1E
17122-008 EX. VII-4
<PAGE> 101
EXHIBIT B
[Insert Description of Collateral]
50026F70.1E
17122-008 EX. VII-5
<PAGE> 102
EXHIBIT VIII
FORM OF SWEEP AGREEMENT
July __, 1994
[Bank Name]
______________________
______________________
Attn: _______________
Re: LDI Corporation, a Delaware corporation,
(THE "BORROWER")
Gentlemen:
1. Reference is made to the following agreements: (a) that
certain Second Amended and Restated Credit Agreement dated as of July 29, 1994
by and among Continental Bank, National City Bank and Society National Bank as
Co-Agents (the "Co-Agents"), the Borrower and the other commercial lending
institutions which are signatories thereof (the "Lenders") (as the same may
be amended, modified or supplemented from time to time, the "Credit
Agreement"); (b) that certain Intercreditor Agreement dated as of July 29,
1994 by and among the Borrower, the "Subject Lenders" and the "Subject
Agents" (each as defined therein), Continental Bank, in its capacity as
collateral agent (the "Collateral Agent") and the other parties thereto (as the
same may be amended, modified or supplemented from time to time, the
"Intercreditor Agreement"); and (c) that certain Amended and Restated Security
Agreement dated as of July 29, 1994 by and between the Borrower and the
Collateral Agent (as the same may be amended, modified or supplemented from
time to time, the "Security Agreement"). All capitalized terms used herein
and not otherwise defined herein shall have the meaning ascribed thereto in the
Security Agreement.
2. The Collateral Agent has been advised that the Borrower
maintains the following deposit accounts with [Bank Name] at [Bank Address]
("[Bank Name]"):
[Insert account numbers and types]
(collectively, all accounts and deposit accounts maintained at [Bank Name],
whether now existing or hereafter established, are hereinafter referred to as
the "[Bank Name] Accounts").
3. As provided in the Security Agreement and to secure the
Borrower's repayment and performance of the Obligations (as defined in the
Security Agreement), the Borrower has granted to the Collateral Agent a
continuing security interest in and Lien upon, among other things, all of the
Borrower's right, title and interest in, to and under certain accounts and
deposit accounts, including
50026F70.1E
17122-008 EX. VIII-1
<PAGE> 103
but not limited to the [Bank Name] Accounts, all cash, funds, monies and
amounts required to be deposited in or deposited in, from time to time, the
[Bank Name] Accounts, all interest, dividends, cash, instruments or other
property from time to time received, receivable or otherwise earned
(whether or not paid), distributed in respect of or in exchange for one or
all of the foregoing and all certificates and instruments, if any, from
time to time representing the [Bank Name] Accounts and such cash, funds,
monies, amounts, interest, dividends or other property (collectively, the
"Accounts").
4. This letter constitutes irrevocable notice to [Bank Name],
[in accordance with Section __ of the Uniform Commercial Code] of the
Collateral Agent's first priority security interest in and Lien upon all of
the Borrower's right, title and interest in, to and under the Accounts. [Bank
Name], by its execution of this letter, acknowledges receipt of this letter and
notice.
5. In order to induce the Collateral Agent to approve [Bank
Name] as the depository of the [Bank Name] Accounts, [Bank Name], by its
execution of this letter in the space provided below, agrees:
(a) that it waives any security interest, lien (banker's or
otherwise) and/or right of setoff against any of the Accounts, other
than the right to setoff fees, insufficient items and charge-backs,
and as contained in paragraph 8 of this letter;
(b) to continue to honor checks and other instruments for
withdrawals from the Accounts issued by the Borrower, consistent
with [Bank Name] normal banking practices, until such time as [Bank
Name] receives written notice from the Collateral Agent at the
written direction of the Required Lenders, to [Bank Name] at its
office located at [Bank Address], stating that an Event of Default
under the Intercreditor Agreement has occurred and notifying [Bank
Name] to cease permitting the Borrower to make withdrawals from any
of the Accounts (a copy of which shall be sent by the Collateral
Agent to the Borrower); thereafter, the Collateral Agent at the
written direction of the Required Lenders may
50026F70.1E
17122-008 EX. VIII-2
<PAGE> 104
request and [Bank Name] shall comply with such request, that [Bank
Name] by wire transfer of immediately available funds shall transfer
to a Collateral Lockbox Account at such financial institution as the
Collateral Agent shall designate in writing, any and all of the
Borrower's cash, funds, monies, items and amounts in the [Bank Name]
Accounts or otherwise in [Bank Name]'s possession and included in
Accounts;
(c) that upon receipt of such notice, [Bank Name] shall
honor only such instructions for withdrawals as are given by the
Collateral Agent, notwithstanding any inconsistent or conflicting
instructions given to [Bank Name] by the Borrower, and that such
notice and instructions can only be revoked by the Collateral Agent,
but not by the Borrower; and
(d) that, prior to [Bank Name]'s receipt of the notice
referred to in paragraph 5(b) above, from time to time upon the
request of the Borrower or the Collateral Agent at the written
direction of the Required Lenders to [Bank Name], [Bank Name] shall
by wire transfer of immediately available funds, transfer to a
Collateral Lockbox Account at such financial institution as the
Collateral Agent shall designate in writing (which account numbers and
other material information shall be as specified at the end of this
letter) all cash, funds, monies, items and amounts in the [Bank
Name] Accounts or otherwise in [Bank Name]'s possession and
included in Accounts, in excess of [$________________] in the
aggregate.
6. [Bank Name] represents and warrants to the Collateral Agent as
follows:
(a) that the only accounts the Borrower maintains at
[Bank Name] are the [Bank Name] Accounts, and that the account
numbers are as specified above;
(b) that the [Bank Name] Accounts are held in the name of
the Borrower only;
(c) that each of the [Bank Name] Accounts is a deposit
account;
50026F70.1E
17122-008 EX. VIII-3
<PAGE> 105
(d) that [Bank Name] has not received notice of any other
lien or security interest in any of the Accounts; and
(e) that the [Bank Name] Accounts are federally insured
accounts and such FDIC insurance covers up to $100,000 in the
aggregate, and the [Bank Name] Accounts have no penalty for immediate
withdrawal.
7. Neither the Collateral Agent, any Subject Lender nor any
Subject Agent shall be responsible for any charges incurred in connection
with any of the Accounts. All charges incurred in connection with the
Accounts will be payable by the Borrower. Notwithstanding the foregoing,
after the Collateral Agent provides [Bank Name] with the notice referred to
in paragraph 5(b) above, the Collateral Agent shall reimburse [Bank Name] for
[Bank Name]'s reasonable expenses incurred in complying with the Collateral
Agent's requests thereafter made under and pursuant to this letter to the
extent that the Accounts are insufficient to reimburse such expenses AND
provided that the Collateral Agent's prior written consent is obtained by
[Bank Name] prior to [Bank Name] incurring any material expenses it expects
to be reimbursed by the Collateral Agent hereunder.
8. The Borrower agrees to save and hold harmless, to defend
and to indemnify, [Bank Name] against all actions, proceedings, claims,
demands, losses, outlays, damages or expenses, including reasonable legal
fees of [Bank Name]'s in-house or outside counsel, of every nature and
character as may arise or be made against [Bank Name] in respect of [Bank
Name] acting in accordance with this letter, or which it may in any way
incur in defending or prosecuting, settling or discontinuing any such
proceedings, actions, claims, damages, expenses or outlays, arising out of
any act or omission of the Borrower. The Borrower and the Collateral Agent
agree that [Bank Name] may setoff against the Accounts reasonable expenses
[Bank Name] incurs in complying with and acting in accordance with the
provisions of this letter, upon providing in writing a description of such
expenses to the Borrower and the Collateral Agent.
50026F70.1E
17122-008 EX. VIII-4
<PAGE> 106
9. The Borrower hereby releases [Bank Name] from any
liabilities, claims, damages, losses and outlays to the Borrower, of every
nature and character as may arise or be made against [Bank Name] by or on
behalf of the Borrower, directly or indirectly, related to actions taken by
[Bank Name] at the direction of the Collateral Agent and pursuant to the
terms of this letter, except for [Bank Name]'s gross negligence or willful
misconduct, determined in such case by a non-appealable judicial order.
10. Notwithstanding any other provision in this Agreement [Bank
Name] shall not be required to take any action with respect to the [Bank Name]
Accounts (including the transfer of funds) to the extent such action is then
prohibited by statute, regulation or legal process binding on [Bank Name].
11. The agreements contained in this letter will become effective
immediately upon its execution by all of the parties and may not be amended
without the express written consent of all parties.
CONTINENTAL BANK,
as Collateral Agent
By: ________________________________
____________________________________
[Printed Name and Title]
Continental Bank, Chicago, Illinois,
as Collateral Agent,
Collateral Lockbox Account
maintained at National City
Bank as agent for Collateral
Agent ABA #: _______________
Name of Account: LDI
Corporation The Borrower's
Account No is:
___________________________________
50026F70.1E
17122-008 EX. VIII-5
<PAGE> 107
LDI Corporation, a Delaware corporation
By:____________________________________
______________________________________
[Printed Name and Title]
Accepted and Agreed to as of
[DATE]
[Bank Name]
By:____________________________________
_______________________________________
[Printed Name and Title]
50026F70.1E
17122-008 EX. VIII-6
<PAGE> 108
AMENDED AND RESTATED
SECURITY AGREEMENT
dated as of July 29, 1994,
by and between
LDI OF OHIO, INC.,
as the Grantor
and
CONTINENTAL BANK,
in its capacity as the Collateral Agent
<PAGE> 109
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C> <C>
SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----------
SECTION 2 CONFIRMATION AND GRANT OF SECURITY INTEREST; COLLATERAL; EXCLUDED COLLATERAL . . . . . . . . 18
----------------------------------------------------------------------------
(a) Confirmation of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . 18
---------------------------------
(b) Grant of Security Interest; Collateral . . . . . . . . . . . . . . . . . . . . . . 18
--------------------------------------
(c) Excluded Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-------------------
SECTION 3 THE GRANTOR TO REMAIN LIABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
----------------------------
SECTION 4 BANK ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-------------
(a) Types of Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
----------------------
(b) Collateral Lockboxes and Collateral Lockbox Accounts . . . . . . . . . . . . . . . 25
----------------------------------------------------
(c) Location of Mandatory Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . 26
-----------------------------------
(d) Non-Recourse Debt Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
----------------------------
(e) Collateral Agent Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-----------------------
(f) Bank Accounts; Collateral Lockbox Account Letters . . . . . . . . . . . . . . . . . 26
-------------------------------------------------
(g) Account Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------
(h) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------------
(i) Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------------
SECTION 5 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-----------------------
SECTION 6 NON-RECOURSE FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
----------------------
(a) CXC Accounts and Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
----------------------
(b) Other Non-Recourse Accounts and Funds . . . . . . . . . . . . . . . . . . . . . . . 28
-------------------------------------
(c) Notice and Release of Collateral for Non-Recourse Debt Transaction . . . . . . . . 29
------------------------------------------------------------------
SECTION 7 MARKING AND DELIVERY OF COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
----------------------------------
(a) Marking of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
---------------------
(b) Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
---------------------
SECTION 8 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
------------------------------
(a) Location of Business and Collateral. . . . . . . . . . . . . . . . . . . . . . . . 31
-----------------------------------
(b) Pledged Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
--------------
(c) Ownership/Title to Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-----------------------------
(d) Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
----------
(e) Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
----------
(f) Approval; Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
------------------
(g) Accounts, Accounts Receivables and General Intangibles. . . . . . . . . . . . . . . 33
------------------------------------------------------
(h) Authorization; Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------------------------
(i) Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--------
(j) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
------
(k) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
---------
</TABLE>
50026F32.1E
17122-008
<PAGE> 110
<TABLE>
<S> <C> <C>
(l) Third Party Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
-----------------
SECTION 9 GENERAL COVENANTS REGARDING COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------------------------------------
(a) Financing Statements, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------------------------
(b) Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
------------------
(c) Statements and Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
------------------------
(d) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--------------------
(e) Identification of Leases and Chattel Paper . . . . . . . . . . . . . . . . . . 38
------------------------------------------
SECTION 10 COVENANTS REGARDING COLLATERAL EQUIPMENT AND COLLATERAL INVENTORY . . . . . . . . . . . 38
------------------------------------------------------------------
(a) Location of Collateral Equipment. . . . . . . . . . . . . . . . . . . . . . . . 38
--------------------------------
(b) Maintenance of Collateral Equipment and Collateral Inventory. . . . . . . . . . 39
------------------------------------------------------------
(c) Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
----------------
(d) Location of Collateral Inventory. . . . . . . . . . . . . . . . . . . . . . . . 39
--------------------------------
SECTION 11 COVENANTS REGARDING INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
-----------------------------
(a) Maintenance of Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
------------------------
(b) Grantor to Take Required Action . . . . . . . . . . . . . . . . . . . . . . . . 40
-------------------------------
(c) Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
----------------
(d) Deposit of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-------------------
(e) Settlement of Claims and Release of Proceeds . . . . . . . . . . . . . . . . . 41
--------------------------------------------
(f) Aircraft Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
------------------
SECTION 12 COVENANTS REGARDING ACCOUNTS AND ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . 41
----------------------------------------------------
(a) Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
-------
(b) Notice to Account Debtors. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
-------------------------
(c) Verifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-------------
(d) Limitations on Modifications of Accounts. . . . . . . . . . . . . . . . . . . . 42
----------------------------------------
(e) Schedule of Accounts and Accounts Receivable. . . . . . . . . . . . . . . . . . 42
--------------------------------------------
SECTION 13 ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--------------------
(a) No Transfer of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-------------------------
(b) Proceeds of Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
----------------
(c) Pledged Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--------------
(d) Payment of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
----------------------
(e) Limitation of Liens on Collateral. . . . . . . . . . . . . . . . . . . . . . . 44
---------------------------------
(f) Compliance with Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
---------------------
(g) Third Party Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
-----------------
(h) Further Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
-----------------------
(i) Maintenance of Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
----------------------
(j) Special Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
------------------
(k) Performance by the Collateral Agent of the Grantor's Obligation . . . . . . . . 45
---------------------------------------------------------------
(l) Maintenance and Repairs of Aircraft. . . . . . . . . . . . . . . . . . . . . . 45
-----------------------------------
(m) Aircraft Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
---------------------
SECTION 14 VOTING RIGHTS; DIVIDENDS; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
------------------------------
(a) Upon Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
---------------------
</TABLE> -ii-
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<TABLE>
<S> <C> <C>
(b) After Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
----------------------
SECTION 15 COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT . . . . . . . . . . . . . . . . . . . . . . . . . 48
-------------------------------------------
(a) Appointment of Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
-------------------------------
(b) Ratification of Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-----------------------
(c) Duties of Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
--------------------------
(d) Additional Authority Upon Event of Default. . . . . . . . . . . . . . . . . . . . . . 50
------------------------------------------
SECTION 16 THE COLLATERAL AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
--------------------
(a) Appointment of the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . 50
-----------------------------------
(b) Responsibility Disclaimed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
-------------------------
(c) Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
----------------------
(d) Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
--------------------
(e) Limitations on Responsibility of the Collateral Agent and Other Matters . . . . . . . 53
-----------------------------------------------------------------------
(f) Action on Instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
----------------------
(g) Advance of Funds by the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . 54
----------------------------------------
(h) Continental and Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
--------------------------
(i) Notice to Holder of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
-------------------------
(j) Reliance by the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
--------------------------------
(k) Termination of the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . 55
-----------------------------------
(l) Resignation of the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . 55
-----------------------------------
(m) Notice of Successor Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . 56
------------------------------------
(n) Status of Successors to the Collateral Agent. . . . . . . . . . . . . . . . . . . . . 56
--------------------------------------------
(o) Merger of the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
------------------------------
SECTION 17 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-----------------
SECTION 18 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
--------
(a) Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-------
(b) Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
-------------------
(c) Treatment of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
---------------------
(d) Disposition of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
-----------------------
SECTION 19 INDEMNITY AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
----------------------
(a) Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
---------------
(b) Reimbursement of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
-------------------------
SECTION 20 SECURITY INTEREST ABSOLUTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
--------------------------
SECTION 21 REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-------------------
SECTION 22 AMENDMENTS; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
---------------
SECTION 23 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
-------
SECTION 24 CONTINUING SECURITY INTEREST; TRANSFER OF NOTES . . . . . . . . . . . . . . . . . . . . . . . 64
-----------------------------------------------
SECTION 25 GOVERNING LAW; TERMS; WAIVER OF DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
----------------------------------------
SECTION 26 REINSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-------------
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 27 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
--------------
(a) Incorporation of Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-------------------------
(b) Headings; Language. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
------------------
(c) Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
------------
(d) No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 66
------------------------------
(e) Conflicts or Inconsistency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
--------------------------
(f) Execution in Counterparts; Amendment and Restatement . . . . . . . . . . . . . . . 66
----------------------------------------------------
SECTION 28 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
--------------------
SECTION 29 RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
-------
</TABLE>
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SCHEDULES
SCHEDULE I MANDATORY BANK ACCOUNTS
SCHEDULE II PERMITTED BANK ACCOUNTS
SCHEDULE III SPECIAL PERMITTED BANK ACCOUNTS
SCHEDULE IV INTELLECTUAL PROPERTY
SCHEDULE V PLEDGED SHARES/PLEDGED DEBT
SCHEDULE VI BANK ACCOUNTS
SCHEDULE VII GRANTOR'S LOCATIONS
SCHEDULE VIII LOCATION OF COLLATERAL
SCHEDULE IX LEASES
SCHEDULE X AIRCRAFT AND ENGINES
SCHEDULE XI AIRCRAFT INSURANCE
SCHEDULE XII SPECIFIED COLLATERAL
EXHIBITS
EXHIBIT I FORM OF COLLATERAL LOCKBOX ACCOUNT LETTER
EXHIBIT II FORM OF NOTICE TO RELEASE CXC FUNDS
EXHIBIT III FORM OF NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS
EXHIBIT IV FORM OF NOTICE OF NON-RECOURSE FINANCING
EXHIBIT V FORM OF NON-RECOURSE DEBT RELEASE
EXHIBIT VI [Intentionally Omitted]
EXHIBIT VII FORM OF SUBORDINATION AGREEMENT
EXHIBIT VIII FORM OF SWEEP AGREEMENT
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AMENDED AND RESTATED
SECURITY AGREEMENT
------------------
THIS AMENDED AND RESTATED SECURITY AGREEMENT ("AGREEMENT") is
made as of July 29, 1994 (the "AGREEMENT DATE") by LDI OF OHIO, INC., an Ohio
corporation (the "GRANTOR"), in favor of CONTINENTAL BANK, in its capacity as
collateral agent as hereinafter provided (the "COLLATERAL AGENT") and amends
and restates in its entirety the Security Agreement, dated as of May 2, 1994
(the "EXISTING SECURITY AGREEMENT"), executed by the Grantor in favor of the
Collateral Agent and the various financial institutions identified therein.
RECITALS:
--------
. The Grantor is a wholly-owned subsidiary of LDI
Corporation, a Delaware corporation ("Borrower"). The Borrower has previously
executed the following agreements: (i) that certain Amended and Restated Credit
Agreement (the "NCB/SOCIETY CREDIT AGREEMENT"), dated as of December 14, 1992,
among the Borrower, National City Bank ("NCB") and Society National Bank
("SOCIETY") as co-agents and the various financial institutions which are
parties thereto; (ii) that certain Credit Agreement (the "CONTINENTAL CREDIT
AGREEMENT"), dated as of August 3, 1992, as amended, among the Borrower,
Continental Bank as agent, and the various financial institutions which are
parties thereto; (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
ATLANTIC"), The Minnesota Mutual Life Insurance Company (successor by merger to
Ministers Life - A Mutual Life Insurance Company) ("MINNESOTA MUTUAL"), Farm
Bureau Life Insurance Company of Michigan ("FARM"), FB Annuity Company ("FB")
and Farm Bureau Mutual Insurance Company of Michigan ("FARM MUTUAL," and
collectively with the 1989 Lenders, North Atlantic, Minnesota Mutual, 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 Borrower in
favor of National Westminster Bank, USA ("NAT WEST").
<PAGE> 115
A. Each of NCB, Society and Continental, each in their
capacity as lender, and each of the various other financial institutions which
are lenders under each of the NCB/Society Credit Agreement and the Continental
Credit Agreement are herein referred to as the "EXISTING BANK LENDERS."
B. The Northwestern Lenders and Nat West are herein
referred to as the "EXISTING TERM LENDERS."
C. The Existing Bank Lenders and the Existing Term
Lenders are herein referred to collectively as the "EXISTING LENDERS."
D. The Borrower has previously executed and delivered a
Credit Agreement, dated as of May 2, 1994, as amended, by and among NCB,
Society and Continental, as co-agents, and the Existing Bank Lenders to be
effective as of July 29, 1994 only upon the terms and conditions set forth
therein (the "NEW CREDIT AGREEMENT").
E. The NCB/Society Credit Agreement, the Continental
Credit Agreement, the Northwestern Agreements, the Nat West Note, and the New
Credit Agreement, as each may hereafter be amended, modified, supplemented or
restated in conformity with the terms of the Intercreditor Agreement (as
hereinafter defined), are herein referred to collectively as the "EXISTING
CREDIT AGREEMENTS."
F. At the request of the Borrower and in consideration
of, among other things, the execution and delivery by the Borrower of the
Existing Security Agreement, each of the Existing Bank Lenders which is a party
to the NCB/Society Credit Agreement executed a waiver dated May 2, 1994 of
certain defaults thereunder and each of the Existing Bank Lenders which is a
party to the Continental Credit Agreement executed and delivered to the
Borrower a waiver dated April 29, 1994 of certain defaults thereunder (each a
"WAIVER").
G. Each Waiver was originally for a period ending on May
31, 1994 and, at the request of the Borrower, the Existing Bank Lenders
executed and delivered to the Borrower extensions of each of the Waivers to
July 29, 1994 (each such extension, a "WAIVER EXTENSION").
H. At the request of the Borrower, each of the Existing
Bank Lenders and the Borrower entered into that certain letter agreement Re:
Proposed Credit Agreement, dated April 28, 1994, as amended (the "EXISTING BANK
LENDERS COMMITMENT LETTER").
I. Pursuant to the terms of the Existing Bank Lenders
Commitment Letter and concurrently with the execution and delivery hereof, the
Borrower is executing and delivering a Second Amended and Restated Credit
Agreement, dated as of the date hereof (the "AMENDED AND RESTATED CREDIT
AGREEMENT"), by and among the Borrower
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and NCB, Society and Continental, each in its capacity as agent (individually,
in such capacity, a "CO-AGENT" and collectively, in such capacities, the
"CO-AGENTS") and the Existing Bank Lenders (collectively with the Co-Agents,
the "AMENDED AND RESTATED CREDIT AGREEMENT LENDERS").
J. At the request of the Borrower, each of the
Northwestern Lenders and the Borrower entered into that certain letter
agreement, 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, dated May 2, 1994, as amended (the "NORTHWESTERN COMMITMENT LETTER"), and
pursuant to the terms of the Northwestern Commitment Letter and concurrently
with the execution and delivery hereof, the Borrower shall execute and deliver
a letter amendment to the 1988 Note Purchase Agreement and a letter amendment
to the 1989 Note Purchase Agreement (as so amended, the "AMENDED NORTHWESTERN
AGREEMENTS").
K. The Borrower has previously executed and delivered to
Nat West an amendment of the Nat West Note, dated as of April 29, 1994 (the
"AMENDED NAT WEST NOTE").
L. The Amended and Restated Credit Agreement, the
Amended Northwestern Agreements and the Amended Nat West Note, and each of the
Subject Facility Documents (as defined in the Intercreditor Agreement) as may
hereafter exist, as each may hereafter be amended, modified, supplemented or
restated in conformity with the terms of the Intercreditor Agreement, are
herein referred to collectively as the "CREDIT AGREEMENTS."
M. The Borrower previously executed and delivered a
certain Security Agreement dated May 2, 1994, in favor of the Collateral Agent
for the benefit of the Existing Lenders ("EXISTING PARENT SECURITY AGREEMENT")
pursuant to which the Borrower granted in favor of the Collateral Agent a first
priority, perfected security interest in and Lien upon certain assets of the
Borrower, and concurrently herewith the Borrower will execute and deliver an
Amended and Restated Security Agreement in favor of the Collateral Agent for
the benefit of the Collateral Agent and the ratable benefit of the
Intercreditor Lenders ("AMENDED AND RESTATED PARENT SECURITY AGREEMENT"), and
it is a condition precedent to the effectiveness of the Amended and Restated
Credit Agreement and the Amended Northwestern Agreements that the Borrower
execute and deliver the Amended and Restated Parent Subsidiary Agreement in
order to, among other things, reaffirm, ratify, confirm, continue the security
interests, pledge and Liens granted pursuant to the terms of the Existing
Parent Security Agreement and to amend and restate the Existing Parent Security
Agreement.
N. The Grantor previously executed and delivered to the
Existing Lenders which are party to the Continental Credit Agreement, that
certain Guaranty of Payment of Debt dated as of ______________, 1994, and to
the Existing Lenders which are party to the NCB/Society Credit Agreement, that
certain Guaranty of Payment
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<PAGE> 117
of Debt, dated ________________, (collectively, the "SUBSIDIARY GUARANTIES").
O. Concurrently with the execution and delivery of this
Agreement, the Credit Agreements and the Intercreditor Agreement, the Grantor
is executing and delivering (i) a certain Amended and Restated Guaranty dated
of even date herewith in favor of ____________, and a certain Guaranty dated of
even date herewith in favor of the Northwestern Lenders.
P. Concurrently with the execution and delivery of this
Agreement, the Collateral Agent, the Grantor, the Borrower and the Existing
Lenders (together with each of the other financial institutions which are or
may become parties thereto, the "INTERCREDITOR LENDERS") are executing and
delivering an Intercreditor Agreement, dated the date hereof (as such agreement
may hereafter be amended, modified, supplemented or restated, the
"INTERCREDITOR AGREEMENT"), pursuant to which the Intercreditor Lenders shall,
among other things, define certain of their rights and remedies with respect to
the Credit Agreements and this Agreement.
Q. Concurrently with the execution and delivery of this
Agreement, the Collateral Agent, the Borrower and Citicorp North America, Inc.,
as agent (the "CXC AGENT") for CXC Incorporated, a Delaware corporation
("CXC"), are executing and delivering an Intercreditor Agreement, dated the
date hereof (as such agreement may hereafter be amended, modified, supplemented
or restated, the "CXC INTERCREDITOR AGREEMENT").
R. The Existing Lenders appointed Continental as
Collateral Agent under the Existing Security Agreement and are hereby
reaffirming their appointment of Continental as Collateral Agent thereunder and
hereunder.
S. Concurrently with the execution and delivery of this
Agreement and pursuant to the terms of the Intercreditor Agreement, the
Intercreditor Lenders are acknowledging the previous appointment of Continental
as Collateral Agent and are appointing Continental as Collateral Agent
thereunder and hereunder.
T. Concurrently with the execution and delivery of this
Agreement and pursuant to the terms of the Intercreditor Agreement, the
Intercreditor Lenders have agreed that notwithstanding the fact that each
Intercreditor Lender is a party to the Existing Security Agreement, from the
date hereof and continuing thereafter, this Agreement shall be by and between
the Borrower and the Collateral Agent only.
U. The Grantor, as a wholly-owned subsidiary of the
Borrower, will receive both direct and indirect benefits from the New Credit
Agreement and the Waivers.
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<PAGE> 118
NOW, THEREFORE, in consideration of the Recitals and of the
mutual covenants herein contained and in order to induce the Intercreditor
Lenders to enter into the Credit Agreements and the Intercreditor Agreement,
the Grantor hereby agrees with the Collateral Agent for the benefit of the
Collateral Agent and the Co-Agents and the ratable benefit of the Intercreditor
Lenders that the Existing Security Agreement be, and the same hereby is,
amended and restated in its entirety to read as set forth above and as follows:
SECTION 1 DEFINITIONS.
-----------
In addition to the terms defined elsewhere herein, the following
terms, shall be a part of this Agreement, and except where the context
otherwise requires, shall have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
"ACCOUNT" shall mean any "account" as such term is defined
in Section 1309.01(A)(15) of the UCC.
"ACCOUNT COLLATERAL" shall have the meaning ascribed to such
term in SECTION 2(b) hereof.
"ACCOUNT DEBTOR" shall mean any "account debtor" as such term
is defined in Section 1309.01(A)(1) of the UCC.
"ACCOUNT RECEIVABLE" shall mean any right to payment arising
out of, or relating to, or in connection with (a) any Account, (b)
the use, sale, lease or disposition of Inventory or goods (including,
without limitation, all Accounts, accounts receivable, other
receivables, Contract Rights, Chattel Paper, Instruments, Documents,
notes, and other forms of obligations now owned or hereinafter
received or acquired by or belonging or owing to the Grantor, whether
arising out of the sale, rental or lease of Inventory or goods); (c)
any amount payable by any person to the Grantor in connection with the
Grantor's purchase, acquisition or leasing of Inventory; (d) any
amounts payable under any of the General Intangibles; and (e) any or
all of the Grantor's rights in, to and under all purchase orders or
receipts now owned or hereinafter acquired by it and all of the
Grantor's rights to any goods represented by any of foregoing
(including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned,
reclaimed or repossessed goods), including, without limitation, the
right to receive the proceeds of said purchase orders and contracts,
and all collateral security and guarantees of any kind given by any
person with respect to any of the foregoing.
"AGREEMENT DATE" shall have the meaning ascribed to such term
in the preamble hereof.
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<PAGE> 119
"AIRCRAFT" shall mean (a) the Airframes; (b) the Engines; and
(c) any and all manuals, logbooks, flight records, maintenance
records, and other historical records or information of the Grantor
relating to the foregoing item (a) and/or item (b).
"AIRFRAME" shall mean those certain airframes identified on
SCHEDULE X attached hereto and incorporated herein by this reference,
together with any and all parts, appliances, components, instruments,
accessories, accessions, attachments, equipment, or avionics
(including, without limitation, radio, radar, navigation systems, or
other electronic equipment) installed in, appurtenant to, or delivered
with or in respect of such airframes.
"AMENDED AND RESTATED CREDIT AGREEMENT" shall have the meaning
ascribed to such term in Paragraph J of the Recitals.
"AMENDED AND RESTATED CREDIT AGREEMENT LENDERS" shall have the
meaning ascribed to such term in Paragraph J of the Recitals.
"AMENDED NAT WEST NOTE" shall have the meaning ascribed to
such term in Paragraph L of the Recitals.
"AMENDED NORTHWESTERN AGREEMENTS" shall have the meaning
ascribed to such terms in Paragraph K of the Recitals.
"APPLICABLE LAW" shall mean, in respect of any person, all
provisions of constitutions, statutes, rules, regulations and orders
of governmental bodies or regulatory agencies applicable to such
person, now in effect or as hereafter amended, modified, enacted or in
effect, and all orders and decrees of all courts and arbitrators in
proceedings or actions to which the person in question is a party or
by which it or any of its property is bound from time to time.
"AUTHORIZED SIGNATORY" shall mean the president, the chief
financial officer and such other specified officers or other senior
personnel of the Grantor as may be duly authorized and designated in
writing by resolution of the board of directors of the Grantor to
execute documents, agreements, certificates and instruments on behalf
of the Grantor.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy
Code, 11 U.S.C. Section 101 ET SEQ., as amended from time to time.
"BORROWER" shall have the meaning ascribed to such term in
Paragraph A of the Recitals.
"BUSINESS DAY" shall have the meaning ascribed to such term in
the Amended and Restated Credit Agreement.
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<PAGE> 120
"CASH EQUIVALENT INVESTMENT" shall mean overnight investment
of funds in a manner and in amounts satisfactory to the Collateral
Agent and the Required Lenders.
"CHATTEL PAPER" shall mean any "chattel paper" as such term is
defined in Section 1309.01(A)(2) of the UCC.
"CO-AGENTS" shall have the meaning ascribed to such term in
Paragraph J of the Recitals, and includes each successor who shall act
as a Co-Agent.
"COLLATERAL" shall have the meaning ascribed to such term in
SECTION 2(b) hereof.
"COLLATERAL AGENT" shall have the meaning ascribed to such
term in the preamble hereto, and includes each successor who shall act
as Collateral Agent.
"COLLATERAL INSURANCE CLAIM" shall mean any claim which
relates to reimbursement for damage to or loss of the Collateral and
arises under the insurance policies required by this Agreement or the
other Subject Facility Documents.
"COLLATERAL LOCKBOX" shall mean a Lockbox maintained by a
Collateral Lockbox Bank for the purpose of receiving payments of
proceeds of Collateral, or such other post office box or mailing
location utilized for a similar purpose as the Grantor and a
Collateral Lockbox Bank may agree upon from time to time.
"COLLATERAL LOCKBOX ACCOUNT" shall mean each account (i)
designated by the Collateral Agent from time to time; (ii) maintained
with a Collateral Lockbox Bank for the purposes described in this
Agreement, including without limitation, the purposes set forth in
SECTION 4 hereof, (iii) in which the Collateral Agent has a first
priority perfected Lien; (iv) over which the Collateral Agent has
exclusive control and dominion; and (v) with respect to which the
Grantor has no right to withdraw funds.
"COLLATERAL LOCKBOX ACCOUNT LETTERS" shall mean the letters in
the form and content of EXHIBIT I attached hereto and as more fully
described in SECTION 4(f) hereof.
"COLLATERAL LOCKBOX BANK" shall mean each and every
Intercreditor Lender which maintains a Collateral Lockbox Account.
"COMPUTER HARDWARE AND SOFTWARE" shall mean all computer
hardware and software in all its forms (including, but not limited to,
(a) 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
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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; (b) 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 clause (a) 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); (c) all firmware associated therewith, whether now owned,
licensed or leased or hereafter acquired by the Grantor; and (d) all
documentation for such hardware, software and firmware described in
the preceding CLAUSES (a), (b) AND (c), 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).
"CONTINENTAL" shall mean Continental Bank, in its individual
capacity.
"CONTINENTAL CREDIT AGREEMENT" shall have the meaning ascribed
to such term in Paragraph A of the Recitals.
"CONTRACTS" shall mean (a) all contracts, undertakings or
other agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) relating to the Collateral, and (b) all
"contract rights," as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction, relating to the
Collateral.
"CREDIT AGREEMENTS" shall have the meaning ascribed to such
term in Paragraph M of the Recitals.
"CXC" shall have the meaning ascribed to such term in
Paragraph R of the Recitals, together with its permitted successors
and assigns pursuant to the terms of the Lease Receivables Transfer
Agreement.
"CXC AGENT" shall have the meaning ascribed to such term in
Paragraph R of the Recitals, together with its permitted successors
and assigns pursuant to the terms of the Lease Receivables Transfer
Agreement.
"CXC EQUIPMENT COLLATERAL" shall have the meaning ascribed to
such term in the CXC Intercreditor Agreement.
"CXC INTERCREDITOR AGREEMENT" shall have the meaning ascribed
to such term in Paragraph R of the Recitals.
"CXC FUNDS" shall have the meaning ascribed to such term in
SECTION 6(a) hereof.
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"CXC LOCKBOX" shall mean a Lockbox maintained by a CXC Lockbox
Bank for the purpose of receiving payments made by Obligors of
Transferred Lease Receivables for subsequent deposit into a related
CXC Lockbox Account, or such other post office box or mailing location
utilized for a similar purpose as the Grantor and the CXC Agent may
agree upon from time to time pursuant to the Lease Receivable Transfer
Agreement.
"CXC LOCKBOX ACCOUNT" shall mean a Lockbox Account maintained
with a CXC Lockbox Bank for the purpose of depositing payments made by
the Obligors of Transferred Lease Receivables in connection with the
CXC Transaction, or such other account or accounts utilized for a
similar purpose as the Grantor and the CXC Agent may agree upon from
time to time pursuant to the Lease Receivables Transfer Agreement.
"CXC LOCKBOX BANK" shall mean a Lockbox Bank at which a CXC
Lockbox Account is maintained, or such other bank or financial
institution or entity utilized for a similar purpose as the Grantor
and the CXC Agent may agree upon from time to time pursuant to the
Lease Receivables Transfer Agreement.
"CXC RESTRUCTURED FACILITY" shall mean the transactions
contemplated by a lease receivables transfer facility to be entered
into among the Grantor, LDI Funding and CXC in order to replace the
facility evidenced by the Lease Receivables Transfer Agreement in
effect on the date hereof pursuant to which (a) all Transferred Assets
existing on the date such replacement facility becomes effective will
be (i) reconveyed by CXC to the Grantor, (ii) sold to and/or
contributed to the capital of LDI Funding by the Grantor and (iii)
transferred by LDI Funding to CXC pursuant to a new lease receivables
transfer agreement and (b) certain Collateral may thereafter be sold
to an/or contributed to the capital of LDI Funding by the Grantor and
become Transferred Assets in accordance with the terms of this
Agreement and the CXC Intercreditor Agreement. The terms and
conditions of the portion of the CXC Restructured Facility evidenced
by the lease receivables transfer agreement between LDI Funding and
CXC shall be substantially similar to terms and conditions contained
in the Lease Receivables Transfer Agreement in effect on the date
hereof.
"CXC TRANSACTION" shall mean the transactions contemplated by
the Lease Receivables Transfer Agreement and, following the effective
date thereof, the transactions contemplated by the CXC Restructured
Facility.
"DEBT DOCUMENTS" shall mean each and every of the following:
this Agreement, the Amended and Restated Credit Agreement, the Amended
and Restated Nat West Note, the Amended Northwestern Agreements, the
Amended and Restated Parent Security Agreement, the CXC Intercreditor
Agreement, the
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Subsidiary Guaranties, the Amended and Restated Guaranties, the Loan
Documents (as defined in the Amended and Restated Credit Agreement),
the Security Documents (as defined in the Intercreditor Agreement),
the Subject Facility Documents, and the Intercreditor Documents (as
defined in the Intercreditor Agreement).
"DEFAULT" shall mean any event, act or condition which, with
the passage of time or the giving of notice, or both, would constitute
an Event of Default.
"DEPOSIT ACCOUNTS" shall mean any "deposit account" as such
term is defined in Section 1309.01(A)(5) of the UCC.
"DOCUMENTS" shall mean any "document" as such term is defined
in Section 1309.01(A)(6) of the UCC.
"EQUIPMENT" shall mean any "equipment" as such term is defined
in Section 1309.07(B) of the UCC, and include, without limitation, all
machinery, equipment, furnishings, fixtures, and computers and other
electronic data processing and other office equipment and any and all
additions, substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
"ENGINES" shall mean those certain aircraft engines identified
on SCHEDULE X attached hereto and incorporated herein by this
reference, and any other aircraft engines which either now or in the
future are installed on, appurtenant to, or delivered with or in
respect of any Airframe, together with any and all parts, appliances,
components, accessories, accessions, attachments or equipment
installed on, appurtenant to, or delivered with or in respect of such
engines. The term "Engines" shall also refer to any replacement
aircraft engine which the Grantor is required or permitted, under this
Agreement, to install upon any Airframe and as to which the Grantor
complies with each of the applicable requirements contained in this
Agreement.
"EVENT OF DEFAULT" shall have the meaning ascribed to such
term in SECTION 17 hereof.
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"EXCLUDED COLLATERAL" shall have the meaning ascribed to such
term in SECTION 2(c) hereof.
"EXISTING BANK LENDERS" shall have the meaning ascribed to
such term in Paragraph B of the Recitals.
"EXISTING BANK LENDERS COMMITMENT LETTER" shall have the
meaning ascribed to such term in Paragraph I of the Recitals.
"EXISTING CREDIT AGREEMENTS" shall have the meaning ascribed
to such term in Paragraph F of the Recitals.
"EXISTING LENDERS" shall have the meaning ascribed to such
term in Paragraph D of the Recitals.
"EXISTING SECURITY AGREEMENT" shall mean that certain Security
Agreement dated as of May 2, 1994, executed by the Grantor in favor of
the Collateral Agent and the various financial institutions identified
therein.
"EXISTING TERM LENDERS" shall have the meaning ascribed to
such term in Paragraph C of the Recitals.
"FAA" shall mean the United States Federal Aviation
Administration, or any successor or replacement administration or
governmental agency having the same or similar authority and
responsibilities.
"FIXTURES" shall mean any "fixture" as such term is defined in
Section 1309.32 of the UCC.
"GENERAL INTANGIBLES" shall mean any "general intangible" as
such term is defined in Section 1309.01(A)(16) of the UCC.
"GENERAL NON-RECOURSE LENDER ACCOUNT" shall mean an account in
which the Collateral Agent has no Lien and which is maintained at NCB
for the purpose of receiving CXC Funds and Non-Recourse Lender Funds
as more fully described in SECTION 6 hereof, PROVIDED, HOWEVER, that
(a) the only deposits into any such account are Excluded Collateral or
the Proceeds of Excluded Collateral, and (b) the deposits made into
any such account shall not consist of any Collateral nor any Proceeds
of Collateral nor the proceeds of any loans, advances or other credit
facilities made by any Intercreditor Lender under any of the Subject
Facility Documents.
"GENEVA CONVENTION" shall mean the Convention on the
International Recognition of Rights in Aircraft made at Geneva,
Switzerland on June 19, 1948 (effective 17 September 1953), together
with the necessary enacting rules and regulations promulgated by any
particular signatory country.
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"GRANTOR" shall mean LDI of Ohio, Inc., an Ohio corporation.
"HEREBY," "HEREIN," "HEREOF", "HEREUNDER" and words of similar
import refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word
appears.
"INSTRUMENTS" shall mean any "instrument" as such term is
defined in Section 1309.01(A)(9) of the UCC, other than instruments or
writings that constitute, or are part of a group of instruments or
writings that constitute, Chattel Paper.
"INTERCREDITOR AGREEMENT" shall have the meaning ascribed to
such term in Paragraph Q of the Recitals.
"INTERCREDITOR LENDERS" shall have the meaning ascribed to
such term in Paragraph Q of the Recitals.
"INVENTORY" shall mean any "inventory" as such term is
defined in Section 1309.07(D) of the UCC.
"LDI Funding" shall mean LDI Lease Funding Corporation, a
Delaware corporation and a wholly-owned subsidiary of the Grantor.
"LEASE" shall mean a lease agreement between the Grantor and
any Obligor for the lease of any Equipment.
"LEASE COLLATERAL" shall have the meaning ascribed to such
term in SECTION 8(j) hereof.
"LEASE RECEIVABLE" shall mean 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
occurring at the end of the term of such Lease.
"LEASE RECEIVABLES TRANSFER AGREEMENT" shall mean the Amended
and Restated Lease Receivables Transfer Agreement, dated as of
February 15, 1994, by and among the Grantor, CXC and the CXC Agent as
amended, modified or supplemented from time to time and, after the
effective date of the CXC Restructured Facility, shall mean the
documents executed pursuant to the CXC Restructured Facility which
evidence the sale and/or contribution of Transferred Assets by the
Grantor to LDI Funding and the transfer of such Transferred Assets by
LDI Funding to CXC.
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"LESSEE COLLATERAL" shall mean all security interests or
liens, and property subject to such security interests or liens, and
all guarantees, indemnities, warranties, letters of credit, insurance
policies and proceeds and premium refunds thereof and other agreements
or arrangements from time to time granted by or entered into by the
lessees or any other person (other than the Grantor) under the
Transferred Leases to secure or support the payment of the lessees'
obligations under the Transferred Leases, including all UCC financing
statements covering the Lessee Collateral.
"LIEN" shall mean, with respect to any property, any mortgage,
lien, pledge, assignment, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not
choate, vested or perfected.
"LOCKBOX" means a post office box or other mailing location
maintained by a Lockbox Bank for the purpose of receiving payments
made by obligors for subsequent deposit into a related Lockbox
Account.
"LOCKBOX ACCOUNT" means a demand deposit account or other
collection account maintained with a Lockbox Bank or Collateral
Lockbox Bank, as the case may be, for the purpose of depositing
payments made by the obligors.
"LOCKBOX BANK" means a bank or credit union at which a Lockbox
Account is maintained.
"MANDATORY BANK ACCOUNT" shall mean each deposit account or
other account: (a) which is maintained by the Grantor at a bank or
other financial institution which is an Intercreditor Lender; (b) with
respect to which the Grantor has executed and delivered to the
Collateral Agent a duly executed Sweep Agreement; and (c) which is
either (i) in the case of those deposit or other accounts identified
on SCHEDULE I attached hereto, a deposit account or other account in
which the Collateral Agent has a first priority Lien, or (ii) in the
case of each other deposit account or other account, a deposit account
or other account in which the Collateral Agent has a first priority
perfected Lien.
"MRK SECURED NOTE" shall mean that certain Secured
Subordinated Promissory Note dated May 31, 1994 in the original
principal amount of Two Million Dollars ($2,000,000) executed by MRK
Computer Systems, Inc. an Ohio corporation (MRK"), and payable to the
order of the Grantor.
"NAT WEST NOTE" shall have the meaning ascribed to such term
in Paragraph A of the Recitals.
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"NCB" shall mean National City Bank, in its individual
capacity.
"NCB/SOCIETY CREDIT AGREEMENT" shall have the meaning ascribed
to such term in Paragraph A of the Recitals.
"NEW CREDIT AGREEMENT" shall have the meaning ascribed to such
term in Paragraph E of the Recitals.
"1988 NOTE PURCHASE AGREEMENT" shall have the meaning ascribed
to such term in Paragraph A of the Recitals.
"1989 LENDERS" shall have the meaning ascribed to such term in
Paragraph A of the Recitals.
"1989 NOTE PURCHASE AGREEMENT" shall have the meaning ascribed
to such term in Paragraph A of the Recitals.
"NON-RECOURSE DEBT" shall mean any debt of the Grantor for
which neither the obligee nor any other person has any legal recourse
against the Grantor, other than to certain specified collateral which
was pledged by the Grantor in connection with the incurrence thereof.
"NON-RECOURSE LENDER" shall mean a lender of Non-Recourse Debt.
"NON-RECOURSE LENDER FUNDS" shall have the meaning ascribed to
such term in SECTION 6(b) hereof.
"NON-RECOURSE LOCKBOX" shall mean a Lockbox maintained by a
Non-Recourse Lockbox Bank for the purpose of receiving payments made
by Obligors of Transferred Lease Receivable for subsequent deposit
into a related Non-Recourse Lockbox Account, or such other post office
box or mailing location utilized for a similar purpose as the Grantor
and the agent for the applicable Non-Recourse Lenders may agree upon
from time to time.
"NON-RECOURSE LOCKBOX ACCOUNT" shall mean a Lockbox Account
maintained with a Non-Recourse Lockbox Bank for the purpose of
depositing payments made by the Obligors of Transferred Lease
Receivables, or such other account or accounts utilized for a similar
purpose as the Grantor and the agent for the applicable Non-Recourse
Lenders may agree upon from time to time.
"NON-RECOURSE LOCKBOX BANK" shall mean a Lockbox Bank at which
a Non-Recourse Lockbox Account is maintained, or such other bank or
financial institution or entity utilized for a similar purpose as the
Grantor and the agent for the applicable Non-Recourse Lenders may
agree upon from time to time.
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"NON-RECOURSE OBLIGOR" shall mean any Non-Recourse Lender
obligated in respect of a Lease Receivable pursuant to a Lease other
than the Lessor or vendor of the Inventory or Equipment covered
thereby.
"NORTHWESTERN AGREEMENTS" shall have the meaning ascribed to
such term in Paragraph A of the Recitals.
"NORTHWESTERN COMMITMENT LETTER" shall have the meaning
ascribed to such terms in Paragraph K of the Recitals.
"NORTHWESTERN LENDERS" shall have the meaning ascribed to such
term in Paragraph A of the Recitals.
"NOTE" shall mean each promissory note executed by the Grantor
pursuant to the terms of the Amended and Restated Credit Agreement,
the Amended Northwestern Agreements, and each of the other Subject
Facility Documents.
"NOTICE TO RELEASE CXC FUNDS" shall have the meaning ascribed
to such term in SECTION 6(a) hereof.
"NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS" shall have the
meaning ascribed to such term in SECTION 6(b) hereof.
"OBLIGATIONS" shall mean any and all existing and future
liabilities, indebtedness and obligations, (including without
limitation, all Debt Obligations (as defined in the Intercreditor
Agreement), and all Obligations (as defined in the Intercreditor
Agreement)), and other payment obligations of the Grantor owing from
time to time to each and every present or future Intercreditor Lender,
Co-Agent or the Collateral Agent under any Debt Document and under the
Intercreditor Agreement, and to the present or future Collateral Agent
under any of the Loan Documents (as defined in the Amended and
Restated Credit Agreement), including without limitation, all fees,
costs, expenses, court costs, attorneys' fees and expenses, and the
like covered by any of the foregoing.
"OBLIGOR" shall mean any party obligated in respect of a
Lease Receivable pursuant to a Lease other than the lessor or vendor
of the Inventory or Equipment covered thereby.
"PERMITTED BANK ACCOUNT" shall mean each deposit account or
other account: (a) which is maintained by the Grantor at a bank or
other financial institution which is not an Intercreditor Lender; (b)
with respect to which the Grantor has executed and delivered to the
Collateral Agent a duly executed Sweep Agreement; (c) which is
existing on the Agreement Date; and (d) which is either (i) in the
case of those deposit accounts or other accounts identified on SCHEDULE
II attached hereto, a deposit account or other
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account in which the Collateral Agent has a first priority Lien, or
(ii) in the case of each other deposit account or other account, a
deposit account or other account in which the Collateral Agent has a
first priority perfected Lien.
"PERMITTED LIEN" shall mean a Lien permitted by Section 7.2.3
of the Amended and Restated Credit Agreement.
"PERMITTED NON-RECOURSE BANK ACCOUNT" shall mean a deposit or
other account maintained by the Grantor at a bank or other financial
institution and in which the Collateral Agent has no Lien; PROVIDED,
HOWEVER, that (a) the only deposits into any such account are Excluded
Collateral or the Proceeds of Excluded Collateral, and (b) the
deposits made into any such account shall not consist of any
Collateral nor any Proceeds of Collateral nor the proceeds of any
loans, advances or other credit facilities made by any Intercreditor
Lender under any of the Subject Facility Documents.
"PICKER" shall mean Picker Financial Group, an Ohio general
partnership.
"PICKER NOTE" shall mean that certain promissory note dated
April 28, 1994 in the original principal amount of Three Million Five
Hundred Thousand Dollars ($3,500,000) executed by Picker and payable
to the order of the Grantor.
"PLEDGED DEBT" shall have the meaning ascribed to such term
in SECTION 2(B) hereof.
"PLEDGED SHARES" shall have the meaning ascribed to such term
in SECTION 2(B) hereof.
"PROCEEDS" shall mean any "proceeds" as such term is defined
in Section 1309.25 of the UCC, and, in any event, shall have the
broadest meaning permissible under the Ohio Uniform Commercial Code,
and the Uniform Commercial Code of any other state which is deemed
applicable, and shall include, without limitation, (a) any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to
the Grantor from time to time with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental body, authority,
bureau or agency (or any person acting under color of governmental
authority), and (c) any and all other amounts from time to time paid
or payable, whether as rents, fees, lease payments or otherwise, under
or in connection with any of the Collateral.
"REQUIRED LENDERS" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
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"SECURITY COLLATERAL" shall have the meaning ascribed to such
term in SECTION 2(B) hereof.
"SOCIETY" shall mean Society National Bank, in its individual
capacity.
"SPECIAL PERMITTED BANK ACCOUNT" shall mean those accounts
(e.g., trust accounts) listed on SCHEDULE III attached hereto.
"SUBJECT FACILITY DOCUMENTS" shall have the meaning ascribed
to such term in the Intercreditor Agreement.
"SUBSIDIARY GUARANTIES" shall have the meaning ascribed to
such term in Paragraph O of the Recitals.
"SWEEP AGREEMENT" shall mean an agreement between the Grantor
and any depositary institution for the benefit of the Collateral Agent
substantially in the form of EXHIBIT VIII attached hereto.
"THIRD PARTY NOTES" shall mean, collectively, the Picker Note
and the MRK Secured Note.
"TRANSFERRED ASSETS" shall have the meaning ascribed to such
term in the CXC Intercreditor Agreement.
"TRANSFERRED LEASE RECEIVABLE" shall mean (a) with respect to
the CXC Transaction, any Lease Receivable which is offered for
transfer by the Grantor and in which CXC has acquired an interest
pursuant to the Lease Receivables Transfer Agreement; and (b) with
respect to all other Non-Recourse Debt transactions, Lease Receivables
transferred (including, without limitation, by way of a grant of a
security interest) by the Grantor to a Non-Recourse Lender in
connection with the incurrence of Non-Recourse Debt.
"TRANSFERRED LEASE" shall mean each Lease transferred by the
Grantor to a Non-Recourse Lender in connection with the incurrence of
Non-Recourse Debt.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of Ohio; PROVIDED,
HOWEVER, in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of the Collateral
Agent's, or any of the Intercreditor Lenders' security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in
a jurisdiction other than the State of Ohio, the term "UCC" shall mean
the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.
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"UNIDENTIFIED CHECK" shall mean a check held in a Collateral
Lockbox Account with respect to which the Grantor is unable to
identify whether all or any portion of such check constitutes either
CXC Funds or Non-Recourse Lender Funds.
"WAIVER" shall have the meaning ascribed to such term in
Paragraph G of the Recitals.
"WAIVER EXTENSION" shall have the meaning ascribed to such
term in Paragraph H of the Recitals.
SECTION 2 CONFIRMATION AND GRANT OF SECURITY INTEREST;
--------------------------------------------
COLLATERAL; EXCLUDED COLLATERAL.
-------------------------------
(a) CONFIRMATION OF SECURITY INTEREST. The Grantor
hereby ratifies and confirms that pursuant to the Existing Security Agreement,
on the date thereof, the Grantor assigned and pledged to the Collateral Agent
for its benefit and for the benefit of the Existing Lenders and to the Existing
Lenders, and granted to the Collateral Agent for its benefit and for the
ratable benefit of the Existing Lenders and to the Existing Lenders, a
continuing security interest in and Lien upon all of the Collateral (as defined
in the Existing Security Agreement). The parties hereto hereby ratify,
reaffirm and restate such assignment, pledge and grant of security interest and
Lien.
(b) GRANT OF SECURITY INTEREST; COLLATERAL. As security
for the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all of the Obligations, the Grantor
hereby grants to the Collateral Agent for the benefit of the Collateral Agent
and each of the Co-Agents and for the ratable benefit of the Intercreditor
Lenders a continuing security interest in, and Lien upon, all of the Grantor's
right, title and interest in, to and under the following property, whether now
existing or owned or hereafter existing, acquired or arising, and wherever
located (all of which are herein referred to collectively as the "COLLATERAL"):
(i) all Accounts and Accounts Receivable;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Deposit Accounts (other than the CXC Lockbox
Accounts and the Non-Recourse Lockbox Accounts);
(v) all Documents;
(vi) all Equipment;
(vii) all Fixtures;
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(viii) all General Intangibles;
(ix) all Instruments;
(x) all Inventory;
(xi) the Third Party Notes;
(xii) immediately upon the occurrence of any of the
following events: (a) the Lien in favor of First Security Bank of
Utah, National Association, as indenture trustee ("FSB") on the
Aircraft and the Engines is released, or should be released by FSB,
(b) the Aircraft or Engines are returned to or repossessed by the
Grantor by way of substitution or replacement, as a result of
expiration of the lease to which the Aircraft and the Engines are
subject or otherwise, or (c) FSB no longer has any outstanding and
unpaid amounts owing to FSB, the Aircraft, the Engines and all right,
title and interest of the Grantor in and to any lease, rental
agreement, charter agreement, or other agreement(s) respecting the
Aircraft and/or any of the Engines, including, but not limited to, the
Grantor's right to receive, either directly or indirectly, from any
party or person, any rents or other payments due under such
agreement(s);
(xiii) all right, title and interest of the Grantor in,
to and under that certain Asset Acquisition Agreement dated as of May
31, 1994 by and among the Grantor, the Borrower and MRK, including,
without limitation, all rights to any and all amounts due or to become
due the Grantor and any all payments made to the Grantor thereunder
and all proceeds of any of the above;
(xiv) all of the following: all Computer Hardware and
Software, each and every item of property which is subject to a Lease,
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
(collectively, all of the items in this CLAUSE (xiv), together with the
Equipment, are hereinafter referred to as the COLLATERAL EQUIPMENT");
(xv) all of the following: 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
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equipment and other goods leased by the Grantor, each and every item
of property subject to a Lease, 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), goods that are returned to or
repossessed by the Grantor, and all accessions thereto and products
thereof and documents therefor (collectively, all of the items in
this CLAUSE (xv), together with the Inventory, are hereinafter referred
to as the COLLATERAL INVENTORY");
(xvi) all of the following: all tax refunds, corporate
or other business records (including all records relating to
Inventory, Accounts and Accounts Receivable), 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 owing to the Grantor 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 (including, but not limited to, each Lease) and other contract
rights, Chattel Paper, instruments, General Intangibles or other
obligations;
(xvii) all of the following:
(A) 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;
(B) 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;
(C) all rights of action on account of past,
present and future unauthorized use of any of said inventions,
copyrights, trademarks or service marks and
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for infringement of said patents, copyrights, trademarks or
service marks and like protection;
(D) 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;
(E) 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
(F) 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;
(xviii) all of the following:
(A) all deposit accounts of the Grantor (other
than CXC Lockbox Accounts, the General Non-Recourse Lender
Account, Non-Recourse Lockbox Accounts, Permitted Non-Recourse
Bank Accounts and the Special Permitted Bank Accounts), each
Lockbox Account, each Permitted Bank Account, each Mandatory
Bank Account and each Collateral Lockbox Account, all cash,
funds, monies and amounts required to be deposited, or
deposited in, the Grantor's deposit accounts, each Collateral
Lockbox Account, each Permitted Bank Account, or each
Mandatory Bank Account and all certificates and instruments,
if any, from time to time representing or evidencing the
foregoing deposit accounts, each Collateral Lockbox Account,
each Permitted Bank Account or each Mandatory Bank Account;
(B) 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;
(C) all interest, dividends, cash, instruments
and other property from time to time received, receivable
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or otherwise distributed in respect of or in exchange for
any or all of the then existing Account Collateral;
(D) all deposits of cash, funds or monies at any
bank (other than deposits in the CXC Lockbox Accounts and the
Non-Recourse Lockbox Accounts); and
(E) all cash, checks, drafts, chattel paper,
notes and other instruments or writings for the payment of
money received by the Grantor in respect of the property and
interests in property described in this SECTION 2(b) and all
investments from time to time made pursuant to SECTION 4
hereof (collectively, all of items in this clause (xviii) are
hereinafter referred to as the "ACCOUNT COLLATERAL");
(xix) all of the following:
(A) all shares (the "PLEDGED SHARES") of stock
described in Part I of SCHEDULE V 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;
(B) all indebtedness (the "PLEDGED DEBT")
described in Part II of SCHEDULE V 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;
(C) all additional shares of stock of any issuer
of the Pledged Shares from time to time acquired by the
Grantor 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
(D) 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 (collectively,
all of the foregoing is hereinafter referred to as the
"SECURITY COLLATERAL");
(xx) any item of the Grantor's property which ceases to
be Excluded Collateral;
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(xxi) all of Grantor's books and records (including,
without limitation, all computerized books and records, all computer
programs or other devices related thereto, printouts, computer discs,
minute books, journals, ledgers, work papers, financial statements,
orders, receipts, and any correspondence and other data relating to
the Grantor's business or to any transactions the Grantor has entered
into, no matter how or where such records may be maintained, generated
or stored) as the foregoing relates to any of the property and
interests in property described in thisSECTION 2(b); and
(xxii) all Proceeds of each of the foregoing property and
interests in property, and all accessories to, substitutions and
replacements for, and rents, profits and products of each of the
foregoing.
(c) EXCLUDED COLLATERAL. Notwithstanding anything
contained herein to the contrary, and subject to the proviso at the end of this
SECTION 2(c), the term "COLLATERAL" shall not include any of the following (the
"EXCLUDED COLLATERAL"):
(i) in the case of each Non-Recourse Debt transaction
other than the CXC Transaction, all Transferred Lease Receivables,
Transferred Leases and Lessee Collateral together with all of the
Grantor's right, title and interest in the data processing,
telecommunications, and other capital equipment leased by the Grantor
as lessor which is subject to the Transferred Leases, and all Proceeds
of the foregoing transferred to a Non-Recourse Lender as of the
Agreement Date, and the following assets which become Transferred
Lease Receivables, Transferred Leases or Lessee Collateral pursuant to
the release procedures set forth in SECTION 6(c) hereof or which are
transferred by the Grantor to a Non-Recourse Lender pursuant to the
release procedures set forth in SECTION 6(c) hereof:
(A) Transferred Lease Receivables and Transferred
Leases;
(B) any Lessee Collateral;
(C) all of the Grantor's right, title and
interest in the data processing, telecommunications, and other
capital equipment leased by the Grantor as lessor which is
subject to the Transferred Leases; and
(D) all Proceeds of the Excluded Collateral
described in clauses (A) through (C) above; and
(ii) in the case of the CXC Transaction, all
Transferred Assets and CXC Equipment Collateral as of the Agreement
Date, together with all Collateral that becomes Transferred Assets and
CXC Equipment Collateral pursuant to
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the release procedures described in the CXC Intercreditor Agreement;
PROVIDED, HOWEVER, that with respect to each item which constitutes Excluded
Collateral which is or should be released by the CXC Agent in accordance with
the terms of the CXC Intercreditor Agreement (it being understood that none of
the Excluded Collateral subject to the CXC Transaction immediately preceding
the effective date of the CXC Restructured Facility shall cease to be Excluded
Collateral as a result of the consummation of the CXC Restructured Facility),
or which is returned to or repossessed by the Grantor by way of substitution,
replacement, as a result of expiration of the Lease to which each such item is
subject or otherwise, or with respect to which the applicable Non-Recourse
Lender no longer has any outstanding and unpaid amounts owing to such
Non-Recourse Lender, each such item shall, immediately upon the cessation of
the applicable Non-Recourse Lender's interest therein, (x) cease to be Excluded
Collateral and (y) automatically be Collateral for all purposes hereunder.
SECTION 3 THE GRANTOR TO REMAIN LIABLE.
-----------------------------
Notwithstanding anything contained herein to the contrary, (a) the
Grantor shall remain liable under each of the Contracts and agreements included
in the Collateral to observe and perform all of its duties and obligations
thereunder and the Grantor shall perform all of its duties and obligations
thereunder, (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 any of the Contracts and agreements included in the Collateral, and (c)
neither the Collateral Agent nor any Intercreditor Lender shall have any
obligation or liability under the Contracts and agreements included in the
Collateral by reason of this Agreement or the granting to the Collateral Agent
of any Lien or the receipt by the Collateral Agent of any payment relating to
any contract or agreement included in the Collateral. Neither the Collateral
Agent nor any Intercreditor Lender shall be obligated in any manner to perform
or fulfill any of the obligations or duties of the Grantor under any of the
Contracts or agreements included in the Collateral, to make any payment
thereunder or to make any inquiry as to the nature or sufficiency of any
payment received by the Collateral Agent or the sufficiency of any performance
by any party to such Contracts or agreements, or to take any action to collect
or enforce any performance or the payment of any amounts or any claim for
payment which may have been assigned to the Collateral Agent or to which the
Collateral Agent may be entitled at any time or times.
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SECTION 4 BANK ACCOUNTS.
-------------
(a) TYPES OF BANK ACCOUNTS. Until all Obligations
have been paid and performed in full, the Grantor shall establish and maintain
only Collateral Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank
Accounts, Permitted Non-Recourse Bank Accounts and Special Permitted Bank
Accounts and the General Non-Recourse Lender Account.
(b) COLLATERAL LOCKBOXES AND COLLATERAL LOCKBOX
ACCOUNTS. The Grantor shall establish and maintain Collateral Lockboxes and
Collateral Lockbox Accounts at one or more Collateral Lockbox Banks designated
by the Collateral Agent from time to time, into which the Grantor shall
forthwith, upon receipt, transmit and deliver for deposit in a Collateral
Lockbox Account, in the form received, all cash, checks, drafts, Chattel Paper
and other Instruments or writings for the payment of money (other than any
items which constitute Excluded Collateral), properly endorsed, where required,
so that such items may be collected by the Collateral Agent, which may be
received by the Grantor at any time. The Grantor shall have no right to
withdraw any funds deposited in the Collateral Lockbox Accounts. Except as
otherwise provided below in this paragraph, the Collateral Agent shall apply,
or cause to be applied, all or any of the then balance, representing collected
funds, in each of the Collateral Lockbox Accounts, toward payment of the
Obligations, whether or not then due, in such amounts and in such order of
application as set forth in the Intercreditor Agreement; PROVIDED, HOWEVER,
that for the time period commencing on the date of this Agreement and ending on
a date ninety (90) days thereafter, the Collateral Agent shall apply, or cause
to be applied on a daily basis, all or any of the then balance representing
collected funds in each of the Collateral Lockbox Accounts, other than (i)
funds which satisfy the requirements set forth in SECTION 6 hereof and which
are funds identified as Non-Recourse Lender Funds or CXC Funds pursuant to a
Notice to Release Non-Recourse Lender Funds or Notice to Release CXC Funds,
plus (ii) an amount equal to the lesser of (A) $3,000,000, (B) an amount equal
to the sum of: (I) Unidentified Checks held in a Collateral Lockbox Account
for less than seventeen (17) Business Days after receipt of each such
Unidentified Check by the Grantor or the Collateral Agent, as applicable and
(II) funds which have not been identified as CXC Funds or Non-Recourse Lender
Funds as described above and which have been held in a Collateral Lockbox
Account for seven (7) Business Days or less, and (C) an amount identified by
the Grantor as funds not to be applied. The Collateral Agent is authorized to
endorse, in the name of the Grantor, any item, however received by the
Collateral Agent, representing any payment on or other proceeds of any of the
Collateral. Except as otherwise set forth below in paragraph (d) of this
Section, any such items which constitute Collateral which may be received by
the Grantor shall not be commingled with any other funds or property, but will
be held in express trust for the benefit of the Collateral Agent separate and
apart from the Grantor's own funds or property until
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delivery is made to the Collateral Agent. The Collateral Agent is hereby
entitled to notify each financial institution at which any of the Grantor's
Collateral Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank Accounts,
or deposit accounts are located and on which the Collateral Agent has a Lien,
to immediately remit the balance in such accounts to the Collateral Agent to be
deposited in a Collateral Lockbox Account as directed by the Collateral Agent.
(i) The Collateral Agent may invest or reinvest, or cause to be
invested or reinvested, to the extent practicable, monies on deposit
in any or all Collateral Lockbox Accounts in a Cash Equivalent
Investment.
(ii) The Collateral Agent shall have no liability for any loss of
principal or failure to achieve any minimum return, absent gross
negligence or willful misconduct on the part of the Collateral Agent.
Any interest or other income earned on amounts in any Collateral
Lockbox Account shall be held by the Collateral Agent as Collateral to
secure the Obligations, including without limitation, the Grantor's
Obligations and shall be applied in accordance with SECTION 4(b)
hereof. Income tax on all interest earned on amounts in the
Collateral Lockbox Account shall be payable solely by the Grantor.
(c) LOCATION OF MANDATORY BANK ACCOUNTS. Each
Mandatory Bank Account shall be maintained with an Intercreditor Lender.
(d) NON-RECOURSE DEBT TRANSITION. For the time period
commencing on the Agreement Date and ending on a date ninety (90) days
thereafter, funds representing Excluded Collateral may be remitted to the
Collateral Lockboxes and Collateral Lockbox Accounts. The Grantor hereby
agrees to deliver to the Collateral Agent, no less frequently than once a day,
a written certification duly executed by the Grantor setting forth the dollar
amount of funds representing Excluded Collateral received in each of the
Collateral Lockboxes and each of the Collateral Lockbox Accounts for the time
period specified and identifying the applicable Non-Recourse Lender(s) entitled
to receive such funds and the amount due each such Non-Recourse Lender. The
Grantor agrees to effectuate a transition to the CXC Lockboxes, CXC Lockbox
Accounts, the Non-Recourse Lockboxes, and the Non-Recourse Lockbox Accounts as
described in SECTION 6 below to be completed no later than a date which is
ninety (90) days after the Agreement Date.
(e) COLLATERAL AGENT POWERS. The Grantor hereby
transfers to the Collateral Agent the exclusive dominion and control of each of
the Collateral Lockbox Accounts and all funds from time to time therein.
(f) BANK ACCOUNTS; COLLATERAL LOCKBOX ACCOUNT LETTERS.
With respect to each Mandatory Bank Account and each Permitted Bank
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Account in existence on the Agreement Date, other than those listed on
SCHEDULES I AND II attached hereto, the Grantor has taken and has caused to be
taken, all actions necessary or as requested by the Collateral Agent to create
and maintain in each such account a first priority perfected Lien in favor of
the Collateral Agent and the Grantor has executed and delivered or will execute
and deliver to the Collateral Agent no later than five (5) Business Days after
the Agreement Date a duly executed Sweep Agreement with respect to each such
Mandatory Bank Account and Permitted Bank Account. With respect to each
Mandatory Bank Account and Permitted Bank Account listed on SCHEDULES I AND II
attached hereto, the Grantor has taken and has caused to be taken, all actions
necessary or as requested by the Collateral Agent to create and maintain in
each such account a first priority Lien in favor of the Collateral Agent and
the Grantor has executed and delivered or will execute and deliver to the
Collateral Agent no later than five (5) Business Days after the Agreement Date
a duly executed Sweep Agreement with respect to each such Mandatory Bank
Account and Permitted Bank Account. With respect to each and every other
Mandatory Bank Account, the Grantor agrees to take, and cause to be taken, all
actions necessary or as requested by the Collateral Agent to create and
maintain in each such Mandatory Bank Account a first priority perfected Lien in
favor of the Collateral Agent and to execute and deliver to the Collateral
Agent a duly executed Sweep Agreement with respect to each such account prior
to the creation of each such account. With respect to each Collateral Lockbox
Account in existence on the Agreement Date maintained at a financial
institution other than the Collateral Agent, the Grantor has delivered to the
Collateral Agent duly executed Collateral Lockbox Account Letters in the form
of EXHIBIT I attached hereto (the "COLLATERAL LOCKBOX ACCOUNT LETTERS"). The
Grantor agrees to execute and deliver, and cause to be executed and delivered,
such additional Collateral Lockbox Account Letters as the Collateral Agent may
request.
(g) ACCOUNT DEBTORS. The Grantor has instructed each
and every existing Account Debtor, and hereby agrees to, at the Grantor's
expense, immediately instruct each new Account Debtor, to make all payments due
or to become due, or to continue to make all payments due or to become due, as
the case may be, subject to the terms and conditions hereof, to the Collateral
Lockboxes for deposit in the Collateral Lockbox Accounts.
(h) AUTHORIZATION. The Grantor hereby authorizes the
Collateral Agent to notify each Collateral Lockbox Bank of the Collateral
Agent's exclusive control of and dominion over the Collateral Lockbox Accounts
maintained at such Collateral Lockbox Bank and the Grantor agrees to execute
and deliver from time to time to the Collateral Lockbox Banks such documents,
agreements and writings as the Collateral Agent may reasonably request
including, without limitation, Collateral Lockbox Account Letters.
(i) BANK ACCOUNTS. Attached hereto as SCHEDULE VI is
a true, complete, correct and accurate listing of each of the
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Grantor's Lockboxes, Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank
Accounts, Permitted Non-Recourse Bank Accounts, Deposit Accounts, deposit
accounts, CXC Lockboxes, CXC Lockbox Accounts, Non-Recourse Lockbox Accounts,
Collateral Lockboxes, Collateral Lockbox Accounts, Special Permitted Bank
Accounts and other deposit accounts and other accounts existing as of the
Agreement Date.
SECTION 5 [INTENTIONALLY OMITTED].
-----------------------
SECTION 6 NON-RECOURSE FINANCING.
----------------------
(a) CXC ACCOUNTS AND FUNDS. With respect to the CXC
Transaction, the Grantor hereby agrees to continue to make or redirect, as the
case may be, within ninety (90) days after the Agreement Date, all payments due
from Obligors of the Transferred Lease Receivables to new Lockboxes and Lockbox
Accounts thereby creating CXC Lockboxes and CXC Lockbox Accounts for the
benefit of the CXC Agent and CXC. In the event that the Collateral Agent
receives a written notice and certification in the form of EXHIBIT II attached
hereto ("NOTICE TO RELEASE CXC FUNDS") duly executed by an Authorized Signatory
stating, among other things, that the Collateral Agent previously received
monies or monies were deposited into the Collateral Lockbox Account which
constitute Collections (as defined in the CXC Intercreditor Agreement) or
proceeds of any Transferred Lease Receivable, Related Security (as defined in
the CXC Intercreditor Agreement) or CXC Equipment Collateral with respect
thereto, and provided that such monies constitute collected funds
(collectively, "CXC Funds"), which are either (i) held in a Collateral Lockbox
Account, or (ii) funds previously applied in reduction of the Obligations and
to the extent that new funds were not subsequently advanced to the Grantor, the
Collateral Agent shall promptly deliver such monies (A) prior to the occurrence
of an Event of Default, to the Grantor for delivery to the CXC Agent by
depositing such monies into the General Non-Recourse Lender Account, and (B)
after the occurrence of an Event of Default which has not been waived in
accordance with the terms of the Intercreditor Agreement, to the CXC Agent.
(b) OTHER NON-RECOURSE ACCOUNTS AND FUNDS. With
respect to all other Non-Recourse Debt, the Grantor hereby agrees to continue
to make or redirect, as the case may be, all payments due from Non-Recourse
Obligors of the Transferred Lease Receivables to existing or new, as the case
may be, Lockboxes and Lockbox Accounts (to be established within ninety (90)
days after the Agreement Date) which, in either case, shall constitute
Non-Recourse Lockboxes and Non-Recourse Lockbox Accounts for the benefit of the
Non-Recourse Lenders (other than CXC). In the event that the Collateral Agent
receives a written notice and certification in the form of EXHIBIT III attached
hereto ("NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS") duly executed by an
Authorized Signatory stating, among other things, that the Collateral Agent
previously received monies or monies were
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deposited into the Collateral Lockbox Account which constitute Excluded
Collateral, and provided that such monies constitute collected funds
(collectively, "Non-Recourse Lender Funds"), which are either (i) held in a
Collateral Lockbox Account, or (ii) funds previously applied in reduction of
the Obligations and to the extent that new funds were not subsequently advanced
to the Grantor, the Collateral Agent shall promptly deliver such monies (A)
prior to the occurrence of an Event of Default, to the Grantor for delivery to
the appropriate Non-Recourse Lender by depositing such monies into the General
Non-Recourse Lender Account, and (B) after the occurrence of an Event of
Default which has not been waived in accordance with the terms of the
Intercreditor Agreement, to the applicable Non-Recourse Lender.
(c) NOTICE AND RELEASE OF COLLATERAL FOR NON-RECOURSE DEBT TRANSACTION.
(i) In the ordinary course of its business, the
Grantor and LDI Funding may carry-out the CXC Transaction and may
otherwise sell and/or finance Leases and related Collateral and, in
connection therewith, incur Non-Recourse Debt. At least one Business
Day prior to the proposed sale or financing, the Grantor shall provide
to the Collateral Agent a written notice in the form of EXHIBIT IV
attached hereto ("NOTICE OF NON-RECOURSE FINANCING"), duly executed by
an Authorized Signatory, of any proposed sale or financing of Leases
and related Collateral and the incurrence of Non-Recourse Debt.
(ii) The Grantor may request that the Collateral Agent
release or subordinate its Lien on that portion of the Collateral
which is the subject of the proposed Non-Recourse Debt transaction
(other than pursuant to the CXC Transaction) by submitting to the
Collateral Agent a release in the form ofEXHIBIT V attached hereto
("NON-RECOURSE DEBT RELEASE") duly executed by an Authorized
Signatory, or a subordination agreement in the form ofEXHIBIT VII,
attached hereto ("SUBORDINATION AGREEMENT"), duly executed by an
Authorized Signatory, as applicable.
(iii) Subject to the terms and conditions of the
Intercreditor Agreement, upon receipt of such Notice of Non-Recourse
Financing and such Non-Recourse Debt Release, CXC Release or
Subordination Agreement, as the case may be, the Collateral Agent
shall forthwith execute and deliver to the Grantor such Non-Recourse
Debt Release or Subordination Agreement, as applicable, unless, after
the occurrence of an Event of Default, the Required Lenders and, if
required pursuant to the terms of the Intercreditor Agreement, each
Affected Subject Lender (as defined in the Intercreditor Agreement)
have directed otherwise. The Non-Recourse Debt Release, or
Subordination Agreement, as the case may be, will become effective
only upon consummation of the proposed Non-
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Recourse Debt Transaction described in the applicable Notice of
Non-Recourse Financing, and receipt by the Collateral Agent of the
full proceeds of such other Non-Recourse Debt transaction minus the
amount specified by the Grantor in the Notice of Non-Recourse
Financing to be paid to third parties. Upon the effectiveness of the
Non-Recourse Debt Release the Collateral which is described therein
shall, for all purposes hereof, cease to be Collateral and will be
deemed to be Excluded Collateral.
(iv) Subject to the terms and conditions of the Intercreditor
Agreement, the Collateral Agent shall release its Lien on Collateral
in connection wit the CXC Transaction in accordance with the terms and
procedures of Section 3 of the CXC Intercreditor Agreement and, upon
such release, such Collateral shall, for all purposes hereof, cease to
be Collateral and will constitute Excluded Collateral.
(v) Except as otherwise specifically provided in this Section
6, the Collateral Agent shall not release or subordinate its Lien on
any Collateral unless specifically authorized and directed by the
Required Lenders and, if required pursuant to the terms of the
Intercreditor Agreement, the Affected Subject Lenders (as defined in
the Intercreditor Agreement).
SECTION 7 MARKING AND DELIVERY OF COLLATERAL.
----------------------------------
(a) MARKING OF COLLATERAL. The Grantor shall: (i)
promptly mark conspicuously each document included in the Inventory and each
item of Chattel Paper and each Contract and each of its records pertaining to
the Collateral with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to a first priority security interest
of Continental Bank, as the Collateral Agent" (or an abbreviation thereof
satisfactory to the Collateral Agent), and (ii) ensure that each item of
Chattel Paper is evidenced by one and only one, if any, executed original
document.
(b) UPON EVENT OF DEFAULT. Following the occurrence
of any Event of 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
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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.
SECTION 8 REPRESENTATIONS AND WARRANTIES.
------------------------------
The Grantor represents and warrants to the Collateral Agent as follows:
(a) LOCATION OF BUSINESS AND COLLATERAL.
(i) The Grantor's principal place of business and
chief executive office is located at 1375 East Ninth Street,
Cleveland, Ohio 44114. The Grantor's books and records are located,
at 30033 Clemens Road, Westlake, Ohio 44145. The Grantor's principal
place of business and its books and records will be moved, effective
on or about August 31, 1994, to 4770 Hinckley Industrial Parkway,
Cleveland, Ohio 44109. As of the Agreement Date, each of the
Grantor's offices, warehouses (whether owned or leased) and each other
of the Grantor's locations are identified on SCHEDULE VII attached
hereto. Except for the transfer to the Hinckley facility, the Grantor
will not change such principal place of business, chief executive
office or the location of its books and records relating to the
Collateral. In no event shall the books and records relating to the
Collateral be relocated to anywhere outside the continental United
States. In addition to its actual name, the Grantor also uses the
following trade names: Leasing Dynamics and Sea-Tech. After the
Agreement Date, Grantor will not do business under any other trade
name, unless it has given twenty (20) days' prior written notice
thereof to the Collateral Agent and taken such action as is necessary
and as is reasonably requested by the Collateral Agent or any
Intercreditor Lender to cause the Lien of the Collateral Agent in the
Collateral to continue to be perfected.
(ii) All of the Collateral Equipment and Collateral
Inventory are located at the places specified on SCHEDULE VIII (as
updated in accordance with SECTION 10(D) hereof). For the time period
commencing on the date of this Agreement and ending on the date of the
move to the Hinckley facility referred to in clause (i) above, but in
any event, no later than October 15, 1994, the office where the
Grantor keeps its records concerning the Accounts, Accounts Receivable
and all Chattel Paper that evidences Collateral, is located at 30033
Clemens Road, Westlake, Ohio 44145. Thereafter, the office where the
Grantor keeps its records concerning the Accounts, Accounts Receivable
and all Chattel Paper that evidences
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Collateral, will be located at 4770 Hinckley Industrial Parkway,
Cleveland, Ohio 44109. No Account in excess of One Thousand Dollars
($1,000) or in the aggregate amount of Fifty Thousand Dollars
($50,000) and no Account Receivable in excess of One Thousand Dollars
($1,000) or in the aggregate amount of Fifty Thousand Dollars
($50,000) is evidenced by a promissory note or other instrument which
has not been delivered to the Collateral Agent in accordance with
SECTION 9(b) hereof.
(b) PLEDGED SHARES. The Pledged Shares have been duly
authorized and validly issued and are fully paid and nonassessable. The
Pledged Shares constitute one hundred percent (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) OWNERSHIP/TITLE TO COLLATERAL. 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 Permitted Liens and
the security interest created by this 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 Amended and Restated Credit Agreement. The Grantor owns
each of the patents, trademarks, copyrights, licenses and other intellectual
property included in the Collateral.
(d) POSSESSION. The Grantor has exclusive possession
and control of the Collateral Equipment and Collateral Inventory owned by it
other than Collateral Inventory subject to a Lease entered into in the
ordinary course of business, naming the Grantor as lessor, Collateral Inventory
in transit and Collateral Inventory shipped directly to the Grantor's vendees
or lessees by the Grantor's vendors in the ordinary course of the Grantor's
business.
(e) COLLATERAL. The pledge and delivery of the
Pledged Shares and Pledged Debt pursuant to this Agreement creates a valid,
continuing, and perfected first priority Lien upon the Security Collateral in
favor of the Collateral Agent. This Agreement creates and maintains a valid
and continuing Lien upon the Collateral in favor of the Collateral Agent which
is, except for those accounts and deposit accounts set forth on SCHEDULES I AND
II, a perfected Lien and which is, except as set forth on SCHEDULE XII which
the Grantor agrees to deliver no later than five (5) Business Days after the
Agreement Date to be attached hereto, a first priority Lien. Appropriate
financing statements have been filed in all jurisdictions necessary to create
and maintain a first priority Lien which is, except for those accounts and
deposit
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accounts set forth on SCHEDULES I AND II, a perfected security interest and
Lien.
(f) APPROVAL; CONSENTS. No authorization, approval or
other action by, and no notice to or filing with (other than the filings and
deliveries referred to in this Agreement) any governmental authority or
regulatory body is required for the (i) creation or perfection by the Grantor
of the security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor or (ii) for the exercise by the
Collateral Agent 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 may be required in connection with such disposition by
laws affecting the offering and sale of securities generally).
(g) ACCOUNTS, ACCOUNTS RECEIVABLES AND GENERAL
INTANGIBLES. With respect to each of the Accounts, the Accounts Receivable and
the General Intangibles, and the Documents evidencing the underlying
obligations, the Collateral Agent may rely on all statements or representations
made by the Grantor on or with respect to any schedule of accounts furnished to
the Collateral Agent by the Grantor and, unless otherwise indicated in writing
by the Grantor, that:
(i) They are genuine, are in all material respects
what they purport to be, are not evidenced by a judgment and are
evidenced by one and only one, if any, executed original Instrument,
which has been delivered to the Collateral Agent;
(ii) Except for disputes in the ordinary course of
business, they represent undisputed, bona fide transactions completed
in accordance with the terms and provisions contained in any documents
related thereto;
(iii) The face amounts shown on any such schedule of
accounts provided to the Collateral Agent and all invoices and
statements delivered to the Collateral Agent with respect to any
Account, Account Receivable and the General Intangibles are actually
and absolutely owing to the Grantor and are not contingent for any
reason, except for disputes and non-material errors arising in the
ordinary course of business;
(iv) To the best of the Grantor's knowledge, there are
no set-offs, counterclaims or disputes existing or asserted with
respect thereto and the Grantor has not made any agreement with any
Account Debtor thereunder for any deduction therefrom, except
discounts or allowances allowed by the Grantor in the ordinary course
of its business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face amount of the
invoices to which such discounts or allowances relate;
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(v) To the best of the Grantor's knowledge, there are
no facts, events or occurrences which in any way impair the validity
or enforcement thereof or tend to reduce the amount payable thereunder
from the invoice face amount shown on any schedule of Accounts,
Accounts Receivable and General Intangibles furnished to the
Collateral Agent and on all contracts, invoices and statements
delivered to the Collateral Agent with respect thereto;
(vi) Such Accounts, Accounts Receivable and the General
Intangibles are not subject to any Lien, except those of the
Collateral Agent and Permitted Liens;
(vii) The Collateral giving rise to the Accounts,
Accounts Receivable and the General Intangibles is not, and was not at
the time of the sale thereof, subject to any Lien or claim, except the
Lien of the Collateral Agent and Permitted Liens;
(viii) To the best of the Grantor's knowledge, there is
no fact or circumstances which would impair the validity or
collectability of any Account or any Account Receivable;
(ix) To the best of the Grantor's knowledge, there are
no proceedings or actions which are threatened or pending against any
Account Debtor thereunder which might result in any materially adverse
effect upon the Grantor; and
(x) No Collateral is under consignment to or from any
person.
(h) AUTHORIZATION; ENFORCEABILITY. This Agreement,
the Intercreditor Agreement and each of the Debt Documents to which the Grantor
is a party, when executed and delivered, will constitute the legal, valid and
binding obligations of the Grantor, enforceable against the Grantor in
accordance with its respective terms, except as enforcement may be limited by
bankruptcy, insolvency or any other similar laws of general application
affecting enforcement of creditors rights or by general principles of equity
limiting the availability of equitable remedies.
(i) SOLVENCY. The Grantor is now, and after
consummation of the transactions contemplated by this Agreement, the
Intercreditor Agreement and each Debt Document (i) will be solvent and able to
pay its debts as they mature; (ii) will be the owner of assets the fair
saleable value of which is greater than the amount necessary to repay the
obligations thereunder, and (iii) will have capital which is not unreasonably
small in relation to its business. The Grantor is not insolvent (as that term
is defined in the Bankruptcy Code) and will not be rendered insolvent by the
execution, delivery or performance of this Agreement or, the other Debt
Documents, or the consummation of the transactions contemplated hereby and
thereby. The Grantor has not made a
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general assignment for the benefit of its creditors. No proceeding has been
instituted by or against the Grantor alleging that the Grantor is insolvent or
unable to pay its debts as they mature. The Grantor does not presently
contemplate the commencement of a general assignment for the benefit of
creditors nor the filing of any proceeding under any provisions of the
Bankruptcy Code.
(j) LEASES. Attached hereto as SCHEDULE IX, is a
true, correct, complete and accurate list of each of the Leases and all Chattel
Paper subject to the Collateral Agent's Lien (collectively, each Lease and all
Chattel Paper subject to the Collateral Agent's Lien, "LEASE COLLATERAL") in
effect as of the Agreement Date, each of which is in full force and effect.
The Grantor shall promptly notify the Collateral Agent if it believes or has
been notified by any person that any Lease Collateral is no longer in full
force and effect, except for the expiration or termination of a Lease in
accordance with its stated terms. With respect to the Lease Collateral in
existence from time to time: (i) each item of Lease Collateral is valid,
enforceable in accordance with its terms and in full force and effect; (ii) the
Grantor is the sole holder of the rights and interests ascribed to the Grantor
under each item of Lease Collateral and has full power and authority to assign,
transfer and set over the same and to grant to and confer upon the Collateral
Agent the rights, interests, powers and authorities granted and conferred under
this Agreement to the Collateral Agent; (iii) the Grantor has observed and
performed all covenants and obligations under each item of Lease Collateral,
required to be performed by the Grantor and the Grantor shall observe and
perform all of the covenants under each item of Lease Collateral; (iv) all
representations and warranties of the Grantor contained in each item of Lease
Collateral are true, complete, correct and accurate in all material respects;
(v) the Grantor has no knowledge of any facts which impair the validity or
enforceability of any item of Lease Collateral; (vi) the Grantor will not
modify, waive or amend in a manner adverse to the Grantor, nor consent to such
modification, waiver or amendment of, any item of Lease Collateral, without the
Collateral Agent's prior written consent; and (vii) each item of Lease
Collateral originated by the Grantor is not and does not have the potential of
being, subject to any offset, counterclaim or other defense on the part of the
applicable lessee or to any claim on the part of such lessee denying liability
thereunder in whole or in part: with respect to each item of Lease Collateral
not originated by the Grantor, the Grantor agrees to use its best efforts to
ensure that each item of Lease Collateral is not, and does not have the
potential of being, subject to any offset, counterclaim or other defense on the
part of the applicable lessee or to any claim on the part of such lessee
denying liability thereunder in whole or in part.
(k) INVENTORY. With respect to the Collateral
Inventory:
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(i) Each item of Inventory is classified as Inventory
under the UCC;
(ii) Each item of Collateral Inventory certified by the
Grantor in any Borrowing Base Certificate (as such term is defined in
the Amended and Restated Credit Agreement) was either new when
purchased or acquired by the Grantor or is designated as used
equipment in the Borrowing Base Certificate; and
(iii) Except for necessary repairs and servicing, each
item of Collateral Inventory which is not leased is located only at
the location for such item of Inventory set forth herein.
(l) THIRD PARTY NOTES. Each of the Third Party Notes
(i) constitutes the valid and binding obligation of the maker thereof and is
enforceable in accordance with its terms, and (ii) has not been modified or
amended. The Grantor has no knowledge of any facts which would impair the
validity or enforceability of any of the Third Party Notes. As of the date
hereof, there remains owing under the Picker Note and the MRK Secured Note, the
sum of $3,500,000 and $2,000,000, respectively, in principal, plus accrued and
accruing interest.
SECTION 9 GENERAL COVENANTS REGARDING COLLATERAL.
--------------------------------------
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) FINANCING STATEMENTS, ETC.. Concurrently with the
execution and delivery of this Agreement, and from time to time thereafter
promptly following the request of the Collateral Agent, the Grantor shall take
any and all actions necessary and as reasonably requested by the Collateral
Agent or any of the Intercreditor Lenders to maintain the first priority
perfected security interest and Lien on the Collateral in favor of the
Collateral Agent, including, without limitation, recording, registering and
filing this Agreement and all necessary and/or requested notices, financing
statements and/or other documents or instruments with the FAA in Oklahoma City,
Oklahoma, United States of America, and the Grantor agrees to execute and
deliver to the Collateral Agent such documents as may be necessary to perfect
and maintain perfected the Collateral Agent's first priority continuing
security interest in and Lien thereon and on the Collateral. The Grantor will
join with the Collateral Agent in the execution and filing of such financing
statement or statements and the like, in the form and content reasonably
required by the Collateral Agent. The Grantor will execute and file in the
appropriate jurisdictions such financing statements and other documents
necessary and as reasonably requested by the Collateral Agent or any
Intercreditor Lender to create and maintain the Grantor's first priority
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perfected security interest in and Lien on all property subject to a Lease.
The Grantor will pay all costs of filing any financing, continuation or
termination statements, or other filings with respect to the Liens created by
this Agreement, together with all costs and expenses of any Lien search
reasonably required by the Collateral Agent during the term hereof.
(b) FURTHER ASSURANCES. At any time and from time to
time, upon the written request of the Collateral Agent, and at the sole expense
of the Grantor, the Grantor will promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as the
Collateral Agent may reasonably deem desirable to obtain the full benefits of
this Agreement and of the rights and powers herein granted, including, without
limitation, using its reasonable efforts to secure all consents and approvals
necessary or appropriate for the assignment to the Collateral Agent of any
Lease or Contract held by the Grantor or in which the Grantor has any rights
not heretofore assigned, the filing of any financing or continuation statements
under the UCC with respect to the Liens granted hereby, transferring Collateral
to the Collateral Agent's possession (if a Lien in such Collateral can be
perfected by possession), and complying with or remaining subject to the Geneva
Convention, the laws and regulations of the FAA, or the laws and regulations of
any of the various states or countries in which the Aircraft is or may fly
over, operate in, or become located in. The Grantor also hereby authorizes the
Collateral Agent to file any such financing or continuation statement without
the signature of the Grantor to the extent permitted by applicable law.
(c) STATEMENTS AND SCHEDULES. The Grantor will
furnish to the Collateral Agent from time to time statements, schedules and any
other information further identifying and describing the Collateral and such
reports in connection with the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail.
(d) COMPLIANCE WITH LAWS. The Grantor will neither use
the Collateral, nor permit the Collateral to be used, for any unlawful purpose
or contrary to any statute, law, ordinance or regulation relating to the
registration, use, operation or control of the Collateral. The Grantor will
comply with, or cause to be complied with, at all times and in all material
respects, all statutes, laws, ordinances and regulations of the United States
(including, without limitation, the FAA), the State of Ohio, and of all other
governmental, regulatory, or judicial bodies applicable to the use, operation,
maintenance, overhauling, or condition of the Collateral, or any part thereof,
and with all requirements under any licenses, permits, or certificates relating
to the use or operation of the Collateral which are issued to the Grantor or to
any other person having operational control of the Collateral; PROVIDED,
HOWEVER, that the Grantor may, in good faith and by appropriate legal or other
proceedings, contest the validity of any
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such statutes, laws, ordinances or regulations, or the requirements of any such
licenses, permits, or certificates, and pending the determination of such
contest may postpone compliance therewith, unless the rights of the Collateral
Agent hereunder are or may be materially adversely affected thereby.
Without limiting the generality of the foregoing, the Grantor
agrees that at no time during the effectiveness of this Agreement shall the
Aircraft be operated in, located in, or relocated to, by the Grantor or any
other person or entity, any jurisdiction unless the Geneva Convention, together
with the necessary enacting rules and regulations therefor (or some like treaty
and regulations satisfactory to the Collateral Agent and the Required Lenders)
shall be in effect in such jurisdiction and any notices, financing statements,
documents, or instruments necessary or required, in the opinion of counsel for
the Collateral Agent, to be filed in such jurisdiction shall have been filed
and file stamped copies thereof shall have been furnished to the Collateral
Agent. The foregoing authority to use the Aircraft to the contrary
notwithstanding, at no time shall the Aircraft be operated in or over any area
which may expose the Collateral Agent to any penalty, fine, sanction or other
liability, whether civil or criminal, under any applicable law, rule, treaty or
convention, nor may the Aircraft be used in any manner which is or is declared
to be illegal and which may thereby render the Aircraft liable to confiscation,
seizure, detention or destruction.
(e) IDENTIFICATION OF LEASES AND CHATTEL PAPER. The
Grantor shall deliver to the Collateral Agent a revised SCHEDULE IX (i) prior
to the occurrence of an Event of Default, on or prior to the tenth (10th) day
of each calendar month, and (ii) following the occurrence of an Event of
Default, as requested by the Collateral Agent or any Intercreditor Lender but
no less frequently than once a month, on or prior to the tenth (10th) Business
Day of each calendar month. The failure of the Grantor to execute and deliver
such schedule shall not affect or limit the Collateral Agent's Lien or other
rights in and to the Lease Collateral.
SECTION 10 COVENANTS REGARDING COLLATERAL EQUIPMENT
----------------------------------------
AND COLLATERAL INVENTORY.
------------------------
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) LOCATION OF COLLATERAL EQUIPMENT. The Grantor
shall keep the Collateral Equipment at the places specified in SECTION 8(a)
hereof and keep the Collateral Inventory at the places specified in such
SECTION 8(a) and SECTION 10(d) hereof or, with respect to Collateral Equipment,
upon thirty (30) days' prior written notice to the Collateral Agent, at such
other places in a jurisdiction in which all action required by SECTION 9 hereof
shall have been taken with respect to the Collateral Equipment.
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(b) MAINTENANCE OF COLLATERAL EQUIPMENT AND COLLATERAL
INVENTORY. The Grantor shall cause each item of the Collateral Equipment and
Collateral Inventory to be maintained and preserved or cause the lessee thereof
to maintain and preserve the Collateral Equipment 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, (i) make or cause to be
made all repairs, replacements, and other improvements thereto that are
necessary or desirable to such end only by qualified personnel who are trained
in the repair and maintenance of such item, and (ii) deliver any and all
proceeds, subject to the terms of the lease, received in the case of any loss
or damage to the Collateral Agent (who shall deposit the same in a Collateral
Lockbox Account). In addition to the provisions set forth in SECTION 11
hereof, 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 Collateral Equipment.
(c) PAYMENT OF TAXES. The Grantor shall pay promptly
when due or cause the lessee to 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
Collateral Equipment and Collateral Inventory, except to the extent the
validity thereof is being contested in good faith as permitted pursuant to the
Credit Agreements.
(d) LOCATION OF COLLATERAL INVENTORY. The Grantor
shall update SCHEDULE VIII of this Agreement with a written schedule describing
the location of all Collateral Inventory (i) prior to the occurrence of an
Event of Default, on or prior to the tenth (10th) day of each calendar month,
and (ii) following the occurrence of an Event of Default, as requested by the
Collateral Agent or any Intercreditor Lender but no less frequently than once a
month, on or prior to the tenth (10th) Business Day of each calendar month.
The failure of the Grantor to execute and deliver such schedule shall not
affect or limit the Collateral Agent's security interest or Lien or other
rights in and to the Collateral Inventory.
SECTION 11 COVENANTS REGARDING INSURANCE.
-----------------------------
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) MAINTENANCE OF INSURANCE. The Grantor shall, at
its own expense, maintain insurance, or cause any lessee to insure, with
respect to the Collateral in such amounts, against such risks, in such form and
with such insurers, as shall be satisfactory to the Collateral Agent and the
Required Lenders from time to time. Each such policy shall in addition (i)
name the Collateral Agent as an additional insured party and loss payee
thereunder (without any
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representation or warranty by or obligation upon the Collateral Agent) pursuant
to certificates in form and substance satisfactory to the Required Lenders,
(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 for payment of premiums or other
amounts with respect thereto, (iv) with respect to insurance maintained by the
Grantor, provide that at least thirty (30) days' prior written notice of any
proposed termination, cancellation, lapse or nonrenewal shall be given to the
Collateral Agent by the insurer, and (v) with respect to insurance maintained
by a lessee of the Grantor, the Grantor shall use its best efforts to comply
with the preceding clause (iv). The Grantor shall deliver to the Collateral
Agent original or duplicate policies of such insurance and certificates of
insurance and, as often as the Collateral Agent may reasonably request, a
report of a reputable insurance broker with respect to such insurance. The
Grantor shall deliver to the Collateral Agent from time to time, as the
Collateral Agent may reasonably request, schedules setting forth all insurance
maintained by the Grantor then in effect.
(b) GRANTOR TO TAKE REQUIRED ACTION. The Grantor
shall, at the request of the Collateral Agent, duly execute and deliver
instruments of assignment of the insurance policies described in paragraph (a)
in order to comply with the requirements of SECTION 9 above and shall cause the
insurer(s) to acknowledge notice of such assignment. The Grantor shall take all
such action as the insurer(s) providing such insurance shall require if the
failure to do so would cause the insurance policy(ies) to be cancelled or the
coverage thereunder adversely modified.
(c) NOTICE OF CLAIMS. The Grantor shall notify the
Collateral Agent of any single Collateral Insurance Claim known or which should
have been known to the Grantor which exceeds One Hundred Thousand Dollars
($100,000) or any Collateral Insurance Claims known or which should have been
known to the Grantor which, in the aggregate, exceed Two Hundred Fifty Thousand
Dollars ($250,000) in any one (1) calendar year.
(d) DEPOSIT OF PROCEEDS. All amounts paid with
respect to any Collateral Insurance Claim shall be deemed to constitute
Proceeds and shall be deposited only in the Collateral Lockbox Accounts. In
the event that the applicable lease agreement requires that amounts paid with
respect to Collateral Insurance Claims be used to purchase replacement
Collateral Equipment, upon the request of the Grantor and receipt by the
Collateral Agent of evidence satisfactory to the Collateral Agent that such
purchase is so required, the Collateral Agent, prior to the occurrence of an
Event of Default, may release such Proceeds in order to purchase such
replacement Collateral Equipment.
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(e) SETTLEMENT OF CLAIMS AND RELEASE OF PROCEEDS. At
any time prior to the occurrence or existence of an Event of Default, the
Grantor shall have the right to negotiate and settle only those Collateral
Insurance Claims less than Two Hundred Fifty Thousand Dollars ($250,000); with
respect to all other Collateral Insurance Claims and at any time from and after
the occurrence or existence of an Event of Default, the Collateral Agent shall
have full right and power (pursuant to the power of attorney contained herein)
to negotiate, settle and compromise any Collateral Insurance Claim, at the
direction of the Required Lenders. Except as set forth in clause (d) above,
all policy proceeds paid by the insurer(s) relating to any such Collateral
Insurance Claim shall be deposited into a Collateral Lockbox Account.
(f) AIRCRAFT INSURANCE. The Grantor will at all
times, at its own cost and expense, maintain, or cause to be maintained, a
policy or policies of insurance with respect to the Aircraft covering such
risks, including, without limitation, insurance on the Aircraft for actual
usage, including all risk, ground and flight aircraft hull insurance, fire and
explosion coverage, including lightning and electrical damage, and public
liability and property damage insurance in the amounts and of the types and
with insurers as set forth on SCHEDULE XI attached hereto or as otherwise
satisfactory to the Collateral Agent and the Required Lenders from time to
time.
SECTION 12 COVENANTS REGARDING ACCOUNTS AND ACCOUNTS
-----------------------------------------
RECEIVABLE.
----------
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) RECORDS. The Grantor shall keep its chief place
of business and chief executive office and the office where it keeps its books
and records concerning the Accounts and Accounts Receivable, and the original
copies of all Chattel Paper that evidences Collateral, at the location therefor
specified on SCHEDULE VIII attached hereto or, upon twenty (20) 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.
(b) NOTICE TO ACCOUNT DEBTORS. The Grantor hereby
authorizes the Collateral Agent, at any time or times after an Event of
Default, to notify, any or all Account Debtors that the Accounts and Accounts
Receivable have been assigned to the Collateral Agent, and that the Collateral
Agent has a Lien therein and to direct such Account Debtors to make all
payments due or to become due from them to the Grantor directly to a Collateral
Lockbox Account designated by the Collateral Agent from time to time. Any such
notice, in the Collateral Agent's sole discretion,
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may be sent on the Grantor's stationery, in which event the Grantor shall
co-sign such notice with the Collateral Agent.
(c) VERIFICATIONS. The Collateral Agent shall have
the right to make test verifications of the Accounts and Accounts Receivable
and physical verifications of the Collateral in any manner and through any
commercially reasonable medium that it considers advisable, and the Grantor
agrees to furnish all such assistance and information as the Collateral Agent
may require in connection therewith. Prior to an Event of Default, the
Collateral Agent shall give reasonable advance notice of any such verification
(which shall be during business hours to the extent possible) if such
activities include a visit to any of the Grantor's business locations. At any
time after an Event of Default, the Grantor at its expense will cause certified
independent public accountants satisfactory to the Collateral Agent to prepare
and deliver to the Collateral Agent at any time and from time to time promptly
upon the Collateral Agent's request in form and substance satisfactory to the
Collateral Agent such information pertaining to the Accounts and Accounts
Receivable, including statements and schedules further identifying and
describing the Collateral and such other reports (in addition to all reports
required by the Credit Agreements) in connection with the Collateral as the
Collateral Agent may reasonably request from time to time, all in reasonable
detail.
(d) LIMITATIONS ON MODIFICATIONS OF ACCOUNTS. Until
such time as the Collateral Agent, at the direction of the Required Lenders,
shall notify the Grantor of the revocation of such power and authority, the
Grantor may grant any extension of the time of payment of any of the Accounts,
Accounts Receivable, Chattel Paper or Instruments, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any person liable for the payment thereof, and allow any credit or
discount.
(e) SCHEDULE OF ACCOUNTS AND ACCOUNTS RECEIVABLE. On
or prior to the tenth (10th) day of each calendar month, the Grantor shall
provide the Collateral Agent with schedules describing all Accounts and
Accounts Receivable created or acquired by it and shall execute and deliver
confirmatory written assignments of such Accounts and Accounts Receivable to
the Collateral Agent; PROVIDED, HOWEVER, that the failure of the Grantor to
execute and deliver such schedules and/or assignments describing all Accounts
and Accounts Receivable to the Collateral Agent shall not affect or limit the
Collateral Agent's or any Intercreditor Lender's security interest or other
rights in and to the Accounts and Accounts Receivable. Together with each
schedule, the Grantor shall furnish, upon request of the Collateral Agent,
following the occurrence of a Default or an Event of Default, 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 the Collateral Agent may require. The Grantor will not re- date
any invoice or sale or make sales on extended dating beyond that customary in
its
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industry. If the Grantor becomes aware of anything materially detrimental to
the material credit of any of its customers in the possession of material
Collateral, it will promptly advise the Collateral Agent thereof.
SECTION 13 ADDITIONAL COVENANTS.
--------------------
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) NO TRANSFER OF COLLATERAL. The Grantor shall not:
(i) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, or attempt to contract to
do so, except (A) Collateral Inventory and that portion of Collateral
Equipment consisting of property subject to a Lease, in the ordinary
course of business (and provided that the Proceeds thereof are
promptly deposited into a Collateral Lockbox Account designated by the
Collateral Agent from time to time), (B) as permitted under the
Amended and Restated Credit Agreement and the Lease Receivables
Transfer Agreement and (C) pursuant to the CXC Transaction; or
(ii) 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) PROCEEDS OF SALE. With respect to the sale,
assignment or other disposition of any of the Collateral pursuant to clause
(a)(i)(B) above, the Grantor covenants and agrees that the proceeds of such
sale, assignment or other disposition shall be immediately deposited into a
Collateral Lockbox Account designated by the Collateral Agent from time to
time.
(c) PLEDGED SHARES. The Grantor 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 the Grantor, and (ii) pledge hereunder, immediately upon the
Grantor's acquisition directly or indirectly thereof, any and all additional
shares of stock or other securities of each issuer of the Pledged Shares.
(d) PAYMENT OF OBLIGATIONS. The Grantor will pay
promptly when due all charges imposed upon the Collateral or in respect of its
income or profits therefrom and all claims of any kind (including, without
limitation, claims for labor, materials and supplies), unless the same are
being diligently contested in good faith and for which reserves or appropriate
provision, if any, as shall be required by generally accepted accounting
principles, shall have been made therefor.
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(e) LIMITATION OF LIENS ON COLLATERAL. The Grantor
will not create, permit or suffer to exist, and will defend the Collateral
against, and take such other action as is necessary to remove, any Lien on the
Collateral except Permitted Liens and will defend the right, title and interest
of the Collateral Agent in and to any of the Grantor's rights in or under the
Collateral against the claims and demands of all persons whomsoever.
(f) COMPLIANCE WITH TERMS. The Grantor will perform
and comply with all obligations in respect of the Accounts, Accounts
Receivable, Chattel Paper, Contracts and all other agreements to which it is a
party or by which it is bound.
(g) THIRD PARTY NOTES. The Grantor shall irrevocably
instruct, respectively, (i) MRK to make all payments under that certain Asset
Acquisition Agreement dated May 31, 1994 by and among the Grantor, the Borrower
and MRK, including, without limitation, payments in connection with the MRK
Secured Note, and (ii) Picker to make all payments in connection with the
Picker Note, directly into a Collateral Lockbox Account designated by the
Collateral Agent from time to time. The Grantor agrees that it shall not
amend, modify or waive any provision of any of the Third Party Notes without
the prior written consent of the Required Lenders and that upon a default under
the Third Party Notes, the Grantor shall promptly take all steps necessary to
enforce the same.
(h) FURTHER INDEMNIFICATION. The Grantor agrees to
pay, and to save the Collateral Agent and the Intercreditor Lenders harmless
from, any and all liabilities with respect to, or resulting from any delay in
paying, any and all excise, sales or other similar taxes which may be payable
or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
(i) MAINTENANCE OF RECORDS. The Grantor will keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral in the ordinary course of business, including, without limitation, a
record of all payments received and all credits granted with respect to the
Collateral and all other dealings with the Collateral. The Grantor will mark
its books and records pertaining to the Collateral to evidence this Agreement
and the Liens granted hereby. The Grantor agrees that the Collateral Agent
shall have the right, upon the occurrence of an Event of Default, without prior
notice, to require the Grantor to turn over physical possession of, or to make
available any such books and records to the Collateral Agent or to its
representatives on demand of the Collateral Agent. Prior to the occurrence of
an Event of Default, the Grantor shall permit any representative of the
Collateral Agent to inspect such books and records during normal business hours
at reasonable times and will provide photocopies thereof to the Collateral
Agent and such clerical and other assistance as may be reasonably requested
with regard thereto. Upon reasonable notice and during regular business hours,
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the Collateral Agent and its representatives shall also have the right to enter
into and upon any premises where any of the Collateral is located for the
purpose of inspecting the same, observing its use or otherwise protecting its
interests therein.
(j) SPECIAL COLLATERAL. Promptly upon the Grantor's
receipt of that portion of the Collateral (other than Chattel Paper) which is
or becomes evidenced by an agreement, writing, Instrument and/or Document,
including, without limitation, promissory notes, trade acceptances, documents
of title and warehouse receipts, but excluding Leases which are or become
Chattel Paper, the Grantor shall deliver the original thereof to the Collateral
Agent, together with appropriate endorsements or other specific evidence (in
form and substance acceptable to the Collateral Agent) of assignment thereof to
the Collateral Agent; PROVIDED, HOWEVER, that the Grantor may deposit such
Instruments only in a Collateral Lockbox Account designated by the Collateral
Agent from time to time.
(k) PERFORMANCE BY THE COLLATERAL AGENT OF THE
GRANTOR'S OBLIGATION. If the Grantor fails to perform or comply with any of
its covenants or agreements contained herein and the Collateral Agent, as
provided for by the terms of this Agreement, shall itself perform or comply, or
otherwise cause performance or compliance, with such covenants or agreements,
the reasonable expenses of the Collateral Agent incurred in connection with
such performance or compliance, together with interest thereon from the date
paid or incurred by the Collateral Agent until paid in full at the interest
rate determined in accordance with Section 2.3(b) of the Amended and Restated
Credit Agreement then in effect in respect of the Loans (as defined in the
Amended and Restated Credit Agreement), shall be payable by the Grantor to the
Collateral Agent on demand and shall constitute Obligations secured hereby.
(l) MAINTENANCE AND REPAIRS OF AIRCRAFT.
(i) During the effectiveness of this Agreement, the
Grantor shall, at its expense, do or cause to be done each and all of
the following:
(A) Maintain and keep the Aircraft in as good
condition and repair as it is on the date of this
Agreement, ordinary wear and tear excepted;
(B) Maintain and keep the Aircraft in good order and
repair and airworthy condition in accordance with
the requirements of each of the manufacturers'
manuals and mandatory service bulletins and each
of the manufacturers' nonmandatory service
bulletins which relate to airworthiness;
(C) Replace in or on the Airframe, any and all
Engines, parts, appliances, instruments or
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accessories which may be worn out, lost,
destroyed or otherwise rendered unfit
for use; and
(D) Without limiting the foregoing, cause to be
performed, on all parts of the Aircraft, all
applicable mandatory Airworthiness Directives,
Federal Aviation Regulations, Special Federal
Aviation Regulations, and manufacturers' service
bulletins relating to airworthiness, the
compliance date of which shall occur during the
term of this Agreement.
(ii) The Grantor shall be responsible for all required
inspections of the Aircraft and licensing or re-licensing of the
Aircraft in accordance with all applicable FAA and other governmental
requirements. The Grantor shall at all times cause the Aircraft to
have, on board and in a conspicuous location, a current Certificate of
Airworthiness issued by the FAA.
(iii) All inspections, maintenance, modifications,
repairs, and overhauls of the Aircraft (including those performed on
the Airframe, the Engines, and/or any components, appliances,
accessories, instruments, or equipment) shall be performed by
personnel authorized by the FAA to perform such services.
(iv) If any Engine, component, appliance, accessory,
instrument, equipment or part of the Aircraft shall reach such a
condition as to require overhaul, repair or replacement, for any cause
whatever, in order to comply with the standards for maintenance and
other provisions set forth in this Agreement, the Grantor may:
(A) Install on the Aircraft such items of
substantially the same type in temporary
replacement of those then installed on the
Aircraft, pending overhaul or repair of the
unsatisfactory item; PROVIDED, HOWEVER, that such
replacement items must be in such a condition as
to be permissible for use upon the Aircraft in
accordance with the standards for maintenance and
other provisions set forth in this Agreement;
PROVIDED FURTHER, HOWEVER, that the Grantor must,
at all times, retain unencumbered title to any and
all items temporarily removed; or
(B) Install on the Aircraft such items of
substantially the same type in permanent
replacement of those then installed on the
Aircraft; PROVIDED, HOWEVER, that such replacement
items must be in such condition as to
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be permissible for use upon the Aircraft in
accordance with the standards for maintenance and
other provisions set forth in this Agreement;
PROVIDED FURTHER, HOWEVER, that the Grantor must
first comply with each of the requirements of
clause (v) hereinbelow.
(v) In the event that during the effectiveness of this
Agreement, the Grantor shall be required or permitted to install upon
the Airframe or any Engine, components, appliances, accessories,
instruments, engines, equipment or parts in permanent replacement of
those then installed on the Airframe or such Engine, the Grantor may
do so provided that, in addition to any other requirements provided
for in this Agreement:
(A) The Collateral Agent is not divested of its
security interest in and Lien upon any item
removed from the Aircraft and that no such removed
item shall be or become subject to the lien or
claim of any person, unless and until such item is
replaced by an item of the type and condition
required by this Agreement, title to which, upon
its being installed or attached to the Airframe,
is validly vested in the Grantor, free and clear
of any liens and/or claims, of any kind or nature,
of any person other than the Collateral Agent;
(B) The Grantor's title to every substituted item
shall immediately be and become subject to the
security interest and Lien of the Collateral
Agent, and each of the provisions of this
Agreement, and each such item shall remain so
encumbered and so subject unless it is, in turn,
replaced by a substitute item in the manner
permitted herein;
(C) If an item is removed from the Aircraft and
replaced in accordance with the requirements of
this Agreement, and if the substituted item
satisfies the requirements of this Agreement,
including the terms and conditions of clauses (A)
and (B) hereinabove, then the item which is
removed shall thereupon, and only thereupon, be
free and clear of the security interest and Lien
of the Collateral Agent.
(vi) In the event that any Engine, component,
appliance, accessory, instrument, equipment or part is installed upon
the Airframe, and is not in substitution for or in replacement of an
existing item, such additional item shall be considered as an
accession to the Airframe.
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(m) AIRCRAFT REGISTRATION. The Grantor is the
registered owner of the Aircraft pursuant to a proper registration under the
Federal Aviation Act of 1958, as amended (the "Act"), and the Grantor qualifies
in all respects as a "citizen of the United States" as defined in Section
101(16) of the Act and the Grantor shall, so long as this Agreement remains in
full force and effect, maintain the registration of the Aircraft with the FAA
in its name and shall remain a "citizen of the United States" as defined in
Section 101(16) of the Act.
SECTION 14 VOTING RIGHTS; DIVIDENDS; ETC.
-----------------------------
(a) UPON EVENT OF DEFAULT. So long as no Event of
Default shall have occurred which has not been waived in accordance with the
provisions of the Intercreditor Agreement:
(i) the 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, the Credit Agreements
(as each is in effect on the Agreement Date) or the Intercreditor
Agreement; PROVIDED, HOWEVER, that the Grantor shall not exercise or
shall refrain from exercising any such right if, in the 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 the Grantor shall give the
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; and
(ii) the Collateral Agent shall execute and deliver (or
cause to be executed and delivered) to the Grantor all such proxies
and other instruments as the Grantor may reasonably request for the
purpose of enabling the Grantor to exercise the voting and other
rights that they are entitled to exercise pursuant to paragraph (i)
above.
(b) AFTER EVENT OF DEFAULT. Upon the occurrence of an
Event of Default, and after notice to the Grantor by the Collateral Agent, all
rights of the Grantor to exercise the voting and other consensual rights that
it would otherwise be entitled to exercise pursuant to SECTION 14(a)(i) above
shall cease, and all such rights shall thereupon become vested in the
Collateral Agent who shall thereupon have the sole right to exercise such
voting and other consensual rights.
SECTION 15 COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------
(a) APPOINTMENT OF COLLATERAL AGENT. The Grantor
hereby irrevocably appoints the Collateral Agent and any officer or agent
thereof, with full power of substitution, as the Grantor's attorney-in-fact,
with full irrevocable power and authority in the
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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:
(i) to obtain and adjust insurance required to be paid
to the Collateral Agent pursuant to SECTION 11 hereof;
(ii) 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;
(iii) to receive, indorse, and collect any drafts or
other instruments, documents and Chattel Paper, in connection with
CLAUSES (I) OR (II)above;
(iv) following the occurrence of an Event of Default,
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;
(v) 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;
(vi) to pay or discharge taxes, liens, security
interests or other encumbrances levied or placed on or threatened
against the Collateral;
(vii) to defend any suit, action or proceeding brought
against the Grantor with respect to any Collateral and to settle,
compromise or adjust any suit, action or proceeding described in this
Section 15 and, in connection therewith, to give such discharges or
releases as the Collateral Agent may deem appropriate; and
(viii) to make any agreement with respect to or otherwise
deal with, including, without limitation, leasing or chartering the
Aircraft, and, after the occurrence of an Event of Default, to sell,
transfer, or pledge, any of the Collateral as fully and completely as
though the Collateral Agent were the absolute owner thereof for all
purposes and to do, at the Collateral Agent's option and the Grantor's
expense, at any time, or from time to time, all acts and things which
the Collateral Agent reasonably deems necessary to protect, preserve
or realize upon the Collateral and the Collateral Agent's security
interests and liens therein, in
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order to effect the intent of this Agreement, all as fully and
effectively as the Grantor might do.
(b) RATIFICATION OF ACTIONS. The Grantor hereby
ratifies, to the extent permitted by law, all that said attorneys shall
lawfully do or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Section 15 is a power coupled with an interest and
shall be irrevocable until the Obligations are indefeasibly paid in full.
(c) DUTIES OF COLLATERAL AGENT. The powers conferred
on the Collateral Agent hereunder are solely to protect the Collateral Agent's
interests in the Collateral and shall not impose any duty upon it to exercise
any such powers. The Collateral Agent shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers and
neither it nor any of its past, present or future officers, directors,
employees or agents shall be responsible to the Grantor for any act or failure
to act, except for its own gross negligence or willful misconduct.
(d) ADDITIONAL AUTHORITY UPON EVENT OF DEFAULT. The
Grantor also authorizes the Collateral Agent, at any time or times after the
occurrence of an Event of Default, (i) to communicate in its own name with any
party to any Contract with regard to the assignment of the right, title and
interest of the Grantor in and under the Contracts hereunder and other matters
relating thereto, and (ii) to execute, in connection with the sale provided for
in SECTION 18 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
SECTION 16 THE COLLATERAL AGENT.
--------------------
(a) APPOINTMENT OF THE COLLATERAL AGENT.
(i) Under the Existing Security Agreement, the
Existing Lenders appointed Continental as Collateral Agent.
Concurrently herewith, the Intercreditor Lenders, pursuant to the
terms of the Intercreditor Agreement, have appointed Continental as
the Collateral Agent under this Agreement to act under this Agreement.
The Collateral Agent acts with the authorization of and at the
direction of the Required Lenders and, if required pursuant to the
terms of the Intercreditor Agreement, the Affected Subject Lenders (as
defined in the Intercreditor Agreement), as more fully described in
the Intercreditor Agreement. Except as set forth in SECTION 6 hereof,
the Collateral Agent shall only release its Lien on Collateral as
authorized and directed in writing by (A) the Required Lenders, and
(B) the Required Banks (as defined in the Amended and Restated Credit
Agreement.
(ii) The powers conferred on the Collateral Agent
hereunder are solely to protect its interest in the Collateral
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and shall not impose any duty upon it to exercise any such powers and,
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 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 Collateral if its possession of the 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 Intercreditor Lender shall have
any responsibility or liability for (A) ascertaining or taking action
with respect to calls, conversations, exchanges, maturities, tenders
or other matters relative to any Collateral whether or not the
Collateral Agent or any Intercreditor Lender has or is deemed to have
knowledge of such matters, or (B) taking any necessary steps to
preserve rights against any parties with respect to any Collateral, or
(C) the collection of any proceeds of any Collateral or, by reason of
any invalidity, the lack of value of any of the payments received by
it from Account Debtors or otherwise or the uncollectability of any of
the Collateral.
(b) RESPONSIBILITY DISCLAIMED. The Collateral Agent
shall be under no liability or responsibility whatsoever as the Collateral
Agent to the Grantor or any other person as a consequence of any failure or
delay in performance by or any breach by, any Intercreditor Lender or
Intercreditor Lenders of any of its or their obligations under this Agreement,
the Intercreditor Agreement or any of the Debt Documents.
(c) EXCULPATORY PROVISIONS.
(i) The Collateral Agent shall not be responsible in
any manner whatsoever for the correctness of any recitals, statements,
representations or warranties contained herein or in the Intercreditor
Agreement or in any of the Debt Documents, except for those made by
the Collateral Agent. The Collateral Agent makes no representations
as to the title of the Grantor or as to the security afforded by this
Agreement (including the perfection and relative priority of such
security) and the Collateral Agent shall incur no liability or
responsibility in respect of any such matters. The Collateral Agent
shall not be responsible for the attachment, perfection, priority or
enforceability of any Lien created or purported to be created by this
Agreement or the value of any Collateral granted hereunder from time
to time.
(ii) Except as otherwise provided herein, the
Collateral Agent shall not be required to ascertain or inquire as to
the performance by the Grantor of any of the covenants or agreements
contained in this Agreement, the Intercreditor
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Agreement or any of the Debt Documents. Whenever it is necessary, or
in the opinion of the Collateral Agent advisable, for the Collateral
Agent to ascertain the principal amount outstanding for which the
Grantor is obligated to any Intercreditor Lender, the Collateral Agent
may rely on a certificate of such Intercreditor Lender.
(iii) Neither the Collateral Agent nor any of its past,
present or future directors, agents, officers, employees or attorneys
shall be liable for any acts, omissions, errors of judgment or
mistakes of fact or law made, taken or omitted to be made or taken in
accordance with this Agreement, the Intercreditor Agreement or any
Debt Documents (including, without limitation, acts, omissions, errors
or mistakes with respect to the Collateral), except for those arising
out of or in connection with gross negligence or willful misconduct.
Without limiting the foregoing, neither the Collateral Agent nor any
of its past, present or future directors, officers, agents, employees
or attorneys shall be responsible for, or have any duty to examine,
ascertain, or inquire about (A) the genuineness, execution, validity,
effectiveness, enforceability, value or sufficiency of (x) this
Agreement, or (y) any document or instrument furnished pursuant to or
in connection with this Agreement, including the Grantor's books and
records, (B) the collectability of any amounts owed by the Grantor,
(C) any recitals or statements or representations or warranties in
connection with this Agreement, the Intercreditor Agreement or any of
the Debt Documents, (D) any failure of any party to this Agreement,
the Intercreditor Agreement or any Debt Documents or any Intercreditor
Lender to receive any communication sent to the notice address
specified inSECTION 23 hereof, or (E) the assets, liabilities,
financial condition, result of operations, business or credit
worthiness of the Grantor.
(iv) The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of
the Collateral in its possession if it takes such action for that
purpose as the Grantor requests in writing, but failure of the
Collateral Agent to comply with any such request shall not of itself
be deemed a failure to exercise reasonable care, and no failure of the
Collateral Agent to preserve or protect any rights with respect to
such Collateral against prior parties, or to do any act with respect
to the preservation of such Collateral not so requested by the
Grantor, shall be deemed a failure to exercise reasonable care in the
custody or preservation of such Collateral.
(d) DELEGATION OF DUTIES. The Collateral Agent may
execute any of the powers hereof and perform any duty hereunder including,
without limitation, establishment and maintenance of Collateral Lockbox
Accounts at banks or other financial institutions other than the Collateral
Agent, either directly or by
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or through agents, nominees or attorneys-in-fact, which may include employees
or officers of the Grantor, provided that the Collateral Agent shall obtain a
written acknowledgement from such agents, nominees or attorneys-in-fact that
they shall be liable to any person for losses or damages incurred by any person
as a result of such agents', nominees' or attorneys'-in-fact gross negligence
or willful misconduct as and to the extent the Collateral Agent would be liable
for such losses or damages if the actions or omissions of such agents, nominees
or attorneys- in-fact constituting such gross negligence or willful misconduct
had been actions or omissions of the Collateral Agent. The Collateral Agent
shall be entitled to rely on advice of counsel concerning all matters
pertaining to such trusts, powers and duties. The Collateral Agent shall not
be responsible for any negligence or misconduct of any agents, nominees or
attorneys-in-fact selected by the Collateral Agent.
(e) LIMITATIONS ON RESPONSIBILITY OF THE COLLATERAL
AGENT AND OTHER MATTERS.
(i) The Collateral Agent shall have no duties or
responsibilities other than those expressly set forth in this
Agreement. Such duties and liabilities shall be subject to the
limitations and qualifications set forth in this Section 16. No
implied duties or obligations shall be read into this Agreement
against the Collateral Agent.
(ii) The Collateral Agent shall be entitled to act, and
shall be fully protected in acting upon, any communication in whatever
form believed by the Collateral Agent in good faith to be genuine and
correct and to have been signed or sent or made by a proper person or
persons. The Collateral Agent shall not be bound to investigate any
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order or other communication which it believes to be genuine, and may
rely on the facts or matters so stated; but the Collateral Agent, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may deem fit.
(iii) The Collateral Agent shall not have any duty (A)
to review the financial condition or operations of the Grantor or make
any determination with respect to an adverse change therein, (B) to
ascertain or inquire as to the performance or observance of any
covenants of the Grantor or any Intercreditor Lender, or (C) to
qualify to do business in any jurisdiction in which it is not already
so qualified.
(f) ACTION ON INSTRUCTIONS. The Collateral Agent
shall be entitled to act or refrain from acting, and in all cases shall be
fully protected in acting or refraining from acting, under this Agreement in
accordance with instructions in writing from the Required Lenders, or, if
required pursuant to the terms of the Intercreditor Agreement, all
Intercreditor Lenders and
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additionally, if required pursuant to the terms of the Intercreditor Agreement,
each Affected Subject Lender (as defined in the Intercreditor Agreement), as
the case may be; PROVIDED, HOWEVER, the Collateral Agent shall not be required
to take or refrain from taking any particular action in accordance with
instructions from the Required Lenders, an Affected Subject Lender, if required
pursuant to the terms of the Intercreditor Agreement, or all Intercreditor
Lenders, as the case may be, pursuant to this Agreement, and no provision of
this Agreement shall be deemed to impose a duty on the same to take or refrain
from taking any particular action, if the Collateral Agent shall have received
an opinion of independent counsel that the Collateral Agent's taking or
refraining from taking such action would violate the terms hereof or thereof or
Applicable Law.
(g) ADVANCE OF FUNDS BY THE COLLATERAL AGENT. The
Collateral Agent shall not be required to advance any of its own funds or to
take any action hereunder to enforce any Obligation (or any note substituted
therefor in connection with the refinancing thereof) or to take any action at
the request or direction of the Intercreditor Lenders unless it shall
previously have been furnished with an indemnity in form and substance
satisfactory to it against any losses or expenses or liabilities which it may
sustain or incur in making such advance or in taking such action.
(h) CONTINENTAL AND AFFILIATES. With respect to
Obligations owed to Continental under this Agreement, the Intercreditor
Agreement, or any Debt Document, Continental shall have the same rights,
powers, duties and obligations under this Agreement as any other Intercreditor
Lender and may exercise the same as though it were not the Collateral Agent.
Continental and its affiliates may accept deposits from, lend money to, and
generally engage, and continue to engage, in any kind of business with the
Grantor as if Continental were not the Collateral Agent. If Continental is
removed as the Collateral Agent, it will not affect Continental's rights and
interests as an Intercreditor Lender or as an Amended and Restated Credit
Agreement Lender.
(i) NOTICE TO HOLDER OF NOTES. The Collateral Agent
may deem and treat the payees of any note issued pursuant to any Subject
Facility Document as the owners thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof has been filed with the
Collateral Agent. Any request, authority or consent of any holder of any note
shall be conclusive and binding on any subsequent holder, transferee or
assignee of such note.
(j) RELIANCE BY THE COLLATERAL AGENT. The Collateral
Agent shall have the following privileges and immunities in the exercise of the
rights and powers vested in it by this Agreement:
(i) it may accept a copy of a resolution of the board
of directors of the Grantor certified by the Secretary or an
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Assistant Secretary thereof as conclusive evidence that such
resolution has been duly adopted by said board and is in full force
and effect, provided such acceptance is in good faith;
(ii) as to any other fact or matter the manner of
ascertainment of which is not specifically set forth herein, it may
for all purposes hereof rely on a certificate of an officer of the
person making such claim as to such fact or matter, and such
certificate shall constitute full protection to it for any action
reasonably taken, suffered or omitted to be taken by it in good faith
in reliance thereon;
(iii) may consult with independent counsel and
accountants, and the Collateral Agent shall not be liable for any
action reasonably taken, suffered or omitted to be taken by any such
agent or attorney selected by it with due care or by it in good faith
in reliance on the advice or opinion of any such counsel or
accountants selected by it with due care;
(iv) it may, from time to time, request direction from
the Required Lenders with respect to the performance of its powers and
duties hereunder, and it shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Required Lenders relating to the time,
method and place of conducting any proceeding for any remedy available
to the Collateral Agent, or exercising any power conferred upon the
Collateral Agent under this Agreement; and
(v) no provision of this Agreement shall require the
Collateral Agent to extend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder or thereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(k) TERMINATION OF THE COLLATERAL AGENT. The Required
Lenders shall have the right to terminate the agency of the Collateral Agent
hereunder by giving the Collateral Agent thirty (30) days' notice of such
termination and, upon giving such notice, shall have the right to appoint a
successor Collateral Agent. Notwithstanding any other provision herein
contained, the Collateral Agent shall be discharged of all of its duties and
obligations hereunder, and its agency shall terminate, upon payment in full of
all outstanding Obligations secured by Collateral held by the Collateral Agent
pursuant to the terms of this Agreement and disbursement of all funds held by
the Collateral Agent pursuant to this Agreement.
(l) RESIGNATION OF THE COLLATERAL AGENT. The
Collateral Agent may resign at any time by giving sixty (60) days'
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prior written notice to each Intercreditor Lender then holding any Obligations;
provided, however, that such resignation shall not become effective until a
successor Collateral Agent has been appointed and qualified. Upon receipt of
notice of such resignation, the Required Lenders shall have the right to
appoint a successor Collateral Agent. If no successor Collateral Agent shall
have been appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring the Collateral Agent's
notice of resignation, then the retiring the Collateral Agent may, but shall
not be required to, on behalf of the Intercreditor Lenders, appoint a successor
Collateral Agent. In the event no successor Collateral Agent shall have been
appointed by either the Required Lenders or the retiring the Collateral Agent
pursuant to this Section 16(l) by the 60th day after the notice of resignation
was given by the retiring the Collateral Agent, then, subject to SECTION 16(n)
hereof, the Collateral Agent or any Intercreditor Lender may apply to any court
of competent jurisdiction for the appointment of a successor Collateral Agent,
which appointment shall be binding upon all Intercreditor Lenders. No
Collateral Agent shall be discharged from its duties or obligations hereunder
until all Collateral and documents then held by such Collateral Agent shall
have been delivered to the successor Collateral Agent, and until such retiring
Collateral Agent shall have executed and delivered to the successor Collateral
Agent appropriate instruments substituting such successor Collateral Agent as
attorney-in-fact of the Grantor as necessary for the purposes of this
Agreement. Each such successor Collateral Agent shall provide the Grantor with
its address to be sued for the purposes of SECTION 23 hereof, in a notice
complying with the terms of such Section.
(m) NOTICE OF SUCCESSOR COLLATERAL AGENT. The
Required Lenders appointing a successor Collateral Agent pursuant to SECTIONS
16(k) or 16(l) hereof shall make such appointment by written notice to all
parties to this Agreement and to such successor Collateral Agent. Following
receipt of such notice, such successor Collateral Agent, if it consents to such
appointment, shall execute, acknowledge and deliver to its predecessor
Collateral Agent, the Grantor and each Intercreditor Lender, an instrument in
writing accepting such appointment hereunder and thereupon, without any further
act, deed or conveyance, succeed to all rights and obligations of the
Collateral Agent hereunder, effective immediately upon the expiration of the
thirty (30) day period provided for in SECTION 16(k) hereof or the sixty (60)
day period provided for in SECTION 16(l) hereof. Any Collateral Agent ceasing
to act shall, notwithstanding anything herein to the contrary, retain, a Lien,
upon all Collateral and all Proceeds of Collateral held or collected by such
Collateral Agent to secure any amounts then due it pursuant to the provisions
of this Agreement.
(n) STATUS OF SUCCESSORS TO THE COLLATERAL AGENT.
Every successor to the Collateral Agent appointed pursuant to
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SECTIONS 16(k) or 16(l) hereof shall be a bank or trust company in good
standing and having power so to act, incorporated under the laws of the United
States of any state (other than Florida) thereof or the District of Columbia,
and having its principal corporate trust office within the forty-eight (48)
contiguous states, and shall also have capital, surplus and undivided profits
of not less than Five Hundred Million Dollars ($500,000,000).
(o) MERGER OF THE COLLATERAL AGENT. Any corporation
into which the Collateral Agent shall be merged, or with which it shall be
consolidated, or any corporation resulting from any merger, or consolidation to
which the Collateral Agent shall be a party, shall be the Collateral Agent
under this Agreement without the execution or filing of any document or any
further act on the part of the parties hereto.
SECTION 17 EVENTS OF DEFAULT.
-----------------
The occurrence of one or more of the following events shall constitute
an EVENT OF DEFAULT" hereunder:
(a) the Grantor shall fail or neglect to perform, keep
or observe any of its agreements, covenants or obligations hereunder and such
failure or neglect shall continue for ten (10) days after such performance or
observance is due hereunder;
(b) any statement, representation or warranty made by
the Grantor is not true, correct, complete and accurate in any material respect
when made; or
(c) an Event of Default as defined in the Intercreditor
Agreement or any of the Debt Documents shall have occurred; or
(d) the Grantor shall fail to deliver to the
Collateral Agent (i) the Sweep Agreements required pursuant to Section
4(f) hereof, (ii) Schedule XII required pursuant to Section 8(e)
hereof, or (iii) the evidence required pursuant to Section 30 hereof,
within the respective time periods specified in each such section.
SECTION 18 REMEDIES.
--------
After the occurrence of an Event of Default which has not been waived
in accordance with the terms of the Intercreditor Agreement:
(a) SET-OFF.
(i) As additional security for the payment and
performance of the Obligations, the Collateral Agent shall have a
general right of set-off and banker's lien under applicable law
against all of the Grantor's respective property and interests in
property now or from time to time hereafter in the possession, custody
or control of Continental
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in any capacity or any of the Co-Agents including without limitation,
the Mandatory Bank Accounts, or any other Deposit Account of any type
maintained from time to time by the Grantor with the Collateral Agent
or any other Intercreditor Lender. The Collateral Agent may, and is
hereby authorized by the Grantor to, at any time and from time to
time, to the fullest extent permitted by Applicable Law, without
advance notice to the Grantor (any such notice being expressly waived
by the Grantor), set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and
any other indebtedness at any time owing by the Collateral Agent or
any Intercreditor Lender to or for the credit or the account of the
Grantor against any or all of the Obligations of the Grantor now or
hereafter existing whether or not such Obligations have matured and
irrespective of whether or not Collateral Agent has exercised any
other rights that it has or may have with respect to such Obligations,
including, without limitation, any acceleration rights.
(ii) Notwithstanding the introduction to this Section
18 to the contrary, both before and after an Event of Default, the
Grantor agrees to immediately notify the Collateral Agent whenever any
third party obtains or asserts any interest in any Collateral Lockbox
Account, Mandatory Bank Account or Permitted Bank Account.
(iii) The Collateral Agent agrees to promptly notify the
Grantor after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such
set-off and application. The Collateral Agent shall not be liable to
any Person for failure to give any such notice. The rights of the
Collateral Agent under this Section 18(a) are in addition to the other
rights and remedies (including, without limitation, other rights of
set-off) which the Collateral Agent may have.
(b) RIGHTS AND REMEDIES. The Collateral Agent shall,
in addition to other rights and remedies provided for herein or otherwise
available to it, have all the rights and remedies of a secured party on default
under the UCC (whether or not the UCC applies to the affected Collateral), and
may, upon direction of the Required Lenders, (i) exercise any and all rights
and remedies of the Grantor in respect of the Collateral PROVIDED, HOWEVER,
that with respect to that portion of the Collateral consisting of books and
records, such exercise shall be consistent with the terms of the CXC
Intercreditor Agreement, (ii) require the Grantor to, and the Grantor hereby
agrees that it will at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the Collateral
Agent and make it available to the Collateral Agent at a place to be designated
by the Collateral Agent, (iii) occupy any premises owned or leased by the
Grantor where the Collateral or any part thereof is assembled for a reasonable
period in order to effectuate its rights and
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remedies hereunder or under law, without obligation to the Grantor in respect
of such occupation and the Collateral Agent may exclude the 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 the
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 the 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
the 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 the Collateral Agent deems necessary or desirable
in order to maximize the value of the Grantor's business or the Collateral) and
upon every such entry, the Collateral Agent, at the expense of the 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 the Grantor, the
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 the Grantor with respect
thereto in the name or names of any of the 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, the 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
employed, shall apply the moneys arising as aforesaid pursuant to the
provisions of this Agreement (nothing contained herein shall be construed to
impose upon the Collateral Agent any obligation to preserve or protect the
Collateral or the 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 the Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Collateral
Agent may deem commercially reasonable. The Grantor agrees that, to the extent
notice of sale shall be required by law, at least
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five (5) days' notice to the 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. The Collateral Agent shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. The
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.
(c) TREATMENT OF PAYMENTS. All payments received by
the Grantor in connection with any Collateral or otherwise in respect of the
Collateral shall be received in trust for the benefit of the Collateral Agent,
and shall be segregated from other funds of the Grantor and shall be forthwith
deposited into a Collateral Lockbox Account designated by the Collateral Agent
from time to time in the same form as so received (with any necessary
indorsement).
(d) DISPOSITION OF PAYMENTS. Any surplus of such cash
or cash proceeds held by the Collateral Agent and remaining after payment in
full of all the Obligations and termination in writing by the Intercreditor
Lenders of each of the Intercreditor Agreement and each of the Debt Documents
shall be paid over to the Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION 19 INDEMNITY AND EXPENSES.
----------------------
(a) INDEMNIFICATION. The Grantor agrees to indemnify
the Collateral Agent, the Co-Agents and each of the Intercreditor Lenders from
and against any and all claims, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, disbursements and liabilities of
any kind or nature whatsoever arising out of, relating to or resulting from
this Agreement (including, without limitation, enforcement of this Agreement
and the establishment and maintenance from time to time of Collateral Lockbox
Accounts at banks other than the Collateral Agent) or any action taken or
omitted by any such indemnified person in connection herewith, except claims,
losses or liabilities resulting from the Collateral Agent's gross negligence or
willful misconduct.
(b) REIMBURSEMENT OF EXPENSES. The Grantor shall
reimburse the Collateral Agent on demand for all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred by the
Collateral Agent in connection with the preparation, execution, administration
or enforcement of, or legal advice in respect of rights or responsibilities
under this Agreement and the Intercreditor Agreement, regardless of whether any
suit is filed, including, without limitation, all costs and expenses incurred
in checking, retaking, holding, handling, preparing for sale and selling or
otherwise disposing of any and all Collateral and the establishment and
maintenance from time to
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time of Collateral Lockbox Accounts at banks other than the Collateral Agent's
bank. The Grantor's reimbursement obligations hereunder shall be part of the
Obligations, shall bear interest at the Prime Rate (as defined in the Amended
and Restated Credit Agreement) from the date incurred until paid in full, and
shall be secured by the Collateral and enjoy the benefits of this Agreement,
notwithstanding that such obligations may cause the principal balance of the
unpaid Loans (as defined in the Amended and Restated Credit Agreement) and the
Notes to exceed the face amount of the Notes. In the event the Grantor shall
fail to pay all amounts reimbursable hereunder within ten (10) days after
demand therefor, the same shall constitute an Event of Default, and, from and
including the tenth (10th) day after demand for payment, the amount owing under
this paragraph (b) shall bear interest at the interest rate determined in
accordance with Section 2.3(b) of the Amended and Restated Credit Agreement.
The Grantor's reimbursement obligations hereunder shall survive the repayment
of the Obligations.
All obligations provided for in this Section 19 shall survive
termination of this Agreement and the replacement of the Collateral Agent under
SECTION 16(K) or SECTION 16(L) 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 terms of this Agreement, the Intercreditor Agreement or any of the Debt
Documents or other agreements, writings, documents 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 terms of
this Agreement, the Intercreditor Agreement or any of the Debt Documents;
(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 terms of this Agreement, the Intercreditor Agreement
or any of the Debt 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, including, without limitation, the Subsidiary
Guaranty, for any or all of the Obligations; or
(e) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Grantor,
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any guarantor of the Obligations or any third party grantor of a security
interest.
SECTION 21 REGISTRATION RIGHTS.
-------------------
If the Collateral Agent shall determine to exercise its right to sell
all or any of the Pledged Shares pursuant toSECTION 18 hereof, the Grantor
agrees that, upon request of the Collateral Agent, the 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 the 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 the 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 the 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
(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.
The Grantor further acknowledges the impossibility of ascertaining the amount
of damages that would be suffered by the Collateral Agent and each
Intercreditor Lender by reason of the failure by the Grantor to perform any of
the covenants contained in this Section 21 and, consequently, agree that, if
the Grantor shall fail to perform any of such covenants, the Grantor shall pay,
as liquidated damages and not as a penalty, an amount equal to the value of the
Security Collateral on the date the Collateral Agent shall demand compliance
with this Section 21 in addition to any other amounts otherwise payable to the
Collateral Agent pursuant to the terms of this Agreement.
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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 upon the
direction of the Required Lenders and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 23 NOTICES.
-------
Except as otherwise provided herein, whenever it is provided herein
that any notice, demand, request, consent, approval, declaration or other
communication (a "NOTICE") shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party a Notice with respect to this Agreement, each such
Notice shall be in writing and shall be delivered in person with receipt
acknowledged, sent by nationwide commercial courier service (such as Federal
Express), or telecopied (with a copy also mailed by registered or certified
mail), or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Grantor, to it at:
LDI of Ohio, Inc.
One Cleveland Center
1375 East Ninth Street
Cleveland, Ohio 44114
Telecopier: (216) 566-8955
Attention: Chief Financial Officer
with a copy to:
LDI of Ohio, Inc.
One Cleveland Center
1375 East Ninth Street
Cleveland, Ohio 44114
Telecopier: (216) 566-8955
Attention: General Counsel
(b) If to the Collateral Agent, to it at:
Continental Bank
231 South LaSalle Street
10th Floor
Chicago, IL 60697
Telecopier: (312) 828-1997
Attention: Vice President
Leasing and Finance Co. Division
with a copy to:
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Keck, Mahin & Cate
77 West Wacker Drive
49th Floor
Chicago, IL 60601
Telecopier: (312) 634-5000
Attention: Janet L. Tracy, Esq.
(c) If to the Intercreditor Lenders, to them at their
respective addresses in accordance with Section 6.4
of the Intercreditor Agreement.
or at such other address as may substituted by Notice given as herein provided.
The giving of any Notice required hereunder may be waived in writing by the
party entitled to receive such Notice. Every Notice hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or upon receipt by the party to whom the Notice is
addressed, if sent by telecopy transmission, or three (3) business days after
the same shall have been deposited in the United States mail, or the first
business day after timely delivery to the courier service, if sent by
nationwide commercial courier service. Failure or delay in delivering copies
of any Notice to the persons designated above to receive copies thereof shall
in no way adversely affect the effectiveness of such Notice.
SECTION 24 CONTINUING SECURITY INTEREST; TRANSFER OF NOTES.
-----------------------------------------------
This Agreement has created and continues to create a continuing
security interest in the Collateral and shall (a) remain in full force and
effect until payment in full of the Obligations and termination of the
Intercreditor Agreement and all of the Debt Documents as evidenced by written
statements of the Intercreditor Lenders, (b) be binding upon the Grantor, its
successors and assigns and (c) inure, together with the rights and remedies of
the Collateral Network HP IIIsi (select from menu)eNET_3SI.PRSing the
generality of the foregoing CLAUSE (C), any Intercreditor 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 Intercreditor Lender herein
or otherwise. Upon the payment in full of the Obligations and termination of
the Intercreditor Agreement and each of the Debt Documents as evidenced by
written statements of the Intercreditor Lenders, 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 OF DEFAULTS.
----------------------------------------
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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.
This Agreement is submitted to the Grantor in Cleveland, Ohio, and shall be
deemed to have been delivered thereat. Unless otherwise defined herein, terms
used in Article 9 of the Uniform Commercial Code as in effect in the State of
Ohio are used herein as therein defined.
SECTION 26 REINSTATEMENT.
-------------
This Agreement shall remain in full force and effect and continue to
be effective should any petition be filed by or against the Grantor for
liquidation or reorganization, should the Grantor become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee by
appointed for all or any significant part of the Grantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any part thereof, is, pursuant
to Applicable Law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
SECTION 27 INTERPRETATION.
--------------
(a) INCORPORATION OF RECITALS. The preamble and each of
the Recitals hereto shall be considered as part of this Agreement and,
accordingly, each is hereby incorporated herein.
(b) HEADINGS; LANGUAGE. The section and paragraph
headings contained in this Agreement are solely for the purpose of reference
and shall not affect the meaning or interpretation of this Agreement. The
language used in this Agreement shall be deemed to be the language chosen by
the parties hereto to express their common intent and no rule of strict
construction shall be applied against any of the parties.
(c) SEVERABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
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(d) NO WAIVER; CUMULATIVE REMEDIES. Neither the
Collateral Agent nor any Intercreditor Lender shall by any act, delay, omission
or otherwise be deemed to have waived any of its rights or remedies hereunder.
A waiver by the Collateral Agent of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Collateral Agent would otherwise have had on any future occasion. No failure
to exercise nor any delay in exercising on the part of the Collateral Agent,
any right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise or any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive
of any rights and remedies provided by law.
(e) CONFLICTS OR INCONSISTENCY. A conflict or
inconsistency, if any, between the terms and provisions of this Agreement and
the terms and provisions of any of the Credit Agreements shall be controlled by
the terms and provisions of this Agreement to the extent of such conflict or
inconsistency; PROVIDED, HOWEVER, that in the event of any conflict or
inconsistency between the terms and provisions of this Agreement and the
Intercreditor Agreement, the terms and provisions of the Intercreditor
Agreement shall control to the extent of such conflict or inconsistency.
(f) EXECUTION IN COUNTERPARTS; AMENDMENT AND RESTATEMENT.
This Agreement may be executed by the parties hereto in several counterparts,
each of which, when so executed shall be deemed an original but all such
counterparts shall constitute one and the same instrument. This Agreement is an
amendment and restatement of the Existing Security Agreement and is intended
to, and does, continue unimpaired and uninterrupted all Liens and security
interests granted by the Grantor thereunder.
SECTION 28 WAIVER OF JURY TRIAL.
--------------------
THE COLLATERAL AGENT, EACH OF THE CO-AGENTS, EACH OF THE INTERCREDITOR
LENDERS AND THE GRANTOR 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, THE
INTERCREDITOR AGREEMENT OR ANY DEBT DOCUMENT OR ANY COURSES OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE COLLATERAL
AGENT, EACH OF THE CO-AGENTS, THE INTERCREDITOR LENDERS OR THE GRANTOR. THE
GRANTOR WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON THE GRANTOR AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO THE GRANTOR AT THE ADDRESSES PROVIDED IN SECTION
23 ABOVE AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED THREE (3) BUSINESS
DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE
50026F32.1E
17122-008
-66-
<PAGE> 180
UNITED STATES MAIL, POSTAGE PREPAID. THE GRANTOR HEREBY IRREVOCABLY APPOINTS
CT CORPORATION SYSTEM AS THE GRANTOR'S AGENT FOR THE PURPOSE OF ACCEPTING THE
SERVICE OF ANY PROCESS RELATING TO THIS AGREEMENT, THE INTERCREDITOR AGREEMENT
OR ANY OF THE DEBT DOCUMENTS WITHIN THE STATE OF OHIO. THE GRANTOR
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF THIS AGREEMENT, THE
INTERCREDITOR AGREEMENT AND EACH DEBT DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL AGENT, EACH OF THE
CO-AGENTS AND EACH OF THE INTERCREDITOR LENDERS ENTERING INTO THIS AGREEMENT,
THE INTERCREDITOR AGREEMENT AND EACH DEBT DOCUMENT.
SECTION 29 RELEASE.
-------
The Grantor does hereby release and discharge the Collateral Agent,
the Co-Agents and each of them, the Intercreditor Lenders and each of them, the
Existing Lenders and each of them, each agent under each of the Existing Credit
Agreements, and each of their respective shareholders, agents, servants,
employees, directors, officers, attorneys, affiliates, subsidiaries, successors
and assigns and all persons, firms, corporations and organizations acting on
its behalf ("RELEASE PARTIES") of and from all damages, losses, claims,
demands, liabilities, obligations, actions and causes of actions whatsoever,
that the Grantor has, had or will have, or claims to have, against any of the
Release Parties as of the date the Grantor executes this Agreement and whether
known or unknown at the time of this release, and of every nature and extent
whatsoever on account of or in any way, direct or indirect, touching,
concerning, arising out of or founded upon this Agreement, the Existing Credit
Agreements, the Existing Security Agreement, the Existing Parent Security
Agreement, the Intercreditor Agreement, any of the Credit Agreements, or any
Debt Document.
SECTION 30 IBM SECURITY INTEREST.
---------------------
The Grantor will deliver to the Collateral Agent, no later than five
(5) Business Days after the Agreement Date, evidence satisfactory to the
Collateral Agent that all actions necessary to amend any and all financing
statements in favor of International Business Machines Corporation ("IBM") have
been filed and all actions necessary to amend the security agreement in favor
of IBM have been taken so that the Grantor is in compliance with all of the
terms of this AGreement and the Amended and Restated Credit Agreement,
including without limitation, Section 7.2.3(d) thereof.
[Signature pages to follow]
50026F32.1E
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-67-
<PAGE> 181
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered by their
officers thereunto duly authorized as of the date first above
written.
LDI of Ohio, Inc.
By:_____________________________________
Title:__________________________________
Grantor
CONTINENTAL BANK, as Collateral Agent
By:_____________________________________
Title:__________________________________
<PAGE> 182
SCHEDULE I
MANDATORY BANK ACCOUNTS
50026F32.1E
17122-008
SCH. I-1
<PAGE> 183
SCHEDULE II
PERMITTED BANK ACCOUNTS
50026F32.1E
17122-008
SCH. II-1
<PAGE> 184
SCHEDULE III
SPECIAL PERMITTED BANK ACCOUNTS
50026F32.1E
17122-008
SCH. III-1
<PAGE> 185
SCHEDULE IV
INTELLECTUAL PROPERTY
50026F32.1E
17122-008
SCH. IV-1
<PAGE> 186
SCHEDULE V
PLEDGED SHARES/PLEDGED DEBT
50026F32.1E
17122-008
SCH. V-1
<PAGE> 187
<TABLE>
SCHEDULE VI
BANK ACCOUNTS
<CAPTION>
<S> <C> <C> <C>
Name and Address Mailing Address Type of
of Bank of Account Account Number Account
- - ----------------- --------------- -------------- -------
</TABLE>
50026F32.1E
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SCH. VI-1
<PAGE> 188
SCHEDULE VII
GRANTOR'S LOCATIONS
50026F32.1E
17122-008
SCH. VII-1
<PAGE> 189
SCHEDULE VIII
LOCATION OF COLLATERAL
Location of Equipment:
Location of Inventory:
50026F32.1E
17122-008
SCH. VII-1
<PAGE> 190
SCHEDULE IX
LEASES
50026F32.1E
17122-008
SCH. VIII-1
<PAGE> 191
<TABLE>
SCHEDULE X
AIRCRAFT AND ENGINES
Airframes
The following aircraft:
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial No. Registration No.
- - ------------ ----- ---------- ----------------
<S> <C> <C> <C>
McDonnell Douglas DC-9-32 47281 N 17533
McDonnell Douglas DC-9-32 47218 N 12538
</TABLE>
Engines
The following engines, each engine having 750 or more rated takeoff horsepower
or the equivalent thereof:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial No.
- - ------------ ----- ----------
<S> <C> <C> <C>
1. Pratt & Whitney JT8D-9A 666960
2. Pratt & Whitney JT8D-9A 657191
3. Pratt & Whitney JT8D-9A 666693
4. Pratt & Whitney JT8D-9A 656906
</TABLE>
50026F32.1E
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SCH. IX-1
<PAGE> 192
SCHEDULE XI
AIRCRAFT INSURANCE
50026F32.1E
17122-008
SCH. X-1
<PAGE> 193
SCHEDULE XII
SPECIFIED COLLATERAL
50026F32.1E
17122-008
SCH. XI-1
<PAGE> 194
EXHIBIT I
FORM OF COLLATERAL LOCKBOX ACCOUNT LETTER
July 29, 1994
Continental Bank, in its capacity
as Collateral Agent
231 South LaSalle Street
6th Floor
Chicago, IL 60697
Gentlemen:
1. The undersigned, _________________________ ("Bank"),
recognizes that Continental Bank is the collateral agent (the "Collateral
Agent") under that certain Amended and Restated Security Agreement, dated
as of July 29, 1994, as the same may be amended, modified, supplemented or
restated (the "Security Agreement"), by and between LDI of Ohio, Inc., an
Ohio corporation (the "Grantor"), and the Collateral Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Security Agreement.
2. Grantor has requested that, as an accommodation to
Grantor, certain of the Collateral Lockbox Accounts be established and
maintained at [Bank]. The Collateral Agent and [Bank] are willing to grant
such request provided that the Grantor, [Bank] and Collateral Agent agree to
the terms set forth herein and execute this Agreement. The Collateral Agent
hereby appoints [Bank] as Collateral Agent's agent and pledgee-in-possession
for the Account and all funds, monies, accounts, cash and other items from
time to time deposited in such Account and [Bank] by its execution and
delivery of this Collateral Lockbox Letter accepts such appointment.
3. [Bank] hereby confirms and acknowledges to the
Collateral Agent that (i) the Collateral Lockbox Account bearing account
number ____________ (the "Account" ) has been established at [Bank], (ii) the
Account is in the name of the Collateral Agent and the Collateral Agent has
the exclusive dominion and control over the Account and all funds and monies
from time to time therein, (iii) to the best of [Bank's] knowledge, no party
other than the Collateral Agent claims a Lien on the Account, and (iv) [Bank]
has marked its books and records to indicate the Collateral Agent's exclusive
dominion and control over the Account and all funds and monies from time to
time therein, and (v) the Account is a "Collateral Lockbox Account" as defined
in the Security Agreement.
50026F32.1E
17122-008
EX. I-1
<PAGE> 195
4. [Bank] hereby confirms and acknowledges that [Bank] has
no rights with respect to the Account and [Bank] agrees not to take any
action with respect to the Account except as specifically directed in writing
by the Collateral Agent.
5. [Bank] further agrees that it will not exercise or claim
any right of offset against the Account and hereby waives and assigns to
the Collateral Agent any and all liens, claims, demand or rights of setoff or
offset of any kind whatsoever which [Bank] may now or hereafter have in any of
the monies and/or funds deposited in the Account.
6. The Collateral Agent shall at all times have full
and irrevocable right, power and authority, to demand, collect, withdraw,
receipt for or sue for all amounts due or to become due and payable under the
Account and, at the Collateral Agent's discretion, to take any other action,
including the transfer of the Account to any institution designated by the
Collateral Agent.
7. In accordance with Section 16(d) of the Security
Agreement, [Bank] hereby acknowledges that it shall be liable to any person
for losses or damages incurred by any person as a result of its or its
agents', nominees' or attorneys'-in-fact gross negligence or willful
misconduct with respect to this Agreement or with respect to the Account as
and to the extent the Collateral Agent would be liable for such losses or
damages if the actions or omissions of such agents, nominees or
attorneys-in-fact constituting such gross negligence or willful misconduct had
been actions or omissions of the Collateral Agent.
8. The Grantor hereby agrees to indemnify and hold harmless
each of [Bank] and the Collateral Agent from and against any and all claims,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, disbursements and liabilities of any kind or nature whatsoever and
agrees to reimburse each of [Bank] and the Collateral Agent for any
costs, fees and expenses (including, without limitation, reasonable
attorneys' fees and expenses) against any and all such claims or liability
arising out of or in any way relating to the establishment and/or maintenance
of the Account at [Bank].
9. The Collateral Agent agrees to pay [Bank's] fees, costs
and expenses in connection with the establishment and maintenance of the
Accounts.
10. Notwithstanding any other provisions in this Agreement,
[Bank] shall not be required to take any action with respect to the Account
(including the transfer of funds) to the extent such action is then prohibited
by statute, regulation or legal process binding on [Bank].
11. This Agreement may not be amended or modified or
supplemented without the prior written consent of all parties.
50026F32.1E
17122-008
EX. I-2
<PAGE> 196
[BANK]
By:_______________________________
Its:______________________________
LDI of Ohio, Inc.
By: _______________________________
Its:_______________________________
LDI CORPORATION
By: _______________________________
Its:_______________________________
The foregoing is hereby accepted
and agreed to:
CONTINENTAL BANK,
in its capacity as Collateral Agent
By:___________________________________
Its:__________________________________
50026F32.1E
17122-008
EX. I-3
<PAGE> 197
EXHIBIT II
FORM OF NOTICE TO RELEASE CXC FUNDS
[LDI of Ohio, Inc. LETTERHEAD]
NOTICE TO RELEASE CXC FUNDS
This Notice to Release CXC Funds ("Notice") is delivered pursuant to
that certain Amended and Restated Security Agreement dated as of July __,
1994, by and between Continental Bank, in its capacity as Collateral Agent
thereunder, and LDI of Ohio, Inc., defined as the Grantor thereunder (the
"Security Agreement"). All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.
Pursuant to Section 6(a) of the Security Agreement, this Notice will
serve as the written notice and certification by the Grantor to the
Collateral Agent that the Collateral Agent previously received monies or
monies were deposited into a Collateral Lockbox Account constituting
Collections (as defined in the CXC Intercreditor Agreement) or proceeds of any
Transferred Lease Receivable, Related Security (as defined in the CXC
Intercreditor Agreement) or CXC Equipment Collateral, and such monies
constitute collected funds which either (i) are held in a Collateral Lockbox
Account, or (ii) have been applied in reduction of the Obligations and to
the extent new funds have not been subsequently advanced to the Grantor, as
follows:
Collections: $______________________________________________
Proceeds of Transferred Lease Receivable: $_________________
Proceeds of Related Security: $_____________________________
Proceeds of CXC Equipment Collateral: $_____________________
The Grantor hereby authorizes and directs the Collateral Agent to
deliver such monies to the CXC Agent.
The undersigned, ______________________________, hereby certifies that
[s]he is an Authorized Signatory.
WITNESS MY HAND this __ day of __________, 1994.
LDI of Ohio, Inc., as Grantor
BY:
------------------------------------
TITLE:
---------------------------------
Acknowledged and Agreed
LDI CORPORATION
BY:________________________________________
TITLE: ____________________________________
50026F32.1E
17122-008
EX. II-1
<PAGE> 198
EXHIBIT III
FORM OF NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS
[LDI of Ohio, Inc. LETTERHEAD]
NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS
This Notice to Release Non-Recourse Funds ("NOTICE") is delivered
pursuant to that certain Amended and Restated Security Agreement dated as
of July __, 1994, by and between Continental Bank, in its capacity as
Collateral Agent thereunder, and LDI of Ohio, Inc., defined as the Grantor
thereunder (the "SECURITY AGREEMENT"). All capitalized terms used herein and
not otherwise defined herein shall have the meanings ascribed thereto in the
Security Agreement.
Pursuant to Section 6(b) of the Security Agreement, this Notice will
serve as the written notice and certification by the Grantor to the
Collateral Agent that the Collateral Agent previously received monies or
monies were deposited into a Collateral Lockbox Account which constitute
Excluded Collateral and such monies constitute collected funds which either
(i) are held in a Collateral Lockbox Account, or (ii) have been applied in
reduction of the Obligations and to the extent new funds have not been
subsequently advanced to the Grantor, as follows:
Description of Excluded Collateral:
-----------------------------------
Amount: $
-------------------------------------------------------------
Non-Recourse Lended
---------------------------------------------------
The Grantor hereby authorizes and directs the Collateral Agent to
deliver such monies to [Non-Recourse Lender].
The undersigned, ______________________________, hereby certifies that
[s]he is an Authorized Signatory.
WITNESS MY HAND this __ day of __________, 1994.
LDI of Ohio, Inc., as Grantor
BY:
------------------------------------
TITLE:
---------------------------------
Acknowledged and Agreed
LDI CORPORATION
BY:________________________________________
TITLE: ____________________________________
50026F32.1E
17122-008
EX. III-1
<PAGE> 199
EXHIBIT IV
FORM OF
NOTICE OF NON-RECOURSE
FINANCING
[LDI of Ohio, Inc. LETTERHEAD]
NOTICE OF NON-RECOURSE FINANCING
This Notice of Non-Recourse Financing ("NOTICE") is delivered pursuant
to that certain Amended and Restated Security Agreement dated as of July __,
1994 by and between Continental Bank, in its capacity as Collateral Agent
thereunder, and LDI of Ohio, Inc., defined as the Grantor thereunder (the
"SECURITY AGREEMENT"). All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.
In the ordinary course of its business, the Grantor desires to
sell and/or finance the Leases and related Collateral more fully described
below and, in connection therewith, incur the Non-Recourse Debt more fully
described below.
Pursuant to Section 6 of the Security Agreement, this Notice will
serve as the written notice to the Collateral Agent of the proposed sale
and/or financing, and the proposed incurrence of Non-Recourse Debt, described
more fully below. This Notice is being delivered to the Collateral Agent at
least one Business Day prior to the proposed incurrence of Non-Recourse Debt.
Description of Lease and Schedules: (see attached Annex (I)
-----------------------
Length of Lease: (see attached Annex I)
----------------------------------------------------
Description of Underlying Inventory or Equipment: (see
attached Annex I)
----------------------------------------------------------------------
Name of Non-Recourse Lender:
------------------------------------------
Address of Non-Recourse Lender:
---------------------------------------
Esdtimated Amount of Non-Recourse Funding:$
---------------------------
The Grantor hereby requests that the Collateral Agent execute the
accompanying [Release] [Subordination Agreement] which sets forth a complete
description of the Collateral to be [released] [subordinated].
50026F32.1E
17122-008
EX. IV-1
<PAGE> 200
The undersigned, _____________________________________, hereby
certifies that [s]he is an Authorized Signatory. The Grantor certifies to
the Collateral Agent and the Intercreditor Lenders that the proposed
transaction described above constitutes Non-Recourse Debt, as defined in the
Security Agreement. The Grantor further certifies that, as of the date
hereof, no Event of Default or Default has occurred or will occur as a result
of the consummation of the transactions contemplated herein.
WITNESS MY HAND this __ day of ____________, 1994.
LDI of Ohio, Inc., as Grantor
BY:___________________________
TITLE:________________________
Acknowledged and Agreed
LDI CORPORATION
BY:____________________________
TITLE:_________________________
50026F32.1E
17122-008
EX. IV-2
<PAGE> 201
EXHIBIT V
FORM OF NON-RECOURSE DEBT RELEASE
This Release, dated ________________, 1994 is delivered pursuant to
that certain Amended and Restated Security Agreement dated as of July __,
1994, by and between Continental Bank, in its capacity as Collateral Agent
thereunder, and LDI of Ohio, Inc., defined as the Grantor thereunder (the
"SECURITY AGREEMENT"). All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.
The Collateral Agent has previously received a Notice of Non-Recourse
Financing dated ________________ from the Grantor stating that in the ordinary
course of its business the Grantor desires to sell and/or finance the Leases
and related Collateral more fully described below and, in connection
therewith, incur the Non-Recourse Debt more fully described below. In
connection therewith, the Grantor has requested that the Collateral Agent
release its Lien on the Released Collateral, as defined below.
Description of Lease and Schedules: (see attached Annex I)
-------------------------------------------
Length of Lease: (see attached Annex I)
--------------------------------------------------------------
Description of Underlying Inventory or Equipment: (see attached
-----------------------------
Annex I)
- - ------------------------------------------------------------------------------
Name of Non-Recourse Lender:
--------------------------------------------------
Address of Non-Recourse Lender:
-----------------------------------------------
Estimated Amount of Non-Recourse Debt Financing:$
-----------------------------
Estimated Amount of Non-Recourse Debt Financing to be Received by Grantor:
$
- - ------------------------------------------------------------------------------
Estimated Amount of Non-Recourse Debt Financing to be Paid to Third Parties:
$
- - ------------------------------------------------------------------------------
Subject to the terms set forth in this Release and the Security
Agreement, the Collateral Agent hereby releases the Lien of the Collateral
Agent on the following described Collateral (collectively, the "RELEASED
COLLATERAL"):
(i) the Lease[s], described above, transferred by the
Grantor to the Non-Recourse Lender, described above, on or about
the date hereof (the "Transferred Lease[s]") and the Grantor's
interest in the Transferred Lease[s];
(ii) all security interests or liens, and property subject
to such security interests or liens, and all guarantees, indemnities,
warranties, letters of credit, insurance policies and proceeds and
premium refunds thereof and other agreements or arrangements from
time to time granted by or entered into by the lessees or any other
person (other than the Grantor) under the Transferred Lease[s] to
secure or support the payment of the lessees' obligations under the
Transferred Lease[s] including all UCC financing statements covering
the Lessee Collateral;
50026F32.1E
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EX. V-1
<PAGE> 202
(iii) all of the Grantor's right, title and interest in the
data processing, telecommunications, and other capital equipment
leased by the Grantor as lessor which is subject to the Transferred
Lease[s]; and
(iv) all Proceeds of the foregoing.
This Release will become effective only upon receipt by the
Collateral Agent of the full proceeds of the Non-Recourse Debt described
above, minus the amount specified by the Grantor above to be paid to third
parties, and (ii) consummation of the proposed incurrence of Non- Recourse
Debt, within ten (10) days following the date of this Release, on the
terms set forth in this Release and all annexes attached thereto.
The Grantor hereby certifies that as of the date of this Release and
as of the date that this Release becomes effective, no Default or Event of
Default has occurred or will occur as a result of the consummation of the
transactions contemplated herein.
CONTINENTAL BANK, LDI of Ohio, Inc.,
as Collateral Agent as Grantor
BY:____________________________
BY:____________________________ TITLE:_________________________
TITLE:_________________________
Acknowledged and Agreed
LDI CORPORATION
BY:____________________________
TITLE:_________________________
EX. V-2
<PAGE> 203
EXHIBIT VI
[Intentionally Omitted]
50026F32.1E
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EX. VI-1
<PAGE> 204
EXHIBIT VII
FORM OF SUBORDINATION AGREEMENT
This Subordination Agreement ("Agreement") is entered into as of
______________, 1994, by and between the parties hereto in order to induce
______________________________ ("Lender") to make loans or extend credit to LDI
of Ohio, Inc., an Ohio corporation ("Borrower").
Continental Bank, in its capacity as Collateral Agent for various
financial institutions ("Collateral Agent"), hereby agrees for the benefit of,
and covenants to, Lender as follows:
1. The Borrower desires to obtain loans or credit from Lender
in the amount and on the terms set forth in EXHIBIT A attached hereto (all
obligations owing under the documents set forth in such EXHIBIT A being
hereinafter referred to as "Secured Obligations"). Collateral Agent hereby
acknowledges that Lender will not make loans or extend credit to Borrower
unless Lender has a lien on or security interest in the property described
on EXHIBIT B hereto, all replacements, additions or substitutions thereto
and all proceeds (including, without limitation, any goods, chattel paper,
documents, instruments or contract rights which constitute proceeds) thereof
(collectively, the "Collateral"), which lien or security interest is prior
in right to any lien or security interest granted to or held by Collateral
Agent as provided in this Agreement.
2. Subject to SECTION 11 hereof, all understandings, agreements,
representations and warranties contained herein are solely for the benefit of
the parties hereto, and there are no other parties (including, without
limitation, Borrower) who are intended to be benefitted in any way by this
Agreement.
3. Nothing contained herein is intended to affect or limit in
any way the lien or security interest that Lender or Collateral Agent has in
any assets of Borrower, whether tangible or intangible, insofar as Borrower
and third parties are concerned, and the parties hereto reserve all of their
respective liens, security interests, rights, remedies and priorities as
against Borrower and any such third party.
4. Subject to SECTION 8 hereof, (a) Collateral Agent hereby
subordinates any and all liens and security interests which it now has or may
hereafter acquire in the Collateral to the liens and security interests
Lender now has or may hereafter acquire in the Collateral; (b) Collateral
Agent agrees that, so long as Lender has any Secured Obligations outstanding
secured by the Collateral, Collateral Agent will not take any action to
enforce its lien on or security interest in the Collateral, including, without
limitation, giving notice of foreclosure, effecting foreclosure,
50026F32.1E
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EX. VII-1
<PAGE> 205
taking possession of the Collateral or giving notice to obligors with respect
to the Collateral of its lien or security interest thereon; (c) Collateral
Agent agrees not to oppose, interfere with or otherwise attempt to prevent
Lender from enforcing its lien on and security interest in the Collateral or
otherwise realizing on the Collateral; and (d) at the request of Lender,
Collateral Agent shall release any lien and security interest it has on the
Collateral to facilitate the transfer or sale of the Collateral so long as
the proceeds thereof are applied against Borrower's Secured Obligations to
Lender which are secured by the Collateral and any excess is applied against
indebtedness or other obligations secured by Collateral Agent's security
interest in the Collateral.
5. Subject to SECTION 8 hereof, (a) Collateral Agent agrees that
Lender is entitled to all payments from the Collateral and all proceeds of
the Collateral (including, without limitation, any payment by any lessee under
any lease which is part of the Collateral) prior to payment thereof to the
Collateral Agent, and (b) Collateral Agent agrees that until all Secured
Obligations of Borrower to Lender which are secured by the Collateral are paid
in full, Collateral Agent shall not knowingly receive, accept or retain any
direct or indirect payment from the Collateral or the proceeds thereof and if
Collateral Agent receives any such payment at any time prior to the payment
in full of the Secured Obligations (including, without limitation, any
obligations accruing after any bankruptcy, insolvency or similar proceeding
involving Borrower), Collateral Agent will promptly upon request by Lender (so
long as such request is received within 60 days after such receipt of such
payment by Collateral Agent) deliver such payment (or funds in the amount of
such payment) to Lender.
6. The subordination set forth herein shall remain in full force
and effect, regardless of whether Lender or Collateral Agent (or any party
for which Collateral Agent acts as agent) amends, extends, waives,
supplements or otherwise modifies any of its agreements with Borrower. Lender
may exercise or refrain from exercising any right or remedy against Borrower
without affecting the subordination set forth herein.
7. The subordination set forth herein is applicable irrespective
of the time or order of attachment or perfection of any lien or security
interest referred to herein, the time or order of filing of any financing
statement, the acquisition of purchase money or other priority with respect
to any such lien or security interest or the time of giving or the failure to
give notice of the acquisition or expected acquisition of a purchase money or
other security interest.
8. The subordination provisions set forth herein shall be of
no force or effect if and to the extent that Lender's lien on or security
interest in the Collateral is finally determined to be
50026F32.1E
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EX. VII-2
<PAGE> 206
avoidable in any bankruptcy, insolvency or similar proceeding involving
Borrower.
9. This Agreement is governed by, and shall be construed in
accordance with, the laws of the State of Illinois.
10. This Agreement may not be amended or otherwise modified except
in a writing signed by Collateral Agent and Lender.
11. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assignees of Lender and Collateral Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their duly authorized officers as of the
date first written above.
_____________________, as Lender
By: _______________________________
Its: _______________________________
CONTINENTAL BANK, in its
capacity as Collateral Agent
By: _________________________________
Its: ________________________________
Acknowledged and Agreed
LDI of Ohio, Inc.
By:___________________________
Its:__________________________
50026F32.1E
17122-008
EX. VII-3
<PAGE> 207
EXHIBIT A
[Insert term sheet]
50026F32.1E
17122-008
EX. VII-4
<PAGE> 208
EXHIBIT B
[Insert Description of Collateral]
50026F32.1E
17122-008
EX. VII-5
<PAGE> 209
EXHIBIT VIII
FORM OF SWEEP AGREEMENT
July __, 1994
[Bank Name]
______________________
______________________
______________________
Attn: _______________
Re: LDI of Ohio, Inc., an Ohio corporation,
(the "Borrower")
_______________________________________
Gentlemen:
1. Reference is made to the following agreements: (a) that
certain Second Amended and Restated Credit Agreement dated as of July 29, 1994
by and among Continental Bank, National City Bank and Society National Bank as
Co-Agents (the "Co-Agents"), the Borrower and the other commercial lending
institutions which are signatories thereof (the "Lenders") (as the same may be
amended, modified or supplemented from time to time, the "Credit Agreement");
(b) that certain Intercreditor Agreement dated as of July 29, 1994 by and
among the Borrower, the "Subject Lenders" and the "Subject Agents" (each as
defined therein), Continental Bank, in its capacity as collateral agent (the
"Collateral Agent") and the other parties thereto (as the same may be amended,
modified or supplemented from time to time, the "Intercreditor Agreement"); and
(c) that certain Amended and Restated Security Agreement dated as of July 29,
1994 by and between the Borrower and the Collateral Agent (as the same may be
amended, modified or supplemented from time to time, the "Security
Agreement"). All capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed thereto in the Security Agreement.
2. The Collateral Agent has been advised that the Borrower
maintains the following deposit accounts with [Bank Name] at [Bank Address]
("[Bank Name]"):
[Insert account numbers and types]
(collectively, all accounts and deposit accounts maintained at [Bank Name],
whether now existing or hereafter established, are hereinafter referred to
as the "[Bank Name] Accounts").
50026F32.1E
17122-008
EX. VIII-1
<PAGE> 210
3. As provided in the Security Agreement and to secure the
Borrower's repayment and performance of the Obligations (as defined in the
Security Agreement), the Borrower has granted to the Collateral Agent a
continuing security interest in and Lien upon, among other things, all of the
Borrower's right, title and interest in, to and under certain accounts and
deposit accounts, including but not limited to the [Bank Name] Accounts, all
cash, funds, monies and amounts required to be deposited in or deposited in,
from time to time, the [Bank Name] Accounts, all interest, dividends, cash,
instruments or other property from time to time received, receivable or
otherwise earned (whether or not paid), distributed in respect of or in
exchange for one or all of the foregoing and all certificates and
instruments, if any, from time to time representing the [Bank Name]
Accounts and such cash, funds, monies, amounts, interest, dividends or
other property (collectively, the "Accounts").
4. This letter constitutes irrevocable notice to [Bank Name],
[in accordance with [Section _______ of the __________ Uniform Commercial
Code,] of the Collateral Agent's first priority security interest in and Lien
upon all of the Borrower's right, title and interest in, to and under the
Accounts. [Bank Name], by its execution of this letter, acknowledges receipt
of this letter and notice.
5. In order to induce the Collateral Agent to approve [Bank Name]
as the depository of the [Bank Name] Accounts, [Bank Name], by its execution
of this letter in the space provided below, agrees:
(a) that it waives any security interest, lien (banker's or
otherwise) and/or right of setoff against any of the Accounts, other
than the right to setoff fees, insufficient items and charge-backs,
and as contained in paragraph 8 of this letter;
(b) to continue to honor checks and other instruments for
withdrawals from the Accounts issued by the Borrower, consistent
with [Bank Name] normal banking practices, until such time as [Bank
Name] receives written notice from the Collateral Agent at the
written direction of the Required Lenders, to [Bank Name] at its
office located at [Bank Address], stating that an Event of Default
under the Intercreditor Agreement has occurred and notifying [Bank
Name] to cease permitting the Borrower to make withdrawals from any
of the Accounts (a copy of which shall be sent by the Collateral
Agent to the Borrower); thereafter, the Collateral Agent at the
written direction of the Required Lenders may request and [Bank Name]
shall comply with such request, that [Bank Name] by wire transfer of
immediately available funds shall transfer to a Collateral Lockbox
Account at such financial institution as the Collateral Agent shall
designate
50026F32.1E
17122-008
EX. VIII-2
<PAGE> 211
____
Page 3
in writing, any and all of the Borrower's cash, funds, monies,
items and amounts in the [Bank Name] Accounts or otherwise in [Bank
Name]'s possession and included in Accounts;
(c) that upon receipt of such notice, [Bank Name] shall
honor only such instructions for withdrawals as are given by the
Collateral Agent, notwithstanding any inconsistent or conflicting
instructions given to [Bank Name] by the Borrower, and that such
notice and instructions can only be revoked by the Collateral Agent,
but not by the Borrower; and
(d) that, prior to [Bank Name]'s receipt of the notice
referred to in paragraph 5(b) above, from time to time upon the
request of the Borrower or the Collateral Agent at the written
direction of the Required Lenders to [Bank Name], [Bank Name] shall
by wire transfer of immediately available funds, transfer to a
Collateral Lockbox Account at such financial institution as the
Collateral Agent shall designate in writing (which account numbers and
other material information shall be as specified at the end of this
letter) all cash, funds, monies, items and amounts in the [Bank
Name] Accounts or otherwise in [Bank Name]'s possession and
included in Accounts, in excess of [$________________] in the
aggregate.
6. [Bank Name] represents and warrants to the Collateral Agent as
follows:
(a) that the only accounts the Borrower maintains at
[Bank Name] are the [Bank Name] Accounts, and that the account
numbers are as specified above;
(b) that the [Bank Name] Accounts are held in the name of
the Borrower only;
(c) that each of the [Bank Name] Accounts is a deposit
account;
(d) that [Bank Name] has not received notice of any other
lien or security interest in any of the Accounts; and
50026F32.1E
17122-008
EX. VIII-3
<PAGE> 212
____
Page 4
(e) that the [Bank Name] Accounts are federally insured
accounts and such FDIC insurance covers up to $100,000 in the
aggregate, and the [Bank Name] Accounts have no penalty for immediate
withdrawal.
7. Neither the Collateral Agent, any Subject Lender nor any
Subject Agent shall be responsible for any charges incurred in connection
with any of the Accounts. All charges incurred in connection with the
Accounts will be payable by the Borrower. Notwithstanding the foregoing,
after the Collateral Agent provides [Bank Name] with the notice referred to
in paragraph 5(b) above, the Collateral Agent shall reimburse [Bank Name] for
[Bank Name]'s reasonable expenses incurred in complying with the Collateral
Agent's requests thereafter made under and pursuant to this letter to the
extent that the Accounts are insufficient to reimburse such expenses and
provided that the Collateral Agent's prior written consent is obtained by
[Bank Name] prior to [Bank Name] incurring any material expenses it expects
to be reimbursed by the Collateral Agent hereunder.
8. The Borrower agrees to save and hold harmless, to defend
and to indemnify, [Bank Name] against all actions, proceedings, claims,
demands, losses, outlays, damages or expenses, including reasonable legal
fees of [Bank Name]'s in-house or outside counsel, of every nature and
character as may arise or be made against [Bank Name] in respect of [Bank
Name] acting in accordance with this letter, or which it may in any way
incur in defending or prosecuting, settling or discontinuing any such
proceedings, actions, claims, damages, expenses or outlays, arising out of
any act or omission of the Borrower. The Borrower and the Collateral Agent
agree that [Bank Name] may setoff against the Accounts reasonable expenses
[Bank Name] incurs in complying with and acting in accordance with the
provisions of this letter, upon providing in writing a description of such
expenses to the Borrower and the Collateral Agent.
9. The Borrower hereby releases [Bank Name] from any
liabilities, claims, damages, losses and outlays to the Borrower, of every
nature and character as may arise or be made against [Bank
50026F32.1E
17122-008
EX. VIII-4
<PAGE> 213
____
Page 5
Name] by or on behalf of the Borrower, directly or indirectly, related to
actions taken by [Bank Name] at the direction of the Collateral Agent and
pursuant to the terms of this letter, except for [Bank Name]'s gross
negligence or willful misconduct, determined in such case by a non-
appealable judicial order.
10. Notwithstanding any other provision in this Agreement [Bank
Name] shall not be required to take any action with respect to the [Bank
Name] Accounts (including the transfer of funds) to the extent such action is
then prohibited by statute, regulations or legal process binding on [Bank
Name].
11. The agreements contained in this letter will become effective
immediately upon its execution by all of the parties and may not be amended
without the express written consent of all parties.
CONTINENTAL BANK,
as Collateral Agent
By:___________________________________
______________________________________
[Printed Name and Title]
Continental Bank, Chicago, Illinois,
as Collateral Agent, Collateral
Lockbox Account maintained at National
City Bank as agent for Collateral Agent
ABA #: _______________
Name of Account: LDI of Ohio, Inc.
The Borrower's Account No is: LDI of
Ohio, Inc., an Ohio corporation
By:___________________________________
______________________________________
50026F32.1E
17122-008
EX. VIII-5
<PAGE> 214
____
Page 6
[Printed Name and Title]
Accepted and Agreed to as of
[DATE]
[Bank Name]
By:___________________________________
________________________________________
[Printed Name and Title]
50026F32.1E
17122-008
EX. VIII-6
<PAGE> 1
Exhibit 4.23
LETTER AMENDMENT
Dated as of July 29, 1994
TO THE PARTIES NAMED IN APPENDIX I HERETO:
Reference is made to the Note Purchase Agreement dated as of
August 1, 1989 (as from time to time amended, the "Note Purchase Agreement")
pursuant to which Northwestern National Life Insurance Company, Northern Life
Insurance Company, Confederation Life Insurance Company, and Beneficial
Standard Life Insurance Company (collectively, the "Noteholders") hold the
9.96% Senior Notes of LDI Corporation (the "Company") dated August 11, 1989 in
the aggregate original principal amount of $20,000,000 (the "Notes"). The
Noteholders are the registered holders of 100% of the outstanding principal
amount of the Notes as reflected in the Note Register required to be maintained
by the Company pursuant to paragraph 8 of the Note Purchase Agreement. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Note Purchase Agreement.
The Company proposes to enter into a Second Amended and
Restated Credit Agreement with National City Bank, Society National Bank and
Continental Bank N.A., as Co-Agents, and the other banks party thereto (the
"Bank Credit Agreement"). Pursuant to the Bank Credit Agreement, the Company
is required to grant to the banks certain liens on its assets, which liens are
not permitted pursuant to the terms of the Note Purchase Agreement.
In order to permit the consummation of the transactions
contemplated by the Bank Credit Agreement, and in order to eliminate certain
inconsistencies between the Note Purchase Agreement and the Bank Credit
Agreement, the Company hereby requests that the Note Purchase Agreement be
amended in the following respects, such amendments to take effect as of the
date hereof:
1. PAYMENTS OF PRINCIPAL AND INTEREST ON THE NOTES. As
of the date hereof, the aggregate outstanding principal amount of the Notes is
$6,592,110.93, and all interest through June 30, 1994 has been paid.
Notwithstanding anything to the contrary contained in paragraph 1(a) of the
Note Purchase Agreement or the Notes, the outstanding principal amount of the
Notes shall be payable in the amounts and on the dates set forth in Exhibit A
hereto. All such payments of principal shall be applied to the Notes PRO RATA.
The Notes shall continue to bear interest at the rate of 9.96% per annum until
the Notes are paid in full. Notwithstanding anything to the contrary contained
in paragraph 1(a) of the Note Purchase Agreement or the Notes, interest on the
Notes accruing from and after July 1, 1994 shall be payable monthly on the
tenth day of each month, commencing August 10, 1994 and continuing until the
Notes are paid in full. To evidence such amendments the Company and the
Noteholders will execute an Addendum to each of the Notes in the form of
Exhibit B hereto.
2. MANDATORY PREPAYMENT. Upon receipt by the Company or
any Subsidiary of any Net Disposition Proceeds, the Company shall prepay the
Notes, at par, in an aggregate amount equal to the Noteholders Percentage of
such Net Disposition Proceeds. Such prepayment shall be applied to the Notes
pro rata on the last maturing required installment or installments of principal
in inverse order of their maturity.
<PAGE> 2
3. FEES. On the date hereof, the Company shall pay to
the Noteholders (i) a Facility Fee in the amount of $50,994, and (ii) an Agent
Fee in the amount of $25,000.
4. SECURITY FOR NOTES. The Notes will be secured by (i)
an Amended and Restated Security Agreement executed by the Company in favor of
Continental Bank N.A. (the "Collateral Agent") in substantially the form of
Exhibit B-1 to the Bank Credit Agreement and (ii) an Amended and Restated
Security Agreement executed by LDI of Ohio, Inc. ("LDI Ohio") in favor of the
Collateral Agent in substantially the form of Exhibit B-2 to the Bank Credit
Agreement. In addition, LDI Ohio shall execute a Guaranty of the Notes
substantially in the form of Exhibit C hereto.
5. COMPLIANCE WITH BANK CREDIT AGREEMENT; AFFIRMATIVE
AND NEGATIVE COVENANTS. So long as the Bank Credit Agreement shall remain in
full force and effect, the following provisions shall apply:
(a) The Company and its Subsidiaries shall not be
required to comply with paragraphs 4(n),
5(a), 5(b), 5(c), 5(e), 5(i), 5(j) and 5(k)
of the Note Purchase Agreement, and the
failure of the Company and its Subsidiaries
to comply with such paragraphs shall not
constitute an Event of Default under
paragraph 7 of the Note Purchase Agreement;
and
(b) The Company and each of its Subsidiaries
shall comply with each of the affirmative and
negative covenants contained in Article VII
of the Bank Credit Agreement, without regard
to any amendment, modification, waiver or
consent agreed to or given by the banks party
thereto. Whenever the consent of the Banks
party to the Bank Credit Agreement is
required under any provision of Article VII
of the Bank Credit Agreement, such consent
shall be effective for purposes hereof only
if consented to by the holders of at least
66-2/3% of the outstanding principal amount
of the Notes. No amendment, waiver or
modification of the provisions of Article VII
of the Bank Credit Agreement shall be
effective for purposes hereof unless
consented to by the holders of 66-2/3% of the
outstanding principal amount of the Notes.
6. EVENTS OF DEFAULT. Paragraph 7 of the Note Purchase
Agreement shall be amended by adding thereto the following new paragraph:
(1) The Company or any of its Subsidiaries shall
default in the due performance and observance
of any of their respective obligations under
Sections 7.1.1(a), 7.1.1(b), 7.1.1(c),
7.1.1(d), 7.1.1(e), 7.1.1(f), 7.1.1(g),
7.1.1(h), 7.1.1(i), 7.1.1(j), 7.1.1(k),
7.1.1(l), 7.1.1(m), 7.1.1(n), 7.1.5, 7.2.1,
7.2.2, 7.2.3, 7.2.4(a), 7.2.4(c), 7.2.4(d),
7.2.4(e), 7.2.4(f), 7.2.5, 7.2.6, 7.2.7,
7.2.8, 7.2.9, 7.2.10, 7.2.11, or 7.2.12 of
the Bank Credit Agreement, whether or not
waived by the banks party to the Bank Credit
Agreement; or the
-2-
<PAGE> 3
Company or any of its Subsidiaries shall
default in the due performance and observance of
their obligations under Section 7.1.1(o) of the
Bank Credit Agreement with respect to any
information requested by the holders of the Notes,
and such default shall continue unremedied for a
period of ten (10) days after the holders of the
Notes shall have provided written notice thereof
to the Company, or the Company or any of its
Subsidiaries shall default in the due performance
and observance of any of their respective
obligations under any other provision of Article
VII the Bank Credit Agreement or under the
Intercreditor Agreement and such default shall
continue unremedied for a period of ten days after
the occurrence thereof, whether or not waived by
the banks party to the Bank Credit Agreement; or
any Event of Default shall occur under any
Security Agreement; or any other Event of Default
shall occur under the Bank Credit Agreement,
whether or not waived by the banks party to the
Bank Credit Agreement.
7. ADDITIONAL DEFINITIONS. Paragraph 15 of the Note Purchase
Agreement shall be amended by adding thereto the following additional
definitions:
"Bank Credit Agreement" shall mean that certain Second
Amended and Restated Credit Agreement dated July 29, 1994
between the Company, National City Bank, Society National
Bank and Continental Bank N.A., as Co-Agents, and the other
banks party thereto.
"Collateral Agent" shall mean Continental Bank N.A., or
any successor collateral agent under the Intercreditor
Agreement.
"Intercreditor Agreement" shall mean that certain
Intercreditor Agreement dated as of July 29, 1994 among the
Company, the holders of the Notes, the Collateral Agent, the
banks party to the Bank Credit Agreement and certain other
senior debt lenders of the Company, as such Intercreditor
Agreement may be amended, supplemented, restated or
otherwise modified from time to time.
"Net Disposition Proceeds" shall have the meaning set
forth in the Bank Credit Agreement as in effect on the date
hereof.
"Noteholders Percentage" means the percentage equal to
thirty percent (30%) times a fraction, (i) the numerator of
which is the aggregate outstanding principal amount of the
Notes, and (ii) the denominator of which is the sum of (A)
the aggregate amount of the commitments under the Bank
Credit Agreement, plus (B) the aggregate outstanding
principal amount of the Notes.
"Security Agreements" shall mean that certain Amended
and Restated Security Agreement dated July 29, 1994 between
the Company and the Collateral Agent, that certain Amended
and Restated Security Agreement dated July 29, 1994
- 3 -
<PAGE> 4
between LDI Ohio and the Collateral Agent, and every other
Security Agreement hereafter executed by the Company or any Subsidiary
in favor of the Collateral Agent.
8. CONDITIONS PRECEDENT. The effectiveness of the foregoing
amendments to the Note Purchase Agreement and Notes shall be subject to
the satisfaction of the following conditions:
(a) The Noteholders shall have received an Addendum to each
Note in the form of Exhibit B hereto executed by
the Company.
(b) the Noteholders shall have received copies of the
Security Agreements, executed by the Company and LDI
Ohio.
(c) The Noteholders shall have received the Guaranty
executed by LDI Ohio.
(d) The Noteholders shall have received a copy of the
Intercreditor Agreement, executed by the Company and the
financial institutions party thereto.
(e) The Noteholders shall have received an opinion of Baker
& Hostetler, counsel to the Company as to such
matters as the Noteholders may reasonably request.
(f) The Noteholders shall have received a copy of the Bank
Credit Agreement and a certificate signed by an
officer of the Company that all conditions precedent
set forth therein have been satisfied.
(g) The Noteholders shall have received the Facility Fee
and the Agent Fee specified in paragraph 3 hereof.
(h) All proceedings to be taken in connection with the
transactions contemplated by this Amendment shall be
satisfactory in form and substance to the Noteholders
and their counsel, and the Noteholders shall have
received copies of all documents which the Noteholders
may reasonably request.
9. NOTICE ADDRESSES. The address of each Noteholder for purposes
of giving notice pursuant to paragraph 15 of the Note Purchase Agreement
shall be as set forth on Appendix I hereto.
10. MISCELLANEOUS. Except as specifically amended hereby, all
terms and provisions of the Note Purchase Agreement and all other documents
and instruments related thereto shall remain in full force and effect with
no other modification or waiver. This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
- 4 -
<PAGE> 5
If you agree to amending the Note Purchase Agreement in the
manner set forth above, please so indicate by executing the form of
acknowledgment set forth below. This Amendment shall then take effect as of
the date hereof upon satisfaction of the conditions set forth in paragraph 8
hereof.
Very truly yours,
LDI CORPORATION
By /s/Frank G. Skedel
-----------------------------
Its EVP & CFO
--------------------------
Agreed to and accepted as of the
date first-above mentioned.
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By
-----------------------------------------------------
Its
-------------------------------------------------
NORTHERN LIFE INSURANCE COMPANY
By
-----------------------------------------------------
Its
-------------------------------------------------
CONFEDERATION LIFE INSURANCE COMPANY
By
-----------------------------------------------------
Its
-------------------------------------------------
BENEFICIAL STANDARD LIFE INSURANCE
COMPANY
By
-----------------------------------------------------
Its
-------------------------------------------------
- 5 -
<PAGE> 6
APPENDIX I
NOTEHOLDERS
Name and Notice Address
- - -----------------------
Northwestern National Life
Insurance Company
c/o Washington Square Capital, Inc.
100 Washington Square
Suite 800
Minneapolis, Minnesota 55401-2147
Northern Life Insurance Company
c/o Washington Square Capital, Inc.
100 Washington Square
Suite 800
Minneapolis, Minnesota 55401-2147
Confederation Life Insurance Company
321 Bloor Street East
Toronto, Ontario CANADA M4W 1H1
Attn: John Donelan,
Manager, Private Placements
Beneficial Standard Life
Insurance Company
c/o Washington Square Capital, Inc.
100 Washington Square
Suite 800
Minneapolis, Minnesota 55401-2147
<PAGE> 7
<TABLE>
EXHIBIT A
REQUIRED PRINCIPAL PAYMENTS ON NOTES
<CAPTION>
PAYMENT DATE AMOUNT
------------ ------
<S> <C>
August 10, 1994 96,628.98
September 10, 1994 82,824.82
October 10, 1994 82,824.82
November 10, 1994 82,824.82
December 10, 1994 41,412.41
January 10, 1995 41,412.41
February 10, 1995 13,804.13
March 10, 1995 13,804.13
April 30, 1995 6,136,574.38
</TABLE>
<PAGE> 8
EXHIBIT B
ADDENDUM
to
$____________ 9.96% SENIOR NOTE
of
LDI CORPORATION
DATED AUGUST 11, 1989
This Addendum to the above-referenced Senior Note (together
with any note or notes issued in exchange therefor, the "Note") of LDI
Corporation (the "Company") payable to ___________________ or registered
assigns is made as of the ___ day of July, 1994. The Company agrees as
follows:
1. The principal amount of the Note outstanding on the
date of this Addendum is $_______________.
2. Notwithstanding the provisions of paragraph 1(a) of
the Agreement (as defined in the Note) or the Note, the principal amount of the
Note outstanding on the date of this Addendum shall be payable in the amounts
and on the dates set forth below:
August 10, 1994 $______________________
September 10, 1994 $______________________
October 10, 1994 $______________________
November 10, 1994 $______________________
December 10, 1994 $______________________
January 10, 1995 $______________________
February 10, 1995 $______________________
March 10, 1995 $______________________
April 30, 1995 $______________________
3. The Note shall continue to bear interest at the rate
of 9.96% per annum, as set forth in paragraph 1(a) of the Agreement. Interest
shall be payable monthly on the tenth day of each month, commencing August 10,
1994 and continuing until the payment in full of the principal amount of the
Note.
4. Upon execution and delivery by the Company and
acceptance by the holder of the Note of this Addendum, this Addendum shall
become part of the Note. All references to the Note in the Note, the
Agreement, and all other documents relating to or securing the Note, and this
Addendum shall hereinafter be deemed to references to the Note as amended by
this Addendum. Except as expressly set forth herein, the Note shall remain in
full force and effect without modification.
<PAGE> 9
5. This Addendum shall be governed by the laws of the
State of Minnesota.
LDI CORPORATION
By
---------------------------
Its
--------------------------
Agreed to and accepted as of
the date first-above mentioned:
[___________________________________]
By
----------------------------------
Its
------------------------------
<PAGE> 1
Exhibit 10.01
July 18, 1994
Mr. Floyd S. Robinson
24 Inverrary Lane
Alamo, California 94507
Dear Floyd:
I am pleased to present to you LDI Corporation's ("LDI") offer of employment as
president and Chief Executive Officer. Your experience coupled with your
industry knowledge will make you an invaluable component to our Strategic
Business Plan for LDI.
You will report to, discharge responsibilities assigned to you by, and be
accountable to the Board of Directors of which you will also become a member.
You will receive a base salary of $350,000 per annum (paid biweekly). In
addition, for the current fiscal year, you will receive a guaranteed bonus of
$100,000 payable on February 15, 1995. For subsequent fiscal years, it is
LDI's intent that you will participate in a cash bonus plan based upon
performance goals to be determined by the Board of Directors. The attainment
of those goals will allow you to earn up to one hundred percent (100%) of your
base salary then in effect.
Upon joining LDI, you will receive a sign-on bonus of $50,000. In addition,
you will be awarded a grant of 15,000 restricted shares of Common Stock of LDI,
which shall fully vest twelve (12) months from the date you execute this
letter. Additionally, you will be eligible for all fringe benefits effective
with your date of hire, according to the provisions, limitations and enrollment
procedures of each plan. This includes, but not limited to:
--- Standard LDI benefits in addition to the executive benefits
program and (4) weeks vacation.
--- LDI's senior executive relocation package which substantially
reimburses you for all normal out of pocket moving expenses,
including without limitation, temporary living expenses,
moving expenses and realtor's commissions.
<PAGE> 2
Floyd S. Robinson
July 18, 1994
Page 2
--- LDI stock options to be granted in accordance with and
pursuant to the existing LDI Stock Option Plan as follows:
- 250,000 options priced at the closing price of LDI
stock on the business day next preceding your
execution of this letter.
- 250,000 options to be granted one year from the date
of your execution of this letter, priced at the
closing price on the business day next preceding that
one year anniversary date.
- 250,000 options to be granted two years from the date
of your execution of this letter, priced at the
closing price on the business day next preceding that
two year anniversary date.
You will be entitled to select a luxury automobile of your choice that LDI will
lease and insure for you during the term of your employment. Also, after
February 1995, we would support your membership in a Cleveland-area country
club.
It is our understanding that during your employment with LDI you will devote
your full time to the interests of LDI and not be engaged in other commercial
pursuits. You shall have the full privilege of terminating your employment
with LDI at any time, with or without cause, and LDI shall have the same
privilege. It is our understanding that you are not bound by any
non-competition or non-disclosure restrictions. If another entity attempts to
enforce a non-competition agreement or other restrictive covenants against you,
LDI shall not be liable for or responsible for defending violations of any such
agreement.
Continuance of employment is not required by this Agreement nor is it a
condition to this Agreement and you may be terminated with or without cause or
notice at any time. If however, you are terminated for reasons other than
"cause", LDI will provide you salary continuation at your base salary amount
then in effect and continue medical benefits coverage for one year after such
termination. "Cause" shall include the violation of any of the provisions of
this Agreement, or your neglect of your duty, failure to perform
responsibilities assigned by the Board of Directors, negligence, incompetence
(as measured by custom and practice in the industry), dishonesty or any
misconduct or willful inattention which is substantially harmful to LDI.
<PAGE> 3
Floyd S. Robinson
July 18, 1994
Page Three
This offer of employment is contingent only upon your successful completion of
a drug screen. If you agree to the terms and conditions of this letter, please
signify your approval by signing your name under the words "Approved &
Accepted" and return a signed copy to us. We look forward to your prompt
decision and an early start date, not later than August 1, 1994.
We look forward to your arrival and the beginning of a successful association.
If you have further questions, please feel free to contact me.
Very truly yours,
LDI CORPORATION
By: /s/Robert S. Kendall
----------------------------------------
Robert S. Kendall
Chairman and CEO
cc: LDI Compensation Committee of the Board of Directors:
Scott Cowen
Norton Rose
Benjamin W. Cannon, Vice President - Human Resources and General
Counsel
APPROVED AND ACCEPTED
/s/Floyd S. Robinson
- - -------------------------------------------------
Floyd S. Robinson
Date: July 19 , 1994
---------------
07189402
<PAGE> 1
<TABLE>
EXHIBIT 11.01
LDI CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in Thousands, Except Per Share Data)
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
JULY 31 JULY 31
1994 1993 1994 1993
------------ -------------- ------------ ------------
AVERAGE SHARES OUTSTANDING
--------------------------
<S> <C> <C> <C> <C>
1. Average common shares outstanding 6,727 6,727 6,727 6,727
2. Net additional shares outstanding assuming
stock options and warrants exercised and
proceeds used to purchase treasury stock (A) (A) (A) (A)
3. Dilutive shares contingently issuable
upon conversion of debentures (See Note
6 of the Notes to Consolidated Financial N/A 656 (A) 656
Statements)
4. Adjusted average common shares
outstanding for fully diluted computation 6,727 7,383 6,727 7,383
NET EARNINGS
------------
5. Net earnings (loss) as reported in
statements of consolidated earnings $(2,240) $1,210 $(3,077) $2,482
6. Decrease in interest expense and
amortization of debt issuance costs relating to
the subordinated debentures, net of N/A 148 (A) 303
income tax benefit
7. Adjusted net earnings (loss) $(2,240) $1,358 $(3,077) $2,786
EARNINGS PER SHARE
------------------
8. Net earnings (loss) per average common share
outstanding $(.34) $ .18 $(.46) $ .37
9. Net earnings per common share on a fully (A) (B)$ .18 (A) (B)$ .37
diluted basis
<FN>
(A) Antidilutive
(B) Fully diluted earnings per share is not presented, as the dilutive effect
is less than 3%.
N/A Not Applicable
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> JUL-31-1994
<PERIOD-TYPE> 6-MOS
<CASH> 9,803
<SECURITIES> 0
<RECEIVABLES> 35,322
<ALLOWANCES> 6,123
<INVENTORY> 10,951
<CURRENT-ASSETS> 49,953
<PP&E> 23,192
<DEPRECIATION> 8,554
<TOTAL-ASSETS> 499,022
<CURRENT-LIABILITIES> 141,989
<BONDS> 289,989
0
0
<COMMON> 68
<OTHER-SE> 66,976
<TOTAL-LIABILITY-AND-EQUITY> 499,022
<SALES> 36,429
<TOTAL-REVENUES> 96,948
<CGS> 32,546
<TOTAL-COSTS> 67,419
<OTHER-EXPENSES> 14,689
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,833
<INCOME-PRETAX> 7
<INCOME-TAX> 3
<INCOME-CONTINUING> 4
<DISCONTINUED> (3,081)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,077)
<EPS-PRIMARY> (.46)
<EPS-DILUTED> 0
</TABLE>
