<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission File Number: 0-15994
-------
LDI CORPORATION
-----------------------------------------------------
(exact name of registrant as specified in its charter)
DELAWARE 31-1179824
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4770 Hinckley Industrial Parkway, Cleveland, Ohio 44109-6096
------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 661-5400
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
6,763,957 shares of Common Stock, $.01 par value,
as of August 31, 1995
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED JULY 31, 1995 AND 1994
(Amounts in Thousands, Except Per Share Data)
<TABLE>
====================================================================================================================
<S> <C> <C>
1995 1994
REVENUES: ------------------ ------------------
Leasing.......................................... $ 17,329 $ 31,117
Direct sales..................................... 11,970 12,380
Technical services............................... 3,055 3,962
Equity in earnings of 50% owned affiliate........ 286 172
Other............................................ 600 280
--------------- ---------------
Total....................................... 33,240 47,911
--------------- ---------------
COSTS AND EXPENSES:
Leasing.......................................... 8,851 19,845
Direct sales..................................... 10,598 10,812
Technical services............................... 1,666 2,077
Interest......................................... 6,420 7,414
Debt financing fees.............................. 2,032 732
Selling, general, and administrative............. 5,665 5,674
--------------- ---------------
Total....................................... 35,232 46,554
--------------- ---------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES..................... (1,992) 1,357
Income tax expense.................................... - 516
--------------- ---------------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS............ (1,992) 841
Loss from discontinued operations, net of
income tax benefit of $1,888.................... - (3,081)
--------------- ---------------
NET EARNINGS (LOSS)................................... $ (1,992) $ (2,240)
=============== ===============
EARNINGS (LOSS) PER PRIMARY SHARE:
Continuing operations................................. $ (.30) $ .12
Discontinued operations............................... - (.46)
--------------- ---------------
NET EARNINGS (LOSS)................................... $ (.30) $ (.34)
=============== ===============
Average shares outstanding............................ 6,747 6,727
=============== ===============
<FN>
NOTE: Certain reclassifications have been made to the prior year's
consolidated financial statements to conform to the current period's
presentation.
See the accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 3
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JULY 31, 1995 AND 1994
(Amounts in Thousands, Except Per Share Data)
<TABLE>
================================================================================================================
<S> <C> <C>
1995 1994
REVENUES: ------------- ------------
Leasing....................................... $ 37,165 $ 51,792
Direct sales.................................. 22,664 36,429
Technical services............................ 6,289 7,885
Equity in earnings of 50% owned affiliate..... 536 379
Other......................................... 1,147 463
------------- ------------
Total.................................... 67,801 96,948
------------- ------------
COSTS AND EXPENSES:
Leasing....................................... 20,018 31,088
Direct sales.................................. 19,506 31,389
Technical services............................ 3,381 4,341
Interest...................................... 13,134 14,833
Debt financing fees........................... 3,201 1,148
Selling, general, and administrative.......... 11,051 14,142
------------- ------------
Total.................................... 70,291 96,941
------------- ------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES.................. (2,490) 7
Income tax expense (benefit)...................... (199) 3
------------- ------------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS......... (2,291) 4
Loss from discontinued operations, net of
income tax benefit of $1,888.................. - (3,081)
------------- ------------
NET EARNINGS (LOSS)................................ $ (2,291) $ (3,077)
============= ============
EARNINGS (LOSS) PER PRIMARY SHARE:
Continuing operations.............................. $ (.34) $ -
Discontinued operations............................ - (.46)
------------- ------------
NET EARNINGS (LOSS)................................ $ (.34) $ (.46)
============= ============
Average shares outstanding......................... 6,737 6,727
============= ============
<FN>
NOTE: Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current
period's presentation.
See the accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> 4
LDI CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1995 (Unaudited) AND JANUARY 31, 1995
(Dollars in Thousands)
<TABLE>
===============================================================================================================================
<CAPTION>
July 31, January 31,
1995 1995
---------------- ----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 12,578 $ 11,744
Receivables - net of allowance for doubtful accounts . . . . . . 19,469 23,244
Inventory held for lease or sale . . . . . . . . . . . . . . . . 12,372 10,933
Leased assets:
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . 261,743 311,478
Operating leases - net of accumulated depreciation of $28,339
and $22,120 . . . . . . . . . . . . . . . . . . . . . . . . 31,424 37,610
Land, buildings, equipment and furniture - net of accumulated .
depreciation of $9,063 and $8,062 . . . . . . . . . . . . . . . 11,853 12,715
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 17,091 19,185
---------------- ----------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 366,530 $ 426,909
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 9,271 $ 13,008
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 7,616 5,553
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 85,165 107,855
Subordinated notes . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 3,721 3,933
Nonrecourse lease financing . . . . . . . . . . . . . . . . . . . 195,039 227,574
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 6,375 7,391
---------------- ----------------
Total liabilities . . . . . . . . . . . . . . . . . . . 317,187 375,314
---------------- ----------------
SHAREHOLDERS' EQUITY:
Common stock, par value of $.01 - 20,000,000 shares . . . . . .
authorized; 6,865,484 and 6,828,984 shares issued . . . . . . . 69 68
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 45,035 44,997
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 5,499 7,790
Treasury shares at cost - 101,527 shares . . . . . . . . . . . . (1,260) (1,260)
---------------- ----------------
Total shareholders' equity . . . . . . . . . . . . . . . 49,343 51,595
---------------- ----------------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 366,530 $ 426,909
================ ================
<FN>
NOTE: The balance sheet at January 31, 1995 has been derived from the audited financial statements at that date but does not
include all of the information and notes required by generally accepted accounting principles for complete financial statements.
Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current period's
presentation.
See the accompanying notes to consolidated financial statements.
</TABLE>
- 3 -
<PAGE> 5
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JULY 31, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
===========================================================================================================================
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net earnings (loss) from continuing operations . . . . . . . . $ (2,291) $ 4
Adjustments to reconcile net earnings (loss) to net cash flow from
operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 9,107 10,837
Deferred income taxes . . . . . . . . . . . . . . . . . . . (199) (2,280)
Additions to capital leases . . . . . . . . . . . . . . . . (37,377) (49,276)
Principal portion of lease rentals received . . . . . . . . 87,112 89,824
Purchases of inventory for resale . . . . . . . . . . . . .. (7,069) (30,886)
Sales, transfers, and disposals of inventory and equipment . 28,422 84,591
Change in accounts receivable . . . . . . . . . . . . . . .. 3,775 5,407
Change in accounts payable . . . . . . . . . . . . . . . .. (3,737) (9,744)
Change in accrued expenses and other liabilities . . . . .. 1,095 (4,267)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2,081 (462)
------------- -------------
Cash provided by continuing operations . . . . . . . . . . . . 80,919 93,748
------------- -------------
Discontinued operations:
Net loss from discontinued operations . . . . . . . . . . . - (3,081)
Change in assets and liabilities of discontinued operations . - 11,660
Cash provided by discontinued operations . . . . . . . . . . . -0- 8,579
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,919 102,327
------------- -------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of equipment for lease . . . . . . . . . . . . . . . (24,631) (51,528)
Purchases of land, buildings, equipment and furniture . . . . (219) (852)
Proceeds from sale of businesses, properties and other assets - 8,226
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,850) (44,154)
------------- -------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from nonrecourse lease financing . . . . . . . . . . 42,193 60,591
Payments on nonrecourse lease financing . . . . . . . . . . . (74,727) (82,661)
Net repayments of senior recourse debt facilities . . . . . . (22,689) (35,200)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (72)
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . (55,235) (57,342)
------------- -------------
Increase in Cash and Cash Equivalents . . . . . . . . . . . . . . 834 831
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . 11,744 8,972
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . $ 12,578 $ 9,803
============= =============
</TABLE>
See the accompanying notes to consolidated financial statements.
- 4 -
<PAGE> 6
LDI CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 31, 1995 (UNAUDITED) AND
FOR THE YEAR ENDED JANUARY 31, 1995
(Dollars in Thousands)
<TABLE>
===================================================================================================================================
<CAPTION>
Common
Additional stock in Total
Common paid-in Retained treasury at shareholders'
stock capital earnings cost equity
--------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE AT FEBRUARY 1, 1994 $ 68 $ 44,922 $ 26,354 $ (1,260) $ 70,084
Net loss . . . . . . . . . . (18,564) (18,564)
Compensation expense under
stock award plan . . . . 75 75
--------- ---------- --------- ---------- ---------
BALANCE AT JANUARY 31, 1995 . 68 44,997 7,790 (1,260) 51,595
Net loss . . . . . . . . . . (2,291) (2,291)
Compensation expense under
stock award plans . . . .. 1 38 39
--------- ---------- --------- ---------- ---------
BALANCE AT JULY 31, 1995 . . $ 69 $ 45,035 $ 5,499 $ (1,260) $ 49,343
========= ========== ========= ========== =========
</TABLE>
See the accompanying notes to consolidated financial statements.
- 5 -
<PAGE> 7
LDI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in Thousands, Except Where Indicated)
================================================================================
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals, except as otherwise disclosed)
considered necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended January
31, 1995.
2. RECEIVABLES
<TABLE>
<CAPTION>
July 31, January 31,
1995 1995
-------------- --------------
<S> <C> <C>
Trade accounts . . . . . . . . . . . . $ 14,623 $ 19,351
Trade notes . . . . . . . . . . . . . . 6,447 7,688
Other . . . . . . . . . . . . . . . . . 2,067 2,209
Allowance for doubtful accounts . . . . (3,668) (6,004)
-------------- --------------
Net receivables . . . . . . . . . . . . $ 19,469 $ 23,244
============== ==============
</TABLE>
3. ACCRUED AND OTHER LIABILITIES
<TABLE>
<CAPTION>
July 31, January 31,
1995 1995
-------------- --------------
<S> <C> <C>
Accrued liabilities consist of:
Compensation . . . . . . . . . . . . . $ 1,876 $ 2,189
Interest . . . . . . . . . . . . . . . 689 1,078
Debt financing fees . . . . . . . . . . 1,422 -
Sales tax . . . . . . . . . . . . . . . 329 354
Other . . . . . . . . . . . . . . . . . 3,300 1,932
-------------- --------------
Total . . . . . . . . . . . . . . . . . $ 7,616 $ 5,553
============== ==============
Other liabilities consist of:
Customer rental prepayments . . . . . . $ 2,677 $ 3,668
Deferred revenues . . . . . . . . . . . 2,461 1,724
Other . . . . . . . . . . . . . . . . . 1,237 1,999
-------------- --------------
Total . . . . . . . . . . . . . . . . . $ 6,375 $ 7,391
============== ==============
</TABLE>
4. NOTES PAYABLE
<TABLE>
<CAPTION>
July 31, January 31,
1995 1995
-------------- --------------
<S> <C> <C>
Revolving credit facilities . . . . . . $ 55,865 $ 100,307
Term loans and notes . . . . . . . . . 29,300 7,548
-------------- --------------
Total . . . . . . . . . . . . . . . . . $ 85,165 $ 107,855
============== ==============
</TABLE>
Effective July 21, 1995, the Company entered into a new revolving credit and
term loan agreement with its senior lenders. The new facility, which
refinanced all of the Company's then outstanding senior secured recourse debt,
consists of a revolving credit commitment in the initial amount of $74.3
million and term loans in the
- 6 -
<PAGE> 8
amount of $29.3 million, all of which mature on January 31, 1997. The interest
rate on the revolving credit borrowings is equal to the prime rate plus 1% and
the interest rate on the term loans is equal to the prime rate minus 1%. The
revolving credit commitment will reduce on a quarterly basis to a total
commitment of not more than $47.3 million during the last three months of the
commitment period. The new facility is secured by substantially all of the
Company's unencumbered assets.
At July 31, 1995, $90.2 million was outstanding under this facility.
Subsequent to July 31, 1995, $5.0 million of the revolving credit borrowings
were financed on a nonrecourse basis. Accordingly, these amounts have been
included in nonrecourse lease financing at July 31, 1995.
Under the terms of the refinancing, the Company committed to pay fees and
expenses substantially in excess of those payable under the former loan
agreements. At the closing of the refinancing, the Company was required to
pay agent fees of $0.7 million, participant fees of $0.8 million, professional
fees of approximately $1.3 million and an initial development fee of $0.5
million. Additional agent and participant fees totaling $1.2 million will be
payable on specified dates if the facility is in place until January 31, 1997.
Additional development fees in the amount of $1.0 million per quarter
($7.0 million over the term of the facility) accrue beginning on the closing
date of the loan agreement and thereafter on the first day of each fiscal
quarter. The Company will have the right to reduce such fees by refinancing
the facility with another lender or group of lenders prior to its maturity date
or by otherwise repaying the outstanding borrowings more quickly than required
by the agreement. However, at least $2.1 million of such fees will be payable,
regardless of the amount of amortization, if the facility is in place until
January 31, 1997. All accrued and unpaid development fees, as so reduced, are
payable on the earlier of January 31, 1997 or the repayment in full of the
loans.
The loan agreement contains certain covenants, including an earnings
covenant and a covenant concerning the ratio of outstanding borrowings to
collateral values. The covenants also prohibit the payment of cash dividends.
Management believes that cash generated from operations, borrowings under
the new senior credit facility and financing from existing nonrecourse programs
and other sources will provide sufficient funds to meet the Company's
reasonably foreseeable liquidity needs. However, the substantial principal
amortization and debt financing fee payments under the new senior recourse debt
agreement may require that additional liquidity be generated through other
sources including, but not restricted to, the sale of various other assets.
5. NONRECOURSE LEASE FINANCING
<TABLE>
<CAPTION>
July 31, January 31,
1995 1995
----------- ----------
<S> <C> <C>
Financial institutions . . . . . . . . . . . $ 96,486 $ 119,365
Commercial paper . . . . . . . . . . . . . . 98,553 108,209
----------- ----------
Total . . . . . . . . . . . . . . . . . . . . $ 195,039 $ 227,574
=========== ==========f
</TABLE>
Nonrecourse discounted lease rentals consist of fixed rate capital obtained
from financial institutions on a nonrecourse basis. The lender has a security
interest in the lease rental stream and the underlying assets, but has no
recourse to the Company in the case of default by the lessee.
The Company established two asset-backed financing programs to fund lease
transactions on a nonrecourse basis through the use of commercial paper
securitized by lease rental receivables. The programs are rated A-1 by
Standard & Poor's or 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 July 31, 1995, $17.4 million
of commercial paper was outstanding under this program. Effective May 1, 1994,
the letter of credit under this program was not extended, however, leases
funded previously continue to amortize under the terms of the existing
agreement.
- 7 -
<PAGE> 9
A second securitized program provides for the financing of lease receivables
through an independent special purpose corporation which issues commercial
paper. This program is backed by a surety bond. The availability to finance
under this program was increased from $75 million to $125 million during the
fiscal year ended January 31, 1995. Effective with the completion of the
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 July 31, 1995, $81.2 million of commercial paper was
outstanding under this program.
6. SUBORDINATED NOTES
The Company has $10.0 million of subordinated notes maturing in August 2000.
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 at July 31, 1995,
which declines ratably to par in August 1999.
The Company also issued a total of 1,574,803 warrants in conjunction with
these notes. Each warrant is exercisable by the holder through August 15,
1996, for one share of the Company's common stock at $6.35 per share. The
exercise price is subject to adjustment for stock dividends, splits and certain
other issuances of common stock.
The Company and the holder of the notes have agreed in principle to amend the
notes and related note purchase agreement to increase the interest rate on the
notes from 9.375 percent to 12.75 percent per annum, to change interest payment
dates from semi-annual to quarterly and to amend the financial covenants.
Pending the execution of a definitive amendment, noncompliance by the Company
with certain of the existing financial covenants has been waived by the holder
of the notes. The amendment will be subject to certain conditions precedent,
including the approval of the amendment by the Company's senior lenders.
7. RESTRUCTURED OPERATIONS
During the year ended January 31, 1995, the Company (1) sold substantially
all the assets of its personal computer distribution and direct sales business;
(2) completed the sale of the stock of the Company's Canadian leasing
subsidiary; and (3) sold certain assets of its point-of-sale equipment
businesses.
The revenues and expenses of Restructured Operations are included in the
results of Consolidated Operations through the date of disposition.
8. DISCONTINUED OPERATIONS
During the year ended January 31, 1995, the Company (1) completed the
liquidation and closing of its retail computer superstores; (2) completed the
liquidation and closing of its retail PC outlet stores; (3) sold certain assets
of its software distribution business; and (4) sold certain assets and
transferred certain liabilities of its catalog distribution business.
During the second quarter ended July 31, 1994, the Company recorded a
loss from discontinued operations of $5.0 million (after tax $3.1 million).
This loss, which was in addition to amounts accrued in the prior fiscal year,
was related to incremental costs for the liquidation and closing of the
Company's retail computer superstores and retail PC outlets.
9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Months Ended July 31
-------------------------
1995 1994
----- -------
<S> <C> <C>
Cash paid for:
Interest........................ $ 16,323 $ 15,050
Income taxes.................... $ 10 $ 35
</TABLE>
- 8 -
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LDI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Six Months Ended July 31, 1995
================================================================================
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.
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. At July 31, 1995, the Company had a total of $290 million
of recourse and nonrecourse interest-bearing obligations, of which $187 million
were on a floating rate basis. Of the total floating rate financings, $96
million were converted to fixed rate financing through interest rate swap
agreements and $19 million were subject to interest rate ceilings through
interest rate cap agreements.
During the six months ended July 31, 1995, cash generated from operating
activities was $81 million as compared to $102 million for the period ended
July 31, 1994. This $21 million decrease is attributable primarily to the
following: decrease in cash inflows from the sale or disposal of inventory and
off-lease equipment ($56 million); lower cash outflows for purchases of
inventory for resale ($24 million), and a reduction in cash inflows from
changes in assets and liabilities of discontinued operations ($9 million).
Cash used in investing activities was $25 million for the period ended July 31,
1995 as compared to $44 million for the period ended July 31, 1994. This
decrease of $19 million was due to a $27 million reduction in equipment
purchased for lease offset by a decrease in proceeds from the sale of
businesses, properties and other assets of $8 million. Cash used in financing
activities was $55 million for the period ended July 31, 1995 as compared to
$57 million for the period ended July 31, 1994.
As discussed in Note 4 of Notes to Consolidated Financial Statements,
effective July 21, 1995, the Company entered into a new revolving credit and
term loan agreement with its senior lenders. The new facility, which
refinanced all of the Company's then outstanding senior secured recourse debt,
consists of a revolving credit commitment in the initial amount of $74.3
million and term loans in the amount of $29.3 million, all of which mature on
January 31, 1997. The interest rate on the revolving credit borrowings is
equal to the prime rate plus 1% and the interest rate on the term loans is
equal to the prime rate minus 1%. The revolving credit commitment will reduce
on a quarterly basis to a total commitment of not more than $47.3 million
during the last three months of the commitment period. The new facility is
secured by substantially all of the Company's unencumbered assets.
Management believes that cash generated from operations, borrowings under
the new senior credit facility and financing from existing nonrecourse programs
and other sources will provide sufficient funds to meet the Company's
reasonably foreseeable liquidity needs. However, the substantial principal
amortization and debt financing fee payments under the new senior recourse debt
agreement may require that additional liquidity be generated through other
sources including, but not restricted to, the sale of various other assets.
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.
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<PAGE> 11
LDI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Three Months Ended July 31, 1995 as
Compared to the Three Months Ended July 31, 1994
================================================================================
LEASING:
A summary of the operating results from leasing for the three months
ended July 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1995 1994
-------------------------------------------------------------------------
<S> <C> <C> <C>
Leasing Revenues $ 17,329 $ 31,117
Cost of Leasing 8,851 19,845
----------------- ------------------
Gross Leasing Margin $ 8,478 $ 11,272
================= ==================
Percent of Revenue 48.9% 36.2%
</TABLE>
A summary of new leasing activity, which is a measure of business volume,
for the three months ended July 31, 1995, and 1994, is as follows:
<TABLE>
<CAPTION>
COST OF LEASED EQUIPMENT
------------------------------------------------------
1995 1994
-------------------------- ------------------------
<S> <C> <C> <C> <C>
New Equipment Leases $ 12,047 95.7% $ 22,782 89.3%
Re-Leased Equipment 537 4.3% 2,738 10.7%
--------- ---------- --------- ----------
TOTAL $ 12,584 100.0% $ 25,520 100.0%
========= ========== ========= ==========
Sales-Type Leases $ 3,362 26.7% $ 14,173 55.5%
Direct Finance Leases 8,004 63.6% 9,996 39.2%
Operating Leases 1,218 9.7% 1,351 5.3%
--------- ---------- --------- ----------
TOTAL $ 12,584 100.0% $ 25,520 100.0%
========= ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF TRANSACTIONS
--------------------------------------------------------
1995 1994
-------------------------- --------------------------
<S> <C> <C> <C> <C>
New Equipment Leases 138 79.3% 259 83.0%
Re-Leased Equipment 36 20.7% 53 17.0%
--------- ---------- --------- ----------
TOTAL 174 100.0% 312 100.0%
========= ========== ========= ==========
Sales-Type Leases 113 64.9% 203 65.0%
Direct Finance Leases 43 24.7% 86 27.6%
Operating Leases 18 10.4% 23 7.4%
--------- ---------- --------- ----------
TOTAL 174 100.0% 312 100.0%
========= ========== ========= ==========
</TABLE>
For the three months ended July 31, 1995, aggregate leasing revenues
declined $13.8 million (44.3%) from the same period in the prior year. Leasing
revenues consist of sales-type lease revenues and finance income and operating
lease revenues, both of which declined during the period. The decrease in
sales-type lease revenues ($10.9 million) was primarily the result of two
factors: lower volume of equipment placed on sales-type leases during the three
months ended July 31, 1995 as compared to the same period of the prior year and
a change in the mix of new lease originations. The decrease in finance income
and operating lease revenues ($2.9 million) was principally due to the
reduction ($110.0 million or 26.3%) in average leased assets of the Company for
the three months ended July 31, 1995 as compared to the prior year period.
Gross leasing margin percentage increased from 36.2% for the three
months ended July 31, 1994 to 48.9% for the most recent three month period.
This margin increase is due to finance income constituting a higher proportion
of leasing revenues in the current quarter as compared to the prior year.
There are no leasing costs
- 10 -
<PAGE> 12
directly related to finance income. Consequently, when these revenues account
for a larger portion of the overall revenue mix, costs of leasing as a
percentage of total revenue tend to decrease, resulting in a corresponding
favorable increase in the realized gross leasing margin percentage.
DIRECT SALES:
A summary of the operating results from direct sales for the three months
ended July 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION> Restructured Reported
Core Operations (1) Operations (2) Operations (2)
------------------- -------------- --------------
(Dollars in Thousands) 1995 1994 1995 1994 1995 1994
------------------------ -------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Direct Sales $11,970 $9,114 - $3,266 $ 11,970 $ 12,380
Cost of Direct Sales 10,598 7,960 - 2,852 10,598 10,812
-------------------- ------------------- --------------------
Gross Sales Margins $ 1,372 $1,154 - $ 414 $ 1,372 $ 1,568
==================== =================== ====================
Percent of Sales 11.5% 12.7% - 12.7% 11.5% 12.7%
<FN>
(1) Core operations include Leasing Services, Technology Services, and PC
Rentals, which were identified in the strategic plan as those product
lines that constitute the ongoing business of the Company.
(2) Restructured operations include the results of business units which
are, for financial statement presentation purposes only, considered to
be a part of reported operations. As discussed in Note 7 of Notes to
Consolidated Financial Statements, the restructured operations were
either sold or substantially liquidated during the year ended January
31, 1995.
</TABLE>
Core operations' direct sales for the three months ended July 31, 1995
increased approximately $2.8 million (31.3%) from the prior year's period.
This increase resulted primarily from a $6.5 million sale of certain leases in
a single transaction. The lower gross sales margin associated with this
transaction was the primary reason for the 1.2% decrease in the core operations
gross sales margin percentage.
TECHNICAL SERVICES:
A summary of the operating results from technical services for the three
months ended July 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1995 1994
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Services Revenues $ 3,055 $ 3,962
Cost of Services 1,666 2,077
-------------- --------------
Gross Margin $ 1,389 $ 1,885
============== ==============
Percent of Revenues 45.5% 47.6%
</TABLE>
For the three months ended July 31, 1995, technical services revenues
decreased by 22.9% from the prior year's second quarter. The revenue decline
reflects a decrease in the Company's technical services revenue base and lower
per unit maintenance revenues as the cost of new computers and peripherals have
declined.
The gross margin percentage decreased 2.1% reflecting overall higher
cost relationships in proportion to the decrease in the Technical Services
revenue base. Competitive market conditions also continue to pressure pricing
decisions and have resulted in some erosion of gross sales margins.
INTEREST EXPENSE:
For the three months ended July 31, 1995, interest expense decreased by
13.4% from the prior year's quarter, primarily as a result of a $110.5 million
(26.6%) reduction in the average amount of outstanding debt offset by an
increase in the average rate of interest.
- 11 -
<PAGE> 13
DEBT FINANCING FEES:
Debt financing fees increased during the quarter ended July 31, 1995 by $1.3
million (177.6%) primarily due to amortization of fees associated with the new
senior secured credit facility discussed in Note 4 of Notes to Consolidated
Financial Statements. Approximately $0.7 million of the fees accrued at July
31, 1995 can be recovered as described in Note 4.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE:
<TABLE>
<CAPTION>
Three months ended July 31
--------------------------
1995 1994
---- ----
<S> <C> <C>
Selling, general, and administrative expense $5.4 $6.9
Addition to allowance for doubtful accounts 0.7 0.1
Capitalized initial direct costs (0.4) (0.9)
Adjustment of prior year pension accrual - (0.4)
--------- ----------
Reported selling, general, and administrative expense $5.7 $5.7
========= ==========
</TABLE>
Excluding the effects detailed above for changes in allowance for
doubtful accounts, initial direct costs and pension accrual adjustment,
selling, general, and administrative expense decreased $1.5 million (21.7%) in
the quarter ended July 31, 1995 compared to the prior year's second quarter.
The decrease is due primarily to head count reductions and facilities
consolidation instituted as part of the Company's strategic plan.
INCOME TAXES:
As of January 31, 1995, the Company had investment tax credits for
income tax purposes of $2.9 million and tax loss carryforwards for income tax
purposes of $88.3 million.
During the quarter ended July 31, 1995 the Company recorded a valuation
reserve of $0.9 million against the deferred tax asset. The reserve relates to
the portion of the tax credit carryforwards that management does not believe
will be utilized prior to expiration. The decision to record this valuation
reserve was based in part on revised income projections for continuing
operations. Before recording this reserve, the effective tax benefit rate for
the quarter ended July 31, 1995 was 38%, which was comparable to the prior
year period.
- 12 -
<PAGE> 14
LDI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Six Months Ended July 31, 1995 as
Compared to the Six Months Ended July 31, 1994
LEASING:
A summary of the operating results from leasing for the six months
ended July 31, 1995 and 1994 is as follows:
<TABLE>
================================================================================
<CAPTION>
(Dollars in Thousands) 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C>
Leasing Revenues $ 37,165 $ 51,792
Cost of Leasing 20,018 31,088
-------------- ----------------
Gross Leasing Margin $ 17,147 $ 20,704
============== ================
Percent of Revenue 46.1% 40.0%
</TABLE>
A summary of new leasing activity, which is a measure of business volume,
for the six months ended July 31, 1995, and 1994, is as follows:
<TABLE>
<CAPTION>
COST OF LEASED EQUIPMENT
-----------------------------------------------------
1995 1994
-----------------------------------------------------
<S> <C> <C> <C> <C>
New Equipment Leases $ 24,631 96.8% $ 33,826 82.7%
Re-Leased Equipment 826 3.2% 7,060 17.3%
---------- ----------- ----------- --------
TOTAL $ 25,457 100.0% $ 40,886 100.0%
========== =========== =========== ========
Sales-Type Leases $ 9,531 37.4% $ 15,482 37.9%
Direct Finance Leases 11,881 46.7% 20,262 49.6%
Operating Leases 4,045 15.9% 5,142 12.5%
---------- ----------- ----------- --------
TOTAL $ 25,457 100.0% $ 40,886 100.0%
========== =========== =========== ========
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF TRANSACTIONS
-----------------------------------------------------
1995 1994
------------------------- ------------------------
<S> <C> <C> <C> <C>
New Equipment Leases 306 83.2% 478 80.2%
Re-Leased Equipment 62 16.8% 118 19.8%
---------- ----------- ----------- ---------
TOTAL 368 100.0% 596 100.0%
========== =========== =========== =========
Sales-Type Leases 250 67.9% 384 64.4%
Direct Finance Leases 83 22.6% 162 27.2%
Operating Leases 35 9.5% 50 8.4%
---------- ----------- ----------- ---------
TOTAL 368 100.0% 596 100.0%
========== =========== =========== =========
</TABLE>
For the six months ended July 31, 1995, aggregate leasing revenues
declined $14.6 million (28.2%) from the same period in the prior year. Leasing
revenues consist of sales-type lease revenues and finance income and operating
lease revenues, both of which declined during the period. The decrease in
sales-type lease revenues ($8.0 million, of which $2.0 million was attributable
to the Company's Canadian leasing subsidiary sold in May 1994) was primarily
due to the lower volume of equipment placed on sales-type leases during the six
months ended July 31, 1995 as compared to the same period of the prior year.
The decrease in finance income and operating lease revenues ($6.6 million) was
principally due to the reduction ($112.8 million or 26.0%) in average leased
assets of the Company for the six months ended July 31, 1995 as compared to the
prior year period.
- 13 -
<PAGE> 15
DIRECT SALES:
A summary of the operating results from direct sales for the six months
ended July 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Restructured Reported
Core Operations (1) Operations (2) Operations (2)
------------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands) 1995 1994 1995 1994 1995 1994
--------------------------- ------------------- ------------------- -------------------
Direct Sales $ 22,664 $ 17,607 - $ 18,822 $ 22,664 $ 36,429
Cost of Direct Sales 19,506 15,207 - 16,182 19,506 31,389
------------------- ------------------- -------------------
Gross Sales Margins $ 3,158 $ 2,400 - $ 2,640 $ 3,158 $ 5,040
=================== =================== ===================
Percent of Sales 14.0% 13.6% - 14.0% 14.0% 13.8%
<FN>
(1) Core operations include Leasing Services, Technology Services, and PC
Rentals, which were identified in the strategic plan as those product
lines that constitute the ongoing business of the Company.
(2) Restructured operations include the results of business units which
are, for financial statement presentation purposes only, considered to
be a part of reported operations. As discussed in Note 7 of Notes to
Consolidated Financial Statements, the restructured operations were
either sold or substantially liquidated during the year ended January
31, 1995.
</TABLE>
Core operations' direct sales for the six months ended July 31, 1995
increased approximately $5.0 million (28.7%) from the prior year's period.
This increase resulted primarily from incremental sales of off-lease equipment
to existing lease customers and the sale of certain leases in a single
transaction. Gross core operations sales margin percentages remained
comparable from period to period.
TECHNICAL SERVICES:
A summary of the operating results from technical services for the six
months ended July 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1995 1994
-------------------------------------------------------------
<S> <C> <C>
Services Revenues $ 6,289 $ 7,885
Cost of Services 3,381 4,341
-------------- --------------
Gross Margin $ 2,908 $ 3,544
============== ==============
Percent of Revenues 46.2% 44.9.%
</TABLE>
For the six months ended July 31, 1995, technical services revenues
decreased by 20.2% from the prior year's comparable period. The revenue
decline reflects a decrease in the Company's technical services revenue base
and lower per unit maintenance revenues resulting from decreases in the cost of
new computers and peripherals.
The gross margin percentage increase of 1.3% reflects increased labor
efficiencies and lower parts costs incurred during the current period offset by
margin erosion from competitive pricing pressures.
INTEREST EXPENSE:
For the six months ended July 31, 1995, interest expense decreased by 11.5%
from the prior year's period, primarily as a result of a $110.2 million (25.7%)
reduction in the average amount of outstanding debt offset by an increase in
the average rate of interest.
DEBT FINANCING FEES:
Debt financing fees increased during the six months ended July 31, 1995 by
$2.1 million (178.8%) primarily due to amortization of fees associated with the
new senior secured credit facility discussed in Note 4 of Notes to Consolidated
Financial Statements. Approximately $0.7 million of the fees accrued at July
31, 1995 can be recovered as described in Note 4.
- 14 -
<PAGE> 16
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE:
<TABLE>
<CAPTION>
Six months ended July 31
----------------------------
1995 1994
---- ----
<S> <C> <C>
Selling, general, and administrative expense $10.6 $15.4
Additions to allowance for doubtful accounts 1.2 0.1
Capitalized initial direct costs (0.8) (1.0)
Adjustment of prior year pension accrual - (0.4)
---------- ----------
Reported selling, general, and administrative expense $11.0 $14.1
========== ==========
</TABLE>
Excluding the effects detailed above for changes in allowance for
doubtful accounts, initial direct costs, and pension accrual adjustment,
selling, general, and administrative expense decreased $4.8 million (31.2%) in
the six months ended July 31, 1995 compared to the prior year's period. The
decrease is due primarily to head count reductions and facilities consolidation
instituted as part of the Company's strategic plan and the effect of the sale
of the restructured businesses as discussed in Note 7 of Notes to Consolidated
Financial Statements.
INCOME TAXES:
As a result of the valuation reserve recorded in the quarter ended July 31,
1995, the effective income tax benefit rate for the six month period ended July
31, 1995 was 10%. Had the valuation reserve not been recorded in the current
period, the effective income tax benefit rate for the six month period ended
July 31, 1995 would have been 38%, which is comparable to the prior year
period.
- 15 -
<PAGE> 17
<TABLE>
<CAPTION>
Exhibits:
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.)
4.02 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.)
4.03 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.)
4.04(a) Note Purchase Agreement dated as of July 2, 1991, between the 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.)
4.04(b) Amendment dated April 29, 1994, to Note Purchase Agreement dated as of July 2, 1991, between the 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.)
4.05(a) 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.)
4.05(b) 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.)
4.05(c) 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.)
</TABLE>
- 16 -
<PAGE> 18
<TABLE>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
4.05(d) Third Amendment dated January 15, 1992, to Amended and Restated Credit Agreement dated November 16, 1990, between LDI
Lease Funding Corporation and the Dai-Ichi Kangyo Bank Ltd., Chicago Branch (Included as an exhibit to the Registrant's
Annual Report on Form 10-K (No. 0-15994) for the year ended January 31, 1992, and incorporated herein by reference.)
4.05(e) 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.)
4.05(f) 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.)
4.05(g) 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.)
4.05(h) 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.)
4.06(a) 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.)
4.06(b) Lease Receivables Purchase and Contribution Agreement dated as of October 7, 1994, between LDI Lease Receivables Funding
Corp. and the 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.)
4.07(a) Third Amended and Restated Credit Agreement dated as of July 21, 1995, among the Registrant, certain Commercial Lending
Institutions, and National City Bank and Society National Bank, as co-agents
4.07(b) Second Amended and Restated Security Agreement dated as of July 21, 1995, between the Registrant and Society National
Bank, as Collateral Agent
4.07(c) Subordinated Second Amended and Restated Security Agreement dated as of July 21, 1995, between the Registrant and Society
National Bank, as Collateral Agent
4.07(d) Security Agreement dated as of July 21, 1995, between LDI Computer Rentals, Inc. and Society National Bank, as Collateral
Agent
10.01 1995 Non-Employee Directors' Stock Option Plan (Included as an exhibit to the Registrant's Annual Report on Form 10-K
(No. 0-15994) for the year ended January 31, 1995, and incorporated herein by reference.)
10.02 Amended and Restated Employee Stock Option Plan (Included as an exhibit to the Registrant's Annual Report on Form 10-K
(No. 0-15994) for the year ended January 31, 1995, and incorporated herein by reference.)
</TABLE>
- 17 -
<PAGE> 19
<TABLE>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
11.01 Computation of Earnings Per Share for the period ended July 31, 1995
27.01 Financial Data Schedules
</TABLE>
- 18 -
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LDI CORPORATION
---------------
Date: September 14, 1995 By: /s/ Frank G. Skedel
------------------------------------------
Frank G. Skedel, Executive Vice President,
Chief Financial Officer, Treasurer and
Secretary
- 19 -
<PAGE> 1
EXHIBIT 4.07(a)
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
dated as of July 21, 1995
among
LDI CORPORATION,
as the Borrower,
and
CERTAIN LENDING INSTITUTIONS,
as the Lenders,
and
NATIONAL CITY BANK and SOCIETY NATIONAL BANK
as the Co-Agents for the Lenders
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1 Defined Terms.................................................................................... 2
1.2 Use of Defined Terms............................................................................. 26
1.3 Cross-References................................................................................. 26
1.4 Accounting and Financial Determinations.......................................................... 26
ARTICLE II
AMOUNT AND TERMS OF CREDIT
2.1 Revolving Loans.................................................................................. 27
2.2 Term Loans ...................................................................................... 28
2.3 Notice of Borrowing.............................................................................. 28
2.4 Interest ........................................................................................ 28
2.5 Notes ........................................................................................... 29
2.6 Voluntary Reduction of Revolving Commitments..................................................... 29
2.7 Mandatory Reduction in Revolving Commitments and Term Loans...................................... 30
2.8 Repayment and Prepayment......................................................................... 32
ARTICLE III
FEES
3.1 Participant Fee.................................................................................. 34
3.2 Agent Fees ...................................................................................... 34
3.3 Development Fee.................................................................................. 35
ARTICLE IV
CERTAIN OTHER PROVISIONS
4.1 Increased Capital Costs.......................................................................... 37
4.2 Taxes ........................................................................................... 37
4.3 Payments, Computations, Etc. .................................................................... 38
4.4 Sharing of Payments.............................................................................. 39
4.5 Setoff .......................................................................................... 40
4.6 Use of Proceeds.................................................................................. 40
ARTICLE V
CONDITIONS TO EFFECTIVENESS
5.1 Conditions to Effectiveness...................................................................... 40
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.2 All Borrowings................................................................................... 45
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Organization, etc................................................................................ 46
6.2 Due Authorization, Non-Contravention, etc........................................................ 46
6.3 Governmental Approval, Regulation, etc........................................................... 46
6.4 Validity, etc.................................................................................... 47
6.5 Financial Information............................................................................ 47
6.6 No Material Adverse Change....................................................................... 47
6.7 Litigation, Labor Controversies, etc............................................................. 47
6.8 Subsidiaries .................................................................................... 48
6.9 Ownership of Properties.......................................................................... 48
6.10 Taxes ........................................................................................... 48
6.11 Pension and Welfare Plans........................................................................ 48
6.12 Environmental Warranty........................................................................... 48
6.13 Regulations G, U and X........................................................................... 49
6.14 Investment Company Act; Public Utility Holding
Company Act............................................................................... 49
6.15 Solvency......................................................................................... 49
6.16 No Default....................................................................................... 49
6.17 Adverse Contracts................................................................................ 50
6.18 Full Disclosure.................................................................................. 50
6.19 Leases of Aircraft............................................................................... 50
ARTICLE VII
COVENANTS
7.1 Affirmative Covenants............................................................................ 50
7.1.1 Financial Information, Reports, Notices, Etc..................................................... 50
7.1.2 Compliance with Laws, etc........................................................................ 54
7.1.3 Maintenance of Properties........................................................................ 54
7.1.4 Insurance........................................................................................ 54
7.1.5 Books and Records; Visitation.................................................................... 54
7.1.6 Environmental Covenant........................................................................... 55
7.1.7 Payment.......................................................................................... 56
7.1.8 Payment of Taxes and Claims...................................................................... 56
7.1.9 Retirement Plans................................................................................. 57
7.1.10 Deficiency....................................................................................... 57
7.1.11 Casualty Loss.................................................................................... 57
7.1.12 Key Man Life Insurance........................................................................... 57
7.2 Negative Covenants............................................................................... 57
7.2.1 Business Activities.............................................................................. 57
7.2.2 Indebtedness..................................................................................... 58
7.2.3 Liens............................................................................................ 59
7.2.4 Financial Condition.............................................................................. 60
7.2.5 Investments...................................................................................... 60
7.2.6 Restricted Payments, etc......................................................................... 61
7.2.7 Consolidation, Merger, etc. ..................................................................... 61
7.2.8 Asset Dispositions, etc. ........................................................................ 61
7.2.9 Transactions with Affiliates..................................................................... 61
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
7.2.10 Subordination of Claims.......................................................................... 61
7.2.11 Credit Rating System............................................................................. 62
7.2.12 Securitized Non-Recourse Debt Pools.............................................................. 62
7.2.13 Severance Payments............................................................................... 62
7.2.14 Amendments to Subordinated Debt.................................................................. 62
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Listing of Events of Default..................................................................... 63
8.1.1 Non-Payment of Obligations....................................................................... 63
8.1.2 Breach of Warranty............................................................................... 63
8.1.3 Non-Performance of Certain Covenants and Obligations............................................. 63
8.1.4 Non-Performance of Other Covenants and Obligations............................................... 63
8.1.5 Default on Other Indebtedness.................................................................... 64
8.1.6 Judgments........................................................................................ 64
8.1.7 Pension Plans.................................................................................... 64
8.1.8 Bankruptcy, Insolvency, etc., of Borrower........................................................ 64
8.1.9 Bankruptcy, Insolvency, etc., of Borrower's
Subsidiaries.............................................................................. 65
8.1.10 Material Adverse Change.......................................................................... 65
8.1.11 Default Under Picker Joint Venture Financing..................................................... 65
8.1.12 Independent Directors............................................................................ 66
8.1.13 CXC Financing Arrangement........................................................................ 66
8.2 Action if Bankruptcy of Borrower................................................................. 66
8.3 Action if Other Event of Default................................................................. 67
ARTICLE IX
THE CO-AGENTS
9.1 Actions.......................................................................................... 67
9.2 Funding Reliance, etc............................................................................ 68
9.3 Exculpation...................................................................................... 69
9.4 Successors....................................................................................... 69
9.5 Loans by Agent Lenders........................................................................... 70
9.6 Credit Decisions................................................................................. 70
9.7 Copies, etc...................................................................................... 71
9.8 Note Holders..................................................................................... 71
9.9 Knowledge of Default............................................................................. 71
9.10 Action by Agent.................................................................................. 71
9.11 Notices, Default, Etc............................................................................ 72
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Waivers, Amendments, etc......................................................................... 72
10.2 Notices.......................................................................................... 73
10.3 Payment of Costs and Expenses.................................................................... 73
10.4 Indemnification.................................................................................. 74
10.5 Survival......................................................................................... 75
10.6 Severability .................................................................................... 75
</TABLE>
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<TABLE>
<S> <C>
10.7 Headings......................................................................................... 75
10.8 Execution in Counterparts........................................................................ 75
10.9 Governing Law; Entire Agreement.................................................................. 75
10.10 Successors and Assigns........................................................................... 76
10.11 Sale and Transfer of Loans and Note; Participation
in Loans and Note......................................................................... 76
10.11.1 Assignments...................................................................................... 77
10.11.2 Participations................................................................................... 78
10.12 Other Transactions............................................................................... 79
10.13 Further Assurances............................................................................... 79
10.14 WAIVER OF JURY TRIAL............................................................................. 79
10.15 Release.......................................................................................... 79
</TABLE>
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ANNEX A - COMMITMENTS
ANNEX B - [INTENTIONALLY OMITTED]
ANNEX C - CERTAIN FINANCIAL REPORTS AND OTHER INFORMATION
ANNEX D - EXISTING LOANS
ANNEX E - BORROWING BASE RATIOS
ANNEX F - EARNINGS BEFORE TAXES
ANNEX G - BORROWING BASE AUDIT AGREED UPON PROCEDURES
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Term Note
EXHIBIT B-1 - Form of Senior Borrower Security Agreement
EXHIBIT B-2 - Form of Subsidiary Security Agreement
EXHIBIT B-3 - Form of Subordinated Borrower Security Agreement
EXHIBIT C - Form of Borrowing Base Certificate
EXHIBIT D - Form of Lender Assignment Agreement
EXHIBIT E - Litigation
EXHIBIT F - Subsidiaries
EXHIBIT G - Existing Indebtedness
EXHIBIT H - Existing Investments
EXHIBIT I - Form of Intercreditor Agreement
EXHIBIT J - Existing Subordinated Claims
EXHIBIT K - Form of Collateral Assignment of Life Insurance
Policy
EXHIBIT L-1 - Form of Open-End Mortgage (Leasehold), Security
Agreement and Collateral Assignment
EXHIBIT L-2 - [INTENTIONALLY OMITTED]
EXHIBIT L-3 - Form of Assignment of Leases and Rentals
EXHIBIT M - [INTENTIONALLY OMITTED]
EXHIBIT N - Form of Severance Payment Subordination Agreement
EXHIBIT O - Form of Subsidiary Guaranty
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<PAGE> 7
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
July 21, 1995, among LDI CORPORATION, a Delaware corporation (the "Borrower"),
the various financial institutions as are or may become parties hereto
(collectively, the "Lenders") and NATIONAL CITY BANK ("NCB") and SOCIETY
NATIONAL BANK ("Society"), as Co-Agents for the Lenders,
W I T N E S S E T H:
WHEREAS, the Borrower is primarily engaged in the business of
leasing, selling, maintaining, financing and providing technical and business
services related to data processing, communications, computer and other capital
equipment; and
WHEREAS, the Borrower, various financial institutions (the
"Existing Banks"), and NCB, Society and Bank of America Illinois (successor in
interest to Continental Bank N.A.), as co-agents for the Existing Banks, entered
into a Second Amended and Restated Credit Agreement, dated as of July 29, 1994,
as heretofore amended (the "Existing NCB Credit Agreement"), pursuant to which
the Existing Banks made certain financial accommodations to Borrower; and
WHEREAS, the Borrower and various financial institutions
("Existing Insurance Company Lenders") (the Existing Banks and the Existing
Insurance Company Lenders are sometimes collectively referred to as the
"Existing Lenders") are parties to a Note Purchase Agreement, dated as of August
1, 1989, as heretofore amended (the "Existing Note Purchase Agreement") (the
Existing NCB Credit Agreement and the Existing Note Purchase Agreement are
sometimes collectively referred to as the "Existing Loan Agreements"), pursuant
to which the Existing Insurance Company Lenders made certain financial
accommodations to the Borrower; and
WHEREAS, the Borrower has requested the Co-Agents and the
Lenders to amend and restate each of the Existing Loan Agreements in their
entirety to provide for certain matters as herein provided; and
WHEREAS, the Borrower desires to use the proceeds of the Loans
from time to time and after the Effective Date (as hereinafter defined) for its
working capital and general corporate purposes; and
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<PAGE> 8
WHEREAS, the Co-Agents and the Lenders are willing, but only
on the terms and subject to the conditions hereinafter set forth, to amend and
restate the Existing Loan Agreements so as to accomplish the foregoing and, in
connection therewith, the Existing Lenders have agreed to continue their loans
outstanding under the Existing Loan Agreements, and make new Loans hereunder,
all in accordance with their Percentages (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto hereby agree that, from
and after the Effective Date, the Existing Loan Agreements (including all
Annexes, Schedules and Exhibits thereto) be, and the same hereby are, amended
and restated in their entirety to read as set forth above and as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Accrual Date" is defined in Section 3.2.
"Accrual Portion Payment Date" is defined in Section 3.3.
"Administrative Agent" means NCB. Such term also includes each
other Person as shall have subsequently been appointed as successor
Administrative Agent pursuant to Section 9.4.
"Affiliate" of any Person means (a) any Person who or which is
a director, manager, managing general partner or officer of such Person, or (b)
any other Person who or which, directly or indirectly, either individually or
together with members of his or her immediate family (as defined in Item 404 of
Regulation S-K ("Item 404") promulgated pursuant to the Securities Act of 1933,
as amended), beneficially owns five percent (5%) or more of the voting stock of,
or partnership interests, membership interests or other similar equity interests
in, such Person, or (c) any member of the immediate family (as defined in Item
404), of such Person or of any Person described in clause (a) or (b) above, or
(d) any other Person in which any Person described in clause (a), (b) or (c)
above owns, directly or indirectly, a five percent (5%) or greater equity
interest. Without limiting the foregoing, for purposes of this Agreement, (u)
Kendall, (v) Kennedy, (w)
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Cutter, (x) each member of the immediate family (as defined in Item 404) of
Kendall, Kennedy or Cutter, (y) each Person as to which Kendall, Kennedy, Cutter
or any member of the immediate family (as defined in Item 404) of Kendall,
Kennedy or Cutter is a director, manager, managing general partner, officer or
employee, and (z) each Person in which Kendall, Kennedy, Cutter or any member of
the immediate family (as defined in Item 404) of Kendall, Kennedy or Cutter
owns, directly or indirectly, a five percent (5%) or greater equity interest,
shall at all times be deemed to be an Affiliate of the Borrower.
"Agreement" means, on any date, this Third Amended and
Restated Credit Agreement as originally in effect and as thereafter from time to
time amended, supplemented, amended and restated, or otherwise modified and in
effect on such date.
"Assignee Lender" is defined in Section 10.11.1.
"Authorized Officer" means, relative to any Obligor, those of
the following of its officers whose signatures and incumbency shall have been
certified by the Obligor to the Administrative Agent and the Lenders as of the
date hereof: its Chief Executive Officer, President, Chief Financial Officer and
Treasurer.
"Availability Deficiency" means the occurrence, as at any
time, of a condition in which (a) the then aggregate outstanding principal
amount of all Revolving Loans exceeds (b) the then total Revolving Commitments
of the Lenders.
"Borrower" is defined in the introductory paragraph.
"Borrower Security Agreements" means, collectively, the Senior
Borrower Security Agreement and the Subordinated Borrower Security Agreement.
"Borrowing" means the Revolving Loans made by all Lenders on
the same Business Day and pursuant to the request of the Borrower in accordance
with Section 2.3.
"Borrowing Base Amount" means, as at any time, an amount equal
to the difference of (a) the then Total Borrowing Base Assets, minus (b) the
then Total Borrowing Base Liabilities.
"Borrowing Base Certificate" means a borrowing base
certificate substantially in the form of Exhibit C hereto.
"Borrowing Base Deficiency" means the occurrence, as at any
time during the applicable period set forth on Annex E attached hereto, of a
condition in which the ratio of (a) the then Total Borrowing Base Assets to (b)
the then Total Borrowing Base Liabilities, is less than the ratio set forth on
Annex E attached hereto for such period.
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<PAGE> 10
"Business Day" means any day which is neither a Saturday or
Sunday nor a legal holiday on which banks are authorized or required to be
closed in Cleveland, Ohio.
"Capital Lease" means any arrangement for the leasing of
personal property (including, but not limited to, any Lease) which, in
accordance with GAAP, is or should be accounted for as a capital lease.
"Capital Lease Liabilities" means the aggregate amount of all
monetary obligations of the Borrower or any of its Subsidiaries under Capital
Leases, and, for purposes of this Agreement and each other Loan Document, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with GAAP, and the stated maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without payment
of a penalty.
"Cash Collateral and Account Maintenance Agreement" has the
meaning given to such term in each of the Borrower Security Agreements.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of indebtedness, maturing not more than
ninety (90) days after such time, issued or guaranteed by the United
States government;
(b) commercial paper, maturing not more than ninety (90) days
from the date of issuance (or longer term investments with an annually
recurring unconditional put right) issued by a corporation (other than
an Affiliate of the Borrower) organized under the laws of any state of
the United States or of the District of Columbia and rated in one of
the two highest categories by Standard & Poor's Corporation or by
Moody's Investors Services, Inc.;
(c) any certificate of deposit or banker's acceptance,
maturing not more than ninety (90) days after such time, issued by a
commercial banking institution that is a member of the Federal Reserve
System and which has a combined capital and surplus and undivided
profits of not less than One Hundred Million Dollars ($100,000,000); or
(d) any repurchase agreement entered into with any commercial
banking institution of the stature referred to in clause (c),
(i) secured by a fully perfected security interest in
any obligation of the type described in any of clauses (a)
through (c); and
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<PAGE> 11
(ii) having a market value at the time such
repurchase agreement is entered into of not less than one
hundred percent (100%) of the repurchase obligation of such
commercial banking institution thereunder.
"Casualty Loss" means any of the following events with respect
to any item of Collateral or other property of the Borrower on which the
Collateral Agent and the Lenders now or hereafter may have Liens: (i) the actual
total loss of the item or such loss as shall render repair of the item
uneconomical, (ii) the item shall become lost, stolen, destroyed, damaged beyond
repair or permanently rendered unfit for use for any reason whatsoever, or (iii)
the condemnation or taking, by exercise of the power of eminent domain or
otherwise, of such item or confiscation of such item, or of so much of any such
item as to render impractical or unreasonable the use of such item for
substantially the same purposes for which such item was used immediately prior
to such condemnation, taking or confiscation.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response
Compensation Liability Information System List.
"Co-Agents" means, collectively, NCB and Society and
"Co-Agent" means either of them. Such term also includes each other Person as
shall have subsequently been appointed as successor Co-Agent pursuant to Section
9.4.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Collateral" has the meaning given to such term in each of the
Security Agreements.
"Collateral Agent" means Society, or such other Person as
shall have been appointed as successor Collateral Agent, acting in its capacity
as collateral agent under each of the Security Agreements.
"Collateral Assignment of Life Insurance Policy" is defined in
Section 7.1.12.
"Commitment Period" means, with respect to any Lender, the
period from the Effective Date to the date set forth opposite such Lender's name
under the column headed "Commitment Period Expiration Date" on Annex A hereto,
or such other date as may from time to time be agreed upon by the Borrower and
such Lender and reflected in appropriate amendments to Annex A executed by the
Borrower, the Required Lenders and such Lender.
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<PAGE> 12
"Commitments" means, collectively, the Revolving Commitments
and the Term Loan Commitments.
"Contingent Liability" means any agreement, undertaking,
arrangement, condition or circumstance by which any Person guarantees, endorses
or otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise invest in, a debtor, or otherwise to assure a creditor
against loss) any indebtedness, obligations or liabilities of any kind or the
indebtedness, obligations or any other liabilities of any Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum principal amount, if larger) of the indebtedness,
or obligation or other liability guaranteed thereby.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.
"Cumulative Mandatory Reduction Amount" is defined in Section
2.7(a).
"Cumulative Net Disposition Proceeds" is defined in Section
2.7(a).
"Cutter" means Thomas A. Cutter.
"CXC Financing Arrangement" means the financing arrangement
provided by CXC Incorporated to LDI Lease Receivables Funding Corp. pursuant to
the terms of that certain Lease Receivables Transfer Agreement, dated as of
October 7, 1994, among LDI Lease Receivables Funding Corp., CXC Incorporated and
Citicorp North America, as amended prior to the Effective Date, and as may be
further amended from time to time with the prior written consent of the Required
Lenders or as permitted pursuant to the terms of the CXC Intercreditor
Agreement.
"CXC Intercreditor Agreement" means that certain Intercreditor
Agreement, dated as of July 29, 1994, by and among the Borrower, Citicorp North
America, Inc. and Continental Bank (now known as Bank of America Illinois) as
predecessor collateral agent to Society.
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<PAGE> 13
"Debt" means the total liabilities of the Borrower and its
Subsidiaries as reflected on the consolidated financial statements of the
Borrower.
"Default" means any Event of Default or any condition,
occurrence or event which, after notice or lapse of time or both, would
constitute an Event of Default.
"Deficiency" means either an Availability Deficiency or a
Borrowing Base Deficiency, or both.
"Development Fee" is defined in Section 3.3.
"Development Fee Cash Portion" is defined in Section 3.3.
"Development Fee Maximum Amount" is defined in Section 3.3.
"Dollar" and the sign "$" mean lawful money of the United
States.
"Effective Date" is defined in Section 5.1.
"Eligibility Ratio" means, with respect to any Person, the
ratio of (i) the aggregate amount of such Person's Excluded Receivables to (ii)
the aggregate amount of all Receivables (including Excluded Receivables) arising
under Leases and Subsidiary Leases to which such Person is a party. For purposes
of this definition of "Eligibility Ratio", the term "Receivable" shall include
all Lease Receivables and all Receivables arising under Leases which have been
transferred by the Borrower to another Person in connection with any "lease
pooling arrangement" as well as under all other Leases.
"Eligible Capital Lease Residual Value" means, as at any time,
the amount set forth on the books and records of the Borrower at such time as
the residual value (net of unearned residual income) of equipment (i) located in
the United States or Canada, and (ii) which is the subject of a Capital Lease
between the Borrower, as lessor, and any Person located in the United States or
Canada, as lessee. In addition, "Eligible Capital Lease Residual Value" means,
as at any time, the amount set forth on the books and records of the Borrower at
such time as the residual value (net of unearned residual income) of equipment
located in Mexico, but only if (i) such equipment is the subject of a Capital
Lease between the Borrower, as lessor, and any Person located in Mexico, as
lessee, (ii) such Capital Lease is rated one (1) or two (2) under the Borrower's
credit rating system as in effect on January 31, 1994, (iii) such Capital Lease
is not then being held in the "holding tank," (iv) a Person (a) which has its
principal operations and chief executive office located in the United States and
(b) whose Leases would otherwise
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<PAGE> 14
be rated one (1) or two (2) under the Borrower's credit rating system as in
effect on January 31, 1994, either (y) has guaranteed the lessee's obligations
under such Capital Lease pursuant to terms acceptable to the Co-Agents, in their
sole discretion, or (z) is a co-lessee under such Capital Lease, (v) the
Collateral Agent, the Co-Agents, the Administrative Agent and the Lenders shall
have a perfected first priority Lien on such equipment (both during the term and
after the termination of such Capital Lease), and (vi) such Capital Lease
contains an obligation on the part of the lessee to return the equipment to a
site located in the United States upon the termination of such Capital Lease.
Notwithstanding the foregoing, the Co-Agents may at any time deem any such
Eligible Capital Lease Residual Value with respect to any equipment under any
such Capital Lease to be ineligible, in their sole discretion, based on such
credit and/or collateral considerations as they deem appropriate.
"Eligible Committed Inventory" means, as at any date, Eligible
Inventory existing on such date (i) which is subject to (a) a binding Lease or
(b) a written and binding agreement between the Borrower and a Person to sell
such Eligible Inventory to such Person, and (ii) as to which a "delivery and
acceptance certificate" or other similar writing has not been executed by such
Person and delivered to the Borrower. Notwithstanding the foregoing, the
Co-Agents may at any time deem any such Eligible Committed Inventory to be
ineligible, in their sole discretion, based upon such credit and/or collateral
considerations as they deem appropriate. In no event shall Rental Inventory be
included in this definition of "Eligible Committed Inventory".
"Eligible Inventory" means Inventory of the Borrower meeting
all of the following requirements: (i) it is in first-class condition, (ii) it
is owned by the Borrower and it is Inventory on which the Collateral Agent, the
Co-Agents, the Administrative Agent and the Lenders have a perfected first
priority Lien, subject only to unperfected purchase money security interests or
other unperfected liens which (a) may be granted by Borrower to a vendor of such
Inventory pursuant to the standard terms of such vendor's invoices and (b) are
subordinate (by operation of law or otherwise) to the Lien of the Collateral
Agent, the Co-Agents, the Administrative Agent and the Lenders in such
Inventory, (iii) it is located in the United States or Canada, (iv) it is
located on premises owned by the Borrower, unless (a) with respect to Rental
Inventory, it is located at the premises of a customer of the Borrower and is
subject to a binding Lease between the Borrower and such customer for the rental
of such Inventory to such customer, (b) with respect to Eligible Committed
Inventory, it is located at the premises of a customer of the Borrower, and (c)
with respect to any other Inventory, (A) the owner and/or operator of any leased
premises of the Borrower or warehouse where Inventory is located shall have
executed and delivered to the Collateral Agent a landlord, warehouseman or other
similar waiver in form and substance
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<PAGE> 15
satisfactory to the Collateral Agent, in its sole discretion, or (B) such
Inventory is being installed by the Borrower at the lessee site, (v) it is not
subject to any trademark, trade name or licensing arrangement (other than those
relating to the licensing of software), or any law, rule or regulation that
could limit or impair the ability of the Collateral Agent or any of the Lenders
to promptly exercise any of their respective rights with respect thereto, (vi)
it is covered by the insurance required under Section 11(a) of each of the
Borrower Security Agreements, and (vii) it does not consist of general supplies
or maintenance supplies, or cartons and packaging. Any Inventory which is at any
time Eligible Inventory, but which subsequently fails to meet any of the
foregoing requirements, shall forthwith cease to be Eligible Inventory. In
addition, notwithstanding the foregoing, the Co-Agents may at any time deem any
such Eligible Inventory to be ineligible, in their sole discretion, based upon
such credit and/or collateral considerations as they deem appropriate.
"Eligible Lease Receivable" means a Lease Receivable which
meets each of the following requirements: (i) the goods which are the subject of
the underlying Lease have been shipped or delivered to, and accepted by, the
applicable lessee, (ii) it arises out of a noncancelable Lease (except, with
respect to American Express Company or any of its Subsidiaries, to the extent
the Borrower has granted such lessee the right to terminate such Lease prior to
the end of the initial term based upon the Borrower's judgment as to the
reasonableness of such grant in view of the nature of the leased goods and other
relevant factors) which is a valid, legally enforceable obligation of the lessee
thereunder, is in full force and effect, and under which there exists no event
of default or event which might mature into an event of default, (iii) it is
not, and does not have the potential of being, subject to any offset,
counterclaim or other defense on the part of such lessee or to any claim on the
part of such lessee denying liability thereunder in whole or in part, (iv) it is
not arising from any Lease between the Borrower and any officers or employees of
the Borrower or any Affiliate of Borrower, (v) the Collateral Agent, the
Co-Agents, the Administrative Agent and the Lenders have a perfected first
priority Lien on such Lease Receivable, (vi) it is not in dispute, (vii) the
lessee has not filed or had filed against it a petition in bankruptcy or for
reorganization, made an assignment for the benefit of creditors, or has not
failed, suspended business operations, become insolvent or had or suffered a
receiver or a trustee to be appointed for a significant portion of its assets or
affairs, (viii) the underlying Lease is between the Borrower and a lessee
located in (a) the United States or (b) Canada or (c) Mexico, but only if, with
respect to a lessee located in Mexico, (A) such underlying Lease is rated one
(1) or two (2) under the Borrower's credit rating system as in effect on January
31, 1994, (B) such Lease is not then being held in the "holding tank," and (C) a
Person (m) which has its principal operations and chief executive office
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<PAGE> 16
located in the United States and (n) whose Leases would otherwise be rated one
(1) or two (2) under the Borrower's credit rating system as in effect on January
31, 1994, either (y) has guaranteed the lessee's obligations under such Lease
pursuant to terms acceptable to the Co-Agents, in their sole discretion, or (z)
is a co-lessee under such Lease, (ix) the lessee is not the federal or any state
government or any agency or department thereof, unless with respect to such
Lease Receivable the Assignment of Claims Act or comparable state statute or
regulation has been complied with, (x) the underlying Lease with respect to such
Lease Receivable does not contain a prohibition of assignment of such Lease
Receivable, (xi) the lessee is not located in New Jersey, unless the Borrower
shall have properly qualified to do business in New Jersey or shall have filed a
Notice of Business Activities Report with the New Jersey Division of Taxation
for the then current year, (xii) the lessee is not located in Minnesota, unless
the Borrower shall have properly qualified to do business in Minnesota or shall
have filed a Notice of Business Activities Report with the Minnesota Division of
Taxation for the then current year, (xiii) the lessee is not located in any
other jurisdiction which requires that the Borrower, in order to sue any Person
in such jurisdiction's courts, either (a) qualify to do business in such
jurisdiction, or (b) file a report with the taxation division of such
jurisdiction for the then current year, unless the Borrower shall have fulfilled
either of such requirements for the then current year with respect to such
jurisdiction, (xiv) it is not an Excluded Receivable, and (xv) the Eligibility
Ratio (y) for the lessee (other than one described in subclause (z) of this
clause (xv)) obligated to pay such Lease Receivable is not greater than 0.10 to
1.00 or (z) with respect to a lessee obligated to pay such Lease Receivable and
whose Leases are rated one (1) or two (2) under the Borrower's credit rating
system as in effect on January 31, 1994, is not greater than 0.15 to 1.00. A
Lease Receivable which is at any time an Eligible Lease Receivable, but which
subsequently fails to meet any of the foregoing requirements, shall forthwith
cease to be an Eligible Lease Receivable. The Co-Agents may at any time deem any
such Eligible Lease Receivable to be ineligible, in their sole discretion, based
upon such credit and/or collateral considerations as they deem appropriate.
"Eligible Operating Lease Residual Value" means, as at any
time, the estimated net book value at such time of equipment (i) located in the
United States or Canada, and (ii) which is the subject of an operating Lease
between the Borrower, as lessor, and any Person located in the United States or
Canada, as lessee, as at the termination of such operating Lease. In addition,
"Eligible Operating Lease Residual Value" means, as at any time, the estimated
net book value (as at the termination of the applicable operating Lease) at such
time of equipment located in Mexico, but only if (i) such equipment is the
subject of an operating Lease between the Borrower, as lessor, and any Person
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<PAGE> 17
located in Mexico, as lessee, (ii) such operating Lease is rated one (1) or two
(2) under the Borrower's credit rating system as in effect on January 31, 1994,
(iii) such operating Lease is not then being held in the "holding tank," (iv) a
Person (a) which has its principal operations and chief executive office located
in the United States and (b) whose Leases would otherwise be rated one (1) or
two (2) under the Borrower's credit rating system as in effect on January 31,
1994, either (y) has guaranteed the lessee's obligations under such operating
Lease pursuant to terms acceptable to the Co-Agents, in their sole discretion,
or (z) is a co-lessee under such operating Lease, (v) the Collateral Agent, the
Co-Agents, the Administrative Agent and the Lenders shall have a perfected first
priority Lien on such equipment (both during the term and after the termination
of such operating Lease), and (vi) such operating Lease contains an obligation
on the part of the lessee to return the equipment to a site located in the
United States upon the termination of such operating Lease. Notwithstanding the
foregoing, the Co-Agents may at any time deem any such Eligible Operating Lease
Residual Value with respect to any equipment under any such operating Lease to
be ineligible, in their sole discretion, based upon such credit and/or
collateral considerations as they deem appropriate.
"Eligible Receivable" means a Receivable of the Borrower
(other than a Lease Receivable, it being understood and agreed that a Lease
Receivable shall, to the extent the requirements shall otherwise have been
satisfied, only be included in the definition of "Eligible Lease Receivable" for
purposes of calculating the Total Borrowing Base Assets), which meets each of
the following requirements: (i) (a) if it arises from the sale or lease of
goods, such goods have been shipped or delivered to, and accepted by, the
applicable account debtor, and (b) if it arises from the rendering of or
contracting for services, bona fide services have been performed or, if such
have not been performed, a binding contract between the Borrower and another
Person exists whereby the Borrower has agreed to perform services for such
Person pursuant to such binding contract, (ii) it is a valid, legally
enforceable obligation of the account debtor thereunder, and is not subject to
any offset, counterclaim or other defense on the part of such account debtor or
to any claim on the part of such account debtor denying liability thereunder in
whole or in part, (iii) the Collateral Agent, the Co-Agents, the Administrative
Agent and the Lenders have a perfected first priority Lien on such Receivable,
(iv) it is evidenced by an invoice rendered to such account debtor or a binding
agreement which, by its terms, does not require such an invoice, (v) it is not
evidenced by any chattel paper, (vi) it is not evidenced by any instrument
unless the original of such instrument(s) shall have been pledged and delivered
to the Collateral Agent, for its benefit and for the benefit of the Lenders, as
security for the Obligations, (vii) it does not arise from the sale or lease of
goods to officers or employees of the Borrower or to any Affiliate of the
Borrower, (viii) it is not in
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dispute, (ix) it is not more than ninety (90) days past the due date set forth
in (a) the invoice issued therefor or (b) the binding agreement under which such
Receivable arose, as the case may be, (x) the account debtor has not filed or
had filed against it a petition in bankruptcy or for reorganization, made an
assignment for the benefit of creditors, or has not failed, suspended business
operations, become insolvent or had or suffered a receiver or a trustee to be
appointed for a significant portion of its assets or affairs, (xi) if it arises
from the sale of goods, the sale is to an account debtor located in (a) the
United States or (b) Canada, (xii) if it arises from the lease of goods, the
lease is to an account debtor located in (a) the United States or (b) Canada or
(c) Mexico, but only if, with respect to an account debtor located in Mexico,
(A) the underlying Lease is rated one (1) or two (2) under the Borrower's credit
rating system as in effect on January 31, 1994, (B) such Lease is not then being
held in the "holding tank," and (C) a Person (m) which has its principal
operations and chief executive office located in the United States and (n) whose
Leases would otherwise be rated one (1) or two (2) under the Borrower's credit
rating system as in effect on January 31, 1994, either (y) has guaranteed the
account debtor's obligations under such Lease pursuant to terms acceptable to
the Co-Agents, in their sole discretion, or (z) is a co-lessee under such Lease,
(xiii) the account debtor is not the federal or any state government or any
agency or department thereof, unless with respect to such Receivable the
Assignment of Claims Act or comparable state statute or regulation has been
complied with, (xiv) it does not consist of finance charges, interest on
delinquent accounts, proceeds of consigned Inventory, employee or officer
Receivables, service charges, or debit memoranda, (xv) it does not arise from a
contract which contains a prohibition of assignment thereof, (xvi) it is not
generated by a sale on approval, a bill and hold sale, a sale on consignment, or
other type of conditional sale, (xvii) the account debtor is not located in New
Jersey, unless the Borrower shall have properly qualified to do business in New
Jersey or shall have filed a Notice of Business Activities Report with the New
Jersey Division of Taxation for the then current year, (xviii) the account
debtor is not located in Minnesota, unless Borrower shall have properly
qualified to do business in Minnesota or shall have filed a Notice of Business
Activities Report with the Minnesota Division of Taxation for the then current
year, (xix) the account debtor is not located in any other jurisdiction which
requires that the Borrower, in order to sue any Person in such jurisdiction's
courts, either (a) qualify to do business in such jurisdiction, or (b) file a
report with the taxation division of such jurisdiction for the then current
year, unless the Borrower shall have fulfilled either of such requirements for
the then current year with respect to such jurisdiction, (xx) it is not a
progress billing, (xxi) the account debtor has not sold or is not in the process
of selling substantially all of its assets, (xxii) it is not an Excluded
Receivable, and (xxiii) the Eligibility Ratio (y) for the account
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debtor (other than one described in subclause (z) of this clause (xxiii))
obligated to pay such Receivable is not greater than 0.10 to 1.00 or (z) with
respect to an account debtor obligated to pay such Receivable and whose Leases
are rated one (1) or two (2) under the Borrower's credit rating system as in
effect on January 31, 1994, is not greater than 0.15 to 1.00. A Receivable which
is at any time an Eligible Receivable, but which subsequently fails to meet any
of the foregoing requirements, shall forthwith cease to be an Eligible
Receivable. In addition, notwithstanding the foregoing, the Co-Agents may at any
time deem any such Eligible Receivable to be ineligible, in their sole
discretion, based upon such credit and/or collateral considerations as they deem
appropriate.
"Eligible Residual Value Amount" means, as at any time, an
amount equal to the sum of (a) the aggregate Eligible Operating Lease Residual
Value of all equipment existing at such time which satisfies all of the
applicable requirements set forth in the definition of "Eligible Operating Lease
Residual Value", plus (b) the aggregate Eligible Capital Lease Residual Value of
all equipment existing at such time which satisfies all of the applicable
requirements set forth in the definition of "Eligible Capital Lease Residual
Value", plus (c) the amount set forth on the Borrower's balance sheet prepared
in accordance with GAAP under the heading "trade notes receivable" at such time
with respect to the following promissory notes: (i) the Secured Subordinated
Promissory Notes, each dated December 15, 1992, payable by Avalon Partners and
listed as of the date hereof in Part 2 to Schedule V to each of the Borrower
Security Agreements; (ii) the Secured Subordinated Promissory Notes, each dated
August 16, 1993, payable by Mercury Financial Partners, L.P. and listed as of
the date hereof in Part 2 to Schedule V to each of the Borrower Security
Agreements; and (iii) the Secured Subordinated Promissory Notes, dated February
23, 1993, or May 4, 1993, as the case may be, payable by Paragon Partners and
listed as of the date hereof in Part 2 to Schedule V to each of the Borrower
Security Agreements (the Secured Subordinated Promissory Notes referred to in
(i), (ii) and (iii) of this subpart (c) being collectively referred to herein as
the "Secured Subordinated Promissory Notes"). The Borrower acknowledges and
agrees that, for purposes of calculating the Total Borrowing Base Assets, the
Secured Subordinated Promissory Notes shall only be included in this definition
of "Eligible Residual Value Amount." The aggregate Eligible Capital Lease
Residual Value or Eligible Operating Lease Residual Value, as the case may be,
of aircraft under all Capital Leases or operating Leases, as applicable, for the
lease of such aircraft between the Borrower, as lessor, and any Person, as
lessee, shall be included in this definition only if such aggregate Eligible
Capital Lease Residual Value or Eligible Operating Lease Residual Value, as the
case may be, is supported by appraisals acceptable to the Co-Agents, in their
sole discretion.
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"Eligible Uncommitted Inventory" means, as at any date,
Eligible Inventory existing on such date (i) which is Rental Inventory, or (ii)
which (a) is owned by the Borrower, (b) is not subject to a written and binding
agreement between the Borrower and a Person to lease or sell such Eligible
Inventory to such Person, and (c) has not been held for sale or lease by the
Borrower for a period of more than one hundred twenty (120) days.
Notwithstanding the foregoing, the Co-Agents may at any time deem any such
Eligible Uncommitted Inventory to be ineligible, in their sole discretion, based
upon such credit and/or collateral considerations as they deem appropriate.
"Eligible Unfunded One (1) Through Four (4) Lease Receivables"
means, as at any time, the then aggregate amount of Eligible Lease Receivables
arising under One (1) Through Four (4) Leases, discounted at the lease booking
rate which the Borrower enters into its "Eagle" accounting system on the date
such One (1) Through Four (4) Leases are entered into by the Borrower.
Notwithstanding the foregoing, the Co-Agents may at any time deem any such
Eligible Unfunded One (1) Through Four (4) Lease Receivables to be ineligible,
in their sole discretion, based upon such credit and/or collateral consideration
as they deem appropriate.
"Environmental Laws" means all applicable federal, state or
local statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public health
and safety and protection of, or the regulation of the discharge of substances
into, the environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 8.1.
"Excluded Lease" means a Lease as to which a Lease
Ineligibility Event has occurred.
"Excluded Receivable" means a Receivable (including a Lease
Receivable) of the Borrower arising under an Excluded Lease.
"Existing Banks" is defined in the preamble.
"Existing Insurance Company Lenders" is defined in the
preamble.
"Existing Insurance Company Loans" means the loans made by the
Existing Insurance Company Lenders to the Borrower under
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<PAGE> 21
the Existing Note Purchase Agreement (together with all accrued and unpaid
interest thereon as of the Effective Date).
"Existing Lenders" is defined in the preamble.
"Existing Loan Agreements" is defined in the preamble.
"Existing Loans" means, collectively, the Existing NCB Loans
and the Existing Insurance Company Loans.
"Existing NCB Credit Agreement" is defined in the preamble.
"Existing NCB Loans" means the loans made by the Existing
Banks to the Borrower under the Existing NCB Credit Agreement (together with all
accrued and unpaid interest thereon as of the Effective Date).
"Existing Note Purchase Agreement" is defined in the preamble.
"Expiration Date" means January 31, 1997, or such other date
as may from time to time be agreed upon by the Borrower and the Lenders.
"Federal Funds Effective Rate" for any period means a
fluctuating interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day), by the Federal Reserve Bank of Cleveland, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Co-agents from
three federal funds brokers of recognized standing selected by them.
"Fiscal Quarter" means any period of three (3) consecutive
calendar months ending on April 30, July 31, October 31 or January 31 of a
Fiscal Year.
"Fiscal Year" means any period of twelve (12) consecutive
calendar months ending on January 31.
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Funded Debt" means any obligation for borrowed money or for
the acquisition of property or assets including guaranties, endorsements (other
than endorsements of negotiable instruments for collection or deposit in the
ordinary course of business) and other Contingent Liabilities, but not including
Non-Recourse Debt.
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"GAAP" is defined in Section 1.4.
"Hedging Transaction" means any interest rate swap, rate cap,
rate floor or rate collar transaction, or other exchange or rate protection
transaction, or any combination of such transactions or agreements entered into
by any one (1) or more of the Borrower and/or its Subsidiaries; provided,
however, that the net maximum interest rate of the underlying transaction
relating to each Hedging Transaction (as a result of the Hedging Transaction)
shall not exceed a rate per annum three percent (3%) in excess of (i) the Prime
Rate at the time of such Hedging Transaction or (ii) the coupon rate of any
Subordinated Indebtedness outstanding at the time of such Hedging Transaction.
"herein", "hereof", "hereto", "hereunder" and similar terms
contained in this Agreement or any other Loan Document refer to this Agreement
or such other Loan Document, as the case may be, as a whole and not to any
particular Section, paragraph or provision of this Agreement or such other Loan
Document.
"Impermissible Qualification" means, relative to the opinion
or certification of any independent public accountant as to any financial
statement of the Borrower, any qualification or exception to such opinion or
certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause the Borrower to be in default of any of its
obligations under Section 7.2.4.
"including" means including without limiting the generality of
any description preceding such term, and, for purposes of this Agreement and
each other Loan Document, the parties hereto agree that the rule of ejusdem
generis shall not be applicable to limit a general statement, which is followed
by or referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
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(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases
which are, in accordance with GAAP, recorded as Capital Lease
Liabilities;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(e) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase
price of property or services, and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being
purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited
in recourse; and
(f) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer, to the extent any such Indebtedness is
recourse to such Person.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Intercreditor Agreement" means the Amended and Restated
Intercreditor Agreement entered into by the Lenders, attached hereto as Exhibit
I, as such Amended and Restated Intercreditor Agreement may be amended,
supplemented, restated or otherwise modified from time to time.
"Inventory" has the meaning given to such term in each of the
Security Agreements and shall also specifically include Rental Inventory.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business); and
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(b) any ownership or similar interest held or other investment
by such Person in any other Person.
"Kendall" means Robert S. Kendall.
"Kennedy" means Michael R. Kennedy.
"Key Man Policy" is defined in Section 7.1.12.
"Lease" means a written agreement for the lease of goods
between the Borrower, as lessor, and another Person, as lessee. In the case of a
master lease agreement between the Borrower, as lessor, and another Person, as
lessee, in respect of which one (1) or more "lease schedules" shall have been
executed, the term "Lease" shall mean as to each such "lease schedule," such
"lease schedule" as it incorporates the terms of the applicable master lease
agreement with respect thereto.
"Lease Ineligibility Event" means at any time, with respect to
a Lease, the occurrence of a condition in which (i) in the case of a Lease
requiring monthly rental payments, three (3) of such monthly rental payments
shall then be more than sixty (60) days past the respective due dates therefor
as set forth in (a) the applicable invoices issued therefor or (b) such Lease,
as the case may be, or (ii) in the case of a Lease requiring rental payments
less frequently than monthly, one (1) of such rental payments shall then be more
than sixty (60) days past the due date therefor as set forth in (a) the invoice
issued therefor or (b) such Lease, as the case may be.
"Lease Receivable" means a Receivable of the Borrower arising
under a Lease representing an amount thereunder which is not yet due (whether or
not the Borrower has issued an invoice to the lessee for such amount).
"Lender Assignment Agreement" means a Lender Assignment
Agreement substantially in the form of Exhibit D hereto.
"Lender Parties" is defined in Section 10.15.
"Lenders" is defined in the introductory paragraph.
"Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), charge against or interest in property to secure payment of a debt
or performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loans" means Revolving Loans described in Section 2.1 and the
Term Loans described in Section 2.2.
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"Loan Documents" means this Agreement, the Notes, the Security
Agreements, the Intercreditor Agreement, the Collateral Assignment of Life
Insurance Policy, the Mortgages, the Subordination Agreements, the Cash
Collateral and Account Maintenance Agreement, and all agreements, instruments
and other documents now or hereafter executed in connection with any of the
foregoing.
"Mandatory Reduction Date" is defined in Section 2.7(a).
"Mortgages" is defined in Section 5.1(p).
"MRK Note" means that certain Secured Subordinated Promissory
Note, dated May 31, 1994, executed by MRK Computer Systems, Inc. in favor of the
Borrower in the original principal amount of Two Million Dollars ($2,000,000).
"NCB" is defined in the introductory paragraph.
"Net Disposition Proceeds" means the gross cash proceeds
received by the Borrower or any Subsidiary of the Borrower from any sale, lease,
assignment or other disposition permitted under Section 7.2.8(d) of (i) all or
substantially all of the assets of Borrower's PC Rental Services Division, (ii)
all or substantially all of the assets of Borrower's Technology Services
Division, (iii) all or any part of Borrower's joint venture interest in the
Picker Joint Venture, and (iv) any other assets of the Borrower or any
Subsidiary of the Borrower not in the ordinary course of business (excluding (a)
the MRK Note, and (b) all or any part of the net miscellaneous Receivables in
the approximate amount of $650,000 which arise from or have been retained by the
Borrower in connection with sales of non-core business assets as set forth in
the Borrower's Strategic Plan, dated April 21, 1994), less reasonable selling
expenses incurred in connection therewith and good faith estimated taxes payable
as a result thereof which are actually paid. In addition, the term "Net
Disposition Proceeds" shall not include the payment by CruisePhone, Inc. to the
Borrower of the cash portion of the purchase price for the assets of the
Borrower's Sea-Tech Division under that certain Asset Purchase Agreement, dated
as of February 20, 1995, between CruisePhone, Inc. and the Borrower.
"1995 Period" means the period commencing on the Effective
Date and ending on January 31, 1996.
"Non-Recourse Debt" means (i) any Debt of the Borrower and/or
its Subsidiaries for which neither the obligee nor any other Person has any
legal recourse against the Borrower or any of its Subsidiaries, other than to
certain specified collateral which shall have been pledged by the Borrower or
its Subsidiaries in connection with the incurrence thereof, (ii) the Debt of the
Borrower under the lease pooling arrangement described in the
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Loan and Security Agreement, dated as of November 21, 1991, between the Borrower
and Sanwa Business Credit Corporation ("Sanwa"), as amended by that certain
Amendment to Loan and Security Agreement, dated July 30, 1992, between the
Borrower and Sanwa and as further amended by that certain Amendment to Loan and
Security Agreement, dated October 27, 1992, between the Borrower and Sanwa,
(iii) the Debt of LDI Lease Receivables Funding Corp. under the CXC Financing
Arrangement, (iv) the Debt of LDI Lease Funding Corporation ("LDI Funding")
under the lease pooling arrangement described in Amended and Restated Credit
Agreement, dated as of November 16, 1990, between LDI Funding and The Dai-Ichi
Kangyo Bank, Ltd., Chicago Branch, and (v) any Debt of the Borrower and/or its
Subsidiaries similar to the Debt described in (ii), (iii) and (iv) above which
has been approved and consented to by the Required Lenders.
"Note" means a Revolving Note or a Term Note of the Borrower
payable to any Lender.
"Obligations" means all obligations, indebtedness and
liabilities (monetary or otherwise) of the Borrower and each other Obligor to
the Administrative Agent, the Co-Agents and/or the Lenders arising under or in
connection with this Agreement, the Notes and each other Loan Document.
"Obligor" means the Borrower or any other Person (other than
the Administrative Agent, either Co-Agent or any Lender) obligated under any
Loan Document.
"One (1) Through Four (4) Leases" means unfunded Leases of the
Borrower rated one (1), two (2), three (3) or four (4) under the Borrower's
credit rating system as in effect on January 31, 1994, a written copy of which
credit rating system has been delivered to the Co-Agents prior to the date
hereof (not including any such Leases held in the "holding tank").
"Organic Documents" means, relative to any Obligor, its
certificate or articles of incorporation or limited liability company agreement,
its by-laws or code of regulations or other similar documents governing such
Obligor and all shareholder agreements, voting trusts and similar arrangements
applicable to any of its authorized shares of capital stock.
"Participant" is defined in Section 10.11.2.
"Participant Fee" is defined in Section 3.1.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined
in section 3(2) or ERISA, which is subject to Title IV of
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ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of
ERISA), and to which the Borrower or any corporation, trade or business that is,
along with the Borrower, a member of a Controlled Group, may have liability,
including any liability by reason of having been a substantial employer within
the meaning of section 4063 of ERISA at any time during the preceding five (5)
years, or by reason of being deemed to be a contributing sponsor under section
4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage set
opposite such Lender's name under the column headed "Percentage" on Annex A or
set forth in the Lender Assignment Agreement, as such percentage may be adjusted
from time to time pursuant to Lender Assignment Agreement(s) executed by such
Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11.1.
"Person" means any natural person, corporation, limited
liability company, partnership, firm, association, trust, government,
governmental agency or any other entity, whether acting in an individual,
fiduciary or other capacity.
"Picker Joint Venture" means the joint venture partnership
established between Picker Financial Corporation and the Borrower pursuant to
the Joint Venture Partnership Agreement, dated February 27, 1992, as such
agreement has been amended in accordance with the Amendment, dated July 31,
1992.
"Plan" means any Pension Plan or Welfare Plan.
"Prime Rate" means the rate of interest which the Lender then
acting as Administrative Agent hereunder announces from time to time as its
prime rate. The Prime Rate is not necessarily intended to be the lowest rate of
interest charged by such Lender in connection with extensions of credit and such
Lender may charge interest at rates at, above or below the Prime Rate in
connection with other extensions of credit. Any change in the Prime Rate shall
be effective hereunder immediately from and after the effective date of change
in such rate by such Lender.
"Proceeds" has the meaning given to such term in each of the
Security Agreements and shall also specifically include Net Disposition Proceeds
and any amounts received or receivable under the Subsidiary Guaranty.
"Purchase Money Obligation" means indebtedness incurred in
connection with the acquisition of property, which indebtedness is secured by
security interests or mortgages on the property so acquired.
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"Receivables" has the meaning given to the term "Account" as
set forth in each of the Security Agreements and shall also specifically include
Lease Receivables.
"Release" means a "release", as such term is defined in
CERCLA.
"Rental Inventory" means Inventory of the Borrower meeting all
of the following requirements: (i) it is specifically identified as such and
itemized on the Borrower's books and record, (ii) it is used by the Borrower, in
the ordinary course, for rentals of short-term duration only, (iii) if not then
currently being leased, it is located at those premises disclosed in accordance
with Section 10(a) of each of the Borrower Security Agreements in an area, at
each such location, where it is segregated from all other Inventory and
specifically identified as "Rental Inventory," and (iv) it has been leased by
the Borrower as "Rental Inventory" within the last one hundred eighty (180)
days, and (v) if then currently being leased, the lessee has not executed a
"delivery and acceptance certificate" or other similar writing in favor of the
Borrower.
"Required Lenders" means, at any time, Lenders holding at
least sixty-six and two-thirds percent (66-2/3%) of the then aggregate amount of
the Commitments, or, if the Commitments shall have been terminated, holding
Notes evidencing at least sixty-six and two-thirds percent (66-2/3%) of the then
aggregate outstanding principal amount of the Loans.
"Reserve Amount" means an amount determined by the Co-Agents,
in their sole discretion, as a reserve against collateral values and potential
or anticipated obligations of the Borrower including, without limitation, (i)
tax liabilities and other obligations owing to governmental entities, (ii) the
anticipated costs and expenses relating to the liquidation of collateral, (iii)
unpaid sales taxes, (iv) those reserve amounts as required to be held as
reserves under GAAP, other than those specific reserves otherwise allocated to
each component of the Total Borrowing Base Assets and the Total Borrowing Base
Liabilities, and (v) liabilities and other obligations owing by the Borrower to
any lessor of real property leased by the Borrower or to any warehouseman.
Without limiting the foregoing, the Reserve Amount shall also include any
potential or anticipated obligations of the Borrower with respect to any
litigation liabilities. As of the Effective Date, the Reserve Amount is zero
(0).
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as in effect from
time to time.
"Restricted Payments" means any payment in cash, property or
other assets upon or in respect of any shares of any class of capital stock
including, without limitation, payments as
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dividends and payments for the purpose of redeeming, purchasing, or otherwise
acquiring any shares of any class of its capital stock, or making any other
distribution in respect of any such shares of stock, including in the term
"stock" any warrant or option or other right to purchase such stock; provided,
however, that Restricted Payments shall not include any distribution which may
be payable solely in common stock of the corporation making the distribution.
"Revolving Commitment" means the obligation hereunder of each
Lender to make Revolving Loans to the Borrower during such Lender's Commitment
Period up to the amount set opposite such Lender's name under the column headed
"Revolving Commitment" as set forth in Annex A (or such lesser amount as shall
be determined pursuant to Sections 2.6 and 2.7). The aggregate Revolving
Commitments as of the Effective Date shall equal Seventy-Four Million Three
Hundred Thousand Dollars ($74,300,000).
"Revolving Loans" is defined in Section 2.1.
"Revolving Note" means a promissory note of the Borrower
payable to any Lender in the form of Exhibit A-1 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Revolving Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Revolving Portion" means, with respect to any Lender, that
portion of such Lender's Existing Loans which is equal to (a) the amount of such
Lender's Existing Loans, multiplied by (b) the quotient obtained by dividing (i)
such Lender's Revolving Commitment as of the Effective Date by (ii) the sum of
(A) such Lender's Revolving Commitment as of the Effective Date plus (B) such
Lender's Term Loan Commitment as of the Effective Date.
"Security Agreements" means, collectively, the Borrower
Security Agreements and the Subsidiary Security Agreement.
"Senior Borrower Security Agreement" means the Second Amended
and Restated Security Agreement executed by the Borrower in favor of the
Collateral Agent and the Lenders, substantially in the form attached hereto as
Exhibit B-1, as the same may be amended, supplemented, restated or otherwise
modified from time to time.
"Senior Secured Revolving Debt" means all principal and
interest owing by the Borrower under this Agreement in respect of the Revolving
Loans.
"Society" is defined in the introductory paragraph.
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"Subordinated Borrower Security Agreement" means the
Subordinated Second Amended and Restated Security Agreement executed by the
Borrower in favor of the Collateral Agent and the Lenders, substantially in the
form attached hereto as Exhibit B-3, as the same may be amended, supplemented,
restated or otherwise modified from time to time.
"Subordinated Debt" means the Borrower's 9-3/8% Convertible
Subordinated Notes due August 15, 2000 and any other indebtedness of the
Borrower which has been subordinated (by written terms or agreement being in
form and substance satisfactory to the Required Lenders) in favor of the prior
payment in full of Borrower's indebtedness to the Lenders (it being understood
that the Borrower will notify each Lender and the Administrative Agent promptly
of any other such proposed subordinated indebtedness and that if the Required
Lenders do not indicate to the Borrower within fourteen (14) days after receipt
by the Lenders and the Administrative Agent of all information from the Borrower
requested by the Administrative Agent or any Lender pertaining to such
subordinated indebtedness, that the subordinated indebtedness is not in form and
substance satisfactory to the Required Lenders, the form and substance of such
subordinated indebtedness shall be deemed acceptable to the Required Lenders).
"Subordination Agreements" is defined in Section 5.1(ac).
"Subsidiary" means, with respect to any Person, any
corporation of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency) is at the time directly or indirectly owned
by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person.
"Subsidiary Guaranty" is defined in Section 5.1(ae).
"Subsidiary Lease" means a written agreement for the lease of
goods between a Subsidiary of the Borrower, as lessor, and another Person, as
lessee. In the case of a master lease agreement between a Subsidiary of the
Borrower, as lessor, and another Person, as lessee, in respect of which one (1)
or more "lease schedules" shall have been executed, the term "Subsidiary Lease"
shall mean as to each such "lease schedule," such "lease schedule" as it
incorporates the applicable master lease agreement with respect thereto.
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"Subsidiary Security Agreement" means a Security Agreement
executed by LDI Computer Rentals, Inc., an Ohio corporation, in favor of the
Collateral Agent and the Lenders, in substantially the form attached hereto as
Exhibit B-2, as the same may be amended, supplemented, restated or otherwise
modified from time to time.
"Taxes" is defined in Section 4.2.
"Term Loan Commitment" means the obligation hereunder of each
Lender to make a Term Loan to the Borrower on the Effective Date in the amount
set forth opposite such Lender's name under the column headed "Term Loan
Commitment" as set forth in Annex A. The aggregate Term Loan Commitments as of
the Effective Date shall equal Twenty-Nine Million Three Hundred Thousand
Dollars ($29,300,000).
"Term Loan Portion" means, with respect to any Lender, that
portion of such Lender's Existing Loans which is equal to (a) the amount of such
Lender's Existing Loans, multiplied by (b) the quotient obtained by dividing (i)
such Lender's Term Loan Commitment as of the Effective Date by (ii) the sum of
(A) such Lender's Revolving Loan Commitment as of the Effective Date plus (B)
such Lender's Term Loan Commitment as of the Effective Date.
"Term Loans" is defined in Section 2.2.
"Term Note" means a promissory note of the Borrower payable to
any Lender in the form of Exhibit A-2 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from the
outstanding amount of the Term Loan made by such Lender, and also means all
other promissory notes accepted from time to time in substitution therefor or
renewal thereof.
"Total Borrowing Base Assets" means, as at any time, an amount
equal to (a) forty percent (40%) of the value of the Borrower's Eligible
Uncommitted Inventory, plus (b) sixty-five percent (65%) of the value of the
Borrower's Eligible Committed Inventory, plus (c) seventy-five percent (75%) of
the net amount of the Borrower's Eligible Receivables, plus (d) seventy-five
percent (75%) of the net amount of the Borrower's Eligible Unfunded One (1)
Through Four (4) Lease Receivables, plus (e) sixty percent (60%) of the then
Eligible Residual Value Amount; provided, however, that in no event shall the
sum of (x) seventy-five percent (75%) of the net amount of the Borrower's
Eligible Unfunded One (1) Through Four (4) Lease Receivables of lessees located
in Mexico, plus (y) seventy-five percent (75%) of the net amount of the
Borrower's Eligible Receivables of account debtors located in Mexico, plus (z)
sixty percent (60%) of the Eligible Residual Value Amount of equipment located
in Mexico at any time exceed Two Million Five Hundred Thousand Dollars
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($2,500,000). The Eligible Uncommitted Inventory and the Eligible Committed
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 to the extent specifically
applicable to any assets of the Borrower included in the calculation of "Total
Borrowing Base Assets."
"Total Borrowing Base Liabilities" means, as at any time, an
amount equal to (a) the Senior Secured Revolving Debt then owing, plus (b) any
Reserve Amount then in effect.
"United States" or "U.S." means the United States of America,
its fifty (50) States and the District of Columbia.
"Welfare Plan" means a "welfare plan", as such term is defined
in section 3(1) of ERISA.
"Year One Excess" is defined in Section 3.3.
"Year Two Amount" is defined in Section 3.3.
SECTION 1.2 Use of Defined Terms. Unless otherwise defined or
the context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each Note, Loan Document, notice
and other communication delivered from time to time in connection with this
Agreement or any other Loan Document.
SECTION 1.3 Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references to
such clause of such Article, Section or definition.
SECTION 1.4 Accounting and Financial Determinations. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined, or any accounting computation is required to be made,
for the purpose of this Agreement, such determination or calculation shall, to
the extent applicable and except as otherwise specified in this Agreement, be
made in accordance with Generally Accepted Accounting Principles ("GAAP")
applied on a basis consistent with the financial statements referred to in
Section 6.5 except insofar as:
(a) the Borrower shall have elected (with the concurrence of
the independent public accountants referred to in Section 7.1.1(b) upon
prior written notification to the Lenders) to adopt more recently
promulgated generally
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accepted accounting principles (which election shall continue to be
effective for subsequent years); and
(b) the Required Lenders shall have consented to such election
(it being understood that such consent may be conditioned upon the
negotiation of such changes to this Agreement, as the Required Lenders
may in their sole discretion deem appropriate).
ARTICLE II
AMOUNT AND TERMS OF CREDIT
SECTION 2.1 Revolving Loans. Subject to the terms and
conditions of, and relying upon the representations and warranties set forth in,
this Agreement, during such Lender's Commitment Period, each Lender agrees,
severally and not jointly, to make Revolving Loans to the Borrower at such times
as the Borrower may from time to time request in aggregate amounts not in excess
of the lesser of (a) the Revolving Commitment of such Lender, as the same may be
reduced from time to time pursuant to Sections 2.6 and 2.7, or (b) such Lender's
pro rata share (based on its Percentage) of the Borrowing Base Amount then in
effect; provided, however, that no such Lender shall be required to make a
Revolving Loan if, after giving effect thereto, (c) a Deficiency has occurred or
will occur, (d) such Revolving Loan would cause the amount of the then
outstanding principal amount of all Revolving Loans made by such Lender to
exceed the Revolving Commitment of such Lender, as the same may be reduced from
time to time pursuant to Section 2.6 and 2.7, or (e) a Default or an Event of
Default has occurred or will occur. Subject to the provisions of this Agreement,
the Borrower may borrow, pay, prepay in whole or in part and reborrow Revolving
Loans under this Section 2.1 from time to time until the Expiration Date. Each
Revolving Loan shall be made as part of a Borrowing consisting of Revolving
Loans made by the Lenders ratably according to their respective Percentages;
provided, however, that the failure of any Lender to make any Revolving Loan
shall not in itself relieve any other Lender of its obligation to lend a
Revolving Loan hereunder (it being understood, however, that no Lender shall be
responsible for the failure of any other Lender to make any Revolving Loan
required to be made by such other Lender). Each Borrowing shall be in an
aggregate principal amount of Two Hundred Fifty Thousand Dollars ($250,000) or
any larger integral multiple of Fifty Thousand Dollars ($50,000). All of the
Revolving Loans shall mature and be due and payable in full on the Expiration
Date. Each Lender shall, to the extent of such Lender's Revolving Portion of its
Existing Loans as specified in Annex D hereto, satisfy all or a portion of its
agreement to make Revolving Loans on the Effective Date by converting its
Revolving Portion of its Existing Loans into a Revolving Loan, whereupon such
converted amount shall be a
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Revolving Loan for all purposes of this Agreement and the other Loan Documents.
Such conversion shall be deemed to have taken place at the time the Borrower
executes and delivers to such Lender the applicable Revolving Note.
SECTION 2.2 Term Loans. Subject to the terms and conditions
of, and relying upon the representations and warranties set forth in this
Agreement, on the Effective Date, each Lender agrees, severally and not jointly,
to make a Term Loan to the Borrower in an amount equal to the Term Loan
Commitment of such Lender as of the Effective Date. No repayment or prepayment
by the Borrower of the Term Loans hereunder shall be reason for any relending of
Term Loan proceeds hereunder. All of the Term Loans shall mature and be due and
payable in full on the Expiration Date. Payment of the principal amount of the
Term Loans and the Development Fee (other than the Development Fee Cash Portion)
is hereby subordinated to the prior final payment in full by the Borrower of all
other Obligations. Each Lender shall, to the extent of such Lender's Term Loan
Portion of its Existing Loans as specified in Annex D hereto, satisfy its
agreement to make a Term Loan on the Effective Date by converting its Term Loan
Portion of its Existing Loans into a Term Loan, whereupon such converted amount
shall be a Term Loan for all purposes of this Agreement and the other Loan
Documents. Such conversion shall be deemed to have taken place at the time the
Borrower executes and delivers to such Lender the applicable Term Note.
SECTION 2.3 Notice of Borrowing. In order to request a
Borrowing, the Borrower shall provide to the Administrative Agent a telephonic,
written or telecopy notice (in the case of telephonic notice, such notice shall
be promptly confirmed in writing or by telecopy) of such Borrowing, specifying
(a) the date of the proposed Borrowing (which shall be a Business Day), and (b)
the aggregate amount of the requested Borrowing. Such notice of such Borrowing
shall be irrevocable and must be received by the Administrative Agent not later
than 12:00 noon, Cleveland, Ohio, time, on the Business Day of the proposed
Borrowing. On the Business Day it receives such notice from Borrower, the
Administrative Agent shall notify each Lender of such proposed Borrowing. Each
Lender shall provide to the Administrative Agent by wire transfer, not later
than 2:00 p.m., Cleveland, Ohio time, on the specified day of the Borrowing,
federal or other immediately available funds in the amount which constitutes its
Percentage of the Borrowing being made on such day, and the Administrative Agent
shall credit such amounts as of such day to the general deposit account of the
Borrower with the Administrative Agent or, if a Borrowing shall not occur on
such date because any condition precedent herein specified shall not have been
met, return the amounts so received to the respective Lenders.
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SECTION 2.4 Interest (a) The Borrower shall pay interest on
the unpaid principal amount of the Revolving Loans outstanding from time to time
from the date thereof until paid, at a fluctuating rate per annum equal to the
Prime Rate from time to time in effect plus one percent (1%), payable on the
tenth (10th) day of each month and at the maturity thereof.
(b) The Borrower shall pay interest on the unpaid principal amount of
the Term Loans from the date hereof until paid, at a fluctuating rate per annum
equal to the Prime Rate from time to time in effect minus one percent (1%),
payable on the tenth (10th) day of each month and at the maturity thereof.
(c) If an Event of Default shall occur hereunder, the Borrower shall,
on demand, pay interest on the outstanding principal amount of the Loans and any
other amount due hereunder, until such Event of Default is cured or waived
pursuant to the terms hereof, at a fluctuating rate per annum equal to two
percent (2%) in excess of the interest rates set forth in clauses (a) and (b) of
this Section 2.4 from time to time in effect.
SECTION 2.5 Notes. Each Lender's Revolving Loans shall be
evidenced by a Revolving Note duly executed by an Authorized Officer of the
Borrower, payable to the order of such Lender in a maximum principal amount
equal to such Lender's Revolving Commitment as in effect on the Effective Date.
Each Lender's Term Loan shall be evidenced by a Term Note duly executed by an
Authorized Officer of the Borrower, payable to the order of such Lender in the
principal amount equal to such Lender's Term Loan Commitment. The Borrower
hereby irrevocably authorizes each Lender to make (or cause to be made)
appropriate notations either on the grid attached to such Lender's Revolving
Note (or on any continuation of such grid) or in its internal records, which
notations, if made, shall evidence, inter alia, the date of, the outstanding
principal of, the interest rate applicable to, each payment and prepayment of
principal of and each payment of interest on the Revolving Loans evidenced
thereby. Such notations shall be conclusive and binding on the Borrower absent
manifest error; provided, however, that the failure of any Lender to make any
such notations shall not limit or otherwise affect any Obligations of the
Borrower or any other Obligor.
SECTION 2.6 Voluntary Reduction of Revolving Commitments. The
Borrower may, upon at least one (1) Business Day's prior irrevocable written or
telecopy notice to the Administrative Agent permanently reduce by an aggregate
amount of One Million Dollars ($1,000,000) or more, the Revolving Commitments on
a ratable basis (according to each Lender's respective Percentage); provided,
however, that if after giving effect to any such reduction of the Revolving
Commitments, an Availability Deficiency occurs, then, on the date of such
reduction, the Borrower shall pay to the Administrative Agent, as
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a repayment of the Revolving Loans for the benefit of the Lenders, an amount
sufficient to eliminate such Availability Deficiency together with all accrued
and unpaid interest on the amount so paid to the date of such payment. The
Administrative Agent shall promptly notify each Lender of the amount of its
Revolving Commitment then being reduced and the effective date thereof.
SECTION 2.7 Mandatory Reduction in Revolving Commitments and
Term Loans.
(a) Scheduled Reductions. On each date set forth below (each a
"Mandatory Reduction Date"), the Revolving Commitments then in effect shall be
permanently reduced on a ratable basis (according to each Lender's respective
Percentage) as follows (the aggregate of all such permanent reductions which
have taken effect between the Effective Date and any specified subsequent point
in time being referred to herein as the "Cumulative Mandatory Reduction
Amount"):
(i) On July 31, 1995, by the amount of Three
Million Dollars ($3,000,000);
(ii) On October 31, 1995, by the amount of Four
Million Dollars ($4,000,000);
(iii) On January 31, 1996, by the amount necessary
in order that (y) the Cumulative Mandatory
Reduction Amount as of said date shall equal
at least Twelve Million Dollars
($12,000,000) and (z) such Cumulative
Mandatory Reduction Amount plus the
aggregate amount of all Net Disposition
Proceeds received by the Administrative
Agent pursuant to Section 2.7(b) hereof
since the Effective Date (the "Cumulative
Net Disposition Proceeds") as of said date
shall equal at least Seventeen Million
Dollars ($17,000,000);
(iv) On April 30, 1996, by the amount necessary
in order that (y) the Cumulative Mandatory
Reduction Amount as of said date shall equal
at least Fourteen Million Dollars
($14,000,000) and (z) such Cumulative
Mandatory Reduction Amount plus the
Cumulative Net Disposition Proceeds as of
said date shall equal at least Twenty-Two
Million Dollars ($22,000,000);
(v) On July 31, 1996, by the amount necessary in
order that (y) the Cumulative Mandatory
Reduction Amount as of said date shall equal
at least Sixteen Million Dollars
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($16,000,000) and (z) such Cumulative
Mandatory Reduction Amount plus the
Cumulative Net Disposition Proceeds as of
said date shall equal at least Twenty-Four
Million Dollars ($24,000,000);
(vi) On October 31, 1996, by the amount necessary
in order that (y) the Cumulative Mandatory
Reduction Amount as of said date shall equal
at least Nineteen Million Dollars
($19,000,000) and (z) such Cumulative
Mandatory Reduction Amount plus the
Cumulative Net Disposition Proceeds as of
said date shall equal at least Twenty-Seven
Million Dollars ($27,000,000); and
(vii) On January 31, 1997, by the amount necessary
in order that (y) the Cumulative Mandatory
Reduction Amount as of said date shall equal
at least Twenty-Two Million Dollars
($22,000,000) and (z) such Cumulative
Mandatory Reduction Amount plus the
Cumulative Net Disposition Proceeds as of
said date shall equal at least Thirty
Million Dollars ($30,000,000).
Notwithstanding the provisions of clause (vii) of this Section 2.7(a), all of
the Obligations shall be due and payable on the Expiration Date.
(b) Asset Dispositions. The Borrower shall pay, or shall cause to be
paid, to the Administrative Agent, for the benefit of the Lenders, all Net
Disposition Proceeds. All Net Disposition Proceeds shall be promptly applied by
the Administrative Agent, for the benefit of the Lenders on a ratable basis
(according to each Lender's respective Percentage), if applicable, as follows:
(i) first, to all fees (other than the accrual
portion of the Development Fee) and expenses then due from the Borrower
under this Agreement and the Loan Documents;
(ii) second, to all accrued and unpaid interest on
the Obligations;
(iii) third, to the aggregate outstanding principal
amount of the Revolving Loans;
(iv) fourth, after all Revolving Loans have been
reduced to Zero Dollars ($0) (together with all accrued and unpaid
interest thereon), to the aggregate outstanding principal amount of the
Term Loans; and
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(v) fifth, after the Revolving Commitments have been
reduced to Zero Dollars ($0), and all Revolving Loans and all Term
Loans have been fully and finally paid (together with all accrued and
unpaid interest thereon), to the accrual portion of the Development
Fee.
Upon each application of Net Disposition Proceeds as set forth in clause (iii)
of this Section 2.7(b), the Revolving Commitments shall be permanently reduced,
on a ratable basis (according to each Lender's respective Percentage), by the
amount of the Net Disposition Proceeds so applied.
(c) Deficiency. If, as a result of any such mandatory reduction or
event requiring the application of Net Disposition Proceeds under this Section
2.7, a Deficiency occurs, the Borrower shall, on the date of such mandatory
reduction or such application, pay to the Administrative Agent, as a repayment
of the Revolving Loans for the benefit of the Lenders, an amount sufficient to
eliminate such Deficiency together with all accrued and unpaid interest on the
amount so repaid to the date of such repayment.
SECTION 2.8 Repayment and Prepayment.
(a) Prepayment of the Term Loans. Subject to the terms of
Section 2.7(b) and Section 2.8(b) hereof, after the Revolving Commitments shall
have been reduced to Zero Dollars ($0) and all Revolving Loans shall have been
fully and finally paid (together with all interest thereon), the Borrower shall
have the right at any time and from time thereafter to time to prepay on a
ratable basis (according to each Lender's respective Percentage) all or any
part, as designated by the Borrower, of the aggregate principal amount of the
Term Loans then outstanding, plus accrued and unpaid interest on the amount so
prepaid to the date of such prepayment.
(b) Proceeds. Subject to the terms of Section 2.7(b) hereof,
the Borrower shall, concurrently with the receipt by it or any of its
Subsidiaries of any Proceeds, deliver such Proceeds to the Administrative Agent.
All such Proceeds shall be promptly applied by the Administrative Agent, for the
benefit of the Lenders on a ratable basis (according to each Lender's respective
Percentage), if applicable, as follows:
(i) first, to all fees (other than the accrual
portion of the Development Fee) and expenses then due from the Borrower
under this Agreement and the Loan Documents;
(ii) second, to all accrued and unpaid interest on
the Obligations;
(iii) third, to the aggregate outstanding principal
amount of the Revolving Loans;
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(iv) fourth, after all Revolving Loans have been
reduced to Zero Dollars ($0) (together with all accrued and unpaid
interest thereon), to the aggregate outstanding principal amount of the
Term Loans; and
(v) fifth, after the Revolving Commitments have been
reduced to Zero Dollars ($0), and all Revolving Loans and all Term
Loans have been fully and finally paid (together with all accrued and
unpaid interest thereon), to the accrual portion of the Development
Fee.
Upon each application of Proceeds as set forth in clauses (iv) and (v) of this
Section 2.8(b), the aggregate outstanding principal amount of the Term Loans
and/or the unpaid amount of the accrual portion of the Development Fee, as the
case may be, shall be permanently reduced, on a ratable basis (according to each
Lender's respective Percentage), by the amount of the Proceeds so applied.
Notwithstanding the foregoing or anything to the contrary set forth in this
Agreement or any other Loan Document, all Proceeds realized by the Collateral
Agent, for itself and for the ratable benefit of the Lenders, in respect of the
Key Man Policy under the Collateral Assignment of Life Insurance Policy shall be
first applied to the aggregate outstanding principal amount of the Term Loans on
a ratable basis (according to each Lender's respective Percentage) and
thereafter, in accordance with the application schedule set forth in clauses
(i), (ii), (iii), (iv) and (v) of this Section 2.8(b).
(c) Administration. Prior telephonic, written or telecopy
notice (in the case of telephonic notice such notice shall be promptly confirmed
by written or telecopy notice) of each repayment or prepayment under this
Section 2.8 must be received by the Administrative Agent not later than 12:00
noon, Cleveland, Ohio, time, on the Business Day of the repayment or prepayment.
The Administrative Agent shall promptly upon receipt of such notice notify each
Lender of such proposed repayment or prepayment. Any repayment or prepayment
under this Section 2.8 shall be without premium or penalty. Each notice of a
repayment or prepayment shall specify the repayment or prepayment date and the
amount to be repaid or prepaid, shall be irrevocable and shall commit the
Borrower to repay or prepay such amount stated therein on the date stated
therein.
ARTICLE III
FEES
SECTION 3.1 Participant Fee. The Borrower shall pay to the
Administrative Agent for the ratable account of each Lender (according to each
such Lender's respective Percentage),
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an annual participant fee equal to three-quarters of one percent (3/4%) of the
aggregate Commitments as in effect on the date such fee (or partial payment
thereof) is due hereunder (the "Participant Fee"). The Participant Fee for the
1995 Period shall be paid by the Borrower on the Effective Date. The Participant
Fee for the period commencing on February 1, 1996 and ending on January 31, 1997
shall be paid by the Borrower as follows: (i) on February 1, 1996, fifteen
thirty-seconds of one percent (15/32%) of the aggregate Commitments as in effect
on such date shall be paid, (ii) on May 1,1996, three thirty-seconds of one
percent (3/32%) of the aggregate Commitments as in effect on such date shall be
paid, (iii) on August 1, 1996, three thirty-seconds of one percent (3/32%) of
the aggregate Commitments as in effect on such date shall be paid, and (iv) on
November 1, 1996, three thirty-seconds of one percent (3/32%) of the aggregate
Commitments as in effect on such date shall be paid. In the event that on or
prior to January 31, 1997 the Borrower shall reduce the Revolving Commitments to
Zero Dollars ($0) and fully and finally pay the outstanding principal amount of
all Revolving Loans and all Term Loans (together with all accrued and unpaid
interest on such amount to the date of repayment), the Borrower shall not be
obligated to make any of the payments in respect of any of the fees set forth in
this Section 3.1 which would have otherwise been due hereunder after the date of
such reduction and payment in full. Notwithstanding the foregoing or anything to
the contrary set forth herein, in the event that the Commitments shall have been
terminated under Section 8.2 or Section 8.3 hereof, all fees under this Section
3.1 which would have otherwise been due and payable by the Borrower on and after
the date of such termination of the Commitments shall be deemed to have been
earned by the Lenders immediately preceding such termination of the Commitments,
shall be immediately due and payable by the Borrower, and shall be calculated
with reference to the aggregate Commitments as in effect immediately preceding
such termination.
SECTION 3.2 Agent Fees. The Borrower shall pay (i) an annual
administrative agent fee in the amount of Seventy-Five Thousand Dollars
($75,000) to the Administrative Agent, for the sole account of the
Administrative Agent, and (ii) an annual collateral agent fee in the amount of
Seventy-Five Thousand Dollars ($75,000) to the Collateral Agent, for the sole
account of the Collateral Agent. Such annual administrative agent fee and annual
collateral agent fee each shall be paid by the Borrower to the Administrative
Agent of the Collateral Agent, as the case may be, on the Effective Date and on
February 1, 1996. In addition, the Borrower shall pay to each Co-Agent a
co-agent fee in the amount of Five Hundred Thousand Dollars ($500,000) each,
payable in seven (7) consecutive quarterly installments commencing on the
Effective Date and thereafter on the first day of each Fiscal Quarter of the
Borrower (each such date being referred to herein as an "Accrual Date"). The
amount of the quarterly payments of such co-agent fee to be paid to each Co-
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Agent shall be as follows: (i) Two Hundred Eighty-Five Thousand Seven Hundred
Fifteen Dollars ($285,715) shall be paid to each Co-Agent on the first Accrual
Date, and (ii) Thirty-Five Thousand Seven Hundred Fifteen Dollars ($35,715)
shall be paid to each Co-Agent on the next six (6) consecutive Accrual Dates. In
the event that on or prior to January 31, 1997 the Borrower shall reduce the
Revolving Commitments to Zero Dollars ($0) and fully and finally pay the
outstanding principal amount of all Revolving Loans and all Term Loans (together
with all accrued and unpaid interest on such amount to the date of repayment),
the Borrower shall not be obligated to make any of the payments in respect of
any of the fees set forth in this Section 3.2 which would have otherwise been
due hereunder after the date of such reduction and payment in full.
Notwithstanding the foregoing or anything to the contrary set forth herein, in
the event that the Commitments shall have been terminated under Section 8.2 or
Section 8.3 hereof, all fees under this Section 3.2 which would have otherwise
been due and payable by the Borrower on and after the date of such termination
of the Commitments shall be deemed to have been earned by the Lenders
immediately preceding such termination of the Commitments and shall be
immediately due and payable by the Borrower.
SECTION 3.3 Development Fee. The Borrower shall pay to the
Administrative Agent for the ratable account of each Lender (according to each
such Lender's respective Percentage) a development fee ("Development Fee") in an
amount not to exceed Seven Million Five Hundred Thousand Dollars ($7,500,000)
(such amount being the "Development Fee Maximum Amount"), calculated as set
forth in this Section 3.3. The Development Fee shall comprise the following two
(2) components: (a) a cash portion in the amount of Five Hundred Thousand
Dollars ($500,000) which shall be paid by the Borrower on the Effective Date
(the "Development Fee Cash Portion"); and (b) an accrual portion which shall
accrue at the rate of One Million Dollars ($1,000,000) on the Effective Date and
thereafter at the rate of One Million Dollars ($1,000,000) on each subsequent
Accrual Date. On the earlier to occur of (y) the date on which the Revolving
Commitments shall have been reduced to Zero Dollars ($0) and the Borrower shall
have repaid all of the then outstanding principal amount of the Revolving Loans
and the Term Loans in full, and (z) the Expiration Date (such earlier date being
referred to as the "Accrual Portion Payment Date"), the Borrower shall pay an
amount equal to the product of One Million Dollars ($1,000,000) times the number
of Accrual Dates (including the Effective Date) which have occurred prior to
January 31, 1997, reduced by the lesser of:
(i) forty percent (40%) of the Year One Excess
(as defined below), increased by fifteen
percent (15%) of the Year Two Amount (as
defined below) if such amount is positive,
or reduced by forty percent (40%) of the
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absolute value of the Year Two Amount if
such amount is negative; and
(ii) Seven Hundred Thousand Dollars ($700,000)
times the number of Accrual Dates (including
the Effective Date) which have occurred
prior to January 31, 1997;
provided, however, that the amount of the reduction calculated pursuant to
clause (i) or clause (ii) above shall be deemed to be zero (0) if an Event of
Default under Section 8.1.1 shall have occurred and be continuing on the Accrual
Portion Payment Date (other than an Event of Default which shall occur as a
result of the Borrower's failure to fully and finally pay and perform all of the
Obligations on such Accrual Portion Payment Date). For purposes of this Section
3.3:
(A) The "Year One Excess" means the greater of:
(i) Fifty-Seven Million Three Hundred Thousand
Dollars ($57,300,000), minus the aggregate
amount of the Revolving Commitments in
effect at the close of business on January
31, 1996; and
(ii) zero; and
(B) The "Year Two Amount" means Forty-Four Million Three
Hundred Thousand Dollars ($44,300,000), minus the
aggregate amount of the Revolving Commitments in
effect at January 31, 1997, minus the Year One
Excess.
Notwithstanding the foregoing or anything to the contrary set forth herein, in
the event that the Commitments shall have been terminated under Section 8.2 or
Section 8.3 hereof, the Development Fee Maximum Amount (less the Development Fee
Cash Portion) shall be deemed to have been earned by the Lenders immediately
preceding such termination of the Commitments and shall be immediately due and
payable by the Borrower, without any of the reductions set forth in this Section
3.3 or any other adjustment.
ARTICLE IV
CERTAIN OTHER PROVISIONS
SECTION 4.1 Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of
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capital required or expected to be maintained by any Lender or any Person
controlling such Lender, and such Lender determines (in its sole and absolute
discretion) that the rate of return on its or such controlling Person's capital
as a consequence of the Loans made by such Lender is reduced to a level below
that which such Lender or such controlling Person could have achieved but for
the occurrence of any such circumstance, then, in any such case upon notice from
time to time by such Lender to the Borrower, the Borrower shall immediately pay
directly to such Lender additional amounts sufficient to compensate such Lender
or such controlling Person for such reduction in rate of return. A statement of
such Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower. In determining such amount, such Lender
may use any reasonable method of averaging and attribution that it (in its sole
and absolute discretion) shall deem applicable.
SECTION 4.2 Taxes. All payments by the Borrower of principal
of, and interest on, the Loans and all other amounts payable hereunder shall be
made free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by any Lender's net
income or receipts (such non-excluded items being called "Taxes"). In the event
that any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative Agent
evidencing such payment to such authority; and
(c) pay to the Administrative Agent for the account of the
Lenders such additional amount or amounts as is necessary to ensure
that the net amount actually received by each Lender will equal the
full amount such Lender would have received had no such withholding or
deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent or
any Lender with respect to any payment received by the Administrative Agent or
such Lender hereunder, the Administrative Agent or such Lender may pay such
Taxes and the Borrower will promptly pay such additional amounts (including any
penalties, interest or expenses) as are necessary in order that the net amount
received by such Person after the payment of
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such Taxes (including any Taxes on such additional amount) shall equal the
amount such Person would have received had not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent, for
the account of the respective Lenders, the required receipts or other required
documentary evidence, the Borrower shall indemnify the Lenders for any
incremental Taxes, interest or penalties that may become payable by any Lender
as a result of any such failure. For purposes of this Section 4.2, a
distribution hereunder by the Administrative Agent or any Lender to or for the
account of any Lender shall be deemed a payment by the Borrower.
Upon the request of the Borrower or the Administrative Agent,
each Lender that is organized under the laws of a jurisdiction other than the
United States shall, prior to the due date of any payments under the Notes,
execute and deliver to the Borrower and the Administrative Agent, on January 31
of each calendar year, one or more (as the Borrower or the Administrative Agent
may reasonably request) United States Internal Revenue Service Forms 4224 or
Forms 1001 or such other forms or documents (or successor forms or documents),
appropriately completed, as may be applicable to establish the extent, if any,
to which a payment to such Lender is exempt from withholding or deduction of
Taxes.
SECTION 4.3 Payments, Computations, Etc. Unless otherwise
expressly provided, all payments by the Borrower pursuant to this Agreement, the
Notes or any other Loan Document shall be made by the Borrower to the
Administrative Agent for the pro rata account of the Lenders entitled to receive
such payment. All such payments required to be made to the Administrative Agent
shall be made, without setoff, deduction or counterclaim, not later than 11:00
a.m., Cleveland, Ohio, time, on the date due, in same day or immediately
available funds, to such account as the Administrative Agent shall specify from
time to time by notice to the Borrower. Funds received after that time shall be
deemed to have been received by the Administrative Agent on the next succeeding
Business Day. The Administrative Agent shall promptly remit in same day funds to
each Lender its share, if any, of such payments received by the Administrative
Agent for the account of such Lender. All interest and fees shall be computed on
the basis of the actual number of days (including the first day but excluding
the last day) occurring during the period for which such interest or fee is
payable over a year comprised of three hundred sixty (360) days. Whenever any
payment to be made shall otherwise be due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in computing interest and fees, if any, in
connection with such payment.
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SECTION 4.4 Sharing of Payments. If any Lender shall obtain
any payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan (other than pursuant to the terms of
Sections 4.1 and 4.2) in excess of its pro rata share (according to such
Lender's Percentage) of payments then or therewith obtained by all Lenders, such
Lender shall purchase from the other Lenders such participations in Loans made
by them as shall be necessary to cause such purchasing Lender to share the
excess payment or other recovery ratably with each of them; provided, however,
that if all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender shall repay to
the purchasing Lender the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Lender's ratable share (according
to the proportion of
(a) the amount of such selling Lender's required repayment to
the purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section may, to
the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.5) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this Section to share in the benefits of any
recovery on such secured claim.
SECTION 4.5 Setoff. Each Lender shall, upon the occurrence of
any Event of Default described in clauses (a) through (f) of Section 8.1.8 or
any other Event of Default, have the right to set off against, and to
appropriate and apply to the payment of the Obligations owing to it (whether or
not then due) (i) any and all balances, credits, deposits, accounts or moneys of
the Borrower then or thereafter maintained with such Lender and (ii) all other
Indebtedness (other than Non-Recourse Debt) then held or owing by such Lender to
or for the credit or account of the Borrower; provided, however, that any such
setoff, appropriation and application shall be subject to the provisions
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of Section 4.4. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff under applicable law or otherwise) which such Lender may have.
SECTION 4.6 Use of Proceeds. The Borrower shall use the
proceeds of the Loans for general corporate purposes and working capital
purposes; without limiting the foregoing, no proceeds of any Loan will be used
to purchase or carry any equity security of a class which is registered pursuant
to Section 12 of the Securities Exchange Act of 1934 or any "margin stock", as
defined in F.R.S. Board Regulation U.
ARTICLE V
CONDITIONS TO EFFECTIVENESS
SECTION 5.1 Conditions to Effectiveness. This Agreement shall
become effective on the date the following conditions shall have been fulfilled
to the satisfaction of the Co-Agents in addition to the conditions set forth in
Section 5.2 hereof (such date being referred to as the "Effective Date"):
(a) the Borrower shall have delivered to the Co-Agents
certified copies of the resolutions of the board of directors of each
of the Borrower and LDI Computer Rentals, Inc. evidencing approval of
the execution and delivery of each of the Loan Documents to which it is
a party;
(b) the Borrower shall have delivered to the Co-Agents a
favorable opinion of counsel for the Borrower and LDI Computer Rentals,
Inc. in form and substance and covering such matters as the Co-Agents
may request;
(c) the Borrower shall have delivered to the Co-Agents a
certificate of the secretary or assistant secretary of each of the
Borrower and LDI Computer Rentals, Inc., certifying the names of the
officers of the Borrower and LDI Computer Rentals, Inc. authorized to
sign each Loan Document to which it is a party, together with the true
signatures of such officers;
(d) the Borrower shall have delivered the Senior Borrower
Security Agreement, substantially in the form attached hereto as
Exhibit B-1, and the Subordinated Borrower Security Agreement,
substantially in the form attached hereto as Exhibit B-3, each executed
by an
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Authorized Officer of the Borrower in favor of the Collateral Agent and
the Lenders;
(e) the Borrower shall have delivered to the Co-Agents (i) all
consents from the Borrower's and LDI Computer Rentals, Inc.'s other
existing lenders which are required to allow the liens in favor of the
Collateral Agent contemplated hereby to be placed upon the Collateral,
(ii) all lien releases or lien subordinations to enable the Collateral
Agent and the Lenders to have a perfected first priority lien on and
security interest in the Collateral, each of which shall be in form and
substance satisfactory to the Co-Agents, and (iii) all landlord,
mortgagee, warehouseman and other similar waivers deemed necessary by
the Co-Agents, each of which shall be in form and substance
satisfactory to the Co-Agents, including a mortgagee waiver to be
executed by Marine Midland Realty Credit Corporation with respect to
4770 Hinckley Industrial Parkway, Cleveland, Ohio;
(f) all reasonable fees and out-of-pocket expenses of (i)
counsel for each of the Co-Agents, (ii) all consultants hired by such
counsel or by the Co-Agents, and (iii) the Collateral Agent in
connection with the preparation, execution and delivery of this
Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby shall have been paid;
(g) the Co-Agents shall have received from the Borrower and
LDI Computer Rentals, Inc. certificates of insurance in form, amounts,
coverages and with an insurer, loss payee/coinsured endorsements, and
riders providing at least thirty (30) days prior written notice of
non-renewal, amendments or cancellation acceptable to the Co-Agents;
(h) the Borrower and LDI Computer Rentals, Inc. each shall
have delivered to the Co-Agents a certificate of its President and
Chief Executive Officer, in form and substance acceptable the
Co-Agents, in their sole discretion, certifying that, as of the
Effective Date,
(i) the representations and warranties set
forth in Article VI of this Agreement, in the other Loan
Documents and otherwise made in writing by or on behalf of the
undersigned in connection with the transactions contemplated
by this Agreement or any of the other Loan Documents are true
and correct with the same effect as if made on and as of the
Effective Date,
(ii) no Default exists on the Effective
Date, and
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(iii) since the date of the financial
statements described in Section 6.5, there has been no
material adverse change in the condition (financial or
otherwise), operations, assets, business, properties or
prospects of the Borrower and its Subsidiaries;
(i) the Borrower shall have delivered to the Co-Agents and the
Collateral Agent a Borrowing Base Certificate setting forth the
Borrowing Base Amount as of May 31, 1995;
(j) the Borrower shall have delivered each of the Notes
(appropriately completed) executed by an Authorized Officer of the
Borrower;
(k) each of Lenders shall have completed all due diligence
with respect to the Borrower and its Subsidiaries deemed necessary by
the Lenders;
(l) each of Lenders and the Collateral Agent shall possess (i)
perfected first priority liens on and security interests in the
Collateral, and (ii) perfected liens on and security interests in
certain other assets of the Borrower and LDI Computer Rentals, Inc. as
determined by the Lenders in their sole discretion, with priority
acceptable to the Lenders, in their sole discretion;
(m) [INTENTIONALLY OMITTED];
(n) [INTENTIONALLY OMITTED];
(o) the Lenders shall have equalized in accordance with the
terms of that certain Intercreditor Agreement, dated as of July 29,
1994, by and among the Borrower and certain other parties;
(p) the Borrower shall have delivered (i) an Open-End Mortgage
(Leasehold), Security Agreement and Collateral Assignment in
substantially the form attached hereto as Exhibit L-1, executed by an
Authorized Officer of the Borrower, with respect to the real property
located at 23350 Broadway Avenue, Oakwood, Ohio (the "Oakwood
Mortgage") and (ii) an Assignment of Leases and Rentals in
substantially the form attached hereto as Exhibit L-3, executed by an
Authorized Officer of the Borrower, with respect to the real property
located at 23350 Broadway Avenue, Oakwood, Ohio (the "Assignment of
Leases") (the Oakwood Mortgage and the Assignment of Leases are
collectively referred to herein as the "Mortgages");
(q) the Borrower shall have delivered to the Collateral Agent
a commitment to issue a Title Insurance Policy in ALTA form and
otherwise satisfactory to the
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Required Lenders, in their sole discretion, with respect to the
Mortgages;
(r) the Borrower shall have executed and delivered a Cash
Collateral and Account Maintenance Agreement, substantially in the form
attached to each of the Borrower Security Agreements as Exhibit VI,
executed by an Authorized Officer of the Borrower;
(s) the Borrower shall have delivered to the Co-Agents copies
of all material lease pool documents with the following Persons (such
copies to be certified as true correct and complete by an Authorized
Officer of the Borrower as of the Effective Date):
(i) Sanwa Business Credit Corporation,
(ii) CXC/Citicorp North America, Inc., and
(iii) The Dai-Ichi Kangyo Bank, Ltd.;
(t) the Collateral Agent shall have received fully executed
Sweep Agreements, each to be substantially in the form attached to each
of the Borrower Security Agreements as Exhibit VIII, with respect to
the accounts of the Borrower located at the following financial
institutions:
(i) Bank One, Cleveland,
(ii) Fifth Third Bank,
(iii) National City Bank,
(iv) Society National Bank,
(v) Star Bank, National Association, and
(vi) Comerica Bank;
(u) the Borrower shall have delivered to the Co-Agents copies
of all material documents executed and delivered in connection with the
Note Purchase Agreement, dated as of July 2, 1991, between the Borrower
and Olympus Private Placement Fund, L.P., and all amendments to such
documents (such copies to be certified as true, correct and complete by
an Authorized Officer of the Borrower as of the Effective Date);
(v) the Borrower shall have delivered to the Co-Agents copies
of all material documents and agreements with respect to the governance
of the Picker Joint Venture, and all other agreements and documents
relating to any Indebtedness of the Picker Joint Venture (other than
Indebtedness for which neither the obligee nor any other Person has any
legal recourse against the Picker Joint Venture), and all amendments to
such agreements and documents (such copies to be certified as true,
correct and complete by an Authorized Officer of the Borrower as of the
Effective Date);
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(w) [INTENTIONALLY OMITTED];
(x) [INTENTIONALLY OMITTED];
(y) the Collateral Agent shall have received evidence
satisfactory to the Collateral Agent, in its sole discretion, that all
necessary filings with the FAA have been made with respect to all
aircraft and aircraft engines covered by the Borrower Security
Agreement;
(z) the Borrower shall have delivered to the Collateral Agent
the original stock certificates (together with stock powers executed in
blank) with respect to the capital stock owned by the Borrower of the
following corporations:
(i) Data Broadcasting Corporation,
(ii) LDI Lease Receivables Funding Corp.,
(iii) Broadway Stores,
(iv) Wang Labs,
(v) Bulk Materials, Inc.,
(vi) CruisePhone, Inc., and
(vii) LDI Computer Rentals, Inc.;
(aa) the Borrower shall have delivered to the Collateral Agent
the original MRK Note (together with an allonge with respect thereto);
(ab) the Borrower shall have delivered to the Required Lenders
evidence satisfactory to the Required Lenders, in their sole
discretion, that all principal payments in respect of any Subordinated
Debt have been subordinated to the prior and final payment in full of
the Obligations;
(ac) the Borrower shall have delivered to the Co-Agents
written agreements, in substantially the form attached hereto as
Exhibit N, executed and delivered by each of Kendall, Kennedy and
Cutter in favor of the Lenders;
(ad) the Borrower shall have delivered to the Co-Agents (i) a
certificate issued by the Secretary of State of New Jersey with respect
to the status of the Borrower as a foreign corporation in good standing
and qualified to do business in New Jersey, and (ii) a certificate
issued by the Secretary of State of Minnesota with respect to the
status of the Borrower as a foreign corporation in good standing and
qualified to do business in Minnesota, or (iii) in the event that the
Borrower is not required to qualify to do business in New Jersey or
Minnesota, as the case may be, a copy of the Notice of Business
Activities Report filed with the New Jersey Division of Taxation or the
Minnesota
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Division of Taxation, as the case may be, for the 1995 calendar year;
(ae) LDI Computer Rentals, Inc. shall have delivered the
Subsidiary Security Agreement, substantially in the form attached
hereto as Exhibit B-2, and the Guaranty of Payment of Debt (the
"Subsidiary Guaranty"), substantially in the form attached hereto as
Exhibit O, each executed by an Authorized Officer of LDI Computer
Rentals, Inc. in favor of the Collateral Agent and the Lenders; and
(af) any other delivery items and conditions which the
Required Lenders deem necessary, in their sole discretion, in
connection with this Agreement shall have been delivered or satisfied.
SECTION 5.2 All Borrowings. The obligation of each Lender to
make a Revolving Loan to the Borrower in connection with each Borrowing
(including the initial Borrowing) hereunder is subject to the prior or
concurrent satisfaction of each of the following conditions:
(a) the Administrative Agent shall have timely received from
the Borrower the notice of Borrowing required by Section 2.3;
(b) before and after giving effect to such Borrowing, no
Default shall exist which has not been waived in accordance with the
terms hereof;
(c) the representations and warranties set forth in Article VI
and in each of the other Loan Documents shall be true and correct with
the same effect as if made on and as of the date of such borrowing
except to the extent that any thereof expressly relate to an earlier
date; and
(d) before and after giving effect to such Borrowing, no
Deficiency has occurred or will occur.
Each request for a Borrowing hereunder shall be deemed to be a representation
and warranty by the Borrower as of the date of such Borrowing that the
statements in clauses (b), (c) and (d) of this Section are true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Co-Agents to enter into
this Agreement and to make Loans hereunder, the Borrower represents and warrants
unto the Co-Agents and each Lender as set forth in this Article VI.
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SECTION 6.1 Organization, etc. The Borrower and each
Subsidiary of the Borrower is a corporation validly organized and existing and
in good standing under the laws of the state of its incorporation, is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the nature of its business requires such qualification,
and has full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform its Obligations under this
Agreement, the Notes and each other Loan Document to which it is a party and to
own and hold under lease its property and to conduct its business as currently
conducted by it and as proposed to be conducted by it.
SECTION 6.2 Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by the Borrower of this Agreement, the Notes
and each other Loan Document executed or to be executed by it, and the
execution, delivery and performance by each other Obligor of each Loan Document
executed or to be executed by it are within the Borrower's and each such
Obligor's corporate powers, have been duly authorized by all necessary corporate
action, and do not
(a) contravene, result in a breach of or constitute (alone or
with notice or lapse of time or both) a default under the Borrower's or
any such Obligor's Organic Documents;
(b) contravene, result in a breach of or constitute (alone or
with notice or lapse of time or both) a default under any contractual
restriction, law or governmental regulation or court decree or order
binding on or affecting the Borrower or any such Obligor; or
(c) result in, or require the creation or imposition of, any
Lien on any of the Borrower's or any such Obligor's properties.
SECTION 6.3 Governmental Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or filing with or
consent of, any governmental authority or regulatory body or other Person is
required for the due execution, delivery or performance by the Borrower or any
other Obligor of this Agreement, the Notes or any other Loan Document to which
it is a party. Neither the Borrower nor any of its Subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
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SECTION 6.4 Validity, etc. This Agreement constitutes, and the
Notes and each other Loan Document executed by the Borrower will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms; and each Loan Document executed pursuant hereto by each other Obligor
will, on the due execution and delivery thereof by such Obligor, be the legal,
valid and binding obligation of such Obligor enforceable in accordance with its
terms.
SECTION 6.5 Financial Information. The balance sheets of the
Borrower and each of its Subsidiaries as at January 31, 1995 and as at April 30,
1995, and the related statements of earnings and cash flow of the Borrower and
each of its Subsidiaries, copies of which have been furnished to each Lender,
have been prepared in accordance with GAAP applied on a basis consistent with
those used by Borrower during its immediately preceding Fiscal Year, and present
fairly, in all material respects, the consolidated financial condition of the
corporations covered thereby as at the dates thereof and the results of their
operations for the periods then ended.
SECTION 6.6 No Material Adverse Change. Since the date of the
financial statements described in Section 6.5, there has been no material
adverse change in the condition (financial or otherwise), operations, assets,
business, properties or prospects of the Borrower and its Subsidiaries.
SECTION 6.7 Litigation, Labor Controversies, etc. Exhibit E
hereto sets forth all pending litigation, actions, proceedings and labor
controversies affecting the Borrower or any of its Subsidiaries, or any of their
respective properties, businesses, assets or revenues existing on the Effective
Date, which involves potential damages thereunder in an amount of One Million
Dollars ($1,000,000) or more, or which may otherwise materially and adversely
affect the condition (financial or otherwise), operations, assets, business,
properties or prospects of the Borrower or any Subsidiary of the Borrower, or
which purports to affect the legality, validity or enforceability of this
Agreement, the Notes or any other Loan Document. There is no pending or, to the
knowledge of the Borrower, threatened litigation, action, proceeding, or labor
controversy affecting the Borrower or any of its Subsidiaries, or any of their
respective properties, businesses, assets or revenues, which (i) involves a
potential award of damages in an amount of One Million Dollars ($1,000,000) or
more, except as otherwise set forth on Exhibit E on the date hereof and except
as is covered by insurance, (ii) may otherwise materially and adversely affect
the condition (financial or otherwise), operations, assets, business, properties
or prospects of the Borrower or any Subsidiary of the Borrower, or (iii) which
purports to affect the legality, validity or enforceability of this Agreement,
the Notes or any other Loan Document.
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SECTION 6.8 Subsidiaries. The Borrower has no Subsidiaries,
except those Subsidiaries which are set forth on Exhibit F hereto. With the
exception of LDI Computer Rentals, Inc., none of Borrower's Subsidiaries is
actively engaged in operations.
SECTION 6.9 Ownership of Properties. The Borrower and each of
its Subsidiaries owns good and marketable title to all of its properties and
assets, real and personal, tangible and intangible, of any nature whatsoever
(including patents, trademarks, trade names, service marks and copyrights), free
and clear of all Liens, charges or claims (including infringement claims with
respect to patents, trademarks, copyrights and the like) except as permitted
pursuant to Section 7.2.3.
SECTION 6.10 Taxes. The Borrower and each of its Subsidiaries
has filed all tax returns and reports required by law to have been filed by it
and has paid all taxes and governmental charges thereby shown to be due and
owing or due and owing pursuant to any assessment received by the Borrower or
any Subsidiary of Borrower, except any such taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 6.11 Pension and Welfare Plans. No steps have been
taken to terminate any Pension Plan, and no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which might result in the incurrence by the Borrower
or any member of the Controlled Group of any material liability, fine or
penalty. Neither the Borrower nor any member of the Controlled Group has any
contingent liability with respect to any post-retirement benefit under a Welfare
Plan, other than liability for continuation coverage described in Part 6 of
Title I of ERISA.
SECTION 6.12 Environmental Warranty. All facilities and
property owned, operated or leased by the Borrower and/or any of its
Subsidiaries have been, and continue to be, owned, operated or leased by the
Borrower and/or its Subsidiaries in compliance with all Environmental Laws, the
noncompliance with which could have a material adverse effect on the business,
operations, property, assets, prospects or condition, financial or otherwise, of
the Borrower or of any of its Subsidiaries. The Borrower and/or its Subsidiaries
have no liability with respect to any Environmental Laws, the violation of which
could have a material adverse effect on the business, operations, property,
assets, prospects or condition, financial or otherwise, of the Borrower or of
any of its Subsidiaries. To the best knowledge of the Borrower, neither the
Borrower nor any of its Subsidiaries is
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a party to any agreement with any other Person whereby the Borrower or any such
Subsidiary has agreed to indemnify such Person for any losses, costs,
liabilities or damages incurred by such Person with respect to any actions,
causes of action, suits or any other matters relating to Environmental Laws or
any violations thereof, where the amount of such losses, costs, liabilities or
damages has the potential, based on the Borrower's understanding and belief, of
exceeding One Hundred Thousand Dollars ($100,000).
SECTION 6.13 Regulations G, U and X. Neither the Borrower nor
any of its Subsidiaries is engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock, and no proceeds of any Loans
will be used, directly or indirectly, for a purpose which violates, or would be
inconsistent with, F.R.S. Board Regulation G, U or X. Terms for which meanings
are provided in F.R.S. Board Regulation G, U or X or any regulations substituted
therefor, as from time to time in effect, are used in this Section with such
meanings.
SECTION 6.14 Investment Company Act; Public Utility Holding
Company Act. Neither the Borrower nor any Subsidiary is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
SECTION 6.15 Solvency. Borrower has received consideration
which is the reasonable equivalent value of the obligations and liabilities that
Borrower has incurred to the Lenders. Borrower is solvent as defined in any
applicable state or federal statute, and Borrower will not be rendered insolvent
by the execution and delivery of this Agreement or any Loan Document. Borrower
is not engaged or about to engage in any business or transaction for which the
assets retained by it shall be an unreasonably small capital, taking into
consideration the obligations incurred in connection with this Agreement or any
other Loan Document. Borrower does not intend to, nor does it believe that it
will, incur debts beyond its ability to pay them as they mature.
SECTION 6.16 No Default. No event has occurred and is
continuing which constitutes, or which, with the passage of time or the giving
of notice or both, would constitute, a default under or in respect of any
agreement, instrument or undertaking with respect to any Indebtedness (other
than Non-Recourse Debt) to which the Borrower or any Subsidiary of Borrower is a
party or by which the Borrower or any Subsidiary of Borrower or any of their
respective assets are bound, having an outstanding principal amount individually
or in the aggregate, in excess of Five Hundred Thousand Dollars ($500,000); and
no Default or Event of Default exists hereunder, nor will any begin to exist
immediately after the execution and delivery of this Agreement
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and the other Loan Documents or immediately after the making of any Loan.
SECTION 6.17 Adverse Contracts. Neither the Borrower nor any
Subsidiary of the Borrower is a party to, nor are any of them or any of their
respective properties subject to or bound by, any long term lease, forward
purchase contract or future contract, covenant not to compete, or other
agreement which restricts its ability to conduct its business, or has a material
adverse effect or could have a material adverse effect on its financial
condition, results of operations or business.
SECTION 6.18 Full Disclosure. This Agreement, the financial
statements delivered in connection herewith, the representations and warranties
set forth herein and in any other Loan Document, do not and will not contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein, in light of the circumstances under
which they were made, not misleading.
SECTION 6.19 Leases of Aircraft. Borrower is not a party to
any Capital Lease or operating Lease for the lease of aircraft other than that
certain (i) Amended and Restated Aircraft Lease Agreement 533, dated as of March
30, 1992, between the Borrower, as lessor, and Continental Airlines, Inc., as
lessee, relating to DC-9-32 aircraft N17533, s/n 47281, and JT8D-9A engines s/n
666960 and 657191, and (ii) Amended and Restated Aircraft Lease Agreement 538,
dated as of March 30, 1992, between the Borrower, as lessor, and Continental
Airlines, Inc., as lessee, relating to DC-9-32 aircraft N12538, s/n 47218, and
JT8D-9A engines s/n 666693 and 656906.
ARTICLE VII
COVENANTS
SECTION 7.1 Affirmative Covenants. The Borrower agrees with
each Lender that, until each of the Commitments have expired and until all
Obligations have been paid and performed in full, the Borrower will perform and
observe and will cause each Subsidiary to perform and observe the obligations
set forth in this Section 7.1.
SECTION 7.1.1 Financial Information, Reports, Notices, Etc.
The Borrower will furnish, or will cause to be furnished, to each Lender (unless
otherwise noted) copies of the following financial statements, reports, notices
and information:
(a) on the respective dates set forth on Annex C hereto,
copies of all of the financial statements, reports and other
information set forth on Annex C hereto, each certified by the
President, Treasurer, Chief Financial
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Officer or Chief Accounting Officer of Borrower to have been prepared
in good faith;
(b) as soon as available and in any event within ninety (90)
days after the end of each Fiscal Year of the Borrower, a copy of the
annual audit report for such Fiscal Year for the Borrower and its
Subsidiaries, including therein consolidated and consolidating (by
business segment) balance sheets of the Borrower and its Subsidiaries
as of the end of such Fiscal Year and consolidated and consolidating
(by business segment) statements of earnings of the Borrower and its
Subsidiaries and consolidated statements of cash flow of the Borrower
and its Subsidiaries, each for such Fiscal Year and a consolidated
statement of stockholder's equity of the Borrower and its Subsidiaries
reflecting the operations during such Fiscal Year, all in reasonable
detail, and setting forth comparable figures for the same accounting
period in the preceding Fiscal Year, and in each case (except as to the
consolidating balance sheets of the Borrower and its Subsidiaries and
the consolidating statements of earnings of the Borrower and its
Subsidiaries) certified (without any Impermissible Qualification) by
independent public accountants of national standing acceptable to the
Required Lenders, in their sole discretion, including, but not limited
to, a certification of such accounting firm that in making its
examination upon which the audit report is based, no information came
to its attention which to its knowledge indicated that a Default or an
Event of Default had occurred or specifying any such Default or Event
of Default;
(c) concurrently with the delivery of each of the financial
statements required by clause (b) of this Section 7.1.1, a certificate
signed by its President, Chief Financial Officer, Chief Accounting
Officer or Treasurer, (i) certifying that he or she has reviewed the
provisions of this Agreement, (ii) stating that (A) no Default or Event
of Default has occurred and is continuing, or (B) a Default or an Event
of Default has occurred and is continuing (such statement to include a
description of (y) the nature of those Default(s) or Event(s) of
Default in detail satisfactory to the Lenders, and (z) the action which
Borrower has taken and proposes to take in order to cure the same), or
(C) a Default or Event of Default had occurred and was continuing
(since the end of the period covered by the last financial certificate
delivered to the Lenders hereunder), but that such Default or Event of
Default no longer exists (such statement to include a description of
(y) the nature of those Default(s) or Event(s) of Default in detail
satisfactory to the Lenders, and (z) the facts or computations on which
the Borrower bases its belief that those Default(s) or Event(s) of
Default have been cured), and (iii) setting forth (in sufficient
detail) the
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information and calculations required in order to establish whether the
Borrower was in compliance with the financial covenants set forth in
Section 7.2.4 at the end of the period covered by the financial
statements then being furnished;
(d) as soon as possible and in any event within three (3) days
after the occurrence of each Default or Event of Default, a statement
of the President, the Treasurer or the Chief Financial Officer of the
Borrower, setting forth details of such Default and the action which
the Borrower has taken and proposes to take with respect thereto;
(e) as soon as possible and in any event within three (3) days
after becoming aware of (y) the occurrence of any material adverse
development with respect to any litigation, action, proceeding, or
labor controversy described in Section 6.7 or (z) the commencement of
any labor controversy, litigation, action or proceeding of the type
described in Section 6.7, notice thereof and copies of all
documentation relating thereto; provided, however, that the Borrower
shall only be obligated to deliver the information and documents
referred to in this Section 7.1.1(e) to the Co-Agents;
(f) promptly after the sending or filing thereof, copies of
all proxy statements, notices and reports which the Borrower sends to
any of its security holders, and all reports, notices and registration
statements which the Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange
or any other regulatory agency;
(g) immediately upon obtaining knowledge of the institution of
any steps by the Borrower or any other Person to terminate any Pension
Plan, or the failure to make a required contribution to any Pension
Plan if such failure is sufficient to give rise to a Lien under section
302(f) of ERISA, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Borrower furnish a
bond or other security to the PBGC or such Pension Plan, or the
occurrence of any event with respect to any Pension Plan which could
result in the incurrence by the Borrower of any liability, fine or
penalty, or any increase in the contingent liability of the Borrower
with respect to any post-retirement Welfare Plan benefit, notice
thereof and copies of all documentation relating thereto; provided,
however, that the Borrower shall only be obligated to deliver the
information and documents referred to in this Section 7.1.1(g) to the
Co-Agents;
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(h) promptly after the receipt thereof by the Borrower, copies
of any interim audit of the accounts of the Borrower or any of its
Subsidiaries;
(i) immediately upon receipt thereof by the Borrower, copies
of all management letters given to the Borrower by the Borrower's
independent public accountants;
(j) as soon as available and in any event within thirty (30)
days after the end of each Fiscal Quarter of the Borrower, a listing of
all new lease transactions executed during such Fiscal Quarter, in such
detail as to permit to be conducted an appraisal of the residual values
associated with each such lease transaction, based on a random sampling
format (with a particular emphasis on those leases having residual
values in excess of $100,000 on a net present value basis as carried on
the books of the Borrower for such Fiscal Quarter); such appraisal
shall be conducted by the Required Lenders (or a consultant hired by
the Co-Agents or by counsel to the Co-Agents) and shall otherwise be in
form and substance satisfactory to the Required Lenders, in their sole
discretion; and such appraisal shall be obtained by the Lenders at
Borrower's expense and the Borrower shall also reimburse the Lenders
for the cost of an annual update of that certain Leased Equipment
Portfolio Residual Value and Inventory Appraisal of LDI Corporation,
dated March 13, 1995, prepared by Independent Equipment Company;
(k) promptly upon the Borrower's learning that the Eligibility
Ratio for a Person whose Leases are rated one (1) or two (2) under the
Borrower's credit rating system as in effect on January 31, 1994
exceeds 0.10 to 1.00, the Borrower shall deliver written notice to the
Co-Agents to that effect setting forth such Person's actual Eligibility
Ratio as of the date of such notice; and
(l) 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 Lender through any Co-Agent may
from time to time request.
Notwithstanding the foregoing, upon its written request (which
shall be delivered to the Borrower with a copy to each Co-Agent), each Lender
may receive (directly from the Borrower), and the Borrower shall furnish
(directly to such Lender), any or all of the foregoing information which is not
otherwise required to be delivered to such Lender. Each Lender acknowledges and
agrees that the Co-Agents shall not be obligated to furnish to such Lender any
information not otherwise required to be delivered to such Lender by the
Borrower under this Section 7.1.1. In the event the Borrower shall, within five
(5) days following the delivery of any item referred to in clauses (a) and (l)
of this Section 7.1.1, have concluded that the information set forth
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therein is inaccurate in any respect, it shall be permitted to amend any such
item so long as (A) any such amendment is delivered to the Co-Agents within the
five (5) day period immediately following the date such item was required to be
delivered hereunder, and (B) such amendment does not disclose an inaccuracy (in
the aggregate for the entirety of the amendment) in excess of One Million
Dollars ($1,000,000).
SECTION 7.1.2 Compliance with Laws, etc. The Borrower will,
and will cause each of its Subsidiaries to, comply in all material respects with
all applicable laws, rules, regulations and orders of the United States and of
each state thereof and of each political subdivision thereof and of any and all
other governmental authorities, such compliance to include (without limitation)
the maintenance and preservation of its corporate existence and qualification
and good standing as a foreign corporation in each jurisdiction where the nature
of its business requires such qualification.
SECTION 7.1.3 Maintenance of Properties. The Borrower will,
and will cause each of its Subsidiaries to, maintain, preserve, protect and keep
its properties in good repair, working order and condition, and make necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly and advantageously conducted at all times.
SECTION 7.1.4 Insurance. The Borrower will, and will cause
each of its Subsidiaries to, maintain or cause to be maintained the insurance
with respect to its properties and business required under the Security
Agreements.
SECTION 7.1.5 Books and Records; Visitation. The Borrower
will, and will cause each of its Subsidiaries to, (a) at all times keep proper
books and records in which full, true and correct entries are made of all of
their respective business affairs and transactions and which are kept in
accordance with reasonable commercial practice and in such a manner as to permit
the preparation therefrom of financial statements in accordance with GAAP, (b)
permit the Co-Agents and each Lender or any of their respective representatives,
at all reasonable times and intervals, during normal business hours, to visit
all of its offices and inspect their respective properties and operations, to
speak with their officers, employees and independent public accountant (and the
Borrower hereby authorizes such independent public accountant to discuss the
Borrower's affairs with each Lender or its representatives whether or not any
representative of the Borrower is present) and to examine (and, at the expense
of the Borrower, photocopy extracts from) any of the Borrower's or any of its
Subsidiaries' books or other records, and (c) permit the consultants of the
Lenders' counsel or the consultants of the Co-Agents, as the case may be, to
complete the procedures set forth on Annex G attached hereto and such other
similar
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procedures as the Lenders' counsel or the Required Lenders may deem necessary,
in their sole discretion; provided, however, that upon the occurrence and during
the continuance of a Default, the Co-Agents and each Lender may exercise such
visitation inspection and examination rights at any time they may deem necessary
or desirable. The Borrower shall be obligated to pay all of the reasonable fees
and expenses incurred by each Co-Agent (or any of their respective agents,
attorneys, consultants or other representatives, including, but not limited to,
the consultants referred to in clause (c) of this Section 7.1.5) and those
reasonable fees and expenses of any other Lender to the extent authorized by the
Required Lenders, in connection with any such visitation, inspection or
examination as set forth above. In addition to and not in limitation of any
other right of inspection set forth in this Section 7.1.5, upon the request of
the Co-Agents, the Borrower will, and will cause each of its Subsidiaries to,
permit the Co-Agents, the Lenders and their representatives to audit and review
the Borrower's and such Subsidiary's lease portfolio, accounting and other
systems for the identification of recourse and non-recourse loans and the
receipt of any payments thereunder, policies for the establishment and
continuation of credit to its lessees and any other matter reasonably related to
any of the foregoing. In connection with such audit and review, the Co-Agents
and the Lenders may make extracts of any information or data supplied or
provided by the Borrower or any Subsidiary and may speak with the Borrower's
management and the management of any of its Subsidiaries. Upon the request of
any Lender, the Co-Agents shall provide such Lender with copies of any such
information or data.
SECTION 7.1.6 Environmental Covenant. The Borrower will, and
will cause each of its Subsidiaries to,
(a) (i) use and operate all of its facilities and properties
in compliance with all Environmental Laws, the noncompliance with which
could have a material adverse effect on the business, assets, revenues,
condition (financial or otherwise), operations or prospects of the
Borrower or any of its Subsidiaries, (ii) keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance with all such
permits, approvals, certificates and other authorizations to the extent
that noncompliance thereof would have a material adverse effect on the
business, assets, revenues, condition (financial or otherwise),
operations or prospects of the Borrower or any of its Subsidiaries, and
(iii) handle all Hazardous Materials in compliance with all applicable
Environmental Laws, the noncompliance with which could have a material
adverse effect on the business, assets, revenues, condition (financial
or otherwise), operations or prospects of the Borrower or any of its
Subsidiaries;
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(b) immediately notify the Co-Agents and provide copies upon
receipt of all written claims, complaints, notices or inquiries
relating to the condition of its facilities and properties or
compliance with Environmental Laws, and shall promptly cure and have
dismissed with prejudice to the satisfaction of the Co-Agents any
actions and proceedings relating to compliance with Environmental Laws;
and
(c) provide such information and certifications which either
of the Co-Agents may reasonably request from time to time to evidence
compliance with this Section 7.1.6.
SECTION 7.1.7 Payment. Borrower will duly and punctually pay
or cause to be paid the principal of and interest on the Notes and all other
amounts due hereunder in accordance with the terms thereof and will duly and
punctually perform or cause to be performed all things on its part or on the
part of any Subsidiary to be done or performed under this Agreement and the
other Loan Documents.
SECTION 7.1.8 Payment of Taxes and Claims. Borrower will pay
and cause each Subsidiary of the Borrower to pay before they become delinquent
(a) all taxes, assessments and governmental charges or levies imposed on the
Borrower, any Subsidiary of the Borrower or upon the property of the Borrower or
any Subsidiary of the Borrower; (b) all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like persons which, if
unpaid, might result in the creation of a lien or charge upon any property of
the Borrower or any Subsidiary of the Borrower; and (c) all claims, assessments
or levies required to be paid by the Borrower or any Subsidiary of the Borrower
pursuant to any agreement, contract, law, ordinance or governmental rule or
regulation governing any pension, retirement, profit-sharing or any similar plan
of the Borrower or any Subsidiary of the Borrower; provided, however, that the
Borrower or such Subsidiary shall have the right to contest in good faith, by
appropriate proceedings promptly initiated and diligently conducted, the
validity, amount or imposition of any such tax or claim and upon such good faith
contest to delay or refuse payment thereof, if (A) such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor, and (B) such proceedings prevent the forfeiture or sale of any
property of the Borrower or such Subsidiary or any material interference with
the use thereof by the Borrower or such Subsidiary.
SECTION 7.1.9 Retirement Plans. Borrower will cause each Plan
and the documents and instruments governing each such Plan to be conformed and
administered in compliance with those provisions of ERISA, which may, from time
to time, become effective and operative with respect to such Plans; and if
requested by the Lenders in writing from time to time, furnish to
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the Lenders a copy of any annual report with respect to each such Plan that the
Borrower files with the Internal Revenue Service pursuant to ERISA.
SECTION 7.1.10 Deficiency. If at any time a Deficiency shall
occur, the Borrower shall, within one (1) Business Day after the occurrence
thereof, pay to the Administrative Agent, as a prepayment of the Loans for the
benefit of the Lenders, an amount sufficient to eliminate such Deficiency.
SECTION 7.1.11 Casualty Loss. If a Casualty Loss occurs with
respect to any of the Collateral or any other security for the Obligations which
is greater than or equal to One Million Dollars ($1,000,000) and which is not
covered by insurance (or any self-insurance program of any lessee under any
Lease included in the Collateral), the Borrower shall, within one (1) Business
Day after the occurrence thereof, deliver to the Co-Agents a pro forma Borrowing
Base Certificate (based upon the Borrowing Base Certificate in effect on the
date of such Casualty Loss) showing the effect of such Casualty Loss on the
Borrowing Base Amount in effect on the date of such Casualty Loss.
SECTION 7.1.12 Key Man Life Insurance. Within forty-five (45)
days after the Effective Date, the Borrower shall (i) obtain a key man life
insurance policy on the life of Floyd Robinson in the amount of Ten Million
Dollars ($10,000,000) naming the Borrower as beneficiary thereunder, issued by
an insurer and otherwise in form and substance satisfactory to the Co-Agents, in
their reasonable discretion (the "Key Man Policy"), and (ii) collaterally assign
the Key Man Policy to the Collateral Agent, for its benefit, and the benefit of
the Co-Agents and the Administrative Agent, and for the ratable benefit of the
Lenders pursuant to a Collateral Assignment of Life Insurance Policy (the
"Collateral Assignment of Life Insurance Policy") in substantially the form
attached hereto as Exhibit K.
SECTION 7.2 Negative Covenants. The Borrower agrees with each
Lender that, until each of the Commitments have expired and until all
Obligations have been paid and performed in full, the Borrower will perform the
obligations set forth in this Section 7.2.
SECTION 7.2.1 Business Activities. The Borrower will not, and
will not permit any of its Subsidiaries to, engage in any business activity
other than the leasing, selling, maintaining, financing and providing of
technical services related to data processing, communications, computer, medical
diagnostic and other capital equipment and such activities as may be incidental
or related thereto, nor purchase or invest, directly or indirectly, in any
substantial amount of assets or property other than assets or property useful
and to be used in its businesses as presently conducted.
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SECTION 7.2.2 Indebtedness. The Borrower will not, and will
not permit any of its Subsidiaries to, create, incur, assume or suffer to exist
or otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Loans and other
Obligations;
(b) Indebtedness existing as of the effective date of this
Agreement and set forth on Exhibit G hereto; provided, however, that
all such Indebtedness (other than Subordinated Debt) shall be repaid in
accordance with its terms with no extension, renewal or other
modification; and provided, further, that the principal amount of any
Subordinated Debt set forth on Exhibit G hereto shall not be paid by
the Borrower until all of the Obligations shall have been fully and
finally paid and performed by the Borrower;
(c) unsecured Indebtedness incurred in the ordinary course of
business (including open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, but excluding
Indebtedness incurred through the borrowing of money or Contingent
Liabilities);
(d) Funded Debt incurred by the Borrower or any of its
Subsidiaries or any of its partnerships or joint ventures after the
date hereof, which constitutes a Purchase Money Obligation or a Capital
Lease Liability; provided, however, that the aggregate amount of such
Funded Debt incurred by the Borrower, its Subsidiaries and its
partnerships and joint ventures during any Fiscal Year of the Borrower
(other than any such Funded Debt incurred in connection with any
purchase of Inventory) shall in no event exceed One Million Dollars
($1,000,000);
(e) Funded Debt incurred by the Borrower under credit
facilities (whether secured or unsecured) not otherwise permitted under
this Section 7.2.2 having amortization schedules acceptable to the
Required Lenders, in their reasonable discretion; provided, however,
that Funded Debt incurred by Borrower under a secured credit facility
shall be permitted hereunder only if the creditor with respect to such
Funded Debt is or shall become a party to an intercreditor agreement
with the Lenders in form and substance satisfactory to the Required
Lenders, in their sole discretion, and only if such Funded Debt is
approved by the Required Lenders as set forth in this Section 7.2.2(e);
(f) Subordinated Debt of the Borrower which is not set forth
on Exhibit G hereto; provided, however, that the principal amount of
any such Subordinated Debt shall not be paid by the Borrower until all
of the Obligations shall have
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been fully and finally paid and performed by the Borrower; and
(g) any Non-Recourse Debt of the Borrower or any of its
Subsidiaries or any non-recourse Indebtedness of any of Borrower's or
any of its Subsidiaries' partnerships or joint ventures.
SECTION 7.2.3 Liens. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of its property, revenues or assets, whether now owned or
hereafter acquired, except:
(a) Liens in favor of the Collateral Agent for its benefit,
the benefit of the Administrative Agent and the Co-Agents and for the
ratable benefit of the Lenders and in favor of the Lenders pursuant to
the terms of the Security Agreements;
(b) Liens for taxes or claims of the nature described in
Section 7.1.8 hereof which are not yet due or which are being contested
as permitted by such section;
(c) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance
of tenders, statutory obligations, leases and contracts (other than for
borrowed money) entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds;
(d) Liens securing Purchase Money Obligations or Capital Lease
Liabilities provided (i) the Indebtedness secured by such Liens does
not exceed one hundred percent (100%) of the cost of assets acquired,
(ii) such Liens do not encumber any property other than assets acquired
subject thereto, and (iii) such Liens do not secure any Indebtedness
owing by the Borrower or such Subsidiary, as the case may be, to the
seller or lessor of such assets, other than the financed portion of the
purchase price of or lease payments with respect to such assets;
(e) Liens on Leases (and related equipment) which have been
discounted on a non-recourse basis in the ordinary course of the
business of the Borrower and its Subsidiaries;
(f) unperfected Liens on equipment leases and related
equipment leased thereunder imposed in the ordinary course of business
by vendors of such equipment to secure the purchase price therefor
which are subordinate (by operation of law or otherwise) to the Lien of
the Collateral Agent, the Co-Agents, the Administrative Agent and the
Lenders, provided such Liens become of no further force and effect
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within sixty (60) days of the later of (i) date of invoice for such
equipment or (ii) the date on which installation of the subject
equipment has occurred;
(g) Liens securing Non-Recourse Debt issued with respect to
any securitized pool of assets but only to the extent that such Liens
do not encumber any assets other than those subject to the pooling
arrangement in question; and
(h) Liens securing Funded Debt permitted under Section
7.2.2(e).
SECTION 7.2.4 Financial Condition. The Borrower will not
suffer or permit the Borrower's earnings before taxes plus the portion of the
Development Fee which has been paid and which has accrued plus professional
restructuring fees plus the fees set forth in Section 3.1 and Section 3.2 which
have been paid plus the interest and fees paid by the Borrower on the Borrower's
9-3/8% Convertible Subordinated Notes due August 15, 2000 minus gains on sales
of assets outside the ordinary course of the Borrower's business plus losses on
sales of assets outside the ordinary course of the Borrower's business,
determined on a cumulative basis, to be less than the amounts set forth on Annex
F attached hereto (each such amount being referred to as an "EBT Amount") as at
the respective dates set forth opposite such EBT Amounts on such Annex F (each
such date being referred to as an "EBT Date").
SECTION 7.2.5 Investments. The Borrower will not, and will not
permit any of its Subsidiaries to, make, incur, assume, purchase or suffer or
permit to exist any Investment in any other Person, other than Investments
existing on the date hereof as set forth on Exhibit H hereto and Cash Equivalent
Investments; provided, however, that the Borrower or any of its Subsidiaries may
hold notes and/or securities issued to it in settlement of any claim against an
insolvent debtor (including a debtor that is unable to pay its debts as they
fall due); and provided, further, that the Borrower may make further Investments
in the entities set forth on Exhibit H upon the prior written consent of the
Required Lenders. In addition, the Borrower will not, and will not permit any of
its Subsidiaries, partnerships or joint ventures to, enter into any transaction
with any other Person for the purchase of any aircraft or the purchase of any
lease or leases of aircraft.
SECTION 7.2.6 Restricted Payments, etc. On and at all times
after the date hereof, Borrower will not, and not permit any of its Subsidiaries
to, make any Restricted Payments, except payments by a Subsidiary to the
Borrower.
SECTION 7.2.7 Consolidation, Merger, etc. The Borrower will
not, nor will it permit any Subsidiary of the Borrower to merge, acquire or
consolidate with or acquire
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substantially all of the assets or the stock of any other corporation.
SECTION 7.2.8 Asset Dispositions, etc. The Borrower will not,
and will not permit any of its Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, dispose or grant options, warrants or other
rights with respect to, all or any part of its assets (including accounts
receivable and capital stock of Subsidiaries) to any Person, other than
(a) sales, transfers, leases, contributions or conveyances of
Inventory or leased assets in the ordinary course of its business;
(b) sales or transfers of assets by a Subsidiary to the
Borrower;
(c) sales of Lease Receivables in the ordinary course of
business; and
(d) other sales, transfers, leases, contributions or
conveyances not specifically included in clauses (a), (b) or (c) of
this Section 7.2.8 to the extent that (i) the Borrower shall have
received the prior written consent of the Required Lenders therefor,
and (ii) the Borrower shall have complied with the terms of Section
2.7(b) hereof in connection therewith.
SECTION 7.2.9 Transactions with Affiliates. Except on terms no
less favorable to the Borrower or Subsidiary of the Borrower, as the case may
be, than would be obtainable if no such relationship existed, Borrower will not,
nor will it permit any Subsidiary of the Borrower to, purchase, acquire or lease
any property from, or sell, transfer or lease any property to, or loan or
advance money to, or otherwise deal with any Affiliate of the Borrower or any
Subsidiary of the Borrower.
SECTION 7.2.10 Subordination of Claims. Other than in the
ordinary course of business and except as set forth on Exhibit J attached
hereto, Borrower will not, nor will it permit any Subsidiary of the Borrower to,
subordinate or permit to be subordinated any claim against, or obligation of
another person, firm or corporation held or owned by it to any other claim
against, or obligation of, such other person, firm or corporation.
SECTION 7.2.11 Credit Rating System. The Borrower will not,
and will not permit any of its Subsidiaries to, modify its credit rating system
with respect to grading leases if, after giving effect to such modification,
such credit rating system is less restrictive and less rigorous than the credit
rating system which the Borrower has in place as of January 31, 1994, a written
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copy of which credit rating system has been delivered to the Co-Agents prior to
the date hereof.
SECTION 7.2.12 Securitized Non-Recourse Debt Pools. Other than
those transactions existing on the Effective Date, the Borrower will not, and
will not permit any of its Subsidiaries to, enter into any transaction providing
for the incurrence of any Non-Recourse Debt by the Borrower or any such
Subsidiary which shall be secured by (a) ten (10) or more leases (whether
operating leases, Capital Leases, or any combination thereof) between the
Borrower or any such Subsidiary, as lessor, and any Person, as lessee, (b) such
leases having aggregate lease payments equal to Ten Million Dollars
($10,000,000) or more, or (c) such leases the equipment under which has an
aggregate Residual Value of Three Million Dollars ($3,000,000) or more, without
delivering written notice to the Co-Agents at least five (5) Business Days prior
to entering into such transaction, which notice shall contain the terms of such
transaction and any other information reasonably required by the Co-Agents;
provided, however, that the Borrower shall not be obligated to deliver such
notice so long as the Collateral Agent is also a Co-Agent. The Borrower
acknowledges and agrees that each such transaction shall be subject to the
release of collateral provisions contained in the Borrower Security Agreement.
SECTION 7.2.13 Severance Payments. Until the Obligations shall
have been fully and finally paid and performed by the Borrower, the Borrower
will not make any payments to (a) Kendall under that certain Compensation Plan
and Severance Agreement, dated as of December 9, 1994, between the Borrower and
Kendall, (b) Kennedy under that certain Revised Compensation Plan and Severance
Agreement, dated as of April 20, 1994, between the Borrower and Kennedy, or (c)
Cutter under that certain Revised Compensation Plan and Severance Agreement,
dated as of April 21, 1994, between the Borrower and Cutter, except as otherwise
specifically permitted pursuant to the terms of the respective Subordination
Agreements.
SECTION 7.2.14 Amendments to Subordinated Debt. The Borrower
will not amend, supplement or otherwise modify any of the terms of any
Subordinated Debt without the prior written consent of the Required Lenders.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1 Listing of Events of Default. Each of the
following events or occurrences described in this Section 8.1 shall constitute
an "Event of Default".
SECTION 8.1.1 Non-Payment of Obligations. The Borrower shall
default in the payment when due and payable of (a)
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any payment required under Section 2.7 or Section 7.1.10, or (b) any other
Obligation, and such default with respect to the payment of such other
Obligation shall continue for one (1) Business Day.
SECTION 8.1.2 Breach of Warranty. Any representation or
warranty of the Borrower made or deemed to be made hereunder or pursuant hereto
or in any other Loan Document executed by it or any other writing or certificate
furnished by or on behalf of the Borrower to any Co-Agent or any Lender or
pursuant thereto for the purposes of or in connection with this Agreement or any
such other Loan Document is or shall be incorrect when made (or deemed made) in
any respect.
SECTION 8.1.3 Non-Performance of Certain Covenants and
Obligations. The Borrower or any of its Subsidiaries shall default in the due
performance and observance of any of its obligations under Section 7.1.1(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), Section 7.1.1(i), Section
7.1.1(j), Section 7.1.1(k), Section 7.1.5, Section 7.1.12, Section 7.2.1,
Section 7.2.2, Section 7.2.3, Section 7.2.4, 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,
Section 7.2.12, Section 7.2.13 or Section 7.2.14, or an event of default shall
occur under any of the Security Agreements or either of the Mortgages.
SECTION 8.1.4 Non-Performance of Other Covenants and
Obligations. The Borrower or any of its Subsidiaries shall default in the due
performance and observance of any other agreement contained herein (other than
under Section 7.1.1(l) and those referred to in Sections 8.1.1, 8.1.2 or 8.1.3
hereof) or in any other Loan Document other than as referenced in Section 8.1.3
executed by it, and such default shall continue unremedied for a period of ten
(10) days after the occurrence thereof. The Borrower or any of its Subsidiaries
shall default in the due performance and observance of its obligations under
Section 7.1.1(l), and such default shall continue unremedied for a period of ten
(10) days after any of the Co-Agents shall have provided notice of such default
to the Borrower.
SECTION 8.1.5 Default on Other Indebtedness. A default shall
occur in the payment of, or in the performance or observance of any other
obligation, term or condition with respect to (in all cases subject to any
applicable grace period), any Indebtedness (other than Non-Recourse Debt) of the
Borrower or any of its Subsidiaries having a principal amount, individually or
in the aggregate, in excess of Five Hundred Thousand Dollars ($500,000).
SECTION 8.1.6 Judgments. Any judgment or order for the payment
of money in excess of Five Hundred Thousand Dollars
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($500,000) shall be rendered against the Borrower or any of its Subsidiaries and
there shall be any period of twenty (20) consecutive days during which (i) stay
of enforcement of such judgment or order, by reason of pending appeal or
otherwise, shall not be in effect and (ii) such judgment has not been paid.
SECTION 8.1.7 Pension Plans. Any of the following events shall
occur with respect to any Pension Plan:
(a) the institution of any steps by the Borrower, any member
of its Controlled Group or any other Person to terminate a Pension Plan
if, as a result of such termination, the Borrower or any such member
could be required to make a contribution to such Pension Plan, or could
reasonably expect to incur a liability or obligation to such Pension
Plan, in excess of Five Hundred Thousand Dollars ($500,000); or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION 8.1.8 Bankruptcy, Insolvency, etc., of Borrower.
(a) The Borrower shall discontinue business;
(b) The Borrower shall become insolvent or generally fail to
pay, or admit in writing its inability or unwillingness to pay, debts
as they become due;
(c) The Borrower shall apply for, consent to, or acquiesce in,
the appointment of a trustee, receiver, sequestrator or other custodian
for the Borrower or any property of any thereof, or make a general
assignment for the benefit of creditors;
(d) The Borrower shall in the absence of such application,
consent or acquiescence, permit or suffer to exist any judgment, decree
or order for the appointment of a trustee, receiver, sequestrator or
other custodian for the Borrower or for a substantial part of the
property of any thereof;
(e) The Borrower shall permit or suffer to exist the
commencement of any bankruptcy, reorganization, debt arrangement or
other case or proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of the
Borrower;
(f) The Borrower shall take or omit to take any other action
authorizing, or in furtherance of, any of the foregoing.
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SECTION 8.1.9 Bankruptcy, Insolvency, etc., of Borrower's
Subsidiaries.
(a) Any of Borrower's Subsidiaries shall become insolvent or
generally fail to pay, or admit in writing its inability or
unwillingness to pay, debts as they become due.
(b) Any of Borrower's Subsidiaries shall apply for, consent
to, or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for such Subsidiary or any property of
any thereof, or make a general assignment for the benefit of creditors.
(c) Any of Borrower's Subsidiaries shall in the absence of
such application, consent or acquiescence, permit or suffer to exist
any judgment, decree or order for the appointment of a trustee,
receiver, sequestrator or other custodian for such Subsidiary or for a
substantial part of the property of any thereof.
(d) Any of Borrower's Subsidiaries shall permit or suffer to
exist the commencement of any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or
insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of such Subsidiary.
(e) Any of Borrower's Subsidiaries shall take or omit to take
any other action authorizing, or in furtherance of, any of the
foregoing.
SECTION 8.1.10 Material Adverse Change. There shall have
occurred a material adverse change in the condition (financial or otherwise),
operations, assets, business, properties or prospects of the Borrower and its
Subsidiaries, as determined by the Required Lenders, in their sole discretion.
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.
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SECTION 8.1.12 Independent Directors. At any time following
August 31, 1995, either (a) a majority of the members of the Board of Directors
of the Borrower shall be Persons who are Affiliates of the Borrower or (b) the
number of members of the Board of Directors of the Borrower who are Affiliates
of the Borrower shall be equal to the number of members of the Board of
Directors of the Borrower who are not Affiliates of the Borrower; provided,
however, that if the occurrence of the condition under either clause (a) or
clause (b) is caused by the death of a member of the Borrower's Board of
Directors who is not an Affiliate of the Borrower, an Event of Default under
this Section 8.1.12 shall be deemed to have occurred only if such condition is
not eliminated within ninety (90) days after such dying member's death. For
purposes of this Section 8.1.12 only, the word "director" in clause (a) of the
definition of "Affiliate" set forth in Section 1.1 hereof shall be excluded
therefrom. In addition, for purposes of this Section 8.1.12 only, the word
"Affiliate" shall not include Floyd Robinson.
SECTION 8.1.13 CXC Financing Arrangement. Either (a) no Leases
shall have been transferred by the Borrower (directly or through LDI Lease
Receivables Funding Corp.) to CXC Incorporated pursuant to the CXC Financing
Arrangement during any period of forty-six (46) consecutive days, or (b) the CXC
Financing Arrangement shall have been terminated for any reason.
SECTION 8.2 Action if Bankruptcy of Borrower. If any Event of
Default described in clauses (a) through (f) of Section 8.1.8 shall occur, (a)
all of the Commitments and the credits hereby established shall automatically
and forthwith terminate, if not theretofore terminated, and no Lender thereafter
shall be under any obligation to grant any further Loans hereunder, and (b) the
outstanding principal amount of and interest on all outstanding Loans and all
other Obligations (including, but not limited to, all fees hereunder) shall
automatically be and become immediately due and payable, all without any
presentment, notice or demand of any kind, all of which are hereby waived by
Borrower.
SECTION 8.3 Action if Other Event of Default. If any Event of
Default (other than any Event of Default described in clauses (a) through (f) of
Section 8.1.8) shall occur for any reason, whether voluntary or involuntary, the
Required Lenders shall have the right in their discretion, by a notice given to
the Borrower by the Administrative Agent upon the direction of the Required
Lenders, to (a) terminate the Commitments and the credits hereby established, if
not theretofore terminated, and forthwith upon such election the obligations of
the Lenders (or any of them) to make any further loans hereunder immediately
shall be terminated, and (b) declare all or any portion of the outstanding
principal amount of and interest on Loans and all other Obligations (including,
but not limited to, all fees
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hereunder) to be due and payable, whereupon the full unpaid principal amount of
and interest on such Loans and other Obligations (including, but not limited to,
all fees hereunder) which shall be so declared due and payable shall be and
become immediately due and payable in full, without any further notice, demand
or presentment, each of which are hereby waived by the Borrower.
ARTICLE IX
THE CO-AGENTS
SECTION 9.1 Actions. Each Lender hereby appoints and
authorizes NCB, and NCB hereby agrees to act as Administrative Agent for the
Lenders under, for purposes of and subject to the terms of this Agreement, the
Notes and each other Loan Document. Each Lender hereby appoints and authorizes
NCB and Society, and NCB and Society each hereby agrees to act as Co-Agent for
the Lenders under, for purposes of and subject to the terms of this Agreement,
the Notes and each other Loan Document. Each Lender authorizes the
Administrative Agent to act as Administrative Agent on behalf of such Lender
under this Agreement, the Notes and each other Loan Document and, in the absence
of other written instructions from the Required Lenders received from time to
time by the Administrative Agent (with respect to which the Administrative Agent
agrees that it will comply, except as otherwise provided in this Section or as
otherwise advised by its counsel), to exercise such powers hereunder and
thereunder as are specifically delegated to or required of the Administrative
Agent by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Lender authorizes each Co-Agent to act as
Co-Agent on behalf of such Lender under this Agreement, the Notes and each other
Loan Document and to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Co-Agent by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto. Each
Lender hereby agrees to indemnify (which indemnity shall survive any termination
of this Agreement) the Administrative Agent and each Co-Agent, pro rata
according to such Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, disbursements or expenses of any kind or nature whatsoever which may at
any time be imposed on, incurred by, or asserted against the Administrative
Agent or any Co-Agent in any way relating to or arising out of this Agreement,
the Notes and any other Loan Document or any action taken or omitted by the
Administrative Agent and/or such Co-Agent with respect to such documents,
including reasonable attorneys' fees, and as to which the Administrative Agent
and/or such Co-Agent is not reimbursed by the Borrower; provided, however, that
no Lender shall be liable for the payment of the ordinary expenses of
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administration of the Administrative Agent or any Co-Agent or of any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, disbursements or expenses which are determined by a court
of competent jurisdiction in a final proceeding to have resulted solely from the
Administrative Agent's or any Co-Agent's gross negligence or wilful misconduct.
Neither the Administrative Agent nor any Co-Agent shall be required to take any
action hereunder, under the Notes or under any other Loan Document, or to
prosecute or defend any suit in respect of this Agreement, the Notes or any
other Loan Document, unless it is indemnified hereunder to its satisfaction. If
any indemnity in favor of the Administrative Agent or any Co-Agent shall be or
become, in the Administrative Agent's or such Co-Agent's determination,
inadequate, the Administrative Agent or such Co-Agent, as the case may be, may
call for additional indemnification from the Lenders and cease to do the acts
indemnified against hereunder until such additional indemnity is given.
SECTION 9.2 Funding Reliance, etc. Unless the Administrative
Agent shall have been notified by telephone, confirmed in writing, by any Lender
by 2:00 p.m., Cleveland, Ohio, time, on the day of a Borrowing that such Lender
will not make available the amount which would constitute its Percentage of the
Borrowing on the date specified therefor, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent on
the date of such Borrowing and, in reliance upon such assumption, make available
to the Borrower on such date a corresponding amount. If and to the extent that
such Lender shall not have made such amount available to the Administrative
Agent, such Lender and the Borrower severally agree to repay the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date the Administrative Agent made such amount
available to the Borrower to the date such amount is repaid to the
Administrative Agent, at the Federal Funds Effective Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such amount shall
constitute such Lender's Loan as part of such Borrowing for purposes of this
Agreement.
SECTION 9.3 Exculpation. Neither the Administrative Agent nor
any Co-Agent nor any of their respective directors, officers, attorneys,
employees or agents shall be liable to any Lender for any action taken or
omitted to be taken by it or them under this Agreement or any other Loan
Document, or in connection herewith or therewith, except for its or their own
wilful misconduct or gross negligence, nor responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan Document, nor for
the creation, perfection or priority of any Liens purported to be created by any
of the Loan Documents, or the validity, genuineness, enforceability, existence,
value or
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sufficiency of any collateral security, nor to make any inquiry respecting the
performance by the Borrower of its obligations hereunder or under any other Loan
Document. Any such inquiry which may be made by the Administrative Agent or any
Co-Agent shall not obligate it to make any further inquiry or to take any
action. The Administrative Agent or any Co-Agent may consult with legal counsel
selected by it with reasonable care and shall be entitled to rely upon the
advice of such legal counsel concerning legal matters and upon any notice,
consent, certificate, statement or writing which the Administrative Agent or
such Co-Agent believes to be genuine and to have been presented by a proper
Person and shall not be liable for any action taken or suffered in good faith by
it in accordance with the opinion of such legal counsel.
SECTION 9.4 Successors. Any Co-Agent may resign as such at any
time by giving thirty (30) days prior written notice thereof to the Borrower and
all Lenders unless such Co-Agent is required to resign pursuant to any law or
regulation, directive, guideline, decision or request (whether or not having the
force of law) of any court, central bank, regulator or other governmental
authority, in which case such Co-Agent shall use reasonable efforts promptly to
notify the Borrower and all Lenders of such required resignation. In addition,
any Co-Agent may be removed at any time by the Required Lenders. Concurrently
with such removal, the Required Lenders shall appoint a successor Co-Agent,
which shall be one of the Lenders, who shall thereupon become a Co-Agent
hereunder. If all Co-Agents at any time shall have resigned, whether or not on
the same date, the Required Lenders may appoint another Lender as a successor
which shall thereupon become the Administrative Agent and sole Co-Agent
hereunder. If no successor shall have been so appointed by the Required Lenders,
or the Lender so appointed shall not have accepted such appointment, within
thirty (30) days after the retiring Co-Agent's giving notice of resignation,
then the retiring Co-Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent and sole Co-Agent, which shall be one of the Lenders or a
commercial banking institution organized under the laws of the U.S. (or any
State thereof) or a U.S. branch or agency of a commercial banking institution,
and having a combined capital and surplus of at least Five Hundred Million
Dollars ($500,000,000). Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall be entitled to receive from the retiring
Administrative Agent such documents of transfer and assignment as such successor
Administrative Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement and any liabilities arising
in connection herewith. After any retiring Administrative Agent's resignation
hereunder as the Administrative Agent, the provisions of:
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(a) this Article IX shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the
Administrative Agent under this Agreement; and
(b) Section 10.3 and Section 10.4 shall continue to inure to
its benefit.
SECTION 9.5 Loans by Agent Lenders. The Administrative Agent
and each Co-Agent shall have the same rights and powers with respect to (y) the
Loans made by it or any of its Affiliates, and (z) the Notes held by it or any
of its Affiliates as any other Lender and may exercise the same as if it were
not the Administrative Agent or a Co-Agent. The Administrative Agent, each
Co-Agent and their respective Affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the Borrower or any
Subsidiary or Affiliate of the Borrower as if it were not the Administrative
Agent or a Co-Agent hereunder.
SECTION 9.6 Credit Decisions. Each Lender hereby acknowledges
and agrees that (a) the Co-Agents have made no representation or warranty,
express or implied, with respect to the creditworthiness, financial condition,
or any other condition of Borrower or any Subsidiary or with respect to the
statements contained in any information furnished in connection herewith or in
any other oral or written communication between the Co-Agents and/or the
Administrative Agent and such Lender, and (b) it has, independently of the
Co-Agents, the Administrative Agent and each other Lender, and based on such
Lender's review of the financial information of the Borrower, this Agreement,
the other Loan Documents (the terms and provisions of which being satisfactory
to such Lender) and such other documents, information and investigations as such
Lender has deemed appropriate, made its own credit decision to make its Loans.
Each Lender also acknowledges and agrees that it will, independently of the
Co-Agents, the Administrative Agent and each other Lender, and based on such
other documents, information and investigations as it shall deem appropriate at
any time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under
this Agreement or any other Loan Document. Each Lender agrees that neither the
Administrative Agent nor the Co-Agents have the duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto (other than such notices as may be
expressly required to be given by the Administrative Agent to the Lenders
hereunder), whether coming into its possession before the granting of the first
Loans or at any time thereafter.
SECTION 9.7 Copies, etc. The Administrative Agent (or the
Co-Agents, as the case may be) shall give prompt notice to each Lender of each
notice or request required or permitted to
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be given to the Administrative Agent or the Co-Agents by the Borrower pursuant
to the terms of this Agreement (unless concurrently delivered to the Lenders by
the Borrower). The Co-Agents (or the Administrative Agent, as the case may be)
will distribute to each Lender each document or instrument received for their
account and copies of all other communications received by the Co-Agents (or the
Administrative Agent, as the case may be) from the Borrower for distribution to
the Lenders by the Co-Agents (or the Administrative Agent, as the case may be)
in accordance with the terms of this Agreement, as deemed necessary by the
Co-Agents (or the Administrative Agent, as the case may be) or upon the request
of such Lender.
SECTION 9.8 Note Holders. The Administrative Agent may treat
the payee of any Note as the holder thereof until written notice of transfer
shall have been filed with it signed by such payee and in form satisfactory to
the Administrative Agent.
SECTION 9.9 Knowledge of Default. It is expressly understood
and agreed that the Administrative Agent and each Co-Agent shall be entitled to
assume that no Default has occurred and is continuing, unless a Default under
Section 8.1.1 has occurred and is continuing or the Administrative Agent or any
Co-Agent has otherwise been notified by a Lender in writing that such Lender
considers that a Default has occurred and is continuing and specifying the
nature thereof.
SECTION 9.10 Action by Agent. So long as the Administrative
Agent shall be entitled, pursuant to Section 9.9 hereof, to assume that no
Default shall have occurred and be continuing, the Administrative Agent shall be
entitled to use its discretion with respect to exercising or refraining from
exercising any rights which may be vested in it by, or with respect to taking or
refraining from taking any action or actions which it may be able to take under
or in respect of, this credit agreement. The Administrative Agent shall incur no
liability under or in respect of this Agreement by acting upon any notice,
certificate, warranty or other paper or instrument believed by it to be genuine
or authentic or to be signed by the proper party or parties, or with respect to
anything which it may do or refrain from doing in the reasonable exercise of its
judgment, or which may seem to it to be necessary or desirable in the premises.
SECTION 9.11 Notices, Default, Etc. In the event that the
Administrative Agent shall have acquired actual knowledge of any Default, the
Administrative Agent shall promptly notify the Lenders and will take such
actions and assert such rights under this Agreement as set forth in Article VIII
hereof and as the Required Lenders shall direct and the Administrative Agent
shall inform the other Lenders in writing of the action taken. The
Administrative Agent may take such action and assert
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<PAGE> 78
such rights as it deems to be advisable, in its discretion, for the protection
of the interests of the holders of the Notes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Required Lenders and the Borrower; provided, however, that
no such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders, shall be
effective unless consented to by each Lender;
(b) modify this Section 10.1, change the definition of
"Required Lenders", increase the Revolving Commitment, Term Loan
Commitment or the Percentage of any Lender, reduce any fees described
in Article III, except as otherwise specifically provided in any Loan
Document, shall be made without the consent of each Lender and each
holder of a Note;
(c) extend the due date for, or reduce the amount of, (i) any
scheduled repayment or prepayment of principal of or interest on any
Loan (or reduce the principal amount of or rate of interest on any
Loan) or (ii) any mandatory reduction of the Revolving Commitments
required under Section 2.7, shall be made without the consent of the
holder of the Note evidencing such Loan;
(d) affect adversely the interests, rights or obligations of
the Co-Agents (in such capacity) or the Administrative Agent (in such
capacity) shall be made without consent of the Co-Agents or the
Administrative Agent, as the case may be;
(e) extend the Commitment Period of any Lender shall be made
without the specific consent of such Lender and the Required Lenders;
or
(f) extend the Expiration Date unless consented to by each
Lender as to which such extension is applicable.
No failure or delay on the part of the Administrative Agent, the Co-Agents, any
Lender or the holder of any Note in exercising any power or right under this
Agreement or any other Loan Document shall operate as a waiver thereof, nor
shall any single or
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<PAGE> 79
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Administrative
Agent, the Co-Agents, any Lender or the holder or any Note under this Agreement
or any other Loan Document shall, except as may be otherwise stated in such
waiver or approval, be applicable to subsequent transactions. No waiver or
approval hereunder shall require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
SECTION 10.2 Notices. All notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing and addressed, delivered or transmitted to such party at its
address set forth below its signature hereto or set forth in the Lender
Assignment Agreement or at such other address as may be designated by such party
in a notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid or if properly addressed and sent by pre-paid courier
service, shall be deemed given when so mailed or sent, except that any notice by
the Borrower to the Administrative Agent pursuant to Article II shall be deemed
given only when received.
SECTION 10.3 Payment of Costs and Expenses. The Borrower
agrees to pay on demand all expenses of the Lenders (including the reasonable
fees and out-of-pocket expenses of counsel to the Co-Agents and of local
counsel, if any, who may be retained by counsel to the Co-Agents) in connection
with
(a) the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required,
(b) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document, and
(c) any inspection, audit or review made pursuant to Section
7.1.5.
The Borrower further agrees to pay, and to save the Administrative Agent, the
Co-Agents and the Lenders harmless from all liability for, any stamp or other
taxes which may be payable in connection with the execution or delivery of this
Agreement, any Borrowing hereunder, or the issuance of the Notes or any other
Loan Documents. The Borrower also agrees to reimburse the Administrative Agent,
the Co-Agents and each Lender upon demand for all out-of-pocket expenses
(including reasonable attorneys'
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<PAGE> 80
fees and legal expenses) incurred by the Administrative Agent, the Co-Agents or
such Lender in connection with (x) the engagement by the Co-Agents or by legal
counsel to the Co-Agents of third party consultants in connection with this
Agreement, (y) the negotiation of any restructuring or "work-out", whether or
not consummated, of any Obligations and (z) the enforcement of any Obligations.
SECTION 10.4 Indemnification. In consideration of the
execution and delivery of this Agreement by each Lender and the making of the
Loans, the Borrower hereby indemnifies, exonerates and holds the Administrative
Agent, each Co-Agent and each Lender and each of their respective officers,
directors, employees, consultants, attorneys and agents (collectively, the
"Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties;
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not the Indemnified Party is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the protection of the environment or the Release by the Borrower or any
of its Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of
any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary,
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<PAGE> 81
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
SECTION 10.5 Survival. The obligations of the Borrower under
Sections 4.1, 4.2, 10.3 and 10.4, and the obligations of the Lenders under
Section 9.1, shall in each case survive any termination of this Agreement and
the payment in full of all Obligations. The representations and warranties made
by each Obligor in this Agreement and in each other Loan Document shall survive
the execution and delivery of this Agreement and each such other Loan Document.
SECTION 10.6 Severability. Any provision of this Agreement or
any other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7 Headings. The various headings of this Agreement
and of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 10.8 Execution in Counterparts. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
SECTION 10.9 Governing Law; Entire Agreement. THIS AGREEMENT,
THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO. For purposes
of any action or proceeding involving this Agreement, the Borrower hereby
expressly submits to the nonexclusive jurisdiction of all Federal and State
courts located in the State of Ohio and consents that it may be served with any
process or paper by registered mail or by personal service within or without the
State of Ohio in accordance with applicable law, provided a reasonable time for
appearance is allowed. In addition, by executing this Agreement, the Notes and
each other Loan Document to which it is a party, the Borrower, on behalf of
itself and each of its Subsidiaries, hereby irrevocably and unconditionally
waives any objection which
75
<PAGE> 82
it may now or hereafter have to the laying of venue or any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement, the
Notes or any other Loan Document brought in any of the aforesaid courts, and
hereby further irrevocably and unconditionally waives and agrees not to plead
any claim that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. To the extent that the Borrower has or
hereafter may acquire any immunity from jurisdiction of any Ohio State or
federal court sitting in Cleveland, Cuyahoga County, Ohio, in any action or
proceeding arising out of or relating to this Agreement or from any legal
process in such action or proceeding (whether through service or notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, the Borrower hereby
irrevocably waives to the fullest extent permitted by applicable law such
immunity in respect of its obligations under this Agreement. This Agreement, the
Notes and the other Loan Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
SECTION 10.10 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the
Co-Agents and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders
are subject to Section 10.11.
SECTION 10.11 Sale and Transfer of Loans and Note;
Participation in Loans and Note. Each Lender may assign, or sell participations
in, its Loans to one or more other Persons in accordance with this Section
10.11.
SECTION 10.11.1 Assignments. Any Lender,
(a) with the written consent of the Co-Agents (which
consent(s) shall not be unreasonably delayed or withheld) may at any
time assign and delegate to one or more commercial banks or other
financial institutions, and
(b) with notice to the Borrower and the Co-Agents, but without
the consent of the Borrower or the Co-Agents, may assign and delegate
to any of its Affiliates or to any other Lender
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be
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<PAGE> 83
made, being hereinafter referred to as an "Assignee Lender"), all or less than
all of such Lender's total Loans and Revolving Commitment; provided, however,
that such assignment and delegation shall be of a constant, and not a varying
percentage of all the assigning Lender's Loans and Revolving Commitment, such
that after giving effect to such assignment the respective ratios of the
Assignee Lender's (i) Revolving Loans to the aggregate outstanding Revolving
Loans, (ii) Revolving Commitment to the aggregate Revolving Commitments, and
(iii) Term Loan to the aggregate outstanding Term Loans shall be equal to each
other; and provided, further, that any such Assignee Lender will comply, if
applicable, with the provisions contained in the last sentence of Section 4.2;
and provided, further, that the Borrower, each other Obligor, the Co-Agents and
the Administrative Agent shall be entitled to continue to deal solely and
directly with such Lender in connection with the interests so assigned and
delegated to an Assignee Lender until
(c) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the Borrower
and the Co-Agents by such Lender and such Assignee Lender,
(d) such Assignee Lender shall have executed and delivered to
the Borrower and the Co-Agents a Lender Assignment Agreement,
substantially in the form of Exhibit D hereto and otherwise acceptable
to the Co-Agents, and
(e) the processing fees described below shall have been paid.
From and after the date that the Co-Agents accept such Lender Assignment
Agreement, (y) the Assignee Lender thereunder shall be deemed automatically to
have become a party hereto and to the extent that rights and obligations
hereunder have been assigned and delegated to such Assignee Lender in connection
with such Lender Assignment Agreement, shall have the rights and obligations of
a Lender hereunder and under the other Loan Documents, and (z) the assignor
Lender, to the extent that rights and obligations hereunder have been assigned
and delegated by it in connection with such Lender Assignment Agreement, shall
be released from its obligations hereunder and under the other Loan Documents.
Within five (5) Business Days after its receipt of notice that the Co-Agents
have received an executed Lender Assignment Agreement, the Borrower shall
execute and deliver to the Administrative Agent (for delivery to the relevant
Assignee Lender) a new Revolving Note and a new Term Note evidencing such
Assignee Lender's assigned Loans, Revolving Commitment and Term Loan Commitment.
Each such Note shall be dated the date of the applicable predecessor Note. The
assignor Lender shall mark each predecessor Note "exchanged" and deliver each of
them to the Borrower. Accrued interest on that part of each predecessor Note
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<PAGE> 84
evidenced by a new Note, and accrued fees, shall be paid as provided in the
Lender Assignment Agreement. Accrued interest on that part of each predecessor
Note evidenced by a replacement Note shall be paid to the assignor Lender.
Accrued interest and accrued fees shall be paid at the same time or times
provided in each predecessor Note and in this Agreement. Such assignor Lender or
such Assignee Lender must also pay a processing fee to the Administrative Agent
upon delivery of any Lender Assignment Agreement in the amount of Two Thousand
Five Hundred Dollars ($2,500). Any attempted assignment and delegation not made
in accordance with this Section 10.11.1 shall be null and void.
SECTION 10.11.2 Participations. Any Lender may at any time
sell to one or more commercial banks or other financial institutions (each of
such commercial banks and other financial institutions being herein called a
"Participant") participating interests in all or less than all of such Lender's
total Loans and Revolving Commitment; provided, however, that
(a) no participation contemplated in this Section 10.11.2
shall relieve such Lender from its obligations hereunder or under any
other Loan Document,
(b) such Lender shall remain solely responsible for the
performance of such obligations,
(c) the Borrower and each other Obligor, the Co-Agents and the
Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under this Agreement and each of the other Loan Documents,
(d) no Participant, unless such Participant is an Affiliate of
such Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (b), (c) or
(e) of Section 10.1,
(e) the Borrower shall not be required to pay any amount under
Section 4.2 that is greater than the amount which it would have been
required to pay had no participating interest been sold, and
(f) such sale shall be of a constant, and not a varying
percentage of all the selling Lender's Loans, such that after giving
effect to such sale the respective ratios of the Participant's (i)
participating interest in the selling Lender's Revolving Loans to the
aggregate outstanding Revolving Loans, and (ii) participating interest
in the selling Lender's Term Loan to the aggregate outstanding Term
Loans shall be equal to each other.
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<PAGE> 85
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.1, 4.2, 4.4, 4.5, 10.3 and 10.4, shall be considered a Lender.
SECTION 10.12 Other Transactions. Nothing contained herein
shall preclude the Administrative Agent, either Co-Agent or any other Lender
from engaging in any transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Borrower or any of its Affiliates
in which the Borrower or such Affiliate is not restricted hereby from engaging
with any other Person.
SECTION 10.13 Further Assurances. The Borrower hereby agrees
that it will, from time to time at its own expense, promptly execute and deliver
all further agreements, instruments, certificates and other documents and
writings, and take all further action, that may be necessary or appropriate, or
that the Administrative Agent and/or the Lenders may reasonably request, in
order to perfect or protect any Lien which may be now or hereafter granted to
enable the Lenders, the Administrative Agent and the Co-Agents to exercise and
enforce their rights under this Agreement and the other Loan Documents and
otherwise to carry out the intent of this Agreement and the other Loan
Documents.
SECTION 10.14 WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT,
THE CO-AGENTS, THE LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE
AGENT, THE CO-AGENTS, THE LENDERS OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
(AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY)
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT
AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 10.15 Release. Effective as of the date of the
execution and delivery of this Agreement, the Borrower agrees to release and
hereby does release and discharge, the Administrative Agent, each Co-Agent, the
Collateral Agent, the Lenders, their respective shareholders, agents, servants,
employees, directors, officers, attorneys, consultants, affiliates,
subsidiaries, partners, members, successors and assigns, and all persons, firms,
corporations, and organizations acting on their behalf, and all consultants
hired by any attorney of any Lender (collectively, the "Lender Parties") of and
from all damages, losses, claims, demands, liabilities, obligations, actions and
causes of action whatsoever that the Borrower has or claims to have against or
with respect to any Lender Party as of the date the Borrower executes and
delivers this Agreement and whether known or unknown at the time of this
release, and of
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<PAGE> 86
every nature and extent whatsoever on account of or in any way, directly or
indirectly, touching, concerning, arising out of or founded upon any (a) lending
relationship of any of the Lenders with the Borrower or any of its Subsidiaries,
(b) inspections or audits conducted by or on behalf of any of the Lenders with
respect to the Borrower or any of its Subsidiaries, (c) extensions by any of the
Lenders of their Existing Loans, (d) waivers given by any of the Lenders in
connection with any of the Existing Loans, (e) "work-out" by any of the Lenders
of any of their Existing Loans or the terms relating thereto, (f) dealings by
any of the Lenders with any officer, employee, shareholder, agent or director of
the Borrower or any of its Subsidiaries or any third party hired by the Borrower
or any of its Subsidiaries, or (g) any determinations or exercise of discretion
by any of the Lenders with respect to making advances to the Borrower under the
Existing Loan Agreements, occurring on and which have occurred prior to the
execution and delivery of this Agreement by the Borrower.
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<PAGE> 87
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
Address: LDI CORPORATION, Borrower
4770 Hinckley Industrial
Parkway
Cleveland, Ohio 44109 By:_________________________________
Attn: Treasurer Title:
Telephone: (216) 661-5400
Telecopy: (216) 485-4811 And by:_____________________________
Title:
Address: NATIONAL CITY BANK, Lender,
National City Center Co-Agent and Administrative
9th Floor Agent
1900 East Ninth Street
Cleveland, Ohio 44114
Attn: Gregory A. Godec
Telephone: (216) 575-3130 By:_________________________________
Telecopy: (216) 575-3053 Title:
Address: SOCIETY NATIONAL BANK, Lender
Society Center and Co-Agent
5th Floor
127 Public Square
Cleveland, Ohio 44114
Attn: Terry A. Graffis
Telephone: (216) 689-3528
Telecopy: (216) 689-7991 By:_________________________________
Title:
Address: BANK OF AMERICA ILLINOIS
231 South LaSalle Street (Successor in interest to
Chicago, Illinois 60697 Continental Bank N.A.),
Attn: James R. Coulter Lender
Telephone: (312) 828-2002
Telecopy: (312) 987-0234
By:_________________________________
Title:
Address: COMERICA BANK, Lender
One Detroit Center
3rd Floor, MC 3205
500 Woodward Avenue
Detroit, Michigan 48226
Attn: Timothy K. McLaughlin
Telephone: (313) 222-9534 By:_________________________________
Telecopy: (313) 222-5706 Title:
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<PAGE> 88
Address: FIRST UNION NATIONAL BANK OF
One First Union Center NORTH CAROLINA, Lender
Charlotte, North
Carolina 28288
Attn: Dennis Snyder
Telephone: (704) 383-3853
Telecopy: (704) 383-5031 By:_________________________________
Title:
Address: THE DAIWA BANK, LIMITED,
2450 CNG Tower Acting through its Chicago
625 Liberty Avenue Branch, Lender
Pittsburgh, Pennsylvania
15222
Telephone: (412) 288-1800
Telecopy: (412) 288-1819 By:_________________________________
Title:
And by:_____________________________
Title:
Address: THE FIFTH THIRD BANK,
1404 East Ninth Street Lender
Cleveland, Ohio 44115
Attn: Deborah Perkins
Telephone: (216) 687-5995
Telecopy: (216) 687-5996 By:_________________________________
Title:
Address: STAR BANK, NATIONAL
501 W. Schrock Road ASSOCIATION, Lender
Westerville, Ohio 43081
Attn: Mark E. Storer
Telephone: (614) 794-5448
Telecopy: (614) 794-5468
By:_________________________________
Title:
Address: BANK OF AMERICA ILLINOIS
c/o Bank of America (as Assignee of First National
Securities, Inc. Bank of Ohio and as Assignee
231 S. LaSalle Street of Michigan National Bank),
Chicago, Illinois 60697 Lender
Attn: Moira A. Cary
Telephone: (312) 828-7806
Telecopy: (312) 828-5423 By:_________________________________
Title:
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<PAGE> 89
Address: THE BANK OF TOKYO TRUST
National Banking Dept. COMPANY, Lender
1251 Avenue of the
Americas, 12th Floor
New York, New York 10116
Attn: John R. Blasi
Telephone: (212) 782-4831 By:_________________________________
Telecopy: (212) 782-6444 Title:
Address: FIRST BANK NATIONAL
601 Second Avenue South ASSOCIATION, Lender
MPFP 1802
Minneapolis, Minnesota
55402
Attn: Conrad A. Keech
Telephone: (612) 973-2126 By:_________________________________
Telecopy: (612) 973-2148 Title:
Address: CONFEDERATION LIFE INSURANCE
U.S. Investments COMPANY (U.S.) IN
260 Interstate North Circle REHABILITATION, Lender
Atlanta, Georgia 30339
Attn: Robert Male
Telephone: (404) 859-3762
Telecopy: (404) 953-1795 By:_________________________________
Title:
Address: BENEFICIAL STANDARD LIFE
Conseco Capital INSURANCE COMPANY, Lender
Management, Inc.
11825 N. Pennsylvania Street By: Conseco Capital
P.O. Box 1925 Management, Inc., acting
Carmel, Indiana 46032 as investment advisor
Attn: Gary Greaves
Telephone: (317) 817-6805 By:_________________________________
Telecopy: (317) 817-2763 Title:
Address: NORTHWESTERN NATIONAL LIFE
Washington Square INSURANCE COMPANY, Lender
Capital, Inc.
Suite 800
100 Washington Square
Minneapolis, Minnesota
55401-2147
Attn: Robert G. Riggs
Telephone: (612) 342-7244 By:_________________________________
Telecopy: (612) 342-7323 Title:
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<PAGE> 90
Address: NORTHERN LIFE INSURANCE
Washington Square COMPANY, Lender
Capital, Inc.
Suite 800
100 Washington Square
Minneapolis, Minnesota
55401-2147
Attn: Robert G. Riggs
Telephone: (612) 342-7244 By:_________________________________
Telecopy: (612) 342-7323 Title:
84
<PAGE> 91
ANNEX A
<TABLE>
<CAPTION>
======================================================================================================================
Commitment
Period
Revolving Term Loan Percentage Expiration
Commitment Commitment Percentage Date
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NATIONAL CITY BANK $9,947,001.44 $3,922,572.57 13.3876197% 1/31/97
----------------------------------------------------------------------------------------------------------------------
SOCIETY NATIONAL BANK $9,947,001.44 $3,922,572.57 13.3876197% 1/31/97
----------------------------------------------------------------------------------------------------------------------
BANK OF AMERICA $9,236,501.33 $3,642,388.81 12.4313611% 1/31/97
----------------------------------------------------------------------------------------------------------------------
COMERICA BANK $7,957,601.15 $3,138,058.06 10.7100958% 1/31/97
----------------------------------------------------------------------------------------------------------------------
FIRST UNION BANK $5,541,900.80 $2,185,433.29 7.4588167% 1/31/97
----------------------------------------------------------------------------------------------------------------------
THE DAIWA BANK, LIMITED $3,978,800.58 $1,569,029.03 5.3550479% 1/31/97
----------------------------------------------------------------------------------------------------------------------
THE FIFTH THIRD BANK $3,978,800.58 $1,569,029.03 5.3550479% 1/31/97
----------------------------------------------------------------------------------------------------------------------
STAR BANK, NATIONAL ASSOCIATION $3,978,800.58 $1,569,029.03 5.3550479% 1/31/97
----------------------------------------------------------------------------------------------------------------------
BANK OF AMERICA ILLINOIS (as Assignee $3,978,800.58 $1,569,029.03 5.3550479% 1/31/97
of First National Bank of Ohio)
----------------------------------------------------------------------------------------------------------------------
BANK OF AMERICA ILLINOIS (as Assignee $3,978,800.58 $1,569,029.03 5.3550479% 1/31/97
of Michigan National Bank)
----------------------------------------------------------------------------------------------------------------------
THE BANK OF TOKYO TRUST $3,978,800.58 $1,569,029.03 5.3550479% 1/31/97
COMPANY
----------------------------------------------------------------------------------------------------------------------
FIRST BANK NATIONAL ASSOCIATION $3,694,600.53 $1,456,955.53 4.9725445% 1/31/97
----------------------------------------------------------------------------------------------------------------------
NORTHWESTERN NATIONAL LIFE INSURANCE $1,846,165.43 $728,030.24 2.4847449% 1/31/97
COMPANY
----------------------------------------------------------------------------------------------------------------------
NORTHERN LIFE INSURANCE COMPANY $1,025,647.46 $404,461.25 1.3804138% 1/31/97
----------------------------------------------------------------------------------------------------------------------
CONFEDERATION LIFE INSURANCE COMPANY $615,388.48 $242,676.75 0.8282483% 1/31/97
(U.S.) IN REHABILITATION
----------------------------------------------------------------------------------------------------------------------
BENEFICIAL STANDARD LIFE INSURANCE $615,388.48 $242,676.75 0.8282483% 1/31/97
COMPANY
----------------------------------------------------------------------------------------------------------------------
TOTAL $74,300,000.00 $29,300,000.00 100.000000%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 92
ANNEX B
[INTENTIONALLY OMITTED]
<PAGE> 93
ANNEX C - CERTAIN FINANCIAL REPORTS
AND OTHER INFORMATION
<PAGE> 94
ANNEX D - EXISTING LOANS
<TABLE>
<CAPTION>
Bank Name Payment
--------- -------
<S> <C>
National City Bank $ 11,485,153.00
Society National Bank 11,484,990.90
Bank of America Illinois (Successor in
interest to Continental Bank N.A.) 10,664,669.14
Comerica Bank 9,187,992.72
First Union National Bank of
North Carolina 6,398,769.07
First Bank National Association 4,265,900.08
The Bank of Tokyo Trust Company 4,593,996.36
Bank of America Illinois (as Assignee of
First National Bank of Ohio and as
Assignee of Michigan National Bank) 9,187,992.72
Star Bank National Association 4,593,996.36
The Fifth Third Bank 4,593,996.36
The Daiwa Bank, Limited 4,593,996.36
Northwestern National Life Insurance Company 2,528,186.10
Northern Life Insurance Company 1,404,547.82
Beneficial Standard Life Insurance Company 842,728.70
Confederation Life Insurance Company (U.S.)
in Rehabilitation 842,722.70
</TABLE>
<PAGE> 95
ANNEX E - BORROWING BASE RATIOS
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Effective Date through December 31, 1995 1.00 to 1.00
January 1, 1996 through January 31, 1996 1.05 to 1.00
February 1, 1996 through April 30, 1996 1.10 to 1.00
May 1, 1996 through June 30, 1996 1.15 to 1.00
July 1, 1996 through July 31, 1996 1.20 to 1.00
August 1, 1996 through August 31, 1996 1.25 to 1.00
September 1, 1996 through October 31, 1996 1.30 to 1.00
November 1, 1996 through November 30, 1996 1.35 to 1.00
December 1, 1996 through January 31, 1997 1.40 to 1.00
</TABLE>
<PAGE> 96
ANNEX F - EARNINGS BEFORE TAXES
<TABLE>
<CAPTION>
Date EBT Amount
---- ----------
<S> <C>
July 31, 1995 ($1,900,000)
October 31, 1995 ($2,500,000)
January 31, 1996 ($2,200,000)
April 30, 1996 ($2,700,000)
July 31, 1996 ($2,700,000)
October 31, 1996 ($2,300,000)
January 31, 1997 ($1,800,000)
</TABLE>
<PAGE> 97
ANNEX G - BORROWING BASE AUDIT AGREED UPON PROCEDURES
<PAGE> 1
EXHIBIT 4.07(b)
SECOND AMENDED AND RESTATED
SECURITY AGREEMENT
dated as of July 21, 1995
by and between
LDI CORPORATION,
as the Grantor
and
SOCIETY NATIONAL BANK,
in its capacity as the Collateral Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS ......................................................................................... 3
SECTION 2 CONFIRMATION AND GRANT OF SECURITY INTEREST; COLLATERAL; EXCLUDED COLLATERAL......................... 15
(a) Confirmation of Security Interest................................................................. 15
(b) Grant of Security Interest; Collateral............................................................ 15
(c) Excluded Collateral............................................................................... 20
SECTION 3 THE GRANTOR TO REMAIN LIABLE......................................................................... 22
SECTION 4 BANK ACCOUNTS ....................................................................................... 22
(a) Types of Bank Accounts............................................................................ 22
(b) Collateral Lockboxes and Collateral Lockbox Accounts.............................................. 22
(c) Location of Mandatory Bank Accounts............................................................... 23
(d) Collateral Agent Powers........................................................................... 23
(e) Bank Accounts; Collateral Lockbox Account Letters................................................. 23
(f) Account Debtors................................................................................... 24
(g) Authorization..................................................................................... 24
(h) Bank Accounts..................................................................................... 24
(i) Maximum Permitted Amount.......................................................................... 25
SECTION 5 [INTENTIONALLY OMITTED].............................................................................. 25
SECTION 6 NON-RECOURSE FINANCING............................................................................... 25
(a) CXC Accounts and Funds............................................................................ 25
(b) Other Non-Recourse Accounts and Funds............................................................. 25
(c) Notice and Release of Collateral For Non-Recourse
Debt Transaction................................................................................. 26
SECTION 7 MARKING AND DELIVERY OF COLLATERAL................................................................... 27
(a) Marking of Collateral............................................................................. 27
(b) Upon Event of Default............................................................................. 27
SECTION 8 REPRESENTATIONS AND WARRANTIES....................................................................... 28
(a) Location of Business and Collateral............................................................... 28
(b) Pledged Shares.................................................................................... 28
(c) Ownership/Title to Collateral..................................................................... 29
(d) Possession........................................................................................ 29
(e) Collateral........................................................................................ 29
(f) Approval; Consents................................................................................ 29
(g) Accounts, Accounts Receivables and General Intangibles............................................ 30
(h) Authorization; Enforceability..................................................................... 31
(i) Solvency.......................................................................................... 31
(j) Leases............................................................................................ 32
(k) Inventory......................................................................................... 33
(l) MRK Secured Note.................................................................................. 33
SECTION 9 GENERAL COVENANTS REGARDING COLLATERAL............................................................... 33
(a) Financing Statements, Etc......................................................................... 33
(b) Further Assurances................................................................................ 34
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
(c) Statements and Schedules.......................................................................... 34
(d) Compliance with Laws.............................................................................. 35
(e) Identification of Leases and Chattel Paper........................................................ 35
SECTION 10 COVENANTS REGARDING COLLATERAL
EQUIPMENT AND COLLATERAL INVENTORY.................................................................... 36
(a) Location of Collateral Equipment.................................................................. 36
(b) Maintenance of Collateral Equipment and Collateral Inventory...................................... 36
(c) Payment of Taxes.................................................................................. 36
(d) Location of Collateral Inventory.................................................................. 36
SECTION 11 COVENANTS REGARDING INSURANCE....................................................................... 37
(a) Maintenance of Insurance.......................................................................... 37
(b) Grantor to Take Required Action................................................................... 37
(c) Notice of Claims.................................................................................. 38
(d) Deposit of Proceeds............................................................................... 38
(e) Settlement of Claims and Release of Proceeds...................................................... 38
(f) Aircraft Insurance................................................................................ 38
SECTION 12 COVENANTS REGARDING ACCOUNTS AND ACCOUNTS
RECEIVABLE............................................................................................ 39
(a) Records........................................................................................... 39
(b) Notice to Account Debtors......................................................................... 39
(c) Verifications..................................................................................... 39
(d) Limitations on Modifications of Accounts.......................................................... 40
(e) Schedule of Accounts and Accounts Receivable...................................................... 40
SECTION 13 ADDITIONAL COVENANTS................................................................................ 40
(a) No Transfer of Collateral......................................................................... 40
(b) Proceeds of Sale.................................................................................. 41
(c) Pledged Shares.................................................................................... 41
(d) Payment of Obligations............................................................................ 41
(e) Limitation of Liens on Collateral................................................................. 41
(f) Compliance with Terms............................................................................. 41
(g) MRK Secured Note.................................................................................. 42
(h) Further Indemnification........................................................................... 42
(i) Maintenance of Records............................................................................ 42
(j) Special Collateral................................................................................ 42
(k) Performance by the Collateral Agent of the Grantor's Obligation................................... 43
(l) Maintenance and Repairs of Aircraft............................................................... 43
(m) Aircraft Registration............................................................................. 45
SECTION 14 VOTING RIGHTS; DIVIDENDS; ETC....................................................................... 46
(a) Upon Event of Default............................................................................. 46
(b) After Event of Default............................................................................ 46
SECTION 15 COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT......................................................... 46
(a) Appointment of Collateral Agent................................................................... 46
(b) Ratification of Actions........................................................................... 48
(c) Duties of Collateral Agent........................................................................ 48
(d) Additional Authority Upon Event of Default........................................................ 48
SECTION 16 THE COLLATERAL AGENT................................................................................ 48
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 17 EVENTS OF DEFAULT................................................................................... 49
SECTION 18 REMEDIES............................................................................................ 50
(a) Set-Off........................................................................................... 50
(b) Rights and Remedies............................................................................... 51
(c) Treatment of Payments............................................................................. 52
(d) Disposition of Payments........................................................................... 52
SECTION 19 INDEMNITY AND EXPENSES.............................................................................. 52
(a) Indemnification................................................................................... 53
(b) Reimbursement of Expenses......................................................................... 53
SECTION 20 SECURITY INTEREST ABSOLUTE.......................................................................... 54
SECTION 21 REGISTRATION RIGHTS................................................................................. 54
SECTION 22 AMENDMENTS; ETC..................................................................................... 55
SECTION 23 NOTICES ............................................................................................ 55
SECTION 24 CONTINUING SECURITY INTEREST; TRANSFER OF NOTES..................................................... 57
SECTION 25 GOVERNING LAW; TERMS; WAIVER OF DEFAULTS............................................................ 57
SECTION 26 REINSTATEMENT ...................................................................................... 57
SECTION 27 INTERPRETATION...................................................................................... 58
(a) Incorporation of Recitals......................................................................... 58
(b) Headings; Language................................................................................ 58
(c) Severability...................................................................................... 58
(d) No Waiver; Cumulative Remedies.................................................................... 58
(e) Conflicts or Inconsistency........................................................................ 59
(f) Execution in Counterparts; Amendment and Restatement.............................................. 59
SECTION 28 WAIVER OF JURY TRIAL................................................................................ 59
SECTION 29 RELEASE............................................................................................. 60
</TABLE>
<PAGE> 5
SCHEDULES
SCHEDULE I MANDATORY BANK ACCOUNTS
SCHEDULE II PERMITTED BANK ACCOUNTS
SCHEDULE III SPECIAL PERMITTED BANK ACCOUNTS
SCHEDULE IV INTELLECTUAL PROPERTY
SCHEDULE V PLEDGED SHARES/PLEDGED DEBT
SCHEDULE VI BANK ACCOUNTS
SCHEDULE VII GRANTOR'S LOCATIONS
SCHEDULE VIII LOCATION OF COLLATERAL
SCHEDULE IX LEASES
SCHEDULE X AIRCRAFT AND ENGINES
SCHEDULE XI AIRCRAFT INSURANCE
EXHIBITS
EXHIBIT I FORM OF COLLATERAL LOCKBOX ACCOUNT LETTER
EXHIBIT II FORM OF NOTICE TO RELEASE CXC FUNDS
EXHIBIT III FORM OF NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS
EXHIBIT IV FORM OF NOTICE OF NON-RECOURSE FINANCING
EXHIBIT V FORM OF NON-RECOURSE DEBT RELEASE
EXHIBIT VI CASH COLLATERAL AND ACCOUNT MAINTENANCE AGREEMENT
EXHIBIT VII FORM OF SUBORDINATION AGREEMENT
EXHIBIT VIII FORM OF SWEEP AGREEMENT
<PAGE> 6
SECOND AMENDED AND RESTATED
SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED SECURITY AGREEMENT
("Agreement") is made as of July 21, 1995 (the "Agreement Date") by LDI
CORPORATION, a Delaware corporation (the "Grantor"), in favor of SOCIETY
NATIONAL BANK, in its capacity as collateral agent as hereinafter provided (the
"Collateral Agent") and amends and restates in its entirety the Amended and
Restated Security Agreement, dated as of July 29, 1994 (the "Amended and
Restated Security Agreement"), executed by the Grantor in favor of Continental
Bank (now known as Bank of America Illinois) the predecessor to Society National
Bank as collateral agent.
RECITALS:
A. The Grantor has previously executed the following
agreements: (i) that certain Second Amended and Restated Credit Agreement, as
amended (the "Second Amended and Restated Credit Agreement"), dated as of July
29, 1994, among the Grantor, National City Bank ("NCB"), Society National Bank
("Society") and Continental Bank N.A., now known as Bank of America Illinois
("Bank of America Illinois") as co-agents and the various financial institutions
which are parties thereto (the "Existing Bank Lenders"); and (ii) that certain
Note Purchase Agreement, as amended (the "1989 Note Purchase Agreement") with
Northwestern National Life Insurance Company ("Northwestern"), Northern Life
Insurance Company ("Northern"), American Investors Life Insurance Company
("American"), Confederation Life Insurance Company ("Confederation") and
Beneficial Standard Life Insurance Company ("Beneficial," and collectively with
Northwestern, Northern, American and Confederation, the "Northwestern Lenders"),
dated as of August 1, 1989, with respect to $20,000,000 9.96% Senior Notes Due
1995.
B. As a condition precedent to the effectiveness of the Second
Amended and Restated Credit Agreement, and the Letter Amendment, dated as of
July 29, 1994, among the Grantor and the Northwestern Lenders, the Grantor
executed and delivered that certain Amended and Restated Security Agreement,
dated as of July 29, 1994 (the "Amended and Restated Security Agreement") in
favor of Continental Bank (now known as Bank of America Illinois), as collateral
agent for the various financial institutions parties to the Second Amended and
Restated Credit Agreement and the Subject Lenders as defined in that certain
Intercreditor Agreement, made as of July 29, 1994, by and among the Grantor and
the financial institutions parties thereto, which Amended and Restated Security
Agreement, among other things, reaffirmed, ratified, and confirmed the security
interests, pledge and Liens granted by the Grantor pursuant to the terms of that
certain Security Agreement, dated as
<PAGE> 7
of May 2, 1994, executed by the Grantor in favor of Continental Bank as
collateral agent and the various financial institutions identified therein (the
"May 1994 Security Agreement").
C. Pursuant to that certain Appointment of Successor
Collateral Agent under Security Agreements, effective as of November 21, 1994,
Society was appointed as successor Collateral Agent to Bank of America Illinois
under the Amended and Restated Security Agreement.
D. Pursuant to that certain Third Amended and Restated Credit
Agreement, dated as of the date hereof (the "Third Amended and Restated Credit
Agreement"), by and among the Grantor, NCB and Society, each in its capacity as
agent (individually, in such capacity, a "Co-Agent" and collectively, in such
capacities, the "Co-Agents"), NCB in its capacity as Administrative Agent (the
"Administrative Agent"), the Existing Bank Lenders and the Northwestern Lenders
(collectively with the Co-Agents, the "Lenders"), the Grantor and the Lenders
have agreed to amend and restate the indebtedness represented by the Second
Amended and Restated Credit Agreement and the 9.96% Senior Notes Due 1995.
E. It is a condition precedent to the effectiveness of the
Third Amended and Restated Credit Agreement that the Grantor execute and deliver
this Agreement in order to, among other things, reaffirm, ratify, confirm, and
continue the security interests, pledge and Liens granted pursuant to the terms
of the May 1994 Security Agreement and the Amended and Restated Security
Agreement, and to amend and restate the Amended and Restated Security Agreement.
F. Concurrently with the execution and delivery of this
Agreement, the Collateral Agent, the Grantor and the Lenders (together with each
of the other financial institutions which are or may become parties thereto) are
executing and delivering the Amended and Restated Intercreditor Agreement, dated
the date hereof (as such agreement may hereafter be amended, modified,
supplemented or restated, the "Intercreditor Agreement"), pursuant to which the
Lenders shall, among other things, define certain of their rights and remedies
with respect to the Third Amended and Restated Credit Agreement and this
Agreement.
G. The Lenders appointed Society as Collateral Agent (as
successor to Continental Bank, now known as Bank of America Illinois) under the
Amended and Restated Security Agreement and are hereby reaffirming their
appointment of Society as Collateral Agent thereunder and hereunder.
NOW, THEREFORE, in consideration of the Recitals and of the
mutual covenants herein contained and in order to induce the Lenders to enter
into the Third Amended and Restated Credit Agreement, the Grantor hereby agrees
with the Collateral Agent for the benefit of the Collateral Agent, the
Administrative Agent
2
<PAGE> 8
and the Co-Agents and the ratable benefit of the Lenders that the Amended and
Restated Security Agreement be, and the same hereby is, amended and restated in
its entirety to read as set forth above and as follows:
SECTION 1 DEFINITIONS.
In addition to the terms defined elsewhere herein, the following terms,
shall be a part of this Agreement, and except where the context otherwise
requires, shall have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):
"Account" shall mean any "account" as such term is defined in
Section 1309.01(A)(15) of the UCC.
"Account Collateral" shall have the meaning ascribed to such
term in Section 2(b) hereof.
"Account Debtor" shall mean any "account debtor" as such term
is defined in Section 1309.01(A)(1) of the UCC.
"Account Receivable" shall mean any right to payment arising
out of, or relating to, or in connection with (a) any Account; (b) the
use, sale, lease or disposition of Inventory or goods (including,
without limitation, all Accounts, accounts receivable, other
receivables, contract rights, Chattel Paper, Instruments, Documents,
notes, and other forms of obligations now owned or hereinafter received
or acquired by or belonging or owing to the Grantor, whether arising
out of the sale, rental or lease of Inventory or goods); (c) any amount
payable by any person to the Grantor in connection with the Grantor's
purchase, acquisition or leasing of Inventory; (d) any amounts payable
under any of the General Intangibles; and (e) any or all of the
Grantor's rights in, to and under all purchase orders or receipts now
owned or hereinafter acquired by it and all of the Grantor's rights to
any goods represented by any of foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or
repossessed goods), including, without limitation, the right to receive
the proceeds of said purchase orders and contracts, and all collateral
security and guarantees of any kind given by any person with respect to
any of the foregoing.
"Administrative Agent" shall have the meaning ascribed to such
term in the preamble hereto, and includes each successor who shall act
as Administrative Agent.
"Agreement Date" shall have the meaning ascribed to such term
in the preamble hereof.
3
<PAGE> 9
"Aircraft" shall mean (a) the Airframes; (b) the Engines; and
(c) any and all manuals, logbooks, flight records, maintenance records,
and other historical records or information of the Grantor relating to
the foregoing item (a) and/or item (b).
"Airframe" shall mean those certain airframes identified on
Schedule X attached hereto and incorporated herein by this reference,
together with any and all parts, appliances, components, instruments,
accessories, accessions, attachments, equipment, or avionics
(including, without limitation, radio, radar, navigation systems, or
other electronic equipment) installed in, appurtenant to, or delivered
with or in respect of such airframes.
"Amended and Restated Security Agreement" shall mean that
certain Security Agreement dated as of July 29, 1994, executed by the
Grantor in favor of Continental Bank as collateral agent for the
various financial institutions identified therein.
"Applicable Law" shall mean, in respect of any person, all
provisions of constitutions, statutes, rules, regulations and orders of
governmental bodies or regulatory agencies applicable to such person,
now in effect or as hereafter amended, modified, enacted or in effect,
and all orders and decrees of all courts and arbitrators in proceedings
or actions to which the person in question is a party or by which it or
any of its property is bound from time to time.
"Authorized Signatory" shall mean the president, the chief
financial officer and such other specified officers or other senior
personnel of the Grantor as may be duly authorized and designated in
writing by resolution of the board of directors of the Grantor to
execute documents, agreements, certificates and instruments on behalf
of the Grantor.
"Bank of America Illinois" shall have the meaning ascribed to
such term in Paragraph A of the Recitals.
"Bankruptcy Code" shall mean the United States Bankruptcy
Code, 11 U.S.C. Section 101 et seq., as amended from time to time.
"Business Day" shall have the meaning ascribed to such term in
the Third Amended and Restated Credit Agreement.
"Cash Collateral and Account Maintenance Agreement" shall mean
that certain Cash Collateral and Account Maintenance Agreement, made as
of July 21, 1995, among Society, NCB and Grantor, substantially in the
form of Exhibit VI attached hereto.
4
<PAGE> 10
"Cash Equivalent Investment" shall mean overnight investment
of funds in a manner and in amounts satisfactory to the Collateral
Agent and the Required Lenders.
"Chattel Paper" shall mean any "chattel paper" as such term is
defined in Section 1309.01(A)(2) of the UCC.
"Co-Agents" shall have the meaning ascribed to such term in
Paragraph D of the Recitals, and includes each successor who shall act
as a Co-Agent.
"Collateral" shall have the meaning ascribed to such term in
Section 2(b) hereof.
"Collateral Agent" shall have the meaning ascribed to such
term in the preamble hereto, and includes each successor who shall act
as Collateral Agent.
"Collateral Insurance Claim" shall mean any claim which
relates to reimbursement for damage to or loss of the Collateral and
arises under the insurance policies required by this Agreement, the
Third Amended and Restated Credit Agreement, the Debt Documents or the
Loan Documents (as defined in the Third Amended and Restated Credit
Agreement).
"Collateral Lockbox" shall mean a Lockbox maintained by a
Collateral Lockbox Bank for the purpose of receiving payments of
proceeds of Collateral, or such other post office box or mailing
location utilized for a similar purpose as the Grantor and a Collateral
Lockbox Bank may agree upon from time to time.
"Collateral Lockbox Account" shall mean each account (i)
designated by the Collateral Agent from time to time; (ii) maintained
with a Collateral Lockbox Bank for the purposes described in this
Agreement, including without limitation, the purposes set forth in
Section 4 hereof, (iii) in which the Collateral Agent has a first
priority perfected Lien; (iv) over which the Collateral Agent has
exclusive control and dominion; and (v) with respect to which the
Grantor has no right to withdraw funds.
"Collateral Lockbox Account Letters" shall mean the letters in
the form and content of Exhibit I attached hereto and as more fully
described in Section 4(f) hereof.
"Collateral Lockbox Bank" shall mean each and every Lender
which maintains a Collateral Lockbox Account.
"Computer Hardware and Software" shall mean all computer
hardware and software in all its forms (including, but not limited to,
(a) all computer and other electronic data
5
<PAGE> 11
processing hardware, whether now owned, licensed or leased or hereafter
acquired by the Grantor, integrated computer systems, central
processing units, memory units, display terminals, printers, features,
computer elements, card readers, tape drives, hard and soft disk
drives, cables, electrical supply hardware, mask rights, generators,
power equalizers, accessories and all peripheral devices and other
related computer hardware; (b) all software programs, whether now
owned, licensed or leased or hereafter acquired by the Grantor,
designed for use on the computers and electronic data processing
hardware described in clause (a) above, including, without limitation,
operating system software, utilities and application programs in
whatsoever form (source code and object code in magnetic tape, disk or
hard copy format or any other listings whatsoever); (c) all firmware
associated therewith, whether now owned, licensed or leased or
hereafter acquired by the Grantor; and (d) all documentation for such
hardware, software and firmware described in the preceding clauses (a),
(b) and (c), whether now owned, licensed or leased or hereafter
acquired by the Grantor, including, without limitation, flow charts,
logic diagrams, manuals, specifications, training materials, charts and
pseudo codes).
"Computer Systems" shall mean LDI of Ohio, Inc., f/k/a LDI
Computer Systems, Inc., a wholly-owned subsidiary of the Grantor.
"Contracts" shall mean (a) all contracts, undertakings or
other agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) relating to the Collateral, and (b) all
"contract rights," as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction, relating to the
Collateral.
"CXC" shall mean CXC Incorporated, a Delaware corporation,
together with its permitted successors and assigns pursuant to the
terms of the Lease Receivables Transfer Agreement.
"CXC Agent" shall mean Citicorp North America, Inc., together
with its permitted successors and assigns pursuant to the terms of the
Lease Receivables Transfer Agreement.
"CXC Equipment Collateral" shall have the meaning ascribed to
such term in the CXC Intercreditor Agreement.
"CXC Intercreditor Agreement" shall mean that certain
Intercreditor Agreement, dated as of July 29, 1994, by and among the
Grantor, CXC Agent and Continental Bank (now known as Bank of America
Illinois) as predecessor collateral agent to the Collateral Agent.
6
<PAGE> 12
"CXC Funds" shall have the meaning ascribed to such term in
Section 6(a) hereof.
"CXC Lockbox" shall mean a Lockbox maintained by a CXC Lockbox
Bank for the purpose of receiving payments made by Obligors of
Transferred Lease Receivables for subsequent deposit into a related CXC
Lockbox Account, or such other post office box or mailing location
utilized for a similar purpose as the Grantor and the CXC Agent may
agree upon from time to time pursuant to the Lease Receivable Transfer
Agreement.
"CXC Lockbox Account" shall mean a Lockbox Account maintained
with a CXC Lockbox Bank for the purpose of depositing payments made by
the Obligors of Transferred Lease Receivables in connection with the
CXC Transaction, or such other account or accounts utilized for a
similar purpose as the Grantor and the CXC Agent may agree upon from
time to time pursuant to the Lease Receivables Transfer Agreement.
"CXC Lockbox Bank" shall mean a Lockbox Bank at which a CXC
Lockbox Account is maintained, or such other bank or financial
institution or entity utilized for a similar purpose as the Grantor and
the CXC Agent may agree upon from time to time pursuant to the Lease
Receivables Transfer Agreement.
"CXC Transaction" shall mean the transactions contemplated by
the Lease Receivables Transfer Agreement and the Lease Receivables
Purchase and Contribution Agreement.
"Debt Documents" shall mean each and every of the following:
this Agreement, the Third Amended and Restated Credit Agreement, the
Notes, the Intercreditor Agreement, the CXC Intercreditor Agreement and
the Loan Documents (as defined in the Third Amended and Restated Credit
Agreement).
"Default" shall mean any event, act or condition which, with
the passage of time or the giving of notice, or both, would constitute
an Event of Default.
"Deposit Accounts" shall mean any "deposit account" as such
term is defined in Section 1309.01(A)(5) of the UCC.
"Documents" shall mean any "document" as such term is defined
in Section 1309.01(A)(6) of the UCC.
"Equipment" shall mean any "equipment" as such term is defined
in Section 1309.07(B) of the UCC, and include, without limitation, all
machinery, equipment, furnishings, fixtures, and computers and other
electronic data processing and other office equipment and any and all
additions, substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
7
<PAGE> 13
"Engines" shall mean those certain aircraft engines identified
on Schedule X attached hereto and incorporated herein by this
reference, and any other aircraft engines which either now or in the
future are installed on, appurtenant to, or delivered with or in
respect of any Airframe, together with any and all parts, appliances,
components, accessories, accessions, attachments or equipment installed
on, appurtenant to, or delivered with or in respect of such engines.
The term "Engines" shall also refer to any replacement aircraft engine
which the Grantor is required or permitted, under this Agreement, to
install upon any Airframe and as to which the Grantor complies with
each of the applicable requirements contained in this Agreement.
"Event of Default" shall have the meaning ascribed to such
term in Section 17 hereof.
"Excluded Collateral" shall have the meaning ascribed to such
term in Section 2(c) hereof.
"Existing Bank Lenders" shall have the meaning ascribed to
such term in Paragraph A of the Recitals.
"FAA" shall mean the United States Federal Aviation
Administration, or any successor or replacement administration or
governmental agency having the same or similar authority and
responsibilities.
"Fixtures" shall mean any "fixture" as such term is defined in
Section 1309.32 of the UCC.
"General Intangibles" shall mean any "general intangible" as
such term is defined in Section 1309.01(A)(16) of the UCC.
"General Non-Recourse Lender Account" shall mean an account in
which the Collateral Agent has no Lien and which is maintained at NCB
for the purpose of receiving CXC Funds and Non-Recourse Lender Funds as
more fully described in Section 6 hereof, provided, however, that (a)
the only deposits into any such account are Excluded Collateral or the
Proceeds of Excluded Collateral, and (b) the deposits made into any
such account shall not consist of any Collateral nor any Proceeds of
Collateral nor the proceeds of any loans, advances or other credit
facilities made by any Lender under the Third Amended and Restated
Credit Agreement.
"Geneva Convention" shall mean the Convention on the
International Recognition of Rights in Aircraft made at Geneva,
Switzerland on June 19, 1948 (effective 17 September 1953), together
with the necessary enacting rules and regulations promulgated by any
particular signatory country.
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"Grantor" shall mean LDI Corporation, a Delaware corporation.
"hereby," "herein," "hereof", "hereunder" and words of similar
import refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word
appears.
"Instruments" shall mean any "instrument" as such term is
defined in Section 1309.01(A)(9) of the UCC, other than instruments or
writings that constitute, or are part of a group of instruments or
writings that constitute, Chattel Paper.
"Intercreditor Agreement" shall have the meaning ascribed to
such term in Paragraph F of the Recitals.
"Inventory" shall mean any "inventory" as such term is defined
in Section 1309.07(D) of the UCC.
"LDI Funding" shall mean LDI Lease Receivables Funding Corp.,
a Delaware corporation and a wholly-owned subsidiary of the Grantor.
"Lease" shall mean a lease agreement between the Grantor and
any Obligor for the lease of any Equipment.
"Lease Collateral" shall have the meaning ascribed to such
term in Section 8(j) hereof.
"Lease Receivable" shall mean with respect to any Lease at any
time, all periodic installments of rent then or thereafter payable by
the Obligor under such Lease, together with all supplemental or
additional payments required by the terms of such Lease with respect to
insurance, maintenance, ancillary products and services and other
specific charges, excluding any such payments or charges which
constitute sales or other taxes or the price for a purchase option
occurring at the end of the term of such Lease.
"Lease Receivables Purchase and Contribution Agreement" shall
mean the Lease Receivables Purchase and Contribution Agreement, dated
as of October 7, 1994, between LDI Funding and the Grantor, as amended,
modified or supplemented from time to time as permitted by the CXC
Intercreditor Agreement.
"Lease Receivables Transfer Agreement" shall mean the Lease
Receivables Transfer Agreement, dated as of October 7, 1994, by and
among LDI Funding, CXC and the CXC Agent, as amended, modified or
supplemented from time to time as permitted by the CXC Intercreditor
Agreement.
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"Lenders" shall have the meaning ascribed to such term in
Paragraph D of the Recitals.
"Lessee Collateral" shall mean all security interests or
liens, and property subject to such security interests or liens, and
all guarantees, indemnities, warranties, letters of credit, insurance
policies and proceeds and premium refunds thereof and other agreements
or arrangements from time to time granted by or entered into by the
lessees or any other person (other than the Grantor) under the
Transferred Leases to secure or support the payment of the lessees'
obligations under the Transferred Leases, including all UCC financing
statements covering the Lessee Collateral.
"Lien" shall mean, with respect to any property, any mortgage,
lien, pledge, assignment, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not
choate, vested or perfected.
"Lockbox" means a post office box or other mailing location
maintained by a Lockbox Bank for the purpose of receiving payments made
by obligors for subsequent deposit into a related Lockbox Account.
"Lockbox Account" means a demand deposit account or other
collection account maintained with a Lockbox Bank or Collateral Lockbox
Bank, as the case may be, for the purpose of depositing payments made
by the obligors.
"Lockbox Bank" means a bank or credit union at which a Lockbox
Account is maintained.
"Mandatory Bank Account" shall mean each deposit account or
other account: (a) which is maintained by the Grantor at a bank or
other financial institution which is a Lender; (b) with respect to
which the Grantor has executed and delivered to the Collateral Agent a
duly executed Sweep Agreement; and (c) which is either (i) in the case
of those deposit or other accounts identified on Schedule I attached
hereto, a deposit account or other account in which the Collateral
Agent has a first priority Lien, or (ii) in the case of each other
deposit account or other account, a deposit account or other account in
which the Collateral Agent has a first priority perfected Lien.
"May 1994 Security Agreement" shall have the meaning ascribed
to such term in Paragraph B of the Recitals.
"MRK Secured Note" shall mean that certain Secured
Subordinated Promissory Note dated May 31, 1994 in the original
principal amount of Two Million Dollars ($2,000,000)
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executed by MRK Computer Systems, Inc., an Ohio corporation, now by
merger MRK Technologies, Ltd., an Ohio L.L.C., ("MRK"), and payable to
the order of the Grantor.
"NCB" shall mean National City Bank, in its individual
capacity.
"1989 Note Purchase Agreement" shall have the meaning ascribed
to such term in Paragraph A of the Recitals.
"Non-Recourse Debt" shall mean (i) any debt of the Grantor
and/or its Subsidiaries for which neither the obligee nor any other
person has any legal recourse against the Grantor or any of its
Subsidiaries, other than to certain specified collateral which shall
have been pledged by the Grantor or its Subsidiaries in connection with
the incurrence thereof, (ii) the debt of the Grantor under the Sanwa
Lease Pooling Arrangement, (iii) the debt of LDI Lease Funding
Corporation ("LDI Lease Funding") under the lease pooling arrangement
described in the Amended and Restated Credit Agreement, dated as of
November 16, 1990, between LDI Lease Funding and The Dai-Ichi Kangyo
Bank, Ltd., Chicago Branch, and (iv) any debt of the Grantor and/or its
Subsidiaries similar to the debt described in (ii) and (iii) above
which has been approved and consented to by the Required Lenders.
"Non-Recourse Lender" shall mean a lender of Non-Recourse
Debt.
"Non-Recourse Lender Funds" shall have the meaning ascribed to
such term in Section 6(b) hereof.
"Non-Recourse Lockbox" shall mean a Lockbox maintained by a
Non-Recourse Lockbox Bank for the purpose of receiving payments made by
Obligors of Transferred Lease Receivable for subsequent deposit into a
related Non-Recourse Lockbox Account, or such other post office box or
mailing location utilized for a similar purpose as the Grantor and the
agent for the applicable Non-Recourse Lenders may agree upon from time
to time.
"Non-Recourse Lockbox Account" shall mean a Lockbox Account
maintained with a Non-Recourse Lockbox Bank for the purpose of
depositing payments made by the Obligors of Transferred Lease
Receivables, or such other account or accounts utilized for a similar
purpose as the Grantor and the agent for the applicable Non-Recourse
Lenders may agree upon from time to time.
"Non-Recourse Lockbox Bank" shall mean a Lockbox Bank at which
a Non-Recourse Lockbox Account is maintained, or such other bank or
financial institution or entity utilized for a similar purpose as the
Grantor and the agent for the
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applicable Non-Recourse Lenders may agree upon from time to time.
"Non-Recourse Obligor" shall mean any Non-Recourse Lender
obligated in respect of a Lease Receivable pursuant to a Lease other
than the Lessor or vendor of the Inventory or Equipment covered
thereby.
"Northwestern Lenders" shall have the meaning ascribed to such
term in Paragraph A of the Recitals.
"Note" shall mean each promissory note executed by the Grantor
pursuant to the terms of the Third Amended and Restated Credit
Agreement.
"Notice to Release CXC Funds" shall have the meaning ascribed
to such term in Section 6(a) hereof.
"Notice to Release Non-Recourse Lender Funds" shall have the
meaning ascribed to such term in Section 6(b) hereof.
"Obligations" shall mean any and all existing and future
liabilities, indebtedness and obligations (including without
limitation, all Obligations (as defined in the Third Amended and
Restated Credit Agreement) including all indebtedness represented by
each of the Revolving Notes (as defined in the Third Amended and
Restated Credit Agreement)), and other payment obligations of the
Grantor owing from time to time to each and every present or future
Lender, Co-Agent or the Collateral Agent under the Third Amended and
Restated Credit Agreement or any Debt Document, and to the present or
future Collateral Agent under any of the Loan Documents (as defined in
the Third Amended and Restated Credit Agreement), including without
limitation, all fees, costs, expenses, court costs, attorneys' fees and
expenses, and the like covered by any of the foregoing; provided,
however, Obligations shall not include the principal and interest
indebtedness represented by the Term Notes (as defined in the Third
Amended and Restated Credit Agreement) and amounts constituting the
Development Fee (as defined in the Third Amended and Restated Credit
Agreement).
"Obligor" shall mean any party obligated in respect of a Lease
Receivable pursuant to a Lease other than the lessor or vendor of the
Inventory or Equipment covered thereby.
"Permitted Bank Account" shall mean each deposit account or
other account: (a) which is maintained by the Grantor at a bank or
other financial institution which is not a Lender; (b) with respect to
which the Grantor has executed and delivered to the Collateral Agent a
duly executed Sweep Agreement; and (c) which is either (i) in the case
of those deposit accounts or other accounts identified on Schedule II
attached hereto, a
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deposit account or other account in which the Collateral Agent has a
first priority Lien, or (ii) in the case of each other deposit account
or other account, a deposit account or other account in which the
Collateral Agent has a first priority perfected Lien.
"Permitted Lien" shall mean a Lien permitted by Section 7.2.3
of the Third Amended and Restated Credit Agreement.
"Permitted Non-Recourse Bank Account" shall mean a deposit or
other account maintained by the Grantor at a bank or other financial
institution and in which the Collateral Agent has no Lien; provided,
however, that (a) the only deposits into any such account are Excluded
Collateral or the Proceeds of Excluded Collateral, and (b) the deposits
made into any such account shall not consist of any Collateral nor any
Proceeds of Collateral nor the proceeds of any loans, advances or other
credit facilities made by any Lender under the Third Amended and
Restated Credit Agreement or any of the Debt Documents.
"Pledged Debt" shall have the meaning ascribed to such term in
Section 2(b) hereof.
"Pledged Shares" shall have the meaning ascribed to such term
in Section 2(b) hereof.
"Proceeds" shall mean any "proceeds" as such term is defined
in Section 1309.25 of the UCC, and, in any event, shall have the
broadest meaning permissible under the Ohio Uniform Commercial Code,
and the Uniform Commercial Code of any other state which is deemed
applicable, and shall include, without limitation, (a) any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to
the Grantor from time to time with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental body, authority,
bureau or agency (or any person acting under color of governmental
authority), and (c) any and all other amounts from time to time paid or
payable, whether as rents, fees, lease payments or otherwise, under or
in connection with any of the Collateral.
"Required Lenders" shall have the meaning ascribed to such
term in the Third Amended and Restated Credit Agreement.
"Sanwa Agreement" shall mean that certain Loan and Security
Agreement, dated as of November 21, 1991, between the Grantor and Sanwa
Business Credit Corporation ("Sanwa"), as amended by that certain
Amendment to Loan and Security Agreement, dated July 30, 1992, between
the Grantor and Sanwa
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and as further amended by that certain Amendment to Loan and
Security Agreement, dated October 27, 1992, between the Grantor
and Sanwa, and as further amended as, and to the extent, permitted
by the Third Amended and Restated Credit Agreement.
"Sanwa Lease Pooling Arrangement" shall mean the lease pooling
arrangement described in the Sanwa Agreement.
"Security Collateral" shall have the meaning ascribed to such
term in Section 2(b) hereof.
"Second Amended and Restated Credit Agreement" shall have the
meaning ascribed to such term in Paragraph A of the Recitals.
"Society" shall mean Society National Bank, in its individual
capacity.
"Special Permitted Bank Account" shall mean those accounts
(e.g., trust accounts) listed on Schedule III attached hereto.
"Subsidiary" means, with respect to any person, any
corporation of which more than fifty percent (50%) of the outstanding
capital stock having ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such
person, by such person and one or more other Subsidiaries of such
person, or by one or more other Subsidiaries of such person.
"Sweep Agreement" shall mean an agreement between the Grantor
and any depositary institution for the benefit of the Collateral Agent
substantially in the form of Exhibit VIII attached hereto.
"Transferred Assets" shall have the meaning ascribed to such
term in the CXC Intercreditor Agreement.
"Transferred Lease" shall mean each Lease transferred
(including, without limitation, by way of a grant of a security
interest) by the Grantor to a Non-Recourse Lender in connection with
the incurrence of Non-Recourse Debt.
"Transferred Lease Receivable" shall mean (a) with respect to
the CXC Transaction, any Lease Receivable which is offered for transfer
by LDI Funding and in which CXC has acquired an interest pursuant to
the Lease Receivables Transfer Agreement; and (b) with respect to all
other Non-Recourse Debt transactions, Lease Receivables transferred
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(including, without limitation, by way of a grant of a security
interest) by the Grantor to a Non-Recourse Lender in connection with
the incurrence of Non-Recourse Debt.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of Ohio; provided,
however, in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of the Collateral
Agent's, or any of the Lenders' security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction
other than the State of Ohio, the term "UCC" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"Unidentified Check" shall mean a check held in a Collateral
Lockbox Account with respect to which the Grantor is unable to identify
whether all or any portion of such check constitutes either CXC Funds
or Non-Recourse Lender Funds.
SECTION 2 CONFIRMATION AND GRANT OF SECURITY INTEREST; COLLATERAL;
EXCLUDED COLLATERAL.
(a) Confirmation of Security Interest. The Grantor hereby
ratifies and confirms that pursuant to the May 1994 Security Agreement and the
Amended and Restated Security Agreement, on the respective dates thereof, the
Grantor assigned and pledged to the Collateral Agent, or its predecessor, for
its benefit and for the benefit of the Lenders and to the Lenders, and granted
to the Collateral Agent for its benefit and for the ratable benefit of the
Lenders and to the Lenders, a continuing security interest in and Lien upon all
of the Collateral (as defined in the Amended and Restated Security Agreement).
The parties hereto hereby ratify, reaffirm and restate such assignment, pledge
and grant of security interest and Lien.
(b) Grant of Security Interest; Collateral. As security for
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all of the Obligations, the Grantor
hereby grants to the Collateral Agent for the benefit of the Collateral Agent,
the Administrative Agent, each of the Co-Agents and for the ratable benefit of
the Lenders, and to the Lenders, a continuing security interest in, and Lien
upon, all of the Grantor's right, title and interest in, to and under the
following property, whether now existing or owned or hereafter existing,
acquired or arising, and wherever located (all of which are herein referred to
collectively as the "Collateral"):
(i) all Accounts and Accounts Receivable;
(ii) all Chattel Paper;
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(iii) all Contracts;
(iv) all Deposit Accounts (other than the CXC Lockbox
Accounts and the Non-Recourse Lockbox Accounts);
(v) all Documents;
(vi) all Equipment;
(vii) all Fixtures;
(viii) all General Intangibles;
(ix) all Instruments;
(x) all Inventory;
(xi) the MRK Secured Note;
(xii) immediately upon the occurrence of any of the following
events: (a) the Lien in favor of First Security Bank of Utah, National
Association, as indenture trustee ("FSB") on the Aircraft and the
Engines is released, or should be released by FSB, (b) the Aircraft or
Engines are returned to or repossessed by the Grantor by way of
substitution or replacement, as a result of expiration of the lease to
which the Aircraft and the Engines are subject or otherwise, or (c) FSB
no longer has any outstanding and unpaid amounts owing to FSB, the
Aircraft, the Engines and all right, title and interest of the Grantor
in and to any lease, rental agreement, charter agreement, or other
agreement(s) respecting the Aircraft and/or any of the Engines,
including, but not limited to, the Grantor's right to receive, either
directly or indirectly, from any party or person, any rents or other
payments due under such agreement(s);
(xiii) all right, title and interest of the Grantor in, to and
under that certain Asset Acquisition Agreement dated as of May 31, 1994
by and among the Grantor, Computer Systems and MRK, including, without
limitation, all rights to any and all amounts due or to become due the
Grantor and any and all payments made to the Grantor thereunder and all
proceeds of any of the above, and all right, title and interest of the
Grantor in, to and under that certain Asset Purchase Agreement dated as
of February 20, 1995, by and between the Grantor and CruisePhone, Inc.,
including, without limitation, all rights to any and all amounts due or
to become due the Grantor and any and all payments made to the Grantor
thereunder and all proceeds of any of the above;
(xiv) all of the following: all Computer Hardware and
Software, each and every item of property which is subject to
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a Lease, warehouse racks, fork lifts, store shelving, displays, cash
registers, office and other machinery, vehicles, furniture, tools and
spare parts, and all parts thereof and all additions, substitutions and
replacements thereof wherever located, together with all components,
equipment and accessories installed thereon or affixed thereto
(collectively, all of the items in this clause (xiv), together with the
Equipment, are hereinafter referred to as the "Collateral Equipment");
(xv) all of the following: all goods, merchandise and other
personal property furnished under any contract of service or intended
for sale or lease, including, without limitation, all raw materials and
work in process therefor, finished goods thereof, Computer Hardware and
Software, materials used or consumed in the manufacture or production
thereof, returned or repossessed goods and data processing,
communications, computer, medical diagnostic and other capital
equipment and other goods leased by the Grantor, each and every item of
property subject to a Lease, goods in which the Grantor has an interest
in mass or a joint or other interest or right of any kind (including,
without limitation, goods in which the Grantor has an interest or right
as consignee), goods that are returned to or repossessed by the
Grantor, and all accessions thereto and products thereof and documents
therefor (collectively, all of the items in this clause (xv), together
with the Inventory, are hereinafter referred to as the "Collateral
Inventory");
(xvi) all of the following: all tax refunds, corporate or
other business records (including all records relating to Inventory,
Accounts and Accounts Receivable), inventions, designs, blueprints,
trade secrets, goodwill, licenses, franchises, customer lists, rights
and claims against carriers and shippers and rights to indemnification,
rights pursuant to warranties, guarantees and insurance policies,
patents, copyrights, trademarks and trade names and other obligations
owing to the Grantor of any kind, now or hereafter existing, whether or
not arising out of or in connection with the sale or lease of goods or
the rendering of services and all rights now or hereafter existing in
and to all security agreements, leases (including, but not limited to,
each Lease) and other contract rights, Chattel Paper, Instruments,
General Intangibles or other obligations;
(xvii) all of the following:
(A) all trademarks, trade names, corporate names,
company names, trade styles, service marks, logos, other
source of business identifiers, prints and labels on which any
of the foregoing have appeared or appear, designs and general
intangibles of like nature, now existing or hereafter adopted
or acquired, all
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registrations and recordings thereof, and all applications in
connection therewith, including, without limitation,
registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof, including,
without limitation, those described in Schedule IV hereto;
(B) all renewals, reissues, continuations,
extensions or the like of any patents, copyrights, trademarks,
service marks and like protection, including, without
limitation, those obtained or permissible under past, present
and future laws and statutes;
(C) all rights of action on account of past,
present and future unauthorized use of any of said inventions,
copyrights, trademarks or service marks and for infringement
of said patents, copyrights, trademarks or service marks and
like protection;
(D) the right to file and prosecute applications
for patents, copyrights, and for registration of trademarks
and service marks on any of said inventions, copyrights,
trademarks, service marks or for similar intellectual property
in the United States or any other country or place anywhere in
the world;
(E) the entire goodwill of the businesses of the
Grantor connected with and symbolized by the trademarks,
service marks, trade names and the other general intangibles
of the Grantor; and
(F) all of the Grantor's customer lists, trade
secrets, corporate and other business records, license rights,
advertising materials, operating manuals, methods, processes,
know-how, sales literature, drawings, specifications,
descriptions, name plates, catalogs, dealer contracts,
supplier contracts, distributor agreements, confidential
information, consulting agreements, engineering contracts, and
all other assets which uniquely reflect the goodwill of the
businesses of the Grantor to which said General Intangibles
relate;
(xviii) all of the following:
(A) all deposit accounts of the Grantor (other
than CXC Lockbox Accounts, the General Non-Recourse Lender
Account, Non-Recourse Lockbox Accounts, Permitted Non-Recourse
Bank Accounts and the Special Permitted Bank Accounts), each
Lockbox Account, each Permitted Bank Account, each Mandatory
Bank Account and each
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Collateral Lockbox Account, all cash, funds, monies and
amounts required to be deposited, or deposited in, the
Grantor's deposit accounts, each Collateral Lockbox Account,
each Permitted Bank Account, or each Mandatory Bank Account
and all certificates and instruments, if any, from time to
time representing or evidencing the foregoing deposit
accounts, each Collateral Lockbox Account, each Permitted Bank
Account or each Mandatory Bank Account;
(B) all notes, certificates of deposit, checks
and other instruments from time to time hereafter delivered to
or otherwise possessed by the Collateral Agent for or on
behalf of the Grantor in substitution for or in addition to
any or all of the then existing Account Collateral; all
securities (as defined in Article 8 of the UCC) and all
dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect
of or in exchange for any or all securities (as defined in
Article 8 of the UCC);
(C) all interest, dividends, cash, instruments
and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the then existing Account Collateral;
(D) all deposits of cash, funds or monies at any
bank (other than deposits in the CXC Lockbox Accounts and the
Non-Recourse Lockbox Accounts); and
(E) all cash, checks, drafts, chattel paper,
notes and other instruments or writings for the payment of
money received by the Grantor in respect of the property and
interests in property described in this Section 2(b) and all
investments from time to time made pursuant to Section 4
hereof (collectively, all of items in this clause (xviii) are
hereinafter referred to as the "Account Collateral");
(xix) all of the following:
(A) all shares (the "Pledged Shares") of stock
described in Part I of Schedule V and issued by the
corporations named therein and the certificates representing
the Pledged Shares, and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the Pledged Shares;
(B) all indebtedness (the "Pledged Debt")
described in Part II of Schedule V and issued by the obligors
named therein and the instruments evidencing
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the Pledged Debt, and all interest, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the Pledged Debt;
(C) all additional shares of stock of any issuer
of the Pledged Shares from time to time acquired by the
Grantor in any manner, and the certificates representing such
additional shares, and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all such shares; and
(D) all additional indebtedness from time to
time owed to the Grantor by any obligor of the Pledged Debt
and the instruments evidencing such indebtedness, and all
interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such indebtedness
(collectively, all of the foregoing is hereinafter referred to
as the "Security Collateral");
(xx) any item of the Grantor's property which ceases to be
Excluded Collateral;
(xxi) all of Grantor's books and records (including, without
limitation, all computerized books and records, all computer programs
or other devices related thereto, printouts, computer discs, minute
books, journals, ledgers, work papers, financial statements, orders,
receipts, and any correspondence and other data relating to the
Grantor's business or to any transactions the Grantor has entered into,
no matter how or where such records may be maintained, generated or
stored) as the foregoing relates to any of the property and interests
in property described in this Section 2(b); and
(xxii) all Proceeds of each of the foregoing property and
interests in property, and all accessories to, substitutions and
replacements for, and rents, profits and products of each of the
foregoing.
(c) Excluded Collateral. Notwithstanding anything contained
herein to the contrary, and subject to the proviso at the end of this Section
2(c), the term "Collateral" shall not include any of the following (the
"Excluded Collateral"):
(i) in the case of each Non-Recourse Debt transaction other
than the CXC Transaction, all Transferred Lease Receivables,
Transferred Leases and Lessee Collateral together with all of the
Grantor's right, title and interest in the data processing,
telecommunications, and other capital
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equipment leased by the Grantor as lessor which is subject to the
Transferred Leases, and all Proceeds of the foregoing transferred to a
Non-Recourse Lender as of the Agreement Date, and the following assets
which become Transferred Lease Receivables, Transferred Leases or
Lessee Collateral pursuant to the release procedures set forth in
Section 6(c) hereof or which are transferred by the Grantor to a
Non-Recourse Lender pursuant to the release procedures set forth in
Section 6(c) hereof:
(A) Transferred Lease Receivables and Transferred
Leases;
(B) any Lessee Collateral;
(C) all of the Grantor's right, title and interest in
the data processing, telecommunications, and other capital
equipment leased by the Grantor as lessor which is subject to
the Transferred Leases;
(D) all of the Grantor's right, title and interest in
and to all of the reserves and interest earned thereon which
are pledged to Sanwa pursuant to Section 8 of the Sanwa
Agreement; and
(E) all Proceeds of the Excluded Collateral described
in clauses (A) through (D) above; and
(ii) in the case of the CXC Transaction, all Transferred
Assets and CXC Equipment Collateral as of the Agreement Date, together
with all Collateral that becomes Transferred Assets and CXC Equipment
Collateral pursuant to the release procedures described in the CXC
Intercreditor Agreement;
provided, however, that with respect to each item which constitutes Excluded
Collateral which is or should be released by the CXC Agent in accordance with
the terms of the CXC Intercreditor Agreement or which is returned to or
repossessed by the Grantor by way of substitution, replacement, as a result of
expiration of the Lease to which each such item is subject or otherwise, or with
respect to which the applicable Non-Recourse Lender no longer has any
outstanding and unpaid amounts owing to such Non-Recourse Lender, each such item
shall, immediately upon the cessation of the applicable Non-Recourse Lender's
interest therein, (x) cease to be Excluded Collateral and (y) automatically be
Collateral for all purposes hereunder.
SECTION 3 THE GRANTOR TO REMAIN LIABLE.
Notwithstanding anything contained herein to the contrary, (a) the
Grantor shall remain liable under each of the Contracts and agreements included
in the Collateral to observe and perform all of
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its duties and obligations thereunder and the Grantor shall perform all of its
duties and obligations thereunder, (b) the exercise by the Collateral Agent of
any of the rights hereunder shall not release the Grantor from any of its duties
or obligations under any of the Contracts and agreements included in the
Collateral, and (c) neither the Collateral Agent nor any Lender shall have any
obligation or liability under the Contracts and agreements included in the
Collateral by reason of this Agreement or the granting to the Collateral Agent
of any Lien or the receipt by the Collateral Agent of any payment relating to
any contract or agreement included in the Collateral. Neither the Collateral
Agent nor any Lender shall be obligated in any manner to perform or fulfill any
of the obligations or duties of the Grantor under any of the Contracts or
agreements included in the Collateral, to make any payment thereunder or to make
any inquiry as to the nature or sufficiency of any payment received by the
Collateral Agent or the sufficiency of any performance by any party to such
Contracts or agreements, or to take any action to collect or enforce any
performance or the payment of any amounts or any claim for payment which may
have been assigned to the Collateral Agent or to which the Collateral Agent may
be entitled at any time or times.
SECTION 4 BANK ACCOUNTS.
(a) Types of Bank Accounts. Until all Obligations have been
paid and performed in full, the Grantor shall establish and maintain only
Collateral Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank Accounts,
Permitted Non-Recourse Bank Accounts and Special Permitted Bank Accounts and the
General Non-Recourse Lender Account.
(b) Collateral Lockboxes and Collateral Lockbox Accounts. The
Grantor shall establish and maintain Collateral Lockboxes and Collateral Lockbox
Accounts at one or more Collateral Lockbox Banks designated by the Collateral
Agent from time to time, into which the Grantor shall forthwith, upon receipt,
transmit and deliver for deposit in a Collateral Lockbox Account, in the form
received, all cash, checks, drafts, Chattel Paper and other Instruments or
writings for the payment of money (other than any items which constitute
Excluded Collateral), properly endorsed, where required, so that such items may
be collected by the Collateral Agent, which may be received by the Grantor at
any time. The Grantor shall have no right to withdraw any funds deposited in the
Collateral Lockbox Accounts. Except as otherwise provided below in this
paragraph, the Collateral Agent shall apply, or cause to be applied, all or any
of the then balance, representing collected funds, in each of the Collateral
Lockbox Accounts, toward payment of the Obligations, whether or not then due, in
such amounts and in such order of application as set forth in the Third Amended
and Restated Credit Agreement. The Collateral Agent is authorized to endorse, in
the name of the Grantor, any item, however received by the Collateral Agent,
representing any payment on or other proceeds of any of the Collateral. Except
as otherwise set forth below in
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paragraph (d) of this Section, any such items which constitute Collateral which
may be received by the Grantor shall not be commingled with any other funds or
property, but will be held in express trust for the benefit of the Collateral
Agent separate and apart from the Grantor's own funds or property until delivery
is made to the Collateral Agent. The Collateral Agent is hereby entitled to
notify each financial institution at which any of the Grantor's Collateral
Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank Accounts, or deposit
accounts are located and on which the Collateral Agent has a Lien, to
immediately remit the balance in such accounts to the Collateral Agent to be
deposited in a Collateral Lockbox Account as directed by the Collateral Agent.
(i) The Collateral Agent may invest or reinvest, or cause to be
invested or reinvested, to the extent practicable, monies on deposit in
any or all Collateral Lockbox Accounts in a Cash Equivalent Investment.
(ii) The Collateral Agent shall have no liability for any loss of
principal or failure to achieve any minimum return, absent gross
negligence or willful misconduct on the part of the Collateral Agent.
Any interest or other income earned on amounts in any Collateral
Lockbox Account shall be held by the Collateral Agent as Collateral to
secure the Obligations, including without limitation, the Grantor's
Obligations and shall be applied in accordance with Section 4(b)
hereof. Income tax on all interest earned on amounts in the Collateral
Lockbox Account shall be payable solely by the Grantor.
(c) Location of Mandatory Bank Accounts. Each Mandatory Bank
Account shall be maintained with a Lender.
(d) Collateral Agent Powers. The Grantor hereby transfers to
the Collateral Agent the exclusive dominion and control of each of the
Collateral Lockbox Accounts and all funds from time to time therein.
(e) Bank Accounts; Collateral Lockbox Account Letters. With
respect to each Mandatory Bank Account and each Permitted Bank Account in
existence on the Agreement Date, other than those listed on Schedules I and II
attached hereto, the Grantor has taken and has caused to be taken, all actions
necessary or as requested by the Collateral Agent to create and maintain in each
such account a first priority perfected Lien in favor of the Collateral Agent
and the Grantor has executed and delivered or will execute and deliver to the
Collateral Agent no later than five (5) Business Days after the Agreement Date a
duly executed Sweep Agreement with respect to each such Mandatory Bank Account
and Permitted Bank Account. With respect to each Mandatory Bank Account and
Permitted Bank Account listed on Schedules I and II attached hereto, the Grantor
has taken and has caused to be taken, all actions necessary or as requested by
the Collateral Agent to create and maintain in each such account a first
priority Lien in favor of the Collateral
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Agent and the Grantor has executed and delivered or will execute and deliver to
the Collateral Agent no later than five (5) Business Days after the Agreement
Date a duly executed Sweep Agreement with respect to each such Mandatory Bank
Account and Permitted Bank Account. With respect to each and every other
Mandatory Bank Account, the Grantor agrees to take, and cause to be taken, all
actions necessary or as requested by the Collateral Agent to create and maintain
in each such Mandatory Bank Account a first priority perfected Lien in favor of
the Collateral Agent and to execute and deliver to the Collateral Agent a duly
executed Sweep Agreement with respect to each such account prior to the creation
of each such account. With respect to each Collateral Lockbox Account in
existence on the Agreement Date maintained at a financial institution other than
the Collateral Agent, the Grantor has delivered to the Collateral Agent duly
executed Collateral Lockbox Account Letters in the form of Exhibit I attached
hereto (the "Collateral Lockbox Account Letters"). The Grantor agrees to execute
and deliver, and cause to be executed and delivered, such additional Collateral
Lockbox Account Letters as the Collateral Agent may request.
(f) Account Debtors. The Grantor has instructed each and every
existing Account Debtor, and hereby agrees to, at the Grantor's expense,
immediately instruct each new Account Debtor, to make all payments due or to
become due, or to continue to make all payments due or to become due, as the
case may be, subject to the terms and conditions hereof, to the Collateral
Lockboxes for deposit in the Collateral Lockbox Accounts.
(g) Authorization. The Grantor hereby authorizes the
Collateral Agent to notify each Collateral Lockbox Bank of the Collateral
Agent's exclusive control of and dominion over the Collateral Lockbox Accounts
maintained at such Collateral Lockbox Bank and the Grantor agrees to execute and
deliver from time to time to the Collateral Lockbox Banks such documents,
agreements and writings as the Collateral Agent may reasonably request
including, without limitation, Collateral Lockbox Account Letters.
(h) Bank Accounts. Attached hereto as Schedule VI is a true,
complete, correct and accurate listing of each of the Grantor's Lockboxes,
Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank Accounts, Permitted
Non-Recourse Bank Accounts, Deposit Accounts, deposit accounts, CXC Lockboxes,
CXC Lockbox Accounts, Non-Recourse Lockbox Accounts, Collateral Lockboxes,
Collateral Lockbox Accounts, Special Permitted Bank Accounts and other deposit
accounts and other accounts existing as of the Agreement Date.
(i) Maximum Permitted Amount. The Grantor shall not at any
time maintain in the operating disbursement account no. 2526479 maintained in
the name of the Grantor at National City Bank, a balance in excess of Five
Million Dollars ($5,000,000).
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SECTION 5 [INTENTIONALLY OMITTED].
SECTION 6 NON-RECOURSE FINANCING.
(a) CXC Accounts and Funds. In the event that the Collateral
Agent receives a written notice and certification in the form of Exhibit II
attached hereto ("Notice to Release CXC Funds") duly executed by an Authorized
Signatory stating, among other things, that the Collateral Agent previously
received monies or monies were deposited into the Collateral Lockbox Account
which constitute Collections (as defined in the CXC Intercreditor Agreement) or
proceeds of any Transferred Lease Receivable, Related Security (as defined in
the CXC Intercreditor Agreement) or CXC Equipment Collateral with respect
thereto, and provided that such monies constitute collected funds (collectively,
"CXC Funds"), which are either (i) held in a Collateral Lockbox Account, or (ii)
funds previously applied in reduction of the Obligations and to the extent that
new funds were not subsequently advanced to the Grantor, the Collateral Agent
shall promptly deliver such monies (A) prior to the occurrence of an Event of
Default, to the Grantor for delivery to the CXC Agent by depositing such monies
into the General Non-Recourse Lender Account, and (B) after the occurrence of an
Event of Default which has not been waived in accordance with the terms of the
Third Amended and Restated Credit Agreement, to the CXC Agent.
(b) Other Non-Recourse Accounts and Funds. With respect to all
other Non-Recourse Debt, the Grantor hereby agrees to continue to make or
redirect, as the case may be, all payments due from Non-Recourse Obligors of the
Transferred Lease Receivables to existing Non-Recourse Lockboxes and
Non-Recourse Lockbox Accounts for the benefit of the Non-Recourse Lenders (other
than CXC). In the event that the Collateral Agent receives a written notice and
certification in the form of Exhibit III attached hereto ("Notice to Release
Non-Recourse Lender Funds") duly executed by an Authorized Signatory stating,
among other things, that the Collateral Agent previously received monies or
monies were deposited into the Collateral Lockbox Account which constitute
Excluded Collateral, and provided that such monies constitute collected funds
(collectively, "Non-Recourse Lender Funds"), which are either (i) held in a
Collateral Lockbox Account, or (ii) funds previously applied in reduction of the
Obligations and to the extent that new funds were not subsequently advanced to
the Grantor, the Collateral Agent shall promptly deliver such monies (A) prior
to the occurrence of an Event of Default, to the Grantor for delivery to the
appropriate Non-Recourse Lender by depositing such monies into the General
Non-Recourse Lender Account, and (B) after the occurrence of an Event of Default
which has not been waived in accordance with the terms of the Third Amended and
Restated Credit Agreement, to the applicable Non-Recourse Lender.
(c) Notice and Release of Collateral For Non-Recourse Debt
Transaction.
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(i) In the ordinary course of its business, the Grantor and
LDI Funding may carry-out the CXC Transaction and may otherwise sell
and/or finance Leases and related Collateral and, in connection
therewith, incur Non-Recourse Debt. At least one Business Day prior to
the proposed sale or financing, the Grantor shall provide to the
Collateral Agent a written notice in the form of Exhibit IV attached
hereto ("Notice of Non-Recourse Financing"), duly executed by an
Authorized Signatory, of any proposed sale or financing of Leases and
related Collateral and the incurrence of Non-Recourse Debt.
(ii) The Grantor may request that the Collateral Agent release
or subordinate its Lien on that portion of the Collateral which is the
subject of the proposed Non-Recourse Debt transaction (other than
pursuant to the CXC Transaction) by submitting to the Collateral Agent
a release in the form of Exhibit V attached hereto ("Non-Recourse Debt
Release") duly executed by an Authorized Signatory, or a subordination
agreement in the form of Exhibit VII, attached hereto ("Subordination
Agreement"), duly executed by an Authorized Signatory, as applicable.
(iii) Subject to the terms and conditions of the Third Amended
and Restated Agreement, upon receipt of such Notice of Non-Recourse
Financing and such Non-Recourse Debt Release, CXC Release or
Subordination Agreement, as the case may be, the Collateral Agent shall
forthwith execute and deliver to the Grantor such Non-Recourse Debt
Release or Subordination Agreement, as applicable, unless, after the
occurrence of an Event of Default, the Required Lenders have directed
otherwise. The Non-Recourse Debt Release or Subordination Agreement, as
the case may be, will become effective only upon consummation of the
proposed Non-Recourse Debt Transaction described in the applicable
Notice of Non-Recourse Financing, and receipt by the Collateral Agent
of the full proceeds of such Non-Recourse Debt transaction minus the
amount specified by the Grantor in the Notice of Non-Recourse Financing
to be paid to third parties. Upon the effectiveness of the Non-Recourse
Debt Release the Collateral which is described therein shall, for all
purposes hereof, cease to be Collateral and will be deemed to be
Excluded Collateral.
(iv) Subject to the terms and conditions of the Third Amended
and Restated Credit Agreement, the Collateral Agent shall release its
Lien on Collateral in connection with the CXC Transaction in accordance
with the terms and procedures of Section 3 of the CXC Intercreditor
Agreement and, upon such release, such Collateral shall, for all
purposes hereof, cease to be Collateral and will constitute Excluded
Collateral.
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(v) Except as otherwise specifically provided in this Section
6 and Section 13(a)(i)(A) and (B) below, the Collateral Agent shall not
release or subordinate its Lien on any Collateral unless specifically
authorized and directed by the Required Lenders.
SECTION 7 MARKING AND DELIVERY OF COLLATERAL.
(a) Marking of Collateral. The Grantor shall: (i) promptly
mark conspicuously each Instrument and each item of Chattel Paper and each
Contract with the following legend: "This writing and the obligations evidenced
or secured hereby are subject to a first priority security interest of Society
National Bank, as the Collateral Agent" (or an abbreviation thereof satisfactory
to the Collateral Agent), and (ii) ensure that each item of Chattel Paper is
evidenced by one and only one, if any, executed original document.
(b) Upon Event of Default. Following the occurrence of any
Event of Default, upon the request of the Collateral Agent, all certificates and
Chattel Paper (including, without limitation, all instruments, contracts,
documents and agreements executed or delivered in connection therewith,
including, without limitation, all equipment schedules, certificates of title,
financing statements, insurance certificates, bills of sale, collateral
assignments of leases, purchase agreement assignments and mortgagee/landlord
waivers) representing or evidencing any of the Collateral, shall be delivered to
and held by or on behalf of the Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Collateral Agent and the Collateral Agent shall have the
right, at any time in its discretion and without notice to the Grantor, to
transfer to or to register in the name of the Collateral Agent or any of its
nominees any or all of the Collateral. In addition, the Collateral Agent shall
have the right at any time to exchange certificates or instruments representing
or evidencing the Collateral for certificates or instruments of smaller or
larger denominations.
SECTION 8 REPRESENTATIONS AND WARRANTIES.
The Grantor represents and warrants to the Collateral Agent as follows:
(a) Location of Business and Collateral.
(i) The Grantor's principal place of business, chief executive
office and books and records are located at 4770 Hinckley Industrial
Parkway, Cleveland, Ohio 44109. As of the Agreement Date, each of the
Grantor's offices, warehouses (whether owned or leased) and each other
of the Grantor's locations are identified on Schedule VII attached
hereto. The
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Grantor will not change such principal place of business, chief
executive office or the location of its books and records relating to
the Collateral. In no event shall the books and records relating to the
Collateral be relocated to anywhere outside the continental United
States. In addition to its actual name, the Grantor also uses the
following trade name: Leasing Dynamics. After the Agreement Date,
Grantor will not do business under any other trade name, unless it has
given twenty (20) days' prior written notice thereof to the Collateral
Agent and taken such action as is necessary and as is reasonably
requested by the Collateral Agent or any Lender to cause the Lien of
the Collateral Agent in the Collateral to continue to be perfected.
(ii) All of the Collateral Equipment and Collateral Inventory
are located at the places specified on Schedule VIII (as updated in
accordance with Section 10(d) hereof). The office where the Grantor
keeps its records concerning the Accounts, Accounts Receivable and all
Chattel Paper that evidences Collateral, is located at 4770 Hinckley
Industrial Parkway, Cleveland, Ohio 44109. No Account in excess of One
Thousand Dollars ($1,000) or in the aggregate amount of Fifty Thousand
Dollars ($50,000) and no Account Receivable in excess of One Thousand
Dollars ($1,000) or in the aggregate amount of Fifty Thousand Dollars
($50,000) is evidenced by a promissory note or other instrument which
has not been delivered to the Collateral Agent in accordance with
Section 9(b) hereof.
(b) Pledged Shares. The Pledged Shares have been duly
authorized and validly issued and are fully paid and nonassessable. The Pledged
Shares constitute one hundred percent (100%) of the issued and outstanding
capital stock of each issuer thereof, and there are no warrants, options or
other rights to acquire any of the capital stock of any issuer of Pledged
Shares. The Pledged Debt has been duly authorized, authenticated or issued and
delivered, and is the legal, valid and binding obligation of the issuers
thereof, and is not in default.
(c) Ownership/Title to Collateral. The Grantor is the legal
and beneficial owner of the Collateral free and clear of any Lien, security
interest, option, charge or encumbrance except for Permitted Liens and the
security interest created by this Agreement, the May 1994 Security Agreement and
the Amended and Restated Security Agreement. No effective financing statement or
other instrument similar in effect covering all or any part of the Collateral is
on file in any recording office, except such as may have been filed in favor of
the Collateral Agent relating to this Agreement, the May 1994 Security Agreement
or the Amended and Restated Security Agreement or as permitted under the Third
Amended and Restated Credit Agreement. The Grantor owns each of the patents,
trademarks, copyrights, licenses and other intellectual property included in the
Collateral.
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(d) Possession. The Grantor has exclusive possession and
control of the Collateral Equipment and Collateral Inventory owned by it other
than Collateral Inventory subject to a Lease entered into in the ordinary course
of business, naming the Grantor as lessor, Collateral Inventory in transit and
Collateral Inventory shipped directly to the Grantor's vendees or lessees by the
Grantor's vendors in the ordinary course of the Grantor's business.
(e) Collateral. The pledge and delivery of the Pledged Shares,
the Pledged Debt and any other securities (as defined in Article 8 of the UCC)
pursuant to this Agreement creates a valid, continuing, and perfected first
priority Lien upon the Security Collateral and any other securities (as defined
in Article 8 of the UCC) in favor of the Collateral Agent. This Agreement
creates and maintains a valid and continuing Lien upon the Collateral in favor
of the Collateral Agent which is, except for those accounts and deposit accounts
set forth on Schedules I and II, a perfected Lien and which is a first priority
Lien. Appropriate financing statements have been filed in all jurisdictions
necessary to create and maintain a first priority Lien which is, except for
those accounts and deposit accounts set forth on Schedules I and II, a perfected
security interest and Lien.
(f) Approval; Consents. No authorization, approval or other
action by, and no notice to or filing with (other than the filings and
deliveries referred to in this Agreement) any governmental authority or
regulatory body is required for the (i) creation or perfection by the Grantor of
the security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor or (ii) for the exercise by the
Collateral Agent of the voting or other rights provided for in this Agreement or
the remedies in respect of the Pledged Collateral, pursuant to this Agreement
(except as may be required in connection with such disposition by laws affecting
the offering and sale of securities generally).
(g) Accounts, Accounts Receivables and General Intangibles.
With respect to each of the Accounts, the Accounts Receivable and the General
Intangibles, and the Documents evidencing the underlying obligations, the
Collateral Agent may rely on all statements or representations made by the
Grantor on or with respect to any schedule of accounts furnished to the
Collateral Agent by the Grantor and, unless otherwise indicated in writing by
the Grantor, that:
(i) They are genuine, are in all material respects what they
purport to be, are not evidenced by a judgment and are evidenced by one
and only one, if any, executed original Instrument, which has been
delivered to the Collateral Agent;
(ii) Except for disputes in the ordinary course of business,
they represent undisputed, bona fide transactions
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completed in accordance with the terms and provisions contained in any
documents related thereto;
(iii) The face amounts shown on any such schedule of accounts
provided to the Collateral Agent and all invoices and statements
delivered to the Collateral Agent with respect to any Account, Account
Receivable and the General Intangibles are actually and absolutely
owing to the Grantor and are not contingent for any reason, except for
disputes and non-material errors arising in the ordinary course of
business;
(iv) To the best of the Grantor's knowledge, there are no
set-offs, counterclaims or disputes existing or asserted with respect
thereto and the Grantor has not made any agreement with any Account
Debtor thereunder for any deduction therefrom, except discounts or
allowances allowed by the Grantor in the ordinary course of its
business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face amount of the invoices to
which such discounts or allowances relate;
(v) To the best of the Grantor's knowledge, there are no
facts, events or occurrences which in any way impair the validity or
enforcement thereof or tend to reduce the amount payable thereunder
from the invoice face amount shown on any schedule of Accounts,
Accounts Receivable and General Intangibles furnished to the Collateral
Agent and on all contracts, invoices and statements delivered to the
Collateral Agent with respect thereto;
(vi) Such Accounts, Accounts Receivable and the General
Intangibles are not subject to any Lien, except those of the Collateral
Agent and Permitted Liens;
(vii) The Collateral giving rise to the Accounts, Accounts
Receivable and the General Intangibles is not, and was not at the time
of the sale thereof, subject to any Lien or claim, except the Lien of
the Collateral Agent and Permitted Liens;
(viii) To the best of the Grantor's knowledge, there is no
fact or circumstances which would impair the validity or collectability
of any Account or any Account Receivable;
(ix) To the best of the Grantor's knowledge, there are no
proceedings or actions which are threatened or pending against any
Account Debtor thereunder which might result in any materially adverse
effect upon the Grantor; and
(x) No Collateral is under consignment to or from any person.
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Notwithstanding anything contained in this Section 8(g) to the contrary, the
Grantor shall not be deemed to have violated the representations and warranties
contained in this Section 8(g) if items (i) through (x) above, collectively, are
untrue at any time with respect to Accounts, Accounts Receivable and General
Intangibles, with an aggregate value not in excess of Twenty-Five Thousand
Dollars ($25,000).
(h) Authorization; Enforceability. This Agreement and each of
the Debt Documents to which the Grantor is a party, when executed and delivered,
will constitute the legal, valid and binding obligations of the Grantor,
enforceable against the Grantor in accordance with its respective terms, except
as enforcement may be limited by bankruptcy, insolvency or any other similar
laws of general application affecting enforcement of creditors rights or by
general principles of equity limiting the availability of equitable remedies.
(i) Solvency. The Grantor is now, and after consummation of
the transactions contemplated by this Agreement and each Debt Document (i) will
be solvent and able to pay its debts as they mature; (ii) will be the owner of
assets the fair saleable value of which is greater than the amount necessary to
repay the obligations thereunder, and (iii) will have capital which is not
unreasonably small in relation to its business. The Grantor is not insolvent (as
that term is defined in the Bankruptcy Code) and will not be rendered insolvent
by the execution, delivery or performance of this Agreement or, the other Debt
Documents, or the consummation of the transactions contemplated hereby and
thereby. The Grantor has not made a general assignment for the benefit of its
creditors. No proceeding has been instituted by or against the Grantor alleging
that the Grantor is insolvent or unable to pay its debts as they mature. The
Grantor does not presently contemplate the commencement of a general assignment
for the benefit of creditors nor the filing of any proceeding under any
provisions of the Bankruptcy Code.
(j) Leases. Attached hereto as Schedule IX, is a true,
correct, complete and accurate list of each of the Leases and all Chattel Paper
subject to the Collateral Agent's Lien (collectively, each Lease and all Chattel
Paper subject to the Collateral Agent's Lien, "Lease Collateral") in effect as
of the Agreement Date, each of which is in full force and effect. The Grantor
shall promptly notify the Collateral Agent if it believes or has been notified
by any person that any Lease Collateral is no longer in full force and effect,
except for the expiration or termination of a Lease in accordance with its
stated terms. With respect to the Lease Collateral in existence from time to
time: (i) each item of Lease Collateral is valid, enforceable in accordance with
its terms and in full force and effect; (ii) the Grantor is the sole holder of
the rights and interests ascribed to the Grantor under each item of Lease
Collateral and has full power and authority to assign, transfer and set over the
same and to grant to and confer upon the
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Collateral Agent the rights, interests, powers and authorities granted and
conferred under this Agreement to the Collateral Agent; (iii) the Grantor has
observed and performed all covenants and obligations under each item of Lease
Collateral, required to be performed by the Grantor and the Grantor shall
observe and perform all of the covenants under each item of Lease Collateral;
(iv) all representations and warranties of the Grantor contained in each item of
Lease Collateral are true, complete, correct and accurate in all material
respects; (v) the Grantor has no knowledge of any facts which impair the
validity or enforceability of any item of Lease Collateral; (vi) the Grantor
will not modify, waive or amend in a manner adverse to the Grantor, nor consent
to such modification, waiver or amendment of, any item of Lease Collateral,
without the Collateral Agent's prior written consent; and (vii) each item of
Lease Collateral originated by the Grantor is not and does not have the
potential of being, subject to any offset, counterclaim or other defense on the
part of the applicable lessee or to any claim on the part of such lessee denying
liability thereunder in whole or in part: with respect to each item of Lease
Collateral not originated by the Grantor, the Grantor agrees to use its best
efforts to ensure that each item of Lease Collateral is not, and does not have
the potential of being, subject to any offset, counterclaim or other defense on
the part of the applicable lessee or to any claim on the part of such lessee
denying liability thereunder in whole or in part. Notwithstanding anything
contained in this Section 8(j) to the contrary, Grantor shall not be deemed to
have violated the representations and warranties contained in the immediately
preceding sentence if items (i) through (vii), collectively, are untrue at any
time with respect to Lease Collateral with an aggregate value not in excess of
Twenty-Five Thousand Dollars ($25,000).
(k) Inventory. With respect to the Collateral Inventory:
(i) Each item of Inventory is classified as Inventory under
the UCC;
(ii) Each item of Collateral Inventory certified by the
Grantor in any Borrowing Base Certificate (as such term is defined in
the Third Amended and Restated Credit Agreement) is Eligible
Uncommitted Inventory or Eligible Committed Inventory (as such terms
are defined in the Third Amended and Restated Credit Agreement) and was
either new when purchased or acquired by the Grantor or is designated
as used equipment in the Borrowing Base Certificate; and
(iii) Except for necessary repairs and servicing, each item of
Collateral Inventory which is not leased is located only at the
location for such item of Inventory set forth herein.
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Notwithstanding anything contained in this Section 8(k) to the contrary, Grantor
shall not be deemed to have violated the representations and warranties
contained in this Section 8(k) if items (i) through (iii) above, collectively,
are untrue at any time with respect to Collateral Inventory with an aggregate
value not in excess of Twenty-Five Thousand Dollars ($25,000).
(l) MRK Secured Note. The MRK Secured Note (i) constitutes the
valid and binding obligation of the maker thereof and is enforceable in
accordance with its terms, and (ii) has not been modified or amended. The
Grantor has no knowledge of any facts which would impair the validity or
enforceability of the MRK Secured Note. As of the date hereof, there remains
owing under the MRK Secured Note, the sum of $1,500,000 in principal, plus
accrued and accruing interest.
SECTION 9 GENERAL COVENANTS REGARDING COLLATERAL.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) Financing Statements, Etc. Concurrently with the execution
and delivery of this Agreement, and from time to time thereafter promptly
following the request of the Collateral Agent, the Grantor shall take any and
all actions necessary and as reasonably requested by the Collateral Agent or any
of the Lenders to maintain the first priority perfected security interest and
Lien on the Collateral in favor of the Collateral Agent, including, without
limitation, recording, registering and filing this Agreement and all necessary
and/or requested notices, financing statements and/or other documents or
instruments with the FAA in Oklahoma City, Oklahoma, United States of America,
and the Grantor agrees to execute and deliver to the Collateral Agent such
documents as may be necessary to perfect and maintain perfected the Collateral
Agent's first priority continuing security interest in and Lien thereon and on
the Collateral. The Grantor will join with the Collateral Agent in the execution
and filing of such financing statement or statements and the like, in the form
and content reasonably required by the Collateral Agent. The Grantor will
execute and file in the appropriate jurisdictions such financing statements and
other documents necessary and as reasonably requested by the Collateral Agent or
any Lender to create and maintain the Grantor's first priority perfected
security interest in and Lien on all property subject to a Lease. The Grantor
will pay all costs of filing any financing, continuation or termination
statements, or other filings with respect to the Liens created by this
Agreement, together with all costs and expenses of any Lien search reasonably
required by the Collateral Agent during the term hereof.
(b) Further Assurances. At any time and from time to time,
upon the written request of the Collateral Agent, and at the
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sole expense of the Grantor, the Grantor will promptly and duly execute and
deliver any and all such further instruments and documents and take such further
action as the Collateral Agent may reasonably deem desirable to obtain the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, using its reasonable efforts to secure all
consents and approvals necessary or appropriate for the assignment to the
Collateral Agent of any Lease or Contract held by the Grantor or in which the
Grantor has any rights not heretofore assigned, the filing of any financing or
continuation statements under the UCC with respect to the Liens granted hereby,
transferring Collateral to the Collateral Agent's possession (if a Lien in such
Collateral can be perfected by possession), and complying with or remaining
subject to the Geneva Convention, the laws and regulations of the FAA, or the
laws and regulations of any of the various states or countries in which the
Aircraft is or may fly over, operate in, or become located in. The Grantor also
hereby authorizes the Collateral Agent to file any such financing or
continuation statement without the signature of the Grantor to the extent
permitted by applicable law.
(c) Statements and Schedules. The Grantor will furnish to the
Collateral Agent from time to time statements, schedules and any other
information further identifying and describing the Collateral and such reports
in connection with the Collateral as the Collateral Agent may reasonably
request, all in reasonable detail.
(d) Compliance with Laws. The Grantor will neither use the
Collateral, nor permit the Collateral to be used, for any unlawful purpose or
contrary to any statute, law, ordinance or regulation relating to the
registration, use, operation or control of the Collateral. The Grantor will
comply with, or cause to be complied with, at all times and in all material
respects, all statutes, laws, ordinances and regulations of the United States
(including, without limitation, the FAA), the State of Ohio, and of all other
governmental, regulatory, or judicial bodies applicable to the use, operation,
maintenance, overhauling, or condition of the Collateral, or any part thereof,
and with all requirements under any licenses, permits, or certificates relating
to the use or operation of the Collateral which are issued to the Grantor or to
any other person having operational control of the Collateral; provided,
however, that the Grantor may, in good faith and by appropriate legal or other
proceedings, contest the validity of any such statutes, laws, ordinances or
regulations, or the requirements of any such licenses, permits, or certificates,
and pending the determination of such contest may postpone compliance therewith,
unless the rights of the Collateral Agent hereunder are or may be materially
adversely affected thereby.
Without limiting the generality of the foregoing, the Grantor
agrees that at no time during the effectiveness of this Agreement shall the
Aircraft be operated in, located in, or
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relocated to, by the Grantor or any other person or entity, any jurisdiction
unless the Geneva Convention, together with the necessary enacting rules and
regulations therefor (or some like treaty and regulations satisfactory to the
Collateral Agent and the Required Lenders) shall be in effect in such
jurisdiction and any notices, financing statements, documents, or instruments
necessary or required, in the opinion of counsel for the Collateral Agent, to be
filed in such jurisdiction shall have been filed and file stamped copies thereof
shall have been furnished to the Collateral Agent. The foregoing authority to
use the Aircraft to the contrary notwithstanding, at no time shall the Aircraft
be operated in or over any area which may expose the Collateral Agent to any
penalty, fine, sanction or other liability, whether civil or criminal, under any
applicable law, rule, treaty or convention, nor may the Aircraft be used in any
manner which is or is declared to be illegal and which may thereby render the
Aircraft liable to confiscation, seizure, detention or destruction.
(e) Identification of Leases and Chattel Paper. The Grantor
shall deliver to the Collateral Agent a revised Schedule IX (i) prior to the
occurrence of an Event of Default, on or prior to the tenth (10th) day of each
calendar month, and (ii) following the occurrence of an Event of Default, as
requested by the Collateral Agent or any Lender but no less frequently than once
a month, on or prior to the tenth (10th) Business Day of each calendar month.
The failure of the Grantor to execute and deliver such schedule shall not affect
or limit the Collateral Agent's Lien or other rights in and to the Lease
Collateral.
SECTION 10 COVENANTS REGARDING COLLATERAL EQUIPMENT AND COLLATERAL
INVENTORY.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) Location of Collateral Equipment. The Grantor shall keep
the Collateral Equipment at the places specified in Section 8(a) hereof and keep
the Collateral Inventory at the places specified in such Section 8(a) and
Section 10(d) hereof or, with respect to Collateral Equipment, upon thirty (30)
days' prior written notice to the Collateral Agent, at such other places in a
jurisdiction in which all action required by Section 9 hereof shall have been
taken with respect to the Collateral Equipment.
(b) Maintenance of Collateral Equipment and Collateral
Inventory. The Grantor shall cause each item of the Collateral Equipment and
Collateral Inventory to be maintained and preserved or cause the lessee thereof
to maintain and preserve the Collateral Equipment in the same condition, repair
and working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual, and shall, (i) make or cause to be
made all repairs, replacements, and other improvements thereto that are
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necessary or desirable to such end only by qualified personnel who are trained
in the repair and maintenance of such item, and (ii) deliver any and all
proceeds, subject to the terms of the lease, received in the case of any loss or
damage to the Collateral Agent (who shall deposit the same in a Collateral
Lockbox Account). In addition to the provisions set forth in Section 11 hereof,
upon the request of the Collateral Agent, the Grantor shall promptly furnish to
the Collateral Agent a statement respecting any loss or damage to any of the
Collateral Equipment.
(c) Payment of Taxes. The Grantor shall pay promptly when due
or cause the lessee to pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral
Equipment and Collateral Inventory, except to the extent the validity thereof is
being contested in good faith as permitted pursuant to the Third Amended and
Restated Credit Agreement.
(d) Location of Collateral Inventory. The Grantor shall update
Schedule VIII of this Agreement with a written schedule describing the location
of all Collateral Inventory (i) prior to the occurrence of an Event of Default,
on or prior to the tenth (10th) day of each calendar month, and (ii) following
the occurrence of an Event of Default, as requested by the Collateral Agent or
any Lender but no less frequently than once a month, on or prior to the tenth
(10th) Business Day of each calendar month. The failure of the Grantor to
execute and deliver such schedule shall not affect or limit the Collateral
Agent's security interest or Lien or other rights in and to the Collateral
Inventory.
SECTION 11 COVENANTS REGARDING INSURANCE.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) Maintenance of Insurance. The Grantor shall, at its own
expense, maintain insurance, or cause any lessee to insure, with respect to the
Collateral in such amounts, against such risks, in such form and with such
insurers, as shall be satisfactory to the Collateral Agent and the Required
Lenders from time to time. Each such policy maintained by Grantor, and, if
requested by the Collateral Agent as directed by the Required Lenders, each such
policy maintained by any lessee, shall in addition (i) name the Collateral Agent
as an additional insured party and loss payee thereunder (without any
representation or warranty by or obligation upon the Collateral Agent) pursuant
to certificates in form and substance satisfactory to the Collateral Agent, (ii)
contain the agreement by the insurer that any loss thereunder shall be payable
to the Collateral Agent notwithstanding any action, inaction or breach of
representation or warranty by the Grantor, (iii) provide that there shall be no
recourse against the Collateral Agent for
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payment of premiums or other amounts with respect thereto, (iv) with respect to
insurance maintained by the Grantor, provide that at least thirty (30) days'
prior written notice of any proposed termination, cancellation, lapse or
nonrenewal shall be given to the Collateral Agent by the insurer, and (v) with
respect to insurance maintained by a lessee of the Grantor, the Grantor shall
use its best efforts to comply with the preceding clause (iv). The Grantor shall
deliver to the Collateral Agent original or duplicate policies of such insurance
and certificates of insurance and, as often as the Collateral Agent may
reasonably request, a report of a reputable insurance broker with respect to
such insurance. The Grantor shall deliver to the Collateral Agent from time to
time, as the Collateral Agent may reasonably request, schedules setting forth
all insurance maintained by the Grantor then in effect.
(b) Grantor to Take Required Action. The Grantor shall, at the
request of the Collateral Agent, duly execute and deliver instruments of
assignment of the insurance policies described in paragraph (a) in order to
comply with the requirements of Section 9 above and shall cause the insurer(s)
to acknowledge notice of such assignment. The Grantor shall take all such action
as the insurer(s) providing such insurance shall require if the failure to do so
would cause the insurance policy(ies) to be cancelled or the coverage thereunder
adversely modified.
(c) Notice of Claims. The Grantor shall notify the Collateral
Agent of any single Collateral Insurance Claim known or which should have been
known to the Grantor which exceeds One Hundred Thousand Dollars ($100,000) or
any Collateral Insurance Claims known or which should have been known to the
Grantor which, in the aggregate, exceed Two Hundred Fifty Thousand Dollars
($250,000) in any one (1) calendar year.
(d) Deposit of Proceeds. All amounts paid with respect to any
Collateral Insurance Claim shall be deemed to constitute Proceeds and shall be
deposited only in the Collateral Lockbox Accounts. In the event that the
applicable lease agreement requires that amounts paid with respect to Collateral
Insurance Claims be used to purchase replacement Collateral Equipment, upon the
request of the Grantor and receipt by the Collateral Agent of evidence
satisfactory to the Collateral Agent that such purchase is so required, the
Collateral Agent, prior to the occurrence of an Event of Default, may release
such Proceeds in order to purchase such replacement Collateral Equipment.
(e) Settlement of Claims and Release of Proceeds. At any time
prior to the occurrence or existence of an Event of Default, the Grantor shall
have the right to negotiate and settle only those Collateral Insurance Claims
less than Two Hundred Fifty Thousand Dollars ($250,000); with respect to all
other Collateral Insurance Claims and at any time from and after the occurrence
or existence of an Event of Default, the Collateral Agent shall have full right
and power (pursuant to the power of attorney contained
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herein) to negotiate, settle and compromise any Collateral Insurance Claim, at
the direction of the Required Lenders. Except as set forth in clause (d) above,
all policy proceeds paid by the insurer(s) relating to any such Collateral
Insurance Claim shall be deposited into a Collateral Lockbox Account.
(f) Aircraft Insurance. The Grantor will at all times, at its
own cost and expense, maintain, or cause to be maintained, a policy or policies
of insurance with respect to the Aircraft covering such risks, including,
without limitation, insurance on the Aircraft for actual usage, including all
risk, ground and flight aircraft hull insurance, fire and explosion coverage,
including lightning and electrical damage, and public liability and property
damage insurance in amounts and types and with insurers as set forth on Schedule
XI attached hereto or as otherwise satisfactory to the Collateral Agent and the
Required Lenders from time to time.
SECTION 12 COVENANTS REGARDING ACCOUNTS AND ACCOUNTS RECEIVABLE.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) Records. The Grantor shall keep its chief place of
business and chief executive office and the office where it keeps its books and
records concerning the Accounts and Accounts Receivable, and the original copies
of all Chattel Paper that evidences Collateral, at the location therefor
specified on Schedule VIII attached hereto or, upon twenty (20) days' prior
written notice to the Collateral Agent, at such other locations in a
jurisdiction in which all actions required by Section 9 above shall have been
taken with respect to the Collateral.
(b) Notice to Account Debtors. The Grantor hereby authorizes
the Collateral Agent, at any time or times after an Event of Default, to notify,
any or all Account Debtors that the Accounts and Accounts Receivable have been
assigned to the Collateral Agent, and that the Collateral Agent has a Lien
therein and to direct such Account Debtors to make all payments due or to become
due from them to the Grantor directly to a Collateral Lockbox Account designated
by the Collateral Agent from time to time. Any such notice, in the Collateral
Agent's sole discretion, may be sent on the Grantor's stationery, in which event
the Grantor shall co-sign such notice with the Collateral Agent.
(c) Verifications. The Collateral Agent shall have the right
to make test verifications of the Accounts and Accounts Receivable and physical
verifications of the Collateral in any manner and through any commercially
reasonable medium that it considers advisable, and the Grantor agrees to furnish
all such assistance and information as the Collateral Agent may require in
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connection therewith. Prior to an Event of Default, the Collateral Agent shall
give reasonable advance notice of any such verification (which shall be during
business hours to the extent possible) if such activities include a visit to any
of the Grantor's business locations. At any time after an Event of Default, the
Grantor at its expense will cause certified independent public accountants
satisfactory to the Collateral Agent to prepare and deliver to the Collateral
Agent at any time and from time to time promptly upon the Collateral Agent's
request in form and substance satisfactory to the Collateral Agent such
information pertaining to the Accounts and Accounts Receivable, including
statements and schedules further identifying and describing the Collateral and
such other reports (in addition to all reports required by the Third Amended and
Restated Credit Agreement) in connection with the Collateral as the Collateral
Agent may reasonably request from time to time, all in reasonable detail.
(d) Limitations on Modifications of Accounts. Until such time
as the Collateral Agent, at the direction of the Required Lenders, shall notify
the Grantor of the revocation of such power and authority, the Grantor may grant
any extension of the time of payment of any of the Accounts, Accounts
Receivable, Chattel Paper or Instruments, compromise, compound or settle the
same for less than the full amount thereof, release, wholly or partly, any
person liable for the payment thereof, and allow any credit or discount.
(e) Schedule of Accounts and Accounts Receivable. On or prior
to the tenth (10th) day of each calendar month, the Grantor shall provide the
Collateral Agent with schedules describing all Accounts and Accounts Receivable
created or acquired by it and shall execute and deliver confirmatory written
assignments of such Accounts and Accounts Receivable to the Collateral Agent;
provided, however, that the failure of the Grantor to execute and deliver such
schedules and/or assignments describing all Accounts and Accounts Receivable to
the Collateral Agent shall not affect or limit the Collateral Agent's or any
Lender's security interest or other rights in and to the Accounts and Accounts
Receivable. Together with each schedule, the Grantor shall furnish, upon request
of the Collateral Agent, following the occurrence of a Default or an Event of
Default, copies of customers' invoices or the equivalent, and, upon request
therefor, copies of original shipping or delivery receipts for all merchandise
sold and such other documents as the Collateral Agent may require. The Grantor
will not re-date any invoice or sale or make sales on extended dating beyond
that customary in its industry. If the Grantor becomes aware of anything
materially detrimental to the material credit of any of its customers in the
possession of material Collateral, it will promptly advise the Collateral Agent
thereof.
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SECTION 13 ADDITIONAL COVENANTS.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) No Transfer of Collateral. The Grantor shall not:
(i) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, or attempt to contract to
do so, except (A) Collateral Inventory and that portion of Collateral
Equipment consisting of property subject to a Lease, in the ordinary
course of business (and provided that the Proceeds thereof are promptly
deposited into a Collateral Lockbox Account designated by the
Collateral Agent from time to time), (B) as permitted under the Third
Amended and Restated Credit Agreement and (C) pursuant to the CXC
Transaction; or
(ii) take any action that would directly or indirectly impair
the value of the interest or rights of the Grantor or the Collateral
Agent in such Collateral;
(b) Proceeds of Sale. In the event the Grantor transfers,
sells, leases, conveys, disposes of or grants any warrants or options with
respect to any of the Collateral outside of the ordinary course of business
pursuant to clause (a)(i)(B) above (collectively, a "Transfer"), the Grantor
covenants and agrees that it shall (i) in the event the proceeds from such
Transfer aggregate in excess of One Hundred Thousand Dollars ($100,000), require
that the transferee of such Transfer wire such proceeds directly to an
appropriate Collateral Lockbox Account or (ii) in the event the proceeds from
such Transfer aggregate One Hundred Thousand Dollars ($100,000) or less,
promptly deposit all such proceeds into an appropriate Collateral Lockbox
Account. No consent to any Transfer hereunder shall be deemed to have been given
by the Collateral Agent until the proceeds from such Transfer are actually
received in a Collateral Lockbox Account.
(c) Pledged Shares. The Grantor will (i) cause each issuer of
the Pledged Shares not to issue any stock or other securities in addition to or
in substitution for the Pledged Shares issued by the issuer, except to the
Grantor, and (ii) pledge hereunder, immediately upon the Grantor's acquisition
directly or indirectly thereof, any and all additional shares of stock or other
securities of each issuer of the Pledged Shares.
(d) Payment of Obligations. The Grantor will pay promptly when
due all charges imposed upon the Collateral or in respect of its income or
profits therefrom and all claims of any kind (including, without limitation,
claims for labor, materials and supplies), unless the same are being diligently
contested in good faith and for which reserves or appropriate provision, if any,
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as shall be required by generally accepted accounting principles, shall have
been made therefor.
(e) Limitation of Liens on Collateral. The Grantor will not
create, permit or suffer to exist, and will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Liens and will defend the right, title and interest of the
Collateral Agent in and to any of the Grantor's rights in or under the
Collateral against the claims and demands of all persons whomsoever.
(f) Compliance with Terms. The Grantor will perform and comply
with all obligations in respect of the Accounts, Accounts Receivable, Chattel
Paper, Contracts and all other agreements to which it is a party or by which it
is bound.
(g) MRK Secured Note. The Grantor shall irrevocably instruct
MRK to make all payments under that certain Asset Acquisition Agreement dated
May 31, 1994 by and among the Grantor, Computer Systems and MRK, including,
without limitation, payments in connection with the MRK Secured Note, directly
into a Collateral Lockbox Account designated by the Collateral Agent from time
to time. The Grantor agrees that it shall not amend, modify or waive any
provision of any of the MRK Secured Note without the prior written consent of
the Required Lenders and that upon a default under the MRK Secured Note, the
Grantor shall promptly take all steps necessary to enforce the same.
(h) Further Indemnification. The Grantor agrees to pay, and to
save the Collateral Agent and the Lenders harmless from, any and all liabilities
with respect to, or resulting from any delay in paying, any and all excise,
sales or other similar taxes which may be payable or determined to be payable
with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
(i) Maintenance of Records. The Grantor will keep and maintain
at its own cost and expense satisfactory and complete records of the Collateral
in the ordinary course of business, including, without limitation, a record of
all payments received and all credits granted with respect to the Collateral and
all other dealings with the Collateral. The Grantor will mark its books and
records pertaining to the Collateral to evidence this Agreement and the Liens
granted hereby. The Grantor agrees that the Collateral Agent shall have the
right, upon the occurrence of an Event of Default, without prior notice, to
require the Grantor to turn over physical possession of, or to make available
any such books and records to the Collateral Agent or to its representatives on
demand of the Collateral Agent. Prior to the occurrence of an Event of Default,
the Grantor shall permit any representative of the Collateral Agent to inspect
such books and records during normal business hours at reasonable times and will
provide photocopies thereof to the Collateral Agent and such clerical and
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other assistance as may be reasonably requested with regard thereto. Upon
reasonable notice and during regular business hours, the Collateral Agent and
its representatives shall also have the right to enter into and upon any
premises where any of the Collateral is located for the purpose of inspecting
the same, observing its use or otherwise protecting its interests therein.
(j) Special Collateral. Promptly upon the Grantor's receipt of
that portion of the Collateral (other than Chattel Paper) which is or becomes
evidenced by an agreement, writing, Instrument and/or Document, including,
without limitation, promissory notes, securities (as defined in Article 8 of the
UCC), trade acceptances, documents of title and warehouse receipts, but
excluding Leases which are or become Chattel Paper, the Grantor shall deliver
the original thereof to the Collateral Agent, together with appropriate
endorsements, stock powers or other specific evidence (in form and substance
acceptable to the Collateral Agent) of assignment thereof to the Collateral
Agent; provided, however, that the Grantor may deposit such Instruments only in
a Collateral Lockbox Account designated by the Collateral Agent from time to
time.
(k) Performance by the Collateral Agent of the Grantor's
Obligation. If the Grantor fails to perform or comply with any of its covenants
or agreements contained herein and the Collateral Agent, as provided for by the
terms of this Agreement, shall itself perform or comply, or otherwise cause
performance or compliance, with such covenants or agreements, the reasonable
expenses of the Collateral Agent incurred in connection with such performance or
compliance, together with interest thereon from the date paid or incurred by the
Collateral Agent until paid in full at the interest rate determined in
accordance with Section 2.4(a) of the Third Amended and Restated Credit
Agreement then in effect in respect of the Revolving Loans (as defined in the
Third Amended and Restated Credit Agreement), shall be payable by the Grantor to
the Collateral Agent on demand and shall constitute Obligations secured hereby.
(l) Maintenance and Repairs of Aircraft.
(i) During the effectiveness of this Agreement, the Grantor
shall, at its expense, do or cause to be done each and all of the
following:
(A) Maintain and keep the Aircraft in as good condition and
repair as it is on the date of this Agreement, ordinary
wear and tear excepted;
(B) Maintain and keep the Aircraft in good order and repair
and airworthy condition in accordance with the
requirements of each of the manufacturers' manuals and
mandatory service bulletins and
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each of the manufacturers' nonmandatory service bulletins
which relate to airworthiness;
(C) Replace in or on the Airframe, any and all Engines, parts,
appliances, instruments or accessories which may be worn
out, lost, destroyed or otherwise rendered unfit for use;
and
(D) Without limiting the foregoing, cause to be performed, on
all parts of the Aircraft, all applicable mandatory
Airworthiness Directives, Federal Aviation Regulations,
Special Federal Aviation Regulations, and manufacturers'
service bulletins relating to airworthiness, the
compliance date of which shall occur during the term of
this Agreement.
(ii) The Grantor shall be responsible for all required
inspections of the Aircraft and licensing or re-licensing of the
Aircraft in accordance with all applicable FAA and other governmental
requirements. The Grantor shall at all times cause the Aircraft to
have, on board and in a conspicuous location, a current Certificate of
Airworthiness issued by the FAA.
(iii) All inspections, maintenance, modifications, repairs,
and overhauls of the Aircraft (including those performed on the
Airframe, the Engines, and/or any components, appliances, accessories,
instruments, or equipment) shall be performed by personnel authorized
by the FAA to perform such services.
(iv) If any Engine, component, appliance, accessory,
instrument, equipment or part of the Aircraft shall reach such a
condition as to require overhaul, repair or replacement, for any cause
whatever, in order to comply with the standards for maintenance and
other provisions set forth in this Agreement, the Grantor may:
(A) Install on the Aircraft such items of substantially the
same type in temporary replacement of those then installed
on the Aircraft, pending overhaul or repair of the
unsatisfactory item; provided, however, that such
replacement items must be in such a condition as to be
permissible for use upon the Aircraft in accordance with
the standards for maintenance and other provisions set
forth in this Agreement; provided further, however, that
the Grantor must, at all times, retain unencumbered title
to any and all items temporarily removed; or
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(B) Install on the Aircraft such items of substantially the same
type in permanent replacement of those then installed on the
Aircraft; provided, however, that such replacement items must be
in such condition as to be permissible for use upon the Aircraft
in accordance with the standards for maintenance and other
provisions set forth in this Agreement; provided further,
however, that the Grantor must first comply with each of the
requirements of clause (v) hereinbelow.
(v) In the event that during the effectiveness of this Agreement,
the Grantor shall be required or permitted to install upon the Airframe or
any Engine, components, appliances, accessories, instruments, engines,
equipment or parts in permanent replacement of those then installed on the
Airframe or such Engine, the Grantor may do so provided that, in addition
to any other requirements provided for in this Agreement:
(A) The Collateral Agent is not divested of its security interest in
and Lien upon any item removed from the Aircraft and that no
such removed item shall be or become subject to the lien or
claim of any person, unless and until such item is replaced by
an item of the type and condition required by this Agreement,
title to which, upon its being installed or attached to the
Airframe, is validly vested in the Grantor, free and clear of
any liens and/or claims, of any kind or nature, of any person
other than the Collateral Agent;
(B) The Grantor's title to every substituted item shall immediately
be and become subject to the security interest and Lien of the
Collateral Agent, and each of the provisions of this Agreement,
and each such item shall remain so encumbered and so subject
unless it is, in turn, replaced by a substitute item in the
manner permitted herein;
(C) If an item is removed from the Aircraft and replaced in
accordance with the requirements of this Agreement, and if the
substituted item satisfies the requirements of this Agreement,
including the terms and conditions of clauses (A) and (B)
hereinabove, then the item which is removed shall thereupon, and
only thereupon, be free and clear of the security interest and
Lien of the Collateral Agent.
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(vi) In the event that any Engine, component, appliance, accessory,
instrument, equipment or part is installed upon the Airframe, and is not
in substitution for or in replacement of an existing item, such additional
item shall be considered as an accession to the Airframe.
(m) Aircraft Registration. The Grantor is the registered owner of
the Aircraft pursuant to a proper registration under the Federal Aviation Act of
1958, as amended (the "Act"), and the Grantor qualifies in all respects as a
"citizen of the United States" as defined in Section 101(16) of the Act and the
Grantor shall, so long as this Agreement remains in full force and effect,
maintain the registration of the Aircraft with the FAA in its name and shall
remain a "citizen of the United States" as defined in Section 101(16) of the
Act.
SECTION 14 VOTING RIGHTS; DIVIDENDS; ETC.
(a) Upon Event of Default. So long as no Event of Default shall
have occurred which has not been waived in accordance with the provisions of the
Third Amended and Restated Credit Agreement:
(i) the Grantor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Security Collateral or any
part thereof owned by it for any purpose not inconsistent with the terms
of this Agreement or the Third Amended and Restated Credit Agreement;
provided, however, that the Grantor shall not exercise or shall refrain
from exercising any such right if, in the Collateral Agent's judgment,
such action or inaction would have a material adverse effect on the value
of the Security Collateral or any part thereof; and, provided, further,
that the Grantor shall give the Collateral Agent at least five (5) days'
written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right; and
(ii) the Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Grantor all such proxies and other
instruments as the Grantor may reasonably request for the purpose of
enabling the Grantor to exercise the voting and other rights that they are
entitled to exercise pursuant to paragraph (i) above.
(b) After Event of Default. Upon the occurrence of an Event of
Default, and after notice to the Grantor by the Collateral Agent, all rights of
the Grantor to exercise the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 14(a)(i) above shall
cease, and all such rights shall thereupon become vested in the Collateral Agent
who shall thereupon have the sole right to exercise such voting and other
consensual rights.
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SECTION 15 COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
(a) Appointment of Collateral Agent. The Grantor hereby irrevocably
appoints the Collateral Agent and any officer or agent thereof, with full power
of substitution, as the Grantor's attorney-in-fact, with full irrevocable power
and authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument that the Collateral Agent may deem
necessary or advisable to enforce its rights and remedies hereunder, including,
without limitation:
(i) to obtain and adjust insurance required to be paid to the
Collateral Agent pursuant to Section 11 hereof;
(ii) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral;
(iii) to receive, indorse, and collect any drafts or other
instruments, documents and Chattel Paper, in connection with clauses (i)
or (ii) above;
(iv) following the occurrence of an Event of Default, to file any
claims or take any action or institute any proceedings which the
Collateral Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of the Collateral
Agent with respect to any of the Collateral;
(v) to receive, indorse and collect all instruments made payable
to the Grantor representing any dividend, interest payment or other
distribution in respect of the Security Collateral or any part thereof and
to give full discharge for the same;
(vi) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(vii) to defend any suit, action or proceeding brought against the
Grantor with respect to any Collateral and to settle, compromise or adjust
any suit, action or proceeding described in this Section 15 and, in
connection therewith, to give such discharges or releases as the
Collateral Agent may deem appropriate; and
(viii) to make any agreement with respect to or otherwise deal with,
including, without limitation, leasing or chartering the Aircraft, and,
after the occurrence of an Event of Default, to sell, transfer, or pledge,
any of the Collateral as fully and completely as though the Collateral
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Agent were the absolute owner thereof for all purposes and to do, at the
Collateral Agent's option and the Grantor's expense, at any time, or from
time to time, all acts and things which the Collateral Agent reasonably
deems necessary to protect, preserve or realize upon the Collateral and
the Collateral Agent's security interests and liens therein, in order to
effect the intent of this Agreement, all as fully and effectively as the
Grantor might do.
(b) Ratification of Actions. The Grantor hereby ratifies, to the
extent permitted by law, all that said attorneys shall lawfully do or cause to
be done by virtue hereof. The power of attorney granted pursuant to this Section
15 is a power coupled with an interest and shall be irrevocable until the
Obligations are indefeasibly paid in full.
(c) Duties of Collateral Agent. The powers conferred on the
Collateral Agent hereunder are solely to protect the Collateral Agent's
interests in the Collateral and shall not impose any duty upon it to exercise
any such powers. The Collateral Agent shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers and neither it
nor any of its past, present or future officers, directors, employees or agents
shall be responsible to the Grantor for any act or failure to act, except for
its own gross negligence or willful misconduct.
(d) Additional Authority Upon Event of Default. The Grantor also
authorizes the Collateral Agent, at any time or times after the occurrence of an
Event of Default, (i) to communicate in its own name with any party to any
Contract with regard to the assignment of the right, title and interest of the
Grantor in and under the Contracts hereunder and other matters relating thereto,
and (ii) to execute, in connection with the sale provided for in Section 18
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
SECTION 16 THE COLLATERAL AGENT.
Under the May 1994 Security Agreement and the Amended and Restated
Security Agreement, the Existing Bank Lenders and the Northwestern Lenders,
among others, originally appointed Continental Bank as Collateral Agent.
Pursuant to that certain Appointment of Successor Collateral Agent under
Security Agreements, effective as of November 21, 1994, Society was appointed as
successor Collateral Agent to Continental Bank. The Collateral Agent acts with
the authorization of and at the direction of the Required Lenders, as more fully
described in the Third Amended and Restated Credit Agreement and the
Intercreditor Agreement. Except as set forth in Section 6 hereof, the Collateral
Agent shall only release its Lien on Collateral as authorized and directed in
writing by the Required Lenders. The Collateral Agent is authorized by the
Lenders to, among other things, execute in its
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capacity as Collateral Agent for the Lenders, the Sweep Agreements and the Cash
Collateral and Account Maintenance Agreement.
(a) Neither the Collateral Agent nor any of its past, present or
future directors, agents, officers, employees or attorneys shall be liable for
any acts, omissions, errors of judgment or mistakes of fact or law made, taken
or omitted to be made or taken in accordance with this Agreement or any Debt
Documents (including, without limitation, acts, omissions, errors or mistakes
with respect to the Collateral), except for those arising out of or in
connection with gross negligence or willful misconduct. Without limiting the
foregoing, neither the Collateral Agent nor any of its past, present or future
directors, officers, agents, employees or attorneys shall be responsible for, or
have any duty to examine, ascertain, or inquire about (A) the genuineness,
execution, validity, effectiveness, enforceability, value or sufficiency of (x)
this Agreement, or (y) any document or instrument furnished pursuant to or in
connection with this Agreement, including the Grantor's books and records, (B)
the collectability of any amounts owed by the Grantor, (C) any recitals or
statements or representations or warranties in connection with this Agreement or
any of the Debt Documents, (D) any failure of any party to this Agreement or any
Debt Documents or any Lender to receive any communication sent to the notice
address specified in Section 23 hereof, or (E) the assets, liabilities,
financial condition, result of operations, business or creditworthiness of the
Grantor.
(b) The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as the Grantor requests in
writing, but failure of the Collateral Agent to comply with any such request
shall not of itself be deemed a failure to exercise reasonable care, and no
failure of the Collateral Agent to preserve or protect any rights with respect
to such Collateral against prior parties, or to do any act with respect to the
preservation of such Collateral not so requested by the Grantor, shall be deemed
a failure to exercise reasonable care in the custody or preservation of such
Collateral.
(c) no provision of this Agreement shall require the Collateral
Agent to extend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or thereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
SECTION 17 EVENTS OF DEFAULT.
The occurrence of one or more of the following events shall constitute an
" Event of Default" hereunder:
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(a) the Grantor shall fail or neglect to perform, keep or observe
any of its agreements, covenants or obligations hereunder and such failure or
neglect shall continue for ten (10) days after such performance or observance is
due hereunder;
(b) any statement, representation or warranty made by the Grantor
is not true, correct, complete and accurate in any material respect when made;
(c) an Event of Default as defined in any of the Debt Documents
shall have occurred; or
(d) the Grantor shall fail to deliver to the Collateral Agent the
Sweep Agreements required pursuant to Section 4(f) hereof.
SECTION 18 REMEDIES.
After the occurrence of an Event of Default which has not been waived in
accordance with the terms of the Third Amended and Restated Credit Agreement:
(a) Set-Off.
(i) As additional security for the payment and performance of the
Obligations, the Collateral Agent shall have a general right of set-off
and banker's lien under applicable law against all of the Grantor's
respective property and interests in property now or from time to time
hereafter in the possession, custody or control of Society in any capacity
or any of the Co-Agents including without limitation, the Mandatory Bank
Accounts, or any other Deposit Account of any type maintained from time to
time by the Grantor with the Collateral Agent or any other Lender. The
Collateral Agent may, and is hereby authorized by the Grantor to, at any
time and from time to time, to the fullest extent permitted by Applicable
Law, without advance notice to the Grantor (any such notice being
expressly waived by the Grantor), set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held and any other indebtedness at any time owing by the Collateral Agent
or any Lender to or for the credit or the account of the Grantor against
any or all of the Obligations of the Grantor now or hereafter existing
whether or not such Obligations have matured and irrespective of whether
or not Collateral Agent has exercised any other rights that it has or may
have with respect to such Obligations, including, without limitation, any
acceleration rights.
(ii) Notwithstanding the introduction to this Section 18 to the
contrary, both before and after an Event of Default, the Grantor agrees to
immediately notify the Collateral Agent whenever any third party obtains
or asserts
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any interest in any Collateral Lockbox Account, Mandatory Bank Account or
Permitted Bank Account.
(iii) The Collateral Agent agrees to promptly notify the Grantor
after any such set-off and application, provided that the failure to give
such notice shall not affect the validity of such set-off and application.
The Collateral Agent shall not be liable to any Person for failure to give
any such notice. The rights of the Collateral Agent under this Section
18(a) are in addition to the other rights and remedies (including, without
limitation, other rights of set-off) which the Collateral Agent may have.
(b) Rights and Remedies. The Collateral Agent shall, in addition to
other rights and remedies provided for herein or otherwise available to it, have
all the rights and remedies of a secured party on default under the UCC (whether
or not the UCC applies to the affected Collateral), and may, upon direction of
the Required Lenders, (i) exercise any and all rights and remedies of the
Grantor in respect of the Collateral provided, however, that with respect to
that portion of the Collateral consisting of books and records, such exercise
shall be consistent with the terms of the CXC Intercreditor Agreement, (ii)
require the Grantor to, and the Grantor hereby agrees that it will at its
expense and upon request of the Collateral Agent forthwith, assemble all or part
of the Collateral as directed by the Collateral Agent and make it available to
the Collateral Agent at a place to be designated by the Collateral Agent, (iii)
occupy any premises owned or leased by the Grantor where the Collateral or any
part thereof is assembled for a reasonable period in order to effectuate its
rights and remedies hereunder or under law, without obligation to the Grantor in
respect of such occupation and the Collateral Agent may exclude the Grantor, its
agents, employees and servants therefrom, and having and holding the same may
use, operate, manage and control the Collateral and conduct the business of the
Grantor and do any acts which it deems necessary or desirable to preserve the
value, marketability or rentability of the Collateral, or any part thereof or
interest therein, all without prior notice to the Grantor, except as
specifically provided in Section 18(b)(iv) below with respect to a formal public
or private sale (including, without limitation, the right: to convert raw
materials inventory to work-in-process inventory; to convert work-in-process
inventory to finished goods inventory; to order, procure and purchase all
materials, goods and other items necessary in connection with any such
conversions; to sell finished goods inventory in the ordinary course of the
Grantor's business and otherwise; to complete any goods; to fill and ship in
accordance with then existing purchase orders; to solicit orders; and to do all
such things and acts as the Collateral Agent deems necessary or desirable in
order to maximize the value of the Grantor's business or the Collateral) and
upon every such entry, the Collateral Agent, at the expense of the Grantor, from
time to time, either by purchase, repairs or construction, may maintain and
restore Collateral, may complete the
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construction of improvements thereon and, in the course of such completion, may
make such changes in the contemplated improvements and collateral as is deemed
desirable and may insure the same; and likewise, from time to time, at the
expense of the Grantor, the Collateral Agent may make all necessary or proper
repairs, renewals and replacements and such useful alterations, additions,
betterments and improvements thereto and thereon as may seem advisable, and in
every such case shall have the right to manage and operate the Collateral and to
carry on the business thereof and exercise all rights and powers of the Grantor
with respect thereto in the name or names of any of the Grantor or otherwise as
is deemed appropriate, after deducting the expenses of conducting the business
thereof and of all maintenance, repairs, replacements, alterations, additions,
betterments and improvements and amounts necessary to pay for taxes,
assessments, insurance and prior insurance and prior or other property charges
upon the Collateral, the Grantor's business or any part thereof, as well as just
and reasonable compensation for its services and for all attorneys, counsel,
agents, clerks, servants and other employees by it engaged and employed, shall
apply the moneys arising as aforesaid pursuant to the provisions of this
Agreement (nothing contained herein shall be construed to impose upon the
Collateral Agent any obligation to preserve or protect the Collateral or the
Grantor's business following the occurrence of an Event of Default), and (iv)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Collateral Agent may deem
commercially reasonable. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least five (5) days' notice to the Grantor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Collateral Agent shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
(c) Treatment of Payments. All payments received by the Grantor in
connection with any Collateral or otherwise in respect of the Collateral shall
be received in trust for the benefit of the Collateral Agent, and shall be
segregated from other funds of the Grantor and shall be forthwith deposited into
a Collateral Lockbox Account designated by the Collateral Agent from time to
time in the same form as so received (with any necessary indorsement).
(d) Disposition of Payments. Any surplus of such cash or cash
proceeds held by the Collateral Agent and remaining after payment in full of all
the Obligations and termination in writing by the Lenders of each of the Third
Amended and Restated Credit
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Agreement and each of the Debt Documents shall be paid over to the Grantor or
to whomsoever may be lawfully entitled to receive such surplus.
SECTION 19 INDEMNITY AND EXPENSES.
(a) Indemnification. The Grantor agrees to indemnify the Collateral
Agent, the Co-Agents and each of the Lenders from and against any and all
claims, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, disbursements and liabilities of any kind or nature whatsoever
arising out of, relating to or resulting from this Agreement (including, without
limitation, enforcement of this Agreement and the establishment and maintenance
from time to time of Collateral Lockbox Accounts at banks other than the
Collateral Agent) or any action taken or omitted by any such indemnified person
in connection herewith, except claims, losses or liabilities resulting from the
Collateral Agent's gross negligence or willful misconduct.
(b) Reimbursement of Expenses. The Grantor shall reimburse the
Collateral Agent on demand for all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred by the Collateral
Agent in connection with the preparation, execution, administration or
enforcement of, or legal advice in respect of rights or responsibilities under
this Agreement, the Third Amended and Restated Credit Agreement and the Debt
Documents, regardless of whether any suit is filed, including, without
limitation, all costs and expenses incurred in checking, retaking, holding,
handling, preparing for sale and selling or otherwise disposing of any and all
Collateral and the establishment and maintenance from time to time of Collateral
Lockbox Accounts at banks other than the Collateral Agent's bank. The Grantor's
reimbursement obligations hereunder shall be part of the Obligations, shall bear
interest at the interest rate determined in accordance with Section 2.4(a) of
the Third Amended and Restated Credit Agreement from the date incurred until
paid in full, and shall be secured by the Collateral and enjoy the benefits of
this Agreement, notwithstanding that such obligations may cause the principal
balance of the unpaid Loans (as defined in the Third Amended and Restated Credit
Agreement) and the Notes to exceed the face amount of the Notes. In the event
the Grantor shall fail to pay all amounts reimbursable hereunder within ten (10)
days after demand therefor, the same shall constitute an Event of Default, and,
from and including the tenth (10th) day after demand for payment, the amount
owing under this paragraph (b) shall bear interest at the interest rate
determined in accordance with Section 2.4(c) of the Third Amended and Restated
Credit Agreement. The Grantor's reimbursement obligations hereunder shall
survive the repayment of the Obligations.
All obligations provided for in this Section 19 shall survive
termination of this Agreement and the replacement of the Collateral Agent under
Section 16(k) or Section 16(l) hereof.
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SECTION 20 SECURITY INTEREST ABSOLUTE.
All rights of the Collateral Agent and security interests hereunder, and
all obligations of the Grantor hereunder, shall be absolute and unconditional,
irrespective of:
(a) any lack of validity or enforceability of any of the terms of
this Agreement or any of the Debt Documents or other agreements, writings,
documents or instruments relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other amendment or waiver of
or any consent to any departure from any of the terms of this Agreement or any
of the Debt Documents;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from any of
the terms of this Agreement or any of the Debt Documents;
(d) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty for any or all of the Obligations; or
(e) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Grantor, any guarantor of the Obligations
or any third party grantor of a security interest.
SECTION 21 REGISTRATION RIGHTS.
If the Collateral Agent shall determine to exercise its right to sell all
or any of the Pledged Shares pursuant to Section 18 hereof, the Grantor agrees
that, upon request of the Collateral Agent, the Grantor will, at its own
expense:
(a) execute and deliver, and cause each issuer of the Pledged Shares
contemplated to be sold and the directors and officers thereof to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts and things, as may be necessary or, in the opinion of the Collateral
Agent, advisable to register such Security Collateral under the provisions of
the Securities Act of 1933, as from time to time amended (the "Securities Act"),
and to cause the registration statement relating thereto to become effective and
to remain effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the related
prospectus that, in the opinion of the Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto;
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(b) use its best efforts to qualify the Security Collateral under
the state securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Security Collateral, as requested by the
Collateral Agent;
(c) use its best efforts to cause each such issuer to make available
to its security holders, as soon as practicable, an earning statement that will
satisfy the provisions of Section 11(a) of the Securities Act; and
(d) use its best efforts to do or cause to be done all such other
acts and things as may be necessary to make such sale of the Security Collateral
or any part thereof valid and binding and in compliance with applicable law.
The Grantor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent and each Lender by reason
of the failure by the Grantor to perform any of the covenants contained in this
Section 21 and, consequently, agree that, if the Grantor shall fail to perform
any of such covenants, the Grantor shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the Security Collateral on the date the
Collateral Agent shall demand compliance with this Section 21 in addition to any
other amounts otherwise payable to the Collateral Agent pursuant to the terms of
this Agreement.
SECTION 22 AMENDMENTS; ETC.
No amendment or waiver of any provision of this Agreement nor consent to
any departure by the Grantor herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Collateral Agent upon the
direction of the Required Lenders and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 23 NOTICES.
Except as otherwise provided herein, whenever it is provided herein that
any notice, demand, request, consent, approval, declaration or other
communication (a "Notice") shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party a Notice with respect to this Agreement, each such
Notice shall be in writing and shall be delivered in person with receipt
acknowledged, sent by nationwide commercial courier service (such as Federal
Express), or telecopied (with a copy also mailed by registered or certified
mail), or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Grantor, to it at:
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LDI Corporation
4770 Hinckley Industrial Parkway
Cleveland, Ohio 44109
Telecopier: (216) 485-4811
Attention: Chief Executive Officer
with a copy to:
LDI Corporation
4770 Hinckley Industrial Parkway
Cleveland, Ohio 44109
Telecopier: (216) 485-4811
Attention: Legal Department
(b) If to the Collateral Agent, to it at:
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Telecopier: (216) 689-7991
Attention: Loan Administration
with respect to all Notices other than a Notice to
Release CXC Funds, Notice to Release Non-Recourse
Lender Funds, Notice of Non-Recourse Financing, the
revised Schedule IX referred to in Section 9(e) above
and the update of Schedule VIII referred to in Section
10(d) above, with a copy to:
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Telecopier: (216) 241-0816
Attention: Thomas A. Cicarella, Esq.
(c) If to the Lenders, to them at their respective addresses in
accordance with Section 10.2 of the Third Amended and Restated
Credit Agreement.
or at such other address as may substituted by Notice given as herein provided.
The giving of any Notice required hereunder may be waived in writing by the
party entitled to receive such Notice. Every Notice hereunder shall be deemed to
have been duly given or served on the date on which personally delivered, with
receipt acknowledged, or upon receipt by the party to whom the Notice is
addressed, if sent by telecopy transmission, or three (3) business days after
the same shall have been deposited in the United States mail, or the first
business day after timely delivery to the courier service, if sent by nationwide
commercial courier service. Failure or delay in delivering copies of any Notice
to the persons
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designated above to receive copies thereof shall in no way adversely affect the
effectiveness of such Notice.
SECTION 24 CONTINUING SECURITY INTEREST; TRANSFER OF NOTES.
This Agreement has created and continues to create a continuing security
interest in the Collateral and shall (a) remain in full force and effect until
payment in full of the Obligations and termination of the Third Amended and
Restated Credit Agreement and all of the Debt Documents as evidenced by written
statements of the Lenders, (b) be binding upon the Grantor, its successors and
assigns and (c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent for the benefit of the
Co-Agents, the Administrative Agent and the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), to the extent permitted by the Third Amended and Restated
Credit Agreement any Lender may assign or otherwise transfer any note or other
instrument held by it to any other person or entity, and such other person or
entity shall thereupon become vested with all the benefits in respect thereof
granted to such Lender herein or otherwise. Upon the payment in full of the
Obligations and termination of the Third Amended and Restated Credit Agreement
and each of the Debt Documents as evidenced by written statements of the
Lenders, the security interest granted hereby shall terminate and all rights to
the Collateral shall revert to the Grantor. Upon any such termination, the
Collateral Agent will, at the Grantor's expense, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination.
SECTION 25 GOVERNING LAW; TERMS; WAIVER OF DEFAULTS.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Ohio, except to the extent that the validity or perfection
of the security interest hereunder, or remedies hereunder, in respect of any
particular Collateral are governed by the laws of a jurisdiction other than the
State of Ohio without regard to principles of conflict of law. This Agreement is
submitted to the Grantor in Cleveland, Ohio, and shall be deemed to have been
delivered thereat. Unless otherwise defined herein, terms used in Article 9 of
the Uniform Commercial Code as in effect in the State of Ohio are used herein as
therein defined.
SECTION 26 REINSTATEMENT.
This Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Grantor for liquidation
or reorganization, should the Grantor become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of the Grantor's assets, and shall continue to be effective
or be reinstated, as the case may be, if at any time payment and performance of
the Obligations, or any part thereof,
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is, pursuant to Applicable Law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent conveyance," "fraudulent transfer," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
SECTION 27 INTERPRETATION.
(a) Incorporation of Recitals. The preamble and each of the Recitals
hereto shall be considered as part of this Agreement and, accordingly, each is
hereby incorporated herein.
(b) Headings; Language. The section and paragraph headings contained
in this Agreement are solely for the purpose of reference and shall not affect
the meaning or interpretation of this Agreement. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their common intent and no rule of strict construction shall be applied
against any of the parties.
(c) Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(d) No Waiver; Cumulative Remedies. Neither the Collateral Agent nor
any Lender shall by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder. A waiver by the Collateral Agent
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Collateral Agent would otherwise have had
on any future occasion. No failure to exercise nor any delay in exercising on
the part of the Collateral Agent, any right, power or privilege hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise or any
right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.
(e) Conflicts or Inconsistency. A conflict or inconsistency, if any,
between the terms and provisions of this Agreement and the terms and provisions
of the Third Amended and Restated Credit Agreement shall be controlled by the
terms and provisions of the Third Amended and Restated Credit Agreement to
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the extent of such conflict or inconsistency; provided, however, that in the
event of any conflict or inconsistency between the terms and provisions of this
Agreement, the Third Amended and Restated Credit Agreement and the Intercreditor
Agreement, the terms and provisions of the Intercreditor Agreement shall control
to the extent of such conflict or inconsistency.
(f) Execution in Counterparts; Amendment and Restatement. This
Agreement may be executed by the parties hereto in several counterparts, each of
which, when so executed shall be deemed an original but all such counterparts
shall constitute one and the same instrument. This Agreement is an amendment and
restatement of the Amended and Restated Security Agreement and is intended to,
and does, continue unimpaired and uninterrupted all Liens and security interests
granted by the Grantor thereunder and under the May 1994 Security Agreement, as
amended hereby.
SECTION 28 WAIVER OF JURY TRIAL.
THE COLLATERAL AGENT, EACH OF THE CO-AGENTS, EACH OF THE LENDERS AND THE
GRANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY DEBT
DOCUMENT OR ANY COURSES OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE COLLATERAL AGENT, EACH OF THE CO-AGENTS,
THE LENDERS OR THE GRANTOR. THE GRANTOR WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON THE GRANTOR AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE
BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE GRANTOR AT THE
ADDRESSES PROVIDED IN SECTION 23 ABOVE AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED THREE (3) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN
THE UNITED STATES MAIL, POSTAGE PREPAID. THE GRANTOR HEREBY IRREVOCABLY APPOINTS
CT CORPORATION SYSTEM AS THE GRANTOR'S AGENT FOR THE PURPOSE OF ACCEPTING THE
SERVICE OF ANY PROCESS RELATING TO THIS AGREEMENT OR ANY OF THE DEBT DOCUMENTS
WITHIN THE STATE OF OHIO. THE GRANTOR ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF THIS AGREEMENT AND EACH DEBT DOCUMENT TO WHICH IT IS A PARTY) AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL AGENT, EACH OF
THE CO-AGENTS AND EACH OF THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH DEBT
DOCUMENT.
SECTION 29 RELEASE.
The Grantor does hereby release and discharge the Collateral Agent, the
Co-Agents and each of them, the Lenders and each of them, and each of their
respective shareholders, agents, servants, employees, directors, officers,
attorneys, affiliates, subsidiaries, successors and assigns and all persons,
firms, corporations and organizations acting on its behalf ("Release Parties")
of and from all damages, losses, claims, demands, liabilities, obligations,
actions and causes of actions whatsoever,
58
<PAGE> 64
that the Grantor has, had or will have, or claims to have, against any of the
Release Parties as of the date the Grantor executes this Agreement and whether
known or unknown at the time of this release, and of every nature and extent
whatsoever on account of or in any way, direct or indirect, touching,
concerning, arising out of or founded upon this Agreement, the Amended and
Restated Security Agreement or any Debt Document.
[Signature pages to follow]
59
<PAGE> 65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their officers thereunto duly authorized as of
the date first above written.
LDI CORPORATION, Grantor
By:
---------------------------------
Title:
------------------------------
SOCIETY NATIONAL BANK, as Collateral
Agent
By:
---------------------------------
Title:
------------------------------
60
<PAGE> 66
STATE OF OHIO )
) ss:
COUNTY OF CUYAHOGA )
The foregoing instrument was acknowledged before me this 21st day of
July, 1995, by Floyd S. Robinson, President of LDI Corporation, a Delaware
corporation, on behalf of the corporation.
------------------------------
Notary Public
STATE OF OHIO )
) ss:
COUNTY OF CUYAHOGA )
The foregoing instrument was acknowledged before me this 21st day of
July, 1995, by Terry A. Graffis, Vice President of Society National Bank, a
national banking association, on behalf of the corporation.
------------------------------
Notary Public
61
<PAGE> 67
SCHEDULE I
MANDATORY BANK ACCOUNTS
Mandatory Bank Accounts are those designated as "Mandatory" on Schedule VI
hereto.
<PAGE> 68
SCHEDULE II
PERMITTED BANK ACCOUNTS
Permitted Bank Accounts are those designated as "Permitted" on Schedule VI
hereto.
<PAGE> 69
SCHEDULE III
SPECIAL PERMITTED BANK ACCOUNTS
Special Permitted Bank Accounts are those designated as "Special" on Schedule
VI hereto.
<PAGE> 70
SCHEDULE IV
INTELLECTUAL PROPERTY
None
<PAGE> 71
SCHEDULE V
PLEDGED SHARES/PLEDGED DEBT
<PAGE> 72
SCHEDULE VI
BANK ACCOUNTS
<TABLE>
<CAPTION>
Name and Address Mailing Address Type of
of Bank of Account Account Number Account
---------------- --------------- -------------- -------
<S> <C> <C> <C>
</TABLE>
<PAGE> 73
SCHEDULE VII
GRANTOR'S LOCATIONS
<PAGE> 74
SCHEDULE VIII
LOCATION OF COLLATERAL
The locations of the Collateral are as set forth on Schedule IX hereto as
updated and filed with the Collateral Agent from time to time.
<PAGE> 75
SCHEDULE IX
LEASES
The information required by Schedule IX is on file with the Collateral Agent.
<PAGE> 76
SCHEDULE X
AIRCRAFT AND ENGINES
Airframes
The following aircraft:
<TABLE>
<CAPTION>
Manufacturer's United States
Manufacturer Model Serial No. Registration No.
------------ ---------------- ----------------
<S> <C> <C> <C>
McDonnell Douglas DC-9-32 47281 N 17533
McDonnell Douglas DC-9-32 47218 N 12538
</TABLE>
Engines
The following engines, each engine having 750 or more rated takeoff horsepower
or the equivalent thereof:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial No.
------------ ------- ----------
<S> <C> <C>
1. Pratt & Whitney JT8D-9A 666960
2. Pratt & Whitney JT8D-9A 657191
3. Pratt & Whitney JT8D-9A 666693
4. Pratt & Whitney JT8D-9A 656906
</TABLE>
<PAGE> 77
EXHIBIT I
FORM OF COLLATERAL LOCKBOX ACCOUNT LETTER
___________, 1995
Terry A. Graffis, Vice President
Society National Bank
as Collateral Agent
127 Public Square
5th Floor
Cleveland, Ohio 44115
Gentlemen:
(a) The undersigned, _____________________ ("Bank"), recognizes that
Society National Bank is the collateral agent (the "Collateral Agent") under
that certain Second Amended and Restated Security Agreement, dated as of
___________, 1995, as the same may be amended, modified, supplemented or
restated (the "Security Agreement"), by and between, LDI Corporation, a Delaware
corporation (the "Grantor"), and the Collateral Agent. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Security Agreement.
(b) Grantor has requested that, as an accommodation to Grantor,
certain of the Collateral Lockbox Accounts be established and maintained at
Bank. The Collateral Agent and Bank are willing to grant such request provided
that the Grantor, Bank and Collateral Agent agree to the terms set forth herein
and execute this Agreement. The Collateral Agent hereby appoints Bank as
Collateral Agent's agent and pledgee-in-possession for the Account (as defined
in paragraph (c) below) and all funds, monies, accounts, cash and other items
from time to time deposited in such Account and Bank by its execution and
delivery of this Collateral Lockbox Account Letter accepts such appointment.
(c) Bank hereby confirms and acknowledges to the Collateral Agent
that (i) the Collateral Lockbox Account bearing account number ____________ (the
"Account") has been established at Bank, (ii) the Account is in the name of the
Collateral Agent and the Collateral Agent has the exclusive dominion and control
over the Account and all funds and monies from time to time therein, (iii) to
the best of Bank's knowledge, no party other than the Collateral Agent claims a
Lien on the Account, and (iv) Bank has marked its books and records to indicate
the Collateral Agent's exclusive dominion and control over the Account and all
funds and monies from time to time therein, and (v) the Account is a "Collateral
Lockbox Account" as defined in the Security Agreement.
<PAGE> 78
(d) Bank hereby confirms and acknowledges that Bank has no rights
with respect to the Account and Bank agrees not to take any action with respect
to the Account except as specifically directed in writing by the Collateral
Agent.
(e) Bank further agrees that it will not exercise or claim any right
of offset against the Account and hereby waives and assigns to the Collateral
Agent any and all liens, claims, demand or rights of setoff or offset of any
kind whatsoever which Bank may now or hereafter have in any of the monies and/or
funds deposited in the Account.
(f) The Collateral Agent shall at all times have full and
irrevocable right, power and authority, to demand, collect, withdraw, receipt
for or sue for all amounts due or to become due and payable under the Account
and, at the Collateral Agent's discretion, to take any other action, including
the transfer of the Account to any institution designated by the Collateral
Agent.
(g) In accordance with Section 3.6 of the Intercreditor Agreement,
Bank hereby acknowledges that it shall be liable to any person for losses or
damages incurred by any person as a result of its' or its' agents', nominees' or
attorneys'-in-fact gross negligence or willful misconduct with respect to this
Agreement or with respect to the Account as and to the extent the Collateral
Agent would be liable for such losses or damages if the actions or omissions of
such agents, nominees or attorneys-in-fact constituting such gross negligence
or willful misconduct had been actions or omissions of the Collateral Agent.
(h) The Grantor hereby agrees to indemnify and hold harmless each of
Bank and the Collateral Agent from and against any and all claims, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses,
disbursements and liabilities of any kind or nature whatsoever not resulting
from the Bank's or the Collateral Agent's gross negligence or willful misconduct
and agrees to reimburse each of Bank and the Collateral Agent for any costs,
fees and expenses (including, without limitation, reasonable fees and expenses
of in-house or outside counsel) against any and all such claims or liability
arising out of or in any way relating to the establishment and/or maintenance of
the Account at Bank.
(i) The Collateral Agent agrees to pay Bank's fees, costs and
expenses in connection with the establishment and maintenance of the Account.
(j) Notwithstanding any other provision in this Agreement, Bank
shall not be required to take any action with respect to the Account (including
the transfer of funds) to the
<PAGE> 79
extent such action is then prohibited by statute, regulation or legal process
binding on Bank.
(k) This Agreement may not be amended or modified or supplemented
without the prior written consent of all parties.
[BANK]
By:
-------------------------------
Its:
------------------------------
LDI CORPORATION
By:
-------------------------------
Its:
------------------------------
LDI COMPUTER RENTALS, INC.
By:
-------------------------------
Its:
------------------------------
The foregoing is hereby accepted and agreed to:
SOCIETY NATIONAL BANK,
in its capacity as Collateral Agent
By:
-------------------------------
Its:
------------------------------
<PAGE> 80
EXHIBIT II
FORM OF NOTICE TO RELEASE CXC FUNDS
[LDI CORPORATION LETTERHEAD]
NOTICE TO RELEASE CXC FUNDS
This Notice to Release CXC Funds ("Notice") is delivered pursuant to
that certain Second Amended and Restated Security Agreement dated as of
____________, 1995, by and between Society National Bank, in its capacity as
Collateral Agent thereunder, and LDI CORPORATION, defined as the Grantor
thereunder (the "Security Agreement"). All capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed thereto in the
Security Agreement.
Pursuant to Section 6(a) of the Security Agreement, this Notice will
serve as the written notice and certification by the Grantor to the Collateral
Agent that the Collateral Agent previously received monies or monies were
deposited into a Collateral Lockbox Account constituting Collections (as defined
in the CXC Intercreditor Agreement) or proceeds of any Transferred Lease
Receivable, Related Security (as defined in the CXC Intercreditor Agreement) or
CXC Equipment Collateral, and such monies constitute collected funds which
either (i) are held in a Collateral Lockbox Account, or (ii) have been applied
in reduction of the Obligations and to the extent new funds have not been
subsequently advanced to the Grantor, as follows:
Collections: $______________________________________________
Proceeds of Transferred Lease Receivable: $_________________
Proceeds of Related Security: $_____________________________
Proceeds of CXC Equipment Collateral: $_____________________
The Grantor hereby authorizes and directs the Collateral Agent to
deliver such monies (a) prior to the occurrence of an Event of Default to the
Grantor for delivery to the CXC Agent by depositing such monies into the General
Non-Recourse Lender Account, and (b) after the occurrence of an Event of Default
which has not been waived in accordance with the terms of the Third Amended and
Restated Credit Agreement, to the CXC Agent by wire transfer in accordance with
the following wire instructions:
Bank Name:__________________________________________________
ABA Number:_________________________________________________
Account Name:_______________________________________________
Account Number:_____________________________________________
Attn:_______________________________________________________
<PAGE> 81
The undersigned, ______________________________, hereby certifies that
[s]he is an Authorized Signatory.
WITNESS MY HAND this __ day of __________, 199__.
LDI CORPORATION, as Grantor
BY:________________________
TITLE:_____________________
Acknowledged and Agreed
LDI COMPUTER RENTALS, INC.
By:_________________________
Its:________________________
<PAGE> 82
EXHIBIT III
FORM OF NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS
[LDI CORPORATION LETTERHEAD]
NOTICE TO RELEASE NON-RECOURSE LENDER FUNDS
This Notice to Release Non-Recourse Funds ("Notice") is delivered pursuant
to that certain Second Amended and Restated Security Agreement dated as of
___________, 1995, by and between Society National Bank, in its capacity as
Collateral Agent thereunder, and LDI CORPORATION, defined as the Grantor
thereunder (the "Security Agreement"). All capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed thereto in the
Security Agreement.
Pursuant to Section 6(b) of the Security Agreement, this Notice will serve
as the written notice and certification by the Grantor to the Collateral Agent
that the Collateral Agent previously received monies or monies were deposited
into a Collateral Lockbox Account which constitute Excluded Collateral and such
monies constitute collected funds which either (i) are held in a Collateral
Lockbox Account, or (ii) have been applied in reduction of the Obligations and
to the extent new funds have not been subsequently advanced to the Grantor, as
follows:
Description of Excluded Collateral:_______________________________________
Amount:$__________________________________________________________________
Non-Recourse Lender:______________________________________________________
The Grantor hereby authorizes and directs the Collateral Agent to deliver
such monies (a) prior to the occurrence of an Event of Default to the Grantor
for delivery to the appropriate Non-Recourse Lender by depositing such monies
into the General Non-Recourse Lender Account [Non-Intercreditor Account?], and
(b) after the occurrence of an Event of Default which has not been waived in
accordance with the terms of the Third Amended and Restated Credit Agreement, to
the applicable Non-Recourse Lender by wire transfer in accordance with the
following instructions:
Bank Name:________________________________________________________________
ABA Number:_______________________________________________________________
Account Name:_____________________________________________________________
Account Number:___________________________________________________________
Attn:_____________________________________________________________________
<PAGE> 83
The undersigned, ______________________________, hereby certifies that
[s]he is an Authorized Signatory.
WITNESS MY HAND this __ day of __________, 199__.
LDI CORPORATION, as Grantor
BY:________________________
TITLE:_____________________
Acknowledged and Agreed
LDI COMPUTER RENTALS, INC.
BY:_________________________
TITLE:______________________
<PAGE> 84
EXHIBIT IV
FORM OF
NOTICE OF NON-RECOURSE
FINANCING
[LDI CORPORATION LETTERHEAD]
NOTICE OF NON-RECOURSE FINANCING
This Notice of Non-Recourse Financing ("Notice") is delivered pursuant to
that certain Second Amended and Restated Security Agreement dated as of
____________, 1995 by and between Society National Bank, in its capacity as
Collateral Agent thereunder, and LDI CORPORATION, defined as the Grantor
thereunder (the "Security Agreement"). All capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed thereto in the
Security Agreement.
In the ordinary course of its business, the Grantor desires to sell and/or
finance the Leases and related Collateral more fully described below and, in
connection therewith, incur the Non-Recourse Debt more fully described below.
Pursuant to Section 6 of the Security Agreement, this Notice will serve as
the written notice to the Collateral Agent of the proposed sale and/or
financing, and the proposed incurrence of Non-Recourse Debt, described more
fully below. This Notice is being delivered to the Collateral Agent at least one
Business Day prior to the proposed incurrence of Non-Recourse Debt.
Description of Lease and Schedules: (see attached Annex I)
_______________________________________
Length of Lease: (see attached Annex I)
__________________________________________________________
Description of Underlying Inventory or Equipment: (see attached Annex I)
__________________________________________________________________________
Name of Non-Recourse Lender:
______________________________________________
Address of Non-Recourse Lender:
___________________________________________
Estimated Amount of Non-Recourse Funding: $
_______________________________
The Grantor hereby requests that the Collateral Agent execute the
accompanying [Release] [Subordination Agreement] which sets forth a complete
description of the Collateral to be [released] [subordinated].
<PAGE> 85
The undersigned, ____________________, hereby certifies that [s]he is an
Authorized Signatory. The Grantor certifies to the Collateral Agent and the
Lenders that the proposed transaction described above constitutes Non-Recourse
Debt, as defined in the Security Agreement. The Grantor further certifies that,
as of the date hereof, no Event of Default or Default has occurred or will occur
as a result of the consummation of the transactions contemplated herein.
WITNESS MY HAND this day ________________ of ______________, 199 .
LDI CORPORATION, as Grantor
BY:
-------------------------------------
TITLE:
----------------------------------
Acknowledged and Agreed
LDI COMPUTER RENTALS, INC.
BY:
----------------------------------
TITLE:
-------------------------------
<PAGE> 86
EXHIBIT V
FORM OF NON-RECOURSE DEBT RELEASE
This Release, dated __________, 199_ is delivered pursuant to that
certain Second Amended and Restated Security Agreement dated as of
_____________, 1995, by and between Society National Bank, in its capacity as
Collateral Agent thereunder, and LDI CORPORATION, defined as the Grantor
thereunder (the "Security Agreement"). All capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed thereto in the
Security Agreement.
The Collateral Agent has previously received a Notice of Non-Recourse
Financing dated _____________ from the Grantor stating that in the ordinary
course of its business the Grantor desires to sell and/or finance the Leases
and related Collateral more fully described below and, in connection therewith,
incur the Non-Recourse Debt more fully described below. In connection
therewith, the Grantor has requested that the Collateral Agent release its Lien
on the Released Collateral, as defined below.
Description of Lease and Schedules: (see attached Annex I)
___________________________________________
Length of Lease: (see attached Annex I)
______________________________________________________________
Description of Underlying Inventory or Equipment: (see attached Annex I)
_____________________________
Name of Non-Recourse Lender:____________________________________________________
Address of Non-Recourse Lender:_________________________________________________
Estimated Amount of Non-Recourse Debt Financing: $______________________________
Estimated Amount of Non-Recourse Debt Financing
to be Received by Grantor: $____________________________________________________
Estimated Amount of Non-Recourse Debt Financing
to be Paid to Third Parties: $__________________________________________________
Subject to the terms set forth in this Release and the Security Agreement,
the Collateral Agent hereby releases the Lien of the Collateral Agent on the
following described Collateral (collectively, the "Released Collateral"):
(i) the Lease[s], described above, transferred by the Grantor to
the Non-Recourse Lender, described above, on or about the date hereof (the
"Transferred Lease[s]") and the Grantor's interest in the Transferred
Lease[s];
(ii) all security interests or liens, and property subject to such
security interests or liens, and all guarantees, indemnities, warranties,
letters of credit, insurance policies and proceeds and premium refunds
thereof and other agreements or arrangements from time to time granted by
or entered into by the lessees or any other person (other than the
Grantor) under the Transferred Lease[s] to secure or support the payment
of the lessees' obligations under the Transferred Lease[s]
<PAGE> 87
the payment of the lessees' obligations under the including all
UCC financing statements covering the Lessee Collateral;
(iii) all of the Grantor's right, title and interest in the data
processing, telecommunications, and other capital equipment leased by the
Grantor as lessor which is subject to the Transferred Lease[s]; and
(iv) all Proceeds of the foregoing.
This Release will become effective only upon receipt by the Collateral
Agent of the full proceeds of the Non-Recourse Debt described above, minus the
amount specified by the Grantor above to be paid to third parties, and (ii)
consummation of the proposed incurrence of Non-Recourse Debt, within ten (10)
days following the date of this Release, on the terms set forth in this Release
and all annexes attached thereto.
The Grantor hereby certifies that as of the date of this Release and as of
the date that this Release becomes effective, no Default or Event of Default has
occurred or will occur as a result of the consummation of the transactions
contemplated herein.
SOCIETY NATIONAL BANK, LDI CORPORATION,
as Collateral Agent as Grantor
BY: BY:
----------------------------- ---------------------------
TITLE: TITLE:
-------------------------- ------------------------
Acknowledged and Agreed
LDI COMPUTER RENTALS, INC.
BY:
-----------------------------
TITLE:
--------------------------
<PAGE> 88
EXHIBIT VI
[FORM OF CASH COLLATERAL AND ACCOUNT MAINTENANCE AGREEMENT]
<PAGE> 89
EXHIBIT VII
FORM OF SUBORDINATION AGREEMENT
This Subordination Agreement ("Agreement") is entered into as of
______________, 199__, by and between the parties hereto in order to induce
______________________________ ("Lender") to make loans or extend credit to LDI
Corporation, a Delaware corporation ("Borrower").
Society National Bank, in its capacity as Collateral Agent for various
financial institutions ("Collateral Agent"), hereby agrees for the benefit of,
and covenants to, Lender as follows:
1. The Borrower desires to obtain loans or credit from Lender in the
amount and on the terms set forth in Exhibit A attached hereto (all obligations
owing under the documents set forth in such Exhibit A being hereinafter referred
to as "Secured Obligations"). Collateral Agent hereby acknowledges that Lender
will not make loans or extend credit to Borrower unless Lender has a lien on or
security interest in the property described on Exhibit B hereto, all
replacements, additions or substitutions thereto and all proceeds (including,
without limitation, any goods, chattel paper, documents, instruments or contract
rights which constitute proceeds) thereof (collectively, the "Collateral"),
which lien or security interest is prior in right to any lien or security
interest granted to or held by Collateral Agent as provided in this Agreement.
2. Subject to Section 11 hereof, all understandings, agreements,
representations and warranties contained herein are solely for the benefit of
the parties hereto, and there are no other parties (including, without
limitation, Borrower) who are intended to be benefitted in any way by this
Agreement.
3. Nothing contained herein is intended to affect or limit in any way the
lien or security interest that Lender or Collateral Agent has in any assets of
Borrower, whether tangible or intangible, insofar as Borrower and third parties
are concerned, and the parties hereto reserve all of their respective liens,
security interests, rights, remedies and priorities as against Borrower and any
such third party.
4. Subject to Section 8 hereof, (a) Collateral Agent hereby subordinates
any and all liens and security interests which it now has or may hereafter
acquire in the Collateral to the liens and security interests Lender now has or
may hereafter acquire in the Collateral; (b) Collateral Agent agrees that, so
long as Lender has any Secured Obligations outstanding secured by the
Collateral, Collateral Agent will not take any action to enforce its lien on or
<PAGE> 90
security interest in the Collateral, including, without limitation, giving
notice of foreclosure, effecting foreclosure, taking possession of the
Collateral or giving notice to obligors with respect to the Collateral of its
lien or security interest thereon; (c) Collateral Agent agrees not to oppose,
interfere with or otherwise attempt to prevent Lender from enforcing its lien on
and security interest in the Collateral or otherwise realizing on the
Collateral; and (d) at the request of Lender, Collateral Agent shall release any
lien and security interest it has on the Collateral to facilitate the transfer
or sale of the Collateral so long as the proceeds thereof are applied against
Borrower's Secured Obligations to Lender which are secured by the Collateral and
any excess is applied against indebtedness or other obligations secured by
Collateral Agent's security interest in the Collateral.
5. Subject to Section 8 hereof, (a) Collateral Agent agrees that Lender is
entitled to all payments from the Collateral and all proceeds of the Collateral
(including, without limitation, any payment by any lessee under any lease which
is part of the Collateral) prior to payment thereof to the Collateral Agent, and
(b) Collateral Agent agrees that until all Secured Obligations of Borrower to
Lender which are secured by the Collateral are paid in full, Collateral Agent
shall not knowingly receive, accept or retain any direct or indirect payment
from the Collateral or the proceeds thereof and if Collateral Agent receives any
such payment at any time prior to the payment in full of the Secured Obligations
(including, without limitation, any obligations accruing after any bankruptcy,
insolvency or similar proceeding involving Borrower), Collateral Agent will
promptly upon request by Lender (so long as such request is received within 60
days after such receipt of such payment by Collateral Agent) deliver such
payment (or funds in the amount of such payment) to Lender.
6. The subordination set forth herein shall remain in full force and
effect, regardless of whether Lender or Collateral Agent (or any party for which
Collateral Agent acts as agent) amends, extends, waives, supplements or
otherwise modifies any of its agreements with Borrower. Lender may exercise or
refrain from exercising any right or remedy against Borrower without affecting
the subordination set forth herein.
7. The subordination set forth herein is applicable irrespective of the
time or order of attachment or perfection of any lien or security interest
referred to herein, the time or order of filing of any financing statement, the
acquisition of purchase money or other priority with respect to any such lien or
security interest or the time of giving or the failure to give notice of the
acquisition or expected acquisition of a purchase money or other security
interest.
8. The subordination provisions set forth herein shall be of no force or
effect if and to the extent that Lender's lien on or
<PAGE> 91
security interest in the Collateral is finally determined to be avoidable in
any bankruptcy, insolvency or similar proceeding involving Borrower.
9. This Agreement is governed by, and shall be construed in accordance
with, the laws of the State of Ohio.
10. This Agreement may not be amended or
otherwise modified except in a writing signed by Collateral Agent and Lender.
11. This Agreement shall be binding upon and shall inure to the benefit of
the successors and assignees of Lender and Collateral Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
, as Lender
---------------------
By:
-----------------------------
SOCIETY NATIONAL BANK, in its
capacity as Collateral Agent
By:
-----------------------------
Its:
----------------------------
Acknowledged and Agreed
LDI CORPORATION
By:
-----------------------------
Its:
----------------------------
<PAGE> 92
EXHIBIT A
[Insert term sheet]
<PAGE> 93
EXHIBIT B
[Insert Description of Collateral]
<PAGE> 94
EXHIBIT VIII
FORM OF SWEEP AGREEMENT
____________________, 1995
[Bank Name]
______________________
______________________
______________________
Attn:
_________________
Re: LDI Corporation, a Delaware corporation,
(the "Borrower")
________________________________________
Gentlemen:
1. Reference is made to the following agreements: (a) that certain Third
Amended and Restated Credit Agreement dated as of ___________, 1995 by and among
Society National Bank, National City Bank and Society National Bank as Co-Agents
(the "Co-Agents"), the Borrower and the other commercial lending institutions
which are signatories thereof (the "Lenders") (as the same may be amended,
modified or supplemented from time to time, the "Credit Agreement"); and (b)
that certain Second Amended and Restated Security Agreement dated as of
_____________, 1995 by and between the Borrower and the Collateral Agent (as the
same may be amended, modified or supplemented from time to time, the "Security
Agreement"). All capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed thereto in the Security Agreement.
2. The Collateral Agent has been advised that the Borrower maintains the
following deposit accounts with [Bank Name] at [Bank Address] ("[Bank Name]"):
[Insert account numbers and types]
(collectively, all accounts and deposit accounts maintained at [Bank Name],
whether now existing or hereafter established, are hereinafter referred to as
the "[Bank Name] Accounts").
3. As provided in the Security Agreement and to secure the Borrower's
repayment and performance of the Obligations (as defined in the Security
Agreement), the Borrower has granted to the Collateral Agent a continuing
security interest in and Lien upon, among other things, all of the Borrower's
right, title and interest in, to and under certain accounts and deposit
accounts, including but not limited to the [Bank Name] Accounts, all cash,
funds, monies and amounts required to be deposited in or deposited in, from time
to time, the [Bank Name] Accounts, all interest, dividends, cash, instruments or
other property from time to time received, receivable or otherwise earned
(whether or not paid),
2
<PAGE> 95
distributed in respect of or in exchange for one or all of the foregoing and all
certificates and instruments, if any, from time to time representing the [Bank
Name] Accounts and such cash, funds, monies, amounts, interest, dividends or
other property (collectively, the "Accounts").
4. This letter constitutes irrevocable notice to [Bank Name], [in
accordance with Section __ of the Uniform Commercial Code] of the Collateral
Agent's first priority security interest in and Lien upon all of the Borrower's
right, title and interest in, to and under the Accounts. [Bank Name], by its
execution of this letter, acknowledges receipt of this letter and notice.
5. In order to induce the Collateral Agent to approve [Bank Name] as the
depository of the [Bank Name] Accounts, [Bank Name], by its execution of this
letter in the space provided below, agrees:
(a) that it waives any security interest, lien (banker's or otherwise)
and/or right of setoff against any of the Accounts, other than the right
to setoff fees, insufficient items and charge-backs, and as contained in
paragraph 8 of this letter;
(b) to continue to honor checks and other instruments for withdrawals
from the Accounts issued by the Borrower, consistent with [Bank Name]
normal banking practices, until such time as [Bank Name] receives written
notice from the Collateral Agent at the written direction of the Required
Lenders, to [Bank Name] at its office located at [Bank Address], stating
that an Event of Default under the Credit Agreement has occurred and
notifying [Bank Name] to cease permitting the Borrower to make withdrawals
from any of the Accounts (a copy of which shall be sent by the Collateral
Agent to the Borrower); thereafter, the Collateral Agent at the written
direction of the Required Lenders may request and [Bank Name] shall comply
with such request, that [Bank Name] by wire transfer of immediately
available funds shall transfer to a Collateral Lockbox Account at such
financial institution as the Collateral Agent shall designate in writing,
any and all of the Borrower's cash, funds, monies, items and amounts in
the [Bank Name] Accounts or otherwise in [Bank Name]'s possession and
included in Accounts;
(c) that upon receipt of such notice, [Bank Name] shall honor only such
instructions for withdrawals as are given by the Collateral Agent,
notwithstanding any inconsistent or conflicting instructions given to
[Bank Name] by the Borrower, and that such notice and instructions can
only be revoked by the Collateral Agent, but not by the Borrower; and
(d) that, prior to [Bank Name]'s receipt of the notice referred to in
paragraph 5(b) above, from time to time upon
3
<PAGE> 96
the request of the Borrower or the Collateral Agent at the written
direction of the Required Lenders to [Bank Name], [Bank Name] shall by
wire transfer of immediately available funds, transfer to a Collateral
Lockbox Account at such financial institution as the Collateral Agent
shall designate in writing (which account numbers and other material
information shall be as specified at the end of this letter) all cash,
funds, monies, items and amounts in the [Bank Name] Accounts or otherwise
in [Bank Name]'s possession and included in Accounts, in excess of
[$ ] in the aggregate.
6. [Bank Name] represents and warrants to the Collateral Agent as follows:
(a) that the only accounts the Borrower maintains at [Bank Name] are
the [Bank Name] Accounts, and that the account numbers are as specified
above;
(b) that the [Bank Name] Accounts are held in the name of the Borrower
only;
(c) that each of the [Bank Name] Accounts is a deposit account;
(d) that [Bank Name] has not received notice of any other lien or
security interest in any of the Accounts; and
(e) that the [Bank Name] Accounts are federally insured accounts and
such FDIC insurance covers up to $100,000 in the aggregate, and the [Bank
Name] Accounts have no penalty for immediate withdrawal.
7. Neither the Collateral Agent, either Co-Agent nor any Lender shall be
responsible for any charges incurred in connection with any of the Accounts. All
charges incurred in connection with the Accounts will be payable by the
Borrower. Notwithstanding the foregoing, after the Collateral Agent provides
[Bank Name] with the notice referred to in paragraph 5(b) above, the Collateral
Agent shall reimburse [Bank Name] for [Bank Name]'s reasonable expenses incurred
in complying with the Collateral Agent's requests thereafter made under and
pursuant to this letter to the extent that the Accounts are insufficient to
reimburse such expenses and provided that the Collateral Agent's prior written
consent is obtained by [Bank Name] prior to [Bank Name] incurring any material
expenses it expects to be reimbursed by the Collateral Agent hereunder.
8. The Borrower agrees to save and hold harmless, to defend and to
indemnify, [Bank Name] against all actions, proceedings, claims, demands,
losses, outlays, damages or expenses, including reasonable legal fees of [Bank
Name]'s in-house or outside counsel, of every nature and character as may arise
or be made against [Bank Name] in respect of [Bank Name] acting in accordance
with this
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<PAGE> 97
letter, or which it may in any way incur in defending or prosecuting, settling
or discontinuing any such proceedings, actions, claims, damages, expenses or
outlays, arising out of any act or omission of the Borrower. The Borrower and
the Collateral Agent agree that [Bank Name] may setoff against the Accounts
reasonable expenses [Bank Name] incurs in complying with and acting in
accordance with the provisions of this letter, upon providing in writing a
description of such expenses to the Borrower and the Collateral Agent.
9. The Borrower hereby releases [Bank Name] from any liabilities, claims,
damages, losses and outlays to the Borrower, of every nature and character as
may arise or be made against [Bank Name] by or on behalf of the Borrower,
directly or indirectly, related to actions taken by [Bank Name] at the direction
of the Collateral Agent and pursuant to the terms of this letter, except for
[Bank Name]'s gross negligence or willful misconduct, determined in such case by
a non-appealable judicial order.
10. Notwithstanding any other provision in this Agreement [Bank Name]
shall not be required to take any action with respect to the [Bank Name]
Accounts (including the transfer of funds) to the extent such action is then
prohibited by statute, regulation or legal process binding on [Bank Name].
11. The agreements contained in this letter will become effective
immediately upon its execution by all of the parties and may not be amended
without the express written consent of all parties.
SOCIETY NATIONAL BANK,
as Collateral Agent
By:
--------------------------
-----------------------------
[Printed Name and Title]
Society National Bank, Cleveland,
Ohio, as Collateral Agent
ABA #:
-----------------------
Name of Account: LDI Corporation
The Borrower's Account No is:
-----------------------------
5
<PAGE> 98
LDI Corporation, a Delaware
corporation
By:
------------------------------
---------------------------------
[Printed Name and Title]
Accepted and Agreed to as of
[DATE]
[Bank Name]
By:
------------------------------
---------------------------------
[Printed Name and Title]
6
<PAGE> 1
EXHIBIT 4.07(c)
The Registrant is not filing the complete text of the Subordinated
Second Amended and Restated Security Agreement dated as of July 21, 1995 (the
"Subordinated Security Agreement") between the Registrant and Society National
Bank, as Collateral Agent, inasmuch as such text is substantially identical to
the text of the Second Amended and Restated Security Agreement dated as of July
21, 1995 (the "Senior Security Agreement") between the Registrant and Society
National Bank, as Collateral Agent (included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q (No. 0-15994) for the quarter ended July 31,
1995, and incorporated herein by reference). The principal differences between
the Senior Security Agreement and the Subordinated Security Agreement are as
follows:
(i) The Subordinated Security Agreement defines the
obligations secured as follows:
"Obligations" shall mean any and all existing and
future liabilities, indebtedness and obligations represented
by each of the Term Notes (as defined in the Third Amended and
Restated Credit Agreement), owing from time to time by Grantor
to each and every present or future Lender, Co-Agent or the
Collateral Agent under the Third Amended and Restated Credit
Agreement or any Debt Document, and to the present or future
Collateral Agent under any of the Loan Documents (as defined
in the Third Amended and Restated Credit Agreement), including
without limitation, all fees, costs, expenses, court costs,
attorneys' fees and expenses, and the like covered by any of
the foregoing.
(ii) The Subordinated Security Agreement includes an
additional paragraph 2(d) as follows:
(d) Subordination. Subject to and in accordance
with the terms of the Intercreditor Agreement, the security
interest and Lien granted hereby are subject to and
subordinate to the security interest and Lien granted pursuant
to the Senior Security Agreement and the obligations secured
thereby.
(iii) Various references throughout the Subordinated Security
Agreement recognize the existence of the prior security interest and
Lien granted pursuant to the Senior Security Agreement.
<PAGE> 1
EXHIBIT 4.07(d)
SECURITY AGREEMENT
dated as of July 21, 1995
by and between
LDI COMPUTER RENTALS, INC.
as the Grantor
and
SOCIETY NATIONAL BANK,
in its capacity as the Collateral Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1 DEFINITIONS............................................................................2
SECTION 2 GRANT OF SECURITY INTEREST; COLLATERAL.................................................9
SECTION 3 THE GRANTOR TO REMAIN LIABLE..........................................................14
SECTION 4 BANK ACCOUNTS.........................................................................14
SECTION 5 [INTENTIONALLY OMITTED]...............................................................17
SECTION 6 [INTENTIONALLY OMITTED]...............................................................17
SECTION 7 MARKING AND DELIVERY OF COLLATERAL....................................................17
SECTION 8 REPRESENTATIONS AND WARRANTIES........................................................18
SECTION 9 GENERAL COVENANTS CONCERNING COLLATERAL...............................................23
SECTION 10 COVANANTS REGARDING COLLATERAL EQUIPMENT AND
COLLATERAL INVENTORY..................................................................25
SECTION 11 COVENANTS REGARDING INSURANCE.........................................................26
SECTION 12 COVENANTS REGARDING ACCOUNTS AND ACCOUNTS
RECEIVABLE............................................................................27
SECTION 13 ADDITIONAL COVENANTS..................................................................29
SECTION 14 VOTING RIGHTS; DIVIDENDS; ETC.........................................................31
SECTION 15 COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT...........................................32
SECTION 16 THE COLLATERAL AGENT..................................................................34
SECTION 17 EVENTS OF DEFAULT.....................................................................35
SECTION 18 REMEDIES..............................................................................35
SECTION 19 INDEMNITY AND EXPENSES................................................................38
SECTION 20 SECURITY INTEREST ABSOLUTE............................................................39
SECTION 21 REGISTRATION RIGHTS...................................................................40
SECTION 22 AMENDMENTS; ETC.......................................................................41
SECTION 23 NOTICES...............................................................................41
SECTION 24 CONTINUING SECURITY INTEREST; TRANSFER OF
NOTES.................................................................................42
SECTION 25 GOVERNING LAW; TERMS; WAIVER OF DEFAULTS..............................................43
SECTION 26 REINSTATEMENT.........................................................................44
SECTION 27 INTERPRETATION........................................................................44
SECTION 28 WAIVER OF JURY TRIAL..................................................................45
SECTION 29 RELEASE...............................................................................46
</TABLE>
SCHEDULES:
SCHEDULE I MANDATORY BANK ACCOUNTS
SCHEDULE II PERMITTED BANK ACCOUNTS
SCHEDULE III SPECIAL PERMITTED BANK ACCOUNTS
SCHEDULE IV INTELLECTUAL PROPERTY
SCHEDULE V PLEDGED SHARES/PLEDGED DEBT
SCHEDULE VI BANK ACCOUNTS
SCHEDULE VII GRANTOR'S LOCATIONS
SCHEDULE VIII LOCATION OF COLLATERAL
SCHEDULE IX LEASES
EXHIBITS:
EXHIBIT I FORM OF COLLATERAL LOCKBOX ACCOUNT LETTER
EXHIBIT II FORM OF SWEEP AGREEMENT
<PAGE> 3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of July 21,
1995 (the "Agreement Date") by LDI COMPUTER RENTALS, INC., an Ohio corporation
(the "Grantor"), in favor of SOCIETY NATIONAL BANK, in its capacity as
collateral agent as hereinafter provided (the "Collateral Agent").
RECITALS:
A. The Grantor is a wholly-owned subsidiary of LDI
Corporation, a Delaware corporation (the "Borrower") and will directly and
indirectly benefit from the extension of credit to the Borrower.
B. Pursuant to that certain Guaranty of Payment of
Debt (the "Guaranty"), dated as of the date hereof, executed by the Grantor in
favor of the Lenders (as defined below), the Grantor has guaranteed the
obligations of the Borrower under that certain Third Amended and Restated Credit
Agreement, dated as of the date hereof (the "Third Amended and Restated Credit
Agreement"), by and among the Borrower, National City Bank ("NCB") and Society
National Bank ("Society"), each in its capacity as agent (individually, in such
capacity, a "Co-Agent" and collectively, in such capacities, the "Co-Agents"),
NCB in its capacity as Administrative Agent (the "Administrative Agent"), the
various financial institutions which are parties thereto (collectively with the
Co-Agents, the "Lenders").
C. It is a condition precedent to the effectiveness
of the Third Amended and Restated Credit Agreement that the Grantor execute and
deliver this Agreement in order to, among other things, grant certain security
interests in, and Liens upon, substantially all of the Grantor's assets.
D. Concurrently with the execution and delivery of
this Agreement, the Collateral Agent, the Borrower, the Grantor and the Lenders
(together with each of the other financial institutions which are or may become
parties thereto) are executing and delivering the Amended and Restated
Intercreditor Agreement, dated the date hereof (as such agreement may hereafter
be amended, modified, supplemented or restated, the "Intercreditor Agreement"),
pursuant to which the Lenders shall, among other things, define certain of their
rights and remedies with respect to the Third Amended and Restated Credit
Agreement, this Agreement, that certain Second Amended and Restated Security
Agreement dated as of the date hereof, by and between the Borrower and the
Collateral Agent (the "Second Amended and Restated Security Agreement") and that
certain Subordinated Second Amended and Restated Security Agreement, dated
1
<PAGE> 4
as of the date hereof, by and between the Borrower and the Collateral Agent (the
"Subordinated Second Amended and Restated Security Agreement").
NOW, THEREFORE, in consideration of the Recitals and of the
mutual covenants herein contained and in order to induce the Lenders to enter
into the Third Amended and Restated Credit Agreement, the Grantor hereby agrees
with the Collateral Agent for the benefit of the Collateral Agent, the
Administrative Agent and the Co-Agents and the ratable benefit of the Lenders as
follows:
SECTION 1 DEFINITIONS.
In addition to the terms defined elsewhere herein, the following terms,
shall be a part of this Agreement, and except where the context otherwise
requires, shall have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):
"Account" shall mean any "account" as such term is defined in
Section 1309.01(A)(15) of the UCC.
"Account Collateral" shall have the meaning ascribed to such
term in Section 2(b) hereof.
"Account Debtor" shall mean any "account debtor" as such term
is defined in Section 1309.01(A)(1) of the UCC.
"Account Receivable" shall mean any right to payment arising
out of, or relating to, or in connection with (a) any Account; (b) the
use, sale, lease or disposition of Inventory or goods (including,
without limitation, all Accounts, accounts receivable, other
receivables, contract rights, Chattel Paper, Instruments, Documents,
notes, and other forms of obligations now owned or hereinafter received
or acquired by or belonging or owing to the Grantor, whether arising
out of the sale, rental or lease of Inventory or goods); (c) any amount
payable by any person to the Grantor in connection with the Grantor's
purchase, acquisition or leasing of Inventory; (d) any amounts payable
under any of the General Intangibles; and (e) any or all of the
Grantor's rights in, to and under all purchase orders or receipts now
owned or hereinafter acquired by it and all of the Grantor's rights to
any goods represented by any of foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or
repossessed goods), including, without limitation, the right to receive
the proceeds of said purchase orders and contracts, and all collateral
security and guarantees of any kind given by any person with respect to
any of the foregoing.
2
<PAGE> 5
"Administrative Agent" shall have the meaning ascribed to such
term in the preamble hereto, and includes each successor who shall act
as Administrative Agent.
"Agreement Date" shall have the meaning ascribed to such term
in the preamble hereof.
"Applicable Law" shall mean, in respect of any person, all
provisions of constitutions, statutes, rules, regulations and orders of
governmental bodies or regulatory agencies applicable to such person,
now in effect or as hereafter amended, modified, enacted or in effect,
and all orders and decrees of all courts and arbitrators in proceedings
or actions to which the person in question is a party or by which it or
any of its property is bound from time to time.
"Authorized Signatory" shall mean the president, the chief
financial officer and such other specified officers or other senior
personnel of the Grantor as may be duly authorized and designated in
writing by resolution of the board of directors of the Grantor to
execute documents, agreements, certificates and instruments on behalf
of the Grantor.
"Bankruptcy Code" shall mean the United States Bankruptcy
Code, 11 U.S.C. Section 101 et seq., as amended from time to time.
"Borrower" shall mean LDI Corporation, a Delaware corporation.
"Business Day" shall have the meaning ascribed to such term in
the Third Amended and Restated Credit Agreement.
"Cash Equivalent Investment" shall mean overnight investment
of funds in a manner and in amounts satisfactory to the Collateral
Agent and the Required Lenders.
"Chattel Paper" shall mean any "chattel paper" as such term is
defined in Section 1309.01(A)(2) of the UCC.
"Co-Agents" shall have the meaning ascribed to such term in
Paragraph B of the Recitals, and includes each successor who shall act
as a Co-Agent.
"Collateral" shall have the meaning ascribed to such term in
Section 2(b) hereof.
"Collateral Agent" shall have the meaning ascribed to such
term in the preamble hereto, and includes each successor who shall act
as Collateral Agent.
3
<PAGE> 6
"Collateral Insurance Claim" shall mean any claim which
relates to reimbursement for damage to or loss of the Collateral and
arises under the insurance policies required by this Agreement, the
Third Amended and Restated Credit Agreement, the Debt Documents or the
Loan Documents (as defined in the Third Amended and Restated Credit
Agreement).
"Collateral Lockbox" shall mean a Lockbox maintained by a
Collateral Lockbox Bank for the purpose of receiving payments of
proceeds of Collateral, or such other post office box or mailing
location utilized for a similar purpose as the Grantor and a Collateral
Lockbox Bank may agree upon from time to time.
"Collateral Lockbox Account" shall mean each account (i)
designated by the Collateral Agent from time to time; (ii) maintained
with a Collateral Lockbox Bank for the purposes described in this
Agreement, including without limitation, the purposes set forth in
Section 4 hereof, (iii) in which the Collateral Agent has a first
priority perfected Lien; (iv) over which the Collateral Agent has
exclusive control and dominion; and (v) with respect to which the
Grantor has no right to withdraw funds.
"Collateral Lockbox Account Letters" shall mean the letters in
the form and content of Exhibit I attached hereto and as more fully
described in Section 4(f) hereof.
"Collateral Lockbox Bank" shall mean each and every Lender
which maintains a Collateral Lockbox Account.
"Computer Hardware and Software" shall mean all computer
hardware and software in all its forms (including, but not limited to,
(a) all computer and other electronic data processing hardware, whether
now owned, licensed or leased or hereafter acquired by the Grantor,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply
hardware, mask rights, generators, power equalizers, accessories and
all peripheral devices and other related computer hardware; (b) all
software programs, whether now owned, licensed or leased or hereafter
acquired by the Grantor, designed for use on the computers and
electronic data processing hardware described in clause (a) above,
including, without limitation, operating system software, utilities and
application programs in whatsoever form (source code and object code in
magnetic tape, disk or hard copy format or any other listings
whatsoever); (c) all firmware associated therewith, whether now owned,
licensed or leased or hereafter acquired by the Grantor; and (d) all
documentation for such hardware, software and firmware described in the
preceding clauses (a), (b) and (c), whether now owned, licensed or
4
<PAGE> 7
leased or hereafter acquired by the Grantor, including, without
limitation, flow charts, logic diagrams, manuals, specifications,
training materials, charts and pseudo codes).
"Contracts" shall mean (a) all contracts, undertakings or
other agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) relating to the Collateral, and (b) all
"contract rights," as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction, relating to the
Collateral.
"Debt Documents" shall mean each and every of the following:
this Agreement, the Guaranty, the Second Amended and Restated Security
Agreement and the Subordinated Second Amended and Restated Security
Agreement, the Third Amended and Restated Credit Agreement, the Notes,
the Intercreditor Agreement, the CXC Intercreditor Agreement and the
Loan Documents (as defined in the Third Amended and Restated Credit
Agreement).
"Default" shall mean any event, act or condition which, with
the passage of time or the giving of notice, or both, would constitute
an Event of Default.
"Deposit Accounts" shall mean any "deposit account" as such
term is defined in Section 1309.01(A)(5) of the UCC.
"Documents" shall mean any "document" as such term is defined
in Section 1309.01(A)(6) of the UCC.
"Equipment" shall mean any "equipment" as such term is defined
in Section 1309.07(B) of the UCC, and include, without limitation, all
machinery, equipment, furnishings, fixtures, and computers and other
electronic data processing and other office equipment and any and all
additions, substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
"Event of Default" shall have the meaning ascribed to such
term in Section 17 hereof.
"Fixtures" shall mean any "fixture" as such term is defined in
Section 1309.32 of the UCC.
"General Intangibles" shall mean any "general intangible" as
such term is defined in Section 1309.01(A)(16) of the UCC.
"Grantor" shall mean LDI Computer Rentals, Inc., an Ohio
corporation.
5
<PAGE> 8
"hereby," "herein," "hereof", "hereunder" and words of similar
import refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word
appears.
"Instruments" shall mean any "instrument" as such term is
defined in Section 1309.01(A)(9) of the UCC, other than instruments or
writings that constitute, or are part of a group of instruments or
writings that constitute, Chattel Paper.
"Intercreditor Agreement" shall have the meaning ascribed to
such term in Paragraph D of the Recitals.
"Inventory" shall mean any "inventory" as such term is defined
in Section 1309.07(D) of the UCC.
"Lease" shall mean a lease agreement between the Grantor and
any Obligor for the lease of any Equipment.
"Lease Collateral" shall have the meaning ascribed to such
term in Section 8(j) hereof.
"Lease Receivable" shall mean with respect to any Lease at any
time, all periodic installments of rent then or thereafter payable by
the Obligor under such Lease, together with all supplemental or
additional payments required by the terms of such Lease with respect to
insurance, maintenance, ancillary products and services and other
specific charges, excluding any such payments or charges which
constitute sales or other taxes or the price for a purchase option
occurring at the end of the term of such Lease.
"Lenders" shall have the meaning ascribed to such term in
Paragraph B of the Recitals.
"Lien" shall mean, with respect to any property, any mortgage,
lien, pledge, assignment, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not
choate, vested or perfected.
"Lockbox" means a post office box or other mailing location
maintained by a Lockbox Bank for the purpose of receiving payments made
by obligors for subsequent deposit into a related Lockbox Account.
"Lockbox Account" means a demand deposit account or other
collection account maintained with a Lockbox Bank or Collateral Lockbox
Bank, as the case may be, for the purpose of depositing payments made
by the obligors.
6
<PAGE> 9
"Lockbox Bank" means a bank or credit union at which a Lockbox
Account is maintained.
"Mandatory Bank Account" shall mean each deposit account or
other account: (a) which is maintained by the Grantor at a bank or
other financial institution which is a Lender; (b) with respect to
which the Grantor has executed and delivered to the Collateral Agent a
duly executed Sweep Agreement; and (c) which is either (i) in the case
of those deposit or other accounts identified on Schedule I attached
hereto, a deposit account or other account in which the Collateral
Agent has a first priority Lien, or (ii) in the case of each other
deposit account or other account, a deposit account or other account in
which the Collateral Agent has a first priority perfected Lien.
"NCB" shall mean National City Bank, in its individual
capacity.
"Note" shall mean each promissory note executed by the
Borrower pursuant to the terms of the Third Amended and Restated Credit
Agreement.
"Obligations" shall mean any and all obligations of the
Grantor under the Guaranty and any and all existing and future
liabilities, indebtedness and obligations (including without
limitation, all Obligations (as defined in the Third Amended and
Restated Credit Agreement) including all indebtedness represented by
each of the Revolving Notes and the Term Notes (both as defined in the
Third Amended and Restated Credit Agreement)), and other payment
obligations of the Borrower owing from time to time to each and every
present or future Lender, Co-Agent or the Collateral Agent under the
Third Amended and Restated Credit Agreement or any Debt Document, and
to the present or future Collateral Agent under any of the Loan
Documents (as defined in the Third Amended and Restated Credit
Agreement), including without limitation, all fees, costs, expenses,
court costs, attorneys' fees and expenses, and the like covered by any
of the foregoing.
"Obligor" shall mean any party obligated in respect of a Lease
Receivable pursuant to a Lease other than the lessor or vendor of the
Inventory or Equipment covered thereby.
"Permitted Bank Account" shall mean each deposit account or
other account: (a) which is maintained by the Grantor at a bank or
other financial institution which is not a Lender; (b) with respect to
which the Grantor has executed and delivered to the Collateral Agent a
duly executed Sweep Agreement; and (c) which is either (i) in the case
of those deposit accounts or other accounts identified on Schedule II
attached hereto, a deposit account or other account in which the
Collateral Agent has a first priority Lien, or (ii) in the case of each
other
7
<PAGE> 10
deposit account or other account, a deposit account or other account in
which the Collateral Agent has a first priority perfected Lien.
"Permitted Lien" shall mean a Lien permitted by Section 7.2.3
of the Third Amended and Restated Credit Agreement.
"Pledged Debt" shall have the meaning ascribed to such term in
Section 2(b) hereof.
"Pledged Shares" shall have the meaning ascribed to such term
in Section 2(b) hereof.
"Proceeds" shall mean any "proceeds" as such term is defined
in Section 1309.25 of the UCC, and, in any event, shall have the
broadest meaning permissible under the Ohio Uniform Commercial Code,
and the Uniform Commercial Code of any other state which is deemed
applicable, and shall include, without limitation, (a) any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to
the Grantor from time to time with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental body, authority,
bureau or agency (or any person acting under color of governmental
authority), and (c) any and all other amounts from time to time paid or
payable, whether as rents, fees, lease payments or otherwise, under or
in connection with any of the Collateral.
"Required Lenders" shall have the meaning ascribed to such
term in the Third Amended and Restated Credit Agreement.
"Security Collateral" shall have the meaning ascribed to such
term in Section 2(b) hereof.
"Society" shall mean Society National Bank, in its individual
capacity.
"Special Permitted Bank Account" shall mean those accounts
(e.g., trust accounts) listed on Schedule III attached hereto.
"Subsidiary" means, with respect to any person, any
corporation of which more than fifty percent (50%) of the outstanding
capital stock having ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such
person, by such
8
<PAGE> 11
person and one or more other Subsidiaries of such person, or by one or
more other Subsidiaries of such person.
"Sweep Agreement" shall mean an agreement between the Grantor
and any depositary institution for the benefit of the Collateral Agent
substantially in the form of Exhibit II attached hereto.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of Ohio; provided,
however, in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of the Collateral
Agent's, or any of the Lenders' security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction
other than the State of Ohio, the term "UCC" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
SECTION 2 GRANT OF SECURITY INTEREST; COLLATERAL.
(a) Grant of Security Interest; Collateral. As
security for the prompt and complete payment and performance when due (whether
at stated maturity, by acceleration or otherwise) of all of the Obligations, the
Grantor hereby grants to the Collateral Agent for the benefit of the Collateral
Agent, the Administrative Agent, each of the Co-Agents and for the ratable
benefit of the Lenders, and to the Lenders, a continuing security interest in,
and Lien upon, all of the Grantor's right, title and interest in, to and under
the following property, whether now existing or owned or hereafter existing,
acquired or arising, and wherever located (all of which are herein referred to
collectively as the "Collateral"):
(i) all Accounts and Accounts Receivable;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Deposit Accounts;
(v) all Documents;
(vi) all Equipment;
(vii) all Fixtures;
(viii) all General Intangibles;
(ix) all Instruments;
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(x) all Inventory;
(xi) all of the following: all Computer Hardware
and Software, each and every item of property which is subject to a
Lease, warehouse racks, fork lifts, store shelving, displays, cash
registers, office and other machinery, vehicles, furniture, tools and
spare parts, and all parts thereof and all additions, substitutions and
replacements thereof wherever located, together with all components,
equipment and accessories installed thereon or affixed thereto
(collectively, all of the items in this clause (x), together with the
Equipment, are hereinafter referred to as the "Collateral Equipment");
(xii) all of the following: all goods,
merchandise and other personal property furnished under any contract of
service or intended for sale or lease, including, without limitation,
all raw materials and work in process therefor, finished goods thereof,
Computer Hardware and Software, materials used or consumed in the
manufacture or production thereof, returned or repossessed goods and
data processing, communications, computer, medical diagnostic and other
capital equipment and other goods leased by the Grantor, each and every
item of property subject to a Lease, goods in which the Grantor has an
interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which the Grantor has an
interest or right as consignee), goods that are returned to or
repossessed by the Grantor, and all accessions thereto and products
thereof and documents therefor (collectively, all of the items in this
clause (xi), together with the Inventory, are hereinafter referred to
as the "Collateral Inventory");
(xiii) all of the following: all tax refunds,
corporate or other business records (including all records relating to
Inventory, Accounts and Accounts Receivable), inventions, designs,
blueprints, trade secrets, goodwill, licenses, franchises, customer
lists, rights and claims against carriers and shippers and rights to
indemnification, rights pursuant to warranties, guarantees and
insurance policies, patents, copyrights, trademarks and trade names and
other obligations owing to the Grantor of any kind, now or hereafter
existing, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services and all rights now or
hereafter existing in and to all security agreements, leases
(including, but not limited to, each Lease) and other contract rights,
Chattel Paper, Instruments, General Intangibles or other obligations;
(xiv) all of the following:
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(A) all trademarks, trade names, corporate
names, company names, trade styles, service marks, logos,
other source of business identifiers, prints and labels on
which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection
therewith, including, without limitation, registrations,
recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the
United States, any State thereof, including, without
limitation, those described in Schedule IV hereto;
(B) all renewals, reissues, continuations,
extensions or the like of any patents, copyrights, trademarks,
service marks and like protection, including, without
limitation, those obtained or permissible under past, present
and future laws and statutes;
(C) all rights of action on account of past,
present and future unauthorized use of any of said inventions,
copyrights, trademarks or service marks and for infringement
of said patents, copyrights, trademarks or service marks and
like protection;
(D) the right to file and prosecute
applications for patents, copyrights, and for registration of
trademarks and service marks on any of said inventions,
copyrights, trademarks, service marks or for similar
intellectual property in the United States or any other
country or place anywhere in the world;
(E) the entire goodwill of the businesses of
the Grantor connected with and symbolized by the trademarks,
service marks, trade names and the other general intangibles
of the Grantor; and
(F) all of the Grantor's customer lists,
trade secrets, corporate and other business records, license
rights, advertising materials, operating manuals, methods,
processes, know-how, sales literature, drawings,
specifications, descriptions, name plates, catalogs, dealer
contracts, supplier contracts, distributor agreements,
confidential information, consulting agreements, engineering
contracts, and all other assets which uniquely reflect the
goodwill of the businesses of the Grantor to which said
General Intangibles relate;
(xv) all of the following:
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(A) all deposit accounts of the Grantor,
each Lockbox Account, each Permitted Bank Account, each
Mandatory Bank Account and each Collateral Lockbox Account,
all cash, funds, monies and amounts required to be deposited,
or deposited in, the Grantor's deposit accounts, each
Collateral Lockbox Account, each Permitted Bank Account, or
each Mandatory Bank Account and all certificates and
instruments, if any, from time to time representing or
evidencing the foregoing deposit accounts, each Collateral
Lockbox Account, each Permitted Bank Account or each Mandatory
Bank Account;
(B) all notes, certificates of deposit,
checks and other instruments from time to time hereafter
delivered to or otherwise possessed by the Collateral Agent
for or on behalf of the Grantor in substitution for or in
addition to any or all of the then existing Account
Collateral; all securities (as defined in Article 8 of the
UCC) and all dividends, cash, instruments and other property
from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all
securities (as defined in Article 8 of the UCC);
(C) all interest, dividends, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of the then existing Account
Collateral;
(D) all deposits of cash, funds or monies at
any bank; and
(E) all cash, checks, drafts, chattel paper,
notes and other instruments or writings for the payment of
money received by the Grantor in respect of the property and
interests in property described in this Section 2(a) and all
investments from time to time made pursuant to Section 4
hereof (collectively, all of items in this clause (xiii) are
hereinafter referred to as the "Account Collateral");
(xvi) all of the following:
(A) all shares (the "Pledged Shares") of
stock described in Part I of Schedule V and issued by the
corporations named therein and the certificates representing
the Pledged Shares, and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the Pledged Shares;
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(B) all indebtedness (the "Pledged Debt")
described in Part II of Schedule V and issued by the obligors
named therein and the instruments evidencing the Pledged Debt,
and all interest, cash, instruments and other property from
time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Debt;
(C) all additional shares of stock of any
issuer of the Pledged Shares from time to time acquired by the
Grantor in any manner, and the certificates representing such
additional shares, and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all such shares; and
(D) all additional indebtedness from time to
time owed to the Grantor by any obligor of the Pledged Debt
and the instruments evidencing such indebtedness, and all
interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such indebtedness
(collectively, all of the foregoing is hereinafter referred to
as the "Security Collateral");
(xvii) all of Grantor's books and records (including, without
limitation, all computerized books and records, all computer programs or
other devices related thereto, printouts, computer discs, minute books,
journals, ledgers, work papers, financial statements, orders, receipts,
and any correspondence and other data relating to the Grantor's business
or to any transactions the Grantor has entered into, no matter how or
where such records may be maintained, generated or stored) as the
foregoing relates to any of the property and interests in property
described in this Section 2(a); and
(xviii) all Proceeds of each of the foregoing property and
interests in property, and all accessories to, substitutions and
replacements for, and rents, profits and products of each of the
foregoing.
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SECTION 3 THE GRANTOR TO REMAIN LIABLE.
Notwithstanding anything contained herein to the contrary, (a) the
Grantor shall remain liable under each of the Contracts and agreements included
in the Collateral to observe and perform all of its duties and obligations
thereunder and the Grantor shall perform all of its duties and obligations
thereunder, (b) the exercise by the Collateral Agent of any of the rights
hereunder shall not release the Grantor from any of its duties or obligations
under any of the Contracts and agreements included in the Collateral, and (c)
neither the Collateral Agent nor any Lender shall have any obligation or
liability under the Contracts and agreements included in the Collateral by
reason of this Agreement or the granting to the Collateral Agent of any Lien or
the receipt by the Collateral Agent of any payment relating to any contract or
agreement included in the Collateral. Neither the Collateral Agent nor any
Lender shall be obligated in any manner to perform or fulfill any of the
obligations or duties of the Grantor under any of the Contracts or agreements
included in the Collateral, to make any payment thereunder or to make any
inquiry as to the nature or sufficiency of any payment received by the
Collateral Agent or the sufficiency of any performance by any party to such
Contracts or agreements, or to take any action to collect or enforce any
performance or the payment of any amounts or any claim for payment which may
have been assigned to the Collateral Agent or to which the Collateral Agent may
be entitled at any time or times.
SECTION 4 BANK ACCOUNTS.
(a) Types of Bank Accounts. Until all Obligations
have been paid and performed in full, the Grantor shall establish and maintain
only Collateral Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank
Accounts and Special Permitted Bank Accounts.
(b) Collateral Lockboxes and Collateral Lockbox
Accounts. The Grantor shall establish and maintain Collateral Lockboxes and
Collateral Lockbox Accounts at one or more Collateral Lockbox Banks designated
by the Collateral Agent from time to time, into which the Grantor shall
forthwith, upon receipt, transmit and deliver for deposit in a Collateral
Lockbox Account, in the form received, all cash, checks, drafts, Chattel Paper
and other Instruments or writings for the payment of money, properly endorsed,
where required, so that such items may be collected by the Collateral Agent,
which may be received by the Grantor at any time. The Grantor shall have no
right to withdraw any funds deposited in the Collateral Lockbox Accounts. Except
as otherwise provided below in this paragraph, the Collateral Agent shall apply,
or cause to be applied, all or any of the then balance, representing collected
funds, in each of the Collateral Lockbox Accounts, toward payment of the
Obligations, whether or not then due, in such amounts and in such order of
application as set forth in the Third Amended and Restated Credit Agreement. The
Collateral
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Agent is authorized to endorse, in the name of the Grantor, any item, however
received by the Collateral Agent, representing any payment on or other proceeds
of any of the Collateral. Except as otherwise set forth below in paragraph (d)
of this Section, any such items which constitute Collateral which may be
received by the Grantor shall not be commingled with any other funds or
property, but will be held in express trust for the benefit of the Collateral
Agent separate and apart from the Grantor's own funds or property until delivery
is made to the Collateral Agent. The Collateral Agent is hereby entitled to
notify each financial institution at which any of the Grantor's Collateral
Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank Accounts, or deposit
accounts are located and on which the Collateral Agent has a Lien, to
immediately remit the balance in such accounts to the Collateral Agent to be
deposited in a Collateral Lockbox Account as directed by the Collateral Agent.
(i) The Collateral Agent may invest or reinvest, or cause to be
invested or reinvested, to the extent practicable, monies on deposit in
any or all Collateral Lockbox Accounts in a Cash Equivalent Investment.
(ii) The Collateral Agent shall have no liability for any loss of
principal or failure to achieve any minimum return, absent gross
negligence or willful misconduct on the part of the Collateral Agent.
Any interest or other income earned on amounts in any Collateral
Lockbox Account shall be held by the Collateral Agent as Collateral to
secure the Obligations, including without limitation, the Grantor's
Obligations and shall be applied in accordance with Section 4(b)
hereof. Income tax on all interest earned on amounts in the Collateral
Lockbox Account shall be payable solely by the Grantor.
(c) Location of Mandatory Bank Accounts. Each
Mandatory Bank Account shall be maintained with a Lender.
(d) Collateral Agent Powers. The Grantor hereby
transfers to the Collateral Agent the exclusive dominion and control of each of
the Collateral Lockbox Accounts and all funds from time to time therein.
(e) Bank Accounts; Collateral Lockbox Account
Letters. With respect to each Mandatory Bank Account and each Permitted Bank
Account in existence on the Agreement Date, other than those listed on Schedules
I and II attached hereto, the Grantor has taken and has caused to be taken, all
actions necessary or as requested by the Collateral Agent to create and maintain
in each such account a first priority perfected Lien in favor of the Collateral
Agent and the Grantor has executed and delivered or will execute and deliver to
the Collateral Agent no later than five (5) Business Days after the Agreement
Date a duly executed Sweep Agreement with respect to each such Mandatory Bank
Account and Permitted Bank Account. With respect to each Mandatory Bank
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Account and Permitted Bank Account listed on Schedules I and II attached hereto,
the Grantor has taken and has caused to be taken, all actions necessary or as
requested by the Collateral Agent to create and maintain in each such account a
first priority Lien in favor of the Collateral Agent and the Grantor has
executed and delivered or will execute and deliver to the Collateral Agent no
later than five (5) Business Days after the Agreement Date a duly executed Sweep
Agreement with respect to each such Mandatory Bank Account and Permitted Bank
Account. With respect to each and every other Mandatory Bank Account, the
Grantor agrees to take, and cause to be taken, all actions necessary or as
requested by the Collateral Agent to create and maintain in each such Mandatory
Bank Account a first priority perfected Lien in favor of the Collateral Agent
and to execute and deliver to the Collateral Agent a duly executed Sweep
Agreement with respect to each such account prior to the creation of each such
account. With respect to each Collateral Lockbox Account in existence on the
Agreement Date maintained at a financial institution other than the Collateral
Agent, the Grantor has delivered to the Collateral Agent duly executed
Collateral Lockbox Account Letters in the form of Exhibit I attached hereto (the
"Collateral Lockbox Account Letters"). The Grantor agrees to execute and
deliver, and cause to be executed and delivered, such additional Collateral
Lockbox Account Letters as the Collateral Agent may request.
(f) Account Debtors. The Grantor has instructed
each and every existing Account Debtor, and hereby agrees to, at the Grantor's
expense, immediately instruct each new Account Debtor, to make all payments due
or to become due, or to continue to make all payments due or to become due, as
the case may be, subject to the terms and conditions hereof, to the Collateral
Lockboxes for deposit in the Collateral Lockbox Accounts.
(g) Authorization. The Grantor hereby authorizes
the Collateral Agent to notify each Collateral Lockbox Bank of the Collateral
Agent's exclusive control of and dominion over the Collateral Lockbox Accounts
maintained at such Collateral Lockbox Bank and the Grantor agrees to execute and
deliver from time to time to the Collateral Lockbox Banks such documents,
agreements and writings as the Collateral Agent may reasonably request
including, without limitation, Collateral Lockbox Account Letters.
(h) Bank Accounts. Attached hereto as Schedule VI
is a true, complete, correct and accurate listing of each of the Grantor's
Lockboxes, Lockbox Accounts, Mandatory Bank Accounts, Permitted Bank Accounts,
Deposit Accounts, deposit accounts, Collateral Lockboxes, Collateral Lockbox
Accounts, Special Permitted Bank Accounts and other deposit accounts and other
accounts existing as of the Agreement Date.
(i) Maximum Permitted Amount. The Grantor shall
not at any time maintain in any bank account, a balance in excess of One Million
Dollars ($1,000,000).
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SECTION 5 [INTENTIONALLY OMITTED].
SECTION 6 [INTENTIONALLY OMITTED].
SECTION 7 MARKING AND DELIVERY OF COLLATERAL.
(a) Marking of Collateral. The Grantor shall: (i) promptly
mark conspicuously each Instrument and each item of Chattel Paper and each
Contract with the following legend: "This writing and the obligations evidenced
or secured hereby are subject to a first priority security interest of Society
National Bank, as the Collateral Agent" (or an abbreviation thereof
satisfactory to the Collateral Agent), and (ii) ensure that each item of Chattel
Paper is evidenced by one and only one, if any, executed original document.
(b) Upon Event of Default. Following the occurrence of any
Event of Default, upon the request of the Collateral Agent, all certificates
and Chattel Paper (including, without limitation, all instruments, contracts,
documents and agreements executed or delivered in connection therewith,
including, without limitation, all equipment schedules, certificates of title,
financing statements, insurance certificates, bills of sale, collateral
assignments of leases, purchase agreement assignments and mortgagee/landlord
waivers) representing or evidencing any of the Collateral, shall be delivered
to and held by or on behalf of the Collateral Agent pursuant hereto and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent and the Collateral Agent shall
have the right, at any time in its discretion and without notice to the
Grantor, to transfer to or to register in the name of the Collateral Agent or
any of its nominees any or all of the Collateral. In addition, the Collateral
Agent shall have the right at any time to exchange certificates or instruments
representing or evidencing the Collateral for certificates or instruments of
smaller or larger denominations.
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SECTION 8 REPRESENTATIONS AND WARRANTIES.
The Grantor represents and warrants to the Collateral Agent as follows:
(a) Location of Business and Collateral.
(i) The Grantor's principal place of business,
chief executive office and books and records are located at 4770
Hinckley Industrial Parkway, Cleveland, Ohio 44109. As of the Agreement
Date, each of the Grantor's offices, warehouses (whether owned or
leased) and each other of the Grantor's locations are identified on
Schedule VII attached hereto. The Grantor will not change such
principal place of business, chief executive office or the location of
its books and records relating to the Collateral. In no event shall the
books and records relating to the Collateral be relocated to anywhere
outside the continental United States. As of the Agreement Date, the
Grantor uses no trade name other than its actual name. After the
Agreement Date, Grantor will not do business under any other trade
name, unless it has given twenty (20) days' prior written notice
thereof to the Collateral Agent and taken such action as is necessary
and as is reasonably requested by the Collateral Agent or any Lender to
cause the Lien of the Collateral Agent in the Collateral to continue to
be perfected.
(ii) All of the Collateral Equipment and
Collateral Inventory are located at the places specified on Schedule
VIII (as updated in accordance with Section 10(d) hereof). The office
where the Grantor keeps its records concerning the Accounts, Accounts
Receivable and all Chattel Paper that evidences Collateral, is located
at 4770 Hinckley Industrial Parkway, Cleveland, Ohio 44109. No Account
in excess of One Thousand Dollars ($1,000) or in the aggregate amount
of Fifty Thousand Dollars ($50,000) and no Account Receivable in excess
of One Thousand Dollars ($1,000) or in the aggregate amount of Fifty
Thousand Dollars ($50,000) is evidenced by a promissory note or other
instrument which has not been delivered to the Collateral Agent in
accordance with Section 9(b) hereof.
(b) Pledged Shares. The Pledged Shares have been
duly authorized and validly issued and are fully paid and nonassessable. The
Pledged Shares constitute one hundred percent (100%) of the issued and
outstanding capital stock of each issuer thereof, and there are no warrants,
options or other rights to acquire any of the capital stock of any issuer of
Pledged Shares. The Pledged Debt has been duly authorized, authenticated or
issued and delivered, and is the legal, valid and binding obligation of the
issuers thereof, and is not in default.
(c) Ownership/Title to Collateral. The Grantor is
the legal and beneficial owner of the Collateral free and clear of
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any Lien, security interest, option, charge or encumbrance except for Permitted
Liens and the security interest created by this Agreement. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except such as may
have been filed in favor of the Collateral Agent relating to this Agreement or
as permitted under the Third Amended and Restated Credit Agreement. The Grantor
owns each of the patents, trademarks, copyrights, licenses and other
intellectual property included in the Collateral.
(d) Possession. The Grantor has exclusive
possession and control of the Collateral Equipment and Collateral Inventory
owned by it other than Collateral Inventory subject to a Lease entered into in
the ordinary course of business, naming the Grantor as lessor, Collateral
Inventory in transit and Collateral Inventory shipped directly to the Grantor's
vendees or lessees by the Grantor's vendors in the ordinary course of the
Grantor's business.
(e) Collateral. The pledge and delivery of the
Pledged Shares, the Pledged Debt and any other securities (as defined in Article
8 of the UCC) pursuant to this Agreement creates a valid, continuing, and
perfected first priority Lien upon the Security Collateral and any other
securities (as defined in Article 8 of the UCC) in favor of the Collateral
Agent. This Agreement creates and maintains a valid and continuing Lien upon the
Collateral in favor of the Collateral Agent which is, except for those accounts
and deposit accounts set forth on Schedules I and II, a perfected Lien and which
is a first priority Lien. Appropriate financing statements have been filed in
all jurisdictions necessary to create and maintain a first priority Lien which
is, except for those accounts and deposit accounts set forth on Schedules I and
II, a perfected security interest and Lien.
(f) Approval; Consents. No authorization, approval
or other action by, and no notice to or filing with (other than the filings and
deliveries referred to in this Agreement) any governmental authority or
regulatory body is required for the (i) creation or perfection by the Grantor of
the security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor or (ii) for the exercise by the
Collateral Agent of the voting or other rights provided for in this Agreement or
the remedies in respect of the Pledged Collateral, pursuant to this Agreement
(except as may be required in connection with such disposition by laws affecting
the offering and sale of securities generally).
(g) Accounts, Accounts Receivables and General
Intangibles. With respect to each of the Accounts, the Accounts Receivable and
the General Intangibles, and the Documents evidencing the underlying
obligations, the Collateral Agent may rely on all statements or representations
made by the Grantor on or
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with respect to any schedule of accounts furnished to the Collateral Agent by
the Grantor and, unless otherwise indicated in writing by the Grantor, that:
(i) They are genuine, are in all material respects
what they purport to be, are not evidenced by a judgment and are
evidenced by one and only one, if any, executed original Instrument,
which has been delivered to the Collateral Agent;
(ii) Except for disputes in the ordinary course of
business, they represent undisputed, bona fide transactions completed
in accordance with the terms and provisions contained in any documents
related thereto;
(iii) The face amounts shown on any such schedule
of accounts provided to the Collateral Agent and all invoices and
statements delivered to the Collateral Agent with respect to any
Account, Account Receivable and the General Intangibles are actually
and absolutely owing to the Grantor and are not contingent for any
reason, except for disputes and non-material errors arising in the
ordinary course of business;
(iv) To the best of the Grantor's knowledge, there
are no set-offs, counterclaims or disputes existing or asserted with
respect thereto and the Grantor has not made any agreement with any
Account Debtor thereunder for any deduction therefrom, except discounts
or allowances allowed by the Grantor in the ordinary course of its
business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face amount of the invoices to
which such discounts or allowances relate;
(v) To the best of the Grantor's knowledge, there
are no facts, events or occurrences which in any way impair the
validity or enforcement thereof or tend to reduce the amount payable
thereunder from the invoice face amount shown on any schedule of
Accounts, Accounts Receivable and General Intangibles furnished to the
Collateral Agent and on all contracts, invoices and statements
delivered to the Collateral Agent with respect thereto;
(vi) Such Accounts, Accounts Receivable and the
General Intangibles are not subject to any Lien, except those of the
Collateral Agent and Permitted Liens;
(vii) The Collateral giving rise to the Accounts,
Accounts Receivable and the General Intangibles is not, and was not at
the time of the sale thereof, subject to any Lien or claim, except the
Lien of the Collateral Agent and Permitted Liens;
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(viii) To the best of the Grantor's knowledge,
there is no fact or circumstances which would impair the validity or
collectability of any Account or any Account Receivable;
(ix) To the best of the Grantor's knowledge, there
are no proceedings or actions which are threatened or pending against
any Account Debtor thereunder which might result in any materially
adverse effect upon the Grantor; and
(x) No Collateral is under consignment to or from
any person.
Notwithstanding anything contained in this Section 8(g) to the contrary, the
Grantor shall not be deemed to have violated the representations and warranties
contained in this Section 8(g) if items (i) through (x) above, collectively, are
untrue at any time with respect to Accounts, Accounts Receivable and General
Intangibles, with an aggregate value not in excess of Twenty-Five Thousand
Dollars ($25,000).
(h) Authorization; Enforceability. This Agreement
and each of the Debt Documents to which the Grantor is a party, when executed
and delivered, will constitute the legal, valid and binding obligations of the
Grantor, enforceable against the Grantor in accordance with its respective
terms, except as enforcement may be limited by bankruptcy, insolvency or any
other similar laws of general application affecting enforcement of creditors
rights or by general principles of equity limiting the availability of equitable
remedies.
(i) Solvency. The Grantor is now, and after
consummation of the transactions contemplated by this Agreement and each Debt
Document (i) will be solvent and able to pay its debts as they mature; (ii) will
be the owner of assets the fair saleable value of which is greater than the
amount necessary to repay the obligations thereunder, and (iii) will have
capital which is not unreasonably small in relation to its business. The Grantor
is not insolvent (as that term is defined in the Bankruptcy Code) and will not
be rendered insolvent by the execution, delivery or performance of this
Agreement or, the other Debt Documents, or the consummation of the transactions
contemplated hereby and thereby. The Grantor has not made a general assignment
for the benefit of its creditors. No proceeding has been instituted by or
against the Grantor alleging that the Grantor is insolvent or unable to pay its
debts as they mature. The Grantor does not presently contemplate the
commencement of a general assignment for the benefit of creditors nor the filing
of any proceeding under any provisions of the Bankruptcy Code.
(j) Leases. Attached hereto as Schedule IX, is a
true, correct, complete and accurate list of each of the Leases and all Chattel
Paper subject to the
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Collateral Agent's Lien (collectively, each Lease and all Chattel Paper subject
to the Collateral Agent's Lien, "Lease Collateral") in effect as of the
Agreement Date, each of which is in full force and effect. The Grantor shall
promptly notify the Collateral Agent if it believes or has been notified by any
person that any Lease Collateral is no longer in full force and effect, except
for the expiration or termination of a Lease in accordance with its stated
terms. With respect to the Lease Collateral in existence from time to time: (i)
each item of Lease Collateral is valid, enforceable in accordance with its terms
and in full force and effect; (ii) the Grantor is the sole holder of the rights
and interests ascribed to the Grantor under each item of Lease Collateral and
has full power and authority to assign, transfer and set over the same and to
grant to and confer upon the Collateral Agent the rights, interests, powers and
authorities granted and conferred under this Agreement to the Collateral Agent;
(iii) the Grantor has observed and performed all covenants and obligations under
each item of Lease Collateral, required to be performed by the Grantor and the
Grantor shall observe and perform all of the covenants under each item of Lease
Collateral; (iv) all representations and warranties of the Grantor contained in
each item of Lease Collateral are true, complete, correct and accurate in all
material respects; (v) the Grantor has no knowledge of any facts which impair
the validity or enforceability of any item of Lease Collateral; (vi) the Grantor
will not modify, waive or amend in a manner adverse to the Grantor, nor consent
to such modification, waiver or amendment of, any item of Lease Collateral,
without the Collateral Agent's prior written consent; and (vii) each item of
Lease Collateral originated by the Grantor is not and does not have the
potential of being, subject to any offset, counterclaim or other defense on the
part of the applicable lessee or to any claim on the part of such lessee denying
liability thereunder in whole or in part: with respect to each item of Lease
Collateral not originated by the Grantor, the Grantor agrees to use its best
efforts to ensure that each item of Lease Collateral is not, and does not have
the potential of being, subject to any offset, counterclaim or other defense on
the part of the applicable lessee or to any claim on the part of such lessee
denying liability thereunder in whole or in part. Notwithstanding anything
contained in this Section 8(j) to the contrary, Grantor shall not be deemed to
have violated the representations and warranties contained in the immediately
preceding sentence if items (i) through (vii), collectively, are untrue at any
time with respect to Lease Collateral with an aggregate value not in excess of
Twenty-Five Thousand Dollars ($25,000).
(k) Inventory. With respect to the Collateral
Inventory:
(i) Each item of Inventory is classified as
Inventory under the UCC;
(ii) Each item of Collateral Inventory certified
by the Grantor in any Borrowing Base Certificate (as such term is
defined in the Third Amended and Restated Credit Agreement) is
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Eligible Uncommitted Inventory or Eligible Committed Inventory (as such
terms are defined in the Third Amended and Restated Credit Agreement)
and was either new when purchased or acquired by the Grantor or is
designated as used equipment in the Borrowing Base Certificate; and
(iii) Except for necessary repairs and servicing,
each item of Collateral Inventory which is not leased is located only
at the location for such item of Inventory set forth herein.
Notwithstanding anything contained in this Section 8(k) to the contrary, Grantor
shall not be deemed to have violated the representations and warranties
contained in this Section 8(k) if items (i) through (iii) above, collectively,
are untrue at any time with respect to Collateral Inventory with an aggregate
value not in excess of Twenty-Five Thousand Dollars ($25,000).
SECTION 9 GENERAL COVENANTS REGARDING COLLATERAL.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) Financing Statements, Etc. Concurrently with
the execution and delivery of this Agreement, and from time to time thereafter
promptly following the request of the Collateral Agent, the Grantor shall take
any and all actions necessary and as reasonably requested by the Collateral
Agent or any of the Lenders to maintain the first priority perfected security
interest and Lien on the Collateral in favor of the Collateral Agent, and the
Grantor agrees to execute and deliver to the Collateral Agent such documents as
may be necessary to perfect and maintain perfected the Collateral Agent's first
priority continuing security interest in and Lien thereon and on the Collateral.
The Grantor will join with the Collateral Agent in the execution and filing of
such financing statement or statements and the like, in the form and content
reasonably required by the Collateral Agent. The Grantor will execute and file
in the appropriate jurisdictions such financing statements and other documents
necessary and as reasonably requested by the Collateral Agent or any Lender to
create and maintain the Grantor's first priority perfected security interest in
and Lien on all property subject to a Lease. The Grantor will pay all costs of
filing any financing, continuation or termination statements, or other filings
with respect to the Liens created by this Agreement, together with all costs and
expenses of any Lien search reasonably required by the Collateral Agent during
the term hereof.
(b) Further Assurances. At any time and from time
to time, upon the written request of the Collateral Agent, and at the sole
expense of the Grantor, the Grantor will promptly and duly execute and deliver
any and all such further instruments and docu-
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ments and take such further action as the Collateral Agent may reasonably deem
desirable to obtain the full benefits of this Agreement and of the rights and
powers herein granted, including, without limitation, using its reasonable
efforts to secure all consents and approvals necessary or appropriate for the
assignment to the Collateral Agent of any Lease or Contract held by the Grantor
or in which the Grantor has any rights not heretofore assigned, the filing of
any financing or continuation statements under the UCC with respect to the Liens
granted hereby, transferring Collateral to the Collateral Agent's possession (if
a Lien in such Collateral can be perfected by possession). The Grantor also
hereby authorizes the Collateral Agent to file any such financing or
continuation statement without the signature of the Grantor to the extent
permitted by applicable law.
(c) Statements and Schedules. The Grantor will
furnish to the Collateral Agent from time to time statements, schedules and any
other information further identifying and describing the Collateral and such
reports in connection with the Collateral as the Collateral Agent may reasonably
request, all in reasonable detail.
(d) Compliance with Laws. The Grantor will neither
use the Collateral, nor permit the Collateral to be used, for any unlawful
purpose or contrary to any statute, law, ordinance or regulation relating to the
registration, use, operation or control of the Collateral. The Grantor will
comply with, or cause to be complied with, at all times and in all material
respects, all statutes, laws, ordinances and regulations of the United States,
the State of Ohio, and of all other governmental, regulatory, or judicial bodies
applicable to the use, operation, maintenance, overhauling, or condition of the
Collateral, or any part thereof, and with all requirements under any licenses,
permits, or certificates relating to the use or operation of the Collateral
which are issued to the Grantor or to any other person having operational
control of the Collateral; provided, however, that the Grantor may, in good
faith and by appropriate legal or other proceedings, contest the validity of any
such statutes, laws, ordinances or regulations, or the requirements of any such
licenses, permits, or certificates, and pending the determination of such
contest may postpone compliance therewith, unless the rights of the Collateral
Agent hereunder are or may be materially adversely affected thereby.
(e) Identification of Leases and Chattel Paper.
The Grantor shall deliver to the Collateral Agent a revised Schedule IX (i)
prior to the occurrence of an Event of Default, on or prior to the tenth (10th)
day of each calendar month, and (ii) following the occurrence of an Event of
Default, as requested by the Collateral Agent or any Lender but no less
frequently than once a month, on or prior to the tenth (10th) Business Day of
each calendar month. The failure of the Grantor to execute and deliver such
schedule shall
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not affect or limit the Collateral Agent's Lien or other rights in and to the
Lease Collateral.
SECTION 10 COVENANTS REGARDING COLLATERAL EQUIPMENT AND COLLATERAL INVENTORY.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) Location of Collateral Equipment. The Grantor
shall keep the Collateral Equipment at the places specified in Section 8(a)
hereof and keep the Collateral Inventory at the places specified in such Section
8(a) and Section 10(d) hereof or, with respect to Collateral Equipment, upon
thirty (30) days' prior written notice to the Collateral Agent, at such other
places in a jurisdiction in which all action required by Section 9 hereof shall
have been taken with respect to the Collateral Equipment.
(b) Maintenance of Collateral Equipment and
Collateral Inventory. The Grantor shall cause each item of the Collateral
Equipment and Collateral Inventory to be maintained and preserved or cause the
lessee thereof to maintain and preserve the Collateral Equipment in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual, and shall, (i) make
or cause to be made all repairs, replacements, and other improvements thereto
that are necessary or desirable to such end only by qualified personnel who are
trained in the repair and maintenance of such item, and (ii) deliver any and all
proceeds, subject to the terms of the lease, received in the case of any loss or
damage to the Collateral Agent (who shall deposit the same in a Collateral
Lockbox Account). In addition to the provisions set forth in Section 11 hereof,
upon the request of the Collateral Agent, the Grantor shall promptly furnish to
the Collateral Agent a statement respecting any loss or damage to any of the
Collateral Equipment.
(c) Payment of Taxes. The Grantor shall pay
promptly when due or cause the lessee to pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Collateral Equipment and Collateral Inventory, except to the extent the validity
thereof is being contested in good faith as permitted pursuant to the Third
Amended and Restated Credit Agreement.
(d) Location of Collateral Inventory. The Grantor
shall update Schedule VIII of this Agreement with a written schedule describing
the location of all Collateral Inventory (i) prior to the occurrence of an Event
of Default, on or prior to the tenth (10th) day of each calendar month, and (ii)
following the occurrence of an Event of Default, as requested by the Collateral
Agent or any Lender but no less frequently than once a month, on or
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prior to the tenth (10th) Business Day of each calendar month. The failure of
the Grantor to execute and deliver such schedule shall not affect or limit the
Collateral Agent's security interest or Lien or other rights in and to the
Collateral Inventory.
SECTION 11 COVENANTS REGARDING INSURANCE.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) Maintenance of Insurance. The Grantor shall,
at its own expense, maintain insurance, or cause any lessee to insure, with
respect to the Collateral in such amounts, against such risks, in such form and
with such insurers, as shall be satisfactory to the Collateral Agent and the
Required Lenders from time to time. Each such policy maintained by Grantor, and,
if requested by the Collateral Agent as directed by the Required Lenders, each
such policy maintained by any lessee, shall in addition (i) name the Collateral
Agent as an additional insured party and loss payee thereunder (without any
representation or warranty by or obligation upon the Collateral Agent) pursuant
to certificates in form and substance satisfactory to the Collateral Agent, (ii)
contain the agreement by the insurer that any loss thereunder shall be payable
to the Collateral Agent notwithstanding any action, inaction or breach of
representation or warranty by the Grantor, (iii) provide that there shall be no
recourse against the Collateral Agent for payment of premiums or other amounts
with respect thereto, (iv) with respect to insurance maintained by the Grantor,
provide that at least thirty (30) days' prior written notice of any proposed
termination, cancellation, lapse or nonrenewal shall be given to the Collateral
Agent by the insurer, and (v) with respect to insurance maintained by a lessee
of the Grantor, the Grantor shall use its best efforts to comply with the
preceding clause (iv). The Grantor shall deliver to the Collateral Agent
original or duplicate policies of such insurance and certificates of insurance
and, as often as the Collateral Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. The Grantor shall
deliver to the Collateral Agent from time to time, as the Collateral Agent may
reasonably request, schedules setting forth all insurance maintained by the
Grantor then in effect.
(b) Grantor to Take Required Action. The Grantor
shall, at the request of the Collateral Agent, duly execute and deliver
instruments of assignment of the insurance policies described in paragraph (a)
in order to comply with the requirements of Section 9 above and shall cause the
insurer(s) to acknowledge notice of such assignment. The Grantor shall take all
such action as the insurer(s) providing such insurance shall require if the
failure to do so would cause the insurance policy(ies) to be cancelled or the
coverage thereunder adversely modified.
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(c) Notice of Claims. The Grantor shall notify the
Collateral Agent of any single Collateral Insurance Claim known or which should
have been known to the Grantor which exceeds One Hundred Thousand Dollars
($100,000) or any Collateral Insurance Claims known or which should have been
known to the Grantor which, in the aggregate, exceed Two Hundred Fifty Thousand
Dollars ($250,000) in any one (1) calendar year.
(d) Deposit of Proceeds. All amounts paid with
respect to any Collateral Insurance Claim shall be deemed to constitute Proceeds
and shall be deposited only in the Collateral Lockbox Accounts. In the event
that the applicable lease agreement requires that amounts paid with respect to
Collateral Insurance Claims be used to purchase replacement Collateral
Equipment, upon the request of the Grantor and receipt by the Collateral Agent
of evidence satisfactory to the Collateral Agent that such purchase is so
required, the Collateral Agent, prior to the occurrence of an Event of Default,
may release such Proceeds in order to purchase such replacement Collateral
Equipment.
(e) Settlement of Claims and Release of Proceeds.
At any time prior to the occurrence or existence of an Event of Default, the
Grantor shall have the right to negotiate and settle only those Collateral
Insurance Claims less than Two Hundred Fifty Thousand Dollars ($250,000); with
respect to all other Collateral Insurance Claims and at any time from and after
the occurrence or existence of an Event of Default, the Collateral Agent shall
have full right and power (pursuant to the power of attorney contained herein)
to negotiate, settle and compromise any Collateral Insurance Claim, at the
direction of the Required Lenders. Except as set forth in clause (d) above, all
policy proceeds paid by the insurer(s) relating to any such Collateral Insurance
Claim shall be deposited into a Collateral Lockbox Account.
SECTION 12 COVENANTS REGARDING ACCOUNTS AND ACCOUNTS RECEIVABLE.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) Records. The Grantor shall keep its chief
place of business and chief executive office and the office where it keeps its
books and records concerning the Accounts and Accounts Receivable, and the
original copies of all Chattel Paper that evidences Collateral, at the location
therefor specified on Schedule VIII attached hereto or, upon twenty (20) days'
prior written notice to the Collateral Agent, at such other locations in a
jurisdiction in which all actions required by Section 9 above shall have been
taken with respect to the Collateral.
(b) Notice to Account Debtors. The Grantor hereby
authorizes the Collateral Agent, at any time or times after an Event of Default,
to notify, any or all Account Debtors that the
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Accounts and Accounts Receivable have been assigned to the Collateral Agent, and
that the Collateral Agent has a Lien therein and to direct such Account Debtors
to make all payments due or to become due from them to the Grantor directly to a
Collateral Lockbox Account designated by the Collateral Agent from time to time.
Any such notice, in the Collateral Agent's sole discretion, may be sent on the
Grantor's stationery, in which event the Grantor shall co-sign such notice with
the Collateral Agent.
(c) Verifications. The Collateral Agent shall have
the right to make test verifications of the Accounts and Accounts Receivable and
physical verifications of the Collateral in any manner and through any
commercially reasonable medium that it considers advisable, and the Grantor
agrees to furnish all such assistance and information as the Collateral Agent
may require in connection therewith. Prior to an Event of Default, the
Collateral Agent shall give reasonable advance notice of any such verification
(which shall be during business hours to the extent possible) if such activities
include a visit to any of the Grantor's business locations. At any time after an
Event of Default, the Grantor at its expense will cause certified independent
public accountants satisfactory to the Collateral Agent to prepare and deliver
to the Collateral Agent at any time and from time to time promptly upon the
Collateral Agent's request in form and substance satisfactory to the Collateral
Agent such information pertaining to the Accounts and Accounts Receivable,
including statements and schedules further identifying and describing the
Collateral and such other reports (in addition to all reports required by the
Guaranty and the Third Amended and Restated Credit Agreement) in connection with
the Collateral as the Collateral Agent may reasonably request from time to time,
all in reasonable detail.
(d) Limitations on Modifications of Accounts.
Until such time as the Collateral Agent, at the direction of the Required
Lenders, shall notify the Grantor of the revocation of such power and authority,
the Grantor may grant any extension of the time of payment of any of the
Accounts, Accounts Receivable, Chattel Paper or Instruments, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any person liable for the payment thereof, and allow any
credit or discount.
(e) Schedule of Accounts and Accounts Receivable.
On or prior to the tenth (10th) day of each calendar month, the Grantor shall
provide the Collateral Agent with schedules describing all Accounts and Accounts
Receivable created or acquired by it and shall execute and deliver confirmatory
written assignments of such Accounts and Accounts Receivable to the Collateral
Agent; provided, however, that the failure of the Grantor to execute and deliver
such schedules and/or assignments describing all Accounts and Accounts
Receivable to the Collateral Agent shall not affect or limit the Collateral
Agent's or any Lender's security interest or other rights in and to the Accounts
and Accounts Receivable. Together with each schedule, the Grantor
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shall furnish, upon request of the Collateral Agent, following the occurrence of
a Default or an Event of Default, copies of customers' invoices or the
equivalent, and, upon request therefor, copies of original shipping or delivery
receipts for all merchandise sold and such other documents as the Collateral
Agent may require. The Grantor will not re-date any invoice or sale or make
sales on extended dating beyond that customary in its industry. If the Grantor
becomes aware of anything materially detrimental to the material credit of any
of its customers in the possession of material Collateral, it will promptly
advise the Collateral Agent thereof.
SECTION 13 ADDITIONAL COVENANTS.
The Grantor covenants and agrees with the Collateral Agent that from
and after the Agreement Date and until the Obligations are fully satisfied:
(a) No Transfer of Collateral. The Grantor shall
not:
(i) sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral, or attempt to
contract to do so, except (A) Collateral Inventory and that portion of
Collateral Equipment consisting of property subject to a Lease, in the
ordinary course of business (and provided that the Proceeds thereof are
promptly deposited into a Collateral Lockbox Account designated by the
Collateral Agent from time to time) and (B) as permitted under the
Guaranty or the Third Amended and Restated Credit Agreement; or
(ii) take any action that would directly or
indirectly impair the value of the interest or rights of the Grantor or
the Collateral Agent in such Collateral;
(b) Proceeds of Sale. In the event the Grantor
transfers, sells, leases, conveys, disposes of or grants any warrants or options
with respect to any of the Collateral outside of the ordinary course of business
pursuant to clause (a)(i)(B) above (collectively, a "Transfer"), the Grantor
covenants and agrees that it shall (i) in the event the proceeds from such
Transfer aggregate in excess of One Hundred Thousand Dollars ($100,000), require
that the transferee of such Transfer wire such proceeds directly to an
appropriate Collateral Lockbox Account or (ii) in the event the proceeds from
such Transfer aggregate One Hundred Thousand Dollars ($100,000) or less,
promptly deposit all such proceeds into an appropriate Collateral Lockbox
Account. No consent to any Transfer hereunder shall be deemed to have been given
by the Collateral Agent until the proceeds from such Transfer are actually
received in a Collateral Lockbox Account.
(c) Pledged Shares. The Grantor will (i) cause
each issuer of the Pledged Shares not to issue any stock or other
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securities in addition to or in substitution for the Pledged Shares issued by
the issuer, except to the Grantor, and (ii) pledge hereunder, immediately upon
the Grantor's acquisition directly or indirectly thereof, any and all additional
shares of stock or other securities of each issuer of the Pledged Shares.
(d) Payment of Obligations. The Grantor will pay
promptly when due all charges imposed upon the Collateral or in respect of its
income or profits therefrom and all claims of any kind (including, without
limitation, claims for labor, materials and supplies), unless the same are being
diligently contested in good faith and for which reserves or appropriate
provision, if any, as shall be required by generally accepted accounting
principles, shall have been made therefor.
(e) Limitation of Liens on Collateral. The Grantor
will not create, permit or suffer to exist, and will defend the Collateral
against, and take such other action as is necessary to remove, any Lien on the
Collateral except Permitted Liens and will defend the right, title and interest
of the Collateral Agent in and to any of the Grantor's rights in or under the
Collateral against the claims and demands of all persons whomsoever.
(f) Compliance with Terms. The Grantor will
perform and comply with all obligations in respect of the Accounts, Accounts
Receivable, Chattel Paper, Contracts and all other agreements to which it is a
party or by which it is bound.
(g) Further Indemnification. The Grantor agrees to
pay, and to save the Collateral Agent and the Lenders harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
excise, sales or other similar taxes which may be payable or determined to be
payable with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
(h) Maintenance of Records. The Grantor will keep
and maintain at its own cost and expense satisfactory and complete records of
the Collateral in the ordinary course of business, including, without
limitation, a record of all payments received and all credits granted with
respect to the Collateral and all other dealings with the Collateral. The
Grantor will mark its books and records pertaining to the Collateral to evidence
this Agreement and the Liens granted hereby. The Grantor agrees that the
Collateral Agent shall have the right, upon the occurrence of an Event of
Default, without prior notice, to require the Grantor to turn over physical
possession of, or to make available any such books and records to the Collateral
Agent or to its representatives on demand of the Collateral Agent. Prior to the
occurrence of an Event of Default, the Grantor shall permit any representative
of the Collateral Agent to inspect such books and records during normal business
hours at reasonable times and will provide photocopies thereof to the Collateral
Agent and such clerical and
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other assistance as may be reasonably requested with regard thereto. Upon
reasonable notice and during regular business hours, the Collateral Agent and
its representatives shall also have the right to enter into and upon any
premises where any of the Collateral is located for the purpose of inspecting
the same, observing its use or otherwise protecting its interests therein.
(i) Special Collateral. Promptly upon the
Grantor's receipt of that portion of the Collateral (other than Chattel Paper)
which is or becomes evidenced by an agreement, writing, Instrument and/or
Document, including, without limitation, promissory notes, securities (as
defined in Article 8 of the UCC), trade acceptances, documents of title and
warehouse receipts, but excluding Leases which are or become Chattel Paper, the
Grantor shall deliver the original thereof to the Collateral Agent, together
with appropriate endorsements, stock powers or other specific evidence (in form
and substance acceptable to the Collateral Agent) of assignment thereof to the
Collateral Agent; provided, however, that the Grantor may deposit such
Instruments only in a Collateral Lockbox Account designated by the Collateral
Agent from time to time.
(j) Performance by the Collateral Agent of the
Grantor's Obligation. If the Grantor fails to perform or comply with any of its
covenants or agreements contained herein and the Collateral Agent, as provided
for by the terms of this Agreement, shall itself perform or comply, or otherwise
cause performance or compliance, with such covenants or agreements, the
reasonable expenses of the Collateral Agent incurred in connection with such
performance or compliance, together with interest thereon from the date paid or
incurred by the Collateral Agent until paid in full at the interest rate
determined in accordance with Section 2.4(a) of the Third Amended and Restated
Credit Agreement then in effect in respect of the Revolving Loans (as defined in
the Third Amended and Restated Credit Agreement), shall be payable by the
Grantor to the Collateral Agent on demand and shall constitute Obligations
secured hereby.
SECTION 14 VOTING RIGHTS; DIVIDENDS; ETC.
(a) Upon Event of Default. So long as no Event of
Default shall have occurred which has not been waived in accordance with the
provisions of the Guaranty and the Third Amended and Restated Credit Agreement:
(i) the Grantor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the Security
Collateral or any part thereof owned by it for any purpose not
inconsistent with the terms of this Agreement, the Guaranty or the
Third Amended and Restated Credit Agreement; provided, however, that
the Grantor shall not exercise or shall refrain from exercising any
such right if, in the Collateral Agent's judgment, such action or
inaction would
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have a material adverse effect on the value of the Security Collateral
or any part thereof; and, provided, further, that the Grantor shall
give the Collateral Agent at least five (5) days' written notice of the
manner in which it intends to exercise, or the reasons for refraining
from exercising, any such right; and
(ii) the Collateral Agent shall execute and
deliver (or cause to be executed and delivered) to the Grantor all such
proxies and other instruments as the Grantor may reasonably request for
the purpose of enabling the Grantor to exercise the voting and other
rights that they are entitled to exercise pursuant to paragraph (i)
above.
(b) After Event of Default. Upon the occurrence of
an Event of Default, and after notice to the Grantor by the Collateral Agent,
all rights of the Grantor to exercise the voting and other consensual rights
that it would otherwise be entitled to exercise pursuant to Section 14(a)(i)
above shall cease, and all such rights shall thereupon become vested in the
Collateral Agent who shall thereupon have the sole right to exercise such voting
and other consensual rights.
SECTION 15 COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.
(a) Appointment of Collateral Agent. The Grantor
hereby irrevocably appoints the Collateral Agent and any officer or agent
thereof, with full power of substitution, as the Grantor's attorney-in-fact,
with full irrevocable power and authority in the place and stead of the Grantor
and in the name of the Grantor or otherwise, from time to time in the Collateral
Agent's discretion, to take any action and to execute any instrument that the
Collateral Agent may deem necessary or advisable to enforce its rights and
remedies hereunder, including, without limitation:
(i) to obtain and adjust insurance required to be
paid to the Collateral Agent pursuant to Section 11 hereof;
(ii) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Collateral;
(iii) to receive, indorse, and collect any drafts
or other instruments, documents and Chattel Paper, in connection with
clauses (i) or (ii) above;
(iv) following the occurrence of an Event of
Default, to file any claims or take any action or institute any
proceedings which the Collateral Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Collateral Agent with respect to any of the Collateral;
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(v) to receive, indorse and collect all
instruments made payable to the Grantor representing any dividend,
interest payment or other distribution in respect of the Security
Collateral or any part thereof and to give full discharge for the same;
(vi) to pay or discharge taxes, liens, security
interests or other encumbrances levied or placed on or threatened
against the Collateral;
(vii) to defend any suit, action or proceeding
brought against the Grantor with respect to any Collateral and to
settle, compromise or adjust any suit, action or proceeding described
in this Section 15 and, in connection therewith, to give such
discharges or releases as the Collateral Agent may deem appropriate;
and
(viii) to make any agreement with respect to or
otherwise deal with, and, after the occurrence of an Event of Default,
to sell, transfer, or pledge, any of the Collateral as fully and
completely as though the Collateral Agent were the absolute owner
thereof for all purposes and to do, at the Collateral Agent's option
and the Grantor's expense, at any time, or from time to time, all acts
and things which the Collateral Agent reasonably deems necessary to
protect, preserve or realize upon the Collateral and the Collateral
Agent's security interests and liens therein, in order to effect the
intent of this Agreement, all as fully and effectively as the Grantor
might do.
(b) Ratification of Actions. The Grantor hereby
ratifies, to the extent permitted by law, all that said attorneys shall lawfully
do or cause to be done by virtue hereof. The power of attorney granted pursuant
to this Section 15 is a power coupled with an interest and shall be irrevocable
until the Obligations are indefeasibly paid in full.
(c) Duties of Collateral Agent. The powers
conferred on the Collateral Agent hereunder are solely to protect the Collateral
Agent's interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Collateral Agent shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers and
neither it nor any of its past, present or future officers, directors, employees
or agents shall be responsible to the Grantor for any act or failure to act,
except for its own gross negligence or willful misconduct.
(d) Additional Authority Upon Event of Default.
The Grantor also authorizes the Collateral Agent, at any time or times after the
occurrence of an Event of Default, (i) to communicate in its own name with any
party to any Contract with regard to the assignment of the right, title and
interest of the Grantor in and
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under the Contracts hereunder and other matters relating thereto, and (ii) to
execute, in connection with the sale provided for in Section 18 hereof, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.
SECTION 16 THE COLLATERAL AGENT.
Pursuant to the Third Amended and Restated Credit Agreement and the
Intercreditor Agreement, Society has been appointed Collateral Agent hereunder.
The Collateral Agent acts with the authorization of and at the direction of the
Required Lenders, as more fully described in the Third Amended and Restated
Credit Agreement and the Intercreditor Agreement. Except as set forth in Section
6 hereof, the Collateral Agent shall only release its Lien on Collateral as
authorized and directed in writing by the Required Lenders. The Collateral Agent
is authorized by the Lenders to, among other things, execute in its capacity as
Collateral Agent for the Lenders, the Sweep Agreements.
(a) Neither the Collateral Agent nor any of its
past, present or future directors, agents, officers, employees or attorneys
shall be liable for any acts, omissions, errors of judgment or mistakes of fact
or law made, taken or omitted to be made or taken in accordance with this
Agreement or any Debt Documents (including, without limitation, acts, omissions,
errors or mistakes with respect to the Collateral), except for those arising out
of or in connection with gross negligence or willful misconduct. Without
limiting the foregoing, neither the Collateral Agent nor any of its past,
present or future directors, officers, agents, employees or attorneys shall be
responsible for, or have any duty to examine, ascertain, or inquire about (A)
the genuineness, execution, validity, effectiveness, enforceability, value or
sufficiency of (x) this Agreement, or (y) any document or instrument furnished
pursuant to or in connection with this Agreement, including the Grantor's books
and records, (B) the collectability of any amounts owed by the Grantor, (C) any
recitals or statements or representations or warranties in connection with this
Agreement or any of the Debt Documents, (D) any failure of any party to this
Agreement or any Debt Documents or any Lender to receive any communication sent
to the notice address specified in Section 23 hereof, or (E) the assets,
liabilities, financial condition, result of operations, business or
creditworthiness of the Grantor.
(b) The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral in its possession if it takes such action for that purpose as the
Grantor requests in writing, but failure of the Collateral Agent to comply with
any such request shall not of itself be deemed a failure to exercise reasonable
care, and no failure of the Collateral Agent to preserve or protect any rights
with respect to such Collateral against prior parties, or to do any
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<PAGE> 37
act with respect to the preservation of such Collateral not so requested by the
Grantor, shall be deemed a failure to exercise reasonable care in the custody or
preservation of such Collateral.
(c) no provision of this Agreement shall require
the Collateral Agent to extend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or
thereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 17 EVENTS OF DEFAULT.
The occurrence of one or more of the following events shall constitute
an "Event of Default" hereunder:
(a) the Grantor shall fail or neglect to perform, keep or
observe any of its agreements, covenants or obligations hereunder and such
failure or neglect shall continue for ten (10) days after such performance or
observance is due hereunder;
(b) any statement, representation or warranty made by the
Grantor is not true, correct, complete and accurate in any material respect when
made;
(c) an Event of Default as defined in any of the Debt
Documents shall have occurred; or
(d) the Grantor shall fail to deliver to the Collateral Agent
the Sweep Agreements required pursuant to Section 4(f) hereof.
SECTION 18 REMEDIES.
After the occurrence of an Event of Default which has not been waived
in accordance with the terms of the Guaranty and the Third Amended and Restated
Credit Agreement:
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(a) Set-Off.
(i) As additional security for the payment and
performance of the Obligations, the Collateral Agent shall have a
general right of set-off and banker's lien under applicable law
against all of the Grantor's respective property and interests in
property now or from time to time hereafter in the possession, custody
or control of Society in any capacity or any of the Co-Agents
including without limitation, the Mandatory Bank Accounts, or any
other Deposit Account of any type maintained from time to time by the
Grantor with the Collateral Agent or any other Lender. The Collateral
Agent may, and is hereby authorized by the Grantor to, at any time and
from time to time, to the fullest extent permitted by Applicable Law,
without advance notice to the Grantor (any such notice being expressly
waived by the Grantor), set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held and any other indebtedness at any time owing by the Collateral
Agent or any Lender to or for the credit or the account of the Grantor
against any or all of the Obligations of the Grantor now or hereafter
existing whether or not such Obligations have matured and irrespective
of whether or not Collateral Agent has exercised any other rights that
it has or may have with respect to such Obligations, including,
without limitation, any acceleration rights.
(ii) Notwithstanding the introduction to this
Section 18 to the contrary, both before and after an Event of Default,
the Grantor agrees to immediately notify the Collateral Agent whenever
any third party obtains or asserts any interest in any Collateral
Lockbox Account, Mandatory Bank Account or Permitted Bank Account.
(iii) The Collateral Agent agrees to promptly
notify the Grantor after any such set-off and application, provided
that the failure to give such notice shall not affect the validity of
such set-off and application. The Collateral Agent shall not be liable
to any Person for failure to give any such notice. The rights of the
Collateral Agent under this Section 18(a) are in addition to the other
rights and remedies (including, without limitation, other rights of
set-off) which the Collateral Agent may have.
(b) Rights and Remedies. The Collateral Agent
shall, in addition to other rights and remedies provided for herein or otherwise
available to it, have all the rights and remedies of a secured party on default
under the UCC (whether or not the UCC applies to the affected Collateral), and
may, upon direction of the Required Lenders, (i) exercise any and all rights and
remedies of the Grantor in respect of the Collateral, (ii) require the Grantor
to, and the Grantor hereby agrees that it will at its expense and upon request
of the Collateral Agent forthwith, assemble all or
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<PAGE> 39
part of the Collateral as directed by the Collateral Agent and make it available
to the Collateral Agent at a place to be designated by the Collateral Agent,
(iii) occupy any premises owned or leased by the Grantor where the Collateral or
any part thereof is assembled for a reasonable period in order to effectuate its
rights and remedies hereunder or under law, without obligation to the Grantor in
respect of such occupation and the Collateral Agent may exclude the Grantor, its
agents, employees and servants therefrom, and having and holding the same may
use, operate, manage and control the Collateral and conduct the business of the
Grantor and do any acts which it deems necessary or desirable to preserve the
value, marketability or rentability of the Collateral, or any part thereof or
interest therein, all without prior notice to the Grantor, except as
specifically provided in Section 18(b)(iv) below with respect to a formal public
or private sale (including, without limitation, the right: to convert raw
materials inventory to work-in-process inventory; to convert work-in-process
inventory to finished goods inventory; to order, procure and purchase all
materials, goods and other items necessary in connection with any such
conversions; to sell finished goods inventory in the ordinary course of the
Grantor's business and otherwise; to complete any goods; to fill and ship in
accordance with then existing purchase orders; to solicit orders; and to do all
such things and acts as the Collateral Agent deems necessary or desirable in
order to maximize the value of the Grantor's business or the Collateral) and
upon every such entry, the Collateral Agent, at the expense of the Grantor, from
time to time, either by purchase, repairs or construction, may maintain and
restore Collateral, may complete the construction of improvements thereon and,
in the course of such completion, may make such changes in the contemplated
improvements and collateral as is deemed desirable and may insure the same; and
likewise, from time to time, at the expense of the Grantor, the Collateral Agent
may make all necessary or proper repairs, renewals and replacements and such
useful alterations, additions, betterments and improvements thereto and thereon
as may seem advisable, and in every such case shall have the right to manage and
operate the Collateral and to carry on the business thereof and exercise all
rights and powers of the Grantor with respect thereto in the name or names of
any of the Grantor or otherwise as is deemed appropriate, after deducting the
expenses of conducting the business thereof and of all maintenance, repairs,
replacements, alterations, additions, betterments and improvements and amounts
necessary to pay for taxes, assessments, insurance and prior insurance and prior
or other property charges upon the Collateral, the Grantor's business or any
part thereof, as well as just and reasonable compensation for its services and
for all attorneys, counsel, agents, clerks, servants and other employees by it
engaged and employed, shall apply the moneys arising as aforesaid pursuant to
the provisions of this Agreement (nothing contained herein shall be construed to
impose upon the Collateral Agent any obligation to preserve or protect the
Collateral or the Grantor's business following the occurrence of an Event of
Default), and (iv) without notice except as specified below, sell the Collateral
or any part
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thereof in one or more parcels at public or private sale, at any of the
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Collateral Agent may deem
commercially reasonable. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least five (5) days' notice to the Grantor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Collateral Agent shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
(c) Treatment of Payments. All payments received
by the Grantor in connection with any Collateral or otherwise in respect of the
Collateral shall be received in trust for the benefit of the Collateral Agent,
and shall be segregated from other funds of the Grantor and shall be forthwith
deposited into a Collateral Lockbox Account designated by the Collateral Agent
from time to time in the same form as so received (with any necessary
indorsement).
(d) Disposition of Payments. Any surplus of such
cash or cash proceeds held by the Collateral Agent and remaining after payment
in full of all the Obligations and termination in writing by the Lenders of each
of the Third Amended and Restated Credit Agreement and each of the Debt
Documents shall be paid over to the Grantor or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 19 INDEMNITY AND EXPENSES.
(a) Indemnification. The Grantor agrees to
indemnify the Collateral Agent, the Co-Agents and each of the Lenders from and
against any and all claims, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, disbursements and liabilities of any kind or
nature whatsoever arising out of, relating to or resulting from this Agreement
(including, without limitation, enforcement of this Agreement and the
establishment and maintenance from time to time of Collateral Lockbox Accounts
at banks other than the Collateral Agent) or any action taken or omitted by any
such indemnified person in connection herewith, except claims, losses or
liabilities resulting from the Collateral Agent's gross negligence or willful
misconduct.
(b) Reimbursement of Expenses. The Grantor shall
reimburse the Collateral Agent on demand for all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred by the
Collateral Agent in connection with the preparation, execution, administration
or enforcement of, or legal advice in respect of rights or responsibilities
under this
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Agreement, the Guaranty, the Third Amended and Restated Credit Agreement and the
Debt Documents, regardless of whether any suit is filed, including, without
limitation, all costs and expenses incurred in checking, retaking, holding,
handling, preparing for sale and selling or otherwise disposing of any and all
Collateral and the establishment and maintenance from time to time of Collateral
Lockbox Accounts at banks other than the Collateral Agent's bank. The Grantor's
reimbursement obligations hereunder shall be part of the Obligations, shall bear
interest at the interest rate determined in accordance with Section 2.4(a) of
the Third Amended and Restated Credit Agreement from the date incurred until
paid in full, and shall be secured by the Collateral and enjoy the benefits of
this Agreement, notwithstanding that such obligations may cause the principal
balance of the unpaid Loans (as defined in the Third Amended and Restated Credit
Agreement) and the Notes to exceed the face amount of the Notes. In the event
the Grantor shall fail to pay all amounts reimbursable hereunder within ten (10)
days after demand therefor, the same shall constitute an Event of Default, and,
from and including the tenth (10th) day after demand for payment, the amount
owing under this paragraph (b) shall bear interest at the interest rate
determined in accordance with Section 2.4(c) of the Third Amended and Restated
Credit Agreement. The Grantor's reimbursement obligations hereunder shall
survive the repayment of the Obligations.
All obligations provided for in this Section 19 shall survive
termination of this Agreement and the replacement of the Collateral Agent under
Section 16(k) or Section 16(l) hereof.
SECTION 20 SECURITY INTEREST ABSOLUTE.
All rights of the Collateral Agent and security interests hereunder,
and all obligations of the Grantor hereunder, shall be absolute and
unconditional, irrespective of:
(a) any lack of validity or enforceability of any
of the terms of this Agreement or any of the Debt Documents or other agreements,
writings, documents or instruments relating thereto;
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations or any other
amendment or waiver of or any consent to any departure from any of the terms of
this Agreement or any of the Debt Documents;
(c) any exchange, release or non-perfection of
any other collateral, or any release or amendment or waiver of or consent to any
departure from any of the terms of this Agreement or any of the Debt Documents;
(d) any exchange, release or non-perfection of
any other collateral, or any release or amendment or waiver of or
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<PAGE> 42
consent to departure from any guaranty for any or all of the Obligations; or
(e) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Grantor, any guarantor
of the Obligations or any third party grantor of a security interest.
SECTION 21 REGISTRATION RIGHTS.
If the Collateral Agent shall determine to exercise its right to sell
all or any of the Pledged Shares pursuant to Section 18 hereof, the Grantor
agrees that, upon request of the Collateral Agent, the Grantor will, at its own
expense:
(a) execute and deliver, and cause each issuer of the Pledged
Shares contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done all
such other acts and things, as may be necessary or, in the opinion of the
Collateral Agent, advisable to register such Security Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto to
become effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and supplements
thereto and to the related prospectus that, in the opinion of the Collateral
Agent, are necessary or advisable, all in conformity with the requirements of
the Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto;
(b) use its best efforts to qualify the Security Collateral
under the state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Security Collateral, as requested by
the Collateral Agent;
(c) use its best efforts to cause each such issuer to make
available to its security holders, as soon as practicable, an earning statement
that will satisfy the provisions of Section 11(a) of the Securities Act; and
(d) use its best efforts to do or cause to be done all such
other acts and things as may be necessary to make such sale of the Security
Collateral or any part thereof valid and binding and in compliance with
applicable law.
The Grantor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent and each Lender by reason
of the failure by the Grantor to perform any of the covenants contained in this
Section 21 and, consequently, agree that, if the Grantor shall fail to perform
any of such covenants, the Grantor shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the Security
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<PAGE> 43
Collateral on the date the Collateral Agent shall demand compliance with this
Section 21 in addition to any other amounts otherwise payable to the Collateral
Agent pursuant to the terms of this Agreement.
SECTION 22 AMENDMENTS; ETC.
No amendment or waiver of any provision of this Agreement nor consent
to any departure by the Grantor herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Collateral Agent upon the
direction of the Required Lenders and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 23 NOTICES.
Except as otherwise provided herein, whenever it is provided herein
that any notice, demand, request, consent, approval, declaration or other
communication (a "Notice") shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party a Notice with respect to this Agreement, each such
Notice shall be in writing and shall be delivered in person with receipt
acknowledged, sent by nationwide commercial courier service (such as Federal
Express), or telecopied (with a copy also mailed by registered or certified
mail), or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Grantor, to it at:
LDI Computer Rentals, Inc.
4770 Hinckley Industrial Parkway
Cleveland, Ohio 44109
Telecopier: (216) 485-4811
Attention: Chief Executive Officer
with a copy to:
LDI Corporation
4770 Hinckley Industrial Parkway
Cleveland, Ohio 44109
Telecopier: (216) 485-4811
Attention: Legal Department
(b) If to the Collateral Agent, to it at:
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Telecopier: (216) 689-7991
Attention: Loan Administration
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with respect to all Notices other than the
revised Schedule IX referred to in Section
9(e) above and the update of Schedule VIII
referred to in Section 10(d) above, with a
copy to:
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Telecopier: (216) 241-0816
Attention: Thomas A. Cicarella, Esq.
(c) If to the Lenders, to them at their respective
addresses in accordance with Section 10.2 of the
Third Amended and Restated Credit Agreement.
or at such other address as may substituted by Notice given as herein provided.
The giving of any Notice required hereunder may be waived in writing by the
party entitled to receive such Notice. Every Notice hereunder shall be deemed to
have been duly given or served on the date on which personally delivered, with
receipt acknowledged, or upon receipt by the party to whom the Notice is
addressed, if sent by telecopy transmission, or three (3) business days after
the same shall have been deposited in the United States mail, or the first
business day after timely delivery to the courier service, if sent by nationwide
commercial courier service. Failure or delay in delivering copies of any Notice
to the persons designated above to receive copies thereof shall in no way
adversely affect the effectiveness of such Notice.
SECTION 24 CONTINUING SECURITY INTEREST; TRANSFER OF NOTES.
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This Agreement has created and continues to create a continuing
security interest in the Collateral and shall (a) remain in full force and
effect until payment in full of the Obligations and termination of the Guaranty,
the Third Amended and Restated Credit Agreement and all of the Debt Documents as
evidenced by written statements of the Lenders, (b) be binding upon the Grantor,
its successors and assigns and (c) inure, together with the rights and remedies
of the Collateral Agent hereunder, to the benefit of the Collateral Agent for
the benefit of the Co-Agents, the Administrative Agent and the Lenders and their
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (c), to the extent permitted by the Third Amended and
Restated Credit Agreement any Lender may assign or otherwise transfer any note
or other instrument held by it to any other person or entity, and such other
person or entity shall thereupon become vested with all the benefits in respect
thereof granted to such Lender herein or otherwise. Upon the payment in full of
the Obligations and termination of the Guaranty, the Third Amended and Restated
Credit Agreement and each of the Debt Documents as evidenced by written
statements of the Lenders, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert to the Grantor. Upon any such
termination, the Collateral Agent will, at the Grantor's expense, execute and
deliver to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination.
SECTION 25 GOVERNING LAW; TERMS; WAIVER OF DEFAULTS.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, except to the extent that the validity or
perfection of the security interest hereunder, or remedies hereunder, in respect
of any particular Collateral are governed by the laws of a jurisdiction other
than the State of Ohio without regard to principles of conflict of law. This
Agreement is submitted to the Grantor in Cleveland, Ohio, and shall be deemed to
have been delivered thereat. Unless otherwise defined herein, terms used in
Article 9 of the Uniform Commercial Code as in effect in the State of Ohio are
used herein as therein defined.
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SECTION 26 REINSTATEMENT.
This Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Grantor for liquidation
or reorganization, should the Grantor become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of the Grantor's assets, and shall continue to be effective
or be reinstated, as the case may be, if at any time payment and performance of
the Obligations, or any part thereof, is, pursuant to Applicable Law, rescinded
or reduced in amount, or must otherwise be restored or returned by any obligee
of the Obligations, whether as a "voidable preference," "fraudulent conveyance,"
"fraudulent transfer," or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
SECTION 27 INTERPRETATION.
(a) Incorporation of Recitals. The preamble and each
of the Recitals hereto shall be considered as part of this Agreement and,
accordingly, each is hereby incorporated herein.
(b) Headings; Language. The section and paragraph
headings contained in this Agreement are solely for the purpose of reference and
shall not affect the meaning or interpretation of this Agreement. The language
used in this Agreement shall be deemed to be the language chosen by the parties
hereto to express their common intent and no rule of strict construction shall
be applied against any of the parties.
(c) Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(d) No Waiver; Cumulative Remedies. Neither the
Collateral Agent nor any Lender shall by any act, delay, omission or otherwise
be deemed to have waived any of its rights or remedies hereunder. A waiver by
the Collateral Agent of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Collateral Agent
would otherwise have had on any future occasion. No failure to exercise nor any
delay in exercising on the part of the Collateral Agent, any right, power or
privilege hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise or any right, power or privilege hereunder preclude any other
or future exercise thereof
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or the exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law.
(e) Conflicts or Inconsistency. A conflict or
inconsistency, if any, between the terms and provisions of this Agreement and
the terms and provisions of the Third Amended and Restated Credit Agreement
shall be controlled by the terms and provisions of the Third Amended and
Restated Credit Agreement to the extent of such conflict or inconsistency;
provided, however, that in the event of any conflict or inconsistency between
the terms and provisions of this Agreement, the Third Amended and Restated
Credit Agreement and the Intercreditor Agreement, the terms and provisions of
the Intercreditor Agreement shall control to the extent of such conflict or
inconsistency.
(f) Execution in Counterparts; Amendment and
Restatement. This Agreement may be executed by the parties hereto in several
counterparts, each of which, when so executed shall be deemed an original but
all such counterparts shall constitute one and the same instrument.
SECTION 28 WAIVER OF JURY TRIAL.
THE COLLATERAL AGENT, EACH OF THE CO-AGENTS, EACH OF THE LENDERS AND
THE GRANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY DEBT
DOCUMENT OR ANY COURSES OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE COLLATERAL AGENT, EACH OF THE CO-AGENTS,
THE LENDERS OR THE GRANTOR. THE GRANTOR WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON THE GRANTOR AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE
BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE GRANTOR AT THE
ADDRESSES PROVIDED IN SECTION 23 ABOVE AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED THREE (3) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN
THE UNITED STATES MAIL, POSTAGE PREPAID. THE GRANTOR HEREBY IRREVOCABLY APPOINTS
CT CORPORATION SYSTEM AS THE GRANTOR'S AGENT FOR THE PURPOSE OF ACCEPTING THE
SERVICE OF ANY PROCESS RELATING TO THIS AGREEMENT OR ANY OF THE DEBT DOCUMENTS
WITHIN THE STATE OF OHIO. THE GRANTOR ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF THIS AGREEMENT AND EACH DEBT DOCUMENT TO WHICH IT IS A PARTY) AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL AGENT, EACH OF
THE CO-AGENTS AND EACH OF THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH DEBT
DOCUMENT.
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SECTION 29 RELEASE.
The Grantor does hereby release and discharge the Collateral Agent, the
Co-Agents and each of them, the Lenders and each of them, and each of their
respective shareholders, agents, servants, employees, directors, officers,
attorneys, affiliates, subsidiaries, successors and assigns and all persons,
firms, corporations and organizations acting on its behalf ("Release Parties")
of and from all damages, losses, claims, demands, liabilities, obligations,
actions and causes of actions whatsoever, that the Grantor has, had or will
have, or claims to have, against any of the Release Parties as of the date the
Grantor executes this Agreement and whether known or unknown at the time of this
release, and of every nature and extent whatsoever on account of or in any way,
direct or indirect, touching, concerning, arising out of or founded upon this
Agreement, the Guaranty or any Debt Document.
[Signature pages to follow]
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<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their officers thereunto duly
authorized as of the date first above written.
LDI COMPUTER RENTALS, INC.,
Grantor
By:________________________
Title:_____________________
SOCIETY NATIONAL BANK, as
Collateral Agent
By:________________________
Title:_____________________
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<PAGE> 50
STATE OF OHIO )
) ss:
COUNTY OF _________________)
The foregoing instrument was acknowledged before me this _____
day of _____________, 1995, by __________________, _________ of LDI Computer
Rentals, Inc., an Ohio corporation, on behalf of the corporation.
_________________________________
Notary Public
STATE OF OHIO )
) ss:
COUNTY OF CUYAHOGA )
The foregoing instrument was acknowledged before me this _____
day of _____________, 1995, by __________________, _________ of Society National
Bank, a national banking association, on behalf of the corporation.
________________________________
Notary Public
48
<PAGE> 51
SCHEDULE I
MANDATORY BANK ACCOUNTS
<PAGE> 52
SCHEDULE II
PERMITTED BANK ACCOUNTS
<PAGE> 53
SCHEDULE III
SPECIAL PERMITTED BANK ACCOUNTS
<PAGE> 54
SCHEDULE IV
INTELLECTUAL PROPERTY
<PAGE> 55
SCHEDULE V
PLEDGED SHARES/PLEDGED DEBT
<PAGE> 56
SCHEDULE VI
BANK ACCOUNTS
Name and Address Mailing Address Type of
of Bank of Account Account Number Account
----------------- --------------- -------------- -------
<PAGE> 57
SCHEDULE VII
GRANTOR'S LOCATIONS
<PAGE> 58
SCHEDULE VIII
LOCATION OF COLLATERAL
All of the Collateral is located at the locations identified on
Schedules VII & IX attached hereto and incorporated hereby.
Location of Equipment:
Location of Inventory:
<PAGE> 59
SCHEDULE IX
LEASES
<PAGE> 60
EXHIBIT I
FORM OF COLLATERAL LOCKBOX ACCOUNT LETTER
___________, 1995
Terry A. Graffis, Vice President
Society National Bank
as Collateral Agent
127 Public Square
5th Floor
Cleveland, Ohio 44115
Gentlemen:
(a) The undersigned, ____________________________ ("Bank"),
recognizes that Society National Bank is the collateral agent (the
"Collateral Agent") under that certain Security Agreement, dated as of
July ___, 1995, as the same may be amended, modified, supplemented or
restated (the "Security Agreement"), by and between, LDI Computer Rentals,
Inc., an Ohio corporation (the "Grantor"), and the Collateral Agent.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to them in the Security Agreement.
(b) Grantor has requested that, as an accommodation to
Grantor, certain of the Collateral Lockbox Accounts be established and
maintained at Bank. The Collateral Agent and Bank are willing to grant such
request provided that the Grantor, Bank and Collateral Agent agree to the terms
set forth herein and execute this Agreement. The Collateral Agent hereby
appoints Bank as Collateral Agent's agent and pledgee-in-possession for the
Account (as defined in paragraph (c) below) and all funds, monies, accounts,
cash and other items from time to time deposited in such Account and Bank by
its execution and delivery of this Collateral Lockbox Account Letter accepts
such appointment.
(c) Bank hereby confirms and acknowledges to the Collateral
Agent that (i) the Collateral Lockbox Account bearing account number __________
____________ (the "Account") has been established at Bank, (ii) the Account is
in the name of the Collateral Agent and the Collateral Agent has the exclusive
dominion and control over the Account and all funds and monies from time to time
therein, (iii) to the best of Bank's knowledge, no party other than the
Collateral Agent claims a Lien on the Account, and (iv) Bank has marked its
books and records to indicate the Collateral Agent's exclusive dominion and
control over the Account and all funds and monies from time to time therein, and
(v) the Account is a "Collateral Lockbox Account" as defined in the Security
Agreement.
<PAGE> 61
(d) Bank hereby confirms and acknowledges that Bank has no
rights with respect to the Account and Bank agrees not to take any action with
respect to the Account except as specifically directed in writing by the
Collateral Agent.
(e) Bank further agrees that it will not exercise or claim any
right of offset against the Account and hereby waives and assigns to the
Collateral Agent any and all liens, claims, demand or rights of setoff or offset
of any kind whatsoever which Bank may now or hereafter have in any of the monies
and/or funds deposited in the Account.
(f) The Collateral Agent shall at all times have full and
irrevocable right, power and authority, to demand, collect, withdraw, receipt
for or sue for all amounts due or to become due and payable under the Account
and, at the Collateral Agent's discretion, to take any other action, including
the transfer of the Account to any institution designated by the Collateral
Agent.
(g) In accordance with Section 3.6 of the Intercreditor
Agreement, Bank hereby acknowledges that it shall be liable to any person for
losses or damages incurred by any person as a result of its' or its' agents',
nominees' or attorneys'-in-fact gross negligence or willful misconduct with
respect to this Agreement or with respect to the Account as and to the extent
the Collateral Agent would be liable for such losses or damages if the actions
or omissions of such agents, nominees or attorneys-in-fact constituting such
gross negligence or willful misconduct had been actions or omissions of the
Collateral Agent.
(h) The Grantor hereby agrees to indemnify and hold harmless
each of Bank and the Collateral Agent from and against any and all claims,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, disbursements and liabilities of any kind or nature whatsoever not
resulting from the Bank's or the Collateral Agent's gross negligence or willful
misconduct and agrees to reimburse each of Bank and the Collateral Agent for any
costs, fees and expenses (including, without limitation, reasonable fees and
expenses of in-house or outside counsel) against any and all such claims or
liability arising out of or in any way relating to the establishment and/or
maintenance of the Account at Bank.
(i) The Collateral Agent agrees to pay Bank's fees, costs and
expenses in connection with the establishment and maintenance of the Account.
(j) Notwithstanding any other provision in this Agreement,
Bank shall not be required to take any action with respect to the Account
(including the transfer of funds) to the
<PAGE> 62
extent such action is then prohibited by statute, regulation or legal process
binding on Bank.
(k) This Agreement may not be amended or modified or
supplemented without the prior written consent of all parties.
[BANK]
By:__________________________________
Its:_________________________________
LDI COMPUTER RENTALS, INC.
By:__________________________________
Its:_________________________________
LDI CORPORATION
By:__________________________________
Its:_________________________________
The foregoing is hereby accepted
and agreed to:
SOCIETY NATIONAL BANK,
in its capacity as Collateral Agent
By:______________________________________
Its:_____________________________________
<PAGE> 63
EXHIBIT II
FORM OF SWEEP AGREEMENT
___________, 1995
[Bank Name]
___________________________________
___________________________________
Attn: ____________________________
Re: LDI Computer Rentals, Inc., an Ohio corporation,
(the "Guarantor")
________________________________________________
Gentlemen:
Reference is made to the following agreements: (a) that certain Third
Amended and Restated Credit Agreement dated as of July ___, 1995 by and among
Society National Bank, National City Bank and Society National Bank as
Co-Agents (the "Co-Agents"), LDI Corporation (the "Borrower") and the other
commercial lending institutions which are signatories thereof (the "Lenders")
(as the same may be amended, modified or supplemented from time to time, the
"Credit Agreement"); (b) that certain Guaranty of Payment of Debt, dated as of
July ___, 1995, by the Guarantor in favor of the Lenders (the "Guaranty"), and
(c) that certain Security Agreement dated as of July ___, 1995 by and between
the Guarantor and the Collateral Agent (as the same may be amended, modified or
supplemented from time to time, the "Security Agreement"). All capitalized
terms used herein and not otherwise defined herein shall have the meaning
ascribed thereto in the Security Agreement.
SECTION 1 The Collateral Agent has been advised that the Guarantor
maintains the following deposit accounts with [Bank Name] at [Bank Address]
("[Bank Name]"):
[Insert account numbers and types]
(collectively, all accounts and deposit accounts maintained at [Bank Name],
whether now existing or hereafter established, are hereinafter referred to as
the "[Bank Name] Accounts").
SECTION 2 As provided in the Security Agreement and to secure the
Guarantor's repayment and performance of the Obligations (as defined in the
Security Agreement), the Guarantor has granted to the Collateral Agent a
continuing security interest in and Lien upon, among other things, all of the
Guarantor's right, title and interest in, to and under certain accounts and
deposit accounts, including but not limited to the [Bank Name] Accounts, all
cash, funds, monies and amounts required to be deposited in or deposited in,
from time to time, the [Bank Name] Accounts, all interest,
<PAGE> 64
dividends, cash, instruments or other property from time to time received,
receivable or otherwise earned (whether or not paid), distributed in respect of
or in exchange for one or all of the foregoing and all certificates and
instruments, if any, from time to time representing the [Bank Name] Accounts and
such cash, funds, monies, amounts, interest, dividends or other property
(collectively, the "Accounts").
SECTION 3 This letter constitutes irrevocable notice to [Bank Name],
[in accordance with Section __ of the Uniform Commercial Code] of the Collateral
Agent's first priority security interest in and Lien upon all of the Guarantor's
right, title and interest in, to and under the Accounts. [Bank Name], by its
execution of this letter, acknowledges receipt of this letter and notice.
SECTION 4 In order to induce the Collateral Agent to approve [Bank
Name] as the depository of the [Bank Name] Accounts, [Bank Name], by its
execution of this letter in the space provided below, agrees:
(a) that it waives any security interest, lien (banker's or
otherwise) and/or right of setoff against any of the Accounts, other
than the right to setoff fees, insufficient items and charge-backs, and
as contained in paragraph 8 of this letter;
(b) to continue to honor checks and other instruments for
withdrawals from the Accounts issued by the Guarantor, consistent with
[Bank Name] normal banking practices, until such time as [Bank Name]
receives written notice from the Collateral Agent at the written
direction of the Required Lenders, to [Bank Name] at its office located
at [Bank Address], stating that an Event of Default under the Credit
Agreement or the Guaranty has occurred and notifying [Bank Name] to
cease permitting the Guarantor to make withdrawals from any of the
Accounts (a copy of which shall be sent by the Collateral Agent to the
Guarantor); thereafter, the Collateral Agent at the written direction
of the Required Lenders may request and [Bank Name] shall comply with
such request, that [Bank Name] by wire transfer of immediately
available funds shall transfer to a Collateral Lockbox Account at such
financial institution as the Collateral Agent shall designate in
writing, any and all of the Guarantor's cash, funds, monies, items and
amounts in the [Bank Name] Accounts or otherwise in [Bank Name]'s
possession and included in Accounts;
(c) that upon receipt of such notice, [Bank Name] shall honor
only such instructions for withdrawals as are given by the Collateral
Agent, notwithstanding any inconsistent or conflicting instructions
given to [Bank Name] by the
2
<PAGE> 65
Guarantor, and that such notice and instructions can only be revoked by
the Collateral Agent, but not by the Guarantor; and
(d) that, prior to [Bank Name]'s receipt of the notice
referred to in paragraph 5(b) above, from time to time upon the request
of the Guarantor or the Collateral Agent at the written direction of
the Required Lenders to [Bank Name], [Bank Name] shall by wire transfer
of immediately available funds, transfer to a Collateral Lockbox
Account at such financial institution as the Collateral Agent shall
designate in writing (which account numbers and other material
information shall be as specified at the end of this letter) all cash,
funds, monies, items and amounts in the [Bank Name] Accounts or
otherwise in [Bank Name]'s possession and included in Accounts, in
excess of [$_____________] in the aggregate.
SECTION 5 [Bank Name] represents and warrants to the Collateral Agent
as follows:
(a) that the only accounts the Guarantor maintains
at [Bank Name] are the [Bank Name] Accounts, and that the account
numbers are as specified above;
(b) that the [Bank Name] Accounts are held in the
name of the Guarantor only;
(c) that each of the [Bank Name] Accounts is a
deposit account;
(d) that [Bank Name] has not received notice of any
other lien or security interest in any of the Accounts; and
(e) that the [Bank Name] Accounts are federally
insured accounts and such FDIC insurance covers up to $100,000 in the
aggregate, and the [Bank Name] Accounts have no penalty for immediate
withdrawal.
SECTION 6 Neither the Collateral Agent, either Co-Agent nor any Lender
shall be responsible for any charges incurred in connection with any of the
Accounts. All charges incurred in connection with the Accounts will be payable
by the Guarantor. Notwithstanding the foregoing, after the Collateral Agent
provides [Bank Name] with the notice referred to in paragraph 5(b) above, the
Collateral Agent shall reimburse [Bank Name] for [Bank Name]'s reasonable
expenses incurred in complying with the Collateral Agent's requests thereafter
made under and pursuant to this letter to the extent that the Accounts are
insufficient to reimburse such expenses and provided that the Collateral Agent's
prior written consent is obtained by [Bank Name] prior to [Bank Name] incurring
any material expenses it expects to be reimbursed by the Collateral Agent
hereunder.
3
<PAGE> 66
SECTION 7 The Guarantor agrees to save and hold harmless, to defend and
to indemnify, [Bank Name] against all actions, proceedings, claims, demands,
losses, outlays, damages or expenses, including reasonable legal fees of [Bank
Name]'s in-house or outside counsel, of every nature and character as may arise
or be made against [Bank Name] in respect of [Bank Name] acting in accordance
with this letter, or which it may in any way incur in defending or prosecuting,
settling or discontinuing any such proceedings, actions, claims, damages,
expenses or outlays, arising out of any act or omission of the Guarantor. The
Guarantor and the Collateral Agent agree that [Bank Name] may setoff against the
Accounts reasonable expenses [Bank Name] incurs in complying with and acting in
accordance with the provisions of this letter, upon providing in writing a
description of such expenses to the Guarantor and the Collateral Agent.
SECTION 8 The Guarantor hereby releases [Bank Name] from any
liabilities, claims, damages, losses and outlays to the Guarantor, of every
nature and character as may arise or be made against [Bank Name] by or on behalf
of the Guarantor, directly or indirectly, related to actions taken by [Bank
Name] at the direction of the Collateral Agent and pursuant to the terms of this
letter, except for [Bank Name]'s gross negligence or willful misconduct,
determined in such case by a non-appealable judicial order.
SECTION 9 Notwithstanding any other provision in this Agreement [Bank
Name] shall not be required to take any action with respect to the [Bank Name]
Accounts (including the transfer of funds) to the extent such action is then
prohibited by statute, regulation or legal process binding on [Bank Name].
4
<PAGE> 67
SECTION 10 The agreements contained in this letter will become
effective immediately upon its execution by all of the parties and
may not be amended without the express written consent of all parties.
SOCIETY NATIONAL BANK,
as Collateral Agent
By:_______________________________
__________________________________
[Printed Name and Title]
Society National Bank, Cleveland,
Ohio, as Collateral Agent
ABA #: __________________
Name of Account: LDI Corporation
The Borrower's Account No is:
______________________
LDI Computer Rentals, Inc., a
______________ corporation
By:_______________________________
[Printed Name and Title]
Accepted and Agreed to as of
[DATE]
[Bank Name]
By:_______________________________
[Printed Name and Title]
<PAGE> 1
EXHIBIT 11.01
LDI CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
1995 1994 1995 1994
---------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
--------------------------
1. Average common shares outstanding 6,747 6,727 6,737 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 or exercise of
warrants (See Note 6 of the Notes to
Consolidated Financial Statements) (A) N/A (A) (A)
4. Adjusted average common shares outstanding
for fully diluted computation 6,747 6,727 6,737 6,727
NET EARNINGS (LOSS)
-------------------
5. Net earnings (loss) as reported in
statements of consolidated earnings $(1,992) $(2,240) $(2,291) $(3,077)
6. Decrease in interest expense and amortization
of debt issuance costs relating to the
subordinated debentures, net of income tax
benefit (A) N/A (A) (A)
7. Adjusted net earnings (loss) $(1,992) $(2,240) $(2,291) $(3,077)
EARNINGS (LOSS) PER SHARE
-------------------------
8. Net earnings (loss) per average common share
outstanding $(.30) $(.34) $(.34) $(.46)
9. Net earnings per common share on a fully
diluted basis (A) (A) (A) (A)
<FN>
(A) Antidilutive
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JUL-31-1995
<CASH> 12,578
<SECURITIES> 0
<RECEIVABLES> 23,137
<ALLOWANCES> 3,668
<INVENTORY> 12,372
<CURRENT-ASSETS> 44,419
<PP&E> 20,916
<DEPRECIATION> 9,063
<TOTAL-ASSETS> 366,530
<CURRENT-LIABILITIES> 108,427
<BONDS> 208,760
<COMMON> 69
0
0
<OTHER-SE> 49,274
<TOTAL-LIABILITY-AND-EQUITY> 366,530
<SALES> 22,664
<TOTAL-REVENUES> 67,801
<CGS> 19,506
<TOTAL-COSTS> 42,905
<OTHER-EXPENSES> 11,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,335
<INCOME-PRETAX> (2,490)
<INCOME-TAX> (199)
<INCOME-CONTINUING> (2,291)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,291)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
