SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-23309
LINC CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0850149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
303 East Wacker Drive, Suite 1000,
Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
(312) 946-1000
(Registrant's telephone number, including area code)
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 |_|
At November 12, 1998, 5,183,688 shares of the Registrant's Common Stock were
outstanding.
<PAGE>
LINC CAPITAL, INC.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Operations -
Three and nine months ended September 30, 1997
and 1998(unaudited)................................3
Consolidated Balance Sheets -
December 31, 1997 and September 30, 1998 (unaudited)...........4
Consolidated Statements of Cash Flows -
Three and nine months ended September 30, 1997 and
1998(unaudited)..........................................5
Notes to Consolidated Financial Statements.......................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................22
SIGNATURES ..............................................................23
<PAGE>
PART I - FINANCIAL INFORMATION
LINC Capital, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
-------- --------
1997 1998 1997 1998
---- ---- ---- ----
Net Revenues:
Sales of equipment..........................$5,900 8,425 16,152 23,225
Cost of equipment sold...................... 4,791 6,861 13,013 18,958
----- ----- ------ ------
Gross profit from sales of equipment........ 1,109 1,564 3,139 4,267
Rental and operating lease revenue.......... 1,870 2,274 5,034 6,988
Direct finance lease income................. 1,728 3,580 4,326 8,848
Fee income.................................. 252 937 1,041 1,531
Gain on sale of lease financing
receivables.............................. -- 3,251 -- 6,839
Gain on remarketing of leased equipment..... 120 678 397 1,465
Gain on equity participation rights......... 20 1,131 117 3,809
Interest income............................. 228 543 566 1,347
Other income................................ 159 429 459 950
----- ------ ------ ------
Total net revenues.................. 5,486 14,387 15,079 36,044
----- ------ ------ ------
Expenses:
Selling, general and administrative......... 2,207 5,685 6,149 13,473
Interest.................................... 1,188 2,736 3,032 6,772
Depreciation of equipment under rental
agreements and operating leases.......... 1,022 1,606 2,880 4,508
Goodwill amortization....................... 26 102 47 169
Provision for credit losses................. 230 1,435 709 3,762
----- ------ ------ ------
Total expenses...................... 4,673 11,564 12,817 28,684
----- ------ ------ ------
Income from continuing operations before
income taxes and minority interest.......... 813 2,823 2,262 7,360
Income tax expense............................. 333 1,148 867 2,923
--- ----- --- -----
Income from continuing operations before
minority interest........................... 480 1,675 1,395 4,437
Minority interest.............................. -- -- (13) --
---- ----- ------ ----
Net income from continuing operations.......... 480 1,675 1,382 4,437
Discontinued operations:
Loss from discontinued operations, net of
income tax benefit for the three months
ended September 30,1997 of $222, and the
nine months ended September 30, 1997 of $206 (347) -- (402) --
===== ===== ===== ====
Net income..................................... $133 1,675 980 4,437
==== ===== ===== =====
Per common share:
Net income from continuing operations
Basic............................ $0.15 0.32 0.45 0.86
Diluted.......................... $0.15 0.31 0.44 0.83
Net income
Basic............................ $0.04 0.32 0.32 0.86
Diluted.......................... $0.04 0.31 0.31 0.83
See accompanying notes to consolidated financial statements.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except per share data)
December September
31, 30,
------------ --------
ASSETS 1997 1998
------ ---- ----
Net investment in direct finance leases and loans..... $67,264 100,112
Equipment held for rental and operating leases, net... 22,007 24,352
Accounts receivable................................... 6,583 7,999
Securitization residual interest...................... 3,017 19,486
Other assets.......................................... 8,210 15,471
Goodwill.............................................. 1,896 8,822
Cash and cash equivalents............................. -- 6,493
-------- --------
Total assets.................................. $108,977 182,735
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Senior credit facility and other senior notes payable.. $38,117 85,446
Recourse debt.......................................... 2,955 7,367
Nonrecourse debt....................................... 17,951 14,555
Accounts payable....................................... 2,985 9,749
Accrued expenses....................................... 2,905 7,495
Customer holdbacks..................................... 1,738 9,292
Subordinated debentures................................ 5,386 5,612
Deferred income taxes.................................. 236 1,624
------- -----
Total liabilities.............................. $72,273 141,140
------- -------
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000
shares authorized; none outstanding................ -- --
Common stock $0.001 par value, 15,000,000
shares authorized; 5,199,591 and 5,249,591
shares issued; 5,133,688 and 5,183,688 outstanding. 5 5
Additional paid-in capital.......................... 28,840 29,567
Deferred compensation from issuance of options...... (171) (135)
Stock note receivable............................... (511) (182)
Treasury stock, at cost; 65,903 shares.............. (287) (287)
Retained earnings................................... 7,902 12,339
Accumulated other comprehensive income.............. 926 288
------ ------
Total stockholders' equity..................... 36,704 41,595
-------- -------
Total liabilities and stockholders' equity............. $108,977 182,735
======== =======
See accompanying notes to consolidated financial statements.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Consolidated Cash Flow Statements (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------- --------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................... $133 1,675 980 4,437
Adjustments to reconcile net income to net cash
provided by continuing operations
Net loss from discontinued operations.................... 347 -- 402 --
Depreciation and amortization ........................... 1,280 1,835 3,213 4,999
Direct finance lease income.............................. (1,728) (3,580) (4,326) (8,848)
Payments on direct finance leases ....................... 7,622 18,407 17,461 46,643
Deferred income taxes ................................... 196 367 660 1,388
Provision for credit losses.............................. 230 1,435 709 3,762
Gain on sale of lease financing receivables ............. -- (3,251) -- (6,839)
Gain on equity participation rights...................... (20) (1,131) (117) (3,809)
Amortization of discount................................. 113 78 237 226
Deferred compensation ................................... -- 11 -- 36
Minority interest ....................................... -- -- 202 --
Changes in assets and liabilities
Increase in receivables.................................. (1,841) (897) (2,567) (2,535)
Increase in other assets .............................. (1,960) 125 (2,593) (6,262)
Increase (decrease) in accounts payable.................. (402) 2,559 (952) 4,221
Increase in accrued expenses ............................ 1,028 1,554 594 2,100
Increase (decrease) in customer holdbacks ............... 43 1,868 (603) 7,554
------ ------ ---- ------
Cash provided by continuing operations ......................... 5,041 21,055 13,300 47,073
Cash flows from discontinued operations....................... 4,503 -- 12,354 --
----- ------ ----- ------
Cash provided by operating activities........................... 9,544 21,055 25,654 47,073
----- ------ ------ ------
Cash flows from investing activities:
Cost of equipment acquired for lease and rental .............. (15,086) (69,939) (37,870) (184,970)
Fixed assets purchased ....................................... (277) (312) (780) (780)
Cash used in acquisitions, net of cash acquired .............. -- -- -- (39,180)
Receipts on securitization residual interest.................. -- 3,956 -- 5,781
Proceeds from sale of investments ............................ 20 1,131 117 3,809
------- -------- -------- ---------
Net cash used in investing activities .......................... (15,343) (65,164) (38,533) (215,340)
------- -------- ------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Consolidated Cash Flow Statements (Unaudited) - (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------- --------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in notes payable..................... (2,774) (5,000) 14,776 44,650
Proceeds from recourse and nonrecourse debt.................. 12,069 -- 12,069 4,697
Repayment of recourse and nonrecourse debt................... (397) (7,357) (2,878) (19,834)
Proceeds from sales of lease financing receivables,
net of securitization residual interest.................... -- 57,076 -- 144,918
Purchase of stock ........................................... -- -- (17) --
Sale of stock ............................................... 21 -- 127 --
Proceeds from stock notes receivable ........................ -- -- -- 329
Payment of notes from discontinued operations................ (3,120) -- (11,198) --
------ ------- -------- -------
Net cash provided by financing activities....................... 5,799 44,719 12,879 174,760
------ ------- ------ -------
Net increase in cash............................................ -- 610 -- 6,493
Cash at beginning of period .................................... -- 5,883 -- --
===== ===== ===== =====
Cash at end of period .......................................... $-- 6,493 -- 6,493
====== ===== ===== =====
Supplemental disclosures of cash flow information:
Interest paid ............................................... $1,297 2,582 3,141 6,320
Income taxes paid ........................................... $ -- 15 70 863
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LINC Capital Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(1) The Company
LINC Capital, Inc. (the "Company") is a finance company specializing in the
origination, acquisition, securitization and servicing of equipment leases and
in the rental and distribution of analytical instruments. The Company's
principal businesses are (i) the direct origination of leases to emerging growth
companies primarily serving the healthcare and information technology industries
("Select Growth Leasing" activities), (ii) the acquisition and financing of
lease portfolios originated by other lessors and the acquisition of leasing
companies ("Portfolio Finance & Lessor Acquisition" activities) and (iii) the
rental and distribution of analytical instruments to companies serving the
environmental, chemical, pharmaceutical and biotechnology industries
("Instrument Rental and Distribution" activities).
(2) Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission for interim
financial statements. Accordingly, the interim statements do not include all of
the information and disclosures required for annual financial statements. In the
opinion of the Company's management, all adjustments (consisting solely of
adjustments of a normal recurring nature) necessary for a fair presentation of
these interim results have been included. Inter-company accounts and
transactions have been eliminated. 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 December 31, 1997. The results for
the three-month and nine-month periods ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1998.
The balance sheet at December 31, 1997 has been derived from the audited
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
Earnings Per Share
Earnings per share amounts have been determined in accordance with the
provisions of SFAS No. 128 and reflect the application of Staff Accounting
Bulletin No. 98 issued by the Securities and Exchange Commission effective
February 3, 1998. SFAS No. 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effect of options. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented and restated to conform to the SFAS No. 128
requirements. See note 9.
Reclassifications
Certain reclassifications have been made to the 1997 financial statements
to conform to the 1998 presentation.
(3) Acquisitions
Effective January 31, 1998, the Company purchased all of the outstanding
common stock of Comstock Leasing, Inc., a small-ticket lessor specializing in
office-based information technology equipment. Additionally, effective March 31,
1998, the Company acquired the assets of Monex Leasing, Ltd., a Texas-based
lessor of telecommunications, business, and other equipment. The aggregate
consideration for these two acquisitions included $2,699,000 in cash payments,
net of cash acquired, $2,678,000 in installment notes, 50,000 shares of the
Company's common stock valued at approximately $725,000, and future contingent
payments of up to $3,900,000 in cash and 48,528 shares of the Company's common
stock. The fair value of assets purchased and liabilities assumed in the
acquisitions were $30,389,000 and $25,864,000, respectively. Both acquisitions
have been accounted for using the purchase method of accounting and the results
of operations of the acquired businesses have been included in the consolidated
financial statements since the dates of acquisition. These acquisitions had no
significant impact on results of operations for the nine months ended September
30, 1998.
Effective June 30, 1998, the Company acquired the assets and business of
Spectra Precision Credit Corp. (Spectra), the finance subsidiary of Spectra
Precision, Inc. Spectra Precision, Inc. is an international manufacturer of
laser-based leveling and alignment instruments, machine control systems,
surveying instruments and software. Spectra provides leasing, financing, and
rental services to direct sales offices and dealer/distributors of Spectra
Precision's products. The consideration paid was $39,939,000, net of cash
acquired, including the assumption of $3,458,000 of Spectra's liabilities, plus
future contingent consideration of up to $3,500,000. The fair value of assets
purchased in the acquisition was $35,829,000. The acquisition has been accounted
for using the purchase method of accounting and the results of operations of the
acquired business has been included in the consolidated financial statements
since the date of acquisition.
The following unaudited pro forma consolidated results of operations for
the nine months ended September 30, 1997 and 1998 are presented as if the
Spectra acquisition had been made at the beginning of each period presented. The
unaudited pro forma information is not necessarily indicative of either the
results of operations that would have occurred had the purchase been made during
the periods presented or the future results of the combined operations.
Pro Forma
Nine months ended September 30,
1997 1998
---- ----
(In thousands,
except per share amounts)
Pro forma net revenues...................... $18,502 $38,620
Pro forma net income from continuing
operations................................. 1,638 4,247
Pro forma net income from continuing
operations per common share
Basic.................................... $0.53 $0.82
Diluted.................................. $0.52 $0.79
<PAGE>
(4) Net Investment in Direct Finance Leases and Loans
Net investment in direct finance leases and loans is as follows:
December 31, September 30,
1997 1998
------------- -------------
(In thousands)
Lease and loan contracts receivable in
installments ......................... $ 78,036 $116,026
Estimated residual value of leased
equipment ............................. 4,677 7,257
Unearned income ........................... (13,276) (19,806)
Allowance for doubtful receivables ....... (2,173) (3,365)
--------- ---------
Net investment ........................... $ 67,264 $100,112
========= =========
At September 30, 1998 future lease and loan contract payments to be received on
direct finance leases and loans are as follows:
Amount
------------
(In thousands)
Year Ending December 31,
1998................................... $ 16,614
1999................................... 37,639
2000................................... 29,751
2001................................... 19,906
2002 and thereafter.................... 12,116
------------
Future lease contract payments.............. $116,026
============
At September 30, 1998 certain future lease contract payments have been
assigned to financial institutions (note 8).
(5) Equipment Held for Rental and Operating Leases, Net
The net book value of equipment held for rental and operating leases is as
follows:
December 31, September 30,
------------- -------------
1997 1998
--------- --------
(In thousands)
Equipment under operating leases......... $ 6,649 $ 5,509
Equipment under rental agreements........ 15,358 18,843
-------- --------
Net book value........................... $22,007 $24,352
========= =========
The book values presented in the above table are net of accumulated
depreciation of $7,067,000, and $8,269,000 at December 31, 1997 and September
30, 1998, respectively. Equipment under rental agreements is comprised primarily
of analytical instruments.
At September 30, 1998 future contract payments to be received on operating
leases are as follows:
Amount
----------
(In thousands)
Year Ending December 31,
1998................................... $ 645
1999................................... 2,391
2000................................... 1,226
2001................................... 563
2002 and thereafter.................... 452
------------
Future contract lease payments to be received $5,277
============
At September 30, 1998 certain future contract payments have been assigned
to financial institutions (note 8).
(6) Securitization Facility
Under the Company's securitization facility, the Company sells and
transfers a pool of leases to a wholly-owned, bankruptcy remote, special purpose
subsidiary established for the purpose of purchasing the Company's leases. This
subsidiary in turn simultaneously sells and transfers its interest in the leases
to a bank conduit facility which issues securities to investors. The securities
are collateralized by an undivided interest in the leases, the leased equipment,
and certain collateral accounts. A securitization is treated as a sale and a
gain on sale of lease financing receivables is recognized upon the
securitization. The difference between the aggregate principal balance and the
proceeds received, net of an allowance for doubtful receivables, is reflected on
the balance sheet as the securitization residual interest. A portion of the
proceeds from the sale of leases is required to be held in a separate restricted
account as collateral for the leases sold. This amount is recorded as restricted
cash and included in other assets on the balance sheet at September 30, 1998.
During September 1998, the Company securitized leases with a book value
$51,335,000. Year to date, the Company has securitized leases with a book value
of $135,990,000. These amounts are net of bad debt reserves, customer holdbacks,
and interests in the securitization retained by the Company of $6,125,000 and
$15,682,000, for the three months and nine months ended September 30, 1998,
respectively. In connection with its securitization of lease receivables, the
Company realized a gain on sale of lease receivables of $3,251,000 in the
quarter ended September 30, 1998 and year to date has realized gains of
$6,839,000.
<PAGE>
(7) Loss Experience and Reserves
The following table sets forth the amount of delinquencies as a percentage
of Gross Contract Balance of leases and loans included in the Company's owned
and securitized lease portfolio as of the period indicated and net charge-offs
as a percentage of the Company's remaining net investment in direct finance
leases and loans as of the end of the period indicated. Additionally, the table
sets forth loss reserves provided for on the Gross Contract Balance as well as
holdback reserves on portfolio acquisitions as of December 31, 1997 and
September 30,1998.
December 31, September 30,
1997 1998
------------ ----------
(In thousands)
Select Growth:
Gross Contract Balance...................... $56,654 $70,681
31 - 60 days past due....................... 11.31% 2.84%
61 - 90 days past due....................... 0.00% 2.11%
Over 90 days past due....................... 0.00% 1.92%
Portfolio Finance:
Gross Contract Balance...................... $31,630 $127,669
31 - 60 days past due....................... 0.39% 1.66%
61 - 90 days past due....................... 0.18% 1.06%
Over 90 days past due....................... 0.02% 0.10%
Small Ticket and Vendor:
Gross Contract Balance...................... $9,352 $93,512
31 - 60 days past due....................... 11.70% 1.57%
61 - 90 days past due....................... 5.76% 0.61%
Over 90 days past due....................... 9.98% 0.33%
Totals:
Gross Contract Balance...................... $97,636 $291,862
31 - 60 days past due....................... 7.81% 1.92%
61 - 90 days past due....................... 0.61% 1.17%
Over 90 days past due....................... 0.96% 0.61%
Average net investment in leases and loans owned
& managed........................................ $58,234 $174,611
Net charge-offs................................... 171 1,922
Net charge-off percentage......................... 0.29% 1.10%
Allowance for doubtful receivables included in:
Net investment in direct finance leases and loans $2,173 $3,365
Securitization residual interest 328 1,899
Holdback reserves on portfolio
acquisitions 603 4,871
---------- ----------
Total allowance and holdbacks $3,104 $10,135
========== ==========
The decrease in delinquencies as a percentage of Gross Contract Balance at
September 30, 1998 from year end is attributable to improvement in collections
and charge-offs taken on certain delinquent Select Growth leases during the
second quarter. The Company recovered the assets related to three Select Growth
leases during the second quarter and either sold the assets or wrote them down
to net realizable value. Charge-offs for these accounts totaled $1,456,000 on a
net investment of $5,799,000.
(8) Debt
Notes Payable
Notes payable to banks and others were as follows:
December 31, September 30,
1997 1998
------------ ----------
(In thousands)
Senior credit facility.................. $35,850 $80,500
Other................................... 2,267 4,946
-------- --------
$38,117 $85,446
Total.............................. ======== ========
At December 31, 1997 and September 30, 1998, the Company along with its
divisions LINC Quantum Analytics and LINC Capital Partners, ("the Borrowers"),
had available a senior credit facility in the amount of $100,000,000 and
$125,000,000, respectively, of which $35,850,000, and $80,500,000 at December
31, 1997 and September 30, 1998, respectively, was outstanding. The
weighted-average interest rate on the senior credit facility at December 31,
1997 and September 30, 1998 was 7.32% and 7.03%, respectively. In October 1998,
the facility was amended and increased to $155,000,000. The facility, as
amended, provides for interest at LIBOR plus 1.25% to 1.75% or, at the Company's
option, prime plus up to 0.25% or the CD rate or Fed Funds rate plus 1.30% to
1.80% with the precise rate dependent on certain leverage tests. Additionally,
the facility calls for the Company to pay a quarterly commitment fee of 0.25% on
the unused daily balance below 25% of the facility and 0.50% on the unused daily
balance above 25% of the facility. The facility is secured by substantially all
of the assets of the borrowers and is used by the borrowers to finance
acquisition of equipment pending completion of permanent financing and for
normal working capital purposes. The facility matures October 31, 1999 at which
point in time the remaining balance of the facility may be converted to a term
loan maturing October 31, 2001.
Recourse and Nonrecourse Debt
The Company permanently finances leases with financial institutions, on
either a nonrecourse and/or partial recourse basis. In connection with these
financings, the Company receives a cash payment equal to the discounted value of
the future rentals less, in certain cases, a holdback or cash reserve. In the
event of default by a lessee under a lease which has been assigned to a lender
under these financings, the lender has recourse to the lessee and to the
underlying leased equipment but no recourse to the Company except to the extent
of the recourse portion of the financing.
<PAGE>
At September 30, 1998 the future principal maturities of recourse and
nonrecourse debt are as follows:
Amount
-------------
(In thousands)
Year Ending December 31,
1998................................... $2,945
1999................................... 9,130
2000................................... 5,842
2001................................... 3,136
2002 and thereafter.................... 869
-------------
Total recourse and nonrecourse
discounted lease rentals................. $21,922
=============
(9) Earnings per Share
The following table sets forth the computation of basic and diluted
earnings per share from continuing operations.
<TABLE>
<CAPTION>
Three months ended September Nine months ended September
30, 30,
-------------------------------- -------------------------------
1997 1998 1997 1998
------------- --------------- ------------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings
per share from continuing operations
Net income from continuing operations $ 480,000 $ 1,675,000 $ 1,382,000 $ 4,437,000
------------- --------------- ------------- -------------
Denominator for basic earnings per share
Weighted average shares 3,307,118 5,183,688 3,069,244 5,167,204
Effect of dilutive stock options 3,055 166,062 68,449 190,015
------------- --------------- ------------- -------------
Denominator for diluted earning per share
Adjusted weighted average shares 3,310,173 5,349,750 3,137,693 5,357,219
------------- --------------- ------------- -------------
Net income from continuing operations:
Basic earnings per share $ .15 $ .32 $ .45 $ .86
=============
=============== ============= =============
Diluted earnings per share $ .15 $ .31 $ .44 $ .83
============= =============== ============= =============
</TABLE>
(10) Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for the reporting and
presentation of comprehensive income and its components in financial statements
by requiring minimum pension liability adjustments, unrealized gains or losses
on available-for-sale securities and foreign currency translation adjustments,
which prior to adoption were reported separately in shareholders' equity, to be
included in other comprehensive earnings.
<PAGE>
The components of comprehensive income, net of related tax, for the nine
months ended September 30, 1997 and 1998 are as follows:
Nine months ended September 30,
------------------------------
1997 1998
---------- ----------
(In thousands)
Net income .............................. $ 980 $4,437
Other comprehensive income, net of tax:
Unrealized holding gain (loss) arising
during period net of reclassification
adjustment for gains included
in net income ........................ 309 (522)
Foreign currency translation
adjustments .......................... -- (116)
------ ------
Comprehensive income .................... $1,289 $3,799
====== ======
Accumulated other comprehensive income (loss), net of tax, at December 31,
1997 and September 30, 1998 consists of unrealized gains on securities of
$926,000 and $404,000 and accumulated currency adjustment of $0 and $(116,000),
respectively.
(11) Segment Information
The Company's operations have been classified into two business segments:
select growth/portfolio finance and instrument rental and distribution. The
select growth/portfolio finance segment includes the Select Growth Leasing and
Portfolio Finance & Lessor Acquisition activities. The instrument rental and
distribution segment includes Instrument Rental & Distribution activities.
<TABLE>
<CAPTION>
Select Growth/ Instrument
Portfolio Rental &
Finance Distribution Consolidated
------- ------------ ------------
(In thousands)
<S> <C> <C> <C>
Nine months ended September 30, 1997
Total net revenues.................................... $7,109 7,970 15,079
Depreciation and amortization expense................. 437 2,776 3,213
Total expenses........................................ 5,562 7,255 12,817
Income from continuing operations before income taxes
and minority interest.............................. 1,547 715 2,262
Capital expenditures.................................. 20,873 17,777 38,650
Total assets.......................................... 68,983 22,900 91,883
Nine months ended September 30, 1998
Total net revenues.................................... $26,560 9,484 36,044
Depreciation and amortization expense................. 1,905 3,094 4,999
Total expenses........................................ 20,900 7,784 28,684
Income from continuing operations before income taxes
and minority interest.............................. 5,660 1,700 7,360
Capital expenditures.................................. 179,109 6,641 185,750
Total assets.......................................... 156,047 26,688 182,735
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Net Income
Net income from continuing operations ("net income") for the three months
ended September 30, 1998 was $1.7 million, or $0.31 per diluted common share
compared to $480,000, or $0.15 per diluted common share for the comparable
period in 1997. Net income for the nine months ended September 30, 1998 was $4.4
million or $0.83 per diluted common share compared to $1.4 million or $0.44 per
diluted common share for the nine months ended September 30, 1997. The increase
in net income in the three and nine months ended September 30, 1998 compared to
the earlier period is primarily due to increased earnings from the completion of
securitizations, gains recognized on the sale of equity participation rights,
and increased earnings contributions from the Company's Instrument Rental &
Distribution activities. New lease originations grew from $37.3 million for the
nine months ended September 30, 1997 to $170.3 million (excluding leases funded
in connection with acquisitions) for the nine months ended September 30, 1998.
Interest expense increased as a result of an increase in borrowings to fund new
lease originations, and selling, general, and administrative expenses increased
as a result of three acquisitions and the building of the Company's sales and
operations organization. Additionally, the provision for doubtful accounts
increased from 4.7% of net revenues for the nine months ended September 30, 1997
to 10.4% of net revenues for the comparable current year period.
Results of Continuing Operations
Three Months ended September 30, 1997 Compared to Three Months ended
September 30, 1998
Income before taxes and minority interest for the Company's Select Growth
Leasing and Portfolio Finance & Lessor Acquisition activities increased $1.6
million for the three months ended September 30, 1998 from $0.5 million for
September 30, 1997 to $2.1 million for September 30, 1998. Income before taxes
and minority interest for the Company's Instrument Rental & Distribution
activities increased from $0.3 million to $0.7 million for the three months
ended September 30, 1998.
Sales of analytical instruments increased from $5.9 million to $8.4 million
and costs of analytical instruments sold increased from $4.8 million to $6.9
million due to an increase in volume resulting from increased market penetration
and a promotional trade-in program offered by Hewlett-Packard, the Company's
largest supplier. Net margins on sales of analytical instruments was 18.8% in
the 1997 period and 18.6% in the 1998 period.
Rental and operating lease revenue increased from $1.9 million to $2.3
million primarily due to acquisitions of portfolios of operating leases upon the
Company's re-entry into Portfolio Finance & Lessor Acquisition activities after
the expiration of a non-compete agreement in September 1997.
Direct finance lease income increased from $1.7 million to $3.6 million due
to a substantially higher level of finance lease receivables outstanding
resulting from the acquisitions of Comstock Leasing, Monex Leasing, and Spectra
Precision Credit Corp. and an increase in lease originations in the Company's
other leasing businesses. The average finance lease receivables outstanding
increased 108%.
Fee income, for the three-month period, increased from $0.3 million to
$0.9 million. This increase was attributable to the receipt of deferred
servicing fees relating to a third party lease portfolio serviced by the Company
and an increase in servicing fees received in connection with the servicing of
the securitized leases.
During the third quarter of 1998, the Company securitized leases with a
book value of $51.3.million, net of reserve for doubtful accounts, customer
holdbacks and retained securitization interest of $6,125,000. In connection with
the securitization, a gain on the sale of lease financing receivables of $3.3
million was realized. No leases were securitized by the Company in the third
quarter of 1997.
Gains on remarketing of leased equipment of $0.7 million were realized in
the three months ended September 30, 1998 compared to $0.1 million in the
comparable period in 1997. The increase resulted from increased lease maturities
in 1998.
Gains of $1.1 million were realized from the sale of equity participation
rights in the three months ended September 30, 1998. Gains on equity
participation rights fluctuate based on the timing of the sale of the Company's
equity participation rights and their related value.
Interest income increased from $0.2 million to $0.5 million primarily due
to an increase in interest-bearing notes receivable and equipment loans held by
the Company.
Other income, which consists primarily of interim rents received in
connection with Select Growth Leasing activities and late fees, increased from
$0.2 million to $0.4 million primarily due to the increase in the volume of
Select Growth leases originated by the Company and the collection of late fees
on the Company's small ticket lease portfolio.
Net selling, general and administrative expenses increased from $2.2
million to $5.7 million primarily as a result of additional operations,
marketing and sales personnel associated with the Company's re-entry into
Portfolio Finance & Lessor Acquisition activities, the acquisitions completed in
the first and second quarter of 1998, increased business activity, and the
occurrence of certain expenses, including legal, consulting, and other expenses,
at higher levels than expected to occur during the balance of the year.
Interest expense increased from $1.2 million to $2.7 million due primarily
to an increase in average borrowings. The increase in average borrowings
resulted from increased lease originations and the acquisitions of businesses in
the first and second quarter.
Depreciation of equipment, increased from $1.0 million to $1.6 million.
Such increase was attributable to a 35% increase in equipment held for rental
and operating leases primarily resulting from the acquisitions of portfolios of
operating leases referred to above.
Goodwill amortization of $0.1 million increased over the prior year
period due to the three acquisitions completed in the first half of 1998.
The provision for credit losses increased from $0.2 million to $1.4 million
due to a nearly five fold increase in lease originations to $62.8 million for
the three months ended September 30, 1998.
<PAGE>
The Company's effective tax rate was 40.7% for the three month period ended
September 30, 1998 compared to 41.0% in the same period of 1997.
Nine Months ended September 30, 1997 Compared to Nine Months ended
September 30, 1998
Income before taxes and minority interest for the Company's Select Growth
Leasing and Portfolio Finance & Lessor Acquisition activities increased $4.2
million from $1.5 million for the nine months ended September 30, 1997 to $5.7
million in the nine months ended September 30, 1998. Income before taxes and
minority interest for the Company's Instrument Rental and Distribution
activities increased from $0.7 million to $1.7 million in the current period.
Sales of analytical instruments increased from $16.2 million to $23.2
million and costs of analytical instruments sold increased from $13.0 million to
$19.0 million due to an increase in volume during the second and third quarters
resulting from increased market penetration and a promotional trade-in program
offered by Hewlett-Packard, the Company's largest supplier. However, net margins
on sales of analytical instruments declined from 19.4% to 18.4% primarily as a
result of lower gross margins on sale type leases originated in the Company's
Instrument Rental & Distribution activities during the first half of 1998.
Rental and operating lease revenue increased from $5.0 million to $7.0
million primarily due to acquisitions of portfolios of operating leases upon the
Company's re-entry into Portfolio Finance & Lessor Acquisition activities after
the expiration of a non-compete agreement in September 1997.
Direct finance lease income more than doubled from $4.3 million to $8.8
million as a result of a substantially higher level of finance lease receivables
outstanding due to the acquisitions and increase in lease originations. Average
finance lease receivables outstanding increased 87%.
Fee income increased from $1.0 million to $1.5 million due to the receipt
of deferred servicing fees relating to a third party lease portfolio serviced by
the Company and an increase in servicing fees in the third quarter received in
connection with the servicing of the securitized leases. This increase was
partially offset by the decline in the number of leases serviced by the Company
for unrelated parties due to a non-compete agreement, which expired in September
1997.
During September 1998, the Company securitized leases with a book value
$51,335,000. Year to date, the Company has securitized leases with a book value
of $135,990,000. These amounts are net of bad debt reserves, customer holdbacks,
and interests in the securitization retained by the Company of $6,125,000 and
$15,682,000, for the three months and nine months ended September 30, 1998,
respectively. In connection with its securitization of lease receivables, the
Company realized a gain on sale of lease receivables of $3,251,000 in the
quarter ended September 30, 1998 and year to date has realized gains of
$6,839,000.
Gains on remarketing of leased equipment of $1.5 million were realized in
the nine months ended September 30, 1998 compared to $0.4 million in the earlier
period. The increase in gains from the comparable period in 1997 resulted from
increased lease maturities in 1998.
During 1998, the Company experienced an increase in the value of certain
warrants held by the Company and consequently elected to sell a portion of these
warrants realizing a gain of $3.8 million. For the same period in 1997, the
Company sold certain equity participation rights realizing a gain of $0.1
million.
Interest income increased from $0.6 million to $1.3 million due to an
increase in interest-bearing notes receivable and equipment loans held by the
Company.
<PAGE>
Other income, which consists primarily of interim rents received in
connection with Select Growth Leasing activities and late fees, increased from
$0.5 million to $1.0 million primarily due to the increase in the volume of
Select Growth leases originated by the Company and the collection of late fees
in connection with the Company's small ticket lease portfolio.
Net selling, general and administrative expenses increased from $6.1
million to $13.5 million. This increase primarily resulted from additional
operations, marketing and sales personnel associated with the Company's re-entry
into Portfolio Finance & Lessor Acquisition activities, three acquisitions
completed in 1998, increased business activity, and the occurrence of certain
expenses during the third quarter, including legal, consulting, and other
expenses, at higher levels than expected to occur during the balance of the
year.
Interest expense increased from $3.0 million to $6.8 million due primarily
to increased direct finance lease originations and acquisitions and the
resulting increase in borrowings.
Depreciation of equipment increased from $2.9 million to $4.5 million. Such
increase was attributable to an increase in equipment held for rental and
operating leases primarily resulting from the acquisitions of portfolios of
operating leases referred to above.
Goodwill amortization of $0.2 million increased over the prior year
period due to the three acquisitions completed in the first half of 1998.
The provision for credit losses increased from $0.7 million to $3.8 million
due to a substantially higher volume of new leases originated. The provision
also increased in response to certain charge offs made in the second quarter of
1998. Lease fundings, excluding portfolios acquired in connection with the
Company's acquisitions, increased 357% over the comparable period in the prior
year.
The Company's effective tax rate was 39.7% for the nine month period
ended September 30, 1998 compared to 38.3% in the same period of 1997.
Liquidity and Capital Resources
General
The Company's activities are capital intensive and require access to a
substantial amount of credit to fund new equipment leases. The Company funds its
operations primarily through cash flow from operations, borrowings under the
Senior Credit Facility, proceeds from securitizations, and non-recourse and
recourse loans. The Company will continue to require access to significant
additional capital to maintain and expand its volume of leases originated and
portfolio of rental equipment as well as fund its Portfolio Finance & Lessor
Acquisition activities. The Company believes that cash flow from its operations,
net proceeds from securitization transactions and other borrowings, and amounts
available under its Senior Credit Facility will be sufficient to fund the
Company's operations for the foreseeable future.
Cash Flow
Cash flows from operating and financing activities provided by continuing
operations are generated primarily from receipts on direct finance leases and
rentals of analytical instruments, gross profit on the sale of analytical
instruments, realization of residual values, the financing of new lease
originations and rental inventory, and securitizations. Cash flows from such
activities increased from $37.3 million for the nine months ended September 30,
1997 to $221.5 million for the nine months ended September 30, 1998. The
increase resulted primarily from the growth in the Company's Portfolio Finance &
Lessor Acquisition activities and the securitizations completed in 1998.
Credit Facilities
As of September 30, 1998, the Company had $125 million available for
borrowing under its Senior Credit Facility of which $80.5 million was
outstanding. In October 1998, the facility was amended and increased to $155
million. The amended facility provides for interest at LIBOR plus 1.25% to
1.75%, prime rate plus up to 0.25%, or the CD rate or Fed Funds rate plus 1.30%
to 1.80% depending on certain leverage tests, and matures on October 31, 1999.
In 1997, the Company entered into a Securitization Facility in an initial
amount of $60 million. In accordance with the terms of the facility, the Company
increased the facility to $100 million during the second quarter of 1998. In
August 1998, the facility was increased to $150 million. At September 30, 1998,
$142.0 million of the facility was utilized. The Securitization Facility
provides for an interest rate which is 0.55% in excess of 30 day LIBOR and may
be converted into an amortizing term facility at any time. The terms of the
facility permits the securitization of substantially all of the leases
originated in the Company's Portfolio Finance & Lessor Acquisition activities
and Instrument Rental & Distribution activities as well as the substantial
majority of the leases originated in the Company's Select Growth Leasing
activities.
Year 2000 Compliance
Year 2000 compliance refers to the ability of computer hardware and
software to respond to the problems posed by the fact that computer programs
have traditionally been written using two digits rather than four to define the
applicable year. As a consequence, unless modified, computer systems will not be
able to differentiate between the year 2000 and 1999. Failure to address this
problem could result in system failures and the generation of erroneous data.
The Company believes that its information technology systems are year 2000
compliant except for certain of the systems of the companies acquired in 1998.
As part of its integration strategy, the Company is currently converting the
information of the non-compliant information technology systems of the acquired
companies onto its own systems. The Company also has several non-IT systems,
including voice mail and phone systems, which use dates electronically that are
being reviewed for compliance. The Company expects to have all systems year 2000
compliant by the end of the first quarter of 1999 and plans to complete
comprehensive, full system testing in the second quarter of 1999. The Company
believes that significant third parties in which the Company conducts business
with, including parties to the Company's credit facilities, are or will be year
2000 compliant by January 1, 1999.
The Company has not prepared estimates of costs for the correction of
year 2000 issues. Based on information available at this time, including the
year 2000 compliance status of information technology systems as well as the
anticipated replacement costs for non-compliant systems, the Company does not
believe that the cost will have a material adverse effect on the Company's
results of operations or financial condition. However, there can be no assurance
of unforeseen problems in its own computer systems or computer systems of third
parties with which the Company conducts business. Such problems, depending on
the extent and nature, could materially and adversely effect the Company's
operations and financial condition. Based on its assessment of the year 2000
issue to date, the Company has not developed a contingency plan. However, the
Company continues to evaluate the impact of year 2000 issues and will create a
contingency plan if considered warranted.
Recently Issued Accounting Pronouncements
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," will affect the disclosure requirements for the Company's 1998
financial statements. The Company does not expect that the adoption of the
disclosure requirements of this pronouncement will have a material impact on its
financial statements.
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for derivative
instruments and for hedging activities, and will not apply to the Company until
the year ended December 31, 2000. The Company has not yet evaluated the effect
of the pronouncement on its financial statements.
Note on Forward Looking Information
Certain statements in this Form 10-Q and in other filings by the Company
with the Securities and Exchange Commission and in the Company's written and
oral statements made by or with the approval of an authorized executive officer
constitute "forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
and the Company intends that such forward-looking statements be subject to the
safe harbors created thereby. The words "believe", "expect" and "anticipate" and
similar expressions identify forward-looking statements. These forward-looking
statements reflect the Company's current view with respect to future events and
financial performance, but are subject to many uncertainties and factors
relating to the Company's operations and business environment including, but not
limited to, those surrounding such forward looking statements and those
contained in the Company's other filings with the Commission including the Risk
Factors set forth in the Company's Registration Statement in Form S-1 (Reg. No
333-34729), which may cause the actual results of the Company to be materially
different from any future results expressed or implied by such forward-looking
statements. Examples of such uncertainties, include, but are not limited to, the
volume of new leases originated, the backlog of unfunded leases and the adequacy
of financial resources. The Company undertakes no obligation to publicly update
or revise any forward-looking statements whether as a result of new information,
future events or otherwise.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit
Number Document Description
10.1(c) Amendment No. 5 to Third Amended and Restated
Loan Agreement, among the Company, the various
lending institutions named therein and Fleet
Bank, N.A., as Agent
10.11(a) Receivables Purchase Agreement, among the
Company, LINC Receivables Corporation, Blue Keel
Funding, LLC, and Fleet Bank, N.A., as Agent
10.11(b) Second Amendment to Receivables Purchase
Agreement, among the Company, LINC Receivables
Corporation, Blue Keel Funding, LLC, and Fleet
Bank, N.A., as Agent
10.12 Asset Purchase Agreement by and among LINC
Capital, Inc., Spectra Precision Credit Corp.,
Spectra Precision Funding Corporation, and
Spectra Precision, Inc. dated June 30, 1998
(incorporated by reference to the Company's Form
8-K dated June 30, 1998).
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
b) Reports on Form 8-K
On July 15, 1998, the Company filed a current report on Form 8-K
reporting under Item 2 thereof the acquisition of Spectra
Precision Credit Corp. and Spectra Precision Funding Corporation
on June 30, 1998.
On September 14, 1998, the Company filed a current report on Form
8-K/A dated June 30, 1998, amending Item 7 of the Form 8-K filed
on July 15, 1998.
<PAGE>
SIGNATURES
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.
LINC CAPITAL, INC.
Dated: November 12, 1998
By: /s/ Martin E. Zimmerman
-----------------------
Martin E. Zimmerman
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
By: /s/ Allen P. Palles
-------------------
Allen P. Palles
Executive Vice President and
Chief Financial Officer
(Principal Financial
and Accounting Officer)
AMENDMENT NO. 5
TO
THIRD AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------------
AMENDMENT, dated as of October 31, 1998 ("Amendment No. 5"),
to the Third Amended and Restated Loan Agreement dated as of July 22, 1997 (as
amended hereby and from time to time hereafter, the "Loan Agreement"), by and
among LINC CAPITAL, INC. (formerly known as Scientific Leasing Inc.), a Delaware
corporation (the "Borrower"), the banks from time to time party thereto (each a
"Bank" and collectively, the "Banks"), and FLEET BANK, N.A. as agent for the
Banks (in such capacity, together with its successors in such capacity, the
"Agent").
W I T N E S S E T H:
--------------------
WHEREAS, the Borrower, the Agent and the Banks desire to amend
the Loan Agreement (a) to extend the Commitment Termination Date until October
31, 1999, (b) to increase the Banks' Commitments thereunder to an aggregate of
One Hundred Fifty-Five Million ($155,000,000) Dollars and the Temporary
Commitment to Fifteen Million ($15,000,000) Dollars, (c) to make a "CD Rate" and
a "Fed Funds Rate" available with respect to interest payable on the Loans, (d)
to consent to the acquisition by the Borrower or any Subsidiary thereof of 100%
of the outstanding capital stock of Analease B.V., and (e) to make certain other
changes as hereinafter set forth; and
WHEREAS, capitalized terms used and not defined herein shall
have the meanings specified in the Loan Agreement.
NOW, THEREFORE, in consideration of the premises, the
Borrower, the Banks and the Agent agree as follows:
Article I. Amendments to Loan Agreement.
-----------------------------
<PAGE>
This Amendment No. 5 to Loan Agreement shall be deemed to be
an amendment to the Loan Agreement, and shall not be construed in any way as a
replacement therefor. All of the terms and provisions of this Amendment No. 5,
including, without limitation, the representations and warranties set forth
herein, are hereby incorporated by reference into the Loan Agreement as if such
terms and provisions were set forth in full therein. The Loan Agreement is
hereby amended, effective as of the Effective Date (as defined in Section 5.1
hereof) upon the satisfaction of the conditions precedent set forth in Article V
hereof, in the following respects.
1.1 The following definitions appearing in Section 1.1, "General
Definitions", are amended as hereinafter set forth:
(a) "Applicable Margin" is amended and restated to read:
"Applicable Margin" -(a) For the periods from each Applicable
Margin Determination Date until the next Applicable Margin
Determination Date, or if earlier, the Commitment Termination
Date, that percentage to be added to the Prime Rate,
Eurodollar Rate, CD Rate or Fed Funds Rate, as appropriate,
pursuant to Section 2.11 for purposes of determining the per
annum rate of interest applicable from time to time thereto
which shall be, with respect to (i) Prime Rate Loans and
Eurodollar Loans, the percentage set forth in the table below
in this subsection (a), for the Prime Rate and the Eurodollar
Rate, respectively, that as of the Applicable Margin
Determination Date, corresponds to the Leverage Ratio set
forth in such table, and (ii) CD Rate Loans and Fed Funds Rate
Loans, the sum of (x) the Applicable Margin for Eurodollar
Loans determined as hereinbefore provided, plus (y) five basis
points."
Applicable Margin Applicable Margin
for for
Leverage Ratio Prime Rate Loans Eurodollar Loans
-------------- ---------------- -----------------
Less than 2.5:1 0% 1.25%
2.5:1 or more but .10% 1.375%
less than 3.0:1
3.0:1 or more but .15% 1.50%
less than 3.5:1
3.5:1 or greater .25% 1.75%
<PAGE>
For purposes of the preceding subsection (a), the Leverage
Ratio shall be determined five business days after the date on
which the Agent receives a certificate pursuant to subsection
5.11(c) hereof showing the calculation of the Leverage Ratio
for the immediately preceding full calendar month, provided
that if the Borrower shall not have submitted to the Agent
such certificate as and when required under subsection 5.11(c)
hereof, the Applicable Margin shall be as determined by the
Agent for so long as such certificate has not been received by
the Agent. The Applicable Margin shall become effective on
each Applicable Margin Determination Date and shall remain in
effect until the next succeeding Applicable Margin
Determination Date (except that notwithstanding the foregoing,
if an Event of Default shall have occurred and be continuing
at the time of delivery of such certified calculations or at
any time following the same, until the next succeeding date of
determination the Applicable Margin for any such Loan shall
not as a consequence of this provision be reduced for the
period from the occurrence of such Event of Default for and so
long as the same shall be continuing). In confirmation of the
foregoing (and subject to the terms of the exception set forth
in parentheticals above in respect of any decreases in the
Applicable Margin), if, at the last day of any calendar month,
the Leverage Ratio shall increase from that in effect at the
end of the preceding month, then the Applicable Margin shall
increase from the first day of the month following delivery of
such certificate until the next succeeding redetermination
date. In the event that quarterly or annual financial
statements of the Borrower shall reflect that the Leverage
Ratio for any particular period was higher than as calculated
for any month and theretofore delivered to the Agent, then the
Borrower shall be obligated to pay to the Agent, for the
ratable benefit of the Banks, additional interest in the
amount that would have been payable in respect of any
respective period if the calculation of the Leverage Ratio for
the applicable period had been correct.
<PAGE>
(b) As at any date of determination thereof which
determination shall be made on each successive Applicable
Margin Determination Date, the applicable percentage set forth
below shall apply if such date of determination is on or after
the Commitment Termination Date: the Applicable Margin for
Prime Rate Loans: 1.75% (175 basis points); and the Applicable
Margin for Eurodollar Loans: 3% (300 basis points); and the
Applicable Margin for CD Rate Loans and Fed Funds Rate Loans:
3.05% (305 basis points)".
(b) "Borrowing Base" is amended to add a new paragraph to the
end of paragraph (2), "Certain Concentration Limits", to read as follows:
"In addition, at no time shall the Post-Computation
Amount included in the Borrowing Base under any of the
foregoing clauses (a) through (g) with respect to Analease
B.V. and its Subsidiaries exceed in the aggregate One Million
Five Hundred Thousand ($1,500,000) Dollars."
(c) "Commitment Termination Date" is amended to replace the
date "October 31, 1998" with the date "October 31, 1999".
(d) "Interest Period" is amended and restated to read as
follows:
<PAGE>
"Interest Period - with respect to any Fixed Rate Loan, each
period commencing on the date such Loan is made or converted
from a Loan or Loans of another type, or the last day of the
next preceding Interest Period with respect to such Loan, and
ending, with respect to any (a) Eurodollar Loan, one, two,
three, four, five, six, nine or twelve months later, or (b) CD
Rate Loan or Fed Funds Rate Loan, seven days or thirty days
later, in each case as the Borrower may select as provided in
Section 2.3 hereof (subject to availability of funds), except
that each such Interest Period which commences on the last
Eurodollar Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last
Eurodollar Business Day of the appropriate subsequent calendar
month. Notwithstanding the foregoing: (i) any Interest Period
which commences prior to a Payment Date shall end no later
than such Payment Date if the aggregate principal amount of
the Loans or portions thereof to which such Interest Period
would be applicable would include any portion of the aggregate
principal amount of the Loans which is due and payable on such
Payment Date; provided, however, that the Borrower shall in
any event be liable for the payment of any and all amounts of
the type described in Section 2.20 hereof in the event that
the Term Conversion Date occurs after the commencement of an
Interest Period resulting in payments being required on
Payment Dates prior to the expiration of the then applicable
Interest Period; (ii) each Interest Period which would
otherwise end on a day which is not a Business Day shall end
on the next succeeding Business Day (or, in the case of an
Interest Period for Eurodollar Loans, if such next succeeding
Eurodollar Business Day falls in the next succeeding calendar
month, on the next preceding Eurodollar Business Day); (iii)
no more than five (5) Interest Periods for Eurodollar Loans
shall be in effect at the same time; and (iv) notwithstanding
clause (i) above, no Interest Period shall have a duration of
less than 1 month (in the case of Eurodollar Loans) or 7 days
(in the case of CD Rate Loans and Fed Funds Rate Loans). In
the event that the Borrower fails to select the duration of
any Interest Period for any Loan within the time period and
otherwise as provided in Section 2.7 hereof, such Loans will
be automatically converted into a Prime Rate Loan on the last
day of the preceding Interest Period for such Loan.
(e) "Post-Default Rate" is amended to restate clause "(b)" to
read, as follows:
<PAGE>
" (b) if such Loans are Fixed Rate Loans, 2% above the rate of
interest in effect thereon at the time of the Event of Default
that resulted in the Post-Default Rate being instituted until
the end of the then current Interest Period therefor and,
thereafter, 2% above the Prime Rate as in effect from time to
time plus the Applicable Margin for Prime Rate Loans (but in
no event less than the interest rate in effect on the due
date);"
(f) "Quarterly Dates" is amended and restated to read as
follows:
"Quarterly Dates" - the last day of each calendar quarter, the
first of which shall be the first such day after the date of
this Agreement, provided that, in the event that if any such
date is not a (a) Eurodollar Business Day and any Eurodollar
Loans are then outstanding, the relevant Quarterly Date shall
be the next succeeding Eurodollar Business Day (or, if the
next succeeding Eurodollar Business Day falls in the next
succeeding calendar month, then the next preceding Eurodollar
Business Day), or (b) Business Day and any Prime Rate Loans,
CD Rate Loans or Fed Funds Rate Loans are outstanding, the
relevant Quarterly Date shall be the next succeeding Business
Day.
(g) "Reference Bank" is amended to replace the word
"Eurodollar" with the word "Fixed".
(h) "Reserve Requirement" is amended and restated to read as
follows:
<PAGE>
"Reserve Requirement" - for any Fixed Rate Loans (other than
Fed Funds Rate Loans) for any Interest Period therefor, the
average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to
be maintained during such Interest Period under Regulation D
by member banks of the Federal Reserve System in New York City
with deposits exceeding One Billion Dollars against, in the
case of (a) Eurodollar Loans, "Eurocurrency liabilities" (as
such term is used in Regulation D), or (b) CD Rate Loans,
nonpersonal Dollar time deposits in an amount of $100,000 or
more. Without limiting the effect of the foregoing, the
Reserve Requirement shall reflect any other reserves required
to be maintained by such member banks by reason of any
Regulatory Change against (i) any category of liabilities
which includes deposits by reference to which the Fixed Rate
for any "Fixed Rate" Loan is to be determined as provided in
the definition of "Fixed Base Rate" in this Article 1 or (ii)
any category of extensions of credit or other assets which
include Fixed Rate Loans.
(i) "Temporary Commitment" is amended to replace the words
"Ten Million ($10,000,000) Dollars" with the words "Fifteen Million
($15,000,000) Dollars".
(j) "Type" is amended to replace the word "either", with the
word "whether" and to add immediately before the period the words "or a CD Rate
Loan or a Fed Funds Rate Loan".
1.2. The following new definitions are added in appropriate
alphabetical order in Section 1.1, "General Definitions", to read as follows:
"Amendment No. 5" - Amendment No. 5 dated as of October 31, 1998 to this
Agreement.
"Assessment Rate" - at any time, the rate (rounded upwards, if
necessary, to the nearest 1/100 of 1%) then charged by the Federal
Deposit Insurance Corporation (or any successor) to the Reference Bank
for deposit insurance for Dollar time deposits with the Reference Bank
at the Principal Office as determined by the Reference Bank.
"CD Rate Loans" - Loans the interest on which is determined on the
basis of rates referred to in clause (b) of the definition of "Fixed
Base Rate" in this Article 1.
<PAGE>
"Fed Funds Rate Loans" - Loans the interest on which is determined on
the basis of rates referred to in clause (c) of the definition of
"Fixed Base Rate" in this Article 1.
"Fed Funds Rate Notice" - as defined in Section 2.3(a).
"Fixed Base Rate" - with respect to any Eurodollar Loan, CD Rate Loan or
Fed Funds Rate Loan for any Interest Period therefor:
(a) if such Loan is a Eurodollar Loan, the rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) quoted by the Reference Bank at approximately 10:00 a.m.
New York time (or as soon thereafter as practicable) two (2)
Eurodollar Business Days prior to the first day of such
Interest Period for the offering by the Reference Bank to
leading banks in the Eurodollar interbank market of Dollar
deposits having a term comparable to such Interest Period and
in an amount comparable to the principal amount of the
Eurodollar Loan to be made by the Banks to which such Interest
Period relates;
(b) if such Loan is a CD Rate Loan, the rate per
annum (rounded upwards, if necessary, to the nearest 1/20 of
1%) determined by the Reference Bank to be the average of the
bid rate quoted to the Reference Bank at approximately 10:00
a.m. New York time (or as soon thereafter as practicable) on
the first day of such Interest Period by at least two
certificate of deposit dealers in New York of recognized
national standing selected by the Reference Bank for the
purchase at face value of time certificates of deposit of the
Reference Bank having a term comparable to such Interest
Period and in an amount comparable to the principal amount of
the CD Rate Loan made by the Banks to which such Interest
Period relates; and
(c) if such Loan is a Fed Funds Rate Loan, the rate
per annum determined by the Agent to be the Fed Funds Rate as
set forth by the Agent in a Fed Funds Rate Notice to the
Borrower pursuant to Section 2.3 hereof.
<PAGE>
"Fixed Rate" - for any Fixed Rate Loan for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Agent to be equal to the sum of: (a) (i) the Fixed Base Rate
for such Loan for such Interest Period; divided by (ii) 1 minus the Reserve
Requirement for such Loan for such Interest Period, plus (b) if such Loan is a
CD Rate Loan, the Assessment Rate in effect at the commencement of such Interest
Period. The Agent shall use its best efforts to advise the Borrower of the Fixed
Rate as soon as practicable after each change in the Fixed Rate; provided,
however, that the failure of the Agent to so advise the Borrower on any one or
more occasions shall not affect the rights of the Banks or the Agent or the
obligations of the Borrower hereunder.
"Fixed Rate Loans" - CD Rate Loans, Eurodollar Loans and Fed Funds Rate
Loans.
1.3 The following definitions are deleted from Section 1.1, "General
Definitions":
"Eurodollar Base Rate"
"Eurodollar Rate"
1.4 The following definitions appearing in Section 2.1, "Borrowing Base
Definitions", are amended as hereinafter set forth:
(a) "Borrowing Base" is amended to revise the third paragraph
of subsection (2) under the provisions governing calculation of the Borrowing
Base to add the following proviso to the end thereof:
<PAGE>
"; provided, however, that the foregoing limitation
-------- -------
notwithstanding, Post-Computation Amounts included in the
Borrowing Base with respect to Eligible Contracts of Foreign
Leasing Subsidiaries covering assets located in the United
Kingdom, Australia or Canada shall not, in the aggregate,
exceed an amount equal to ten (10%) percent of the Total
Commitment, provided, that all security arrangements,
--------
including without limitation all filings and other
documentation with respect to the Agent's lien on such
Eligible Contracts, shall be satisfactory to counsel for the
Agent."
(b) "Eligible Contract" is amended to add the following
proviso to the end of paragraph (i):
"; provided, however, that there shall be no obligation to
-------- -------
name the Agent as assignee (or any foreign equivalent) on any
Financing Statement filed with respect to a Contract covering
equipment the original cost of which was Twenty-five Thousand
($25,000) Dollars or less;"
1.5 The last sentence of Section 2.1(a), "Loans; Credit Period; Term
Conversion", is amended to insert the words "or CD Rate Loans or Fed Funds Rate
Loans" immediately after the words "Eurodollar Loans".
1.6 Section 2.3(a), "Borrowing Notice; Borrowing Computation", is
amended (a) to replace the words "Eurodollar Loan" with the words "Fixed Rate
Loan" immediately before the parenthetical in the first sentence, (b) to replace
the period at the end of clause (ii) with a semicolon and to add new clauses
(iii) and (iv) to read as follows:
"(iii) In the case of each notice of borrowing or prepayment
of or conversion into CD Rate Loans, or the duration of an
Interest Period for CD Rate Loans, two (2) Business Days prior
to the date of the related borrowing, prepayment, or
conversion or the first day of such Interest Period;
<PAGE>
(iv) In the case of each notice of: (x) prepayment of Fed
Funds Rate Loans, not less than three (3) Business Days prior
to the date of the related prepayment, and (y) borrowing of,
or conversion into, Fed Funds Rate Loans, not more than
one-half of one (1/2) hour, and in any event, not later than
11:00 a.m., New York City time, (provided that such notice may
be telephonic, if it is followed by written confirmation given
not later than the next Business Day), after the time of the
Agent's notice, which may be telephonic or written, to the
Borrower (each, a "Fed Funds Rate Notice") advising the
Borrower of the amount of and interest rate on the Loan or
portion thereof that the Banks are willing to make available
to the Borrower.
It is acknowledged and confirmed by the Borrower that, with
respect to Fed Funds Rate Loans, each Borrowing Notice
delivered by the Borrower pursuant to clause (y) of subsection
(iv) above shall be deemed to be a request to the Banks to
make the Fed Funds Rate Loan referred to therein and that none
of the Banks shall be obligated to make, and in fact no Bank
shall make, all or any portion of such requested Fed Funds
Rate Loan unless each Bank, in its discretion, agrees to make
its pro rata share of such requested Fed Funds Rate Loan, and
such agreement is set forth in the notice from the Agent to
the Borrower referred to in such clause (y) above."
and (c) to add the words "or CD Rate Loans or Fed Funds Rate Loans" immediately
after the words "Prime Rate Loans" in the first sentence of the second paragraph
of subsection (a).
1.7 Section 2.7, "Conversion of Loans", is amended to replace the words
(a) "Eurodollar Loans" in clause (ii) with the words "Fixed Rate Loans", and (b)
"Eurodollar Loan" in clause (iii) with the words "Fixed Rate Loan".
1.8 Section 2.8, "Mandatory and Optional Prepayment", is amended (a) to
replace the words "Eurodollar Loans" wherever they appear in paragraph (e) with
the words "Fixed Rate Loans", and (b) to insert the words "and then to Fed Funds
Rate Loans, and then to CD Rate Loans" immediately following the words "Prime
Rate Loans" in paragraph (f).
1.9 Section 2.10, "Principal Repayment Schedule", is amended (a) to
restate paragraph (b) to read as follows:
<PAGE>
(b) Except as set forth in Sections 2.16, 2.17 and 2.18
hereof, all payments and repayments made pursuant to the terms hereof
shall be applied first to Prime Rate Loans, and shall be applied
ratably to Eurodollar Loans, CD Rate Loans and Fed Funds Rate Loans
only to the extent any such payment exceeds the principal amount of
Prime Rate Loans outstanding at the time of such payment.
and (b) to replace the words "Eurodollar Loan" wherever they appear in paragraph
(c) with the words "Fixed Rate Loan".
1.10 Section 2.11, "Interest", is amended (a) to replace the period at
the end of clause (a)(ii) with a semicolon, and (b) to add two new clauses to
paragraph (a) to read as follows:
(iii) During such periods such Loan is a CD Rate Loan, for
each Interest Period relating thereto, the CD Rate for such Loan for
such Interest Period plus the Applicable Margin; and
(iv) During such periods such Loan is a Fed Funds Rate Loan
for each Interest Period relating thereto, the Federal Funds Rate plus
the Applicable Margin.
1.11 Section 2.14(a), "Computations", is amended (a) to replace the
words "Eurodollar Loans" with the words "Fixed Rate Loans" and (b) to add the
words "and Fed Funds Rate Loans" after the words "Prime Rate Loans" in clause
(b).
1.12 Section 2.16, "Additional Costs", is amended (a) to replace the
words "Eurodollar Loans" wherever they appear in paragraph (b) with the words
"Fixed Rate Loans", and (b) to replace the word "Eurodollar" each time it
appears in paragraph (c) with the words "Fixed Rate", and (c) to add after the
last time the words "Fixed Rate" appear the words "of another type or".
1.13 Section 2.17, "Limitations on Types of Loans", is amended (a) to
add the words "or CD Rate Loans or Fed Funds Rate Loans" after the words
"Eurodollar Loans" in the first sentence thereof, and (b) to replace the words
"Eurodollar Base Rate" with the words "Fixed Base Rate" and to add the words "or
CD Rate Loans or Fed Funds Rate Loans" after the words "Eurodollar Loans" in
paragraph (b).
<PAGE>
1.14 Section 2.19, "Certain Conversions pursuant to Section 2.16 and
2.18", is amended to replace the words "Prime Rate Loans or Eurodollar Loans, as
the case may be" with the words "another type of Loan".
1.15 Section 2.20, "Indemnification", is amended to replace the words
"Eurodollar Loan" with the words "Fixed Rate Loan" wherever they appear.
1.16 Section 2.25, "Required Borrowing Documentation", is amended to
add the following proviso to the end of subsection (c)(i) thereof:
(C) there shall be no obligation to name the Agent as assignee
(or any foreign equivalent) with respect to any Financing
Statement filed with respect to a Contract covering equipment
the original cost of which was Twenty-five Thousand ($25,000)
Dollars or less; and"
1.17 Section 2.32, "Temporary Loans", is amended (a) to add the words
"or a CD Rate Loan or a Fed Funds Rate Loan" after the words "Eurodollar Loan"
in subsection (a)(iii), and (b) to amend subsections (c) and (d)(i) to replace
the amount "Ten Million ($10,000,000) Dollars" with the amount "Fifteen Million
($15,000,000) Dollars"'.
1.18 Section 6.9, "Financial Covenants", is amended to restate subsection
6.9(a) to read as follows:
(a) With respect to LCI and its Subsidiaries, on a
consolidated basis, at the end of each calendar quarter commencing with
the quarter ending December 31, 1997, have minimum Adjusted Tangible
Net Worth in an amount not less than (i) $31,700,000, plus (ii)
seventy-five (75%) percent of consolidated net income (with no
deduction for losses) commencing from the calendar quarter ending
December 31, 1997 and subsequent quarters thereto;
1.19 Exhibits D, E and P to the Loan Agreement shall be replaced by
Exhibits D, E and P annexed hereto reflecting the effects of the Acquisition (as
hereinafter defined).
<PAGE>
1.20 The Commitments of the Banks, as set forth on the signature pages
to the Loan Agreement, are amended as set forth on Schedule A annexed hereto,
and the addresses of the Applicable Lending Offices for CD Rate Loans and Fed
Funds Rate Loans for each Bank are as set forth on Schedule B annexed hereto.
Article II. Increases in Commitments.
-------------------------
2.1 Commencing as of the Effective Date, the Commitment of each of the
Banks shall be increased from the amounts set forth, with respect to each Bank
on Schedule A to Amendment No. 1, to the respective amounts set forth opposite
the name of each of the Banks on Schedule A annexed hereto, and the Temporary
Commitment shall be increased from Ten Million ($10,000,000) Dollars to Fifteen
Million ($15,000,000) Dollars.
2.2 In order to evidence the Loans made by each of the Banks under the
Commitments as amended hereby, the Borrower shall execute and deliver to each of
the Banks a new note substantially in the form attached to the Loan Agreement as
Exhibit B-1, reflecting the Commitment of each Bank respectively as amended
hereby, dated the Effective Date and otherwise duly completed (collectively, all
of the above-described promissory notes are defined as the "New Bank Notes"). In
order to evidence the Temporary Loans by the Temporary Lender under the
Temporary Commitment as amended hereby, the Borrower shall execute and deliver
to the Temporary Lender a new note substantially in the form attached to the
Loan Agreement as Exhibit B-2 reflecting the Temporary Commitment amount as
amended hereby, dated the Effective Date and otherwise duly completed
(hereinafter, the "New Temporary Note" and together with the New Bank Notes,
collectively, the "New Notes"). Upon execution and delivery by the Borrower of
the New Notes, the Agent shall cause each of the Notes being replaced by a New
Note to be marked "Replaced by New Note", and returned to the Borrower.
<PAGE>
2.3 All references in the Loan Agreement, Loan Documents and all other
instruments, documents and agreements executed and delivered pursuant to any of
the foregoing, to "the ratable benefit of the Banks", "pro rata", or terms of
similar effect shall be deemed to refer to the ratable interests of the Banks,
as their respective pro rata interests shall be adjusted to reflect the increase
in the Commitments of each of the Banks as set forth on Schedule A annexed
hereto.
2.4 In order to reflect the foregoing, if necessary, the Banks shall,
as of the Effective Date, make appropriate adjustments among themselves in order
that the amount of Loans outstanding to the Borrower from each Bank under the
Loan Agreement are in principal amounts, as of the Effective Date, which are in
the same proportion to the outstanding principal amount of all Loans that each
Bank's Commitment, respectively, bears to the aggregate Commitments of all the
Banks, after giving effect to the increased amount of the Commitments; provided,
---------
however, that the foregoing adjustments shall not be made as of the Effective
- -------
Date in respect of Loans bearing interest at a rate subject to an Interest
Period outstanding immediately prior to the Effective Date but such adjustments
shall be made on the first day on which the foregoing adjustments can be made
without incurring "breakage costs" in respect of each respective Interest
Period, so that the foregoing adjustment shall be made as of the Effective Date
only in respect of borrowings from and after the Effective Date or borrowings
that are not subject to an Interest Period, provided further that in no event
-------- -------
shall any Bank be required to lend any amount in excess of its Commitment. The
Borrower agrees and consents to the terms of this Article II.
Article III. Consent to Acquisition.
-----------------------
3.1 Consent to Acquisition. Pursuant to Section 10.6 of the Loan
------------------------
Agreement, the Banks and the Agent hereby consent to the acquisition (the
"Acquisition") by the Borrower or any of its Subsidiaries (the "Purchaser") of
all of the outstanding capital stock of Analease B.V. a company organized under
the laws of the Netherlands (the "Company") and its subsidiaries in accordance
with the terms and conditions set forth on Schedule C annexed hereto subject,
however, to the fulfillment, to the satisfaction of the Banks and the Agent, of
the conditions precedent hereinafter set forth. The date upon which all such
conditions precedent shall have been fulfilled to the satisfaction of the Banks
and the Agent is hereinafter called the "Acquisition Effective Date".
<PAGE>
(a) The Borrower, the Banks and the Agent shall have executed
and delivered this Amendment No. 5, which Amendment shall have become effective
in accordance with its terms.
(b) The representations and warranties contained in Section
3.2 hereof and in Article IV of this Amendment No. 5 and in each other
agreement, instrument, certificate or other writing delivered to the Agent or
any Bank pursuant hereto or to the Loan Agreement shall be correct on and as of
the date hereof and on and as of the Acquisition Effective Date (after giving
effect to the consents included herein) as though made on and as of such date
except to the extent modified hereby, and (b) no Default or Event of Default
shall have occurred and be continuing on the Acquisition Effective Date or would
result from the consummation of the Acquisition.
(c) The Agent shall have received a true and correct copy of
the stock purchase agreement relating to the Acquisition (the "Acquisition
Agreement"), and all agreements, instruments, and documents executed and
delivered in connection therewith, and all exhibits, annexes and schedules
annexed thereto, and all amendments and modifications to any of the foregoing
(collectively, all of the foregoing are referred to as the "Acquisition
Documents"), which Acquisition Documents shall be certified as true and complete
by an officer of the Borrower and shall be satisfactory to the Agent and the
Banks in all respects.
(d) The Agent and the Banks shall be satisfied with the
capital, corporate and legal structure of the Borrower and its Subsidiaries,
including the Company and its Subsidiaries, as in effect after the Acquisition,
and the Agent shall have received such pro forma financial statements showing
the effect of the Acquisition, together with all such other information
concerning the Company and its Subsidiaries, as it or the Banks may have
requested.
(e) The Agent shall have received (i) such organizational and
corporate documents relating to the Company as it shall have requested, each of
which shall be satisfactory to the Agent and the Banks, and (ii) copies of the
resolutions of the board of directors of the Purchaser certified as true and
correct by an officer thereof, authorizing the execution and delivery of the
Acquisition Agreement and the consummation of the Acquisition.
<PAGE>
(f) If requested by the Agent, the Agent shall have received
an opinion, in form and substance satisfactory to the Banks and the Agent, of
Allen P. Palles, Esq., counsel to the Borrower as to such matters relating to
the Acquisition as the Agent and the Banks may reasonably request.
(g) All legal matters incident to the Acquisition shall be reasonably
satisfactory to the Agent and counsel to the Agent.
3.2 Representations and Warranties With Respect to Acquisition.
-----------------------------------------------------------
(a) The Purchaser has the power to execute and deliver each of
the Acquisition Documents to which it is or will be a party and to perform such
Acquisition Documents. No consent or approval of any Person (including, without
limitation, any stockholder of the Purchaser), no consent or approval of any
landlord or mortgagee, no waiver of any Lien or right of distraint or other
similar right and no consent, license, approval, authorization or declaration of
any governmental authority, bureau or agency, is or will be required in
connection with the execution or delivery by the Purchaser of any of the
Acquisition Documents to which it is or will be a party.
<PAGE>
(b) The execution and delivery by the Purchaser of each of the
Acquisition Documents to which it is or will be a party does not and will not
violate any provision of law (including, without limitation, the Williams Act,
Sections 13 and 14 of the Securities and Exchange Act of 1934, and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, and Regulations U, G and X
of the Board of Governors of the Federal Reserve System and the rules and
regulations promulgated thereunder) and does not and will not conflict with or
result in a breach of any order, writ, injunction, ordinance, resolution,
decree, or other similar document or instrument of any court or governmental
authority, bureau or agency, domestic or foreign, or any certificate of
incorporation or by-laws of or applicable to the Purchaser or create (with or
without the giving of notice or lapse of time, or both) a default under or
breach of any agreement, instrument, documents, bond, note or indenture to which
the Purchaser is a party, or by which it is bound or any of its properties or
assets is affected, or result in the imposition of any Lien of any nature
whatsoever upon any of the properties or assets owned by or used in connection
with the business of the Purchaser, the Company or any other Loan Party, except
for the Liens created and granted pursuant to the Security Documents or
otherwise permitted under the Loan Agreement.
(c) Upon consummation of the Acquisition, all of the
outstanding capital stock of the Company shall be owned by the Purchaser free
and clear of all Liens other than those created by the Security Documents. None
of the parties to any of the Acquisition Documents has waived compliance by any
of the other parties thereto with any term, covenant or condition thereof, and
no party thereto has breached any covenant set forth therein or failed to
perform any of its obligations thereunder. Upon consummation of the Acquisition,
the Acquisition shall have been consummated in substantially the manner set
forth in Schedule C hereto and on substantially the terms and conditions set
forth in the Acquisition Documents and in accordance with applicable law.
(d) Each Acquisition Document to which the Purchaser or any of
the sellers under the Acquisition Agreement (the "Sellers") is or will be a
party, when duly executed and delivered by the Purchaser and each Seller will
constitute the valid and legally binding obligation of the Purchaser or such
Seller, as the case may be, enforceable in accordance with its terms, except
that the remedy of specific performance and other equitable remedies are subject
to judicial discretion and except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws, now or hereafter in effect, relating to or affecting the enforcement of
creditors' rights generally.
3.3 Foreign Leasing Subsidiary. The parties hereto acknowledge and
----------------------------
agree that, notwithstanding any provisions of the Loan Agreement, although the
Company is a "Foreign Leasing Subsidiary" under the Loan Agreement, the Company
shall not be (a) deemed to be a "Borrower" under the Loan Agreement, or (b)
eligible to borrow any Foreign Subsidiary Loans under the Loan Agreement.
<PAGE>
Article IV. Representation and Warranties.
------------------------------
The Borrower represents and warrants as follows:
4.1 The Borrower is duly organized and validly existing as a
corporation under the laws of the state of Delaware and has the power to own its
assets and to transact the business in which it is presently engaged and in
which it proposes to be engaged.
4.2 The Borrower is in good standing in its state of incorporation and
in each state in which it is qualified to do business. There are no
jurisdictions in which the character of the properties owned by the Borrower or
in which the transaction of the business of the Borrower as now conducted
requires or will require the Borrower to qualify to do business, except
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the Collateral in the Borrowing Base or on the business,
operations, financial condition, or properties of the Borrower.
4.3 The Borrower has the power to execute and deliver this Amendment
No. 5 and to perform the Loan Agreement, as amended hereby, and to make and
deliver the New Notes and to perform its obligations under the New Notes, and
the Borrower has taken all necessary action, corporate or otherwise, to
authorize the execution and delivery of this Amendment No. 5, the making and
delivery of the New Notes, the performance of the Loan Agreement, as amended
hereby. No consent or approval of any Person (including, without limitation, any
stockholder of the Borrower), no consent or approval of any landlord or
mortgagee, no waiver of any Lien or right of distraint or other similar right
and no consent, license, approval, authorization or declaration of any
governmental authority, bureau or agency, is or will be required in connection
with the execution or delivery by the Borrower of this Amendment No. 5 or the
making and delivery of the New Notes or the performance by the Borrower, or the
validity or enforcement of the Loan Agreement as amended hereby and the New
Notes.
<PAGE>
4.4 The execution and delivery by the Borrower of this Amendment No. 5
and the making and delivery of the New Notes and performance by it hereunder,
thereunder and under the Loan Agreement as amended hereby and under the New
Notes, does not and will not violate any provision of law (including, without
limitation, the Williams Act, Sections 13 and 14 of the Securities and Exchange
Act of 1934, and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and
Regulations U, G and X of the Board of Governors of the Federal Reserve System
and the rules and regulations promulgated thereunder) and does not and will not
conflict with or result in a breach of any order, writ, injunction, ordinance,
resolution, decree, or other similar document or instrument of any court or
governmental authority, bureau or agency, domestic or foreign, or any
certificate of incorporation or by-laws of the Borrower or create (with or
without the giving of notice or lapse of time, or both) a default under or
breach of any agreement, instrument, documents, bond, note or indenture to which
the Borrower is a party, or by which it is bound or any of its properties or
assets is affected, or result in the imposition of any Lien of any nature
whatsoever upon any of the properties or assets owned by or used in connection
with the business of the Borrower or any other Loan Party, except for the Liens
created and granted pursuant to the Security Documents or otherwise permitted
under the Loan Agreement.
4.5 Each of this Amendment No. 5, the New Notes, and the Loan Agreement
as amended hereby have been duly executed and delivered by the Borrower and each
constitutes the valid and legally binding obligation of the Borrower,
enforceable in accordance with its terms, except that the remedy of specific
performance and other equitable remedies are subject to judicial discretion and
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws, now or hereafter in effect,
relating to or affecting the enforcement of creditors' rights generally.
4.6 The Liens granted pursuant to the Security Documents secure,
without limitation, the Obligations under the Loan Agreement as amended by this
Amendment No. 5 and under the New Notes, whether or not so stated in the
Security Documents. The terms "Obligations" as used in the Security Documents
(or any other term used therein to refer to the Indebtedness, liabilities and
obligations of the Borrower to the Banks) include, without limitation,
Indebtedness, liabilities and obligations to the Banks under the Loan Agreement
as amended by this Amendment No. 5 and under the New Notes made and delivered in
connection with this Amendment No. 5.
<PAGE>
Article V. Conditions Precedent.
---------------------
5.1 Effective Date Conditions. The effectiveness of the amendments set
-------------------------
forth in Article I hereof shall be subject to the fulfillment by the Borrower,
in a manner satisfactory to the Agent and the Banks, of all of the conditions
precedent set forth in this Article V, and the date on which the last of all
such conditions shall have been fulfilled to the satisfaction of the Agent and
the Banks, shall be herein called the "Effective Date" :
(a) The Borrower, the Banks and the Agent shall have executed
and delivered this Amendment.
(b)(i) The representations and warranties contained herein and
in each other agreement, instrument, certificate or other writing delivered to
the Agent or any Bank pursuant hereto or to the Loan Agreement shall be correct
on and as of the Effective Date after giving effect to this Amendment No. 5 as
though made on and as of such date except to the extent modified hereby and (ii)
no Default or Event of Default shall have occurred and be continuing on the
Effective Date or would result from the taking effect of this Amendment No. 5
except that the Agent's Lien has not been perfected with respect to certain
interests of the Borrower in Equipment located in England the Residual Value of
which has been included in the Residual Value Clause of the Borrowing Base in a
post-computation amount not in excess of $2,606,000, and the Borrower hereby
covenants and agrees to take all necessary action to cause such Lien to be
perfected with respect to such Equipment, in a manner satisfactory to the Agent,
as of a date not later than 60 days after the date hereof.
(c) The Borrower shall have:
(i) executed and delivered to each of the Banks its
respective New Bank Note;
(ii) paid all fees and expenses of counsel to the
Agent and to Fleet Bank N.A. incurred in connection
herewith; and
(iii) otherwise complied in all respects with the
terms hereof and of any other agreement, document, instrument or other writing
to be delivered by the Borrower in connection herewith.
<PAGE>
(d) The Agent shall have received, on or before the date
hereof, the following, each in form and substance satisfactory to the Agent:
(i) copies of the resolutions adopted by the
Borrower's Board of Directors, certified by an authorized officer thereof,
authorizing the execution, delivery and performance by the Borrower of this
Amendment No. 5 and the New Notes;
(ii) a certificate of an authorized officer of the
Borrower, certifying the names and true signatures
of the officer authorized to sign this Amendment No. 5 and the New Notes,
together with evidence of the incumbency of such authorized officer; and a
Compliance Certificate dated the Effective Date certifying that the conditions
set forth in this Section 5.1 shall have been satisfied; and
(iii) if requested by the Agent, an opinion, in form
and substance satisfactory to the Banks and the Agent, of Allen P. Palles,
Esq., counsel to the Borrower as to such matters relating to this Amendment
No. 5 as the Agent and the Banks may reasonably request.
(e) All legal matters incident to this Amendment and the Loan
Agreement shall be reasonably satisfactory to the Agent and counsel to the
Agent.
Article VI. Miscellaneous.
--------------
<PAGE>
6.1 The Loan Agreement and the other agreements to which the Borrower
is a party delivered in connection herewith or with the Loan Agreement are, and
shall continue to be, in full force and effect, and are hereby ratified and
confirmed in all respects, except that on and after the Effective Date (a) all
references in the Loan Agreement to "this Agreement", "hereto", "hereof",
"hereunder" or words of like import referring to the Loan Agreement shall mean
the Loan Agreement as amended hereby, (b) all references in the Loan Agreement,
the Security Documents or any other agreement, instrument or document executed
and delivered in connection therewith to (i) the "Loan Agreement", "thereto",
"thereof", "thereunder" or words of like import referring to the Loan Agreement
shall mean the Loan Agreement as amended hereby, (ii) a "Note" payable to any
Bank shall be deemed to refer to the New Note payable to such Bank and (iii) the
"Loans" (or any other term or terms used in any of such documents to describe or
refer to Loans made by the Banks to the Borrower under the Loan Agreement) shall
be deemed to refer to Loans made by the Banks to the Borrower pursuant to the
Loan Agreement as amended hereby.
6.2 The Loan Agreement, the Security Documents and all agreements,
instruments and documents executed and delivered in connection with any of the
foregoing shall each be deemed amended hereby to the extent necessary, if any,
to give effect to the provisions of this Amendment No. 5. Except as so amended
hereby, the Loan Agreement and the other Loan Documents shall remain in full
force and effect in accordance with their respective terms. The execution and
delivery of this Amendment No. 5 by the Borrower, the Banks and the Agent shall
not waive or be deemed to waive any default which has occurred or which may be
occurring in respect of the Loan Agreement. All of the terms and provisions of
this Amendment No. 5 are hereby incorporated by reference into the Loan
Agreement as if such terms and provisions were set forth in full therein.
6.3 The miscellaneous provisions under Article 10 of the Loan
Agreement, together with the definitions of all terms used therein, and all
other Sections of the Loan Agreement to which such Sections refer are hereby
incorporated by reference as if the provisions thereof were set forth in full
herein.
6.4 This Amendment No. 5 may be executed in counterparts by the parties
hereto, and each such counterpart shall be considered an original, and all such
counterparts shall constitute one and the same instrument.
6.5 THIS AMENDMENT NO. 5 SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS),
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 5 to the Third Amended and Restated Loan Agreement to be duly
executed as of the date first above written.
LINC CAPITAL, INC. (formerly known
as SCIENTIFIC LEASING, INC.),
as Borrower
By /s/ Steven A. Vernick
Name: Steven A. Vernick
Title: V.P. and Treasurer
FLEET BANK, N.A. (formerly NatWest
Bank N.A.) as Agent and as a Bank
By /s/ Harris C. Mehos
Name: Harris C. Mehos
Title: Vice President
FIRST UNION NATIONAL BANK (formerly
known as CORESTATES BANK, N.A.)
By /s/ Carmel C. Albano
Name: Carmel C. Albano
Title: Vice President
LASALLE NATIONAL BANK
By /s/ Henry J. Munez
Name: Henry J. Munez
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Todd E. Rite
Name: Todd E. Rite
Title: Vice President
<PAGE>
EUROPEAN AMERICAN BANK
By /s/ Christine M. Czaja
Name: Christine M. Czaja
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Allison A. Mason
Name: Allison A. Mason
Title: Vice President
KEY BANK NATIONAL ASSOCIATION
By: /s/ Chris Wallace
Name: Chris Wallace
Title: Senior Vice President
NATIONAL CITY BANK
By: /s/ John E. Stinson
Name: John E. Stinson
Title: Senior Vice President
<PAGE>
Schedule A
to
Amendment No. 5 to Third Amended and Restated Loan Agreement
------------------------------------------------------------
COMMITMENT BANK
- ---------- ----
$29,000,000 Fleet Bank, N.A.
(including $15,000,000
sublimit)
$26,666,666 FIRST UNION NATIONAL BANK
(formerly, CoreStates Bank N.A.)
$20,000,000 LASALLE NATIONAL BANK
$13,333,333 THE FIRST NATIONAL BANK OF CHICAGO
$10,000,000 EUROPEAN AMERICAN BANK
$10,000,000 UNION BANK OF CALIFORNIA, N.A.
$23,500,000 KEY BANK NATIONAL ASSOCIATION
$22,500,000 NATIONAL CITY BANK
<PAGE>
Schedule B
to
Amendment No. 5 to Third Amended and Restated Loan Agreement
------------------------------------------------------------
LENDING OFFICE FOR
CD RATE LOANS AND
FED FUNDS RATE LOANS BANK
- -------------------- ----
RECEIVABLES PURCHASE AGREEMENT
dated as of December 30, 1997
among
LINC RECEIVABLES CORPORATION,
as Seller
LINC CAPITAL, INC.
as Servicer
BLUE KEEL FUNDING, LLC
as Purchaser
and
FLEET BANK, N.A.
as Agent
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS
SECTION 1.1 Defined Terms............................................1
SECTION 1.2 Other Definitional Provisions...........................25
SECTION 1.3 Other Terms.............................................26
SECTION 1.4 Computation of Time Periods.............................26
ARTICLE I PURCHASE PROCEDURES
SECTION 2.1 Offer and Acceptance....................................26
SECTION 2.2 Purchase Limits.........................................26
SECTION 2.3 Making Purchases from Seller............................27
SECTION 2.4 Facility Termination Date...............................27
SECTION 2.5 Representation and Warranty.............................27
SECTION 2.6 Voluntary Termination of Facility;
Reduction of Purchase Limit...............27
SECTION 2.7 Increase of Purchase Limit..............................28
ARTICLE III FEES, ETC.
SECTION 3.1 Fees....................................................28
SECTION 3.2 Computation of Earned Yield and Fees....................28
ARTICLE IV ESTABLISHMENT AND USE OF ACCOUNTS; SETTLEMENTS
SECTION 4.1 Accounts................................................28
SECTION 4.2 Settlements.............................................29
SECTION 4.3 Interest Rate Swaps.....................................30
SECTION 4.4 Withdrawals from Reserve Account........................30
SECTION 4.5 Deemed Collections; Repurchases.........................30
SECTION 4.6 Servicer Advances.......................................31
ARTICLE V PAYMENTS
SECTION 5.1 Making of Payments......................................31
ARTICLE VI INCREASED COSTS, ETC.
SECTION 6.1 Increased Costs.........................................32
SECTION 6.2 Funding Losses..........................................33
ARTICLE VII CONDITIONS TO PURCHASES
SECTION 7.1 Initial Purchase........................................33
SECTION 7.2 All Purchases...........................................35
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 8.1 Representations and Warranties of Seller................36
SECTION 8.2 Organization and Good Standing, Etc.....................36
SECTION 8.3 Power and Authority; Due Authorization..................36
SECTION 8.4 No Violation............................................37
SECTION 8.5 Validity and Binding Nature.............................37
SECTION 8.6 Bulk Sales Act..........................................37
SECTION 8.7 Government Approvals....................................37
SECTION 8.8 Financial Condition.....................................38
SECTION 8.9 Margin Regulations......................................38
SECTION 8.10 Quality of Title.......................................38
SECTION 8.11 Accuracy of Information................................38
SECTION 8.12 Offices................................................38
SECTION 8.13 Capitalization.........................................39
SECTION 8.14 Trade Names............................................39
SECTION 8.15 Taxes..................................................39
SECTION 8.16 Compliance with Applicable Laws, etc...................39
SECTION 8.17 No Proceedings.........................................39
SECTION 8.18 Investment Company Act, Etc............................40
SECTION 8.19 Eligible Contracts.....................................40
ARTICLE IX REPRESENTATIONS AND WARRANTIES OF SERVICER
SECTION 9.1 Representations and Warranties of
Servicer..................................40
SECTION 9.2 Organization and Good Standing, Etc.....................40
SECTION 9.3 Power and Authority; Due Authorization..................40
SECTION 9.4 No Violation............................................40
SECTION 9.5 Validity and Binding Nature.............................41
SECTION 9.6 Government Approvals....................................41
SECTION 9.7 Financial Condition.....................................41
SECTION 9.8 Accuracy of Information.................................42
SECTION 9.9 Offices.................................................42
SECTION 9.10 Taxes..................................................42
SECTION 9.11 Compliance with Applicable Laws........................42
SECTION 9.12 No Proceedings.........................................42
SECTION 9.13 Investment Company Act, Etc............................43
SECTION 9.14 Software Programs......................................43
ARTICLE X COVENANTS OF SELLER
SECTION 10.1 Affirmative Covenants of Seller........................43
SECTION 10.2 Negative Covenants of Seller...........................49
ARTICLE XI COVENANTS OF SERVICER
SECTION 11.1 Affirmative Covenants of Servicer......................51
SECTION 11.2 Negative Covenants of Servicer.........................55
ARTICLE XII TERMINATION EVENTS AND THEIR EFFECT; REMEDIES
SECTION 12.1 Termination Events.....................................56
SECTION 12.2 Effect of Termination Event............................58
ARTICLE XIII THE SERVICER
SECTION 13.1 LINC as Initial Servicer...........................59
SECTION 13.2 Duties of Servicer.................................59
SECTION 13.3 Rights of the Agent................................60
SECTION 13.4 Responsibilities of Seller.........................61
SECTION 13.5 Further Action.....................................62
SECTION 13.6 Application of Collections.........................62
SECTION 13.7 Servicing Compensation; Costs
of Servicing..............................62
ARTICLE XIV THE AGENT
SECTION 14.1 Authorization and Action...............................63
SECTION 14.2 Exculpation............................................63
SECTION 14.3 Agent and Affiliates...................................63
SECTION 14.4 Contract Schedules.....................................64
ARTICLE XV ASSIGNMENTS
SECTION 15.1 Restrictions on Assignments............................64
SECTION 15.2 Documentation..........................................64
SECTION 15.3 Rights of Assignee.....................................65
SECTION 15.4 Notice of Assignment...................................65
ARTICLE XVI INDEMNIFICATION
SECTION 16.1 General Indemnity of Seller............................65
SECTION 16.2 Indemnity by Servicer..................................67
SECTION 16.3 Contribution...........................................67
ARTICLE XVII SECURITY INTEREST
SECTION 17.1 Grant of Security Interest.............................67
SECTION 17.2 Further Assurances.....................................68
SECTION 17.3 Remedies...............................................68
ARTICLE XVIII MISCELLANEOUS
SECTION 18.1 No Waiver; Remedies....................................69
SECTION 18.2 Amendments, Etc........................................69
SECTION 18.3 Notices, Etc...........................................69
SECTION 18.4 Costs, Expenses and Taxes..............................70
SECTION 18.5 Binding Effect; Survival...............................70
SECTION 18.6 Captions and Cross References..........................71
SECTION 18.7 Severability...........................................71
SECTION 18.8 Governing Law..........................................71
SECTION 18.9 Counterparts...........................................71
SECTION 18.10 WAIVER OF JURY TRIAL..................................71
SECTION 18.11 Recourse to Directors or Officers.....................72
SECTION 18.12 No Proceedings........................................72
SECTION 18.13 ENTIRE AGREEMENT......................................72
EXHIBITS
Exhibit A Form of Purchase Request
Exhibit B Form of Seller Opinion of Counsel
Exhibit C Form of Portfolio Certificate
Exhibit D Form of Lockbox Agreement
Exhibit E Form of Contract
SCHEDULES
Schedule I Categories
Schedule 8.17 Seller Proceedings
Schedule 9.12 Servicer Proceedings
Schedule 11.1.7 Credit Policy
Schedule 18.3 Notice Addresses
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
THIS RECEIVABLES PURCHASE AGREEMENT is made and entered into as of
December 30, 1997, among LINC RECEIVABLES CORPORATION, a Delaware corporation
("Seller"), LINC CAPITAL, INC., a Delaware corporation ("LINC"), as initial
------ ----
Servicer, BLUE KEEL FUNDING, LLC, a Delaware limited liability company
("Purchaser"), and FLEET BANK, N.A., a national banking association ("Fleet"),
--------- -----
as agent for Purchaser (in such capacity, together with its successors and
assigns, the "Agent").
-----
BACKGROUND
----------
1. The Originator originates and acquires Contracts in the ordinary
course of its business, certain of which it intends to sell or contribute to
Seller pursuant to the Purchase and Sale Agreement. Seller intends to sell
undivided interests in its portfolio of Contracts and other Contract Assets (the
"Portfolio") which interests are referred to herein as Participations. Seller
---------
has requested Purchaser, and Purchaser has agreed on the terms and subject to
the conditions contained in this Agreement, to purchase Participations from
Seller from time to time during the term of this Agreement.
2. Fleet has been requested, and is willing, to act as the Agent.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. As used in this Agreement, the following
----------- --------------
terms have the following meanings:
"Adjusted Tangible Net Worth" means at any time, the difference between
----------------------------
(a) the sum of (i) the non-current portion of Subordinated Debt, (ii) the total
of shareholders' equity calculated in accordance with GAAP, and (iii) deferred
income tax credits, minus (b) the sum of (i) deferred charges (after tax), and
-----
(ii) the total amount of any intangible assets which shall include, without
limitation, (A) unamortized debt discount after taxes, (B) prepaid expenses
after tax, and (C) goodwill.
"Administration Fee" means the administration fee payable pursuant to the
---------------------
Fee Letter.
<PAGE>
"Advance" has the meaning set forth in Section 4.6.
--------- -----------
"Adverse Claim" means a lien, security interest, pledge, charge,
----------------
mortgage or encumbrance, or similar right or claim of any Person.
"Affected Party" means each of Purchaser, each Program Support
-----------------
Provider, any permitted assignee of Purchaser or any Program Support Provider,
the Agent, and the holding company of any Program Support Provider and any
successor holding company thereof.
"Affiliate" of any Person means any other Person that (i) directly or
-----------
indirectly controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any employee benefit plan) or (ii) is an executive officer or
director of such Person. A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
The word "Affiliated" has a correlative meaning.
------------
"Agent" has the meaning set forth in the Preamble.
------- --------
"Aggregate Principal Balance" means at any time the aggregate
---------------------------------
Outstanding Principal Balance of all Contracts.
"Agreement" shall mean this Receivables Purchase Agreement, as it may
-----------
be amended, supplemented or otherwise modified from time to time.
"Alternate Base Rate" means, on any date, a fluctuating rate of
-----------------------
interest per annum equal to the higher of:
---------
(a) the rate of interest most recently announced by the Agent
in New York, New York as its prime commercial rate for United States
loans made in the United States, which rate is not necessarily intended
to be the lowest rate of interest determined by Fleet in connection
with extensions of credit; or
<PAGE>
(b) the Federal Funds Rate most recently determined by the
Agent plus 1.0% per annum.
---------
"Bankruptcy Code" means the Bankruptcy Code of 1986, 11 U.S.C. ss. 101, et
------------------ --
seq. as amended.
- ---
"Booked Residual Value" means, with respect to any item of Equipment,
------------------------
the residual value thereof that was established by the Originator at the time of
the origination or acquisition of the related Contract by the Originator as
reflected on the books and records of the Originator.
"Business Day" shall mean any day other than a Saturday, a Sunday or
---------------
day on which commercial banks in New York City or Chicago, Illinois are
authorized or required to be closed for business and in the case of determining
the Eurodollar Rate, on which banks are open for business in London, England.
"Capital" means, an amount equal to (a) the amount paid to (or as
---------
directed by) Seller for the Participation pursuant to Section 2.3 of this
------------
Agreement less (b) the aggregate amount of Collections received and actually
distributed to the Purchaser on account of such Capital pursuant to clause (vii)
of Section 4.2.
-----------
"Category" means (i) the traditional portfolio, (ii) the LQA portfolio
----------
and (iii) the emerging growth portfolio, all as more fully described on Schedule
--------
I.
- -
"Change in Control" means, (i) with respect to Seller, that LINC shall
-------------------
fail to own, directly or indirectly, free and clear of all Adverse Claims (other
than an Adverse Claim in favor of the lenders under the Credit Agreement), 100%
of the shares of the outstanding voting stock of Seller on a fully diluted
basis, or (ii) with respect to LINC, that Martin Zimmerman or Allen Palles shall
cease for any reason to be executive officers of LINC or to actively participate
in the management thereof.
"Collateral" has the meaning set forth in Section 17.1.
------------ ------------
"Collection Account" means a bank account maintained at the Collection
---------------------
Account Bank (which initially shall be account numbered 9403543609 at Fleet in
New York, New York), which is (i) a blocked account, (ii) identified as the
"LINC Receivables Corporation Collection Account", (iii) in Purchaser's name,
- ---------------------------------------------------
and (iv) pledged to Purchaser pursuant to Section 17.1.
------------
"Collection Account Bank" means the bank holding the Collection
---------------------------
Account, which bank shall initially be Fleet.
<PAGE>
"Collections" means, without duplication, with respect to any Contract,
-------------
all funds other than scheduled payments that were due and received with respect
to such Contract prior to the applicable Cut-off Date and late fees that (a) are
received by the Originator, Servicer or Seller, from or on behalf of the related
Obligors in payment of any amounts owed (including, without limitation,
principal, finance charges, interest, rent and all other amounts and charges) in
respect of such Contract, (b) received by the Originator, Servicer or Seller and
applied to such amounts owed by such Obligors (including, without limitation,
insurance payments or proceeds on account of any casualty loss with respect to
the related Equipment and net proceeds of sale or other disposition of
repossessed Equipment or other collateral or property of the Obligor or any
other party directly or indirectly liable for payment of such Contract and
available to be applied thereon), (c) received by Seller from the Originator in
respect of the purchase price of Contracts re-purchased by the Originator from
Seller pursuant to the Purchase and Sale Agreement, (d) representing deemed
collections pursuant to this Agreement or the Purchase and Sale Agreement or (e)
representing Repurchase Amounts.
"Commercial Paper Notes" means short-term promissory notes issued or to
------------------------
be issued by Purchaser, or the proceeds of which are loaned or are to be loaned
to Purchaser, to fund its loans or investments in Contracts or other financial
assets.
"Contract" means each finance lease, true lease, retail installment
----------
sale contract or note and security agreement that is or has been listed on a
Contract Schedule and that has not been repurchased by the Seller pursuant to
this Agreement.
<PAGE>
"Contract Assets" means the assets sold, contributed, transferred,
------------------
conveyed and assigned, or purported to have been sold, contributed, transferred,
conveyed or assigned, by the Originator to the Seller pursuant to the Purchase
and Sale Agreement, which shall consist of all of the Seller's right, title and
interest in and to (i) the Contracts, including all interest, finance charges,
rent payments and principal due on or with respect to the Contracts from and
after the applicable Cut-off Date, and all rights, powers and remedies under or
in connection with the Contracts; (ii) the Equipment related to the Contracts;
(iii) all property which secures a Contract; (iv) all rights to guaranties or
other agreements providing support or credit enhancement for such Contracts; (v)
all insurance policies related to the Contracts or the Equipment; (vi) all
rights and claims under the dealer agreements related to the Contracts, or any
other agreement pursuant to which the Originator acquired any Contract, in each
case to the extent related to such Contract; (vii) the Collections; (viii) all
lock-boxes and accounts to which Collections are sent or deposited, including
the Collection Account and the Reserve Account, and all monies, funds and
investments therein; (ix) a Pro-Rata Share of all warrants and similar equity
participation agreements, and the proceeds thereof; (x) the Purchase and Sale
Agreement, and all claims thereunder; (xi) all books and records, including
computer records, evidencing or relating to the foregoing; (xii) all proceeds of
the foregoing and the rights to enforce the foregoing.
"Contract Payment Date" means, with respect to any Contract, each date
-----------------------
shown as a "Contract Payment Date" for such Contract on the related Contract
Schedule.
"Contract Schedule" means a schedule of Contracts delivered to the
--------------------
Agent with each Purchase Request and approved by the Agent, such schedule
identifying each Contract to be sold to Purchaser in connection with such
Purchase Request by the name of the Obligor thereof and setting forth as to each
Contract the Outstanding Principal Balance, the Category of each Contract, loan
or lease number, scheduled payments, final maturity date, and the Contract
Payment Dates for each such Contract.
"Convertible Subordinated Debt" means the balance (approximately
----------------------------------
$7,700,000 in principal amount outstanding as of the date of this Agreement) of
the $25,000,000 in original face principal amount of 8-1/4% Convertible
Subordinated Debentures due 2003 issued by LINC pursuant to the Convertible
Subordinated Debt Indenture dated as of June 15, 1983 between LINC and United
States Trust Company of New York.
"Cost of Funds Rate" for any Settlement Period means the sum of (i) the
--------------------
rate equivalent to the rate (or if more than one rate, the weighted average of
rates) at which Commercial Paper Notes having a term equal to such Settlement
Period and to be issued to fund or maintain the Capital may be sold by any
placement agent or commercial paper dealer selected by the Purchaser or a
Program Support Provider, as agreed between each such agent or dealer and the
Purchaser or such Program Support Provider and notified by the Purchaser to the
Agent and the Servicer; provided, however, if the rate (or rates) as agreed
between any such agent or dealer and the Purchaser with regard to any Settlement
Period is a discount rate (or rates), the "Cost of Funds Rate" for such
----------------------
Settlement Period shall be the rate (or if more than one rate, the weighted
average of the rates) resulting from converting such discount rate (or rates) to
an interest-bearing equivalent rate (or rates) per annum, plus (ii), without
duplication, the commissions and charges charged as a percentage of such face
amount and converted to an interest-bearing equivalent rate per anum.
<PAGE>
"Credit Agreement" means the Third Amended and Restated Loan Agreement,
------------------
dated as of July 22, 1997, by and among LINC, LINC Quantum Analytics, Inc.,
Fleet and the banks from time to time signatory thereto, as amended pursuant to
Amendment No. 1 dated October 29, 1997.
"Credit Policy" means those underwriting, credit and collection
----------------
policies of LINC with respect to the Contracts as described in Schedule 11.1.7
----------------
hereto, as amended from time to time in accordance with this Agreement.
"Custodian" means LINC initially, and any other Person appointed as
-----------
custodian pursuant to Section 13.2(c).
---------------
"Cut-off Date" means, with respect to any Funding Date, the first day
---------------
of the month following the month in which such Funding Date occurs.
"Defaulted Contract" means, with respect to a Contract: (a) a Contract
--------------------
as to which all or any part of any scheduled payment was (1) delinquent for 91
or more days from the original due date for such payment or (2) delinquent for
60 or more days and which was repurchased prior to becoming 91 days past due by
Seller or the Originator or (b) a Contract as to which any of the following has
occurred: (i) the Contract has been charged off, or should have been charged
off, by the Servicer in accordance with the Credit Policy, (ii) the related
Equipment has been repossessed without reinstatement of such Contract, (iii) the
Servicer has determined that eventual payment of the Contract in full is
unlikely or (iv) foreclosure proceedings have been initiated and are continuing
or (c) a Contract as to which the Obligor thereof is the subject of an Event of
Bankruptcy.
"Default Proxy Ratio" means the ratio (expressed as a percentage)
-----------------------
computed as of a Month End Date for any Category by dividing (i) the aggregate
Gross Contract Amount of all Contracts of such Category that are Past Due
Contracts as of such Month End Date by (ii) the aggregate Gross Contract Amount
of all Contracts of such Category on such Month End Date.
"Delinquency Ratio" means the ratio (expressed as a percentage)
--------------------
computed as of a Month End Date by dividing (i) the aggregate Gross Contract
Amount of all Contracts as to which any scheduled payment or part thereof
remains unpaid for 61 days or more from the original due date for such payment
as of such Month End Date by (ii) the aggregate Gross Contract Amount of all
Contracts on such Month End Date.
"Delinquent Contract" means a Contract that is not a Defaulted Contract
---------------------
(i) as to which any scheduled payment or part thereof remains unpaid for 31 days
or more from the original due date for such payment or (ii) which has been, or
should have been, classified as delinquent by the Servicer in accordance with
the Credit Policy.
<PAGE>
"Dilutions" means all setoffs, discounts, credit memos, rebates,
-----------
refunds and other reductions of amounts originally scheduled to be paid under
the Contracts (other than write-offs for credit losses and reductions resulting
from prepayments).
"Discount Rate" means, as of any Settlement Date or other date of
----------------
determination, the sum of (A) with respect to those Contracts that are not the
subject of an Interest Rate Swap, the Eurodollar Rate (Reserve Adjusted) as of
two Business Days prior to such Settlement Date or other date of determination,
plus 1.00%, and, with respect to those Contracts that are the subject of an
Interest Rate Swap, the fixed rate (or, if there is more than one Interest Rate
Swap, the weighted average blended fixed rate) payable by Seller thereunder,
plus (B) the Fee Percentage, plus (C) the Servicing Fee Rate.
- ---- ----
"Dividend" means any dividend or distribution (in cash, property or
----------
obligations) on any shares of any class of Seller's capital stock or any
warrants, options or other rights with respect to shares of any class of
Seller's capital stock.
"Dollar(s)" and the sign "$" shall mean lawful money of the United
-----------
States of America.
"Dynamic Credit Enhancement Percentage" means as of any date for any
-----------------------------------------
Category, the greater of (A) 10% and (B) the product of (i) the average of the
Default Proxy Ratio for such Category over the last 12 months, times (ii) the
weighted average remaining life of the Contracts in such Category, expressed in
years, times (iii) the applicable Stress Factor.
"Earned Yield" means for any Settlement Period, an amount equal to the
--------------
product of (i) the Capital on the first day of such Settlement Period, (ii) the
Purchaser Rate for such Settlement Period, and (iii) the number of days in such
Settlement Period divided by 360.
----------
"Eligible Contract" means at any time a Contract:
-------------------
(i) that constitutes "chattel paper" as defined in the
applicable Uniform Commercial Code as in effect in all applicable
jurisdictions, and, if more than one original was executed, then either
such Contract contains a provision stating that only counterpart number
one shall constitute "chattel paper" within the meaning of the Uniform
Commercial Code as in effect in all applicable jurisdictions, which
counterpart is in the possession of the Custodian, or each and every
original counterpart is in the possession of the Custodian;
<PAGE>
(ii) the Obligor of which is a United States resident, duly
organized and existing under the laws of its jurisdiction of
organization, is not an Affiliate of Seller, and is not a government or
a governmental subdivision or agency;
(iii) that is not a Delinquent Contract or a Defaulted
Contract at the time of Purchase hereunder;
(iv) with regard to which the warranty of Seller in Section
-------
8.10 is true and correct;
----
(v) the assignment of which (including, without limitation,
the sale or contribution of which to Seller by the Originator) does not
contravene or conflict in any material respect with any law, rule or
regulation or any contractual or other restriction, limitation or
encumbrance, and the sale or assignment of which does not require the
consent of the Obligor thereof or any other Person which has not been
obtained and is in full force and effect;
(vi) that is denominated and payable only in Dollars;
(vii) that is in full force and effect and constitutes the
legal, valid and binding obligation of the Obligor of such Contract,
enforceable against such Obligor in accordance with its terms, and is
not subject to any dispute, offset, counterclaim or defense whatsoever
(except the discharge in bankruptcy of such Obligor) that could
reasonably be expected to have a material adverse effect on the
collectibility of such Contract;
(viii) that does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to usury, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair
debt collection practices and privacy) and with respect to which no
party thereto is in violation of any such law, rule or regulation in
any material respect;
(ix) that satisfies in all material respects all applicable
requirements of the Credit Policy;
(x) as to which each of Seller's and Purchaser's first-priority
security interest in such Contract and, unless the Equipment is owned
by Seller, in the related Equipment, respectively, have been perfected
under the applicable UCC and other applicable laws (if any);
<PAGE>
(xi) that has a scheduled maturity date of not more than 84
(or, in the case of any Contract in the emerging growth Category, 72)
months from the date of such Contract;
(xii) that was originated or acquired by the Originator in the
ordinary course of its business to finance the sale or lease of
Equipment to the related Obligor and was sold, transferred and assigned
to Seller pursuant to the Purchase and Sale Agreement;
(xiii) the scheduled payments under which will be sufficient
to fully amortize such Contract at maturity, assuming that each
scheduled payment is made on the date due in accordance with such
Contract; such scheduled payments are applicable only to payment of
principal and interest (or imputed principal and interest) on such
Contract, and which does not have a balloon payment in excess of 30% of
the Gross Contract Amount thereof and which otherwise provides for
monthly or quarterly payments in substantially equal installments;
(xiv) related to Equipment that has been delivered and
unconditionally accepted by the related Obligor;
(xv) that provides for insurance coverage that covers such
risks, and is in such amounts, as a prudent person in a similar
circumstance would carry
(xvi) the obligations of the Obligor under which have not been
cancelled or terminated, and the execution and delivery by such Obligor
of, and the performance of its obligations under such Contract do not,
and will not, conflict with or result in any violation of or constitute
a default under the organizational documents of such Obligor;
(xvii) the term of which has commenced; the Obligor under such
Contract has made at lease two regularly scheduled payments thereunder;
(xviii) the Obligor of which has no right to prepay such
Contract unless the payment which the Obligor is required to make in
connection with any prepayment is at least equal to the Outstanding
Principal Balance of such Contract;
<PAGE>
(xix) the Obligor of which has not denied any liability
thereunder in whole or in part, or been released in whole or in part
from its obligations thereunder, and the payments due under such
Contract are subject to no conditions precedent that are unsatisfied,
and no agreement relating to such Contract imposes any obligation of
the Originator (other than a warranty of title and quiet enjoyment)
that if not performed would give rise to a right of offset,
counterclaim or defense on the part of the Obligor;
(xx) which includes an obligation on the part of the Obligor
to maintain or cause to be maintained the related Equipment, at such
Obligor's expense, in good condition repair and working order, and
neither the Originator nor Seller have any reason to believe such
Equipment is not in good condition, repair and working order;
(xxi) which relates to Eligible Equipment;
(xxii) which is in substantially the form of one of the forms
included in Exhibit E, and such Contract constitutes the entire
----------
agreement of the parties with respect thereto; such Contract has not
been amended, altered or modified in any respect and no provision
thereof has been waived, in each case, in any way that is not reflected
in a writing that is part of the contract file or in any manner adverse
to the Originator;
(xxiii) with respect to which neither the Originator nor
Seller knows of any facts or circumstances that might reasonably be
expected to render such Contract less valuable than it purports to be,
and neither the Originator nor Seller has taken any action that might
reasonably be expected to impair the value of such Contract or the
related Equipment or the rights of any party with respect to such
Contract or the related Equipment;
(xxiv) which has not been rejected or refused as unacceptable
for inclusion in any securitization transaction or under any
warehousing loan agreement or under any permanent financing transaction
for any reason other than obligor concentration issues, geographical
location criteria, equipment type criteria, dollar size or similar
criteria;
(xxv) the payment terms of which have not been restructured
due to the Obligor's financial condition or inability to make payment
under the original contract, unless such Obligor has remained current
with respect to all payments due under such restructured contract for a
period of at least 180 consecutive days;
(xxvi) no matured or unmatured default or event of default
under any third-party servicing agreement for the Equipment related to
such Contract shall have occurred and be continuing;
<PAGE>
(xxvii) neither the Originator nor any Affiliate thereof has
given or loaned to the Obligor thereof, directly or indirectly, any
unpaid rent or other amount due thereunder; and
(xxviii) which is not assignable by the Obligor thereof
without the prior consent of the Originator.
"Eligible Equipment" means any item of Equipment that meets all of the
---------------------
following requirements at all times:
(i) such Equipment is personalty (including software) and does
not constitute a fixture, except for portions thereof that are
immaterial in type, quantity and value;
(ii) such Equipment is not used or intended for use primarily
for personal, family or household purposes and is not consumer goods or
gaming equipment;
(iii) such Equipment (other than vehicles) is located at the
related Obligor's premises in the United States;
(iv) such Equipment is not installed in or affixed to other
equipment that is not Equipment subject to a Contract;
(v) if such Equipment includes software, Seller has, or will
have after foreclosure or repossession, the right to remarket such
equipment with the associated software remaining in place without
obtaining any consent or approval from the license source of such
software (unless such software is not material to the operation or
value of such Equipment), and such software is covered by the Contract
that relates to such Equipment;
(vi) if such Equipment is a motor vehicle, the certificate of
title therefor shows the Originator as owner and the Agent as the sole
lienholder; and
(vii) either such Equipment is owned by Seller or Seller has a
first priority perfected security interest in such Equipment.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
-------
amended from time to time.
"Equipment" means non-consumer equipment, as generally described in the
-----------
Credit Policy.
<PAGE>
"Eurodollar Rate (Reserve Adjusted)" means, with respect to any
---------------------------------------
Settlement Period, a rate per annum (rounded upwards, if necessary, to the
---------
nearest 1/100 of 1%) determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
---------------
(Reserve Adjusted) 1-Eurodollar
Reserve Percentage
where: "Eurodollar Rate" means, with respect to any Settlement Period, the rate
-----------------
per annum that appears on page 3750 (or any successor page) of the Dow Jones
- ---------
Telerate Quotation Service (or if no such rate appears, on the display
designated "LIBO" on the Reuter Monitor Money Rates Service) as of 11:00 a.m.,
London time two Business Days prior to the first day of such Settlement Period;
provided that if no such rate is shown on the foregoing services, "Eurodollar
- --------
Rate" shall mean the rate at which deposits in Dollars are offered to the Agent
at approximately 11:00 a.m. London time two Business Days prior to the first day
of such Settlement Period; provided, further that for purposes of the definition
-------- -------
of Purchaser Rate, the Eurodollar Rate (Reserve Adjusted) shall be determined on
the first day of the related Settlement Period. "Eurodollar Reserve Percentage"
-------------------------------
means, with respect to each Settlement Period, the then-applicable percentage
(expressed as a decimal) prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining reserve requirements
applicable to "Eurocurrency Liabilities" pursuant to Regulation D or any other
then-applicable regulation of the Board of Governors (or any successor) that
prescribes reserve requirements applicable to "Eurocurrency Liabilities" as
presently defined in Regulation D.
"Event of Bankruptcy" shall be deemed to have occurred with respect to
---------------------
a Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, (i) seeking (A)
the liquidation, reorganization, debt arrangement, dissolution, winding
up, or composition or readjustment of debts of such Person; (B) the
appointment of a trustee, receiver, custodian, liquidator, assignee,
sequestrator or the like for such Person or all or substantially all of
its assets; or (C) any similar action with respect to such Person under
any law relating to bankruptcy, insolvency, reorganization, winding up
or composition or adjustment of debts, and such case or proceeding
shall continue undismissed, or unstayed and in effect, for a period of
60 consecutive days; or (ii) an order for relief in respect of such
Person shall be entered in an involuntary case under the federal
bankruptcy laws or other similar laws now or hereafter in effect; or
<PAGE>
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency, reorganization,
debt arrangement, dissolution or other similar law now or hereafter in
effect, or shall consent to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator (or
other similar official) for such Person or for any substantial part of
its property, or shall make any general assignment for the benefit of
creditors, or shall fail to, or admit in writing its inability to, pay
its debts generally as they become due, or, if a corporation or similar
entity, its board of directors shall vote to implement any of the
foregoing.
"Excess Concentration Amount" means, with respect to any date of
-------------------------------
determination, the sum of(A) the amount, if any, by which the aggregate
Outstanding Principal Balance of the Obligors with the five largest Outstanding
Principal Balances exceeds an amount equal to 12% of the Aggregate Principal
Balance (after giving effect to any Purchase taking place on the date of
determination), plus (B) the sum, for all Obligors other than the Obligors with
the five largest Outstanding Principal Balances, of the excess, if any, of the
Outstanding Principal Balance of all Contracts of an Obligor and its Affiliates
over an amount equal to 3% of the Aggregate Principal Balance(after giving
effect to any Purchase taking place on the date of determination).
"Facility" means the right of Seller to offer Participations to Purchaser
----------
hereunder.
"Facility Termination Date" has the meaning set forth in Section 2.4.
--------------------------- ------------
"Federal Funds Rate" means, for any period, a fluctuating interest rate
--------------------
per annum equal (for each day during such period) to:
- ---------
(i) the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New
York; or
(ii) if such rate is not so published for any day
that is a Business Day, the average of the quotations for such
day on such transactions received by the Agent from three
federal funds brokers of recognized standing selected by it.
<PAGE>
"Fee Letter" means the letter agreement between Seller and the Agent,
------------
dated as of December 30, 1997, as it may be amended, supplemented or otherwise
modified from time to time.
"Fee Percentage" means the sum of (i) the Program Fee Rate, plus (ii)
----------------- ----
the Liquidity Fee Rate.
"Fees" means all fees and other amounts payable by Seller to the Agent
------
or Purchaser pursuant to the Fee Letter.
"Final Payoff Date" has the meaning set forth in Section 10.1.
------------------- ------------
"Financial Officer" has the meaning set forth in Section 10.1.9(a).
------------------- ------------------
"Fiscal Quarter" means any quarter in a Fiscal Year.
----------------
"Fiscal Year" means any period of twelve consecutive calendar months
-------------
ending on December 31.
"Fleet" has the meaning set forth in the preamble.
-------
"Funding Date" means any date, which shall be a Settlement Date (except
--------------
with respect to the first Purchase), on which a Purchase occurs.
"GAAP" means generally accepted United States accounting principles.
------
"Gross Contract Amount" means, with respect to any Contract as of any
------------------------
date, the aggregate amount of scheduled payments remaining to be paid by the
Obligor as of such date.
"Hedge Trigger Event" means that either (i) the Eurodollar Rate
-----------------------
(Reserve Adjusted) has increased by more than 0.50% from the immediately
preceding Settlement Date or (ii) the Swap Cost exceeds the Eurodollar Rate
(Reserve Adjusted) as of the immediately preceding Settlement Date plus 0.75%.
<PAGE>
"Indebtedness" means, with respect to any Person, all (a) liabilities
--------------
or obligations, direct and contingent, which liabilities or obligations would,
in accordance with GAAP, be included in determining total liabilities as show on
the liability side of a balance sheet of such Person at the date as of which
Indebtedness is to be determined, including, without limitation, (i) contingent
liabilities which, in accordance with such principles, would be set forth in a
specific Dollar amount on the liability side of such balance sheet, (ii)
capitalized lease obligations of such Person, (iii) obligations in respect of
interest rate exchange, swap, cap and other agreements or arrangements designed
to provide protection against fluctuation in interest rates; (b) liabilities or
obligations of others for which such Person is directly or indirectly liable, by
way of guaranty (whether by direct guaranty, suretyship, discount, endorsement,
reimbursement of amounts drawn under letters of credit, take-or-pay agreement,
agreement to purchase or advance or keep in funds or other agreement having the
effect of a guaranty other than endorsements of negotiable instruments for
deposit or collection in the ordinary course of business) or otherwise whether
or not such liabilities would, in accordance with GAAP, be included in
determining total liabilities as shown on a balance sheet; and (c) without
duplication, liabilities or obligations secured by liens on any assets of such
Person, whether or not such liabilities or obligations shall have been assumed
by it.
"Indemnified Amounts" has the meaning set forth in Section 16.1.
--------------------- ------------
"Indemnified Party" has the meaning set forth in Section 16.1.
------------------- ------------
"Independent Director" has the meaning set forth in Section 10.1.8(b).
---------------------- -----------------
"Interest Rate Swap" means any one of, and "Interest Rate Swaps" means
--------------------- ---------------------
all of, the interest rate swap agreements entered into by Seller and a
counterparty to hedge its interest rate risk with respect to the Contracts
hereunder, in each case, as the same may be amended, supplemented, modified,
renewed, extended or replaced from time to time.
"Liquidity Agent" means Fleet, as liquidity agent for the Liquidity
------------------
Banks pursuant to the Liquidity Agreement.
<PAGE>
"Liquidity Agreement" means and includes (a) the Liquidity Asset
----------------------
Purchase Agreement dated as of December 30, 1997, among Purchaser, Fleet, as
liquidity agent for the Liquidity Banks and as administrator for Purchaser, and
the Liquidity Banks, and (b) any other agreement hereafter entered into by
Purchaser providing for the sale by Purchaser of Participations (or portions
thereof or participations therein), or the making of loans or other extensions
of credit to Purchaser secured by security interests in the Participations (or
portions thereof), to support all or part of Purchaser's payment obligations
with respect to the Commercial Paper Notes or to provide an alternate means of
funding Purchaser's investments in accounts receivable or other financial
assets, and under which the amount available from such sale or such extension of
credit is limited to an amount calculated by reference to the value or eligible
unpaid balance of such accounts receivable or other financial assets or any
portion thereof, in each case as amended, supplemented or otherwise modified
from time to time.
"Liquidity Bank" means and includes Fleet and the various financial
-----------------
institutions as are, or may become, parties to the Liquidity Agreement, as
purchasers thereunder, and any other or additional bank or other financial
institution hereafter purchasing Participations (or portions thereof), extending
credit to or for the account of Purchaser or having a commitment to do either of
the foregoing under the Liquidity Agreement.
"Liquidity Fee" means the liquidity fee payable pursuant to Section 3.1.
--------------- -----------
"Liquidity Fee Rate" shall have the meaning given to such term in the
---------------------
Fee Letter.
"Lockbox Agreement" means an agreement, substantially in the form of
--------------------
Exhibit D, among Seller, Servicer, the Agent and any bank where a lockbox and/or
- ---------
an account (including the Collection Account and the Reserve Account) where
Collections are sent or deposited is located.
"Lockbox Bank" means a bank (including the Collection Account Bank)
--------------
where a lockbox and/or an account to which Collections are deposited or sent
(including the Reserve Account) is located.
"Material Adverse Effect" means, with respect to any event or
----------------------------
circumstance, a material adverse effect on:
(a) the business, assets, financial condition or operations
of LINC or of Seller, as applicable;
(b) the ability of LINC or Seller, as applicable, to perform
their respective obligations under this Agreement or any other
Transaction Document;
(c) the validity, enforceability or collectibility against
Seller or LINC, as applicable of this Agreement or the other
Transaction Documents;
(d) the status, existence, perfection or priority of (i) the
Purchaser's ownership interest in the Portfolio or its security
interest in the Collateral, or (ii) Seller's interest in the Contracts
or the Contract Assets; or
(e) the validity, enforceability or collectibility of the Contracts.
"Month-End Date" means the last day of each calendar month.
- ----------------
<PAGE>
"Monthly Report" has the meaning set forth in Section 11.1.8(c).
----------------
"Moody's" means Moody's Investors Service, Inc.
---------
"Net Offering Proceeds" means $27,000,000.
-----------------------
"Net Portfolio Principal Balance" means, with respect to any date of
-----------------------------------
determination, an amount equal to the then aggregate Outstanding Principal
Balances of all Eligible Contracts (it being understood that for purposes of
calculating Net Portfolio Principal Balance at any time, the Outstanding
Principal Balance of each Contract that is a Defaulted Contract at such time
shall be deemed to be zero), minus the Overcollateralization Amount, minus, the
------ -----
Excess Concentration Amount, minus, the amount by which the aggregate
-----
Outstanding Principal Balances of all Eligible Contracts that relate solely or
primarily to software exceeds 5% of the aggregate Outstanding Principal Balances
of all Eligible Contracts, minus the amount by which the portion of the
-----
aggregate Outstanding Principal Balances of all Eligible Contracts attributable
to the Scheduled Residual Value of the Equipment related to such Eligible
Contracts exceeds 4% of the aggregate Outstanding Principal Balances of all
Eligible Contracts.
"Obligations" means all obligations (monetary or otherwise) of Seller
-------------
to Purchaser, the Agent and their respective successors, permitted transferees
and assigns arising under or in connection with this Agreement and each other
Transaction Document, in each case however created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due.
"Obligor" means a Person obligated to make payments with respect to a
---------
Contract.
"Operating Agreement" means the Operating Agreement, dated as of
----------------------
December 30, 1997, between LINC and Seller.
"Original Contract Balance" means, with respect to any Contract, the
----------------------------
original Outstanding Principal Balance of such Contract as of the date of its
Purchase.
"Originator" means LINC in its capacity as an originator and seller of
------------
Contracts pursuant to the Purchase and Sale Agreement.
<PAGE>
"Outstanding Principal Balance" means, as of any date with respect to
---------------------------------
any Contract, an amount equal to the remaining scheduled payments on such
Contract (including the Scheduled Residual Payment), as set forth on the
Contract Schedule, discounted on a monthly basis, from the 15th day of the month
in which such payments are due to the date of determination at the applicable
Discount Rate.
"Overcollateralization Amount" means with respect as of any date the
-------------------------------
sum of (i) the greatest of (a) the sum, for each Category, of the sum of (1) (x)
the current Dynamic Credit Enhancement Percentage for such Category (or, in the
case of the emerging growth Category, the greatest Dynamic Credit Enhancement
Percentage to have occurred in the prior 3 years), times (y) the aggregate
-----
Outstanding Principal Balances of the Contracts in such Category calculated,
until the Residual Inclusion Date, without regard to the Scheduled Residual
Payment on each such Contract, plus (2) until the Residual Inclusion Date, the
aggregate of the Scheduled Residual Payments under the Contracts in such
Category, in each case, discounted as described in the definition of Outstanding
Principal Balance, (b) 25% of an amount equal to the greatest
Overcollateralization Amount determined pursuant to the foregoing clause (a)
----------
that existed during the period from the last date on which the Capital was, or
was reduced to, zero until the date of determination, provided that, if the
--------
Residual Inclusion Date has occurred during such period, all amounts determined
pursuant to clause (a) shall be calculated as if the Residual Inclusion Date
occurred prior to the commencement of such period, and (c) the sum of the five
largest Outstanding Principal Balances owed by a single Obligor and its
Affiliates, minus (ii) the amount in the Reserve Account at such time (after
-----
taking into account any amount to be deposited therein on such date).
"Participations" means each undivided interest in the Contracts and the
----------------
other Contract Assets purchased by Purchaser pursuant to Section 2.1.
------------
"Past Due Contract" means a Contract as to which all or any part of any
-------------------
scheduled payment is more than 60, but less than 91, days past due or that has
been charged-off or repurchased by Seller prior to becoming more than 60, but
less than 91, days past due.
"Pay-Out Amount Limit" shall have the meaning given to such term in
------------------------
Section 2.2(b).
- ---------------
"Permitted Investment" means, at any time, determined as of the time of
-----------------------
investment:
(a) any evidence of debt, maturing not more than one year
after such time, issued or guaranteed by the United States Government
or any agency thereof;
<PAGE>
(b) commercial paper, maturing not more than nine months from
the date of issue or corporate demand notes, in each case issued by a
corporation (other than Seller or any Affiliate of Seller) organized
under the laws of any state of the United States or of the District of
Columbia and rated at least A-1 by S&P and P-1 by Moody's;
(c) any certificate of deposit (or time deposits represented
by such certificates of deposit) or bankers acceptance, maturing not
more than one year after such time, or overnight federal funds
transactions that are issued or sold by a commercial banking
institution that is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$500,000,000 and is rated at least A-1 by S&P and P-1 by Moody's;
(d) any repurchase agreement entered into with a commercial
banking institution of the stature referred to in clause (c)(i) that:
-------------
(i) is secured by a fully perfected security interest
in any obligation of the type described in any of
clauses (a) through (c); and
-------------------------
(ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of
the repurchase obligation of Fleet (or other
commercial banking institution) thereunder; or
(e) shares in a mutual fund investing solely in short-term
securities of the United States government and/or securities described
in clause (d) above where the mutual fund custodian has taken delivery
----------
of the collateralizing securities, provided that (i) such fund shall
--------
have the highest short-term credit rating available from Moody's and
S&P and (ii) such shares shall be hereby transferrable by the holder on
a daily basis.
"Person" means an individual, partnership, corporation (including a
--------
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company, government or any agency or political
subdivision thereof or any other entity.
"Portfolio" has the meaning set forth in the first recital.
-----------
"Portfolio Certificate" has the meaning set forth in Section 11.1.8(c).
---------------------- -----------------
"Pro Rata Share" of any warrant or similar equity participation
------------------
agreement, and the proceeds thereof, means such percentage interest in such
warrant or other agreement shown on the Contract Schedule for the Contract
related to such warrant or other agreement.
<PAGE>
"Program Documents" means the Liquidity Agreement, each agreement
--------------------
pursuant to which Purchaser obtains funding, through the issuance of Commercial
Paper Notes or otherwise, and the other documents executed or to be executed and
delivered in connection with Purchaser's securitization program, as amended,
supplemented or otherwise modified from time to time.
"Program Fee" means the program fee payable pursuant to Section 3.1.
------------- ------------
"Program Fee Rate" shall have the meaning assigned to such term in
------------------
the Fee Letter. "Program Support Provider" means each Liquidity Bank, the Agent
and any entity that issues Commercial Paper Notes.
"Purchase" has the meaning set forth in Section 2.1.
---------- -----------
"Purchase and Sale Agreement" means the Purchase and Sale Agreement
-------------------------------
dated as of December 30, 1997 between LINC and Seller, as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time in accordance with the Transaction Documents.
"Purchase and Sale Termination Event" has the meaning set forth in
--------------------------------------
the Purchase and Sale Agreement.
"Purchase Limit" has the meaning set forth in Section 2.2(a).
---------------- ---------------
"Purchase Request" has the meaning set forth in Section 2.3.
----------------- ------------
"Purchaser" has the meaning set forth in the Preamble.
----------- ---------
"Purchaser Rate" for any Settlement Period means:
----------------
<PAGE>
(A) (i) with respect to any portion of the Capital that is subject to
an Interest Swap Agreement, the Eurodollar Rate (Reserve Adjusted) for such
Settlement Period and (ii) with respect to that portion, if any, of the Capital
not related to an Interest Swap Agreement, either (1) the Eurodollar Rate
(Reserve Adjusted) for such Settlement Period, or (2) the Cost of Funds Rate for
such Settlement Period, as designated by Seller in a written notice delivered to
the Agent and the Purchaser at least two Business Days prior to the first day of
such Settlement Period, provided that if no option is designated by Seller the
--------
Purchaser Rate shall be the rate set forth in the foregoing clause (ii)(1) and
--------------
provided, further, that with respect to any portion of the Capital funded
- -------------------
pursuant to the Liquidity Agreement, the Purchaser Rate shall be the sum of the
Eurodollar Rate (Reserve Adjusted) for such Settlement Period, plus 1.25%; and
----
(B) with respect to any day on which a Termination Event shall have
occurred and shall be continuing, notwithstanding clause (A) of this definition,
----------
the "Purchaser Rate" shall be a rate per annum equal to the rate then in effect
on such day pursuant to the foregoing clause (A), plus 2% per annum.
----------
No provision of this Agreement shall require the payment or permit the
collection of interest in excess of the maximum permitted by applicable law.
"Qualified Interest Swap Agreement" means an Interest Swap Agreement
-------------------------------------
that meets all of the following criteria: (i) the counterparty to such agreement
is Fleet or a bank whose short term unsecured debt is rated at least A-1/P-1 by
the Rating Agencies, (ii) the benefits of such agreement have been assigned to
the Agent, for the benefit of the Purchaser, and (iii) all payments by the
counterparty thereto will be made directly to the Collection Account and (iv) is
otherwise reasonably acceptable to the Agent.
"Quarterly Payment Date" means the Settlement Date occurring in
--------------------------
January, April, July and October, provided that the first Quarterly Payment Date
--------
shall occur in April, 1998.
"Rating Agencies" means Standard & Poor's and Moody's Investors Service,
------------------
Inc.
"Regulatory Change" means, relative to any Affected Party:
-------------------
(a) any change in (or the adoption, implementation, change
in the phase-in or commencement of effectiveness of) any: (i) United
States Federal or state law or foreign law applicable to such Affected
Party;
(ii) regulation, interpretation, directive, or
requirement (whether or not having the force of law)
applicable to such Affected Party of (A) any court or
government authority charged with the interpretation or
administration of any law referred to in clause (a)(i), or of
-------------
(B) any rating agency rating the Commercial Paper Notes,
fiscal, monetary or other authority having jurisdiction over
such Affected Party; or
<PAGE>
(iii) GAAP or regulatory accounting principles
applicable to such Affected Party and affecting the
application to such Affected Party of any law, regulation,
interpretation, directive, or requirement referred to in
clause (a)(i) or (a)(ii) above;
(b) any change in the application to such Affected Party of
any existing law, regulation, interpretation, directive, requirement or
accounting principles referred to in clause (a)(i), (a)(ii) or (a)(iii)
---------------------------
above; or
(c) the issuance, publication or release of any regulation,
interpretation, directive, or requirement of a type described in clause
------
(a)(ii) above to the effect that the obligations of any Liquidity Bank
-------
under the Liquidity Agreement are not entitled to be included in the
zero percent category of off-balance sheet assets for purposes of any
risk-weighted capital guidelines applicable to such Liquidity Bank or
any related Affected Party.
"Repurchase Amounts" means the amounts paid by Seller in connection
---------------------
with the repurchase by Seller of any Contracts pursuant to Section 4.5.
------------
"Required Reduction Amount" for any Settlement Date means the amount
-----------------------------
equal to (i) if no Termination Event has occurred, the excess of the Capital
over the Net Portfolio Principal Balance calculated as of the first day of the
next month following the month in which such Settlement Date occurs and (ii) if
a Termination Event has occurred, the Capital.
"Required Reserve Amount" means, as of any Settlement Date or date of
---------------------------
Purchase the greater of (i) 1% of the Aggregate Principal Balance as of such
Settlement Date or date of Purchase and (ii) the amount necessary so that the
Capital does not exceed the Pay-Out Limit, provided that if the average of the
---------
Delinquency Ratio at the end of the three previous months exceeds 4%, the
Required Reserve Amount shall equal the greater of the amount set forth in the
foregoing clause (ii) and 4% of the Aggregate Principal Balance as of such
------------
Settlement Date or date of Purchase.
"Reserve Account" means a bank account maintained at a Lockbox Bank
------------------
(which initially shall be account numbered 9403543596 maintained at Fleet in New
York, New York), which is (i) a blocked account, (ii) identified as the "LINC
-----
Receivables Corporation Reserve Account", (iii) in Purchaser's name and (iv)
- -------------------------------------------
pledged to Purchaser pursuant to Section 17.1.
-------------
"Residual Inclusion Date" means the date which the Agent identifies in
--------------------------
writing to the Seller as such.
<PAGE>
"S & P" means Standard & Poor's Rating Services, a division of The
-------
McGraw-Hill Companies, Inc.
"Scheduled Facility Termination Date" has the meaning set forth in Section
-------------------------------------- -------
2.4.
- ----
"Scheduled Residual Payment" means, with respect to any Contract, the
-----------------------------
Scheduled Residual Value of the related Equipment, which shall be assumed to be
due on the date which is three months after the last scheduled payment under
such Contract is otherwise due.
"Scheduled Residual Value" means, with respect to any item of
-----------------------------
Equipment, the lesser of (a) the Booked Residual Value of such Equipment and (b)
15% of the original purchase price for such Equipment.
"Seller" has the meaning set forth in the preamble.
-------- ---------
"Servicer" has the meaning set forth in Section 13.1.
---------- -------------
"Servicer Termination Event" means any one of the following events: (i)
---------------------------
Servicer fails to make any payment or deposit to be made by it hereunder when
due; (ii) Servicer shall fail to perform or observe in any material respect any
term, covenant or agreement contained in this Agreement or any other Transaction
Document on its part to be performed or observed (other than as set forth in
clause (i)), which failure shall continue for more than ten Business Days after
- ----------
notice to Servicer; (iii) Servicer shall fail to deliver any Monthly Report on
or before the day that is two Business Days prior to the related Settlement
Date; (iv) any representation or warranty made by Servicer under or in
connection with any Transaction Document, any Report or any other information
delivered pursuant to or in connection with any Transaction Document shall prove
to have been false or incorrect in any material respect when made and, if such
circumstances are capable of cure, shall continue to be incorrect for more than
ten Business Days after notice to Servicer; provided, however, that if any
representation or warranty related to a Contract that is repurchased by Seller,
then the breach of such representation or warranty shall not give rise to a
Servicer Termination Event; (v) Servicer is the subject of an Event of
Bankruptcy; (vi) Servicer shall fail to have an Adjusted Tangible Net Worth of
at least the sum of (A) $10,500,000, plus (B) Net Offering Proceeds, minus
$3,000,000, plus (C) 75% of consolidated net income (with no deduction for
losses) of Servicer commencing from the calendar quarter ending December 31,
1997 and all subsequent quarters thereto; or (vii) the average of the
Delinquency Ratios at the end of the three consecutive prior months exceeds 8%.
<PAGE>
"Servicing Fee" means, for any Settlement Period an amount equal to (i)
---------------
the Servicing Fee Rate, times (ii) the Aggregate Principal Balance on the first
-----
day of such Settlement Period, times (iii) the number of days in such Settlement
-----
Period divided by 360.
"Servicing Fee Rate" means (i) 0.75% so long as LINC is Servicer and
---------------------
(ii) if LINC is no longer the Servicer, such annual percentage rate as may be
charged by any replacement Servicer, provided such rate is a market rate.
--------
"Settlement Date" means the twentieth (20th) day of each calendar
------------------
month, commencing with February, 1998 (or if such day is not a Business Day, the
next Business Day).
"Settlement Period" means:(i) in the case of the first Settlement Period,
--------------------
the date from, and including, the date of the first Purchase hereunder to, but
excluding, the first Settlement Date and (ii) thereafter, the period from, and
including, the last day of the immediately preceding Settlement Period to, but
excluding, the next Settlement Date.
"Stress Factor" means (i) 3 for the traditional Category and the LQA
----------------
Category and (ii) 4 for the emerging growth Category (provided that any such
--------
stress factor may be changed at the discretion of the Agent by notice to
Servicer in order to reflect current market conditions for similar asset-backed
securities).
"Subordinated Debt" means (i) the Convertible Subordinated Debt; and
--------------------
(ii) any unsecured Indebtedness for money borrowed by LINC and which is
subordinated to the debt under the Credit Agreement.
"Subsidiary" means, with respect to any Person, a corporation of which
------------
such Person and/or its other Subsidiaries own, directly or indirectly, such
number of outstanding shares as have more than 50% of the ordinary voting power
for the election of directors.
"Successor Notice" has the meaning set forth in Section 13.1.
------------------ -------------
"Swap Cost" means, as of any date, the sum of (A) a market swap spread,
----------
as reasonably determined by the Agent, for an amortizing interest rate swap for
a portfolio similar to the Contracts, pursuant to which the Seller would pay a
fixed rate equal to the yield of a United States Treasury Note with an average
life equal to the expected average life of the Contracts and the counterparty to
such interest rate swap would pay a floating rate equal to the Eurodollar Rate
(Reserve Adjusted), plus (B) the fixed rate described in the foregoing clause
----
(A).
<PAGE>
"Swap Date" means the date that is 270 days from the Closing Date and
-----------
the date that is 270 days after the later of the date on which the Capital has
been reduced to zero and the immediately preceding Swap Date.
"Tangible Net Worth" means, with respect to Seller the net worth of
---------------------
Seller calculated in accordance with GAAP after subtracting therefrom the
aggregate amount of Seller's intangible assets, including, without limitation,
goodwill, franchises, licenses, patents, trademarks, trade names, copyrights and
service marks.
"Termination Event" shall mean any of the events described in Section 12.1.
------------------- -------------
"Transaction Documents" means this Agreement, the Purchase and Sale
------------------------
Agreement, the Fee Letter, the Interest Rate Swaps, the Lockbox Agreements, any
custodian agreement entered into in connection herewith and the other
instruments, certificates, agreements, reports and documents to be executed and
delivered under or in connection with this Agreement and the Purchase and Sale
Agreement (except the Program Documents), as any of the foregoing may be
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with this Agreement and the Purchase and Sale Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect in
-----
the applicable jurisdiction or jurisdictions.
"Unmatured Termination Event" shall mean any event that, if it
-------------------------------
continues uncured, will, with the lapse of time or notice or the lapse of time
and notice, constitute a Termination Event.
"Unrecoverable Advance" means any Advance made by the Servicer that has
-----------------------
not previously been reimbursed and that, in the reasonable opinion of the
Servicer, will not be ultimately recoverable from the related Obligor, the
related Equipment or otherwise.
SECTION 1.2 Other Definitional Provisions.
------------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement have the meanings as so defined herein when used in any other
Transaction Document, certificate, report or other document made or delivered
pursuant hereto.
<PAGE>
(b) Each term defined in the singular form in Section 1.1 or elsewhere
-----------
in this Agreement shall mean the plural thereof when the plural form of such
term is used in this Agreement or any other Transaction Document, certificate,
report or other document made or delivered pursuant hereto, and each term
defined in the plural form in Section 1.1 shall mean the singular thereof when
-----------
the singular form of such term is used herein or therein.
(c) The words "hereof," "herein," "hereunder" and similar terms when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and article, section, subsection,
schedule and exhibit references herein are references to articles, sections,
subsections, schedules and exhibits to this Agreement unless otherwise
specified.
SECTION 1.3 Other Terms. All accounting terms not specifically defined
-----------
herein shall be construed in accordance with GAAP. All terms used in Article 9
of the UCC in the State of Illinois, and not specifically defined herein, are
used herein as defined in such Article 9.
SECTION 1.4 Computation of Time Periods. Unless otherwise stated in
---------------------------
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding."
ARTICLE II
PURCHASE PROCEDURES
SECTION II.1 Offer and Acceptance. On the terms and subject to the
---------------------
conditions set forth in this Agreement, Purchaser shall purchase from Seller
Participations from time to time during the period from the date hereof to the
Facility Termination Date. Each such purchase and, as the context may require,
the purchase price paid by Purchaser to Seller in respect thereof, is called a
"Purchase."
SECTION II.2 Purchase Limits. Under no circumstances shall Purchaser
---------------
make any Purchase to the extent that, after giving effect to such Purchase, as
the case may be:
(a) Purchase Limit. The Capital would exceed an amount (the "Purchase
--------------- --------
Limit") equal to $60,000,000, as such amount may be reduced pursuant to Section
- ------ -------
2.6 or increased pursuant to Section 2.7; or
- ---- -----------
(b) Pay-Out Amount Limit. The Capital would exceed an amount
---------------------
(the "Pay-Out Amount Limit") equal to 100% of the Net Portfolio
------------------------
Principal Balance (as calculated on such date of Purchase).
<PAGE>
SECTION II.3 Making Purchases from Seller. (a) Notice of Purchase.
------------------------------- -------------------
Seller may request a Purchase by delivering a notice substantially in the form
of Exhibit A (a "Purchase Request") to the Agent and Purchaser not later than
--------- -----------------
11:00 a.m. (Chicago time) on the second Business Day preceding the date of such
proposed Purchase. Each such notice of a proposed Purchase shall include a
Contract Schedule and shall specify (i) the Funding Date for such Purchase
(which, except for the initial Purchase, shall be a Settlement Date), and (ii)
the calculation of the amount of the Purchase for such Participation.
(b) Amount of Purchase. The amount of each Purchase shall be equal to
------------------
the lesser of (x) the amount requested by Seller in the applicable Purchase
Notice and (y) the maximum amount permitted under Section 2.2; provided,
------------------------
however, that each such Purchase shall be in an amount of at least $5,000,000
- -------
(or, in the case of the first Purchase, $10,000,000).
(c) Funding of Purchase. On the date of each Purchase, Purchaser shall,
-------------------
upon satisfaction of the applicable conditions set forth in Article VII, make
-----------
available to Seller the amount of its Purchase (determined pursuant to Section
-------
2.3(b)), in same-day funds, to such account as is designated by Seller to the
- ------
Agent in writing.
SECTION II.4 Facility Termination Date. The "Facility Termination Date"
------------------------- --------------------------
shall be the earliest of (i) December 30, 2000 (herein, as such date may be
extended, called the "Scheduled Facility Termination Date"), (ii) the
-----------------------------------------
termination or expiration of the Liquidity Banks' commitments under the
Liquidity Facility and (iii) the date of termination of the Facility pursuant to
Section 2.6 or Section 12.2.
- ----------- -------------
SECTION II.5 Representation and Warranty. Each request for a Purchase
---------------------------
pursuant to Section 2.3 shall automatically constitute a representation and
-----------
warranty by Seller to the Agent and Purchaser that on the requested date of such
Purchase, (a) the representations and warranties contained in Article VIII will
------------
be true and correct in all material respects as of such requested date as though
made on such date, (b) no Termination Event or Unmatured Termination Event has
occurred and is continuing or will result from the making of such Purchase, and
(c) after giving effect to such requested Purchase, the Capital will not exceed
the Pay-Out Limit.
<PAGE>
SECTION II.6 Voluntary Termination of Facility; Reduction of Purchase
----------------------------------------------------------
Limit. Seller may, in its sole discretion for any reason, upon at least fifteen
- -----
(15) days' notice to the Agent (with a copy to Purchaser), terminate the
Facility in whole or reduce in part the unused portion of the Purchase Limit;
provided, however, that (a) each such partial reduction will be in a minimum
- ------------------
amount of $5,000,000 or a higher integral multiple of $1,000,000, and (b) in the
event of a partial reduction and after giving effect to any such partial
reduction and any prior partial reduction, the remaining Purchase Limit will not
be less than $25,000,000.
SECTION II.7 Increase of Purchase Limit. Seller may, in its sole
-----------------------------
discretion, upon at least fifteen (15) days' notice to the Agent (with a copy to
Purchaser) increase the Purchase Limit to an amount not to exceed $100,000,000;
provided, however (a) the Liquidity Banks have increased their commitments under
- -----------------
the Liquidity Agreement, which increase shall be at their sole discretion, to an
aggregate amount equal to not less than 102% of such increased Purchase Limit
and (ii) any such increase shall be in multiples of $10,000,000.
ARTICLE III
FEES, ETC.
SECTION III.1 Fees. Seller agrees to pay the Agent the following fees:
----
(i) a program fee for each Settlement Period equal to
(i) the daily outstanding Capital during such Settlement
Period, times (ii) the Program Fee Rate, times (iii) the
----- -----
number of days in such Settlement Period, divided by 360; and
(ii) a liquidity fee for each Settlement Period equal
to (i) the unfunded amount of the Liquidity Banks' commitments
under the Liquidity Agreement times (ii) the Liquidity Fee
-----
Rate, times (iii) the number of days in such Settlement Period
divided by 360.
SECTION III.2 Computation of Earned Yield and Fees. All Earned Yield
-------------------------------------
and fees shall be computed on the basis of the actual number of days (including
the first day but excluding the last day) occurring during the period for which
such interest or fee is payable over a year comprised of 360 days.
ARTICLE IV
ESTABLISHMENT AND USE OF ACCOUNTS; SETTLEMENTS
<PAGE>
SECTION IV.1 Accounts. (a) Collection Account. Seller hereby agrees to
-------- ------------------
establish the Collection Account on or before the date of the first Purchase
hereunder. Seller and Servicer hereby agree to direct all Obligors to make all
payments due under the Contracts to an account that is the subject of a Lock-Box
Agreement. Servicer shall transfer all Collections received to the Collection
Account within two Business Days of receipt.
(b) Reserve Account. Seller hereby agrees to establish the Reserve
----------------
Account on or before the date of the first Purchase hereunder.
(c) Permitted Investments. Funds on deposit in the Collection Account
----------------------
or the Reserve Account may be invested at the direction of Seller in Permitted
Investments, provided that such Permitted Investments mature on or prior to the
--------
next occurring Settlement Date. Interest earned on such Permitted Investments
shall be distributed pursuant to Section 4.3, with respect to the Collection
-----------
Account, and Section 4.4, with respect to the Reserve Account.
-----------
SECTION IV.2 Settlements. On each Settlement Date, all Collections
-----------
received on or prior to such date and not previously distributed, all interest
earned on investments in the Collection Account (net of expenses related to such
investments), all Advances made by the Servicer pursuant to Section 4.6 and all
-----------
net payments received from the counterparties to the Interest Rate Swaps shall
be distributed in the following order:
(i) first, to the Servicer in any amount equal to all
-----
Unrecoverable Advances, if any, for which the Servicer has not
previously been reimbursed;
(ii) second, to the counterparties of the Interest Rate Swaps any
------
net payment due to such counterparties from Seller,
(iii) third, to the Servicer (if Servicer is not LINC) in an amount
-----
equal to the Servicing Fee due on such date,
(iv) fourth, to the Agent in an amount equal to the accrued and
------
unpaid Program Fee and Liquidity Fee,
(v) fifth, to Purchaser an amount equal to the accrued and unpaid
-----
Earned Yield,
(vi) sixth, if such Settlement Date is a Quarterly Payment Date, to
-----
the Agent an amount equal to the Administration Fee payable on
such Settlement Date,
(vii) seventh, to Purchaser an amount equal to the Required
-------
Reduction Amount for application to the Capital,
(viii) eighth, to Purchaser and the Agent, on a pro rata
------
basis, in payment of all other amounts then due hereunder or
under the Fee Letter,
<PAGE>
(ix) ninth, to the Reserve Account to the extent necessary
-----
to result in the funds therein being equal to the Required
Reserve Amount,
(x) tenth, to the counterparties of the Interest Rate Swaps any
-----
payments due, if any, resulting from the early termination
thereof or other amounts (other than net payments) owed by
Seller thereunder;
(xi) eleventh, if LINC is the Servicer, an amount equal to
--------
the Servicing Fee due on such date and
(xii) twelfth, any remaining amounts to Seller.
-------
SECTION IV.3 Interest Rate Swaps. If (i) a Hedge Trigger Event has
--------------------
occurred, (ii) a Termination Event has occurred and is continuing or (iii) on a
Swap Date, the Capital exceeds zero, then, within five Business Days of such
event or date, unless Seller has already entered into such a Qualified Interest
Swap Agreement, Seller shall execute and deliver one or more Qualified Interest
Swap Agreements (or other interest rate hedging arrangement acceptable to the
Agent, in its sole discretion), with a notional principal amount equal to the
Gross Contract Amount as of such date, which shall amortize in accordance with
the expected schedule of Contract payments. Such Interest Rate Swap shall
provide for fixed rate payments by Seller equal to the Swap Cost and floating
rate payments by the counterparty equal to the one-month Eurodollar Rate
(Reserve Adjusted) with a same day settlement in effect from time to time.
SECTION IV.4 Withdrawals from Reserve Account. To the extent that on
-----------------------------------
any Settlement Date, there are insufficient funds to distribute in full the
amounts set forth in clauses first through seventh of Section 4.2, Servicer
------- -------------
shall withdraw the lesser of (1) the amount of such deficiency and (ii) the
amounts on deposit in such Reserve Account from the Reserve Account and
distribute it pursuant to such Section 4.2. If on any Settlement Date, after
-----------
giving effect to the distributions on such date pursuant to Section 4.2 and any
-----------
Purchase on such date, the funds in the Reserve Account (including net
investment earnings thereon) exceed the Required Reserve Amount, such excess
shall be withdrawn and distributed to Seller.
<PAGE>
SECTION IV.5 Deemed Collections; Repurchases. If on any day the Gross
------------------
Contract Amount of any Contract is reduced or cancelled as a result of a
Dilution, or the Originator is required to make a deemed Collection payment with
respect thereto pursuant to the Purchase and Sale Agreement, then Seller shall
be deemed to have received a Collection in the amount of such Dilution. If any
of the representations or warranties set forth in Section 8.10 or 8.19 is no
------------ ----
longer true with respect to a Contract, and such breach, in the sole judgment of
the Agent, materially and adversely affects the value, enforceability or
collectibility of such Contract or the related Equipment (it being understood
that any Contract shall be deemed to be materially and adversely affected by any
inaccurate representation as to its validity or enforceability or as to the
amount of payments due thereunder) then, on the next occurring Settlement Date,
Seller shall repurchase such Contract from Purchaser for an amount equal to the
Outstanding Principal Balance thereof. Upon receipt of such amount by Purchaser,
such repurchased Contract shall be released from the lien of this Agreement and
reconveyed by Purchaser to Seller (without recourse or warranty) and shall no
longer be considered part of the Portfolio.
SECTION IV.6 Servicer Advances. The Servicer shall make an advance (an
-----------------
"Advance") with respect to each Contract that is not a Defaulted Contract in an
- ----------
amount equal to the scheduled payment (other than the Scheduled Residual
Payment) with respect to such Contract that became, or will become, due during
the calendar month in which the related Settlement Date occurs to the extent
that such payment has not previously been deposited to the Collection Account,
subject to the Servicer's reasonable determination that any such Advance would
not constitute an Unrecoverable Advance if made. Each such Advance shall be
remitted to the Collection Account on the Business Day immediately preceding
such Settlement Date. To the extent that the Servicer subsequently receives the
scheduled payment with respect to which it made an Advance, the Servicer shall
be entitled to retain such payment in reimbursement of such Advance.
ARTICLE V
PAYMENTS
SECTION V.1 Making of Payments. All payments of Capital or Earned Yield
------------------
and of all Fees, and all amounts to be deposited by Seller or Servicer
hereunder, shall be made by Seller or Servicer, as the case may be, no later
than 10:00 a.m. (Chicago time), on the day when due in lawful money of the
United States of America in same-day funds to such account as is specified by
Purchaser or the Agent to Servicer. Funds received by the Purchaser or the Agent
after 10:00 a.m. (Chicago time) on the date when due will be deemed to have been
received by the Purchaser or the Agent, as the case may be, on the next
following Business Day.
<PAGE>
ARTICLE VI
INCREASED COSTS, ETC.
SECTION VI.1 Increased Costs. If (i) any change in Regulation D of the
----------------
Board of Governors of the Federal Reserve System, or (ii) any Regulatory Change,
in each case occurring after the date hereof:
(A) shall subject any Affected Party to any tax, duty or other
charge with respect to any Participation owned by or funded by it, or
any obligations or rights to provide funding therefor, or shall change
the basis of taxation of payments to such Affected Party of any Capital
or Earned Yield made by or owed to or funded by it or any other amounts
due under this Agreement in respect of any Participation owned by or
funded by it (except for changes in the rate of tax on the overall net
income of such Affected Party imposed by the jurisdiction in which such
Affected Party's principal executive office (or, in the case of a
Eurodollar Office of such Affected Party, in which such Eurodollar
Office) is located); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
Governors of the Federal Reserve System, but excluding any such reserve
included in the determination of any Purchaser Rate), special deposit
or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Affected Party;
(C) shall change the amount of capital maintained or required or
requested or directed to be maintained by any Affected Party; or
<PAGE>
(D) shall impose on any Affected Party any other condition
affecting any Participation made or funded by any Affected Party; and
the result of any of the foregoing is or would be to increase the cost
to or, to impose a cost on (a) an Affected Party funding or making or
maintaining any Participation (including extensions of credit under the
Liquidity Agreement, or any commitment of such Affected Party with
respect to any of the foregoing), or (b) the Agent for continuing its
or Seller's relationship with Purchaser, to reduce the amount of any
sum received or contract by an Affected Party under this Agreement or
the Liquidity Agreement with respect thereto, or in the sole good faith
determination of such Affected Party, to reduce the rate of return on
the capital of an Affected Party as a consequence of its obligations
hereunder or arising in connection herewith to a level below that which
such Affected Party would otherwise have achieved, then within five
Business Days after demand by such Affected Party to Seller (which
demand shall be accompanied by a written statement setting forth the
basis of such demand), Seller shall pay to the Agent for the account of
such Affected Party such additional amount or amounts as will (in the
reasonable determination of such Affected Party) compensate such
Affected Party for such increased cost or such reduction. Such written
statement (which shall include calculations in reasonable detail)
shall, in the absence of manifest error, be rebuttably presumptive
evidence of the subject matter thereof.
SECTION VI.2 Funding Losses. Seller hereby agrees that upon demand by
---------------
any Affected Party (which demand shall be accompanied by a statement setting
forth the basis for the calculations of the amount being claimed) Seller will
indemnify such Affected Party against any net loss or expense which such
Affected Party may sustain or incur (including, without limitation, any net loss
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Affected Party to fund or maintain any
Participation), as reasonably determined by such Affected Party, as a result of
(a) any payment of any Capital or Earned Yield thereon on a date other than a
Settlement Date, or (b) any failure of Seller to sell any Participation to
Purchaser on a date specified therefor in a related Purchase Request. Such
written statement shall, in the absence of manifest error, be rebuttably
presumptive evidence of the subject matter thereof.
ARTICLE VII
CONDITIONS TO PURCHASES
The making of any Purchase hereunder is subject to the following
conditions precedent:
SECTION VII.1 Initial Purchase. The making of the initial Purchase is,
----------------
in addition to the conditions precedent specified in Section 7.2, subject to the
-----------
condition precedent that the Agent shall have received all of the following,
each duly executed and dated the date of such Purchase (or such earlier date as
shall be satisfactory to the Agent), in form and substance reasonably
satisfactory to the Agent:
<PAGE>
VII.1.1 Resolutions; Corporate Documents. Certified copies of
---------------------------------
resolutions of the Board of Directors of each of LINC and Seller authorizing or
ratifying the execution, delivery and performance, respectively, of this
Agreement and the other Transaction Documents to which it is a party, together
with a certified copy of its articles or certificate of incorporation and
by-laws.
VII.1.2 Consents, Etc. Certified copies of all documents
---------------
evidencing any necessary consents and governmental approvals (if any) with
respect to this Agreement and the other Transaction Documents.
VII.1.3 Incumbency and Signatures. A certificate of the
---------------------------
Secretary or an Assistant Secretary of each of LINC and Seller certifying the
names of officer or officers of each of LINC and Seller authorized to sign this
Agreement and the other Transaction Documents to which it is a party.
VII.1.4 Good Standing Certificates. Good standing certificates
--------------------------
for LINC and Seller, issued as of a recent date acceptable to the Agent by (a)
the Secretary of State of the jurisdiction of such Person's formation, and (b)
the Secretary of State of the jurisdiction where such Person's chief executive
office and principal place of business are located.
VII.1.5 Search Reports. A written search report provided to
---------------
the Agent by a search service acceptable to the Agent, listing all effective
financing statements that name Seller or LINC as debtor or assignor and that are
filed in the jurisdictions in which filings were made pursuant to Section 7.1.12
--------------
with respect to the first Purchase and in such other jurisdictions that Agent
shall reasonably request, together with copies of such financing statements
(none of which shall cover any Contract or any property or interests therein or
proceeds of any thereof, unless an executed termination statement therefor has
been delivered to the Agent), and tax and judgment lien search reports from a
Person satisfactory to the Agent showing no evidence of such lien filed against
Seller or LINC.
VII.1.6 Fee Letter; Payment of Fees. The Fee Letter, together
---------------------------
with all Fees payable pursuant to the Fee Letter and all costs and expenses due
and payable pursuant to Section 18.4, if then invoiced.
------------
VII.1.7 Closing Certificate. A certificate from an
--------------------
authorized officer of Seller as to the satisfaction of the conditions set forth
in Section 7.2.1.
-------------
VII.1.8 Purchase and Sale Agreement. A duly executed and
-----------------------------
delivered copy of the Purchase and Sale Agreement of even date herewith, in form
and substance reasonably acceptable to the Agent, together with evidence that
all of the conditions precedent set forth therein have been satisfied.
<PAGE>
VII.1.9 Opinions of Counsel to Seller and LINC. Favorable
-----------------------------------------
opinions of counsel to the Seller and LINC, substantially in the form of
Exhibits B-1 and B-2.
- ------------ ---
VII.1.10 Monthly Report. A Monthly Report, together with a Portfolio
---------------
Certificate as of the date of such initial Purchase.
VII.1.11 Lockbox Agreement. Lockbox Agreements, duly executed
-----------------
by LINC, Seller, the Agent and the respective Lockbox Banks, with respect to the
Collection Account and any other account to which Collections are sent.
VII.1.12 UCC Filings. Acknowledgment copies of such proper
------------
financing statements (Form UCC-1), filed on or prior to the date of such
Purchase, naming (i) the Originator as debtor/seller, Seller as secured
party/purchaser and Purchaser as assignee, filed in the State of the
Originator's principal place of business and (ii) Seller as debtor/seller and
Purchaser as the secured party/purchaser filed in the State of Seller's
principal place of business and the States with the 10 greatest concentrations
of Obligor locations after giving effect to such Purchase.
VII.1.13 Liquidity Agreement. The Liquidity Agreement, duly executed by the
-------------------
Liquidity Banks, Purchaser and the Liquidity Agent.
VII.1.14 Other. Such other documents as the Agent may
-----
reasonably request.
SECTION VII.2 All Purchases. The making of the initial Purchase and
--------------
each subsequent Purchase, are subject to the following further conditions
precedent that:
VII.2.1 No Termination Event, Etc. (a) No Termination Event or
-------------------------
Unmatured Termination Event has occurred and is continuing or will result from
the making of such Purchase or increase, (b) the representations and warranties
of Seller and Servicer contained in Article VIII are true and correct as of the
------------
date of such Purchase or increase, with the same effect as though made on the
date of such Purchase or increase and (c) after giving effect to such Purchase
or increase, the Capital will not exceed the Purchase Limit and the Capital will
not exceed the Pay-Out Limit.
<PAGE>
VII.2.2 Purchase Request. The Agent and Purchaser shall have
-----------------
received a Purchase Request for such Purchase in accordance with Section 2.3
-----------
(which may be a facsimile transmission of a properly completed and executed
Purchase Request followed on that same day with actual delivery of the original
thereof), together with all items required to be delivered in connection
therewith.
VII.2.3 Facility Termination Date. The Facility Termination Date shall not
--------------------------
have occurred. VII.2.4 Commercial Paper Notes. Purchaser is able to obtain funds
in the commercial paper market pursuant to its Program Documents.
VII.2.5 Reserve Account. The amount in the Reserve Account is
---------------
at least equal to the Required Reserve Amount, after giving effect to such
Purchase.
VII.2.6 Financing Statements. Executed copies of proper
---------------------
Uniform Commercial Code Form UCC-3 termination statements necessary to release
all liens and other Adverse Claims of any Person in any Contract related to such
Purchase or the proceeds thereof granted by any Person.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION VIII.1 Representations and Warranties of Seller. In order to
-----------------------------------------
induce Purchaser and the Agent to enter into this Agreement and, in the case of
Purchaser, to make Purchases hereunder, Seller hereby represents and warrants to
the Agent and Purchaser as follows:
SECTION VIII.2 Organization and Good Standing, Etc. Seller has been
--------------------------------------
duly organized and is validly existing as a corporation in good standing under
the laws of its state of incorporation, with power and authority to own its
properties and to conduct its business as such properties are presently owned
and such business is presently conducted. It is duly licensed or qualified to do
business as a foreign corporation in good standing in the jurisdiction where its
principal place of business and chief executive office are located and in each
other jurisdiction in which the failure to be so licensed or qualified would be
reasonably likely to have a Material Adverse Effect.
<PAGE>
SECTION VIII.3 Power and Authority; Due Authorization. Seller has (a)
----------------------------------------
all necessary power, authority and legal right to (i) execute, deliver and
perform its obligations under this Agreement and each of the other Transaction
Documents to which it is a party, and (ii) to sell Participations on the terms
and subject to the conditions herein provided, and (b) duly authorized by all
necessary corporate action the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and such
sales and the granting of a security interest in the Collateral on the terms and
conditions provided herein.
SECTION VIII.4 No Violation. The consummation of the transactions
-------------
contemplated by this Agreement and the other Transaction Documents and the
fulfillment of the terms hereof will not (a) conflict with, result in any breach
of any of the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, (i) the certificate of incorporation or
by-laws of Seller, or (ii) any indenture, loan agreement, pooling and servicing
agreement, contract purchase agreement, mortgage, deed of trust, or other
agreement or instrument to which Seller is a party or by which it or any of
their its properties is bound, (b) result in or require the creation or
imposition of any Adverse Claim upon any of its properties pursuant to the terms
of any such indenture, loan agreement, pooling and servicing agreement, contract
purchase agreement, mortgage, deed of trust, or other agreement or instrument,
other than the Transaction Documents, or (c) violate any law, rule, or
regulation applicable to Seller or any order of any court or of any federal,
state or foreign regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over Seller or any of its properties, which
violation would be reasonably likely to have a Material Adverse Effect.
SECTION VIII.5 Validity and Binding Nature. This Agreement is, and the
---------------------------
other Transaction Documents to which it is a party when duly executed and
delivered by Seller will be, the legal, valid and binding obligation of Seller,
enforceable in accordance with their respective terms except as enforceability
may be limited by bankruptcy, insolvency, reorganization, or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered in
effect or at law.
SECTION VIII.6 Bulk Sales Act. No transaction contemplated by this
--------------
Agreement or any of the other Transaction Documents requires compliance with, or
will be subject to avoidance under, any bulk sales act or similar law.
SECTION VIII.7 Government Approvals. No authorization or approval or
---------------------
other action by, and no notice to or filing with, any governmental authority or
regulatory body required of Seller for the due execution, delivery or
performance by Seller of any Transaction Document to which it is a party remains
unobtained or unfiled, other than the UCC filings referred to in Section 7.1.12.
---------------
<PAGE>
SECTION VIII.8 Financial Condition.
-------------------
(a Seller's pro forma balance sheet as of the date hereof, certified by
---------
the Financial Officer, copies of which have been furnished to the Agent and
Purchaser, fairly presents Seller's respective assets and liabilities at such
date.
(b Since the date of Seller's incorporation, no event has occurred that
has had, or is reasonably likely to have, a Material Adverse Effect.
SECTION VIII.9 Margin Regulations. Seller is not engaged in the
-------------------
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Participation, directly or indirectly, will be
used for a purpose that violates, or would be inconsistent with, Regulations G,
T, U and X promulgated by the Federal Reserve Board from time to time.
SECTION VIII.10 Quality of Title. Seller owns each Contract, and the
----------------
Contract Assets related thereto, free and clear of any Adverse Claim (other than
any Adverse Claim arising solely as the result of any action taken by the Agent
or Purchaser and any interest in the Equipment by the Obligors under the
Contracts). Seller has a first priority perfected ownership interest in the
Contracts. Seller either owns the Equipment related to the Contracts or has a
valid and perfected first priority security interest therein. No effective
financing statement or other instrument similar in effect covering any Contract,
any Contract Asset or any interest therein is on file in any recording office,
except for financing statements that may be filed (i) in favor of Purchaser,
(ii) in favor of Seller in accordance with the Purchase and Sale Agreement,
(iii) in connection with any Adverse Claim arising solely as the result of any
action taken by Purchaser or the Agent or (iv) in favor of the Originator (or
any party from which it purchased such Contract) in accordance with the
Contract.
SECTION VIII.11 Accuracy of Information. All factual written
--------------------------
information heretofore or contemporaneously furnished by, or on behalf of,
Seller to Purchaser or the Agent for purposes of or in connection with any
Transaction Document or any transaction contemplated hereby or thereby is, and
all other such factual, written information hereafter furnished by, or on behalf
of, Seller to Purchaser or the Agent pursuant to or in connection with any
Transaction Document will be, true and accurate in all material respects on the
date as of which such information is dated or certified.
<PAGE>
SECTION VIII.12 Offices. The principal place of business and chief
-------
executive office of Seller is located at the address referred to in Section 18.3
------------
(or at such other locations, notified to the Agent in accordance with Section
-------
10.1.6, in jurisdictions where all action required thereby has been taken and
- ------
completed).
SECTION VIII.13 Capitalization. The authorized capital stock of Seller
--------------
consists of one thousand (1,000) shares of common stock, $0.01 par value, of
which all are currently issued and outstanding. All of such outstanding shares
are validly issued, fully paid and nonassessable and are owned (beneficially and
of record), free and clear of any Adverse Claim, by LINC.
SECTION VIII.14 Trade Names. Seller does not use any trade name other
-----------
than its actual corporate name.
SECTION VIII.15 Taxes. Seller 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 owing, except any such taxes or charges that 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 VIII.16 Compliance with Applicable Laws, etc. Seller is in
---------------------------------------
compliance with the requirements of all applicable laws, rules, regulations, and
orders of all governmental authorities (including, without limitation, the
Federal Consumer Credit Protection Act, as amended, Regulation Z of the Board of
Governors of the Federal Reserve System, as amended, laws, rules and regulations
relating to usury, truth in lending, fair credit billing, fair credit reporting,
equal credit opportunity, fair debt collection practices and privacy and all
other consumer laws, rules and regulations applicable to the Contracts), a
breach of any of which, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect.
SECTION VIII.17 No Proceedings. Except as described in Schedule 8.17,
--------------- -------------
there is no order, judgment, decree, injunction, stipulation or consent order of
or with any court or other government authority which Seller is named, and there
is no action, suit, arbitration, or regulatory proceeding pending, or, to the
knowledge of Seller, threatened, nor, to the best of Seller's knowledge, is
there any investigation pending or threatened before or by any court, regulatory
body, administrative agency or other tribunal or governmental instrumentality,
against Seller (A) asserting the invalidity of this Agreement or any other
Transaction Document or (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any other Transaction Document or
(C) that, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect.
<PAGE>
SECTION VIII.18 Investment Company Act, Etc. Seller is not 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 a "subsidiary company" of
a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION VIII.19 Eligible Contracts. Each Contract included in the
-------------------
calculation of the Net Portfolio Principal Balance as an Eligible Contract is an
Eligible Contract on such date of calculation.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF SERVICER
SECTION IX.1 Representations and Warranties of Servicer. In order to
-------------------------------------------
induce Purchaser and the Agent to enter into this Agreement and, in the case of
Purchaser, to make Purchases hereunder, Servicer hereby represents and warrants
to the Agent and Purchaser as follows:
SECTION IX.2 Organization and Good Standing, Etc. Servicer has been
--------------------------------------
duly organized and is validly existing as a corporation in good standing under
the laws of its state of incorporation, with power and authority to own its
properties and to conduct its business as such properties are presently owned
and such business is presently conducted. It is duly licensed or qualified to do
business as a foreign corporation in good standing in the jurisdiction where its
principal place of business and chief executive office are located and in each
other jurisdiction in which the failure to be so licensed or qualified would be
reasonably likely to have a Material Adverse Effect.
SECTION IX.3 Power and Authority; Due Authorization. Servicer has (a)
---------------------------------------
all necessary power, authority and legal right to execute, deliver and perform
its obligations under this Agreement and each of the other Transaction Documents
to which it is a party, and (b) duly authorized by all necessary corporate
action the execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party.
<PAGE>
SECTION IX.4 No Violation. The consummation of the transactions
-------------
contemplated by this Agreement and the other Transaction Documents and the
fulfillment of the terms hereof will not (a) conflict with, result in any breach
of any of the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, (i) the certificate of incorporation or
by-laws of Servicer, or (ii) any indenture, loan agreement, pooling and
servicing agreement, contracts purchase agreement, mortgage, deed of trust, or
other agreement or instrument to which Servicer is a party or by which it or any
of its properties is bound, (b) result in or require the creation or imposition
of any Adverse Claim upon any of its properties pursuant to the terms of any
such indenture, loan agreement, pooling and servicing agreement, contracts
purchase agreement, mortgage, deed of trust, or other agreement or instrument,
or (c) violate any law, rule, or regulation applicable to Servicer or any order
of any court or of any federal, state or foreign regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over Servicer
or any of its properties, which in the case of clause (a) (ii), (b) or (c) would
---------------------------
be reasonably likely to have a Material Adverse Effect.
SECTION IX.5 Validity and Binding Nature. This Agreement is, and the
----------------------------
other Transaction Documents to which it is a party when duly executed and
delivered by Servicer will be, the legal, valid and binding obligation of
Servicer, enforceable in accordance with their respective terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in equity or at law.
SECTION IX.6 Government Approvals. No authorization or approval or
---------------------
other action by, and no notice to or filing with, any governmental authority or
regulatory body required of Servicer for the due execution, delivery or
performance by Servicer of any Transaction Document to which it is a party
remains unobtained or unfiled.
SECTION IX.7 Financial Condition.
-------------------
(a Servicer's consolidated balance sheet as of June 30, 1997, and the
related statements of earnings and cash flows of Servicer and its consolidated
Subsidiaries for the six months then ended, certified by Peat Marwick,
independent certified public accountants, and Servicer's consolidated balance
sheet as of September 30, 1997, and the related statements of earnings and cash
flows of Servicer and its consolidated Subsidiaries for the nine months then
ended, certified by Servicer's chief financial officer, copies of which have
been furnished to the Agent and Purchaser, fairly present in all material
respects the consolidated financial condition, business and operations of
Servicer and its consolidated Subsidiaries as at such dates and the consolidated
results of operation of Servicer and its consolidated Subsidiaries for the
periods ended on such dates.
(b Since June 30, 1997 no event has occurred that has had, or is
reasonably likely to have, a Material Adverse Effect.
<PAGE>
SECTION IX.8 Accuracy of Information. All factual written information
-----------------------
heretofore or contemporaneously furnished by, or on behalf of, Servicer to
Purchaser or the Agent for purposes of or in connection with any Transaction
Document or any transaction contemplated hereby or thereby is, and all other
such factual, written information hereafter furnished by Servicer, or on behalf
of, to Purchaser or the Agent pursuant to or in connection with any Transaction
Document will be, true and accurate in every material respect on the date as of
which such information is dated or certified. No information contained in any
report or certificate delivered pursuant to this Agreement or any other
Transaction Document shall be incomplete by omitting to state a material fact or
any fact necessary to make the statements contained therein not misleading on
the date as of which such information is dated or certified.
SECTION IX.9 Offices. The principal place of business and chief
-------
executive office of Servicer is located at the address referred to in Section
-------
18.3 (or at such other locations, notified to the Agent in accordance with
- ----
Section 11.1.6, in jurisdictions where all action required thereby has been
- --------------
taken and completed).
SECTION IX.10 Taxes. Servicer 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 owing, except any such taxes or charges that 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 IX.11 Compliance with Applicable Laws. Servicer is in
-----------------------------------
compliance with the requirements of all applicable laws, rules, regulations, and
orders of all governmental authorities (including, without limitation, the
Federal Consumer Credit Protection Act, as amended, Regulation Z of the Board of
Governors of the Federal Reserve System, as amended, laws, rules and regulations
relating to usury, truth in lending, fair credit billing, fair credit reporting,
equal credit opportunity, fair debt collection practices and privacy and all
other consumer laws, rules and regulations applicable to the Contracts), a
breach of any of which, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect.
<PAGE>
SECTION IX.12 No Proceedings. Except as described in Schedule 9.12,
--------------- ---------------
there is no order, judgment, decree, injunction, stipulation or consent order of
or with any court or other government authority to which Servicer is named, and
there is no action, suit, arbitration, or regulatory proceeding pending, or, to
the knowledge of Servicer, threatened, nor, to the best of Servicer's knowledge,
is there any investigation pending or threatened before or by any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality, against Servicer (A) asserting the invalidity of this Agreement
or any other Transaction Document or (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or any other Transaction
Document or (C) that, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect.
SECTION IX.13 Investment Company Act, Etc. Servicer is not 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 a "subsidiary company" of
a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION IX.14 Software Programs. Servicer owns, or has valid and
------------------
existing licenses of or subcontracts with respect to, all software programs
sufficient to service the Portfolio and produce the Monthly Reports and
Portfolio Certificates, of which software, licenses and subcontracts is either
assignable to a successor Servicer or is readily available without undue cost.
ARTICLE X
COVENANTS OF SELLER
SECTION X.1 Affirmative Covenants of Seller. From the date hereof until
-------------------------------
the first day following the Facility Termination Date on which all
Participations have been reduced to zero and all Obligations shall have been
finally and fully paid and performed (the "Final Payoff Date"), unless Purchaser
-----------------
and the Agent shall otherwise consent in writing Seller hereby covenants and
agrees with Purchaser and the Agent that it shall:
X.1.1 Compliance with Laws, Etc. Comply in all material
----------------------------
respects with all applicable laws, rules, regulations and orders of all
governmental authorities (including those which relate to the Contracts), except
to the extent the failure to so comply would not have a Material Adverse Effect.
X.1.2 Preservation of Corporate Existence. Preserve and
--------------------------------------
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in the jurisdiction where its principal place
of business and its chief executive office are located and in each other
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualifications would have a Material Adverse Effect.
<PAGE>
X.1.3 Audits. (i) At any time and from time to time during
------
regular business hours upon reasonable prior notice (provided that if a
Termination Event or Unmatured Termination Event shall have occurred and be
continuing, no notice shall be required), permit the Agent, or its agents or
representatives (A) to examine and make copies of and abstracts from all books,
records and documents (including, without limitation, computer tapes and disks)
in possession or under the control of Seller relating to the Contracts, and (B)
to visit the offices and properties of Seller for the purpose of examining such
materials described in clause (i)(A) next above, and to discuss matters relating
------------
to the Contracts or the performance hereunder with any of the officers or
employees of Seller having knowledge of such matters, and (ii) without limiting
the foregoing clause (i) above, from time to time on request of the Agent,
----------
permit certified public accountants or other auditors reasonably acceptable to
the Agent to conduct, at Seller's expense (provided that, so long as no
Termination Event or Unmatured Termination Event has occurred and is continuing,
Seller shall only be responsible for the expense of one such audit in any
calendar year), a review of Seller's books and records with respect to the
Contracts, and all other documents related thereto.
X.1.4 Keeping of Records and Books of Account. Keep books and
---------------------------------------
records that accurately reflect in all material respects Seller's business
affairs and transactions.
X.1.5 Performance and Compliance with Contracts. Timely and
------------------------------------------
fully perform and comply with all provisions, covenants and other promises
required to be observed by it under the Contracts and all other agreements
related to such Contracts, unless Seller is disputing the applicability of any
such provision, covenant or promise in good faith and except to the extent that
failure to comply therewith would not have a Material Adverse Effect.
X.1.6 Location of Records. Keep its principal place of
---------------------
business and chief executive office at the address referred to in Section 8.12
------------
or, upon 30 days' prior written notice to the Agent, at such other locations in
jurisdictions in the continental United States where all action required to
maintain the Purchaser's perfected ownership and security interest pursuant to
Section 17.1 shall have been taken and completed or shall be so taken and
- -------------
completed prior to the loss of any perfection thereof arising from such
relocation.
<PAGE>
X.1.7 Separate Corporate Existence. Seller hereby acknowledges
----------------------------
that Purchaser and the Agent are entering into the transactions contemplated by
this Agreement and the other Transaction Documents in reliance upon Seller's
identity as a legal entity separate from LINC. Therefore, from and after the
date hereof, Seller shall take all reasonable steps specifically required by
this Agreement to continue Seller's identity as a separate legal entity and to
make it apparent to third Persons that Seller is an entity with assets and
liabilities distinct from those of LINC and any other Person, and is not a
division of LINC or any other Person. Without limiting the generality of the
foregoing, Seller shall take such actions as shall be required in order that:
(a Seller will be a limited purpose corporation whose primary
activities are restricted in its certificate of incorporation to
acquiring retail installment contracts and leases, and the related
equipment from the Originator, entering into this Agreement to finance
such purchases and conducting such other activities as it deems
necessary or appropriate to carry out its primary activities;
(b Not less than one member of Seller's Board of Directors
(the "Independent Director") shall be an individual who is not a
---------------------
direct, indirect or beneficial stockholder, officer, director,
employee, customer or supplier of LINC or any of its Affiliates (other
than Seller and other special purpose, "bankruptcy remote"
corporations). The Certificate of Incorporation of Seller shall provide
that (i) Seller's Board of Directors shall not approve, or take any
other action to cause the filing of, a voluntary bankruptcy petition or
dissolution proceeding with respect to Seller unless all of the Board
of Director's, including the Independent Director, shall approve the
taking of such action in writing prior to the taking of such action and
(ii) such provision cannot be amended without the prior written consent
of the Independent Director;
(c The Independent Director shall not at any time serve
as a trustee in bankruptcy for Seller, LINC or any Affiliate thereof;
(d Any employee, consultant or agent of Seller will be
compensated from funds of Seller for services provided to Seller.
Seller will engage no agents other than a Servicer for the Contracts,
which Servicer will be fully compensated for its services to Seller by
payment of the Servicing Fee, and attorneys and accountants, who will
be compensated from funds of Seller, and other than LINC pursuant to
the Operating Agreement, provided that LINC shall pay the attorneys'
--------
fees and disbursements incurred in connection with the initial closing
of the transactions contemplated hereby;
<PAGE>
(e Seller will not incur any material indirect or overhead
expenses for items shared between Seller and LINC (or any other
Affiliate thereof), except as set forth in the Operating Agreement. To
the extent, if any, that Seller and LINC (or any other Affiliate
thereof) share items of expenses such as legal, auditing and other
professional services, such expenses will be allocated to the extent
practical on the basis of actual use or the value of services rendered,
and otherwise on a basis reasonably related to the actual use or the
value of services rendered, it being understood that LINC shall pay all
expenses relating to the preparation, negotiation, execution and
delivery of the Transaction Documents, including, without limitation,
legal, commitment, agency and other up-front fees;
(f Seller's operating expenses will not be paid by LINC or any
other Affiliate thereof, except as permitted under the terms of this
Agreement or otherwise consented to by the Agent and Purchaser;
(g Seller will have its own stationery;
(h Seller's books and records will be maintained separately from those of
LINC and any other Affiliate thereof;
(i All audited financial statements of LINC or any Affiliate
thereof that are consolidated to include Seller will contain detailed
notes clearly stating that (A) all of Seller's assets are owned by
Seller, and (B) Seller is a separate corporate entity with creditors
who have received ownership and/or security interests in Seller's
assets;
(j Seller's assets will be maintained in a manner that facilitates their
identification and segregation from those of LINC or any Affiliate thereof;
(k Seller will strictly observe corporate formalities in its
dealings with LINC or any Affiliate thereof, and funds or other assets
of Seller will not be commingled with those of LINC or any Affiliate
thereof (other than in connection with LINC's role as Servicer to the
extent permitted hereby). Seller shall not maintain joint bank accounts
or other depository accounts to which LINC or any Affiliate thereof has
independent access, except as Servicer hereunder. None of Seller's
funds will at any time be pooled with any funds of LINC or any
Affiliate thereof, except for Collections to the extent permitted by
this Agreement;
<PAGE>
(l Seller shall pay to LINC (or any Affiliate thereof) the
marginal increase (or, in the absence of such increase, the market
amount of its portion of) in the premium payable with respect to any
insurance policy that covers Seller and LINC (or any Affiliate
thereof), but Seller shall not, directly or indirectly, be named or
enter into an agreement to be named, as a direct or contingent
beneficiary or loss payee under any such insurance policy with respect
to any amounts payable due to occurrences or events related to LINC (or
any Affiliate thereof); and
(m Seller will maintain arm's-length relationships with LINC
(and any Affiliate thereof). Any Person, including Seller's Affiliates,
that renders or otherwise furnishes services to Seller will be
compensated by Seller at market rates for such services it renders or
otherwise furnishes to Seller. Neither Seller nor LINC will be or will
hold itself out to be responsible for the debts of the other or the
decisions or actions respecting the daily business and affairs of the
other.
X.1.8 Reporting Requirements of Seller. Until the Final Payout Date, Seller
--------------------------------
will furnish to the Agent and Purchaser:
(a Quarterly Financial Statements. As soon as available and in
------------------------------
any event within 45 days after the end of each of the first three
Fiscal Quarters of each fiscal year of Seller, (i) copies of the
unaudited balance sheet of Seller, as at the end of such Fiscal
Quarter, together with unaudited statements of earnings for such Fiscal
Quarter and for the period commencing at the end of the previous Fiscal
Year and ending with the end of such Fiscal Quarter, certified by the
chief financial officer, treasurer, assistant treasurer or chief
accounting officer (such officer being herein called the "Financial
---------
Officer") of Seller and (ii) a letter from the Financial Officer of
-------
Seller certifying whether a Termination Event or an Unmatured
Termination Event has occurred and is continuing;
(b Annual Financial Statements. As soon as available and in
-----------------------------
any event within 90 days after the end of each Fiscal Year of each of
Seller, (i) a copy of the unaudited balance sheet of Seller, as at the
end of such Fiscal Year together with the related statements of
earnings and cash flows for such Fiscal Year, certified by the
Financial Officer of Seller, and (ii) a letter from the Financial
Officer of Seller certifying whether a Termination Event or an
Unmatured Termination Event has occurred and is continuing;
<PAGE>
(c ERISA. Promptly after receiving notice of any Reportable Event (as
-----
defined in Title IV of ERISA) with respect to Seller (or any Affiliate thereof),
a copy of such notice;
(d Proceedings. As soon as possible and in any event within
-----------
three Business Days after Seller receives notice thereof, any
settlement of, material judgment (including a material judgment with
respect to the liability phase of a bifurcated trial) in or
commencement of any labor controversy, litigation, action or proceeding
of the type described in Section 8.17, notice thereof and, upon the
-------------
Agent's reasonable request, copies of all non-confidential or
non-privileged documentation relating thereto;
(e Litigation. As soon as possible, and in any event within
three days of Seller's knowledge thereof, notice of (i) any litigation,
investigation or proceeding of the type described in Schedule 8.17 not
previously disclosed to the Agent, and (ii) any material adverse
development in any previously disclosed litigation, investigation or
proceeding;
(f Notice of Material Events. Promptly after becoming aware thereof, notice
-------------------------
of any other event or circumstance that, in the reasonable judgment of Seller,
is likely to have a Material Adverse Effect;
(g Termination Events. As soon as possible, and in any event
-------------------
within three Business Days after the occurrence of each Termination
Event or Unmatured Termination Event, a written statement of the
Financial Officer of Seller setting forth details of such event and the
action that Seller proposes to take with respect thereto; and
(h Other. Promptly, from time to time, such other information,
-----
documents, records or reports respecting the Collateral, the Contracts,
or the condition or operations, financial or otherwise, of Seller as
the Agent may from time to time reasonably request in order to protect
the interests of the Agent or Purchaser under or as contemplated by
this Agreement or the other Transaction Documents.
X.1.9 Use of Proceeds. Seller shall use the proceeds of the
----------------
Purchases made hereunder solely to fund the purchase price for the Contracts
purchased from LINC pursuant to the Purchase and Sale Agreement.
X.1.10 Collections.
-----------
<PAGE>
(a Promptly (and in any event within two Business Days of
receipt) remit to the Collection Account all Collections, if any,
received directly by Seller from the Obligors; and
(b Instruct all Obligors to cause all Collections of Contracts
to be deposited directly to a lock-box that is the subject of a Lockbox
Agreement.
SECTION X.2 Negative Covenants of Seller. From the date hereof until
------------------------------
the Final Payout Date, unless Purchaser and the Agent shall otherwise consent in
writing, Seller shall perform its Obligations under this Section 10.2.
X.2.1 Sales, Liens, Etc. Except pursuant to, or as
---------------------
contemplated by, the Transaction Documents, Seller shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist voluntarily or involuntarily any Adverse Claims upon or with respect to
any of its assets, including, without limitation, the Portfolio, any interest
therein or any right to receive any amount from or in respect thereof.
X.2.2 Mergers, Acquisitions, Sales, Subsidiaries, etc. Seller shall not:
-----------------------------------------------
(i be a party to any merger or consolidation, or
directly or indirectly purchase or otherwise acquire all or
substantially all of the assets or any stock of any class of,
or any partnership or joint venture interest in, any other
Person, or sell, transfer, assign, convey or lease any of its
property and assets (or any interest therein) other than
pursuant to, or as contemplated by, this Agreement;
(ii make, incur or suffer to exist an investment in,
equity contribution to, loan or advance to, or payment
obligation in respect of the deferred purchase price of
property from, any other Person (other than Permitted
Investments); or
(iii create any direct or indirect Subsidiary or
otherwise acquire direct or indirect ownership of any equity
interests in any other Person.
X.2.3 Restricted Payments.
-------------------
<PAGE>
(a Seller shall not (i) declare, pay or make any Dividend
(other than dividends or distributions payable in its common stock or
split-ups or reclassifications of its stock into additional or other
shares of its common stock) or (ii) apply any of its funds, property or
assets to the purchase, redemption, sinking fund or other retirement
of, any shares of any class of capital stock (now or hereafter
outstanding) of Seller, or warrants, options or other rights with
respect to any shares of any class of capital stock (now or hereafter
outstanding) of Seller or (iii) make any loan or other advance to any
shareholder; and
(b Seller will not make any deposit for any of the foregoing
purposes; except that Seller may declare, pay or make Dividends if,
immediately before and after giving effect to any proposed action
described above,
(i) no Termination Event or Unmatured Termination Event
shall have occurred and be continuing and(ii) the
Tangible Net Worth of Seller is not less than $1,000,000.
X.2.4 Amendments to Certain Documents.
-------------------------------
(a) Seller shall not amend, supplement, amend and restate, or
otherwise modify or agree to any waiver of any provision contained in
any Transaction Document or Seller's certificate of incorporation or
by-laws, except (i) in accordance with the terms of such document,
instrument or agreement and (ii) with the prior written consent of the
Agent and Purchaser; and
(b) Except for the Transaction Documents, Seller shall not
enter into, execute and deliver, or otherwise become bound by any
agreement, instrument, document or other arrangement that restricts its
right to amend, supplement, amend and restate or otherwise modify, or
to extend or renew, or to waive any right under, this Agreement or any
other Transaction Document.
X.2.5 Incurrence of Indebtedness. Seller shall not create,
----------------------------
incur or permit to exist any Indebtedness, except for indebtedness and
liabilities incurred pursuant to the Transaction Documents (including Interest
Rate Swaps) and normal trade payables incurred in the ordinary course of its
business that do not exceed $4,500 in the aggregate at any time.
X.2.6 Deposits to the Collection Account. Seller shall not
------------------------------------
deposit or otherwise credit, or cause or permit to be so deposited or credited
by any Person, to the Collection Account cash or cash proceeds other than
Collections with respect to the Contracts or proceeds of the Collateral and
payments under Interest Rate Swaps.
X.2.7 Change in Business Policy. Seller shall not make any
--------------------------
change in the character of its business which would impair in any material
respect the collectibility of any Contract.
<PAGE>
X.2.8 Change in Payment Instructions to Obligors. Seller shall
------------------------------------------
not make any change in its instructions to Obligors regarding Collections or
payments to be made to a lock-box that is the subject of a Lockbox Agreement,
unless (i) the Agent shall have received notice of such change and (ii) the
Agent previously shall have consented in writing to such change. Seller shall
not add or terminate any bank as a Lockbox Bank or make any change in its
instructions regarding payments to be made by the Lockbox Bank, unless (A) the
Agent shall have received duly executed counterparts of a Lockbox Agreement with
each new Lockbox Bank and copies of such instructions (which shall be in form
and substance acceptable to the Agent) and (B) the Agent previously shall have
consented in writing to such termination or change.
X.2.9 Amendments to Contracts. Seller shall not amend, modify
-----------------------
or waive any provision of any Contract except as permitted by Section 13.2(b).
---------------
ARTICLE XI
COVENANTS OF SERVICER
SECTION XI.1 Affirmative Covenants of Servicer. From the date hereof
----------------------------------
until the Final Payout Date, unless Purchaser and the Agent otherwise consent in
writing, Servicer hereby covenants and agrees with Purchaser and the Agent that
it shall:
XI.1.1 Compliance with Laws, Etc. Comply in all material
----------------------------
respects with all applicable laws, rules, regulations and orders of all
governmental authorities (including those which relate to the Contracts) except
to the extent the failure to so comply would not have a Material Adverse Effect.
XI.1.2 Preservation of Corporate Existence. Preserve and
--------------------------------------
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in the jurisdiction where its principal place
of business and its chief executive office are located and in each other
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualifications would have a Material Adverse Effect.
<PAGE>
XI.1.3 Audits. (i) At any time and from time to time during
------
regular business hours upon reasonable prior notice (provided that if a
Termination Event or Unmatured Termination Event shall have occurred and be
continuing, no notice shall be required), permit the Agent, or its agents or
representatives (A) to examine and make copies of and abstracts from all books,
records and documents (including, without limitation, computer tapes and disks)
in possession or under the control of Servicer relating to the Contracts, and
(B) to visit the offices and properties of Servicer for the purpose of examining
such materials described in clause (i)(A) next above, and to discuss matters
-------------
relating to the Contracts or the performance hereunder with any of the officers
or employees of Servicer having knowledge of such matters, and (ii) without
limiting the foregoing clause (i) above, from time to time on request of the
----------
Agent, permit certified public accountants or other auditors reasonably
acceptable to the Agent to conduct, at Servicer's expense (provided that, so
long as no Termination Event or Unmatured Termination Event has occurred and is
continuing, Servicer shall only be responsible for the expense of one such audit
in any calendar year), a review of Servicer's books and records with respect to
the Contracts and all other documents related thereto.
XI.1.4 Keeping of Records and Books of Account. Keep books and
---------------------------------------
records that accurately reflect in all material respects Servicer's business
affairs and transactions, and maintain and implement administrative and
operating procedures (including, without limitation, an ability to re-create
records evidencing the Contracts in the event of the destruction of the
originals thereof) and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Contracts.
XI.1.5 Performance and Compliance with Contracts. Timely and
-----------------------------------------
fully perform and comply with all material provisions, covenants and other
promises required to be observed by it under the Contracts and all other
agreements related to such Contracts, unless Servicer is disputing the
applicability of any such provision, covenant or promise in good faith and
except to the extent that the failure to comply therewith would not have a
Material Adverse Effect.
XI.1.6 Location of Records. Keep its principal place of
---------------------
business and chief executive office at the address referred to in Section 9.9
-----------
or, upon 30 days' prior written notice to the Agent, at such other locations in
jurisdictions in the continental United States where all action required to
maintain the Purchaser's perfected ownership and security interest pursuant to
Section 17.1 shall have been taken and completed or shall be so taken and
- -------------
completed prior to the loss of any perfection thereof arising from such
relocation.
XI.1.7 Credit Policy. Comply in all material respects with the Credit
--------------
Policy in regard to each Contract.
XI.1.8 Reporting Requirements of Servicer. Furnish to the Agent and
-------------------------------------
Purchaser:
<PAGE>
(a) Quarterly Financial Statements. As soon as available and
-------------------------------
in any event within 45 days after the end of each of the first three
Fiscal Quarters of each fiscal year of Servicer, (i) copies of the
unaudited consolidated balance sheet of Servicer and its consolidated
Subsidiaries, as at the end of such Fiscal Quarter, together with
unaudited statements of earnings for such Fiscal Quarter and for the
period commencing at the end of the previous Fiscal Year and ending
with the end of such Fiscal Quarter, certified by a Financial Officer
of Servicer and (ii) a letter from the Financial Officer of Servicer
certifying that neither a Termination Event nor an Unmatured
Termination Event nor a Servicer Termination Event has occurred and is
continuing;
(b) Annual Financial Statements. As soon as available and in
----------------------------
any event within 90 days after the end of each Fiscal Year of Servicer,
a copy of the annual audit report for such Fiscal Year of Servicer,
including a copy of the consolidated balance sheet of Servicer and its
consolidated Subsidiaries, as at the end of such Fiscal Year together
with the related statements of earnings and cash flows for such Fiscal
Year, certified by Peat Marwick or other independent public accountants
reasonably acceptable to the Agent and Purchaser, and a certificate
from such accountant stating that, relying (without independent
verification) upon internal management reports, they have reviewed and
independently computed for each Fiscal Quarter during such Fiscal Year,
compliance with the Pay Out Amount Limit as of the last Business Day in
the final calendar month in such Fiscal Year and as of the last
Business Day in one randomly selected calendar month in such Fiscal
Year and have compared their calculations of the Net Portfolio
Principal Balance with the corresponding Portfolio Certificates and
stating whether such computations indicate that such Portfolio
Certificates accurately reflected the Net Portfolio Principal Balance
as of the respective applicable dates;
(c) Monthly Reports. On or before the day that is two Business
---------------
Days prior to each Settlement Date, Servicer shall prepare and deliver
to the Agent and Purchaser a report (a "Monthly Report"), substantially
--------------
in the form of the form of monthly report approved by the Purchaser and
Agent, together with a certificate substantially in the form of Exhibit
-------
C (a "Portfolio Certificate"), setting forth a calculation of the Net
----------------------
Portfolio Principal Balance (together with such other information set
forth therein) as of such Month-End Date, signed by a Financial Officer
of Servicer;
<PAGE>
(d) Weekly Calculation. On or before the Friday of each week
-------------------
(or if such day is not a Business Day, the immediately preceding
Business Day), Servicer shall prepare and deliver to the Agent and
Purchaser a calculation to determine whether a Hedge Trigger Event has
occurred;
(e) ERISA. Promptly after receiving notice of any Reportable
-----
Event (as defined in Title IV of ERISA) with respect to Servicer (or
any Affiliate thereof), a copy of such notice;
(f) Proceedings. As soon as possible and in any event within
-----------
three Business Days after Servicer receives notice thereof, any
settlement of, material judgment (including a material judgment with
respect to the liability phase of a bifurcated trial) in or
commencement of any labor controversy, litigation, action or proceeding
of the type described in Section 9.12, notice thereof and, upon the
-------------
Agent's reasonable request, copies of all non-confidential or
non-privileged documentation relating thereto;
(g) Litigation. As soon as possible, and in any event within
----------
three days of Servicer's knowledge thereof, notice of (i) any
litigation, investigation or proceeding of the type described in
Schedule 9.12 not previously disclosed to the Agent, and (ii) any
--------------
material adverse development in any previously disclosed litigation,
investigation or proceeding;
(h) SEC and Other Reports. Within 30 days after the sending or
---------------------
filing thereof, copies of all reports that Servicer or any of its
Subsidiaries is required (by any regulatory agency) to send to its
securityholders generally, and all reports and registration statements
that Servicer or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange;
(i) Notice of Material Events. Promptly after becoming aware
--------------------------
thereof, notice of any Hedge Trigger Event and any event or
circumstance that, in the reasonable judgment of Servicer, is likely to
have a Material Adverse Effect;
(j) Termination Events. As soon as possible, and in any event
------------------
within three Business Days after the occurrence of each Servicer
Termination Event, Termination Event or Unmatured Termination Event, a
written statement of the Financial Officer of Servicer setting forth
details of such event and the action that Servicer proposes to take
with respect thereto; and
<PAGE>
(k) Other. Promptly, from time to time, such other
-----
information, documents, records or reports respecting the Collateral,
the Contracts, or the condition or operations, financial or otherwise,
of Servicer as the Agent may from time to time reasonably request in
order to protect the interests of the Agent or Purchaser under or as
contemplated by this Agreement or the other Transaction Documents.
XI.1.9 Collections.
-----------
(a) Promptly (and in any event within two Business Days of
receipt) remit to the Collection Account all Collections, if any,
received directly by Servicer from the Obligors; and
(b) Instruct all Obligors to cause all Collections of
Contracts to be deposited directly to a lock-box that is the subject of
a Lockbox Agreement.
SECTION XI.2 Negative Covenants of Servicer. From the date hereof until
------------------------------
the Final Payout Date, unless Purchaser and the Agent shall otherwise consent in
writing, Servicer shall perform its Obligations under this Section 11.2.
------------
XI.2.1 Mergers, Acquisitions, Sales, Subsidiaries, etc.
------------------------------------------------------
Servicer shall not be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire all or substantially all of the assets
or any stock of any class of, or any partnership or joint venture interest in,
any other Person, or sell, transfer, assign, convey or lease any of its property
and assets (or any interest therein) other than pursuant to, or as contemplated
by, the Purchase and Sale Agreement, unless (i) Servicer is the surviving
corporation, or the surviving entity as a Person organized under the
jurisdiction of a state of the United States and expressly assumes all of
Servicer's obligations under this Agreement and the other Transaction Documents
pursuant to an agreement reasonably satisfactory to the Agent, (ii) the tangible
net worth of survivor is not less than the tangible net worth of Servicer
immediately prior to such transaction, (iii) Servicer remains in substantially
the same business that it was in on the date hereof, (iv) no Termination Event
or Servicer Termination Event has occurred and is continuing, or would result
therefrom, and (v) the Agent reasonably determines that such transaction will
not have a Material Adverse Effect.
<PAGE>
XI.2.2 Deposits to the Collection Account. Servicer shall not
----------------------------------
deposit or otherwise credit, or cause or permit to be so deposited or credited
by any Person, to the Collection Account cash or cash proceeds other than
Collections with respect to the Contracts, proceeds of the Collateral and
payments under Interest Rate Swaps.
XI.2.3 Change in Business or Credit Policy. Servicer shall not
-----------------------------------
make any change in the character of its business or in the Credit Policy which
would impair in any material respect the collectibility of a significant portion
of the Contracts.
XI.2.4 Change in Payment Instructions to Obligors. Servicer
--------------------------------------------
shall not make any change in its instructions to Obligors regarding Collections
or payments to be made to a lock-box that is the subject of a Lockbox Agreement,
unless (i) the Agent shall have received notice of such change and (ii) the
Agent previously shall have consented in writing to such change. Servicer shall
not add or terminate any bank as the Lockbox Bank or make any change in its
instructions regarding payments to be made by the Lockbox Bank, unless (A) the
Agent shall have received duly executed counterparts of a Lockbox Agreement with
each new Lockbox Bank and copies of such instructions (which shall be in form
and substance acceptable to the Agent) and (B) the Agent previously shall have
consented in writing to such termination or change.
XI.2.5 Amendment of Contracts. Servicer shall not amend,
------------------------
modify or waive any provision of any Contract except in accordance with Section
-------
13.2(b).
- -------
ARTICLE XII
TERMINATION EVENTS AND THEIR EFFECT; REMEDIES
SECTION XII.1 Termination Events. Each of the following shall constitute a
-------------------
Termination Event under this Agreement:
XII.1.1 Non-Payment, Etc. Seller shall fail to make any payment or deposit
-----------
to be made by it hereunder when due.
XII.1.2 Non-Compliance with Other Provisions. Seller shall
--------------------------------------
fail to perform or observe in any material respect any other term, covenant or
agreement contained in this Agreement, or any other Transaction Document on its
part to be performed or observed and any such failure shall remain unremedied
for ten Business Days after knowledge thereof or after written notice thereof
shall have been given by the Agent or Purchaser to Seller.
<PAGE>
XII.1.3 Breach of Representations and Warranties. Any
----------------------------------------------
representation or warranty of Seller made or deemed to have been made hereunder
or in any other Transaction Document or any other writing or certificate
furnished by or on behalf of Seller to the Agent or Purchaser for purposes of or
in connection with this Agreement or any other Transaction Document (including
any certificates delivered pursuant to Section 11.1.8(a) or (b) and any Monthly
------------------------
Report or Portfolio Certificate delivered pursuant to Section 11.1.8(c)) shall
-----------------
prove to have been false or incorrect in any material respect when made or
deemed to have been made and, if such circumstance is capable of cure, it shall
continue to be incorrect for more than ten Business Days after knowledge thereof
or written notice shall have been given by the Agent or Purchaser to Seller;
provided that if such representation or warranty relates to a Contract that is
- --------
repurchased by Seller in accordance with this Agreement, then such inaccuracy
shall not constitute a Termination Event.
XII.1.4 Non-Payment of Other Indebtedness, etc. A default
------------------------------------------
shall occur in the payment of principal when due of any Indebtedness of LINC or
any Subsidiary thereof having a principal amount in excess of $1,000,000, and
such default continues after the expiration of any applicable grace period, or
any other default shall occur with respect to such Indebtedness and shall
continue after the applicable grace period, if any, if the effect of such
default is to cause or permit, if unremedied, uncured or unwaived, the holder or
trustee of such indebtedness to accelerate the maturity of any such indebtedness
(including by way of any consensual re-scheduling of principal payments), or any
such Indebtedness shall be declared to be due and payable or required to be
prepaid (other than by regularly scheduled required prepayments) prior to the
stated maturity thereof.
XII.1.5 Bankruptcy. An Event of Bankruptcy shall have occurred
----------
and remained continuing with respect to Seller.
XII.1.6 Purchase and Sale Termination Event. A Purchase and Sale
-----------------------------------------
Termination Event shall have occurred and be continuing.
XII.1.7 Ratio. The average of the Delinquency Ratios for any
-----
three consecutive calendar months exceeds 8%.
XII.1.8 Material Adverse Effect. The warranty in Section 8.8(b) or 9.7(b)
------------------------ ------------------------
shall not be true at any time.
XII.1.9 Tax Liens; ERISA Liens. The Internal Revenue Service
-----------------------
shall file notice of a lien pursuant to Section 6323 of the Internal Revenue
Code with regard to any of the assets of Seller, and such lien shall not have
been released within 5 days, or the Pension Benefit Guaranty Corporation shall
file notice of a lien pursuant to Section 4068 of ERISA with regard to any of
the assets of Seller.
<PAGE>
XII.1.10 Validity of Transaction Documents. (a) Any
---------------------------------------
Transaction Document, or any lien or security interest granted thereunder, shall
(except in accordance with its terms), in whole or in part, terminate, cease to
be effective or cease to be the legally valid, binding and enforceable
obligation of Seller or LINC, (b) Seller or any other party to the Transaction
Documents shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability, or (c) any
Participation, or any security interest securing any Obligation, shall, in whole
or in part, cease to be a perfected first priority ownership or security
interest; provided that if any such cessation relates to a Contract repurchased
by Seller in accordance with this Agreement, such event shall not result in a
Termination Event.
XII.1.11 Change in Control. A Change in Control shall have
------------------
occurred.
XII.1.12 Servicer Termination Event. A Servicer Termination Event shall
----------------------------
occur and be continuing.
XII.1.13 Pay-Out Limit. The Capital exceeds the Pay-Out Limit.
-------------
SECTION XII.2 Effect of Termination Event.
---------------------------
(a) Optional Termination. Upon the occurrence of a Termination
--------------------
Event (other than a Termination Event described in Section 12.1.5), the
--------------
Agent may, and at the request of Purchaser shall, by notice to Seller,
declare the Facility Termination Date to have occurred.
(b) Automatic Termination. Upon the occurrence of a
-----------------------
Termination Event described in Section 12.1.5, the Facility Termination
--------------
Date shall be deemed to have occurred automatically upon the occurrence
of such event.
(c) Additional Remedies. Upon the occurrence of a Termination
-------------------
Event, the Agent and Purchaser, in addition to all other rights and
remedies under this Agreement or otherwise, shall have all other rights
and remedies provided under the UCC and other applicable laws, which
rights shall be cumulative. Without limiting the foregoing or the
general applicability of Article XII hereof, (i) the occurrence of a
-----------
Termination Event shall not deny Purchaser any remedy in addition to
termination of the Facility to which Purchaser may be otherwise
appropriately entitled, whether at law or in equity, and (ii) Purchaser
may elect to assign any Participation owned by Purchaser to an assignee
following the occurrence of any Termination Event.
<PAGE>
ARTICLE XIII
THE SERVICER
SECTION XIII.1 LINC as Initial Servicer. (a) Initial Servicer. The
------------------------- -----------------
servicing, administering and collection of the Contracts shall be conducted by
the Person designated from time to time as servicer hereunder (the "Servicer").
-------------
Until the Agent gives notice to the Servicer (the "Successor Notice"), which
-----------------
notice may be given at any time by the Agent after and during the continuation
of a Servicer Termination Event, LINC is hereby designated as, and hereby agrees
to perform the duties and obligations of, the Servicer pursuant to the terms
hereof and the other Transaction Documents.
(b) Successor Notice. Upon LINC's receipt of a Successor
-----------------
Notice, LINC agrees that it will terminate its activities as Servicer hereunder
in a manner so as to facilitate the transition of the performance of such
activities to the new Servicer, and the Agent (or its designee) shall assume
each and all of LINC's obligations hereunder to service and administer the
Contracts, on the terms and subject to the conditions herein set forth and LINC
shall use its reasonable efforts to assist the Agent (or its designee) in
assuming such obligations.
(c) Subcontracts. Servicer, with the prior consent of the
------------
Agent, may subcontract with any other Person for servicing, administering or
collecting the Collateral, provided that Servicer shall remain liable for the
--------
performance of the duties and obligations of Servicer pursuant to the terms
hereof and that such subcontract may be terminated upon the appointment of any
successor Servicer hereunder.
SECTION XIII.2 Duties of Servicer. (a) Appointment; General Duties.
------------------ ----------- ---------------
Each of Seller, Purchaser and the Agent hereby appoints as its agent, the
Servicer, as from time to time designated pursuant to Section 13.1, to enforce
------------
its rights and interests in and under the Contracts. The Servicer shall take or
cause to be taken all such actions as may be necessary or advisable to collect
each Contract from time to time, all in accordance in all material respects with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance in all material respects with the Credit Policy.
<PAGE>
(b) Modification and Early Termination of Contracts. So long
------------------------------------------------
as no Servicer Termination Event shall have occurred and be continuing, LINC,
while it is Servicer, may, in accordance with the Credit Policy, (i) extend the
maturity or adjust the Outstanding Principal Balance of any Defaulted Contract
as LINC may determine to be appropriate to maximize Collections thereof
(provided that such extension or adjustment shall not affect the categorization
--------
of such Contract as a Defaulted Contract); and (ii) adjust the Outstanding
Principal Balance of any Contract to reflect the reductions or cancellations
described in the first clause of Section 4.5. So long as no Servicer Termination
-----------
event shall have occurred and be continuing, Servicer may permit the early
termination of any Contract at the request of the Obligor thereof if Servicer
either (i) remits, or causes Obligor to remit, an amount equal to the
Outstanding Principal Balance thereof to the Collection Amount or (ii)
substitutes another Contract that is an Eligible Contract on the date of such
substitution with an Outstanding Principal Balance at least equal to the
Outstanding Principal Balance of such terminated Contract.
(c) Documents and Records. Seller shall deliver to the
-----------------------
Servicer, and the Servicer shall hold in trust, as custodian and bailee, for
Seller and Purchaser in accordance with their respective interests, all
documents, instruments and records (including, without limitation, computer
tapes or disks) that evidence or relate to the Contracts. If any payment due
under a Contract is evidenced by an instrument, Seller and the Servicer agree to
promptly deliver the original thereof, properly endorsed, to the Agent; any
payments made thereunder shall be Collections for all purposes of this
Agreement. If requested by the Agent, Servicer shall deliver all original
Contracts and the documents related thereto to a third-party custodian pursuant
to a custodial agreement reasonably satisfactory in form and substance to the
Agent and Seller.
(d) Collections. Seller hereby agrees that, after the
-----------
occurrence and during the continuance of any Servicer Termination Event, the
Agent shall have the right to instruct the Servicer and the Obligor to deposit
all payments in respect of Collections directly to the Agent on a daily basis.
(e) Termination. The Servicer's authorization under this
-----------
Agreement shall terminate upon the Final Payout Date.
SECTION XIII.3 Rights of the Agent. (a) At any time that a Servicer
--------------------
Termination Event has occurred and is continuing, upon at least three (3)
Business Days' prior notice to Seller, the Agent may notify the Obligors, or any
of such Obligors, of the interest of Purchaser.
(b) At any time following the designation of a Servicer other
than LINC pursuant to Section 13.1:
------------
(i) The Agent may direct the Obligors or any of them, that
payment of all amounts payable under any Contract be made directly to
the Agent or its designee;
<PAGE>
(ii) At the Agent's request and at Seller's expense, Seller
shall give notice of Purchaser's interest to each such Obligor and
direct that payments be made directly to the Agent or its designee;
(iii) At the Agent's request, Seller and Servicer shall (A)
assemble all of the documents, instruments and other records
(including, without limitation, computer programs, tapes and disks) in
their possession which evidence the Contracts, or which are otherwise
necessary or desirable to collect such Contracts, and shall make the
same available to the Agent at a place selected by the Agent or its
designee, and (B) segregate all cash, checks and other instruments
received by it from time to time constituting Collections, in a manner
reasonably acceptable to the Agent and shall remit promptly upon
receipt, all such cash, checks and instruments, duly endorsed or with
duly executed instruments of transfer, to the Agent or its designee;
and
(iv) Each of Seller and Purchaser hereby authorizes the
Agent to take any and all steps in Seller's name and on behalf of
Seller and Purchaser necessary or desirable, in the reasonable
determination of the Agent, to collect all amounts due under any and
all Contracts, including, without limitation, endorsing Seller's name
on checks and other instruments representing Collections and enforcing
such Contracts and disposing of related Equipment.
SECTION XIII.4 Responsibilities of Seller. Anything herein to the contrary
--------------------------
notwithstanding:
(a) Seller shall perform, or cause to be performed, all of its
obligations under the Contracts and under the other agreements included in, or
related to, the Contract Assets, to the same extent as if an interest had not
been conveyed hereunder and the Agent's exercise of its rights hereunder shall
not relieve Seller from such obligations.
(b) Neither the Agent nor Purchaser shall have any obligation
or liability with respect to any Contract, nor shall any of them be obligated to
perform any of the obligations of Seller thereunder.
(c) Seller hereby grants to the Servicer an irrevocable power
of attorney, with full power of substitution, coupled with an interest, to take
in the name of Seller all steps necessary or advisable to endorse, negotiate or
otherwise realize on any writing or other right of any kind held or transmitted
by Seller or transmitted or received by Purchaser (whether or not from Seller)
in connection with any Contract.
<PAGE>
SECTION XIII.5 Further Action. Seller agrees that from time to time, at
--------------
its expense, it will promptly execute and deliver all further instruments and
documents, and take all further action that the Agent may reasonably request in
order to perfect, protect or more fully evidence the security interest granted
hereunder, or to enable the Purchaser or the Agent to exercise or enforce any of
their respective rights hereunder. Without limiting the generality of the
foregoing, Seller will: (i) upon the request of the Agent, execute and file such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate; (ii) mark conspicuously each Contract with a legend, acceptable to
the Agent, evidencing that such interest has been granted in accordance with
this Agreement; and (iii) mark its data processing records evidencing such
Contracts with such legend. Seller hereby authorizes the Agent to file one or
more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Contracts now existing or
hereafter arising in the name of Seller. If Seller fails to perform any of its
agreements or obligations under this Agreement, the Agent may (but shall not be
required to) itself perform, or cause performance of, such Agreement or
obligation, and the reasonable expenses of the Agent incurred in connection
therewith shall be payable by Seller.
SECTION XIII.6 Application of Collections. Any payment by an Obligor in
--------------------------
respect of any indebtedness (including payments on leases and the Contracts)
owed by it to Seller shall, except as otherwise specified by such Obligor or
otherwise required by contract or law and be applied in accordance with the
Servicer's usual and customary practice.
SECTION XIII.7 Servicing Compensation; Costs of Servicing. (a) For its
----------------------
services hereunder, the Servicer shall be entitled to receive the Servicing Fee
for each Settlement Period, payable on the Settlement Date occurring on the day
immediately following the last day of such Settlement Period in accordance with
Section 4.2. As additional compensation for its services hereunder, the Servicer
shall be entitled to any late fees collected by the Servicer with respect to any
Contract.
(b) All costs of servicing the Contract Assets as required
hereunder shall be borne by the Servicer, provided that the Servicer shall be
entitled to retain, out of any amounts actually recovered by the Servicer with
respect to a Defaulted Contract or any Equipment related thereto, the Servicer's
actual out-of-pocket expenses reasonably incurred in connection therewith.
<PAGE>
ARTICLE XIV
THE AGENT
SECTION XIV.1 Authorization and Action. Purchaser hereby appoints Fleet
------------------------
as its Agent for purposes of the Transaction Documents and authorizes Fleet in
such capacity to take such action on its behalf under each Transaction Document
and to exercise such powers hereunder and thereunder as are delegated to Fleet
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto.
SECTION XIV.2 Exculpation. Neither the Agent (acting in such capacity under
-----------
the Transaction Documents) nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with the Transaction Documents, except for its or
their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Agent: (a) may consult with legal counsel
(including counsel for Seller or LINC), independent certified public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (b) makes no warranty or representation to
Purchaser or any other holder of a Participation, and shall not be responsible
to Purchaser or any other holder of a Participation, for any statements,
warranties or representations made by Seller or LINC in or in connection with
any Transaction Document; (c) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of any Transaction Document on the part of Seller, LINC, or Servicer or to
inspect the property (including the books and records) of Seller, LINC, or
Servicer; (d) shall not be responsible to Purchaser or any other holder of a
Participation for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, any other Transaction
Document or any other instrument or document provided for herein or delivered or
to be delivered hereunder or in connection herewith; and (e) shall incur no
liability under or in respect of any Transaction Document by acting upon any
notice (including notice by telephone), consent, certificate or other instrument
or writing (which may be by facsimile transmission) believed by it to be genuine
and signed or sent by the proper party or parties.
<PAGE>
SECTION XIV.3 Agent and Affiliates. Fleet and any of its Affiliates may
---------------------
generally engage in any kind of business with Seller, LINC, Servicer, any
Obligor, any of their respective Affiliates and any Person who may do business
with or own securities of Seller, LINC, Servicer, any Obligor or any of their
respective Affiliates, all as if Fleet were not the Agent and without any duty
to account therefor to Purchaser.
SECTION XIV.4 Contract Schedules. The Agent shall at all times maintain
------------------
a copy for public inspection during normal business hours of the Contract
Schedules delivered hereunder and under the Purchase and Sale Agreement at its
address set forth on Schedule 18.3 or such other address as it shall notify
--------------
Purchaser and Seller of.
ARTICLE XV
ASSIGNMENTS
SECTION XV.1 Restrictions on Assignments. Neither Seller nor Servicer
---------------------------
(except in connection with transactions permitted pursuant to Section 11.2.1)
---------------
may assign its rights hereunder or any interest herein without the prior written
consent of the Agent, and Purchaser may not assign its rights hereunder, or any
Participation (or any portion thereof) to any Person without the prior written
consent of Seller (which consent shall not be unreasonably withheld); provided,
---------
however, that Purchaser may assign all or any portion of the Participations (or
- -------
a participation therein) to the Liquidity Banks or the Liquidity Agent in
accordance with the Liquidity Agreement and, provided that the Purchaser Rate
shall not increase as a result thereof, to any other commercial paper conduit
administered by Fleet.
Within five Business Days after notice to Seller of any proposed
assignment by Purchaser for which Seller's consent is required, Seller agrees to
advise the Agent of its consent or non-consent thereto. If Seller does not
consent to such assignment, Purchaser may immediately assign the Participations
(or portion thereof) that was subject to such proposal to Fleet, any Liquidity
Bank or any Affiliate of Fleet or any Liquidity Bank. Subject to Section 15.2,
-------------
all of the aforementioned assignments shall be upon such terms and conditions as
Purchaser and the assignee may mutually agree.
SECTION XV.2 Documentation. Purchaser shall deliver to each assignee an
-------------
assignment, in such form as Purchaser and the related assignee may agree, duly
executed by Purchaser, assigning any such Participation to the assignee, and
Purchaser shall promptly execute and deliver all further instruments and
documents, and take all further action, that the assignee may reasonably
request, in order to perfect, protect or more fully evidence the assignee's
right, title and interest in and to such Participation, and to enable the
assignee to exercise or enforce any rights hereunder.
<PAGE>
SECTION XV.3 Rights of Assignee. Upon any assignment of any
--------------------
Participation from Purchaser pursuant to this Article XV, the respective
-----------
assignee receiving such assignment shall have all of the rights of Purchaser
hereunder with respect to such Participation and all references to Purchaser in
Article VI shall be deemed to apply to such assignee.
SECTION XV.4 Notice of Assignment. Purchaser shall provide notice to Seller
--------------------
of any assignment hereunder by Purchaser to any assignee (other than to a
Liquidity Bank).
ARTICLE XVI
INDEMNIFICATION
SECTION XVI.1 General Indemnity of Seller. Without limiting any other
----------------------------
rights which any such Person may have hereunder or under applicable law, Seller
hereby agrees to indemnify the Agent, Purchaser, the Liquidity Banks, the
Program Support Providers, and each of their respective successors, transferees,
participants and assigns and all officers, directors, shareholders, controlling
persons, employees and agents of any of the foregoing (each of the foregoing
Persons being individually called an "Indemnified Party"), forthwith on demand,
-----------------
from and against any and all damages, losses, claims, liabilities and related
costs and expenses, including reasonable attorneys' fees and disbursements (all
of the foregoing being collectively called "Indemnified Amounts") awarded
--------------------
against or incurred by any of them arising out of or relating to the failure of
Seller to perform its obligations under any Transaction Document or arising out
of claims asserted against an Indemnified Party relating to the transactions
contemplated thereby or the use of proceeds therefrom, including (without
limitation) in respect of the funding of any Participation or in respect of any
Contract, excluding, however, (a) Indemnified Amounts to the extent resulting
-------------------
from gross negligence or willful misconduct on the part of any Indemnified
Party, (b) recourse (except as otherwise provided in this Agreement) for credit
losses with respect to the Contracts, (c) any tax based upon or measured by net
income and (d) subject to Section 18.4, normal and customary expenses incurred
------------
in the ordinary course of business in the preparation, execution, delivery and
administration of this Agreement. Without limiting the foregoing, but subject to
the foregoing exclusions, Seller agrees to indemnify each Indemnified Party for
Indemnified Amounts arising out of or relating to:
(i) the sale of any Participation, or the grant of a security interest to
the Purchaser, pursuant to this Agreement;
<PAGE>
(ii) the breach of any representation or warranty made by
Seller (or any of its officers) under or in connection with this
Agreement or the other Transaction Documents, any Monthly Report,
Portfolio Certificate or any other information, report or certificate
delivered by Seller pursuant hereto or thereto, which shall have been
false or incorrect when made or deemed made;
(iii) the failure by Seller to comply with any applicable law,
rule or regulation with respect to any Contract, or the nonconformity
of any Contract with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Purchaser
a first-priority perfected ownership interest in the Portfolio and a
first-priority security interest in all the Collateral, free and clear
of any Adverse Claim, other than an Adverse Claim arising solely as a
result of an act of Purchaser or the Agent, or any assignee of
Purchaser or the Agent, and the failure to vest and maintain vested in
the Seller a first-priority perfected ownership interest in all
Contracts and in the security interests in all related Equipment, free
and clear of any Adverse Claim, other than an Adverse Claim arising
solely as a result of an act of Purchaser or the Agent, or any assignee
thereof;
(v) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Collateral;
(vi) any dispute, claim, offset or defense of an Obligor to
the payment of any Contract based on such Contract not being a legal,
valid and binding obligation of such Obligor, enforceable against it in
accordance with its terms(other than discharge in bankruptcy or
resulting from credit matters) ;
(vii) any claim in connection with any Equipment related to
the Contracts; or
(viii) any tax or governmental fee or charge (but not
including taxes upon or measured by net income), all interest and
penalties thereon or with respect thereto, and all out-of-pocket costs
and expenses, including the reasonable fees and expenses of counsel in
defending against the same, which may arise by reason of the making,
maintenance or funding, directly or indirectly, of any Participation,
or any other interest in the Collateral.
<PAGE>
SECTION XVI.2 Indemnity by Servicer. Without limiting any other rights
---------------------
which any such Person may have hereunder or under applicable law, Servicer
hereby agrees to indemnify each Indemnified Party, forthwith on demand, from and
against any and all Indemnified Amounts awarded against or incurred by any of
them arising out of or relating to (i) the failure of Servicer to perform its
obligations under any Transaction Document, (ii) the inaccuracy of any
representation or warranty made by Servicer in any Transaction Document, or in
any Monthly Report, Portfolio Certificate or any other information, report or
certificate delivered by Servicer pursuant hereto or thereto, (iii) the failure
by Servicer to comply with any applicable law, rule or regulation with respect
to any Contract or the servicing thereof or (iv) the commingling of any
Collections.
SECTION XVI.3 Contribution. If for any reason (other than the
------------
exclusions (a) and (b) set forth in the first paragraph of Section 16.1) the
-------------
indemnification provided above in Section 16.1 or 16.2 is unavailable to an
---------------------
Indemnified Party or is insufficient to hold an Indemnified Party harmless, then
Seller or Servicer, as the case may be, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Party, on the one hand, and Seller or
Servicer, as the case may be, on the other hand, but also the relative fault of
such Indemnified Party, on the one hand, and Seller or Servicer, as the case may
be, on the other hand, as well as any other relevant equitable considerations.
ARTICLE XVII
SECURITY INTEREST
<PAGE>
SECTION XVII.1 Grant of Security Interest. Each of the parties hereto
---------------------------
expressly intends that the transfer of the Participation to Purchaser hereunder
is a complete and absolute sale and transfer. In the event that a court shall
determine that, notwithstanding the intent of the parties, such transfer does
not constitute a sale, this Agreement shall be a security agreement, and to
secure the prompt payment and performance of all Obligations of Seller arising
in connection with this Agreement, whether now or hereafter existing, due or to
become due, direct or indirect, or absolute or contingent, including, without
limitation, all Indemnified Amounts, payments on account of Collections received
or deemed to be received and fees, Seller hereby assigns and grants to Purchaser
a first priority security interest in all of Seller's right, title and interest
in, to and under all of the following property, whether now or hereafter
existing (the "Collateral"): (a) all Contracts and other Contract Assets, all
----------
Collections with respect to, and other proceeds of, such Contracts and Contract
Assets; (b) all of Seller's rights, remedies, powers and privileges under, or in
respect of, the Purchase and Sale Agreement; (c) all Lock-box Accounts, the
Collection Account, the Reserve Account, all funds on deposit in each of the
foregoing accounts and all certificates and instruments, if any, from time to
time evidencing such accounts and funds on deposit therein, all investments made
with such funds, all claims thereunder or in connection therewith, and all
interest, dividends, moneys, instruments, securities and other property from
time to time received, receivable or otherwise distributed in respect or in
exchange for any or all of the foregoing; and (d) all proceeds and amounts
received or receivable by Seller under any or all of the foregoing. This
Agreement shall constitute a security agreement under applicable law with regard
to security interest granted pursuant to this Section 17.1.
------------
SECTION XVII.2 Further Assurances. Seller agrees that from time to
-------------------
time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that the Agent may
reasonably request in order to perfect, protect or more fully evidence the
Participations purchased by Purchaser hereunder, or to enable any of Purchaser,
any other holder of a Participation or the Agent to exercise or enforce any of
their respective rights hereunder. Without limiting the generality of the
foregoing, Seller will upon the request of the Agent execute and file such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be reasonably necessary
or appropriate. Seller hereby authorizes the Agent to file one or more financing
or continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Contracts and other Collateral now existing or
hereafter arising in the name of Seller. If Seller fails to perform any of its
agreements or obligations under this Section 17.2, the Agent may (but shall not
------------
be required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection therewith shall
be payable by Seller as provided in Section 18.4. The provisions of this Section
-------
17.2 shall apply to the security interest granted under Section 17.1 as well as
- ---- ------------
to the Purchase and all Participations hereunder.
SECTION XVII.3 Remedies. Upon the occurrence of a Termination Event,
--------
Purchaser shall have, with respect to the collateral granted pursuant to Section
-------
17.1, and in addition to all other rights and remedies available to Purchaser or
- ----
the Agent under this Agreement or other applicable law, all the rights and
remedies of a secured party upon default under the UCC.
<PAGE>
ARTICLE XVIII
MISCELLANEOUS
SECTION XVIII.1 No Waiver; Remedies. No failure on the part of
---------------------
Purchaser, the Agent, any Indemnified Party or any Affected Party to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise by any of them of
any right, power or remedy hereunder preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law. Without limiting the foregoing, each of Fleet and the Liquidity Banks is
hereby authorized by Seller at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Fleet and the Liquidity Banks to or for the
credit or the account of Seller, now or hereafter existing under this Agreement,
to the Agent, any Affected Party, any Indemnified Party or Purchaser or their
respective successors and assigns.
SECTION XVIII.2 Amendments, Etc. No amendment, modification or waiver of,
----------------
or consent with respect to, any provision of this Agreement and any Schedules
hereto shall in any event be effective unless the same shall be in writing and
signed and delivered by (a) Seller, Servicer, the Agent and Purchaser (with
respect to an amendment), or (b) the Agent and Purchaser (with respect to a
waiver or consent by them) or Seller or Servicer (with respect to a waiver or
consent by it), as the case may be, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
<PAGE>
SECTION XVIII.3 Notices, Etc. All notices and other communications provided
------------
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by certified
mail, postage prepaid, or by facsimile, to the intended party at the address or
facsimile number of such party opposite its name on Schedule 18.3, or at such
--------------
other address or facsimile number as shall be designated by such party in a
written notice to the other parties hereto. All such notices and communications
shall be effective (a) if personally delivered, when received, (b) if sent by
certified mail, three Business Days after having been deposited in the mail,
postage prepaid, (c) if sent by overnight courier, one Business Day after having
been given to such courier and (d) if transmitted by facsimile, when sent,
receipt confirmed by telephone or electronic means, except that notices and
communications pursuant to Section 2.3 shall not be effective until received.
-----------
SECTION XVIII.4 Costs, Expenses and Taxes. In addition to its obligations
--------------------------
under Section 16.1, Seller agrees to pay on demand:
------------
(a) (i) all reasonable costs and expenses incurred by the Agent,
Purchaser, the Liquidity Banks and the Program Support Providers in connection
with the negotiation, preparation, execution and delivery of this Agreement the
other Transaction Documents (including any amendments or modifications or of
supplements to the Program Documents entered into directly related to this
Agreement) and any amendments, consents or waivers executed in connection
therewith, including, without limitation (A) the reasonable fees and expenses of
counsel to any of such Persons incurred in connection with any of the foregoing
or in advising such Persons as to their respective rights and remedies under any
of the Transaction Documents or (to the extent directly related to this
Agreement) the Program Documents and (B) all reasonable out-of-pocket expenses
(including reasonable fees and expenses of independent accountants) incurred in
connection with any audit of Seller's or Servicer's books and records permitted
hereunder and (ii) all costs and expenses incurred by the Agent, Purchaser, the
Liquidity Banks and the Program Support Providers in connection with the
enforcement, or any actual or claimed breach, of this Agreement, the other
Transaction Documents and, to the extent directly related to this Agreement, the
Program Documents (including any amendments or modifications of or supplements
to the Program Documents directly related to this Agreement), including, without
limitation, the reasonable fees and expenses of counsel to any of such Persons
incurred in connection therewith;
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of this
Agreement, the other Transaction Documents, or (to the extent directly related
to this Agreement) the Program Documents, and Seller agrees to indemnify each
Indemnified Party against any liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.
<PAGE>
SECTION XVIII.5 Binding Effect; Survival. This Agreement shall be
--------------------------
binding upon and inure to the benefit of Seller, Purchaser, the Agent and their
respective successors and assigns, and the provisions of Article VI and Article
----------------------
XVI shall inure to the benefit of the Affected Parties and the Indemnified
- ---
Parties, respectively, and their respective successors and assigns; provided,
---------
however, that nothing in the foregoing shall be deemed to authorize any
- -------
assignment not permitted by Article XV. This Agreement shall create and
-----------
constitute the continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until such time after the
Final Payoff Date. The rights and remedies with respect to any breach of any
representation and warranty made by Seller or Servicer pursuant hereto and the
indemnification and payment provisions of Article XVI and Article VI, Sections
------------------------------------
18.4 and 18.12 shall be continuing and shall survive any termination of this
- --------------
Agreement and any termination of Servicer's rights to act as Servicer hereunder
or under any other Transaction Document.
SECTION XVIII.6 Captions and Cross References. The various captions
--------------------------------
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Appendix, Schedule or Exhibit are
to such Section of or Appendix, Schedule or Exhibit to this Agreement, as the
case may be, and references in any Section, subsection, or clause to any
subsection, clause or subclause are to such subsection, clause or subclause of
such Section, subsection or clause.
SECTION XVIII.7 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 of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION XVIII.8 Governing Law. THIS AGREEMENT SHALL BE A CONTRACT MADE
--------------
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD
TO ANY OTHERWISE APPLICABLE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION XVIII.9 Counterparts. This Agreement may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed to be an original
but all of which shall constitute together but one and the same agreement.
<PAGE>
SECTION XVIII.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
---------------------
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT 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 TRANSACTION DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF SELLER, THE AGENT, PURCHASER OR ANY OTHER AFFECTED PARTY.
EACH OF SERVICER AND SELLER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL
AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER TRANSACTION DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE AGENT AND PURCHASER ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER TRANSACTION DOCUMENT.
SECTION XVIII.11 Recourse to Directors or Officers. The obligations of
---------------------------------
Purchaser under this Agreement are solely the corporate obligations of
Purchaser. No recourse shall be had for the payment of any amount owing in
respect to this Agreement or for the payment of any fee hereunder or for any
other obligation or claim arising out of or based upon this Agreement against
any member of the Purchaser. The obligations of Seller under this Agreement are
solely the corporate obligations of Seller. No recourse shall be had for the
payment of any claim against Seller arising out of or based upon this Agreement
against any stockholder of Seller.
SECTION XVIII.12 No Proceedings. Each of Servicer and Seller hereby
---------------
agree that it will not institute against Purchaser, or join any other Person in
instituting against Purchaser, any insolvency proceeding (namely, any proceeding
of the type referred to in the definition of Event of Bankruptcy) so long as any
Commercial Paper Notes shall be outstanding or there shall not have elapsed one
year plus one day since the last day on which any such Commercial Paper Notes
shall be outstanding.
SECTION XVIII.13 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER
-----------------
TRANSACTION DOCUMENTS EXECUTED AND DELIVERED HEREWITH REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
[signature pages begin on next page]
<PAGE>
S-1
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
LINC RECEIVABLES CORPORATION
/s/ M. Eileen O'Brien
By_________________________________
M. Eileen O'Brien
Name:____________________________
VP & Treasurer
Title:___________________________
LINC CAPITAL, INC.
/s/ R. E. Laing
By_________________________________
R. E. Laing
Name:____________________________
President
Title:___________________________
BLUE KEEL FUNDING, LLC, as Purchaser
/s/ Kevin P. Burns
By_________________________________
Kevin P. Burns
Name:____________________________
Vice President
Title:___________________________
FLEET BANK, N.A., as Agent
/s/ Harris E Mehos
By_________________________________
Harris E. Mehos
Name:____________________________
Vice President
Title:___________________________
SECOND AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This Second Amendment to Receivables Purchase Agreement, dated as of
August 14, 1998 (this "Amendment"), is among LINC RECEIVABLES CORPORATION, a
---------
Delaware corporation ("Seller"), LINC CAPITAL, INC., a Delaware corporation
------
("LINC"), BLUE KEEL FUNDING, LLC, a Delaware limited liability company
----
("Purchaser"), and FLEET BANK, N.A., a national banking association, as agent
---------
for Purchaser (in such capacity, the "Agent").
-----
BACKGROUND
----------
1. Seller, LINC, Purchaser and the Agent are parties to that certain
Receivables Purchase Agreement, dated as of December 30, 1997, as amended by the
First Amendment to Receivables Purchase Agreement, dated as of June 29, 1998
(the "Receivables Purchase Agreement").
------------------------------
2. The parties hereto desire to amend the Receivables Purchase
Agreement in certain respects as set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used in this Amendment and not
-----------
otherwise defined herein shall have the meanings assigned thereto in the
Receivables Purchase Agreement.
SECTION 2. Overcollateralization Amount. The definition of
-------------------------------
"Overcollateralization Amount" in Section 1.1 of the Receivables Purchase
------------
Agreement is hereby amended by (i) deleting the phrase ",until the Residual
Inclusion Date, without regard to" where it appears in clause (i)(a)(1)(y)
--------------------
thereof and substituting therefor the clause "including only 50% of" and (ii)
deleting the phrase "until the Residual Inclusion Date," where it appears in
clause (i)(a)(2) thereof and substituting therefor the phrase "50% of". The
- -----------------
"Residual Inclusion Date" shall be the date of this Amendment.
SECTION 3. Purchase Limit. Section 2.2(a) of the Receivables Purchase
-------------------------------
Agreement is hereby amended by adding the phrase "(or $150,000,000 for the
period from August 14, 1998 until November 1, 1998)"after the number
"$100,000,000" where it appears therein.
SECTION 4. Representations. Seller and the Servicer hereby represent
---------------
and warrant that, after giving effect to this Amendment (i) the representations
and warranties of Seller and Servicer contained in Article VIII of the
-------------
Receivables Purchase Agreement are true and correct as of the date hereof and
(ii) no Termination Event or Unmatured Termination Event has occurred and is
continuing.
<PAGE>
SECTION 5. Miscellaneous. The Receivables Purchase Agreement as amended
-------------
hereby, remains in full force and effect. Any reference to the Receivables
Purchase Agreement from and after the date hereof shall be deemed to refer to
the Receivables Purchase Agreement as amended hereby, unless otherwise expressly
stated. This Amendment shall be a contract made under and governed by the
internal laws of the State of Illinois without regard to any otherwise
applicable conflict of law principles thereof. This Amendment may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original, but all of which shall constitute together but one and the same
agreement.
[signature pages begin on next page]
<PAGE>
LINC RECEIVABLES CORPORATION
/s/ M. Eileen O'Brien
By_______________________________
M. Eileen O'Brien
Name:___________________________
Vice President_
Title:___________________________
LINC CAPITAL, INC.
/s/ Allen P. Palles
By_______________________________
Allen P. Palles
Name:____________________________
Chief Financial Officer
Title:___________________________
BLUE KEEL FUNDING, LLC, as Purchaser
/s/ Kevin P. Burns
By_______________________________
Kevin P. Burns
Name:____________________________
Vice President
Title:___________________________
FLEET BANK, N.A., as Agent
/s/ Anthony Nocera
By_______________________________
Anthony Nocera
Name:____________________________
Vice President
Title:___________________________
SECOND AMENDMENT
TO RECEIVABLES
PURCHASE AGREEMENT
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000936094
<NAME> LINC Capital, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,493
<SECURITIES> 1,573
<RECEIVABLES> 7,999
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<PP&E> 32,621
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<CURRENT-LIABILITIES> 0
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0
0
<COMMON> 29,285
<OTHER-SE> 12,310
<TOTAL-LIABILITY-AND-EQUITY> 182,735
<SALES> 23,225
<TOTAL-REVENUES> 36,044
<CGS> 18,958
<TOTAL-COSTS> 18,958
<OTHER-EXPENSES> 18,150
<LOSS-PROVISION> 3,762
<INTEREST-EXPENSE> 6,772
<INCOME-PRETAX> 7,360
<INCOME-TAX> 2,923
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<CHANGES> 0
<NET-INCOME> 4,437
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 1,677
<RECEIVABLES> 10,875
<ALLOWANCES> 2,076
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<PP&E> 28,419
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0
0
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<TOTAL-REVENUES> 15,079
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<OTHER-EXPENSES> 9,076
<LOSS-PROVISION> 709
<INTEREST-EXPENSE> 3,032
<INCOME-PRETAX> 2,262
<INCOME-TAX> 867
<INCOME-CONTINUING> 1,382
<DISCONTINUED> (402)
<EXTRAORDINARY> 0
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<NET-INCOME> 980
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.31
</TABLE>
