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September 1, 1988. If Transit or LWSI chose to convert, the
loans from LIIBV would become fixed-term loans repayable in 10
equal semiannual installments. However, LIIBV could demand
repayment at any time if it needed the funds.
After the GSX acquisition, LTI and LII did not comply with
leverage ratios to which they had agreed in the loan agreements
with TDB, RBC, and BBC. On October 16, 1986, Haworth told LIIBV
that LII's repayment of its advances must be subordinated to
LII's commercial lenders. Also on October 16, 1986, Haworth
asked LIIBV to amend petitioners' loan agreements to provide,
effective September 1, 1986, that (1) all sums would be due on
demand at interest rates equal to the prime rate at ABN Bank, New
York, plus 2 percent, (2) petitioners need not meet any financial
ratios, (3) petitioners no longer had restrictions as to the
maximum amount of funds they could seek and that LIIBV was to
provide on request, subject to availability of funds, and (4)
LIIBV would subordinate its advances to petitioners to their bank
loans. On October 20, 1986, LIIBV's managing board unanimously
agreed to subordinate repayment of its advances to Transit's bank
loans.
Transit and LWSI made new loan agreements with LIIBV, dated
"as of September 1, 1986". In the first of these agreements,
signed by Haworth for Transit, LIIBV subordinated Laidlaw's and
Transit's indebtedness to LIIBV to any amounts owed by Laidlaw to
TDB.
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