As filed with the Securities and Exchange Commission on October 23, 1997
Registration No. 333-8879
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 2
to
Form S-1
Registration Statement
Under
The Securities Act of 1933
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
(Exact name of registrant as specified in governing instruments)
California 7394 94-3248318
(State or other juris- (Primary standard (IRS Employer
diction of organization) industrial classification Identification
number) code number)
235 Pine Street, 6th Floor
San Francisco, California 94104
(415) 989-8800
(Address, including zip code, and telephone number,including area code,
of principal executive offices)
DEAN L. CASH
235 Pine Street, 6th Floor
San Francisco, California 94104
(415) 989-8800
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
With a copy to:
PAUL J. DERENTHAL, ESQ.
Derenthal & Dannhauser
455 Market Street, Suite 1600
San Francisco, California 94105
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. X
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
CROSS REFERENCE SHEET
Furnished Pursuant to Regulation S-K, Item 501(b)
Item No. and Caption in Form S-1 Location in Prospectus
1. Forepart of the Registration
Statement and Outside
Front Cover Page of Prospectus .... Forepart of the
Registration Statement;
Outside Front Cover Page;
Cross Reference Sheet
2. Inside Front and Outside Back
Cover Pages of Prospectus .......... Cover Page; Table of
Contents
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges ........................... Summary of the Offering;
Risk Factors
4. Use of Proceeds .................... Estimated Use of Proceeds;
Supplement No. 2
5. Determination of Offering Price .... Inapplicable
6. Dilution ........................... Inapplicable
7. Selling Security Holders ........... Inapplicable
8. Plan of Distribution ............... Cover Page; Plan of
Distribution
9. Description of Securities to
be Registered ..................... Summary of the Offering;
Summary of the Partnership
Agreement; Supplement No. 2
10. Interests of Named Experts and
Counsel ........................... Inapplicable
11. Information With Respect to the
Registrant ........................ Summary of the Offering;
Management; Management
Compensation; Investment
Objectives and Policies;
Summary of the Partner-
ship Agreement; Financial
Statements; Supplement No. 2
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities ................... Fiduciary Duty of the
General Partner
d:\atel7\cover997.edg
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
Limited Partnership Units
$10 per Unit - Minimum Offering 120,000 Units
Minimum Investment -- 250 Units ($2,500)
(200 Units or $2,000 for an Individual Retirement Account or Qualified Plan)
ATEL Capital Equipment Fund VII, L.P. (the "Fund") is a California limited
partnership of which ATEL Financial Corporation ("ATEL") is the General Partner
and Fund Manager. The Fund's business will be to acquire a diversified portfolio
of primarily low-technology capital equipment leased to third parties. See
"Investment Objectives and Policies." The Fund expects
(Continued on following page)
-----------------------
AN INVESTMENT IN THE FUND INVOLVES SIGNIFICANT RISKS. (See "Risk Factors" on
page 13) Among the most prominent risks are the following:
- - Limited voting rights for investors mean total reliance on the Fund
Manager for Fund management, and the Fund Manager may be subject to certain
conflicts of interest;
- - Substantial fees are payable to the Fund Manager and its affiliates even
if the Fund does not generate profits;
- - All equipment investments are not specified, and investors cannot fully
assess the risks involved in the Fund's equipment portfolio;
- - The Fund's ability to realize lease revenues and make cash distributions
is subject to the risk of lessee defaults, and the use of secured debt to
acquire equipment may result in the loss of equipment used as collateral for
such debt in the event of a lessee default;
- - The use of secured debt to acquire equipment may result in the loss of
equipment used as collateral for such debt if the Fund is unable to pay its
debt obligations;
- - The Units will not be listed on any securities exchange and there are
significant limitations on transferability. Accordingly, investors may be
unable to resell or dispose of Units except at discounts from the offering
price, which discounts may be substantial, and, while the Fund is expected to
liquidate over a ten to eleven year term, the Partnership Agreement provides
for termination no later than December 2017;
- - The Fund's ability to diversify its portfolio of leased equipment by
types of equipment, manufacturers, lessees and geographic regions is dependent
on the amount of capital actually raised and the amount of available debt
financing (the Fund intends to incur debt equal to approximately 50% of its
equipment cost, but there can be no assurance as to the amount of available
debt financing);
- - A substantial portion of distributions will be deemed, and a substantial
portion of distributions by prior ATEL programs have been, a return of
invested capital, as opposed to investment income, and the amount of
investment income investors may realize depends in part on the resale or
re-lease value of equipment after the initial leases terminate; and
(Continued on the following page)
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- ----------------------------------------------------------------------------
Price to Selling Proceeds to
Public Commissions Fund
Per Unit $ 10 $ 0.95 $ 9.05
Total Minimum $ 1,200,000 $ 114,000 $ 1,086,000
Total Maximum $150,000,000 $14,250,000 $135,750,000
- -----------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 29, 1996
Any supplements which update this Prospectus are contained inside the back
cover.
ATEL Capital Equipment Fund VII, L.P. is not a mutual fund or any other
type of investment company within the meaning of the Investment Company Act of
1940 and is not subject to regulation thereunder.
<PAGE>
(Cover page continued)
to commit approximately 86% of the total proceeds of this offering to the
purchase of equipment. At least an additional 0.5% of the total proceeds will be
retained by the Fund as capital reserves. The balance will be used to pay
selling commissions equal to 9.5% of the total proceeds (including up to 1.5% of
the proceeds which may be retained by the Dealer Manager, an affiliate of the
Fund Manager), Acquisition Expenses and the other expenses of the offering in
the estimated amount of from 2.5% to 4% of the offering proceeds (which may be
advanced by the Fund Manager and reimbursed by the Fund). Other than the
foregoing selling commissions, the Fund Manager and its Affiliates will not
receive any compensation from the Gross Proceeds of the Offering, but will
receive compensation only from Fund operating revenues. See "Estimated Use of
Proceeds."
The Fund's objective is to invest in a diversified portfolio of leased
equipment which will generate regular cash distributions to investors. There can
be no assurance that such objective can be attained.
It is anticipated that a substantial portion of such distributions will
be tax-deferred during the initial years of Fund operations as a result of
depreciation available from equipment purchased by the Fund. To the extent the
Fund's net income is reduced thereby and distributions exceed net income, any
distributions will be considered a return of capital and income tax will be
deferred until subsequent years.
The offering is a best efforts minimum-maximum offering. A best efforts
offering is one in which no underwriter guarantees that any specific amount of
offering proceeds will be raised. All offering proceeds will be deposited in an
escrow account with First Trust of California, National Association, and will
not be released to the Fund, until subscriptions for a minimum of 120,000 Units
($1,200,000) have been received and accepted. Unless the Fund receives
and accepts subscriptions for a minimum of 120,000 Units ($1,200,000) by a date
one year from the date of this Prospectus, all subscription proceeds will be
promptly released from the escrow account and returned to subscribers, together
with all interest earned thereon. If the minimum offering amount is achieved
within the stated period, the offering may continue for a period of up to two
years from the date hereof, but will terminate when the maximum of 15,000,000
Units ($150,000,000) is sold or the offering is earlier terminated in the
discretion of the Fund and the Dealer Manager.
(Cover page risk factors continued)
- The return of investors' capital is not guaranteed and there can be no
assurance as to the timing or amount of any distributions.
Under the terms of the Partnership Agreement, the Fund will provide each
Holder with quarterly and annual financial statements, Fund information
necessary to prepare the Holder's federal income tax return and an annual report
of the Fund's business. The annual financial statements will be examined by, and
include the opinion of, an independent certified public accountant.
2
<PAGE>
THE USE OF PROJECTIONS IN THIS OFFERING IS PROHIBITED. ANY REPRESENTATIONS TO
THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE AMOUNT OR CERTAINTY
OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCE WHICH MAY FLOW FROM AN
INVESTMENT IN THE FUND IS A VIOLATION OF THE LAW. HOWEVER, SUCH PROHIBITIONS
SHOULD NOT BE CONSTRUED TO PREVENT THE FUND FROM FILING SUPPLEMENTALLY ANY PRO
FORMA FINANCIAL STATEMENTS REQUIRED BY THE FEDERAL SECURITIES LAWS AND
REGULATIONS THEREUNDER.
THE FOLLOWING LEGEND IS REQUIRED BY THE ARIZONA CORPORATION COMMISSION PURSUANT
TO ITS RULE 14-4-118B: THESE ARE SPECULATIVE SECURITIES.
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT RECOMMEND
OR ENDORSE THE PURCHASE OF THESE UNITS.
NOTICE TO PROSPECTIVE PURCHASERS IN THE STATE OF NEW HAMPSHIRE: NEITHER THE FACT
THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED NOR
THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED
CONSTITUTES A FINDING BY THE DIRECTOR OF THE NEW HAMPSHIRE OFFICE OF SECURITIES
REGULATION THAT ANY DOCUMENT FILED UNDER THE NEW HAMPSHIRE UNIFORM SECURITIES
ACT IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT
THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE DIRECTOR HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION.
IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER,
CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS
SECTION 421-B:20 OF THE NEW HAMPSHIRE UNIFORM SECURITIES ACT.
PENNSYLVANIA INVESTORS: BECAUSE THE MINIMUM OFFERING AMOUNT IS UNDER
$15,000,000, YOU ARE CAUTIONED TO EVALUATE CAREFULLY THE FUND'S ABILITY TO
ACCOMPLISH FULLY ITS STATED OBJECTIVES AND INQUIRE AS TO THE CURRENT DOLLAR
VOLUME OF FUND SUBSCRIPTIONS.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
3
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY OF THE OFFERING................................................... 7
Risk Factors.......................................................... 7
Who Should Invest..................................................... 8
Estimated Use of Proceeds............................................. 9
Management Compensation............................................... 9
Investment Objectives and Policies.................................... 10
Conflicts of Interest................................................. 11
Fiduciary Duty of the General Partner................................. 11
Management............................................................ 11
Prior Performance Summary............................................. 12
Income, Losses and Distributions...................................... 12
Income Tax Consequences............................................... 12
Summary of the Partnership Agreement.................................. 13
Plan of Distribution.................................................. 15
Glossary.............................................................. 15
RISK FACTORS.............................................................. 15
Limited Investor Voting Rights and
Total Reliance on Management.......................................... 15
Fund Manager's Compensation and
Conflicts of Interest............................................... 16
Unspecified Equipment and Lessees....................................... 16
Defaults by Lessees..................................................... 16
Risks of Leverage....................................................... 16
Balloon Payments........................................................ 17
Limited Transferability of Units........................................ 18
Diversification Dependent Upon Size of Fund............................. 18
Return on Investment Dependent Upon
Residual Value of Equipment........................................... 18
Portion of Distributions Characterized
as Return of Capital................................................ 18
Activities Outside of the United States................................. 19
General Risks in the Equipment Leasing Business......................... 19
Fluctuations in Demand for Equipment.................................... 20
Competition............................................................. 20
Risks of Operating Leases............................................... 20
Casualty Losses......................................................... 20
Consequences of Government Regulation................................... 20
Registration of Aircraft May Not Be Possible............................ 21
Newly-Formed Entity..................................................... 21
Difficulty in Investing Proceeds........................................ 21
Income in Excess of Distributions....................................... 21
Limited Financial Resources of Fund Manager............................. 22
Liability of Holders.................................................... 22
Risks of Joint Ventures................................................. 22
Partnership Status...................................................... 23
Certain Other Tax Considerations........................................ 23
<PAGE>
Tax Opinion............................................................. 24
ERISA Considerations.................................................... 25
WHO SHOULD INVEST......................................................... 25
ESTIMATED USE OF PROCEEDS................................................. 28
MANAGEMENT COMPENSATION................................................... 29
Summary Table......................................................... 29
Defined Terms Used in Description of Compensation..................... 33
Narrative Description of Compensation................................. 34
INVESTMENT OBJECTIVES AND POLICIES........................................ 37
Principal Investment Objectives....................................... 37
General Policies...................................................... 38
Identified Equipment Acquisitions..................................... 40
Types of Equipment.................................................... 41
Borrowing Policies.................................................... 48
Description of Lessees................................................ 50
Foreign Leases........................................................ 51
Description of Leases................................................. 52
Agreements with Manufacturers and Vendors............................. 53
Competition........................................................... 54
Joint Venture Investments............................................. 55
General Restrictions.................................................. 56
Changes in Investment Objectives and Policies......................... 57
CONFLICTS OF INTEREST..................................................... 57
ORGANIZATIONAL DIAGRAM.................................................... 60
FIDUCIARY DUTY OF THE GENERAL PARTNER..................................... 61
MANAGEMENT................................................................ 63
The Fund Manager...................................................... 63
The Dealer Manager.................................................... 70
PRIOR PERFORMANCE SUMMARY................................................. 70
INCOME, LOSSES AND DISTRIBUTIONS.......................................... 74
Allocations of Net Income and Net Loss................................ 74
Timing of Distributions............................................... 75
Allocations of Distributions.......................................... 75
Reinvestment.......................................................... 77
Return of Unused Capital.............................................. 78
Cash From Reserve Account............................................. 78
Sources of Distributions - Accounting Matters......................... 79
CAPITALIZATION............................................................ 79
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION.................................................. 80
5
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INCOME TAX CONSEQUENCES................................................... 81
Summary............................................................... 82
Opinion of Counsel.................................................... 82
Classification as a "Partnership"..................................... 82
Allocations of Profits and Losses..................................... 82
Income Recognition.................................................... 82
Taxation of Holders of Units.......................................... 82
Limitation on Deduction of Losses..................................... 82
Tax Status of Leases.................................................. 83
Depreciation.......................................................... 83
Deductibility of Management Fees...................................... 83
Sales or Exchanges of Fund Equipment.................................. 83
Disposition of Units.................................................. 83
Fund Elections........................................................ 83
Investment by Qualified Plans and IRAS................................ 83
Dissolution of Fund................................................... 83
Opinion of Counsel.................................................... 84
Classification as a "Partnership" .................................... 85
Allocation of Profits and Losses ..................................... 88
Income Recognition.................................................... 90
Taxation of Holders of Units ......................................... 91
Limitation on Deduction of Losses .................................... 92
Tax Basis ............................................................ 92
At Risk Rules ........................................................ 92
Passive Loss Limitations ............................................. 93
Hobby Losses ......................................................... 94
Tax Status of Leases ................................................. 94
Depreciation ......................................................... 95
MACRS and ADR ........................................................ 95
Recapture ............................................................ 97
Basis ................................................................ 97
Limitation on the Use of MACRS ....................................... 97
Property Used Predominantly Outside the United States ................ 97
Tax Exempt Leasing ................................................... 98
Deductibility of Management Fees ..................................... 98
Tax Liabilities in Later Years ....................................... 99
Sales orExchange of Fund Equipment ................................... 99
Disposition of Units ................................................. 101
Original Issue Discount .............................................. 102
Fund Elections ....................................................... 102
Dissolution of Fund .................................................. 103
Treatment of Gifts of Units .......................................... 103
Investment by Qualified Plans and IRAS ............................... 103
Individual Tax Rates ................................................. 105
Alternative Minimum Tax .............................................. 105
Fund Tax Returns and Tax Information.................................. 106
Interest and Penalties................................................ 107
Audit of Tax Returns.................................................. 109
Registration Provisions............................................... 110
Miscellaneous Partnership Tax Aspects................................. 110
Foreign Tax Considerations............................................ 110
Taxation of Foreign Persons........................................... 111
Future Federal Income Tax Changes..................................... 112
State and Local Taxes................................................. 113
Need for Independent Advice........................................... 114
ERISA CONSIDERATIONS...................................................... 114
Prohibited Transactions Under ERISA and the Code...................... 114
Plan Assets........................................................... 114
Other ERISA Considerations............................................ 115
SUMMARY OF THE PARTNERSHIP AGREEMENT...................................... 116
The Duties of the Fund Manager........................................ 116
Liability of Holders.................................................. 117
Term and Dissolution.................................................. 117
Voting Rights of Limited Partners..................................... 118
Dissenters' Rights and Limitations on
Mergers and Roll-ups................................................ 119
Meetings.............................................................. 119
Books of Account and Records.......................................... 119
Status of Units....................................................... 120
Transferability of Units.............................................. 120
Repurchase of Units................................................... 124
6
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Indemnification of the General Partner............................... 124
PLAN OF DISTRIBUTION..................................................... 125
Distribution......................................................... 125
Selling Compensation and Certain Expenses............................ 126
Escrow Arrangements.................................................. 127
Investments by Certain Persons....................................... 128
State Requirements................................................... 129
REPORTS TO HOLDERS....................................................... 130
SUPPLEMENTAL SALES MATERIAL.............................................. 131
LEGAL OPINIONS........................................................... 131
EXPERTS.................................................................. 131
ADDITIONAL INFORMATION................................................... 132
GLOSSARY................................................................. 132
FINANCIAL STATEMENTS..................................................... F-1
Exhibit A - Prior Performance Information................................ A-1
Exhibit B - Partnership Agreement......................................... B-1
Exhibit C - Subscription Instructions and Documents ..................... C-1
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer contained herein, and if given or made, such information or
representation must not be relied upon. This Prospectus does not constitute an
offer or solicitation by anyone in any state or other jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
is not qualified to do so or to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus or any Supplement
nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the facts set forth herein since
the date hereof; however, if any material change not contemplated hereby occurs
while this Prospectus is required to be delivered, this Prospectus will be
amended or supplemented accordingly.
Until February 27, 1997 all dealers effecting transactions in the
registered securities, whether or not participating in this distribution may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
SUMMARY OF THE OFFERING
The following is a summary of the pertinent facts and highlights from the
material contained in this Prospectus. More detailed information with respect
7
<PAGE>
to this offering may be found in the remainder of this Prospectus.
Risk Factors: An investment in Units involves significant risks.
The "Risk Factors" section of this Prospectus contains a detailed
discussion of the most important risks, organized into the categories of
Investment Risks (those relating to the types of investments the Fund will
make), Fund Risks (those relating to the investments in limited partnerships and
the terms of the Partnership Agreement), and Tax Risks (those relating to the
tax laws as they apply to the Fund and its investments). Please refer to those
sections of the Prospectus for discussions of material risk factors, including,
but not limited to, the following risks:
- Limited voting rights for investors mean total reliance on the Fund
Manager for Fund management, and the Fund Manager may be subject to
certain conflicts of interest;
- Substantial fees are payable to the Fund Manager and its affiliates
even if the Fund does not generate profits;
- All equipment investments are not specified, and investors cannot fully
assess the risks involved in the Fund's equipment portfolio;
- The Fund's ability to realize lease revenues and make cash distributions
is subject to the risk of lessee defaults;
- The use of secured debt to acquire equipment may result in the loss of
equipment used as collateral for such debt if the Fund is unable to pay
its debt obligation;
- The Units will not be listed on any securities exchange and there are
significant limitations on transferability. Accordingly, investors may
be unable to resell or dispose of Units except at discounts from the
offering price, which discounts may be substantial, and, while the
Fund is expected to liquidate over a ten to eleven year term, it must
terminate no later than December 2017;
- The Fund's ability to diversify its portfolio of leased equipment by
types of equipment, manufacturers, lessees and geographic regions is
dependent on the amount of capital actually raised and the amount of
available debt financing (the Fund intends to incur debt equal to
approximately 50% of its equipment cost, but there can be no assurance
as to the amount of available debt financing);
- A substantial portion of distributions will be deemed, and a
substantial portion of distributions by prior ATEL programs have been,
a return of invested capital, as opposed to investment income, and the
amount of investment income investors may realize depends in part on
the resale or re-lease value of equipment after the initial leases
terminate;
- The return of investors' capital is not guaranteed and there can be no
assurance as to the timing or amount of any distributions; and
Who Should Invest: The section of the Prospectus entitled "Who Should
Invest" contains an explanation of investor suitability requirements, and
describes the minimum net worth and income requirements that various states
8
<PAGE>
impose on investors. In particular, that discussion addresses the rules
applicable to certain investors such as IRAs.
Estimated Use of Proceeds: Of each dollar raised by the Fund,
approximately 86% will actually be invested in the cash portion of the purchase
price of equipment. An additional 0.5% will be retained as capital reserves. The
balance will be used to pay selling commissions equal to 9.5% (including up to
1.5% which may be retained by the Dealer Manager, an affiliate of the Fund
Manager, for wholesaling expenses and commissions), Acquisition Expenses and the
other expenses of the offering in the estimated amount of from 2.5% to 4% (which
may be advanced by the Fund Manager and reimbursed by the Fund). See "Estimated
Use of Proceeds" for a precise breakdown of the Fund's estimate as to the use of
the capital it raises.
Management Compensation: The Fund Manager and its affiliates will
receive substantial fees and compensation in connection with this offering and
the operation of the Fund's business, including the following:
- Selling commissions on the sale of Units are payable to the
Dealer Manager, a substantial portion of which will be reallowed to
participating broker dealers. The Dealer Manager may retain up to 1.5%
of the total proceeds from the sale of Units.
- An equipment management fee will be paid to an Affiliate
of the Fund Manager, in an amount equal to either 2% or 3.5%
of the gross revenues from Fund leases (depending on the type of
lease).
- An incentive management fee will be paid to the Fund Manager
or an Affiliate, in an amount equal to 4% of
distributions of cash from operations (generally consisting of lease
revenues less operating expenses and reserves). When investors have
received distributions equal to their original investment plus
distributions equal to a cumulative 10% per annum on an investor's
unreturned capital, then the incentive management fee will be paid in
an amount equal to 7.5% of all Fund distributions, including
distributions of the proceeds from sale, refinancing or other
disposition of the equipment.
- An equipment resale/re-leasing fee may be paid to ATEL
Equipment Corporation in an amount up to 3% of the sale price of Fund
equipment, but only after investors have received their capital back
plus distributions equal to a cumulative 10% per annum on an investor's
unreturned capital. A fee of up to 2% of the gross rents may also be
paid to ATEL Equipment Corporation upon a re-lease of Fund equipment.
- The Fund Manager has an interest as the General Partner in
the Fund allocating to it 7.5% of all net income and net loss for tax
and accounting purposes and cash distributions.
See "Management Compensation." The Fund Manager has discretion with
respect to all decisions related to Fund transactions, and may therefore be
9
<PAGE>
able to affect the amount and timing of compensation payable by the Fund. See
"Conflicts of Interest - Receipt of Commissions, Fees and other Compensation
by the Fund Manager and its Affiliates."
Investment Objectives and Policies: The Fund's objectives are to invest
in a diversified portfolio of equipment for lease to third parties which will:
(i) Preserve, protect and return the Fund's invested capital;
(ii) Generate regular distributions to investors from net lease revenues
and from sales or refinancing of equipment, with any balance remaining after
certain minimum distributions (see "Income, Losses and Distributions Allocations
of Distributions") to be reinvested in equipment during the period ending six
years after the year in which this offering of Units terminates (the
"Reinvestment Period"); and
(iii) Provide additional distributions after the end of the Reinvestment
Period and until all Equipment has been sold.
There can be no assurance that any such objectives can be attained.
The Fund's equipment portfolio may include various types of equipment,
as described more fully under "Investment Objectives and Policies - Types of
Equipment."
It is the Fund's investment objective to acquire primarily
low-technology, low-obsolescence equipment such as materials handling equipment,
manufacturing equipment, mining equipment, and transportation equipment. A
portion of the portfolio may include some more technology-dependent equipment,
such as certain types of communications equipment, medical equipment and office
equipment, although the Fund will seek to invest in such equipment in a manner
consistent with its primary objective of acquiring equipment which is generally
subject to relatively low rates of technological obsolescence. The Partnership
Agreement does not limit the Fund's ability to invest in high-technology
equipment. Equipment that depends on high-technology design or applications for
its value may often tend to lose value more rapidly than equipment which is less
technology dependent, as advances in technology may render such high-technology
equipment functionally obsolete at an earlier date. See Table IV of Exhibit A,
"Prior Performance Information," for information concerning the composition of
the equipment portfolios held by the six prior public programs sponsored by the
Fund Manager and its affiliates which have investment objectives and policies
identical to those of the Fund.
The effect of owning assets which may be subject to economic
depreciation is, generally, that the investors' return on their capital, and in
some cases the return of their capital, is dependent on the rate of such
economic depreciation. In other words, the residual values realized upon the
sale, release or other disposition of the equipment will play a significant role
in determining the success of the investment. Like most goods, new equipment
generally has a higher market value than comparable used equipment, and capital
equipment tends to lose value as it is used over a period of time. An
10
<PAGE>
equipment lessor such as the Fund seeks to negotiate lease terms based in part
on its estimate of the value of the leased equipment upon termination of the
lease. The lessor will negotiate a lease rate designed to generate sufficient
rental revenues over the term of the lease so that, when the total lease
payments are added to the estimated value of the equipment upon lease
termination, the lessor will have achieved a return of the capital used to
purchase the equipment plus an overall profit on the investment. There can be no
assurance, however, that the lessor's assumptions regarding the residual value
of the equipment will be accurate or that its objective will be achieved.
A majority of the Fund's equipment will be leased on terms which return
at least 90% of the original purchase price through lease payments ("High Payout
Leases"), and a substantial portion of the purchase prices of other leased
assets may be expected to be returned through rents. The residual value risk and
the dependence on residual values to achieve a return on investment is discussed
under "Risk Factors - Investment Risks - Return on Investment Dependent Upon
Residual Value of Equipment."
Upon termination of the Fund's leases, the Fund Manager will seek to
release or sell the equipment, provided that subsequent leases will be for terms
consistent with the Fund's intended term.
Other than as set forth under "Investment Objectives and Policies
Identified Equipment Acquisitions" and in any supplement to this Prospectus, the
Fund does not currently have options, contractual obligations or letters of
intent to acquire any equipment. See "Risk Factors" and "Investment Objectives
and Policies."
There is no limit on the borrowings on individual items of equipment.
However, the Fund's objective is to incur total portfolio debt equal to the
maximum permitted under the Partnership Agreement, which is an amount equal to
50% of the cost of its equipment as of the date of its final investment of the
offering proceeds or, thereafter, as of the date any subsequent indebtedness is
incurred. See "Risk Factors - Risks of Leverage" and "Investment Objectives and
Policies - Borrowing Policies."
Conflicts of Interest: The Fund Manager will have conflicts of interest
in the management of the Fund, including having interests which may be
inconsistent with those of the investors under some circumstances and being
permitted to engage in other activities which may conflict with those of the
Fund. The section of this Prospectus entitled "Conflicts of Interest" discusses
the most important of these conflicts of interest and how the Fund Manager
intends to resolve them.
Fiduciary Duty of the General Partner: The Fund Manager is responsible
for supervising all aspects of the administration of the Fund and management of
its business. The Fund Manager, as General Partner of the Fund, will act as a
fiduciary to the Fund, and, consequently, is required to exercise good faith and
integrity in all dealings with respect to Fund affairs. See "Fiduciary Duty of
General Partner." However, the Fund will indemnify the Fund Manager against
certain liabilities and the Fund Manager will have certain
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conflicts of interest, as described under "Conflicts of Interest."
Management: The General Partner of the Fund is ATEL Financial
Corporation ("ATEL" or the "Fund Manager"), a California corporation. Affiliates
of the Fund Manager will provide various services to the Fund. See "Management."
The offices of the Fund Manager and its Affiliates are located at 235 Pine
Street, 6th Floor, San Francisco, California 94104, and its telephone numbers
are (415) 989-8800 and (800) 543-ATEL. The Fund Manager's balance sheet is
included in this Prospectus under the caption "Financial Statements."
Prior Performance Summary: The Fund Manager and its affiliates have
sponsored six prior public and one prior private equipment leasing programs. The
six prior public programs have had investment objectives substantially identical
to those of the Fund, while the private program had similar investment
objectives which differed in certain respects from those of the Fund. The
section of the Prospectus entitled "Prior Performance Summary" contains a
summary of certain of these prior investment programs in which the Fund Manager
and its affiliates have been involved. The Prior Performance Tables attached as
Exhibit A to the Prospectus include statistical and financial data regarding
these prior investment programs. Upon request, the Fund Manager will provide a
copy of the most recent annual report on Form 10-K for any of the six prior
public programs.
Income, Losses and Distributions: Fund income and loss for tax purposes
shall be allocated 92.5% to investors and 7.5% to the Fund Manager. After
payment of Fund expenses, permitted reinvestment in equipment and setting aside
of reserves, investors will receive 88.5% and the Fund Manager and its
Affiliates a total of 11.5% (7.5% as a distribution to the Fund Manager and 4%
as a fee payable to its Affiliate) of all distributions of net lease revenues.
Investors will initially receive 92.5% and the Fund Manager 7.5% of all
distributions of the net proceeds of equipment sales or refinancings. At such
time as investors have received aggregate Distributions equal to their original
capital contributions plus an amount equal to 10% per annum on their "adjusted
invested capital" (their original capital contribution reduced by all prior
distributions to investors in excess of 10% per annum), investors will receive
85% and the General Partner and its Affiliates a total of 15% (7.5% as a
distribution to the General Partner and 7.5% as a fee payable to its Affiliate)
of all subsequent distributions of proceeds from sales or refinancings. The
foregoing is only a brief summary of complicated provisions in the Partnership
Agreement. See "Income, Losses and Distributions" for a more complete and
precise description of these provisions.
Upon liquidation of the Fund, the proceeds of liquidation will be
distributed in accordance with each partner's positive capital account balance.
See "Income, Losses and Distributions."
Reinvestment: Subject to certain limitations, including the prior
distribution of cash in specified minimum amounts, the Fund Manager may reinvest
Fund revenues in additional equipment through the end of a six-year period
commencing after the year this offering closes. See "Income, Losses and
Distributions - Reinvestment."
Income Tax Consequences: The following is a brief summary of, and is
qualified by, the more extensive discussion of the material federal income tax
consequences set forth in "Income Tax Consequences."
- - Partnership Classification. Counsel is of the opinion that the Fund will
be classified as a partnership for federal income tax purposes.
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- - Allocation of Net Income and Net Loss. Tax counsel is of the opinion
that, it is more likely than not, the tax allocation provisions in the
Partnership Agreement will not be significantly modified by the
Internal Revenue Service.
- - Income Recognition. In any year, an investor's tax liabilities
attributable to his investment in the Fund may exceed cash realized by
such investor in that year.
- - Limitations on Deduction of Losses. There are certain limitations on the
ability of an investor to utilize his allocable share of Fund tax losses.
- - Tax Status of Leases. In order for investors to be entitled to
depreciation deductions, the equipment leases must be classified "true
leases" for federal income tax purposes. The Fund Manager has
represented that it will use its best efforts to assure that each item
of equipment will comply or will substantially comply with the Internal
Revenue Service's equipment leasing guidelines.
- - Disposition of Units. In certain circumstances, the amount of tax
payable by an investor on the gain realized from a sale or disposition
of his Units may exceed the cash received therefrom.
- - Fund Elections. The Fund is not expected to file an election under
Internal Revenue Code section 754. The absence of such election may have
an adverse effect on the marketability and sale price of the Units.
- - UBTI. The Fund will generate unrelated business taxable income to
Holders who are Qualified Plans or IRAs.
- - AMT. The Fund's depreciation deductions may be subject to adjustment
under the alternative minimum tax.
Summary of the Partnership Agreement: The Partnership Agreement that
will govern the relationship between the investors and the Fund Manager is a
complex legal document, and the section of the Prospectus entitled "Summary of
the Limited Partnership Agreement" summarizes some of its important provisions.
Other important provisions are summarized elsewhere in the Prospectus under the
captions "Management Compensation," "Income, Losses and Distributions" and
"Reports to Holders." The following is a brief summary of certain provisions of
the Partnership Agreement which are discussed in greater detail under "Summary
of the Limited Partnership Agreement."
- - Voting Rights of Limited Partners. Each limited partner of the Fund
("Limited Partner") will be entitled to cast one vote for each Unit which
such partner owns as of the date designated as the record date for any
Limited Partner vote. The Limited Partners are entitled to vote on only
certain fundamental organizational matters affecting the Fund, and are
not authorized to participate in the conduct of Fund operations or the
establishment or implementation of Fund investment policies.
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- - Meetings. The General Partner or Limited Partners holding 10% or more
of the total outstanding Units may call a meeting of the Limited
Partners or a vote of the Limited Partners without a meeting, on
matters on which they are entitled to vote.
- - Dissenters' Rights and Limitations on Mergers and Roll-ups. Section
16.7 of the Partnership Agreement provides Limited Partners with
certain rights in the event of any proposal involving an acquisition,
conversion, merger or consolidation transaction in which the investors
would be issued new securities in the resulting entity.
- - Transferability of Units. The Fund Manager may condition the
effectiveness of any proposed transfer of Units or an interest in Units
on such representations, warranties, opinions of counsel, and other
assurances as it considers appropriate as to certain matters set
forth in the Partnership Agreement. Any assignment, sale, exchange or
other transfer in contravention of any of the provisions of the
Partnership Agreement shall be void and ineffectual, and shall not bind
or be recognized by the Fund.
- - Liability of Investors. Under the Partnership Agreement and the
California Revised Limited Partnership Act, an investor complying with
the Partnership Agreement will not be liable for Fund obligations in
excess of his unreturned capital contribution and share of
undistributed profits; provided that, if the Fund has made an improper
distribution, the investor may be required to return the amount
received as a result.
- - Status Of Units. Under the Partnership Agreement, each Unit will be
fully paid and nonassessable and all Units have equal voting and other
rights, except with respect to certain limitations on the voting of
Units held by the Fund Manager or its Affiliates.
- - Term and Dissolution. The Fund will continue for a maximum period ending
December 31, 2017, but may be dissolved at an earlier date if certain
contingencies occur. The Fund intends to liquidate its assets and
distribute the proceeds thereof beginning after the Reinvestment Period
expires (at the end of the sixth full year following the year during
which the final investors are admitted to the Fund) with final
liquidation expected to occur approximately ten to eleven years after the
date the final investors are admitted to the Fund.
- - The Duties of the Fund Manager. ATEL Financial Corporation, the Fund
Manager, is General Partner of the Fund and, under the terms of the
Partnership Agreement, has the exclusive management and control of all
aspects of the business of the Fund.
- - Books of Account and Records. The General Partner is responsible under
the Partnership Agreement for keeping certain books of account and
records of the Fund reflecting all of the contributions to the capital
of the Fund and all of the expenses and transactions of the Fund. Such
books of account and records will be kept at the principal place of
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business of the Fund in the State of California, and each Limited
Partner and his authorized representatives shall have, at all times
during reasonable business hours, free access to and the right to
inspect and copy at their expense such books of account and all records
of the Fund, and each Limited Partner shall have the right to compel
the Fund to deliver copies of certain of these records on demand.
- - Indemnification of the Fund Manager. The Partnership Agreement provides
that the Fund Manager and its affiliates who perform services for the
Fund will be indemnified against certain liabilities.
Plan of Distribution: The Units will be offered through ATEL Securities
Corporation (the "Dealer Manager"), an Affiliate of the Fund Manager. The
Dealer Manager will in turn offer Units through other broker-dealers who are
members of the National Association of Securities Dealers, Inc. ("NASD"). See
"Plan of Distribution."
Until subscriptions for a total of 120,000 Units are received and accepted,
all subscription checks must be made payable to, and all offering proceeds will
be deposited in an escrow account at, First Trust of California National
Association, San Francisco, California. The offering will terminate not later
than two years from the date of this Prospectus, subject to any re-qualification
or renewal of qualification of the offering which may be required in certain
jurisdictions after the end of the first year of the offering. Upon receipt and
acceptance of subscriptions to a minimum of 120,000 Units, the subscription
proceeds will be released to the Fund. See "Plan of Distribution."
Glossary: See "Glossary" for definitions of certain capitalized terms
which are not otherwise defined herein.
RISK FACTORS
The purchase of Units involves various risks. Therefore, prospective
purchasers should consider the following factors, among others discussed in this
Prospectus, before making a decision to purchase Units.
Limited Investor Voting Rights and Total Reliance on Management. All
decisions with respect to the management of the Fund will be made exclusively by
the Fund Manager. The success of the Fund will, to a large extent, depend on the
quality of the management of the Fund, particularly as it relates to Equipment
acquisition, leasing and disposition. Holders are not permitted to take part in
the management of the Fund and Limited Partners have only limited voting rights.
An affirmative vote by holders of more than 50% of the outstanding Units is
required to remove the General Partner. See "Summary of the Partnership
Agreement - Voting Rights of Holders." Accordingly, no person should purchase
any of the Units offered hereby unless he is willing to entrust all aspects of
the management of the Fund to the Fund Manager and has evaluated the Fund
Manager's capabilities to perform such functions. The Fund Manager has engaged
in various phases of equipment acquisition, leasing, financing and disposition
for its own account, and for corporate investors and others, and has sponsored
six prior public partnerships, none of which has yet completed
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its operations and been liquidated. Although the General Partner does maintain
key employee life insurance policies, the key executives are not bound by
specific employment agreements. See "Management" and Exhibit A - "Prior
Performance Information."
Fund Manager's Compensation and Conflicts of Interest. Substantial fees
are payable to the Fund Manager and its Affiliates before distributions are paid
to investors and even if the Fund does not generate profits. The Fund Manager
will also be subject to many conflicts of interest in connection with its
management of the Fund. In particular, the anticipated use of leverage equal to
50% of the aggregate cost of Equipment could result in higher Equipment
Management Fees and other compensation as well.
Unspecified Equipment and Lessees. It is not possible to assess all of
the potential risks of an investment in Units because all of the Equipment to be
purchased and the lessees to whom such Equipment will be leased have not been
identified. A prospective investor will not have complete information as to the
manufacturers from which the Fund will purchase Equipment, the number of
Operating Leases or Full Payout Leases to be entered into, the specific types
and models of Equipment to be acquired, or the identity, financial condition and
creditworthiness of the lessees who will lease such Equipment. The Holders must
rely solely upon the judgment and ability of the Fund Manager with respect to
the selection and methods of investment and reinvestment in Equipment,
evaluation of Equipment manufacturers, vendor leasing programs, types of leases
and potential lessees. See "Investment Objectives and Policies."
Defaults by Lessees. The default by a lessee under a lease may cause a
lease to terminate and Equipment to be returned to the Fund at a time when the
Fund Manager or its agents may be unable promptly to arrange for the re-leasing
or sale of such Equipment, thus resulting in the loss of anticipated revenues
and the inability to recover the entire amount of the Fund's original
investment. Furthermore, the Fund may experience difficulties and delays in
recovering the Equipment from the defaulting lessee, if a lessee files for
protection under the bankruptcy laws or otherwise. The Equipment may be returned
in poor condition and the Fund may be unable to enforce the return provisions
and other lessee obligations in its lease against an insolvent lessee. In any
event, the costs associated with recovering Equipment upon a lessee's default,
enforcing the lessee's obligations under the lease, and transporting, storing,
repairing and remarketing the Equipment may be substantial and may adversely
affect Fund operations. See Exhibit A, "Prior Performance Information," Table IV
and the attached footnotes for a discussion of defaults by lessees of prior
programs sponsored by the Fund Manager and its Affiliates. On its defaulted
leases, the prior program realized lower residual values on certain items of
equipment than had been anticipated at the time of acquisition.
Risks of Leverage. To finance a portion of the purchase price of its
Equipment portfolio, the Fund expects to incur aggregate indebtedness in an
amount equal to the maximum permitted under the Partnership Agreement. Total
Fund debt may not exceed an amount equal to 50% of the aggregate cost of
Equipment as of the final commitment of the Net Proceeds and, thereafter, on
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the date any subsequent indebtedness is incurred. Equipment purchased on a
leveraged basis generally can be expected to be profitable only if it generates
sufficient cash revenues from rents and residual proceeds in excess of those
required to pay interest on the related debt, recover the purchase price and
cover other operating expenses. The Fund intends to use both nonrecourse debt
(debt in which only the asset financed by the lender is collateral securing the
obligation) and recourse debt (in which all of the Fund's assets or a selected
pool of the assets are collateral securing the obligation). The Fund expects to
incur recourse debt obligations in the form of asset securitization transactions
and short term bridge financing to provide temporary financing for transactions
approved for acquisition by the Fund, including a common recourse debt facility
with affiliated programs. See the discussion under "Investment Objecties and
Policies - Borrowing Policies." Upon a default by a borrower under a secured
debt transaction, the lender generally has the right to accelerate the entire
debt obligation and to foreclose on the collateral. The lender can thereby force
a sale of the collateral to satisfy the full balance due under the debt
obligation of the borrower. The use of leverage may therefore cause the risk of
loss to the Holders to be greater than if no debt were incurred, because fixed
payment obligations must be met on certain specified dates regardless of the
amount of revenues derived by the Fund from leveraged Equipment. At the same
time, the use of debt increases the potential size of the Fund's Equipment
portfolio, the amount of gross lease revenues and potential residual proceeds,
and would also thereby increase the potential Equipment Management Fees payable
to the Fund Manager, as such fees are determined as a percentage of the gross
revenues from leases of Equipment.
Furthermore, the amount of Distributions to the Holders and the amount
of potential tax benefits may depend upon the availability and the terms of
financing for the purchase of Equipment. The Fund has not entered into any
agreements to obtain permanent financing, and it is not currently possible to
ascertain the availability of such financing. No assurance can be given that
financing will be available or, if available, that it will be provided upon
terms which the Fund Manager deems reasonable.
Balloon Payments. The Fund may borrow on terms which do not provide for
amortization of the entire principal amount or a substantial portion thereof
prior to maturity. Such "balloon payment" debt involves greater risks than
secured debt where the principal amount is amortized over the term of the loan
because the ability of the Fund to repay at maturity the outstanding principal
amount may be dependent upon its ability to obtain adequate refinancing, and in
turn upon economic conditions in general and the value of the underlying
Equipment in particular. There is no assurance that the Equipment will have
sufficient value to permit the Fund to pay or refinance any such balloon payment
at maturity. Further, a significant decline in the value of the underlying
Equipment could result in a loss of the Equipment through foreclosure.
Limited Transferability of Units. There are significant limitations on
the transferability of Units, and, as a result of potential adverse tax effects,
the Fund Manager will take steps to assure that no public trading market
develops for the Units offered hereby. Holders may not, therefore, be
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able to liquidate their investments in the event of an emergency. In addition,
Units may not be readily accepted as collateral for a loan. Consequently, the
purchase of Units should be considered only as a long-term investment.
Diversification Dependent Upon Size of Fund. The Fund will be capitalized
with contributions of not less than $1,200,000 nor more than $150,000,000. The
potential for portfolio diversification and therefore the potential
profitability of the Fund may be affected by the amount of funds actually
raised. In the event that the Fund receives only the minimum Gross Proceeds, it
will have less ability to obtain diversification of its Equipment portfolio and
lessees, and the degree to which it may be adversely affected by the results of
any single lease transaction will be increased. See "Estimated Use of Proceeds"
and "Plan of Distribution." It should be noted that there is no minimum number
of lease transactions nor is there any restriction on the percentage of offering
proceeds at the minimum offering amount which may be used to purchase equipment
of a single type or equipment leased to a single lessee.
Return on Investment Dependent Upon Residual Value of Equipment. A
substantial portion of Fund distributions from lease revenues is expected to be
a return of capital. The Fund's ability to generate income from its investment
in Equipment will depend in part upon the continuing value of such Equipment
when its leases terminate, which in turn will depend upon, among other things:
(i) the condition of the Equipment; (ii) the cost of comparable new Equipment;
and (iii) the functional and technological obsolescence of the Equipment. In
general, leased equipment can be expected to depreciate in constant dollars
(that is, in dollars discounted for the effects of inflation during the lease
term). In structuring the terms of Fund leases, the Fund Manager will make
certain assumptions regarding the anticipated residual values of Equipment in an
effort to calculate lease rates which, when combined with estimated sale
proceeds, may be expected to return the Fund's invested capital and provide a
profit. There can be no assurance that the Fund's residual value assumptions
will prove to be accurate or that the Equipment will not decline in value more
rapidly than anticipated.
Portion of Distributions Characterized as Return of Capital. The
portion of each Distribution which exceeds the Fund's net income for the fiscal
period in which the Distribution is made would constitute a return of capital.
In other words, to the extent an investor receives cash in excess of his
allocable share of income for a period, he will be deemed to be receiving a
return of his invested capital rather than investment income. Distributions by
the Fund may be characterized for tax, accounting and economic purposes as a
return of capital, a return on capital (i.e., investment income) or a portion of
each. The portion of total Distributions which will constitute a return of
capital and the portion which will constitute investment income upon termination
of the Fund will depend on a number of factors in the Fund's operations,
including the values which may be realized on the sales of the Fund's Equipment
at the end of its leases, and cannot be determined until its Equipment portfolio
is liquidated and the total amount of all Distributions is compared to the total
capital invested. The amount and sources of cash distributions to investors in
each of the prior public programs sponsored by the General Partner and its
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Affiliates are set forth in Table III of Exhibit A to this Prospectus. Set forth
under the line item "Cash distributions to investors on a GAAP basis," are the
amount of annual distributions by each prior program per $1,000 invested and the
portions of which constitute return of capital and investment income. It should
be noted, however, that, as discussed above with respect to the Fund, the return
of capital and investment income ultimately to be realized by the prior programs
will not be finally determinable until each program is completed and liquidated.
Activities Outside of the United States. The Fund may lease Equipment
to foreign subsidiaries of United States corporations and to foreign lessees and
otherwise lease Equipment which is to be used outside the United States. There
is no limit on the amount of Equipment which may be so leased, but the Fund
Manager will seek to limit the aggregate amount of the Fund's equity invested in
all Equipment which is leased to such foreign lessees and which is otherwise to
be used primarily outside the United States to not more than 20% of the Gross
Proceeds at any time during the period the Fund is acquiring equipment. In such
cases, the Fund's interest in the Equipment may be subject to the regulatory,
taxing and judicial authorities of a foreign jurisdiction. The Fund will attempt
to require foreign lessees to consent to the jurisdiction of U.S. courts in the
event disputes should arise regarding the lease. Even if the Fund is successful
in this effort, it may be difficult or impossible to enforce judgments obtained
against foreign lessees in the event of a lease default, or to obtain possession
of leased Equipment or otherwise to enforce the Fund's rights under the related
lease. Moreover, the use and operation of Fund Equipment in foreign
jurisdictions may subject the Equipment to unanticipated taxes, assessments or
confiscation without fair compensation. The Fund will attempt to include in such
leases provisions which will cause all payments due under the leases to be made
in U.S. currency and require lessees to reimburse the Fund for any foreign taxes
billed to the Fund and to maintain insurance covering the risk of confiscation.
In the event that lease payments or other terms of the leases involve payments
in other than U.S. currency, the Fund will be subject to the risk of currency
exchange rate fluctuations, which could reduce the Fund's overall return on an
investment. Many countries also have laws regulating the transfer and exchange
of currencies, and such laws may affect a foreign lessee's ability to comply
with lease terms. Finally, certain depreciation methods may not be available for
Equipment leased by a foreign lessee or "used predominantly outside the United
States." See the discussion below under "Income Tax Consequences - Depreciation
- - Limitations on the Use of MACRS - (1) Property Used Predominantly Outside the
United States, and (2) Tax-Exempt Leasing."
General Risks in the Equipment Leasing Business. The success of the
Fund will be affected by the quality of the Equipment, the viability of the
Equipment manufacturer, the timing of the purchases of Equipment by the Fund
Manager and its ability to forecast technological advances concerning such
Equipment. Equipment leasing is subject to the risk of credit losses,
technological and economic obsolescence and defaults by lessees. Increases in
operating expenses borne by the Fund (including expenses relating to energy,
labor, taxes and insurance) could have an adverse impact upon the Fund's
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ability to keep the Equipment leased on a profitable basis.
Fluctuations in Demand for Equipment. The ability of the Fund to keep
the Equipment leased and/or operating and the terms of acquisitions, leases and
dispositions of Equipment depend on various factors (many of which are not
within the control of the Fund Manager or the Fund), such as general economic
conditions, including the effects of inflation or recession, and fluctuations in
supply and demand for various types of Equipment resulting from, among other
things, technological and economic obsolescence.
Competition. The equipment leasing industry is highly competitive.
Equipment manufacturers, corporations, partnerships and others offer users an
alternative to the purchase of most types of equipment with payment terms which
vary widely depending on the lease term and type of equipment. In seeking
suitable lease transactions, the Fund will compete with other entities,
including financial institutions, manufacturers and public and private limited
partnerships organized and managed similarly to the Fund, some of which may have
greater financial resources or experience than the Fund and the Fund Manager.
Such competition may have an adverse effect on the terms of lease transactions
available to the Fund.
Risks of Operating Leases. Equipment representing at least a majority of
the aggregate purchase price of the Fund's Equipment portfolio as of the final
investment of the Net Proceeds must be leased under High Payout Leases, the
Equipment portfolio will predominantly consist of investments in Operating
Leases, under which the Fund will be entitled to receive aggregate rental
payments equal to at least 90% of the purchase price of the leased Equipment.
The Equipment portfolio is expected predominantly to consist of investments in
Operating Leases, under which the Fund will receive aggregate rental payments in
an amount that is less than its purchase price for the Equipment. he Fund must,
upon termination of an Operating Lease, either obtain a renewal from the
original lessee, find a new lessee or sell the Equipment in order to cover its
investment in such Equipment. If the Fund is unable to renew leases, to enter
into new leases or to sell Equipment on desirable terms after the expiration of
the initial terms of Operating Leases, it may experience (i) loss of anticipated
revenues and (ii) the inability to recover the Fund's investment in the
Equipment.
Casualty Losses. Equipment may be damaged or lost as a result of fire,
weather, accident, theft or other events of casualty. There is no assurance that
all potential casualties will be insurable or that, if insured, the insurance
proceeds will be sufficient to cover a casualty.
Consequences of Government Regulation. The use, maintenance and
ownership of certain types of Equipment are regulated by federal, state and/or
local authorities which may impose restrictions and financial burdens on the
Fund's ownership and operation of such Equipment. Changes in government
regulations, industry standards or deregulation may also affect the ownership,
operation and resale of such Equipment.
In addition, certain types of Equipment (such as railcars and aircraft)
are subject to extensive safety and operating regulations by governmental
agencies and/or industry organizations. Such agencies or organizations may
require modifications or capital improvements to items of Equipment. Such
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modifications or improvements may require the removal from service of items of
Equipment for a period of time and substantial capital expenditures by the
owner. The terms of leases may provide for rent abatements if required
improvements cannot be made in a timely manner or if the Equipment must remain
out of service for an extended period. The Fund may as a result experience
reductions or interruptions in operating revenues from such leases. If the Fund
lacked sufficient funds to make a required improvement or modification, it might
be required to sell the affected item of Equipment or to sell other items of
Equipment owned by it in order to obtain the necessary funds; in either event,
the Fund might sustain a loss on its investment in the items sold and might lose
future revenues, and the Holders might experience adverse tax consequences.
Registration of Aircraft May Not Be Possible. The Fund may invest a
portion of the Net Proceeds in aircraft. Aircraft operated in the United States
must be registered with the Federal Aviation Administration, which limits such
registration to aircraft owned by U.S. Citizens and Resident Aliens. The FAA's
Rules are not clear on the status of a partnership which owns aircraft, and
there may be a risk that a Fund aircraft may not be registered or may have its
registration revoked. The fund's acquisition of any aircraft will be conditioned
on appropriate registration with the FAA or other government agency having
jurisdiction over the aircraft. If such registration were revoked for any
reason, the aircraft could not be operated in the United States airspace, and
the Fund would be subject to resulting risks, including a possible forced sale
of the aircraft, the potential for uninsured casualties to the aircraft, the
loss of the benefits of the central recording system under federal law (and
exposure to liens not of record with the FAA) and a breach by the Fund of leases
or financing agreements relating to the aircraft. See "Investment Objectives and
Policies -- Types of Equipment - Aircraft."
Newly-Formed Entity. The Fund was formed in May, 1996, and has no
operating history. No assurance can be given that the Fund's operations will be
successful or that it will meet its stated investment objectives.
Difficulty in Investing Proceeds. There can be no assurance as to the
length of time it will take the Fund to invest the Net Proceeds. A delay in the
investment could affect the Fund's ability to meet its investment objectives.
Any overall decline in corporate expansion or demand for capital goods would
adversely affect the Fund's ability to invest the Net Proceeds.
Income in Excess of Distributions. The Fund Manager may, in its
discretion, withhold Distributions if, in the opinion of the Fund Manager, such
funds should be used to meet Fund obligations, establish or replenish capital
reserves or, as discussed below, reinvest in additional Equipment. Distributions
to the Holders may be less than the amount of the Fund's taxable income. In such
event, depending upon a Holder's tax rate and the amount distributed, a Holder
may be subject to income tax payable out of his personal funds. Until the end
of the Reinvestment Period, the Fund Manager intends to purchase additional
Equipment from funds obtained from operations and sales of Equipment after the
Fund has provided certain specified Distributions. Cash from Operations and
Cash from Sales or Refinancing must be distributed to the extent necessary to
pay federal and state tax liabilities arising from
21
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the Fund for a taxpayer in a 31% federal income tax bracket (subject to the
additional minimum Distribution requirements described under "Income,
Losses and Distributions - Distributions"). Accordingly, the risk of any tax
liability in excess of cash distributions for any period resulting from
reinvestment of Fund revenues in additional Equipment is limited to those
persons in a federal income tax bracket in excess of 31%. See "Income, Losses
and Distributions" and "Income Tax Consequences" for information with respect
to the allocation of Net Income, Net Loss and Distributions. In addition,
distributions to foreign and nonresident Holders may be subject to withholding
taxes which would reduce the amount of cash actually received by such Holders.
See "Income Tax Consequences Taxation of Foreign Persons" and "State Taxes."
Limited Financial Resources of Fund Manager. The net worth of the Fund
Manager as of July 31, 1996 was in excess of $3 million determined on a book
value basis. If the financial condition of the Fund Manager should be
substantially reduced, the Fund might not continue to satisfy the conditions
required for classification as a partnership for federal income tax purposes,
thereby resulting in adverse income tax consequences for the Partners. See
"Income Tax Consequences." Furthermore, should such net worth be materially
reduced in the future the Fund Manager's ability to satisfy its obligations to
the Fund could be impaired. The Fund Manager is also general partner for five
other limited partnerships and has contingent liabilities arising out of leasing
transactions with various non-affiliated third parties; as such, it may be
liable for the debts and obligations arising therefrom. See "Financial
Statements". If the Fund Manager were forced into bankruptcy or receivership and
the Holders did not elect to continue the Fund, dissolution of the Fund could
result at a time when such dissolution would be adverse to the interests of the
Holders.
Liability of Holders. Under California law, neither the existence nor
the exercise of certain voting rights in a limited partnership agreement will
cause limited partners to be deemed to take part in the control of partnership
business. A substantial number of states have adopted legislation which provides
that the laws of the state under which a foreign limited partnership is
organized govern its organization and internal affairs and the liability of its
partners. Accordingly, in such states, the limitation of liability of limited
partners provided by California law should be respected. In those states which
have not adopted similar legislative provisions, counsel for the Fund has
advised that strong arguments may be made in support of the conclusion that
California law should govern as to the liability of limited partners and that
neither the possession nor the exercise of such rights should affect the limited
liability of limited partners; counsel, however, has also advised that there is
no authoritative precedent on this issue, and a question exists as to whether
the exercise (or perhaps even the existence) of such rights might provide a
basis on which a court in such a state could determine that the Holders are not
entitled to the limitation on liability for which the Partnership Agreement and
California law provide.
Risks of Joint Ventures. Some of the Fund's investments may be owned by
joint ventures or partnerships between the Fund and unaffiliated third parties
or, under certain circumstances, Affiliates of the Fund or the Fund Manager, or
as co-tenants with such parties. The investment by the Fund in joint ownership
of Equipment, instead of investing in the Equipment directly or as the sole
owner, may involve risks not otherwise present, including, for
22
<PAGE>
example, risks associated with the possibility that the Fund's co-venturer in an
investment might become bankrupt, that such co-venturer may at any time have
economic or business interests or goals which are inconsistent with the business
interests or goals of the Fund, that the parties may reach an impasse on joint
venture decisions or that such co-venturer may be in a position to take action
contrary to the instructions or the requests of the Fund or contrary to the
Fund's policies or objectives. Among other things, actions by such a co-venturer
might have the result of subjecting Equipment owned by the joint venture to
liabilities in excess of those contemplated by the terms of the joint venture
agreement or might have other adverse consequences for the Fund. (See
"Investment Objectives and Policies - Joint Venture Investments.")
Partnership Status. The Fund will not apply for a ruling from the
Internal Revenue Service (the "Service") that it will be classified as a
partnership and not as an association taxable as a corporation for federal
income tax purposes. The Service has set forth certain net worth requirements
which must be met by general partners in a limited partnership before the
Service will issue a ruling concerning the tax status of such partnership. There
can be no assurance that the Fund Manager will maintain a net worth sufficient
to satisfy such requirements. Furthermore, there is the possibility that Units
may be considered to be "publicly traded," thereby resulting in the Fund being
taxed as a corporation. The Fund Manager will cause the Fund to contest any
contention by the Service that the Fund constitutes an association taxable as a
corporation, but Holders should be aware that this may result in additional
representation expenses (i.e., legal and accounting fees). In the event that the
Fund is treated for tax purposes as an association, the effective yield on an
investment in the Units would be substantially reduced because certain tax
benefits associated with the offering would be unavailable. See "Income Tax
Consequences."
Certain Other Tax Considerations. In determining whether to invest in
the Units offered hereby, a prospective Holder should consider other possible
tax consequences thereof which may include, among others:
(a) the Service could disallow or reduce the Fund's
depreciation deductions or other deductions, or reallocate among the
Holders the items of Fund income, gain, deduction and loss in a manner
that is different from the provisions contained in the Partnership
Agreement, in each case potentially resulting in less tax loss to
Holders, or additional taxable income to Holders without a
corresponding increase in cash Distributions;
(b) the investment by an exempt organization or a trustee or
custodian of a Qualified Plan or an IRA will result in unrelated
business taxable income to the exempt organization, Qualified Plan or
IRA;
(c) changes in the tax law or in the Regulations promulgated
under the Code may materially and adversely affect the Fund and the
Holders, including limiting the ability of limited partnerships such as
the Fund to generate passive income, and could adversely affect the
value of equipment in general, including the value of the Equipment
acquired by the Fund;
23
<PAGE>
(d) the tax opinion of counsel is limited in scope and
qualified by certain assumptions;
(e) Holders may be subject to taxation of an amount in excess
of proceeds actually received on a sale of the Units and/or the
Equipment and on undistributed income;
(f) the taxable losses incurred by the Fund will be subject to
the passive loss limitation which will limit the deductibility of such
losses;
(g) possible audit of a Holder's tax return resulting from the
audit of the Fund's or another Holder's return; and
(h) Holders may be required to file tax returns and pay state,
local and/or foreign taxes as a result of an investment in the Fund.
See "Income Tax Consequences" for further discussion with respect to
the above and other possible tax consequences of the ownership and sale of
Units.
EACH PROSPECTIVE PURCHASER OF UNITS IS URGED TO CONSULT HIS TAX ADVISOR
WITH SPECIFIC REFERENCE TO HIS OWN TAX SITUATION AND POTENTIAL CHANGES IN
APPLICABLE LAW.
Tax Opinion. The Fund has obtained an opinion from its tax counsel,
Derenthal & Dannhauser ("Tax Counsel"), concerning the Fund's classification as
a partnership for federal income tax purposes. See "Income Tax Consequences --
Classification as a Partnership." The opinion also states that the summaries of
federal income tax consequences set forth herein under the headings "Risk
Factors" and "Income Tax Consequences" have been reviewed by Tax Counsel and, to
the extent such summaries involve matters of law, Tax Counsel is of the opinion
that such statements of law are correct under the Code, the regulations
promulgated thereunder and existing interpretations thereof.
The opinion of Tax Counsel is based upon the facts described in this
Prospectus and upon the facts as they have been represented by the Fund Manager
or determined by Tax Counsel as of the date of the opinion. Any alteration of
the facts may adversely affect the opinion rendered. Furthermore, the opinion of
Tax Counsel is based upon existing law and applicable current and proposed
Treasury Regulations, current published administrative positions of the Service
contained in Revenue Rulings and Revenue Procedures, and judicial decisions, all
of which are subject to change either prospectively or retroactively.
Each prospective investor should note that the opinions described
herein represent only Tax Counsel's best legal judgment and have no binding
effect or official status of any kind before the Service or the courts. In the
absence of a ruling from the Service, there can be no assurance that the Service
will not challenge such conclusions (or the tax positions taken by the Fund).
ERISA Considerations. In considering an investment of a portion of the
assets of a Qualified Plan or IRA in the Fund, a fiduciary should assess (i)
24
<PAGE>
whether the investment satisfies the diversification requirements of Section
404(a)(1)(C) of the Employee Retirement Income Security Act of 1974 ("ERISA")
(in the case of IRA's and Keogh Plans, fiduciaries should first determine
whether the investment is subject to ERISA requirements), (ii) whether the
investment is prudent, as it is unlikely that there will be a market created in
which the Qualified Plan or IRA can sell or otherwise dispose of the Units, and
(iii) whether the investment is made solely in the interest of the participants
in the Qualified Plan or IRA. Under certain circumstances ERISA and the Code, as
interpreted by the Department of Labor will apply a "look- through" rule under
which the assets of an entity in which a Qualified Plan or IRA has made an
equity investment may generally constitute "plan assets." For this reason, the
Fund is limiting sales to Qualified Plans and IRAs to less than 25% in value of
the total sale of Units at any time. In the event that Qualified Plans or IRAs
acquire more than 25% in value of the Units either because the investors have
misrepresented the status of their investment or because of transfers made to
Qualified Plans or IRAs the assets of the Fund might be treated as "plan
assets." ERISA also requires that the assets of a plan be valued at their fair
market value as of the close of the plan year. It may not be possible to value
the Units accurately from year to year, because there will not be a secondary
market for them and any change in the value of the Equipment may not be
reflected in the value of the Units.
WHO SHOULD INVEST
The Units represent a long-term investment, the primary benefit of
which is expected to be Distributions. A purchase of Units involves investment
risks and is suitable only for persons who meet the financial suitability
standards described herein and who have no need for liquidity from this
investment. See "Risk Factors." In order to subscribe for Units, each investor
must execute a Subscription Agreement, a specimen of which is included herein as
Exhibit C. The Subscription Agreement provided to the investor for execution
must be accompanied by a copy of this Prospectus, and each subscriber has the
right to cancel his or her subscription during a period of five business days
after the subscriber has submitted the executed Subscription Agreement to the
broker-dealer through which the Units are sold. The Fund and/or the selling
broker-dealer will send each investor a written confirmation of the acceptance
of the investor's subscription for Units upon admission to the Fund.
As a result of the relative lack of liquidity and the long-term nature
of the investment, the Fund has established suitability standards which require
that an investor (including subsequent transferees) (i) have an annual gross
income of at least $30,000 and a net worth (exclusive of home, home furnishings
and automobiles) of at least $30,000 in excess of his Original Invested Capital;
or (ii) have a net worth (determined with the same exclusions) of at least
$75,000 in excess of his Original Invested Capital; or (iii) be purchasing in a
fiduciary capacity for a person or entity, and either the investor or the
fiduciary account or the donor who is directly or indirectly supplying the funds
to purchase the Units subscribed for, meets the suitability standards set forth
in clause (i) or (ii). Instead of the standards in clauses (i) and (ii) above,
however, an investor (or fiduciary, as described above) in Alabama, Arizona,
Arkansas, California, Indiana, Iowa, Kentucky, Maine, Massachusetts,
25
<PAGE>
Michigan, Mississippi, Minnesota, Nebraska, New Hampshire, New Mexico,
Oklahoma, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Vermont and
Washington must (i) have an annual gross income of at least $45,000 and a net
worth (exclusive of home, home furnishings and automobiles) of at least $45,000
in excess of his Original Invested Capital; or (ii) have a net worth (determined
with the same exclusions) of at least $150,000 in excess of his Original
Invested Capital. Certain state securities commissioners have established
investor suitability standards different from those set forth above for the
marketing, sale or subsequent transfers of Units within their respective
jurisdictions, which standards are set forth below under "Plan of Distribution -
State Requirements" or will be set forth in a supplement hereto. By executing
the Subscription Agreement, an investor represents that he meets the suitability
standards applicable to him as set forth herein and in the Subscription
Agreement, and agrees that such standards may be applied to any proposed
transferee of his Units. Notwithstanding the foregoing, each participating
broker-dealer who sells Units has the affirmative duty to determine prior to the
sale of Units that an investment in Units is a suitable investment for its
subscribing customer and must maintain information concerning such suitability
for at least six years following the date of investment. The selling broker and
the sponsor must make every reasonable effort to determine that the purchase of
Units is a suitable and appropriate investment for each purchaser.
The minimum number of Units which an investor may purchase is 250,
representing a total minimum investment of $2,500, except that an Individual
Retirement Account ("IRA") or a qualified pension plan, profit-sharing plan,
stock bonus plan or Keogh Plan ("Qualified Plans") may purchase a minimum of 200
Units ($2,000). Additional investments may subsequently be made in a minimum
amount of 50 Units ($500) per subscription, and minimum additional increments of
one Unit ($10). Investors seeking to acquire additional Units after their
initial subscription need not complete a second subscription agreement. In
addition to restrictions on transfer imposed by the Fund, an investor seeking to
transfer his Units subsequent to his initial investment may be subject to the
securities or "Blue Sky" laws of the state in which the transfer is to take
place.
Because the Fund will be engaged in the business of equipment leasing,
the distributive share of Fund income realized by a Qualified Plan or IRA will
be taxable to such plan as "unrelated business taxable income" under the
Internal Revenue Code (the "Code"). Furthermore, in considering an investment in
the Fund, plan fiduciaries should consider, among other things, the
diversification requirements of Section 401(a)(1)(C) of the Code, additional
legal requirements under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and the prudent investment standards generally imposed on plan
fiduciaries. Additionally, in certain circumstances the assets of an entity in
which a Qualified Plan or IRA has made an equity investment may constitute "plan
assets." To the extent necessary to avoid this result, the Fund will limit the
sale and transfer of Units to Qualified Plans and IRAs so that less than 25% of
the total outstanding Units are held by Qualified Plans and IRAs at all times.
In order to satisfy such requirement, each investor must make a representation
at the time of his subscription as to the record and beneficial ownership of the
Units subscribed. See "Income Tax Consequences -- Investment
26
<PAGE>
by Qualified Plans and IRAs."
Investors should also note that the Fund is required by the Partnership
Agreement to distribute, to the extent available, Cash from Operations and Cash
from Sales or Refinancing in any year to the extent necessary to allow a Holder
in a 31% federal income tax bracket (but not a higher bracket) to pay the
federal income taxes due with respect to his interest in Fund Net Income for
such year. Accordingly, it is possible that a Holder subject to a higher
effective tax rate might not receive sufficient Distributions to pay such tax
liabilities. However, the Fund Manager is also required to make Distributions in
certain minimum amounts during the Reinvestment Period prior to any reinvestment
in Equipment and must distribute all available revenues after the Reinvestment
Period. The Fund Manager anticipates that such Distributions will be in amounts
which will exceed the expected tax liabilities resulting from allocations of
Fund Net Income regardless of the investors' respective tax brackets. See "Risk
Factors - Income and Distributions" and "Income, Losses and Distributions." In
addition, distributions to nonresident or foreign investors may be subject to
withholding taxes which would reduce the amount of cash actually received by
such investors. See "Income Tax Consequences Taxation of Foreign Persons" and
"State Taxes."
Under federal law, certain types of Equipment, including aircraft and
marine vessels, may not be operated unless they are owned by United States
Citizens or Resident Aliens. To assure that the Fund will not exceed relevant
federal limits on foreign ownership, the Fund Manager will not permit in excess
of 20% of the outstanding Units to be held by persons other than U.S. Citizens
and Resident Aliens, and may deny or condition any proposed subscription or
transfer in order to comply with such limitation. Furthermore, any Holder who
ceases to be a United States Citizen or Resident Alien may be required to tender
his Units to the Fund for repurchase at a price determined pursuant to the
formula described under "Summary of Partnership Agreement - Repurchase of
Units." A HOLDER WHO FAILS TO CONFORM TO THE REPRESENTATIONS REGARDING UNIT
OWNERSHIP AND CITIZENSHIP REQUIREMENTS OR MISREPRESENTS HIS UNIT OWNERSHIP OR
CITIZENSHIP MAY FORFEIT AND NO LONGER BE ENTITLED TO CASH DISTRIBUTIONS, TAX
ALLOCATIONS, RECEIPT OF REPORTS AND VOTING PRIVILEGES, ALTHOUGH HE MAY REALIZE
PROCEEDS UPON THE TRANSFER OF HIS UNITS TO AN ELIGIBLE INVESTOR, WHO WOULD BE
ENTITLED TO THE FULL ECONOMIC BENEFITS AND OTHER PRIVILEGES ATTRIBUTABLE TO SUCH
UNITS.
ESTIMATED USE OF PROCEEDS
Many of the figures set forth below are estimates, and consequently
should not be relied upon as a prediction of the actual use of the proceeds of
this offering. The Fund expects to commit approximately 86% of the Gross
Proceeds of this offering to the cash portion of the purchase price of
Equipment. The amounts set forth as the estimated use of the Net Proceeds are
based on the assumption, and the Fund Manager's expectation, that the Fund will
incur total acquisition indebtedness in an estimated amount equal to 50% of the
aggregate cost of its Equipment.
27
<PAGE>
Minimum Offering Maximum Offering
Amount Percent Amount Percent
Gross Offering
Proceeds(1)...... $1,200,000 100.00% $150,000,000 100.00%
Less Offering and
Organization
Expenses:
Selling Com-
missions(2)...... 114,000 9.50% 14,250,000 9.50%
Other Offering
and Organ-
ization
Expenses(3)...... 30,000 2.50% 5,250,000 3.50%
--------- ------ ----------- ------
Net Offering Proceeds. 1,056,000 88.00% 130,500,000 87.00%
Capital Reserves(4)... 6,000 0.50% 750,000 0.50%
Amount Available for
Cash Payments for
Equipment(5) .. 978,000 87.50% 129,750,000 86.50%
--------- ------ ----------- ------
- --------
(1) The offering amounts shown do not include the Units purchased by
the initial Holders.
(2) The Fund will pay ATEL Securities Corporation (the "Dealer
Manager"), an Affiliate of the Fund Manager, selling commissions equal to 9.5%
of the Gross Proceeds, and the Dealer Manager will in turn reallow to
participating broker-dealers selling commissions equal to 8% of the Gross
Proceeds from Units sold by them, retaining the balance of 1.5%. See "Plan of
Distribution." Out of the amounts retained by the Dealer Manager, it may pay one
or more broker-dealers for "wholesaling" services in connection with the
offering. Wholesaling services include coordinating the sales effort of
participating broker-dealers and training their personnel with respect to the
offering. Total selling commissions, disbursements and reimbursements to
participating broker-dealers may not exceed an amount equal to 10% of the Gross
Proceeds, except that an additional 1/2 of 1% of the Gross Proceeds may be paid
for accountable, bona fide due diligence expenses. If the Fund Manager, the
Dealer Manager or the broker-dealers engaged by the Dealer Manager to sell the
Units, or any of their Affiliates or employees, purchase any Units in this
offering, the Dealer Manager, in its discretion, may reimburse to any such
purchasers selling commissions paid with respect to such Units. Sales to any
such purchasers on such terms would be for investment purposes only, and the
Fund and the Fund Manager would not recognize any attempted transfer of such
Units unless certain conditions are satisfied. See "Plan of Distribution."
(3) Consists of expenses incurred in connection with the organization
and formation of the Fund, legal, accounting and escrow fees, printing costs,
filing and qualification fees and disbursements and reimbursements to
participating broker-dealers in connection with the sale and distribution of
Units; provided, however, that total selling commissions, disbursements and
28
<PAGE>
reimbursements to participating broker-dealers may not exceed the
limitations thereon set forth in footnote (2) above. See "Management
Compensation." The Fund Manager has agreed to pay all Organization and Offering
Expenses which exceed an amount equal to (i) 15% of the Gross Proceeds of the
offering up to $25,000,000, and (ii) 14% of the Gross Proceeds in excess of
$25,000,000. Notwithstanding the foregoing, in the event that the Fund's Gross
Proceeds upon the termination of the offering are in an amount less than
$2,000,000, the Fund Manager has agreed to pay all Offering and Organization
Expenses which exceed an amount equal to 12% of the Gross Proceeds. Payment of
such expenses by the Fund Manager will be made without recourse to or
reimbursement by the Fund.
(4) The Fund will initially establish capital reserves in an amount
equal to 1/2 of 1% of Gross Proceeds for general working capital purposes. This
amount may fluctuate from time to time as the Fund Manager determines the level
of reserves necessary for the proper operation of the Fund.
(5) Includes the amount available for the cash portion of the purchase
price to be paid for Equipment plus Acquisition Expenses of the Fund. The Fund
will not pay the Fund Manager or any of its Affiliates Acquisition Fees. The
Fund anticipates paying Acquisition Expenses in an amount equal to approximately
0.25% of the Gross Proceeds. Acquisition Fees or Expenses may be paid by sellers
or lessees of Equipment (though not to the Fund Manager or any of its
Affiliates). In cases where the sellers or lessees bear such costs, the price of
Equipment or lease terms will generally be negotiated with consideration of such
economic factors, so that, in effect, the Fund as purchaser and lessor may
indirectly bear a portion of such fees and costs.
MANAGEMENT COMPENSATION
Summary Table
The following table includes estimates of the maximum amounts of all
fees, compensation, Distributions and other payments that the Fund Manager and
its Affiliates will receive, directly or indirectly, in connection with the
operations of the Fund, all of which are described more completely below under
"Narrative Description of Compensation." It should be noted that the terms of
compensation and amounts of Distributions payable to the Fund Manager and its
Affiliates were not determined by arm's-length negotiation. See "Conflicts of
Interest - Non-Arm's-Length Agreements" below. The Partnership Agreement does
not permit the Fund Manager or its Affiliates to receive fees or expenses in
excess of the maximum amount stated for each type of compensation described
below by reclassifying such items under a different category.
Estimated Amount
Entity Receiving Assuming Maximum
Compensation Type of Compensation Units Sold
OFFERING AND ORGANIZATION STAGE
The Dealer Selling Commissions Total selling
Manager (Up to 1.5% of Gross commissions to be
29
<PAGE>
Proceeds to be retained retained by the
by the Dealer Manager) Dealer Manager are
not expected to
exceed $2,250,000.
Fund Manager Reimbursement of $5,250,000 (1)
and/or Affiliates Organization and Offering
Expenses (when added to selling
commissions, not to
exceed a total equal to 15%
of Gross Proceeds up to
$25 million and 14% of any
additional Gross Proceeds)
OPERATIONAL STAGE
Fund Manager Equipment Management Fee Not determinable
and/or Affiliate (2% or 3.5% of Gross at this time (2)
Revenues from leases,
depending on type of
lease)
Fund Manager Incentive Management Fee Not determinable
and/or Affiliate (4% of Distributions of at this time (2)
Cash from Operations
until investors receive
their Original Invested
Capital plus a Priority
Distribution, then 7.5%
of all Distributions)
ATEL Equipment Equipment Resale/ Not determinable
Corporation Re-Leasing Fees at this time (2)
(Up to 3% of resale
price, subject to
subordination;
and up to 2% of re-lease
revenues from certain
leases)
Fund Manager Reimbursement of Not determinable
and/or Affiliates Operating Expenses, at this time (2)
subject to certain
limitations (3)
INTEREST IN FUND
Fund Manager Interest in Net Income, Not determinable
Net Loss and Dist- at this time (2)
ributions (7.5% of all
allocations of Net
Income, Net Loss and
Distributions)(4)
- -----------------------
30
<PAGE>
(1) The estimated maximum amount excludes selling commissions which will be
paid directly by the Fund, and will therefore not be reimbursed to the Fund
Manager. Selling commissions are included as "Front End Fees" in the calculation
of the minimum Investment in Equipment described in footnote (4) below. Total
Organization and Offering Expenses payable or reimbursable by the Fund,
including selling commissions payable directly by the Fund, may not exceed an
amount equal to (i) 15% of the Gross Proceeds up to $25,000,000, and (ii) 14% of
the Gross Proceeds in excess of $25,000,000. It is anticipated that
substantially all of the Organization and Offering Expenses, other than selling
commissions, will be paid by the Fund Manager and reimbursed by the Fund,
subject to such limitations.
(2) The Fund Manager is unable to predict the amounts which may be
realized. Any such prediction would depend on the amount of Gross Revenues, Cash
from Operations and/or Cash from Sales or Refinancing and would, therefore,
necessarily involve assumptions of future events and operating results which
cannot be made at this time.
(3) Beginning with the first full year after the termination of this
offering, the total amount of Reimbursable Administrative Expenses payable by
the Fund for the remainder of its term may not exceed a cumulative limit. This
cumulative limit on such Reimbursable Administrative Expenses will equal, as of
any date, a maximum of (i) 0.5% of the Gross Proceeds per annum if the total
Gross Proceeds are at least 90% of the maximum Gross Proceeds; (ii) 0.75% of the
Gross Proceeds per annum if the total Gross Proceeds are at least 75%, but less
than 90%, of the maximum Gross Proceeds; and (iii) 1% of the Gross Proceeds per
annum if the total Gross Proceeds are less than 75% of the maximum Gross
Proceeds. In addition, beginning with the first full year after the termination
of this offering, the maximum amount of Reimbursable Administrative Expenses
payable by the Fund for any single year shall be limited to an amount equal to
1% of the Gross Proceeds.
(4) Pursuant to Section 15.7 of the Partnership Agreement, the Fund
Manager must commit not less than 85.875% of the Gross Proceeds to "Investment
in Equipment" (which term includes the purchase price of Equipment, expenses
such as interest and taxes and amounts set aside for reserves, but excludes
Front End Fees). In the event the total amount of Investment in Equipment would
otherwise be insufficient, the Fund Manager's interest in Fund Net Income, Net
Loss and Distributions shall be decreased by an amount necessary to obtain
compliance with the foregoing provision, as described in the discussion below
under "Limitations on Fees".
Defined Terms Used in Description of Compensation
Definitions of certain capitalized terms used in the following
narrative description of compensation payable to the Fund Manager and its
Affiliates are as follows:
"Adjusted Invested Capital" means, as of any date, the Original Invested
Capital attributable to the Units held by any Person on or before such date, as
decreased (but not below zero) by the amount by which (i) all
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<PAGE>
Distributions with respect to such Units on or before the date of determination
pursuant to any provision of the Partnership Agreement exceed (ii) the Priority
Distribution attributable to such Units for such period.
"Cash from Operations" means the excess of Gross Revenues
(which excludes revenues from Equipment sales or refinancing) over cash
disbursements (including the Equipment Management Fee and amounts reinvested by
the Fund in Equipment) without reduction for depreciation and amortization of
intangibles such as organization and underwriting costs but after a reasonable
allowance for cash for repairs, replacements, contingencies and anticipated
obligations, as determined by the Fund Manager.
"Cash from Sales or Refinancing" means the net cash realized
by the Fund from the sale, refinancing or other disposition of any Equipment
after payment of all expenses related to the transaction (including the
Equipment Resale Fee).
"Distributions" means any cash distributed to Holders and the
Fund Manager arising from their respective interests in the Fund.
"Full Payout Lease" means a lease under which the
non-cancelable rental payments due during the initial term of the lease are at
least sufficient to cover the purchase price of the Equipment leased.
"Net Income" or "Net Loss" means the taxable income or taxable
loss of the Fund as determined for federal income tax purposes, computed by
taking into account each item of Fund income, gain, loss, deduction or credit
not already included in the computation of taxable income and taxable loss, but
does not mean Distributions.
"Operating Lease" means a lease under which the aggregate
rental payments due during the initial term of the lease are less than the
purchase price of the Equipment leased.
"Original Invested Capital" means the amount in cash
contributed by each Partner to the capital of the Fund for his interest in the
Fund, which amount shall be attributed to Units in the hands of a subsequent
Holder.
"Priority Distribution" for any calendar year or other period
means, with respect to the Units held by any Person, the average Adjusted
Invested Capital with respect to such Units during each calendar year multiplied
by 10% per annum (calculated on a cumulative basis, compounded daily, from the
last day of the calendar quarter in which the initial purchaser of such Units
was admitted as a Holder pursuant to the Partnership Agreement and pro rated for
any fraction of a calendar year for which such calculation is made).
"Reimbursable Administrative Expenses" shall mean the ordinary
recurring administration expenses incurred by the Fund Manager and reimbursed by
the Fund. Such expenses shall not include interest, depreciation, equipment
maintenance or repair, third party services or other non-administrative
expenses.
32
<PAGE>
See Article II of the Partnership Agreement for more complete
definitions of the foregoing terms.
Narrative Description of Compensation
Selling Commissions. The Dealer Manager will receive selling
commissions on all sales of Units in an amount equal to 9.5% of Gross Proceeds.
The Dealer Manager will reallow to participating broker-dealers 8% of the Gross
Proceeds from Units sold by them, and may use a portion of the retained selling
commissions to compensate certain participating broker-dealers for wholesaling
services or reimburse certain selling expenses. It is not anticipated that the
Dealer Manager or other Affiliates of the General Partner will directly effect
any sales of the Units, although the Dealer Manager will provide certain
wholesaling services. See "Plan of Distribution."
Reimbursement of Organization and Offering Expenses. The Fund Manager
and/or its Affiliates will be reimbursed for certain expenses in connection with
the organization of the Fund and the offering of Units. Total Organization and
Offering Expenses payable or reimbursable by the Fund, including selling
commissions payable directly by the Fund, may not exceed an amount equal to (i)
15% of the Gross Proceeds up to $25,000,000, and (ii) 14% of the Gross Proceeds
in excess of $25,000,000.
Equipment Management Fee. The Fund Manager and/or its Affiliate, will
receive an Equipment Management Fee equal to the lesser of (i) 3.5% of annual
Gross Revenues from Operating Leases and 2% of annual Gross Revenues from Full
Payout Leases which contain Net Lease Provisions), or (ii) the fees customarily
charged by others rendering similar services as an ongoing public activity in
the same geographic location and for similar types of equipment. The Fund
Manager believes that the Equipment Management Fee payable by the Fund is
currently equal to the fee customarily charged for similar services under
circumstances similar to those of the Fund. Such compensation will be paid for
the services rendered generally in managing or supervising the management of the
Equipment and in performing other ongoing services and activities, including,
among others, collection of lease revenues, monitoring compliance by lessees
with the lease terms, assuring that Equipment is being used in accordance with
all operative contractual arrangements, paying operating expenses and arranging
for necessary maintenance and repair of Equipment in the event a lessee fails to
do so, monitoring property, sales and use tax compliance and preparation of
operating financial data. If the services with respect to certain Operating
Leases are performed by nonaffiliated persons under the active supervision of
the Fund Manager or its Affiliate, then the amount payable to the Fund Manager
or such Affiliate shall be 1% of Gross Revenues from such Operating Leases.
Incentive Management Fee. Until Holders have received a return of their
Original Invested Capital plus a Priority Distribution, the Fund Manager and/or
its Affiliates of the Fund Manager will receive, as Incentive Management Fees,
an amount equal to 4% of Distributions of Cash from Operations, and, thereafter,
an amount equal to a total of 7.5% of Distributions from all sources, including
Sale or Refinancing Proceeds. In subordinating the increase in the Incentive
33
<PAGE>
Management Fees to a cumulative return of a Holder's Original Invested Capital
plus a Priority Distribution, a Holder is deemed to have received Distributions
of Original Invested Capital only to the extent that Distributions to the Holder
exceed the amount of the Priority Distribution. The Incentive Management Fees
will be paid for services which may be distinguished from those for which the
Equipment Management Fee is payable. In general the Incentive Management Fees
are paid for determining portfolio and investment strategies (i.e., establishing
and maintaining the composition of the Equipment portfolio as a whole and the
Fund's overall debt structure), and overall supervision of Fund administration
(i.e., investor communications and services, regulatory reporting, accounting
and transfers of Units), while the Equipment Management Fee is paid for
management of the Fund's Equipment leasing business, including supervision of
the portfolio of Equipment and leases owned by the Fund, monitoring compliance
with lease terms and maintaining lessee communications and relations. See
"Income, Losses and Distributions."
Equipment Resale/Re-Leasing Fee. For services in connection with
Equipment resale, ATEL Equipment Corporation may receive a fee in an amount
equal to the lesser of (i) 3% of the sale price of the Equipment, or (ii)
one-half the normal competitive equipment sale commission charged by
unaffiliated parties for resale services. Such fee is payable only after the
Holders have received a return of their Original Invested Capital plus a
Priority Distribution. For services in connection with the re-leasing of
Equipment to lessees other than previous lessees or their Affiliates, ATEL
Equipment Corporation may receive a fee in an amount equal to the lesser of (i)
the competitive rate for comparable services for similar equipment, or (ii) 2%
of the gross rental payments derived from the re-lease of such Equipment,
payable out of each rental payment received by the Fund from such re-lease.
Reimbursement of Operating Expenses. The Fund Manager and/or its Affiliates
may be reimbursed for expenses advanced or incurred on the Fund's behalf, to the
extent permitted under the Partnership Agreement. The Fund Manager and its
Affiliates will be reimbursed (i) the actual cost to the Fund Manager or its
Affiliates of services, goods and materials used for and by the Fund and
obtained from unaffiliated parties; (ii) administrative services necessary to
the prudent operation of the Fund, provided that reimbursement for
administrative services will be at the lower of (a) the actual cost of such
services, or (b) the amount which the Fund would be required to pay to
independent parties for comparable services. Beginning with the first full year
after the termination of this offering, the total amount of Reimbursable
Administrative Expenses payable by the Fund for the remainder of its term may
not exceed a cumulative limit. If at least 75% of the maximum Gross Proceeds are
raised by the end of this offering, the cumulative limit will be an amount equal
to 0.5% of the gross proceeds per annum as of any date. If less than 75% of the
maximum Gross Proceeds is raised, then the cumulative limit will be an amount
equal to 1% of the Gross Proceeds per annum. In addition, beginning with the
first full year after the termination of this offering, the maximum amount of
Reimbursable Administrative Expenses payable by the Fund for any single year
shall be limited to an amount equal to 1% of the Gross Proceeds. The Fund
Manager estimates that the total amount of Reimbursable Administrative Expenses
during the Fund's first full year of operations after completion of
34
<PAGE>
the offering, assuming receipt of the maximum Gross Proceeds, may be
approximately $400,000 to $500,000. See the footnotes to Table III of Exhibit A
- - "Prior Performance Information" for information concerning the reimbursement
of operating expenses by prior programs sponsored by the Fund Manager and its
Affiliates.
Interest in Net Income, Net Loss and Distributions. The Fund Manager
will have an interest in the Fund as a Partner equal to 7.5% of all allocations
of all Net Income, Net Loss and Distributions.
Limitations on Fees
Under the North American Securities Administrators Association, Inc.
("NASAA") Statement of Policy concerning Equipment Programs, as amended through
October 24, 1991 (referred to herein as the "NASAA Guidelines"), the Fund is
required to commit a minimum percentage of the Gross Proceeds to Investment in
Equipment, calculated as the greater of: (i) 80% of the Gross Proceeds reduced
by 0.0625% for each 1% of indebtedness encumbering the Fund's Equipment; or (ii)
75% of such Gross Proceeds. The Fund intends to incur total indebtedness equal
to 50% of the aggregate cost of its Equipment. The Partnership Agreement
requires the Fund to commit at least 85.875% of the Gross Proceeds to Investment
in Equipment. Based on the formula in the NASAA Guidelines, the Fund's minimum
Investment in Equipment would equal 76.875% of Gross Proceeds (80% - [50% x
.0625%] = 76.875%), and the Fund's minimum Investment in Equipment would
therefore exceed the NASAA Guideline minimum by 9%.
The NASAA Guidelines permit the Fund Manager and its Affiliates to
receive compensation in the form of a carried interest in Fund Net Income, Net
Loss and Distributions equal to 1% for the first 2.5% of excess Investment in
Equipment over the NASAA Guidelines minimum, 1% for the next 2% of such excess,
and 1% for each additional 1% of excess Investment in Equipment. With a minimum
Investment in Equipment of 85.875%, the Fund Manager and its Affiliates may
receive an additional carried interest equal to 6.5% of Net Profit, Net Loss and
Distributions under the foregoing formula (2.5% + 2% + 4.5% = 9%; 1% + 1% + 4.5%
= 6.5%]. At the lowest permitted level of Investment in Equipment, the NASAA
Guidelines would permit the Fund Manager and its Affiliates to receive a
promotional interest equal to 5% of Distributions of Cash from Operations and 1%
of Distributions of Sale or Refinancing Proceeds until Limited Partners have
received total Distributions equal to their Original Invested Capital plus an 8%
per annum cumulative return on their Adjusted Invested Capital, and, thereafter,
the promotional interest may increase to 15% of all Distributions.
With the additional carried interest calculated as described above, the
maximum aggregate fees payable to the Fund Manager and Affiliates under the
NASAA Guidelines as carried interest and promotional interest would equal 11.5%
of Distributions of Cash from Operations (6.5% + 5% = 11.5%), and 7.5% of
Distributions of Sale or Refinancing Proceeds (6.5% + 1% = 7.5%), before the
subordination level was reached, and 21.5% of all Distributions thereafter. The
actual amounts to be paid under the terms of the Partnership Agreement will
equal 11.5% of Distributions of Cash from Operations (4% as the Incentive
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<PAGE>
Management Fee plus 7.5% as the Fund Manager's Interest in the Fund) and 7.5% of
Distributions of Sale or Refinancing Proceeds (as the Fund Manager's 7.5%
Interest in the Fund) before the Priority Return (which is equal to Original
Invested Capital plus a cumulative return of 10% per annum on Adjusted Invested
Capital), and 15% of all Distributions thereafter (7.5% as the Incentive
Management Fee plus 7.5% as the Fund Manager's Interest in the Fund).
Upon completion of the offering of Units, final commitment of Net
Proceeds to the acquisition of Equipment and the establishment of final levels
of permanent portfolio debt encumbering such Equipment, the Fund Manager shall
calculate the maximum carried interest and promotional interest payable to the
Fund Manager and its Affiliates under the NASAA Guidelines and compare such
total permitted fees to the total of the Incentive Management Fees and the Fund
Manager's Interest in the Fund. If and to the extent that the fees payable to
the Fund Manager and its Affiliates as the Incentive Management Fee and the Fund
Manager's Interest in the Fund should exceed the maximum promotional interest
plus carried interest permitted under the NASAA Guidelines, as described above,
whether due to a lower than anticipated level of leverage for the initial Fund
portfolio or the Fund incurring higher Front End Fees than permitted under the
Partnership Agreement or otherwise, the fees payable to the Fund Manager and its
Affiliates shall be reduced as described in this paragraph. In such event, the
Partnership Agreement shall be amended immediately to reduce the Fund Manager's
Interest in the Partnership by an amount sufficient to cause the total of the
Incentive Management Fees and such Interest to comply with the limitations in
the NASAA Guidelines on the aggregate of promotional interests and carried
interests. A comparison of the Front End Fees actually paid by the Fund and the
NASAA Guideline maximums shall be repeated, and any required adjustments shall
be made, at least annually thereafter.
INVESTMENT OBJECTIVES AND POLICIES
Principal Investment Objectives
The Fund's principal objectives are to invest in a diversified
portfolio of primarily low-technology, low-obsolescence Equipment which will
(i) preserve, protect and return the Fund's invested capital;
(ii) generate regular Distributions to Holders of Cash from
Operations and Cash From Sales or Refinancing, any balance remaining
after certain minimum Distributions to be used to purchase additional
Equipment during the Reinvestment Period; and
(iii) provide additional Distributions after the end of the
Reinvestment Period and until all Equipment has been sold.
Distributions will be made only to the extent cash is available after
payment of Fund obligations (including payment of Fund administrative expenses,
debt service and the Equipment Management Fee) and allowance for necessary
reserves. There can be no assurance that any specific level of Distributions
36
<PAGE>
or any other objectives will be attained.
General Policies
The Fund intends to acquire various types of Equipment for lease. See
the discussion below under "Types of Equipment." Generally, the Fund expects to
acquire newly-manufactured Equipment. However, the Fund may also invest in
desirable used Equipment and Equipment subject to pre-existing leases under
appropriate circumstances and where consistent with the Fund's overall
investment objectives.
The Fund's investment objective is to acquire primarily low-technology,
low-obsolescence equipment such as materials handling equipment, manufacturing
equipment, mining equipment, and transportation equipment. A portion of the
portfolio may include some more technology-dependent equipment such as certain
types of communications equipment, medical equipment and office equipment,
although the Fund will seek to invest in such equipment in a manner consistent
with its primary objective of acquiring equipment which is generally subject to
relatively low rates of technological obsolescence. The Partnership Agreement
does not limit the Fund's ability to invest in high-technology Equipment. See
Table IV of Exhibit A, "Prior Performance Information," for information
concerning the composition of the equipment portfolios held by the four prior
public programs sponsored by the Fund Manager and its Affiliates which have
investment objectives and policies similar to those of the Fund.
Like most goods, new equipment generally has a higher market value than
comparable used equipment, and capital equipment tends to lose value as it is
used over a period of time. An equipment lessor such as the Fund seeks to
negotiate lease terms based in part on its estimate of the value of the leased
equipment upon termination of the lease. The lessor will negotiate a lease rate
designed to generate sufficient rental revenues over the term of the lease so
that, when the total lease payments are added to the estimated value of the
equipment upon lease termination, the lessor will have achieved a return of the
capital used to purchase the equipment plus an overall profit on the investment.
There can be no assurance, however, that the lessor's assumptions regarding the
residual value of the equipment will be accurate or that its objective will be
achieved.
The Fund Manager will seek to maintain an appropriate balance in the
types of Equipment acquired and the types of leases entered into by the Fund. At
least a majority of the Fund's Equipment, based on the aggregate purchase price,
will be subject to High Payout Leases (with noncancellable lease payments
returning at least 90% of the Equipment Price through the term of the lease)
upon final investment of the Net Proceeds and completion of permanent financing
for the portfolio. In addition, the Fund Manager will seek to invest not more
than 20% of the aggregate purchase price of Equipment in Equipment acquired from
a single manufacturer. However, the latter limitation is a general guideline
only, and the Fund Manager may in its discretion cause the Fund to acquire
Equipment from a single manufacturer in excess of the stated percentage if it
deems such a course of action to be in the Fund's best interest. A number of
factors will determine the actual composition of the
37
<PAGE>
Fund's Equipment portfolio; for example, the amount of Gross Proceeds actually
received prior to the termination of the offering will be a significant factor
in determining the Fund's ability to diversify its portfolio. Furthermore, the
Fund Manager cannot anticipate what types of Equipment will be available and at
what prices at the time the Fund is ready to invest its funds.
As set forth above under "Principal Investment Objectives," it will be
the Fund's objective to reinvest in additional Equipment any Cash from
Operations and Cash from Sales or Refinancing remaining after payment of certain
minimum Distributions during the Reinvestment Period. The Fund will not acquire
Equipment after the Reinvestment Period, except to the extent necessary to
satisfy obligations entered into prior to the end of the Reinvestment Period or
to maintain or improve Equipment already owned at such time.
Other than as set forth below under "Identified Equipment Acquisitions"
and in any supplement to this Prospectus, the Fund has not invested in or
committed to purchase any Equipment, and, as a result, there can be no assurance
as to when the Net Proceeds from the offering will be fully invested.
Furthermore, prospective investors may not have an opportunity prior to
investing to evaluate all of the Equipment to be acquired. This Prospectus will
be supplemented to describe the Fund's acquisition, in any single transaction or
related series of transactions, of items of Equipment involving a cash payment
of more than 10% of the maximum Net Proceeds prior to the termination of this
offering.
Prior to final funding of any acquisition of a single item of Equipment
which has a contract purchase price in excess of $1,000,000, the Fund Manager
will cause the Fund to obtain an appraisal of the item of Equipment from a
qualified independent third party appraiser. The Fund Manager may also, in its
discretion, obtain Equipment appraisals for certain smaller acquisitions if it
deems an appraisal to be appropriate because of the type of Equipment, the
overall size of a transaction or otherwise. It should be noted, however, that
any such appraisals would represent only the appraiser's opinion of the value of
the Equipment, and would not necessarily represent the actual amount which might
be realized by the Fund upon disposition of the Equipment.
The Fund Manager or an Affiliate may purchase Equipment in its own
name, the name of an Affiliate or the name of a nominee, a trust or otherwise
and hold title thereto on a temporary or interim basis (generally not in excess
of six months) for the purpose of facilitating the acquisition of such Equipment
or the completion of manufacture of the Equipment or for any other purpose
related to the business of the Fund, provided, however that: (i) the transaction
is in the best interest of the Fund; (ii) such Equipment is purchased by the
Fund for a purchase price no greater than the cost of such Equipment to the Fund
Manager or Affiliate (including any out-of-pocket carrying costs), except for
compensation permitted by the Partnership Agreement; (iii) there is no
difference in interest terms of the loans secured by the Equipment at the time
acquired by the Fund Manager or Affiliate and the time acquired by the Fund;
(iv) there is no benefit arising out of such transaction to the Fund Manager or
its Affiliate apart from the compensation otherwise permitted by the Partnership
Agreement; and (v) all income generated
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<PAGE>
by, and all expenses associated with, Equipment so acquired shall be treated
as belonging to the Fund.
Any of the Net Proceeds received by the Fund during the first twelve
months following the date hereof which have not been invested or committed to
investment in Equipment during the period ending eighteen months following the
date hereof, and any of the Net Proceeds received thereafter which have not been
invested or committed to investment in Equipment during the period ending six
months after the Final Closing Date (except, in either case, for amounts used to
pay Fund operating expenses or deemed to be required as capital reserves, as
determined in the sole discretion of the Fund Manager and in accordance with the
Partnership Agreement) will be distributed pro rata by the Fund to the Holders.
In addition, in order to refund to the Holders the amount of Front End Fees
attributable to such returned capital, the Fund Manager has agreed to contribute
to the Fund, and the Fund shall distribute to the Holders pro rata, the amount
by which (x) the amount of unused capital so distributed, divided by (y) the
percentage of Gross Proceeds remaining after payment of all Front End Fees,
exceeds the unused capital so distributed. The Fund's funds will be available
for general use during the foregoing period and may be expended in operating the
Equipment which has been acquired. Net Proceeds will not be segregated or held
separate from other funds of the Fund pending investment, and no interest will
be payable to the Holders if uninvested Net Proceeds are returned to them. For
the purpose of the foregoing provision, Net Proceeds will be deemed to have been
committed to investment and will not be returned to the Holders to the extent
written agreements in principle or letters of understanding were executed at any
time prior to the end of such period, regardless of whether any such investment
is eventually consummated, and also to the extent any funds have been reserved
to make contingent payments in connection with any Equipment, regardless of
whether any such payments are ever made.
Identified Equipment Acquisitions
Set forth in the table below is a summary of the Equipment acquisitions
and leases identified by the Fund as of the date of this Prospectus. These
transactions have been committed and/or funded by the Fund Manager or its
Affiliates and will be assigned to the Fund at such time as the Fund has
sufficient capital to acquire the Equipment. The Fund's ability to acquire the
Equipment described below will be dependent upon the amount of capital raised
and the timing of the Fund's capital raising efforts. In addition, the Fund
Manager will cause the Fund to acquire these transactions only to the extent
consistent with its investment objectives at the time of each such acquisition.
Therefore, there can be no assurance that these transactions will be acquired as
described.
<TABLE>
EQUIPMENT ACQUISITIONS
<S> <C> <C> <C> <C> <C>
Equipment Commence Acquisition Lease Lease
Lessee Type Date(s) (1) Price (2) Term (4) Type (5)
- ------ ---- ----------- --------- -------- ---------
Mobil Business Helicopter 12/96-3/97 $1,650,000 36 OL
Resources
Corporation (5)
General Electric Plastic 12/96-3/97 906,370 24 OL
Company Molding
Equipment
Chrysler Corporation Material 12/96-3/97 347,628 60 OL
Handling
Equipment
Total
</TABLE>
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<PAGE>
NOTES
(1) In many cases, a Lease transaction is funded over a period of time
according to the Lessee's requirements. Therefore, "Commence Date(s)"
expressed as a range represents multiple Lease commencement dates
occurring or anticipated under the same Lease line.
(2) "Acquisition Price" includes amounts committed to Lessees for funding
by the program. To the extent that the transaction is not fully funded,
the information in the table represents the Fund Manager's best
estimates as to the size, timing and terms of the transaction upon full
funding, based on the outstanding lease commitment, its discussions
with the lessee, the current and anticipated availability of Fund
capital and other factors. There can be no assurance, however, that the
portion of the transaction which has not yet been funded will be
completed as described.
(3) "Lease Term" is expressed in months, although actual Lease Terms may be
monthly, quarterly, semiannual or annual.
(4) A designation of "FP" indicates that the aggregate rentals to be
received during the Lease Term equals or exceeds the Acquisition Price
of the Equipment. A designation of "HP" indicates that total lease
payments are at least 90% of such Acquisition Price. A designation of
"OL" indicates that the aggregate rentals to be received during the
Lease Term is less than 90% of the Acquisition Price.
(5) Guaranteed by Mobil Corporation, parent of Mobil Oil Corporation and
Mobil Business Resources Corporation.
In addition to the foregoing specified Equipment, as of the date hereof
ATEL Capital Group, the parent of the Fund Manager, has been awarded lease
transactions representing equipment purchase costs in excess of $24 million
which are suitable for acquisition by the Fund as well as certain Affiliates of
the Fund. Some or all of these transactions may be allocated to the Fund,
subject to the discretion of the Fund Manager and depending on future
circumstances and the factors discussed below in the second paragraph under
"Conflicts of Interest - Competition for Investments." ATEL Capital Group has
the right to allocate and assign participations in these transactions among its
affiliates in its discretion, and the Fund Manager has the authority to
determine what level of participation, if any, is appropriate for each of the
programs under its management, including the Fund. There can be no assurance as
to what, if any, portion of these transactions awarded to ATEL Capital Group may
be allocated and assigned to the Fund. However, these transactions include
binding lease commitments to ATEL Capital Group from the following lessees in
the approximate amounts noted: Aetna Life & Casualty Co. ($8 million in office
equipment); Burlington Northern, Inc. ($7 million in locomotives); Cargill, Inc.
($6.5 million in railroad hopper cars); Southern Illinois Railcar (%460,000 in
railroad hopper cars); Sisseton Milbank ($300,000 in railroad hopper cars);
Illinois Central Gulf ($1.6 million in boxcars); and Columbus and Greenville
Railway ($640,000 in boxcars).
Types of Equipment
The Fund intends to acquire and lease a diversified portfolio of
Equipment. The Fund intends to invest primarily in what it deems to be
relatively low-technology, low-obsolescence types of equipment. These types of
equipment would include a variety of items which are not dependent on
high-technology design or applications for their usefulness to lessees, and are
therefore less subject to rapid obsolescence than types which are so dependent.
Equipment acquisition will be subject to the Fund Manager or its agents
obtaining such information and reports, and undertaking such inspections and
surveys as the Fund Manager may deem necessary and appropriate to determine the
probable economic life, reliability and productivity of the Equipment, its
competitive position with respect to other equipment and its suitability and
desirability as compared with other equipment. Purchases of new Equipment for
lease will typically be made directly from a manufacturer or its authorized
40
<PAGE>
dealers, either pursuant to a purchase agreement relating to significant
quantities of such equipment, through lease brokers, or on an ad hoc basis to
meet the needs of a particular lessee. Purchases pursuant to vendor leasing
programs (discussed below under "Agreements with Manufacturers and Vendors")
will typically be made directly from the manufacturers or principal
distributors. There can be no assurance that favorable purchase agreements can
be negotiated with equipment manufacturers or their authorized dealers or lease
brokers at the time the Fund commences operations. In addition, the Fund may
enter into sale/leaseback transactions pursuant to which the Fund will purchase
Equipment from companies which will simultaneously lease the Equipment from the
Fund.
The following is a more detailed description of the various types of
Equipment which the Fund may purchase and lease. The types of Equipment are
listed in alphabetical order, and the discussion is not intended to imply any
order of emphasis in the Fund's acquisition policies. The final mix of Equipment
types in the Fund's portfolio will depend on the factors discussed above under
"General Policies."
Aircraft. The Fund may invest in cargo and freight aircraft, corporate
aircraft and aircraft used for medical evacuation and rescue purposes. The Fund
will not invest in commercial passenger aircraft. The Fund Manager anticipates
that the Fund's cash investments in aircraft will not exceed an amount equal to
20% of the maximum Gross Proceeds. Cargo and freight aircraft are used by
commercial freight carriers and national and international mail and package
delivery services exclusively for the hauling of cargo. Corporate aircraft,
including both helicopters and fixed-wing aircraft, are used by many businesses
to move employees from city to city or to locations without scheduled air
service and for the express delivery of personnel, components and products at
various manufacturing and service facilities. Commercial passenger aircraft
consist of aircraft used in the day to day operation of scheduled passenger air
carriers. All domestic corporate and commercial aircraft are registered with the
Federal Aviation Administration ("FAA").
Under the Federal Aviation Act of 1958, as amended (the "Act"), it is
unlawful to operate an unregistered aircraft in the United States. In order to
be eligible for registration, the rules and regulations of the FAA provide, in
effect, that aircraft is eligible for registration only if it is owned by a
United States Citizen or a Resident Alien. A literal reading of the Act could
lead to the conclusion that aircraft in which the Fund has an interest are not
eligible for registration because the term United States Citizen is defined in
the Act to include a partnership in which each member is an "individual" who is
a citizen of the United States or one of its possessions, and the Fund has a
corporate Fund Manager. The FAA has indicated informally that it will permit
registration of an aircraft under the Federal Aviation Act of 1958 and the
regulations thereunder in the name of a trustee of a trust in which a
partnership is the sole beneficiary if the partnership's partners are United
States Citizens (whether or not they are all individuals) or Resident Aliens.
However, such representations are not binding on the FAA; therefore, the
possibility exists that the FAA would challenge such a registration. In
addition, a registration may be challenged and rendered invalid if a Partner
41
<PAGE>
is not, contrary to his representation to the Fund, a United States Citizen or a
Resident Alien or if a Partner ceases to be a United States Citizen or a
Resident Alien. Any challenge, if successful, could result in an inability to
operate the aircraft, substantial penalties, the premature sale of the aircraft,
the loss of the benefits of the central recording system under federal law
thereby leaving the aircraft exposed to liens or other interests not of record
with the FAA, and a breach by the Fund of lease agreements entered into in
connection with the aircraft. Accordingly, the Fund Manager will limit the
ownership of Units or interests therein by any persons who are not United States
Citizens or Resident Aliens to not more than 20% of the outstanding Units.
It is anticipated that any aircraft lease will provide, as a condition
precedent to the transaction, that application for registration shall have been
duly made and that the prospective lessee shall have temporary or permanent
authority to operate the aircraft. If such authority were not obtainable because
of failure of registration, the lessee might be entitled to void the transaction
and the lease would not take effect.
Communications Equipment. Communications equipment is used for voice
and data transmission. Its applications include, but are not limited to,
telephone communication, radio and television broadcasting, cable television,
and satellite communications. The Fund may acquire and lease communications
equipment including telephone equipment and systems, data communication
terminals, cables, transmission wires, transmitters, control and amplification
equipment, repeaters, monitoring equipment, teleprinters, connector and
switching equipment, satellite and microwave transmission facilities and support
equipment.
Construction Equipment. Construction equipment includes bulldozers,
haulers, cranes, graders, backhoes, front-end loaders, scrapers and asphalt and
cement spreaders used in a wide variety of applications including building
construction and road, bridge and other civil engineering construction projects.
Energy Equipment. Energy equipment includes cogeneration facilities,
transmission lines, generation facilities, compression and pumping equipment and
other processing and treatment equipment, as well as energy management systems.
General Purpose Plant/Office Equipment. Plant/office equipment includes
racking, shelving, storage bins, portable steel storage sheds, furniture,
fixtures, tables, counters, desks, chairs, cabinets and numerous other items
generally used in manufacturing plants, storage and distribution facilities and
offices.
Graphic Processing Equipment. Graphic processing equipment includes
print setters, printing presses, automatic drafting machines and all equipment
which is used for the visual display of designs, drawings and printed matter.
Printing presses come in a variety of sizes depending on the applications for
which they are used. Some printing presses are of a single color, whereas
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<PAGE>
others can apply up to eight colors. Phototype setters are used for the setting
of type for publications such as newspapers and magazines. Computerized
type-setters have become common in recent years, as they simplify type-setting,
correction of mistakes and lay-out of printed pages. Automatic drafting machines
are computer controlled visual displays of drawings which enable designers to
make changes in engineering drawings without the time required to make a
completely new drawing by hand.
Machine Tools and Manufacturing Equipment. Machine tools and
manufacturing equipment include a wide variety of metalworking machinery, such
as lathes, drilling presses, turning mills, grinders, metal bending equipment,
metal slitting equipment and other metal forming equipment used in the
production of a variety of machinery and equipment. Some form of machine tool is
used in virtually every production process of a metal product or component.
While some machine tools and metalworking equipment are built for a particular
end product, the majority of machine tools can be used in a variety of
applications.
Materials Handling Equipment. Materials handling equipment includes
many varieties of fork lift trucks. They are either battery-powered or
gas-powered, and are used in warehouses and factories for the movement of
products and materials from one work station to another or from a warehouse to a
truck for shipment, or for the storing of products and materials. The equipment
comes in a variety of styles, depending on the design of the items to be moved
and the design of the shipping or warehouse facility. However, this type of
equipment is generally of standard design and can be used by a variety of
industries.
Medical Equipment. Medical equipment includes a wide variety of testing
and diagnostic equipment including:
Radiology Equipment. This category includes x-ray equipment,
CAT and MRI scanners (i.e., body and head scanners) and other equipment
to be used in the radiology departments of hospitals and clinics.
Laboratory Equipment. This category includes blood analysis
equipment and other automated medical laboratory equipment.
Other Medical Equipment. This general category includes
equipment using ultrasound technology, patient monitoring systems and a
variety of other equipment used in hospitals, clinics and medical
laboratories.
Photocopying Equipment. The Fund may acquire and lease photocopying and
other document duplicating or reproduction equipment.
Railroad Rolling Stock. Railroad rolling stock includes gondolas, tank
cars, boxcars,hopper cars, flatcars, locomotives and various other equipment
used by railroads in the maintenance of their tracks. Flatcars and boxcars have
a variety of designs, some of which are general purpose and some of which are
special purpose. Special purpose flatcars and boxcars are used for the shipment
of specific products whereas a general purpose car can be used for the
43
<PAGE>
shipment of a wide variety of products. Many electric utilities lease hopper
cars for the shipment of coal from the mine to the generating plant. Tank cars
are used to transport liquids. Locomotives are the engines, generally diesel
powered, that drive trains of railcars from one location to another. Locomotives
come in a variety of designs which vary in the amount of horsepower produced.
Research and Experimentation Equipment. Research and experimentation
equipment include various types of analyzers, spectrometers, oscilloscopes,
measuring instruments, gas and liquid chromatographs, physical testing
centrifuges, graphic plotters and printers, laser equipment, digital-aided
design systems, scanning electron microscopes, dissolution sampling systems, and
other general laboratory instruments and equipment used in businesses for the
development of ongoing research programs.
Tractors, Trailers and Trucks. Tractors, trailers and trucks are used
for the shipment of various products and goods from one location to another.
Tractor-trailer rigs are often used for longer shipments and delivery of larger
pieces; whereas heavy-duty trucks are generally used for the more local delivery
of large products. A "tractor" refers to the power unit of a tractor- trailer
combination. The tractor cab is generally manufactured by one company and the
engine and drive train by another. The engine may use gasoline or diesel fuel.
Trailers are the container portion of a tractor-trailer rig and come in a
variety of sizes and designs depending on the product to be shipped. Trailers
may be designed for intermodal use so they can either be pulled by tractors or
transported on railroad flatcars. Trailers may be up to 45 feet long in most
states and most commonly have a set of twin axles (eight wheels) to carry the
load. A trailer may be enclosed on a flatbed for the shipment of large or
oversized products, and may be refrigerated for the shipment of perishable
products. The Fund intends to invest in trailers that can be used for the
shipment of a wide variety of goods and are not limited to specific
applications. Heavy-duty trucks are large trucks in which the engine and load
carrying components are mounted on a single frame. The trucks can be used for
the local delivery of large products or for the hauling of construction
materials.
Miscellaneous Equipment. The Fund may also acquire various other types
of equipment, including, but not limited to, oil drilling equipment, mining and
ore-processing equipment, electronic test equipment, office automation
equipment, furniture and fixtures, automobiles, dairy production equipment,
video projection and production equipment, store fixtures, display cases,
freezers and equipment used in production facilities.
Incidental Property Acquisitions. Incidental to an acquisition of
Equipment, the Fund may acquire certain interests in real property, mineral
rights or other tangible or intangible property or financial instruments. The
Fund may acquire ownership of an item of Equipment by acquiring the beneficial
interests of a trust or the equity interest in a special purpose corporation
which holds an asset sought by the Fund. Nothing in the Partnership Agreement
prohibits the Fund from acquiring any such incidental property rights or
indirect ownership interest, provided that the primary purpose and objective
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is the acquisition and leasing of equipment as described herein, the acquisition
of the incidental rights does not alter the essential character of the
transaction as an acquisition and lease which otherwise satisfies the investment
objectives and policies of the Fund, and the acquisition does not otherwise
violate or circumvent any provision of the Partnership Agreement.
Prior Program Diversification
The six prior public equipment leasing programs sponsored by the Fund
Manager and its Affiliates have had equipment portfolio objectives substantially
identical to those of the Fund. See "Prior Performance Summary" below and the
Prior Performance Tables included as Exhibit A to this Prospectus for more
information concerning these prior programs. The first chart set forth below
represents the actual equipment portfolio diversification by equipment type for
all prior ATEL public programs as of July 31, 1996; the second chart set forth
below represents the actual equipment portfolio diversification by lessee
industry for all prior ATEL public programs as of July 31, 1996; and the third
chart set forth below represents the actual portfolio diversification by the
lessees' geographic location for all prior ATEL public programs as of July 31,
1996. Diversification of the Fund's portfolio will depend on a number of
variables, including the amount of Gross Proceeds raised and market conditions,
which cannot be predicted in advance. Although there can be no assurance that
the Fund will achieve diversification similar to that of the prior programs,
achieving such diversification will be one of the primary investment objectives
and policies of the Fund.
[GRAPHIC OMITTED - FIGURE 1]
[GRAPHIC OMITTED - FIGURE 2]
[GRAPHIC OMITTED - FIGURE 3]
Borrowing Policies
The Fund expects to incur debt to finance the purchase of a portion of
its Equipment portfolio. The amount of borrowings in connection with any
Equipment acquisition transaction will be determined by, among other things, the
credit of the lessee, the terms of the lease, the nature of the Equipment and
the condition of the money market. There is no limit on the amount of debt which
may be incurred in connection with any single acquisition of Equipment. However,
the Fund may not incur aggregate indebtedness in excess of 50% of the total cost
of Equipment as of the date of the final commitment of Net Proceeds and,
thereafter, as of the date any subsequent indebtedness is incurred. The Fund
intends to borrow amounts equal to such maximum debt level in order to fund a
portion of its Equipment acquisitions. While the Fund Manager has obtained
commitments for certain short term lines of credit, there can be no assurance
that such short term credit or permanent financing will be available to the Fund
in the amounts desired or on terms considered reasonable by the Fund Manager at
the time the Fund seeks to finance a specific Equipment acquisition.
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Financing for the Fund is expected to be a combination of nonrecourse
and recourse borrowings. The Fund Manager intends to use nonrecourse debt
primarily to finance assets leased to those credits which, in the opinion of the
Fund Manager, have a relatively higher potential risk of lease default than
other lessees of the Fund's Equipment. This use of nonrecourse debt will
mitigate the risk of loss due to default by such lessees.
Nonrecourse borrowing, in the context of the type of business to be
conducted by the Fund, means that the lender providing the funds would only be
able to look to the Equipment purchased with such funds and the proceeds derived
from the leasing or reselling of such Equipment as security; neither the Fund
nor any Partner (including the Fund Manager) will be liable for repayment of any
such loan, nor will any such loan be secured by other Equipment owned by the
Fund. Investors should note, however, that the presence of nonrecourse financing
may limit an investor's ability to claim losses from the Fund. See "Income Tax
Consequences - Limitation on Deduction of Losses At Risk Rules." Furthermore, a
creditor may under some circumstances have recourse to the Fund's assets upon
establishing fraud or misrepresentation by the Fund.
The Fund expects to incur recourse debt in connection with short-term
bridge financing and asset securitization, as described below. Recourse debt, in
the context of the type of business to be conducted by the Fund, means that the
lender can look beyond the specific asset financed by the loan to all of the
assets of the borrower, or a specified pool of assets, as collateral for
repayment of its debt obligation.
The Fund expects to incur recourse debt in the context of temporary or
short-term bridge financing used to acquire equipment and which is intended to
be repaid through a combination of permanent financing, offering proceeds and/or
operating revenues. In addition, the Fund may participate with other affiliated
programs and the Fund Manager in a common recourse debt facility to provide
temporary or short-term bridge financing of transactions approved for
acquisition by the Fund and such Affiliates. In such instances, lease
transactions may be held in the name of ATEL Leasing Corporation, or some other
nominee name, for convenience, notwithstanding that the transaction has been
approved for one or more participants. The ultimate acquisition of the financed
transaction will depend on many factors, including without limitation, the
Fund's available cash, portfolio makeup, and investment objectives at the time
of closing. See the discussion under "Risk Factors" and "Conflicts of Interest"
above.
The Fund may also incur long-term recourse debt in the form of asset
securitization transactions in order to obtain lower interest rates or other
more desirable terms than may be available for individual nonrecourse debt
transactions. In an "asset securitization", the lender would receive a security
interest in a specified pool of "securitized" Fund assets or a general lien
against all of the otherwise unencumbered assets of the Fund. It is the
intention of the Fund Manager to use such asset securitization primarily to
finance assets leased to those credits which, in the opinion of the Fund
Manager, have a relatively lower potential risk of lease default than those
46
<PAGE>
lessees with Equipment financed with nonrecourse debt.
In the case of any recourse bridge financing or asset securitization,
however, the lender would not be entitled to look to the individual assets of
any Holder, or, in many cases, of the Fund Manager, for repayment of such loans.
Thus, the liability of the Holders would be limited to their unreturned capital
contributions. See "Summary of the Partnership Agreement - Liability of Holders"
for a discussion of potential liability of Holders for return of certain
Distributions. If, under tax principles, it is determined that the Fund Manager
or one of its Affiliates bears the economic risk of loss for such recourse debt,
then the recourse debt will be allocated to the Fund Manager or its Affiliate
for tax basis purposes and all deductions attributable to the recourse debt will
be allocated to the Fund Manager or its Affiliate. See "Income Tax Consequences
- - Limitation on Deduction of Losses - Tax Basis."
Other than in connection with short-term bridge financing, the Fund
Manager will seek to avoid borrowing under terms which provide for a rate of
interest which may vary with the prime or reference rate of interest of a
lender. The Fund Manager will attempt to limit such variable interest rate
borrowings to short-term debt or to those instances in which the lessee agrees
to bear the cost of any increase in the interest rate. If such borrowings are
incurred without a corresponding variable lease payment obligation, the Fund's
interest obligations could increase while lease revenues remain fixed.
Accordingly, a rise in the prime or reference rate may increase borrowing costs
and reduce the amount of income and cash available for Distributions.
Historically, the prime rates charged by major banks have fluctuated; as a
result, the precise amount of interest which the Fund may be charged under such
circumstances cannot be predicted.
Fund indebtedness may provide for amortization of the principal balance
over the term of the loan through regular payments of principal and interest or
may provide that all or a substantial portion of the principal due will be
payable in a single "balloon payment" upon maturity. Such balloon payment
indebtedness involves greater risks than fully amortizing debt. See "Risk
Factors - Balloon Payments."
In the event that the Fund does not have sufficient funds to purchase
an item of Equipment at the time it is acquired (including prior to the Fund's
Final Closing Date), the Fund may borrow such funds from third parties on a
short-term basis, and repay the loans out of the Net Proceeds derived from the
subsequent sale of Units. Any such short-term loans may be unsecured or secured
by the assets acquired and/or other assets of the Fund.
Although the Partnership Agreement does not prohibit the Fund Manager
or its Affiliates from lending to the Fund, the Fund does not have any intention
or arrangements to borrow from such Persons. In the event that any such
borrowing is incurred, the terms may not permit the Fund Manager or any
Affiliate to receive a rate of interest or other terms which are more favorable
than those generally available from commercial lenders under the circumstances.
In no event may the Fund Manager or its Affiliates provide financing to the Fund
with a term in excess of twelve months.
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<PAGE>
Description of Lessees
The Fund will only purchase Equipment for which a lease exists or for
which a lease will be entered into at the time of purchase.
The Fund's objective is to lease a minimum of 75% of the Equipment (by
cost) acquired with the Net Proceeds to lessees which (i) have an average credit
rating by Moody's Investor Service, Inc. of "Baa" or better, or the credit
equivalent as determined by the Fund Manager, with the average rating weighted
to account for the original Equipment cost for each item leased; or (ii) are
established hospitals with histories of profitability or municipalities. The
Fund Manager may determine that the credit equivalent of a Moody's Baa rating
applies to those lessees which are not rated by Moody's, but which (i) have
comparable credit ratings as determined by other nationally recognized credit
rating services; (ii) although not rated by nationally recognized credit rating
services, are believed by the Fund Manager to have comparable creditworthiness;
or (iii) in the Fund Manager's opinion, as a result of guarantees provided,
collateral given, deposits made or other security interests granted, have
provided such safeguards of the Fund's interest in the Equipment that the risk
is equivalent to that involved in a lease to a company with a credit rating of
Baa. The balance of the original Equipment portfolio may include Equipment
leased to lessees which, although deemed creditworthy by the Fund Manager, would
not satisfy the general credit rating criteria for the portfolio. If the risk of
lessee default is not deemed significant, and the potential return is deemed by
the Fund Manager to justify the risk involved, the Fund may enter into leases
with such lessees for up to 25% of the Equipment acquired with the Net Proceeds.
In arranging lease transactions on behalf of corporate investors and
securing institutional financing for such transactions, the Fund Manager and its
Affiliates have been required to analyze and evaluate the creditworthiness of
potential lessees. See "Exhibit A - Prior Performance Information." However,
neither the Fund Manager nor any of its Affiliates is in the business of
regularly providing credit rating analyses as an independent activity. In order
to analyze whether a prospective lessee's credit risk is comparable or
equivalent to a Moody's Baa rating, the Fund Manager will attempt to apply the
standards applicable to securities qualifying for the Baa rating. Such
securities are generally deemed to be of "investment grade," neither highly
protected nor poorly secured, with earnings and asset protection which appear
adequate at present but which may be questionable over any great length of time.
Notwithstanding the Fund Manager's best efforts to assure the lessees'
creditworthiness, there can be no assurance that lease defaults will not occur.
It is not anticipated that the Fund's lessees will be located primarily
in any given geographic area. The Fund Manager will use its best efforts to
diversify lessees by geography and industry. The Fund Manager will seek to limit
the amount invested in Equipment leased to any single lessee to not more than
20% of the aggregate purchase price of Equipment owned at any time during the
Reinvestment Period, although there can be no assurance that it will be
successful in doing so. The Partnership Agreement provides, however, that in no
event may the Fund's equity investment in Equipment leased to a single
48
<PAGE>
lessee exceed an amount equal to 20% of the maximum Gross Proceeds from the sale
of Units offered hereunder (or $30,000,000).
Foreign Leases
There is no limit on the amount of Equipment which may be leased to
foreign subsidiaries of United States corporations, to foreign lessees or which
may otherwise be permitted to be used predominantly outside the United States.
The Fund Manager does not have any specific objective with regard to the amount
of Equipment to be subject to foreign leases, but intends to pursue desirable
foreign leasing opportunities for the Fund to the extent consistent with the
Fund's overall investment objectives.
Of the total Purchase Price of Equipment leased to foreign lessees, the
Fund Manager will require that a minimum of 75% must represent Equipment leased
to lessees which have a credit risk equivalent to a credit rating by Moody's
Investor Service, Inc. of "Baa" (investment grade) or better, as determined by a
credit rating agency which is generally recognized in the financial services
industry or, if no such credit rating is available, as determined by the Fund
Manager. Any leases to foreign lessees which do not meet the foregoing credit
standard will either be guaranteed by a U.S. parent company of the lessee, or
will involve lessees which have assets located in the United States with a value
equal to or greater than the original purchase cost of the Fund Equipment
subject to the lease.
The Fund Manager will seek to limit the aggregate amount of the Fund's
equity invested in all Equipment leased to foreign lessees or which is otherwise
to be used primarily outside the United States to not more than 20% of the Gross
Proceeds at any time during the Reinvestment Period. For this purpose, a lessee
under a lease guaranteed by a United States corporation will not be deemed a
foreign lessee.
Description of Leases
The Equipment will be leased to third parties primarily pursuant to High
Payout Leases. High Payout Leases are Full Payout Leases or Operating Leases
under which the non-cancelable lease payments and other payment obligations of
the lessee are equal to at least 90% of the original purchase price of the
Equipment paid by the Fund. Operating Leases are leases which will return to the
lessor less than the purchase price of the subject equipment from non-cancelable
rentals payable during the initial term of the lease. These include leases where
rental payments are based upon equipment usage. A majority of the aggregate
purchase price of the Fund's Equipment will represent Equipment leased under
High Payout Leases upon final investment of the Net Proceeds and completion of
permanent financing of the portfolio.
Generally, in a lease involving new Equipment, the lessee will express
an interest in lease financing for equipment and the Fund Manager will attempt
to create a lease package for the prospective lessee. In formulating the lease
package, the Fund Manager will consider the following factors, among others: the
type of Equipment and its anticipated residual value; the business of the
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<PAGE>
lessee and its credit rating; the cost of alternative financing services, and
competitive pricing and other market factors. The initial lease terms will vary
as to the type of Equipment, but will generally be for 36 months to 84 months.
The Fund may lease some Equipment to federal, state or local governments, or
agencies thereof. Many of such leases will be subject to renewal each year,
because many governmental lessees must obtain appropriations for funds for their
leases on an annual basis. In addition, the Fund may, under appropriate
circumstances, engage in other short-term or "per diem" leases when the Fund
Manager deems it in the best interests of the Fund and consistent with its
overall objectives.
Operating Leases may represent a greater risk to the Fund than Full
Payout Leases, because upon termination of the initial lease term it is
necessary either to renew or extend an existing Operating Lease, lease the
Equipment to a third party, or sell the Equipment in order to obtain recovery of
the purchase price. If Equipment is sold at the end of the initial term of an
Operating Lease, the sale will likely result in a recapture of depreciation.
Notwithstanding the risks associated with investments in Operating Leases, lease
rentals during comparable terms are ordinarily higher under Operating Leases
than under Full Payout Leases, and, accordingly, the Fund Manager believes that
well-structured Operating Leases may help the Fund satisfy its investment
objectives.
The Fund's objective will generally be to lease the Equipment for an
initial lease term during which the lessee may not cancel the lease or otherwise
avoid the lease obligation. However, where the Fund Manager deems it to be in
the Fund's best interests, because of favorable lease terms, anticipated high
demand for particular items of Equipment or otherwise, it may permit an
appropriate cancellation clause.
The Fund Manager believes that the Fund will be able to lease or
dispose of its purchased Equipment profitably in the aggregate after the initial
lease terms although no assurances can be given in this regard. The Fund's
ability to renew or extend the terms of its leases or to re-lease or sell the
Equipment on expiration of the initial lease terms is dependent on many factors,
including possible economic or technological obsolescence of the Equipment,
competitive practices and conditions and generally prevailing economic
conditions.
It is anticipated that the leases which the Fund will enter into will
generally be "net leases," which provide that the lessee must bear the risk of
loss of the Equipment, provide adequate insurance, pay applicable taxes,
maintain the Equipment and indemnify the Fund from and against any liability
which may arise as the result of any act or omission by the lessee or its
agents. In the case of Operating Leases, the Fund may be responsible for certain
of these obligations, such as certain insurance and maintenance expenses, but
generally only during a period when the Equipment is not under lease.
The Fund's lease agreements, other than certain operating and per diem
leases, will generally require the respective lessees (i) to maintain casualty
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<PAGE>
insurance in an amount equal to the greater of the full value of the Equipment
or a specified amount set forth in the lease, and (ii) to maintain liability
insurance naming the Fund as an additional insured with a minimum limit of
$1,000,000 in coverage.
Agreements with Manufacturers and Vendors
The Fund may participate in manufacturer's or vendor leasing programs.
Such programs will generally involve a contract between the Fund Manager and a
seller of Equipment (typically, the manufacturer) whereby the Fund Manager
agrees to purchase Equipment from the seller during the term of the contract,
which Equipment is subject to a lease between the seller and a third party
lessee. The Fund Manager will then assign suitable vendor leasing transactions
to the Fund. See "Conflicts of Interest" for a discussion of potential conflicts
which may arise if the Fund and one or more Affiliates of the Fund Manager have
funds available to invest at the same time in similar equipment. The Fund will
be unable to dictate the terms of third party leases involved in such programs,
as such leases will be negotiated by the seller, but the Fund will, under such
agreements, have the right to approve both the credit of each lessee and the
terms of the lease. The terms of such agreements may vary, but they will
generally include, among other provisions, covenants by the manufacturer to (i)
warrant the Equipment and its use, (ii) provide for the maintenance of the
Equipment and the supply of replacement parts, (iii) indemnify the Fund against
patent infringement and patent violation claims and other similar actions, and
(iv) assist the Fund in obtaining new leases for, or arranging the sale of, the
Equipment upon termination of the subject leases.
The Fund Manager will determine, in its sole discretion, in which
vendor leasing programs, if any, the Fund will participate. It is the Fund
Manager's intention, however, to limit the Fund's investments pursuant to vendor
leasing programs to an insignificant portion of its Equipment portfolio. It
should be noted that the Fund Manager and its Affiliates have not engaged in any
vendor leasing programs on behalf of prior programs they have sponsored.
The Fund may enter into remarketing agreements with manufacturers of
Equipment on terms which are customary in the industry. A remarketing agreement
is an agreement whereby the manufacturer agrees with the lessor to assist the
lessor in finding a new lessee at the termination of the original lease. The
Fund Manager will determine, in its sole discretion, whether to enter into such
agreements and with which manufacturers to do so. Most remarketing agreements
call for the manufacturer to find a second user only on a "best efforts" basis.
Thus, a remarketing agreement does not assure the lessor that the equipment can
or will be re-leased at the end of the initial lease term. In the case of an
Operating Lease, the manufacturer will not be required to repurchase Equipment,
but may, through the use of its sales force and contacts with its customers,
re-lease or sell such Equipment for the benefit of the Fund. The monthly rental
payments under a new lease or the sale price of such Equipment would be subject
to the final approval of the Fund Manager. Under a remarketing agreement, the
manufacturer participates with the Fund in revenues on an incentive basis. The
manufacturer would typically
51
<PAGE>
receive a percentage of the revenue derived by the Fund from Equipment subject
to a remarketing agreement, which percentage would increase substantially after
the Fund derived a specified return on its investment in such Equipment.
In connection with the Fund entering into a management or service
agreement with vendors, manufacturers or others covering such services as
collection of rents, payment of expenses and monitoring of Equipment, an annual
fee may be paid by the Fund to the vendors for such services in addition to the
Equipment Management Fee and Incentive Management Fee payable to Affiliates of
the Fund Manager, subject to the limitations in the Partnership Agreement. See
"Management Compensation."
Competition
Leasing has become one of the major methods by which American businesses
finance their capital equipment needs. See Figure 4 below for a
graphic-presentation of the dollar amount of equipment investment and equipment
lease financing in the United States for each year since 1982 (according to the
Equipment Leasing Association, a leasing industry trade association). Please
note that this chart reflects the growth of equipment lease financing from all
sources, including manufacturers, financial institutions and private and public
lease financing companies, and not just public equipment leasing programs such
as the Fund. Such public direct participation programs represent only a
relatively small portion of the total lease financing industry.
[GRAPHIC OMITTED - FIGURE 4]
In obtaining lessees the Fund will compete with manufacturers of equipment
which provide leasing programs and with established leasing companies and
equipment brokers. Manufacturers of equipment may offer certain incentives
including maintenance services and trade-in or replacement privileges which the
Fund cannot offer. The Fund may also be competing with manufacturers and others
who offer Full Payout Leases that provide for longer terms and lower rates than
Operating Leases which the Fund will offer. There are numerous other potential
entities, including limited partnerships organized and managed similarly to the
Fund, seeking to purchase equipment subject to either Operating Leases or Full
Payout Leases, some of which have greater financial resources than the Fund.
Joint Venture Investments
The Fund may purchase certain of its Equipment by acquiring a
controlling interest in a partnership, equipment trust or other form of joint
venture with a non-Affiliate which owns such Equipment or beneficial interest
therein. For purposes of determining the permissibility of a joint venture with
a non- Affiliate, the controlling interest requirement may be satisfied by
ownership of more than 50% of the venture's capital or profits or from
provisions in the governing agreement giving the Fund certain basic rights. For
example, control may take the form of the right to make or veto certain
management decisions or provide for certain predetermined benefits for the Fund
in the event that the other party or parties to the venture should make certain
decisions respecting the sale, refinancing or alteration of assets owned by the
venture. The Fund may not acquire Equipment jointly with others unless (i) the
joint venture agreement does not authorize or require the Fund to do anything
with respect
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to the Equipment which the Fund, or the Fund Manager, could not do directly
because of the policies set forth in the Partnership Agreement and (ii) the
transaction does not result in payment of duplicate fees.
The Fund may also acquire Equipment by joint venture or as co-owner
with an Affiliate. In such event, the following conditions must be met: (i) the
Affiliate will be required to have substantially identical investment objectives
to those of the Fund; (ii) there are no duplicative fees; (iii) the Affiliate
must make its investment on substantially the same terms and conditions as the
Fund; (iv) the Affiliate must have a compensation structure substantially
identical to that of the Fund; (v) the venture must be entered into in order to
obtain diversification or to relieve the Fund Manager or Affiliates from
commitments entered into under Section 15.2.15 of the Partnership Agreement or
similar provisions of the Affiliate's partnership agreement; and (vi) the Fund
has a right of first refusal should a co-venturer decide to sell the property
owned by the venture. Because both the Fund and such Affiliate will be required
to approve decisions pertaining to the Equipment, it is possible that an impasse
will develop. If one party, but not the other, wishes to sell the Equipment, the
party not desiring to sell will have a right of first refusal to purchase the
other party's interest in the Equipment. The Fund may not, however, be able to
exercise its right of first refusal unless it has the financial resources to do
so, and there can be no assurances that it will.
The investment by the Fund in joint ventures which own Equipment or as
a co-owner of Equipment, instead of investing directly in the Equipment itself
or as the sole owner, may under certain circumstances involve risks not
otherwise present, including, for example, risks associated with the possibility
that a Fund's co-venturer might become bankrupt, that the parties may reach an
impasse on joint venture decisions, or that each co-venturer may at any time
have economic or business interests or goals which are inconsistent with the
business interests or goals of the Fund. See "Risk Factors - Risks of Joint
Ventures."
The Fund may not acquire limited partnership interests in other
partnerships.
General Restrictions
The Fund will not: (i) issue any Units after the Final Closing Date or
issue Units in exchange for property, (ii) make loans to the Fund Manager or its
Affiliates, (iii) invest in or underwrite the securities of other issuers, (iv)
operate in such a manner as to be classified as an "investment company" for
purposes of the Investment Company Act of 1940, (v) except as set forth herein,
purchase or lease any Equipment from nor sell or lease property to the Fund
Manager or its Affiliates, or (vi) except as expressly provided herein, grant
the Fund Manager or any of its Affiliates any rebates or give-ups or participate
in any reciprocal business arrangements with such parties which would circumvent
the restrictions in the Partnership Agreement, including the restrictions
applicable to transactions with Affiliates. See Article 15 of the Partnership
Agreement for a description of additional investment limitations.
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The Fund Manager and its Affiliates, including their officers and
directors, may engage in other businesses or ventures that own, finance, lease,
operate, manage, broker or develop equipment, as well as businesses unrelated to
equipment leasing. See "Conflicts of Interest," "Management Compensation" and
"Management."
Changes in Investment Objectives and Policies
Holders have no voting rights with respect to the establishment or
implementation of the investment objectives and policies of the Fund, all of
which are the responsibility of the Fund Manager. However, the Fund Manager
cannot make any material changes in the investment objectives and policies
described above without first obtaining the written consent or approval of
Limited Partners owning more than 50% of the total outstanding Units entitled to
vote.
CONFLICTS OF INTEREST
The Fund is subject to various conflicts of interest arising out of its
relationship with the Fund Manager and Affiliates of the Fund Manager. These
conflicts include, but are not limited to, the following:
Other Activities of the Fund Manager. The Fund Manager serves in the
capacity of general partner in six other public partnerships engaged in the
equipment leasing business, and it and its Affiliates otherwise engage in the
business of purchasing and selling equipment and arranging leases for its own
account and for the accounts of others. See Exhibit A - "Prior Performance
Information." The Fund Manager will have conflicts of interest in allocating
management time, services and functions among the prior partnerships, the Fund,
any future investment programs and activities for their own accounts. The Fund
Manager believes that it has or can employ sufficient staff, equipment and other
resources to discharge fully their responsibilities to each such activity.
In addition, as general partner of prior and future partnerships, the
Fund Manager will be contingently liable for obligations of such partnerships,
except nonrecourse indebtedness relating to the acquisition of equipment. Such
obligations are expected to consist primarily of normal operating and other
current expenses, and it is not believed this responsibility will materially
affect the ability of the Fund Manager to satisfy its responsibilities to the
Fund.
Competition for Investments. The Fund Manager will have conflicts of
interest to the extent that its prior or future investment programs may compete
with the Fund for opportunities in the acquisition and leasing of equipment. Six
prior public programs, ATEL Cash Distribution Fund ("ACDF"), a California
limited partnership, ATEL Cash Distribution Fund II ("ACDF II"), a California
limited partnership, ATEL Cash Distribution Fund III, L.P. ("ACDF III"), ATEL
Cash Distribution Fund IV, L.P. ("ACDF IV"), ATEL Cash Distribution Fund V, L.P.
("ACDF V") and ATEL Cash Distribution Fund VI, L.P. ("ACDF VI") (together
collectively referred to as the "Prior Programs") have investment objectives
54
<PAGE>
substantially identical to those of the Fund and may have funds available
for investment at the same time the Fund is seeking to acquire Equipment. ACDF
completed a fully-subscribed offering of $10,000,000 of its limited partnership
interests in December 1987. All of its available net offering proceeds have been
committed to investment as of the date hereof. ACDF II completed a fully-
subscribed public offering of $35,000,000 of its limited partnership interests
in January 1990. All of such gross offering proceeds have been committed to
equipment acquisitions, estimated organization and offering expenses and capital
reserves. ACDF III completed a public offering of its limited partnership
interests on January 3, 1992, pursuant to which it raised total offering
proceeds in the amount of approximately $73,900,000. All of such gross offering
proceeds have been committed to equipment acquisitions, estimated organization
and offering expenses and capital reserves. ACDF IV completed a fully-subscribed
public offering of $75,000,000 of its limited partnership interests on February
4, 1993. All of such gross offering proceeds had been committed to equipment
acquisitions, offering and organization expenses and capital reserves. ACDF V
completed a public offering of its limited partnership interests in November
1994 pursuant to which it raised total offering proceeds in the amount of $125
million. All of such gross offering proceeds have been committed to equipment
acquisitions, offering and organization expenses and capital reserves. ACDF VI
completed a public offering of its limited partnership interests on November 23,
1996, pursuant to which it raised total offering proceeds of $125 million.
Substantially, all of such gross offering had been committed to equipment
acquisitions, offering and organization expenses and capital reserves as of such
date. In addition, one or more of the Prior Programs may have excess operating
revenues or financing proceeds available to invest in additional equipment at a
time when the Fund is also active in seeking to invest or reinvest in Equipment.
Certain of the equipment owned and to be acquired by the Prior Programs and the
Fund may be similar and may be purchased from the same manufacturers.
Furthermore, the Fund Manager and its Affiliates may in the future form
additional investment programs having similar objectives, and accordingly, the
Fund may be in competition with any such future programs formed by the Fund
Manager.
Any time two or more investment programs (including the Fund)
affiliated with the Fund Manager have funds available to acquire and lease the
same types of equipment, conflicts of interest may arise as to which of the
programs should proceed to acquire available items of equipment. In such
situations, the Fund Manager will analyze the equipment already purchased by,
and investment objectives of, each program involved, and will determine which
program will purchase the equipment based upon such factors, among others, as
(i) the amount of cash available in each program for such acquisition and the
length of time such funds have been available, (ii) the current and long-term
liabilities of each program, (iii) the effect of such acquisition on the
diversification of each program's equipment portfolio, (iv) the estimated income
tax consequences to the investors in each program from such acquisition, and (v)
the cash distribution objectives of each program. If after analyzing the
foregoing and any other appropriate factors, the Fund Manager determines that
such acquisition would be equally suitable for more than one program, then
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the Fund Manager shall purchase such equipment for the programs on the basis of
rotation with the order of priority determined by the length of time each
program has had funds available for investment, with the available equipment
allocated first to the program which has had funds available for investment the
longest.
Receipt of Commissions, Fees and Other Compensation by the Fund Manager
and its Affiliates. Fund operations will result in certain compensation to the
Fund Manager and its Affiliates. See "Management Compensation." The Fund Manager
has absolute discretion with respect to all decisions related to such
operations. Because the amount and timing of such fees may depend, in part, on
the debt structure of Equipment acquisitions and the timing of such
transactions, the Fund Manager and its Affiliates may be subject to conflicts of
interest to the extent the acquisition, retention, re-lease or sale of Equipment
and the terms and conditions thereof may be less advantageous to the Fund and
more advantageous to the Fund Manager under certain circumstances. It should be
noted that the Fund Manager intends to cause the Fund to incur aggregate
acquisition debt in an amount approximately equal to 50% of the total cost of
Fund Equipment.
In all cases where the Fund Manager or its Affiliate may have a conflict
of interest in determining the terms or timing of a transaction by the Fund,
it will exercise its discretion strictly in accordance with its fiduciary duty
to the Fund and the Holders. See "Fiduciary Duty of the Fund Manager."
Non-Arm's-Length Agreements. Any agreements and arrangements relating
to compensation between the Fund and the Fund Manager or any of its Affiliates
will not be the result of arm's-length negotiations and the performance thereof
by the Fund Manager and its Affiliates will not be supervised or enforced at
arm's-length.
Distribution of Units. No independent managing underwriter has been
engaged for the distribution of the Units. Furthermore, ATEL Securities
Corporation (the "Dealer Manager"), an Affiliate of the Fund Manager which may
sell Units and will perform certain wholesaling services for the Fund, may not
be expected to have performed due diligence in the same manner as an independent
broker-dealer. The Dealer Manager has acted in the same capacity in prior
offerings sponsored by the Fund Manager and its Affiliates and is expected to do
so in any future offerings that the Fund Manager and its Affiliates may conduct.
Lack of Separate Representation. The Fund, the Fund Manager and
prospective Holders have not been represented by separate counsel in connection
with the formation of the Fund, drafting of the Partnership Agreement or the
offering of Units. The attorneys, accountants and other professionals who
perform services for the Fund all perform similar services for the Fund Manager
and its Affiliates and it is contemplated that such dual representation will
continue in the future. However, should a dispute arise between the Fund and the
Fund Manager, the Fund Manager will cause the Fund to retain separate counsel in
connection with such matters.
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Joint Ventures with Affiliates of the Fund Manager. The Fund may enter
into joint ownership or joint venture agreements for the acquisition and leasing
of Equipment with other persons, including limited partnerships of which the
Fund Manager or its Affiliates are general partners. See "Investment Objectives
and Policies - Joint Venture Investments." Should any such joint ventures be
consummated, the Fund Manager may face certain conflicts of interest inasmuch as
it may control and owe fiduciary duties to both the Fund and, through such
Affiliates, the affiliated co-venturer. For example, because of the differing
financial positions of the co-venturing partnerships, it may be in the best
interest of one partnership to sell the jointly-held Equipment at a time when it
is in the best interest of the other partnership to hold such Equipment.
Nevertheless, such joint ventures are restricted to circumstances where the
co-venturer's investment objectives are comparable to the Fund's, the Fund's
investment is on substantially the same terms as the co-venturer and the
compensation to be received by the Fund Manager and its Affiliates from each
co-venturer is substantially identical.
Maintenance of Reserves. The Fund Manager will have the discretion to
determine the amount of reserves to be maintained by the Fund. The Fund Manager
is required by the Partnership Agreement to establish an initial working capital
reserve equal to 1/2 of 1% of the Gross Proceeds. This amount may fluctuate from
time to time as the Fund Manager determines the appropriate amount of reserves
for the Fund to maintain. The Fund Manager may be subject to conflicts of
interest to the extent that its interests may be served by the Fund maintaining
higher reserves in order to avoid the Fund Manager's personal liability for Fund
obligations when such reserves might otherwise be distributed to Holders. Any
personal liability incurred by the Fund Manager for Fund obligations, however,
would generally be reimbursable to the Fund Manager by the Fund. As a result,
the Fund Manager does not believe any such potential conflict will have a
material impact on the Fund or the Holders.
ORGANIZATIONAL DIAGRAM
The following diagram shows the relationships among the Fund,
the Fund Manager and certain of Affiliates of the Fund Manager which may perform
services for the Fund (solid lines denote ownership and dotted lines denote
other relationships).
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[GRAPHIC OMITTED - FIGURE 5]
ATEL Capital Group's capital stock is owned 75% by A.J. Batt and 25% by
Dean L. Cash. ATEL Capital Group owns 100% of the outstanding capital
stock of each of the Fund Manager, ALC, AIS and AEC. The Fund Manager owns 100%
of the outstanding capital stock of the Dealer Manager. See "Management" for
further information concerning the above entities and their respective officers
and directors.
FIDUCIARY DUTY OF THE GENERAL PARTNER
The Fund Manager, as General Partner of the Fund, is accountable to the
Fund as fiduciary and, consequently, is required to exercise good faith and
integrity in all dealings with respect to Fund affairs.
Under California law and subject to certain conditions, a limited partner
may institute legal action on behalf of the limited partnership (a partnership
derivative action) to recover damages from a third party or to recover damages
resulting from a breach by a general partner of its fiduciary duty. In addition,
a limited partner may institute a legal action on behalf of himself and all
other similarly situated limited partners (a class action) to recover damages
for a breach by a general partner of its fiduciary duty, subject to procedural
rules generally applicable to class actions. This area of the law is
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complex and rapidly changing, and investors who have questions regarding the
duties of a general partner and the remedies available to limited partners
should consult with their counsel.
The Partnership Agreement does not exculpate the Fund Manager from
liability or provide it with any defenses for breaches of its fiduciary duty.
However, the fiduciary duty owed by a general partner to his partners is similar
in many respects to the fiduciary duty owed by directors of a corporation to its
shareholders, and is subject to the same rule, commonly referred to as the
"business judgment rule," that directors are not liable for mistakes in the good
faith exercise of honest business judgment or for losses incurred in the good
faith performance of their duties when performed with such care as an ordinarily
prudent person would use. As a result of the business judgement rule, a general
partner may not be held liable for mistakes made or losses incurred in the good
faith exercise of reasonable business judgment. Accordingly, provision has been
made in the Partnership Agreement that the Fund Manager shall have no liability
to the Fund for losses arising out of any act or omission by the Fund Manager,
provided that the Fund Manager determined in good faith that its conduct was in
the best interest of the Fund and, provided further, that its conduct did not
constitute fraud, negligence or misconduct. As a result, purchasers of Units may
have a more limited right of action in certain circumstances than they would in
the absence of such a provision in the Partnership Agreement specifically
defining the General Partner's standard of care.
The Partnership Agreement also provides that, to the extent permitted
by law, the Fund shall indemnify the Fund Manager and its Affiliates providing
services to the Fund against liability and related expenses (including
attorneys' fees) incurred in dealings with third parties, provided that the
conduct of the Fund Manager is consistent with the standards described in the
preceding paragraph. A successful claim for such indemnification would deplete
Fund assets by the amount paid. The Fund Manager shall not be indemnified
against any liabilities arising under the Securities Act of 1933. The Fund shall
not pay for any insurance covering liability of the Fund Manager or any other
persons for actions or omissions for which indemnification is not permitted by
the Partnership Agreement.
Subject to the fiduciary relationship, the Fund Manager has broad
discretionary powers to manage the affairs of the Fund under the terms of the
Partnership Agreement and under the California Revised Limited Partnership Act.
Generally, actions taken by the Fund Manager are not subject to vote or review
by the Holders, except to the limited extent provided in the Partnership
Agreement and under California law. (See "Summary of
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the Partnership Agreement.")
MANAGEMENT
The Fund Manager
The Fund Manager and General Partner of the Fund is ATEL Financial
Corporation (the "General Partner", "Fund Manager" or "AFC"), a California
corporation formed in 1977 under the name All Type Equipment Leasing, Inc. The
Fund Manager's offices are located at 235 Pine Street, 6th Floor, San Francisco,
California 94104, and its telephone numbers are 415/989-8800 and 800/543-ATEL.
Its officers have extensive experience with transactions involving the
acquisition, leasing, financing and disposition of equipment, including
acquiring and disposing of equipment subject to Operating Leases and Full Payout
Leases, as more fully described below and in Exhibit A hereto. The Fund Manager
and its Affiliates are sometimes collectively referred to below as "ATEL" for
convenience.
Since its organization in 1977, ATEL has been active in several areas
within the equipment leasing industry, including: (i) originating and financing
leveraged and single investor lease transactions for corporate investors, (ii)
acting as a broker/packager by arranging equity and debt participants for
equipment lease transactions originated by other leasing companies, and (iii)
consulting on the pricing and structuring of equipment lease transactions for
banks, leasing companies and corporations. The Fund Manager has organized one
privately- placed limited partnership and six public limited partnerships formed
to acquire and lease equipment. During the past 14 years, ATEL has participated
in structuring and/or arranging lease transactions involving aggregate equipment
costs in excess of $1 billion.
All of the outstanding capital stock of ATEL Financial Corporation is
held by ATEL Capital Group ("ACG"). The outstanding capital stock of ATEL
Capital Group is owned 75% by A.J. Batt and 25% by Dean L. Cash. Each of ATEL
Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC") and ATEL
Investor Services ("AIS") is a wholly-owned subsidiary of ATEL Capital Group
which will perform services for the Fund. Acquisition services will be performed
for the Fund by ALC, equipment management and asset disposition services will be
performed by AEC, and AIS will perform partnership management, administration
and investor services. Finally, the Dealer Manager, ATEL Securities Corporation
("ASC"), is a wholly-owned subsidiary of ATEL Financial Corporation. See the
chart included
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under the caption "Organizational Diagram" above for more information in
this regard.
The officers and directors of ATEL Capital Group, ATEL Financial
Corporation and their Affiliates are as follows:
Name Positions
A.J. Batt ................... Chairman of the Board of
Directors of ACG, AFC,
ALC, AEC, AIS and ASC;
President and Chief
Executive Officer
of ACG, AFC, and
AEC
Dean L. Cash ................ Director, Executive Vice
President and Chief Operating
Officer of ACG, AFC and AEC;
Director, President and Chief
Executive Officer of ALC, AIS
and ASC
F. Randall Bigony............ Chief Financial Officer of
ACG, AFC, ALC, AIS and AEC
Donald E. Carpenter.......... Controller of ACG, AFC, ALC,
AEC and AIS; Chief Financial
Officer of ASC
Vasco H. Morais.............. General Counsel for ACG, AFC,
ALC, AIS and AEC
William J. Bullock........... Director of Asset Management
of AEC
Janet V. Eyre............. Vice President of ALC
Jeffrey A. Schwager.......... Vice President - Syndication
of ALC
Carl W. Magnuson............. Vice President - Syndication of ALC
Russell H. Wilder............ Vice President - Credit of ALC
J. Edwin Holliday............ Senior Vice President -
National Sales Manager of ASC
John P. Scarcella............ Senior Vice President of ASC
A. J. Batt, age 60, founded ATEL in 1977 and has been its president and
chairman of the board of directors since its inception, and a director of the
Dealer Manager since its organization in October, 1985. From 1973 to 1977, he
was
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employed by GATX Leasing Corporation as manager-data processing and equity
placement for the lease underwriting department, which was involved in equipment
financing for major corporations. From 1967 to 1973 Mr. Batt was a senior
technical representative for General Electric Corporation, involved in sales and
support services for computer time-sharing applications for corporations and
financial institutions. Prior to that time, he was employed by North American
Aviation as an engineer involved in the Apollo project. Mr. Batt received a
B.Sc. degree with honors in mathematics and physics from the University of
British Columbia in 1961. Mr. Batt is qualified as a registered principal with
the NASD.
Dean L. Cash, age 46, joined ATEL as director of marketing in 1980 and
has been a vice president since 1981, executive vice president since 1983 and a
director since 1984. He has been a director of the Dealer Manager since its
organization and its president since 1986. Prior to joining ATEL, Mr. Cash was a
senior marketing representative for Martin Marietta Corporation, data systems
division, from 1979 to 1980. From 1977 to 1979, he was employed by General
Electric Corporation, where he was an applications specialist in the medical
systems division and a marketing representative in the information services
division. Mr. Cash was a systems engineer with Electronic Data Systems from 1975
to 1977, and was involved in maintaining and developing software for commercial
applications. Mr. Cash received a B.S. degree in psychology and mathematics in
1972 and an M.B.A. degree with a concentration in finance in 1975 from Florida
State University. Mr. Cash is an arbitrator with the American Arbitration
Association and is qualified as a registered principal with the NASD.
F. Randall Bigony, age 39, joined ATEL in 1992 and became chief
financial officer in 1994. From 1987 until joining AFC, Mr. Bigony was president
of F. Randall Bigony & Co., a consulting firm that provided financial and
strategic planning services to emerging growth companies. From 1983 to 1987, he
was a manager with the accounting firm of Ernst & Whinney, serving clients in
its management consulting practice. Mr. Bigony received a B.A. degree in
business from the University of Massachusetts and an M.B.A. degree in finance
from the University of California, Berkeley. He is a founding board member and
acting treasurer of the I Have a Dream Foundation - Bay Area Chapter.
Donald E. Carpenter, age 47, joined ATEL in 1986 as controller. Prior
to joining the Fund Manager, Mr. Carpenter was employed as an audit
supervisor with Laventhol & Horwath, certified public accountants in San
Francisco, California, from 1983 to 1986. From 1979 to 1983, Mr. Carpenter was
employed by Deloitte Haskins & Sells, certified public
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accountants in San Jose, California. From 1971 to 1975, Mr. Carpenter was a
supply officer in the U.S. Navy. Mr. Carpenter received a B.S. degree in
mathematics (magna cum laude) from California State University, Fresno in 1971
and completed a second major in accounting in 1978. Mr. Carpenter has been a
California certified public accountant since 1981. He is qualified as a
registered principal with the NASD.
Vasco H. Morais, age 38, joined ATEL in 1989 as general counsel to
provide legal support in the drafting and reviewing of lease documentation,
advising on general corporate law matters, and assisting on securities law
issues. From 1986 to 1989, Mr. Morais was employed by the BankAmeriLease
Companies, Bank of America's equipment leasing subsidiaries, providing in-house
legal support on the documentation of tax-oriented and non-tax oriented direct
and leveraged lease transactions, vendor leasing programs and general corporate
matters. Prior to the BankAmeriLease Companies, Mr. Morais was with the
Consolidated Capital Companies in the Corporate and Securities Legal Department
involved in drafting and reviewing contracts, advising on corporate law matters
and securities law issues. Mr. Morais received a B.A. degree in 1982 from the
University of California in Berkeley and a J.D. degree in 1986 from Golden Gate
University Law School. Mr. Morais has been an active member of the State Bar of
California since 1986.
William J. Bullock, age 33, joined ATEL in 1991, as the director of asset
management. He assumes responsibility for the disposition of off-lease equipment
and residual valuation analysis on new lease transactions. Prior to joining
ATEL, Mr. Bullock was a senior member of the equipment group at McDonnell
Douglas Finance Corporation ("MDFC") responsible for managing its $4 billion
portfolio of leases. Mr. Bullock was involved in negotiating sales and renewals
as well as appraising and inspecting equipment. Prior to joining MDFC in 1989,
Mr. Bullock was the senior negotiator at Equitable Leasing (a subsidiary of GE
Capital Equipment Corp.) in San Diego, California. At Equitable Leasing, he was
responsible for end-of-lease negotiations and equipment dispositions of a
portfolio comprised of equipment leased primarily to Fortune 200 companies. Mr.
Bullock has authored industry articles for the Equipment Lessors Association
("ELA") and has been named to the ELA's equipment management committee. He
received a B.S. degree in Finance in 1987 from San Diego State University and is
currently pursuing his MBA.
Janet V. Eyre, age 41, joined ATEL in 1993 as director of sales support in
charge of the pricing of lease transactions and has been a vice president since
1995. From 1986 to 1993, Ms. Eyre was employed by GE Capital Corporation to
price and purchase
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lease transaction. Prior to that, Ms. Eyre worked for United States
Portfolio Leasing (a subsidiary of US Leasing International) for five years
marketing lease financing; responsibilities included pricing, negotiations,
documentation and the remarketing of off-lease equipment. From 1977 to 1981, Ms.
Eyre worked at ITEL Corporation in various administrative and sales positions.
Ms. Eyre received a B.A. degree (cum laude) from Harvard University in 1976.
Jeffrey A. Schwager, age 36, joined ATEL in 1991 as vice president -
syndication and is responsible for acquiring lease transactions from
intermediaries as well as debt and equity placement. Prior to joining ALC, Mr.
Schwager was a member of General Electric Capital Corporation's Institutional
Financing Group. There, he was responsible for originating equipment lease and
corporate finance opportunities, as well as soliciting equipment portfolios in
conjunction with marketing a proprietary capital enhancement product. From 1985
through 1990, Mr. Schwager held several positions with Bank Ireland/First
Financial, most recently Vice President Marketing, where he was responsible for
originating and negotiating tax-oriented leveraged lease financings with Fortune
500 companies. From 1983 to 1985 Mr. Schwager was an Associate Consultant with
The Bigelow Company, a middle market investment banking and management
consulting firm, developing and implementing strategic plans for a number of
clients. Prior to The Bigelow Company, he worked for Petro-Lewis Corporation as
a joint-interest accountant. Mr. Schwager received his B.S. in Business
Administration from Babson College in 1982, majoring in Finance and
Entrepreneurial Studies.
Carl W. Magnuson, age 53, joined ATEL in 1994 and is Vice President -
Syndication for ALC. Mr. Magnuson is responsible for acquiring third party lease
transactions and debt placement. Prior to joining ATEL he was a Regional Group
Manager and Portfolio Sales Manager for Bell Atlantic Systems Leasing for 10
years. From 1983 to 1984 he was Vice President and Chief Financial Officer of
the Handi-Kup Company, a plastics manufacturer, and from 1981 to 1982 he was
Controller for the Cyclotron Corporation, engaged in nuclear medicine research
and development. From 1978 to 1981 he was Executive Vice President of Shannon
Financial Corporation, a middle market leasing corporation. From 1975 to 1978 he
was a Deputy Program Manager for the Watkins Johnson Company. From 1968 to 1973
Mr. Magnuson was an engineering duty officer in the U.S. Navy. Mr. Magnuson
received a B.S. in Engineering Science and an M.S. in Applied Mathematics from
the Rensselaer Polytechnic Institute, an MS in Industrial Engineering/Operations
Research from Stanford University,and an M.B.A. form the University of
California at Berkeley.
Russell H. Wilder, age 41, joined ATEL in 1992 as Vice President of
Credit for ALC. Immediately prior to joining ATEL, Mr. Wilder was a
personal property broker specializing in equipment leasing and financing and an
outside contractor in the areas of credit and collections. From 1985 to 1990 he
was Vice President and Manager of Leasing for Fireside Thrift Co., a Teledyne
subsidiary, and was responsible for all aspects of setting up and managing the
department, which operated as a small ticket lease funding source. From 1983 to
1985 he was with Wells Fargo Leasing Corporation as Assistant Vice President in
the credit department where he oversaw all credit analysis on transactions in
excess of $2 million. From 1978 to 1983 he was a District Credit Manager with
Westinghouse Credit Corporation's Industrial Group and was responsible for all
non-marketing operations of various district offices. Mr. Wilder holds a B.S.
with Honors in Agricultural Economics and Business Management from the
University of California at Davis. He has been awarded the Certified Lease
Professional designation by the Western Association of Equipment Lessors.
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J. Edwin Holliday, age 53, joined ATEL in 1988 as Regional Vice President
of the Dealer Manager for the Southwestern region and has been a Senior Vice
President and its National Sales Manager since April 1994. From August 1993
until April 1994, Mr. Holliday was a Managing Director of HomeMac Corporation, a
mortgage bank that also markets a mortgage-related trust. Prior to joining ATEL,
Mr. Holliday was a Regional Vice President for several firms marketing
investment securities, including Icon Group from 1986 to 1988, Stonehenge
Capital from 1982 to 1986, and Quantum Resources from 1980 to 1982. Mr. Holliday
was Sales Manager for a retail division of Beech Aircraft in Denver, Colorado
from 1975 to 1980, and sales engineer for Trane Company in Canton, Ohio from
1968 to 1975. Mr. Holliday received a B.S. degree in Mechanical Engineering from
West Virginia Institute of Technology in 1968, and served as Chairman of the
Board of the Orange County, California Chapter of the International Association
for Financial Planning in 1993 and 1994.
John P. Scarcella, age 35, joined the Dealer Manager as vice president
of broker dealer relations in 1992. He is involved in the marketing of
securities offered by the Dealer Manager. Prior to joining ATEL Securities
Corporation, from 1987 to 1991, he was employed by Landsing Pacific Fund, a real
estate investment trust in San Mateo, California and acted as director of
investor relations. From 1984 to 1987, Mr. Scarcella acted as broker dealer
representative for Landsing Capital Corporation, where he was involved in the
marketing of limited partnerships and REITs. Mr. Scarcella received a B.S.C.
degree with an emphasis in investment finance in 1983 and an M.B.A. degree with
a concentration in marketing in 1991 from Santa Clara University.
Selection and Management of Investments
An Affiliate of the Fund Manager, ATEL Leasing Corporation, will have
primary responsibility for selecting and negotiating potential acquisitions and
leases of Equipment, subject to the Fund Manager's supervision and approval. The
Fund Manager's Investment Committee will approve any acquisition before it is
consummated. The Investment Committee currently consists of A.J. Batt, Dean L.
Cash, Donald E. Carpenter and F. Randall Bigony.
ATEL Equipment Corporation will manage the Fund's portfolio of Equipment,
subject to the Fund Manager's supervision. Management services to be provided by
AEC include collection of lease payments from the lessees of Equipment,
re-leasing services upon termination of leases, inspection of Equipment, acting
as a liaison between lessees and vendors, general supervision of lessees and
vendors to ensure that the Equipment is being properly used and operated by
lessees, arranging for maintenance and related services with respect to the
Equipment and the
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supervision, monitoring and review of others performing services for the Fund.
Third parties may participate in managing or may separately manage Equipment for
which they will receive a fee from the Fund.
Management Compensation
The Fund is not required to pay the officers or directors of the Fund
Manager or its Affiliates any remuneration. However, the Fund will pay the Fund
Manager and its Affiliates certain fees and compensation for their services to
the Fund, including Equipment Management Fees, Equipment Resale and Re-lease
Fees and Incentive Management Fees. Furthermore, the Fund will reimburse the
Fund Manager and its Affiliates for certain costs incurred on behalf of the
Fund, including the cost of certain personnel (excluding controlling persons of
the Fund Manager) who will be engaged by the Fund Manager to perform
administrative, accounting, secretarial, transfer and other services required by
the Fund. Such individuals may also perform similar services for the Fund
Manager, its Affiliates and other investment programs to be formed in the
future. See "Management Compensation."
Changes in Management
The Partnership Agreement provides that the Fund Manager may be removed
as General Partner at any time upon the vote of Holders owning more than 50% of
the total outstanding Units entitled to vote, and Holders have the right to
elect a successor General Partner in place of the removed General Partner by a
similar vote. The Fund Manager may only withdraw voluntarily from the Fund with
the approval of Holders owning in excess of 50% of the Units entitled to vote on
Fund matters. The Holders have no voice in the election of directors or
appointment of officers of the Fund Manager or its parent, ATEL Capital Group,
and the capital stock of such entities can be transferred without the consent of
the Fund or the Holders.
The by-laws of the Fund Manager provide for a maximum of three
directors. The by-laws can be amended to increase the number of directors either
by a vote of stockholders or of directors. In the event of a vacancy or increase
in the number of members of the board of directors, the remaining directors may
elect the members to serve until the next annual meeting of directors. Directors
are otherwise elected annually by vote of the stockholders, and the directors
appoint corporate officers to serve at the will of the board.
The Dealer Manager
ATEL Securities Corporation (the "Dealer Manager") was
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organized in October 1985 principally for the purpose of participating in and
facilitating the distribution of securities of partnerships to be sponsored by
the Fund Manager and its Affiliates. The Dealer Manager became a member of the
NASD in February 1986. The Dealer Manager is a wholly-owned subsidiary of AFC.
The Dealer Manager will provide certain wholesaling services to the
Fund in connection with the distribution of the Units offered hereby. (See "Plan
of Distribution.") The executive officers and directors of the Dealer Manager
are discussed above under "The Fund Manager."
PRIOR PERFORMANCE SUMMARY
THE INFORMATION PRESENTED IN THIS SECTION AND IN THE TABLES INCLUDED AS
EXHIBIT A TO THIS PROSPECTUS REPRESENTS THE HISTORICAL RESULTS OF PRIOR
EQUIPMENT LEASING PROGRAMS SPONSORED BY THE FUND MANAGER AND ITS AFFILIATES.
INVESTORS IN THE FUND SHOULD NOT ASSUME THAT THEY WILL EXPERIENCE INVESTMENT
RESULTS COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN SUCH PRIOR PROGRAMS.
Since July 28, 1977, the Fund Manager and its Affiliates have financed,
structured or arranged equity and debt participations for equipment leasing
transactions involving total equipment costs in excess of $1 billion. The Fund
Manager sponsored and syndicated six prior public and one prior private limited
partnership. See Exhibit A - Prior Performance Tables for more detailed
information concerning the prior public programs (collectively referred to
herein as the "Prior Programs").
The first Prior Program, ATEL Cash Distribution Fund ("ACDF"),
commenced a public offering of up to $10,000,000 of its limited partnership
interests on March 11, 1986. ACDF terminated its offering on December 18, 1987
after raising a total of $10,000,000 in offering proceeds from a total of
approximately 1,000 investors, all of which proceeds have been committed to
equipment acquisitions, organization and offering expenses and capital reserves.
ACDF public acquired a variety of types of equipment with a total purchase cost
of approximately $11,133,679 as of June 30, 1996. See Table IV -
"Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACDF. Of such
equipment, items representing an original purchase cost of approximately
$8,700,153 had been sold as of June 30, 1996. See Table V - "Sales or
Disposals of Equipment" in Exhibit A. Through June 30, 1996, ACDF had made
cash distributions to its investors in the aggregate amount of $1,068.40 per
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$1,000 invested. Of this amount a total of $229.30 represents investment
income and $839.10 represents return of capital. See Table III - "Operating
Results of Prior Programs" in Exhibit A for further information concerning such
distributions.
The second Prior Program, ATEL Cash Distribution Fund II ("ACDF II"),
commenced a public offering of up to $25,000,000 (with an option to increase the
offering to $35,000,000) of its limited partnership interests on January 4,
1988. ACDF II terminated its offering on January 3, 1990 after raising a total
of $35,000,000 in offering proceeds from a total of approximately 3,100
investors, all of which proceeds have been committed to equipment acquisitions,
organization and offering expenses and capital reserves. ACDF II had acquired a
variety of types of equipment with a total purchase cost of approximately
$52,270,536 as of June 30, 1996. See Table IV - "Acquisition of Equipment by
Prior Programs" in Exhibit A for further information concerning the types of
equipment acquired by ACDF II. Of such equipment, items representing an original
purchase cost of approximately $33,874,148 had been sold as of June 30,
1996. See Table V - "Sales or Disposals of Equipment" in Exhibit A. Through
June 30, 1996, ACDF II had made cash distributions to its investors in the
aggregate amount of $1,018.35 per $1,000 invested. Of this amount a total of
$254.34 represents investment income and $764.01 represents return of capital.
See Table III - "Operating Results of Prior Programs" in Exhibit A for further
information concerning such distributions.
The third Prior Program, ATEL Cash Distribution Fund III ("ACDF III"),
commenced a public offering of up to $50,000,000 (with an option to increase the
offering to $75,000,000) of its limited partnership interests on January 4,
1990. ACDF III terminated its offering on January 3, 1992 after raising a total
of $73,855,840 in offering proceeds from a total of approximately 4,822
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF III had
acquired a variety of types of equipment with a total purchase cost of
approximately $99,629,941 as of June 30, 1996. See Table IV - "Acquisition
of Equipment by Prior Programs" in Exhibit A for further information concerning
the types of equipment acquired by ACDF III. Of such equipment, items
representing an original purchase cost of approximately $23,608,542 had been
sold as of June 30, 1996. See Table V - "Sales or Disposals of Equipment" in
Exhibit A. Through June 30, 1996, ACDF III had made cash distributions to
its investors in the aggregate amount of $776.30 per $1,000 invested. Of this
amount a total of $165.97 represents investment income and $607.63 represents
return of capital. See Table III - "Operating Results of Prior Programs" in
Exhibit A for further information concerning such distributions.
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The fourth Prior Program, ATEL Cash Distribution Fund IV ("ACDF IV"),
commenced a public offering of up to $75,000,000 of its limited partnership
interests on February 4, 1992. ACDF IV terminated its offering on February 3,
1993 after raising a total of $75,000,000 in offering proceeds from a total of
approximately 4,873 investors, all of which proceeds have been committed to
equipment acquisitions, estimated organization and offering expenses and capital
reserves. ACDF IV had acquired a variety of types of equipment with a total
purchase cost of approximately $112,424,026 as of June 30, 1996. See Table
IV "Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACDF IV. Of such
equipment, items representing an original purchase cost of approximately
$13,835,773 had been sold as of June 30, 1996. See Table V - "Sales or
Disposals of Equipment" in Exhibit A. Through June 30, 1996, ACDF IV had
made cash distributions to its investors in the aggregate amount of $517.84 per
$1,000 invested. Of this amount a total of $69.25 represents investment income
and $448.59 represents return of capital. See Table III - "Operating Results of
Prior Programs" in Exhibit A for further information concerning such
distributions.
The fifth Prior Program, ATEL Cash Distribution Fund V ("ACDF V"),
commenced a public offering of up to $125,000,000 of its limited partnership
interests In February 1993. ACDF V terminated its offering in November 1994,
after raising a total of $125 million in offering proceeds, all of which
proceeds have been committed to equipment acquisitions, estimated organization
and offering expenses and capital reserves. ACDF V had acquired a variety of
types of equipment with a total purchase cost of approximately $186,537,028 as
of June 30, 1996. See Table IV - "Acquisition of Equipment by Prior
Programs" in Exhibit A for further information concerning the types of equipment
acquired by ACDF V. Of such equipment, items representing an original purchase
cost of approximately $7,411,341 had been sold as of June 30, 1996. See
Table V - "Sales or Disposals of Equipment" in Exhibit A. Through June 30,
1996, ACDF V had made cash distributions to its investors in the aggregate
amount of $297.14 per $1,000 invested. Of this amount a total of $28.23
represents investment income and $268.91 represents return of capital. See Table
III - "Operating Results of Prior Programs" in Exhibit A for further information
concerning such distributions.
The sixth Prior Program, ATEL Cash Distribution Fund VI ("ACDF VI"),
commenced a public offering of up to $125,000,000 of its limited partnership
interests in November 1994. ACDF VI terminated its offering on November 23,
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1996 after raising a total of $125 million in offering proceeds,
substantially all of which proceeds have been committed to equipment
acquisitions, estimated organization and offering expenses and capital reserves.
ACDF VI had acquired a variety of types of equipment with a total purchase cost
of $147,437,403 as of June 30, 1996. See Table IV - "Acquisition of Equipment by
Prior Programs" in Exhibit A for further information concerning the types of
equipment acquired by ACDF VI. Of such equipment, items representing an original
purchase cost of approximately $155,361 had been sold as of June 30, 1996. See
Table V "Sales or Disposals of Equipment" in Exhibit A. Through June 30, 1996,
ACDF VI had made cash distributions to its investors in the aggregate amount of
$124.73 per $1,000 invested, all of which represents return of capital. See
Table III - "Operating Results of Prior Programs" in Exhibit A for further
information concerning such distributions.
Although certain of the Prior Programs have experienced lessee defaults
in the ordinary course of business, none of the Prior Programs has experienced
an unanticipated rate of default or major adverse business developments which
the Fund Manager believes will impair its ability to meet its investment
objectives.
The Prior Programs have investment objectives which are similar to
those of the Fund. The factors considered by the Fund Manager in determining
that the investment objectives of the prior programs were similar to those of
the Fund include the types of equipment to be acquired, the structure of the
leases to such equipment, the credit criteria for lessees, the intended
investment cycles, the reinvestment policies and the investment goals of each
program. Therefore all of the information set forth in the tables included in
Exhibit A - "Prior Performance Information" may be deemed to relate to programs
with investment objectives similar to those of the Fund.
In Tables I through III information is presented with respect to all Prior
Programs sponsored by the Fund Manager and its Affiliates which completed their
offerings of interests within the five-year period ending December 31, 1995,
except that ACDF completed its offering in December 1987, ACDF II completed its
offering in January 1990 and ACDF VI completed its public offering as of
November 23, 1996. Accordingly, the tabular information concerning ACDF VI does
not reflect results of an operating period after completion of its funding.
Table V includes information regarding all dispositions of equipment by Prior
Programs during the five year period ending June 30, 1996. No information
concerning results of completed programs is presented herein, because none of
the Prior Programs has
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completed its operations.
The following is a list of the tables set forth in Exhibit A:
Table I - Experience in Raising and Investing Funds
Table II - Compensation to the Fund Manager and
Affiliates
Table III - Operating Results of Prior Programs
Table IV - Acquisition of Equipment by Prior Programs
Table V - Sales or Disposals of Equipment
The Fund Manager will provide to any investor, upon written request and
without charge, copies of the most recent Annual Reports on Form 10-K filed with
the Securities and Exchange Commission by each of the Prior Programs, and will
provide to any investor, for a reasonable fee, copies of the exhibits to such
reports. Investors may request such information by writing to ATEL Investor
Services, Inc. at 235 Pine Street, 6th Floor, San Francisco, CA 94104 or by
calling the Fund Manager at (415) 989-8800.
>
INCOME, LOSSES AND DISTRIBUTIONS
Allocations of Net Income and Net Loss
The taxable income and taxable loss of the Fund (the "Net Income and
Net Loss") shall be allocated 7.5% to the Fund Manager and 92.5% to investors.
The Fund will close its books as of the end of each quarter and
allocate Net Income, Net Loss and cash distributions on a daily basis, i.e.,
Fund items will be allocated to the investors in the ratio in which the number
of Units held by each of them bears to the total number of Units held by all as
of the last day of the fiscal quarter with respect to which such Net Income, Net
Loss and Distributions are attributable; provided, however, that, with respect
to Net Income, Net Loss and cash distributions attributable to the offering
period of the Units (including the full quarter in which the offering
terminates), such Net Income, Net Loss and cash distributions shall be
apportioned in the ratio in which (i) the number of Units held by each investor
multiplied by the number of days during the period the investor owned the Units
bears to (ii) the amount obtained by totaling the number of Units outstanding on
each day during such period. No Net Income, Net Loss and cash distributions with
respect to any quarter shall be allocated to Units repurchased by the Fund
during such quarter, and such Units shall not be deemed to have been outstanding
during such quarter for purposes of the foregoing allocations. Transfers of
limited partnership interests will not be effective for any purpose until the
first day of the following quarter.
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Timing of Distributions
Fund cash distributions are generally made and allocated to Holders on
a quarterly basis. However, the Fund Manager will determine amounts available
for distributions on a monthly rather than quarterly basis. All investors will
be entitled to elect to receive distributions monthly rather than quarterly by
designating such election in a written request delivered to the Fund Manager. An
initial election to receive monthly rather than quarterly distributions may be
made at the time of subscription by designating such election on the
Subscription Agreement. Thereafter, each investor may during each fiscal quarter
designate an election to change the timing of Distributions payable to the
investor for the ensuing fiscal quarter by delivering to the Fund Manager a
written request. Investors who have previously elected monthly distributions may
at such time elect to return to quarterly distributions and those receiving
quarterly distributions may elect monthly distributions for the following
quarter.
Allocations of Distributions
Distributions allocated to the investors as described below will be
allocated among them on the same basis as Net Income and Net Loss is to be
allocated, as described under "Allocations of Net Income and Net Loss" above.
Amounts to be distributed will be determined after payment of Fund operating
expenses, establishment or restoration of Capital reserves deemed appropriate by
the Fund Manager, and, to the extent permitted as described below, reinvestment
in additional Equipment.
Until the investors have received aggregate distributions in an amount
equal to their original capital investment plus an amount equal to an 10% per
annum return on their Adjusted Invested Capital (which is equal to the original
investment reduced by prior distributions in excess of 10% per annum),
calculated on a cumulative basis, compounded daily, commencing the last day of
the calendar quarter in which an investor or his predecessor in interest was
admitted to the Fund), investors will receive 88.5% of distributions of cash
from operations and 92.5% of distributions of the proceeds of any equipment
sales or refinancing, the Fund Manager will receive 7.5% of all distributions,
and an Affiliate of the Fund Manager will receive 4% of distributions of cash
from operations as Incentive Management Fees. Thereafter, investors will receive
85% of distributions from all sources, the Fund Manager will receive 7.5% of all
distributions, and its Affiliate will receive 7.5% of all distributions as
Incentive Management Fees.
It is anticipated that income taxes on a portion of distributions will
be deferred by depreciation available from Equipment purchased by the Fund. To
the extent Net Income is reduced by depreciation deductions, distributions will
be considered return of capital for tax purposes and income tax will be deferred
until subsequent years. Furthermore, until investors receive aggregate
distributions equal to their original capital, a portion of each distribution
will be deemed a return of capital rather than a return on capital.
Notwithstanding the foregoing, however, the Fund Manager intends to make
distributions only out of cash from operations and cash from sales or
refinancing and not out of capital reserves or offering proceeds held pending
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investment.
The Fund is intended to be self-liquidating in nature. After the
expiration of the Reinvestment Period, the Fund will distribute any available
cash, subject to the establishment of reserves deemed reasonably required by the
Fund Manager for the proper operation of the business of the Fund, which may
include reserves for the upgrading of Equipment in order to preserve its rental
or sales value or for purchasing Equipment for which the Fund has committed
funds prior to the end of the Reinvestment Period.
Upon liquidation of the Fund, the proceeds of liquidation will be
distributed, after creditors of the Fund (including investors who may be
creditors) have been paid or provision has been made for their payment, in
accordance with each Partner's positive Capital Account balance. As a result, if
cash distributions are made during the period between the date investors are
first admitted to the Fund and the end of the offering of Units, it is likely
that different amounts would be distributable upon liquidation to the different
investors, depending on their then Capital Account balances. This difference
will be substantially reduced or eliminated by the special allocation of gain
from the sale or other disposition of Equipment to the investors which will
equalize their respective Capital Account balances. In particular, if
distributions made during the offering period to investors who were admitted at
the initial admission date reflect a return of capital (or to the extent that
such investors receive allocations of net losses relating to the offering
period), such investors will receive less on liquidation of the Fund than those
who were admitted at the final admission date. Furthermore, to the extent that
those investors who were admitted at the first admission date receive
allocations of net profits relating to the offering period in excess of the
distributions of cash for that same period, such investors will receive more
distributions on liquidation than those investors who are admitted at end of the
offering. As noted above, any such differences will be substantially reduced or
eliminated to the extent the Fund Manager equalizes Capital Accounts through the
use of special allocations of gain from the sale or other disposition of
Equipment.
Reinvestment
Subject to the limitations set forth herein, the Fund Manager has the right
to reinvest on behalf of the Fund cash from operations and cash from sales or
refinancing during the Reinvestment Period (which ends six years after the last
day of the year in which the offering of Units terminates). Notwithstanding the
foregoing, however, the Fund Manager shall, at a minimum, distribute, to the
extent available, such amounts of cash from sales or refinancing and cash from
operations as may be sufficient to allow an investor in a 31% federal income tax
bracket (but not a higher bracket) to meet the federal and state income taxes
due with respect to income derived by him from the operations of the Fund. See
"Risk Factors - Income in Excess of Distributions" for a discussion of the risk
that a Holder in a higher tax bracket may, under some circumstances, be required
to pay certain tax liabilities out of his personal funds rather than out of
amounts distributed by the Fund.
Furthermore, through the end of the Reinvestment Period the Fund may
reinvest cash from operations and cash from sales or refinancing, but only after
the Fund Manager has caused the Fund to distribute to the investors:
(i) prior to the end of the year the offering of Units
terminates, an amount equal to the lesser of (a) 10% per annum on their
original capital investment, or (b) 90% of the total amounts available
for distributions; and
(ii) in each of the six years after the end of the year the
offering terminates, an amount equal to 10% of their original capital
investment.
Distributions will be made only to the extent cash is available to
distribute after payment of Fund obligations and allowance for necessary
reserves. There can be no prediction as to any future rate of return on original
capital investment nor assurance that any specific amount of cash distributions
can be attained. Distributions may in any year be in amounts less than the
amounts stated above.
Return of Unused Capital
Any portion of the net offering proceeds received by the Fund during
the first twelve months following the date hereof which has not been invested or
committed to Investment in Equipment during the period ending eighteen months
from the date hereof, and any of the net offering proceeds received thereafter
which have not been invested or committed to Investment in
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Equipment during the period ending six months after the end of the offering
(except, in either case, for amounts used to pay Fund operating expenses or
deemed by the Fund Manager to be required as capital reserves) will be
distributed to investors pro rata as a return of capital. In addition, in order
to refund to the investors the amount of Front End Fees attributable to such
returned capital, the Fund Manager has agreed to contribute to the Fund, and the
Fund shall distribute to investors pro rata, the amount by which (x) the amount
of unused capital so distributed, divided by (y) the percentage of offering
proceeds remaining after payment of all Front End Fees, exceeds the unused
capital so distributed.
Cash from Reserve Account
The Partnership Agreement requires that the Fund initially establish a
cash reserve for general working capital purposes in an amount equal to not less
than 1/2 of 1% of the offering proceeds (equal to $6,000 if the minimum Units
are sold and $750,000 if the maximum Units are sold). Any cash reserves used as
provided herein need not be restored, and, if restored, shall be restored from
the operating revenues of the Fund. When Equipment is sold or otherwise disposed
of, all cash reserves specifically allocated to such Equipment may be
distributed to the Holders as a return of original capital investment or be
applied as a reserve for other Equipment. Distributions of cash reserves will be
allocated and distributed in the same manner as cash proceeds from sales or
refinancing of equipment. Cash reserves which the Fund Manager deem no longer
reasonably required to be maintained as reserves may be distributed or invested
by the Fund, subject to the limitations described herein. No distributions or
investments will be made from Fund reserve accounts during the three-year period
following the date investors are first admitted to the Fund; thereafter, no
distributions or investments will be made unless the Fund Manager determines
that the reserves of the Fund, in any fiscal quarter, are in excess of the
amount deemed sufficient in connection with the Fund's operations.
Sources of Distributions - Accounting Matters
During the initial years, the Fund may experience a Net Loss in
accordance with generally accepted accounting principles, and it is anticipated
that a substantial portion of any such Net Loss would be caused by depreciation
which is a non-cash expense. As a result, distributions, if any, made in the
initial years of the Fund may be considered to be a return of capital and not
investment income.
Without regard to the accounting method adopted, to the
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extent Equipment is not producing revenues in excess of operating expenses, debt
service and other contractual obligations related to such Equipment,
distributions may be considered a return of capital.
CAPITALIZATION
The capitalization of the Fund, as of the date of this Prospectus and
as adjusted to reflect the issuance and sale of the Units offered hereby
assuming the minimum 120,000 Units and the maximum 1,250,000 Units are sold is
as follows:
As of Minimum Maximum
the Date 120,000 12,250,000
hereof(2) Units Units
Fund Manager's
Capital Contribution(1) $ 100 $ 100 $ 100
Units of Limited
Fund Interest
($10 per Unit) 500 1,200,500 150,000,500
------- --------- -----------
Total Capitalization $ 600 $1,200,600 $150,000,600
Less Estimated Organization
and Offering Expenses - 144,000 20,250,000
------- --------- ----------
Net Capitalization $ 600 $1,056,600 $129,750,600
------- --------- -----------
------- --------- -----------
- ---------------
(1) See "Management Compensation" and "Income, Losses and
Distributions" for a description of the fees and compensation, including an
interest in Net Income, Net Loss and Distributions, payable to the Fund Manager
or its Affiliates.
(2) The Fund was originally capitalized with $600, representing a cash
contribution to the Fund of $100 by the Fund Manager and $500 from the initial
Holders.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Until receipt and acceptance of subscriptions for 120,000 Units, the
Fund will not commence active operations.
Following achievement of such funding level, subscription proceeds will
be released to the Fund from escrow and applied to the payment or reimbursement
of Organization and Offering Expenses, leaving estimated net proceeds available
for investment and operations of $1,056,000. Thereafter, the Fund will
experience a relative increase in liquidity as additional subscriptions for
Units are received, and a relative decrease in liquidity as Net Proceeds
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are expended in connection with the acquisition and leasing of
Equipment.
The Fund will acquire Equipment with cash offering proceeds and
indebtedness. The Fund may borrow on a secured or unsecured basis amounts up to
50% (and intends to borrow the maximum amount permitted) of the aggregate
purchase price of Equipment as of the date of the final investment of Net
Proceeds and, thereafter, on the date any subsequent indebtedness is incurred.
The Fund currently has no arrangements with, or commitments from, any lender
with respect to permanent financing. The Fund Manager anticipates that any
acquisition financing or other borrowing will be obtained from institutional
lenders. See "Investment Objectives and Policies Borrowing Policies."
Until required for the acquisition or operation of Equipment, the Net
Proceeds will be held in short-term, liquid investments. The Fund is required by
the Partnership Agreement to establish an initial working capital reserve in the
amount of 1/2 of 1% of the Gross Proceeds. See also "Summary of the Partnership
Agreement Reserves."
For financial reporting purposes, Fund Equipment on operating leases will
generally be depreciated using the straight-line method, over periods equal to
the terms of the related leases to the Equipment, down to an amount equal to the
estimated residual value of the Equipment at the end of the related leases. The
treatment for financial reporting purposes differs from cost recovery for tax
purposes (generally, the Modified Accelerated Cost Recovery System or "MACRS"),
in which the Service prescribes certain useful lives for each type of equipment
and the Code provides specific accelerated rates of depreciation over those
useful lives. See "Income Tax Consequences - Depreciation".
The potential effects of inflation on the Fund are difficult to
predict. If the general economy experiences significant rates of inflation,
however, it could affect the Fund in a number of ways. The cost of equipment
acquisitions could increase with inflation, but such cost increases could be
offset by the Fund's ability to increase lease rates in an inflationary market.
Revenues from existing leases would not generally increase with inflation, as
the Fund does not generally expect to provide for rent escalation clauses tied
to inflation in its leases. Nevertheless, the anticipated residual values to be
realized upon the sale or re-lease of equipment upon lease terminations (and
thus the overall cash flow from the Fund's leases) may be expected to increase
with inflation as the cost of similar new and used equipment increases.
Fluctuations in prevailing interest rates could also affect the Fund.
The cost of capital reflected in interest rates is a significant factor in
determining market lease rates and the pricing of lease financing generally.
Higher interest rates could affect the cost of Fund borrowing, reducing its
yield on leveraged investments or reducing the desirability of leverage. The
Fund would also expect that increases or decreases in prevailing interest rates
would generally result in corresponding increases or decreases in available
lease rates on new leases. Interest rate fluctuations would generally have
little or no effect on existing leases, as rates on such leases would generally
be fixed without any adjustment related to interest rates.
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INCOME TAX CONSEQUENCES
The following is a summary of all material federal tax considerations
which may be relevant to a prospective Holder. However, it is impractical to set
forth in this Prospectus all aspects of federal, state, local and foreign tax
law which may affect a Holder's participation in the Fund. Furthermore, the
discussion of various aspects of federal, state, local and foreign taxation
contained herein is based on the Internal Revenue Code of 1986, as amended (the
"Code"), existing laws, judicial decisions and administrative regulations,
rulings and practice, all of which are subject to change. Each prospective
Holder should consult his own tax counsel to satisfy himself as to the tax
consequences of his investment.
Derenthal & Dannhauser ("Tax Counsel") as tax counsel to the Fund, will not
prepare or review the Fund's income tax information returns, which will be
prepared by the management and independent accountants for the Fund. The Fund
will make a number of decisions on such tax matters as the expensing or
capitalizing of particular items, the proper period over which capital costs may
be depreciated or amortized, the allocation of acquisition costs between
Equipment and management fees and many other similar items. Such matters will be
handled by the Fund, often with the advice of independent accountants retained
by the Fund, and usually will not be reviewed by Tax Counsel.
Summary
The following is a summary of, and is qualified by, the more extensive
discussion of the federal income tax consequences set forth in this section.
Opinion of Counsel. Tax Counsel has delivered its opinion to the Fund,
which will be confirmed as of the effective date of the registration statement
of which this Prospectus is a part, concerning the likely outcome on the merits
of a challenge to the Fund's position on certain material tax issues. There are
certain issues upon which Tax Counsel cannot express an opinion. (See "Opinion
of Counsel.")
Classification as a "Partnership". Tax Counsel has rendered its opinion
that the Fund will be classified as a partnership for federal income tax
purpose. (See "Classification as a Partnership.")
Allocations of Profits and Losses. Tax Counsel has opined that, more likely
than not, the tax allocation provisions in the Partnership Agreement will not be
significantly modified by the Internal Revenue Service and that and each
Holder's distributive share of income, gain, loss and deduction will be
determined and allocated substantially in accordance with the Partnership
Agreement. (See "Allocations of Profits and Losses.")
Income Recognition. The Fund's tax returns will be prepared using the
accrual method of accounting. Under such method, the Fund
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will include in income items such as rentals and interest as and when earned by
the Fund, whether or not received. In addition, certain of the Fund's Equipment
leases may be subject to section 467 which could result in a Holder receiving
increased allocations of taxable income (or reduced allocations of loss) in
earlier years without any increase in cash available for distribution until
subsequent years. (See "Income Recognition.") Finally, after some years of Fund
operations, a Holder's tax liabilities may exceed cash distributions to him in
corresponding years. (See "Tax Liabilities in Later Years.")
Taxation of Holders of Units. A Holder's share of Fund income generally is
not identical to the Holder's share of Distributions. Any Distributions in
excess of a Holder's adjusted tax basis in his Units will cause such Holder to
recognize such excess as taxable income. (See "Taxation of Holders of Units.")
Limitations on Deduction of Losses. There are certain limitations on the
ability of a Holder to utilize his distributive share of losses from the Fund to
offset income from other sources. (See "Limitations on Deduction of Losses.")
Tax Status of Leases. In order for the Fund and Holders to be entitled
to depreciation deductions, a lease of Equipment must be treated as a lease
rather than a sale or financing for federal income tax purposes. The Fund
Manager has represented that any initial lease of an item of Equipment acquired
with the Net Proceeds will comply or will substantially comply with the
equipment leasing guidelines of the Internal Revenue Service (the "Service") if
the cost of such item exceeds 10% of the Gross Proceeds of this offering.
Furthermore, the Fund Manager has agreed to use its best efforts to cause any
other lease entered into by the Fund to satisfy such guidelines. (See "Tax
Status of Leases.")
Deductibility of Management Fees. The Fund intends to deduct the Equipment
Management Fee and the Incentive Management Fee for services performed by
Affiliates of the Fund Manager. Subject to certain assumptions, Tax Counsel has
opined that it is more likely than not that such fees would be deductible. See
"Deductibility of Management Fees.")
Sale or Exchange of Fund Equipment. The Fund's gain or loss on sale or
disposition of an item of Equipment will equal the difference between sale
proceeds (including the amount of any indebtedness to which the Equipment is
subject) and the Fund's adjusted tax basis in the Equipment. In certain
circumstances, the amount of tax payable by a Holder on his share of gain on
sale of Equipment may exceed his share of cash proceeds therefrom. (See "Sales
or Exchanges of Fund Equipment.")
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Disposition of Units. On sale or disposition of Units, a Holder will
recognize gain equal to the excess, if any, of cash received (plus the Holder's
share of any Fund liabilities) over the Holder's tax basis in the Units. Such
gain will be taxed at ordinary income tax rates to the extent of depreciation
recapture. In certain circumstances, the amount of tax payable by a Holder on
the gain realized from a sale or disposition of his Units may exceed the cash
received therefrom. (See "Disposition of Units.")
Fund Elections. The Fund is not expected to file an election under
section 754 of the Code. The absence of such election may have an adverse effect
on the marketability and sale price of Units.
(See "Fund Elections.")
Investment by Qualified Plans and IRAs. The Fund will generate
unrelated business taxable income to Holders who are Qualified Plans or IRAs,
with the result that the Fund income will be subject to tax to the extent that
the Qualified Plan's or IRA's unrelated business taxable income from all sources
exceeds $1,000. (See "Investment by Qualified Plans and IRAs.")
Dissolution of Fund. Upon dissolution of the Fund, a Holder will recognize
taxable income if the cash received (including the reduction in his share of
Fund liabilities) exceeds his tax basis in his Units. (See "Dissolution of
Fund.")
Alternative Minimum Tax. The tax preference items and adjustments under the
alternative minimum tax that may be present in the Fund include the excess of
depreciation deductions claimed over deductions that would be allowable if the
Equipment were subject to depreciation over its ADR midpoint life using the 150%
declining balance method, switching to the straight-line method in later years.
(See "Alternative Minimum Tax.")
Opinion of Counsel
The Fund has obtained an opinion from Derenthal & Dannhauser ("Tax
Counsel"), concerning the likely outcome on the merits of a challenge to the
Fund's position on certain material tax issues. This opinion will also be
executed and delivered to the Fund as of the effective date of the registration
statement of which this Prospectus is a part, and, if there are any material
changes to the opinion as of such date, the prospectus will be amended to
reflect all such material changes. The opinion further states that the summary
of federal income tax consequences to the Holders set forth in this Prospectus
under the headings "Risk Factors - Partnership Status," " - Certain Other Tax
Considerations" and " - Tax Opinion" and "Income Tax Consequences" has been
reviewed by Tax Counsel and, to the extent such summaries involve matters of
law, Tax Counsel is of the opinion that such statements of law are correct under
the Code, the Treasury Regulations and existing interpretations thereof.
The opinion of Tax Counsel is based upon the facts described in this
Prospectus, upon facts as they have been represented by the Fund Manager to Tax
Counsel or determined by them as of the date of the opinions and upon the
assumption the Fund will operate its
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business as described in the Prospectus. Any alteration of the facts may
adversely affect the opinion rendered. Furthermore, the opinion is based on the
Code, current and proposed Treasury Regulations, current published
administrative positions of the Service contained in Revenue Rulings and Revenue
Procedures, and judicial decisions, which are subject to change either
prospectively or retroactively.
In the preparation and rendition of its opinion, Tax Counsel has
considered all material tax issues and has addressed fully and fairly in the
offering materials all of the material tax issues which Tax Counsel believes
involve the reasonable possibility of a challenge by the Service.
Each prospective investor should note that the opinion described herein
represents only Tax Counsel's best legal judgment and has no binding effect or
official status of any kind. Thus, in the absence of a ruling from the Service,
there can be no assurance that the Service will not challenge the conclusion or
propriety of any of Tax Counsel's opinions or that legislative or administrative
changes or court decisions may not be forthcoming which would significantly
modify the statements expressed herein. Any such changes may or may not be
retroactive with respect to transactions prior to the date of such changes.
Treasury Regulations and certain ethical standards require specific
opinions to be rendered in connection with an opinion of counsel regarding the
federal tax consequences of a "tax shelter" investment. For this purpose, a "tax
shelter" is an investment that has, as a significant or intended feature, the
generation of tax losses or tax credits to shelter taxable income or tax
liability from other sources. The Fund is not a "tax shelter" within the meaning
of these Regulations and ethical standards. Therefore, although Tax Counsel is
rendering its opinion on certain material federal income tax issues relating to
an investment in the Fund, such opinion will not follow the standards applicable
to opinions with respect to "tax shelters."
It should also be noted that there are certain issues upon which Tax
Counsel cannot express an opinion because: (i) the issue is subject to facts
that are not presently known and cannot readily be determined, (ii) the issue is
subject to future events, or (iii) the issue involves a question of law on which
there is insufficient judicial or other authority upon which a conclusive
opinion can be based. Except for certain expenses that Tax Counsel has indicated
must be capitalized, no opinion is expressed as to whether certain fees will be
deductible as ordinary and necessary expenses reasonable in amount in relation
to services rendered, and no opinion is expressed as to the proper allocation of
various fees and expenses, the proper periods for their deduction or
amortization, or whether certain fees are properly allocable to the cost
recovery
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basis of the Equipment. In addition, no opinion is expressed on the issue of
whether the Fund will be determined to be a "dealer" with respect to the
Equipment.
Classification as a "Partnership"
The Fund has not applied for a ruling from the Service that it will be
classified as a partnership and will not be treated as an association taxable as
a corporation for federal income tax purposes.
In the opinion of Tax Counsel, under current federal income tax laws
and regulations, the Fund will be classified as a partnership and not as an
association taxable as a corporation for federal income tax purposes. However,
unlike a tax ruling, an opinion of counsel has no binding effect or official
status of any kind, and no assurance can be given that the conclusions reached
in said opinion would be sustained by a court if contested by the Service.
Tax Counsel's opinion is based in part upon Sections 301.7701-2 and
301.7701-3 of the Regulations, which provide that, in the absence of significant
relevant "other factors," an unincorporated organization will not be treated as
a corporation for federal income tax purposes unless it has more than two of the
following four corporate characteristics: (a) continuity of life; (b) free
transferability of interests; (c) limited liability; and (d) centralized
management.
If interests in the Fund were considered "publicly traded," the Fund
would be treated as a corporation under the publicly traded partnership
provisions of Code section 7704. (Being classified as a publicly traded
partnership also may have other adverse tax consequences. See "Limitation on
Deduction of Losses - Passive Loss Limitation" below.) Under that section, the
Fund would be treated as publicly traded if Units were traded on an established
securities market or were readily tradable on a secondary market or the
substantial equivalent thereof. An established securities market includes a
securities exchange as well as a regular over-the-counter market. The
legislative history of Code Section 7704 states that a secondary market is
generally indicated by the existence of a person standing ready to make a market
in the partnership interests, or where the holder of an interest has a readily
available, regular and ongoing opportunity to sell or exchange his interest
through a public means of obtaining or providing information on offers to buy,
sell or exchange interests, whether or not there exists an identifiable market
maker. On the other hand, where offers to buy or sell interests are normally not
accepted in a time frame comparable to that which would be available on a
secondary market, then the interests would not be treated as readily tradable on
the substantial equivalent of a secondary market. A secondary market is not
created by occasional accommodation trades of partnership
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interests or by the general partner providing information as to the desire of
partners to buy or sell interests to each other or arranging such transfers
between partners, without offering to buy or redeem interests. Complicity or
participation of the partnership or the general partner is relevant in
determining whether there is public trading of its interests. A partnership will
be considered as participating in public trading where trading is in fact taking
place and the partnership agreement imposes no meaningful limitation on
partners' ability to readily transfer their interests. The partnership's or the
general partner's right to refuse to recognize transfers is not a meaningful
limitation unless such right is exercised (except in the case of transfers by
reason of death, divorce or gift and occasional accommodation transfers).
The Fund Manager does not expect to list Units on an exchange or to
facilitate the quotation of Units in an over-the-counter market. Accordingly,
the Fund Manager does not expect that the Units will be readily tradable on an
established securities market. Whether Units will become readily tradable on a
secondary market or the substantial equivalent thereof cannot be predicted with
certainty. In this regard, it should be noted that the Regulations provide that
certain types of limited non-public transfers will be disregarded in determining
whether a partnership is publicly-traded. The six categories of exempt transfers
are:
(1) Transfers in which the basis of the partnership interest in the
hands of the transferee is determined by reference to its basis in the hands of
the transferor, or is determined under Section 732 of the Code. Transactions in
which basis is determined by reference to the transferor include gifts of
partnership interests;
(2) Transfers at death;
(3) Transfers between members of a family, as defined in
Section 267(c)(4) of the Code. This includes one's brothers and
sisters, spouse, ancestors (including parents and grandparents), and
lineal descendants (including children and grandchildren);
(4) Transfers resulting from the issuance of partnership
interests by the partnership in exchange for cash, property, or
services;
(5) Transfers resulting from distributions from a retirement
plan qualified under Section 401(a) of the Code (e.g., Qualified
Plans);
(6) Any block transfer. A block transfer is a transfer by a partner in
one or more transactions during any thirty-day period of partnership interests
representing in the aggregate more than two percent of the total outstanding
interests in partnership capital or profits.
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In addition to providing for these exempt transfers, the Regulations
state that partnership interests will not be deemed "readily tradable on a
secondary market (or the substantial equivalent thereof)" if any of the safe
harbors provided for in that Notice is satisfied. One of these is the "two
percent safe harbor." It provides that a secondary market or its equivalent will
not exist if the sum of the interests in partnership capital or profits
attributable to those partnership interests that are sold or otherwise
transferred during the partnership's taxable year does not exceed two percent of
the total interests in partnership capital or profits. The six categories of
exempt transfers listed above do not count towards the two percent ceiling. In
determining whether the Fund satisfies the two percent safe harbor, non-exempt
privately arranged transactions will be counted.
Although neither the Fund nor the Fund Manager would have any control
over an independent third person establishing a secondary market, the
Partnership Agreement requires that the Holders obtain the consent of the Fund
Manager prior to any transfers of Units. The Fund Manager intends to exercise
its discretion in granting and withholding its consent to transfers in such a
manner as to fall within the parameters of the two percent safe harbor
articulated in the Regulations. Accordingly, based on representations of the
Fund Manager of its intention to comply with the two percent safe-harbor
provision of the Regulations, Tax Counsel is of the opinion that, more likely
than not, the Fund will not be considered a "publicly traded" partnership.
If the Fund were treated for federal income tax purposes as an
association taxable as a corporation in any taxable year, (i) it would be
required to pay federal income taxes upon its taxable income, rather than there
being no tax on income at the Fund level; (ii) state and local income taxes
could be imposed on the Fund; (iii) losses of the Fund would not be reportable
by the Holders on their personal income tax returns; and (iv) any Distributions
would be taxable to them as ordinary income to the extent of current or
accumulated earnings and profits or treated as gain from the sale of their Units
to the extent any Distribution exceeded such earnings and profits and the tax
basis of such Holder for his Units and would not be deductible by the Fund in
computing its taxable income. In addition, Distributions from the Fund would be
classified as portfolio income, rather than passive activity income and thus,
would not be available to offset passive activity losses of any Holder. See
"Limitation on Deduction of Losses - Passive Loss Limitation" below. If after a
period of operations the Fund is first deemed to be an association for federal
income tax purposes, such change in status would result in taxable income to a
Holder measured by the excess, if any, of his share of the liabilities of the
Fund over the adjusted basis of his Units. The effect of the foregoing would be
to substantially reduce the effective yield on an investment in Units.
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THE FOLLOWING DISCUSSION IS BASED UPON THE ASSUMPTION THAT THE FUND WILL BE
CLASSIFIED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES.
Allocations of Profits and Losses
Under Section 704(b) of the Code, a partner's distributive share of
partnership income, gain, deduction or loss will be determined in accordance
with the partnership agreement, unless the allocation does not have "substantial
economic effect," in which case the distributive shares will be determined in
accordance with the partners' interests in the partnership.
An allocation has "economic effect" under the Regulations if: (i) each
partner's share of partnership items, including certain nondeductible
expenditures (such as syndication expenses), is reflected by an increase or
decrease in the capital account established for the partner; (ii) liquidation
proceeds are distributed in accordance with capital account balances; and (iii)
any partner with a capital account deficit following the distribution of
liquidation proceeds is required to restore such deficit to the partnership.
The Regulations further provide that liquidating distributions must be
made by the end of the taxable year of liquidation or, if later, within 90 days
after the date of the liquidation. In addition, the Regulations provide that an
allocation can have substantial economic effect even if a partner is not
required to restore a deficit balance in his capital account, but only (i) to
the extent the allocation does not reduce his capital account balance below zero
(after reducing the capital account for certain adjustments, allocations or
distributions in excess of income which are reasonably expected in the future)
and (ii) if the partnership agreement contains a "qualified income offset." A
partnership agreement contains a "qualified income offset" if it provides that a
partner who unexpectedly receives such an adjustment, allocation or distribution
that reduces his capital account below zero will be allocated income or gain in
an amount and manner sufficient to eliminate his deficit capital account balance
as quickly as possible.
With respect to allocations of loss and deductions attributable to
nonrecourse debt, the Regulations provide that such allocations will be
respected if the partners who were allocated the deductions bear the burden of
the future income related to the previous deductions. In particular, the
following additional elements must be satisfied: (i) the partnership agreement
must provide for allocations of nonrecourse deductions in a manner consistent
with allocations of some other significant partnership item attributable to the
property securing the nonrecourse liability; and (ii) the partnership agreement
must contain a "minimum gain chargeback."
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A partnership agreement contains a "minimum gain chargeback" if it
provides that, if there is a net decrease in partnership "minimum gain" during a
partnership taxable year, all partners will be allocated items of partnership
income and gain for such year (and, if necessary, subsequent years) in
proportion to, and to the extent of, an amount equal to the portion of such
partner's share of the net decrease in partnership minimum gain. The amount of
partnership minimum gain is determined by computing the amount of gain (of
whatever character), if any, that would be realized by the partnership if it
disposed of the partnership property subject to the nonrecourse liability in
full satisfaction thereof.
The Partnership Agreement prohibits losses from being allocated to the
Holders that would cause deficit Capital Accounts in excess of their share of
Fund Minimum Gain. Nonrecourse deductions (if any) will be allocated in the same
manner as operating profits and losses. The Partnership Agreement contains a
minimum gain chargeback and a qualified income offset that are intended to
comply with the provisions of the Regulations. The Partnership Agreement
provides that Capital Accounts of the Holders will be maintained in accordance
with the provisions of the Regulations and proceeds on liquidation will be
distributed in accordance with the positive Capital Account balances of the
Holders. Therefore, Tax Counsel is of the opinion that, more likely than not,
the allocations will not be significantly modified by the Service.
Under the substantial economic effect requirement, the economic effect
of the Fund allocations also must be "substantial." Tax Counsel notes that the
meaning and scope of the substantiality requirements are unclear at this time.
Based on the existing language of the Regulations, Tax Counsel does not believe
the Fund allocations present any material substantiality issues. Consequently,
as stated above, Tax Counsel is of the opinion that the allocations to the
Holders, more likely than not, will not be significantly modified by the
Service. However, Tax Counsel cautions that no assurance can be given that the
Service will not interpret the Regulations in a manner that could cause those
allocations to be treated as lacking substantiality. If the Service were
successful in challenging the Fund's method of allocating profits and losses,
then this may decrease the Holders' shares of taxable loss or increase the
Holders' shares of taxable income.
As noted later in this discussion, there can be no assurance that the
Service will not attempt to recharacterize fees paid to the Fund Manager or its
Affiliates as nondeductible partnership distributions. See Edward T. Pratt, 64
TC 203 (1975), aff'd, 550 F.2d 1023 (5th Cir.1977). If the Service were to take
such position and prevail, any losses allocated to Holders would be decreased
and any taxable income allocated to Holders would be increased. A protective
gross income allocation is included in the Partnership Agreement to guard
against this recharacterization having any
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adverse economic effect.
Apart from the foregoing, if the Service were to recharacterize fees
paid to the Fund Manager or its Affiliates as Fund Distributions, the Service
might additionally take the position that the Fund Manager's interest in Fund
profits and losses should be proportionately increased on the theory that if the
Fund Manager is receiving a greater share of Fund Distributions, it should also
be credited with a greater share of the profits and losses. If the Service were
to take that position and prevail, any Fund profits and losses allocated to the
Holders would be reduced.
Income Recognition
The Fund's tax returns will be prepared using the accrual method of
accounting. Under the accrual method, the Fund will include in income items such
as interest and rentals as and when earned by the Fund, whether or not received.
Thus, the Fund may be required to recognize income sooner than would be the case
under the cash receipts and disbursements method of accounting.
In certain circumstances, where a lease provides for varying rental
payments increasing in the later years of the lease (step rentals), Section 467
of the Code requires the lessor to take the rental payments into income as if
the rent accrued at a constant level rate. This provision applies to certain
sale-leaseback transactions and certain long-term leases. The Fund Manager
expects that certain of the Fund's Equipment leases may provide for rental
payments that increase or decrease in the later years of such leases, and
Section 467 may operate to require the Fund to accrue the rental payments on
such leases at a constant level rate. This could result in Holders receiving
increased allocations of taxable income (or reduced allocations of loss) in
earlier years, without any increase in cash available for distribution until
subsequent years. An additional consequence could be a conversion of a portion
of the Fund's rental income (passive income) from any such lease to interest
income (portfolio income).
Taxation of Holders of Units
As long as the Fund is treated as a partnership for federal income tax
purposes, it will not be subject to any federal income taxes. The Fund will file
federal partnership information tax returns reporting its operations on the
accrual basis for each calendar year. Within 75 days after the end of each
calendar year, Holders will be provided with federal income tax information
relevant to the Fund and their own federal income tax returns, including each
Holder's share of the Fund's ordinary income or loss, capital gain or loss (net
short-term and net long-term) and credits for the year. Each Holder (whether or
not a substitute Holder) will be required to report on his own federal income
tax return his share
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of Fund items of income, gain, loss, deduction, or credit and, accordingly, may
be subject to tax on his distributive share of Fund income whether or not any
Distribution is made to him.
If the cash distributed by the Fund for any year exceeds its taxable
income for the year, the excess will constitute a return of capital. A return of
capital is applied first to reduce the tax basis of the Holder's interest in the
Fund (as described below), and any amounts in excess of such tax basis will
generally be taxable as a gain from the sale of a capital asset. However, a
distribution of money or property which is received by a Holder in exchange for
an interest in "inventory items" which have substantially appreciated in value
or "unrealized receivables" (as defined in Section 751) will generally result in
the receipt of ordinary income to the extent that such distributions are in
excess of the Holder's basis for his interest in such property. The term
"unrealized receivables" under Section 751 includes depreciable property subject
to depreciation recapture, but only to the extent of the amount which would be
treated as ordinary income upon a sale of the property. See "Disposition of
Units" below.
Limitation on Deduction of Losses
There are certain limitations on the ability of a Holder to utilize his
distributive share of losses of the Fund to offset income from other sources:
(1) losses are limited to the extent of a partner's tax basis in his interest in
a partnership; (2) losses are limited to the amounts for which a partner is "at
risk"; (3) losses derived from investments in "passive activities" are limited
to a taxpayer's income from such activities; and (4) losses attributable to
"activities not engaged in for profit" are also limited. These limitations are
described below.
Tax Basis. Generally, each Holder's tax basis for his Units will be
equal to the price paid therefor plus his share of those liabilities of the Fund
with respect to which none of the Partners (General or Limited) nor the Fund has
any personal liability ("Fund Nonrecourse Debts"). See "Investment Objectives
and Policies Borrowing Policies." The Service has ruled that a partner acquiring
multiple interests in a partnership in separate transactions at different prices
must maintain an aggregate adjusted tax basis in a single partnership interest
consisting of his combined interests. Possible adverse tax consequences could
result from the application of this ruling upon a sale of Units. Each Holder
will increase (or decrease) the tax basis of his Units by the amount of his
allocable share of the Fund's taxable income (or loss) for any year and reduce
the tax basis of his Units by the amount of any distributions (including any
reduction in his share of Fund Nonrecourse Debts) made by the Fund to him during
such year. If the tax basis of a Holder's Units should be reduced to zero, the
amount of any
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Distributions (including any reduction in Fund Nonrecourse Debts) in excess of
his share of the income reported by the Fund for any year will be treated as
gain from the sale or exchange of the Holder's Units.
On his own federal income tax return, each Holder may, subject to the
limitations discussed below, deduct his share of the Fund's taxable loss, if
any, to the extent of the tax basis for his Units; Fund losses which exceed his
tax basis may be carried over indefinitely and, subject to the limitations
discussed below, deducted in any year to the extent his tax basis is increased
above zero.
At Risk Rules. Under Code Section 465, the amount of losses which may
be claimed by an individual investor or a closely-held corporation (a
corporation of which more than 50% in value of its shares is owned directly or
indirectly by not more than five individuals) in equipment leasing activities is
limited to the amount which the investor has "at risk" with respect to such
activities. For purposes of the at risk rules, the amount at risk is generally
equal to the sum of money and the adjusted basis of property contributed to the
activity plus borrowed amounts for which the taxpayer is personally liable and
the net fair market value of his personal assets (other than Units) that secure
nonrecourse borrowings, the proceeds of which are used in the Fund. A partner's
at risk amount is decreased by his share of partnership losses and
distributions, and is increased by his share of partnership income. Any losses
in excess of a partner's at risk amount will be treated as a deduction in
succeeding taxable years, again subject to the at risk limitations. Recapture of
previously allowed losses is required if the Partner's amount at risk at the end
of the year is reduced below zero (e.g., by distributions of cash from the
Fund).
In the case of the Fund the total amount of money contributed by each
Holder for his Units will be considered at risk, but any Fund borrowings will
not be considered at risk. Accordingly, subject to the passive loss rules
discussed below, a Holder will only be able to deduct his share of Fund losses
in an amount equal to the purchase price of his Units (as adjusted for Fund
income and distributions).
The Code allows the Fund to aggregate its Equipment leasing activities
only with respect to Equipment placed in service during the same taxable year.
Therefore, the "at risk" rules will be applied to the net taxable income or loss
resulting from leasing Equipment which is placed in service during the same
taxable year. This could result in a Holder's deduction for losses with respect
to certain Equipment being limited by the "at risk" rules, even though he must
recognize income with respect to other Equipment. It is unclear what the effect
of this provision on ownership of Units will be.
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Passive Loss Limitation. Code section 469 imposes a limitation (the
"passive loss limitation") on the amount of losses that a taxpayer may claim
from an activity in which he/she does not materially participate.
Under the passive loss limitation, net losses from a passive activity,
such as the leasing activity of the Fund, may not be used to offset active
income (e.g., compensation) or portfolio income (e.g., interest and dividends).
Passive losses may, however, be used to offset passive income from any other
passive activity carried on by the taxpayer. Tax Counsel has opined that, under
section 469 of the Code, the income received by the Fund will constitute passive
income and may thus be offset by a Holder's passive losses from other
activities. Furthermore, excess passive losses for a particular year are
"suspended" and carried forward indefinitely. Suspended passive losses may be
used to offset passive income in future years and may be claimed in full (even
to offset active income) if a taxpayer disposes of his/her entire interest in a
passive activity in a fully taxable transaction and the transferee is not a
related person to the taxpayer.
The passive loss limitation is applied after the "at risk" rules. Thus,
if a loss is disallowed under the "at risk" rules for a particular year, it is
not again disallowed by the passive loss limitation for such year. Rather, for
the year in which the taxpayer becomes "at risk" in the activity, the suspended
"at risk" loss becomes subject to the passive loss limitation. On the other
hand, even if a loss is permitted under the "at risk" rules, it may still be
disallowed under the passive loss rules.
Section 469(k) of the Code provides that net income from "publicly
traded" partnerships which are not taxable as corporations for Federal income
tax purposes will not be treated as passive income for purposes of the passive
loss rules but, rather, as portfolio income. In addition, each partner in such a
publicly traded partnership would treat a loss (if any) from the partnership as
separate from income and loss from any other publicly traded partnerships and
also as separate from any income or loss from passive activities. This provision
should not apply to the Fund since the Fund should not be considered to be
publicly traded; if it were to be so considered, it would be taxable as a
corporation. If the Fund were taxable as a corporation, income and deductions of
the Fund would not be passed through to the Holders and certain cash
distributions would be treated as dividends and be considered portfolio income.
Hobby Losses. Under Section 183 of the Code, certain losses from
activities not engaged in for profit are not allowed as deductions from other
income. That section contains a presumption that an activity is engaged in for
profit if income exceeds deductions in at least three out of five consecutive
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years. Although one of the objectives of the Fund is to provide Holders with
Distributions (see "Investment Objectives and Policies"), there can be no
assurance that the Fund will be deemed to be engaged in an activity for profit
because the applicable test is based on the facts and circumstances from time to
time. Further, although the Service has not indicated that Section 183 is
applicable to limited partners, it is conceivable that it may take such a
position, notwithstanding any "profit objective" which the Fund may be deemed to
have. Prospective investors should consult their own tax advisers regarding the
impact of this section on their particular situations.
Tax Status of Leases
The decision of whether a specific lease is to be categorized as a
lease rather than as a sale for federal income tax purposes involves a factual
determination, and, accordingly, no assurance can be given that, upon audit by
the Service, the leases of Equipment would be treated as such for federal income
tax purposes. If they are treated as sales or financings rather than leases, the
Fund and the Holders would not be entitled to depreciation deductions. On the
other hand, a portion of the lease rental payments (otherwise fully taxable),
would be deemed to constitute amortization of such financing or sales proceeds
which would not be taxable to the Fund.
The Fund does not intend to apply to the Service for a ruling that any
leases of Equipment which conform to the Service guidelines will be treated as
leases for federal income tax purposes. However, Service guidelines are set
forth in Revenue Procedures 75-21, 1975-1 C.B. 715, 75-28, 1975-1 C.B. 752,
76-30, 1976-2 C.B. 647 and 79-48, 1979-2 C.B. 529, which provide that, unless
other facts and circumstances indicate a contrary intent, for advance ruling
purposes only, the Service will consider the lessor in a leveraged lease
transaction to be the owner of property if:
(a) the lessor has a minimum unconditional investment in the property
at all times during the lease of at least 20% of the cost of the property and
can demonstrate that the estimated residual value of the property is at least
20% of the cost of the property;
(b) the lessee does not have an option to purchase the property (other
than at fair market value) and the lessor does not have the right to require
anyone to purchase the property;
(c) no part of the cost of the property subject to the lease
is furnished by the lessee other than for full consideration;
(d) the lessee does not lend the lessor any of the funds
necessary to purchase the property; and
(e) the lessor expects to receive a profit from the
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transaction apart from tax benefits.
The Fund Manager has represented that any initial lease of an item of
Equipment acquired with the Net Proceeds will meet the foregoing guidelines if
the amount of Net Proceeds used to acquire such item exceeds an amount equal to
10% of the maximum Gross Proceeds of this offering. Although, as stated above,
determination of lease status is made on a case-by-case basis, Tax Counsel is of
the opinion that any lease satisfying the foregoing guidelines should more
likely than not qualify as a lease for tax purposes.
Depreciation
MACRS and ADR. Under the "Modified Accelerated Cost Recovery System"
("MACRS"), the cost of depreciable property placed in service after 1986,
so-called "recovery property," may be depreciated using certain specified
depreciation methods (referred to as "recovery methods") over specified
depreciable lives (referred to as "recovery periods"). Under MACRS the methods
of recovery and the recovery periods apply equally to new and used property.
MACRS provides that the cost of tangible personal property is
depreciated over a period determined with reference to the ADR midpoint life
("ADR Midpoint Life") of such property prescribed by the Service.
For Assets With An The MACRS Recovery
ADR Midpoint Life Of... Period Is...
----------------------- ------------
4 years or less............................3 years
More than 4, but
less than 10............................5 years
10 or more, but
less than 16............................7 years
16 or more, but
less than 20...........................10 years
20 or more, but
less than 25...........................15 years
25 or more................................20 years
The cost of MACRS property is recovered over the periods specified
above using the 200% declining balance method, except for 15 or 20 year property
for which the 150% declining balance method is utilized.
The Code contains "anti-churning" provisions to prevent taxpayers from
utilizing MACRS on property placed in service prior to January 1, 1987. These
provisions generally attempt to reach situations where personal property used
during 1986 is transferred without a real change in the owner or user of such
property and MACRS depreciation would be more favorable than depreciation under
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prior law. The Fund may acquire used Equipment which will be leased back to the
owner or continued under lease to the original lessee. If the Fund is not able
to use MACRS with respect to such Equipment, the depreciation deductions thereon
will be determined under the rules in effect prior to 1987 ("ACRS"). In such
cases, depreciation deductions allowed with respect to such Equipment could be
less in the early years and greater in later years than the depreciation
deductions allowable under MACRS and the Holders' share of Fund losses in the
early years could be reduced.
Neither MACRS nor ACRS will be available to the Fund for Equipment (i)
owned or used at any time during 1980 by certain related persons; (ii) acquired
by the Fund from a person who owned the Equipment at any time during 1980 if the
user of such Equipment does not change as part of the transaction; or (iii)
leased by the Fund to a person (or a person related to such person) who owned or
used such Equipment at any time during 1980. Such Equipment will instead by
subject to depreciation under the pre-1981 rules, which would include the Asset
Depreciation Range ("ADR") System. Under ADR, the cost of used Equipment is
depreciated using the 150% declining balance method, switching to straight-line
at a time that will maximize the remaining deductions, over the Equipment's ADR
useful life.
It should be noted that the excess of the depreciation deduction on
Equipment over the amount that would have been allowed had the deduction been
calculated using the half-year convention, no salvage value, and the 150%
declining balance method over the property's ADR Midpoint Life, will effectively
be an item of tax preference. See "Alternative Minimum Tax."
There can be no assurance that the Service will not challenge the
Fund's determination of the appropriate depreciation period for its Equipment.
If such a challenge were successful, the Fund's depreciation deductions would be
reduced for a particular period, although deferred to a subsequent period, and a
corresponding adjustment would be made to the income or loss of the Holders for
tax purposes. Further, a depreciation deduction may be disallowed with respect
to Equipment which the Fund is deemed to hold as a "dealer". See "Sales or
Exchanges of Fund Equipment."
Recapture. All depreciation deductions with respect to the Equipment are
subject to recapture upon the disposition of the Equipment. See "Sales or
Exchanges of Fund Equipment."
Basis. The basis of the Equipment for depreciation purposes includes
reasonable costs payable in connection with the acquisition of the Equipment.
The Fund intends to include in the cost basis of the Equipment the fees payable
by the Fund to the Fund Manager for services rendered in connection with the
acquisition of the Equipment. See "Management Compensation."
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Limitations on the Use of MACRS. Under certain circumstances, in
addition to those set forth above, a taxpayer is required to recover the cost of
an asset over a period longer than its MACRS recovery period. The relevant
restrictions include the use of the property predominantly outside the United
States and the use of equipment by a foreign or "tax-exempt" entity. These
limitations are described below.
(1) Property Used Predominantly Outside the United States. The MACRS
provisions of the Code contain special rules for recovering the cost of personal
property used predominantly outside the United States. Under Code section
168(g), the cost of such property is to be recovered using the straight-line
method over a period equal to the property's ADR Midpoint Life as set forth in
Regulation section 1.167-11, utilizing a half-year convention and no salvage
value. If the Regulations do not provide an ADR Midpoint Life, a 12-year period
is used. To the extent personal property used predominantly outside the United
States is subject to the ADR system of depreciation, the alternative
depreciation system of Code section 168(g) is not applicable.
Section 168(g)(4) of the Code provides an exception to the predominant
use limitation described above. Under this Section, certain types of property
which are used predominantly outside the United States qualify for the normal
MACRS cost recovery rules; the exceptions include aircraft registered by the
administrator of the FAA which are operated to and from the United States, i.e.,
such aircraft return to the United States with some degree of frequency.
(2) Tax-Exempt Leasing. Section 168 of the Code provides that the use
of personal property by a tax-exempt entity (including (i) certain foreign
persons or entities, (ii) certain governmental units, or (iii) certain other
tax-exempt organizations), which is classified as "tax-exempt use property,"
will result in a reduction of the tax benefits which would otherwise be
available. The portion of tax-exempt use property leased to a tax-exempt entity
must be depreciated using the straight-line method over the greater of (i) the
ADR Midpoint Life (12 years if there is no ADR Midpoint Life assigned to such
property), or (ii) 125 percent of the lease term. The tax-exempt use provisions
do not apply to property subject to the ADR system. The Fund does not anticipate
leasing a significant amount of its portfolio to tax-exempt entities.
If any property which is not otherwise tax-exempt use property is owned
by a partnership which has both a tax-exempt entity and a person who is not a
tax-exempt entity as a partner, such tax-exempt entity's proportionate share of
such property is treated as tax-exempt use property unless (i) all allocations
to the tax-exempt entity of partnership items are qualified; or (ii) the income
derived from such share of the property is subject to the unrelated business
tax. Income derived by tax-exempt entities other than
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foreign entities from the Fund should be subject to the unrelated business tax
(see "Investment by Qualified Plans and IRAs," below); thus, admission of such
Qualified Plans and IRAs as Holders should not, in and of themselves, cause any
of the Equipment to be treated as tax-exempt use property. If the Service
successfully asserted that the income of the Fund does not constitute unrelated
business taxable income to tax-exempt Holders, then the Fund would be required
to maintain separate depreciation systems for its Equipment subject to MACRS,
and, as a result, depreciation deductions available to Holders in the early
years of operations of the Fund would be reduced.
Deductibility of Management Fees
The Fund intends to deduct the Equipment Management Fee and the
Incentive Management Fee for services performed by Affiliates of the Fund
Manager.
The U.S. Court of Appeals for the Fifth Circuit has held that a partnership
was not entitled to deduct as an ordinary and necessary business expense amounts
paid to general partners equal to 5% of the gross rentals paid by tenants for
the performance of services basic to partnership business. See Edward T. Pratt,
550 F.2d 1023 (5th Cir. 1977). aff'g, 64 T.C.203 (1975).
However, the Service in Revenue Ruling 81-300, 1981-2 C.B. 143, and
Revenue Ruling 81-301, 1981-2 C.B. 144, ruled that a payment to a general
partner of a partnership for advisory services provided to the partnership may
constitute a "guaranteed payment" and be deductible by the partnership if not a
capital expenditure, if reasonable in amount and if the method for determining
the amount would have been used to compensate an unrelated party for such
services.
It is possible that the Service may challenge the deductibility of all
or a portion of any fees on the basis that they are excessive, or that all or a
portion of the fees should properly be considered payment for other services
performed by, or other value provided by, the recipient of the fee, or that
payments for such services rendered are not deductible. If a challenge by the
Service were successful, the asserted deductions could be reduced or eliminated.
This would result in a proportionate increase in the taxable income, or decrease
in tax loss, of the Partners resulting in the Partners being required to pay
additional tax.
Tax Liabilities in Later Years
After some years of Fund operations, a Holder's tax liabilities may
exceed cash distributions to him in corresponding years. Such situations will
typically arise at the "cross-over point", i.e., the point in time when the
Fund's nondeductible loan amortization
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payments on its Equipment exceed its depreciation deductions. This is
principally due to (i) the short periods over which Equipment is depreciated
under MACRS and (ii) the annual increases in the amount of nondeductible
principal amortization payments and the corresponding decreases in the amount of
deductible interest payments which will typically occur on level payment
obligations on Fund Equipment. To the extent a Holder's tax liabilities exceed
cash distributions, such excess would be a nondeductible out-of-pocket expense
to a Holder.
Sales or Exchanges of Fund Equipment
Gain realized by the Fund on a sale of any Equipment will, to the
extent of all depreciation deductions claimed thereon, be treated as ordinary
income. Unless the Fund is a "dealer" in the property sold, any gain realized by
the Fund in excess of such depreciation deductions will, generally, be treated
as long-term capital gain (if the property has been held for more than one year)
under Code Section 1231. Any loss realized upon a sale will generally be treated
as an ordinary loss (if the property has been held for more than one year) under
Code Section 1231.
A "dealer" is one who holds property "primarily for sale to customers
in the ordinary course of business". Under existing law, whether property is so
held is a question of fact, depending upon all of the facts and circumstances of
the particular transactions. The Fund intends to purchase Equipment for
investment only, to engage in the business of owning and operating such
Equipment and make such occasional sales thereof as in the opinion of the Fund
Manager is consistent with the Fund's investment objectives. Accordingly, the
Fund does not anticipate that it will be treated as a dealer with respect to any
of its Equipment, although there is no assurance that the Service will not take
the contrary position.
Under Section 1033 of the Code, the Fund would not be required to
report income from the receipt of insurance proceeds to the extent the proceeds
are reinvested in property similar or related in service or use to the property
damaged or destroyed. If the Fund Manager elects to distribute any insurance
proceeds that are received as the result of the destruction or other conversion
of an item of Equipment, the Fund would recognize gain in the same amount as
would be the case if the item of Equipment had been sold for an amount equal to
the insurance proceeds.
If the Fund were to sell an item of Equipment on an installment basis,
all depreciation recapture income would be recognized at the time of sale
whether or not payments were to be made in succeeding taxable years.
Furthermore, if the Fund were to sell an item of Equipment on an installment
basis, the "OID" rules, discussed below in "Original Issue Discount," might
apply to the Sale.
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Unless the Equipment is found to be "dealer property" as discussed
above, and assuming the Equipment has been held for more than one year, any gain
or loss generally will be treated as "section 1231" gain or loss, except to the
extent of recapture of certain cost recovery or depreciation deductions, which
will be taxed as ordinary income. A Holder's allocable share of Fund Section
1231 gains or losses, if any, for the particular year are netted with the
Partner's other Section 1231 gains and losses; a "net" Section 1231 loss will be
treated as an ordinary loss. Net Section 1231 gain will be treated as a
long-term capital gain, except to the extent of the taxpayer's "non-recaptured"
net Section 1231 loss (generally, the excess of net Section 1231 losses over net
Section 1231 gains) for the five preceding taxable years, to which extent the
net Section 1231 gain will be treated as ordinary income.
Under Section 1231, casualty and theft gains and losses on depreciable
business property and capital assets which are used in a taxpayer's trade or
business and held for more than one year, must be grouped together by each
Holder and, if casualty gains equal or exceed casualty losses, then the gains
and losses are further grouped with other Section 1231 transactions to determine
whether there is an overall Section 1231 gain or loss. If the casualty or theft
losses exceed such gains, the resulting net loss is not further grouped with
other Section 1231 transactions, but is instead excluded from Section 1231 and
characterized as an ordinary loss.
As the Fund's gain on a sale of Equipment will be measured by the
difference between the sales proceeds (including the amount of any indebtedness
to which the property is subject) and the adjusted basis of the Equipment, the
amount of tax payable by a Holder in respect of his share of such gain may in
some cases exceed his share of the cash proceeds therefrom. In the event of a
foreclosure of a debt on Equipment owned by the Fund, the Fund may realize gain
equal to the excess of such indebtedness over the adjusted basis of the
Equipment, and the Holders may realize taxable income although they may not
receive any cash distributions as a result of the foreclosure.
Disposition of Units
Gain or loss realized by a Holder on the sale of Units that have been
held for more than one year generally will have the character of long-term
capital gain or loss, and any such gain will be subject to tax at a maximum rate
of 28%, as opposed to the maximum rate of 39.6% imposed on ordinary income and
short-term capital gain. However, any gain realized on the sale or other
disposition of a Unit by a Holder which is attributable to the Holder's share of
previous Fund depreciation deductions (computed as if the Equipment of the Fund
had been sold at its fair market value on the date the Units are sold), will be
taxed at ordinary income rates. A Holder must recognize such depreciation
recapture upon the
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sale or other disposition of the Equipment by the Fund (see "Sale or Exchange of
Fund Equipment" above) or upon the sale or other disposition of a Unit by a
Holder, in the year of sale or disposition, regardless of the amount of sale
proceeds received in the year of sale or disposition.
The amount of gain which a Holder will realize upon the sale or other
disposition of his Units will equal the excess, if any, of (i) the amount
realized by the Holder for the Units over (ii) the Holder's tax basis in the
Units. The amount of any loss which a Holder will realize on the sale or other
disposition of the Holder's Units will equal the excess, if any, of (i) the
Holder's tax basis over (ii) the amount realized for the Units. For this
purpose, the amount realized on the sale of the Units will include the Holder's
share of any Fund liabilities. As a result, a sale or disposition of Units by a
Holder may result in a tax liability in excess of cash proceeds received on the
sale or other disposition of such Units.
Original Issue Discount
The original issue discount ("OID") rules apply to seller- provided
financing furnished to a purchaser of property. If the interest on such
financing is not equal to an established federal rate, interest will be imputed
at that rate. In addition, the payee of deferred interest on such an obligation
is required to recognize such interest income ratably as it accrues. The imputed
rate is equal to the interest rate of U.S. government securities of comparable
maturity (the "applicable federal rate"), provided that for seller financing of
property other than new Section 38 property (as defined in Section 48(b) of the
Code as in effect on the day before the date of enactment of the Omnibus Budget
Reconciliation Act of 1990) in an amount equal to or less than $2.8 million per
transaction, the applicable rate will not exceed 9%.
If the Fund were to sell an item of Equipment and provide financing to
the buyer bearing interest at a rate less than the applicable federal rate, the
Fund's gain on sale would be reduced by the application of that rate. Such a
reduction in gain on sale would be offset, in whole or in part, by interest
income exceeding the nominal interest received by the Fund.
Fund Elections
The Code permits partnerships to elect to adjust the basis of
partnership property on the transfer of an interest in a partnership by sale or
exchange or on the death of a partner, and on the distribution of property by
the partnership to a partner (Section 754 election). The general effect of such
an election is that transferees of the partnership interests are treated, for
the purpose of depreciation and gain, as though they had acquired a direct
interest in the partnership assets and the partnership is
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treated for such purposes, upon certain distributions to partners, as though it
had newly acquired an interest in the partnership assets and therefore acquired
a new cost basis for such assets. Any such election, once made, may not be
revoked without the consent of the Service. As a result of the complexities and
added expense of the tax accounting required to implement such an election, the
Fund Manager does not intend to cause the Fund to make the election.
Accordingly, upon the sale of Equipment subsequent to the transfer of a Unit,
taxable gain or loss to the transferee of the Unit will be measured by the
difference between his share of the gross proceeds of such sale and his share of
the Fund's tax basis in the Equipment (which, in the absence of a Section 754
election, will be unchanged by the transfer of the Unit to him), rather than by
the difference between his share of the amount realized and the portion of his
purchase price that was allocable to the Equipment. As a consequence, such
transferee will be subject to tax upon a portion of the proceeds which, as to
such transferee, constitutes a return of capital, if the purchase price of his
Unit exceeded his share of the adjusted basis for all Equipment.
Therefore, any benefits which might have been available to the Holders
of Units by reason of such an election will not be available. Moreover, a Holder
may have greater difficulty in selling his Units since the purchaser will obtain
no current tax benefits from his investment to the extent that his cost of such
investment exceeds his allocable share of the Fund's basis in its assets.
The Fund may make various elections for federal tax reporting purposes
which could result in various items of income, gain, loss, deduction and credit
being treated differently for tax purposes than for accounting purposes.
Dissolution of Fund
Upon the dissolution of the Fund, the Fund assets are to be sold, which
may result in the realization of taxable gain to the Holders of Units including
recapture of depreciation deductions taken. See "Disposition of Units."
Subsequent distributions of cash in complete dissolution of the Fund will
generally be treated in the same manner as nonliquidating distributions. See
"Limitation on Deduction of Losses - Tax Basis."
Treatment of Gifts of Units
Generally, no gain or loss is recognized for income tax purposes as a
result of a gift of property. Although the Fund Manager does not anticipate that
a Holder's allocable share of the Fund's nonrecourse indebtedness will exceed
the adjusted basis of his Unit, if a gift of a Unit were made at a time when the
Holder's allocable share of the Fund's nonrecourse indebtedness exceeded the
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adjusted basis of his Unit, such Holder would realize gain for income tax
purposes, to the extent of such excess, upon the transfer of such Unit. A
charitable contribution of Units by a Holder also would result in income or gain
to the extent that the Holder's share of nonrecourse liabilities exceeds the
adjusted basis in his Units. For this purpose, rules applicable to bargain sales
to charitable organizations may substantially reduce the portion of the tax
basis of the Units to reduce gain. Gifts of Units may also result in gift tax
liability pursuant to the rules generally applicable to all gifts of property.
Investment by Qualified Plans and IRAs
Qualified pension, profit-sharing, stock bonus plans, Keogh Plans
(collectively, "Qualified Plans") and Individual Retirement Accounts ("IRAs")
are generally exempt from taxation except to the extent that "unrelated business
taxable income" (determined in accordance with Sections 511-514 of the Code)
exceeds $1,000 during any fiscal year. Because the Fund will be engaged in the
business of equipment leasing, each Qualified Plan's distributive share of the
Fund's taxable income (including capital gain) will constitute "unrelated
business taxable income" ("UBTI"). Therefore, a Qualified Plan or IRA that
purchases Units in the Fund would be required to report its pro rata share of
the Fund's taxable income as unrelated business taxable income if and to the
extent that the Qualified Plan's or IRA's unrelated business taxable income from
all sources exceeds $1,000 in any year.
Income from property subject to acquisition indebtedness also will be
included in the unrelated business income of a tax-exempt entity, converting
what might otherwise be portfolio income into unrelated business income. For
this purpose, indebtedness will constitute acquisition indebtedness if it was
incurred directly or indirectly in connection with the acquisition or
improvement of property.
Except to the extent of gain or loss from the sale, exchange, or other
disposition of acquisition indebtedness property, and except to the extent
Equipment constitutes inventory or property held primarily for sale to customers
in the ordinary course of a trade or business, gains from the sale or exchange
of Equipment generally will be excluded from the scope of unrelated business
taxable income. However, any gain on the disposition of Equipment which is
characterized as ordinary income as a result of the recapture of depreciation
deductions in all events will constitute unrelated business taxable income of
Qualified Plans and IRAs. See "Sale or Exchange of Fund Equipment" above.
Finally, interest income from the investment of Fund cash balances
should not constitute unrelated business taxable income, unless such interest is
derived from acquisition indebtedness
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property.
If an IRA has UBTI in excess of a specific exemption of $1,000 for any
taxable year, the IRA is subject to income tax on this excess at the same tax
rates applicable to trusts and estates. Even though an IRA is not subject to tax
for any year, if the gross income taken into account in computing UBTI exceeds
$1,000, the IRA customer is still obligated to file a tax return for such year
on Form 990-T. Generally, this tax return must be filed with the Service by
April 15th of the following year.
Penalties may be imposed by the Service for failing to file this tax
return when required, and, if tax is due, additional penalties and interest may
be imposed if the tax is not paid. In addition, any tax due should be paid from
the IRA. Direct payment of the tax by the IRA customer may have other adverse
tax consequences.
AN IRA CUSTOMER WHO MAKES AN INVESTMENT IN HIS/HER IRA WHICH MAY RESULT
IN THE REALIZATION OF UNRELATED BUSINESS INCOME IS URGED TO OBTAIN THE ADVICE OF
A QUALIFIED TAX ADVISOR ON THE EFFECT OF REALIZING UNRELATED BUSINESS INCOME IN
HIS/HER IRA AND ANY OBLIGATION TO FILE INCOME TAX RETURNS AND TO PAY TAX ON SUCH
UNRELATED BUSINESS INCOME. FOR A DISCUSSION OF THE ERISA CONSIDERATIONS OF AN
INVESTMENT IN THE FUND BY A QUALIFIED PLAN OR IRA, SEE "ERISA CONSIDERATIONS."
Individual Tax Rates
General. The highest individual tax rate currently is 39.6%. The
benefits of personal exemptions are phased out for taxpayers with an adjusted
gross income over certain thresholds. Further, otherwise allowable itemized
deductions (other than medical expenses, casualty and theft losses and
investment interest) are reduced by an amount equal to 3% of a taxpayer's
adjusted gross income over certain thresholds. In no event, however, are such
deductions reduced by more than 80%.
Capital Gains and Losses. Net capital gains (the excess of net
long-term capital gains over short-term capital losses) of individuals are taxed
at a 28% maximum rate. Capital losses, whether long-term or short-term, will
only be available to offset $3,000 of ordinary income in a given taxable year.
Any remaining capital loss may be carried forward indefinitely.
Two Percent Floor on Miscellaneous Itemized Deductions. Noncorporate
Holders may deduct expenses paid or incurred for (a) the production or
collection of income, (b) the management, conservation, or maintenance of
property held for the production of income, or (c) in connection with the
determination, collection or
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refund of a tax, only to the extent such expenses exceed 2% of adjusted gross
income. This rule is to apply with respect to indirect deductions through
pass-through entities (such as the Fund) of amounts that would not be allowable
as a deduction if paid or incurred directly by an individual. Although it is not
anticipated that the Fund will incur any material expenses of this nature, the
2% limit described above may cause certain expenses allocable to Holders to be
nondeductible.
Alternative Minimum Tax
The alternative minimum tax ("AMT") rate for individuals is 26% of so
much of the taxable excess as does not exceed $175,000, plus 28% of so much of
the taxable excess as exceeds $175,000. For this purpose, "taxable excess" means
the amount by which alternative minimum taxable income ("AMTI") exceeds the
exemption amounts: $45,000 for married taxpayers filing jointly, $33,750 for
single individuals and $22,500 for married individuals filing separately or
trusts. (The foregoing exempt amounts are reduced for taxpayers with income in
excess of certain specified levels.) The alternative minimum tax is imposed to
the extent that such tax exceeds the taxpayer's "regular tax" liability for the
year.
AMTI is computed differently than taxable income for regular tax
purposes in various respects, including the following: (i) certain tax-exempt
interest excluded from income for regular tax purposes is included in AMTI; (ii)
deductions for depreciation are computed using longer depreciable lives and in
some cases slower depreciation methods (i.e., a 150% declining balance method
rather than a 200% declining balance method); and (iii) deductions for
miscellaneous itemized deductions, for state and local real property, personal
property and income taxes and for interest expense on certain borrowings related
to residences are not permitted. Because of this second item, the basis of
depreciated property for AMT purposes will be different from its basis for
regular federal income tax purposes. Thus, upon disposition of the property, the
taxpayer may recognize less gain for AMT purposes than for regular federal
income tax purposes.
The tax preference items and adjustments that may be present in the
Fund include, with respect to an item of Equipment, the excess of depreciation
deductions claimed over deductions that would be allowable if the item of
Equipment were subject to depreciation over its ADR midpoint life using the 150%
declining balance method, switching to the straight line method in later years.
Items of tax preference also include other items which are not anticipated to be
generated by the Fund, but may apply in the case of certain Holders due to their
particular facts and circumstances unrelated to the Fund.
The effect of the AMT on each Holder will depend upon each
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Holder's particular circumstances. Each prospective investor should therefore
consult his own tax advisor as to the effect of an investment in the Fund on his
AMT liability.
Fund Tax Returns and Tax Information
The Fund Manager will file the Fund's tax returns using the accrual
method of accounting and will adopt the calendar year as the Fund's taxable
year. The Fund will provide tax information to the Holders within 75 days after
the close of each taxable year. If a Holder is required to file its tax return
on or before March 15, it may be necessary for the Holder to obtain an extension
to file if the tax information referred to above is not distributed until the
end of the 75-day period.
Holders will be required to file their returns consistent with the
information provided on the Fund's informational return or notify the Service of
any inconsistency. A failure to notify the Service of an inconsistent position
allows the Service automatically to assess and collect the tax, if any,
attributable to the inconsistent treatment.
Under Section 6050K of the Code, a selling Holder is required to inform
the Fund of the sale or exchange of the Holder's Units within 30 days of the
transaction or, if earlier, January 15 of the calendar year following the
calendar year in which the transaction occurs. The Fund is required to inform
the Service of each such transaction in connection with the filing of its tax
information return for the taxable year in which the transaction occurs. Failure
to provide this notice may result in a $50 penalty per unreported transfer with
an annual maximum penalty of $250,000. Intentional failure may result in a
penalty per unreported transfer in an amount equal to the greater of $100 or 5%
of the transfer price with no annual maximum. The Fund is also required to
inform both the seller and the buyer of Units of the proportionate interest of
those Units in the unrealized receivables (including potential depreciation
recapture) and substantially appreciated inventory items of the Fund. This
notification is required to be made prior to February 1 of the calendar year
following the calendar year in which the transaction occurs. A Holder who fails
to inform the Fund of a sale or exchange of the Holder's Units in accordance
with the rules described in this paragraph is liable under the Code for a
penalty of $50 per unreported transfer with an annual maximum penalty of
$100,000. These reporting requirements may increase the Fund's administrative
costs.
Interest and Penalties
With certain exceptions, a penalty will be assessed for each month or
fraction thereof (up to a maximum of five months) that a partnership return is
filed either late or incomplete. The monthly
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penalty is equal to $50 multiplied by the number of partners in the partnership
during the year for which the return is due.
A penalty will be assessed if the Fund fails to furnish to the Holders
a correct Schedule K-1 to the federal income tax return for the Fund on or
before the prescribed due date (including any extension thereof). The penalty is
equal to $50 multiplied by the number of partners not furnished a correct
Schedule K-1 on or before the prescribed due date (including any extension
thereof), with a maximum penalty of $100,000 per calendar year. If such failure
to furnish a correct Schedule K-1 to the Holders is due to intentional disregard
of this requirement, the penalty is equal to the greater of (i) $100 multiplied
by the number of partners not furnished a correct Schedule K-1 on or before the
prescribed due date (including any extension thereof) or (ii) 10% of the amount
required to be shown on the Fund's return, with no limitation on the maximum
penalty per calendar year.
A nondeductible penalty may be imposed by the Service in connection with an
underpayment of tax resulting from a taxpayer's negligent disregard of
applicable rules and regulations. This penalty is equal to 20% of the
underpayment.
Section 6662 of the Code establishes a penalty equal to 20% on
underpayment of tax attributable to substantial valuation overstatements. This
penalty applies only if (i) the value or adjusted basis of any property as
claimed on an income tax return exceeds 200% of the correctly determined amount
of its value or adjusted basis and (ii) the underpayment of tax attributable to
the substantial overvaluation exceeds $5,000 ($10,000 in the case of a
corporation other than an S corporation or personal holding company). In the
event an underpayment of tax is attributable to a gross valuation misstatement,
then the penalty is increased from 20% to 40%. A gross valuation misstatement
occurs only if (i) the value or adjusted basis of any property as claimed on an
income tax return exceeds 400% of the correctly determined amount of its value
or adjusted basis and (ii) the underpayment of tax attributable to such gross
valuation misstatement exceeds $5,000 ($10,000 in the case of a corporation,
other than an S corporation or personal holding company). All or any part of the
penalty may be waived by the Service upon the taxpayer's showing that a
reasonable basis existed for the valuation claimed on the return and that the
claim was made in good faith. If the Fund were to overstate the value of
Equipment, a Holder might be liable for this penalty.
There is a 20% penalty on the amount of an underpayment of tax
attributable to the "substantial understatement" of a tax liability. A
substantial understatement is defined as an understatement for the taxable year
that exceeds the greater of 10% of the required tax or $5,000 ($10,000 for
corporations other than personal holding companies and S corporations). Interest
accrues on the amount of
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the penalty at the applicable federal rate as of the due date of the return and
not the date the penalty is assessed. The penalty can be avoided either by
disclosing the questionable item on the return or by showing that there was
"substantial authority" for taking the position on the return. If a questionable
item is related to a tax shelter (defined as any entity, plan or arrangement
whose principal purpose is the avoidance or evasion of tax), the understatement
penalty can only be avoided by showing that the taxpayer reasonably believed
that the treatment of the item was "more likely than not" the proper treatment.
Based upon the representations of the Fund Manager, Tax Counsel believes the
Fund will not be characterized as a "tax shelter" for these purposes. It should
also be noted that the Fund Manager will not cause the Fund to claim a deduction
unless the Fund Manager believes, based upon the advice of its accountants or
counsel, that substantial authority exists to support the deduction.
All interest payable with respect to a deficiency is compounded daily.
Interest rates are redetermined quarterly and are based on the federal
short-term interest rate (the average rate of interest on Treasury obligations
maturing in less than three years) for the first month of the preceding quarter
plus three percent.
Audit of Tax Returns
An audit of the Fund's information return may result in adjustments to
items of income, gain, deduction, loss or credit reported on such information
return. At a minimum such adjustments will result in a corresponding adjustment
to the federal income tax liability of individual Partners, and may result in a
full audit of their individual tax returns (thus resulting in adjustments to
non- Fund as well as Fund items).
The tax treatment of items of Fund income, loss, deduction or credit
will be determined at the Fund level in a unified Fund proceeding, rather than
in separate proceedings with the Partners. Similarly, only one judicial
proceeding contesting a Service determination may be filed on behalf of the Fund
and all Partners.
With respect to proposed tax deficiency adjustments at the
administrative level, in general each partner (other than a partner owning less
than a 1% profits interest in a partnership having more than 100 partners) whose
name and address is furnished to the Service (a "notice-partner") will receive
notice of the commencement of a partnership level audit as well as notice of the
final partnership administrative adjustment. All partners have the right to
participate in a partnership audit proceeding. In general, each partner is free
to negotiate his own settlement of partnership items with the Service. If the
Service enters into a settlement agreement with any partner, it must offer the
same settlement terms to the other parties who request settlement. The Fund must
designate a
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"tax matters partner" who may enter into a settlement on behalf of, and binding
upon, partners owning less than a 1% profits interest in partnerships having
more than 100 partners. The tax matters partner may not settle on behalf of
partners with less than a 1% profits interest if (i) an aggregate of 5% or more
of such partners designate with the Service a notice partner to receive notice
from the Service on behalf of the group or (ii) such partners notify the Service
that the tax matters partner may not settle on their behalf. Except for the
above-described settlement power granted the tax matters partner, any settlement
entered into by any partner (including the tax matters partner) is not binding
on any partner who does not wish to be bound thereby. However, the tax matters
partner may extend the statute of limitations for assessment of a deficiency
with respect to all partners. The Fund has designated ATEL as the tax matters
partner.
Registration Provisions
Sections 6111 and 6112 of the Code require (i) registration of certain
tax shelters and (ii) the maintenance of lists of investors participating in
certain tax shelter investments, respectively.
Under Section 6111, anyone who organizes a "tax shelter" must register
such shelter with the Service not later than the day on which occurs the first
offering for sale of interest therein. A "tax shelter" is defined as any
investment with respect to which a person could reasonably infer from
representations made or to be made in connection with an offer for sale of any
interest that, as of the close of any of the first 5 years, the ratio with
respect to any investor of (A) the sum of the aggregate gross deductions and
350% of the credits potentially allowable to (B) the aggregate of the cash
invested and the adjusted basis of other property contributed by the investor
(reduced by any liability to which the property is subject) is greater than 2 to
1.
The Fund Manager has determined that, because of the limited amount of
leverage that will be placed on the Equipment, and because a significant amount
of the Equipment will be "net leased" by the Fund, the Fund is not expected to
generate a tax shelter ratio of greater than 2 to 1. Based on this
determination, the Fund Manager will not register the Fund as a tax shelter.
Miscellaneous Partnership Tax Aspects
(a) Fees for the syndication of a partnership must be capitalized;
partnership organization fees must be capitalized and may be amortized over a
five-year period.
(b) Under Code Section 195, a taxpayer must amortize "start-up
expenditures" over a period of 60 months, beginning with the date on
which the business begins. Start-up expenditures are costs incurred
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in investigating the creation or organization of a business, or in creating a
business, which would be deductible if incurred in connection with the expansion
of an existing business.
Foreign Tax Considerations
As noted above, the Fund may acquire Equipment which is operated
outside the United States. As a consequence, Holders may be required to file
returns and pay taxes in foreign jurisdictions with respect to the foreign
source income of the Fund. The income taxed by the foreign jurisdiction would in
such a case be calculated according to the tax laws of the foreign jurisdiction,
which may or may not correspond with applicable United States standards.
Holders who have foreign tax liabilities as a result of the Fund may be
entitled to a foreign tax credit or to a deduction for foreign taxes paid which
can be utilized to reduce their United States tax liabilities or taxable income,
respectively. The calculation of the foreign tax credit is quite complex and no
assurance can be given that a credit will be available in the amount of any
foreign tax paid. In particular, prospective Holders should be aware that United
States law does not generally allow a foreign tax credit greater than the
taxpayer's United States federal income tax liability with respect to the
foreign source income of the taxpayer calculated according to United States
rather than the foreign jurisdiction's tax law. Because the United States tax
rate may be lower than the tax rate imposed by a foreign country, it is possible
that a foreign country might impose a tax in an amount greater than the
allowable foreign credit under United states law. In such a case, Holders would
be subject to a higher effective rate of taxation than if no foreign tax had
been imposed. To the extent that all income taxes paid to a foreign country
exceed the amount of foreign tax credit allowable in any year, the excess
foreign tax credits generally may be carried back two years or forward five
years to offset United States income taxes on foreign source income in those tax
years. If the Fund were to suffer an overall foreign loss in one year and incur
foreign taxes in a subsequent year, the amount of foreign tax credit allowable
in that subsequent taxable year could be reduced on account of the prior foreign
loss, regardless of whether the loss resulted in a United States tax benefit to
the Holders. Each Holder should consult his own tax advisor regarding the
applicability of foreign taxes to his own situation.
Prior to the Fund entering into an arrangement which contemplates the
use of Equipment outside the United States, the Fund Manager will consult with
its counsel and with special tax advisor located in the foreign jurisdiction
concerning the possibility of structuring the transaction in a manner which will
enable the Holders to avoid being required to file income tax returns in the
foreign jurisdiction. The Fund Manager has
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discretion to cause the Fund to enter into any such arrangement.
Taxation of Foreign Persons
Special rules in the Code govern the U.S. federal income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships and
other foreign investors ("foreign persons"). No attempt is made to provide
herein more than a brief summary of some of the relevant rules. Holders that are
foreign persons should consult their own tax advisors to fully determine the
impact of them of United States federal, state and local income tax laws.
Foreign persons who own Units will be considered to be engaged in a
trade or business in the United States because of the activities of the Fund and
such activities will be deemed to be conducted through a permanent establishment
within the meaning of potentially applicable tax treaties. Therefore, a foreign
person who becomes a Holder of Units will generally be required to file United
States tax returns on an annual basis on which he must report his distributive
share of the Fund's items of income, gain, loss, deduction and credit, and will
be required to pay United States taxes at regular rates on his share of any Fund
net income that is effectively connected with a United States trade or business,
whether ordinary income or capital gains.
A partnership such as the Fund engaged in a United States business is
required to withhold with respect to a foreign Partner's distributive share of
the partnership's "effectively connected" income at the maximum regular rate
applicable to such foreign Partner (currently 39.6% for individual foreign
partners and 35% for corporate foreign partners). Amounts withheld will be
creditable by a foreign Partner against the foreign Partner's United States
income tax liability. Further, if any portion of a foreign Partner's
distributive share of Fund income is not effectively connected with a United
States trade or business, such income may, depending on its character, be
subject to a 30% United States withholding tax (or such lower rates as may be
prescribed under an applicable income tax treaty).
Foreign corporations that are Holders will also be subject to a branch
profits tax equal to 30% of a foreign corporation's earnings and profits
effectively connected with a United States business that are withdrawn (or
deemed withdrawn) from investment in the United States. This tax is payable in
addition to the regular United States corporate tax. The branch profits tax will
generally not apply in cases inconsistent with United States tax treaties.
A foreign person may also be subject to tax on his distributive share
of the Fund's income and gain in his country of nationality or residence or
elsewhere, against which the tax paid to the United
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States may in some instances be creditable. The method of taxation in such
jurisdictions may differ considerably from the United States tax system
described herein and may be affected by the United States characterization of
the Fund and its income. Prospective foreign investors should consult their own
tax advisors with respect to their potential tax liability in such
jurisdictions, as well as in the United States, on income derived from an
investment in the Fund.
Future Federal Income Tax Changes
Neither the Fund Manager nor Tax Counsel can predict what additional
legislation, if any, may be proposed by members of Congress, by the current
administration, or by any subsequent administration, nor can either predict
which proposals, if any, might ultimately be enacted. Moreover, neither the Fund
Manager nor Tax Counsel can predict what changes may be made to existing
Regulations, or what revisions may occur in the Service's ruling policies. Any
such changes may have a retroactive effect. Consequently, no assurance can be
given that the income tax consequences of an investment in Units will continue
to be as described in this Prospectus.
State and Local Taxes
In addition to the federal income tax considerations described above,
prospective investors should consider applicable state and local taxes which may
be imposed by various jurisdictions. A Partner's distributive share of the
income, gain or loss of the Fund will be required to be included in determining
his reportable income for state or local tax purposes in the jurisdiction in
which he is a resident. Moreover, California and a number of other states in
which the Fund may do business impose taxes on nonresident Partners, determined
with reference to their pro rata share of Fund income derived from such states;
any tax losses associated with an investment in the Fund from operations in one
state may not be available to offset income from other sources taxable in a
different state.
California and a number of other states have adopted a withholding tax
procedure in order to facilitate the collection of taxes from nonresident and
foreign Holders on Fund income derived from such states. Any amounts withheld
would be deemed distributed to the nonresident or foreign Holder and would
therefore reduce the amount of cash actually received by the nonresident or
foreign Holder as a result of such distribution. Nonresidents may be allowed a
credit for the amount so withheld against any income tax imposed by their state
of residency. The Fund cannot, at present, estimate the percentage of its future
income that will be from states which have adopted such withholding tax
procedures and it cannot therefore estimate the required withholding tax, if
any. In addition, while the Fund may apply to the applicable taxing
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authority of such states for a waiver (or a partial waiver), if any, of such
withholding requirements, no assurance can be given that such waiver will
ultimately be granted.
To the extent that a nonresident Partner pays tax to a state by virtue
of Fund operations within that state, he may be entitled to a deduction or
credit against tax owed to his state of residence with respect to the same
income. Furthermore, estate or inheritance taxes might be payable in such
jurisdiction upon the death of a Holder.
PROSPECTIVE INVESTORS SHOULD BE AWARE THAT, IN COMPUTING THEIR TAXABLE
INCOME FOR THE PURPOSE OF DETERMINING THEIR STATE INCOME TAX LIABILITIES, THEY
MAY BE SUBJECT TO RULES WHICH ARE LESS FAVORABLE THAN THOSE UNDER FEDERAL INCOME
TAX LAWS.
Need for Independent Advice
The foregoing summary is not intended as a substitute for careful tax
planning, particularly as the income tax consequences associated with an
investment in the Fund are complex and certain of them will not be the same for
all taxpayers. ACCORDINGLY, EACH PROSPECTIVE PURCHASER OF UNITS IS STRONGLY
URGED TO CONSULT HIS OWN TAX ADVISORS WITH SPECIFIC REFERENCE TO HIS OWN TAX
SITUATION.
ERISA CONSIDERATIONS
Prohibited Transactions Under ERISA and the Code
Section 4975 of the Code (which applies to all Qualified Plans and
IRAs) and Section 406 of the Employee Retirement Income Security Act of 1974
("ERISA") (which does not apply to IRAs or to certain Qualified Plans that are
not subject to ERISA's fiduciary rules) prohibit Qualified Plans and IRAs from
engaging in certain transactions involving "plan assets" with parties that are
"disqualified persons" under the Code. "Disqualified persons" include
fiduciaries of the Qualified Plan or IRA, officers, directors, shareholders and
other owners of the company sponsoring the Qualified Plan and natural persons
and legal entities sharing certain family or ownership relationships with other
"disqualified persons."
"Prohibited transactions" include any direct or indirect transfer or
use of a Qualified Plan's or IRA's assets to or for the benefit of a
disqualified person, any act by a fiduciary that involves the use of a Qualified
Plan's or IRA's assets in the fiduciary's individual interest or for the
fiduciary's own account, and any receipt by a fiduciary of consideration for his
or her own personal account from any party dealing with a Qualified Plan or IRA.
Under ERISA, a disqualified person that engages in a prohibited transaction will
be required to disgorge any profits made
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in connection with the transaction and will be required to compensate any
Qualified Plan that was a party to the prohibited transaction for any losses
sustained by the Qualified Plan. Section 4975 of the Code imposes excise taxes
on a disqualified person that engages in a prohibited transaction with a
Qualified Plan or IRA. Section 408(e)(2) of the Code provides that an IRA will
cease to be an IRA and will be treated as having immediately distributed all of
its assets, if it engages in a prohibited transaction.
Plan Assets
If the Fund's assets were determined under ERISA or the Code to be
"plan assets" of Qualified Plans and/or IRAs holding Units, fiduciaries of such
Qualified Plans and IRAs might under certain circumstances be subject to
liability for actions taken by the Fund Manager or its Affiliates, and certain
of the transactions described in this Prospectus in which the Fund might engage,
including certain transactions with Affiliates of the Fund, might constitute
prohibited transactions under the Code and ERISA with respect to such Qualified
Plans and IRAs, even if their acquisition of Units did not originally constitute
a prohibited transaction. Moreover, Qualified Plans (other than IRAs) might be
deemed to have delegated their fiduciary responsibility to the Fund Manager in
violation of ERISA.
Although under certain circumstances ERISA and the Code, as interpreted
by the Department of Labor in currently effective regulations, apply a
"look-through" rule under which the assets of an entity in which a Qualified
Plan or IRA has made an equity investment may generally constitute "plan
assets," the applicable regulations except from the application of the
"look-through" principle investments in entities in which equity participation
in the entity by benefit plan investors is not significant.
In order to qualify for the exception described above, "benefit plan
investors" must at all times hold less than 25% of the value of any class of
equity interest in the entity. For this purpose, the value of any equity
interests held by a person (other than a "benefit plan investor") who has
discretionary authority or control with respect to the assets of an entity or
any person who provides investment advice for a fee (direct or indirect) with
respect to such assets, or any affiliate of such a person, is disregarded. A
"benefit plan investor" is any of the following: (a) any employee benefit plan
(as defined in Section 3(3) of ERISA, which definition includes Qualified
Plans), whether or not it is subject to the provisions of Title I of ERISA, (b)
any plan described in Section 4975(e)(1) of the Code (which description includes
Qualified Plans and IRAs), and (c) any entity (such as a common or collective
trust fund of a bank) whose underlying assets include plan assets by reason of a
plan's investment in the entity. As described above under "Who Should Invest"
and "Summary of the Partnership Agreement
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- - Transferability of Units," the sale of Units during this offering and the
subsequent transfer of Units will be limited to the extent that the Fund Manager
deems it necessary to qualify for this exception. Therefore, the Fund's assets
should not be "plan assets" of any Qualified Plan or IRA investor; and no
prohibited transaction should occur based on treatment of the Fund's underlying
assets as "plan assets" of Qualified Plan or IRA investors.
Other ERISA Considerations
In addition to the above considerations in connection with the "plan
asset" question, a fiduciary's decision to cause a Qualified Plan or IRA to
acquire Units should involve, among other factors, considerations that include
whether (a) the investment is in accordance with the documents and instruments
governing the Qualified Plan or IRA, (b) the purchase is prudent in light of the
potential difficulties that may exist in liquidating Units, (c) the investment
will provide sufficient cash distributions in light of the Qualified Plan's
likely required benefit payments, (d) the investment is made solely in the
interests of plan participants, and (e) the fair market value of Units will be
sufficiently ascertainable, with sufficient frequency, to enable the Qualified
Plan to value its assets on an annual basis in accordance with the Qualified
Plan's rules and policies. Prospective Qualified Plan investors should note
that, with respect to the diversification of assets requirement, the legislative
history of ERISA and a Department of Labor advisory opinion indicate that in
determining whether the assets of a Qualified Plan that has invested in an
entity such as the Fund are sufficiently diversified, it may be relevant to look
through the Qualified Plan's interest in the entity to the underlying portfolio
of assets owned by the entity, regardless of whether the entity's underlying
assets are treated as "plan assets" for the purpose of ERISA's and the Code's
prohibited transaction and other fiduciary duty rules.
SUMMARY OF THE PARTNERSHIP AGREEMENT
The Partnership Agreement (attached hereto as Exhibit B) is the
governing instrument establishing the Fund's right under the laws of the State
of California to operate as a limited partnership, and contains the rules under
which the Fund will be operated. The Partnership Agreement will be executed on
behalf of each subscriber upon his admission to the Fund by the Fund Manager
acting pursuant to the power of attorney contained in the Subscription
Agreement.
The following is a brief summary of certain provisions of the
Partnership Agreement. It does not purport to be complete and it is recommended
that each prospective investor review the Partnership Agreement carefully in its
entirety. Aspects of the Partnership Agreement relating to allocations of Net
Income, Net Loss and Distributions to Holders and reports to the Partners are
summarized
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elsewhere in this Prospectus. See "Income, Losses and Distributions" and
"Reports to Holders."
The Duties of the Fund Manager
ATEL Financial Corporation, the Fund Manager, is General Partner of the
Fund and has the exclusive management and control of all aspects of the business
of the Fund. Affiliates of the Fund Manager will perform certain Equipment
acquisition, leasing, management and disposition services, as well as certain
administrative services, for the Fund. In the course of its management, the Fund
Manager may, in its absolute discretion, acquire, hold title to, sell, re-lease
or otherwise dispose of Equipment and interests therein when and upon such terms
as it determines to be in the best interest of the Fund and employ such persons,
including Affiliates of the Fund Manager, as it deems necessary for the
efficient operation of the Fund. However, prior to the sale or other disposition
of Substantially All of the Assets of the Fund in any single 12-month period,
except upon liquidation of the Fund, Holders owning more than 50% of the total
outstanding Units must consent to such sale or other disposition.
Liability of Holders
A Holder's capital is subject to the risks of the Fund's business. He
is not permitted to take any part in the management or control of the business
and he may not be required to contribute additional capital at any time. Under
the California Revised Limited Partnership Act, a Holder will not be liable for
Fund obligations in excess of his unreturned capital contribution and share of
undistributed profits. Notwithstanding the foregoing, a Holder will be liable to
the Fund in an amount equal to any Distribution made by the Fund to such Holder
to the extent that, immediately after the Distribution is made, all liabilities
of the Fund, other than liabilities to Partners on account of their interest in
the Fund and liabilities as to which recourse of creditors is limited to
specified property of the Fund, exceed the fair value of the Fund assets,
provided that the fair value of any property that is subject to a liability as
to which recourse of creditors is so limited is included in the Fund assets only
to the extent that the fair value of the property exceeds such liability.
Term and Dissolution
The Fund will continue for a maximum period ending December 31, 2017,
but may be dissolved at an earlier date if certain contingencies occur. The Fund
intends to liquidate its assets and distribute the proceeds thereof beginning
after the Reinvestment Period expires (at the end of the sixth full year
following the year during which the Final Closing Date occurs) with final
liquidation expected to occur approximately ten to eleven years after the Final
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Closing Date. A Holder may not withdraw from the Fund prior to dissolution, but
may assign his Units to others or may, under certain circumstances, request that
the Fund repurchase his Units. See "Repurchase of Units" below under this
caption. The contingencies whereupon the Fund may be dissolved are as follows:
(a) The Fund becomes insolvent or bankrupt;
(b) The removal, adjudication of bankruptcy, insolvency, disability or
incompetence or dissolution or death of a Fund Manager unless (i) there is a
remaining Fund Manager, and the remaining Fund Manager, within 45 days of the
date of such event, elects to continue the business of the Fund or (ii) if, upon
removal of the last remaining Fund Manager, the Limited Partners holding in
excess of 50% of the outstanding Units elect a successor Fund Manager prior to
the effective date of removal and such successor Fund Manager elects to continue
the business of the Fund;
(c) An election to dissolve upon the vote of Limited Partners owning
more than 50% of the total outstanding Units; or
(d) The disposition of all interests in Equipment and other assets of
the Fund and the receipt by the Fund of the proceeds of such disposition.
Voting Rights of Limited Partners
In any vote of the Limited Partners, each Limited Partner will be
entitled to cast one vote for each Unit which such Partner owns as of the date
designated as the record date for such vote. Notwithstanding the foregoing,
Units held by the Fund Manager or any Affiliate of the Fund Manager will not be
entitled to vote, and will not be deemed to be "outstanding" for purposes of any
vote, upon matters which involve a conflict between the interests of the Fund
Manager and the Fund, including, but not limited to, any vote on the proposed
removal or withdrawal of the Fund Manager as General Partner or any proposed
amendment to the Partnership Agreement which would expand or extend the rights,
authorities or powers of the General Partner. The Limited Partners have the
right, by vote of Limited Partners owning more than 50% of the total outstanding
Units, to vote upon:
(a) Removal or voluntary withdrawal of the General Partner;
(b) Election of a successor General Partner;
(c) Termination and dissolution of the Fund;
(d) Amendment of the Partnership Agreement, provided such amendment
is not for the purpose of reflecting the addition or substitution of Limited
Partners, the reduction of Capital Accounts
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or for any other purposes prohibited under the Partnership Agreement
as described below;
(e) The sale or other disposition of Substantially All of the Assets in
a single sale, or in multiple sales in the same twelve-month period, except in
the liquidation and winding up of the business of the Fund upon its termination
and dissolution; and
(f) The extension of the term of the Fund.
Without the consent of the Partners to be adversely affected by the
amendment, the Partnership Agreement may not be amended so as to (i) convert a
Holder into a general partner; (ii) modify the limited liability of a Holder;
(iii) alter the interest of the Partners in Net Income, Net Loss and
Distributions; or (iv) affect the status of the Fund as a partnership for
federal income tax purposes.
Dissenters' Rights and Limitations on Mergers and Roll-ups
Section 16.7 of the Partnership Agreement provides that Limited
Partners holding not less than 90% of the outstanding Units must approve any
proposal that involves an acquisition, conversion, merger or consolidation
transaction in which the Holders are issued new securities in the resulting
entity. The rights of any dissenting Holders will be as provided under Section
16.7 and Sections 15679.1 through 15679.14 of the California Revised Limited
Partnership Act. Such provisions generally give a dissenting limited partner the
right, subject to certain procedural requirements, to require that the limited
partnership repurchase the dissenting limited partner's partnership interest at
a price equal to its fair market value.
Meetings
The General Partner may at any time call a meeting of the Limited
Partners or a vote of the Limited Partners without a meeting, on matters on
which they are entitled to vote, and shall call such meeting or for a vote
without a meeting following receipt of a written request therefore of Limited
Partners holding 10% or more of the total outstanding Units. Upon such written
request of Limited Partners holding 10% or more of the total outstanding Units,
such Limited Partners may propose a vote by all Partners on any matter on which
Limited Partners are entitled to vote under the Partnership Agreement.
Books of Account and Records
The General Partner is responsible for keeping books of account and
records of the Fund reflecting all of the contributions to the capital of the
Fund and all of the expenses and transactions of the Fund. Such books of account
and records will include the following:
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(i) A current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order
together with the Original Invested Capital, the Units held and the
share in Net Income and Net Loss of each Partner;
(ii) A copy of the certificate of limited partnership and all
certificates of amendment, together with executed copies of any powers
of attorney pursuant to which any certificate has been executed;
(iii) Copies of the Fund's federal, state and local income tax
or information returns and reports, if any, for the six most recent
taxable years;
(iv) Copies of the original of the Partnership Agreement
and all amendments;
(v) Financial statements of the Fund for the six most
recent fiscal years; and
(vi) The Fund's books and records for at least the current
and past three fiscal years.
Such books of account and records will be kept at the principal place
of business of the Fund in the State of California, and each Limited Partner and
his authorized representatives shall have, at all times during reasonable
business hours, free access to and the right to inspect and copy at their
expense such books of account and all records of the Fund. Upon the request of a
Limited Partner, the General Partner shall promptly deliver to such Limited
Partner at the expense of the Fund a copy of the information described in (i),
(ii) and (iv) above. In the event a Limited Partner is required to compel the
General Partner to produce the foregoing records as a result of the General
Partner's breach of its obligation to deliver such information, the General
Partner shall reimburse the Limited Partner for all reasonable costs actually
incurred in compelling production.
Status Of Units
Each Unit will be fully paid and nonassessable and all Units have equal
voting and other rights, except as noted above with respect to the voting of
Units held by the Fund Manager or its Affiliates.
Transferability of Units
The General Partner may condition the effectiveness of any proposed
transfer of Units or an interest in Units on such representations, warranties,
opinions of counsel, and other
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assurances as it considers appropriate as to:
(i) such assignment or transfer not resulting, in the opinion
of counsel for the Fund, in the Fund being considered to have
terminated within the meaning of Section 708 of the Code;
(ii) the transferee not being a minor or an incompetent;
(iii) the transfer or assignment not violating federal or
state securities laws;
(iv) the transferor or the transferee not holding Units
representing Original Invested Capital of less than $2,500 ($2,000 in
the case of IRAs and Keogh Plans);
(v) such assignee or transferee being a Citizen of the United
States;
(vi) such assignment or transfer not constituting a transfer "on a
secondary market (or the substantial equivalent thereof)" within the
meaning of Section 7704 of the Code or otherwise adversely affecting
the tax status of the Fund;
(vii) such assignment or transfer not causing Fund assets to be
deemed Plan Assets under ERISA; and
(viii) the transferor filing with the Fund a duly executed and
acknowledged counterpart of the instrument effecting such assignment or
transfer, which instrument evidences the written acceptance by the
assignee or transferee of all of the terms and provisions of the
Partnership Agreement, contains a representation that such assignment
or transfer was made in accordance with all applicable laws and
regulations (including any investor suitability requirements) and in
all other respects is satisfactory in form and substance to the Fund
Manager.
In connection with state securities laws restrictions on transfer,
Section 260.141.11 of the Rules of the California Commissioner of Corporations
states:
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or
260.534 of the Rules of the California Corporations Commissioner shall
cause a copy of this section to be delivered to each issuee or
transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security
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to consummate a sale or transfer of such security, or any interest
therein, without the prior written consent of the Commissioner (until
this condition is removed pursuant to Section 260.141.12 of the Rules
of the California Corporations Commissioner), except: (1) to the
issuer; (2) pursuant to the order or process of any court; (3) to any
person described in Subdivision (i) of Section 25102 of the
Corporations Code of the State of California or Section 260.105.14 of
the Rules of the California Corporations Commissioner; (4) to the
transferor's ancestors, descendants, or spouse, or any custodian or
trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's
ancestors, descendants, or spouse; (5) to holders of securities of the
same class of the same issuer; (6) by way of gift or donation inter
vivos or on death; (7) by or through a broker-dealer licensed under the
Corporations Code of the State of California (either acting as such or
as a finder) to a resident of a foreign state, territory, or country
who is neither domiciled in the State of California to the knowledge of
the broker-dealer, nor actually present in the State of California if
the sale of such securities is not in violation of any securities law
of the foreign state, territory, or country concerned; (8) to a
broker-dealer licensed under the Corporations Code of the State of
California in a principal transaction, or as an underwriter or member
of an underwriting syndicate or selling group; (9) if the interest sold
or transferred is a pledge or other lien given by the purchaser to the
seller upon a sale of the security for which the California
Corporations Commissioner's written consent is obtained or is not
required under Section 260.141.11 of the Rules of the California
Corporations Commissioner; (10) by way of a sale qualified under
Section 25111, 25112, 25113, or 25121 of the Corporations Code of the
State of California, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 of the
Corporations Code of the State of California is in effect with respect
to such qualification; (11) by a corporation to a wholly-owned
subsidiary of such corporation, or by a wholly-owned subsidiary of a
corporation to such corporation; (12) by way of an exchange qualified
under Section 25111, 25112, or 25113 of the Corporations Code of the
State of California, provided that no order under Section 25140 or
subdivision (a) of Section 25143 of the Corporations Code of the State
of California is in effect with respect to such qualification; (13)
between residents of foreign states, territories, or countries who are
neither domiciled nor actually present in the State of California; (14)
to the California State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another
state; or (15) by the California State Controller
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pursuant to the Unclaimed Property Law or by the administrator of the
unclaimed property law of another state if, in either such case, such
person (i) discloses to potential purchasers at the sale that transfer
of the securities is restricted under Section 260.141.11 of the Rules
of the California Corporations Commissioner, (ii) delivers to each
purchaser a copy of Section 260.141.11 of the Rules of the California
Corporations Commissioner, and (iii) advises the California
Corporations Commissioner of the name of each purchaser; (16) by a
trustee to a successor trustee when such transfer does not involve a
change in the beneficial ownership of the securities; provided that any
such transfer is on the condition that any certificate evidencing the
security issued to such transferee shall contain the legend required by
Section 260.141.11 of the Rules of the California Corporations
Commissioner; or (17) by way of an offer and sale of outstanding
securities in an issuer transaction that is subject to the
qualification requirement of Section 25110 of the Corporations Code but
exempt from that qualification requirement by subdivision (f) of
Section 25102.
(c) The certificates representing such securities subject to
such a restriction on transfer, whether upon initial issuance or upon
any transfer thereof, shall bear on their face a legend, prominently
stamped or printed thereon in capital letters of not less than 10-point
size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
Any assignment, sale, exchange or other transfer in contravention of
any of the provisions of the Partnership Agreement shall be void and
ineffectual, and shall not bind or be recognized by the Fund.
An Assignee of Record will be entitled to receive allocations and
Distributions from the Fund attributable to the Units acquired by reason of such
assignment from and after the effective date of the assignment of such Units to
him; provided, however, the Fund and the Fund Manager will be entitled to treat
the assignor of such Units as the absolute owner thereof in all respects, and
will incur no liability for allocations of Net Income, Net Loss or
Distributions, or transmittal of reports and notices requested to be given to
Holders which are made in good faith to such assignor until such time as the
written instrument of assignment has been received by the Fund and recorded on
its books and the effective date of an assignment of Units has passed. The
effective date of an assignment of Units and the date on which the Assignee
shall be deemed an
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Assignee of Record shall be the first day of the first full fiscal quarter
following the later of (i) the date set forth on the written instrument of
assignment, or (ii) the date on which the Fund has actual notice of the
assignment.
All costs and expenses incurred by the Fund in connection with the
transfer of a Unit shall be paid by the transferring Holder.
An Assignee may only be substituted as a Limited Partner in the place
of the assignor with the prior consent of the Fund Manager, which consent may be
withheld in the Fund Manager's sole discretion. Any substituted Limited Partner
must also agree to be bound by the provisions of the Partnership Agreement. The
Fund Manager shall cause the Partnership Agreement to be amended to reflect the
substitution of Limited Partners at least once in each fiscal quarter.
The Fund Manager will, with respect to any Units owned by it, enjoy all
of the rights, other than the right to request that the Fund repurchase any such
Units, and be subject to all of the obligations and duties of a Limited Partner,
except as noted above under "Voting Rights of Limited Partners."
Repurchase of Units
In the event a Holder ceases to be a United States Citizen or Resident
Alien for any reason, he must immediately notify the Fund and may be required to
tender his Units to the Fund for repurchase in order to protect the Fund's
interest in certain leases. The Fund will have the absolute right, but no
obligation, to repurchase the Units for a price equal to the Unit Holder's
capital account, computed in accordance with federal tax accounting principles,
allocable to the repurchased Units as of the last day of the quarter during
which the precipitating event occurs.
Upon any repurchase of Units by the Fund, the Units will be canceled
and will no longer be deemed to represent an interest in the Fund, and the
interests of all other Unit holders will be adjusted accordingly. The Fund
Manager may, in its discretion and on such terms as it deems appropriate,
repurchase Units in the event that it deems such repurchase in the best
interests of the Fund, but the Fund is in no event required to make any such
repurchase. No such repurchase may be effected if it would impair the capital of
the Fund or cause the Fund or any remaining Unit holder to suffer a material
adverse tax consequence.
Indemnification of the General Partner
The Partnership Agreement provides that the General Partner and its
affiliates who perform services for the Fund will be indemnified against any
liability or loss arising out of any act or omission by
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any such Person when acting in connection with the business of the Fund,
provided that such Person determines in good faith that its conduct was in the
best interest of the Fund and, provided further, that its conduct did not
constitute fraud, negligence, breach of fiduciary duty or misconduct. The
Partnership Agreement also provides that, to the extent permitted by law, the
Fund will indemnify the General Partner against liability and related expenses
(including attorneys' fees) incurred in dealing with third parties, provided
that the conduct of the General Partner is consistent with the standards
described in the preceding sentence. A successful claim for such indemnification
would deplete the Fund's capital assets by the amount paid.
The General Partner will not be indemnified against liabilities arising
under the Securities Act of 1933. Furthermore, the General Partner has agreed to
indemnify the Fund against any loss or liability it may incur as a result of any
violation of state or federal securities laws by the General Partner or its
Affiliates. The Fund will not pay for any insurance covering liability of the
General Partner or any other persons for actions or omissions for which
indemnification is not permitted by the Partnership Agreement, provided,
however, that this will not preclude the naming of the General Partner or any
Affiliates as additional insured parties on policies obtained for the benefit of
the Fund to the extent that there is no additional cost to the Fund.
The General Partner will have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Fund. See
"Fiduciary Duty of the General Partner."
PLAN OF DISTRIBUTION
Distribution
The Units will be offered and sold on a "best efforts minimum/maximum"
basis through ATEL Securities Corporation (the "Dealer Manager"), a
broker-dealer which is an Affiliate of the Fund Manager (see "Conflicts of
Interest" and "Management"), and through other participating broker-dealers who
are members of the National Association of Securities Dealers, Inc. ("NASD").
The Dealer Manager will manage the selling group and provide certain wholesaling
services. Although the Dealer Manager may participate in the offering on the
same basis as other broker-dealers, it has not in the past effected, nor does it
anticipate in this offering directly effecting, any significant sales of the
Units. The Dealer Manager is a wholly-owned subsidiary of ATEL formed solely to
manage offerings sponsored by ATEL and its Affiliates.
The minimum offering amount is $1,200,000 (120,000 Units) and the
maximum is $150,000,000 (15,000,000 Units).
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The minimum subscription is 250 Units ($2,500); provided that an IRA or
Keogh Plan may subscribe for a minimum of 200 Units ($2,000). Additional
investments may subsequently be made in a minimum amount of 50 Units ($500), and
additional one-Unit ($10) increments.
The broker-dealers are not obligated to obtain any subscriptions, and
there is no assurance that any Units will be sold.
Subscriptions will be effective only on acceptance by the Fund Manager
and the right is reserved to reject any subscription in whole or in part. The
Subscription Agreement provided to the investor for execution must be
accompanied by a copy of this Prospectus, and each subscriber has the right to
cancel his or her subscription during a period of five business days after the
subscriber has submitted the executed Subscription Agreement to the
broker-dealer through which the Units are sold. The Fund and/or the selling
broker-dealer will send each investor a written confirmation of the acceptance
of the investor's subscription for Units upon admission to the Fund.
The offering will terminate on a date not later than two years from the
date of this Prospectus. The offering of Units after the end of one year from
the date hereof will be subject to renewal or requalification in all those
jurisdictions requiring such renewal or requalification. However, the offering
may be terminated at any time by the Fund Manager. If subscriptions for a
minimum of 120,000 Units have not been received and accepted prior to a date one
year from the date hereof, all funds received will be promptly returned together
with any interest earned thereon.
Selling Compensation and Certain Expenses
The Dealer Manager will receive selling commissions in an amount equal
to 9.5% of the Gross Proceeds, and will reallow to participating broker-dealers
selling commissions equal to 8% of the Gross Proceeds attributable to Units sold
by them. Out of the 1.5% of the selling commissions retained by the Dealer
Manager, it will pay wholesaling compensation in the form of salaries and
commissions to its personnel and certain participating broker-dealers, reimburse
certain wholesaling expenses incurred by participating broker-dealers and
reimburse amounts which may be advanced by ATEL for certain overhead expenses of
the Dealer Manager and its personnel.
The Dealer Manager (out of its compensation equal to 1.5% of the Gross
Proceeds) or the Fund (up to a maximum amount equal to 0.5% of the Gross
Proceeds) may pay or reimburse participating dealers a portion of their actual
expenses in connection with this offering (including expenses incurred in
coordinating their sales efforts, training their personnel and expenses
incurred, by such
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broker-dealers as the Dealer Manager shall designate, in performing
"wholesaling" functions). The Fund may also pay or reimburse participating
dealers for their due diligence expenses. Subject to NASD approval and
compliance with Rule 2810(b)(4)(E) of the NASD's Conduct Rules, the Fund, the
Fund Manager or the Dealer Manager may establish noncash sales incentive
programs for sales representatives of participating dealers, provided that the
aggregate value of any noncash incentive awards to any individual by the Fund
Manager or any of its Affiliates during any year does not exceed the sum of
$100. The total of all selling compensation, including sales commissions,
wholesaling salaries and commissions, retail and wholesaling expense
reimbursements, broker dealer and investment seminar expenses, non-cash
incentive payments and any other forms of compensation paid to the Dealer
Manager or other participating broker-dealers (including any unreimbursed
overhead costs of the Dealer Manager advanced by ATEL), will not exceed 10% of
the Gross Proceeds, except that up to an additional 0.5% of the Gross Proceeds
may, in the sole discretion of the Fund Manager, be paid in connection with
accountable, bona fide due diligence activities.
The Fund Manager has agreed to indemnify the participating
broker-dealers, including the Dealer Manager, against certain liabilities
arising under the Securities Act of 1933, as amended.
At various times during the offering period the Fund Manager may elect
to pay a portion of the set-up fees for IRAs which purchase Units. The Fund
Manager will pay a maximum of $25 toward such fees for each IRA which purchases
the minimum number of Units or more.
The Fund will not pay referral or similar fees to any accountants,
attorneys or other persons in connection with the distribution of Units.
Escrow Arrangements
Until the minimum number of subscriptions are received and the initial
subscribers are admitted to the Fund, subscription checks will be made payable
to, and subscription funds will be held in an escrow account at First Trust of
California, National Association, San Francisco, California. Until such time all
participating broker-dealers will forward subscription checks to the Dealer
Manager promptly but in no event later than noon of the next business day
following receipt thereof, and the Dealer Manager will forward such
subscriptions to the bank escrow agent promptly, but in no event later than noon
of the second business day following receipt thereof by the Dealer Manager.
Subscription proceeds held in the escrow account will be invested in
United States government securities, including Treasury bills, securities issued
or guaranteed by United States government agencies, certificates of deposit and
time or demand deposits in
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banks and savings and loan associations which are insured by United States
government agencies or deposits in members of the Federal Home Loan Bank System,
as directed by the Fund Manager. Subscribers may not withdraw funds from the
escrow account. Upon the earlier of termination of the offering or satisfaction
of the escrow condition, any interest which accrues on funds held in escrow will
be distributed to subscribers and allocated among them on the basis of the
respective amounts of the subscriptions and the number of days that such amounts
were on deposit in the escrow account.
Notwithstanding the foregoing, subscriptions received from Pennsylvania
subscribers will be placed in a separate escrow account and will not be counted
toward satisfaction of the minimum escrow condition. Instead, such Pennsylvania
subscriptions will be released to the Fund only at such time as total
subscription proceeds received by the Fund from all subscribers, including the
escrowed Pennsylvania subscriptions, equal not less than $7.5 million in Gross
Proceeds.
The Original Invested Capital of the initial subscribers will be
transferred from escrow to the Fund at any time after subscriptions for the
minimum of 120,000 Units have been accepted by the Fund Manager and received and
collected by the bank escrow agent, and such subscribers will be admitted to the
Fund within 15 days thereafter. Subsequent subscribers will have their
subscriptions accepted or rejected within 30 days after receipt. Investors whose
subscriptions are accepted will be admitted to the Fund promptly after such
acceptance, but not later than 30 days thereafter. Rejected subscription funds
will be promptly returned.
First Trust of California, National Association's sole role in this
offering is that of escrow holder and as such it has not reviewed any of the
offering materials and makes no representations whatsoever as to the nature of
this offering or its compliance or lack thereof with any applicable state or
federal laws, rules or regulations. First Trust of California neither endorses,
recommends nor guarantees any aspect of an investment in the Units. First Trust
of California does not represent the interests of the Limited Partners or
potential investors. Its duties are limited as expressly set forth in the Escrow
Agreement and interested parties may request a copy of the Escrow Agreement
from the Fund Manager. Pursuant to the terms of the Escrow Agreement, the Fund
has directed First Trust of California to distribute to the subscribers any
interest earned on funds held in escrow as described above under this caption.
Investments By Certain Persons
The Fund Manager and its Affiliates may, but do not currently intend
to, acquire such number of Units as they determine. Except as noted below, any
Units purchased by the Fund Manager or its Affiliates will be purchased on the
same terms as the other Units
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offered hereby. Such Units will be acquired solely for investment and not with a
view to or for distribution. Any Units acquired by such Persons will not be
applied to the requirement that a minimum of 120,000 Units be purchased by all
subscribers.
The Fund Manager, the Dealer Manager or the broker-dealers engaged by
the Dealer Manager to sell the Units, or any of their Affiliates or employees,
may purchase Units in this offering net of the 8% retail selling commissions at
a per Unit price of $9.20. In addition, clients of an investment advisor which
is registered under the Investment Advisors Act of 1940 and is an Affiliate of a
participating broker-dealer may also purchase Units with reduced selling
commissions, subject to the express approval of such participating broker-dealer
Affiliate, if the client (i) has been advised by such advisor over a continuous
course of time on investments other than the purchase of Units, and (ii) is not
being charged by the advisor or its Affiliates, through the payment of
commissions or otherwise, for the advice rendered by such advisor specifically
in connection with the purchase of Units. In no event will the net contribution
to the Fund by such persons be less than $9.20 per Unit. The Dealer Manager may
require that any investor claiming the right to purchase on the foregoing terms
demonstrate the basis for such right through reasonable documentation and
certification. Sales to any such purchasers on such terms would be for
investment purposes only, and the Fund and the Fund Manager would no recognize
any attempted transfer of such Units unless the Fund Manager is satisfied that
the original purchase was not made with a view to distribution of the securities
and that any proposed transfer was in compliance with all applicable laws and
regulations, including the NASD's Rules of Fair Practice.
State Requirements
In addition to the investor suitability and minimum investment
standards established by the Fund and described under "Who Should Invest" above,
the securities administrators of certain states have imposed more restrictive
standards on investments in Units effected within their jurisdictions. Any such
additional requirements imposed after the date of this Prospectus will be
reflected in a supplement hereto, and investors are urged to review any such
supplement to ascertain whether more restrictive standards are applicable to
their investment.
The following states have imposed additional conditions on investments
in such jurisdictions:
Iowa. The minimum investment for all IRAs in Iowa is $2,500
(250 Units).
Maine. The minimum amount which may be invested by a Maine
investor on any subscription, whether an initial investment or any
subsequent investment, is $2,500 (250 Units), or $2,000 (200 Units)
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for IRAs and Qualified Plans.
Michigan. An investor in Michigan may not invest in Units any
amount in excess of 10% of the investor's net worth (exclusive of
home, home furnishings and automobiles)
Missouri. Each Missouri investor must (i) have an annual gross income
of at least $60,000 and a net worth (exclusive of home, home furnishings and
automobiles) of at least $60,000 in excess of his Original Invested Capital; or
(ii) have a net worth (determined with the same exclusions) of at least $225,000
in excess of his Original Invested Capital.
Nebraska. The minimum investment for all investors in Nebraska,
except IRAs and Keogh Plans, is $5,000 (500 Units).
North Carolina. Each North Carolina investor must (i) have an annual
gross income of at least $60,000 and a net worth (exclusive of home, home
furnishings and automobiles) of at least $60,000 in excess of his Original
Invested Capital; or (ii) have a net worth (determined with the same exclusions)
of at least $225,000 in excess of his Original Invested Capital.
Pennsylvania. In addition to the investor suitability standards set
forth under "Who Should Invest," an investor in Pennsylvania may not invest in
Units an amount in excess of 10% of the investor's net worth (with such net
worth calculated exclusive of home, home furnishings and automobiles).
Furthermore, Pennsylvania subscriptions will be subject to a separate escrow and
will be released to the Fund only when the Fund has received aggregate
subscriptions from all investors equal to not less than $7.5 million. See
"Escrow Arrangements" above.
REPORTS TO HOLDERS
The Fund fiscal year will be the calendar year; provided, however, that
the Fund Manager may, subject to the approval of applicable taxing authorities,
adopt another fiscal year if they deem it to be in the Fund's best interest.
The Fund will furnish to each Holder certain reports, statements and
tax information, as set forth in Article 14 of the Partnership Agreement. The
Fund Manager shall have prepared and
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distributed at least annually, at the Fund's expense, (i) a statement of cash
flow, (ii) Fund information necessary in the preparation of each Holder's
federal income tax returns; (iii) a report of the business of the Fund; (iv) a
statement as to the compensation received by the Fund Manager and its Affiliates
from the Fund during the year; (v) a report identifying the sources of all Fund
Distributions for the year; and (vi) a special report containing an opinion of a
certified public accounting firm and a breakdown of the costs reimbursed by the
Fund to the Fund Manager or its Affiliates. Following the close of each taxable
year of the Fund, the Fund will distribute to the Holders copies of the annual
report and annual financial statements (balance sheet, statement of income or
loss, statement of partners' equity and statement of cash flow, accompanied by a
report containing an opinion of independent certified public accountants) within
120 days thereafter, and such statements will be prepared on an accrual basis in
accordance with generally accepted accounting principals; and all Fund
information necessary in the preparation of their federal income tax returns
within 75 days after the end of each fiscal year. The Fund Manager does not
intend to cause the Fund to prepare and distribute any reconciliation between
the financial information contained in the foregoing reports and the information
furnished to Holders for income tax purposes.
During the offering period and until the Fund is fully invested, the
Fund will also furnish to each Holder, at least quarterly, information
concerning the investments of the Fund.
The Fund will also furnish to each Holder a quarterly report covering
each of the first three quarters of Fund operations in each calendar year,
including unaudited financial statements (each of which shall include a balance
sheet, statement of income or loss for said quarterly period and statement of
Cash from Operations and Cash from Sales or Refinancing for said quarterly
period) and a statement of other pertinent information regarding the Partnership
and its activities during the quarterly period covered by the report. Copies of
such statements and other pertinent information shall be distributed to each
Holder within 60 days after the close of the quarterly period covered by the
report of the Partnership.
SUPPLEMENTAL SALES MATERIAL
In addition to and apart from this Prospectus, the Fund may use certain
sales material in connection with the offering of Units. In certain
jurisdictions such sales material may not be available. This material will
include information relating to this offering, the Fund Manager and its
Affiliates and brochures and articles and publications concerning equipment
leasing.
The Fund will use only sales material which has been approved
by such appropriate regulatory bodies as may be required. The
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offering is made only by means of this Prospectus. Although the information
contained in such sales material does not conflict with any of the information
contained in this Prospectus, such material does not purport to be complete, and
should not be considered as part of this Prospectus or the registration
statement of which this Prospectus is a part, or as incorporated by reference in
this Prospectus or said registration statement or as forming the basis of the
offering of Units which are offered hereby.
LEGAL OPINIONS
The legality of the Units and the statements under the captions "Income
Tax Consequences" and "ERISA Considerations" as they relate to federal income
tax and ERISA matters have been reviewed and passed upon by Derenthal &
Dannhauser, San Francisco, California.
EXPERTS
The balance sheet of ATEL Capital Equipment Fund VII, L.P. at July 17,
1996 and the consolidated balance sheet of ATEL Financial Corporation at July
31, 1996, appearing in this prospectus and registration statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein and in the registration statement,
and are included in reliance upon such reports given upon the authority of such
firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Fund has filed with the Securities and Exchange Commission,
Washington, D.C., a registration statement under the Securities Act of 1933, as
amended, with respect to the Units offered pursuant to this Prospectus. For
further information, reference is made to the registration statement and the
exhibits thereto which are available for inspection at no fee in the principal
office of the Commission at 450 Fifth Street, Northwest, Washington, D.C. 20549.
Photostatic copies of the material containing this information may be obtained
from the Commission upon paying of the fees prescribed by the rules and
regulations of the Commission. This Prospectus contains a fair summary of the
material provisions of the exhibits filed with the Commission. This Prospectus
does not knowingly contain any untrue statement of a material fact or omit to
state any material fact required to be stated herein or necessary to make the
statements herein not misleading.
GLOSSARY
The following terms used in this Prospectus shall (unless otherwise
expressly provided herein or unless the context otherwise requires) have the
following respective meanings:
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"Acquisition Expenses" shall mean expenses including, but not limited
to, legal fees and expenses, travel and communication expenses, costs of
appraisals, accounting fees and expenses, and miscellaneous expenses relating to
selection and acquisition of Equipment, whether or not acquired.
"Acquisition Fees" shall mean the total of all fees and commissions
paid by any party in connection with the initial purchase or manufacture of
Equipment. Included in the computation of such fees or commissions shall be any
commission, selection fee, financing fee, nonrecurring management fee, or any
fee of a similar nature, however designated.
"Adjusted Invested Capital" shall mean, as of any date, the Original
Invested Capital attributable to the Units held by any Person on or before such
date, as decreased (but not below zero) by the amount by which (i) all
Distributions with respect to such Units on or before the date of determination
pursuant to any provision of the Partnership Agreement exceed (ii) the Priority
Distribution attributable to such Units for such period.
"Affiliate" of a Person shall mean (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling 10% or more of the outstanding voting
securities or beneficial interests of such Person, (iii) any officer, director,
trustee or partner of such Person and (iv) if such Person is an officer,
director, trustee, partner or holder of 10% or more of the voting securities or
beneficial interests of such Person, any other company for which such Person
acts in such capacity. However, such term shall not include a Person who is a
partner in a partnership or joint venture with the Fund if such Person is not
otherwise an Affiliate.
"Assignee" shall mean a Person who has acquired a beneficial interest
in one or more Units from a third party but who is neither a substituted Holder
nor an Assignee of Record.
"Assignee of Record" shall mean an Assignee who has acquired a
beneficial interest in one or more Units whose ownership has been recorded on
the books of the Partnership and which ownership is the subject of a written
instrument of assignment, the effective date of which assignment has passed.
"ATEL" shall mean ATEL Financial Corporation, a California
corporation.
"Capital Account" shall mean, with respect to any Partner, such
Partner's Capital Account determined in accordance with Section 6.7 of the
Partnership Agreement.
"Cash from Operations" shall mean the excess of Gross
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Revenues (which excludes revenues from Equipment sales or refinancing) over cash
disbursements (including the Equipment Management Fee and amounts reinvested by
the Fund in Equipment) without reduction for depreciation and amortization of
intangibles such as organization and underwriting costs but after a reasonable
allowance for cash for repairs, replacements, contingencies and anticipated
obligations, as determined by the Fund Manager.
"Cash from Reserve Account" shall mean that portion of the Net
Proceeds not utilized in the acquisition of Equipment, including cash maintained
according to the provisions of Section 9.4 of the Partnership Agreement.
"Cash from Sales or Refinancing" shall mean the net cash realized by
the Fund from the sale, refinancing or other disposition of any Equipment after
payment of all expenses related to the transaction (including the Equipment
Resale Fee).
"Closing Date" shall mean such date designated by the General Partner
for the termination of the offering of Units, but not later than ____________,
1998 (a date two years from the date the offering of Units commenced). Extension
of the offering beyond one year from the date of the Prospectus shall be subject
to the qualification of the offering for any such extension in those
jurisdictions which may limit the offering period to one year. "Initial Closing
Date" shall mean the date on which subscribers for Units, other than the initial
Holder, are first admitted to the Fund as Holders. "Final Closing Date" shall
mean the last date on which subscribers for Units are admitted to the Fund as
Holders.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent federal revenue laws.
"Distributions" shall mean any cash distributed to Holders and the Fund
Manager arising from their respective interests in the Fund.
"ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended.
"Equipment" shall mean the equipment acquired and owned by the Fund to
be leased by the Fund to others as well as any Fund interest in equipment,
including without limitation its rights, whether direct or indirect, in all
trusts, joint ventures, leases, chattel paper, options and other contract rights
with respect to equipment.
"Equipment Management Fee" shall mean the fee payable to an Affiliate of
the General Partner under the provisions of Section 8.3.1 of the Partnership
Agreement. See "Management Compensation."
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"Equipment Re-leasing Fee" shall mean the fee payable to an Affiliate
of the General Partner under the provisions of Section 8.3.3 of the Partnership
Agreement. See "Management Compensation."
"Equipment Resale Fee" shall mean the fee payable to an Affiliate of
the General Partner, under the provisions of Section 8.3.2 of the Partnership
Agreement. See "Management Compensation."
"Front-End Fees" shall mean fees and expenses paid by any party for any
services rendered during the Fund's organization and acquisition phase including
Organization and Offering Expenses, Leasing Fees, Acquisition Fees, Acquisition
Expenses, and any other similar fees, however designated. Notwithstanding the
foregoing, Front-End Fees shall not include any Acquisition Fees or Acquisition
Expenses paid by a manufacturer of Equipment to any of its employees unless such
Persons are Affiliates of the General Partner.
"Full Payout Lease" shall mean a lease under which the non-cancelable
rental payments due during the initial term of the lease are at least sufficient
to cover the purchase price of the Equipment leased.
"Fund" shall mean the limited partnership created under the Partnership
Agreement.
"Fund Manager" shall mean the General Partner, ATEL Financial
Corporation or its successor as General Partner of the Fund.
"Fund Minimum Gain" shall have the meaning set forth in Regulations
section 1.704-2(d)(1).
"General Partner" shall mean ATEL Financial Corporation ("ATEL"), a
California corporation, or any other Person or Persons which succeed it in such
capacity. The General Partner is referred to throughout the Prospectus as "ATEL"
or the "Fund Manager."
"Gross Proceeds" shall mean the aggregate total of the Original
Invested Capital of the initial and all of the additional Holders.
"Gross Revenues" shall mean all revenues from the operation and lease
of the Equipment other than from security deposits paid by lessees thereof. The
term "Gross Revenues" shall not include revenues from the sale, refinancing or
other disposition of Equipment.
"High Payout Lease" shall mean a lease under which the noncancelable
rental payments and other payment obligations of the lessee due through the
initial term of the lease are equal to at least 90% of the original purchase
price paid by the Fund for the Equipment.
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"Holders" shall mean owners of Units who are either Partners or
Assignees of Record, and reference to a "Holder" shall be to any one of them.
The General Partner shall not be considered to be a Holder except to the extent
it also owns Units.
"Incentive Management Fee" shall mean the fee payable to an Affiliate
of the General Partner under the provisions of Section 8.3.4 of the Partnership
Agreement.
"IRA" shall mean an individual retirement account qualifying under
Section 408 of the Code.
"Investment in Equipment" shall mean the amount of Gross Proceeds
actually paid or allocated to the purchase of Equipment acquired by the Fund,
any amount of Gross Proceeds reserved pursuant to Section 9.4 of the Partnership
Agreement up to a maximum of 3% of Gross Proceeds and other cash payments such
as interest and taxes, but excluding Front-End Fees.
"Limited Partners" shall mean the initial limited partners and any other
Persons who are admitted to the Fund as additional or substituted limited
partners. Reference to a "Limited Partner" shall refer to any one of them.
"Net Income" or "Net Loss" shall mean the taxable income or taxable
loss of the Fund as determined for federal income tax purposes, computed by
taking into account each item of Fund income, gain, loss, deduction or credit
not already included in the computation of taxable income and taxable loss, but
does not mean Distributions.
"Net Lease Provisions" shall mean contractual arrangements under which
the lessee assumes responsibility for, and bears the cost of, insurance, taxes,
maintenance, repair and operation of the leased asset and where non-cancelable
rental payments under the lease are absolutely net to the lessor,
notwithstanding that some minor costs or responsibilities remain with the Fund
as lessor or that the Fund retains the option to require and pay for a higher
standard of care or greater level of maintenance or insurance than would be
imposed on the lessee under the terms of the lease.
"Net Proceeds" shall mean the total Gross Proceeds less Organization
and Offering Expenses.
"Operating Lease" shall mean a lease under which the aggregate rental
payments due during the initial term of the lease are less than the purchase
price of the Equipment leased.
"Organization and Offering Expenses" shall mean those expenses incurred
in connection with preparing the Fund for registration and subsequently offering
and distributing Units to the public,
132
<PAGE>
including selling commissions and all advertising expenses except advertising
expenses related to the leasing of Equipment.
"Original Invested Capital" shall mean the amount in cash contributed
by each Partner to the capital of the Fund for his interest in the Fund, which
amount shall be attributed to Units in the hands of a subsequent Holder.
"Partners" shall mean collectively the General Partner and Holders who
are admitted to the Fund as Limited Partners and reference to a "Partner" shall
be to any one of the Partners.
"Partnership Agreement" or "Agreement" shall mean the Amended and
Restated Agreement of
Limited Partnership of ATEL Capital Equipment Fund VII, L.P., as it may be
further amended from time to time.
"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.
"Priority Distribution" for any calendar year or other period shall
mean, with respect to the Units held by any Person, the average Adjusted
Invested Capital with respect to such Units during such period multiplied by 10%
per annum (calculated on a cumulative basis, compounded daily, from the last day
of the calendar quarter in which the capital contribution of the initial
purchaser of such Units was received by the Fund and pro rated for any fraction
of a calendar year for which such calculation is made).
"Prospectus" shall mean the final prospectus filed in connection with
the registration of the Units with the Securities and Exchange Commission on
Form S-1, as amended, together with any supplement thereto which may be
subsequently filed with such Commission.
"Purchase Price of Equipment" shall mean the price paid upon the
purchase or sale of a particular item of equipment, including the amount of
Acquisition Fees and all liens and mortgages on the equipment, but excluding
points and prepaid interest.
"Qualified Plan" shall mean employee trusts (or employer individual
retirement accounts), Keogh Plans and corporate retirement plans qualifying
under Section 401(a) of the Code.
"Regulations" shall mean the income tax regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Reinvestment Period" shall mean the period commencing with the Initial
Closing Date and ending on a date 72 months after the last day of the fiscal
year during which the Final Closing Date occurs.
133
<PAGE>
"Resident Alien" shall mean a resident alien as defined within the
Federal Aviation Act of 1958, as amended from time to time, or any successor
statute, or any regulations adopted pursuant to such Act or any successor
statute.
"Roll-Up" shall mean a transaction involving the acquisition, merger,
conversion or consolidation, either directly or indirectly, of the Fund and the
issuance of securities of a Roll-Up Entity.
Such term does not include:
(a) any transaction if the securities of the Fund have
been for at least twelve months traded through the National
Association of Securities Dealers, Inc. Automated Quotation
National Market System; or
(b) a transaction involving the conversion to corporate, trust
or association form of only the Fund, if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following
(i) the Limited Partners voting rights;
(ii) the term of existence of the Fund;
(iii) the terms of compensation of the
General partner and its Affiliates;
or
(iv) the Fund's investment objectives.
"Service" shall mean the United States Internal Revenue Service
or its successor.
"Substantially All of the Assets" shall mean, unless the context
otherwise dictates, Equipment representing 66 2/3% or more of the net book value
of all Equipment as of the end of the most recently completed fiscal quarter.
"Unit" shall mean the interest in the Fund representing Original
Invested Capital in the amount of $10 and shall entitle the Holder thereof to
the rights herein provided.
"United States Citizen" shall mean a "citizen of the United States" as
defined within the Federal Aviation Act of 1958, as amended from time to time,
or any successor statute, or any regulations adopted pursuant to such Act or any
successor statute.
134
<PAGE>
FINANCIAL STATEMENTS
Set forth below are the following financial statements:
ATEL Capital Equipment Fund VII, L.P.
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . F - 2
Balance Sheet, July 17, 1996 . . . . . . . . . . . . . . . . . . . . . . F - 3
Notes to Financial Statements, July 17, 1996 . . . . . . . . . . . . . . F - 4
ATEL Financial Corporation
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . F - 6
Consolidated Balance Sheet, July 31, 1996 . . . . . . . . . . . . . . . . F - 7
Notes to Consolidated Balance Sheet, July 31, 1996 . . . . . . . . . . . F - 8
F - 1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
ATEL Capital Equipment Fund VII, L.P.
We have audited the accompanying balance sheet of ATEL Capital Equipment Fund
VII, L.P. as of July 17, 1996. This balance sheet is the responsibility of the
Partnership's management. Our responsibility is to express an opinion on the
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of ATEL Capital Equipment Fund VII,
L.P. at July 17, 1996, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
San Francisco, California
July 18, 1996
F - 2
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
BALANCE SHEET
JULY 17, 1996
ASSETS
Cash $600
========
PARTNERS' CAPITAL
Partners' capital:
General Partner $100
Limited Partners 500
--------
Total partners' capital $600
========
See accompanying notes.
F - 3
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO BALANCE SHEET
JULY 17, 1996
1. Organization and Partnership matters:
ATEL Capital Equipment Fund VII, L.P. (the Fund), was formed under the laws of
the State of California on May 17, 1996, for the purpose of acquiring equipment
to engage in equipment leasing and sales activities. Contributions in the amount
of $600 were received as of July 17, 1996, $100 of which represented the General
Partner's (ATEL Financial Corporation's) continuing interest, and $500 of which
represented the Initial Limited Partners' capital investment.
As of July 17, 1996, the Fund had not commenced operations other than those
relating to organizational matters. The Fund, or the General Partner on behalf
of the Fund, will incur costs in connection with the organization, registration
and issuance of the Units of Limited Partnership interest (Units). The amount of
such costs to be borne by the Fund is limited by certain provisions of the
Partnership Agreement. In the event that the minimum number of Units specified
in the Prospectus are not sold, all funds received for subscribed Units will be
refunded together with interest thereon.
2. Income taxes:
The Partnership does not provide for income taxes since all income and losses
are the liability of the individual partners and are allocated to the partners
for inclusion in their individual tax returns.
3. Partners' capital:
As of July 17, 1996, 50 Units were issued and outstanding. The Fund is in the
process of filing a registration statement with the Securities and Exchange
Commission in order to issue up to 15,000,000 additional Units of Limited
Partnership interest at $10.00 per Unit.
The Partnership Net Profits, Net Losses, and Tax Credits are to be allocated
92.5% to the Limited Partners and 7.5% to the General Partner.
Available Cash from Operations, as defined in the Limited Partnership Agreement,
shall be distributed as follows:
First, Distributions of Cash from Operations shall be 88.5% to the Limited
Partners, 7.5% to the General Partner and 4% to the General Partner or its
affiliate designated as the recipient of the Incentive Management Fee, until the
Limited Partners have received Aggregate Distributions in an amount equal to
their Original Invested Capital, as defined, plus a 10% per annum cumulative
(compounded daily) return on their Adjusted Invested Capital, as defined in the
Limited Partnership Agreement.
Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the
General Partner or its affiliate designated as the recient of the Incentive
Management Fee.
F - 4
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO BALANCE SHEET
JULY 17, 1996
3. Partners' capital (continued):
Available Cash from Sales or Refinancing, as defined in the Limited Partnership
Agreement, shall be distributed as follows:
First, Distributions of Sales or Refinancings shall be 92.5% to the Limited
Partners and 7.5% to the General Partner, until the Limited Partners have
received Aggregate Distributions in an amount equal to their Original Invested
Capital, as defined, plus a 10% per annum cumulative (compounded daily) return
on their Adjusted Invested Capital.
Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the
General Partner or its affiliate designated as the recient of the Incentive
Management Fee.
4. Commitments and management:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or affiliates are entitled to receive certain fees, in addition to those
described above, which are more fully described in Section 8 of the Limited
Partnership Agreement. The additional fees to management include fees for
equipment management and resale.
F - 5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
ATEL Financial Corporation
We have audited the accompanying consolidated balance sheet of ATEL Financial
Corporation and subsidiary as of July 31, 1996. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free from material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of ATEL
Financial Corporation at July 31, 1996 in conformity with generally accepted
accounting principles.
Ernst & Young LLP
San Francisco, California
September 13, 1996
F-6
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JULY 31, 1996
ASSETS
Cash and cash equivalents $818,309
Short-term investments 372,649
Accounts receivable, net of allowance for doubtful accounts
of $10,828 41,033
Amounts due from affiliated partnerships 1,931,434
Investments in leases 4,538,190
Cash surrender value of life insurance 300,000
Other assets 581,227
----------------
$8,582,842
================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Non-recourse debt $1,959,206
Line of credit 499,639
Amounts due to affiliated companies 129,553
Accounts payable and accrued liabilities 287,757
Customer deposits 83,389
Deferred liabilities and credits:
Unearned acquisition fees 1,946,985
Deferred income taxes 415,856
----------------
Total liabilities 5,322,385
Shareholder's equity:
Common stock, 100,000 shares authorized, 666 1/2shares
issued and outstanding 2,000
Additional paid-in capital 93,855
Retained earnings 3,164,602
----------------
Total shareholder's equity 3,260,457
----------------
$8,582,842
================
See accompanying notes.
F-7
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1996
1. Summary of significant accounting policies:
Organization and principles of consolidation:
The consolidated balance sheet includes the accounts of ATEL Financial
Corporation (ATEL) and its wholly owned subsidiary, ATEL Securities Corporation
(ASC). ATEL is a wholly owned subsidiary of ATEL Capital Group (ACG).
ATEL is a California corporation formed in July 1977 to engage in the brokering
and leasing of equipment for its own account and the account of affiliated
partnerships. ASC was formed in November 1985 and was registered as a securities
broker/dealer in February 1986. All significant intercompany balances have been
eliminated in consolidation.
ATEL organizes and sponsors limited partnerships (the "affiliated partnerships"
or the "programs") engaged in equipment leasing and sales activities. It also
acts as the corporate general partner in these affiliated partnerships. Through
these programs, ACG derives various fees and also receives reimbursements for
expenses incurred on behalf of these entities, of which certain fees and expense
reimbursements are allocated to ATEL and the balance is allocated to various
other affiliates. The basis for determination of the types and amounts of these
fees and reimbursements are provided in agreements with the various programs.
In addition, under the terms of the partnership agreements for certain of the
affiliated partnerships for which ATEL is a general partner, ATEL is entitled to
participate in net cash from operations and sales or refinancing of equipment
owned by the affiliated partnerships. A portion of ATEL's participation is
subordinated to the limited partners' full recovery of their initial invested
capital contributions plus a specified return on their investments. No earnings
or equity interests from such subordinated interests have been recognized
through July 31, 1996. The shareholders of ATEL Capital Group are also general
partners in certain of these affiliated partnerships.
Operating leases:
Assets on operating leases are stated at cost less accumulated depreciation.
Revenues from operating leases are recognized evenly over the terms of the
related leases. Depreciation is provided by the straight-line method over the
term of the lease to an amount equal to the equipment's estimated residual value
at lease termination.
Initial direct costs:
Initial direct costs are capitalized and amortized over the terms of the related
leases.
Short-term investments:
Short-term investments consist of certificates of deposit with original
maturities in excess of ninety days.
F-8
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1996
1. Summary of significant accounting policies (continued):
Investment in leveraged leases:
Leases which are financed principally with non-recourse debt at lease inception
and which meet certain other criteria are accounted for as leveraged leases.
Leveraged lease contracts receivable are stated net of the related non-recourse
debt service (which includes unpaid principal and aggregate interest on such
debt) plus estimated residual values. Unearned income represents the excess of
anticipated cash flows (after taking into account the related debt service and
residual values) over the investment in the lease and is amortized using a
constant rate of return applied to the net investment when such investment is
positive.
Residual interests:
Residual interests represent the present value of ATEL's proportionate interest
(calculated at the time of the transaction) in the estimated residual value of
equipment originally owned by ATEL and subsequently sold to a third party where
ATEL retains an unconditional right to participate in such residual value upon
the expiration of the related lease. This retained residual value is presented
as an asset until the ultimate liquidation of the underlying equipment and
realization of the participation.
Commissions:
Commission revenue is recognized as the offerer accepts each subscription for
interests in the affiliated partnership units after minimum funding levels are
achieved. Commissions to outside broker-dealers are expensed as the
corresponding income is recognized.
Acquisition fees:
Acquisition fees received from the affiliated partnerships on equipment
purchased prior to 1995, generally 3.5% to 4.75% of the affiliated partnerships'
equipment cost, were deferred and are recognized as income as services are
provided in connection with the partnerships' acquisition of equipment and
leases. It is estimated that these services will be rendered over a period of
seven years. Beginning in 1995, acquisition services are performed by an
affiliate.
Cash surrender value of life insurance
ATEL purchased two single premium key-man life insurance policies to cover its
two officer-shareholders. ATEL is a beneficiary under the contracts for $300,000
of cash surrender values and death benefits. The spouses are the beneficiaries
for amounts above $300,000.
F-9
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1996
1. Summary of significant accounting policies (continued):
Income taxes:
For federal and state income tax reporting, ATEL's taxable income is included in
the returns filed by its parent. For financial reporting, ATEL's income tax
provision is calculated on a separate return basis. The current portion is
included in the intercompany account with the parent. Deferred taxes are
calculated using the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
New accounting pronouncement:
In August 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Live
Assets to be Disposed Of" (FAS 121). This statement requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets during the holding period are less than the assets' carrying
amount. The impairment loss is measured by comparing the fair value of the asset
to its carrying amount. FAS 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. ATEL adopted FAS 121 as of August 1,
1995. No impairment losses were required to be recorded as a result of adopting
FAS 121.
Credit Risk:
Financial instruments which potentially subject the Partnership to
concentrations of credit risk include cash and cash equivalents. The Partnership
places its cash deposits and temporary cash investments with creditworthy, high
quality financial institutions. The concentration of such deposits and temporary
cash investments is not deemed to create a significant risk to the Partnership.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-10
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1996
2. Investments in leases:
Investments in leases consist of the following:
Equipment on operating leases, net of accumulated depreciation $3,170,411
Residual interests 682,227
Lease assets held for sale, net of allowance for losses of
$273,446 435,281
Investment in leveraged leases 250,271
----------------
$4,538,190
================
Operating leases:
Equipment on operating leases consists of the following:
Electrical cogeneration plant (estimated useful life,
20 years) $2,565,815
Concrete hauling trucks (estimated useful life, 7 years) 1,793,410
----------------
4,359,225
Less accumulated depreciation (1,188,814)
----------------
Equipment on operating leases, net of accumulated depreciation $3,170,411
================
At July 31, 1996, the aggregate amounts of future minimum lease payments
receivable from operating leases are as follows:
Year ending July 31,
1996 $641,295
1997 641,295
1998 286,590
1999 290,999
2000 290,999
Thereafter 339,500
================
$2,490,678
================
Leveraged leases:
ATEL participates in leveraged lease transactions in which the cost of assets
leased to others is financed primarily by loans from financial institutions but
ownership of property is retained by ATEL. The lessees' rental obligations are
assigned to the financial institutions and the related property is pledged as
collateral for the loans and are without deficiency liability (non-recourse)
against ATEL. Equipment under leveraged leases includes coal mining and
processing equipment and over-the-road tractors and trailers. The net investment
in leveraged leases is as follows:
Aggregate rentals receivable $3,852,459
Aggregate principal and interest payable on non-recourse loans (3,852,459)
Estimated residual value of leased assets 581,000
Less unearned income (330,729)
----------------
Investment in leveraged leases 250,271
Deferred tax asset, included in the accompanying
balance sheet 328,131
----------------
Net investment in leveraged leases $578,402
================
F-11
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1996
2. Investments in leases (continued):
General lease terms and concentration of credit risk:
Operating and leveraged leases generally provide that the lessee will be
responsible for maintenance, insurance and similar costs (referred to as net
leases).
ATEL leases equipment to lessees in diversified industries. As of July 31, 1996,
equipment representing 18% and 16% of total assets was leased to lessees in the
heavy construction and machine tool industries, respectively. Leases are subject
to the Company's credit committee review. The leases provide for the
repossession of the equipment in the event of default.
3. Non-recourse debt:
Non-recourse debt consists of the following:
Note payable to financial institution, interest at 9.6094% per
year, concrete hauling trucks and related leases pledged as
collateral, due in various installments through 2002 $1,237,030
Note payable to financial institution, interest at 10.87% per
year, cogeneration plant and related lease pledged as
collateral, due in quarterly installments of $100,801 through
July 1998 722,176
----------------
$1,959,206
================
The net book value of assets financed with non-recourse debt was $3,170,411 at
July 31, 1996.
Future minimum payments on non-recourse debt are as follows:
Principal Interest Total
Year ending July 31, Payments Payments Payments
1997 $467,755 $173,540 $641,295
1998 516,173 125,122 641,295
1999 201,397 85,194 286,591
2000 226,437 64,562 290,999
2001 249,180 41,819 290,999
Thereafter 298,264 16,985 315,249
---------------- ---------------- ----------------
$1,959,206 $507,222 $2,466,428
================ ================ ================
Cash in the amount of $250,000 is restricted as a security interest to the
lender. The cash would transfer to the lender only in the event of ATEL's
default on the related notes.
F-12
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1996
4. Income taxes:
Deferred income taxes as of July 31, 1996 reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. At
July 31, 1996, deferred tax assets total $1,009,670 and deferred tax liabilities
total $1,425,526.
Deferred income taxes arise primarily from differences in the reporting of lease
income, depreciation, acquisition fees and valuation accounts for tax purposes
as compared to their treatment for financial reporting purposes.
5. Line of credit:
ATEL participates with ACG, certain other subsidiaries of ACG and with certain
affiliated partnerships, in a $70,000,000 line of credit facility with a lender
to be used in connection with warehousing lease transactions. The line expires
July 18, 1997. Included in this line of credit is a $1,000,000 facility
available for operations and working capital. At July 31, 1996, ATEL's
borrowings related to working capital were $499,639. At July 31, 1996,
$2,501,013 was borrowed under a separate small ticket lease facility by another
subsidiary of ACG relating to lease transactions. Interest is at the bank's
prime rate plus 1/2% (8 1/4% at July 31, 1996).
These facilities, when used, are collateralized by (i) leases and equipment
owned by the specific borrower and financed by the lines and (ii) all other
assets owned by the borrower except equipment, lease receipts and residual
values specifically pledged to other equipment funding sources. ATEL's
borrowings under the facility are guaranteed by ACG and/or its shareholders.
In separate facilities under the line, the affiliated partnerships have borrowed
$37,341,915 as July 31, 1996. These funds are collateralized by the assets owned
by the affiliated partnerships, except equipment, lease receipts and residual
values specifically pledged to other equipment funding sources.
6. Commitments and contingencies:
Office lease:
ATEL occupies office space under operating leases expiring through January 2003.
Future minimum payments for fiscal year periods under the leases are $468,374 in
1997, $512,438 in 1998, $526,279 in 1999, $536,164 in 2000 and $550,004 in 2001.
Office rent expense was $434,964 in 1996 and $362,963 in 1995.
7. Reimbursements of operating costs:
The Limited Partnership Agreements of the affiliated partnerships allow for the
reimbursement of costs incurred by ACG and its subsidiaries in providing
administrative services to the Partnerships, of which a portion of such amounts
is allocated to ATEL. Administrative services provided include partnership
accounting, investor relations, legal counsel and lease and equipment
documentation. ACG and its subsidiaries are not reimbursed for services where
they are entitled to receive a separate fee as compensation for such services,
such as acquiring and overseeing the
F-13
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1996
7. Reimbursements of operating costs (continued):
management of equipment. Reimbursable operating costs incurred by ACG and its
subsidiaries are allocated to the Partnerships based upon actual time incurred
by employees working on partnership business and an allocation of rent and other
costs based on utilization studies. Accrual and payment of reimbursable costs
and management fees due from ATEL Cash Distribution Fund were voluntarily
suspended in May 1994.
8. Fair value of financial instruments:
During the year ended July 31, 1996, ATEL adopted Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments," which requires disclosure of the fair value of financial
instruments for which it is practicable to estimate fair value. The following
methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate that value.
Cash and cash equivalents:
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.
Accounts payable, accrued interest and customer deposits:
The carrying amounts of accounts payable, accrued interest and customer deposits
approximate fair value because of the short maturity of these instruments.
Non-recourse debt:
The fair value of ATEL's non-recourse debt is estimated using discounted cash
flow analyses, based on ATEL's current incremental borrowing rates for similar
types of borrowing arrangements. The estimated fair value of ATEL's non-recourse
debt at July 31, 1996 is $1,923,376.
Line of credit:
The carrying amount of ATEL's variable rate line of credit approximates fair
value.
F-14
<PAGE>
-----------------------------------------------------------------
PRIOR PERFORMANCE INFORMATION
-----------------------------------------------------------------
ATEL Financial Corporation ("ATEL"), the General Partner of the Fund, and
its affiliates have extensive experience in the equipment leasing industry,
including: (i) originating and financing leveraged and single investor lease
transactions for corporate investors, (ii) acting as a broker/packager by
arranging equity and debt participants for equipment leasing transactions
originated by other companies, (iii) consulting on the pricing and structuring
of equipment lease transactions for banks, leasing companies and corporations,
(iv) organizing and offering individual ownership and limited partnership
investment leasing programs and (v) supervising and arranging for the
supervision of equipment management and marketing on leasing transactions
involving total equipment costs in excess of $1 billion. In addition to the
Fund, ATEL has sponsored six prior public and one private equipment leasing
limited partnership(s). See "Prior Performance Summary" for a summary of
information regarding such prior programs.
The first prior partnership, ATEL Lease Income Fund 1985-A ("ALIF"), completed a
private placement of $218,500 of its limited partnership interests in April 1986
from a total of 12 investors. ALIF had acquired a variety of equipment with a
total purchase cost of approximately $296,627 as of June 30, 1996. All such
equipment had been sold as of June 30, 1996. See Table V - "Sales or Disposals
of Equipment" in this Exhibit A.
The second prior partnership, ATEL Cash Distribution Fund ("ACDF"), commenced a
public offering of up to $10,000,000 of its limited partnership interests on
March 11, 1986. ACDF terminated its offering on December 18, 1987 after raising
a total of $10,000,000 in offering proceeds from a total of approximately 1,000
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF had
acquired a variety of types of equipment with a total purchase cost of
approximately $11,133,679 as of June 30, 1996. See Table IV - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF. Of such equipment, items representing an
original purchase cost of approximately $8,700,153 had been sold as of June 30,
1996. See Table V - "Sales or Disposals of Equipment" in Exhibit A. Through June
30, 1996, ACDF had made cash distributions to its investors in the aggregate
amount of $1,068.40 per $1,000 invested. Of this amount a total of $229.30
represents investment income and $839.10 represents return of capital. See Table
III - "Operating Results of Prior Programs" in this Exhibit A for further
information concerning such distributions.
The third prior partnership, ATEL Cash Distribution Fund II ("ACDF II"),
commenced a public offering of up to $25,000,000 (with an option to increase the
offering to $35,000,000) of its limited partnership interests on January 4,
1988. ACDF II terminated its offering on January 3, 1990 after raising a total
of $35,000,000 in offering proceeds from a total of approximately 3,100
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF II had
acquired a variety of types of equipment with a total purchase cost of
approximately $52,270,536 as of June 30, 1996. See Table IV - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF II. Of such equipment, items representing an
original purchase cost of approximately $33,874,148 had been sold as of June 30,
1996. See Table V - "Sales or Disposals of Equipment" in Exhibit A. Through June
30, 1996, ACDF II had made cash distributions to its investors in the aggregate
amount of $1,018.35 per $1,000 invested. Of this amount a total of $254.34
represents investment income and $764.01 represents return of capital. See Table
III - "Operating Results of Prior Programs" in this Exhibit A for further
information concerning such distributions.
A-1
<PAGE>
The fourth prior partnership, ATEL Cash Distribution Fund III ("ACDF III"),
commenced a public offering of up to $50,000,000 (with an option to increase the
offering to $75,000,000) of its limited partnership interests on January 4,
1990. ACDF III terminated its offering on January 3, 1992 after raising a total
of $73,855,840 in offering proceeds from a total of approximately 4,822
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF III had
acquired a variety of types of equipment with a total purchase cost of
approximately $99,629,941 as of June 30, 1996. See Table IV - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF III. Of such equipment, items representing
an original purchase cost of approximately $23,608,542 had been sold as of June
30, 1996. See Table V - "Sales or Disposals of Equipment" in Exhibit A. Through
June 30, 1996, ACDF III had made cash distributions to its investors in the
aggregate amount of $776.30 per $1,000 invested. Of this amount a total of
$165.97 represents investment income and $607.63 represents return of capital.
See Table III - "Operating Results of Prior Programs" in this Exhibit A for
further information concerning such distributions.
The fifth prior partnership, ATEL Cash Distribution Fund IV ("ACDF IV"),
commenced a public offering of up to $75,000,000 of its limited partnership
interests on February 4, 1992. ACDF IV terminated its offering on February 3,
1993 after raising a total of $75,000,000 in offering proceeds from a total of
approximately 4,873 investors, all of which proceeds have been committed to
equipment acquisitions, estimated organization and offering expenses and capital
reserves. ACDF IV had acquired a variety of types of equipment with a total
purchase cost of approximately $112,424,026 as of June 30, 1996. See Table IV
"Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACDF IV. Of such
equipment, items representing an original purchase cost of approximately
$13,835,773 had been sold as of June 30, 1996. See Table V - "Sales or Disposals
of Equipment" in Exhibit A. Through June 30, 1996, ACDF IV had made cash
distributions to its investors in the aggregate amount of $517.84 per $1,000
invested. Of this amount a total of $69.25 represents investment income and
$448.59 represents return of capital. See Table III - "Operating Results of
Prior Programs" in this Exhibit A for further information concerning such
distributions.
The sixth prior partnership, ATEL Cash Distribution Fund V ("ACDF V"), commenced
a public offering of up to $125,000,000 of its limited partnership interests on
February 22, 1993. ACDF V terminated its offering on November 15, 1994. As of
that date, $125,000,000 of offering proceeds had been received. All of the
proceeds have been committed to equipment acquisitions, estimated organization
and offering expenses and capital reserves. ACDF V had acquired a variety of
types of equipment with a total purchase cost of $186,537,028 as of June 30,
1996. Of such equipment, items representing an original purchase cost of
approximately $7,411,341 had been sold as of June 30, 1996. Through June 30,
1996, ACDF V had made cash distributions to its investors in the aggregate
amount of $297.14 per $1,000 invested. Of this amount a total of $28.23
represents investment income and $268.91 represents return of capital. See Table
III - "Operating Results of Prior Programs" in this Exhibit A for further
information concerning such distributions. See Table IV - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF V. See Table V - "Sales or Disposals of
Equipment" in Exhibit A.
The seventh prior partnership, ATEL Cash Distribution Fund VI ("ACDF VI"),
commenced a public offering of up to $125,000,000 of its limited partnership
interests on November 23, 1994. ACDF VI has not terminated its offering as of
June 30, 1996. As of that date, $93,303,920 of offering proceeds had been
received. All of the proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF VI had
acquired a variety of types of equipment with a total purchase cost of
$147,437,403 as of June 30, 1996. Of such equipment, items representing an
original purchase cost of approximately $155,361 had been sold as of June 30,
1996. Through June 30, 1996, ACDF VI had made cash distributions to its
investors in the aggregate amount of $124.73 per $1,000 invested. All of this
amount represents return of capital. See Table III - "Operating Results of Prior
Programs" in this Exhibit A for further information concerning such
distributions. See Table IV - "Acquisition of Equipment by Prior Programs" in
Exhibit A for further information concerning the types of equipment acquired by
ACDF VI. See Table V - "Sales or Disposals of Equipment" in Exhibit A.
Although certain of the Prior Programs have experienced lessee defaults in
the ordinary court of business, none of the Prior Programs has experienced an
unanticipated rate of default or major adverse business developments which the
Fund Manager believes will impair its ability to meet its investment
objectives.
A-2
<PAGE>
All of the Prior Programs have investment objectives that are similar to
those of the Fund. It should be noted, however, that the prior privately placed
program, ALIF, invested in equipment without the use of any acquisition debt,
while the Prior Programs ("Prior Public Programs") were designed to use moderate
amounts of acquisition debt, as is the Fund. In addition, as in the case of the
Fund's portfolio objectives, the Prior Public Programs' equipment portfolios
placed greater emphasis on relatively low technology equipment than did ALIF.
The factors considered by the General Partner in determining that the investment
objectives of the prior programs were similar to those of the Fund include the
types of equipment to be acquired, the structure of the leases to such
equipment, the credit criteria for lessees, the intended investment cycles, the
reinvestment policies and the investment goals of each program. Therefore all of
the information set forth in Tables included in this Exhibit A - "Prior
Performance Information" may be deemed to relate to programs with investment
objectives similar to those of the Fund.
In Tables I through III information is presented with respect to all Prior
Programs sponsored by the General Partner and its Affiliates which closed their
offerings within the five year period ending June 30, 1996, except that ACDF
closed its offering December 18, 1987, ACDF II closed its offering January 3,
1990 and ACDF VI has not completed its offering as of the date hereof.
Accordingly, the tabular information for ACDF VI does not reflect results of an
operating period after completion of its funding. Table V includes information
regarding all dispositions of equipment by prior programs during the five year
period ending June 30, 1996. No information concerning results of completed
programs is presented herein, because none of the prior partnerships has
completed its operations. The following is a list of the tables set forth on
this Exhibit A:
TABLE I - Experience in Raising and Investing Funds
TABLE II - Compensation to ATEL and Affiliates
TABLE III - Operating results of Prior Programs
TABLE IV - Acquisition of Equipment by Prior Programs
TABLE V - Sales or Disposals of Equipment
ATEL will provide to any investor, upon written request and without charge,
copies of the most recent Annual Reports on Form 10-K filed with the Securities
and Exchange Commission by each Prior Public Program, and will provide to any
investor, for a reasonable fee, copies of the exhibits to such reports.
INVESTORS IN THE PARTNERSHIP WILL HAVE NO INTEREST IN THE INVESTMENTS DESCRIBED
IN THE FOLLOWING TABLES. PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE INCLUSION
OF THIS INFORMATION AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE PARTNERSHIP.
In addition to Tables I through V, two summary charts are set forth below.
Figure 6 is a summary of cumulative cash distributions through June 30, 1996
by each Prior Public Program, expressed as a percentage of an initial investor's
original capital contribution and divided into the portions of such
distributions which have been characterized in the Prior Programs' financial
statements as a return of capital, on the one hand, and net income, on the
other.
{GRAPHIC OMITTED]
Figure 7 below illustrates the disposition of equipment after expiration of
the initial lease term for equipment coming off lease through May 1, 1996 for
all of the Prior Public Programs that had completed their public offerings as of
December 31, 1995. The dispositions are characterized as (i) short term renewals
by the lessee (for terms of less than 12 months), (ii) long term renewals by the
lessee (for terms of at least 12 months), (iii) equipment purchased by the
lessee, and (iv) equipment returned by the lessee to the Prior Public Program
for sale or lease to another party.
[GRAPHIC OMITTED]
A-3
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
(on a percentage basis)
June 30, 1996
(Unaudited)
The following Table sets forth certain information concerning the experience of
the General Partners in raising and investing funds. A percentage analysis of
the application of the proceeds raised is presented.
<TABLE>
<CAPTION>
ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash
Distribution Distribution Distribution istribution Distribution Distribution
Fund Fund II Fund III Fund IV Fund V Fund VI
---- -------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
EQUITY PROCEEDS
Dollar amount of equity
offered $10,000,000 $35,000,000 $75,000,000 $75,000,000 $125,000,000 $125,000,000
Dollar amount of equity
raised $10,000,000 $35,000,000 $73,855,840 $75,000,000 $125,000,000 $93,303,920
--------------- --------------- --------------- --------------- --------------- ----------------
Less: Offering expenses:
Selling commissions 9.50% 9.50% 9.50% 9.50% 9.50% 9.50%
Organization and program
expenses (1) 4.00% 5.00% 4.25% 4.53% 4.60% 4.77%
Reserves 3.00% 1.50% 1.50% 1.50% 1.50% 1.50%
--------------- --------------- --------------- --------------- --------------- ----------------
Percent available for
investment 83.50% 84.00% 84.75% 84.47% 84.40% 84.23%
Acquisition costs:
Purchase price (2) 79.00% 79.25% 80.00% 79.71% 79.64% 79.73%
Acquisition fees 4.50% 4.75% 4.75% 4.76% 4.76% 4.50%
--------------- --------------- --------------- --------------- --------------- ----------------
83.50% 84.00% 84.75% 84.47% 84.40% 84.23%
=============== =============== =============== =============== =============== ================
Percent leverage (9) 20.26% 40.93%(8) 43.04%(10) 41.50% 28.93% 28.93%
=============== =============== =============== =============== =============== ================
Date offering commenced: Mar. 1, 1986 Jan. 4, 1988 Jan. 4, 1990 Feb. 4, 1992 Feb. 22, 1993 Nov. 23, 1994
Length of offering 21 Months 24 Months 24 Months 12 Months 21 Months N/A (11)
Months to invest 90% of
amount available for
investment (measured from
beginning of offering 30 Months (3) 27 Months (4) 30 Months (5) 20 Months (6) 22 Months (7) N/A (11)
</TABLE>
FOOTNOTES:
(1) Includes organization, legal, accounting, printing, binding, delivery and
other costs incurred by the General Partner.
(2) Represents amounts paid to unrelated third parties for purchase of equipment
under leases.
(3) As of September 1988, 90% of the amount available for investment had been
invested. As of December 1988, 100% of the amount available for investment had
been invested.
(4) As of March 1990, 90% of the amount available for investment had been
invested. As of June 1990, 100% of the amount available for investment had been
invested.
(5) As of September 30, 1992, 100% of the amount available for investment had
been invested.
(6) As of February 3, 1993, the Partnership's offering of Limited Partnership
Units was completed. As of September 30, 1993, 90% of the proceeds of the
offering had been invested. As of December 31, 1993, the proceeds of the
offering had been fully invested.
(7) As of November 15, 1994, the Partnership's offering of Limited Partnership
Units was completed. As of December 31, 1994, the proceeds of the offering had
been fully committed.
(8) From January 4, 1988 through August 31, 1994, the maximum amount of leverage
at the end of any quarter was 37%. This was computed as the outstanding balance
of all debt divided by the original cost of all equipment owned by the
partnership as of the end of each period.
(9) The percentage leverage is calculated by dividing the initial principal
amount of debt incurred by the program through the date of this table by the
aggregate original cost of all equipment purchased by the program through such
date. It should be noted, however, that each program has acquired assets, has
made or will make principal amortizing debt service payments and/or has disposed
or will dispose of assets over a period of time extending from its first
investment in equipment. As a result, for each program the total cost of the
assets in its portfolio and the total principal amount of debt outstanding have
fluctuated from time to time. The percentage figure, therefore, does not reflect
the current leverage ratio or the debt ratio at any one point in time, but
constitutes an aggregate ratio for the life of the program through the date of
the table.
(10) From January 4, 1990 through June 30, 1996, the maximum amount of leverage
at the end of any quarter was less than 40%. This was computed as the
outstanding balance of all debt divided by the original cost of all equipment
owned by the partnership as of the end of each period.
(11) The offering had not been completed as of June 30, 1996.
A-4
<PAGE>
TABLE II
COMPENSATION TO THE GENERAL PARTNERS
June 30, 1996
(Unaudited)
The following Table sets forth certain information concerning the compensation
derived by the General Partner. Amounts paid are from two sources: proceeds of
the offering and gross revenues.
<TABLE>
<CAPTION>
ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash
Distribution Distribution Distribution Distribution Distribution Distribution
Fund Fund II Fund III Fund IV Fund V Fund VI
---- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Date offering commenced Mar. 1, 1986 Jan. 4, 1988 Jan. 4, 1990 Feb. 4, 1992 Feb. 22, 1993 Nov. 23, 1994
Date offering closed Dec. 18, 1987 Jan. 4, 1990 Jan. 3, 1992 Feb. 3, 1993 Nov. 15, 1994 N/A
Dollar amount raised $10,000,000 $35,000,000 $73,855,840 $75,000,000 $125,000,000 $93,303,920
Amounts paid to General
Partners from proceeds of
offering:
Acquisition fees $450,000 $1,662,500 $3,558,700 $3,575,123 $5,956,443 4,460,019
Organization and program costs $550,000 $1,751,422 $3,135,942 $3,394,652 $5,751,177 $4,450,776
Dollar amount of cumulative
cash generated from operations
before deducting payments to
the General Partner $10,288,753 $41,060,384 $61,802,522 $40,156,559 $39,313,793 $12,056,344
Cumulative amount paid to the
General Partner from operations:
Management fees $765,081 $2,724,746 $4,503,090 $3,272,322 $3,678,541 $784,209
Other operating expenses $475,740 $1,342,886 $2,071,102 $1,744,830 $1,737,049 $819,403
Aggregate payments to General
Partner: (1)
1991 $185,640 $605,326 $8,681,140
1992 220,893 664,605 3,709,768 $10,986,027
1993 221,000 741,295 1,383,380 4,178,039 $8,084,815
1994 54,739 551,300 1,339,355 2,007,562 15,675,132
1995 - 380,380 1,201,436 1,480,305 4,067,056 $12,837,117
1996 - 134,942 482,421 599,992 1,122,537 6,691,017
--------------- --------------- --------------- --------------- --------------- ----------------
$682,272 $3,077,848 $16,797,500 $19,251,925 $28,949,540 $19,528,134
=============== =============== =============== =============== =============== ================
</TABLE>
FOOTNOTES:
(1) As of June 30, 1996. Includes payments of management fees, reimbursements of
syndication costs to general partner (and affiliates), acquisition fees and
reimbursements of administrative costs.
A-5
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
June 30, 1996
(Unaudited)
The following Table summarizes the operating results of Prior Programs (ACDF,
ACDF II, ACDF III, ACDF IV, ACDF V and ACDF VI). The Programs' records are
maintained in accordance with generally accepted accounting principles for
financial statement purposes.
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund
---------------------------------------------------------
Period Ended December 31,
1986 1987 1988
---- ---- ----
Months of operations 2 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $6,257 $375,072 $1,493,794
Less Operating Expenses: (1)
Depreciation expense - 51,965 914,188
Amortization expense - 7,849 7,949
Interest expense 1,558 29,918 37,727
Administrative costs and reimbursements - 16,288 20,978
Legal/Professional fees - 15,105 16,586
Provision for doubtful accounts - - -
Supplies - 10,507 6,414
Other 125 10,886 18,329
Management fee - 19,882 108,196
--------------- --------------- ----------------
Net income - GAAP basis (2) $4,574 $212,672 $363,427
=============== =============== ================
Taxable income (loss) from operations $3,972 ($208,962) ($414,155)
=============== =============== ================
Cash generated by (used in) operations (3) $221,291 $160,581 $1,402,104
Cash generated from sales - - -
Cash generated from refinancing - - -
Cash generated from other (3) - 104,143 183,679
--------------- --------------- ----------------
221,291 264,724 1,585,783
--------------- --------------- ----------------
Less cash distributions to investors:
From operating cash flow - 160,581 1,215,018
From sales - - -
From refinancing - - -
From other - 93,374 -
--------------- --------------- ----------------
Total distributions - 253,955 1,215,018
--------------- --------------- ----------------
Cash generated (deficiency) after cash distributions $221,291 $10,769 $370,765
=============== =============== ================
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $2.76 ($46.78) ($41.00)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income None $47.60 $35.98
- Return of capital None 9.82 85.52
--------------- --------------- ----------------
None 57.42 121.50
Cash available for distribution, reinvested for
investors' accounts None 65.08 28.50
--------------- --------------- ----------------
Total None $122.50 $150.00
=============== =============== ================
Sources (on a cash basis)
Sales
Refinancing
Operations $77.46 $150.00
Other 45.04
--------------- --------------- ----------------
Total None $122.50 $150.00
=============== =============== ================
Amount invested in program equipment (cost, excluding
acquisition fees) $467,071 $4,293,800 $8,139,130
Amount invested in program equipment (book value) $488,090 $4,341,128 $7,244,935
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage
of cost of all equipment purchased by the program) (4) 4.20% 38.57% 73.10%
</TABLE>
(Footnotes follow on page A-21)
A-6
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund
Period Ended December 31,
-------------------------
1989 1990 1991 1992
---- ---- ---- ----
Months of operations 12 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $1,761,021 $2,201,630 $1,816,898 $1,410,396
- gain (loss) on sales of assets 11,951 8,766 4,998 15,909
--------------- --------------- --------------- ----------------
1,772,972 2,210,396 1,821,896 1,426,305
Less Operating Expenses: (1)
Depreciation expense 1,215,223 1,612,647 1,277,406 906,100
Amortization expense 7,949 7,949 7,849 -
Interest expense 52,553 176,922 144,752 72,057
Administrative costs and reimbursements 43,990 37,163 55,293 126,664
Legal/Professional fees 39,712 35,231 41,141 41,459
Provision for doubtful accounts - 96,682 42,870 5,731
Supplies - - - -
Other 12,648 11,786 25,922 35,839
Management fee 147,120 164,932 130,347 94,229
--------------- --------------- --------------- ----------------
Net income (loss) - GAAP basis (2) $253,777 $67,084 $96,316 $144,226
=============== =============== =============== ================
Taxable income (loss) from operations ($294,778) $150,104 $180,117 $1,105,467
=============== =============== =============== ================
Cash generated by (used in) operations (3) $1,521,502 $1,585,967 $1,424,425 $1,673,016
Cash generated from sales - 30,000 159,396 562,504
Cash generated from refinancing - - - -
Cash generated from other (3) 221,151 237,576 185,406 126,552
--------------- --------------- --------------- ----------------
1,742,653 1,853,543 1,769,227 2,362,072
--------------- --------------- --------------- ----------------
Less cash distributions to investors:
From operating cash flow 1,508,226 1,516,124 1,265,955 1,470,260
From sales - - - -
From refinancing - - - -
From other - - - -
--------------- --------------- --------------- ----------------
Total distributions 1,508,226 1,516,124 1,265,955 1,470,260
--------------- --------------- --------------- ----------------
Cash generated (deficiency) after cash distributions $234,427 $337,419 $503,272 $891,812
=============== =============== =============== ================
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($29.20) $14.88 $17.83 $109.44
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $25.14 $6.66 $9.54 $14.30
- Return of capital 125.75 145.17 117.24 132.94
--------------- --------------- --------------- ----------------
150.89 151.83 126.78 147.24
--------------- --------------- --------------- ----------------
Cash available for distribution, reinvested for
investors' accounts 9.11 18.17 14.46 31.00
--------------- --------------- --------------- ----------------
Total $160.00 $170.00 $141.24 $178.24
=============== =============== =============== ================
Sources (on a cash basis)
Sales
Refinancing
Operations $160.00 $170.00 $141.24 $178.24
Other
--------------- --------------- --------------- ----------------
Total $160.00 $170.00 $141.24 $178.24
=============== =============== =============== ================
Amount invested in program equipment (cost,
excluding acquisition fees) $8,989,917 $10,064,292 $8,607,852 $7,402,311
Amount invested in program equipment (book value) $6,724,650 $5,961,158 $3,639,966 $2,147,253
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (4) 80.75% 90.40% 77.31% 66.49%
</TABLE>
(Footnotes follow on page A-21)
A-7
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund
Period Ended December 31, June 30,
------------------------- --------
1993 1994 1995 1996
---- ---- ---- ----
Months of operations 12 12 12 6
<S> <C> <C> <C> <C>
Gross revenue - lease and other $895,012 $264,117 $374,172 $108,081
- gain (loss) on sales of assets 9,929 220,266 15,106 5,196
--------------- --------------- --------------- ----------------
904,941 484,383 389,278 113,277
Less Operating Expenses: (1)
Depreciation expense 348,650 98,835 29,324 21,572
Amortization expense - - - -
Interest expense 25,403 5,154 12,496 8,358
Administrative costs and reimbursements 140,984 34,380 - -
Legal/Professional fees 44,256 20,391 15,443 5,035
Provision for losses - - 3,768 1,133
Provision for doubtful accounts - - - -
Supplies - - - -
Other 21,664 20,697 17,552 7,973
Management fee 80,016 20,359 - -
--------------- --------------- --------------- ----------------
Net income (loss) - GAAP basis (2) $243,968 $284,567 $310,695 $69,206
=============== =============== =============== ================
Taxable income (loss) from operations $692,509 $745,274 $339,275 $150,000
=============== =============== =============== ================
Cash generated by (used in) operations (3) $574,077 $195,123 $200,234 $89,612
Cash generated from sales 1,343,908 622,350 112,188 14,000
Cash generated from refinancing - - - -
Cash generated from other (3) 183,275 119,745 79,692 47,112
--------------- --------------- --------------- ----------------
2,101,260 937,218 392,114 150,724
--------------- --------------- --------------- ----------------
Less cash distributions to investors:
From operating cash flow 574,077 195,123 200,234 89,612
From sales 524,806 622,350 112,188 14,000
From refinancing - - - -
From other 183,275 412,143 174,165 20,467
--------------- --------------- --------------- ----------------
Total distributions 1,282,158 1,229,616 486,587 124,079
--------------- --------------- --------------- ----------------
Cash generated (deficiency) after cash distributions $819,102 ($292,398) ($94,473) $26,645
=============== =============== =============== ================
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $68.55 $73.92 $33.65 $14.88
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $24.18 $28.22 $30.82 $6.86
- Return of capital 104.22 94.96 17.91 5.57
--------------- --------------- --------------- ----------------
128.40 123.18 48.73 12.43
--------------- --------------- --------------- ----------------
Cash available for distribution, reinvested for
investors' accounts (21.92) (23.66) (18.63) (2.43)
=============== =============== =============== ================
Total $106.48 $99.52 $30.10 $10.00
=============== =============== =============== ================
Sources (on a cash basis)
Sales $43.58 $50.37 $6.94 $1.13
Refinancing
Operations 47.68 15.79 12.39 7.22
Other 15.22 33.36 10.77 1.65
=============== =============== =============== ================
Total $106.48 $99.52 $30.10 $10.00
=============== =============== =============== ================
Amount invested in program equipment (cost,
excluding acquisition fees) $3,620,293 $2,300,024 $2,825,287 $2,785,169
Amount invested in program equipment (book value) $724,675 $484,971 $552,050 $473,429
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (4) 32.52% 20.66% 25.38% 25.02%
</TABLE>
(Footnotes follow on page A-21)
A-8
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund II
Period Ended December 31,
1988 1989 1990
Months of operations 9 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $1,001,065 $4,190,191 $8,619,546
- gain (loss) on sales of assets
--------------- --------------- ----------------
1,001,065 4,190,191 8,619,546
Less Operating Expenses: (1)
Depreciation expense 531,855 2,579,866 5,253,869
Provision for decline in value of commercial aircraft - - 1,083,834
Provision for doubtful accounts - - -
Interest expense 31,445 362,122 1,485,960
Administrative costs and reimbursements 19,284 107,082 95,474
Legal/Professional fees - 32,022 42,748
Other 7,799 41,448 58,465
Management fee 43,721 252,159 472,064
--------------- --------------- ----------------
Net income - GAAP basis (5) $366,961 $815,492 $127,132
=============== =============== ================
Taxable income (loss) from operations ($588,007) ($3,544,620) ($3,583,850)
Cash generated by (used in) operations (3) $1,044,176 $3,639,963 $6,823,453
Cash generated from sales
Cash generated from refinancing
Cash generated from other (3) 100,715 147,741 400,308
--------------- --------------- ----------------
1,144,891 3,787,704 7,223,761
Less cash distributions to investors:
From operating cash flow 253,760 1,986,455 4,069,920
From sales - - -
From refinancing - - -
From other - - -
--------------- --------------- ----------------
Total distributions 253,760 1,986,455 4,069,920
--------------- --------------- ----------------
Cash generated (deficiency) after cash distributions $891,131 $1,801,249 $3,153,841
=============== =============== ================
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($96.15) ($158.82) ($101.37)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $41.91 $36.54 $3.60
- Return of capital 53.37 112.69
--------------- --------------- ----------------
41.91 89.91 116.29
Cash available for distribution, reinvested for investors' accounts 37.47 30.09 13.71
--------------- --------------- ----------------
Total $79.38 $120.00 $130.00
=============== =============== ================
Sources (on a cash basis)
Operations $79.38 $120.00 $130.00
Sales
Refinancing
Other
--------------- --------------- ----------------
Total $79.38 $120.00 $130.00
=============== =============== ================
Amount invested in program equipment (cost, excluding acquisition fees) $14,664,014 $30,309,212 $48,538,987
Amount invested in program equipment (book value) $14,661,074 $28,412,251 $40,154,353
Amount remaining invested in program equipment (Cost of equipment owned at end
of period as a percentage of cost of all equipment purchased by
the program) (4) 28.05% 57.99% 92.86%
</TABLE>
(Footnotes follow on page A-21)
A-9
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund II
Period Ended December 31,
1991 1992 1993
Months of operations 12 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $8,774,789 $8,148,565 $6,665,582
- gain (loss) on sales of assets (31,613) 111,809 184,599
--------------- --------------- ----------------
8,743,176 8,260,374 6,850,181
Less Operating Expenses: (1)
Depreciation expense 5,546,000 5,285,315 4,285,373
Provision for decline in value of commercial - - -
aircraft - - -
Provision for doubtful accounts 30,400 4,064 -
Interest expense 1,353,033 1,171,105 860,663
Administrative costs and reimbursements 94,910 256,184 313,421
Legal/Professional fees 52,281 39,612 47,110
Other 38,337 70,316 49,725
Management fee 510,416 408,421 427,874
--------------- --------------- ----------------
Net income - GAAP basis (5) $1,117,799 $1,025,357 $866,015
=============== =============== ================
Taxable income (loss) from operations ($2,013,494) $1,686,207 $2,346,733
Cash generated by (used in) operations (3) $6,705,095 $6,601,157 $4,720,797
Cash generated from sales 223,447 767,749 2,643,336
Cash generated from refinancing - - -
Cash generated from other (3) 488,962 698,496 1,437,114
--------------- --------------- ----------------
7,417,504 8,067,402 8,801,247
Less cash distributions to investors:
From operating cash flow 4,561,842 4,927,246 4,720,797
From sales - - -
From refinancing - - -
From other - - 794,270
--------------- --------------- ----------------
Total distributions 4,561,842 4,927,246 5,515,067
--------------- --------------- ----------------
Cash generated (deficiency) after cash distributions $2,855,662 $3,140,156 $3,286,180
=============== =============== ================
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($56.95) $47.69 $66.38
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $31.62 $29.01 $24.50
- Return of capital 98.72 111.77 133.07
--------------- --------------- ----------------
130.34 140.78 157.57
Cash available for distribution, reinvested for
investors' accounts 9.66 9.22 2.43
--------------- --------------- ----------------
Total $140.00 $150.00 $160.00
=============== =============== ================
Sources (on a cash basis)
Operations $140.00 $150.00 $136.96
Sales
Refinancing
Other 23.04
--------------- --------------- ----------------
Total $140.00 $150.00 $160.00
=============== =============== ================
Amount invested in program equipment (cost, excluding acquisition fees) $47,181,808 $41,405,356 $36,692,677
Amount invested in program equipment (book value) $29,983,437 $23,667,996 $16,204,828
Amount remaining invested in program equipment (Cost of equipment owned at end
of period as a percentage of cost of all equipment purchased by
the program) (4) 90.26% 79.21% 70.20%
</TABLE>
(Footnotes follow on page A-21)
A-10
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund II
December 31, June 30,
1994 1995 1996
Months of operations 12 12 6
<S> <C> <C> <C>
Gross revenue - lease and other $5,627,738 $3,191,834 $1,098,313
- gain (loss) on sales of assets (3,239) 453,960 63,650
--------------- --------------- ----------------
5,624,499 3,645,794 1,161,963
Less Operating Expenses: (1)
Depreciation expense 2,963,445 1,451,193 527,880
Provision for decline in value of commercial
aircraft - - -
Provision for losses 11,616 25,972 11,344
Interest expense 509,267 365,099 134,967
Administrative costs and reimbursements 238,185 157,444 60,902
Legal/Professional fees 37,647 44,864 13,211
Other 66,324 71,101 51,019
Management fee 313,115 222,936 74,040
--------------- --------------- ----------------
Net income - GAAP basis (5) $1,484,900 $1,307,185 $288,600
=============== =============== ================
Taxable income (loss) from operations $4,340,559 $3,101,835 $1,000,000
Cash generated by (used in) operations (3) $3,921,897 $2,788,119 $748,095
Cash generated from sales 2,959,549 2,304,367 431,159
Cash generated from refinancing - - -
Cash generated from other (3) 1,311,673 875,730 449,828
--------------- --------------- ----------------
8,193,119 5,968,216 1,629,082
Less cash distributions to investors:
From operating cash flow 3,921,897 2,788,119 748,095
From sales 859,241 1,064,197
From refinancing -
From other 1,311,673 875,730 382,999
--------------- --------------- ----------------
Total distributions 6,092,811 4,728,046 1,131,094
--------------- --------------- ----------------
Cash generated (deficiency) after cash distributions $2,100,308 $1,240,170 $497,988
=============== =============== ================
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $122.79 $87.76 $28.29
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $42.01 $36.99 $8.17
- Return of capital 132.10 98.14 24.16
--------------- --------------- ----------------
174.11 135.13 32.33
Cash available for distribution, reinvested for
investors' accounts (4.11) (30.13) (6.33)
--------------- --------------- ----------------
Total $170.00 $105.00 $26.00
=============== =============== ================
Sources (on a cash basis)
Operations $109.43 $61.92 $17.20
Sales 23.97 23.63
Refinancing
Other 36.60 19.45 8.80
--------------- --------------- ----------------
Total $170.00 $105.00 $26.00
=============== =============== ================
Amount invested in program equipment (cost, excluding acquisition fees) $26,755,760 $21,031,914 $19,473,778
Amount invested in program equipment (book value) $11,523,077 $7,459,980 $6,113,064
Amount remaining invested in program equipment (Cost of equipment owned at end
of period as a percentage of cost of all equipment purchased
by the program) (4) 51.19% 40.24% 37.26%
</TABLE>
(Footnotes follow on page A-21)
A-11
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund III
Period Ended December 31,
1990 1991 1992
Months of operations 12 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $2,130,161 $7,760,246 $12,713,280
- gain (loss) on sales of assets - (17,714) 1,202,188
--------------- --------------- ----------------
2,130,161 7,742,532 13,915,468
Less Operating Expenses: (1)
Depreciation expense 1,278,427 4,919,605 7,739,054
Provision for decline in value of commercial aircraft 623,294 - -
Interest expense 482,047 1,002,520 1,186,760
Administrative costs and reimbursements 70,775 239,667 542,510
Legal/Professional fees 7,600 52,746 31,691
Other 22,898 49,198 52,629
Management fee 83,245 391,494 839,909
--------------- --------------- ----------------
Net income - GAAP basis (6) ($438,125) $1,087,302 $3,522,915
=============== =============== ================
Taxable income (loss) from operations ($2,539,135) ($6,476,596) ($3,010,933)
=============== =============== ================
Cash generated by (used in) operations (3) $1,572,921 $6,288,997 $9,564,446
Cash generated from sales - - 4,006,080
Cash generated from refinancing - - -
Cash generated from other (3) 125,093 14,587 181,746
--------------- --------------- ----------------
1,698,014 6,303,584 13,752,272
Less cash distributions to investors:
From operating cash flow 396,751 4,185,400 9,261,560
From sales - - -
From refinancing - - -
From other - - -
--------------- --------------- ----------------
Total distributions 396,751 4,185,400 9,261,560
--------------- --------------- ----------------
Cash generated (deficiency) after cash distributions $1,301,263 $2,118,184 $4,490,712
=============== =============== ================
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($282.13) ($200.01) ($40.37)
Recapture
Capital gain (loss) Cash distributions to investors on a GAAP basis:
- Investment income $33.58 $47.23
- Return of capital $44.53 96.98 78.19
--------------- --------------- ----------------
$44.53 $130.56 $125.42
=============== =============== ================
Sources (on a cash basis)
Sales
Refinancing
Operations $44.53 $130.56 $125.42
Other
--------------- --------------- ----------------
Total $44.53 $130.56 $125.42
=============== =============== ================
Amount invested in program equipment (cost, excluding acquisition fees) $28,534,220 $52,188,848 $83,423,686
Amount invested in program equipment (book value) $27,475,925 $44,531,829 $64,526,606
Amount remaining invested in program equipment (Cost of equipment owned at end
of period as a percentage of cost of all equipment purchased by
the program) (4) 28.64% 52.38% 83.73%
</TABLE>
(Footnotes follow on page A-21)
A-12
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund III
Period Ended
December 31, June 30,
1993 1994 1995 1996
---- ---- ---- ----
Months of operations 12 12 12 6
<S> <C> <C> <C> <C>
Gross revenue - lease and other $13,970,227 $14,212,777 13,378,680 5,411,317
- gain (loss) on sales of assets (140,513) 155,497 954,115 181,879
--------------- --------------- --------------- ----------------
13,829,714 14,368,274 14,332,795 5,593,196
Less Operating Expenses: (1)
Depreciation expense 8,984,502 9,734,408 9,037,450 3,801,365
Provision for losses - 36,626 826,550 55,882
Interest expense 1,456,147 1,395,276 1,064,823 389,779
Administrative costs and reimbursements 468,005 340,269 300,952 108,924
Legal/Professional fees 58,809 60,552 59,237 21,604
Other 75,289 113,411 110,637 86,679
Management fee 915,375 999,086 900,484 373,497
--------------- --------------- --------------- ----------------
Net income - GAAP basis (6) $1,871,587 $1,688,646 $2,032,662 $755,466
=============== =============== =============== ================
Taxable income (loss) from operations ($5,122,581) $635,990 $6,281,437 $3,000,000
=============== =============== =============== ================
Cash generated by (used in) operations (3) $11,402,915 $11,400,861 $10,333,228 $4,664,962
Cash generated from sales 269,479 682,595 3,276,705 1,025,749
Cash generated from refinancing - - - -
Cash generated from other (3) 719,701 1,317,531 1,518,191 867,605
--------------- --------------- --------------- ----------------
12,392,095 13,400,987 15,128,124 6,558,316
Less cash distributions to investors:
From operating cash flow 9,594,918 10,201,485 10,333,228 4,664,962
From sales - - - -
From refinancing - - - -
From other - - 4,961 122,835
--------------- --------------- --------------- ----------------
Total distributions 9,594,918 10,201,485 10,338,189 4,787,797
--------------- --------------- --------------- ----------------
Cash generated (deficiency) after cash distributions $2,797,177 $3,199,502 $4,789,935 $1,770,519
=============== =============== =============== ================
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($68.68) $8.53 $84.28 $40.25
Recapture
Capital gain (loss) Cash distributions to investors on a GAAP basis:
- Investment income $25.09 $22.66 $27.27 $10.14
- Return of capital 104.86 115.59 112.73 54.76
=============== =============== =============== ================
$129.95 $138.25 $140.00 $64.90
=============== =============== =============== ================
Sources (on a cash basis)
Sales
Refinancing
Operations $129.95 $138.25 $139.93 $63.23
Other 0.07 1.67
=============== =============== =============== ================
Total $129.95 $138.25 $140.00 $64.90
=============== =============== =============== ================
Amount invested in program equipment (cost, excluding
acquisition fees) $91,612,304 $87,442,745 $79,602,818 $76,864,677
Amount invested in program equipment (book value) $63,434,911 $52,479,724 $39,107,792 $33,691,962
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (4) 91.95% 87.77% 79.90% 77.15%
</TABLE>
(Footnotes follow on page A-21)
A-13
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund IV
Period Ended December 31,
1992 1993 1994
---- ---- ----
Months of operations 12 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $2,123,081 $10,510,289 $13,246,145
- gain (loss) on sales of assets - (38,429) (102,932)
--------------- --------------- ---------------
2,123,081 10,471,860 13,143,213
Less Operating Expenses: (1)
Depreciation and amortization expense 1,147,209 7,054,380 8,743,149
Provision for losses - - 34,505
Interest expense 91,577 81,437 1,332,542
Administrative costs and reimbursements 382,114 537,918 358,441
Legal/Professional fees 46,935 52,838 86,594
Other 25,988 57,575 114,376
Management fee 103,510 752,950 1,060,190
--------------- --------------- ---------------
Net income - GAAP basis $325,748 $1,934,762 $1,413,416
=============== =============== ===============
Taxable income (loss) from operations ($2,034,428) ($9,624,570) ($8,073,869)
=============== =============== ===============
Cash generated by (used in) operations (3) $3,560,891 $9,021,440 $10,366,325
Cash generated from sales - 98,752 5,648,425
Cash generated from refinancing - - -
Cash generated from other (3) - 220,258 1,522,609
--------------- --------------- ---------------
3,560,891 9,340,450 17,537,359
Less cash distributions to investors:
From operating cash flow 1,936,639 8,686,491 9,653,038
From sales - - -
From refinancing - - -
From other - - -
--------------- --------------- ---------------
Total distributions 1,936,639 8,686,491 9,653,038
--------------- --------------- ---------------
Cash generated (deficiency) after cash distributions $1,624,252 $653,959 $7,884,321
=============== =============== ===============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($76.67) ($127.78) ($106.64)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $12.28 $15.86 $18.67
- Return of capital 61.44 100.63 110.12
--------------- --------------- ---------------
$73.72 $116.49 $128.79
=============== =============== ===============
Sources (on a cash basis)
Sales
Refinancing
Operations $73.72 $116.49 $128.79
Other
--------------- --------------- ---------------
Total $73.72 $116.49 $128.79
=============== =============== ===============
Amount invested in program equipment (cost, excluding
acquisition fees) $49,603,894 $82,896,683 $88,187,291
Amount invested in program equipment (book value) $49,801,834 $69,901,953 $65,252,553
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (4) 44.12% 73.74% 78.44%
</TABLE>
(Footnotes follow on page A-21)
A-14
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund IV
Period Ended
December 31, June 30,
1995 1996
---- ----
Months of operations 12 6
<S> <C> <C>
Gross revenue - lease and other $12,973,718 $5,889,736
- gain (loss) on sales of assets 615,042 790,390
--------------- ---------------
13,588,760 6,680,126
Less Operating Expenses: (1)
Depreciation and amortization expense 8,740,231 4,047,106
Provision for losses 679,634 66,796
Interest expense 1,960,823 986,666
Administrative costs and reimbursements 349,663 116,694
Legal/Professional fees 76,365 23,261
Other 110,466 58,388
Management fee 872,374 483,298
--------------- ---------------
Net income - GAAP basis $799,204 $897,917
=============== ===============
Taxable income (loss) from operations ($2,073,084) $1,000,000
=============== ===============
Cash generated by (used in) operations (3) $8,830,893 $3,359,858
Cash generated from sales 2,722,954 2,152,220
Cash generated from refinancing - -
Cash generated from other (3) 2,384,094 1,732,475
--------------- ---------------
13,937,941 7,244,553
Less cash distributions to investors:
From operating cash flow 8,830,893 3,359,858
From sales 57,182
From refinancing
From other 906,007 1,732,475
--------------- ---------------
Total distributions 9,736,900 5,149,515
--------------- ---------------
Cash generated (deficiency) after cash distributions $4,201,041 $2,095,038
=============== ===============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($27.43) $13.22
Recapture
Capital gain (loss) 0.04
Cash distributions to investors on a GAAP basis:
- Investment income $10.57 $11.87
- Return of capital 119.50 56.90
--------------- ---------------
$130.07 $68.77
=============== ===============
Sources (on a cash basis)
Sales $0.76
Refinancing
Operations $117.97 44.87
Other 12.10 23.14
--------------- ---------------
Total $130.07 $68.77
=============== ===============
Amount invested in program equipment (cost, excluding
acquisition fees) $98,547,911 $98,588,253
Amount invested in program equipment (book value) $63,967,204 $59,321,966
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (4) 87.66% 87.69%
</TABLE>
(Footnotes follow on page A-21)
A-15
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund V
Period Ended
December 31, June 30,
------------ --------
1993 1994 1995 1996
---- ---- ---- ----
Months of operations 10 12 12 6
<S> <C> <C> <C> <C>
Gross revenue - lease and other $2,173,205 $10,806,892 $19,951,380 $12,045,075
- gain (loss) on sales of assets 2,564 933,289 137,301
--------------- --------------- --------------- ----------------
2,173,205 10,809,456 20,884,669 12,182,376
Less Operating Expenses: (1)
Depreciation and amortization expense 1,600,628 8,135,951 14,600,474 7,943,833
Provision for losses - 34,158 987,013 121,824
Interest expense 31,511 61,036 1,222,050 1,924,366
Administrative costs and reimbursements 373,089 706,324 535,812 201,113
Legal/Professional fees 13,746 65,028 110,744 84,003
Other 36,269 113,981 176,847 125,702
Management fee 178,583 1,013,448 1,623,818 862,692
--------------- --------------- --------------- ----------------
Net income - GAAP basis ($60,621) $679,530 $1,627,911 $918,843
=============== =============== =============== ================
Taxable income (loss) from operations ($5,061,304) ($13,005,033) ($11,831,759) ($4,000,000)
=============== =============== =============== ================
Cash generated by (used in) operations (3) $1,795,722 $10,053,220 $15,800,948 $6,248,313
Cash generated from sales - 22,572 6,930,477 247,488
Cash generated from refinancing - - - -
Cash generated from other (3) - 1,513,782 2,498,923 2,678,736
--------------- --------------- --------------- ----------------
1,795,722 11,589,574 25,230,348 9,174,537
Less cash distributions to investors:
From operating cash flow 922,278 8,223,081 13,101,508 6,248,313
From sales - - - -
From refinancing - - - -
From other - - - 551,666
--------------- --------------- --------------- ----------------
Total distributions 922,278 8,223,081 13,101,508 6,799,979
--------------- --------------- --------------- ----------------
Cash generated (deficiency) after cash distributions $873,444 $3,366,493 $12,128,840 $2,374,558
=============== =============== =============== ================
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($219.75) ($152.59) ($93.72) ($31.68)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $8.05 $12.89 $7.28
- Return of capital $40.45 89.41 91.93 47.13
--------------- --------------- --------------- ----------------
$40.45 $97.46 $104.82 $54.41
=============== =============== =============== ================
Sources (on a cash basis)
Sales
Refinancing
Operations $40.45 $97.46 $104.82 $49.99
Other 4.42
--------------- --------------- --------------- ----------------
Total $40.45 $97.46 $104.82 $54.41
=============== =============== =============== ================
Amount invested in program equipment (cost, excluding
acquisition fees) $34,699,207 $113,427,843 $161,866,626 $179,127,761
Amount invested in program equipment (book value) $34,246,741 $100,762,242 $131,686,535 $139,397,206
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (4) 18.60% 60.81% 86.77% 96.03%
</TABLE>
(Footnotes follow on page A-21)
A-16
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
TABLE III
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund VI
Period Ended
December 31, June 30,
1995 1996
---- ----
Months of operations 12 6
<S> <C> <C>
Gross revenue - lease and other $6,440,218 $9,651,807
- gain (loss) on sales of assets 3,819 9,380
--------------- ---------------
6,444,037 9,661,187
Less Operating Expenses: (1)
Depreciation and amortization expense 4,976,075 7,438,946
Provision for losses 64,892 96,599
Interest expense 931,651 1,919,915
Administrative costs and reimbursements 539,009 280,394
Legal/Professional fees 50,962 123,552
Other 121,541 141,343
Management fee 362,581 421,628
--------------- ---------------
Net income - GAAP basis ($602,674) ($761,190)
=============== ===============
Taxable income (loss) from operations ($11,625,618) ($7,500,000)
=============== ===============
Cash generated by (used in) operations (3) $4,354,020 $6,098,712
Cash generated from sales 54,156 103,247
Cash generated from refinancing - -
Cash generated from other (3) 195,884 236,138
--------------- ---------------
4,604,060 6,438,097
Less cash distributions to investors:
From operating cash flow 2,484,971 3,583,893
From sales - -
From refinancing - -
From other - -
--------------- ---------------
Total distributions 2,484,971 3,583,893
--------------- ---------------
Cash generated (deficiency) after cash distributions $2,119,089 $2,854,204
=============== ===============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($364.88) ($95.19)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income
- Return of capital $78.78 $45.95
--------------- ---------------
$78.78 $45.95
=============== ===============
Sources (on a cash basis)
Sales
Refinancing
Operations $78.78 $45.95
Other
--------------- ---------------
Total $78.78 $45.95
=============== ===============
Amount invested in program equipment (cost, excluding acquisition fees) $98,036,611 $147,282,097
Amount invested in program equipment (book value) $92,802,029 $136,619,553
Amount remaining invested in program equipment (Cost of equipment owned at end
of period as a percentage of cost of all equipment purchased by the
program) (4) 66.49% 99.89%
</TABLE>
(Footnotes follow on page A-21)
A-17
<PAGE>
FOOTNOTES:
(1) Operating expenses include reimbursements to the corporate general partner
as follows:
<TABLE>
<CAPTION>
ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash
Distribution Distribution Distribution Distribution Distribution Distribution
Year ended December 31, Fund Fund II Fund III Fund IV Fund V Fund VI
- ----------------------- ---- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
1986 $100
1987 15,100
1988 21,500 $3,000
1989 32,201 86,234
1990 37,163 95,474 $70,775
1991 48,195 71,289 239,667
1992 126,664 256,184 542,510 $382,114
1993 140,984 313,421 468,005 537,918 $373,089
1994 34,380 238,185 340,269 358,441 706,324
1995 - 157,444 300,952 349,663 535,812 $539,009
1996 - 60,902 108,924 116,694 201,113 280,394
--------------- --------------- --------------- --------------- ---------------- ----------------
$456,287 $1,282,133 $2,071,102 $1,744,830 $1,816,338 $819,403
=============== =============== =============== =============== ================ ================
</TABLE>
(2) A portion of the equipment owned by the Partnership is accounted for under
the direct financing method. Income under direct financing leases is reported on
the financing method where the income portion of each rental payment is
calculated so as to generate a constant rate of return on the outstanding net
investment. The effect is to recognize decreasing amounts of income in later
periods as the net investment declines. Net income was also negatively impacted
in 1990 by necessity for a provision for doubtful accounts. Prior to 1990, there
had been no such need. The decrease in net income from 1988 to 1989 and from
1989 to 1990 is due to increasing debt levels and interest expense. The decrease
from 1992 to 1993 is due to decreased lease revenues. Revenues have declined as
equipment leases have expired and as the related assets have been sold.
(3) Cash generated by (used in) operations does not include the principal
portion of lease rentals received under direct financing leases. In the
partnerships' statements of cash flows (under generally accepted accounting
principles), these amounts are included in the investing activities section.
(4) The percentage is calculated as a fraction, the numerator of which is the
amount invested in program equipment (at cost) as of the end of the indicated
period and the denominator of which is the cumulative total of the cost of all
equipment acquired by the program through the end of the latest period shown.
(5) Net income decreased from 1989 to 1990 due to the provision for decline
value of commercial aircraft ($1,083,834) included in net income in 1990.
Excluding the effect of that provision, net income per $1,000 invested would
have been $34.60. The results in 1990 are also effected by higher depreciation
rates used for more recent equipment purchases, resulting in increased
depreciation expense compared to lease revenues. The remaining amount of the
changes from 1988 to 1989 and from 1989 to 1990 are primarily due to the timing
of the acquisition of assets, the placement of debt against certain assets and
other operating factors.
(6) Net income increased from 1990 to 1991 due to the provision for decline
value of commercial aircraft ($623,294) included in net income in 1990. The
remaining amount of the changes from 1990 to 1991 and from 1991 to 1992 are
primarily due to the timing of the acquisition of assets, the placement of debt
against certain assets and other operating factors.
A-18
<PAGE>
TABLE IV
ACQUISITION OF EQUIPMENT
BY PRIOR PROGRAMS
The following is a summary of Equipment acquisitions and Lessees by the six
prior publicly-registered programs sponsored by ATEL Financial Corporation and
its affiliates. Information concerning the prior programs' Equipment acquisition
is current through June 30, 1996.
<TABLE>
<CAPTION>
Commence Acquisition Acquisition Percent Lease Lease
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) Type (6)
- ------ ----- -------------- ----------- -------- -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ATEL Cash Distribution Fund
- ---------------------------
Acushnet Company Office Information Jan-87 $134,246 $6,041 60 FP
Systems
Alachua General Hospital, Inc. 7 Medical Jan-89 628,632 28,288 36 OL
American Motors Corporation Lift Trucks Oct-87 to Jan-88 622,632 28,018 48 OL
Anaheim Memorial Hospital Medical Jan-88 779,613 35,083 48.07% 60 FP
Campbell Soup Company Lift Trucks Mar-87 317,500 14,288 84 FP
Colour Graphics Corporation 8 Printing Jan-87 222,520 10,013 80.75% 84 FP
Enron Corp. Office Information Aug-88 244,488 11,002 36 FP
Systems
Financial News Network, Inc. 9 Studio and Apr-90 909,735 26,183 36 FP
Broadcasting
GAF Corporation 10 Manufacturing Oct-88 512,208 23,049 60 FP
GAF Corporation Lift Trucks Oct-87 439,866 19,794 60 OL
Galardi Group, Inc. Restaurant Furnitue Jul-94 247,000 - 48 FP
and Fixtures
Hartford Insurance Group Communication Mar-88 89,236 4,016 60 FP
Imperial Plastics, Inc. 11 Manufacturing Sep-87 to Apr-88 526,270 23,682 69.63% 84 FP
Martin Marietta Corporation Communication May-88 425,670 19,155 48 OL
Nord Kaolin Company 12, 13 Mining, Processing Jul-87 to Jan-88 358,710 16,734 60-62 FP
Nord Sil-Flo Company 12, 13 Material Handling Aug-89 to Jan-88 28,113 673 86.27% 60 FP
Polaroid Corporation Office Information Jan-87 36,190 1,629 59 FP
Systems
Putnam County Hospital Medical May-88 110,000 4,950 60 FP
Rohr Industries, Inc. Motor Vehicle Apr-88 to Oct-88 327,240 14,726 36-84 FP, OL
Teledyne Industries, Inc. 14 Lift Trucks Jan-88 to Oct-89 1,653,596 74,412 36-84 FP, OL
The Dow Chemical Company Motor Vehicle May-88 217,908 9,805 74.86% 50 FP
Treasure Chest 15 Printing Apr-87 498,746 22,444 97.79% 60 FP
Advertising Company
TRW, Inc. Communication Apr-89 320,657 14,430 36 OL
United Technologies Office Information Jan-87 74,115 3,335 48 FP
Corporation, Pratt & Systems
Whitney Aircraft Group
Vista Chemical Company Railroad Rolling Mar-88 850,000 38,250 53.45% 60 FP
Stock
Vista Chemical Company Railroad Rolling Apr-93 350,000 - 60 OL
Stock,
Improvements
WSMP, Inc. Food Processing Jul-95 208,788 - 98.47% 60 FP
Equipment
-------------- -----------
ATEL Cash Distribution Fund total: $11,133,679 $450,000
============== ===========
</TABLE>
A-19
<PAGE>
<TABLE>
<CAPTION>
Commence Acquisition Acquisition Percent Lease Lease
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) Type (6)
- ------ ----- -------------- ----------- -------- -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ATEL Cash Distribution Fund II
- ------------------------------
A.O. Smith Corporation Office Information Jul-89 to Feb-91 $873,480 $6,880 11.59% 36-59 FP
Systems, Lift
Trucks
Addwest Gold, Inc. 16 Mining Oct-88 1,100,717 52,284 60 FP
Alachua General Hospital, Inc. 7 Medical Jan-89 1,257,263 59,720 36 OL
American Express Company Manufacturing May-89 276,775 13,147 48 FP
American President 17 Tractors Sep-88 2,890,840 137,315 84 FP
Trucking Co., Ltd.
Bristol-Myers Squibb Company Office Furniture Jul-92 324,310 - 24 OL
Buffalo & Pittsburgh Railroad Locomotive Nov-93 108,127 - 37 FP
Campbell Soup Company Lift Trucks Aug-88 350,772 16,662 84 FP
Chesebrough-Pond's Inc. Lift Trucks Jun-90 201,452 - 48-50 FP
Chrysler Corporation Material Handling Dec-93 103,620 - 12 OL
Colour Graphics Corporation Computer System Oct-88 33,805 1,606 60 FP
Cooper Tire & Rubber Company Lift Trucks Jan-89 576,326 27,375 84 FP
Delnor Community Hospital Medical Jul-88 449,956 21,373 36 OL
DJ Aerospace (Bermuda), Ltd. Executive Aircraft Jul-94 810,000 - 36 OL
Emanuel Hospital & Health Center Helicopter Oct-88 2,247,765 106,769 79.58% 144 FP
Financial News 9, 18 Studio and Apr-90 640,544 29,815 36 FP
Network, Inc. Broadcasting
Fingerhut Corporation Binding, Printing Jan-89 to Mar-89 1,441,690 68,481 60 FP
FMC Gold Company Material Handling Apr-90 761,129 36,154 36 OL
GAF Corporation Manufacturing Oct-88 to Apr-88 682,310 32,410 60 FP
Galardi Group, Inc. Restaurant Furniture Jul-94 507,000 - 48 FP
and Fixtures
General Motors Corporation Video Projectors Jan-94 58,644 - 36 OL
Home Life Insurance Company Office Furniture/ Dec-88 425,658 20,219 60 FP
Lift Trucks/
Binding
Hudson Foods, Inc. Food Processing Dec-89 2,713,115 128,872 65.91% 57-59 FP
Inland Steel Company Scientific Measuring Sep-89 417,000 19,808 54 FP
International Paper Company 19 Delivery Trucks Jul-88 1,281,761 60,884 36-60 FP, OL
KeyCorp Office Furniture, Jul-89 1,618,337 76,870 40.09% 53-55 FP
Automated Teller
Machines
Koppers Industries, Inc. Material Handling Jun-90 639,120 - 60 FP
Liggett Group, Inc. 20 Manufacturing Dec-88 648,577 30,807 56 FP
Midway Airlines, Inc. 21 Commercial Aircraft Jun-90 4,592,040 - 68.85% 102 FP
National Semiconductor Manufacturing Apr-89 728,000 34,580 56 FP
Corporation
National Steel Corporation Material Handling May-89 606,153 28,792 87.63% 81 FP
National Union Electric 22 Communication Apr-89 459,893 21,845 60 FP
Corporation
Nissan Motor Corporation Office Information Jul-88 219,187 10,411 48 FP
In USA Systems
NMCS, Inc. , d/b/a National 23 Office Furniture Apr-88 599,001 28,452 60 FP
Medical Group Services,
Inc.
Nord Kaolin Company 12 Drilling Apr-89 292,799 13,908 60 FP
Owens Corning Fiberglas Material Handling Jul-89 to Oct-90 1,689,012 42,404 39.57% 36-84 FP, OL
Corporation
Quaker Coal Company Tractor Apr-94 558,301 - 24 OL
Regents of the University Communication Dec-88 80,386 3,818 60 FP
of California
Rocky Mountain Helicopters, Medical Aircraft Nov-89 2,150,000 102,125 81.86% 84 FP
Inc.
Rohr Industries, Inc. Motor Vehicles Jan-89 to Jan-90 749,291 33,835 36-84 FP
Sebastiani Vineyards, Inc. Production Line, Jan-90 to Jan-91 2,818,067 133,417 79.98% 60-84 FP
Wine Barrels
Shell Mining Company 24 Mining Jul-90 3,736,965 - 21.46% 60-84 FP
Sherwood Rehabilitation 25 Medical Furniture/ Oct-90 1,814,036 - 97.36% 87 FP
Hospital, Inc. Fixtures & Eqt.
South Dade Nursing Home Ltd. 25 Physical Therapy & Jul-90 36,676 - 60 FP
Exercise Eqt.
St. Luke's-Roosevelt Medical Furniture/ Feb-90 1,075,795 50,428 84.68% 34-39 OL
Hospital Center Fixtures & Eqt.
The Budd Company Material Handling May-90 to Jun-90 1,099,014 - 75.09% 55-80 FP
The Dow Chemical Company Material Handling Jun-88 1,532,061 72,773 74.86% 50 OL
Treasure Chest Advertising Printing Press Apr-93 850,000 - 95.59% 60 FP
Company
Treasure Chest Advertising Printing Equipment Feb-94 233,000 - 60 FP
Company
USX Corporation Haul Trucks Dec-89 2,910,766 138,261 83.41% 60 FP
-------------- -----------
ATEL Cash Distribution Fund II total: $52,270,536 $1,662,500
============== ===========
</TABLE>
A-20
<PAGE>
<TABLE>
<CAPTION>
Commence Acquisition Acquisition Percent Lease Lease
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) Type (6)
- ------ ----- -------------- ----------- -------- -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ATEL Cash Distribution Fund III
- -------------------------------
A.O. Smith Corporation Material Handling Feb-91 $451,902 $21,465 60 FP
Alachua General Hospital, Inc. Medical Oct-92 2,074,989 - 36 OL
Alachua General Hospital, Inc. Medical Apr-95 80,500 - 18 FP
Alumina Partners of Jamaica 26 Earth Moving Jun-93 2,057,133 - 60 FP
American President Trucking Tractors and Mar-90 to Aug-90 4,859,181 230,811 68.08% 77-84 FP
Co., Ltd. Trailers
AMOCO Corporation Trailers May-94 523,805 - 85.88% 66 FP
ARR, Inc. 27, 28 Corporate Aircraft Oct-92 5,275,000 - 84 OL
Barney's, Inc. Retail Store Oct-93 2,041,222 - 60.04% 60 FP
Furniture and
Fixtures
Buffalo & Pittsburgh Locomotives Nov-93 792,657 - 37 FP
Railroad Company
Carrier Corporation Lift Trucks Jul-90 108,062 5,133 55 FP
Carrier Corporation Lift Trucks Jul-90 to Aug-90 533,950 25,363 53 FP
Dean Foods Company Trailers Nov-90 to Apr-91 1,213,190 57,627 75-84 FP
Fingerhut Corporation Offset Printing Apr-91 1,303,078 61,896 85 FP
Press
Fingerhut Corporation Printing Oct-91 to Oct-92 2,074,915 14,464 48.47% 84-85 FP
FMC Gold Company Haul Truck Jul-90 534,828 25,404 48 OL
Fred Meyer, Inc. Point-of-Sale Oct-90 6,343,897 301,335 63.93% 58 FP
General American Life Insurance Office Furniture Jan-93 1,611,278 76,536 84 FP
H.E. Butt Grocery Company Tractors and Jan-93 2,112,747 - 60-84 OL/FP
Trailers
Ingersoll International, Inc. Communication Dec-90 277,017 13,158 60 FP
System
Kelly-Springfield Tire Company Material Handling Apr- to Jul-92 127,834 6,072 60 FP
Koppers Industries, Inc. Material Handling Oct-90 402,722 19,129 60 FP
Kraft General Foods, Inc. Lift Trucks May-91 to Nov-91 1,621,541 77,023 48-72 FP
Midway Airlines, Inc. 21 Commercial Aircraft Jul-90 2,296,020 109,061 68.85% 102 FP
Mobil Oil Corporation Material Handling Jul-92 70,256 1,173 36 OL
Mobil Oil Corporation Electric Golf Carts Nov-93 280,119 - 36 OL
Nord Kaolin Company 29 Materials Processing Sep-90 391,116 18,578 60 FP
Ohio Coal Company 30 Mining Apr-92 10,630,130 504,931 84.48% 51-84 OL/FP
Pepsico, Inc., d/b/a/ PFS Material Handling Jul-90 to Sep-90 539,330 25,618 45.63% 58-72 FP
Pilgrim's Pride Corporation Food Processing Nov-90 3,619,095 171,907 59 FP
Pittston Coal Group 31 Mining Jul-92 5,810,941 276,020 75.71% 60 FP
Portland General Electric 32 Power Generation Jun-90 2,710,359 128,742 70.25% 101 OL
Company
PSI Energy, Inc. Earth Moving Aug-90 842,013 39,996 72 FP
Quaker Coal Company Mining Jan-94 5,808,385 - 60 OL
Reliance Insurance Company Office Furniture Jul-92 1,222,297 50,135 51.90% 60 FP
Rohr Industries Motor Vehicle Oct-95 37,244 - 36 OL
Shell Mining Company Haul Trucks Jan-92 3,167,443 150,454 65.64% 60-84 FP
Stone Container Corporation Material Handling Nov-90 2,975,000 141,313 34.40% 26-57 OL
Teledyne Industries, Inc. Lift Trucks Feb-91 116,476 5,533 39 OL
Terex Corporation Manufacturing Apr-91 291,455 13,845 84 FP
The Dow Chemical Company Material Handling Nov-90 to Dec-92 4,504,918 195,358 68.68% 53-60 OL/FP
The Helen Mining Company 33 Mining Shields Jul-91 5,270,314 250,340 60 FP
The Pillsbury Company Harvesting Jan-93 2,327,946 110,577 59.93% 60 OL
Treasure Chest Advertising Flying High Speed Apr-93 239,171 - 87 FP
Company Paster
Treasure Chest Advertising Printing Stackers Oct-95 139,600 - 84 FP
Company
Truck-Lite Company, Inc. 33 Project Line Oct-91 to Jan-93 6,875,715 308,441 81.76% 69-84 FP
USS/Kobe Steel Company 34 Lift Trucks Sep-19 to Nov-91 408,410 19,399 36-60 OL/FP
Utilicorp United, Inc. 35 Power Generation Sep-91 1,086,934 51,629 75.65% 105 FP
Wal-Mart, Inc. Trailers / Forklifts May-94 490,255 - 95.09% 20-38 OL/FP
West Penn Power Company Storage Tanks Sep-91 1,057,551 50,234 97.86% 87 FP
-------------- -----------
ATEL Cash Distribution Fund III total: $99,629,941 $3,558,700
============== ===========
</TABLE>
A-21
<PAGE>
<TABLE>
<CAPTION>
Commence Acquisition Acquisition Percent Lease Lease
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) Type (6)
- ------ ----- -------------- ----------- -------- -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ATEL Cash Distribution Fund IV
- ------------------------------
ARR, Inc. 27, 28 Corporate Aircraft Oct-92 to Dec-92 $9,635,969 $337,259 84 OL
ATS Automatic Tooling Machine Tools Mar-95 3,338,997 123,410 86.98% 60 FP
Systems
ATS Automatic Tooling Machine Tools Mar-95 1,353,644 6,545 86.98% 60 FP
Systems
Barney's, Inc. Retail Store Oct-93 2,353,608 82,376 60.05% 60 FP
Furniture and
Fixtures
Buffalo & Pittsburgh Railroad Locomotives Nov-93 849,216 29,723 37 FP
Burlington Air Exress Materials Handling Apr-95 622,663 21,793 78.25% 84 FP
Burlington Air Exress Materials Handling Jul-95 505,325 80.23% 84 FP
Burlington Northern Railroad Locomotives Jan-93 7,950,000 278,250 24 OL
Company
Chrysler Corporation 36 Tractors & Trailers Dec-93 3,253,000 113,855 84.13% 71-72 FP
Clinchfield Coal Company Drill, Endloader, Jan-94 985,203 34,482 65.79% 73 1/2- FP
Diesel Generator 91 1/2
DJ Aerospace (Bermuda), Ltd. Executive Aircraft Jul-94 1,890,000 66,150 36 OL
Federal Paper Board Co., Inc. Office Equipment Jul-95 77,950 - 36 FP
Foodmaker, Inc. Restaurant Furniture Oct-94 to Jan-95 2,651,356 92,797 60 FP
and Fixtures
Galardi Group, Inc. Restaurant Furniture Jul-94 546,000 19,110 48 FP
and Fixtures
GE Industrial & Power Systems Office Automation Mar-95 138,130 4,835 36 FP
GE Industrial & Power Systems Machine Center Jun-95 457,670 - 84 FP
H.E. Butt Grocery Company Trailers Oct-92 to Jan-93 5,709,369 199,828 72.48% 60-84 OL/FP
H.E. Butt Grocery Company Trailers Jun-93 1,404,302 49,151 75.71% 84 FP
Holston Mining, Inc. 37 Endloader, Dozer Jan-94 584,617 20,462 91 1/2 FP
Kraft General Foods, Inc. Tractors Dec-93 964,315 33,751 71.69% 31 FP
Liquid Carbonic Industrial/ 38 Air Separation Plant Dec-93 9,500,897 332,531 54.21% 99 FP
Medical Corporation
Midwest Power Systems, Inc. Coal Hopper Cars Jan-93 2,240,000 78,400 28.36% 36 OL
Mobil Oil Corporation Tractors/ Oct-92 to Apr-94 2,760,175 95,786 27-60 OL
Construction/
Earth Moving
Nabisco, Inc. Office Automation Aug-95 337,594 - 36 FP
National Steel Corporation Construction Jan-95 2,208,510 77,298 76.55% 60-84 FP
Equipment
National Steel Corporation Construction Apr-95 3,675,997 83,148 88.15% 85-91 FP
Equipment
Omnicom Group, Inc. Office Automation Oct-95 901,849 - 36 FP
Paramount Coal Corporation 37 Drill, Dozer Jan-94 595,800 20,853 65.79% 61 1/2- FP
91 1/2
Pepsico, Inc. Materials Handling Jan-94 146,926 5,142 48-60 OL/FP
Pepsico, Inc. Materials Handling Jul-93 to Sep-93 458,017 16,031 48-60 OL/FP
Pittston Coal Group 31 Mining Jul-92 846,883 29,641 78.76% 60 FP
Quaker Coal Company Rail Car Mover Nov-95 263,984 - 48 FP
Rochelle Coal Company 39 Mining Jan-93 6,303,701 220,630 70.34% 84 FP
Sebastiani Vineyards, Inc. Wine Barrels Apr-94 189,855 6,645 60 FP
Sebastiani Vineyards, Inc. Wine Barrels Apr-94 to Jul-94 454,721 15,915 36 FP
Sebastiani Vineyards, Inc. Wine Barrels Apr-95 180,253 6,309 60 FP
Signature Flight Support Air Support Jan-95 1,142,400 39,200 84 FP
Corporation Equipment
Tarmac America, Inc. Crawler Dozer, Aug-94 385,443 13,491 75.64% 60-84 FP
Wheel Loader
Tarmac America, Inc. Construction Jan-95 210,438 7,365 80.90% 84 FP
Equipment
Tarmac America, Inc. Construction Jul-95 to Aug-95 1,309,300 - 79.82% 97 FP
Equipment
TASC, Inc. Office Automation Jan-95 131,008 4,585 36 FP
TASC, Inc. Office Automation Oct-95 to Apr-96 601,701 - 36 FP
The Dow Chemical Company Boom Lift May-93 66,900 2,342 75.81% 60 FP
The Dow Chemical Company Material Handling, Dec-92 2,221,228 77,743 74.80% 60-84 FP
Research
The Dow Chemical Company Research Feb-93 102,149 3,575 87.94% 60 FP
The Helen Mining Company 33 Mining Jan- to May-92 3,816,507 133,578 32.62% 60 FP
The Kendall Company Office Automation Nov-94 166,835 5,839 36 FP
The Kendall Company Office Automation Jan-95 86,108 3,014 36 FP
The Kendall Company Office Automation Apr-95 434,705 15,071 36 FP
The Kendall Company Office Automation Oct-95 to Jan-96 568,370 - 24 - 36 FP
The Pittston Company Mining Equipment Mar-95 819,349 28,677 65.79% 60 FP
The Stop & Shop Supermarket Bakery Labeling Feb-96 368,500 - 60 FP
Company Machines
Trans Ocean Container Intermodal Oct-93 3,001,930 105,068 120 FP
Corporation Containers
Treasure Chest Advertising Bin Stackers and Dec-93 to Apr 94 753,419 26,370 84-86 FP
Company Trimmers
Treasure Chest Advertising Printing Press Dec-93 3,478,749 121,756 88.28% 84 FP
Company
Treasure Chest Advertising Printing Press & Aug-93 2,075,000 72,625 89.99% 66 FP
Company Associated
Equipment
Treasure Chest Advertising Printing Press & Feb-95 511,907 17,917 84 FP
Company Associated
Equipment
Union Pacific Corporation Intermodal Jan-93 1,453,096 50,858 46.85% 60 OL
Union Tank Car Company Rail Sep-92 to Oct-92 6,460,600 225,666 23.25% 25-51 OL
USS/Kobe Steel Company 34 Materials Handling Jul-94 35,920 1,257 60 FP
USS/Kobe Steel Company 34 Dump Truck Aug-92 256,000 8,960 84 FP
USX Corporation Materials Handling Jun-93 3,061,376 107,148 83.67% 54-69 FP
Xerox Corporation Materials Handling Feb-95 26,092 913 44 OL
Xerox Corporation AKT PVD System Jul-96 2,542,500 - 60 FP
-------------- -----------
ATEL Cash Distribution Fund IV total: $112,424,026 $3,575,123
============== ===========
</TABLE>
A-22
<PAGE>
<TABLE>
<CAPTION>
Commence Acquisition Acquisition Percent Lease Lease
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) Type (6)
- ------ ----- -------------- ----------- -------- -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ATEL Cash Distribution Fund V
- -----------------------------
Armco, Inc. Phone Mail System Jan-96 $459,835 $16,094 84 FP
Atchison, Topeka & Santa Containers Jan-95 1,926,930 67,443 62.75% 84 OL
Fe Railroad Company
Atchison, Topeka & Santa Rail Car Containers Jul-94 7,812,200 273,427 55.89% 84 OL
Fe Railroad Company and Chassis
Atchison, Topeka & Santa 40 Tank Containers Nov-93 744,875 26,071 84 FP
Fe Railroad Company
Barney's, Inc. Retail Store Oct-93 3,365,947 117,808 60.04% 60 FP
Furniture and
Fixtures
BNMC Leasing, Inc. Over-the-road May-94 141,540 4,954 35.62% 8 OL
Tractors
Burlington Air Express Materials Handling Jan-95 to Apr-95 1,720,008 60,200 75.87% 84 FP
Burlington Northern Railroad 41 Covered Hopper Rail Apr-96 9,344,563 60,848 21 FP
Cars
Burlington Northern Railroad Locomotives Jan-95 12,350,000 432,250 28 OL
Burris Foods, Inc. Over-the-road May-94 245,296 8,585 21.16% 5 OL
Trailers
Canadian Pacific Limited 41 Covered Hopper Rail Apr-96 1,798,388 - 13 FP
Cars
Cargill, Inc. 41 Covered Hopper Rail Apr-96 282,100 - 36 FP
Cars
CF Industries, Inc. 41 Covered Hopper Rail Apr-96 528,938 - 12 FP
Cars
Chrysler Corporaion Materials Handling Dec-94 to Mar-95 1,300,286 45,510 76.79% 60 OL
Chrysler Corporation Materials Handling Nov-93 to Jan-94 1,303,039 45,606 58.69% 60 OL
Chrysler Corporation Materials Handling Apr-95 to Jun-95 166,069 5,812 30.07% 60 OL
Chrysler Corporation Materials Handling Apr-96 9,296 - 60 OL
Chrysler Corporation Over-the-road Dec-93 1,379,490 48,282 54.62% 60 OL
Tractors
CITGO Petroleum Corp. Over-the-road May-94 837,904 29,327 74.10% 36 OL
Tractors
Clark Oil & Refining Retail Store Jan-94 1,268,656 44,403 36 OL
Corporation Fixtures
Denver and Rio Grande Western Auto Racks May-94 7,180,000 251,300 44 FP/OL
Railroad
Emerson Electric Company Over-the-road May-94 237,149 8,300 27.39% 80 FP
Trailers
Federal Paper Board Company Materials Handling Jan-95 1,315,911 46,057 36 OL
Federal Paper Board Company Materials Handling Apr-95 930,814 32,578 36 OL
Federal Paperboard Company, Inc. Forklifts, Oct-94 167,791 5,873 36 OL
Wheeloader
Foodmaker, Inc. Fixtures and Jan-94 to Oct-94 6,042,382 211,489 60 FP
Fittings and
Trailers
General Electric Company Injection Molding Feb-96 1,470,000 51,450 120 FP
General Motors Corporation Materials Handling Jan-94 to May-94 3,023,173 105,811 62.16% 60 OL
(Service Parts Operation
Division)
General Motors Corporation Materials Handling Jul-94 893,382 31,268 73.33% 60 OL
(Truck and Bus Division)
IBM Corporation Office Furniture Aug-93 1,825,710 63,900 48 OL
Illinois Central Railroad 41 Covered Hopper Rail Apr-96 1,234,188 - 12 - 40 FP
Company Cars
Ingersoll International, Inc. Machine Tools Jun-94 1,196,355 41,872 72 FP
Kaiser Cement Corporation Tractor and Dump Oct-93 984,671 34,463 60 OL
Truck
Kraft, Inc. Over-the-road May-94 1,000,353 35,012 91.49% 56 FP
Trailers
McDonnell Douglas Helicopter Office Automation Aug-95 110,320 3,861 36 FP
Systems
Minteq International, Inc. 42 Turbo Laser May-96 347,430 - 36 FP
Minteq International, Inc. 42 Turbo Laser Feb-94 461,800 16,163 60 FP
Mobil Administrative Services 43 Helicopter Jun-93 844,525 29,558 24 OL
Company, Inc.
Mobil Oil Corporation Environmental Jul-93 423,000 14,805 36 OL
Ejector Systems
Mobil Oil Corporation Liquid Petroleum Oct-95 to Jan-96 12,863,591 450,226 75.74% 240 FP
Tank Cars
Mobil Oil Corporation Materials Handling Jan-95 853,093 29,858 60 OL
Mobil Oil Corporation Wheel Loader Oct-93 70,200 2,457 36 OL
Montana Rail Link, Inc. 41 Covered Hopper Rail Apr-96 846,300 - 12 FP
Cars
Nabisco, Inc. Office Automation Mar-95 426,420 14,925 36 OL
Nabisco, Inc. Office Automation Oct-95 190,442 6,665 36 FP
National Steel Corporation Bulldozer / Crane Oct-95 2,137,183 74,801 90 FP
National Steel Corporation Materials Handling Oct-94 64,650 2,263 49 OL
National Steel Corporation Materials Handling Jan-95 66,134 2,315 36 OL
National Steel Corporation Materials Handling Jan-95 1,649,465 57,731 61 OL
National Steel Corporation Materials Handling Apr-95 609,500 21,333 49 OL
National Steel Corporation Materials Handling Apr-95 873,161 30,561 61 OL
National Steel Corporation Wheel Loader Oct-94 253,527 8,873 60 FP
Occidental Chemical Corporation Barges Aug-94 2,798,303 97,941 56.31% 16 OL
Omnicom Group, Inc. Office Automation & Jan-96 1,458,896 51,061 36 - 60 FP
Office Furniture
Owens Corning Fiberglas Corp. Materials Handling Aug-93 157,462 5,511 36 OL
Pegasus Gold Corporation Surface Mining Jan-96 7,280,747 254,826 79.77% 84 FP
Praxair, Inc. Over-the-road May-94 668,114 23,384 52.77% 27 OL
Tractors
Primark Corporation Office Automation Jul-95 to Apr-96 143,449 5,021 36 FP
PV Trucking Over-the-road May-94 75,332 2,637 18 FP
Tractors
Quaker Coal Company Haul Truck & Oct-94 2,626,953 91,943 24-30 OL
Crawler Tractor
Quaker Coal Company Haul Trucks & Oct-95 2,877,672 100,719 48 - 60 FP
Tractor
Quaker Coal Company Mining Equipment Jan-95 3,000,000 105,000 24 OL
Quantum Restaurant Group, Inc. Restaurant Furniture Oct-96 205,981 7,209 60 FP
/ Fixtures /
Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture Oct-96 425,437 14,890 60 FP
/ Fixtures /
Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture Oct-96 432,328 15,131 60 FP
/ Fixtures /
Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture Sep-96 272,498 - 60 FP
/ Fixtures /
Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture Jun-96 436,331 - 60 FP
/ Fixtures /
Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture Jul-96 499,131 - 60 FP
/ Fixtures /
Equipment
Roper Corporation Forklifts Jan-96 243,659 8,528 84 FP
Schwegmann Giant Super Fixtures & Equipment Jul-95 5,058,331 176,161 60 FP
Markets, Inc.
Sebastiani Vineyards, Inc. Bottling Equipment Apr-94 113,673 3,979 48 OL
Sebastiani Vineyards, Inc. Wine Barrels Apr-95 95,848 3,355 36 FP
Smitty's Super Valu, Inc. Retail Store Jan-96 4,709,326 164,826 60 FP
Furniture &
Fixtures
Soo Line Railroad Company 41 Covered Hopper Rail Apr-96 1,586,813 - 12 FP
Cars
Star Enterprise Over-the-road May-94 923,533 32,324 59.16% 32 OL
Tractors
Tarmac America, Inc. 44 Concrete Trucks Sep-94 to Oct-94 5,937,371 207,808 76.81% 48 FP
with Mixers
Tarmac America, Inc. 44 Concrete Trucks Sep-95 to Oct-95 1,982,071 69,372 75.27% 97 FP
with Mixers
Tarmac America, Inc. 44 Construction Sep-95 to Jan-96 1,491,348 52,197 70.16% 84 FP
Equipment
TASC, Inc. Office Automation Jan-95 237,685 8,319 18 OL
TASC, Inc. Office Automation Apr-96 522,280 16,716 18 - 36 FP
Texaco Trading and Over-the-road May-94 4,485,676 156,999 60.91% 32-68 FP/OL
Transportation, Inc. Tractors &
Trailers
The Dow Chemical Company Copiers Jul-94 272,809 9,548 36 OL
The Dow Chemical Company Office Automation Oct-94 to Jan-95 377,702 13,220 36 OL/FP
The Dow Chemical Company Office Equipment Apr-95 122,800 4,298 36 FP
The Kendall Company Office Automation Oct-96 3,735 131 36 FP
The Pillsbury Company Harvesting Equipment Oct-94 1,643,101 57,509 84.91% 60 FP/OL
The Pittston Company Construction & Jan-94 to Dec-94 14,037,683 491,319 38.93% 49-61 OL/FP
Mining Equipment
Tom's Foods, Inc. Over-the-road May-94 259,102 9,069 35.23% 9 OL
Tractors
Trans Ocean Container 45 Intermodal Oct-93 5,000,683 175,024 120 OL
Corporation Containers
Treasure Chest Advertising Printing Press & Oct-93 2,069,950 72,448 66 FP
Company, Inc. Associated
Equipment
Treasure Chest Advertising Printing Press & Jul-95 to Nov-95 2,328,538 81,499 60 - 84 FP
Company, Inc. Associated
Equipment
Treasure Chest Advertising Printing Press & Aug-96 258,588 9,051 84 FP
Company, Inc. Associated
Equipment
Tyson Foods, Inc. Tractors / Trailers Jul-93 to Aug-93 5,785,000 202,475 26.95% 36 - 84 OL
Union Carbide Corporation Rail Tank Cars Aug-95 4,835,759 140,000 39.30% 68 - 92 FP
USS / Kobe Steel Company 34 Wheel loader, Crane Jan-94 603,352 21,117 60 - 84 FP/OL
& Lift Truck
Waban, Inc. Materials Handling Oct-94 613,998 21,490 62 FP
-------------- -----------
ATEL Cash Distribution Fund V total: $186,537,028 $5,956,443
============== ===========
</TABLE>
A-23
<PAGE>
<TABLE>
<CAPTION>
Commence Acquisition Acquisition Percent Lease Lease
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) Type (6)
- ------ ----- -------------- ----------- -------- -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ATEL Cash Distribution Fund VI
- ------------------------------
AT&T Communications, Inc. Printers Aug-95 to Nov-95 $1,578,500 $46,200 36 OL
American President Trucking 17 Tractors and Nov-95 759,092 22,773 0.91% 8 OL
Company, Ltd. trailers
Applied Magnetics Corporation Sputter Jul-96 3,274,642 98,239 60 FP
Armco, Inc. Link-Belt Oct-95 388,993 11,670 36 OL
Scrapmaster
Armco, Inc. Data processing Nov-95 67,829 2,035 37 FP
Armco, Inc. Office Automation Jul-96 109,416 3,282 30 FP
AT&L Railroad Company 41 Covered Hopper Apr-96 35,263 1,050 12 FP
Rail Cars
AT&T Communications, Inc. 46 Printers Jun-96 to Jul-96 540,181 16,205 28 - 34 OL
Atchison, Topeka & Santa Fe Containers Oct-94 to Jan-95 9,196,811 298,896 60.53% 84 OL
Railroad Company
ATS Automation Tooling Systems Machine Tools Apr-96 to Oct-96 2,569,753 77,093 60 FP
BJ's Wholesale Club 47 Materials Handling Jul-95 931,635 30,278 63 OL
Burlington Northern Railroad 41 Covered Hopper Apr-96 13,223,438 396,703 21 FP
Rail Cars
Canadian Pacific Limited 41 Covered Hopper Apr-96 2,433,113 72,450 13 FP
Rail Cars
Cargill, Inc. 41 Covered Hopper Apr-96 352,625 10,500 36 FP
Rail Cars
CF Industries, Inc. 41 Covered Hopper Apr-96 705,250 21,000 12 FP
Rail Cars
Chrysler Corporation Materials Handling Feb-96 to Jul-96 1,716,947 51,508 60 OL
Chrysler Corporation Materials Handling Mar-95 to Dec-95 5,925,384 184,233 66.83% 60 OL
Consolidated Rail Corporation Locomotives Sep-95 22,353,332 668,372 57.02% 60 OL
Consolidated Rail Corporation Intermodal Container Jan-96 2,502,750 75,083 60 OL
Chassis
Coors Transportation Company 48 Refrigerated Nov-95 797,704 23,931 47.35% 21 OL
Trailers
Fairmont Homes, Inc. Materials Handling Apr-96 644,565 19,337 60 OL
Federal Paper Board Company Materials Handling Apr-96 to Jun-96 1,740,861 52,226 36 - 60 OL
Federal Paper Board Company Materials Handling Jul-95 to Jan-96 5,401,765 166,124 36 - 84 OL/FP
General Motors Corporation Manufacturing Jul-95 652,232 19,567 36 OL
Equipment
Illinois Central Railroad 41 Covered Hopper Apr-96 1,692,600 50,400 12 - 40 FP
Company Rail Cars
IMC Fertilizer, Inc. Rail Tank Cars Sep-95 1,266,374 37,991 27 OL
Mobil Oil Corporation Tractor Jul-96 78,327 2,350 36 OL
Mobil Oil Corporation Liquid Petroleum Jan-96 to Feb-96 16,110,807 483,324 75.44% 240 FP
Tank Cars
Montana Rail Link, Inc. 41 Covered Hopper Apr-96 1,198,925 35,700 12 FP
Rail Cars
Nabisco, Inc. Office Automation Apr-95 709,572 23,061 36 OL
National Steel Corporation Hydraulic Shovels Jul-96 6,245,062 187,352 60 OL
National Steel Corporation Wheel Loaders & Jan-96 to Apr-96 4,710,131 141,304 36 - 90 OL/FP
Forklifts
National Steel Corporation Materials Handling, Jul-96 to Oct-96 1,525,887 49,517 60 - 84 OL/FP
Tractors &
Trailers
National Steel Corporation Cranes & Loaders Jul-96 to Oct-96 1,099,210 32,976 36 - 84 FP OL
NVR, Inc. Roof Truss Assembly Jul-96 78,484 2,355 84 FP
Omnicom Group, Inc. 49 Office Automation Apr-95 to Oct-95 2,232,559 68,290 36 - 60 OL/FP
Overnite Transportation Company Tractors Apr-96 2,140,643 62,961 36 OL
Peerless Eagle Coal Company 50 Haul Trucks & Jul-95 5,184,875 168,508 59.29% 48 OL
Construction
Perdue Transportation 51 Freightliner Nov-95 536,740 16,102 49.71% 24 OL
Incorporated Tractors
Quaker Coal Company Wheel Loaders, Jan-96 3,298,935 98,968 48 FP
Drill & Grader
Sebastiani Vineyards, Inc. Bottle Labeler Feb-96 317,520 9,526 60 OL
Soo Line Railroad Company 41 Covered Hopper Apr-96 2,256,800 67,200 12 FP
Rail Cars
Tarmac America, Inc. 44 Concrete Mixer Jul-96 582,340 17,470 96 FP
Trucks
Tarmac America, Inc. 44 Dragline Jul-96 1,441,764 43,253 84 FP
Tarmac America, Inc. 44 Construction Oct-94 to Nov-94 3,114,870 101,233 71.69% 97 FP
Equipment
TASC, Inc. Office Automation Jan-96 to Jul-96 796,027 23,881 36 FP
TASC, Inc. Office Automation May-95 to Oct-95 1,567,339 50,413 18 - 36 OL/FP
Trans Ocean Container 45 Intermodal Jan-96 9,995,127 299,854 120 FP
Corporation Containers
Tyson Foods, Inc. Office Automation Jun-95 563,411 18,311 24 OL
Xerox Corporation Binding & Finishing Feb-95 to Jun-95 646,466 24,279 48 OL
Equipment
Xerox Corporation Materials Handling May-95 to Aug-95 144,527 4,456 44 OL
-------------- -----------
ATEL Cash Distribution Fund VI total: $147,437,403 $4,489,790 60 OL
============== ===========
TOTALS OF ALL FUNDS: $609,432,613 $19,692,557
============== ===========
</TABLE>
A-24
<PAGE>
TABLE IV ACQUISITION OF EQUIPMENT FOOTNOTES
(1) In many cases, a Lease transaction is funded over a period of time according
to the Lessee's requirements. Therefore "Commencement Date (s)" expressed as a
range represents multiple commencement dates occurring or anticipated under the
same Lease line.
(2) "Acquisition Cost" includes either amounts committed to Lessees for funding
by the program, or the actual Equipment acquisition cost, less any Acquisition
Fees. All figures are rounded.
(3) "Acquisition Fees" include fees accrued by the program as of the Preparation
Date. For partially funded Lease lines, additional fees may be expended by the
program for future acquisitions made pursuant to the terms of the Lease.
(4) "Percent Leverage" represents the percent ratio of the original principal
amount of the debt acquired or assumed by the program, to the Acquisition Cost
of the Equipment. The Equipment may be "leveraged" (where a portion of the
Equipment Acquisition Cost is financed using non-recourse debt financing) at the
time of, or subsequent to, the acquisition of the Equipment by the program.
Therefore, actual leverage ratios may be more or less than indicated due to the
timing of the acquisition of the Equipment in relation to the amortization of
the principal amounts of the debt.
(5) "Lease Term" is expressed in terms of months, although the actual Lease Term
may be expressed as monthly, quarterly, semiannual or annual.
(6) A designation of "FP" indicates that the aggregate rents to be received
during the Lease Term exceed or are equal to the Acquisition Cost of the
Equipment. A designation of "OL" indicates that the aggregate rentals to be
received during the Lease Term are less than the Acquisition Cost.
(7) The interest in this transaction is held 1/3 by ATEL Cash Distribution Fund
and 2/3 by ATEL Cash Distribution Fund II.
(8) Guaranteed by both Fingerhut Corporation and by Primerica Corporation, as
successor in interest to American Can Company.
(9) In March 1992, Financial News Network ("FNN"), a lessee of ATEL Lease Income
Fund, ATEL Cash Distribution Fund and ATEL Cash Distribution Fund II, filed for
protection under Chapter 11 of the U.S. Bankruptcy Act. Subsequent competitive
bidding between CNBC (a division of General Electric Company) and a partnership
consisting of Dow Jones, Inc. and Group W (Westinghouse) developed for the
purchase of FNN assets. This bidding resulted in the sale of certain FNN assets,
principally its subscribers, to CNBC for $145 million in cash and the assumption
of $9.3 million in liabilities. The proceeds from the sale were distributed
beginning in June 1992 resulting in the recovery of substantially all of the
programs' remaining investment in the Equipment.
(10) A 34.41% interest in this transaction was acquired by ATEL Cash
Distribution Fund. The remaining 65.59% was acquired by ATEL Cash Distribution
Fund II.
(11) Guaranteed by Fingerhut Corporation.
(12) Credit support provided by an Investment Agreement of Nord Kaolin
Corporation and of Nord Resources Corporation.
(13) These transactions are all leveraged under one non-recourse note with
Sogelease Corporation.
(14) Leased to Teledyne Wah Chang Albany, a division of Teledyne Industries,
Inc.
(15) ATEL Cash Distribution Fund holds a one-half interest in this transaction,
the remaining half interest was acquired by ATEL Financial Corporation on
identical terms.
(16) Guaranteed by Addington Resources.
(17) Guaranteed by American President Companies.
(18) A 97.75% interest in Equipment Schedule No. 2 was acquired by ATEL Cash
Distribution Fund II. The remaining 2.25% interest in that Schedule was acquired
by ATEL Lease Income Fund.
A-25
<PAGE>
(19) Lease originally with Hammermill Paper Company as lessee and subsequently
assumed by International Paper Company.
(20) Lease assigned to and assumed by Liggett & Meyers Tobacco Company, with
recourse retained against the original Lessee.
(21) On January 1, 1991 Midway Airlines, Inc., the lessee of the DC9-32 in which
ATEL Cash Distribution Fund II and ATEL Cash Distribution Fund III owned
interests, suspended payments on its debt and aircraft leases. On March 26,
1991, the Lessee filed for protection under Chapter 11 of the U.S. Bankruptcy
Act. On September 4, 1991, the non-recourse lender, John Hancock Leasing
Corporation, exercised its right to foreclose on the aircraft. As this
investment represents a relatively small portion of the programs' total equity
and anticipated cash flow, the General Partners do not believe that the adverse
developments with respect to this investment will have a material effect on
their respective operations, cash flows or rates of cash distributions. The
beneficial interest in the Equipment was held two-thirds by ATEL Cash
Distribution Fund II and one-third by ATEL Cash Distribution Fund III.
(22) Equipment operated by the Eureka Company, a division of Lessee, an indirect
subsidiary of AB Electrolux, Sweden.
(23) Guaranteed by Reynolds and Reynolds.
(24) On October 13, 1993, the lessee, Rocky Mountain Helicopters, Inc.,
filed for protection under Chapter 11 of the U.S. Bankruptcy Act. The aircraft
which was the subject of the lease was delivered to ATEL Cash Distribution Fund
II, prior to the petition for bankruptcy and was sold by the lessor. The
proceeds of the sale satisfied in full the non-recourse debt obligation owed to
USX Credit Corporation and the excess was applied to mitigate the lessor's claim
against the lessee. The lessor subsequently filed and was allowed an unsecured
claim in the amount of $776,542. Through September 30, 1996, the lessor has
received $310,617 on this claim, representing 40% of the allowed claim. The sum
of the proceeds from the rents, sale of the aircraft and the claim filed in
bankruptcy has resulted in a recovery exceeding the lessor's original investment
in the aircraft.
(25) Guaranteed by Continental Medical Systems, Inc.
(26) An indirect subsidiary and joint venture of Kaiser Aluminum & Chemical
Corporation and Norsk Hydro.
(27) Guaranteed by United States Surgical Corporation.
(28) Acquisition Cost represents one-half of the total Equipment Acquisition
Cost. Title to this Equipment is held in an equipment trust where one-half of
the beneficial interest in the Equipment is owned by ATEL Cash Distribution Fund
III and one-half by ATEL Cash Distribution Fund IV.
(29) Guaranteed by Nord Resources Corporation.
(30) On January 10, 1996, Barney's, Inc., a lessee of ATEL Cash
Distribution Fund III, ATEL Cash Distribution Fund IV and ATEL Cash Distribution
Fund V filed for protection under Chapter 11 of the U.S. Bankruptcy Act. In July
of 1996, the lessors sold their unsecured claim in the bankruptcy for an amount
equal to approximately 73% of the unsecured claim, which, after satisfaction of
the non-recourse loan due to the CIT Group/Equipment Financing, Inc. (and taking
into account all prior rents received, security deposits retained and loan
proceeds previously received), resulted in proceeds to the lessors in excess of
their original investments in the equipment.
(31) The Lessee name is indicated for convenience only. The actual Lessees are
Paramount Coal Corporation, Clinchfield Coal Company, Heartland Resources, Inc.
and Meadow River Coal Company, all subsidiaries of The Pittston Company. The
Lease is guaranteed by the Pittston Company.
(32) Title to the Equipment and Lease transaction is held by an equipment trust.
A divisible 1/2 beneficial interest in the equipment trust is owned by the
program. The remaining divisible 1/2 beneficial interest in the equipment trust
is owned by a non-affiliate.
(33) Guaranteed by Quaker State Corporation.
(34) Lessee is a partnership formed by United States Steel Corporation and Kobe
Steel Corporation.
(35) Title to the Equipment and Lease transaction is held by an equipment trust.
Partnership owns a 17.3199% beneficial interest in the equipment trust.
(36) Subject to a remarketing agreement with General Motors - Electro-Motive
division.
A-26
<PAGE>
(37) Guaranteed by The Pittston Company.
(38) Guaranteed by CBI Industries, Inc.
(39) Guaranteed by Peabody Holding Company, Inc.
(40) Lessee has limited option to terminate at 36 months and 60 months, subject
to a remarketing agreement with Bond International (US), Inc.
(41) Equipment is subject to a full payout management agreement with MRXX
Corporation.
(42) Guaranteed by Mineral Technologies, Inc.
(43) Guaranteed by Mobil Corporation.
(44) Guaranteed by Tarmac PLC, a British Limited Liability Company.
(45) Rentals under the Lease are variable. Average monthly lease payments are
estimated based on the minimum lease payments to be received on similar
Equipment owned by a prior program.
(46) Subject to
a remarketing/residual sharing agreement with AT&T Credit
Corporation.
(47) A division of Waban, Inc.
(48) Guaranteed by Adolf Coors Company.
(49) Guaranteed by Omnicom Group, Inc. Actual lessees are various subsidiaries
of Omnicom Group, Inc.: DDB Needham Worldwide, Inc.; Griffin Bacal, Inc.; DDB
Needham Chicago, Inc.; Tracy-Locke, Inc.; Puskar Gibbon Chapin, Inc.; The Focus
Agency, Inc.; and Elgin Syferd/DDB Needham, Inc.
(50) Guaranteed by A.T. Massey Coal Company, Inc.
(51) Guaranteed by Perdue Farms, Inc.
A-27
<PAGE>
TABLE V
SALES OR DISPOSALS OF EQUIPMENT
ATEL Lease Income Fund, ATEL Cash Distribution Fund, ATEL Cash Distribution Fund
II, ATEL Cash Distribution Fund III, ATEL Cash Dsitribution Fund IV, ATEL Cash
Distribution Fund V and ATEL Cash Distribution Fund VI have disposed of
equipment in their portfolios as of June 30, 1996. Set forth below is a summary
of equipment sales and dispositions as of such date. Sales were for
consideration unless otherwise noted. Interim rent (rent paid prior to formal
commencement of a lease), hold-over rent (rent received after termination of the
initial lease term, but before formal extension or disposition) and extension
rent (rent paid after formal extension of a lease) are included in the "Excess
of Rents Over Expenses" column. "Equipment Acquisition Price" includes
acquisition fees. Dispositions are shown on a per asset basis.
<TABLE>
<CAPTION>
Excess of
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
<S> <C> <C> <C> <C> <C> <C> <C>
ATEL LEASE INCOME FUND 1985-A
- -----------------------------
Colour Graphics Computer system Feb-87 $34,500 Oct-93 $2,525 $44,483
Colour Graphics Office Information Systems Jul-88 45,000 Jan-94 11,200 55,777
Educational Loan Services, Inc. Office Information Systems May-86 33,050 Oct-90 900 31,350
Federal Home Loan Bank of Office Information Systems May-86 39,127 Apr-90 870 36,800
New York
Financial News Network, Inc. Studio and Broadcasting Feb-90 14,777 Jun-92 11,493 2,027 5
Gorham, Inc. Office Information Systems May-86 38,799 Mar-90 2,300 45,180
Long Lake Staionary, Inc. Binding Equipment May-87 4,023 Jul-92 1 6,242
Philip Morris, U.S.A. Office Information Systems May-86 13,297 Jan-89 3,600 12,400
Philip Morris, U.S.A. Office Information Systems May-86 21,584 Aug-92 - 22,050
Polaroid Corporation Office Information Systems May-86 48,028 Jan-90 4,500 45,000
Rohr Industries, Inc. Motor Vehicle Jan-89 12,451 Apr-95 6,400 17,843
Rohr Industries, Inc. Motor Vehicle Apr-89 8,376 Jul-92 4,723 8,558
------------ ------------ ------------
$313,012 $48,512 $327,710
============ ============ ============
</TABLE>
A-28
<PAGE>
<TABLE>
<CAPTION>
Excess of
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
<S> <C> <C> <C> <C> <C> <C> <C>
ATEL CASH DISTRIBUTION FUND
- ---------------------------
Acushnet Company Office Information Systems Jan-87 $140,287 Dec-91 $4,545 $156,000
Alachua General Hospital Tractor Jan-89 15,327 Sep-92 9,000 15,900 6
American Motors Corporation Lift Trucks Oct-87 25,754 Sep-92 6,200 30,215
American Motors Corporation Lift Truck Oct-87 34,494 May-89 30,818 10,117
American Motors Corporation Lift Trucks Oct-87 25,754 Sep-92 6,200 31,306
American Motors Corporation Lift Trucks Oct-87 12,367 Jan-93 3,200 15,863
American Motors Corporation Lift Trucks Oct-87 105,158 Mar-93 31,800 141,636
American Motors Corporation Lift Trucks Oct-87 53,186 Apr-93 15,956 71,727
American Motors Corporation Lift Trucks Oct-87 15,201 Feb-94 4,500 22,886
American Motors Corporation Hoist Mill Truck Dec-87 100,325 Mar-93 18,000 131,164
American Motors Corporation Lift Trucks Jan-88 45,378 Dec-92 7,000 63,268
Anaheim Memorial Hospital CAT Scanner Jan-88 779,613 Apr-93 88,000 839,938
Campbell Soup Company Lift Truck Mar-87 34,790 Jun-90 30,000 19,575
Campbell Soup Company Lift Truck Battery Chargers Mar-87 35,529 Aug-93 12,435 38,812
Campbell Soup Company Reach / Walkie Trucks Mar-87 75,836 Sep-93 2,700 89,216
Campbell Soup Company Batteries / Chargers Mar-87 11,882 Dec-93 4,250 13,977
Campbell Soup Company Lift Truck Mar-87 25,668 Jul-94 5,022 31,663
Campbell Soup Company Lift Truck Apr-87 4,997 Apr-91 3,616 3,616
Campbell Soup Company Lift Truck Apr-87 24,550 Apr-91 17,764 17,765
Campbell Soup Company Lift Truck Mar-87 19,763 Oct-95 2,000 27,283
Color Graphics Corporation 645-MSS Output Scanning Dec-86 232,533 Mar-94 20,000 303,307
Station
Enron Corp. Office Information Systems Jun-88 88,364 Jun-91 17,857 90,326
Enron Corp. Office Information Systems Jun-88 87,399 Feb-92 10,650 85,140
Enron Corp. Office Information Systems Jun-88 79,726 Mar-92 8,000 76,968
Financial News Network, Inc. Studio and Broadcasting Mar-90 935,918 Jun-92 747,617 123,050 7
GAF Corporation Lift Trucks Oct-87 459,660 Nov-92 94,575 457,460
Hartford Insurance Group Communication Jul-88 89,236 Jul-93 3,618 106,785
Imperial Plastics, Inc. Injection Molding Jun-87 137,247 Apr-94 67,000 147,445
Imperial Plastics, Inc. Injection Molding Dec-87 150,879 Apr-94 64,000 170,530
Imperial Plastics, Inc. Injection Molding Jan-88 194,944 Apr-94 77,000 229,797
Imperial Plastics, Inc. Air Compressor Temperature Mar-88 275,718 Apr-94 131,000 369,505
Control Unit
Martin Marietta Corporation Communication Apr-88 148,275 Jun-92 16,000 138,592
Martin Marietta Corporation Communication Apr-88 283,780 Aug-93 500 277,184
Nord Kaolin Company Hydraulic Excavator May-87 156,450 Mar-93 45,000 184,567
Nord Kaolin Company Lift Trucks Sep-87 15,633 Oct-95 3,500 27,386
Polaroid Corporation Office Information Systems Mar-87 37,819 Apr-92 2,475 41,005
Putnam County Hospital Spectrum Analyzer May-88 114,950 May-94 2,000 158,780
Rohr Industries, Inc. Motor Vehicle Jul-87 14,153 Feb-93 4,175 17,080
Rohr Industries, Inc. Motor Vehicle Mar-88 15,714 Feb-93 4,575 19,073
Rohr Industries, Inc. Motor Vehicle Apr-88 12,060 Apr-91 3,498 10,804
Rohr Industries, Inc. Motor Vehicle Apr-88 12,060 Apr-91 3,198 10,804
Rohr Industries, Inc. Motor Vehicle Apr-88 12,932 Apr-91 4,380 11,585
Rohr Industries, Inc. Motor Vehicle Apr-88 14,630 Apr-91 5,725 13,106
Rohr Industries, Inc. Motor Vehicle Apr-88 15,486 Aug-93 3,977 18,986
Rohr Industries, Inc. Motor Vehicle Jul-88 11,566 Jul-91 4,075 10,517
Rohr Industries, Inc. Motor Vehicle Jul-88 11,566 Jul-91 4,850 10,517
Rohr Industries, Inc. Motor Vehicle Jul-88 11,566 Jul-91 3,890 10,517
Rohr Industries, Inc. Motor Vehicle Aug-88 15,826 May-93 2,622 18,710
Rohr Industries, Inc. Motor Vehicle Aug-88 14,031 Oct-93 3,435 16,587
Rohr Industries, Inc. Motor Vehicle May-88 13,981 Sep-95 3,900 20,280
Rohr Industries, Inc. Motor Vehicle Apr-88 14,028 Dec-95 4,630 20,629
Rohr Industries, Inc. Motor Vehicle Apr-88 16,052 Feb-96 5,000 21,252
Rohr Industries, Inc. Motor Vehicle Jul-88 25,755 Mar-96 9,000 33,051
Teledyne Industries, Inc. Lift Truck Oct-87 154,000 Feb-93 48,000 162,751
Teledyne Industries, Inc. Lift Truck Oct-87 83,500 Mar-93 19,000 89,166
Teledyne Industries, Inc. Lift Truck Jan-88 39,188 Apr-91 10,000 35,832
Teledyne Industries, Inc. Lift Truck Jan-88 52,250 Apr-91 15,000 47,775
Teledyne Industries, Inc. Lift Truck Jan-88 147,345 Nov-91 41,000 137,956
Teledyne Industries, Inc. Lift Truck Feb-88 165,866 Feb-93 58,000 150,644
Teledyne Industries, Inc. Lift Truck Mar-88 48,000 May-93 11,000 51,896
Teledyne Industries, Inc. Lift Truck Apr-88 53,500 Feb-93 20,000 58,088
Teledyne Industries, Inc. Lift Truck Jul-88 147,345 Oct-92 20,000 134,726
Teledyne Industries, Inc. Lift Truck Aug-88 42,845 Jan-94 9,000 46,240
Teledyne Industries, Inc. Lift Truck Nov-88 35,530 Jan-94 10,390 36,406
Teledyne Industries, Inc. Lift Truck Nov-88 38,278 Mar-94 11,000 41,481
Teledyne Industries, Inc. Lift Trucks Aug-89 32,771 Nov-94 7,896 33,173
Teledyne Industries, Inc. Lift Truck Sep-89 68,970 Oct-92 10,000 67,300
Teledyne Industries, Inc. Lift Truck Nov-89 208,740 Jan-93 44,000 204,009
Teledyne Industries, Inc. Lift Truck Nov-89 58,374 Mar-94 12,500 63,256
Teledyne Industries, Inc. Lift Truck Jan-90 57,487 Mar-94 13,000 55,978
Teledyne Industries, Inc. Lift Trucks Jan-90 57,350 Jan-95 15,000 58,052
Teledyne Industries, Inc. Lift Trucks Jan-90 57,350 Jan-95 15,000 58,052
The Dow Chemical Company Motor Vehicle Jul-87 25,211 Aug-92 7,500 22,361
The Dow Chemical Company Mack Truck Jul-87 25,210 Aug-92 7,500 24,846
The Dow Chemical Company Truck Jul-87 106,495 Jun-93 17,500 102,367
The Dow Chemical Company Trucks Jul-87 87,288 Jul-93 26,000 80,985
TRW, Inc. Communication Apr-89 77,957 May-92 19,800 70,704
TRW, Inc. Communication Apr-89 246,057 Jul-93 8,400 235,080
United Technologies Corporation,Office Information Dec-86 77,450 Mar-91 20,000 80,985
Systems
Vista Chemical Company Tank cars Mar-88 1,200,000 Dec-93 885,000 1,090,493
========= ========================
$8,700,153 $3,066,214 $8,263,854
=========== ========================
ATEL CASH DISTRIBUTION FUND II
A. O. Smith Corporation Office Automation Equipment Dec-90 $723,258 Sep-94 $75,017 $763,652
A.O. Smith Corporation Machinery Jul-91 27,667 Jan-93 18,360 15,660
A.O. Smith Corporation Lift Truck Jul-89 80,717 Jun-94 34,000 81,198
A.O. Smith Corporation Personnel Carrier Jul-89 4,381 Jul-94 500 4,407
A.O. Smith Corporation Lift Truck Jul-89 26,910 Jun-95 6,250 51,147
A.O. Smith Corporation Lift Truck Jul-89 17,616 Jul-95 1,500 23,346
Addwest Gold, Inc. Portable Jaw Crusher Plant Sep-88 1,153,001 Nov-94 301,000 1,104,720
Alachua General Hospital Tractor Jan-89 30,727 Sep-92 18,000 31,801 6
American Express Company Manufacturing May-89 276,775 May-93 10,000 293,040
American President Trucking Tractors Nov-88 58,724 May-93 44,172 44,957
Co., Ltd.
American President Trucking Tractors Nov-88 57,590 Jun-93 45,041 47,171
Co., Ltd.
American President Trucking Tractors Oct-88 58,724 Dec-93 16,000 52,752
Co., Ltd
American President Trucking Tractors Oct-88 57,590 Dec-93 15,000 51,734
Co., Ltd.
American President Trucking Tractors Nov-88 58,724 Dec-93 15,926 59,573
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Jan-94 15,500 55,808
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Jan-94 16,000 60,854
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Jan-94 16,000 58,674
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Jan-94 15,500 56,701
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jan-94 16,000 59,369
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jan-94 16,000 56,907
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-94 17,461 58,772
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-94 15,500 55,808
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Apr-94 16,400 61,125
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Apr-94 16,200 61,571
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Apr-94 16,400 58,570
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Apr-94 17,000 59,724
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Apr-94 19,000 55,809
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Apr-94 16,400 58,570
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Apr-94 16,400 55,808
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Apr-94 16,400 58,145
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Apr-94 19,000 58,595
Co., Ltd.
American President Trucking Tractors Nov-88 60,325 Dec-95 11,522 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jun-96 8,500 71,279
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 May-96 10,390 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,350 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jun-96 9,500 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Apr-96 10,565 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,282 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,350 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,350 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Jun-96 9,500 69,903
Co., Ltd.
American President Trucking Tractors Mar-89 61,513 Feb-96 10,488 71,279
Co., Ltd.
Bistol-Meyers Squib Office furniture Jun-92 324,310 Oct-95 89,834 340,960
Campbell Soup Company Lift Trucks Jul-88 237,980 Oct-95 33,000 304,036
Campbell Soup Company Life plus charger Jul-88 28,056 Aug-95 6,000 34,608
Campbell Soup Company Lift Truck Jul-88 26,604 Oct-95 2,500 33,597
Chesebrough-Pond's Inc. Lift Trucks May-90 109,901 Aug-94 42,000 124,236
Chesebrough-Pond's Inc. Lift Truck May-90 18,220 Aug-94 6,750 20,502
Chesebrough-Pond's Inc. Lift Truck May-90 35,029 Aug-94 12,950 39,270
Chesebrough-Pond's Inc. Motorized Lowlift Walk/Ride May-90 38,303 Aug-94 4,800 43,452
Colour Graphics Corporation Computer system Jul-88 33,805 Oct-93 2,475 41,767
Continental Medical Systems, Physical therapy Jun-90 36,676 Jun-95 11,750 45,485
Inc.
Cooper Tire and Rubber Company Lift Trucks Nov-88 33,296 Jan-96 10,600 37,698
Delnor Community Hospital Medical Jul-88 118,775 Apr-91 17,850 106,513
Delnor Community Hospital Medical Jul-88 265,473 Apr-91 45,000 247,586
Delnor Community Hospital Medical Apr-88 89,081 Dec-91 35,000 87,406
Financial News Network, Inc. Studio and Broadcasting Feb-90 670,359 Jun-92 534,432 148,788 8
Fingerhut Corporation Pacesetter Saddlebinder Dec-89 233,268 Dec-94 110,000 258,130
FMC Gold Company Material Handling Apr-90 362,960 May-93 105,000 322,256
FMC Gold Company Material Handling Apr-90 398,169 Jul-93 155,000 361,891
Hudson Foods, Inc. Chicken Processing Jul-89 326,880 Aug-94 120,215 373,808
Hudson Foods, Inc. Waste Water Pre-treatment Aug-89 331,070 Aug-94 121,600 377,895
Plant
Hudson Foods, Inc. Chicken Processing Dec-89 1,102,591 Sep-94 333,006 1,182,678
Equipment
Hudson Foods, Inc. Chicken Processing Dec-89 890,708 Sep-94 272,280 959,784
Equipment
Hudson Foods, Inc. Chicken Processing Dec-89 190,739 Sep-94 56,897 205,202
Equipment
Inland Steel Company Laser Measuring System Sep-89 436,808 Apr-94 105,000 487,179
Inland Steel Company Laser Measuring Equipment Sep-89 436,808 Apr-94 105,000 461,538
International Paper Company Trucks Nov-88 165,175 Aug-91 118,185 90,831
International Paper Company Trucks Jul-88 32,039 Nov-91 7,412 31,840
International Paper Company Trucks Sep-88 37,910 May-92 17,372 33,220
International Paper Company Trucks Oct-89 116,589 May-92 83,477 63,595
International Paper Company Trucks Mar-90 76,300 May-92 54,047 34,906
International Paper Company Trucks Sep-88 26,840 Dec-93 7,750 30,848
International Paper Company Truck Nov-89 33,587 Mar-94 9,000 32,917
International Paper Company Trucks Nov-89 33,587 Mar-94 9,000 34,975
International Paper Company Truck Jun-89 27,457 Apr-94 4,500 26,928
International Paper Company Trucks Jun-89 27,457 Apr-94 4,500 32,538
International Paper Company Truck Sep-88 35,302 Sep-94 8,500 36,360
International Paper Company Van Sep-88 39,626 Nov-94 11,325 37,872
International Paper Company Truck with power lift gate Nov-88 32,691 Dec-94 10,000 36,079
International Paper Company Cargo Van Mar-89 13,910 Dec-94 2,740 16,189
International Paper Company Cut-away Van Aug-89 19,484 Dec-94 5,750 19,095
International Paper Company Truck with power lift gate Nov-88 32,691 Feb-95 9,500 36,079
International Paper Company Truck Mar-89 24,458 Apr-95 11,000 25,968
International Paper Company Trucks Apr-89 76,873 May-95 20,000 86,592
International Paper Company Trucks Mar-89 48,783 May-95 26,000 40,150
International Paper Company Truck Jun-89 29,079 May-95 9,000 31,744
International Paper Company Trucks Dec-89 123,513 Apr-95 50,750 139,088
International Paper Company Truck Sep-88 20,850 Dec-95 11,924 39,114
International Paper Company Truck Sep-88 42,161 Dec-95 11,120 73,774
International Paper Company Cab & chassis Oct-89 25,374 Dec-95 9,477 38,797
International Paper Company Truck Aug-89 27,249 Apr-96 7,000 37,622
KeyCorp ATM Machines Aug-89 139,658 Jan-94 41,250 146,802
KeyCorp Office Furniture and Aug-89 913,120 Apr-94 245,000 1,014,508
Equipment
KeyCorp ATM Machines Aug-89 55,864 Aug-94 14,500 66,333
KeyCorp ATM Machines Aug-89 195,522 Apr-96 18,650 211,431
Koppers Industries, Inc. Hydraulic loader & Jun-90 639,120 Jun-95 317,500 793,198
end loader
Midway Airlines, Inc. Commercial Aircraft Jun-90 4,592,040 Sep-91 3,444,589 463,076 9
National Semiconductor Wafer Processing System Apr-89 762,580 Jan-94 82,000 869,955
Corporation
National Union Electric Phone System Aug-89 481,738 Mar-94 130,000 507,722
Corporation
Nissan Motor Corporation Office Information Systems Jul-88 219,187 Jul-93 3,700 221,328
In USA
NMCS, Inc., d/b/a National Office Furniture Jun-88 627,453 Mar-94 1 747,640
Medical Group Services, Inc.
Owens Corning Fiberglas Lift Truck Aug-90 59,786 Dec-94 20,000 59,404
Corporation
Owens Corning Fiberglas Lift Truck Mar-90 18,288 Mar-95 6,500 19,851
Corporation
Owens Corning Fiberglas Material Handling Jul-89 175,098 Jul-92 41,020 154,944
Corporation
Owens Corning Fiberglas Material Handling Oct-89 144,350 Mar-93 47,000 139,317
Corporation
Owens Corning Fiberglas Material Handling Apr-90 97,160 Jun-93 29,100 92,836
Corporation
Owens Corning Fiberglas Material Handling May-90 57,956 Jun-93 13,500 62,821
Corporation
Owens Corning Fiberglas Material Handling Aug-90 123,102 Aug-93 41,000 113,082
Corporation
Owens Corning Fiberglas Sweeper Nov-90 27,592 Dec-93 6,600 26,638
Corporation
Owens Corning Fiberglas Material Handling Apr-90 122,130 Apr-94 36,600 126,827
Corporation
Owens Corning Fiberglas Material Handling May-90 18,972 Apr-94 4,800 20,165
Corporation
Owens Corning Fiberglas Material Handling Oct-89 31,192 Sep-94 9,000 34,524
Corporation
Owens Corning Fiberglas Material Handling Oct-89 56,733 Sep-94 13,000 62,760
Corporation
Owens Corning Fiberglas Material Handling Apr-90 118,092 Apr-95 44,500 128,182
Corporation
Owens Corning Fiberglas Automobile Nov-88 15,822 Apr-95 3,650 20,000
Corporation
Owens Corning Fiberglas Material Handling Feb-90 100,985 Oct-95 35,000 119,560
Corporation
Owens Corning Fiberglas Material Handling Aug-90 20,858 Sep-95 10,750 22,911
Corporation
Owens Corning Fiberglas Material Handling Aug-90 20,858 Aug-95 10,750 22,911
Corporation
Owens Corning Fiberglas Material Handling Jun-90 152,935 Oct-95 56,000 179,186
Corporation
Owens Corning Fiberglas Material Handling Oct-90 22,750 Nov-95 7,000 29,948
Corporation
Owens Corning Fiberglas Material Handling Oct-90 21,920 Oct-95 10,750 24,521
Corporation
Owens Corning Fiberglas Material Handling Dec-89 21,331 May-96 4,100 27,834
Corporation
Quaker Coal Company Crawler Dozer Feb-94 558,301 Apr-96 255,000 356,875
Ran-Bar Corporation Boom lift Aug-93 7,950 Sep-95 1 19,152
Regents of the University Communication Jan-89 80,386 Dec-93 25,500 87,434
of California
Rocky Mountain Aircraft Oct-89 2,150,000 Dec-93 1,472,413 1,383,000
Helicopters, Inc.
Rohr Industries, Inc. Motor Vehicles Apr-89 36,263 Apr-89 7,667 35,328
Rohr Industries, Inc. Motor Vehicles Apr-89 12,393 Jan-92 2,313 12,086
Rohr Industries, Inc. Motor Vehicles Jan-89 14,990 Feb-92 3,509 12,925
Rohr Industries, Inc. Motor Vehicles Apr-89 35,762 Apr-92 9,019 34,793
Rohr Industries, Inc. Motor Vehicles Jan-89 14,990 May-92 5,538 13,776
Rohr Industries, Inc. Motor Vehicles Apr-89 11,921 May-92 3,058 11,597
Rohr Industries, Inc. Motor Vehicles Jan-90 16,378 May-92 13,340 9,100
Rohr Industries, Inc. Motor Vehicles Apr-89 11,920 Jul-92 2,973 11,597
Rohr Industries, Inc. Motor Vehicles Apr-89 24,343 Jul-92 5,146 23,683
Rohr Industries, Inc. Motor Vehicles Apr-89 72,014 Jul-92 20,088 68,396
Rohr Industries, Inc. Motor Vehicles Jul-89 17,801 Jul-92 3,823 15,948
Rohr Industries, Inc. Motor Vehicles Dec-88 95,039 Jan-93 22,012 99,184
Rohr Industries, Inc. Motor Vehicles Jul-89 17,639 Feb-93 11,810 14,614
Rohr Industries, Inc. Motor Vehicles Mar-90 14,382 Feb-93 6,756 12,658
Rohr Industries, Inc. Motor Vehicles Oct-88 23,341 May-93 5,534 24,406
Rohr Industries, Inc. Motor Vehicles May-89 11,380 May-93 2,772 12,955
Rohr Industries, Inc. Motor Vehicles Oct-88 45,369 Aug-93 19,095 61,845
Rohr Industries, Inc. Motor Vehicles Oct-88 10,854 Dec-93 3,977 13,300
Rohr Industries, Inc. Motor Vehicles Dec-88 14,863 Dec-93 4,777 17,664
Rohr Industries, Inc. Motor Vehicles Aug-89 13,910 Dec-93 3,695 15,270
Rohr Industries, Inc. Motor Vehicles Jan-89 9,532 Apr-94 3,300 12,375
Rohr Industries, Inc. Motor Vehicles Apr-89 21,759 Jul-94 8,500 25,267
Rohr Industries, Inc. Motor Vehicles May-89 16,760 Jul-94 3,677 18,710
Rohr Industries, Inc. Motor Vehicles Feb-89 9,359 Aug-94 3,177 12,851
Rohr Industries, Inc. Auto Dec-88 15,642 Jan-95 3,077 21,521
Rohr Industries, Inc. Pickup Truck Nov-89 9,652 Jan-95 4,100 10,720
Sebastiani Vineyards, Inc. Wine Barrels May-89 33,919 Jun-94 4,340 41,682
Sebastiani Vineyards, Inc. Wine Barrels Oct-88 13,728 Jun-96 6,535 36,137
Shell Mining Company Crawler Tractor Oct-89 1,013,257 Dec-94 390,000 1,048,122
Shell Mining Company Miner Machine Feb-90 640,995 Mar-95 130,000 648,032
Shell Mining Company Miner Machine Feb-90 640,427 Mar-95 130,000 647,458
St. Luke's-Roosevelt Medical Furniture, Feb-90 1,075,795 Apr-93 404,654 1,116,417
Hospital Center Fixtures & Equipment
The Budd Company Lift Trucks May-90 154,260 Mar-96 29,000 158,330
The Dow Chemical Company Lift Truck Jul-87 26,198 Aug-92 4,300 25,820
The Dow Chemical Company Material Handling Jul-87 991,409 Aug-92 382,160 877,628
The Dow Chemical Company Rail car Mover Jul-87 145,822 Jan-93 43,650 125,152
The Dow Chemical Company Material Handling May-88 281,424 Jul-93 74,300 290,517
The Dow Chemical Company Material Handling May-88 17,045 Jan-94 5,800 16,340
The Dow Chemical Company Material Handling May-88 33,943 Jun-94 10,900 32,539
The Dow Chemical Company Medical Furniture, May-88 33,119 Jan-95 10,000 39,517
Fixtures & Equipment
USX Steel Corporation Haul Truck Dec-89 1,017,631 Dec-94 324,300 1,003,483
USX Steel Corporation Haul Truck Dec-89 1,017,631 Dec-94 324,300 1,003,483
USX Steel Corporation Haul Truck Dec-89 1,013,766 Dec-94 324,300 999,671
========= =====================
$33,874,148 $13,133,987 $29,250,612
========= =====================
ATEL CASH DISTRIBUTION FUND III
American President Trucking Tractors Feb-90 $64,510 Jun-96 $18,738 $62,791
Co., Ltd.
American President Trucking Tractors Feb-90 64,510 May-96 19,738 62,791
Co., Ltd.
American President Trucking Tractors Feb-90 64,863 Jun-96 18,788 63,134
Co., Ltd.
American President Trucking Tractors Apr-90 322,551 Jun-96 97,892 300,307
Co., Ltd.
American President Trucking Tractors May-90 129,021 Jun-96 37,934 120,123
Co., Ltd.
American President Trucking Tractors May-90 387,062 Jun-96 150,839 343,988
Co., Ltd.
A.O. Smith Corporation Lift trucks Nov-90 22,516 Jan-96 9,000 23,215
A.O. Smith Corporation Lift trucks Nov-90 17,860 Mar-96 3,950 18,414
A.O. Smith Corporation Carton Clamps Nov-90 22,469 Jan-96 9,000 26,166
A.O. Smith Corporation Towmotors Nov-90 120,865 Jan-96 44,000 124,614
A.O. Smith Corporation Lift trucks Nov-90 25,315 Jan-96 8,250 26,100
Carrier Corporation Lift trucks Jun-90 113,195 Apr-95 27,950 114,228
Carrier Corporation Lift trucks Jun-90 359,305 Apr-95 89,800 369,875
Carrier Corporation Lift trucks Aug-90 200,008 Apr-95 43,100 203,148
FMC Gold Company Haul Truck Jun-90 560,232 Jan-94 295,000 427,663
Fred Meyer, Inc. Data Processing Nov-90 3,340,551 Dec-92 2,715,033 2,338,583
Fred Meyer, Inc. Data Processing Oct-90 3,244,649 Aug-95 1,060,276 3,608,683
Koppers Industries, Inc. Material Handling Aug-90 45,485 Jan-94 33,383 31,471
Koppers Industries, Inc. Material Handling Jul-90 54,156 Sep-95 23,000 64,020
Koppers Industries, Inc. Material Handling Dec-90 200,911 Dec-95 102,500 237,614
Koppers Industries, Inc. Hydraulic Excavator Mar-91 114,492 Apr-96 57,500 129,848
Kraft Genersl Foods, Inc. Material Handling Jul-91 46,694 Aug-94 24,248 22,701
Midway Airlines, Inc. Commercial Aircraft Jun-90 2,405,081 Sep-91 1,656,694 226,541 11
Mobil Oil Corporation Material Handling Apr-92 35,662 Jun-95 13,040 29,673
Mobil Oil Corporation Material Handling Jul-92 36,249 Jun-95 10,611 30,163
Pepsico, Inc., d/b/a/ PFS Material Handling Jul-90 73,050 Jun-95 8,470 52,933
Pilgrim's Pride Corporation Chicken Processing Dec-90 3,791,002 Oct-95 1,400,000 4,000,050
Southern Ohio Coal Company Mining Mar-92 3,795,152 Jun-92 4,469,135 207,307
Stone Container Corporation Material Handling Nov-90 15,984 Mar-93 5,500 14,058
Stone Container Corporation Material Handling Nov-90 43,850 Apr-93 9,000 36,268
Stone Container Corporation Material Handling Nov-90 227,384 May-93 54,500 163,622
Stone Container Corporation Material Handling Nov-90 299,787 Aug-93 115,700 301,446
Stone Container Corporation Material Handling Nov-90 23,674 Oct-93 5,800 24,262
Stone Container Corporation Material Handling Nov-90 45,669 Apr-94 17,500 45,093
Stone Container Corporation Material Handling Nov-90 18,611 Jul-94 3,500 16,737
Stone Container Corporation Material Handling Nov-90 50,097 Oct-94 17,735 52,700
Stone Container Corporation Tractor Nov-90 17,227 Jan-95 6,000 18,431
Stone Container Corporation Tractor Nov-90 53,694 Jan-95 30,500 50,456
Stone Container Corporation Material Handling Nov-90 15,625 Feb-95 4,000 14,480
Stone Container Corporation Tractor Nov-90 137,327 Mar-95 75,842 124,820
Stone Container Corporation Material Handling Nov-90 33,498 Mar-95 14,500 35,136
Stone Container Corporation Material Handling Apr-91 128,314 Dec-93 117,236 59,610
Stone Container Corporation Material Handling Nov-90 96,611 Jun-95 29,500 107,181
Stone Container Corporation Material Handling Nov-90 51,420 Jun-95 14,500 54,541
Stone Container Corporation Material Handling Nov-90 216,936 Jun-95 72,500 199,500
Stone Container Corporation Material Handling Nov-90 17,250 Jul-95 5,500 15,176
Stone Container Corporation Material Handling Nov-90 116,700 Jul-95 23,750 133,201
Stone Container Corporation Material Handling Nov-90 63,433 Sep-95 14,000 69,970
Stone Container Corporation Material Handling Nov-90 22,308 Jul-95 5,500 23,453
Stone Container Corporation Material Handling Nov-90 49,232 Jul-95 14,500 54,618
Stone Container Corporation Material Handling Nov-90 110,836 Jul-95 21,750 125,403
Stone Container Corporation Material Handling Nov-90 17,124 Jul-95 4,300 19,535
Stone Container Corporation Material Handling Nov-90 25,898 Jul-95 12,000 26,586
Stone Container Corporation Sweeper Nov-90 14,203 Oct-95 2,100 10,440
Stone Container Corporation Material Handling Nov-90 15,810 Jul-95 8,500 16,230
Stone Container Corporation Material Handling Nov-90 12,949 Jul-95 6,000 13,293
Stone Container Corporation Material Handling Nov-90 183,825 Jul-95 105,500 188,712
Stone Container Corporation Material Handling Nov-90 46,928 May-96 8,400 57,267
Stone Container Corporation Material Handling Nov-90 68,950 Mar-96 21,500 85,665
Stone Container Corporation Material Handling Nov-90 46,492 Mar-96 13,500 41,148
Stone Container Corporation Material Handling Nov-90 136,838 Jun-96 60,670 164,020
Stone Container Corporation Material Handling Nov-90 22,561 Jan-96 2,000 29,525
Teledyne Industries, Inc. Material Handling Nov-90 56,635 Jan-94 13,714 52,309
Teledyne Industries, Inc. Material Handling Nov-90 24,073 Apr-94 11,100 22,234
Teledyne Industries, Inc. Material Handling Nov-90 41,301 Apr-96 15,000 42,464
The Dow Chemical Company Material Handling Oct-91 50,478 Aug-93 12,000 47,859
The Dow Chemical Company Research Equipment Apr-91 930,833 Feb-96 214,500 1,013,116
The Helen Mining Company Mining Jun-91 211,129 Aug-93 14,321 227,537 10
Wal-mart Stores, Inc. Forklifts, Trucks Jun-94 189,632 Jan-96 165,000 188,817
& Trailers ======== =====================
$23,608,542 $13,816,787 $17,253,064
======== =====================
ATEL CASH DISTRIBUTION FUND IV
Burlington Northern Railroad Locomotives Dec-92 $ 7,950,000 Dec-94 5,595,000 4,161,000
Canadian Pacific Limited Rail Car Oct-92 5,704 Apr-96 21,772 520
H. E. Butt Grocery Company Trailers Nov-92 37,957 Jan-96 35,624 18,607
Kraft General Foods Tractors Dec-93 419,267 Jan-95 363,510 337,986
Midwest Power Systems, Inc. Coal Hopper Car Dec-92 17,500 Sep-93 20,543 3,915
Midwest Power Systems, Inc. Coal Hopper Car Dec-92 2,222,500 Apr-96 1,730,291 1,993,170
Mobil Oil Corportion Boom Trucks Nov-92 69,903 Jan-94 46,026 19,329
Mobil Oil Corportion Tractors Nov-92 182,949 Jun-96 48,000 136,246
Mobil Oil Corportion Tractors Nov-92 62,312 Jan-96 25,500 43,963
Mobil Oil Corportion Tractors Nov-92 62,312 Mar-96 25,500 43,963
Mobil Oil Corportion Tractors Dec-92 23,500 Feb-96 8,950 21,126
The Helen Mining Company Mining May-92 641,854 Aug-93 44,235 679,436 10
Trans Ocean Container Intermodal Containers Sep-93 6,744 Jul-94 7,398 825
Corporation
Trans Ocean Container Intermodal Containers Sep-93 13,223 Apr-95 12,095 3,016
Corporation
Trans Ocean Container Intermodal Containers Sep-93 6,706 Jul-95 6,394 2,069
Corporation
Trans Ocean Container Intermodal Containers Sep-93 10,196 Oct-95 6,112 3,595
Corporation
Trans Ocean Container Intermodal Containers Sep-93 13,870 Dec-95 10,608 5,537
Corporation
Union Tank Car Box Car Oct-92 25,000 Feb-95 23,158 21,678
Union Tank Car Company Rail Car Dec-92 13,000 Jan-93 14,569 880
Union Tank Car Company Rail Car Oct-92 12,000 Apr-95 11,088 12,752
Union Tank Car Company Rail Car Oct-92 1,222,542 Jul-95 1,383,118 601,100
Union Tank Car Company Rail Car Oct-92 389,367 Sep-95 441,332 203,680
Union Tank Car Company Rail Car Oct-92 389,367 Oct-95 442,564 209,760
Union Tank Car Company Rail Car Oct-92 12,000 Jan-96 10,371 8,202
Union Tank Car Company Rail Car Oct-92 26,000 Apr-96 21,695 18,920
========== =====================
$13,835,773 10,355,453 8,551,275
========== =====================
ATEL CASH DISTRIBUTION FUND V
Burris Foods Trailers Apr-94 $108,442 Dec-95 $121,000 $53,210
IBM Corporation Office furniture Sep-93 693,896 Jun-95 516,291 666,576
Mobil Administrative Services Helicopter Jun-93 844,525 Mar-95 920,000 308,000
PV Trucking Tractors Jun-94 75,333 Jan-96 50,000 36,000
Quaker Coal Company Mining equipment Jun-94 595,000 Jun-95 505,775 173,253
Quaker Coal Company Mining equipment Jun-94 1,118,880 Jun-95 930,251 347,926
Quaker Coal Company Mining equipment Dec-94 3,000,000 Jun-95 2,696,718 794,600
The Atchison Topeka & Santa Fe Intermodal Containers Jun-94 9,787 Jan-95 10,107 611
Railroad Company
The Atchison Topeka & Santa Fe Intermodal Containers Oct-94 9,635 Jan-95 10,123 306
Railroad Company
The Atchison Topeka & Santa Fe Intermodal Containers Apr-94 9,787 Jan-96 9,612 1,832
Railroad Company
The Atchison Topeka & Santa Fe Intermodal Containers May-94 9,787 Jan-96 9,612 1,832
Railroad Company
The Atchison Topeka & Santa Fe Intermodal Containers Jun-94 9,787 Jan-96 9,612 1,832
Railroad Company
The Dow Chemical Company Copiers Jul-94 42,694 Jul-95 31,150 13,588
The Dow Chemical Company Copiers Jan-95 37,493 Dec-95 20,750 12,437
The Dow Chemical Company Copiers Apr-95 13,455 Dec-95 14,080 2,199
The Dow Chemical Company Copiers Jul-94 195,975 Jan-96 139,400 224,830
The Dow Chemical Company Copiers Oct-94 230,577 Jan-96 204,000 76,459
The Dow Chemical Company Copiers Jan-95 110,900 Jan-96 98,750 38,074
The Dow Chemical Company Staplers Apr-95 109,800 Jan-96 119,000 18,576
Tom's Foods, Inc. Tractors Jun-94 61,908 Feb-96 36,800 49,982
Trans Ocean Container Intermodal Containers Sep-93 18,054 Jul-94 18,898 2,371
Corporation
Trans Ocean Container Intermodal Containers Sep-93 3,372 Oct-94 3,675 1,674
Corporation
Trans Ocean Container Intermodal Containers Sep-93 10,116 Apr-95 5,246 2,345
Corporation
Trans Ocean Container Intermodal Containers Sep-93 5,814 Jul-95 5,263 1,866
Corporation
Trans Ocean Container Intermodal Containers Sep-93 4,647 Oct-95 4,405 850
Corporation
Trans Ocean Container Intermodal Containers Sep-93 53,507 Dec-95 46,560 21,970
Corporation
Trans Ocean Container Intermodal Containers Sep-93 2,245 Jun-96 2,468 1,041
Corporation
Trans Ocean Container Intermodal Containers Sep-93 25,925 Apr-96 19,257 10,817
Corporation ========= ======================
$7,411,341 $6,558,803 $2,865,057
========= ======================
ATEL CASH DISTRIBUTION FUND VI
Perdue Transportation Tractors Nov-95 $47,038 Feb-96 $45,838 $3,900
Corporation
The Atchison Topeka & Intermodal Containers Jan-94 20,068 Jan-95 21,084 567
Santa Fe Railroad Company
The Atchison Topeka & Intermodal Containers Sep-94 10,034 Jan-95 10,446 335
Santa Fe Railroad Company
The Atchison Topeka & Intermodal Containers Nov-94 10,034 Feb-95 10,446 1,159
Santa Fe Railroad Company
The Atchison Topeka & Intermodal Containers Sep-94 20,068 Jan-96 19,973 2,543
Santa Fe Railroad Company
The Atchison Topeka & Intermodal Containers Nov-94 9,633 Apr-96 9,588 1,240
Santa Fe Railroad Company
The Atchison Topeka & Intermodal Containers Nov-94 10,034 Jan-96 10,113 968
Santa Fe Railroad Company
The Atchison Topeka & Intermodal Containers Nov-94 6,453 Apr-96 6,567 788
Tracy Locke, Inc. Printers Mar-95 12,470 Sep-95 12,179 1,662
Trans Ocean Container Intermodal Containers Dec-95 9,529 Jun-96 11,167 700
Corporation ====== =======================
$155,361 $157,401 $13,862
====== =======================
TOTALS OF ALL FUNDS: $87,898,330 $47,137,157 $66,525,434
============ =========================
</TABLE>
Notes
(1) "Acquisition Date" is the date the Equipment was acquired by the prior
program.
(2) "Equipment Acquisition Price" is the actual cost of the item of Equipment,
including Acquisition Fees, and any other expenditures incurred by the prior
program in the acquisition of the Equipment.
(3) "Sale Price" is the actual cash received for the purchase, early termination
or casualty of the Equipment upon Lease termination, net of any direct
out-of-pocket closing costs incurred by the prior program as a result of such
termination.
(4) "Excess of Rents Over Expenses" is a total amount of Lease rents, less any
applicable direct out-of-pocket costs incurred by the prior program during the
term of the Lease for the particular Lease transaction.
(5) "Sale Price" represents cash and non-cash amounts distributed by Lessee as a
result of U.S. Bankruptcy Court-approved Chapter 11 Reorganization Plan.
Distributions were as follows: Cash $9,512; Senior Secured Notes $1,000;
Convertible Subordinated Notes $700; Common Stock $296 (market value as of
7/16/92).
(6) The original lease included a mobile MRI unit and a tractor. The tractor
leased under the original lease was sold to the lessee. The MRI unit has been
leased to a third party on a 24 month term with a bargain purchase option to be
exercised at the end of the lease term. The Equipment under this lease is owned
1/3 by ATEL Cash Distribution Fund and 2/3 By ATEL Cash Distribution Fund II.
(7) "Sale Price" represents cash and non-cash amounts distributed by Lessee as a
result of U.S. Bankruptcy Court-approved pre-packaged Chapter 11 Plan.
Distributions were as follows: Cash $602,435; Senior Secured Notes $72,800;
Convertible Subordinated Notes $50,900; Common Stock $21,482 (market value as of
7/16/92).
(8) "Sales Price" represents cash and non-cash amounts distributed by Lessee as
a result of U.S. Bankruptcy Court-approved pre-packaged Chapter 11 Plan.
Distributions were as follows: Cash $431,499; Senior Secured Notes $51,600;
Convertible Subordinated Notes $36,100; Common Stock $15,233 (market value as of
7/16/92).
(9) "Equipment Acquisition Price" represents a 2/3 beneficial interest in the
transaction. The Equipment was foreclosed in September 1990 by the non-recourse
lender, John Hancock Leasing. Actual cash/equity amount paid by the prior
program for the Equipment was $1,430,345, the balance of the Acquisition Price
was financed with non-recourse debt. "Sale Price" represents the amount of the
non-recourse debt written off at the time of foreclosure.
(10) The "Sales Price" represents the sum of cash received from the sale of
the aircraft pre-bankruptcy petition, plus all amounts received by the lessor
under its unsecured claim filed in the lessee's Chapter 11 reorganization,
through the date of this table. Through September 30, 1996, such claim payments
have amounted to 40% of the allowed claim amount of $776,542, or $310,617.
(11) "Equipment Acquisition Price" represents a 1/3 beneficial interest in the
transaction. The Equipment was foreclosed in September 1990 by the non-recourse
lender, John Hancock Leasing. Actual cash/equity amount paid by the prior
program for the Equipment was $715,172, the balance of the Acquisition Price was
financed with non-recourse debt. "Sale Price" represents the amount of the
non-recourse debt written off at the time of foreclosure.
A-37
<PAGE>
EXHIBIT B
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
November 29, 1996
atel7-2/lpa.3
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
1. NAME AND PRINCIPAL PLACE OF BUSINESS............................ B-1
2. DEFINITIONS..................................................... B-1
3. BUSINESS AND PURPOSE............................................ B-8
4. TERM............................................................ B-9
5. GENERAL PARTNER................................................. B-9
6. INITIAL AND ADDITIONAL LIMITED PARTNERS......................... B-9
Section 6.1 Initial Limited Partners........................... B-9
Section 6.2 Additional Limited Partners........................ B-9
Section 6.3 Conditions to Admission............................ B-9
Section 6.4 Admission as a Limited Partner..................... B-10
Section 6.5 Limitation on Additional Insurance................. B-10
Section 6.6 Escrow............................................. B-10
Section 6.7 Capital Account.....................................B-10
7. LIABILITY AND STATUS OF LIMITED PARTNERS.........................B-11
8. COMPENSATION TO THE GENERAL PARTNER AND/OR
AFFILIATES OF THE GENERAL PARTNER..............................B-11
Section 8.1 General Limitation..................................B-11
Section 8.2 Acquisition Stage...................................B-11
Section 8.3 Operating Stage.....................................B-11
Section 8.4 Payment of Fees on Removal..........................B-14
Section 8.5 Employment of Broker-Dealers........................B-14
9. FUND EXPENSES AND RESERVES.......................................B-14
Section 9.1 Reimbursement of General Partner....................B-14
Section 9.2 Limitation on Reimbursement.........................B-14
Section 9.3 Fund Expenses.......................................B-15
Section 9.4 Reserves............................................B-16
10. ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS... .................B-16
Section 10.1 Allocation of Net Income and Net
Loss Prior to Initial Closing Date...............B-17
Section 10.2 Allocation of Net Income and Net
Loss After Initial Closing Date..................B-17
Section 10.3 Special Allocations................................B-19
Section 10.4 Distribution of Cash From Operations...............B-19
atel7-2/lpa.3
B-i
<PAGE>
Section 10.5 Distribution of Cash From Sales
or Refinancing..................................B-19
Section 10.6 Distributions of Cash From
Reserve Account.................................B-20
Section 10.7 Determination of Amounts to
be Distributed..................................B-21
Section 10.8 Consent to Allocations............................B-21
Section 10.9 Limitation on Distributions.......................B-21
Section 10.10 Allocation to General Partner.....................B-21
Section 10.11 Return of Unused Capital..........................B-21
Section 10.12 General Partner Interest..........................B-21
Section 10.13 Distributions in Kind.............................B-21
Section 10.14 Withholding Taxes.................................B-22
11. ASSIGNMENT OF FUND INTERESTS.....................................B-22
Section 11.1 Limitations on Transfer............................B-22
Section 11.2 Distributions and Effective
Date of Transfer ................................B-23
Section 11.3 Governmental Restrictions..........................B-24
Section 11.4 Non-Complying Transfers............................B-24
Section 11.5 Misrepresentations and Forfeit.....................B-24
12. SUBSTITUTED LIMITED PARTNERS.....................................B-24
Section 12.1 Limitations on Substitution........................B-24
Section 12.2 Consent to Admission...............................B-25
Section 12.3 Amendment of Agreement.............................B-25
13. REPURCHASE OF FUND INTERESTS.....................................B-25
14. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS..........................B-26
Section 14.1 Books of Account and Records.......................B-26
Section 14.2 Audited Annual Financial Statements................B-28
Section 14.3 Other Annual Reporting.............................B-28
Section 14.4 Quarterly Reports..................................B-29
Section 14.5 Unaudited Quarterly
Financial Statements.............................B-29
Section 14.6 Other Quarterly Reports............................B-29
Section 14.7 Tax Returns........................................B-29
Section 14.8 Governmental Reports...............................B-30
Section 14.9 Maintenance of Suitability Records.................B-30
15. RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES
OF THE GENERAL PARTNER...........................................B-30
Section 15.1 Services of the General Partner....................B-30
Section 15.2 Authority of the General Partner...................B-30
Section 15.3 General Powers and Fiduciary Duty..................B-34
Section 15.4 Limitations on General
Partner's Authority.............................B-34
Section 15.5 Limitation on General Partner's
Liability.......................................B-39
Section 15.6 Tax Matters Partner................................B-39
Section 15.7 Minimum Investment in Equipment /
Maximum Front-End Fees..........................B-39
atel7-2/lpa.3
B-ii
<PAGE>
Section 15.8 Reliance on General Partner's Authority............B-40
16. RIGHTS, POWERS AND VOTING RIGHTS OF
THE LIMITED PARTNERS.............................................B-41
Section 16.1 Limitation on Limited Partner Authority............B-41
Section 16.2 Voting Rights......................................B-41
Section 16.3 Voting Procedures..................................B-41
Section 16.4 Limitations on Limited Partner Rights..............B-43
Section 16.5 Limitations on Power to Amend Agreement............B-43
Section 16.6 Limited Partner List...............................B-44
Section 16.7 Dissenters' Rights and Limitations on
Mergers and Roll-ups............................B-44
17. TERMINATION OF A GENERAL PARTNER AND TRANSFER
OF A GENERAL PARTNER'S INTEREST..................................B-46
Section 17.1 Removal or Withdrawal..............................B-46
Section 17.2 Other Terminating Events...........................B-46
Section 17.3 Election of Successor General Partner;
Continuation of Fund Business....................B-46
Section 17.4 Admission of Successor or
Additional General Partner.......................B-47
Section 17.5 Effect of a Terminating Event......................B-47
Section 17.6 Election of Additional General Partner.............B-48
Section 17.7 Assignment of General
Partner's Interest...............................B-48
Section 17.8 Limited Partners' Participation
in General Partner's Bankruptcy..................B-48
18. CERTAIN TRANSACTIONS.............................................B-49
19. TERMINATION AND DISSOLUTION OF THE FUND..........................B-49
Section 19.1 Termination and Dissolution........................B-49
Section 19.2 Accounting and Liquidation.........................B-50
20. SPECIAL POWER OF ATTORNEY........................................B-50
Section 20.1 Execution of Power of Attorney.....................B-50
Section 20.2 Special Power of Attorney..........................B-51
21. INDEMNIFICATION..................................................B-51
Section 21.1 Indemnification of the General Partner.............B-51
Section 21.2 Limitations on Indemnification.....................B-52
Section 21.3 Insurance..........................................B-53
22. MISCELLANEOUS....................................................B-53
Section 22.1 Counterparts.......................................B-53
Section 22.2 Successors and Assigns.............................B-53
Section 22.3 Severability.......................................B-53
Section 22.4 Notices............................................B-53
Section 22.5 Captions...........................................B-53
Section 22.6 Number and Pronouns................................B-53
Section 22.7 General Partner Address............................B-54
Section 22.8 Limited Partner Address............................B-54
Section 22.9 Construction.......................................B-54
atel7-2/lpa.3
B-iii
<PAGE>
Section 22.10 Qualification to Do Business.......................B-54
atel7-2/lpa.3
B-iv
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF ATEL CAPITAL EQUIPMENT FUND VII, L.P.
This PARTNERSHIP AGREEMENT (the "Agreement"), entered into as of the 17th day of
May, 1996, by and between ATEL Financial Corporation ("ATEL"), a California
Corporation, as the General Partner (the "General Partner"), and Eliza Cash and
Linda Batt as the initial Limited Partners, whereby the parties together agrees
to form a limited partnership pursuant to the California Revised Limited
Partnership Act is hereby amended and restated in its entirety this 29th day of
November, 1996, as set forth below:
1. NAME AND PRINCIPAL PLACE OF BUSINESS
The name of the Fund shall be ATEL Capital Equipment Fund VII, L.P. or
such other name as the General Partner shall hereafter designate in writing to
the Limited Partners. The Fund's principal place of business shall be 235 Pine
Street, 6th Floor, San Francisco, California 94104, or such other place or
places in the State of California as the General Partner may hereafter
determine.
2. DEFINITIONS
The following terms used in this Agreement shall (unless otherwise
expressly provided herein or unless the context otherwise requires) have the
following respective meanings:
"Acquisition Expenses" shall mean expenses including, but not limited
to, legal fees and expenses, travel and communication expenses, costs of
appraisals, accounting fees and expenses, and miscellaneous expenses relating to
selection and acquisition of Equipment, whether or not acquired.
"Acquisition Fees" shall mean the total of all fees and commissions
paid by any party in connection with the initial purchase or manufacture of
Equipment. Included in the computation of such fees or commissions shall be any
commission, selection fee, financing fee, nonrecurring management fee, or any
fee of a similar nature, however designated.
"Adjusted Capital Account Deficit" shall mean, with respect to any
Partner, the deficit balance if any, in such Partner's Capital Account as of the
end of the relevant fiscal year, after giving effect to the following
adjustments: (a) Crediting to such Capital Account any amounts which such
Partner is obligated to restore or is deemed to be obligated to restore pursuant
to Regulations sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) Debiting to
such Capital Account the items described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4),(5) and (6). This definition is intended to
atel7-2/lpa.3
B-1
<PAGE>
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Adjusted Invested Capital" shall mean, as of any date, the Original
Invested Capital attributable to the Units held by any Person on or before such
date, as decreased (but not below zero) by the amount which (i) all
Distributions from Cash from Operations and Cash from Sales and Refinancing with
respect to such Units on or before the date of determination pursuant to any
provision of this Agreement exceed (ii) the Priority Distribution attributable
to such Units for such period.
"Affiliate" of a Person shall mean (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling 10% or more of the outstanding voting
securities or beneficial interests of such Person, (iii) any officer, director,
trustee or partner of such Person and (iv) if such Person is an officer,
director, trustee, partner or holder of 10% or more of the voting securities or
beneficial interests of such Person, any other company for which such Person
acts in such capacity. However, such term shall not include a Person who is a
partner in a partnership or joint venture with the Fund if such Person is not
otherwise an Affiliate.
"Assignee" shall mean a Person who has acquired a beneficial interest
in one or more Units from a third party but who is neither a substituted Holder
nor an Assignee of Record.
"Assignee of Record" shall mean an Assignee who has acquired a
beneficial interest in one or more Units whose ownership has been recorded on
the books of the Partnership and which ownership is the subject of a written
instrument of assignment, the effective date of which assignment has passed.
"ATEL" shall mean ATEL Financial Corporation, a California
corporation.
"Capital Account" shall mean, with respect to any Partner, such
Partner's Capital Account determined in accordance with Section 6.7.
"Cash from Operations" shall mean the excess of Gross Revenues over
cash disbursements (including the Equipment Management Fee and amounts
reinvested by the Fund in Equipment in compliance with Section 15.4.18) without
reduction for depreciation and amortization of intangibles such as organization
and underwriting costs but after a reasonable allowance for cash for repairs,
replacements, contingencies and anticipated obligations, as determined by the
General Partner. Cash from Operations shall not include Cash from Sales or
Refinancing or Cash from Reserve Account.
atel7-2/lpa.3
B-2
<PAGE>
"Cash from Reserve Account" shall mean that portion of the Net
Proceeds not utilized in the acquisition of Equipment, including cash maintained
according to the provisions of Section 9.4.
"Cash from Sales or Refinancing" shall mean the net cash realized by
the Fund from the sale, refinancing or other disposition of any Equipment
(including insurance proceeds or lessee indemnity payments arising from the loss
or destruction of any Equipment through casualty) after payment of all expenses
related to the transaction (including, subject to the subordination provisions
of Section 8.3.2, the Equipment Resale Fee); provided, however that Cash from
Sales or Refinancing shall not include Cash from Reserve Account or Cash from
Operations.
"Closing Date" shall mean such date designated by the General Partner for
the termination of the offering of Units, but not later than November 29, 1998.
Extension of the offering beyond one year from the date of the Prospectus shall
be subject to the qualification of the offering for any such extension in those
jurisdictions which may limit the offering period to one year. "Initial Closing
Date" shall mean the date on which subscribers for Units, other than the initial
Holder, are first admitted to the Fund as Holders. "Final Closing Date" shall
mean the last date on which subscribers for Units are admitted to the Fund as
Holders.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent federal revenue laws.
"Distributions" shall mean any cash, tax credits or other property
allocated to or distributed to Holders and the General Partner arising from
their respective interests in the Fund, but shall not include any compensation
payable to the General Partner under the provisions of Article 8 or Article 9,
except as otherwise provided herein.
"ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended.
"Equipment" shall mean the equipment acquired and owned by the Fund to
be leased by the Fund to others as well as any Fund interest in equipment,
including without limitation its rights, whether direct or indirect, in all
trusts, joint ventures, leases, chattel paper, options and other contract rights
with respect to equipment.
"Equipment Management Fee" shall mean the fee payable to an Affiliate
of the General Partner under the provisions of Section 8.3.1 of this Agreement.
atel7-2/lpa.3
B-3
<PAGE>
"Equipment Re-lease Fee" shall mean the fee payable to an Affiliate of
the General Partner under the provisions of Section 8.3.3 of this Agreement.
"Equipment Resale Fee" shall mean the fee payable to an Affiliate of
the General Partner, under the provisions of Section 8.3.2 of this Agreement.
"Front-End Fees" shall mean fees and expenses paid by any party for any
services rendered during the Fund's organization and acquisition phase including
Organization and Offering Expenses, Leasing Fees, Acquisition Fees, Acquisition
Expenses, and any other similar fees, however designated. Notwithstanding the
foregoing, Front-End Fees shall not include any Acquisition Fees or Acquisition
Expenses paid by a manufacturer of Equipment to any of its employees unless such
Persons are Affiliates of the General Partner.
"Full Payout Lease" shall mean a lease under which the non-cancellable
rental payments due during the initial term of the lease are at least sufficient
to cover the purchase price of the Equipment leased.
"Fund" shall mean the limited partnership created under this
Agreement.
"Fund Manager" shall mean the General Partner, ATEL Financial
Corporation or its successor as General Partner of the Fund.
"Fund Minimum Gain" shall have the meaning set forth in Regulations
section 1.704-2(d)(1).
"General Partner" shall mean ATEL Financial Corporation ("ATEL"), a
California corporation, or any other Person or Persons which succeed it in such
capacity. The General Partner is referred to throughout the Prospectus as "ATEL"
or the "Fund Manager."
"Gross Income" shall mean the gross income of the Fund within the
meaning of section 61(a) of the Code.
"Gross Proceeds" shall mean the aggregate total of the Original
Invested Capital of the initial and all of the additional Holders.
"Gross Revenues" shall mean all revenues from the operation and lease
of the Equipment other than from security deposits paid by lessees thereof. The
term "Gross Revenues" shall not include revenues from the sale, refinancing or
other disposition of Equipment.
"High Payout Lease" shall mean a lease under which the noncancellable
rental payments and other payment obligations of the lessee due through the
initial term of the lease are equal to at
atel7-2/lpa.3
B-4
<PAGE>
least 90% of the original purchase price paid by the Fund for the
Equipment.
"Holders" shall mean owners of Units who are either Partners or
Assignees of Record, and reference to a "Holder" shall be to any one of them.
The General Partner shall not be considered to be a Holder except to the extent
it also owns Units.
"Incentive Management Fee" shall mean the fee payable to an Affiliate
of the General Partner under the provisions of Section 8.3.4 of this Agreement.
"Independent Expert" shall mean a person with no current material or
prior business or personal relationship with the General Partner or any of its
Affiliates who is engaged to a substantial extent in the business of rendering
opinions regarding the value of assets of the type held by the Fund, and who is
qualified to perform such work.
"IRA" shall mean an individual retirement account qualifying under
Section 408 of the Code.
"Investment in Equipment" shall mean the amount of Gross Proceeds
actually paid or allocated to the purchase of Equipment acquired by the Fund,
any amount of Gross Proceeds reserved pursuant to Section 9.4 hereof up to a
maximum of 3% of Gross Proceeds and other cash payments such as interest and
taxes, but excluding Front-End Fees.
"Leasing Fees" shall mean the total of all fees and commissions paid by
any party in connection with the initial lease of equipment acquired by the
Fund.
"Limited Partners" shall mean the initial limited partners and
any other Persons who are admitted to the Fund as additional or
substituted limited partners. Reference to a "Limited Partner"
shall refer to any one of them.
"Net Income" or "Net Loss" shall mean the taxable income or taxable
loss of the Fund (including the Fund's share of income or loss of any
partnership, venture or other entity which owns a particular item of Equipment),
as determined for federal income tax purposes, computed by taking into account
each item of Fund income, gain, loss, deduction or credit not already included
in the computation of taxable income and taxable loss.
"Net Lease Provisions" shall mean contractual arrangements under which
the lessee assumes responsibility for, and bears the cost of, insurance, taxes,
maintenance, repair and operation of the leased asset and where non-cancellable
rental payments under the lease are absolutely net to the lessor,
notwithstanding that some minor costs or responsibilities remain with the Fund
as lessor or that the Fund retains the option to require and pay for a higher
atel7-2/lpa.3
B-5
<PAGE>
standard of care or greater level of maintenance or insurance than would be
imposed on the lessee under the terms of the lease.
"Net Proceeds" shall mean the total Gross Proceeds less
Organization and Offering Expenses.
"Nonrecourse Deductions" has the meaning given it in
Regulations section 1.704-2(b)(1).
"Nonrecourse Liability" means a Partnership liability with respect to
which no Partner or Related Person bears the economic risk of loss.
"Operating Lease" shall mean a lease under which the aggregate rental
payments due during the initial term of the lease are less than the purchase
price of the Equipment leased.
"Organization and Offering Expenses" shall mean those expenses incurred
in connection with preparing the Fund for registration and subsequently offering
and distributing Units to the public, including selling commissions and all
advertising expenses except advertising expenses related to the leasing of
Equipment.
"Original Invested Capital" shall mean the amount in cash contributed
by each Partner to the capital of the Fund for his interest in the Fund, which
amount shall be attributed to Units in the hands of a subsequent Holder.
"Partner Nonrecourse Debt" has the meaning given it in
Regulations section 1.704-2(b)(4).
"Partners" shall mean collectively the General Partner and Holders who
are admitted to the Fund as Limited Partners and reference to a "Partner" shall
be to any one of the Partners.
"Partnership Agreement" or "Agreement" shall mean this Agreement of
Limited Partnership of ATEL Capital Equipment Fund VII, L.P., as it may be
amended from time to time.
"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.
"Priority Distribution" for any calendar year or other period shall
mean, with respect to the Units held by any Person, the average Adjusted
Invested Capital with respect to such Units during such period multiplied by 10%
per annum (calculated on a cumulative basis, compounded daily, from the last day
of the calendar quarter in which the capital contribution of the initial
purchaser of such Units was received by the Fund and pro rated for any fraction
of a calendar year for which such calculation is made).
"Prospectus" shall mean the final prospectus filed in
connection with the registration of the Units with the Securities
atel7-2/lpa.3
B-6
<PAGE>
and Exchange Commission on Form S-1, as amended, together with any supplement
thereto which may be subsequently filed with such Commission.
"Purchase Price of Equipment" shall mean the price paid upon the
purchase or sale of a particular item of equipment, including the amount of
Acquisition Fees and all liens and mortgages on the equipment, but excluding
points and prepaid interest.
"Qualified Plan" shall mean employee trusts (or employer individual
retirement accounts), Keogh Plans and corporate retirement plans qualifying
under Section 401(a) of the Code.
"Regulations" shall mean the income tax regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Reimbursable Administrative Expenses" shall mean the ordinary
recurring administration expenses incurred by the Fund Manager and reimbursed by
the Fund. Such expenses shall not include interest, depreciation, equipment
maintenance or repair, third party services or other non-administrative
expenses.
"Reinvestment Period" shall mean the period commencing with the Initial
Closing Date and ending on a date 72 months after the last day of the fiscal
year during which the Final Closing Date occurs.
"Related Person" means a Person having an relationship with a Partner
that is described in Regulations section 1.752-4(b).
"Resident Alien" shall mean a resident alien as defined within the
Federal Aviation Act of 1958, as amended from time to time, or any successor
statute, or any regulations adopted pursuant to such Act or any successor
statute.
"Roll-Up" shall mean a transaction involving the acquisition, merger,
conversion or consolidation, either directly or indirectly, of the Fund and the
issuance of securities of a Roll-Up Entity.
Such term does not include:
(a) any transaction if the securities of the Fund have
been for at least twelve months traded through the National
Association of Securities Dealers, Inc. Automated Quotation
National Market System; or
(b) a transaction involving the conversion to corporate, trust
or association form of only the Fund, if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following
(i) the Limited Partners voting rights;
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(ii) the term of existence of the Fund;
(iii) the terms of compensation of the General
partner and its Affiliates; or
(iv) the Fund's investment objectives.
"Roll-Up Entity" means the partnership, trust, corporation or other
entity that would be created or would survive after the successful completion of
a proposed Roll-Up transaction.
"Service" shall mean the United States Internal Revenue
Service or its successor.
"Sponsor" shall mean any Person directly or indirectly instrumental in
organizing, wholly or in part, a Program or any Person who will manage or
participate in the management of a Program, and any Affiliate of any such
Person. Sponsor does not include the Program itself or a Person whose only
relation with the Program is that of an independent equipment manager and whose
only compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants and underwriters whose only compensation
is for professional services rendered in connection with the offering of Program
interests.
"Substantially All of the Assets" shall mean, unless the context
otherwise dictates, Equipment representing 66 2/3% or more of the net book value
of all Equipment as of the end of the most recently completed fiscal quarter.
"Unit" shall mean the interest in the Fund representing Original
Invested Capital in the amount of $10 and shall entitle the Holder thereof to
the rights herein provided.
"United States Citizen" shall mean a "citizen of the United States" as
defined within the Federal Aviation Act of 1958, as amended from time to time,
or any successor statute, or any regulations adopted pursuant to such Act or any
successor statue.
3. BUSINESS AND PURPOSE
The primary purpose of the Fund is to purchase, own, lease and sell
various types of Equipment pursuant to such arrangements as the General Partner
in its discretion may enter into on behalf of the Fund. The Fund may enter into
ventures, partnerships and other business arrangements with respect to Equipment
to the extent deemed prudent by the General Partner in order to achieve
successful operations for the Fund, subject to the provisions of Section 15.4.8.
The Fund may also engage in such other lawful activities as may be deemed by the
General Partner to be incident to its primary purpose or prudent and in the
Fund's best interest. The Fund's investment objectives shall be those set forth
in the Prospectus, and the General Partner may not make any material change to
such investment objectives without first obtaining the
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written consent or approval of Limited Partners owning more than 50% of the
total outstanding Units entitled to vote.
4. TERM
The Fund commenced as of the 17th day of May, 1996 and shall continue
until the 31st day of December, 2017, unless previously terminated in accordance
with the provisions of this Agreement.
5. GENERAL PARTNER
5.1 The General Partner has contributed $100 in cash to the Fund and at
all times during the existence of the Fund the General Partner shall have a
present and continuing interest in Net Income, Net Losses and Distributions
according to the provisions of Article 10.
5.2 In the event that, immediately prior to the dissolution of the Fund
referred to in Article 19, the General Partner shall have a deficiency in its
Capital Account as determined in accordance with generally accepted accounting
principles, then the General Partner shall contribute in cash to the capital of
the Fund an amount equal to the lesser of (a) the deficiency in the General
Partner's Capital Account or (b) 1.01% of the Original Invested Capital which
has not been returned pursuant to Section 10.12. This Section 5.2 is intended to
comply with Regulation Section 1.704-1(b), and shall be interpreted and applied
in a manner consistent with such regulation.
6. INITIAL AND ADDITIONAL LIMITED PARTNERS
6.1 Initial Limited Partners. Linda Batt and Eliza Cash, as the initial
Limited Partners, have each contributed the sum of $250 to the capital of the
Fund and each has received 25 Units in return therefor.
6.2 Additional Limited Partners. The Fund intends to sell and issue to
Holders not less than 120,000 nor more than 15,000,000 additional Units and to
admit as additional Limited Partners the Persons who contribute cash to the
capital of the Fund for such Units.
6.3 Conditions to Admission. Subject to the provisions of Section 6.6, each
Person who acquires any such additional Units shall become a Limited Partner in
the Fund at such time as he has: (i) purchased 250 or more Units (200 Units in
case of an IRA or Keogh Plan), (ii) contributed the sum of $10 in cash for each
Unit purchased (or such lesser net amount as may be provided in accordance with
the terms described in the Prospectus under "Plan of Distribution"), (iii)
executed and filed with the Fund a written instrument which sets forth an
intention to become a Limited Partner and requests admission to the Fund in that
capacity, together with such other instruments as the General Partner may
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deem necessary or desirable to effect such admission, including the written
acceptance and adoption by such Person of the provisions of this Agreement, and
the execution, acknowledgment and delivery to the General Partner of a special
power of attorney, the form, style and content of which are more fully described
herein, and (iv) the General Partner accepts such Person as a Limited Partner in
the Fund.
6.4 Admission as a Limited Partner. Each Person who subscribes for Units
under Section 6.2 shall be admitted to the Fund promptly after the General
Partner's acceptance of such subscription, but, except as provided in Section
6.6, in no event later than 30 days after the receipt by the Fund of such
subscription.
6.5 Limitation on Additional Issuance. The Fund shall not issue any
additional Units after the Final Closing Date.
6.6 Escrow. All Original Invested Capital of Holders shall be received by
the Fund in trust, and shall be deposited in an escrow account with First Trust
of California, National Association, San Francisco, California, or in any other
banking institution designated by the General Partner, as escrow holder for the
Original Invested Capital, until such time as subscriptions for a total of
120,000 Units, in addition to the Unit purchased by the initial Holder,
representing Original Invested Capital of $1,200,000 have been deposited
therein. Not less than 15 days after receipt of a minimum of $1,200,000 of such
additional Original Invested Capital, the Fund will admit subscribers into the
Fund as additional Holders. At the time a subscriber is admitted as a Holder,
the escrow holder shall transfer the subscriber's Original Invested Capital to
the Fund. If the $1,200,000 minimum is not obtained on or before a date one year
from the date of the Prospectus, all Original Invested Capital will be promptly
refunded to the investors. In any event, any interest earned on Original
Invested Capital while in escrow shall be paid to investors.
6.7 Capital Account. An individual Capital Account shall be maintained for
each Partner. The Capital Account of a Partner shall consist of the Original
Invested Capital of such Partner, increased by (i) any additional contributions
to capital and (ii) such Partner's share of Fund Net Income, and decreased by
(i) Distributions to such Partner and (ii) such Partner's share of Fund Net
Loss. In the event a Partner transfers all or a portion of his Units, the
Assignee shall succeed to the Capital Account of the transferor (as adjusted for
all events preceding the date the transferee is deemed admitted to the Fund
under Section 10.3.1) according to the number of Units, and the allocable
portion of the transferor's Capital Account, so transferred. No Holder shall
have the obligation to restore any deficit in his Capital Account upon
termination or dissolution of the Fund. The foregoing provisions of this Section
6.7 are intended to comply with Regulation Section 1.704-1(b), and shall be
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<PAGE>
interpreted and applied in a manner consistent with such Regulations.
7. LIABILITY AND STATUS OF LIMITED PARTNERS
Holders shall not be bound by, or be personally liable for, the
expenses, liabilities or obligations of the Fund. However, in accordance with
Section 15666 of the California Revised Limited Partnership Act, Partners will
be obligated to return any Distribution from the Fund to the extent that,
immediately after giving effect to the Distribution, all liabilities of the Fund
(other than liabilities as to which recourse of creditors is limited to specific
Fund property and liabilities to Partners on account of their interest in the
Fund) exceed the fair value of its assets (including, as to assets serving as
security for nonrecourse liabilities, only that portion of the fair value of
such assets which exceeds the amount of such nonrecourse liabilities).
8. COMPENSATION TO THE GENERAL PARTNER AND/OR AFFILIATES OF THE
GENERAL PARTNER
8.1 General Limitation. The General Partner and its Affiliates
shall receive compensation only as specified by this Agreement.
8.2 Acquisition Stage. The Fund shall pay no Acquisition Fees to the
General Partner or any of its Affiliates, and, except as expressly provided
herein, no other leasing commission, Equipment purchase fee, finder's fee or
other compensation shall be paid or payable by the Fund to the General Partner
or to any Affiliate of the General Partner in connection with the acquisition of
specific Equipment (including Equipment acquired upon the reinvestment of Cash
from Operations or Cash from Sales or Refinancing).
8.3 Operating Stage
8.3.1 Equipment Management Fee. As compensation for its
services rendered generally in supervising the management of the
Equipment and other ongoing services and activities including, among
others, arranging for necessary maintenance and repair of Equipment,
collecting revenues, paying operating expenses, determining that the
Equipment is being used in accordance with all operative contractual
arrangements, property and sales tax monitoring, preparation of
financial data, and supervising the performance of such services (it
being understood and agreed that the provision of such services does
not constitute a part of the duties or obligations of the General
Partner as general partner of the Fund), ATEL Equipment Corporation, an
Affiliate of the General Partner, or another Affiliate of the General
Partner, shall be entitled to receive the Equipment Management Fee
which shall be payable for each fiscal quarter and shall be an amount
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<PAGE>
equal to (i) 3.5% of the Gross Revenues from Operating Leases, except
that if the services are performed by nonaffiliated Persons under the
active supervision of the General Partner or its Affiliate, then the
amount payable to the General Partner or such Affiliate shall be 1% of
the Gross Revenues from such Operating Leases, and (ii) 2% of Gross
Revenues from Full Payout Leases which contain Net Lease Provisions. It
is the intention of the Fund that the Equipment Management Fee shall be
a fixed management fee with respect to each item of Equipment.
8.3.2 Equipment Resale Fee. As compensation for remarketing
services rendered in connection with the sale of Equipment, ATEL
Equipment Corporation, an Affiliate of the General Partner, or another
of the Affiliates of the General Partner, shall be entitled to receive
an amount equal to the lesser of (i) 3% of the sales price of the
Equipment, or (ii) one-half the normal competitive equipment sale
commission charged by unaffiliated parties for such services. Such fee
is payable only after the Holders have received a return of their
Original Invested Capital plus a Priority Distribution. In addition,
the total commissions paid to all parties in connection with the sale
of Equipment by the Fund shall not exceed the normal competitive sales
commission charged by unaffiliated parties for such services. The
subordination provisions referred to in the second sentence of this
paragraph shall only apply to the amounts earned by the General Partner
and its Affiliates.
8.3.3 Equipment Re-lease Fee. Subject to the provisions of
Section 15.4.28, ATEL Equipment Corporation, an Affiliate of the
General Partner, or another of the Affiliates of the General Partner,
may provide Equipment re-leasing services to the Fund, provided that
all of the following conditions are met:
(i) The General Partner or its Affiliates have and
will maintain adequate staff to render such services to
the Fund;
(ii) The fee for such services shall not exceed the lesser
of the competitive rate for comparable services for similar
equipment or 2% of gross rental payments derived from the
re-lease of such Equipment after the time the re-lease is
consummated as a result of the recipient's efforts, and such
fee is payable as each rental payment is received by the Fund
over the term of the re-lease;
(iii) No such re-lease fee is payable in connection
with the re-lease of Equipment to a previous lessee or
its Affiliates;
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<PAGE>
(iv) The General Partner or its Affiliates have rendered
substantial re-leasing services in connection with such
re-lease; and
(v) The General Partner or its Affiliates are
compensated for rendering Equipment management services
pursuant to Section 8.3.1.
8.3.4 Incentive Management Fee. As compensation for the
services rendered in establishing and maintaining the composition of
the Fund's Equipment portfolio and its acquisition and debt strategies,
and for supervising Fund administration and investor services,
including the preparation of reports and maintenance of financial and
operating data of the Fund, Securities and Exchange Commission and
Internal Revenue Service filings, returns and reports, the General
Partner or an Affiliate of the General Partner, shall be entitled to
receive an Incentive Management Fee in an amount equal to (i) 4% of all
Distributions of Cash from Operations until such time as the Holders
have received aggregate Distributions in an amount equal to their
Original Invested Capital plus a Priority Distribution, and (ii)
thereafter, in an amount equal to 7.5% of all Distributions of Cash
from Operations and Cash from Sales or Refinancing. For the purposes of
calculating the Incentive Management Compensation for any period during
which the Fund has available both Cash from Operations and Cash from
Sales or Refinancing, Distributions to Holders shall first be treated
as consisting of Cash from Operations unless specifically designated
otherwise by the General Partner.
8.3.5 Other Services. Except as set forth in this Article 8
and Article 9 hereof, no other services may be performed by the General
Partner or its Affiliates for the Fund except in extraordinary
circumstances (which shall be defined as an emergency situation
requiring immediate action by the General Partner or its Affiliate and
the service is not immediately available from an unaffiliated party).
Any such other services must meet the following criteria: (i) the
compensation, price or fee therefor must be comparable and competitive
with the compensation, price or fee of any other Person who is
rendering comparable services or selling or leasing comparable goods
which could reasonably be made available to the Fund and shall be on
competitive terms, (ii) the fees and other terms of the contract shall
be fully disclosed to Holders, (iii) the General Partner or its
Affiliates must be previously engaged in the business of rendering such
services or selling or leasing such goods, independently of the Fund
and as an ordinary and ongoing business and at least 75% of such
Person's gross revenues from such activity must be derived from other
than Affiliates of the General Partner, and (iv) all services for which
the General Partner or its Affiliates are to receive compensation
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<PAGE>
shall be embodied in a written contract which precisely describes the
services to be rendered and all compensation to be paid, which contract
may only be modified by a vote of the majority of the Holders. Said
contract shall contain a clause allowing termination without penalty on
60 days notice.
8.4 Payment of Fees on Removal. Should a General Partner be removed
from the Fund according to provisions of Article 17, any portion of any fee or
commission payable to the General Partner according to the provisions of this
Article 8 which is then accrued and due, but not yet paid, shall be paid by the
Fund to the General Partner in cash within 30 days of the date of expulsion as
stated in the written notice of expulsion, except to the extent any amount
payable under Section 8.3.4 is included in calculating the purchase price
for the General Partner's interest in the Fund under Section 17.5.2 hereof.
8.5 Employment of Broker-Dealers. The Fund may employ underwriters
and selected broker-dealers, including Affiliates of the General Partner as set
forth in the Prospectus, for the sale of Units.
9. FUND EXPENSES AND RESERVES
9.1 Reimbursement of General Partner. Except as set forth in this Article
9, all of the Fund's expenses shall be billed directly to and paid by the Fund.
The General Partner and its Affiliates may be reimbursed for the following Fund
expenses: (i) Organization and Offering Expenses not in excess of 15% of Gross
Proceeds up to $25,000,000 plus 14% of all Gross Proceeds in excess of
$25,000,000 (or an amount equal to 12% of the Gross Proceeds if, upon
termination of the offering of Units, the total Gross Proceeds are in an amount
less than $2,000,000); (ii) the actual cost of goods and materials used for and
by the Fund and obtained from entities unaffiliated with the General Partner;
and (iii) administrative services necessary to the prudent operation of the
Fund, provided that such reimbursement for administrative services will be at
the lower of (A) the actual cost of such services, or (B) the amount which the
Fund would be required to pay independent parties for comparable administrative
services in the same geographic location; provided further that, beginning with
the first full year after the termination of the offering of Units, the total
amount of Reimbursable Administrative Expenses payable by the Fund for the
remainder of its term may not exceed a cumulative limit. This cumulative limit
on such Reimbursable Administrative Expenses will equal, as of any date, a
maximum of (i) 0.5% of the Gross Proceeds per annum if the total Gross Proceeds
are at least 90% of the maximum Gross Proceeds; (ii) 0.75% of the Gross Proceeds
per annum if the total Gross Proceeds are at least 75%, but less than 90%, of
the maximum Gross Proceeds; and (iii) 1% of the Gross Proceeds per annum if the
total Gross Proceeds are less than 75% of the maximum Gross Proceeds. In
addition, beginning with the first full year after the termination of the
offering of Units, the maximum amount of Reimbursable Administrative Expenses
payable by the Fund for any single year shall be limited to an amount equal to
1% of the Gross Proceeds.
9.2 Limitation on Reimbursement. The General Partner and its
Affiliates will not be reimbursed by the Fund for the following expenses:
9.2.1 Services for which the General Partner or its Affiliates
are entitled to compensation in the form of a separate fee pursuant to
Article 8 hereof;
9.2.2 Rent or depreciation, utilities or capital equipment and
other administrative items of the Sponsor;
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9.2.3 Salaries, fringe benefits, travel expenses or
administrative items incurred by or allocated to any Controlling Person
of the General Partner or its Affiliates. For purposes of this
subparagraph, "Controlling Person" shall mean any person, regardless of
title, who performs executive or senior management functions for the
General Partner or its Affiliates similar to those of executive
management or senior management, and directors, or those holding 5% or
more equity interest in the General Partner or its Affiliates; or
persons having the power to direct or cause the direction of the
General Partner or Affiliates through ownership of voting securities,
by contract or otherwise. It is not intended that every person who
carries a title such as vice president, senior vice president,
secretary, controller or treasurer be considered a Controlling Person;
9.2.4 Organization and Offering Expenses of the Fund to the
extent such Organization and Offering Expenses exceed 15% of the Gross
Proceeds up to $25,000,000 plus 14% of all Gross Proceeds in excess of
$25,000,000 (or an amount equal to 12% of the Gross Proceeds if, upon
termination of the offering of Units, the total Gross Proceeds are in
an amount less than $2,000,000), and the General Partner guarantees
payment of any such excess expenses, which guarantee is without
recourse to, or reimbursement by, the Fund; and
9.2.5 All other expenses which are unrelated to the business
of the Fund.
9.3 Fund Expenses. Subject to Sections 9.1 and 9.2, the Fund shall pay
all expenses of the Fund which may include, but are not limited to: (i) all
costs of personnel employed by the Fund and involved in the business of the Fund
(which may include personnel who are employed by a General Partner or one or
more Affiliates), (ii) all taxes and assessments on Equipment and other taxes
applicable to the Fund, (iii) legal, appraisal, audit, accounting, brokerage and
other fees, (iv) printing, engraving and other
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<PAGE>
expenses and taxes incurred in connection with the issuance, distribution,
transfer, registration and recording of documents evidencing ownership of an
interest in the Fund or in connection with the business of the Fund, (v) fees
and expenses paid to independent contractors, brokers and servicers, leasing
agents, consultants, equipment lease brokers, insurance brokers and other
agents, (vi) expenses in connection with the acquisition, disposition,
replacement, alteration, repair, leasing and operation of Equipment (including
the costs and expenses of insurance premiums, equipment lease brokerage and
leasing commissions and of maintenance of such Equipment), (vii) the cost of
insurance as required in connection with the business of the Fund, (viii)
expenses of organizing, revising, amending, converting, modifying or terminating
the Fund, (ix) the cost of preparation and dissemination of the informational
material and documentation relating to potential sale or other disposition of
Equipment, (x) costs incurred in connection with any litigation in which the
Fund is involved, as well as the examination, investigation or other proceedings
conducted by any regulatory agency, including legal and accounting fees incurred
in connection therewith, (xi) costs of any computer equipment or services used
for or by the Fund, (xii) costs of any accounting, or statistical bookkeeping
equipment necessary for the maintenance of the books and records of the Fund,
and (xiii) the costs of supervision and expenses of professionals employed by
the Fund in connection with any of the foregoing, including attorneys,
accountants and appraisers; provided, however, that the cost of any services
relating to items (vi) or (vii) above must either be attributable to services
performed by Persons other than the General Partner or its Affiliates, be
compensated by a specific fee described in Article 8 (and thus would not be
reimbursable by the Fund, as provided in Section 9.2.1) or comply with the
requirements for compensation for "other services" as provided in Section 8.3.5.
9.4 Reserves. The Fund shall initially establish a cash reserve for
general working capital purposes in an amount equal to at least one-half of 1%
of the Gross Proceeds. Upon the disposition of each item of Equipment, any cash
reserve which was specifically allocated to that Equipment need not be
maintained thereafter, but may be applied as reserves for other Equipment. Any
cash reserve used as aforesaid need not be restored and if restored, may be
restored out of Gross Revenues.
10. ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS
10.1 Allocation of Net Income and Net Loss Prior to Initial Closing
Date. From the commencement of the Fund until the Initial Closing Date Net
Income and Net Loss shall be allocated 99% to the General Partner and 1% to the
initial Holders.
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10.2 Allocation of Net Income and Net Loss After Initial
Closing Date.
10.2.1 Commencing with the Initial Closing Date, Net Income
and Net Loss shall be allocated 92.5% to the Holders and 7.5% to the
General Partner.
10.2.2 Notwithstanding Section 10.2.1 of this Agreement, items
of Net Loss arising out of the Fund's payment of expenditures
classified as syndication expenses pursuant to Regulations section
1.709-2(b) with respect to each Unit shall be specially allocated to
the Holder who acquires such Unit.
10.3 Special Allocations
10.3.1 Except as provided in section 10.3.2, Net Income, Net
Loss and Distributions allocable to the Holders shall be determined on
a quarterly basis and shall be allocated among the Holders in the ratio
in which the number of Units held by each of them bears to the total
number of Units held by all Holders as of the last day of the fiscal
quarter with respect to which such Net Income, Net Loss and
Distributions are attributable; provided, however, that, with respect
to Net Income, Net Loss and Distributions attributable to the offering
period of the Units (including the full quarter in which the offering
terminates), such Net Income, Net Loss and Distributions shall be
apportioned among the Holders in the ratio in which (i) the number of
Units held by each Holder multiplied by the number of days during such
period that such Holder was the owner of such Units bears to (ii) the
amount obtained by totaling the number of Units outstanding on each day
during such period. No Net Income, Net Loss and Distributions with
respect to any quarter shall be allocated to Units repurchased by the
Fund during such quarter, and such Units shall not be deemed to have
been outstanding during such quarter for purposes of the foregoing
allocations.
10.3.2 Notwithstanding anything in this Agreement to the
contrary, the following items of Fund income and loss shall be
specially allocated to the Partners in the manner described below:
(i) Gain characterized as recapture income under Sections 1245 or
1250 of the Code shall be allocated to those Partners who
claimed the deductions giving rise to such recapture income.
(ii) Except as provided in Section 10.3.2(iii), in the event any
Partner unexpectedly receives any adjustments, allocations or
distributions described in sections 1.704- 1(b)(2)(ii)(d)(4),
(5) or (6) of the Regulations, items of Fund gross income and
gain (consisting of a pro rata
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portion of each item of the Fund's income, including gross
income, and gain for such year) shall be allocated to such
Partner in an amount and manner sufficient to eliminate, to
the extent required by Regulations, the Negative Capital
Account balances (or any increase in the amount thereof)
created by such adjustments, allocations or distributions as
quickly as possible. This Section 10.3.2(ii) is intended to
comply with the qualified income offset requirement in Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
(iii) If there is a net decrease in Fund Minimum Gain during
any Fund fiscal year, each Partner shall be specially
allocated items of Fund income and gain for such year
(and, if necessary, subsequent years) in proportion to,
and to the extent of, an amount equal to the portion of
such Partner's share of the net decrease in Fund Minimum
Gain during such year. The items to be so allocated
shall be determined in accordance with Section 1.704-
2(f)(6) of the Regulations. This Section 10.3.2(iii) is
intended to comply with the minimum gain chargeback
requirement in such Section of the Regulations and shall
be interpreted consistently therewith.
(iv) After giving effect to the allocations set forth in
Sections 10.3.2(ii) and 10.3.2(iii), in the event any
Partner receives any actual or deemed distribution (i.e.,
----
under section 752 of the Code) during a taxable year
which exceeds the adjusted tax basis of such Partner's
interest in the Fund at the end of such taxable year
(determined immediately before giving effect to such
distribution), such Partner shall be allocated an amount
of gross income or gain equal to such excess.
(v) In the event any fee to which the General Partner or an
Affiliate thereof is entitled is treated as a Fund
distribution by the Service, a special allocation of Fund
gross income shall be made annually to the General Partner or
an Affiliate thereof in an amount equal to any such
recharacterized fee for that taxable year.
(vi) The General Partner will specifically allocate items of
gain from the sale or other disposition of items of
Equipment for any year in which the sale or disposition
of any item of Equipment occurs (and, if necessary,
subsequent years) to any Holder in such amounts and in
such manner so as to equalize the Capital Account
balances of the Holders; provided, however, that such
allocations are reasonably consistent with, and
reasonably supportable under, the Code.
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(vii) Net Loss shall not be allocated to any Holder if such
allocation would cause or increase an Adjusted Capital
Account Deficit for such Holder at the end of any Fiscal
Year, and any such Net Loss shall instead be allocated to
the General Partner. This limitation shall be applied on
a Holder by Holder basis so as to allocate the maximum
permissible Net Loss to each Holder under Section 1.704-
1(b)(2)(ii)(d) of the Regulations.
(viii) To the extent an adjustment to the adjusted tax basis of
any Fund asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated
to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted
pursuant to such Section of the Regulations.
(ix) Except as otherwise provided herein, Nonrecourse Liabilities
and Nonrecourse Deductions shall be allocated 92.5% to the
Holders and 7.5% to the General Partner.
(x) Any deduction attributable to Partner Nonrecourse Debt shall
be allocated to the Partners that bear the economic risk of
loss for the Partner Nonrecourse Debt.
10.4 Distribution of Cash From Operations. Cash from
Operations shall be distributed as follows:
10.4.1 First, 88.5% to the Holders, 7.5% to the General
Partner and 4% to the General Partner or its Affiliate designated as
the recipient of the Incentive Management Fee, until each Holder has
received aggregate Distributions from all sources in an amount equal to
his Original Invested Capital plus a Priority Distribution (so that a
Holder will be deemed to have received Distributions of Original
Invested Capital only to the extent that Distributions to the Holder
exceed the amount of the Priority Distribution); and
10.4.2 Thereafter, 85% to the Holders, 7.5% to the General
Partner and 7.5% to the General Partner or its Affiliate designated as
the recipient of the Incentive Management Fee.
10.5 Distribution of Cash From Sales or Refinancing. Cash
from Sales or Refinancing shall be distributed as follows:
10.5.1 First, 92.5% to the Holders and 7.5% to the General
Partner until each Holder has received aggregate Distributions from
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all sources in an amount equal to his Original Invested Capital plus a
Priority Distribution (so that a Holder will be deemed to have
received Distributions of Original Invested Capital only to the extent
that Distributions to the Holder exceed the amount of the Priority
Distribution); and
10.5.2 Thereafter, 85% to the Holders, 7.5% to the General
Partner and 7.5% to the General Partner or its Affiliate designated as
the recipient of the Incentive Management Fee.
Notwithstanding anything to the contrary herein, however, no cash
Distribution shall be made to a Holder to the extent that, after giving effect
to all allocations under sections 10.1, 10.2 and 10.3 which would accompany such
Distribution (including allocations of gross income and gain under section
10.3.2(iv)), such Distribution would exceed the tax basis of the Holder to whom
such Distribution is otherwise payable.
10.6 Distributions of Cash from Reserve Account. Distributions of Cash
from Reserve Account, if any, shall be distributed in the same manner as Cash
from Sales or Refinancing.
10.7 Determination of Amounts to be Distributed. The General Partner
shall have sole discretion in determining the amount of any Distributions.
Subject to provisions of Section 15.4.18 of this Agreement, the General Partner
may use any funds of the Fund not distributed to Holders to purchase additional
Equipment during the Reinvestment Period or otherwise as permitted by this
Agreement; provided, however, that the General Partner will not reinvest in
Equipment, but will distribute, subject to payment of any obligations of the
Fund, such available Cash from Operations and Cash from Sales or Refinancing as
may be necessary to cause total Distributions to Holders to equal the following
amounts for the specified periods:
10.7.1 Prior to the end of the year in which the Final Closing
Date occurs, an amount equal to the lesser of (i) a 10% per annum
noncumulative, noncompounded return on their Original Invested Capital,
or (ii) 90% of such amounts which are available for Distributions;
10.7.2 In each of the six years after the end of the year in
which the Final Closing Date occurs, an amount equal to a noncumulative
and noncompounded return on the Holders' Original Invested Capital of
10% per annum; and
10.7.3 Such amounts with respect to each year which are
sufficient to allow a Holder in a 31% federal income tax bracket (but
not a higher bracket) to pay the federal income taxes and state income
taxes due with respect to Net Income derived by him from the Fund for
such year.
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10.8 Consent to Allocations. The methods hereinabove set forth by which
Distributions and allocations of Net Income and Net Loss are made and
apportioned are hereby expressly consented to by each Partner as an express
condition to becoming a Partner.
10.9 Limitation on Distributions. All Distributions are subject to the
payment of Fund expenses and to maintenance and repair of Equipment.
10.10 Allocation to General Partner. To the extent that the Fund shall
be entitled to any deduction for federal income tax purposes as a result of any
interest in Net Income or Net Loss granted to a General Partner, such deduction
shall be allocated for federal income tax purposes to such General Partner.
10.11 Return of Unused Capital. In the event that any portion of the
Net Proceeds received by the Fund during the first twelve months after the
date of the Prospectus is not invested or committed for investment within
eighteen months of the date of the Prospectus, or in the event any portion of
the Net Proceeds received by the Fund thereafter is not invested or committed
for investment within six months from the Final Closing Date (except for any
amounts used to pay Fund operating expenses, including amounts set aside for
reserves as set forth in Section 9.4), such portion of the Net Proceeds shall be
distributed to the Holders pro rata by the Fund as a return of capital. In
addition, the General Partner shall contribute to the Fund, and the Fund shall
distribute pro rata to the Holders, the amount by which (x) the amount of unused
capital distributed pursuant to the foregoing sentence, divided by (y) the
percentage of the Gross Proceeds which remain after payment of all Front End
Fees, exceeds the unused capital so distributed. For the purposes of this
Section 10.11, funds will be deemed to have been committed to investment and
will not be returned to the Holders to the extent written agreements in
principle or letters of understanding were executed at any time prior to the end
of said period, regardless of whether any such investment is actually
consummated, and to the extent any funds have been reserved to make contingent
payments in connection with any Equipment, regardless of whether any such
payment is actually made.
10.12 General Partner Interest. In no event shall the General
Partner's interest in each material item of income, gain, loss, deduction,
credit or distributions be less than 1% of each such item at any time during the
existence of the Fund.
10.13 Distributions in Kind. Distributions in kind shall not be
permitted except upon dissolution and liquidation, and then only to a
liquidating trust which has been established for the purpose of the liquidation
of the assets of the Fund, and the distribution of cash in accordance with the
terms of the Partnership Agreement.
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<PAGE>
10.14 Withholding Taxes.
10.14.1 In the event the Fund pays to any federal, state or
local government authority any amount of tax, penalty, interest, fee or other
expenditure which is attributable to the particular status of one or more
Holders including, without limitation, the status of a Holder as a nonresident
of California or any other state imposing such a charge, the General Partner
shall treat such tax, penalty, interest or fee, and in its discretion may treat
other related Fund expenditures, as a distribution of Cash from Operations or
Cash from Sales or Refinancing as appropriate, to such Holders. Such a
distribution shall reduce the amount of Cash from Operations or Cash from Sales
or Refinancing otherwise payable by the Fund to such Holders. Such Holders shall
be distributed any refund of any such tax, penalty, interest or other amounts
received by the Fund; provided, however, that the distribution due such Holders
shall be reduced by any Fund expenses (and such expenses shall be specially
allocated to such Holders) incurred in connection with the payment or obtaining
of the refund of such taxes, penalties, interest or other amounts and the Fund
shall have no duty or obligation to seek to obtain or collect any such refund or
expend any amount to reduce the amount of any withholding, penalty, interest or
other amount otherwise payable to any government authority. The General Partner
may require from a Holder the appropriate documentation with respect to any
distribution hereunder.
10.14.2 As security for any withholding tax or other amount
referred to in section 10.14.1 or other liability or obligation to which the
Fund may be subject as a result of any act or status of any Holder, the Fund
shall have (and each Holder hereby grants to the Fund) a security interest in
all Cash from Operations or Cash from Sales or Refinancing distributable to such
Holder to the extent of the amount of such withholding tax or other liability or
obligation. The Fund shall have a right of set-off against any such
distributions of Cash from Operations or Cash from Sales or Refinancing in the
amount of such withholding tax or other liability or obligation.
11. ASSIGNMENT OF FUND INTERESTS
11.1 Limitations on Transfer. A Holder may not transfer all or part
of his legal and equitable interest in his Units except in compliance with the
provisions of this Agreement. The General Partner may condition any proposed
transfer on receipt by the Fund of such representations and warranties of the
transferor and the assignee, opinions of counsel for the Fund and other
assurances as it may deem necessary and appropriate as to:
11.1.1 such assignments or transfers not resulting, in the
opinion of counsel for the Fund, in the Fund being considered to have
terminated within the meaning of Section 708 of the Code;
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<PAGE>
11.1.2 the assignee not being a minor or an incompetent;
11.1.3 the transfer or assignment not violating federal or
state securities laws;
11.1.4 the transferor or the assignee not holding Units
representing Original Invested Capital of less than $2,500 ($2,000 in
the case of IRAs and Keogh Plans);
11.1.5 such assignee being a Citizen of the United States;
11.1.6 such assignment or transfer not causing the assets of
the Fund to be deemed "plan assets" for ERISA purposes;
11.1.7 such assignment or transfer not constituting a transfer
"on a secondary market (or the substantial equivalent thereof)" within
the meaning of Section 7704 of the Code or otherwise adversely
affecting the tax status of the Fund; and
11.1.8 the transferor filing with the Fund a duly executed and
acknowledged counterpart of the instrument effecting such assignment or
transfer, which instrument evidences the written acceptance by the
assignee or transferee of all of the terms and provisions of this
Agreement, contains a representation that such assignment or transfer
was made in accordance with all applicable laws and regulations
(including any investor suitability requirements) and in all other
respects being satisfactory in form and substance to the General
Partner.
11.2 Distributions and Effective Date of Transfer. An Assignee of
Record shall be entitled to receive Distributions from the Fund attributable to
the Units acquired by reason of such assignment from and after the effective
date of the assignment of such Units; provided, however, that notwithstanding
anything herein to the contrary, the Fund and the General Partner shall be
entitled to treat the assignor of such Units as the absolute owner thereof in
all respects, and shall incur no liability for allocations of Net Income, Net
Loss or Distributions, or transmittal of reports and notices required to be
given to Holders hereunder, which are made in good faith to such assignor until
such time as the written instrument of assignment has been received by the Fund
and recorded on its books and the effective date of the assignment has passed.
The effective date of such assignment on which the Assignee shall be deemed an
Assignee of Record shall be the last day of the first full calendar month
following the later of (i) the date set forth on the written instrument of
assignment or (ii) the date on which the Fund has actual notice of the
assignment of Units and has received complete documentation of the assignment.
Notwithstanding anything to the contrary contained herein, no Distributions
shall
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<PAGE>
be made in any calendar quarter with respect to Units repurchased by the Fund
during such calendar quarter.
11.3 Governmental Restrictions. No assignment, sale, transfer,
exchange or other disposition of Units may be made except in compliance
with the then applicable rules of any other applicable governmental authority.
All Units originally issued pursuant to qualification under the California
Corporate Securities Law of 1968 shall be subject to, and all documents of
assignment and transfer evidencing such securities shall bear, the following
legend condition:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES."
No transfer of any such Unit shall be made unless the transferor shall have
obtained, if necessary, the written consent of the California Commissioner of
Corporations to such transfer.
11.4 Non-Complying Transfers. Any assignment, sale, exchange or other
transfer in contravention of any of the provisions of this Article 11 shall
be void and shall not bind or be recognized by the Fund.
11.5 Misrepresentation and Forfeit. Subject to the discretion of
the General Partner, in the event a Holder who originally obtained Units in the
Fund's offering misrepresented that he was a Citizen of the United States,
or that it was not an IRA or Qualified Plan or purchasing on behalf of an IRA or
Qualified Plan, such person fails to remain a Citizen of the United States, or a
subsequent transferee of Units is not or fails to remain a Citizen of the United
States, such Person may, in the General Partner's discretion if it deems that
the Fund will fail certain citizenship requirements with respect to its
Equipment, be required to forfeit such Units to the Fund and no longer be
entitled to cash Distributions or allocations of the Fund, receipt of Fund
reports and voting privileges, although he may realize proceeds upon the
transfer of his Units to a Citizen of the United States, which subsequent
transferee would be entitled to the full economic benefits and other privileges
attributable to such Units.
12. SUBSTITUTED LIMITED PARTNERS
12.1 Limitations on Substitution. No Assignee shall have the right
to become a substituted Limited Partner of the Fund in place of his assignor
unless all of the following conditions are first satisfied:
12.1.1 A duly executed and acknowledged written instrument of
assignment covering no less than 250 Units (200 in the case of an IRA or Keogh
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<PAGE>
Plan) shall have been filed with the Fund, which instrument shall
specify the number of Units being assigned and set forth the intention
of the assignor that the Assignee succeed to the assignor's interest as
a substituted Limited Partner.
12.1.2 The assignor and Assignee shall have executed and
acknowledged such other instruments as the General Partner may deem
necessary or desirable to effect such substitution, including the
written acceptance and adoption by the Assignee of the provisions of
this Agreement, as the same may be amended and his execution,
acknowledgment and delivery to the General Partner of a special power
of attorney, the form and content of which are described herein;
12.1.3 The written consent of the General Partner to such
substitution shall have been obtained, the granting of which may be
withheld by the General Partner in its sole discretion;
12.1.4 A transfer fee not to exceed $100 shall have been paid
to the Fund to cover all reasonable expenses connected with such
substitution; and
12.1.5 The provisions of Section 11.1 and 11.3 of this
Agreement are complied with.
12.2 Consent to Admission. By executing or adopting this Agreement,
each Holder hereby consents to the admission of additional or substituted
Holders by the General Partner and to any Assignee becoming a substituted
Holder, in accordance with the provisions herein.
12.3 Amendment of Agreement. The General Partner shall cause this
Agreement to be amended to reflect the admission and/or substitution of Limited
Partners at least once in each fiscal quarter.
13. REPURCHASE OF FUND INTERESTS
13.1 In the event a Holder ceases to be a United States Citizen or
Resident Alien for any reason whatsoever, he may be required, in the General
Partner's discretion, to tender his Units to the Fund for repurchase as of the
date of such event. The Fund will have the absolute right to purchase such Units
at a price equal to 100% of the Holder's Capital Account as of such date, in all
cases determined as of the last day of the quarter prior to the fiscal quarter
during which such Units are repurchased. IT SHOULD BE NOTED THAT THE FUND WILL
NOT BE OBLIGATED TO PURCHASE UNITS FROM HOLDERS WHO CEASE TO BE UNITED STATES
CITIZENS OR RESIDENT ALIENS.
13.2 The General Partner may otherwise use available Reserves to
repurchase Units, in its discretion and on terms it determines to be appropriate
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<PAGE>
under given circumstances, in the event the Fund Manager deems such
repurchase to be in the best interest of the Fund; provided, the Fund shall
never be required to repurchase any Units. Upon the repurchase of any Units by
the Fund, the tendered Units shall be canceled and shall no longer be deemed to
represent an interest in the Fund; and, provided further, that any such
repurchase shall not impair the capital of the Fund, or cause the Fund or any of
its remaining Partners to incur an adverse tax consequence as a result of such
repurchase.
13.3 The General Partner shall cause this Agreement to be amended to
reflect the change in the interests of the Holders (including the person whose
Units were repurchased) in the Net Income, Net Loss and Distributions of the
Fund at least once in each fiscal quarter.
13.4 Neither the General Partner nor its Affiliates may request the
Fund to repurchase any Units owned by them.
14. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS
14.1 Books of Account and Records. The General Partner shall, for
income tax purposes, keep on an accrual basis adequate books of account and
records of the Fund wherein shall be recorded and reflected all of the
contributions to the capital of the Fund and all of the expenses and
transactions of the Fund.
14.1.1 Such books of account and records shall include
the following:
(i) A current list of the full name and last known
business or residence address and business telephone number of
each Partner set forth in alphabetical order together with the
Original Invested Capital, the Units held and the share in Net
Income and Net Loss of each Partner, which list shall be
updated at least quarterly to reflect changes in the
information contained therein;
(ii) A copy of the certificate of limited partnership
and all certificates of amendment, together with executed
copies of any powers of attorney pursuant to which any
certificate has been executed;
(iii) Copies of the Fund's federal, state and
local income tax or information returns and reports, if
any, for the six most recent taxable years;
(iv) Copies of the original of this Agreement and
all amendments;
(v) Financial statements of the Fund for the six
most recent fiscal years; and
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<PAGE>
(vi) The Fund's books and records for at least the
current and past three fiscal years.
14.1.2 Such books of account and records shall be kept at the
principal place of business of the Fund in the State of California, and
each Limited Partner and his authorized representatives shall have, at
all times during normal business hours and at any other reasonable
time, free access to and the right to inspect and copy at their expense
such books of account and all records of the Fund.
14.1.3 Upon the request of a Limited Partner, the General
Partner shall mail to such Limited Partner within ten days of the
request a copy of the information described in Section 14.1.1(i), (ii)
and (iv). The information described in Section 14.1.1(i) shall be
printed in alphabetical order, on white paper, and in a readily
readable type size (in no event smaller than ten-point type). The Fund
may require payment of a reasonable charge for copy work.
14.1.4 If the General Partner neglects or refuses to exhibit,
produce or mail a copy of the information in Section 14.1.1(i) above as
requested and required under this Agreement, the General Partner shall
be liable to the Limited Partner requesting the information for the
costs, including attorneys' fees, incurred by the Limited Partner for
compelling production of the information and for actual damages
suffered by the Limited Partner by reason of such refusal or neglect.
It shall be a defense that the actual purpose and reason for the
requests for inspection or for a copy of the information is to secure
the list of Limited Partners or other information for the purpose of
selling such list or copies thereof, or of using the same for a
commercial purpose other than in the interest of the requesting person
as a Limited Partner relative to the affairs of the Fund. The General
Partner may require that a Limited Partner requesting the information
in Section 14.1.1(i) above represent that the list is not requested for
a commercial purpose unrelated to the Limited Partner's interest in the
Fund. The remedies provided hereunder to Limited Partners requesting
copies of the information in Section 14.1.1(i) above are in addition
to, and shall not in any way limit, other remedies available to Limited
Partners under federal law or the laws of any state.
14.1.5 Subject to any change pursuant to Section 15.2.8, all
books and records of the Fund shall be kept on the basis of an annual
accounting period ending December 31, except for the final accounting
period which shall end on the dissolution or termination of the Fund.
All references herein to a "year of the Fund" are to such an annual
accounting period, and all references to a Fund "quarter" shall refer
to a calendar quarter unless and until such periods are changed by an
amendment hereto. Accelerated methods of depreciation
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<PAGE>
with respect to Fund assets and other elections available to the Fund
may be used by the Fund for purposes of reporting federal or state
income taxes.
14.2 Audited Annual Financial Statements. The General Partner
shall have prepared and distributed to the Holders at least annually, at
Fund expense, financial statements (each of which shall include a balance sheet,
statement of income or loss, statement of Partners' equity, and statement of
cash flow) prepared in accordance with generally accepted accounting principles
and accompanied by a report thereon containing an opinion of an independent
certified public accounting firm. Such opinion shall also state that reported
"Cash from Operations" is consistent with the definition of Cash from Operations
herein. Copies of such statements and report shall be distributed to each Holder
within 120 days after the close of each taxable year of the Fund.
14.3 Other Annual Reporting. The General Partner shall have
prepared and distributed to the Holders at least annually, at Fund expense:
(i) a statement of cash flow, (ii) Fund information necessary in the
preparation of the Holders' and Assignees' federal income tax returns; (iii) a
report of the business of the Fund, which shall include for each piece of
Equipment which individually represents at least 10% of the Fund's total
investment in Equipment, a status report to indicate: (a) the condition of the
Equipment, (b) how the Equipment is being used as of the end of the year
(leased, operated, held for lease, repair, or sale), (c) the remaining term of
the Equipment leases, (d) the projected use of Equipment for the next year
(renewal of lease, re-lease, retirement, or sale), and (e) such other
information relevant to the value or use of the Equipment as the General Partner
deems appropriate, including the method used as basis for valuation; (iv) a
statement as to the compensation received by the General Partner and its
Affiliates from the Fund during the year, which statement shall set forth the
services rendered or to be rendered by the General Partner and its Affiliates
and the amount of fees received; (v) a report identifying Distributions from:
(a) Cash from Operations for that year, (b) Gross Revenues of prior years held
in reserves, (c) Cash from Sales or Refinancing, and (d) Cash from Reserve
Account and other sources; and (vi) a special report prepared in accordance with
the American Institute of Certified Public Accountants United States Auditing
Standards relating to special reports, containing an opinion of an independent
certified public accounting firm, to report the breakdown of the costs
reimbursed by the Fund to the General Partner or its Affiliates. Such special
report shall at a minimum provide: (a) a review of the time records of
individual employees, the costs of whose services were reimbursed, and (b) a
review of the specific nature of the work performed by each such employee. The
additional costs of such special report shall be itemized by the auditors among
all programs sponsored by the General Partner and its Affiliates on a
program-by-program basis and may be reimbursed to the General Partner or its
Affiliates to the extent that such reimbursement,
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<PAGE>
when added to the cost for administrative services rendered, does not exceed the
competitive rate for comparable services performed by independent parties in the
same geographic location. Copies of the reports hereunder shall be distributed
to each Holder within 120 days after the close of each taxable year of the Fund;
provided, however, that all Fund information necessary in the preparation of the
Holders' and Assignees' federal income tax returns shall be distributed to each
Holder and Assignee not later than 75 days after the close of each taxable year
of the Fund.
14.4 Quarterly Reports. The General Partner shall have prepared
quarterly, at Fund expense, commencing with the first full quarter after the
Closing Date: (i) a statement as to the compensation received by the General
Partner during such quarter from the Fund which statement shall set forth the
services rendered or to be rendered by the General Partner during such quarter
from the Fund and the amount of fees received, and (ii) other relevant
information. Copies of such statements shall be distributed to each Holder
within 60 days after the end of each quarterly period.
14.5 Unaudited Quarterly Financial Statements. The General Partner
shall have prepared, at Fund expense, a quarterly report covering each of the
first three quarters of Fund operations in each calendar year, unaudited
financial statements (each of which shall include a balance sheet, statement of
income or loss for said quarterly period and statement of Cash from Operations
and Cash from Sales or Refinancing for said quarterly period) and a statement of
other pertinent information regarding the Fund and its activities during the
quarterly period covered by the report. Copies of such statements and other
pertinent information shall be distributed to each Holder within 60 days after
the close of the quarterly period covered by the report of the Fund.
14.6 Other Quarterly Reports. The General Partner shall have prepared,
at Fund expense, after the end of each quarter in which Equipment is acquired
and until the Net Proceeds are fully invested or returned to investors, a
notice which shall describe therein: (i) a statement of the actual purchase
price of the Equipment, including the terms of the purchase, (ii) a statement of
the total amount of cash expended by the Fund to acquire such items of Equipment
(including and itemizing all commissions, fees, expenses and the name of each
payee), and (iii) a statement of the amount of proceeds in the Fund which remain
unexpended or uncommitted. Copies of such notice shall be distributed to each
Holder within 60 days after the end of such quarter. If deemed appropriate by
the General Partner such notice may be prepared and distributed to each Holder
more frequently than quarterly.
14.7 Tax Returns. The General Partner, at Fund expense, shall cause
income tax returns for the Fund to be prepared and timely filed with appropriate
authorities.
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<PAGE>
14.8 Governmental Reports. The General Partner, at Fund expense, shall
cause to be prepared and timely filed with appropriate federal and state
regulatory and administrative bodies, all reports required to be filed with such
entities under then current applicable laws, rules and regulations. Such reports
shall be prepared on the accounting or reporting basis required by such
regulatory bodies. Any Holder shall be provided with a copy of any such report
upon request without expense to him.
14.9 Maintenance of Suitability Records. The General Partner, at Fund
expense, shall maintain for a period of at least four years, a record of the
information obtained to indicate that a Holder meets the suitability standards
set forth in the Prospectus.
15. RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES OF THE GENERAL PARTNER
15.1 Services of the General Partner. The General Partner shall be
responsible for providing the following services to the Fund:
15.1.1 Supervising the organization of the Fund and
the offering and sale of Units;
15.1.2 Supervising Fund management, which includes (i)
establishing policies for the operation of the Fund; (ii) causing the
Fund's agents or employees to arrange for the provision of services
necessary to the operation of the Fund (including Equipment management
and investor, accounting and legal services, and services relating to
Distributions by the Fund); (iii) approving actions to be taken by the
Fund; (iv) providing advice, consultation, analysis and supervision
with respect to the functions of the Fund as an owner of the Equipment
(including, without limitation, decisions regarding adjustments to
rental schedules, the sale or disposition of Equipment and compliance
with federal, state and local regulatory requirements and procedures);
(v) executing documents on behalf of the Fund; (vi) having a fiduciary
responsibility for the safekeeping and use of all funds of the Fund,
whether or not in the General Partner's immediate possession or
control; and (vii) making all decisions as to accounting matters; and
15.1.3 Approval of the terms of the sale or other disposition
of Equipment, including establishing the terms for and arranging any
such transaction.
15.2 Authority of the General Partner. The conduct of the Fund's
business shall be controlled solely by the General Partner in accordance with
this Agreement. The General Partner shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Fund, whether or not in its
immediate possession or control, and shall have all authority, rights and powers
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<PAGE>
conferred by law and those required or appropriate to the management of the
Fund business which, by way of illustration but not by way of limitation, shall,
subject only to the provisions of Section 15.4, include the right, authority and
power:
15.2.1 To acquire, lease, sell, hold and dispose of Equipment,
interests therein or appurtenances thereto, as well as personal or
mixed property connected therewith, including the purchase, lease,
improvement, maintenance, exchange, trade or sale of such Equipment, at
such price, rental or amount, for cash, securities (in compliance with
appropriate securities regulations) or other property, and upon such
terms, as the General Partner deems in its sole discretion, to be in
the best interest of the Fund; provided that, as of the date of the
final investment of Net Proceeds and completion of the permanent
financing of the Equipment portfolio, at least 50% of the Fund's
Equipment, by aggregate purchase cost, shall be subject to initial
leases which are High Payout Leases.
15.2.2 To place record title to, or the right to use Fund
assets in, the name or names of a nominee or nominees, trustee or
trustees for any purpose convenient or beneficial to the Fund;
15.2.3 To acquire and enter into any contract of insurance
which the General Partner deems necessary or appropriate for the
protection of the Fund and the General Partner, for the conservation of
Fund assets, or for any purpose convenient or beneficial to the Fund;
15.2.4 To employ Persons in the operation and management of
the business of the Fund including, but not limited to, supervisory
managing agents, insurance brokers and equipment lease brokers and
Persons to perform, on behalf of the Fund, the activities enumerated in
Section 15.2.1, on such terms and for such compensation as the General
Partner shall determine, subject, however, to the limitations with
respect thereto as set forth in Article 8; provided that no Person is
employed to provide duplicative services; and provided further that
agreements with the General Partner or their Affiliates for the
services set forth in Article 8 shall contain the terms and limitations
as to fees and expenses as set forth in said Article 8 and any of such
agreements shall be terminable immediately upon dissolution of the Fund
under Section 19.1;
15.2.5 To prepare or cause to be prepared reports, statements
and other relevant information for distribution to Holders, as provided
in Article 14 and as they otherwise deem appropriate;
15.2.6 To open accounts and deposit and maintain funds in the
name of the Fund in banks or savings and loan associations; provided,
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<PAGE>
however, that the Fund funds shall not be commingled with the funds of
any other Person;
15.2.7 To cause the Fund to make or revoke any of the
elections referred to in the Code;
15.2.8 To select as the Fund's accounting year a calendar
year or such fiscal year as approved by the Service;
15.2.9 To determine the appropriate accounting method or
methods to be used by the Fund;
15.2.10 To offer and sell Units in the Fund directly or
through any licensed Affiliate of the General Partner or nonaffiliate
and to employ personnel, agents and dealers for such purpose;
15.2.11 To amend this Agreement to reflect the addition or
substitution of Holders, the reduction of capital accounts upon the
return of capital to Partners or the change in the interests of the
Holders in the Net Income, Net Loss and Distributions of the Fund after
the repurchase of Units;
15.2.12 To require in all Fund obligations that the General
Partner shall not have any personal liability thereon but that the
Person contracting with the Fund is to look solely to the Fund and its
assets for satisfaction of such obligations; and in the event that the
General Partner has personal liability with respect to any such
obligation, the General Partner may require its satisfaction prior to
obligations with respect to which the General Partner has no personal
liability; provided, however, that the inclusion of the aforesaid
provisions shall not materially affect the cost of the service or
material being supplied and all Fund obligations are satisfied in
accordance with prudent business practices as to the time and manner of
payment;
15.2.13 To execute and file certificates of amendment and
cancellation of the certificate of Limited Partnership, and
certificates of dissolution of the Fund;
15.2.14 Subject to the provisions of Article 10, to determine
the amount of Cash from Operations and Cash from Sales or Refinancing
used to purchase additional Equipment and to make Distributions;
15.2.15 To purchase Equipment in its own name, the name of an
Affiliate (other than an Affiliate which is a limited or general
partnership, joint venture, unincorporated association or similar
organization, other than a corporation, formed and operated for the
primary purpose of investment in and the operation of or gain from an
interest in equipment) or in the name of a nominee, a trust or a
corporation or otherwise and hold title thereto on a temporary or
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<PAGE>
interim basis (generally not in excess of six months) for the purpose
of facilitating the acquisition of such Equipment or completion of
manufacture of the Equipment, or any other purpose related to the
business of the Fund; provided, however that: (i) the transaction is
in the best interest of the Fund; (ii) such Equipment is purchased by
the Fund for a purchase price no greater than the cost of such
Equipment to the General Partner or Affiliate (including any
out-of-pocket carrying costs), except for compensation permitted by
this Agreement; (iii) there is no difference in interest terms of the
loans secured by the Equipment at the time acquired by the General
Partner or Affiliate and the time acquired by the Fund; (iv) there is
no benefit arising out of such transaction to the General Partner or
its Affiliate apart from the compensation otherwise permitted by this
Agreement; and (v) all income generated by, and all expenses
associated with, Equipment so acquired shall be treated as belonging
to the Fund.
15.2.16 Subject to Sections 15.4.21 and 15.4.22, to borrow
money and, if security is required therefor, to mortgage or subject any
Equipment to any other security device, to obtain replacements of any
mortgage or other security device, and to prepay, in whole or in part,
refinance, increase, modify, consolidate or extend any mortgage or
other security device, all of the foregoing at such terms and in such
amounts as the General Partner, in its sole discretion, deems to be in
the best interests of the Fund;
15.2.17 To invest (i) the Gross Proceeds or Net Proceeds
temporarily prior to investment in Equipment, (ii) other funds of the
Fund prior to the investment in Equipment or the distribution to
Holders and (iii) the Fund's capital reserves, in short-term, highly
liquid investments where there is appropriate safety of principal;
15.2.18 In addition to any amendments otherwise authorized
herein, this Agreement may be amended from time to time by the General
Partner, without the consent of any of the Holders
(i) to add to the representations, duties or
obligations of the General Partner or its Affiliates or
surrender any right or power granted to the General
Partner or its Affiliates herein, for the benefit of the
Holders;
(ii) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect
to matters or questions arising under this Agreement which
will not be inconsistent with the provisions of this Agreement
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<PAGE>
provided that no amendment hereunder will change the voting
rights of Holders;
(iii) to delete or add any provision of this Agreement
required to be so deleted or added by the staff of the
Securities and Exchange Commission or by a state "Blue Sky"
administrator or similar such official, which addition or
deletion is deemed by such staff or official to be for the
benefit or protection of the Holders; or
(iv) to amend the provisions of Article 10 of this
Agreement relating to the allocations of Net Income, Net Loss
and Distributions among Partners or any other provisions
hereof if the Fund is advised at any time by the Fund's
accountants or legal counsel that the allocations or such
other provisions set forth in this Agreement are unlikely to
be respected, either because of promulgation of Regulations
under Sections 704 or 706 of the Code or other developments in
the law, but only to the minimum extent necessary in
accordance with such advice of accountants and/or counsel to
cause such provisions of this Agreement to be respected. Such
amendment or amendments made by the General Partner in
reliance upon the advice of the accountants or counsel
described above shall be deemed to be made pursuant to the
fiduciary obligation of the General Partner to the Fund and
the Holders, and no such amendment or amendments shall give
rise to any claim or cause of action by any Holder.
15.2.19 To execute, acknowledge and deliver any and all
instruments to effectuate the foregoing, and to take all such action in
connection therewith as the General Partner shall deem necessary or
appropriate.
15.3 General Powers and Fiduciary Duty. The General Partner
shall, except as otherwise provided in this Agreement, have all the rights and
powers and shall be subject to all the restrictions and liabilities of a
general partner of a limited partnership or a partner in a partnership
without limited partners as provided under the laws of the State of California.
Notwithstanding any other provision of this Agreement, in no event may the
General Partner modify or compromise, by contract or otherwise, its
fiduciary duty to the Fund or the Holders, whether such duty is imposed under
the common law or by statute.
15.4 Limitations on General Partner's Authority. Neither the
General Partner nor any Affiliate shall have the authority to:
15.4.1 Enter into contracts with the Fund which would bind the
Fund after the expulsion, adjudication of bankruptcy or insolvency of a
General Partner, or continue the business of the Fund with Fund assets
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<PAGE>
after the occurrence of such an event;
15.4.2 Grant to the General Partner or any Affiliate an
exclusive listing for the sale of Fund assets, including Equipment;
15.4.3 Sell Substantially All of the Assets in a single sale,
or in multiple sales in the same twelve-month period, except in the
orderly liquidation and winding up of the business of the Fund upon its
termination and dissolution;
15.4.4 Pledge or encumber Substantially All of the Assets in a
single transaction or in multiple transactions in the same twelve-month
period other than in connection with the acquisition or improvement of
assets or the refinancing of existing obligations;
15.4.5 Alter the primary purpose of the Fund as set forth in
Article 3;
15.4.6 Receive from the Fund a rebate or give-up or
participate in any reciprocal business arrangements which would
circumvent the provisions of this Agreement, nor shall any such person
permit any reciprocal business arrangement which would circumvent the
restrictions herein against dealing with the General Partner and its
Affiliates;
15.4.7 Sell or lease any Equipment to any entity in which a
General Partner or any Affiliate has an interest, other than a joint
venture or similar program which complies with the conditions set forth
in Section 15.4.8 hereof;
15.4.8 Cause the Fund to invest in any program, partnership or
other venture unless: (i) it is a general partnership, equipment trust
or other form of joint venture, but not a limited partnership; (ii) the
other partner or joint owner is not a General Partner (but it may be an
Affiliate of a General Partner, provided the Affiliate is a limited or
general partnership, joint venture, unincorporated association or
similar organization, other than a corporation formed and operated for
the primary purpose of investment in and operation of or gain from an
interest in equipment, which has substantially identical investment
objectives to those of the Fund); (iii) such general partnership or
joint venture owns and operates particular Equipment and the Fund or
the Fund and Affiliate, as the case may be, acquire the controlling
interest in such general partnership, or joint venture; (iv) the
agreement of partnership or joint venture does not authorize the Fund
to do anything as a partner or joint venturer with respect to the
Equipment which the Fund, or a General Partner, could not do directly
because of the provisions of this Agreement; (v) the Fund's investment
is on substantially the same terms and conditions as the investment of
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<PAGE>
any Affiliate; (vi) no compensation (other than as provided for by this
Agreement) is received in connection therewith by the General Partner
or any of its Affiliates, there are no duplicate equipment management
or any other duplicate fees and such investment shall not result in the
impairment, abrogation or circumvention of any of the terms or
provisions of this Agreement; (vii) the joint venture is in the best
interest of both co-venturers; and (viii) in joint venture arrangements
with an Affiliate of a General Partner, if all of the following
additional conditions are met: the compensation of the General Partner
is substantially identical to that received by the sponsor of such
Affiliate, the Fund has a right of first refusal to buy, if such
Affiliate wishes to sell, equipment held in the joint venture, and the
joint venture is established either for the purpose of effecting
appropriate diversification of the Fund's investment portfolio or for
the purpose of relieving the General Partner or its Affiliates or
nominees from a commitment entered into pursuant to Section 15.2.15 of
this Agreement; for the purposes of this Section, a controlling
interest shall include: (1) ownership of more than 50% of the venture's
capital or profits; or (2) provisions in the venture agreement giving
the Fund effective control;
15.4.9 Except as provided in the Sections 15.2.15, 15.4.7 and
15.4.8, purchase or lease Equipment from the Fund or sell or lease
Equipment to the Fund;
15.4.10 Cause the Fund to loan any funds or property to any
General Partner or Affiliate of a General Partner;
15.4.11 Cause the Fund to borrow from any of the General
Partner or its Affiliates on terms which provide for interest,
financing charges or fees in excess of the amounts charged by unrelated
lending institutions on comparable loans for the same purpose, or in
excess of the legder's cost of funds, or, in any event, to cause the
Fund to obtain "permanent financing" (defined as financing with a term
in excess of 12 months) from any such Person;
15.4.12 Cause the Fund to exchange Units for property
other than cash;
15.4.13 Do any action in contravention of this Agreement or
which would make it impossible to carry on the ordinary business of the
Fund;
15.4.14 Confess a judgment against the Fund in connection
with any threatened or pending legal action;
15.4.15 Possess any Equipment or assign the rights of the
Fund in specific Equipment for other than a Fund purpose;
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<PAGE>
15.4.16 Admit a Person as a General Partner except with the
consent of the Holders as provided in Article 17 hereof;
15.4.17 Perform any act (other than an act required by this
Agreement or any act taken in good faith reliance upon counsel's
opinion) which would, at the time such act occurred, subject any Holder
to liability as a general partner in any jurisdiction;
15.4.18 Reinvest any funds of the Fund after the end of the
Reinvestment Period other than to invest in Equipment pursuant to
commitments entered into prior to the expiration of the Reinvestment
Period or in Equipment to be used in connection with Equipment under an
existing lease, or reinvest any funds of the Fund during the
Reinvestment Period unless such reinvestment is effected for all
Holders on the same terms and is otherwise in compliance with Section
10.7 hereof;
15.4.19 Invest any of the Gross Proceeds in Equipment which
is non-income producing;
15.4.20 Employ, or permit any Person to employ, the funds or
assets of the Fund in any manner except for the exclusive benefit of
the Fund; this provision shall not prohibit the General Partner from
causing Fund funds to be deposited in a separate Fund account with a
bank or other financial institution which aggregates all funds held on
behalf of the General Partner and its Affiliates in calculating
qualifying balances for purposes of discounts on service charges or
other account benefits, provided that the Fund benefits on a pro rata
basis from any such discounts or other favorable terms, and, provided
further, that no creditor of any party other than the Fund shall have
any recourse to funds held in the Fund's separate account;
15.4.21 Incur any indebtedness wherein the lender will have or
acquire, at any time as a result of making the loan, any direct or
indirect interest in the profit, capital or property of the Fund other
than as a secured creditor; or incur any indebtedness specifically for
the purpose of funding operating distributions, provided however that
the Fund may enter into refinancing transactions with respect to its
Equipment and distribute net proceeds from any such refinancing to the
extent consistent with its investment objectives;
15.4.22 Incur aggregate Fund borrowings which, as of the date
of the final investment of the Net Proceeds and, thereafter, on the
date any subsequent indebtedness is incurred, are in excess of 50% of
the purchase price of all Equipment on a combined basis. "Purchase
price" for purposes of this Section 15.4.22 shall mean the sum of the
cash downpayment and any indebtedness incurred in connection with
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<PAGE>
the acquisition of an item of Equipment by the Fund, or to which the
Equipment is taken subject, plus any Acquisition Fees paid, but does
not include loan points, prepaid interest, or other prepaid expenses;
15.4.23 Commingle Fund funds with those of any other Person;
15.4.24 Except as otherwise provided herein, cause the Fund to
enter into any transaction with any other partnership in which a
General Partner or any of its Affiliates have an interest, including,
but not limited to, any transaction involving the sale, lease or
purchase of any Equipment to or from the Fund, the rendering of
services to or from the Fund, or the lending of any monies or other
property to or from the Fund;
15.4.25 Directly or indirectly pay or award any finder's fees,
commissions or other compensation to any Person engaged by a potential
investor for investment advice as an inducement to such advisor to
advise the purchaser regarding the purchase of Units; provided,
however, that the General Partner shall not be prohibited from paying
the normal sales commissions payable to a registered broker-dealer or
other properly-licensed Person for selling Units;
15.4.26 Operate the Fund in such a manner as to have the Fund
classified as an "investment company" for purposes of the Investment
Company Act of 1940;
15.4.27 Invest any of the Gross Proceeds in units of limited
partnership interest, junior mortgages, deeds of trust or other similar
instruments or obligations;
15.4.28 Cause the Fund to enter into any agreements with a
General Partner or any Affiliate of a General Partner which are not
subject to termination without penalty by either party upon not more
than 60 days' written notice, except for agreements which comply with
the provisions of Section 15.2.15 or those which comply with the
provisions of Section 15.4.8 and relate to the purchase of Equipment by
the Fund and an Affiliate as joint venturers;
15.4.29 Cause the Fund to acquire any single item of Equipment
that has a contract purchase price in excess of $1,000,000 unless prior
to final funding of the acquisition it obtains an appraisal of the
Equipment from a qualified independent third party appraiser;
15.4.30 Cause the Fund to invest cash in an aggregate amount
in excess of $30,000,000 in Equipment leased to a single lessee.
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<PAGE>
15.5 Limitation on General Partner's Liability. The General
Partner shall have no personal liability for the repayment of the Original
Invested Capital of any Holder or to repay the Fund any portion or all of any
negative balance in its Capital Account, except as otherwise provided in Section
5.2.
15.6 Tax Matters Partner. ATEL is hereby designated as the "Tax
Matters Partner" in accordance with Section 6231(a)(7) of the Code and, in
connection therewith and in addition to all other powers given therein, shall
have all other powers needed to perform fully hereunder including, without
limitation, the power to retain all attorneys and accountants of its choice and
the right to settle any audits without the consent of Limited Partners. The
designation made in this paragraph is hereby consented to by each Partner as an
express condition to becoming a Partner. The Fund hereby indemnifies ATEL from
and against any damages or losses (including attorney's fees) arising out of or
incurred in connection with any action taken or omitted to be taken by it in
carrying out its responsibilities as tax matters partner, subject to the same
conditions under which indemnification is provided the General Partner in
Article 21 hereof.
15.7 Minimum Investment in Equipment / Maximum Front-End Fees. The
General Partner must commit not less than 85.875% of the Gross Proceeds to
Investment in Equipment, with the balance thereof available to pay Organization
and Offering Expenses and Front End Fees, however designated. Under the North
American Securities Administrators Association, Inc. ("NASAA") Statement of
Policy concerning Equipment Programs, as amended through October 24, 1991
(referred to herein as the "NASAA Guidelines"), the Fund is required to commit a
minimum percentage of the Gross Proceeds to Investment in Equipment, calculated
as the greater of: (i) 80% of the Gross Proceeds reduced by 0.0625% for each 1%
of indebtedness encumbering the Fund's Equipment; or (ii) 75% of such Gross
Proceeds. Based on the formula in the NASAA Guidelines, with 50% portfolio
leverage the Fund's minimum Investment in Equipment would equal 76.875% of Gross
Proceeds (80% - [50% x .0625%] = 76.875%), and the Fund's minimum Investment in
Equipment would therefore exceed the NASAA Guideline minimum by 9%. The NASAA
Guidelines permit the Fund Manager and its Affiliates to receive compensation in
the form of a carried interest in Fund Net Income, Net Loss and Distributions
equal to 1% for the first 2.5% of excess Investment in Equipment over the NASAA
Guidelines minimum, 1% for the next 2% of such excess, and 1% for each
additional 1% of excess Investment in Equipment. With a minimum Investment in
Equipment of 85.875% and 50% leverage, the Fund Manager and its Affiliates may
receive an additional carried interest equal to 6.5% of Net Profit, Net Loss and
Distributions under the foregoing formula (2.5% + 2% + 4.5% = 9%; 1% + 1% + 4.5%
= 6.5%]. At the lowest permitted level of minimum Investment in Equipment, the
NASAA Guidelines would permit the Fund Manager and its Affiliates to receive a
promotional interest equal to 5% of Distributions of Cash from Operations and 1%
of Distributions of Sale or Refinancing Proceeds until Limited
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<PAGE>
Partners have received total Distributions equal to their Original Invested
Capital plus an 8% per annum cumulative return on their Adjusted Invested
Capital, and, thereafter, the promotional interest could increase to 15% of all
Distributions. With the additional carried interest calculated as described
above, the maximum aggregate fees payable to the Fund Manager and Affiliates
under the NASAA Guidelines as carried interest and promotional interest would
equal 11.5% of Distributions of Cash from Operations (6.5% + 5% = 11.5%), and
7.5% of Distributions of Sale or Refinancing Proceeds (6.5% + 1% = 7.5%), before
the subordination level was reached, and 21.5% of all Distributions thereafter.
The amounts to be paid under the terms hereof will equal 11.5% of Distributions
of Cash from Operations (4% as the Incentive Management Fee plus 7.5% as the
Fund Manager's Interest in the Fund) and 7.5% of Distributions of Sale or
Refinancing Proceeds (as the Fund Manager's 7.5% Interest in the Fund) before
the Priority Return, and 15% of all Distributions thereafter (7.5% as the
Incentive Management Fee plus 7.5% as the Fund Manager's Interest in the Fund).
Upon completion of the offering of Units, final commitment of Net Proceeds to
acquisition of Equipment and establishment of final levels of permanent
portfolio debt encumbering such Equipment, the Fund Manager shall calculate the
maximum carried interest and promotional interest payable to the Fund Manager
and its Affiliates under the NASAA Guidelines and compare such total permitted
fees to the total of the Incentive Management Fees and Fund Manager's Interest
in the Fund. If and to the extent that the fees payable to the Fund Manager and
its Affiliates as the Incentive Management Fee and the Fund Manager's Interest
in the Fund should exceed the maximum promotional interest plus carried interest
permitted under the NASAA Guidelines, as described above, the fees payable to
the Fund Manager and its Affiliates shall be reduced as described herein. In
such event, this Agreement shall be amended immediately to reduce the Fund
Manager's Interest in the Partnership by an amount sufficient to cause the total
of the Incentive Management Fees and such Interest to comply with the
limitations in the NASAA Guidelines on the aggregate of promotional interests
and carried interests. A comparison of the Front End Fees actually paid by the
Fund and the NASAA Guideline maximums shall be repeated, and any required
adjustments shall be made, at least annually thereafter.
15.8 Reliance on General Partner's Authority. The General
Partner shall conduct the business of the Fund, devoting such time thereto
as it, in its sole discretion, shall determine to be necessary to manage the
Fund business and affairs in an efficient manner. Any Person dealing with the
Fund or the General Partner may rely upon a certificate signed by the General
Partner as authority with respect to: (i) the identity of the General Partner or
any Holder hereof; (ii) the existence or non-existence of any fact or facts
which constitute a condition precedent to acts by the General Partner or are in
any other manner germane to the affairs of the Fund; (iii) the Persons who are
authorized to execute and deliver any instrument or document on behalf of the
Fund; or (iv) any act or failure to act by the Fund as to any other matter
atel7-2/lpa.3
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<PAGE>
whatsoever involving the Fund or any Partners.
16. RIGHTS, POWERS AND VOTING RIGHTS OF THE LIMITED PARTNERS
16.1 Limitation on Limited Partner Authority. Limited Partners
shall take no part in the control, conduct or operation of the Fund and shall
have no right or authority to act for or bind the Fund except as expressly
provided herein.
16.2 Voting Rights. Limited Partners shall have the right, by
the vote of Limited Partners who own more than 50% of the total outstanding
Units entitled to vote (a "majority-in-interest"), to approve the following
matters affecting the basic structure of the Fund:
16.2.1 Removal or withdrawal of a General Partner;
16.2.2 Subject to the further requirements of Article
17, continuation of the Fund and election of a successor General
Partner upon the termination of a General Partner;
16.2.3 Termination and dissolution of the Fund;
16.2.4 Amendment of this Agreement, provided such amendment
is not for any of the purposes set forth in Sections 16.4 or 16.5, and
provided, further, that the Limited Partners shall have the right to
approve or disapprove by separate vote each proposed amendment to this
Agreement;
16.2.5 The pledge or granting of a security interest in,
or sale of, Substantially All of the Assets in a single transaction, or
in multiple transactions in the same twelve-month period, except in the
liquidation and winding up of the business of the Fund upon its
termination and dissolution; and
16.2.6 The extension of the term of the Fund.
16.3 Voting Procedures. In any vote of the Limited Partners,
each Limited Partner shall be entitled to cast one vote for each Unit which
he owns as of the designated record date. Notwithstanding any other provision of
this Agreement, any Units held by a General Partner or an Affiliate of a General
Partner will not be entitled to vote, and will not be considered to be
"outstanding" Units for purposes of any vote, upon matters which involve a
conflict between the interests of such General Partner and the Fund, including,
but not limited to, any vote on the proposed removal or withdrawal of such
General Partner or on any proposed amendment to this Agreement which would
expand or extend the rights, authorities or powers of such General Partner.
16.3.1 Meetings of the Limited Partners to vote upon
any matters as to which the Limited Partners are authorized to
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<PAGE>
take action under this Agreement, as the same may be amended from time
to time, may be called at any time by the General Partner or by one or
more Limited Partners holding more than 10% of the outstanding Units by
delivering written notice, either in person or by registered mail, of
such meeting to the General Partner. Promptly, but in any event within
10 days following receipt of such request, the General Partner shall
cause a written notice, either in person or by certified mail, to be
given to the Limited Partners entitled to vote at such meeting, which
notice shall state that a meeting will be held at a time and place
fixed by the General Partner, which is to be convenient to the Partners
as a group, and which is not less than 15 days nor more than 60 days
after the mailing of the notice of the meeting; provided, however, that
such maximum period for the giving of notice and the holding of
meetings may be extended for an additional 60 days if such extension is
necessary to obtain the qualification with the California Commissioner
of Corporations of the matters to be acted upon at such meeting, the
clearance by the Securities and Exchange Commission or other
appropriate governing agency of the solicitation materials to be
forwarded to Limited Partners in connection with such meeting or any
other administrative authorizations which may be required. Included
with the notice of a meeting shall be a detailed statement of the
action proposed, including a verbatim statement of the wording of any
resolution proposed for adoption by the Limited Partners and of any
proposed amendment to this Agreement. All expenses of the meeting and
notification shall be borne by the Fund.
16.3.2 In order to establish the Partners of record entitled
to act upon matters by vote or written consent, the General Partner or
Limited Partners holding more than 10% of the Units may fix in advance
a record date (the "Record Date") which is not more than 60 nor less
than 10 days prior to the date of the meeting or the date upon which
written consents are to be delivered. If no Record Date is fixed in the
notice of meeting or action by written consent, the Record Date shall
be deemed to be at the close of business on the business day next
preceding the date on which notice is given. A new Record Date shall be
fixed if a meeting is adjourned for more than 45 days from the date set
for the original meeting.
16.3.3 Upon adjournment of a meeting to another time or place,
notice of the new time or place shall be announced at the meeting at
which adjournment is taken. If the adjournment is for more than 45 days
or if, after the adjournment, a new Record Date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to
each Partner of record entitled to vote at the meeting.
16.3.4 Personal presence of the Limited Partners at a
meeting shall not be required, provided that sufficient Units
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<PAGE>
are represented at the meeting, by Limited Partners appearing in person
and/or by duly executed proxies, to take any action proposed for a vote
at such meeting. Attendance by a Limited Partner at any meeting and
voting in person shall revoke any proxies of such Limited Partner
submitted with respect to action proposed to be taken at such meeting.
Submission of a later proxy with respect to any action shall revoke an
earlier one as to such action. Only the votes, whether in person or by
proxy, of Limited Partners holding Units as of the Record Date
established for such meeting shall be counted.
16.3.5 Any matter as to which the Limited Partners are
authorized to take action under this Agreement or under law may be
taken by the Limited Partners without a meeting and shall be as valid
and effective as action taken by the Limited Partners at a meeting duly
assembled, if written consents to such action by the Limited Partners
are (i) signed by the Limited Partners entitled to vote upon such
action at a meeting who held, as of the Record Date for such actions,
the number of Units required to authorize such action and (ii)
delivered to the General Partner as of the date set for such action.
Any action taken without a meeting shall be effective 15 days after the
required minimum number of Limited Partners have signed the consent and
shall be effective immediately if the General Partner and Limited
Partners holding at least 90% of the outstanding Units as of the Record
Date have signed the consent.
16.3.6 In the event that there shall be no General Partner,
the Limited Partners may take action without a meeting by the written
consent of Limited Partners having the requisite voting power of the
Limited Partners entitled to vote.
16.4 Limitations on Limited Partner Rights. No Holder shall
have the right or power to: (i) withdraw or reduce his contribution to the
capital of the Fund except as a result of the repurchase of the Units as
provided in Article 13, the dissolution of the Fund or as otherwise provided by
law, (ii) bring an action for partition against the Fund, (iii) cause the
termination and dissolution of the Fund by court decree or otherwise, except as
set forth in this Agreement, or (iv) demand or receive property other than cash
in return for his contribution. No Holder shall have priority over any other
Holder either as to the return of contributions of capital or as to Net Income,
Net Loss or Distributions. Other than upon the termination and dissolution of
the Fund as provided by this Agreement there has been no time agreed upon when
the contribution of each Holder may be returned.
16.5 Limitations on Power to Amend Agreement. Except as provided
in Section 15.2.18, and notwithstanding anything to the contrary contained in
this Agreement, this Agreement may not, without the consent of each of the
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<PAGE>
Partners who would be adversely affected thereby, be amended to:
16.5.1 Convert a Holder into a general partner;
16.5.2 Modify the limited liability of a Holder;
16.5.3 Alter the interest of any Partner in Net
Income, Net Loss or Distributions; or
16.5.4 Affect the status of the Fund as a partnership
for federal income tax purposes.
16.6 Limited Partner List. Upon the written request of a Limited
Partner, the General Partner will furnish to such Limited Partner or his
representative, at his expense, a list containing the name and address of the
Units held of record by each Limited Partner, as provided in Section 14.1.3.
16.7 Dissenters' Rights and Limitations on Mergers and Roll-ups.
16.7.1 Any proposal that the Fund enter into a Roll-Up will
require approval by Limited Partners of not less than 90% of the
outstanding Units. Limited Partners who dissent with respect to a
Roll-Up proposal will have the rights of a dissenting limited partner
as provided under Sections 15679.1 through 15679.14 of the California
Revised Limited Partnership Act. The Fund shall not reimburse the
sponsor of a proposed Roll-Up for the costs of its proxy contest in the
event the Roll-Up is not approved by the Limited Partners as provided
herein.
16.7.2 In connection with a proposed Roll-Up, an appraisal of
all Fund assets shall be obtained from a competent, independent expert
(defined as a Person with no current material or prior business or
personal relationship with the General Partner or its Affiliates who is
engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by the Fund, and who is
qualified to perform such work). If the appraisal will be included in a
Prospectus used to offer the securities of a Roll-Up Entity, the
appraisal shall be filed with the SEC and the states as an Exhibit to
the Registration Statement for the offering. Accordingly, an issuer
using the appraisal shall be subject to liability for violation of
Section 11 of the Securities Act of 1933 and comparable provisions
under state laws for any material misrepresentations or material
omissions in the appraisal. Fund assets shall be appraised on a
consistent basis. The appraisal shall be based on an evaluation of all
relevant information, and shall indicate the value of the Fund's assets
as of a date immediately prior to the announcement of the proposed
Roll-Up transaction. The appraisal shall assume an orderly liquidation
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<PAGE>
of Fund assets over a 12-month period. The terms of the engagement of
the Independent Expert shall clearly state that the engagement is for
the benefit of the Fund and its Holders. A summary of the independent
appraisal, indicating all material assumptions underlying the
appraisal, shall be included in a report to the Holders in connection
with a proposed Roll-Up transaction.
16.7.3 In connection with a proposed Roll-Up, the Person
sponsoring the Roll-Up transaction shall offer to Holders who vote "no"
on the proposal the choice of:
(a) accepting the securities offered in the proposed
Roll-Up transaction; or
(b) one of the following:
(i) remaining as Holders in the Fund, and
preserving their interests therein on the same
terms and conditions as existed previously; or
(ii) receiving cash in an amount equal to the
Holders' pro-rata share of the appraised value
of the net assets of the Fund.
16.7.4 The Fund shall not participate in any proposed Roll-Up
transaction which would result in Holders having democracy rights which
are less than those provided for under this Agreement. If the resulting
entity is a corporation, the voting rights of Holders shall correspond
to the voting rights provided for in this Agreement to the greatest
extent possible.
16.7.5 The Fund shall not participate in any proposed Roll-Up
transaction which includes provisions which would operate to materially
impede or frustrate the accumulation of shares by any purchaser of the
securities of the Roll-Up Entity (except to the minimum extent
necessary to preserve the tax status of the entity). The Fund shall not
participate in any proposed Roll-Up transaction which would limit the
ability of a Holder to exercise the voting rights of the securities of
the Roll-Up Entity on the basis of the number of Units held by that
Holder.
16.7.6 The Fund shall not participate in any proposed Roll-Up
Transaction in which Holders' rights of access to the records of the
Roll-Up Entity will be less than those provided for under this
Agreement.
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<PAGE>
17. TERMINATION OF A GENERAL PARTNER AND TRANSFER OF A GENERAL
PARTNER'S INTEREST
17.1 Removal or Withdrawal. The following conditions shall
govern the voluntary withdrawal or removal of a General Partner:
17.1.1 The General Partner may not voluntarily withdraw from
the Fund without the approval of Limited Partners holding more than 50%
of the total outstanding Units entitled to vote.
17.1.2 A General Partner may be removed upon a vote of Limited
Partners owning more than 50% of the total outstanding Units entitled
to vote. Written notice of removal of a General Partner shall be served
either by certified or by registered mail, return receipt requested, or
by personal service. Such notice shall set forth the date upon which
the removal is to become effective.
17.2 Other Terminating Events. In the event of the adjudication of
bankruptcy, filing of a certificate of dissolution, death or adjudication of
insanity or incompetency of a General Partner (each of such events, as well as
removal, resignation and withdrawal of a General Partner, being herein referred
to as a "Terminating Event"), the Fund shall be dissolved and shall be
liquidated under the provisions of Article 19, subject to the provisions of
Section 17.3.
17.3 Election of Successor General Partner; Continuation of Fund
Business. The following provisions shall govern the election of a successor
General Partner and continuation of the business of the Fund upon the occurrence
of a Terminating Event with respect to a General Partner (the "Retiring General
Partner"):
17.3.1 If at the time of a Terminating Event the Fund has one
or more General Partners other than the Retiring General Partner, any
remaining General Partner or a majority-in-interest of the Limited
Partners may elect, within 90 days thereafter, to continue the Fund
business, in which case the Fund shall not dissolve. So long as there
is at least one remaining General Partner which so elects, or if a
majority-in-interest of the Limited Partners so elect and a remaining
General Partner does not so elect, any remaining General Partner which
is not willing to elect to continue the Fund business will be deemed to
have been removed from the Fund by vote of the Limited Partners.
17.3.2 If at the time of a Terminating Event the Retiring
General Partner is the sole remaining General Partner, the Fund shall
be dissolved unless a majority-in-interest of the Limited Partners
elect to continue the Fund business. In the event of such election, the
Fund business may be continued if the Limited Partners making such
election,
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<PAGE>
within 90 days after the occurrence of the Terminating Event, elect a
successor General Partner and continue the Fund's business on the same
terms and conditions as are contained herein, but with a name which
does not include or in any way refer to the name of any Retiring
General Partner.
17.4 Admission of Successor or Additional General Partner.
The following conditions shall be satisfied before any Person shall
become a successor General Partner or an additional General
Partner:
17.4.1 Such Person shall have been elected in
accordance with Section 17.3 or 17.6;
17.4.2 Such Person shall have accepted and agreed to
be bound by all the terms and provisions of this Agreement;
17.4.3 If such Person is a corporation, it shall have
provided the Fund with evidence satisfactory to counsel for the Fund of
its authority to become a General Partner and to be bound by this
Agreement; and
17.4.4 Any amendments and filings required or
appropriate under the California Revised Limited Partnership Act shall
have been made.
17.5 Effect of a Terminating Event. Upon the occurrence of
a Terminating Event, the following provisions shall be applicable:
17.5.1 The Retiring General Partner shall immediately cease to
be a General Partner and shall not have any right to participate in the
management of the affairs of the Fund or to receive any fees under this
Agreement not already paid or earned; provided, however, that the
Retiring General Partner shall receive all amounts then accrued and
payable by the Fund and shall be, and shall remain, liable as a General
Partner for all obligations and liabilities incurred by the Fund prior
to the effective date of the Terminating Event, but shall be free from
any obligation or liability incurred on account of the activities of
the Fund from and after such time.
17.5.2 If the business of the Fund is continued, as aforesaid,
the Retiring General Partner shall be entitled to receive from the Fund
the then present fair market value of its interest in the Fund,
determined by agreement of the Retiring General Partner and the
remaining or new General Partners, or, if they cannot agree, by
arbitration in accordance with the then current rules of the American
Arbitration Association. The expense of such arbitration shall be borne
equally by the Fund and the Retiring General Partner, and such
arbitration shall be conducted in San Francisco, California unless
otherwise agreed by both parties. The Fund shall forthwith pay to the
Retiring General Partner
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<PAGE>
an amount equal to the then present fair market value of the interest
so determined. If the Retiring General Partner has voluntarily
withdrawn from the Fund, payment shall be in the form of a non-interest
bearing unsecured promissory note with principal payable, if at all,
out of Distributions the Retiring General Partner would otherwise have
received under this Agreement had such General Partner not been
terminated. If the Retiring General Partner has been terminated
involuntarily, the payment shall be in the form of an interest bearing
promissory note payable in equal annual installments over a term of not
less than five years. Such payment when made shall constitute complete
and full discharge of all amounts to which the Retiring General Partner
is entitled in respect to such interest.
17.5.3 All executory contracts between the Fund and the
Retiring General Partner or any Affiliate thereof (unless such
Affiliate is also an Affiliate of the remaining or new General Partner
or Partners) may be terminated by the Fund effective upon written
notice to the party so terminated. The Retiring General Partner or any
Affiliate thereof (unless such Affiliate is also an Affiliate of the
remaining or new General Partner or Partners) may also terminate and
cancel any such executory contract effective upon 60 days' prior
written notice of such termination and cancellation given to the
remaining or new General Partner or Partners, if any, or to the Fund.
17.6 Election of Additional General Partner. Limited Partners owning in
excess of 50% of the outstanding Units may at any time and from time to time
elect an additional General Partner, and, upon satisfaction of the conditions
set forth in Section 17.4, the Person so elected shall be admitted as an
additional General Partner. Admission of an additional General Partner shall not
cause dissolution of the Fund.
17.7 Assignment of General Partner's Interest. A General Partner's
interest in the Fund shall not be assignable without the consent of Limited
Partners owning in excess of 50% of the total outstanding Units, unless such an
assignment is to an entity which succeeds to all of the assets of the assigning
General Partner and of which at least 80% of the voting and beneficial interest
is controlled by Persons controlling 80% or more of the voting and beneficial
interest of the assigning General Partner. Any entity to which the entire
interest of a General Partner in the Fund is assigned in compliance with this
Section 17.7 shall be substituted as a General Partner by the filing of
appropriate amendments to this Agreement.
17.8 Limited Partners' Participation in General Partner's Bankruptcy.
In the event the General Partner is subject to a voluntary or involuntary
petition for reorganization or liquidation under the federal Bankruptcy Act, the
General Partner will cause separate counsel to be retained on behalf of the
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<PAGE>
Fund, at Fund expense, to represent the Limited Partners' interests in the
bankruptcy action. In such event, the Fund will also bear any reasonable and
necessary expenses of a duly appointed committee of Limited Partners incurred
while acting on behalf of all of the Limited Partners as a group in connection
with such bankruptcy action.
18. CERTAIN TRANSACTIONS
The General Partner and its Affiliates, the Holders, any shareholder,
officer, director, partner or employee thereof, or any Person owning a legal or
beneficial interest therein, may engage in or possess an interest in any other
business or venture of every nature and description, independently or with
others, including, but not limited to, the ownership, financing, leasing,
operation, management and brokerage of equipment. Except as described in the
Prospectus, and subject to their fiduciary duties to the Fund, neither the
General Partner nor its Affiliates shall be obligated to present to the Fund any
particular investment opportunity, regardless of whether such opportunity is of
such character that the Fund could take advantage thereof if it were presented
to the Fund, and the General Partner and its Affiliates shall have the right to
take for their own accounts (individually or otherwise) or to recommend to
others any such investment opportunity.
19. TERMINATION AND DISSOLUTION OF THE FUND
19.1 Termination and Dissolution. The Fund shall be terminated
and dissolved upon the earliest to occur of the following:
19.1.1 The withdrawal, removal, adjudication of bankruptcy,
insolvency, insanity or incompetency, death or dissolution of a General
Partner unless a remaining General Partner or a majority-in-interest of
the Limited Partners, within 90 days of the date of such event, elects
to continue the business of the Fund, and, if necessary, elects a
replacement general partner, in the manner provided in Article 17;
provided that expenses incurred on behalf of the General Partner and/or
Limited Partners in the continuation or reformation, or attempted
continuation or reformation, of the Fund hereunder shall be deemed
expenses of the Fund;
19.1.2 The Limited Partners owning more than 50% of
the total outstanding Units vote in favor of dissolution and
termination of the Fund;
19.1.3 The term of the Fund expires; or
19.1.4 The Fund disposes of all interests in Equipment and its
other assets and receives final payment in cash of the proceeds of such
dispositions.
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<PAGE>
19.2 Accounting and Liquidation. Upon the dissolution and
termination of the Fund for any reason, the General Partner shall take full
account of the Fund assets and liabilities, shall liquidate the assets as
promptly as is consistent with obtaining the fair value thereof, and shall
apply and distribute the proceeds therefrom in the following order:
19.2.1 To the payment of creditors of the Fund but excluding
secured creditors whose obligations will be assumed or otherwise
transferred on the liquidation of Fund assets;
19.2.2 To the repayment of any outstanding loans made by the
General Partner to the Fund; and
19.2.3 To the General Partner and Holders in accordance with
their respective Capital Account balances, after giving effect to all
allocations described in Article 10 of this Agreement; provided,
however, that prior to any allocation under Section 10 of this
Agreement, Gross Income shall be specially allocated to the General
Partner to the extent, if any, necessary to cause its Capital Account
balance to be zero as of the close of such final taxable year (after
crediting the General Partner's Capital Account with the General
Partner's share of Fund Minimum Gain). For purposes of making the
foregoing allocation, Net Income and Net Loss for the final taxable
year of the Fund shall first tentatively be computed by including all
Gross Income as an element thereof; then, to the extent, if any, that
the Capital Account balance of the General Partner is negative as of
the close of such final taxable year (after giving effect to all Fund
distributions), Gross Income shall be separately stated and allocated
away from the Holders and to the General Partner pursuant to this
Section 19.2.3.
19.2.4 Distributions in liquidation shall be made by the end
of the taxable year in which the liquidation occurs or, if later,
within 90 days of the liquidating event and shall otherwise comply with
Regulations Section 1.704-1(b).
20. SPECIAL POWER OF ATTORNEY
20.1 Execution of Power of Attorney. By executing this Agreement, each
Holder is hereby granting to the General Partner a special power of
attorney irrevocably making, constituting and appointing ATEL, its duly
appointed officers, and any one of them, as the attorney-in-fact for such
Holder, with power and authority to act alone in his name and on his behalf to
execute, acknowledge and swear to the execution, acknowledgement and filing of
the following documents:
20.1.1 This Agreement, any separate certificates of
limited partnership, as well as any amendments to the
foregoing which, under the laws of the State of California or
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<PAGE>
the laws of any other state, are required to be filed or which
the General Partner deems advisable to file;
20.1.2 Any other instrument or document which may be required
to be filed by the Fund under the laws of any state or by any
governmental agency, or which the General Partner deems advisable to
file; and
20.1.3 Any instrument or document which may be required to
effect the continuation of the Fund, the admission of an additional or
substituted Holder, or the dissolution and termination of the Fund
(provided such continuation, admission or dissolution and termination
are in accordance with the terms of this Agreement), or to reflect any
reductions in amount of contributions of Partners.
20.2 Special Power of Attorney. The special power of attorney
being granted hereby:
20.2.1 Is a special power of attorney coupled with an
interest, is irrevocable, shall survive the death or legal incapacity
of the granting Holder, and is limited to those matters herein set
forth;
20.2.2 May be exercised by a single General Partner acting
alone for each Holder by a facsimile signature of such General Partner
or by one of its officers, or by listing all of the Holders executing
any instrument with a single signature of a General Partner, or of one
of the corporate General Partner's officers, acting as
attorney-in-fact; and
20.2.3 Shall survive an assignment by a Holder of all or any
portion of his Units except that, where the Assignee of the Units owned
by a Holder has been approved by the General Partner for admission to
the Fund as a substituted Holder, the special power of attorney shall
survive such assignment for the sole purpose of enabling the General
Partner to execute, acknowledge and file any instrument or document
necessary to effect such substitution.
21. INDEMNIFICATION
21.1 Indemnification of the General Partner. The Fund, its
receiver or its trustee, shall indemnify, save harmless and pay all judgments
and claims against the General Partner and any of its Affiliates who
perform services for the Fund from any liability, loss or damage incurred by
them or the Fund by reason of any act performed or omitted to be performed by
them when acting in connection with the business of the Fund, including costs
and attorneys' fees and any amounts expended in the settlement of any claims or
liability, loss or damage; provided, however, that, if such liability, loss or
claim arises out of any action or inaction of the General Partner or Affiliates
who perform services for the
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<PAGE>
Fund, the General Partner or Affiliates who perform services for the Fund must
have determined, in good faith, that such course of conduct was in the best
interest of the Fund and did not constitute fraud, negligence, breach of
fiduciary duty or misconduct by the General Partner or Affiliates who perform
services for the Fund; and provided further, that any such indemnification shall
be recoverable only from the assets of the Fund and not from the assets of the
Holders. All judgments against the Fund and the General Partner, wherein a
General Partner is entitled to indemnification, must first be satisfied from
Fund assets before such General Partner may be held responsible. Persons
entitled to indemnification hereunder shall be entitled to receive advances for
attorney's fees and other legal costs and expenses arising out of claims made
against them, provided that (i) no such advances may be made for such fees,
costs or expenses resulting from claims made by Holders; and (ii) advances for
such fees and expenses relating to claims made by parties other than Holders may
only be made if the action relates to the performance of duties or services by
the indemnified party on behalf of the Fund, the indemnified party obtains an
opinion of independent counsel that such party will be entitled to
indemnification pursuant to this Agreement under the specific circumstances of
the claim in question, and the indemnified party undertakes in writing prior to
receipt of such advances that such party will repay in full any such advanced
funds together with interest thereon in the event that, upon the ultimate
disposition of the claim, the party would not be entitled to indemnification
hereunder. Nothing contained herein shall constitute a waiver by a Holder of any
right which he may have against any party under federal or state securities
laws.
21.2 Limitations on Indemnification. Notwithstanding
anything to the contrary contained in the foregoing Section 21.1,
neither the General Partner nor any of its Affiliates performing services for
the Fund nor any party acting as a broker-dealer shall be indemnified from any
liability, loss or damage incurred by them in connection with (i) any claim or
settlement involving violations of state or federal securities laws by the
General Partner or by any Affiliate performing services for the Fund; or (ii)
any liability imposed by law, such as liability for fraud, bad faith or
negligence; provided, however, that indemnification will be allowed for
settlements and related expenses of lawsuits alleging securities law violations,
and for expenses incurred in successfully defending such lawsuits, provided that
a court either (x) approves the settlement and finds that indemnification of any
payment in settlement and related costs should be made; or (y) approves
indemnification of litigation costs if a successful defense is made, or a
dismissal with prejudice is obtained, as to the indemnitee on the merits of each
count involving alleged securities law violations; and (z) the parties seeking
indemnification apprise the court of the positions of the securities law
administrators of any state in which the Units were offered or sold, including
the Massachusetts Securities Division, and the Securities and Exchange
Commission with respect to
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<PAGE>
indemnification for securities laws violations before seeking court approval for
indemnification. Furthermore, the General Partner shall indemnify the Fund
against any loss or liability which it may incur as a result of the violation by
the General Partner or any of its Affiliates performing services for the Fund of
any state or federal securities laws.
21.3 Insurance. The Fund shall not pay for any insurance covering
liability of the General Partner or any of its Affiliates for actions or
omissions for which indemnification is not permitted hereunder; provided,
however, that nothing contained herein shall preclude the Fund from purchasing
and paying for such types of insurance, including extended coverage liability
and casualty and worker's compensation, as would be customary for any Person
owning comparable Equipment and engaged in a similar business or from naming the
General Partner and any of its Affiliates as additional insured parties
thereunder, provided that such addition does not add to the premiums payable by
the Fund.
22. MISCELLANEOUS
22.1 Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on all
parties hereto, notwithstanding that all of the parties are not signatory to the
original or the same counterpart.
22.2 Successors and Assigns. The terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the successors and
assigns of the respective Partners.
22.3 Severability. In the event any sentence or paragraph of this
Agreement is declared by a court of competent jurisdiction to be void, such
sentence or paragraph shall be deemed severed from the remainder of this
Agreement and the balance of this Agreement shall remain in effect.
22.4 Notices. All notices under this Agreement shall be in writing and
shall be given to the Person entitled thereto, by personal service or by mail,
posted to the address maintained by the Fund for such Person or at such other
address as he may specify in writing.
22.5 Captions. Article and section titles or captions contained in this
Agreement are inserted only as a matter of convenience and for reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement nor the intent of any provision hereof.
22.6 Number and Pronouns. Whenever required by the context hereof, the
singular shall include the plural, and vice-versa; the masculine gender shall
include the feminine and neuter genders, and vice-versa.
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<PAGE>
22.7 General Partner Address. The address of the General
Partner is:
ATEL Financial Corporation
235 Pine Street, 6th Floor
San Francisco, California 94104
22.8 Limited Partner Addresses. The names, addresses and
capital contributions of the Limited Partners are set forth on
Exhibit I attached hereto, which exhibit shall be maintained at the
principal place of business of the Fund.
22.9 Construction. Notwithstanding the place where this Agreement may
be executed by any of the parties hereto, the parties expressly agree that all
the terms and provisions hereof shall be construed under the laws of the State
of California and that the Fund shall be governed by the California Revised
Limited Partnership Act, as amended, governing limited partnerships formed under
California law.
22.10 Qualification to Do Business. In the event the business of the
Fund is carried on or conducted in states in addition to the State of
California, then the parties agree that this Fund shall exist under the laws of
each state in which business is actually conducted by the Fund, and they
severally agree to execute such other and further documents as may be required
or requested in order that the General Partner may qualify the Fund to conduct
business in such states. The power of attorney granted to the General Partner by
each Holder in Article 20 shall constitute authority for the General Partner to
perform the ministerial duty of qualifying the Fund under the laws of any state
in which it is necessary to file documents or instruments of qualification. A
Fund office or principal place of business in a state may be designated from
time to time by the General Partner.
GENERAL PARTNER: INITIAL LIMITED PARTNERS:
ATEL FINANCIAL CORPORATION
By:________________________________ _____________________________
Linda Batt
_____________________________
Eliza Cash
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<PAGE>
EXHIBIT I
Schedule of Limited Partners
Capital
Name Address Contribution
Linda Batt c/o ATEL Financial $250/25 Units
Corporation
235 Pine Street
6th Floor
San Francisco, CA 94104
Eliza Cash c/o ATEL Financial $250/25 Units
Corporation
235 Pine Street
6th Floor
San Francisco, CA 94104
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<PAGE>
EXHIBIT C
HOW TO INVEST
TO THE INVESTOR:
Make your check payable to "ATEL CAPITAL EQUIPMENT FUND VII". Investments must
be made in increments of $10, minimum of $2,500 (or $2,000 for an IRA, Keogh or
qualified plan) in most states. See the discussion under Plan of
Distribution-State Requirements in the prospectus for exceptions (page no. ).
Fully complete sections 1, 2, and 3 of the Subscription Agreement.
All subscribers must:
1) sign each appropriate section where indicated,
2) initial each appropriate section (sections 7A - 7D) where
indicated on the bottom of the subscription agreement.
If you would like your distributions sent to an address other than your own
(mutual fund, bank, etc.). please fill in the optional check address section
(section 6).
ADD-ON INVESTMENTS
The subscription agreement accompanying additional investments in Fund VII must
have an authorized signature of a Broker/Dealer, but does not require the
signature of the investor. Add-on investments must bear the exact name in which
the previous investment was registered, or a new signed subscription form will
be required.
FOREIGN INVESTOR OPTION
As described in the Prospectus, the General Partners have elected to permit
limited investment in Units by nonresident alien investors. In section 1 of the
Subscription Agreement there are three boxes, one of which must be checked to
indicate whether an investor is a resident alien, nonresident alien or U.S.
citizen residing outside the United States. If none of the three boxes is
checked, the executed Subscription Agreement will constitute the investor's
representation that he or she is a U.S. citizen residing in the United States.
TO THE SELLING REPRESENTATIVE:
Please complete the Broker/Dealer Information section (Box 5) using your office
address rather than the home office address. This section must be completed for
all investments, including add-on investments by previous subscribers. Please
make sure that the exact same name is used for the registered owner if the
investment is an additional subscription.
Please have the subscription document signed by your branch manager or other
authorized signatory.
Mail original white, pink and yellow copies, retain blue copy for Broker/Dealer
and green copy for the investor unless otherwise specified by your home office,
(all IRA investments must be submitted directly to the custodian and they will
then forward the subscription on to ATEL) to:
ATEL SECURITIES CORPORATION
SUBSCRIPTION PROCESSING DESK
235 PINE STREET, Suite 800
SAN FRANCISCO, CA 94104
(415) 989-8800
(800) 543-ATEL
C-1
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P. The investor whose signature appears
in Section 2 on the reverse side hereof (the "Investor") hereby subscribe for
the number of Units of ATEL Capital Equipment Fund VII, L.P. (the "Fund") set
forth in Section I of this subscription Agreement in the manner described in the
prospectus to which this agreement is an exhibit (the "Prospectus"). Prior to
the satisfaction of the escrow condition (sale of 120,000 Units), there is
transmitted herewith as the subscription price a check payable to "Bank of
America NT&SA-ACEF VII ESCROW" in the amount required to purchase such Units
($10 per Unit), Such funds will be promptly transmitted (as defined in Rule
15c2-4 under the Securities Exchange Act of 1934 and NASD Notice to members
84-64). No subscription funds will be released to the Fund unless and until
subscriptions for a minimum of 120,000 units have been received and collected by
the escrow agent prior to a date 12 months after the date of the Prospectus.
After the escrow condition of 120,000 Units sold has been satisfied, checks
should be made payable to "ATEL Capital Equipment Fund VII". Minimum initial
investment is 250 Units (200 Units for Individual Retirement Accounts or
Qualified Plans). The Investor agrees that if this subscription is accepted it
will be held, together with the accompanying payment, on the terms described in
the Prospectus and that, if accepted as a holder of the Units ("Holder"), the
Investor shall be bound by the terms and conditions of the Agreement of Limited
Partnership set forth as Exhibit B to the Prospectus, including the special
power of attorney set forth therein. The subscription may be canceled by the
subscriber at any time during a period of five days after the subscriber has
submitted this executed subscription agreement to the Fund. The assignability
and transferability of the Units will be governed by the Agreement and all
applicable laws, and the Investor must have adequate means of providing for his
current needs and personal contingencies and must have no need for liquidity in
this investment. The Investor may not be able to consummate a sale or transfer
of the Units, or any interest therein, or receive any consideration therefor,
without the prior written consent of the Commissioner of Corporations of the
State of California, except as permitted in the Commissioner's Rules, and the
Units, or any document of assignment or transfer evidencing the Units, will bear
a legend reflecting the substance of the foregoing understanding if such Units
have been issued pursuant to qualification under the California Corporate
Securities Law of 1968.
INSTRUCTIONS FOR COMPLETING THE SUBSCRIPTION AGREEMENT
Note- Please type or print legibly when completing the Subscription Agreement.
Section 1: Units Purchased.
o Fill in the total dollar amount and the number of Units to be acquired. Please
note there are no fractional Units. All purchases must be in increments of $10.
o Indicate whether this is an original investment in the Fund or an additional
investment to an existing Fund account with the exact same registration by
checking the appropriate box. Please note the minimum requirements. Only the
dollar amount, subscriber name and broker/dealer information sections of the
subscription forms need be completed for additional subscriptions by the same
investor.
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<PAGE>
Section 2: Registered Owner.
o Fill in the name(s) and addresses for the investment as they should appear
in the registration.
o Check the applicable citizen status boxes.
o Enter the appropriate taxpayer identification number for this investment,
depending on the type of ownership. For IRAs and Keoghs please include both the
custodian's taxpayer identification and investor's social security number. o
Check whether monthly or quarterly distributions are desired. o Please read the
Subscription Agreement, then sign and date the form. o Single Ownership - one
signature required o Joint Tenants - all parties must sign o Community Property
- - one signature required o Tenants in Common - all parties must sign o Tenants
in Entirety - one signature required o In all other cases, the custodian,
trustee, general partner or authorized corporate officer must sign. Where the
documents establishing such representative capacity require more than one
signature for execution of instruments on behalf of the represented entity, then
all signatures required by such documents are required here.
Section 3: Legal Form of Ownership.
o Mark only one box. Fill in any information requested and note whose
signature(s) is (are) required in Section 2.
Section 4: Optional Check Addresses.
o Complete this section only if you want your distribution checks mailed to an
address other than that shown in Section 2.
Section 5: Broker/Dealer Information.
o Fill in the name of the licensed Broker/Dealer firm, the name of the Account
Executive, and the telephone number and mailing address of the Account
Executive. The name, address and phone number of the Account Executive are
required so he/she can receive copies of all investor communications. o An
authorized Branch Manager or Registered Principal of the Broker/Dealer firm must
sign the form. Orders cannot be accepted without Broker/Dealer authorization.
Mailing Address.
o Mail the completed form with a check payable as indicated in Section 1 to:
ATEL Securities Corporation
Attention: Subscription Processing Desk
235 Pine Street, Suite 800
San Francisco, CA 94104
If you have any additional questions about completing this Subscription
Agreement, please call ATEL Securities Corporation Subscription Processing
Desk at (800) 543-ATEL.
C-3
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P. o SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT Please type or print the following information:
1.UNITS PURCHASED
Make checks payable to "ATEL Capital Equipment Fund VII" $________is for the
purchase, as a Holder, of________Units
and should be registered as indicated in the Registered Owner section below.
2. REGISTERED OWNER. Name(s) and addresses will be recorded exactly as
printed below. (Include custodial address if applicable.)
__Mr. __Ms. __Mr. and Mrs. __Mrs.
Investor(s) Name and/or Custodian/Nominee_________________________________
Investor Name(s)
Address___________________________________________________________________
City_____________________________State______Zip Code______________________
Investor Phone Number_____________________________________________________ Fax
Number__________________E-Mail address________________________________ Account #
(if any)________________________________________________________
X__________________________________________________Date___________________
Subscriber's Signature
X__________________________________________________Date___________________
Subscriber/Custodian/Nominee or Authorized Signature
__INITIAL INVESTMENT $10 per unit ($2,500/250 Unit Minimum, $2,000/200 Unit
Minimum for IRA or Qualified Plan, unless a higher minimum is required in the
investor's state - see the Prospectus)
__ADDITIONAL INVESTMENT ($500/50 Units, unless a higher minimum is required
in the investor's state - see the Prospectus)
__Check if you are a resident alien.
__Check if you are a nonresident alien.
__Check if you are a U.S. citizen residing outside the U.S.
Enter your taxpayer identification number.
Note: If the account is in more than one name, the number should be that
of the first person listed.
Taxpayer Identification Number_____________________________________________
Social Security No.________________________________________________________
Include BOTH numbers for IRAs and Keoughs.
HAVE YOU INVESTED IN ANY PRIOR ATEL FUND? __YES __NO
DISTRIBUTION OPTION
(check one) __Quarterly __Monthly
C-4
<PAGE>
No representations should be relied upon other than those contained in the
Prospectus, as amended and/or supplemented. The subscriber represents, warrants
and agrees as set forth on the reverse side of this signature page; further, the
undersigned declares under penalty of perjury that to the best of his knowledge
the information supplied above is true and correct and may be relied upon by the
General Partner in connection with his investment as a Holder in the Fund. The
subscriber hereby subscribe(s) for the purchase of fully-paid and nonassessable
Units of the Fund as indicated.
3. LEGAL FORM OF OWNERSHIP (Check Only One)
__Single Ownership
__Joint Tenants with Rights of Survivorship
__Profit Sharing Plan
__Husband and Wife as Community Property
__Tenants in CommonPartnership
__Tenants in Entirety
__Sep IRA
__IRA __regular __rollover Trust Date:(MM/DD/YY)____/____/____
__Trust
__Custodian
__Custodian for______________________________
__UGMA / UTMA - State of:_______
__Pension Plan
__Profit Sharing Plan
__Corporation
__Non-Profit Organization
__Other__________________
4. INVESTOR MAILING ADDRESS
(if different from above, as with IRA's and Keogh's)
Name_______________________________________________________________________
Name_______________________________________________________________________
Address____________________________________________________________________
City___________________________________State______Zip Code_________________
Investor Phone Number______________________________________________________
Fax Number______________________E-mail address_____________________________
5. BROKER/DEALER INFORMATION The Broker/Dealer must sign below to complete
order. Broker/Dealer hereby warrants that it is a duly licensed Broker/Dealer
and may lawfully offer Units in the state designated as the investor's residence
and, further, that it has reasonable grounds to believe, based on information
obtained from the Subscriber concerning his investment objectives, other
investments, financial situation and needs and any other information known by
the Broker/Dealer, that investment in the Fund is suitable for the Subscriber in
light of his/her financial position, net worth and other suitability
characteristics, and that the Broker/Dealer has informed the Subscriber as to
the limited liquidity and marketability of the Units. The undersigned
Broker/Dealer warrants that a current Prospectus was delivered to the
Subscriber.
Licensed Firm Name__________________________________________________________
Mr. Ms._____________________________________________________________________
Account Executive Name_________________________________B/D rep #____________
A/E Mailing Address_______________________________________Suite#____________
City___________________________________State______Zip Code__________________
Telephone Number____________________________________________________________
Fax Number____________________________E-mail address________________________
X___________________________________________________________________________
Authorized signature (Branch Manager or Registered Principal).
Order cannot be accepted without signature.
This transaction, for blue sky purposes, took place in the state of_______.
ACCEPTANCE BY GENERAL PARTNER
FOR GENERAL PARTNER'S USE ONLY
Received and Subscription Accepted
ATEL Financial Corporation, General Partner
Amount______________________________________________Date____________________
By__________________________________________________B/D rep #_______________
C-5
<PAGE>
6. OPTIONAL CHECK ADDRESS If you would like your distribution checks mailed to
an address other than shown at left, please complete. __Designated for all Units
or, __Designated for Partial Units______ Receiving
Entity____________________________________________________________
Address_____________________________________________________________________
City_____________________________________State____Zip Code__________________
Fund Name_________________________________________Acct No.__________________
7. SUBSCRIBER AGREES AS FOLLOWS (EACH ITEM MUST BE INITIALED):
In order to induce the General Partner to accept this subscription, the
Investor hereby represents to you as follows (initial in the space provided):
A. The Investor has (a) a net worth of at least $75,000 in excess of his
investment in Units, or (b) has a net worth of at least $30,000 in excess of his
investment in Units and had during the last tax year or estimates that he will
have during the current tax year a minimum of $30,000 annual gross income. In
all cases net worth is exclusive of home, home furnishings and automobiles. The
investor further represents that he/she satisfies any other minimum income
and/or net worth standards imposed by the jurisdiction in which he/she resides,
if any different standards are set forth in the Prospectus or any supplement
thereto. Initial Here______
B. If the undersigned is acting in a representative capacity for a
corporation, partnership, trust or other entity, or as agent for any person
or entity, he hereby represents and warrants that he has full authority to
enter into this agreement in such capacity.
Initial Here______
C. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the representations and warranties herein shall be
deemed to have been made on behalf of the person or persons for whom the
undersigned is so purchasing.
Initial Here______
D. Under the penalties of perjury, the undersigned certifies that (l) the number
provided herein is his correct Taxpayer Identification Number; and (2) he is not
subject to backup withholding either because he has not been notified that he is
subject to backup withholding as a result of a failure to report all interest or
dividends, or the Internal Revenue Service has notified him that he is no longer
subject to backup withholding. (If the undersigned is currently subject to
backup withholding, he has stricken the language under clause (2) above before
signing). Initial Here______
RETURN TOP 3 COPIES:
WHITE - ATEL COPY
YELLOW - BROKER/DEALER COPY
PINK - INVESTOR COPY
RETAIN:
BLUE - BROKER/DEALER COPY
GREEN - INVESTOR COPY
ATEL SECURITIES CORPORATION
235 PINE STREET
SUITE 800
SAN FRANCISCO, CA 94104
C-6
<PAGE>
<PAGE>
SUPPLEMENT NO. 1
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
Supplement dated April 30, 1997 to prospectus dated November 29, 1996 of ATEL
Capital Equipment Fund VII, L.P. (the "Fund"). The following is an update to the
equipment acquisition summary in the prospectus reflecting all lessees and
equipment leased through April 30, 1997.
- -------------------------------------------------------
Chrysler Corporation
Moody's Credit Rating A3
Lease Financing of Material Handling Equipment
Lease Term 5 years
Equipment Cost(1)
Lease Commitment: $1,032,628
Funded to Date: $982,293
Commencement Date of Lease October to December 1996
- -------------------------------------------------------
Mobil Business Resources Corp.
Moody's Credit Rating Aa2
Lease Financing of Helicopters
Lease Term 3 years
Equipment Cost(1) Fully Funded: $1,650,000
Commencement Date of Lease November 1996
- -------------------------------------------------------
Burlington Northern Railroad Co.(2)
Moody's Credit Rating Aa1
Lease Financing of Locomitives
Lease Term 13 months
Equipment Cost(1) Fully Funded: $5,010,960
Commencement Date of Lease December 1996
- -------------------------------------------------------
General Electric Corporation
Moody's Credit Rating Aaa
Lease Financing of Blow Molding Machine
Lease Term 2 years
Equipment Cost(1) Fully Funded: $906,370
Commencement Date of Lease January 1997
- -------------------------------------------------------
International Paper Company
Moody's Credit Rating A3
Lease Financing of Trackmobile
Lease Term 5 years
Equipment Cost(1) Fully Funded: $248,952
Commencement Date of Lease January 1997
- -------------------------------------------------------
Illinois Central Railroad Co.(3)
Moody's Credit Rating Baa2
Lease Financing of Railcars
Lease Term 3 years
Equipment Cost(1) Fully Funded: $1,610,000
Commencement Date of Lease January 1997
- -------------------------------------------------------
Cargill, Inc.(3)
Moody's Credit Rating Aa3
Lease Financing of Covered Hopper Railcars
Lease Term 6 years
Equipment Cost(1) Fully Funded: $6,534,000
Commencement Date of Lease January 1997
<PAGE>
- -------------------------------------------------------
National Steel Corporation
Moody's Credit Rating Ba3
Lease Financing of Dozer Tractors
Lease Term 5 years
Equipment Cost(1) Fully Funded: $734,730
Commencement Date of Lease April 1997
- -------------------------------------------------------
General Electric Corporation
Moody's Credit Rating Aaa
Lease Financing of Spectrometers
Lease Term 5 years
Equipment Cost(1) Fully Funded: $306,545
Commencement Date of Lease March 1997
- -------------------------------------------------------
Southern Illinois Railcar Company(3)
Lease Financing of Covered Hopper Railcars
Lease Term 4 years
Equipment Cost(1) Fully Funded: $462,000
Commencement Date of Lease January 1997
- -------------------------------------------------------
Minteq International, Inc.
Lease Financing of Laser Measuring Machine
Lease Term 3 years
Equipment Cost(1) Fully Funded: $689,350
Commencement Date of Lease January to March 1997
- -------------------------------------------------------
International Paper Company
Moody's Credit Rating A3
Lease Financing of Wheel Loaders
Lease Term 4 years
Equipment Cost(1) Fully Funded: $417,700
Commencement Date of Lease January to February 1997
- -------------------------------------------------------
International Paper Company
Moody's Credit Rating A3
Lease Financing of Knuckle Boom Loader
Lease Term 6 years
Equipment Cost(1) Fully Funded: $213,095
Commencement Date of Lease February 1997
- -------------------------------------------------------
General Electric Corporation
Moody's Credit Rating Aaa
Lease Financing of Trackmobile
Lease Term 5 years
Equipment Cost(1) Fully Funded: $166,602
Commencement Date of Lease March 1997
- -------------------------------------------------------
Sisseton Milbank Railroad(3)
Lease Financing of Covered Hopper Railcars
Lease Term 3 years
Equipment Cost Fully Funded: $330,000
Commencement Date of Lease January 1997
<PAGE>
- -------------------------------------------------------
Columbus & Greenville Railroad(3)
Lease Financing of Railcars
Lease Term 16 months
Equipment Cost(1) Fully Funded: $667,000
Commencement Date of Lease January 1997
- -------------------------------------------------------
Signature Flight Support Corporatiom
Lease Financing of Fuel Trucks
Lease Term 11 years
Equipment Cost(1) Fully Funded: $760,000
Commencement Date of Lease April 1997
- -------------------------------------------------------
Tarmac America, Inc.(4)
Lease Financing of Wheel Loaders
Lease Term 18 months
Equipment Cost(1) Fully Funded: $350,000
Commencement Date of Lease April 1997
- -------------------------------------------------------
National Steel Corporation
Moody's Credit Rating Ba3
Lease Financing of Dozers and Loaders
Lease Term 5 years
Equipment Cost(1) Fully Funded: $2,985,284
Commencement Date of Lease July 1997
- -------------------------------------------------------
Sematec, Inc.
Lease Financing of Manufacturing Equipment
Lease Term 3 years
Equipment Cost(1) Lease Commitment:$3,703,600
Funded to Date: $840,000
Commencement Date of Lease July to August 1997
- -------------------------------------------------------
International Paper Company
Moody's Credit Rating A3
Lease Financing of Material Handling Equipment
Lease Term 5 Years
Equipment Cost(1) Lease Commitment: $73,195
Commencement Date of Lease 1997
- -------------------------------------------------------
Omnicom Group, Inc.(5)
Moody's Credit Rating Baa2
Lease Financing of Furniture & Fixtures
Lease Term 5 years
Equipment Cost(1) Lease Commitment: $1,400,000
Commencement Date of Lease 1997
- -------------------------------------------------------
International Paper Company
Moody's Credit Rating A3
Lease Financing of Construction and Logging & Lumber Equipement
Lease Term 5 to 6 years
Equipment Cost(1) Lease Commitment: $650,008
Commencement Date of Lease 1997
<PAGE>
- -------------------------------------------------------
Maxtor Corporation(6)
Lease Financing of Manufacturing Equipment
Lease Term 3 years
Equipment Cost(1) Lease Commitments: $10,000,000
Commencement Date of Lease 1997
- -------------------------------------------------------
Minteq International, Inc.
Lease Financing of Manufacturing Equipment
Lease Term 3 years
Equipment Cost(1) Lease Commitment: $653,950
Commencement Date of Lease 1997
- -------------------------------------------------------
National Steel Corporation
Moody's Credit Rating Ba3
Lease Financing of Mining Equipment
Lease Term 4 to 5 years
Equipment Cost(1) Lease Commitment: $4,279,986
Commencement Date of Lease 1997
- -------------------------------------------------------
ATEL Capital Equipment Fund VII
Total Equipment Cost(as of April 30, 1997)
Funded to Date: $25,864,881
Commitments to be Funded: $19,971,074
Total Cost: $45,835,955
- -------------------------------------------------------
(1) The "equipment cost" for each of the Fund's lease transactions may reflect a
fully funded acquisition, a partially funded commitment or a lease commitment
which has not yet been funded. Transactions for which the equipment cost is
characterized as "fully funded" reflect the actual amount invested in the
transaction as of the date hereof, and no further funding is anticipated for
these transactions. The equipment cost for partially funded transactions is
described by the full lease commitment and the amount actually funded as of the
date hereof. For transactions which have not yet been funded, the equipment cost
reflects only the lease commitment. For those leases which are not fully funded
as of the date hereof, the amount of the lease commitment and the stated range
of commencement dates of the lease represent the Fund Manager's best estimate as
to the ultimate size and timing of the transaction, based on the Fund's lease
commitment to the lessee, its discussions with the lessee regarding funding
requirements and timing, the current and anticipated availability of Fund
capital and other factors. There can be no assurance, however, that any portion
of a transaction which has not yet been funded will be completed as described.
(2) A portfolio purchased from LPCA (a wholly-owned subsidiary of GATX
Corporation). Lease term represents the remaining months of the existing lease
contract.
(3) A portfolio purchased from MRX Corporation. Lease term represents the
remaining months of the existing lease contract.
(4) Co-lessee with Tarmac Mid-Atlantic, Inc. Lease is guaranteed by Tarmac PLC.
(5) Guaranteed by Omnicon Group, Inc. Actual Lessees are various
subsidiaries of OmnicomGroup, Inc.; DDB Needham Worldwide, Inc.; Griffin Bacal,
Inc.; DDB Needham Chicago, Inc.; Tracey-Locke, Inc.; Puskar Gibbon Chapin, Inc.;
The Focus Agency Inc.; and Elgin Syferd/DDB Needham, Inc.
(6) Guaranteed by Hyundai Electronics.
<PAGE>
Status of the Offering
As of January 6, 1997, the Fund had received and accepted subscriptions for
120,000 Units. As a result, the escrow condition was met and the subscription
proceeds were released to the Fund.
As of April 30, 1997, the Fund had received and accepted subscriptions for
2,202,797 units for total subscriptions in the amount of $22,027,970. As of this
date, the Fund had committed all of such proceeds to equipment costs, offering
and organization expenses and capital reserves.
<PAGE>
SUPPLEMENT NO. 2
To be used in conjunction with Supplement No. 1
ATEL Capital Equipment Fund VII, L.P.
Supplement dated August 31, 1997
to the Prospectus dated November 29, 1996 of
ATEL Capital Equipment Fund VII, L.P.
(the "Fund")
TABLE OF CONTENTS
Page
Status of the offering . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Equipment acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Management's Discussion and Analysis. . . . . . . . . . . . . . . . . . . . .5
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Prior Performance Tables . . . . . . . . . . . . . . . . . . . . . . . . .A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . .F-1
The Fund's Prospectus is hereby supplemented as set forth on the following
pages. This supplement is a part of and must be accompanied by the Fund's
Prospectus dated November 29, 1996. Terms not otherwise defined herein have the
meaning as defined in the Prospectus.
Status of the Offering
As of January 7, 1997, the Fund had received and accepted subscriptions for
120,000 Units. As a result, the escrow condition was satisfied and the
subscription proceeds were released to the Fund.
As of August 31, 1997, the Fund had received and accepted subscriptions for
4,572,581 Units for total subscription proceeds in the amount of $45,725,810. As
of such date, the Fund had committed all of such proceeds to equipment costs,
offering and organization expenses and capital reserves.
1
<PAGE>
Equipment Acquisitions
Set forth below is a summary of the Equipment acquisitions and leases entered
into or identified by the Fund as of the date of this supplement.
<TABLE>
<CAPTION>
EQUIPMENT ACQUISITIONS
Equipment Commence Acquisition Indebt- Lease Lease
Lessee Type Date(s) (1) Price (2) edness (3) Term (4) Type (5) Notes
- ------ ---- ----------- --------- ---------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Leases Funded:
Applied Magnetics Corporation Manufacturing Jul-97 $4,152,810 63 FP
Burlington Northern Railroad Co. Locomotives Dec-96 5,010,960 13 OL 6
Cargill, Incorporated Covered Hopper Cars Jan-97 6,534,000 72 FP 7
Chrysler Corporation Materials Handling Oct-96 982,293 60 OL/HP
to Dec-96
Columbus & Greenville Railway Company Covered Hopper Cars Jan-97 667,000 16 FP 7
Consolidated Rail Corporation Containers & Chassis Sep-97 1,657,000 84 OL
General Electric Company - Plastics Blow Molding System Jan-97 906,370 24 OL
General Electric Company - Plastics Railcar Mover Mar-97 166,602 60 OL
General Electric Company - Plastics Office Automation Sep-97 306,545 60 FP
Illinois Central Railroad Company Covered Hopper Cars Jan-97 1,610,000 36 FP 7
International Paper Company CAT Wheel Loader Jan-97 177,700 48 OL
International Paper Company Trackmobile Jan-97 248,952 60 OL
International Paper Company CAT Wheel Loader Feb-97 240,000 48 HP
International Paper Company Knuckleboom Loader Feb-97 213,095 72 FP
International Paper Company CAT Hydraulic Excavator Jun-97 150,493 60 OL
International Paper Company Industrial Truck Jul-97 73,595 60 HP
International Paper Company Linde-Baker Forklift Jul-97 40,350 60 FP
International Paper Company Knuckleboom Loader Jul-97 275,000 60 HP
Maxtor Corporation Testing Equipment Sep-97 533,698 36 HP 8
Minteq International, Inc. Laser Profiling System Jan-97 1,364,260 36 HP
to Sep-97
Mobil Business Resources Corp. Helicopters Nov-96 1,650,000 36 OL 9
National Steel Corporation Steel Yard Equipment Apr-97 734,730 $553,698 60 HP
National Steel Corporation Steel Yard Equipment Jul-97 3,666,101 - 60 OL
National Steel Corporation Steel Yard Equipment Oct-97 599,149 - 60 HP
NVR, Inc. Home Manufacturing Aug-97 286,574 - 84 FP
Omnicom Group, Inc. Office Furniture Jul-97 20,292 - 60 FP 10
Sematec, Inc. Research Equipment Oct-97 2,973,240 - 36 FP
Signature Flight Support Company Fuel Trucks Apr-97 760,000 - 132 FP
Sisston Milbank Railroad, Inc. Covered Hopper Cars Jan-97 330,000 - 36 FP 7
Southern Illinois Railcar Co. Covered Hopper Cars Jan-97 462,000 - 48 FP 7
Tarmac America, Inc. Loaders Apr-97 350,000 - 18 OL 11
TASC, Inc. Computers Oct-97 354,762 - 36 FP
------------- -----------
Total funded as of August 31, 1997: 37,497,571 553,698
------------- -----------
Leases committed:
Burlington Northern Santa Fe Railroad Sep-97 16,200,000 - 9 OL
Consolidated Rail Corporation Containers Oct-97 3,314,000 - 84 OL
Federal Paperboard Company, Inc. Railroad Sep-97 5,616,373 - 51 OL
General Electric Company - Plastics Spectrometer Mar-97 400,000 - 60 FP
Hambros Vendor Leasing Limited Trucks Sep-97 5,645,350 4,434,695 60 HP
Hastings Leasing Limited Medical Jul-97 6,269,850 5,514,852 74-84 HP
Hastings Leasing Limited Trucks & Trailers Jul-97 17,464,162 15,508,162 48-72 HP
Hyundai Electronics America Manufacturing Jul-98 6,235,608 - 60 FP 8
International Paper Company Logging & Lumber Sep-97 476,184 - 72 HP
International Paper Company Construction Oct-97 286,420 - 60 OL
Maxtor Corporation Manufacturing Sep-97 9,466,302 - 36 HP 8
Maxtor Corporation Manufacturing Nov-97 4,730,697 - 36 HP 8
Mobil Business Resources Corporation Aviation Nov-97 1,100,000 - 36 OL 9
Morton's Restaurant Group, Inc. Restaurant FF&E Oct-97 2,200,000 - 60 FP 12
National Steel Corporation Mining Oct-97 2,399,169 - 60 HP
NVR, Inc. Home Manufacturing Oct-97 1,000,000 - 84 FP
Sematech, Inc. Manufacturing Nov-97 600,000 - 36 OL
Sematech, Inc. Manufacturing Nov-97 130,360 - 36 HP
Sony Pictures International, Inc. Office Equipment Oct-97 926,525 - 36 HP
TASC, Inc. Office Equipment Dec-97 981,789 - 36 HP
Ultratech Stepper, Inc. Manufacturing Apr-98 938,600 - 48 FP
Ultratech Stepper, Inc. Manufacturing Oct-97 3,032,660 - 48 HP
------------- ------------
Total committed as of August 31, 1997: 89,414,049 25,457,709
------------- ------------
Total Acquisition Price: $126,911,620 $26,011,407
============= ============
</TABLE>
2
<PAGE>
NOTES
(1) In many cases, a Lease transaction is funded over a period of time
according to the Lessee's requirements. Therefore, "Commence Date(s)" expressed
as a range represents multiple Lease commencement dates occurring or anticipated
under the same Lease line.
(2) "Acquisition Price" includes either amounts committed to Lessees for
funding by the Program, or actual Equipment acquisition costs as of August 31,
1997. All figures are rounded. For any transactions which are not fully funded,
the "Acquisition Price", may change as a result of ongoing fundings. o the
extent that the transaction is not fully funded, the information in the table
represents the General Partner's best estimates as to the size, timing and terms
of the transaction upon full funding, based on the outstanding lease commitment,
its discussions with the lessee, the current and anticipated availability of
Fund capital and other factors. There can be no assurance, however, that the
portion of the transaction which has not been funded will be completed as
described.
(3) "Indebtedness" is the original principal amount of the debt acquired or
assumed by the Fund in order to acquire the Equipment and leverage the
Acquisition Price of the Equipment. Although transactions may originally be
purchased for all cash, the General Partner may subsequently leverage equipment
in order to achieve an overall debt-equity balance for the portfolio.
(4) "Lease Term" is expressed in terms of months, although actual Lease
Terms may be monthly, quarterly, semiannual or annual.
(5) A designation of "FP" indicates that the aggregate rents to be received
during the Lease Term equal or exceed the Acquisition Price of the Equipment. A
designation of "HP" indicates that the aggregate rents to be received during the
Lease Term equal or exceed 90% of the Acquisition Price of the Equipment. A
designation of "OL" indicates that the aggregate rents to be received during the
Lease Term are less than 90% of the Acquisition Price of the Equipment.
(6) Title to the Equipment and Lease is held by an equipment trust. A
divided beneficial interest in the trust representing 24 of 34 of the
diesel-electric locomotives is owned by the program. A divided beneficial
interest in the trust representing the remaining 10 diesel-electric locomotives
has been assigned to a non-affiliate, however, such interest continues to be
managed by an affiliate of the program.
(7) The equipment is subject to a full payout management agreement with
MRXX Corporation.
(8) Guaranteed by Hyundai Electronics Industries Co., Ltd.
(9) Guaranteed by Mobil Corporation.
(10) Guaranteed by Omnicom Group, Inc. Actual lessees are various
subsidiaries of Omnicom Group, Inc.: DDB Needham Worldwide Communications Group,
Inc.; Griffin Bacal, Inc.; DDB Needham Chicago, Inc.; DDB Needham Dallas, Inc.;
PGC Advertising, Inc.; The Focus Agency, LP.; Elgin DDB, Inc.; and TLP, Inc.
(11) Tarmac America, Inc.; Tarmac Mid-Atlantic, Inc.; and Tarmac Florida,
Inc. are co-lessees. Guaranteed by Tarmac PLC, a British Limited Liability
Company.
3
<PAGE>
(12) The lessee name represents the guarantor of the lease obligations.
Actual lessees are various subsidiaries of the guarantor.
Distributions
The following table is a summary of cash distributions by the Fund to Holders
from commencement to the date of this Supplement. Distributions may be
characterized for tax, accounting and economic purposes as a return of capital,
a return on capital or a portion of each. Generally, the portion of each cash
distribution by a partnership which exceeds its net income for the fiscal period
would constitute a return of capital. On this basis, all of the distributions to
date of the Fund would constitute a return of capital. The source of all cash
distributions has been Cash from Operations. Cash from Operations is defined in
the Agreement of Limited Partnership as follows: "Cash from Operations" shall
mean the excess of Gross Revenues over cash disbursements (including the
Equipment Management Fee and amounts reinvested by the Fund in compliance with
Section 15.4.18) without reduction for depreciation and amortization of
intangibles such as organization and underwriting costs but after reasonable
allowance for cash repairs, replacements, contingencies and anticipated
obligations determined by the General Partner. Cash from Operations shall not
include Cash from Sales or Refinancing or Cash from Reserve Account".
<TABLE>
<CAPTION>
Weighted
Total Average
Distribution Month Return of Total Distribution Units
Period (1) Paid Capital Distribution per Unit Outstanding
---------- ---- ------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
Monthly:
January 1997 February 1997 $18,763 $18,763 $0.0833 225,156
February 1997 March 1997 57,464 57,464 0.0833 689,568
March 1997 April 1997 90,761 90,761 0.0833 1,089,132
April 1997 May 1997 134,181 134,181 0.0833 1,610,172
May 1997 June 1997 177,428 177,428 0.0833 2,129,136
June 1997 July 1997 221,427 221,427 0.0833 2,657,124
July 1997 August 1997 261,544 261,544 0.0833 3,138,528
------------ ------------- ---------
961,568 961,568 $0.5833
------------ ------------- =========
Quarter ended:
March 31, 1997 April 1997 27,275 27,275 $0.2500 109,100
June 30, 1997 July 1997 95,167 95,167 0.2500 380,668
------------ ------------- ---------
122,442 122,442 $0.5000
------------ ------------- =========
$1,084,010 $1,084,010
============ =============
</TABLE>
(1) Investors may elect to receive their distributions either monthly or
quarterly. See "Timing of Distributions on Page 54 of the Prospectus. The
monthly distributions in the table include only those distributions made to
investors on a monthly basis. The quarterly distributions in the table include
only those distributions made to investors on a quarterly basis.
4
<PAGE>
Management's Discussion and Analysis
Capital Resources and Liquidity
During the first and second quarters of 1997, the Partnership's primary
activities were raising funds through its offering of Limited Partnership Units
(Units) and engaging in equipment leasing activities. Through August 31, 1997,
the Partnership had received subscriptions for 4,572,581 Units ($45,725,810),
all of which were issued and outstanding.
During the funding period, the Partnership's primary source of liquidity is
subscription proceeds from the public offering of Units. The liquidity of the
Partnership will vary in the future, increasing to the extent cash flows from
leases exceed expenses, and decreasing as lease assets are acquired, as
distributions are made to the limited partners and to the extent expenses exceed
cash flows from leases.
As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire the Partnership will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $90,000,000 revolving line of credit with a financial
institution. The line of credit expires on October 28, 1997.
The Partnership anticipates reinvesting a portion of lease payments from assets
owned in new leasing transactions. Such reinvestment will occur only after the
payment of all obligations, including debt service (both principal and
interest), the payment of management and acquisition fees to the General Partner
and providing for cash distributions to the Limited Partners.
The Partnership currently has available adequate reserves to meet contingencies,
but in the event those reserves were found to be inadequate, the Partnership
would likely be in a position to borrow against its current portfolio to meet
such requirements. The General Partner envisions no such requirements for
operating purposes.
The General Partner expects that aggregate borrowings in the future will be
approximately 50% of aggregate Equipment cost. In any event, the Agreement of
Limited Partnership limits such borrowings to 50% of the total cost of
Equipment, in aggregate.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. Such commitments totaled approximately
$89,414,049 as of August 31, 1997.
The fund commenced regular distributions, based on cash flows from operations,
beginning with the first quarter of 1997. The first distribution was made in
February 1997. See "Distributions" above for additional information regarding
distributions to date from cash from operations in 1997.
If inflation in the general economy becomes significant, it may affect the
Partnership inasmuch as the residual (resale) values and rates on re-leases of
the Partnership's leased assets may increase as the costs of similar assets
increase. However, the Partnership's revenues from existing leases would not
increase, as such rates are generally fixed for the terms of the leases without
adjustment for inflation.
5
<PAGE>
If interest rates increase significantly, the lease rates that the Partnership
can obtain on future leases will be expected to increase as the cost of capital
is a significant factor in the pricing of lease financing. Leases already in
place, for the most part, would not be affected by changes in interest rates.
During the first quarter of 1997, the Partnership's primary sources of liquidity
were the proceeds of its offering of Units and funds borrowed on the line of
credit or on a non-recourse basis.
Cash from operating activities was almost entirely from operating lease rents.
Sources of cash from investing activities consisted of proceeds from sales of
assets ($32,288) and direct financing lease rents ($8,975) and were not
significant. Cash was used in investing activities to purchase assets on
operating and direct financing leases.
Cash from financing sources consisted primarily of cash received for
subscriptions for Units and borrowings under the line of credit. The purchase of
lease assets was primarily funded with borrowings on this line of credit and the
proceeds of the Partnership's public offering of Units.
Results of operations
As of January 7, 1997, subscriptions for the minimum amount of the offering
($1,200,000) had been received and accepted by the Fund. As of that date, the
Fund commenced operations in its primary business (leasing activities).
Operations resulted in a net loss of $78,151 (six months) and $68,222 (three
months). The Partnership's primary source of revenues is from operating leases.
This is expected to remain true in future periods although the amounts are
expected to increase as a result of additional equipment acquisitions.
Depreciation expense is the single largest expense of the Partnership and is
expected to remain so in future periods although at a higher amount. Equipment
management fees are based on the Partnership's rental revenues and are expected
to increase in relation to expected increases in the Partnership's revenues from
leases. Incentive management fees are based on the levels of distributions to
limited partners. As the effective distribution rate increases and as the number
of units outstanding increases (as a result of the continuing offering of such
units), the incentive management fee is expected to increase. Interest expense
in 1997 related primarily to the borrowings under the line of credit. It
included all amounts related to those borrowings, going back as far as November
1996 when the General Partner started to fund the related transactions on behalf
of the Partnership. All of the revenues and related carrying costs for these
transactions have been attributed to the Partnership in 1997 operations.
As of June 30, 1997, the Partnership's public offering was continuing. During
the offering period, the Partnership expects to purchase significant amounts of
lease assets. Because of this, operations in 1997 are not expected to be
comparable to future periods.
Experts
The consolidated balance sheet of ATEL Financial Corporation at July 31,
1996 and the financial statements of ATEL Capital Equipment Fund VII, L.P. at
December 31, 1996 and for the period from May 17, 1996 (inception) to December
31, 1996, appearing in this supplement to the Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports there on appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
6
<PAGE>
PRIOR PERFORMANCE INFORMATION
ATEL Financial Corporation ("ATEL"), the General Partner of the Fund, and its
affiliates have extensive experience in the equipment leasing industry,
including: (i) originating and financing leveraged and single investor lease
transactions for corporate investors, (ii) acting as a broker/packager by
arranging equity and debt participants for equipment leasing transactions
originated by other companies, (iii) consulting on the pricing and structuring
of equipment lease transactions for banks, leasing companies and corporations,
(iv) organizing and offering individual ownership and limited partnership
investment leasing programs and (v) supervising and arranging for the
supervision of equipment management and marketing on leasing transactions
involving total equipment costs in excess of $1 billion. In addition to the
Fund, ATEL has sponsored six prior public and one private equipment leasing
limited partnership(s). See "Prior Performance Summary" for a summary of
information regarding such prior programs.
The first prior partnership, ATEL Lease Income Fund 1985-A ("ALIF"), completed a
private placement of $218,500 of its limited partnership interests in April 1986
from a total of 12 investors. ALIF had acquired a variety of equipment with a
total purchase cost of approximately $296,627 as of June 30, 1997. All such
equipment had been sold as of June 30, 1997. See Table V - "Sales or Disposals
of Equipment" in this Exhibit A.
The second prior partnership, ATEL Cash Distribution Fund ("ACDF"), commenced a
public offering of up to $10,000,000 of its limited partnership interests on
March 11, 1986. ACDF terminated its offering on December 18, 1987 after raising
a total of $10,000,000 in offering proceeds from a total of approximately 1,000
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF had
acquired a variety of types of equipment with a total purchase cost of
approximately $11,133,679 as of June 30, 1997. See Table IV - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF. Of such equipment, items representing an
original purchase cost of approximately $10,736,685 had been sold as of June 30,
1997. See Table V - "Sales or Disposals of Equipment" in Exhibit A. Through June
30, 1997, ACDF had made cash distributions to its investors in the aggregate
amount of $1,090.78 per $1,000 invested. Of this amount a total of $236.34
represents investment income and $854.44 represents return of capital. See Table
III - "Operating Results of Prior Programs" in this Exhibit A for further
information concerning such distributions.
The third prior partnership, ATEL Cash Distribution Fund II ("ACDF II"),
commenced a public offering of up to $25,000,000 (with an option to increase the
offering to $35,000,000) of its limited partnership interests on January 4,
1988. ACDF II terminated its offering on January 3, 1990 after raising a total
of $35,000,000 in offering proceeds from a total of approximately 3,100
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF II had
acquired a variety of types of equipment with a total purchase cost of
approximately $52,270,536 as of June 30, 1997. See Table IV - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF II. Of such equipment, items representing an
original purchase cost of approximately $40,058,789 had been sold as of June 30,
1997. See Table V - "Sales or Disposals of Equipment" in Exhibit A. Through June
30, 1997, ACDF II had made cash distributions to its investors in the aggregate
amount of $1,066.72 per $1,000 invested. Of this amount a total of $274.88
represents investment income and $791.84 represents return of capital. See Table
III - "Operating Results of Prior Programs" in this Exhibit A for further
information concerning such distributions.
A-1
<PAGE>
The fourth prior partnership, ATEL Cash Distribution Fund III ("ACDF III"),
commenced a public offering of up to $50,000,000 (with an option to increase the
offering to $75,000,000) of its limited partnership interests on January 4,
1990. ACDF III terminated its offering on January 3, 1992 after raising a total
of $73,855,840 in offering proceeds from a total of approximately 4,822
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF III had
acquired a variety of types of equipment with a total purchase cost of
approximately $99,629,941 as of June 30, 1997. See Table IV - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF III. Of such equipment, items representing
an original purchase cost of approximately $42,579,035 had been sold as of June
30, 1997. See Table V - "Sales or Disposals of Equipment" in Exhibit A. Through
June 30, 1997, ACDF III had made cash distributions to its investors in the
aggregate amount of $886.87 per $1,000 invested. Of this amount a total of
$213.55 represents investment income and $673.35 represents return of capital.
See Table III - "Operating Results of Prior Programs" in this Exhibit A for
further information concerning such distributions.
The fifth prior partnership, ATEL Cash Distribution Fund IV ("ACDF IV"),
commenced a public offering of up to $75,000,000 of its limited partnership
interests on February 4, 1992. ACDF IV terminated its offering on February 3,
1993 after raising a total of $75,000,000 in offering proceeds from a total of
approximately 4,873 investors, all of which proceeds have been committed to
equipment acquisitions, estimated organization and offering expenses and capital
reserves. ACDF IV had acquired a variety of types of equipment with a total
purchase cost of approximately $112,816,643 as of June 30, 1997. See Table IV
"Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACDF IV. Of such
equipment, items representing an original purchase cost of approximately
$43,029,232 had been sold as of June 30, 1997. See Table V - "Sales or Disposals
of Equipment" in Exhibit A. Through June 30, 1997, ACDF IV had made cash
distributions to its investors in the aggregate amount of $657.87 per $1,000
invested. Of this amount a total of $101.49 represents investment income and
$556.38 represents return of capital. See Table III - "Operating Results of
Prior Programs" in this Exhibit A for further information concerning such
distributions.
The sixth prior partnership, ATEL Cash Distribution Fund V ("ACDF V"), commenced
a public offering of up to $125,000,000 of its limited partnership interests on
February 22, 1993. ACDF V terminated its offering on November 15, 1994. As of
that date, $125,000,000 of offering proceeds had been received. All of the
proceeds have been committed to equipment acquisitions, estimated organization
and offering expenses and capital reserves. ACDF V had acquired a variety of
types of equipment with a total purchase cost of $186,897,181 as of June 30,
1997. Of such equipment, items representing an original purchase cost of
approximately $21,019,489 had been sold as of June 30, 1997. Through June 30,
1997, ACDF V had made cash distributions to its investors in the aggregate
amount of $407.11 per $1,000 invested. Of this amount a total of $63.30
represents investment income and $343.81 represents return of capital. See Table
III - "Operating Results of Prior Programs" in this Exhibit A for further
information concerning such distributions. See Table IV - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF V. See Table V - "Sales or Disposals of
Equipment" in Exhibit A.
A-2
<PAGE>
The seventh prior partnership, ATEL Cash Distribution Fund VI ("ACDF VI"),
commenced a public offering of up to $125,000,000 of its limited partnership
interests on November 23, 1994. ACDF VI terminated its offering on November 22,
1996. As of that date, $125,000,000 of offering proceeds had been received. All
of the proceeds have been committed to equipment acquisitions, estimated
organization and offering expenses and capital reserves. ACDF VI had acquired a
variety of types of equipment with a total purchase cost of $209,270,404 as of
June 30, 1997. Of such equipment, items representing an original purchase cost
of approximately $1,277,374 had been sold as of June 30, 1997. Through June 30,
1997, ACDF VI had made cash distributions to its investors in the aggregate
amount of $221.09 per $1,000 invested. All of this amount represents return of
capital. See Table III - "Operating Results of Prior Programs" in this Exhibit A
for further information concerning such distributions. See Table IV -
"Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACDF VI. See Table V -
"Sales or Disposals of Equipment" in Exhibit A.
Although certain of the Prior Programs have experienced lessee defaults in the
ordinary course of business, none of the Prior Programs has experienced an
unanticipated rate of default or major adverse business developments which the
Fund Manager believes will impair its ability to meet its investment objectives.
All of the Prior Programs have investment objectives that are similar to those
of the Fund. It should be noted, however, that the prior privately placed
program, ALIF, invested in equipment without the use of any acquisition debt,
while Prior Programs ("Prior Public Programs") were designed to use moderate
amounts of acquisition debt, as is the Fund. In addition, as in the case of the
Fund's portfolio objectives, the Prior Public Programs' equipment portfolios
placed greater emphasis on relatively low technology equipment than did ALIF.
The factors considered by the General Partner in determining that the investment
objectives of the prior programs were similar to those of the Fund include the
types of equipment to be acquired, the structure of the leases to such
equipment, the credit criteria for lessees, the intended investment cycles, the
reinvestment policies and the investment goals of each program. Therefore all of
the information set forth in Tables included in this Exhibit A - "Prior
Performance Information" may be deemed to relate to programs with investment
objectives similar to those of the Fund.
In Tables I through III information is presented with respect to all Prior
Programs sponsored by the General Partner and its Affiliates which closed their
offerings within the five year period ending June 30, 1997, except that ACDF
closed its offering December 18, 1987, ACDF II closed its offering January 3,
1990 and ACDF III closed its offering January 3, 1992. Table V includes
information regarding all dispositions of equipment by prior programs during the
five year period ending June 30, 1997. No information concerning results of
completed programs is presented herein, because none of the prior partnerships
has completed its operations. The following is a list of the tables set forth on
this Exhibit A:
TABLE I - Experience in Raising and Investing Funds TABLE II - Compensation to
ATEL and Affiliates TABLE III - Operating results of Prior Programs TABLE IV
Acquisition of Equipment by Prior Programs TABLE V - Sales or Disposals of
Equipment
ATEL will provide to any investor, upon written request and without charge,
copies of the most recent Annual Reports on Form 10-K filed with the Securities
and Exchange Commission by each Prior Public Program and will provide to any
investor, for a reasonable fee, copies of the exhibits to such reports.
INVESTORS IN THE PARTNERSHIP WILL HAVE NO INTEREST IN THE INVESTMENTS
DESCRIBED IN THE FOLLOWING TABLES. PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE
INCLUSION OF THIS INFORMATION AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
PARTNERSHIP.
In addition to Tables I through V, two summary charts are set forth below.
Figure 6 is a summary of cumulative cash distributions through June 30, 1996 by
each Prior Public Program, expressed as a percentage of an initial investors
capital contribution and divided to portions of such distributions which have
been characterized in the Prior Programs' financial statements as a return of
capital, on the one hand, and net income on the other.
A-3
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
(on a percentage basis)
June 30, 1997
(Unaudited)
The following Table sets forth certain information concerning the experience of
the General Partners in raising and investing funds. A percentage analysis of
the application of the proceeds raised is presented.
<TABLE>
<CAPTION>
ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash
Distribution Distribution Distribution Distribution Distribution Distribution
Fund Fund II Fund III Fund IV Fund V Fund VI
---- -------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
EQUITY PROCEEDS
Dollar amount of equity
offered $10,000,000 $35,000,000 $75,000,000 $75,000,000 $125,000,000 $125,000,000
Dollar amount of equity
raised $10,000,000 $35,000,000 $73,855,840 $75,000,000 $125,000,000 $125,000,000
------------- ------------- --------------- -------------- -------------- -------------
Less: Offering expenses:
Selling commissions 9.50% 9.50% 9.50% 9.50% 9.50% 9.50%
Organization and program
expenses (1) 4.00% 5.00% 4.25% 4.53% 4.60% 4.70%
Reserves 3.00% 1.50% 1.50% 1.50% 1.50% 1.50%
------------- ------------- --------------- -------------- -------------- -------------
Percent available for investmen 83.50% 84.00% 84.75% 84.47% 84.40% 84.30%
Acquisition costs:
Purchase price (2) 79.00% 79.25% 80.00% 79.71% 79.64% 79.80%
Acquisition fees 4.50% 4.75% 4.75% 4.76% 4.76% 4.50%
------------- ------------- --------------- -------------- -------------- -------------
83.50% 84.00% 84.75% 84.47% 84.40% 84.30%
------------- ------------- --------------- -------------- -------------- -------------
Percent leverage (9) 20.26% 40.93 (8) 43.04 (10) 43.50% 35.06% 46.12%
============= ============= =============== ============== ============== =============
Date offering commenced: Mar. 1, 1986 Jan. 4, 1988 Jan. 4, 1990 Feb. 4, 1992 Feb. 22, 1993 Nov. 23, 1994
Length of offering 21 Months 24 Months 24 Months 12 Months 21 Months 24 Months
Months to invest 90% of
amount available for
investment (measured
from beginning of offering) 30 Months(3) 27 Months (4) 30 Months (5) 20 Months(6) 22 Months(7) 24 Months(11)
</TABLE>
(Footnotes follow on page A-5)
A-4
<PAGE>
FOOTNOTES:
(1) Includes organization, legal, accounting, printing, binding, delivery
and other costs incurred by the General Partner.
(2) Represents amounts paid to unrelated third parties for purchase of
equipment under leases.
(3) As of September 1988, 90% of the amount available for investment had
been invested. As of December 1988, 100% of the amount available for investment
had been invested.
(4) As of March 1990, 90% of the amount available for investment had been
invested. As of June 1990, 100% of the amount available for investment had been
invested.
(5) As of September 30, 1992, 100% of the amount available for investment
had been invested.
(6) As of February 3, 1993, the Partnership's offering of Limited
Partnership Units was completed. As of September 30, 1993, 90% of the proceeds
of the offering had been invested. As of December 31, 1993, the proceeds of the
offering had been fully invested.
(7) As of November 15, 1994, the Partnership's offering of Limited
Partnership Units was completed. As of December 31, 1994, the proceeds of the
offering had been fully committed.
(8) From January 4, 1988 through August 31, 1994, the maximum amount of
leverage at the end of any quarter was 37%. This was computed as the outstanding
balance of all debt divided by the original cost of all equipment owned by the
partnership as of the end of each period.
(9) The percentage leverage is calculated by dividing the initial principal
amount of debt incurred by the program through the date of this table by the
aggregate original cost of all equipment purchased by the program through such
date. It should be noted, however, that each program has acquired assets, has
made or will make principal amortizing debt service payments and/or has disposed
or will dispose of assets over a period of time extending from its first
investment in equipment. As a result, for each program the total cost of the
assets in its portfolio and the total principal amount of debt outstanding have
fluctuated from time to time. The percentage figure, therefore, does not reflect
the current leverage ratio or the debt ratio at any one point in time, but
constitutes an aggregate ratio for the life of the program through the date of
the table.
(10) From January 4, 1990 through June 30, 1997, the maximum amount of
leverage at the end of any quarter was less than 40%. This was computed as the
outstanding balance of all debt divided by the original cost of all equipment
owned by the partnership as of the end of each period.
(11) As of November 22, 1996, the Partnership's offering of Limited
Partnership Units was completed. As of that date, the proceeds of the offering
had been fully committed.
A-5
<PAGE>
TABLE II
COMPENSATION TO THE GENERAL PARTNERS
June 30, 1997
(Unaudited)
The following Table sets forth certain information concerning the compensation
derived by the General Partner. Amounts paid are from two sources: proceeds of
the offering and gross revenues.
<TABLE>
<CAPTION>
ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash
Distribution Distribution Distribution Distribution Distribution Distribution
Fund Fund II Fund III Fund IV Fund V Fund VI
---- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Date offering commenced Mar. 1, 1986 Jan. 4, 1988 Jan. 4, 1990 Feb. 4, 1992 Feb. 22, 1993 Nov. 23, 1994
Date offering closed Dec. 18, 1987 Jan. 4, 1990 Jan. 3, 1992 Feb. 3, 1993 Nov. 15, 1994 Nov. 22, 1996
Dollar amount raised $10,000,000 $35,000,000 $73,855,840 $75,000,000 $125,000,000 $125,000,000
Amounts paid to General
Partners from proceeds of
offering:
Acquisition fees $450,000 $1,662,500 $3,558,700 $3,575,123 $5,956,319 $5,625,000
Organization and program costs $550,000 $1,751,422 $3,135,942 $3,394,652 $5,751,177 $5,875,000
Dollar amount of cumulative
cash generated from operations
before deducting payments to
the General Partner $10,348,459 $42,105,968 $70,378,133 $44,741,324 $57,958,608 $32,149,807
Cumulative amount paid to the
General Partner from operations:
Management fees $765,081 $2,808,061 $4,852,018 $3,610,352 $4,541,600 $1,424,437
Other operating expenses $475,740 $1,479,846 $2,332,398 $2,044,170 $1,989,083 $1,478,726
Aggregate payments to General
Partner: (1)
1992 $220,893 $664,605 $3,709,768 $10,986,027
1993 221,000 741,295 1,383,380 4,178,039 $8,084,815
1994 54,739 551,300 1,339,355 2,007,562 15,675,132
1995 - 380,380 1,201,436 1,480,305 4,067,056 $12,837,117
1996 - 290,349 967,667 1,097,106 2,119,066 12,043,919
1997 - 114,783 419,139 553,563 940,322 2,095,555
------------- ------------- --------------- -------------- -------------- -------------
$496,632 $2,742,712 $9,020,745 $20,302,602 $30,886,391 $26,976,591
============= ============= =============== ============== ============== =============
</TABLE>
FOOTNOTES:
(1) As of June 30, 1997. Includes payments of management fees,
reimbursements of syndication costs to general partner (and affiliates),
acquisition fees and reimbursements of administrative costs.
A-6
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
June 30, 1997
(Unaudited)
The following Table summarizes the operating results of Prior Programs (ACDF,
ACDF II, ACDF III, ACDF IV, ACDF V and ACDF VI). The Programs' records are
maintained in accordance with generally accepted accounting principles for
financial statement purposes.
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund
Period Ended December 31,
1986 1987 1988 1989
---- ---- ---- ----
Months of operations 2 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $6,257 $375,072 $1,493,794 $1,761,021
- - - 11,951
------------- --------------- -------------- --------------
6,257 375,072 1,493,794 1,772,972
Less Operating Expenses: (1)
Depreciation expense - 51,965 914,188 1,215,223
Amortization expense - 7,849 7,949 7,949
Interest expense 1,558 29,918 37,727 52,553
Administrative costs and reimbursements - 16,288 20,978 43,990
Legal/Professional fees - 15,105 16,586 39,712
Provision for doubtful accounts - - - -
Supplies - 10,507 6,414 -
Other 125 10,886 18,329 12,648
Management fee - 19,882 108,196 147,120
------------- --------------- -------------- --------------
Net income - GAAP basis (2) $4,574 $212,672 $363,427 $253,777
============= =============== ============== ==============
Taxable income (loss) from operations $3,972 ($208,962) ($414,155) ($294,778)
============= =============== ============== ==============
Cash generated by (used in) operations (3) $221,291 $160,581 $1,402,104 $1,521,502
Cash generated from sales - - - -
Cash generated from refinancing - - - -
Cash generated from other (3) - 104,143 183,679 221,151
------------- --------------- -------------- --------------
221,291 264,724 1,585,783 1,742,653
------------- --------------- -------------- --------------
Less cash distributions to investors:
From operating cash flow - 160,581 1,215,018 1,508,226
From sales - - - -
From refinancing - - - -
From other - 93,374 - -
------------- --------------- -------------- --------------
Total distributions - 253,955 1,215,018 1,508,226
------------- --------------- -------------- --------------
Cash generated (deficiency) after cash distributions $221,291 $10,769 $370,765 $234,427
============= =============== ============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $2.76 ($46.78) ($41.00) ($29.20)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income None $47.60 $35.98 $25.14
- Return of capital None 9.82 85.52 125.75
------------- --------------- -------------- --------------
None 57.42 121.50 150.89
Cash available for distribution, reinvested for
investors' accounts None 65.08 28.50 9.11
------------- --------------- -------------- --------------
Total None $122.50 $150.00 $160.00
============= =============== ============== ==============
Sources (on a cash basis)
Sales
Refinancing
Operations $77.46 $150.00 $160.00
Other 45.04 - -
------------- --------------- -------------- --------------
Total None $122.50 $150.00 $160.00
============= =============== ============== ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $467,071 $4,293,800 $8,139,130 $8,989,917
Amount invested in program equipment (book value) $488,090 $4,341,128 $7,244,935 $6,724,650
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as a
percentage of cost of all equipment purchased
by the program) (4)
program) (4) 4.20% 38.57% 73.10% 80.75%
</TABLE>
(Footnotes follow on page A-20)
A-7
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund
Period Ended December 31,
1990 1991 1992 1993
---- ---- ---- ----
Months of operations 12 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $2,201,630 $1,816,898 $1,410,396 $895,012
- gain (loss) on sales of assets 8,766 4,998 15,909 9,929
------------- --------------- -------------- --------------
2,210,396 1,821,896 1,426,305 904,941
Less Operating Expenses: (1)
Depreciation expense 1,612,647 1,277,406 906,100 348,650
Amortization expense 7,949 7,849 - -
Interest expense 176,922 144,752 72,057 25,403
Administrative costs and reimbursements 37,163 55,293 126,664 140,984
Legal/Professional fees 35,231 41,141 41,459 44,256
Provision for doubtful accounts 96,682 42,870 5,731 -
Supplies - - - -
Other 11,786 25,922 35,839 21,664
Management fee 164,932 130,347 94,229 80,016
------------- --------------- -------------- --------------
Net income (loss) - GAAP basis (2) $67,084 $96,316 $144,226 $243,968
============= =============== ============== ==============
Taxable income (loss) from operations $150,104 $180,117 $1,105,467 $692,509
============= =============== ============== ==============
Cash generated by (used in) operations (3) $1,585,967 $1,424,425 $1,673,016 $574,077
Cash generated from sales 30,000 159,396 562,504 1,343,908
Cash generated from refinancing - - - -
Cash generated from other (3) 237,576 185,406 126,552 183,275
------------- --------------- -------------- --------------
1,853,543 1,769,227 2,362,072 2,101,260
------------- --------------- -------------- --------------
Less cash distributions to investors:
From operating cash flow 1,516,124 1,265,955 1,470,260 574,077
From sales - - - 524,806
From refinancing - - - -
From other - - - 183,275
------------- --------------- -------------- --------------
Total distributions 1,516,124 1,265,955 1,470,260 1,282,158
------------- --------------- -------------- ---------------
Cash generated (deficiency) after cash distributions $337,419 $503,272 $891,812 $819,102
============= =============== ============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $14.88 $17.83 $109.44 $68.55
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $6.66 $9.54 $14.30 $24.18
- Return of capital 145.17 117.24 132.94 104.22
------------- --------------- -------------- --------------
151.83 126.78 147.24 128.40
------------- --------------- -------------- --------------
Cash available for distribution, reinvested for
investors' accounts 18.17 14.46 31.00 (21.92)
------------- --------------- -------------- ---------------
Total $170.00 $141.24 $178.24 $106.48
============= =============== ============== ==============
Sources (on a cash basis)
Sales $43.58
Refinancing
Operations $170.00 $141.24 $178.24 47.68
Other - - - 15.22
------------- --------------- -------------- --------------
Total $170.00 $141.24 $178.24 $106.48
============= =============== ============== ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $10,064,292 $8,607,852 $7,402,311 $3,620,293
Amount invested in program equipment (book value) $5,961,158 $3,639,966 $2,147,253 $724,675
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment purchased
by the program) (4) 90.40% 77.31% 66.49% 32.52%
</TABLE>
(Footnotes follow on page A-20)
A-8
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
ATEL Cash Distribution Fund
Period Ended December 31, June 30,
------------------------- --------
1994 1995 1996 1997
---- ---- ---- ----
Months of operations 12 12 12 6
<S> <C> <C> <C> <C>
Gross revenue - lease and other $264,117 $374,172 $169,765 $53,466
- gain (loss) on sales of assets 220,266 15,106 39,095 25,000
------------- --------------- -------------- --------------
484,383 389,278 208,860 78,466
Less Operating Expenses: (1)
Depreciation expense 98,835 29,324 62,028 17,686
Amortization expense - - - -
Interest expense 5,154 12,496 15,883 6,655
Administrative costs and reimbursements 34,380 - - -
Legal/Professional fees 20,391 15,443 10,606 4,363
Provision for losses - 3,768 2,088 -
Provision for doubtful accounts - - - -
Supplies - - - -
Other 20,697 17,552 16,712 11,169
Management fee 20,359 - - -
------------- --------------- -------------- --------------
Net income (loss) - GAAP basis (2) $284,567 $310,695 $101,543 $38,593
============= =============== ============== ==============
Taxable income (loss) from operations $745,274 $339,275 $193,822 $100,000
============= =============== ============== ==============
Cash generated by (used in) operations (3) $195,123 $200,234 $93,675 $55,643
Cash generated from sales 622,350 112,188 212,802 57,000
Cash generated from refinancing - - - -
Cash generated from other (3) 119,745 79,692 79,520 27,236
------------- --------------- -------------- --------------
937,218 392,114 385,997 139,879
------------- --------------- -------------- --------------
Less cash distributions to investors:
From operating cash flow 195,123 200,234 93,675 55,643
From sales 622,350 112,188 142,200 56,140
From refinancing - - - -
From other 412,143 174,165 - -
------------- --------------- -------------- --------------
Total distributions 1,229,616 486,587 235,875 111,783
------------- --------------- -------------- --------------
Cash generated (deficiency) after cash distributions ($292,398) ($94,473) $150,122 $28,096
============= =============== ============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $73.92 $33.65 $19.22 $9.92
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $28.22 $30.82 $10.07 $3.83
- Return of capital 94.96 17.91 13.55 7.36
------------- --------------- -------------- --------------
123.18 48.73 23.62 11.19
------------- --------------- -------------- --------------
Cash available for distribution, reinvested for
investors' accounts (23.66) (18.63) (3.62) (1.19)
------------- --------------- -------------- --------------
Total $99.52 $30.10 $20.00 $10.00
============= =============== ============== ==============
Sources (on a cash basis)
Sales $50.37 $6.94 $12.06 $5.02
Refinancing
Operations 15.79 12.39 7.94 4.98
Other 33.36 10.77
------------- --------------- -------------- --------------
Total $99.52 $30.10 $20.00 $10.00
============= =============== ============== ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $2,300,024 $2,825,287 $2,296,755 $830,949
Amount invested in program equipment (book value) $484,971 $552,050 $234,707 $157,785
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment purchased
by the program) (4) 20.66% 25.38% 20.63% 7.46%
</TABLE>
(Footnotes follow on page A-20)
A-9
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund II
Period Ended December 31,
1988 1989 1990
Months of operations 9 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $1,001,065 $4,190,191 $8,619,546
- gain (loss) on sales of assets - - -
--------------- -------------- --------------
1,001,065 4,190,191 8,619,546
Less Operating Expenses: (1)
Depreciation expense 531,855 2,579,866 5,253,869
Provision for decline in value of commercial aircraft - - 1,083,834
Provision for doubtful accounts - - -
Interest expense 31,445 362,122 1,485,960
Administrative costs and reimbursements 19,284 107,082 95,474
Legal/Professional fees - 32,022 42,748
Other 7,799 41,448 58,465
Management fee 43,721 252,159 472,064
--------------- -------------- --------------
Net income - GAAP basis (5) $366,961 $815,492 $127,132
=============== ============== ==============
Taxable income (loss) from operations ($588,007) ($3,544,620) ($3,583,850)
=============== ============== ==============
Cash generated by (used in) operations (3) $1,044,176 $3,639,963 $6,823,453
Cash generated from sales
Cash generated from refinancing
Cash generated from other (3) 100,715 147,741 400,308
--------------- -------------- --------------
1,144,891 3,787,704 7,223,761
Less cash distributions to investors:
From operating cash flow 253,760 1,986,455 4,069,920
From sales - - -
From refinancing - - -
From other - - -
--------------- -------------- --------------
Total distributions 253,760 1,986,455 4,069,920
--------------- -------------- --------------
Cash generated (deficiency) after cash distributions $891,131 $1,801,249 $3,153,841
=============== ============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($96.15) ($158.82) ($101.37)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $41.91 $36.54 $3.60
- Return of capital - 53.37 112.69
--------------- -------------- --------------
41.91 89.91 116.29
Cash available for distribution, reinvested for investors' accounts 37.47 30.09 13.71
--------------- -------------- --------------
Total $79.38 $120.00 $130.00
=============== ============== ==============
Sources (on a cash basis)
Operations $79.38 $120.00 $130.00
Sales - - -
Refinancing - - -
Other - - -
--------------- -------------- --------------
Total $79.38 $120.00 $130.00
=============== ============== ==============
Amount invested in program equipment (cost, excluding acquisition fees) $14,664,014 $30,309,212 $48,538,987
Amount invested in program equipment (book value) $14,661,074 $28,412,251 $40,154,353
Amount remaining invested in program equipment (Cost of equipment
owned at end of period as a percentage of cost of all equipment
purchased by the program) (4) 28.05% 57.99% 92.86%
</TABLE>
(Footnotes follow on page A-20)
A-10
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund II
Period Ended December 31,
1991 1992 1993
Months of operations 12 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $8,774,789 $8,148,565 $6,665,582
- gain (loss) on sales of assets (31,613) 111,809 184,599
--------------- -------------- --------------
8,743,176 8,260,374 6,850,181
Less Operating Expenses: (1)
Depreciation expense 5,546,000 5,285,315 4,285,373
Provision for decline in value of commercial - - -
aircraft - - -
Provision for doubtful accounts 30,400 4,064 -
Interest expense 1,353,033 1,171,105 860,663
Administrative costs and reimbursements 94,910 256,184 313,421
Legal/Professional fees 52,281 39,612 47,110
Other 38,337 70,316 49,725
Management fee 510,416 408,421 427,874
--------------- -------------- --------------
Net income - GAAP basis (5) $1,117,799 $1,025,357 $866,015
=============== ============== ==============
Taxable income (loss) from operations ($2,013,494) $1,686,207 $2,346,733
=============== ============== ==============
Cash generated by (used in) operations (3) $6,705,095 $6,601,157 $4,720,797
Cash generated from sales 223,447 767,749 2,643,336
Cash generated from refinancing - - -
Cash generated from other (3) 488,962 698,496 1,437,114
--------------- -------------- --------------
7,417,504 8,067,402 8,801,247
Less cash distributions to investors:
From operating cash flow 4,561,842 4,927,246 4,720,797
From sales - - -
From refinancing - - -
From other - - 794,270
--------------- -------------- --------------
Total distributions 4,561,842 4,927,246 5,515,067
--------------- -------------- --------------
Cash generated (deficiency) after cash distributions $2,855,662 $3,140,156 $3,286,180
=============== ============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($56.95) $47.69 $66.38
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $31.62 $29.01 $24.50
- Return of capital 98.72 111.77 133.07
--------------- -------------- --------------
130.34 140.78 157.57
Cash available for distribution, reinvested for
investors' accounts 9.66 9.22 2.43
--------------- -------------- --------------
Total $140.00 $150.00 $160.00
=============== ============== ==============
Sources (on a cash basis)
Operations $140.00 $150.00 $136.96
Sales - - -
Refinancing - - -
Other - - 23.04
--------------- -------------- --------------
Total $140.00 $150.00 $160.00
=============== ============== ==============
Amount invested in program equipment (cost, excluding acquisition fees) $47,181,808 $41,405,356 $36,692,677
Amount invested in program equipment (book value) $29,983,437 $23,667,996 $16,204,828
Amount remaining invested in program equipment (Cost of equipment
owned at end of period as a percentage of cost of all equipment
purchased by the program) (4) 90.26% 79.21% 70.20%
</TABLE>
(Footnotes follow on page A-20)
A-11
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund II
December 31, June 30,
------------ --------
1994 1995 1996 1997
---- ---- ---- ----
Months of operations 12 12 12 6
<S> <C> <C> <C> <C>
Gross revenue - lease and other $5,627,738 $3,191,834 $1,994,161 693,440
- gain (loss) on sales of assets (3,239) 453,960 168,927 150,117
------------- --------------- -------------- --------------
5,624,499 3,645,794 2,163,088 843,557
Less Operating Expenses: (1)
Depreciation expense 2,963,445 1,451,193 885,426 217,793
Provision for decline in value of commercial
aircraft - - - -
Provision for losses 11,616 25,972 22,221 4,162
Interest expense 509,267 365,099 237,226 71,318
Administrative costs and reimbursements 238,185 157,444 132,994 64,868
Legal/Professional fees 37,647 44,864 21,173 8,450
Other 66,324 71,101 72,138 46,712
Management fee 313,115 222,936 157,355 49,915
------------- --------------- -------------- --------------
Net income - GAAP basis (5) $1,484,900 $1,307,185 $634,555 $380,339
============= =============== ============== ==============
Taxable income (loss) from operations $4,340,559 $3,101,835 $2,079,449 $1,000,000
============= =============== ============== ==============
Cash generated by (used in) operations (3) $3,921,897 $2,788,119 $1,288,526 $284,878
Cash generated from sales 2,959,549 2,304,367 1,298,116 563,964
Cash generated from refinancing - - - -
Cash generated from other (3) 1,311,673 875,730 877,510 422,809
------------- --------------- -------------- --------------
8,193,119 5,968,216 3,464,152 1,271,651
Less cash distributions to investors:
From operating cash flow 3,921,897 2,788,119 1,288,526 284,878
From sales 859,241 1,064,197 - 37,889
From refinancing - - - -
From other 1,311,673 875,730 788,922 422,809
------------- --------------- -------------- --------------
Total distributions 6,092,811 4,728,046 2,077,448 745,576
------------- --------------- -------------- --------------
Cash generated (deficiency) after cash distributions $2,100,308 $1,240,170 $1,386,704 $526,075
============= =============== ============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $122.79 $87.76 $58.84 $28.29
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $42.01 $36.99 $17.95 $10.76
- Return of capital 132.10 98.14 41.42 10.55
------------- --------------- -------------- --------------
174.11 135.13 59.37 21.31
Cash available for distribution, reinvested for
investors' accounts (4.11) (30.13) (7.37) (6.31)
------------- --------------- -------------- --------------
Total $170.00 $105.00 $52.00 $15.00
============= =============== ============== ==============
Sources (on a cash basis)
Operations $109.43 $61.92 $32.25 $5.73
Sales 23.97 23.63 - -
Refinancing - - - -
Other 36.60 19.45 19.75 9.27
------------- --------------- -------------- --------------
Total $170.00 $105.00 $52.00 $15.00
============= =============== ============== ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $26,755,760 $21,031,914 $16,329,599 $13,485,844
Amount invested in program equipment (book value) $11,523,077 $7,459,980 $4,564,924 $3,518,451
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as a
percentage of cost of all equipment purchased
by the program) (4) 51.19% 40.24% 31.24% 25.80%
</TABLE>
(Footnotes follow on page A-20)
A-12
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund III
Period Ended December 31,
1990 1991 1992 1993
---- ---- ---- ----
Months of operations 12 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $2,130,161 $7,760,246 $12,713,280 $13,970,227
- gain (loss) on sales of assets - (17,714) 1,202,188 (140,513)
------------- --------------- -------------- --------------
2,130,161 7,742,532 13,915,468 13,829,714
Less Operating Expenses: (1)
Depreciation expense 1,278,427 4,919,605 7,739,054 8,984,502
Provision for decline in value of commercial
aircraft 623,294 - - -
Interest expense 482,047 1,002,520 1,186,760 1,456,147
Administrative costs and reimbursements 70,775 239,667 542,510 468,005
Legal/Professional fees 7,600 52,746 31,691 58,809
Other 22,898 49,198 52,629 75,289
Management fee 83,245 391,494 839,909 915,375
------------- --------------- -------------- --------------
Net income - GAAP basis (6) ($438,125) $1,087,302 $3,522,915 $1,871,587
============= =============== ============== ==============
Taxable income (loss) from operations ($2,539,135) ($6,476,596) ($3,010,933) ($5,122,581)
============= =============== ============== ==============
Cash generated by (used in) operations (3) $1,572,921 $6,288,997 $9,564,446 $11,402,915
Cash generated from sales - - 4,006,080 269,479
Cash generated from refinancing - - - -
Cash generated from other (3) 125,093 14,587 181,746 719,701
------------- --------------- -------------- --------------
1,698,014 6,303,584 13,752,272 12,392,095
Less cash distributions to investors:
From operating cash flow 396,751 4,185,400 9,261,560 9,594,918
From sales - - - -
From refinancing - - - -
From other - - - -
------------- --------------- -------------- --------------
Total distributions 396,751 4,185,400 9,261,560 9,594,918
------------- --------------- -------------- --------------
Cash generated (deficiency) after cash distributions $1,301,263 $2,118,184 $4,490,712 $2,797,177
============= =============== ============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($282.13) ($200.01) ($40.37) ($68.68)
Recapture
Capital gain (loss) Cash distributions to investors on a GAAP basis:
- Investment income $33.58 $47.23 $25.09
- Return of capital $44.53 96.98 78.19 104.86
------------- --------------- -------------- --------------
$44.53 $130.56 $125.42 $129.95
============= =============== ============== ==============
Sources (on a cash basis)
Sales
Refinancing
Operations $44.53 $130.56 $125.42 $129.95
Other - - - -
------------- --------------- -------------- --------------
Total $44.53 $130.56 $125.42 $129.95
============= =============== ============== ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $28,534,220 $52,188,848 $83,423,686 $91,612,304
Amount invested in program equipment (book value) $27,475,925 $44,531,829 $64,526,606 $63,434,911
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment purchased
by the program) (4) 28.64% 52.38% 83.73% 91.95%
</TABLE>
(Footnotes follow on page A-20)
A-13
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund III
Period Ended
December 31, June 30,
1994 1995 1996 1997
---- ---- ---- ----
Months of operations 12 12 12 6
<S> <C> <C> <C> <C>
Gross revenue - lease and other $14,212,777 $13,378,680 $10,565,963 $4,228,804
- gain (loss) on sales of assets 155,497 954,115 1,143,807 608,324
------------- --------------- -------------- --------------
14,368,274 14,332,795 11,709,770 4,837,128
Less Operating Expenses: (1)
Depreciation expense 9,734,408 9,037,450 7,051,625 2,583,530
Provision for losses 36,626 826,550 118,023 34,095
Interest expense 1,395,276 1,064,823 630,450 200,192
Administrative costs and reimbursements 340,269 300,952 245,242 124,978
Legal/Professional fees 60,552 59,237 38,522 12,698
Other 113,411 110,637 149,613 138,233
Management fee 999,086 900,484 722,425 294,161
------------- --------------- -------------- --------------
12,679,628 12,300,133 8,955,900 3,387,887
------------- --------------- -------------- --------------
Income before extraordinary items 1,688,646 2,032,662 2,753,870 1,449,241
Extrordinary gain on early extinguisment of debt - - 97,608 -
------------- --------------- -------------- --------------
Net income - GAAP basis (6) $1,688,646 $2,032,662 $2,851,478 $1,449,241
============= =============== ============== ==============
Taxable income (loss) from operations $635,990 $6,281,437 $8,404,788 $4,000,000
============= =============== ============== ==============
Cash generated by (used in) operations (3) $11,400,861 $10,333,228 $8,435,426 $4,194,923
Cash generated from sales 682,595 3,276,705 5,335,135 2,343,433
Cash generated from refinancing - - - -
Cash generated from other (3) 1,317,531 1,518,191 1,628,837 607,460
------------- --------------- -------------- --------------
13,400,987 15,128,124 15,399,398 7,145,816
Less cash distributions to investors:
From operating cash flow 10,201,485 10,333,228 8,435,426 3,929,371
From sales - - - -
From refinancing - - - -
From other - 4,961 777,879 -
------------- --------------- -------------- --------------
Total distributions 10,201,485 10,338,189 9,213,305 3,929,371
------------- --------------- -------------- --------------
Cash generated (deficiency) after cash distributions $3,199,502 $4,789,935 $6,186,093 $3,216,445
============= =============== ============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $8.53 $84.28 $112.76 $53.67
Recapture
Capital gain (loss) Cash distributions to investors on a GAAP basis:
- Investment income $22.66 $27.27 $38.26 $19.45
- Return of capital 115.59 112.73 86.63 33.82
------------- --------------- -------------- --------------
$138.25 $140.00 $124.89 $53.27
============= =============== ============== ==============
Sources (on a cash basis)
Sales
Refinancing
Operations $138.25 $139.93 $114.35 $53.27
Other - 0.07 10.54 0.00
------------- --------------- -------------- --------------
Total $138.25 $140.00 $124.89 $53.27
============= =============== ============== ==============
Amount invested in program equipment (cost, excluding
acquisition fees) $87,442,745 $79,602,818 $64,700,440 $58,571,795
Amount invested in program equipment (book value) $52,479,724 $39,107,792 $26,203,009 $21,094,123
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment purchased
by the program) (4) 87.77% 79.90% 64.94% 58.79%
</TABLE>
(Footnotes follow on page A-20)
A-14
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund IV
Period Ended December 31,
1992 1993 1994
---- ---- ----
Months of operations 12 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $2,123,081 $10,510,289 $13,246,145
- gain (loss) on sales of assets - (38,429) (102,932)
------------- --------------- --------------
2,123,081 10,471,860 13,143,213
Less Operating Expenses: (1)
Depreciation and amortization expense 1,147,209 7,054,380 8,743,149
Provision for losses - - 34,505
Interest expense 91,577 81,437 1,332,542
Administrative costs and reimbursements 382,114 537,918 358,441
Legal/Professional fees 46,935 52,838 86,594
Other 25,988 57,575 114,376
Management fee 103,510 752,950 1,060,190
------------- --------------- --------------
Net income - GAAP basis $325,748 $1,934,762 $1,413,416
============= =============== ==============
Taxable income (loss) from operations ($2,034,428) ($9,624,570) ($8,073,869)
============= =============== ==============
Cash generated by (used in) operations (3) $3,560,891 $9,021,440 $10,366,325
Cash generated from sales - 98,752 5,648,425
Cash generated from refinancing - - -
Cash generated from other (3) - 220,258 1,522,609
------------- --------------- --------------
3,560,891 9,340,450 17,537,359
Less cash distributions to investors:
From operating cash flow 1,936,639 8,686,491 9,653,038
From sales - - -
From refinancing - - -
From other - - -
------------- --------------- --------------
Total distributions 1,936,639 8,686,491 9,653,038
------------- --------------- --------------
Cash generated (deficiency) after cash distributions $1,624,252 $653,959 $7,884,321
============= =============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($76.67) ($127.78) ($106.64)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $12.28 $15.86 $18.67
- Return of capital 61.44 100.63 110.12
------------- --------------- --------------
$73.72 $116.49 $128.79
============= =============== ==============
Sources (on a cash basis)
Sales
Refinancing
Operations $73.72 $116.49 $128.79
Other - - -
------------- --------------- --------------
Total $73.72 $116.49 $128.79
============= =============== ==============
Amount invested in program equipment (cost, excluding
acquisition fees) $49,603,894 $82,896,683 $88,187,291
Amount invested in program equipment (book value) $49,801,834 $69,901,953 $65,252,553
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as a
percentage of cost of all equipment purchased
by the program) (4) 43.97% 73.48% 78.17%
(Footnotes follow on page A-20)
A-15
<PAGE>
TABLE III
</TABLE>
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund IV
Period Ended
December 31, June 30,
1995 1996 1997
---- ---- ----
Months of operations 12 12 6
<S> <C> <C> <C>
Gross revenue - lease and other $12,973,718 $11,664,408 $4,620,662
- gain (loss) on sales of assets 615,042 1,574,946 1,104,635
------------- --------------- --------------
13,588,760 13,239,354 5,725,297
Less Operating Expenses: (1)
Depreciation and amortization expense 8,740,231 7,849,010 3,261,287
Provision for losses 679,634 135,965 57,231
Interest expense 1,960,823 1,858,316 681,579
Administrative costs and reimbursements 349,663 275,778 140,256
Legal/Professional fees 76,365 46,419 15,512
Other 110,466 98,471 86,793
Management fee 872,374 821,328 413,307
------------- --------------- --------------
12,789,556 11,085,287 4,655,965
------------- --------------- --------------
Income before extraordinary items 799,204 2,154,067 1,069,332
Extrordinary gain on early extinguisment of debt - 112,546 -
------------- --------------- --------------
Net income - GAAP basis (6) $799,204 $2,266,613 $1,069,332
============= =============== ==============
Taxable income (loss) from operations ($2,073,084) $1,101,252 $4,000,000
============= =============== ==============
Cash generated by (used in) operations (3) $8,830,893 $7,511,884 ($204,631)
Cash generated from sales 2,722,954 4,376,555 14,368,852
Cash generated from refinancing - - -
Cash generated from other (3) 2,384,094 2,991,035 1,426,678
------------- --------------- --------------
13,937,941 14,879,474 15,590,899
Less cash distributions to investors:
From operating cash flow 8,830,893 7,511,884 -
From sales - - 3,814,479
From refinancing - - -
From other 906,007 2,881,345 1,426,678
------------- --------------- --------------
Total distributions 9,736,900 10,393,229 5,241,157
------------- --------------- --------------
Cash generated (deficiency) after cash distributions $4,201,041 $4,486,245 $10,349,742
============= =============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($27.43) $14.56 $52.88
Recapture
Capital gain (loss) $0.04
Cash distributions to investors on a GAAP basis:
- Investment income $10.57 $29.97 $14.14
- Return of capital 119.50 108.84 55.86
------------- --------------- --------------
$130.07 $138.80 $70.00
============= =============== ==============
Sources (on a cash basis)
Sales $50.95
Refinancing -
Operations $117.97 $100.32 -
Other 12.10 38.48 19.05
------------- --------------- --------------
Total $130.07 $138.80 $70.00
============= =============== ==============
Amount invested in program equipment (cost, excluding
acquisition fees) $98,547,911 $92,543,075 $71,150,993
Amount invested in program equipment (book value) $63,967,204 $52,264,526 $34,279,086
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment purchased
by the program) (4) 87.35% 82.03% 63.07%
</TABLE>
(Footnotes follow on page A-20)
A-16
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
ATEL Cash Distribution Fund V
Period Ended
December 31,
1993 1994 1995
---- ---- ----
Months of operations 10 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $2,173,205 $10,806,892 $19,951,380
- gain (loss) on sales of assets - 2,564 933,289
------------- --------------- --------------
2,173,205 10,809,456 20,884,669
Less Operating Expenses: (1)
Depreciation and amortization expense 1,600,628 8,135,951 14,600,474
Provision for losses - 34,158 987,013
Interest expense 31,511 61,036 1,222,050
Administrative costs and reimbursements 373,089 706,324 535,812
Legal/Professional fees 13,746 65,028 110,744
Other 36,269 113,981 176,847
Management fee 178,583 1,013,448 1,623,818
------------- --------------- --------------
Net income - GAAP basis ($60,621) $679,530 $1,627,911
============= =============== ==============
Taxable income (loss) from operations ($5,061,304) ($13,005,033) ($11,831,759)
============= =============== ==============
Cash generated by (used in) operations (3) $1,795,722 $10,053,220 $15,800,948
Cash generated from sales - 22,572 6,930,477
Cash generated from refinancing - - -
Cash generated from other (3) - 1,513,782 2,498,923
------------- --------------- --------------
1,795,722 11,589,574 25,230,348
Less cash distributions to investors:
From operating cash flow 922,278 8,223,081 13,101,508
From sales - - -
From refinancing - - -
From other - - -
------------- --------------- --------------
Total distributions 922,278 8,223,081 13,101,508
------------- --------------- --------------
Cash generated (deficiency) after cash distributions $873,444 $3,366,493 $12,128,840
============= =============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($219.75) ($152.59) ($93.72)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $8.05 $12.89
- Return of capital $40.45 89.41 91.93
------------- --------------- --------------
$40.45 $97.46 $104.82
============= =============== ==============
Sources (on a cash basis)
Sales
Refinancing
Operations $40.45 $97.46 $104.82
Other - - -
------------- --------------- --------------
Total $40.45 $97.46 $104.82
============= =============== ==============
Amount invested in program equipment (cost, excluding
acquisition fees) $34,699,207 $113,427,843 $161,866,626
Amount invested in program equipment (book value) $34,246,741 $100,762,242 $131,686,535
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as a
percentage of cost of all equipment purchased
by the program) (4) 18.57% 60.69% 86.61%
</TABLE>
(Footnotes follow on page A-20)
A-17
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
June 30, 1997
(Unaudited)
ATEL Cash Distribution Fund V
Period Ended
December 31, June 30,
1996 1997
---- ----
Months of operations 12 6
<S> <C> <C>
Gross revenue - lease and other $23,662,790 $11,669,327
- gain (loss) on sales of assets 1,325,132 187,102
------------- ---------------
24,987,922 11,856,429
Less Operating Expenses: (1)
Depreciation and amortization expense 15,351,574 6,843,581
Provision for losses 255,294 118,564
Interest expense 3,962,860 1,885,260
Administrative costs and reimbursements 455,316 171,615
Legal/Professional fees 117,566 45,244
Other 428,631 302,003
Management fee 1,725,751 821,758
------------- ---------------
22,296,992 10,188,025
------------- ---------------
Income before extraordinary items 2,690,930 1,668,404
Extrordinary gain on early extinguisment of debt 160,955 -
------------- ---------------
Net income - GAAP basis (6) $2,851,885 $1,668,404
============= ===============
Taxable income (loss) from operations ($7,493,824) ($1,000,000)
============= ===============
Cash generated by (used in) operations (3) $14,733,366 $9,044,669
Cash generated from sales 5,900,451 1,095,544
Cash generated from refinancing - -
Cash generated from other (3) 4,855,093 2,233,316
------------- ---------------
25,488,910 12,373,529
Less cash distributions to investors:
From operating cash flow 13,672,825 6,870,996
From sales - -
From refinancing - -
From other -
------------- ---------------
Total distributions 13,672,825 6,870,996
------------- ---------------
Cash generated (deficiency) after cash distributions $11,816,085 $5,502,533
============= ===============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($59.36) ($11.73)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $22.59 $19.77
- Return of capital 86.81 35.21
------------- ---------------
$109.40 $54.98
============= ===============
Sources (on a cash basis)
Sales
Refinancing
Operations $109.40 $54.98
Other - -
------------- ---------------
Total $109.40 $54.98
============= ===============
Amount invested in program equipment (cost, excluding
acquisition fees) $168,575,337 $166,547,573
Amount invested in program equipment (book value) $125,729,656 $115,658,775
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment purchased
by the program) (4) 90.20% 89.11%
</TABLE>
(Footnotes follow on page A-20)
A-18
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
TABLE III
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund VI
Period Ended
December 31, June 30,
1995 1996 1997
Months of operations 12 12 6
<S> <C> <C> <C>
Gross revenue - lease and other $6,440,218 $25,837,343 $17,799,302
- gain (loss) on sales of assets 3,819 (107,873) 60,113
------------- --------------- --------------
6,444,037 25,729,470 17,859,415
Less Operating Expenses: (1)
Depreciation and amortization expense 4,976,075 19,298,500 13,776,065
Provision for losses 64,892 257,814 178,594
Interest expense 931,651 5,773,463 4,292,369
Administrative costs and reimbursements 539,009 748,745 190,972
Legal/Professional fees 50,962 186,724 47,844
Other 121,541 612,698 429,575
Management fee 362,581 1,061,856 698,428
------------- --------------- --------------
Net income - GAAP basis ($602,674) ($2,210,330) ($1,754,432)
============= =============== ==============
Taxable income (loss) from operations ($11,625,618) ($27,319,391) ($10,000,000)
============= =============== ==============
Cash generated by (used in) operations (3) $4,354,020 $13,940,220 $10,952,404
Cash generated from sales 54,156 636,397 202,660
Cash generated from refinancing - - -
Cash generated from other (3) 195,884 501,623 299,201
------------- --------------- --------------
4,604,060 15,078,240 11,454,265
Less cash distributions to investors:
From operating cash flow 2,484,971 8,719,731 6,223,013
From sales - - -
From refinancing - - -
From other - - -
------------- --------------- --------------
Total distributions 2,484,971 8,719,731 6,223,013
------------- --------------- --------------
Cash generated (deficiency) after cash distributions $2,119,089 $6,358,509 $5,231,252
============= =============== ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($364.88) ($346.74) ($126.92)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income
- Return of capital $78.78 $92.53 $49.78
------------- --------------- --------------
$78.78 $92.53 $49.78
============= =============== ==============
Sources (on a cash basis)
Sales
Refinancing
Operations $78.78 $92.53 $49.78
Other - - -
------------- --------------- --------------
Total $78.78 $92.53 $49.78
============= =============== ==============
Amount invested in program equipment (cost, excluding
acquisition fees) $98,036,611 $204,553,244 $208,027,365
Amount invested in program equipment (book value) $92,802,029 $185,510,097 $172,289,921
Amount remaining invested inprogram equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment purchased
by the program) (4) 46.85% 97.75% 99.41%
</TABLE>
(Footnotes follow on page A-20)
A-19
<PAGE>
FOOTNOTES:
(1) Operating expenses include reimbursements to the corporate general
partner as follows:
<TABLE>
<CAPTION>
ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash
Distribution Distribution Distribution Distribution Distribution Distribution
Year ended December 31, Fund Fund II Fund III Fund IV Fund V Fund VI
------------------------ ---- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
1986 $100
1987 15,100
1988 21,500 $3,000
1989 32,201 86,234
1990 37,163 95,474 $70,775
1991 48,195 71,289 239,667
1992 126,664 256,184 542,510 $382,114
1993 140,984 313,421 468,005 537,918 $373,089
1994 34,380 238,185 340,269 358,441 706,324
1995 - 157,444 300,952 349,663 535,812 $539,009
1996 - 132,994 245,242 275,778 455,316 748,745
Six months ended June 30, 1997 - 64,868 124,978 140,256 171,615 190,972
------------- ------------- --------------- -------------- ------------- -------------
$456,287 $1,419,093 $2,332,398 $2,044,170 $2,242,156 $1,478,726
============= ============= =============== ============== ============== =============
</TABLE>
(2) A portion of the equipment owned by the Partnership is accounted for
under the direct financing method. Income under direct financing leases is
reported on the financing method where the income portion of each rental payment
is calculated so as to generate a constant rate of return on the outstanding net
investment. The effect is to recognize decreasing amounts of income in later
periods as the net investment declines. Net income was also negatively impacted
in 1990 by necessity for a provision for doubtful accounts. Prior to 1990, there
had been no such need. The decrease in net income from 1988 to 1989 and from
1989 to 1990 is due to increasing debt levels and interest expense. The decrease
from 1992 to 1993 is due to decreased lease revenues. Revenues have declined as
equipment leases have expired and as the related assets have been sold.
(3) Cash generated by (used in) operations does not include the principal
portion of lease rentals received under direct financing leases. In the
partnerships' statements of cash flows (under generally accepted accounting
principles), these amounts are included in the investing activities section.
(4) The percentage is calculated as a fraction, the numerator of which is
the amount invested in program equipment (at cost) as of the end of the
indicated period and the denominator of which is the cumulative total of the
cost of all equipment acquired by the program through the end of the latest
period shown.
(5) Net income decreased from 1989 to 1990 due to the provision for decline
value of commercial aircraft ($1,083,834) included in net income in 1990.
Excluding the effect of that provision, net income per $1,000 invested would
have been $34.60. The results in 1990 are also effected by higher depreciation
rates used for more recent equipment purchases, resulting in increased
depreciation expense compared to lease revenues. The remaining amount of the
changes from 1988 to 1989 and from 1989 to 1990 are primarily due to the timing
of the acquisition of assets, the placement of debt against certain assets and
other operating factors.
(6) Net income increased from 1990 to 1991 due to the provision for decline
value of commercial aircraft ($623,294) included in net income in 1990. The
remaining amount of the changes from 1990 to 1991 and from 1991 to 1992 are
primarily due to the timing of the acquisition of assets, the placement of debt
against certain assets and other operating factors.
A-20
<PAGE>
TABLE IV
ACQUISITION OF EQUIPMENT
BY PRIOR PROGRAMS
The following is a summary of Equipment acquisitions and Lessees by the six
prior publicly-registered programs sponsored by ATEL Financial Corporation and
its affiliates. Information concerning the prior programs' Equipment acquisition
is current through June 30, 1997.
<TABLE>
<CAPTION>
Lease
Commence Acquisition Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) (6)
- ------ ----- -------------- ----------- ----------- ----------- ------------ -------- ---
ATEL Cash Distribution Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Acushnet Company Office Information Jan-87 $134,246 $6,041 60 FP
Systems
Alachua General Hospital, Inc. 7 Medical Jan-89 628,632 28,288 36 OL
American Motors Corporation Lift Trucks Oct-87 to Jan-88 622,632 28,018 48 OL
Anaheim Memorial Hospital Medical Jan-88 779,613 35,083 48.07% 60 FP
Campbell Soup Company Lift Trucks Mar-87 317,500 14,288 84 FP
Colour Graphics Corporation 8 Printing Jan-87 222,520 10,013 80.75% 84 FP
Enron Corp. Office Information Aug-88 244,488 11,002 36 FP
Systems
Financial News Network, Inc. 9 Studio and Apr-90 909,735 26,183 36 FP
Broadcasting
GAF Corporation 10 Manufacturing Oct-88 512,208 23,049 60 FP
GAF Corporation Lift Trucks Oct-87 439,866 19,794 60 OL
Galardi Group, Inc. Restaurant Furnitue Jul-94 247,000 - 48 FP
and Fixtures
Hartford Insurance Group Communication Mar-88 89,236 4,016 60 FP
Imperial Plastics, Inc. 11 Manufacturing Sep-87 to Apr-88 526,270 23,682 69.63% 84 FP
Martin Marietta Corporation Communication May-88 425,670 19,155 48 OL
Nord Kaolin Company 12, 13 Mining, Processing Jul-87 to Jan-88 358,710 16,734 60-62 FP
Nord Sil-Flo Company 12, 13 Material Handling Aug-89 to Jan-88 28,113 673 86.27% 60 FP
Polaroid Corporation Office Information Jan-87 36,190 1,629 59 FP
Systems
Putnam County Hospital Medical May-88 110,000 4,950 60 FP
Rohr Industries, Inc. Motor Vehicle Apr-88 to Oct-88 327,240 14,726 36-84 FP, OL
Teledyne Industries, Inc. 14 Lift Trucks Jan-88 to Oct-89 1,653,596 74,412 36-84 FP, OL
The Dow Chemical Company Motor Vehicle May-88 217,908 9,805 74.86% 50 FP
Treasure Chest Advertising
Company 15 Printing Apr-87 498,746 22,444 97.79% 60 FP
TRW, Inc. Communication Apr-89 320,657 14,430 36 OL
United Technologies
Corporation, Pratt &
Whitney Aircraft Grou Office Information Jan-87 74,115 3,335 48 FP
Systems
Vista Chemical Company Railroad Rolling Stock Mar-88 850,000 38,250 53.45% 60 FP
Vista Chemical Company Railroad Rolling Stock, Apr-93 350,000 - 60 OL
Improvements
WSMP, Inc. Food Processing Equipment Jul-95 208,788 - 98.47% 60 FP
------------- ------------
ATEL Cash Distribution Fund total: $11,133,679 $450,000
============= ============
</TABLE>
A-21
<PAGE>
<TABLE>
<CAPTION>
Lease
Commence Acquisition Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) (6)
- ------ ----- -------------- ----------- ----------- ----------- ------------ -------- ---
ATEL Cash Distribution Fund II
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A.O. Smith Corporation Office Information Jul-89 to Feb-91 $873,480 $5,878 11.59% 36-59 FP
Systems, Lift
Trucks
Addwest Gold, Inc. 16 Mining Oct-88 1,100,717 52,284 60 FP
Alachua General 7 Medical Jan-89 1,257,263 59,720 36 OL
Hospital, Inc.
American Express Company Manufacturing May-89 276,775 13,147 48 FP
American President 17 Tractors Sep-88 2,890,840 137,315 84 FP
Trucking Co., Ltd.
Bristol-Myers Squibb Office Furniture Jul-92 324,310 - 24 OL
Company
Buffalo & Pittsburgh Locomotive Nov-93 108,127 - 37 FP
Railroad
Campbell Soup Company Lift Trucks Aug-88 350,772 16,662 84 FP
Chesebrough-Pond's Inc. Lift Trucks Jun-90 201,452 - 48-50 FP
Chrysler Corporation Material Handling Dec-93 103,620 - 12 OL
Colour Graphics Corporation Computer System Oct-88 33,805 1,606 60 FP
Cooper Tire & Rubber Lift Trucks Jan-89 576,326 27,375 84 FP
Company
Delnor Community Hospital Medical Jul-88 449,956 21,373 36 OL
DJ Aerospace (Bermuda), Ltd. Executive Aircraft Jul-94 810,000 - 36 OL
Emanuel Hospital & Helicopter Oct-88 2,247,765 106,769 79.58% 144 FP
Health Center
Financial News Network, Inc. 9, 18 Studio and Apr-90 640,544 29,815 36 FP
Broadcasting
Fingerhut Corporation Binding, Printing Jan-89 to Mar-89 1,441,690 68,481 60 FP
FMC Gold Company Material Handling Apr-90 761,129 36,154 36 OL
GAF Corporation Manufacturing Oct-88 to Apr-88 682,310 32,410 60 FP
Galardi Group, Inc. Restaurant Furniture Jul-94 507,000 - 48 FP
and Fixtures
General Motors Corporation Video Projectors Jan-94 58,644 - 36 OL
Home Life Insurance Company Office Furniture/Lift Dec-88 425,658 20,219 60 FP
Trucks/Binding
Hudson Foods, Inc. Food Processing Dec-89 2,713,115 128,872 65.91% 57-59 FP
Inland Steel Company Scientific Measuring Sep-89 417,000 19,808 54 FP
International Paper Company 19 Delivery Trucks Jul-88 1,281,761 60,884 36-60 FP, OL
KeyCorp Office Furniture, Jul-89 1,618,337 76,870 40.09% 53-55 FP
Automated Teller
Machines
Koppers Industries, Inc. Material Handling Jun-90 639,120 - 60 FP
Liggett Group, Inc. 20 Manufacturing Dec-88 648,577 30,807 56 FP
Midway Airlines, Inc. 21 Commercial Aircraft Jun-90 4,592,040 - 68.85% 102 FP
National Semiconductor Manufacturing Apr-89 728,000 34,580 56 FP
Corporation
National Steel Corporation Material Handling May-89 606,153 28,792 87.63% 81 FP
National Union Electric 22 Communication Apr-89 459,893 21,845 60 FP
Corporation
Nissan Motor Corporation Office Information Jul-88 219,187 10,411 48 FP
In USA Systems
NMCS, Inc. , d/b/a National 23 Office Furniture Apr-88 599,001 28,452 60 FP
Medical Group
Services, Inc.
Nord Kaolin Company 12 Drilling Apr-89 292,799 13,908 60 FP
Owens Corning Fiberglas
Corporation Material Handling Jul-89 to Oct-90 1,689,012 42,404 39.57% 36-84 FP, OL
Quaker Coal Company Tractor Apr-94 558,301 - 24 OL
Regents of the University Communication Dec-88 80,386 3,818 60 FP
of California
Rocky Mountain Helicopters,
Inc. 24 Medical Aircraft Nov-89 2,150,000 102,125 81.86% 84 FP
Rohr Industries, Inc. Motor Vehicles Jan-89 to Jan-90 749,291 33,835 36-84 FP
Sebastiani Vineyards, Inc. Production Line, Jan-90 to Jan-91 2,818,067 29,362 79.98% 60-84 FP
Wine Barrels
Shell Mining Company 25 Mining Jul-90 3,736,965 104,055 21.46% 60-84 FP
Sherwood Rehabilitation 26 Medical Furniture/ Oct-90 1,814,036 - 97.36% 87 FP
Hospital, Inc. Fixtures & Eqt.
South Dade Nursing Home Ltd. 26 Physical Therapy & Jul-90 36,676 - 60 FP
Exercise Eqt.
St. Luke's-Roosevelt Medical Furniture/ Feb-90 1,075,795 50,428 84.68% 34-39 OL
Hospital Center Fixtures & Eqt.
The Budd Company Material Handling May-90 to Jun-90 1,099,014 - 75.09% 55-80 FP
The Dow Chemical Company Material Handling Jun-88 1,532,061 72,773 74.86% 50 OL
Treasure Chest Printing Press Apr-93 850,000 - 95.59% 60 FP
Advertising Company
Treasure Chest Printing Equipment Feb-94 233,000 - 60 FP
Advertising Company
USX Corporation Haul Trucks Dec-89 2,910,766 138,261 83.41% 60 FP
------------- ------------
ATEL Cash Distribution Fund II total: $52,270,536 $1,662,500
============= ============
</TABLE>
A-22
<PAGE>
<TABLE>
<CAPTION>
Lease
Commence Acquisition Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) (6)
- ------ ----- -------------- ----------- ----------- ----------- ------------ -------- ---
ATEL Cash Distribution Fund III
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A.O. Smith Corporation Material Handling Feb-91 $451,902 $21,465 60 FP
Alachua General Hospital, Medical Oct-92 2,074,989 - 36 OL
Inc.
Alachua General Hospital, Inc. Medical Apr-95 80,500 - 0.00% 18 FP
Alumina Partners of Jamaica 27 Earth Moving Jun-93 2,057,133 - 60 FP
American President Trucking Tractors and Trailers Mar-90 to Aug-90 4,859,181 230,811 68.08% 77-84 FP
Co., Ltd.
AMOCO Corporation Trailers May-94 523,805 - 85.88% 66 FP
ARR, Inc. 28, 29 Corporate Aircraft Oct-92 5,275,000 - 84 OL
Barney's, Inc. 30 Retail Store Oct-93 2,041,222 - 60.04% 60 FP
Furniture and
Fixtures
Buffalo & Pittsburgh Locomotives Nov-93 792,657 - 37 FP
Railroad Company
Carrier Corporation Lift Trucks Jul-90 108,062 5,133 55 FP
Carrier Corporation Lift Trucks Jul-90 to Aug-90 533,950 25,363 53 FP
Dean Foods Company Trailers Nov-90 to Apr-91 1,213,190 57,627 75-84 FP
Fingerhut Corporation Offset Printing Press Apr-91 1,303,078 61,896 85 FP
Fingerhut Corporation Printing Oct-91 to Oct-92 2,074,915 14,464 48.47% 84-85 FP
FMC Gold Company Haul Truck Jul-90 534,828 25,404 48 OL
Fred Meyer, Inc. Point-of-Sale Oct-90 6,343,897 301,335 63.93% 58 FP
General American Life Office Furniture Jan-93 1,611,278 76,536 84 FP
Insurance
H.E. Butt Grocery Company Tractors and Trailers Jan-93 2,112,747 - 60-84 OL/FP
Ingersoll International, Inc. Communication System Dec-90 277,017 13,158 60 FP
Kelly-Springfield Tire Material Handling Apr- to Jul-92 127,834 6,072 60 FP
Company
Koppers Industries, Inc. Material Handling Oct-90 402,722 19,129 60 FP
Kraft General Foods, Inc. Lift Trucks May-91 to Nov-91 1,621,541 77,023 48-72 FP
Midway Airlines, Inc. 21 Commercial Aircraft Jul-90 2,296,020 109,061 68.85% 102 FP
Mobil Oil Corporation Material Handling Jul-92 70,256 1,173 36 OL
Mobil Oil Corporation Electric Golf Carts Nov-93 280,119 - 36 OL
Nord Kaolin Company 31 Materials Processing Sep-90 391,116 18,578 60 FP
Ohio Coal Company 32 Mining Apr-92 10,630,130 504,931 84.48% 51-84 OL/FP
Pepsico, Inc., d/b/a/ PFS Material Handling Jul-90 to Sep-90 539,330 25,618 45.63% 58-72 FP
Pilgrim's Pride Corporation Food Processing Nov-90 3,619,095 171,907 59 FP
Pittston Coal Group 33 Mining Jul-92 5,810,941 276,020 75.71% 60 FP
Portland General Electric 34 Power Generation Jun-90 2,710,359 128,742 70.25% 101 OL
Company
PSI Energy, Inc. Earth Moving Aug-90 842,013 39,996 72 FP
Quaker Coal Company Mining Jan-94 5,808,385 - 60 OL
Reliance Insurance Company Office Furniture Jul-92 1,222,297 50,135 51.90% 60 FP
Rohr Industries Motor Vehicle Oct-95 37,244 - 36 OL
Shell Mining Company Haul Trucks Jan-92 3,167,443 150,454 65.64% 60-84 FP
Stone Container Corporation Material Handling Nov-90 2,975,000 141,313 34.40% 26-57 OL
Teledyne Industries, Inc. Lift Trucks Feb-91 116,476 5,533 39 OL
Terex Corporation Manufacturing Apr-91 291,455 13,845 84 FP
The Dow Chemical Company Material Handling Nov-90 to Dec-92 4,504,918 195,358 68.68% 53-60 OL/FP
The Helen Mining Company 35 Mining Shields Jul-91 5,270,314 250,340 60 FP
The Pillsbury Company Harvesting Jan-93 2,327,946 110,577 59.93% 60 OL
Treasure Chest Advertising Flying High Speed Paster Apr-93 239,171 - 87 FP
Company
Treasure Chest Advertising Printing Stackers Oct-95 139,600 - 84 FP
Company
Truck-Lite Company, Inc. 35 Project Line Oct-91 to Jan-93 6,875,715 308,441 81.76% 69-84 FP
USS/Kobe Steel Company 36 Lift Trucks Sep-19 to Nov-91 408,410 19,399 36-60 OL/FP
Utilicorp United, Inc. 37 Power Generation Sep-91 1,086,934 51,629 75.65% 105 FP
Wal-Mart, Inc. Trailers / Forklifts May-94 490,255 - 95.09% 20-38 OL/FP
West Penn Power Company Storage Tanks Sep-91 1,057,551 50,234 97.86% 87 FP
------------- ------------
ATEL Cash Distribution Fund III total: $99,629,941 $3,558,700
============= ============
</TABLE>
A-23
<PAGE>
<TABLE>
<CAPTION>
Lease
Commence Acquisition Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) (6)
- ------ ----- -------------- ----------- ----------- ----------- ------------ -------- ---
ATEL Cash Distribution Fund IV
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ARR, Inc. 28, 29 Corporate Aircraft Oct-92 to Dec-92 $9,635,969 $337,259 84 OL
ATS Automatic Tooling Systems Machine Tools Mar-95 3,338,997 123,410 86.98% 60 FP
ATS Automatic Tooling Systems Machine Tools Mar-95 1,353,644 6,545 86.98% 60 FP
Barney's, Inc. 30 Retail Store Furniture Oct-93 2,353,608 82,376 60.05% 60 FP
and Fixtures
Buffalo & Pittsburgh Railroad Locomotives Nov-93 849,216 29,723 37 FP
Burlington Air Exress Materials Handling Apr-95 622,663 21,793 78.25% 84 FP
Burlington Air Exress Materials Handling Jul-95 505,325 - 80.23% 84 FP
Burlington Northern Locomotives Jan-93 7,950,000 278,250 24 OL
Railroad Company
Chrysler Corporation 38 Tractors & Trailers Dec-93 3,253,000 113,855 84.13% 71-72 FP
Clinchfield Coal Company Drill, Endloader, Diesel Jan-94 985,203 34,482 65.79% 73.5-91.5 FP
Generator
DJ Aerospace (Bermuda), Ltd. Executive Aircraft Jul-94 1,890,000 66,150 36 OL
Federal Paper Board Co., Inc. Office Equipment Jul-95 77,950 - 36 FP
Foodmaker, Inc. Restaurant Furniture Oct-94 to Jan-95 2,651,356 92,797 60 FP
and Fixtures
Galardi Group, Inc. Restaurant Furniture Jul-94 546,000 19,110 48 FP
and Fixtures
GE Industrial & Power Systems Office Automation Mar-95 138,130 4,835 36 FP
GE Industrial & Power Systems Machine Center Jun-95 457,670 - 84 FP
H.E. Butt Grocery Company Trailers Oct-92 to Jan-93 5,709,369 199,828 72.48% 60-84 OL/FP
H.E. Butt Grocery Company Trailers Jun-93 1,404,302 49,151 75.71% 84 FP
Holston Mining, Inc. 39 Endloader, Dozer Jan-94 584,617 20,462 91.5 FP
Kraft General Foods, Inc. Tractors Dec-93 964,315 33,751 71.69% 31 FP
Liquid Carbonic Industrial/ 40 Air Separation Plant Dec-93 9,500,897 332,531 54.21% 99 FP
Medical Corporation
Midwest Power Systems, Inc. Coal Hopper Cars Jan-93 2,240,000 78,400 28.36% 36 OL
Mobil Oil Corporation Tractors/Construction/ Oct-92 to Apr-94 2,760,175 95,786 27-60 OL
Earth Moving
Nabisco, Inc. Office Automation Aug-95 337,594 - 36 FP
National Steel Corporation Construction Equipment Jan-95 2,208,510 77,298 76.55% 60-84 FP
National Steel Corporation Construction Equipment Apr-95 3,675,997 83,148 88.15% 85-91 FP
Omnicom Group, Inc. Office Automation Oct-95 901,849 - 36 FP
Omnicom Group, Inc. Computers & Related Aug-96 32,599 - 36 FP
Equipment
Paramount Coal Corporation 39 Drill, Dozer Jan-94 595,800 20,853 65.79% 61.5-91.5 FP
Pepsico, Inc. Materials Handling Jan-94 146,926 5,142 48-60 OL/FP
Pepsico, Inc. Materials Handling Jul-93 to Sep-93 458,017 16,031 48-60 OL/FP
Pittston Coal Group 33 Mining Jul-92 846,883 29,641 78.76% 60 FP
Quaker Coal Company Rail Car Mover Nov-95 263,984 - 48 FP
Rochelle Coal Company 41 Mining Jan-93 6,303,701 220,630 70.34% 84 FP
Sebastiani Vineyards, Inc. Wine Barrels Apr-94 189,855 6,645 60 FP
Sebastiani Vineyards, Inc. Wine Barrels Apr-94 to Jul-94 454,721 15,915 36 FP
Sebastiani Vineyards, Inc. Wine Barrels Apr-95 180,253 6,309 60 FP
Signature Flight Support Air Support Equipment Jan-95 1,142,400 39,200 84 FP
Corporation
Tarmac America, Inc. Crawler Dozer, Wheel Aug-94 385,443 13,491 75.64% 60-84 FP
Loader
Tarmac America, Inc. Construction Equipment Jan-95 210,438 7,365 80.90% 84 FP
Tarmac America, Inc. Construction Equipment Jul-95 to Aug-95 1,309,300 - 79.82% 97 FP
TASC, Inc. Office Automation Jan-95 131,008 4,585 36 FP
TASC, Inc. Office Automation Oct-95 to Apr-96 601,701 - 36 FP
The Dow Chemical Company Boom Lift May-93 66,900 2,342 75.81% 60 FP
The Dow Chemical Company Material Handling, Dec-92 2,221,228 77,743 74.80% 60-84 FP
Research
The Dow Chemical Company Research Feb-93 102,149 3,575 87.94% 60 FP
The Helen Mining Company 35 Mining Jan- to May-92 3,816,507 133,578 32.62% 60 FP
The Kendall Company Office Automation Nov-94 166,835 5,839 36 FP
The Kendall Company Office Automation Jan-95 86,108 3,014 36 FP
The Kendall Company Office Automation Apr-95 434,705 15,071 36 FP
The Kendall Company Office Automation Oct-95 to Jan-96 568,370 - 24 - 36 FP
The Pittston Company Mining Equipment Mar-95 819,349 28,677 65.79% 60 FP
The Stop & Shop Supermarket Bakery Labeling Feb-96 368,500 - 60 FP
Company Machines
Trans Ocean Container Intermodal Containers Oct-93 3,001,930 105,068 120 FP
Corporation
Treasure Chest Advertising Bin Stackers and
Company Trimmers Dec-93 to Apr 94 753,419 26,370 84-86 FP
Treasure Chest Advertising Printing Press Dec-93 3,478,749 121,756 88.28% 84 FP
Company
Treasure Chest Advertising Printing Press &
Company Associated Equipment Aug-93 2,075,000 72,625 89.99% 66 FP
Treasure Chest Advertising Printing Press &
Company Associated Equipment Feb-95 511,907 17,917 84 FP
Union Pacific Corporation Intermodal Jan-93 1,453,096 50,858 46.85% 60 OL
Union Tank Car Company Rail Sep-92 to Oct-92 6,460,600 225,666 23.25% 25-51 OL
USS/Kobe Steel Company 36 Materials Handling Jul-94 35,920 1,257 60 FP
USS/Kobe Steel Company 36 Dump Truck Aug-92 256,000 8,960 84 FP
USX Corporation Materials Handling Jun-93 3,061,376 107,148 83.67% 54-69 FP
Xerox Corporation Materials Handling Feb-95 26,092 913 44 OL
Xerox Corporation AKT PVD System Upgrade Jan-97 77,518 - 54 FP
Xerox Corporation AKT PVD System Jul-96 2,825,000 - 85.74% 60 FP
------------- ------------
ATEL Cash Distribution Fund IV total: $112,816,643 $3,575,123
============= ============
</TABLE>
A-24
<PAGE>
<TABLE>
<CAPTION>
Lease
Commence Acquisition Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) (6)
- ------ ----- -------------- ----------- ----------- ----------- ------------ -------- ---
ATEL Cash Distribution Fund V
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Armco, Inc. Phone Mail System Jan-96 $459,835 $16,094 84 FP
Armco, Inc. Telephone System Upgrade Jan-97 31,932 - 72 FP
Atchison, Topeka & Santa Fe Containers Jan-95 1,926,930 67,443 62.75% 84 OL
Railroad Company
Atchison, Topeka & Santa Fe 42 Rail Car Containers and
Railroad Company Chassis Jul-94 7,812,200 273,427 55.89% 84 OL
Atchison, Topeka & Santa Fe 30 Tank Containers Nov-93 744,875 26,071 84 FP
Railroad Company
Barney's, Inc. Retail Store Furniture Oct-93 3,365,947 117,808 60.04% 60 FP
and Fixtures
BNMC Leasing, Inc. Over-the-road Tractors May-94 141,540 4,954 35.62% 8 OL
Burlington Air Express Materials Handling Jan-95 to Apr-95 1,720,008 60,200 75.87% 84 FP
Burlington Northern Railroad 43 Covered Hopper Rail Cars Apr-96 9,344,563 60,848 21 FP
Burlington Northern Railroad Locomotives Jan-95 12,350,000 432,250 28 OL
Burris Foods, Inc. Over-the-road Trailers May-94 245,296 8,585 21.16% 5 OL
Canadian Pacific Limited 43 Covered Hopper Rail Cars Apr-96 1,798,388 - 13 FP
Cargill, Inc. 43 Covered Hopper Rail Cars Apr-96 282,100 - 36 FP
CF Industries, Inc. 43 Covered Hopper Rail Cars Apr-96 528,938 - 12 FP
Chrysler Corporaion Materials Handling Dec-94 to Mar-95 1,300,286 45,510 76.79% 60 OL
Chrysler Corporation Forklifts Jul-96 25,162 - 60 OL
Chrysler Corporation Materials Handling Nov-93 to Jan-94 1,303,039 45,606 58.69% 60 OL
Chrysler Corporation Materials Handling Apr-95 to Jun-95 166,069 5,812 30.07% 60 OL
Chrysler Corporation Materials Handling Apr-96 9,296 - 60 OL
Chrysler Corporation Over-the-road Tractors Dec-93 1,379,490 48,282 54.62% 60 OL
CITGO Petroleum Corp. Over-the-road Tractors May-94 837,904 29,327 74.10% 36 OL
Clark Oil & Refining Retail Store Fixtures Jan-94 1,268,656 44,403 36 OL
Corporation
Denver and Rio Grande Auto Racks May-94 7,180,000 251,300 44 FP/OL
Western Railroad
Emerson Electric Company Over-the-road Trailers May-94 237,149 8,300 27.39% 80 FP
Federal Paper Board Company Materials Handling Jan-95 1,315,911 46,057 36 OL
Federal Paper Board Company Materials Handling Apr-95 930,814 32,578 36 OL
Federal Paperboard Forklifts, Wheeloader Oct-94 167,791 5,873 36 OL
Company, Inc.
Foodmaker, Inc. Fixtures and Fittings Jan-94 to Oct-94 6,042,382 211,489 15.63% 60 FP
and Trailers
General Electric Company Injection Molding Feb-96 1,470,000 51,450 76.28% 120 FP
General Motors Corporation Materials Handling Jan-94 to May-94 3,023,173 105,811 62.16% 60 OL
(Service Parts Operation
Division)
General Motors Corporation Materials Handling Jul-94 893,382 31,268 73.33% 60 OL
(Truck and Bus Division)
IBM Corporation Office Furniture Aug-93 1,825,710 63,900 48 OL
Illinois Central Railroad 43 Covered Hopper Rail Cars Apr-96 1,234,188 - 12 - 40 FP
Company
Ingersoll International, Inc. Machine Tools Jun-94 1,196,355 41,872 72 FP
Kaiser Cement Corporation Tractor and Dump Truck Oct-93 984,671 34,463 60 OL
Kraft, Inc. 44 Over-the-road Trailers May-94 1,000,353 35,012 91.49% 56 FP
McDonnell Douglas 44 Office Automation Aug-95 110,320 3,861 36 FP
Helicopter Systems
Minteq International, Inc. 44 Turbo Laser May-96 347,430 - 36 FP
Minteq International, Inc. 44 Turbo Laser Feb-94 461,800 16,163 60 FP
Mobil Administrative 45 Helicopter Jun-93 844,525 29,558 24 OL
Services Company, Inc.
Mobil Oil Corporation Environmental Ejector Jul-93 423,000 14,805 36 OL
Systems
Mobil Oil Corporation Liquid Petroleum Oct-95 to Jan-96 12,863,591 450,226 75.74% 240 FP
Tank Cars
Mobil Oil Corporation Materials Handling Jan-95 853,093 29,858 60 OL
Mobil Oil Corporation Wheel Loader Oct-93 70,200 2,457 36 OL
Montana Rail Link, Inc. 43 Covered Hopper Rail Cars Apr-96 846,300 - 12 FP
Nabisco, Inc. Office Automation Mar-95 426,420 14,925 36 OL
Nabisco, Inc. Office Automation Oct-95 190,442 6,665 36 FP
National Steel Corporation Bulldozer / Crane Oct-95 2,137,183 74,801 78.44% 90 FP
National Steel Corporation Materials Handling Oct-94 64,650 2,263 46.63% 49 OL
National Steel Corporation Materials Handling Jan-95 66,134 2,315 51.26% 36 OL
National Steel Corporation Materials Handling Jan-95 1,649,465 57,731 59.70% 61 OL
National Steel Corporation Materials Handling Apr-95 609,500 21,333 56.28% 49 OL
National Steel Corporation Materials Handling Apr-95 873,161 30,561 63.31% 61 OL
National Steel Corporation Wheel Loader Oct-94 253,527 8,873 55.74% 60 FP
Occidental Chemical Corporation Barges Aug-94 2,798,303 97,941 56.31% 16 OL
Omnicom Group, Inc. Office Automation & Jan-96 1,458,896 51,061 36 - 60 FP
Office Furniture
Owens Corning Fiberglas Corp. Materials Handling Aug-93 157,462 5,511 36 OL
Pegasus Gold Corporation Surface Mining Jan-96 7,280,747 254,826 79.77% 84 FP
Praxair, Inc. Over-the-road Tractors May-94 668,114 23,384 52.77% 27 OL
Primark Corporation Office Automation Jul-95 to Apr-96 143,449 5,021 36 FP
PV Trucking Over-the-road Tractors May-94 75,332 2,637 18 FP
Quaker Coal Company Haul Truck & Oct-94 2,626,953 91,943 24-30 OL
Crawler Tractor
Quaker Coal Company Haul Trucks & Tractor Oct-95 2,877,672 100,719 48 - 60 FP
Quaker Coal Company Mining Equipment Jan-95 3,000,000 105,000 24 OL
Quantum Restaurant Group, Inc. POS System Oct-96 36,185 - 60 FP
Quantum Restaurant Group, Inc. POS System Sep-96 33,023 - 60 FP
Quantum Restaurant Group, Inc. Restaurant Furniture, Oct-97 205,981 7,209 60 FP
Fixtures & Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture, Oct-97 425,437 14,890 60 FP
Fixtures & Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture, Oct-97 432,328 15,131 60 FP
Fixtures & Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture, Sep-96 450,273 - 60 FP
Fixtures & Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture, Jun-96 436,331 - 60 FP
Fixtures & Equipment
Quantum Restaurant Group, Inc. Restaurant Furniture, Jul-96 499,131 - 60 FP
Fixtures & Equipment
Roper Corporation Forklifts Jan-96 243,659 8,528 84 FP
Roper Corporation Industrial Batteries Sep-96 30,882 - 76 FP
Schwegmann Giant Super Fixtures & Equipment Jul-95 5,058,331 176,161 60 FP
Markets, Inc.
Sebastiani Vineyards, Inc. Bottling Equipment Apr-94 113,673 3,979 48 OL
Sebastiani Vineyards, Inc. Wine Barrels Apr-95 95,848 3,355 36 FP
Smitty's Super Valu, Inc. Retail Store Furniture Jan-96 4,709,326 164,826 64.27% 60 FP
& Fixtures
Soo Line Railroad Company 43 Covered Hopper Rail Cars Apr-96 1,586,813 - 12 FP
Star Enterprise Over-the-road Tractors May-94 923,533 32,324 59.16% 32 OL
Tarmac America, Inc. 46 Concrete Trucks with Sep-94 to Oct-94 5,937,371 207,808 76.81% 48 FP
Mixers
Tarmac America, Inc. 46 Concrete Trucks with Sep-95 to Oct-95 1,982,071 69,372 75.27% 97 FP
Mixers
Tarmac America, Inc. 46 Construction Equipment Sep-95 to Jan-96 1,491,348 52,197 70.16% 84 FP
TASC, Inc. Office Automation Jan-95 237,685 8,319 18 OL
TASC, Inc. Office Automation Apr-96 522,280 16,716 18 - 36 FP
Texaco Trading and Over-the-road Tractors May-94 4,485,676 156,999 60.91% 32-68 FP/OL
Transportation, Inc. & Trailers
The Dow Chemical Company Copiers Jul-94 272,809 9,548 36 OL
The Dow Chemical Company Office Automation Oct-94 to Jan-95 377,702 13,220 36 OL/FP
The Dow Chemical Company Office Equipment Apr-95 122,800 4,298 36 FP
The Kendall Company Office Automation Oct-96 3,735 131 36 FP
The Pillsbury Company Harvesting Equipment Oct-94 1,643,101 57,509 84.91% 60 FP/OL
The Pittston Company Construction & Mining Jan-94 to Dec-94 14,037,683 491,319 38.93% 49-61 OL/FP
Equipment
Tom's Foods, Inc. Over-the-road Tractors May-94 259,102 9,069 35.23% 9 OL
Trans Ocean Container 47 Intermodal Containers Oct-93 5,000,683 175,024 120 OL
Corporation
Treasure Chest Advertising Printing Press & Jul-95 to Nov-95 2,325,000 81,375 46.50% 66 FP
Company, Inc. Associated Equipment
Treasure Chest Advertising Printing Press & Oct-93 2,069,950 72,448 77.94% 60 - 84 FP
Company, Inc. Associated Equipment
Treasure Chest Advertising Printing Press &
Company, Inc. Associated Equipment Aug-96 287,320 9,051 84 FP
Tyson Foods, Inc. Tractors / Trailers Jul-93 to Aug-93 5,785,000 202,475 26.95% 36 - 84 OL
Union Carbide Corporation Rail Tank Cars Aug-95 4,835,759 140,000 39.30% 68 - 92 FP
USS / Kobe Steel Company 36 Wheel loader, Crane & Jan-94 603,352 21,117 60 - 84 FP/OL
Lift Truck
Waban, Inc. Materials Handling Oct-94 613,998 21,490 62 FP
------------- ------------
ATEL Cash Distribution Fund V total: $186,897,181 $5,956,319
============= ============
</TABLE>
A-25
<PAGE>
<TABLE>
<CAPTION>
Lease
Commence Acquisition Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) (6)
- ------ ----- -------------- ----------- ----------- ----------- ------------ -------- ---
ATEL Cash Distribution Fund VI
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A T & T Communications, Inc. Printers Aug-95 to Nov-95 $1,578,500 $46,200 36 OL
A T & T Communications, Inc. Printers Jul-96 to Dec-96 1,171,302 17,192 34 OL
American President Trucking 17 Tractors and trailers Nov-95 759,092 22,773 30.18% 8 OL
Company, Ltd.
Applid Magnetics Corporation Manufacturing Sep-96 to Oct-96 7,435,380 223,061 71.50% 60 OL/FP
Applied Magnetics Corporation Sputter Jul-96 3,274,642 98,239 78.86% 60 FP
Armco, Inc. Link-Belt Scrapmaster Oct-95 388,993 11,670 36 OL
Armco, Inc. Data processing Nov-95 67,829 2,035 37 FP
Armco, Inc. Office Automation Jul-96 109,416 3,282 30 FP
AT&L Railroad Company 43 Covered Hopper Rail Cars Apr-96 35,263 1,050 12 FP
AT&T Communications, Inc. 48 Printers Jun-96 to Jul-96 540,181 15,752 28 - 34 OL
Atchison, Topeka & Santa Fe Containers Oct-94 to Jan-95 9,196,811 298,896 60.53% 84 OL
Railroad Company
ATS Automation Tooling Systems Machine Tools Apr-96 to Oct-96 2,569,753 77,093 60 FP
ATS Automation tooling Systems, Machine Center Oct-96 to Jan-97 330,901 3,513 60 FP
BJ's Wholesale Club 49 Materials Handling Jul-95 931,635 30,278 63 OL
Burlington Northern Railroad 43 Covered Hopper Rail Cars Apr-96 13,223,438 396,703 21 FP
Canadian Pacific Limited 43 Covered Hopper Rail Cars Apr-96 2,433,113 72,450 13 FP
Cargill, Inc. 43 Covered Hopper Rail Cars Apr-96 352,625 10,500 36 FP
Certified Grocers of California 43 Materials Handling Oct-96 637,702 19,131 60 OL
CF Industries, Inc. 43 Covered Hopper Rail Cars Apr-96 705,250 21,000 12 FP
Chrysler Corporation Materials Handling Feb-96 to Jul-96 1,749,200 52,476 69.99% 53 - 60 OL
Chrysler Corporation Materials Handling Mar-95 to Dec-95 5,925,384 184,233 66.83% 60 OL
Chrysler Corporation Materials Handling May-96 to Oct-96 2,419,598 69,832 69.93% 52 - 60 OL/FP
Consolidated Rail Corporation Locomotives Sep-95 22,353,332 668,372 57.02% 60 OL
Consolidated Rail Corporation Intermodal Container Jan-96 2,502,750 75,083 60 OL
Chassis
Coors Transportation Company 50 Refrigerated Trailers Nov-95 797,704 23,931 47.35% 21 OL
Fairmont Homes, Inc. Materials Handling Apr-96 644,565 19,337 60 OL
Federal Paper Board Company Materials Handling Apr-96 to Jun-96 1,740,861 52,226 70.43% 36 - 60 OL
Federal Paper Board Company Materials Handling Jul-95 to Jan-96 5,401,765 166,124 57.05% 36 - 84 OL/FP
General Electric Company - Office Filing System Jan-97 101,685 60 FP
Aircraft Engines
General Motors Corporation Manufacturing Equipment Jul-95 652,232 19,567 36 OL
Gerber Products Company Materials Handling Oct-96 197,035 5,911 60 FP
Hastings Leasing Limited 51 Trucks & Miscellaneous Aug-96 20,242,332 607,270 90.58% 80 FP
Illinois Central Railroad 43 Covered Hopper Rail Cars Apr-96 1,692,600 50,400 12 - 40 FP
Company
IMC Fertilizer, Inc. Rail Tank Cars Sep-95 1,266,374 37,991 27 OL
Mobil Oil Corporation Tractor Jul-96 78,327 2,350 36 OL
Mobil Oil Corporation Materials Handling Oct-96 185,726 5,256 36 OL
Mobil Oil Corporation Hydraulic Crane Oct-96 160,773 4,823 84 OL
Mobil Oil Corporation Liquid Petroleum Tank Jan-96 to Feb-96 16,110,807 483,324 75.44% 240 FP
Cars
Montana Rail Link, Inc. 43 Covered Hopper Rail Cars Apr-96 1,198,925 35,700 12 FP
Nabisco, Inc. Office Automation Apr-95 709,572 23,061 36 OL
National Steel Corporation Hydraulic Shovels Jul-96 6,245,062 187,352 69.96% 60 OL
National Steel Corporation Steel Yard Equipemt Jan-97 948,705 14,543 48 - 60 OL/FP
National Steel Corporation Steel Yard Equipemt Oct-96 338,674 10,160 75.58% 60 FP
National Steel Corporation Wheel Loaders & Forklifts Jan-96 to Apr-96 4,710,131 141,304 59.68% 36 - 90 OL/FP
National Steel Corporation Materials Handling, Jul-95 to Oct-95 1,525,887 49,517 66.05% 60 - 90 OL/FP
Tractors & Trailers
National Steel Corporation Cranes & Loaders Jul-96 to Oct-96 1,099,210 32,976 72.33% 36 - 84 FP OL
NEC Electronics, Inc. 52 Manufacturing Jan-96 18,320,603 66.67% 51 OL/FP
NVR, Inc. Roof Truss Assembly Jul-96 78,484 2,355 84 FP
Omnicom Group, Inc. 53 Office Automation Apr-95 to Oct-95 2,232,559 68,290 36 - 60 OL/FP
Omnicom Group, Inc. 53 Television Production Jul-96 to Oct-96 1,080,056 4,819 48 FP
Equipment
Overnite Transportation Tractors Apr-96 2,140,643 62,961 36 OL
Company
Peerless Eagle Coal Company 54 Haul Trucks & Construction Jul-95 5,184,875 168,508 59.29% 48 OL
Perdue Transportation 55 Freightliner Tractors Nov-95 536,740 16,102 62.74% 24 OL
Incorporated
Quaker Coal Company Wheel Loaders, Drill & Jan-96 3,298,935 98,968 48 FP
Grader
Quantum Restaurant Group, Inc. 56 Restaurant Furniture & Oct-96 253,676 7,610 60 FP
Fixtures
Quantum Restaurant Group, Inc. 56 POS System Nov-96 33,815 60 FP
Sebastiani Vineyards, Inc. Bottle Labeler Feb-96 317,520 9,526 60 OL
Signature Flight Support Fuel Trucks Jan-97 1,085,000 85.01% 96 - 132 FP
Corporation
Soo Line Railroad Company 43 Covered Hopper Rail Cars Apr-96 2,256,800 67,200 12 FP
Tarmac America, Inc. 46 Dragline Jul-96 1,441,764 43,253 84 FP
Tarmac America, Inc. 46 Concrete Mixer Trucks Jul-96 to Sep-96 4,787,890 143,637 96 FP
Tarmac America, Inc. 46 Construction Equipment Oct-94 to Nov-94 3,114,870 101,233 71.69% 97 FP
TASC, Inc. Office Automation Jan-96 to Jul-96 1,018,030 30,542 36 FP
TASC, Inc. Office Automation May-95 to Oct-95 1,567,339 50,413 18 - 36 OL/FP
TASC, Inc. OfficeAutomation Oct-96 to Jul-97 2,430,232 11,629 36 FP
Trans Ocean Container 47 Intermodal Containers Jan-96 9,995,127 299,854 120 FP
Corporation
Tyson Foods, Inc. Office Automation Jun-95 563,411 18,311 24 OL
Xerox Corporation Binding & Finishing Feb-95 to Jun-95 646,466 19,981 48 OL
Equipment
Xerox Corporation Materials Handling May-95 to Aug-95 144,527 4,456 44 OL
------------- ------------
ATEL Cash Distribution Fund VI total: $209,270,404 $5,623,585
============= ============
TOTALS OF ALL FUNDS: $672,018,384 $20,826,227
============= ============
</TABLE>
A-26
<PAGE>
TABLE IV ACQUISITION OF EQUIPMENT FOOTNOTES
(1) In many cases, a Lease transaction is funded over a period of time
according to the Lessee's requirements. Therefore "Commencement Date (s)"
expressed as a range represents multiple commencement dates occurring or
anticipated under the same Lease line.
(2) "Acquisition Cost" includes either amounts committed to Lessees for
funding by the program, or the actual Equipment acquisition cost, less any
Acquisition Fees. All figures are rounded.
(3) "Acquisition Fees" include fees accrued by the program as of the
Preparation Date. For partially funded Lease lines, additional fees may be
expended by the program for future acquisitions made pursuant to the terms of
the Lease.
(4) "Percent Leverage" represents the percent ratio of the original
principal amount of the debt acquired or assumed by the program, to the
Acquisition Cost of the Equipment. The Equipment may be "leveraged" (where a
portion of the Equipment Acquisition Cost is financed using non-recourse debt
financing) at the time of, or subsequent to, the acquisition of the Equipment by
the program. Therefore, actual leverage ratios may be more or less than
indicated due to the timing of the acquisition of the Equipment in relation to
the amortization of the principal amounts of the debt.
(5) "Lease Term" is expressed in terms of months, although the actual Lease
Term may be expressed as monthly, quarterly, semiannual or annual.
(6) A designation of "FP" indicates that the aggregate rents to be received
during the Lease Term exceed or are equal to the Acquisition Cost of the
Equipment. A designation of "OL" indicates that the aggregate rentals to be
received during the Lease Term are less than the Acquisition Cost.
(7) The interest in this transaction is held 1/3 by ATEL Cash Distribution
Fund and 2/3 by ATEL Cash Distribution Fund II.
(8) Guaranteed by both Fingerhut Corporation and by Primerica Corporation,
as successor in interest to American Can Company.
(9) In March 1992, Financial News Network ("FNN"), a lessee of ATEL Lease
Income Fund, ATEL Cash Distribution Fund and ATEL Cash Distribution Fund II,
filed for protection under Chapter 11 of the U.S. Bankruptcy Act. Subsequent
competitive bidding between CNBC (a division of General Electric Company) and a
partnership consisting of Dow Jones, Inc. and Group W (Westinghouse) developed
for the purchase of FNN assets. This bidding resulted in the sale of certain FNN
assets, principally its subscribers, to CNBC for $145 million in cash and the
assumption of $9.3 million in liabilities. The proceeds from the sale were
distributed beginning in June 1992 resulting in the recovery of substantially
all of the programs' remaining investment in the Equipment.
(10) A 34.41% interest in this transaction was acquired by ATEL Cash
Distribution Fund. The remaining 65.59% was acquired by ATEL Cash Distribution
Fund II.
(11) Guaranteed by Fingerhut Corporation.
(12) Credit support provided by an Investment Agreement of Nord Kaolin
Corporation and of Nord Resources Corporation.
A-27
<PAGE>
(13) These transactions are all leveraged under one non-recourse note with
Sogelease Corporation.
(14) Leased to Teledyne Wah Chang Albany, a division of Teledyne
Industries, Inc.
(15) ATEL Cash Distribution Fund holds a one-half interest in this
transaction, the remaining half interest was acquired by ATEL Financial
Corporation on identical terms.
(16) Guaranteed by Addington Resources.
(17) Guaranteed by American President Companies.
(18) A 97.75% interest in Equipment Schedule No. 2 was acquired by ATEL
Cash Distribution Fund II. The remaining 2.25% interest in that Schedule was
acquired by ATEL Lease Income Fund.
(19) Lease originally with Hammermill Paper Company as lessee and
subsequently assumed by International Paper Company.
(20) Lease assigned to and assumed by Liggett & Meyers Tobacco Company,
with recourse retained against the original Lessee.
(21) On January 1, 1991 Midway Airlines, Inc., the lessee of the DC9-32 in
which ATEL Cash Distribution Fund II and ATEL Cash Distribution Fund III owned
interests, suspended payments on its debt and aircraft leases. On March 26,
1991, the Lessee filed for protection under Chapter 11 of the U.S. Bankruptcy
Act. On September 4, 1991, the non-recourse lender, John Hancock Leasing
Corporation, exercised its right to foreclose on the aircraft. As this
investment represents a relatively small portion of the programs' total equity
and anticipated cash flow, the General Partners do not believe that the adverse
developments with respect to this investment will have a material effect on
their respective operations, cash flows or rates of cash distributions. The
beneficial interest in the Equipment was held two-thirds by ATEL Cash
Distribution Fund II and one-third by ATEL Cash Distribution Fund III.
(22) Equipment operated by the Eureka Company, a division of Lessee, an
indirect subsidiary of AB Electrolux, Sweden.
(23) Guaranteed by Reynolds and Reynolds.
(24) On October 13, 1993 the lessee, Rocky Mountain Helicopters, Inc.,
filed for protection under Chapter 11 of the U. S. Bankruptcy Act. The aircraft
which was the subject of the lease was delivered to ATEL Cash Distribution Fund
II, prior to the petition for bankruptcy and was sold by the lessor. The
proceeds of the sale satisfied in full the non-recourse debt obligation owed to
USX Credit Corporation and the excess was applied to mitigate the lessor's claim
against the lessee. The lessor subsequently filed and was allowed an unsecured
claim in the amount of $776,542. Through June 30, 1997, the lessor has received
$310,617 on this claim, representing 40% of the allowed claim. The sum of the
proceeds from the rents, sale of the aircraft and the claim filed in bankruptcy
has resulted in a recovery exceeding the lessor's original investment in the
aircraft.
(25) Assigned to and assumed by various subsidiaries of Lessee. Recourse
retained against Lessee. Lessee subsequently changed its name to SMC Mining
Corporation.
(26) Guaranteed by Continental Medical Systems, Inc.
A-28
<PAGE>
(27) An indirect subsidiary and joint venture of Kaiser Aluminum & Chemical
Corporation and Norsk Hydro.
(28) Guaranteed by United States Surgical Corporation.
(29) Acquisition Cost represents one-half of the total Equipment
Acquisition Cost. Title to this Equipment is held in an equipment trust where
one-half of the beneficial interest in the Equipment is owned by ATEL Cash
Distribution Fund III and one-half by ATEL Cash Distribution Fund IV.
(30) On January 10, 1996, Barney's, Inc., a lessee of ATEL Cash
Distribution Fund III, ATEL Cash Distribution Fund IV and ATEL Cash Distribution
Fund V filed for protection under Chapter 11 of the U. S. Bankruptcy Act. In
July of 1996, the lessors sold their unsecured claim in the bankruptcy for an
amount equal to approximately 73% of the unsecured claim, which, after
satisfaction of the non-recourse loan due to the CIT Group/Equipment Financing,
Inc. (and taking into account all prior rents received, security deposits
retained and loan proceeds previously received), resulted in proceeds to the
lessors in excess of their original investments in the equipment.
(31) Guaranteed by Nord Resources Corporation.
(32) Lessee indicated is the parent of Central Ohio Coal Company and
Southern Ohio Coal Company. The Lease transaction represents three distinct
leases with subsidiary companies. Credit support is provided by the parent, Ohio
Power Company by an Inducement Letter.
(33) The Lessee name is indicated for convenience only. The actual Lessees
are Paramount Coal Corporation, Clinchfield Coal Company, Heartland Resources,
Inc. and Meadow River Coal Company, all subsidiaries of The Pittston Company.
The Lease is guaranteed by the Pittston Company.
(34) Title to the Equipment and Lease transaction is held by an equipment
trust. A divisible 1/2 beneficial interest in the equipment trust is owned by
the program. The remaining divisible 1/2 beneficial interest in the equipment
trust is owned by a non-affiliate.
(35) Guaranteed by Quaker State Corporation.
(36) Lessee is a partnership formed by United States Steel Corporation and
Kobe Steel Corporation.
(37) Title to the Equipment and Lease transaction is held by an equipment
trust. Partnership owns a 17.3199% beneficial interest in the equipment trust.
(38) Subject to a remarketing agreement with General Motors -
Electro-Motive division.
(39) Guaranteed by The Pittston Company.
(40) Guaranteed by CBI Industries, Inc.
(41) Guaranteed by Peabody Holding Company, Inc.
(42) Lessee has limited option to terminate at 36 months and 60 months,
subject to a remarketing agreement with Bond International (US), Inc.
(43) Equipment is subject to a full payout management agreement with MRXX
Corporation.
A-29
<PAGE>
(44) Guaranteed by Mineral Technologies, Inc.
(45) Guaranteed by Mobil Corporation.
(46) Tarmac America, Inc.; Tarmac Mid-Atlantic, Inc.; and Tarmac Florida,
Inc. are co-lessees. Guaranteed by Tarmac PLC, a British Limited Liability
Company.
(47) Rentals under the Lease are variable. Average monthly lease payments
are estimated based on the minimum lease payments to be received on similar
Equipment owned by a prior program.
(48) Subject to a remarketing/residual sharing agreement with AT&T Credit
Corporation.
(49) A division of Waban, Inc.
(50) Guaranteed by Adolf Coors Company.
(51) The end-users of the Equipment are various governmental entities in
the United Kingdom.
(52) Guaranteed by NEC Corporation.
(53) Guaranteed by Omnicom Group, Inc. Actual lessees are various
subsidiaries of Omnicom Group, Inc.: DDB Needham Worldwide Communications Group,
Inc.; Griffin Bacal, Inc.; DDB Needham Chicago, Inc.; DDB Needham Dallas, Inc.;
PGC Advertising, Inc.; The Focus Agency, LP.; Elgin DDB, Inc.; and TLP, Inc.
(54) Guaranteed by A.T. Massey Coal Company, Inc.
(55) Guaranteed by Perdue Farms, Inc.
(56) The lessee name represents the guarantor of the lease obligations
(which has since changed its name to the Morton's Restaurant Group, Inc.).
Actual lessees are various subsidiaries of the guarantor.
A-30
<PAGE>
TABLE V
SALES OR DISPOSALS OF EQUIPMENT
ATEL Lease Income Fund, ATEL Cash Distribution Fund, ATEL Cash Distribution Fund
II, ATEL Cash Distribution Fund III, ATEL Cash Dsitribution Fund IV, ATEL Cash
Distribution Fund V and ATEL Cash Distribution Fund VI have disposed of
equipment in their portfolios as of June 30, 1997. Set forth below is a summary
of equipment sales and dispositions as of such date. Sales were for
consideration unless otherwise noted. Interim rent (rent paid prior to formal
commencement of a lease), hold-over rent (rent received after termination of the
initial lease term, but before formal extension or disposition) and extension
rent (rent paid after formal extension of a lease) are included in the "Excess
of Rents Over Expenses" column. "Equipment Acquisition Price" includes
acquisition fees. Dispositions are shown on a per asset basis. Excess of
<TABLE>
<CAPTION>
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
ATEL LEASE INCOME FUND 1985-A
<S> <C> <C> <C> <C> <C> <C> <C>
Colour Graphics Computer system Feb-87 $34,500 Oct-93 $2,525 $44,483
Colour Graphics Office Information Systems Jul-88 45,000 Jan-94 11,200 55,777
Educational Loan Services, Office Information Systems May-86 33,050 Oct-90 900 31,350
Inc.
Federal Home Loan Bank of Office Information Systems May-86 39,127 Apr-90 870 36,800
New York
Financial News Network, Inc. Studio and Broadcasting Feb-90 14,777 Jun-92 11,493 2,027 5
Gorham, Inc. Office Information Systems May-86 38,799 Mar-90 2,300 45,180
Long Lake Staionary, Inc. Binding Equipment May-87 4,023 Jul-92 1 6,242
Philip Morris, U.S.A. Office Information Systems May-86 13,297 Jan-89 3,600 12,400
Philip Morris, U.S.A. Office Information Systems May-86 21,584 Aug-92 - 22,050
Polaroid Corporation Office Information Systems May-86 48,028 Jan-90 4,500 45,000
Rohr Industries, Inc. Motor Vehicle Jan-89 12,451 Apr-95 6,400 17,843
Rohr Industries, Inc. Motor Vehicle Apr-89 8,376 Jul-92 4,723 8,558
------------- --------------- ------------
$313,012 $48,512 $327,710
============= =============== ============
</TABLE>
A-31
<PAGE>
<TABLE>
<CAPTION>
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
ATEL CASH DISTRIBUTION FUND
<S> <C> <C> <C> <C> <C> <C> <C>
Acushnet Company Office Information Systems Jan-87 $140,287 Dec-91 $4,545 $156,000
Alachua General Hospital Tractor Jan-89 15,327 Sep-92 9,000 15,900 6
Alachua General Hospital MRI Scanner Jan-89 641,593 Jan-95 1 699,453
American Motors Corporation Lift Truck Oct-87 34,494 May-89 30,818 10,117
American Motors Corporation Lift Trucks Oct-87 25,754 Sep-92 6,200 31,306
American Motors Corporation Lift Trucks Oct-87 12,877 Jan-93 3,200 15,863
American Motors Corporation Lift Trucks Oct-87 109,751 Mar-93 31,800 141,636
American Motors Corporation Lift Trucks Oct-87 55,579 Apr-93 15,956 71,727
American Motors Corporation Lift Trucks Oct-87 15,201 Feb-94 4,500 22,886
American Motors Corporation Hoist Mill Truck Dec-87 104,834 Mar-93 18,000 131,164
American Motors Corporation Lift Trucks Jan-88 45,378 Dec-92 7,000 63,268
Anaheim Memorial Hospital CAT Scanner Jan-88 814,696 Apr-93 88,000 839,938
Campbell Soup Company Lift Truck Mar-87 34,790 Jun-90 30,000 19,575
Campbell Soup Company Lift Truck Battery Chargers Mar-87 37,127 Aug-93 12,435 38,812
Campbell Soup Company Reach / Walkie Trucks Mar-87 79,248 Sep-93 2,700 89,216
Campbell Soup Company Batteries / Chargers Mar-87 12,417 Dec-93 4,250 13,977
Campbell Soup Company Lift Truck Mar-87 25,668 Jul-94 5,022 31,663
Campbell Soup Company Lift Truck Mar-87 19,763 Oct-95 2,000 27,283
Campbell Soup Company Lift Truck Apr-87 4,997 Apr-91 3,616 3,616
Campbell Soup Company Lift Truck Apr-87 24,550 Apr-91 17,764 17,765
Campbell Soup Company Lift Truck Mar-87 19,491 May-95 - 25,976
Chrysler Corporation Lift Trucks Oct-87 217,066 Jun-97 57,000 229,029
Chrysler Corporation Lift Truck Dec-87 29,709 Jun-97 - 21,189
Color Graphics Corporation 645-MSS Output Scanning Dec-86 232,533 Mar-94 20,000 303,307
Station
Enron Corp. Office Information Systems Jun-88 88,364 Jun-91 17,857 90,326
Enron Corp. Office Information Systems Jun-88 87,399 Feb-92 10,650 85,140
Enron Corp. Office Information Systems Jun-88 79,726 Mar-92 8,000 76,968
Financial News Network, Inc. Studio and Broadcasting Mar-90 935,918 Jun-92 747,617 123,050 7
GAF Corporation Lift Trucks Oct-87 459,660 Nov-92 94,575 457,460
Galardi Group Restaurant FF&E Jun-94 247,000 Oct-96 147,148 173,042
Hartford Insurance Group Communication Jul-88 93,252 Jul-93 3,618 106,785
Imperial Plastics, Inc. Injection Molding Jun-87 137,247 Apr-94 67,000 147,445
Imperial Plastics, Inc. Injection Molding Dec-87 150,879 Apr-94 64,000 170,530
Imperial Plastics, Inc. Injection Molding Jan-88 194,944 Apr-94 77,000 229,797
Imperial Plastics, Inc. Air Compressor Temperature Mar-88 66,883 Apr-94 17,000 71,949
Control Unit
Martin Marietta Corporation Communication Apr-88 148,275 Jun-92 16,000 138,592
Martin Marietta Corporation Communication Apr-88 296,550 Aug-93 500 277,184
Nord Kaolin Company Hydraulic Excavator May-87 163,490 Mar-93 45,000 184,567
Nord Kaolin Company Komatsu Crawler Tractor Aug-87 50,693 Jul-96 12,000 36,492
Nord Kaolin Company Lift Trucks Sep-87 15,633 Oct-95 3,500 27,386
Nord Kaolin Company Magnetic Separator Oct-87 160,669 Dec-96 25,000 150,087
Polaroid Corporation Office Information Systems Mar-87 37,819 Apr-92 2,475 41,005
Putnam County Hospital Spectrum Analyzer May-88 114,950 May-94 2,000 158,780
Rohr Industries, Inc. Motor Vehicle Jul-87 14,790 Feb-93 4,175 17,080
Rohr Industries, Inc. Motor Vehicle Jan-88 9,346 Aug-96 3,232 11,495
Rohr Industries, Inc. Motor Vehicle Feb-88 12,060 Aug-96 1,502 14,896
Rohr Industries, Inc. Motor Vehicle Mar-88 16,421 Feb-93 4,575 19,073
Rohr Industries, Inc. Motor Vehicle Apr-88 12,060 Apr-91 3,498 10,804
Rohr Industries, Inc. Motor Vehicle Apr-88 12,060 Apr-91 3,198 10,804
Rohr Industries, Inc. Motor Vehicle Apr-88 12,932 Apr-91 4,380 11,585
Rohr Industries, Inc. Motor Vehicle Apr-88 14,630 Apr-91 5,725 13,106
Rohr Industries, Inc. Motor Vehicle Apr-88 16,183 Aug-93 3,977 18,986
Rohr Industries, Inc. Motor Vehicle Apr-88 14,028 Dec-95 4,630 20,629
Rohr Industries, Inc. Motor Vehicle Apr-88 16,052 Feb-96 5,000 21,252
Rohr Industries, Inc. Motor Vehicle Apr-88 9,356 Aug-96 3,332 12,647
Rohr Industries, Inc. Motor Vehicle May-88 13,981 Sep-95 3,900 20,280
Rohr Industries, Inc. Motor Vehicle Jul-88 11,566 Jul-91 4,075 10,517
Rohr Industries, Inc. Motor Vehicle Jul-88 11,566 Jul-91 4,850 10,517
Rohr Industries, Inc. Motor Vehicle Jul-88 11,566 Jul-91 3,890 10,517
Rohr Industries, Inc. Motor Vehicle Jul-88 25,755 Mar-96 9,000 33,051
Rohr Industries, Inc. Motor Vehicle Aug-88 16,538 May-93 2,622 18,710
Rohr Industries, Inc. Motor Vehicle Apr-88 13,330 Oct-92 2,530 15,081
Rohr Industries, Inc. Motor Vehicle Jul-88 29,656 Nov-92 7,135 31,553
Rohr Industries, Inc. Motor Vehicle Aug-88 14,662 Oct-93 3,435 16,587
Rohr Industries, Inc. Motor Vehicle Aug-88 17,829 Nov-96 6,590 23,532
Teledyne Industries, Inc. Lift Truck Oct-87 160,930 Feb-93 48,000 162,751
Teledyne Industries, Inc. Lift Truck Oct-87 87,258 Jan-93 19,000 89,166
Teledyne Industries, Inc. Lift Truck Oct-87 147,345 Nov-92 20,000 149,763
Teledyne Industries, Inc. Lift Truck Jan-88 39,188 Apr-91 10,000 35,832
Teledyne Industries, Inc. Lift Truck Jan-88 52,250 Apr-91 15,000 47,775
Teledyne Industries, Inc. Lift Truck Jan-88 147,345 Nov-91 41,000 137,956
Teledyne Industries, Inc. Lift Truck Feb-88 173,330 Feb-93 58,000 150,644
Teledyne Industries, Inc. Lift Truck Mar-88 50,160 May-93 11,000 51,896
Teledyne Industries, Inc. Lift Truck Apr-88 55,907 Feb-93 20,000 58,088
Teledyne Industries, Inc. Lift Truck Jul-88 147,345 Oct-92 20,000 134,726
Teledyne Industries, Inc. Lift Truck Aug-88 42,845 Jan-94 9,000 46,240
Teledyne Industries, Inc. Lift Truck Nov-88 35,530 Jan-94 10,390 36,406
Teledyne Industries, Inc. Lift Truck Nov-88 38,278 Mar-94 11,000 41,481
Teledyne Industries, Inc. Lift Trucks Aug-89 32,771 Nov-94 7,896 33,173
Teledyne Industries, Inc. Lift Truck Sep-89 68,970 Oct-92 10,000 67,300
Teledyne Industries, Inc. Lift Truck Nov-89 218,133 Jan-93 44,000 204,009
Teledyne Industries, Inc. Lift Truck Nov-89 58,374 Mar-94 12,500 63,256
Teledyne Industries, Inc. Lift Truck Jan-90 57,487 Mar-94 13,000 55,978
Teledyne Industries, Inc. Lift Trucks Jan-90 57,350 Jan-95 15,000 58,052
Teledyne Industries, Inc. Lift Trucks Jan-90 57,350 Jan-95 15,000 58,052
Treasure Chest Advertising Printing Press Mar-87 521,190 Dec-92 311,844 523,950
Company
The Dow Chemical Company Mack Truck Jul-87 25,210 Aug-92 7,500 24,846
The Dow Chemical Company Truck Jul-87 111,288 Jun-93 17,500 102,367
The Dow Chemical Company Trucks Jul-87 91,216 Jul-93 26,000 80,985
TRW, Inc. Communication Apr-89 77,957 May-92 19,800 70,704
TRW, Inc. Communication Apr-89 257,130 Jul-93 8,400 235,080
United Technologies Office Information Systems Dec-86 77,450 Mar-91 20,000 80,985
Corporation,
Vista Chemical Company Tank cars Mar-88 1,238,250 Dec-93 885,000 1,090,493
------------- --------------- ------------
$10,736,685 $3,535,828 $9,332,454
============= =============== ============
</TABLE>
A-32
<PAGE>
<TABLE>
<CAPTION>
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
ATEL CASH DISTRIBUTION FUND II
<S> <C> <C> <C> <C> <C> <C> <C>
A.O. Smith Corporation Office Automation Equipment Dec-90 $723,258 Sep-94 $75,017 $763,652
A.O. Smith Corporation Lift Truck Jul-89 80,717 Jun-94 34,000 81,198
A.O. Smith Corporation Personnel Carrier Jul-89 4,381 Jul-94 500 4,407
A.O. Smith Corporation Lift Truck Jul-89 26,910 Jun-95 6,250 51,147
A.O. Smith Corporation Lift Truck Jul-89 17,616 Jul-95 1,500 23,346
A.O. Smith Corporation Machinery Jul-91 26,475 Jan-93 18,360 15,660
Addwest Gold, Inc. Portable Jaw Crusher Plant Sep-88 1,153,001 Nov-94 301,000 1,104,720
Alachua General Hospital Tractor Jan-89 30,727 Sep-92 18,000 31,801 6
Alachua General Hospital MRI Scanner Jan-89 1,286,256 Jan-95 1 1,683,244
American Express Company Manufacturing May-89 289,922 May-93 10,000 293,040
American President Trucking Tractors Sep-88 60,326 Jan-94 15,500 55,808
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Apr-94 16,400 61,125
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Apr-94 16,200 61,571
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Apr-94 16,400 55,808
Co., Ltd.
American President Trucking Tractors Sep-88 60,325 Sep-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Dec-93 16,000 52,752
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Dec-93 15,000 51,734
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Jan-94 16,000 60,854
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Jan-94 16,000 58,674
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Jan-94 15,500 56,701
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Apr-94 16,400 58,570
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Apr-94 17,000 59,724
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Apr-94 16,400 58,145
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Apr-94 19,000 58,595
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 May-93 44,172 44,957
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jun-93 45,041 47,171
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Dec-93 15,926 59,573
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jan-94 16,000 59,369
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jan-94 16,000 56,907
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-94 17,461 58,772
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-94 15,500 55,808
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Apr-94 19,000 55,809
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Apr-94 16,400 58,570
Co., Ltd.
American President Trucking Tractors Nov-88 60,325 Dec-95 11,522 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,350 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,282 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,350 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,350 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Apr-96 10,565 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 May-96 10,390 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jun-96 8,500 71,279
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jun-96 9,500 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jul-96 9,995 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Sep-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Sep-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Sep-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Oct-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Oct-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Oct-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Oct-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Oct-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Nov-96 7,600 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Jun-96 9,500 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Aug-96 7,200 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Sep-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Sep-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Sep-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Nov-96 7,600 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Nov-96 7,600 69,903
Co., Ltd.
American President Trucking Tractors Mar-89 61,513 Feb-96 10,488 71,279
Co., Ltd.
Bistol-Meyers Squib Office furniture Jun-92 324,310 Oct-95 89,834 340,960
Buffalo & Pittsburgh Locomotives Nov-93 108,127 Nov-96 103,500 109,471
Railroad
Campbell Soup Company Life plus charger Jul-88 28,056 Aug-95 6,000 34,608
Campbell Soup Company Lift Trucks Jul-88 237,980 Oct-95 33,000 304,036
Campbell Soup Company Lift Truck Jul-88 26,604 Oct-95 2,500 33,597
Chesebrough-Pond's Inc. Lift Trucks May-90 109,901 Aug-94 42,000 124,236
Chesebrough-Pond's Inc. Lift Truck May-90 18,220 Aug-94 6,750 20,502
Chesebrough-Pond's Inc. Lift Truck May-90 35,029 Aug-94 12,950 39,270
Chesebrough-Pond's Inc. Motorized Lowlift Walk/Ride May-90 38,303 Aug-94 4,800 43,452
Trucks
Colour Graphics Corporation Computer system Jul-88 35,411 Oct-93 2,475 41,767
Continental Medical Physical therapy Jun-90 36,676 Jun-95 11,750 45,485
Systems, Inc.
Cooper Tire & Rubber Company Lift Trucks Nov-88 33,296 Jan-96 10,600 37,698
Cooper Tire & Rubber Company Forklifts Apr-89 87,906 Jul-96 15,760 107,895
to Jun-89
Cooper Tire & Rubber Company Forklifts Jan-89 482,499 Oct-96 89,200 598,468
to Mar-89
Delnor Community Hospital Medical Apr-88 89,081 Dec-91 35,000 87,406
Delnor Community Hospital Medical Jul-88 118,775 Apr-91 17,850 106,513
Delnor Community Hospital Medical Jul-88 263,473 Apr-91 45,000 247,586
DJ Aerospace Limited Executive Aircraft Apr-94 810,000 Jan-97 436,309 681,820
Financial News Network, Inc. Studio and Broadcasting Feb-90 670,359 Jun-92 534,432 148,788 8
Fingerhut Corporation Pacesetter Saddlebinder Dec-89 233,268 Dec-94 110,000 258,130
FMC Gold Company Material Handling Apr-90 380,201 May-93 105,000 322,256
FMC Gold Company Material Handling Apr-90 417,082 Jul-93 155,000 361,891
GAF Corporation Manufacturing Mar-88 433,267 Jun-95 1 657,024
Galardi Group Restaurant FF&E Jun-94 507,000 Oct-96 302,042 355,190
General Motors Corporation Video Projectors Dec-93 52,128 Jun-97 11,613 59,207
Hudson Foods, Inc. Chicken Processing Jul-89 326,880 Aug-94 120,215 373,808
Hudson Foods, Inc. Waste Water Pre-treatment Aug-89 331,070 Aug-94 121,600 377,895
Plant
Hudson Foods, Inc. Chicken Processing Equipment Dec-89 1,102,591 Sep-94 333,006 1,182,678
Hudson Foods, Inc. Chicken Processing Equipment Dec-89 890,708 Sep-94 272,280 959,784
Hudson Foods, Inc. Chicken Processing Equipment Dec-89 190,739 Sep-94 56,897 205,202
Inland Steel Company Laser Measuring System Sep-89 436,808 Apr-94 105,000 487,179
International Paper Company Truck Jun-88 25,080 Nov-92 14,653 28,446
International Paper Company Trucks Jul-88 32,039 Nov-91 7,412 31,840
International Paper Company Trucks Sep-88 37,910 May-92 17,372 33,220
International Paper Company Trucks Sep-88 28,114 Dec-93 7,750 30,848
International Paper Company Truck Sep-88 35,302 Sep-94 8,500 36,360
International Paper Company Van Sep-88 39,626 Nov-94 11,325 37,872
International Paper Company Truck Sep-88 20,850 Dec-95 11,924 39,114
International Paper Company Truck Sep-88 42,161 Dec-95 11,120 73,774
International Paper Company Trucks Nov-88 165,175 Aug-91 118,185 90,831
International Paper Company Truck with power lift gate Nov-88 32,691 Dec-94 10,000 36,079
International Paper Company Truck with power lift gate Nov-88 32,691 Feb-95 9,500 36,079
International Paper Company Motor Vehicle Dec-88 13,873 Apr-97 5,500 22,610
International Paper Company Motor Vehicle Jan-89 33,029 Jul-96 4,000 58,146
International Paper Company Motor Vehicle Feb-89 41,080 Jun-97 4,250 65,533
International Paper Company Cargo Van Mar-89 13,910 Jan-95 2,740 16,189
International Paper Company Truck Mar-89 24,458 Apr-95 11,000 25,968
International Paper Company Trucks Mar-89 48,783 May-95 26,000 40,150
International Paper Company Trucks Apr-89 76,873 May-95 20,000 86,592
International Paper Company Trucks Jun-89 27,457 Apr-94 4,500 32,538
International Paper Company Truck Jun-89 29,079 May-95 9,000 31,744
International Paper Company Cut-away Van Aug-89 19,484 Dec-94 5,750 19,095
International Paper Company Truck Aug-89 27,249 Apr-96 7,000 37,622
International Paper Company Trucks Oct-89 116,589 May-92 83,477 63,595
International Paper Company Cab & chassis Oct-89 25,374 Dec-95 9,477 38,797
International Paper Company Trucks Nov-89 33,587 Mar-94 9,000 34,975
International Paper Company Trucks Dec-89 123,513 Apr-95 50,750 139,088
International Paper Company Trucks Mar-90 76,300 May-92 54,047 34,906
KeyCorp ATM Machines Aug-89 139,658 Jan-94 41,250 146,802
KeyCorp Office Furniture and Aug-89 913,120 Apr-94 245,000 1,014,508
Equipment
KeyCorp ATM Machines Aug-89 55,864 Aug-94 14,500 66,333
KeyCorp ATM Machines Aug-89 195,522 Apr-96 18,650 211,431
Keycorp ATM's Aug-89 251,385 Dec-96 23,500 287,781
Keycorp ATM's Aug-89 139,658 Jun-97 10,000 213,512
Koppers Industries, Inc. Hydraulic loader & end Jun-90 639,120 Jun-95 317,500 793,198
loader
Midway Airlines, Inc. Commercial Aircraft Jun-90 4,592,040 Sep-91 3,444,589 463,076 9
National Semiconductor Wafer Processing System Apr-89 762,580 Jan-94 82,000 869,955
Corporation
National Steel Corporation Wheel Loader Dec-89 380,203 Jul-96 134,512 476,098
National Steel Corporation Forklifts Dec-89 85,296 Jun-97 25,000 109,159
National Union Electric Phone System Aug-89 481,738 Mar-94 130,000 507,722
Corporation
Nissan Motor Corporation Office Information Systems Jul-88 229,598 Jul-93 3,700 221,328
In USA
NMCS, Inc. , d/b/a National Office Furniture Jun-88 627,453 Mar-94 1 747,640
Medical Group Services,
Inc.
Nord Kaolin Company Water Tank Trucks Feb-89 229,795 Nov-96 31,800 191,762
Nord Kaolin Company Ford Truck & Truck Crane Apr-89 76,913 Mar-97 28,000 109,219
Owens Corning Fiberglas Automobile Nov-88 15,822 Apr-95 3,650 20,000
Corp.
Owens Corning Fiberglas Material Handling Jul-89 175,098 Jul-92 41,020 154,944
Corp.
Owens Corning Fiberglas Material Handling Oct-89 151,207 Mar-93 47,000 139,317
Corp.
Owens Corning Fiberglas Material Handling Oct-89 31,192 Sep-94 9,000 34,524
Corp.
Owens Corning Fiberglas Material Handling Oct-89 56,733 Sep-94 13,000 62,760
Corp.
Owens Corning Fiberglas Material Handling Dec-89 21,331 May-96 4,100 27,834
Corp.
Owens Corning Fiberglas Material Handling Feb-90 100,985 Oct-95 35,000 119,560
Corp.
Owens Corning Fiberglas Lift Truck Mar-90 18,288 Mar-95 6,500 19,851
Corp.
Owens Corning Fiberglas Material Handling Apr-90 101,775 Jun-93 29,100 92,836
Corp.
Owens Corning Fiberglas Material Handling Apr-90 122,130 Apr-94 36,600 126,827
Corp.
Owens Corning Fiberglas Material Handling Apr-90 118,092 Apr-95 44,500 128,182
Corp.
Owens Corning Fiberglas Material Handling May-90 57,956 Jun-93 13,500 62,821
Corp.
Owens Corning Fiberglas Material Handling May-90 18,972 Apr-94 4,800 20,165
Corp.
Owens Corning Fiberglas Material Handling Jun-90 152,935 Oct-95 56,000 179,186
Corp.
Owens Corning Fibergla Material Handling Jun-90 16,179 Aug-96 5,000 19,670
Corp.
Owens Corning Fiberglas Material Handling Aug-90 123,102 Aug-93 41,000 113,082
Corp.
Owens Corning Fiberglas Lift Truck Aug-90 59,786 Dec-94 20,000 59,404
Corp.
Owens Corning Fiberglas Material Handling Aug-90 20,858 Aug-95 10,750 22,911
Corp.
Owens Corning Fiberglas Material Handling Aug-90 20,858 Sep-95 10,750 22,911
Corp.
Owens Corning Fiberglas Forklift Aug-90 25,601 Oct-96 5,050 31,106
Corp.
Owens Corning Fiberglas Material Handling Oct-90 21,920 Oct-95 10,750 24,521
Corp.
Owens Corning Fiberglas Material Handling Oct-90 22,750 Nov-95 7,000 29,948
Corp.
Owens Corning Fiberglas Sweeper Nov-90 27,592 Dec-93 6,600 26,638
Corp.
Owens Corning Fiberglas Material Handling Nov-90 11,302 Mar-95 1 15,881
Corp.
Quaker Coal Company Crawler Dozer Feb-94 558,301 Apr-96 255,000 356,875
Ran-Bar Corporation Boom lift Aug-93 7,950 Sep-95 1 19,152
Regents of the University Communication Jan-89 84,204 Dec-93 25,500 87,434
of California
Rocky Mountain Helicopters, Aircraft Oct-89 2,252,125 Dec-93 1,472,413 1,383,000 10
Inc.
Rohr Industries, Inc. Motor Vehicles Oct-88 24,450 May-93 5,534 24,406
Rohr Industries, Inc. Motor Vehicles Oct-88 47,524 Aug-93 19,095 61,845
Rohr Industries, Inc. Motor Vehicles Oct-88 11,370 Dec-93 3,977 13,300
Rohr Industries, Inc. Motor Vehicle Oct-88 8,742 Aug-96 3,482 12,950
Rohr Industries, Inc. Motor Vehicles Dec-88 99,553 Jan-93 22,012 99,184
Rohr Industries, Inc. Motor Vehicles Dec-88 15,569 Dec-93 4,777 17,664
Rohr Industries, Inc. Auto Dec-88 15,642 Jan-95 3,077 21,521
Rohr Industries, Inc. Motor Vehicles Jan-89 14,990 Feb-92 3,509 12,925
Rohr Industries, Inc. Motor Vehicles Jan-89 14,990 May-92 5,538 13,776
Rohr Industries, Inc. Motor Vehicles Jan-89 9,532 Apr-94 3,300 12,375
Rohr Industries, Inc. Motor Vehicles Feb-89 9,359 Aug-94 3,177 12,851
Rohr Industries, Inc. Motor Vehicle Feb-89 8,952 Aug-96 - 14,280
Rohr Industries, Inc. Motor Vehicles Apr-89 36,263 Apr-89 7,667 35,328
Rohr Industries, Inc. Motor Vehicles Apr-89 12,393 Jan-92 2,313 12,086
Rohr Industries, Inc. Motor Vehicles Apr-89 35,762 Apr-92 9,019 34,793
Rohr Industries, Inc. Motor Vehicles Apr-89 11,921 May-92 3,058 11,597
Rohr Industries, Inc. Motor Vehicles Apr-89 11,920 Jul-92 2,973 11,597
Rohr Industries, Inc. Motor Vehicles Apr-89 24,343 Jul-92 5,146 23,683
Rohr Industries, Inc. Motor Vehicles Apr-89 72,014 Jul-92 20,088 68,396
Rohr Industries, Inc. Motor Vehicles Apr-89 21,759 Jul-94 8,500 25,267
Rohr Industries, Inc. Motor Vehicles May-89 11,920 May-93 2,772 12,955
Rohr Industries, Inc. Motor Vehicles May-89 16,760 Jul-94 3,677 18,710
Rohr Industries, Inc. Motor Vehicles Jul-89 17,801 Jul-92 3,823 15,948
Rohr Industries, Inc. Motor Vehicles Jul-89 18,477 Feb-93 11,810 14,614
Rohr Industries, Inc. Motor Vehicles Aug-89 14,570 Dec-93 3,695 15,270
Rohr Industries, Inc. Motor Vehicle Sep-89 8,702 Aug-96 3,979 12,557
Rohr Industries, Inc. Motor Vehicles Nov-89 16,378 May-92 13,340 9,100
Rohr Industries, Inc. Pickup Truck Nov-89 9,652 Jan-95 4,100 10,720
Rohr Industries, Inc. Motor Vehicle Nov-89 15,863 Aug-96 4,422 20,605
Rohr Industries, Inc. Motor Vehicles Mar-90 15,065 Feb-93 6,756 12,658
Sebastiani Vineyards, Inc. Wine Barrels Oct-88 143,804 Jun-96 6,535 188,158
Sebastiani Vineyards, Inc. Wine Barrels May-89 33,919 Jun-94 4,340 41,682
Sebastiani Vineyards, Inc. Wine Barrels May-89 67,314 Jun-96 2,700 81,120
Shell Mining Company Crawler Tractor Oct-89 1,013,257 Dec-94 390,000 1,048,122
Shell Mining Company Miner Machine Feb-90 640,995 Mar-95 130,000 648,032
Shell Mining Company Miner Machine Feb-90 640,427 Mar-95 130,000 647,458
St. Luke's-Roosevelt Medical Furniture, Fixtures Feb-90 1,126,223 Apr-93 404,654 1,116,417
Hospital Center & Equipment
The Budd Company Lift Trucks May-90 154,260 Mar-96 29,000 158,330
The Dow Chemical Company Lift Truck Jul-87 26,198 Aug-92 4,300 25,820
The Dow Chemical Company Material Handling Jul-87 990,448 Aug-92 382,160 877,628
The Dow Chemical Company Rail car Mover Jul-87 145,822 Jan-93 43,650 125,152
The Dow Chemical Company Material Handling May-88 294,792 Jul-93 74,300 290,517
The Dow Chemical Company Material Handling May-88 17,045 Jan-94 5,800 16,340
The Dow Chemical Company Material Handling May-88 33,943 Jun-94 10,900 32,539
The Dow Chemical Company Material Handling May-88 33,119 Jan-95 10,000 39,517
The Dow Chemical Company Material Handling May-88 55,516 Sep-95 - 73,736
USX Steel Corporation Haul Truck Dec-89 1,017,631 Dec-94 324,300 1,003,483
USX Steel Corporation Haul Truck Dec-89 1,017,631 Dec-94 324,300 1,003,483
USX Steel Corporation Haul Truck Dec-89 1,013,766 Dec-94 324,300 999,671
------------- --------------- ------------
$40,058,789 $14,413,592 $36,166,091
============= =============== ============
</TABLE>
A-33
<PAGE>
<TABLE>
<CAPTION>
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
ATEL CASH DISTRIBUTION FUND III
<S> <C> <C> <C> <C> <C> <C> <C>
A. O. Smith Corporation Forklifts Nov-90 $32,221 Feb-97 $8,100 $40,198
A. O. Smith Corporation Side loaders Nov-90 230,135 Feb-97 62,000 266,272
A.O. Smith Corporation Lift trucks Nov-90 22,516 Jan-96 9,000 23,215
A.O. Smith Corporation Carton Clamps Nov-90 22,469 Jan-96 9,000 26,166
A.O. Smith Corporation Towmotors Nov-90 120,865 Jan-96 44,000 124,614
A.O. Smith Corporation Lift trucks Nov-90 25,315 Jan-96 8,250 26,100
A.O. Smith Corporation Lift trucks Nov-90 17,860 Mar-96 3,950 18,414
American President Trucking Tractors Feb-90 64,510 May-96 19,738 62,791
Co., Ltd.
American President Trucking Tractors Feb-90 64,510 Jun-96 18,738 62,791
Co., Ltd.
American President Trucking Tractors Feb-90 61,585 Nov-96 15,443 74,622
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Nov-96 10,000 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Nov-96 18,788 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Nov-96 10,000 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Nov-96 10,000 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Nov-96 10,000 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 61,585 Dec-96 15,443 74,622
Co., Ltd.
American President Trucking Tractors Feb-90 61,585 Dec-96 15,443 74,622
Co., Ltd.
American President Trucking Tractors Feb-90 61,585 Dec-96 15,443 74,622
Co., Ltd.
American President Trucking Tractors Feb-90 61,585 Dec-96 9,900 76,442
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Dec-96 15,473 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Dec-96 11,894 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Dec-96 9,900 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Feb-97 15,993 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Feb-97 15,455 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 61,921 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 64,863 Jun-96 18,788 63,134
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Nov-96 15,472 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Nov-96 15,472 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Nov-96 14,572 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Nov-96 15,472 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Dec-96 15,534 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Dec-96 15,372 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Dec-96 15,372 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Dec-96 15,372 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Apr-97 14,396 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Apr-97 14,072 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Apr-97 14,072 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Apr-97 14,072 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Apr-97 15,598 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 May-97 13,972 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Jun-97 13,772 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 60,797 Jun-97 13,772 73,663
Co., Ltd.
American President Trucking Tractors Apr-90 61,585 Nov-96 15,543 72,620
Co., Ltd.
American President Trucking Tractors Apr-90 61,585 Dec-96 15,443 72,620
Co., Ltd.
American President Trucking Tractors Apr-90 61,585 Dec-96 15,443 72,620
Co., Ltd.
American President Trucking Tractors Apr-90 322,551 Jun-96 97,892 300,307
Co., Ltd.
American President Trucking Tractors May-90 61,585 Nov-96 15,543 71,710
Co., Ltd.
American President Trucking Tractors May-90 61,585 Nov-96 15,543 71,710
Co., Ltd.
American President Trucking Tractors May-90 61,585 Dec-96 15,543 71,710
Co., Ltd.
American President Trucking Tractors May-90 61,585 Feb-97 15,543 71,710
Co., Ltd.
American President Trucking Tractors May-90 61,585 Feb-97 15,543 68,070
Co., Ltd.
American President Trucking Tractors May-90 387,062 Jun-96 150,839 343,988
Co., Ltd.
American President Trucking Tractors May-90 129,021 Jun-96 37,934 120,123
Co., Ltd.
Barney's, Inc. Retail Store FF&E Sep-93 2,009,077 Jul-96 1,033,020 967,060 11
Buffalo & Pittsburgh Locomotives Nov-93 792,657 Nov-96 713,100 802,504
Railroad
Carrier Corporation Lift trucks Jun-90 113,195 Apr-95 27,950 114,228
Carrier Corporation Lift trucks Jun-90 359,305 Apr-95 89,800 369,875
Carrier Corporation Lift trucks Aug-90 200,008 Apr-95 43,100 203,148
Central Ohio Coal Company CAT Scrapers Mar-92 2,713,694 Jul-96 1,048,730 2,580,680
Central Ohio Coal Company Billdozer Mar-92 396,549 Oct-96 53,000 392,373
Dean Foods Company Trailer Oct-90 34,996 Nov-96 20,461 35,617
FMC Gold Company Haul Truck Jun-90 560,232 Jan-94 295,000 427,663
Fred Meyer, Inc. Data Processing Oct-90 3,244,649 Aug-95 1,060,276 3,608,683
Fred Meyer, Inc. Data Processing Nov-90 3,340,551 Dec-92 2,715,033 2,338,583
Koppers Industries, Inc. Material Handling Jul-90 54,156 Sep-95 23,000 64,020
Koppers Industries, Inc. Material Handling Aug-90 45,485 Jan-94 33,383 31,471
Koppers Industries, Inc. Material Handling Dec-90 200,911 Dec-95 102,500 237,614
Koppers Industries, Inc. Hydraulic Excavator Mar-91 114,492 Apr-96 57,500 129,848
Kraft General Foods, Inc. Material Handling Jul-91 46,694 Aug-94 24,248 22,701
Midway Airlines, Inc. Commercial Aircraft Jun-90 2,405,081 Sep-91 1,656,694 226,541 12
Mobil Oil Corporation Material Handling Apr-92 35,662 Jun-95 13,040 29,673
Mobil Oil Corporation Material Handling Jul-92 36,249 Jun-95 10,611 30,163
Mobil Oil Corporation Golf Carts Jun-93 137,654 Jul-96 80,800 95,642
Mobil Oil Corporation Golf Carts Jun-93 142,464 Jul-97 74,800 98,983
Pepsico, Inc. Material Handling Jul-90 208,042 Sep-96 16,000 254,225
Pepsico, Inc. Material Handling Sep-90 32,885 Sep-96 1,200 41,214
Pepsico, Inc. Material Handling Sep-90 228,666 Oct-96 21,000 266,447
Pepsico, Inc., d/b/a/ PFS Material Handling Jul-90 73,050 Jun-95 8,470 52,933
Pilgrim's Pride Corporation Chicken Processing Dec-90 3,791,002 Oct-95 1,400,000 4,000,050
PSI Energy, Inc. Wheel Tractor Scraper Jul-90 842,013 Sep-96 295,000 923,917
Reliance Insurance Company Office Furniture Jun-92 1,055,471 Jun-97 287,622 1,213,841
Shell Mining Company Crawler Dozer Oct-91 776,000 Dec-96 350,000 801,763
Southern Ohio Coal Company Mining Mar-92 3,795,152 Jun-92 4,469,135 207,307
Southern Ohio Coal Company Shuttle Cars Mar-92 732,783 Apr-97 120,000 851,419
Southern Ohio Coal Company Power Center Mar-92 98,164 Apr-97 15,000 114,056
Stone Container Corporation Material Handling Nov-90 15,984 Mar-93 5,500 14,058
Stone Container Corporation Material Handling Nov-90 43,850 Apr-93 9,000 36,268
Stone Container Corporation Material Handling Nov-90 227,384 May-93 54,500 163,622
Stone Container Corporation Material Handling Nov-90 299,787 Aug-93 115,700 301,446
Stone Container Corporation Material Handling Nov-90 23,674 Oct-93 5,800 24,262
Stone Container Corporation Material Handling Nov-90 45,669 Apr-94 17,500 45,093
Stone Container Corporation Material Handling Nov-90 18,611 Jul-94 3,500 16,737
Stone Container Corporation Material Handling Nov-90 50,097 Oct-94 17,735 52,700
Stone Container Corporation Tractor Nov-90 17,227 Jan-95 6,000 18,431
Stone Container Corporation Tractor Nov-90 53,694 Jan-95 30,500 50,456
Stone Container Corporation Material Handling Nov-90 15,625 Feb-95 4,000 14,480
Stone Container Corporation Tractor Nov-90 137,327 Mar-95 75,842 124,820
Stone Container Corporation Material Handling Nov-90 33,498 Mar-95 14,500 35,136
Stone Container Corporation Material Handling Nov-90 96,611 Jun-95 29,500 107,181
Stone Container Corporation Material Handling Nov-90 216,936 Jun-95 72,500 199,500
Stone Container Corporation Material Handling Nov-90 51,420 Jun-95 14,500 54,541
Stone Container Corporation Material Handling Nov-90 17,250 Jul-95 5,500 15,176
Stone Container Corporation Material Handling Nov-90 116,700 Jul-95 23,750 133,201
Stone Container Corporation Material Handling Nov-90 22,308 Jul-95 5,500 23,453
Stone Container Corporation Material Handling Nov-90 49,232 Jul-95 14,500 54,618
Stone Container Corporation Material Handling Nov-90 110,836 Jul-95 21,750 125,403
Stone Container Corporation Material Handling Nov-90 17,124 Jul-95 4,300 19,535
Stone Container Corporation Material Handling Nov-90 25,898 Jul-95 12,000 26,586
Stone Container Corporation Material Handling Nov-90 15,810 Jul-95 8,500 16,230
Stone Container Corporation Material Handling Nov-90 12,949 Jul-95 6,000 13,293
Stone Container Corporation Material Handling Nov-90 183,825 Jul-95 105,500 188,712
Stone Container Corporation Material Handling Nov-90 63,433 Sep-95 14,000 69,970
Stone Container Corporation Sweeper Nov-90 14,203 Oct-95 2,100 10,440
Stone Container Corporation Material Handling Nov-90 22,561 Jan-96 2,000 29,525
Stone Container Corporation Material Handling Nov-90 68,950 Mar-96 21,500 85,665
Stone Container Corporation Material Handling Nov-90 46,492 Mar-96 13,500 41,148
Stone Container Corporation Material Handling Nov-90 46,928 May-96 8,400 57,267
Stone Container Corporation Material Handling Nov-90 136,838 Jun-96 60,670 164,020
Stone Container Corporation Forklifts Nov-90 46,681 Jul-96 13,375 67,363
Stone Container Corporation Forklifts Nov-90 32,261 Nov-96 9,100 47,409
Stone Container Corporation Forklifts Nov-90 25,065 Apr-97 9,000 55,930
Stone Container Corporation Material Handling Apr-91 128,314 Dec-93 117,236 59,610
Teledyne Industries, Inc. Material Handling Nov-90 56,635 Jan-94 13,714 52,309
Teledyne Industries, Inc. Material Handling Nov-90 24,073 Apr-94 11,100 22,234
Teledyne Industries, Inc. Material Handling Nov-90 41,301 Apr-96 15,000 42,464
The Dow Chemical Company Research Equipment Apr-91 56,295 Oct-96 25,000 61,271
The Dow Chemical Company Research Equipment Apr-91 212,698 Mar-97 6,000 231,500
The Dow Chemical Company Research Equipment Apr-91 930,833 Feb-96 214,500 1,013,116
The Dow Chemical Company Material Handling Oct-91 50,478 Aug-93 12,000 47,859
The Dow Chemical Company Research Equipment Oct-91 58,821 Dec-96 2,200 68,479
The Dow Chemical Company Research Equipment Oct-91 649,269 Nov-96 125,030 748,348
to Dec-96
The Dow Chemical Company Research Equipment Jan-92 894,950 Jan-97 217,000 1,031,519
The Dow Chemical Company Research Equipment Jan-92 446,983 Jan-97 94,875 512,287
The Dow Chemical Company Dozer Jul-92 158,778 Jun-97 79,389 160,540
The Helen Mining Company Mining Jun-91 211,129 Aug-93 14,321 227,537 13
The Helen Mining Company Mining Shields Sep-93 149,536 Jan-97 - 149,536
The Kelly Springfield Trackmobile Mar-92 83,000 Mar-97 65,000 86,246
Tire Co.
The Kelly Springfield Mail Sorter Mar-92 27,162 Mar-97 5,432 30,512
Tire Co.
The Kelly Springfield Forklifts May-92 17,672 Jun-97 5,000 20,139
Tire Co.
The Pittston Company Versatrack Apr-92 159,207 Oct-96 83,321 147,150
The Pittston Company Personnel Carrier Apr-92 58,758 Jun-97 12,000 63,880
The Pittston Company Simmons Rand Scoup Apr-92 130,340 Jun-97 18,000 141,702
The Pittston Company Compressor Car Apr-92 32,700 Jun-97 7,000 35,550
The Pittston Company Versatrack Apr-92 174,801 Jun-97 31,500 188,826
The Pittston Company Continuous Miner Jun-92 909,072 Feb-97 437,995 869,572
The Pittston Company Locomotive Jun-92 119,708 Jun-97 28,000 125,298
The Pittston Company Un-a-hauler Jun-92 235,899 Jun-97 35,000 246,915
Truck-Lite Company Project Line Equipement Sep-91 395,910 Jun-97 224,054 397,993
Truck-Lite Company Project Line Equipement Dec-91 667,363 Jun-97 380,946 656,930
Wal-mart Stores, Inc. Forklifts, Trucks & Trailers Jun-94 189,632 Jan-96 165,000 188,817
------------- --------------- ------------
$42,579,035 $20,580,958 $36,482,095
============= =============== ============
</TABLE>
A-34
<PAGE>
<TABLE>
<CAPTION>
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
ATEL CASH DISTRIBUTION FUND IV
<S> <C> <C> <C> <C> <C> <C> <C>
Barney's, Inc. Retail Store FF&E Sep-93 $2,316,543 Jul-96 $1,191,112 $1,115,058
Buffalo & Pittsburgh Locomotives Nov-93 849,216 Nov-96 729,200 859,766
Railroad
Burlington Northern Railroad Locomotives Dec-92 7,950,000 Dec-94 5,595,000 4,161,000
Canadian Pacific Limited Rail Car Oct-92 5,704 Apr-96 21,772 520
Canadian Pacific Limited Boxcar Oct-92 13,000 May-97 20,466 3,539
DJ Aeorspace Limited Executive Aircraft Apr-94 1,890,000 Jan-97 1,018,053 1,590,913
Galardi Group Restaurant FF&E Jun-94 546,000 Oct-96 325,276 382,513
H. E. Butt Grocery Company Refrigerated Trailers Oct-92 2,128,029 Mar-97 1,174,703 1,410,730
H. E. Butt Grocery Company Refrigerated Trailers Nov-92 1,897,830 Mar-97 1,079,789 1,246,977
H. E. Butt Grocery Company Refrigerated Trailers Nov-92 1,645,554 Mar-97 610,258 1,299,522
H. E. Butt Grocery Company Trailers Nov-92 37,957 Jan-96 35,624 18,607
H. E. Butt Grocery Company Refrigerated Trailers May-93 1,404,302 Mar-97 831,127 790,395
Kraft General Foods Tractors Dec-93 419,267 Jan-95 363,510 337,986
Kraft General Foods, Inc. Tractors Dec-93 545,048 Jul-96 139,956 581,119
Midwest Power Systems, Inc. Coal Hopper Car Dec-92 17,500 Sep-93 20,543 3,915
Midwest Power Systems, Inc. Coal Hopper Car Dec-92 2,222,500 Apr-96 1,730,291 1,993,170
Mobil Oil Corporation Tractors Nov-92 436,136 Sep-96 137,900 536,101
Mobil Oil Corporation Tractor Accessories Oct-93 3,541 Sep-96 - 979
Mobil Oil Corportion Boom Trucks Nov-92 69,903 Jan-94 46,026 19,329
Mobil Oil Corportion Tractors Nov-92 62,312 Jan-96 25,500 43,963
Mobil Oil Corportion Tractors Nov-92 62,312 Mar-96 25,500 43,963
Mobil Oil Corportion Tractors Nov-92 182,949 Jun-96 48,000 136,246
Mobil Oil Corportion Tractors Dec-92 23,500 Feb-96 8,950 21,126
Nabisco, Inc. Computers & Related Jul-95 43,423 Dec-96 to Jun-97 34,799 21,684
Equipment
Nabisco, Inc. Computers & Related Jul-95 10,447 Dec-96 to Jun-97 8,590 5,071
Equipment
National Steel Corporation Wheel Loader Oct-94 2,180,730 May-97 1,259,019 1,080,629
National Steel Corporation Forklift Oct-94 27,780 May-97 21,495 11,992
National Steel Corporation Scrap Loader Jan-95 242,595 May-97 193,044 92,425
National Steel Corporation Dump Haul Trucks Mar-95 3,433,402 May-97 2,783,959 1,145,594
Rochelle Coal Company Haul Truck Nov-92 1,429,807 Jun-97 772,200 1,022,764
Rochelle Coal Company Haul Truck Dec-92 1,429,807 Jun-97 772,200 1,008,524
Rochelle Coal Company Loader Dec-92 1,988,931 Jun-97 1,074,250 1,403,767
Rochelle Coal Company Haul Truck Jan-93 1,455,158 Jun-97 800,500 1,002,462
The Helen Mining Company Battery Locomotive Apr-92 183,100 May-97 39,131 198,041
The Helen Mining Company Mining May-92 641,854 Aug-93 44,235 679,436 13
The Kendall Company Computer Oct-94 4,735 Dec-96 2,233 3,822
The Kendall Company Computers Mar-95 9,553 Dec-96 5,817 6,304
The Pittston Company Drill Nov-93 358,831 Apr-97 203,034 203,113
The Pittston Company Wheel Loader Nov-93 381,922 Apr-97 223,879 198,841
The Pittston Company Diesel Generator Nov-93 244,450 Apr-97 156,164 114,774
The Pittston Company Wheel Loader Nov-93 382,831 Apr-97 243,561 169,890
The Pittston Company Crawler Tractor Nov-93 201,786 Apr-97 132,280 94,742
The Pittston Company Drill Nov-93 387,000 Apr-97 184,092 254,059
The Pittston Company Crawler Tractor Nov-93 208,800 Apr-97 136,878 98,035
The Pittston Company Continuous Miner Mar-95 819,349 Apr-97 546,207 346,748
The Stop & Shop
Supermarket Co. Bakery Labeling Machine Dec-95 2,750 Mar-97 2,568 759
Trans Ocean Container Intermodal Containers Sep-93 6,744 Jul-94 7,398 825
Corporation
Trans Ocean Container Intermodal Containers Sep-93 13,223 Apr-95 12,095 3,016
Corporation
Trans Ocean Container Intermodal Containers Sep-93 6,706 Jul-95 6,394 2,069
Corporation
Trans Ocean Container Intermodal Containers Sep-93 10,196 Oct-95 6,112 3,595
Corporation
Trans Ocean Container Intermodal Containers Sep-93 13,870 Dec-95 10,608 5,537
Corporation
Trans Ocean Container Intermodal Containers Sep-93 65,073 Oct-96 53,512 24,637
Corporation to Apr-97
Union Tank Car Box Car Oct-92 25,000 Feb-95 23,158 21,678
Union Tank Car Company Rail Car Oct-92 12,000 Apr-95 11,088 12,752
Union Tank Car Company Rail Car Oct-92 1,222,542 Jul-95 1,383,118 601,100
Union Tank Car Company Rail Car Oct-92 389,367 Sep-95 441,332 203,680
Union Tank Car Company Rail Car Oct-92 389,367 Oct-95 442,564 209,760
Union Tank Car Company Rail Car Oct-92 12,000 Jan-96 10,371 8,202
Union Tank Car Company Rail Car Oct-92 26,000 Apr-96 21,695 18,920
Union Tank Car Company Boxcar Oct-92 13,000 Nov-96 8,979 11,220
Union Tank Car Company Boxcar Oct-92 13,000 Apr-97 9,829 12,100
Union Tank Car Company Rail Car Dec-92 13,000 Jan-93 14,569 880
------------- --------------- ------------
$43,029,232 $27,281,513 $26,900,884
============= =============== ============
</TABLE>
A-35
<PAGE>
<TABLE>
<CAPTION>
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
ATEL CASH DISTRIBUTION FUND V
<S> <C> <C> <C> <C> <C> <C> <C>
Barney's, Inc Retail Store FF&E Sep-93 3,312,940 Jul-96 1,703,435 1,594,669
Burlington Northern Railroad Covered Hopper Cars Mar-96 35,000 Dec-96 22,425 619
Company
Burlington Northern Railroad Covered Hopper Cars Mar-96 35,000 Jan-97 36,367 -
Company
Burris Foods Trailers Apr-94 $108,442 Dec-95 $121,000 $53,210
Clark Oil & Refining Refrigeration Units Aug-93 1,268,656 Dec-96 560,000 1,164,635
Corporation
IBM Corporation Office furniture Sep-93 693,896 Jun-95 516,291 666,576
Mobil Administrative Helicopter Jun-93 844,525 Mar-95 920,000 308,000
Services Company
Mobil Oil Corporation Environmental Ejector May-93 423,000 Apr-97 88,000 458,067
Systems
Mobil Oil Corporation Wheel Loader Oct-93 70,200 Oct-96 39,000 50,579
Nabisco, Inc. Computers & Related Aug-95 66,932 Dec-96 54,102 29,697
Equipment to Oct-95 to Jun-97
Owens Corning Fiberglas Forklifts Jul-93 157,462 May-97 31,800 157,273
Corp.
Praxair, Inc. Tractors Jun-94 576,685 Sep-96 214,000 340,982
to Apr-97
PV Trucking Tractors Jun-94 75,333 Jan-96 50,000 36,000
Quaker Coal Company Mining equipment Jun-94 595,000 Jun-95 505,775 173,253
Quaker Coal Company Mining equipment Jun-94 1,118,880 Jun-95 930,251 347,926
Quaker Coal Company Crawler Dozer Jun-94 913,073 Oct-96 425,000 732,192
Quaker Coal Company Mining equipment Dec-94 3,000,000 Jun-95 2,696,718 794,600
Schwegmann Giant Retail Store FF&E Jun-95 574,703 Oct-96 527,405 167,353
Supermarkets, Inc.
Schwegmann Giant Retail Store FF&E Jun-95 309,024 Dec-96 272,109 101,701
Supermarkets, Inc.
Star Enterprise Tractors Jun-94 887,041 Jan-97 331,750 649,727
to Apr-97
TASC, Inc. Computers & Related Dec-94 237,685 Jul-96 70,000 226,989
Equipment
Texaco Trading & Tractors & Trailers Jun-94 156,645 Apr-97 55,000 120,533
Transportation
Texaco Trading & Tractors Jun-94 983,294 Feb-97 to Jun-97 370,000 742,508
Transportation
Texaco Trading & Tractors Jun-94 138,783 Feb-97 to Mar-97 59,250 94,571
Transportation
The Atchison Topeka & Santa Intermodal Containers Apr-94 9,787 Jan-96 9,612 1,832
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers May-94 9,787 Jan-96 9,612 1,832
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Jun-94 9,787 Jan-95 10,107 611
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Jun-94 9,787 Jan-96 9,612 1,832
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Oct-94 9,635 Jan-95 10,123 306
Fe Railroad Company
The Burlington Northern & Intermodal Containers May-94 9,787 Jul-96 9,337 2,548
Santa Fe Railway Co.
The Burlington Northern & Intermodal Containers Jun-94 9,787 Jul-96 9,337 2,843
Santa Fe Railway Co.
The Burlington Northern & Intermodal Containers Jun-94 9,787 Jan-97 8,991 2,843
Santa Fe Railway Co.
The Burlington Northern & Intermodal Containers Nov-94 9,634 Jul-96 9,462 1,993
Santa Fe Railway Co.
The Dow Chemical Company Copiers Jul-94 42,694 Jul-95 31,150 13,588
The Dow Chemical Company Copiers Jul-94 195,975 Jan-96 139,400 224,830
The Dow Chemical Company Copiers Oct-94 230,577 Jan-96 204,000 76,459
The Dow Chemical Company Copiers Jan-95 37,493 Dec-95 20,750 12,437
The Dow Chemical Company Copiers Jan-95 110,900 Jan-96 98,750 38,074
The Dow Chemical Company Copiers Apr-95 13,455 Dec-95 14,080 2,199
The Dow Chemical Company Staplers Apr-95 109,800 Jan-96 119,000 18,576
The Kendall Company Computer Mar-96 3,735 Jan-97 4,112 686
Tom's Food, Inc. Tractors Jun-94 197,195 Aug-96 77,000 181,009
to Feb-97
Tom's Foods, Inc. Tractors Jun-94 61,908 Feb-96 36,800 49,982
Trans Ocean Container Intermodal Containers Sep-93 18,054 Jul-94 18,898 2,371
Corporation
Trans Ocean Container Intermodal Containers Sep-93 3,372 Oct-94 3,675 1,674
Corporation
Trans Ocean Container Intermodal Containers Sep-93 10,116 Apr-95 5,246 2,345
Corporation
Trans Ocean Container Intermodal Containers Sep-93 5,814 Jul-95 5,263 1,866
Corporation
Trans Ocean Container Intermodal Containers Sep-93 4,647 Oct-95 4,405 850
Corporation
Trans Ocean Container Intermodal Containers Sep-93 53,507 Dec-95 46,560 21,970
Corporation
Trans Ocean Container Intermodal Containers Sep-93 25,925 Apr-96 19,257 10,817
Corporation
Trans Ocean Container Intermodal Containers Sep-93 2,245 Jun-96 2,468 1,041
Corporation
Transocean Container Intermodal Containers Sep-93 62,100 Oct-96
to Apr-97 51,749 21,640
Corporation
Tyson Foods, Inc. Tractors Jun-93 1,585,000 Jul-96 637,500 1,027,080
Tyson Foods, Inc. Tractors Aug-93 1,575,000 Jul-96 637,500 1,022,490
------------- --------------- ------------
$21,019,489 $12,863,434 $11,760,284
============= =============== ============
</TABLE>
A-36
<PAGE>
<TABLE>
<CAPTION>
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
ATEL CASH DISTRIBUTION FUND VI
<S> <C> <C> <C> <C> <C> <C> <C>
American President Trucking Tractors Nov-95 $759,092 Jul-96 $327,062 $225,942
Co., Ltd. to Apr-97
Burlington Northern Railroad Covered Hopper Cars Mar-96 70,000 Dec-96 59,553 619
Company to Jan-97
Mobil Oil Corporation Petroleum Wax Car Feb-96 59,953 Jan-97 64,717 3,597
Perdue Transportation Tractors Nov-95 47,038 Feb-96 45,838 3,900
Incorporated
The Atchison Topeka & Santa Intermodal Containers Jan-94 20,068 Jan-95 21,084 567
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Sep-94 10,034 Jan-95 10,446 335
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Sep-94 20,068 Jan-96 19,973 2,543
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Nov-94 10,034 Feb-95 10,446 1,159
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Nov-94 10,034 Jan-96 10,113 968
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Nov-94 9,633 Apr-96 9,588 1,240
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Nov-94 6,453 Apr-96 6,567 788
Fe Railroad Company
The Burlington Northern & Intermodal Container Sep-94 10,034 Jul-96 9,717 2,225
Santa Fe Railway Company
The Burlington Northern & Intermodal Container Nov-94 10,034 Jul-96 9,855 1,614
Santa Fe Railway Company
Tracy Locke, Inc. Printers Mar-95 12,470 Sep-95 12,179 1,662
Transocean Container Intermodal Containers Dec-95 9,529 Jun-96 11,167 700
Corporation
Transocean Container Intermodal Containers Dec-95 17,748 Oct-96 20,730 1,107
Corporation to Jan-97
Tyson Foods, Inc. Computers & Related Jun-95 195,152 Jun-97 23,080 181,113
Equipment
------------- --------------- -------------
$1,277,374 $672,115 $430,079
============= =============== =============
TOTALS OF ALL FUNDS: $157,107,134 $79,395,952 $119,229,508
============= =============== =============
</TABLE>
A-37
<PAGE>
TABLE V SALES OR DISPOSALS OF EQUIPMENT FOOTNOTES
(1) "Acquisition Date" is the date the Equipment was acquired by the prior
program.
(2) "Equipment Acquisition Price" is the actual cost of the item of
Equipment, including Acquisition Fees, and any other expenditures incurred by
the prior program in the acquisition of the Equipment.
(3) "Sale Price" is the actual cash received for the purchase, early
termination or casualty of the Equipment upon Lease termination, net of any
direct out-of-pocket closing costs incurred by the prior program as a result of
such termination.
(4) "Excess of Rents Over Expenses" is a total amount of Lease rents, less
any applicable direct out-of-pocket costs incurred by the prior program during
the term of the Lease for the particular Lease transaction.
(5) "Sale Price" represents cash and non-cash amounts distributed by Lessee
as a result of U.S. Bankruptcy Court-approved Chapter 11 Reorganization Plan.
Distributions were as follows: Cash $9,512; Senior Secured Notes $1,000;
Convertible Subordinated Notes $700; Common Stock $296 (market value as of
7/16/92).
(6) The original lease included a mobile MRI unit and a tractor. The
tractor leased under the original lease was sold to the lessee. The MRI unit has
been leased to a third party on a 24 month term with a bargain purchase option
to be exercised at the end of the lease term. The Equipment under this lease is
owned 1/3 by ATEL Cash Distribution Fund and 2/3 By ATEL Cash Distribution Fund
II.
(7) "Sale Price" represents cash and non-cash amounts distributed by Lessee
as a result of U.S. Bankruptcy Court-approved pre-packaged Chapter 11 Plan.
Distributions were as follows: Cash $602,435; Senior Secured Notes $72,800;
Convertible Subordinated Notes $50,900; Common Stock $21,482 (market value as of
7/16/92).
(8) "Sales Price" represents cash and non-cash amounts distributed by
Lessee as a result of U.S. Bankruptcy Court-approved pre-packaged Chapter 11
Plan. Distributions were as follows: Cash $431,499; Senior Secured Notes
$51,600; Convertible Subordinated Notes $36,100; Common Stock $15,233 (market
value as of 7/16/92).
(9) "Equipment Acquisition Price" represents a 2/3 beneficial interest in
the transaction. The Equipment was foreclosed in September 1990 by the
non-recourse lender, John Hancock Leasing. Actual cash/equity amount paid by the
prior program for the Equipment was $1,430,345, the balance of the Acquisition
Price was financed with non-recourse debt. "Sale Price" represents the amount of
the non-recourse debt written off at the time of foreclosure.
(10) The "Sales Price" represents the sum of cash received from the sale of
the aircraft pre-bankruptcy petition, plus all amounts received by the lessor
under its unsecured claim filed in the lessee's Chapter 11 reorganization,
through the date of this table. Through September 30, 1996, such claim payments
have amounted to 40% of the allowed claim amount of $776,542, or $310,617.
A-38
<PAGE>
(11) On January 10, 1996, Barney's, Inc., a lessee of ATEL Cash
Distribution Fund III, ATEL Cash Distribution Fund IV and ATEL Cash Distribution
Fund V filed for protection under Chapter 11 of the U. S. Bankruptcy Act. In
July of 1996, the lessors sold their unsecured claim in the bankruptcy for an
amount equal to approximately 73% of the unsecured claim, which, after
satisfaction of the non-recourse loan due to the CIT Group/Equipment Financing,
Inc. (and taking into account all prior rents received, security deposits
retained and loan proceeds previously received), resulted in proceeds to the
lessors in excess of their original investments in the equipment.
(12) "Equipment Acquisition Price" represents a 1/3 beneficial interest in
the transaction. The Equipment was foreclosed in September 1990 by the
non-recourse lender, John Hancock Leasing. Actual cash/equity amount paid by the
prior program for the Equipment was $715,172, the balance of the Acquisition
Price was financed with non-recourse debt. "Sale Price" represents the amount of
the non-recourse debt written off at the time of foreclosure.
(13) The remaining equipment originally leased to The Helen Mining Company
is now leased to Costain Coal. Quaker State Corporation continued to guarantee
payments through the original lease term. The new lease also includes a two year
extension of the lease term.
A-39
<PAGE>
FINANCIAL STATEMENTS
Set forth below are the following financial statements:
ATEL Capital Equipment Fund VII, L.P.
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . .F-2
Balance Sheet, December 31, 1996 . . . . . . . . . . . . . . . . . . . . . .F-3
Statement of Changes in Partner's Capital for the Period
from May 17, 1996 (inception) to December 31, 1996 . . . . . . . . . . .F-3
Statement of Cash Flows for the Period from May 17, 1996
(inception) to December 31, 1996 . . . . . . . . . . . . . . . . . . . .F-3
Notes to Financial Statements, December 31, 1996 . . . . . . . . . . . . . .F-4
Balance Sheet, June 30, 1997 (Unaudited) . . . . . . . . . . . . . . . . . .F-6
Statement of Operations for the six and three month periods
ended June 30, 1997 (Unaudited) . . . . . . . . . . . . . . . . . . . . F-7
Statement of Changes in Partner's Capital for the six months
ended June 30, 1997 (Unaudited) . . . . . . . . . . . . . . . . . . . . .F-7
Statement of Cash Flows for the six and three month periods
ended June 30, 1997 (Unaudited) . . . . . . . . . . . . . . . . . . . . .F-8
Notes to Financial Statements, June 30, 1997 (Unaudited) . . . . . . . . . .F-9
ATEL Financial Corporation
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . .F-14
Consolidated Balance Sheet, July 31, 1997 . . . . . . . . . . . . . . . . .F-15
Notes to Consolidated Balance Sheet, July 31, 1997 . . . . . . . . . . . . .F-16
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
ATEL Capital Equipment Fund VII, L.P.
We have audited the accompanying balance sheet of ATEL Capital Equipment Fund
VII, L.P. as of December 31, 1996 and the related statements of changes in
partners' capital and cash flows for the period from May 17, 1996 (inception)
through December 31,1996. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ATEL Capital Equipment Fund
VII, L.P. at December 31, 1996 and its changes in partners' capital and cash
flows for the period from May 17, 1996 (inception) through December 31,1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Francisco, California February 7, 1997, except for Note 6, as to which the
date is February 28, 1997
F-2
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
(A Development Stage Enterprise)
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Cash $600
=====
LIABILITIES AND PARTNERS' CAPITAL
Partners' capital:
General Partner $100
Limited Partners 500
-----
Total partners' capital $600
=====
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD FROM MAY 17, 1996 (INCEPTION)
THROUGH DECEMBER 31, 1996
Limited Partners General
Units Amount Partner Total
Capital contributions 50 $500 $100 $600
===== ===== ===== =====
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MAY 17, 1996 (INCEPTION)
THROUGH DECEMBER 31, 1996
Financing activities:
Capital contributions received $600
-----
Net increase in cash 600
-----
Cash at end of period $600
=====
See accompanying notes.
F-3
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. Organization and Partnership matters:
ATEL Capital Equipment Fund VII, L.P. (the Fund), was formed under the laws of
the State of California on May 17 , 1996, for the purpose of acquiring equipment
to engage in equipment leasing and sales activities. Contributions in the amount
of $600 were received as of July 17, 1996, $100 of which represented the General
Partner's (ATEL Financial Corporation's) (ATEL's) continuing interest, and $500
of which represented the Initial Limited Partners' capital investment.
As of December 31, 1996, the Fund had not commenced operations other than those
relating to organizational matters. The Fund, or the General Partner on behalf
of the Fund, will incur costs in connection with the organization, registration
and issuance of the Limited Partnership Units (Units). The amount of such costs
to be born by the Fund is limited by certain provisions of the Partnership
Agreement. Operations commenced January 7, 1997.
2. Income taxes:
The Partnership does not provide for income taxes since all income and losses
are the liability of the individual partners and are allocated to the partners
for inclusion in their individual tax returns.
3. Partners' capital:
As of December 31, 1996, 50 Units were issued and outstanding. The Fund's
registration statement with the Securities and Exchange Commission became
effective November 29, 1996. The Fund is authorized to issue up to 15,000,000
additional Units. As of December 31, 1996, subscriptions for 93,542 Units
($935,420) had been received by the Partnership and were being held by the
escrow agent. On January 6, 1997, the General Partner requested that the escrow
agent release the funds to the Partnership, except those funds received from
Pennsylvania investors (400 Units, $4,000). As of that date, subscriptions for
149,442 Units were accepted.
The Partnership Net Profits, Net Losses, and Tax Credits are to be allocated
92.5% to the Limited Partners and 7.5% to the General Partner.
Available Cash from Operations, as defined in the Limited Partnership Agreement,
shall be distributed as follows:
First, Distributions of Cash from Operations shall be 88.5% to the Limited
Partners, 7.5% to the General Partner and 4% to the General Partner or its
affiliate designated as the recipient of the Incentive Management Fee, until the
Limited Partners have received Aggregate Distributions in an amount equal to
their Original Invested Capital, as defined, plus a 10% per annum cumulative
(compounded daily) return on their Adjusted Invested Capital, as defined in the
Limited Partnership Agreement.
Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the
General Partner or its affiliate designated as the recipient of the Incentive
Management Fee.
F-4
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. Partners' capital (continued):
Available Cash from Sales or Refinancing, as defined in the Limited Partnership
Agreement, shall be distributed as follows:
First, Distributions of Sales or Refinancings shall be 92.5% to the Limited
Partners and 7.5% to the General Partner, until the Limited Partners have
received Aggregate Distributions in an amount equal to their Original Invested
Capital, as defined, plus a 10% per annum cumulative (compounded daily) return
on their Adjusted Invested Capital.
Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the
General Partner or its affiliate designated as the recipient of the Incentive
Management Fee.
4. Commitments and management:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or affiliates are entitled to receive certain fees, in addition to those
described above, which are more fully described in Section 8 of the Limited
Partnership Agreement. The additional fees to management include fees for
equipment management and resale.
5. Lines of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $90,000,000 revolving credit agreement with a group of financial
institutions which expires on October 28, 1997. The agreement includes an
acquisition facility and a warehouse facility which are used to provide bridge
financing for assets on leases. Draws on the acquisition facility by any
individual borrower are secured only by that borrower's assets, including
equipment and related leases. Borrowings on the warehouse facility are recourse
jointly to certain of the Affiliates, the Partnership and the General Partner.
Certain of the Affiliates had borrowed an aggregate of $9,821,300 under the
warehouse facility as of December 31, 1996.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of December
31, 1996. At December 31, 1996, $38,857,117 was available under this agreement.
6. Subsequent events:
As of February 28, 1997, the Partnership had received and accepted subscriptions
for 1,051,744 Units ($10,517,440), in addition to the Units issued to the
initial limited partners. As of that date, the Partnership had purchased assets
with a total cost of $7,421,906.
F-5
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
ASSETS
1997 1996
---- ----
Cash and cash equivalents $565,012 $600
Accounts receivable 722,075 -
Investments in leases 29,555,190 -
----------------- -----------------
Total assets $30,842,277 $600
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Lines of credit $2,073,240
Non-recourse debt $524,186
Accounts payable:
General Partner 26,817
Other 8,173
Unearned operating lease income 22,278
-----------------
Total liabilities 2,654,694
Partners' capital:
General Partner (28,556) $100
Limited Partners 28,216,139 500
----------------- -----------------
Total partners' capital 28,187,583 600
----------------- -----------------
Total liabilities and partners' capital $30,842,277 $600
================= =================
See accompanying notes.
F-6
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENT OF OPERATIONS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1997
(Unaudited)
Revenues: Six Months Three Months
Leasing activities:
Operating leases $2,965,253 $1,449,708
Direct financing 15,020 15,020
Loss on sales of assets (296) (296)
Interest 11,796 9,150
Other 368 251
----------------- -----------------
2,992,141 1,473,833
Expenses:
Depreciation 2,175,260 1,156,537
Interest expense 408,356 104,373
Administrative cost reimbursements
to General Partner 197,185 110,022
Other 145,157 92,463
Equipment and incentive management
fees to General Partner 110,380 53,051
Professional fees 19,216 10,871
Provision for losses 14,738 14,738
----------------- -----------------
3,070,292 1,542,055
----------------- -----------------
Net loss ($78,151) ($68,222)
================= =================
Net loss:
General Partner ($5,861) ($5,117)
Limited Partners (72,290) (63,105)
----------------- -----------------
($78,151) ($68,222)
================= =================
Net loss per Limited Partnership Unit ($0.04) ($0.03)
Weighted average number of Units outstanding 1,652,902 2,507,661
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SIX MONTH PERIOD
ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
<S> <C> <C> <C> <C>
Balance December 31, 1996 50 $500 $100 $600
Capital contributions 3,373,627 33,736,270 - 33,736,270
Less selling commissions to affiliates (3,204,946) - (3,204,946)
Other syndication costs to affiliates (1,738,800) - (1,738,800)
Distributions to partners (504,595) (22,795) (527,390)
Net loss (72,290) (5,861) (78,151)
----------------- ----------------- ----------------- -----------------
Balance June 30, 1997 3,373,677 $28,216,139 ($28,556) $28,187,583
================= ================= ================= =================
</TABLE>
See accompanying notes.
F-7
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1997
(Unaudited)
Six Months Three Months
Operating activities:
Net loss ($78,151) ($68,222)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation 2,175,260 1,156,537
Loss on sales of assets 296 296
Provision for losses 14,738 14,738
Changes in operating assets and
liabilities:
Accounts receivable (722,075) (505,857)
Accounts payable, General Partner 26,817 (27,262)
Accounts payable, other 8,173 (45,806)
Unearned lease income 22,278 (102,936)
----------------- -----------------
Net cash provided by operations 1,447,336 421,488
----------------- -----------------
Investing activities:
Purchases of equipment on operating leases (28,091,937) (6,945,886)
Purchases of equipment on direct financing
leases (3,694,810) (2,934,810)
Reduction in net investment in direct
financing leases 8,975 8,975
Proceeds from sales of assets 32,288 32,288
----------------- -----------------
Net cash used in investing activities (31,745,484) (9,839,433)
----------------- -----------------
Financing activities:
Borrowings under line of credit 13,346,930 4,073,240
Repayments of borrowings under line of
credit (11,273,690) (10,788,690)
Proceeds of non-recourse debt 553,566 553,566
Repayments of non-recourse debt (29,380) (29,380)
Capital contributions received 33,736,270 18,169,180
Payment of syndication costs to General
Partner (4,943,746) (2,662,202)
Distributions to partners (527,390) (451,163)
----------------- -----------------
Net cash provided by financing activities 30,862,560 8,864,551
----------------- -----------------
Net increase (decrease) in cash and cash
equivalents 564,412 (553,394)
Cash and cash equivalents at beginning of
period 600 1,118,406
----------------- -----------------
Cash and cash equivalents at end of period $565,012 $565,012
================= =================
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $408,356 $104,373
================= =================
See accompanying notes.
F-8
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
1. Summary of significant accounting policies:
Interim financial statements:
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the most recent report on Form
10K.
2. Organization and partnership matters:
ATEL Capital Equipment Fund VII, L.P. (the Fund), was formed under the laws of
the State of California on July 17 , 1996, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities. Contributions in
the amount of $600 were received as of July 17, 1996, $100 of which represented
the General Partner's (ATEL Financial Corporation's) continuing interest, and
$500 of which represented the Initial Limited Partners' capital investment.
Upon the sale of the minimum amount of Units of Limited Partnership interest
(Units) of $1,200,000 and the receipt of the proceeds thereof on January 7,
1997, the Partnership commenced operations.
The Partnership does not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their individual tax
returns.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
<TABLE>
<CAPTION>
Depreciation
Expense or Reclass- Balance
Amortization ifications & June 30,
Additions of Leases Dispositions 1997
--------- --------- -------------- ----
<S> <C> <C> <C> <C>
Net investment in operating leases $28,091,937 ($2,175,260) ($32,584) $25,884,093
Net investment in direct financing leases 3,694,810 (8,975) - 3,685,835
Reserve for losses (14,738) - - (14,738)
----------------- ----------------- ----------------- -----------------
$31,772,009 ($2,184,235) ($32,584) $29,555,190
================= ================= ================= =================
</TABLE>
F-9
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
Acquisitions & Balance
Dispositions June 30,
1st Quarter 2nd Quarter 1997
Transportation $18,907,388 ($32,584) $18,874,804
Manufacturing 906,370 2,972,824 3,879,194
Data processing - 3,666,101 3,666,101
Materials handling 982,293 - 982,293
Construction 350,000 - 350,000
Research - 306,546 306,546
----------------- ----------------- -----------------
21,146,051 6,912,887 28,058,938
Less accumulated
depreciation (1,018,723) (1,156,122) (2,174,845)
----------------- ----------------- -----------------
$20,127,328 $5,756,765 $25,884,093
================= ================= =================
As of June 30, 1997, investment in direct financing leases consists of fuel
trucks and a sputtering system. The following lists the components of the
Partnership's investment in direct financing leases as of June 30, 1997:
Total minimum lease payments receivable $4,289,412
Estimated residual values of leased equipment (unguaranteed) 573,601
-----------------
Investment in direct financing leases 4,863,013
Less unearned income (1,177,178)
-----------------
Net investment in direct financing leases $3,685,835
=================
All of the property on leases was acquired in 1997. There were no significant
dispositions of such property.
At June 30, 1997, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
1997 $2,763,989 $373,753 $3,137,742
1998 4,535,997 747,507 5,283,504
1999 3,206,268 747,507 3,953,775
2000 2,408,750 747,507 3,156,257
2001 2,190,517 747,507 2,938,024
Thereafter 1,482,615 925,631 2,408,246
----------------- ----------------- -----------------
$16,588,136 $4,289,412 $20,877,548
================= ================= =================
F-10
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
4. Non-recourse debt:
Non-recourse debt consists of a note payable to a financial institution due in
quarterly installments of principal and interest. The note is secured by an
assignment of lease payments and a pledge of the assets which were purchased
with the proceeds of the note. Interest on the note is at 8.828%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
1997 $45,914 $21,919 $67,833
1998 97,583 37,819 135,402
1999 106,198 29,204 135,402
2000 115,573 19,829 135,402
2001 125,776 9,626 135,402
Thereafter 33,142 708 33,850
----------------- ----------------- -----------------
$524,186 $119,105 $643,291
================= ================= =================
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Partnership.
The Limited Partnership Agreement allows for the reimbursement of costs incurred
by the General Partner in providing administrative services to the Partnership.
Administrative services provided include Partnership accounting, investor
relations, legal counsel and lease and equipment documentation. The General
Partner is not reimbursed for services where it is entitled to receive a
separate fee as compensation for such services, such as acquisition and
management of equipment. Reimbursable costs incurred by the General Partner are
allocated to the Partnership based upon actual time incurred by employees
working on Partnership business and an allocation of rent and other costs based
on utilization studies.
Substantially all employees of the General Partner record time incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General Partner. The General Partner believes that the costs reimbursed
are the lower of (i) actual costs incurred on behalf of the Partnership or (ii)
the amount the Partnership would be required to pay independent parties for
comparable administrative services in the same geographic location and are
reimbursable in accordance with the Limited Partnership Agreement.
F-11
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
5. Related party transactions (continued):
The General Partner and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:
Selling commissions (equal to 9.5% of the selling price
of the Limited Partnership units, deducted from Limited Partners'
capital) $3,204,946
Reimbursement of other syndication costs 1,738,800
Administrative costs reimbursed to General Partner 197,185
Incentive management fees (computed as 4% of distributions
of cash from operations, as defined in the Limited Partnership
Agreement) and equipment management fees (computed as 3.5% of
gross revenues from operating leases, as defined in the Limited
Partnership Agreement plus 2% of gross revenues from full
payout leases, as defined in the Limited Partnership Agreement). 110,380
-------------
$5,251,311
=============
6. Partner's capital:
As of June 30, 1997, 3,373,677 Units ($33,736,770) were issued and outstanding.
The Fund's registration statement with the Securities and Exchange Commission
became effective November 29, 1996. The Fund is authorized to issue up to
15,000,050 Units, including the 50 Units issued to the initial limited partners.
Available Cash from Operations, as defined in the Limited Partnership Agreement,
shall be distributed as follows:
First, Distributions of Cash from Operations shall be 88.5% to the Limited
Partners, 7.5% to the General Partner and 4% to the General Partner or its
affiliate designated as the recipient of the Incentive Management Fee, until the
Limited Partners have received Aggregate Distributions in an amount equal to
their Original Invested Capital, as defined, plus a 10% per annum cumulative
(compounded daily) return on their Adjusted Invested Capital, as defined in the
Limited Partnership Agreement.
Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the
General Partner or its affiliate designated as the recipient of the Incentive
Management Fee.
Available Cash from Sales or Refinancing, as defined in the Limited Partnership
Agreement, shall be distributed as follows:
First, Distributions of Sales or Refinancings shall be 92.5% to the Limited
Partners and 7.5% to the General Partner, until the Limited Partners have
received Aggregate Distributions in an amount equal to their Original Invested
Capital, as defined, plus a 10% per annum cumulative (compounded daily) return
on their Adjusted Invested Capital.
Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the
General Partner or its affiliate designated as the recipient of the Incentive
Management Fee.
F-12
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
7. Line of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $90,000,000 revolving credit agreement with a group of financial
institutions which expires on October 28, 1997. The agreement includes an
acquisition facility and a warehouse facility which are used to provide bridge
financing for assets on leases. Draws on the acquisition facility by any
individual borrower are secured only by that borrower's assets, including
equipment and related leases. Borrowings on the warehouse facility are recourse
jointly to certain of the Affiliates, the Partnership and the General Partner.
At June 30, 1997, the Partnership had $2,073,240 of borrowings under the line of
credit.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of June 30,
1997.
8. Commitments:
As of June 30, 1997, the Partnership had outstanding commitments to purchase
lease equipment totaling approximately $24,031,000.
F-13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
ATEL Financial Corporation
We have audited the accompanying consolidated balance sheet of ATEL Financial
Corporation and subsidiary as of July 31, 1997. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free from material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of ATEL
Financial Corporation at July 31, 1997 in conformity with generally accepted
accounting principles.
Ernst & Young LLP
San Francisco, California
September 19, 1997
F-14
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JULY 31, 1997
ASSETS
Cash and cash equivalents $1,883,530
Accounts receivable, net of allowance for doubtful accounts
of $10,828 100,636
Amounts due from affiliated partnerships 1,798,472
Income taxes receivable (from affiliated companies) 858,942
Investments in leases 3,814,833
Cash surrender value of life insurance 300,000
Property and equipment, net of accumulated depreciation
of $986,890 563,193
Leasehold improvements, net of accumulated amortization
of $187,360 546,080
Other assets 186,931
----------------
$10,052,617
================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Non-recourse debt $1,491,451
Amounts due to affiliated companies 1,228,290
Accounts payable and accrued liabilities 722,441
Customer deposits 83,389
Deferred liabilities and credits:
Unearned acquisition fees 1,210,812
Deferred income taxes 1,712,657
----------------
Total liabilities 6,449,040
Shareholder's equity:
Common stock, 100,000 shares authorized, 666 1/2 shares issued
and outstanding 2,000
Additional paid-in capital 93,855
Retained earnings 3,507,722
----------------
Total shareholder's equity 3,603,577
----------------
$10,052,617
================
See accompanying notes.
F-15
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
1. Summary of significant accounting policies:
Organization and principles of consolidation:
The consolidated balance sheet includes the accounts of ATEL Financial
Corporation (ATEL) and its wholly owned subsidiary, ATEL Securities Corporation
(ASC). ATEL is a wholly owned subsidiary of ATEL Capital Group (ACG).
ATEL is a California corporation formed in July 1977 to engage in the brokering
and leasing of equipment for its own account and the account of affiliated
partnerships. ASC was formed in November 1985 and was registered as a securities
broker/dealer in February 1986. All significant intercompany balances have been
eliminated in consolidation.
ATEL organizes and sponsors limited partnerships (the "affiliated partnerships"
or the "programs") engaged in equipment leasing and sales activities. It also
acts as the corporate general partner in these affiliated partnerships. Through
these programs, ACG derives various fees and also receives reimbursements for
expenses incurred on behalf of these entities, of which certain fees and expense
reimbursements are allocated to ATEL and the balance is allocated to various
other affiliates. The basis for determination of the types and amounts of these
fees and reimbursements are provided in agreements with the various programs.
In addition, under the terms of the partnership agreements for certain of the
affiliated partnerships for which ATEL is a general partner, ATEL is entitled to
participate in net cash from operations and sales or refinancing of equipment
owned by the affiliated partnerships. A portion of ATEL's participation is
subordinated to the limited partners' full recovery of their initial invested
capital contributions plus a specified return on their investments. No earnings
or equity interests from such subordinated interests have been recognized
through July 31, 1997. The shareholders of ATEL Capital Group are also general
partners in certain of these affiliated partnerships.
Operating leases:
Assets on operating leases are stated at cost less accumulated depreciation.
Revenues from operating leases are recognized evenly over the terms of the
related leases. Depreciation is provided by the straight-line method over the
term of the lease to an amount equal to the equipment's estimated residual value
at lease termination.
Initial direct costs:
Initial direct costs are capitalized and amortized over the terms of the related
leases.
Investment in leveraged leases:
Leases which are financed principally with non-recourse debt at lease inception
and which meet certain other criteria are accounted for as leveraged leases.
Leveraged lease contracts receivable are stated net of the related non-recourse
debt service (which includes unpaid principal and aggregate interest on such
debt) plus estimated residual values. Unearned income represents the excess of
anticipated cash flows (after taking into account the related debt service and
residual values) over the investment in the lease and is amortized using a
constant rate of return applied to the net investment when such investment is
positive.
F-16
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
1. Summary of significant accounting policies (continued):
Residual interests:
Residual interests represent the present value of ATEL's proportionate interest
(calculated at the time of the transaction) in the estimated residual value of
equipment originally owned by ATEL and subsequently sold to a third party where
ATEL retains an unconditional right to participate in such residual value upon
the expiration of the related lease. This retained residual value is presented
as an asset until the ultimate liquidation of the underlying equipment and
realization of the participation.
Acquisition fees:
Acquisition fees received from the affiliated partnerships on equipment
purchased prior to 1995, generally 3.5% to 4.75% of the affiliated partnerships'
equipment cost, were deferred and are recognized as income as services are
provided in connection with the partnerships' acquisition of equipment and
leases. It is estimated that these services will be rendered over a period of
seven years. Beginning in 1995, acquisition services are performed by an
affiliate.
Property and equipment:
Property and equipment is stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the respective assets,
which range from three to seven years.
Leasehold improvements:
Leasehold improvements are stated at cost. Amortization is calculated using the
straight-line method over the lives of the related leases or estimated lives,
whichever is shorter.
Cash surrender value of life insurance
ATEL purchased two single premium key-man life insurance policies to cover its
two officer-shareholders. ATEL is a beneficiary under the contracts for $300,000
of cash surrender values and death benefits. The spouses are the beneficiaries
for amounts above $300,000.
Income taxes:
For federal and state income tax reporting, ATEL's taxable income is included in
the returns filed by its parent. For financial reporting, ATEL's income tax
provision is calculated on a separate return basis. The current portion is
included in the intercompany account with the parent. Deferred taxes are
calculated using the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Credit risk:
Financial instruments which potentially subject the Company to concentrations of
credit risk include cash and cash equivalents. The Company places its cash
deposits and temporary cash investments with creditworthy, high quality
financial institutions. The concentration of such deposits and temporary cash
investments is not deemed to create a significant risk to the Company.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-17
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
2. Investments in leases:
Investments in leases consist of the following:
Equipment on operating leases, net of accumulated depreciation $2,872,550
Residual interests 682,227
Assets held for sale or lease 3,523
Investment in leveraged leases 256,533
----------------
$3,814,833
================
Operating leases:
Equipment on operating leases consists of the following:
Electrical cogeneration plant (estimated useful life, 20 years) $2,565,815
Concrete hauling trucks (estimated useful life, 7 years) 1,793,410
----------------
4,359,225
Less accumulated depreciation (1,486,675)
----------------
Equipment on operating leases, net of accumulated depreciation $2,872,550
================
At July 31, 1997, the aggregate amounts of future minimum lease payments
receivable from operating leases are as follows:
Year ending July 31,
1998 $641,295
1999 286,590
2000 290,999
2001 290,999
2002 290,999
Thereafter 24,250
----------------
$1,825,132
================
Leveraged leases:
ATEL participates in leveraged lease transactions in which the cost of assets
leased to others is financed primarily by loans from financial institutions but
ownership of property is retained by ATEL. The lessees' rental obligations are
assigned to the financial institutions and the related property is pledged as
collateral for the loans and are without deficiency liability (non-recourse)
against ATEL. Equipment under leveraged leases includes coal mining and
processing equipment and over-the-road tractors and trailers. The net investment
in leveraged leases is as follows:
Aggregate rentals receivable $2,579,317
Aggregate principal and interest payable on non-recourse loans (2,579,317)
Estimated residual value of leased assets 381,000
Less unearned income (124,467)
----------------
Investment in leveraged leases 256,533
Deferred tax liability, included in the accompanying balance
sheet (322,747)
----------------
Net investment in leveraged leases ($66,214)
================
F-18
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
2. Investments in leases (continued):
General lease terms and concentration of credit risk:
Operating and leveraged leases generally provide that the lessee will be
responsible for maintenance, insurance and similar costs (referred to as net
leases).
ATEL leases equipment to lessees in diversified industries. As of July 31, 1997,
equipment representing 19% and 13% of total assets was leased to lessees in the
machine tool and heavy construction industries, respectively. Leases are subject
to the Company's credit committee review. The leases provide for the
repossession of the equipment in the event of default.
3. Non-recourse debt:
Non-recourse debt consists of the following:
Note payable to financial institution, interest at 9.6094% per
year, concrete hauling trucks and related leases pledged as
collateral, due in various installments through 2002 $1,112,412
Note payable to financial institution, interest at 10.87% per
year, cogeneration plant and related lease pledged as
collateral, due in quarterly installments of $100,801 through
July 1998 379,039
----------------
$1,491,451
================
The net book value of assets financed with non-recourse debt was $2,872,550 at
July 31, 1997.
Future minimum payments on non-recourse debt are as follows:
Principal Interest Total
Year ending July 31, Payments Payments Payments
1998 $516,173 $125,122 $641,295
1999 201,397 85,193 286,590
2000 226,437 64,562 290,999
2001 249,180 41,819 290,999
2002 274,207 16,792 290,999
Thereafter 24,057 193 24,250
---------------- ---------------- ----------------
$1,491,451 $333,681 $1,825,132
================ ================ ================
F-19
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
4. Income taxes:
Deferred income taxes as of July 31, 1997 reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. At
July 31, 1997, deferred tax assets total $131,050 and deferred tax liabilities
total $1,843,707.
Deferred income taxes arise primarily from differences in the reporting of lease
income, depreciation, acquisition fees and valuation accounts for tax purposes
as compared to their treatment for financial reporting purposes.
5. Line of credit:
ATEL participates with ACG, certain other subsidiaries of ACG and with
certain affiliated partnerships, in a $90,000,000 line of credit facility with a
lender to be used in connection with warehousing lease transactions. The line
expires October 28, 1997. Included in this line of credit is a $1,000,000
facility available for operations and working capital. At July 31, 1997, ATEL
had no borrowings related to the line of credit. At July 31, 1997, $1,000,000
was borrowed under a separate small ticket lease facility by another subsidiary
of ACG relating to lease transactions. Interest is at the bank's prime rate (8
1/2% at July 31, 1997) or at LIBOR plus 1 1/2% (7.14% at July 31, 1997).
These facilities, when used, are collateralized by (i) leases and equipment
owned by the specific borrower and financed by the lines and (ii) all other
assets owned by the borrower except equipment, lease receipts and residual
values specifically pledged to other equipment funding sources. ATEL's
borrowings under the facility are guaranteed by ACG and/or its shareholders.
In separate facilities under the line, the affiliated partnerships have borrowed
$8,000,000 as July 31, 1997. These funds are collateralized by the assets owned
by the affiliated partnerships, except equipment, lease receipts and residual
values specifically pledged to other equipment funding sources.
6. Commitments and contingencies:
Office lease:
ATEL occupies office space under operating leases expiring through December
2002. Future minimum payments for fiscal year periods under the leases are
$526,279 in 1998, $536,162 in 1999, $550,001 in 2000, $559,886 in 2001 and
$233,286 in 2002.
7. Reimbursements of operating costs:
The Limited Partnership Agreements of the affiliated partnerships allow for the
reimbursement of costs incurred by ACG and its subsidiaries in providing
administrative services to the Partnerships, of which a portion of such amounts
is allocated to ATEL. Administrative services provided include partnership
accounting, investor relations, legal counsel and lease and equipment
documentation. ACG and its subsidiaries are not reimbursed for services where
they are entitled to receive a separate fee as compensation for such services,
such as acquiring and overseeing the management of equipment. Reimbursable
operating costs incurred by ACG and its subsidiaries are allocated to the
Partnerships based upon actual time incurred by employees working on partnership
business and an allocation of rent and other costs based on utilization studies.
Accrual and payment of reimbursable costs and management fees due from ATEL Cash
Distribution Fund were voluntarily suspended in May 1994. As of July 31, 1997,
$1,798,472 remained outstanding from affiliated partnerships for reimbursable
operating and syndication costs and management fees.
F-20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Number Exhibits
1.1 Form of Selling Agreement - Previously filed in Registration
Statement dated July 25, 1996
1.2 Form of Selected Dealers Agreement - Previously filed in
Registration Statement dated July 25, 1996
3.1 Amended and Restated Limited Partnership Agreement (incorporated
by reference to Exhibit B to Prospectus)
5.1 Opinion regarding legality - Previously filed in Registration
Statement dated July 25, 1996
8.1 Opinion regarding tax matters - Previously filed in Registration
Statement dated July 25, 1996
10.1 Form of Escrow Agreement - Previously filed in Pre-effective
Amendment No. 1 dated October 10, 1996
23.1 Consent of Ernst & Young - Previously filed in Pre-effective
Amendment No. 2 dated November 15, 1996
23.2 Consent of Derenthal & Dannhauser - Previously filed as part of
Exhibit 5.1 in Pre-Effective Amendment No.3 dated
November 27, 1996
23.3 Consent of Derenthal & Dannhauser - Previously filed as part of
Exhibit 5.1 in Pre-Effective Amendment No.3 dated
November 27, 1996
23.4 Consent of Ernst & Young - Previously filed in Post-Effective
Amendment No. 1 dated September 19, 1997
23.5 Consent of Ernst & Young
24.1 Powers of Attorney are set forth in Part II of the
Registration Statement on Form S-1 filed July 25, 1996 (File No.
333-8879) and are hereby incorporated herein by this reference.
d\atel7\part1.edg
<PAGE>
ITEM 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
baing made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this Registration
Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4) That all post-effective amendments will comply with the
applicable forms, rules and regulations of the Commission in effect at the
time such post-effective amendments are filed.
(5) To send to each limited partner at least on an annual
basis a detailed statement of any transactions with the General Partner or its
affiliates, and of fees, commissions, compensation and other benefits paid,
or accrued to the General Partner or its affiliates for the fiscal year
completed, showing the amount paid or accrued to each recipient and the services
performed.
(6) To send to the limited partners, within 45 days after
the close of each quarterly fiscal period, the information specified by the
Form 10-Q, if such report is required to be filed with the Commission.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to the General Partner of the Registrant (or
controlling persons of the General Partner or of the Registrant) pursuant to the
provisions described under Item 14 above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by the General Partner or controlling
person of the Registrant in the successful defense of any action suit or
proceeding) is asserted by any such General Partner or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
atel7-2/S1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California, on the 23rd day of October, 1997.
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
By: ATEL Financial Corporation,
a California corporation,
General Partner
By: /s/ A. J. BATT*
A. J. Batt
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
A. J. BATT* Principal executive October 23, 1997
A. J. Batt officer of
Registrant; chief
executive officer
and director of
ATEL Financial
Corporation
/s/ Dean L. Cash Director and October 23, 1997
Dean L. Cash Executive Vice
President of ATEL
Financial Corporation
F. RANDALL BIGONY* Principal financial October 23, 1997
F. Randall Bigony officer and principal
accounting officer of
Registrant; chief
financial officer and
chief accounting officer
of ATEL Financial
Corporation
* /s/ Dean L. Cash
Dean L. Cash, as attorney
in fact for such person
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
1.1 Form of Selling Agreement Previously filed in
Registration Statement
dated July 25, 1996
1.2 Form of Selected Dealers Agreement Previously filed in
Registration Statement
dated July 25, 1996
3.1 Amended and Restated
Limited Partnership Agreement
(incorporated by reference to
Exhibit B to Prospectus)
5.1 Opinion regarding legality Previously filed in
Registration Statement
dated July 25, 1996
8.1 Opinion regarding tax matters Previously filed in
Registration Statement
dated July 25, 1996
10.1 Form of Escrow Agreement Previously filed in
Pre-effective Amendment No.
1 dated October 10, 1996
23.1 Consent of Ernst & Young Previously filed in
Pre-effective Amendment No.
2 dated November 15, 1996
23.2 Consent of Derenthal & Dannhauser Previously filed as part of
Exhibit 5.1 in Pre-Effective
Amendment No. 3 dated
November 27, 1996
23.3 Consent of Derenthal & Dannhauser Previously filed as part of
Exhibit 5.1 in Pre-Effective
Amendment No. 3 dated
November 27, 1996
23.4 Consent of Ernst & Young Previously filed in Post-
Effective Amendment No. 1
dated September 19, 1997
23.5 Consent of Ernst & Young
24.1 Powers of Attorney were set forth
in Part II of the Registration
Statement on Form S-1 filed July 25,
1996 (File No. 333-8879) and are
incorporated herein by this reference
(b) Financial Statements Included in the Prospectus.
See the index to "Financial Statements" in Supplement No. 1 at
Page F-1 for a list of the financial statements included herein,
which list is incoporated herein by reference.
<PAGE>
EXHIBIT E
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated September 19, 1997 and February 7, 1997, with
respect to the consolidated balance sheet of ATEL Financial Corporation at July
31, 1997 and the financial statements of ATEL Capital Equipment Fund VII L.P. at
December 31, 1996 and for the period from May 17, 1996 (inception) through
December 31, 1996, respectively, included in the Registration Statement (Form
S-1) and related Prospectus of ATEL Capital Equipment Fund VII, L.P. for the
registration of 15,000,000 units of limited partnership interests.
San Francisco, California
October 20, 1997 Ernst & Young LLP
d\atel7\consent
