<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended January 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 0-15994
LDI CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 31-1179824
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
4770 Hinckley Industrial Parkway, Cleveland, Ohio 44109
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (216) 661-5400
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Title of each class: None Name of each exchange on which registered:________
</TABLE>
<TABLE>
<S> <C>
Securities registered pursuant to Section 12 (g) of the Act: Common Stock $.01 par value
(Title of Class)
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 31, 1995, was $13,580,452.
The number of shares outstanding of the registrant's Common Stock, $.01
par value, as of March 31, 1995, was 6,727,457.
Documents Incorporated by Reference
Portions of the Registrant's Proxy Statement for use at the 1995 Annual Meeting
of Stockholders are incorporated by reference in Part III hereof.
<PAGE> 2
PART I
ITEM 1. BUSINESS
The Company was organized in 1972 as Leasing Dynamics, Inc., an Ohio
corporation. In October 1986, LDI Corporation, a Delaware corporation, became a
holding company for Leasing Dynamics, Inc. and certain of its affiliated
corporations. Subsequently, the Company completed an internal realignment
pursuant to which most of its subsidiaries were merged into the Company pursuant
to applicable parent-subsidiary merger statutes.
During the year ended January 1994, the Board of Directors determined
the need to commence preparation of a new long-term strategic business plan for
the Company. The plan included the sale or other divestiture of certain product
lines and non-strategic businesses, the consolidation of facilities and other
measures to increase the Company's overall profitability. The plan is discussed
in more detail in this Item 1, in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in "Notes to Consolidated
Financial Statements."
During the year ended January 1995, the Company completed the
strategic realignment, including the sale or divestiture of all non-strategic
businesses, consolidated its Cleveland-based facilities and hired Floyd S.
Robinson as the President and Chief Executive Officer of the Company. The
Company is currently focusing on the development of its previously identified
"core" businesses including Leasing Services, Technology Services and PC Rental
Services as described below.
All references herein to the "Company," "LDI" or the "Registrant"
refer to LDI Corporation and its subsidiaries, unless the context otherwise
requires.
GENERAL
During the year ended January 31, 1995, LDI implemented a strategic
plan to focus on its historical strength of equipment leasing, maintenance and
technical support services related to computer and other high technology
equipment and short-term computer (PC) rentals. These services were previously
identified as LDI's "core" businesses and represent the foundation of the
ongoing LDI corporate operations.
The Company operations are managed in three product lines: Leasing
Services, Technology Services and PC Rentals. Leasing Services provides
customers with selected high technology and data processing equipment,
telecommunications products, and other capital equipment through sale or lease
transactions. Technology Services provides technical support services, including
system installation, integration, maintenance and other system support related
services both in house and at customer locations. PC Rentals provides
state-of-the-art personal computer technology to corporate customers for
short-term rentals, normally ranging from one week to one year.
LEASING SERVICES
LDI leases a diverse range of equipment, including computer and
telecommunication systems and related peripheral devices, production and
manufacturing machinery, and medical and diagnostic systems.
The Company leases equipment manufactured by a wide variety of
companies to meet the specific requirements of its customers. LDI also remarkets
this equipment if it is returned at lease expiration. By emphasizing a full
selection of equipment options from many manufacturers, LDI increases its
leasing and remarketing opportunities while mitigating risk through a
diversified portfolio.
2
<PAGE> 3
Ongoing market dynamics in the computer industry, such as the continued
decline in demand for mainframe computer equipment, have prompted a shift to
smaller systems, peripheral equipment, and related services to meet the changing
needs of customers. Recognizing this, LDI has increased its portfolio of
mid-range systems and peripheral devices, integrated network computing and
cross-platform systems integration.
Even though LDI has shifted growth emphasis to other computer product
lines, it recognizes that the mainframe will continue to be used, sometimes in
new and different roles. In the near term, the Company believes that many
organizations will continue to use mainframe systems for certain
processing-intensive functions. Also, these systems are becoming primary back-up
devices for information storage.
LDI also offers its customers lease financing for capital equipment
acquisitions, resulting in an alternative funding source for a significant
portion of their equipment needs. Production equipment, manufacturing systems
and medical equipment are often equipped with technology components that are
improved with new product offerings. This continued introduction of new
technology increases the demand for leasing as customers demand the flexibility
to utilize new technology in their operations. LDI negotiates upgrades to the
equipment which results in amending the existing lease or replacing the
equipment and initiating a new lease contract.
The Company purchases new equipment directly from the manufacturer and
obtains used equipment from its customer base and from the nationwide secondary
market for used data processing and telecommunications equipment. LDI's active
presence in this secondary market, coupled with its large portfolio of equipment
under lease and its technical capabilities to upgrade and refurbish used
equipment, allow it to combine new and used equipment configurations at
competitive prices. Similarly, the Company is often able to facilitate new lease
or sale transactions by either buying, remarketing, or trading a prospective
customer's existing equipment. Management believes that the Company's ability to
fully integrate high-technology products and services represents a competitive
advantage and differentiates it from most of its competitors.
LDI's customers are medium to large corporations and other
organizations that have significant information processing and production
equipment needs that meet the Company's credit standards. LDI's principal
objective is to selectively engage in lease transactions with customers whose
creditworthiness permits the Company to maximize the use of long term
nonrecourse financing. No customer accounts for more than 5% of the Company's
total revenues, and the Company does not believe that it is dependent on any
single customer.
LDI's equipment lease terms generally range from monthly to seven
years, with information processing and telecommunications equipment lease terms
typically from two to five years. The majority of the Company's leases are
capital leases. Capital leases have less risk than shorter-term operating
leases, since a higher percentage of the cost of the equipment is returned in
the form of rental receipts during the initial lease term. Substantially all
leases are noncancellable and place the risk of damage to the equipment on the
lessee. Approximately one-half of the dollar amount of LDI's lease portfolio is
comprised of small and medium-size transactions ranging from $50,000 to
$200,000. Lessees typically use a significant amount of high-technology
equipment and have multiple capital leases with the Company with varying
expiration dates.
LDI's marketing activities historically have been directed toward the
Midwest and Northeast, although it has equipment on lease throughout the United
States. As of January 31, 1995, LDI employed leasing services sales
representatives in sales offices located in the following metropolitan areas:
Boston, Cincinnati, Chicago, Cleveland, Columbus, Dallas, Detroit, New York and
New Jersey. The sales representatives market the Company's services primarily
through personal sales calls, telemarketing and direct mailing.
3
<PAGE> 4
TECHNICAL SERVICES
LDI's Technology Services operation provides hardware and software
maintenance and other support services for large, medium, and small computer
systems, personal computers, point-of-sale equipment, and telecommunications
equipment produced by various manufacturers. The operation provides many types
of hardware, software, and support services at the customers' facilities from
its five district operation centers. The largest of these centers is located in
Cleveland at LDI's headquarters. The other operations are located in Columbus,
Cincinnati, Detroit, and Ithaca. Service programs provided include on-site
hardware and software maintenance contracts, depot repair and return, and time
and material contracts as well as tailored agreements to accommodate the needs
of customers. Qualified field engineers and technicians are available
twenty-four hours a day, seven days a week. In addition, LDI provides advanced
engineering support and high-technology remote diagnostic and repair services.
As of January 31, 1995, the Company had 169 employees in its Technology
Services operation, including 94 field engineers and bench technicians. Certain
field engineers perform on-site repair and maintenance services for mainframe
central processing units and larger peripheral devices. Bench technicians
perform repair service functions on various types of equipment, which include
personal computers, telecommunications equipment, and point-of-sale devices.
Because of the Company's participation in the secondary market for used data
processing equipment, the Company is often able to supply a customer with
replacement equipment while repairing their equipment, particularly with respect
to personal computers, terminals, and small items of peripheral equipment.
LDI refurbishes used information processing, telecommunications and
other electronic equipment in connection with its remarketing activities and
also contracts to refurbish used equipment from others. The refurbishing
activities may include enhancing existing computer equipment by adding features
that make systems more powerful or capable of performing additional functions.
The Company believes that these refurbishing capabilities contribute to LDI's
ability to remarket used equipment. Additionally, they are an important
component of LDI's objective of developing long-term relationships with its
customers by meeting their high-technology equipment support and services needs,
thereby differentiating LDI from its competitors.
RENTAL SERVICES
LDI provides short and intermediate term rentals of personal
computers, peripherals and software to corporate customers nationwide. LDI rents
desktop and notebook computers sourced from leading manufacturers such as IBM,
Compaq, Dell, AST and Apple. Printers rented include those manufactured by
Hewlett-Packard, Epson and Apple. Other products rented include scanners,
plotters, data projection equipment, CD ROM, large screen monitors and external
hard drives.
LDI provides its computer rental services nationwide. To support this
level of service, LDI has offices in the following locations: Cleveland,
Detroit, Chicago, Cincinnati, Dallas, Houston and Atlanta. These offices include
a local sales force, technical staff, and inventory. This structure enables LDI
to provide same day delivery, installation and on-site service. This
full-service strategy differentiates LDI from the majority of its competitors,
who primarily provide box shipping services.
LDI's target customers include rapidly growing companies, service
companies such as financial, accounting, engineering and consulting firms, and
companies which have a large installed base of personal computers. Customers
rent personal computers for many reasons, including access to new technology,
special projects, peak work loads, training, disaster recovery and minimizing
long term capital expenditures. LDI markets its services primarily through
Yellow Pages advertising, telemarketing and outside sales representatives
calling on Fortune 1,000 companies. At January 31, 1995, the Company had 40
employees in its personal computer rentals operation.
4
<PAGE> 5
CORE BUSINESS REVENUES AND ASSETS
Revenues and assets of LDI's core business of leasing, maintenance and
technical services and personal computer rentals for the years ended January 31,
1994, and January 31, 1995, are as follows:
(IN MILLIONS)
<TABLE>
<CAPTION>
1994 1995
------------------- -----------------
<S> <C> <C> <C> <C>
Revenues $209.6 62% (A) $162.0 80% (A)
Assets $537.0 91% (A) $426.9 100% (A)
</TABLE>
(A) % of consolidated amounts including discontinued operations.
COMPETITION
The information processing industry is fragmented and characterized by
many different, but related, markets. The Company competes in a number of these
markets with many different competitors. In the mainframe and mid-range computer
equipment leasing business, the Company competes with equipment manufacturers,
leasing companies and large financial institutions, many of which are
substantially larger than the Company and possess significantly greater capital.
Among those are IBM Credit Corporation, General Electric Capital Corporation and
Comdisco, Inc. In the technical support services marketplace, the Company
competes with equipment manufacturers as well as several large technical
organizations. For computer rentals, primary competition comes from companies
offering computer rentals on a national basis. These include GE Rental/Lease,
AT&T and Personal Computer Rentals (PCR).
DISCONTINUED AND NON-STRATEGIC BUSINESSES
The businesses LDI identified as discontinued or non-strategic were
generally characterized as being transactional in nature, commodity oriented and
not conducive to building long-term customer relationships. These attributes
translated into low-margin, low-return businesses which did not match LDI's new
strategy. The Company's core business emphasizes exceptional customer service,
building long-term customer relationships and providing value-added services
that can translate into higher margins and acceptable financial returns. These
core business attributes, in conjunction with the completed facilities
consolidation and other cost saving measures, are expected to result in higher
margins and financial returns in future years.
EMPLOYEES
As of January 31, 1995, the Company had 330 full time employees. This
represents a 63% decrease from the prior year employment levels and is
attributable to the implementation of the strategic realignment. Management
believes that the remaining employees are sufficient to support the Company's
ongoing core business. The Company also believes that its employee relations are
good.
ITEM 2. PROPERTIES
During the fiscal year ended January 31, 1995, the Company moved its
executive offices and its leasing and corporate operations previously located in
downtown Cleveland and Westlake, Ohio, respectively, to its recently expanded
Technology Center located in Cleveland. Other facilities eliminated during the
year ended January 31, 1995, related to the implementation of the Company's
strategic realignment and included the closing of three "LDI Computer
Superstores" in Cleveland and Pittsburgh and the buyout of a lease in Solon,
Ohio for office and warehouse space. Although no longer operating a
"Superstore," LDI is leasing one of the former superstore facilities in
Cleveland to an office supplies and equipment retailer. The Company also leases
other sales offices and maintenance centers in various locations throughout the
United States.
The Company believes that its offices and facilities are adequately
insured and sufficient to service their present purposes.
5
<PAGE> 6
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings which require disclosure
pursuant to Item 103 of Regulation S-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF REGISTRANT
There is hereby incorporated by reference the information with respect
to executive officers of LDI Corporation and its subsidiaries set forth in Item
10 of this Annual Report on Form 10-K.
6
<PAGE> 7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market on
the NASDAQ National Market System under the symbol LDIC. The following schedule
sets forth, for the periods indicated, the range of the high and low sales
prices on the NASDAQ National Market System.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 31, 1994 HIGH LOW
<S> <C> <C> <C>
First Quarter (ended April 30) $7.75 $6.25
Second Quarter (ended July 31) 8.00 7.00
Third Quarter (ended October 31) 8.25 7.13
Fourth Quarter (ended January 31) 8.13 6.25
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 31, 1995 HIGH LOW
<S> <C> <C> <C>
First Quarter (ended April 30) 7.25 5.13
Second Quarter (ended July 31) 5.88 3.25
Third Quarter (ended October 31) 6.75 4.00
Fourth Quarter (ended January 31) 6.00 3.50
</TABLE>
As of March 31, 1995, the Company's common stock was held by 510
stockholders of record.
During the year ended January 31, 1994, the Company paid quarterly
cash dividends on its common stock of $.04 per share. During the year ended
January 31, 1995, the Company paid no cash dividends on its common stock.
The Company is prohibited from paying cash dividends under the
covenants of certain of its financing agreements.
7
<PAGE> 8
ITEM 6. SELECTED FINANCIAL DATA
The following schedule sets forth selected consolidated financial data
regarding the Company for the periods indicated, derived from the Company's
consolidated financial statements. The Company's consolidated financial
statements as of and for each of the five years in the period ended January 31,
1995, have been audited by Deloitte & Touche LLP, the Company's independent
auditors. The information set forth in the following table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing in Item 7 of this report and the Company's
consolidated financial statements and notes thereto appearing in Item 8 of the
report.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
EARNINGS STATEMENT DATA: YEAR ENDED JANUARY 31
------------------------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C> <C>
Leasing $292,806 $262,695 $199,113 $156,606 $103,659
Direct sales 57,606 58,456 82,113 94,852 63,757
Technical services 17,831 18,864 18,240 16,127 15,108
Equity in earnings of 50%
owned affiliate - - 101 733 1,010
Other 1,237 1,980 4,098 3,593 633
--------- --------- --------- --------- ---------
TOTAL 369,480 341,995 303,665 271,911 184,167
-------- -------- -------- -------- -------
Costs and Expenses:
Leasing 209,920 174,676 130,175 121,961 83,833
Direct sales 48,494 50,441 70,637 82,135 54,385
Technical services 11,822 12,274 12,751 11,096 8,345
Interest 49,296 49,746 41,685 33,446 28,333
Debt financing fees 493 1,117 1,318 1,725 3,433
Selling, general and administrative 33,570 37,019 36,088 40,484 30,945
Restructuring charges - - - 6,641 -
------------ ------------ ------------- ---------- -------------
TOTAL 353,595 325,273 292,654 297,488 209,274
-------- -------- -------- -------- --------
Earnings (loss) from continuing
operations before income taxes 15,885 16,722 11,011 (25,577) (25,107)
Income tax expense (benefit) 5,769 6,185 4,240 (9,532) (9,624)
-------- -------- -------- --------- ---------
Earnings (loss) from continuing
operations 10,116 10,537 6,771 (16,045) (15,483)
Discontinued operations:
Earnings (loss) from operations,
net of tax (172) (179) 164 (1,395) (3,081)
Provision for loss on disposal,
net of tax - - - (7,082) -
------------ ------------ ------------ ----------- ------------
Net earnings (loss) $ 9,944 $ 10,358 $ 6,935 $(24,522) $(18,564)
======== ======== ======== ========- ========-
Earnings (loss) per primary share:
Continuing operations $ 1.50 $ 1.57 $ 1.01 $ (2.39) $ (2.30)
Discontinued operations (.02) (.03) .02 (1.26) (.46)
--------- --------- --------- --------- ----------
Net earnings (loss) $ 1.48 $ 1.54 $ 1.03 $ (3.65) $ (2.76)
======== ======== ======== ========= =========
Net earnings per share -
fully diluted $ 1.48 $ 1.47 $ 1.01 - -
Cash dividends paid per share - - - $ .16 -
</TABLE>
Results of operations for all years prior to the year ended January 31, 1995,
have been restated to segregate debt financing fees and the results of
discontinued operations.
8
<PAGE> 9
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA: YEAR ENDED JANUARY 31
--------------------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets $745,877 $754,455 $688,023 $593,027 $426,909
Leased assets:
Capital leases 580,785 607,524 512,480 412,561 311,478
Operating leases - net of
accumulated depreciation 66,853 40,007 53,092 55,006 37,610
Notes payable 164,147 186,031 148,433 148,175 107,855
Subordinated notes - 10,000 10,000 10,000 10,000
Nonrecourse lease financing 426,190 382,443 330,494 296,794 227,574
Shareholders' equity 77,866 88,565 95,644 70,084 51,595
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------
APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31,
1993 1993 1993 1994 1994 1994 1994 1995
--------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $61,644 $64,487 $74,347 $ 71,433 $ 49,037 $ 47,911 $ 49,680 $37,539
Gross profit (loss) 19,233 18,859 18,839 (4,538) 14,863 14,981 14,160 (8,043)
Earnings (loss) from
continuing operations 1,262 1,512 963 (19,782) (837) 841 208 (15,695)
Discontinued operations
(net of tax) (52) (239) (267) (7,919) - (3,081) - -
--------- ------- ------- -------- ---------- --------- ----------- -----------
Net earnings (loss) $ 1,210 $ 1,273 $ 696 $(27,701) $ (837) $ (2,240) $ 208 $(15,695)
========= ======== ======== ========= ========== ========= ========= =========
Earnings (loss) per
share - primary
Continuing operations $ .19 $ .22 $ .14 $ (2.94) $(.12) $.12 $.03 ($2.33)
Discontinued operations (.01) (.03) (.04) (1.18) - (.46) - -
-------- -------- -------- --------- ------- ------- ------ ---------
Net earnings (loss) $ .18 $ .19 $ .10 $ (4.12) $(.12) $(.34) $.03 $(2.33)
======== ======== ======== ========= ====== ====== ==== =======
Net Earnings per
share - fully diluted $ .18 $ .19 $ .10 - - - - -
Cash dividends paid
per share $ .04 $ .04 $ .04 $ .04 - - - -
</TABLE>
Results of operations for all quarters have been restated to segregate the
results of discontinued operations. Accordingly, amounts for revenues and gross
profit pertain only to continuing operations.
Earnings (loss) from continuing operations for the three months ended January
31, 1994 includes restructuring charges of $6.6 million ($.62 per share, net of
tax).
Gross profit for the three months ended January 31, 1994 and 1995 includes
equipment valuation adjustments and off-lease writedowns totaling $22 and $21
million, respectively. (See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Leasing" and Note 3 of "Notes to
Consolidated Financial Statements" for additional discussion.)
9
<PAGE> 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ACCOUNTING PRACTICES
Refer to Note 1 of "Notes to Consolidated Financial Statements" for a
discussion of the Company's significant accounting practices.
RESULTS OF OPERATIONS
The following schedule presents the amounts and relative percentages
of total revenues represented by major revenue and expense items for each of the
three years in the period ended January 31, 1995.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
--------------------------------------------------------------------------
(Dollars in Thousands) 1993 1994 1995
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Leasing $199,113 65.6% $156,606 57.6% $103,659 56.3%
Direct sales 82,113 27.0 94,852 34.9 63,757 34.6
Technical services 18,240 6.0 16,127 5.9 15,108 8.2
Equity in earnings of 50%
owned affiliate 101 - 733 0.3 1,010 0.6
Other 4,098 1.4 3,593 1.3 633 0.3
--------- ------ ---------- ------ --------- ------
TOTAL 303,665 100.0 271,911 100.0 184,167 100.0
-------- ----- -------- ----- ------- -----
Costs and Expenses:
Leasing 130,175 42.9 121,961 44.9 83,833 45.5
Direct sales 70,637 23.3 82,135 30.2 54,385 29.5
Technical services 12,751 4.2 11,096 4.1 8,345 4.5
Interest 41,685 13.7 33,446 12.3 28,333 15.4
Debt financing fees 1,318 0.4 1,725 0.6 3,433 1.9
Selling, general and administrative 36,088 11.9 40,484 14.9 30,945 16.8
Restructuring charges - - 6,641 2.42 - -
------------- ------- ---------- ------ ------------ --------
TOTAL 292,654 96.4 297,488 109.4 209,274 113.6
-------- ----- -------- ----- ------- -----
Earnings (loss) from
continuing operations
before income taxes 11,011 3.6 (25,577) (9.4) (25,107) (13.6)
Income tax expense (benefit) 4,240 1.4 (9,532) (3.5) (9,624) (5.2)
-------- ----- --------- ------ --------- ------
Earnings (loss) from
continuing operations 6,771 2.2 (16,045) (5.9) (15,483) (8.4)
Discontinued operations:
Earnings (loss) from
operations, net of tax 164 0.1 (1,395) (0.5) (3,081) (1.7)
Provision for loss on
disposal, net of tax - - (7,082) (2.6) - -
----------- ------ --------- ------ ------------ --------
Net earnings (loss) $ 6,935 2.3% $(24,522) (9.0)% $(18,564) (10.1)%
======== ===== ========= ====== ========= ======
</TABLE>
10
<PAGE> 11
LEASING
A summary of the operating results from leasing for the three years ended
January 31, is as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Leasing Revenues $199,113 $156,606 $103,659
Cost of Leasing 130,175 121,961 83,833
-------- -------- ---------
Gross Leasing Margin $ 68,938 $ 34,645 $ 19,826
-------- -------- --------
Percent of Revenue 34.6% 22.1% 19.1%
</TABLE>
<TABLE>
<CAPTION>
COST OF LEASED EQUIPMENT
----------------------------------------------------------------------------------------
1993 1994 1995
------------------------- ---------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
New Equipment Leases $126,853 94.7% $124,931 86.4% $80,919 80.9%
Re-Leased Equipment 7,158 5.3 19,601 13.6 19,049 19.1
-------- ----- -------- ----- ------- -----
TOTAL $134,011 100.0% $144,532 100.0% $99,968 100.0%
======== ===== ======== ===== ======= =====
Sales-Type Leases $91,858 68.6% $74,199 51.3% $37,416 37.4%
Direct Finance Leases 7,246 5.4 42,194 29.2 54,106 54.1
Operating Leases 34,907 26.0 28,139 19.5 8,446 8.5
-------- ----- -------- ----- ------- -----
TOTAL $134,011 100.0% $144,532 100.0% $99,968 100.0%
======== ===== ======== ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF TRANSACTIONS
----------------------------------------------------------------------------------------
1993 1994 1995
------------------------- ---------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
New Equipment Leases 1,153 74.3% 1,343 79.8% 985 83.3%
Re-Leased Equipment 399 25.7 340 20.2 197 16.7
----- ------ ----- ------ ----- ------
TOTAL 1,552 100.0% 1,683 100.0% 1,182 100.0%
===== ====== ===== ====== ===== ======
Sales-Type Leases 1,462 94.2% 1,454 86.4% 744 63.0%
Direct Finance Leases 39 2.5 115 6.8 322 27.2
Operating Leases 51 3.3 114 6.8 116 9.8
----- ------ ----- ------ ----- ------
TOTAL 1,552 100.0% 1,683 100.0% 1,182 100.0%
===== ====== ===== ====== ===== ======
</TABLE>
For the year ended January 31, 1995 leasing revenues decreased 34% as
compared to the 21% decline experienced in the previous year. The results
reflect an overall change in the mix of leases being written by the Company as a
result of changing market conditions. During 1993, 69% of total leased equipment
cost was recorded as sales-type leases, which recognize the major portion of
lease revenue at lease commencement. For the years ended January 31, 1994 and
1995 the percentages of leased equipment cost under sales-type classification
decreased to 51% and 37%, respectively. Over the same period the Company saw its
percentage of leased equipment cost recorded as direct-finance leases increase
from 5% in 1993 to 29% in 1994 and 54% in 1995. Direct finance leases spread
income recognition over the term of the lease. Based upon current market
dynamics and related factors, the Company anticipates its future mix of lease
transactions will parallel recent trends.
The Company also experienced a significant decrease in the cost of
equipment placed under lease as compared to the prior year, which had a direct
influence on leasing revenue. A key factor underlying the decline was a
continued market shift toward less expensive, more powerful mid-range computers
and personal computer networks.
During the quarters ended January 31, 1994 and 1995 the Company
recorded charges which increased cost of leasing (see Note 3 of "Notes to
Consolidated Financial Statements"). The charges, primarily related to
provisions for estimated future residual value writedowns, were precipitated by
deteriorating customer credit
11
<PAGE> 12
quality and/or a significant decline in the market value of classes of leased
equipment. These charges are described below and aggregated $21.5 million in
1994 and $21.2 million in 1995.
Asset valuation writedowns of off-lease equipment can occur when the
lessee elects not to renew, extend, or reconfigure the lease, while lease
renewals tend to maintain the in-place value of leased equipment. Leased
equipment is recorded at the lower of cost or fair market value when equipment
is received from lessees at the end of the lease. The Company also reviews
residual values periodically during the lease and, if necessary, reduces the
estimated residual to be realized at the termination of the lease. During the
quarter ended January 31, 1994, several major customers decided not to renew
their leases and negotiated to purchase or return the equipment. These sales and
returns during the quarter resulted in a $7 million charge. The Company also
recorded charges of $14.5 million for equipment valuation writedowns primarily
for lessees in bankruptcy or with deteriorating credit conditions.
During the quarter ended January 31, 1995 the Company recorded charges
of $13.3 million to revise residual values of certain categories of leased
equipment, both for leases terminated in the quarter and similar equipment
leases which will expire in the future. The Company also recorded charges of
$5.1 million to adjust residual values and other assets for equipment leased to
customers with deteriorating credit quality and $2.8 million to reduce the
valuation of PC rental equipment and other inventories.
Although asset valuation adjustments are considered normal operating
costs of the leasing business, the Company believes the amount of the off-lease
writedowns taken in each of the two most recent fiscal years were unusual and
related to specific situations with certain customers and/or included
significant changes in prevailing market conditions for specific classes of
equipment in the Company's lease portfolio. While the Company cannot provide
assurance that future results will not be impacted by similar events, it does
believe that the strategic initiatives announced and implemented during the year
ended January 31, 1995 will result in more predictable gross leasing margins in
the future.
DIRECT SALES
A summary of the operating results from direct sales for the three years ended
January 31, is as follows:
<TABLE>
<CAPTION>
CORE OPERATIONS (1) RESTRUCTURED OPERATIONS (2)
----------------------------------------- ----------------------------------------
1993 1994 1995 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Direct Sales $36,315 $38,732 $44,936 $45,798 $ 56,120 $18,822
Cost of Direct Sales 32,611 33,544 38,204 38,026 48,591 16,182
-------- -------- -------- -------- ---------- --------
Gross Sales Margins $ 3,704 $ 5,188 $ 6,732 $ 7,772 $ 7,529 $ 2,640
======== ======== ======== ======== ========== ========
Percent of Sales 10.2% 13.4% 15.0% 17.0% 13.4% 14.0%
<CAPTION>
REPORTED OPERATIONS
--------------------------------------------
1993 1994 1995
<S> <C> <C> <C>
Direct Sales $ 82,113 $ 94,852 $ 63,757
Cost of Direct Sales 70,637 82,135 54,385
--------- --------- ---------
Gross Sales Margins $ 11,476 $ 12,717 $ 9,372
========= ========= =========
Percent of Sales 14.0% 13.4% 14.7%
</TABLE>
(1) Core operations include: Leasing Services, Technology Services, and PC
Rentals which were identified in the strategic plan as those product lines
that constitute the ongoing business of the Company.
(2) Restructured operations include the results of business units which are,
for financial statement presentation purposes only, considered to be a
part of reported operations. As discussed in Note 4 of "Notes to
Consolidated Financial Statements," the restructured operations were
determined to be non-strategic to the future operations of the Company and
as such, were either sold or substantially liquidated during the first
half of the year ended January 31, 1995.
12
<PAGE> 13
For the year ended January 31, 1994 direct sales from core operations
increased $2.4 million (7%) due primarily to higher levels of sales of equipment
coming off lease. For the year ended January 31, 1995 direct sales increased
$6.2 million (16%) due primarily to the sale, prior to the end of the initial
term, of equipment to lessees. Gross direct sales margin percentages increased
in both years due to more in place sales of equipment, which normally command
higher margins.
The increase in direct sales of restructured operations for the year
ended January 31, 1994 of $10.3 million was due primarily to sales of
microcomputers to commercial accounts. The decrease in direct sales of
restructured operations for the year ended January 31, 1995 of $37.3 million was
due to the sale, effective May 31, 1994, of LDI's corporate microcomputer sales
organization.
TECHNICAL SERVICES
A summary of the operating results from technical services for the three years
ended January 31, is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Services Revenues $ 18,240 $ 16,127 $ 15,108
Cost of Services 12,751 11,096 8,344
--------- --------- ----------
Gross Margin $ 5,489 $ 5,031 $ 6,764
========= ========= =========
Percent of Revenues 30.1% 31.2% 44.8%
</TABLE>
For the year ended January 31, 1994, technical services revenues
decreased 12% from the prior year. This was primarily due to a decline of $3.1
million in disaster recovery services as a result of an agreement, effective May
1, 1993, to form a strategic marketing relationship with SunGard Recovery
Services Inc. The Company's contract base of business recovery customers and two
"hot site" recovery centers were transferred to SunGard and are operated by
SunGard as part of the agreement. Increased consulting revenues partially offset
the decline in services revenues.
For the year ended January 31, 1995, technical services revenues
decreased 6% from the prior year. This decrease is also due primarily to the
strategic marketing relationship with SunGard Recovery Services, Inc. A decline
of $1.0 million in revenues occurred as a result of this transaction.
For the year ended January 31, 1994, the gross margin declined due to
lower revenues, a $1.2 million write-off of obsolete and excessive maintenance
inventories during the fourth quarter, and the absence, beginning in the second
quarter, of disaster recovery operations, which bore higher direct costs per
revenue dollar. In the year ended January 31, 1995, the gross margin increased
by 34% and there was a significant improvement in the gross margin percentage
due principally to lower parts costs and increased labor efficiency in the
maintenance operations.
INTEREST EXPENSE
For the years ended January 31, 1994 and 1995, interest expense
decreased $8.2 million (20%) and $5.1 million (15%), respectively. These
decreases resulted primarily from lower interest rates and reductions in the
average amount of debt outstanding during the year ended January 31, 1994, and
reduction in the average amount of debt outstanding offset by higher interest
rates in the year ended January 31, 1995.
DEBT FINANCING FEES
Debt financing fees increased $0.4 million (31%) and $1.7 million
(99%) for the years ended January 31, 1994 and 1995, respectively. The increase
for the year ended January 31, 1994, primarily represents a full year of fees
from a $50 million installment note completed in August 1992. The increase for
the year ended
13
<PAGE> 14
January 31, 1995, was primarily due to a $1.7 million amortization of the
$2.4 million of costs related to the restructuring of LDI's senior credit
agreements in July 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the year ended January 31, 1994, selling, general and
administrative expenses increased by $4.4 million (12%), and as a percent of
total revenue from 11.9% to 14.9%. The increase was primarily attributable to
additional bad debt reserves ($4.8 million or 1.8% of revenue) resulting from
losses for credit and collection-related situations with several customers and
the decline in leasing revenues discussed in the "Leasing Section of
Management's Discussion and Analysis".
For the year ended January 31, 1995, selling, general and
administrative expenses decreased $9.5 million (23.6%), but as a percent of
revenue increased from 14.9% to 16.8%. The gross dollar decrease was due to the
implementation of the strategic business plan which included facility
consolidation, reduction of work force and the completion of the divestiture or
sale of non-core businesses. This decrease was partially offset by bad debt
charges of $2.7 million recorded during the fourth quarter ended January 31,
1995. The increase as a percentage of revenue was due to the decline in leasing
revenues discussed in the "Leasing Section of Management's Discussion and
Analysis".
Selling, general and administrative expenses are expected to decrease
in the year ending January 31, 1996, as the cost savings from facility
consolidation and reduction in workforce will be in effect for the entire year.
STRATEGIC BUSINESS PLAN
During the year ended January 31, 1994, the Company initiated a
strategic business plan that included the sale or other divestiture of certain
product lines and non-core businesses, the closing of facilities, and other cost
reduction measures to improve the Company's profitability. The Company completed
the strategic realignment, including divestitures of non-strategic businesses,
during the year ended January 31, 1995.
The businesses the Company identified as discontinued or non-strategic
were generally characterized as transactional in nature, commodity oriented and
not conducive to building long-term customer relationships. These attributes
translated into low-margin, low-return businesses which did not match the
Company's new strategy of focusing on a core business emphasizing exceptional
customer service, building long-term customer relationships and providing
value-added services.
RESTRUCTURING CHARGES
Under the strategic plan implemented during the year ended January 31,
1995, businesses sold or closed (other than those included in Discontinued
Operations) included: (1) LDI Retail Services, which provided hardware,
software, and system integration for retail chain stores; (2) LDI Computer
Systems, which sold microcomputers and related equipment to commercial accounts;
(3) SeaTech Communications, a ship-to-shore satellite telecommunications
venture; and (4) LDI Canada, Ltd., a leasing subsidiary based in Toronto,
Canada.
The cost of implementing the plan was $6.6 million, recorded in the
Company's fourth quarter ended January 31, 1994 ($4.1 million after-tax, or $.62
per share). The costs included $4.3 million attributable to disposing of the
above businesses, $1.7 million for employee severance and termination costs and
$0.6 million for closing facilities. There were no additional costs incurred
during the implementation of the plan in the year ended January 31, 1995.
14
<PAGE> 15
INCOME TAXES
The Company's effective income tax benefit rate for continuing
operations decreased to 37.3% for the year ended January 31, 1994, from a tax
expense rate of 38.5% for the prior year due to the effect of the Federal tax
rate change.
The effective tax benefit rate for continuing operations increased to
38.3% for the year ended January 31, 1995, due to the effect in the prior year
of the Federal tax rate change.
DISCONTINUED OPERATIONS
Under the restructuring plan, discontinued segments included (1) LDI
Computer Superstores, the retail PC superstores; (2) LDI Computer Outlets, the
retail PC outlet stores; (3) LDI Distribution Supply, a catalog distribution
business selling PC peripheral equipment and modems; and (4) LDI Open Software,
a distributor of software for UNIX-based systems.
As a result of discontinuing these businesses the Company recorded
during its fourth quarter ended January 31, 1994, a charge of $11.7 million
($7.1 million after-tax), consisting of $10.8 million for estimated operational
losses during the phase-out period and $0.9 million for employee severance and
termination costs.
During the three months ended July 31, 1994, the Company recorded an
additional loss from discontinued operations of $5.0 million (after tax $3.1
million). This loss was due to additional costs related to the liquidation and
closing of the Company's retail computer superstores and retail PC outlets.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses a combination of credit facilities, term loans and
internally generated cash flow to finance, on an interim basis, the acquisition
of equipment for lease or sale. Upon completion of lease documentation, the
Company generally finances the present value of future lease rentals by the
assignment of such rentals to banks, insurance companies, or other lenders on a
discounted, nonrecourse basis. In this manner, a substantial portion of the
equipment cost is financed on a long-term basis and the Company limits its risk,
if any, to its equity investment in the equipment. In December 1994, the Company
completed a $50 million expansion of the capacity of one of its securitized
lease receivable financing programs from $75 million to $125 million (see Note
12 of "Notes to Consolidated Financial Statements").
The Company enters into interest rate swap and cap agreements to
manage exposure to changes in interest rates for portions of its recourse and
nonrecourse debt. The agreements generally involve the exchange of fixed or
floating rate interest payments without the exchange of the underlying principal
amounts. The notional amount of interest rate swaps outstanding at January 31,
1995 was $125 million with a weighted average interest rate payable of 5.8%. The
agreements have maturities from one to four years.
During the year ended January 31, 1995, cash generated from operating
activities (including discontinued operations) was $171 million as compared to
$190 million for the year ended January 31, 1994. This $19 million decrease is
primarily attributable to the following: decrease in cash inflows from the sale
or disposal of inventory and off-lease equipment ($83 million); lower cash
outflows for purchases of inventory for resale ($26 million); incremental cash
inflows from changes in assets and liabilities of discontinued operations ($21
million); and the reduction in accounts receivable balances as compared with an
increase in the prior year ($18 million). Cash used in investing activities was
$66 million for the year ended January 31, 1995 as compared to $151 million for
the year ended January 31, 1994. This decrease of $85 million was due primarily
to a $71 million reduction in equipment purchased for lease and the receipt of
$12 million in proceeds from the sale of noncore businesses and properties. Cash
used in financing activities was $102 million for the year ended January 31,
1995 as compared to $35 million for the year ended January 31, 1994. This $67
million increase was primarily the result of incremental payments of $40 million
on revolving credit facilities and term loans and incremental net payments of
$28 million on nonrecourse lease financings.
15
<PAGE> 16
As discussed in Note 11 of "Notes to Consolidated Financial
Statements," the Company's senior secured revolving credit facility and senior
secured term notes were scheduled to mature on April 30, 1995. Pending
finalization of a new agreement, the lenders have extended the maturity date of
the credit facility and term notes through May 31, 1995. Additionally, due to
the operating results for the year ended January 31, 1995, the Company was in
noncompliance with certain financial covenants of its senior debt agreements and
subordinated notes as described in Notes 11 and 13. The Company has obtained
amendments or waivers through May 31, 1995 for noncompliance with these
covenants.
The Company is negotiating with its lenders to refinance its senior
secured recourse debt and with the holder of its subordinated notes to effect
permanent amendments of the financial covenants. The Company's ability to
continue to meet its liquidity requirements is dependent upon its ability to
successfully complete these negotiations and, in the meantime, upon the
willingness of its creditors to continue to grant extensions and waivers or
otherwise not demand immediate payment with respect to such indebtedness. Based
upon the status of the negotiations to date, management believes that a new
senior debt agreement will be finalized and the subordinated notes will be
amended. The Company expects, however, that the effective interest rate of the
new senior debt agreement, including interest expense and debt financing fees,
may be higher than the effective interest rate of the existing senior credit
facility and term loans for the year ended January 31, 1995.
The Company is also currently negotiating a new financing program
which, if completed, would provide nonrecourse financing of lease equipment
purchases until the related lease documentation is finalized and permanent
nonrecourse funding is obtained. Management believes that cash generated from
operations, cash obtained from this new nonrecourse interim financing program,
borrowings under the new senior credit facility, financing from existing
nonrecourse programs and other sources and, if necessary, proceeds from sales of
leases or other assets will provide sufficient funds to meet the Company's
reasonably foreseeable liquidity needs.
Net assets of discontinued operations decreased from January 31, 1994,
to January 31, 1995, 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 January 31, 1995, 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 January 31,
1995, by approximately $18.6 million due primarily to the collection and/or 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.
16
<PAGE> 17
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LDI CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report ................................ 18
Consolidated Balance Sheets as of January 31, 1994 and 1995 . 19
Statements of Consolidated Earnings for the years ended
January 31, 1993, 1994, and 1995 .......................... 20
Statements of Consolidated Cash Flows for the years ended
January 31, 1993, 1994, and 1995 .......................... 21
Statements of Consolidated Shareholders' Equity for the years
ended January 31, 1993, 1994, and 1995 .................... 22
Notes to Consolidated Financial Statements .................. 23-37
Financial Statement Schedule:
Schedule VIII -- Valuation and Qualifying Accounts .......... 38
</TABLE>
17
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
LDI CORPORATION:
We have audited the accompanying consolidated balance sheets of LDI Corporation
and its subsidiaries as of January 31, 1994 and 1995, and the related statements
of consolidated earnings, cash flows, and shareholders' equity for each of the
three years in the period ended January 31, 1995. Our audits also included the
financial statement schedule listed in the Index at Item 8. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of LDI Corporation and
its subsidiaries at January 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1995, in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, the Company has incurred significant net
losses for each of the two years in the period ended January 31, 1995. As
discussed in Note 2 to the consolidated financial statements, the Company's
senior secured revolving credit facility and senior secured term notes, which
before extension had a scheduled maturity of April 30, 1995, may become due and
payable after May 31, 1995, unless the debt is refinanced or the existing
agreements are further extended. Additionally, as discussed in Note 2, the
Company was in noncompliance with certain financial covenants of its senior
debt agreements and subordinated notes and has obtained amendments or waivers
through May 31, 1995. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 2. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
May 15, 1995
18
<PAGE> 19
<TABLE>
<CAPTION>
LDI CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JANUARY 31
----------------------
ASSETS 1994 1995
---- ----
<S> <C> <C>
Cash and cash equivalents....................................................... $ 8,972 $ 11,744
Receivables--net of allowances for doubtful accounts............................ 41,831 23,244
Inventory held for lease or sale................................................ 18,336 10,933
Leased assets:
Capital leases................................................................ 412,561 311,478
Operating leases--net of accumulated depreciation............................. 55,006 37,610
Land, buildings, equipment, and furniture--net of
accumulated depreciation of $8,521 and $8,062................................. 16,712 12,715
Net assets of discontinued operations........................................... 20,868 -
Other assets ................................................................... 18,741 19,185
--------- ---------
Total......................................................................... $593,027 $426,909
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable................................................................. $ 28,793 $13,008
Accrued liabilities.............................................................. 9,508 5,553
Notes payable.................................................................... 148,175 107,855
Subordinated notes............................................................... 10,000 10,000
Deferred income taxes............................................................ 15,941 3,933
Nonrecourse lease financing...................................................... 296,794 227,574
Reserves and liabilities related to discontinued
operations and restructuring programs.......................................... 7,456 1,952
Other liabilities................................................................ 6,276 5,439
---------- ----------
Total liabilities................................................................ 522,943 375,314
-------- --------
Shareholders' Equity:
Common stock, par value of $.01 -- 20,000,000
shares authorized, 6,828,984 shares issued..................................... 68 68
Additional paid-in capital....................................................... 44,922 44,997
Retained earnings................................................................ 26,354 7,790
Treasury shares at cost -- 101,527 shares........................................ (1,260) (1,260)
--------- -----------
Total shareholders' equity..................................................... 70,084 51,595
--------- ----------
Total............................................................................ $593,027 $426,909
======== ========
</TABLE>
See the accompanying notes to consolidated financial statements.
19
<PAGE> 20
<TABLE>
<CAPTION>
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
FOR THE YEARS ENDED JANUARY 31, 1993, 1994, AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Leasing.......................................................... $199,113 $156,606 $103,659
Direct sales .................................................... 82,113 94,852 63,757
Technical services............................................... 18,240 16,127 15,108
Equity in earnings of 50% owned affiliate ....................... 101 733 1,010
Other............................................................ 4,098 3,593 633
---------- ---------- -----------
TOTAL......................................................... 303,665 271,911 184,167
--------- -------- --------
Costs and Expenses:
Leasing.......................................................... 130,175 121,961 83,833
Direct sales..................................................... 70,637 82,135 54,385
Technical services............................................... 12,751 11,096 8,345
Interest......................................................... 41,685 33,446 28,333
Debt financing fees.............................................. 1,318 1,725 3,433
Selling, general and administrative.............................. 36,088 40,484 30,945
Restructuring charges............................................ - 6,641 -
------------ ---------- ------------
TOTAL......................................................... 292,654 297,488 209,274
-------- -------- --------
Earnings (loss) from continuing operations
before income taxes.............................................. 11,011 (25,577) (25,107)
Income tax expense (benefit)....................................... 4,240 (9,532) (9,624)
-------- -------- --------
Earnings (loss) from continuing operations......................... 6,771 (16,045) (15,483)
Discontinued operations:
Earnings (loss) from operations, net of
income tax expense (benefit) of $106,
$(907), and $(1,888)........................................... 164 (1,395) (3,081)
Provision for loss on disposal, net of income
tax benefit of $4,604 ......................................... - (7,082) -
----------- ---------- -------------
Net earnings (loss)................................................ $ 6,935 $(24,522) $(18,564)
======== ======== ========
Earnings (loss) per primary share:
Continuing operations............................................ $ 1.01 $ (2.39) $ (2.30)
Discontinued operations.......................................... .02 (1.26) (.46)
----------- ------------------------
Net earnings (loss).............................................. $ 1.03 $ (3.65) $ (2.76)
========= =========== ==========
Net earnings per share - fully-diluted............................. $ 1.01 - -
</TABLE>
See the accompanying notes to consolidated financial statements.
20
<PAGE> 21
<TABLE>
<CAPTION>
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1993, 1994, AND 1995
(DOLLARS IN THOUSANDS)
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net earnings (loss) from continuing operations $ 6,771 $ (16,045) $ (15,483)
Adjustments to reconcile net earnings to net cash flow
from operating activities:
Depreciation 27,274 24,371 22,437
Deferred income taxes 4,534 (9,844) (9,624)
Additions to sales-type and direct financing leases (117,381) (112,189) (75,543)
Principal portion of lease rentals received 211,259 211,610 166,100
Purchases of inventory for resale (70,584) (75,578) (49,970)
Sales, transfers, and disposals of inventory and equipment 169,307 210,009 127,406
Changes in reserves related to restructuring programs - 6,641 (4,588)
Change in accounts receivable (8,435) (5,898) 12,485
Change in accounts payable 9,564 (24,695) (9,276)
Change in accrued expenses and other liabilities 2,465 (2,763) (4,234)
Other (4,785) (1,564) (1,156)
----------- ----------- ------------
Cash provided by continuing operations 229,989 204,055 158,554
--------- --------- ----------
Discontinued operations:
Net earnings (loss) from discontinued operations 164 (1,395) (3,081)
Estimated loss on disposal, net of tax - (7,082) -
Change in assets and liabilities of discontinued operations (3,325) (5,669) 15,373
------------ ------------ ----------
Cash provided by (used in) discontinued operations (3,161) (14,146) 12,292
----------- ---------- ----------
Total 226,828 189,909 170,846
--------- --------- ---------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of equipment for lease (135,517) (147,426) (76,036)
Purchases of land, buildings, equipment and furniture (4,625) (3,544) (2,657)
Purchases of companies, net of cash acquired - (3,328) -
Proceeds from sale of businesses, properties and other assets 166 3,591 12,252
------------ ----------- ----------
Total (139,976) (150,707) (66,441)
--------- --------- ---------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from nonrecourse lease financing 152,853 179,418 120,673
Payments on nonrecourse lease financing (203,553) (212,621) (181,903)
Change in revolving credit facilities (71,748) 19,842 (30,384)
Proceeds from term loan 50,000 - -
Payments on term loans and notes (15,850) (20,100) (9,936)
Cash dividends paid - (1,076) -
Other (170) (175) (83)
--------- --------- ------------
Total (88,468) (34,712) (101,633)
--------- --------- --------
Increase (decrease) in cash and cash equivalents (1,616) 4,490 2,772
Cash and cash equivalents at beginning of year 6,098 4,482 8,972
--------- --------- ---------
Cash and cash equivalents at end of year $ 4,482 $ 8,972 $ 11,744
========= ========= =========
</TABLE>
See the accompanying notes to consolidated financial statements.
21
<PAGE> 22
<TABLE>
<CAPTION>
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1993, 1994, AND 1995
(DOLLARS IN THOUSANDS)
================================================================================================================================
Common Total
Additional stock in share-
Common Stock paid-in Retained treasury - holders'
capital earnings at cost equity
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT FEBRUARY 1, 1992 $ 68 $ 44,740 $ 45,017 $ (1,260) $88,565
Net earnings 6,935 6,935
Employee stock options
exercised,
10,626 shares issued 106 106
Compensation expense under
stock award plan for shares
issued in a prior year 38 38
----------- ---------- -------- ------- ------
BALANCE AT JANUARY 31, 1993 68 44,884 51,952 (1,260) 95,644
Net loss (24,522) (24,522)
Cash dividends - $.16 per share (1,076) (1,076)
Compensation expense under
stock award plan for shares
issued in a prior year 38 38
----------- ---------- -------- ------- ------
BALANCE AT JANUARY 31, 1994 68 44,922 26,354 (1,260) 70,084
Net loss (18,564) (18,564)
Compensation expense under
stock award plan for shares
issued in a prior year 75 75
----------- ---------- -------- ------- ------
BALANCE AT JANUARY 31, 1995 $ 68 $ 44,997 $ 7,790 $ (1,260) $51,595
=========== ========== ======== ======= ======
</TABLE>
See the accompanying notes to consolidated financial statements.
22
<PAGE> 23
LDI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS EXCEPT WHERE INDICATED)
FOR THE YEARS ENDED JANUARY 31, 1993, 1994, AND 1995
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. An investment
in a 50 percent owned affiliate is accounted for using the equity method.
Lease Accounting - The Company's lease transactions are classified as either
sales-type, direct financing, or operating leases at the inception of the lease
in accordance with Statement of Financial Accounting Standards (SFAS) No. 13.
Sales-type and direct financing leases are those leases (capital leases) which
transfer substantially all of the costs and risks of ownership of the equipment
to the lessee. Generally, the Company classifies a lease as a capital lease if
either (a) the lease term is at least 75 percent of the estimated economic life
of the leased equipment at lease inception or (b) the present value of the
rental payments is at least 90 percent of the fair market value of the leased
equipment at lease inception. Operating leases are those leases in which
substantially all the benefits and risks of ownership of the equipment are
retained by the Company. Generally, the leases that do not meet conditions (a)
or (b) described above are classified as operating leases.
The lease accounting methods used by the Company are:
Sales-Type Leases: At lease inception, the present value of rentals over the
lease term is recorded as leasing revenues. The cost of the equipment less the
present value of the estimated residual value is recorded as leasing costs and a
dealer profit is recognized at the inception. The present values of future
rentals and of the residual are recorded as leased assets. Unearned interest
income, consisting of the excess of the gross rentals and of the residual over
their present values, is amortized to leasing revenues over the lease term to
produce a constant percentage return on the investment.
Direct Financing Leases: At lease inception, the present values of future
rentals and of the residual are recorded as leased assets. Unearned interest
income is amortized to leasing revenues over the lease term to produce a
constant percentage return on the investment.
Operating Leases: The monthly rental is recorded as leasing revenue. The cost of
equipment is recorded as leased assets and is depreciated over the lease term to
an estimated residual value.
Residual Values: The estimated residual values used in leases are reviewed
periodically and reduced if necessary.
Initial Direct Costs: Sales commissions and other direct costs incurred in
producing direct financing and operating leases are deferred and amortized over
the lease term.
Nonrecourse Financing - The Company assigns the rentals under most of its leases
to financial institutions and other lenders on a nonrecourse basis, for which
the Company receives a cash amount equal to a discounted value of the lease
rentals. In the event of a default by a lessee, the lender has a security
interest in the underlying leased equipment but has no recourse against the
Company. Proceeds from refinancing are recorded on the balance sheet as
nonrecourse lease financing. Under capital leases, nonrecourse lease financing
and leased assets are
23
<PAGE> 24
reduced as lessees make rental payments under the leases. Under operating
leases, leasing revenue is recorded monthly as lessees are billed. Receivables
and nonrecourse lease financing are reduced as lessees make rental payments.
Direct Sales - Revenues and costs of direct sales of equipment are recorded at
the time title to the equipment transfers to the customer.
Other Revenues - Other revenues include fees earned for arranging leases between
unrelated parties and for selling equity interests in lease transactions. The
fees are recognized at the closing of such transactions. In addition to these
fees, the Company also may be entitled at lease termination to fees equal to a
portion of the net proceeds from the subsequent lease or sale of the equipment.
The Company's portion of such net proceeds, if any, is reported as income at the
time of the subsequent lease or sale of the equipment.
Inventory - Inventory is valued at the lower of cost or market, using primarily
a first-in, first-out method.
Buildings, Equipment, And Furniture - Buildings, equipment, and furniture are
stated at cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets.
Income Taxes - Income taxes are determined under SFAS No. 109. Deferred income
taxes are provided to give effect to temporary differences between the amount of
assets and liabilities for financial reporting purposes and such amounts as
determined by tax laws and regulations. Principal differences are capital
leases, which are accounted for as sales-type and direct financing leases for
financial reporting purposes and as operating leases for tax purposes, and
certain reserves and liabilities recorded for financial reporting purposes that
are not deductible for tax purposes until paid.
Statement of Consolidated Cash Flows - For the purposes of this statement, the
Company considers all highly liquid short term investments that have an original
maturity when purchased of ninety days or less to be cash equivalents.
Debt Financing Fees - The Company capitalizes costs incurred to establish
recourse and nonrecourse debt agreements. These costs are amortized on a
straight line basis over the term of the agreement.
Interest Rate Swap and Cap Agreements - The Company enters into interest rate
swap and cap agreements to manage exposure to changes in interest rates for
portions of its recourse and nonrecourse debt. The agreements involve the
exchange of fixed or floating rate interest payments without the exchange of the
underlying principal amounts. The differential to be paid or received is accrued
as interest rates change and is recognized over the life of the agreements as an
adjustment to interest expense. Gains or losses as a result of termination of
swaps and caps are deferred and amortized over the maturity of the terminated
agreement.
Earnings Per Share - Primary earnings per share are computed on the basis of the
weighted average number of common shares outstanding during each year. For the
year ended January 31, 1993, fully diluted earnings per share were computed on
the basis of the weighted average number of common shares outstanding and the
dilutive effect of the assumed conversion of the convertible notes from the date
of issuance, with related interest expense reduced accordingly, and the assumed
exercise of stock options and warrants. For the years ended January 31, 1994 and
1995, fully diluted earnings per share are not shown since the effect would be
anti-dilutive.
24
<PAGE> 25
The number of common shares used for computing earnings per share are as
follows:
<TABLE>
<CAPTION>
Year Ended January 31
---------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Primary 6,727 6,727 6,727
Fully diluted 7,383 - -
</TABLE>
NOTE 2 LIQUIDITY AND DEBT REFINANCING
As discussed in Note 11, the Company's senior secured revolving credit facility
and senior secured term notes were scheduled to mature on April 30, 1995.
Pending finalization of a new agreement, the lenders have extended the maturity
date of the credit facility and term notes through May 31, 1995. Additionally,
due to the operating results for the year ended January 31, 1995, the Company
was in noncompliance with certain financial covenants of its senior debt
agreements and subordinated notes as described in Notes 11 and 13. The Company
has obtained amendments or waivers through May 31, 1995 for noncompliance with
these covenants.
The Company is negotiating with its lenders to refinance its senior secured
recourse debt and with the holder of its subordinated notes to effect permanent
amendments of the financial covenants. The Company's ability to continue to meet
its liquidity requirements is dependent upon its ability to successfully
complete these negotiations and, in the meantime, upon the willingness of its
creditors to continue to grant extensions and waivers or otherwise not demand
immediate payment with respect to such indebtedness. Based upon the status of
the negotiations to date, management believes that a new senior debt agreement
will be finalized and the subordinated notes will be amended. The Company
expects, however, that the effective interest rate of the new senior debt
agreement, including interest expense and debt financing fees, may be higher
than the effective interest rate of the existing senior credit facility and term
loans for the year ended January 31, 1995.
The Company is also currently negotiating a new financing program which, if
completed, would provide nonrecourse financing of lease equipment purchases
until the related lease documentation is finalized and permanent nonrecourse
funding is obtained. Management believes that cash generated from operations,
cash obtained from this new nonrecourse interim financing program, borrowings
under the new senior credit facility, financing from existing nonrecourse
programs and other sources and, if necessary, proceeds from sales of leases or
other assets will provide sufficient funds to meet the Company's reasonably
foreseeable liquidity needs.
The Company's consolidated financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Until a new senior
secured recourse debt agreement is finalized and the subordinated notes are
amended, there is substantial doubt concerning the Company's ability to continue
as a going concern for a reasonable period of time. The consolidated financial
statements do not include any adjustments relating to the recoverability of
assets that may result should the Company be unable to continue as a going
concern.
NOTE 3 RESULTS OF CONTINUING OPERATIONS
During the years ended January 31, 1994 and 1995, results of continuing
operations were adversely impacted by charges recorded during the fourth
quarter. These charges were in addition to those discussed in Note 4 related to
the restructuring of the Company, and those discussed in Note 5 related to
discontinued operations.
During the fourth quarter ended January 31, 1994, the Company recorded charges
of $21.5 million to leasing costs. Approximately $7.0 million of these charges
related to off-lease writedowns primarily for end of lease buyouts or
settlements negotiated during the quarter. Approximately $14.5 million of these
charges related to
25
<PAGE> 26
equipment valuation writedowns primarily for lessees in bankruptcy or with
deteriorating credit conditions. The Company also recorded technical service
expenses of $1.2 million to write-off obsolete or excessive maintenance
inventories. Additionally, $4.8 million of bad debt charges were recorded to
selling, general and administrative expenses. These charges were receivable
reserves for lessees in bankruptcy or with deteriorating credit quality.
During the fourth quarter ended January 31, 1995, the Company recorded charges
of $21.2 million to leasing costs. Approximately $13.3 million of these charges
resulted from revisions to residual values of certain categories of leased
equipment, both for leases terminated in the quarter and similar equipment
leases which will expire in the future. These charges also include $5.1 million
to adjust residual values for equipment leases to customers with deteriorating
credit quality and $2.8 million to reduce the valuation of PC rental equipment
and other inventories. Additionally, selling, general and administrative
expenses include $2.7 million of bad debt charges which were recorded for
lessees in bankruptcy or with deteriorating credit quality.
NOTE 4 RESTRUCTURING CHARGES
During the year ended January 31, 1994, the Board of Directors determined the
need to commence a strategic realignment of operations of the Company and to
discontinue certain business segments (see Note 5). The strategic plan included
the sale or other divestiture of certain product lines and non-strategic
businesses, the closing of facilities, and other measures to improve the
Company's overall profitability. The cost of implementing the plan was $6.6
million, recorded in the Company's fourth quarter ended January 31, 1994
(after-tax $4.1 million, or $.62 per share).
The costs included $4.3 million attributable to disposing of certain product
lines and businesses, $1.7 million to employee severance and terminations and
$0.6 million to the closing of facilities. No additional costs were incurred
during the year ended January 31, 1995. There were reserves and liabilities at
January 31, 1994 and 1995, of $3.6 and $2.0 million, respectively, relating to
these items.
Summary financial information for the years ended January 31, 1994 and 1995 for
operations subject to sale or other divestiture (exclusive of discontinued
business segments) were as follows:
<TABLE>
<CAPTION>
Year Ended January 31
-----------------------
1994 1995
---- ----
<S> <C> <C>
Revenues $62,250 $22,134
Operating results (before taxes) (5,219) 71
Assets 35,129 -
Liabilities 28,963 -
</TABLE>
Revenues and operating income of the non-strategic businesses for the year ended
January 31, 1995, represent the results of operations through the sale or
divestiture dates. All of the non-strategic businesses were sold or otherwise
disposed of during the year.
NOTE 5 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. The
software distribution segment was sold in March 1994, and all retail outlet
stores were closed in April 1994. The Company sold the catalog distribution
segment in May 1994 and completed the liquidation of the retail computer
superstores in the third quarter ended October 31, 1994.
26
<PAGE> 27
The Company recorded in the fourth quarter ended January 31, 1994, a charge of
$11.7 million (after-tax, $7.1 million), consisting of $10.8 million for
estimated losses during the planned phase-out period and $0.9 million for
employee severance and termination costs. At January 31, 1994, there were
reserves and liabilities of $3.9 million relating to these items.
During the second quarter ended July 31, 1994, the Company recorded an
additional loss from discontinued operations of $5.0 million (after-tax $3.1
million). This loss was related to incremental costs for the liquidation and
closing of the Company's retail computer superstores and retail PC outlets.
Combined revenues of the four discontinued segments were $40 million, $65
million, and $19 million during the years ended January 31, 1993, 1994, and
1995, respectively. Assets of the discontinued operations, consisting primarily
of accounts receivable and inventory at January 31, 1994, are reported on the
balance sheets as net assets of discontinued operations. The consolidated
financial statements disclose the operating results of discontinued operations
separately from continuing operations.
NOTE 6 ACQUISITIONS
During the year ended January 31, 1994, the Company acquired the assets of
companies engaged in sales of microcomputers and related equipment to commercial
accounts, short-term rentals of computer equipment, and the distribution of
communications products. The aggregate consideration for these acquisitions was
$3.3 million.
These acquisitions have been accounted for using the purchase method and,
accordingly, the results of operations of these companies have been included in
the consolidated results of operations from the date of acquisition. The
operations of the companies prior to acquisition were not material in relation
to the consolidated amounts.
Certain of these businesses were determined to be non-strategic and were sold
during the year ended January 31, 1995, as discussed in Notes 4 and 5.
NOTE 7 RECEIVABLES
<TABLE>
<CAPTION>
JANUARY 31
------------------------------
1994 1995
---- ----
<S> <C> <C>
Trade accounts $34,441 $19,351
Trade notes 13,537 7,688
Other 153 2,209
Allowances for doubtful accounts (6,300) (6,004)
---------- ----------
Net receivables $41,831 $23,244
======== =======
</TABLE>
27
<PAGE> 28
NOTE 8 LEASING ACTIVITIES
Assets leased under capital leases consist of:
<TABLE>
<CAPTION>
JANUARY 31
----------------------------------
1994 1995
----- -----
<S> <C> <C>
Future minimum lease rentals $388,966 $303,102
Net estimated residual values of leased equipment 98,779 73,386
Allowance for impaired lease rentals and residual values (14,105) (13,659)
Less unearned income (61,079) (51,351)
-------- --------
Total $412,561 $311,478
========= ========
</TABLE>
<TABLE>
<CAPTION>
Assets leased under operating leases consist of: JANUARY 31
-------------------------------
1994 1995
---- ----
<S> <C> <C>
Equipment at cost $ 78,418 $ 59,730
Accumulated depreciation (23,412) (22,120)
---------- --------
Net $ 55,006 $ 37,610
========= ========
</TABLE>
Future minimum lease rentals are:
<TABLE>
<CAPTION>
NON-CANCELABLE
YEAR ENDING JANUARY 31 CAPITAL LEASES OPERATING LEASES
- ---------------------- -------------- ----------------
<S> <C> <C>
1996 $128,740 $13,144
1997 82,828 8,821
1998 56,023 1,429
1999 26,514 565
2000 8,892 -
2001 and subsequent 105 -
--------- -------
Total $303,102 $23,959
======== =======
</TABLE>
Noncancelable leases are extended automatically on a month-to-month basis for a
minimum of usually 120 days unless the Company or the lessee provides written
notice of termination.
28
<PAGE> 29
NOTE 9 INCOME TAXES
The provision (benefit) for income taxes consists of:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
----------------------------------
1993 1994 1995
----- ----- ----
<S> <C> <C> <C>
Continuing operations:
Current:
State, local and other $ (188) $ 312 $ -
------ --------- ----------
Deferred:
Federal 3,735 (9,177) (8,006)
State, local and other 693 (1,208) (1,618)
Federal tax rate adjustment - 541 -
---------- ---------- ----------
Total 4,428 (9,844) (9,624)
------- --------- ---------
Total continuing operations 4,240 (9,532) (9,624)
------- --------- ---------
Discontinued operations:
Deferred:
Federal 93 (4,896) (1,586)
State, local and other 13 (615) (302)
--------- ------------ ------------
Total discontinued operations 106 (5,511) (1,888)
-------- ----------- -----------
Total provision (benefit) $4,346 $(15,043) $(11,512)
====== ========= =========
</TABLE>
The following is a reconciliation between the federal statutory tax rate and the
Company's effective tax rate for continuing operations:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
-----------------------------------
1993 1994 1995
------- ------- ------
<S> <C> <C> <C>
Statutory tax expense (benefit) rate 34.0% (35.0%) (35.0%)
Effects of:
State income tax expense (benefit) 4.2 (4.3) (4.3)
Federal tax rate adjustment - 2.1 -
Other 0.3 (0.1) 1.0
------ ------- -------
Effective tax expense (benefit) rate 38.5% (37.3%) (38.3%)
====== ======= =======
</TABLE>
Principal components of the deferred income tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
JANUARY 31
--------------------
1994 1995
---- ----
<S> <C> <C>
Deferred income tax assets:
Investment tax credit and tax loss
carryforwards $36,508 $37,708
Reserves and liabilities 10,108 10,101
Other 318 549
------- --------
Total 46,934 48,358
Deferred income tax liabilities - leases 62,875 52,291
-------- -------
Net deferred income tax liability $15,941 $ 3,933
======= =======
</TABLE>
29
<PAGE> 30
At January 31, 1995, the Company has investment tax credit carryforwards for
income tax purposes of $2.9 million that expire in various amounts beginning in
1999 and has tax loss carryforwards for income tax purposes of $88.3 million.
These tax loss carryforwards expire in future years as follows: 2004 ($19
million), 2005 ($19 million), 2006 ($4.5 million), 2007 ($18.1 million), 2008
($2.6 million) and 2010 ($25.1 million).
The Company expects to realize fully its deferred tax assets and, accordingly,
has made the determination that recording a valuation allowance is not required.
The primary component of the net operating loss carryforwards results from the
temporary differences in the accounting for sales-type leases (see Note 1).
Based on management's review of the current lease portfolio, the majority of
existing sales-type lease differences will reverse in the next three years,
resulting in recognition of taxable income. Management also projects that
sales-type lease volume in future years will decline. Other actions which the
Company could take to generate taxable income to utilize the carryforwards
include the election of straight-line, rather than accelerated, tax depreciation
for equipment purchased for lease, and structuring of partnerships and joint
ventures which would purchase lease transactions from the Company.
The Omnibus Budget Revenue Reconciliation Act of 1993, enacted in August 1993,
included a one percent increase in the Federal tax rate for corporations, which
was effective retroactive to January 1, 1993. Under the provisions of SFAS No.
109, the effect on taxes currently payable and deferred tax assets and
liabilities of a change in tax rates is recognized in the period that includes
the enactment date. Accordingly, deferred tax liabilities as of February 1,
1993, increased by $541,000 as a result of the new law.
NOTE 10 ACCRUED AND OTHER LIABILITIES
Accrued liabilities consist of:
<TABLE>
<CAPTION>
JANUARY 31
------------------
1994 1995
---- ----
<S> <C> <C>
Compensation $3,896 $2,189
Interest 1,594 1,078
Sales tax 1,022 354
Miscellaneous 2,996 1,932
------- -------
Total $9,508 $5,553
====== ======
Other liabilities consist of:
JANUARY 31
------------------
1994 1995
---- ----
Customer rental prepayments $4,035 $3,668
Deferred revenues 2,084 1,724
Miscellaneous 157 47
------- --------
Total $6,276 $5,439
====== ======
NOTE 11 NOTES PAYABLE
Notes payable consist of:
JANUARY 31
------------------
1994 1995
---- ----
Revolving credit facilities $ 97,075 $100,307
Term loans and notes 51,100 7,548
---------- -----------
Total $148,175 $107,855
======== ========
</TABLE>
30
<PAGE> 31
As of January 31, 1995, the Company had a $103.0 million senior secured
revolving credit facility with a group of banks that provides for a floating
interest rate based on either LIBOR or the prime rate. The facility amortized to
$102.6 million at its scheduled maturity on April 30, 1995. As described in Note
2, the maturity date of the facility has been extended through May 31, 1995. At
January 31, 1995, $103.0 million was outstanding on this facility at an interest
rate of 8.5%. This facility resulted from the consolidation on May 2, 1994 of a
senior unsecured $130 million revolving credit facility and a four year senior
unsecured $50 million term loan. This facility was subsequently modified on July
29, 1994, to include restrictions on the amounts of borrowings under the
facility based on the amounts of certain assets as defined in the agreements. At
January 31, 1994, $129.8 million was outstanding on the former revolving credit
facilities at an interest rate of 4.3% and $38.8 million was outstanding on the
former unsecured term loan.
Subsequent to January 31, 1994 and 1995, $32.7 million and $2.7 million,
respectively, of the borrowings under the revolving credit facilities were
refinanced on a nonrecourse basis. Accordingly, the refinanced amounts have been
included in nonrecourse lease financing at January 31, 1994 and 1995.
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 $1.4 million at January 31, 1995, and was paid in
full, as scheduled, on May 10, 1995.
On May 2, 1994, senior unsecured installment notes of $9.7 million were changed
to senior secured term notes with modifications made to the principal repayment
schedule to proportionately match the principal amortization of the senior
secured revolving credit facility. These notes aggregated $6.1 million at
January 31, 1995, and were scheduled to mature on April 30, 1995. The maturity
date of the notes has been extended through May 31, 1995, and certain waivers
have been obtained from the holders as described in Note 2. Additionally, $2.6
million of unsecured installment notes were changed to secured notes, and paid
in full, as originally scheduled, on August 31, 1994.
The installment notes consist of fixed rate notes with interest rates ranging
from 9.7 percent to 10.0 percent.
Under the terms of the above debt 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 facilities based on the amounts of certain assets as
defined in the agreements. The loan agreements are secured by receivables,
inventories and substantially all other unpledged assets of the Company. As
described in Note 2, at January 31, 1995, the Company was in noncompliance with
certain financial covenants and has obtained amendments or waivers of them
through May 31, 1995.
NOTE 12 NONRECOURSE LEASE FINANCING
<TABLE>
<CAPTION>
JANUARY 31
---------------------
1994 1995
---- ----
<S> <C> <C>
Nonrecourse discounted lease rentals consist of:
Financial institutions $182,713 $119,365
Commercial paper 114,081 108,209
-------- -------
Total $296,794 $227,574
======== ========
</TABLE>
Nonrecourse discounted lease rentals include 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 also established two asset-backed financing programs to fund lease
transactions on a nonrecourse basis through the use of commercial paper secured
by lease rental receivables. The programs are rated A-1 by Standard &
31
<PAGE> 32
Poor's and P-1 by Moody's. These ratings represent the highest attainable
ratings available under the respective classification systems.
Under one of the programs, the Company sold lease receivables to a wholly owned
special purpose corporation that issues commercial paper backed by an annually
renewing five year letter of credit. At January 31, 1994 and 1995, $43.8 million
and $26.1 million of commercial paper was outstanding under this program at
average interest rates of 3.4% and 6.3%, respectively. Effective May 1, 1994,
the letter of credit under this program was not extended; however, leases funded
previously continue to amortize under the terms of the existing agreement.
A second securitized program provides for the financing of lease receivables
through an independent corporation which issues commercial paper. This program
is backed by a surety bond. On June 3, 1994, the Company executed a letter
agreement to increase the availability to finance under this program from $75
million to $125 million in two steps. The first $25 million of additional
capacity became available on September 9, 1994, and the remaining $25 million
became available December 1, 1994. Effective with the December increase, the
program began operating through a wholly owned subsidiary of the Company to
which the Company sells lease receivables and transfers the related equipment.
The subsidiary then transfers the receivables to the independent corporation to
support the issuance of commercial paper, which is nonrecourse to the Company.
At January 31, 1994 and 1995, $70.3 million and $82.1 million of commercial
paper was outstanding under this program at average interest rates of 3.3% and
6.0%, respectively.
Contractual payments of principal and interest required on nonrecourse lease
financings are:
<TABLE>
<CAPTION>
YEAR ENDING JANUARY 31
<S> <C>
1996 $107,556
1997 74,480
1998 45,309
1999 20,941
2000 5,411
2001 and subsequent 3,520
--------
Total 257,217
Less interest (29,643)
--------
Principal amount $227,574
========
</TABLE>
The average interest rate on all nonrecourse lease financing was 7.2% and 6.5%
for the years ended January 31, 1994 and 1995, respectively.
NOTE 13 SUBORDINATED NOTES
The Company has $10 million of 9.375 percent subordinated notes, with interest
payable semiannually, maturing in August 2000. Prior to May 1994, the notes were
convertible into shares of the Company's common stock. The notes require annual
repayments of $2.5 million beginning in August 1997. The notes are callable by
the Company at a premium of 109 3/8 beginning August 1994, with the premium
declining ratably to par in August 1999.
In conjunction with the issuance of the notes, the Company also issued 45,496
warrants. Each warrant is exercisable by the holder through August 15, 1996,
into one share of the Company's common stock. The exercise price is subject to
adjustment for stock dividends, splits and certain other issuances of common
stock.
On May 2, 1994, the notes were amended to eliminate the conversion feature, to
adjust the exercise price of the outstanding warrants to $6.35 per share, and to
issue 1,529,307 additional warrants with the same exercise price, terms,
32
<PAGE> 33
and expiration date as the previously issued warrants. In exchange, the holder
of the notes agreed to permit the Company to grant security interests to its
recourse lenders as described in Note 11. Additionally, the Company and the
holder agreed to modify certain other terms and conditions of the notes.
As described in Note 2, at January 31, 1995, the Company was in noncompliance
with certain financial covenants and has obtained amendments or waivers of them
through May 31, 1995.
NOTE 14 SHAREHOLDERS' EQUITY
EMPLOYEE STOCK OPTION PLAN - The Company has a stock option plan for officers
and key employees and has reserved 1,500,000 shares of common stock for
distribution under the plan. Options are exercisable beginning not less than one
year after the date of grant and expire ten years after the date of grant.
Options are granted at market value and become exercisable at the rate of 20
percent per year. Options granted under the plan may qualify as incentive stock
options under the Internal Revenue Code or may be non-qualified stock options.
Options issued to date, except for those granted during the year ended January
31, 1995, have qualified as incentive stock options.
Stock option transactions during the three years ended January 31, 1995, are:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE RANGE
SHARES PER SHARE
--------- ------------------
<S> <C> <C>
Balance, February 1, 1992 484,459 $ 8.25 - $10.36
Granted 5,000 $14.00
Exercised (10,626)
Canceled (58,779)
-------
Balance, January 31, 1993 420,054 $ 8.25 - $14.00
Granted 298,000 $ 7.13 - $7.84
Exercised -
Canceled (35,931)
-------
Balance, January 31, 1994 682,123 $ 7.13 - $14.00
Granted 250,000 $3.75
Exercised -
Canceled (431,427)
---------
Balance, January 31, 1995 500,696 $ 3.75 - $10.36
========
</TABLE>
At January 31, 1995, there were 499,304 options available for grant and 144,341
options were exercisable.
RESTRICTED STOCK PLAN - The Company also has a restricted stock plan for
officers and key employees and has reserved 55,000 shares of common stock for
distribution under the plan in amounts and at times as determined by the Board
of Directors. Common stock awarded becomes vested at such time as specified by
the Board. On March 21, 1994, the Board of Directors approved an acceleration of
vesting with respect to the 10,000 shares granted in 1990, which were originally
scheduled to vest at the rate of 5,000 shares each on February 1, 1995 and 1996.
The plan shall continue until terminated by the Board. However, no awards may be
granted after January 31, 1999, and all awards shall vest no later than January
31, 2004.
RETIREMENT SAVINGS PLAN - The Company has a Section 401(k) retirement savings
plan for eligible employees and has reserved 275,000 shares of common stock for
distribution under the plan.
33
<PAGE> 34
DIRECTOR STOCK OPTION PLAN - On March 27, 1995, the Board of Directors adopted a
stock option plan, subject to the approval of the Company's shareholders, for
non-employee directors and reserved 150,000 shares of common stock for
distribution under the plan. Each eligible director on the date of adoption of
the plan was granted options to purchase 10,000 shares, and each future eligible
director will be granted options to purchase 10,000 shares upon joining the
Board. Each eligible director will also receive options to purchase an
additional 10,000 shares on each third anniversary of that director's initial
grant, if he remains an eligible director on that anniversary. Options are
granted at market value and become exercisable six months after the date of
grant. They expire ten years after the date of grant.
In June 1991, the shareholders approved the grant of options to purchase 10,500
shares to a non-employee director with an option price of $13.81 per share. The
options are currently exercisable and expire nine years after the date of grant.
PREFERRED STOCK - The Board of Directors is authorized to issue 2,000,000 shares
of preferred stock, $.01 par value, with terms as may be subsequently determined
by the Board of Directors without further action by the shareholders of the
Company. At January 31, 1995, none of the shares were outstanding.
NOTE 15 EMPLOYEE RETIREMENT BENEFIT PLANS
The Company had two defined contribution employee retirement benefit plans: the
LDI Corporation Pension Plan and Trust and the LDI Corporation Retirement
Savings Plan. These plans provided retirement benefits for eligible employees
who meet certain service requirements. The Company's annual contributions under
the pension provision are determined each year by the Board of Directors. The
Company's contributions under the retirement savings provision are based on
various percentages of the voluntary pretax contributions of the participants,
up to a maximum contribution of 2.75 percent of the participant's annual
compensation. Effective June 30, 1994, in conjunction with the strategic
realignment of the Company and in an effort to improve the administrative
efficiencies and the overall return on investments, the Board of Directors of
the Company elected to merge the plans. The Board of Directors did not authorize
a contribution to the Pension Plan for the fiscal year ended January 31, 1994.
Costs for the plans maintained by the Company for the years ended January 31,
1993, 1994, and 1995 were $1.4 million, $1.0 million, and $0.5 million,
respectively.
NOTE 16 RELATED PARTY TRANSACTIONS
The Company has engaged in certain transactions with entities owned or
controlled by certain of its principal shareholders.
(a) The Company rented office, technical and warehouse facilities
from a related partnership under leases which had a scheduled
expiration in 2000. During the year ended Jan. 31, 1995, an
agreement was reached whereby the Company assigned its interest
in a sublease arrangement to the partnership and the Company was
released from further obligation under the leases. Rental
payments made to the partnership during the years ended January
31, 1993, 1994, and 1995 were $587, $343, and $355, respectively.
(b) The Company contracted with the related partnership for building
management and maintenance services, and paid the partnership
other specified consulting fees. Expenditures under these
agreements aggregated $325, $156, and $40 during the years ended
January 1993, 1994, and 1995, respectively.
(c) On May 31, 1994, the Company sold to the predecessor of MRK
Technologies, Ltd. ("MRK") substantially all of the assets of a
subsidiary and a division of the Company engaged in the
businesses of selling computer systems and software and related
equipment, network connectivity products and related services.
Michael R. Kennedy, who is a principal shareholder of the
Company, is the Chairman and
34
<PAGE> 35
Chief Executive Officer and one of the principal members of MRK.
The purchase price paid by MRK for the assets consisted of cash
and short-term notes in the aggregate amount of approximately
$8.5 million and a subordinated note in the original principal
amount of $2 million payable in installments through 1999. The
note is subordinated to certain commercial financing arrangements
of MRK, is guaranteed by Mr. Kennedy and is secured by Mr.
Kennedy's pledge to the Company of shares of the Company held by
him. The unpaid principal amount of the note and accrued interest
at January 31, 1995, was $2.1 million. In connection with the
sale, the Company leases to MRK certain furniture, fixtures and
equipment used in the business. The lease provides for aggregate
rentals of approximately $796 over a term of thirty-six months
and gives MRK the option to purchase the leased equipment at the
end of the lease term for a nominal amount. Rentals earned for
the year ended January 31, 1995, by the Company under the terms
of the lease were $177. On March 31, 1994, the Company sold to
Open Software, Inc. substantially all of the assets of the
Company's open systems software distribution business. The
purchase price consisted of $100 in cash and certain percentage
amounts based on software revenues during the two months
following the closing. Mr. Kennedy was the Chairman and Chief
Executive Officer and one of the principal stockholders of Open
Software, Inc., which is now a part of MRK.
(d) During the year ended January 31, 1995, the Company purchased
computer equipment which was leased to its customers and acquired
other products and services from MRK. The aggregate amount of
these purchases was $5.3 million, for which the Company owed MRK
$145 at January 31, 1995. In addition, the Company provided $180
of goods and services to MRK during the year. At January 31,
1995, the Company was owed approximately $360 from MRK for goods
and services, and custodial funds held by MRK.
(e) The Company is reimbursed for expenses paid on behalf of its 50
percent owned affiliate. At January 31, 1994, accounts receivable
from the affiliate were $72. In addition the Company advanced the
affiliate $3.5 million during the year ended January 31, 1995,
with interest at 8%. The note was secured by all unencumbered
assets of the affiliate and was repaid in full, including $136 of
accrued interest. The Company has also guaranteed the repayment
of certain indebtedness of the affiliate under two credit
arrangements in an aggregate amount not to exceed the lesser of
$12.5 million or 50% of such indebtedness. At January 31, 1995,
the amount guaranteed by the Company was $5.5 million.
NOTE 17 LEASE OBLIGATIONS
In addition to the lease obligations described in Note 16, the Company leases
office, technical, and other facilities from unrelated third parties. Rent
expense for these leases was $941, $969, and $605 for the years ended January
31, 1993, 1994, and 1995, respectively. Annual rentals are subject to increases
for escalation in operating costs.
Additionally, the Company leases data processing equipment under agreements
classified as capital leases (as a lessee) and subleases this equipment to third
parties (as a lessor) under agreements classified as capital or operating
leases. Rent payments for these leases were $156, $45, and $54 for the years
ended January 31, 1993, 1994, and 1995, respectively.
35
<PAGE> 36
A summary of the Company's commitments with respect to capital and operating
leases is:
<TABLE>
<CAPTION>
OBLIGATIONS
OBLIGATIONS UNDER
UNDER OPERATING
CAPITAL LEASES LEASES
-------------- ------------
(EQUIPMENT) (FACILITIES)
YEAR ENDING JANUARY 31
<S> <C> <C>
1996 $ 40 $ 753
1997 - 602
1998 - 383
1999 - 322
2000 - 295
2001 and subsequent - 1,348
------ --------
Total 40 3,703
Less interest (2) -
----- -----------
Net amount $ 38 $ 3,703
==== =======
</TABLE>
At January 31, 1995, future minimum rentals to be received under noncancelable
subleases for facilities included in the Company's obligations under operating
leases above totaled $4,349.
NOTE 18 FINANCIAL INSTRUMENTS
Credit loss exposure of interest rate swap and cap agreements in the event of
nonperformance by the other party is limited to the amount of net cash payments
due under the swap or cap agreements. Collateral is not obtained from
counterparties to swap or cap agreements. Terms of the swaps and caps as of
January 31, 1995, are set forth in the table below.
<TABLE>
<S> <C>
Notional Amount $124,593
Weighted Average Maturity (in years) 1.74
Receive - Variable Index Primarily LIBOR
Pay - Weighted Average Fixed Rate 5.79%
</TABLE>
The estimated fair value amounts have been determined by the Company, using
current available market information as of each balance sheet date and
appropriate valuation methods. Considerable judgment is necessary in
interpreting market data to develop the estimates of fair value. The use of
different market assumptions and/or methods of estimation may have a material
effect on the estimated fair value amounts. Accordingly, the estimates presented
are not necessarily indicative of the amounts that the Company could realize in
a current market exchange or the value that ultimately will be realized by the
Company upon maturity or disposition.
Generally accepted accounting principles exclude certain items from its
disclosure requirements such as the Company's investment in leased assets.
Accordingly, the aggregate fair value amounts presented are not intended to
represent the underlying value of the net assets of the Company.
The carrying amounts for cash, receivables, accounts payable, accrued
liabilities, and revolving and line of credit notes payable approximate fair
value because of the short maturity of these instruments or, as to trade notes
receivable, bear interest rates that approximate current market rates.
36
<PAGE> 37
The estimated fair values of the Company's other financial instruments are
assets (liabilities) as follows:
<TABLE>
<CAPTION>
JANUARY 31
---------------------------------------------------------
1994 1995
------------------------- -------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Nonrecourse lease financing $(296,794) $(297,099) $(227,574) $(226,305)
Term loans and notes (50,832) (51,230) (7,505) (7,125)
Subordinated notes (9,588) (10,433) (9,636) (9,527)
Interest rate swaps and caps contracts 226 (1,520) 859 2,288
Letter of credit - (2,561) - (1,987)
</TABLE>
The fair values of nonrecourse lease financing, term loans and notes and
subordinated notes are estimated based on market rates of comparable debt for
similar remaining maturities at year end. The fair values of interest rate swaps
and caps, and the letter of credit are estimated based on pricing models or
formulas using current assumptions.
The fair value estimates presented herein are based on pertinent information
available to management as of January 31, 1994 and 1995. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued since that
date and, therefore, current estimates of fair value may differ significantly
from the amounts presented herein.
NOTE 19 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The amounts below reflect the total cash paid by the Company and are not
restated for the discontinued entities.
<TABLE>
<CAPTION>
Year Ended January 31
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Cash paid for:
Interest $42,354 $34,332 $28,848
Income taxes 18 190 422
</TABLE>
37
<PAGE> 38
<TABLE>
<CAPTION>
LDI CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JANUARY 31, 1995
(DOLLARS IN THOUSANDS)
ADDITIONS
CHARGED DEDUCTIONS BALANCE
BALANCE AT TO (ACCOUNTS AT
BEGINNING COSTS AND WRITTEN END OF
PERIOD EXPENSES OFF) PERIOD
--------- --------- ---------- -------
<S> <C> <C> <C> <C>
Year ended January 31, 1993:
Allowance for doubtful accounts $ 3,860 $ 1,230 $ (1,390) $ 3,700
======= ======= ======== =======
Allowance for uncollectible future lease rentals (1) $ 2,772 $ 335 $ (1,052) $ 2,055
======= ======= ======== =======
Reserve for inventory valuation (2) $ 529 $ 870 $ (21) $ 1,378
======== ======= ========= =======
Year ended January 31, 1994:
Allowance for doubtful accounts $ 3,700 $ 5,975 $ (3,375) $ 6,300
======= ======= ======== =======
Allowance for uncollectible future lease rentals (1) $ 2,055 $ 4,590 - $ 6,645
======= ======= ========== =======
Reserve for inventory valuation (2) $ 1,378 $ 7,138 $ (746) $ 7,770
======= ======= ======= =======
Reserves and liabilities related to discontinued
operations and restructuring programs - $ 7,456 - $ 7,456
========== ======= ========== =======
Reserve for residual valuation (3) - $ 11,060 $ (3,600) $ 7,460
========== ======== ======== =======
Year ended January 31, 1995:
Allowance for doubtful accounts $ 6,300 $ 2,401 $ (2,697) $ 6,004
======= ======= ========= =======
Allowance for uncollectible future lease rentals (1) $ 6,645 $ 338 $ (2,927) $ 4,056
======= ======== ========= =======
Reserve for inventory valuation (2) $ 7,770 $ 4,071 $ (6,220) $ 5,621
======= ======= ========= =======
Reserves and liabilities related to discontinued
operations and restructuring programs $ 7,456 $3,094 $ (8,598) $ 1,952
======= ====== ========= =======
Reserve for residual valuation (3) $ 7,460 $14,354 $(12,211) $ 9,603
======= ======= ========= =======
</TABLE>
(1) The allowance for uncollectible future lease rentals is included in the
caption "Leased Assets - Capital Leases" in the accompanying consolidated
balance sheet.
(2) The reserve for inventory valuation is included in the caption "Inventory
held for lease or sale" in the accompanying consolidated balance sheet.
(3) The reserve for residual valuation is included in the caption "Leased
Assets - Capital Leases" in the accompanying consolidated balance sheet.
38
<PAGE> 39
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The description of the directors of the Registrant is incorporated
hereby by reference from the section of the Proxy Statement for the 1995 Annual
Meeting of Stockholders (the "Proxy Statement"), entitled "Election of
Directors."
A description of the executive officers of the Registrant follows:
<TABLE>
<CAPTION>
Offices Held and
Name Age Business Experience
------------- ----------- ---------------------------
<S> <C> <C>
Robert S. Kendall 56 Chairman, President and Director of CPS Capital, Ltd., a
privately-owned mergers and acquisitions and institutional investments
company, since September 1994; Chairman of the Company since February
1989; Chief Executive Officer of the Company from February 1989 to July
1994; Chairman of Leasing Dynamics, Inc. from July 1989 to May 1991.
Floyd S. Robinson 48 President and Chief Executive Officer of the Company since August 1994;
President-Business Equipment Financing of USL Capital from January 1992
to July 1994; President and Chief Operating Officer of Fleet Credit
Corporation from 1986 to January 1992.
Frank G. Skedel 48 Executive Vice President and Chief Financial Officer of the Company
since June 1994; Senior Vice President of the Company from June 1991 to
June 1994; Treasurer of the Company since March 1991; Vice President of
the Company from April 1989 to June 1991; and President of LDI
Financial Services Corp. from July 1989 until its merger into the
Company in April 1991.
Mont C. Hollingsworth 47 Senior Vice President of the Company since June 1994; Vice President of
the Company from December 1992 to June 1994; Controller of the Company
since December 1992; Vice President and Controller, Leasing Services
Group, from April 1991 to December 1992; and Vice President and
Controller of Leasing Dynamics, Inc. from January 1989 until its merger
into the Company in April 1991.
Stephen F. Smith 44 Senior Vice President of the Company since October 1994; International
Operations Manager of G.E. Capital (Vendor Financial Services) from
June 1994 to October 1994; Senior Vice President of Credit and
Operations of USL Capital from August 1992 to June 1994; Senior Vice
President of Credit of Fleet Credit Corporation from November 1989 to
July 1992.
</TABLE>
39
<PAGE> 40
<TABLE>
<CAPTION>
Offices Held and
Name Age Business Experience
------------ ----------- ---------------------------
<S> <C> <C>
Richard G. Greece 47 Vice President and Assistant Treasurer of the Company since July 1994;
Director and Assistant Treasurer from August 1993 to July 1994;
Director of Accounting and Financial Projects from April 1991 to July
1993; Director of Accounting of LDI Financial Services from June 1990
until its merger into the Company in April 1991.
John S. Rainsberger 38 Vice President Sales - Leasing Services of the Company since December
1991; District Sales Manager of Leasing Dynamics, Inc. from January
1990 until December 1991.
Brian Turnbull 47 Vice President, Technology Services of the Company since December
1992; President and CEO of Servicescope Corporation from November 1990
to October 1992; Senior Vice President, Operations of Mediq
Corporation from January 1987 to October 1990.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by referenced from the section of the Proxy Statement entitled
"Executive Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the section of the Proxy Statement entitled
"Security Ownership of Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the section of the Proxy Statement entitled
"Executive Compensation -- Certain Transactions."
40
<PAGE> 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements and related notes of
the Registrant and its subsidiaries are included herein:
Independent Auditors' Report
Consolidated Balance Sheets, as of January 31, 1994 and 1995
Statements of Consolidated Earnings for the Years Ended January 31,
1993, 1994, and 1995 Statements of Consolidated Cash Flows for the
Years Ended January 31, 1993, 1994, and 1995 Statements of Consolidated
Shareholders' Equity for the Years Ended January 31, 1993, 1994, and
1995
Notes to Consolidated Financial Statements for the Years Ended
January 31, 1993, 1994, and 1995
(a)(2) Financial Statement Schedule:
The following financial statement schedule is included herein:
Schedule VIII -- Valuation and Qualifying Accounts
(a)(3) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- ------- ----------------------
<S> <C>
2.01 Asset Acquisition Agreement dated May 31, 1994, between LDI
Corporation and LDI Computer Systems, Inc., as Sellers, and MRK
Computer Systems, Inc., as Buyer (Included as an exhibit to the
Registrant's Quarterly Report on Form 10-Q (No. 0-15994) for the
quarter ended July 31, 1994, and incorporated herein by reference.)
3.01 Restated Certificate of Incorporation (Included as an exhibit to the
Registrant's Registration Statement on Form S-1 (No. 33-14486) and
incorporated herein by reference.)
3.02 By-laws, as amended (Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q (No. 0-15994) for the quarter ended
October 31, 1994, 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.)
</TABLE>
41
<PAGE> 42
<TABLE>
<S> <C>
4.02 Note Purchase Agreement dated as of July 2, 1991, between Registrant
and Olympus Private Placement Fund, L.P. (Included as an exhibit to
the Registrant's Quarterly Report on Form 10-Q (No. 0-15994) for the
quarter ended July 31, 1991, and incorporated herein by reference.)
4.03 Amendment dated April 29, 1994, to Note Purchase Agreement dated as
of July 2, 1991, between Registrant and Olympus Private Placement
Fund, L.P. (Included as an exhibit to the Registrant's Quarterly
Report on Form 10-Q (No. 0-15994) for the quarter ended April 30,
1994, and incorporated herein by reference.)
4.04 Form of Indemnification Agreement (Included as an exhibit to the
Registrant's Registration Statement on Form S-1 (No. 33-14486) and
incorporated herein by reference.)
4.05 Stockholders' Agreement dated May 22, 1987, among the Registrant,
Robert S. Kendall, Michael R. Kennedy, Thomas A. Cutter, Ronald M.
Lipson, Jay J. Ross, Primus Capital Fund and National City Venture
Corporation, as amended (Included as an exhibit to the Registrant's
Annual Report on Form 10-K (No. 0-15994) for the year ended January
31, 1991, and incorporated herein by reference.)
4.06 Amended and Restated Credit Agreement dated November 16, 1990,
between LDI Lease Funding Corporation and the Dai-Ichi Kangyo Bank
Ltd., Chicago Branch, and specimen Nonrecourse Promissory Note of
LDI Lease Funding Corporation (Included as an exhibit to the
Registrant's Annual Report on Form 10-K (No. 0-15994) for the year
ended January 31, 1992, and incorporated herein by reference.)
4.07 First Amendment dated August 1, 1991, to Amended and Restated Credit
Agreement dated November 16, 1990, between LDI Lease Funding
Corporation and the Dai-Ichi Kangyo Bank Ltd., Chicago Branch
(Included as an exhibit to the Registrant's Annual Report on Form
10-K (No. 0-15994) for the year ended January 31, 1992, and
incorporated herein by reference.)
4.08 Second Amendment dated November 15, 1991, to Amended and Restated
Credit Agreement dated November 16, 1990, between LDI Lease Funding
Corporation and the Dai-Ichi Kangyo Bank Ltd., Chicago Branch
(Included as an exhibit to the Registrant's Annual Report on Form
10-K (No. 0-15994) for the year ended January 31, 1992, and
incorporated herein by reference.)
4.09 Third Amendment dated January 15, 1992, to Amended and Restated
Credit Agreement dated November 16, 1990, between LDI Lease Funding
Corporation and the Dai-Ichi Kangyo Bank Ltd., Chicago Branch
(Included as an exhibit to the Registrant's Annual Report on Form
10-K (No. 0-15994) for the year ended January 31, 1992, and
incorporated herein by reference.)
</TABLE>
42
<PAGE> 43
<TABLE>
<S> <C>
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 Annual Report on Form
10-Q (No. 0-15994) for the quarter ended August 31, 1993, and
incorporated herein by reference.)
4.13 Seventh Amendment dated October 1, 1993, to Amended and Restated
Credit Agreement dated November 16, 1990, between LDI Lease Funding
Corporation and the Dai-Ichi Kangyo Bank Limited, Chicago Branch
(Included as an exhibit to the Registrant's Annual Report on Form
10-Q (No. 0-15994) for the quarter ended October 31, 1993, and
incorporated herein by reference.)
4.14 Lease Receivables Transfer Agreement dated as of October 7, 1994,
among LDI Lease Receivables Funding Corp., CXC Incorporated and
Citicorp North America, Inc. (Included as an exhibit to the
Registrant's Quarterly Report on Form 10-Q (No. 0-15994) for the
quarter ended October 31, 1994, and incorporated herein by
reference.)
4.15 Lease Receivables Purchase and Contribution Agreement dated as of
October 7, 1994, between LDI Lease Receivables Funding Corp. and
Registrant. (Included as an exhibit to the Registrant's Quarterly
Report on Form 10-Q (No. 0-15994) for the quarter ended October 31,
1994, and incorporated herein by reference.)
4.16 Note Purchase Agreement dated as of August 1, 1989, among the
Registrant, Northwestern National Life Insurance Company and the
other parties listed in Appendix I thereto (Included as an exhibit
to the Registrant's Quarterly Report on Form 10-Q (No. 0-15994) for
the quarter ended October 31, 1989, and incorporated herein by
reference.)
</TABLE>
43
<PAGE> 44
<TABLE>
<S> <C>
4.17 Amendment dated as of January 31, 1992, to the Note Purchase
Agreement dated August 31, 1989, among the Registrant, Northwestern
National Life Insurance Company and the other parties listed in
Appendix I thereto (Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q (No. 0-15994) for the quarter ended
April 30, 1992, and incorporated herein by reference.)
4.18 Amendment dated May 2, 1994, to Note Purchase Agreement dated August
31, 1989, among Registrant, Northwestern National Life Insurance
Company and the other parties listed in Appendix I thereto (Included
as an exhibit to the Registrant's Annual Report on Form 10-K (No.
0-15994) for the year ended January 31, 1994, and incorporated
herein by reference.)
4.19 Letter Amendment dated July 29, 1994, to Note Purchase Agreement
dated August 31, 1989, among Registrant, Northwestern National Life
Insurance Company and the other parties listed in Appendix I thereto
(Included as an exhibit to the Registrant's Quarterly Report on Form
10-Q (No. 0-15994) for the quarter ended July 31, 1994, and
incorporated herein by reference.)
4.20 Amended and Restated Promissory Note of the Registrant dated as of
July 1, 1993, in favor of National Westminster Bank USA (Included as
an exhibit to the Registrant's Quarterly Report on Form 10-Q (No.
0-15994) for the quarter ended October 31, 1993, and incorporated
herein by reference.)
4.21 Amendment dated April 29, 1994, to Amended and Restated Promissory
Note of Registrant dated as of July 1, 1993, in favor of National
Westminster Bank USA (Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q (No. 0-15994) for the quarter ended
April 30, 1994, and incorporated herein by reference.)
4.22 Second Amended and Restated Credit Agreement dated July 29, 1994,
among Registrant, certain Commercial Lending Institutions, and
National City Bank, Society National Bank and Continental Bank N.A.,
as co-agents (Included as an exhibit to the Registrant's Quarterly
Report on Form 10-Q (No. 0-15994) for the quarter ended July 31,
1994, and incorporated herein by reference.)
4.23 Consent, Waiver and Amendment No. 1 dated as of January 20, 1995 to
Second Amendment and Restated Credit Agreement dated July 29, 1994.
4.24 Amendment No. 2 dated as of March 10, 1995 to Second Amended and
Restated Credit Agreement dated July 29, 1994.
4.25 Amendment No. 3 dated as of April 28, 1995 to Second Amended and
Restated Credit Agreement dated July 29, 1994.
44
<PAGE> 45
4.26 Letter Amendment dated as of April 28, 1995 to Note Purchase
Agreement dated August 31, 1989, among registrant, Northwestern
National Life Insurance Company and the other parties listed in
Appendix I thereto.
4.27 Amendment No. 4 dated as of May 15, 1995 to Second Amended and
Restated Credit Agreement dated July 29, 1994.
4.28 Letter Amendment dated as of May 15, 1995 to Note Purchase Agreement
dated August 31, 1989, among registrant, Northwestern Mutual Life
Insurance Company and the other parties listed in Appendix I
thereto.
4.29 Amendment dated April 27, 1995, to Note Purchase Agreement dated as
of July 2, 1991, between registrant and Olympus Private Placement
Fund, L.P.
10.01 1995 Non-Employee Directors' Stock Option Plan.
10.02 Amended and Restated Employee Stock Option Plan.
11.01 Computation of Earnings Per Share for the year ended January 31, 1995.
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>
(b) Reports on Form 8-K:
On March 22, 1995, the Registrant filed a report on Form 8-K with
respect to certain special charges to be recorded as of January 31,
1995.
(c) Exhibits:
The Exhibits listed in Item 14 are included and submitted with this
report.
(d) Financial Statement Schedules:
The financial statement schedules required to be filed with this report
are included in Item 8 of this report.
45
<PAGE> 46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LDI CORPORATION
Date: May 16, 1995 By: /s/Floyd S. Robinson
---------------------
Floyd S. Robinson, President and
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/Floyd S. Robinson President, Chief Executive Officer May 16, 1995
- -----------------------------
Floyd S. Robinson and Director (Principal Executive
Officer)
/s/Frank G. Skedel Executive Vice President and Chief May 16, 1995
- -----------------------------
Frank G. Skedel Financial Officer (Principal Financial
Officer)
/s/Mont C. Hollingsworth Senior Vice President and Controller May 16, 1995
- -----------------------------
Mont C. Hollingsworth (Principal Accounting Officer)
/s/Robert S. Kendall Chairman of the Board and Director May 16, 1995
- -----------------------------
Robert S. Kendall
/s/Scott S. Cowen Director May 16, 1995
- -----------------------------
Scott S. Cowen
/s/Thomas A. Cutter Director May 16, 1995
- -----------------------------
Thomas A. Cutter
/s/Michael R. Kennedy Director May 16, 1995
- -----------------------------
Michael R. Kennedy
/s/Norton W. Rose Director May 16, 1995
- -----------------------------
Norton W. Rose
</TABLE>
46
<PAGE> 1
EXHIBIT 4.23
CONSENT, WAIVER AND
AMENDMENT NO.1
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT,
CONSENT AND WAIVER WITH RESPECT TO NOTE PURCHASE
AGREEMENT, AND CONSENT AND WAIVER OF INTERCREDITOR LENDERS
THIS CONSENT, WAIVER AND AMENDMENT NO.1 TO SECOND AMENDED AND
RESTATED CREDIT AGREEMENT, CONSENT AND WAIVER WITH RESPECT TO NOTE PURCHASE
AGREEMENT, AND CONSENT AND WAIVER OF INTERCREDITOR LENDERS (this "Agreement"),
is made as of this 20th day of January, 1995, among LDI CORPORATION, a Delaware
corporation ("Borrower"), the various financial institutions listed on the
signature pages hereof (collectively, the "Intercreditor Lenders"), and BANK OF
AMERICA ILLINOIS (successor in interest to Continental Bank N.A.), as
collateral agent (the "Collateral Agent"),
WITNESSETH:
WHEREAS, Borrower has entered into that certain Second Amended
and Restated Credit Agreement, dated as of July 29, 1994 (the "Bank Credit
Agreement"), with the various financial institutions listed on the signature
pages thereto (the "Credit Agreement Banks"), pursuant to which the Credit
Agreement Banks have made certain financial accommodations available to
Borrower;
WHEREAS, Borrower has entered into that certain (a) Note
Purchase Agreement, dated as of August 31, 1988 (as amended, the "1994 Note
Purchase Agreement"), with Northwestern National Life Insurance Company
("Northwestern"), The North Atlantic Life Insurance Company of America ("North
Atlantic"), Confederation Life Insurance Company ("Confederation"), The
Minnesota Mutual Life Insurance Company ("Minnesota Life"), Farm Bureau Life
Insurance Company of Michigan ("Farm Bureau"), FB Annuity Company ("FB
Annuity") and Farm Bureau Mutual Insurance Company of Michigan ("Farm Bureau
Mutual") (North Atlantic, Minnesota Life, Farm Bureau, FB Annuity and Farm
Bureau Mutual being collectively referred to as the "Paid-Off Lenders"), and
(b) Note Purchase Agreement, dated as of August 1, 1989 (as amended, the "1995
Note Purchase Agreement"), with Northwestern, Northern Life Insurance Company,
Confederation and Beneficial Standard Life Insurance Company (such financial
institutions being collectively referred to as the "1995 Noteholders"),
pursuant to each of which the foregoing financial institutions have made
certain financial accommodations available to Borrower;
WHEREAS, Borrower has executed and delivered that certain
Promissory Note, dated as of July 1, 1993, in favor of
<PAGE> 2
National Westminster Bank USA, in the original principal amount of $20,000,000
(as amended, the "Natwest Note");
WHEREAS, Borrower has executed and delivered that certain
Amended and Restated Security Agreement, dated as of July 29, 1994 (the
"Security Agreement"), in favor of the Collateral Agent, pursuant to which
Borrower (a) ratified and confirmed the grant of the security interest to the
Existing Lenders (as defined in the Security Agreement) under the Existing
Security Agreement (as defined in the Security Agreement) and (b) granted a
continuing security interest to the Collateral Agent, for the benefit of the
Collateral Agent and each of the Co-Agents (as defined in the Security
Agreement) and for the ratable benefit of the Intercreditor Lenders, in and to
the Collateral (as defined in the Security Agreement), all as security for
Borrower's obligations under the Bank Credit Agreement, the 1994 Note Purchase
Agreement, the 1995 Note Purchase Agreement and the Natwest Note;
WHEREAS, in connection with the Bank Credit Agreement, the
1994 Note Purchase Agreement, the 1995 Note Purchase Agreement, the Natwest
Note and the Security Agreement, Borrower, the Intercreditor Lenders, the
Paid-Off Lenders and the Collateral Agent entered into that certain
Intercreditor Agreement, dated as of July 29, 1994 (the "Intercreditor
Agreement");
WHEREAS, all of Borrower's obligations with respect to the
1994 Note Purchase Agreement have been paid and performed in full;
WHEREAS, Borrower has informed the Intercreditor Lenders and
the Collateral Agent that Picker Financial Group ("PFG"), an Ohio general
partnership established pursuant to that certain Joint Venture Partnership
Agreement, dated February 27, 1992 (the "Joint Venture Agreement"), between
Picker Financial Corporation and LDI Finance Company, has entered into certain
financial arrangements with Heller Financial, Inc., a Delaware corporation
("Heller"), pursuant to the terms of (a) a Loan and Security Agreement, dated
December 22, 1994 (the "Heller Loan Agreement"), a copy of which is attached
hereto as Exhibit A, and (b) a Contract Warehousing Agreement, dated December
22, 1994 (the "Warehousing Agreement"), a copy of which is attached hereto as
Exhibit B (such financial arrangements provided to PFG by Heller under the
Heller Loan Agreement and the Warehousing Agreement being referred to herein as
the "Heller/PFG Financing");
WHEREAS, the Joint Venture Agreement has been amended by that
certain Amendment, dated July 31, 1992, to provide, inter alia, that Borrower,
rather than LDI Finance
-2-
<PAGE> 3
Company, is the joint venture partner under the Joint Venture Agreement;
WHEREAS, Borrower also has informed the Intercreditor Lenders,
the Co-Agents and the Collateral Agent that in connection with the Heller/PFG
Financing, Borrower and Picker International Corporation ("Picker
International") guaranteed PFG's obligations under the Heller/PFG Financing,
pursuant to the terms of (a) a Guaranty, dated December 22, 1994, as amended by
that certain letter agreement, dated January 17, 1995, among Borrower, Picker
International and Heller (collectively, the "Heller Loan Agreement Guaranty"),
a copy of each of which is attached hereto as Exhibit C, and (b) a Guaranty,
dated December 22, 1994, as amended by that certain letter agreement, dated
January 17, 1995, among Borrower, Picker International and Heller
(collectively, the "Warehousing Agreement Guaranty"), a copy of each of which
is attached hereto as Exhibit D;
WHEREAS, part of the proceeds of the Heller/PFG Financing have
been used to pay all amounts owing by PFG to Borrower under the Picker Note (as
defined in the Security Agreement), and in connection with such payment,
Borrower released its liens on and security interests in the assets of PFG;
WHEREAS, Borrower has requested that the Credit Agreement
Banks (a) consent to the incurrence by PFG of indebtedness pursuant to the
Heller Loan Agreement and the Warehousing Agreement and waive all defaults
which have arisen under the Bank Credit Agreement as a result of the incurrence
of such indebtedness, (b) consent to the incurrence of indebtedness by Borrower
pursuant to the terms of the Heller Loan Agreement Guaranty and the Warehousing
Agreement Guaranty and waive all defaults which have arisen under the Bank
Credit Agreement as a result of the incurrence of such indebtedness and (c)
amend the Bank Credit Agreement to increase the Applicable Residual Percentage
(as defined in the Bank Credit Agreement) from sixty-five percent (65%) to
seventy percent (70%) for the period commencing on November 30, 1994 and ending
on the earlier of (i) January 30, 1995 and (ii) the actual date on which
Borrower shall have delivered the Borrowing Base Certificate (as defined in the
Bank Credit Agreement) which is otherwise due on January 30, 1995;
WHEREAS, Borrower also has requested that the 1995 Noteholders
(a) consent to the incurrence by PFG of indebtedness pursuant to the Heller
Loan Agreement and the Warehousing Agreement and waive all defaults which have
arisen under the 1995 Note Purchase Agreement as a result of the incurrence of
such indebtedness and (b) consent to the incurrence of indebtedness by Borrower
pursuant to the terms
-3-
<PAGE> 4
of the Heller Loan Agreement Guaranty and the Warehousing Agreement Guaranty
and waive all defaults which have arisen under the 1995 Note Purchase Agreement
as a result of the incurrence of such indebtedness;
WHEREAS, Borrower also has requested that the Intercreditor
Lenders (a) direct the Collateral Agent to release the Picker Note (as defined
in the Security Agreement) to Borrower for delivery to PFG, and (b) consent to
the release by Borrower of its liens on and security interests in the assets of
PFG and waive all defaults which have arisen under the Security Agreement as a
result of the release of such liens and security interests; and
WHEREAS, the Credit Agreement Banks, the 1995 Noteholders and
the Intercreditor Lenders are willing give such consents and waivers upon the
terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
SECTION 1. CONSENTS AND WAIVERS OF THE CREDIT
AGREEMENT BANKS AND THE 1995 NOTEHOLDERS.
1.1 Consents and Waivers of the Credit Agreement Banks.
Subject to the terms and the conditions set forth in this Agreement, the Credit
Agreement Banks hereby (a) consent to the incurrence by PFG of Indebtedness (as
defined in the Bank Credit Agreement) pursuant to the terms of the Heller Loan
Agreement and the Warehousing Agreement, (b) consent to the incurrence by
Borrower of Indebtedness (as defined in the Bank Credit Agreement) pursuant to
the terms of the Heller Loan Agreement Guaranty and the Warehousing Agreement
Guaranty, and (c) waive any Default or Event of Default (as such terms are
defined in the Bank Credit Agreement) which has occurred under the Bank Credit
Agreement as a result of the incurrence of such Indebtedness by PFG and
Borrower.
1.2 Consents and Waiver of the 1995 Noteholders. Subject to
the terms and the conditions set forth in this Agreement, the 1995 Noteholders
hereby (a) consent to the incurrence by PFG of Indebtedness (as defined in the
Bank Credit Agreement) pursuant to the terms of the Heller Loan Agreement and
the Warehousing Agreement, (b) consent to the incurrence by Borrower of
Indebtedness (as defined in the Bank Credit Agreement) pursuant to the terms of
the Heller Loan Agreement Guaranty and the Warehousing Agreement Guaranty, and
(c) waive any Event of Default (as such term is defined in the
-4-
<PAGE> 5
1995 Note Purchase Agreement) or event which with the passing of time or giving
of notice, or both, would constitute an Event of Default, which has occurred
under the 1995 Note Purchase Agreement as a result of the incurrence of such
Indebtedness by PFG and Borrower.
SECTION 2. AMENDMENTS TO THE BANK CREDIT AGREEMENT.
2.1 Amendment to Section 1.1. The Credit Agreement Banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by deleting the definition of "Applicable Residual Percentage" in
its entirety and substituting the following new definition of "Applicable
Residual Percentage" in lieu thereof:
"Applicable Residual Percentage" means (a) eighty
percent (80%) for the period commencing on the Effective Date
and ending on July 30, 1994, (b) seventy-five percent (75%)
for the period commencing on July 31, 1994 and ending on
October 30, 1994, (c) sixty-five percent (65%) for the period
commencing on October 31, 1994, and ending on November 29,
1994, (d) seventy percent (70%) for the period commencing on
November 30, 1994 and ending on the earlier of (i) January 30,
1995 and (ii) the actual date on which Borrower shall have
delivered to each Bank the Borrowing Base Certificate which is
otherwise due on January 30, 1995, and (e) sixty-five percent
(65%) upon the earlier to occur of (i) and (ii) set forth in
clause (d) above, at which time such Applicable Residual
Percentage shall be deemed to be effective as of December 31,
1994, and at all times after such date.
2.2 Amendment to Section 7.1.1. The Credit Agreement
Banks and the Borrower hereby agree that Section 7.1.1 of the Bank Credit
Agreement shall be amended by deleting Section 7.1.1(o) in its entirety and
substituting the following new Section 7.1.1(o) in lieu thereof:
(o) such other information respecting the
condition or operations, financial or otherwise, of the
Borrower or any of its Subsidiaries as any Co-Agent or any
Bank through any of the Co-Agents may from time to time
request;
-5-
<PAGE> 6
2.3 Amendment to Section 7.1.1. The Credit Agreement
Banks and Borrower hereby agree that Section 7.1.1 of the Bank Credit Agreement
shall be amended by adding the following new Section 7.1.1(p):
(p) on Wednesday of each week ("Sources and Uses
Delivery Date"), a working capital reconciliation report, in
form and substance satisfactory to the Banks, showing in
reasonable detail all changes in the amount of Borrower's
cash, cash expenditures by control account, a treasury
department working capital report and Loans made to Borrower
during the seven (7) day period commencing on the Monday
occurring nine (9) days prior to such Sources and Uses
Delivery Date and ending on the Sunday occurring three (3)
days prior to such Sources and Uses Delivery Date, and also
showing a ninety (90) day revolving cash report, certified by
the Chairman, President, Treasurer, any Assistant Treasurer or
Chief Financial Officer of Borrower to have been prepared in
good faith;
2.4 Amendment to Section 7.1.1. The Credit Agreement Banks and
the Borrower hereby agree that Section 7.1.1 of the Bank Credit Agreement shall
be amended by adding the following new Section 7.1.1(q):
(q) on or before January 20, 1995, a financial
plan of Borrower and its Subsidiaries for their fiscal year
ending January 31, 1996, in form and substance satisfactory to
the Banks.
2.5 Amendment to Section 8.13. The Credit Agreement Banks and
Borrower hereby agree that Section 8.1.3 of the Bank Credit Agreement shall be
amended by deleting Section 8.1.3 in its entirety and substituting the
following new Section 8.1.3 in lieu thereof:
SECTION 8.1.3 Non-Performance of Certain Covenants
and Obligations. The Borrower or any of its Subsidiaries
shall default in the due performance and observance of any of
its obligations under Section 7.1.1(a), Section 7.1.1(b),
Section 7.1.1(c), Section 7.1.1(d), Section 7.1.1(e), Section
7.1.1(f), Section 7.1.1(g), Section 7.1.1(h),
-6-
<PAGE> 7
Section 7.1.1(i), Section 7.1.1(j), Section 7.1.1(k), Section
7.1.1(l), Section 7.1.1(m), Section 7.1.1(n), Section
7.1.1(p), Section 7.1.1(q), Section 7.1.5, Section 7.2.1,
Section 7.2.2, Section 7.2.3, Section 7.2.4(a), Section 7.2.4
(c), Section 7.2.4(d), Section 7.2.4(e), Section 7.2.4(f),
Section 7.2.5, Section 7.2.6, Section 7.2.7, Section 7.2.8,
Section 7.2.9, Section 7.2.10, Section 7.2.11 or Section
7.2.12, or an event of default shall occur under either of the
Security Agreements.
2.6 Amendment to Article VIII. The Credit Agreement
Banks and Borrower hereby agree that Article VIII to the Bank Credit Agreement
shall be amended by adding the following new Section 8.1.11:
SECTION 8.1.11 Default Under Picker Joint Venture
Financing. An event of default (howsoever described or
defined) shall occur under (a) the Loan and Security
Agreement, dated as of December 22, 1994, as the same may be
amended, supplemented or otherwise modified from time to time
("Heller Loan Agreement"), between the Picker Joint Venture
and Heller Financial, Inc. ("Heller"), (b) the Contract
Warehousing Agreement, dated as of December 22, 1994, as the
same may be amended, supplemented or otherwise modified from
time to time ("Warehousing Agreement"), between the Picker
Joint Venture and Heller, or (c) any agreement, instrument or
other document executed or to be executed in connection with
the Heller Loan Agreement and/or the Warehousing Agreement, as
such agreements, instruments or other documents may be
amended, supplemented or otherwise modified from time to time.
-7-
<PAGE> 8
SECTION 3. CONSENT AND WAIVER OF THE INTERCREDITOR
LENDERS; REPRESENTATIONS OF BORROWER.
3.1 Consents and Waiver of the Intercreditor Lenders. Subject
to the terms and the conditions set forth in this Agreement, the Intercreditor
Lenders hereby (a) consent to the terms and provisions of Section 1 and Section
2 of this Agreement, (b) consent to the release by Borrower of its liens on and
security interests in the assets of PFG and waive any Default or Event of
Default (as such terms are defined in the Security Agreement) which has
occurred under the Security Agreement as a result of such release by Borrower
of its liens on and security interest in the assets of PFG, and (c) consent to
the release of the Picker Note (as defined in the Security Agreement) by the
Collateral Agent to Borrower for delivery to PFG. Subject to the terms and the
conditions set forth in this Agreement, the Intercreditor Lenders hereby
authorize and direct the Collateral Agent to deliver the Picker Note (as
defined in the Security Agreement) to Borrower for delivery to PFG.
3.2 Representations of Borrower. Borrower hereby represents
and warrants to the Intercreditor Lenders that Borrower has paid and performed
all of its obligations with respect to the 1994 Note Purchase Agreement.
Borrower further represents and warrants to the Intercreditor Lenders that the
Paid-Off Lenders (a) have no further rights or obligations under the
Intercreditor Agreement, the Security Agreement, or the Amended and Restated
Security Agreement, dated as of July 29, 1994 (the "Subsidiary Security
Agreement"), executed by LDI of Ohio, Inc. in favor of the Collateral Agent,
and (b) no longer are Subject Lenders (as such term is defined in the
Intercreditor Agreement) or parties to the Intercreditor Agreement, or
Intercreditor Lenders (as such term is defined in the Security Agreement and
the Subsidiary Security Agreement).
SECTION 4. CONDITIONS PRECEDENT TO
EFFECTIVENESS.
In addition to all of the other conditions and agreements set
forth herein, the effectiveness of the consents, waivers, authorization and
direction set forth in this Agreement, and the amendment set forth in Section
2.1 of this Agreement, is subject to the following conditions precedent:
4.1 Acknowledgment of LDI of Ohio, Inc.. The
Intercreditor Lenders shall have received an original of the
-8-
<PAGE> 9
attached Acknowledgment of LDI of Ohio, Inc. ("Guarantor"), executed and
delivered by a duly authorized officer of Guarantor.
4.2 PFG Financing Documents. Borrower shall have
delivered to the Intercreditor Lenders fully executed copies of the Heller Loan
Agreement, the Warehousing Agreement, the Heller Loan Agreement Guaranty, the
Warehousing Agreement Guaranty and each of the other agreements, instruments
and documents executed in connection therewith, each of which shall be in form
and substance satisfactory to the Intercreditor Lenders.
4.3 Heller Agreement. The Intercreditor Lenders shall have
received a written agreement executed by Heller in favor of the Co-Agents (as
defined in the Bank Credit Agreement) whereby Heller agrees that (a) upon
Heller's becoming aware of the occurrence of an event of default under the
Heller Loan Agreement and/or the Warehousing Agreement, Heller shall notify the
Co- Agents in writing of the existence of such event of default, and (b) not
less than ten (10) days prior to any demand by Heller for payment by Borrower
under the Heller Loan Agreement Guaranty and/or the Warehousing Agreement
Guaranty, Heller shall notify the Co- Agents in writing of Heller's intent to
make such demand.
SECTION 5. MISCELLANEOUS.
5.1 Consultant. Borrower hereby agrees that it shall pay
the fees and expenses (including, but not limited to, any retainer which may be
required) of an independent consultant to be hired by the Intercreditor
Lenders, which consultant shall assist the Intercreditor Lenders in the review
of the financial plan referred to in Section 2.4 of this Agreement and other
matters and issues with respect thereto. Borrower agrees to cooperate with
such independent consultant in its review. Failure to pay such fees and
expenses or cooperate with such independent consultant shall constitute an
Event of Default under the Bank Credit Agreement.
5.2 Other Terms With Respect to the Waivers and Consents.
The effectiveness of the provisions of Section 1, Section 2.1 and Section 3.1
hereof shall also be subject to the condition that, in all other respects,
Borrower, as of the date hereof, shall not have violated any warranties,
covenants, agreements or provisions or otherwise suffered to occur any Default
or Event of Default (as such terms are defined in the Bank Credit Agreement)
under the Bank Credit
-9-
<PAGE> 10
Agreement, or violated any warranties, covenants, agreements or provisions, or
otherwise suffered to occur any Event of Default (as defined in the 1995 Note
Purchase Agreement) under the 1995 Note Purchase Agreement, or violated any
warranties, covenants, agreements or provisions, or otherwise suffered to occur
any Default or Event of Default (as such terms are defined in the Security
Agreement) under the Security Agreement. The waivers given as set forth in
Section 1 and Section 3.1(b) hereof shall not extend to prejudice any rights
and remedies which the Credit Agreement Banks, the 1995 Noteholders or the
Intercreditor Lenders may have in respect of any other violations of any of the
terms and provisions of the Bank Credit Agreement, the 1995 Note Purchase
Agreement or the Intercreditor Agreement, as the case may be.
5.3 Bank Credit Agreement, the Security Agreement and
1995 Note Purchase Agreement. The execution of this Agreement by Borrower
shall serve as an acknowledgment that (a) the waivers and consents set forth
herein shall not affect the continued legality, validity and binding effect of
the Bank Credit Agreement, as amended as set forth herein, the Security
Agreement and the 1995 Note Purchase Agreement, as amended as set forth herein,
and (b) the Bank Credit Agreement, as amended as set forth herein, the Security
Agreement and the 1995 Note Purchase Agreement, as amended as set forth herein,
remain in full force and effect and remain the valid and binding obligations of
Borrower enforceable against Borrower in accordance with their respective
terms. Borrower hereby ratifies and confirms the Bank Credit Agreement, as
amended as set forth herein, the Security Agreement and the 1995 Note Purchase
Agreement, as amended as set forth herein.
5.4 Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of Ohio, without regard
to principles of conflict of law.
5.5 Severability. In the event any provision of this
Agreement should be invalid, the validity of the other provisions hereof shall
not be affected thereby.
5.6 Counterparts. This Agreement may be executed in one or
more counterparts, each of which, when taken together, shall constitute but one
and the same agreement.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as a sealed instrument as of the date first set forth above.
<TABLE>
<S> <C>
LDI CORPORATION, Borrower BANK OF AMERICA ILLINOIS (successor in
interest to Continental Bank, N.A.), as
Collateral Agent
By:
------------------------------------------ By:
------------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
BANK OF AMERICA ILLINOIS
NATIONAL CITY BANK, Intercreditor Lender and
(successor in interest to Credit Agreement Bank
Continental Bank N.A.),
Intercreditor Lender and Credit Agreement Bank
By:
By: ------------------------------------------
------------------------------------------ Title:
Title: ---------------------------------------
---------------------------------------
SOCIETY NATIONAL BANK,
Intercreditor Lender NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY,
and Credit Agreement Bank Intercreditor Lender and 1995 Noteholder
By:
By: ------------------------------------------
------------------------------------------ Title:
Title: ---------------------------------------
---------------------------------------
CONFEDERATION LIFE INSURANCE COMPANY, BENEFICIAL STANDARD LIFE INSURANCE COMPANY,
Intercreditor Lender and 1995 Noteholder
Intercreditor Lender and 1995 Noteholder
By: By:
------------------------------------------ ------------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
COMERICA BANK, Intercreditor Lender and Credit
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
Agreement Bank Intercreditor Lender and Credit Agreement Bank
By:
By: ------------------------------------------
------------------------------------------ Title:
Title: ---------------------------------------
---------------------------------------
</TABLE>
-11-
<PAGE> 12
<TABLE>
<S> <C>
THE DAIWA BANK, LIMITED,
THE FIFTH THIRD BANK, Intercreditor Lender and
Acting through its Chicago Credit Agreement Bank
Branch, Intercreditor Lender and Credit
Agreement Bank By:
------------------------------------------
Title:
By: -------------------------------------- ---------------------------------------
Title: And
-------------------------------------- by:
------------------------------------------
Title:
---------------------------------------
STAR BANK, NATIONAL ASSOCIATION, Intercreditor
FIRST NATIONAL BANK OF OHIO, Intercreditor
Lender and Credit Agreement Bank Lender and Credit Agreement Bank
By:
-----------------------------------------
Title: By:
-------------------------------------- ------------------------------------------
Title:
---------------------------------------
MICHIGAN NATIONAL BANK, Intercreditor Lender THE BANK OF TOKYO TRUST COMPANY, Intercreditor
and Credit Agreement Bank Lender and Credit Agreement Bank
By:
------------------------------------------
By: Title:
----------------------------------------- ---------------------------------------
Title:
--------------------------------------
FIRST BANK NATIONAL ASSOCIATION, Intercreditor
NATIONAL WESTMINSTER BANK, USA, Intercreditor
Lender and Credit Agreement Bank Lender
By: By:
----------------------------------------- ------------------------------------------
Title: Title:
-------------------------------------- ---------------------------------------
NORTHERN LIFE INSURANCE COMPANY, Intercreditor
Lender and 1995 Noteholder
By:
-----------------------------------------
Title:
--------------------------------------
</TABLE>
-12-
<PAGE> 13
ACKNOWLEDGMENT OF LDI OF OHIO, INC.
The undersigned, LDI of Ohio, Inc., hereby acknowledges and
consents to the terms and provisions set forth in the foregoing Consent, Waiver
and Amendment No.1 to Second Amended and Restated Credit Agreement, Consent and
Waiver With Respect To Note Purchase Agreement, and Consent and Waiver of
Intercreditor Lenders ("Agreement"). The undersigned represents and warrants
to the Intercreditor Lenders (as defined in the foregoing Agreement) that (a)
the Guaranty of Payment of Debt, executed and delivered by the undersigned,
dated July 29, 1994, and (b) the Amended and Restated Security Agreement, dated
as of July 29, 1994 remain the valid and binding obligations of the
undersigned, enforceable against it in accordance with their respective terms.
LDI OF OHIO, INC.
By:
-------------------------------------
Its:
------------------------------------
Dated: January 20, 1995
<PAGE> 1
AMENDMENT NO. 2 EXHIBIT 4.24
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT,
AND CONSENT OF INTERCREDITOR LENDERS
THIS AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT, AND CONSENT OF INTERCREDITOR LENDERS (this "Agreement"), is made as
of this 10th day of March, 1995, among LDI CORPORATION, a Delaware corporation
("Borrower"), the various financial institutions listed on the signature pages
hereof (collectively, the "Intercreditor Lenders"), and SOCIETY NATIONAL BANK
(successor collateral agent to Bank of America Illinois), as collateral agent
(the "Collateral Agent"),
WITNESSETH:
WHEREAS, Borrower has entered into that certain Second Amended
and Restated Credit Agreement, dated as of July 29, 1994 (as amended by that
certain Consent, Waiver and Amendment No. 1 to Second Amended and Restated
Credit Agreement, Consent and Waiver with Respect to Note Purchase Agreement,
and Consent and Waiver of Intercreditor Lenders, dated as of January 20, 1995,
the "Bank Credit Agreement"), with the various financial institutions listed on
the signature pages thereto (the "Credit Agreement Banks"), pursuant to which
the Credit Agreement Banks have made certain financial accommodations available
to Borrower;
WHEREAS, Borrower has entered into that certain Note Purchase
Agreement, dated as of August 1, 1989 (as amended, the "1995 Note Purchase
Agreement"), with Northwestern National Life Insurance Company, Northern Life
Insurance Company, Confederation Life Insurance Company and Beneficial Standard
Life Insurance Company (such financial institutions being collectively referred
to as the "1995 Noteholders"), pursuant to which the 1995 Noteholders have made
certain financial accommodations available to Borrower;
WHEREAS, Borrower has executed and delivered that certain
Promissory Note, dated as of July 1, 1993, in favor of National Westminster
Bank USA, in the original principal amount of $20,000,000 (as amended, the
"Natwest Note");
WHEREAS, Borrower has executed and delivered that certain
Amended and Restated Security Agreement, dated as of July 29, 1994 (the
"Security Agreement"), in favor of the Collateral Agent, pursuant to which
Borrower (a) ratified and confirmed the grant of the security interest to the
Existing Lenders (as defined in the Security Agreement) under the Existing
Security Agreement (as defined in the Security Agreement) and (b) granted a
continuing security interest to the Collateral Agent, for the benefit of the
Collateral Agent and each of the Co-Agents (as defined in the Security
Agreement) and for the ratable benefit of the Intercreditor Lenders, in and to
the Collateral (as defined in the Security
<PAGE> 2
Agreement), all as security for Borrower's obligations under the Bank Credit
Agreement, the 1995 Note Purchase Agreement and the Natwest Note;
WHEREAS, in connection with the Bank Credit Agreement, the
1995 Note Purchase Agreement, the Natwest Note and the Security Agreement,
Borrower, the Intercreditor Lenders and the Collateral Agent entered into that
certain Intercreditor Agreement, dated as of July 29, 1994 (the "Intercreditor
Agreement");
WHEREAS, Borrower has requested that the Credit Agreement
Banks amend the Bank Credit Agreement as set forth in this Agreement; and
WHEREAS, the Credit Agreement Banks are willing to amend the
Bank Credit Agreement upon the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
SECTION 1. AMENDMENTS TO AND WAIVERS OF CERTAIN PROVISIONS UNDER THE BANK
CREDIT AGREEMENT.
1.1 Amendment to Section 1.1. The Credit Agreement Banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by deleting the definition of "Aircraft Residual Reserve Amount" in
its entirety and substituting the following new definition of "Aircraft
Residual Reserve Amount" in lieu thereof:
"Aircraft Residual Reserve Amount" means an amount
equal to Two Hundred Fifty Thousand Dollars ($250,000) or such
other amount as may be determined by the Required Co-Agents,
in their sole discretion, after review of appraisals
acceptable to the Required Co-Agents, in their sole
discretion.
1.2 Amendment to Section 1.1. The Credit Agreement Banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by deleting the definition of "Applicable Eligible Aged Receivables
Percentage" in its entirety and substituting the following new definition of
"Applicable Eligible Aged Receivable Amount" in lieu thereof:
-2-
<PAGE> 3
"Applicable Eligible Aged Receivables Percentage"
means (a) twenty-five percent (25%) for the period commencing
on the Effective Date and ending on July 30, 1994; (b) twenty
percent (20%) for the period commencing on July 31, 1994, and
ending on October 30, 1994; and (c) fifteen percent (15%) on
October 31, 1994, and at all times thereafter.
1.3 Amendment to Section 1.1. The Credit Agreement Banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by deleting the definition of "Applicable Extended Eligible
Committed Inventory" in its entirety and substituting the following new
definition of "Applicable Extended Eligible Committed Inventory" in lieu
thereof:
"Applicable Extended Eligible Committed Inventory
Percentage" means (a) eighty percent (80%) for the period
commencing on the Effective Date and ending on July 30, 1994,
(b) seventy- five percent (75%) for the period commencing on
July 31, 1994, and ending on October 30, 1994, and (c) seventy
percent (70%) on October 31, 1994, and at all times
thereafter.
1.4 Amendment to Section 1.1. The Credit Agreement banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by deleting the definition of "Applicable One (1) Through Four (4)
Percentage" in its entirety and substituting the following new definition of
"Applicable One (1) Through Four (4) Percentage" in lieu thereof:
"Applicable One (1) Through Four (4) Percentage"
means (a) where the lease has been effective for less than
ninety (90) days, ninety-five percent (95%), (b) where the
lease has been effective for greater than eighty-nine (89)
days but less than one hundred eighty-one (181) days, (i)
ninety-five percent (95%) for the period commencing on the
effective date and ending on July 30, 1994, (ii) ninety
percent (90%) for the period commencing on July 31, 1994, and
ending on October 30, 1994, (iii) eighty-five percent (85%) on
October 31, 1994, and at all times thereafter, and (c) where
the
-3-
<PAGE> 4
lease has been effective in excess of one hundred eighty (180)
days, (i) sixty-five percent (65%) for the period commencing
on the Effective Date and ending on July 30, 1994, (ii) sixty
percent (60%) for the period commencing on July 31, 1994, and
ending on October 30, 1994, (iii) fifty-five percent (55%) on
October 31, 1994, and at all times thereafter.
1.5 Amendment to Section 1.1. The Credit Agreement Banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by deleting the definition of "Applicable Residual Percentage" in
its entirety and substituting the following new definition of "Applicable
Residual Percentage" in lieu thereof:
"Applicable Residual Percentage" means (a) eighty
percent (80%) for the period commencing on the Effective Date
and ending on July 30, 1994, (b) seventy-five percent (75%)
for the period commencing on July 31, 1994 and ending on
October 30, 1994, (c) sixty-five percent (65%) for the period
commencing on October 31, 1994 and ending on November 29,
1994, (d) seventy percent (70%) for the period commencing on
November 30, 1994 and ending on the earlier of (i) January 30,
1995 and (ii) the actual date on which Borrower shall have
delivered to each Bank the Borrowing Base Certificate which is
otherwise due on January 30, 1995, (e) sixty-five percent
(65%) upon the earlier to occur of (i) and (ii) set forth in
clause (d) above, at which time such Applicable Residual
Percentage shall be deemed to be effective as of December 31,
1994 and continuing for the period commencing on such date and
ending on January 30, 1995, and (f) eighty percent (80%) on
January 31, 1995 and at all times after such date.
1.6 Amendment to Section 1.1. The Credit Agreement Banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by deleting the definition of "Existing Adverse Conditions" in its
entirety and substituting the following new definition of "Existing Adverse
Conditions" in lieu thereof:
-4-
<PAGE> 5
"Existing Adverse Conditions" means (i) the defaults
specifically waived (and only for the period set forth in any
such waiver letters) by the Banks under those certain waiver
letters attached hereto as Annex C, (ii) the financial loss
experienced by the Borrower for the Borrower's first fiscal
quarter of 1994 as set forth in the Borrower's Form 10-Q filed
with the Securities and Exchange Commission for the reporting
period ended April 30, 1994, (iii) the incurrence by the
Borrower of the 1995 Reserves, and (iv) the consolidated net
loss (without taking into account the 1995 Reserves) for the
Fiscal Quarter ended January 31, 1995 in an amount not to
exceed One Million Eight Hundred Fifty-Four Thousand Dollars
($1,854,000), and (v) the consolidated net loss (without
taking into account the 1995 Reserves) for the Fiscal Year
ended January 31, 1995 in an amount not to exceed Four Million
Seven Hundred Twenty-Three Thousand Dollars ($4,723,000).
1.7 Amendment to Section 1.1. The Credit Agreement Banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by deleting the definition of "Total Borrowing Base Assets" in its
entirety and substituting the following new definition of "Total Borrowing Base
Assets" in lieu thereof:
"Total Borrowing Base Assets" means, as at any time,
an amount equal to (a) eighty-five percent (85%) of the value
of the Borrower's Regular Eligible Committed Inventory, plus
(b) the lesser of (i) the Applicable Extended Eligible
Committed Inventory Percentage then in effect of the value of
the Borrower's Extended Eligible Committed Inventory, or (ii)
Three Million Four Hundred Thousand Dollars ($3,400,000), plus
(c) forty percent (40%) of the value of the Borrower's
Eligible Uncommitted Inventory, plus (d) eighty percent (80%)
of the net amount of the Borrower's Eligible Receivables, plus
(e) the Applicable Eligible Aged Receivables Percentage then
in effect of the net amount of Borrower's Eligible Aged
Receivables, (f) the Applicable One (1)
-5-
<PAGE> 6
Through Four (4) Percentage then in effect of the net amount
of the Borrower's Eligible Unbilled One (1) Through Four (4)
Lease Receivables, plus (g) sixty-five percent (65%) of the
net amount of the Borrower's Eligible Zero (0) Rated Lease
Receivables, plus (h) (i) during the period commencing on the
Effective Date and ending on October 30, 1994, twenty-five
percent (25%) of the net amount of the Borrower's Eligible
Unbilled Five (5) Rated Lease Receivables, (ii) during the
period commencing on October 31, 1994 and ending on January
30, 1995, zero percent (0%) of the net amount of the
Borrower's Eligible Unbilled Five (5) Rated Lease Receivables,
and (iii) on January 31, 1995, and at all times thereafter,
ten percent (10%) of the net amount of the Borrower's Eligible
Unbilled Five (5) Rated Lease Receivables, plus (i)
eighty-five percent (85%) of the net amount of the Borrower's
Eligible Holding Tank Receivables, plus (j) one hundred
percent (100%) of the collected funds in the Borrower's
operating accounts which constitute Mandatory Bank Accounts
(as such term is defined in the Security Agreements), plus (k)
the Applicable Residual Percentage then in effect of the then
Eligible Residual Value Amount, plus (1) during the period
commencing on the Effective Date and ending October 30, 1994,
eighty percent (80%) of the MRK Final Payment, plus (m) at
such time, and for so long, during the period commencing on
the Effective Date and ending on January 30, 1995, as the
Borrower shall be the holder of the PFG Note and as the
Required Co-Agents shall be satisfied, in their sole
discretion, that the Borrower shall have obtained and
perfected a security interest in all of the assets of the
Picker Joint Venture (other than those, in the ordinary course
of business, securing any Picker Joint Venture Non-Recourse
Debt), eighty-five percent (85%) of the principal amount then
outstanding under the PFG Note, plus (n) eighty percent (80%)
of the net amount to be received by the Borrower upon exercise
of the Put. The Regular
-6-
<PAGE> 7
Eligible Committed Inventory, the Extended Eligible Committed
Inventory and the Eligible Uncommitted Inventory will be
valued at the lower of cost or market value, determined in
accordance with GAAP. All components set forth in this
definition shall be calculated net of all reserves of the
Borrower.
1.8 Amendment to Section 1.1. The Credit Agreement Banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by adding the following new definition of "1995 Reserves" in proper
alphabetical order:
"1995 Reserves" means the pre-tax amounts set forth
in Borrower's financial statements as at and for the year
ended January 31, 1995 delivered in accordance with the terms
hereof, to the Banks to accurately reflect the valuation
adjustments of Receivables, Inventory, net investments in
leases, and/or other balance sheet items, all as identified on
a preliminary basis in Borrower's report presented to the
Banks and its other senior lenders in the Lender Group Meeting
of January 26, 1995; provided, however, that all of the 1995
Reserves shall be deemed for purposes of this Agreement to
have been incurred as of January 31, 1995 or during the Fiscal
Quarter then ended; and provided, further, that the aggregate
amount of the 1995 Reserves shall not exceed Twenty-three
Million Dollars ($23,000,000).
1.9 Amendment to Section 7.2.4(a). The Credit Agreement
Banks and the Borrower hereby agree that Section 7.2.4(a) of the Bank Credit
Agreement shall be amended by deleting Section 7.2.4(a) in its entirety and
substituting the following new Section 7.2.4(a) in lieu thereof:
(a) Consolidated Tangible Net Worth to be less
than (i) with respect to the Fiscal Quarters ending on January
31, 1994, April 30, 1994, July 31, 1994 and October 31, 1994,
(A) Sixty-five Million Seven Hundred Thousand Dollars
($65,700,000) plus (B) one hundred percent (100%) of
Consolidated Net Earnings of each such Fiscal Quarter, as
reported in the financial statements
-7-
<PAGE> 8
delivered to the Securities Exchange Commission in connection
with Borrower's Form 10-K or Form 10-Q for each such Fiscal
Quarter plus (C) the net proceeds received by the Borrower
from the sale of any capital stock of the Borrower after
January 31, 1994, and (ii) with respect to the Fiscal Quarter
ending on January 31, 1995 and each Fiscal Quarter thereafter,
(A) Sixty-Four Million Five Hundred Thousand Dollars
($64,500,000) plus (B) one hundred percent (100%) of
Consolidated Net Earnings of each such Fiscal Quarter, as
reported in the financial statements delivered to the
Securities Exchange Commission in connection with Borrower's
Form 10-K or Form 10-Q for each such Fiscal Quarter plus (C)
the net proceeds received by the Borrower from the sale of any
capital stock of the Borrower after January 31, 1995 less (D)
the applicable after tax effect of the 1995 Reserves computed
in accordance with GAAP.
1.10 Amendment to Annex A. The Credit Agreement Banks and
the Borrower hereby agree that Annex A to the Bank Credit Agreement shall be
amended by deleting Annex A in its entirety and substituting the new Annex A
which is attached hereto as Exhibit A, and incorporated herein by reference.
1.11 Amendment to Annex D. The Credit Agreement Banks and
the Borrower hereby agree that Annex D to the Bank Credit Agreement shall be
amended by deleting Annex D in its entirety and substituting the new Annex D
which is attached hereto as Exhibit B and incorporated herein by reference.
1.12 Waiver of Section 7.2.4(c) and Section 7.2.4(d). The
Credit Agreement Banks hereby waive compliance by Borrower with Section
7.2.4(c) and Section 7.2.4(d) of the Bank Credit Agreement commencing on the
date of this Agreement and ending on the Expiration Date.
SECTION 2. CONSENT AND DIRECTION OF THE INTERCREDITOR
LENDERS.
2.1 Consent and Direction of the Intercreditor Lenders.
Subject to the terms and the conditions set forth in this Agreement, the
Intercreditor Lenders hereby consent to the terms and provisions of Section 1
of this Agreement.
-8-
<PAGE> 9
SECTION 3. MISCELLANEOUS.
3.1 Other Terms With Respect to the Waivers and Consents.
The effectiveness of the provisions of Section 1.1, Section 1.2, Section 1.3,
Section 1.4, Section 1.5, Section 1.6, Section 1.7, Section 1.8, Section 1.9,
Section 1.12 and Section 2.1 hereof shall also be subject to the condition
that, in all other respects, Borrower, as of the date hereof, shall not have
violated any warranties, covenants, agreements or provisions or otherwise
suffered to occur any Default or Event of Default (as such terms are defined in
the Bank Credit Agreement) under the Bank Credit Agreement, or violated any
warranties, covenants, agreements or provisions, or otherwise suffered to occur
any Event of Default (as defined in the 1995 Note Purchase Agreement) under the
1995 Note Purchase Agreement, or violated any warranties, covenants, agreements
or provisions, or otherwise suffered to occur any Default or Event of Default
(as such terms are defined in the Security Agreement) under the Security
Agreement. The waiver given as set forth in Section 1 hereof shall not extend
to prejudice any rights and remedies which the Credit Agreement Banks, the 1995
Noteholders or the Intercreditor Lenders may have in respect of any other
violations of any of the terms and provisions of the Bank Credit Agreement, the
1995 Note Purchase Agreement or the Intercreditor Agreement, as the case may
be.
3.2 Bank Credit Agreement, the Security Agreement and
1995 Note Purchase Agreement. The execution of this Agreement by Borrower
shall serve as an acknowledgment that (a) the waivers and consents set forth
herein shall not affect the continued legality, validity and binding effect of
the Bank Credit Agreement, as previously amended and as further amended as set
forth herein, the Security Agreement and the 1995 Note Purchase Agreement, and
(b) the Bank Credit Agreement, as previously and as further amended as set
forth herein, the Security Agreement and the 1995 Note Purchase Agreement
remain in full force and effect and remain the valid and binding obligations of
Borrower enforceable against Borrower in accordance with their respective
terms. Borrower hereby ratifies and confirms the Bank Credit Agreement, as
previously amended and as further amended as set forth herein, the Security
Agreement and the 1995 Note Purchase Agreement.
3.3 Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of Ohio, without regard
to principles of conflict of law.
3.4 Severability. In the event any provision of this
Agreement should be invalid, the validity of the other provisions hereof shall
not be affected thereby.
-9-
<PAGE> 10
3.5 Counterparts. This Agreement may be executed in one
or more counterparts, each of which, when taken together, shall constitute but
one and the same agreement.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as a sealed instrument as of the date first set forth above.
<TABLE>
<S> <C>
LDI CORPORATION, Borrower SOCIETY NATIONAL BANK, as Collateral Agent
By:
---------------------------------------------
Title:
By: ------------------------------------------
----------------------------------------------
Title:
-------------------------------------------
BANK OF AMERICA ILLINOIS
NATIONAL CITY BANK, Intercreditor Lender and
(successor in interest to Credit Agreement Bank
Continental Bank N.A.),
Intercreditor Lender and Credit Agreement Bank
By:
---------------------------------------------
Title:
By: ------------------------------------------
----------------------------------------------
Title:
-------------------------------------------
SOCIETY NATIONAL BANK, Intercreditor Lender
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY,
and Credit Agreement Bank Intercreditor Lender and 1995 Noteholder
By:
---------------------------------------------
Title:
By: ------------------------------------------
----------------------------------------------
Title:
-------------------------------------------
CONFEDERATION LIFE INSURANCE COMPANY, BENEFICIAL STANDARD LIFE INSURANCE COMPANY,
Intercreditor Lender and 1995 Noteholder
Intercreditor Lender and 1995 Noteholder
By: By:
---------------------------------------------- ---------------------------------------------
Title: Title:
------------------------------------------- ------------------------------------------
COMERICA BANK, Intercreditor Lender and Credit
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
Agreement Bank Intercreditor Lender and Credit Agreement Bank
By:
---------------------------------------------
Title:
By: ------------------------------------------
----------------------------------------------
Title:
-------------------------------------------
</TABLE>
-11-
<PAGE> 12
<TABLE>
<S> <C>
THE DAIWA BANK, LIMITED,
THE FIFTH THIRD BANK, Intercreditor Lender and
Acting through its Chicago Credit Agreement Bank
Branch, Intercreditor Lender and Credit
Agreement Bank By:
----------------------------------------------
Title:
By: ------------------------------------------
----------------------------------------------
Title: And
------------------------------------------- by:
---------------------------------------------
Title:
------------------------------------------
STAR BANK, NATIONAL ASSOCIATION, Intercreditor
FIRST NATIONAL BANK OF OHIO, Intercreditor
Lender and Credit Agreement Bank
Lender and Credit Agreement Bank
By:
----------------------------------------------
Title: By:
------------------------------------------- ---------------------------------------------
Title:
------------------------------------------
MICHIGAN NATIONAL BANK, Intercreditor Lender THE BANK OF TOKYO TRUST COMPANY, Intercreditor
and Credit Agreement Bank Lender and Credit Agreement Bank
By:
---------------------------------------------
By: Title:
---------------------------------------------- ------------------------------------------
Title:
-------------------------------------------
FIRST BANK NATIONAL ASSOCIATION, Intercreditor
NATIONAL WESTMINSTER BANK, USA, Intercreditor
Lender and Credit Agreement Bank
Lender
By:
----------------------------------------------
Title: By:
------------------------------------------- ---------------------------------------------
Title:
------------------------------------------
NORTHERN LIFE INSURANCE COMPANY, Intercreditor
Lender and 1995 Noteholder
By:
----------------------------------------------
Title:
-------------------------------------------
</TABLE>
-12-
<PAGE> 13
EXHIBIT A
ANNEX A
<TABLE>
<CAPTION>
Commitment
Period
Total Expiration
Commitment Percentage Date
<S> <C> <C> <C>
NATIONAL CITY BANK $ 14,537,135.77 14.1701% 4/30/95
SOCIETY NATIONAL BANK $ 14,537,135.77 14.1701% 4/30/95
CONTINENTAL BANK N.A. $ 13,498,717.64 13.1579% 4/30/95
COMERICA BANK $ 11,629,626.55 11.3360% 4/30/95
FIRST UNION BANK $ 8,099,189.55 7.8947% 4/30/95
THE DAIWA BANK, LIMITED $ 5,814,813.27 5.6680% 4/30/95
THE FIFTH THIRD BANK $ 5,814,813.27 5.6680% 4/30/95
STAR BANK, NATIONAL ASSOCIATION $ 5,814,813.27 5.6680% 4/30/95
FIRST NATIONAL BANK OF OHIO $ 5,814,813.27 5.6680% 4/30/95
MICHIGAN NATIONAL BANK $ 5,814,813.27 5.6680% 4/30/95
THE BANK OF TOKYO TRUST COMPANY $ 5,814,813.27 5.6680% 4/30/95
FIRST BANK NATIONAL ASSOCIATION $ 5,399,528.09 5.2632% 4/30/95
TOTAL $102,590,213.00 100.0000%
</TABLE>
<PAGE> 14
EXHIBIT B
ANNEX D - MANDATORY REDUCTIONS
<TABLE>
<CAPTION>
Mandatory Reduction Date Reductions
<S> <C>
August 10, 1994 1,653,371.03
September 10, 1994 1,417,175.17
October 10, 1994 1,417,175.17
November 10, 1994 1,417,175.17
December 10, 1994 708,587.58
January 10, 1995 708,587.58
February 10, 1995 236,195.86
March 10, 1995 0
</TABLE>
<PAGE> 1
EXHIBIT 4.25
AMENDMENT NO. 3
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT,
WAIVER, CONSENT OF INTERCREDITOR LENDERS AND
AMENDMENT NO. 1 TO INTERCREDITOR AGREEMENT
THIS AMENDMENT NO. 3 TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT, WAIVER, CONSENT OF INTERCREDITOR LENDERS AND AMENDMENT NO. 1 TO
INTERCREDITOR AGREEMENT (this "Agreement"), is made as of this 30th day of
April, 1995, among LDI CORPORATION, a Delaware corporation ("Borrower"), the
various financial institutions listed on the signature pages hereof
(collectively, the "Intercreditor Lenders"), and SOCIETY NATIONAL BANK
(successor collateral agent to Bank of America Illinois), as collateral agent
(the "Collateral Agent"),
WITNESSETH:
WHEREAS, Borrower has entered into that certain Second Amended
and Restated Credit Agreement, dated as of July 29, 1994 (as amended by that
certain Consent, Waiver and Amendment No. 1 to Second Amended and Restated
Credit Agreement, Consent and Waiver with Respect to Note Purchase Agreement,
and Consent and Waiver of Intercreditor Lenders, dated as of January 20, 1995,
and as further amended by that certain Amendment No. 2 to Second Amended and
Restated Credit Agreement, and Consent of Intercreditor Lenders, dated as of
March 10, 1995, the "Bank Credit Agreement"), with the various financial
institutions listed on the signature pages thereto (the "Credit Agreement
Banks"), pursuant to which the Credit Agreement Banks have made certain
financial accommodations available to Borrower;
WHEREAS, Borrower has entered into that certain Note Purchase
Agreement, dated as of August 1, 1989 (as amended, the "1995 Note Purchase
Agreement"), with Northwestern National Life Insurance Company, Northern Life
Insurance Company, Confederation Life Insurance Company and Beneficial Standard
Life Insurance Company (such financial institutions being collectively referred
to as the "1995 Noteholders"), pursuant to which the 1995 Noteholders have made
certain financial accommodations available to Borrower;
WHEREAS, Borrower has executed and delivered that certain
Promissory Note, dated as of July 1, 1993, in favor of National Westminster
Bank USA, in the original principal amount of $20,000,000 (as amended, the
"Natwest Note");
WHEREAS, Borrower has executed and delivered that certain
Amended and Restated Security Agreement, dated as of July 29, 1994 (the
"Security Agreement"), in favor of the Collateral Agent, pursuant to which
Borrower (a) ratified and confirmed the grant of the security interest to the
Existing Lenders (as defined in the Security Agreement) under the
<PAGE> 2
Existing Security Agreement (as defined in the Security Agreement) and (b)
granted a continuing security interest to the Collateral Agent, for the benefit
of the Collateral Agent and each of the Co-Agents (as defined in the Security
Agreement) and for the ratable benefit of the Intercreditor Lenders, in and to
the Collateral (as defined in the Security Agreement), all as security for
Borrower's obligations under the Bank Credit Agreement, the 1995 Note Purchase
Agreement and the Natwest Note;
WHEREAS, in connection with the Bank Credit Agreement, the
1995 Note Purchase Agreement, the Natwest Note and the Security Agreement,
Borrower, the Intercreditor Lenders and the Collateral Agent entered into that
certain Intercreditor Agreement, dated as of July 29, 1994 (the "Intercreditor
Agreement");
WHEREAS, Borrower has requested that the Credit Agreement
Banks amend the Bank Credit Agreement as set forth in this Agreement; and
WHEREAS, the Credit Agreement Banks are willing to amend the
Bank Credit Agreement upon the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
SECTION 1. AMENDMENTS TO AND WAIVERS OF CERTAIN
PROVISIONS UNDER THE BANK CREDIT AGREEMENT.
1.1 Amendment to Section 1.1. The Credit Agreement Banks
and Borrower hereby agree that Section 1.1 of the Bank Credit Agreement shall
be amended by deleting the definition of "Expiration Date" in its entirety and
substituting the following new definition of "Expiration Date" in lieu thereof:
"Expiration Date" means May 15, 1995, or such other
date as may from time to time be agreed upon by the Borrower
and the Banks.
1.2 Amendment to Annex A. The Credit Agreement Banks and
the Borrower hereby agree that Annex A to the Bank Credit Agreement shall be
amended by deleting Annex A in its entirety and substituting the new Annex A
which is attached hereto as Exhibit A, and incorporated herein by reference.
1.3 Waiver of Section 7.2.4(c), Section 7.2.4(d), and
Section 7.1.1(c). The Credit Agreement Banks hereby waive compliance
-2-
<PAGE> 3
by Borrower with Section 7.2.4(c), Section 7.2.4(d) and Section 7.1.1(c) of
the Bank Credit Agreement commencing on the date of this Agreement and ending
on the Expiration Date.
SECTION 2. CONSENT AND DIRECTION OF THE INTERCREDITOR
LENDERS, AMENDMENT TO INTERCREDITOR AGREEMENT.
2.1 Consent and Direction of the Intercreditor Lenders.
Subject to the terms and the conditions set forth in this Agreement, the
Intercreditor Lenders hereby consent to the terms and provisions of Section 1
of this Agreement; provided, however, that each Intercreditor Lender's Exposure
Percentage, as defined in the Intercreditor Agreement, shall not be affected
by this Agreement.
2.2 Amendment to Schedule VII to Intercreditor Agreement.
The Intercreditor Lenders and the Borrower hereby agree that Schedule VII to
the Intercreditor Agreement shall be amended by deleting the last page of
Schedule VII to the Intercreditor Agreement and substituting the new last page
of Schedule VII which is attached hereto as Exhibit B, and incorporated herein
by referenced.
SECTION 3. CONDITIONS PRECEDENT TO
EFFECTIVENESS.
In addition to all of the other conditions and agreements set
forth herein, the effectiveness of the waiver set forth in this Agreement, and
the amendments set forth in Sections 1.1, 1.2 and 2.2 of this Agreement, is
subject to the following conditions precedent:
3.1 Acknowledgment of LDI of Ohio, Inc.. The
Intercreditor Lenders shall have received an original of the attached
Acknowledgment of LDI of Ohio, Inc. ("Guarantor"), executed and delivered by a
duly authorized officer of Guarantor.
3.2 Extension of and Waiver of provisions of 1995 Note
Purchase Agreement. The Intercreditor Lenders shall have received evidence in
form and substance satisfactory to the Intercreditor Lenders of an extension of
the terms of the 1995 Note Purchase Agreement such that no payments of
principal will be required to be made by Borrower in connection therewith
during the period beginning April 1, 1995, and ending May 15, 1995,
and a waiver of all then existing defaults under the 1995 Note Purchase
Agreement.
-3-
<PAGE> 4
SECTION 4. MISCELLANEOUS.
4.1 Other Terms With Respect to the Waivers and Consents.
The effectiveness of the provisions of Section 1.1, Section 1.2, Section 1.3,
Section 2.1 and Section 2.2 hereof shall also be subject to the condition that,
in all other respects, Borrower, as of the date hereof, shall not have violated
any warranties, covenants, agreements or provisions or otherwise suffered to
occur any Default or Event of Default (as such terms are defined in the Bank
Credit Agreement) under the Bank Credit Agreement, or violated any warranties,
covenants, agreements or provisions, or otherwise suffered to occur any Event
of Default (as defined in the 1995 Note Purchase Agreement) under the 1995 Note
Purchase Agreement, or violated any warranties, covenants, agreements or
provisions, or otherwise suffered to occur any Default or Event of Default (as
such terms are defined in the Security Agreement) under the Security Agreement.
The waiver given as set forth in Section 1.3 hereof shall not extend to
prejudice any rights and remedies which the Credit Agreement Banks, the 1995
Noteholders or the Intercreditor Lenders may have in respect of any other
violations of any of the terms and provisions of the Bank Credit Agreement, the
1995 Note Purchase Agreement or the Intercreditor Agreement, as the case may
be.
4.2 Bank Credit Agreement, the Security Agreement and
1995 Note Purchase Agreement. The execution of this Agreement by Borrower
shall serve as an acknowledgment that (a) the waivers and consents set forth
herein shall not affect the continued legality, validity and binding effect of
the Bank Credit Agreement, as previously amended and as further amended as set
forth herein, the Security Agreement and the 1995 Note Purchase Agreement, and
(b) the Bank Credit Agreement, as previously and as further amended as set
forth herein, the Security Agreement and the 1995 Note Purchase Agreement
remain in full force and effect and remain the valid and binding obligations of
Borrower enforceable against Borrower in accordance with their respective
terms. Borrower hereby ratifies and confirms the Bank Credit Agreement, as
previously amended and as further amended as set forth herein, the Security
Agreement and the 1995 Note Purchase Agreement.
4.3 Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of Ohio, without regard
to principles of conflict of law.
4.4 Severability. In the event any provision of this
Agreement should be invalid, the validity of the other provisions hereof shall
not be affected thereby.
4.5 Counterparts. This Agreement may be executed in one
or more counterparts, each of which, when taken together, shall constitute but
one and the same agreement.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as a sealed instrument as of the date first set forth above.
<TABLE>
<S> <C>
LDI CORPORATION, Borrower SOCIETY NATIONAL BANK, as Collateral Agent
By:
------------------------------------------
By: Title:
------------------------------------------ ---------------------------------------
Title:
---------------------------------------
BANK OF AMERICA ILLINOIS NATIONAL CITY BANK, Intercreditor Lender and
(successor in interest to Credit Agreement Bank
Continental Bank N.A.),
Intercreditor Lender and Credit Agreement Bank
By: By:
------------------------------------------ ------------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
SOCIETY NATIONAL BANK, Intercreditor Lender NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY,
and Credit Agreement Bank Intercreditor Lender and 1995 Noteholder
By: By:
------------------------------------------ ------------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
CONFEDERATION LIFE INSURANCE COMPANY, BENEFICIAL STANDARD LIFE INSURANCE COMPANY,
Intercreditor Lender and 1995 Noteholder
Intercreditor Lender and 1995 Noteholder
By: By:
------------------------------------------ ------------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
COMERICA BANK, Intercreditor Lender and Credit FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
Agreement Bank Intercreditor Lender and Credit Agreement Bank
By: By:
------------------------------------------ ------------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
</TABLE>
-5-
<PAGE> 6
<TABLE>
<S> <C>
THE DAIWA BANK, LIMITED,
THE FIFTH THIRD BANK, Intercreditor Lender and
Acting through its Chicago Credit Agreement Bank
Branch, Intercreditor Lender and Credit
Agreement Bank By:
------------------------------------------
Title:
By: ---------------------------------------
------------------------------------------
Title: And
--------------------------------------- by:
------------------------------------------
Title:
---------------------------------------
STAR BANK, NATIONAL ASSOCIATION, Intercreditor FIRST NATIONAL BANK OF OHIO, Intercreditor
Lender and Credit Agreement Bank Lender and Credit Agreement Bank
By: By:
------------------------------------------ ------------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
MICHIGAN NATIONAL BANK, Intercreditor Lender THE BANK OF TOKYO TRUST COMPANY, Intercreditor
and Credit Agreement Bank Lender and Credit Agreement Bank
By: By:
------------------------------------------ ------------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
FIRST BANK NATIONAL ASSOCIATION, Intercreditor NATIONAL WESTMINSTER BANK, USA, Intercreditor
Lender and Credit Agreement Bank Lender
By: By:
------------------------------------------ ------------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
NORTHERN LIFE INSURANCE COMPANY, Intercreditor
Lender and 1995 Noteholder
By:
------------------------------------------
Title:
---------------------------------------
</TABLE>
-6-
<PAGE> 7
EXHIBIT A
ANNEX A
<TABLE>
<CAPTION>
Commitment
Period
Total Expiration
Commitment Percentage Date
<S> <C> <C> <C>
NATIONAL CITY BANK $ 13,622,040.21 14.1701% 5/15/95
SOCIETY NATIONAL BANK $ 13,622,040.21 14.1701% 5/15/95
CONTINENTAL BANK N.A. $ 12,648,989.27 13.1579% 5/15/95
COMERICA BANK $ 10,897,555.26 11.3360% 5/15/95
FIRST UNION BANK $ 7,589,355.11 7.8947% 5/15/95
THE DAIWA BANK, LIMITED $ 5,448,777.63 5.6680% 5/15/95
THE FIFTH THIRD BANK $ 5,448,777.63 5.6680% 5/15/95
STAR BANK, NATIONAL ASSOCIATION $ 5,448,777.63 5.6680% 5/15/95
FIRST NATIONAL BANK OF OHIO $ 5,448,777.63 5.6680% 5/15/95
MICHIGAN NATIONAL BANK $ 5,448,777.63 5.6680% 5/15/95
THE BANK OF TOKYO TRUST COMPANY $ 5,448,777.63 5.6680% 5/15/95
FIRST BANK NATIONAL ASSOCIATION $ 5,059,634.16 5.2632% 5/15/95
TOTAL $ 96,132,280.00 100.0000%
</TABLE>
<PAGE> 8
EXHIBIT B
SEE ATTACHED LAST PAGE OF
SCHEDULE VII TO INTERCREDITOR AGREEMENT
<PAGE> 9
<TABLE>
<CAPTION>
Scheduled
Prorata Share Payment At
Bank Without Natwest 5/15/95* Balance % of Collateral
<S> <C> <C> <C> <C>
National City Bank 13.3876% $14,878,531.94 $0.00 0.0000%
Society 13.3876% $14,878,531.94 0.00 0.0000%
Continental 12.4314% $13,815,779.65 0.00 0.0000%
Comerica 10.7101% $11,902,825.55 0.00 0.0000%
First Union 7.4588% $8,289,467.80 0.00 0.0000%
Daiwa Ltd. 5.3550% $5,951,412.78 0.00 0.0000%
Fifth Third Bank 5.3550% $5,951,412.78 0.00 0.0000%
First National Bank 5.3550% $5,951,412.78 0.00 0.0000%
Michigan National Bank 5.3550% $5,951,412.78 0.00 0.0000%
Star Bank 5.3550% $5,951,412.78 0.00 0.0000%
Bank of Tokyo 5.3550% $5,951,412.78 0.00 0.0000%
First Bank, N.A. 4.9725% $5,526,311.86 0.00 0.0000%
Northwestern National Life 2.4847% $2,761,458.47 0.00 0.0000%
Northern Life 1.3804% $1,534,143.59 0.00 0.0000%
Confederation Life 0.8282% $920,486.16 0.00 0.0000%
Beneficial Standard Life 0.8282% $920,486.16 0.00 0.0000%
Northwestern National Life 0.0000% $0.00 0.00 0.0000%
North Atlantic Life 0.0000% $0.00 0.00 0.0000%
Confederation Life 0.0000% $0.00 0.00 0.0000%
Minnesota Mutual Life 0.0000% $0.00 0.00 0.0000%
Farm Bureau Life 0.0000% $0.00 0.00 0.0000%
FB Annuity 0.0000% $0.00 0.00 0.0000%
Farm Bureau Mutual Ins. Co. of Michigan 0.0000% $0.00 0.00 0.0000%
Natwest 0.0000% $0.00** 0.00 100.0000%
100.0000% $111,136,500.12 $0.00 100.0000%
Revolver Only Payment $104,999,925.74
Total Payment - All Facilities $111,482.333.12
</TABLE>
*For purposes of calculating Exposure Percentage as of May 15, 1995 only.
**$345,833.34 scheduled to be paid to Natwest on May 10, 1995. After payment
on such date, $0.00 will be outstanding.
<PAGE> 10
ACKNOWLEDGMENT OF LDI OF OHIO, INC.
The undersigned, LDI of Ohio, Inc., hereby acknowledges and
consents to the terms and provisions set forth in the foregoing Amendment No. 3
to Second Amended and Restated Credit Agreement, Waiver, Consent of
Intercreditor Lenders and Amendment No. 1 to Intercreditor Agreement
("Agreement"). The undersigned represents and warrants to the Intercreditor
Lenders (as defined in the foregoing Agreement) that (a) the Guaranty of
Payment of Debt, executed and delivered by the undersigned, dated July 29,
1994, and (b) the Amended and Restated Security Agreement, dated as of July 29,
1994 remain the valid and binding obligations of the undersigned, enforceable
against it in accordance with their respective terms.
LDI OF OHIO, INC.
By:
-----------------------------------
Its:
----------------------------------
Dated: April ___, 1995
<PAGE> 1
EXHIBIT 4.26
LETTER AMENDMENT
Dated as of April 28, 1995
TO THE PARTIES NAMED IN APPENDIX I HERETO:
Reference is made to the Note Purchase Agreement 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.
1. Payment of Principal on the Notes. The principal payment on the
Notes in the aggregate principal amount of $6,136,574.38 due on April 30, 1995,
shall be deferred until May 15, 1995. Interest on the Notes shall continue to
be payable on the 10th day of each month.
2. 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 Acknowledgment executed
by LDI Ohio in the form of Exhibit A.
(b) The expiration date of the Bank Credit Agreement shall have
been extended until May 15, 1995
3. 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.
<PAGE> 2
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; ___________________________________
Its__________________________________
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_________________________
-2-
<PAGE> 3
BENEFICIAL STANDARD LIFE INSURANCE
COMPANY
By________________________________
Its______________________________
-3-
<PAGE> 4
EXHIBIT A
ACKNOWLEDGMENT OF LDI OF OHIO, INC.
The undersigned, LDI of Ohio, Inc., hereby acknowledges and consents
to the terms and provisions set forth in the foregoing Letter Amendment dated
as of April 28, 1995. The undersigned represents and warrants to the
Noteholders (as defined in the foregoing Letter Amendment) that (a) the
Guaranty of Payment of Debt, executed and delivered by the undersigned, dated
July 29, 1994, and (b) the Amended and Restated Security Agreement, dated as of
July 29, 1994 remain the valid and binding obligations of the undersigned,
enforceable against it in accordance with their respective terms.
LDI OF OHIO, INC.
By_______________________
Its______________________
Dated: April ____, 1995
<PAGE> 1
EXHIBIT 4.27
AMENDMENT NO. 4
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT,
WAIVER, CONSENT OF INTERCREDITOR LENDERS AND
AMENDMENT NO. 2 TO INTERCREDITOR AGREEMENT
THIS AMENDMENT NO. 4 TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT, WAIVER, CONSENT OF INTERCREDITOR LENDERS AND AMENDMENT NO. 2 TO
INTERCREDITOR AGREEMENT (this "Agreement"), is made as of this 15th day of May,
1995, among LDI CORPORATION, a Delaware corporation ("Borrower"), the various
financial institutions listed on the signature pages hereof (collectively, the
"Intercreditor Lenders"), and SOCIETY NATIONAL BANK (successor collateral agent
to Bank of America Illinois), as collateral agent (the "Collateral Agent"),
WITNESSETH:
WHEREAS, Borrower has entered into that certain Second Amended
and Restated Credit Agreement, dated as of July 29, 1994 (as amended by that
certain Consent, Waiver and Amendment No. 1 to Second Amended and Restated
Credit Agreement, Consent and Waiver with Respect to Note Purchase Agreement,
and Consent and Waiver of Intercreditor Lenders, dated as of January 20, 1995,
and as further amended by that certain Amendment No. 2 to Second Amended and
Restated Credit Agreement, and Consent of Intercreditor Lenders, dated as of
March 10, 1995, and as further amended by that certain Amendment No. 3 to Second
Amended and Restated Credit Agreement, Waiver, Consent of Intercreditor Lenders
and Amendment No. 1 to Intercreditor Agreement, dated as of April 30, 1995, the
"Bank Credit Agreement"), with the various financial institutions listed on the
signature pages thereto (the "Credit Agreement Banks"), pursuant to which the
Credit Agreement Banks have made certain financial accommodations available to
Borrower;
WHEREAS, Borrower has entered into that certain Note Purchase
Agreement, dated as of August 1, 1989 (as amended, the "1995 Note Purchase
Agreement"), with Northwestern National Life Insurance Company, Northern Life
Insurance Company, Confederation Life Insurance Company and Beneficial Standard
Life Insurance Company (such financial institutions being collectively referred
to as the "1995 Noteholders"), pursuant to which the 1995 Noteholders have made
certain financial accommodations available to Borrower;
WHEREAS, Borrower has executed and delivered that certain
Promissory Note, dated as of July 1, 1993, in favor of National Westminster Bank
USA, in the original principal amount of $20,000,000 (as amended, the "Natwest
Note");
WHEREAS, Borrower has executed and delivered that certain
Amended and Restated Security Agreement, dated as of July 29, 1994 (the
"Security Agreement"), in favor of the
<PAGE> 2
Collateral Agent, pursuant to which Borrower (a) ratified and confirmed the
grant of the security interest to the Existing Lenders (as defined in the
Security Agreement) under the Existing Security Agreement (as defined in the
Security Agreement) and (b) granted a continuing security interest to the
Collateral Agent, for the benefit of the Collateral Agent and each of the
Co-Agents (as defined in the Security Agreement) and for the ratable benefit of
the Intercreditor Lenders, in and to the Collateral (as defined in the Security
Agreement), all as security for Borrower's obligations under the Bank Credit
Agreement, the 1995 Note Purchase Agreement and the Natwest Note;
WHEREAS, in connection with the Bank Credit Agreement, the
1995 Note Purchase Agreement, the Natwest Note and the Security Agreement,
Borrower, the Intercreditor Lenders and the Collateral Agent entered into that
certain Intercreditor Agreement, dated as of July 29, 1994, as amended by that
certain Amendment No. 3 to Second Amended and Restated Credit Agreement, Waiver,
Consent of Intercreditor Lenders and Amendment No. 1 to Intercreditor Agreement,
dated as of April 30, 1995 (the "Intercreditor Agreement");
WHEREAS, Borrower has requested that the Credit Agreement
Banks amend the Bank Credit Agreement as set forth in this Agreement; and
WHEREAS, the Credit Agreement Banks are willing to amend the
Bank Credit Agreement upon the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
SECTION 1. AMENDMENTS TO AND WAIVERS OF CERTAIN
PROVISIONS UNDER THE BANK CREDIT AGREEMENT.
1.1 Amendment to Section 1.1.
(a) The Credit Agreement Banks and Borrower hereby agree that
Section 1.1 of the Bank Credit Agreement shall be amended by deleting the
definition of "Expiration Date" in its entirety and substituting the following
new definition of "Expiration Date" in lieu thereof:
"Expiration Date" means May 31, 1995, or such other
date as may from time to time be agreed upon by the Borrower
and the Banks.
-2-
<PAGE> 3
(b) The Credit Agreement Banks and Borrower hereby agree that
Section 1.1 of the Bank Credit Agreement shall be amended by deleting the
definition of "1995 Reserves" in its entirety and substituting the following new
definition of "1995 Reserves" in lieu thereof:
"1995 Reserves" means the pre-tax amounts set forth
in Borrower's financial statements as at and for the year
ended January 31, 1995 delivered in accordance with the terms
hereof, to the Banks to accurately reflect the valuation
adjustments of Receivables, Inventory, net investments in
leases, and/or other balance sheet items, all as identified on
a preliminary basis in Borrower's report presented to the
Banks and its other senior lenders in the Lender Group Meeting
of January 26, 1995; provided, however, that all of the 1995
Reserves shall be deemed for purposes of this Agreement to
have been incurred as of January 31, 1995 or during the Fiscal
Quarter then ended; and provided, further, that the aggregate
amount of the 1995 Reserves shall not exceed Twenty-three
Million Nine Hundred Thousand Dollars ($23,900,000).
1.2 Amendment to Annex A. The Credit Agreement Banks and the
Borrower hereby agree that Annex A to the Bank Credit Agreement shall be amended
by deleting Annex A in its entirety and substituting the new Annex A which is
attached hereto as Exhibit A, and incorporated herein by reference.
1.3 Waiver of Certain Provisions of Section 7.1.1(c). The
Credit Agreement Banks hereby waive, for purposes of the delivery of the annual
audit report of the Borrower and its Subsidiaries for the Fiscal Year ending
January 31, 1995 only, the requirement set forth in Section 7.1.1(c) of the Bank
Credit Agreement that the certification of the annual audit report by
independent public accountants be without any Impermissible Qualification.
1.4 Waiver of Section 7.2.4(c) and Section 7.2.4(d). The
Credit Agreement Banks hereby waive compliance by Borrower with Section 7.2.4(c)
and Section 7.2.4(d) of the Bank Credit Agreement commencing on the date of this
Agreement and ending on the Expiration Date.
-3-
<PAGE> 4
SECTION 2. CONSENT AND DIRECTION OF THE INTERCREDITOR
LENDERS, AMENDMENT TO INTERCREDITOR AGREEMENT.
2.1 Consent and Direction of the Intercreditor Lenders.
Subject to the terms and the conditions set forth in this Agreement, the
Intercreditor Lenders hereby consent to the terms and provisions of Section 1 of
this Agreement; provided, however, that each Intercreditor Lender's Esposure
Percentage, as defined in the Intercreditor Agreement, shall not be affected by
this Agreement.
2.2 Amendment to Schedule VII to Intercreditor Agreement. The
Intercreditor Lenders and the Borrower hereby agree that Schedule VII to the
Intercreditor Agreement shall be amended by deleting the last page of Schedule
VII to the Intercreditor Agreement and substituting the new last page of
Schedule VII which is attached hereto as Exhibit B, and incorporated herein by
reference.
SECTION 3. CONDITIONS PRECEDENT TO
EFFECTIVENESS.
In addition to all of the other conditions and agreements set
forth herein, the effectiveness of the waiver set forth in this Agreement, and
the amendments set forth in Sections 1.1, 1.2 and 2.2 of this Agreement, is
subject to the following conditions precedent:
3.1 Acknowledgment of LDI of Ohio, Inc.. The Intercreditor
Lenders shall have received an original of the attached Acknowledgment of LDI of
Ohio, Inc. ("Guarantor"), executed and delivered by a duly authorized officer of
Guarantor.
3.2 Extension of and Waiver of provisions of 1995 Note
Purchase Agreement. The Intercreditor Lenders shall have received evidence in
form and substance satisfactory to the Intercreditor Lenders of an extension of
the terms of the 1995 Note Purchase Agreement such that no payments of principal
will be required to be made by Borrower in connection therewith during the
period beginning April 1, 1995, and ending May 31, 1995, and a waiver of all
then existing defaults under the 1995 Note Purchase Agreement.
-4-
<PAGE> 5
SECTION 4. MISCELLANEOUS.
4.1 Other Terms With Respect to the Waivers and Consents. The
effectiveness of the provisions of Section 1.1, Section 1.2, Section 1.3,
Section 1.4, Section 2.1 and Section 2.2 hereof shall also be subject to the
condition that, in all other respects, Borrower, as of the date hereof, shall
not have violated any warranties, covenants, agreements or provisions or
otherwise suffered to occur any Default or Event of Default (as such terms are
defined in the Bank Credit Agreement) under the Bank Credit Agreement, or
violated any warranties, covenants, agreements or provisions, or otherwise
suffered to occur any Event of Default (as defined in the 1995 Note Purchase
Agreement) under the 1995 Note Purchase Agreement, or violated any warranties,
covenants, agreements or provisions, or otherwise suffered to occur any Default
or Event of Default (as such terms are defined in the Security Agreement) under
the Security Agreement. The waiver given as set forth in Section 1.3 and Section
1.4 hereof shall not extend to prejudice any rights and remedies which the
Credit Agreement Banks, the 1995 Noteholders or the Intercreditor Lenders may
have in respect of any other violations of any of the terms and provisions of
the Bank Credit Agreement, the 1995 Note Purchase Agreement or the Intercreditor
Agreement, as the case may be.
4.2 Bank Credit Agreement, the Security Agreement and 1995
Note Purchase Agreement. The execution of this Agreement by Borrower shall serve
as an acknowledgment that (a) the waivers and consents set forth herein shall
not affect the continued legality, validity and binding effect of the Bank
Credit Agreement, as previously amended and as further amended as set forth
herein, the Security Agreement and the 1995 Note Purchase Agreement, and (b) the
Bank Credit Agreement, as previously and as further amended as set forth herein,
the Security Agreement and the 1995 Note Purchase Agreement remain in full force
and effect and remain the valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms. Borrower hereby
ratifies and confirms the Bank Credit Agreement, as previously amended and as
further amended as set forth herein, the Security Agreement and the 1995 Note
Purchase Agreement.
4.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Ohio, without regard to
principles of conflict of law.
4.4 Severability. In the event any provision of this Agreement
should be invalid, the validity of the other provisions hereof shall not be
affected thereby.
-5-
<PAGE> 6
4.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which, when taken together, shall constitute but one
and the same agreement.
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as a sealed instrument as of the date first set forth above.
<TABLE>
<S> <C>
LDI CORPORATION, Borrower SOCIETY NATIONAL BANK, as
Collateral Agent
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
BANK OF AMERICA ILLINOIS NATIONAL CITY BANK,
(successor in interest to Intercreditor Lender and
Continental Bank N.A.), Credit Agreement Bank
Intercreditor Lender and
Credit Agreement Bank
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
SOCIETY NATIONAL BANK, NORTHWESTERN NATIONAL LIFE
Intercreditor Lender and INSURANCE COMPANY,
Credit Agreement Bank Intercreditor Lender and
1995 Noteholder
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
CONFEDERATION LIFE INSURANCE BENEFICIAL STANDARD LIFE
COMPANY (U.S) IN REHABILITATION, INSURANCE COMPANY,
Intercreditor Lender and Intercreditor Lender and 1995
1995 Noteholder Noteholder
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
COMERICA BANK, FIRST UNION NATIONAL BANK OF
Intercreditor Lender and NORTH CAROLINA,
Credit Agreement Bank Intercreditor Lender and
Credit Agreement Bank
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
</TABLE>
-6-
<PAGE> 7
<TABLE>
<S> <C>
THE DAIWA BANK, LIMITED, THE FIFTH THIRD BANK,
Acting through its Chicago Intercreditor Lender and
Branch, Intercreditor Credit Agreement Bank
Lender and Credit Agreement
Bank By:
----------------------------
Title:
-------------------------
By:
--------------------------
Title: And
-----------------------
by:
----------------------------
Title:
-------------------------
STAR BANK, NATIONAL FIRST NATIONAL BANK OF OHIO,
ASSOCIATION, Intercreditor Intercreditor Lender
Lender and Credit Agreement and Credit Agreement Bank
Bank
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
MICHIGAN NATIONAL BANK, THE BANK OF TOKYO TRUST
Intercreditor Lender and COMPANY, Intercreditor
Credit Agreement Bank Lender and Credit Agreement
Bank
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
FIRST BANK NATIONAL NATIONAL WESTMINSTER BANK, USA,
ASSOCIATION, Intercreditor Intercreditor Lender
Lender and Credit Agreement Bank
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
NORTHERN LIFE INSURANCE
COMPANY, Intercreditor
Lender and 1995 Noteholder
By:
--------------------------
Title:
-----------------------
</TABLE>
-7-
<PAGE> 8
EXHIBIT A
ANNEX A
<TABLE>
<CAPTION>
Commitment
Period
Total Expiration
Commitment Percentage Date
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NATIONAL CITY BANK $ 13,622,040.21 14.1701% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
SOCIETY NATIONAL BANK $ 13,622,040.21 14.1701% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
CONTINENTAL BANK N.A. $ 12,648,989.27 13.1579% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
COMERICA BANK $ 10,897,555.26 11.3360% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
FIRST UNION BANK $ 7,589,355.11 7.8947% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
THE DAIWA BANK, LIMITED $ 5,448,777.63 5.6680% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
THE FIFTH THIRD BANK $ 5,448,777.63 5.6680% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
STAR BANK, NATIONAL ASSOCIATION $ 5,448,777.63 5.6680% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
FIRST NATIONAL BANK OF OHIO $ 5,448,777.63 5.6680% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
MICHIGAN NATIONAL BANK $ 5,448,777.63 5.6680% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
THE BANK OF TOKYO TRUST COMPANY $ 5,448,777.63 5.6680% 5/31/95
- ----------------------------------------------------------------------------------------------------------------
FIRST BANK NATIONAL ASSOCIATION $ 5,059,634.16 5.2632% 5/31/95
--------------
- ----------------------------------------------------------------------------------------------------------------
TOTAL $ 96,132,280.00 100.0000%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 9
EXHIBIT B
SEE ATTACHED LAST PAGE OF
SCHEDULE VII TO INTERCREDITOR AGREEMENT
<PAGE> 10
<TABLE>
<CAPTION>
Scheduled
Payment
Bank at
5/15/95* Balance % of Collateral
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
National City Bank 13.3876% $14,878,531.94 $0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Society 13.3876% $14,878,531.94 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Continental 12.4314% $13,815,779.65 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Comerica 10.7101% $11,902,825.55 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
First Union 7.4588% $8,289,467.80 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Daiwa Ltd 5.3550% $5,951,412.78 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Fifth Third Bank 5.3550% $5,951,412.78 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
First National Bank 5.3550% $5,951,412.78 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Michigan National Bank 5.3550% $5,951,412.78 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Star Bank 5.3550% $5,951,412.78 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Bank of Tokyo 5.3550% $5,951,412.78 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
First Bank, N.A 4.9725% $5,526,311.86 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Northwestern National Life 2.4847% $2,761,458.47 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Northern Life 1.3804% $1,534,143.59 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Confederation Life 0.8282% $920,486.16 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Beneficial Standard Life 0.8282% $920,486.16 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Northwestern National Life 0.0000% $0.00 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
North Atlantic Life 0.0000% $0.00 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Confederation Life 0.0000% $0.00 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Minnesota Mutual Life 0.0000% $0.00 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Farm Bureau Life 0.0000% $0.00 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
FB Annuity 0.0000% $0.00 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
Farm Bureau Mutual Ins. Co. of Michigan 0.0000% $0.00 0.00 0.0000%
- ------------------------------------------------------------------------------------------------------------
100.0000% $111,136,500.12 $0.00 100.0000%
--------- --------------- ----- ---------
- ------------------------------------------------------------------------------------------------------------
Revolver Only Payment $104,999,925.74
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*For purposes of calculating Exposure Percentage as of May 31, 1995 only.
<PAGE> 11
ACKNOWLEDGMENT OF LDI OF OHIO, INC.
The undersigned, LDI of Ohio, Inc., hereby acknowledges and
consents to the terms and provisions set forth in the foregoing Amendment No. 3
to Second Amended and Restated Credit Agreement, Waiver, Consent of
Intercreditor Lenders and Amendment No. 1 to Intercreditor Agreement
("Agreement"). The undersigned represents and warrants to the Intercreditor
Lenders (as defined in the foregoing Agreement) that (a) the Guaranty of Payment
of Debt, executed and delivered by the undersigned, dated July 29, 1994, and (b)
the Amended and Restated Security Agreement, dated as of July 29, 1994 remain
the valid and binding obligations of the undersigned, enforceable against it in
accordance with their respective terms.
LDI OF OHIO, INC.
By:_____________________________________
Its:____________________________________
Dated: May ___, 1995
<PAGE> 1
EXHIBIT 4.28
LETTER AMENDMENT
Dated as of May 12, 1995
TO THE PARTIES NAMED IN APPENDIX I HERETO:
Reference is made to the Note Purchase Agreement 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.
1. Payment of Principal on the Notes. The principal payment on the
Notes in the aggregate principal amount of $6,136,574.38 due on May 15, 1995,
shall be deferred until May 31, 1995. Interest on the Notes shall continue to
be payable on the 10th day of each month.
2. 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 Acknowledgment executed
by LDI Ohio in the form of Exhibit A.
(b) The expiration date of the Bank Credit Agreement shall have
been extended until May 31, 1995
3. 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.
<PAGE> 2
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 2 hereof.
Very truly yours,
LDI CORPORATION
By; ___________________________________
Its__________________________________
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_________________________
-2-
<PAGE> 3
BENEFICIAL STANDARD LIFE INSURANCE
COMPANY
By________________________________
Its______________________________
-3-
<PAGE> 4
EXHIBIT A
ACKNOWLEDGMENT OF LDI OF OHIO, INC.
The undersigned, LDI of Ohio, Inc., hereby acknowledges and consents
to the terms and provisions set forth in the foregoing Letter Amendment dated
as of April 28, 1995. The undersigned represents and warrants to the
Noteholders (as defined in the foregoing Letter Amendment) that (a) the
Guaranty of Payment of Debt, executed and delivered by the undersigned, dated
July 29, 1994, and (b) the Amended and Restated Security Agreement, dated as of
July 29, 1994 remain the valid and binding obligations of the undersigned,
enforceable against it in accordance with their respective terms.
LDI OF OHIO, INC.
By_______________________
Its______________________
Dated: May 15, 1995
<PAGE> 1
EXHIBIT 4.29
April 27, 1995
Olympus Private Placement Fund, L.P.
Metro Center
One Station Place
Stamford, Connecticut 06902
Ladies and Gentlemen:
Reference is made to the Note Purchase Agreement dated July 2, 1991, as
amended by the letter agreement dated April 29, 1994 (the "Agreement"), between
LDI Corporation (the "Company") and Olympus Private Placement Fund, L.P. (the
"Purchaser"). Capitalized terms used herein and not otherwise defined have the
meanings set forth in the Agreement.
The Company has informed you of certain valuation adjustments of
receivables, inventory, net investments in leases and/or other balance sheet
items to be incurred by the Company and reflected in its financial statements as
at January 31, 1995 and for the year then ended, in a pre-tax amount not to
exceed $24,000,000 (the "1995 Reserves"), and of certain changes to be made in
the Company's senior debt agreements as a result thereof. The Company has
requested that the Purchaser agree to certain amendments to the Agreement in
order to reflect the effect of the 1995 Reserves and related matters, and the
Purchaser is willing to consider such amendments at such time as corresponding
amendments to the Company's senior debt agreements have been structured.
Accordingly, the Company and the Purchaser (which acknowledges that it is the
holder of all of the outstanding Notes issued by the Company to the Purchaser
under the Agreement) hereby agree as follows:
1. The Purchaser hereby waives the provisions of Section 5E of the
Agreement with respect to the three fiscal quarters ended January 31, 1995.
2. For the period beginning on January 31, 1995 and ending on April 29,
1995 only, the figure "$65,000,000" in Section 5F of the Agreement is amended to
read "$64,500,000 less the after tax effect of the 1995 Reserves".
4. All of the terms and conditions of the Agreement and the Notes shall
remain in full force and effect as amended hereby, except to the extent
specifically waived hereby.
5. If a definitive amendment of the Agreement as referred to in the
second paragraph above has not been executed and delivered by the Company and
the Purchaser on or before May 31, 1995, then on June 1, 1995, (i) the waiver
set forth in paragraph 1 above shall expire and be of no further force and
effect and (ii) the amendment to Section 5F set forth in paragraph 2 above shall
be void and of no further force and effect, and the provisions of Section 5F
shall be reinstated as in effect immediately prior to the effectiveness of this
letter agreement.
<PAGE> 2
Olympus Private Placement Fund, L.P.
April 27, 1995
Page 2
6. This letter agreement shall become effective when it has been
executed by the Company and the Purchaser.
Please indicate your agreement with the foregoing by executing this
letter agreement in the space provided below and returning a signed copy to me.
Sincerely,
LDI CORPORATION
By: Frank G. Skedel
Executive Vice President and
Chief Financial Officer
ACCEPTED AND AGREED:
OLYMPUS PRIVATE PLACEMENT FUND, L.P.
By: OGP Partners, L.P.
Its General Partner
By:
--------------------------
Title:
-----------------------
<PAGE> 1
EXHIBIT 10.01
1995 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN OF
LDI CORPORATION
1. PURPOSE OF THE PLAN. This 1995 Non-Employee Directors' Stock
Option Plan of LDI Corporation adopted on this 27th day of March, 1995, is
intended to encourage directors of the Company who are not officers or key
employees of the Company or any of its Subsidiaries to acquire or increase
their ownership of common stock of the Company. The opportunity so provided is
intended to foster in participants an incentive to put forth maximum effort for
the continued success and growth of the Company and its Subsidiaries, to aid in
retaining individuals who put forth such efforts, and to assist in attracting
the best available individuals to the Company in the future.
2. DEFINITIONS. When used herein, the following terms shall have the
meaning set forth below:
2.1 "Board" means the Board of Directors of LDI
Corporation.
2.2 "Code" means the Internal Revenue Code of 1986, as in
effect at the time of reference, or any successor revenue code which
may hereafter be adopted in lieu thereof.
2.3 "Company" means LDI Corporation.
2.4 "Directors" means directors who serve on the Board
and who are not officers or key employees of the Company or any of its
Subsidiaries.
2.5 "ERISA" means the Employee Retirement Income Security
Act of 1974, as in effect at the time of reference, or any successor
law which may hereafter be adopted in lieu thereof, and any reference
to any specific provisions of ERISA shall refer to the corresponding
provisions of ERISA as it may hereafter be amended or replaced.
2.6 "Exchange Act" means the Securities Exchange Act of
1934, as in effect at the time of reference, or any successor law
which may hereafter be adopted in lieu thereof, and any reference to
any specific provisions of the Exchange Act shall refer to the
corresponding provisions of the Exchange Act as it may be amended or
replaced.
2.7 "Fair Market Value" means with respect to the
Shares, (i) the closing price of the Shares on the principal stock
exchange on which Shares are then traded or admitted to trading, on
the last business day prior to the date on which the value is to be
determined, (ii) if no sales take place on such day on any such
exchange, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange, or (iii)
if the Shares are not then listed or admitted to trading on any such
exchange, the average of the last reported closing bid and asked
prices on such day on the over-the-counter market. For purposes of
this Section 2.7. the National Association of Securities Dealers
National Market System shall be deemed a principal stock exchange.
1
<PAGE> 2
2.8 "Option" means the right to purchase the number of
Shares specified by the Plan at a price and for a term fixed by the
Plan, and subject to such other limitations and restrictions as the
Plan and the Board impose.
2.9 "Option Agreement" means a written agreement in such
form as may be, from time to time, hereafter approved by the Board,
which shall be duly executed by the Company and the Director and which
shall set forth the terms and conditions of an Option under the Plan.
2.10 "Plan" means the 1995 Non-Employee Directors' Stock
Option Plan of LDI Corporation.
2.11 "Regulation T" means Part 220, chapter II, title 12
of the Code of Federal Regulations, issued by the Board of Governors
of the Federal Reserve System pursuant to the Exchange Act, as amended
from time to time.
2.12 "Rule 16b-3" means Rule 16b-3 of the General Rules
and Regulations of the Securities and Exchange Commission as in effect
at the time of reference, or any successor rules or regulations which
may hereafter be adopted in lieu thereof, and any reference to any
specific provisions of Rule 16b-3 shall refer to the corresponding
provisions of Rule 16b-3 as it may hereafter be amended or replaced.
2.13 "Shares" means shares of the Company's $.01 par value
common stock or, if by reason of the adjustment provisions contained
herein any rights under an Option under the Plan pertain to any other
security, such other security.
2.14 "Subsidiary" or "Subsidiaries" means any corporation
or corporations other than the Company in an unbroken chain of
corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
2.15 "Successor" means the legal representative of the
estate of a deceased Director or the person or persons who shall
acquire the right to exercise or receive an Option by bequest or
inheritance or by reason of the death of the Director.
2.16 "Term" means the period during which a particular
Option may be exercised.
3. STOCK SUBJECT TO THE PLAN. There will be reserved for use, upon
the exercise of Options to be granted from time to time under the Plan, an
aggregate of 150,000 Shares, which Shares may be, in whole or in part, as the
Board shall from time to time determine, authorized but unissued Shares, or
issued Shares which shall have been reacquired by the Company. Any Shares
subject to issuance upon exercise of Options but which are not issued because
of a surrender, lapse, expiration or termination of any such Option prior to
issuance of the Shares shall once again be available for issuance in
satisfaction of Options.
4. ADMINISTRATION OF THE PLAN. Subject to the provisions of the
Plan, the Board shall have full authority, in its discretion, to interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to
2
<PAGE> 3
the Plan, and generally to interpret and determine any and all matters
whatsoever relating to the administration of the Plan and the granting of
Options hereunder.
5. GRANT OF OPTIONS.
5.1 Existing Directors. Each Director who is a Director
on the date the Plan becomes effective (other than Robert S. Kendall,
Michael R. Kennedy and Thomas A. Cutter) shall be granted an Option on
such date to purchase 10,000 Shares without further action by the
Board. On each third anniversary of the date the Plan becomes
effective, each such Director who is still a Director on such
anniversary date shall be granted an additional Option to purchase
10,000 Shares without further action by the Board.
5.2 Future Directors. Each Director who joins the Board
after the date the Plan becomes effective shall be granted an Option
on the first day of his initial term on the Board (the "Initial Grant
Date") to purchase 10,000 Shares without further action by the Board.
On each third anniversary of the Initial Grant Date, if the Director
is still a Director on such anniversary date, such Director shall be
granted an additional Option to acquire 10,000 Shares without further
action by the Board.
5.3 Limitations. If the number of Shares available to
grant under the Plan on a scheduled date of grant is insufficient to
make all automatic grants required to be made pursuant to the Plan on
such date, then each eligible Director shall receive an Option to
purchase a pro rata number of the remaining Shares available under the
Plan; provided further, however, that if such proration results in
fractional Shares, then such Option shall be rounded down to the
nearest number of whole Shares.
6. BASIC STOCK OPTION PROVISIONS.
6.1 Option Price. The option price per Share of any
Option granted under the Plan shall be the Fair Market Value of a
Share on the date the Option is granted.
6.2 Terms of Options. Options granted hereunder
shall be exercisable for a Term beginning six (6) months from the date
of grant and ending ten (10) years from the date of grant, but shall
be subject to earlier termination as hereinafter provided. Except as
otherwise provided in the Plan, prior to its expiration or
termination, an Option granted hereunder may be exercised as to any
part or all of the Shares subject to the Option at any time during the
Term.
6.3 Termination of Directorship. In the event a Director
ceases to be a member of the Board (other than by reason of death or
disability), then an Option may be exercised by the Director (to the
extent that the Director was entitled to do so at the termination of
his or her directorship) at any time within three (3) months after he
or she ceases to be a member of the Board, but not beyond the Term of
the Option, or prior to the approval of the Plan by the Company's
stockholders.
6.4 Death or Disability of Director. If a Director dies
or becomes disabled while he or she is a member of the Board, or
within three (3) months after he or she ceases to be a
3
<PAGE> 4
member of the Board, an Option may be exercised (to the extent the
Director shall have been entitled to do so at the time of his or her
death or disability) by the Director's Successor in the event of
death, or by the Director or his or her personal representative, as
the case may be, in the event of disability, at any time within one
(1) year after he or she ceases to be a member of the Board on account
of such death or disability, but not beyond the Term of the Option or
prior to the approval of the Plan by the Company's stockholders.
7. EXERCISE OF RIGHTS UNDER OPTIONS.
7.1 Notice of Exercise. A Director entitled to exercise
an Option may do so by delivery of a written notice to that effect
specifying the number of Shares with respect to which the Option is
being exercised and any other information the Board may require. The
notice shall be accompanied by payment in full of the purchase price
of any Shares to be purchased, which payment shall be made (i) in
cash, (ii) by delivery of certificates of Shares held for more than
six (6) months, duly endorsed in blank, equal in value to the purchase
price of the Shares to be purchased based on their Fair Market Value
at the time of exercise or (iii) a combination thereof. No Shares
shall be issued upon exercise of an Option until full payment has been
made therefor. All notices or requests provided for herein shall be
delivered to the Company's Secretary, or such other person as the
Board may designate. No fractional Shares shall be issued.
7.2 Cashless Exercise Procedures. The Company, in its
sole discretion, may establish procedures whereby a Director, subject
to the requirements of Rule 16b-3, Regulation T, federal income tax
laws, and other federal, state and local tax and securities laws, can
exercise an Option or a portion thereof without making a direct
payment of the option price to the Company. If the Company so elects
to establish a cashless exercise program, the Company shall determine,
in its sole discretion, and from time to time, such administrative
procedures and policies as it deems appropriate and such procedures
and policies shall be binding on any Director wishing to utilize the
cashless exercise program.
8. OTHER OPTION TERMS AND CONDITIONS. Each Option or each Option
Agreement evidencing the grant of an Option shall contain such other terms and
conditions not inconsistent herewith as shall be approved by the Board.
9. RIGHTS OF OPTION HOLDER. The holder of an Option shall not have
any of the rights of a stockholder with respect to the Shares subject to
purchase or receipt under his or her Option, except to the extent that one or
more certificates for such Shares shall be issuable to the holder upon the due
exercise of the Option and the payment in full of the purchase price therefor.
10. NONTRANSFERABILITY OF OPTIONS. An Option shall not be
transferable, other than: (a) by will or the laws of descent and distribution,
and an Option may be exercised, during the lifetime of the holder of the
Option, only by the holder, or in the event of death, the holder's Successor,
or in the event of disability, the holder's personal representative, or (b)
pursuant to a qualified domestic relation order, as defined in the Code or
ERISA or the rules thereunder, in which case the Option shall be exercisable in
accordance with such order.
4
<PAGE> 5
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of
changes in all of the outstanding Shares by reason of stock dividends, stock
splits, reclassifications, recapitalizations, mergers, consolidations,
combinations, or exchanges of shares, separations, reorganizations or
liquidations, or similar events, or in the event of extraordinary cash or
non-cash dividends being declared with respect to the Shares, or similar
transactions or events, the number and class of Shares available under the Plan
in the aggregate, the number and class of Shares subject to Options theretofore
granted, applicable purchase prices and all other applicable provisions, shall,
subject to the provisions of the Plan, be equitably adjusted by the Board
(which adjustment may, but need not, include payment to the holder of an
Option, in cash or in shares, in an amount equal to the difference between the
price at which such Option may be exercised and the then current Fair Market
Value of the Shares subject to such Option as equitably determined by the
Board). The foregoing adjustment and the manner of application of the
foregoing provisions shall be determined by the Board, in its sole discretion.
Any such adjustment may provide for the elimination of any fractional share
which might otherwise become subject to an Option.
12. FORMS OF OPTIONS. An Option shall be granted hereunder on the
date or dates specified in the Plan. Whenever the Plan provides for the
receipt of an Option by a Director, the Company's Secretary or such other
person as the Board shall appoint, shall forthwith send notice thereof to the
Director, in such form as the Board shall approve, stating the number of Shares
subject to the Option, its Term, and the other terms and conditions thereof.
The notice shall be accompanied by a written Option Agreement, in such form as
may from time to time hereafter be approved by the Board, which shall have been
duly executed by or on behalf of the Company. Execution by the Director to
whom such Option is granted of said Option Agreement in accordance with the
provisions set forth in this Plan shall be a condition precedent to the
exercise of any Option.
13. TAXES.
13.1 Right to Withhold Required Taxes. The Company shall
have the right to require a person entitled to receive Shares pursuant
to the exercise of an Option under the Plan to pay the Company the
amount of any taxes which the Company is or will be required to
withhold, if any, with respect to such Shares before the certificate
for such Shares is delivered pursuant to the Option. Furthermore, the
Company may elect to deduct such taxes from any other amounts then
payable in cash or in shares or from any other amounts payable any
time thereafter to the Director.
13.2 Director Election to Withhold Shares. A Director may
satisfy the withholding tax liability, if any, with respect to the
exercise of an Option, by having the Company withhold Shares otherwise
issuable upon exercise of the Option if such Director makes an
election to do so which satisfies the requirements of Rule 16b-3.
14. TERMINATION OF THE PLAN. The Plan shall terminate ten (10) years
from the date the Plan becomes effective, and an Option shall not be granted
under the Plan after that date although the terms of any Option may be amended
at any date prior to the end of its Term in accordance with the Plan. Any
Option outstanding at the time of termination of the Plan shall continue in
full force and effect according to the terms and conditions of the Option and
the Plan.
5
<PAGE> 6
15. AMENDMENT OF THE PLAN. The Plan may be amended at any time and
from time to time by the Board, but no amendment without the approval of the
stockholders of the Company shall be made if stockholder approval under Rule
16b-3 would be required. Notwithstanding the foregoing, the Plan may not be
amended more than once every six (6) months to change the Plan provisions
listed in section (c)(2)(ii)(A) of Rule 16b-3, other than to comport with
changes in the Code, ERISA or Rule 16b-3. Notwithstanding the discretionary
authority granted to the Board in Section 4 of the Plan, no amendment of the
Plan or any Option granted under the Plan shall impair any of the rights of any
holder, without the holder's consent, under any then outstanding Option
theretofore granted under the Plan.
16. DELIVERY OF SHARES ON EXERCISE. Delivery of certificates for
Shares pursuant to an Option exercise may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with any
applicable requirements of any federal, state or local law or regulation or any
administrative or quasi-administrative requirement applicable to the sale,
issuance, distribution or delivery of such Shares. The Board may, in its sole
discretion, require a Director to furnish the Company with appropriate
representations and a written investment letter prior to the exercise of an
Option or the delivery of any Shares pursuant thereto.
17. FEES AND COSTS. The Company shall pay all original issue taxes
on the exercise of any Option granted under the Plan and all other fees and
expenses necessarily incurred by the Company in connection therewith.
18. EFFECTIVENESS OF THE PLAN. The Plan shall be approved by the
Board. The Plan shall thereafter be submitted to the Company's stockholders
for approval and unless the Plan is approved by the affirmative votes of the
holders of shares having a majority of the voting power of all shares
represented at a meeting duly held in accordance with Delaware law within
twelve (12) months after being approved by the Board, the Plan and all Options
made under it shall be void and of no force and effect. The Plan shall become
effective on the date specified by the Board.
19. OTHER PROVISIONS. As used in the Plan, and in Option Agreements
and other documents prepared in implementation of the Plan, references to the
masculine pronoun shall be deemed to refer to the feminine or neuter, and
references in the singular or the plural shall refer to the plural or the
singular, as the identity of the person or persons or entity or entities being
referred to may require. The captions used in the Plan and in such Option
Agreements and other documents prepared in implementation of the Plan are for
convenience only and shall not affect the meaning of any provision hereof or
thereof.
20. DELAWARE LAW TO GOVERN. This Plan shall be governed by and
construed in accordance with the laws of the State of Delaware.
6
<PAGE> 1
EXHIBIT 10.02
LDI CORPORATION
AMENDED AND RESTATED
EMPLOYEE STOCK OPTION PLAN
1. INCENTIVE PURPOSE. The purpose of the LDI Corporation Employee Stock
Option Plan (the "Plan") is to encourage and enable certain officers
and other key management employees of LDI Corporation, a Delaware
Corporation (the "Company"), and its subsidiaries to acquire a larger
stock ownership and personal financial interest in the Company and
thereby provide additional incentive for the promotion of the welfare
of the Company and for the continued service of the participants with
the Company.
2. AMOUNT OF STOCK. Upon the approval of the Plan by the shareholders,
there shall be reserved, allotted and set aside for issuance under the
Plan 1,500,000 of the presently authorized but unissued Common Shares,
$.01 par value, of the Company (the "Common Shares"), subject to
Paragraph 13.
3. ADMINISTRATION. The Board of Directors or a duly appointed committee
thereof (the "Board") will designate employees to whom incentive or
nonqualified stock options are to be granted and will specify the
number of shares subject to each such option. The Board shall be
authorized to administer the Plan in accordance with its terms and may
adopt and amend such rules and regulations as the Board may desire
concerning the conduct of its affairs. The interpretation and
construction by the Board of any provision of the Plan or of any stock
option granted under it shall be final. No member of the Board shall
be liable for any action or determination made in good faith.
4. PARTICIPATION. Subject to the limitations herein set forth, the Board
may grant incentive or nonqualified stock options from time to time
during the period ending April 30, 1997 to such officers or other key
management employees of the Company or any subsidiary thereof as in
the opinion of the Board will best further the interests of the
Company and achieve the purposes of the Plan. No option shall be
granted to any individual who, at the time the option is granted,
shall not be an employee of the Company or subsidiary thereof.
5. THE OPTION PRICE. Except as provided in Paragraph 7, the option price
per Share of Common Stock to be paid upon the exercise of any stock
option shall be not less than the fair market value per share at the
time the option is granted, as determined by the Board. Such fair
market value shall be the closing sale price per share (or in the
event there are no sales, then the average of the closing bid and
asked prices per share), on NASDAQ on the last trading day preceding
the date on which the option is granted.
6. LENGTH OF OPTION. Each incentive stock option shall by its terms
provide that it is not exercisable after nine (9) years from the date
it is granted; provided, however, if an employee, at the time an
incentive stock option is granted to him owns more than ten percent
(10%) of the total combined voting power of all classes of stock of
the employer corporation and its parent or subsidiary corporation
(taking into account the attribution of stock ownership rules set
forth in Section 425 (d) of the Internal Revenue Code) such option
shall be its terms provide that it is not exercisable after five (5)
years from the date it is granted. Each nonqualified stock option
shall by its terms provide that it is not exercisable after eleven
(11) years from the date it is granted. Each option shall also
provide that it may not be exercised prior to one year from the date
it is granted.
B-1
<PAGE> 2
Thereafter, not more than twenty percent (20%) of the number of Share
of Common Stock subject thereto may be purchased during any succeeding
one-year period; provided, however, that any unexercised option may be
exercised any succeeding year of the term of the option. The Board
may, on a case-by-case basis, at any time on or after the date of the
grant of any option and during the term thereof, accelerate the
schedule of the time or times when an option granted under this Plan
may be exercised. Except as provided in Paragraphs 8, 9 and 10
hereof, no option may be exercised unless the optionee is, at the time
of such exercise, in the employ of the Company or of a subsidiary
thereof and shall have been continuously so employed since the
granting of his option. Absence or leave approved by the Board in
accordance with applicable provisions of the Internal Revenue Code and
Regulations shall not be considered an interruption of employment for
any purpose of the Plan.
7. LIMITATION ON GRANTING OF OPTIONS. The aggregate fair market value
(determined at the time the option is granted) of the stock, with
respect to which incentive stock options are exercisable for the first
time by any employee during any calendar year (under all option plans
of his employer corporation and its parent and subsidiary
corporations), shall not exceed $100,000. If an employee, at the time
an incentive stock option is granted to him, owns stock possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the employer corporation or its parent or
subsidiary corporations (taking into account the attribution of stock
ownership rules set forth in Section 425(d) of the Internal Revenue
Code), the option price per Common Share to be paid upon the exercise
of such option shall not be less than one hundred and ten percent
(110%) of the fair market value per Common Share at the time the
option is granted, as determined in accordance with Paragraph 5.
8. TERMINATION OF EMPLOYMENT. If an optionee shall cease to be employed
by the Company or a subsidiary thereof on account of normal
retirement, early retirement, or disability retirement, either
physical or mental, or on account of physical or mental disability, he
may exercise his option to the extent that he was entitled to exercise
it at the date of such cessation or for such greater number of shares
subject to the option as to which the Board may authorize an
acceleration of time of exercise under the option. If such cessation
of employment is for any reason other than death or permanent and
total disability (within the meaning of Section 105(d) (4) of the
Internal Revenue Code), said optionee may exercise his option to the
same extent, but only within the three months next succeeding such
cessation of employment; provided, however, that in the event of an
uninterrupted transfer of employment to or between the Company and/or
any parent or subsidiary corporation of the Company, such option shall
continue in effect until the employee ceases to be employed by all
such affiliated corporations. Neither the Plan, nor the granting of
any option thereunder, will confer upon any optionee any right with
respect to continuance of employment by the Company, or any subsidiary
thereof, nor will it interfere in any way with his right, or the
employer's right, to terminate his employment at any time.
9. DEATH OF OPTIONEE. In the event of the death of an optionee while in
the employ of the Company or a subsidiary thereof, the options
theretofore granted to him shall be exercisable only within one year
next succeeding such death, or within the balance of the period of the
option if less than one year, and then only by the administrator or
executor of his estate and to the extent that the deceased optionee
was entitled to exercise it at the date of his death.
B-2
<PAGE> 3
10. DISABILITY OF OPTIONEE. In the event of the permanent and total
disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code) of the optionee while in the employ of the Company or a
subsidiary thereof, the options theretofore granted to him shall be
exercisable only within one year next succeeding his cessation of
employment.
11. NONASSIGNABILITY. Each option shall by its terms provide that it is
not transferable by the optionee otherwise than by will or the laws of
descent and distribution and that it is exercisable during his
lifetime, only by the optionee, and after his death, only by his
administrator or executor, as above provided.
12. METHOD OF EXERCISE. Exercise of options shall be by the execution by
the person entitled at the time to exercise the options of a written
notice of such exercise and delivery thereof to the Company at its
principal office in Cleveland, Ohio, which notice shall specify the
number of shares being purchased. In the case of shares of Common
Stock purchased under options (unless such shares of Common Stock have
in either case been registered under the Securities Act of 1933 (the
"1933 Act")), the written notice shall contain a representation in
form approved by the Company that such shares are being acquired not
with a view to resale or distribution and will not be sold or
otherwise transferred except upon compliance with the 1933 Act and the
Rules and Regulations issued thereunder. In the case of the exercise
of an option, such notice shall be accompanied by payment in full of
the purchase price of such shares. The payment may be made in cash or
in shares of Common Stock valued at the closing sales price per share
(or in the event there are no sales, then the average of the closing
bid and asked prices per share), on the NASDAQ on the last trading day
preceding the date on which the option is exercised. Upon receipt of
such notice and payment, the Company will promptly issue and deliver
its certificate for `the number of shares of Common Stock being
purchased under options. No person, estate or other entity shall have
any of the rights of a shareholder with reference to shares of Common
Stock subject to an option until a certificate or certificates for the
shares have been delivered. An option granted under this Plan may be
exercised for any lesser number of shares than the full amount for
which it could be exercised. Such a partial exercise of an option
shall not affect the right to exercise the option from time to time in
accordance with this Plan for the remaining shares subject to the
option.
13. ADJUSTMENTS. In the event of any change in the number or kind of
outstanding shares of the Company by reason of recapitalization,
merger, consolidation, reorganization, separation, liquidation, stock
split, stock dividend, combination of shares or any other change in
the corporate structure or shares of stock of the Company, the Board
in its discretion shall make an appropriate adjustment in the number
and kind of shares for which options may thereafter be granted both in
the aggregate and as to each optionee, as well as in the number and
kind of shares subject to options theretofore granted and the option
price payable upon exercise of such options.
14. REALLOCATION OF UNUSED SHARES. Shares which are not purchased under
options which terminate or lapse may be used for the further grant of
options under the Plan.
15. EXPIRATION AND TERMINATION OF THE PLAN. Options may be granted under
the Plan at any time up to and including April 30, 1997, on which date
the Plan will expire, except as to options then outstanding under the
Plan, which options shall remain in effect until they have been
exercised or have expired.
16. AMENDMENT AND REVOCATION. The Board shall have the right to alter,
amend or revoke the Plan or any part thereof at any time and from time
to time; provided, however, that without
B-3
<PAGE> 4
approval of the shareholders, the Board may not make any alteration or
amendment to the Plan which would change the maximum number of shares
which may be issued under the Plan, change the description or
designation of the class of employees eligible to receive options
under the Plan, extend the term of the Plan or of options granted
thereunder, or make any alteration or amendment to the Plan as to
which approval by shareholders is necessary for Rule 16b-3 of the
Securities and Exchange Commission; and provided, further, that,
without the consent of the optionees, no change may be made in any
option theretofore granted which will impair the rights of such
optionees.
17. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES.
a. No option shall be exercisable and no shares of Common Stock
will be delivered under this Plan except in compliance with
all applicable federal and state laws and regulations
including, without limitation, compliance with the rules of
all stock exchanges on which the Company's Common Stock may be
listed. Any share certificate issued to evidence shares of
Common Stock may bear legends and statements the Board shall
deem advisable to assure compliance with federal and state
laws and regulations. No option shall be exercisable, and no
shares will be delivered under this Plan, until the Company
has obtained consent or approval from regulatory bodies,
federal or state, having jurisdiction over such matters as the
Board may deem advisable.
b. In the case of the exercise of an option by a person or estate
acquiring the right to exercise the option by bequest or
inheritance, the Board may require reasonable evidence as to
the ownership of the option and may require such consents and
releases of taxing authorities that it may deem advisable.
B-4
<PAGE> 1
EXHIBIT 11.01
LDI CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
THREE TWELVE
MONTHS ENDED MONTHS ENDED
JANUARY 31 JANUARY 31
1995 1994 1995 1994
--------------------------- ---------------------
<S> <C> <C> <C> <C>
Average Shares Outstanding
- --------------------------
1. Average common shares outstanding 6,727 6,727 6,727 6,727
2. Net additional shares outstanding
assuming stock options exercised and
proceeds used to purchase treasury stock (A) (A) (A) (A)
3. Dilutive shares contingently issuable
upon conversion of debentures (See Note
6 of the Notes to Consolidated Financial (A) 656 (A) 656
Statements)
4. Adjusted average common shares
outstanding for fully diluted computation 6,727 7,383 6,727 7,383
Net Earnings
- ------------
5. Net earnings (loss) as reported in
statements of consolidated earnings $(15,695) $(27,701) $(18,564) $(24,522)
6. Decrease in interest expense and
amortization of debt issuance costs relating
to the subordinated debentures, net of - 153 - 607
income tax benefit
7. Adjusted net earnings (loss) $(15,695) $(27,548) $(18,564) $(23,915)
Earnings Per Share
- ------------------
8. Net earnings (loss) per average common share
outstanding $(2.33) $(4.12) $(2.76) $ (3.65)
9. Net earnings per common share on a fully
diluted basis (A) (A) (A) (A)
</TABLE>
(A) Antidilutive
47
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-START> FEB-1-1994
<PERIOD-END> JAN-31-1995
<CASH> 11,744
<SECURITIES> 0
<RECEIVABLES> 29,248
<ALLOWANCES> 6,004
<INVENTORY> 10,933
<CURRENT-ASSETS> 45,921
<PP&E> 20,777
<DEPRECIATION> 8,062
<TOTAL-ASSETS> 426,909
<CURRENT-LIABILITIES> 133,807
<BONDS> 241,507
<COMMON> 68
0
0
<OTHER-SE> 51,527
<TOTAL-LIABILITY-AND-EQUITY> 426,909
<SALES> 63,757
<TOTAL-REVENUES> 184,167
<CGS> 54,385
<TOTAL-COSTS> 146,563
<OTHER-EXPENSES> 30,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,766
<INCOME-PRETAX> (25,107)
<INCOME-TAX> (9,624)
<INCOME-CONTINUING> (15,483)
<DISCONTINUED> (3,081)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,564)
<EPS-PRIMARY> (2.76)
<EPS-DILUTED> (2.76)
</TABLE>
