<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1997
REGISTRATION NO. 333-38717
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ICON HOLDINGS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7359 04-3314510
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
600 MAMARONECK AVENUE
HARRISON, NEW YORK 10528-1632
914/698-0600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
BEAUFORT J. B. CLARKE
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ICON HOLDINGS CORP.
600 MAMARONECK AVENUE
HARRISON, NEW YORK 10528-1632
914/698-0600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ADOLFO R. GARCIA, ESQ. JOHN L. LEE, ESQ. MICHAEL T. EDSALL, ESQ.
DAVID A. CIFRINO, ESQ. SENIOR VICE PRESIDENT & LANCE C. BALK, ESQ.
MCDERMOTT, WILL & EMERY GENERAL COUNSEL KIRKLAND & ELLIS
75 STATE STREET ICON HOLDINGS CORP. 655 FIFTEENTH STREET,
BOSTON, MASSACHUSETTS 31 MILK STREET, SUITE N.W.
02109 1111 WASHINGTON, D.C. 20005
617/345-5000 BOSTON, MASSACHUSETTS 202/879-5000
02109
617/338-4292
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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]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] .
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] .
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] .
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box. [X]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: (i) one to be
used in connection with an offering by the Company of newly issued shares of
its Common Stock (the "Company Prospectus") and (ii) one to be used in
connection with the secondary sale from time to time (commencing not earlier
than one year from the date of the Company Prospectus) of up to 924,314 shares
of Common Stock by Friedman, Billings, Ramsey & Co., Inc., the Representative
of the Underwriters, which shares the Representative may acquire upon exercise
of warrants to be granted by the Company to the Representative upon the
consummation of the Offering (the "Selling Security Holders' Prospectus"). The
Company Prospectus and the Selling Security Holders' Prospectus will be
identical in all respects except for the alternate pages for the Selling
Security Holders' Prospectus which are included herein after the final page of
the Company Prospectus and are labelled "Alternate Page for Selling Security
Holders' Prospectus," and except as the Selling Security Holders' Prospectus
may be updated from time to time to reflect current financial results and
business developments. Final forms of each Prospectus and any further
amendments or supplements thereto will be filed with the Securities and
Exchange Commission under Rule 424(b).
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 17, 1997
PROSPECTUS
12,500,000 Shares
ICON HOLDINGS CORP.
Common Stock
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All of the shares of common stock, $.01 par value per share (the "Common
Stock"), being offered hereby (the "Offering") are being sold by ICON Holdings
Corp. (the "Company" or "ICON Holdings"). Prior to the Offering, there has been
no public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price per share will be between $ and
$ . See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. Application has been made for
quotation of the Common Stock on The Nasdaq National Market under the symbol
"ICOH."
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
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Total(3)................................... $ $ $
</TABLE>
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(1) Does not reflect additional compensation payable by the Company in the form
of warrants entitling Friedman, Billings, Ramsey & Co., Inc., the
representative of the Underwriters (the "Representative"), to purchase,
during the four year period commencing on the first anniversary of the
completion of the Offering, up to 830,564 shares of Common Stock (924,314
shares if the Underwriters' over-allotment option is exercised in full) at
an exercise price equal to the initial public offering price. The Company
has agreed to indemnify the Underwriters against certain liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be
$1,000,000. See "Underwriting."
(3) The Company has granted to the Underwriters an option, exercisable within
30 days of the date of this Prospectus, to purchase up to an aggregate of
1,875,000 additional shares of Common Stock at the price to public less
underwriting discounts and commissions for the purpose of covering over-
allotments, if any. If the Underwriters exercise such option in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively. See
"Underwriting."
----------
The shares of Common Stock offered by this Prospectus are being offered by
the Underwriters, subject to prior sale, when, as and if accepted by the
Underwriters and subject to the Underwriters' right to reject orders, in whole
or in part, and to certain other conditions. It is expected that delivery of
the shares to the Underwriters will be made at the office of the Underwriters
on or about , 1998 against payment therefor in immediately available
funds.
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FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
The date of this Prospectus is , 1998
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, with respect to the Common Stock offered hereby. This Prospectus
omits certain information contained in the Registration Statement, and
reference is made to the Registration Statement, and the exhibits and
schedules thereto, for further information with respect to the Company and the
Common Stock offered hereby. Statements contained in this Prospectus as to the
contents of any contract, agreement or other document filed as an exhibit to
the Registration Statement are not necessarily complete, and in each instance,
reference is made to the exhibit for a more complete description of the matter
involved, each such statement being qualified in its entirety by such
reference. The Registration Statement may be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission maintained at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such materials may be obtained from the Public Reference
Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, registration
statements and certain other filings made with the Commission through its
Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system are
publicly available through the Commission's site on the Internet's World Wide
Web, located at http://www.sec.gov. The Registration Statement, including all
exhibits thereto and amendments thereof, has been filed with the Commission
through EDGAR.
Forward-looking statements in this Prospectus, which can be identified by
the use of forward-looking terminology such as "may," "will," "expect,"
"intend," "plans," "anticipate," "estimate" or "continue" or the negative
thereof or other variations thereon or comparable terminology, are subject to
risks and uncertainties which are described in the Risk Factors section
commencing on page 10 and elsewhere in this Prospectus. The Company's actual
results could differ materially from those anticipated in such forward-looking
statements due to such risks and uncertainties.
The Company intends to furnish to its stockholders annual reports containing
audited financial statements and an opinion thereon expressed by its
independent auditors, and quarterly reports containing unaudited interim
financial information for the first three quarters of each year.
Except where the context indicates otherwise, the term "Company" as used
herein refers to ICON Holdings together with its subsidiaries.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Each
prospective investor should carefully consider the information set forth under
the heading "Risk Factors." Unless otherwise indicated herein, the information
in this Prospectus (i) gives effect to a 8,000-for-1 stock split in the form of
a dividend of the Company's Common Stock, effective as of the effectiveness of
the Offering (the "Stock Split"), (ii) gives effect to the redemption of
4,000,000 shares of Common Stock by the Company simultaneously with the
consummation of the Offering, (iii) gives effect to the redemption of 1,000
shares of Class B Common Stock by the Company simultaneously with consummation
of the Offering, (iv) gives effect to the conversion of $1,112,760 (as of
September 30, 1997) of indebtedness owed to a related party into 111,276 shares
(assuming an initial public offering price of $10.00 per share) of Common
Stock, and (v) assumes no exercise of the Underwriters' over-allotment option.
See "Description of Capital Stock" and "Certain Transactions." The term "fiscal
year" as used herein refers to the fiscal year of the Company ending on
March 31 of such year.
THE COMPANY
GENERAL
The Company is a specialty finance company engaged in equipment leasing and
financing. The Company intends, through its ICON Leasing subsidiary, to use the
proceeds of the Offering primarily to acquire, hold for investment and remarket
large ticket Seasoned Leases. A "large ticket" equipment lease involves
equipment with an original equipment cost in excess of $1 million, and
typically in excess of $10 million as in the case of aircraft and marine
vessels. An equipment lease is considered a "Seasoned Lease" by the Company
when its remaining term is short enough (often the last third of the lease
term) that (i) the Company can confidently estimate the likely residual value
of the underlying equipment at lease expiry, and (ii) most of the Company's
total return from such lease is expected to be derived from the realization of
such residual value at lease expiry by selling or re-leasing such equipment to
the lessee or to a third party. The Company believes that currently there are
relatively few participants in the market for large ticket Seasoned Leases and,
consequently, opportunities exist for experienced participants to achieve
attractive returns. To date, the only acquisitions of Seasoned Leases by the
Company have been by its ICON Capital subsidiary on behalf of limited
partnerships (the "ICON Partnerships") which ICON Capital sponsors and manages.
Since August 1996, when current management assumed control, ICON Capital has
invested, or committed to invest, more than $207 million (as measured by gross
purchase price) on behalf of the ICON Partnerships in Seasoned Lease
transactions such as aircraft leased to Airbus Industries, US Airways, Inc.,
Continental Airlines, Inc. and Federal Express Corporation; marine vessels
leased to Occidental Petroleum Corporation and SEACOR-Smit, Inc.; tractor-
trailer equipment leased to Wal-Mart Stores, Inc.; drilling rig equipment
leased to Rowan Cos., Inc.; and telecommunications equipment leased to America
Online, Inc. and Texas Utilities Services, Inc. The Offering will enable the
Company to pursue Seasoned Lease acquisition opportunities for its own benefit
rather than exclusively on behalf of the ICON Partnerships. See "Business--
Recent Transactions."
The Company's ICON Capital subsidiary is engaged in acquiring and managing
for the benefit of the ICON Partnerships (i) large ticket Seasoned Leases, and
(ii) to a lesser degree, "small ticket" leases (those involving equipment with
an original equipment cost less than $1 million, and typically less than
$150,000 as in the case of computers or office equipment). From the formation
of the first ICON Partnership in 1988 to September 30, 1997, ICON Capital has
raised funds for seven ICON Partnerships, the proceeds of which have been
invested in more than $843 million of equipment (as measured by gross purchase
price) subject to lease. Following the acquisition of ICON Capital by the
Company in 1996, the ICON Partnerships have concentrated on acquiring large
ticket Seasoned Leases. The Company intends to sponsor an eighth ICON
Partnership after the subscription period for the seventh
3
<PAGE>
ICON Partnership ends in late 1998. After the Offering, the Company, through
its ICON Funding Subsidiary, will also acquire and originate finance-type
leases of, and loans secured by, small ticket equipment (collectively, "small
ticket financing transactions") for its own benefit and for that of the ICON
Partnerships. Prior to the Offering, ICON Funding engaged in small ticket
financing transactions only for the benefit of the ICON Partnerships. ICON
Funding intends to utilize warehouse finance facilities to fund future small
ticket financing transactions, which will be refinanced through securitizations
or other structured finance transactions. While the Company expects after the
Offering that the majority of its revenues and earnings will be derived from
the large ticket Seasoned Lease acquisition and remarketing activities of ICON
Leasing, it anticipates that ICON Capital and ICON Funding will continue to
make material contributions to the Company's results of operations. See
"Business--Current Businesses of the Company."
MANAGEMENT
The Company's three most senior executives, none of whom had any relationship
with the Company prior to their participation in the acquisition of ICON
Capital in 1996, have extensive experience in equipment lease financing and
remarketing in general and Seasoned Lease acquisitions in particular. The
Company believes that these executives, who replaced the former management of
ICON Capital, have a record of success in the acquisition and remarketing of
Seasoned Leases. Beaufort J. B. Clarke, the Chairman and Chief Executive
Officer of the Company, has more than twenty years of senior management
experience in the leasing industry, including chief executive and other senior
executive positions at Griffin Equity Partners, Inc. and Gemini Financial
Holdings, Inc., both equipment leasing companies engaged in the acquisition of
Seasoned Leases. Mr. Clarke was a Vice President and one of the founders of
Encore International, Inc. (now known as AT&T Systems Leasing) prior to its
acquisition by AT&T Capital Corporation. Paul B. Weiss and Thomas W. Martin,
the Executive Vice Presidents of the Company, have approximately 10 and 15
years of experience in the industry, respectively. Each worked with Mr. Clarke
at Griffin Equity Partners and Gemini Financial Holdings, where they and Mr.
Clarke specialized in Seasoned Lease transactions, in addition to serving in
other positions in the industry. These three individuals and the four senior
vice presidents (three of whom have joined the Company since August 1996) of
the Company have approximately 85 years of combined experience in the equipment
leasing industry. See "Management."
INDUSTRY OVERVIEW
The Equipment Leasing Association of America ("ELA"), based on U.S.
Department of Commerce data, estimates that in the United States, approximately
$169 billion of the estimated $566 billion spent on productive capital assets
in 1996 was financed by means of leasing. ELA estimates that 80% of all U.S.
businesses use leasing or financing to acquire equipment. The size of the
market for Seasoned Leases is primarily a function of the number of leases
entered into in the past, adjusted downward for leases that have terminated.
ELA estimates that from 1987 through the end of 1997, equipment leasing volume
in the United States will be approximately $1.4 trillion. Sellers of Seasoned
Leases are believed to have one or more of the following objectives in seeking
and consummating such a sale: (i) realization of book profit by selling at a
premium to book value because the fair market value of the equipment is above
such book value; (ii) removal of the actual or perceived risk of residual loss
upon return of equipment by a user at lease expiry; (iii) removal of actual or
perceived credit risk from the seller's balance sheet; (iv) repositioning of
the seller's tax-motivated investment portfolio resulting from a change in tax
law, change in the seller's profit base or outlook, or the seller becoming
subject to alternative minimum tax; and (v) freeing up capital for investment
in core business activities (which may include making new lease investments in
the case of leasing company sellers).
The Company believes that the relative lack of competition in the market for
large ticket Seasoned Leases is due to the fact that Seasoned Lease
transactions often fail to meet many leasing companies' primary objectives.
Many large equipment leasing companies are subsidiaries of financial
institutions that have tax deferral
4
<PAGE>
objectives and are adverse to taking substantial equipment residual exposure.
Many new equipment leases are highly structured and have a very long effective
term to maximize the economic benefit of tax deferral and minimize residual
value risk. In particular, most new equipment leases are designed to allow the
initial lessor to recover most or all of its investment from contractual rent
payments to be received under the lease. The Company believes that most large
ticket Seasoned Lease acquisitions are completed in the final one-third of the
term of an equipment lease, when the fair value of the equipment subject to
lease is more likely to exceed the seller's book value. When acquired at a
relatively late stage in the lease, term, these large ticket Seasoned Leases
have fewer tax deferral attributes (due to the short term) and more residual
value exposure (because only a small amount of the secondary market purchaser's
investment will be repaid from the remaining contractual rents) than new large
ticket leasing deals.
STRATEGY
The Company intends to focus principally on the acquisition, management and
remarketing of large ticket Seasoned Leases to provide attractive total returns
consistent with prudent risk management. The Company will also pursue related
equipment lease opportunities that complement its large ticket Seasoned Lease
acquisition activity. The Company will employ the following strategies to
achieve its objectives:
Capitalize on Inefficiencies in the Market for Seasoned Leases. No formal
market exists for prospective sellers of large ticket Seasoned Leases. Compared
to the market for new equipment leasing, there are relatively few participants
in the secondary market focusing principally on large ticket Seasoned Lease
transactions, and even fewer considering transactions involving as many
different equipment types as does the Company. The Company believes most
companies engaged in equipment leasing have not actively pursued Seasoned Lease
transactions primarily because these transactions may not meet, or may conflict
with, the principal objectives of such companies (primarily to obtain tax
deferral while avoiding residual value risk). As a result of this relative lack
of competition, the Company has been and expects to continue to be able to find
large ticket Seasoned Lease acquisition opportunities on attractive terms.
Utilize the Experience and Resources of Management to Source Seasoned Lease
Opportunities. The Company believes that the experience and creativity of
senior management and its existing network of referral sources will provide the
Company with a steady flow of Seasoned Lease acquisition opportunities.
Potential sellers include companies that are no longer making lease
investments; public companies that may from time to time seek out accounting
gains to contribute to reported earnings; companies that could benefit from
recovering and redeploying invested capital; banks and other financial
institutions that have been parties to consolidation transactions and seek to
dispose of assets that are not consistent with the surviving company's
objectives; and companies that desire to limit residual value risk from leases
held. The Company's willingness to work with a potential seller to identify its
objectives and to creatively develop transaction structures, such as residual
value option transactions and residual sharing arrangements, to meet that
seller's objectives is in part responsible for the Company's success in
sourcing Seasoned Lease acquisition opportunities. The Company also has an
extensive referral network of leasing companies, leasing brokers, investment
bankers, attorneys, lenders and appraisers that are expected to continue to
refer Seasoned Lease acquisition opportunities to the Company.
Apply a Disciplined, Value-Based Approach to Lease Investments. The Company
uses a disciplined, value-based approach to evaluate Seasoned Lease acquisition
opportunities in an effort to maximize return while minimizing credit and
residual value risk. The Company generally targets transactions from which it
believes it can achieve a total rate of return of at least 20% per annum,
compounded monthly. In evaluating a transaction, the Company considers the type
of equipment involved, the creditworthiness of the lessee, the provisions of
the lease contract (including the equipment maintenance and return
requirements), the time remaining to lease expiry, and management's experience
in remarketing such equipment.
5
<PAGE>
The Company engages nationally recognized independent appraisers to assist
it in determining the value likely to be realized from the leased equipment at
lease expiry. In most transactions, the Company will seek out leasing
opportunities where the remaining lease term is greater than two years and, on
expiry of the lease, at least one-third of the economic useful life of the
equipment is likely to remain, based on the equipment age or utilization
history. To maximize its remarketing options (and its returns), the Company
seeks to avoid investing in equipment that may become technologically obsolete
or otherwise of limited utility (perhaps from excessive wear and tear). Also,
the Company generally enters into leasing transactions involving equipment
types that can be feasibly moved to other locations or are considered essential
to the operations of the lessee and either impossible to replace or only
replaceable at a significantly higher cost than its fair market value. The
Company believes that there is a substantial pool of such leases, many of which
involve equipment such as commercial aircraft, marine vessels, and other
transportation and telecommunications equipment. The creditworthiness of a
lessee is also important because lessees with inadequate financial resources
may be unable to afford to comply with the maintenance- and return-condition
provisions of the lease contract, thus exposing the lessor to costs associated
with repair and return of equipment. A large percentage of the Company's recent
acquisitions on behalf of the ICON Partnerships has consisted of the purchase
of large ticket Seasoned Leases where the lessee is rated investment grade (or
is believed equivalent). Large ticket transactions of this type are expected to
represent a majority of the Company's future Seasoned Lease acquisitions.
Proactively Manage Lease Investments to Maximize Total Returns. The Company
pursues numerous alternatives to maximize realization of residual values
through the sale or re-lease of the equipment to the lessee or to a third
party. In many cases, the amount of such realization may depend on the extent
to which the Company elects to enforce its rights under the lease. In general,
the Company also will hold its lease investments until maturity, unless various
factors enable the Company to achieve what it believes would be a superior
result from disposing of the asset prior to maturity. Senior management and the
Company have also had success in working with lessees to restructure leases to
achieve greater profitability, while achieving other objectives of the lessee
such as lowering periodic payments in exchange for a longer lease term, which
could benefit the Company to the extent that the present value of the revised
payment schedule is greater than the original payment schedule.
Pursue Related Opportunities Complementing Seasoned Lease Acquisitions. To
complement its large ticket Seasoned Lease activity, the Company intends to
expand its volume of small ticket financing transactions by adding sales and
marketing people to expand its referral network, and placing additional
emphasis on originating new lease opportunities by creating vendor programs.
The Company also may occasionally encounter opportunities to acquire companies
that operate in the large ticket or small ticket leasing business. These
companies may have portfolios of equipment subject to lease or relationships
that result in an additional volume of leasing or financing opportunities. To
the extent that such acquisitions can be completed at reasonable cost to the
Company and can immediately or over time add to the Company's portfolio of
lease investments, the Company will consider such transactions. In addition,
the Company may pursue an expanded presence in Europe. The Company believes
that many European markets have less competition for attractive equipment
leasing transactions. In the United Kingdom, for example, recent accounting and
regulatory changes have, in the opinion of the Company, made the leasing of
equipment a more attractive option relative to purchasing than it had been
before such changes. To the extent that such international equipment leasing
transactions can be structured to mitigate or remove certain risks, such as
currency exchange, protecting a lessor's interest through equipment lien
recordation, and taking advantage of beneficial local laws, the Company
believes that the leasing industry in Europe may present significant
opportunities.
----------------
ICON Holdings is a Delaware corporation incorporated in May 1996 for the
purpose of acquiring ICON Capital Corp., and an affiliate thereof. The
Company's principal executive offices are located at 600 Mamaroneck Avenue,
Harrison, New York 10528 and its telephone number at such address is
(914) 698-0600. See "The Company."
6
<PAGE>
THE OFFERING
Common Stock offered by the
Company......................... 12,500,000 Shares
Common Stock to be outstanding
after the Offering............. 16,611,276 Shares (1)(2)(3)
Use of Proceeds.................
To acquire Seasoned Leases and to enter into
other equipment financing transactions
(approximately $100 million of the net
proceeds), to redeem 4,000,000 shares of
Common Stock for $7.2 million and other
consideration, to repay indebtedness of
approximately $4.8 million, and for general
corporate purposes, including, but not
limited to, working capital. See "Use of
Proceeds" and "Certain Transactions."
Proposed Nasdaq National Market
symbol.......................... ICOH
- --------
(1) Does not include: (i) 2,000,000 shares of Common Stock reserved for
issuance under the Company's 1997 Stock Option Plan, of which options to
purchase approximately 1,200,000 shares of Common Stock are expected to be
granted upon consummation of the Offering at an exercise price per share
equal to the initial public offering price; (ii) 200,000 shares of Common
Stock reserved for issuance under the Company's 1997 Non-Employee Directors
Stock Plan, of which options to purchase 30,000 shares of Common Stock are
expected to be granted upon the consummation of the Offering at an exercise
price per share equal to the initial public offering price; (iii) 498,338
shares of Common Stock issuable under warrants to be granted to a related
party upon the consummation of the Offering at an exercise price per share
equal to the initial public offering price; and (iv) 830,564 shares of
Common Stock subject to warrants to be granted to the Representative of the
Underwriters at an exercise price per share equal to the initial public
offering price. See "Executive Compensation--1997 Stock Option Plan," "--
1997 Non-Employee Directors Plan," "--Employment and Severance Agreements,"
"Certain Transactions" and "Underwriting."
(2) Does not include 4,000,000 shares of Common Stock to be redeemed by the
Company simultaneously with the consummation of the Offering. See "Certain
Transactions."
(3) Includes 111,276 shares (assuming an initial public offering price of
$10.00 per share) of Common Stock to be issued to a related party upon
conversion of $1,112,760 (as of September 30, 1997) of indebtedness.
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition, certain statements contained herein expressing the
beliefs and expectations of the Company regarding its future results or
performance are forward-looking statements that involve a number of risks and
uncertainties. The Company's actual results could differ significantly from the
results discussed in such forward-looking statements. For a discussion of
important factors that could cause or contribute to such differences and other
risks and uncertainties which relate to an investment in the shares of Common
Stock offered hereby, see "Risk Factors" beginning on page 10.
7
<PAGE>
SUMMARY CONSOLIDATED AND COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary consolidated and combined financial data should be read
in conjunction with the Consolidated and Combined Financial Statements and the
Notes thereto included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
consolidated and combined financial data set forth below as of and for the
fiscal years ended March 31, 1997, 1996 and 1995 have been derived from the
consolidated and combined audited financial statements of the Company. The
consolidated and combined financial data as of and for the three and six months
ended September 30, 1997 and September 30, 1996 are unaudited, but have been
prepared on the same basis as the audited financial statements and, in the
opinion of management, reflect all adjustments, which consist only of normal
recurring adjustments, necessary for the fair presentation of the financial
position and results of operations for these periods. Consolidated and combined
operating results for the three and six months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the entire year.
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
YEAR ENDED MARCH 31, ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- ------------------- -------------------
1995 1996 1997(1) 1996 1997(1) 1996 1997(1)
------ ------- ------- ------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues:
Fees--managed
partnerships.......... $8,437 $ 9,376 $12,180 $ 5,661 $ 5,315 $ 3,479 $ 3,084
Rental income from
operating lease....... 661 1,010 1,542 1,028 -- 514 --
Interest income and
other income.......... 37 59 120 23 82 15 28
------ ------- ------- ------- ----------- ------- -----------
Total revenues....... 9,135 10,445 13,842 6,712 5,397 4,008 3,112
------ ------- ------- ------- ----------- ------- -----------
Expenses:
Selling, general, and
administrative........ 7,190 8,495 8,208 3,962 4,421 1,938 2,215
Depreciation and
amortization.......... 1,030 1,455 2,098 1,162 374 606 146
Interest expense....... 389 361 809 277 354 183 152
Amortization of
goodwill.............. -- -- 574 95 457 95 229
Other.................. 225 -- -- -- -- -- --
------ ------- ------- ------- ----------- ------- -----------
Total expenses....... 8,834 10,311 11,689 5,496 5,606 2,822 2,742
------ ------- ------- ------- ----------- ------- -----------
Income (loss) before
provision for income
taxes and
extraordinary item.... 301 134 2,153 1,216 (209) 1,186 370
Provision for income
taxes................. 138 75 1,128 605 50 605 191
------ ------- ------- ------- ----------- ------- -----------
Income (loss) before
extraordinary item.... 163 59 1,025 611 (259) 581 179
Extraordinary item--
gain on early
extinguishment of debt
(net of applicable
income taxes of $49).. -- -- -- -- 73 -- --
------ ------- ------- ------- ----------- ------- -----------
Net income (loss)...... $ 163 $ 59 $ 1,025 $ 611 $ (186) $ 581 $ 179
====== ======= ======= ======= =========== ======= ===========
Pro forma weighted
average number of
shares of Common Stock
and equivalents
outstanding (2)....... -- -- -- -- 17,940,178 -- 17,940,178
Pro forma earnings
(loss) per share of
Common Stock and
equivalents
outstanding (2)....... -- -- -- -- $ (0.01) -- $ 0.01
(Continued)
</TABLE>
8
<PAGE>
SUMMARY CONSOLIDATED AND COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
--------------------- SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997(1) 1997(1) 1997(3)
(Continued) ------ ------ ------- ------------- -------------
(UNAUDITED) (UNAUDITED)
(ACTUAL) (AS ADJUSTED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets:
Cash................... $ 391 $ 185 $ 747 $ 157 $103,547
Receivables from
managed
partnerships.......... 1,915 2,023 1,324 1,360 1,360
Prepaid and other
assets................ 552 790 580 1,104 1,104
Fixes assets and
leasehold
improvements, net..... 952 781 752 686 686
Goodwill, net.......... -- -- 8,270 7,813 7,813
Investment in
operating lease,
net................... 4,913 4,261 -- -- --
------ ------ ------- ------- --------
Total assets......... $8,723 $8,040 $11,673 $11,120 $114,510
====== ====== ======= ======= ========
Liabilities and
Stockholders' Equity:
Accounts payable and
accrued expenses...... $ 517 $ 872 $ 1,648 $ 1,203 $ 513
Subordinated notes
payable............... -- -- 2,399 2,213 --
Notes payable.......... 5,332 4,308 3,538 3,402 600
Deferred income taxes,
net................... 410 484 1,533 1,632 1,632
Deferred management
fees--managed
partnerships.......... 715 668 758 789 789
------ ------ ------- ------- --------
Total liabilities.... 6,974 6,332 9,876 9,239 3,534
------ ------ ------- ------- --------
Redeemable Stock....... -- -- -- 270 --
Total Stockholders'
equity................ 1,749 1,708 1,797 1,611 110,976
------ ------ ------- ------- --------
Total liabilities and
stockholders'
equity.............. $8,723 $8,040 $11,673 $11,120 $114,510
====== ====== ======= ======= ========
</TABLE>
- --------
(1) As discussed in Note 2 of the Notes to the Consolidated and Combined
Financial Statements, ICON Capital and ICON Securities were acquired by
ICON Holdings on August 21, 1996 in a business combination accounted for as
a purchase. As a result of such acquisition, the financial information for
the period after the acquisition is presented on a different cost basis
than that for the periods before the acquisition and, therefore, the
amounts for the year ended March 31, 1997 and the three and six months
ended September 30, 1997 are not comparable to the other periods presented
in this table as a result of goodwill and its related amortization.
(2) Gives effect to the sale of the 12,500,000 shares offered hereby, the
redemption of 4,000,000 shares owned by Summit, the conversion of related-
party indebtedness into 111,276 shares (assuming an initial public offering
price of $10.00 per share), and the issuance of 1,328,902 shares issuable
under warrants to be granted upon the effectiveness of the Offering. See
"Certain Transactions" and "Underwriting."
(3) As adjusted to give effect to the Stock Split, the sale of the 12,500,000
shares of Common Stock offered hereby and the application of the net
proceeds therefrom. See "Use of Proceeds."
9
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors, in addition to the other information contained in this
Prospectus, in evaluating an investment in the shares of Common Stock offered
hereby. The risk factors set forth below and elsewhere in this Prospectus
should be read as accompanying "forward-looking statements" which can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "plans," "anticipate," "estimate" or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
Company's actual results could differ materially from those anticipated in
such forward-looking statements.
SIGNIFICANT UNALLOCATED USE OF NET PROCEEDS
The leased equipment to be acquired and the equipment financing transactions
to be entered into by the Company with the proceeds of the Offering have not
been determined as of the date of this Prospectus, and the Company's
management will have complete discretion in investing the proceeds of the
Offering. Investors in the Offering must therefore rely solely on the judgment
and ability of the Company's management with respect to the selection of
lessees, the purchase of equipment, the incurring of indebtedness, the
negotiation of the terms of purchases of leased equipment and equipment
financing transactions, and other aspects of the Company's business and
affairs. There is no way of reliably anticipating what types of leased
equipment and equipment financing transactions will be available on reasonable
terms when the Company is ready to invest its funds. In addition, the Company
may seek growth through the acquisition of other equipment leasing companies,
although it has no current acquisition candidates. If the Company does make
any such acquisitions, its inability to, among other things, assimilate the
operations, services, products and personnel of acquired companies, or meet
expected revenue and income levels of such acquired companies, could have a
material adverse effect on the Company. The Company may vary its portfolio,
may invest a substantial portion of the proceeds of the Offering in types of
equipment, financing transactions or strategic business acquisitions other
than those described below under the caption "Business--Strategy" or may
invest in the identified types of equipment or financing transactions to a
greater degree than currently anticipated. See "Business."
The Company intends to invest the proceeds of the Offering in short-term,
readily marketable, interest- bearing government treasury or equivalent
securities until the Company otherwise employs such proceeds in the
acquisition of leased equipment or equipment financing transactions. Although
the Company believes that it will be able to engage in a number of such
transactions expeditiously following the Offering, until such time as the
Company does so, the applicable portions of the proceeds of the Offering will
be temporarily invested in such interest-bearing securities. See "Use of
Proceeds."
RESIDUAL EQUIPMENT VALUE RISKS
The Company intends to utilize a major portion (approximately $100 million)
of the proceeds of the Offering to accumulate a portfolio of large ticket
Seasoned Leases. The Company expects that in many transactions that it may
pursue, only a portion of its investment, if any, will be recovered from the
contractual obligation of the lessee to pay rent. As a result, the recovery of
its investment and realization of a return is expected to depend, at least in
part and perhaps entirely, on the Company's success in remarketing equipment
upon lease expiry. Numerous factors, many of which are beyond the control of
the Company, may have an impact on the Company's ability to remarket a
particular asset in a satisfactory manner. Among the factors are general
market conditions and economic conditions such as the strength or weakness of
the economy, interest rates, and inflation; regulatory changes affecting
particular classes of equipment; changes in the supply or cost of particular
equipment classes; technological developments; and the condition of the
equipment and general conditions in the industry utilizing such assets.
Consequently, there can be no assurance that the Company's estimated residual
value for particular equipment purchased will be realized. The Company's
inability to remarket equipment on favorable terms (including with respect to
its book value) could have a material adverse effect on the Company.
10
<PAGE>
RISKS ASSOCIATED WITH ACQUISITION OF SEASONED LEASES
The Company will focus on making acquisitions of large ticket Seasoned
Leases. Such transactions have more residual value exposure than leasing
transactions involving new equipment in which, typically, a greater percentage
of a lessor's investment is recovered from rental payments under the lease.
Although Seasoned Leases have the benefit of providing the Company with (i) a
historical payment performance record on the part of the lessee and (ii) the
opportunity to perform due diligence on the maintenance and utilization of
equipment subject to such leases, the acquisition of Seasoned Leases typically
requires that the Company accept all aspects of the existing lease agreement
without the ability to modify its terms. The Company may seek indemnification
from the selling party for issues that the Company identifies in reviewing a
proposed transaction, such as incomplete documentation or damage to equipment,
or for risks that the Company is not, due to the "secondary" nature of the
transaction, able to fully investigate. The ability of the Company to
successfully profit from Seasoned Lease transactions depends on its ability to
analyze and adequately address such underlying risks or, when necessary, to
avoid transactions where the risks presented are unacceptable. A failure by
the Company to properly evaluate the risks in any one or more Seasoned Lease
transactions could have a material adverse effect on the Company. See
"Business--Strategy."
DEPENDENCE ON CREDITWORTHINESS OF LESSEES
The failure of a lessee to make required rental payments would constitute an
event of default which, in a large ticket equipment lease, could have a
material adverse effect on the Company. In the case of a default with respect
to a leveraged lease, a lender thereto might choose to foreclose on the
equipment and dispose of it; or, in the case of a "single investor" lease (a
lease structured without leverage), the Company could be required to foreclose
on the equipment in an effort to recover its investment. If the liquidation
proceeds from the sale of repossessed equipment are materially less than its
book value, the Company would realize a significant loss. If a lessee were to
seek protection under the federal Bankruptcy Code, then either the lessee, as
debtor-in-possession, or the bankruptcy trustee, would have the option of
assuming, rejecting or, subject to certain conditions, assigning to a third
party any of the debtor's unexpired lease and financing obligations. If such a
lessee were to reject any of such equipment leases, such rejection could have
material adverse effect on the Company. See "Business--Selection of Lease
Investment Opportunities."
DEPENDENCE ON THIRD-PARTY APPRAISALS
The Company will consider Seasoned Leases involving most types of equipment
that meet its investment policy and philosophy, including equipment types that
the Company has no actual experience in remarketing at lease expiry. In
establishing an expected residual value in connection with Seasoned Lease
acquisitions, the Company will rely on information it gathers from many
sources, including estimates of future value from independent appraisers
retained by the Company. To the extent that such appraisals are materially
incorrect, the Company could face a partial or total loss of its investment,
which could have a material adverse effect on the Company. See "Business--
Selection of Lease Investment Opportunities."
RISKS ASSOCIATED WITH USE OF LEVERAGE
The Company plans to make extensive use of borrowed funds in acquiring
leased equipment. As long as the cost of such funds applied to defray a
portion of the purchase price for leased equipment is less than the return
which the Company expects to achieve from its investment in such leased
equipment, the potential profit attainable from such investment would be
enhanced by borrowing funds. To the extent such leverage is used, the
potential loss on the Company's equity investment would also be greater. In
addition, in the case where the Company incurs indebtedness and the lender has
recourse to the Company in addition to the equipment financed, a loss where
the value of the equipment is inadequate to satisfy the outstanding amount
borrowed could result in a claim against the Company for the amount of such
deficiency.
11
<PAGE>
DEPENDENCE ON KEY MANAGEMENT
The Company depends upon the expertise of certain key employees in
conducting its business. Loss of the services of such employees, particularly
Beaufort J. B. Clarke, the Chairman and Chief Executive Officer of the
Company, and Paul B. Weiss, Vice Chairman and Executive Vice President of the
Company, could have a material adverse effect on the Company's business. The
Company has entered into employment agreements with certain executives
including Messrs. Clarke and Weiss. See "Management" and "Executive
Compensation--Employment and Severance Agreements."
LIMITED TENURE OF CURRENT MANAGEMENT AT THE COMPANY
ICON Holdings was formed in May 1996 for the purpose of acquiring the
established business of ICON Capital Corp. ("ICON Capital") and its affiliate,
ICON Securities Corp. ("ICON Securities"). The current top three executives of
the Company were members of the acquisition group and replaced the former
management of ICON Capital. These new executives, none of whom had any
relationship with the Company prior to the acquisition, have made significant
changes to the Company's strategies and operations and may further alter and
expand the Company's business activities upon completion of the Offering.
Although these executives have substantial experience in the equipment leasing
industry, investors in the Offering have a limited history of the Company as
operated under its current management on which to base an evaluation of the
Company and its prospects. See "Business--Strategy" and "Management."
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly results of operations are susceptible to
fluctuations for a number of reasons and, accordingly, the Company believes
that comparisons of the results of its operations for one quarter should not
be relied upon as an indication of future performance. The reasons for such
fluctuations may include, without limitation, any decline in expected residual
value realizations related to the equipment the Company leases, the timing of
specific transactions, the degree to which the Company encounters competition
in its markets and general economic conditions. Quarterly operating results
could also fluctuate as a result of the sale by the Company of equipment in
its lease portfolio to the lessee or to a third party at the expiration of a
lease term or prior to such expiration. Such sales of equipment may have the
effect of increasing revenues and net income during the quarter in which the
sale occurs, and reducing revenues and net income otherwise expected in
subsequent quarters. The Company's planned small ticket leasing securitization
activities may also cause quarterly results to fluctuate due to a number of
factors, including, among others, the completion of a securitization
transaction in a particular calendar quarter (or the failure to complete such
a securitization transaction), the occurrence of credit losses with respect to
securitized portfolios, the interest rate on the securities issued in
connection with such securitization transactions, variations in the volume of
leases funded by the Company, and differences between the Company's cost of
funds and the average implicit yield to the Company on its leases prior to
being securitized. In the event the Company's revenues or earnings for any
quarter are less than the level expected by securities analysts or the market
in general, such a shortfall could have an immediate and significant adverse
impact on the market price of the Common Stock. Any such adverse impact could
be greater if any such shortfall occurs near the time of any material decrease
in any widely followed stock index or in the market price of the stock of one
or more public equipment leasing and financing companies or major customers of
the Company. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
NO DIVIDENDS
The Company has not paid any dividends on its Common Stock to date. The
payment of any dividends will be within the discretion of the Company's Board
of Directors. It is the present intention of the Board of Directors to retain
all earnings, if any, for use in the Company's business operations and,
accordingly, the Board of Directors does not anticipate declaring any
dividends in the foreseeable future. See "Dividend Policy."
12
<PAGE>
IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS
Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in the as adjusted net tangible book value of their
shares in the amount of $3.79 per share. If the Company issues additional
Common Stock in the future, including shares which may be issued pursuant to
earn-out arrangements, option grants and future acquisitions, purchasers of
Common Stock in the Offering may experience further dilution in the net
tangible book value per share of the Common Stock. See "Dilution."
RISK OF CHANGES IN TAX LAWS OR ACCOUNTING PRINCIPLES
Any change to current tax laws or generally accepted accounting principles
that makes lease financing of new equipment or purchases or sales of Seasoned
Leases less attractive could have a material adverse affect on the Company.
Leasing industry activities can be substantially affected by such
considerations, and there is no way to reliably anticipate which such changes
are likely to occur or the effect of such changes on the Company's markets or
ability to adapt to such changes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
COMPETITION
The equipment leasing business is very competitive. In the market for large
ticket Seasoned Leases, the Company competes with larger, more established
companies, some of which may in the future determine that the market for
Seasoned Leases is a market to which they wish to devote increased resources.
Many of these companies may have a lower cost of funds than the Company,
greater access to capital markets and other funding sources, and extensive
experience in identifying attractive investment opportunities in the leasing
industry. In addition, this potential for increased competition for Seasoned
Leases could hinder the Company's efforts to differentiate itself and to
compete effectively.
In the small ticket leasing sector, the Company competes for customers with
a number of national, regional and local finance companies, equipment
manufacturers that finance the sale or lease of their products themselves,
commercial lenders, and other traditional types of financial services
companies. Such competitors may have competitive advantages, and such
competition may make certain transactions less attractive to the Company and
make securitizations more difficult to accomplish. The failure of the Company
to effectively compete in the markets in which it participates would have a
material adverse effect on the Company. See "Business--Competition."
POTENTIAL CONFLICTS WITH ICON PARTNERSHIPS
Due to ICON Capital's fiduciary and contractual obligations in its capacity
as general partner of the ICON Partnerships, which it has sponsored and
managed since 1988, ICON Capital is required to invest capital on behalf of
the ICON Partnerships in a manner which may compete with the Company's
investment objectives and have the effect of reducing the availability of
suitable transactions for the Company's own benefit and increasing the time it
will take to fully invest the proceeds of the Offering. Under the agreements
establishing the ICON Partnerships, ICON Capital has agreed to refer
investment opportunities to the partnerships until such time as all initial
capital contributions of the limited partners have been fully invested or
committed in certain specified investments and specified reserves, subject to
limitations such as the ICON Partnerships' cash available for investment,
existing debt, structure of the transaction, or creditworthiness of the
lessee. See "Business--Current Businesses of the Company--ICON Capital --
Sponsorship and Management of ICON Partnerships" and "Business--Resolution of
Potential Conflicts of Interest."
UNINSURED LOSSES
Equipment leases and financing transactions generally require lessees and
users to arrange, at their own expense, for comprehensive insurance (including
fire, liability and extended coverage) and to assume the risk of loss of the
equipment or the collateral securing the leases or financing transactions,
whether or not insured. When
13
<PAGE>
the lessee or user is not required to provide such insurance, the Company will
generally arrange for insurance at its own expense. Generally, the Company
requires that it be named as an additional insured on liability insurance
policies carried by lessees, with the Company's lenders normally required to
be identified as the payee for loss and damage to the equipment. The Company
monitors compliance with the insurance provisions of the leases. Certain types
of catastrophic losses (e.g., losses due to war or earthquakes), however, are
either uninsurable or prohibitively costly to insure. Should an uninsured loss
occur with respect to equipment or collateral securing the leases and
financing transactions, or should the Company experience an uninsured loss or
partially insured claim, or have a claim for which third-party indemnification
is not available, the Company could suffer a total loss of its investment.
Ownership of certain types of capital equipment, such as aircraft or marine
vessels, could also entail exposure to product liability claims, in the event
that the use of such equipment is alleged to have resulted in bodily injury or
property damage. To date, the ICON Partnerships have not experienced any
significant uninsured or insured claims and have not experienced any product
liability claims related to its equipment. See "Business--Sourcing, Evaluation
and Acquisition of Seasoned Leases."
INTERNATIONAL RISKS
The Company intends to increase its leasing and finance activities in
foreign markets generally, and in Europe in particular. Such transactions may
present greater risks to the Company because certain foreign laws, regulations
and judicial procedures may not be as protective of lessor rights as those
which apply in the United States. In addition, many foreign countries have
currency and exchange laws regulating the international transfer of
currencies. When possible, the Company will seek to minimize its currency and
exchange risks by negotiating transactions in U.S. dollars and requiring
guarantees obtained to support various lease agreements to be denominated in
U.S. dollars. In addition, political instability abroad and changes in
international policy may also present risks associated with the possible
expropriation of certain of the Company's leased equipment, such as aircraft.
Certain countries have no registration or other recording system with which to
locally establish the Company's or its lender's interest in equipment,
potentially making it more difficult for the Company to prove its interest in
collateral in the event that it needs to recover such property located in such
a country. See "Business--Strategy."
NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Company's
Common Stock. There can be no assurance that an active public market for the
Common Stock will develop or be sustained after the Offering. The initial
public offering price of the Common Stock will be determined by negotiation
between the Company and the Representative based on the factors described
under "Underwriting." The price at which the Common Stock will trade in the
public market after the Offering may be less than the initial public offering
price. See "Underwriting."
The market price of the Common Stock after the Offering could be subject to
significant fluctuations in response to activities of the Company's
competitors, variations in quarterly operating results, changes in general
market conditions and other events or factors. The volatility of the stock
market, in general, could adversely affect the market price of the Common
Stock and the ability of the Company to raise equity in the public markets.
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940 (the "Investment
Company Act") extends generally to companies engaged primarily in the business
of investing, reinvesting, owning, holding or trading securities. The
Investment Company Act also may apply to a company which does not intend to be
characterized as an investment company, but which, nevertheless, engages in
activities that subject it to registration and regulation under the Investment
Company Act's definition of an investment company. The Company believes
that its anticipated activities as described in this Prospectus will not
subject the Company to registration and regulation under the Investment
Company Act. The Company will avail itself of a safe harbor rule that will
exempt it from regulation under the Investment Company Act for a period of one
year, provided certain conditions
14
<PAGE>
are met. Thereafter, the Company intends to remain exempt from investment
company regulation either by not engaging in investment company activities or
by qualifying for the exemption from investment company regulation available
to any company that has no more than 45 percent of its total assets invested
in, and no more than 45 percent of its income derived from, investment
securities, as defined in the Investment Company Act.
There can be no assurance that the Company will be able to avoid
registration and regulation as an investment company. In the event the Company
is unable to avail itself of an exemption or safe harbor from the Investment
Company Act, the Company may become subject to certain restrictions relating
to its activities, as noted below. The Investment Company Act imposes
substantive requirements on registered investment companies, including
limitations on capital structure, restrictions on certain investments,
prohibitions on transactions with affiliates and compliance with reporting,
record keeping, voting, proxy disclosure and other rules and regulations.
Registration as an investment company, should it become necessary, could have
a material adverse effect on the Company.
ANTI-TAKEOVER PROVISIONS
Certain provisions of law, the Company's Certificate of Incorporation as
amended and restated upon consummation of the Offering (the "Restated
Charter") and its By-laws, could make more difficult the removal of incumbent
officers and directors and the acquisition of the Company by means of a tender
offer, a proxy contest or otherwise. These provisions include authorization of
the issuance of up to 10,000,000 shares of Preferred Stock with such
characteristics that may render it more difficult or tend to discourage a
merger, tender offer or proxy contest. The By-laws also provide that, after
the Offering, shareholder action can be taken only at an annual or special
meeting of its shareholders and may not be taken by written consent. See
"Description of Capital Stock--Certain Provisions of Delaware Law and the
Company's Certificate of Incorporation and By-laws."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 16,611,276 shares of
Common Stock outstanding. The 12,500,000 shares sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), unless acquired by
an "affiliate" of the Company, as that term is defined in Rule 144 ("Rule
144") promulgated under the Securities Act; shares held by affiliates will be
subject to resale limitations of Rule 144. All of the remaining outstanding
shares of Common Stock will be held by affiliates and available, subject to
Rule 144 volume as well as other limitations, for resale beginning 180 days
after the date of this Prospectus. Also, the Representative will be granted
warrants exercisable during a four-year period commencing on the first
anniversary of the consummation of the Offering, for 830,564 shares (924,234
shares if the Underwriters' over-allotment is exercised) of Common Stock at
the initial public offering price, which shares have been registered by
separate prospectus under the Registration Statement of which this Prospectus
is a part, for resale from time to time after a 180-day period following the
consummation of the Offering. Sales of substantial amounts of Common Stock, or
the perception that such sales could occur, could adversely affect prevailing
market price of the Common Stock and impair the Company's ability to raise
additional capital through the sale of equity securities. See "Shares Eligible
for Future Sale." Each of the Company, its existing stockholders, and its
executive officers and directors has generally agreed not to offer, pledge,
sell, contract to sell, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock during the period ending 180 days
after the date of this Prospectus without the prior written consent of
Friedman, Billings, Ramsey & Co., Inc., as the Representative of the
Underwriters. See "Shares Eligible for Future Sale" and "Underwriting."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, after deducting estimated underwriting discounts and other
offering expenses, all of which are payable by the Company, are estimated to
be approximately $115.5 million (approximately $132.9 million if the
Underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $10.00 per share. The Company intends to use
approximately $100 million of the net proceeds of the Offering to acquire
large ticket Seasoned Leases and to enter into other equipment financing
transactions. In addition, the Company intends to use portions of the net
proceeds to redeem 4,000,000 shares of Common Stock held by Summit Asset
Holding L.L.C. ("Summit") for $7.2 million (and other non-cash consideration),
to redeem 1,000 shares of Class B Common Stock held by TKO Finance Corporation
("TKO"), a secured lender to the Company, for $349,000, to repay indebtedness
(including a premium of approximately $225,000) of approximately $3.4 million
owed to TKO (currently bearing interest at a fixed annual rate of 11.5% and
with a maturity of July 31, 2000), and to repay indebtedness owed to Summit of
approximately $1.4 million (currently bearing interest at a fixed annual rate
of 12.5% and due in 2001). Any remaining proceeds will be used for general
corporate purposes, including, but not limited to, acquisitions of related
businesses and working capital. See "The Company" and "Certain Transactions."
The Company does not have any agreements or understandings with respect to any
acquisitions at the present time.
Pending use of the net proceeds as described above, the Company intends to
invest such proceeds in short-term readily marketable, interest-bearing
government treasury obligations and equivalent securities.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future because it intends to retain its earnings, if
any, to finance the expansion of its business and for general corporate
purposes. Any payment of future dividends will be at the discretion of the
Board of Directors and will depend upon, among other factors, the Company's
earnings, financial condition, capital requirements, level of indebtedness,
contractual restrictions with respect to the payment of dividends and other
considerations that the Board of Directors deems relevant.
16
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at September 30, 1997 and (ii) the capitalization of the Company as adjusted
to give effect to the sale of 12,500,000 shares of Common Stock offered hereby
at an assumed initial public offering price of $10.00 per share and the other
transactions set forth in the notes to the table. This information should be
read in conjunction with the Company's Consolidated and Combined Financial
Statements and the Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------
UNAUDITED
ACTUAL AS ADJUSTED
----------- --------------
<S> <C> <C>
Due to stockholder (1).............................. $ 140,000 $ --
Notes payable--recourse (2)......................... 3,402,249 600,000
Subordinated notes payable--related party (3)....... 2,213,399 --
Redeemable Stock (4)................................ 269,576 --
Stockholders' equity:
Common Stock: $.01 par value per share; 50,000,000
shares authorized; 1,000 shares outstanding,
actual; 16,611,276 shares outstanding, as
adjusted......................................... 10 206,113
Preferred Stock: $.01, par value per share;
10,000,000 shares authorized; no shares
outstanding, actual and as adjusted.............. -- --
Additional paid-in capital........................ 133,990 116,462,753
Retained earnings................................. 1,476,818 1,476,818
Less: Treasury shares (5) -- (7,169,643)
----------- -------------
Total stockholders' equity...................... 1,610,818 110,976,041
=========== =============
Total capitalization............................ $ 7,636,042 $ 111,576,041
=========== =============
</TABLE>
- --------
(1) As adjusted to give effect to repayment of amounts due to Summit. See
"Certain Transactions."
(2) As adjusted to give effect to the repayment of indebtedness to TKO. See
"Use of Proceeds" and "Certain Transactions."
(3) As adjusted to give effect to the conversion of indebtedness owed to a
related party into shares of Common Stock and the repayment of
indebtedness owed to Summit. See "Use of Proceeds" and "Certain
Transactions."
(4) As adjusted to give effect to the redemption of 1,000 shares of Class B
Common Stock held by TKO. See "Use of Proceeds" and "Certain
Transactions."
(5) As adjusted to give effect to the redemption of 4,000,000 shares of Common
Stock held by Summit. See "Use of Proceeds" and "Certain Transactions."
17
<PAGE>
DILUTION
The deficit in net tangible book value of the Company at September 30, 1997
was $6,202,349, or $0.78 per share of Common Stock. Net tangible book value
per share is determined by dividing the net tangible book value of the Company
(tangible assets less total liabilities) by the number of shares of Common
Stock outstanding. Adjusting for the sale by the Company of the 12,500,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $10.00 per share, and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds," the net tangible book value of
the Company, as adjusted, at September 30, 1997 would have been $103,162,874,
or $6.21 per share. This amount represents an immediate dilution to new
investors of $3.79 per share and an immediate increase in as adjusted net
tangible book value per share to existing stockholders of $6.99 per share. The
following table illustrates this per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $10.00
Net tangible book value per share at September 30, 1997....... $(0.78)
Increase in net tangible book value per share resulting from
the Offering................................................. $ 6.99
------
Net tangible book value per share after the Offering............ $ 6.21
------
Dilution to new investors....................................... $ 3.79
======
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the
increase in net tangible book value per share attributable to the Offering,
net tangible book value per share after the Offering, and dilution to new
investors would be $7.30, $6.52 and $3.48, respectively.
The following table sets forth at September 30, 1997, after giving effect to
the sale of the Common Stock offered by the Company in the Offering: (i) the
number of shares of Common Stock purchased from the Company by the sole
existing stockholder that will remain a stockholder after the Offering and the
total consideration and the average price per share paid to the Company for
such shares; (ii) the number of shares of Common Stock purchased by new
investors in the Offering from the Company and the total consideration and the
price per share paid by them for such shares; and (iii) the percentage of
shares purchased from the Company by such existing stockholder and the new
investors and the percentages of consideration paid to the Company for such
shares by such existing stockholder and new investors.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholder
(1)(2)................... 4,111,276 24.8% $ 1,179,760 0.9% $ 0.29
New Investors............. 12,500,000 75.2 $125,000,000 99.1 10.00
---------- ----- ------------ -----
Total................... 16,611,276 100.0% $126,179,760 100.0%
</TABLE>
- --------
(1) The table does not reflect the purchase of 4,000,000 shares for $67,000 by
Summit, which will be redeemed by the Company upon consummation of the
Offering. If such transaction were included, the Total Consideration of
existing stockholders in the above table would be $1,246,760, or 1.0% of
the Total Consideration, and the Price Per Share of existing stockholders,
including Summit, would be $0.15 per share.
(2) Does not include: (i) 2,000,000 shares of Common Stock reserved for
issuance under the Company's 1997 Stock Option Plan, of which options to
purchase approximately 1,200,000 shares of Common Stock are expected to be
granted upon the consummation of the Offering at an exercise price equal
to the initial public offering price per share; (ii) 200,000 shares of
Common Stock reserved for issuance under the Company's 1997 Non-Employee
Directors Stock Plan, of which options to purchase 15,000 shares of Common
Stock are expected to be granted upon the consummation of the Offering at
an exercise price per share equal to the initial public offering price;
(iii) 498,338 shares of Common Stock subject to warrants to be granted to
a related party upon the consummation of the Offering at an exercise price
per share equal to the initial public offering price; and (iv) 830,564
shares of Common Stock subject to warrants to be granted to the
Representative of the Underwriters at an exercise price per share equal to
the initial public offering price. See "Management--1997 Stock Option
Plan" "--Employment and Severance Agreements," and "--1997 Non-Employee
Directors' Stock Plan," "Certain Transactions" and "Underwriting."
18
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The tables on the following two pages present (i) selected audited (to the
extent described below) and unaudited historical financial data of the Company
and its wholly owned subsidiaries, and (ii) selected unaudited pro forma
financial data after giving effect to the acquisition by the Company in August
1996 of ICON Capital and its affiliate, ICON Securities Corp. ("ICON
Securities"), as if such acquisitions had occurred at the beginning of the
fiscal year ended March 31, 1997. The information for periods prior to August
21, 1996 are presented on a combined basis, while the information for periods
subsequent to such date is presented on a consolidated basis.
The Company's historical data for the period from August 21, 1996 to March
31, 1997 is based on the audited historical financial statements of the
Company. The Company's historical data for the three- and six-month periods
ended September 30, 1997 and for the period from August 21, 1996 (formation of
the Company) to September 30, 1996 have been derived from the unaudited
financial statements of the Company appearing elsewhere herein, which
financial statements have been prepared on the same basis as the Company's
audited financial statements and, in the opinion of the Company, include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the information set forth therein. The Company's results of
operations for the three- and six-month periods ended September 30, 1997 are
not necessarily indicative of results for the entire year ending March 31,
1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company."
The ICON Capital and ICON Securities historical data for each of the years
in the four-year period ended March 31, 1996 and for the period from April 1,
1996 to August 20, 1996 is based on the audited historical financial
statements of ICON Capital and ICON Securities. The ICON Capital and ICON
Securities historical data for the period from July 1, 1996 to August 20, 1996
have been derived from the unaudited interim financial statements of ICON
Capital and ICON Securities, which financial statements have been prepared on
the same basis as ICON Capital's and ICON Securities' audited financial
statements and, in the opinion of the Company, include all adjustments
(consisting only of normal recurring adjustments) necessary to fairly present
the information set forth therein.
The unaudited pro forma financial information presents the consolidated
results of operations of the Company as if the acquisitions of ICON Capital
and ICON Securities had occurred at the beginning of the fiscal year ended
March 31, 1997, after giving effect to certain adjustments, including the
amortization of goodwill (i.e., costs in excess of net assets of businesses
acquired), increased interest expense from debt assumed to have been issued to
fund the acquisition, elimination of management fees paid to a former parent
of ICON Securities, and the income tax effects of the aforementioned. This pro
forma financial information does not necessarily reflect the results of
operations as they would have been if the Company, ICON Capital and ICON
Securities had constituted a single entity during such periods, and is not
necessarily indicative of results which may be obtained in the future.
This data should be read in conjunction with the consolidated financial
statements of the Company and the combined financial statements of ICON
Capital and ICON Securities, and the related notes thereto, included elsewhere
herein and in conjunction with the unaudited pro forma financial information,
including the notes thereto, appearing elsewhere in this Prospectus. See "Pro
Forma Condensed Consolidated Financial Statements."
19
<PAGE>
SELECTED CONSOLIDATED AND COMBINED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
----------------------------------- ------------------ -----------------
1993 1994 1995 1996 1997(1) 1996 1997(1) 1996 1997(1)
------ ------ ------ ------ ------- ------ ----------- ------ ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Revenues:
Fees--managed
partnerships.......... $9,392 $8,588 $8,437 $9,376 $12,180 $5,661 $ 5,315 $3,479 $ 3,084
Rental income from
operating lease....... -- 198 661 1,010 1,542 1,028 -- 514 --
Interest income and
other income.......... 150 48 37 59 120 23 82 15 28
------ ------ ------ ------ ------- ------ ----------- ------ ----------
Total revenues....... 9,542 8,834 9,135 10,445 13,842 6,712 5,397 4,008 3,112
------ ------ ------ ------ ------- ------ ----------- ------ ----------
Expenses:
Selling, general, and
administrative........ 8,439 7,399 7,190 8,495 8,208 3,962 4,421 1,938 2,215
Depreciation and
amortization.......... 530 768 1,030 1,455 2,098 1,162 374 606 146
Interest expense....... 31 173 389 361 809 277 354 183 152
Amortization of
goodwill.............. -- -- -- -- 574 95 457 95 229
Other.................. -- 339 225 -- -- -- -- -- --
------ ------ ------ ------ ------- ------ ----------- ------ ----------
Total expenses....... 9,000 8,679 8,834 10,311 11,689 5,496 5,606 2,822 2,742
------ ------ ------ ------ ------- ------ ----------- ------ ----------
Income (loss) before
provision for income
taxes and
extraordinary item.... 542 155 301 134 2,153 1,216 (209) 1,186 370
Provision for income
taxes................. 141 43 138 75 1,128 605 50 605 191
------ ------ ------ ------ ------- ------ ----------- ------ ----------
Income (loss) before
extraordinary item.... 401 112 163 59 1,025 611 (259) 581 179
Extraordinary item-gain
on early
extinguishment of debt
(net of applicable
income taxes of $49).. -- -- -- -- -- -- 73 -- --
------ ------ ------ ------ ------- ------ ----------- ------ ----------
Net income (loss)...... $ 401 $ 112 $ 163 $ 59 $ 1,025 $ 611 $ (186) $ 581 $ 179
====== ====== ====== ====== ======= ====== =========== ====== ==========
Pro forma weighted
average number of
shares of Common Stock
outstanding and
equivalents(2)........ -- -- -- -- -- -- 17,940,178 -- 17,940,178
====== ====== ====== ====== ======= ====== =========== ====== ==========
Pro forma earnings
(loss) per share of
Common Stock and
equivalents
outstanding(2) ....... -- -- -- -- -- -- $ (0.01) -- $ 0.01
====== ====== ====== ====== ======= ====== =========== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
----------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997(1) 1997(1)
------ ------ ------ ------ ------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Assets:
Cash........................ $ 441 $ 557 $ 391 $ 185 $ 747 $ 157
Receivables from managed
partnerships............... 956 1,399 1,915 2,023 1,324 1,360
Prepaid and other assets.... 595 712 552 790 580 1,104
Fixes assets and leasehold
improvements, net.......... 1,182 1,144 952 781 752 686
Goodwill, net............... -- -- -- -- 8,270 7,813
Investment in operating
lease, net................. -- 5,234 4,913 4,261 -- --
------ ------ ------ ------ ------- -------
Total assets................ $3,174 $9,046 $8,723 $8,040 $11,673 $11,120
====== ====== ====== ====== ======= =======
Liabilities and
Stockholders' Equity:
Accounts payable and
accrued expenses........... $ 576 $ 764 $ 517 $ 872 $ 1,648 $ 1,203
Subordinated notes
payable.................... -- -- -- -- 2,399 2,213
Notes payable............... 1,028 6,004 5,332 4,308 3,538 3,402
Deferred income taxes,
net........................ 96 274 410 484 1,533 1,632
Deferred management fees--
managed partnerships....... -- 418 715 668 758 789
------ ------ ------ ------ ------- -------
Total liabilities........... 1,700 7,460 6,974 6,332 9,876 9,239
------ ------ ------ ------ ------- -------
Redeemable Stock............ -- -- -- -- -- 270
Total Stockholders' equity.. 1,474 1,586 1,749 1,708 1,797 1,611
------ ------ ------ ------ ------- -------
Total liabilities and
stockholders' equity..... $3,174 $9,046 $8,723 $8,040 $11,673 $11,120
====== ====== ====== ====== ======= =======
</TABLE>
- -------
(1) As discussed in Note 2 of the Notes to the Consolidated and Combined
Financial Statements, ICON Capital and ICON Securities were acquired by
ICON Holdings on August 21, 1996 in a business combination accounted for
as a purchase. As a result of such acquisition, the financial information
for the period after the acquisition is presented on a different cost
basis than that for the periods before the acquisition and, therefore, the
amounts for the year ended March 31, 1997 and the three and six months
ended September 30, 1997 are not comparable to the other periods presented
in this table as a result of goodwill and its related amortization.
(2) Gives effect to the Stock Split, the 12,500,000 shares offered hereby, the
redemption of 4,000,000 shares owned by Summit, the conversion of
indebtedness owed to a related party into 111,276 shares (assuming an
initial public offering price of $10.00 per share), and the issuance of
1,328,902 shares issuable under warrants to be granted upon the
effectiveness of the Offering. See "Certain Transactions" and
"Underwriting."
20
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
TOTAL FOR THE FOR THE
YEAR ENDED YEAR ENDED
MARCH 31, PRO FORMA MARCH 31,
1997(1) ADJUSTMENTS 1997
------------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Fees-managed partnerships........... $12,180,238 $ -- $12,180,238
Rental income from operating lease.. 1,541,647 -- 1,541,647
Interest income and other income.... 119,891 -- 119,891
----------- --------- -----------
Total revenues.................... 13,841,776 -- 13,841,776
----------- --------- -----------
Expenses:
Selling, general and
administrative..................... 8,208,308 (298,503)(2) 7,909,805
Amortization of goodwill............ 574,500 339,754 (3) 914,254
Depreciation and amortization....... 2,097,354 -- 2,097,354
Interest expense.................... 808,854 263,838 (4) 1,072,692
----------- --------- -----------
Total expenses.................... 11,689,016 305,089 11,994,105
----------- --------- -----------
Income before provision for income
taxes.............................. 2,152,760 (305,089) 1,847,671
Provision for income taxes............ 1,127,788 13,866 1,141,654
----------- --------- -----------
Net income............................ $ 1,024,972 $(318,955) $ 706,017
=========== ========= ===========
</TABLE>
- --------
(1) As discussed in Note 2 to the Notes to the Consolidated and Combined
Financial Statements, ICON Capital and ICON Securities were acquired by
ICON Holdings on August 21, 1996 in a business combination accounted for
as a purchase. As a result of such acquisition, the financial information
for the period after the acquisition is presented on a different cost
basis than that for the periods before the acquisition and, therefore, the
amounts in the total column for the year ended March 31, 1997 are not
comparable to the years ended March 31, 1996 and 1995 as a result of
goodwill and its related amortization.
(2) Adjustment relates to management fees paid by ICON Securities to its
former parent.
(3) Adjustment relates to amortization of goodwill.
(4) Adjustment relates to interest expense associated with notes payable-
seller financing.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following analysis of the financial condition and the results of
operations should be read in conjunction with Selected Consolidated and
Combined Financial and Operating Data, the Company's consolidated financial
statements and the notes thereto and other financial data included elsewhere
in this Prospectus. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors."
GENERAL
The Company's operating results following the Offering are anticipated to be
significantly different from its results prior to the Offering due to changes
in the nature of the Company's business resulting from the substantial
increase in the Company's capital resources. Upon completion of the Offering,
the Company intends to use a substantial portion of the proceeds to acquire
large ticket Seasoned Leases and, to a lesser extent, to engage in small
ticket financing transactions that may be subsequently securitized. The
Company will also continue to engage in equipment leasing and financing
activities through the ICON Partnerships. As a result, following the Offering,
a majority of the Company's revenues are expected to be derived from leasing
transactions, while a smaller portion will be derived from fees from the ICON
Partnerships.
Revenues from investments in large ticket Seasoned Leases will consist of
finance income from investments in direct finance and leveraged leases, rental
income from operating leases, and gains, if any, from equipment sale proceeds
that exceed the carrying value of the residual. The Company may from time to
time collaterally assign all or a portion of its lease portfolio to a lender
to secure related borrowings. Depending on the use of leverage, the timing of
the recognition of revenue and the receipt of cash will vary. A portion of the
unearned income from direct finance and leveraged leases relates to the
residual value that was estimated at inception of the lease and has been
accrued over the life of the lease. The ultimate realization of that income is
dependent upon the receipt of cash at lease expiry. If during the term of a
lease, the Company determines that the residual value is impaired, then the
Company will write it down to the then-estimated realizable value.
Historically, revenues have consisted primarily of fees paid to ICON Capital
for services rendered to the ICON Partnerships and rental income from an
operating lease. Fees from the ICON Partnerships are earned for the
acquisition, management and administration of ICON Partnership lease
portfolios, and the organization, offering and related underwriting of each
ICON Partnership. In addition, the Company receives distributions from the
ICON Partnerships with respect to its general partnership interest therein.
Acquisition fees are earned based on the purchase price or principal amount of
each transaction entered into on behalf of the ICON Partnerships. Management
fees are earned for the active management of equipment subject to lease and
equipment financing transactions for the ICON Partnerships. This fee is based
on a percentage of the gross rental payments for equipment leases held
thereby. Organization, offering and underwriting fees are based on investment
units sold during the offering stage of the ICON Partnerships.
ICON Holdings was formed for the purpose of acquiring ICON Capital and ICON
Securities, which, although affiliates, were not part of the same consolidated
group at that time. Therefore, the historical financial statements have been
prepared on a combined basis through August 20, 1996, and on a consolidated
basis for the period from August 21, 1996 to September 30, 1997.
PROSPECTIVE ACCOUNTING AND REVENUE RECOGNITION POLICIES
The manner in which the acquisition of large ticket Seasoned Leases and the
origination, acquisition and securitization of small ticket leases are
characterized and reported for accounting purposes has a significant impact
upon the Company's reported revenue, net income and its resulting financial
position. The Company classifies its lease transactions, as required by
Statement of Financial Accounting Standards No. 13, Accounting
22
<PAGE>
for Leases ("SFAS No. 13") as: (i) direct financing, (ii) leveraged leases, or
(iii) operating leases. The timing of recognition of revenues and expenses for
each lease will vary depending on the lease classification. Lease accounting
methods significant to the Company's business are discussed below.
Direct Financing. Direct financing leases transfer substantially all
benefits and risks of equipment ownership to the lessee. A lease is a direct
financing lease if the creditworthiness of the lessee and the collectibility
of lease payments are reasonably certain and it meets one of the following
criteria: (i) the lease transfers ownership of the equipment to the customer
by the end of the lease term, (ii) the lease contains a bargain purchase
option, (iii) the lease term at inception represents at least 75% of the
estimated economic life of the leased equipment, or (iv) the present value of
the minimum lease payments is at least equal to 90% of the fair market value
of the leased equipment at inception of the lease.
Direct finance leases are recorded as investment in direct finance leases
upon acceptance of the equipment by the lessee. At the inception of the lease,
unearned lease income is recorded, which represents the amount by which the
gross lease payments receivable plus the estimated unguaranteed residual value
of the equipment exceeds the equipment cost. Unearned lease income is
recognized, using the interest method, as lease revenue over the lease term.
Leveraged Leases. Leveraged leases meet the definition of direct financing
leases and also include the following characteristics: (i) the lease involves
three parties--a lessee, a lender and a lessor, (ii) the lender provides
substantial amounts of non-recourse financing and (iii) the lessor's net
investment declines during the early years once the investment has been
completed and rises during the later years of the lease before its lease term
ends. Net investment in leveraged leases consists of minimum lease payments
receivable, estimated unguaranteed residual values and the initial direct
costs related to the leases, net of the unearned income and principal and
interest on the related non-recourse debt. Unearned income is recognized as
income from leveraged leases over the life of the lease at a constant rate of
return on the positive net investment.
Operating Leases. All leases that do not meet the criteria to be classified
as direct financing or leveraged leases are accounted for as operating leases.
Lease revenue is comprised of rentals that are accrued on a straight-line
basis over the lease term. The Company's cost of the leased equipment is
recorded on the balance sheet as investment in operating lease equipment, and
is depreciated on a straight-line basis over the lease term to the estimated
residual value.
Residual Values. Residual values represent the Company's estimated value of
the equipment at the end of the initial lease term. The residual values for
direct financing and leveraged leases are recorded as investment in direct
financing and leveraged leases. The residual values for operating leases are
included as a component of the leased equipment's net book value. The
estimated residual values will vary, both in amount and as a percentage of the
original equipment cost, depending upon several factors, including the
equipment type, manufacturer's discount, market conditions, the term of the
lease and other factors.
The Company's policy with respect to impairment of estimated residual values
will be to review, on a quarterly basis, the carrying value of its residuals
on an individual asset basis to determine whether events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable and, therefore, an impairment loss should be recognized. The
events or changes in circumstances which generally indicate that the residual
value of an asset has been impaired are (i) the estimated fair value of the
underlying equipment is less than the Company's carrying value or (ii) the
lessee is experiencing financial difficulties and it does not appear likely
that the estimated proceeds from disposition of the asset will be sufficient
to satisfy the remaining obligation to the non-recourse lender and the
Company's residual position. Generally, in the latter situation, the residual
position relates to equipment subject to third-party non-recourse notes
payable where the lessee remits its rental payments directly to the lender and
the Company does not recover its residual until the non-recourse note
obligation is repaid in full.
The Company will determine its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Company from remarketing the equipment. Generally, quoted
market prices will be used as the basis for measuring whether an impairment
loss should be recognized.
23
<PAGE>
The Company will seek to realize the estimated residual value at lease
termination through: (i) renewal or extension of the original lease; (ii) sale
of the equipment either to the lessee or in the secondary market; or (iii)
lease of the equipment to a new user. The difference between the proceeds of a
sale and the remaining estimated residual value will be recorded as a gain or
loss in lease revenues when the title is transferred to the buyer.
Allowance for Losses. Management will evaluate the collectibility of its
leases based on the level of recourse provided, if any, delinquency
statistics, historical loss experience, current economic conditions and other
relevant factors. The Company will provide an allowance for credit losses for
leases that are considered impaired.
Initial Direct Costs. Initial direct costs related to the origination of
direct finance and leveraged leases are capitalized and recorded as part of
the investment in direct financing and leveraged leases, and will be amortized
over the terms of the related leases using the interest method. Initial direct
costs related to the origination of operating leases are capitalized and
amortized on the straight-line method over the lease terms.
Small Ticket Warehousing and Securitization. The Company expects to fund the
initial acquisition and origination of small ticket financing transactions
through warehouse finance facilities. The Company anticipates that the
transactions financed thereunder will be refinanced from time to time through
securitizations or other structured finance transactions. In such
securitizations, the Company anticipates it will sell a pool of leases to a
wholly owned, special-purpose subsidiary of the Company. The special-purpose
subsidiary will issue and sell notes or other securities secured by such
leases and the underlying equipment. The Company generally will retain the
right to service the leases it sells through securitizations, receive a fee
for performing such services, and retain any excess cash flows from the lease
pool.
In June 1996, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standard No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities" ("SFAS No. 125"). SFAS
No. 125 is generally effective for transactions occurring after December 31,
1996. Among other things, SFAS No. 125 requires that servicing assets and
other retained interests in transferred assets be measured by allocating the
previous carrying amount between the assets sold, if any, and retained
interests, if any, based on relative fair values at the date of transfer.
Under SFAS No. 125, the Company will record a servicing asset representing the
excess of estimated fees to be received over expenses to be incurred in
servicing leases sold through securitizations. The effect will be to decrease
the cost basis allocable to the senior and subordinated securities and trust
certificates issued in connection with the Company's securitization
transactions.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 Compared to Three Months Ended
September 30, 1996
The Company acquired $65,111,069 and $91,475,040 (such amounts including
cash paid and debt incurred or assumed) in equipment subject to lease and
financing transactions on behalf of the ICON Partnerships, and raised
$7,632,264 and $5,242,597 of ICON Partnership capital for the three months
ended September 1997 and 1996, respectively. As of September 30, 1997 and
1996, the Company managed equipment subject to lease and other assets on
behalf of the ICON Partnerships with a book value of $255,381,779 and
$229,195,681, respectively.
Total revenues decreased by $896,252 or 22.4% from $4,007,946 to $3,111,694
from the three months ended September 30, 1996 to the three months ended
September 30, 1997. The decrease in revenues was primarily due to a decrease
in acquisition fees of $1,040,839, and the early termination of an operating
lease in December 1996, which reduced rental income from operating leases by
$513,882. Those decreases in total revenues were partially offset by an
increase in management fees of $507,591, an increase in organization,
offering, distribution and underwriting fees of $137,887 and an increase in
interest income and other income of $12,991. The decrease in acquisition fees
is attributable to an unusually high volume of lease acquisitions during the
three months ended September 30, 1996 resulting from the expeditious
deployment of uninvested cash in the ICON Partnerships following the
acquisition of ICON Capital by the Company (the "Acquisition"). In general,
the Company expects that investment activity on behalf of the ICON
Partnerships will be commensurate with equity raised through the sale of
partnership interests. Management fees increased due to the increase in the
average size of lease portfolios managed by the Company. Organization,
offering, distribution and underwriting fees increased due to growth in the
sale of interests in the ICON Partnerships. The increase in interest and other
income is primarily due to an increase in fee income earned.
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<PAGE>
Selling, general and administrative expenses increased by $277,565 or 14.3%
from $1,937,795 to $2,215,360, from the three months ended September 30, 1996
to the three months ended September 30, 1997. The increase in selling, general
and administrative expenses was due primarily to an increase in salaries and
benefits of $260,208 and an increase in travel and lodging of $38,663.
Salaries and benefits have increased due to the Company's recruitment of
additional senior executives at an average salary that is higher than in the
comparable prior period. Travel and lodging increased due to: (i) increased
business development travel with respect to new transactions, and (ii)
expenses incurred to increase the sale of interests in the ICON Partnerships
by recruiting new broker/dealers.
Depreciation and amortization decreased by $459,724 or 75.9% from $605,607
to $145,883 from the three months ended September 30, 1996 to the three months
ended September 30, 1997. Depreciation and amortization includes the
amortization of the costs of organizing and offering the sale of interests in
the ICON Partnerships and the depreciation and amortization of fixed assets,
leasehold improvements, and equipment under an operating lease. This decrease
was primarily due to a decrease in depreciation of equipment under an
operating lease of $431,186 as a result of the early termination of the lease.
The amortization of goodwill increased by $133,220 or 139.7% from $95,344 to
$228,564 from the three months ended September 30, 1996 to the three months
ended September 30, 1997. The Company's goodwill (i.e., costs in excess of net
assets of business acquired) relates to the Acquisition. This increase is the
result of amortizing goodwill for the entire three-month period in 1997 as
compared to recognizing slightly more than a month of amortization in the
three-month period ended September 30, 1996.
Interest expense decreased from $183,412 to $152,307 or 17.0% from the three
months ended September 30, 1996 to the three months ended September 30, 1997.
The decrease in interest expense is due primarily to the decrease in interest
on non-recourse financings of $82,696 as a result of the early termination of
the operating lease.
Net income decreased $401,786 or 130.5% from net income of $580,822 for the
three months ended September 30, 1996 to net income of $179,036 for the three
months ended September 30, 1997. The decrease is primarily attributable to an
increase in amortization of goodwill and a decrease in revenues.
Six Months Ended September 30, 1997 Compared to Six Months Ended September
30, 1996
The Company acquired $82,145,308 and $92,328,966 (including cash paid and
debt incurred or assumed) in equipment subject to lease and equipment
financing transactions on behalf of the ICON Partnerships, and raised
$13,866,539 and $12,544,192 of ICON Partnership capital for the six months
ended September 30, 1997 and 1996, respectively.
Total revenues decreased by $1,192,799 or 17.8% from $6,712,045 to
$5,519,246 from the six months ended September 30, 1996 to the six months
ended September 30, 1997. The decrease in revenue was primarily due to a
decrease in acquisition fees of $1,128,882, and the early termination of an
operating lease in December 1996, which reduced rental income from operating
leases by $1,027,764. Those decreases were partially offset by an increase in
management fees of $709,372, an increase in organization, offering,
distribution and underwriting fees of $73,575 and an increase in interest
income and other income of $180,900. The decrease in acquisition fees is
attributable to an unusually high volume of lease acquisitions during the six
months ended September 30, 1996 resulting from the expeditious deployment of
available cash in the ICON Partnerships. In general, the Company expects that
investment activity on behalf of the ICON Partnerships will be commensurate
with equity raised. Management fees increased due to the increase in the
average size of lease portfolios managed by the Company. Organization,
offering, distribution and underwriting fees increased due to growth in the
sale of interests in the ICON Partnerships following the Acquisition.
Selling, general and administrative expenses increased by $459,316 or 11.6%
from $3,961,671 to $4,420,987, from the six months ended September 30, 1996 to
the six months ended September 30, 1997. The increase in selling, general and
administrative expenses was due primarily to an increase in travel and lodging
of
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$222,514, an increase in salaries and benefits of $90,656, and an increase in
rent and utilities of $33,231. Salaries and benefits have increased due to the
Company's recruitment of additional senior executives at an average salary that
is higher than in the comparable prior period.
Depreciation and amortization decreased by $787,670 or 67.8% from $1,161,770
to $374,100, from the six months ended September 30, 1996 to the six months
ended September 30, 1997. This decrease was primarily due to a decrease in
depreciation of equipment under an operating lease of $852,868 as a result of
the early termination of the lease.
The amortization of goodwill increased by $361,783 or 379.5% from $95,344 to
$457,127 from the six months ended September 30, 1996 to the six months ended
September 30, 1997. The Company's goodwill (i.e., costs in excess of net assets
of businesses acquired) relates to the acquisition of ICON Capital and ICON
Securities by the Company on August 21, 1996. This increase is the result of
amortizing goodwill for the entire six month period in 1997 as compared to
recognizing slightly more than a month of amortization in the six month period
ended September 30, 1996.
Interest expense increased from $277,000 to $353,908 or 27.8% from the six
months ended September 30, 1996 to the six months ended September 30, 1997. The
increase in interest expense is due primarily to a full six months of interest
on the debt associated with the acquisition of ICON Capital and ICON
Securities, partially offset by the decrease in interest on non-recourse
financings of $174,897 as a result of the early termination of the operating
lease.
During the six months ended September 30, 1997 the Company refinanced the
notes payable-seller financing with proceeds received from a $3,000,000 term
loan. The Company realized a gain of $122,206 ($73,324 net of related taxes) in
connection with the early extinguishment of the debt. The gain has been
recorded as an extraordinary item.
Net income decreased $797,557 from net income of $611,294 for the six months
ended September 30, 1996 to a net loss of $186,263 for the six months ended
September 30, 1997. The net loss is due to increases in amortization of
goodwill and interest expense, both attributable to the Acquisition and the
other factors described above.
YEAR ENDED MARCH 31, 1997 COMPARED TO YEAR ENDED MARCH 31, 1996
The Company acquired $204,153,662 and $94,415,959 (including cash paid and
debt assumed or incurred) in equipment subject to lease and equipment financing
transactions on behalf of the ICON Partnerships, and raised $24,193,537 and
$27,463,913 of ICON Partnership capital for fiscal 1997 and 1996, respectively.
As of March 31, 1997 and 1996, the Company managed equipment subject to lease
on behalf of the ICON Partnerships with a net investment of $258,784,493 and
$230,550,843, respectively.
Total revenues increased by $3,397,285 or 32.5% from $10,444,491 to
$13,841,776, from fiscal 1996 to fiscal 1997. The increase in revenues was due
to an increase in acquisition fees of $2,444,401, an increase in rental income
from an operating lease of $531,891, an increase in management and
administrative fees of $295,330, and an increase in organization, offering,
distribution and underwriting fees of $64,711. The increase in acquisition fees
was caused by an increase in lease transactions entered into on behalf of the
ICON Partnerships. Rental income from an investment in an operating lease
increased due to an acceleration of rental receivables upon early termination.
Management and administrative fees increased due to the increase in the average
size of lease portfolios managed by the Company on behalf of the ICON
Partnerships. Organization, offering, distribution and underwriting fees
increased due to an increase in capital raised for the ICON Partnerships.
Selling, general and administrative expenses decreased by $286,251 or 3.4%
from $8,494,559 to $8,208,308, from fiscal 1996 to fiscal 1997. The decrease in
selling, general and administrative expenses was due primarily to a decrease in
salaries and benefits of $493,078, and a decrease in management fees paid by
ICON Securities to its former parent of $163,691. These decreases were
partially offset by an increase in travel and lodging of $187,893. Salaries and
benefits decreased due to a temporary reduction in the number of employees;
positions which have since been filled with new hires. Travel and lodging
increased due to: (i) temporary expenses resulting from employee travel to
Company headquarters prior to the opening of the Boston
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<PAGE>
office, (ii) increased national business development travel with respect to new
transactions, and (iii) expenses incurred to increase the sale of interests in
ICON Partnerships by recruiting new broker/dealers.
Depreciation and amortization increased $642,045 or 44.1% from $1,455,309 to
$2,097,354 from fiscal 1996 to fiscal 1997. This increase was primarily due to
an acceleration of depreciation of equipment under an operating lease.
The amortization of goodwill for fiscal 1997 relates to the costs in excess
of net assets acquired in connection with the August 20, 1996 acquisition of
ICON Capital and ICON Securities.
Interest expense increased by $447,782 or 124.0% from $361,072 to $808,854
from fiscal 1996 to fiscal 1997. The increase in interest expense is due
primarily to the interest expense on the debt associated with the Acquisition.
Net income increased $966,084 from net income of $58,888 for fiscal 1996 to
$1,024,972 for fiscal 1997. This increase is attributable to an overall
increase in revenues partially offset by an increase in the amortization of
goodwill and an increase of interest expense.
YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995
The Company acquired $94,415,959 and $117,941,656 (in cash paid and debt
assumed or incurred) in equipment subject to lease and financing transactions
on behalf of the ICON Partnerships, and raised $27,463,913 and $18,216,586 of
capital on behalf of the ICON Partnerships, for fiscal 1996 and 1995,
respectively. As of March 31, 1996 and 1995, the Company managed leased
equipment on behalf of the ICON Partnerships with a net investment of
$230,550,843 and $197,122,087, respectively.
Total revenues increased by $1,309,350 or 14.3% from $9,135,141 to
$10,444,491, from fiscal 1995 to fiscal 1996. The increase in revenues was due
to an increase in management and administrative fees of $1,049,302, an increase
in organization, offering, distribution and underwriting fees of $607,172 and
an increase in rental income of $348,591. These increases were partially offset
by a decrease in acquisition fees of $717,453. Management fees increased due to
the increase in the average size of lease portfolios managed by the Company.
Organization, offering, distribution and underwriting fees increased due to an
increase in the sale of interests in the ICON Partnerships. Acquisition fees
decreased due to a reduction in new lease transactions entered into for the
ICON Partnerships. Rental income increased from 1995 to 1996 due to a lease
restructuring and renewal in 1996.
Selling, general and administrative expenses increased by $1,305,139 or 18.1%
from $7,189,420 to $8,494,559 from fiscal 1995 to fiscal 1996. The increase in
selling, general and administrative expenses was due primarily to an increase
in salaries and benefits of $466,681, an increase in management fees paid by
ICON Securities to its parent of $292,107 and an increase in travel and lodging
costs of $107,905. Salaries and benefits increased due to growth in the number
of employees from fiscal 1995 to fiscal 1996 and the effects of pay increases
over that period.
Depreciation and amortization increased $424,864 or 41.2% from $1,030,445 to
$1,455,309 from fiscal 1995 to fiscal 1996. This increase was primarily due to
an increase of $100,409 in the amortization of the costs of organizing and
offering the sale of interests in ICON Partnerships and an increase in
depreciation of equipment under operating leases of $332,278 as a result of
acceleration of depreciation, partially offset by a decrease in the
depreciation of fixed assets and amortization of leasehold improvements of
$7,823 due to a decrease in the average amount of depreciable assets.
Interest expense decreased by $28,144 or 7.2% from $389,216 to $361,072 from
fiscal 1995 to fiscal 1996. The decrease in interest expense is due primarily
to the reduction in debt outstanding.
Net income decreased $104,429 from net income of $163,317 for fiscal 1995 to
$58,888 for fiscal 1996. This decrease was primarily due to an increase in
selling, general and administrative expenses and depreciation and amortization
partially offset by an increase in revenue.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flow is comprised of cash flow from operations,
investing and financing activities. Historically, the Company has financed its
operations primarily through fees earned from the management of the ICON
Partnerships.
Cash Flow From Operations. The Company generated cash flow from operating
activities of ($492,088) and $2,972,377 during the six months ended September
30, 1997 and 1996, respectively. Cash flow from operating activities was lower
than the net loss of $186,263 and higher than the net income of $611,294, for
the six months ended September 30, 1997 and 1996, respectively, primarily as a
result of changes in non-cash expenses such as depreciation and amortization
and changes in other assets and liabilities. The Company generated cash flow
from operating activities of $4,159,895, $344,203 and $491,972 for fiscal
1997, 1996 and 1995, respectively. Cash flow from operating activities was
higher than net income of $1,024,972, $58,888 and $163,317 for fiscal 1997,
1996 and 1995, respectively, primarily as a result of non-cash expenses such
as depreciation and amortization. A significant increase in cash flows from
operating activities for fiscal 1997, relative to net income for fiscal 1997,
also resulted from the significant increase in deferred taxes generated as a
result of the higher earnings which are payable in the future.
Cash Flow From Investing Activities. The Company generated cash flow from
investing activities of $118,978 and ($262,097) for the six months ended
September 30, 1997 and 1996, respectively, and $2,774,433, $158,694 and
$370,766 in fiscal 1997, 1996 and 1995, respectively. The Company's use of
cash flow for investing activities historically has been related to the
acquisition of fixed assets for the Company and the costs associated with the
sale of interests in the ICON Partnerships. During fiscal March 31, 1997 (and
the six months ended September 30, 1996) however, the Company acquired all the
outstanding common stock of ICON Capital and ICON Securities, which included
the use of $2,683,000 of the Company's available cash.
Cash Flow From Financing Activities. The Company used cash flow from
financing activities of $20,911 and $262,097 for the six months ended
September 30, 1997 and 1996, respectively, and $823,209, $391,407 and $287,908
in fiscal 1997, 1996 and 1995, respectively. Historically, the Company's cash
used in financing activities has been limited to principal payments on
outstanding indebtedness associated with the purchase of furniture and
fixtures. For the year ended March 31, 1997, cash flow from the Company's
financing activities included $134,000 in equity and $2,599,000 in
subordinated indebtedness when the Company was initially capitalized. These
funds, along with seller financing, were used to acquire the outstanding
common stock of ICON Capital and ICON Securities on August 21, 1996. In
addition, in June 1997, the Company refinanced the remaining portion of its
notes payable to the seller with a $3,000,000 loan that is to be repaid over
36 monthly installments of $99,177 with an interest rate of 11.5%. On August
21, 1997, ICON Capital entered into a one-year renewable unsecured line of
credit agreement. The maximum amount available under the line of credit
agreement is $600,000, all of which was outstanding as of September 30, 1997.
Future Liquidity. The Company's lease finance business will be capital
intensive and will require access to substantial short-term and long-term
credit to fund new equipment leases and financing. Immediately following the
Offering, the Company will have approximately $103.5 million in cash, most of
which it intends to deploy expeditiously to acquire large ticket Seasoned
Leases. The Company's uses of cash may also include payment of interest
expense, repayment of borrowings, operating and administrative expenses,
income taxes and capital expenditures. The Company believes that the net
proceeds from the Offering, along with non-recourse asset-backed financing and
cash from operations, will be sufficient to fund its operations and lease
acquisitions through 1998. The Company anticipates it will fund the initial
acquisition and origination of small ticket financing transactions on behalf
of the Company through warehouse finance facilities. The Company anticipates
that the transactions financed thereby will be refinanced from time to time
through securitizations or other structured finance transactions.
28
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THE COMPANY
ICON Holdings is a Delaware corporation incorporated in May 1996 for the
purpose of acquiring ICON Capital Corp., a Connecticut corporation established
in 1985 and ICON Securities Corp., a New York corporation formed in 1982,
which is a National Association of Securities Dealers ("NASD") registered
broker-dealer. ICON Holdings is owned fifty percent by Summit Asset Holding
L.L.C. ("Summit"), an indirect subsidiary of Summit Group Plc, a diversified
financial and business services group based in the United Kingdom, and fifty
percent by Warrenton Capital Partners L.L.C. ("Warrenton"), the owners of
which are the three top executives of the Company; Beaufort J. B. Clarke, Paul
B. Weiss and Thomas W. Martin. The shares of Common Stock owned by Summit will
be redeemed by the Company upon consummation of the Offering. See "Certain
Transactions." Following the acquisition of ICON Capital in August 1996, the
Company established a new wholly owned subsidiary, ICON Funding Corp. ("ICON
Funding"), a Delaware corporation, to expand the group's origination and
funding of small ticket financing transactions and to develop a securitization
capability. In connection with the Offering, the Company recently formed a new
wholly owned subsidiary, ICON Leasing Corp. ("ICON Leasing"), a Delaware
corporation, to acquire, hold for investment and remarket large ticket
Seasoned Leases. Upon completion of the Offering, ICON Holdings will be
engaged in no business other than serving as the holding company for ICON
Leasing, ICON Capital, ICON Funding and ICON Securities and other non-material
subsidiaries.
The Company's principal executive offices are located at 600 Mamaroneck
Avenue, Harrison, New York 10528-1632 and its telephone number at such address
is (914) 698-0600.
Set forth below is an organizational chart illustrating the relationship
between ICON Holdings and each of its material operating subsidiaries and the
principal activities of each such subsidiary.
ICON HOLDINGS CORP.
------------------------------------------------------------------
ICON ICON ICON ICON
Leasing Funding Capital Securities
Corp. Corp. Corp. Corp.
Acquisition Small Ticket General NASD Broker-
of Large Financing Partner of Dealer
Ticket Transactions ICON Managing Sale
Seasoned and Partnerships of Interests
Leases Securitizations in ICON
Partnerships
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BUSINESS
The Company is a specialty finance company engaged in equipment leasing and
financing. The Company intends, through its ICON Leasing subsidiary, to use
the proceeds of the Offering primarily to acquire, hold for investment and
remarket large ticket Seasoned Leases. A "large ticket" equipment lease
involves equipment with an original equipment cost in excess of $1 million,
and typically in excess of $10 million as in the case of aircraft and marine
vessels. An equipment lease is considered a "Seasoned Lease" by the Company
when its remaining term is short enough (often the last third of the lease
term) that (i) the Company can confidently estimate the likely residual value
of the underlying equipment at lease expiry, and (ii) most of the Company's
total return from such lease is expected to be derived from the realization of
such residual value at lease expiry by selling or re-leasing such equipment to
the lessee or to a third party. The Company believes that currently there are
relatively few participants in the market for large ticket Seasoned Leases
and, consequently, opportunities exist for experienced participants to achieve
attractive returns. To date, the only acquisitions of Seasoned Leases by the
Company have been by its ICON Capital subsidiary on behalf of limited
partnerships (the "ICON Partnerships") which ICON Capital sponsors and
manages. Since August 1996, when current management assumed control, ICON
Capital has invested, or committed to invest, more than $207 million (as
measured by gross purchase price) on behalf of the ICON Partnerships in
Seasoned Lease transactions such as aircraft leased to Airbus Industries, US
Airways, Inc., Continental Airlines, Inc. and Federal Express Corporation;
marine vessels leased to Occidental Petroleum Corporation and SEACOR-Smit,
Inc.; tractor-trailer equipment leased to Wal-Mart Stores, Inc.; drilling rig
equipment leased to Rowan Cos., Inc.; and telecommunications equipment leased
to America Online, Inc. and Texas Utilities Services, Inc. The Offering will
enable the Company to pursue Seasoned Lease acquisition opportunities for its
own benefit rather than exclusively on behalf of the ICON Partnerships. See
"--Recent Transactions."
The Company's ICON Capital subsidiary is engaged in acquiring and managing
for the benefit of the ICON Partnerships (i) large ticket Seasoned Leases, and
(ii) to a lesser degree, "small ticket" leases (those involving equipment with
an original equipment cost less than $1 million, and typically less than
$150,000 as in the case of computers or office equipment). From the formation
of the first ICON Partnership in 1988 to September 30, 1997, ICON Capital has
raised funds for seven ICON Partnerships, the proceeds of which have been
invested in more than $843 million of equipment (as measured by gross purchase
price) subject to lease. Following the acquisition of ICON Capital by the
Company in 1996, the ICON Partnerships have concentrated on acquiring large
ticket Seasoned Leases. The Company intends to sponsor an eighth ICON
Partnership after the subscription period for the seventh ICON Partnership
ends in late 1998. After the Offering, the Company, through its ICON Funding
subsidiary, will also acquire and originate finance-type leases of, and loans
secured by, small ticket equipment (collectively, "small ticket financing
transactions") for its own benefit and for that of the ICON Partnerships.
Prior to the Offering, ICON Funding engaged in small ticket financing
transactions only for the benefit of the ICON Partnerships. ICON Funding
intends to utilize warehouse finance facilities to fund future small ticket
financing transactions, which will be refinanced through securitizations or
other structured finance transactions. While the Company expects that after
the Offering the majority of its revenues and earnings will be derived from
the large ticket Seasoned Lease acquisition and remarketing activities of ICON
Leasing, it anticipates that ICON Capital and ICON Funding will continue to
make material contributions to the Company's results of operations. See "--
Current Businesses of the Company."
MANAGEMENT
The Company's three most senior executives, none of whom had any
relationship with the Company prior to their participation in the acquisition
of ICON Capital in 1996, have extensive experience in equipment lease
financing and remarketing in general and Seasoned Lease acquisitions in
particular. The Company believes that these executives, who replaced the
former management of ICON Capital, have a record of success in the acquisition
of Seasoned Leases. Beaufort J. B. Clarke, the Chairman and Chief Executive
Officer of the Company, has more than twenty years of senior management
experience in the leasing industry, including chief
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executive and other senior executive positions at Griffin Equity Partners,
Inc. and Gemini Financial Holdings, Inc., both equipment leasing companies
engaged in the acquisition of Seasoned Leases. Mr. Clarke was a Vice President
and one of the founders of Encore International, Inc. (now known as AT&T
Systems Leasing) prior to its acquisition by AT&T Capital Corporation. Paul B.
Weiss and Thomas W. Martin, the Executive Vice Presidents of the Company, have
approximately 10 and 15 years of experience in the industry, respectively.
Each worked with Mr. Clarke at Griffin Equity Partners and Gemini Financial
Holdings, where they and Mr. Clarke specialized in Seasoned Lease
transactions, in addition to serving in other positions in the industry. These
three individuals and the four senior vice presidents (three of whom have
joined the Company since August 1996) of the Company have approximately 85
years of combined experience in the equipment leasing industry. See
"Management."
INDUSTRY OVERVIEW
Leasing provides an equipment user with an alternative to purchasing the
equipment it needs, usually in a manner which has favorable effects on its
cash flow and balance sheet. Leasing generally provides a lessee with greater
flexibility than ownership in the event it outgrows the equipment or, due to
strategic shifts in business orientation, decides not to keep it in the
future. The Equipment Leasing Association of America ("ELA"), based on U.S.
Department of Commerce data, estimates that in the United States,
approximately $169 billion of the estimated $566 billion spent on productive
capital assets in 1996 was financed by means of leasing. ELA estimates that
80% of all U.S. businesses use leasing or financing to acquire equipment.
The size of the market for Seasoned Leases is primarily a function of the
number of leases entered into in the past, adjusted downward for leases that
have terminated. ELA estimates that from 1987 through the end of 1997,
equipment leasing volume in the United States will be approximately $1.4
trillion. Sellers of Seasoned Leases are believed to have one or more of the
following objectives in seeking and consummating such a sale: (i) realization
of book profit by selling at a premium to book value because the fair market
value of the equipment is above such book value; (ii) removal of the actual or
perceived risk of residual loss upon return of equipment by a user at lease
expiry; (iii) removal of actual or perceived credit risk from the seller's
balance sheet; (iv) repositioning of the seller's tax-motivated investment
portfolio resulting from a change in tax law, change in the seller's profit
base or outlook, or the seller becoming subject to alternative minimum tax;
and (v) freeing up capital for investment in core business activities (which
may include making new lease investments in the case of leasing company
sellers).
The Company believes that the relative lack of competition in the market for
large ticket Seasoned Leases is due to the fact that Seasoned Lease
transactions often fail to meet many leasing companies' primary objectives.
Many large equipment leasing companies are subsidiaries of financial
institutions that have tax deferral objectives and are adverse to taking
substantial equipment residual exposure. Many new equipment leases are highly
structured and have a very long effective term to maximize the economic
benefit of tax deferral and minimize residual value risk. In particular, most
new equipment leases are designed to allow the initial lessor to recover most
or all of its investment from contractual rent payments to be received under
the lease. The Company believes that most large ticket Seasoned Lease
acquisitions are completed in the final one-third of the term of an equipment
lease, when the fair value of the equipment subject to lease is more likely to
exceed the seller's book value. When acquired at a relatively late stage in
the lease term, these large ticket Seasoned Leases have fewer tax deferral
attributes (due to the short term) and more residual value exposure (because
only a small amount of the secondary market purchaser's investment will be
repaid from the remaining contractual rents) than new large ticket leasing
deals.
In addition, Seasoned Lease transactions may require the purchaser to accept
certain key terms and conditions which it can avoid or limit in a new lease
transaction customized to its needs. New equipment leasing transactions can be
individually selected, priced, and documented in a manner that precisely
matches the objectives of a leasing company; objectives which may include
yield requirements, creditworthiness considerations, equipment preferences,
industry preferences, appetite for residual value risk, and documentation
31
<PAGE>
needs. The acquisition of Seasoned Leases conversely requires that the
purchaser accept all aspects of the existing lease agreement and underlying
equipment which is the subject of the sale, and to conduct extensive due
diligence into the current state of affairs of the transaction and the user.
In such cases, the user has little or no obligation to cooperate with such an
investigation and the prospective purchaser may be frustrated in its efforts
to complete such investigation, while in a new lease transaction, full
cooperation would be a condition to funding. Further, certain restrictions on
the transfer of the equipment may exist and certain important documents
underlying the transaction may be missing or made obsolete by external
changes, and certain of the equipment underlying the transaction may have been
damaged. In the opinion of the Company, many such risks can be mitigated
through due diligence and structuring, but many leasing companies find
secondary market transactions unsuitable for their objectives or perceive such
transactions to be unduly risky, particularly in the case of leasing companies
associated with commercial banks and other typically conservative
institutions.
Another area of the equipment leasing industry in which the Company competes
is the small ticket sector, which is undergoing rapid growth, in part due to:
(i) the consolidation of the banking industry, which has eliminated many of
the smaller community banks that traditionally provided equipment financing
for small to mid-size businesses, forcing these businesses to seek alternative
financing rather than deal with the approval process of large commercial
banks; (ii) stricter lending requirements of commercial banks; (iii) a trend
toward instant approvals at the point of sale made possible by improved
technology; and (iv) the adoption of accounting pronouncements concerning the
accounting treatment of transactions with captive finance company
subsidiaries, which has caused a number of manufacturers to eliminate their
finance companies, resulting in an increased demand for independent financing.
STRATEGY
The Company intends to focus principally on the acquisition, management and
remarketing of large ticket Seasoned Leases to provide attractive total
returns consistent with prudent risk management. The Company will also pursue
related equipment lease opportunities that complement its large ticket
Seasoned Lease acquisition activity. The Company will employ the following
strategies to achieve its objectives:
Capitalize on Inefficiencies in the Market for Seasoned Leases. No formal
market exists for prospective sellers of large ticket Seasoned Leases.
Compared to the market for new equipment leasing, there are relatively few
participants in the secondary market focusing principally on large ticket
Seasoned Lease transactions, and even fewer considering as many different
equipment types as does the Company. The Company believes most companies
engaged in equipment leasing have not actively pursued Seasoned Lease
transactions primarily because these transactions may not meet, or may
conflict with, the principal objectives of such companies (primarily to obtain
tax deferral while avoiding residual value risk). As a result of this relative
lack of competition, the Company has been and expects to continue to be able
to find large ticket Seasoned Lease acquisition opportunities on attractive
terms.
Utilize the Experience and Resources of Management to Source Seasoned Lease
Opportunities. The Company believes that the experience and creativity of
senior management and its existing network of referral sources will provide
the Company with a steady flow of Seasoned Lease acquisition opportunities.
Potential sellers include companies that are no longer making lease
investments; public companies that may from time to time seek out accounting
gains to contribute to reported earnings; companies that could benefit from
recovering and redeploying invested capital; banks and other financial
institutions that have been parties to consolidation transactions and seek to
dispose of assets that are not consistent with the surviving company's
objectives; and companies that desire to limit residual value risk from leases
held. The Company's willingness to work with a potential seller to identify
its objectives and to creatively develop transaction structures, such as
residual value option transactions and residual sharing arrangements, to meet
that seller's objectives is in part responsible for the Company's success in
sourcing Seasoned Lease acquisition opportunities. The Company also has an
extensive referral network of leasing companies, leasing brokers, investment
bankers, attorneys, lenders and appraisers that are expected to continue to
refer Seasoned Lease acquisition opportunities to the Company.
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Apply a Disciplined, Value-Based Approach to Lease Investments. The Company
uses a disciplined, value-based approach to evaluate Seasoned Lease
acquisition opportunities in an effort to maximize return while minimizing
credit and residual value risk. The Company generally targets transactions
from which it believes it can achieve a total rate of return of at least 20%
per annum, compounded monthly. In evaluating a transaction, the Company
considers the type of equipment involved, the creditworthiness of the lessee,
the provisions of the lease contract (including the equipment maintenance and
return requirements), the time remaining to lease expiry, and management's
experience in remarketing such equipment. The Company engages nationally
recognized independent appraisers to assist it in determining the value likely
to be realized from the leased equipment at lease expiry. In most
transactions, the Company will seek out leasing opportunities where the
remaining lease term is greater than two years and, on expiry of the lease, at
least one-third of the economic useful life of the equipment is likely to
remain, based on the equipment age or utilization history. To maximize its
remarketing options (and its returns), the Company seeks to avoid investing in
equipment that may become technologically obsolete or is otherwise of limited
utility (including from excessive wear and tear). Also, the Company generally
enters into leasing transactions involving equipment types that can be
feasibly moved to other locations or are considered essential to the
operations of the lessee and either impossible to replace or only replaceable
at a significantly higher cost than its fair market value. The Company
believes that there is a substantial pool of attractive Seasoned Leases, many
of which involve equipment such as commercial aircraft, marine vessels, and
other transportation and telecommunications equipment.
The creditworthiness of a lessee is also important because lessees with
inadequate financial resources may be unable to afford to comply with the
maintenance and return condition provisions of the lease contract, exposing
the lessor to costs associated with repair and return of equipment. A large
percentage of the Company's recent acquisitions on behalf of the ICON
Partnerships has consisted of the purchase of large ticket Seasoned Leases
where the lessee is rated investment grade (or is believed equivalent). Large
ticket transactions of this type are expected to represent a majority of the
Company's future Seasoned Lease acquisitions.
Proactively Manage Lease Investments to Maximize Total Returns. The Company
pursues numerous alternatives to maximize realization of residual values
through the sale or re-lease of the equipment to the lessee or to a third
party. In many cases, the amount of such realization may depend on the extent
to which the Company elects to enforce its rights under the lease. In general,
the Company will hold its lease investments until maturity, unless various
factors enable the Company to achieve what it believes would be a superior
result from disposing of the asset prior to maturity. Senior management and
the Company also have had success in working with lessees to restructure
leases to achieve greater profitability, while achieving other objectives of
the lessee, such as lowering periodic payments in exchange for a longer lease
term, which could benefit the Company to the extent that the present value of
the revised payment schedule is greater than the original payment schedule.
Pursue Related Opportunities Complementing Seasoned Lease Acquisitions. To
complement its large ticket Seasoned Lease activity, the Company intends to
expand its volume of small ticket financing transactions by adding sales and
marketing people to expand its referral network, and placing additional
emphasis on originating new lease opportunities by creating vendor programs.
The Company also may occasionally encounter opportunities to acquire companies
which operate in the large ticket or small ticket leasing business. These
companies may have portfolios of equipment subject to lease or relationships
that result in an additional volume of leasing or financing opportunities. To
the extent that such acquisitions can be completed at reasonable cost to the
Company and can immediately or over time add to the Company's portfolio of
lease investments, the Company will consider such transactions.
In addition, the Company may pursue an expanded presence in Europe. The
Company believes that many European markets have less competition for
attractive equipment leasing transactions. In the United Kingdom, for example,
recent accounting and regulatory changes have, in the opinion of the Company,
made the leasing of equipment a more attractive option relative to purchasing
than it had been before such changes. To the extent that such international
equipment leasing transactions can be structured to mitigate or remove certain
risks, such as currency exchange, protecting a lessor's interest through
equipment lien recordation, and taking advantage of beneficial local laws, the
Company believes that the leasing industry in Europe may present significant
opportunities.
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<PAGE>
SOURCING, EVALUATION AND ACQUISITION OF SEASONED LEASES
The Company conducts its acquisitions of large ticket Seasoned Leases
through an experienced staff of equipment leasing professionals. Described
below are the stages of a typical transaction:
Sourcing Process. The Company employs a team of professionals responsible on
a full-time basis for identifying opportunities to acquire Seasoned Leases
and, to a lesser degree, to identify lease opportunities for new or used
equipment. The Company operates primarily out of three facilities located in
Harrison, New York; San Francisco, California; and Boston, Massachusetts, and
in addition, operates out of a London office under a trading agreement with a
U.K.-based lease origination sales force. Upon completion of the Offering, the
Company intends to add an additional origination experienced leasing
professional to this team.
The Company has established an extensive referral network comprised of
leasing companies, leasing brokers, investment bankers, attorneys, lenders,
and equipment appraisers. The Company also advertises in trade press and
related periodicals, and conducts direct-mail, telemarketing, and fax
campaigns to keep prospective sellers and intermediaries aware of the
Company's interests and capabilities. As of September 30, 1997, the Company
had three employees dedicated to implementing marketing plans and coordinating
marketing activities with the Company's lease sources with respect to the
acquisition of large ticket Seasoned Leases. The Company is represented at
major equipment leasing conventions and trade shows held each year, and
several officers of the Company are active in the Equipment Leasing
Association of America, the United Association of Equipment Lessors and the
Eastern Association of Equipment Lessors, all well-recognized trade
associations.
Review and Analysis. The Company conducts a review and analysis of each
proposed lease transaction. Based on preliminary information about the
transaction, various appraisal firms are consulted for general feedback as to
possible residual value ranges and economic outcomes are forecast. On this
basis, a non-binding letter of intent to purchase a Seasoned Lease may be
issued subject to, among other things, a comprehensive due diligence review of
the equipment, the creditworthiness of the lessee, and the lease contract;
the completion of a purchase agreement acceptable to the Company; and approval
of the Investment Committee of the Company. Upon acceptance of the letter of
intent by the selling transaction party, the Company's due diligence typically
begins. The Company selects a nationally recognized appraiser or appraisers
which, based on their initial comments on the subject equipment as well as the
Company's experience with such appraisers, seem most knowledgeable about the
equipment. Such appraisers will provide a detailed appraisal report to the
Company, supplying estimates of the current value as well as estimates of
residual value at lease expiry. Such a report may include an on-site
inspection if the parties believe that such inspection could provide insight
into the future value of the equipment. Simultaneously, the Company's credit
department assembles all relevant financial statements, rating agency reports,
and related information that will enable it to make a determination as to the
creditworthiness of the lessee. Lessees whose securities are rated as
investment grade by both Moody's Investor Service and Standard & Poor's are
generally subject to a less intensive independent review. A comprehensive
investment write-up including the findings of the appraiser(s) and the
Company's legal department, as well as a summary and recommendation by the
Company's transaction professional, copies of the lease and related documents,
the financial statements of the lessee, the credit department analysis, and
any other attachments deemed appropriate, are then circulated to the Company's
Investment Committee for approval.
Lease Documentation Review. The Company evaluates each lease agreement and
related transaction documents for completeness and to confirm that the lease
provides suitable protection from contingencies that may otherwise affect the
total return prospects. In almost every case, the leases entered into or
acquired by the Company obligate the lessee to (i) pay all rents and payments
without diminution or offset, (ii) bear the risk of loss of the leased
equipment, (iii) pay applicable taxes, and (iv) indemnify the lessor against
claims arising from lessee's negligent acts and failure to maintain the
equipment. Many of such leases contain a provision prohibiting the assignment
or sublease of the leased equipment. Other common lease provisions require the
lessee to maintain both casualty insurance and liability insurance (naming the
Company as an additional insured) in an amount consistent with industry
standards, and to indemnify the Company against any loss or liability incurred
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<PAGE>
by or asserted against it arising out of such lease, or any performance
thereunder, or related to the equipment subject thereto, and to insure the
equipment, the Company and any other party with an interest in the equipment
from the normal risks of owning and operating the equipment. Additionally,
such leases commonly provide rights and remedies to the lessor upon the
occurrence of an event of default, which could include non-payment of rent,
breach of certain material covenants, or the bankruptcy or insolvency of the
Lessee.
Purchase Documentation. Simultaneously with the commencement of its due
diligence processes, the Company commences the negotiation of a purchase
agreement with the selling party. Such agreement describes all of the terms
and conditions of the proposed transaction, and in most transactions includes
comprehensive representations, warranties and indemnification provisions. The
Company typically requires the seller to represent and warrant, among other
things, that it has and can convey good and marketable title to the equipment;
that the lease is enforceable in accordance with its terms and is in full
force and effect; that no default has occurred; that the equipment has not, to
its knowledge, suffered a casualty, and is being maintained in accordance with
the lease; and that no other condition exists that would have a material
adverse effect on the Company's ability to achieve its economic expectations
other than as a result of unforseen credit losses or equipment residual value
shortfalls. From time to time, the Company may limit the representations and
warranties it seeks if, in its judgment, adequate confirmation of certain
attributes of the lease or the equipment can be gained from other sources. In
any event, the Company will require the selling party to indemnify it with
respect to losses in the event of a breach of any such representation and
warranty. Indemnification for loss may be limited to the Company's actual
damages or provide for a return of all of the Company's investment at an
agreed rate of return.
Investment Committee. The Investment Committee is currently comprised of
four executive officers, Messrs. Clarke, Weiss, Martin, and Kohlmeyer. The
Committee may, by unanimous vote and, subject to the general supervision of
the Company's Board of Directors, commit the Company to prospective
transactions.
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<PAGE>
RECENT TRANSACTIONS
The following table sets forth all transactions involving investments of
more than $1 million made or committed to by the Company since August 1996 on
behalf of the ICON Partnerships. The Company believes these transactions,
which represent approximately 80% (as measured by gross purchase price) of all
transactions completed on behalf of the ICON Partnerships since August 1996,
are illustrative of those that the Company expects to engage in after the
Offering. The parties identified as Lessee Party in the table are either the
lessee under the transaction documents or a parent company guarantor of a
subsidiary company which is the lessee.
<TABLE>
<CAPTION>
ICON
GROSS PARTNERSHIP
LESSEE PARTY EQUIPMENT DESCRIPTION PURCHASE PRICE INVESTMENT
------------ --------------------- -------------- -----------
<S> <C> <C> <C>
Federal Express
Corporation One DC10-30 aircraft $ 40,973,585 $ 6,000,000
Airbus
Industries One A300-200B4 aircraft 19,595,956 1,409,839
America Online,
Inc. Telecommunications equipment 18,311,382 1,317,021
SEACOR-Smit,
Inc. Three offshore supply vessels 17,100,000 4,275,000
Continental
Airlines, Inc. Three 737-300 aircraft 14,339,799 1,237,500
Rowan
Companies,
Inc. Offshore drilling rig 12,325,000 12,325,000
Continental
Airlines One DC10-30 aircraft 12,109,759 2,800,000
Occidental
Petroleum
Corp. Two anchor handling vessels 9,283,364 3,430,000
Texas Utilities
Services, Inc. Telecommunications equipment 9,177,567 1,745,550
US Airways,
Inc. Two de Havilland DHC-8-102 aircraft 6,819,250 3,619,250
Wal-Mart
Stores, Inc. 770 over-the-road trailers 4,554,815 2,803,175
------------ -----------
Totals $164,590,477 $40,962,335
============ ===========
</TABLE>
The Company intends to engage in similar transactions both for its own
benefit and for the benefit of the ICON Partnerships. See "--Resolution of
Potential Conflicts of Interest." To a lesser degree, the Company will also
continue to engage in small ticket financing transactions for its own benefit
and for the benefit of the ICON Partnerships.
CURRENT BUSINESSES OF THE COMPANY
ICON Capital--Sponsorship and Management of ICON Partnerships
Since 1988, ICON Capital has sponsored seven ICON Partnerships. ICON Capital
is the sole general partner of each of the seven ICON Partnerships, for which
it performs all services relating to their management. Currently, ICON Capital
is raising equity through the sale of interests in ICON Cash Flow Partners
L.P. Seven ("ICON Seven"). The first six ICON Partnerships are closed to new
investors, but ICON Capital continues to manage their portfolios. As of
September 30, 1997, ICON Seven had raised a total of $47 million in equity
from 2,149 investors and had purchased leased equipment with an aggregate
purchase price of approximately $170 million (as measured by gross purchase
price).
As the sole general partner of the ICON Partnerships, ICON Capital has
complete investment discretion over the proceeds of limited partnership unit
sales. Proceeds of unit sales are invested in equipment subject to lease to
achieve a partnership's stated investment objectives, which are to provide
cash flow from lease rentals or residual value realizations that: (i) will
fund fixed monthly distributions to limited partners through the fifth
anniversary of the partnership's final closing, and (ii) will thereafter be
distributed to the limited partners on a pro rata basis. Upon the acquisition
of ICON Capital in August 1996, the Company changed the investment approach of
the ICON Partnerships in a manner that was consistent with the Partnership
Agreements and, in the opinion of management, would provide superior total
return prospects to the limited partnerships without meaningful added risk.
Under this new investment approach, the ICON Partnerships have been pursuing
investments in large ticket Seasoned Lease transactions.
ICON Capital expects to be selling interests in ICON Seven until November
1998 through a nationwide network of broker/dealers. The Company anticipates
that it will form a new equipment leasing limited
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partnership fund after the subscription period for ICON Seven ends in 1998.
ICON Securities, a wholly owned subsidiary of the Company, is a NASD-
registered broker/dealer that serves as dealer/manager for the ICON
Partnership offerings, and in that capacity receives an underwriting fee equal
to 2.0% of gross offering proceeds of partnership units sold.
Most of the Company's historical revenues have been derived from the fees
its subsidiaries earn from the organization and management of the ICON
Partnerships. Fees earned by ICON Capital are governed by the Statement of
Policy regarding Equipment Programs adopted by the North American Securities
Administrators Association, Inc. ("NASAA Guidelines"). The NASAA Guidelines
are the de facto standard imposed by many Blue Sky administrators in
determining whether to approve the sale of interests in equipment leasing
investment programs in their states. The fees outlined below (payable to ICON
Capital as general partner unless otherwise noted) are those of ICON Seven,
whose limited partnership interests are currently being offered and sold to
the public. Such fee structure is substantially similar to the six prior ICON
Partnerships, and because of the NASAA Guidelines, it is anticipated that the
aggregate fees generated from any future ICON Partnership also will be
substantially similar to the aggregate of those set forth below:
<TABLE>
<S> <C>
Underwriting Fees (payable to ICON
Securities as dealer/manager)...... 2.0% of gross offering proceeds
Organizational and Offering Expense
Reimbursement...................... 3.5% of gross offering proceeds
Equipment Acquisition Fee........... 3.0% of equipment cost
Management Fees..................... 5.0% of gross rentals from operating
leases or 2.0% of gross rentals from full
payout leases
Reimbursement of Administrative
Fees............................... up to 2.0% of gross revenues
</TABLE>
In addition to the fees set forth above, there are other fees payable from
cash to be distributed to the limited partners of ICON Seven, which vary
depending on ICON Seven's performance. These fees require the payment to ICON
Capital of 1.0% of distributable cash prior to "payout" and 10.0% thereafter.
Payout occurs when ICON Seven's limited partners have received the return of
their initial investment plus an 8.0% cumulative return. A 3.0% subordinated
remarketing fee on equipment sales is also payable after payout. The aggregate
amount of management fees and reimbursement of administrative expenses
contractually owed to the Company upon collection of existing gross
receivables by the seven ICON Partnerships at their respective fiscal years
ended December 31, 1996 was approximately $10.3 million.
Under the ICON Partnership agreements, management fees payable to ICON
Capital are subordinate to the preferred cash distributions to limited
partners, on a cumulative basis. Management fees payable to the Company with
respect to certain of the ICON Partnerships have been deferred until the
limited partners of such partnerships have received their stated cash
distribution rate of return on a cumulative basis. Management fees deferred
for the period September 1, 1993 to March 31, 1997 totaled $758,452, and were
comprised of $36,263 for ICON Cash Flow A, $127,000 for ICON Cash Flow B and
$595,189 for ICON Cash Flow C. Since the formation of the first ICON
Partnership in 1988 to September 30, 1997, less than 5.0% of management fees
earned by ICON Capital have been deferred due to such subordination
provisions. In order to provide limited partners of ICON Cash Flow C with an
opportunity to obtain improved returns, the Company is currently soliciting
the consent of the limited partners to amend the partnership agreement to
provide for an extension of the reinvestment period, which may result in
increased future distributions to the limited partners. If such consent is not
obtained, ICON Capital will have the option to liquidate the partnership's
investments and to receive its deferred management fees to the extent
available. If such a liquidation were to occur, the Company currently
anticipates it would receive substantially all of its deferred management
fees. See Note 3 of the Notes to the Consolidated and Combined Financial
Statements.
The Company's servicing responsibilities with respect to each lease it may
acquire and with respect to the ICON Partnership leases vary, depending on the
nature of the transaction size and the circumstances under which the lease was
acquired or originated. Services to be provided by ICON Capital may include
billing, processing payments, paying taxes and insurance and performing
collection and remarketing functions. In addition, on behalf of its limited
partners, the Company prepares investor reports, makes regulatory filings, and
oversees investor relations matters.
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<PAGE>
ICON Funding -- Small Ticket Financing Transactions and Securitizations
ICON Funding was established in 1996 to expand (initially on behalf of the
ICON Partnerships) the Company's small ticket financing transaction activity
and to develop a securitization capability. The Company intends to increase
small ticket lease volume primarily for its own benefit by (i) adding sales
and marketing personnel to expand its referral network, (ii) establishing
vendor programs and emphasizing portfolio purchases, and (iii) acquiring
businesses in this market sector. The Company anticipates that ICON Funding
will fund the initial acquisition and origination of small ticket financing
transactions through warehouse finance facilities. The Company anticipates
that the transactions financed thereby will be refinanced from time to time
through securitizations or other structured finance transactions.
The FundingPlus division of ICON Funding currently originates the Company's
small ticket financing transactions primarily through strategic alliances it
has formed with a network of independent leasing companies, lease brokers and
equipment vendors. Such transactions generally involve equipment with a
purchase price of less than $150,000 and an average, in the most recent
completed fiscal year, of approximately $30,000.
ICON Funding also (i) develops vendor leasing programs, (ii) acquires
equipment lease portfolios of individual transactions in excess of $100,000 on
a "wholesale" basis from vendors or finance companies, and (iii) develops
lease financing programs for select equipment-intensive niche industries that
offer attractive profit potential consistent with the Company's underwriting
standards.
Small ticket underwriting guidelines are established by the Company's credit
committee. These guidelines require a credit investigation for the lessee,
including an analysis of the personal credit of the owner or shareholder that
typically guarantees the lease, verification of time in business and corporate
name, and bank and trade references. A proprietary credit scoring model is the
primary method for underwriting FundingPlus leases under $50,000.
Proposed financing transactions greater than $50,000 are submitted to the
Company's credit department for evaluation. In connection with its review, the
credit department applies established underwriting policies and procedures.
Proposed transactions are reviewed and assessed by a credit analyst. If the
transaction has sufficient essential positive elements, a formal credit write-
up is prepared. After review and approval by a senior officer of ICON Funding,
the transaction is then presented to ICON Funding's credit committee. The
committee meets regularly to review specific transactions. Documentation is
prepared and reviewed by the Company's legal department. In addition, all
terms and conditions delineated in a credit approval memorandum must be
verified by both the credit and legal departments prior to funding. As of
September 30, 1997, nine of the Company's sales force of twelve employees were
focused on small ticket financing transactions.
FundingPlus's credit guidelines are based upon a two-level screening process
to further enhance portfolio performance and reduce the risk of loss. The
Company first approves a broker prior to accepting any of such broker's
transactions. The Company performs a full review of the broker, including its
resources and creditworthiness, and establishes an "exposure limit" with
regards to accepting deals. FundingPlus personnel conduct a background
investigation of each prospective source. The review requires such source (i)
to have a minimum of two years in the leasing industry, (ii) to produce
references, (iii) to produce verification of bank and trade references, and
(iv) to provide a minimum of two years financial statements or tax returns and
past credit history, and also includes overview of the industry in which the
source generates most of its leases. The FundingPlus program prefers brokers
that market to specific industries or selected vendors. All purchased
transactions are full recourse to the brokers on a first payment default
basis. The Company monitors the performance of leases by each broker and drops
brokers exhibiting high delinquencies and defaults in their originations.
ICON Funding's securitization capability was inaugurated in September 1997
with the establishment of ICON Receivables 1997-A, a special-purpose
subsidiary set up by ICON Funding for the benefit of the ICON
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<PAGE>
Partnerships ("1997-A"). 1997-A securitized a pool of 1,421 leases and loans
with an aggregate remaining contract balance of approximately $59.4 million.
1997-A issued three tranches of Class A Notes with a weighted average coupon of
6.59%. These bonds were offered by Prudential Securities, Inc. and were rated
investment grade by both Duff & Phelps Credit Rating Co. and Fitch Investors
Service, L.P. Following the closing of 1997-A, the ICON Partnerships
established a second warehouse facility, ICON Receivables 1997-B ("1997-B"),
structurally identical to 1997-A. This second facility is currently acquiring
lease transactions with a view towards their securitization once a sufficient
number of such transactions have been acquired.
RESOLUTION OF POTENTIAL CONFLICTS OF INTEREST
Due to ICON Capital's fiduciary and contractual obligations in its capacity
as general partner of the ICON Partnerships, the Company's ICON Capital
subsidiary is required to invest capital on behalf of the ICON Partnerships in
a manner which may compete with the Company's investment objectives and have
the effect of reducing the availability of suitable transactions for the
Company. Under the Partnership Agreements, ICON Capital has agreed with the
limited partners to refer investment, opportunities to the ICON Partnerships
until such time as all initial capital contributions have been fully invested
subject to limitations such as the partnership's cash available for investment,
existing debt, structure of the transaction, or creditworthiness of the lessee.
The Company believes that this potential for conflicts of interest will not
substantially impair the Company's objective of engaging in such transactions
for its own benefit due to a substantial number of transaction opportunities
which the Company believes are and will continue to be available for the
foreseeable future. Further, the Company believes that the amount of capital
which the ICON Partnerships will have to invest from time to time, whether from
initial contributions or otherwise, will only infrequently be in amounts great
enough to present meaningful competition to the interests of the Company's own
investment objectives with respect to large ticket Seasoned Leases. The Company
intends to refer appropriate small ticket financing transactions to the ICON
Partnerships and does not expect any material conflicts to arise in this area.
As of September 30, 1997, substantially all of the initial contributions to the
seventh ICON Partnership received as of such date had been invested, or
committed for investment.
Any conflicts in determining and allocating investment capital between the
Company and the ICON Partnerships will be resolved by the Company's Investment
Committee, which will evaluate the suitability of all prospective lease
acquisitions and financing transactions for investment by an ICON Partnership
before it makes a decision about the suitability of the opportunity for the
Company's own portfolio. In general, the Company intends to apply the following
criteria and, in the event that some or all of these criteria are not
satisfied, the prospective transaction is expected to be considered for the
Company's own portfolio only if:
. The required cash investment is greater than the cash available for
investment by an ICON Partnership;
. The amount of debt is above levels deemed acceptable for an ICON
Partnership;
. The equipment type is not appropriate to an ICON Partnership's
objectives, which include, among others, the avoidance of concentration
of exposure to any one class of equipment;
. The lessee credit quality does not satisfy an ICON Partnership's
objective of maintaining a high-quality portfolio with low credit losses
while avoiding a concentration of exposure to any individual lessee or
borrower;
. The term remaining exceeds the liquidation period guidelines established
in the Partnership Agreements;
. The available cash flow (or lack thereof) is not commensurate with an
ICON Partnership's need to make certain distributions during the
Reinvestment Period (as defined);
. The transaction structure, particularly with respect to the end-of-lease
options governing the equipment, does not provide an ICON Partnership
with the residual value opportunity commensurate with the total return
requirements of such ICON Partnership; and
. The transaction does not comply with the terms and conditions of the
Partnership Agreements.
39
<PAGE>
The Audit Committee of the Board of Directors will from time to time review
the procedures described above in an effort to ensure that, in general,
transactions have been considered for the ICON Partnerships prior to being
considered by the Company.
COMPETITION
The Company competes in the equipment financing market with a number of
national, regional and local finance companies. In addition, the Company's
competitors in equipment leasing and finance in general include equipment
manufacturers that finance the sale or lease of their products and other
financial services companies, such as commercial banks and savings and loan
associations, all of which provide financing for the purchase of equipment.
The Company's competitors in the secondary market for large ticket lease
acquisitions include several larger, more established companies, such as GE
Capital Services, GATX Capital Corp., The CIT Group, Inc., Finova Capital
Corporation and First Union Corporation, that may have access to capital
markets and to other funding sources, as well as personnel and marketing
resources, which may only be available to the Company to a far lesser degree.
Many of the Company's competitors have substantially greater financial,
marketing and operational resources and longer operating histories than the
Company.
With respect to small ticket leasing and financing, the Company faces intense
competition from a significant number of leasing companies and lenders. In
general, the cost of such financing to the equipment user is believed to be the
largest consideration in the decision as to which financing source to use. A
significant number of the Company's competitors benefit from a cost of money
below ICON Funding's cost. However, the Company believes that the structure of
its warehouse facilities and its securitization program provide it with access
to capital on terms similar to those of its larger, more established
competitors. The Company believes that its experienced management team and
sales force, its technology and servicing capacity and its significant broker
and vendor base allows the Company to aggressively compete with larger, more
established companies on the basis of service and responsiveness.
FACILITIES
The Company's corporate headquarters and operations center are located in
leased space at 600 Mamaroneck Avenue, Harrison, New York. The Company also
leases office space for its other offices in Boston, Massachusetts; San
Francisco, California and New York, New York. As of September 30, 1997, the
monthly rent under the Company's Harrison, New York office lease was
approximately $36,000. The Company rents approximately 24,000 square feet at
that location through November 2004. The other office space leases are each for
a term less than 36 months, as of the date of this Prospectus, and have rent
payments in the aggregate of approximately $22,000 per month.
EMPLOYEES
As of September 30, 1997, the Company had 70 full-time employees, of whom 3
were engaged in executive management; 29 were engaged in finance and
administration; 19 in marketing; 9 in collections and remarketing; 6 in credit
evaluation; and 4 in legal. The Company's management believes that its
relationship with its employees is good. No employees of the Company are
members of a collective bargaining unit.
LEGAL PROCEEDINGS
From time to time, the Company and its subsidiaries are parties to various
claims, lawsuits and administrative proceedings arising in the ordinary course
of business. Although the outcome of these lawsuits cannot be predicted with
certainty, the Company does not expect such matters to have a material adverse
effect on the financial condition or results of operations of the Company.
40
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning each of the
executive officers, directors and a designated future director of the Company
and their ages as of September 30, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Beaufort J. B. Clarke...... 51 Chairman of the Board,
President and Chief Executive Officer
Paul B. Weiss.............. 36 Vice Chairman of the Board
and Executive Vice President; President of ICON
Leasing
Thomas W. Martin........... 42 Executive Vice President and Director
Gary N. Silverhardt........ 37 Chief Financial Officer and Treasurer
John L. Lee................ 53 Senior Vice President, General Counsel
and Secretary
Robert W. Kohlmeyer, Jr.... 36 Senior Vice President
Allen V. Hirsch............ 43 Senior Vice President
Adolfo R. Garcia........... 48 Future Director
</TABLE>
Mr. Garcia has agreed to be elected as a Director of the Company effective
upon the completion of the Offering and has consented to be named as such
herein.
BEAUFORT J. B. CLARKE has been President and Chief Executive Officer, and a
director of the Company since August 1996 and Chairman of the Board of
Directors since October 1997. Prior to his current position, Mr. Clarke was
Chairman of the Board, Chief Executive Officer and President of Griffin Equity
Partners, Inc., a purchaser of Seasoned Leases, which he co-founded in October
1993 and served with until August 1996. From May 1991 to September 1993, Mr.
Clarke was President of Gemini Financial Holdings, Inc., a purchaser of
Seasoned Leases. Prior to that, Mr. Clarke was a Vice President and one of the
founders of Encore International, Inc. (now known as AT&T Systems Leasing), an
equipment leasing company which became, after Mr. Clarke resigned, a division
of AT&T Capital Corporation. From 1981 to 1987, Mr. Clarke was a senior
executive with several other equipment leasing companies, including Charter
Financial Company, Finalco, Inc., and CMI Corporation. Prior to that, Mr.
Clarke was an attorney with the law firm of Shearman & Sterling in New York
City.
PAUL B. WEISS has been Executive Vice President of the Company since
November 1996 and will become a member of and serve as Vice Chairman of the
Board of Directors upon consummation of the Offering. He was appointed
President of ICON Leasing upon its formation in December 1997. He has served
since November 1996 as Executive Vice President of ICON Capital, where he is
engaged in the acquisition of large ticket Seasoned Leases. Mr. Weiss served
as Executive Vice President and a director and was co-founder of Griffin
Equity Partners, Inc. from October 1993 through October 1996. Prior to that
time, Mr. Weiss was Senior Vice President of Gemini Financial Holdings, Inc.
from 1991 to 1993 and Vice President of Pegasus Capital Corporation (an
equipment leasing company) from 1988 through 1991, where he was responsible
for Seasoned Lease portfolio acquisitions.
THOMAS W. MARTIN has been Executive Vice President and a director of the
Company since August 1996, and served as Secretary of the Company from August
1996 until October 1997. Mr. Martin has served since August 1996 as Executive
Vice President and Secretary of ICON Capital. He has served since October 1997
as President of ICON Funding, where he has been responsible for lease
originations for ICON Funding since October 1997. Prior to his present
position, Mr. Martin was the Executive Vice President and Chief Financial
Officer of Griffin Equity Partners, Inc. from October 1993 to August 1996.
Prior to that time, Mr. Martin was Senior Vice President of Gemini Financial
Holdings, Inc. from April 1992 to October 1993. Earlier, he held the position
of Vice President at Chancellor Corporation (an equipment leasing company) for
seven years.
41
<PAGE>
GARY N. SILVERHARDT has been Senior Vice President of the Company since
August 1997 and has been Chief Financial Officer and Treasurer of the Company
since August 1996. He has been with ICON Capital since 1989 and served as Vice
President and Controller thereof from 1989 until its acquisition by the
Company in August 1996. From 1985 to 1989, he was with Coopers & Lybrand, most
recently as an Audit Supervisor.
JOHN L. LEE has been Senior Vice President and General Counsel of the
Company since April 1997. He was appointed Secretary of the Company in October
1997. Since 1992, Mr. Lee had been a partner at the Boston law firm of Peabody
& Brown with a practice focusing on commercial aircraft and vessel leasing and
financing transactions. Prior to joining Peabody & Brown, Mr. Lee served as
General Counsel of American Finance Group, an equipment leasing company, and
was earlier an associate with the law firm of Shearman & Sterling in New York
City.
ROBERT W. KOHLMEYER, JR. has been Senior Vice President of Operations of the
Company and ICON Capital since August 1997. He served as Vice President of
Operations of ICON Capital from August 1996 to August 1997. From March 1993 to
August 1996, Mr. Kohlmeyer was President of Corporate Capital Services. From
September 1991 to February 1993, Mr. Kohlmeyer held the title of Vice
President--Credit with Gemini Financial Holdings, Inc.
ALLEN V. HIRSCH has been Senior Vice President of the Company since December
1996. He has also served since December 1996 as the Senior Vice President of
ICON Capital and the President of ICON Securities. Previously, Mr. Hirsch
spent 16 years with PLM Financial Services and Affiliates, most recently as
President of PLM Securities Corp. He also served as the Vice Chairman of the
Board of PLM International (an equipment leasing company) from May 1989
through June 1996.
ADOLFO R. GARCIA has agreed to serve on the Board of Directors commencing
upon consummation of the Offering. He is the president of Adolfo R. Garcia,
P.C., a Massachusetts-based professional corporation which is a partner of
McDermott, Will & Emery, an international law firm with offices in Boston and
several other U.S. cities and foreign countries. Mr. Garcia, who has practiced
out of the firm's Boston office since April 1982, has headed the corporate,
corporate finance, securities and international law practice in the firm's
Boston office and since 1993 has been a member of the firm's management
committee.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors intends to appoint two independent
directors (in compliance with the rules of The Nasdaq Stock Market) to the
Audit Committee after consummation of the Offering. The responsibilities of
the Audit Committee will include making recommendations to the Board of
Directors as to the independent public accountants to be selected to conduct
the annual audit of the books and records of the Company, reviewing the
proposed scope of such audit and approving the audit fees to be paid,
reviewing accounting and financial controls of the Company with the
independent public accountants and the Company's financial and accounting
staff and reviewing and approving transactions between the Company and its
directors, officers and affiliates.
The Board of Directors does not have a Compensation Committee or a
Nominating Committee.
42
<PAGE>
DIRECTOR COMPENSATION
No compensation has ever been paid to any of the directors of the Company
for service in such capacity. Non-employee directors shall be eligible to
receive reasonable compensation for their service in this capacity as well as
grants of non-qualified stock options under the 1997 Non-Employee Directors
Stock Option Plan.
1997 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Company's 1997 Non-Employee Directors Stock Option Plan (the "Director
Plan") was adopted by the Company in October 1997 and will become effective
upon consummation of the Offering. Under the terms of the Director Plan,
options to purchase 15,000 shares of Common Stock (the "Initial Options") will
be granted to each person who becomes a non-employee director after the
effectiveness of the Offering, effective as of the date of election to the
Board of Directors. The Initial Options will vest in equal annual installments
over three years after the date of grant. In addition each non-employee
director will receive 10,000 shares ("Annual Options") on the date of each
annual meeting of the Company's stockholders held after the closing of the
Offering. The Annual Options will vest on the first anniversary of the date of
grant. Both Initial Options and Annual Options will be exercisable at the fair
market value of the Common Stock on the date of grant. A total of 200,000
shares of Common Stock may be issued upon the exercise of stock options
granted under the Director Plan. Unless sooner terminated pursuant to its
terms, the Director Option Plan will terminate in October 2007.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company, or its subsidiaries in all
capacities for the fiscal year ended March 31, 1997 by the Company's current
President and Chief Executive Officer, the former President and Chief
Executive Officer of ICON Capital, and the two other executive officers of the
Company (collectively, the "Named Executive Officers") who earned greater than
$100,000 in salary and bonus in such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------
NAME AND POSITION FISCAL YEAR SALARY ($) BONUS ($)
- ----------------- ----------- ---------- ---------
<S> <C> <C> <C>
Beaufort J. B. Clarke (1)...................... 1997 $160,740 $ --
President and Chief Executive Officer
Gary N. Silverhardt............................ 1997 168,600 40,000
Chief Financial Officer
Paul B. Weiss (1).............................. 1997 109,376 --
Executive Vice President
Peter D. Beekman (2)........................... 1997 96,595 8,561
Former President and
Chief Executive Officer of ICON Capital
</TABLE>
- --------
(1) Messrs. Clarke and Weiss commenced service with the Company in August 1996
and November 1996, respectively.
(2) Mr. Beekman resigned as President of ICON Capital in August 1996 upon the
acquisition of ICON Capital by the Company.
1997 STOCK OPTION PLAN
The Company's 1997 Stock Option Plan (the "1997 Stock Option Plan") was
adopted in October 1997 and will become effective upon consummation of the
Offering. The 1997 Stock Option Plan, as amended, provides for the grant of
stock options to employees, officers and directors of, and consultants or
advisors to, the Company and its subsidiaries. Under the 1997 Stock Option
Plan, the Company may grant options qualified as "incentive stock options"
under U.S. federal tax law or non-qualified stock options. Incentive stock
options may only be granted to employees of the Company or its parents or
subsidiaries. A total of 2,000,000 shares of
43
<PAGE>
Common Stock may be granted under the 1997 Stock Option Plan. Unless terminated
earlier pursuant to its terms, the 1997 Stock Option Plan will terminate in
October 2007.
Upon the effective date of the Offering, the Company intends to grant certain
stock options under the 1997 Stock Option Plan to Messrs. Clarke, Weiss, Martin
and certain other officers, a total of approximately 1,200,000 shares at an
exercise price equal to the initial public offering price per share. Such
options to be granted are expected to vest 33 1/3% each on the first three
anniversaries of the date of grant and are expected to expire on the tenth
anniversary of the date of grant.
401(K) PLAN
Effective in September 1996, the Company adopted a 401(k) Retirement Plan and
Trust (the "Plan") for the exclusive benefit of its eligible employees and
their beneficiaries. The 401(k) Plan is intended to qualify under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986 (the "Code"). All
employees who have at least one year of full-time service with the Company and
have attained the age of 18 are eligible to participate in the 401(k) Plan.
Pursuant to the Plan, and subject to the Code's requirements, a participant may
elect to contribute a percentage of compensation each year to the 401(k) Plan.
The Company currently contributes an amount equal to 100% of the amount
contributed by a participant. The 401(k) Plan also allows the Company to make
additional contributions by means of an annual discretionary contribution. The
existence and amount of any such discretionary contribution is determined by
the Board of Directors and is allocated among those participants who elect
salary reduction. Discretionary contributions are subject to certain
contingencies as set forth in the 401(k) plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a Compensation Committee. No executive officer of
the Company has served as a director or a member of the compensation committee
(or other committee serving an equivalent function) of any other entity whose
executive officers served as a director of the Company. Mr. Clarke, Chief
Executive Officer and President of the Company, with the approval of the Board
of Directors, has determined executive officer compensation.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. Clarke and Mr. Weiss have each entered into an employment agreement with
the Company for a five-year term expiring in December 2002. The agreements
provide that Mr. Clarke and Mr. Weiss are entitled to receive an annual base
salary of $275,000 and $250,000 respectively, subject to annual increases of
7.5%, and are eligible to receive an annual incentive bonus based upon certain
performance objectives established by the Board (the "Bonus Plan"). Under the
Bonus Plan, the Company anticipates that there will be a pool whereby a portion
of the pre-tax income of the Company will be distributed to Messrs. Clarke,
Weiss, Martin and certain other executives. Messrs. Clarke and Weiss each shall
be entitled to receive between 25.0% and 33.0% of the total pool at the end of
such year, with the remainder being distributed to the other Executive Vice
President and Senior Vice Presidents of the Company, such distribution amounts
being determined and recommended by Mr. Clarke and approved by the Board of
Directors. The amount of the distribution will be calculated based on a
reference rate multiplied by pre-tax income that will be equal to 9.5% for
calendar years 1998 and 1999 and 9.0% for the years 2000, 2001 and 2002 if the
Company achieves 85% or more of its projected financial results. If performance
targets set by the Board of Directors are not achieved, this rate is adjusted
downward.
Mr. Clarke's and Mr. Weiss' employment agreements also provide that they will
each be granted options under the 1997 Stock Option Plan to acquire a number of
shares equal to 1.75% of the outstanding shares of Common Stock upon
consummation of the Offering at the initial public offering price, subject to
ratable annual vesting over three (3) years.
Each of Messrs. Clarke's and Weiss' employment agreements include a non-
competition covenant pursuant to which he shall be prohibited from competing
with the Company during the term of the agreement and for
44
<PAGE>
three years following its termination. In consideration of such covenant, if
either Mr. Clarke's or Mr. Weiss's employment is terminated by the Company
without cause following a "change of control" (as defined in the agreement),
Messrs. Clarke or Weiss, as the case may be, will receive the following
severance payments and further benefits: (i) $500,000 if such termination
occurs in the third year or later of the agreement and the Company has achieved
its earnings objectives in the first two years; (ii) full payment of accrued,
unpaid salary, bonus and benefit payments; (iii) a sum equal to three years of
his highest annual base pay to date; (iv) a sum equal to three times his
highest to date annual bonus earned; (v) full immediate vesting of any issued
but unvested stock options; (vi) three years of continuation of participation
in the Company's benefits (to the extent not received by Messrs. Clarke or
Weiss, as the case may be, in another position), including health, disability
and life insurance, qualified and non-qualified retirement and pension plans,
if any, or the then current value of the same in cash if the terms of such
plans preclude such continued participation; and (vii) such additional sums as
are necessary for Messrs. Clarke or Weiss, as the case may be, to meet any
additional federal taxes due to the payment of the severance pay and other
benefits having been contingent upon a change in control. If Messrs. Clarke's
or Weiss's employment is terminated by the Company without cause in the absence
of such a change of control, Messrs. Clarke or Weiss, as the case may be, will
be entitled to all of the foregoing severance payments and other benefits,
other than additional sums required for the payment of federal taxes in the
event of a change in control transaction. If either of Messrs. Clarke or Weiss
were to resign following a reduction in his responsibilities or pay or change
in location, his agreement deems such a termination as having been effected by
the Company.
At the expiration of the term of their employment agreement, Messrs. Clarke
or Weiss, as the case may be, will receive the following severance payments and
benefits: (i) full payment of any accrued, unpaid salary, bonus and benefit
payments; (ii) a sum equal to eighteen months of his highest to date annual
base pay; (iii) a sum equal to 150% of his highest to date annual bonus earned;
and (iv) eighteen months of continuation of participation in the Company's
benefits (to the extent not received by Messrs. Clarke and Weiss in another
position), including health, disability and life insurance, qualified and non-
qualified retirement and pension plans or, if any, the then current value of
the same in cash if the terms of such plans preclude such continued
participation. If Messrs. Clarke or Weiss were to be terminated for cause (as
defined in the agreement), Messrs. Clarke or Weiss, as the case may be, would
be entitled only to full payment of any accrued, unpaid salary, bonus and
benefit payments and retention of any fully vested stock options and similarly
vested benefits. Pursuant to the agreement, throughout the term of his
employment, Mr. Clarke will serve as Chief Executive Officer of the Company and
Mr. Weiss will serve as Executive Vice President of the Company.
The Company is party to an employment agreement with its Chief Financial
Officer, Gary N. Silverhardt, for a term expiring in August 1998 with an
automatic renewal term of six months unless the Company terminates earlier for
cause or the employee gives advance notice of termination. Pursuant to the
agreement, Mr. Silverhardt is entitled to receive an annual salary of not less
than $170,000 in addition to annual bonus payments in accordance with the
Company's Bonus Plan. In addition, if the agreement is terminated without cause
by the Company, the Company is obligated to pay Mr. Silverhardt a termination
fee equal to the amount of annual salary unpaid from the date of termination to
the date of expiration of the initial employment term, or the amount of equal
to six months' base salary, whichever is greater, plus any deferred
compensation, plus any accrued but unpaid bonus and any vacation pay.
PRIOR LITIGATION INVOLVING CURRENT MANAGEMENT
Three senior executives of the Company, Messrs. Clarke, Martin and Weiss,
were involved in litigation with a former employer, which commenced in late
1993 and was settled in October 1996. The litigation involved the termination
of the employment relationship of Messrs. Clarke, Martin and Weiss, including
claims against the former employer for monies owed to Messrs. Clarke, Martin
and Weiss, and certain competitive matters. All litigation relating to or
involving Gemini Group and its affiliates was settled in October 1996, with all
entities and parties waiving and releasing any and all claims arising out of or
in connection with the subject matter of the litigation.
45
<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION.
Indemnification Agreements. Prior to the completion of the Offering, the
Company will enter into separate but identical indemnification agreements (the
"Indemnification Agreements") with each director and executive officer of the
Company and expects to enter into Indemnification Agreements with persons who
become directors or executive officers in the future. The Indemnification
Agreements shall provide that the Company will indemnify the director or
officer (the "Indemnitee") against any expenses or liabilities incurred by the
Indemnitee in connection with any proceeding in which such Indemnitee may be
involved as a party or otherwise, by reason of the fact that such Indemnitee
is or was a director or officer of the Company or by reason of any action
taken by or omitted to be taken by such Indemnitee while acting as an officer
or director of the Company, provided that such indemnity shall only apply if
(i) the Indemnitee was acting in good faith and in a manner the Indemnitee
reasonably believed to be in the best interests of the Company and, with
respect to any criminal action, had no reasonable cause to believe the
Indemnitee's conduct was unlawful, (ii) the claim was not made to recover
profits made by such Indemnitee in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any successor statute, (iii)
the claim was not initiated by the Indemnitee, (iv) the claim was not covered
by applicable insurance, or (v) the claim was not for an act or omission of a
director of the Company from which a director may not be relieved of liability
under Section 102(b)(7) of the Delaware General Corporation Law ("DGCL"). Each
Indemnitee will undertake to repay the Company for any costs or expenses paid
by the Company if it shall ultimately be determined that such Indemnitee is
not entitled to indemnification under the Indemnification Agreements.
Provisions of Certificate of Incorporation. As allowed by the DGCL, the
Company's Certificate of Incorporation provides for the limitation of the
liability of the directors of the Company for monetary damages to the fullest
extent permissible under Delaware law. See "Description of Capital Stock--
Certain Provisions of Delaware Law and the Company's Certificate of
Incorporation. The Company's By-laws also permit the Company to indemnify its
officers and directors to the fullest extent permitted by law.
Directors and Officers Insurance. The Company intends to obtain directors
and officers liability and company reimbursement insurance pursuant to which
the insurer will pay, on behalf of directors and officers of the Company,
certain losses (as defined) incurred as a result of specified wrongful acts by
such persons, for which they are not indemnified by the Company. In addition,
the insurer will reimburse the Company for certain losses incurred as a result
of the Company's indemnification of an officer or director in connection with
such a wrongful act. The policy will provide that the insurer's aggregate
liability to the Company with respect to a single policy year shall not exceed
$10 million and is subject to customary exclusions.
46
<PAGE>
CERTAIN TRANSACTIONS
On August 20, 1996, Warrenton and Summit Asset Holdings LLC ("Summit") each
purchased 50 percent of the Common Stock of the Company for consideration of
$67,000. Simultaneously, each of Warrenton and Summit entered into certain loan
agreements with the Company evidenced by notes payable to Summit in the amount
of $1,133,000 and to Warrenton in the amount of $1,433,000. On August 21, 1996,
the Company acquired all of the outstanding stock of ICON Capital and ICON
Securities for $9,332,680. See Note 2 of the Notes to Consolidated and Combined
Financial Statements.
Upon consummation of the Offering, the remaining indebtedness evidenced by
the Warrenton note payable ($1,112,760 as of September 30, 1997) will be
converted to 111,276 shares of Common Stock (assuming an initial public
offering price of $10.00 per share). In October 1997, Summit agreed to have its
shares of the Common Stock of the Company redeemed by the Company for
consideration of $7.2 million pursuant to the terms of a Stock Redemption
Agreement between the Company and Summit. In addition, the Company has agreed
to repay $1,133,000 (as of September 30, 1997 and excluding accrued interest)
in indebtedness owed to Summit. Also, the Company agreed to enter into a five-
year Trading Agreement with Summit under which Summit will grant the Company a
right of first refusal to purchase all equipment lease transactions from
$500,000 to $15 million (as measured by gross purchase price) which Summit
originates in the United Kingdom and which meet the credit quality and residual
risk parameters established by the Company's Investment Committee as they may
be revised from time to time. As consideration for this right of first refusal,
the Company will agree not to source United Kingdom lease transactions other
than from Summit, unless such lease transactions are already in the portfolio
of a third party, whether in the United Kingdom or in other countries in the
European community. In addition, the Company agreed to issue Summit upon
consummation of the Offering warrants exercisable, in the four-year period
commencing upon the first anniversary of the consummation of the Offering, for
498,338 shares of Common Stock at a price per share equal to the initial public
offering price. In the fiscal year ended March 31, 1997, Summit Asset
Management Limited, the managing member of Summit, sold an equipment lease to
the ICON Seven partnership for consideration of approximately $20.9 million and
received an acquisition fee of approximately $156,000 in connection with such
transaction. The Company believes the terms of such transaction were
substantially similar to those which could have been obtained if such
transaction had been conducted at arms' length among unrelated parties.
Peter B. Beekman was a principal owner of ICON Capital and ICON Securities
and President of ICON Capital prior to its acquisition by ICON Holdings in
August 1996. See Notes 2 and 8 of the Notes to Consolidated and Combined
Financial Statements.
Adolfo R. Garcia, who has agreed to serve as a director of the Company after
consummation of the Offering, is the President of Adolfo R. Garcia, P.C., a
professional corporation which is a partner of McDermott, Will & Emery, the law
firm that represents the Company in connection with the Offering. Through
November 30, 1997, McDermott, Will & Emery had billed the Company approximately
$153,000 for services rendered and expenses incurred in connection with the
Offering.
47
<PAGE>
PRINCIPAL STOCKHOLDERS AND
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information as of September 30, 1997, as
adjusted to reflect the sale of the Common Stock offered hereby, with respect
to the beneficial ownership of Common Stock of each person known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, each director, designated future director and executive officer of the
Company, and all designated future directors, current directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OWNED COMMON STOCK OWNED
---------------------- ----------------------
BEFORE AFTER BEFORE AFTER
OFFERING OFFERING OFFERING OFFERING
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Warrenton Capital
Partners L.L.C......... 4,000,000 4,111,276(3) 50.0% 24.8%
200 East Washington
Street
Middleburg, Virginia
20117
Summit Asset Holding
L.L.C.................. 4,000,000(1) -- 50.0 --
c/o Roy & Stevens
Sears Crescent Building
100 City Hall Plaza
Boston, MA 02108
Beaufort J. B. Clarke,.. 4,000,000(2) 4,111,276(2)(3) 50.0 24.8
Chairman of the Board,
President and Chief
Executive Officer
Paul B. Weiss,.......... 4,000,000(2) 4,111,276(2)(3) 50.0 24.8
Vice Chairman of the
Board and Executive
Vice President
Thomas W. Martin,....... 4,000,000(2) 4,111,276(2)(3) 50.0 24.8
Executive Vice
President and Director
Gary N. Silverhardt,.... -- -- -- --
Chief Financial Officer
Adolfo R. Garcia,....... -- -- -- --
Future Director
All directors,
designated future
director and executive
officers as a group (8
persons)............... 4,000,000(2) 4,111,276(2)(3) 50.0 24.8
</TABLE>
- --------
(1) Such shares will be redeemed upon consummation of the Offering. See
"Certain Transactions."
(2) Consists of shares held by Warrenton, as to which entity each of Messrs.
Clarke, Weiss and Martin hold a greater-than-10% beneficial ownership
interest. Each of Messrs. Clarke, Weiss and Martin disclaim beneficial
ownership of such shares to the extent such deemed beneficial ownership
exceeds their respective pro rata beneficial ownership of Warrenton.
(3) Includes 111,276 shares (assuming an initial public offering price of
$10.00 per share) to be issued to Warrenton upon consummation of the
Offering, in exchange for indebtedness of $1,112,760 (as of September 30,
1997). See "Certain Transactions."
48
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company upon completion of the Offering
will consist of 50,000,000 shares of Common Stock, par value $.01 per share,
and 10,000,000 shares of Preferred Stock, $.01 par value per share. The Common
Stock, prior to completion of the Offering, consists of Class A voting shares
and Class B non-voting shares. Other than voting rights, the Class A and Class
B shares are identical. The Company and the holder of the 1,000 shares of the
Class B Common Stock which are outstanding as of the date of this Prospectus
have entered into an agreement whereby such shares shall be redeemed by the
Company upon consummation of the Offering for $349,000 and other
consideration. See "Certain Transactions." The Restated Charter will remove
the Class A and Class B designations. Unless indicated otherwise, when used
with respect to periods of time prior to consummation of the Offering, the
term "Common Stock" in this Prospectus refers exclusively to the Class A
Common Stock. Upon consummation of the Offering, the Company will have
outstanding 16,611,276 shares of Common Stock; 17,486,270 if the Underwriters'
over-allotment option is exercised in full. The following summary description
of the capital stock of the Company does not purport to be complete and is
subject to the detailed provisions of, and qualified in its entirety by
reference to, the Company's Restated Charter to be filed with the Delaware
Secretary of State upon consummation of the Offering and its By-laws, copies
of which have been filed as exhibits to the registration statement of which
this Prospectus forms a part, and to the applicable provisions of the DGCL.
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the stockholders. Holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available. See "Dividend
Policy." In the event of a liquidation, dissolution or winding-up of the
Company, holders of the Common Stock are entitled to share ratably in the
distribution of all assets remaining after payment of liabilities, subject to
the rights of any holders of preferred stock of the Company. The holders of
Common Stock have no preemptive rights to subscribe for additional shares of
the Company and no right to convert their Common Stock into any other
securities. In addition, there are no redemption or sinking-fund provisions
applicable to the Common Stock. All of the outstanding shares of Common Stock
are, and the shares of Common Stock offered hereby will be, fully paid and
nonassessable.
DESCRIPTION OF PREFERRED STOCK
The Restated Charter authorizes the Board of Directors, subject to any
limitations prescribed by law and without further stockholder approval, to
issue from time to time up to 10,000,000 shares of $.01 par value preferred
stock of the Company (the "Preferred Stock") in one or more series. Each such
series of Preferred Stock shall have such number of shares, designations,
preferences, voting powers, qualifications or special or relative rights or
privileges as shall be determined by the Board of Directors in its sole
discretion, which may include, among others, dividend rights, voting rights,
redemption and sinking-fund provisions, liquidation preferences, conversion
rights and preemptive rights.
The stockholders of the Company have granted the Board of Directors
authority to issue the Preferred Stock and to determine its rights and
preferences in order to eliminate delays associated with a stockholder vote on
specific issuances. The rights of the holders of Common Stock will be subject
to the rights of holders of any Preferred Stock issued in the future. The
issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, a majority of the
outstanding voting stock of the Company. The Company currently has no plans to
issue any shares of Preferred Stock.
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BY-LAWS
The Company's Restated Charter provides that no director of the Company will
be liable to the Company or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability: (i) for
49
<PAGE>
any breach of the director's duty of loyalty to the Company or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for any wilful or
negligent payment of an unlawful dividend, stock purchase or redemption; or
(iv) for any transaction from which the director derived an improper personal
benefit.
Certain provisions of Delaware law and the Company's Restated Charter and
By-laws could make more difficult the acquisition of the Company by means of a
tender offer, proxy contest or otherwise, and the removal of incumbent
officers and directors.
The provisions of the Restated Charter and By-laws described herein would
make more difficult or discourage a proxy contest or the assumption of control
by a holder of a substantial block of the Company's Common Stock or the
removal of the incumbent Board of Directors, and thus could have the effect of
perpetuating the incumbent management. At the same time, the provisions would
help ensure that the Board of Directors, if confronted by a surprise proposal
from a third party that has recently acquired a block of the Company's voting
stock, will have sufficient time to review the proposal and appropriate
alternatives to the proposal and to seek a premium price for the stockholders.
These provisions are thus intended to encourage persons seeking to acquire
control of the Company to initiate such an acquisition through arms' length
negotiations with the Company's management and Board of Directors. The
provisions are permitted under Delaware law and are consistent with the rules
of the Nasdaq National Market.
The following discussion is a general summary of material provisions of the
Company's Restated Charter and By-laws, as currently in effect, and certain
other regulatory provisions, which may be deemed to have an "anti-takeover"
effect. The following description of certain of these provisions is
necessarily general and, with respect to provisions contained in the Company's
Restated Charter and By-laws, as currently in effect, reference should be made
in each case to the document in question, each of which is part of the
Registration Statement filed with the Commission. See "Available Information."
Directors. Certain provisions of the Restated Charter and By-laws will
impede changes in majority control of the Board of Directors. The Restated
Charter will provide that the Board of Directors of the Company are to be
divided into three classes, with directors in each class elected for three-
year staggered terms except for the initial directors. This classification of
the Board of Directors could make it more difficult for a third party to
acquire control of the Company, because it would require more than one annual
meeting of stockholders to elect a majority of the directors. The Company's
By-laws provide that any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, shall
be filled for the remainder of the unexpired term by a majority vote of the
directors then in office. The number of directors constituting the Board of
Directors will initially be seven.
Restrictions on Call of Special Meetings. The By-laws provide that a special
meeting of stockholders may be called only by the Board of Directors, the
Chairman of the Board, the President, or an Executive Vice President, and for
the transaction of any proper business. Holders of Common Stock, in their
capacity as stockholders, are not authorized to call a special meeting.
Absence of Cumulative Voting. The Restated Charter does not provide for
cumulative voting rights in the election of directors.
Authorization of Preferred Stock. The Restated Charter authorizes 10,000,000
shares of Preferred Stock. The Company is authorized to issue Preferred Stock
from time to time in one or more series subject to applicable provisions of
law, and the Board of Directors is authorized to fix the designations, powers,
preferences and rights of such shares, including voting rights and conversion
rights. In the event of a proposed merger, tender offer or other attempt to
gain control of the Company that the Board of Directors does not approve, it
might be possible for the Board of Directors to authorize the issuance of a
series of Preferred Stock with rights and preferences that would impede the
completion of such a transaction. An effect of the possible issuance of
Preferred Stock,
50
<PAGE>
therefore, may be to deter a future takeover attempt. The Board of Directors
has no present plans or understandings for the issuance of any Preferred Stock,
and does not intend to issue any Preferred Stock except on terms which the
Board of Directors deems to be in the best interests of the Company and its
stockholders.
Amendment to Certificate of Incorporation and By-Laws. Amendments to the
Company's Certificate of Incorporation requires the approval by a majority vote
of the Company's Board of Directors and also by a majority vote of the
outstanding shares of the Company's stock entitled to vote thereon. The By-laws
may be amended by a majority vote of the Board of Directors or the affirmative
vote of a majority of the outstanding shares of the Company's stock entitled to
vote thereon.
Delaware Anti-Takeover Statute. Generally, Section 203 of the DGCL prevents
an "interested stockholder" (defined generally as a person owning 15% or more
of the outstanding voting stock of a Delaware corporation, such as the Company)
from engaging in a "business combination" with such corporation for three years
following the date that the person became an interested stockholder. The
takeover can be completed, however, if (i) the buyer, while acquiring the 15%
interest, acquires at least 85% of the Company's outstanding stock (the 85%
requirement excludes shares held by directors who are also officers and certain
shares held under employee stock plans), or (ii) the takeover is approved by
the target corporation's board of directors and two-thirds of the shares of
outstanding stock of the Company (excluding shares held by the bidder). Section
203 could make it more difficult for a third party to acquire control of the
Company, but does not apply to Delaware corporations that do not have a class
of voting stock listed on a national exchange, authorized for quotation on an
inter-dealer quotation system of a registered national securities association
or held of record by more than 2,000 stockholders. The Company may exempt
itself from the requirements of the DGCL by adopting an amendment to its
Certificate of Incorporation or By-laws electing not to be governed by this
provision. At the present time, the Board of Directors does not intend to
propose any such amendment.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is State Street Bank
and Trust Company.
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have 16,611,276 shares of
Common Stock outstanding. The 12,500,000 shares sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act, unless acquired by an "affiliate" of the Company, as that term
is defined in Rule 144; shares held by affiliates will be subject to resale
limitations of Rule 144 described below. All of the remaining outstanding
shares of Common Stock held by affiliates and, subject to the volume and other
limitations of Rule 144, will be available for resale at various dates
beginning 180 days after the date of this Prospectus, upon expiration of
applicable lock-up agreements described below and subject to compliance with
Rule 144 as the holding provisions of Rule 144 are satisfied. Also, the
Representative has been granted warrants exercisable during the four-year
period commencing upon the first anniversary of the consummation of the
Offering for 830,564 shares (924,314 if the Underwriters' over-allotment is
exercised) of Common Stock at the initial public offering price, which shares
have been registered for resale by separate prospectus under the Registration
Statement of which this Prospectus is a part for resale from time to time.
Further, upon consummation of the Offering, 2,000,000 shares will be reserved
for issuance pursuant to provisions of the Company's 1997 Stock Option Plan,
and 200,000 shares of Common Stock will be reserved for issuance pursuant to
provisions of the 1997 Non-Employee Directors Plan. The Company intends to file
a registration statement on Form S-8 as soon as practicable after the
consummation of the Offering with respect to the shares of Common Stock
issuable under such plans.
In general, under Rule 144 as currently in effect, a stockholder who has
beneficially owned for at least one year shares privately acquired directly or
indirectly from the Company or from an affiliate of the Company, and persons
who are affiliates of the Company who have acquired the shares in registered
transactions, will be entitled to sell within any three-month period a number
of shares that does not exceed the greater of: (i) one percent of the
outstanding shares of Common Stock (approximately 166,112 shares) immediately
after consummation of the Offering; or (ii) the average weekly trading volume
in the Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain requirements relating to the manner
and notice of sale and the availability of current public information about the
Company.
Each of the Company, its executive officers and directors, Summit and
Warrenton has agreed not to offer, pledge, sell, contract to sell, or otherwise
transfer or dispose, directly or indirectly, of any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
during the period ending 180 days after the date of this Prospectus without the
prior consent of Friedman, Billings, Ramsey & Co., Inc.
Prior to this Offering, there has been no market for the Common Stock. No
predictions can be made with respect to the effect, if any, that public sales
of shares of the Common Stock or the availability of shares for sale will have
on the market price of the Common Stock after the completion of the Offering.
Sales of substantial amounts of Common Stock in the public market following the
Offering, or the perception that such sales may occur, could adversely affect
the market price of the Common Stock or the ability of the Company to raise
capital through sales of its equity securities.
52
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the underwriters named below (the
"Underwriters") and each of the Underwriters, for whom Friedman, Billings,
Ramsey & Co., Inc., is acting as Representative, has severally agreed to
purchase, the number of shares of Common Stock offered hereby set forth below
opposite its name:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Friedman, Billings, Ramsey & Co., Inc..........................
Total.......................................................... 12,500,000
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to purchase all the shares of Common Stock offered
hereby if any are purchased.
The Underwriters propose initially to offer the shares of Common Stock
directly to the public at the public offering price set forth on the cover
page of this Prospectus and to certain dealers at such offering price less a
concession not to exceed $ per share of Common Stock. The Underwriters may
allow and such dealers may reallow a concession not to exceed $ per share of
Common Stock to certain other dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms
may be changed by the Underwriters.
The Company has granted to the Underwriters an over-allotment option (the
"Over-Allotment Option"), which is an option exercisable during a 30-day
period after the date hereof to purchase, at the initial offering price less
underwriting discounts and commissions, up to an additional 1,875,000 shares
of Common Stock for the sole purpose of covering over-allotments, if any. To
the extent that the Underwriters exercise the Over-Allotment Option, each
Underwriter will be committed, subject to certain conditions, to purchase a
number of the additional shares of Common Stock proportionate to such
Underwriter's initial commitment.
The Company has agreed to issue upon consummation of the Offering to the
Representative and/or its designees warrants (the "Representative's Warrants")
to purchase, during the four-year period commencing upon the first anniversary
of the consummation of the Offering, up to 830,564 shares of Common Stock
(924,314 shares if the Over-Allotment Option is exercised in full),
representing 5% of the shares of Common Stock outstanding after completion of
the Offering, at a purchase price equal to the initial public offering price
per share. The Representative's Warrants are exercisable in the four year
period commencing upon the first anniversary of the consummation of the
Offering (the "Warrant Exercise Term"). The Company has also registered for
resale shares of Common Stock underlying the Representative's Warrants. During
the Warrant Exercise Term, the Representative is given the opportunity to
profit from a rise in market price of the shares of Common Stock. To the
extent that the Representative's Warrants are exercised, dilution to the
interests of the holders of the Common Stock will occur. In addition, the
terms upon which the Company will be able to obtain additional equity capital
may be adversely affected because the holders of the Representative's Warrants
can be expected to exercise them at a time when the Company likely would be
able to obtain any needed capital on terms more favorable to the Company than
those provided in the Representative's Warrants. In addition, the Company has
agreed to reimburse the Representative for its reasonable expenses in
connection with the Offering, including fees and expenses of its counsel.
53
<PAGE>
The Company has agreed to indemnify the several Underwriters against certain
civil liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof.
Prior to the Offering, there has been no public market for the shares of
Common Stock. The initial public offering price has been determined by
negotiation between the Company and the Representative. Among the factors
considered in making such determination were an assessment of management, the
Company's prospects for future earnings, the general conditions of the economy
and the securities market and the prices of offerings by similar issuers. There
can, however, be no assurance that the price at which the shares of Common
Stock will sell in the public market after the Offering will not be lower than
the price at which they are sold by the Underwriters.
The Representative has informed the Company that the Underwriters do not
intend to confirm sales of the shares offered hereby to any accounts over which
they exercise discretionary authority.
Until the distribution of the Common Stock is completed, the rules of the
Commission may limit the ability of the Underwriters and certain selling-group
members to bid for or purchase the Common Stock. As an exception to these
rules, the Representative is permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
If the Underwriters create a short position in the Common Stock in connection
with the Offering (i.e., if they sell more shares of Common Stock than are set
forth on the cover page of this Prospectus), the Representative may reduce that
short position by purchasing shares of Common Stock in the open market. The
Representative may also elect to reduce any short position by exercising all or
part of the Over-Allotment Option described above.
The Representative may also impose a penalty bid on certain Underwriters and
selling-group members. This means that if the Representative purchases Common
Stock in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock, it may reclaim the amount of the
selling concession from the Underwriters and selling group members who sold
that Common Stock as part of the Offering.
In general, purchases of securities for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representative will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Each of the Company and its existing stockholders, executive officers and
directors has generally agreed not to offer, pledge, sell, contract to sell, or
otherwise transfer or dispose, directly or indirectly, of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock during the period ending 180 days after the date of this
Prospectus without the prior consent of the Representative.
From time to time, each of the Underwriters and their respective affiliates
may provide investment banking services to the Company. The Company has agreed
that for a three-year period following the Offering that if it engages a
financial advisor in connection with any merger, acquisition or strategic
transaction, the Representative shall act as such advisor. In addition, if the
Company undertakes any private or public offering of debt or equity securities
of the Company during such period, the Representative shall act as lead manager
of any such offering.
54
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by McDermott, Will & Emery, Boston, Massachusetts, a
partnership including professional corporations. Certain legal matters will be
passed upon for the Underwriters by Kirkland & Ellis, Washington, D.C.
EXPERTS
The consolidated balance sheet of the Company as of March 31, 1997 and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the period from August 21, 1996 (formation of the Company) to
March 31, 1997, and the combined balance sheet of ICON Capital and ICON
Securities as of March 31, 1996 and the related combined statements of income,
changes in stockholders' equity and cash flows for the period from April 1,
1996 to August 20, 1996 and for the years ended March 31, 1996 and 1995 have
been included herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheet as of March 31, 1997 (Successor) and Combined
Balance Sheet as of March 31, 1996 (Predecessor)........................ F-3
Consolidated Statement of Income for the period August 21, 1996 through
March 31, 1997 (Successor) and Combined Statements of Income for the
period April 1, 1996 through August 20, 1996 and the years ended March
31, 1996 and 1995 (Predecessor)......................................... F-4
Consolidated Statement of Changes in Stockholders' Equity for the period
August 21, 1996 through March 31, 1997 (Successor) and Combined
Statements of Changes in Stockholders' Equity for the period April 1,
1996 through August 20, 1996 and the years ended March 31, 1996 and 1995
(Predecessor)........................................................... F-5
Consolidated Statement of Cash Flows for the period August 21, 1996
through March 31, 1997 (Successor) and Combined Statements of Cash Flows
for the period April 1, 1996 through August 20, 1996 and the years ended
March 31, 1996 and 1995 (Predecessor)................................... F-6
Notes to Consolidated and Combined Financial Statements.................. F-7
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets as of September 30, 1997 and March 31, 1997.. F-16
Consolidated Statements of Income for the six months ended September 30,
1997 and for the period August 21, 1996 through September 30, 1996
(Successor) and Combined Statement of Income for the period April 1,
1996 to August 20, 1996 (Predecessor)................................... F-17
Consolidated Statements of Income for the three months ended September
30, 1997 and for the period August 21, 1996 through September 30, 1996
(Successor) and Combined Statement of Income for the period July 1, 1996
to August 20, 1996 (Predecessor)........................................ F-18
Consolidated Statements of Changes in Stockholders' Equity for the six
months ended September 30, 1997 and for the period August 21, 1996
through September 30, 1996 (Successor) and Combined Statement of Changes
in Stockholders' Equity for the period April 1, 1996 to August 20, 1996
(Predecessor)........................................................... F-19
Consolidated Statements of Cash Flows for the six months ended September
30, 1997 and for the period August 21, 1996 through September 30, 1996
(Successor) and Combined Statement of Cash Flows for the period April 1,
1996 to August 20, 1996 (Predecessor)................................... F-20
Notes to Interim Consolidated and Combined Financial Statements.......... F-22
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ICON Holdings Corp.:
We have audited the accompanying consolidated balance sheet of ICON Holdings
Corp. ("Holdings") (Successor) as of March 31, 1997 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the period from August 21, 1996 (formation of the Company) to March
31, 1997. We have also audited the accompanying combined balance sheet of ICON
Capital Corp. ("Capital") and ICON Securities Corp. ("Securities")
(collectively, Predecessor) as of March 31, 1996 and the related combined
statements of income, changes in stockholders' equity and cash flows for the
period from April 1, 1996 to August 20, 1996 and for the years ended March 31,
1996 and 1995. These consolidated and combined financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated and combined financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated and combined financial statements referred
to above present fairly, in all material respects, the financial position of
Holdings (Successor) as of March 31, 1997 and Capital and Securities
(collectively, Predecessor) as of March 31, 1996, and the results of their
operations and their cash flows for the periods April 1, 1996 to August 20,
1996 (Predecessor) and August 21, 1996 to March 31, 1997 (Successor), and for
the years ended March 31, 1996 and March 31, 1995 (Predecessor), in conformity
with generally accepted accounting principles.
As discussed in note 2 to the financial statements, Capital and Securities
were acquired by Holdings (a newly formed corporation) in a business
combination accounted for as a purchase. As a result of the acquisition, the
financial information for the period after the acquisition is presented on a
different cost basis than that for the periods before the acquisition and,
therefore, is not comparable.
KPMG Peat Marwick LLP
October 17, 1997
New York, New York
F-2
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
BALANCE SHEETS
MARCH 31,
ASSETS
<TABLE>
<CAPTION>
(SUCCESSOR) (PREDECESSOR)
------------ ----------------
CONSOLIDATED COMBINED CAPITAL
HOLDINGS AND SECURITIES
1997 1996
------------ ----------------
<S> <C> <C>
Cash............................................. $ 747,123 $ 184,870
Receivables from related parties--managed
partnerships.................................... 1,323,502 2,023,380
Prepaid and other assets......................... 200,098 150,749
Deferred charges................................. 379,717 302,886
Receivables from affiliates...................... -- 336,806
Fixed assets and leasehold improvements, at cost,
less accumulated depreciation and amortization
of $1,533,265 and $1,246,975.................... 752,472 781,058
Goodwill, less accumulated amortization of
$574,500 and $0................................. 8,270,294 --
Investment in equipment under an operating lease,
at cost, less accumulated depreciation of $0 and
$1,079,939...................................... -- 4,260,497
----------- ----------
Total assets................................. $11,673,206 $8,040,246
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses............ $ 1,214,366 $ 871,770
Due to stockholder............................... 432,742 --
Subordinated notes payable--related party........ 2,399,336 --
Notes payable--seller financing.................. 3,342,196 --
Notes payable--recourse.......................... 196,105 46,185
Notes payable--non-recourse...................... -- 4,262,185
Deferred income taxes, net....................... 1,532,928 483,944
Deferred management fees--managed partnerships... 758,452 667,824
----------- ----------
Total liabilities............................ 9,876,125 6,331,908
----------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock: $.01 par value; 1,000 shares
authorized, issued and outstanding at March 31,
1997. No par value; $10 stated value;
3,200 shares authorized, 1,600 shares issued
and outstanding at March 31, 1996.............. 10 15,100
Additional paid-in capital...................... 133,990 739,300
Retained earnings............................... 1,663,081 953,938
----------- ----------
1,797,081 1,708,338
----------- ----------
Total liabilities and stockholders' equity... $11,673,206 $8,040,246
=========== ==========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-3
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(PREDECESSOR) (SUCCESSOR) (PREDECESSOR) (PREDECESSOR)
------------- ------------ ------------- -------------
COMBINED COMBINED COMBINED
CAPITAL AND CONSOLIDATED CAPITAL AND CAPITAL AND
SECURITIES HOLDINGS TOTAL SECURITIES SECURITIES
4/1/96 8/21/96 FOR THE FOR THE FOR THE
TO TO YEAR ENDED YEAR ENDED YEAR ENDED
8/20/96 3/31/97 3/31/97(1) 3/31/96 3/31/95
------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Fees--managed
partnerships.......... $2,985,092 $ 9,195,146 $12,180,238 $ 9,375,796 $8,436,772
Rental income from
investment in
operating lease....... 799,372 742,275 1,541,647 1,009,756 661,165
Interest income and
other income.......... 21,102 98,789 119,891 58,939 37,204
---------- ----------- ----------- ----------- ----------
Total revenues...... 3,805,566 10,036,210 13,841,776 10,444,491 9,135,141
---------- ----------- ----------- ----------- ----------
Expenses:
Selling, general and
administrative........ 3,399,180 4,809,128 8,208,308 8,494,559 7,189,420
Amortization of
deferred charges...... 118,190 366,389 484,579 473,484 373,075
Amortization of
goodwill.............. -- 574,500 574,500 -- --
Depreciation and
amortization.......... 121,368 197,632 319,000 329,121 336,944
Depreciation--equipment
under operating
lease................. 660,160 633,615 1,293,775 652,704 320,426
Interest expense--non-
recourse financings... 139,212 108,660 247,872 333,728 329,030
Interest expense--
recourse financings... 5,565 555,417 560,982 27,344 60,186
Write off of related
party notes
receivable............ -- -- -- -- 225,000
---------- ----------- ----------- ----------- ----------
Total expenses...... 4,443,675 7,245,341 11,689,016 10,310,940 8,834,081
---------- ----------- ----------- ----------- ----------
Income (loss) before
provision for income
taxes.................. (638,109) 2,790,869 2,152,760 133,551 301,060
Provision for income
taxes.................. -- 1,127,788 1,127,788 74,663 137,743
---------- ----------- ----------- ----------- ----------
Net income (loss)....... $ (638,109) $ 1,663,081 $ 1,024,972 $ 58,888 $ 163,317
========== =========== =========== =========== ==========
</TABLE>
- --------
(1) As discussed in note 2 of the accompanying notes to the consolidated and
combined financial statements, Capital and Securities were acquired by
ICON Holdings on August 21, 1996, in a business combination accounted for
as a purchase. As a result of the acquisition, the financial information
for the period after the acquisition is presented on a different cost
basis than that for the periods before the acquisition and, therefore, the
amounts in the total column for the year ended March 31, 1997 are not
comparable to the years ended March 31, 1996 and 1995 as a result of
goodwill and its related amortization.
See accompanying notes to consolidated and combined financial statements.
F-4
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK NOTE
------------------- ADDITIONAL RECEIVABLE TOTAL
SHARES PAR PAID-IN RETAINED FROM STOCKHOLDERS'
OUTSTANDING VALUE CAPITAL EARNINGS STOCKHOLDER EQUITY
----------- ------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Combined Capital and
Securities
(Predecessor)
Balance at March 31,
1994.................. 1,600 $15,100 $1,439,300 $ 831,733 $(700,000) $1,586,133
Net income............. -- -- -- 163,317 -- 163,317
----- ------- ---------- ---------- --------- ----------
Balance at March 31,
1995.................. 1,600 15,100 1,439,300 995,050 (700,000) 1,749,450
Cancellation of note
receivable from
stockholder........... -- -- (700,000) -- 700,000 --
Dividends.............. -- -- -- (100,000) -- (100,000)
Net income............. -- -- -- 58,888 -- 58,888
----- ------- ---------- ---------- --------- ----------
Balance at March 31,
1996.................. 1,600 15,100 739,300 953,938 -- 1,708,338
Net loss............... -- -- -- (638,109) -- (638,109)
----- ------- ---------- ---------- --------- ----------
Balance at August 20,
1996.................. 1,600 $15,100 $ 739,300 $ 315,829 $ -- $1,070,229
===== ======= ========== ========== ========= ==========
Consolidated Holdings
(Successor)
August 21, 1996 (date
of acquisition of
Capital and
Securities)........... -- $ -- $ -- $ -- $ -- $ --
Capitalization of
Holdings.............. 1,000 10 133,990 -- -- 134,000
Net income............. -- -- -- 1,663,081 -- 1,663,081
----- ------- ---------- ---------- --------- ----------
Balance at March 31,
1997.................. 1,000 $ 10 $ 133,990 $1,663,081 $ -- $1,797,081
===== ======= ========== ========== ========= ==========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-5
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(PREDECESSOR) (SUCCESSOR) (PREDECESSOR) (PREDECESSOR)
------------- ------------ ------------- -------------
COMBINED COMBINED COMBINED
CAPITAL AND CONSOLIDATED CAPITAL AND CAPITAL AND
SECURITIES HOLDINGS TOTAL SECURITIES SECURITIES
4/1/96 8/21/96 FOR THE FOR THE FOR THE
TO TO YEAR ENDED YEAR ENDED YEAR ENDED
8/20/96 3/31/97 3/31/97 3/31/96 3/31/95
------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)...... $ (638,109) $ 1,663,081 $ 1,024,972 $ 58,888 $ 163,317
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization......... 781,528 831,247 1,612,775 981,825 657,370
Amortization of
goodwill............. -- 574,500 574,500 -- --
Amortization of
deferred charges..... 118,190 366,389 484,579 473,484 373,075
Interest expense paid
directly to lender by
lessee............... 139,212 108,660 247,872 333,728 329,030
Rental income paid
directly to lender by
lessee............... (799,372) (742,275) (1,541,647) (1,009,756) (661,165)
Principal payments on
litigation
settlement........... -- -- -- (55,847) (50,545)
Write-off of related
party notes
receivable........... -- -- -- -- 225,000
Deferred income
taxes................ -- 1,048,984 1,048,984 74,103 135,420
Changes in operating
assets and
liabilities:
Receivables from
managed partnerships,
net of deferred...... 1,364,974 (574,468) 790,506 (156,672) (218,239)
Prepaid and other
assets............... 38,680 317,181 355,861 41,827 262,465
Deferred charges...... (153,479) (407,931) (561,410) (495,680) (423,259)
Receivables from
affiliates........... (68,404) 130,242 61,838 (273,294) (291,489)
Accounts payable and
accrued expenses..... (158,491) 219,556 61,065 371,597 (9,008)
---------- ----------- ----------- ----------- ---------
Total adjustments... 1,262,838 1,872,085 3,134,923 285,315 328,655
---------- ----------- ----------- ----------- ---------
Net cash provided by
operating activities... 624,729 3,535,166 4,159,895 344,203 491,972
---------- ----------- ----------- ----------- ---------
Cash flows from
investing activities:
Purchase of fixed
assets................ (9,962) (81,471) (91,433) (157,694) (145,766)
Investment in
Partnership........... -- -- -- (1,000) --
Loan to related party.. -- -- -- -- (225,000)
Acquisition of Capital
and Securities........ -- (2,683,000) (2,683,000) -- --
---------- ----------- ----------- ----------- ---------
Net cash used by
investing activities... (9,962) (2,764,471) (2,774,433) (158,694) (370,766)
---------- ----------- ----------- ----------- ---------
Cash flows from
financing activities:
Holdings capital
contributions......... -- 134,000 134,000 -- --
Proceeds from
subordinated notes
payable............... -- 2,599,000 2,599,000 -- --
Principal payments on
subordinated notes
payable............... -- (199,664) (199,664) -- --
Seller notes retired... -- (2,949,680) (2,949,680) -- --
Principal payments on
seller notes.......... -- (357,804) (357,804) -- --
Dividend paid to
parent................ -- -- -- (100,000) --
Principal payments on
notes payable--
recourse financings... (45,417) (3,644) (49,061) (291,407) (287,908)
---------- ----------- ----------- ----------- ---------
Net cash used by
financing activities... (45,417) (777,792) (823,209) (391,407) (287,908)
---------- ----------- ----------- ----------- ---------
Net increase (decrease)
in cash................ 569,350 (7,097) 562,253 (205,898) (166,702)
Cash, beginning of
period................. 184,870 754,220 184,870 390,768 557,470
---------- ----------- ----------- ----------- ---------
Cash, end of period..... $ 754,220 $ 747,123 $ 747,123 $ 184,870 $ 390,768
========== =========== =========== =========== =========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-6
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
MARCH 31, 1997
(1) ORGANIZATION
ICON Holdings Corp. ("Holdings") was formed on May 1, 1996 as a Delaware
corporation. Holdings is fifty-percent owned by Summit Asset Holding L.L.C.
("Summit"), a subsidiary of a diversified financial and business services
group based in the United Kingdom and fifty-percent owned by Warrenton Capital
Partners L.L.C. ("Warrenton"). Warrenton was formed by two of the founders of
Griffin Equity Partners, Inc., a U.S. company engaged in the acquisition of
leases and lease portfolios. On August 21, 1996, Holdings acquired all of the
outstanding stock of ICON Capital Corp. ("Capital"), as well as all of the
outstanding stock of ICON Securities Corp. ("Securities"), an affiliate of
Capital. Holdings has five wholly-owned subsidiaries; Capital, Securities,
ICON Financial Corp., ICON Receivables Management Corp. and ICON Funding
Corp., and one sixty-percent owned subsidiary, MGC Griffin Capital Corp.,
(collectively, the "Company"). The primary activity of the Company is the
development, marketing, underwriting and management of publicly registered
equipment leasing limited partnerships. The Company is also engaged in the
business of originating and securitizing contract receivables and providing
consulting services to unrelated parties in connection with the acquisition
and administration of lease transactions. Capital is the general partner and
manager of ICON Cash Flow Partners, L.P., Series A ("ICON Cash Flow A"), ICON
Cash Flow Partners, L.P., Series B ("ICON Cash Flow B"), ICON Cash Flow
Partners, L.P., Series C ("ICON Cash Flow C"), ICON Cash Flow Partners, L.P.,
Series D ("ICON Cash Flow D"), ICON Cash Flow Partners, L.P., Series E ("ICON
Cash Flow E"), ICON Cash Flow Partners L.P. Six ("ICON Cash Flow Six") and
ICON Cash Flow Partners L.P. Seven ("ICON Cash Flow Seven") (collectively, the
"Partnerships"), which are publicly registered equipment leasing limited
partnerships. The Partnerships were formed for the purpose of acquiring
equipment and leasing such equipment to third parties. The Company's
investments in the Partnerships of $7,000 are carried at cost and are included
in prepaid and other assets.
Capital earns fees from the Partnerships on the sale of Partnership units
during their respective offering periods. Additionally, Capital earns
acquisition and management fees and shares in Partnership cash distributions.
ICON Cash Flow Seven began offering its units to suitable investors on
November 9, 1995. The offering period for ICON Cash Flow Seven will end
thirty-six months after the Partnership began offering such units, November 8,
1998.
Securities is a registered broker-dealer and is a member of the National
Association of Securities Dealers, Inc. Securities has earned fees from the
underwriting and sale of ICON Cash Flow Seven units since its inception and
will continue to earn fees through the end of its proposed offering on
November 8, 1998.
The following table identifies pertinent offering information relating to
the Partnerships:
<TABLE>
<CAPTION>
DATE OPERATIONS DATE CEASED GROSS PROCEEDS
BEGAN OFFERING UNITS RAISED
--------------- -------------- --------------
<S> <C> <C> <C>
ICON Cash Flow A...... May 6, 1988 February 1, 1989 $ 2,504,500
ICON Cash Flow B...... September 22, 1989 November 15, 1990 20,000,000
ICON Cash Flow C...... January 3, 1991 June 21, 1991 20,000,000
ICON Cash Flow D...... September 13, 1991 June 5, 1992 40,000,000
ICON Cash Flow E...... June 6, 1992 July 31, 1993 61,041,151
ICON Cash Flow Six.... March 31, 1994 November 8, 1995 38,385,712
ICON Cash Flow Seven.. January 19, 1996 (a) 48,297,094(a)
------------
$230,228,457
============
</TABLE>
- --------
(a) Anticipated closing on November 8, 1998 with gross proceeds raised through
October 15, 1997.
F-7
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(2) ACQUISITION
On August 21, 1996, Holdings acquired all of the outstanding stock of
Capital and Securities for $9,332,680. The purchase price consisted of
$2,683,000 in cash and $6,649,680 in seller financing, of which $2,949,680 of
the seller financing was paid off at closing.
The acquisition has been accounted for as a purchase. The purchase price and
expenses associated with the acquisition exceeded the fair values allocated to
the assets acquired and the liabilities assumed as of the date of acquisition.
The excess of the purchase price ($8,284,406) and related expenses ($560,388)
over the estimated fair values of the net assets acquired has been recorded as
goodwill and is being amortized on a straight line basis over ten and five
year periods, respectively. The factors that influenced the determination of
the amortization period included (i) the Company's historical operating
performances and earnings history, (ii) the projected fees and administrative
expenses contractually owed to the Company upon collection of existing gross
receivables by the ICON Partnerships, (iii) the position of the acquired
enterprise in the market, including its customers and product mix, and (iv)
the opportunities to expand the product offerings.
The following unaudited pro forma financial information presents the
consolidated results of operations of Holdings as if the acquisition of
Capital and Securities had occurred at the beginning of the fiscal year ended
March 31, 1997, after giving effect to certain adjustments, including the
amortization of goodwill (i.e. costs in excess of net assets of businesses
acquired), increased interest expense from debt assumed to have been issued to
fund the acquisition, elimination of management fees paid to Securities'
former parent and the income tax effects of the afore mentioned. This pro
forma financial information does not necessarily reflect the results of
operations as they would have been if Holdings, Capital and Securities had
constituted a single entity during such periods and is not necessarily
indicative of results which may be obtained in the future.
<TABLE>
<CAPTION>
PRO FORMA FOR THE
YEAR ENDED
MARCH 31, 1997
--------------------
THOUSANDS OF DOLLARS
(UNAUDITED)
<S> <C>
Statement of Income:
Revenue:
Fees--managed partnerships........................... $12,180
Rental income from investment in operating lease..... 1,542
Interest income and other............................ 120
-------
Total revenues..................................... 13,842
-------
Expenses:
Selling, general, and administrative................. 7,910
Amortization of deferred charges..................... 484
Amortization of goodwill............................. 914
Depreciation and amortization........................ 319
Depreciation--equipment under operating lease........ 1,294
Interest expense--recourse financings................ 825
Interest expense--non-recourse financings............ 248
-------
Total expenses..................................... 11,994
-------
Income before provision for income taxes............... 1,848
Provision for income taxes............................. 1,142
-------
Net income............................................. $ 706
=======
</TABLE>
F-8
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(3) SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Accounting and Presentation
The Company's consolidated and combined financial statements have been
prepared on the historical cost basis of accounting using the accrual basis.
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.
(b) Consolidation and Combination
The consolidated financial statements include the accounts of the Company
and all majority owned subsidiaries. All significant inter-company accounts
and transactions have been eliminated.
The combined financial statements include the accounts of Capital and
Securities. All significant inter-company accounts and transactions have been
eliminated.
(c) Disclosures About Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures
about Fair Value of Financial Instruments" requires disclosures about the fair
value of financial instruments. The fair values of the Company's financial
instruments (cash, receivables and notes payable) approximate the carrying
values at March 31, 1997 and 1996.
(d) Revenue and Cost Recognition
The Company earns fees from the Partnerships for the underwriting, sale,
organization and offering of each Partnership and for the acquisition,
management and administration of their lease portfolios. Underwriting, sale,
organization and offering fees are earned based on investment units sold and
are recognized at each closing. Acquisition fees are earned based on the
purchase price paid or the principal amount of each transaction entered into.
Management and administrative fees are earned for actively managing the
leasing, re-leasing, financing and refinancing of Partnership equipment and
financing transactions and for the administration of the Partnerships.
Management and administrative fees are earned based primarily on gross rental
payments.
At March 31, 1997 and 1996 the Company had accounts receivable due from the
Partnerships of $1,323,502 and $2,023,380, respectively. Included in these
amounts are receivables of $758,452 and $667,824 due from ICON Cash Flow A,
ICON Cash Flow B and ICON Cash Flow C relating to management fees which have
been earned, but deferred since September 1, 1993, as discussed below.
Under the Partnership agreements, the Company is entitled to management fees
from the Partnerships. Management fees are subordinate to the preferred cash
distributions to limited partners, on a cumulative basis, during the period of
reinvestment. Effective September 1, 1993, ICON Cash Flow A, ICON Cash Flow B,
and ICON Cash Flow C decreased the monthly distribution rate to limited
partners from the cash distribution rates stated in their prospectuses.
Currently such distribution rates are at an annual rate of 9%. As a result of
the decreased distribution rate, all management fees payable to the Company
related to these entities have been deferred until the limited partners of
ICON Cash Flow A, ICON Cash Flow B and ICON Cash Flow C have received their
stated cash distribution rate of return on a cumulative basis. Management fees
deferred for the period September 1, 1993 to March 31, 1997 totaled $758,452
and were comprised of $36,263 for ICON Cash
F-9
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Flow A, $127,000 for ICON Cash Flow B and $595,189 for ICON Cash Flow C. Such
amounts are included in receivables due from managed income funds as well as
in deferred management fees on the March 31, 1997 consolidated balance sheet.
(e) Goodwill
Goodwill, representing the excess of the purchase price and related expenses
over the estimated fair value of net assets acquired, is being amortized on a
straight-line basis over ten and five year periods, respectively. For the
period August 21, 1996 to March 31, 1997, amortization expense totaled
$574,500.
(f) Deferred Charges
Under the terms of the Partnerships' agreements, the Company is entitled to
be reimbursed for the costs of organizing and offering the units of the
Partnerships from the gross proceeds raised, subject to certain limitations,
based on the number of investment units sold. The unamortized balance of these
costs is included on the consolidated and combined balance sheets as deferred
charges and is being amortized over the offering period.
(g) Fixed Assets and Leasehold Improvements
Fixed assets, which consist primarily of computer equipment, software and
furniture and fixtures, are recorded at cost and are being depreciated over
three to five years using the straight-line method. Leasehold improvements are
also recorded at cost and are being amortized over the estimated useful lives
of the improvements, or the term of the lease, if shorter, using the straight-
line method.
(h) Investment in Equipment Under Operating Lease
The Company's investment in equipment under operating lease is recorded at
cost and is being depreciated to estimated salvage value. Both lease rentals
and depreciation are recognized on the straight-line basis over the lease
term. The Company, on a non-recourse basis, financed the purchase of the
equipment with a financial institution. Interest on the related non-recourse
financing is calculated under the interest method. The excess of rental income
over depreciation and related interest expense represents the net amount
earned on this type of transaction.
(i) Income Taxes
The Company accounts for its income taxes following the liability method as
provided for in SFAS No. 109, "Accounting for Income Taxes."
Capital files stand alone Federal and state income tax returns for the
period April 1, 1996 to August 20, 1996. Securities files, for the period
ended April 1, 1996 to August 20, 1996, consolidated Federal and state income
tax returns with its former parent, Soundview Leasing Corp. For the period
August 21, 1996 to March 31, 1997, Holdings and its subsidiaries will file a
consolidated Federal tax return and combined state tax return.
(4) STOCKHOLDERS' EQUITY
Holdings was capitalized on August 21, 1996 with an initial capital
contribution of $134,000, consisting of a $67,000 contribution from Summit and
a $67,000 contribution from Warrenton.
F-10
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(5) RELATED PARTY TRANSACTIONS
The Company earns fees from the Partnerships for the underwriting, sale,
organization and offering of each Partnership and for the acquisition,
management and administration of their lease portfolios. Receivables from
managed income funds primarily relate to such fees earned from the
Partnerships.
For the period August 21, 1996 to March 31, 1997, the Company accrued
$217,655 and $175,000 in acquisition and management fees to Summit,
respectively. As of March 31, 1997, the Company had payables of $432,742 to
Summit related to acquisition fees, management fees and expense
reimbursements.
In 1996, pursuant to a proxy solicitation, the limited partners in ICON Cash
Flow B agreed to the following amendments to their Partnership Agreement: (1)
extend the Reinvestment Period for a maximum of four additional years, and (2)
eliminate ICON Cash Flow B's obligation to pay the Company $228,906 of the
$355,906 in deferred management fees which were outstanding as of November 15,
1995, the original end of the Reinvestment Period. The elimination of these
fees reduced receivables from related parties--managed partnerships and
deferred management fees--managed partnerships by the same amount. In
addition, the remaining $127,000 in deferred management fees, when paid to the
Company, would be returned to ICON Cash Flow B in the form of an additional
capital contribution.
In February and March 1995, the Company lent $75,000 and $100,000,
respectively, to ICON Cash Flow Series A. Principal on the loans was to be
repaid only after the extended Reinvestment Period expired, and after the
limited partners had received at least a 6% total return on their capital.
Since recoverability of these notes was questionable, such notes were written
off by the Company in fiscal 1995.
Effective January 31, 1995, ICON Cash Flow Series A, by consent of its
limited partners, amended its Partnership Agreement. The amendments: (1)
extend the Reinvestment Period of ICON Cash Flow Series A to January 1997, (2)
allow the company to lend funds to ICON Cash Flow Series A for a term in
excess of twelve months for amounts up to an aggregate of $250,000 and (3)
decrease management fees to a flat rate of 1% of rentals for all investments
under management.
In January and October 1994, the Company contributed $75,000 and $50,000,
respectively, in additional capital to ICON Cash Flow A. Since management fees
from ICON Cash Flow A are currently being deferred (see Note 3) and the
recoverability of the additional capital contributions is questionable, such
contributions were written off by the Company. Profits, losses and cash
distributions will not be affected by the additional capital contributions and
will continue to be allocated in the same manner as stated in the ICON Cash
Flow A prospectus.
(6) PREPAID AND OTHER ASSETS
Included in prepaid and other assets are unamortized insurance costs, the
Company's investment in the Partnerships and sublease receivables.
F-11
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(7) INCOME TAXES
The provision for income taxes for Holdings (Successor) for the period
August 21, 1996 to March 31, 1997, and combined Capital and Securities
(Predecessor) for the years ended March 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR)
------------ ---------------- ----------------
CONSOLIDATED COMBINED CAPITAL COMBINED CAPITAL
HOLDINGS AND SECURITIES AND SECURITIES
1997 1996 1995
------------ ---------------- ----------------
<S> <C> <C> <C>
Current:
Federal...................... $ -- $ -- $ --
State........................ 78,804 560 2,323
---------- ------- --------
78,804 560 2,323
---------- ------- --------
Deferred:
Federal...................... 963,231 46,078 80,344
State........................ 85,753 28,025 55,076
---------- ------- --------
1,048,984 74,103 135,420
---------- ------- --------
$1,127,788 $74,663 $137,743
========== ======= ========
</TABLE>
There was no provision for income taxes for Capital and Securities for the
period April 1, 1996 to August 20, 1996.
Deferred income taxes at March 31, 1997 and 1996 are primarily the result of
temporary differences relating to net operating loss carryforwards, the
carrying value of fixed assets, equipment under an operating lease, the
investments in the Partnerships and deferred charges. The deferred tax assets
and liabilities at March 31, consisted of the following:
<TABLE>
<CAPTION>
(SUCCESSOR) (PREDECESSOR)
------------ ----------------
CONSOLIDATED COMBINED CAPITAL
HOLDINGS AND SECURITIES
1997 1996
------------ ----------------
<S> <C> <C>
Deferred Tax Assets:
Federal...................................... $ 58,066 $ 611,179
State........................................ 59,995 9,010
---------- ---------
118,061 620,189
---------- ---------
Deferred Tax Liabilities:
Federal...................................... 1,389,403 979,287
State........................................ 261,586 124,846
---------- ---------
1,650,989 1,104,133
---------- ---------
$1,532,928 $ 483,944
========== =========
</TABLE>
At March 31, 1997 the Company had $230,777 in net operating loss carry-
forwards. A valuation allowance for deferred tax assets has not been recorded
since management believes that the deferred tax assets will be utilized in
future periods. Taxes payable of $78,804 and $560 were included in accounts
payable and accrued expenses on the respective consolidated and combined
balance sheets.
F-12
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following table reconciles income taxes computed at the Federal
statutory rate to the Company's effective tax rate for Holdings (Successor)
for the period August 21, 1996 to March 31, 1997 and combined Capital and
Securities (Predecessor) for the years ended March 31, 1996 and 1995:
<TABLE>
<CAPTION>
(SUCCESSOR) (PREDECESSOR) (PREDECESSOR)
----------------- ------------------- -------------------
CONSOLIDATED COMBINED CAPITAL COMBINED CAPITAL
HOLDINGS AND SECURITIES AND SECURITIES
1997 1996 1995
----------------- ------------------- -------------------
TAX RATE TAX RATE TAX RATE
---------- ----- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal statutory
taxes.................. $ 948,895 34.00% $ 45,407 34.00% $ 102,360 34.00%
State income taxes, net
of Federal tax
benefit................ 108,609 3.89 18,866 14.13 37,883 12.58
Amortization of
goodwill............... 171,514 6.14 -- -- -- --
Meals and entertainment
exclusion.............. 21,978 .79 11,490 8.60 11,744 3.90
Other................... (123,208) (4.41) (3,149) (2.36) (10,384) (3.45)
Adjustment to prior year
Federal income tax..... -- -- 12,773 9.57 -- --
Effect of graduated
rates.................. -- -- (10,724) (8.03) (3,860) (1.28)
---------- ----- --------- ------- --------- ------
$1,127,788 40.41% $ 74,663 55.91% $ 137,743 45.75%
========== ===== ========= ======= ========= ======
</TABLE>
(8) NOTES PAYABLE
Notes payable at March 31, consisted of the following:
<TABLE>
<CAPTION>
(SUCCESSOR) (PREDECESSOR)
------------ ----------------
CONSOLIDATED COMBINED CAPITAL
HOLDINGS AND SECURITIES
1997 1996
------------ ----------------
<S> <C> <C>
Subordinated Notes Payable
Installment note due Warrenton, interest at
12.5%, principal and interest due in monthly
installments of $40,284 through September
1999........................................... $1,033,336 $ --
Term note due Warrenton, interest at 12.5%,
principal and interest due August 2001......... 233,000 --
Term note due Summit, interest at 12.5%,
principal and interest due August 2001......... 1,133,000 --
---------- -------
$2,399,336 $ --
========== =======
Notes Payable--Seller Financing
Installment note due Peter D. Beekman, interest
at 16.705%, principal and interest due in
monthly installments of $111,358 through August
1999........................................... $2,642,196 $ --
Term note due Peter D. Beekman, interest at 12%,
interest due monthly........................... 700,000 --
---------- -------
$3,342,196 $ --
========== =======
Note Payable--Capital Lease
Various obligations under capital leases,
payable in monthly installments through March
2002........................................... $ 196,105 $46,185
========== =======
</TABLE>
On June 24, 1997, the Company refinanced the notes payable-seller financing
with proceeds received from a $3,000,000 term loan. The loan is with TKO
Finance Corp. ("TKO"), bears interest at 11.5% and is payable in thirty-six
equal monthly installments of $99,177 commencing August 1, 1997.
F-13
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the TKO loan, the Company issued 1,000 shares of Class B
non-voting common stock and entered into a Put and Call Agreement. The Put
portion of the Agreement grants TKO the right to require the Company to
purchase 200 shares, 350 shares and the remaining 450 shares of the Class B
common stock at $432.22 per share in April 2000, 2001 and 2002, respectively.
The Call portion of the Agreement grants the Company the right to require TKO
to sell 200 shares, 350 shares and the remaining 450 shares of the Class B
common stock at $480.07 per share in February 2000, 2001 and 2002,
respectively. In the event the Company registers any of its stock or other
securities under the Securities Act of 1933, TKO will have the right to
convert its shares of the Class B common stock into shares of the stock to be
issued. The Class B common stock was recorded at fair value at date of issue.
The fair value will be increased by periodic accretions so that the carrying
amount will equal the Call amount at each respective Call date.
(9) INVESTMENT IN EQUIPMENT UNDER OPERATING LEASE
On December 12, 1993, the Company invested $5,340,436 in manufacturing
equipment which was subsequently leased to a third party user for a two year
period commencing on January 1, 1994. Rentals were payable monthly in advance.
Simultaneous with the purchase of the equipment, the Company, on a non-
recourse basis, obtained $5,393,840 in financing from a financial institution,
of which $5,340,436 was paid directly to the equipment vendor to satisfy the
cost of the equipment. The excess of the proceeds from the financing over the
cost of the equipment, $53,404, was paid directly to the Company and earned
over the two year period of the lease. All rental payments by the lessee were
paid directly to the financial institution. The original non-recourse
financing bore interest at a rate of 6.6%, and was paid in 24 monthly
installments of $55,097 through December 1995, with a final payment of
$4,699,584 in January 1996.
Effective January 1, 1996, the lessee renewed the lease and the bank
extended the term of the collateralized non-recourse note. The terms of the
renewal required monthly rentals of $171,294, payable by the lessee in
advance, for two years. Such rental payments continued to be paid directly to
the financial institution to reduce the loan, with interest now calculated at
8.95%. The lease was terminated in 1997 resulting in a gain of $1,694 being
recognized on disposition.
(10) COMMITMENTS AND CONTINGENCIES
The Company has operating leases for office space through the year 2004.
Rent expense for the period April 1, 1996 to August 20, 1996 (Predecessor),
August 21, 1996 to March 31, 1997 (Successor) and the years ended March 31,
1996 and 1995 amounted to $129,000, $231,000, $319,000 and $308,000, net of
sublease income of $70,000, $101,000, $165,000 and $160,000, respectively. The
future minimum rental commitments under non-cancelable operating leases are
due as follows (sublease rental income is all from short term leases):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
MARCH 31, AMOUNT
------------------ ----------
<S> <C>
1998..................................................... $ 520,683
1999..................................................... 669,176
2000..................................................... 503,688
2001..................................................... 490,817
2002..................................................... 504,840
Thereafter............................................... 1,345,822
----------
$4,035,026
==========
</TABLE>
F-14
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(11) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
For the period April 1, 1996 to August 20, 1996 (Predecessor), August 21,
1996 to March 31, 1997 (Successor) and the years ended March 31, 1996 and
1995, the Company paid $5,565, $555,417, $27,344 and $60,186 in interest on
recourse financings, respectively.
Certain equipment, which the Company was carrying as investment in equipment
under operating lease, was paid for directly by a financing institution. In
connection with this transaction, the lessee's monthly installments were
remitted directly to the financing institution to service the Company's non-
recourse note payable, which was incurred when the financing institution paid
for the equipment on behalf of the Company. For the period April 1, 1996 to
August 20, 1996 (Predecessor), August 21, 1996 to March 31, 1997 (Successor)
and the years ended March 31, 1996 and 1995, such payments aggregated
$799,372, $742,275, $1,009,756 and $661,165, which was comprised of $660,160,
$633,615, $676,028 and $332,393 of principal and $139,212, $108,660, $333,728
and $328,772 of interest. The equipment under the operating lease was sold to
the lessee in 1997 and a gain of $1,694 was recognized on disposition.
On August 21, 1996, Holdings acquired all of the outstanding stock of
Capital and Securities for $9,332,680. The purchase price consisted of
$2,683,000 in cash and $6,649,680 in seller financing, of which $2,949,680 of
the seller financing was paid off at closing.
F-15
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1997 1997 1997
------------- ------------- -----------
<S> <C> <C> <C>
Cash................................... $ 156,968 $ 156,968 $ 747,123
Receivables from related parties--
managed partnerships.................. 1,359,899 1,359,899 1,323,502
Prepaid and other assets............... 445,026 445,026 200,098
Deferred charges....................... 658,642 658,642 379,717
Fixed assets and leasehold
improvements, at cost, less
accumulated depreciation and
amortization of $1,716,531 and
$1,533,265............................ 686,493 686,493 752,472
Goodwill less accumulated amortization
of $1,031,627 and $574,500............ 7,813,167 7,813,167 8,270,294
----------- ----------- -----------
Total assets....................... $11,120,195 $11,120,195 $11,673,206
=========== =========== ===========
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses.. $1,063,290 $ 1,063,290 $ 1,214,366
Redemption of treasury stock payable
(1) .................................. 7,169,643 -- --
Due to stockholder..................... 140,000 140,000 432,742
Subordinated notes payable--related
party................................. 2,213,399 2,213,399 2,399,336
Notes payable--seller financing........ -- -- 3,342,196
Notes payable--recourse................ 3,402,249 3,402,249 196,105
Deferred income taxes, net............. 1,632,316 1,632,316 1,532,928
Deferred management fees--managed
partnerships.......................... 788,547 788,547 758,452
----------- ----------- -----------
Total liabilities.................. 16,409,449 9,239,801 9,876,125
----------- ----------- -----------
Redeemable stock....................... 269,576 269,576 --
Commitments and Contingencies
Stockholders' Equity:
Common stock: $.01 par value; 1,000
shares authorized, issued and
outstanding (2)...................... 80,000 10 10
Additional paid-in capital (2)........ 54,000 133,990 133,990
Retained earnings..................... 1,476,818 1,476,818 1,663,081
Less: Treasury Shares (1)............. (7,169,643) -- --
----------- ----------- -----------
(5,558,825) 1,610,818 1,797,081
----------- ----------- -----------
Total liabilities and stockholders'
equity............................ $11,120,195 $11,120,195 $11,673,206
=========== =========== ===========
</TABLE>
- --------
(1) Gives effect to the proposed redemption of 4,000,000 shares of Common Stock
held by Summit upon consummation of the contemplated initial public
offering.
(2) Gives effect to the contemplated 8,000-to-1 stock dividend.
See accompanying notes to consolidated and combined financial statements.
F-16
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(SUCCESSOR) (PREDECESSOR) (SUCCESSOR)
------------ ------------- ------------
CONSOLIDATED COMBINED
HOLDINGS CAPITAL AND CONSOLIDATED TOTAL
FOR THE SECURITIES HOLDINGS FOR THE
SIX MONTHS 4/1/96 8/21/96 SIX MONTHS
ENDED TO TO ENDED
9/30/97 8/20/96 9/30/96 9/30/96(1)
------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues:
Fees--managed
partnerships............. $5,315,363 $2,985,092 $2,676,206 $5,661,298
Rental income in operating
lease.................... -- 799,372 228,392 1,027,764
Interest income and other
income................... 81,677 21,102 1,881 22,983
---------- ---------- ---------- ----------
Total revenues......... 5,397,040 3,805,566 2,906,479 6,712,045
---------- ---------- ---------- ----------
Expenses:
Selling, general and
administrative............ 4,420,987 3,399,180 562,491 3,961,671
Amortization of deferred
charges................... 189,143 118,190 30,933 149,123
Amortization of goodwill... 457,127 -- 95,344 95,344
Depreciation and
amortization.............. 184,957 121,368 38,411 159,779
Depreciation--equipment
under operating lease..... -- 660,160 192,708 852,868
Interest expense--recourse
financings................ 353,908 5,565 96,538 102,103
Interest expense--non-
recourse financings....... -- 139,212 35,685 174,897
---------- ---------- ---------- ----------
Total expenses......... 5,606,122 4,443,675 1,052,110 5,495,785
---------- ---------- ---------- ----------
Income (loss) before
provision for income taxes
and extraordinary item.... (209,082) (638,109) 1,854,369 1,216,260
Provision for income
taxes..................... 50,505 -- 604,966 604,966
---------- ---------- ---------- ----------
Income (loss) before
extraordinary item........ (259,587) (638,109) 1,249,403 611,294
Extraordinary item--gain on
early extinguishment of
debt (net of applicable
income taxes of $48,882).. 73,324 -- -- --
---------- ---------- ---------- ----------
Net income (loss).......... $ (186,263) $ (638,109) $1,249,403 $ 611,294
========== ========== ========== ==========
</TABLE>
- --------
(1) As discussed in note 2 to the audited consolidated and combined financial
statements, Capital and Securities were acquired by ICON Holdings on
August 21, 1996, in a business combination accounted for as a purchase. As
a result of the acquisition, the financial information for the period
after the acquisition is presented on a different cost basis than that for
the periods before the acquisition and, therefore, the amounts in the
total column for the six months ended September 30, 1996 are not
comparable to the six months ended September 30, 1997 as a result of
goodwill and its related amortization.
See accompanying notes to consolidated and combined financial statements.
F-17
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(SUCCESSOR) (PREDECESSOR) (SUCCESSOR)
------------ ------------- ------------
CONSOLIDATED COMBINED
HOLDINGS CAPITAL AND CONSOLIDATED TOTAL
FOR THE SECURITIES HOLDINGS FOR THE
THREE MONTHS 7/1/96 8/21/96 THREE MONTHS
ENDED TO TO ENDED
9/30/97 8/20/96 9/30/96 9/30/96(1)
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Fees--managed
partnerships........... $3,083,590 $ 802,745 $2,676,206 $3,478,951
Rental income in
operating lease........ -- 285,490 228,392 513,882
Interest income and
other income........... 28,104 13,232 1,881 15,113
---------- --------- ---------- ----------
Total revenues....... 3,111,694 1,101,467 2,906,479 4,007,946
---------- --------- ---------- ----------
Expenses:
Selling, general and
administrative......... 2,215,360 1,375,304 562,491 1,937,795
Amortization of deferred
charges................ 52,505 61,340 30,933 92,273
Amortization of
goodwill............... 228,564 -- 95,344 95,344
Depreciation and
amortization........... 93,378 43,737 38,411 82,148
Depreciation--equipment
under operating lease.. -- 238,478 192,708 431,186
Interest expense--
recourse financings.... 152,307 4,178 96,538 100,716
Interest expense--non-
recourse financings.... -- 47,011 35,685 82,696
---------- --------- ---------- ----------
Total expenses....... 2,742,114 1,770,048 1,052,110 2,822,158
---------- --------- ---------- ----------
Income (loss) before
provision for income
taxes................... 369,580 (668,581) 1,854,369 1,185,788
Provision for income
taxes................... 190,544 -- 604,966 604,966
---------- --------- ---------- ----------
Net income (loss)........ $ 179,036 $(668,581) $1,249,403 $ 580,822
========== ========= ========== ==========
</TABLE>
- --------
(1) As discussed in note 2 to the audited consolidated and combined financial
statements, Capital and Securities were acquired by ICON Holdings on
August 21, 1996, in a business combination accounted for as a purchase. As
a result of the acquisition, the financial information for the period
after the acquisition is presented on a different cost basis than that for
the periods before the acquisition and, therefore, the amounts in the
total column for the three months ended September 30, 1996 are not
comparable to the three months ended September 30, 1997 as a result of
goodwill and its related amortization.
See accompanying notes to consolidated and combined financial statements.
F-18
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL TOTAL
SHARES PAR PAID-IN RETAINED STOCKHOLDERS'
OUTSTANDING VALUE CAPITAL EARNINGS EQUITY
----------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Combined Capital and
Securities
(Predecessor)
Balance at March 31,
1996.................. 1,600 $15,100 $739,300 $ 953,938 $1,708,338
----- ------- -------- ---------- ----------
Net loss............... -- -- -- (638,109) (638,109)
Balance at August 20,
1996.................. 1,600 $15,100 $739,300 $ 315,829 $1,070,229
===== ======= ======== ========== ==========
Consolidated Holdings
(Successor)
August 21, 1996 (date
of acquisition of
Capital and
Securities)........... -- $ -- $ -- $ -- $ --
Capitalization of
Holdings.............. 1,000 10 133,990 134,000
Net income............. -- -- -- 1,249,403 1,249,403
----- ------- -------- ---------- ----------
Balance at September
30, 1996.............. 1,000 10 133,990 1,249,403 1,383,403
Net income............. -- -- -- 413,678 413,678
----- ------- -------- ---------- ----------
Balance at March 31,
1997.................. 1,000 10 133,990 1,663,081 1,797,081
Net loss............... -- -- -- (186,263) (186,263)
----- ------- -------- ---------- ----------
Balance at September
30, 1997.............. 1,000 $ 10 $133,990 $1,476,818 $1,610,818
===== ======= ======== ========== ==========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-19
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(SUCCESSOR) (PREDECESSOR) (SUCCESSOR)
------------ ------------- ------------
CONSOLIDATED COMBINED
HOLDINGS CAPITAL AND CONSOLIDATED TOTAL
FOR THE SECURITIES HOLDINGS FOR THE
SIX MONTHS 4/1/96 8/21/96 SIX MONTHS
ENDED TO TO ENDED
9/30/97 8/20/96 9/30/96 9/30/96
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net income (loss)........ $ (186,263) $ (638,109) $ 1,249,403 $ 611,294
Adjustments to reconcile
net income (loss) to net
cash provided (used) by
operating activities:
Gain on early
extinguishment of
debt................... (73,324) -- -- --
Depreciation and
amortization........... 184,957 781,528 231,119 1,012,647
Amortization of
goodwill............... 457,127 -- 95,344 95,344
Amortization of deferred
charges................ 189,143 118,190 30,933 149,123
Interest expense paid
directly to lender by
lessee................. -- 139,212 35,685 174,897
Rental income paid
directly to lender by
lessee................. -- (799,372) (228,392) (1,027,764)
Deferred income taxes... 99,388 -- 604,275 604,275
Changes in operating
assets and liabilities:
Receivables from managed
partnerships, net of
deferred management
fees................... (6,302) 1,364,974 (49,470) 1,315,504
Prepaid and other
assets................. (244,928) 38,680 (22,911) 15,769
Deferred charges........ (468,068) (153,479) (28,687) (182,166)
Receivable from
affiliates............. -- (68,404) 412,113 343,709
Accounts payable and
accrued expenses....... (151,076) (158,491) 18,236 (140,255)
Due to stockholder...... (292,742) -- -- --
----------- ---------- ----------- -----------
Total adjustments..... (305,825) 1,262,838 1,098,245 2,361,083
----------- ---------- ----------- -----------
Net cash provided (used)
by operating activities.. (492,088) 624,729 2,347,648 2,972,377
----------- ---------- ----------- -----------
Cash flows from investing
activities:
Purchase of fixed
assets................. (118,978) (9,962) (10,238) (20,200)
Acquisition of Capital
and Securities......... -- -- (2,683,000) (2,683,000)
----------- ---------- ----------- -----------
Net cash used by investing
activities............... (118,978) (9,962) (2,693,238) (2,703,200)
----------- ---------- ----------- -----------
Cash flows from financing
activities:
Initial capital
contribution............ -- -- 134,000 134,000
Proceeds from
subordinated notes
payable................. -- -- 2,599,000 2,599,000
Principal payments on
subordinated notes
payable................. (185,937) -- -- --
Seller notes retired..... -- -- (2,949,680) (2,949,680)
Repayment of seller
notes................... (3,269,072) -- -- --
Proceeds from recourse
financings and issuance
of Class B common
stock................... 3,630,328 -- -- --
Principal payments on
notes payable--recourse
financings.............. (154,608) (45,417) -- (45,417)
----------- ---------- ----------- -----------
Net cash provided (used)
by financing activities.. 20,911 (45,417) (216,680) (262,097)
----------- ---------- ----------- -----------
Net increase (decrease) in
cash..................... (590,155) 569,350 (562,270) 7,080
Cash, beginning of
period................... 747,123 184,870 754,220 184,870
----------- ---------- ----------- -----------
Cash, end of period....... $ 156,968 $ 754,220 $ 191,950 $ 191,950
=========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-20
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
(1) BASIS OF ACCOUNTING AND PRESENTATION
The consolidated and combined financial statements of ICON Holdings Corp.,
and its wholly owned subsidiaries (the "Company") are unaudited and reflect
all adjustments (consisting only of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim period. Certain
information and footnote disclosures normally included in consolidated and
combined financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Management believes that
the disclosures made are adequate to prevent the information from being
misleading. The consolidated and combined financial statements should be read
in conjunction with the Company's March 31, 1997 and 1996 audited consolidated
and combined financial statements. The results of operations for the three and
six months ended September 30, 1997 are not necessarily indicative of the
results of operations for the entire fiscal year ending March 31, 1998.
(2) SUBORDINATED NOTES PAYABLE AND NOTES PAYABLE
On June 24, 1997 the Company refinanced the notes payable-seller financing
with proceeds received from a $3,000,000 term loan. The loan is with TKO
Finance Corp. ("TKO"), bears interest at 11.5% and is payable in thirty-six
equal monthly installments of $99,177 commencing August 1, 1997. The Company
realized a gain of $122,206 ($73,324 net of related taxes) in connection with
the early extinguishment of the debt which has been recorded as an
extraordinary item in the income statement.
On August 21, 1997, ICON Capital Corp. ("Capital"), a wholly owned
subsidiary of the Company, entered into a one-year renewable unsecured
discretionary line of credit agreement (the "Facility"). The maximum amount
available under the Facility is $600,000, and interest is payable at prime
(8.5% at September 30, 1997) plus 1%. The Facility requires that Capital,
among other things, meet certain objectives with respect to financial ratios.
At September 30, 1997, Capital was in compliance with the covenants required
by the Facility. As of September 30, 1997, $600,000 was available and
outstanding.
F-21
<PAGE>
ICON HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Notes payable at September 30, 1997 and March 31, 1997 consisted of the
following:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
------------- ----------
<S> <C> <C>
Subordinated Notes Payable
Installment note due Warrenton, interest at
12.5%, principal and interest due in monthly
installments of $40,284 through September 1999.. $ 847,399 $1,033,336
Term note due Warrenton, interest at 12.5%,
principal and interest due August 2001.......... 233,000 233,000
Term note due Summit, interest at 12.5%,
principal and interest due August 2001.......... 1,133,000 1,133,000
---------- ----------
$2,213,399 $2,399,336
========== ==========
Notes Payable--Seller Financing
Installment not due Peter D. Beekman, interest at
16.705%, principal and interest due in monthly
installments of $111,358........................ $ -- $2,642,196
Term note due Peter D. Beekman, interest at 12%,
interest due monthly............................ -- 700,000
---------- ----------
$ -- $3,342,196
========== ==========
Notes Payable--Recourse
Installment note, interest at 11.5%, principal
and interest due in monthly installments of
$99,177 through July 2000....................... $2,595,758 $ --
One year renewable line of credit, interest at
Prime plus 1%................................... 600,000 --
Various obligations under capital leases, payable
in monthly installments through March 2002...... 206,491 196,105
---------- ----------
$3,402,249 $ 196,105
========== ==========
</TABLE>
(3) REDEEMABLE STOCK
In connection with the TKO loan, the Company issued 1,000 shares of Class B
non-voting common stock and entered into a Put and Call Agreement. The Put
portion of the Agreement grants TKO the right to require the Company to
purchase 200 shares, 350 shares and the remaining 450 shares of the Class B
common stock for $432.22 per share in April 2000, 2001 and 2002, respectively.
The Call portion of the Agreement grants the Company the right to require TKO
to sell 200 shares, 350 shares and the remaining 450 shares of the Class B
common stock for $480.07 per share in February 2000, 2001 and 2002,
respectively. In the event that the Company registers any of its stock or
other securities under the Securities Act of 1933, TKO will have the right to
convert its shares of the Class B common stock into shares of the stock to be
issued. The Class B common stock was recorded at fair value at the date of
issue. The fair value will be increased by periodic accretions so that the
carrying amount will equal the Call amount at each respective Call date.
F-22
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMA-
TION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OF-
FERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UN-
LAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
--------------
SUMMARY TABLE OF CONTENTS
--------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information................................................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Historical and Pro forma Financial Data......................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
The Company.............................................................. 29
Business................................................................. 30
Management............................................................... 41
Director Compensation.................................................... 43
Executive Compensation................................................... 43
Certain Transactions..................................................... 47
Principal Stockholders and Beneficial Ownership of Management............ 48
Description of Capital Stock............................................. 49
Transfer Agent and Registrar............................................. 51
Shares Eligible for Future Sale.......................................... 52
Underwriting............................................................. 53
Legal Matters............................................................ 55
Experts.................................................................. 55
Index to Financial Statements............................................ F-1
</TABLE>
----------------
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACT-
ING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
12,500,000 SHARES
ICON HOLDINGS CORP.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
FRIEDMAN, BILLINGS,
RAMSEY & CO., INC.
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
ALTERNATE PAGE FOR SELLING SECURITY HOLDERS' PROSPECTUS
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
924,314 SHARES
ICON HOLDINGS CORP.
COMMON STOCK
------------
This Prospectus relates to the resale of up to 924,314 shares of Common Stock
of ICON Holdings Corp. (together with its subsidiaries, the "Company") held by
Friedman, Billings, Ramsey & Co., Inc. (the "Representative").
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF COMMON STOCK OFFERED
HEREBY.
The Representative and its agents, donates, distributes, pledges and other
successors in interest (collectively, the "Selling Security Holders") may offer
and sell the remainder of the shares from time to time in one or more
transactions on The Nasdaq Stock Market, or otherwise, at market prices then
prevailing or in negotiated transactions. The shares may also be sold pursuant
to option, hedging or other transactions with broker-dealers. The shares may
also be offered in one or more underwritten offerings, although no such
arrangements have been made. The underwriters in an underwritten offering, if
any, and the terms and conditions of any such offering will be described in a
supplement to this Prospectus. See "Selling Security Holders" and "Plan of
Distribution."
On , 1997, the Company completed an initial public offering (the
"Offering") of 12,500,000 shares of Common Stock through the "Representative"
as the representative of several underwriters. The Company will not receive any
of the proceeds from the sale of the shares by the Selling Security Holders.
See "Use of Proceeds". The Common Stock of the Company is traded on the
National Market of The Nasdaq Stock Market (the "Nasdaq National Market") under
the symbol "ICOH". On , 1997, the last reported sale price of Common Stock
on the Nasdaq National Market was $ per share.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE>
ALTERNATE PAGE FOR SELLING SECURITY HOLDERS' PROSPECTUS
THE OFFERING
The 924,314 shares of Common Stock which may be offered by the Selling
Security Holders are identical to the 12,500,000 shares of Common Stock
offered and sold by the Company in its underwritten initial public offering
(the "Offering") by separate prospectus. Upon completion of the Offering,
16,611,276 shares of Common Stock were outstanding. Such number of shares does
not include (i) 4,000,000 shares of Common Stock to be redeemed by the Company
simultaneously with the consummation of the Offering; (ii) 2,000,000 shares of
Common Stock reserved for issuance under the Company's 1997 Stock Option Plan,
of which options to purchase 15,000 shares of Common Stock were granted upon
the consummation of the Offering at an exercise price equal to the initial
public offering price per share; (iii) 200,000 shares of Common Stock reserved
for issuance under the Company's 1997 Non-Employee Directors' Stock Plan, of
which options to purchase 15,000 shares of Common Stock were granted upon the
consummation of the Offering at an exercise price equal to the initial public
offering per share; (iv) 498,338 shares of Common Stock issuable under
warrants granted to a related party upon consummation of the Offering at an
exercise price per share equal to the initial public offering price; and (v)
up to 924,314 shares of Common Stock which are the subject of this offering
under warrants granted to the Representative of the Underwriters at an
exercise price per share equal to the initial public offering price. See
"Executive Compensation--1997 Stock Option Plan," "1997 Non-Employee Directors
Plan," "Certain Transactions" and "Underwriting."
A-2
<PAGE>
ALTERNATE PAGE FOR SELLING SECURITY HOLDERS' PROSPECTUS
USE OF PROCEEDS
The Company will receive no proceeds from the sale of Common Stock by the
Selling Security Holders. The net proceeds to the Company from the sale of the
shares of Common Stock in the Offering, after deducting estimated underwriting
discounts and other offering expenses, all of which are payable by the
Company, are estimated to be approximately $115.5 million (approximately
$132.9 million if the Over-Allotment Option is exercised in full), assuming an
initial public offering price of $10.00 per share. The Company intends to use
approximately $100 million of the net proceeds of the Offering to acquire
equipment subject to lease and to enter into equipment financing transactions.
In addition, the Company intends to use a portion of the net proceeds to
redeem 4,000,000 shares of Common Stock held by Summit Asset Holding L.L.C.
("Summit") for $7.2 million (and other non-cash consideration), to redeem
1,000 shares of Class B Common Stock held by TKO Finance Corporation ("TKO"),
a secured lender to the Company, for $349,000, to repay indebtedness
(including a premium of approximately $225,000) of approximately $3.4 million
owed to TKO and currently bearing interest at a fixed annual rate of 11.5% and
with a maturity of July 31, 2000, to repay indebtedness owed to Summit of
approximately $1.4 million currently bearing interest at a fixed annual rate
of 12.5% and due in 2001. Any remaining proceeds will be used for general
corporate purposes, including, but not limited to, purchases of equipment
subject to lease, acquisitions of related businesses or joint ventures, and
working capital. See "Certain Transactions". The Company does not have any
agreements or understandings with respect to any acquisitions at the present
time.
Pending use of the net proceeds as described above, the Company intends to
invest the net proceeds in short-term readily marketable, interest-bearing
government treasury obligations and equivalent securities.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future because it intends to retain its earnings, if
any, to finance the expansion of its business and for general corporate
purposes. Any payment of future dividends will be at the discretion of the
Board of Directors and will depend upon, among other factors, the Company's
earnings, financial condition, capital requirements, level of indebtedness,
contractual restrictions with respect to the payment of dividends and other
considerations that the Board of Directors deems relevant.
A-3
<PAGE>
ALTERNATE PAGE FOR SELLING SECURITY HOLDERS' PROSPECTUS
PLAN OF DISTRIBUTION
The Selling Security Holders and their agents, donees, distributees,
pledgees and other successors in interest may, from time to time, offer for
sale and sell or distribute the shares to be offered by them hereby (a) in
transactions executed on the Nasdaq National Market, or any securities
exchange on which the shares may be traded, through registered broker-dealers
(who may act as principals, pledges or agents) pursuant to unsolicited orders
or offers to buy, (b) in negotiated transactions, or (c) through other means.
The shares may be sold from time to time in one or more transactions at market
prices prevailing at the time of sale or a fixed offering price, which may be
changed, or at varying prices determined at the time of sale or at negotiated
prices. Such prices will be determined by the Selling Security Holders or by
agreement between the Selling Security Holders and their underwriters,
dealers, brokers or agents. The shares may also be offered in one or more
underwritten offerings. The underwriters in an underwritten offering, if any,
and the terms and conditions of any such offering will be described in a
supplement to this Prospectus.
In connection with distribution of the shares, the Selling Security Holders
may enter into hedging or other option transactions with broker-dealers in
connection with which, among other things, such broker-dealers may engage in
short sales of the shares pursuant to this Prospectus in the course of hedging
the positions they may assume with one or more of the Selling Security
Holders. The Selling Security Holders may also sell shares short pursuant to
this Prospectus and deliver the shares to close out such short positions. The
Selling Security Holders may also enter into option or other transactions with
broker-dealers which may result in the delivery of shares to such broker-
dealers who may sell such shares pursuant to this Prospectus. The Selling
Security Holders may also pledge the shares to a broker-dealer and upon
default the broker-dealer may effect the sales of the pledged shares pursuant
to this Prospectus.
The distribution of the shares by the Selling Security Holders is not
subject to any underwriting agreement. Any underwriters, dealers, brokers or
agents participating in the distribution of the shares may receive
compensation in the form of underwriting discounts, concessions, commissions
or fees from the Selling Security Holders and/or purchasers of shares, for
whom they may act. Such discounts, concessions, commissions or fees will not
exceed those customary for the type of transactions involved. In addition, the
Selling Security Holders and any such underwriters, dealers, brokers or agents
that participate in the distribution of shares may be deemed to be
underwriters under the Securities Act, and any profits on the sale of shares
by them and any discounts, commissions or concessions received by any of such
persons may be deemed to be underwriting discounts and commissions under the
Securities Act. Those who act as underwriter, broker, dealer or agent in
connection with the sale of the shares will be selected by the Selling
Security Holders and may have other business relationships with the Company
and its subsidiaries or affiliates in the ordinary course of business.
The aggregate proceeds to the Selling Security Holders from the sale of the
shares offered by the Selling Security Holders hereby will be the purchase
price of such shares less any broker's commissions.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdiction only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration of qualification
requirement is available and is complied with.
The Selling Security Holders and any broker-dealer, agent or underwriter
that participates with the Selling Security Holders in the distribution of the
shares may be deemed to be "underwriters" within the meaning of the Securities
Act, in which event any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the shares purchased by them may
be deemed to be underwriting commissions or discounts under the Securities
Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares offered hereby may not
simultaneously engage in market making activities with respect to the shares
A-4
<PAGE>
for a period of two business days prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Security Holders will be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder, including, without limitation, Rules
10b-2, 10b-5, 10b-6 and 10b-7, which provisions may limit the timing of sales
of the shares by the Selling Security Holders.
There is no assurance that the Selling Security Holders will sell any or all
of the shares described herein and may transfer, devise or gift such
securities by other means not described herein. The Company is permitted to
suspend the use of this Prospectus in connection with sales of the shares by
holders during certain periods of time under certain circumstances relating to
pending corporate developments and public filings with the Commission and
similar events. Expenses of preparing and filing the Registration Statement
and any and all amendments thereto will be borne by the Company.
A-5
<PAGE>
ALTERNATIVE PAGE FOR SELLING SECURITY HOLDERS' PROSPECTUS
SELLING SECURITY HOLDERS
Set forth below, is the number of shares of Common Stock beneficially owned
by the Representative as of December , 1997, the maximum number of shares of
Common Stock which may be offered pursuant to this Prospectus and the number
of shares to be owned after completion of the Offering (assuming the sale of
the maximum of all of the shares offered hereby).
<TABLE>
<CAPTION>
MAXIMUM NUMBERED SHARES TO
TOTAL NUMBER OF NUMBER OF SHARES TO BE OWNED AFTER THE
NAME & ADDRESS SHARES OWNED(1) BE OFFERED OR SOLD OFFERING
-------------- --------------- ------------------- ------------------
<S> <C> <C> <C>
Friedman, Billings,
Ramsey & Co., Inc. .... 924,314 924,314 0
</TABLE>
- --------
(1) Consists of shares issuable under a warrant granted to the Representative
upon the closing of the Offering.
A-6
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMA-
TION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OF-
FERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UN-
LAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
--------------
SUMMARY TABLE OF CONTENTS
--------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information................................................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Historical and Pro forma Financial Data......................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 30
Management............................................................... 41
Description of Capital Stock............................................. 49
Shares Eligible for Future Sale.......................................... 52
Legal Matters............................................................ 55
Experts.................................................................. 55
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
924,314 SHARES
ICON HOLDINGS CORP.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc., and other
estimated expenses expected to be incurred in connection with issuance and
distribution of securities being registered. All such fees and expenses shall
be paid by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................. $ 46,361
NASD Fee............................................................ 15,799
Blue Sky Fees....................................................... 2,500
Nasdaq National Market Listing Fee.................................. 48,750
Printing and Engraving Expenses..................................... 75,000
Accounting Fees and Expenses........................................ 150,000
Legal Fees and Expenses............................................. 500,000
Transfer Agent Fees and Expenses.................................... 2,500
Miscellaneous....................................................... 159,090
----------
Total............................................................. $1,000,000
==========
</TABLE>
- --------
* To be supplied by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of
directors to the corporation or its stockholders for monetary damages for
breaches of fiduciary duty, except for liability (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any
transaction from which the director derived an improper personal benefit.
Article 10 of the registrant's Certificate of Incorporation provides that the
personal liability of directors of the registrant is eliminated as provided by
extent permitted by Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of being a director or officer of the
corporation if it is determined that the director or officer acted in
accordance with the applicable standard of conduct set forth in such statutory
provision. Article XI of the registrant's Certificate of Incorporation
provides that the registrant will indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding by reason of the fact that he is or was a director,
officer, employee or agent of the registrant, or is or was serving at the
request of the registrant as a director, officer, employee or agent of another
entity, against certain liabilities, costs and expenses. Article XI further
permits the registrant to maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the registrant, or is or was
serving at the request of the registrant as a director, officer, employee or
agent of another entity, against any liability asserted against such person
and incurred by such person in any such capacity or arising out of his status
as such, whether or not the registrant would have the power to indemnify such
person against such liability under the DGCL.
The Registrant intends to obtain directors and officers liability and
company reimbursement insurance pursuant to which insurer will pay, on behalf
of directors and officers of the Registrant, certain losses (as defined)
II-1
<PAGE>
incurred as a result of specified wrongful acts by such persons, for which
they are not indemnified by the Registrant. In addition, the insurer will
reimburse the Registrant for certain losses incurred as a result of the
Registrant's indemnification of an officer or director in connection with such
a wrongful act. The policy will provide that the insurer's aggregate liability
to the Registrant with respect to a single policy year shall not exceed $10
million and is subject to customary exclusions.
Prior to the completion of the Offering, the Registrant will enter into
separate but identical indemnification agreements (the "Indemnification
Agreements") with each director and executive officer of the Registrant and
expects to enter into Indemnification Agreements with persons who become
directors or executive officers in the future. The Indemnification Agreements
shall provide that the Registrant will indemnify the director or officer (the
"Indemnitee") against any expenses or liabilities incurred by the Indemnitee
in connection with any proceeding in which such Indemnitee may be involved as
a party or otherwise, by reason of the fact that such Indemnitee is or was a
director or officer of the Registrant or by reason of any action taken by or
omitted to be taken by such Indemnitee while acting as an officer or director
of the Registrant, provided that such indemnity shall only apply if (i) the
Indemnitee was acting in good faith and in a manner the Indemnitee reasonably
believed to be in the best interests of the Registrant and, with respect to
any criminal action, had no reasonable cause to believe the Indemnitee's
conduct was unlawful, (ii) the claim was not made to recover profits made by
such Indemnitee in violation of Section 16(b) of the Securities Exchange Act
of 1934, as amended, or any successor statute, (iii) the claim was not
initiated by the Indemnitee, (iv) the claim was not covered by applicable
insurance, or (v) the claim was not for an act or omission of a director of
the Registrant from which a director may not be relieved of liability under
Section 102(b)(7) of the DGCL. Each Indemnitee will undertake to repay the
Registrant for any costs or expenses paid by the Registrant if it shall
ultimately be determined that such Indemnitee is not entitled to
indemnification under the Indemnification Agreements.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Pursuant to exemptions from registration for transactions by an issuer not
involving a public offering as afforded by Section 4(2) of the Securities Act,
the Registrant (i) in August 1996 issued 500 shares of its Common Stock, par
value $.01 per share, to each of Warrenton Capital Partners L.L.C., a Delaware
limited liability company, and Summit Asset Holding L.L.C., a Delaware limited
liability company, for consideration of $67,000 in each case; and (ii) in July
1997 issued 1,000 shares of Class B Common Stock, $.01 par value per share, to
TKO Finance Corporation in partial consideration of the extension of a
$3,000,000 secured term loan facility by such lender.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) The following exhibits are or will be filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
1.01 Draft Form of Underwriting Agreement.
3.01 Certificate of Incorporation of the Registrant, as amended.
3.02 Form of First Amended and Restated Certificate of Incorporation to
be adopted by the Registrant.
3.03 Amended and Restated By-Laws of the Registrant.
4.01 Articles Fourth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh,
Twelfth and Thirteenth of the First Amended and Restated
Certificate of Incorporation to be filed by the Registrant
(included in Exhibit 3.01).
4.02 Articles II, III, IV, V, VI, VII, VIII, IX, X, XIV, XXI, XII and
XXVI of the Registrant's By-laws, as amended (included in Exhibit
3.03).
*5.01 Opinion of McDermott, Will & Emery as to the legality of the
securities being registered.
10.01 $1,133,000 Promissory Note from the Registrant to Summit Asset
Holding L.L.C.
10.02 $1,200,000 Promissory Note from the Registrant to Warrenton
Capital Partners L.L.C.
10.03 $233,000 Promissory Note from the Registrant to Warrenton Capital
Partners L.L.C.
10.04 Employment Agreement between the Registrant and Beaufort J. B.
Clarke, as amended.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
10.05 Employment Agreement between the Registrant and Paul B. Weiss, as
amended.
10.06 Employment Agreement between the Registrant and Thomas W. Martin.
10.07 Employment Agreement between the Registrant and Gary N.
Silverhardt.
10.08 Letter Agreement dated August 21, 1997 regarding unsecured line of
credit in the amount of $600,000 for ICON Capital Corp. between
PNC Bank, New England.
10.09 Third Amended and Restated Agreement of Limited Partnership of
ICON Cash Flow Partners L.P. Seven dated September 12, 1995.
10.10 Loan and Security Agreement dated June 20, 1997 between TKO
Finance Corporation and the Registrant.
10.11 $3,000,000 Term Promissory Note from the Registrant to TKO Finance
Corporation.
10.12 Put and Call Agreement between TKO Finance Corporation and the
Registrant dated June 20, 1997.
10.13 Release and Payoff Agreement between TKO Finance Corporation and
the Registrant dated October 24, 1997.
10.14 Lease Agreement for the Lease of Office Space by the Registrant in
Harrison, New York.
10.15 The Registrant's 1997 Non-Employee Directors Stock Option Plan.
10.16 The Registrant's 1997 Stock Option Plan.
10.17 Draft of Warrant Agreement between the Registrant and
Representative of the Underwriters.
10.18 Stock Redemption Agreement between the Registrant and Summit Asset
Holding L.L.C.
10.19 Form of Indemnification Agreements to be entered into between the
Registrant and each of its directors and executive officers.
10.20 Employment Agreement between the Registrant and John L. Lee.
10.21 Employment Agreement between the Registrant and Allen V. Hirsch.
11.01 Computation of Earnings Per Share.
21.01 Subsidiaries of the Registrant.
23.01 Consent of KPMG Peat Marwick LLP.
*23.02 Consent of McDermott, Will & Emery (included in Exhibit 5.01).
23.03 Consent of Adolfo R. Garcia to be named as Future Director.
+24.01 Power of Attorney (included on signature page of this registration
statement).
+27.01 Financial Data Schedule.
</TABLE>
- --------
+ Previously filed
* To be filed by amendment.
(b) Financial statement schedules have been omitted because they are
inapplicable, are not required under applicable provisions of Regulation
S-X, or the information that would otherwise be included in such schedules
is contained in the registrant's financial statements or accompanying
notes.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being 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 the 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 the
registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the 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.
(f) To provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to provisions described in 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 and is, therefore, unenforceable. In the event
that a claim of indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer 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 whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(i)(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Pre-Effective Amendment No. 1 to Registration Statement
on Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Harrison, New York, on December 17, 1997.
ICON Holdings Corp.
/s/ Beaufort J. B. Clarke
By: _________________________________
BEAUFORT J. B. CLARKE
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 1 to Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
/s/ Beaufort J. B. Clarke Chief Executive
- ------------------------------------- Officer, President December 17,
BEAUFORT J. B. CLARKE (principal 1997
executive officer),
and Director
/s/ Gary N. Silverhardt Chief Financial
- ------------------------------------- Officer and December 17,
GARY N. SILVERHARDT Treasurer 1997
(principal
financial and
accounting officer)
/s/ Thomas W. Martin Executive Vice
- ------------------------------------- President and December 17,
THOMAS W. MARTIN Director 1997
II-5
<PAGE>
EXHIBITS
<TABLE>
<C> <S>
1.01 Draft Form of Underwriting Agreement.
3.01 Certificate of Incorporation of the Registrant, as amended.
3.02 Form of First Amended and Restated Certificate of Incorporation to be
adopted by the Registrant.
3.03 Amended and Restated By-Laws of the Registrant.
4.01 Articles Fourth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh,
Twelfth and Thirteenth of the First Amended and Restated Certificate
of Incorporation to be filed by the Registrant (included in Exhibit
3.01).
4.02 Articles II, III, IV, V, VI, VII, VIII, IX, X, XIV, XXI, XII and XXVI
of the Registrant's By-laws, as amended (included in Exhibit 3.03).
*5.01 Opinion of McDermott, Will & Emery as to the legality of the securities
being registered.
10.01 $1,133,000 Promissory Note from the Registrant to Summit Asset Holding
L.L.C.
10.02 $1,200,000 Promissory Note from the Registrant to Warrenton Capital
Partners L.L.C.
10.03 $233,000 Promissory Note from the Registrant to Warrenton Capital
Partners L.L.C.
10.04 Employment Agreement between the Registrant and Beaufort J. B. Clarke,
as amended.
10.05 Employment Agreement between the Registrant and Paul B. Weiss, as
amended.
10.06 Employment Agreement between the Registrant and Thomas W. Martin.
10.07 Employment Agreement between the Registrant and Gary N. Silverhardt.
10.08 Letter Agreement dated August 21, 1997 regarding unsecured line of
credit in the amount of $600,000 for ICON Capital Corp. between PNC
Bank, New England.
10.09 Third Amended and Restated Agreement of Limited Partnership of ICON
Cash Flow Partners L.P. Seven dated September 12, 1995.
10.10 Loan and Security Agreement dated June 20, 1997 between TKO Finance
Corporation and the Registrant.
10.11 $3,000,000 Term Promissory Note from the Registrant to TKO Finance
Corporation.
10.12 Put and Call Agreement between TKO Finance Corporation and the
Registrant dated June 20, 1997.
10.13 Release and Payoff Agreement between TKO Finance Corporation and the
Registrant dated October 24, 1997.
10.14 Lease Agreement for the Lease of Office Space by the Registrant in
Harrison, New York.
10.15 The Registrant's 1997 Non-Employee Directors Plan.
10.16 The Registrant's 1997 Stock Option Plan.
10.17 Draft of Warrant Agreement between the Registrant and Representative of
the Underwriters.
10.18 Stock Redemption Agreement between the Registrant and Summit Asset
Holding L.L.C.
10.19 Form of Indemnification Agreements to be entered into between the
Registrant and each of its directors and executive officers.
10.20 Employment Agreement between the Registrant and John L. Lee.
10.21 Employment Agreement between the Registrant and Allen V. Hirsch.
11.01 Computation of Earnings Per Share.
21.01 Subsidiaries of the Registrant.
23.01 Consent of KPMG Peat Marwick LLP.
*23.02 Consent of McDermott, Will & Emery (included in Exhibit 5.01).
23.03 Consent of Adolfo R. Garcia to be named as Future Director.
+24.01 Power of Attorney (included on signature page of this registration
statement).
+27.01 Financial Data Schedule.
</TABLE>
- --------
+ Previously filed
* To be filed by amendment.
<PAGE>
EXHIBIT 1.01
[K & E DRAFT - OCTOBER 23, 1997]
ICON HOLDINGS CORP.
12,500,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
December __, 1997
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
as Representative of the several Underwriters
c/o Friedman, Billings, Ramsey & Co., Inc.
1001 19th Street North
Arlington, Virginia 22209
Dear Sirs:
ICON Holdings Corp., a Delaware corporation (the "Company"), confirms its
agreement with Friedman, Billings, Ramsey & Co., Inc. and each of the other
Underwriters listed on Schedule I hereto (collectively, the "Underwriters"), for
whom Friedman, Billings, Ramsey & Co., Inc. is acting as representative (in such
capacity, the "Representative"), with respect to (i) the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of Common Stock, par value $0.01 per share, of the
Company ("Common Stock") set forth in Schedule I hereto and (ii) the grant by
the Company to the Underwriters, acting severally and not jointly, of the option
described in Section 1(b) hereof to purchase all or any part of 1,875,000
additional shares of Common Stock to cover over-allotments, if any. The
12,500,000 shares of Common Stock (the "Initial Shares") to be purchased by the
Underwriters and all or any part of the 1,875,000 shares of Common Stock subject
to the option described in Section (b) hereof (the "Option Shares") are
hereinafter called, collectively, the "Shares".
The Company understands that the Underwriters propose to make a public
offering of the Shares as soon as the Underwriters deem advisable after this
Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a registration statement on Form S-1 (No. 333-______) and a
related preliminary prospectus for the registration of the Shares under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder (the "Securities Act Regulations"). The Company has
prepared and filed such amendments thereto, if any, and such amended preliminary
prospectuses, if any, as may have been required to the date hereof, and will
file such additional amendments thereto and such amended prospectuses as may
hereafter be required. The registration statement has been declared effective
under the Securities Act by the Commission. The registration statement as
amended at the time it became effective (including all information deemed to be
a part of the registration at the time it became effective pursuant to Rule
430A(b) of the Securities Act Regulations) is hereinafter called the
"Registration Statement," except that, if the Company files a post-effective
amendment to such
<PAGE>
registration statement which becomes effective prior to the Closing Time (as
defined below), "Registration Statement" shall refer to such registration
statement as so amended. Any registration statement filed pursuant to Rule
462(b) of the Securities Act Regulations is hereinafter called the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the 462(b) Registration Statement. Each prospectus included in the
registration statement, or amendments thereof or supplements thereto, before it
became effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Underwriters pursuant to Rule
424(a) of the Securities Act Regulations is hereinafter called the "Preliminary
Prospectus." The term "Prospectus" means the final prospectus, as first filed
with the Commission pursuant to Rule 424(b) of the Securities Act Regulation,
and any amendments thereof or supplements thereto. The Commission has not issued
any order preventing or suspending the use of any Preliminary Prospectus.
The Company also will issue and sell at the Closing Time (as hereinafter
defined) to the Representative for its own account warrants (the "Warrants") to
purchase at an exercise price of $______ per share up to an aggregate of
___________ shares of Common Stock (the "Warrant Shares"), which Warrant Shares
will be registered under the Securities Act pursuant to the Registration
Statement and which issuance will be consummated in accordance with the terms
and conditions of the Warrant Agreement substantially in the form filed as an
exhibit to the Registration Statement (the "Warrant Agreement'').
As a condition to their obligations hereunder, the Underwriters require
that Summit Asset Holding L.L.C., a Delaware limited liability company (the
"Exiting Stockholder") and Summit Asset Management Limited, a corporation
organized under the laws of England and Wales ("SAM"), the Managing Member of
the Exiting Stockholder, agree to indemnify the Underwriters as set forth in
Section 10 hereof. Each of the Exiting Stockholder and SAM have so agreed.
The Company and the Underwriters agree as follows:
1. Sale and Purchase:
-----------------
(a) Initial Shares. Upon the basis of the warranties and representations
and other terms and conditions herein set forth, the Company agrees to sell to
each Underwriter, severally and not jointly, and each Underwriter agrees,
severally and not jointly, to purchase from the Company at the purchase price
per share of $_____ the number of Initial Shares set forth in Schedule I
opposite such Underwriter's name, plus any additional number of Initial Shares
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 9 hereof, subject in each case, to such adjustments among
the Underwriters as the Representative in its sole discretion shall make to
eliminate any sales or purchases of fractional shares. The Underwriters may from
time to time increase or decrease the public offering price alter the initial
public offering to such extent as the Underwriters may determine.
(b) Option Shares. In addition, upon the basis of the warranties and
representations and other terms and conditions herein set forth the Company
hereby grants an option to the Underwriters,
-2-
<PAGE>
severally and not jointly, to purchase from the Company up to an aggregate
of 1,875,000 Option Shares at the purchase price per share set forth in
paragraph (a) above plus any additional number of Option Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 9 hereof. The option hereby granted will expire 30 days after the
date hereof and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Initial Shares upon notice by the
Representative to the Company setting forth the number of Option Shares as
to which the several Underwriters are then exercising the option and the
time and date of payment and delivery for such Option Shares. Any such time
and date of delivery (a "Date of Delivery") shall be determined by the
Representative, but shall not be later than three full business days (or
earlier, without the consent of the Company, than two full business days)
after the exercise of said option, nor in any event prior to the Closing
Time, as hereinafter defined. If the option is exercised as to all or any
portion of the Option Shares, each of the Underwriters, acting severally
and not jointly, will purchase that proportion of the total number of
Option Shares then being purchased which the number of Initial Shares set
forth in Schedule I opposite the same of such Underwriter bears to the
total number of Initial Shares, subject in each case to such adjustments as
the Representative in its sole discretion shall make to eliminate any sales
or purchases of fractional shares. The Underwriters may from time to time
increase or decrease the public offering price of the Option Shares after
the initial public offering to such extent as the Underwriters may
determine.
(c) Warrants. Upon the basis of the warranties and representations and other
terms and conditions herein set forth, the Company also agrees to issue to
the Representative, in further consideration of the Representative's
efforts in connection with the sale and purchase of the Shares and the
Option Shares, the Warrants to purchase at an exercise price of $______ per
share up to an aggregate of 924,314 Warrant Shares.
2. Payment and Delivery:
--------------------
(a) Initial Shares and Warrants. Payment of the purchase price for the Initial
Shares shall be made to the Company by wire transfer of immediately
available funds or certified or official bank check payable in federal
(same-day) funds at the offices of [Kirkland & Ellis] located at [Citicorp
Center, 153 East 53rd Street, New York, New York 10022] (unless another
place shall be agreed upon by the Representative and the Company) against
delivery of the certificates for the Initial Shares to the Representative
for the respective accounts of the Underwriters and the delivery of the
Warrants, represented by one or more certificates as the Representative may
specify, to the Representative. Such payment and delivery shall be made at
9:30 a.m., New York City time, on the third (fourth, if pricing occurs
after 4:30 p.m., New York City time) business day after the date hereof
(unless another time, not later than ten business days after such date,
shall be agreed to by the Representative and the Company). The time at
which such payment and delivery are actually made is hereinafter sometimes
called the "Closing Time." Certificates for the Initial Shares shall be
delivered to the Representative in definitive form registered in such names
and in such denominations as the Representative shall specify in writing to
the Company at least two full business days before the Closing Time. For
the purpose of expediting the checking of the certificates
-3-
<PAGE>
for the Initial Shares by the Representative, the Company agrees to make
such certificates available to the Representative for such purpose at least
one full business day preceding the Closing Time.
(b) Option Shares. In addition, payment of the purchase price for the Option
Shares shall be made to the Company by wire transfer of immediately
available funds or certified or official bank check payable in federal
(same-day) funds at the of offices of [Kirkland & Ellis] located at
[Citicorp Center, 153 East 53rd Street, New York, New York 10022] (unless
another place shall be agreed upon by the Representative and the Company),
against delivery of the certificates for the Option Shares to the
Representative for the respective accounts of the Underwriters. Such
payment and delivery shall be made at 9:30 a.m., New York City time, on
each Date of Delivery. Certificates for the Option Shares shalt be
delivered to the Representative in definitive form registered in such names
and in such denominations as the Representative shall specify at least two
full business days before the Closing Time. For the purpose of expediting
the checking of the certificates for the Option Shares by the
Representative, the Company agrees to make such certificates available to
the Representative for such purpose at least one full business day
preceding the relevant Date of Delivery.
3. Representations and Warranties of the Company: The Company represents and
---------------------------------------------
warrants to the Underwriters that
(a) neither the Company nor any of its Subsidiaries is, or upon the sale of the
Shares as herein contemplated will be, an "investment company" which is
required to register under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), nor will any of the Company's or its
Subsidiaries' current business operations and investments or any of their
contemplated business operations and investments as described in the
Prospectus require any of them to register as an "investment company" under
the Investment Company Act; neither the Company nor any of its
Subsidiaries is required to register as an "investment adviser" under the
Investment Advisers Act of 1940, as amended (the "Investment Adviser Act"),
nor will any of the Company's or its Subsidiaries' current business
operations and investments or any of their contemplated business operations
and investments as described in the Prospectus require any of them to
register as an "investment adviser" under the Investment Adviser Act;
(b) the Company has an authorized capitalization as set forth in the Prospectus
under the caption "Capitalization"; the outstanding shares of capital stock
of the Company and its subsidiaries listed on Exhibit 21.01 to the
Registration Statement (the "Subsidiaries") have been duly and validly
authorized and issued and are fully paid and non-assessable; all of the
outstanding shares of capital stock of the Subsidiaries are directly or
indirectly owned of record and beneficially by the Company; except as
disclosed in the Prospectus, there are no outstanding (i) securities or
obligations of the Company or any of its Subsidiaries convertible into or
exchangeable for any capital stock of the Company or any such Subsidiary,
(ii) warrants, rights or options to subscribe for or purchase from the
Company or any such Subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (iii) obligations
of the Company or any such Subsidiary to issue any shares of capital stock,
any such convertible or exchangeable securities or obligation, or any such
warrants, rights or options;
-4-
<PAGE>
(c) each of the Company and its Subsidiaries has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
respective jurisdiction of incorporation with full corporate power and
authority to own its respective properties and to conduct its respective
business as described in the Registration Statement and Prospectus and, in
the case of the Company, to execute and deliver this Agreement, the Warrant
Agreement and the other agreements described in the Prospectus, including
but not limited to the Employment Agreements between the Company and each
of Beaufort J.B. Clarke and Paul B. Weiss and the Stock Redemption
Agreement, dated October __, 1997, among the Company, the Exiting
Stockholder and SAM (the "Redemption Agreement") [agreements relating to
conversion of TKO debt? conversion of Warrenton debt?] (the "Other
Transaction Documents") and to consummate the transactions demanded in each
such agreement;
(d) each of the Company and its Subsidiaries is duly qualified by each
jurisdiction in which they conduct their respective businesses and in which
the failure, individually or in the aggregate, to be so qualified or
licensed could reasonably be expected to have a material adverse effect on
the assets, operations, business or condition (financial or otherwise) of
the Company and its Subsidiaries taken as a whole, and each of the Company
and its Subsidiaries is duly qualified, and in good standing, in each
jurisdiction in which they own or lease real property or maintain an office
and in which such qualification is necessary, except where the failure to
be so qualified and in good standing would not have a material adverse
effect on the assets, operations, business or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole; except as
disclosed in the Prospectus, no Subsidiary is prohibited or restricted,
directly or indirectly, from paying dividends to the Company, or from
making any other distribution with respect to such Subsidiary's capital
stock or from paying the Company or any other Subsidiary, any loans or
advances to such Subsidiary from the Company or such other Subsidiary, or
from transferring any such Subsidiary's property or assets to the Company
or to any other Subsidiary; other than as disclosed in the Prospectus, the
Company does not own, directly or indirectly, any capital stock or other
equity securities of any other corporation or any ownership interest in any
partnership, joint venture or other association;
(e) the Company and its Subsidiaries are in compliance in all material respects
with all applicable laws, rules, regulations, orders, decrees and
judgments, including those relating to transactions with affiliates, except
for noncompliance with which would not have a material adverse effect on
the assets, operations, business or condition (financial or otherwise) of
the Company and its Subsidiaries taken as a whole;
(f) neither the Company nor any of its Subsidiaries is in breach of, or in
default under (nor has any event occurred which with notice, lapse of time,
or both would consulate a breach of, or default under), its respective
articles of incorporation or charter or by-laws or in the performance or
observance of any obligation, agreement, covenant or condition contained in
any license, indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of them or their respective
properties is bound, except for such breaches or defaults which would not
have a material adverse effect on the assets, operations, business or
condition (financial or otherwise) of the Company and
-5-
<PAGE>
its Subsidiaries taken as a whole, and the execution, delivery and
performance of this Agreement and the Other Transaction Documents, and
consummation of the transactions contemplated hereby and thereby will not
conflict with, or result in any breach of, or constitute a default under
(nor constitute any event which with notice, lapse of time, or both would
constitute a breach of, or default under), (i) any provision of the
articles of incorporation or charter or bylaws of the Company or any of its
Subsidiaries, or (ii) any provision of any license, indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which any of
them or their respective properties may be bound or affected, or under any
federal, state, local or foreign law, regulation or rule or any decree,
judgment or order applicable to the Company or any of its Subsidiaries,
except in the case of this clause (ii) for such breaches or defaults which
would not have a material adverse effect on the assets, operations,
business or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole; or result in the creation or imposition of
any lien, charge, claim or encumbrance upon any property or asset of the
Company or its Subsidiaries;
(g) this Agreement has been duly authorized, executed and delivered by the
Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of equity,
and except to the extent that the indemnification and contribution
provisions of Section 10 hereof may be limited by federal or state
securities laws and public policy consideration in respect thereof,
(h) the issuance of the Warrants has been duly authorized; when issued and
delivered pursuant to the terms of the Warrant Agreement, the Warrants will
constitute legal, valid and binding Obligations of the Company enforceable
in accordance with their terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, and by general principles of equity; the Warrant Shares
have been duly reserved for issuance upon exercise of the Warrants in
accordance with the terms of the Warrant Agreement; and the Warrants will
conform to the description thereof in the Registration Statement and the
Prospectus;
(i) the Warrant Agreement and the Other Transaction Documents have been duly
authorized and will be, upon execution and delivery by the Company, legal,
valid and binding Cements of the Company enforceable in accordance with
their terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity;
(j) no approval, authorization, consent or order of or filing with any federal,
state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the execution, delivery
and performance of this Agreement and the Other Transaction Documents, the
consummation of the transaction contemplated hereby and thereby, the sale
and delivery of the Shares, issuance of the Warrants or the Warrant Shares
by the Company as contemplated hereby or in the Warrant Agreement other
than (A) such as have been obtained, or will have been obtained at the
Closing Time or the relevant Date of Delivery, as the case may be, under
-6-
<PAGE>
the Securities Act, (B) such approvals as have been obtained in connection
with the approval of the quotation of the Shares on the Nasdaq National
Market and (C) any necessary qualification under the securities or blue sky
laws of the various jurisdictions in which the Shares are being offered by
the Underwriters;
(k) each of the Company and its Subsidiaries has all necessary licenses,
authorizations, consents and approvals and has made all necessary filings
required under any federal, state or local law, regulation or rule, and has
obtained all necessary authorizations, consents and approvals from other
persons, required in order to conduct their respective businesses as
described in the Prospectus, except to the extent that any failure to have
any such licenses, authorizations, consents or approvals, to make any such
filings or to obtain any such authorizations, consents or approvals would
not, individually or in the aggregate, have a material adverse effect on
the assets, operations, business or condition (financial or otherwise) of
the Company and its Subsidiaries taken as a whole; neither the Company nor
any of its Subsidiaries is in violation of, in default under, or has
received any notice regarding a possible violation, default or revocation
of any such license, authorization, consent or approval applicable to the
Company or any of its Subsidiaries the effect of which could be material
and adverse to the assets, operations, business or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, and no
such license, authorization, consent or approval contains a materially
burdensome restriction that is not adequately disclosed in the Registration
Statement and the Prospectus;
(l) each of the Registration Statement and any Rule 462(b) Registration
Statement has become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement has been issued under the Securities Act and
no proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are threatened by the Commission, and any
request on the part of the Commission for additional information has been
complied with;
(m) the Preliminary Prospectus and the Registration Statement comply and the
Prospectus and any further amendments or supplements thereto will, when
they have become effective or are filed with the Commission, as the case
may be, comply in all material respects with the requirements of the
Securities Act and the Securities Act Regulations; the Registration
Statement did not, and any amendment thereto will not, in each case as of
the applicable effective date, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Preliminary Prospectus
does not, and the Prospectus or any amendment or supplement thereto will
not, as of the applicable filing date and at the Closing Time and on each
Date of Delivery (if any), contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the Company
makes no warranty or representation with respect to any statement contained
in the Registration Statement or the Prospectus in reliance upon and in
conformity with the information concerning the Underwriters and furnished
in writing by or on behalf of the Underwriters through the Representative
to the Company expressly for use in the Registration Statement or the
Prospectus
-7-
<PAGE>
(that information being limited to that described in the last sentence of
the first paragraph of Section 10(b) hereof);
(n) the Preliminary Prospectus was and the Prospectus delivered to the
Underwriters for use in connection with this offering will be identical to
the versions of the Preliminary Prospectus and Prospectus created to be
transmitted to the Commission for filing via the Electronic Data Gathering
Analysis and Retrieval System ("EDGAR"), except to the extent permitted by
Regulation S-T;
(o) all legal or governmental proceedings, contracts or documents of a
character required to be filed as exhibits to the Registration Statement or
to be summarized or described in the Prospectus have been summarized or
described as required and any such summaries or descriptions present fairly
the information required to be shown;
(p) there are no actions, suits, proceedings, inquiries or investigations
pending or, to the Company's knowledge, threatened against the Company or
any of its Subsidiaries or any of their respective officers and directors
or to which the properties, assets or rights of any such entity are
subject, at law or in equity, before or by any federal, state, local or
foreign governmental or regulatory commission, board, body, authority,
arbitral panel or agency which could result in a judgment, decree, award or
order having a material adverse effect on the assets, operations, business
or condition (financial or otherwise) of the Company and its Subsidiaries
taken as a whole;
(q) the financial statements, including the notes thereto, included in the
Registration Statement and the Prospectus present fairly the consolidated
financial position of the Company and its Subsidiaries as of the dates
indicated and the consolidated results of operations and changes in
financial position and cash flows of the Company and its Subsidiaries for
the periods specified; such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as indicated in the
notes thereto); the financial statement schedules included in the
Registration Statement and the amounts in the Prospectus under the captions
"Prospectus Summary -- Summary Financial Information" and "Selected
Financial Information" fairly present the information shown therein and
have been compiled on a basis consistent with the financial statements
included in the Registration Statement and the Prospectus;
(r) KPMG Peat Marwick LLP, whose reports on the consolidated financial
statements of the Company and its Subsidiaries are filed with the
Commission as part of the Registration Statement and Prospectus, are and
were during the periods covered by their reports independent public
accountants as required by the Securities Act and the Securities Act
Regulations;
(s) subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as may be otherwise
stated in the Registration Statement or Prospectus, there has not been (A)
any material adverse change, in the assets, liabilities, capital
operations, business or condition (financial or otherwise), present or
prospective, of the Company and its Subsidiaries taken as a whole, whether
or not arising in the ordinary course of business,
-8-
<PAGE>
(B) any transaction, which is material to the Company and its Subsidiaries
taken as a whole, contemplated or entered into by the Company or any of its
Subsidiaries, (C) any obligation, contingent or otherwise, directly or
indirectly incurred by the Company or any of its Subsidiaries, which is
material to the Company and its Subsidiaries taken as a whole or (D) any
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock;
(t) the Shares and the Warrant Shares will conform in all material respects to
the description thereof contained in the Registration Statement and the
Prospectus;
(u) there are no persons with registration or other similar rights to have any
equity securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the Securities Act except as
provided in the Warrant Agreement;
(v) the Shares, the Warrants, and the Warrant Shares have been duly authorized
and, when the Shares and the Warrant Shares have been issued and duly
delivered against payment therefor as contemplated by this Agreement or the
Warrant Agreement, as the case may be, the Shares and the Warrant Shares
will be validly issued, fully paid and nonassessable, free and clear of any
pledge, lien, encumbrance, security interest, or other claim, and the
issuance and sale of the Shares, the Warrants, and the Warrant Shares by
the Company is not subject to preemptive or other similar rights arising by
operation of law, under the articles of incorporation or by-laws of the
Company, under any agreement to which the Company or any of its
Subsidiaries is a party or otherwise;
(w) the Company has not taken, and will not take, directly or indirectly, any
action which is designed to or which has constituted or which might
reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Shares;
(x) other than as described in the Prospectus, neither the Company nor any of
its affiliates (i) is required to register as a "broker" or "dealer" in
accordance with the provisions of the Securities Exchange Act of 1934 or
the rules and regulations thereunder, or (ii) directly, or indirectly
through one or more intermediaries, controls or has any other association
with (within the meaning of Article I of the By-laws of the National
Association of Securities Dealers, Inc. (the "NASD")) any member firm of
the NASD;
(y) any certificate signed by any officer of the Company or any Subsidiary
delivered to the Representative or to counsel for the Underwriters pursuant
to or in connection with this Agreement shall be deemed a representation
and warranty by the Company to each Underwriter as to the matters covered
thereby;
(z) the form of certificate used to evidence the Common Stock complies in all
material respects with all applicable statutory requirements, with any
applicable requirements of the articles of incorporation and by-laws of the
Company and the requirements of the Nasdaq National Market;
-9-
<PAGE>
(aa) the Company and each of its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable internals and appropriate action is taken with
respect to any differences;
(bb) in connection with this offering, the Company has not offered and will not
offer its Common Stock or any other securities convertible into or exchangeable
or exercisable for Common stock in a manner in violation of the Act; and
(cc) the Company has not incurred any liability for any finder's fees or
similar payments in connection with the transactions herein contemplated.
4. Representations and Warranties of the Exiting Shareholder and SAM: Each of
------------------------------------------------------------------
the Exiting Stockholder and SAM represents and warrants to the Underwriters
that
(a) to the best actual knowledge of the Exiting Shareholder and SAM, without
having made any special inquiry, the Registration Statement did not, and
any amendment thereto will not, in each case as of the applicable effective
date, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and the Preliminary Prospectus does not, and the
Prospectus or any amendment or supplement thereto will not, as of the
applicable filing date and at the Closing Time and on each Date of Delivery
(if any), contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that neither the Exiting
Shareholder nor SAM makes any warranty or representation with respect to
any statement contained in the Registration Statement or the Prospectus in
reliance upon and in conformity with the information concerning the
Underwriters and furnished in writing by or on behalf of the Underwriters
through the Representative to the Company expressly for use in the
Registration Statement or the Prospectus (that information being limited to
that described in the last sentence of the first paragraph of Section 10(b)
hereof);
(b) the Exiting Stockholder is the lawful owner of the shares of Common Stock
to be redeemed (the "Redeemed Shares") pursuant to the Stock Redemption
Agreement, dated October __, 1997, among the Company, the Exiting
Stockholder and SAM (the "Redemption Agreement") and has, and at the
Closing Time will have, good and clear title to such Redeemed Shares, free
of all restrictions on transfer, liens, encumbrances, security interests
and claims whatsoever;
(c) upon delivery of and payment for such Redeemed Shares pursuant to the
Redemption Agreement, good and clear title to such Redeemed Shares will
pass to the Company free of all restrictions on transfer, liens,
encumbrances, security interests and claims whatsoever;
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<PAGE>
(d) each of the Exiting Stockholder and SAM has, on October __, 1997 had and at
the Closing Time will have, full legal right, power and authority to enter
into this Agreement and the Redemption Agreement and to sell, assign,
transfer and deliver such Redeemed Shares in the manner provided therein,
and this Agreement and the Redemption Agreement have been duly authorized,
executed and delivered by the Exiting Stockholder and SAM and each of this
Agreement and the Redemption Agreement is a valid and binding agreement of
the Exiting Stockholder and SAM enforceable in accordance with its terms;
(e) neither the Exiting Stockholder nor SAM has taken, and neither will take,
directly or indirectly, any action designed to, or which might reasonably
be expected to, cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Shares pursuant to the distribution contemplated by this Agreement;
neither the Exiting Stockholder nor SAM has distributed or will distribute,
other than as permitted by the Act, any prospectus or other offering
material in connection with the offering and sale of the Shares;
(f) the execution, delivery and performance of this Agreement and the
Redemption Agreement by each of the Exiting Stockholder and SAM, compliance
by the Exiting Stockholder and SAM with all the provisions hereof and
thereof and the consummation of the transactions contemplated hereby and
thereby will not require any consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other
governmental body and will not conflict with or constitute a breach of any
of the terms or provisions of, or a default under, organizational documents
of such person, or any agreement, indenture or other instrument to which
such person is a party or by which such person or property of such person
is bound, or violate or conflict with any laws, administrative regulation
or ruling or court decree applicable to such person or property of such
person;
(g) such parts of the Registration Statement under the caption "Principal
Stockholders" which specifically relate to the Exiting Stockholder do not,
and will not at the Closing Time (and any Date of Delivery of Option
Shares, if applicable), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of circumstances under which they
were made, not misleading; and
(h) at any time during the period described in paragraph 5(e) hereof, if there
is any change in the information referred to in paragraph 4(g) above, the
Exiting Stockholders and SAM will immediately notify the Representative of
such change.
5. Certain Covenants of the Company: The Company hereby agrees with each
--------------------------------
Underwriter:
(a) to furnish such information as may be required and otherwise to cooperate
in qualifying the Shares for opening arid sale under the securities or blue
sky laws of such states as the Representative may designate and to maintain
such qualifications in effect as long as required for the distribution of
the Shares, provided that the Company shall not be required to qualify as a
foreign
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<PAGE>
corporation or to consent to the service of process under the laws
of any such state (except service of process with respect to the offering
and sale of the Shares);
(b) to prepare immediately an amended Prospectus in a form approved by the
Underwriters and file or transmit for filing such Prospectus with the
Commission in accordance with Rule 430A and to furnish promptly to the
Underwriters as many copies of the Prospectus (or of the Prospectus as
amended or supplemented if the Company shall have made any amendments or
supplements thereto after the effective date of the Registration Statement)
as the Underwriters may reasonably request for the purposes contemplated by
the Securities Act Regulations, which Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be identical to the
version created to be transmitted to the Commission for filing via EDGAR,
except to the extent permitted by Regulation S-T;
(c) to advise the Representative promptly, confirming such advice in writing,
of (i) the receipt of any comments from, or any request by, the Commission
for amendments or supplements to the Registration Statement or Prospectus
or for additional information with respect thereto, or (ii) the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus, or of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes
and, if the Commission or any other government agency or authority should
issue any such order, to make every reasonable effort to obtain the lifting
or removal of such order as soon as possible; to advise the Representative
promptly of any proposal to amend or supplement the Registration Statement
or Prospectus and to file no such amendment or supplement to which the
Representative shall reasonably object in writing;
(d) to furnish to the Underwriters for a period of five years from the date of
this Agreement (i) as soon as available, copies of all annual quarterly and
current reports or other communications supplied to holden of shares of
Common Stock, (ii) as soon as practicable after the filing thereof copies
of all reports filed by the Company with the Commission, the NASD or any
securities exchange and (iii) such other public information as the
Underwriters may reasonably request regarding the Company and its
Subsidiaries;
(e) to advise the Underwriters of the happening of any event known to the
Company within the time during which a Prospectus relating to the Shares is
required to be delivered under the Securities Act Regulations which, in the
judgment of the Company, would require the making of any change in the
Prospectus then being used so that the Prospectus would not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, and, during such time, to prepare and furnish, at the Company's
expense, to the Underwriters promptly such amendments or supplements to
such Prospectus as may be necessary to reflect any such change and to
furnish to the Underwriters a copy of such proposed amendment or supplement
before filing any such amendment or supplement with the Commission;
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<PAGE>
(f) to furnish promptly to the Representative a signed copy of the Registration
Statement, as initially filed with the Commission, and of all amendments or
supplements thereto (including all exhibits filed therewith or incorporated
by reference therein) and such number of conformed copies of the foregoing
as the Underwriters may reasonably request;
(g) to furnish to the Underwriters, not less than one business day before
filing with the Commission subsequent to the effective date of the
Prospectus and during the period referred to in paragraph (d) above, a copy
of any document proposed to be filed with the Commission pursuant to
Section 13, 14, or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act");
(h) to apply the net proceeds of the sale of the Shares in accordance with its
statements under the caption "Use of Proceeds" in the Prospectus;
(i) to make generally available to its security holders as soon as practicable,
but in any event not later than the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the
Registration Statement an earnings statement complying with the provisions
of Section 1l(a) of the Securities Act (in form, at the option of the
Company, complying with the provisions of Rule 158 of the Securities Act
Regulations) covering a period of 12 months beginning after the effective
date of the Registration Statement;
(j) to use its best efforts to effect and maintain the quotation of the Shares
on the Nasdaq National Market and to file with the Nasdaq National Market
all documents and notices required by the Nasdaq National Market of
companies that have securities that are traded in the over-the-counter
market and quotations for which are reported by the Nasdaq National Market;
(k) to refrain during a period of 180 days from the date of the Prospectus,
without the prior written consent of the Representative, from (i) offering,
pledging, selling, contracting to sell, selling any option or contract to
purchase, purchasing any option or contract to sell, granting any option
for the sale of, or other disposing of or transferring, directly or
indirectly, any share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or filing any registration
statement under the Securities Act with respect to any of the foregoing or
(ii) entering into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise.
The foregoing sentence shall not apply to (A) the Shares to be sold
hereunder, (B) the Warrants and Warrant Shares or (C) any shares of Common
Stock issued by the Company upon the exercise of an option outstanding on
the date hereof and referred to in the Prospectus;
(l) to use its best efforts to ensure that neither it nor any of its
Subsidiaries is required to register as an "investment company" under the
Investment Company Act or an "investment adviser" under the Investment
Adviser Act at all times during the period from the Effective Date to
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<PAGE>
the fifth anniversary of the Effective Date;
(m) to comply with the terms of the Warrant Agreement; and
(n) to not itself and to use its best efforts to cause its officers, directors
and affiliates not to, (i) take, directly or indirectly prior to
termination of the underwriting syndicate contemplated by this Agreement,
any action designed to stabilize or manipulate the price of any security of
the Company, or which may cause or result in, or which might in the future
reasonably be expected to cause or result in, the stabilization or
manipulation of the price of any security of the Company, to facilitate the
sale or resale of any of the Shares, (ii) sell, bid for, purchase or pay
anyone any compensation for soliciting purchases of the Shares or (iii) pay
or agree to pay to any person any compensation for soliciting any order to
purchase any other securities of the Company.
6. Payment of Expenses:
-------------------
(a) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement and the Warrant
Agreement, whether or not the transactions contemplated hereunder or
thereunder are consummated or this Agreement and the Warrant Agreement are
terminated, including expenses, fees and taxes in connection with (i) the
preparation and filing of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and any amendments or supplements thereto, and
the printing and furnishing of copies of each thereof to the Underwriters
and to dealers (including costs of mailing and shipment), (ii) the
preparation, issuance and delivery of the certificates for the Shares to
the Underwriters, including any stock or other transfer taxes or duties
payable upon the sale of the Shares to the Underwriters, (iii) the printing
of this Agreement and any dealer agreements and furnishing of copies of
each to the Underwriters and to dealers (including costs of mailing and
shipment), (iv) the qualification of the Shares for offering and sale under
state laws that the Company and the Representative have mutually agreed are
appropriate and the determination of their eligibility for investment under
state law as aforesaid (including the legal fees and filing fees and other
disbursements of counsel for the Underwriters) and the printing and
furnishing of copies of any blue sky surveys or legal investment surveys to
the Underwriters and to dealers, (v) filing for review of the public
offering of the Shares by the NASD, (vi) the fees and expenses of any
transfer agent or registrar the Shares and miscellaneous expenses referred
to in the Registration Statement, (vii) the fees and expenses incurred in
connection with the inclusion of the Shares in the Nasdaq National Market,
(viii) its making road show presentations with respect to the offering of
the Shares, (ix) preparing and distributing bound volumes of transaction
documents for the Representative and its legal counsel and (x) the
performance of the Company's other obligations hereunder (including,
without limitation, costs incurred in closing the purchase of the Options
Shares, if any). Upon the Representative's request, the Company will
provide funds in advance for filing fees.
(b) The Company agrees to reimburse the Representative for its reasonable and
documented out-of-pocket expenses in connection with the performance of its
activities under this Agreement, including, but not limited to, costs such
as printing, facsimile, courier service, direct computer expenses,
accommodations, travel and the fees and expenses of the Underwriters'
outside legal counsel and any other advisors, accountants, appraisers,
etc., but only if the Initial Shares are purchased by the Underwriters as
provided in Section 2(a) hereof.
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<PAGE>
7. Conditions of the Underwriters' Obligations: The obligations of the
-------------------------------------------
Underwriters hereunder are subject to the accuracy of the representations
and warranties on the part of the Company in all material respects on the
date hereof and at the Closing Time and on each Date of Delivery, the
performance by the Company of its obligations hereunder in all material
respects and to the following further conditions:
(a) The Company shall furnish to the Underwriters at the Closing Time and on
each Date of Delivery an opinion of McDermott, Will & Emery, counsel for
the Company, the Exiting Stockholder and SAM addressed to the Underwriters
and dated the Closing Time and each Date of Delivery and in form
satisfactory to Kirkland & Ellis, counsel for the Underwriters, stating
that:
(i) neither the Company nor any of its Subsidiaries is, or upon the sale of
the Shares as herein contemplated will be, an "investment company" which is
required to register under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), nor will any of the Company's or its
Subsidiaries' current business operations and investments or any of their
contemplated business operations and investments as described in the
Prospectus require any of them to register as an "investment company" under
the Investment Company Act; neither the Company nor any of its
Subsidiaries is required to register as an "investment adviser" under the
Investment Advisers Act of 1940, as amended (the "Investment Adviser Act"),
nor will any of the Company's or its Subsidiaries' current business
operations and investments or any of their contemplated business operations
and investments as described in the Prospectus require any of them to
register as an "investment adviser" under the Investment Adviser Act;
(ii) the Company has an authorized capitalization as set forth in the
Prospectus under the caption "Capitalization"; the outstanding shares of
capital stock of the Company and its Subsidiaries have been duly and
validly authorized and issued and are fully paid and non-assessable; all of
the outstanding shares of capital stock of the Company's Subsidiaries are
directly or indirectly owned of record and beneficially by the Company;
except as disclosed in the Prospectus, there are no outstanding (i)
securities or obligations of the Company or any of its Subsidiaries
convertible into or exchangeable for any capital stock of the Company or
any such Subsidiary, (ii) warrants, rights or options to subscribe for or
purchase from the Company or any such Subsidiary any such capital stock or
any such convertible or exchangeable securities or obligations, or (iii)
obligations of the Company or any such Subsidiary to issue any shares of
capital stock, any such convertible or exchangeable securities or
obligation, or any such warrants, rights or options;
(iii) the Company and the Subsidiaries each has been duly incorporated and
is validly existing as a corporation in good standing under the laws of its
respective jurisdiction of incorporation with full corporate power and
authority to own its respective properties and to conduct its respective
business as described in the Registration Statement and Prospectus and, in
the case of the Company, to execute and deliver this Agreement, the Warrant
Agreement and the other agreements described in the Prospectus, including
but not limited to the Employment Agreements between the Company and each
of Beaufort J.B. Clarke
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<PAGE>
and Paul B. Weiss and the Redemption Agreement [agreements relating to
conversion of TKO debt? conversion of Warrenton debt?] (the "Other
Transaction Documents") and to consummate the transactions demanded in each
such agreement;
(iv) except as disclosed in the Prospectus, no Subsidiary is prohibited or
restricted, directly or indirectly, from paying dividends to the Company,
or from making any other distribution with respect to such Subsidiary's
capital stock or from paying the Company or any other Subsidiary, any loans
or advances to such Subsidiary from the Company or such other Subsidiary,
or from transferring any such Subsidiary's property or assets to the
Company or to any other Subsidiary; other than as disclosed in the
Registration Statement, to the counsel's knowledge the Company does not
own, directly or indirectly, any capital stock or other equity securities
of any other corporation or any ownership interest in any partnership,
joint venture or other association;
(v) the execution, delivery and performance of this Agreement, the Warrant
Agreement and the Other Transaction Documents by the Company, the Exiting
Stockholder and SAM (to the extent that such parsons are parties to such
agreements) and the consummation by the Company, the Exiting Stockholder
and SAM of the transactions contemplated under this Agreement, the Warrant
Agreement or the Other Transaction Documents, as the case may be (to the
extent that such parsons are parties to such agreements), do not and will
not conflict with, or result in any breach of, or constitute a default
under (nor constitute any event which with notice, lapse of time, or both
would constitute a breach of or default under), (i) any provisions of the
articles of incorporation, charter or by-laws of the Company or any
Subsidiary or the organizational documents of the Exiting Stockholder or
SAM, (ii) any provision of any license, indenture, mortgage, deed of trust
loan or credit agreement or other agreement or intent to which the Company
or any Subsidiary or the Exiting Stockholder or SAM is a party or by which
any of them or their respective properties may be bound or affected, or
(iii) to such counsel's knowledge, any law or regulation or any decree,
judgment or order applicable to the Company or any Subsidiary or the
Exiting Stockholder or SAM, except in the case of clause (ii) for such
conflicts, breaches or defaults which individually or in the aggregate
would not have a material adverse effect on the assets, operations,
business or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole; or result in the creation or imposition of
any lien, charge, claim or encumbrance upon any property or assets of the
Company or its Subsidiaries;
(vi) this Agreement has been duly authorized, executed and delivered by
the Company, the Exiting Stockholder and SAM and is a legal, valid and
binding agreement of the Company, the Exiting Stockholder and SAM
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of equity,
and except that enforceability of the indemnification and contribution
provisions set forth in Section 10 of this Agreement may be limited by the
federal or state securities laws of the United States or public policy
underlying such laws;
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<PAGE>
(vii) the Warrant Agreement and the Other Transaction Documents have been
duly authorized, executed, and delivered by the Company and are legal,
valid and binding agreements of the Company enforceable in accordance with
their terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity; the issuance of the
Warrants has been duly authorized; when issued and delivered pursuant to
the terms of the Warrant Agreement, the Warrants will constitute legal,
valid and binding obligations of the Company enforceable in accordance with
their terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity; the Warrant Shares have
been duly reserved for issuance upon exercise of the Warrants in accordance
with the terms of the Warrant Agreement; and the Warrants will conform in
all material respects to the description thereof in the Registration
Statement and the Prospectus;
(viii) no approval, authorization, consent or order of or filing with any
federal or state governmental or regulatory commission, board, body,
authority or agency is required in connection with the execution, delivery
and performance of this Agreement and the Other Transaction Documents, the
consummation of the transaction contemplated hereby and thereby, the sale
and delivery of the Shares by the Company as contemplated hereby other than
such as have been obtained or made under the Securities Act and except that
such counsel need express no option as to any necessary qualification under
the state securities or blue sky laws of the various jurisdictions in which
the Shares are being offered by the Underwriters or any approval of the
underwriting terms and arrangements by the National Association of
Securities Dealers, Inc.
(ix) the Shares, the Warrants, and the Warrant Shares have been duly
authorized and, when the Shares and the Warrant Shares have been issued and
duly delivered against payment therefor as contemplated by this Agreement
or the Warrant Agreement, as the case may be, the Shares and the Warrant
Shares will be validly issued, fully paid and nonassessable, free and clear
of any pledge, lien, encumbrance, security interest, or other claim;
(x) the issuance and sale of the Shares, the Warrants, and the Warrant
Shares by the Company is not subject to preemptive or other similar rights
arising by operation of law, under the articles of incorporation or by-laws
of the Company, under any agreement known to such counsel to which the
Company or any of its Subsidiaries is a party or, to the counsel's
knowledge, otherwise;
(xi) the Shares and the Warrant Shares conform in all material respects to
the descriptions thereof contained in the Registration Statement and
Prospectus;
(xii) the form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, with
any applicable requirements
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<PAGE>
of the articles of incorporation and by-laws of the Company and the
requirements of the Nasdaq National Market;
(xiii) the Registration Statement has become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement has been issued and, to the counsel's knowledge, no
proceedings with respect thereto have been commenced or threatened;
(xiv) as of the effective date of the Registration Statement, the
Registration Statement and the Prospectus (except as to the financial
statements and other financial and statistical data contained in such
Registration Statement or Prospectus, as to which such counsel need express
no opinion) complied as to form in all material respects with the
requirements of the Securities Act and the Securities Act Regulations;
(xv) the statements under the captions "Capitalization," "__________,"
"__________," "_________," "Description of Capital Stock," and "Shares
Eligible for Future Sale," in the Registration Statement and the
Prospectus, insofar as such statements constitute a summary of the legal
matters referred to therein, constitute accurate summaries thereof in all
material respects;
(xvi) the Exiting Stockholder has good and clear title to the certificates
for the Redeemed Shares to be redeemed pursuant to the Redemption Agreement
and upon delivery thereof, pursuant thereto and payment therefor, good and
clear title will pass to the Company, free of all restrictions on transfer,
liens, encumbrances, security interests and claims whatsoever; and
(xvii) to the counsel's knowledge, there are no contracts or documents of
a character which are required to be filed as exhibits to the Registration
Statement or to be described or summarized in the Prospectus which have not
been so filed, summarized or described.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company, independent
public accountants of the Company and Underwriters at which the contents of the
Registration Statement and Prospectus were discussed and, although such counsel
is not passing upon and does not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus (except as and to the extent stated in subparagraphs
(xi), (xiv), and (xv) above), nothing has caused them to believe that the
Registration Statement, the Preliminary Prospectus or the Prospectus, as of
their respective effective or issue dates and as of the date of the counsel's
opinion, contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that, in each case, such counsel
need express no view with respect to the financial statements and other
financial statistical data included in the Registration Statement, Preliminary
Prospectus or Prospectus).
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<PAGE>
(b) The Representative shall have received from KPMG Peat Marwick LLP, letters
dated, respectively, as of the date of this Agreement, the Closing Time and
each Date of Delivery as the case may be, addressed to the Representative
as representative of the Underwriters and in form and substance
satisfactory to the Representative.
(c) The Underwriters shall have received at the Closing Time and on each Date
of Delivery the favorable opinion of Kirkland & Ellis, dated the Closing
Time or such Date of Delivery, addressed to the Representative and in form
and substance satisfactory to the Representative.
(d) No amendment or supplement to the Registration Statement or Prospectus
shall have been filed to which the Underwriters shall have objected in
writing.
(e) Prior to the Closing Time and each Date of Delivery (i) no stop order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus or
Prospectus has been issued by the Communion, and no suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes,
has occurred; and (ii) the Registration Statement and the Prospectus shall
not contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(f) Between the time of execution of this Agreement and the Closing Time or the
relevant Date of Delivery (i) no material and unfavorable change in the
assets, operations, business, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole shall occur
or become known (whether or not arising in the ordinary course of
business), and (ii) no transaction which is material and unfavorable to the
Company shall have been entered into by the Company or any of its
Subsidiaries.
(g) At the Closing Time, the Warrant Agreement and the Other Transaction
Documents shall have been entered into and delivered by all required
parties.
(h) At the Closing Time, the Shares shall have been approved for inclusion in
the Nasdaq National Market.
(i) The NASD shall not have raised any objection with respect to the fairness
and reasonableness of the underwriting terms and arrangements.
(j) The Representative shall have received letters from each of the Company's
officers, directors and stockholders, including, without limitation the
persons listed in the Prospectus under the caption "Management", in form
and substance satisfactory to the Representative, confirming that for a
period of 180 days after the Closing Time, such persons will not directly
or indirectly (i) offer, pledge to secure any obligation due on or within
180 days after the Closing Time, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option for the sale of, or otherwise dispose of or transfer, directly or
indirectly, any share of Common Stock
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<PAGE>
(other than by participating as selling stockholders in a registered
offering of Common Stock offered by the Company with the consent of the
Representative) or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise, without the prior written consent of the Representative,
which consent may be withheld at the sole discretion of the Representative.
(k) The Company will, at the Closing Time and on each Date of Delivery, deliver
to the Underwriters a certificate of its two principal executive officers
and principal financial officer, Beaufort J.B. Clark, Paul B. Weiss and
Gary N. Silverhardt, to the effect that, to each of such officer's
knowledge, the representations and warranties of the Company set forth in
this Agreement and the conditions set forth in paragraphs (e), (f), (g) and
(h) have been met and are true and correct as of such date.
(l) The Company shall have furnished to the Underwriters such other documents
and certificates as to the accuracy and completeness of any statement in
the Registration Statement and the Prospectus, the representations,
warranties and statement of the Company contained herein and in the Warrant
Agreement, and the performance by the Company of its covenants contained
herein and therein, and the fulfillment of any conditions contained herein
or therein, as of the Closing Time or any Date of Delivery as the
Underwriters may reasonably request.
(m) The Company shall perform such of its obligations under this Agreement and
the Warrant Agreement as are to be performed by the terms hereof and
thereof at or before the Closing Time or the relevant Date of Delivery.
(n) Neither the Commission nor Nasdaq have suspended trading in any securities
of the Company.
8. Termination
-----------
(a) The obligations of the several Underwriters hereunder shall be subject to
termination in the absolute discretion of the Representative, at any time
prior to the Closing Time or any Date of Delivery, (i) if any of the
conditions specified in Section 7 shall not have been fulfilled when and as
required by this Agreement to be fulfilled, or (ii) if there has occurred
outbreak or escalation of hostilities or other national or international
calamity or crisis or charge in economic, political or other conditions the
effect of which on the financial markets of the United States is such as to
make it, in the judgment of the Representative, impracticable to market the
Shares or enforce contracts for the sale of the Shares, or (iii) if trading
generally on the New York Stock Exchange or in the Nasdaq over-the-counter
market has been suspended (including automatic halt in trading pursuant to
market-decline triggers other than those in which solely program trading is
temporarily halted), or limitations on prices for trading (other than
limitations on hours or numbers of days of trading) have been fixed, or
maximum ranges for prices for securities have been required, by such
exchange or the
-20-
<PAGE>
NASD or Nasdaq or by order of the Commission or any over governmental
authority, or (iv) any federal or state statute, regulation, rule or order
of any court or other governmental authority has been enacted, published,
decreed or otherwise promulgated which in the reasonable opinion of the
Representative materially adversely affects or will materially adversely
affect the business or operations of the Company, or (v) any action has
been taken by any federal, state or local government or agency in respect
of its monetary or fiscal affairs which in the reasonable opinion of the
Representative has a material adverse effect on the securities markets in
the United States.
(b) If the Representative elects to terminate this Agreement as provided in
this Section 8, the Company, the Exiting Stockholder and SAM and the
Underwriters shall be notified promptly by telephone, promptly confirmed by
facsimile.
(c) If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted
under this Agreement or if such sale is not carried out because the Company
shall be unable to comply in all material respects with any of the terms of
this Agreement, the Company shall not be under any obligation or liability
under this Agreement (except to the extent provided in Sections 6 and 10
hereof) and the Underwriters shall be under no obligation or liability to
the Company under this Agreement (except to the extent provided in Section
10 hereof) or to one another hereunder.
9. Increase in Underwriters' Commitments: If any Underwriter shall default at
-------------------------------------
the Closing Time or on a Date of Delivery in its obligation to take up and pay
for the Shares to be purchased by it under this Agreement on such date the
Representative shall have the right, within 36 hours after such default, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Shares which such
Underwriter shall have agreed but failed to take up and pay for (the "Defaulted
Shares"). Absent the completion of such arrangements within such 36 hour period,
(i) if the total number of Defaulted Shares does not exceed 10% of the total
number of Shares to be purchased on such date, each non-defaulting Underwriter
shall take up and pay for (in addition to the number of Shares which it us
otherwise obligated to purchase on such date pursuant to this Agreement) the
portion of the total number of Shares agreed to be purchased by the defaulting
Underwriter on such date in the proportion that its underwriting obligations
hereunder bears to the underwriting obligations of all non-defaulting
Underwriters; and (ii) if the total number of Defaulted Shares exceeds 10% of
such total, the Representative may terminate this Agreement by notice to the
Company, without liability to any non-defaulting Underwriter.
Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that it will
not sell any Shares hereunder on such date unless all of the Shares to be
purchased on such date are purchased on such date by the Underwriters (or by
substituted Underwriters selected by the Representative with the approval of the
Company or selected by the Company with the approval of the Representative).
If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter in accordance with the foregoing provision, the Company or the non-
defaulting Underwriters shall have
-21-
<PAGE>
the right to postpone the Closing Time or the relevant Date of Delivery for a
period not exceeding five business days in order that any necessary changes in
the Registration Statement and Prospectus and other documents may be effected.
The term Underwriter as used in this Agreement shall refer to and include
any Underwriter substituted under this Section 9 with the like effect as if such
substituted Underwriter had originally been named in this Agreement.
10. Indemnity and Contribution by the Company and the Underwriters
--------------------------------------------------------------
(a) The Company, the Exiting Stockholder and SAM, jointly and severally, agree
to indemnify, defend and hold harmless each Underwriter and any person who
controls any such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any
loss, expense, liability, damage or claim (including the reasonable cost of
investigation) which, jointly or severally, any such Underwriter or
controlling person may incur under the Securities Act, the Exchange Act or
otherwise, insofar as such loss, expense, liability, damage or claim arises
out of or is based upon any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment thereof
by the Company) or in a Prospectus (the term Prospectus for the purpose of
this Section 10 being deemed to include any Preliminary Prospectus, the
Prospectus and the Prospectus as amended or supplemented by the Company),
or arises out of or is based upon any omission or alleged omission to state
a material fact required to be stated in either such Registration Statement
or Prospectus or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading,
except insofar as any such loss, expense, liability, damage or claim arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in and in
conformity with information furnished in writing by the Underwriters
through the Representative to the Company expressly for use in such
Registration Statement or such Prospectus, provided, however, that the
indemnity agreement contained in this subsection (a) with respect to the
Preliminary Prospectus or the Prospectus shall not inure to the benefit of
an Underwriter (or to the benefit of any person controlling such
Underwriter) with respect to any person asserting any such loss, expense,
liability, damage or claim which is the subject thereof if the Prospectus
or any supplement thereto prepared with the consent of the Representative
and furnished to the Underwriters prior to the Closing Time corrected any
such alleged untrue statement or omission and if such Underwriter failed to
send or give a copy of the Prospectus or supplement thereto to such person
at or prior to the written confirmation of the sale of Shares to such
person, unless such failure resulted from noncompliance by the Company with
Section 5(b). Notwithstanding the foregoing, the Exiting Stockholder and
SAM will not be required to indemnify the Underwriters for any such loss,
expense, liability, damage or claim which arises out of or is based upon
any untrue statement or alleged untrue statement or omission or alleged
omission of a material fact not known to either of them (to their best
actual knowledge without having made any special inquiry) and the aggregate
liability of the Exiting Stockholder and SAM pursuant to the provisions of
this paragraph shall be limited to an amount equal to the Cash Redemption
Price (as defined in the Redemption Agreement) received by them from the
redemption of the Redeemed Shares.
-22-
<PAGE>
If any action is brought against an Underwriter or controlling person in
respect of which indemnity may be sought against the Company, the Exiting
Stockholder and SAM pursuant to the preceding paragraph, such Underwriter shall
promptly notify the Company, the Exiting Stockholder and SAM in writing of the
institution of such action and the Company, the Exiting Stockholder and SAM
shall assume the defense of such action, including the employment of counsel and
payment of expenses, provided, however, that any failure or delay to so notify
the Company will not relieve the Company of any obligation hereunder, except to
the extent that its ability to defend is actually unpaired by such failure or
delay. Such Underwriter or controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless the employment of such counsel shall have been authorized in writing by
the Company in connection with the defense of such action or the Company, the
Exiting Stockholder and SAM shall not have employed counsel to have charge of
the defense of such action within a reasonable time or such indemnified party or
parties shall have reasonably concluded (based on the advice of counsel) that
there may be defenses available to it or them which are different from or
additional to those available to the Company, the Exiting Stockholder or SAM, as
the case may be, (in which case the Company, the Exiting Stockholder and SAM
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the Company, the Exiting Shareholder and SAM and paid as
incurred (it being understood, however, that the Company shall not be liable for
the expenses of more than one separate firm of attorneys for the Underwriters or
controlling persons in any one action or series of related actions in the same
jurisdiction representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, neither
the Company, the Exiting Stockholder nor SAM shall be liable for any settlement
of any such claim or action effected without its written consent.
(b) Each Underwriter agrees, severally and not jointly, to indemnify, defend
and hold harmless the Company, its directors, the officers that signed the
Registration Statement and any person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any loss, expense, liability, damage or claim
(including the reasonable cost of investigation) which, jointly or
severally, the Company or any such person may incur under the Securities
Act, the Exchange Act or otherwise, insofar as such loss, expense,
liability, damage or claim arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in and
in conformity with information furnished in writing by such Underwriter
through the Representative to the Company expressly for use in the
Registration Statement (or in the Registration Statement as amended by any
post-effective amendment thereof by the Company) or in a Prospectus, or
arises out of or is based upon any omission or alleged omission to state a
material fact in connection with such information required to be stated
either in such Registration Statement or Prospectus or necessary to make
such information, in the light of the circumstances under which made, not
misleading. The statements set forth in the last paragraph on the cover
page and in the second paragraph under the caption "Underwriting" in the
Preliminary Prospectus and the Prospectus (to the extent such statements
relate to the Underwriters) constitute the only information furnished by or
on behalf of any Underwriter through the Representative to the Company for
purposes of Section 3(m) and this Section 10.
-23-
<PAGE>
If any action is brought against the Company or any such person in respect
of which Indemnity may be sought against any Underwriter pursuant to the
foregoing paragraph, the Company or such person shall promptly notify the
Representative in writing of the institution of such action and the
Representative, on behalf of the Underwriters, shall assume the defense of such
action, including the employment of counsel and payment of expenses, provided,
however, that any failure or delay to so notify the Representative will not
relieve any such Underwriter of any obligation hereunder, except to the extent
that its ability to defend is actually impaired by such failure or delay. The
Company or such person shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
the Company or such person unless the employment of such counsel shall have been
authorized in writing by the Representative in connection with the defense of
such action or the Representative shall not have employed counsel to have charge
of the defense of such action within a reasonable time or such indemnified party
or parties shall have reasonably concluded (based on the advice of counsel) that
there may be defenses available to it or them which are different from or
additional to those available to the Underwriters (in which case the
Representative shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events such fees
and expenses shall be borne by such Underwriter and paid as incurred (it being
understood, however, that the Underwriters shall not be liable for the expenses
of more than one separate firm of attorneys in any one action or series of
related actions in the same jurisdiction representing the indemnified parties
who are parties to such action). Anything in this paragraph to the contrary
notwithstanding, no Underwriter shall be liable for any settlement of any such
claim or action effected without the written consent of the Representative.
(c) If the indemnification provided for in this Section 10 is available to an
indemnified party under subsections (a) and (b) of this Section 10 in
respect of any losses, expenses, liabilities, damages or claims referred to
therein, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, expenses, liabilities,
damages or claims (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Exiting Stockholder and SAM
on the one hand and the Underwriters on the other hand from the offering of
the Shares or (ii) if (but only if) the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefit referred to in clause
(i) above but also the relative fault of the Company, the Exiting
Stockholder and SAM on the one hand and of the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
expenses, liabilities, damages or claim as well as any other relevant
equitable considerations. The relative benefits received by the Company,
the Exiting Stockholder and SAM on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total proceeds
from the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company (including the aggregate Cash
Redemption Price received by the Exiting Stockholder and SAM pursuant to
the Redemption Agreement) bear to the underwriting discounts and
commissions received by the Underwriters. The relative fault of the
Company, the Exiting Stockholder and SAM on the one hand and of the
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue statement or
-24-
<PAGE>
alleged untrue statement of a material fact or omission or alleged omission
relates to information supplied by the Company, the Exiting Stockholder and
SAM or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The amount paid or payable by a party as a result of the
losses, claims, damages and liabilities referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any claim or action.
(d) The Company, the Exiting Stockholder and SAM and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
Section 10 were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to in subsection (c)(i) and, if applicable (ii), above.
Notwithstanding the provisions of this Section 10, no Underwriter shall be
required to contribute any amount in excess of the underwriting discounts
and commissions applicable to the Shares purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 10 are
several in proportion to their respective underwriting commitments and not
joint.
11. Survival: The indemnity and contribution agreements contained in Section
--------
10 and the covenants, warranties and representations of the Company, the Exiting
Stockholder and SAM contained in Sections 3, 4, 5 and 6 of this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Underwriter, or any person who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
or by or on behalf of the Company, its directors and officers or any person who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and shall survive any termination of this
Agreement or the sale and delivery of the Shares. The Company, the Exiting
Stockholder and SAM and each Underwriter agree promptly to notify the others of
the commencement of any litigation or proceeding against it and, in the case of
the Company, against any of the Company's officers and directors, in connection
with the sale and delivery of the Shares, or in connection with the Registration
Statement or Prospectus.
12. Notices: Except as otherwise herein provided, all statements, requests,
-------
notices and agreements shall be in writing or by telegram and, if to the
Underwriters, shall be sufficient in all respects if delivered to Friedman,
Billings, Ramsey & Co., Inc., 1001 19th Street North, Arlington, Virginia 22209,
Attention: Syndicate Department; if to the Company, shall be sufficient in all
respects if delivered to the Company at the offices of the Company at 600
Mamaroneck Avenue, Harrison, New York 10528, Attention: President; and if to
the Exiting Stockholder and SAM. shall be sufficient in all respects if
delivered to the Exiting Stockholder and SAM at Summit House, Brooklands Close,
Windmill Road, Sunbury on Thames, U.K. TW16 7EH.
13. Governing Law; Headings: THIS AGREEMENT SHALL BE GOVERNED BY, AND
-----------------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
-25-
<PAGE>
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The section headings
in this Agreement have been inserted as a matter of convenience of reference and
are not a part of this Agreement.
14. Parties at Interest: The Agreement herein set forth has been and is made
-------------------
solely for the benefit of the Underwriters, the Company, the Exiting Stockholder
and SAM and the controlling persons, directors and officers referred to in
Sections 10 and 11 hereof, and their respective successors, assigns, executors
and administrators. No other person, partnership, association or corporation
(including a purchaser, as such purchaser, from any of the Underwriters) shall
acquire or have any right under or by virtue of this Agreement.
15. Counterparts: This Agreement may be signed by the parties in counterparts
------------
which together shall constitute one and the same agreement among the parties.
-26-
<PAGE>
If the foregoing correctly sets forth the understanding among the Company,
the Exiting Stockholder and SAM and the Underwriters, please so indicate in the
space provided below for the purpose, whereupon this Agreement shall constitute
a binding agreement among the Company, the Exiting Stockholder and SAM and the
Underwriters.
Very truly yours,
ICON HOLDINGS CORP.
------------------------------
By:
Title:
SUMMIT ASSET HOLDING L.L.C.
------------------------------
By:
Title:
SUMMIT ASSET MANAGEMENT LIMITED
------------------------------
By:
Title:
Accepted and agreed to as
of the date first above written:
FRIEDMAN, BILLINGS, RAMSEY &
CO., INC.
- ------------------------------
By:
Title:
For themselves and as Representative
of the other Underwriters named on
Schedule I hereto.
-27-
<PAGE>
SCHEDULE I
UNDERWRITER NUMBER OF INITIAL SHARES TO BE PURCHASED
Friedman, Billings, Ramsey & Co., Inc. 12,500,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
TOTAL................................... 12,500,000
<PAGE>
Exhibit 3.01
------------
CERTIFICATE OF INCORPORATION
OF
ICON HOLDINGS CORP., AS AMENDED
* * * *
1. The name of the corporation is
ICON Holdings Corp.
2. The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1013 Centre Road in the City of
Wilmington, County of New Castle. The name of the corporation's registered
agent at such address is Corporation Service Company.
3. The nature of the business or purposes to be conducted or promoted
by the corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law.
4. The corporation is authorized to issue Fifty Million (50,000,000)
shares of its capital stock, all of which shall be designated common stock, $.01
par value per share (the "Common Stock"). The Common Stock shall be divided
into two (2) classes, to be designated, respectively, Class A Common Stock,
which shall have voting rights, and Class B Common Stock, which shall have no
voting rights. In all other respects, the rights of the Class A Common Stock
and the Class B Common Stock shall be equal.
5. A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except
<PAGE>
for liability (a) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the Delaware General Corporation Law, or (d) for any transaction
from which the director derived any improper personal benefit. If the Delaware
General Corporation Law is amended after the filing of the certificate of
incorporation of which this paragraph is a part to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing portion of this paragraph by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
6. The board of directors shall have the power to adopt, amend or
repeal the by-laws of the corporation. However, any by-law so adopted or
amended by the board of directors may be repealed, and any by-law so repealed by
the board of directors may be reinstated, by vote of the holders of a majority
of the shares of stock of the corporation entitled to vote, in which case the
board of directors shall not thereafter take any action with respect to the by-
laws which is inconsistent with the action so taken by the stockholders.
7. Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
8. Without the unanimous written consent of the stockholders, the
affirmative vote of a number of directors constituting the whole board of
directors shall be necessary for the transaction of any item of business at any
meeting of the board of directors.
-2-
<PAGE>
9. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of the Delaware General Corporation Law or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of the Delaware General
Corporation Law order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this corporation, as the case
may be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in the value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
this corporation, as the case may be, and also on this corporation.
10. The name and mailing address of the sole incorporator is as
follows:
Melissa E. Whitman
Thacher Proffitt & Wood
Two World Trade Center, 40th Floor
New York, NY 10048
-3-
<PAGE>
11. The corporation shall, to the fullest extent permitted under the
General Corporation Law of the State of Delaware, as amended from time to time,
indemnify each of its directors, officers, employees and agents (each, an
"Indemnified Party") against all expenses (including, without limitation,
attorney's fees and expenses), liabilities, judgements, fines and amounts paid
or otherwise due in respect of any action, suit or proceeding in which such
Indemnified Party may be involved or with which he may be threatened, as a party
or otherwise, whether or not he continues to be such at the time such expenses
and liabilities shall have been imposed or incurred, by reason of his actions or
omissions in connection with services rendered directly or indirectly to the
corporation, such indemnification to include prompt payment of expenses in
advance of the final disposition of any such action, suit or proceeding.
-4-
<PAGE>
Exhibit 3.02
------------
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ICON HOLDINGS CORP.
* * * *
ICON HOLDINGS CORP., a corporation and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is:
ICON HOLDINGS CORP.
2. The Certificate of Incorporation of the corporation was filed with
the Secretary of State of Delaware on May 1, 1996. Certificates of Amendment
were filed with the Secretary of State of Delaware on June 19, 1997, July 18,
1997 and December __, 1997.
3. The First Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of this
corporation by amending Articles Fourth, Sixth, Seventh, Eighth, Ninth and
Tenth, and by adding Articles Twelfth and Thirteenth, all as set forth in this
First Amended and Restated Certificate of Incorporation.
4. This First Amended and Restated Certificate of Incorporation was
proposed and declared advisable by the Board of Directors of the corporation in
accordance with the applicable provisions of Sections 242 and 245 of the
Delaware General Corporation Law. The stockholders of the corporation duly
approved this First Amended Restated Certificate of Incorporation by unanimous
written consent. The capital of the corporation has not been reduced by the
amendments effected by this First Amended and Restated Certificate of
Incorporation.
5. This First Amended and Restated Certificate of Incorporation, as
amended and restated herein, shall upon the effective date hereof, read as
follows:
FIRST: The name of the corporation is:
ICON Holdings Corp.
<PAGE>
SECOND: The registered office of the corporation in the State of
Delaware is located at 1013 Centre Road, City of Wilmington, County of New
Castle and the name of its registered agent is Corporation Service Company.
THIRD: The nature of the business or purposes to be conducted or
promoted by the corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law.
FOURTH: The total number of shares of capital stock which the
corporation shall have authority to issue is 60,000,000, of which 50,000,000
shall be common stock, $.01 par value per share ("Common Stock"), and 10,000,000
shall be preferred stock, $.01 par value per share ("Preferred Stock"). The
preferences, qualifications, limitations, restrictions and special or relative
rights of each class of stock are as set forth below:
A. Common Stock. All shares of Common Stock will be identical and
------------
will entitle holder thereof to the same preferences, qualifications,
limitations, restrictions and relative and special rights.
(1) Voting Rights. Each outstanding share of Common Stock shall
-------------
be entitled to vote on each matter on which the stockholders of
the corporation shall be entitled to vote, and each holder of
Common Stock shall be entitled to one vote for each share of such
Common Stock held by such holder.
(2) Preemptive Rights. The holders of Common Stock shall not have
-----------------
preemptive rights to acquire additional shares of the stock of the
corporation.
(3) Cumulative Voting. The holders of Common shall not be
-----------------
entitled to cumulate their shares for the purpose of electing
directors of the corporation, or for any other purpose.
(4) Dividends. The Board of Directors of the corporation (the
---------
"Board of Directors") may cause dividends to be paid to holders of
shares of Common Stock out of funds legally available for the
payment of dividends. Any dividend of distribution on the Common
Stock shall be subject to the rights of the holders of the
Preferred Stock.
(5) Liquidation. In the event of any voluntary or involuntary
-----------
liquidation, dissolution or winding up of the corporation, the
holders of the Common Stock shall be entitled, after payment or
provision for payment of the debts and other liabilities of the
corporation and the payment to the holders of the Preferred Stock
of any preference on distributions in the liquidation, dissolution
or winding up of the corporation, to share on a per share basis in
the remaining net assets of the corporation.
-2-
<PAGE>
B. Preferred Stock. The Preferred Stock may be divided into, and may
---------------
be issued from time to time in, one or more series. The Board of Directors is
authorized from time to time to establish and designate one or more series of
Preferred Stock, in addition to the series established and designated in this
Article FOURTH, by fixing and determining the variations in the relative rights
and preferences as between and among such series and any other classes of
capital stock of the corporation and fixing or altering the number of shares
comprising any such series and the designation thereof. The authority of the
Board of Directors from time to time with respect to each subsequent series of
Preferred Stock shall include, but not be limited to, determination of the
following: (i) the designation of the series; (ii) the number of shares of the
series and (except where otherwise therein; (iii) the dividends, if any, for
shares of the series and the rates, conditions, times, and relative preferences
thereof; (iv) the redemption rights, if any, and price or prices for shares of
the series; (v) the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series; (vi) the relative rights of
shares of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation; (vii) whether the
shares of the series shall be convertible into share of any other class or
series of shares of the corporation, and, if so, the specification of such other
class or series, the conversion price or prices or rate or rates, any
adjustments thereof, the date or dates as of which such shares shall be
convertible and all other terms and conditions upon which such conversion may be
made; (viii) the voting rights, if any, of the holders of such series; and (ix)
such other designations, powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof.
FIFTH: No director of the corporation shall be personally liable to
the corporation or its stockholders for monetary damages, except for liability
(a) for breach of the director's duty of loyalty to the corporation or its
stockholders, (b) for acts of omission not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 174 of
the Delaware General Corporation Law, or (d) for any transaction from which the
director derived an improper personal benefit. If the Delaware General
Corporation Law is amended after approval by the stockholders of this paragraph
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended from time to time. Any repeal or
modification of this paragraph shall not increase the personal liability of any
director of the corporation for any act or occurrence taking place prior to such
repeal or modification, or otherwise adversely affect any right or protection of
a director of the corporation existing hereunder prior to the time of such
repeal or modification.
SIXTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court or equitable
jurisdiction within the State of Delaware may, on the application of any
receiver or receivers appointed for this corporation
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<PAGE>
under Section 291 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directors. If a majority in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made, be binding
on all the creditors or class of creditors, and/or on all the stockholders or
class of stockholders, of this corporation, as the case may be, and also on this
corporation.
SEVENTH: The management of the business and the conduct of the
affairs of the corporation shall be vested in the Board of Directors. In
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized:
To make, alter, amend, or repeal the by-laws of the corporation.
To authorize and cause to be executed mortgages and liens upon the
real and personal property of the corporation.
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
When and as authorized by the stockholders in accordance with statute,
to sell, lease or exchange all or substantially all of the property and assets
of the corporation, including its good will and its corporate franchises, upon
such terms and conditions and for such consideration, which may consist in whole
or in part of money or property including shares of stock in, and/or other
securities of, any other corporation or corporations, as its Board of Directors
shall deem expedient and for the best interests of the corporation.
To determine the extent, if any, to which and the time and place at
which, and the conditions under which any stockholder of the corporation may
examine books and records now or hereafter required by statute to be kept open
for inspection of stockholders of the corporation.
To provide, in any vote or votes authorizing liquidation of the
corporation or proceedings for its dissolution, for the distribution pro rata
among the stockholders of the corporation of assets for the corporation, wholly
or in part or kind, whether such assets be in cash or other property, that the
board of directors of the corporation may determine the value of the different
assets of the corporation for the purpose of such liquidation and that the board
of directors may divide or authorize the division of such assets of the
corporation or any part thereof among the stockholders and the corporation so
that each stockholder will
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<PAGE>
receive a proportionate amount in value (determined as aforesaid) of cash or
property of the corporation upon such liquidation of dissolution even though
every stockholder may not receive a strictly proportionate part of each such
asset.
EIGHTH: Meetings of stockholders may be held at such place, either
within or without the State of Delaware, as the by-laws may provide. The books
of the corporation may be kept (subject to any provision contained in the
statutes) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the by-laws of the
corporation. Elections of directors need not be by written ballot unless by the
by-laws of the corporation shall so provide.
NINTH: Any amendment, repeal, or other alteration of this First
Restated Certificate of Incorporation shall, unless proposed and declared
advisable by the Board of Directors, require the affirmative vote of at least
two-thirds of the outstanding shares of capital stock of the corporation
entitled to vote in the election of directors. Subject to the foregoing, the
corporation reserves the right to amend, alter, change or repeal any provision
contained in this certificate of incorporation, in the manner now or hereafter
prescribed by statute and this certificate of incorporation, and all rights
conferred upon a stockholder, director of officer herein, are granted subject to
this reservation.
TENTH: Whenever the corporation shall be authorized to issue more
than one class of stock, no outstanding share of any class of stock which is
denied voting power under the provisions of the certificate of incorporation
shall entitle the holder thereof to the right to vote at any meeting of
stockholders except as the provisions of paragraph (2) of subsection (b) of
Section 242 of the General Corporation Law of the State of Delaware shall
otherwise require; provided, that no share of any such class which is otherwise
denied voting power shall entitle the holder thereof to vote upon the increase
or decrease in the number of authorized shares of said class.
ELEVENTH: The corporation shall, to the fullest extent permitted under
the General Corporation Law of the State of Delaware, as amended from time to
time, indemnify each of its directors, officers, employees and agents (each, an
"Indemnified Party") against all expenses (including, without limitation,
attorney's fees and expenses), liabilities, judgements, fines and amounts paid
or otherwise due in respect of any action, suit or proceeding in which such
Indemnified Party may be involved or with which he may be threatened, as a party
or otherwise, whether or not he continues to be such at the time such expenses
and liabilities shall have been imposed or incurred, by reason of his actions or
omissions in connection with services rendered directly or indirectly to the
corporation, such indemnification to include prompt payment of expenses in
advance of the final disposition of any such action, suit or proceeding.
TWELFTH:
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<PAGE>
A. Number, Terms and Election of Directors.
---------------------------------------
Subject to the rights, if any, of the holders of any class or series
of Preferred Stock to elect additional directors under specified circumstances,
the number of directors of the corporation shall be fixed and may be increased
or decreased from time to time by the Board of Directors, but in no case shall
the number be less than three nor more than fifteen.
The directors shall be divided into three classes, as nearly equal in
number as possible. One class of directors has been initially elected for a
term expiring at the annual meeting of stockholders to be held in 1998, another
class of directors has been initially elected for a term expiring at the annual
meeting of stockholders to be held in 1999, and another class of director has
been initially elected for a term expiring at the annual meeting of stockholders
to be held in 2000, with member of each class to hold office until their
successors are elected and qualified. At each succeeding annual meeting of the
stockholders of the corporation, the successors of the class of directors whose
term expires at the meeting shall be elected by plurality vote of all votes cast
at such meeting to hold office for a term expiring at the annual meeting of
stockholders held in the third year following their year of election.
B. Newly Created Directorships and Vacancies
-----------------------------------------
Subject to the rights, if any, of the holders of any and all series of
Preferred Stock to elect additional directors pursuant to the terms and
conditions of such Preferred Stock, newly created directorships resulting form
any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause shall be filled solely by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the board
of directors, or by a sole remaining director. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of an
incumbent director.
C. Removal
-------
Subject to the rights, if any, of the holders of any and all series of
Preferred Stock to elect additional directors pursuant to the terms and
conditions of such Preferred Stock, any director may be removed from office by
the stockholders only for cause and only in the following manner. At any annual
meeting or special meeting of the stockholders of the corporation, the notice of
which shall state that the removal of a director or directors is among the
purposes of the meeting, the affirmative vote of the holders of at least a
majority
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<PAGE>
of the outstanding shares of capital stock of the corporation entitled to vote
generally in the election of the directors, voting together as a single class,
may remove such director or directors for cause.
THIRTEENTH: Subject to the rights of the holders of any and all
series of Preferred Stock:
A. any action required or permitted to be taken by the stockholders
of the corporation must be effected at a duly called annual or special meeting
of the stockholders of the corporation and may not be effected by any consent in
writing of such stockholders; and
B. special meetings of stockholders of the corporation may be called
only by the Chairman of the Board of Directors or the Chief Executive Officer of
the corporation or by the Secretary of the corporation with ten (10) days after
receipts of the written request of a majority of the Board of Directors.
* * * *
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<PAGE>
IN WITNESS WHEREOF, said ICON HOLDINGS CORP. has caused its corporate
seal to be hereunto affixed and this First Restated Certificate of Incorporation
to be signed by Beaufort B. J. Clarke, its President, and attested to by John L.
Lee, Esq., its Secretary, this ____ day of December, 1997.
By:
-------------------------------------
ATTEST:
- ----------------------------------------
John L. Lee, Secretary
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<PAGE>
Exhibit 3.03
------------
AMENDED AND RESTATED BY-LAWS
OF
ICON HOLDINGS CORP.
(the "Corporation")
ARTICLE I.
----------
Certificate of Incorporation
----------------------------
These by-laws, the powers of the Corporation and of its directors and
stockholders, and all matters concerning the conduct and regulation of the
business of the Corporation, shall be subject to such provisions in regard
thereto as are set forth in the certificate of incorporation filed pursuant to
the General Corporation Law of Delaware Which is hereby made a part of these by-
laws.
The term "certificate of incorporation" in these by-laws, unless the
context requires otherwise, includes not only the original certificate of
incorporation filed to create the Corporation but also all other restated
certificates, amendments, agreements of merger or consolidation, plans of
reorganization, or other instruments, howsoever designated, filed pursuant to
the General Corporation Law of Delaware which have the effect of amending or
supplementing in some respect the Corporation's original certificate of
incorporation.
ARTICLE II.
-----------
Annual Meeting
--------------
The annual meeting of stockholders shall be held within six months of
the end of the previous fiscal year of the Corporation, within or without the
State of Delaware, on the date and at the time fixed, from time to time, by the
directors. Purposes for which an annual meeting is to be held, in addition to
those prescribed by law, by the certificate of incorporation or by these by-
laws, may be specified by the directors or the President and shall be included
in the notice of the meeting. If the board of directors determines that, in the
interest of an informed stockholder vote on any matter, it is appropriate to
adjourn the annual meeting of stockholders to a later date in order to make
available information materially relevant to consideration of such matter, the
President or other officer presiding at such meeting may defer any action on
such matter and, without a stockholder vote on the matter of adjournment,
adjourn the meeting for the purpose of considering and acting on such matter at
a session to be convened at a later date. When the annual meeting is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. If the adjournment is for more than thirty days, or if after the
<PAGE>
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
ARTICLE III.
------------
Special Meetings of Stockholders
--------------------------------
Special meetings of the stockholders may be held either within or
without the State of Delaware, at such time and place and for such purposes as
shall be specified in a call for such meeting made by the board of directors,
the Chief Executive Officer or the President of the Corporation or by the
Secretary within ten days after receipt of the written request of a majority of
the directors.
ARTICLE IV.
-----------
Notice of Stockholders' Meetings
--------------------------------
Whenever stockholders are required or permitted to take any action at
a meeting, a written notice of the meeting shall be given which shall state the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, which notice shall be given
not less than ten nor more than sixty days before the date of the meeting,
except where longer notice is required by law, to each stockholder entitled to
vote at such meeting, by leaving such notice with him or by mailing it, postage
prepaid, directed to him at his address as it appears upon the records of the
Corporation. In case of the death, absence, incapacity or refusal of the
Secretary, such notice may be given by a person designated either by the
Secretary or by the person or persons calling the meeting or by the board of
directors. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
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 stockholder of
record entitled to vote at the meeting.
An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the Corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
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<PAGE>
ARTICLE V.
----------
Quorum of Stockholders; Stockholder List
----------------------------------------
At any meeting of the stockholders, a majority of all shares issued
and outstanding and entitled to vote upon a question to be considered at the
meeting shall constitute a quorum when represented at such meeting by the
holders thereof in person or by their duly constituted and authorized attorney
or attorneys, but holders of a lesser interest may adjourn any meeting from time
to time, and the meeting may be held as adjourned without further notice. When
a quorum is present at any meeting, a majority of the stock so represented
thereat and voting on any question brought before such meeting shall be
determinative, except where a larger vote is required by law, by the certificate
of incorporation or by these by-laws, and except that the vote required for the
election of directors shall be as set forth in the certificate of incorporation.
The Secretary or other officer having charge of the stock ledger shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours for a period of at least ten days prior to the
meeting, either at a place within the city or town where the meeting is to be
held, which place shall have been specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. Said list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders required by this Article or
the books of the Corporation, or the stockholders entitled to vote in person or
by proxy at any meeting of stockholders.
ARTICLE VI.
-----------
Proxies and Voting
------------------
Except as otherwise provided in the certificate of incorporation, each
stockholder shall at every meeting of the stockholders be entitled to one vote
for each share of the capital stock held by such stockholder. Directors shall
be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. Any other action shall be authorized by a majority of the votes cast
except where the General Corporation Law prescribes a different percentage of
votes and/or a different exercise of voting power, and except as may be
otherwise prescribed by the provisions of the certificate and these bylaws.
Each stockholder entitled to vote at a meeting of stockholders or to express
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<PAGE>
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy but (except as
otherwise expressly permitted by law) no proxy shall be voted or acted upon
after three years from its date, unless (i) the proxy provides for a longer
period, or (ii) the proxy states that it is irrevocable and is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally.
Prior to, but not after, the consummation of an offer and sale of
common stock of the Corporation to the public pursuant to a registration
statement filed by the Corporation on Form S-1 under the Securities Act of 1933,
as amended (the "1933 Act"), for an offering price resulting in gross proceeds
to the Company of at least Twenty Million Dollars ($20,000,000), unless
otherwise provided in the certificate of incorporation, any action required by
law to, or which may, be taken at any annual or special meeting of stockholders
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote therein were present and voted. Prompt notice of
the taking of such action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE VII.
------------
Stockholders' Record Date
-------------------------
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
If no record date is fixed:
(1) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
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<PAGE>
(2) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no
prior action by the board of directors is necessary, shall be the day
on which the first written consent is expressed.
(3) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
ARTICLE VIII.
-------------
Conduct of Meetings
-------------------
Meetings of the stockholders shall be presided over by one of the following
officers in the order of seniority and if present and acting: the Chairman of
the Board, if any, the Vice-Chairman of the Board, if any, the President, a
Vice-President, or, if none of the foregoing is in office and present and
acting, by a chairman to be chosen by the stockholders. The Secretary of the
corporation, or in his absence, an Assistant Secretary, shall act as secretary
of every meeting, but if neither the Secretary nor an Assistant Secretary is
present the Chairman of the meeting shall appoint a secretary of the meeting.
ARTICLE IX.
-----------
Inspectors
----------
In advance of any meeting of stockholders, the board of directors shall
appoint one or more inspectors to act at the meeting and make a written report
thereof. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his or
her ability.
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<PAGE>
The inspectors shall:
(1) Ascertain the number of shares outstanding and the voting power of
each;
(2) Determine the shares represented at a meeting and the validity of
proxies and ballots;
(3) Count all votes and ballots;
(4) Determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the
inspectors; and
(5) Certify their determination of the number of shares represented at the
meeting and their count of all votes and ballots.
ARTICLE X.
----------
Board of Directors
------------------
Except as otherwise provided by law or by the certificate of incorporation,
the business and affairs of the corporation shall be managed by the board of
directors. Subject to the rights of holders of preferred stock, nominations for
the election of directors may be made by the board of directors or a committee
appointed by the board of directors or by any stockholder entitled to vote in
the election of directors generally. However, any stockholder entitled to vote
in the election of directors may nominate one or more persons for election as
directors at a meeting only if written notice of such stockholder's intent to
make such nomination or nominations has been given, either by personal delivery
or by United States mail, postage prepaid, to the Secretary of the corporation
not later than eighty days prior to the date of any annual or special meeting.
In the event that the date of such annual or special meeting was not publicly
announced by the corporation by mail, press release or otherwise more than
ninety days prior to the meeting, notice by the stockholder to be timely must be
delivered to the Secretary of the corporation not later than the close of
business on the tenth day following the day on which such announcement of the
date of the meeting was communicated to the stockholders.
Each such notice shall set forth: (i) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the stockholder is a holder of record
of stock of the corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the
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<PAGE>
board of directors; and (v) the consent of each nominee to serve as a director
of the corporation if so elected.
The classification of the board of directors, the term of each class of
directors and the manner of election and removal of directors shall be as set
forth in the certificate of incorporation. Each director shall hold office
until his successor is elected and qualified or until his earlier resignation or
removal. Any director may resign at any time upon written notice to the
corporation. No director need be a stockholder.
ARTICLE XI.
-----------
Committees
----------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, each committee to consist of one or
more of the directors of the Corporation. The board may designate one or more
directors as alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee and may define the number
and qualifications which shall constitute a quorum of such committee. Except as
otherwise limited by law, any such committee, to the extent provided in the
resolution appointing such committee, shall have and may exercise the powers of
the board of directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
ARTICLE XII.
------------
Meeting of the Board of Directors and of Committees
---------------------------------------------------
Regular meetings of the board of directors may be held without call or
formal notice at such places either within or without the State of Delaware and
at such times as the board may by vote from time to time determine.
Special meetings of the board of directors may be held at any place either
within or without the State of Delaware at any time when called by the
President, Treasurer, Secretary or two or more directors, reasonable notice of
the time and place thereof being given to each director. A waiver of such
notice in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent to
such notice.
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<PAGE>
In any case it shall be deemed sufficient notice to a director to send notice by
mail at least forty-eight hours, or to deliver personally or to send notice by
telegram at least twenty-four hours, before the meeting, addressed to him at his
usual or last known business or residence address.
Unless otherwise restricted by the certificate of incorporation or by other
provisions of these by-laws, (i) any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting if all members of the board or of such committee, as the case
may be, consent thereto in writing and such writing or writings are filed with
the minutes of proceedings of the board or committee, and (ii) members of the
board of directors or of any committee designated by the board may participate
in a meeting thereof by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in person at such
meeting.
ARTICLE XIII.
-------------
Quorum of the Board of Directors
--------------------------------
Except as otherwise expressly provided in the certificate of incorporation
or in these by-laws, a majority of the total number of directors at the time in
office shall constitute a quorum for the transaction of business, except when a
vacancy or vacancies prevents such majority, whereupon a majority of the
directors in office shall constitute a quorum, but a smaller number of directors
may adjourn any meeting from time to time. Except as otherwise so expressly
provided, the vote of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, provided,
however, that the affirmative vote in good faith of a majority of the
disinterested directors, even though the disinterested directors shall be fewer
than a quorum, shall be sufficient to authorize a contract or transaction in
which one or more directors have interest if the material facts as to such
interest and the relation of the interested directors to the contract or
transaction have been disclosed or are known to the directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
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<PAGE>
ARTICLE XIV.
------------
Waiver of Notice of Meetings
----------------------------
Whenever notice is required to be given under any provision of law or
the certificate of incorporation or these by-laws, a written waiver thereof,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the certificate of incorporation or the by-laws.
ARTICLE XV.
-----------
Officers and Agents
-------------------
The Corporation shall have a President, Secretary and Treasurer, who
shall be chosen by the directors, each of whom shall hold his office until his
successor has been chosen and qualified or until his earlier resignation or
removal. The Corporation may have such other officers and agents as are
desired, each of whom shall be chosen by the board of directors and shall hold
his office for such term and have such authority and duties as shall be
determined by the board of directors. The board of directors may secure the
fidelity of any or all of such officers or agents by bond or otherwise. Any
number of offices may be held by the same person. Each officer shall, subject
to these by-laws, have in addition to the duties and powers herein set forth,
such duties and powers as the board of directors shall from time to time
designate. In all cases where the duties of any officer, agent or employee are
not specifically prescribed by the by-laws, or by the board of directors, such
officer, agent or employee shall obey the orders and instructions of the
President. Any officer may resign at any time upon written notice to the
Corporation.
ARTICLE XVI.
------------
President, Chief Executive Officer
-----------------------------------
The President shall, subject to the direction and under the
supervision of the board of directors, be the chief executive officer of the
Corporation and shall have general and active
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<PAGE>
control of its affairs and business and general supervision over its officers,
agents and employees. Except as otherwise voted by the board, he shall preside
at all meetings of the stockholders and of the board of directors at which he is
President. The President shall have custody of the Treasurer's bond, if any.
Notwithstanding the foregoing, the board of directors may provide that an
executive committee of the board of directors shall have general and active
control of the affairs and business of the Corporation and general supervision
over its officers, agents and employees, in which event the President shall not
be the chief executive officer but shall have such duties and authority as may
be assigned by the board of directors and the executive committee.
ARTICLE XVII.
-------------
Secretary
---------
The Secretary shall record all the proceedings of the meetings of the
stockholders and directors in a book, which shall be the property of the
Corporation, to be kept for that purpose; and perform such other duties as shall
be assigned to him by the board of directors. In the absence of the Secretary
from any such meeting, a temporary secretary shall be chosen, who shall record
the proceedings of such meeting in the aforesaid book.
ARTICLE XVIII.
--------------
Treasurer
---------
The Treasurer shall, subject to the direction and under the
supervision of the board of directors, have the care and custody of the funds
and valuable papers of the Corporation, except his own bond, and he shall,
except as the board of directors shall generally or in particular cases
authorize the endorsement thereof in some other manner, have power to endorse
for deposit or collection all notes, checks, drafts and other obligations for
the payment of money to the Corporation or its order. He shall keep, or cause
to be kept, accurate books of account, which shall be the property of the
Corporation.
ARTICLE XIX.
------------
Removals
--------
The board of directors may, at any meeting called for the purpose, by
vote of a majority of their entire number, remove from office any officer or
agent of the Corporation or any
-10-
<PAGE>
member of any committee appointed by the board of directors or by any committee
appointed by the board of directors or by any officer or agent of the
Corporation.
ARTICLE XX.
-----------
Vacancies
---------
Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise and newly created directorships resulting from
any increase in the authorized number of directors, may be filled by a majority
of the directors then in office (though less than a quorum) or by a sole
remaining director and each of the incumbents so chosen shall hold office for
the unexpired term in respect of which the vacancy occurred and until his
successor shall have been duly elected and qualified or for such shorter period
as shall be specified in the filling of such vacancy or, if such vacancy shall
have occurred in the office of director, until such a successor shall have been
chosen by the stockholders.
ARTICLE XXI.
------------
Certificate of Stock
--------------------
Every holder of stock in the Corporation shall be entitled to have a
certificate signed by, or in the name of the Corporation by the Chairman or
Vice-Chairman of the board of directors (if one shall be incumbent) or the
President or a Vice-President and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary, certifying the number of shares owned
by him in the Corporation. If such certificate is countersigned (i) by a
transfer agent other than the Corporation or its employee, or (ii) by a
registrar other than the Corporation or its employee, any other signatures on
the certificate may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificates which the Corporation shall issue to represent such
class or series of stock or there shall be set forth on the face or back of the
certificates which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish, without charge to each
stockholder who so requests, the designations, preferences and
-11-
<PAGE>
relative participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Any restriction imposed upon the transfer of shares
or registration of transfer of shares shall be noted conspicuously on the
certificate representing the shares subject to such restriction.
ARTICLE XXII.
-------------
Loss of Certificate
-------------------
The Corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the directors may require the owner of the lost, stolen of
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate in its place and upon such other terms or
without any such bond as the board of directors shall prescribe.
ARTICLE XXIII.
--------------
Seal
----
The corporate seal shall, subject to alteration by the board of
directors, consist of a flat-faced circular die with the word "Delaware"
together with the name of the Corporation and the year of its organization cut
or engraved thereon. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE XXIV.
-------------
Execution of Papers
-------------------
Except as otherwise provided in these by-laws or as the board of
directors may generally or in particular cases authorize the execution thereof
in some other manner, all deeds, leases, transfers, contracts, bonds, notes,
checks, drafts and other obligations made, accepted or endorsed by the
Corporation, shall be signed by the President or by the Treasurer.
-12-
<PAGE>
ARTICLE XXV.
------------
Fiscal Year
-----------
Except as from time to time otherwise provided by the board of
directors, the fiscal year of the Corporation shall end on the last day of March
of each year.
ARTICLE XXVI.
-------------
Amendments
----------
Except as otherwise provided by law or by the certificate of
incorporation, these by-laws, as from time to time altered or amended, may be
made, altered or amended at any annual or special meeting of the stockholders
called for the purpose, of which the notice shall specify the subject matter of
the proposed alteration or amendment or new by-law or the article or articles to
be affected thereby. If the certificate of incorporation so provides, these by-
laws may also be made, altered or amended by a majority of the whole number of
directors.
-13-
<PAGE>
Exhibit 10.01
-------------
ICON HOLDINGS CORP.
PROMISSORY NOTE
$1,133,000 New York, New York
as of August 20, 1996
FOR VALUE RECEIVED, ICON HOLDINGS CORP., a Delaware Corporation (the
"Company"), hereby promises to pay to the order of SUMMIT ASSET HOLDING L.L.C.
or its assigns (the "Lender") the principal sum of One Million One Hundred
Thirty-Three Thousand and 00/100 Dollars ($1,133,000.00) plus 12.5% interest per
annum, from the date principal is advanced hereunder until paid in full,
computed on the basis of a 360 day year consisting of twelve months of thirty
days each. The principal sum hereunder shall be paid, together with accrued
interest thereon, no later than August 31, 2001.
This Promissory Note may be prepaid, in whole or in part, without penalty
or premium and without the Lender's consent. Any partial prepayments on this
Promissory Note shall be applied to installments of principal in reverse order
of their maturity.
The obligations of the Company on this Promissory Note exist in pari passu
with the promissory notes, dated as of the date hereof, between the Company and
Warrenton Capital Partners L.L.C. in the amounts of $1,200,000 (the "$1,200,000
Note") and $233,000 (the "$233,000 Note"), as and to the extent described in the
ICON Holdings Corp. Shareholders Agreement dated as of the date hereof (the
"Shareholders Agreement"). Any amounts received hereon by Lender not consistent
with the Shareholders Agreement as it relates to this Promissory Note shall be
received in trust by the Lender and promptly paid by the Lender to Warrenton
Capital Partners L.L.C. In the event of insolvency, bankruptcy or liquidation of
the Company, this Promissory Note shall be subordinate in right of payment to
the $1,200,000 Note and senior in right of payment to the $233,000 Note to the
extent that the outstanding principal balance on this Promissory Note is greater
than $233,000, this note being understood that if the remaining outstanding
principal balance of this note is less than or equal in priority to $233,000, it
shall be equal to the $233,000 Note.
This Promissory Note shall be construed in accordance with and governed by
the laws of the State of New York and applicable federal law.
ICON Holdings Corp.
By: /s/ Beaufort J.B. Clarke
------------------------------------
Beaufort J.B. Clarke, President
<PAGE>
Exhibit 10.02
-------------
ICON HOLDINGS CORP.
PROMISSORY NOTE
$1,200,000 New York, New York
as of August 20, 1996
FOR VALUE RECEIVED, ICON HOLDINGS CORP., a Delaware Corporation (the
"Company"), hereby promises to pay to the order of WARRENTON CAPITAL PARTNERS
L.L.C. or its assigns (the "Lender") the principal sum of One Million Two
Hundred Thousand and 00/100 Dollars ($1,200,000.00) plus 12.5% interest per
annum, from the date principal is advanced hereunder until paid in full,
computed on the basis of a 360 day year consisting of twelve months of thirty
days each. The principal sum hereunder shall be paid, together with accrued
interest thereon, in 36 equal successive monthly installments commencing October
16, 1996 and in full by October 31, 1999.
This Promissory Note may be prepaid, in whole or in part, without penalty
or premium and without the Lender's consent. Any partial prepayments on this
Promissory Note shall be applied to installments of principal in reverse order
of their maturity.
The obligations of the Company on this Promissory Note exist in pari passu
with the promissory note, dated as of the date hereof, between the Company and
Summit Asset Holding L.L.C., as and to the extent described in the ICON Holdings
Corp. Shareholders Agreement dated as of the date hereof (the "Shareholders
Agreement"). Any amounts received hereon by Lender not consistent with the
Shareholders Agreement as it relates to this Promissory Note shall be received
in trust by the Lender and promptly paid by the Lender to Summit Asset Holding
L.L.C. In the event the Company enters into insolvency, bankruptcy or
liquidation, the obligations of the Company on this Promissory Note are senior
to the obligations of the Company on the promissory note dated as of the date
hereof between the Company and Summit Asset Holding L.L.C. and the promissory
note dated as of the date hereof between the Company and Warrenton Capital
Partners L.L.C. in the amount of $233,000.
This Promissory Note shall be construed in accordance with and governed by
the laws of the State of New York and applicable federal law.
ICON Holdings Corp.
By: /s/ Beaufort J.B. Clarke
------------------------------------
Beaufort J.B. Clarke, President
<PAGE>
Exhibit 10.03
-------------
ICON HOLDINGS CORP.
PROMISSORY NOTE
$233,000 New York, New York
as of August 20, 1996
FOR VALUE RECEIVED, ICON HOLDINGS CORP., a Delaware Corporation (the
"Company"), hereby promises to pay to the order of WARRENTON CAPITAL PARTNERS
L.L.C. or its assigns (the "Lender") the principal sum of Two Hundred Thirty-
Three Thousand and 00/100 Dollars ($233,000.00) plus 12.5% interest per annum,
from the date principal is advanced hereunder until paid in full, computed on
the basis of a 360 day year consisting of twelve months of thirty days each. The
principal sum hereunder shall be paid, together with accrued interest thereon,
by no later than August 31, 2001.
This Promissory Note may be prepaid, in whole or in part, without penalty
or premium and without the Lender's consent. Any partial prepayments on this
Promissory Note shall be applied to installments of principal in reverse order
of their maturity.
The obligations of the Company on this Promissory Note exist in pari passu
with the promissory note, dated as of the date hereof, between the Company and
Summit Asset Holding L.L.C. (the "Summit Note"), as and to the extent described
in the ICON Holdings Corp. Shareholders Agreement dated as of the date hereof
(the "Shareholders Agreement"). Any amounts received hereon by Lender not
consistent with the Shareholders Agreement as it relates to this Promissory Note
shall be received in trust by the Lender and promptly paid by the Lender to
Summit Asset Holding L.L.C. In the event of insolvency, bankruptcy or
liquidation of the Company, this Promissory Note shall be subordinate in right
of payment to the $1,200,000 Promissory Note between the Company and the Lender
and to the Summit Note to the extent the remaining outstanding principal balance
on the Summit Note is greater than $233,000, it being understood that if the
remaining outstanding principal balance on Summit Note is less than or equal to
$233,000, this note shall be equal in priority to the Summit Note.
This Promissory Note shall be construed in accordance with and governed by
the laws of the State of New York and applicable federal law.
ICON Holdings Corp.
By: /s/ Beaufort J.B. Clarke
------------------------------------
Beaufort J.B. Clarke, President
<PAGE>
Exhibit 10.04
-------------
AMENDMENT NO. 2 TO
EMPLOYEE AGREEMENT
THIS AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT ("Amendment"), entered into as
of October __, 1997 and effective as of December 1, 1997 (the "Amendment Date"),
between Beaufort J. B. Clarke ("Employee") and ICON Holdings Corp., Delaware
corporation (the "Company"), amends that certain Employment Agreement dated as
of August 20, 1996 between the Company and Employee, as amended by Amendment No.
1 to Employment Agreement dated as of April 1, 1997 between the Company and
Employee (the "Current Employment Agreement", and the Current Employment
Agreement as amended by this Amendment, hereinafter the "Agreement").
WHEREAS, the Company wishes to amend and extend the Current Employment
Agreement in order to provide an incentive to the Employee to continue to serve
as the Company's Chief Executive Officer through the extended term thereof, and
Employee shall agree to such amendment and extension upon the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Section 1 of the Current Employment Agreement is amended as follows: "The
Employment Period is hereby extended for a term expiring December 31, 2002,
unless terminated prior thereto in accordance with Section 3 of the Agreement or
further extended by mutual agreement of the Company and Employee."
2. Paragraph (b)(i) of Section 2 of the Current Employment Agreement is hereby
amended as follows:
"Effective as of the Amendment Date and for the period through December 31,
1998, the Employee shall receive a base salary ("Base Salary") at a rate of
$275,000 per year, subject to automatic annual increases commencing January 1,
1999 during the Employment Period of 7.5% per year, to be paid in accordance
with the Company's payroll policies Employee shall also be entitled to retain,
without reimbursement, all bonus payments previously paid to Employee as advance
draws against such bonus as of the Amendment Date.
3. Paragraph (b)(ii) of Section 2 of the Current Employment Agreement,
including Exhibit A to the Current Employment Agreement as incorporated therein
by reference, is hereby deleted in its entirety and the following new provisions
are hereby substituted therefor:
"In addition to Base Salary, the Employee shall receive, with respect to
each fiscal year ending during the Employment Period commencing with the 1998
fiscal year, an annual incentive bonus ("Annual Bonus"), in accordance with the
Company's Executive Bonus Plan
<PAGE>
which has been adopted by the Board of Directors as of October __, 1997 and
attached hereto as Exhibit A, as the same may be amended or modified from time
to time (the "Executive Bonus Plan"). As determined by the Chairman of the Board
and approved by the Board of Directors, the Employee shall receive not less than
twenty-five percent (25%), nor more than thirty-three percent (33%), of the
funds pooled under the Executive Bonus Plan for each fiscal year. The Annual
Bonus shall be paid promptly, but in no event more than thirty (30) days, after
the Company's receipt of the audited financial statements of the Company for the
subject fiscal year. Commencing December 1, 1997, the Employee shall be entitled
to an advance draw against his Annual Bonus in an amount equal to 50% of the
anticipated amount of such Annual Bonus, to be payable in semi-monthly
installments."
4. Section 2 of the Current Employment Agreement is hereby amended by the
addition of the following new paragraph (b)(xiii):
"(xiii) Stock Options. On or before March 31, 1998, the Company
-------------
shall establish an incentive stock option plan to be known as the 1997
Stock Option Plan and shall upon consummation of the Company's planned
initial public offering grant to the Employee options to acquire
thereunder 1.75% of the shares of the outstanding Common Stock at the IPO
price. Such options are expected to vest 33% each on the first three
anniversaries of the grant date and to expire on the tenth anniversary of
the date of grant."
5. Section 2(b)(ix) of the Current Employment Agreement is hereby amended by
the addition of the following new sentence: "The Employee shall also be
entitled to reimbursement of or payment by the Company of Employee's actual
dues, costs and expenses of membership in a social club, plus initiation
expense."
6. The text of the second sentence of Paragraph (b) of Section 3 of the
Current Employment Agreement is hereby deleted and the following text is
substituted therefor:
" "Cause" for the purposes of this Agreement shall mean (i) fraud or
embezzlement involving assets of the Company, its customers, suppliers or
affiliates; (ii) Employee's conviction of a criminal felony offense; (iii) the
willful material breach or habitual neglect of Employee's obligations under this
Agreement or Employee's duties as an employee of the Company; or (iv) Employee's
willful failure to follow lawful material directives of the Board of Directors.
The existence of Cause for termination of Employee's employment by the Company
shall be subject, upon the written election by Employee or the Company, to
binding arbitration as provided in Section 9 hereof. The cost of arbitration,
exclusive of the cost of each party's legal representation (which, except as
hereinafter otherwise provided, shall be borne by the party incurring the
expense), shall be borne by the instigating party; provided, however, that the
arbitrators' award may require either party to reimburse the other for the
reasonable cost of legal representation in the arbitration proceedings."
7. The text of Paragraph (a) of Section 4 of the Current Employment Agreement
is hereby deleted and the following new text is substituted therefor:
2
<PAGE>
"(a) Severance Payments Upon Resignation or Termination Other Than for
-----------------------------------------------------------------
Cause, Death or Disability.
- --------------------------
1. Termination Without Cause after Change in Control: If there occurs a
-------------------------------------------------
change of control of the Company at any time, and Employee's employment as Chief
Executive Officer is terminated (i) by the Company for any reason other than
Cause or (ii) by Employee after a reduction in either responsibilities or pay or
change in location, Employee will receive the following:
(a) Full immediate vesting of any issued, unvested stock options,
(b) Full payment of any accrued, unpaid Base Salary, Annual Bonus and
benefit payments,
(c) A sum equal to three years of his highest to date annual Base Salary,
(d) A sum equal to three times his highest to date Annual Bonus,
(e) Three years of full benefits continuation, including health,
disability and life insurance, and full Company contributions to any qualified
and non-qualified retirement and pension plans or the then current value of same
in cash if the terms of such plans preclude such participation, but only to the
extent that similar benefits are not received by the Employee from a new
employer during such three year period,
(f) If such termination occurs on or after January 1, 2000, a $500,000
cash payment, and
(g) In the event that Employee's employment is terminated pursuant to
this item 1 and the excise tax imposed by Section 4999 of the Internal Revenue
Service Code (the "Code") (or any successor penalty or excise tax subsequently
imposed by law) applies to any payments under this item 1, an additional amount
shall be paid by the Company to Employee such that the aggregate after-tax
amount that Employee shall receive under this subsection 1, shall have a present
value equal to the aggregate after-tax amount that Employee would have received
and retained had such excise tax not applied to you. For this purpose, Employee
shall be assumed to be subject to tax in each year relevant to the computation
at the then maximum applicable combined Federal and New York income tax rate,
and the determination of the present value of payments to Employee shall be made
consistent with the principles of Section 280G of the Code.
2. Termination Without Cause Absent Change in Control: If Employee's
--------------------------------------------------
employment as Chief Executive Officer is terminated by the Company (other than
for Cause) or by Employee after a reduction in either responsibilities or pay or
change in location, absent a change in control of the Company, Employee will
receive all of the payments and other benefits listed in subsection 1 above,
except those listed in paragraph (g).
3
<PAGE>
3. Resignation by Employee: If during the Employment Period Employee
-----------------------
resigns in the absence of a reduction in either responsibilities or pay or
change in location, Employee will be entitled to receive the following:
(a) Full payment of any accrued, unpaid Base Salary, Annual Bonus or
benefit payments,
(b) A sum equal to eighteen (18) months of his highest to day annual
Base Salary,
(c) A sum equal to one and one-half (1 1/2) times his highest to date
Annual Bonus, and
(d) Eighteen (18) months of full benefits continuation, including
health, disability and life insurance, and full Company contributions to any
qualified and non-qualified retirement and pension plans or the then current
value of same in cash if the terms of such plans preclude such participation,
but only to the extent that similar benefits are not received by the Employee
from a new employer during such three year period,
4. Expiration of Employment Agreement: Upon the expiration of this
----------------------------------
Agreement (or successor agreement), Employee will be entitled to receive the
same payments and other benefits to which he would have been entitled upon
resignation as set out in subsection 3 above.
8. The text of Paragraph (c) of Section 4 of the Current Employment
Agreement is hereby deleted and the following new text is substituted therefor:
"(c) Termination For Cause: If Employee's employment as Chief Executive
---------------------
Officer is terminated for Cause, Employee will be entitled only to full payment
of any accrued, unpaid Base Salary,Annual Bonus and benefit payments and
retention of any fully vested stock options and other fully-vested benefits, if
any.
9. The text of first sentence of Section 5 of the Current Employment
Agreement, through the word "not" in the third line thereof, is hereby deleted
and the following new text is substituted therefor:
"During the Employment Period and, provided the Company is not in default
under this Agreement, for a period of three years following the expiration or
termination of this Employment Agreement (other than a termination without Cause
after a Change in Control), Employee shall not:"
4
<PAGE>
EXECUTED as of the date first above written.
The Company: The Employee:
ICON HOLDINGS CORP.
By:
----------------------------- -------------------------------
Title: Beaufort J. B. Clarke
--------------------------
5
<PAGE>
Exhibit A
---------
Summary of Proposed ICON Holdings Corp. Executive Bonus Plan ("Bonus Plan"):
- ---------------------------------------------------------------------------
Under the Bonus Plan, ICON Holdings Corp. (the "Company") shall annually
segregate a pool of funds consisting of a portion of the pre-tax income of the
Company to be distributed to Beaufort J. B. Clarke, Paul B. Weiss and certain
other executives. Messrs. Clarke and Weiss each shall be entitled to receive
between 25% and 33% at the end of each such year, with the remainder being
distributed to the remaining Executive Vice President and Senior Vice Presidents
of the Company, such distribution amounts being determined and recommended by
Mr. Clarke and approved by the Board of Directors. The amount of the
distribution will be calculated based on a reference rate (the "Reference Rate")
multiplied by pre-tax income. The Reference Rate will be equal to 9.5% for
calendar years 1998 and 1999 and 9.0% for the years 2000, 2001 and 2002 if the
Company achieves 85% or more of its projected financial results attached hereto
as amended by the Board from time to time. Otherwise, the Reference Rate shall
be adjusted downward as follows: (i) if the Company's final results are equal to
or greater than 76% and less than 85% of such projections, the Reference Rate
shall be 8.0% of pre-tax income for 1998 and 1999 and 7.65% of pre-tax income
for 2000, 2001 and 2002; (ii) if the Company's final results are equal to or
greater than 66% and less than 75% of such projections, the Reference Rate shall
be 7.125% of pre-tax income for 1998 and 1999 and 6.75% of pre-tax income for
2000, 2001 and 2002; (iii) if the Company's final results are equal to or
greater than 50% and less than 65% of such projections, the Reference Rate shall
be 6.0% of pre-tax income for 1998 and 1999 and 5.95% of pre-tax income for
2000, 2001 and 2002; and (iv) if the Company's final results are less than 50%
of such projections, the Reference Rate shall be 5.0% of pre-tax income for 1998
and 1999 and 4.75% of pre-tax income for 2000, 2001 and 2002.
6
<PAGE>
Exhibit 10.04
-------------
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between ICON Capital Corp., a corporation organized
and existing under the laws of the State of Connecticut (the "Company"), and
Beaufort Clarke (the "Employee"), dated as of August 20, 1996.
--------------------
Pursuant to a certain Stock Purchase Agreement between ICON Holding
Corp. and Peter D. Beekman, Cortes E. DeRussy and Charles Duggan dated as of
August 20, 1996 (the "Purchase Agreement"), the stock of the Company has been
sold to ICON Holdings Corp. and, in order to obtain Employee's services
following the closing of the Purchase Agreement, the Company and Employee have
each decided to enter into this Employment Agreement.
--------------------
1. Employment Period.
-----------------
(a) The terms and conditions of this Agreement shall be and
remain in effect during the continuation of the Employee's employment hereunder
(the 'Employment Period"). The Employment Period shall commence on the date
hereof ("Effective Date") and shall continue for an initial term of 36 months
("Initial Period") or such longer period if Employer's personal guaranty is
still in effect with respect to that certain Loan and Security Agreement between
Company and Prime Leasing, Inc. and thereafter until terminated pursuant to the
terms hereof.
(b) The Company may terminate the Employee's employment only for
Cause or Death or Disability upon six calendar months written notice to the
Employee, expiring on the last day of the Initial Period or at any time
thereafter.
2. Terms of Employment.
-------------------
(a) Position and Duties.
(i) Commencing on the Effective Date and for the remainder
of the Employment Period, the Employee shall be engaged as the
Chief Executive Officer and President of the Company with an
office located at 600 Mamaroneck Avenue, Harrison, New York
reporting to the Board of Directors of the Company and shall have
such duties, responsibilities and authority as shall be
consistent therewith and as the Board of Directors of the Company
shall from time to time reasonably determine; and
<PAGE>
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee shall
devote full business time to the business and affairs of the Company, except as
noted in Section 2(b)(xii) and use all reasonable efforts to perform faithfully
and efficiently such duties, responsibilities and authority.
(b) Compensation.
------------
(i) Base Salary. Effective as of the Effective Date, the Employee
-----------
shall receive a base salary ("Base Salary") at a rate of $200,000 per year. The
Board of Directors may, at its sole discretion, increase the Base Salary from
the beginning of each subsequent fiscal year of the Company, based upon its
review of the Company's and the Employee's performance;
(ii) Annual Bonus. In addition to Base Salary, the Employee shall
------------
receive, for each fiscal year ending during the Employment Period, an annual
bonus (the "Annual Bonus") as set forth in Exhibit A. Unless the Employee shall
elect to defer the receipt of any part of the Annual Bonus, each such payment
shall be paid promptly, but in no event more than thirty (30) days, after the
Company's receipt of the audited financial statements of the Company for the
fiscal year or, as the case may be, preparation of the Company's monthly
management accounts for the relevant period.
(iii) Incentive, Savings and Retirement Plans. During the Employment
---------------------------------------
Period, the Employee shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs, if any, applicable
generally to other employees of the Company;
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Employee and/or the Employee's family, as the case may be, shall be eligible for
participation in and shall receive all benefits currently entitled to under the
Company's welfare benefit plans, practices, policies and programs provided by
the Company (including, without limitation, medical, major medical, hospital,
prescription, dental, short-term and long-term disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs, if any);
(v) Expenses. During the Employment Period, the Employee shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Employee in the performance of his duties hereunder. and until such time as
Employee is provided an apartment in New York City by the Company, Employee
shall be reimbursed for all reasonable living expenses incurred in New York
City;
-2-
<PAGE>
(vi) Vacation. The Employee shall be entitled to at least
--------
four weeks annual paid vacation during the Employment Period. Unused
vacation shall be carried forward without limitation;
(vii) Payment Schedule. Base Salary shall be paid in
----------------
accordance with the regular payroll policies of the Company as
determined by the Board of Directors from time to time but in no event
less frequently than monthly; and
(viii) Automobile. The Employee will be entitled to an
----------
automobile which will be leased and paid for by the Company (including
insurance, any taxes, maintenance and normal operating costs,
including all fuel costs and a parking space in New York City) and
provided to the Employee during the Employment Period.
The Employee may chose the make and model of the automobile so long as
the monthly lease payment does not exceed $1000 per month on a three
year contract.
(ix) During the Employment period, the Company agrees to
make available at Employee's convenience a two-bedroom apartment in
New York City and the Company shall enter into a lease for such
apartment for one year at a time for an amount not to exceed $3,500 a
month plus utilities. The Company also agrees to pay for Employee's
relocation costs which shall include out-of-pocket moving expenses and
other costs not to exceed $5,000.00.
(x) During the Employment period, Employee shall be
reimbursed for costs and expenses for and related to Employer's
membership in a health club in New York, which costs and expenses
shall not exceed $300.00 a month.
(xi) Other Interests. The Company acknowledges that
---------------
Employee retains financial interests in his former company and whereas
Employee will not participate in its day to day business he will need
to spend up to 10% of his time on such activities.
3. Termination of Employment.
-------------------------
(a) Death or Disability. The Employee's employment shall terminate
-------------------
automatically upon the Employee's death during the Employment Period. If the
Company determines in good faith that the Disability (as defined below) of the
Employee has occurred during the Employment Period, it may give to the Employee
written notice in accordance with this Agreement of its intention to terminate
the Employee's employment. In such event, the Employee's employment with the
Company shall terminate effective on the 60th day after receipt of such notice
by the Employee (the "Disability Effective Date"), provided that, within the 60
days after such receipt, the Employee shall not have returned to full-time
performance of the
-3-
<PAGE>
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee's duties with the Company on a full-
time basis for 90 consecutive business days as a result of incapacity due to
mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers; provided, that the Employee
shall be entitled, during the aforesaid 60 day period, to challenge any
determination of Disability by such a physician, and in the event of such a
challenge, the final decision shall be made by a physician selected by the
Company's physician and the Employee's physician.
(b) Cause. The Company may terminate the Employee's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean dishonest conduct in connection with the performance of Employee's
duties hereunder, breach of fiduciary duty to the Company or its shareholders
involving personal profit, intentional failure to perform those duties stated in
Section 2(a)(i) under this Agreement, or fraud or conviction of a felony
resulting in or intended to result in injury to the Company;
(c) By Employee. Employee may terminate this Agreement at any time
-----------
during the Employment Period if the Company fails to pay the Employee any amount
due hereunder within five days after such payment is due or the Company fails to
perform any of its material obligations hereunder ("Employee Termination").
(d) Notice of Termination. Any termination by the Company for Cause
---------------------
or any Employee Termination shall be communicated by Notice of Termination to
the other party hereto given in accordance with this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Employee or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Cause or establishing the right to an Employee Termination shall not
waive any right of the Employee or the Company hereunder or preclude the
Employee or the Company from asserting such fact or circumstance in enforcing
the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Employee's employment is terminated by the Company for Cause or pursuant to an
Employee Termination, the date of receipt of the Notice of Termination or any
later date specified therein, as the case may be, (ii) if the Employee's
employment is terminated by reason of death or Disability, the date of death of
the Employee or the Disability Effective Date, as the case may be.
(f) Right to Cure. Notwithstanding any provision herein to the
-------------
contrary, the Company or Employee, as applicable, shall have a right to cure the
matters giving rise to an Employee Termination or for Cause termination,
respectively, for a period of 30 days commencing upon the receipt of the Notice
of Termination. If the Company or Employee
-4-
<PAGE>
successfully cures such matters within such thirty day period, the termination
of this Agreement or any provision hereof noticed in such Notice of Termination
shall be void and ineffective.
4. Obligations of the Company Upon Termination.
-------------------------------------------
(a) Other Than for Cause, Death or Disability. If, during the Initial
Period, there is an event of an Employee Termination, the Company shall pay to
the Employee in a lump sum in cash within 10 business days after his Date of
Termination, the aggregate of the sum of (A) an amount equal to the remainder of
the Base Salary and Annual Bonus and any other forms of compensation yet unpaid
under this Agreement up to the date of expiration of the Initial Period or six
months Base Salary, whichever is the greater, (B) any compensation previously
deferred by the Employee, (C) any accrued vacation pay, and (D) any Annual Bonus
determined in accordance with Exhibit A. If such termination occurs after the
date of expiration of the Initial Period, the amount stipulated in clause (A) of
this Section 4(a) shall be equal to six months Base Salary less Base Salary
actually paid during the notice period (if any) specified pursuant to Section
l(b).
(b) Death; Disability. If the Employee's employment is terminated by
-----------------
reason of the Employee's death or Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Employee or the
Employee's legal representatives, as the case may be, under this Agreement,
other than for payment of any deferred payments.
(c) Cause: Voluntary Termination. If the Employee's employment shall
----------------------------
be terminated for Cause during the Employment Period or in the event the
Employee voluntarily terminates employment during the Employment Period, this
Agreement shall terminate without further obligations to the Employee.
5. Non-Competition. During the Employment Period and, except in the
---------------
event of an Employee Termination for a period of six (6) months following the
Date of Termination, as long as the Company is not in default under this
Agreement, Employee shall not:
(a) directly or indirectly, either individually or as a principal,
partner, member, agent, employee, consultant, stockholder, joint venturer or
investor, or as a director or officer of any corporation, entity, proprietorship
or association, or in any other ownership, executive or management position,
engage or assist in activities, or have an active interest, of an ownership,
executive, management or consulting nature in a business in the business of
marketing and selling income fund products that would compete with the equipment
leasing investment funds products of the Company actually being marketed at the
time of termination;
(b) directly or indirectly, either individually or as a principal,
partner, member, agent, employee, consultant, stockholder, joint venturer or
investor, or as a director or officer of any corporation, entity, proprietorship
or association, or in any other ownership, executive or management position
whatsoever, (i) divert or attempt to divert from the Company any business with
any customer or prospective customer with which Employee has any business
contact or
-5-
<PAGE>
business association which was either under Employee's supervision or the
identity of which was learned by Employee while employed by the Company, (ii)
induce any salesmen, vendor, broker, dealer, representative, agent, or other
person transacting business with the Company to transact business for a business
in competition with the Company at the time of termination, or (iii) induce or
cause any employee of the Company to leave the employ of the Company other than
in the course of the loyal discharge of his duties.
Notwithstanding the above, this Section 5 shall not prohibit the Employee
from passively owning less than five percent (5%) of the shares of any
corporation or entity that is publicly traded on a securities exchange or over-
the-counter market.
6. Confidential Information.
------------------------
(a) From the date hereof and at all times thereafter, the Employee
shall not at any time or in any manner, directly or indirectly, knowingly
disclose to any party, other than the Company or at the request of the Company,
any trade secrets or Confidential Information (as defined below) of the Company
which employed by the Company and for six (6) months after termination of
employment. As used herein, Confidential Information shall mean information
known to or obtained by Employee prior to the Closing under the Purchase
Agreement or thereafter as an employee of the Company and not generally known in
the Company's industry and that relates in any way to the business of the
Company at any time during the Employment Period, including without limitation
any and all data bases, trade secrets, know-how, and other intellectual property
obtained or developed during the Employment Period.
(b) Employee acknowledges that during the course of his employment
with the Company he may develop or otherwise acquire papers, files or other
records involving or relating to trade secrets or Confidential Information. All
such papers, files and other records shall be the exclusive property of the
Company and shall, together with any and all copies thereof, be returned to the
Company upon the termination of Employee's employment with the Company.
7. Specific Performance. The Employee acknowledges that the covenants of
--------------------
the Employee in Section 5 and Section 6 are special and that the Company will be
irreparably harmed if the Employee's obligations thereunder are not specifically
enforced and that the Company would not have an adequate remedy at law in the
event of a violation or threatened violation thereof. Therefore, the Employee
agrees that the Company shall be entitled to such an injunction or a remedy of
specific performance for any actual or threatened violations or breach by the
Employee without necessity of the Company showing actual damages or that
monetary damages would not afford an adequate remedy. Employee shall have no
personal monetary liability arising out of or in connection with this Agreement,
except to the extent the Company suffers injury on account of the Employee's
willful and intentional actions resulting in or intended to result in injury to
the Company and only to the extent such willful and intentional actions result
in personal gain to the Employee.
8. Successors and Termination. This Agreement is personal to the
--------------------------
Employee and
-6-
<PAGE>
without the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Employee's
legal representatives. This Agreement may not be assigned by the Company
without the prior written consent of Employee.
9. Miscellaneous.
-------------
(a) The laws of the State of New York shall govern this Agreement and
any interpretations or constructions thereof. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors, assigns and legal
representatives, as the case may be.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, or by overnight
courier or by facsimile with confirmed transmission (with a hard copy mailed)
addressed as follows:
If to the Employee:
------------------
Beaufort Clarke
Highfield Farm
8614 North Wales Road
Warrenton, Virginia 22186
If to the Company:
-----------------
ICON Capital Corp.
600 Mamaroneck Avenue
Harrison, New York
Attention: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any
-7-
<PAGE>
right the Employee or the Company may have hereunder shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account for any
other counterpart.
(g) The terms defined in this Agreement have the meanings assigned to
them in this Agreement and include the plural as well as the singular, and the
words of any gender shall include each other gender where appropriate.
(h) Any disputes, controversies, or claims arising between the
parties hereto arising out of or relating to this Agreement, or any provision
thereof, or the breach, termination or invalidity hereof, or the rights and
obligations created hereunder by the parties hereto (collectively "Disputes"),
shall be finally determined and settled by arbitration in accordance with the
commercial rules of the American Arbitration Association ("AAA"), as such are in
force at the time a demand for arbitration is made, as described below.
(i) Any dispute, controversy or claim relating to this
Agreement, or any provision thereof, or any breach or default in the
performance of the terms and conditions hereof shall be settled by
arbitration in the City of White Plains in accordance with the then-
existing arbitration rules promulgated by the AAA. The decision of
the arbitrators shall be final and binding on the parties, and
judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof.
(ii) In any arbitration proceeding under this Section 9(h),
the rights of the parties shall be determined according to the
governing law set forth in Section 9(a) above, and the arbitrators
shall apply such law.
(iii) The prevailing party shall be entitled to recover from
the nonprevailing party all costs and fees, including reasonable
attorney's fees, incurred by such prevailing party in connection with
such Dispute.
-8-
<PAGE>
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand, and
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
----------------------------
Beaufort Clarke
ICON Capital Corp.
By:
-------------------------
-9-
<PAGE>
Exhibit A to Employment Agreement with Beaufort Clarke
------------------------------------------------------
Annual Bonus
- ------------
(1) The Annual Bonus of the Employee shall be computed by multiplying 3%
against the total net profit before tax (NPBT) of the Company and
before any distributions to ICON Holdings Corp., (IHC) the holding
company for the Company which would include any repayments of any
shareholder loans or the Loan and Security Agreement between the
Company and Peter D. Beekman; always provided that after payment of
such Annual Bonus the NPBT as represented by cash (i.e., excluding any
accrual or equity accounting income) is sufficient to meet (when
distributed to IHC) all acquisition loan repayments (including
interest).
(2) If the Employment Period ends other than at the end of the Company's
fiscal year, Annual Bonus shall be based on the Company's earnings
before income tax disclosed in management amounts for the period
ending of the last day of the calendar month prior to that in which
the Employment Period ends.
-10-
<PAGE>
AMENDMENT NO. 2 TO
EMPLOYEE AGREEMENT
THIS AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT ("Amendment"), entered into as
of October __, 1997 and effective as of December 1, 1997 (the "Amendment Date"),
between Beaufort J. B. Clarke ("Employee") and ICON Holdings Corp., Delaware
corporation (the "Company"), amends that certain Employment Agreement dated as
of August 20, 1996 between the Company and Employee, as amended by Amendment No.
1 to Employment Agreement dated as of April 1, 1997 between the Company and
Employee (the "Current Employment Agreement", and the Current Employment
Agreement as amended by this Amendment, hereinafter the "Agreement").
WHEREAS, the Company wishes to amend and extend the Current Employment
Agreement in order to provide an incentive to the Employee to continue to serve
as the Company's Chief Executive Officer through the extended term thereof, and
Employee shall agree to such amendment and extension upon the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Section 1 of the Current Employment Agreement is amended as follows: "The
Employment Period is hereby extended for a term expiring December 31, 2002,
unless terminated prior thereto in accordance with Section 3 of the Agreement or
further extended by mutual agreement of the Company and Employee."
2. Paragraph (b)(i) of Section 2 of the Current Employment Agreement is hereby
amended as follows:
"Effective as of the Amendment Date and for the period through December 31,
1998, the Employee shall receive a base salary ("Base Salary") at a rate of
$275,000 per year, subject to automatic annual increases commencing January 1,
1999 during the Employment Period of 7.5% per year, to be paid in accordance
with the Company's payroll policies Employee shall also be entitled to retain,
without reimbursement, all bonus payments previously paid to Employee as advance
draws against such bonus as of the Amendment Date
3. Paragraph (b)(ii) of Section 2 of the Current Employment Agreement,
including Exhibit A to the Current Employment Agreement as incorporated therein
by reference, is hereby deleted in its entirety and the following new provisions
are hereby substituted therefor:
"In addition to Base Salary, the Employee shall receive, with respect to
each fiscal year ending during the Employment Period commencing with the 1998
fiscal year, an annual incentive bonus ("Annual Bonus"), in accordance with the
Company's Executive Bonus Plan
<PAGE>
which has been adopted by the Board of Directors as of October __, 1997 and
attached hereto as Exhibit A, as the same may be amended or modified from time
to time (the "Executive Bonus Plan"). As determined by the Chairman of the Board
and approved by the Board of Directors, the Employee shall receive not less than
twenty-five percent (25%), nor more than thirty-three percent (33%), of the
funds pooled under the Executive Bonus Plan for each fiscal year. The Annual
Bonus shall be paid promptly, but in no event more than thirty (30) days, after
the Company's receipt of the audited financial statements of the Company for the
subject fiscal year. Commencing December 1, 1997, the Employee shall be entitled
to an advance draw against his Annual Bonus in an amount equal to 50% of the
anticipated amount of such Annual Bonus, to be payable in semi-monthly
installments."
4. Section 2 of the Current Employment Agreement is hereby amended by the
addition of the following new paragraph (b)(xiii):
"(xiii) Stock Options. On or before March 31, 1998, the Company shall
establish an incentive stock option plan to be known as the 1997 Stock Option
Plan and shall upon consummation of the Company's planned initial public
offering grant to the Employee options to acquire thereunder 1.75% of the shares
of the outstanding Common Stock at the IPO price. Such options are expected to
vest 33% each on the first three anniversaries of the grant date and to expire
on the tenth anniversary of the date of grant."
5. Section 2(b)(ix) of the Current Employment Agreement is hereby amended by
the addition of the following new sentence: "The Employee shall also be
entitled to reimbursement of or payment by the Company of Employee's actual
dues, costs and expenses of membership in a social club, plus initiation
expense."
6. The text of the second sentence of Paragraph (b) of Section 3 of the Current
Employment Agreement is hereby deleted and the following text is substituted
therefor:
"Cause" for the purposes of this Agreement shall mean (i) fraud or
embezzlement involving assets of the Company, its customers, suppliers or
affiliates; (ii) Employee's conviction of a criminal felony offense; (iii) the
willful material breach or habitual neglect of Employee's obligations under this
Agreement or Employee's duties as an employee of the Company; or (iv) Employee's
willful failure to follow lawful material directives of the Board of Directors.
The existence of Cause for termination of Employee's employment by the Company
shall be subject, upon the written election by Employee or the Company, to
binding arbitration as provided in Section 9 hereof. The cost of arbitration,
exclusive of the cost of each party's legal representation (which, except as
hereinafter otherwise provided, shall be borne by the party incurring the
expense), shall be borne by the instigating party; provided, however, that the
arbitrators' award may require either party to reimburse the other for the
reasonable cost of legal representation in the arbitration proceedings."
7. The text of Paragraph (a) of Section 4 of the Current Employment Agreement
is hereby deleted and the following new text is substituted therefor:
2
<PAGE>
"(a) Severance Payments Upon Resignation or Termination Other Than for
Cause, Death or Disability.
1. Termination Without Cause after Change in Control: If there occurs a
change of control of the Company at any time, and Employee's employment as Chief
Executive Officer is terminated (i) by the Company for any reason other than
Cause or (ii) by Employee after a reduction in either responsibilities or pay or
change in location, Employee will receive the following:
(a) Full immediate vesting of any issued, unvested stock options,
(b) Full payment of any accrued, unpaid Base Salary, Annual Bonus and
benefit payments,
(c) A sum equal to three years of his highest to date annual Base Salary,
(d) A sum equal to three times his highest to date Annual Bonus,
(e) Three years of full benefits continuation, including health, disability
and life insurance, and full Company contributions to any qualified and non-
qualified retirement and pension plans or the then current value of same in cash
if the terms of such plans preclude such participation, but only to the extent
that similar benefits are not received by the Employee from a new employer
during such three year period,
(f) If such termination occurs on or after January 1, 2000, a $500,000 cash
payment, and
(g) In the event that Employee's employment is terminated pursuant to this
item 1 and the excise tax imposed by Section 4999 of the Internal Revenue
Service Code (the "Code") (or any successor penalty or excise tax subsequently
imposed by law) applies to any payments under this item 1, an additional amount
shall be paid by the Company to Employee such that the aggregate after-tax
amount that Employee shall receive under this subsection 1, shall have a present
value equal to the aggregate after-tax amount that Employee would have received
and retained had such excise tax not applied to you. For this purpose, Employee
shall be assumed to be subject to tax in each year relevant to the computation
at the then maximum applicable combined Federal and New York income tax rate,
and the determination of the present value of payments to Employee shall be made
consistent with the principles of Section 280G of the Code.
2. Termination Without Cause Absent Change in Control: If Employee's
employment as Chief Executive Officer is terminated by the Company (other than
for Cause) or by Employee after a reduction in either responsibilities or pay or
change in location, absent a change in control of the Company, Employee will
receive all of the payments and other benefits listed in subsection 1 above,
except those listed in paragraph (g).
3
<PAGE>
3. Resignation by Employee: If during the Employment Period Employee
resigns in the absence of a reduction in either responsibilities or pay or
change in location, Employee will be entitled to receive the following:
(a) Full payment of any accrued, unpaid Base Salary, Annual Bonus or
benefit payments,
(b) A sum equal to eighteen (18) months of his highest to day annual Base
Salary,
(c) A sum equal to one and one-half (1 1/2) times his highest to date
Annual Bonus, and
(d) Eighteen (18) months of full benefits continuation, including health,
disability and life insurance, and full Company contributions to any qualified
and non-qualified retirement and pension plans or the then current value of same
in cash if the terms of such plans preclude such participation, but only to the
extent that similar benefits are not received by the Employee from a new
employer during such three year period,
4. Expiration of Employment Agreement: Upon the expiration of this
Agreement (or successor agreement), Employee will be entitled to receive the
same payments and other benefits to which he would have been entitled upon
resignation as set out in subsection 3 above.
8. The text of Paragraph (c) of Section 4 of the Current Employment Agreement
is hereby deleted and the following new text is substituted therefor:
"(c) Termination For Cause: If Employee's employment as Chief Executive
Officer is terminated for Cause, Employee will be entitled only to full payment
of any accrued, unpaid Base Salary, Annual Bonus and benefit payments and
retention of any fully vested stock options and other fully-vested benefits, if
any.
9. The text of first sentence of Section 5 of the Current Employment Agreement,
through the word "not" in the third line thereof, is hereby deleted and the
following new text is substituted therefor:
"During the Employment Period and, provided the Company is not in default
under this Agreement, for a period of three years following the expiration or
termination of this Employment Agreement (other than a termination without Cause
after a Change in Control), Employee shall not:"
4
<PAGE>
EXECUTED as of the date first above written.
The Company: The Employee:
ICON HOLDINGS CORP.
By:_____________________________ _______________________________
Title:__________________________ Beaufort J. B. Clarke
5
<PAGE>
EXHIBIT A
---------
Summary of Proposed ICON Holdings Corp. Executive Bonus Plan ("Bonus Plan"):
- ----------------------------------------------------------------------------
Under the Bonus Plan, ICON Holdings Corp. (the "Company") shall annually
segregate a pool of funds consisting of a portion of the pre-tax income of the
Company to be distributed to Beaufort J. B. Clarke, Paul B. Weiss and certain
other executives. Messrs. Clarke and Weiss each shall be entitled to receive
between 25% and 33% at the end of each such year, with the remainder being
distributed to the remaining Executive Vice President and Senior Vice Presidents
of the Company, such distribution amounts being determined and recommended by
Mr. Clarke and approved by the Board of Directors. The amount of the
distribution will be calculated based on a reference rate (the "Reference Rate")
multiplied by pre-tax income. The Reference Rate will be equal to 9.5% for
calendar years 1998 and 1999 and 9.0% for the years 2000, 2001 and 2002 if the
Company achieves 85% or more of its projected financial results attached hereto
as amended by the Board from time to time. Otherwise, the Reference Rate shall
be adjusted downward as follows: (i) if the Company's final results are equal to
or greater than 76% and less than 85% of such projections, the Reference Rate
shall be 8.0% of pre-tax income for 1998 and 1999 and 7.65% of pre-tax income
for 2000, 2001 and 2002; (ii) if the Company's final results are equal to or
greater than 66% and less than 75% of such projections, the Reference Rate shall
be 7.125% of pre-tax income for 1998 and 1999 and 6.75% of pre-tax income for
2000, 2001 and 2002; (iii) if the Company's final results are equal to or
greater than 50% and less than 65% of such projections, the Reference Rate shall
be 6.0% of pre-tax income for 1998 and 1999 and 5.95% of pre-tax income for
2000, 2001 and 2002; and (iv) if the Company's final results are less than 50%
of such projections, the Reference Rate shall be 5.0% of pre-tax income for 1998
and 1999 and 4.75% of pre-tax income for 2000, 2001 and 2002.
6
<PAGE>
Exhibit 10.05
-------------
ASSIGNMENT AND AMENDMENT NO. 1 TO
EMPLOYEE AGREEMENT
THIS ASSIGNMENT AND AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT ("Amendment"),
entered into as of October __, 1997 and effective as of December 1, 1997 (the
"Amendment Date"), between Paul B. Weiss ("Employee"), ICON Capital Corp., a
Connecticut corporation (the "Assignor"), and ICON Holdings Corp., a Delaware
corporation (the "Company"), assigns and amends that certain Employment
Agreement dated as of April 1, 1997 between the Assignor and Employee (the
"Current Employment Agreement", and the Current Employment Agreement as amended
by this Amendment, hereinafter the "Agreement").
WHEREAS, Assignor wishes to assign, and the Company wishes to assume, all
of the obligations of the Assignor as the "Company" under the Current Employment
Agreement, and the Employee consents to such assignment and assumption; and
WHEREAS, the Company wishes to amend and extend the Current Employment
Agreement in order to provide an incentive to the Employee to continue to serve
as the Company's Executive Vice President through the extended term thereof, and
Employee shall agree to such amendment and extension upon the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Assignor hereby assigns and transfers to the Company, and the Company
hereby assumes and agrees to be bound by all of the terms and conditions of, the
Current Employment Agreement and all of Assignor's rights, duties and
obligations thereunder. The Employee hereby consents to such assignment and
assumption.
2. Section 1 of the Current Employment Agreement is amended as follows: "The
Employment Period is hereby extended for a term expiring December 31, 2002,
unless terminated prior thereto in accordance with Section 3 of the Agreement or
further extended by mutual agreement of the Company and Employee. Employee
shall also be entitled to retain, without reimbursement, all bonus payments
previously paid to Employee as advance draws against such bonus as of the
Amendment Date."
3. Paragraph (b)(i) of Section 2 of the Current Employment Agreement is hereby
amended as follows:
"Effective as of the Amendment Date and for the period through December 31,
1998, the Employee shall receive a base salary ("Base Salary") at a rate of
$250,000 per year, subject to
<PAGE>
automatic annual increases commencing January 1, 1999 during the Employment
Period of 7.5% per year, to be paid in accordance with the Company's payroll
policies."
4. Paragraph (b)(ii) of Section 2 of the Current Employment Agreement,
including Exhibit A to the Current Employment Agreement as incorporated therein
by reference, is hereby deleted in its entirety and the following new provisions
are hereby substituted therefor:
"In addition to Base Salary, the Employee shall receive, with respect to
each fiscal year ending during the Employment Period commencing with the 1998
fiscal year, an annual incentive bonus ("Annual Bonus"), in accordance with the
Company's Executive Bonus Plan which has been adopted by the Board of Directors
as of October __, 1997 and attached hereto as Exhibit A, as the same may be
amended or modified from time to time (the "Executive Bonus Plan"). As
determined by the Chairman of the Board and approved by the Board of Directors,
the Employee shall receive not less than twenty-five percent (25%), nor more
than thirty-three percent (33%), of the funds pooled under the Executive Bonus
Plan for each fiscal year. The Annual Bonus shall be paid promptly, but in no
event more than thirty (30) days, after the Company's receipt of the audited
financial statements of the Company for the subject fiscal year. Commencing
December 1, 1997, the Employee shall be entitled to an advance draw against his
Annual Bonus in an amount equal to 50% of the anticipated amount of such Annual
Bonus, to be payable in semi-monthly installments."
5. Section 2 of the Current Employment Agreement is hereby amended by the
addition of the following new paragraph (b)(x):
"(x) Stock Options. On or before March 31, 1998, the Company shall
-------------
establish an incentive stock option plan to be known as the 1997 Stock Option
Plan and shall upon consummation of the Company's planned initial public
offering grant to the Employee options to acquire thereunder 1.75% of the shares
of the outstanding Common Stock at the IPO price. Such options are expected to
vest 33% each on the first three anniversaries of the grant date and to expire
on the tenth anniversary of the date of grant."
6. Section 2(b)(v) of the Current Employment Agreement is hereby amended by
the addition of the following new sentence: "The Employee shall also be entitled
to reimbursement of or payment by the Company of Employee's actual dues, costs
and expenses of membership in a social club, plus initiation expenses."
7. The text of the second sentence of Paragraph (b) of Section 3 of the
Current Employment Agreement is hereby deleted and the following text is
substituted therefor:
" "Cause" for the purposes of this Agreement shall mean (i) fraud or
embezzlement involving assets of the Company, its customers, suppliers or
affiliates; (ii) Employee's conviction of a criminal felony offense; (iii) the
willful material breach or habitual neglect of Employee's obligations under this
Agreement or Employee's duties as an employee of the Company; or (iv) Employee's
willful failure to follow lawful material directives of the Board of Directors.
The existence of Cause for termination of Employee's employment by the Company
shall be subject, upon the written election by Employee or the Company, to
binding arbitration as
<PAGE>
provided in Section 9 hereof. The cost of arbitration, exclusive of the cost of
each party's legal representation (which, except as hereinafter otherwise
provided, shall be borne by the party incurring the expense), shall be borne by
the instigating party; provided, however, that the arbitrators' award may
require either party to reimburse the other for the reasonable cost of legal
representation in the arbitration proceedings."
8. The text of Paragraph (a) of Section 4 of the Current Employment Agreement
is hereby deleted and the following new text is substituted therefor:
"(a) Severance Payments Upon Resignation or Termination Other Than for
-----------------------------------------------------------------
Cause, Death or Disability.
- --------------------------
1. Termination Without Cause after Change in Control: If there occurs a
-------------------------------------------------
change of control of the Company at any time, and Employee's employment as
Executive Vice President is terminated (i) by the Company for any reason other
than Cause or (ii) by Employee after a reduction in either responsibilities or
pay or change in location, Employee will receive the following:
(a) Full immediate vesting of any issued, unvested stock options,
(b) Full payment of any accrued, unpaid Base Salary, Annual Bonus and
benefit payments,
(c) A sum equal to three years of his highest to date annual Base Salary,
(d) A sum equal to three times his highest to date Annual Bonus,
(e) Three years of full benefits continuation, including health,
disability and life insurance, and full Company contributions to any qualified
and non-qualified retirement and pension plans or the then current value of same
in cash if the terms of such plans preclude such participation, but only to the
extent that similar benefits are not received by the Employee from a new
employer during such three year period,
(f) If such termination occurs on or after January 1, 2000, a $500,000
cash payment, and
(g) In the event that Employee's employment is terminated pursuant to
this item 1 and the excise tax imposed by Section 4999 of the Internal Revenue
Service Code (the "Code") (or any successor penalty or excise tax subsequently
imposed by law) applies to any payments under this item 1, an additional amount
shall be paid by the Company to Employee such that the aggregate after-tax
amount that Employee shall receive under this subsection 1, shall have a present
value equal to the aggregate after-tax amount that Employee would have received
and retained had such excise tax not applied to you. For this purpose, Employee
shall be assumed to be subject to tax in each year relevant to the computation
at the then maximum applicable combined Federal and New York income tax rate,
and the determination of the present value of payments to Employee shall be made
consistent with the principles of Section 280G of the Code.
<PAGE>
2. Termination Without Cause Absent Change in Control: If Employee's
--------------------------------------------------
employment as Executive Vice President is terminated by the Company (other than
for Cause) or by Employee after a reduction in either responsibilities or pay or
change in location, absent a change in control of the Company, Employee will
receive all of the payments and other benefits listed in subsection 1 above,
except those listed in paragraph (g).
3. Resignation by Employee: If during the Employment Period Employee
-----------------------
resigns in the absence of a reduction in either responsibilities or pay or
change in location, Employee will be entitled to receive the following:
(a) Full payment of any accrued, unpaid Base Salary, Annual Bonus or
benefit payments,
(b) A sum equal to eighteen (18) months of his highest to day annual Base
Salary,
(c) A sum equal to one and one-half (1 1/2) times his highest to date
Annual Bonus, and
(d) Eighteen (18) months of full benefits continuation, including health,
disability and life insurance, and full Company contributions to any qualified
and non-qualified retirement and pension plans or the then current value of same
in cash if the terms of such plans preclude such participation, but only to the
extent that similar benefits are not received by the Employee from a new
employer during such three year period,
4. Expiration of Employment Agreement: Upon the expiration of this
----------------------------------
Agreement (or successor agreement), Employee will be entitled to receive the
same payments and other benefits to which he would have been entitled upon
resignation as set out in subsection 3 above.
9. The text of Paragraph (c) of Section 4 of the Current Employment Agreement
is hereby deleted and the following new text is substituted therefor:
"(c) Termination For Cause: If Employee's employment as Executive Vice
---------------------
President is terminated for Cause, Employee will be entitled only to full
payment of any accrued, unpaid Base Salary, Annual Bonus and benefit payments
and retention of any fully vested stock options and other fully-vested benefits,
if any.
10. The text of first sentence of Section 5 of the Current Employment
Agreement, through the word "not" in the third line thereof, is hereby deleted
and the following new text is substituted therefor:
"During the Employment Period and, provided the Company is not in default
under this Agreement, for a period of three years following the expiration or
termination of this Employment Agreement (other than a termination without Cause
after a Change in Control), Employee shall not:"
<PAGE>
EXECUTED as of the date first above written.
The Company: The Employee:
ICON HOLDINGS CORP.
By:
------------------------------ ----------------------------
Title: Paul B. Weiss
---------------------------
Assignor:
ICON CAPITAL CORP.
By:
------------------------------
Title:
---------------------------
<PAGE>
Exhibit A
---------
Summary of Proposed ICON Holdings Corp. Executive Bonus Plan ("Bonus Plan"):
- ---------------------------------------------------------------------------
Under the Bonus Plan, ICON Holdings Corp. (the "Company") shall annually
segregate a pool of funds consisting of a portion of the pre-tax income of the
Company to be distributed to Beaufort J. B. Clarke, Paul B. Weiss and certain
other executives. Messrs. Clarke and Weiss each shall be entitled to receive
between 25% and 33% at the end of each such year, with the remainder being
distributed to the remaining Executive Vice President and Senior Vice Presidents
of the Company, such distribution amounts being determined and recommended by
Mr. Clarke and approved by the Board of Directors. The amount of the
distribution will be calculated based on a reference rate (the "Reference Rate")
multiplied by pre-tax income. The Reference Rate will be equal to 9.5% for
calendar years 1998 and 1999 and 9.0% for the years 2000, 2001 and 2002 if the
Company achieves 85% or more of its projected financial results attached hereto
as amended by the Board from time to time. Otherwise, the Reference Rate shall
be adjusted downward as follows: (i) if the Company's final results are equal to
or greater than 76% and less than 85% of such projections, the Reference Rate
shall be 8.0% of pre-tax income for 1998 and 1999 and 7.65% of pre-tax income
for 2000, 2001 and 2002; (ii) if the Company's final results are equal to or
greater than 66% and less than 75% of such projections, the Reference Rate shall
be 7.125% of pre-tax income for 1998 and 1999 and 6.75% of pre-tax income for
2000, 2001 and 2002; (iii) if the Company's final results are equal to or
greater than 50% and less than 65% of such projections, the Reference Rate shall
be 6.0% of pre-tax income for 1998 and 1999 and 5.95% of pre-tax income for
2000, 2001 and 2002; and (iv) if the Company's final results are less than 50%
of such projections, the Reference Rate shall be 5.0% of pre-tax income for 1998
and 1999 and 4.75% of pre-tax income for 2000, 2001 and 2002.
<PAGE>
ASSIGNMENT AND AMENDMENT NO. 1 TO
EMPLOYEE AGREEMENT
THIS ASSIGNMENT AND AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT ("Amendment"),
entered into as of October __, 1997 and effective as of December 1, 1997 (the
"Amendment Date"), between Paul B. Weiss ("Employee"), ICON Capital Corp., a
Connecticut corporation (the "Assignor"), and ICON Holdings Corp., a Delaware
corporation (the "Company"), assigns and amends that certain Employment
Agreement dated as of April 1, 1997 between the Assignor and Employee (the
"Current Employment Agreement", and the Current Employment Agreement as amended
by this Amendment, hereinafter the "Agreement").
WHEREAS, Assignor wishes to assign, and the Company wishes to assume, all
of the obligations of the Assignor as the "Company" under the Current Employment
Agreement, and the Employee consents to such assignment and assumption; and
WHEREAS, the Company wishes to amend and extend the Current Employment
Agreement in order to provide an incentive to the Employee to continue to serve
as the Company's Executive Vice President through the extended term thereof, and
Employee shall agree to such amendment and extension upon the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Assignor hereby assigns and transfers to the Company, and the Company
hereby assumes and agrees to be bound by all of the terms and conditions of, the
Current Employment Agreement and all of Assignor's rights, duties and
obligations thereunder. The Employee hereby consents to such assignment and
assumption.
2. Section 1 of the Current Employment Agreement is amended as follows: "The
Employment Period is hereby extended for a term expiring December 31, 2002,
unless terminated prior thereto in accordance with Section 3 of the Agreement or
further extended by mutual agreement of the Company and Employee. Employee
shall also be entitled to retain, without reimbursement, all bonus payments
previously paid to Employee as advance draws against such bonus as of the
Amendment Date."
3. Paragraph (b)(i) of Section 2 of the Current Employment Agreement is hereby
amended as follows:
"Effective as of the Amendment Date and for the period through December 31,
1998, the Employee shall receive a base salary ("Base Salary") at a rate of
$250,000 per year, subject to
<PAGE>
automatic annual increases commencing January 1, 1999 during the Employment
Period of 7.5% per year, to be paid in accordance with the Company's payroll
policies."
4. Paragraph (b)(ii) of Section 2 of the Current Employment Agreement,
including Exhibit A to the Current Employment Agreement as incorporated therein
by reference, is hereby deleted in its entirety and the following new provisions
are hereby substituted therefor:
"In addition to Base Salary, the Employee shall receive, with respect to
each fiscal year ending during the Employment Period commencing with the 1998
fiscal year, an annual incentive bonus ("Annual Bonus"), in accordance with the
Company's Executive Bonus Plan which has been adopted by the Board of Directors
as of October __, 1997 and attached hereto as Exhibit A, as the same may be
amended or modified from time to time (the "Executive Bonus Plan"). As
determined by the Chairman of the Board and approved by the Board of Directors,
the Employee shall receive not less than twenty-five percent (25%), nor more
than thirty-three percent (33%), of the funds pooled under the Executive Bonus
Plan for each fiscal year. The Annual Bonus shall be paid promptly, but in no
event more than thirty (30) days, after the Company's receipt of the audited
financial statements of the Company for the subject fiscal year. Commencing
December 1, 1997, the Employee shall be entitled to an advance draw against his
Annual Bonus in an amount equal to 50% of the anticipated amount of such Annual
Bonus, to be payable in semi-monthly installments."
5. Section 2 of the Current Employment Agreement is hereby amended by the
addition of the following new paragraph (b)(x):
"(x) Stock Options. On or before March 31, 1998, the Company shall
establish an incentive stock option plan to be known as the 1997 Stock Option
Plan and shall upon consummation of the Company's planned initial public
offering grant to the Employee options to acquire thereunder 1.75% of the shares
of the outstanding Common Stock at the IPO price. Such options are expected to
vest 33% each on the first three anniversaries of the grant date and to expire
on the tenth anniversary of the date of grant."
6. Section 2(b)(v) of the Current Employment Agreement is hereby amended by
the addition of the following new sentence: "The Employee shall also be entitled
to reimbursement of or payment by the Company of Employee's actual dues, costs
and expenses of membership in a social club, plus initiation expenses."
7. The text of the second sentence of Paragraph (b) of Section 3 of the
Current Employment Agreement is hereby deleted and the following text is
substituted therefor:
""Cause" for the purposes of this Agreement shall mean (i) fraud or
embezzlement involving assets of the Company, its customers, suppliers or
affiliates; (ii) Employee's conviction of a criminal felony offense; (iii) the
willful material breach or habitual neglect of Employee's obligations under this
Agreement or Employee's duties as an employee of the Company; or (iv) Employee's
willful failure to follow lawful material directives of the Board of Directors.
The existence of Cause for termination of Employee's employment by the Company
shall be subject, upon the written election by Employee or the Company, to
binding arbitration as
<PAGE>
provided in Section 9 hereof. The cost of arbitration, exclusive of the cost of
each party's legal representation (which, except as hereinafter otherwise
provided, shall be borne by the party incurring the expense), shall be borne by
the instigating party; provided, however, that the arbitrators' award may
require either party to reimburse the other for the reasonable cost of legal
representation in the arbitration proceedings."
8. The text of Paragraph (a) of Section 4 of the Current Employment Agreement
is hereby deleted and the following new text is substituted therefor:
"(a) Severance Payments Upon Resignation or Termination Other Than for
Cause, Death or Disability.
1. Termination Without Cause after Change in Control: If there occurs a
change of control of the Company at any time, and Employee's employment as
Executive Vice President is terminated (i) by the Company for any reason other
than Cause or (ii) by Employee after a reduction in either responsibilities or
pay or change in location, Employee will receive the following:
(a) Full immediate vesting of any issued, unvested stock options,
(b) Full payment of any accrued, unpaid Base Salary, Annual Bonus and
benefit payments,
(c) A sum equal to three years of his highest to date annual Base Salary,
(d) A sum equal to three times his highest to date Annual Bonus,
(e) Three years of full benefits continuation, including health,
disability and life insurance, and full Company contributions to any qualified
and non-qualified retirement and pension plans or the then current value of same
in cash if the terms of such plans preclude such participation, but only to the
extent that similar benefits are not received by the Employee from a new
employer during such three year period,
(f) If such termination occurs on or after January 1, 2000, a $500,000
cash payment, and
(g) In the event that Employee's employment is terminated pursuant to
this item 1 and the excise tax imposed by Section 4999 of the Internal Revenue
Service Code (the "Code") (or any successor penalty or excise tax subsequently
imposed by law) applies to any payments under this item 1, an additional amount
shall be paid by the Company to Employee such that the aggregate after-tax
amount that Employee shall receive under this subsection 1, shall have a present
value equal to the aggregate after-tax amount that Employee would have received
and retained had such excise tax not applied to you. For this purpose, Employee
shall be assumed to be subject to tax in each year relevant to the computation
at the then maximum applicable combined Federal and New York income tax rate,
and the determination of the present value of payments to Employee shall be made
consistent with the principles of Section 280G of the Code.
<PAGE>
2. Termination Without Cause Absent Change in Control: If Employee's
employment as Executive Vice President is terminated by the Company (other than
for Cause) or by Employee after a reduction in either responsibilities or pay or
change in location, absent a change in control of the Company, Employee will
receive all of the payments and other benefits listed in subsection 1 above,
except those listed in paragraph (g).
3. Resignation by Employee: If during the Employment Period Employee
resigns in the absence of a reduction in either responsibilities or pay or
change in location, Employee will be entitled to receive the following:
(a) Full payment of any accrued, unpaid Base Salary, Annual Bonus or
benefit payments,
(b) A sum equal to eighteen (18) months of his highest to day annual Base
Salary,
(c) A sum equal to one and one-half (1 1/2) times his highest to date
Annual Bonus, and
(d) Eighteen (18) months of full benefits continuation, including health,
disability and life insurance, and full Company contributions to any qualified
and non-qualified retirement and pension plans or the then current value of same
in cash if the terms of such plans preclude such participation, but only to the
extent that similar benefits are not received by the Employee from a new
employer during such three year period,
4. Expiration of Employment Agreement: Upon the expiration of this
Agreement (or successor agreement), Employee will be entitled to receive the
same payments and other benefits to which he would have been entitled upon
resignation as set out in subsection 3 above.
9. The text of Paragraph (c) of Section 4 of the Current Employment Agreement
is hereby deleted and the following new text is substituted therefor:
"(c) Termination For Cause: If Employee's employment as Executive Vice
President is terminated for Cause, Employee will be entitled only to full
payment of any accrued, unpaid Base Salary, Annual Bonus and benefit payments
and retention of any fully vested stock options and other fully-vested benefits,
if any.
10. The text of first sentence of Section 5 of the Current Employment
Agreement, through the word "not" in the third line thereof, is hereby deleted
and the following new text is substituted therefor:
"During the Employment Period and, provided the Company is not in default
under this Agreement, for a period of three years following the expiration or
termination of this Employment Agreement (other than a termination without Cause
after a Change in Control), Employee shall not:"
<PAGE>
EXECUTED as of the date first above written.
The Company: The Employee:
ICON HOLDINGS CORP.
By:_____________________________ _______________________________
Title:__________________________ Paul B. Weiss
Assignor:
ICON CAPITAL CORP.
By:_____________________________
Title:__________________________
<PAGE>
Exhibit A
---------
Summary of Proposed ICON Holdings Corp. Executive Bonus Plan ("Bonus Plan"):
- ----------------------------------------------------------------------------
Under the Bonus Plan, ICON Holdings Corp. (the "Company") shall annually
segregate a pool of funds consisting of a portion of the pre-tax income of the
Company to be distributed to Beaufort J. B. Clarke, Paul B. Weiss and certain
other executives. Messrs. Clarke and Weiss each shall be entitled to receive
between 25% and 33% at the end of each such year, with the remainder being
distributed to the remaining Executive Vice President and Senior Vice Presidents
of the Company, such distribution amounts being determined and recommended by
Mr. Clarke and approved by the Board of Directors. The amount of the
distribution will be calculated based on a reference rate (the "Reference Rate")
multiplied by pre-tax income. The Reference Rate will be equal to 9.5% for
calendar years 1998 and 1999 and 9.0% for the years 2000, 2001 and 2002 if the
Company achieves 85% or more of its projected financial results attached hereto
as amended by the Board from time to time. Otherwise, the Reference Rate shall
be adjusted downward as follows: (i) if the Company's final results are equal to
or greater than 76% and less than 85% of such projections, the Reference Rate
shall be 8.0% of pre-tax income for 1998 and 1999 and 7.65% of pre-tax income
for 2000, 2001 and 2002; (ii) if the Company's final results are equal to or
greater than 66% and less than 75% of such projections, the Reference Rate shall
be 7.125% of pre-tax income for 1998 and 1999 and 6.75% of pre-tax income for
2000, 2001 and 2002; (iii) if the Company's final results are equal to or
greater than 50% and less than 65% of such projections, the Reference Rate shall
be 6.0% of pre-tax income for 1998 and 1999 and 5.95% of pre-tax income for
2000, 2001 and 2002; and (iv) if the Company's final results are less than 50%
of such projections, the Reference Rate shall be 5.0% of pre-tax income for 1998
and 1999 and 4.75% of pre-tax income for 2000, 2001 and 2002.
<PAGE>
EXHIBIT 10.06
-------------
EMPLOYMENT AGREEMENT
AGREEMENT by and between ICON Capital Corp., a corporation organized
and existing under the laws of the State of Connecticut (the "Company"), and
Thomas Martin (the "Employee"), dated as of August 20, 1996.
--------------------
Pursuant to a certain Stock Purchase Agreement between ICON Holding
Corp. and Peter D. Beekman, Cortes E. DeRussy and Charles Duggan dated as of
August 20, 1996 (the "Purchase Agreement"), the stock of the Company has been
sold to ICON Holdings Corp. and, in order to obtain Employee's services
following the closing of the Purchase Agreement, the Company and Employee have
each decided to enter into this Employment Agreement.
--------------------
1. Employment Period.
------------------
(a) The terms and conditions of this Agreement shall be and
remain in effect during the continuation of the Employee's employment hereunder
(the "Employment Period"). The Employment Period shall commence on the date
hereof ("Effective Date") and shall continue for an initial term of 24 months
("Initial Period") and thereafter until terminated pursuant to the terms hereof.
(b) Nothing in this Agreement shall be deemed to prohibit the
Company at any time from terminating the Employee's employment during the
Employment Period with notice for any reason; provided, however, that the
relative rights and obligations of the Company and the Employee in the event of
any such termination shall be determined under this Agreement.
2. Terms of Employment.
--------------------
(a) Position and Duties.
-------------------
(i) Commencing on the Effective Date and for the
remainder of the Employment Period, the Employee shall be engaged as
an Executive Vice President of the Company with an office located
initially at 600 Mamaroneck Avenue, Harrison, New York before opening
an office in the greater Boston area. Employee will report to the
Chief Executive Officer of the Company and shall have such duties,
responsibilities and authority as shall be consistent therewith and as
the Chief Executive Officer of the Company shall from time to time
reasonably determine; and
<PAGE>
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Employee is entitled,
the Employee shall devote full business time to the business and
affairs of the Company, except as noted in Section 2(b)(x) and use all
reasonable efforts to perform faithfully and efficiently such duties,
responsibilities and authority.
(b) Compensation.
------------
(i) Base Salary. Effective as of the Effective Date,
-----------
the Employee shall receive a base salary ("Base Salary") at a rate of
$100,000 per year. The Board of Directors may, at its sole discretion,
increase the Base Salary from the beginning of each subsequent fiscal
year of the Company, based upon its review of the Company's and the
Employee's performance;
(ii) Annual Bonus. In addition to Base Salary, the
------------
Employee shall receive, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") as set forth
in Exhibit A. Unless the Employee shall elect to defer the receipt of
any part of the Annual Bonus, each such payment shall be paid
promptly, but in no event more than thirty (30) days, after the
Company's receipt of the audited financial statements of the Company
for the fiscal year or, as the case may be, preparation of the
Company's monthly management accounts for the relevant period. The
Employee may elect to receive a draw against the Annual Bonus up to
$40,000.00 to be paid out monthly in twelve equal installments.
(iii) Incentive, Savings and Retirement Plans. During the
---------------------------------------
Employment Period, the Employee shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs, if any, applicable generally to other employees of the
Company;
(iv) Welfare Benefit Plans. During the Employment Period,
---------------------
the Employee and/or the Employee's family, as the case may be, shall
be eligible for participation in and shall receive all benefits
currently entitled to under the Company's welfare benefit plans,
practices, policies and programs provided by the Company (including,
without limitation, medical, major medical, hospital, prescription,
dental, short-term and long-term disability, salary continuance, em
ployee life, group life, accidental death and travel accident
insurance plans and programs, if any);
(v) Expenses. During the Employment Period, the Employee
--------
shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Employee in the performance of his duties
hereunder;
(vi) Vacation. The Employee shall be entitled to at least
--------
four
-2-
<PAGE>
weeks annual paid vacation during the Employment Period. Unused
vacation shall be carried forward without limitation;
(vii) Payment Schedule. Base Salary shall be paid in
----------------
accordance with the regular payroll policies of the Company as
determined by the Board of Directors from time to time but in no event
less frequently than monthly; and
(viii) Automobile. The Employee will be entitled to an
----------
automobile which will be leased and paid for by the Company (including
insurance, maintenance and normal operating costs, including all fuel
costs) and provided to the Employee during the Employment Period. The
Employee may chose the make and model of the automobile so long as the
monthly lease payment does not exceed $750 per month on a three year
contract.
(ix) Industry Participation. The Employee shall be
----------------------
encouraged to actively participate in ELA and IAFP including
reasonable attendance at annual meetings and other important events at
the Company's expense.
3. Termination of Employment.
-------------------------
(a) Death or Disability. The Employee's employment shall
-------------------
terminate automatically upon the Employee's death during the Employment Period.
If the Company determines in good faith that the Disability (as defined below)
of the Employee has occurred during the Employment Period, it may give to the
Employee written notice in accordance with this Agreement of its intention to
terminate the Employee's employment. In such event, the Employee's employment
with the Company shall terminate effective on the 60th day after receipt of such
notice by the Employee (the "Disability Effective Date"), provided that, within
the 60 days after such receipt, the Employee shall not have returned to full-
time performance of the Employee's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Employee from the Employee's duties
with the Company on a full-time basis for 90 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers;
provided, that the Employee shall be entitled, during the aforesaid 60 day
period, to challenge any determination of Disability by such a physician, and in
the event of such a challenge, the final decision shall be made by a physician
selected by the Company's physician and the Employee's physician.
(b) Cause. The Company may terminate the Employee's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean dishonest conduct in connection with the performance of Employee's
duties hereunder, breach of fiduciary duty to the Company or its shareholders
involving personal profit, intentional failure to perform those duties stated in
Section 2(a)(i) under this Agreement, or fraud or conviction of a felony
resulting in or intended to result in injury to the Company;
(c) By Employee. Employee may terminate this Agreement at any time
-----------
during the
-3-
<PAGE>
Employment Period if the Company fails to pay the Employee any amount due
hereunder within five days after such payment is due or the Company fails to
perform any of its material obligations hereunder ("Employee Termination").
(d) Notice of Termination. Any termination by the Company for Cause or any
---------------------
Employee Termination shall be communicated by Notice of Termination to the other
party hereto given in accordance with this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty days after the giving
of such notice). The failure by the Employee or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Cause or establishing the right to an Employee Termination shall not waive any
right of the Employee or the Company hereunder or preclude the Employee or the
Company from asserting such fact or circumstance in enforcing the Employee's or
the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Employee's employment is terminated by the Company for Cause or pursuant to an
Employee Termination, the date of receipt of the Notice of Termination or any
later date specified therein, as the case may be, (ii) if the Employee's
employment is terminated by the Company other than for Cause or Disability, the
date on which the Company notifies the Employee of such termination and (iii) if
the Employee's employment is terminated by reason of death or Disability, the
date of death of the Employee or the Disability Effective Date, as the case may
be.
(f) Right to Cure. Notwithstanding any provision herein to the contrary,
-------------
the Company or Employee, as applicable, shall have a right to cure the matters
giving rise to an Employee Termination 'or for Cause termination, respectively,
for a period of 30 days commencing upon the receipt of the Notice of
Termination. If Company or Employee successfully cures such matters within such
thirty day period, the termination of this Agreement or any provision hereof
noticed in such Notice of Termination shall be void and ineffective.
4. Obligations of the Company Upon Termination.
-------------------------------------------
(a) Other Than for Cause, Death or Disability. If the Company shall
-----------------------------------------
terminate the Employee's employment other than for Cause, Death or Disability,
or in the event of an Employee Termination, the Company shall pay to the
Employee in a lump sum in cash within 10 Business Days after his Date of
Termination, the aggregate of the sum of (A) an amount equal to the remainder of
the Base Salary and Annual Bonus and any other forms of compensation yet unpaid
under this Agreement up to the date of expiration of the Initial Period or six
months Base Salary, whichever is the greater, (B) any compensation previously
deferred by the Employee, (C) any accrued vacation pay, and (D) any Annual
Bonus determined in accordance with Exhibit A.
-4-
<PAGE>
(b) Death; Disability. If the Employee's employment is terminated
-----------------
by reason of the Employee's death or Disability during the Employment Period,
this Agreement shall terminate without further obligations to the Employee or
the Employee's legal representatives, as the case may be, under this Agreement,
other than for payment of any deferred payments.
(c) Cause; Voluntary Termination. If the Employee's employment
----------------------------
shall be terminated for Cause during the Employment Period or in the event the
Employee voluntarily terminates employment during the Employment Period, this
Agreement shall terminate without further obligations to the Employee.
5. Non-Competition. During the Employment Period and, except in the
---------------
event of an Employee Termination for a period of six (6) months following the
Date of Termination, as long as the Company is not in default under this
Agreement, Employee shall not:
(a) directly or indirectly, either individually or as a principal,
partner, member, agent, employee, consultant, stockholder, joint venturer or
investor, or as a director or officer of any corporation, entity, proprietorship
or association, or in any other ownership, executive or management position,
engage or assist in activities, or have an active interest, of an ownership,
executive, management or consulting nature in a business in the business of
marketing and selling income fund products that would compete with the equipment
leasing investment funds products of the Company actually being marketed at the
time of termination;
(b) directly or indirectly, either individually or as a principal,
partner, member, agent, employee, consultant, stockholder, joint venturer or
investor, or as a director or officer of any corporation, entity, proprietorship
or association, or in any other ownership, executive or management position
whatsoever, (i) divert or attempt to divert from the Company any business with
any customer or prospective customer with which Employee has any business
contact or business association which was either under Employee's supervision or
the identity of which was learned by Employee while employed by the Company,
(ii) induce any salesmen, vendor, broker, dealer, representative, agent, or
other person transacting business with the Company to transact business for a
business in competition with the Company at the time of termination, or (iii)
induce or cause any employee of the Company to leave the employ of the Company
other than in the course of the loyal discharge of his duties.
Notwithstanding the above, this Section 5 shall not prohibit the Employee
from passively owning less than five percent (5%) of the shares of any
corporation or entity that is publicly traded on a securities exchange or over-
the-counter market.
6. Confidential Information.
------------------------
(a) From the date hereof and at all times thereafter, the Employee
shall not at any time or in any manner, directly or indirectly, knowingly
disclose to any party, other than the Company or at the request of the Company,
any trade secrets or Confidential Information (as defined below) of the Company
while employed by the Company and for six (6) months after
-5-
<PAGE>
termination of employment. As used herein, Confidential Information shall mean
information known to or obtained by Employee prior to the Closing under the
Purchase Agreement or thereafter as an employee of the Company and not generally
known in the Company's industry and that relates in any way to the business of
the Company at any time during the Employment Period, including without
limitation any and all data bases, trade secrets, know-how, and other
intellectual property obtained or developed during the Employment Period.
(b) Employee acknowledges that during the course of his employment
with the Company he may develop or otherwise acquire papers, files or other
records involving or relating to trade secrets or Confidential Information. All
such papers, files and other records shall be the exclusive property of the
Company and shall, together with any and all copies thereof, be returned to the
Company upon the termination of Employee's employment with the Company.
7. Specific Performance. The Employee acknowledges that the covenants of
--------------------
the Employee in Section 5 and Section 6 are special and that the Company will be
irreparably harmed if the Employee's obligations thereunder are not specifically
enforced and that the Company would not have an adequate remedy at law in the
event of a violation or threatened violation thereof. Therefore, the Employee
agrees that the Company shall be entitled to seek an injunction or a remedy of
specific performance for any actual or threatened violations or breach by the
Employee without necessity of the Company showing actual damages or that
monetary damages would not afford an adequate remedy.. Employee shall have no
personal monetary liability arising out of or in connection with this Agreement,
except to the extent the Company suffers injury on account of the Employee's
willful and intentional actions resulting in or intended to result in injury to
the Company and only to the extent such willful and intentional actions result
in personal gain to the Employee.
8. Successors and Termination. This Agreement is personal to the
--------------------------
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal representatives. This Agreement may not be assigned by
the Company without the prior written consent of Employee.
9. Miscellaneous.
-------------
(a) The laws of the State of New York shall govern this Agreement
and any interpretations or constructions thereof. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors, assigns and legal
representatives, as the case may be.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, or by overnight
courier or by facsimile with confirmed transmission (with a hard copy mailed)
addressed as follows:
-6-
<PAGE>
(i) Any dispute, controversy or claim relating to this
Agreement, or any provision thereof, or any breach or default in
the.performance of the terms and conditions hereof shall be settled by
arbitration in the City of White Plains in accordance with the then-
existing arbitration rules promulgated by the AA4. The decision of the
arbitrators shall be final and binding on the parties, and judgment
upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
(ii) In any arbitration proceeding under this Section
9(h), the rights of the parties shall be determined according to the
governing law set forth in Section 9(a) above, and the arbitrators
shall apply such law.
(iii) The prevailing party shall be entitled to recover
from the non-prevailing party all costs and fees, including reasonable
attorney's fees, incurred by such prevailing party in connection with
such Dispute.
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand, and
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
--------------------------
Thomas Martin
ICON Capital Corp.
By:
----------------------
If to the Employee:
------------------
Thomas W. Martin
57 Washington Drive
Alton, Massachusetts 01720
If to the Company:
-----------------
ICON Capital Corp.
600 Mamaroneck Avenue
Harrison, New York
Attention: President
-7-
<PAGE>
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Employee or the Company may have hereunder
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account for any
other counterpart.
(g) The terms defined in this Agreement have the meanings assigned
to them in this Agreement and include the plural as well as the singular, and
the words of any gender shall include each other gender where appropriate.
(h) Any disputes, controversies, or claims arising between the
parties hereto arising out of or relating to this Agreement, or any provision
thereof, or the breach, termination or invalidity hereof, or the rights and
obligations created hereunder by the parties hereto (collectively "Disputes"),
shall be formally determined and settled by . arbitration in accordance with the
commercial rules of the American Arbitration Association ("AAA"), as such are in
force at the time a demand for arbitration is made, as described below.
-8-
<PAGE>
Exhibit A to Employment Agreement with Thomas Martin
----------------------------------------------------
Profit Sharing Plan
- -------------------
1. Period to March 31, 1997: The Annual Bonus for the Employee shall be
computed by multiplying 0.25% against the total amount of equity raised by the
Company under the Series 7 Fund, or any other partnership offering or substitute
thereof by the Company during the period commencing on May 1, 1996 and ending on
March 31, 1997 or, if earlier, the date on which the Employment Period ends.
Notwithstanding the above, should Employee assume the role of National
Sales Manager then the bonus multiple will increase from 0.25% to 0.50% upon
appointment.
2. Fiscal years commencing on and after April 1, 1997:
(a) Unless Employee has assumed the role of National Sales Manager
the following shall apply:
(b) The Annual Bonus for each fiscal year of the Company commencing
on or after April 1, 1997 shall be computed in accordance with the non-qualified
profit sharing plan in effect for the time being for certain executive employees
of the Company (the "Plan"). The Plan shall be based upon the Company's earnings
before income tax for the relevant fiscal year. The following principles shall
be applied in formulating the Plan:
(i) the Employee shall be consulted and shall participate
in the formulation of the Plan including the process of setting the
Company's budget and targeted earnings before income taxes;
(ii) for the purposes of the Plan, payments to the
Company's stockholders or affiliates in excess of the amounts budgeted
for the relevant fiscal year shall be discounted;
(c) If the Employment Period ends other than at the end of the
Company's fiscal year, Annual Bonus shall be based on the Company's earnings
before income tax disclosed in management amounts for the period ending of the
last day of the calendar month prior to that in which the Employment Period
ends.
-9-
<PAGE>
EXHIBIT 10.07
-------------
EMPLOYMENT AGREEMENT
AGREEMENT by and between ICON Capital Corp., a corporation organized and
existing under the laws of the State of Connecticut (the "Company"), and Gary
Silverhardt (the "Employee"), dated as of August 20, 1996
-----------------------
Pursuant to the Stock Purchase Agreement between ICON Holding Corp. and
Peter D. Beekman, dated as of the date hereof (the "Purchase Agreement"), the
stock of the Company has been sold to ICON Holdings Corp. and, in order to
obtain Employee's services following the closing of the Purchase Agreement, the
Company and Employee have each decided to enter into this Employment Agreement
-----------------------
1. Employment Period.
-----------------
(a) The terms and conditions of this Agreement shall be and remain in
effect during the continuation of the Employee's employment hereunder (the
"Employment Period"). The Employment Period shall commence on the date hereof
("Effective Date") and shall continue for an initial term of 24 months ("Initial
Period") and thereafter until terminated pursuant to the terms hereof.
(b) Nothing in this Agreement shall be deemed to prohibit the Company at
any time from terminating the Employee's employment during the Employment Period
with or without notice for any reason; provided, however, that the relative
rights and obligations of the Company, and the Employee in the event of any such
termination shall be determined under this Agreement.
2. Terms of Employment.
-------------------
(a) Position and Duties:
-------------------
(i) commencing on the Effective Date and for the remainder of the
Employment Period, the Employee shall be engaged as a Chief Financial
officer and Vice President of the Company with an office located at 600
Mamaroneck Avenue, Harrison, New York reporting to the Chief Executive
Officer of the Company and shall have such duties, responsibilities and
authority as shall be consistent therewith and as the Chief Executive
Officer of the company shall from time to time determine; and
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee
shall devote full business time to the business and affairs of the
<PAGE>
Company, except as noted in Section 2(b)(xi) and use all reasonable
efforts to perform faithfully and efficiently such duties,
responsibilities and authority.
(b) Compensation.
------------
(i) Base Salary. Effective as of the Effective Date, the Employee
-----------
shall receive a base salary ("Base Salary") at a rate of $170,000 per
year. The Board of Directors may, at its sole discretion, increase
the Base Salary form the beginning of each subsequent fiscal year of
the Company, based upon its review of the Company's and the Employee's
performance;
(ii) Annual Bonus. In addition to Base Salary, the Employee shall
------------
receive for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") as set forth in Exhibit A. Unless
the Employee shall elect to defer the receipt of any part of the
Annual Bonus, each such payment shall be paid promptly, but in no
event more than thirty (30) days, after the Company's receipt of the
audited financial statements of the Company for the fiscal year or, as
the case may be, preparation of the Company's monthly management
accounts for the relevant period;
(iii) Incentive, Savings and Retirement Plans. During the Employment
---------------------------------------
Period, the Employee shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and
programs, if any, applicable generally to other employees of the
Company;
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in and shall receive all benefits currently
entitled to under the Company's welfare benefit plans, practices,
policies and programs provided by the Company (including, without
limitation, medical, major medical, hospital, prescription, dental,
short-term and long-term disability, salary continuance, employee
life, group life, accidental death and travel accident insurance plans
and programs, if any);
(v) Expenses. During the Employment Period, the Employee shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Employee in the performance of his duties hereunder;
(vi) Vacation. The Employee shall be entitled to at least four weeks
--------
annual paid vacation during the
<PAGE>
Employment Period. Unused vacation shall be carried forward without
limitation;
(vii) Payment Schedule. Base Salary shall be paid in accordance with
----------------
the regular payroll policies of the Company as determined by the Board
of Directors from time to time but in no event less frequently than
monthly; and
(viii) Automobile. The Employee will be entitled to an automobile
----------
which will be leased and paid for by the Company (including insurance,
maintenance and normal operating costs, including all fuel costs) and
provided to the Employee during the Employment Period. The Employee
may choose the make and model of the automobile so long as the monthly
lease payment does not exceed $600 per month on a three year contract.
(ix) Relocation Costs. If the Company moves from its current
----------------
principal business address, 600 Mamaroneck Avenue, harrison, New York,
and both the Company and the Employee agree, acting in good faith,
that it is in their mutual best interests for the Employee to
relocate, the Company shall reimburse Employee for all reasonable
expenses associated with said relocation, including all costs
associated with the sale of the Employee's old residence and purchase
of a new residence. If the Employee chooses not to relocate such
action shall not be construed as Cause to terminate the Employee's
---
employment.
(x) Industry Participation. The Employee shall be encouraged to
----------------------
actively participate in IPA, EAEL, ELA, including reasonable
attendance at annual meetings and other important events at the
Company's expense.
3. Termination of Employment.
-------------------------
(a) Death or Disability. The Employee's employment shall terminate
-------------------
automatically upon the Employee's death during the Employment Period. If the
company determines in good faith that the Disability (as defined below) of the
Employee has occurred during the Employment Period, it may give to the Employee
written notice in accordance with this Agreement of its intention to terminate
the Employee's employment. In such event, the Employee's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Employee (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Employee shall not have returned to full-time
performance of the Employee's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Employee from the Employee's duties
with the Company on a full-time basis for 90 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and
<PAGE>
permanent by a physician selected by the Company or its insurers; provided, that
the Employee shall be entitled, during the aforesaid 30 day period, to challenge
any determination of Disability by such a physician, and in the event of such a
challenge, the final decision shall be made by a physician selected by the
Company's physician and the Employee's physician.
(b) Cause. The company may terminate the Employee's employment during the
-----
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean
dishonest conduct in connection with the performance of Employee's duties
hereunder, breach of fiduciary duty to the Company or its shareholders involving
personal profit, intentional failure to perform those duties stated in Section
2(a)(i) under this Agreement, or fraud or conviction of a felony resulting in or
intended to result in injury to the Company;
(c) By Employee. Employee may terminate this Agreement at any time during
-----------
the Employment Period if the Company fails to pay the Employee any amount due
hereunder within five days after such payment is due or the Company fails to
perform any of its material obligations hereunder ("Employee Termination").
(d) Notice of Termination. Any termination by the Company for Cause or
---------------------
any Employee Termination shall be communicated by Notice of Termination to the
other party hereto given in accordance with this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
he termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Employee or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Cause or establishing the right to an Employee Termination shall not
waive any right of the Employee or the company hereunder or preclude the
Employee or the Company form asserting such fact or circumstance in enforcing
the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Employee's
-------------------
employment is terminated by the Company for Cause or pursuant to an Employee
Termination, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Employee's employment is
terminated by the Company other than for Cause or Disability, the date on which
the Company notifies the Employee of such termination and (iii) if the
Employee's employment is terminated by reason of death or Disability, the date
of death of the Employee or the Disability Effective Date, as the case may be.
<PAGE>
(f) Right to Cure. Notwithstanding any provision herein to the contrary,
-------------
the Company or Employee, as applicable, shall have a right to cure the matters
giving rise to an Employee Termination or for Cause Termination, respectively,
for a period of 30 days commencing upon the receipt of the Notice of
Termination. If Employee successfully cures such matters within such thirty day
period, the termination of this Agreement or any provision hereof noticed in
such Notice of Termination shall be void and ineffective.
4. Obligations of the Company Upon Termination.
-------------------------------------------
(a) Other Than for Cause, Death or Disability. If the company shall
-----------------------------------------
terminate the Employee's employment other than for Cause, death or Disability,
or in the event of an Employee Termination, the Company shall pay to the
Employee in a lump sum in cash within 10 days after his Date of Termination, the
aggregate of the sum of (A) an amount equal to the remainder of the Base Salary
yet unpaid under this Agreement up to the date of expiration of the Initial
Period or six months Base Salary, whichever is the greater, (b) any compensation
previously deferred by the Employee, (C) any accrued vacation pay, and (D) any
Annual Bonus determined in accordance with Exhibit A.
(b) Death; Disability. If the Employee's employment is terminated by
-----------------
reason of the Employee's death or Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Employee or the
Employee's legal representatives, as the case may be, under this Agreement,
other than for payment of any deferred payments.
(c) Cause, Voluntary Termination. If the Employee's employment shall be
----------------------------
terminated for Cause during the Employment Period or in the event the Employee
voluntarily terminates employment during the Employment Period, this Agreement
shall terminate without further obligations to the Employee.
5. Covenant Not to Compete. For a period of six months from and after
-----------------------
the date of this Agreement, the Employee will not: (i) render services to, or
for, whether as an employee, director, officer or consultant, any of the
following, their respective Affiliates or their respective successors or
assigns: ATEL Financial Corp., Capital Associates, Inc., Commonwealth Income &
Growth Fund, Inc., Cronos Capital Corp., Mobile Storage Investors, Inc., Phoenix
Leasing Associates, PLM Financial Services, Inc., Textainer Capital Corp.,
Triumphe Leasing/Gerald Horwitz, (ii) induce or cause any employee of the
company to leave the employ of the Company, or (iii) directly or indirectly
promote the sale of competing securities through any of the broker/dealers
currently selling ICON Cash Flow Partners LP Seven. From and after the Closing
Date Employee shall not knowingly directly or indirectly take part in or
influence or seek to influence the course or outcome of any negotiations or
discussions between any of the Partnerships (or any person
<PAGE>
representing the interest of any of the Partnerships) and any person who, as of
the Closing Date, is the lessee or user of any equipment owned by any of the
Partnerships or in which any of the Partnerships has an interest. If the final
judgement of a court of competent jurisdiction declares that any term or
provision of this section 5(e) is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgement may be appealed.
Notwithstanding the above, this Section 5 shall not prohibit the Employee from
passively owning less than five percent (5%) of the shares of any corporation or
entity that is publicly traded on a securities exchange or over-the-counter
market.
6. Confidential Information.
------------------------
(a) From the date hereof and for a period of 5 years thereafter, the
Employee shall not at any time or in any manner, directly or indirectly,
knowingly disclose to any party, other than the Company or at the request of the
Company, any trade secrets or Confidential Information (as defined below) of the
Company. AS used herein, Confidential Information shall mean information known
to or obtained by Employees prior to the Closing under the Purchase Agreement or
thereafter as an employee of the Company and not generally known in the
Company's industry and that relates in any way to the business of the Company at
any time during the Employment Period, including without limitation any and all
data bases, trade secrets, know-how, and other intellectual property obtained or
developed during the Employment Period.
(b) Employee acknowledges that during the course of his employment with the
Company he may develop or otherwise acquire papers, files or other records
involving or relating to trade secrets or Confidential Information. All such
papers, files and other records shall be the exclusive property of the company
and shall, together with any and all copies thereof, be returned to the Company
upon the termination of Employee's employment with the Company.
7. Specific Performance. The Employee acknowledges that the covenants of
--------------------
the Employee in Section 5 and Section 6 are special and that the Company will be
irreparably harmed if the Employee's obligations thereunder are not specifically
enforced and that the Company would not have an adequate remedy at law in the
event of a violation or threatened violation thereof. Therefore, the Employee
agrees that the Company shall be entitled to an injunction or a remedy of
specific performance for any actual or threatened violations or breach by the
Employee without
<PAGE>
necessity of the Company showing actual damages or that monetary damages would
not afford an adequate remedy. Employee shall have no personal monetary
liability arising out of or in connection with this Agreement, except to the
extent the Company suffers injury on account of the Employee's willful and
intentional actions resulting in or intended to result in injury to the Company
and only to the extent such willful and intentional actions result in personal
gain to the Employee.
8. Successors and Termination. This Agreement is personal to the
--------------------------
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal representatives. This Agreement may not be assigned by
the Company without the prior written consent of Employee.
9. Miscellaneous.
-------------
(a) The laws of the State of New York shall govern this Agreement and any
interpretations or constructions thereof. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors, assigns and legal
representatives, as the case may be.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, or by overnight courier or by
facsimile (with a hard copy mailed) addressed as follows:
If to the Employee
------------------
Gary Silverhardt
17 Sunnyside Place
Irvington, New York 10533
If to the Company
-----------------
ICON Capital Corp.
600 Mamaroneck Avenue
Harrison, New York
Attention: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
<PAGE>
(c) The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Employee or the Company may have hereunder
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account for any
other counterpart.
(g) The terms defined in this Agreement have the meanings assigned to them
in this Agreement and include the plural as well as the singular, and the words
of any gender shall include each other gender where appropriate.
(h) Any disputes, controversies, or claims arising between the parties
hereto arising out of or relating to this Agreement, or any provision thereof,
or the breach, termination or invalidity hereof, or the rights and obligations
created hereunder by the parties hereto (collectively "Disputes"), shall be
finally determined and settled by arbitration in accordance with the commercial
rules of the American Arbitration Association ("AAA"), as such are in force at
the time a demand for arbitration is made, as described below.
<PAGE>
Rider A to Employment Agreement with Gary Silverhardt
-----------------------------------------------------
Profit Sharing Plan
- -------------------
1. Period to March 31, 1997: The Annual Bonus for the Employee shall be
------------------------
computed by multiplying 0.20% against the total amount of equity raised by the
company under the Series 7 Fund, or any other partnership offering or substitute
thereof by the Company during the period commencing on April 1, 1996 and ending
on March 31, 1997 or, if earlier, the date on which the Employment Period ends.
2. Fiscal years commencing on and after April 1, 1997:
--------------------------------------------------
(a) The Annual Bonus for each fiscal year of the company commencing on or
after April 1, 1997 shall be computed in accordance with the non-
qualified profit sharing plan in effect for the time being for certain
executive employees of the Company (the "Plan"). The Plan shall be
based upon the company's earnings before income tax for the relevant
fiscal year. The following principles shall be applied in formulating
the Plan:
(i) the Employee shall be consulted and shall participate in the
formulation of the Plan including the process of setting the
company's budget and targeted earnings before income taxes;
(ii) the Employee's participation in the Plan shall be formulated so
that, assuming the Company achieves its targeted earning before
income tax, the Annual Bonus shall be not less than $70,000;
(iii) for the purposes of the Plan, payments to the Company's
stockholders or affiliates in excess of the amounts budgeted for
the relevant fiscal year shall be discounted;
(b) For the fiscal year commencing April 1, 1997 (but not for any
subsequent fiscal year) the Employee may elect, up to 14 days following
completion of formulation of the Plan or in the absence of a completed
plan to receive Annual Bonus of 85% of the amount actually paid
pursuant to paragraph 1 above instead of Annual Bonus under the Plan.
(c) If the Employment Period ends other than at the end of the Company's
fiscal year, Annual Bonus shall be based on the Company's earnings
before income tax disclosed in management accounts for the period
ending on the last day of the calendar month prior to that in which the
Employment Period ends.
<PAGE>
Exhibit 10.08
-------------
CONFIRMATION LETTER - DISCRETIONARY LINE OF CREDIT
________ __, 1997
Mr. Gary N. Silverhardt, CFO
ICON Capital Corp.
600 Mamaroneck Avenue
Harrison, NY 10528
Re: $600,000.00 Discretionary Line of Credit
----------------------------------------
Dear Mr. Silverhardt:
I am pleased to confirm that PNC Bank, New England (the "Bank") has
approved a $600,000.00 unsecured discretionary line of credit (the "Facility")
for ICON Capital Corp. (the "Borrower"). The terms and conditions set forth
below are intended to (i) assure that the parties understand each other's
expectations with respect to the Facility and, (ii) assist the Bank in
evaluating the status of the facility on an ongoing basis.
1. Type of Facility and Use of Proceeds. The Facility, a discretionary
------------------------------------
line of credit, is for general corporate expenses of the Borrower. All advances
will bear interest and be subject to the terms and conditions as set forth
herein and in the enclosed note (the "Note"), which will be due and payable on
demand. The Facility is not a committed line of credit. Therefore, advances
under the Facility, if any, will be made at the sole discretion of the Bank.
2. Interest Rate. Interest on the unpaid balance of the Facility will be
-------------
charged at a rate per annum which is at all times ONE PERCENT (1.0%) over the
rate of interest publicly announced by the Bank from time to time as its prime
rate (the "Prime Rate").
3. Expiration. The Bank will review the Facility from time to time and
----------
in any event prior to its expiration on August 31, 1998 (the "Expiration Date")
to determine whether it should be continued or renewed.
4. Repayment. The Borrower acknowledges and agrees that prior to the
---------
Expiration Date (and annually thereafter if the Expiration Date is extended),
the Facility must be repaid in full so that there is no outstanding principal
balance for a period of at least thirty (30) consecutive days.
<PAGE>
Mr. Gary N. Silverhardt, CFO
____________ __, 1997
Page 2
5. Note. The obligation of the Borrower to repay the Facility shall be
----
evidenced by a promissory note (the "Note") in form and content satisfactory to
the Bank.
6. Guarantees. All obligations under the Note will be guaranteed by the
----------
personal guarantee and suretyship agreements of Beaufort J.B. Clarke, Paul B.
Weiss, and Thomas W. Martin under which the Guarantors will unconditionally,
jointly and severally guarantee the due and punctual payment of all indebtedness
owed to the Bank by the Borrower. The guarantee of Beaufort J.B. Clarke will be
secured by second mortgage liens on adjacent commercial properties located at 5
Hamilton Street and 200 Washington Street in Middleburg, VA 22117. The Bank
will engage a commercial appraiser to appraise the properties and Beaufort J.
Clarke will reimburse the Bank for the appraisal and related filing costs. Tom
Martin will secure his guarantee with a second mortgage on property located at
15 Meetinghouse Lane, Siasconset, Nantucket, MA 02564.
7. Conditions Precedent. As a condition to the Bank's making
--------------------
discretionary advances to the Borrower, the Borrower must cause the following to
be executed and delivered to the Bank, in form and content satisfactory to the
Bank:
(a) the Note and this confirmation letter
(b) certified resolutions, incumbency certificates or other evidence
of authority to consummate the Facility
(c) certificates of good standing and legal existence issued by
Connecticut, New York, Massachusetts and California
(d) such other instruments and documents as the Bank may reasonably
request
8. Discretionary Advances. The Bank's willingness to consider making
----------------------
advances under the Facility is subject to the Borrower's and Guarantor's ongoing
agreement.
(a) to comply with the financial and other covenants included in
Exhibit "A" hereto;
(b) to notify the Bank as soon as practicable following the
occurrence of any default (or event which, with the passage of
time or giving of notice
<PAGE>
Mr. Gary N. Silverhardt, CFO
____________ __, 1997
Page 3
or both, would become a default) under any direct or contingent
obligation of the Borrower, and;
(c) upon the Bank's request, to furnish copies of any covenant
compliance certificates in connection with any such obligations.
9. Covenants. Unless compliance is waived in writing by the Bank or
---------
until payment in full of the Facility and the Facility is cancelled, the
Borrower and the Guarantors will comply with the financial and other covenants
included in Exhibit "A" hereto.
10. Representations and Warranties. To induce the Bank to extend the
------------------------------
Facility, the Borrower represents and warrants as follows:
(a) The Borrower's latest financial statements provided to the Bank
are true, complete and accurate in all material respects and
fairly present the financial condition, assets and liabilities,
whether accrued, absolute, contingent or otherwise and the
results of the Borrower's operations for the period specified
therein. The Borrower's financial statements have been prepared
in accordance with generally accepted accounting principles
consistently applied from period to period subject in the case of
interim statements to normal year-end adjustments. Since the
date of the latest financial statements provided to the Bank, the
Borrower has not suffered any damage, destruction or loss which
has materially adversely affected its business, assets,
operations, financial condition or results of operations.
(b) There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrower,
threatened against the Borrower which could result in a material
adverse change in its business, assets, operations, financial
condition or results of operations and thee is no basis known to
the Borrower or its officers, directors of shareholders for any
such action, suit, proceedings or investigation.
(c) The Borrower has filed all returns and reports that are required
to be filed by it in connection with any federal, state or local
tax, duty or charge levied, assessed or imposed upon the Borrower
or its property, including unemployment, social security and
similar taxes and all such
<PAGE>
Mr. Gary N. Silverhardt, CFO
____________ __, 1997
Page 4
taxes have been either paid or adequate reserve or other
provision has been made therefor.
(d) if not a natural person, the Borrower is duly organized, validly
existing and in good standing under the laws of the state of its
incorporation or organization and has the power and authority to
own and operate its assets and to conduct its business as now or
proposed to be carried on, and is duly qualified, licensed and in
good standing to do business in all jurisdictions where its
ownership of property or the nature of its business requires such
qualification or licensing.
(e) The Borrower has full power and authority to enter into the
transactions provided for in this Letter Agreement and has been
duly authorized to do so by all necessary and appropriate action
and when executed and delivered by the Borrower, this Letter
Agreement and the other loan documents executed and delivered
pursuant hereto will constitute the legal, valid and binding
obligations of the Borrower enforceable in accordance with their
terms.
(f) There does not exist any default or violation by the Borrower of
or under any of the terms, conditions or obligations of: (i) its
organizational documents; (ii) any indenture, mortgage, deed of
trust, franchise, permit, contract, agreement, or other
instrument to which it is a party or by which it is bound; or
(iii) any law, regulation, ruling, order, injunction, decree,
condition or other requirement applicable to or imposed upon the
Borrower by any law or by any governmental authority, court or
agency.
11. Depository. The Borrower will establish and maintain at the Bank the
----------
Borrower's primary depository accounts.
12. Fees.
----
(a) The Borrower will reimburse the Bank for the Bank's out-of-pocket
expenses incurred or to be incurred in conducting UCC, title and
other public record searches, and in filing and recording
documents in the public records to perfect the Bank's liens and
security interests. The Borrower shall also reimburse the Bank
for the Bank's expenses
<PAGE>
Mr. Gary N. Silverhardt, CFO
____________ __, 1997
Page 5
(including the reasonable fees and expenses of the Bank's outside
and in-house counsel) in documenting and closing this transaction
and in connection with any amendments, modifications, renewals or
enforcement actions relating to the Facility.
(b) To compensate the Bank for ongoing administrative issues
regarding this relationship as well as the Bank's periodic review
of and analysis of the corporate financial condition and the
personal financial condition of the guarantor(s), you shall pay
to the Bank quarterly in arrears upon submission of the Bank's
invoice a non-refundable administration fee of $350.00 per
quarter.
Please indicate the Borrower's agreement to the terms and conditions of
this letter by having the enclosed copy of this letter executed where indicated
and returning it to the undersigned. I am pleased to offer support for your
banking needs and look forward to our continued relationship.
Sincerely,
PNC BANK, NEW ENGLAND
Timothy P. Van Dam
Vice President
<PAGE>
Mr. Gary N. Silverhardt, CFO
____________ __,1 997
Page 6
AGREED AND ACCEPTED
THIS __ DAY OF __________, 1997
ICON CAPITAL CORP.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Date:
--------------------------
<PAGE>
EXHIBIT A
FINANCIAL REPORTING COVENANTS:
(1) The Borrower will deliver to the Bank:
(a) Annual audited financial Statements for its fiscal year, within
90 days after fiscal year end, and such other financial
information as the Bank may reasonably request from time to time
promptly after receipt of each request:
(b) Copy of corporate federal tax return within two weeks filing.
(c) Financial Statements for each quarter within 45 days after the
quarter end together with year-to-date and comparative figures
for the corresponding periods of the prior year, certified as
true and correct by its chief financial officer.
(d) With each delivery of Financial Statements quarterly, the
Borrower's chief financial officer shall also deliver a
certificate as to the Borrower's compliance with the financial
covenants for the period then ended and whether any Event of
Default (as defined in the Note) exists, and, if so, the nature
thereof and the corrective measures the Borrower proposes to
take.
(2) The Guarantors will deliver to the Bank:
(a) Annual Personal Financial Statements for the calendar year,
within 60 days after the calendar year end.
(b) Complete, signed annual personal federal tax returns (including
K1s if applicable and all other schedules) within 15 days of
filing.
"Financial Statements" means the balance sheet and statements of income and
cash flows prepared in accordance with generally accepted accounting principles
in effect from time to time ("GAAP") applied on a consistent basis (subject in
the case of interim statements to normal year-end adjustments).
FINANCIAL COVENANTS:
(1) Withdrawals from the Borrower by the Guarantors will not exceed 100%
of the Borrower's net income. CFO to confirm quarterly with receipt
of quarterly financial statements.
<PAGE>
(2) Minimum cash flow coverage of debt service of 1.25:1 Cash flow defined
as net income + non-cash expenses divided by CMLTD plus any interest
accrued. Tested quarterly beginning with the quarter ending September
30, 1997.
(3) Borrower to maintain leverage less than or equal to 2:1 leverage
defined as total funded debt to TNW. Tested quarterly.
NEGATIVE COVENANTS:
(1) The Borrower will not create, assume, incur or suffer to exist any
mortgage, pledge, encumbrance, security interest, lien or charge of
any kind upon any of its property, now owned or hereafter acquired, or
acquire or agree to acquire any kind of property under conditional
sales or other title retention agreements, except liens disclosed on
the Borrower's latest Financial Statements provided to the Bank prior
to the date of this letter and additional liens to secure indebtedness
not exceeding $200,000.00 in the aggregate; provided, however, that
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the foregoing restrictions shall not permit the Borrower from:
(i) incurring liens for taxes, assessments or governmental
charges or levies which shall not at the time be due and
payable or can thereafter be paid without penalty or are
being contested in good faith by appropriate proceedings
diligently conducted and with respect to which it has
created adequate reserves;
(ii) making pledges or deposits to secure obligations under
workers' compensation laws or similar legislation; or
(iii) granting liens or security interests in favor of the Bank.
(2) The Borrower will not create, incur, guarantee, endorse (except
endorsements in the course of collection), assume or suffer to exist
any indebtedness, except (i) indebtedness to the Bank, (ii) open
account trade debt incurred in the ordinary course of business and not
past due, or (iii) other indebtedness disclosed to the Bank in writing
prior to the date of this letter.
(3) The Borrower will not liquidate, merge or consolidate with any person,
firm, corporation or other entity, or sell, lease, transfer or
otherwise dispose of all or any substantial part of its property or
assets, whether now owned or hereafter acquired without the prior
written consent of the Bank, such content not to be unreasonable.
(4) The Borrower will not make acquisitions of all or substantially all of
the property or assets of any person, firm, corporation or other
entity.
i
<PAGE>
(5) In the event the Bank shall have terminated, or declined renewal of
the Facility, and so long as any balance remains outstanding under the
note, the Borrower will not declare or pay any dividends on or make
any distribution with respect to any class of its equity, or purchase,
redeem, retire or otherwise acquire any of its equity in excess of the
amount of federal and state income tax of the principals of the
Borrower attributable to the earnings of the Borrower where the
Borrower is an S corporation or a partnership.
(6) The Borrower will not make or have outstanding any loans or advances
to or otherwise extend credit to any person, firm or corporation,
except in the ordinary course of business.
(7) The Borrower will not make or permit any change in the nature of its
business as carried on as of the date of this letter or permit the
Guarantors to cease to control the Borrower's day-to-day operations or
to own less than 75% of the equity ownership.
(8) The Borrower will not make capital expenditures in excess of
$200,000.00 in any one fiscal year of the Borrower without prior
written notification to the Bank.
(9) The departure, retirement or any other defection of any one Guarantors
from the Borrower will constitute an event of default.
ii
<PAGE>
Exhibit 10.09
-------------
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ICON CASH FLOW PARTNERS L.P. SEVEN
This Third Amended and Restated Agreement of Limited Partnership, dated
as of the September 12, 1995 (this "Agreement"), is made and entered into by and
among ICON Capital Corp., a Connecticut corporation ("ICON"), as general partner
(hereinafter referred to as the "General Partner"), Charles Duggan, as the
original limited partner (the "Original Limited Partner"), and such additional
Limited Partners as may be admitted to the Partnership upon the Initial Closing
Date or any subsequent Closing Date pursuant to the terms hereof; such
additional Limited Partners hereinafter each referred to as a "Limited Partner"
and collectively referred to as the "Limited Partners"; and the General Partner
and the Limited Partners hereinafter occasionally referred to collectively as
the "Partners").
WITNESSETH:
WHEREAS, on May 23, 1995, the General Partner filed a Certificate of
Limited Partnership, dated as of May 23, 1995, establishing ICON Cash Flow
Partners L.P. Seven (the "Partnership") under and pursuant to the Delaware
Revised Uniform Limited Partnership Act (the "Delaware Act").
WHEREAS, on September 12, 1995, the General Partner and Original
Limited Partner have determined that it is necessary and appropriate to amend
and restate the original Agreement of Limited Partnership in certain respects;
and
WHEREAS, on November 2, 1995, the General Partner and Original Limited
Partner have determined that it is necessary and appropriate to amend and
restate the original Agreement of Limited Partnership in certain respects; and
WHEREAS, on November 8, 1995, the General Partner and Original Limited
Partner have determined that it is necessary and appropriate to amend and
restate the original Agreement of Limited Partnership in certain respects; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the receipt and sufficiency of which are
hereby acknowledged, the General Partner and each Limited Partner, intending to
be legally bound, hereby agree as follows:
Section 1. ESTABLISHMENT OF PARTNERSHIP.
The parties hereto hereby enter into this Agreement and do hereby set
forth the terms of the Partnership established under and pursuant to the
provisions of the Delaware Act, which terms shall govern the rights and
liabilities of the Partners, except as otherwise herein expressly stated.
Section 2. NAME, PRINCIPAL OFFICE, NAME AND ADDRESS OF
REGISTERED AGENT FOR SERVICE OF PROCESS.
2.1 Legal Name and Address.
The Partnership shall be conducted under the name "ICON Cash Flow
Partners L.P. Seven". The principal office and place of business of the
Partnership shall be 600 Mamaroneck Avenue, Harrison, New York 10528 or at such
other address as the General Partner may from time to time determine and specify
by written notice to the Limited Partners. The Partnership may also maintain
such other offices and places of business as the General Partner may deem
advisable at any other place or places within the United States and, in
connection therewith, the General Partner shall qualify and remain qualified,
and shall use its best efforts to qualify and keep the Partnership qualified, to
do business under the laws of all such jurisdictions as may be necessary to
permit the Partnership legally to conduct its business in such jurisdictions.
The registered office of the Partnership in the State of Delaware shall be at
1209 Orange Street, Wilmington, Delaware, 19801. The name of its registered
agent at such address shall be The Corporation Trust Company. The General
Partner may change the registered office and the registered agent of the
Partnership, with prior written notice to the Limited Partners.
A-1
<PAGE>
2.2 Address of Partners.
The principal place of business of the General Partner and the places
of residence of the Limited Partners shall be those addresses set forth opposite
their respective names in Schedule A to this Agreement (as such may be
supplemented or amended from time to time). Any Partner may change his, her or
its respective place of business or residence, as the case may be, by giving
Notice of such change to the Partnership (and, in the case of the General
Partner, by also giving Notice thereof to all of the Limited Partners), which
Notice shall become effective upon receipt.
Section 3. PURPOSES AND POWERS.
3.1 Purposes.
The Partnership has been organized for the object and purpose of (a)
acquiring, investing in, purchasing, owning, holding, leasing, re-leasing,
financing, refinancing, borrowing, managing, maintaining, operating, improving,
upgrading, modifying, exchanging, assigning, encumbering, creating security
interests in, pledging, selling, transferring or otherwise disposing of, and in
all respects otherwise dealing in or with, Equipment of all kinds, (b) lending
and providing financing to other Persons for their acquisition of items of
equipment and other tangible and intangible personal property of all kinds,
pursuant to financing arrangements or transactions secured by various items of
equipment (or interests therein and leases and licenses thereof) and other such
personal property in any part of the world (including, without limitation, all
land, waters and space under, on or above such part of the world), and (c)
establishing, acquiring, conducting and carrying on any business suitable,
necessary, useful or convenient in connection therewith, in order to generate
monthly cash distributions to the Limited Partners during the term of the
Partnership.
3.2 Investment Objectives and Policies.
The Equipment acquired by the Partnership shall be selected from among
new, used and reconditioned (i) office and management information systems,
graphic processing equipment, photocopying equipment and, communications and
related peripheral equipment, (ii) printing equipment, (iii) materials handling
equipment, (iv) machine tools and manufacturing equipment, (v) medical
diagnostic and testing equipment, (vi) aircraft, rail, over-the-road and marine
equipment and (vii) miscellaneous equipment of other types that meet the
investment objectives of the Partnership and shall be leased to Lessees under
Full-Payout Leases and Operating Leases. The Financing Transactions entered into
by the Partnership shall be with Users that are Creditworthy and shall be
evidenced by a written promissory note of such User evidencing the irrevocable
obligation of such User to repay the principal amount thereof, together with
interest thereon, in accordance with the terms thereof, which repayment
obligation may be collateralized by a security interest in tangible or
intangible personal property and in any lease or license of such personal
property, as well as the revenues arising thereunder, or in such other assets of
such User as the General Partner may deem to be appropriate. All funds held by
the Partnership (including, without limitation, Subscription Monies released to
the Partnership on any Closing Date) that are not invested in Equipment,
Financing Transactions or Reserves shall be invested by the Partnership in
Permitted Investments.
3.3 Powers.
In furtherance of the above purposes, the Partnership shall have the
power:
(a) to acquire, invest in, purchase, own, hold, lease, release,
finance, refinance, borrow, manage, maintain, operate, improve, upgrade, modify,
exchange, assign, encumber, create security interests in, pledge, sell, transfer
or otherwise dispose of, and in all respects otherwise deal in or with,
Equipment and other tangible and intangible personal property of all kinds in
any part of the world (including, without limitation, all land, waters and space
under, on or above such part of the world);
(b) to invest substantially all Cash From Operations (other than those
necessary to pay the expenses of the Partnership and to make First Cash
Distributions) and Cash From Sales in additional Investments during the
Reinvestment Period as provided in Section 8.1(a) hereof;
(c) to enter into joint ventures, partnerships and other business,
financing and legal and beneficial ownership arrangements with respect to
equipment and other tangible and intangible personal property and financing
arrangements deemed prudent by the General Partner in order to achieve
successful operations for the Partnership;
(d) to purchase and hold securities issued by any Person if, in the
General Partner's opinion, the purchase is an advisable or necessary step in the
acquisition and financing by the Partnership of Investments;
A-2
<PAGE>
(e) to hold interests in property, both real and personal, tangible and
intangible, including, without limitation, contract rights, lease rights, debt
instruments and equity interests in corporations, partnerships (both limited and
general and including, subject to the provisions of this Agreement, Affiliated
Entities), joint ventures and other entities (including, but not limited to,
common and preferred stock, debentures, bonds and other securities of every kind
and nature); provided that the Partnership may make such Investments only in
furtherance of its investment objectives and in accordance with its investment
policies;
(f) subject to any applicable statutes and regulations, to lend and
borrow money to further the purposes of the Partnership, to issue and accept
evidences of indebtedness in respect thereof, and to secure the same by
mortgages or pledges or grants of liens on, or other security interests in,
Investments of the Partnership and accept such kinds and amounts of security for
loans, leases and licenses it makes to others as the General Partner in its sole
and absolute discretion shall deem appropriate; and
(g) to do all things, carry on any activities and enter into, perform,
modify, supplement or terminate any contracts necessary to, connected with, or
incidental to, or in furtherance of, the purposes of the Partnership, all so
long as such things, activities and contracts may be lawfully done, carried on
or entered into by the Partnership under the Delaware Act and the laws of the
United States of America and under the terms of this Agreement.
Section 4. TERM.
The term of the Partnership commenced upon the filing of the
Certificate of Limited Partnership with the Secretary of State of the State of
Delaware on May 23, 1995 and shall terminate at midnight on December 31, 2015,
unless sooner dissolved or terminated as provided in Section 11 of this
Agreement.
Section 5. PARTNERS AND CAPITAL.
5.1 General Partner.
The General Partner has contributed $1,000, in cash, as its Capital
Contribution to the Partnership.
The General Partner shall use its best efforts to maintain, at all
times from and after the date of this Agreement through and including the
Termination Date, a Net Worth that is at least sufficient for the Partnership to
qualify, in the opinion of Tax Counsel to the Partnership, as a partnership for
federal income tax purposes and to satisfy the net worth requirements for a
"sponsor" under the NASAA Guidelines.
5.2 Original Limited Partner.
The Original Limited Partner has made a capital contribution of $1,000
to the Partnership.
By his execution hereof, the Original Limited Partner hereby agrees to
withdraw as Original Limited Partner, and the parties hereto agree to return to
him his capital contribution of $1,000 and to retire his original Partnership
Interest of ten (10) Units upon the Initial Closing Date and admission of
additional Limited Partners.
5.3 Limited Partners.
(a) From and after the Initial Closing Date, there shall be one class
of limited partners, the Interests of which shall consist of up to 1,000,000
Units that shall initially be held by the Limited Partners.
(b) Any Person desiring to become a Limited Partner shall execute and
deliver to the General Partner a subscription agreement, substantially in the
form filed as an exhibit to the Prospectus, and such other documents as the
General Partner shall reasonably request, which other documents shall be in form
and substance reasonably satisfactory to the General Partner, pursuant to which,
among other things, such Person shall, subject to acceptance of his subscription
by the General Partner, agree to be bound by all terms and provisions of this
Agreement. Units will be sold only to Persons (i) who represent that they have
either (a) an annual gross income of at least $30,000 and a net worth of at
least $30,000 or (b) a net worth of at least $75,000 or (ii) who satisfy the
suitability standards applicable in the state of their residence or domicile, if
more stringent than the standards described in clause (i) above.
A-3
<PAGE>
(c) Each Limited Partner (other than Affiliated Limited Partners and
Limited Partners entitled to Volume Discounts) shall make a Capital
Contribution, in cash, in an amount equal to the Gross Unit Price to the capital
of the Partnership for each Unit or fraction thereof purchased. Each Affiliated
Limited Partner shall make a Capital Contribution, in cash, in an amount equal
to the Net Unit Price for each Unit or fraction thereof purchased. Each Limited
Partner entitled to a Volume Discount shall make a Capital Contribution, in
cash, to the capital of the Partnership in an amount equal to the Gross Unit
Price for each Unit or fraction thereof purchased less the amount of the Volume
Discount.
(d) Limited Partners (except residents of certain States) must purchase
a minimum of (i) twenty-five (25) whole Units other than (ii) IRA or Qualified
Plans (including Keogh Plans) may purchase a minimum of ten (10) whole Units.
Above such minimum purchase requirements, Limited Partners may subscribe for
additional Units or fractions thereof equal to 1/10,000th of a Unit or any
multiple thereof (unless prohibited by applicable law) at the Gross Unit Price,
Net Unit Price or Gross Unit Price less Volume Discount, whichever shall be
applicable.
(e) The General Partner and any Affiliate of the General Partner shall
have the right to subscribe for Units for its own account for investment
purposes only; provided that the aggregate number of Units purchased by the
--------
General Partner and such Affiliates collectively shall not exceed ten (10%)
percent of all Units subscribed for by non-Affiliated Persons.
(f) No subscribers shall be admitted to the Partnership unless and
until the Minimum Offering shall be achieved. Upon the determination by the
General Partner that the Minimum Offering has been achieved, the General Partner
shall set the Initial Closing Date. Following the Initial Closing Date, a
Closing may be held on the last day of any Segment (or, if such day is not a
business day, on the next preceding business day), provided that no Closing
--------
shall be required to be held on such last day of any Segment (or the next
preceding business day) if the number of Units subscribed for but as to which
the subscribers have not been admitted to the Partnership as Limited Partners as
of such date is insufficient, in the sole and absolute discretion of the General
Partner, to justify the administrative burden and expense of holding a Closing,
and provided, further, that the Final Closing Date may, in the sole and absolute
-------- -------
discretion of the General Partner, be held on a day other than the last day of a
Segment, and shall be held as promptly as practicable after the Termination
Date. As promptly as is practicable following the admission of each subscriber
as Limited Partner, the General Partner shall send notice to such Limited
Partner in confirmation thereof.
(g) Subscriptions for Units shall promptly be accepted or rejected by
the General Partner after their receipt by the Partnership (but in any event not
later than 30 days thereafter) and a confirmation of receipt thereof sent by the
General Partner. The General Partner retains the unconditional right to refuse
to admit any subscriber as a Limited Partner.
(h) Each Subscriber shall be admitted to the Partnership as a Limited
Partner, and shall for all purposes of this Agreement become and be treated as a
Limited Partner, as of the first day immediately following the Closing Date as
of which such Subscribers is admitted to the Partnership or the Final Closing
Date or as of the first day of the Segment immediately following any subsequent
Closing Date (other than the Final Closing Date), as the case may be, next
following the acceptance of their subscriptions by the General Partner and the
receipt by the General Partner of all Subscription Monies payable in connection
therewith. Any subscriber who is a resident of the Commonwealth of Massachusetts
and who has been admitted as a Limited Partner of the Partnership within five
(5) business days following the date he or she receives a copy of the Prospectus
(as evidenced by his or her signature on the Subscription Agreement or a
separate receipt for the Prospectus) may, by giving written notice to the
General Partner or Dealer-Manager within such five (5) day period, rescind his
or her subscription and shall receive a prompt refund of his or her subscription
plus simple interest at 8% per annum from the date such subscription was
received by the Partnership until returned to such subscriber less
distributions, if any, made to such subscriber from the Escrow Account and the
Partnership.
(i) The name and address of each Limited Partner and the amount of the
Capital Contribution made by such Limited Partner are set forth on Schedule A
hereto, as such may be supplemented or amended from time to time. Promptly
following each Closing Date (and, in any event, within 5 business days
thereafter), the General Partner shall amend Schedule A to this Agreement to
reflect the name, address and Capital Contribution of each Limited Partner
admitted to the Partnership as a result of such Closing; provided that any
--------
failure so to amend such Schedule A following any Closing Date shall not in any
way affect the admission of any Limited Partner to the Partnership for all
purposes of this Agreement if such Limited Partner was duly and properly
admitted to the Partnership as a result of such Closing.
(j) From the date hereof to, but not including, the Initial Closing
Date, all funds in respect of Units for which subscriptions have been received
("Subscription Monies") shall be deposited in the Escrow Account. From and after
the Initial Closing Date, all Subscription Monies shall be held by the
Partnership in a Qualified Subscription Account until the release thereof on the
applicable Closing Date. Both the Escrow Account and any Qualified Subscription
Account shall be established
A-4
<PAGE>
by the General Partner for the sole purpose of holding and investing
Subscription Monies pending admission of subscribers to the Partnership as
Limited Partners.
(k) On the Initial Closing Date or any subsequent Closing Date,
whichever may be applicable, all Subscription Monies then held in the Escrow
Account or any Qualified Subscription Account, as the case may be, with respect
to Units purchased by any Limited Partner admitted to the Partnership as a
result of such Closing, together with any interest earned thereon, shall be
released to the Partnership. Any interest earned on such Subscription Monies
prior to such release shall be paid to such Limited Partner promptly after such
Closing Date. If the number of Units subscribed for are not sufficient to
constitute the Minimum Offering, all Subscription Monies deposited by any
subscriber shall be returned, together with any interest earned thereon and
without deduction for any Front-End Fees, to such subscriber. Furthermore, any
Subscription Monies deposited by any subscriber who is not accepted by the
General Partner to become a Limited Partner shall be promptly returned, together
with any interest earned thereon and without deduction for any Front-End Fees,
to such subscriber. In no event shall any Subscription Monies be held in the
Escrow Account or a Qualified Subscription Account for more than one year beyond
the Effective Date before either being released to the Partnership upon a
Closing or returned to the subscriber.
5.4 Partnership Capital.
(a) No Partner shall be paid interest on any Capital Contribution
(except any interest earned on Subscription Monies as provided in Section
5.3(k)).
(b) Except as provided in Section 10.5 and except that the 10 Units
purchased by the Original Limited Partner shall be redeemed at par on the
Initial Closing Date as provided in Section 5.2, the Partnership shall not
redeem or repurchase any Unit. No Partner shall have the right to withdraw or
receive any return of such Partner's Capital Contribution, except as
specifically provided in this Agreement, and no Capital Contribution may be
returned to any Partner in the form of property other than cash.
(c) Except as otherwise specifically provided herein, no Limited
Partner shall have priority over any other Limited Partner either as to (i) the
return of such Limited Partner's Capital Contribution or Capital Account, (ii)
such Limited Partner's share of Profits and Losses or (iii) such Limited
Partner's share of distributions of Cash From Operations and Cash From Sales.
(d) Neither the General Partner nor any Affiliate of the General
Partner shall have any personal liability for the repayment of the Capital
Contribution of any Limited Partner except, and solely to the extent, provided
in Section 6.3, Section 9.3(a) and Section 11.2(a)(iii), above.
5.5 Capital Accounts.
(a) A separate Capital Account shall be established and maintained for
the General Partner and for each Limited Partner.
(b) The Capital Account of the General Partner initially shall be
$1,000.
(c) The Capital Account of each Limited Partner initially shall be the
amount of such Limited Partner's Capital Contribution.
(d) The Capital Account of each Partner shall be increased by (i) the
amount of any additional money contributed by such Partner to the Partnership,
(ii) the fair market value of any property contributed by such Partner to the
Partnership (net of liabilities secured by such contributed property that the
Partnership is considered to assume or take subject to under Code Section 752)
and (iii) allocations to such Partner of Partnership Profits (or items thereof),
and items of income and gain specially allocated pursuant to Section 8.2(f)
hereof. The Capital Account of each Partner shall be decreased by (i) the amount
of money distributed to or on behalf of such Partner by the Partnership, (ii)
the fair market value of any property distributed to or on behalf of such
Partner by the Partnership (net of liabilities secured by such distributed
property that such Partner is considered to assume or take subject to under Code
Section 752), and (iii) allocations to such Partner of Partnership Losses (or
items thereof) and items of loss and deduction specially allocated pursuant to
Section 8.2(f) hereof.
(e) For purposes of this Agreement, a Partner who has more than one
Interest in the Partnership shall have a single Capital Account that reflects
all such Interests, regardless of the class of Interests owned by such Partner
(e.g., general or limited) and regardless of the time or manner in which such
Interests were acquired.
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(f) If an Interest is sold or otherwise transferred, the Capital
Account of the transferor with respect to such Interest shall carry over to the
transferee in accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(l). However,
if the transfer causes a termination of the Partnership under Code Section
708(b)(1)(B), the Capital Account that carries over to the transferee will be
adjusted in accordance with the constructive liquidation and reconstitution
rules under Treas. Reg. Section 1.708-1.
(g) For any taxable year in which the Partnership has a Code section
754 election in effect, the Capital Accounts shall be maintained in accordance
with Treas. Reg. Section 1.704-1(b)(2)(iv)(m).
(h) Upon the occurrence of the events specified in Treas. Reg. Section
1.704-1(b)(2)(iv)(f)5, the Partners' Capital Accounts shall be adjusted and
thereafter maintained to reflect the revaluation of Partnership assets on the
books of the Partnership in accordance with such Treasury Regulation and Treas.
Reg. Sections 1.704-1(b)(2)(iv)(f) through (h).
(i) Notwithstanding anything herein to the contrary, the Partners'
Capital Accounts shall at all times be maintained in the manner required by
Treas. Reg. Section 1.704-1(b)(2)(iv), and any questions or ambiguities arising
hereunder shall be resolved by reference to such Treasury Regulations. Further,
such Treasury Regulations shall govern the maintenance of the Capital Accounts
to the extent this Agreement is silent as to the treatment of a particular item.
In the event Treas. Reg. Section 1.704-1(b)(2)(iv) shall fail to provide
guidance as to how adjustments to the Capital Accounts should be made to reflect
particular adjustments to Partnership capital on the books of the Partnership,
such Capital Account adjustments shall be made in a manner that is consistent
with the underlying economic arrangement of the Partners and is based wherever
practicable, on federal tax accounting principles.
5.6 Additional Capital Contributions.
(a) The General Partner shall not be required to make any Capital
Contributions in addition to its initial $1,000 Capital Contribution except
pursuant to and in accordance with Section 11.2(a)(iii) of this Agreement.
(b) No Limited Partner shall be required to make any Capital
Contribution in addition to the initial price paid for such Limited Partner's
Units pursuant to the Offering.
5.7 Loans by Partners.
Except as provided in Section 11.2(a)(iii), no loan by any Partner or
any Affiliate of any Partner to the Partnership (including, without limitation,
any Partnership Loan) shall constitute a Capital Contribution to the Partnership
or increase the Capital Account balance of any Partner, but shall be treated,
for all purposes, as indebtedness of the Partnership payable or collectible only
out of the assets of the Partnership in accordance with the terms and conditions
upon which such loan was made.
5.8 No Right to Return of Capital.
No Partner shall be entitled to demand or receive any distribution of
or with respect to such Partner's Capital Contribution or Capital Account,
except as specifically provided under this Agreement.
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Section 6. GENERAL PARTNER.
6.1 Extent of Powers and Duties.
(a) General.
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Except as expressly limited by the provisions of this Agreement, the
General Partner shall have complete and exclusive discretion in the management
and control of the affairs and business of the Partnership and shall be
authorized to employ all powers necessary, convenient or appropriate to carry
out the purposes, conduct the business and exercise the powers of the
Partnership. Without limiting the generality of the foregoing, the General
Partner shall provide such asset management personnel and services as the
General Partner, in its sole and absolute discretion, may deem necessary or
appropriate to conduct the business activities of the Partnership and the
day-to-day management of its assets, including, but not limited to, leasing,
licensing, re-leasing and re-licensing the Equipment, monitoring the use of
collateral for the Leases and Financing Transactions, arranging for necessary
licensing, registration, maintenance and repair of the Equipment (to the extent
Lessees or Users are not contractually obligated to do so and the General
Partner expressly assumes such duties), collecting revenues, paying Operating
Expenses, determining that the Equipment is used in accordance with all
operative contractual arrangements and providing clerical and bookkeeping
services necessary to provide tax, financial and regulatory reporting to the
Limited Partners and for the operations of the Partnership. The General Partner
may employ on behalf of the Partnership, to the extent that it, in its sole
judgment shall deem advisable, managerial, sales, maintenance, administrative or
secretarial personnel, agents and other Persons, including any of its
Affiliates, which it determines are necessary for the maintenance of any of the
Partnership's property, and/or the operation of the business of the Partnership,
may engage and retain attorneys, accountants or brokers to the extent that, in
the judgment of the General Partner, their professional services are required
during the term of the Partnership, as well as employ the services of its
Affiliates to assist the General Partner in its managerial duties, and may
compensate all such Persons from the assets of the Partnership at rates which
it, in its sole judgment, deems fair and reasonable; provided that (i) the
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compensation, price or fee payable to any of its Affiliates shall not exceed an
amount which is comparable and competitive with the compensation, price or fee
which would be charged by non-Affiliates to render comparable services which
could reasonably be made available to the Partnership upon comparable terms;
(ii) all services for which the Sponsor is to receive compensation from the
Partnership (other than as provided in Section 6.4 hereof) shall be embodied in
a written contract which (A) precisely describes the services to be rendered and
all compensation to be paid therefor and (B) is terminable by either party
without penalty on 60 days notice; (iii) the compensation, price and fees and
other terms of any such contract shall be fully disclosed in the prospectus as
the Effective Date; and (iv) the Sponsor must, at the time such services are to
be rendered, be engaged in the business of providing such services to
non-Affiliates and derive at least 75% of its gross revenues for such services
therefrom. Any such contract may only be amended in a manner which is either
more favorable to the Sponsor or less favorable to the Partnership by the vote
or consent of a Majority Interest of the Limited Partners. Except as otherwise
provided in this Agreement, the General Partner shall possess and enjoy with
respect to the Partnership all of the rights and powers of a partner of a
partnership without limited partners to the extent permitted by Delaware law.
(b) Powers and Duties.
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(i) General Powers and Duties. The General Partner shall
diligently and faithfully exercise its discretion to the best of its
ability and use its best efforts during so much of its time as the
General Partner, in its sole and absolute discretion, may deem to be
necessary or appropriate to carry out the purposes and conduct the
business of the Partnership in accordance with this Agreement and in
the best interests of the Partnership and so as, consistent therewith,
to protect the interests of the Limited Partners. The General Partner
shall have responsibility as a fiduciary for the safekeeping and use of
all funds and assets of the Partnership, whether or not in its
immediate possession or control, and shall not employ, or permit any
other Person to employ, such funds or assets in any manner other than
as permitted by this Agreement. Notwithstanding anything to the
contrary herein stated or implied, the Limited Partners may not
contract away the fiduciary duty owed to such Limited Partners by the
Sponsor under common law. The General Partner shall be responsible and
shall use its best efforts and exercise discretion to the best of its
ability: (A) to acquire, invest in, purchase, own, hold, lease,
license, re-lease, re-license, finance, refinance, borrow, manage,
maintain, operate, improve, upgrade, modify, exchange, assign,
encumber, create security interests in, pledge, sell, transfer or
otherwise dispose of, and in all respects otherwise deal in or with,
Equipment and Financing Transactions (except as limited by Section
11.1) and to contract with others to do the same on behalf of the
Partnership; (B) to select and supervise the activities of any
equipment management agents for the Partnership; (C) to assure the
proper application of revenues of the Partnership; (D) to maintain
proper books of account for the Partnership and to prepare reports of
operations and tax returns required to be furnished to (1) the
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Partners pursuant to this Agreement or (2) taxing bodies or other
governmental agencies in accordance with applicable laws and
regulations; (E) to employ the Dealer-Manager to select Selling Dealers
to offer and sell Units; and (F) to assure the doing of all other
things necessary, convenient or advisable in connection with the
supervision of the affairs, business and assets of the Partnership. In
establishing criteria for the resolution of conflicts of interest
between the Partnership, on the one hand, and the General Partner or
any Affiliate of the General Partner, on the other hand, the General
Partner shall not abdicate or ignore its fiduciary duty to the
Partnership.
(ii) Amplification of Powers. In amplification, and not by way
of limitation, of the powers of the General Partner expressed herein,
the General Partner shall have, subject to the provisions of this
Agreement, full power and authority, as herein provided or as provided
in the Delaware Act, on behalf of the Partnership, in order to carry
out and accomplish its purposes and functions: (A) to expend
Partnership capital and income; (B) to purchase, lease, license, sell,
exchange, improve, divide, combine and otherwise in all respects
transact business with respect to interests in real and personal
property of any and all kinds whatsoever, both tangible and intangible,
including, without limitation, equipment, contract rights, lease
rights, debt instruments and equity interests in corporations,
partnerships (both limited and general and including, subject to the
provisions of this Agreement, Affiliated Entities), joint ventures and
other entities (including, but not limited to, common and preferred
stock, debentures, bonds and other securities of every kind and
nature), and, in connection therewith, to execute, deliver, amend,
modify and cancel documents and instruments relating to real and
personal property of whatever kind and description, including, but not
limited to, mortgages, leases and other documents of title or
conveyance, assumption agreements pertaining to such agreements, powers
of attorney and other contracts, instruments and agreements of all
kinds and to employ engineers, contractors, attorneys, accountants,
brokers, appraisers, and such other consultants, advisors, artisans and
workmen as may be necessary or advisable, in the sole and absolute
discretion of the General Partner, for all such purposes; (C) to invest
any and all funds held by the Partnership in accordance with the
provisions of clause (x) of this Section 6.1(b) of this Agreement; (D)
to designate depositories of the Partnership's funds, and the terms and
conditions of such deposits and drawings thereon; (E) to borrow money
or otherwise to procure extensions of credit for the Partnership
(except that neither the Partnership nor the Sponsor shall borrow money
solely for the purpose of making First Cash Distributions which the
Partnership would otherwise be unable to make) and, in connection
therewith, to execute, seal, acknowledge and deliver agreements,
promissory notes, guarantees and other written documents constituting
obligations or evidences of indebtedness and to pledge, hypothecate,
mortgage, assign, transfer or convey mortgages or security interests in
the Equipment and other assets of the Partnership as security therefor;
(F) to hold all or any portion of the Investments and other assets of
the Partnership in the name of one or more trustees, nominees, or other
entities or agents of or for the Partnership; (G) to establish Reserves
in accordance with clause (vii) of this Section 6.1(b); and (H) to take
all such actions and execute all such documents and other instruments
as the General Partner may deem necessary, convenient or advisable to
accomplish or further the purposes of the Partnership or to protect and
preserve Partnership assets to the same extent as if the General
Partner were itself the owner thereof.
(iii) Admission of Limited Partners. The General Partner shall
have the right to accept or refuse to accept, in its sole and absolute
discretion, the admission of any Limited Partner (including any
Substitute Limited Partner and the General Partner and any Affiliate of
the General Partner) to the Partnership; provided, however, that the
General Partner shall not admit any Person as a Limited Partner (except
the Original Limited Partner) unless:
(A) such Person shall agree, in writing, to be bound by the
provisions of this Agreement;
(B) such Person shall represent, in writing, that such Person
is or is not a United States Person, as the case may be;
(C) prior to the admission of such Person, the Minimum
Offering shall have been achieved;
(D) the General Partner shall believe that such Person is
"suitable" in all respects under the laws of the state in
which such Person resides;
(E) the General Partner shall have no reason to believe that
the admission of such Person to the Partnership (1) would
cause the Partnership to lose its Partnership status for
federal income tax purposes, (2) would disqualify the
Partnership to engage or to continue to engage in any business
which it is otherwise eligible to transact or (3) would cause
an impermissible percentage of Units to be owned by non-United
States citizens for purposes of any applicable title
registration law; and
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(F) such admission would not cause the "equity participation"
in the Partnership by "benefit plan investors" (both within
the meaning of DOL Reg. Section 2510.3-101(f)) to equal or
exceed 25%.
In connection with such right, the General Partner shall have the
authority to do all things necessary or advisable, in the sole and
absolute discretion of the General Partner, to effect the admission of
the Limited Partners, including, but not limited to, (x) registering
the Units under the Securities Act and (y) effecting the qualification
of, or obtaining exemptions from the qualification of, the Units for
sale with state securities regulatory authorities.
(iv) Authority To Enter into Dealer-Manager Agreement. The
General Partner shall have the authority to enter into, on behalf of
the Partnership, the Dealer-Manager Agreement, substantially in the
form filed as an exhibit to the Registration Statement, with the
Dealer-Manager.
(v) Authority to Enter into Selling Dealer Agreements. The
General Partner shall have the authority to enter into, on behalf of
the Partnership, or to authorize the Dealer-Manager so to enter into,
separate selling dealer agreements, each substantially in the form
filed as an exhibit to the Registration Statement (the "Selling Dealer
Agreements" and each a "Selling Dealer Agreement"), with NASD-member
broker dealers selected by the General Partner or the Dealer-Manager
(the "Selling Dealers" and each a "Selling Dealer").
(vi) Authority to Enter Into Escrow Agreement. The General
Partner shall have the authority to enter into, on behalf of the
Partnership, the Escrow Agreement, substantially in the form filed as
an exhibit to the Registration Statement, with the Escrow Agent,
pursuant to which, among other things, the Escrow Agent shall agree to
act as the Escrow Agent with respect to all Subscription Monies
received prior to the Initial Closing Date and the Escrow Agent shall
be entitled to receive for its services in such capacity such
compensation as the General Partner may deem reasonable under the
circumstances, which compensation shall be deemed to be and shall
constitute an Organization and Offering Expense payable by the General
Partner.
(vii) Reserves. The General Partner shall initially establish
for the Partnership, and shall use its best efforts to maintain,
Reserves, of which an amount not in excess of 3% of Gross Offering
Proceeds may be treated as having been invested or committed to
investment for purposes of Section 8.6 of this Agreement. Reserves,
once expended, need not be restored, provided, however, that any such
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Reserves that are restored in the sole and absolute discretion of the
General Partner shall be restored from Cash From Operations.
(viii) Insurance. The General Partner shall cause the
Partnership to purchase and maintain such insurance policies as the
General Partner deems reasonably necessary to protect the interests of
the Partnership (to the extent that such policies are not maintained by
Lessees, Users or other Persons for the benefit of the Partnership).
The General Partner is authorized, on behalf of the Partnership, to
purchase and pay the premiums for such types of insurance, including,
without limitation, extended coverage liability and casualty and
workers' compensation, as would be customary for any Person owning
comparable property and engaged in a similar business, and the General
Partner and any Affiliate of the General Partner and their respective
employees and agents may be named as additional insured parties
thereunder, provided the cost of premiums payable by the Partnership is
not increased thereby. Notwithstanding the foregoing, the Partnership
shall not incur or assume the cost of any portion of any insurance
which insures any party against any liability the indemnification of
which is prohibited by Section 6.3 of this Agreement.
(ix) Commission Loans. The General Partner may incur
Indebtedness on behalf of the Partnership in an amount up to the total
Sales Commissions payable (up to 8% of the Gross Offering Proceeds) for
the purpose of permitting the Partnership to acquire additional
Investments following each Closing, the cost of any such indebtedness
shall be payable as an operating expense of the Partnership.
(x) Reinvestment. During the Reinvestment Period, the
Partnership may reinvest all or a substantial portion of its Cash From
Operations and Cash From Sales in additional Investments in furtherance
of, and consistent with, the Partnership's purposes and investment
objectives set forth in Sections 3.1 and 3.2.
(c) Delegation of Powers.
--------------------
Except as otherwise provided under this Agreement or by law, the
General Partner may, in its sole and absolute discretion, delegate all or any of
its duties under this Agreement to, and may elect, employ, contract or deal
with, any Person (including, without limitation, any Affiliate of the General
Partner).
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(d) Reliance by Third Parties.
-------------------------
No Person dealing with the Partnership or its assets, whether as
assignee, lessee, licensee, purchaser, mortgagee, grantee or otherwise, shall be
required to investigate the authority of the General Partner in selling,
assigning, leasing, licensing, mortgaging, conveying or otherwise dealing with
any Investments or other assets or any part thereof, nor shall any such
assignee, lessee, purchaser, licensee, mortgagee, grantee or other Person
entering into a contract with the Partnership be required to inquire as to
whether the approval of the Partners for any such assignment, lease, license,
sale, mortgage, transfer or other transaction has been first obtained. Any such
Person shall be conclusively protected in relying upon a certificate of
authority or of any other material fact signed by the General Partner, or in
accepting any instrument signed by the General Partner in the name and behalf of
the Partnership or the General Partner.
6.2 Limitations on the Exercise of Powers of General Partner.
The General Partner shall have no power to take any action prohibited
by this Agreement or by the Delaware Act. Furthermore, the General Partner shall
be subject to the following in the administration of the Partnership's business
and affairs:
(a) Limitations on Indebtedness.
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From and after the date when all Capital Contributions have been
invested or committed to investment in Investments and Reserves (not exceeding
3% of Gross Offering Proceeds), used to pay permitted Front-End Fees or returned
to the Limited Partners (as provided in Section 8.7, below), the Partnership
shall not incur or assume additional Indebtedness in connection with the
acquisition of any Investment to the extent that the sum of (i) the principal
amount of any such additional Indebtedness plus (ii) the aggregate principal
amount of all Indebtedness then outstanding would exceed 80% of the aggregate
Purchase Price paid by the Partnership for Investments then held by the
Partnership (inclusive of any Investment then being acquired).
(b) Investment Company Status.
-------------------------
The General Partner shall use its best efforts to assure that the
Partnership shall not be deemed an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
(c) Sales and Leases of Equipment From or to the General Partner and
----------------------------------------------------------------
its Affiliates.
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The Partnership shall neither purchase, lease or license Investments
from, nor sell, lease or license Investments to, the General Partner or any
Affiliate of the General Partner (including, without limitation, any Program in
which the General Partner or any such Affiliate has an interest) except as
provided in this Section. The Sponsor shall not purchase any equipment or
Financing Transactions from the Partnership or any affiliated program which it
has sponsored (whether held by them on an interim basis or otherwise.
Notwithstanding the first sentence of this Section (c), the Partnership may
purchase Affiliated Investments if:
(i) the General Partner determines that the making of such
Affiliated Investment is in the best interests of the Partnership;
(ii) such Investment is purchased by the Partnership at a
Purchase Price which does not exceed the sum of (A) the net cost to the
General Partner or such Affiliate of acquiring and holding same
(adjusted for any income received and expenses paid or incurred while
holding same) plus (B) any compensation to which the General Partner
and any Affiliate of the General Partner is otherwise entitled pursuant
to this Agreement;
(iii) there is no difference in the interest terms of the
Indebtedness secured by the Investment at the time it is acquired by
the General Partner or such Affiliate and the time it is acquired by
the Partnership;
(iv) neither the General Partner nor any Affiliate of the
General Partner realizes any gain, or receives any other benefit, other
than compensation for its services, if any, permitted by this
Agreement, as a result of the Partnership making such Affiliated
Investment; and
(v) at the time of transfer thereof to the Partnership, the
General Partner or such Affiliate had held such
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Affiliated Investment on an interim basis (generally not longer than
six months) for the purposes of (A) facilitating the acquisition of
such Investment by the Partnership, (B) borrowing money or obtaining
financing for the Partnership or (C) any other lawful purpose related
to the business of the Partnership.
(d) Loans to or from the General Partner and its Affiliates.
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No loans may be made by the Partnership to the General Partner or any
Affiliate of the General Partner. The General Partner or any Affiliate of the
General Partner, however, may, from time to time, loan or advance funds to the
Partnership (each such loan or advance being hereinafter called a "Partnership
Loan") in accordance with this Section 6.2(d). The terms of any Partnership Loan
permitted to be made hereunder shall include the following:
(i) any interest payable by the Partnership in connection with
such Partnership Loan shall be charged at an annual rate of interest
not in excess of the lesser of the following: (A) the rate of interest
payable by the General Partner or such Affiliate in connection with
such borrowing (in the event that the General Partner or any Affiliate
shall borrow money for the specific purpose of making such Partnership
Loan), (B) the rate of interest that would be charged to the
Partnership (without reference to the General Partner's or such
Affiliate's financial abilities or guarantees) by unrelated lending
institutions on a comparable loan for the same purpose in the same
geographic area (if neither the General Partner nor any such Affiliate
has borrowed money to make such Partnership Loan) or (C) a rate of
interest equal to the rate of interest from time to time announced by
The Chase Manhattan Bank (National Association) at its principal
lending offices in New York, New York as its prime lending rate plus 3%
per annum;
(ii) all payments of principal and interest on such
Partnership Loan shall be due and payable within twelve months after
the date on which such Partnership Loan is made; and
(iii) neither the General Partner nor any such Affiliate may
receive points or other financial charges or fees in any amount in
respect of such Partnership Loan (except that the General Partner or
such Affiliate may be reimbursed, dollar for dollar, for the actual
reasonable out-of-pocket expenses (including, without limitation, any
points or other financial charges or fees) incurred by it in connection
with the making of such Partnership Loan), provided that nothing in
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this clause (iii) shall prohibit any increase in Acquisition Fees and
Management Fees otherwise payable to the General Partner or such
Affiliate in accordance with this Agreement, notwithstanding that such
increase may be an indirect result of the making of such Partnership
Loan.
If the General Partner or any Affiliate of the General Partner
purchases Equipment in its own name and with its own funds in order to
facilitate ultimate purchase by the Partnership, the General Partner or
such Affiliate, as the case may be, shall be deemed to have made a
Partnership Loan in an amount equal to the purchase price paid for such
Equipment and shall be entitled to receive interest on such amount in
accordance with clause (i) above. Any advances made by the General
Partner or any Affiliate of the General Partner for the purpose of
paying Organizational and Offering Expenses shall not constitute a
Partnership Loan, but shall be reimbursed to the General Partner or
such Affiliate (to the extent possible) from the O & O Expense
Allowance without interest thereon in accordance with, and to the
extent provided in, Section 6.4(e) of this Agreement.
(e) No Exchange of Interests for Investments.
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The Partnership shall not acquire any Investments in exchange for
Interests in the Partnership.
(f) Joint Venture Investments.
-------------------------
The Partnership may make Investments in Joint Ventures, provided that:
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(i) at the time any such Investment in a Joint Venture is
made, the maximum amount of Gross Offering Proceeds which the
Partnership may so invest shall equal an amount equal to the smallest
of 25% of (A) the Maximum Offering, (B) the sum of (1) the cumulative
Gross Offering Proceeds raised as of the Closing Date next preceding
such investment and (2) the Gross Offering Proceeds which the General
Partner reasonably estimates the Partnership to raise from such Closing
Date to the Termination Date) or (C) the cumulative Gross Offering
Proceeds actually raised as of the Termination Date; and
(ii) the General Partner shall have determined that:
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(A) such Investment is in the best interests of the
Partnership; and
(B) such Investment shall not result in duplicate
fees to the General Partner or any Affiliate of the
General Partner;
(iii) in the case of any Joint Venture with any non-Affiliated
Person, the Partnership must acquire a controlling interest in such
Joint Venture and the non-Affiliate must acquire the non-controlling
interest therein and such Joint Venture must own and lease specific
Equipment and/or invest in one or more specific Financing Transactions;
and
(iv) in the case of any Joint Venture with any Program
sponsored by the General Partner or any Affiliate of the General
Partner, all of the following conditions are met:
(A) all Programs, including the Partnership,
participating in such Joint Venture shall have
substantially identical investment objectives and
shall participate in such Joint Venture on
substantially the same terms and conditions;
(B) the compensation payable by the Partnership to
the General Partner or any Affiliate of the General
Partner by the Partnership and by each other Program
sponsored by any of them in connection with such
Joint Venture shall be substantially identical;
(C) the Partnership shall have a right of first
refusal with respect to the purchase of any equipment
or other tangible or intangible personal property or
financing transactions held by such Joint Venture;
and
(D) the purpose of such Joint Venture shall be either
(1) to effect appropriate diversification for the
Partnership and the other Programs participating in
such Joint Venture or (2) to relieve the Sponsor or
one or more Programs sponsored by it of the
obligation to acquire, or to acquire from any of
them, equipment or other tangible or intangible
personal property or financing transactions at any
time subject to a purchase commitment entered into
pursuant to Section 6.2(c) of this Agreement.
Subject to the other provisions of this Agreement, the Partnership may
employ, or transact business with, any Person, notwithstanding the fact
that any Partner or any Affiliate thereof may have (or have had) an
interest in or connection with such Person and provided that neither
the Partnership nor the other Partners shall have any rights by virtue
of this Agreement in or to any income or profits derived therefrom.
(g) Exchange, Merger, Roll-Up or Consolidation of the Partnership
-------------------------------------------------------------
Prohibited.
----------
The Partnership shall not (i) be a party to any exchange offer, merger,
Roll-Up or similar combination with any other legal entity (including any
Roll-Up Entity) or (ii) reorganize itself if such reorganization would have the
effect of an exchange offer, merger, Roll-Up or similar combination. Neither the
Partnership nor the General Partner shall solicit, or engage or compensate
members, or persons associated with members, of the NASD to solicit, proxies
from any Limited Partners authorizing any exchange offer, merger, Roll-Up or
similar combination or any such reorganization. The General Partner is not
authorized to take any action inconsistent herewith.
(h) No Exclusive Listings.
---------------------
No exclusive listing for the sale of Equipment or other Investments, or
of any other Partnership assets, shall be granted to the General Partner or any
Affiliate of the General Partner.
(i) Other Transactions Involving the General Partner and its
--------------------------------------------------------
Affiliates.
- ----------
Except as specifically permitted by this Agreement, the General Partner
is prohibited from entering into any agreements, contracts or arrangements on
behalf of the Partnership with the General Partner or any Affiliate of the
General Partner. Furthermore, neither the General Partner nor any such Affiliate
shall receive directly or indirectly a commission or fee (except as permitted by
Section 6.4) in connection with the reinvestment of Cash From Sales and Cash
From Operations (including casualty insurance proceeds) in new Investments. In
addition, in connection with any agreement entered into by the Partnership with
the General Partner or any such Affiliate, no rebates or "give-ups" may be
received by the General Partner or
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any such Affiliate, nor may the General Partner or any such Affiliate
participate in any reciprocal business arrangements that could have the effect
of circumventing any of the provisions of this Agreement. Neither the General
Partner nor any Affiliate shall, directly or indirectly, pay or award any
commissions or other compensation to any Person engaged by a potential investor
as an investment advisor as an inducement to such Person to advise such
potential investor of interests in a particular Program; provided, however, that
-------- -------
this Section 6.2(i) shall not prohibit the payment to any such Person of the
Underwriting Fees and Sales Commissions otherwise in accordance with the terms
of this Agreement.
(j) Sale of All or Substantially All Assets; Dissolution.
----------------------------------------------------
During the Reinvestment Period, the General Partner may not dissolve
the Partnership or sell or otherwise dispose of all or substantially all of the
assets of the Partnership without the Consent of the Majority Interest.
(k) No Investments in Limited Partnership Interests of other Programs.
-----------------------------------------------------------------
The Partnership shall not invest in limited partnership interests of any other
Program; provided, however, that nothing herein shall preclude the Partnership
from making investments in Joint Ventures, to the extent and in the manner
provided in this Section.
6.3 Limitation on Liability of General Partner and its Affiliates;
Indemnification.
(a) The General Partner, and any Affiliate engaged in the performance
of services on behalf of the Partnership (hereinafter sometimes referred to as
an "Indemnitee"), shall, except as provided to the contrary in this Section 6.3,
(i) be indemnified by the Partnership from assets of the Partnership (and not by
the Limited Partners) for any liability, loss, cost and expense of litigation
(collectively referred to herein as "Liabilities") suffered by such Indemnitee,
and (ii) have no liability, responsibility, or accountability in damages or
otherwise to the Partnership or any Partner for any loss suffered by the
Partnership or any Partner, which arises out of any action or inaction of such
Indemnitee if (A) the General Partner has determined, in good faith, that such
course of conduct was in the best interests of the Partnership and (B) such
course of conduct did not constitute negligence or misconduct by such
Indemnitee. Notwithstanding the foregoing, each Indemnitee shall be liable,
responsible and accountable, and the Partnership shall not be liable to any such
Indemnitee for any portion of such Liabilities, which resulted from such
Indemnitee's own fraud, negligence, misconduct or, if applicable, breach of
fiduciary duty to the Partnership or any Partner, as determined by a court of
competent jurisdiction. Subject to Section 6.3(c) hereof, if any action, suit,
or proceeding shall be pending against the Partnership or an Indemnitee which is
alleged to relate to, or arise out of, any action or inaction of the General
Partner or any Affiliate, the Partnership shall have the right to employ, at the
expense of the Partnership, separate counsel of its choice in such action, suit,
or proceeding.
Any amounts payable by the Partnership to an Indemnitee pursuant to
this Section 6.3 shall be recoverable only out of the assets of the Partnership
and no Limited Partner shall have any personal liability on account thereof. The
Partnership shall not incur or assume the cost of that portion of liability
insurance which insures the General Partner or any Affiliate for any liability
as to which the General Partner or such Affiliate is prohibited from being
indemnified pursuant to this Section 6.3.
(b) The Partnership shall not furnish indemnification to an Indemnitee
or to any person acting as a Selling Dealer for any Liabilities imposed by a
judgment in a suit arising from or out of a violation of federal or state
securities laws unless (i)(A) there has been a successful adjudication on the
merits in favor of such Indemnitee or Selling Dealer on each count involving
alleged securities laws violations by such Indemnitee or Selling Dealer, (B)
such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction or (C) a court of competent jurisdiction shall have
approved a settlement of the claims against the Indemnitee and indemnification
in respect of the costs thereof, and (ii) the court shall have been advised by
the General Partner as to the current position of the Securities and Exchange
Commission, the Securities Divisions of the Commonwealths of Massachusetts and
Pennsylvania, the States of Missouri and Tennessee and any other relevant
regulatory body with respect to the issue of indemnification for securities law
violations.
(c) The provision of advances from Partnership funds to an Indemnitee
for legal expenses and other costs incurred as a result of any legal action
initiated against an Indemnitee by a Limited Partner of the Partnership in his
capacity as such is prohibited. However, the provision of advances from
Partnership funds to an Indemnitee for legal expenditures and other costs
incurred as a result of any initiated suit, action or proceeding is permissible
only if (i) such suit, action or proceeding relates to or arises out of, or is
alleged to relate to or arise out of, any action or inaction on the part of the
Indemnitee in the performance of its duties or provision of its services on
behalf of the Partnership; (ii) such suit, action or proceeding is initiated by
a third party who is not a Limited Partner; and (iii) the Indemnitee undertakes
to repay any funds advanced pursuant to this Section 6.3 in cases in which such
Indemnitee would not be entitled to indemnification under 6.3(a) and 6.3(b). If
advances are permissible under this Section 6.3, the Indemnitee shall furnish
the Partnership with an undertaking as set forth in the foregoing sentence and
shall thereafter have the right to bill the Partnership for, or otherwise
request that the
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Partnership pay, at any time and from time to time after such Indemnitee has
become obligated to make payment therefor, any and all amounts for which such
Indemnitee believes in good faith that such Indemnitee is entitled to
indemnification under this Section 6.3. The Partnership shall pay any and all
such bills and honor any and all such requests for payment for which the
Partnership is liable as determined above. In the event that a final
determination is made that the Partnership is not so obligated in respect to all
or any portion of the amounts paid by it or if the Indemnitee enters into a
stipulation or settlement with like effect, such Indemnitee will refund such
amount, plus interest thereon at the then prevailing market rate of interest,
within 60 days of such final determination, and in the event that a final
determination is made that the Partnership is so obligated in respect to any
amount not paid by the Partnership to a particular Indemnitee or if the
Partnership enters into a stipulation or settlement with like effect, the
Partnership will pay such amount to such Indemnitee.
6.4 Compensation of General Partner and its Affiliates.
Neither the General Partner nor any Affiliate of the General Partner
shall, in their respective capacities as such, receive any salary, fees,
profits, distributions or other compensation except in accordance with this
Section 6.4.
(a) Allocations and Distributions.
-----------------------------
The General Partner shall be entitled to receive the allocations and
distributions provided for under Section 8 in respect of the Interest held by it
as General Partner.
(b) Underwriting Fees.
-----------------
Underwriting Fees shall be paid by the Partnership to the
Dealer-Manager in respect of each Unit sold.
(c) Sales Commissions.
-----------------
Sales Commissions shall be paid by the Partnership to the
Dealer-Manager and each Selling-Dealer in respect of the respective Units sold
by each of them, provided that no Sales Commissions shall be payable by the
--------
Partnership in respect of any Units sold to Affiliated Limited Partners, and,
provided further, that the Sales Commissions payable with regard to sales of
- -------- -------
Units subject to Volume Discounts shall be reduced by the amount of such Volume
Discounts.
(d) Due Diligence Expenses.
----------------------
Due Diligence Expenses actually incurred in connection with the
Offering shall be paid or reimbursed by the Partnership to the Dealer-Manager
and each Selling Manager, provided that the Dealer-Manager shall be entitled to
--------
payment of or reimbursement for Due Diligence Expenses only after each Selling
Dealer (whether prospective or actual) shall have first been paid or reimbursed
for all Due Diligence Expenses of such Selling Dealer, and provided, further,
-------- -------
that the amount of Due Diligence Expenses actually paid to the Dealer-Manager
shall reduce, dollar-for-dollar, the amount of the O & O Expense Allowance
otherwise payable by the Partnership to the General Partner pursuant to Section
6.4(e) of this Agreement.
(e) O & O Expense Allowance.
-----------------------
The Partnership shall pay, immediately following each Closing Date, the
O & O Expense Allowance to the General Partner, whether or not the full amount
thereof is actually incurred by the General Partner or any Affiliate of the
General Partner, without deduction for Underwriting Fees and Sales Commissions.
The General Partner shall distribute to the Dealer-Manager all or such portion
of the O & O Expense as the General Partner shall, in its sole and absolute
discretion, deem appropriate and the Partnership shall have no separate
liability to the Dealer-Manager for any Organizational and Offering Expenses
incurred by it. The General Partner shall bear any Organizational and Offering
Expenses incurred by the General Partner or any Affiliate of the General Partner
(including, without limitation, the Dealer-Manager) in excess of the O & O
Expense Allowance.
(f) Acquisition Fees.
----------------
In connection with any Investment, the Partnership shall pay to the
General Partner, for services rendered in connection with acquiring such
Investment, an Acquisition Fee equal to the difference (to the extent greater
than zero) between (i) 3.0% of the Purchase Price paid by the Partnership for
any (A) item of Equipment or (B) Financing Transaction, as the case may be, and
(ii) the aggregate amount of Acquisition Fees paid by or on behalf of the
Partnership to any other Person in connection with such Investment; provided,
--------
however, that:
- -------
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<PAGE>
(i) no Acquisition Fees may be paid by or on behalf of the Partnership to
any finder or broker that is an Affiliate of the General Partner;
(ii) the Partnership shall not pay any Acquisition Fees, or part thereof,
that would cause the Partnership's Investment in Equipment and Financing
Transactions to be less than the greater of (x) 80% of the Gross Offering
Proceeds from the Partnership's sale of Units, reduced by .0625% for each
1% of Indebtedness encumbering any Investment acquired by the Partnership,
and (y) 75% of such Gross Offering Proceeds; and
(iii) the aggregate sum of (A) Acquisition Fees and (B) all other Front-End
Fees, which, in each case, may be paid to any Person pursuant to this
Agreement in connection with all Investments made by the Partnership from
any source (including, without limitation, Net Offering Proceeds,
Partnership indebtedness or reinvestment of excess Cash Flows) shall not
exceed an amount equal to the product of multiplying (x) the Gross Offering
Proceeds by (y) a percentage equal to (1) 100% minus (2) the greater of the
two percentages calculated under clause (x) or clause (y) of subsection
6.4(f)(ii), above.
The following are examples of application of the formula in clause
(ii), above:
(1) No Indebtedness - 80% to be committed to Investment in Equipment
and Financing Transactions.
(2) 50% Indebtedness - 50% x .0625% = 3.125%
80% - 3.125% = 76.875% to be committed to
Investment in Equipment and Financing
Transactions.
(3) 80% Indebtedness - 80% x .0625% = 5%
80% - 5% = 75% to be committed to Investment in
Equipment and Financing Transactions.
To calculate the percentage of Indebtedness encumbering Investments, the
aggregate amount of such Indebtedness shall be divided by the aggregate
Purchase Price (without deduction for Front-End Fees) paid for all
Investments. Such percentage of Indebtedness so calculated would be
multiplied by .0625% to determine the percentage to be deducted from 80%.
If any payment of Acquisition Fees causes the Partnership to experience a
shortfall in its required Investment in Equipment and Financing Transactions
(computed under clause (ii) above) or the aggregate amount of Acquisition Fees
paid by the Partnership to exceed the amount determined in accordance with
clause (iii) above, the General Partner shall refund to the Partnership that
portion of Acquisition Fees received by it to the extent necessary to correct
such shortfall or overpayment, as the case may be, together with interest
thereon at the rate of 1.0% per month to the extent that such refund is not made
within 30 days.
Where the Partnership purchases an item of Equipment or any Financing
Transaction from the General Partner or one of its Affiliates pursuant to
Section 6.2(d) for a Purchase Price which includes an Acquisition Fee amount,
such Acquisition Fee amount shall be deemed paid pursuant to this Section 6.4(d)
and there shall be no duplicative payment thereof.
(g) Management Fees.
---------------
Each month, for management services rendered, the Partnership shall pay to
the General Partner such portion of the Management Fees as shall be attributable
to Gross Revenues actually received by the Partnership during such month;
provided that Management Fees shall be payable solely out of Gross Revenues
- --------
received during the month in which paid; and provided, further, that such
-------- -------
Management Fees shall be paid in any month only after payment of any accrued and
unpaid First Cash Distributions for such month and for any previous month (in
each case, up to an amount equal to 8.0% per annum of each respective Limited
Partner's unreturned Capital Contribution), and, to the extent that the
Partnership does not have sufficient Cash From Operations in any month to pay
such proportion of all such First Cash Distributions, the payment of such
Management Fees shall be deferred and paid, without interest, in the next
following month in which the Partnership generates sufficient Cash From
Operations for the payment thereof.
(h) Subordinated Remarketing Fees.
-----------------------------
For rendering services in connection with the sale of any Investment, the
Partnership shall pay to the General Partner the applicable Subordinated
Remarketing Fee; provided that:
--------
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<PAGE>
(i) no such Subordinated Remarketing Fee shall be paid in connection with
the sale of any Investment to the extent that the Cash From Sales realized
thereby is reinvested in additional Investments;
(ii) in no event shall any such Subordinated Remarketing Fee be paid prior
to Payout; and
(iii) the General Partner shall not be entitled to receive any amount of
Subordinated Remarketing Fees to the extent that such amount would cause
the total commissions paid to all Persons, in connection with the sale of
such Investments, to exceed a fee for such services which is reasonable,
customary and competitive in light of the size, type and location of such
Investment.
After Payout, any and all Subordinated Remarketing Fees previously earned by the
General Partner shall be paid, without any interest thereon, by the Partnership,
prior to any other distributions to the Partners.
(i) Partnership Expenses.
--------------------
(i) Reimbursement. Except as otherwise provided in this Section 6.4(i),
expenses of the Partnership, other than those incurred and otherwise
reimbursed in accordance with Sections 6.4(b) through (h), shall be billed
directly to and paid by the Partnership.
(ii) Goods and Third-Party Services. The General Partner and any Affiliate
of the General Partner may be reimbursed for the actual cost of goods and
services used for or by the Partnership and obtained by it or them from
non-Affiliates.
(iii) Administrative Services Provided by the General Partner and
Affiliates. Subject to clause (iv) of this Section 6.4(i), the General
Partner and any Affiliate of the General Partner may be reimbursed for
Operating Expenses which are actually incurred by it or them in connection
with the performance or arrangement of administrative services reasonably
necessary, convenient or advisable, in the discretion of the General
Partner, to the prudent operation of the Partnership (including, without
limitation, legal, accounting, remarketing and agency expenses) provided
--------
that the reimbursement for same shall be limited to the lesser of (A) its
or their actual cost of providing same or (B) the amount the Partnership
would be required to pay to non-Affiliates for comparable administrative
services in the same geographic location and provided further, that no
-------- -------
reimbursement is permitted for such services if the General Partner or any
such Affiliate is entitled to compensation in the form of a separate fee
pursuant to other provisions of this Section 6.4.
(iv) Limitations on Reimbursements. Neither the General Partner nor any
Affiliate of the General Partner shall be reimbursed by the Partnership for
amounts expended by it with respect to the following:
(A) salaries, fringe benefits, travel expenses or other
administrative items incurred by or allocated to any Controlling
Person of the General Partner or of any such Affiliate;
(B) expenses for rent, depreciation and utilities or for capital
equipment or other administrative items (other than as specified
respectively in paragraphs (ii) and (iii) of this Section 6.4(i),
above).
6.5 Other Interests of the General Partner and its Affiliates.
The General Partner shall be required to devote only such time to the
affairs of the Partnership as the General Partner shall, in its sole and
absolute discretion, determine in good faith to be necessary for the business
and operations of the Partnership.
The General Partner and any Affiliate of the General Partner may engage in,
or possess an interest in, business ventures (other than the Partnership) of
every kind and description, independently or with others, including, but not
limited to, serving as sponsor or general partner of other Programs and
participating in the equipment leasing and financing businesses, whether or not
such business ventures may be competitive with the business or Investments of
the Partnership. Neither the Partnership nor any Limited Partner shall have any
rights in and to such independent ventures or the income or profits therefrom by
reason of the General Partner's position with the Partnership.
Neither the General Partner nor any Affiliate of the General Partner shall
be obligated to present any particular
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<PAGE>
investment opportunity to the Partnership, and the General Partner and each such
Affiliate shall have the right, subject only to the provisions of the next
following paragraph, to take for its own account (individually or otherwise), or
to recommend to any Affiliated Entity (including the Partnership), any
particular investment opportunity, considering, among other things, the
following factors with respect to itself and each Affiliated Entity:
(a) its own and each Affiliated Entity's general investment
objectives and policies, including, without limitation, cash distribution
objectives and leverage policies;
(b) its own and each Affiliated Entity's existing portfolio,
including the diversification thereof (by type of equipment, by length of
lease term, by industry and by geographic area) and the effect the making
of such investment would have thereon;
(c) the cash available to it and to each Affiliated Entity for the
purpose of making such investment and the length of time such funds have
been available;
(d) its own and each Affiliated Entity's current and long-term
liabilities; and
(e) the estimated income tax consequences of such investment to it
and each Affiliated Entity and to the individual investors participating
therein.
If, considering such factors and any other appropriate factors, the General
Partner determines that any investment opportunity would be equally suitable for
various Affiliated Entities, the General Partner shall make such investment
opportunity available to such Affiliated Entities on a rotation basis, with the
order of priority determined by the date of each Affiliated Entity's initial
closing.
Notwithstanding the foregoing, until all Capital Contributions have been
invested or committed to investment in Investments and Reserves (not exceeding
3% of Gross Offering Proceeds), used to pay permitted Front-End Fees or returned
to the Limited Partners (as provided in Section 8.7, below), the General Partner
and each Affiliate of the General Partner shall present to the Partnership
first, before any other Affiliated Entity (including any Affiliated Entity that
the General Partner or any such Affiliate advises or manages), the opportunity
to purchase any Investment meeting the investment objectives and policies of the
Partnership, other than a Lease relating to:
(i) used equipment previously leased by the General Partner or any such
Affiliate to third parties that becomes available for re-lease;
(ii) groups of items of equipment to be leased on terms providing various
cost recovery terms for various items, where the Partnership may not, in
accordance with this Agreement, purchase all items in the group;
(iii) equipment to be leased to a third party on favorable terms, from a
cost recovery viewpoint, subsequent to the lease by the General Partner or
its Affiliates to the same third party of other items of equipment on
substantially less favorable terms;
(iv) equipment as to which a prospective or existing lessee indicates to
the General Partner or its Affiliate that it will not lease or continue to
lease through the General Partner or such Affiliate unless the General
Partner or such Affiliate acquires and retains such equipment in its own
equipment portfolio; or
(v) equipment subject to a lease that by its terms is not assignable to
an entity such as the Partnership (leases that permit assignment to a
"financial institution" shall not, without more, be deemed assignable to
the Partnership).
In the event of a conflict between two or more Affiliated Entities
(including the Partnership) that are advised or managed by the General Partner
and that are seeking to re-lease or sell similar equipment contemporaneously,
the first opportunity to re-lease or sell equipment shall generally be allocated
to the Affiliated Entity attempting to re-lease or sell equipment that was
subject to the lease that expired first or, if two or more leases expire
simultaneously, the lease which was first to take effect; provided, however,
-------- -------
that the General Partner may, in its discretion, otherwise provide opportunities
to re-lease or sell equipment if such equipment is subject to remarketing
commitments or if there are other circumstances, in the General Partner's
judgment, under which the withholding of such an opportunity would be
inequitable or uneconomic for a particular Affiliated Entity.
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<PAGE>
If the financing available from time to time to two or more Affiliated
Entities (including the Partnership) is less than the aggregate amount then
sought by them, the available financing shall generally be allocated to the
investment entity that has been seeking financing the longest.
Nothing in this Section 6.5 shall be deemed to diminish the General
Partner's overriding fiduciary obligation to the Partnership or to act as a
waiver of any right or remedy the Partnership or other Partners may have in the
event of a breach of such obligation.
Section 7. POWERS AND LIABILITIES OF LIMITED PARTNERS.
7.1 Absence of Control Over Partnership Business.
The Limited Partners hereby consent to the exercise by the General Partner
of the powers conferred on the General Partner by this Agreement. No Limited
Partner shall participate in or have any control over the Partnership's business
or have any right or authority to act for, or to bind or otherwise obligate, the
Partnership (except one who is also the General Partner, and then only in its
capacity as the General Partner). No Limited Partner shall have the right to
have the Partnership dissolved and liquidated or to have all or any part of such
Limited Partner's Capital Contribution or Capital Account returned except as
provided in this Agreement.
7.2 Limited Liability.
The liability of each Limited Partner in such capacity shall be limited to
the amount of such Limited Partner's Capital Contribution and pro rata share of
any undistributed Profits and other assets of the Partnership. Except as may
otherwise be required by law or by this Agreement, after the payment of all
Subscription Monies for the Units purchased by such Limited Partner, no Limited
Partner shall have any further obligations to the Partnership, be subject to any
additional assessment or be required to contribute any additional capital to, or
to loan any funds to, the Partnership.
No Limited Partner shall have any personal liability on account of any
obligations and liabilities of, including any amounts payable by, the
Partnership under or pursuant to, or otherwise in connection with, this
Agreement or the conduct of the business of the Partnership.
Section 8. DISTRIBUTIONS AND ALLOCATIONS.
8.1 Distribution of Distributable Cash From Operations and Distributable
Cash From Sales.
(a) During the Reinvestment Period, the General Partner shall determine in
its sole discretion what portion, if any, of the Partnership's Distributable
Cash From Operations and Distributable Cash From Sales shall be invested and
reinvested in additional Investments and which portion shall be distributed to
the Partners; provided, however, that the General Partner shall not reinvest,
but shall distribute to the extent available, Distributable Cash From Operations
and Distributable Cash From Sales to Limited Partners in an amount equal to the
following amounts for the periods specified (pro rated, as necessary, for
periods of less than one year):
(i) For the period beginning with a Limited Partner's admission to the
Partnership and ending with the expiration or termination of the
Reinvestment Period, each Limited Partner shall be entitled to receive
monthly cash distributions, to the extent that Distributable Cash From
Operations and Distributable Cash From Sales are sufficient for such
purpose. The annual amount of such distributions will be computed by
multiplying 10.75% by each Limited Partner's respective original Capital
Contribution reduced by any portion thereof which has been (A) returned to
such Limited Partner pursuant to Section 8.6, or (B) redeemed by the
Partnership pursuant to Section 10.5, of this Agreement. A ratable portion
(i.e., one-twelfth) of such annual distribution amount shall be payable
monthly; and
Any portion of the monthly distribution amounts described in this clause
(i) which exceeds the sum of Distributable Cash From Operations and
Distributable Cash From Sales for any year (if any) shall be distributable
(if at all) solely at the discretion of the General Partner. Each monthly
cash distribution amount shall be computed as provided in the preceding
sentence on a non-cumulative basis (that is, without increase for any
portion of the monthly cash distribution amount computed pursuant to this
clause (i) which the Partnership is unable to make, and without reduction
for any cash distributions actually made, in any prior period.
(ii) Each Limited Partner is entitled to receive monthly cash distributions
(if the distributions described in paragraph
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<PAGE>
(i) above are not adequate) in amounts which would permit the Limited
Partners to pay federal, state and local income taxes resulting from
Partnership Operations (assuming that all Limited Partners are subject to
income taxation at a 31% cumulative tax rate on taxable distributions for
GAAP purposes). Such distributions will be made, to the extent that
Distributable Cash From Operations and Distributable Cash From Sales are
sufficient for such purpose.
(b) During the Disposition Period, no Available Cash From Operations or
Available Cash From Sales shall be reinvested in additional Investments, and all
Available Cash From Operations and Available Cash From Sales shall be
distributed to the Partners.
(c) Distributions of Distributable Cash From Operations and Distributable
Cash From Sales (collectively, "Distributable Cash") shall be made to the
Partners monthly. Subject to Section 8.1(a), the amount of each such monthly
distribution shall be determined by the General Partner, in its sole discretion,
based upon the amount of the Partnership's then available Distributable Cash and
other funds of the Partnership and the General Partner's estimate of the
Partnership's total Distributable Cash for such Fiscal Year. Prior to Payout,
distributions pursuant to this Section 8.1(c) shall be made 99% to the Limited
Partners and 1% to the General Partner; provided, however, that prior to the
-------- -------
admission to the Partnership of any Limited Partners, such distributions shall
be made 1% to the Original Limited Partner and 99% to the General Partner. After
Payout, distributions pursuant to this Section 8.1(c) shall be tentatively
attributed and distributed 90% to the Limited Partners and 10% to the General
Partner; provided, however, that, if at the time of Payout, each respective
-------- -------
Limited Partner has not yet received total cash distributions pursuant to this
Section 8.1(c) equal to 150% of such Limited Partner's original Capital
Contribution (reduced by any amounts paid to such Limited Partner (i) as a
return of his uninvested Capital Contributions pursuant to Section 8.6 and (ii)
in redemption of his Units pursuant to Section 10.5), distributions shall
continue to be made 99% to the Limited Partners and 1% to the General Partner
until the total cash distributions made to the Limited Partners equal 150% of
the Limited Partners' aggregate original Capital Contributions. The amount
tentatively attributed to the General Partner pursuant to the previous sentence
and not theretofore distributed to the General Partner shall be distributed to
the General Partner, without interest, out of the first Distributable Cash
available to the Partnership after the Limited Partners have received
distributions equal to 150% of their aggregate original Capital Contributions.
(d) Notwithstanding the provisions of Section 8.1(c), distributions of
Distributable Cash made during the Disposition Period shall be made in
accordance with the provisions of Section 11.3.
8.2 Allocations of Profits and Losses.
(a) The Profits and Losses of the Partnership shall be determined for
each Fiscal Year or Fiscal Period.
(b) Except as otherwise provided in this Agreement, whenever a
proportionate part of the Partnership's Profits or Losses is allocated to a
Partner, every item of income, gain, loss or deduction entering into the
computation of such Profits or Losses, or arising from the transactions with
respect to which such Profits or Losses were realized, shall be allocated to
such Partner in the same proportion.
(c) Profits for any Fiscal Period during the Reinvestment Period shall be
allocated to the Partners as follows:
(i) first, 1% to the General Partner and 99% to the Limited Partners
until the Limited Partners have been allocated Profits equal to the excess,
if any, of their aggregate Unpaid Target Distributions over their aggregate
Capital Account balances;
(ii) next, in a manner that will cause (A) the excess of the Limited
Partners' aggregate Capital Account balances over the amount of their
aggregate Unpaid Target Distributions and (B) the General Partner's Capital
Account balance, to be in the ratio of 90% to 10%; and
(iii) thereafter, 90% to the Limited Partners and 10% to the General
Partner.
(d) Profits for any Fiscal Period during the Disposition Period shall be
allocated to the Partners as follows:
(i) first, to the Partners in proportion to and to the extent of the
deficit balances, if any, in their respective Capital Accounts;
(ii) next, 1% to the General Partner and 99% to the Limited Partners until
the Limited Partners have been allocated Profits equal to the excess, if
any, of their aggregate Unpaid Target Distributions over their aggregate
Capital
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Account balances;
(iii) next, in a manner that will cause (A) the excess of the Limited
Partners' aggregate Capital Account balances over the amount of their
aggregate Unpaid Target Distributions and (B) the General Partner's Capital
Account balance, to be in the ratio of 90% to 10%; and
(iv) thereafter, 90% to the Limited Partners and 10% to the General
Partner.
(e) Losses for any Fiscal Period shall be allocated to the Partners as
follows:
(i) first, 1% to the General Partner and 99% to the Limited Partners
until the Limited Partners have been allocated Losses equal to the excess,
if any, of their aggregate Capital Account balances over their aggregate
Adjusted Capital Contributions;
(ii) next, to the Partners in proportion to and to the extent of their
respective remaining positive Capital Account balances, if any; and
(iii) thereafter, 1% to the General Partner and 99% to the Limited
Partners; provided, however, that if and to the extent that an allocation
of Losses to any Limited Partner pursuant to this Section 8.2(e) or Section
8.2(f) would result in any Limited Partner having an Adjusted Capital
Account Deficit, such Losses shall be allocated to all other Partners in
accordance with this Section 8.2(e) and, when no Limited Partner can be
allocated any such Losses without violating the limitation contained in
this proviso, such remaining Losses shall be allocated to the General
Partner.
(f) Special Allocations.
-------------------
The following special allocations shall, except as otherwise provided, be
made prior to allocations in Section 8.2(a)-(e) in the following order:
(i) Minimum Gain Charge-Back. Notwithstanding any other provision of this
------------------------
Section 8, if there is a net decrease in Partnership Minimum Gain or in any
Partner Nonrecourse Debt Minimum Gain during any Fiscal Period, prior to
any other allocation pursuant this Section 8, each Partner shall be
specifically allocated items of Partnership income and gain for such Fiscal
Period (and, if necessary, subsequent Fiscal Periods) in an amount and
manner required by Treas. Reg. Sections 1.704-2(f) and 1.704-2(i)(4) or any
successor provisions. The items to be so allocated shall be determined in
accordance with Treas. Reg. Section 1.704-2(j)(2) or any successor
provision.
(ii) Partnership Nonrecourse Deductions. Partnership Nonrecourse
----------------------------------
Deductions for any Fiscal Period shall be allocated 99% to the Limited
Partners and 1% to the General Partner.
(iii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
------------------------------
any Fiscal Period shall be allocated to the Partner who made or guaranteed
or is otherwise liable with respect to the loan to which such Partner
Nonrecourse Deductions are attributable in accordance with principles of
Treas. Reg. Section 1.704-2(i) or any successor provision.
(iv) Qualified Income Offset. If in any Fiscal Period, any Partner has an
-----------------------
Adjusted Capital Account Deficit, whether resulting from an unexpected
adjustment, allocation or distribution described in Treas. Reg. Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) or otherwise, such Partner shall be
allocate items of Partnership income and gain (consisting of a pro rata
portion of each item of Partnership income, including gross income, and
gain for such Fiscal Period) sufficient to eliminate such Adjusted Capital
Account Deficit as quickly as possible, to the extent required by such
Treasury Regulation. It is the intention of the parties that this
allocation provision constitute a "qualified income offset" within the
meaning of Treas. Reg. Section 1.704-1(b)(2)(ii)(d).
(v) Curative Allocations. The special allocations provided for in the
--------------------
proviso of Section 8.2(e) and in Sections 8.2(f)(i)-(iv) are intended to
comply with certain requirements of Treas. Reg. Sections 1.704-1 and 1.704-
2. To the extent that any of such special allocations shall have been made,
subsequent allocations of income, gains, losses and deductions and items
thereof ("curative allocations") shall be made as soon as possible and in a
manner so as to cause, to the extent possible without violating the
requirements of Treas. Reg. Sections 1.704-1 and 1.704-2, the Partners'
Capital Account balances to be as nearly as possible in the same
proportions in which they would have been
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had such special allocations not occurred. In making such curative
allocations, due regard shall be given to the character of the Profits and
Losses and items thereof that were originally allocated pursuant to the
provision of Sections 8.2(e) and Sections 8.2(f)(i)-(iv) in order to put
the Partners as nearly as possible in the positions in which they would
have been had such special allocations not occurred.
If the General Partner determines, after consultation with Tax
Counsel, that the allocation of any item of Partnership income, gain, loss
or deduction is not specified in this Section 8 (an "unallocated item"), or
that the allocation of any item of Partnership income, gain, loss or
deduction hereunder is clearly inconsistent with the Partners' economic
interests in the Partnership determined by reference to this Agreement, the
general principles of Treas. Reg. Section 1.704-1(b) and the factors set
forth in Treas. Reg. Section 1.704-1(b)(3)(ii) (a "misallocated item"),
then the General Partner may allocate such unallocated items and reallocate
such misallocated items, to reflect such economic interests.
(vi) Special Allocation of State, Local and Foreign Taxes. Any state,
----------------------------------------------------
local or foreign taxes imposed on the Partnership by reason of a Partner
being a citizen, resident or national of such state, locality or foreign
jurisdiction, including any item(s) of taxable income or tax loss resulting
therefrom, shall be specially allocated to such Partner.
(vii) Transactions with Partnership. If, and to the extent that, any
-----------------------------
Partner is deemed to recognize any item of income, gain, loss, deduction or
credit as a result of any transaction between such Partner and the
Partnership pursuant to Code Sections 482, 483, 1272-1274, 7872 or any
similar provision now or hereafter in effect, any corresponding Profits or
Losses or items thereof shall be allocated to the Partner who was charged
with such item.
(viii) Fees and Commissions Paid to General Partner. It is the intent of
--------------------------------------------
the Partnership that any amount paid or deemed paid to the General Partner
as a fee or payment described in Section 6.4 shall be treated as a
"guaranteed payment" or a payment to a partner not acting in his capacity
as a partner pursuant to Section 707(c) of the Code to the extent possible.
If any such fee or payment is deemed to be a distribution to the General
Partner and not a guaranteed payment or a payment to a partner not acting
in his capacity as a partner, the General Partner shall be allocated an
amount of Partnership gross ordinary income equal to such payment.
(ix) Selling Commissions, Underwriting Fees, Acquisition Fees and O & O
------------------------------------------------------------------
Expense Allowance. Selling Commissions, Underwriting Fees, Acquisition Fees
-----------------
and the O & O Expense Allowance shall be allocated 100% to the Limited
Partners. Organizational and Offering Expenses, in excess of Sales
Commissions, Underwriting Fees and the O & O Expense Allowance, shall be
allocated 100% to the General Partner.
8.3 Distributions and Allocations Among the Limited Partners.
(a) Except to the extent otherwise provided herein, all distributions of
Distributable Cash and all allocations of Profits and Losses and items thereof
for any Fiscal Year or Fiscal Period shall be distributed or allocated, as the
case may be, among the Limited Partners in proportion to their respective
numbers of Units. Each distribution of Distributable Cash shall be made to the
Limited Partners (or their respective assignees) of record as of the last day of
the month next preceding the date on which such distribution is made.
(b) All distributions of Distributable Cash and all allocations of
Profits and Losses or items thereof for any Fiscal Year in which any Limited
Partners are admitted to the Partnership, shall be allocated among the Limited
Partners as follows:
(i) first, the Operations and Sales of the Partnership shall be deemed
to have occurred ratably over such Fiscal Year, irrespective of the actual
results of Operations or Sales of the Partnership during or within any
given Segment;
(ii) second, (A) each Limited Partner who was admitted to the Partnership
prior to the commencement of such Fiscal Year shall be deemed to have held
his respective Units commencing as of the first Segment in such Fiscal
Year; (B) each Limited Partner who was admitted to the Partnership as of
the first day of any subsequent Segment in such Fiscal Year in accordance
with Section 5.3(h), shall be deemed to have held his respective Units
commencing with such Segment; and (C) each Limited Partner who was admitted
to the Partnership commencing as of the day following the Initial Closing
Date or the Final Closing Date (where such Initial Closing Date or Final
Closing Date falls on other than the 15th day or last day of a month or
next preceding business day), shall be deemed to have held his respective
Units for a fraction of the Segment within which such Limited Partner was
admitted to the Partnership, determined by dividing the number of days
within such Segment following the Initial Closing Date or Final Closing
Date, as the case may be, by the number of days in such Segment;
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(iii) third, all Profits and Losses for such Fiscal Year shall be allocated
among the Limited Partners in the ratio that the number of Units held by
each Limited Partner multiplied by the number of Segments (pro rated for
fractions of Segments) in such Fiscal Year that such Units were held by
such Limited Partner bears to the sum of that calculation for all Limited
Partners; and
(iv) Third, all monthly distributions of cash made to the Limited Partners
pursuant to Section 8.1(c) shall be distributed among the Limited Partners
in the ratio that the number of Units held by each Limited Partner
multiplied by the number of Segments (pro rated for fractions of Segments)
in the month preceding the month in which the distribution is made that
such Units were held by such Limited Partner bears to the sum of that
calculation for all Limited Partners. If the General Partner determines at
any time that the sum of the monthly distributions made to any Limited
Partner during or with respect to a Fiscal Year does not (or will not)
properly reflect such Limited Partner's share of the total distributions
made or to be made by the Partnership for such Fiscal Year, the General
Partner shall, as soon as practicable, make a supplemental distribution to
such Limited Partner, or withhold from a subsequent distribution that
otherwise would be payable to such Limited Partner, such amount as shall
cause the total distributions to such Limited Partner for such Fiscal Year
to be the proper amount.
(c) In the event of a transfer of a Unit during a Fiscal Year in
accordance with Section 10, the transferor and transferee shall be allocated a
ratable share of Profits and Losses for such Fiscal Year based on the number of
Segments (pro rated for fractions of Segments) in such Fiscal Year that each
held such transferred Units. Monthly distributions made by the Partnership in
accordance with Section 8.1(c) shall be allocated between the transferor and
transferee (and subsequently adjusted, if necessary) in the manner set forth in
clause (iv) and the last sentence of Section 8.3(b).
(d) Each distribution made to a Limited Partner pursuant to Section
8.1(c), 8.6 or 11.3 of this Agreement, any interest on Subscription Monies
relating to such Limited Partner's Units paid to such Limited Partner pursuant
to Section 5.3(k), and any amount paid to such Limited Partner in redemption of
such Limited Partner's Units pursuant to Section 10.5 shall be applied as
follows:
(i) first, in reduction of such Limited Partner's Unpaid Cumulative
Return, to the extent thereof, as determined immediately before such
distribution; and
(ii) then, in reduction of such Limited Partner's Adjusted Capital
Contribution, to the extent thereof, as determined immediately before such
distribution.
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<PAGE>
8.4 Tax Allocations: Code Section 704(c); Revaluations.
(a) In accordance with Code section 704(c) and the Treasury Regulations
thereunder, income, gain, loss, and deduction, and items thereof, with respect
to any property contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to Clause (ii) of the definition of Gross Asset Value herein
and Section 5(h) hereof, subsequent allocations of income, gain, loss and
deduction, and items thereof, with respect to such asset shall take account of
any variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in a manner consistent with the requirements
of Proposed Treas. Reg. Section 1.704-3(a)(4) or the corresponding provision of
final or successor Treasury Regulations.
(c) Any elections or other decisions relating to the allocations required
by clauses (a) and (b) of Section 8.4 shall be made in a manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant to
this clause (c) of Section 8.4 are solely for purposes of federal, state, and
local taxes and shall not affect, or in any way be taken into account in
computing, any Partner's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
8.5 Compliance with NASAA Guidelines Regarding Front-End Fees.
Notwithstanding anything in this Agreement to the contrary, in the event
the Partnership fails, at any time after the expiration of 30 months from the
date of the Prospectus, to comply with the restrictions set forth in Section
6.4(b) through (f) above, the General Partner shall appropriately adjust the
allocations and distributions set forth in this Section 8 so as to comply with
the requirements contained in NASAA Guidelines. No adjustment proposed to be
made pursuant to this Section 8.5 shall require the General Partner to obtain
the consent of the Limited Partners unless such proposed adjustment adversely
effects the allocations or distributions made, or to be made, to any Limited
Partner.
8.6 Return of Uninvested Capital Contribution.
In the event that 100% of Net Offering Proceeds have not been used to make
Investments or committed to Reserves to the extent permitted to be treated as
Investments pursuant to Section 6.1(b)(vii) within the later of (i) twenty-four
(24) months after the Effective Date of the Offering or (ii) 12 months of the
receipt thereof by the Partnership, the amount of such uninvested Net Offering
Proceeds shall be promptly distributed by the Partnership to the Limited
Partners, pro rata based upon their respective number of Units, as a return of
capital, without interest and without reduction for Front-End Fees in respect of
such uninvested Capital Contributions (which distributions shall not in any
event exceed the related Capital Contribution of any Limited Partner). Funds
shall be deemed to have been committed to investment and need not be returned to
a Limited Partner to the extent written agreements in principle, commitment
letters, letters of intent or understanding, option agreements or any similar
contracts or understandings are executed and not terminated during the
applicable twenty-four (24) or twelve (12) month period described above, if such
investments are ultimately consummated within a further period of twelve (12)
months. Funds deemed committed which are not actually so invested within such
twelve (12) month period will be promptly distributed, without interest and
without reduction for Front-End Fees in respect of such uninvested Net Offering
Proceeds, to the Limited Partners on a pro rata basis, as a return of capital.
8.7 Partner's Return of Investment in the Partnership.
Each Limited Partner shall look solely to the assets of the Partnership for
the return of his Capital Contribution and for any other distributions with
respect to his Partnership Interest. If the assets of the Partnership remaining
after payment or discharge, or provision for payment or discharge, of its debts
and liabilities are insufficient to return such Capital Contribution or to make
any other distribution to such Partner, he shall not have any recourse against
the personal assets of any other Partner, except to the limited extent set forth
in Section 6.3, Section 9.3(a) and Section 11.2(a)(iii).
8.8 No Distributions in Kind.
Distributions in kind shall not be permitted except upon dissolution and
liquidation of the Partnership's assets and may only then be made to a
liquidating trust established for the purposes of (a) liquidating the assets
transferred to it and (b) distributing the net cash proceeds of such liquidation
in cash to the Partners in accordance with the provisions of this Agreement.
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<PAGE>
8.9 Partnership Entitled to Withhold.
The Partnership shall at all times be entitled to withhold or make payments
to any governmental authority with respect to any federal, state, local or
foreign tax liability of any Partner arising as a result of such Partner's
participation in the Partnership. Each such amount so withheld or paid shall be
deemed to be a distribution for purposes of Section 8 and Section 11, as the
case may be, to the extent such Partner is then entitled to a distribution. To
the extent that the amount of such withholdings or payments made with respect to
any Partner exceeds the amount to which such Partner is then entitled as a
distribution, the excess shall be treated as a demand loan, bearing interest at
a rate equal to twelve percent (12%) per annum simple interest from the date of
such payment or withholding until such excess is repaid to the Partnership (i)
by deduction from any distributions subsequently payable to such Partner
pursuant to this Agreement or (ii) earlier payment of such excess and interest
by such Partner to the Partnership. Such excess and interest shall, in any case,
be payable not less than 30 days after demand therefore by the General Partner,
which demand shall be made only if the General Partner determines that such
Partner is not likely to be entitled to distributions within 12 months from the
date of such withholding or payment by the Partnership in an amount sufficient
to pay such excess and interest. The withholdings and payments referred to in
this Section 8.9 shall be made at the maximum applicable statutory rate under
the applicable tax law unless the General Partner shall have received an opinion
of counsel or other evidence, satisfactory to the General Partner, to the effect
that a lower rate is applicable, or that no withholding or payment is required.
Section 9. WITHDRAWAL OF GENERAL PARTNER.
9.1 Voluntary Withdrawal.
The General Partner may not voluntarily withdraw as a General Partner from
the Partnership unless (a) the Limited Partners have received 60 days' advance
written notice of the General Partner's intention to withdraw, (b) the
Partnership shall have received an opinion of Tax Counsel to the Partnership to
the effect that such withdrawal will not constitute a termination of the
Partnership or otherwise materially adversely affect the status of the
Partnership for federal income tax purposes and (c) a Substitute General Partner
shall have been selected and such Substitute General Partner (i) shall have
expressed a willingness to be admitted to the Partnership, (ii) shall have
received the specific written Consent of the Majority Interest to such admission
and (iii) shall have a Net Worth sufficient, in the opinion of Tax Counsel to
the Partnership, for the Partnership to continue to be classified as a
partnership for federal income tax purposes and to satisfy the net worth
requirements for "sponsors" under the NASAA Guidelines.
9.2 Involuntary Withdrawal.
The General Partner shall be deemed to have involuntarily withdrawn as a
General Partner from the Partnership upon the removal of the General Partner
pursuant to the Consent of the Majority Interest or upon the occurrence of any
other event that constitutes an event of withdrawal under the Delaware Act as
then in effect.
For purposes of this Section 9.2 and Section 13, neither the General
Partner nor any Affiliate of the General Partner will participate in any vote by
the Limited Partners to (a) involuntarily remove the General Partner or (b)
cancel any management or service contract with the General Partner or any such
Affiliate.
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<PAGE>
9.3 Consequences of Withdrawal.
(a) Upon the voluntary withdrawal of the General Partner in accordance
with Section 9.1, the General Partner, or its estate, successors or legal
representatives, shall be entitled to receive from the Partnership (i) an amount
equal to the positive balance, if any, in the General Partner's Capital Account
(as adjusted to the date of such withdrawal by allocation pursuant to Section 8
of any Profits or Losses or other allocable items realized by the Partnership
through such date of Withdrawal and any unrealized gains and losses inherent in
the Partnership's assets as of such date), provided, however, that in no event
-------- -------
shall such amount exceed the fair market value of the Partnership Interest then
held by the General Partner, as calculated in accordance with the provisions of
clause (c) of this Section 9.3, plus or minus, as the case may be, (ii) an
amount equal to the difference between (A) any amounts due and owing to the
General Partner by the Partnership and (B) any amounts due and owing by the
General Partner to the Partnership. The right of the General Partner, or its
estate, successors or legal representatives, to receipt of such amount shall be
subject to (x) any claim for damages by the Partnership or any Partner against
the General Partner, or its estate, successors or legal representatives, that
such withdrawal shall have been made in contravention of this Agreement and (y)
if the General Partner has a negative balance in its Capital Account after
making the adjustments provided for in the first sentence of this clause (a) of
Section 9.3, payment to the Partnership of an amount equal to the lesser of (1)
the amount of such deficit balance or (2) the excess of 1.01% of the total
Capital Contributions of the Limited Partners over the capital previously
contributed by the General Partner.
(b) Upon involuntary withdrawal of the General Partner as such from the
Partnership in accordance with Section 9.2, the Partnership shall pay to the
General Partner (i) the fair market value of the Partnership Interest then held
by the General Partner, as calculated in the manner set forth in clause (c) of
this Section 9.3, plus or minus, as the case may be, (ii) an amount equal to the
difference between (A) any amounts due and owing to such withdrawn General
Partner by the Partnership and (B) any amounts due and owing by such withdrawn
General Partner to the Partnership, and, upon such payment, the General
Partner's Interest in the income, losses, distributions and capital of the
Partnership shall be terminated.
(c) For purposes of this Section 9.3, the fair market value of the
withdrawn General Partner's Interest shall be determined, in good faith, by such
General Partner and the Partnership, or, if they cannot agree, by arbitration in
accordance with the then current rules of the American Arbitration Association
by two independent appraisers, one selected by the withdrawn General Partner and
one by the Limited Partners. In the event that such two appraisers are unable to
agree on the value of the withdrawn General Partner's Interest within 90 days,
they shall within 20 days thereafter jointly appoint a third independent
appraiser whose determination shall be final and binding; provided, however,
-------- -------
that if the two appraisers are unable to agree within such 20 days on a third
appraiser, the third appraiser shall be selected by the American Arbitration
Association. The expense of arbitration shall be borne equally by the withdrawn
General Partner and the Partnership.
(d) The method of payment to the General Partner upon withdrawal, whether
voluntary or involuntary, must be fair and must protect the solvency and
liquidity of the Partnership. When the withdrawal is voluntary, the method of
payment will be presumed to be fair if it provides for a non-interest-bearing,
unsecured promissory note of the Partnership, with principal payable, if at all,
from distributions that the withdrawn General Partner otherwise would have
received under the Partnership Agreement had the General Partner not withdrawn.
When the withdrawal is involuntary, the method of payment will be presumed to be
fair if it provides for a promissory note bearing interest on the outstanding
principal amount thereof at the lesser of (i) the rate of interest (inclusive of
any points or other loan charges) which the Partnership would be required to pay
to an unrelated bank or commercial lending institution for an unsecured, 60
month loan of like amount or (ii) the rate of interest from time to time
announced by The Chase Manhattan Bank (National Association) at its principal
lending offices in New York, New York as its prime lending rate plus 3% and
providing for repayments of principal thereunder in sixty (60) equal monthly
installments, together with accrued but unpaid interest.
9.4 Liability of Withdrawn General Partner.
If the business of the Partnership is continued after withdrawal of the
General Partner, the General Partner, or its estate, successors or legal
representatives, shall remain liable for all obligations and liabilities
incurred by it or by the Partnership while it was acting in the capacity of
General Partner and for which it was liable as General Partner, but shall be
free of any obligation or liability incurred on account of or arising from the
activities of the Partnership from and after the time such withdrawal shall have
become effective.
9.5 Continuation of Partnership Business.
In the event that the General Partner withdraws from the Partnership, the
General Partner, or its estate, successors or
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<PAGE>
legal representatives, shall deliver to the Limited Partners Notice stating the
reasons for such withdrawal. If, within 90 days following such withdrawal, any
Person shall be admitted to the Partnership as a Substitute General Partner,
such Substitute General Partner shall execute a counterpart of this Agreement
and the business of the Partnership shall continue. If no Substitute General
Partner shall have been so admitted to the Partnership within 90 days following
the date of the General Partner's withdrawal, then the Partnership shall be
dissolved.
Section 10. TRANSFER OF UNITS.
10.1 Withdrawal of a Limited Partner.
A Limited Partner may withdraw from the Partnership only by Assigning or
having redeemed all Units owned by such Limited Partner in accordance with this
Section 10. The withdrawal of a Limited Partner shall not dissolve or terminate
the Partnership. In the event of the withdrawal of any Limited Partner because
of death, legal incompetence, dissolution or other termination, the estate,
legal representative or successor of such Limited Partner shall be deemed to be
the Assignee of the Partnership Interest of such Limited Partner and may become
a Substitute Limited Partner upon compliance with the provisions of Section
10.3.
10.2 Assignment.
(a) Subject to the provisions of Sections 10.2(b) and (c) and 10.3 of
this Agreement, any Limited Partner may Assign all or any portion of the Units
owned by such Limited Partner to any Person (the "Assignee"); provided that
--------
(i) such Limited Partner and such Assignee shall each execute a written
Assignment instrument, which shall:
(A) set forth the terms of such Assignment;
(B) in the case of assignments other than by operation of law,
state the intention of such Limited Partner that such Assignee
shall become a Substitute Limited Partner and, in all cases,
evidence the acceptance by the Assignee of all of the terms and
provisions of this Agreement;
(C) include a representation by both such Limited Partner and
such Assignee that such Assignment was made in accordance with all
applicable laws and regulations (including, without limitation,
such minimum investment and investor suitability requirements as
may then be applicable under state securities laws); and
(D) otherwise be satisfactory in form and substance to the
General Partner; and
(ii) such Assignee shall pay to the Partnership an aggregate amount, not
exceeding $150.00, of expenses reasonably incurred by the Partnership in
connection with such Assignment.
(b) Notwithstanding the foregoing, unless the General Partner shall
specifically Consent, no Units may be Assigned:
(i) to a minor or incompetent (unless a guardian, custodian or
conservator has been appointed to handle the affairs of such Person);
(ii) to any Person if, in the Opinion of Tax Counsel, such Assignment
would result in the termination of the Partnership's taxable year or its
status as a partnership for federal income tax purposes, provided that the
--------
Partnership may permit such Assignment to become effective if and when, in
the opinion of Tax Counsel, such Assignment would no longer result in the
termination of the Partnership's taxable year or its status as a
partnership for federal income tax purposes;
(iii) to any Person if such Assignment would affect the Partnership's
existence or qualification as a limited partnership under the Delaware Act
or the applicable laws of any other jurisdiction in which the Partnership
is then conducting business;
(iv) to any Person not permitted to be an Assignee under applicable law,
including, without limitation, applicable federal and state securities
laws;
(v) if such Assignment would result in the transfer of a Partnership
Interest representing less than twenty-five (25)
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Units, or ten (10) Units in the case of a Qualified Plan (unless such
Assignment is of the entire Partnership Interest owned by such Limited
Partner);
(vi) if such Assignment would result in the retention by such Limited
Partner of a portion of its Partnership Interest representing less than the
greater of (A) twenty-five (25) Units, or ten (10) Units in the case of a
Qualified Plan, and (B) the minimum number of Units required to be
purchased under minimum investment standards applicable to an initial
purchase of Units by such Limited Partner;
(vii) if, in the reasonable belief of the General Partner, such Assignment
might violate applicable law;
(viii) if the effect of such Assignment would be to cause the "equity
participation" in the Partnership by "benefit plan investors" (both within
the meaning of DOL Reg. Section 2510.3-101(f)) to equal or exceed 25%; or
(ix) if such transfer would cause an impermissible percentage of Units to
be owned by non-United States citizens.
Any attempt to make any Assignment of Units in violation of this Section
10.2(b) shall be null and void ab initio.
(c) So long as there are adverse federal income tax consequences from
being treated as a "publicly traded partnership" for federal income tax
purposes, the General Partner shall not permit any interest in a Unit to be
Assigned on a secondary public market (or a substantial equivalent thereof) as
defined under the Code and any Treasury Regulations or published notices
promulgated thereunder (a "Secondary Market") and, if the General Partner
determines in its sole and absolute discretion, that a proposed Assignment was
effected on a Secondary Market, the Partnership and the General Partner have the
right to refuse to recognize any such proposed Assignment and to take any action
deemed necessary or appropriate in the General Partner's reasonable discretion
so that such proposed Assignment is not, in fact, recognized. For purposes of
this Section 10.2(c), any Assignment which results in a failure to meet the
"safe-harbor" provisions of Notice 88-75 (July 5, 1988) issued by the IRS, or
any substitute safe-harbor provisions subsequently established by Treasury
Regulations or published notices, shall be treated as causing the Units to be
publicly traded. The Limited Partners agree to provide all information
respecting Assignments, which the General Partner deems necessary in order to
determine whether a proposed transfer occurred or will occur on a Secondary
Market.
(d) Assignments made in accordance with this Section 10.2 shall be
effective for record purposes and for purposes of Section 8 as of the first day
of the Segment following the date upon which all of the conditions of this
Section 10.2 shall have been satisfied.
10.3 Substitution.
(a) An Assignee of a Limited Partner shall be admitted to the
Partnership as a Substitute Limited Partner only if:
(i) the General Partner has reasonably determined that all conditions
specified in Section 10.2 have been satisfied and that no adverse effect to
the Partnership does or may result from such admission; and
(ii) such Assignee shall have executed a transfer agreement and such
other forms, including a power of attorney to the effect required by
Section 15, as the General Partner reasonably may require to determine
compliance with this Section 10.
(b) An Assignee of Units who does not become a Substitute Limited
Partner in accordance with this Section 10.3 and who desires to make a further
Assignment of his Units shall be subject to all the provisions of Sections 10.2,
10.3 and 10.4 to the same extent and in the same manner as a Limited Partner
desiring to make an Assignment of his Units. Failure or refusal of the General
Partner to admit an Assignee as a Substitute Limited Partner shall in no way
affect the right of such Assignee to receive distributions from Distributable
Cash From Operations and Distributable Cash From Sales and the share of the
Profits or Losses for Tax Purposes to which his predecessor in interest would
have been entitled in accordance with Section 8.
10.4 Status of an Assigning Limited Partner.
Any Limited Partner that shall Assign the entire Partnership Interest owned
by such Limited Partner to an Assignee who shall become a Substitute Limited
Partner shall cease to be a Limited Partner in the Partnership and shall no
longer have any of the rights or privileges of a Limited Partner in the
Partnership.
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10.5 Limited Right of Presentment for Redemption of Units.
(a) Commencing with the second full calendar quarter following the
Final Closing Date and at any time and from time to time thereafter until
termination of the Partnership, any Limited Partner (other than an Affiliated
Limited Partner) may request that the Partnership redeem, and, subject to the
availability of funds in accordance with clause (b) below and the other
provisions of this Section 10.5 and provided that the Partnership shall not, in
any calendar year, redeem Partnership Interests that, in the aggregate, exceed
2% of the total Partnership Interests outstanding as of the last day of such
year, with the prior Consent of the General Partner, the Partnership shall
redeem, for cash, up to 100% of the Partnership Interest of such Limited
Partner, at the Applicable Redemption Price. The Partnership shall be under no
obligation to redeem Units of a Limited Partner and shall do so only in the sole
and absolute discretion of the General Partner.
(b) No reserves shall be established by the Partnership for the
redemption of Units. The availability of funds for the redemption of any Unit
shall be subject to the availability of sufficient Distributable Cash.
Furthermore, Units may be redeemed only if such redemption would not impair the
capital or the Operations of the Partnership and would not result in the
termination under the Code of the Partnership's taxable year or of its federal
income tax status as a partnership.
(c) A Limited Partner desiring to have a portion or all of his Units
redeemed shall submit a written request to the General Partner on a form
approved by the General Partner duly signed by all owners of such Units on the
books of the Partnership. Redemption requests hereunder shall be deemed given on
the earlier of the date the same is (i) personally delivered with receipt
acknowledged, or (ii) mailed by certified mail, return receipt requested,
postage prepaid, at the General Partner's address set forth herein. Requests
arising from death, major medical expense and family emergency related to
disability or a material loss of family income, collectively "Hardship
Redemptions" shall be treated as having been received at 12:01 A.M. EST and all
other redemption requests shall be deemed received with the start of the
business day during which received. The General Partner shall promptly accept or
deny each redemption request. The General Partner shall, in its sole discretion,
decide whether a redemption is in the best interests of the Partnership.
(d) In the event that the General Partner receives requests for the
Partnership to redeem more Units than there are funds sufficient to redeem, the
General Partner shall honor redemption requests in the order in which duly
executed and supported redemption requests are received. The General Partner
shall use its reasonable efforts to honor requests for redemptions of Units with
the same request date first as to Hardship Redemptions, second so as to provide
liquidity for IRAs or Qualified Plans to meet required distributions and finally
as to all other redemption requests.
(e) Within 30 days following the date upon which the General Partner
receives a written request from any Limited Partner to redeem Units held by such
Limited Partner, the General Partner shall deliver written notice to such
Limited Partner indicating (i) the number, if any, of such Units to be redeemed
and (ii) if appropriate, the date of redemption thereof, which shall be a date
within 30 days following the date of such notice, and the Applicable Redemption
Price with respect thereto. Not less than ten (10) days prior to the redemption
date specified in the Partnership's notice, the Limited Partner requesting
redemption shall deliver to the Partnership all transfer instruments and other
documents reasonably requested by the Partnership to evidence such redemption
and the Partnership shall pay to such Limited Partner the Applicable Redemption
Price per Unit redeemed. In the event that all Units of any Limited Partner are
so redeemed, such Limited Partner shall be deemed to have withdrawn from the
Partnership and shall, from and after the date of the redemption of all Units of
such Limited Partner, cease to have the rights of a Limited Partner.
Section 11. DISSOLUTION AND WINDING-UP.
11.1 Events Causing Dissolution.
The Partnership shall be dissolved upon the happening of any of the
following events (each a "Dissolution Event"):
(a) the withdrawal of the General Partner, unless a Substitute
General Partner shall have been admitted to the Partnership in accordance with
Section 9.5; or
(b) the voluntary dissolution of the Partnership (i) by the General
Partner with the Consent of the Majority Interest or (ii) subject to Section 13,
by the Consent of the Majority Interest without action by the General Partner;
or
(c) the Sale of all or substantially all of the assets of the
Partnership (which Sale prior to the end of the Reinvestment Period requires the
Consent of the Majority Interest); or
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(d) the expiration of the Partnership term specified in Section 4 of
this Agreement; or
(e) the Operations of the Partnership shall cease to constitute legal
activities under the Delaware Act or any other applicable law; or
(f) any other event which causes the dissolution or winding-up of the
Partnership under the Delaware Act to the extent not otherwise provided herein.
11.2 Winding Up of the Partnership; Capital Contribution by the
General Partner Upon Dissolution.
(a) Upon the occurrence of a Dissolution Event, the winding-up of the
Partnership and the termination of its existence shall be accomplished as
follows:
(i) the General Partner (or if there shall be none, such
other Person as shall be selected by the Consent of the Majority
Interest, or if no such other Person is so selected, such other Person
as is required by law to wind up the affairs of the Partnership, which
Person, in either event, may exercise all of the powers granted to the
General Partner herein and is hereby authorized to do any and all acts
and things authorized by law and by this Agreement for such purposes
and any and all such other acts or things consistent therewith as may
be expressly authorized by the Majority Interest) shall proceed with
the liquidation of the Partnership (including, without limitation, the
Sale of any remaining Investments and cancellation of the Certificate
of Limited Partnership), and is hereby authorized to adopt such plan,
method or procedure as may be deemed reasonable by the General Partner
(or such other Person effecting the winding up) to effectuate an
orderly winding-up;
(ii) all Profits or Losses or items thereof and all amounts
required to be specially allocated pursuant to Section 8.2(f) for the
period prior to final termination shall be credited or charged, as the
case may be, to the Partners in accordance with Section 8;
(iii) in the event that, after all requirements of clauses (i)
and (ii) of this Section 11.2(a) shall have been accomplished, the
General Partner shall have a deficit balance in its Capital Account,
the General Partner shall contribute within thirty (30) days to the
Partnership as a Capital Contribution an amount equal to the lesser of
(A) the amount of such deficit balance or (B) the excess of 1.01% of
the total Capital Contributions of the Limited Partners over the
capital previously contributed by the General Partner (for this
purpose, any payments made by the General Partner as co-signatory or
guarantor of any of the indebtedness of the Partnership and not yet
reimbursed to the General Partner at the time of dissolution of the
Partnership and any amounts due and unpaid to the General Partner on,
under or with respect to any Partnership Loans at the time of such
dissolution shall be deemed to be Capital Contributions by the General
Partner to the Partnership and any obligation of the Partnership to
reimburse or repay such amounts shall thereupon cease);
(iv) the proceeds from Sales and all other assets of the
Partnership shall be applied and distributed in liquidation as
provided in Section 11.3; and
(v) the General Partner (or such other Person effecting the
winding up) shall file such certificates and other documents as shall
be required by the Delaware Act, the Code and any other applicable
laws to terminate the Partnership.
(b) If the winding-up of the Partnership is effected by the General
Partner, the General Partner shall be compensated for its services in connection
therewith as provided in Section 6.4 of this Agreement and, if such winding up
is effected by any such other Person (whether selected by the Majority Interest
or as required by law), such other Person shall be compensated for its services
in connection therewith in an amount not in excess of the amount customarily
paid to non-affiliated third parties rendering similar services in respect of
similar entities in the same geographic location.
11.3 Application of Liquidation Proceeds Upon Dissolution.
Following the occurrence of any Dissolution Event, the proceeds of
liquidation and the other assets of the Partnership shall be applied as follows
and in the following order of priority:
(a) first, to the payment of creditors of the Partnership in order of
priority as provided by law, except obligations to Partners or their Affiliates;
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(b) next, to the setting up of any reserve that the General Partner
(or such other Person effecting the winding-up) shall determine is reasonably
necessary for any contingent or unforeseen liability or obligation of the
Partnership or the Partners; such reserve may, in the sole and absolute
discretion of the General Partner (or such other Person effecting the winding
up) be paid over to an escrow agent selected by it to be held in escrow for the
purpose of disbursing such reserve in payment of any of the aforementioned
contingencies, and at the expiration of such period as the General Partner (or
such other Person effecting the winding up) may deem advisable, to distribute
the balance thereafter remaining as provided in clauses (c)-(e) of this Section
11.3.
(c) next, to the payment of all obligations to the Partners in
proportion to and to the extent of advances made by each Partner pursuant to the
provisions of this Agreement;
(d) next, to the payment of all reimbursements to which the General
Partner or any Affiliate of the General Partner may be entitled pursuant to this
Agreement; and
(e) thereafter, to the Partners in proportion to and to the extent of
the positive balances of their Capital Accounts.
11.4 No Recourse Against Other Partners.
Following the occurrence of any Dissolution Event, each Limited
Partner shall look solely to the assets of the Partnership for the return of,
and any return on, such Limited Partner's Capital Contribution. If, after the
complete payment and discharge of all debts, liabilities and other obligations
of the Partnership, the assets of the Partnership are insufficient to provide
the return of, or a return on, the Capital Contribution of any Limited Partner,
such Limited Partner shall have no recourse against any other Limited Partner or
the General Partner, except to the extent that the General Partner is obligated
to make an additional Capital Contribution to the Partnership pursuant to
Section 11.2(a)(iii) hereof.
Section 12. FISCAL MATTERS.
12.1 Title to Property and Bank Accounts.
Except to the extent that trustees, nominees or other agents are
utilized as permitted by Section 6.1(b)(ii)(F), all Investments and other assets
of the Partnership shall be held in the name of the Partnership. The funds of
the Partnership shall be deposited in the name of the Partnership in such bank
account or accounts as shall be designated by the General Partner, and
withdrawals therefrom shall be made upon the signature of the General Partner or
such Person or Persons as shall be designated in writing by the General Partner.
The funds of the Partnership shall not be commingled with the funds of any other
Person.
12.2 Maintenance of and Access to Basic Partnership Documents.
(a) The General Partner shall maintain at the Partnership's
principal office, the following documents:
(i) the Participant List;
(ii) a copy of the Certificate of Limited Partnership and all
amendments thereto, together with executed copies of any powers of
attorney pursuant to which the Certificate or any such amendment has
been executed;
(iii) copies of this Agreement and any amendments hereto;
(iv) copies of the audited financial statements of the Partnership
for the three most recently completed Fiscal Years, including, in each
case, the balance sheet and related statements of operations, cash
flows and changes in Partners' equity at or for such Fiscal Year,
together with the report of the Partnership's independent auditors
with respect thereto;
(v) copies of the Partnership's federal, state and local income tax
returns and reports, if any, for the three most recently completed
Fiscal Years;
(vi) records as required by applicable tax authorities including
those specifically required to be maintained by "tax shelters", if so
required by the Partnership; and
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(vii) investor suitability records for Units sold by any Affiliate of
the General Partner.
(b) Each Limited Partner and his designated representative shall be
given access to all of the foregoing records of the Partnership and such other
records of the Partnership which relate to business affairs and financial
condition of the Partnership, and may inspect the same and make copies of the
same (subject, in the case of copying the Participant's List, to compliance with
clause (c) of this Section 12.2) at such Limited Partner's expense, during
normal business hours upon reasonable advance written notice to the General
Partner, which notice shall specify the date and time of the intended visit and
identify with reasonable specificity the documents which such Limited Partner or
its representative will wish to examine or copy or both.
(c) A copy of the Participant List shall be mailed to any Limited
Partner making written request for the Participant List within ten (10) days of
such request (or, if later, within seven (7) days of the Partnership's receipt
of such request); provided that the General Partner may request, and shall be
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entitled to first receive, (i) reimbursement of the reasonable cost of copying
and mailing of the Participant List to the Limited Partner, and (ii) a
representation from such Limited Partner that the Participant List is not being
requested for a commercial purpose unrelated to such Limited Partner's interest
as a Limited Partner relative to the affairs of the Partnership. The purposes
for which a Limited Partner may request a copy of the Participant List include,
without limitation, matters relating to the Limited Partners' voting rights
under this Agreement and the exercise of Limited Partners' proxy rights under
federal or state securities laws.
(d) If the General Partner refuses or neglects to (i) permit a
Limited Partner or his duly authorized representative to examine the Participant
List (as provided in Paragraph (b) of this Section 12.2) or (ii) produce and
mail a copy of the Participant List within ten (10) days after such request (or,
if later, within seven (7) days of the Partnership's receipt of the applicable
Limited Partner's written request) (as provided in Paragraph (c) of this Section
12.2), the General Partner shall be liable to such Limited Partner for the
costs, including attorneys' fees, incurred by such Limited Partner to compel
production of the Participant List, and for the actual damages suffered by such
Limited Partner by reason of such refusal or neglect; provided, that it shall be
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a defense to liability under this clause (d) that (x) the requesting Limited
Partner has failed or refused to make the representation described in clause
(c)(ii) of this Section 12.2 after being requested to do so by the General
Partner or (y) the actual purpose and reason for such Limited Partner's requests
for inspection or for a copy of the Participant List is to secure such List for
the purpose of (1) selling, or reproducing and selling, such List or any portion
of the information contained therein, or (2) using such List or any of such
information for a commercial purpose other than in the interest of the Limited
Partner relative to the affairs of the Partnership. The remedies provided under
this Section 12.2 to Limited Partners requesting copies of the Participant List
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.
12.3 Financial Books and Accounting.
The General Partner shall keep, or cause to be kept, complete and
accurate financial books and records with respect to the business and affairs of
the Partnership. Except to the extent otherwise required by the accounting
methods adopted by the Partnership for federal income tax purposes, such books
and records shall be kept on an accrual basis and all financial statements of
the Partnership shall be prepared for each Fiscal Year in accordance with
generally accepted accounting principles as applied within the United States of
America.
12.4 Fiscal Year.
Except as may otherwise be determined from time to time by the General
Partner (in a manner which is consistent with the Code and the Treasury
Regulations thereunder or is consented to by the IRS), the Fiscal Year of the
Partnership for both federal income tax and financial reporting purposes shall
end on December 31 of each year.
12.5 Reports.
(a) Quarterly Reports. Within 60 days after the end of each of the
first three Fiscal Quarters of each Fiscal Year, the General Partner shall send,
to each Person who was a Limited Partner at any time during such Fiscal Quarter,
the following written materials:
(i) a report containing the same financial information as is
contained in the Partnership's quarterly report on Form 10-Q filed
with the Commission under the Securities Exchange Act of 1934, as
amended, which shall include unaudited financial statements for the
Partnership at and for such Fiscal Quarter, including a balance sheet
and related
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statements of operations, cash flows and changes in Partners' equity,
all of which financial statements shall be prepared in accordance with
Section 12.3;
(ii) a tabular summary, prepared by the General Partner, with respect
to the fees and other compensation and costs and expenses which were
paid or reimbursed by the Partnership to the Sponsor during such
Fiscal Quarter, identified and properly allocated as to type and
amount. Such tabulation shall (A) include a detailed statement
identifying any services rendered or to be rendered to the Partnership
and the compensation received therefor and (B) summarize the terms and
conditions of any contract, which was not filed as an exhibit to the
Registration Statement, as amended and in effect as on the Effective
Date. The requirement for such summary shall not be circumvented by
lump-sum payments to non-Affiliates who then disburse the funds to, or
for the benefit of, the Sponsor; and
(iii) until all Capital Contributions have been invested or committed
to investment in Investments and Reserves (not exceeding 3% of Gross
Offering Proceeds), used to pay permitted Front-End Fees or returned
to the Limited Partners (as provided in Section 8.7, above), a special
report concerning all Investments made during such Fiscal Quarter
which shall include (A) a description of the types of Equipment
acquired and Financing Transactions made, (B) the total Purchase Price
paid for such categories of Investments, (C) the amounts of Capital
Contributions and indebtedness used to acquire such Investments, (D)
the Acquisition Fees and Acquisition Expenses paid (identified by
party) in connection therewith and (E) the amount of Capital
Contributions, if any, which remain unexpended and uncommitted to
pending Investments as of the end of such Fiscal Quarter.
(b) ANNUAL REPORTS. Within 120 days after the end of each Fiscal
Year, the General Partner shall send to each Person who was a Limited Partner at
any time during such Fiscal Year the following written materials:
(i) financial statements for the Partnership for such Fiscal Year,
including a balance sheet as of the end of such Fiscal Year and
related statements of operations, cash flows and changes in Partners'
equity, which shall be prepared in accordance with Section 12.3 and
shall be accompanied by an auditor's report containing an opinion of
the Accountants;
(ii) an analysis, prepared by the General Partner (which need not be
audited, but shall be reviewed, by the Accountants), of distributions
made to the General Partner and the Limited Partners during such
Fiscal Year separately identifying the portion (if any) of such
distributions from:
(A) Cash Flow during such period;
(B) Cash Flows from prior periods;
(C) Cash From Sales;
(D) Capital Contributions originally used to establish a
Reserve;
(iii) a status report with respect to each piece of Equipment and each
Financing Transaction which individually represents at least 10% of
the aggregate Purchase Price of the Partnership's Investments held at
the end of such Fiscal Year, which report shall state:
(A) the condition of each such item of Equipment and of any
personal property securing any Financing Transaction to which
such report applies;
(B) how such Equipment was being utilized as of the end of
such Fiscal Year (i.e., leased, operated directly by the
Partnership or held for lease, repair or sale);
(C) the remaining term of any Lease to which such Equipment
is subject;
(D) the projected or intended use of such Equipment during
the next following Fiscal Year;
(E) the method used to determine values set forth therein;
(F) such other information as may be relevant to the value or
use of such Equipment or any personal property securing any
such Financing Transaction as the General Partner, in good
faith, deems appropriate;
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(iv) the annual report shall contain a breakdown of all fees and
other compensation paid, and all costs and expenses reimbursed, to the
Sponsor by the Partnership during such Fiscal Year identified (and
properly allocated) as to type and amount:
(A) In the case of any fees and other compensation, such
breakdown shall identify the services rendered or to be
rendered to the Partnership and the compensation therefor and
shall summarize the terms and conditions of any contract which
was not filed as an exhibit to the Registration Statement, as
amended and in effect on the Effective Date. The requirement
for such information shall not be circumvented by lump-sum
payments to non-Affiliates who then disburse the funds to, or
for the benefit of, the Sponsor;
(B) In the case of reimbursed costs and expenses, the General
Partner shall also prepare an allocation of the total amount
of all such items and shall include support for such
allocation to demonstrate how the Partnership's portion of
such total amounts were allocated between the Partnership and
any other Programs in accordance with this Agreement and the
respective governing agreements of such other Programs. Such
cost and expense allocation shall be reviewed by the
Accountants in connection with their audit of the financial
statements of the Partnership for such Fiscal Year in
accordance with the American Institute of Certified Public
Accountants United States Auditing standards relating to
special reports and such Accountants shall state that, in
connection with the performance of such audit, such
Accountants reviewed, at a minimum, the time records of, and
the nature of the work performed by, individual employees of
the Sponsor, the cost of whose services were reimbursed; and
(C) The additional costs of the special review required by
this clause will be itemized by the Accountants on a Program
by Program basis and may be reimbursed to the Sponsor by the
Partnership in accordance with this subparagraph only to the
extent such reimbursement, when added to the cost for all
administrative services rendered, does not exceed the
competitive rate for such services as determined in such
report;
(v) until all Capital Contributions have been invested or committed
to investment in Investments and Reserves (not exceeding 3% of Gross
Offering Proceeds), used to pay permitted Front-End Fees or returned
to the Limited Partners (as provided in Section 8.7, above), a special
report concerning all Investments made during such Fiscal Year which
shall include (A) a description of the types of Equipment acquired or
Financing Transactions made, (B) the total Purchase Price paid for
such categories of Investments, (C) the amounts of Capital
Contributions and indebtedness used to acquire such Investments, (D)
the Acquisition Fees and Acquisition Expenses paid (identified by
party) in connection therewith and (E) the amount of Capital
Contributions, if any, which remain unexpended and uncommitted to
pending Investments as of the end of such Fiscal Year.
12.6 Tax Returns and Tax Information.
The General Partner shall:
(a) prepare or cause the Accountants to prepare, in accordance with
applicable laws and regulations, the tax returns (federal, state, local and
foreign, if any) of the Partnership for each Fiscal Year within 75 days after
the end of such Fiscal Year; and
(b) deliver to each Partner by March 15 following each Fiscal Year a
Form K-1 or other statement setting forth such Partner's share of the
Partnership's income, gains, losses, deductions, and items thereof, and credits
if any, for such Fiscal Year.
12.7 Accounting Decisions.
All decisions as to accounting matters, except as specifically
provided to the contrary herein, shall be made by the General Partner in
accordance with the accounting methods adopted by the Partnership for federal
income tax purposes or otherwise in accordance with generally accepted
accounting principles. Such decisions must be acceptable to the Accountants, and
the General Partner may rely upon the advice of the Accountants as to whether
such decisions are in accordance with the methods adopted by the Partnership for
federal income tax purposes or generally accepted accounting principles.
12.8 Federal Tax Elections.
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The Partnership, in the sole and absolute discretion of the General
Partner, may make elections for federal tax purposes as follows:
(a) In case of a transfer of all or part of the Partnership Interest
of a Partner, the Partnership, in the absolute discretion of the General
Partner, may timely elect pursuant to Section 754 of the Code (or corresponding
provisions of future law), and pursuant to similar provisions of applicable
state or local income tax laws, to adjust the basis of the assets of the
Partnership. In such event, any basis adjustment attributable to such election
shall be allocated solely to the transferee.
(b) All other elections, including but not limited to the adoption of
accelerated depreciation and cost recovery methods, required or permitted to be
made by the Partnership under the Code shall be made by the General Partner in
such manner as will, in the opinion of the General Partner (as advised by Tax
Counsel or the Accountants as the General Partner deems necessary) be most
advantageous to the Limited Partners as a group. The Partnership shall, to the
extent permitted by applicable law and regulations, elect to treat as an expense
for federal income tax purposes all amounts incurred by it for state and local
taxes, interest and other charges which may, in accordance with applicable law
and regulations, be considered as expenses.
12.9 Tax Matters Partner.
(a) The General Partner is hereby designated as the "Tax Matters
Partner" under Section 6231(a)(7) of the Code and may hereafter designate its
successor as Tax Matters Partner, to manage administrative and judicial tax
proceedings conducted at the Partnership level by the Internal Revenue Service
with respect to Partnership matters. Any Partner shall have the right to
participate in such administrative or judicial proceedings relating to the
determination of Partnership items at the Partnership level to the extent
provided by Section 6224 of the Code. The Limited Partners shall not act
independently with respect to tax audits or tax litigation affecting the
Partnership, and actions taken by the General Partner as Tax Matters Partner in
connection with tax audits shall be binding in all respects upon the Limited
Partners.
(b) The Tax Matters Partner shall have the following duties;
(i) To the extent and in the manner required by applicable law and
regulations, the Tax Matters Partner shall furnish the name, address,
Interest and taxpayer identification number of each Partner to the
Secretary of the Treasury or his delegate (the "Secretary"); and
(ii) To the extent and in the manner required by applicable law and
regulations, the Tax Matters Partner shall keep each Partner informed
of administrative and judicial proceedings for the adjustment at the
Partnership level of any item required to be taken into account by a
Partner for income tax purposes (such judicial proceedings referred to
hereinafter as "judicial review").
(c) Subject to Section 6.3 hereof, the Partnership shall indemnify
and reimburse the Tax Matters Partner for all expenses, including legal and
accounting fees, claims, liabilities, losses and damages incurred in connection
with any administrative or judicial proceeding with respect to the tax liability
of the Partners. The payment of all such expenses shall be made before any
distributions are made from Cash from Operations or Cash From Sales. Neither the
General Partner nor any Affiliate nor any other Person shall have any obligation
to provide funds for such purpose. The taking of any action and the incurring of
any expense by the Tax Matters Partner in connection with any such proceeding,
except to the extent required by law, is a matter in the sole and absolute
discretion of the Tax Matters Partner; and the provisions on limitations of
liability of the General Partner and indemnification set forth in Section 6.3 of
this Agreement shall be fully applicable to the Tax Matters Partner in its
capacity as such.
(d) The Tax Matters Partner is hereby authorized, but not required:
(i) to enter in to any settlement with the IRS or the Secretary with
respect to any tax audit or judicial review, in which agreement the
Tax Matters Partner may expressly state that such agreement shall bind
the other Partners, except that such settlement agreement shall not
bind any Partner who (within the time prescribed pursuant to Section
6224(c)(3) of the Code and regulations thereunder) files a statement
with the Secretary providing that the Tax Matters Partner shall not
have the authority to enter into a settlement agreement on the behalf
of such Partner;
(ii) in the event that a notice of a final administrative adjustment
at the partnership level of any item required to be taken into account
by a Partner for tax purposes (a "final adjustment") is mailed to the
Tax Matters Partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax
Court,
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the District Court of the United Sates for the district in which the
partnership's principal place of business is located, the United
States Court of Claims or any other appropriate forum;
(iii) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed
by the Secretary, to file a petition for judicial review with respect
to such request;
(v) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be
taken in to account by a Partner for tax purposes, or an item affected
by such item; and
(vi) to take any other action on behalf of the Partners or the
Partnership in connection with any administrative or judicial tax
proceeding to the extent permitted by applicable law or regulations.
12.10 Reports to State Authorities.
The General Partner shall prepare and file with all appropriate state
regulatory bodies and other authorities all reports required to be so filed by
state securities or "blue sky" authorities and by the NASAA Guidelines.
Section 13. MEETINGS AND VOTING RIGHTS OF THE LIMITED PARTNERS.
13.1 Meetings of the Limited Partners.
(a) A meeting of the Limited Partners may be called by the General
Partner on its own initiative, and shall be called by the General Partner
following its receipt of written request(s) for a meeting from Limited Partners
holding 10% or more of the then outstanding Units, to act upon any matter on
which the Limited Partners may vote (as set forth in this Agreement). Every such
request for a meeting shall state with reasonable specificity (i) the purpose(s)
for which such meeting is to be held and (ii) the text of any matter, resolution
or action proposed to be voted upon by the Limited Partners at such meeting
(which text the General Partner shall, subject to the provisions of Section
13.3, submit an accurate summary of such proposal in its Notice of such meeting
to the Limited Partners). Within ten days following the receipt of such a
request, the General Partner shall give Notice to all Limited Partners of such
meeting in the manner and for a time and place as specified in paragraph
13.1(b). In addition, the General Partner acting on its own initiative may, and
following its receipt of written request(s) therefor from Limited Partners
holding more than 10% of the then outstanding Units shall, submit for action by
Consent of the Limited Partners, in lieu of a meeting, any matter on which the
Limited Partners may vote (as set forth in this Section 13.
(b) A Notice of any such meeting (or action by written Consent
without a meeting) shall be given to all Limited Partners either (i) personally
or by mail (if such meeting is being called, or Consent action is being
solicited, by the General Partner upon the request of the Limited Partners) or
(ii) by regular mail (if such meeting is being called, or Consent action is
being solicited, by the General Partner on its own initiative) and a meeting
called pursuant to such Notice shall be held (or Consent action taken) not less
than 15 days nor more than 60 days after the date such Notice is distributed.
Such Notice shall be delivered or mailed to each Limited Partner at his record
address, or at such other address as he may have furnished in writing to the
General Partner for receipt of Notices, and shall state the place, date and time
of such meeting (which shall be the place, date and time, if any, specified in
the request for such meeting or such other place, date and time as the General
Partner shall determine to be reasonable and convenient to the Limited Partners)
and shall state the purpose(s) for which such meeting is to be held. If any
meeting of the Limited Partners is properly adjourned to another time or place,
and if any announcement of the adjournment of time or place is made at the
meeting, it shall not be necessary to give notice of the adjourned meeting. The
presence in person or by proxy of the Majority Interest shall constitute a
quorum at all meetings of the Limited Partners; provided, however, that, if
-------- -------
there be no such quorum, holders of a majority of the Interests so present or so
represented may adjourn the meeting from time to time without further notice,
until a quorum shall have been obtained. No Notice of any meeting of Limited
Partners need be given to any Limited Partner who attends in person or is
represented by proxy (except when a Limited Partner attends a meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business on the ground that the meeting is not lawfully called or
convened) or to any Limited Partner otherwise entitled to such Notice who has
executed and filed with the records of the meeting, either before or after the
time thereof, a written waiver of such Notice.
(c) For the purpose of determining the Limited Partners entitled to
vote on any matter submitted to the Limited Partners at any meeting of such
Limited Partners (or to take action by Consent in lieu thereof), or any
adjournment thereof, the General Partner or the Limited Partners requesting such
meeting may fix, in advance, a date as the record date, which
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shall be a date not more than fifty (50) days nor less than ten (10) days prior
to any such meeting (or Consent action), for the purpose of any such
determination.
(d) Any Limited Partner may authorize any Person or Persons to act
for such Limited Partner by proxy in respect of all matters as to which such
Limited Partner is entitled to participate, whether by waiving Notice of any
meeting, taking action by Consent or voting as to any matter or participating at
a meeting of the Limited Partners. Every proxy must be signed by a Limited
Partner or his attorney-in-fact. No proxy shall be valid after the expiration of
eleven months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Limited Partner executing
it.
(e) At each meeting of the Limited Partners, the Limited Partners
present or represented by proxy may adopt such rules for the conduct of such
meeting as they shall deem appropriate, provided that such rules shall not be
inconsistent with the provisions of this Agreement.
13.2 Voting Rights of the Limited Partners.
Subject to Section 13.3, the Limited Partners, acting by Consent of
the Majority Interest may take the following actions without the concurrence of
the General Partner:
(a) amend this Agreement, other than (1) in any manner to allow the
Limited Partners to take part in the control or management of the Partnership's
business, and (2) without the specific Consent of the General Partner, to alter
the rights, powers and duties of the General Partner as set forth in this
Agreement;
(b) dissolve the Partnership;
(c) remove the General Partner and elect one or more Substitute
General Partners; and
(d) approve or disapprove of the Sale or series of Sales of all or
substantially all the assets of the Partnership except for any such Sale or
series of Sales in the ordinary course of liquidating the Partnership's
Investments during the Disposition Period.
In determining the requisite percentage in interest of Units necessary
to approve a matter on which the Sponsor may not vote or consent, any Units
owned by the Sponsor shall not be included. With respect to any Interests owned
by the Sponsor, the Sponsor may not vote on matters submitted to the Limited
Partners regarding the removal of the Sponsor or regarding any transaction
between the Program and the Sponsor. In determining the requisite percentage and
interest of Interests necessary to approve a matter in which a Sponsor may not
vote or consent, any Interests owned by the Sponsor shall not be included.
13.3 Limitations on Action by the Limited Partners.
The rights of the Limited Partners under Section 13.2 shall not be
exercised or be effective in any manner (a) to subject a Limited Partner to
liability as a general partner under the Delaware Act or under the laws of any
other jurisdiction in which the Partnership may be qualified or own an item of
Equipment or (b) to contract away the fiduciary duty owed to such Limited
Partner by the Sponsor under common law. Any action taken pursuant to Section
13.2 shall be void if any non-Affiliated Limited Partner, within 45 days after
such action is taken, obtains a temporary restraining order, preliminary
injunction or declaratory judgment from a court of competent jurisdiction on
grounds that, or an opinion of legal counsel selected by the Limited Partners to
the effect that, such action, if given effect, would have one or more of the
prohibited effects referred to in this Section 13.3. For purposes of this
Section 13.3, counsel shall be deemed to have been selected by the Limited
Partners if such counsel is affirmatively approved by the Consent of the
Majority Interest within 45 days of the date that the holders of 10% or more of
the Units propose counsel for this purpose.
Section 14. AMENDMENTS.
14.1 Amendments by the General Partner.
Subject to Section 13.2 of this Agreement and all applicable law, this
Agreement may be amended, at any time and from time to time, by the General
Partner without the Consent of the Majority Interest to effect any change in
this Agreement for the benefit or protection of the Limited Partners, including,
without limitation:
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(a) to add to the representations, duties or obligations of the
General Partner or to surrender any right or power granted to the General
Partner herein;
(b) to cure any ambiguity, to correct or supplement any provision
herein that may be inconsistent with any other provision herein or to add any
other provision with respect to matters or questions arising under this
Agreement that will not be inconsistent with the terms of this Agreement;
(c) to preserve the status of the Partnership as a "limited
partnership" for federal income tax purposes (or under the Delaware Act or any
comparable law of any other state in which the Partnership may be required to be
qualified);
(d) to delete or add any provision of or to this Agreement required
to be so deleted or added by the staff of the Commission, by any other federal
or state regulatory body or other agency (including, without limitation, any
"blue sky" commission) or by any Administrator or similar such official;
(e) to permit the Units to fall within any exemption from the
definition of "plan assets" contained in Section 2510.3-101 of Title 29 of the
Code of Federal Regulations;
(f) if the Partnership is advised by Tax Counsel, by the
Partnership's Accountants or by the IRS that any allocations of income, gain,
loss or deduction provided for in this Agreement are unlikely to be respected
for federal income tax purposes, to amend the allocation provisions of this
Agreement, in accordance with the advice of such Tax Counsel, such Accountants
or the IRS, to the minimum extent necessary to effect as nearly as practicable
the plan of allocations and distributions provided in this Agreement; and
(g) to change the name of the Partnership or the location of its
principal office.
14.2 AMENDMENTS WITH THE CONSENT OF THE MAJORITY INTEREST.
In addition to the amendments permitted to be made by the General
Partner pursuant to Section 14.1, the General Partner may propose to the Limited
Partners, in writing, any other amendment to this Agreement. The General Partner
may include in any such submission a statement of the purpose for the proposed
amendment and of the General Partner's opinion with respect thereto. Upon the
Consent of the Majority Interest, such amendment shall take effect; provided,
--------
however, that (a) no such amendment shall increase the liability of any Partner
- -------
or adversely affect any Partner's share of distributions of cash or allocations
of Profits or Losses for Tax Purposes or of any investment tax credit amounts of
the Partnership without in each case the consent of each Partner affected
thereby; and (b) no such amendment shall modify or amend this Section 14 without
the consent of each Limited Partner.
Section 15. POWER OF ATTORNEY.
15.1 APPOINTMENT OF ATTORNEY-IN-FACT.
By their subscription for Units and their admission as Limited
Partners hereunder, Limited Partners make, constitute and appoint the General
Partner, each authorized officer of the General Partner and each Person who
shall thereafter become a Substitute General Partner during the term of the
Partnership, with full power of substitution, the true and lawful attorney-in-
fact of, and in the name, place and stead of, such Limited Partner, with the
power from time to time to make, execute, sign, acknowledge, swear to, verify,
deliver, record, file and publish:
(a) this Agreement, Schedule A to this Agreement and the Certificate
of Limited Partnership under the Delaware Act and any other applicable laws of
the State of Delaware and any other applicable jurisdiction, and any amendment
of any thereof (including, without limitation, amendments reflecting the
addition of any Person as a Partner or any admission or substitution of other
Partners or the Capital Contribution made by any such Person or by any Partner)
and any other document, certificate or instrument required to be executed and
delivered, at any time, in order to reflect the admission of any Partner
(including, without limitation, any Substitute General Partner and any
Substitute Limited Partner);
(b) any other document, certificate or instrument required to reflect
any action of the Partners duly taken in the manner provided for in this
Agreement, whether or not such Limited Partner voted in favor of or otherwise
consented to such action;
(c) any other document, certificate or instrument that may be
required by any regulatory body or other agency or the
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applicable laws of the United States, any state or any other jurisdiction in
which the Partnership is doing or intends to do business or that the General
Partner deems advisable;
(d) any certificate of dissolution or cancellation of the Certificate
of Limited Partnership that may be reasonably necessary to effect the
termination of the Partnership; and
(e) any instrument or papers required to continue or terminate the
business of the Partnership pursuant to Sections 9.5 and 11 hereof; provided
--------
that no such attorney-in-fact shall take any action as attorney-in-fact for any
Limited Partner if such action could in any way increase the liability of such
Limited Partner beyond the liability expressly set forth in this Agreement or
alter the rights of such Limited Partner under Section 8, unless (in either
case) such Limited Partner has given a power of attorney to such
attorney-in-fact expressly for such purpose.
15.2 AMENDMENTS TO AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.
(a) Each Limited Partner is aware that the terms of this Agreement
permit certain amendments of this Agreement to be effected and certain other
actions to be taken or omitted by, or with respect to, the Partnership, in each
case with the approval of less than all of the Limited Partners, if a specified
percentage of the Partners shall have voted in favor of, or otherwise consented
to, such action. If, as and when:
(i) any amendment of this Agreement is proposed or any action is
proposed to be taken or omitted by, or with respect to, the
Partnership, which amendment or action requires, under the terms of
this Agreement, the Consent of the Partners;
(ii) Partners holding the percentage of Interests specified in this
Agreement as being required for such amendment or action have
consented to such amendment or action in the manner contemplated by
this Agreement; and
(iii) any Limited Partner has failed or refused to consent to such
amendment or action (hereinafter referred to as the "non-consenting
Limited Partner"),
then each non-consenting Limited Partner agrees that each attorney-in-fact
specified in Section 15.1 is hereby authorized and empowered to make, execute,
sign, acknowledge, swear to, verify, deliver, record, file and publish, for and
on behalf of such non-consenting Limited Partner, and in his name, place and
stead, any and all documents, certificates and instruments that the General
Partner may deem necessary, convenient or advisable to permit such amendment to
be lawfully made or such action lawfully taken or omitted. Each Limited Partner
is fully aware that he has executed this special power of attorney and that each
other Partner will rely on the effectiveness of such special power of attorney
with a view to the orderly administration of the Partnership's business and
affairs.
(b) Any amendment to this Agreement reflecting the admission to the
Partnership of any Substitute Limited Partner shall be signed by the General
Partner and by or on behalf of the Substitute Limited Partner. Any amendment
reflecting the withdrawal or removal of the General Partner and the admission of
any Substitute General Partner of the Partnership upon the withdrawal of the
General Partner need be signed only by such Substitute General Partner.
15.3 POWER COUPLED WITH AN INTEREST.
The foregoing grant of authority by each Limited Partner:
(a) is a special power of attorney coupled with an interest in favor
of such attorney-in-fact and as such shall be irrevocable and shall survive the
death, incapacity, insolvency, dissolution or termination of such Limited
Partner;
(b) may be exercised for such Limited Partner by a signature of such
attorney-in-fact or by listing or referring to the names of all of the Limited
Partners, including such Limited Partner, and executing any instrument with a
single signature of any one of such attorneys-in-fact acting as attorney-in-fact
for all of them; and
(c) shall survive the Assignment by any Limited Partner of the whole
or any portion of such Limited Partner's Partnership Interest, provided that, if
--------
any Assignee of an entire Partnership Interest shall have furnished to the
General Partner a power of attorney complying with the provisions of Section
15.1 of this Agreement and the admission to the Partnership of
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such Assignee as a Substitute Limited Partner shall have been approved by the
General Partner, this power of attorney shall survive such Assignment with
respect to the assignor Limited Partner for the sole purpose of enabling such
attorneys-in-fact to execute, acknowledge and file any instrument necessary to
effect such Assignment and admission and shall thereafter terminate with respect
to such Limited Partner.
Section 16. GENERAL PROVISIONS.
16.1 NOTICES, APPROVALS AND CONSENTS.
All Notices, approvals, Consents or other communications hereunder
shall be in writing and signed by the party giving the same, and shall be deemed
to have been delivered when the same are (a) deposited in the United States mail
and sent by first class or certified mail, postage prepaid, (b) hand delivered,
(c) sent by overnight courier or (d) telecopied. In each case, such delivery
shall be made to the parties at the addresses set forth below or at such other
addresses as such parties may designate by notice to the Partnership:
(a) If to the Partnership or the General Partner, at the principal
office of the Partnership, to:
ICON Cash Flow Partners L.P. Seven
c/o ICON Capital Corp.
600 Mamaroneck Avenue
Harrison, New York 10528
Attention: President
Telephone: (914) 698-0600
Telecopy: (914) 698-0699
(b) If to any Limited Partner, at the address set forth in Schedule A
hereto opposite such Limited Partner's name, or to such other address as may be
designated for the purpose by Notice from such Limited Partner given in the
manner hereby specified.
16.2 FURTHER ASSURANCES.
The Partners will execute, acknowledge and deliver such further
instruments and do such further acts and things as may be required to carry out
the intent and purpose of this Agreement.
16.3 CAPTIONS.
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provisions hereof.
16.4 BINDING EFFECT.
Except to the extent required under the Delaware Act and for fees,
rights to reimbursement and other compensation provided as such, none of the
provisions of this Agreement shall be for the benefit of or be enforceable by
any creditor of the Partnership.
16.5 SEVERABILITY.
If one or more of the provisions of this Agreement or any application
thereof shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and any
other application thereof shall not in any way be affected or impaired thereby,
and such remaining provisions shall be interpreted consistently with the
omission of such invalid, illegal or unenforceable provisions.
16.6 INTEGRATION.
This Agreement constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings of the parties in connection
therewith that conflict with the express terms of this Agreement. No covenant,
representation or condition not expressed in this Agreement shall affect, or be
effective to interpret, change or restrict, the express provisions of this
Agreement.
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16.7 APPLICABLE LAW.
This Agreement shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware, including, without limitation,
the Delaware Act (except and solely to the extent that provisions of the laws of
any other jurisdiction are stated to be applicable in any section of this
Agreement), without giving effect to the conflict of laws provisions thereof.
16.8 COUNTERPARTS.
This Agreement may be signed by each party hereto upon a separate
counterpart (including, in the case of a Limited Partner, a separate
subscription agreement or signature page executed by one or more such Partners),
but all such counterparts, when taken together, shall constitute but one and the
same instrument.
16.9 CREDITORS.
No creditor who makes a loan to the Partnership shall have or acquire
at any time, as a result of making such a loan, any direct or indirect interest
in the profits, capital or property of the Partnership other than as a secured
creditor except solely by an assignment of the interest of the Limited Partner
as provided herein above.
16.10 INTERPRETATION.
Unless the context in which words are used in this Agreement otherwise
indicates that such is the intent, words in the singular shall include the
plural and in the masculine shall include the feminine and neuter and vice
versa.
16.11 SUCCESSORS AND ASSIGNS.
Each and all of the covenants, terms, provisions and agreements herein
contained shall be binding upon and inure to the benefit of the successors and
assigns of the respective parties hereto.
16.12 WAIVER OF ACTION FOR PARTITION.
Each of the parties hereto irrevocably waives, during the term of the
Partnership, any right that he may have to maintain any action for partition
with respect to the property of the Partnership.
Section 17. DEFINITIONS.
Defined terms used in this Agreement shall have the meanings specified
below. Certain additional defined terms are set forth elsewhere in this
Agreement. Unless the context requires otherwise, the singular shall include the
plural and the masculine gender shall include the feminine and neuter, and vice
versa, and "Article" and "Section" references are references to the Articles and
Sections of this Agreement.
"ACCOUNTANTS" means KPMG Peat Marwick LLP, or such other firm of
independent certified public accountants as shall be engaged from time
to time by the General Partner on behalf of the Partnership.
"ACQUISITION EXPENSES" means expenses (other than Acquisition Fees)
incurred and paid to any Person which are attributable to selection
and acquisition of Equipment and Financing Transactions, whether or
not acquired or entered into, including legal fees and expenses,
travel and communications expenses, costs of credit reports and
appraisals, non-refundable option payments on equipment and other
tangible or intangible personal property not acquired, commissions,
selection fees, fees payable to finders and brokers which are not
Affiliates of the Sponsor, accounting fees and expenses, costs of each
acquisition of an item of Equipment or a Financing Transaction
(including the negotiation of Leases and the negotiation and
documentation of Partnership borrowings, including commitment or
standby fees payable to Lenders), insurance costs and miscellaneous
other expenses however designated.
"ACQUISITION FEES" means, in connection with any Investment, the
amount payable from all sources (including without limitation, Gross
Offering Proceeds, Indebtedness and reinvestments) in respect of (a)
all fees and commissions paid by any party in connection with the
selection and purchase of any item of Equipment and the negotiation
and consummation of any Financing Transaction by the Partnership,
however designated and however
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treated for tax or accounting purposes, and (b) all finder's fees and
loan fees or points paid in connection therewith to a Lender not
affiliated with the Sponsor, but not any Acquisition Expenses.
In calculating Acquisition Fees, fees payable by or on behalf of the
Partnership to finders and brokers which are not Affiliates of the
Sponsor shall be deducted from the amount of Acquisition Fees payable
to the Sponsor, and no such fees may be paid to any finder or broker
which is an Affiliate of the Sponsor.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Capital
Account as of the end of any taxable year, the amount by which the
balance in such Capital Account is less than zero. For this purpose, a
Partner's Capital Account balance shall be (a) reduced for any items
described in Treas. Reg. Section 1.704-1(b)(2)(ii)(d)(4),(5), and (6),
(b) increased for any amount such Partner is unconditionally obligated
to contribute to the Partnership no later than the end of the taxable
year in which his Units, or the General Partner's Partnership Interest,
are liquidated (as defined in Treas. Reg. Section 1.704-1(b)(2)(ii)(g))
or, if later, within 90 days after such liquidation, and (c) increased
for any amount such Partner is treated as being obligated to contribute
to the Partnership pursuant to the penultimate sentences of Treas. Reg.
Sections 1.704-2(g)(1) and 1.704-2(i)(5) (relating to Minimum Gain).
"ADJUSTED CAPITAL CONTRIBUTION" means, as to any Limited Partner, as of
the date of determination, such Limited Partner's Capital Contribution
reduced, but not below zero, by all distributions theretofore made to
such Limited Partner by the Partnership which are deemed to be in
reduction of such Limited Partner's Capital Contribution pursuant to
Section 8.3(d)(ii).
"ADMINISTRATOR" means the official or agency administering the
securities laws of a state.
"AFFILIATE" means, with respect to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common
control with such Person, (b) any officer, director or partner of such
Person, (c) any other Person owning or controlling 10% or more of the
outstanding voting securities of such Person and (d) if such Person is
an officer, director or partner, any other Person for which such Person
acts in such capacity.
"AFFILIATED ENTITY" means any investment entity of whatever form that
is managed or advised by the General Partner.
"AFFILIATED INVESTMENT" means any Investment in which the General
Partner, any Affiliate of the General Partner or any Program sponsored
by the General Partner or any Affiliate of the General Partner
(including, without limitation, any Program in which the General
Partner or any such Affiliate has an interest) either has or in the
past has had an interest, but excluding any Joint Venture.
"AFFILIATED LIMITED PARTNER" means any officer, employee or securities
representative of the General Partner or any Affiliate of the General
Partner or of any Selling Dealer who is admitted as a Limited Partner
at a Closing.
"AGREEMENT" means this Agreement of Limited Partnership, as the same
may hereafter be amended, supplemented or restated from time to time.
"APPLICABLE REDEMPTION PRICE" means, with respect to any Unit, the
amount (determined as of the date of redemption of such Unit):
(a) during the Reinvestment Period, equal to 85% of the original
Capital Contribution of such Limited Partner less the sum of (i) 100%
of previous distributions to such Limited Partner of uninvested Capital
Contributions pursuant to Section 8.6, (ii) 100% of previous
distributions to such Limited Partner in redemption of a portion or all
of his Units pursuant to Section 10.5, (iii) 100% of previous
distributions of Distributable Cash, (iv) 100% of any previous
allocations to such Limited Partner of investment tax credit amounts
and (v) the aggregate amount, not exceeding $150.00, of expenses
reasonably incurred by the Partnership in connection with the
redemption such Unit; and
(b) during the Disposition Period, equal to 100% of the balance of the
Capital Account of such Limited Partner as of the end of the month next
preceding such date of redemption less the sum of (i) such Limited
Partner's pro rata share (without giving effect to such redemption) of
Profits and Losses of the Partnership (as reasonably estimated by the
General Partner) for the period commencing on the first calendar day of
the month in which such redemption date shall occur and (ii) the
aggregate amount, not exceeding $150.00, of expenses reasonably
incurred by the Partnership in connection with the redemption such
Unit;
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provided, however, that in no event shall the applicable redemption price
- -------- -------
computed under either clause (a) or (b) of this definition exceed an amount
equal to such Limited Partner's Capital Account balance as of the end of the
calendar quarter preceding such redemption minus cash distributions which have
been made or are due to be made for the calendar quarter in which the redemption
occurs (for a redemption of all Units owned by such Limited Partner or that
portion of such amount which is proportionate to the percentage of such Limited
Partner's Units which are redeemed in the case of partial redemptions).
"Assignee" means any Person to whom any Partnership Interest has been Assigned,
in whole or in part, in a manner permitted by Section 10.2 of this Agreement.
"Assignment" means, with respect to any Partnership Interest or any part
thereof, the offer, sale, assignment, transfer, gift or otherwise disposition
of, such Partnership Interest, whether voluntarily or by operation of law,
except that in the case of a bona fide pledge or other hypothecation, no
Assignment shall be deemed to have occurred unless and until the secured party
has exercised his right of foreclosure with respect thereto; and the term
"Assign" has a correlative meaning.
"Available Cash From Operations" means Cash From Operations as reduced by (a)
payments of all accrued but unpaid Management Fees not required to be deferred,
and (b) after Payout, payments of all accrued but unpaid Subordinated
Remarketing Fees.
"Available Cash From Sales" means Cash From Sales, as reduced by (a) payments of
all accrued but unpaid Management Fees not required to be deferred, and (b)
after Payout, payments of all accrued but unpaid Subordinated Remarketing Fees.
"Book Value" means, with respect to any Partnership property, the Partnership's
adjusted basis for federal income tax purposes, adjusted from time to time to
reflect the adjustments required or permitted by Treas. Reg. Section 1.704-
1(b)(2)(iv)(d)-(g).
"Capital Account" means the capital account maintained for each Partner pursuant
to Section 5.5 of this Agreement
"Capital Contributions" means (1) as to the General Partner, its initial $1,000
contribution to the capital of the Partnership plus such additional amounts as
may be contributed to the capital of the Partnership by the General Partner and
(2) as to any Limited Partner, the gross amount of investment in the Partnership
actually paid by such Limited Partner for Units, without deduction for Front-End
Fees (whether payable by the Partnership or not).
"Cash Flow" means the Partnership's cash funds provided from normal operations
of the Partnership and from Financing Transactions (but excluding Cash from
Sales), without deduction for depreciation, but after deducting cash funds used
to pay all other cash expenses, debt payments, capital improvements and
replacements (other than cash funds withdrawn from reserves).
"Cash From Operations" means Cash Flow (a) reduced by amounts allocated to
Reserves to the extent deemed reasonable by the General Partner and (b)
increased by any portion of Reserves then deemed by the General Partner as not
required for Partnership operations.
"Cash From Refinancings" means the cash received by the Partnership as a result
of any borrowings by the Partnership, reduced by (a) all Indebtedness of the
Partnership evidencing such borrowings, and (b) the portion of such cash
allocated to Reserves to the extent deemed reasonable by the General Partner.
"Cash From Sales" means the cash received by the Partnership as a result of a
Sale reduced by (a) all Indebtedness of the Partnership required to be paid as a
result of the Sale, whether or not then payable (including, without limitation,
any liabilities on an item of Equipment sold that are not assumed by the buyer
and any remarketing fees required to be paid to Persons who are not Affiliates
of the General Partner), (b) the Subordinated Remarketing Fee (to the extent
permitted to be paid at the time pursuant to Section 6.4(f) of this Agreement),
(c) any accrued but previously unpaid Management Fees to the extent then
payable, (d) any Reserves to the extent deemed reasonable by the General Partner
and (e) all expenses incurred in connection with such Sale. In the event the
Partnership takes back a promissory note or other evidence of indebtedness in
connection with any Sale, all payments subsequently received in cash by the
Partnership with respect to such note shall be included in Cash From Sales upon
receipt, irrespective of the treatment of such payments by the Partnership for
tax or accounting purposes. If, in payment for Equipment sold, the Partnership
receives purchase money obligations secured by liens on such Equipment, the
amount of such obligations shall not be included in Cash From Sales until and to
the extent the obligations are realized in cash, sold or otherwise disposed of.
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"Closing" means the admission of Limited Partners to the Partnership in
accordance with Section 5.3 of this Agreement.
"Closing Date" means any date on which any Limited Partner shall be admitted to
the Partnership, and includes the Initial Closing Date and any subsequent
Closing Date, including the Final Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended, and in effect from
time to time, or corresponding provisions of subsequent laws.
"Commission" means the Securities and Exchange Commission.
"Commission Loans" means Indebtedness of the Partnership authorized by
Section 6.1(b)(ix).
"Competitive Equipment Sale Commission" means that brokerage fee paid for
services rendered in connection with the purchase or sale of Equipment and the
sale or absolute assignment for value of Financing Transactions which is
reasonable, customary and competitive in light of the size, type and location of
the Equipment or other collateral securing the applicable Partnership Investment
which is so transferred.
"Consent" means either (a) consent given by vote at a meeting called and held in
accordance with the provisions of Section 13.1 of this Agreement or (b) the
written consent without a meeting, as the case may be, of any Person to do the
act or thing for which the consent is solicited, or the act of granting such
consent, as the context may require.
"Controlling Person" means, with respect to the General Partner or any of
Affiliate of the General Partner, any of its chairmen, directors, presidents,
secretaries or corporate clerks, treasurers, vice presidents, any holder of a 5%
or larger equity interest in the General Partner or any such Affiliate, or any
Person having the power to direct or cause the direction of the General Partner
or any such Affiliate, whether through the ownership of voting securities, by
contract or otherwise.
"Counsel" and "Counsel to the Partnership" means Whitman Breed Abbott & Morgan,
New York, New York, or any successor law firm selected by the General Partner.
"Credit Committee" means a committee established by the General Partner to
establish credit review policies and procedures, supervise the efforts of the
credit department and approve significant transactions and transactions which
differ from the standards and procedures it has established. The Credit
Committee will, at all times, consist of three persons designated by the General
Partner.
"Creditworthy" means, when used herein with respect to a prospective Lessee or
User, that (1) the Credit Committee of the General Partner has made the
determination, in its reasonable business judgment, after review of financial,
credit, operational and other information concerning such prospective Lessee or
User, that such party is currently able and is expected to continue throughout
the term of such transaction to be able to meet its obligations to the
Partnership in a timely and complete manner, (2) the Lease or Financing
Transaction is adequately secured by Equipment and/or other collateral obtained,
directly or indirectly, from the Lessee or User (or a guarantor or other party)
and (3) the Lessee or User has satisfied substantially all other criteria
established by the Credit Committee as a condition to the Partnership's
investment in such Lease or Financing Transaction.
"Cumulative Return" means, as to any Limited Partner, an amount equal to an
eight (8%) percent annual cumulative return on such Limited Partner's Adjusted
Capital Contribution (calculated before application of any distribution made to
such Limited Partner pursuant on the date of such calculation) as outstanding
from time to time, compounded daily from a date not later than the last day of
the calendar quarter in which the original Capital Contribution is made
"Dealer-Manager" means ICON Securities Corp., an Affiliate of the General
Partner.
"Dealer-Manager Agreement" means the agreement entered into between the General
Partner and the Dealer-Manager, substantially in the form thereof filed as an
exhibit to the Registration Statement.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, 6
Del. Code Ann. tit. 6, Section 17-101, et seq., as amended from time to time,
and any successor to such Delaware Act.
"Disposition Period" means the period commencing on the first day following the
end of the Reinvestment Period and continuing for the period deemed necessary by
the General Partner for orderly termination of its operations and affairs and
liquidation or disposition of the Partnership's Investments and other assets and
the realization of maximum
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Liquidation Proceeds therefor, which period is expected to continue not less
than six (6), and not more than thirty (30), months beyond the end of the
Reinvestment Period and which, in any event, will end no later than ten and one-
half (10 1/2) years after the Final Closing Date.
"Distributable Cash" has the meaning specified in Section 8.1(c) of this
Agreement.
"Distributable Cash From Operations" means Available Cash From Operations as
reduced by (1) amounts which the General Partner determines shall be reinvested
through the end of the Reinvestment Period in additional Equipment and Financing
Transactions and which ultimately are so reinvested.
"Distributable Cash From Sales" means Available Cash From Sales, as reduced by
(1) amounts which the General Partner determines shall be reinvested through the
end of the Reinvestment Period in additional Equipment and Financing
Transactions and which ultimately are so reinvested.
"Due Diligence Expenses" means fees and expenses actually incurred for bona fide
due diligence efforts expended in connection with the Offering in a maximum
amount not to exceed the lesser of (i) 1/2 of 1% of Gross Offering Proceeds and
(ii) the maximum amount permitted to be reimbursed under Appendix F to Article
III of the NASD Rules of Fair Practice].
"Effective Date" means the date the Registration Statement is declared
effective by the Commission.
"Equipment" means any new, used or reconditioned capital equipment and related
property acquired by the Partnership, including, but not limited to, the types
of equipment referred to in Section 3.2 of this Agreement and shall also be
deemed to include other tangible and intangible personal property which at any
time is subject to, or the collateral for, a Lease.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Account" means an interest-bearing account established and maintained by
the General Partner with the Escrow Agent, in accordance with the terms of the
Escrow Agreement, for the purpose of holding, pending the distribution thereof
in accordance with the terms of this Agreement, any Subscription Monies received
from Persons who are to be admitted as Limited Partners as a result of the
Closing occurring on the Initial Closing Date.
"Escrow Agent" means The Bank of New York (NJ) or another United States banking
institution with at least $50,000,000 in assets, which shall be selected by the
General Partner to serve in such capacity pursuant to the Escrow Agreement.
"Escrow Agreement" means that certain Escrow Agreement, dated as of July 10,
1993, between the General Partner and the Escrow Agent, substantially in the
form thereof filed as an exhibit to the Registration Statement, as amended and
supplemented from time to time as permitted by the terms thereof.
"Final Closing Date" means the last Closing Date on which any Limited Partner
(other than a Substitute Limited Partner) shall be admitted to the Partnership,
which shall be as soon as practicable following the Termination Date.
"Financing Transaction" means any extension of credit or loan to any User, which
is secured by a security interest in tangible or intangible personal property
and in any lease or license of such property.
"First Cash Distributions" means, with respect to any Limited Partner, all
distributions made to such Limited Partner by the Partnership during the
Reinvestment Period equal to an eight percent (8%) annual, cumulative return on
the amount of such Limited Partner's Capital Contribution (as reduced by any
amounts of uninvested Capital Contributions distributed to such Limited Partner
pursuant to Section 8.6 and by any amount paid to such Limited Partner in
redemption of such Limited Partner's Units pursuant to Section 10.5).
"Fiscal Period" means any interim accounting period established by the General
Partner within a Fiscal Year.
"Fiscal Quarter" means, for each Fiscal Year, the three-calendar-month period
which commences on the first day of such Fiscal Year and each additional three-
calendar-month period commencing on the first day of the first month following
the end of the preceding such period within such Fiscal Year (or such shorter
period ending on the last day of a Fiscal Year).
"Fiscal Year" means the Partnership's annual accounting period established
pursuant to Section 12.4 of this Agreement.
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"Front-End Fees" means fees and expenses paid by any Person for any services
rendered during the Partnership's organizational and offering or acquisition
phases (including Sales Commissions, Underwriting Fees, O & O Expense Allowance,
Acquisition Fees and Acquisition Expenses (other than any Acquisition Fees or
Acquisition Expenses paid by a manufacturer of equipment to any of its employees
unless such Persons are Affiliates of the Sponsor) and Leasing Fees, and all
other similar fees however designated).
"Full-Payout Lease" means any lease or license, entered into or acquired from
time to time by the Partnership, pursuant to which the aggregate noncancelable
rental or royalty payments due during the initial term of such lease or license,
on a present value basis, are at least sufficient to permit the Partnership to
recover the Purchase Price of the Equipment subject to such lease or license.
"General Partner" means ICON Capital Corp., a Connecticut corporation, and any
Person who subsequently becomes an additional or Substitute General Partner duly
admitted to the Partnership in accordance with this Agreement, in such Person's
capacity as a general partner of the Partnership.
"Gross Asset Value" means, with respect to any asset of the Partnership, the
asset's adjusted tax basis, except that:
(a) the initial Gross Asset Value of any asset contributed by a Partner to the
Partnership shall be the fair market value of such asset on the date of
contribution;
(b) the Gross Asset Values of all Partnership assets shall be adjusted to equal
their respective gross fair market values at such times as the Partners' Capital
Accounts are adjusted pursuant to Section 5.5(h) hereof;
(c) the Gross Asset Value of any Partnership asset distributed to any Partner
shall be the gross fair market value of such asset on the date of distribution;
(d) to the extent not otherwise reflected in the Partners' Capital Accounts, the
Gross Asset Values of Partnership assets shall be increased (or decreased) to
appropriately reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b); and
(e) if on the date of contribution of an asset or a revaluation of an asset in
accordance with (b)-(d) above, the adjusted tax basis of such asset differs from
its fair market value, the Gross Asset Value of such asset shall thereafter be
adjusted by reference to the depreciation method described in Treas. Reg.
Section 1.704-1(b)(2)(iv)(g)(3).
"Gross Offering Proceeds" means the gross amount of Capital Contributions
(before deduction of Front-End Fees payable by the Partnership and the discount
for Sales Commissions) of all Limited Partners admitted to the Partnership.
"Gross Revenue" means gross cash receipts of the Partnership from whatever
source including, but not limited to, (a) rental and royalty payments realized
under Leases, (b) principal and interest payments realized under Financing
Transactions and (c) interest earned on funds on deposit for the Partnership
(other than Subscription Monies).
"Gross Unit Price" means $100.00 for each whole Unit, and $.01 for each
1/10,000th Unit, purchased by a Limited Partner (other than an Affiliated
Limited Partner).
"Indebtedness" means, with respect to any Person as of any date, all obligations
of such Person (other than capital, surplus, deferred income taxes and, to the
extent not constituting obligations, other deferred credits and reserves) that
could be classified as liabilities (exclusive of accrued expenses and trade
accounts payable incurred in respect of property purchased in the ordinary
course of business which are not overdue or which are being contested in good
faith by appropriate proceedings and are not so required to be classified on
such balance sheet as debt) on a balance sheet prepared in accordance with
generally accepted accounting principles as of such date.
"Independent Expert" means a Person with no material current or prior business
or personal relationship with the Sponsor who is engaged to a substantial extent
in the business of rendering opinions regarding the value of assets of the type
held by the Partnership, and who is qualified to perform such work.
"Initial Closing Date" means the first Closing Date for the Partnership on which
Limited Partners with Interests equal to, or greater than, the Minimum Offering
are admitted to the Partnership.
"Interest" or "Partnership Interest" means the limited partnership unit or other
indicia of ownership in the Partnership. The entire ownership interest of a
Partner in the Partnership, whether held by such Partner or an
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immediate or subsequent Assignee thereof, including, without limitation, such
Partner's right (a) to a distributive share of the Cash From Operations, Cash
From Sales and any other distributions of cash from operation or sale of the
Partnership's Investments or liquidation of the Partnership and its assets, and
of the Partnership's Profits or Losses for Tax Purposes and (b) if a General
Partner, to participate in the management of the business and affairs of the
Partnership.
"Investment in Equipment and Financing Transactions" means the aggregate amount
of Capital Contributions actually paid or allocated to the purchase, manufacture
or renovation of Equipment acquired, and investment in Financing Transactions
entered into or acquired, by the Partnership together with other cash payments
such as interest, taxes and Reserves allocable thereto (not exceeding 3% of
Capital Contributions) and excluding Front-End Fees.
"Investments" means, collectively, the Partnership's portfolio, from time to
time, of Equipment, Leases and Financing Transactions, including any equity
interest of the Partnership therein, whether direct or indirect, through a
nominee, Joint Venture or otherwise.
"IRA" means an Individual Retirement Account and its related funding vehicle.
"IRS" or "Service" means the Internal Revenue Service or any successor agency
thereto.
"Involuntary Withdrawal" means, with respect to the General Partner, the removal
or involuntary withdrawal of the General Partner from the Partnership pursuant
to Section 9.2 of this Agreement.
"Joint Venture" means any syndicate, group, pool, general partnership, business
trust or other unincorporated organization through or by means of which the
Partnership acts jointly with any Program sponsored by the General Partner or
any Affiliate of the General Partner or with any non-Affiliated Person to invest
in Equipment, Leases or Financing Transactions.
"Lease" means any Full-Payout Lease and any Operating Lease.
"Leasing Fees" means the total of all fees and commissions paid by any party in
connection with the initial Lease of Equipment acquired by the Partnership.
"Lender" means any Person that lends cash or cash equivalents to the
Partnership, including any Person that acquires by purchase, assignment or
otherwise an interest in the future rents payable under any Lease and in the
related Equipment or other assets or in payments due under any Financing
Transaction, and any property securing, any such transaction.
"Lessee" means a lessee or license under a Lease.
"Limited Partner" means any Person who is the owner of at least one Unit and who
has been admitted to the Partnership as an Limited Partner and any Person who
becomes a Substitute Limited Partner, in accordance with this Agreement, in such
Person's capacity as a Limited Partner of the Partnership.
"Majority" or "Majority Interest" means Limited Partners owning more than 50% of
the aggregate outstanding Units.
"Management Fees" means, for any Fiscal Year, an annual fee in an amount equal
to the lesser of (a) the sum of (i) an amount equal to 5% of annual gross rental
revenues realized under Operating Leases, (ii) an amount equal to 2% of annual
gross rental payments realized under Full-Payout Leases that are Net Leases,
(iii) an amount equal to 2% of annual gross principal and interest revenues
realized in connection with Financing Transactions and (iv) an amount equal to
7% of annual gross rental revenues from Equipment owned and operated by the
Partnership in the manner contemplated by the NASAA Guidelines (i.e., the
General Partner provides both asset management and additional services relating
to the continued and active operation of such Equipment, such as on-going
marketing and re-leasing or re-licensing of Equipment, hiring or arranging for
the hiring of crews or operating personnel for such Equipment and similar
services), and (b) the amount of reasonable management fees customarily paid to
non-affiliated third parties rendering similar services in the same geographic
location and for similar types of equipment.
"Maximum Offering" means receipt and acceptance by the Partnership of
subscriptions by Persons eligible to purchase a total of 1,000,000 Units of
Partnership Interest on or before the Final Closing Date.
"Minimum Offering" means receipt and acceptance by the Partnership of
subscriptions for not less than 12,000
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Units (excluding the ten (10) Units subscribed for by the Original Limited
Partner and any Units in excess of 600 Units collectively subscribed for by the
General Partner or any Affiliate of the General Partner).
"NASAA Guidelines" means the Statement of Policy regarding Equipment Programs
adopted by the North American Securities Administrators Association, Inc., as in
effect on the date of the Prospectus.
"NASD" means the National Association of Securities Dealers, Inc.
"Net Disposition Proceeds" means the proceeds realized by the Partnership from
the Sale or other disposition of an item of Equipment (including insurance
proceeds or lessee indemnity payments arising from the loss or destruction of
the Equipment), Financing Transactions, or any other Partnership property, less
all related Partnership liabilities.
"Net Lease" means a Lease under which the Lessee assumes responsibility for, and
bears the cost of, insurance, taxes, maintenance, repair and operation of the
leased or licensed asset and where the noncancelable rental or royalty payments
pursuant to such Lease are absolutely net to the Partnership.
"Net Offering Proceeds" means the Gross Offering Proceeds minus the Underwriting
Fees, Sales Commissions and the O & O Expense Allowance payable by the
Partnership.
"Net Unit Price" means the Gross Unit Price less an amount equal to 8% of the
Gross Unit Price (equivalent to Sales Commissions) for each Unit or fraction
thereof purchased by an Affiliated Limited Partner.
"Net Worth" means, with respect to any Person as of any date, the excess, on
such date, of assets over liabilities, as such items would appear on the balance
sheet of such Person in accordance with generally accepted accounting
principles.
"Notice" means a writing containing the information required by this Agreement
to be communicated to any Person, personally delivered to such Person or sent by
registered, certified or regular mail, postage prepaid, to such Person at the
last known address of such Person.
"O & O Expense Allowance" means the aggregate amount equal to the product of (a)
the number of Units subscribed for in the Offering and (b) $3.50.
"Offering" means the offering of Units pursuant to the Prospectus.
"Offering Period" means the period from the Effective Date to the Termination
Date.
"Operating Expenses" means (a) all costs of personnel (including officers or
employees of the General Partner or its Affiliates other than Controlling
Persons) involved in the business of the Partnership, allocated pro rata to
their services performed on behalf of the Partnership, but excluding overhead
expenses attributable to such personnel); (b) all costs of borrowed money, taxes
and assessments on Partnership Investments and other taxes applicable to the
Partnership; (c) legal, audit, accounting, brokerage, appraisal and other fees;
(d) printing, engraving and other expenses and taxes incurred in connection with
the issuance, distribution, transfer, registration and recording of documents
evidencing ownership of an interest in the Partnership or in connection with the
business of the Partnership; (e) fees and expenses paid to independent
contractors, bankers, brokers and services, leasing agents and sales personnel
consultants and other equipment management personnel, insurance brokers and
other agents (all of which shall only be billed directly by, and be paid
directly to, the provider of such services); (f) expenses (including the cost of
personnel as described in (a) above) in connection with the disposition,
replacement, alteration, repair, refurbishment, leasing, licensing, re-leasing,
re-licensing, financing, refinancing and operation of Partnership Equipment and
Financing Transactions (including the costs and expenses of insurance premiums,
brokerage and leasing and licensing commissions, if any, with respect to its
Investments and the cost of maintenance of its Equipment; (g) expenses of
organizing, revising, amending, converting, modifying or terminating the
Partnership; (h) expenses in connection with distributions made by the
Partnership to, and communications and bookkeeping and clerical work necessary
in maintaining relations with, its Limited Partners, including the costs of
printing and mailing to such Person evidences of ownership of Units and reports
of meetings of the Partners and of preparation of proxy statements and
solicitations of proxies in connection therewith; (i) expenses in connection
with preparing and mailing reports required to be furnished to the Limited
Partners for investor, tax reporting or other purposes, and reports which the
General Partner deems it to be in the best interests of the Partnership to
furnish to the Limited Partners and to their sales representatives; (j) any
accounting, computer, statistical or bookkeeping costs necessary for the
maintenance of the books and records of the Partnership (including an allocable
portion of the Partnership's costs of acquiring and owning computer equipment
used in connection with the operations and reporting activities of the
Partnership and any other investment programs sponsored by the General Partner
or any of its Affiliates, the
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Partnership's interest in which equipment shall be liquidated in connection with
the Partnership's liquidation); (k) the cost of preparation and dissemination of
the informational material and documentation relating to potential sale,
refinancing or other disposition of Equipment and Financing Transactions; (l)
the costs and expenses incurred in qualifying the Partnership to do business in
any jurisdiction, including fees and expenses of any resident agent appointed by
the Partnership; and (m) the costs incurred in connection with any litigation or
regulatory proceedings in which the Partnership is involved.
"Operating Lease" means a lease or license, entered into or acquired from time
to time by the Partnership, pursuant to which the aggregate noncancelable rental
or royalty payments during the original term of such lease or license, on a net
present value basis, are not sufficient to recover the Purchase Price of the
Equipment leased or licensed thereby.
"Operations" means all operations and activities of the Partnership except
Sales.
"Organizational and Offering Expenses" means (a) all costs and expenses incurred
in connection with, and in preparing the Partnership for, qualification under
federal and state securities laws and subsequently offering and distributing the
Units to the public (except for Sales Commissions and Underwriting Fees payable
to the General Partner, the Dealer-Manager or any Selling Dealer), including but
not limited to, (i) printing costs, (ii) registration and filing fees, (iii)
attorneys', accountants' and other professional fees and (iv) Due Diligence
Expenses and (b) the direct costs of salaries to and expenses (including costs
of travel) of officers and directors of the General Partner or any Affiliate of
the General Partner while engaged in organizing the Partnership and registering
the Units.
"Original Limited Partner" means Charles Duggan.
"Participant List" means a list, in alphabetical order by name, setting forth
the name, address and business or home telephone number of, and number of Units
held by, each Limited Partner, which list shall be printed on white paper in a
readily readable type size (in no event smaller than 10-point type) and shall be
updated at least quarterly to reflect any changes in the information contained
therein.
"Partner" means the General Partner (including any Substitute General Partner)
and any Limited Partner (including the Original Limited Partner and any
Substitute Limited Partner).
"Partner Nonrecourse Debt" means any Partnership nonrecourse liability for which
any Partner bears the economic risk of loss within the meaning of Treas. Reg.
Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning specified in Treas. Reg.
Section 1.704-2(i)(3), and such additional amount as shall be treated as Partner
Nonrecourse Minimum Gain pursuant to Treas. Reg. Section 1.704-2(j)(1)(iii).
"Partner Nonrecourse Deductions" shall consist of those deductions and in those
amounts specified in Treas. Reg. Sections 1.704-2(i)(2) and (j).
"Partnership" means ICON Cash Flow Partners L.P. Seven, the limited partnership
formed pursuant to, and governed by the terms of, this Agreement.
"Partnership Loan" means any loan made to the Partnership by the General Partner
or any Affiliate of the General Partner in accordance with Section 6.2(d) of
this Agreement.
"Partnership Minimum Gain" has the meaning specified in Treasury Regulation
Section 1.704-2(b)(2) and (d) and such additional amount as shall be treated as
Partnership Minimum Gain pursuant to Treas. Reg. Section 1.704-2(j)(1)(iii).
"Partnership Nonrecourse Deductions" shall consist of those deductions and in
those amounts specified in Treas. Reg. Sections 1.704-2(c) and (j).
"Payout" means the time when the aggregate amount of cash distributions (from
whatever sources) to a Limited Partner equals the amount of such Limited
Partner's Capital Contribution plus an amount equal to an eight (8%) percent
annual cumulative return on such Capital Contribution, compounded daily from a
date not later than the last day of the calendar quarter in which such Capital
Contribution is made (determined by treating distributions actually made to a
Limited Partner as first being applied to satisfy such 8% return on capital
which has accrued and has not been paid and applying any excess distributions as
a return of such Limited Partner's Capital Contribution). Income earned on
escrowed funds and distributed to Limited Partners may be used to satisfy the
cumulative return requirement.
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"Permitted Investment" means an investment in any of (a) certificates of deposit
or savings or money-market accounts insured by the Federal Deposit Insurance
Corporation of banks located in the United States; (b) short-term debt
securities issued or guaranteed by the United States Government or its agencies
or instrumentalities, or bank repurchase agreements collateralized by such
United States Government or agency securities, (c) other highly liquid types of
money-market investments and (d) shares of one or more public investment
companies (but excluding any such company managed by any Affiliate of the
General Partner) registered with the Commission whose assets exceed $10,000,000
and are invested in such money market investments and held by an independent
custodian.
"Person" shall mean any natural person, partnership, trust, corporation,
association or other legal entity, including, but not limited to, the General
Partner and any Affiliate of the General Partner.
"Prior Program" means any Program previously sponsored by the General Partner or
any Affiliate of the General Partner.
"Prior Public Programs" means ICON Cash Flow Partners, L.P., Series A, ICON Cash
Flow Partners, L.P., Series B, ICON Cash Flow Partners, L.P., Series C, ICON
Cash Flow Partners, L.P., Series D, and ICON Cash Flow Partners, L.P., Series E
and ICON Cash Flow Partners L.P. Six.
"Profits" or "Losses" means, for any Fiscal Year, the Partnership's taxable
income or loss for such Fiscal Year, determined in accordance with Code section
703(a) (for this purpose, all items of income, gain, loss or deduction required
to be stated separately pursuant to Code section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses shall be applied to
increase such taxable income or reduce such loss;
(b) any expenditure of the Partnership described in Code section 705(a)(2)(B),
or treated as such pursuant to Treas. Reg. Section 1.704-1(b)(2)(iv)(i) and not
otherwise taken into account in computing Profits and Losses shall be applied to
reduce such taxable income or increase such loss;
(c) gain or loss resulting from a taxable disposition of any asset of the
Partnership shall be computed by reference to the Gross Asset Value of such
asset and the special depreciation calculations described in Treas. Reg. Section
1.704-1(b)(2)(iv)(g), notwithstanding that the adjusted tax basis of such asset
may differ from its Gross Asset Value;
(d) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss for such
Fiscal Year, there shall be taken into account depreciation, amortization or
other cost recovery determined pursuant to the method described in Treas. Reg.
Section 1.704-1(b)(2)(iv)(g)(3); and
(e) any items which are specially allocated pursuant to Section 8.2(f) shall not
be taken into account in computing Profits or Losses.
"Profits from Operations" or "Losses from Operations" means all Profits for Tax
Purposes or Losses for Tax Purposes of the Partnership other than Profits for
Tax Purposes or Losses for Tax Purposes generated by Sales.
"Profits from Sales" or "Losses from Sales" means all Profits for Tax Purposes
or Losses for Tax Purposes of the Partnership generated by Sales.
"Program" means 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.
"Prospectus" means the prospectus included as part of the Registration Statement
on Form S-1 (No. 33-36376) in the final form in which such prospectus is filed
with the Commission pursuant to Rule 424(b) under the Securities Act and as
thereafter supplemented or amended pursuant to Rule 424(c) under the Securities
Act.
"Purchase Price" means, with respect to any Investment, the price paid by, or on
behalf of, the Partnership for or in connection with the purchase or improvement
of any item of Equipment or the acquisition or consummation of any Financing
Transaction, as the case may be, including the amount of the related Acquisition
Fees and all liens and encumbrances on such item of Equipment or Financing
Transaction (but excluding "points" and prepaid interest), plus that portion of
the reasonable, necessary and actual expenses (limited to accounting, auditing
or other such services, interest and principal payments, and loan commitment and
other financing fees on funds used to acquire or maintain
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Equipment or Financing Transactions) incurred by the General Partner or any such
Affiliate in acquiring Equipment or Financing Transactions on an arm's length
basis with a view to transferring such Equipment or Financing Transaction to the
Partnership, which is allocated to the Equipment or Financing Transaction in
question in accordance with allocation procedures employed by the General
Partner or such Affiliate from time to time and within generally accepted
accounting principles, reduced (to a negative figure, if applicable) by the
aggregate amount of any revenues from such Equipment or Financing Transaction
payable to the General Partner or such Affiliate during the period from such
acquisition until the Equipment is transferred to the Partnership.
"Qualified Plan" means a pension, profit-sharing or stock bonus plan, including
Keogh Plans, meeting the requirements of Sections 401 et seq. of the Code, as
amended, and its related trust.
"Qualified Subscription Account" means the interest-bearing account established
and maintained by the Partnership for the purpose of holding, pending the
distribution thereof in accordance with the terms of this Agreement, of
Subscription Monies received from Persons who are to be admitted as Limited
Partners as a result of Closings to be held subsequent to the Initial Closing
Date.
"Registration Statement" means the Registration Statement on Form S-1
(No. 33-36376) filed with the Commission under the Securities Act in the form in
which such Registration Statement is declared to be effective.
"Reinvestment Period" means the period commencing with the Initial Closing Date
and ending five (5) years after the Final Closing Date; provided that such
--------
period may be extended at the sole and absolute discretion of the General
Partner for a further period of not more than an additional 36 months.
"Reserves" means reserves established and maintained by the Partnership for
working capital and contingent liabilities, including repairs, replacements,
contingencies, accruals required by lenders for insurance, compensating balances
required by lenders and other appropriate items, in an amount not less than (a)
during the Reinvestment Period, 1.0% of Gross Offering Proceeds and (b) during
the Disposition Period, the lesser of (1) 1% of Gross Offering Proceeds and (2)
1% of the Partnership's aggregate Adjusted Capital Accounts.
"Roll-Up" means any transaction involving the acquisition, merger, conversion,
or consolidation, either directly or indirectly, of the Partnership and the
issuance of securities of a Roll-Up Entity. Such term does not include (a) a
transaction involving securities of the Partnership if they have been listed on
a national securities exchange or traded through the National Association of
Securities Dealers Automated Quotation National Market System for at least 12
months; or (b) a transaction involving the conversion of only the Partnership to
corporate, trust or association form if, as a consequence of such transaction,
there will be no significant adverse change in (i) Partnership's voting rights;
(ii) the term of existence of the Partnership; (iii) Sponsor's compensation; or
(iv) the Partnership's investment objectives.
"Roll-Up Entity" means any partnership, corporation, trust, or other entity that
is created by, or surviving after, the successful completion of a proposed Roll-
Up transaction.
"Sale" means the sale, exchange, involuntary conversion, foreclosure,
condemnation, taking, casualty (other than a casualty followed by refurbishing
or replacement), or other disposition of any of the Partnership's Equipment and
Financing Transactions.
"Sales Commissions" means, with respect to any Unit, an amount equal to 8.0% of
the Gross Offering Proceeds attributable to the sale of such Unit.
"Schedule A" means Schedule A attached to and made a part of, this Agreement,
which sets forth the names, addresses, Capital Contributions and Interests of
the Partners, as amended or supplemented from time to time to add or delete, as
the case may be, such information with respect to any Partner.
"Secondary Market" has the meaning specified in Section 10.2(c) of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Segment" shall mean each period consisting of that portion of any calendar
month that includes either the first through the fifteenth day of such month or
the sixteenth through the last day of such month, commencing with the first such
period ending after the Initial Closing Date; provided that the first Segment
--------
shall begin on the first day after the Initial Closing Date and end on the
earlier of the fifteenth or the last day of the month in which the Initial
Closing Date occurs and the final Segment shall end on the date of final
liquidation of the Partnership.
"Selling Dealer" means each member firm of the National Association of
Securities Dealers, Inc. which has been
A-50
<PAGE>
selected by the General Partner or the Dealer-Manager to offer and sell Units
and which has entered into a Selling Dealer Agreement with the General Partner
or the Dealer-Manager.
"Selling Dealer Agreement" means each of the agreements entered into between the
General Partner or the Dealer-Manager and any Seller Dealer, each substantially
in the respective form thereof filed as an exhibit to the Registration
Statement.
"Sponsor" means any Person directly or indirectly instrumental in organizing, in
whole or in part, the Partnership or any Person who will manage or participate
in the management of the Partnership, and any Affiliate of such Person. The term
Sponsor does not include any Person whose only relationship to the Partnership
is that of (1) an independent equipment manager and whose only compensation is
as such or (2) a wholly independent third party, such as an attorney, accountant
or underwriter, whose only compensation is for professional services rendered in
connection with the Offering.
"Subordinated Remarketing Fee" means, with respect to any Investment, a fee in
the amount equal to the lesser of (a) 3% of the contract sales price applicable
to such Investment, or (b) one-half of that brokerage fee that is reasonable,
customary and competitive in light of the size, type and location of such
Investment.
"Subscription Agreement" means the Subscription Agreement substantially
in the form thereof filed as an exhibit to the Prospectus.
"Subscription Monies" has the meaning specified in Section 5.3(j) of this
Agreement.
"Substitute General Partner" means any Assignee of or successor to the General
Partner admitted to the Partnership in accordance with Section 9.5 of the
Agreement.
"Substitute Limited Partner" means any Assignee of Units who is admitted to the
Partnership as a Limited Partner pursuant to Section 10.3 of this Agreement.
"Tax Counsel" means Whitman Breed Abbott & Morgan, New York, New York, or such
other tax counsel acceptable to the General Partner.
"Tax Matters Partner" means the Person designated pursuant to Section 6231(a)(7)
of the Code to manage administrative and judicial tax proceedings conducted at
the Partnership level by the Internal Revenue Service with respect to
Partnership matters. The General Partner is designated Tax Matters Partner for
the Partnership in Section 12.6(e) of this Agreement.
"Termination Date" means the earliest of (a) the date on which the Maximum
Offering has been sold, (b) twenty-four (24) months following the Effective
Date, and (c) the termination of the Offering by the General Partner at any
time.
"Treasury Regulation" or "Treas. Reg." means final or temporary regulations
issued by the United States Treasury Department pursuant to the Code.
"Underwriting Fees" means, in the aggregate, fees in an amount equal to 2.0% of
the Gross Offering Proceeds of Units sold.
"Unit" means a Unit of Partnership interest held by any Limited Partner.
"Unpaid Cumulative Return" means, as to any Limited Partner, the amount of such
Limited Partner's Cumulative Return calculated through the date as of which such
Unpaid Cumulative Return is being calculated, reduced (but not below zero) by
the aggregate distributions theretofore made to such Limited Partner by the
Partnership pursuant to Sections 8.1(c) and 11.3 of this Agreement which are
deemed to be a reduction of such Limited Partner's Unpaid Cumulative Return
pursuant to Section 8.3(d)(i).
"Unpaid Target Distribution" means, as to any Limited Partner, as of any given
date, the sum of such Partner's Adjusted Capital Contribution plus such Limited
Partner's Unpaid Cumulative Return.
"User" means any (a) manufacturer, (b) unrelated third-party lessor of equipment
to non-Affiliated equipment users, (c) equipment user to whom the Partnership
provides financing pursuant to a Financing Transaction and (d) intangibles user
to whom the Partnership leases or licenses intangible assets pursuant to a
Financing Transaction.
"Volume Discount" means the following discounts in the price of Units to which
investors purchasing Units in volume are entitled:
A-52
<PAGE>
<TABLE>
<CAPTION>
------------------------------- -------------------- ------------------------
Net Purchase
Number of Units Discount Price
--------------- -------- -----
------------------------------- -------------------- ------------------------
<S> <C> <C>
2,499 or less None $100.00
------------------------------- -------------------- ------------------------
2,500 to 4,999 $2.50 $ 97.50
------------------------------- -------------------- ------------------------
5,000 to 9,999 $3.50 $ 96.50
------------------------------- -------------------- ------------------------
10,000 to 19,999 $4.50 $ 95.50
------------------------------- -------------------- ------------------------
20,000 or more $6.50 $ 93.50
=============================== ==================== ========================
</TABLE>
"Voluntary Withdrawal" means, with respect to the General Partner, the voluntary
withdrawal from the Partnership of the General Partner as the General Partner of
the Partnership, or the voluntary sale, assignment, encumbrance or other
disposition of all of the General Partner's General Partnership Interest
pursuant to Section 9.1 of this Agreement.
"Withdrawal" means, with respect to the General Partner, the Voluntary or
Involuntary Withdrawal of such General Partner.
"Withdrawn General Partner" means a General Partner which has completed a
Withdrawal in accordance with the provisions of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
GENERAL PARTNER: ORIGINAL LIMITED PARTNER:
ICON CAPITAL CORP.
BY: BY:
/s/ Beaufort J. B. Clarke /s/ Charles Duggan
- --------------------------- ---------------------------
BEAUFORT J. B. CLARKE, President CHARLES DUGGAN
A-52
<PAGE>
SCHEDULE A
NAMES, ADDRESSES AND CAPITAL CONTRIBUTIONS OF PARTNERS
Name and Address Capital Contributions Made
---------------- --------------------------
I. General Partner
ICON Capital Corp. $1,000
600 Mamaroneck Avenue
Harrison, New York 10528
II. Original Limited Partner
Charles Duggan $1,000
600 Mamaroneck Avenue
Harrison, New York 10528
A-53
<PAGE>
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ICON CASH FLOW PARTNERS L.P. SEVEN
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. ESTABLISHMENT OF PARTNERSHIP.............................................................. 1
Section 2. NAME, PRINCIPAL OFFICE, NAME AND ADDRESS OF REGISTERED AGENT
FOR SERVICE OF PROCESS................................................................... 1
2.1 Legal Name and Address.................................................................... 1
2.2 Address of Partners....................................................................... 1
Section 3. PURPOSES AND POWERS....................................................................... 2
3.1 Purposes.................................................................................. 2
3.2 Investment Objectives and Policies........................................................ 2
3.3 Powers.................................................................................... 2
Section 4. TERM...................................................................................... 3
Section 5. PARTNERS AND CAPITAL...................................................................... 3
5.1 General Partner........................................................................... 3
5.2 Original Limited Partner.................................................................. 3
5.3 Limited Partners.......................................................................... 3
5.4 Partnership Capital....................................................................... 5
5.5 Capital Accounts.......................................................................... 5
5.6 Additional Capital Contributions . . . . .................................................. 6
5.7 Loans by Partners.......................................................................... 6
5.8 No Right to Return of Capital.............................................................. 6
Section 6. GENERAL PARTNER............................................................................ 6
6.1 Extent of Powers and Duties................................................................ 6
6.2 Limitations on the Exercise of Powers of General Partner................................... 9
6.3 Limitation on Liability of General Partner and its Affiliates; Indemnification............ 12
6.4 Compensation of General Partner and its Affiliates........................................ 13
6.5 Other Interests of the General Partner and its Affiliates................................. 16
Section 7. POWERS AND LIABILITIES OF LIMITED PARTNERS................................................ 17
7.1 Absence of Control Over Partnership Business.............................................. 17
7.2 Limited Liability......................................................................... 17
Section 8. DISTRIBUTIONS AND ALLOCATIONS............................................................. 18
8.1 Distribution of Distributable Cash from Operations and Distributable Cash from Sales ..... 18
8.2 Allocations of Profits and Losses......................................................... 19
8.3 Distributions and Allocations Among the Limited Partners.................................. 21
8.4 Tax Allocations: Code Section 704(c); Revaluations........................................ 22
8.5 Compliance with NASAA Guidelines Regarding Front-End Fees................................. 22
8.6 Return of Uninvested Capital Contribution................................................. 22
8.7 Partner's Return of Investment in the Partnership......................................... 22
8.8 No Distributions in Kind ................................................................. 22
8.9 Partnership Entitled to Withhold.......................................................... 23
Section 9. WITHDRAWAL OF GENERAL PARTNER............................................................. 23
9.1 Voluntary Withdrawal...................................................................... 23
9.2 Involuntary Withdrawal.................................................................... 23
</TABLE>
A-i
A-54
<PAGE>
<TABLE>
<S> <C> <C>
9.3 Consequences of Withdrawal................................................................ 23
9.4 Liability of Withdrawn General Partner.................................................... 24
9.5 Continuation of Partnership Business...................................................... 24
Section 10. TRANSFER OF UNITS......................................................................... 24
10.1 Withdrawal of a Limited Partner........................................................... 24
10.2 Assignment................................................................................ 25
10.3 Substitution.............................................................................. 26
10.4 Status of an Assigning Limited Partner.................................................... 26
10.5 Limited Right of Presentment for Redemption of Units...................................... 26
Section 11. DISSOLUTION AND WINDING-UP................................................................ 27
11.1 Events Causing Dissolution................................................................ 27
11.2 Winding Up of the Partnership; Capital Contribution by the General Partner
Upon Dissolution.......................................................................... 27
11.3 Application of Liquidation Proceeds Upon Dissolution...................................... 28
11.4 No Recourse Against Other Partners........................................................ 29
Section 12. FISCAL MATTERS............................................................................ 29
12.1 Title to Property and Bank Accounts....................................................... 29
12.2 Maintenance of and Access to Basic Partnership Documents.................................. 29
12.3 Financial Books and Accounting............................................................ 30
12.4 Fiscal Year............................................................................... 30
12.5 Reports................................................................................... 30
12.6 Tax Returns and Tax Information........................................................... 32
12.7 Accounting Decisions...................................................................... 32
12.8 Federal Tax Elections..................................................................... 32
12.9 Tax Matters Partner....................................................................... 33
12.10 Reports to State Authorities.............................................................. 34
Section 13. MEETINGS AND VOTING RIGHTS OF THE LIMITED PARTNERS........................................ 34
13.1 Meetings of the Limited Partners.......................................................... 34
13.2 Voting Rights of the Limited Partners..................................................... 35
13.3 Limitations on Action by the Limited Partners............................................. 35
Section 14. AMENDMENTS................................................................................ 35
14.1 Amendments by the General Partner......................................................... 35
14.2 Amendments with the Consent of the Majority Interest...................................... 36
Section 15. POWER OF ATTORNEY......................................................................... 36
15.1 Appointment of Attorney-in-Fact........................................................... 37
15.2 Amendments to Agreement and Certificate of Limited Partnership............................ 37
15.3 Power Coupled With an Interest............................................................ 37
Section 16. GENERAL PROVISIONS........................................................................ 37
16.1 Notices, Approvals and Consents........................................................... 37
16.2 Further Assurances........................................................................ 38
16.3 Captions.................................................................................. 38
16.4 Binding Effect............................................................................ 38
16.5 Severability.............................................................................. 38
16.6 Integration............................................................................... 38
16.7 Applicable Law............................................................................ 38
16.8 Counterparts.............................................................................. 38
16.9 Creditors................................................................................. 39
16.10 Interpretation............................................................................ 39
16.11 Successors and Assigns.................................................................... 39
16.12 Waiver of Action for Partition............................................................ 39
Section 17. DEFINITIONS............................................................................... 39
</TABLE>
A-ii
A-55
<PAGE>
Exhibit 10.10
-------------
LOAN AND SECURITY AGREEMENT
TKO FINANCE CORPORATION, an Illinois corporation
LOAN TO
ICON HOLDINGS CORP.
JUNE 20, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS AND TERMS...............................................................1
- ---------------------
LOAN - GENERAL TERMS................................................................8
- --------------------
The Loan.........................................................................8
--------
Payment Terms....................................................................8
-------------
Payment on Maturity..............................................................9
-------------------
Prepayment.......................................................................9
----------
Usury...........................................................................10
-----
COLLATERAL- GENERAL TERMS..........................................................10
- -------------------------
Grant of Security Interest......................................................10
--------------------------
Disclosure of Security Interest.................................................12
-------------------------------
Inspection of Collateral; Audit of Records......................................12
------------------------------------------
Maintain Perfection; Supplemental Documentation.................................13
-----------------------------------------------
Perfected Security Interest; Location of Collateral.............................13
---------------------------------------------------
Collateral in Lender's Control..................................................13
------------------------------
Payment of Claims...............................................................14
-----------------
Special Collateral..............................................................14
------------------
Sale of Collateral by Lender....................................................14
----------------------------
COLLATERAL - ACCOUNTS..............................................................14
- ---------------------
Representations and Warranties Specifically Relating to Accounts................14
----------------------------------------------------------------
Verification of Accounts........................................................15
------------------------
Notices to Account Debtors......................................................15
--------------------------
Appointment of Lender As Attorney-In-Fact After Default.........................15
-------------------------------------------------------
</TABLE>
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
OTHER COLLATERAL..............................................................................16
- ----------------
Guaranties.................................................................................16
----------
Pledge of Stock............................................................................16
---------------
Landlord's Waiver................................................Error! Bookmark not defined.
-----------------
Life Insurance.............................................................................16
--------------
Security Agreements........................................................................17
-------------------
Notice of Other Collateral.................................................................17
--------------------------
GENERAL WARRANTIES, REPRESENTATIONS AND COVENANTS.............................................17
- -------------------------------------------------
General Representations and Warranties.....................................................17
--------------------------------------
Business Purpose; Margin Stock; Securities.................................................20
------------------------------------------
Survival of Warranties and Representations.................................................21
------------------------------------------
COVENANTS AND CONTINUING AGREEMENTS...........................................................21
- -----------------------------------
Financial Covenants........................................................................21
-------------------
Affirmative Covenants......................................................................21
---------------------
Negative Covenants.........................................................................25
------------------
DEFAULT.......................................................................................27
- -------
Events of Default..........................................................................27
-----------------
Remedies Cumulative........................................................................29
-------------------
Acceleration...............................................................................29
------------
Remedies...................................................................................30
--------
Assemble Collateral........................................................................30
-------------------
Injunctive Relief..........................................................................30
-----------------
Notice of Sale.............................................................................30
--------------
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Postponement of Sale.....................................................31
--------------------
Waiver of Bond...........................................................31
--------------
Consent Does Not Create Custom...........................................31
------------------------------
Revenue Fund.............................................................31
------------
CONDITIONS PRECEDENT TO DISBURSEMENT........................................32
- ------------------------------------
Checklist Items..........................................................32
---------------
Necessary Actions........................................................32
-----------------
Conditions Precedent.....................................................32
--------------------
GENERAL.....................................................................32
- -------
Compliance with ERISA....................................................32
---------------------
Costs....................................................................38
-----
Modification.............................................................38
------------
Strict Compliance........................................................38
-----------------
Severability.............................................................39
------------
Successors and Assigns...................................................39
----------------------
Loan Agreement Controls..................................................39
-----------------------
Termination..............................................................39
-----------
Liability Prior to Termination...........................................39
------------------------------
Waiver of Notice.........................................................40
----------------
Indemnification..........................................................40
---------------
Acceptance by Lender.....................................................40
--------------------
Release of Claims........................................................40
-----------------
Prior Agreements.........................................................40
----------------
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Knowledge................................................................41
---------
Notice...................................................................41
------
Section Titles, etc......................................................42
-------------------
Waiver by Borrower.......................................................42
------------------
Governing Law............................................................42
-------------
Appointment for Service of Process.......................................43
----------------------------------
Representation by Counsel................................................43
-------------------------
Plural, Singular.........................................................43
----------------
Waiver of Trial by Jury..................................................43
-----------------------
</TABLE>
iv
<PAGE>
Schedule of Exhibits
--------------------
Exhibit "A" Wire Transfer Instructions
Exhibit "B" Make Whole Amount Calculation
Exhibit "C" Location of Collateral
Exhibit "D" Fictitious Names
Exhibit "E" Indebtedness
Exhibit "F" Schedule of Affiliates
Exhibit "G" Initial Collateral Report
Exhibit "H" ERISA Matters
Exhibit "I" Lessees
v
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), dated for
reference purposes only as of June 20, 1997 by and between TKO Finance
Corporation, an Illinois corporation ("Lender"), with its principal place of
business at 30 N. LaSalle Street, Suite 4030, Chicago, Illinois 60602, and ICON
Holdings Corp., a Delaware corporation ("Borrower"), with its principal place of
business at 600 Mamaroneck Avenue, Harrison, New York 10528.
RECITALS:
---------
A. Borrower has requested that Lender make financial accommodations to
Borrower in the form of a term loan in the amount of $3,000,000.
B. Lender has agreed to provide such financial accommodations provided
that Borrower pledge to Lender all of its assets, including, but not limited to
shares in certain subsidiaries.
C. Lender and Borrower deem it to be in their best interest to set
forth their mutual covenants and agreements herein.
NOW THEREFORE, in consideration of any loan, advance, extension of credit
and/or other financial accommodation at any time made by Lender to or for the
benefit of Borrower, and of the promises set forth herein, the parties hereto
agree as follows:
1. DEFINITIONS AND TERMS
---------------------
1.1 Definitions. The following words, terms and/or phrases shall have the
-----------
meanings set forth thereafter and such meanings shall be applicable to the
singular and plural form thereof, giving effect to the numerical difference.
(a) "Account Debtor": any Person who is and/or may become obligated to
Borrower under or on account of Accounts.
(b) "Accounts": the definition ascribed to this term in Section 3.1.
(c) "Affiliate": any Person (i) in which Borrower, one or more equity
interest holders owning five percent (5%) or more of the total equity interest
of Borrower, any Subsidiary, and/or any Parent, individually, jointly and/or
severally, now or at any time or times hereafter, has or have an equity or other
ownership interest equal to or in excess of five percent (5%) of the total
equity of or other ownership interest in such Person; and/or (ii) which directly
or indirectly through one or more intermediaries controls or is controlled
<PAGE>
by, or is under common control with Borrower; provided that, Affiliate shall not
-------------
include: (y) any partnership of which Borrower or any Subsidiary is a general
partner or, (z) ICON Receivables 1997-A L.L.C. For purposes of this definition,
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of Stock, by contract or otherwise.
(d) "Agreement": this Loan and Security Agreement, together with all
amendments, modifications, extensions, supplements and restatements hereto or
hereof.
(e) "and/or": one or the other or both, or any one or more or all, of the
things or Persons in connection with which the conjunction is used.
(f) "Assets": any and all real, personal and intangible property of
Borrower, including, without limitation Accounts, chattel paper, contract
rights, letters of credit, instruments and documents, Equipment, General
Intangibles, Inventory, Leases, Options, licenses, and Real Property, whether
now existing or hereafter acquired or arising.
(g) "Borrower": ICON Holdings Corp. and its permitted successors and
assigns.
(h) "Borrower's Liabilities": all obligations and liabilities of Borrower
or any other Loan Party to Lender (including, without limitation, all debts,
claims and indebtedness) whether primary, secondary, direct, contingent, fixed
or otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and whether now
contemplated or hereafter arising, whether under this Agreement , any guaranty,
the other Loan Documents, or by oral or written agreement or operation of law or
otherwise. Borrower's Liabilities shall expressly include all obligations and
liabilities of any Guarantor under its respective guaranty or under any security
agreement entered into in favor of Lender.
(i) "Borrower's Obligations": all terms, conditions, warranties,
representations, agreements, undertakings, covenants and provisions (other than
Borrower's Liabilities) to be performed, discharged, kept, observed or complied
with by Borrower to or for the benefit of Lender, whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter arising, evidenced, created, incurred, acquired or owing, whether not
contemplated or hereafter arising, whether under this Agreement, the other Loan
Documents, by any oral or written agreement, operation of law or otherwise.
Borrower's Obligations shall expressly include all obligations of any Guarantor
under its respective guaranty or under any security agreement entered into in
favor of Lender.
(j) "Business Day": any day, other than a Saturday, Sunday, a day that is
a legal holiday under the laws of the State of Illinois or any other day on
which lending
2
<PAGE>
institutions located in Chicago, Illinois are authorized or required by law or
other governmental action to close.
(k) "Charges": all national, federal, state, county, city, municipal
and/or other governmental (or any instrumentality, division, agency, body or
department thereof, including without limitation the Pension Benefit Guaranty
Corporation) taxes, levies, assessments, charges, liens, claims or encumbrances
upon and/or relating to the Collateral, Borrower's Liabilities, Borrower's
Obligations, Borrower's business, Borrower's ownership and/or use of any of its
assets, Borrower's income and/or gross receipts and/or Borrower's ownership
and/or use of any of its material assets.
(l) "Collateral": the definition ascribed to this term in Section 3.1.
(m) "Collateral Report": the definition ascribed to this term in Section
7.2(b)(iii).
(n) "Corporate Guarantors": collectively, ICON Capital Corp., a
Connecticut corporation, ICON Financial Corp., a Delaware corporation, ICON
Funding Corp., a Delaware corporation and ICON Securities Corp., a New York
corporation.
(o) "Costs": any and all costs and expenses (including, without
limitation, the reasonable fees and expenses of any counsel, accountants,
appraisers or other professionals) incurred by Lender at any time, in connection
with: (a) the preparation, negotiation and execution of this Agreement and all
other Loan Documents; (b) the preparation, negotiation and execution of any
amendment or modification of this Agreement or the other Loan Documents; (c) any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Lender, Borrower or any other Person) in any way relating to the Collateral,
this Agreement, the other Loan Documents, the Secured Obligations, Borrower's
affairs or any Guarantor's affairs; (d) any attempt to enforce any rights of
Lender against Borrower or any other Person which may be obligated to Lender by
virtue of this Agreement or the other Loan Documents, including, without
limitation, the Account Debtors; (e) any inspection, verification or audit of
any of the Collateral in accordance with this Agreement; (f) any action to
preserve, protect, collect, sell, liquidate or otherwise dispose of the
Collateral; and (g) performing any of the obligations relating to or payment of
any Secured Obligation hereunder in accordance with the terms hereof.
(p) "Default Rate": interest at the rate of eighteen percent (18%) per
annum.
(q) "Environmental Laws": any Federal, state or local law, rule,
regulation, ordinance, order, code or statute applicable to Borrower, any
Guarantor or their respective property, in each case as amended (whether now
existing or hereafter enacted or promulgated), controlling, governing or
relating to the pollution or contamination of the air, water or land or
concerning hazardous, special or toxic materials, wastes or substances, or any
judicial or administrative interpretation of such laws, rules or regulations,
including, without limitation, the Water Pollution Control Act (33 U.S.C. (S)
3
<PAGE>
1251 et seq.), Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et
------ --
seq.), Safe Drinking Water Act (42 U.S.C. (S) 3000(f) et seq.), Toxic Substances
- --- ------
Control Act (15 U.S.C. (S) 2601 et seq.), Clean Air Act (42 U.S.C. (S) 7401 et
------ --
seq.), and Comprehensive Environmental Response, Compensation and Liability Act
- ---
(42 U.S.C. (S) 9601 et seq.).
------
(r) "Equipment": the definition ascribed to this term in Section 3.1.
(s) "Equipment Leases": all leases or similar agreements pursuant to which
Borrower leases Equipment.
(t) "Event of Default": the definition ascribed to this term in Section
8.1.
(u) "Fee Agreements": shall mean any partnership agreement, management
agreement, consulting agreement, or other agreements pursuant to which Borrower
is to be paid fees, distributions, allocations, expense reimbursements,
consideration, salary or other compensation in consideration for providing
management, personnel or services, in any form whatsoever, to an Affiliate or to
any other Person. Services to be rendered under Fee Agreements may include, but
not be limited to marketing and leasing and releasing of equipment, monitoring
the use of collateral for financing transactions arranging for necessary
maintenance and repairs of equipment, collecting revenues, paying operating
expenses not paid directly by lessees, determining that equipment is used in
accordance with all operative contractual arrangements and providing clerical
and bookkeeping services.
(v) "Financials": those financial statements of Borrower, heretofore,
concurrently herewith or hereafter delivered by or on behalf of Borrower to
Lender, including but not limited to those financial statements and reports
delivered by Borrower to Lender pursuant to Section 7.2.(b)
(w) "GAAP": generally accepted accounting principles applied in the
preparation of the financial statements of a Person with such changes thereto
as: (i) shall be consistent with the then-effective principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors and
successors and (ii) shall be concurred in by the independent certified public
accountants of recognized standing acceptable to Lender reviewing such financial
statements of Borrower.
(x) "General Intangibles": the definition ascribed to this term in Section
3.1.
(y) "Guarantors": collectively, the Corporate Guarantors and the
Individual Guarantors.
(z) "Icon Subsidiaries": collectively, Corporate Guarantors, MGC/Griffin
Capital Corp., a Delaware corporation and ICON (UK).
4
<PAGE>
(aa) "ICON (UK)": ICON Capital (UK) Limited, a corporation organized under
the laws England and Wales.
(bb) "Individual Guarantors": Beaufort J.B. Clarke, Linda A. Clarke, Thomas
W. Martin, Lynn Martin, Paul B. Weiss and Linnea Weiss.
(cc) "Indebtedness": with respect to any Person, at a particular time: (i)
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise or any commitment by which such
Person assures a creditor against loss; (ii) obligations under leases which
shall have been or should be, in accordance with GAAP, recorded as capital
leases in respect of which obligations such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations such Person assures a creditor against loss; (iii) all obligations
and liabilities with respect to unfunded vested benefits under any "employee
benefit plan" or with respect to withdrawal liabilities incurred under ERISA by
Borrower or any ERISA Affiliate to a "multiemployer plan", as such terms are
defined under the Employee Retirement Income Security Act of 1974; and (iv) any
and all accounts payable, accruals and other items characterized as Indebtedness
in accordance with GAAP.
(dd) "Inventory": the definition ascribed to this term in Section 3.1.
(ee) "Leases": the definition ascribed to this term in Section 3.1.
(ff) "Leaseholds": all estates and interests in land and improvements
created by any Lease.
(gg) "Lender": TKO Finance Corporation and its successors and assigns.
(hh) "Loan": any and all loans, advances, extensions of credit and/or other
financial accommodations of any kind or nature made by Lender at any time to,
for the benefit or at the request of Borrower pursuant to this Agreement and/or
any of the other Loan Documents.
(ii) "Loan Documents": this Agreement and the Other Agreements.
(jj) "Loan Party": Borrower, the ICON Subsidiaries, the Individual
Guarantors, or any one or more of the forgoing.
(kk) "Make Whole Amount": the definition ascribed to this term in Section
2.5.
(ll) "Maturity Date": July 1, 2000 or such earlier date as all Secured
Obligations shall be due and payable by acceleration or otherwise.
5
<PAGE>
(mm) "Note": that certain Term Note dated even date herewith, made by
Borrower payable to the order of Lender in the original principal amount of
$3,000,000, as said Note may hereinafter be replaced, modified, supplemented,
restated, or amended.
(nn) "Options": the definition ascribed to this term in Section 3.1.
(oo) "Other Agreements": the Note, the Pledge Agreements, together with all
agreements, instruments and documents evidencing or securing the Loan or the
transactions contemplated herein, including, without limitation, bond
agreements, loan agreements, security agreements, guaranties, mortgages, deeds
of trust, notes, applications and agreements for letters of credit, letters of
credit, advances of credit, bank acceptances, pledges, powers of attorney,
consents, assignments, collateral assignments, contracts, notices, leases,
financing statements and all other written matter heretofore, now and/or from
time to time hereafter executed by and/or on behalf of Borrower, any other Loan
Party or any other Person and delivered to Lender, or issued by Lender upon the
application and/or other request of, and on behalf of, Borrower.
(pp) "Parent": any Person, now or at any time or times hereafter, owning or
controlling (alone or with Borrower, any Subsidiary and/or any other Person) at
least a majority of the issued and outstanding Stock or other ownership interest
of Borrower or any Subsidiary (hereinafter defined). For purposes of this
definition, "control" shall have the same meaning ascribed to this term in
Section 1.1(c).
(qq) "Permitted Liens": (i) the liens created in favor of Lender, whether
pursuant to this Agreement, any of the Other Agreements or otherwise; (ii) liens
for Charges which are not yet due and payable or which are expressly permitted
pursuant to the terms hereof, or claims and unfunded liabilities under ERISA not
yet due and payable or which are being contested in good faith; (iii) liens
arising in connection with worker's compensation, unemployment insurance, old
age pensions and social security benefits which are not overdue or are being
contested in good faith by appropriate proceedings diligently pursued, provided
--------
that in the case of any such contest any proceedings commenced for the
- ----
enforcement of such liens shall have been duly suspended and such provision for
the payment of such liens has been made on the books of Borrower as may be
required by GAAP; (iv) liens incurred in the ordinary course of business to
secure the performance of statutory obligations arising in connection with
progress payments or advance payments due under contracts with the United States
Government or any agency thereof entered into in the ordinary course of
business; and (v) additional liens expressly permitted from time to time in
writing by Lender.
(rr) "Person": any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether
national, federal, state, county, city,
6
<PAGE>
municipal or otherwise, including without limitation any instrumentality,
division, agency, body or department thereof).
(ss) "Pledge Agreement": those agreements entered into in accordance with
Section 5.2.
(tt) "Put Agreement": that certain Put And Call Agreement dated even date
herewith by and between Lender and Borrower.
(uu) "Real Property": any real property now owned or hereafter acquired by
Borrower, and all portions and parcels thereto, including the land and all
buildings and improvements thereon and all easements appurtenant thereto.
(vv) "Records": the definition ascribed to this term in Section 3.1.
(ww) "Secured Obligations": all Borrower's Liabilities, Borrower's
Obligations and Borrower's liabilities pursuant to the Put Agreement.
(xx) "Securities": shall have the meaning ascribed to that term in the
Securities Act of 1934.
(yy) "Securities Laws": all applicable Federal and state securities laws
and regulations promulgated pursuant thereto.
(zz) "Special Collateral": any Collateral which is evidenced by or consists
of any chattel paper, letters of credit, instrument, certificate or document,
including, without limitation, promissory notes, documents of title, securities
and warehouse receipts.
(aaa) "Stock": all shares, interests, participations or other equivalents
(however designated) of or in a corporation, whether voting or non-voting,
including, but not limited to, common stock, warrants, preferred stock,
convertible debentures and all agreements, instruments and documents
convertible, in whole or in part, into any one or more or all of the foregoing.
(bbb) "Subsidiary": any Person at least a majority of whose issued and
outstanding Stock or other ownership interests now or at any time hereafter is
owned by any Loan Party.
(ccc) "Supplemental Documentation": any and all financing statements,
notices, disclosures, agreements, instruments, documents or other written
matter, which Lender may from time to time deem necessary to maintain or create
a valid and perfected security interest in the Collateral.
7
<PAGE>
(ddd) "Unmatured Default": any event or condition which, with the passage
of time or the giving of notice or both, would constitute an Event of Default
hereunder.
1.2 UCC. Except as otherwise defined in this Agreement or the other Loan
---
Documents, all words, terms and/or phrases used herein and therein shall be
defined by the applicable definition therefor (if any) in the Uniform Commercial
Code as adopted by the State of Illinois.
1.3 GAAP. Except as otherwise defined in this Agreement or the other Loan
----
Documents, all accounting terms used herein shall have the meaning ascribed to
that term in accordance with GAAP.
1.4 Borrower. Whenever the context so requires, the use of "it" in
--------
reference to Borrower shall mean Borrower as defined above.
2. LOAN - GENERAL TERMS
--------------------
2.1 The Loan. Subject to the terms and provisions hereof, Lender shall make
--------
available to Borrower a term loan in the original principal amount of $3,000,000
(the "Loan"). The Loan shall bear interest at the rate of eleven and one-half
percent (11.5%) per annum and shall be payable in thirty-six equal monthly
installments of $99,177.37, commencing on August 1, 1997 and on the first day of
each month thereafter through and including June 1, 2000. The unpaid principal
balance plus accrued but unpaid interest shall be due and payable July 1, 2000.
The Loan shall be further evidenced by the Note to be delivered concurrently
herewith, as amended, restated, modified, extended, supplemented, or replaced
from time to time hereafter, which Note is incorporated herein by reference as
if fully set forth herein.
2.2 Payment Terms. Each payment (including permitted prepayments) of
-------------
principal, interest, or any other amounts of any kind with respect to the Note
shall be made by wire transfer of immediately available funds by Borrower to
Lender's account designated on Exhibit A (or at any other place which Lender may
---------
hereafter designate for such purpose in a notice duly given to Borrower
hereunder), no later than one-thirty p.m., Chicago time, on the date due
therefor. Funds received after that hour shall be deemed to have been received
by Lender on the next following Business Day. Whenever any payment to be made
under the Note shall be stated to be due on a date which is not a Business Day,
the due date therefor shall be extended to the next succeeding Business Day. At
Lender's election, Borrower shall direct its bank or other financial institution
to directly deposit the mandatory monthly installment payments by ACH to an
account designated by Lender.
8
<PAGE>
2.3 Payment on Maturity. On July 1, 2000, the Maturity Date, Borrower shall
-------------------
pay to Lender the entire principal balance of this Note then outstanding,
together with all accrued and unpaid interest, all penalties and late payment
fees hereunder.
2.4 Prepayment.
----------
(a) Prohibition of Partial Prepayments. The Loan may not be prepaid in
----------------------------------
part.
(b) Prohibition on Prepayment. The Loan may not be prepaid in whole
-------------------------
prior to the expiration of the nineteenth month of the term hereof and receipt
by Borrower of the nineteenth payment due hereunder. Borrower expressly waives
the right to prepay the Loan except in strict accordance with the terms hereof.
If the maturity of the Loan is accelerated by reason of the occurrence of an
Event of Default hereunder or under any other Loan Document, including but not
limited to a default under the Note, then any subsequent tender of payment of
the Loan, including any redemption following acceleration under this Note or any
other Loan Document, or any tender by Guarantors, or any one or more of them, at
any time when Borrower is not insolvent or, if insolvent, was rendered insolvent
by a distribution with respect to its stock or other payments to Affiliates,
shall constitute an evasion of the restrictions on prepayment set forth herein
and shall be deemed to be a voluntary prepayment. Accordingly, to the extent
permitted by law, Lender may impose as a condition to accepting such tender that
Borrower pay to Lender an amount equal to the Make Whole Amount, as calculated
in accordance with Exhibit B (the "Make Whole Amount") multiplied by two (2) in
---------
addition to and not in lieu of any payment of principal, interest, fees,
penalties and charges. Any attempted prepayment prior to the nineteenth month of
the term hereof, shall be deemed to be a deposit of cash collateral with Lender
to secure the payment of the Note and the other Secured Obligations and shall be
held by Lender in a non-interest bearing account until prepayment is permitted
hereunder.
(c) Prepayment After Nineteenth Month. The Make Whole Amount is not
---------------------------------
applicable to any prepayment after the nineteenth month and receipt of the
nineteenth payment of principal and interest. After the nineteenth month during
the term hereof and receipt of the nineteen payment of principal and interest,
and provided no Event of Default or Unmatured Default has occurred and is
continuing, Borrower may prepay the Loan under the following terms and
conditions:
(i) The Loan may be prepaid in whole, upon not less than ten (10) days
prior written notice; provided that at the time of such payment, Borrower
-------------
shall pay all accrued but unpaid interest, the then outstanding principal
balance, plus
(ii) At the time of any prepayment, and concurrently with notice
thereof, Borrower shall be deemed to have exercised its option to call any
Class B
9
<PAGE>
stock of Borrower then owned by Lender and Borrower shall be deemed to have
delivered to Lender a call notice in accordance with the terms of Section 4
the Put Agreement. In addition to and not in lieu of any amounts due and
owing pursuant to the terms of the Note, this Loan Agreement or any other
Loan Document, Borrower shall pay to Lender on the date of the prepayment
made pursuant to Section 2.4(c)(i), an amount equal to the price per share
payable by Borrower to Lender pursuant to Section 4 of the Put Agreement.
2.5 Usury. The provisions of this Section shall govern and control over any
-----
irreconcilably inconsistent provision contained in this Agreement or in any
other document evidencing or securing the Loan. Lender shall never be entitled
to receive, collect, or apply as interest hereon (for purposes of this Section,
the word "interest" shall be deemed to include any sums treated as interest
under applicable law governing matters of usury and unlawful interest), any
amount in excess of the Highest Lawful Rate (hereinafter defined) and, in the
event Lender ever receives, collects, or applies as interest any such excess,
such amount which would be excessive interest shall be deemed a partial
prepayment of principal and shall be treated hereunder as such; and, if the
principal of this Agreement is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid
or payable, under any specific contingency, exceeds the Highest Lawful Rate,
Borrower and Lender shall, to the maximum extent permitted under applicable law,
(i) characterize any non-principal payment as an expense, fee or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) spread the total amount of interest throughout the entire contemplated
term of this Agreement, provided that if this Agreement is paid and performed in
-------------
full prior to the end of the full contemplated term hereof, and if the interest
received for the actual period of existence hereof exceeds the Highest Lawful
Rate, Lender shall refund to Borrower the amount of such excess and, in such
event, Lender shall not be subject to any penalties provided by any laws for
contracting for, charging or receiving interest in excess of the Highest Lawful
Rate. "Highest Lawful Rate" shall mean the maximum rate of interest which Lender
is allowed to contract for, charge, take, reserve or receive under applicable
law after taking into account, to the extent required by applicable law, any and
all relevant payments or charges hereunder.
3. COLLATERAL - GENERAL TERMS
--------------------------
3.1 Grant of Security Interest. To secure the prompt payment to Lender of
--------------------------
all Secured Obligations and the prompt, full and faithful performance by
Borrower of all Secured Obligations, Borrower hereby grants to Lender a security
interest in and to, and hereby mortgages, conveys, transfers, assigns and
pledges to Lender, all of Borrower's now existing and/or owned and hereafter
arising and/or acquired:
(a) accounts, accounts receivable, chattel paper, contract rights, letters
of credit, notes, instruments and documents, which shall include, without
limitation, any amounts
10
<PAGE>
due under the Fee Agreements and amounts due or to become due in the future
("Accounts"), and all goods whose sale, lease or other disposition by Borrower
have given rise to Accounts and have been returned to or repossessed or stopped
in transit by Borrower.
(b) patents, copyrights and trademarks, and all applications for and
registrations of the foregoing, all contract rights (including rights to
distributions, dividends, payments or their consideration under any partnership
agreement, shareholder's agreement or limited liability company operating
agreement), franchise rights, trade names, art work, goodwill, beneficial
interests, rights to tax refunds, claims, warranties, guarantees, claims against
any supplier of any Inventory, including claims arising out of purchases of
defective goods or overpayments to or undershipments by suppliers, any claims
which Borrower may have against any vendor or lessor of Equipment or Inventory
and all other general intangibles of any kind or nature whatsoever (the "General
Intangibles");
(c) materials and inventories and finished goods, wherever located, whether
in transit, held by others for Borrower's account, covered by warehouse
receipts, purchase orders and contracts, or in the possession of any carriers,
forwarding agents, truckers, warehousemen, vendors, customers on a consignment
basis or other Persons, including, without limitation, all raw materials, work
in process, finished merchandise, supplies, goods, stores, incidentals, office
supplies and packaging materials ("Inventory");
(d) equipment, machinery, fixtures and appliances (including but not
limited to furniture, office equipment, motor vehicles, aircraft, boats and
vessels, trade fixtures, computer hardware and non-structural additions or
improvements located in or on, or attached to, and used or intended to be used
in connection with or the operation of any Leaseholds) and all other personal
property of every kind or nature, together with all extensions, additions,
improvements, substitutions and replacements to any of any of the foregoing
("Equipment");
(e) monies, reserves, deposits, certificates of deposit and deposit
accounts and interest or dividends thereon, securities, cash, cash equivalents
and other property now or at any time or times hereafter in the possession or
under the control of Lender or its bailee;
(f) books, records, computer records, computer software, ledger cards,
programs and other computer materials, customer and supplier lists, invoices,
orders and other property and general intangibles at any time evidencing or
relating to the Collateral ("Records");
(g) rights of Borrower under all leases, licenses, occupancy agreements,
concessions or other agreements entered into by Borrower as tenant or lessee or
licensee or concessionaire thereunder, whether written or oral, whether now
existing or entered
11
<PAGE>
into at any time hereafter, whereby Borrower is granted the right, either
exclusively or in common with others, to use, possess, or occupy real estate
(the "Leases");
(h) options, rights of first refusal, grants, contracts, agreements, or
rights to purchase, lease, license, or otherwise acquire any interest in real
property, whether now existing or hereafter acquired ("Options");
(i) all accessions to any of the Collateral and all substitutions,
renewals, improvements and replacements of and additions thereto;
(j) all other property of Borrower, real and/or personal, in which Borrower
heretofore, now and/or from time to time hereafter has rights or has granted or
grants to Lender a security interest, assignment, lien, claim or other
encumbrance; and
(k) all products and proceeds of the foregoing (whether such proceeds are
in the form of cash, cash equivalents, proceeds of insurance policies,
condemnation proceeds, Accounts, General Intangibles, Inventory, Equipment,
Records or otherwise).
All of the foregoing is referred to herein individually and collectively as the
"Collateral". It is the intent of the parties that the Collateral shall include
all property of Borrower, real, personal or intangible, whether now existing or
hereafter acquired or arising, whether specifically enumerated herein or not,
and that the broadest possible interpretation should be given to the term
Collateral; provided that, Collateral shall not include any property of any
-------------
other Person (including any partnership of which Borrower is a general partner)
which may be in the possession or control of Borrower.
3.2 Disclosure of Security Interest. Borrower shall make appropriate
-------------------------------
entries upon its financial statements and Records disclosing Lender's security
interest in and assignment and pledge of the Collateral.
3.3 Inspection of Collateral; Audit of Records.
------------------------------------------
(a) Inspect Collateral. Lender (by any of its officers, accountants,
------------------
employees and/or agents) shall have the right, at any time or times, after not
less than two (2) Business Days prior notice during normal business hours
(unless an Unmatured Default or Event of Default then exists, in which event no
notice shall be required) to inspect the Collateral (and the premises upon which
it is located) and all related Records and to verify the amount and condition of
or any other matter relating to the Collateral. In addition to the foregoing
rights, Lender (by any of its officers, employees or agents) shall have the
right, at any time or times during Borrower's usual business hours, after at
least two (2) Business Days prior notice (unless an Event of Default or
Unmatured Default has occurred and is continuing in which event no prior notice
shall be required) to perform field inspections of Borrower's books and records,
at Borrower's sole cost and expense.
12
<PAGE>
(b) Audit Records. In addition to the right to inspect set forth herein,
-------------
Lender (by any of its officers, accountants, employees and/or agents) shall have
the right to inspect the books and Records of Borrower. All reasonable costs,
fees and expenses incurred by Lender, or for which Lender becomes obligated, in
connection with such inspection, verification or audit shall constitute part of
Borrower's Liabilities, payable by Borrower to Lender on demand therefor and any
amount not paid on demand shall bear interest at the Default Rate. Borrower
hereby acknowledges that it is the intent of Lender to perform a field audit of
Borrower's books and Records, at Borrower's cost and expense, no less frequently
than quarterly.
3.4 Maintain Perfection; Supplemental Documentation. Borrower shall perform
-----------------------------------------------
all the acts requested by Lender which are reasonably necessary to maintain a
valid security interest in the Collateral, including but not limited to,
executing and/or delivering to Lender, at any time and from time to time
hereafter, any and all Supplemental Documentation that Lender may request, in
form and substance reasonably acceptable to Lender, to perfect and maintain
perfected Lender's security interest, lien and/or encumbrance in and/or
assignment and pledge of the Collateral and to consummate the transactions
contemplated in or by this Agreement and/or the Other Agreements. Borrower
agrees that Lender, to the extent permitted by applicable law, may execute, on
behalf and in the name of Borrower, any Supplemental Documentation covering all
or any of the Collateral and file the same in each and every appropriate
jurisdiction.
3.5 Perfected Security Interest; Location of Collateral. Borrower hereby
---------------------------------------------------
warrants and represents to and covenants with Lender that: (a) Lender's security
interest in the Collateral is now and at all times hereafter shall be perfected
and have a first priority; (b) the offices and/or locations where Borrower keeps
the Collateral and the Records are at the locations specified on Exhibit C
---------
hereto. Borrower has no other offices or locations and Borrower shall not remove
such Records and/or the Collateral therefrom and shall not keep any such Records
and/or the Collateral at any other office or location unless Borrower gives
Lender notice thereof at least thirty (30) days prior thereto and the same is
within the continental United States of America. Borrower, by written notice
delivered to Lender at least thirty (30) days prior thereto, shall advise Lender
of Borrower's opening or acquisition of any new office, place of business or
place where any of the Collateral is to be stored or kept, or its closing of any
then existing office, place of business or place where any of the Collateral is
to be stored or kept and any new office or place of business shall be within the
continental United States of America.
3.6 Collateral in Lender's Control. Lender, now or at any time hereafter,
------------------------------
in its sole and absolute discretion, may take control of, in any manner, and may
endorse Borrower's name to any of the items of payment or proceeds in its
possession or control and Lender shall apply the same to and on account of the
Secured Obligations in accordance with the terms hereof. Upon the occurrence of
an Event of Default and during the continuation thereof, Borrower, irrevocably,
hereby makes, constitutes and appoints
13
<PAGE>
Lender (and all Persons designated by Lender for that purpose) as Borrower's
true and lawful agent and attorney-in-fact, with power, without notice to
Borrower, to take any such actions.
3.7 Payment of Claims. Upon the occurrence of an Event of Default and
-----------------
during the continuation thereof, Lender, in its sole and absolute discretion,
without waiving or releasing any of the Secured Obligations or any Event of
Default, may at any time or times thereafter, but shall be under no obligation
to, pay, acquire and/or accept an assignment of any security interest, lien,
encumbrance or claim asserted by any Person against the Collateral. All sums
paid by Lender in accordance with this Section 3.7 and all reasonable Costs
relating thereto incurred by Lender or for which Lender becomes obligated on
account thereof shall be part of the Secured Obligations payable by Borrower to
Lender on demand and any amount not paid on demand shall bear interest at the
Default Rate.
3.8 Special Collateral. Immediately upon Borrower's receipt of that portion
------------------
of the Collateral consisting of Special Collateral, Borrower shall mark the same
to show that such Special Collateral is subject to a security interest in favor
of Lender and shall deliver the original thereof to Lender, together with
appropriate endorsement and/or other specific evidence of assignment thereof to
Lender, in form and substance acceptable to Lender.
3.9 Sale of Collateral by Lender. Upon the occurrence of an Event of
----------------------------
Default and during the continuation thereof, regardless of the adequacy of any
Collateral, any deposits or other sums at any time credited by or payable or due
from Lender or any bailee of Lender to Borrower, or any monies, cash, cash
equivalents, certificates of deposit, securities, instruments, documents or
other assets of Borrower in the possession or control of Lender or its bailee
for any purpose may at any time be reduced to cash and applied by Lender to, or
setoff by Lender against, the Secured Obligations which are then currently due
hereunder.
4. COLLATERAL - ACCOUNTS
---------------------
4.1 Representations and Warranties Specifically Relating to Accounts.
----------------------------------------------------------------
Borrower warrants and represents to Lender on each date that it delivers to
Lender a Collateral Report that as of such date:
(a) the Accounts (including the Fee Agreements) listed therein are genuine,
are in all respects what they purport to be, are not reduced to a judgment, and,
if evidenced or secured by any instrument or item of chattel paper, are
evidenced by only one executed original instrument or item of chattel paper, and
such original has been endorsed and delivered to Lender;
14
<PAGE>
(b) the Accounts (including the Fee Agreements) listed therein represent
bona fide transactions completed in accordance with the terms and provisions
hereof;
(c) there are no setoffs, counterclaims or disputes existing, or to the
best of Borrower's knowledge, asserted with respect to any Accounts (including
the Fee Agreements) listed thereon; and
(d) to the best of Borrower's knowledge, all Account Debtors of the
Accounts (including the Fee Agreements) listed thereon are solvent, had the
capacity to contract at the time any contract or other document was entered
into, and were duly authorized to enter into such contract by all required
partnership or corporate action.
4.2 Verification of Accounts. Upon the occurrence of an Event of Default
------------------------
and during the continuation thereof, Lender's nominee, together with any of
Lender's officers, employees or agents shall have the right, at any time or
times hereafter, in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Accounts by mail, telephone,
telegraph or otherwise. All Costs relating thereto reasonably incurred by Lender
(or for which Lender becomes obligated), including the costs of retaining
Lender's nominee, shall be part of the Secured Obligations, payable by Borrower
to Lender on demand and if not paid on demand, shall bear interest at the
Default Rate.
4.3 Notices to Account Debtors. Upon the occurrence of an Event of Default
--------------------------
and during the continuation thereof, Lender shall have the right, in its sole
and absolute discretion, without notice thereof to Borrower: (a) to notify any
or all Account Debtors that the Accounts and Special Collateral have been
assigned to Lender and that Lender has a security interest therein; (b) to
direct such Account Debtors to make all payments due from them to Borrower upon
the Accounts and Special Collateral directly to Lender; and (c) to enforce
payment of and collect, by legal proceedings or otherwise, the Accounts and
Special Collateral in the name of Lender and Borrower.
4.4 Appointment of Lender As Attorney-In-Fact After Default. Borrower,
-------------------------------------------------------
irrevocably, hereby designates, makes, constitutes and appoints Lender (and all
Persons designated by Lender) as Borrower's true and lawful agent and
attorney-in-fact from and after an Event of Default and during the continuation
thereof, with power, without notice to Borrower and at such time or times
hereafter as Lender, in its sole and absolute discretion, may determine, in
Borrower's or Lender's name: (a) to demand payment of the Accounts and Special
Collateral; (b) to enforce payment of the Accounts and Special Collateral by
legal proceedings or otherwise; (c) to exercise all of Borrower's rights and
remedies with respect to the collection of the Accounts and Special Collateral;
(d) to settle, adjust, compromise, extend or renew the Accounts and Special
Collateral; (e) to settle, adjust or compromise any legal proceedings brought to
collect the Accounts and Special Collateral; (f) to sell or assign the Accounts
and Special Collateral upon such terms, for such amounts and at such time or
times as Lender deems advisable; (g) to discharge and release the Accounts and
Special Collateral; (h) to prepare, file and sign Borrower's name
15
<PAGE>
on any notice of lien, assignment or satisfaction of lien or similar document in
connection with the Accounts and Special Collateral; (i) to prepare, file and
sign Borrower's name on any proof of claim in Bankruptcy or similar document
against any Account Debtor; (j) to do all acts and things necessary, in Lender's
sole discretion, to fulfill Borrower's Obligations under this Agreement; and (k)
to prepare, file and sign Borrower's name on any notice of lien, assignment or
satisfaction of lien or similar document in connection with the Accounts and
Special Collateral.
5. OTHER COLLATERAL
----------------
5.1 Guaranties. Concurrently herewith, Borrower shall cause each Guarantor
----------
to execute and deliver to Lender a guaranty of payment and performance of all
Secured Obligations; provided that the liability of the Individual Guarantors
-------------
shall be limited as provided in the guaranty evidencing their respective
obligations. In the event of the death of Beaufort J.B. Clarke, Thomas W. Martin
or Paul B. Weiss, and the payment of insurance proceeds of the key-man life
insurance pledged pursuant to Section 5.4, the spouse of such man shall be
released from her respective guaranty.
5.2 Pledge of Stock. In addition to the Collateral pledged pursuant to the
---------------
terms of Section 4.1, Borrower shall, concurrently herewith, cause its
shareholders to enter into a Pledge Agreement pursuant to which such
shareholders will pledge to Lender 100% of the shares of Borrower to secure all
Secured Obligations. Concurrently herewith, Borrower shall execute Pledge
Agreements pursuant to which Borrower will pledge all of the stock of the ICON
Subsidiaries.
5.3 Life Insurance. Concurrently herewith, Borrower shall deliver to Lender
--------------
the original policies and collateral assignments of life insurance policies in
the amount of $1,000,000 each, insuring the lives of Beaufort J.B. Clarke,
Thomas W. Martin and Paul B. Weiss. In the event of the payment of a death
benefit with respect to any such policy, the proceeds thereof shall be paid to
Lender and applied to the Secured Obligations, whether or not then due and
owing; provided that, in the event said proceeds are paid to Lender at any time
-------------
that the prepayment is prohibited hereunder, at Borrower's option, which option
shall be exercised by written notice to Lender, (i) said proceeds shall be held
as cash collateral by Lender in accordance with Section 2.5; provided that any
-------------
proceeds held by Lender shall be held in an interest-bearing account, interest
payable for the benefit of Borrower, or (ii) notwithstanding anything to the
contrary contained herein, Borrower shall be permitted to prepay the
indebtedness evidenced by the Note in an amount not to exceed insurance proceeds
actually received upon such death; provided that in addition to the principal
-------------
amount prepaid, Borrower shall pay to Lender a prepayment premium equal to the
Make Whole Amount if such prepayment is made prior to the nineteenth month
during the term hereof and receipt of the nineteenth payment of principal and
interest; provided however, that if the amount prepaid is equal to or greater
-------- -------
than the unpaid
16
<PAGE>
principal balance of the Loan, the provisions of Section 2.4(c)(ii) shall be
deemed applicable thereto. In the event the proceeds of such insurance policy is
greater than the Secured Obligations, the excess shall be paid to Borrower or
the beneficiary of the policy, as their interests may appear.
5.4 Security Agreements. In addition to the Collateral pledged pursuant to
-------------------
the provisions of Section 3.1, Borrower shall cause each Corporate Guarantor to
grant to Lender a security interest in all of its property (real, personal and
intangible) as security for the Secured Obligations.
5.5 Notice of Other Collateral. Borrower hereby covenants and agrees to
--------------------------
deliver to Lender notice before entering into any contract or agreement to
acquire any real property, acquiring or entering into any Lease, or acquiring or
entering into any Option. Borrower hereby covenants and agrees to immediately
grant to Lender a first security interest, lien and mortgage, in form and
substance reasonably required by Lender, on any real property or Option
hereafter acquired, and Lease entered into after the date hereof.
6. GENERAL WARRANTIES, REPRESENTATIONS AND COVENANTS
-------------------------------------------------
6.1 General Representations and Warranties. Except as disclosed in writing
--------------------------------------
to Lender concurrently herewith, Borrower warrants and represents to and
covenants with Lender that:
(a) Borrower is and at all times hereafter shall be a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware and qualified or licensed to do business and in good standing in all
states in which the laws thereof require Borrower to be so qualified and/or
licensed, including the State of New York;
(b) Borrower and each other Loan Party has the right, power and
capacity and is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and the Other Agreements to which it is a party;
(c) each of the fictitious names, if any, used by Borrower in the
United States during the five (5) year period preceding the date of this
Agreement is set forth on Exhibit D, attached hereto and none of such fictitious
---------
names are registered trademarks or tradenames with the U.S. Patent and Trademark
Office;
(d) the execution, delivery and/or performance by Borrower of this
Agreement and the Other Agreements shall not, by the lapse of time, the giving
of notice or otherwise, constitute a violation of any applicable law or a breach
of any provision contained in Borrower's Articles of Incorporation or By-Laws,
or contained in any agreement, instrument or document to which Borrower is now
or hereafter a party or by which it is or may become bound, or result in or
require the creation of any lien, security
17
<PAGE>
interest, charge or other encumbrance upon or with respect to any now-owned or
hereafter arising or acquired properties of Borrower;
(e) this Agreement and the Other Agreements are and will be the legal,
valid and binding agreements of Borrower enforceable in accordance with their
terms, except as enforcement thereof may be subject to the effect of applicable
Bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and to general principles of equity (regardless of
whether such enforcement is sought in a proceeding in equity or at law);
(f) Borrower has and at all times hereafter shall have good,
indefeasible and merchantable title to and ownership of the Collateral, free and
clear of all liens, claims, security interests and encumbrances, except the
Permitted Liens;
(g) Borrower owns no United States and foreign patents, trademarks,
tradenames, service marks, copyrights, and has made no applications therefor;
(h) Borrower possesses adequate assets, licenses, patents, copyrights,
trademarks and tradenames to continue to conduct its business as previously
conducted prior to the date hereof;
(i) Borrower is now, and at all times hereafter shall be, solvent and
generally paying its debts as they mature and Borrower now owns, and shall at
all times hereafter own, property which, at a fair valuation, is greater than
the sum of its debts;
(j) Borrower now has, and shall have at all times hereafter, capital
sufficient to carry on its business and transactions and all businesses and
transactions in which it is about to engage;
(k) there are no actions or proceedings which are pending or threatened
against Borrower, or to the best of Borrower's knowledge, any Loan Party which
might result in any material adverse change in its financial condition or
materially affect Borrower's or such other Person's assets or the Collateral or
Borrower's or such other Loan Party's ability to fully pay or perform the
Secured Obligations;
(l) Borrower is not a party to any contract or agreement or subject to
any charge, restriction, judgment, decree or order materially and adversely
affecting its business, property, assets, operations or condition, financial or
otherwise;
(m) Neither Borrower nor any ICON Subsidiary nor any Affiliate of
Borrower or any ICON Subsidiary is in violation of any applicable statute,
regulation or ordinance of the United States of America, of any state, city,
town, municipality, county or of any other jurisdiction, or of any agency
thereof, (including, but not limited to any Environmental Law or any Securities
Law) in any respect which might materially and
18
<PAGE>
adversely affect its business, property, assets, operations or condition,
financial or otherwise;
(n) Borrower and each ICON Subsidiary has filed or caused to be filed all
tax returns which are required to be filed;
(o) Borrower and each ICON Subsidiary has paid all Charges shown to be due
and payable on said returns or on any assessments made against it or any of its
property, and all other Charges imposed on it or any of its properties by any
governmental authority;
(p) ICON (UK) is a wholly-owned subsidiary of Borrower, does not and at no
time during the term hereof shall have any assets with a value in excess of
$5,000, and has not heretofore and will not engage in any business activity.
(q) Except as disclosed in the Financials heretofore delivered by Borrower
to Lender and as set forth on Exhibit E, Borrower has no Indebtedness (except
---------
for Indebtedness arising in the ordinary course of its business since the dates
reflected in the Financials), has not guaranteed (other than as a result of the
endorsement of any instrument or items of payment for deposit or collection in
the ordinary course of business or as otherwise expressly permitted pursuant to
the terms hereof) the obligations of any Person, and there are no actions or
proceedings which are pending or, to the best of Borrower's knowledge,
threatened against Borrower which, in any of the foregoing cases, are reasonably
likely to result in any material adverse change in its financial condition or
materially adversely affect its assets or the Collateral or its ability to fully
perform and satisfy Borrower's Liabilities hereunder;
(r) Neither Borrower nor any ICON Subsidiary is in default with respect to
any indenture, loan agreement, mortgage, deed or other similar agreement
relating to the borrowing of monies to which it is a party, by which it is
bound;
(s) the most recent Financials fairly and accurately present the assets,
liabilities and financial conditions and results of operations of Borrower and
such other Persons, if any, described therein as of and for the periods ending
on such dates set forth therein and have been prepared in accordance with GAAP
and such principles have been applied on a basis consistently followed in all
material respects throughout the periods involved;
(t) there has been no material adverse change (as determined by Lender, in
Lender's sole discretion) in the assets, liabilities or financial condition of
Borrower since the date of the most recent Financials;
(u) the execution, delivery and performance by Borrower of this Agreement
and the Other Agreements will not, except to the extent caused by independent
19
<PAGE>
actions of Lender, impose on or subject Lender to any liability, whether fixed
or contingent, in respect of any Environmental Law or Securities Law relating to
the operation of Borrower's business;
(v) Borrower is now, and at all times during the term or any renewal term
hereof Borrower shall be, in compliance with the Worker's Adjustment and
Retraining Notification Act;
(w) Borrower's execution and delivery of this Agreement and the Other
Agreements does not directly or indirectly violate or result in a violation of
any Securities Laws or Regulations U, G, T and X of the Board of Governors of
the Federal Reserve System (12 CFR 221, 207, 220 and 224, respectively), and
Borrower does not own or intend to purchase or carry any "margin security", as
defined in such Regulations;
(x) Attached hereto as Exhibit F is a true, accurate and complete schedule
---------
of all corporations, partnerships, joint venturers, trusts, limited liability
company, unincorporated organization, association or associate in which Borrower
has an equity interest.
(y) Lender's exercise of any of the rights or remedies described in Article
8 of this Agreement or in any of the Other Agreements shall not constitute a
breach of any provision contained in any agreement, instrument or document
concerning the assignment or license of, or the payment of royalties for, any
patents, patent rights, tradenames, trademarks, trade secrets, know-how,
copyrights or any other form of intellectual property now or at any time or
times hereafter protected as such by any applicable law; and
(z) attached hereto as Exhibit I is a true, accurate and complete list of
---------
the fifty largest lessees of equipment from Affiliates of Borrower (based upon
annual rental paid). No such lessee is in default under the terms of any lease
with any Affiliate of Borrower.
(aa) Borrower is not a party to any lease of real property, either as
lessor or lessee.
6.2 Business Purpose; Margin Stock; Securities. Borrower warrants and
------------------------------------------
represents to Lender that Borrower shall use the proceeds of the Loan solely to
pay existing Indebtedness and for general corporate purposes, consistently with
all applicable laws and statutes. Borrower's use of the proceeds of the Loan are
legal and proper uses (duly authorized by all requisite action of the board of
directors of Borrower), in accordance with applicable laws, rules and
regulations, as in effect from time to time. Borrower further warrants and
represents to Lender and covenants with Lender that Borrower is not in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve
20
<PAGE>
System), and no proceeds of the Loan will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock. As of the date hereof, Borrower does not own the
Securities of any Person.
6.3 Survival of Warranties and Representations. Borrower covenants,
------------------------------------------
warrants and represents to Lender that all representations and warranties of
Borrower contained in this Agreement and the Other Agreements shall be true on
the date hereof, and shall survive the execution, delivery and acceptance hereof
and thereof by the parties thereto and the closing of the transactions described
herein and therein or related hereto or thereto.
7. COVENANTS AND CONTINUING AGREEMENTS.
-----------------------------------
7.1 Financial Covenants.
-------------------
(a) At all times during the term hereof, measured quarterly, Borrower
shall have minimum stockholder's equity of $1,500,000 as stated in Borrower's
balance sheet, and as determined in accordance with GAAP.
(b) At all times during the term hereof, measured quarterly, ICON
Capital Corp., a subsidiary of Borrower, shall have outstanding Accounts
(including the aggregate amount of Accounts due or to become due from Fee
Agreements) in an amount equal to three (3) times the then outstanding principal
balance of the Loan, discounted for the present value thereof at an interest
rate of 10% per annum.
7.2 Affirmative Covenants. Borrower warrants and represents to and
---------------------
covenants with Lender that Borrower shall, unless Lender otherwise consents
thereto in writing, do all of the following during the term hereof:
(a) Insurance. Borrower will at all times maintain or cause to be
---------
maintained on the Equipment, Inventory, any real property owned by Borrower any
ICON Subsidiary or any lessee thereof and Borrower's tangible other assets owned
by Borrower any ICON Subsidiary or any lessee thereof, insurance against such
risks ordinarily insured against by other owners or users of such properties in
similar businesses similarly situated and in any event the following:
(i) Property Insurance: insurance covering the Equipment, Inventory,
------------------
real property and Borrower's other tangible assets in the event of fire,
lightning, windstorm, vandalism, malicious mischief and all other risks
normally covered by "all risk" coverage policies in New York in an amount,
subject to commercially reasonable deductibles, equal to 100% of the
replacement value thereof;
21
<PAGE>
(ii) Commercial General Liability Insurance: comprehensive general
--------------------------------------
public liability insurance (including coverage for elevators and
escalators, if any, contractual liability, explosion, underground
property, and broad form property damage endorsement, against claims for
bodily injury, death or property damage occurring or caused by events
occurring on, in or about any real estate leased by Borrower, and
adjoining streets and sidewalks), in such minimum combined single limit
amount as Lender shall reasonably require, subject to standard
deductibles;
(iii) Workers' Compensation Insurance: Worker's Compensation and
-------------------------------
employer's liability insurance covering Borrower's employees in such
amounts as is required by law;
(iv) Contents Insurance: Fire and Extended Coverage Insurance
------------------
(contents broad form) and Sprinkler Leakage Insurance on Borrower's
tangible personal property located on the premises of Borrower, and on all
improvements or betterments constructed by Borrower thereon, in amounts
sufficient, subject to standard deductibles, to fully insure such tangible
personal property;
(v) Business Interruption/Rent Loss Insurance. Business Interruption
-----------------------------------------
Insurance in such amount as Lender shall reasonably request but in no
event less than the estimated regularly scheduled principal and interest
payable hereunder during a twelve (12) month period and all Charges which
could become a lien upon the Assets.
All policies of insurance on the Collateral or otherwise required hereunder
shall be in form and with companies reasonably satisfactory to Lender. Borrower
shall deliver to Lender the original (or certified copy) of each policy of
insurance and, upon the request of Lender, evidence of payment of all premiums
therefor that had become due and payable and shall deliver renewals of all such
policies to Lender at least ten (10) days prior to their expiration dates. Such
policies of insurance shall contain an endorsement, in form and substance
reasonably acceptable to Lender, showing all losses payable to Lender or, in
Lender's reasonable discretion, Borrower shall execute a separate assignment
thereof, in form and substance reasonably acceptable to Lender. Lender shall be
named as lender loss payee, mortgagee and secured party in all policies of
property insurance and as an additional insured in all policies of liability
insurance. Such endorsement shall provide that the insurance companies will give
Lender at least thirty (30) days' prior notice before any such policy shall be
materially modified or canceled and that no act or default of Borrower or any
other person (other than Lender) shall affect the right of Lender to recover
under such policy in case of loss or damage. Borrower hereby directs all
insurers under such policies to pay all proceeds payable thereunder directly to
Lender. During such times that an Event of Default has occurred and is
continuing, Borrower irrevocably makes, constitutes and appoints Lender (and all
officers, employees or agents designated by Lender) as Borrower's true and
lawful attorney and agent-in-fact for the purpose of making, settling and
adjusting claims under such policies, endorsing the name of Borrower in
22
<PAGE>
writing or by stamp on any check, draft, instrument or other item of payment for
the proceeds of such policies and for making all determinations and decisions
with respect to such policies, in each such case. If Borrower shall fail to
obtain or to maintain any of the policies required by this Section 7.2 (a) or to
pay any premium relating thereto or to renew any such policies and to deliver
evidence of such renewal to Lender no later than ten (10) days prior to the
expiration of the existing policy, then Lender, without waiving or releasing any
obligation or default by Borrower hereunder and without notice to Borrower, may
(but shall be under no obligation to do so) obtain and maintain such policies of
insurance and pay such premiums and take any other action with respect thereto
which Lender deems advisable. Borrower acknowledges that premiums paid by Lender
may be greater than those which Borrower may have been able to negotiate. All
sums so disbursed by Lender, including costs relating thereto, shall be payable
by Borrower to Lender on demand and shall be additional Borrower's Liabilities.
(b) Financial Reports. Borrower shall keep books of account and prepare
-----------------
financial statements and furnish to Lender the following (all of the foregoing
and following to be kept and prepared in accordance with generally accepted
accounting principles, in each case consistent with the Financials heretofore
delivered by Borrower to Lender, unless Borrower's independent certified public
accountants concur in any changes therein and such changes are disclosed in
writing to Lender):
(i) Annual. As soon as available, but no later than ninety (90) days
------
after the close of each fiscal year of Borrower, audited financial
statements of Borrower and ICON Capital Corp. (including a statement of
cash flow, a balance sheet and profit and loss statement with supporting
footnotes) as at the end of such year and for the year then ended all in
form and detail required by GAAP prepared by a firm of independent
certified public accountants selected by Borrower and reasonably acceptable
to Lender and containing the unqualified opinion of such independent
certified public accountants with respect to the financial statements and
accompanied by a statement by such accountant that, as of the date thereof,
there are no Events of Default or Unmatured Defaults under this Agreement
or any Other Agreement.
(ii) Quarterly Reports. As soon as available, but in no event less
-----------------
than forty-five (45) days after the end of each quarter, financial
statements of Borrower and ICON Capital Corp. (including a statement of
cash flow, a balance sheet and profit and loss statement with supporting
footnotes) as at the end of such year and for the year then ended all in
form and detail as reasonably required by Lender, prepared by the chief
financial officer of Borrower and containing the unqualified statement of
such officer that, as of the date thereof, there are no Events of Default
or Unmatured Defaults under this Agreement or any Other Agreement;
(iii) Collateral Reports. As soon as available, but in no event later
------------------
than the thirtieth day of each month, a report (the "Collateral Report"),
in form and detail
23
<PAGE>
reasonably acceptable to Lender, setting forth: (i) any and all Fee
Agreements to which Borrower, any ICON Subsidiary, or any Affiliate of
Borrower or an ICON Subsidiary is a party pursuant to which Borrower, any
ICON Subsidiary or any Affiliate of Borrower or any ICON Subsidiary is to
receive fees, salary, or other compensation; (ii) the amount and timing of
the fees, salary or other compensation to be paid thereunder; and (iii)
whether any default or event of default has occurred by any party under the
terms of such Fee Agreement. Attached hereto as Exhibit G, is the initial
---------
Collateral Report, which Borrower hereby represents is true, accurate and
complete as of the date hereof.
(iv) Guarantor Financial Information. Borrower shall cause each
-------------------------------
Guarantor to deliver to lender those financial statements, Collateral
Reports, and other financial information required by the terms of the
Guaranties.
(v) Other Information. Such other data and information (financial
-----------------
and otherwise) as Lender, from time to time, may reasonably request bearing
upon or related to the Collateral, Borrower's financial condition and/or
result of operations.
(c) Records. Borrower shall keep accurate and complete Records relating to
-------
the Collateral and the operation of Borrower's business which Records shall be
made available to Lender upon notice to Borrower in accordance with Section 4.3
(unless an Event of Default or an Unmatured Default has occurred and is
continuing in which event no notice shall be required) for Lender's inspection,
copying, verification or otherwise.
(d) Pay Debts. Borrower shall pay or discharge or otherwise satisfy all
---------
Indebtedness at or before maturity or before the same becomes delinquent,
provided that Borrower shall not be required to pay any Indebtedness which is
- -------------
unsecured while the same is being contested by it in good faith and by
appropriate proceedings so long as Borrower shall have set aside on its books
reserves in accordance with GAAP with respect thereto and title to any property
of Borrower is not jeopardized.
(e) Payment of Charges. Borrower shall pay promptly when due all of the
------------------
Charges, provided that notwithstanding the foregoing, Borrower may permit or
-------------
suffer the Charges to attach to Borrower's assets and may dispute, without prior
payment thereof, the Charges, on the conditions that: (i) Borrower, in good
faith, shall be contesting the same in an appropriate proceeding; (ii)
enforcement thereof against any assets of Borrower shall be stayed; and (iii)
appropriate reserves therefor shall have been established on the Records of
Borrower in accordance with GAAP. In the event Borrower, at any time or times
hereafter, shall fail to pay the Charges required herein, Borrower shall so
advise Lender thereof in writing; Lender may, without waiving or releasing any
Secured Obligation or any Event of Default hereunder, in its sole and absolute
discretion, at any time or times thereafter, make such payment, or any part
thereof, and take any other action with respect thereto which Lender deems
advisable. All sums so paid by Lender and any expenses, including reasonable
attorneys' fees, court costs, expenses and other charges relating thereto, shall
24
<PAGE>
be part of Borrower's Liabilities, payable by Borrower to Lender on demand and
any amount not paid on demand shall bear interest at the Default Rate.
(f) Corporate Existence. Borrower shall, and shall cause each ICON
-------------------
Subsidiary to, preserve and maintain its corporate existence, rights, privileges
and franchises in the jurisdiction of its incorporation or organization, and
qualify and remain qualified to do business in each other jurisdiction in which
such qualification is necessary in view of its business or operations.
(g) Equity Ownership.
----------------
(i) At all times during the term hereof, Borrower shall be the owner
of 100% of the issued and outstanding stock of the Corporate Guarantors and
ICON UK, subject to no liens and encumbrances, other than the Pledge
Agreement in favor of Lender.
(ii) At all times during the term hereof, Summit Asset Holding L.L.C.
and Warrenton Capital Partners L.L.C. shall each own 50% of the issued and
outstanding voting stock of Borrower, subject to no liens or encumbrances
other than the Pledge Agreement in favor of Lender. There shall be no class
of shares, other than the voting shares owned by Summit Asset Holding
L.L.C. and Warrenton Capital Partners L.L.C. and the Class B Stock, of
which Lender shall be the sole shareholder.
(iii) At all times during the term hereof, Borrower shall own not less
than 60% of the outstanding shares of MGC/Griffin Capital Corporation,
subject to no liens or encumbrances other than the Pledge Agreement in
favor of Lender.
(h) Compliance with Laws. Borrower shall comply with, and shall cause each
--------------------
ICON Subsidiary to comply with, all laws, rules, regulations and governmental
orders (federal, state and local), including all Environmental Laws and all
Securities Laws, having applicability to it or to the business or businesses at
any time conducted by it, where the failure to so comply would have a material
adverse effect, either individually or in the aggregate, on the business,
condition (financial or otherwise) and assets, operations or prospects of
Borrower or the applicable ICON Subsidiary.
7.3 Negative Covenants. Borrower warrants and represents to and covenants
------------------
with Lender that Borrower shall not, without Lender's prior written consent
thereto, which consent Lender may or may not give in its sole discretion,
concurrently or hereafter to do any of the following:
(a) Sale of Collateral. Borrower shall not grant, assign, sell or
------------------
transfer any of Borrower's Assets or the Collateral to any Person. Borrower
shall not grant a security interest in, assign for collateral purposes or
permit, grant, or suffer a lien, claim or
25
<PAGE>
encumbrance upon any of Borrower's Assets or the Collateral, except the
Permitted Liens; provided that, Borrower or any ICON Subsidiary may grant a
-------------
security interest in Accounts arising from Fee Agreements if: (i) Borrower or
the applicable ICON Subsidiary shall give Lender no less than thirty (30) days
prior written notice, and (ii) the creditor, Borrower and Lender shall enter
into a subordination agreement, in form and substance acceptable to Lender,
pursuant to which the holder of the Indebtedness secured by such lien shall
agree that (x) payments of such Indebtedness shall be subordinate to the Secured
Obligations, (y) any lien granted to secure such Indebtedness is expressly
subordinate to the liens in favor of Lender, and (z) upon the occurrence of an
Event of Default or Unmatured Default hereunder and during the continuation
thereof, no payments may be made or received on account of such Indebtedness.
(b) Attachment. Borrower shall not permit or suffer any levy, attachment or
----------
restraint to be made affecting any of its assets or the Collateral which such
levy, attachment or restraint has not been released within a reasonable period
of time.
(c) Receivers. Borrower shall not permit or suffer any receiver, trustee or
---------
assignee for the benefit of creditors, or any other custodian to be appointed to
take possession of all or any of Borrower's assets or any of the Collateral.
(d) Adverse Transactions. Borrower shall not enter into any transaction
--------------------
which materially adversely affects Borrower's ability to repay Borrower's
Liabilities or other Indebtedness, or materially adversely affects the
Collateral, or adversely affects Borrower's ability to perform the Secured
Obligations.
(e) Guaranty Debt. Borrower shall not guaranty or otherwise, in any way,
-------------
become liable with respect to the obligations or liabilities of any other
Person, including, without limitation, by agreement to (i) maintain net worth or
working capital, (ii) purchase the obligations or property of any such Person,
or to furnish funds to any such Person, directly or indirectly, through the
purchase of goods, supplies or services, in any such case with the intent to
provide such a guaranty or otherwise become so liable, or (iii) obtain upon its
credit the issuance of any letter or letters of credit for the obligations of
any such Person, provided that the foregoing limitations shall not apply to
-------------
endorsement of instruments or items of payment for deposit or collection in the
ordinary course of business.
(f) Change Capital Structure. Neither Borrower nor any Corporate Guarantor
------------------------
shall make any change in its capital structure or in any of its business
objectives, purposes and operations; neither Borrower nor any ICON Subsidiary
shall create or acquire any Subsidiary, without in each case causing such
Subsidiary to guaranty the Loan and grant a security interest to secure payment
thereof, on the same terms and conditions as the Corporate Guarantors.
26
<PAGE>
(g) Borrower's Stock. Borrower shall not redeem, retire, purchase or
----------------
otherwise acquire, directly or indirectly, any of Borrower's stock or other
evidence of ownership interest or make any loans, advances and/or extensions of
credit to any Persons.
(h) Merger. Borrower shall not merge or consolidate with or acquire all
------
or substantially all of the assets or stock any Person, unless such merger
results in a Tangible Net Worth that is three times Borrower's Tangible Net
Worth on the date of the execution hereof. Borrower shall give Lender no less
than ten (10) Business Day's advance notice of any proposed merger,
consolidation or acquisition of all or substantially all of the assets or stock
of any Person.
8. DEFAULT
-------
8.1 Events of Default. The occurrence of any one of the following events
-----------------
shall constitute a default ("Event of Default") under this Agreement:
(a) if Borrower fails to pay Borrower's Liabilities, or any part thereof
on the due date thereof.
(b) Borrower breaches the covenants set forth in Sections 7.1, 7.2(a) or
(b), 7.3 and/or 7.4.
(c) Failure by Borrower to promptly perform any other obligation or
observe any other condition, covenant, term, agreement or provision required to
be performed or observed by Borrower under this Agreement within ten (10) days
after written notice thereof; provided that: (i) if such default, in the
-------------
reasonable discretion of Lender, creates a hazardous condition or materially,
adversely and immanently affects the value of the Collateral or the ability of
Borrower to perform its obligations hereunder, such default shall be cured
immediately, and (ii) subject to the provisions of subsection (i) above, to the
extent that such default is of such a character which reasonably requires more
than ten (10) days to cure, Borrower shall have such reasonable additional time
to cure the default, if Borrower has commenced to cure the same within said ten
(10) day period and is diligently and continuously pursuing such cure, which
default shall in all circumstances be corrected within thirty (30) days after
delivery of the above required written notice.
(d) if any representation or warranty on the part of Borrower contained
in this Agreement or the Other Agreements, or any document, instrument or
certificate delivered pursuant hereto or thereto shall have been incorrect in
any material respect when made or deemed made.
(e) if the Collateral, or any portion thereof, is attached, seized,
subjected to a writ of distress, warrant, or are levied upon, or comes within
the possession of any receiver, trustee, custodian or assignee for the benefit
of creditors.
27
<PAGE>
(f) if a petition under any section or chapter of the Bankruptcy Reform Act
of 1978, as amended, or any similar law or regulation shall be filed by Borrower
or any other Loan Party, or if Borrower or any other Loan Party shall make an
assignment for the benefit of its creditors or if any case or proceeding is
filed by Borrower for its dissolution or liquidation.
(g) if Borrower is enjoined, restrained or in any way prevented by court
order from conducting all or any material part of its business affairs or if a
petition under any section or chapter of the Bankruptcy Reform Act of 1978, as
amended, or any similar law or regulation is filed against Borrower or any other
Loan Party or if any case or proceeding is filed against Borrower for its
dissolution or liquidation and such injunction, restraint or petition is not
dismissed or stayed within thirty (30) days after the entry or filing thereof.
(h) if an application is made by any Person other than Borrower for the
appointment of a receiver, trustee, or custodian for the Collateral, or any
other material portion of Borrower's or any other Loan Party's assets and the
same is not dismissed or stayed within thirty (30) days after the application
therefor;
(i) if a notice of any Charge is filed of record with respect to all or any
of Borrower's or any other Loan Party's assets, or if any Charge becomes a lien
or encumbrance upon the Collateral or any other of Borrower's any other Loan
Party's assets, other than Permitted Liens, and the same is not released within
thirty (30) days after the same becomes a lien or encumbrance.
(j) the occurrence of an Event of Default under any of the Other
Agreements, which is not cured within the time period, if any, specified
therefor in such Other Agreement.
(k) if one or more judgments or decrees shall be entered against Borrower,
involving, individually, or in the aggregate, a liability of $50,000 or more and
all such judgments or decrees shall not have been vacated, discharged or stayed
pending appeal within thirty (30) days from the entry thereof.
(l) if this Agreement or any of the Other Agreements shall cease for any
reason to be in full force and effect (other than by reason of the satisfaction
of all of Borrower's Liabilities or voluntary release by Lender of any Other
Agreement) or Borrower or any other Person (other than Lender) shall disavow its
obligations thereunder, or shall contest the validity or enforceability of any
thereof.
(m) if Lender's lien or security interest in any Collateral shall for any
reason cease to be a legal, valid, perfected or enforceable first priority lien
on and security
28
<PAGE>
interest in such Collateral (other than by reason of the payment in full of all
obligations secured thereby or voluntary release by Lender of such Collateral).
(n) if Borrower or any ERISA Affiliate (1) shall effect a complete or
partial withdrawal (as defined in ERISA Sections 4203 or 4205) from a
Multiemployer Plan, if such withdrawal could subject either Borrower or any
ERISA Affiliate to liability; (2) shall fail to pay when due an amount that is
payable by it to the PBGC or to an Employee Benefit Plan; (3) has instituted
against it by a fiduciary of any Multiemployer Plan an action to enforce ERISA
Section 515 and such proceedings shall not have been dismissed within thirty
(30) days thereafter; (4) has imposed against it any tax under Code Section
4980B(a); (5) has assessed against it by the Secretary of Labor a civil penalty
with respect to any Employee Benefit Plan under ERISA Section 502(c) or 502(l);
(6) shall apply for a waiver of the minimum funding standards of the Code; or
(7) shall permit any other event or condition to occur or exist with respect to
an Employee Benefit Plan that could subject either Borrower or any ERISA
Affiliate to liability.
(o) a default by Borrower or any other Loan Party shall occur under any
agreement, document or instrument (other than this Agreement or any of the other
Loan Documents) now or hereafter existing, to which Borrower or any other Loan
Party is a party and the effect of such default is reasonably likely to have a
material adverse effect on the financial conditions or business operations of
Borrower or such other Loan Party.
(p) if Borrower or any other Loan Party is in default in the payment of
any Indebtedness for borrowed money in an aggregate principal amount outstanding
in excess of $25,000 under any agreement (other than the Loan Documents), or is
in breach of any agreement evidencing such Indebtedness (other than any Loan
Document) and the effect of such default or breach, as the case may be, is to
enable the holder thereof then to accelerate the maturity of such Indebtedness,
unless the same is waived or otherwise ceases to exist.
(q) if Borrower or any ICON Subsidiary dissolves, liquidates, or fails
to maintain its corporate existence or amends its Articles of Incorporation or
By-Laws in any material respect.
(r) If any default occurs in the payment of Borrower's liabilities or
performance of Borrower's covenants under the terms of the Put Agreement
8.2 Remedies Cumulative. All of Lender's rights and remedies under this
-------------------
Agreement and the Other Agreements are cumulative and non-exclusive.
8.3 Acceleration. Upon an Event of Default, without notice by Lender to or
------------
demand by Lender to Borrower, Borrower's Liabilities shall be due and payable,
forthwith.
29
<PAGE>
8.4 Remedies. Upon the occurrence of an Event of Default and the
--------
continuation thereof, Lender, in its sole and absolute discretion, may:
(a) exercise any one or more of the rights and remedies of a secured
party under the Uniform Commercial Code of the relevant state or states and any
other applicable law upon default by a debtor;
(b) enter, with or without process of law and without breach of the
peace, any premises where the Collateral is or may be located, and without
charge or liability to Lender therefor seize and remove the Collateral from said
premises and/or remain upon said premises and use the same for the purpose of
collecting, preparing and disposing of the Collateral;
(c) sell or otherwise dispose of the Collateral at public or private
sale for cash or credit, provided, however, that Borrower shall be credited with
-----------------------
the net proceeds of such sale only when such proceeds are actually received by
Lender;
(d) to the extent permitted by law, Borrower hereby waives all right
to the possession, income, and rents of any Real Property from and after the
occurrence of any Event of Default, and Lender is hereby expressly authorized
and empowered, at and following any such occurrence, to enter into and upon and
take possession of the real property and the Leaseholds or any part thereof, to
lease, sublease or assign the same, to collect and receive all rents and to
apply the same and to foreclose the lien of the mortgage hereby granted in
accordance with the laws of the state where the real property is located and
Lender shall have all rights and remedies to the fullest extent of the law;
and/or
(e) exercise any or all rights or remedies under any of the Other
Agreements.
8.5 Assemble Collateral. Upon the occurrence of an Event of Default and
-------------------
the continuation thereof, Borrower, immediately upon demand by Lender, shall
assemble the Collateral and make it available to Lender at a place or places to
be designated by Lender which are reasonably convenient to Lender and Borrower.
8.6 Injunctive Relief. Borrower recognizes that in the event Borrower
-----------------
fails to perform, observe or discharge any of the Secured Obligations, no remedy
of law will provide adequate relief to Lender, and agrees that Lender shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
8.7 Notice of Sale. Any notice required to be given by Lender of a sale,
--------------
lease, other disposition of the Collateral or any other intended action by
Lender, deposited in the United States mail, postage prepaid and duly addressed
to Borrower at its principal place
30
<PAGE>
of business specified on Exhibit C not less than ten (10) days prior to such
proposed action, shall constitute commercially reasonable and fair notice to
Borrower thereof.
8.8 Postponement of Sale. Upon the occurrence of an Event of Default and
--------------------
the continuation thereof, Borrower agrees that Lender may, if Lender deems it
reasonable, postpone or adjourn any such sale of the Collateral from time to
time by an announcement at the time and place of sale or by announcement at the
time and place of such postponed or adjourned sale, without being required to
give a new notice of sale. Borrower agrees that Lender has no obligation to
preserve rights against prior parties to the Collateral. Further, Borrower
waives and releases any cause of action and claim against Lender as a result of
Lender's possession, collection or sale of the Collateral, any liability or
penalty for failure of Lender to comply with any requirement imposed on Lender
relating to notice of sale, holding of sale or reporting of sale of the
Collateral, and, to the extent permitted by law, any right of redemption from
such sale.
8.9 Waiver of Bond. In the event Lender seeks possession of the Collateral
--------------
through replevin or other court process, Borrower hereby irrevocably waives (a)
any bond, surety or security required as an incident to such possession, and (b)
any demand for possession of the Collateral prior to commencement of any suit or
action to recover possession thereof.
8.10 Consent Does Not Create Custom. No authorization given by Lender
------------------------------
pursuant to this Agreement or the Other Agreements to sell any specified portion
of the Collateral or any items thereof, and no waiver by Lender in connection
therewith shall establish a custom or constitute a waiver of the prohibition
contained in this Agreement against such sales, with respect to any portion of
the Collateral or any item thereof not covered by said authorization.
8.11 Revenue Fund. If an Event of Default of Unmatured Default has occurred
------------
and is continuing, upon direction from Lender, Borrower, and to the extent
appropriate Guarantor, shall establish a fund, herein referred to as the
"REVENUE FUND" with a bank (the "Bank") which is acceptable to Lender. Borrower,
and to the extent appropriate Guarantor, shall deposit into such fund all of
Borrower's revenues received from any of the Collateral, including any Fee
Agreements, during each succeeding month, beginning on the first day thereof,
and on each day thereafter. Borrower, and to the extent appropriate, Guarantor,
shall direct all Account Debtor's to remit payments to Borrower to the Revenue
Fund Account. Unless all of the Indebtedness has been accelerated pursuant to
the remedies set forth herein, monies in the Revenue Fund shall be paid first to
the Lender as payment on account of any and all outstanding Indebtedness then
due, and second to pay for ordinary and necessary expenses of the Borrower as
described in a request for disbursements delivered to the Bank.
31
<PAGE>
9. CONDITIONS PRECEDENT TO DISBURSEMENT
------------------------------------
9.1 Checklist Items. The obligation of Lender to make the Loan to Borrower
---------------
is subject to the condition precedent that, in addition to satisfaction of the
conditions set forth in Sections 9.2 and 9.3, Lender shall have received, prior
to the disbursement of the proceeds of the Loan hereunder all documents,
instruments, agreements, notes, mortgages, collateral assignments, evidences of
Borrower's authority, and all other instruments as Lender may reasonably
request, including but not limited to all items on the Documentation Checklist,
delivered by Lender to Borrower prior to the date hereof.
9.2 Necessary Actions. The obligation of Lender to make the Loan to
-----------------
Borrower is subject to the further condition precedent that all proceedings
taken in connection with the transactions contemplated by this Agreement, and
all instruments, authorizations and other documents applicable thereto, shall be
reasonably satisfactory in form and substance to Lender and its counsel.
9.3 Conditions Precedent. In addition to the foregoing, prior to Lender
--------------------
making the Loan, all of the following shall have been satisfied in a manner
satisfactory to Lender:
(a) no change in the condition or operations, financial or otherwise,
of Borrower, or any other Loan Party, shall have occurred which change, in the
sole credit judgment of Lender, may have a material adverse effect on Borrower,
or any other Loan Party or on any of the Collateral;
(b) no litigation shall be outstanding or have been instituted or
threatened which Lender determines to be material against Borrower, any other
Loan Party or any of the Collateral;
(c) all of the representations and warranties of Borrower and all
other Loan Parties set forth in this Agreement and each of the Other Agreements
shall be true and correct on the date of disbursement;
(d) no Event of Default or Unmatured Default shall exist or be
continuing; and
(e) all Uniform Commercial Code financing statements shall have been
filed in the appropriate jurisdictions and Lender shall have received evidence,
in form and substance satisfactory to Lender thereof;
10. GENERAL
-------
10.1 Compliance with ERISA.
---------------------
32
<PAGE>
(a) Representations and Warranties. Borrower hereby represents and
------------------------------
warrants that:
(i) Exhibit H hereto describes the Employee Benefit Plans to which
---------
Borrower or any of its ERISA Affiliates may have obligations;
(ii) each Employee Benefit Plan of Borrower or any of its ERISA
Affiliates is in compliance in all material respects with its terms and with the
applicable provisions of ERISA, the Code and all other statutes and regulations
applicable thereto and each such Employee Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified, and each trust related to any such Employee
Benefit Plan has been determined to be exempt from federal income tax under
Section 501(a) of the Code;
(iii) neither Borrower nor any of its ERISA Affiliates maintains or
contributes to any Employee Benefit Plan with an actuarial present value of
projected benefit obligations that exceeds the fair market value of net assets
available for such benefits, calculated on the basis of the actuarial
assumptions specified in the most recent actuarial valuation for such Employee
Benefit Plan, and no such Employee Benefit Plan provides for subsidized early
retirement benefits that could materially adversely affect the funded status of
such Employee Benefit Plan or Employee Benefit Plans in the event of a reduction
in force or plant closing;
(iv) with respect to each Employee Benefit Plan that is a "defined
benefit plan", as defined in Section 3(35) of ERISA, the assets of each such
Employee Benefit Plan are equal to or greater than the accrued benefits of the
participants and beneficiaries thereunder, as determined pursuant to the
actuarial methods and assumptions utilized by the PBGC in the event of a plan
termination;
(v) neither Borrower nor any of its ERISA Affiliates sponsors,
maintains, participates in or contributes to any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA that provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA
or applicable state law; as such, neither Borrower nor any of its ERISA
Affiliates are currently or will in the future be subject to the accounting
recognition and disclosure standards of Statement of Financial Accounting
Standards No. 106 (FASB 106);
(vi) neither Borrower nor any of its ERISA Affiliates has breached
in any material respect any of the responsibilities, obligations, or duties
imposed on them by ERISA or the regulations promulgated thereunder with respect
to any Employee Benefit Plan;
33
<PAGE>
(vii) neither Borrower nor any ERISA Affiliate has (i) failed to
make a required contribution or payment to a Multiemployer Plan or (ii) made or
expects to make a complete or partial withdrawal under Sections 4203 or 4205 of
ERISA from a Multiemployer Plan;
(viii) at the date hereof, the aggregate potential withdrawal
liability payment, as determined in accordance with Title IV of ERISA, of
Borrower and any ERISA Affiliates with respect to all Employee Benefit Plans
that are Multiemployer Plans does not exceed $50,000 and, to the best of
Borrower's and its ERISA Affiliate's knowledge, no Multiemployer Plan is in
reorganization or insolvent within the meaning of Sections 4241 or 4245 of
ERISA.
(ix) neither Borrower nor any ERISA Affiliate has failed to make a
required installment or any other required payment under Section 412 of the Code
on or before the due date for such installment or other payment;
(x) neither Borrower nor any ERISA Affiliate is required to
provide security to an Employee Benefit Plan under Section 401(a)(29) of the
Code due to an Employee Benefit Plan amendment that results in an increase in
current liability for the plan year;
(xi) no liability to the PBGC has been, or is expected by Borrower
or any ERISA Affiliate to be, incurred by Borrower or any ERISA Affiliate, other
than the payment of premiums, and there are no premium payments that have become
due and which are unpaid;
(xii) no events have occurred in connection with any Employee
Benefit Plan that might constitute grounds for the termination of any such
Employee Benefit Plan by the PBGC or for the appointment by any United States
District Court of a trustee to administer any such Employee Benefit Plan;
(xiii) no Reportable Event has, in the case of any Employee Benefit
Plan maintained by Borrower or an ERISA Affiliate other than a Multiemployer
Plan, occurred and is continuing, or to the best of Borrower's knowledge, has
occurred and is continuing in the case of any such Employee Benefit Plan that is
a Multiemployer Plan;
(xiv) no Employee Benefit Plan maintained by Borrower or an ERISA
Affiliate had an Accumulated Funding Deficiency, whether or not waived, as of
the last day of the most recent fiscal year of such Employee Benefit Plan or, in
the case of any Multiemployer Plan, as of the most recent fiscal year of such
Multiemployer Plan for which the annual reports of such Multiemployer Plan's
actuaries and auditors have been received; and
34
<PAGE>
(xv) neither Borrower nor any ERISA Affiliate has engaged in a
Prohibited Transaction prior to the date hereof, and the execution, delivery,
and carrying out of this Agreement will not involve any non-exempt Prohibited
Transactions (within the meaning of Part 4 of Subtitle B of Title I of ERISA) or
any transaction in connection with which a tax could be imposed pursuant to
Section 4975 of the Code.
(b) ERISA Reports. Borrower shall:
-------------
(i) as soon as possible, and in any event within fifteen (15)
Business Days, after Borrower or an ERISA Affiliate knows or has reason to know
that, regarding any Employee Benefit Plan with respect to Borrower or an ERISA
Affiliate, a Prohibited Transaction or a Reportable Event has occurred (whether
or not the requirement for notice, if applicable, of such Reportable Event has
been waived by the PBGC), deliver to Lender a certificate of a responsible
officer of Borrower setting forth the details of such Prohibited Transaction or
Reportable Event, the action that Borrower proposes to take with respect
thereto, and, when known, any action taken or threatened by the Internal Revenue
Service, Department of Labor, or PBGC;
(ii) upon request of Lender made from time to time, deliver to
Lender a copy of the most recent actuarial report, funding waiver request, and
annual report filed with respect to any Employee Benefit Plan maintained by
Borrower or an ERISA Affiliate;
(iii) upon request of Lender made from time to time, deliver to
Lender a copy of any Employee Benefit Plan sponsored, contributed to,
participated in or maintained by Borrower or any ERISA Affiliate; and
(iv) as soon as possible, and in any event within ten (10) Business
Days, after it knows or has reason to know that any of the following have
occurred with respect to any Employee Benefit Plan maintained, or contributed
to, by Borrower or an ERISA Affiliate, deliver to Lender a certificate of a
responsible officer of Borrower setting forth the details of the events
described in (a) through (l) and the action that Borrower or any ERISA Affiliate
proposes to take with respect thereto, together with a copy of any notice or
filing from the PBGC or other agency of the United States government with
respect to such of the events described in (a) through (l): (a) any Employee
Benefit Plan has been terminated if such termination could subject Borrower or
any ERISA Affiliate to material liability; (b) the Plan Sponsor intends to
terminate any Employee Benefit Plan; (c) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate any such Employee
Benefit Plan or to appoint a trustee to administer such Employee Benefit Plan,
or Borrower or any ERISA Affiliate receives a notice from a Multiemployer Plan
that such action has been taken by the PBGC with respect to such Multiemployer
Plan;
35
<PAGE>
(d) Borrower or any ERISA Affiliate withdraws from any Employee Benefit
Plan, or notice of any withdrawal liability is received by Borrower or any
ERISA Affiliate; (e) any Employee Benefit Plan has received an unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of the Employee Benefit Plan under Section 401(a) of the
Code; (f) Borrower or any ERISA Affiliate fails to make a required
installment or any other required payment under Section 412 of the Code on
or before the due date for such installment or payment or has applied for a
waiver of the minimum funding standard under Section 412 of the Code; (g)
the imposition of any tax under Code Section 4980B(a) or the assessment by
the Secretary of Labor of a civil penalty under Sections 502(c) or 502(l)
of ERISA; (h) there is a partial or complete withdrawal (as described in
ERISA Section 4203 or 4205) by Borrower or any ERISA Affiliate from a
Multiemployer Plan; (i) Borrower or any ERISA Affiliate is in "DEFAULT" as
defined in ERISA Section 4219(c)(5)) with respect to payments to a
Multiemployer Plan required by reason of its complete or partial withdrawal
from such Employee Benefit Plan; (j) a Multiemployer Plan is in
"REORGANIZATION" or is "INSOLVENT" (as described in Title IV of ERISA) or
such Multiemployer Plan intends to terminate or has terminated under
Section 4041A of ERISA; (k) the institution of a proceeding by a fiduciary
of a Multiemployer Plan against Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA; or (1) Borrower or any ERISA Affiliate has materially
increased benefits under any existing Employee Benefit Plan or commenced
material contributions to an Employee Benefit Plan which is either not
fully insured or is a defined benefit plan to which Borrower or any ERISA
Affiliate was not previously contributing. For purposes of this Section,
Borrower shall be deemed to have knowledge of all facts known by the Plan
Administrator of any Employee Benefit Plan of which Borrower or any ERISA
Affiliate is the Plan Sponsor.
(c) Compliance with ERISA. Borrower and its ERISA Affiliates will
---------------------
not (i) establish, maintain, or operate any Employee Benefit Plan that is not in
compliance in all material respects with the provisions of ERISA, the Code, and
all other applicable laws, and the regulations and interpretations thereunder;
(ii) allow to exist any Accumulated Funding Deficiency with respect to any
Employee Benefit Plan, whether or not waived; (iii) terminate any Employee
Benefit Plan or withdraw or effect a partial or complete withdrawal (as
described in ERISA Sections 4203 or 4205) from any Multiemployer Plan, if such
termination or withdrawal could subject Borrower or any ERISA Affiliate to
material liability; (iv) fail to make any required installment or any other
payment required under Section 412 of the Code on or before the due date for
such installment or other payment; (v) amend any Employee Benefit Plan so as to
result in an increase in current liability for the plan year such that Borrower
or any ERISA Affiliate is required to provide security to such Employee Benefit
Plan under Section 401(a)(29) of the Code; (vi) fail to make any contribution or
payment to any Multiemployer Plan which Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer Plan; (vii)
enter into any Prohibited Transaction for which a class exemption is not
available or a
36
<PAGE>
private exemption previously has not been obtained from the Department of Labor;
(viii) permit the occurrence of any Reportable Event, or any other event or
condition, which could subject either Borrower or any ERISA Affiliate to
liability; or (ix) allow or permit to exist any other event or condition known
or that reasonably should be known to Borrower which event or condition relates
to an Employee Benefit Plan and could subject either Borrower or any ERISA
Affiliate to material liability.
(d) Definitions. For purposes of this Section 10.1, the following
-----------
definitions shall apply:
(i) "ACCUMULATED FUNDING DEFICIENCY" shall have the meaning
assigned to that term in Section 302 of ERISA.
(ii) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(iii) "EMPLOYEE BENEFIT PLAN" shall mean an employee benefit plan
within the meaning of Section 3(3) of ERISA that is maintained, sponsored,
participated in or contributed to by Borrower or any ERISA Affiliate.
(iv) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any successor thereto.
(v) "ERISA AFFILIATE" shall mean any corporation, trade or Business
that is, along with Borrower, a member of a controlled group of trades or
businesses, or a member of any group of organizations, within the meaning
of Sections 414(b), (c), (m) or (o) of the Code, and any regulations
thereunder.
(vi) "MULTIEMPLOYER PLAN" shall mean any plan described in Sections
3(37) or 4001(a)(3) of ERISA to which contributions are or have been made
by Borrower or any ERISA Affiliate.
(vii) "PBGC" shall mean the Pension Benefit Guaranty Corporation or
any governmental body succeeding to its functions.
(viii) "PLAN ADMINISTRATOR" shall have the meaning assigned to it in
Section 3(16)(A) of ERISA.
(ix) "PLAN SPONSOR" shall have the meaning assigned to it in Section
3(16)(B) of ERISA.
(x) "PROHIBITED TRANSACTION" shall mean a transaction that is
prohibited under Code Section 4975 or ERISA Section 406 and not exempt
under Code Section 4975 or ERISA Section 408.
37
<PAGE>
(xi) "REPORTABLE EVENT" shall mean (a) an event described in
Sections 4043(c), 4068(a), or 4063(a) of ERISA or in the regulations
thereunder, (b) receipt of a notice of withdrawal liability with respect to
a Multiemployer Plan pursuant to Section 4202 of ERISA, (c) an event
requiring Borrower or any ERISA Affiliate to provide security for an
Employee Benefit Plan under Code Section 401(a)(29), (d) any failure to
make payments required by Code Section 412(m), (e) the withdrawal of
Borrower or any ERISA Affiliate from an Employee Benefit Plan in which it
is a "SUBSTANTIAL EMPLOYER" as defined in Section 4001(a)(2) of ERISA, (f)
the institution of proceedings to terminate an Employee Benefit Plan by the
PBGC, or (g) the filing of a notice to terminate an Employee Benefit Plan
or the treatment of an amendment of an Employee Benefit Plan as a
termination under Section 4041 of ERISA.
10.2 Costs. Borrower hereby agrees that it shall reimburse Lender on
-----
demand, as part of the Secured Obligations, for any and all Costs, and any
amount not paid on demand shall bear interest at the Default Rate; provided
--------
that, (i) the Costs to be reimbursed by Borrower with respect to attorney's fees
- ----
incurred in the negotiation, preparation and execution of this Agreement and the
other Loan Documents shall not exceed $20,000 plus out-of-pocket costs and
expenses, and (ii) unless an Event of Default or an Unmatured Default has
occurred and is continuing, or Borrower and Lender materially amend the terms
hereof, the maximum costs to be reimbursed by Borrower during the term hereof
shall be $5,000 per year.
10.3 Modification. This Agreement and the Other Agreements may not be
------------
modified, altered or amended except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer this Agreement or
the Other Agreements or any portion thereof, including, without limitation,
Borrower's rights, titles, interests, remedies, powers and/or duties thereunder.
Borrower hereby consents to Lender's sale, assignment, transfer or other
disposition, at any time and from time to time hereafter, of this Agreement or
the Other Agreements, or of any participation therein of portion thereof,
including, without limitation, Lender's rights, titles, interests, remedies,
powers and/or duties.
10.4 Strict Compliance. Lender's failure at any time or times hereafter to
-----------------
require strict performance by Borrower of any provision of this Agreement shall
not waive, affect or diminish any right of Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by Lender of an
Event of Default by Borrower under this Agreement or the Other Agreements shall
not suspend, waive or affect any other Event of Default by Borrower under this
Agreement or the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or the Other Agreements and no Event of Default by
Borrower under this Agreement or the Other Agreements shall be deemed to have
been suspended
38
<PAGE>
or waived by Lender unless such suspension or waiver is by an instrument in
writing signed by an officer of Lender and directed to Borrower specifying such
suspension or waiver.
10.5 Severability. If any provision (in whole or in part) of this Agreement
------------
or the other Loan Documents or the application thereof to any person or
circumstance is held invalid or unenforceable, then such provision shall be
deemed modified, restricted, or reformulated to the extent and in the manner
necessary to render the same valid and enforceable, or shall be deemed excised
from this Agreement or the other Loan Document, as the case may require, and
this Agreement and such other Loan Document shall be construed and enforced to
the maximum extent permitted by law, as if such provision had been originally
incorporated herein as so modified, restricted, or reformulated or as if such
provision had not been originally incorporated herein or therein, as the case
may be. The parties further agree to seek a lawful substitute for any provision
found to be unlawful. If such modification, restriction or reformulation is not
reasonably possible, the remainder of this Agreement and the other Loan
Documents and the application of such provision to other persons or
circumstances will not be affected thereby and the provisions of this Agreement
and the other Loan Documents shall be severable in any such instance.
10.6 Successors and Assigns. This Agreement and the Other Agreements shall
----------------------
be binding upon and inure to the benefit of the successors and assigns of
Borrower and Lender; provided that this Agreement and no interest or right
-------------
hereunder may be assigned by Borrower without the prior written consent of
Lender, which consent may be withheld in Lender's sole and exclusive discretion.
10.7 Loan Agreement Controls. The provisions of the Other Agreements are
-----------------------
incorporated in this Agreement by this reference thereto. Except as otherwise
provided in this Agreement and except as otherwise provided in the Other
Agreements by specific reference to the applicable provision of this Agreement,
if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in the Other Agreements, the provision
contained in this Agreement shall govern and control.
10.8 Termination. Except for the obligations set forth in Section 10.9
-----------
hereof and as may be expressly provided in any Other Agreement, this Agreement
and all of the covenants, agreements and obligations of Borrower set forth
herein and in the Other Agreements and the liens and security interests granted
Lender pursuant hereto and the Other Agreements shall automatically terminate
when all accrued but unpaid Secured Obligations hereunder have been paid in
full.
10.9 Liability Prior to Termination. Except to the extent provided to the
------------------------------
contrary in this Agreement and in the Other Agreements, no termination or
cancellation (regardless of cause or procedure) of this Agreement or the Other
Agreements shall in any way affect or impair the powers, obligations, duties,
rights and liabilities of Borrower or Lender in any way or respect relating to
any transaction or event occurring prior to such termination or
39
<PAGE>
cancellation with respect to Collateral and/or any of the undertakings,
agreements, covenants, warranties and representations of Borrower or Lender
contained in this Agreement or the Other Agreements.
10.10 Waiver of Notice. Except as otherwise specifically provided in this
----------------
Agreement, Borrower waives any and all notice or demand which Borrower might be
entitled to receive with respect to this Agreement or the Other Agreements by
virtue of any applicable statute or law, and waives presentment, demand and
protest and notice of presentment, protest, default, dishonor, non-payment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Lender on which Borrower may in any way
be liable and hereby ratifies and confirms whatever Lender may do in this
regard.
10.11 Indemnification. Borrower shall indemnify, defend, and hold Lender
---------------
harmless from and against any and all losses, costs, liabilities, damages, and
expenses (including legal and other expenses incident thereto) of every kind,
nature and description, that result from or arise out of: (a) the breach of any
representation or warranty of Borrower set forth in this Agreement or in any
certificate, schedule, or other instrument by Borrower pursuant hereto; (b) the
breach of any of the covenants of Borrower contained in or arising out of this
Agreement or the transactions contemplated hereby; or (c) any third party claims
relating to the conduct of the Borrower's business.
10.12 Acceptance by Lender. This Agreement and the other Loan Documents are
--------------------
submitted by Borrower to Lender (for Lender's acceptance or rejection thereof)
at Lender's principal place of business as an offer by Borrower to borrow monies
from Lender now and from time to time hereafter and shall not be binding upon
Lender or become effective until and unless accepted by Lender, in writing, at
said place of business. If so accepted by Lender, this Agreement and the other
Loan Documents shall be deemed to have been made at said place of business.
10.13 Release of Claims. Borrower releases Lender from any and all causes
-----------------
of action or claims which Borrower may now or hereafter have for any asserted
loss or damage to Borrower claimed to be caused by or arising from: (a) any
failure of Lender to protect, enforce or collect in whole or in part any of the
Collateral; (b) Lender's notification to any Account Debtor of Lender's security
interests in the Accounts and Special Collateral; (c) Lender's directing any
Account Debtor to pay any sums owing to Borrower directly to Lender; and (d) any
other act or omission to act on the part of Lender, its officers, agents or
employees, except for willful misconduct.
10.14 Prior Agreements. Except as otherwise provided herein, this Agreement
----------------
and the Other Agreements supersede in their entirety any other agreement or
understanding
40
<PAGE>
between Lender and Borrower with respect to loans and advances made by Lender
and all commitments of Lender in connection therewith.
10.15 Knowledge. As used herein the phrase "TO THE BEST OF BORROWER'S
---------
KNOWLEDGE" or words of such import shall mean all knowledge, including actual
knowledge and knowledge of matters which any reasonable person in such position
knew or should have known after due inquiry, of the respective officers,
directors and managers of Borrower.
10.16 Notice. Any and all notices given in connection with this Agreement
------
shall be deemed adequately given only if in writing and addressed to the party
for whom such notices are intended at the address set forth below. All notices
shall be sent by personal delivery, Federal Express or other overnight messenger
service, first class registered or certified mail, postage prepaid, return
receipt requested or by other means at least as fast and reliable as first class
mail. A written notice shall be deemed to have been given to the recipient party
on the earlier of (a) the date it shall be delivered to the address required by
this Agreement; (b) the date delivery shall have been refused at the address
required by this Agreement; or (c) with respect to notices sent by mail, the
date as of which the postal service shall have indicated such notice to be
undeliverable at the address required by this Agreement. Any and all notices
referred to in this Agreement, or which either party desires to give to the
other, shall be addressed as follows:
(a) If to Lender, at: TKO Finance Corporation
30 North LaSalle Street
Suite 4030
Chicago, Illinois 60602
Attn: Timothy K. Ozark, President
with a copy to: Sachnoff & Weaver, Ltd.
30 South Wacker Drive
Suite 2900
Chicago, IL 60606
Attn: Cynthia Jared, Esq.
(b) If to the Borrower, at: ICON Holdings Corp.
600 Mamaroneck Ave.
Harrison, New York 10528
Attn: Beaufort J.B. Clarke, President
with a copy to: John Lee, Esq.
31 Milk Street
Boston, MA 02109
41
<PAGE>
The above addresses may be changed by notice of such change, mailed as
provided herein, to the last address designated.
10.17 Section Titles, etc. The Section titles and table of contents, if
--------------------
any, contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto. All references herein to Section, paragraphs, clauses and other
subdivisions refer to the corresponding Sections, paragraphs, clauses and other
subdivisions of this Agreement; and the words "herein", "hereof", "hereby",
"hereto", "hereunder", and words of similar import refer to this Agreement as a
whole and not to any particular Section, paragraph, clause or subdivision
hereof. All Exhibits which are referred to herein or attached hereto are hereby
incorporated by reference.
10.18 Waiver by Borrower. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS
------------------
AGREEMENT OR REQUIRED BY LAW, BORROWER WAIVES (a) PRESENTMENT, DEMAND AND
PROTEST, NOTICE OF PROTEST, NOTICE OF PRESENTMENT, DEFAULT, NON-PAYMENT,
MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY
BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS
REGARD; (b) ALL RIGHTS TO NOTICE AND A HEARING PRIOR TO LENDER'S TAKING
POSSESSION OR CONTROL OF, OR TO LENDER'S REPLEVY, ATTACHMENT OR LEVY UPON THE
COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO
ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; AND (c) THE BENEFIT OF ALL
VALUATION, APPRAISEMENT, EXTENSION AND EXEMPTION LAWS.
10.19 Governing Law. THIS AGREEMENT HAS BEEN DELIVERED FOR ACCEPTANCE BY
-------------
LENDER IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE
STATE OF ILLINOIS. BORROWER HEREBY (a) IRREVOCABLY SUBMITS, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN CHICAGO, ILLINOIS, OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT; (b) IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT; (c) AGREES THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW; AND (d) TO THE EXTENT PERMITTED BY
42
<PAGE>
APPLICABLE LAW, AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST
LENDER OR ANY OF LENDER'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY,
CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT
OTHER THAN ONE LOCATED IN COOK COUNTY, ILLINOIS. NOTHING IN THIS SECTION SHALL
AFFECT OR IMPAIR LENDER'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED
BY LAW OR LENDER'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR
BORROWER'S PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
10.20 Appointment for Service of Process. Borrower hereby irrevocably
----------------------------------
appoints and designates Corporation Service Company, 700 South Second Street,
Springfield, IL 62704 as its true and lawful attorney-in-fact and duly
authorized agent for service of legal process and agrees that service of such
process upon such agent and attorney-in-fact shall constitute personal service
of such process upon Borrower.
10.21 Representation by Counsel. Borrower hereby represents that it has
--------------------------
been represented by competent counsel of its choice in the negotiation and
execution of this Agreement and the Other Agreements; that it has read and fully
understood the terms hereof; Borrower and its counsel have been afforded an
opportunity to review, negotiate and modify the terms of this Agreement, and
that it intends to be bound hereby. In accordance with the foregoing, the
general rule of construction to the effect that any ambiguities in a contract
are to be resolved against the party drafting the contract shall not be employed
in the construction and interpretation of this Agreement.
10.22 Plural, Singular. The singular shall be deemed to include the plural
----------------
and the plural to include the singular.
10.23 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY LAW, BORROWER AND
-----------------------
LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER AGREEMENTS OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF EITHER PARTY IN CONNECTION HEREWITH WHETHER SOUNDING IN CONTRACT, TORT, FRAUD
OR OTHERWISE. BORROWER HEREBY EXPRESSLY ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN AND THAT BORROWER IS VOLUNTARILY
WAIVING ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE BETWEEN
THE PARTIES HERETO.
43
<PAGE>
BORROWER AND LENDER EACH HEREBY EXPRESSLY ACKNOWLEDGES THAT IT IS
WAIVING ITS RIGHT TO TRIAL BY JURY.
- ----------------------------
INITIALS
- ----------------------------
INITIALS
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
BORROWER:
--------
ICON HOLDINGS CORP., a Delaware corporation
By:
--------------------------------
Beaufort J.B. Clarke, President
LENDER:
------
TKO FINANCE CORPORATION
By:
---------------------------------
Timothy K. Ozark, President
<PAGE>
Exhibit A
---------
Attached to and Forming a
Part of Loan and Security Agreement
ICON Holdings Corp.
Wire Transfer Instructions
--------------------------
First Chicago National Bank
Chicago, IL
ABA #071 000013
For the Account of TKO Finance Corporation
Account No. 119 289 86
Attn: Joan Cline
<PAGE>
Exhibit B
---------
Attached to and Forming a
Part of Loan and Security Agreement
ICON Holdings Corp.
Make Whole Amount
-----------------
For purposes hereof, the "Make Whole Amount" shall mean, as of any
prepayment date, to the extent that the Reinvestment Yield, as hereinafter
defined, on such date is lower than the interest rate payable on or in respect
of the Note, the excess of: (a) the present value of the principal and interest
payments to be foregone by any prepayment on the Note, determined by discounting
(semi-annually on the basis of a 360-day year composed of twelve (12) thirty
(30) day months) such payments at a rate that is equal to the Reinvestment
Yield; over (b) the aggregate principal amount of the Note then to be paid or
prepaid.
To the extent that the Reinvestment Yield on any prepayment date is
equal to or higher than the interest rate payable on or in respect of the Note,
the Make Whole Amount is zero.
For purposes hereof, "Reinvestment Yield" shall mean the yield as set
forth on page "USD" of the Bloomberg Financial Markets Service at 10:00 a.m.
(Chicago time) on the prepayment date for actively traded U.S. Treasury
securities having a maturity equal to the weighted average life to maturity of
the Note then being prepaid rounded to the nearest month, or if such yields
shall not be reported as of such time or the yields as of such time are not
ascertainable in accordance with the preceding clause, then the arithmetic mean
of the yields published in the statistical release designed H-15 (519) of the
Board of Governors of the Federal Reserve System under the caption "U.S.
Government Securities--Treasury Constant Maturities" (the "Statistical Release")
for the maturity corresponding to the remaining weighted average life to
maturity of the Note then being prepaid or paid as of the date of such
prepayment or payment rounded to the nearest month. If no maturity exactly
corresponding to such rounded weighted average life to maturity shall appear
therein, yields for the two most closely corresponding published maturities (one
of which occurs prior and the other subsequent to the weighted average life to
maturity) shall be calculated pursuant to the foregoing sentence and the
Reinvestment Yield shall be interpolated from such yields on a straight-line
basis (rounding, in each of such relevant periods, to the nearest month).
<PAGE>
Exhibit C
---------
Attached to and Forming a
Part of Loan and Security Agreement
ICON Holdings Corp.
Location of Collateral
----------------------
600 Mamaroneck Ave.
Harrison, New York 10528
4 Embarcadero Center
Suite 590
San Francisco, CA 94111
31 Milk Street
Suite 1111
Boston, MA 02109
<PAGE>
Exhibit D
---------
Attached to and Forming a
Part of Loan and Security Agreement
ICON Holdings Corp.
Fictitious Names
----------------
NONE
<PAGE>
Exhibit E
---------
Attached to and Forming a
Part of Loan and Security Agreement
ICON Holdings Corp.
Indebtedness
------------
. Promissory Note dated August 20, 1996 by Borrower in the original
principal amount of $1,133,000 in favor of Summit Asset Holding L.L.C.
. Promissory Note dated August 20, 1996 by Borrower in the original
principal amount of $233,000 in favor of Warrenton Capital Partners L.L.C.
. Promissory Note dated August 20, 1996 by Borrower in the original
principal amount of $1,200,000 in favor of Warrenton Capital Partners
L.L.C.
. Demand Note dated August 20, 1996 by Borrower in the original
principal amount of $1,100,000 in favor of ICON Capital Corp.
49
<PAGE>
Exhibit F
---------
Attached to and Forming a
Part of Loan and Security Agreement
ICON Holdings Corp.
Affiliates
----------
ICON Capital Corp., a Connecticut corporation
600 Mamaroneck Avenue
Harrison, New York 10528
ICON Capital (UK) Limited, a corporation organized
under the laws of the United Kingdom
c/o The Summit Group PLC,
The Pavilion
3 Broadgate
London, England EC2M2Q5
ICON Financial Corp., a Delaware corporation
4 Embarcadero Center, Suite 590
San Francisco, California
ICON Funding Corp., a Delaware corporation
600 Mamaroneck Avenue
Harrison, New York 10528
ICON Securities Corp., a New York corporation
600 Mamaroneck Avenue
Harrison, New York 10528
MGC/Griffin Capital Corporation, a Delaware corporation
600 Mamaroneck Avenue
Harrison, New York 10528
<PAGE>
Exhibit G
---------
Attached to and Forming a
Part of Loan and Security Agreement
ICON Holdings Corp.
INITIAL COLLATERAL REPORT
-------------------------
<PAGE>
Exhibit
-------
Attached to and Forming a
Part of Loan and Security Agreement
ICON Holdings Corp.
ERISA Matters
-------------
NONE
<PAGE>
Exhibit I
---------
Attached to and Forming a
Part of Loan and Security Agreement
ICON Holdings Corp.
Lessees
-------
<PAGE>
Exhibit 10.11
-------------
TERM PROMISSORY NOTE
$3,000,000.00 Effective Date: June 20, 1997
Chicago, IL Maturity Date: July 1, 2000
FOR VALUE RECEIVED, ICON Holdings Corp. ("Borrower") hereby promises to
pay to the order of TKO Finance Corporation ("Lender"), at Lender's principal
office, or at such other place or places as Lender may from time to time
designate in writing, the principal sum of Three Million and no/100 Dollars
($3,000,000.00) or so much thereof as may from time to time be advanced
hereunder, with interest on the principal balance outstanding from time to time,
all as hereinafter set forth.
1. Interest Rate; Monthly Payments.
-------------------------------
(a) Interest Rate. From the date of disbursement of funds until the
-------------
occurrence of an event set forth in Section 1(b) below, the principal balance
from time to time unpaid shall bear interest at the fixed rate of interest equal
to eleven and one-half percent (11.5%) per annum (the "Interest Rate").
(b) Default Rate. After the earlier of (i) the Maturity Date (as
------------
hereafter defined), whether by acceleration or otherwise, or (ii) the occurrence
of any Event of Default (as hereafter defined) the total unpaid indebtedness
hereunder shall bear interest at the rate of eighteen percent (18%) per annum
(the "Default Rate").
(c) Computation of Interest. Interest shall be computed on the
-----------------------
basis of a 360 day year and charged for the actual number of days elapsed.
(d) Monthly Payments. Commencing on August 1, 1997 and on the first
----------------
day of each and every month thereafter through and including June 1, 2000,
Borrower shall make successive monthly installment payments of principal and
interest in an amount equal to $99,177.37.
2. Maturity Date; Prepayment.
-------------------------
(a) The entire principal balance of this Note then outstanding,
plus any accrued and unpaid interest thereon shall be due and payable on July 1,
2000, or such earlier date on which said amount shall become due and payable on
account of acceleration by Lender or otherwise pursuant to the terms hereof of
the Loan Agreement, defined below (the "Maturity Date"). Borrower promises to
pay to Lender principal and
<PAGE>
interest in the amounts and at the times provided in Section 1 above. On the
Maturity Date, Borrower shall pay to Lender the entire principal balance of this
Note then outstanding, together with all accrued and unpaid interest, all
penalties and late payment fees hereunder.
(b) Late Payment Fee. Borrower acknowledges that any late payment by
----------------
Borrower to Lender of principal, interest or any other amount required to be
paid under this Note or the other Loan Documents (defined below) will cause
Lender to incur costs not contemplated by this Note or the other Loan Documents,
the exact amount of which is difficult and impractical to ascertain. Borrower
shall pay Lender a late payment fee of five percent (5%) of any payment of
principal, interest or other amount to be paid under this Note or any other Loan
Document which is not received by Lender within two (2) days after the date when
due. The late payment fee provided for herein shall be in addition to any
interest owed at the Default Rate and shall be payable for each month or partial
month during which payment is late.
3. Making of Payments. Each payment (including prepayments) of
------------------
principal, interest, or any other amounts of any kind with respect to this Note
shall be made in immediately available funds, by Borrower to Lender to the
account designated on Exhibit A attached to the Loan Agreement, (or at any other
---------
place which Lender may hereafter designate for such purpose in a notice duly
given to Borrower hereunder), not later than one-thirty p.m., Chicago time, on
the date due therefor. Funds received after that hour shall be deemed to have
been received by Lender on the next following business day. Whenever any payment
to be made under this Note shall be stated to be due on a date which is not a
business day, the due date therefor shall be extended to the next succeeding
business day.
4. Prohibition on Prepayment. This Note may not be prepaid except in
-------------------------
accordance with the provisions of the Loan Agreement.
5. Default; Remedies.
-----------------
(a) Any one of the following occurrences shall constitute an "Event
of Default" under this Note:
(i) failure by Borrower to make any payment of principal,
interest, penalties, charges, fees or other amounts when the same
becomes due and payable pursuant to the terms of this Note or any
other Loan Document (defined below);
(ii) the occurrence of any Event of Default under the terms of
the Loan Agreement or any other Loan Document (other than as
specifically described in any other clause of this Section 5).
2
<PAGE>
(b) Upon the occurrence of an Event of Default hereunder, the entire
outstanding principal balance and any unpaid interest, penalties, charges, fees
or amounts then accrued under this Note, shall, at the option of Lender and
without demand or notice of any kind to Borrower or any other person (including,
but not limited to, any guarantor now or hereafter existing), immediately become
and be due and payable in full. In such event, Lender shall have and may
exercise any and all rights and remedies available at law or in equity in
addition to any and all rights and remedies provided herein or in any of the
other Loan Documents.
6. Application of Payments. All payments made hereunder shall be applied in
-----------------------
the order of priority set forth in the Loan Agreement.
7. Captions. Any headings or captions in this Note are inserted for
--------
convenience of reference only. Such headings or captions shall not be deemed to
constitute a part hereof, nor shall they be used to construe or interpret the
provisions of this Note. As used herein, the term "Lender" refers to ICON
Holdings Corp., its successors, participants, assignees and any person claiming
by, through or under said entity.
8. Waiver.
------
(a) Borrower, for itself and for its successors, transferees and assigns
hereby irrevocably (i) waives diligence, presentment and demand for payment,
protest, notice, notice of protest and nonpayment, dishonor and notice of
dishonor and all other demands or notices of any and every kind whatsoever; (ii)
agrees that this Note and any or all payments coming due hereunder or under any
of the other Loan Documents may be extended from time to time in the sole
discretion of Lender without in any way affecting or diminishing Borrower's
liability hereunder; and (iii) waives any rights, remedies or defenses arising
at law or in equity relating to guarantees or suretyships.
(b) No extension of the time for any payment due hereunder or under any
of the other Loan Documents made by agreement with any person now or hereafter
liable for payment of this Note or any other Loan Document shall operate to
release, discharge, modify, change or affect the original liability under this
Note or any other Loan Document, either in whole or in part.
(c) No delay in the exercise of any right or remedy hereunder by Lender
shall be deemed to be a waiver of such right or remedy, nor shall the exercise
of any right or remedy hereunder by Lender be deemed an election of remedies or
a waiver of any other right or remedy. Without limiting the generality of the
foregoing, the failure of Lender promptly after the occurrence of any default
hereunder to exercise its right to declare the indebtedness remaining unmatured
hereunder to be immediately due and payable shall not constitute a waiver of
such right while such default continues nor a waiver of such right in connection
with any future default.
3
<PAGE>
(d) No waiver or limitation of any right or remedy hereunder by Lender
shall be effective unless (and any such waiver or limitation shall be effective
only to the extent) expressly set forth in a writing, signed and delivered by
Lender to Borrower. No notice to or demand on Borrower in any case shall entitle
Borrower to any other notice or demand in similar or other circumstances, nor
shall such notice or demand constitute a waiver of any rights or remedy of
Lender to any other or further actions. In its sole discretion, Lender may, at
any time and from time to time, waive any one or more of the rights or remedies
contained herein, but such waiver in any instance or under any particular
circumstance shall not be deemed to be a waiver of such rights or remedies in
any other instance or under any other circumstance.
9. Loan Agreement. This Note is the Term Promissory Note delivered by
--------------
Borrower to Lender pursuant to Section 2.1 of that certain Loan and Security
Agreement dated even date herewith (together with any amendments, modifications,
supplements, restatements or replacements thereof, the "Loan Agreement") by and
between Borrower and Lender. Reference is hereby made to the Loan Agreement and
the other Loan Documents (as defined in the Loan Agreement) for a statement of
certain circumstances under which amounts due pursuant to this Note may be
accelerated and for a description of the property covered thereby and the nature
and extent of the security granted pursuant thereto. Any term not otherwise
defined herein shall have the meaning set forth in the Loan Agreement.
10. Notices. Any and all notices given in connection with this Note shall
-------
be deemed adequately given only if in writing and addressed to the party for
whom such notices are intended at the address and delivered in accordance with
the provisions of Section 10.16 of the Loan Agreement.
11. Time of the Essence. Time is hereby declared to be of the essence of
-------------------
this Note and of every part hereof.
12. Certain Provisions. The provisions of Sections 10.19, 10.20 and 10.21
------------------
of the Loan Agreement are hereby incorporated herein by reference.
13. Waiver of Jury Trial. BORROWER AND LENDER (BY ACCEPTANCE HEREOF) HEREBY
--------------------
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY
WHETHER SOUNDING IN CONTRACT, TORT, FRAUD OR OTHERWISE. BORROWER HEREBY
EXPRESSLY ACKNOWLEDGES THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO ACCEPT
THIS NOTE AND TO MAKE THE LOAN EVIDENCED HEREBY AND BY THE OTHER LOAN DOCUMENTS.
4
<PAGE>
BORROWER HEREBY EXPRESSLY ACKNOWLEDGES THAT IT IS WAIVING ITS RIGHT TO
TRIAL BY JURY.
- ------------------
[INITIALS]
IN WITNESS WHEREOF, Borrower has executed and delivered this Note pursuant
to proper authority duly granted, as of the date and year first above written.
ICON Holdings Corp., a Delaware corporation
By:
------------------------------------
Beaufort J.B. Clarke, President
5
<PAGE>
Exhibit 10.12
-------------
Put and Call Agreement
This Put and Call Agreement ("Agreement") dated as of June 20,1997, is by and
between TKO Finance Corporation, an Illinois corporation with its principal
place of business at 30 North LaSalle Street, Suite 4030, Chicago, IL 60602
("Lender") and ICON Holdings Corp., a Delaware corporation with its principal
place of business at 600 Mamaroneck Avenue, Harrison, NY 10528 ("Borrower").
WHEREAS Lender is making a loan to Borrower in an original outstanding principal
amount not to exceed $3,000,000 pursuant to that certain Loan and Security
Agreement of even date herewith ("Loan Agreement");and
WHEREAS in addition to Lender's rights under the Loan Agreement Borrower has
agreed as additional consideration to grant to Lender certain rights in the
Class B Non-Voting common stock of Borrower.
NOW THEREFORE for and in consideration of the mutual covenants and agreements
set forth herein, and in the Loan Agreement, Lender and Borrower hereby as
follows:
1. Stock.
-----
Borrower has issued and contemporaneously with the execution of this
Agreement is delivering and conveying to Lender 1000 shares of the Class B non-
voting common stock of Borrower ("Stock") as evidenced by a stock certificate
listing Lender as owner of such Stock, a copy of which is attached hereto as
Exhibit A.
2. Grant of Put.
------------
Borrower hereby grants to Lender the right to require Borrower (each such
requirement a "Put") to purchase the Stock on the dates, in the amounts and for
the consideration set forth below.
3. Exercise of Put.
---------------
(a) Each Put shall be exercised by not less than 30 days prior written
notice given by Lender to Borrower at its address set forth below
(which notice shall be irrevocable once given). Each such notice
("Put Notice") shall: (i) be executed by an officer of Lender and
shall reference this Agreement, (ii) shall set forth the number of
shares of Stock Lender intends to transfer to Borrower pursuant to
such Put and (iii) shall include instructions setting forth where
and in what manner the purchase price of the shares of Stock in
question should be remitted. At the closing of each Put Lender
shall deliver to Borrower the Stock certificate in Lender's
possession; Borrower agrees to promptly issue a replacement
certificate for the number of shares of Stock of the prior
certificate reduced by the number of shares subject to
<PAGE>
the Put. If Lender owns no shares of Stock following the close of a
Put, no replacement certificate shall be issued by Borrower. The
purchase price of Stock subject to a Put shall be paid by Borrower
in cash on the closing dates as specified below.
(b) At a closing date occurring on April 30, 2000, Lender by a
Put Notice may require Borrower to purchase up to 200 shares of
Stock at a purchase price of S432.22 per share.
(c) At a closing date occurring on April 30, 2001, Lender by a
Put Notice may require Borrower to purchase up to 350 Shares
of Stock at a price equal to $432.22 per share and, if so
specified by Lender, Lender may require Borrower to purchase
all or any of the shares of Stock which had been available
to be put to Borrower pursuant to Section 3(b) above but
which had not theretofore been put to Borrower.
(d) At a closing date occurring on April 30, 2002, Lender by a Put
Notice may require Borrower to purchase up to 450 shares of
Stock at a price equal to $432.22 per share and, if so specified
by Lender, Lender may require Borrower to purchase all or any of
the shares of Stock which had been available to be put to
Borrower pursuant to the provision of Sections 3(b) and 3(c)
above but which had not theretofore been put to Borrower.
4. Grant of Call.
-------------
Lender hereby grants to Borrower the right to require Lender to convey to
Borrower the Stock (each such requirement a "Call") on the dates, in the amounts
and for the consideration set forth below.
5. Exercise of Call.
----------------
(e) Each Call shall be exercised by not less than 120 days prior
written notice sent by Borrower to Lender at Lender's address
set forth below (which notice shall be irrevocable once given).
Each such notice ("Call Notice") shall: (i) be executed by an
officer of Borrower and shall reference this Agreement and (ii)
set forth the number of shares of Stock Lender is required to
transfer to Borrower pursuant to such Call. Lender shall
acknowledge its receipt of every Call Notice and shall designate
in such acknowledgment where and in what manner the purchase
price of the shares of Stock subject to the Call should be
remitted and such acknowledgment shall be accompanied by the
Stock certificate then in Lender's possession; upon the closing
of the Call Borrower agrees to promptly issue a replacement
certificate for the number of shares of Stock of the prior
certificate reduced by the number of shares of Stock subject to
the Call. If Lender owns no shares of Stock following the
closing of a Call, no replacement certificate shall be issued by
Borrower. All shares of
2
<PAGE>
Stock subject to a Call shall be paid for by Borrower in cash on the
closing dates as specified below.
(f) At a closing date occurring on February 15, 2000, Borrower by a
Call Notice may require Lender to convey to it up to 200 shares of
Stock at a purchase price of $480.07 per share.
(g) At a closing date occurring on February 15, 2001, Borrower by a
Call Notice may require Lender to convey to it up to 350 shares of
Stock at a purchase price of $480.07 per share and, if so specified
by Borrower in any such notice, Lender shall also be required to
convey to Borrower all or any of the Stock specified in Section 5(b)
available to be called by Borrower but which had not theretofore
been so called.
(h) At a closing date occurring on February 15, 2002, Borrower by a
Call Notice may require Lender to convey to it 450 shares of Stock
at a purchase price of S480.07 per share and, if so specified by
Borrower, Lender shall also be required to convey to Borrower
all shares of Stock which could have been called by Borrower
pursuant to the provisions of Section 5(b) and 5(c) above but
which were not so called.
6. Further Agreements of Lender and Borrower.
-----------------------------------------
Lender and Borrower hereby agree as follows:
(f) In the event that on October 30, 2002 Lender owns any
shares of Stock, Borrower shall redeem such stock by paying to
Lender on such date, in cash, the sum of $480.07 for each share of
Stock then owned by Lender against delivery by Lender to Borrower of
its certificate evidencing Lender's ownership of such Stock.
(g) Except in the event of a breach by Borrower of any provision
contained in this Agreement, Lender agrees not to convey any of the
Stock to any person other than Borrower.
(h) Lender agrees to keep to the Stock free of all liens and
encumbrances of every kind and character.
(i) In the event Lender fails to convey to Borrower any shares of
Stock properly called by Borrower, with the purchase price properly
tendered, pursuant to the provisions of Section 5 hereof, such
shares shall, for all purposes of this Agreement be deemed to have
been acquired by Borrower notwithstanding the failure by Lender to
accept payment for such shares and Lender's failure to tender its
Stock certificate to Borrower as required by the provisions of
Section 5.
3
<PAGE>
(j) in the event a Put Notice and Call Notice shall have been validly
given with respect to the same shares of Stock, the Call Notice
shall prevail.
(k) Upon the occurrence Of an Event of Default (as such term is
defined in Section 8.1 of the Loan and Security Agreement dated as
of June 20, 1997 between Lender and Borrower ("Loan and Security
Agreement"), Borrower shall be deemed to have exercised the Call of
all shares of Stock which have not been theretofore put to or called
at the purchase price specified in Section 5 hereof.
(l) In the event Borrower exercises its right to prepay the Loan
pursuant to Section 2.4 of the Loan and Security Agreement, Borrower
shall be deemed to have exercised the Call of all shares of Stock
which have not been theretofore put to or called at the purchase
price specified in Section 5 hereof.
7. Stock Registration.
------------------
In the event Borrower, at any time, proposes to register any of its stock or
other securities under the Securities Act of 1933, as amended ('Securities
Act"), Lender shall have the right to convert its shares of Stock into shares of
stock of the type that Borrower proposes to register and Borrower shall use its
best efforts to cause such Stock to be registered under the Securities Act at no
fee or expense to Lender (other than underwriters discounts or commissions). If
the date the registration statement is filed ("Filing Date") occurs before the
dates Borrower may first close on the Calls as specified in 5(b), 5(c) and 5(d)
("Applicable Call Date"), the number of shares to be issued to Lender as of the
Filing Date shall be equal to the sum of the present values of each of the per
share "call amounts" multiplied by the number of shares of Stock then owned by
Lender measured from each Applicable Call Date to the Filing Date based on a
present value rate equal to 12.5% divided by the proposed price per share using
the low point of the range of the proposed offering price of the registered
offering. If the Filing Date occurs on or after any Applicable Call Date, the
number of shares to be issued shall be equal to the sum of the "call amounts" on
each Applicable Call Date prior to the Filing Date plus the sum of the present
value of each "call amount" remaining to be paid measured from each Applicable
Call Date to the filing Date based on the discount rate and the proposed
offering price as described in the previous sentence.
8. Representation and Warranties of Borrower.
-----------------------------------------
Borrower hereby represents and warrants to Lender, as follows:
(a) Borrower is duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, and has full corporate
power and authority to conduct its business as it is presently being
conducted and to own and lease its properties and assets.
(b) Borrower is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the failure to
so qualify would have material adverse effect on the business or
financial condition of Borrower.
4
<PAGE>
(c) All shares of Stock have been duly authorized and validly issued and
are fully paid and nonassessable.
(d) Upon delivery to Lender of the certificate representing the Stock,
Lender will acquire good and valid title to the Stock, free and
clear of all liens (other than those created by Lender).
(e) Borrower has all necessary corporate power and authority to enter
into this Agreement and has taken all corporate action necessary to
consummate the transactions contemplated hereby, and to perform its
obligations hereunder. This Agreement has been duly executed and
delivered by Borrower and is the legal, valid and binding obligation
of Borrower, enforceable against Borrower in accordance with its
terms, except as such enforcement may be affected by bankruptcy or
other laws of general application affecting the rights of creditors
or general principles of equity.
(f) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby and thereby,
will result in (i) a violation of or a conflict with any provision
of the certificate of incorporation or bylaws of Borrower (ii) a
breach of, or a default under, any term or provision of any material
contract, agreement, lease, license, franchise, permit,
authorization or concession to which Borrower is a party or by which
its assets are bound, which breach or default would have a material
adverse effect on the financial condition of the Borrower or the
ability of the Borrower to consummate the transactions contemplated
hereby or (iii) a violation by Borrower of any statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction,
decree or award, which violation would have a material adverse
effect on the business or financial condition of the Borrower or the
ability of the Borrower to consummate the transactions contemplated
hereby.
(g) No consent, approval or authorization of, or declaration, filing or
registration with, any Person is required to be made or obtained by
Borrower in connection with the execution, delivery, and performance
by Borrower of this Agreement other than those which have been made
or obtained.
9. Representations, Warranties, and Covenants of Lender.
----------------------------------------------------
Lender hereby represents and warrants to Borrower as follows:
(a) Lender is a duly organized, validly existing corporation, in good
standing under the laws of Illinois, and has full corporate power
and authority to conduct its business as it is presently being
conducted and to own and lease its properties and assets. Lender
is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which such qualification
is necessary as a result of the conduct of its business or the
ownership of its properties and where failure to be qualified
would have a material adverse effect on the business or financial
condition of Lender.
(b) Lender has all necessary corporate powers and authority to enter
into this Agreement, and has taken all corporate action necessary
to consummate the transactions contemplated hereby and thereby,
and to perform its obligations
5
<PAGE>
hereunder and thereunder. This Agreement has been duly executed and
delivered by Lender and is the legal, valid and binding obligations
of Lender, enforceable against it in accordance with its terms,
except as such enforcement may be affected by bankruptcy or other
laws of general application affecting the rights of creditors or
general principles of equity.
(c) No consent, approval or authorization of, or declaration, filing
or registration with, any person is required to be made or
obtained by Lender in connection with the execution, delivery and
performance by Lender of this Agreement other than those which
have been made or obtained.
(d) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby will result in
(i) a violation of or a conflict with any provision of the
certificate of incorporation or bylaws of Lender, (ii) breach of, or
a default under, any term or provision of any material contract,
agreement, lease, lien, commitment, license, franchise, permit,
authorization or concession to which Lender is a party or by which
any of its property is bound, which breach or default would have a
material adverse effect on the business or financial condition of
Lender or its ability to consummate the transactions contemplated
hereby, or (iii ) a violation by Lender of any statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction,
decree or award, which violation would have a material adverse
effect on the business or financial condition of Lender or its
ability to consummate the transactions contemplated hereby.
(e) Lender is not in violation of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award,
which violation would have a material adverse effect on the business
or financial condition of Lender or its ability to consummate the
transactions contemplated hereby.
(f) Upon the conveyance to Borrower of any Stock by Lender pursuant to
the terms of this Agreement, such Stock shall be free of liens and
encumbrances of every kind and character arising through the acts or
omissions of Lender.
10. Miscellaneous.
-------------
(a) No term or provision of' the Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. The headings
contained herein are for convenience and reference only and are
not intended to define or limit the scope of any provisions of
this Agreement.
(b) The Agreement may be executed in one or more counterparts with
the same effect as if the signatures to each counterpart were
upon a single instrument and all counterparts shall together be
considered one and the same instrument.
(c) This Agreement has been delivered in the State of Illinois and
shall in all respects be governed by, and construed in accordance
with, the laws of the State of Illinois without regard to its
conflicts of laws provisions, including all matters of
construction, validity and performance.
6
<PAGE>
(d) Neither Lender nor Borrower may assign the Agreement in whole or
in part without the prior written consent of the other. The
terms and provisions of this Agreement shall inure to the benefit
of and be binding on Lender and Borrower and their respective
successors and permitted assigns.
(e) Lender and Borrower shall, from time to time, do and perform such
other and further acts and execute and deliver any and all such
other and further instruments as may be required by law or
reasonably requested by other party to establish, maintain and
protect the respective rights and remedies of the other party and
to carry out the intent and purpose of this Agreement.
(f) This Agreement constitutes the entire understanding of the
parties with respect to the Stock and may not be amended except
by a written instrument executed by lender and Borrower.
IN WITNESS WHEREOF Lender and Borrower have executed this Agreement as of the
date first above written.
Lender: Borrower:
TKO Finance Corporation ICON Holdings Corp.
By: By:
--------------------------- ----------------------------
Title: Title:
------------------------ -------------------------
7
<PAGE>
Exhibit 10.13
-------------
RELEASE AND PAY-OFF AGREEMENT
THIS RELEASE AND PAY-OFF AGREEMENT (the "Agreement") is entered into on
October 23, 1997 by and among TKO Finance Corporation ("Lender") and ICON
Holdings Corp., a Delaware corporation, ("Borrower"), ICON Capital Corp., a
Connecticut corporation, ICON Financial Corp., a Delaware corporation, ICON
Funding Corp., a Delaware corporation and ICON Securities Corp., a New York
corporation (collectively referred to herein as "Corporate Guarantors"),
Beaufort J.B. Clarke, Linda A. Clarke, Thomas W. Martin, Lynn Martin, Paul B.
Weiss and Linnea Weiss (collectively, the "Individual Guarantors"). Borrower,
Corporate Guarantors and Individual Guarantors are sometimes collectively
referred to herein as "Loan Parties".
RECITALS:
--------
WHEREAS, Borrower and Lender have entered into that certain Loan and
Security Agreement dated as of June 20, 1997, as amended (the "Loan Agreement"),
pursuant to which Lender made certain financial accommodations available to
Borrower (any capitalized term not otherwise defined herein shall have the
meaning set forth in the Loan Agreement); and
WHEREAS, Corporate Guarantors and Individual Guarantors (collectively,
"Guarantors") have executed guaranties of payment and performance of the
liabilities and obligations under the Loan Documents; and
WHEREAS, the Loan Documents prohibit prepayment of principal and
interest thereunder; and
WHEREAS, Borrower and Lender have entered into that certain Put and
Call Agreement dated as of June 20, 1997; and
WHEREAS, Borrower desires to effect an initial public offering of $100
million of its stock and has requested that Lender accept a prepayment of the
indebtedness under the Loan Documents and accept a termination of all rights
under the Put and Call Agreement; and
WHEREAS, Lender and Loan Parties desire to enter into this Agreement to
set forth the terms and conditions upon which Lender agrees to accept such
prepayment and terminate the Put and Call Agreement.
NOW THEREFORE, in consideration of the foregoing Recitals, each of
which is made a part hereof, the parties do hereby agree as follows:
1
<PAGE>
1. Pay-Off Amount.
--------------
(a) Assuming that the payments of principal and interest due prior to the
date payment is actually received have been timely paid and that no Event of
Default or Unmatured Default has occurred and is continuing under the terms of
the Loan Documents, the amount necessary to pay all liabilities, obligations and
indebtedness under the terms of the Loan Agreement, the other Loan Documents and
the Put and Call Agreement (collectively, the "Payoff Amount") is:
(i) Principal and Interest. An amount equal to the unpaid
----------------------
principal balance, determined by reference to the Amortization
Schedule, attached hereto as Exhibit A plus all accrued but
---------
unpaid interest.
(ii) Pre-Payment Fee. A pre-payment fee in an amount equal to
---------------
$226,328; plus
(iii) Redemption Fee. A Redemption Fee for the Class B non-voting
--------------
shares of stock in an amount equal to $349,545; plus
(iv) Per Deim. In the event payment is not received on or before
--------
12:00 noon, Chicago Time, January 1, 1998, add a per deim
charge of $111.66, for each additional day or part thereof,
until payment of the Pay-Off amount is received.
(b) The terms of this letter shall expire on March 31, 1998. If the Payoff
Amount is not received on or before 12:00 PM on such date, this letter must be
amended by written amendment signed by Lender.
(c) In consideration of entering into this Agreement, concurrently
herewith, Borrower shall pay to Lender a commitment fee in an amount equal to
$5,000.
(d) All payments due hereunder must be made by wire transfer of the Payoff
Amount to the following account:
First Chicago National Bank
Chicago, IL
ABA #071 000013
For the Account of TKO Finance Corporation
Account No. 119 289 86
Attn: Joan Cline
2
<PAGE>
2. Termination and Release By Lender.
---------------------------------
(a) Upon payment of the Payoff Amount in accordance with the terms of
Section 1, (i) the Loan Agreement and the Loan Documents shall be and are hereby
terminated, canceled and of no further force and effect, except for those
provisions of the Loan Documents relating to the Surviving Obligations (defined
below), (ii) all security interests and liens upon any and all properties and
assets of Borrower and/or Guarantors heretofore granted by Borrower and/or
Guarantors to Lender pursuant to the Loan Documents and/or the Put and Call
Agreement shall be and are hereby released and terminated, and (iii) the
certificate evidencing all shares of Class B stock of Borrower owned by Lender
shall be and are tendered to Borrower for redemption.
(b) Upon receipt of the Pay-Off Amount in accordance with the terms of
Section 1, Lender will deliver: (i) executed releases and Uniform Commercial
Code termination statements pertaining to the liens and security interests of
Lender in certain property of Borrower and Guarantors, (ii) the original
certificates of stock pledged to secure payment of the Secured Obligations,
(iii) the promissory note shall be marked paid in full and delivered to
Borrower, (iv) a release of all guarantees, (v) such other termination
statements, releases and other agreements, in form and substance reasonably
satisfactory to Borrower and/or Guarantors, as such parties may request in
connection with Lender's release and termination of its liens and security
interests in the property of Borrower and/or Guarantors, and (vi) the
certificate evidencing all of the Class B stock owned by Lender shall be
tendered to Borrower for redemption and cancellation.
3. Release by Loan Parties. Upon payment of the Pay-Off Amount, Borrower
-----------------------
and Guarantors hereby, jointly and severally, release, discharge and acquit
Lender, its officers, directors, agents, attorneys and employees and its and
their respective successors and assigns, from all obligations and any and all
claims, demands, debts, accounts, contracts, liabilities, actions and causes of
actions, whether in law or in equity, that Borrower and/or Guarantors at any
time had or has arising or relating to the Loan Documents, or that its
successors and assigns hereafter can or may have against Lender, its officers,
directors, agents, attorneys or employees and its and their respective
successors and assigns, except for obligations of Lender under this Agreement.
4. Surviving Obligations. Notwithstanding anything to the contrary
---------------------
contained herein, neither Borrower nor Guarantors are released from, and hereby
ratify and confirm their respective continuing liability to Lender for full and
indefeasible payment and performance of, the following (collectively, the
"Surviving Obligations"):
(a) all obligations of Borrower and Guarantors to Lender hereunder,
including without limitation, the obligations described in Sections 4 and 5
hereof; and
(b) all indemnification obligations, reimbursement obligations and
other obligations in favor of Lender that, pursuant to the express terms of the
Loan Documents as in effect immediately prior to the effectiveness hereof,
survive the termination of the Loan Documents under which they arise; and
3
<PAGE>
(c) Borrower shall reimburse Lender for all costs and expenses
incurred in connection with the negotiation, execution and performance of this
Agreement, including but not limited to reasonable attorney's fees and filing
fees.
5. Indemnification for Returned Items and Related Expenses. Borrower and
-------------------------------------------------------
Guarantors, jointly and severally, agree to indemnify Lender from any and all
loss, cost, damage or expense (including attorneys' fees) which Lender may
suffer or incur at any time as a result of any non-payment, claim, refund or
dishonor of any checks or other similar items which have been credited by Lender
for the account of Borrower on or prior to the date on which Lender receives the
Payoff Amount, together with any expenses or other charges incident thereto and,
in addition, Borrower agrees to pay Lender on demand all costs and expenses
(including attorneys' fees and legal expenses) incurred in connection with this
Agreement, and any instruments or documents contemplated hereunder.
6. Reinstatement. Notwithstanding anything to the contrary contained
-------------
herein, in the event any payment made to, or other amount of value received by,
Lender from or for the account of Borrower and/or Guarantors is voided,
rescinded, set aside or must otherwise be returned or repaid by Lender whether
in any bankruptcy, reorganization, insolvency or similar proceeding involving
Borrower or otherwise, the indebtedness intended to be repaid thereby shall be
reinstated (without any further action by any party) and shall be enforceable
against Borrower. In such event, Borrower and Guarantors shall be and remain
liable to Lender for the amount so repaid or recovered to the same extent as if
such amount had never originally been received by Lender.
7. Counterparts. This Agreement may be signed in one or more
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one agreement, binding on all of the parties hereto
notwithstanding that all of the parties hereto are not signatories to the same
counterpart. Each of the undersigned parties authorizes the assembly of one or
more original copies of this Agreement through the combination of the several
executed counterpart signature pages with one or more bodies of this Agreement,
including the Exhibits, if any, to this Agreement. Each such compilation of this
Agreement shall constitute one original of this Agreement. Notwithstanding the
foregoing, in the event this Agreement is executed by all parties hereto other
than Linda A. Clarke, Lynn Martin and Linnea Weiss, this Agreement shall,
nonetheless, be binding upon all parties which are signatory hereto, including
Lender, and Borrower shall use its best efforts to deliver the signatures of
Linda A. Clarke, Lynn Martin and Linnea Weiss within ten (10) business days
after the execution hereof by all other parties.
8. Fax Execution. For purposes of negotiating and finalizing this
-------------
Agreement (including any subsequent amendments thereto), any signed document
transmitted by facsimile machine ("FAX") shall be treated in all manner and
respects as an original document. The signature of any party by FAX shall be
considered for these purposes as an original signature. Any such FAX document
shall be considered to have the same binding legal effect as an original
document, provided that an original of the faxed document was mailed by first
class U.S. Mail or personally delivered to the recipient, on the date of its
transmission with proof of the fax transmission. Any FAX document subject to
this Agreement shall be re-executed by both parties in an original form. The
undersigned
4
<PAGE>
parties hereby agree that neither shall raise the use of the FAX or the fact
that any signature or document was transmitted or communicated through the use
of a FAX as a defense to the formation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Release and Pay-Off
Agreement as of the date written above.
BORROWER:
- --------
ICON Holdings Corp., a Delaware corporation
BY:
------------------------------------
Title:
---------------------------------
GUARANTORS:
ICON Capital Corp., a Connecticut corporation
BY:
------------------------------------
Title:
---------------------------------
ICON Financial Corp., a Delaware corporation
BY:
------------------------------------
Title:
---------------------------------
ICON Funding Corp., a Delaware corporation
BY:
------------------------------------
Title:
---------------------------------
ICON Securities Corp., a New York corporation
BY:
------------------------------------
Title:
---------------------------------
(SIGNATURE PAGE CONTINUED)
5
<PAGE>
- --------------------------------------
Beaufort J.B. Clarke
- --------------------------------------
Linda A. Clarke
- --------------------------------------
Thomas W. Martin
- --------------------------------------
Lynn Martin
- --------------------------------------
Paul B. Weiss
- --------------------------------------
Linnea Weiss
LENDER:
TKO Finance Corporation
BY:
-----------------------------------
Title:
--------------------------------
6
<PAGE>
EXHIBIT 10.14
-------------
MENDIK REAL ESTATE LIMITED PARTNERSHIP,
Landlord
and
ICON CAPITAL CORP.,
Tenant
STANDARD FORM LEASE
Dated July , 1992
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Access................................................................ 12
Additional Rent....................................................... 3
Adjoining Building.................................................... 1
Air-Conditioning...................................................... 10
Antenna............................................................... 39
Assignment............................................................ 25
Attornment............................................................ 30
Base Rent............................................................. 13
Base Tax Year......................................................... 1
Base Year............................................................. 1
Brokerage............................................................. 31
Cafeteria............................................................. 37
Changes in the Building............................................... 12
Commencement Date..................................................... 16
Construction.......................................................... 36
Costs of Operation.................................................... 7
Continuation Term..................................................... 38
Curing Tenant's Defaults.............................................. 31
Damage and Destruction................................................ 18
Damages............................................................... 34
Default Provisions.................................................... 24
Definitions and Term.................................................. 1
Demise and Premises................................................... 3
Electrical Energy..................................................... 16
Electric Inclusion Charge............................................. 1
Eminent Domain........................................................ 17
Estoppel Certificate.................................................. 24
Events of Default..................................................... 24
Expiration Date....................................................... 1
Failure to Enforce Terms.............................................. 35
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Guarantor............................................................. 2
Heat.................................................................. 10
Indemnification....................................................... 33
Insurance............................................................. 19
Interest Rate......................................................... 2
Landlord's Contribution............................................... 2
Laws and Requirements of Public Authorities........................... 11
Miscellaneous Provisions.............................................. 37
Modifications......................................................... 35
Mortgaging............................................................ 25
Name of Building...................................................... 10
No Other Representations.............................................. 36
Non-Liability......................................................... 33
Non-Recourse.......................................................... 33
Notices...............................................................30, 33
Other Tenants......................................................... 10
Preparing the Demised Premises........................................ 4
Quiet Enjoyment....................................................... 30
Ready for Occupancy................................................... 6
Real Estate Tax Changes............................................... 13
Recording............................................................. 24
Re-Entry by Landlord.................................................. 31
Rent.................................................................. 3
Rent Adjustments Based Upon Costs of Operation........................ 7
Rent Adjustments Based Upon Taxes..................................... 13
Repairs and Maintenance............................................... 17
Rules and Regulations................................................. 33
Security Deposit...................................................... 2, 28
Services - Landlord's................................................. 14
Shoring............................................................... 36
Storage Space......................................................... 38
Subletting............................................................ 25
Subordination......................................................... 30
Successors and Assigns................................................ 36
Surrender............................................................. 23
Tenant's Changes...................................................... 21
Tenant Identification................................................. 10
Tenant's Property..................................................... 23
Termination of Lease.................................................. 24
Terms and Definitions................................................. 1
Use................................................................... 10
Ventilating........................................................... 10
Waivers............................................................... 35
</TABLE>
<PAGE>
EXHIBITS
--------
<TABLE>
<CAPTION>
EXHIBIT
- ---------
<C> <S>
A - Floor Plan(s)
A-1 - Tenant's Plans
B - Building Standard Work/Work Charge
C - Rules and Regulations
D - General Cleaning Specifications
E - Parking Plan
</TABLE>
<PAGE>
STANDARD FORM
OF LEASE AGREEMENT
LEASE AGREEMENT, made as of the ____ day of July, 1992, between "Landlord"
(as hereinafter defined) and ICON CAPITAL CORP. (hereinafter called the
"Tenant"), a corporation organized under the laws of the State of New York
having its principal office at one Summit Avenue, White Plains, New York 10606.
ARTICLE 1
Definitions and Certain Terms
1.01 The following terms shall have the meanings set forth opposite each of
them, provided that if "None" is set forth opposite any term then the provisions
of the Lease applicable to such term shall be considered deleted and of no force
and effect. Where alternative definitions are set forth, only the definition
following the marked set of parenthesis shall apply.
"Adjoining Building":
That building known as 550 Mamaroneck Avenue, Harrison, New York.
"Base Rent":
(As adjusted in accordance with Articles 3, 6, 10, and 12 hereof):
- For the 1st Rent Year, $408,680.00, payable in monthly installments
of $34,056.67 per month;
- For the 2nd Rent Year, $420,700.00, payable in monthly installments
of $35,058.33;
- For the 3rd Rent Year, $438,730.00, payable in monthly installments
of $36,560.83;
- For each of the 4th and 5th Rent Years, $255,925.81. payable in
monthly Installments of $36,560.83 for each of the last 7 months, and no
monthly Installments of Base Rent shall be payable during each of the first
5 months;
- For the 6th Rent Year, $299,170.33, payable in monthly Installments
of $40,066.67 for each of the last 7 months, $18,703.64 for the fifth month
and no monthly installments of Base Rent shall be payable during each of
the first 4 months
- For each of the 7th and 8th Rent: Years, $480,800.00, payable in
monthly installments of $40,066.67 per month;
<PAGE>
- For each of the 9th and 10th Rent Years, $504,840.00, payable in monthly
installments of $42,070.00 per month; and
- For each of the 11th and 12th Rent Years, $540,900.00, payable in
monthly installments of $45,075.00 per month.
"Base Tax Year":
July 1, 1992 through June 30, 1993.
"Base Year":
The period commencing on the Commencement Date and ending on the day
preceding the first anniversary thereof.
"Building"
The building erected at 600 Mamaroneck Avenue, in the Town of
Harrison, in the County of Westchester, State of New York.
"Commencement Date":
The date on which the Demised Premises are ready for occupancy as
provided
in Article 5 hereof.
"Demised Premises":
That space on the fourth floor of the Building delineated on the floor
plan(s) attached hereto an Exhibit "A", the total area of which in the
Leased Floor Space.
"Electric Inclusion Charge":
None.
"Expiration Date":
The last day of the calendar month in which occurs the end of a 12
year period from the Commencement Date (if the Commencement Date shall
occur on a day other than the first day of a calendar month such period
shall run and be measured from the first day of the calendar month
following the Commencement Date) or ending on an earlier date on which this
Lease may expire or be cancelled or terminated pursuant to the terms of
this Lease.
<PAGE>
"Guarantor":
None.
"Interest Rate":
The annual rate of interest equal to two (2) percentage points above
the interest rate then most recently announced by any of Citibank, N.A.,
The Chase Manhattan Bank, N.A. and Bankers Trust Company (to be chosen by
Landlord), or their successors, as their corporate base lending rate, which
rate may change from time to time during the Term, which rate shall be
deemed additional rent.
"Landlord":
MENDIK REAL ESTATE LIMITED PARTNERSHIP, a New York limited partnership
having an office c/o Mendik Realty Corp., 330 Madison Avenue, New York, New
York 10017, of which the present general partners are Mendik Corporation,
having an office at the same address, and Hutton Real Estate Services XV,
Inc., having an office at 388 Greenwich Street, New York, New York 10013.
"Landlord's Contribution":
None.
"Leased Floor Space":
The total number of rentable square feet of space in the Demised
Premises, which Landlord represents has been computed in accordance with
accepted measurement standards and which, for purposes of this Lease, the
parties agree and stipulate is 24,040 square feet.
"Leasing Broker":
Rostenberg-Doern Company, Inc.
100 First Stamford Place
Stamford, Connecticut 06902
"Parking Spaces":
Approximately 848 parking spaces located in the Building parking lot
for use in common by all tenants of the Building and the Adjoining
Building.
"Permitted Use":
Insofar as the Leased Floor space is concerned, only as executive and
<PAGE>
administrative offices; and insofar as the Storage Space is concerned, as
storage space for Tenant's files and equipment as permitted by applicable
law.
"Prepayment":
$34,056.67 to be applied toward the first full monthly installment of
Base Rent.
"Proportionate Share":
20.18%, which is the percentage resulting from dividing the Leased
Floor Space by the Total Floor Space.
"Rent Year":
The period commencing on the first day of the Term and ending with the
day preceding the first anniversary of such first day, and each twelve-
month period thereafter measured from each anniversary date, except that if
the Period between the last such anniversary and the Expiration Date is
less than twelve months, then the last Rent Year shall be such lesser
period.
"Security Deposit":
$950,000.00 deposited pursuant to Article 23 hereof.
"Standard Business Hours":
8:30 a.m. to 5:30 p.m. on Mondays through Fridays, except the days
when the following six legal holidays are observed: New Year's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
"Term":
The period beginning on the Commencement Date and ending at noon on
the
Expiration Date.
"Total Floor Space":
The total number of square feet of space in the Building which
Landlord represents has been computed in accordance with accepted
measurement standards and which, for purposes of this Lease, the parties
agree and stipulate is 119,112 square feet.
"After Hours Heating Charge":
$150.00 per hour as provided in Section 7.01 hereof.
"After Hours Cooling Charge":
<PAGE>
$175.00 per hour as provided in Section 7.01 hereof.
"After Hours Ventilating Charge":
$100.00 per hour as provided in Section 7.01 hereof.
1.02 Electrical energy consumed by Tenant In the Demised Premises shall be
( ) at the "Electric Inclusion Charge" as defined in, and as provided under,
Section 12-04 hereof, or ( ) measured by a sub-meter, furnished and Installed
at Tenant's cost and expense. and as otherwise provided in Section 12.05 hereof,
or ( X ) separately metered at Landlord's cost and expense pursuant to Section
12.06, and purchased by Tenant from the utility supplying electricity to the
Building.
1.03 Intentionally omitted.
1.04 "Tenant's Plans" (as defined in Section 4.01A) and engineering plans
and drawings shall be prepared by ( X ) Tenant or ( ) Landlord; and the
cost thereof shall be borne ( ) all by Tenant, or ( X ) all by Landlord, or (
) by Landlord to the extent of $_________ per square foot of Leased Floor Space
and the balance by Tenant.
ARTICLE 2
Demise and Premises
2.01 The general location, size and layout of the Demised Premises are
outlined on Exhibit "A", but Exhibit "A" shall not be deemed to be a warranty,
representation or agreement on the part of Landlord that the Demised Premises
and the Building will be exactly as indicated an Exhibit "A".
2.02 Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the Demised Premises for the Term, for the rents hereinafter reserved
and upon and subject to the conditions (including limitations, restrictions, and
reservations) and covenants hereinafter provided. Each party hereto agrees to
observe and perform all of the conditions and covenants herein contained on its
part to be observed and performed.
2.03 Nothing herein contained shall be construed as a grant or demise by
Landlord to Tenant of the roof or exterior walls of the Building, of the space
between the ceiling or drop ceiling and the floor or roof above (although Tenant
may use such space for wiring and cabling for Tenant's equipment so long an
Tenant complies with all applicable codes and such use does not interfere with
Landlord's use of such space), below the floor of the Demised Premises, of the
parcel of land on which the Demised Premises are located, and/or of any parking
or other areas adjacent to the Building.
<PAGE>
ARTICLE 3
Base Rent and Additional Rent
3.01 Whenever used in this Lease, the term (insofar as it pertains to this
Lease) "fixed rent", "minimum rent", "base rent" or "basic rent", or any such
term using the word "rental", "rents" or "rentals" in lieu of "rent", shall mean
Base Rent; and whenever used in this Lease, the term (insofar as it pertains to
this Lease) "rent", "rentals", "Rent", or the plural of any of them, shall mean
Base Rent and additional rent.
3.02 Tenant shall pay to Landlord without notice or demand and without
abatement, deduction or set-off, in lawful money of the United States of
America, at the office of the Landlord as specified in Article 1 hereof or at
such other place as Landlord may designate, the Base Rent reserved under this
Lease for each Lease Year of the Term, payable in equal monthly installments in
advance on the first day of each and every calendar month during the Term; and
additional rent consisting of all such other sums of money as shall become due
from and payable by Tenant to Landlord hereunder (for default in payment of
which Landlord shall have the same remedies as for a default in payment of Base
Rent). If any check tendered by Tenant, for any payment due, shall be
dishonored by the payor bank, Tenant shall pay Landlord, without prejudice to
any of Landlord's rights and remedies, in compensation for the additional
administrative, bookkeeping and collection expenses incurred by reason of such
dishonored check, the sum of $100. If during any Rent Year two or more checks
tendered by Tenant, for any payment due, shall be dishonored by the payor bank,
all future payments of rent by Tenant shall be made by certified or official
bank checks drawn on banks having a banking office in Westchester County, or, if
Landlord requests, by Federal Reserve wired funds into Landlord's account.
3.03 Tenant shall pay the Base Rent and additional rent herein reserved
promptly as and when the same shall become due and payable under this Lease. If
the commencement of the first Rent Year shall occur on a day other than the
first day of a calendar month the Base Rent and additional rent shall be
prorated for the period from such commencement date to the last day of the said
calendar month and shall be due and payable on said commencement date.
Notwithstanding the provisions of the next preceding sentence, Tenant shall pay
on account toward the first full calendar monthly installment of Base Rent, on
the execution of this Lease, the repayment specified in Article 1 hereof.
3.04 If the Base Rent or any additional rent shall be or become
uncollectible, reduced or required to be refunded by virtue of any law,
governmental order or regulation, or direction of any public officer or body
pursuant to law, (of the nature of a rent freeze or rent restriction) Tenant
shall enter into such agreement(s) and take such other action (without
additional expense to Landlord) as Landlord may reasonably request, and as may
be legally permissible, to permit Landlord to collect the maximum Base Rent and
additional rent which may from time to time during the continuance of such legal
rent restriction be legally permissible, but not in excess of the amounts of
Base Rent or additional rent payable under this Lease. Upon the termination of
such rent restriction prior to the Expiration Date, (a) the Base Rent and
additional rent shall become and thereafter be payable under this Lease in the
amount of the Base Rent and additional rent set forth in this Lease for the
period following such termination, and (b) Tenant shall pay to
<PAGE>
Landlord, to the maximum extent legally permissible, an amount equal to (1) the
Base Rent and additional rent which would have been payable pursuant to this
Lease, but for such legal rent restriction, less (2) the Base Rent and
additional rent paid by Tenant during the period that such legal rent
restriction was in effect.
3.05 If Tenant shall fail to pay when due any installment or payment of
Base Rent or additional rent (following 5 days notice of such failure from
Landlord to Tenant with respect to two of such failures in any Rent Year),
Tenant shall be required to pay a late charge of $.01 for each $1.00 which
remains so unpaid. Such charge shall be imposed only once insofar as any
specific installment or payment is concerned. Such late charge is intended to
compensate Landlord for additional expenses incurred by Landlord in processing
such late payments. Tenant agrees that the late charge imposed is fair and
reasonable, complies with all laws, regulations and statutes, and constitutes an
agreement between Landlord and Tenant as to the estimated compensation for costs
and administrative expenses incurred by Landlord due to the late payment of rent
to Landlord by Tenant. Tenant further agrees that the late charge assessed
pursuant to this Lease is not interest, and the late charge assessed does not
constitute a lender/borrower relationship between Landlord and Tenant. Nothing
herein shall be intended to violate any applicable law, code or regulation, and
in all instances all such charges shall be automatically reduced to any maximum
applicable legal rate or charge.
3.06 The receipt or acceptance by Landlord of Base Rent and/or additional
rent with knowledge of breach by Tenant of any term, agreement, covenant,
condition or obligation of this Lease shall not be deemed a waiver of such
breach.
3.07 No payment by Tenant or receipt by Landlord of a lesser amount than
the correct Base Rent or additional rent due hereunder shall be deemed to be
other than a payment on account, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment be deemed to effect or
evidence an accord and satisfaction, unless waived in writing by Landlord, and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance or pursue any other remedy in this Lease or at law
provided.
ARTICLE 4
Preparing the Demised Premises
4.01 A. Tenant's final working plans, specifications and drawings
covering all work to be performed in the Demised Premises ("Tenant's Plans") are
described on Exhibit A-1. Tenant's Plans shall be in compliance with all laws,
codes and regulations and shall be sufficient to obtain a building permit for
all work shown thereon. Landlord shall pay Dennis Noskin, Architects, for
preparation of Tenant's Plans and for preparation of any changes in Tenant's
Plans required to effect such compliance.
"Landlord's Work" shall mean upgrading of elevator cab consistent with
the re-
<PAGE>
design of the Building and with a contemporary look, including, without
limitation, replacement of wall panels (of the same or similar materials but of
a different color to be selected by Landlord's architect) in elevator cabs and
compliance with the Americans for Disabilities Act insofar as areas of the "Real
Property" (as defined in Article 10) not leased to tenants are concerned.
"Tenant's Work" shall mean all work as shown an Tenant's Plans, as
well as (unless presently existing), the supply and installation of a direct
electric meter to measure consumption of electricity in the Demised Premises and
floor patching, where necessary for levelling, prior to installation of
carpeting, except that the following shall not be part of Tenant's Work:
personal property, furniture, work stations, trade fixtures and equipment, and
any work necessary for telephone, telecommunications and computer power
requirements, conduit, wire, outlets and systems (collectively sometimes called
"Excluded Tenant's Work").
Landlord approves Tenant's Plans, but no approval thereof shall be
deemed an agreement by Landlord that the work included therein is in compliance
with any legal requirements or is otherwise feasible or is the only work
necessary to use and occupy the Demised Premises and obtain a certificate of
occupancy therefor. Landlord shall not be required to commence any work until
Tenant's Plans have been received, receipted and approved as provided herein.
B. Landlord's work shall be performed and completed, at Landlord's
cost and expense, simultaneously with the performance of Tenant's Work.
4.02 A. Landlord shall perform Tenant's Work in a good and workmanlike
manner, at Landlord's cost and expense, to the extent of the quality and
quantity set forth in Exhibit A-1, except that labor and materials for the
following Tenant's work (sometimes called "Work Charge Tenant's Work") shall be
performed at the "Work Charge", as described in Paragraph IX of Exhibit B
attached hereto and made a part hereof: magnetic door openers/closers;
supplementary or auxiliary air-conditioning; sound baffling in more than 7
offices; all "millwork", which shall mean all wood walls, wood work in the
fourth floor lobby and all other wood work (including, without limitation, that
in the training center and conference room), if any, which, in accordance with
standard construction practice, must be custom-built or fabricated (as opposed
to purchased from ready-made stock), but specifically excluding laminated
countertops and laminated kitchen cabinets as shown on Tenant's Plans; and all
sconces (in excess of $125 per fixture) and all down lights (in excess of $100
per fixture). Also included within Work Charge Tenant's Work are installation
of all pantry appliances chosen by Tenant (towards which Landlord shall
contribute the lesser of the cost thereof and $3,500), and installation of the
security systems shown on Tenant's Plans in excess of four card readers; it is
understood that the first four card readers are part of Tenant's Work to be paid
for by Landlord.
B Within 30 days following the Commencement Date, Tenant shall pay
to Landlord $10,000 as partial reimbursement of Landlord's cost of performing
Tenant's Work. Unless otherwise specified on Exhibit A-1, work shall be deemed
"Building Standard" (which shall mean that quality and quantity of work set
forth in Paragraphs I through VIII of Exhibit B).
<PAGE>
Work Charge Extra Work and work resulting from changes in Tenant's Plans shall
be performed at the "Work Charge".
C. Within 7 days of the "Execution Date" (as defined in Section
34.05), Landlord will order the following materials shown on Tenant's Plans:
wallcovering, carpeting, supplemental air-conditioning and marble, so long as
within that time Tenant has approved samples of such materials submitted by
Landlord and so long as such materials will not require substitution by
"Substitute Materials" (as defined in Section 4.07 hereof). As a covenant of
this Lease, Landlord shall, within 20 days of the Execution Date, (i) obtain
from the contractor or manufacturer confirmation of the approximate delivery
dates of the following items, as shown on Tenant's Plans: wallcovering,
carpeting, supplemental air-conditioning and marble, or (ii) if any such items
are unavailable or likely will result in a delay in the Demised Premises being
ready for occupancy, notify Landlord of Substitute Materials for such items.
4.03 Tenant shall be responsible for performing all Excluded Tenant's Work
required by Tenant. If Tenant requests, Landlord shall obtain estimates for
Tenant for Excluded Tenant's Work pursuant to details, requirements and from
parties requested of Landlord by Tenant. Notwithstanding the foregoing or any
contrary provision of this Lease, Landlord shall not be responsible for any
damages, or subject to any liability whatsoever, to Tenant or any other party
arising out of, as a consequence of, or related to the use or operation, manner
of installation or any Excluded Tenant's Work or the obtainment of any estimates
therefor in connection with the foregoing. If Tenant shall employ or use any
contractor or subcontractor other than Landlord in the performance of any work
in connection with Tenant's initial occupancy, all of Tenant's duties and
obligations set forth in Article 17 (relating to Tenant's duties and obligations
in making Tenant's Changes) shall be applicable to and binding upon Tenant with
respect to any such work except that Tenant shall not require Landlord's
approval for any work shown on Tenant's Plans. Such work by Tenant shall not
commence until 30 days prior to the Commencement Date. During the performance
by Tenant of any such work prior to it being ready for occupancy, Tenant and
Tenant's contractors shall not interfere with Landlord's contractors or with any
other tenant or its contractors and shall not cause any delays or labor
disputes; if Tenant does, immediately upon notice from Landlord or Landlord's
contractor Tenant shall cause such interference, delays and disputes to
terminate.
In addition to Tenant's contractors and subcontractors, Tenant's
employees (to the extent qualified and licensed, where required by applicable
laws or codes) may, in accordance with the foregoing paragraph, perform Excluded
Tenant's Work. In the event such employee performance shall cause any labor
disputes with Landlord's contractors, then Tenant shall immediately terminate
use of such employees and in lieu thereof use qualified contractors who will not
create such disputes, in which event, after prior notice to Landlord, Tenant
shall pay to Landlord $4.25 for each hour such qualified contractors devote to
completing such Excluded Tenant's Work, and Landlord shall pay the full costs to
such qualified contractors.
4.04 Landlord's agreement to do any work in the Demised Premises as set
forth herein shall not require it to incur overtime costs and expenses and shall
be subject to any delays due to acts of God, governmental restrictions or
guidelines, strikes, labor disturbances, shortages or
<PAGE>
materials and supplies and for any other causes or events whatsoever beyond
Landlord's reasonable control ("Events of Force Majeure"). Landlord has made,
and makes, no representations as to the date when the Demised Premises will be
ready for Tenant's occupancy, and notwithstanding any date specified in Section
1.01 or elsewhere in this Lease as the Commencement Date it is understood that
the same is merely an estimate.
4.05 All materials and workmanship provided or performed by Landlord shall
be Building Standard quality, as defined In Exhibit B, unless otherwise
specified.
4.06 Tenant shall be responsible for all damage caused by trades employed
by Tenant; for the cost of all electricity and trash removal which may be
incurred by Landlord and to the extent necessary, in connection with the
performance of Excluded Tenant's Work and any other work performed by Tenant;
for the cost of employing such additional union help as shall be required under
the rules and regulations of the unions; for the reasonable costs of supervisory
personnel employed by Landlord in connection with such work; a pro rata portion
of the reasonable cost of staff and other personnel to the extent their time
reasonably is spent or incurred in connection with such work; for compliance
with the reasonable rules and regulations of the Building with respect to
construction of such work; for compliance with all laws, codes and regulations
of all authorities having jurisdiction, including, without limitation, all
inspections required by such authorities in connection with such work; and for
obtaining a certificate of occupancy for the Demised Premises in the event such
work is performed after the Demised Premises are ready for occupancy as provided
in Article 5 hereof.
4.07 If by reason of (a) Tenant's failure to substitute "Substitute
Materials" (as defined below in this Section 4.07) for wallcovering, carpeting,
supplemental air-conditioning or marble included in Tenant's Plans or in changes
thereof, if Landlord notifies Tenant that such failure reasonably likely will
delay the completion of Tenant's Work by the dates set forth in Section 5.07
hereof, (b) Intentionally Omitted, (c) Intentionally Omitted, (d) any changes
(or delays in processing any proposed changes, including, without limitation,
revisions of drawings and obtaining and negotiating prices) in the material or
work on Tenant's Plans or otherwise requested by Tenant, (e) the failure of
Tenant to act promptly when any consent or approval reasonably may be requested
by Landlord, or (f) the occurrence of any delays for which Tenant is responsible
in accordance with the terms of the Lease, ("Delay Conditions"), Landlord is
delayed in supplying the materials or completing the work to be performed by
Landlord in accordance with the provisions of this Lease and/or the Work Letter,
then the Commencement Date and the obligations of Tenant to pay Base Rent and
additional rent (i) shall be accelerated by one day for each day, or part of a
day, during which a Delay Condition existed, but (ii) in no event shall be later
than the date the Demised Premises would have been ready for occupancy if no
Delay Conditions had occurred; and the foregoing shall be applicable whether or
not Landlord has completed such work or whether or not a certificate of
occupancy or other permission to occupy shall have issued or been approved for
insurance. Landlord's time to complete the work to be performed by Landlord
shall be extended by the number of days necessary for Landlord to complete such
work as a result of the occurrences of any of the Delay Conditions. For
purposes of this Section 4.07, "Substitute Materials" shall mean wallcovering,
carpeting, supplemental air-conditioning and/or marble, the use of which will
not result in a delay in completion of Tenant's
<PAGE>
Work by the dates set forth in Section 5.07 hereof, and which materials are
reasonably comparable, in price and quality, to those included in Tenant's Plans
or changes thereto.
4.08 Notwithstanding the commencement of rent as aforesaid, work on the
Demised Premises whether performed by Landlord or by Tenant shall be performed
only during regular time union working hours. If Tenant requires Landlord to
perform work during other hours, or if Tenant desires to perform any work
through its contractors, agents, or employees, provided Landlord so consents,
Tenant shall pay as additional rent, the cost of employing such additional union
help as shall be required under the rules and regulations of the unions employed
by Landlord in connection with the Building, as well as the cost of supervisory
personnel employed by Landlord in connection with the Building. Payment shall
be made by Tenant to Landlord within ten (10) days after being billed therefor.
4.09 Wherever in this Lease reference is made to the performance of work or
construction (including, without limitation, in Articles 4, 9 and 15) (a) by
Landlord, it shall mean, unless Landlord otherwise shall determine to perform
the work or construction, by a contractor or contractors chosen by Landlord, it
being understood that Landlord itself shall not be required to perform such work
or construction: and to the extent that, pursuant to this Lease, the cost of
such work or construction is payable by Tenant, such cost shall be at the Work
Charge applicable to work performed by or on behalf of Landlord under, and
computed in accordance with, Paragraph IX of Exhibit B; and (b) by Tenant, it
shall mean at the Work Charge applicable to work performed by Tenant under, and
computed in accordance with, Paragraph IX of Exhibit B.
4.10 Landlord will assign to Tenant all warranties from suppliers and
subcontractors of Tenant's Work, to the extent assignable.
ARTICLE 5
Commencement Date and Ready for Occupancy
5.01 Intentionally Omitted.
5.02 The Demised Premises shall be deemed ready for occupancy on the
earliest date on which all of the following conditions have been met:
A. A certificate of occupancy (temporary or permanent) or other
permission to occupy, if necessary, has been issued for Tenant's Work in the
Demised Premises or approved for issuance by the appropriate department of the
municipality where the Building is located not inconsistent with the Permitted
Uses, subject to the provisions of Section 4.07 and with the restrictions set
forth in Article 8 hereof;
B. Landlord shall have substantially completed Tenant's Work as
shown on the Tenant's Plans but excluding Work Charge Tenant's Work (subject to
delays provided In Section 5.03 hereof); and
<PAGE>
C. Means of access have been provided, and the use without material
interference of the facilities necessary to Tenant's occupancy of the Demised
Premises, including Building corridors, elevators, stairways, Building heating,
ventilating, air conditioning, sanitary, water, and electrical lighting and
power facilities, are available to Tenant substantially in accordance with
Landlord's obligations under this Lease.
"Substantially completed" or "substantial completion" shall mean reasonable
completion required for the ordinary and convenient use and occupancy of the
Demised Premises by Tenant except for "Punch List" type details of construction,
decoration and mechanical, electrical or other adjustments, which do not
significantly interfere with Tenant's use of the Demised Premises.
In the event that Tenant does perform any work prior to the Commencement Date,
substantial completion under this Section 5.02 shall be deemed to have been
achieved if incomplete work to be performed by Landlord has not been completed
because, under good construction scheduling practices such work should be done
after still incompleted work to be done by or on behalf of Tenant is completed.
5.03 In addition to those specific "Delay Conditions" set forth in Section
4.07 hereof, if the occurrence of any of the conditions listed in Article 4 and
thereby making of the Demised Premises ready for occupancy, shall be delayed due
to any act or omission of Tenant or any of its employees, agents. or
contractors, including but not limited to failure by Tenant to act promptly when
any consent or approval may be requested by Landlord, or to plan or execute work
to be performed by Tenant diligently and expeditiously, or due to any special
requirements of Tenant in connection with the preparation of the Demised
Premises for occupancy over and above that shown on the Tenant's Plans other
than Work Charge Tenant's Work, then, notwithstanding any other provision of
this Lease, the Demised Premises shall be deemed ready for occupancy on the date
when they would have been ready but for any such delay whether or not a
certificate of occupancy or other permission to occupy shall have issued.
5.04 When the Commencement Date shall have been determined, Landlord and
Tenant shall, upon the request of either of them, execute and deliver to each
other duplicate originals of a Commencement Date Statement prepared by Landlord
in recordable form, which shall specify the Commencement and Expiration Dates of
the Term. Upon execution and delivery of the Commencement Date Statement it
shall be deemed a part of this Lease. Any failure of Tenant to execute such
statement shall not affect Landlord's determination of the Commencement Date,
and such statement shall be deemed approved and accepted if not received back by
Landlord within fifteen (15) days of submission by Landlord.
5.05 On the commencement Date or at such time as Tenant shall take actual
possession of the Demised Premises, whichever shall be earlier, it shall be
conclusively presumed that the same were as of the Commencement Date or the date
or dates of such taking of possession, in the condition in which Landlord was
required to deliver the Demised Premises under this Lease, unless within thirty
(30) days after such date Tenant shall have given Landlord notice specifying in
which respects the Demised Premises were not in satisfactory condition, latent
defects excepted unless within the earlier of 1 year after such date or 30 days
after discovery of the latent
<PAGE>
defect by Tenant, Tenant shall have given Landlord notice specifying such latent
defects. Performance by Tenant of Excluded Tenant's Work shall not in and of
itself constitute taking of possession of the Demised Premises.
5.06 Notwithstanding any date, Tenant expressly waives any right to recover
any damages which may result from Landlord's failure to deliver possession of
the Demised Premises on such date or at any time thereafter, provided that
Landlord has used due diligence to comply with its obligations under this Lease.
5.07 In the event that due solely to Landlord's failure ("Failure") to
perform Tenant's Work with due diligence and to complete Tenant's Work (and not
due to any Events of Force Majeure or Delay Conditions) (i) Landlord, by the
105th day following the "Execution Date" (as defined in Section 34.05 hereof),
has not completed Tenant's Work to a point ("preliminary substantial
completion") whereby Tenant can perform Excluded Tenant's Work without
unreasonable interference from Landlord which may be completing Tenant's Work
(which preliminary substantial completion shall, without limitation, include
sheetrocking, painting and carpeting, and shall exclude minor Punch List items),
and/or (ii) Tenant's Work (other than millwork) is not substantially completed
by the 133rd day following the Execution Date, then and in either or both of
such event(s) Landlord shall pay to Tenant $300 per day for each day of the
Failure until preliminary substantial completion or substantial completion, as
applicable, is achieved. Such payment by Landlord shall be made on the
Commencement Date. In any event. except for Delay Conditions, the Commencement
Date shall be no earlier than 21 days after the preliminary substantial
completion of Tenant's Work. In addition, if the millwork shown on Tenant's
Plans described on Exhibit A-1 is not substantially completed by the 163rd day
following the Execution Date (other than due to Force Majeure or Delay
Conditions) then Landlord shall pay 75% of the cost of sound baffling 15
offices, where shown on Tenant's Plans (in addition to the 7 offices described
In Section 4.01A hereof).
ARTICLE 6
Rent Adjustments Based Upon Costs of Operation
6.01 Regarding Increases in the Costs of operation, the following shall be
applicable:
A. "Costs of Operation" shall mean all costs and expenses in
connection with the operation. maintenance, and repair of any and all parts of
the "Real Property" (as defined in Section 10.01B, hereof) and of the Building
and the improvements thereon and therein, including, without limitation, the
following: all materials, supplies and equipment, purchased or hired therefor;
service contracts for any of the foregoing (including, without limitation,
elevator, electric, heating, air-conditioning and plumbing); maintenance and
repair of grounds (including, without limitation, all lawns, gardens, shrubbery,
trees, planters, containers, statuary, exhibits, displays, walks, parking and
other vehicle ways and areas and common areas); maintenance and repairs in and
to Building systems including, without limitation, the heating and ventilating
and air-conditioning systems; maintenance and repair of underground pipes,
lines, equipment and systems; repaving; resurfacing; rooftops; and all parts
thereof, whether decorative or otherwise;
<PAGE>
lighting; removal of snow, ice, trash, garbage and other refuse; fuel,
including, without limitation, oil or gas used in connection with heating the
building; electricity used in connection with the Building, including, without
limitation, that used in air conditioning, ventilating and heating, and for
interior and exterior common areas (but excluding electricity used at the
Demised Premises and other portions leased to tenants, to the extent payable by
Tenant or other tenants pursuant to the terms of Article 2); water; telephone
and other utilities; cleaning and sanitary; compliance with laws and with the
requirements of any public authorities or insurance bodies having jurisdiction,
and with the requirements of Landlord's insurer, but excluding Americans with
Disabilities Act and removal of any "Environmental Hazard" (as defined in
Section 29.04 hereof); refurbishing; extermination; the cost of personnel
engaged in the operation, maintenance or repair of the Building (including,
without limitation, salaries, wages, medical, surgical and general welfare
benefits, group insurance, savings and retirement benefits, payroll taxes,
worker's compensation insurance, disability insurance; the maintenance and
repair to the custodian's office (which "custodian" as used herein shall mean a
person who devotes all of or a portion of his working time to the maintenance
and/or operation of all or a portion of the Building), the custodian's telephone
charges pertaining to the operation of the Building and the custodian's
utilities, and all other fringe benefits); fire protection; alterations and
improvements made after the Base Year by reason of laws or requirements of any
public authority, insurance body or Landlord's insurer; all insurance carried by
Landlord applicable to the Building (including, without limitation, primary and
excess liability, and further including vehicle insurance, fire and extended
coverage, vandalism and all broad form coverages including, without limitation,
riot, strike, and war risk insurance, flood insurance, boiler insurance, plate
glass insurance, rent insurance and sign insurance); management fees, legal
(other than those for preparation of this and other leases and other than those
involved in any dispute with any tenant) and accounting fees, commissions and
charges; damages and other losses; taxes (including, without limitation, sales
and use taxes); energy; security systems, security personnel, traffic systems,
and traffic personnel; at Landlord's option, depreciation reserves for capital
expenditures (determined by using reasonably estimated costs and useful lives);
any other costs and expenses in connection with the operation, maintenance and
repair of the Real Property; a pro rata portion of any costs and expenses in
connection with the operation maintenance and repair of any part of those roads,
ways, walks, and other areas whether forming part of the Real Property or used
in connection with the Real Property and whether dedicated to any municipal
authority or used in common with others (sometimes collectively called "Real
Property Common Areas"), it being understood that pro-ration shall be based upon
the respective number of square feet of the buildings involved; and all those
percentages included in the Work Charge of all of the foregoing costs and
expenses referred to in this Section 6.01A to cover Landlord's administrative
supervision, overhead, and general conditions. Excluded from the foregoing,
nevertheless, shall be the following:
(i) any expense to the extent to which Landlord is compensated by
insurance or by any manufacturer's warranty;
(ii) Taxes, (as defined in Article 10);
(iii) any executive salary above the grade of superintendent;
<PAGE>
(iv) leasehold improvements made by Landlord, in the Demised
Premises or in other space in the Building leaned to other tenants; and
(v) brokerage commissions;
(vi) expenditures which under generally accepted accounting
principles are properly classified as capital expenditures (as opposed to
expenses or deferred expenses) for improvements or equipment other than: (a)
those which under generally applied real estate practice are expenses or
regarded as deferred expenses, and (b) capital expenditures made by reason of
legal requirements, insurance requirements or for the purpose of reducing
expenses which otherwise would be included in Costs of Operation, in any of
which cases described in (a) or (b) the cost thereof shall be included in Costs
of Operation for the Operating Year in which the costs are incurred and
subsequent Operating Years, on a straight-line basis, to the extent that such
items are amortized over their reasonably estimated useful lives, but not more
than ten (10) years, with an interest factor equal to the Interest Rate, at the
time of Landlord's having made said expenditure provided that, if Landlord shall
lease any items of capital equipment for the purpose of resulting in savings or
reductions in expenses which would otherwise be included in Costs of Operation,
then the rentals and other costs paid pursuant to such leasing shall be included
in Costs of Operation for the Operating Year in which they were incurred;
(vii) any real estate brokerage commissions or other costs incurred
in procuring tenants;
(viii) any advertising and promotional expenses except as provided
above; and
(ix) structural repairs to the structural elements of the Building.
If a cost or expense permissibly shall be included under more than one
category of Costs of Operation, such cost or expense, of course, shall only be
included once where to do so more than once would cause a duplication of, and a
concomitant increase in Costs of Operation. Notwithstanding various provisions
of this Lease which provide that Landlord shall do or perform certain
obligations or services at Landlord's cost and/or expense, the same shall be
included in "Costs of Operation" to the extent that they otherwise would be
pursuant to this Section 6.01A; and this shall be so notwithstanding that in
certain instances throughout this Lease there is specification that a certain
expense shall be a Cost of Operation, while in other instances there is no such
specification.
B. "Operating Year" shall mean each Rent Year after the Base Year,
all or part of which falls within the Term.
C. Following the end of the Base Year and each Operating Year,
Landlord shall furnish to Tenant a written statement of the Costs of Operation
for such year and shall also show the amount of estimated payments, if any, made
by Tenant for Costs of Operation during such year. In the event the Costs of
Operation for any Operating Year exceed the Costs of Operation for the Base
Year, within 20 days of submission of such a written statement, Tenant
<PAGE>
shall pay Landlord, as additional rent, the Proportionate Share of such excess;
there shall be credited against such excess any estimated payments made by
Tenant with respect to such year, and if such estimated payments are greater
than such excess, then Landlord may credit the difference against rent next
becoming due under this Lease. Every statement furnished by Landlord pursuant to
this Section 6.01(C) hereof shall be conclusive and binding upon Tenant.
1. Unless within thirty (30) days after the receipt of such
statement Tenant shall notify Landlord that it questions the amount or propriety
thereof and requests copies of back-up documentation reasonably necessary for
Tenant to confirm the correctness of Landlord's statement, in which event
Landlord shall, within 15 days of receipt of such request submit such copies to
Tenant; and unless Tenant shall notify Landlord within 15 days after receipt of
such copies if Tenant disputes the correctness of the statement, specifying in
detail the respects in which the statement is claimed to be incorrect; and
2. If such dispute shall not have been settled by agreement
within thirty (30) days after receipt by Landlord of such notice from Tenant,
the parties agree that, due to the confidential nature of Landlord's books and
records, the dispute shall be submitted to a reputable, independent firm of
certified public accountants chosen by Landlord, subject to Tenant's reasonable
approval, whose decision (and where reasonably necessary such decision shall be
based upon the opinion of experts whom such accountant may retain) shall be made
within twenty (20) days of such submission and whose decision shall be final and
binding on the parties; and the cost of such accountants and experts shall be
borne by the unsuccessful party (and if both parties are partially unsuccessful,
such accountants shall apportion the fees and expenses between the parties).
Pending the determination of such dispute Tenant shall, within ten (10)
days after receipt of such statement, pay additional rent in accordance with
Landlord's statement, but such payment shall be without prejudice. If the
dispute shall be determined in Tenant's favor, Landlord shall, within five (5)
days after notice of such determination, pay Tenant the amount of Tenant's
overpayment of Costs of Operation.
D. Any costs or expenses attributable to the construction,
development, leasing, opening or start-up of the Building plus any costs and
expenses which will not likely recur as an expense under Section 6.01A hereof
will be appropriately adjusted from Costs of Operation during the Base Year.
Landlord shall not cause to be deferred from the Base Year into an Operating
Year Costs of Operation which have been incurred during, and are properly
attributable to, the Base Year primarily in order to reduce Costs of Operation
for the Base Year. Notwithstanding any contrary provision of this Article 6,
Landlord shall extrapolate or adjust Costs of Operation to 95% occupancy during
the Base Year and any Operating Year. If Landlord shall eliminate the payment
of any wages or other labor costs as a result of the installation of labor
saving devices or by any other means, then the difference between the cost of
maintenance and operation of such devices and the amount of such wages or other
labor costs shall be deducted from Costs of Operation for the. Base Year.
Landlord is not aware of any major, extraordinary Costs of Operation which are
planned for after the Base Year.
<PAGE>
E. Landlord may submit to Tenant Landlord's estimate, reasonably
determined, of Costs of Operation due and payable or to become due and payable
during any Operating Year, together with the computation thereof and the basis
therefor, in which event on the first day of each month thereafter Tenant shall
pay to Landlord one-twelfth of the excess (over Costs of Operation for the Base
Year) of such estimated sum (plus, if such statement is submitted after the
commencement of the Base Year or any Operating Year, then one-twelfth of such
sum times the number of months, or partial months, which have elapsed since such
commencement). Such payments shall be subject to adjustment in the same manner
as provided in Section 10.07 applicable to Taxes.
F. Landlord's failure to render a statement with respect to
increases in Costs of Operation for any Operating Year shall not prejudice
Landlord's right to thereafter render a statement with respect thereto or with
respect to any subsequent Operating Year.
6.02 Notwithstanding any contrary provisions of Section 6.01 hereof,
Landlord, at Landlord's option, may, at any time and from time to time,
calculate applicable sums under Section 6.01 of this Lease on a calendar year
basis rather than on a fiscal year basis. In such event, if less than a full
calendar year is involved, appropriate adjustments and prorations shall be made.
In the event of such calendar year calculations, if the Expiration Date shall
not be coterminous with the end of the fiscal year, then such prorations shall
be based upon Landlord's estimate as provided in Section 6.01E hereof.
ARTICLE 7
Heat, Ventilating and Air Conditioning
7.01 Landlord shall furnish to the Demised Premises through the Building
heating, ventilating and air conditioning system(s) heated, outside and
conditioned air, at reasonable temperatures, pressures and degrees of humidity
and in reasonable volumes and velocity, during Standard Business Hours; and on
Washington's Birthday Landlord shall furnish heat, in accordance with such
standards, but not cleaning or any other services. The foregoing performance
specifications shall be subject to said systems being balanced. Landlord, as a
Cost of Operation, shall maintain and operate such systems and shall furnish
heat, ventilation and air-conditioning in the Demised Premises through such
systems, subject to Section 11.06, in compliance with such performance
specifications, during Standard Business Hours. Upon reasonable advance notice
from Tenant, Landlord shall furnish heating, cooling or ventilating service at
any time other than Standard Business Hours (hereinafter called "After Hours").
Tenant shall advise Landlord if Tenant plans to use the Demised Premises After
Hours. If Tenant shall request or use such services After Hours, Tenant shall
pay Landlord therefor, as additional rent and upon rendition of a bill therefor,
the After Hours Heating Charge, After Hours Cooling Charge and After Hours
Ventilating Charge, as applicable, all of which charges shall be subject to
adjustment upward from time to time by the same percentage as the increase in
the rates of the applicable utilities or other energy sources (or, if a
combination thereof, then of the weighted average of the components) used to
provide the respective service.
<PAGE>
7.02 Any damage caused to the heating, air conditioning, and ventilating
equipment, appliances or appurtenances an a result of the negligence of, or
careless operation of the same by, Tenant or its agents, servants, employees,
licensees, invitees, or visitors shall be repaired by Landlord, and the cost and
expense thereof shall be paid by Tenant, as additional rent, within ten (10)
days after being billed therefor.
7.03 Tenant shall be responsible for the failure of the air-conditioning
systems to adequately cool and dehumidify the Demised Premises where such
failure results from the occupancy of the Demised Premises with more than an
average or one person for each one hundred and seventy-five (175) square feet of
the Leased Floor Space or where Tenant installs and operates machines and
appliances, the installed electrical load of which when combined with the load
of all lighting fixtures exceeds four (4) watts per square foot of the Leased
Floor space in any one room or other area or where any part of the Demised
Premises is used other than for offices (including, without limitation,
conference rooms, computer rooms, equipment rooms and kitchens) where the heat
release, heat variation or personnel occupancy is greater than in normal office
space. If due to use of the Demised Premises in a manner exceeding the
aforementioned occupancy and electrical load criteria, or due to rearrangement
of partitioning after the initial preparation of the Demised Premises,
interference with normal operation of the air conditioning in the Demised
Promises results, necessitating changes in the air conditioning system servicing
the Demised Premises, such changes shall be made by Landlord upon written notice
to Tenant at Tenant's sole cost and expense. Tenant agrees to keep all windows
closed, and to lower and close window coverings when necessary because of the
sun's position whenever the said air conditioning system is in operation, and
Tenant agrees at all times to cooperate fully with Landlord and to abide by all
the regulations and requirements which Landlord may prescribe for the proper
functioning and protection of the said air conditioning system. Landlord,
throughout the Term, shall have free and unrestricted access to any and all air
conditioning facilities in the Demised Premises. Landlord shall not be required
to furnish, and Tenant shall not be entitled to receive any air conditioning
during any period wherein Tenant shall be in default in any material provision
of this Lease.
ARTICLE 8
Use, Building Name, Tenant Identification and other Tenants
8.01 Tenant shall not suffer or permit the Demised Premises or any part
thereof to be used in any manner, or anything to be done therein, or suffer or
permit anything to be brought into or kept therein which would in any way:
A. violate any of the provisions of any grant, lease, or mortgage to
which this Lease is subordinate, so long as Tenant has received notice of any
such provisions,
B. violate any laws or requirements of public authorities,
C. make void or voidable any fire or liability insurance policy then
in force with respect to the Building,
<PAGE>
D. make unobtainable, or more expensive, from reputable insurance
companies authorized to do business in New York State at standard rates any fire
insurance with extended coverage. or liability, elevator or boiler or other
insurance required to be furnished by Landlord under the terms of any lease or
mortgage to which this Lease is subordinate,
E. cause or in Landlord's reasonable opinion be likely to cause
physical damage to the Building or any part thereof,
F. constitute a public or private nuisance,
G. impair, in the reasonable opinion of the Landlord the appearance
or, character of the Building,
H. result in members of the general public loitering in, on or about
the Building or the Real Property,
I. discharge objectionable fumes, vapors or odors into the Building
air conditioning system or into Building flues or vents not designed to receive
them or otherwise in such manner as may unreasonably offend other occupants,
J. impair or interfere with any of the Building services or the
proper economic heating, cleaning, air conditioning or other servicing of the
Building or the Demised Premises or impair or interfere with or tend to impair
or interfere with the use of any of the other areas of the Building by, or
occasion discomfort, annoyance or inconvenience to, Landlord or any of the other
tenants or occupants of the Building, or
K. cause Tenant to default in any of its other obligations under
this Lease.
The provisions of this Section, and the application thereof, shall not be
deemed to be limited in any way to or by the provisions of any of the other
Sections of this Article or any of the Rules and Regulations referred to in
Article 28 or Exhibit "C" attached hereto, except as may therein be expressly
otherwise provided.
8.02 The "Permitted Use" of the Demised Premises for the purposes specified
in Article 1 hereof shall not in any event be deemed to include, and Tenant
shall not use, or permit the use of, the Demised Premises or any part thereof
for
A. sale of, or traffic in any spirituous liquors, wines, ales or
beer kept in the Demised Premises;
B. sale at retail or any other products or materials kept in the
Demised Premises, by vending machines or otherwise, or demonstrations to the
public, except as may be specifically agreed to by Landlord in writing; vending
machine sales of snacks and beverages to Tenant's employees shall, however, be
permitted;
<PAGE>
C. manufacturing, printing, or electronic data processing, except for
the operation of normal business office reproducing and printing equipment,
business machines and electronic data processing equipment incidental to the
conduct of Tenant's business and for Tenant's own requirements at the Demised
Premises; provided that, such use shall not exceed that portion of the
mechanical or electrical capabilities of the Building equipment allocable to the
Demised Premises;
D. the rendition of medical, dental or other diagnostic or
therapeutic services;
E. the conduct of a public auction or assembly of any kind;
F. the conduct of a banking, trust company, savings bank. safe
deposit, savings and loan association or loan company business;
G. the issuance and sale of traveler's checks, foreign drafts,
letters of credit, foreign exchange or domestic money orders (except as is
incidentally required in conduct of Tenant's normal business activity);
H. the receipt of money for transmission (except as is incidentally
required in conduct of Tenant's normal business activity);
I. a restaurant, bar, or the sale of confectionery, tobacco,
newspapers, magazines, soda, beverages, sandwiches, ice cream, baked goods or
similar items, or the preparation, dispensing or consumption of food and
beverages in any manner whatsoever, except in any lunchroom within the Demised
Premises; or
J. a school, college, university or educational institution, whether
or not for profit, any government or subdivision or agency of any government or
an employment agency or recruitment agency except in the space described in
Section 22.03B hereof.
8.03 If any governmental license or permit, other than a certificate of
occupancy or other permission to occupy, shall be required for the proper and
lawful conduct of Tenant's business in the Demised Premises, or any part
thereof, and if failure to secure such license or permit would in any way affect
Landlord, then Tenant, at its expense, shall duly procure and thereafter
maintain such license or permit, but in no event shall failure to procure and
maintain same by Tenant affect Tenant's obligations hereunder. Tenant shall not
at any time use or occupy, or suffer or permit anyone to use or occupy the
Demised Premises, or do or permit anything to be done in the Demised Premises,
in violation of the certificate of occupancy for the Demised Premises or for the
Building.
8.04 Tenant shall not place a load upon any floor of the Demised Premises
exceeding the floor load per square foot which such floor was designed to carry
and which is allowed by certificate, rule, regulation, permit or law. Landlord
represents that the designed floor load is 100
<PAGE>
live pounds per square foot. Landlord reserves the right to prescribe the weight
and position of all safes and vaults which must be placed by Tenant, at Tenant's
expense. Business machines and mechanical equipment shall be placed and
maintained by Tenant, at Tenant's expense, in such manner as shall be sufficient
in Landlord's judgment to absorb and prevent vibration, noise and annoyance.
8.05 Landlord reserves the right to select a name for the Building and to
make such a change or changes of name as it may deem appropriate during Tenant's
occupancy, and Tenant agrees not to refer to the Building by any other name than
(a) the name as selected by the Landlord, or (b) the postal address Approved by
the U.S. Post office.
8.06 A. Landlord shall furnish and install a Building electronic
directory for Tenants' listings in the ground floor lobby. Tenant shall submit
its Building directory listings with its final plans, which listings may include
names of any affiliated or related entities as provided in Section 22.03 hereof
and of subtenants.
B. Landlord's acceptance of any name for listing on the Building
directory will not be deemed, nor will it substitute for, Landlord's consent, as
required by this Lease, to any sublease, assignment, or other occupancy of the
Demised Premises.
C. Tenant, at its cost and expense, shall furnish and install its
identification on its entrance door. The design of such identification must
conform to the Building standard, be approved by Landlord and shall be
fabricated and installed by a contractor that meets Landlord's approval.
8.07 So long as not in violation of any statute, law, code or regulation,
Landlord will not enter into leases for other space in the Building with any
governmental agencies where use by such agencies likely would result in there
being in the Building large numbers of clients of such agencies who due to the
nature of such clients, on a regular basis, do, or reasonably would, create a
threat, nuisance or disturbance to other tenants in the Building.
ARTICLE 9
Changes in the Building and Access
9.01 All walls, windows, and doors bounding the Demised Premises (including
exterior Building walls, core corridor walls and doors and any core corridor
entrance), except the inside surface thereof, any terraces or roofs adjacent to
the Demised Premises, and space in or adjacent to the Demised Premises used for
shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities,
sinks or other Building facilities, and the use thereof, as well as access
thereto through the Demised Premises for the purposes of operation, maintenance,
decoration and repair, are reserved to Landlord.
9.02 Tenant shall permit Landlord to install, use and maintain pipes, ducts
and conduits within or through the Demised Premises, or through the walls,
columns and ceilings
<PAGE>
therein, provided that the installation work is performed at such times and by
such methods as will not unreasonably interfere with Tenant's use and occupancy
of the Demised Premises, or damage the appearance thereof, reduce the Leased
Floor Space by more than one (1%) percent (without an appropriate adjustment in
rent) or materially affect Tenant's layout. Where access doors are required for
mechanical trades in or adjacent to the Demised Premises, Landlord shall furnish
and install such access doors and confine their location wherever practical to
closets, coat rooms, toilet rooms, corridor, and kitchen or pantry rooms.
Landlord and Tenant shall cooperate with each other in the location of
Landlord's and Tenant's facilities requiring such access doors.
9.03 Landlord reserves the right, at any time after completion of the
Building, without incurring any liability to Tenant therefor, to make such
changes in or to the Building and the fixtures and equipment thereof, as well as
in or to the street entrances, halls, passages, elevators, and stairways
thereof, as it may deemed necessary or desirable; provided that there be no
unreasonably lengthy interference with the use of the Demised Premises or in the
services furnished to the Demised Premises, and no reduction in the Leased Floor
Space in excess of one (1%) percent without an appropriate adjustment of rent.
9.04 Landlord or Landlord's agents or employees shall have the right upon
request made on reasonable advance notice to Tenant, or to an authorized
employee of Tenant at the Demised Premises, to enter and/or pass through the
Demised Premises or any part thereof, at reasonable times during reasonable
hours, (a) to examine the Demised Premises or to show them to lessors of
superior leases, holders of mortgages, insurance carriers, or prospective
purchasers, mortgagees, or lessees of the land or the Building, or prospective
tenants, and (b) for the purpose of making such repairs or changes in or to the
Demised Premises or in or to the Building or its facilities as may be provided
for by this Lease or as Landlord may deem necessary or as Landlord may be
required to make by law or in order to repair and maintain the Building or its
fixtures or facilities. Landlord shall be allowed to take into and store upon
the Demised Premises all materials which may be required for such repairs,
changes, or maintenance. However, Landlord's rights under this Section shall be
exercised in such a manner as will not unreasonably interfere with Tenant's use
and occupancy of the Demised Premises. Landlord, its agents, or employees,
shall also have the right to enter on and/or pass through the Demised Premises,
or any part thereof without notice at such times as such entry shall be required
by circumstances of emergency affecting the Demised Premises or the Building;
included among the foregoing emergencies shall be a situation where water has
entered the Demised Premises, in which event upon Landlord learning thereof
Landlord may enter the Demised Premises and remove such water.
9.05 Landlord may limit and restrict, as provided in the Rules and
Regulations attached hereto as Exhibit "C", the means of access to the Demised
Premises outside of Standard Business Hours, so long as Tenant's employees and
authorized agents have reasonable access at substantially all times to all parts
of the Demised Premises. Tenant, and its agents, employees and visitors shall
be entitled to access from the Demised premises to, and the right to use, the
toilets, lavatories, and powder rooms only on the floor (or floors) on which the
Demised Premises are located.
<PAGE>
ARTICLE 10
Real Estate Tax Changes and Resulting Rent Adjustments
10.01 As used herein:
A. "Taxes" shall mean all real estate taxes, school taxes, sewer
rates and charges, assessed, levied or imposed upon the Real Property, as
hereinafter defined, and all assessments (other than those specified in Section
10.03 hereof), transit taxes or other Governmental charges, general, specific,
ordinary or extraordinary, foreseen or unforeseen, assessed, levied or imposed
upon the Real Property, and "Tax" shall be any of such taxes.
B. "Real Property" shall mean the Building, the land upon which the
Building stands, and any adjoining land (and the Improvements thereon).
C. "Base Assessment" shall mean the assessment by each of the taxing
authorities affecting the Real Property in effect on the date of this Lease as
the same may be adjusted pursuant to Section 10.02 C 2 hereof.
D. "Tax Year" shall mean each twelve (12) month period commencing on
July 1 and ending an June 30, any portion of which period falls within the Term.
10.02 Tenant shall pay Landlord, as additional rent, increases in Taxes,
which additional rent shall be computed and paid as follows:
A. Intentionally Omitted.
B. If any of the respective Taxes payable during and attributable to
any Tax Year shall exceed the respective Base Taxes, Tenant shall pay to
Landlord as additional rent the Proportionate Share of such excess. Such
payment shall be made on the first day of the month following rendition of a
statement therefor by Landlord to Tenant setting forth the amount of additional
rent due.
C. Notwithstanding the foregoing, in determining Base Taxes, and
Taxes for any Tax Year:
1. Any tax abatement or partial assessment granted by any
taxing authority as a tax inducement shall be disregarded.
2. In the event of any partial assessment(s) of the Building
based upon less than full completion thereof, then the Base Assessment and any
other partial assessment (and Base Taxes and Taxes) shall be projected to
assessment an a fully-completed building for purposes of determining the excess,
if any, payable by Tenant under Section 10.02 hereof until full assessment
actually occurs. Upon such full assessment, appropriate adjustments shall be
made, if necessary, to any projections so made and any excess paid or payable
based
<PAGE>
thereon; and any amounts payable as a result of such adjustments from Landlord
to Tenant or Tenant to Landlord, as the case may be, shall be paid in accordance
with the provisions of Section 10.07 hereof. In the event that at any time under
this Lease the Base Assessment is based upon other than a fully completed
building, then once such full assessment occurs, the Base Assessment shall be
revised and adjusted accordingly to reflect such full assessment.
3. In the event of a termination of this Lease, any additional
rent under this Article 10 shall be paid or adjusted within 10 days after
submission of a Landlord's statement. In the event Taxes for such Tax Year have
not been determined as of the Expiration Date, then, at Landlord's option, such
additional rent may be based upon Taxes In effect during the immediately
preceding last full Tax Year; upon Landlord's estimate as provided in Section
10.07 hereof; or upon actual Taxes, once determined for the Tax Year in which
the Expiration Date occurs. In no event shall Base Rent ever be reduced by
operation of this Article 10. The rights and obligations of Landlord and Tenant
under the provisions of this Article with respect to any additional rent shall
survive the Expiration Date or any sooner termination of the Term.
10.03 Tenant shall pay to Landlord, as additional rent, an amount equal to
the Proportionate Share of any assessments or installments thereof for public
betterments or improvements which may hereafter be levied upon or be payable
with respect to, the Real Property. If any such assessment is payable in
installments over a period of time, Tenant shall be obligated to pay only that
percentage of the installments of any such assessments, together with interest
thereon, which shall become due and payable during the Term. Payment shall be
made by Tenant to Landlord on the rent payment date next following the issuance
of a bill therefor by Landlord to Tenant.
10.04 Tenant shall pay as additional rent all increases in Taxes which may
be attributable to additions or improvements to the Demised Premises made by
Tenant or on Tenant's behalf (exclusive of the Building Standard improvements or
additions to be provided by Landlord, at Landlord's cost and expense). Payment
shall be made by Tenant to Landlord on the rent payment day next following the
issuance of a bill therefor by Landlord to Tenant.
10.05 If at any time prior to the establishment of the Base Taxes the
taxing authorities change the standards or methods utilized in arriving at
Taxes, then and in such event calculations under Section 10.02 shall be made by
applying such factor or factors to the new standards or methods as may be
necessary to make the calculation of increases under Section 10.02 on the same
basis as that in effect on the date of execution of this Lease.
10.06 In the event that, at any tine, the Real Property is assessed for
Tax purposes with other property owned by Landlord, and the taxing authorities
are unwilling to separately assess or tax the properties, the tax ascribable to
the Real Property shall be such portion of the Tax on the entire properties as
the value of the Real Property bears to the value of the entire properties, as
such values are determined by the Assessor of the municipality in which the Real
Property is located. An informal apportionment by such Assessor of the total
assessment of such Real Property shall be binding upon the parties hereto.
<PAGE>
10.07 Notwithstanding the provisions of Section 10.02, Landlord may submit
to Tenant Landlord's estimate, reasonably determined, of any increase in Taxes
due and payable during any Tax Year over the Base Taxes, together with the
computation thereof and the basis therefor. If an increase is so estimated,
then on the first day of each month during the calendar year in which such Tax
Year commences Tenant shall pay to Landlord one-twelfth of such estimated
increase. Within 30 days following the end of the Tax Year, Landlord shall
submit to Tenant a statement showing the Base Taxes and the aggregate amount of
such estimated payments made by Tenant during such Tax Year. To the extent that
such estimated payments are less than the amount of such actual increase in
Taxes over the Base Taxes, Tenant shall pay to Landlord the difference within 10
days next following rendition by Landlord of an invoice therefor; to the extent
that such estimated payments are greater than such actual excess of Taxes over
Base Taxes, the difference shall be credited against the next monthly
installment or installments of Base Rent until paid, or if the last lease year
is involved, such difference shall be paid to Tenant within 10 days of rendition
of such Landlord's statement. In the event that the holder of any "superior
mortgage" (as defined in Article 24 hereof) shall notify Tenant and Landlord
that such holder requires that any excess owing by Landlord be paid by Landlord
rather than so applied against Base Rent, then the foregoing provision shall be
deemed amended accordingly. Such holder shall not be liable for payment of any
excess except to the extent that it has received monies, either from Landlord or
directly from Tenant, representing such excess. If Landlord fails to furnish a
Tax estimate for a Tax Year until after the commencement of the calendar year in
which such Tax Year begins, then until the first day of the month following the
month in which such estimate is furnished to Tenant, Tenant shall continue to
pay to Landlord on the first day of each month the same monthly amount payable
during the previous Tax Year as a Tax estimate.
10.08 Landlord's failure to render a statement with respect to increases
in Taxes for any Tax Year shall not prejudice Landlord's right to thereafter
render a statement with respect thereto or with respect to any subsequent Tax
year.
10.09 Only Landlord may, at any time and from time to time, commence a
protest, action or proceeding (a) to reduce the Base Assessment, (b) for a
refund of Taxes and/or (c) for a reduction in Taxes applicable to any Tax Year.
Tenant shall have no right to commence or participate in any such action, and
Tenant hereby waives any and all right which Tenant may have (whether at law,
equity, or otherwise) to commence or participate in any such action. In the
event that any such action is successful in reducing the Base Assessment or in
reducing the assessment of the Real Property below the Base Assessment, then
notwithstanding Section 10.01 hereof, (i) such reduced Base Assessment or
assessment below the Base Assessment thereafter shall be deemed the new Base
Assessment for purposes of computations under Sections 10.02 and 10.07 and for
refunds an hereinafter provided, and (ii) prior payments under Sections 10.02
and 10.07 shall be recalculated, and Tenant shall pay to Landlord, as additional
rent, the Proportionate Share of the amount by which Taxes during Tax Years for
which Tenant was responsible to make payments under Sections 10.02 and 10.07 are
further in excess of Base Taxes as a result of any such further reduction in
Base Assessment. If Landlord shall receive a refund for any Tax Year, Tenant
shall be entitled to that portion of any refund applicable to increases in Taxes
over Base Taxes, payment for which shall have been made by Tenant as additional
rent (including any interest paid on such refund by the taxing authorities), but
not in
<PAGE>
excess of the amount of additional rent paid by Tenant for the respective
Section 10.02 increase on account of such Tax Year, after deducting from such
refund and interest that portion (or all, as the case nay be) of the costs and
expenses (including experts, and attorneys' fees) of obtaining such refunds and
Landlord shall be entitled to any refund applicable to the Base Taxes, and any
reduction thereof, (including any interest paid on such refund by the taxing
authorities) after deducting from such refund and interest that portion (or all,
as the came may be) of the costs and expenses (including experts' and attorneys'
fees) of obtaining such refund; and Landlord shall be entitled to any refund
applicable to the Base Taxes, and any reduction thereof, (including any interest
paid on such refund by the taxing authorities) after deducting from such refund
and interest that portion (or all, as the case may be) of the costs and expenses
(including experts' and attorneys' fees) attributable to such refund or
reduction benefiting Landlord. With respect to costs and expenses (including
experts' and attorneys' fees) attributable to any such protest, action or
proceeding referred to in this Section 10.09 (other than where Landlord receives
a refund, from which such costs and expenses shall be deducted, as hereinabove
provided) Tenant shall pay to Landlord the Proportionate Share of such costs and
expenses, as additional rent, unless such protest, action or proceeding pertains
solely to a reduction in Base Taxes paid or to be paid by Landlord, in which
event Landlord shall be responsible for such costs and expenses.
ARTICLE 11
Landlord's Services
11.01 Landlord, as a Cost of Operation, shall furnish adequate hot and
cold water to the floor or floors on which the Demised Premises are located for
drinking, lavatory, toilet and ordinary cleaning purposes.
11.02 Landlord shall, as a Cost of Operation, keep clean, and in good
order and repair, the public areas and the public facilities of the Building.
11.03 Landlord, as a Cost of Operation, shall provide public elevator
services to the floor(s) on which the Demised Premises are situated during
Standard Business Hours, and shall have at least one (1) elevator subject to
call at all other times. The elevator(s), or any or all of them, if more than
one, may be operated by automatic control, and/or by manual control, as Landlord
shall determine at any time or from time to time. Landlord shall not be
obligated to furnish an operator for any automatic elevator and shall have no
liability to Tenant for discontinuing the service of any operator theretofore
furnished.
11.04 Provided that Tenant shall keep the Demised Premises in good order,
Landlord, as a Cost of Operation, shall cause the Demised Premises, including
the exterior and the interior of the windows thereof (subject to Tenant
maintaining unrestricted access to such windows), to be cleaned in accordance
with the standards set forth in Exhibit "D" annexed hereto and hereby made a
part hereof. Tenant will not clean, nor require, permit, suffer or allow any
window in the Demised Premises to be cleaned from the outside. Tenant shall pay
to Landlord on demand the costs incurred by Landlord for (a) cleaning work in
the Demised Premises or the Building or otherwise on or about the Building
required because of (1) misuse or neglect on the part of
<PAGE>
Tenant or its employees or visitors, (2) use of portions of the Demised Premises
for preparation, serving or consumption of food or beverages, reproducing
operations, private lavatories or toilets or other special purposes requiring
greater or more difficult cleaning work other than office area, (3) interior
glass surfaces, (4) non-building standard materials or finishes installed by
Tenant or at its request, (5) increases in frequency or scope in any of the
items set forth in Exhibit "C" as shall have been requested by Tenant, and (b)
removal from the Demised Premises and the Building of (1) so much of any refuse
and rubbish of Tenant as shall exceed that normally accumulated dally in the
routine or ordinary business office occupancy and (2) all of the refuse and
rubbish of Tenant's machines and the refuse and rubbish of any other eating
facilities requiring special handling (known as "wet garbage"). Landlord and its
cleaning contractor and their employees shall have after hours access to the
Demised Premises and the use of Tenant's light, power and water in the Demised
Premises as may be reasonably required for the purpose of cleaning the Demised
Premises. Extraordinary waste (such as crates, cartons, boxes, etc., and used
furniture or equipment) shall be removed from the Building by Tenant at Tenant's
own cost and expense. At no time shall Tenant place any waste of any kind in any
public areas. If Tenant does so, the parties agree that everything so placed
shall be deemed abandoned and of no value to Tenant and Landlord may have the
same removed and disposed of at Tenant's expense. Such expense shall be deemed
additional rent payable by Tenant within ten (10) days after being billed
therefor. This remedy is in addition to any other remedies Landlord may have
under this Lease.
11.05 With respect to parking of vehicles:
A. Landlord represents that throughout the Term there will be a
paved, illuminated parking area for the Building with the number of Parking
Spaces specified in Article 1. Tenant shall require its personnel and visitors
to park their vehicles only in (i) common Parking Spaces designated by Landlord
for Tenant's use for its personnel and visitors on a "first come, first served"
basis, and (ii) up to seven marked Parking Spaces in the rear of, and near, the
Building which Landlord shall mark with Tenant's name or logo. Landlord
similarly may mark up to 28 additional Parking Spaces for other tenants with
their names or logos. Attached hereto as Exhibit E is a parking plan showing
the marked Parking Spaces for Tenant and the total marked Parking Spaces area.
The actual number of marked Parking Spaces for Tenant shall be equal
proportionately (on a per square foot of Leased Floor Space basis) to the number
of each marked spaces given to any other tenant in the Building. Landlord shall
have no obligation whatsoever to patrol, monitor or secure any marked Parking
Spaces. Landlord reserves the right at all times to redesignate marked and/or
other Parking Spaces. Tenant, its personnel and visitors shall not at any time
park any trucks or delivery vehicles in any of the parking areas. Parking
Spaces shall be provided at no additional cost to Tenant.
B. There shall not be overnight parking except in that portion of
the parking area designated by Landlord for overnight parking ("overnight
parking area"), and Tenant shall, and shall cause its personnel and visitors to,
remove their automobiles from the parking area except any overnight parking area
at the end of the working day. If any automobile owned by Tenant or by its
personnel or visitors remains in the parking area overnight except any overnight
parking area and the same interferes with the cleaning or maintenance of said
areas (snow or otherwise,) any costs or liabilities incurred by Landlord in
removing said automobile
<PAGE>
to effectuate cleaning or maintenance, or any damages resulting to said
automobile or to Landlord's equipment or equipment owned by others by reason of
the presence of or removal of said automobile during such cleaning or
maintenance shall be paid by Tenant to Landlord, as additional rent on the rent
payment date next following the submission of a bill therefor.
C. All Parking Spaces and any other parking areas, roadways, and
driveways used by Tenant, its personnel and visitors will be at their own risk,
and Landlord shall not be liable for any injury to person or property, or for
loss or damage to any automobile or its contents, resulting from theft,
collision, vandalism, or any other cause whatsoever unless solely resulting from
the willful or grossly negligent act of Landlord or Landlord's employees.
Landlord shall have no obligation whatsoever to provide a guard or any other
personnel or device to patrol, monitor, guard or secure any parking areas; if
Landlord does so provide, it shall be solely for Landlord's convenience, and
Landlord shall in no way whatsoever be liable for any acts or omissions of such
personnel or device in falling to prevent any such theft, vandalism, or loss or
damage by other cause.
11.06 Landlord reserves the right, without any liability to Tenant, except
as otherwise expressly provided in this Lease, and without being in breach of
any covenant of this Lease, to stop, interrupt, or suspend service of any of the
heating, ventilating, air conditioning, electric, sanitary, elevator or other
Building systems serving the Demised Premises, or the rendition of any other
services required of Landlord under this Lease, whenever and for so long as may
be necessary, by reason of accidents, emergencies, the making of repairs or
changes which Landlord is required by this Lease or by law to make or in good
faith deems advisable, or by reason of difficulty in securing proper supplies of
fuel, steam, water, electricity, labor or supplies, or by reason of Events of
Force Majeure, provided that, in each instance Landlord shall exercise due
diligence to eliminate the cause of stoppage and to effect restoration of
service and shall give Tenant reasonable notice, when practicable, of the
commencement and anticipated duration of such stoppage, and if any work is
required to be performed in or about the Demised Premises for such purpose, the
provisions of Section 14.03 shall apply. Tenant shall not be entitled to any
diminution or abatement of rent or other compensation nor shall this Lease or
any of the obligations of Tenant be affected or reduced by reason of the
interruption, stoppage, or suspense of any of the Building systems or services
arising out of the causes set forth in this Section.
ARTICLE 12
Electrical Energy
12.01 Landlord agrees to bear the cost of electrical energy involved in
furnishing to Tenant the services described in Article 11, except that Tenant
shall be responsible for providing electricity for lighting and power, at
Tenant's expense, for cleaning the Demised Premises as provided in Section 11.04
hereof.
12.02 Intentionally Omitted.
12.03 Intentionally Omitted.
<PAGE>
12.04 Intentionally Omitted.
12.05 Intentionally Omitted.
12.06 Tenant shall purchase electricity directly from the utility company
furnishing electricity to the Building. The cost of such service shall be paid
by Tenant directly to such utility company. Landlord shall permit its electric
feeders, risers and wiring serving the Demised Premises to be used by Tenant, to
the extent available, safe and capable of being used for such purpose. Landlord
shall pay for the cost of installing a meter (if not already installed) to
measure electrical consumption in the Demised Premises.
12.07 Intentionally Omitted.
12.08 Intentionally Omitted.
(d) if either the quantity or character of the electrical service is
changed by the utility company supplying electrical service to the Building or
is no longer available or suitable for Tenant's requirements, or if there shall
be a change, interruption or termination of electrical service due to a failure
or defect on the part of the utility company, no such change, unavailability,
unsuitability, failure or defect shall constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any payment from Landlord
for any loss, damage or expense, or to abatement or diminution of Base Rent or
additional rent, or otherwise relieve Tenant from any of its obligations under
this Lease, or impose any obligation upon Landlord or its agents. Landlord will
use reasonable efforts to insure that there is no interruption in electrical
service to Tenant, but in no event shall Landlord be responsible for any
failures of the utility providing such service or the negligence or other acts
of third parties causing any such interruption.
(e) Tenant shall not make any electrical installations, alterations,
additions or changes to the electrical equipment or appliances in the Demised
Premises without prior written consent of Landlord in each such instance.
Tenant shall comply with the rules and regulations applicable to the service,
equipment, wiring and requirements of Landlord and of the utility company
supplying electricity to the Building. Tenant agrees that in use of electricity
in the Demised Premises will not exceed the capacity of existing feeders into
the Building or the risers or wiring installations therein and Tenant shall not
use any electrical equipment which, in Landlord's judgment, will overload such
installations or interfere with the use thereof by other tenants in the
Building. If, in Landlord's judgment, Tenant's electrical requirements
necessitate installation of an additional riser, risers or other proper and
necessary equipment or services, including additional ventilating or air-
conditioning, the same shall be provided or installed by Landlord at Tenant's
expense, which shall be chargeable and collectible as additional rent and paid
within 30 days after the rendition to Tenant of a bill therefor.
(f) If, after Landlord's initial installation work, (i) Tenant shall
request the installation of additional risers, feeders or other equipment or
service to supply its electrical requirements and Landlord shall determine that
the same are necessary and will not cause
<PAGE>
damage or injury to the Building or the Demised Premises or cause or create a
dangerous or hazardous condition or entail excessive or unreasonable
alterations, repairs or expense or interfere with or disturb other tenants or
occupants of the Building, or (ii) Landlord shall determine that the
installation of additional risers, feeders or other equipment or service to
supply Tenant's electrical requirements is necessary, then and in either of such
events shall cause such installations to be made, at Tenant's sole cost and
expense and Tenant shall pay Landlord for such installations, as additional
rent, within 10 days after submission of a statement therefor.
ARTICLE 13
Eminent Domain
13.01 In the event that the land, Building or any part thereof, or the
Demised Premises or any part thereof, shall be taken on condemnation proceedings
or by the exercise of any right of eminent domain or by agreement between any
superior lessors and lessees and/or Landlord on the one hand and any
governmental authority authorized to exercise such right on the other hand,
Landlord shall be entitled to collect from any condemnor the entire award or
awards that may be made in any such proceeding without deduction therefrom for
any estate hereby vested in or owned by Tenant, to be paid out as in this
Article provided. Tenant hereby expressly assigns to Landlord all of its right,
title and interest in or to every such award and also agrees to execute any and
all further documents that may be required in order to facilitate the collection
thereof by Landlord.
13.02 At any time during the Term if title to the whole or substantially
all of the land, Building and/or Demised Premises shall be taken in condemnation
proceedings or by the exercise of any right of eminent domain or by agreement
between any superior lessors and lessees and/or Landlord on the one hand and any
governmental authority authorized to exercise such right on the other hand, this
Lease shall terminate and expire on the date of such taking and the Base Rent
and additional rent provided to be paid by Tenant shall be apportioned and paid
to the date of such taking.
13.03 However, if substantially all of the land or Building is not taken
and if only a part of the entire Demised Premises shall be so taken, this Lease
nevertheless shall continue in full force and effect, except that either party
may elect to terminate this Lease if that portion of the Demised Premises then
occupied by Tenant shall be reduced by more than twenty-five (25%) percent by
notice of such election to the other party given not later than thirty (30) days
after (a) notice of such taking is given by the condemning authority, or (b) the
date of such taking, whichever occurs later. Upon the giving of such notice
this lease shall terminate on the date of service of such notice and the Base
Rent and additional rent due and to become due, shall be prorated and adjusted
as of the date of the taking. If both parties fail to give such notice upon
such partial taking, and this Lease continues in force as to any part of the
Demised Premises not taken, the rents apportioned to the part taken shall be
prorated and adjusted as of the date of taking and from such date the Base Rent
and additional rent shall be reduced to the amount apportioned to the remainder
of the Demised Premises, and the Proportionate Share shall be recomputed to
reflect the number of square feet of Leased Floor Space remaining in the Demised
<PAGE>
Premises in relation to the number of square feet of Total Floor Space remaining
in the Building.
13.04 Notwithstanding the foregoing provisions of this Article and subject
to the interests of any mortgages or lessor or grantor under any superior
mortgage or superior lease, Tenant shall be entitled to claim, prove and receive
in proceedings relating to any taking mentioned in the preceding Sections of
this Article, such portion of each award made therein as represents the then
value of Tenant's Property plus Tenant's moving or relocation expenses.
13.05 In the event of any such taking of less than the whole of the
Building which does not result in a termination of this Lease, or in the event
of such a taking of all or any part of the Demised Premises which does not
result in a termination of this Lease, Landlord, at its expense, shall proceed
with reasonable diligence to repair, alter and restore the remaining part of the
Building and the Demised Premises to substantially the same condition as it was
immediately prior to such taking to the extent that the same may be feasible, so
as to constitute a tenantable Building and Demised Premises, provided that
Landlord's liability under this Section shall be limited to the amount received
by landlord as an award arising out of such taking.
ARTICLE 14
Repairs and Maintenance
14.01 Landlord shall, as a Cost of Operation, keep and maintain the
Building and its fixtures, appurtenances, systems and related facilities
(including the central heating, ventilating and air conditioning systems and the
central or core elevator and plumbing systems), serving the Demised Premises, in
good working order, condition and repair (but not auxiliary or supplementary
heating, ventilating or air conditioning units or equipment, plumbing fixtures,
serving only the Demised Premises shall be Tenant's responsibility under Section
14.02 hereof), and Landlord shall, as a Cost of Operation make all repairs to
preserve the strength of the structural components of the Building, interior and
exterior, as and when needed in the Building, except as indicated in the second
sentence of Section 14.02, except further for those repairs for which Tenant is
responsible pursuant to any other provisions of this Lease, and subject to all
other provisions of this lease, including but not limited to the provisions of
Article 15.
14.02 Tenant shall take good care of the Demised Premises and the fixtures
and appurtenances therein and thereto (including, without limitation, windows
and doors adjoining, or used exclusively in connection with, the Demised
Premises), and at its sole cost and expense shall pay for all repairs thereto,
as and when needed to preserve them in good working order and condition except
as otherwise provided in Section 14.01 hereof. In addition, Tenant, at its sole
cost and expense, shall pay for all repairs, ordinary or extraordinary, interior
or exterior, structural or otherwise, in and about the Demised Premises and the
Building as shall be required by reason of (a) the performance or existence of
work by Tenant necessary to suit the Demised Premises to Tenant's initial
occupancy or in connection with Tenant's Changes, (b) the installation, use or
operation of Tenant's Property in the Demised Premises, (c) the moving of
Tenant's Property in or out of the Building, or (d) the misuse or neglect of
Tenant or any of its employees, agents, or contractors. As soon as any such
repair is required, Tenant shall notify
<PAGE>
Landlord, who shall, in turn, at its option, either make such repair (at the
Work Charge), or notify Tenant to make such repairs.
14.03 Except as expressly otherwise provided in this Lease, Landlord shall
have no liability to Tenant by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord or any tenant making
repairs or changes or performing maintenance services, whether or not Landlord
is required or permitted by this Lease or by law to make such repairs or changes
or to perform such services in or to any portion of the Building or Demised
Premises, or in or to the fixture, equipment, or appurtenances of the Building
or the Demised Premises, provided that Landlord shall be reasonably diligent
with respect thereto and shall perform such work, except in case of emergency,
at times reasonably convenient to Tenant and otherwise in such manner and to the
extent practical as will not unreasonably interfere with Tenant's use and
occupancy of the Demised Premises.
14.04 When used in this Lease the term "repair" shall be deemed to include
restoration and replacement as may be necessary to achieve and/or maintain good
working order and condition.
ARTICLE 15
Damage and Destruction
15.01 if the Demised Premises and/or access thereto shall be partially or
totally damaged or destroyed by fire or other casualty, then Landlord, subject
to its rights under Section 15.03 hereof, substantially shall repair the damage
and restore and rebuild the Demised Premises and/or access thereto as nearly as
may be reasonably practical to its condition and character, to the extent of
Building Standard work, immediately prior to such damage or destruction, with
reasonable diligence after notice to it of the damage or destruction.
15.02 If the Demised Premises and/or access thereto shall be partially or
totally damaged or destroyed by fire or other casualty not attributable to the
fault, negligence or misuse of the Demised Premises by the Tenant, its agents or
employees under the provisions of this Lease, the rents payable hereunder shall
be abated to the extent that the Demised Premises shall have been rendered
untenantable from the date of such damage or destruction to the date the damage
shall be substantially repaired or restored or rebuilt to the same condition as
required under Section 5.02 hereof for the Demised Premises to be ready for
occupancy. Should Tenant occupy a portion of the Demised Premises during the
period that the repair, restoration or rebuilding is in progress and prior to
the date that all of the Demised Premises are rendered tenantable, rents and the
Proportionate Share allocable to such occupied portion (based upon that
proportion which the area of the part so occupied bears to the Leased Floor
Space) shall be payable by Tenant from the date of such occupancy to the date
the Demised Premises are made tenantable. Any work to be performed by Tenant
shall be performed in accordance with Article 17 hereof applicable to Tenant's
Changes following completion of Landlord's work.
15.03 In case of substantial damage or destruction of the Demised
Premises, Tenant may
<PAGE>
terminate this Lease by notice to Landlord, if Landlord has not completed the
making of the required repairs and restored and rebuilt the Demised Premises
and/or access thereto within twelve (12) months from the date of such damage or
destruction, and such additional time after such date (but not to exceed six (6)
months) as shall equal the aggregate period Landlord may have been delayed in
doing as by adjustment of insurance or Events of Force Majeure.
In case the Building shall be so damaged by such fire or other
casualty that substantial renovation, reconstruction or demolition of the
Building shall, in Landlord's opinion, be required (whether or not the Demised
Premises shall have been damaged by such fire or other casualty), then Landlord
may, at its option, terminate this Lease and the Term and estate hereby granted,
by notifying Tenant in writing of such termination, within one hundred ninety
(90) days after the date of such damage. If at any time prior to Landlord
giving Tenant the aforesaid notice of termination or commencing the repair and
restoration pursuant to Section 15.01, the holder of a superior mortgage or the
lessor of a superior lease or any person claiming under or through the holder of
such superior mortgage or the lessor of such superior lease takes possession of
the Building through the foreclosure or otherwise, such holder, lessor, or
person shall have a further period of sixty (60) days from the date of so taking
possession to terminate this Lease by appropriate written notice to Tenant. In
the event that such a notice of termination shall be given pursuant to either of
the next two (2) preceding sentences, this Lease and the Term and estate hereby
granted shall expire as of the date of such termination with the same effect as
if that were the date hereinbefore set for the expiration of the Term, and the
Base Rent and additional rent due and to become due hereunder shall be
apportioned as of such date if not earlier abated pursuant to Section 15.02.
Nothing contained in this Section 15.03 shall relieve Tenant from any liability
to Landlord or to its insurers in connection with any damage to the Demised
Premises or the Building by fire or other casualty if Tenant shall be legally
liable in such respect.
15.04 No damages, compensation or claim shall be payable by Landlord for
inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Demised Premises or of the Building pursuant
to this Article. Landlord shall use due diligence to effect such repair or
restoration promptly and in such manner is not unreasonably to interfere with
Tenant's use and occupancy.
15.05 Landlord will not be required to carry insurance of any kind on
Tenant's Property or on Tenant's Work, Tenant's Changes or any other work in
excess of Building Standard work, except to the extent that Tenant shall have
notified Landlord of any such excess work pursuant to Section 16.03 hereof and
except further to the extent that such excess work shall be insurable under
Landlord's policy; and, except as provided by law or its breach of any of its
obligations hereunder. Landlord shall not be obligated to repair any damage to,
or restore or rebuild, Tenant's Property or such excess work or to replace the
same. For purposes of this Article 15 the term casualty damage, to the extent
Landlord is responsible under this Article 15, shall not be deemed to include
damage caused by vandalism, unknown cause or other act not normally covered
under fire and extended coverage insurance policies applicable to office
buildings in the
<PAGE>
area in which the Building is located, if such causes are included in the repair
obligations under Article 15 hereof for which Tenant is responsible to pay.
15.06 The provisions of this Article shall be considered an express
agreement governing any case of damage or destruction of the Demised Premises by
fire or other casualty, and Section 227 of the Real Property Law of the State of
New York, providing for such a contingency in the absence of an express
agreement, and any other law of like import, now or hereafter in force, shall
have no application in such case.
15.07 Notwithstanding any of the foregoing provisions of this Article, if
Landlord or the lessor of any superior lease or the holder of any superior
mortgage shall be unable to collect all of the insurance proceeds (including
rent insurance proceeds) applicable to damage or destruction of the Demised
premises or the Building by fire or other cause, by reason of some action or
inaction on the part of Tenant or any of its employees, agents or contractors,
then, without prejudice to any other remedies which may be available against
Tenant, the abatement of Tenant's rents provided for in this Article shall not
be effective to the extent of the uncollected insurance proceeds.
ARTICLE 16
Insurance
16.01 Tenant shall not violate, or permit the violation of, any condition
imposed by the standard fire insurance policy then issued for office buildings
in the municipality in which the Building is located and shall not do, or permit
anything to be done, or keep or permit anything to be kept in the Demised
Premises which would increase the fire or other casualty insurance rate on the
Building or the property therein over the rate which would otherwise then be in
effect (unless Tenant pays the resulting increased amount of premium) or which
would result in insurance companies of good standing refusing to insure the
Building or any of such property in amounts and at normal rates reasonably
satisfactory to Landlord. However, Tenant shall not be subject to liability,
obligation or violation under this Section by reason of the proper use of the
Demised Premises for standard executive and administrative offices.
16.02 Tenant shall, at its sole cost and expense, maintain at all times
commencing with the earlier of the performance of any work in the Demised
Premises by or on behalf of Tenant under Article 4 hereof and the moving of any
property into the Demised Premises and throughout the Term (unless otherwise in
this Section 16.02 provided) the following types of insurance:
(a) Commercial general liability insurance to afford protection
initially in an amount of not less than $4,000,000 combined single limit of
liability for bodily injury, death and property damage arising out of any one
occurrence, under an occurrence-basis policy, against any and all claims for
personal injury, death or property damage occurring in, upon, adjacent, or
connected with the Demised Premises and any part thereof; from time to time
during the Term the foregoing limits of insurance shall be increased to those
required by the holder of any superior mortgage or superior lease or as are
currently carried with respect to similar properties
<PAGE>
where the Building is located. There shall be added to or included within said
comprehensive general liability insurance all other coverages as may be usual to
Tenant's use of the Demised Premises, including, without limitation, products
and completed operations liability, independent contractors liability, broad
from comprehensive general, liability endorsements, broad form property damage
liability, liquor law legal liability (if applicable), host liquor liability,
explosion, collapse and underground property damage, environmental
impairment/pollution liability (if applicable) and owners and contractors
protective liability coverage during the course of construction.
(b) Commercial auto liability insurance (with special endorsement
covering mobile equipment and contractual liability) covering owned, non-owned
and hired vehicles providing bodily injury and property damage coverage, all on
a per occurrence basis and under an occurrence-basis policy, at a combined
single limit in such amount as Landlord or Landlord's managing agent may
reasonably determine and in no event less than three million dollars
($3,000,000).
(c) Worker's compensation and employer's liability as required by law.
(d) New York State disability benefits liability as required by law.
(e) During the performance by or on behalf of Tenant of any Tenant's
Work, Tenant's Changes or any other work under this lease and until completion
thereof, owners and contractors protective liability coverage in an amount of
not less than $2,000,000.
(f) "All Risk" property insurance upon Tenant's Property, including
contents and trade fixtures: such coverage is to be written on a replacement
cost basis and in an amount of not less than 100% of the full replacement value
thereof.
(g) Such other insurance (customarily required by landlords of other
firstclass buildings in the Harrison/White Plains area) and in such amounts as
Landlord, the holder of a superior mortgage or superior lease may reasonably
require from time to time and as are carried with respect to properties similar
to the Real Property.
16.03 At least ten business days prior to the performance of any Tenant's
Work, Tenant's Changes and all other betterments, improvements and all other
work in, on, attached to or becoming part of the Demised Premises (some time
collectively called "betterments and improvements"), Tenant shall submit to
Landlord all information necessary for Landlord to increase, if necessary under
Landlord's policy, (and not less than annually shall certify replacement costs
to Landlord) so Landlord at all times may maintain its property insurance
coverage on the Building so that the betterments and improvements may be
insured, on a replacement cost basis, in an amount not less than 100% of the
full replacement value, subject to terms, conditions, exclusions and deductibles
of such coverage. Regardless of whether Landlord or Tenant is to perform such
betterments and improvements, and notwithstanding any contrary provision of this
Lease, Tenant shall make payment to Landlord, within ten days of being billed
therefor, of the amount of the insurance premium applicable to providing such
coverage on
<PAGE>
betterments and improvements in excess of Building Standard work.
16.04 With respect to insurance provided by Tenant or others performing
work for Tenant hereunder:
(a) Such insurance shall be written by insurance companies licensed to
do business in the State of New York, authorized to issue such insurance
policies and having a rating of no less than "A" in the most current edition of
Bests Key Rating Guide. The original insurance policies or duly executed,
- ----------------------
appropriate certificates (together with reasonably adequate evidence of waivers
of subrogation required by this Article 16 and of payment of insurance premiums)
shall be deposited with Landlord together with all renewals, replacements and
endorsements. Tenant shall have the right to insure and maintain such insurance
under blanket insurance policies covering other premises used or operated by
Tenant so long as such blanket policies are aggregated so that at all times when
required by this Lease there is adequate insurance attributable to the Demised
Premises or to this Lease so as to comply with the insurance provisions set
forth in this Lease.
(b) There shall be maintained deductibles in such amounts as Tenant
shall reasonably determine but in no event in excess of $5,000 with respect to a
property insurance policy and in no event in excess of $10,000 with respect to a
liability insurance policy.
(c) Landlord, Landlord's managing agent and the holder of any superior
mortgage and of any superior lease, to the extent that Tenant has been notified
(collectively called "Landlord and Others in Interest") shall be (i) included as
an additional named insured under all insurance required to be provided by
Tenant under this Lease except under Sections 16.02 (c) and (d), and (ii) a
named insured under insurance required to be provided by tenant under this Lease
pursuant to Section 16.02(b).
(d) All property insurance policies shall cover the interest of Tenant
and Landlord and Others in Interest, as their interests may appear, and the
policies therefor shall provide that adjustment of any losses thereunder shall
include in the negotiation, not be settled or finalized without, and be payable
to, Landlord and Others in Interest, to the extent applicable. All such
property insurance policies shall contain a provision allowing other insurance
that is provided to or for Landlord. All such property insurance policies shall
be required of Tenant regardless of whether Tenant or others on behalf of Tenant
preform Tenant's Work, Tenant's Changes or any other work in the Demised
Premises.
(e) At least 10 days prior to commencement of construction of any work
in the Demised Premises, Tenant and Tenant's contractor shall deliver to
Landlord (and Others in Interest, if required by them) certificates of insurance
or policies (as provided in Section 16.04(a) hereof) evidencing all insurance
coverages provided in this Article 16. Tenant's contractor shall be required to
comply with all of such insurance obligations only through final completion of
all such work.
(f) At its own cost and expense, Tenant or its general contractor if
other than
<PAGE>
Landlord shall, in accordance with all of the insurance requirements of this
Article 16, obtain professional liability insurance for all architects,
designers and engineers with regard to all of their work in or in connection
with the Demised Premises, in a minimum policy amount of $1,000,000.
(g) The limits of all insurance provided under this Article 16 (a)
shall not limit Tenant's liability to Landlord under this Lease, and (b) shall
be subject to increase to the same extent as provided under Section 16.02 (a)
with respect to liability insurance.
(h) All policies of insurance maintained by Tenant under this Article
16 shall be written as primary policies not contributing with, nor in excess of,
insurance coverage that Landlord and Others in Interest may have. Tenant shall
not carry separate or additional insurance which, in the event of any loss or
damage, is concurrent in form or would contribute with the insurance required to
be maintained by Tenant under this Lease.
(i) Each policy required to be provided hereunder (and each
certificate of insurance issued with respect thereto) shall contain endorsements
by the Insurer, without disclaimers, that the policies will not be cancelled,
materially changed, amended, reduced or non-renewed without at least thirty (30)
days prior notice to Landlord and Others in Interest, that the act or omission
of any insured will not invalidate the policy as to any other insured, and that
Tenant (or the general contractor, as the case may be) solely shall be
responsible for payment of all premiums under such policies and that neither
Landlord nor Others in Interest shall have any obligations for the payment
thereof.
(j) In the event Tenant shall fail to procure and place any insurance
required under this Lease, after notice to Tenant, Landlord may, but shall not
be obligated to, procure and place same, in which event the amount of the
premium paid shall be refunded by Tenant to Landlord within 30 days of notice,
as additional rent.
16.05 Tenant shall procure and maintain at all times during which Tenant
shall be required under this Lease to maintain property insurance a clause in,
or a written endorsement on, all policies applicable to such insurance pursuant
to which the insurer waives subrogation (or consents to a waiver by Tenant of a
right of recovery) against Landlord, Others in Interest and the employees,
agents and licensees of any of the foregoing, and Tenant agrees not to make
claim against or seek to recover against (and Tenant hereby releases Landlord
for any claim which it otherwise might have against) Landlord and Others in
Interest in connection with any loss or damage covered by any such policies. If
Tenant shall decide not to insure for) or to selfinsure part of any loss for)
business interruption or to the extent that Tenant shall be a self-insurer
(including, without limitation, any deductible under any insurance policy),
Tenant hereby releases Landlord and Others in Interest from all loss or damage
which could have been covered by an insurance policy if Tenant had chosen.
16.06 If Tenant shall decide not to insure for (or to self-insure or co-
insure part of any loss for) business interruption and/or if Tenant shall at any
time fail to maintain property insurance as, and to the extent, required under
this Lease, Tenant hereby releases Landlord and
<PAGE>
Others in Interest from all loss or damage which could have been covered by such
insurance if Tenant had chosen.
ARTICLE 17
Tenant's Changes
17.01 After completion of the initial preparation of the Demised Premises
as provided for in Article 4, and subsequent to receipt of a certificate of
occupancy or permission to occupy as provided in Section 5.02 hereof, Tenant may
not, at any time or from time to time during the Term make any alterations,
additions, installations, substitutions and improvements (hereinafter
collectively called "changes" and, as applied to changes provided for in this
Article, "Tenant's Changes") in and to the Demised Premises, (a) without at
least 20 days prior notice to Landlord with respect to decorating and other
changes not exceeding in the aggregate $25,000, and (b) with Landlord's prior
written approval with respect to all other changes. Tenant's Changes shall be
performed on the following conditions, provided that in no event shall such
changes result in a violation of or require a change in the certificate of
occupancy applicable to the Demised Premises:
A. The outside appearance, character or use of the Building shall
not be affected, and no Tenant's Changes shall weaken or impair the structural
strength or, in the opinion of the Landlord, lessen the value of the Building;
B. No part of the Building outside of the Demised Premises shall be
physically affected;
C. The proper functioning of any of the mechanical, electrical,
sanitary and other services systems of the Building shall not be adversely
affected;
D. In performing the work involved in making such changes, Tenant
shall be bound by and observe all of the conditions and covenants contained in
this Article;
E. At the Expiration Date, Tenant shall on Landlord's written
request remove Tenant's Changes and restore the Demised Premises to their
condition prior to the making of any changes permitted by this Article,
reasonable wear and tear excepted (unless at the time of requesting Landlord's
consent to (and requesting a response as to Tenant's removal obligations, at the
time of surrender of) Tenant's Changes, Landlord advised Tenant that Tenant
would be required so to remove, and, even then, only where the cost of such
removal exceeds the cost of removal of any of Tenant's Work which may have been
replaced by such Tenant's Changes);
F. With respect to each change performed by Tenant (other than
decorating or other changes costing in the aggregate less than $25,000), Tenant
shall pay to Landlord, as
additional rent, upon demand, the reasonable costs incurred by Landlord in
connection with such change, including, without limitation, costs of
supervision, plus 10% of such costs for overhead and indirect job costs;
<PAGE>
G. Before proceeding with any change (exclusive of changes in items
constituting "Tenant's Property" as defined in Article 18) Tenant shall submit
to Landlord plans and specifications, together with all contractors and
subcontractors that Tenant proposes to perform Tenant's Changes (all of whom
shall be reputable and have had at least 7 years experience in their respective
trade), for the work to be done, for Landlord's approval in writing, and, if
such change requires approval by or notice to the lessor of a superior lease or
the holder of a superior mortgage, Tenant shall not proceed with the change
until such approval has been received, or such notice has been given, as the
case may be, and all applicable conditions and provisions of said superior lease
or superior mortgage with respect to the proposed change or alteration have been
met or compiled with at Tenant's expense; and Landlord, if it approves the
change, will request such approval or give such notice, as the case may be; any
change for which approval has been received shall be performed strictly in
accordance with the approved plans and specifications, and no amendments or
additions to such plans and specifications shall be made without the prior
written consent of Landlord. Tenant shall not be permitted to install and make
part of the Demised Premises any materials, fixtures or articles which are
subject to liens, conditional sales contracts, security agreements or chattel
mortgages; and
H. Tenant shall comply with all other terms and conditions of this
Lease in connection with Tenant's Changes, including, without limitation,
Section 10.03 hereof. Notwithstanding the foregoing, Landlord shall have the
option of performing Tenant's Changes at the work Charge.
17.02 All Tenant's Changes shall at all times comply with laws, order and
regulations or governmental authorities having jurisdiction thereof, and all
rules and regulations of Landlord (in addition to those expressly provided in
this Lease) which, in Landlord's opinion, are necessary to protect its interest,
including without limitation, a guaranty of completion, payment and restoration;
and Tenant, at its expense, shall obtain all necessary governmental permits and
certificates for the commencement and prosecution of Tenant's Changes and for
final approval thereof upon completion, and shall cause Tenant's Changes to be
performed in compliance therewith and with all applicable requirements of
insurance bodies, and in good and first class workmanlike manner, using
materials and equipment at least equal in quality and class to the original
installations of the Building. Tenant's Changes shall be performed in such a
manner as not to interfere with the occupancy of any other tenant in the
Building nor delay, or impose any additional expense upon Landlord in the
construction, maintenance, or operation of the Building, and shall be performed
by union contractors or mechanics approved by Landlord. Throughout the
performance of Tenant's Changes, Tenant, at its expense, shall carry and shall
cause all contractors, agents and other persons performing Tenant's Changes to
carry, all additional insurance under Article 16 hereof applicable as a result
of, or based upon, Tenant's Changes. Tenant shall furnish Landlord with
reasonably satisfactory evidence that such insurance is in effect at or before
the commencement of Tenant's Changes and, on request, at reasonable intervals
thereafter during the continuance of Tenant's Changes. No Tenant's Changes shall
involve the removal of any fixtures, equipment or other property in the Demised
Premises which are not "Tenant's Property" (as defined in Article 18), unless
Landlord's prior written consent is first obtained and unless such fixtures,
equipment or other property shall be promptly replaced, at Tenant's expense and
free of superior title, liens and claims, with fixtures, equipment or other
<PAGE>
property (as the case may be) of like utility and at least equal value (which
replaced fixtures, equipment or other property shall thereupon become the
property of the Landlord), unless Landlord shall otherwise expressly consent in
writing.
17.03 Tenant, at its expense, and with diligence and dispatch, shall
procure the cancellation or discharge of all notices of violation arising from
or otherwise connected with Tenant's Changes which shall be issued by the
appropriate department of the municipality where the Building is located or any
other public authority having or asserting jurisdiction. Tenant shall defend,
indemnify and save harmless Landlord against any and all mechanics and other
liens in connection with Tenant's Changes, repairs, or installations, including
but not limited to the liens of any conditional sales of, or chattel mortgages
upon, any materials, fixtures, or articles so installed in and constituting part
of the Demised Premises and against all costs, attorneys' fees, fines expenses
and liabilities reasonably incurred in connection with any such lien,
conditional sale or chattel mortgage or any action or proceeding brought
thereon. Tenant, at its expense, shall procure the satisfaction or discharge of
all such liens within ten (10) days of the filing of such lien against the
Demised Premises or the Building. If Tenant shall fail to cause such lien to be
discharged within the period aforesaid, then in addition to any other right or
remedy, Landlord may, but shall not be obligated to, discharge the same either
by paying the amount claimed to be due or by procuring the discharge of such
lien by deposit or by bonding proceedings, and in any such event Landlord shall
be entitled, if Landlord so elects, to compel the prosecution of an action for
the foreclosure of such lien by the lienor and to pay the amount of the judgment
in favor of the lienor with interest, costs and allowances. Any amount so paid
by Landlord and all costs and expenses incurred by Landlord in connection
therewith, together with interest thereon at the lesser of the maximum permitted
by law or three (3%) percent per month or portion thereof from the respective
dates of Landlord's making of the payment or incurring of the cost and expense
shall constitute additional rent payable by Tenant under this Lease and shall be
paid by Tenant on demand. If Tenant makes any such payment it shall not be
entitled to any set-off against rent due hereunder. Tenant agrees that it will
not at any time prior to or during the Term, either directly or indirectly, use
any contractors, labor or materials in the Demised Premises, if the use of such
contractors, labor or materials would, in Landlord's opinion, create any
difficulty with other contractors or labor engaged by Tenant or Landlord or
would in any way disturb harmonious labor relations in the construction,
maintenance or operation of the Building or any part thereof or any other
building owned or operated by Landlord or any affiliate of Landlord.
17.04 All of Tenant's Changes, whether performed by Landlord or by Tenant
shall be performed only during regular time union working hours. If Tenant
requires Landlord to perform work during other hours, or if Tenant desires to
perform work through its contractors, agents or employees, Tenant shall pay as
additional rent, the cost of employing such additional union help as shall be
required under the rules and regulations of the unions
employed in connection with the Building. Payment shall be made by Tenant to
Landlord within ten (10) days after being billed therefor.
<PAGE>
ARTICLE 18
Tenant's Property
18.01 All fixtures, equipment, improvements and appurtenances attached to
or built into the Demised Premises at the Commencement Date or during the Term,
whether or not by or at the expense of the Tenant, shall be and remain a part of
the Demised Premises, shall be deemed the property of Landlord and shall not be
removed by Tenant except an hereinafter in this Article expressly provided.
18.02 All fixtures, furnishings, equipment, including Tenant's movable
shelving, movable files and movable work stations, but exclusive of work
performed by Landlord at Landlord's cost and expense pursuant to the provisions
of Article 4 hereof and exclusive of any electric meter and related wiring and
parts, whether or not attached to or built into the Demised Premises, which are
installed in the Demised Premises by or for the account of Tenant, without
expense to the Landlord, and can be removed without structural damage to or
defacement of the Building (all of which are herein called "Tenant's Property"),
shall be and shall remain the property of Tenant and may be removed by it at any
time during the Term; provided that if any of the Tenant's Property is removed,
Tenant shall repair or pay the cost of repairing any damage to the Demised
Premises or to the Building or the Real Property resulting from such removal.
Any fixtures, equipment or other property for which Landlord shall have granted
any allowance to the Tenant as a credit or substitution in kind shall not be
deemed to have been installed by or for the account of the Tenant without
expense to Landlord, and shall not be considered as Tenant's Property. Any
partitions installed by Landlord, whether movable or not, shall not be
considered Tenant's Property. Landlord shall not be obligated to return and/or
reinstall any partitions supplied to Tenant which are returned by Tenant to
Landlord due to enlargement, reduction or change in the Demised Premises.
Landlord waives any Landlord's lien against the aforementioned movable shelving,
movable files and movable work stations and other of Tenant's personalty and
will execute any instruments as Tenant may reasonably request affirming said
waiver without cost or obligation to Tenant.
18.03 At or before the expiration of this Lease, Tenant shall remove, at
its expense, from the Demised Premises, all of Tenant's Property and shall
repair any damage and make any replacements to the Demised Premises or the
Building resulting from or necessitated by such removal, and shall pay all other
costs of such removal.
18.04 Any items of Tenant's Property which shall remain in the demised
Premises after the expiration of this Lease, may, at the option of the Landlord,
be deemed to have been abandoned, and in such case either may be retained by
Landlord as its property or may be disposed of, without accountability, in such
manner as Landlord may see fit. Tenant agrees to reimburse Landlord for the
costs of removal and for the coat of repairing any damage to the Demised
Premises or the Building arising out of Tenant's failure to remove Tenant's
Property pursuant to the terms of this Lease.
ARTICLE 19
Surrender
19.01 On the last day of the Term, or upon any earlier termination of this
Lease, or upon
<PAGE>
any re-entry by Landlord upon the Demised Premises, Tenant shall quit and
surrender the Demised Premises to Landlord broom clean, in good order, condition
and repair except for ordinary wear and tear and damage by fire or other insured
casualty, restored as provided in Section 17.01, if applicable.
19.02 Prior to such surrender Tenant shall (a) remove Tenant's Property
subject to the provisions of Article 18 hereof, (b) at Landlord's request remove
Tenant's Changes as provided in Section 17.01, and (c) at Landlord's request,
repair any damage and make any replacements to the Real Property resulting from
or necessitated by such removal, and restore those parts of the Demised Premises
from which the removal referred to in subparagraphs "a" and "b" above occurred,
to a condition which will blend with and be comparable to and compatible with
adjacent areas. If Tenant shall fail to perform as provided in this Section
19.02, Landlord shall have the right to do so at Tenant's cost and expense,
without further notice or demand upon Tenant, and Tenant shall indemnify
Landlord against all loss or liability resulting therefrom, including, without
limitation, any delay in granting occupancy of the Demised Premises to a future
occupant.
19.03 In the event Tenant remains in possession of the Demised Premises
after the termination of this Lease without the execution by Landlord and Tenant
of a new Lease, Tenant, at the option of Landlord, shall be deemed to be
occupying the Demised Premises as a Tenant from month to month, at a monthly
rental equal to three (3) times the Base Rent and additional rent payable during
the last month of the Term, subject to all of the other terms of this Lease
insofar as the same are applicable to a month to month tenancy.
19.04 Tenant hereby indemnifies and agrees to hold Landlord harmless from
and against any loss, cost, liability, claim, damage, fine, penalty, and
expense, including reasonable attorneys' fees and disbursements, resulting from
delay by Tenant in surrendering the Demised Premises upon the termination of
this Lease as provided in this Article 19, including without limitation, any
claims made by any succeeding tenant or prospective tenant based upon such
delay.
ARTICLE 20
Recording and Estoppel Certificate
20.01 Tenant agrees not to record this Lease. At the request of either
party, Landlord and Tenant shall promptly execute, acknowledge and deliver a
memorandum with respect to this Lease sufficient for recording, which Tenant may
record. Such memorandum shall not in any circumstance be deemed to change or
otherwise affect any of the obligations or provisions of this Lease.
20.02 Tenant agrees, at any time and from time to time, as requested by
Landlord, or the holder of any superior lease or superior mortgage, upon not
less than ten (10) days prior notice, to execute and deliver without cost or
expense to the Landlord a statement certifying that this Lease is unmodified and
in full force and effect (or if there have been modifications, that the same is
in full force and effect as modified and stating the modifications), certifying
the dates to which the
<PAGE>
Base Rent and additional rent have been paid, and stating whether or not, to the
best knowledge of the Tenant, the Landlord is in default in performance of any
of its obligations under this Lease, and, if so, specifying each such default of
which the Tenant may have knowledge, and specifying as to such other matters an
may be reasonably requested and as are part of the standard form or request of
such holder of any superior lease or superior mortgage, it being intended that
any such statement delivered pursuant thereto may be relied upon by any other
person with whom the Landlord, or the holder or any superior lease or superior
mortgage, may be dealing.
ARTICLE 21
Events of Default and Termination
21.01 This Lease and the Term and estate hereby granted are subject inter
-----
alia to the limitation that whenever Tenant shall make an assignment for the
- ----
benefit of creditors, or shall file a voluntary petition under any bankruptcy or
insolvency law, or an involuntary petition alleging an act of bankruptcy or
insolvency in filed against Tenant, or whenever a petition shall be filed by or
against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
any future federal bankruptcy act or any other present or future applicable
federal, state or other statute or law, or shall seek to consent to or acquiesce
in the appointment of any trustee, receiver or liquidator of Tenant or of all or
any substantial part of its properties, or whenever a permanent or temporary
receiver of Tenant or of, or for, the property of Tenant shall be appointed, or
if Tenant shall plead bankruptcy or insolvency as a defense in any action or
proceeding, then, Landlord, (a) at any time after receipt of notice of the
occurrence of any such event, or (b) if such event occurs without the
acquiescence of Tenant, at any time after the event continues for sixty (60)
days may give Tenant a notice of intention to end the Term at the expiration of
five (5) days from the service of such notice of intention, and upon the
expiration of said five (5) day period (whether or not the event resulting in
such default shall have been cured within such five (5) day period) this Lease
and the Term and estate hereby granted, whether or not the Term shall
theretofore have commenced, shall terminate with the same effect as if that day
were the Expiration Date, but Tenant shall remain liable for damages as provided
as in Article 30. The foregoing provisions of this Section 21.01 also shall be
applicable to Guarantor as though wherever the word "Tenant" is used the words
"and/or Guarantor" immediately followed.
21.02 This Lease and the Term and estate hereby granted are subject to the
further limitation that (a) whenever Tenant shall default in the payment of any
installment of Base Rent, or in the payment of any additional rent, on any day
upon which the same shall be due and payable (following 5 days notice of such
default from Landlord to Tenant with respect to two of such defaults in any Rent
Year), or (b) whenever Tenant shall do or permit anything to be done, whether by
action or inaction, contrary to any of Tenant's obligations hereunder, other
than the payment of rent, and if such situation shall continue and shall not be
remedied by Tenant within thirty (30) days after Landlord shall have given to
Tenant a notice specifying the same, or, in the case of a happening or default
which cannot with due diligence be cured within a period of thirty (30) days and
the continuance of which for the period required for cure will not subject
Landlord to the risk of civil or criminal liability or termination of any
superior lease or foreclosure of any
<PAGE>
superior mortgage, if Tenant shall not duly institute within such thirty (30)
day period and diligently prosecute to completion within an additional 30 days
all steps necessary to remedy the same, or, (c) whenever any event shall occur
or any contingency shall arise whereby this Lease or any interest therein or the
estate hereby granted or any portion thereof or the unexpired balance of the
Term hereof would, by operation of law or otherwise, devolve upon or pass to any
person, firm or corporation other than Tenant, except as expressly permitted by
Article 22, or (d) whenever Tenant shall abandon the Demised Premises, or a
substantial portion of the Demised Premises shall remain vacant for a period of
ten (10) consecutive days, unless such vacancy arises as a result of a casualty;
then in any such event covered by subsections "a", "b", "c" or "d" of this
Section 21.02, at any time thereafter, Landlord may give to Tenant a notice of
intention to end the Term of this Lease at the expiration of ten (10) days from
the date of service of such notice of intention, and upon the expiration of said
ten (10) days (whether or not the event resulting in such default shall have
been cured within such ten (10) day period) this Lease and the Term and estate
hereby granted, whether or not the Term shall theretofore have commenced, shall
terminate with the same effect as if that day were the Expiration Date, but
Tenant shall remain liable for damages as provided in Article 30.
ARTICLE 22
Assignment, Subletting, Mortgaging
22.01 Neither this Lease nor the Term and estate hereby granted, nor any
part hereof or thereof, nor the interest of Tenant in any sublease or the
rentals thereunder, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant by operation of law or otherwise, and neither
the Demised Promises nor any part thereof, shall be encumbered in any manner by
reason of any act or emission on the part of Tenant or anyone claiming under or
through Tenant, or shall be sublet or be used or occupied or permitted to be
used or occupied, or utilized for desk space or for mailing privileges, by
anyone other than Tenant or for any purpose other than as permitted by this
Lease, without the prior written consent of Landlord, at Landlord's sole
discretion, in every case, except as expressly otherwise provided in this
Article. For purposes of this Article 22, (i) the transfer of a majority of the
issued and outstanding capital stock of any corporate tenant, its parent or any
entity having a controlling interest in either (including, without limitation,
any capital stock issued in connection with any transfer), or of a corporate
subtenant, or the transfer of a majority of the total interest in any
partnership tenant or subtenant, however accomplished, whether in single
transaction or in a series of related or unrelated transactions, shall be deemed
an assignment of this Lease, and (ii) a takeover agreement shall be deemed a
transfer of this Lease.
22.02 If this Lease be assigned, whether or not in violation of the
provisions of this Lease, Landlord may collect rent from the assignee. If the
Demised Premises or any part thereof be sublet or be used or occupied by anybody
other than Tenant, whether or not in violation of this Lease, Landlord may after
default by Tenant, and expiration of Tenant's time to cure such default, collect
rent from the subtenant or occupant. In either event, Landlord may apply the
net amount collected to the rents herein reserved, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of any of the
provision of Section 22.01, or the acceptance of the
<PAGE>
assignee, subtenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of Tenant's obligations under this Lease. The
consent by Landlord to assignment, mortgaging, subletting or use or occupancy by
others shall not in any wise be considered to relieve Tenant from obtaining the
express written consent of Landlord to any other or further assignment,
mortgage, or subletting or use or occupancy by others not expressly permitted by
this Article. Notwithstanding any assignment, subletting, mortgaging or use or
occupancy by others, Tenant shall remain fully responsible and liable to
Landlord for all of the terms and conditions of this Lease, and for all acts and
omissions of any assignee, subtenant, user or occupant of the Demised Premises,
or anyone claiming through or under any of the foregoing, which shall be in
violation of any of the obligations of Tenant hereunder. Tenant agrees to pay to
Landlord reasonable counsel fees incurred by Landlord in connection with any
proposed assignment of Tenant's interest in this Lease or any proposed
subletting of the Demised Premises or any part thereof (including, without
limitation, the exercise by Landlord of any options under section 22.04B or C,
and the preparation and/or review of any and all documents in connection with
any rights under this Article 22). References in this Lease to use or occupancy
by others, that is anyone other than Tenant, shall not be construed as limited
to subtenants and those claiming under or through subtenants but as including
also licensees and other claiming under or through Tenant, immediately or
remotely.
22.03 A. Upon at least 20 days prior notice to Landlord, if Tenant is a
corporation, this Lease may be assigned to a corporation into which Tenant
merges or consolidates, or to any other corporation which controls, is
controlled by, or under common control with Tenant, so long as the Demised
Premises continue to be used for the Permitted Use; the transfer is not
principally for the purpose of transferring the leasehold estate created hereby;
the net worth of the assignee is at least equal to or in excess of the net worth
of Tenant immediately prior to such assignment; the assignee assumes by
documents satisfactory to Landlord all of Tenant's obligations to be performed
under this Lease; and subject to all of the other terms and conditions of this
Lease.
B. Tenant may, without Landlord's approval, sublet up to 5,000
rentable square feet of contiguous space in which Tenant shall provide and
conduct an office services business pursuant to which others may share or use
offices with Tenant providing office support services as part thereof
(including, without limitation, secretarial services, telecopy, telephone and
photocopy services and conference room use), on the following terms and
conditions:
1. Tenant shall give Landlord at least 20 days prior notice of
each such sublet together with the information specified in Sections 22.04B 1,
2, 3 and 4.
2. The provision of Sections 22.04E (i), (iv), (v), (ix), (x),
(xii) and (xiv) shall be applicable hereto.
3. No more than the lesser of 2 offices (or 500 rentable square
feet) shall be subleased to the same individual or entity or any affiliated or
related individual or entity. The foregoing 2 offices may be Increased to 3 or
4 offices subject to Landlord's consent not to be unreasonably withheld.
<PAGE>
22.04 In the event that at any time or from time to time prior to or
during the Term Tenant desires to sublet all or any portion of the Demised
Premises (other than pursuant to Section 22.03):
A. Tenant shall submit to Landlord a written notice of Tenant's
desire to sublet, which shall contain or be accompanied by the following
information:
1. a description identifying the space to be sublet (which
shall include appropriate means of ingress and egress; and
2. the terms and conditions (including without limitation the
proposed commencement and termination dates) of the proposed subletting.
Landlord shall have the option to be exercised by notice to Tenant within
thirty (30) days after receipt of such notice to require a surrender of the
Demised Premises or part thereof involved, as the came may be, including
Tenant's leasehold improvements therein, upon the terms and conditions
hereinafter set forth.
B. If Landlord fails to exercise its option as above provided and
Tenant still desires to sublet all or any part of the Demised Premises, Tenant
shall submit to Landlord a written request for Landlord's consent to such
subletting, which request shall contain or be accompanied by the following
information:
1. a description identifying the space to be sublet (which
shall include appropriate means of ingress and egress);
2. the terms and conditions (including without limitation the
proposed commencement and termination dates) of the proposed subletting;
3. the name and address of the proposed subtenant;
4. the nature and character of the business of the proposed
subtenant and of its proposed use of the Demised Premises; and
5. current financial information, and any other information
as Landlord may reasonably request, with respect to the proposed subtenant.
Landlord shall have the option to be exercised by notice given to Tenant
within twenty (20) days after the later of (i) receipt of Tenant's request for
consent or (i) receipt of such further information as Landlord may reasonably
request pursuant to clause 5 of Section 22.04B above, to require a surrender of
the Demised Premises or as to the part thereof involved, as the case may be,
including Tenant's leasehold improvements therein, upon the terms and conditions
hereinafter set forth.
C. If Landlord shall exercise its option to require a surrender of
the Demised
<PAGE>
Premises as provided in Section 22.04A or 22.04B hereof, then upon the proposed
commencement date of the subletting specified in Tenant's notice given pursuant
to Section 22.04A or 22.04B hereof, the Demised Premises or the part thereof
involved, as the case may be, shall be delivered to Landlord in accordance with
the provisions of the Lease relating to surrender of the Demised Premises at the
expiration of the Term, and this Lease shall cease and terminate insofar as the
Demised Premises or part thereof involved, as the case may be, is concerned with
the same force and effect an though such proposed commencement date were the
date set forth in this Lease an the expiration of the Term. If only part of the
Demised Premises is involved, the terms and conditions of the Lease shall remain
in full force and effect as to the remainder of the Demised Premises, except
that the Base Rent and additional rent shall be proportionately reduced based
upon the number of rentable square feet of such part of the Demised Premises
surrendered, and except further to the extent that appropriate modifications of
other terms or Provisions of this Lease (including, without limitation,
Proportionate Share) should be made to reflect such elimination of such part of
the Demised Premises surrendered. Notwithstanding the foregoing, in the event
that less than all of the demised Premises is surrendered,
1. Landlord shall cause to be constructed, at its cost and
expense, such alteration and connections as may be required in order to
physically separate such surrendered part of the Demised from the balance of the
Demised Premises; and
2. At least thirty (30) days prior to the proposed commencement
date specified above, Landlord shall have free access to enter to the Demised
Premises in order to complete such construction referred to in clause "1" above,
and to the extent that there are less than thirty (30) days between Landlord's
exercise of its option to require a surrender and such proposed commencement
date, such proposed commencement date shall be extended by a like number of
days.
D. Intentionally Omitted.
E. If Landlord shall not exercise either of its options under
Section 22.04A or 22.04B hereof, Tenant shall not sublet (other than as
permitted pursuant to Section 22.03) without Landlord's prior consent, which
shall not be unreasonably withheld provided that with respect to any subletting
the following further conditions shall be fulfilled:
(i) There shall be no advertisement, public communication or listing
of the availability of the Demised Premises for subletting without the prior
written consent of Landlord, which shall not be unreasonably withheld; it is
specifically understood that the foregoing condition shall not prohibit
advertisements, communications or listings (x) among brokers, which are not
available to the general public, or (y) in professional or trade journals, or
publications of equal dignity, or the yellow pages of the Westchester County
telephone directory, insofar as the use specified in Section 22.03B is involved.
It shall not be unreasonable for Landlord to deny its consent if any
advertisement or public communication (which shall not be construed as a listing
with a broker) shall list the rental rate in any way or shall adversely reflect
on the dignity, character or prestige of the Building;
<PAGE>
(ii) No space shall be sublet to another tenant, or to a related
entity of any other tenant, or to any other occupancy of the Building; if
Landlord shall then have available for rent comparable or similar space in the
Building;
(iii) No subletting shall be to a person or entity which has a
financial standing less than that of Tenant at the time of execution of this
Lease and is of a character, is engaged in business, is of a reputation, or
proposes to use the sublet premises in a manner, not in keeping with the
standards in such respects of the other tenancies of the Building;
(iv) The subletting shall be expressly subject to all of the
obligations of Tenant under this Lease, and, without limiting the generality of
the foregoing, the sublease shall impose at least the same restrictions and
conditions with respect to use as are contained in Section 1.01 and Article 8
hereof, and shall specifically provide that there shall be no further subletting
of the sublet premises;
(v) That part, if any, of the term of any such sublease or any
renewal or extension thereof, which shall extend beyond a date one (1) day prior
to the expiration or earlier termination of the term, shall be a nullity;
(vi) The subletting shall not have the effect, or give the utility
serving the Building with electricity cause to claim, that Landlord will not be
permitted to serve the Demised Premises or the portion thereof so sublet, or any
of the other lease portions of the Building, with electricity, on a "rent
inclusion" basis as provided for herein;
(vii) No such subletting shall result in there being, in addition
to Tenant and any occupants of Tenant's offices service business, more than
three (3) subtenants, users or occupants in the Demised Premises;
(viii) The Base Rent and additional rent for any such subletting
shall be not less than the greater of (a) that provided for under this lease on
a per square foot basis for the space as proposed to be sublet, and (b) the then
going market rental rate for comparable space and for a comparable term in the
Building (or if none is or has been currently leased or subleased, then
comparable space and term in a comparable building in the area in which the
Building is located;
(ix) The proposed subtenant shall not be a person then negotiating
with Landlord for the rental of any space in the Building;
(x) The subleased premises shall be used for the Permitted Use;
(xi) The business of the subtenant shall not be in violation of any
restriction against competition contained in any other lease of at least 15,000
rentable square feet to which Landlord is a party;
(xii) Landlord shall be furnished with a copy of the agreement of
<PAGE>
sublease to be executed, at least ten (10) days prior to its execution, and with
a duplicate original of the sublease, within ten (10) days after the date of its
execution;
(xiii) Tenant shall pay to Landlord, an additional rent, a sum
equal to 50% of the amount of (a) all Base Rent and additional rent and any
other consideration paid or payable to Tenant by any subtenant which is in
excess of the Base Rent and additional rent then being paid by Tenant to
Landlord pursuant to the terms hereof (after deducting from such excess the
reasonable net costs incurred by Tenant for brokerage and subtenant improvements
in connection with such sublease), and (b) any other profit or gain realized by
Tenant from any such subletting; if only a part of the Demised Premises is
sublet, then the Base Rent and additional rent paid therefor by Tenant to
Landlord shall be deemed to be that fraction thereof that the area of said
sublet space bears to the entire Demised Premises;
(xiv) Tenant shall have fully and faithfully complied with all of
the terms, covenants and conditions of this Lease on the part of the Tenant then
to have been performed under this Lease: and
(xv) Every sublease shall contain substantially the following
language:
"In the event a default under any superior lease covering all or any
portion of the premises demised hereby results in the termination of
such superior lease, this sublease shall, at the option of the lessor
under such superior lease, remain in full force and effect and the
subtenant hereunder shall attorn to and recognize such lessor as owner
and landlord hereunder and shall promptly upon such lessor's request,
execute and deliver all instruments necessary or appropriate to
confirm such attornment and recognition. The subtenant hereunder
hereby waives all rights under any present or future laws or otherwise
to elect, by reason of the termination of such superior lease, to
terminate this sublease or surrender possession of the premises
demised hereby."
22.05 The provisions of this Article 22 shall apply to each such proposed
subletting, none of which shall be effective until all of the foregoing shall
have been compiled with. Notwithstanding any subletting, Tenant and any future
sublessor shall remain liable for the full performance of all the terms and
conditions of this Lease on the part of the Tenant to be performed.
ARTICLE 23
Security Deposit
23.01 A. As security for the punctual performance by Tenant of each and
every obligation of it under this Lease (the "Liabilities"), Tenant hereby
covenants and agrees with Landlord that, except as provided herein, it will not
enter into any pledge, credit retention or
<PAGE>
security or similar agreement (nor execute financing statements pursuant
thereto) selling, transferring, or conveying, or creating a lien in and to any
of the following, whether now existing or owned or hereafter arising or acquired
(collectively, the "Receivables"):
Tenant's right, title and Interest in "Management Fees" (as
hereafter defined) which are now, or which in the future may be
receivable by it pursuant to: (1) the Agreements of Limited
Partnership, as currently amended, for ICON Cash Flow Partners, L.P.,
Series A; ICON Cash Flow Partners, L.P., Series B; ICON Cash Flow
Partners, L.P., Series C; ICON Cash Flow Partners, L.P., Series D,
ICON Cash Flow Partners, L.P., Series E; and (2) any other public
limited partnerships of a similar form or nature formed or sponsored
by Tenant or any subsidiaries of Tenant in which Tenant or any of its
subsidiaries is General Partner and/or Manager (collectively, the
"Limited Partnership" and each individually, a "Limited Partnership").
Tenant represents and warrants that the Receivables are, and that they and
all future Receivables will remain during the Term of this Lease, free and clear
of all liens, security interests and further encumbrances except as permitted by
the terms hereof and of the applicable Partnership Agreement.
B. Landlord shall not have any obligation or liability under the
contracts and agreements included in the Receivables by reason of this Article
23, nor shall Landlord be obligated to perform any of the obligations or duties
of Tenant thereunder or to take any action to collect or enforce any claim for
payment thereunder.
C. Tenant shall not sell, assign or otherwise dispose of any of the
Receivables, and shall not create or authorize creation of any lien, security
interest or other charge or further encumbrance upon or with respect to them
except as permitted by the terms of this Article 23 and of the applicable
Partnership Agreement.
D. (i) In the event that Tenant violates the representations,
warranties and covenants set forth in this Article 23 (which representations,
warranties and covenants are hereinafter referred to as the "Negative Pledge"),
Landlord shall give Tenant written notice of said violation ("Landlord's Notice
of Violation") and Tenant shall have twelve (12) days to cure said violation (or
to deposit with Landlord, as alternate security, cash or a "Letter of Credit",
as hereinafter defined, in either case in the amount specified below at
subsection 23.04). In the event that Tenant has failed to either cure the
violation described in Landlord's Notice of Violation or to deposit with
Landlord the alternate security in cash, or in the form of a Letter of Credit,
by the close of business on the twelfth (12th) day following Landlord's
rendition of such Notice, then Landlord shall have the right to file one or more
financing and/or continuation statements and amendments thereto, relative to all
or any part of the Receivables and the "Collateral" (as hereinafter defined)
without the signature of Tenant, and the above-described Negative Pledge
automatically shall convert to a positive and deliberate pledge of all of
Tenant's
<PAGE>
Receivables, and all proceeds and products of the foregoing (in the
aggregate the "Collateral") to Landlord in the aggregate amount specified below
at subsection 23.01D(ii). Tenant hereby irrevocably appoints Landlord as its
attorney-in-fact, with full authority in its place and stead and in its name to
sign in the name and on behalf of Tenant UCC-1 financing statements reasonably
necessary to accomplish the purposes of this Section 23.01D(i), and to file same
in the locations specified below at Section 23.01D(iii)(b). In the event that
Tenant deposits with Landlord the alternate security in cash, or in the form of
a Letter of Credit, within the above-described twelve day period but falls to
cure the violation described in Landlord's Notice of Violation and same
continues, then nothing herein shall prevent or preclude Landlord from suing
Tenant for fraud.
(ii) The aggregate initial amount of the security interest described in
Section 23.01D(i) shall be $950,000.00; however, said amount shall decline
during the first three Rent Years hereunder on a straight line basis at the rate
of $26,388.88 per month to, but not below, $500,000.00 on the last day of the
third Rent Year, and shall remain at $500,000.00 until the end of the Term
unless substitute security, pursuant to the provisions of Section 23.05 below,
is delivered to Landlord.
(iii) Anything In this Article to the contrary notwithstanding, Tenant
shall have the right to encumber its Receivables in favor of a bank, insurance
company, pension plan, institutional lender, or other third party upon thirty
(30) days prior written notice to Landlord provided that, and only to the extent
that, prior to so doing: (a) it grants and delivers to Landlord, in form and
substance reasonably satisfactory to Landlord, a first security interest in its
Receivables in the then-applicable aggregate amount specified above at Section
23.01D(ii) evidenced by a properly executed and acknowledged security agreement
and UCC-1 form financing statements, (b) it files said statements at its cost
and expense with the Secretary of State of the State of New York and with the
Clerk of the County of Westchester (or the state and county in which Tenant is
then headquartered and in which it maintains evidence of its Receivables and
records pertaining thereto) to evidence such security interest, and (c) Landlord
has received a UCC-11 search report evidencing the proper filing of said UCC-1s.
E. During the period of time that the Negative Pledge serves as
security, Tenant shall provide Landlord with copies of its audited financial
statements prepared on an annual basis and with copies of other financial
statements, if any, prepared by Tenant as part of any public record. Once
Tenant takes possession of the Demised Premises, Tenant shall. at least
initially, keep its principal place of business, its principal executive office
and the offices where it keeps its records concerning its Collateral, at the
Building and Tenant shall give Landlord prior written notice of any change in
the location of same.
F. If any "Default" (as hereinafter defined) shall have occurred and
be continuing after Landlord has filed UCC-1 against Tenant's Collateral as
permitted by Section 23.01D(i) hereof, or after Tenant has filed any such UCC-1s
pursuant to Section 23.01D(iii) hereof, then Landlord (i) may exercise in
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a secured
party on default under the New York Uniform Commercial Code and other applicable
laws and agreements; (ii) shall have the right to notify the account debtors or
obligors under any
<PAGE>
Receivables of the assignment thereof to Landlord to the extent of the sums due
Landlord hereunder and to direct such account debtors or obligors to make
payment of all amounts due or to become due thereon directly to Landlord; and
(iii) if Landlord is unable to collect 100% of the above sums due Landlord by
Tenant under this Lease, Landlord shall have the right to notify Tenant's bank
of the amounts due Landlord plus of all monthly installments thereafter coming
due under this Lease and such notice shall serve as direction to such bank to
debit Tenant's account in the amounts specified in Landlord's notice and pay
said amounts directly to Landlord in accordance with this Lease. Upon such
notification, Tenant at its expense shall take all steps necessary to enforce
collection of any such Receivables for Landlord. After such notification and
during the continuation of a Default: (a) Tenant shall not adjust, settle or
compromise the amount or payment of any Receivable, or release wholly or in part
any account debtor or obligor thereunder, or allow any credit or discount
thereon outside of the ordinary course of business; and (b) all amounts and
proceeds received or collected by Tenant in respect of the Receivables or other
collateral up to the total amount due Landlord shall be received in trust for
Landlord and shall be forthwith paid over to Landlord in the same form an so
received (with any necessary endorsement). Nothing herein shall be read as
authorizing Landlord to collect more than one hundred percent of the sums due
Landlord by Tenant under the Lease.
G. Tenant covenants that: (i) all Management Fees payable by the
Limited Partnerships In existence on the date of this Lease are as of said date
payable only to Tenant; (ii) all Management Fees payable by existing and/or by
future Limited Partnerships will be receivable by and paid to no entity other
than Tenant, unless thirty days prior written notice that they are payable to
another party to delivered by Tenant to Landlord together with a security
agreement from said other party granting to Landlord rights in said other
party's Collateral that are substantially similar to those granted by Tenant to
Landlord herein; (iii) it shall do nothing further to limit its right to receive
Management Fees or to terminate any agreements (whether now existing or
hereafter created) under which It receives or is to receive Management Fees;
(iv) it shall take all steps necessary to maintain in full force and effect all
such agreements; and (v) it shall not exercise any right as general partner or
Manager (as such term is defined in existing agreements of Limited Partnership)
or managing agent of any Limited Partnership or to Appoint a new or substitute
Manager, or to transfer its rights to Management Fees to a new or substitute
Manager without prior written notice to Landlord and the delivery to Landlord
from said new Manager of a security agreement granting to Landlord rights in
said newly appointed Manager's Collateral that are substantially similar to
those granted by Tenant to Landlord herein.
23.02. A. For purposes of this Article 23: (i) "Default" shall mean any
of:
nonpayment and/or nonperformance of any of the Liabilities, or the breach
of any covenant, representation or warranty made by Tenant herein; and (ii)
"Management Fees" shall mean those fees representing compensation to Tenant or
its subsidiaries for the provision to the applicable Limited Partnership(s) of
day-to-day management of assets including, but not limited to, marketing and
leasing and releasing of equipment, monitoring the use of collateral for
financing transactions, arranging for necessary maintenance and repairs of
equipment, collecting revenues, paying operating expenses not paid directly by
lessees, determining that equipment is used in accordance with all operative
contractual arrangements, and providing clerical and bookkeeping services.
<PAGE>
B. Any amounts received or collected by Landlord pursuant to this
Article 23 shall be applied in whole or in part by Landlord against all or any
part of the Liabilities, in such order as Landlord shall reasonably determine in
accordance with this Lease. Any surplus in excess of the security to which
Landlord to then entitled under the terms of this Article remaining after
satisfaction in full of all Liabilities shall be paid over to Tenant.
23.03 A. Anything to the contrary hereinabove notwithstanding, Tenant
shall have the right, at any time upon thirty days prior written notice to
Landlord, to substitute for the security interest above described, as the
security for the Liabilities, a sight, demand, unconditional, irrevocable one
year letter of credit (the "Letter of Credit") in the amount specified in
Section 23.04, issued by a national, commercial bank, naming Landlord as payee,
and providing that (a) in the event of and during the continuance of any Default
by Tenant, Landlord may draw on such Letter of Credit in a sufficient amount,
and may apply the proceeds of such drawing, to cure the Default and, at
Landlord's election to reimburse Landlord for any sum which Landlord may incur
and to which Landlord is entitled to be reimbursed under this Lease by reason of
the Default, and (b) in the event that such Letter of Credit is not renewed or
replaced with a like-kind Letter of Credit, prior to 30 days before the maturity
or expiration date of such Letter of Credit, then the full amount of such Letter
of Credit may be drawn by, and paid to, Landlord on or after such date thereupon
Landlord shall deposit such proceeds in a bank account and the same shall
constitute the Security Deposit. In the case of every drawing described in
clause (a) of the preceding sentence. Tenant shall, on demand, pay to Landlord
a cash sum equal to the proceeds so drawn which shall be placed in a bank
account and when added to the undrawn principal balance of the Letter of Credit
shall total at all times an amount equal to the sum specified in Section 23.04.
B. On receipt of a Letter of Credit pursuant to subsection A above,
Landlord shall promptly release Tenant from its obligation under the negative
Pledge described in Section 23.01 and any cash deposits provided to Landlord
pursuant to Section 23.03.
C. Interest an any cash security deposit shall accrue to Tenant, be
applied against any further security payments due hereunder from Tenant. and the
balance. if any, shall be payable as follows: if at the end of the Term Tenant
shall not be in default under this Lease, the security deposits, or any balance
thereof, together with any interest earned thereon, shall be returned to Tenant,
within thirty (30) days after the Expiration Date. If prior to the Expiration
Date Tenant shall be entitled under the terms of this Article to reduce the
amounts held as security hereunder, then so long as Tenant shall not be in
default under this Lease, so much of the Letter of Credit and security deposits
hereunder or any balance remaining thereof shall be returned to Tenant as will
result in there being on deposit with Landlord reduced security deposits in
accordance with the terms of Sections 23.04 and 23.05 hereof.
D. In the event of a sale of the land and Building, the leasing of
the whole Building or the transfer of the Building to the holder of any superior
mortgage or superior lease, Landlord shall have the right to transfer the
security, whether then in form of a Negative Pledge, a security interest in
Receivables or Collateral, a Letter of Credit or cash in a bank account, to any
vendee, lessee or holder who recognizes Tenant's rights under this Lease and
assumes Landlord's obligations under this Lease. Landlord shall thereupon be
released by Tenant from all
<PAGE>
liability for the return or release of such security and, Tenant shall thereupon
look solely to the new landlord for the return or release of said security. It
is agreed that the provisions hereof shall apply to every transfer made of the
security to a new landlord. In connection with any such transfer where any of
the security then in the form of a Letter of Credit, Tenant shall cause the
Letter of Credit to be amended so as to name such transferee as payee, and if
the foregoing is not effected by Tenant within five days of Landlord's written
request, Landlord shall have the right to draw down the Letter of Credit and
transfer the proceeds thereof to such transferee.
E. Tenant further agrees that it will not assign or encumber or
attempt to assign or encumber the cash security deposit and that neither
Landlord nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.
23.04 The amount of the Letter of Credit shall be determined by the Rent
Year in which the said substitution is made. If substitution is made at the
beginning of the first Rent Year, the face amount of the Letter of Credit shall
be $400,000.00; however, said amount shall decline during the first three Rent
Years hereunder on a straight-line basis to be $200,000.00 on the last day of
the third Rent Year. at which amount it shall remain until the end of the Term
unless substitute security, pursuant to the provisions of Section 23.05 below,
is delivered to Landlord.
23.05 Anything to the contrary hereinabove notwithstanding, no later than
thirty days prior to the expiration of the sixth Rent Year, Tenant shall deposit
with Landlord as security for the punctual performance by Tenant of the
Liabilities, either (i) cash or (ii) a Letter of Credit meeting all the
requirements other than amount specified at Section 23.03, in either case in a
sum equal to two times (x) the average monthly Base Rent payable for the seventh
through twelfth Rent Years of the Term, plus (y) the monthly increases then
payable under Articles 6 and 10. Upon receipt of said deposit in accordance
with the requirements of this Section 23.05, (1) Landlord shall promptly return
to Tenant any previously delivered Letter of Credit, whereupon Tenant shall be
released from its negative Pledge above described at Section 23.01, and (2) for
the balance of the Term Landlord shall have all of the rights, and Tenant shall
have all of the obligations, described above at Sections 23.03C, D and E. If
Tenant shall fail to so deposit timely, such failure shall constitute a Default
thereunder and Landlord shall have the right to draw down any Letter of Credit
then deposited with Landlord, pursuant to Section 23.03A hereof.
23.06 Tenant acknowledges that Landlord is relying on each and every one
of the covenants, representations and warranties above set forth in this Article
23 in entering into this Lease, and agrees that any violation of said covenants,
representations and warranties shall, among all other rights and remedies
available to Landlord therefor, constitute fraud.
<PAGE>
ARTICLE 24
Quiet Enjoyment, Subordination and Attornment, and
Notice Prior to Suit
24.01 Landlord covenants that if, and so long as, Tenant pays all of the
Base Rent and additional rent due hereunder, and keeping and performing each and
every covenant, agreement, term, provision and condition herein contained on the
part and on behalf of Tenant to be kept and performed, Tenant shall quietly
enjoy the Demised Premises without hindrance or molestation by Landlord or by
any other person lawfully claiming the same, subject to the covenants,
agreements, terms, provisions and conditions of this Lease and to any superior
leases and/or superior mortgages.
24.02 This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate in all respects to all present and future ground leases,
over-riding leases and underlying leases and/or grants of term of the land
and/or the Building or the portion thereof in which the Demised Premises are
located in whole or in part now or hereafter existing ("superior leases") and to
all mortgages and building loan agreements, which may now or hereafter affect
the land and/or the Building and/or any superior leases ("superior mortgages")
whether or not the superior leases or superior mortgages shall also cover other
lands and/or buildings, and to each and every advance made or hereafter to be
made under the superior mortgages, and to all renewals, modifications,
replacements and extensions of the superior leases and superior mortgages and
spreaders, consolidations and correlations of the superior mortgages. This
Section shall be self-operative and no further instrument of subordination shall
be required. In confirmation of such subordination, Tenant shall promptly
execute and deliver at its own cost and expense any instrument, in recordable
form, if required, that Landlord, the lessor of any superior lease or the holder
of any superior mortgage of any of their respective successors in interest may
request to evidence such subordination and Tenant hereby constitutes and
appoints Landlord attorney-in-fact for Tenant to execute any such instrument for
and an behalf of Tenant.
Tenant agrees without further instruments of attornment in each came, to
attorn to lessor under any superior lease, or the holder of any superior
mortgage, as the case may be to waive the provisions of any statute or rule or
law now or hereafter in effect which may give or propose to give Tenant any
right of election to terminate this Lease or to surrender possession of the
Demised Premises in the event a superior lease is terminated or a superior
mortgage is foreclosed, and that unless and until said lessor, or holder, as the
case may be, shall elect to terminate this Lease, this Lease shall not be
affected in any way whatsoever by any such proceeding or termination, and Tenant
shall take no steps to terminate this Lease without giving written notice to
said lessor under the superior lease, or holder of a superior mortgage, and a
reasonable opportunity to cure (without such lessor or holder being obligated to
cure), any default on the pact of the Landlord under this Lease. In
confirmation of such attornment, Tenant shall promptly execute and deliver at
its own cost and expense any Instrument, in recordable form, if required, that
Landlord, the lessor of any superior lease or the holder of any superior
mortgage or any of their respective successors in interest may request to
evidence such attornment, and Tenant hereby constitutes and appoints Landlord
attorney-in-fact for Tenant to execute any such instrument for and on behalf of
Tenant.
Landlord shall obtain, and deliver to Tenant within 20 business days
following the Execution Date, from the holder of any present superior mortgage
and superior lease (and Landlord shall use due diligence to obtain from the
holder of any future superior mortgage and
<PAGE>
superior lease) a "non-disturbance agreement", duly executed by such holder,
which shall mean an agreement, in such holder's standard form (so long as
consistent to instruments of other such holders in the area in which the
Building is located), that so long an Tenant is not in default beyond any
applicable cure period, in the event of any termination of the superior lease or
any foreclosure of the superior mortgage, this Lease shall not be terminated by
Landlord and Tenant shall not be named as a party, unless technically so
necessary, in any proceedings in connection therewith.
24.03 Notwithstanding any contrary provision of this Lease, Tenant shall
not under any circumstances commence any action or proceeding or take any action
based upon an alleged breach or default of this Lease by or through Landlord
unless and until (a) Tenant shall have notified Landlord thereof, specifying in
detail the facts of the alleged breach or default, and (b) Landlord shall not
have cured, or used due diligence to cure, said alleged breach or default within
20 days after receipt of said notice.
ARTICLE 25
Brokerage
Tenant represents that, in the negotiation of this Lease, it dealt with no
broker or brokers other than the Leasing Broker, and based thereupon Landlord
agrees to pay to the Leasing Broker a brokerage fee per a separate agreement
between Landlord and Leasing Broker which either has been entered into at the
time of signing this Lease or which may hereinafter be entered into. Tenant
thereby indemnities Landlord and agrees to hold Landlord harmless from any and
all losses, costs. damages, expenses, claims and liabilities, Including, without
limitations court costs and attorneys' fees and disbursements, arising out of
any inaccuracy or alleged inaccuracy of the above representation. Landlord
shall have no liability for brokerage commissions arising out of any sublease by
Tenant, and Tenant shall and does hereby Indemnify Landlord and hold Landlord
harmless from any and all liabilities for brokerage commission arising out of
any such sublease.
ARTICLE 26
Re-Entry by Landlord on Tenant's Default,
Curing Tenant's Defaults
26.01 If this Lease shall terminate for any reason whatsoever, Landlord or
Landlord's agents and employees may, without further notice, immediately or at
any time thereafter enter upon and re-enter the Demised Premises, or any part
thereof, and possess or repossess itself thereof either by summary dispossess
proceedings, ejectment or by any suitable action or proceeding at law, or by
agreement, and may dispossess and remove Tenant and all other persons and
property from the Demised Premises without being liable to indictment,
prosecution, or damages therefor, and may repossess the same, and may remove any
persons therefrom, to the end that Landlord may have, hold and enjoy the Demised
Premises and the right to receive all
<PAGE>
rental income again as and of its first estate and interest therein. The words
"enter" or "re-enter", "possess" or "repossess" an herein used, are not
restricted to their technical legal meaning. In the event of any termination of
this Lease under the provisions of Article 21 or re-entry under this Article or
in the event of the termination of this Lease or of re-entry by summary
dispossess proceedings, ejectment or by any suitable action or proceeding at
law, or by agreement, by reason of default hereunder on the part of Tenant,
Tenant shall thereupon pay to Landlord the Base Rent and additional rent due up
to the time of such termination of this Lease or of such recovery of possession
of the Demised Premises by Landlord, as the came may be, and shall also pay to
Landlord damages as provided In Article 30.
26.02 In the event of any breach or threatened breach by Tenant of any of
the agreements, terms, covenants or conditions contained in this Lease, Landlord
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any right and remedy allowed at law or in equity or by statute
or otherwise as though re-entry, summary proceedings, and other remedies were
not provided for In this Lease.
26.03 Each right and remedy of Landlord provided for in this Lease shall
be cumulative and shall be in addition to every other right or remedy provided
for in this Lease or now or hereafter existing at law or in equity or by statute
or otherwise, and the exercise or beginning of the exercise by Landlord of any
one or more of the rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise.
26.04 If this Lease shall terminate under the provisions of Article 21, or
if Landlord shall re-enter the Demised Premises under the provisions of this
Article 26, or in the event of the termination of this Lease or of re-entry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant Landlord shall be
entitled to retain all monies, if any, paid by Tenant to Landlord, whether as
advance rent, security or otherwise, but such monies shall be credited by
Landlord against any Base Rent or additional rent due from Tenant at the time of
such termination or re-entry or, at Landlord's option, against any damages
payable by Tenant under Article 30 or pursuant to law.
26.05 If Tenant shall default in the performance of any covenant,
agreement, term, provision or condition herein contained, Landlord without
thereby waiving such default, may perform the same for the account and at the
expense of Tenant without notice in case of emergency and in any other case if
such default continues after three (3) days from the due date of the giving by
Landlord to Tenant of written notice of intention to do so. Bills for any
reasonable and necessary expense incurred by Landlord in connection with any
such performance by Landlord for the account of Tenant, and reasonable and
necessary bills for all costs, expenses and disbursements, including (without
being limited to) reasonable counsel fees, incurred in collecting or endeavoring
to collect the Base Rent or additional rent or other charge or any part thereof
or enforcing or endeavoring to enforce any rights against Tenant under or in
connection with this Lease, or pursuant to law, whether or not any action or
proceeding is instituted, payable by Tenant, within three (3) days of notice to
Tenant and if not paid when due, the amounts
<PAGE>
thereof shall immediately become due and payable as additional rent under this
Lease together with interest thereon at the lesser of the maximum rate permitted
by law or the rate of three (3%) percent per month or portion thereof from the
date the said bills should have been paid in accordance with their terms.
Landlord reserves the right, without liability to Tenant and without
constituting any claim or constructive eviction, to suspend furnishing or
rendering to Tenant any property, material, labor, utility or other service,
wherever Landlord is obligated to furnish or render the same at the expense of
Tenant in the event that (but only for so long as) Tenant is in arrears in
paying Landlord therefor.
26.06 To secure the payment of all rent and its performance of this
Lease, Tenant grants to Landlord an express first and prior lien and security
interest on all Tenant's Property which may be placed in the Demised Premises,
and also upon all proceeds of any insurance which may accrue to Tenant by reason
of the destruction or damage of any such Tenant's Property. Tenant will not
remove such Tenant's Property from the Demised Premises (except in the ordinary
course of business) without the written consent of Landlord until all arrearages
in rent have been paid. Tenant waives the benefit of all exemption laws in
favor of such lien and security interest. This lien and security interest is
given in addition to Landlord's statutory lien and is cumulative with it. Upon
the occurrence of an event of default, these liens may be foreclosed with or
without court proceedings by public or private sale, so long as Landlord gives
Tenant at least fifteen (15) days' notice of the time and place of the sale.
Landlord will have the right to become the purchaser if it is the highest bidder
at such sale. Contemporaneous with its execution of this Lease (and if
requested after such execution by Landlord), Tenant will execute and deliver to
Landlord Uniform Commercial Code financing statements in form and substance
sufficient (upon proper filing) to perfect the security interest granted in this
Section. If requested by Landlord, Tenant also will execute and deliver to
Landlord Uniform Commercial Code continuation statements In form and substance
sufficient to reflect any proper amendment of, modification in, or extension of
the security interest granted in this Section.
ARTICLE 27
Notices
27.01 Whenever either party shall consist of more than one (1) person or
entity, any notice, statement. demand, or other communication required or
permitted and any payment to be made shall be deemed duly given or paid if
addressed to or by (or in the case of payment by check, to the order of) any one
of such persons or entities who shall be designated from time to time an the
authorized representative of such party. Such party shall promptly notify the
other of the identity of such person or entity who is so to act on behalf of all
persons and entitles then comprising such party and of all changes in such
identity.
27.02 Any notice, statement, demand, request or other communication
required or permitted pursuant to this Lease or otherwise shall be in writing
and shall be deemed to have been properly given if addressed to the other party
at the address hereinabove set forth (except that after the Commencement Date,
Tenant's address, unless Tenant shall give notice to the
<PAGE>
contrary, shall be the Building), and (a) if sent to such address by (i)
registered or certified United States mall, return receipt requested, postage
prepaid, or (ii) United States Express mail or private reputable overnight
carrier, charges prepaid, or (b) if personally delivered to such address to an
officer, partner or other authorized representative of the other party, receipt
requested, then in any of such events referred to in clauses (a) and (b) above,
notice shall be deemed to have been given, rendered or made upon delivery, or if
rejected when delivery was attempted. Either party may, by notice as aforesaid,
designate a different address or addresses (not to exceed two) for notices,
statements, demands or other communications intended for it. However, notices
requesting After Hours services pursuant to Sections 7.01 and 11.03 may be
given, provided they are in writing, by delivery to the Building Superintendent
or any other person in the Building designated by Landlord to receive such
notices, and notice of fire, accident or other emergency shall be given by
telegram or by personal delivery of written notice to that address designated
for this purpose from time to time by the respective parties hereto.
27.03 Tenant shall give notice to Landlord promptly after Tenant learns
thereof (a) of any accident in or about the Demised Premises or the Building,
(b) of all fires in the Demised Premises, (c) of all damages to or defects in
the Demised Premises, including the fixtures, equipment and appurtenances
thereof, for the repair of which Landlord might be responsible or which
constitutes Landlord's property, and (d) of all damage to or defects in any
parts or appurtenances of the Building's sanitary, electrical, heating,
ventilating, air conditioning, elevator and other systems located in or passing
through the Demised Premises.
ARTICLE 28
Rules and Regulations; Laws and Requirements
of Public Authorities
28.01 Tenant covenants that promptly it shall notify Landlord of any
written notice it receives of the violation of, and Tenant shall comply with,
all present and future laws, statutes, codes, rules, regulations and
requirements of any Federal, State, Municipal or other public authorities which
shall, with respect to the Building or the Demised Premises or the use and
occupation thereof or the abatement of any nuisance therein, impose any
violation, order, duty or obligation in connection with or arising from (a)
Tenant's or any other party's use of the Demised Premises, (b) the manner of
conduct of any business therein or the operation of any installations, equipment
or other property therein, (c) any cause or condition created by or at the
instance of Tenant or any other party, (d) breach of any of Tenant's obligations
hereunder, or (e) any event which with notice or the passage of time, or both,
would constitute a default under this Lease.
28.02 Tenant and its employees and scents shall, at their sole cost and
expenses, faithfully observe and company with (a) the Rules and Regulations
annexed hereto as Exhibit "C", and such reasonable changes therein (whether by
modification, elimination or addition) as Landlord at any time or times
hereafter may make and communicate in writing to Tenant, which do not
unreasonably affect the conduct of Tenant's business in the Demised Premises;
provided however, that in case of any conflict or inconsistency between the
provisions of this Lease and
<PAGE>
any Rules and Regulations changed subsequent to the date of this Lease the
provision of this Lease shall control, and (b) all laws, statutes, codes, rules,
regulations and requirements referred to in Section 28.01 hereof.
ARTICLE 29
Non-Liability, Indemnification and Non-Recourse
29.01 Neither Landlord nor any agent or employee of Landlord shall be
liable to Tenant. Its employees, agents, contractors and licensees, and Tenant
shall hold Landlord harmless for any injury or damage to Tenant or to any other
persons for any damage to, or lose (by theft, vandalism or otherwise) of, any
property of Tenant and/or of any other person, irrespective of the cause (unless
caused by Landlord's gross negligence or willful act) of such injury, damage or
lose, including, without limitation, that caused by water regardless of its
source, or that resulting from promulgating or falling to promulgate or enforce
any Rules and Regulations specified in Exhibit "C". Landlord shall not be
liable in any event for loss of, or damage to, any property entrusted to any of
landlord's employees or agents by Tenant, without Landlord's specific written
consent. Landlord shall not be liable for the security or physical safety of
Tenant, its employees, agents or visitors, including. without limitation, after
hours use of the Demised Premises, the Building or the Real Property.
29.02 Tenant shall defend, indemnify and save harmless Landlord and its
agents and employees against and from all liabilities, obligations, damages,
penalties, claims, costs, charges and expenses, including reasonable architects'
and attorneys' fees, which may be imposed upon or incurred by or asserted
against Landlord and/or its agents by reason or any of the following occurring
during the Term, or during any period of time prior to the Commencement Date
that Tenant may have been given access to or possession of all or any part of
the Demised Premises: (a) any work or thing done in on or about the Demised
Premises or any part thereof by or at the instance of Tenant, its agents,
contractors, subcontractors, servants, employees, licensees, or invitees; (b)
any negligence or otherwise wrongful act or omission on the part of Tenant or
any of its agents, contractors, subcontractors, servants, employees, licensees,
or invitees (c) any accident, injury, or damage to any person or property
occurring in, on or about the Demised Premises or any part thereof, or vault,
passageway, or space adjacent thereto; (d) any failure on the part of Tenant to
perform or comply with any of the covenants, agreements, terms, provisions,
conditions or limitations contained in this Lease on its part to be performed or
complied with. In case any action or proceeding is brought against Landlord by
reason of any such claim, Tenant upon written notice from Landlord shall at
Tenant's expense resist or defend such action or proceeding by counsel approved
by Landlord in writing, which approval Landlord shall not unreasonably be
withheld.
29.03 Except as otherwise provided herein, this Lease and the obligations
of Tenant to pay rent hereunder and perform all of the other covenants,
agreements, terms, provisions and conditions hereunder on the part of Tenant to
be performed shall in no wise be affected, impaired or excused because Landlord
is unable to fulfill any of its obligations under this Lease or is unable to
supply or is delayed in supplying any service, express or implied, to be
supplied or is
<PAGE>
unable to make or is delayed in supplying any equipment or fixtures if Landlord
is prevented or delayed from so doing by reason of any Events of Force Majeure,
as defined in Section 4.04 hereof; provided that Landlord shall in each instance
exercise reasonable diligence to effect performance when and as soon as
possible. However, nothing contained in this Section shall be deemed to extend
or otherwise modify or affect any of the time limits and conditions set forth in
Section 15.03.
29.04 Notwithstanding any contrary provisions of this Lease whatsoever,
including, without limitation, those pertaining to use and Permitted Use, Tenant
shall not use, or permit the use of the Demised Premises or the Real Property so
as to create or result in, directly or indirectly, (a) any sudden or gradual
spill, leak, discharge, escape, seepage, infiltration, abandonment, dumping,
disposal or storage of any hazardous or industrial waste, substance or
contamination, effluent, sewage, pollution or other detrimental or deleterious
material or substance (including without limitation asbestos), or the disposal,
storage or abandonment on the Real Property of any material, tank or container
holding or contaminated by any of the foregoing or residues thereof, or the
installation of any material or product containing or composed of any of the
foregoing, in, on, from under or above the Real Property (the foregoing
occurrences being hereinafter collectively called "Environmental Hazard"), or
(b) any violation, or state of facts or condition which would result in a
violation, of any Federal, State or local statute, law, code, rule, regulation
or order applicable to any Environmental Hazard (the foregoing being hereinafter
collectively called "Legal Violation"). In the event of the violation of the
foregoing by Tenant, in addition to all other rights and remedies of Landlord
under this Lease, regardless of when the existence of the Environmental Hazard
or Legal Violation is determined, and whether during the Term or after the
Expiration Date, (I) Tenant shall, immediately upon notice from Landlord, at
Tenant's sole cost and expense, at Landlord's option either (x) take all action
necessary to test, identify and monitor the Environmental Hazard and to remove
the Environmental Hazard from the Real Property and dispose of the same and
restore the Real Property to the condition existing prior to such removal,
and/or to remedy any Legal Violation, all in accordance with applicable Federal,
State and local statutes, laws, codes, rules, regulations or orders or (y)
reimburse Landlord for all costs and expenses incurred by Landlord for
engineering or environmental consultant or laboratory services) in testing,
investigating, identifying and monitoring the Environmental Hazard and in
removing and disposing of the Environmental Hazard and in restoring the Real
Property, and/or in remedying any Legal Violation, and (II) Tenant shall and
hereby does defend with legal counsel acceptable to Landlord, indemnify and save
harmless Landlord and Others in Interest against and from all liabilities,
obligations, damages, penalties, claims, costs, charges and expenses, including
architects' and attorneys' fees and disbursements which may be imposed upon or
incurred by or asserted against Landlord and Others in Interest, whether by any
governmental authority, Tenant or other third party, by reason of any violation
or alleged violation of any of the foregoing provisions of this Section.
29.05 Tenant shall look solely to the estate and interest of Landlord, its
successors and assigns, in the land and Building (or the proceeds thereof) for
the collection of a judgment (or other judicial process) requiring the payment
of or money by Landlord in the event of any default by Landlord hereunder, and
no other property or assets of Landlord (or if Landlord is a
<PAGE>
partnership of any partner of Landlord) shall be subject to levy, execution or
other enforcement procedure for the satisfaction of Tenant's remedies under or
with respect to either this Lease, the relationship of Landlord and Tenant
hereunder or Tenant's use and occupancy of the Demised Premises.
29.06 All of the provisions of this Article 29 shall survive termination
of this Lease.
ARTICLE 30
Damages
30.01 If this Lease is terminated under the provisions of Article 21, or
if Landlord shall re-enter the Demised Premises under the provisions of Article
26 or in the event of the termination of this Lease, or of re-entry by summary
dispossess proceedings, ejectment or by any suitable action or proceeding at
law, or by agreement, or by force or otherwise, by reason of default hereunder
on the part of Tenant, Tenant shall pay to Landlord as damages, at the election
of Landlord, either.
A. on demand, a sum which at the time of such termination of this
Lease or at the time of any such re-entry by Landlord, as the case may be,
represents the excess of (1) the aggregate of the Base Rent and the additional
rent payable hereunder which would have been payable by Tenant (conclusively
presuming the additional rent to be the same as was payable for the year
immediately preceding such termination) for the period commencing with such
earlier termination of this Lease or the date of any such re-entry, as the case
may be, and ending with the expiration of the Term, had this Lease not so
terminated or had Landlord not so re-entered the Demised Premises, over (2) the
aggregate market rental value (calculated as of the date of such termination or
re-entry) of the Demised Premises for the same period, or,
B. sums equal to the Base Rent and the additional rent (as above
presumed) payable hereunder which would have been payable by Tenant had this
Lease not so terminated, or had Landlord not so re-entered the Demised Premises,
payable quarterly but otherwise upon the terms therefor specified herein
following such termination or such re-entry and until the expiration of the
Term, provided, however, that if Landlord shall relet the Demised Premises or
any portion or portions thereof during said period Landlord shall credit Tenant
with the net rents received by Landlord from such reletting, such net rents to
be determined by first deducting from the gross rents as and when received by
Landlord from such reletting the expenses incurred or paid by Landlord in
terminating this Lease or in re-entering the Demised Premises and in securing
possession thereof, as well as the expenses of reletting, including altering and
preparing the Demised Premises or any portion or portions' thereof for new
tenants, brokers' commissions, advertising expenses, attorneys' fees, and all
other expenses properly chargeable against the Demised Premises and the rental
therefrom; it being understood that any such reletting may be for a period
shorter or longer than the remaining Term of this Lease but in no event shall
Tenant be entitled to receive any excess of such net rents over the sums payable
by Tenant to Landlord hereunder, nor shall Tenant be entitled to any suit for
the collection of damages pursuant to this
<PAGE>
Subsection to a credit in respect of any net rents from a reletting, except to
the extent that such net rents are actually received by Landlord. If the Demised
Premises or any part thereof should be relet in combination with other space,
then proper apportionment shall be made of the rent received from such reletting
and of the expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord for the
unexpired portion of the Term, or any part thereof, before presentation of proof
of such damages to any court, commission, or tribunal, the amount of rent
reserved upon such reletting shall, prima facie, be the fair and reasonable
----- -----
rental value for the Demised Premises, or any part thereof, so relet during the
term of the reletting. Landlord, however, shall in no event and in no way be
responsible or liable for any failure to relet the Demised Premises or any part
thereof or for failure to collect any rent due upon any such reletting. In the
event this Lease is so terminated, Landlord shall use reasonable efforts to
relet the Demised Premises.
30.02 Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord from time to time at its election, and
nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when the Term would have expired if it had not been so terminated
under the provisions of Article 21, or under any provision of law, or had
Landlord not reentered the Demised Premises. Nothing herein contained shall be
construed to limit or preclude recovery by Landlord against Tenant of any sums
or damages to which, in addition to the damages particularly provided above,
Landlord may lawfully be entitled by reason of any default hereunder or
otherwise an the part of Tenant. Nothing herein contained shall be construed to
limit or prejudice the right of the Landlord to prove for and obtain as
liquidated damages by reason of the termination of this Lease or re-entry on the
Demised Premises for the default of Tenant under this Lease, an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved whether or
not such amount be greater, equal to, or less than any of the sums referred to
in Section 30.01.
30.03 Anything in this Lease to the contrary notwithstanding, if Tenant
shall at any time be in default hereunder, whether or not Landlord shall
institute an action or summary proceeding against Tenant based upon such default
and whether or not such default results from non-payment of Base Rent or
additional rent, or if Tenant requests Landlord to review or execute documents
(including, without limitations any sublease or occupancy documents) in
connection with this Lease or to grant its consent or approval to the making of
Tenant's Changes or any other thing, or otherwise if it is reasonably prudent
for Landlord to contact legal counsel, architects, engineers or other
representatives or agents as to the form or substance of any of the foregoing,
then Tenant shall reimburse Landlord, as additional rent, for all fees, charges
and disbursements of such attorneys, architects, engineers or other
representatives or agents, thereby Incurred by Landlord.
<PAGE>
ARTICLE 31
Waivers, Failure to Enforce Terms, Modifications
31.01 Tenant, for itself, and on behalf of any and all persons claiming
through or under Tenant, including creditors of all kinds. does hereby waive and
surrender all right and privilege so far as is permitted by law, which they or
any of them might have under or by reason of any present or future law, of the
service of any notice of intention to re-enter and also waives any and all right
of redemption or re-entry or repossession in case Tenant shall be dispossessed
or ejected by process of law or in case of re-entry or repossession by Landlord
or in case of any expiration or termination of this Lease as herein provided.
31.02 Tenant waives Tenant's rights, if any, to assert a counterclaim in
any summary proceeding brought by Landlord against Tenant, and Tenant agrees to
assert any such claim against Landlord only by way of a separate action or
proceeding.
31.03 Tenant waives Tenant's rights, If any, to designate the items
against which any payments made by Tenant are to be credited, and Tenant agrees
that Landlord may apply any payments made by Tenant to any items it sees fit,
irrespective of and notwithstanding any designation or request by Tenant as to
the Items against which any such payments shall be credited.
31.04 To the extent not prohibited by applicable law, Landlord and Tenant
hereby waive trial by jury in any action, proceeding or counterclaim brought by
either against the other or any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, or Tenant's
use or occupancy of the Demised Premises, or any emergency or other statutory
remedy with respect thereto.
31.05 The failure of either party to Insist in any one or more instances
upon the strict performance of any one or more of the agreements, terms.
covenants, conditions or obligations of this Lease, or to exercise any right,
remedy, or election herein contained, shall not be construed as a waiver or
relinquishment for the future of the performance of such one or more obligations
of this Lease or of the right to exercise such election, but the same shall
continue and remain in full force and effect with respect to any subsequent
breach, act or omission. The manner of enforcement or the failure of Landlord to
enforce any of the Rules and Regulations set forth herein, or hereafter adopted
against the Tenant and/or any other tenant in the Building shall not be deemed a
waiver of any such Rules and Regulations.
31.06 No agreement to accept a surrender of all or any part of the Demised
Premises shall be valid unless in writing and signed by Landlord. The delivery
of keys to an employee of Landlord or of its agent shall not operate as a
termination of this Lease or a surrender of the Demised Premises. If Tenant
shall at any time request Landlord to sublet the Demised Premises for Tenant's
account, Landlord or its agent is authorized to receive said keys for such
purposes without releasing Tenant from any of its obligations under this Lease,
and Tenant hereby releases Landlord of any liability for loss or damage to any
of Tenant's Property in connection with such subletting.
31.07 A. No executory agreement hereafter made between Landlord and Tenant
shall be effective to change, modify, waive, release, discharge, terminate or
effect an
<PAGE>
abandonment of this Lease, in whole or in part, unless such executory agree in
writing, refers expressly to this Lease and is signed by the party against whom
enforcement of the change, modification, waiver, release, discharge or
termination or effectuation of the abandonment is sought.
B. If, in connection with obtaining, continuing or renewing financing for
the Real Property or any part thereof (or leasehold or any interest therein)
represents collateral in whole or in part, a banking, insurance or other lender
shall request modifications of this Lease as a condition of such financing,
Tenant will not withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or adversely
affect to a material degree the Tenant's leasehold interest hereby created.
ARTICLE 32
Shoring
32.01 if an excavation or other substructure work shall be undertaken or
authorized upon land adjacent to the Building or in the vaults beneath the
Building or in subsurface space adjacent to the said vaults, Tenant, without
liability on the part of the Landlord therefor, shall afford to the person
causing or authorized to cause such excavation or other substructure work
license to enter upon the Demised Premises for the purpose of doing such work as
such person shall deem necessary to protect or preserve any of the walls or
structures of the Building or surrounding lands from injury or damage and to
support the same by proper foundations, pinning and/or underpinning, and, except
in case of emergency, if so requested by Tenant such entry shall be accomplished
in the presence of a representative of Tenant, who shall be designated by Tenant
promptly upon Landlord's request. The said license to enter shall be afforded
by Tenant without any claim for damages or indemnity against the Landlord, and
Tenant shall not be entitled to any diminution or abatement of rent on account
thereof.
ARTICLE 33
Successors and Assigns, No Other Representations, Construction
33.01 The obligations of this lease shall bind and benefit the successors
and assigns of the parties with the same effect an if mentioned in each instance
where a party is named or referred to, except that no violation of the
provisions of Article 22 shall operate to vest any rights in any successor or
assignee of Tenant, and that the provisions of this Article shall not be
construed as modifying the conditions of limitation contained in Article 21.
However, the obligations of Landlord under this Lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Building as owner or lessee thereof and in the event of such
transfer such obligations shall thereafter be binding upon each transferee of
the interest of Landlord herein named as such owner or lessee of the Building,
but only with respect to the period ending with a subsequent transfer within the
meaning of this Article, and such transferee, by accepting such interest, shall
be deemed to have assumed such obligations except
<PAGE>
only as may be expressly otherwise provided elsewhere in this Lease. A lease of
Landlord's entire interest in the Building as owner or lessee thereof shall be
deemed a transfer within the meaning of this Article 33.
33.02 This Lease supersedes and revokes all previous negotiations,
arangements, letters of intent, offers to lease, lease proposals, brochures,
"Representations" (meaning covenants, promises, assurances, agreements,
representations, conditions, warranties, statements and understandings) and
information conveyed, whether oral or in writing, between the parties hereto or
their respective representatives or any other person purporting to represent
Landlord or Tenant. Tenant expressly acknowledges and agrees that Landlord has
not made, and is not making, and Tenant, in executing and delivering this Lease,
is not relying upon, and has not been induced to enter into this Lease by, any
Representations, except to the extent that the same are expressly set forth in
this Lease or in any other written agreement which may be made and executed
between the parties concurrently with the execution and delivery of this Lease
and shall expressly refer to this Lease, and no such Representations not so
expressly herein set forth shall be used in the interpretation or construction
of this Lease, and Landlord shall have no liability for any consequences arising
as a result of any such Representations not so expressly herein set forth.
33.03 If any of the provisions of this Lease, or the application thereof
to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
or provisions to persons or circumstances other than those as to whom or which
it is held invalid or unenforceable, shall not be affected thereby, and every
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
ARTICLE 34
Miscellaneous Provisions
34.01 All work, including but not limited to, waxing or additional
cleaning that Tenant does or shall do in the Demised Premises, shall be done
with union labor and materials only, by contractors approved in writing by
Landlord, shall at all times conform to the standards of the Building and shall
comply with all laws and/or requirements of public authorities. Tenant, as
additional rent, shall indemnify and hold harmless Landlord, against any loss or
damage Landlord may sustain by reason of, and against, any orders, decrees.
judgments; attorneys' fees and expenses resulting from, failure of Tenant to
comply with provisions hereof.
34.02 The Article headings in this Lease and the Table of Contents
prefixed to this Lease are inserted only as a matter of convenience or
reference, and are not to be given any effect whatsoever in construing this
Lease.
34.03 Any provision of this Lease which requires a party not to
unreasonably withhold its consent, (a) shall be read as if the word "withhold"
read "withhold, delay or defer", and (b) shall never be the basis for any award
of damages (unless exercised in intentional and deliberate bad faith) or give
rise to a right of setoff to the other party, but shall be the basis for a
declaratory judgment or specific injunction with respect to the matter in
question.
<PAGE>
34.04 Wherever in this Lease Landlord performs any work due to Tenant's
default as set forth in Section 26.01 hereof, due to Tenant's failure to perform
any of the conditions on its part to be performed hereunder, or wherever
Landlord otherwise performs work at Tenant's cost and expense, then such work
performed at the Work Charge.
34.05 This Lease is offered to Tenant for signature with the express
understanding that it shall not be binding upon Landlord unless and until,
within 10 business days after the date Tenant signs this Lease, Landlord shall
have executed and delivered a fully executed copy to Tenant ("Execution Date"),
and the holder of any and all superior mortgages shall have approved the same;
it is understood that such holder already has sent to Tenant a letter confirming
such holder's agreement to make available $725,000 for purposes of paying costs
of Tenant's Work.
34.06 Intentionally omitted.
34.07 This Lease shall be governed in all respects by and construed under
the Laws of the State of New York.
34.08 This Lease shall be construed without any regard to any presumption
or other rule regarding construction against the party Causing this Lease to be
drafted.
34.09 Notwithstanding any cancellation or termination of this Lease,
nothing herein shall be construed to release Tenant from any liability or
responsibility (whether then or thereafter accruing) with respect to any acts,
omissions or obligations of Tenant occurring prior to such cancellation or
termination, all of which shall survive such cancellation or termination.
ARTICLE 35
Cafeteria
35.01 Landlord shall provide space on the ground floor of the Building for
use as a public cafeteria, which Tenant's employees may use in common with other
tenants of the Building, and Landlord shall provide an operator therefor to
operate the cafeteria ("Cafeteria"). Landlord shall use due diligence to cause
the Cafeteria to be opened and in operation by January 1, 1993. In the event the
Commencement Date has occurred and the Cafeteria is not so open and in operation
by January 1, 1993, then until such operation occurs, Landlord shall make
available other space in the Building for employees of Tenant and other tenants
in the Building to use for the consumption of food, and in such space Landlord
shall cause to be provided food and beverages for sale to such employees; if and
for so long as Landlord is required but fails to provide such other space, other
than due to Force Majeure, Landlord shall owe Tenant a reduction at a rate of
$1,000 per month.
<PAGE>
ARTICLE 36
Storage Space
36.01 Landlord shall provide approximately 5,000 rentable square feet of
storage space in the basement level of the Building ("Storage Space"), for
Tenant's "dead file storage". Notwithstanding anything to the contrary, the
rights and obligations under this Article 36 are based upon, and subject to, the
following:
(a) The Storage Space shall be used only in accordance with all applicable
laws, statutes and codes.
(b) The Base Rent for the Storage Space shall be at the rate of $5.00 per
rentable square foot per annum (following the first four Rent Years during which
no Base Rent for the Storage Space shall be due), subject to increase under
Articles 6 and 7 hereof as though the Storage Space originally had been included
and leased under this Lease.
(c) Tenant may not sublease or assign the Storage Space except to a party
to whom or which Tenant may have subleased all of the Demised Premises in
accordance with this Lease.
(d) The terms and conditions of the leasing of the Storage Space shall be
as follows, except to the extent that the parties otherwise mutually agree:
(i) The Storage Space shall be delivered to Tenant "as is" and in the
same condition in which any prior tenant vacated it, and none of Landlord's
obligations under Article 4 or elsewhere in this Lease, regarding improvement of
any space shall be applicable. Tenant shall be responsible to secure the
Storage Space, subject to Landlord's approval not to be unreasonably withheld.
(ii) The term of the leasing of Storage Space shall be the same as the
Term of this Lease.
(iii) No credit against (or contribution towards) cost of
improvements or other items shall be applicable to the Storage Space.
(iv) The term "Demised Premises" shall be deemed to include the
Storage Space.
(v) There shall be no increases in the parking spaces as a result of
the Storage Space.
(vi) None of Landlord's services provided under this Lease (including,
without limitation, those provided under Articles 11 and 12 hereof) shall be
applicable or provided to the Storage Space.
(vii) Except as otherwise in this Article 36, and except as sense
otherwise would require due to the fact that storage space rather than office
space is involved, all of the other terms and conditions of this Lease shall be
applicable to the Storage Space as though the
<PAGE>
Storage Space had been included in this Lease as of the Commencement Date of the
Term.
ARTICLE 37
Continuation Term
37.01 Provided that this Lease is in full force and effect, that Tenant is
not in default under this Lease beyond any applicable notice and cure period,
and that tenant has not then subleased more than 25% of the Demised Premises or
assigned this Lease (other than to an affiliate), then Tenant shall have the
option to continue leasing for an additional period of five years commencing on
the day immediately following the Expiration Date ("First Continuation Term")
upon the following terms and conditions:
(a) The space to be included in the First Continuation Term shall be the
same space as was included in the Lease at the moment immediately prior to the
commencement of the First Continuation Term.
(b) Tenant shall exercise its option to lease for the First Continuation
Term by notifying Landlord thereof ("First Continuation Notice") not later than
ten full calendar months prior to the Expiration Date of the Term.
(c) Provided that Tenant complies with the conditions in Section 37.01 (b)
hereof, then the following terms shall be applicable to the First Continuation
Term:
(i) The Demised Premises shall be delivered to Tenant "as is", in
their same condition, and none of Landlord's obligations under Articles 4, 5,
Exhibit B or elsewhere in this Lease regarding improvement of any space shall be
applicable.
(ii) No rent concession or credit against the cost of, or Landlord's
contribution to the cost of, any improvements or work shall be applicable.
(iii) The same "escalators" or adjustments in rent as are provided in
Articles 6, 7, 10, 12 and elsewhere in this Lease shall be applicable, except
that the bases and base years used in connection with such adjustments shall be
changed to those applicable to the single calendar year in which the First
Continuation Term commences (and which shall be taken into consideration, among
other factors, in determining "Fair Market Rent" pursuant to Section 37.01(d)
hereof).
(iv) The After Hours Heating Charge, After Hours Cooling Charge and
After Hours Ventilating Charge shall be those amounts which Landlord is then
charging therefor to new tenants in the Building (or if no such new tenants,
then in the Adjoining Building, or if no such new tenants there, then in
comparable buildings in the area of the Building).
(v) The annual Base Rent for each Rent Year during the First
Continuation Term shall be increased to the greater of (I) the sum of the Base
Rent and additional rent as
<PAGE>
adjusted under all of the escalation provisions of the Lease (including, without
limitation Articles 6 and 10 of the Lease) applicable to the last month of the
original Term, multiplied by 12 so as to annualize the same, and (II) the amount
determined under Section 37.01(d) hereof.
(vi) All of the other terms and conditions of this Lease shall be
applicable to the First Continuation Term other than rent, any further right to
renew (except for the Second Continuation Term), and other than as may be
reasonably necessary because a renewal term rather than an original term, and a
previously occupied space rather than a new space, is involved.
(d) Promptly following receipt by Landlord of the First Continuation Notice
timely given as provided in Section 37.01(b), Landlord shall notify Tenant of
the amount which, in Landlord's reasonable opinion represents the fair market
Base Rent during the First Continuation Term. Within ten (10) days of such
notice, if Tenant disagrees, Tenant shall notify Landlord that Tenant so
disagrees that the Base Rent therein provided constitutes the "Fair Market
Rent", as hereinafter provided, and shall specify what Base Rent, in Tenant's
opinion, constitutes the Fair Market Rent ("Tenant's Base Rent Notice"). In the
event no Tenant's Base Rent Notice in timely given to Landlord as aforesaid, the
Base Rent set forth in Landlord's said notice shall be deemed the Fair Market
Rent. In the event Tenant's Base Rent Notice is timely given, the following
procedure shall be used in determining Fair Market Rent (sometimes hereinafter
called "Fair Market Rent Procedure"):
In the event the parties cannot agree upon the Fair Market Rent within 7
business days of Tenant's Base Rent Notice, then at the request of either party
to the other (called the "initial request"), the parties shall jointly choose a
real estate appraiser (who shall have had at least ten (10) years experience as
an appraiser, and who shall also be a person involved in commercial office
leasing in the White Plains, New York area), whose decision shall be final and
binding. If the parties do not agree upon such a third party and notify in
writing the other thereof within 7 business days of such initial request, then
within 7 additional business days each party shall choose such a real estate
appraiser and notify in writing the other thereof, and the joint decision of
such real estate appraisers regarding Fair Market Rent shall be final and
binding, (or, failing such choice, or, if such choice is made, failing notice to
the other within such 7 business day period, the decision of one real estate
appraiser timely chosen shall be final and binding). If the two real estate
appraisers do not agree within 7 business days of the end of the 7 business day
period mentioned in the immediately preceding sentence, then they shall choose a
third such real estate appraiser within 5 business days, or if they do not agree
upon a third, then either party may make a request of the Chairman of the Real
Estate Section of the Westchester County Bar Association of the appointment of
such an appraiser, and the decision of such third real estate appraiser
regarding Fair Market Rent shall be final and binding.
37.02 Provided that this Lease is in full force and effect, that Tenant is
not in default under this Lease beyond any applicable notice and cure period,
and that Tenant has not then subleased more than 25% of the Demised Premises or
assigned this Lease (other than to an affiliate), then Tenant shall have the
option to continue leasing for an additional period of five years commencing on
the date immediately following the end of the First Continuation Term
<PAGE>
("Second Continuation Term") upon the following terms and conditions:
(a) All of the provisions of Section 37.01(a), (b), (c) and (d)
shall be applicable to this Section 37.02 as though reference therein to "First
Continuation Term" and "First Continuation Notice" were changed herein to
"Second Continuation Term" and "Second Continuation Notice", respectively,
except that,
(x) reference in Section 37.01(b) to "Expiration Date" shall be
changed to "expiration of the First Continuation Term" for purposes herein; and
(y) the parenthetical exception in Section 37.01(c)(vi) shall be
deleted for purposes of this Section 37.02.
Article 38
Antenna
38.01 Tenant shall have the right to install (and thereafter to modify),
subject to Landlord's prior approval (which shall not be unreasonably withheld
or delayed) as to location, up to a total of 3 microwave, satellite or other
antennas on the Real Property, provided (a) all installations are performed in
accordance with all applicable laws, statutes, ordinances, codes and regulations
of all authorities having jurisdiction, and Tenant obtains all permits, licenses
and approvals required therefor, (b) Tenant indemnifies and holds Landlord
harmless from any liability, cost or expense connected with this Section 38.01,
(c) Tenant promptly repairs any damage caused to any part of the Building or the
Real Property by reason of such installation including without limitation any
repairs to the roof necessitated by or in any way caused or relating to such
installations (if made thereon), reasonable wear and tear excepted, (d) Tenant
removes such installations and lines and repairs any resulting damage to the
Building, reasonable wear and tear excepted, at or prior to expiration of the
Term of this Lease, (e) such antenna shall not disturb or interfere with the use
and quiet enjoyment of any other tenant in the Building, of any ordinary
electrical equipment used by any such tenant within such tenant's demised
premises, (f) such installations do not adversely affect the site line of the
roof of the Building (if the antenna is installed thereon) or the Real Property
and (g) Tenant obtains any additional insurance coverage for the benefit of
Landlord and any mortgagee or ground lessor in such amount and of such type as
mortgagee may require or Landlord may reasonably require.
IN WITNESS WHEREOF, the parties hereto have executed this instrument the
day and year first above written.
LANDLORD:
MENDIK REAL ESTATE LIMITED PARTNERSHIP
By: MENDIK REALTY COMPANY, INC.
as authorized agent
<PAGE>
By:_______________________________
Signature
________________________ Its:______________________________
Witness for Landlord (Title)
TENANT:
ICON CAPITAL CORP.
_________________________ By:______________________________
Witness for Tenant Signature Corporate
Seal
_________________________ Its:_____________________________ President
Witness for Tenant (Title)
_________________________________
Tenant's Federal I.D. Number or
Social Security Number
<PAGE>
FOR CORPORATE TENANT:
- --------------------
STATE OF NEW YORK )
)ss:
COUNTY OF WESTCHESTER )
On this _____ day of July, 1992, before me personally came
_________________________ to me known, who, being by me duly sworn did depose
and say that (s)he resides at _______________________________________ that (s)he
is the President of ICON CAPITAL CORP., the corporation, described in and which
executed the foregoing instrument; that (s)he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation,
and that (s)he signed her/his name thereto by like order.
_______________________________
Notary Public
<PAGE>
EXHIBIT A
---------
Floor Plan(s) of Demised Premises
(Floor Plan Appears Here)
<PAGE>
EXHIBIT A-1
Tenant's Plans
--------------
Plans prepared by Dennis Noskin Architect P.C. carrying Job #92245
consisting of 11 pages, designated as C1, A1, A2, A3, A4 and A5, and
dated 22 June 92, except that pages A-1 and A-5 are revised through
June 30, 1992; attached to which pages are plans prepared by Mistretta
Designs carrying Job designation "ICON", designated as Interior
Finishes Sheet 1, Sheet 2 and Sheet 3, dated June 19, 1992, and
designated as Furniture and Outlet Sheet 1 and Sheet 2, dated May 14,
1992 and revised on June 30, 1992.
<PAGE>
EXHIBIT B
BUILDING STANDARD WORK/WORK CHARGE
The provisions of Paragraphs I through VIII below are included only for the
purpose of setting forth and defining the meaning of "Building Standard" work.
Thus reference in Paragraphs I through VIII to allowances by Landlord or
inclusion of any quantities at Landlord's cost and expense are specifically
negated hereby. In addition, such Building Standard items of work shall not
limit or describe the items of work which Tenant may include in Tenant's Plans
or which shall be performed for Tenant, it being understood that Tenant may
perform or cause to be performed other work to the extent in accordance with the
requirements of the Lease. For clarification only it is understood that
Tenant's Plans (described on Exhibit A-1) differ from this Exhibit B in various
respects, and notwithstanding anything in the Lease to the contrary, to the
extent provided in Article 4 of the Lease, Landlord shall perform Tenant's Work
per Tenant's Plans at Landlord's coat even though such work differ from this
Exhibit B.
I. Drywall Partitions
A. Tenant Interior Partitions
Partitions shall consist of 2-1/2" metal stud spaced 24" O.C. with one
layer of 5/8" gypsum board each side at a ratio of ten (10) lineal
feet per 100 square feet of rentable area. Metal studs shall extend
from floor to ceiling height. Each side to be taped, compounded and
prepared for paint.
B. Demising Partition
Partitions between tenants shall consist of 2-1/2" metal stud spaced
24" O.C. with one layer of 5/8" fire rated gypsum board each side, and
batt insulation fill. Metal studs and gypsum board shall extend from
floor to slab or structure above, with suitable fire-rated openings to
accommodate air conditioning requirements, pipes, ducts or structural
penetrations.
Partitions between tenants and public corridors shall consist of 2-
1/2" metal stud spaced 24" O.C. with two layers of 5/8" fire rated
gypsum board each side, and batt insulation fill. Metal studs and
gypsum board shall extend from floor to slab or structure above with
suitable fire rated openings to accommodate air conditioning
requirements, pipes, ducts or structural penetrations.
NOTE: Partitions that end at or below ceiling height, including
curved, offset, or angled full height partitions shall be at tenant's
expense.
<PAGE>
II. Doors and Frames
A. Interior Office Doors
Shall be 1-3/4" x 7'0" x 3'0" solid core wood door with dark oak or
natural finish, both sides and shall be provided at a ratio of one (1)
door per thirty (30) lineal feet of Building Standard Partition.
Doors shall be prepared to receive Building Standard hardware, with
1/4" undercut for carpet.
B. Tenant Entrance Doors
Shall consist of one 1-3/4" x 7'0" x 3'0" solid core fire-rated label
oak door with dark oak or natural finish. Overhead concealed closure,
pivot mounted. Supplied at a ratio of one (1) per floor or tenant.
Door shall be prepared to receive Building Standard hardware, Sargent
#8100 Series, LNB Design, Rose 695 LN, Lover 1445B, Brushed Brass U.S.
#10 finish. The lockset shall be keyed to the Building Master.
C. Interior Door Frames
Shall be 16 gauge knock down steel sized for Building Standard doors.
Frames shall be reinforced, and templated to receive Building Standard
hardware. Frame to be supplied with factory primed finish. Closet
doors to be luan 1-3/8". Extra to tenant under 1,000 square feet.
III. Hardware
A. Interior Office Doors
Hardware shall consist of one (1) pasage latch #8100 Series, Lever
1445B, US 26 Finish. One and a half (1-1/2) pair (primed) butt
hinges, one (1) floor mounted door stop and supplied at a ratio of one
set per Building Standard door.
IV.IV. Acoustic Tile Ceilings
Ceiling systems shall consist of Ceiling Grid - white finish, fire
rated, for use with 2'-0" lay-in acoustic ceiling tile. Finished
ceiling height shall be at 8'5' above concrete floor.
V. Flooring
A. Carpet
Tenant may select from Landlord's Building Standard carpet. Building
Standard carpet in assorted colors shall be glued down. Tackless and
padding
<PAGE>
tenant extra.
B. Vinyl Tile
Tenant may elect to substitute vinyl tile for carpet in high
maintenance areas and select from the Landlord's Building Standard
color palette.
C. Vinyl Base
Vinyl base shall consist of 3 1/2" high solid color vinyl straight
edge for carpeted areas and 3 1/2" high cove edge for vinyl tile
areas. Colors to be selected from Landlord's Building Standard
palette.
VI. Painting
Shall consist of one (1) prime coat and one (1) finish coat for new
gypsum board walls, "egg shell' finish, in colors selected from
Landlord's Building Standard palette. Hollow metal surfaces shall
receive one (1) factory prime coat. one (1) undercoat and one (1)
semi-gloss enamel finish coat in colors selected from Landlord's
Building Standard color palette. Tenant may elect to have one wall
surface per room or office finished in accent paint color. No credit
shall be issued for unused options or substitutions.
VII. Window Treatment
Landlord shall furnish thin slat (1") horizontal blinds by Levolor, at
all exterior windows in the Landlord's Building standard neutral color
(black). Landlord shall provide a suitable drapery pocket at the
window for tenant to install drapery at the tenant's own expense. All
tenant-supplied drapery or window treatment shall occur on the inside
of the space from the Building Standard blinds. No credit or
substitutions will be permitted.
VIII. Electrical
A. Lighting
Landlord shall provide 3 Lamp - 2' x 4' or 2 lamp - 2' x 2' Parabolic
fluorescent lighting fixture at a ratio of one (1) fixture per ninety
(90) square feet of carpetable area. Fixtures shall be compatible
with the lay-in ceiling and shall be installed and initially lamped by
the Landlord. Building Standard fluorescent lamps shall be "cool
white" in color rendition. Substitution of lamp shall be a tenant's
expense, and in accordance with Building Standard.
B. Switches
<PAGE>
Light switches shall be "Leviton" or "Sister" specification grade in
white or ivory with matching coverplate, installed in quantities as
required by codes and regulations of all governmental agencies having
jurisdiction, but not less than one (1) switch per office or room.
C. Electrical Receptacles
Convenience receptacles shall be "Leviton" or "Sister" specification
grade, three-prong grounded duplex receptacles in white or ivory. No
more than eight (8) duplex receptacles shall be installed on each 20
ampere circuit. Receptacles are to be provided on a ratio of one (1)
per 125 square feet of carpetable area and mounted within Building
Standard gypsum board partitions. Single receptacles requiring a
separate or dedicated circuit or receptacles requiring voltage above
120V and amperage above 20 amperes will be provided at the tenant's
expense.
D. Telephone Receptacles
All wiring shall be done by others and Landlord has no responsibility
for said work which must, however, meet Building Standard criteria and
Westchester County codes and not conflict with the progress of
construction. Any damage incurred by tenant's contractor shall be the
liability of the tenant. Any additional conduit shall be Installed by
Landlord's contractors and charged to tenant.
E. Electric Power
The total connected load for tenant's lighting and convenience power
shall be 2.4 watts per square foot of installed ceiling area for all
purposes, of which, a maximum of 1.5 watts per square foot shall be
apportioned for convenience receptacles (120/208V).
F. H.V.A.C.
Landlord to supply Heat, Ventilation and Air Conditioning during
normal business hours based on the following conditions:
One (1) person for every 175 r.s.f.
Temperature year-round shall be maintained at 72 degrees plus or minus
4 degrees Fahrenheit. The foregoing temperature range based on
outside air temperatures between 25 degrees and 85 degrees Fahrenheit.
IX. Work Charge
All work to be performed by Landlord for Tenant under this Lease to
the extent it in to be performed at Tenant's cost and expense
(including work for which
<PAGE>
Landlord may have agreed to grant to Tenant Landlord's Contribution or
any other credit) shall be performed at the "Work Charge", which shall
mean (a) the cost charged Landlord by, or paid by Landlord to,
Landlord's architects and engineers, contractors, suppliers,
materialmen, employees and agents in connection with such work, plus
the lesser of (i) 10% of such costs and (ii) $1.50 per square foot of
Leased Floor Space for Landlord's general conditions (such as on-the-
job services, supervisory personnel and use of elevators and hoists),
and (b) if Landlord's employees or agents or those of an affiliate of
Landlord are used in connection with such work, an additional sum of
10% of such cost for Landlord's overhead. With respect to any work in
connection with the Demised Premises performed by Tenant, the Work
Charge shall mean the reasonable costs incurred by Landlord in
connection with such work, including, without limitation, costs of
supervision, plus 10% of such costs for overhead and indirect job
costs.
<PAGE>
EXHIBIT C
Rules and Regulations
1. The rights of each tenant in the Building to the entrances, corridors
and elevators of the Building are limited to ingress to and egress from such
tenant's premises and no tenant shall use, or permit the use of the entrances,
corridors or elevators for any other purpose. No tenant shall invite to its
premises, or permit the visit of persons in such numbers or under such
conditions as to interfere with the use and enjoyment of any of the plazas,
entrances, corridors, elevators and other facilities of the Building by other
tenants. No tenant shall encumber or obstruct, or permit the encumbrance or
obstruction of any of the sidewalks, plazas, entrances, corridors, elevators,
fire exits or stairways of the Building. Landlord reserves the. right to
control and operate the public portions of the Building, the public facilities,
as well as facilities furnished for the common use of the tenants, in such
manner as Landlord deems beat for the benefit of the tenants generally.
2. Landlord may refuse admission to the Building outside of ordinary
business hours to any person not known to the watchman in charge, if any, or not
having a pass issued by Landlord or not properly identified, and may require all
persons admitted to or leaving the Building outside of ordinary business hours
to register. Each tenant shall be responsible for all persons for whom it
requests such permission and shall be liable to Landlord for all acts of such
persons. Any person whose presence in the Building at any time shall, in the
judgment of Landlord, be prejudicial to the safety, character, reputation, or
interests of the Building at any time shall, in the judgment of Landlord, be
prejudicial to the safety, character, reputation or interests of the Building or
its tenants may be denied access to the Building or may be ejected therefrom.
In case of invasion, riot, public excitement or other commotion Landlord may
prevent all access to the Building during the continuance of the same, by
closing the doors or otherwise, for the safety of the tenants and protection of
property in the Building. Landlord may require any person leaving the Building
with any package or other object to exhibit a pass from the tenant from whose
premises the package or object is being removed, but the establishment and
enforcement of such requirement shall not impose any responsibility on Landlord
for the protection of any tenant against the removal of property from the
premises of the tenant, Landlord shall, in no way, be liable to any tenant
against the removal of property from the premises of the tenant, Landlord,
shall, in no way, be liable to any tenant for any damage or lose arising from
the admission, exclusion or ejection of any person to or from a tenant's
premises or the Building under the provisions of this rule.
3. No tenant shall obtain or accept for use in its premises ice, drinking
water, food, beverages, towels, barbering, boot blacking, floor polishing,
lighting, maintenance, cleaning or other similar services from any persons not
reasonably authorized by Landlord in writing to furnish such services. Such
services shall be furnished only at such hours, in such places within the
tenant's premises and under such regulation as may be fixed by Landlord.
4. No window or other air-conditioning units shall be installed by any
tenant, and only such window coverings an are supplied or permitted by Landlord
shall be used in a tenant's premises.
<PAGE>
5. There shall not be used in any space, nor in the public halls of the
Building, either by any tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
6. All entrance doors in each tenant's premises shall be left locked, and
all lights turned out, when the tenant's premises are not in use. Entrance doors
shall not be left open at any time. All windows in each tenant's premises shall
be kept closed at all times and all blinds therein above the groundfloor shall
be lowered when and as reasonably required because of the position of the sun,
during the operation of the Building air conditioning system to cool or
ventilate the tenant's premises.
7. No noises, including the playing of any musical instruments, radio or
television, which, in the judgment of Landlord, might disturb other tenants in
the Building, shall be made or permitted by any tenant, and no cooking shall be
done in the tenant's premises, except for microwave cooking in Tenant's kitchen
area or as expressly approved in writing by Landlord. No dangerous,
inflammable, combustible or explosive object, material or fluid shall be brought
into the Building by any tenant or with the permission of any tenant.
8. No tenant shall permit any odors emanating within its premises to seep
into any other portion of the Building.
9. All damages resulting from any misuse of the plumbing fixtures shall
be borne by the tenant who, or whose employees, agents, visitors or licensees,
shall have caused the same.
10. Signs and lettering on doors shall be inscribed. painted, or affixed
for each tenant by Landlord at the expense of such tenant, and shall be of a
size, color and style acceptable to Landlord. Except for the foregoing, no
signs, advertisement, notice or other lettering shall be exhibited, inscribed,
painted or affixed by any tenant on any part of the outside or inside of the
premises or the Building without the prior written consent of Landlord. Tenant
shall not advertise, making reference to the Building as Tenant's address, or
otherwise, in a manner which impairs the reputation of the Building or its
desirability as a first class office building; but this shall not be deemed to
reduce Tenant's rights under Section 22.04E(i) of the Lease.
11. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows in any tenant's premises, and no locks on any door therein
shall be changed or altered in any respect. Duplicate keys for a tenant's
premises and toilets rooms shall be procured only from Landlord, which may make
a reasonable charge therefor. Upon the termination of a tenant's lease, all
keys of the tenant's premises and toilet rooms shall be delivered to Landlord.
12. Each tenant shall, at its expense, provide artificial light in the
premises for Landlord's agents, contractors and employees while performing
janitorial or other cleaning services and making repairs or alterations in said
premises.
<PAGE>
13. If the premises become infested with insects or vermin caused by
Tenant, such tenant, at its sole cost and expense shall cause its premises to be
exterminated, from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefor as shall be approved by Landlord.
14. No tenant shall install or permit to be installed any vending
machines, except for snacks and beverages for Tenant's employees in any
lunchroom in the Demised Premises.
15. No animals or birds, bicycle, mopeds or vehicles of any kind shall be
kept in or about the Building or permitted therein.
16. No furniture, office equipment, packages or merchandise will be
received in the Building or carried up or down in the elevator, except between
such hours as shall be designated by Landlord. Landlord shall prescribe
reasonably the method and manner in which any merchandise, heavy furniture,
equipment or safes shall be brought in or taken out of the Building, and also
the hours at which such moving shall be done. Landlord in all cases retains the
right to prescribe the weight and proper position of such heavy furniture and
safes. All damages done to the Building by taking in or out such merchandise,
heavy furniture or safes or any damages done to the Building while any of said
property shall be therein, shall be made good and paid for by tenant on demand.
17. Intentionally Omitted.
18. Reasonable advance notice for the provision of heating, ventilating
and air conditioning through the Building System after hours shall be oral or
written notice to Landlord's manager of the Building requesting such service not
later than 2 p.m. on the date such service is required, or if such date is not a
business day, by 2 p.m. on the last business day preceding such date.
19. The Demised Premises shall not be used for lodging or sleeping or for
any immoral or illegal purpose.
20. The requirements of tenants will be attended to only upon application
at the office of the Building. Employees of Landlord shall not perform any work
or do anything outside of their regular duties, unless under special
instructions from Landlord.
21. No tenant shall mark, paint, drill into, or in any way deface any part
of the Demised Premises or the Building. No boring, cutting, or stringing of
wires shall be permitted, except with the prior written consent of Landlord, and
as Landlord may direct. No tenant shall lay linoleum, or other similar floor
covering, so that the same shall come in direct contact with the floor of the
Demised Premises, and, if linoleum or other similar floor covering is desired to
be used an interlining of builder's deadening felt shall be first affixed to the
floor, by a paste or other materials, soluble in water. The use of cement and
other similar adhesive material is expressly prohibited.
<PAGE>
22. Tenant shall cooperate with Landlord in obtaining maximum effectiveness
of the cooling system by lowering and closing venetian blinds and/or drapes and
curtains when the sun's rays fall directly on the windows of the Demised
Premises.
23. Landlord reserves the right to rescind, alter or waive any rule or
regulation at any time prescribed for the Building, when, in its judgment it
deems it necessary or desirable for the reputation, safety, care or appearance
of the Building, or the preservation of good order therein, or the operation or
maintenance of the Building or the equipment thereof, or the comfort of tenants
or others in the Building. No recision, alteration of waiver of any rule or
regulation in favor of one tenant shall operate as a recision, alteration or
waiver in favor of any other tenant.
<PAGE>
EXHIBIT D
General Cleaning Specifications
-------------------------------
GENERAL CLEANING:
- ----------------
NIGHTLY:
- -------
General Offices:
---------------
1. All hard surfaced flooring to be swept using approved dustdown
preparation.
2. Carpet sweep all carpets, moving only light furniture (desks, file
cabinets, etc. not to be moved).
3. Hand dust and wipe clean all furniture, fixtures appliances,
countertops and window sills.
4. Empty and clean all ash trays and screen all sand urns.
5S. Empty and clean all waste disposal cans and baskets.
6. Dust Interiors of all waste disposal cans and baskets.
7. Wash clean all water fountains and coolers and appliances.
Public Lavatories:
-----------------
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and enameled
surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls, dispensers and
receptacles in lavatories and restrooms.
6. Empty paper receptacles and remove wastepaper.
7. Fill and clean all soap, towel and toilet tissue dispensers as needed;
supplies therefore to be furnished by Landlord at a reasonable charge
to Tenant. If the Demised Premises consist of a part of rentable
floor, said charge to Tenant shall
<PAGE>
be that portion of a reasonable charge for such supplies that is
reasonably allocable to Tenant.
8. Empty and clean sanitary disposal receptacles
WEEKLY:
- ------
1. Vacuum clean all carpeting and rugs.
2. Dust all door louvres and other ventilating louvres within a person's
reach.
3. Wipe clean all brass and other bright work.
QUARTERLY:
- ---------
High dust the Demised Premises complete, including the following:
1. Dust all pictures, frames, charts, graphs and similar wall hangings
not reached in nightly cleaning.
2. Dust clean all vertical surfaces, such as walls, partitions, doors and
door bucks and other surfaces not reached in nightly cleaning.
3. Dust all pipes, ventilating and air-conditioning louvres, ducts, high
moldings and other high areas not reached in nightly cleaning.
4. Dust all venetian blinds.
Wash exterior and interior of windows twice per year, subject to weather
conditions and requirements of law.
<PAGE>
Parking Plan
------------
(Parking Plan Appears Here)
---------------------------
<PAGE>
Exhibit 10.15
-------------
ICON HOLDINGS CORP.
1997 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
--------------
1. Purpose
The purpose of this ICON Holdings Corp. 1997 Non-Employee Director Stock
Option Plan (the "Plan") is to enable ICON Holdings Corp., a Delaware
corporation (the "Company"), to attract and retain non-employee directors and
further align their interests with those of the shareholders by providing for or
increasing their equity interests in the Company.
2. Administration
This Plan shall be administered by the Board of Directors of the Company
(the "Board") or by the Compensation Committee appointed by the Board (the
"Committee"). In the event the Board refrains from delegating administration of
this Plan to the Committee, the Board shall have all power and authority to
administer this Plan. In such event, the word "Committee" wherever used herein
shall be deemed to mean the Board. The Committee shall, subject to the
provisions of the Plan, have the power to construe this Plan, to determine all
questions hereunder, and to adopt and amend such rules and regulations for the
administration of this Plan as it may deem desirable.
3. Eligibility
Each member of the Board who is not an employee of the Company, its parent
or any of its subsidiaries (a "Non-Employee Director") shall be eligible for the
grant of Options (as hereinafter defined) under this Plan.
4. Available Shares
The total number of shares of Common Stock, par value $.01 per share, of
the Company ("Common Shares"), for which options may be granted under this Plan
shall not exceed Two Hundred Thousand (200,000) (after giving effect to the IPO
Stock Dividend referred to in Section 6(a)), subject to adjustment as provided
in Section 6 hereof. Shares covered by unexercised Options which are no longer
exercisable for any reason shall be available for issuance under Options granted
hereunder for purposes of computing the foregoing limitation unless the Plan has
been terminated. Shares delivered on exercise of Options may be made available
from authorized and issued Common Stock or from Common Stock held in the
treasury of the Company.
<PAGE>
5. Options
(a) Initial Grants. Each person who first becomes a Non-Employee Director
after the effectiveness of an underwritten initial public offering of the Common
Stock shall automatically be granted an option ("Option") to purchase Fifteen
Thousand (15,000) Common Shares, subject to adjustment as provided in Section 6
hereof.
(b) Annual Grants. On the date of each annual meeting of Stockholders of
the Company conducted after the Company consummates an underwritten initial
public offering of the Common Stock, each person who is a Non-Employee Director
shall automatically be granted an Option to purchase Ten Thousand (10,000)
Common Shares, subject to adjustment as provided in Section 6 hereof.
(c) Insufficient Shares. Notwithstanding the foregoing, if, on any date
upon which Options are to be granted under Section 5(a) or 5(b) hereof, the
number of Common Shares remaining available for issuance under this Plan is
insufficient for the grant of Options to purchase the total number of Common
Shares specified in such sections, then each Non-Employee Director entitled to
receive an Option on such date shall be granted an Option to purchase a
proportionate amount of the available number of Common Shares (rounded down to
the greatest number of whole shares). Except for the specific Options referred
to in Sections 5(a) and 5(b) above, no other Options shall be granted under this
Plan.
(d) Option Price and Terms. Each Option shall be evidenced by a written
option agreement that shall contain the following terms and provisions:
(i) The exercise price per Common Share shall be equal to the
Fair Market Value (as hereinafter defined) of one (1) Common Share on the
date of grant of such Option. If, at the time an Option is granted the
Company's Common Shares are publicly traded, "Fair Market Value" shall be
determined as of the last business day for which the prices or quotations
discussed in this sentence are available prior to the date such Option is
granted and shall mean (i) the average (on that date) of the high and low
prices of the Common Shares on the principal national securities exchange
on which the Common Shares are traded, if the Common Shares are then listed
on a national securities exchange; or (ii) the last reported sale price (on
that date) of the Common Shares on The Nasdaq Stock Market if the Common
Shares are not then listed on a national securities exchange; or, if not so
reported or listed, (iii) the closing bid price (or average of bid prices)
last quoted (on that date) of the Common Shares on the over-the-counter
market. If, at the time an Option is granted under the Plan, the Company's
Common Shares are not publicly traded, "Fair Market Value" shall be the
fair market value on the date the Option is granted as determined by the
Committee in good faith.
(ii) Payment of the exercise price of the Option shall be made in
full in cash or by check concurrently with the exercise of the Option.
-2-
<PAGE>
(iii) The Option shall be nontransferable by the optionee other
than by will or the laws of descent and distribution, and shall be
exercisable during the optionee's life time only by the optionee or the
optionee's guardian or legal representative.
(iv) Options granted pursuant to Section 5(a) shall become
exercisable by the optionee in three annual installments of thirty-three
percent (33%), thirty-three percent (33%) and thirty-four percent (34%) on
the first (1st), second (2nd) and third (3rd) anniversaries, respectively,
of the date of grant and shall expire upon the first to occur of the
following:
(A) the third (3rd) anniversary of the date upon which the
optionee shall cease to be a Non-Employee Director; or
(B) the tenth (10th) anniversary of the date of grant.
(v) Options granted pursuant to Section 5(b) shall become
exercisable by the optionee on the first (1st) anniversary of the date of
grant and shall expire upon the first to occur of the following:
(A) the third (3rd) anniversary of the date upon which the
optionee shall cease to be a Non-Employee Director; or
(B) the tenth (10th) anniversary of the date of grant.
(vi) In the event that the optionee shall cease to be a Non-
Employee Director prior to the date all or any portion of an Option becomes
exercisable in accordance with clause (iv) or clause (v) above, such Option
or portion thereof (A) shall become exercisable in full at any time within
one (1) year of the date of such event if it occurred as a result of the
optionee's death or permanent disability, or (B) shall terminate in full on
the date of such event if it occurred for any other reason.
(vii) Such other terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall include in the written option
agreement.
6. Adjustments
(a) Stock Dividends, Recapitalization, Etc. If the outstanding securities
of the class then subject to this Plan are increased, decreased or exchanged for
or converted into a different number or kind of securities of the Company, or if
cash, property or securities are distributed in respect of such outstanding
securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, restructuring, reclassification, dividend
(other than a regular cash dividend or the 8,000-for-1 stock dividend by the
Board of Directors by written consent dated October 24, 1997 in connection with
the Company's
-3-
<PAGE>
contemplated initial public offering (the "IPO Stock Dividend")) or other
distribution, stock split, reverse stock split or the like, then, unless the
terms of such transaction shall provide otherwise, the Committee shall make
appropriate and proportionate adjustments in (i) the number and type of shares
or other securities or cash or other property that may be acquired pursuant to
Options theretofore granted under this Plan, and (ii) the maximum number and
type of shares or other securities that may be issued pursuant to Options
thereafter granted under this Plan.
(b) Merger, Sale of Assets, Etc. If the Company is merged into or
consolidated with another corporation under circumstances where the Company is
not the surviving corporation or if the Company is liquidated or sells or
otherwise disposes of all or substantially all of its assets while unexercised
Options remain outstanding under the Plan, as of the date thirty (30) days prior
to such transaction (i) all outstanding Options shall become fully vested and
exercisable in full, and (ii) any Options which remain unexercised as of the day
prior to the effective date of the transaction shall be canceled as of such day
and shall not thereafter be exercisable by anyone; provided, however, that the
accelerated exercisability of Options shall be contingent on completion of the
transaction and shall be null and void if the transaction is not consummated;
and provided, further, that accelerated exercisability pursuant to this
provision shall not extend the expiration date for any Option determined
pursuant to Section 5.
7. Amendment and Termination of Plan
The Board may amend or terminate this Plan at any time and in any manner,
provided that no such amendment or termination shall deprive the recipient of
any Option theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto.
8. Effective Date and Duration of Plan
The Plan was adopted by the Board on October 24, 1997 to become effective
on the date the Company consummates an underwritten initial public offering of
the Common Stock. The stockholders of the Company approved the Plan on October
24, 1997. This Plan shall terminate and no Options shall be granted hereunder
after October 23, 2007.
-4-
<PAGE>
Exhibit 10.16
-------------
ICON HOLDINGS CORP.
1997 STOCK OPTION PLAN
--------------
1. Purpose
The purpose of this ICON Holdings Corp. 1997 Stock Option Plan (the
"Plan") is to provide an incentive to certain key employees, directors and
consultants of and to ICON Holdings Corp., a Delaware corporation (the
"Company"), and any present or future subsidiaries of the Company (collectively,
the "Related Companies") by providing a favorable opportunity for them to
purchase stock of the Company.
This Plan provides for the grant of incentive stock options, as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to
key employees of the Company and the Related Companies, and for the grant of
non-qualified stock options to key employees, non-employee directors and
consultants to the Company and the Related Companies. All such incentive stock
options and non-qualified options which may be granted under this Plan are
hereinafter referred to as "Options."
2. Administration of the Plan
This Plan shall be administered by the Board of Directors of the Company
(the "Board"). The Board may appoint a Compensation Committee (the "Committee")
of two or more of its members to administer this Plan. If the Company registers
any class of equity security pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), each member of the Committee shall
be an "outside director" within the meaning of Section 162(m) of the Code and a
"non-employee director" as defined in Rule 16b-3 under the Exchange Act.
Subject to the terms of the Plan, the Committee, if so appointed, shall have the
authority to (i) determine the employees, non-employee directors and consultants
(from among the class of persons eligible under Section 4) to whom Options may
be granted; (ii) determine the time or times at which Options may be granted;
(iii) determine the option price of shares subject to each Option, which price
shall not be less than the minimum specified in Section 7; (iv) determine
whether each Option granted shall be an incentive stock option or a non-
qualified option; (v) determine the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi) determine whether
restrictions such as repurchase options are to be imposed on shares subject to
Options and the nature of such restrictions if any; and (vii) interpret the Plan
and prescribe and rescind rules and regulations relating to it.
The interpretation and construction by the Committee of any provisions of
the Plan or of any Option granted under it shall be final unless otherwise
determined by the Board.
<PAGE>
The Committee may from time to time adopt such rules and regulations for
carrying out the Plan as it may deem best. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it.
The Committee may select one of its members as its chairman, and shall
hold meetings at such time and places as it may determine. Acts by a majority
of the Committee, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee. All
references in this Plan to the Committee shall mean the Board if there is no
Committee so appointed. From time to time the Board may increase the size of
the Committee and appoint additional members thereof, remove members (with or
without cause), and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
3. Shares Covered by the Plan
Options may be granted under the Plan while the Plan is in effect for the
purchase of not more than Two Million (2,000,000) shares (after giving effect to
the IPO Stock Dividend referred to in Section 11) of the Common Stock, $.01 par
value per share ("Common Stock"), of the Company. Shares covered by unexercised
Options which are no longer exercisable for any reason shall be available for
issuance under Options granted hereunder for purposes of computing the foregoing
limitation unless the Plan has been terminated. Shares delivered on exercise of
Options may be made available from authorized and unissued Common Stock or from
Common Stock held in the Treasury of the Company. In connection with the grant
of any non-qualified stock option under the Plan, the Committee may in its
discretion provide for a cash payment to be made to the person exercising the
Option, at the time of exercise, in such amount as the Committee determines to
be appropriate to reimburse such person, in whole or in part, for any federal or
state income taxes incurred in connection with such exercise. Such payment may
be applied to the satisfaction of any applicable withholding tax which is
incurred in connection with such exercise or with such payment.
4. Eligibility
The persons who shall be eligible to receive Options under the Plan shall
include key employees, non-employee directors and individuals performing
services as non-employee independent contractors to the Company or any of the
Related Companies. Such persons are hereinafter referred to as "Eligible
Individuals."
5. Allotment of Options and Number of Shares
The allotment of Options among the Eligible Individuals, the number of
shares to be covered by each Option to be granted, and the designation of
Options as either incentive
-2-
<PAGE>
stock options or non-qualified stock options shall be determined by the
Committee; provided, however, that an incentive stock option may be granted only
to an Eligible Individual who is an employee of the Company or a Related
Company.
In no event may any Eligible Individual be granted options with respect to
more than Five Hundred Thousand (500,000) shares of Common Stock in any fiscal
year. The number of shares of Common Stock issuable pursuant to an option
granted to a Plan participant in a fiscal year that is subsequently forfeited,
canceled or otherwise terminated shall continue to count toward the foregoing
limitation in such fiscal year. In addition, if the exercise price of an option
is subsequently reduced, the transaction shall be deemed a cancellation of the
original option and the grant of a new one so that both transactions shall count
toward the maximum shares issuable in the fiscal year of each representative
transaction.
6. Option Agreements
Each Eligible Individual to whom an Option is granted (an "Optionee")
shall enter into a written agreement setting forth the terms and conditions of
the Option granted to him, which agreement may contain such terms, conditions
and restrictions not inconsistent with the terms of the Plan as the Committee
shall approve.
7. Option Price
The price to be paid by an Optionee who exercises an Option shall be
determined by the Committee; provided, however, that in the case of an incentive
stock option granted to an Eligible Individual who owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company, the option price shall not be less than one hundred ten percent (110%)
of such fair market value.
8. Duration and Rate of Exercise of Options
The option period shall be fixed by the Committee but in any event each
Option shall by its terms be exercisable no later than the expiration of ten
(10) years from the date the Option is granted; provided, however, that in the
case of an incentive stock option granted to an Eligible Individual who owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company, the option shall not be exercisable to any
extent after the expiration of five (5) years from the date the Option is
granted.
The Committee shall determine the rate at which each Option shall be
exercisable.
In the case of an incentive stock option, the amount of aggregate fair
market value of shares (determined at the time of grant of the Option pursuant
to Section 7) with respect to which incentive stock options are exercisable for
the first time by an Optionee during any
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<PAGE>
calendar year (under all such plans of his or her employer corporation and its
parent and subsidiary corporations) shall not exceed One Hundred Thousand
Dollars $100,000. To the extent the limitation in the preceding sentence would
be exceeded with respect to any portion of an Option otherwise first becoming
exercisable for any year in accordance with the vesting schedule established for
an Optionee, the Committee may determine at the time of grant that vesting with
respect to such excess amount shall be deferred until the first subsequent year
that such excess amount (or any part thereof) can become exercisable within the
limitation of the preceding sentence, or, in the alternative, that such excess
amount become vested as a non-qualified stock option.
The Committee shall determine the manner in which each Option shall be
exercisable, the timing and form of the purchase price to be paid by an Optionee
upon the exercise of an Option, and any restrictions to be imposed upon the
Common Stock received on exercise of an Option. To the extent provided in the
option agreement, payment of the purchase price may be in cash, part in cash and
part by personal promissory note or in whole or in part by the surrender of a
whole number of shares of previously issued Common Stock of the Company.
Previously issued shares of Common Stock shall be accepted as payment in an
amount equal to the then fair market value of the surrendered shares.
9. Nontransferability of Options
Unless specifically otherwise by the Committee with respect to non-
qualified options only, each Option granted under the Plan to any Eligible
Individual shall by its terms not be transferable by him or her otherwise than
by will or the laws of descent and distribution, and shall be exercisable during
his lifetime only by him.
10. Rights as a Stockholder
An Optionee shall have no rights as a stockholder with respect to any
shares covered by his Options until he shall have become the holder of record of
such shares, and no adjustment shall be made, except adjustments pursuant to
Section 11 hereof, for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights in respect of
such shares for which the record date is prior to the date on which he shall
have become the holder of record thereof.
11. Effect of Change in Stock Subject to the Plan
In the event there is any change in the shares of Common Stock of the
Company through the declaration of stock dividends (other than the 8,000-for-1
stock dividend declared by the Board of Directors by written consent dated
October 24, 1997 in connection with the Company's contemplated initial public
offering (the "IPO Stock Dividend")) or through recapitalizations resulting in
stock split-ups or combinations or exchanges of shares or otherwise, the number
of shares available for Option, the exercise price of outstanding
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<PAGE>
Options, and the number of shares subject to any Option shall be appropriately
adjusted by the Committee.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
the Company is liquidated or sells or otherwise disposes of substantially all of
its assets to another corporation while unexercised Options remain outstanding,
(i) subject to the provisions of clauses (iii) and (iv) below, after the
effective date of such merger, consolidation or sale, as the case may be, each
holder of an outstanding Option shall be entitled, upon exercise of such Option,
to receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of the merger, consolidation or sale; or (ii) the Committee may waive any
discretionary limitations imposed pursuant to Section 8 hereof so that all
Options from and after a date prior to the effective date of such merger,
consolidation, liquidation or sale, as the case may be, specified by the
Committee, shall be exercisable in full; or (iii) all outstanding Options may be
canceled by the Committee as of the effective date of any such merger,
consolidation, liquidation or sale provided that notice of such cancellation
shall be given to each holder of an Option, and each holder of an Option shall
have the right to exercise such Option in full (without regard to any
discretionary limitations imposed pursuant to Section 8 hereof) during a thirty
(30)-day period preceding the effective date of such merger, consolidation,
liquidation or sale; or (iv) all outstanding Options may be canceled by the
Committee as of the date of any such merger, consolidation, liquidation or sale
provided that notice of such cancellation shall be given to each holder of an
Option, and each holder of an Option shall have the right to exercise such
Option but only to the extent exercisable in accordance with any discretionary
limitations imposed pursuant to Section 8 prior to the effective date of such
merger, consolidation, liquidation or sale.
12. Grant of Options in Connection With Certain Acquisitions
The Committee may grant Options under the Plan in substitution for
incentive stock options or non-qualified stock options granted under plans of
other employers, if such grant occurs by reason of a corporate merger,
consolidation, separation, reorganization, or liquidation to which the Company
is a party, or by reason of the acquisition of property or stock of another
corporation by the Company; provided, however, that, with respect to any
incentive stock option, such transaction is a transaction to which Section
424(a) of the Code applies. The Committee may impose such terms and conditions
upon the grant of any incentive stock option under this Section 12 as are
necessary to ensure that the substitution will not constitute a modification of
the Option under Section 424(h) of the Code, even though any such term or
condition would otherwise be inconsistent with the provisions of this Plan.
Options granted under the provisions of this Section 12 may be granted at a
price less than the fair market value of the Common Stock on the date such
Option is granted, so long as the ratio of the option price to the fair market
value of the Common Stock is no more favorable to the Optionee than the ratio of
the option price to the fair market value of the stock subject to the old option
immediately before such substitution. Except as otherwise specifically provided
in the agreement setting forth the terms and conditions of such an Option, the
provisions of this Plan shall govern any options granted under this Section 12.
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<PAGE>
Nothing in this Section 12 shall be deemed to authorize the grant of Options
under the Plan for a number of shares in excess of the number set forth in
Section 3, nor to limit in any way the authority of the Committee to grant
substituted options in connection with such transactions other than under the
Plan.
13. Use of Proceeds
The proceeds received by the Company from the sale of Common Stock
pursuant to the Plan may be used for general corporate purposes.
14. Amendment and Discontinuance
The Board may from time to time alter or suspend and at any time
discontinue the Plan. However, no action of the Board may alter or impair an
Optionee's rights under any outstanding Option previously granted under the
Plan, without the consent of the holder of the Option. Notwithstanding the
above, the Board of Directors may from time to time alter the terms of an
outstanding Option previously granted under the Plan, without the consent of the
holder of the Option, if the sole effect of such alteration is to accelerate the
time at which the Option (or any portion thereof) may be exercised.
15. Effective Date and Termination Date
The Plan shall become effective upon the consummation of an underwritten
public offering of the Common Stock. The Plan shall remain in effect until
terminated by the Board, but not later than ten (10) years after the date the
Plan is initially adopted by the Board, or is approved by the stockholders,
whichever first occurs.
The Plan was initially adopted by the Board on October 24, 1997 and
approved by the stockholders of the Company on October 24, 1997.
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<PAGE>
EXHIBIT 10.17
ICON HOLDINGS CORP.
and
STATE STREET BANK AND TRUST CO.
as Warrant Agent
------------------------
WARRANT AGREEMENT
Dated as of January __, 1998
------------------------
<PAGE>
WARRANT AGREEMENT
This Agreement is made as of January __, 1998 between ICON Holdings Corp.,
a Delaware corporation (the Company), and State Street Bank & Trust Co. (the
"Warrant Agent").
RECITALS
A. The Company proposes to sell, pursuant to an Underwriting Agreement
dated as of December __, 1997 between the Company and Friedman, Billings, Ramsey
& Co., Inc. ("FBR") (the "Underwriting Agreement"), 12,500,000 shares (the
"Initial Shares") of Common Stock, par value $.01 per share, of the Company (the
"Common Stock"), to certain underwriters, for which FBR is acting as
representative (the "Underwriter") and up to 1,875,000 shares (the "Option
Shares") of Common Stock, to cover over-allotment, if any.
B. The Company deems it advisable, in consideration for the services
rendered to the Company by FBR in connection with the offering of the Common
Stock, to issue to FBR warrants (the "Firm Warrants") entitling the holders
thereof to purchase an aggregate of 839,564 shares of Common Stock. The Company
also deems it advisable, for the same consideration, to issue to FBR certain
additional warrants (the "Optional Warrants") entitling the holders thereof to
purchase an aggregate of 93,750 shares of Common Stock, subject to certain
adjustments as provided for in Section 1.04. (The Firm Warrants and the
Optional Warrants shall together be referred to as the "Warrants".) The shares
of Common stock issued upon exercise of the Warrants are referred to as the
"Warrant Shares".
C. The Company desires to enter into this Agreement to set forth the terms
and conditions of the Warrants and the rights of the holders thereof.
D. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to act in connection with the issuance,
exchange, transfers substitution and exercise of Warrants;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
ISSUANCE, EXECUTION, EXPIRATION AND TRANSFER OF WARRANT CERTIFICATES
SECTION 1.01. Form of Warrant Certificates. The Warrants shall be
----------------------------
evidenced by certificates in temporary or definitive fully registered form (the
"Warrant Certificates") substantially in the form of Exhibit A in the case of
the Firm Warrants or, in the case of the Optional Warrants, in the form of
Exhibit B and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with any law or with any rule or regulation made pursuant thereto or with any
role or regulation of any securities exchange, or to conform to usage, or as
consistently herewith may be determined by the officers executing such Warrant
Certificates as evidenced by their execution of the Warrant Certificates. Each
Warrant Certificate shall evidence the right, subject to the
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<PAGE>
provisions of this Agreement and of the Warrant Certificate, to purchase the
number of shares of Common Stock stated therein, adjusted as provided for in
Article III, upon payment of the Exercise Price (as defined in Section 2.01).
SECTION 1.02. Execution of Warrant Certificates. Each Warrant Certificate,
---------------------------------
whenever issued, shall be dated as of the date of countersignature thereof by
the Warrant Agent either upon initial issuance or upon exchange, substitution or
transfer, shall be signed manually by, or bear the facsimile signature of, the
Chairman of the Board or the President or a Treasurer or a Vice President of the
Company, shall have the Company's seal or a facsimile thereof affixed or
imprinted thereon and shall be attested by the manual or facsimile signature of
the Secretary or an Assistant Secretary of the Company. In case any officer of
the Company whose manual or facsimile signature has been placed upon any Warrant
Certificate shall have ceased to be such before such Warrant Certificate is
issued, it may be issued with the same effect as if such officer had not ceased
to be such at the date of issuance. Warrant Certificates shall be countersigned
manually by the warrant Agent (or successor Warrant Agent) and shall not be
valid for any purpose unless so countersigned. Warrant Certificates may be
countersigned by the Warrant Agent (or successor Warrant Agent), however,
notwithstanding that the persons whose manual or facsimile signatures appear
thereon as proper officers of the Company shall have ceased to be such officers
at the time of such countersignature, issuance or delivery. Any Warrant
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such warrant Certificate, although at the date of
the execution this Agreement any such person was not such an officer.
SECTION 1.03. Issuance, Delivery and Registration of Warrant Certificates.
-----------------------------------------------------------
Upon receipt of written instructions from the Company, the Warrant Agent shall
issue and deliver, at the closing of the sale of the Initial Shares to the
Underwriters as provided in the Underwriting Agreement, to FBR or its designees:
(a) a Warrant Certificate representing the Firm Warrants, in substantially the
form of Exhibit A, and (b) a Warrant Certificate representing the Optional
Warrants, substantially in the form of Exhibit B. Additionally, the Warrant
Agent shall countersign and deliver Warrant Certificates upon exchange, transfer
or substitution for one or more previously countersigned Warrant Certificates as
hereinafter provided. The Warrant Agent Shall maintain books for the
registration of transfer and registration of Warrant Certificates (the "Warrant
Register").
SECTION 1.04. Exercise of and Adjustments to the Optional Warrants. The
----------------------------------------------------
Optional Warrants shall not be exercisable in whole or in part until the
Expiration Date, which shall be the day thirty days following the date of the
Underwriting Agreement between the Company and FBR. The number of shares of
Common Stock which a holder of the Optional Warrants is entitled to receive upon
the exercise of the Optional Warrants is subject to certain adjustments. In the
event that FBR fails to exercise its right to purchase the total maximum number
of Option Shares provided for in the Underwriting Agreement, then the Optional
Warrants shall cease to be exercisable with respect to that number of shares of
Common Stock equal to (i) 1,875,000, minus (ii) the total number of Option
Shares purchased by and delivered to FBB, multiplied by (iii) 0.05. In the event
that PBR does not purchase any Option Shares within thirty days following the
date hereof, the Optional Warrants will expire in their entirety. The Warrant
Agent may not deliver Warrant Shares unless and until the Warrant Agent receives
written notice signed by both the Company and FBR which sets out the number of
shares of Common Stock which the holder of the Optional Warrants will be
entitled to receive upon
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<PAGE>
exercise of the Optional Warrants, after making the adjustments described in
this Section 1.04.
SECTION 1.05. Transfer and Exchange of Warrant Certificates. The Warrant
---------------------------------------------
Agent, from time to time, shall register the transfer of any outstanding Warrant
Certificates in the Warrant Register upon surrender at the office or agency
maintained in The City of New York for such purpose or at the principal office
of the Warrant Agent (or successor Warrant Agent) of Warrant Certificates
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Company and the Warrant Agent, duly executed by the Warrant
holder or the Warrantholders' attorney duly authorized in writing, and evidence,
satisfactory to the Warrant Agent, of compliance with the provisions of Section
6.04. Upon any such registration of transfer, a new Warrant Certificate shall be
countersigned by the warrant Agent and issued to the transferee and the
surrendered Warrant Certificate shall be canceled by the Warrant Agent. Warrant
Certificates may be exchanged at the option of the holder thereof, upon
surrender, properly endorsed, at the office or agency maintained in The City of
New York for such purpose or at the principal office of the warrant Agent (or
successor Warrant Agent), with written instructions, for other Warrant
certificates countersigned by the Warrant Agent entitling the registered holder
thereof, subject to the provisions thereof and of this Agreement, to purchase in
the aggregate a like number of shares of Common Stock as the Warrant Certificate
so surrendered. In the case of a Warrant Certificate representing Optional
Warrants, if such Warrant Certificate is exchanged for a new certificate prior
to the Expiration Date, the newly issued Warrant Certificate shall also
represent Optional Warrants. The Company or the Warrant Agent may require the
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any such exchange or transfer.
ARTICLE II
SHARES OF COMMON STOCK ISSUABLE, EXERCISE PRICE,
EXPIRATION DATE AND EXERCISE OF WARRANTS
SECTION 2.01. Warrant Shares Issuable; Exercise Price; Expiration Date.
--------------------------------------------------------
Each Warrant Certificate shall entitle the registered holder thereof, subject to
the provisions
thereof and of this Agreement, to purchase from the Company at any time from the
effective date (the "Effective Date") of the registration statement filed on
Form S-1 under the Securities Act of 1933, as amended (the "Securities Act")
(or, in the case of the Optional Warrants, at any time from the Expiration Date)
to the close of business on the fifth anniversary of such date (or, if such date
is not a Business Day (as defined below), the first following Business Day) the
number of shares of Common Stock stated therein, adjusted as provided in Article
III, upon payment of $__.00 per share (which price is equal to the initial
public offering price), adjusted as provided in Article III. Such price, as in
effect from time to time as provided in Article III, is referred to as the
Exercise Prices. Each share of Common Stock issuable upon exercise of a Warrant
is referred to as a "Warrant Share". Each Warrant not exercised during the
period set forth above shall become void, and all rights thereunder and all
rights in respect thereof under this Agreement shall cease, at the end of such
period. For purposes of this Agreement, the term "Business Day" means any day
of the week other than a Saturday, Sunday or a day which in The City of New York
or in the city in which the principal office of the Warrant Agent is located
shall be a legal holiday or a day on which banking institutions are authorized
or required by law to close.
SECTION 2.02. Exercise of Warrants. (a) Warrants may be exercised by
--------------------
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<PAGE>
surrendering the Warrant Certificate evidencing such Warrants at the office or
agency maintained in The City of New York for such purpose or at the principal
office of the Warrant Agent (or successor Warrant Agent), with the Election to
Exercise form set forth on the reverse of the Warrant Certificate duly completed
and signed, and by paying in full to the Warrant Agent for the account of the
Company (i) in cash, or (ii) by certified or official bank check, or (iii) by
any combination of the foregoing, the Exercise Price for each Warrant Share as
to which Warrants are exercised and any applicable taxes, other than taxes that
the Company is required to pay hereunder. A Warrant holder may exercise such
holder's Warrant for the full number of Warrant Shares issuable upon exercise
thereof or any lesser number of whole Warrants Shares.
(b) As soon as practicable after the exercise of any Warrants and payment
by the Warrant holder of the full Exercise Price for the Warrant Shares as to
which such Warrants are then being exercised, the Warrant Agent shall
requisition from the transfer agent of the shares of Common Stock and deliver to
or upon the order of such Warrant holder a certificate or certificates for the
number of full Warrant Shares to which such Warrant holder is entitled,
registered in the name of such Warrant holder or as such Warrant holder shall
direct. Fractional Warrant Shares that otherwise would be issuable in respect
of such exercise shall be paid in cash as provided in Section 2.03, and the
number of Warrant Shares issuable to such Warrant holder shall be rounded down
to the next nearest whole number. If such Warrant Certificate shall not have
been exercised in full, the Warrant Agent on behalf of the Company will issue to
such Warrant holder a new Warrant Certificate exercisable for the number of
shares of Common Stock as to which such Warrant shall not have been exercised.
The warrant Agent on behalf of the Company will cancel all Warrants so
surrendered.
(c) Each person in whose name any such certificate for Warrant Shares is
issued shall for all purposes be deemed to have become the holder of record of
such Warrant Shares on the date on which the Warrant Certificate was surrendered
to the Warrant Agent and payment of the Exercise Price and any applicable taxes
was made to the Warrant Agent for the account of the Company, irrespective of
the date of delivery of such certificate for Warrant Shares.
(d) All Warrant Shares will be duly authorized, validly issued, fully paid
and nonassessable. The Company will pay all documentary stamp taxes
attributable to the initial issuance of Warrant Shares. The Company will not be
required, however, to pay any tax imposed in connection with any transfer
involved in the issue of the Warrant Shares in a name other than that of the
Warrant holder. In such case, the Company will not be required to issue any
certificate for Warrant Shares until the person or persons requesting the same
shall have paid to the Company the amount of any such tax or shall have
established to the Company's satisfaction that the tax has been paid or that no
tax is due.
(e) Promptly after the Warrant Agent shall have taken the action required
in Section 2.02(b) or at such later time as may be mutually agreeable to the
Company and the Warrant Agent, the Warrant Agent shall account to the Company
with respect to any Warrants exercised and shall pay to the Company the amount
of money received by it upon the exercise of Warrants.
SECTION 2.03. No Fractional Shares To Be Issued. If more than one Warrant
---------------------------------
Certificate shall be surrendered for exercise at one time by the came holder,
the number of full Warrant Shares which shall be issuable upon exercise thereof
shall be computed on the basis of
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<PAGE>
the aggregate number of Warrants so surrendered. The Warrantholders, by their
acceptance of the Warrant Certificates, expressly waive their right to receive
any fraction of a Warrant Share or a share certificate representing a fraction
of a Warrant Share. In lieu thereof, the Company will purchase such fractional
interest for an amount in cash equal to the current market value of such
fractional interest, as reasonably determined by the Board of Directors of the
Company.
SECTION 2.04. Cancellation of Warrants The Warrant Agent shall cancel any
------------------------
Warrant Certificate delivered to it for exercise, in whole or in part, or
delivered to it for transfer, exchange or substitution, and no Warrant
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. On request of the Company, the Warrant
Agent shall destroy canceled warrant Certificates held by it and shall deliver
its certificates of destruction to the Company, subject to record retention
requirements applicable to the Warrant Agent pursuant to the Exchange Act. If
the Company shall acquire any of the Warrants, such acquisition shall not
operate as a redemption or termination of the right represented by such Warrants
unless and until the Warrant Certificates evidencing such Warrants are
surrendered to the Warrant Agent for cancellation.
ARTICLE III
ADJUSTMENT OF EXERCISE PRICE; MERGER, ACQUISITION,
ETC.; RESERVATION OF SHARES OF COMMON STOCK, PAYMENT
OF TAXES
SECTION 3.01. Adjustment of Exercise Price and Number of Warrant
--------------------------------------------------
Shares. (a) The Exercise Price shall be subject to adjustment from time to time
- ------
as provided in this Article III. After each adjustment of the Exercise Price,
each Warrant holder shall at any time thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares purchasable pursuant to the
provisions of such Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment
(b) Fox purposes of making adjustments of the Exercise price pursuant
to this Article 711, the "Current Market Price" shall be determined as of the
date of the issuance or sale giving rise to the adjustment and shall be equal to
the last sale price with respect to shares of Common Stock as reported in the
consolidated transaction reporting system on that date. If there are no
reported transactions in the consolidated transaction reporting system on that
date, the "Current Market Price" shall be the average of the highest current
independent bid and lowest current independent offer for the shares.
SECTION 3.02. Exercise Price Adjustment Formula. If the Company
---------------------------------
issues or sells any shares of Common Stock for a price per share that is less
than the Current Market Price in effect at the time of such issuance or sale,
the Exercise Price immediately shall be adjusted by multiplying the Exercise
Price by (a) an amount equal to the sum of (i) the number of shares of Common
stock outstanding and deemed (in accordance with the provisions of Section 3.03)
to be outstanding immediately prior to such issuance and sale multiplied by the
Current Market Price at the time of such Issuance or sale and (ii) the total
consideration received and deemed (in
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<PAGE>
accordance with the provisions of Section 3.03) to be received by the Company
upon such issuance and sale and (b) dividing the result by an amount equal to
(i) the sum of (A) the amount determined in (a) and (B) the product of the
number of shares issued or sold multiplied by the Current Market Price, minus
(ii) the consideration received.
SECTION 3.03. Constructive Issuance of Shares. (a) If the Company
-------------------------------
grants any rights or options (collectively referred to as "options") to
subscribe for or purchase any shares of Common Stock or any securities
(collectively referred to as "convertible securities") convertible into or
exchangeable for shares of Common Stock, whether or not any such options or the
right to convert or exchange any such convertible securities are immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon the exercise of such options or upon conversion or exchange of
such convertible securities (determined by dividing (i) the total consideration
received or receivable by the Company for the granting of such options, plus any
additional consideration payable to the Company upon the exercise of such
options, plus in the case of any such options which relate to convertible
securities any additional consideration payable to the Company upon the
conversion or exchange thereof by (ii) the maximum number of shares of Common
Stock issuable upon the exercise of such options or upon the conversion or
exchange of such convertible securities) shall be less than the Current Market
Price in effect as of the time of granting such options, the maximum number of
shares of Common Stock issuable upon the exercise of such options or upon
conversion or exchange of all convertible securities issuable upon the exercise
of such options shall be deemed, upon the granting of such options, to be
outstanding and to have been issued for such price per share. Except as provided
in Section 3.03(c), no further adjustment of the Exercise price shall be made
upon the issue or sale of shares of Common Stock upon the exercise of such
options or the conversion or exchange of such convertible securities.
(b) If the Company issues or sells any convertible securities (other
than securities referred to in Section 3.03(a)), whether or not the right to
convert or exchange any such convertible securities is immediately exercisable,
and the price per share for which the shares of Common stock are issuable upon
such conversion or exchange (determined by dividing (i) the total consideration
received or receivable by the Company for the issue or sale of such convertible
securities, plus any additional consideration payable to the Company upon the
conversion or exchange of such convertible securities by (ii) the maximum number
of shares of Common Stock issuable upon the conversion or exchange of such
convertible securities) shall be less than the Current Market Price in effect as
of the time of such issue or sale, the maximum number of shares of Common Stock
issuable upon conversion or exchange of all such convertible securities shall be
deemed, upon the issue or sale of such convertible securities, to be outstanding
and to have been issued for such price per share. Except as provided in Section
3.03(c), no further adjustment of the Exercise Price shall be made upon the
issue or sale of shares of Common Stock upon conversion or exchange of any such
convertible securities.
(c) If the exercise provided for in any option referred to in Section
3.03(a), or the rate at which any convertible security referred to in Section
3.03(a) or 3.03(b) is convertible into or exchangeable for shares of Common
Stock, shall change or a different exercise price or rate shall become effective
at any time or from time to time, the Exercise Price immediately shall be
adjusted to the Exercise Price that would have obtained had the adjustments made
and required to be made under this Section 3.03 upon the issuance or sale of
such options or such convertible securities been made upon the basis of (i) the
issuance of the number of Shares of Common Stock theretofore delivered upon the
exercise of such options or upon the conversion or
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<PAGE>
exchange of such convertible securities and the total consideration received
therefor, (ii) the issuance of all shares of Common Stock and all other options
or convertible securities and the total consideration received therefor and
(iii) the original issuance at the time of such change of exercise price or rate
of any such options or convertible securities then outstanding and the total
consideration received therefor. On the expiration of any such option or the
termination of any such right to convert or exchange any such convertible
securities, the Exercise Price immediately shall be adjusted to the Exercise
Price that would have obtained (iv) had the adjustments made upon the issuance
of such options or such convertible securities been made upon the issuance of
only the number of shares of Common Stock actually delivered and the total
consideration received therefor upon the exercise of such options or upon the
conversion or exchange of such convertible securities and (v) had adjustments
been made on the basis of the Exercise Price as adjusted under clause (iv) of
this Section 3.03(c) for all issues or sales of shares of Common Stock, options
or convertible securities made after the issuance of such options or convertible
securities. If the exercise price provided for in any option referred to in
Section 3.03(a), or the rate at which any convertible security referred to in
Section 3.03(a) or 3.03(b) is convertible or exchangeable for shares of Common
Stock, shall decrease at any time pursuant to applicable provisions thereof
designed to protect against dilution, the Exercise price immediately shall be
decreased in the case of delivery of shares of Common Stock upon the exercise of
any such option or upon the conversion or exchange of any such convertible
securities, to the Exercise Price that would have obtained had the adjustment
made upon the issue or sale of such option or such convertible security been
made upon the basis of the issuance of the shares of Common Stock so delivered
and the total consideration received therefor.
(d) If any shares of Common Stock or any convertible securities or any
option shall be issued or sold for cash, the consideration received by the
Company shall be deemed to be the amount payable to the company therefor without
deduction of any expense incurred or any underwriting commission, concession or
discount paid or allowed by the Company in connection therewith. If any shares
of Common Stock or any convertible securities or any option shall be issued or
sold for a consideration other than cash, the consideration received by the
Company shall be deemed to be the fair value of such consideration as determined
by the Board of Directors of the Company without deduction of any expense
incurred or any underwriting commission, concession or discount paid or allowed
by the Company in connection therewith. If any shares of Common Stock or any
convertible securities or any option shall be issued in connection with a merger
of another corporation into the Company, the consideration received by the
Company shall be deemed to be the fair value as determined by the Board of
Directors of the Company of such portion of the assets of such merged
corporation as the Board of Directors shall reasonably determine to be
attributable to such shares of Common Stock or such option or convertible
securities, as the case may be.
SECTION 3.04. Stock Dividends. If the Company shall declare a
---------------
dividend or any other distribution upon any capital stock which is payable in
shares of Common Stock, the Exercise Price shall be reduced to the quotient
obtained by dividing (i) the number of shares of Common Stock outstanding and
deemed (in accordance with the provisions of Section 3.03(c)) to be outstanding
immediately prior to such declaration multiplied by the then effective Exercise
Price by (ii) the total number of shares of Common Stock outstanding and deemed
(in accordance with the provisions of Section 3.03(c) to be outstanding
immediately after such declaration. All shares of Common Stock and all
convertible securities issuable in payment of any dividend or other distribution
upon the capital stock of the Company shall be deemed to have been issued or
sold without consideration.
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SECTION 3.05. Extraordinary Dividends and Distribution. If the
----------------------------------------
Company shall declare a dividend or any other distribution upon the shares of
Common Stock payable otherwise than out of current earnings, retained earnings
or earned surplus and otherwise than in shares of Common Stock or convertible
securities, the Exercise Price shall be reduced by an amount equal, in the case
of a dividend or distribution in cash, to the amount thereof payable per share
of Common Stock or, in the case of any other dividend or other distribution, to
the fair value thereof per share of Common Stock at the time such dividend or
other distribution was declared, as reasonably determined by the Board of
Directors of the Company. A dividend or distribution other than in cash shall
be considered payable out of current earnings, retained earnings or earned
surplus only to the extent that such current earnings, retained earnings or
earned surplus are charged an amount equal to the fair value of such dividend or
distribution as reasonably determined by the Board of Directors of the Company.
SECTION 3.06. Stock Splits and Reverse Stock Splits. If the Company
-------------------------------------
shall subdivide its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price shall be proportionately reduced and the number of
Warrant Shares issuable upon exercise of each Warrant shall be proportionately
increased. If the Company shall combine the outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price shall be proportionately
increased and the number of Warrant Shares issuable upon exercise of each
Warrant shall be proportionately decreased.
SECTION 3.07. Reorganizations and Asset Sales. If any capital
-------------------------------
reorganization or reclassification of the Company, or any consolidation or
merger of the Company with another corporation, or the sale of all or
substantially all of the assets of the Company shall be effected in such a way
that the holders of the shares of Common Stock shall be entitled to receive
securities or assets with respect to or in exchange for shares of Common Stock,
adequate provision shall be made, prior to and as a condition of such
reorganization, reclassification, consolidation, merger or sale, whereby each
Warrant holder shall have the right to receive, upon the terms and conditions
specified herein and in lieu of the Warrant Shares otherwise receivable upon the
exercise of such Warrants, such securities or assets as may be issued or payable
with respect to or in exchange for the number of outstanding shares of Common
Stock equal to the number of Warrant Shares otherwise receivable had such
reorganization, reclassification, consolidation, merger or sale not taken place.
In any such case appropriate provision shall be made with respect to the rights
and interests of such Warrant holder so that the provisions of this Agreement
shall be applicable with respect to any securities or assets thereafter
deliverable upon exercise of the Warrants. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the survivor or successor corporation resulting from such
consolidation or merger or the purchaser of such assets shall assume by written
instrument delivered to each holder of Warrants the obligation to deliver to
such holder such securities or assets as such holder may be entitled to receive.
SECTION 3.08. Covenant to Reserve Shares for Issuance on Exercise.
---------------------------------------------------
(a) The Company will cause an appropriate number of shares of Common Stock to
be duly and validly authorized and reserved and will keep available out of its
authorized shares of Common Stock, solely for the purpose of issue upon exercise
of Warrants as herein provided, the full number of shares of Common Stock, if
any, then issuable if all outstanding Warrants then exercisable were to be
exercised. The Company covenants that all shares of Common Stock that shall be
so issuable shall be duly and validly issued and, upon payment of the Exercise
Price, fully paid and
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non-assessable.
(b) The Company hereby authorizes and directs its current and future
transfer agents for the shares of Common Stock at all times to reserve such
number of authorized shares as shall be requisite for such purpose. The Warrant
Agent is hereby authorized to requisition from time to time from any such
transfer agents share certificates required to honor outstanding Warrants upon
exercise thereof in accordance with the terms of this Agreement, and the Company
hereby authorizes and directs such transfer agents to comply with all such
requests of the Warrant Agent. The Company will supply such transfer agents
with duly executed stock certificates for such purposes. Promptly after the
date of expiration of the Warrants, the Warrant Agent shall certify to the
Company the aggregate number of Warrants then outstanding, and thereafter no
shares shall be reserved in respect of such Warrants.
SECTION 3.09. Warrant Agent Not Responsible for Validity of Shares.
----------------------------------------------------
The Warrant Agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock or of any securities or
property that at any time may be issued or delivered upon the exercise of any
Warrant or upon any adjustment pursuant to Article III, and it makes no
representation with respect thereto. The Warrant Agent shall not be responsible
for any failure of the Company to make any cash payment or to issue, transfer or
deliver any shares of Common Stock or share certificates or other securities or
property upon the surrender of any Warrant for the purpose of exercise or upon
any adjustment pursuant to Article III, or to comply with any of the covenants
of the Company contained in this Article III.
SECTION 3.10. Statements on Warrants. The form of Warrant
----------------------
Certificate need not be changed because of any adjustment made pursuant to this
Article III, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of shares of Common Stock as are stated
in the Warrant Certificates initially issued pursuant to this Agreement. The
Company, however, may at any time in its sole discretion (which shall be
conclusive) make any change in the form of Warrant Certificate that it may deem
appropriate and that does not affect the substance thereof; and any Warrant
Certificates thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed .
SECTION 3.11. Notice of Change in Securities Issuable, etc. Whenever
---------------------------------------------
the securities issuable or deliverable in exchange for Warrants is changed
pursuant to this Article III, the Company promptly shall file with the Warrant
Agent a certificate executed by its chief financial officer, setting forth in
reasonable detail the facts requiring the change and specifying the effective
date of such change and the number or amount of, and describing the shares or
other securities issuable or deliverable in exchange for, each Warrant as so
changed. The Company also shall mail such a notice to each Warrant holder.
Failure to file such statement or to publish such notice, or any defect in such
statement or notice, shall not affect the legality or validity of any such
change.
SECTION 3.12. References to Common Stock. Unless the context
--------------------------
otherwise indicates, all references to Common Stock in this Agreement and in the
Warrant Certificates, in the event of a change under this Article III, shall be
deemed to refer also to any other securities issuable or deliverable in exchange
for Warrants pursuant to such change.
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ARTICLE XV
OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS
SECTION 4.01. No Rights as Shareholders. Nothing contained in this
-------------------------
Agreement or in any Warrant Certificate shall be construed as conferring on any
Warrant holder any rights whatsoever as a shareholder of the Company, including
the right to vote at, or to receive notice of, any meeting of shareholders of
the Company; nor shall the consent of any such holder be required with respect
to any action or proceeding of the Company; nor shall any such holder, by reason
of the ownership or possession of a Warrant or the Warrant Certificate
representing the same, either at, before or after exercising such Warrant, have
any right to receive any cash dividends, stock dividends, allotments or rights,
or other distributions (except as specifically provided herein), paid, allotted
or distributed or distributable to the shareholders of the Company prior to the
date of the exercise of such Warrant, nor shall such holder have any right not
expressly conferred by such holder's Warrant or Warrant certificate,
SECTION 4.02. Mutilated or Missing Warrant Certificates. If any
-----------------------------------------
Warrant Certificate is lost, stolen, mutilated or destroyed, the Company in its
discretion may issue and the Warrant Agent may countersign, in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, upon receipt of proper affidavit or other evidence satisfactory to
the Company and the Warrant Agent (and surrender of any mutilated Warrant
Certificate) and bond of indemnity in fore and amount and with corporate surety
satisfactory to the Company and the Warrant Agent in each instance protecting
the Company and the Warrant Agent, a new Warrant Certificate of like tenor and
exercisable for an equivalent number of shares of Common Stock as the Warrant
Certificate so lost, stolen, mutilated or destroyed. Any such new Warrant
Certificate shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant
Certificate at any time shall be enforceable by anyone. An applicant for such a
substitute Warrant Certificate also shall comply with such other reasonable
regulations and pay such other reasonable charges as the Company or the Warrant
Agent may prescribe. All Warrant Certificates shall be held and owned upon the
express condition that the foregoing provisions are exclusive with respect to
the replacement of lost, stolen, mutilated or destroyed Warrant Certificates,
and shall preclude any and all other rights or remedies notwithstanding any law
or statute existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without their
surrender.
SECTION 4.03. Liquidation, Merger, etc.; Notice to Warrantholders.
---------------------------------------------------
If:
(a) the Company shall authorize the issuance to all holders of Common
Stock of rights or warrants to subscribe for or purchase capital stock of the
Company or of any other subscription rights or warrants: or
(b) the Company shall authorize the distribution to all holders of
Common Stock of evidences of its indebtedness or assets (other than cash
dividends or cash distributions payable out of current earnings, retained
earnings or earned surplus or dividends payable in Common Stock); or
(c) there shall be proposed any consolidation or merger to which the
Company is to be a party and for which approval of the holders of Common Stock
is required, or the conveyance or transfer of the properties and assets of the
Company substantially as an
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entirety; or
(d) there shall be proposed the voluntary or involuntary dissolution,
liquidation or winding up of the Company; the Company shall cause to be filed
with the Warrant Agent and shall cause to be given to each Warrant holder, by
first-class mail, postage prepaid, a written notice stating (i) the date as of
which the holders of record of shares of Common Stock to be entitled to receive
any such rights, warrants or distribution are to be determined or (ii) the date
on which any consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange the shares for securities
or other property, if any, deliverable upon the consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. Such notice shall be filed and mailed in the case of a notice
pursuant to (i) above at least ten calendar days before the record date
specified and in the case of a notice pursuant to clause (ii) above at least 20
calendar days before the earlier of the dates specified. From the time notice
is required to be given pursuant to this Section 4.03, the holders of Warrants
shall be entitled to exercise such Warrants regardless of the provisions of
Section 2.01.
ARTICLE V
CONCERNING THE WARRANT AGENT
SECTION 5.01. Change of Warrant Agent. (a) The Warrant Agent, or
-----------------------
any successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities hereunder after giving 60 days' notice
in writing to the Company, except that such shorter notice may be given as the
Company, in writing, shall accept as sufficient. If the office of the Warrant
Agent becomes vacant by resignation or incapacity to act or otherwise, the
Company shall appoint a successor Warrant Agent in place of the Warrant Agent.
If the Company shall fail to make such appointment within a period of 60 days
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by any holder of Warrants (who, with
such notice, shall submit such holder's Warrant Certificate for inspection by
the Company), then the holder of any Warrants may apply to any court of
competent jurisdiction for the appointment of a successor Warrant Agent.
(b) The Warrant Agent may be removed by the Company at any time upon
30 days' written notice to the Warrant Agent; provided, however, that the
-------- -------
Company shall not remove the Warrant Agent until a successor Warrant Agent
meeting the requirements hereof shall have been appointed.
(c) Any successor Warrant Agent, whether appointed by the Company or
by a court of competent jurisdiction, shall be a corporation or association
(including the Company) organized, in good standing and doing business under the
laws of the United states of America or any state thereof or the District of
Columbia. After appointment, any successor Warrant Agent shall be vested with
all the authority, powers, rights, immunities, duties and obligations of its
predecessor Warrant Agent with like effect as if originally named as warrant
Agent hereunder, without any further act or deed; but if for any reason it
becomes necessary or appropriate, the predecessor Warrant Agent shall execute
and deliver, at the expense of the Company, an instrument transferring to such
successor Warrant Agent all the authority, powers and rights of such predecessor
Warrant Agent hereunder; and upon request of any successor Warrant Agent,
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the Company shall make, execute, acknowledge and deliver any and all instruments
in writing to more fully and effectually vest in and confirm to such successor
Warrant Agent all such authority, powers, rights, immunities, duties and
obligations. Upon assumption by a successor Warrant Agent of the duties and
responsibilities hereunder, the predecessor Warrant Agent shall deliver and
transfer, at the expense of the Company, to the successor Warrant Agent any
property at the time held by it hereunder. As soon as practicable after such
appointment, the Company shall give notice thereof to the predecessor Warrant
Agent, the Warrantholders and each transfer agent for the shares of Common
Stock. Failure to give such notice, or any defect therein, shall not affect the
validity of the appointment of the successor Warrant Agent.
(d) Any corporation or association into which the Warrant Agent may be
merged or with which it may be consolidated, or any corporation or association
resulting from any merger or consolidation to which the Warrant Agent shall be a
party, shall be the successor Warrant Agent under this Agreement without any
further act. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement, any of the Warrant Certificates
shall have been countersigned but not delivered, any such successor to the
Warrant Agent may adopt the countersignature of the original Warrant Agent and
deliver such Warrant Certificates so countersigned, and in case at that time any
of the Warrant Certificates shall not have been countersigned, any successor to
the Warrant Agent may countersign such Warrant Certificates either in the name
of the predecessor Warrant Agent or in the name of the successor Warrant Agent;
and in all such cases Warrant Certificates shall have the full force provided in
the in the Warrant Certificates and in this Agreement.
(e) In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been countersigned
but not delivered, the Warrant Agent may adopt the countersignatures under its
prior name and deliver such Warrant Certificates 60 countersigned: and in case
at that time any of the Warrant Certificates shall not have been countersigned,
the Warrant Agent may countersign such Warrant Certificates either in its prior
name or in its changed name; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and in this
Agreement.
SECTION 5.02 Compensation; Further Assurances. The Company agrees
--------------------------------
(i) that it will pay the warrant Agent reasonable compensation for its Services
as Warrant Agent hereunder and, except as otherwise expressly provided, will pay
or reimburse the Warrant Agent upon demand for all reasonable expenses,
disbursements and advances incurred or made by the Warrant Agent in accordance
with any of the provisions of this Agreement (including the reasonable
compensation, expenses and disbursements of its agents and counsel) except any
such expense, disbursement or advance as may arise from its or any of their
negligence or bad faith; and (ii) that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments And assurances as reasonably may be required
by the Warrant Agent for the carrying out or performing of the provisions of
thin Agreement.
SECTION 5.03. Reliance on Counsel. The Warrant Agent may consult
-------------------
with legal counsel (who may be legal counsel for the Company), and the written
opinion of such counsel or any advice of legal counsel subsequently confirmed by
a written opinion of such counsel shall be full and complete authorization and
protection to the Warrant Agent as to any action taken or omitted by it in good
faith and in accordance with such written opinion or advice.
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<PAGE>
SECTION 5.04. Proof of Actions Taken. Whenever in the performance of
----------------------
its duties under this Agreement the Warrant Agent shall deem it necessary or
desirable that any matter be proved or established by the Company prior to
taking or suffering or omitting any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed), in the absence
of bad faith on the part of the Warrant Agent, may be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the Warrant
Agent; and such Officers' Certificate, in the absence of bad faith on the part
of the Warrant Agent, shall be full warrant to the Warrant Agent for any action
taken, suffered or omitted in good faith by it under the provisions of this
Agreement in reliance upon such certificate: but in its discretion the Warrant
Agent in lieu thereof may accept other evidence of such fact or matter or may
require such further or additional evidence as to it may seem reasonable.
SECTION 5.05. Correctness of Statements. The Warrant Agent shall not
-------------------------
be liable for or by reason of any of the statements of fact or recitals
contained in this Agreement or in the Warrant Certificates (except its
countersignature thereon) or be required to verify the same, and all such
statements and recitals are and shall be deemed to have been made by the Company
only.
SECTION 5.06. Validity of Agreement. The Warrant Agent shall not be
---------------------
under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof or in respect of the validity or execution of any
Warrant Certificates (except its countersignature thereon); nor shall it be
responsible for any breach by the Company of any covenant or condition contained
in this Agreement or in any Warrant Certificate; nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or Any Warrants or as to whether any shares of Common Stock,
when issued, will be validly issued and fully paid and nonassessable.
SECTION 5 07. Use of Agents. The Warrant Agent may execute and
-------------
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents and the Warrant
Agent shall not be responsible for the misconduct or negligence of any agent or
attorney, provided due care had been exercised in the appointment and continued
employment thereof.
SECTION 5.08. Liability of Warrant Agent. The Warrant Agent shall
--------------------------
incur no liability or responsibility to the company or to any holder of Warrants
for any action taken in reliance on any notice, resolution, waiver, consent,
order, certificate, or other paper, document or instrument believed by it to be
genuine and to have been signed, sent or presented by the proper party or
parties. The Company agrees to indemnify the Warrant Agent and save it harmless
against any and all liabilities, including judgments, costs and reasonable
counsel fees, for anything done or omitted in good faith by the Warrant Agent in
the execution of this Warrant Agreement, except as a result of the Warrant
Agent's gross negligence or willful misconduct or bad faith.
SECTION 5.09. Legal Proceedings. The Warrant Agent shall be under no
-----------------
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or one or more holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses that may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as
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<PAGE>
the Warrant Agent may consider proper, whether with or without any such security
or indemnity.
SECTION 5.10. Other Transactions in Shares of the Company. The
-------------------------------------------
Warrant Agent in its individual or any other capacity may become the owner of
the Warrants or other securities of the Company, or become pecuniarily
interested in any transaction in which the company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Warrant Agreement. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for the
Company or for any other legal entity.
SECTION 5.11. Actions as Agent. The Warrant Agent shall act
----------------
hereunder solely as agent and not in a ministerial capacity, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not be liable for anything which it may do or refrain from doing in good faith
in connection with this Agreement except for its own negligence or willful
misconduct or bad faith.
SECTION 5.12. Appointment and Acceptance of Agency. The Company
hereby appoints the Warrant Agent to act as agent for the Company in accordance
with the instructions set forth in this Agreement, and the Warrant Agent hereby
accepts the agency established by this Agreement and agrees to perform the same
upon the terms and conditions herein set forth.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Reservation of Shares. The Company at all times shall
---------------------
reserve and keep available such number of shares of its authorized but unissued
Common Stock as from time to time shall be sufficient to permit the exercise of
all outstanding Warrants. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient for such purpose, the Company
will take such action as, in the opinion of its counsel, may be necessary to
increase its authorized but unissued Common Stock to such number of shares as
shall be sufficient for such purpose. Prior to the issuance of any Warrant
Shares, the Company shall secure the listing of such Warrant Shares upon any
securities exchange upon which shares of Common Stock are then listed, if any.
SECTION 6.02. Registration of Warrant Shares. (a) The Company shall
------------------------------
cause the Warrant Shares to be registered under the Securities Act on the date
that they are issuable to FBR pursuant to the Underwriting Agreement and will
use its best efforts to keep such registration effective through the close of
business on the fifth anniversary of the Effective Date.
(b) If, at any time prior to the close of business on the fifth
anniversary of the Effective Date, there is no registration statement in effect
for the Warrant Shares, the Company, upon the written request of holders of
Warrants and of Warrant Shares representing an aggregate of 50% or more of the
Warrant Shares, will file with the Securities and Exchange Commission under the
Securities Act, such registration statements and amendments thereto and such
other fillings as may be required to permit the public offering and sale of such
Warrant Shares in compliance with the Securities Act. The Company shall be
required to register Warrant Shares only once pursuant to this Section 6.02(b).
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(c) The Company will permit any Warrant Shares to be included, at the
request of the holders of such Warrant Shares, in any registration of securities
of the Company (other than shares of Common Stock for an employees' option or
stock purchase plan) under a registration statement filed by the Company under
the Securities Act at any time prior to the close of business on the seventh
anniversary of the Effective Date. The Company shall provide written notice to
the record holders of all Warrants and Warrant Shares at least 30 days prior to
the filing of any such registration statement sent by registered mail to the
address of record of each such holder.
(d) Each such holder shall pay the underwriting discount attributable
to such holder's Warrant Shares, any transfer tax payable with respect thereto
and the fees and expenses of such holder's counsel. All other expenses of
registration under Section 6.02(a), Section 6.02(b) or Section 6.02(c) shall be
borne by the Company.
(e) The Company will agree to indemnify the holders of Warrant Shares
that are included in a registration statement or amendments to existing
registration statements pursuant to this Section 6.02 substantially to the same
extent as the Company has agreed to indemnify the Underwriters in the
Underwriting Agreement and such holders will agree to indemnify the Company and
any underwriter with respect to information furnished by them in writing to the
Company for inclusion therein substantially to the same extent as the
Underwriters have indemnified the Company in the Underwriting Agreement.
(f) If the offering pursuant to any registration statement provided
for herein is made through underwriters, the Company will enter into an
underwriting agreement in customary form and indemnity, in customary form, such
underwriters and each person who controls any such underwriter within the
meaning of the Securities Act. Such underwriting agreement shall contain
provisions for the indemnification of the Company in customary form, provided
that the aggregate amount that may be recovered from any such underwriter
pursuant to such provisions shall be limited to the total price at which the
Warrant Shares purchased by any such underwriter under such underwriting
agreement were offered to the public.
SECTION 6.03 Enforcement of Warrant Rights. All rights of action are
-----------------------------
vested in the respective Warrantholders. Any holder of any Warrant, in his own
behalf and for his own benefit, may enforce, and may institute and maintain any
suit, action or proceeding against the company or the warrant Agent suitable to
enforce, or otherwise in respect of, his right to exercise his Warrant for the
purchase of the number of Warrant Shares issuable or deliverable in exchange
therefor, in the manner provided in the Warrant and in this Agreement.
SECTION 6.04. Negotiability and Ownership. The Warrants issued
---------------------------
hereunder shall not, for a period of one year following the Effective Date, be
sold, transferred, assigned or hypothecated by the holders thereof except (a) to
persons who are officers of FBR or (b) in the case of an individual, pursuant to
such individual's last will and testament or the laws of descent and
distribution and, in any case, only in compliance with the Securities Act. For
the purposes of this Section 6.04, the term "officers" shall refer to those
persons who are officers of FBR or who become officers of FBR at any time before
the expiration of the Warrants regardless of whether such persons are officers
of FBR at the time they sell, transfer, assign or hypothecate a Warrant. Any
attempt to sell, transfer, assign or hypothecate in contravention of this
Section shall be null and void.
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SECTION 6.05. Warrant Legend. (a) Each Warrant shall contain a legend
--------------
in substantially the following form:
"THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT ARE SUBJECT TO THE CONDITIONS SPECIFIED IN THE AGREEMENT,
DATED JANUARY __, 1998, BETWEEN ICON HOLDINGS CORP. AND STATE STREET BANK
AND TRUST CO. ANY ATTEMPT TO TRANSFER THIS WARRANT OR ANY SHARE OF COMMON
STOCK ISSUED UPON EXERCISE OF THIS WARRANT, PRIOR TO JANUARY __, 1999, TO
ANY UNAUTHORIZED TRANSFEREE, SHALL BE NULL AND VOID. NO TRANSFER IN
VIOLATION OF SAID AGREEMENT SHALL BE EFFECTIVE. THIS WARRANT MAY NOT BE
SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE AND CURRENT
REGISTRATION STATEMENT OR POSTEFFECTIVE AMENDMENT THERETO FOR SUCH SHARES
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR AN APPLICABLE EXEMPTION
UNDER THE ACT. THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
MAY NOT BE SOLD OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
OR POSTEFFECTIVE AMENDMENT THERETO FOR SUCH SHARES UNDER THE ACT OR AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED UNDER THIS ACT."
(b) Each certificate representing Warrant Shares, unless registered
pursuant to Section 6.02, shall contain a legend substantially in the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR
TRANSFERRED WITHOUT AN EFFECTIVE AND CURRENT REGISTRATION STATEMENT OR
POSTEFFECTIVE AMENDMENT THERETO FOR SUCH SHARES UNDER THE SECURITIES ACT OF
1933 OR AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THAT ACT. THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CONDITIONS SPECIFIED IN
THE AGREEMENT, DATED JANUARY __, 1998, BETWEEN ICON HOLDINGS CORP. AND
STATE STREET BANK & TRUST CO. ANY ATTEMPT TO TRANSFER THE SHARES
REPRESENTED BY THIS CERTIFICATE, PRIOR TO JANUARY __, 1999, TO ANY
UNAUTHORIZED TRANSFEREE, SHALL BE NULL AND VOID. NO TRANSFER IN VIOLATION
OF SAID AGREEMENT SHALL BE EFFECTIVE."
SECTION 6.06. Supplements and Amendments. (a) Notwithstanding the
--------------------------
provisions of Section 6 06(b), the Warrant Agent, without the consent or
concurrence of the registered holders of the Warrants, may enter into one or
more supplemental agreements or amendments with the Company for the purpose of
evidencing the rights of Warrantholders upon consolidation, merger, sale,
transfer or reclassification pursuant to Section 3.07, making any changes or
corrections in this Agreement that are required to cure any ambiguity, to
correct or supplement any provision contained hereon that may be defective or
inconsistent with any other
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<PAGE>
provision herein or any clerical omission or mistake or manifest error herein
contained, or making such other provisions in regard to matters or questions
arising under this Agreement as shall not adversely affect the interests of the
holders of the Warrants or be inconsistent with this Agreement or any
supplemental agreement or amendment.
(b) With the consent of the registered holders of at least a majority
in number of the Warrants at the time outstanding, the Company and the Warrant
Agent at any time and from time to time by supplemental agreement or amendment
may add any provisions to or change in any manner or eliminate any of the
provisions of this Agreement or of any supplemental agreement or modify in any
manner the rights and obligations of the Warrantholder and of the Company;
provided, however, that no such supplemental agreement or amendment, without the
consent of the registered holder of each outstanding Warrant affected thereby,
shall:
(1) alter the provisions of this Agreement so as to affect adversely
the terms upon which the Warrants are exercisable or may be redeemed; or
(2) reduce the number of Warrants outstanding the consent of whose
holders is required for any such supplemental agreement or amendment.
SECTION 6.07. Successors and Assigns. All the covenants and
----------------------
provisions of this Agreement by or for the benefit of the Company or the Warrant
Agent shall bind and inure to the benefit of their respective successors and
assigns hereunder.
SECTION 6.08. Notices. Any notice or demand authorized by this
-------
Agreement to be given or made by the Warrant Agent or by the holder of any
Warrant to or on the Company shall be sufficiently given or made if sent by mail
first-class, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:
ICON Holdings Corp.
600 Mamoroneck Ave.
Harrison, NY 10528-1632
Attention: Beaufort J.B. Clarke
Any notice or demand authorized by this Agreement to be given or made
by the holder of any Warrant or by the Company to or on the Warrant Agent shall
be sufficiently givenor made if sent by mail first-class, postage prepaid,
addressed (until another address is filed in writing by the Warrant Agent with
the Company), as follows:
State Street Bank and Trust & Co.
c/o Boston EquiServe
Corporate Reorganization
70 Campanelli Drive
Braintree, MA 02484
Attention: __________________
Any notice or demand authorized by this Agreement to be given or made
to the holder of any Warrants shall be sufficiently given or made if sent by
first-class mail, postage prepaid to the last address of such holder as it shall
appear on the Warrant Register.
-18-
<PAGE>
SECTION 6.09. Applicable Law. The validity, interpretation and
--------------
performance of this Agreement and of the Warrant Certificate shall be governed
by the law of the State of New York without giving effect to the principles of
conflicts of laws thereof.
SECTION 6.10. Benefits of this Agreement. Nothing in this Agreement
--------------------------
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any person or
corporation other than the parties hereto and the holders of the Warrants any
right, remedy or claim under or by reason of this Agreement or of any covenant,
condition, stipulation, promise or agreement hereof, and all covenants,
conditions, stipulations, promises and agreements in this Agreement contained
shall be for the sole and exclusive benefit of the parties hereto and theft
successors and of the holders of the Warrants.
SECTION 6.11. Registered Warrantholders. Prior to due presentment
-------------------------
for registration of transfer, the Company and the Warrant Agent may deem and
treat the person in whose name any Warrants are registered in the Warrant
Register as the absolute owner thereof for all purposes whatever
(notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Company or the Warrant Agent) and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary or be bound to
recognize any equitable or other claim to or interest in any Warrants on the
part of any other person and shall not be liable for any registration of
transfer of Warrants that are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with actual knowledge that a
fiduciary or nominee is committing a breach of trust in requesting such
registration of transfer or with such knowledge of such facts that its
participation therein amounts to bad faith. The terms "Warrantholder" and
"holder" of any "Warrants" and all other similar terms used herein shall mean
such person in whose name Warrants are registered in the Warrant Register.
SECTION 6.12. Inspection of Agreement. A copy of this Agreement
-----------------------
shall be available at all reasonable times for inspection by any Warrantholder
at the principal office of the Warrant Agent (or successor Warrant Agent). The
Warrant Agent may require any such Warrantholder to submit his Warrant
certificate for inspection by it before allowing such Warrantholder to inspect a
copy of this Agreement
SECTION 6.13. Headings. The Article and Section headings herein are
--------
for convenience only and are not a part of this Agreement and shall not affect
the interpretation thereof.
SECTION 6.14. Counterparts. The Agreement may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original.
* * * * *
-19-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto under their respective seals as of the day and year first above
written.
ICON HOLDINGS CORP.
[CORPORATE SEAL]
By:
Name:
----------------------------------
Title:
Attest:
Name:
Title:
STATE STREET BANK & TRUST CO.,
as Warrant Agent
[CORPORATE SEAL]
By:
Name:
----------------------------------
Title:
Attest:
Name:
Title:
-20-
<PAGE>
EXHIBIT A
Exhibit A
[FORM OF FIRM WARRANT CERTIFICATE]
No. ________ ________ Warrants
WARRANTS
TO PURCHASE SHARES OF COMMON STOCK OF
ICON HOLDING CORP.
ICON Holdings Corp., a Delaware corporation (the "Company"), for value
received, hereby certifies that
or registered assigns, is the owner of the number of Firm Warrants, set forth
above, each of which represents the right, subject to the terms and conditions
hereof and of the Warrant Agreement hereafter referred to (the "Warrant
Agreement"), to purchase from the Company at any time, or from time to time,
from the date of original issuance of the Firm Warrants to the close of business
on the fifth anniversary of such date (or, if such date is not a Business Day
(as defined below), the first following Business Day) (the "Exercise Period"),
the number of shares of Common Stock, par value $.01 per share, of the Company
(the "Common Stock") described in the Warrant Agreement (each share of Common
Stock issuable upon exercise of a Firm Warrant is referred to as a "Warrant
Share"). Subject to the terms and conditions of the Warrant Agreement, the
exercise price per Firm Warrant represented by this Warrant Certificate shall be
$__.00 per share, adjusted as provided in Article III of the Warrant Agreement,
payable in full as to each Firm Warrant exercised at the time of purchase. The
term "Underwriting Agreement" as used herein refers to the Underwriting
Agreement dated ___________, 1997 between the Company and Friedman, Billings,
Ramsey & Co., Inc. The term "Exercise Price" as used herein refers to the
foregoing price per share in effect at any time.
This Firm Warrant may be exercised in whole or in part at any time or
from time to time during the Exercise Period. The portion of any Firm Warrant
not exercised during the Exercise Period shall become void, and all rights
hereunder and all rights in respect hereof and under the Warrant Agreement shall
cease at the end of the Exercise Period.
Each such purchase of Warrant Shares shall be made, and shall be
deemed effective for the purpose of determining the date of exercise, only upon
surrender hereof to the Company at the office or agency maintained for such
purpose in The City of New York or the principal office of [Name of Warrant
Agent], Warrant Agent (or any successor Warrant Agent), with the form of
Election to Exercise on the reverse hereof duly filled in and signed, and upon
payment in full to the Warrant Agent for the account of the Company of the
Exercise Price (i) in cash or (ii) by certified or official bank check or (iii)
by any combination of the foregoing, all as provided in the Warrant Agreement
and upon compliance with and subject to the conditions set forth herein and in
the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement dated as
A-1
<PAGE>
of January __, 1998 (the "Warrant Agreement"), between the Company and the
Warrant Agent and is subject to the terms and provisions of the Warrant
Agreement, which terms and provisions are hereby incorporated by reference
herein and made a part hereof. Copies of the Warrant Agreement and of the
Underwriting Agreement are available for inspection by the registered holder at
the principal office of the Warrant Agent (or successor Warrant Agent).
The Company shall not be required upon the exercise of the Firm
Warrants represented hereby to issue fractions of warrant shares or to
distribute share certificates that evidence fractional Warrant Shares. Every
holder of this Warrant Certificate expressly waives its right to receive any
fraction of a Warrant Share or a share certificate representing a fraction of a
Warrant Share. Fractional Warrant Shares that otherwise would be issuable in
respect of such exercise shall be paid in cash as provided in the Warrant
Agreement, and the number of Warrant Shares issuable to such Warrant holder
shall be rounded down to the next nearest whole number. If such Warrant
Certificate shall not have been exercised in full, the Warrant Agent on behalf
of the Company will issue to such Warrant holder a new Warrant Certificate
exercisable for the number of shares of Common Stock as to which such Firm
Warrant shall not have been exercised.
This Warrant Certificate may be exchanged either separately or in
combination with other Warrant Certificates at the office or agency maintained
in The City of New York for such purpose or at the principal office of the
Warrant Agent (or successor Warrant Agent) for new Warrant Certificates
representing the same aggregate number of Firm Warrants as were evidenced by the
Warrant Certificate or Warrant Certificates exchanged, upon surrender of this
Warrant Certificate and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement.
This Warrant Certificate is transferable (subject to restrictions set
forth in the Warrant Agreement) at the office or agency maintained in The City
of New York for such purpose or at the principal office of the Warrant Agent (or
successor Warrant Agent) by the registered holder hereof in person or by his
attorney duly authorized in writing, upon (i) surrender of this Warrant
Certificate and (ii) upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement. Upon any such transfer, a new
Warrant Certificate or new Warrant Certificates of different denominations,
representing in the aggregate a like number of Firm Warrants, will be issued to
the transferee. Every holder of Firm Warrants, by accepting this Warrant
Certificate, consents and agrees with the Company, the Warrant Agent and with
every subsequent holder of this Warrant Certificate that until due presentation
for the registration of transfer of this Warrant Certificate on the Warrant
Register maintained by the Warrant Agent, the Company and the Warrant Agent may
deem and treat the person in whose name this Warrant Certificate is registered
as the absolute and lawful owner for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
Nothing contained in the Warrant Agreement or in this Warrant
Certificate shall be construed as conferring on the holder of any Firm Warrants
or his transferee any rights whatsoever as a shareholder of the Company.
This Warrant Certificate shall not be valid unless countersigned
manually by the Warrant Agent.
A-2
<PAGE>
The Warrant Agreement and each Warrant Certificate, including this
Warrant Certificate, shall be deemed a contract made under the laws of the State
of New York and for all purposes shall be construed in accordance with the laws
of the State of New York without giving effect to the principles of conflicts of
law thereof.
* * * * *
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated:
ICON HOLDINGS CORP.
[CORPORATE SEAL] By:
---------------------------
A-4
<PAGE>
--------------------------------
ATTEST:
COUNTERSIGNED: [NAME OF WARRANT AGENT], as
Warrant Agent
By:
----------------------------
Authorized Signature
A-5
<PAGE>
ELECTION TO EXERCISE
(To be executed upon exercise of Warrant)
TO [NAME OF COMPANY]:
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
____________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the purchase price in full in the form of cash or a
certified or official bank check (or combination thereof) in the amount of $
___________ .
Please issue a certificate or certificates for such shares of Common Stock
in the name of:
PLEASE INSERT SOCIAL SECURITY Name________________________________
OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
______________________________ Address_____________________________
______________________________ Signature___________________________
____________________________________
Note: The above signature should
correspond exactly with the name on
the face of this Warrant Certificate
or with the name of assignee appearing
in the assignment form below.
Dated:______________________, 1998
A-6
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _____________________ hereby sells, assigns and transfer
unto, the within Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
__________________________ attorney, to transfer said Warrant Certificate on the
books of the within-named Company, with full power of substitution in the
premises.
Dated: ____________________________, 1998
________________________________________
NOTE: The above signature should correspond
exactly with the name on the face of this Warrant
Certificate.
A-7
<PAGE>
Exhibit B
[FORM OF OPTIONAL WARRANT CERTIFICATE]
No. ________ ________ Warrants
WARRANTS
TO PURCHASE SHARES OF COMMON STOCK OF
ICON HOLDINGS CORP.
ICON Holdings Corp., a Delaware corporation (the "Company"), for value
received, hereby certifies that or registered assigns, is the owner
of the number of Optional Warrants, set forth above, each of which represents
the right, subject to the terms and conditions hereof and of the Warrant
Agreement hereafter referred to (the "Warrant Agreement"), to purchase from the
Company at any time, or from time to time, from the Expiration Pate, which is
thirty days following the date of the Underwriting Agreement, to the close of
business on the fifth anniversary of such date (or, if such date is not a
Business Day (as defined below), the first following Business Day) (the
"Exercise Period"), the number of shares of Common Stock, par value $.01 per
share, of the Company (the "Common Stocks") described in the Warrant Agreement
(each share of Common Stock issuable upon exercise of an Optional Warrant is
referred to as a "Warrant Share"), subject to certain adjustments. Subject to
the terms and conditions of the Warrant Agreement, the exercise price per
Optional Warrant represented by this Warrant Certificate shall be $__.00 per
share, adjusted as provided in Article III of the Warrant Agreement, payable in
full as to each Optional Warrant exercised at the time of purchase. The term
"Underwriting Agreement" as used herein refers to the Underwriting Agreement
dated December __, 1997 between the Company and Friedman, Billings, Ramsey &
Co., Inc. The term "Exercise Price" as used herein refers to the foregoing
price per share in effect at any time.
Subject to the terms and conditions of the Warrant Agreement, the
number of shares of Common Stock which the holder of this Warrant Certificate is
entitled to receive upon exercise of the Optional Warrants represented hereby is
subject to certain adjustments, as follows: in the event that FBR fails to
exercise its right to receive the total maximum number of Option Shares, then
the Optional Warrants shall cease to be exercisable with respect to that number
of shares of Common Stock equal to (i) 1,875,000, minus (ii) the total number of
Option Shares purchased by and delivered to FBR, multiplied by (iii) 0.05. In
the event that FBR does not purchase any Option Shares within thirty days
following the date hereof, the Optional Warrants will expire in their entirety.
The Warrant Agent may not deliver Warrant Shares pursuant to this Optional
Warrant unless and until the Warrant Agent receives written notice signed by
both the Company and FBR which sets out the number of shares of Common Stock
which the holder of the Optional Warrants will be entitled to receive.
This Optional Warrant may be exercised in whole or in part at any time
or from time to time during the Exercise Period. The portion of any Optional
Warrant not exercised during the Exercise Period shall become void, and all
rights hereunder and all rights in respect hereof and under the Warrant
Agreement shall cease at the end of the Exercise Period.
Each such purchase of Warrant Shares shall be made, and shall be
deemed effective for the purpose of determining the date of exercise, only upon
surrender hereof to the
B-1
<PAGE>
Company ah the office or agency maintained for such purpose in The City of New
York or the principal office of [Name of Warrant Agent], Warrant Agent (or any
successor Warrant Agent), with the form of Election to Exercise on the reverse
hereof duly filled in and signed, and upon payment in full to the Warrant Agent
for the account of the Company of the Exercise Price (i) in cash or (ii) by
certified or official bank check or (iii) by any combination of the foregoing,
all as provided in the Warrant Agreement and upon compliance with and subject to
the conditions set forth herein and in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement dated as of January __, 1998 (the "Warrant Agreement"),
between the Company and the Warrant Agent and is subject to the terms and
provisions of the Warrant Agreement, which terms and provisions are hereby
incorporated by reference herein and made a part hereof. Copies of the Warrant
Agreement and of the Underwriting Agreement are available for inspection by the
registered holder at the principal office of the Warrant Agent (or successor
Warrant Agent).
The Company shall not be required upon the exercise of the Firm
Warrants represented hereby to issue fractions of Warrant Shares or to
distribute share certificates that evidence fractional Warrant Shares. Every
holder of this Warrant Certificate expressly waives its right to receive any
fraction of a Warrant Share or a share certificate representing a fraction of a
Warrant Share. Fractional Warrant Shares that otherwise would be issuable in
respect of such exercise shall be paid in cash as provided in the Warrant
Agreement, and the number of Warrant Shares issuable to such Warrant holder
shall be rounded down to the next nearest whole number. If such Warrant
Certificate shall not have been exercised in full, the Warrant Agent on behalf
of the Company will issue to such Warrant holder a new Warrant Certificate
exercisable [or the number of shares of Common Stock as to which such Firm
Warrant shall not have been exercised.
This Warrant Certificate may be exchanged either separately or in
combination with other Warrant Certificates at the office or agency maintained
in The City of New York for such purpose or at the principal office of the
Warrant Agent (or Successor Warrant Agent) for new Warrant Certificates
representing the same aggregate number of Firm Warrants as were evidenced by the
Warrant Certificate or Warrant Certificates exchanged, upon surrender of this
Warrant Certificate and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement.
This Warrant Certificate is transferable (subject to restrictions set
forth in the Warrant Agreement) at the office or agency maintained in The City
of New York for such purpose or at the principal office of the Warrant Agent (or
successor Warrant Agent) by the registered holder hereof in person or by his
attorney duly authorized in writing, upon (i) surrender of this Warrant
Certificate and (ii) upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement. Upon any such transfer, a new
warrant Certificate or new Warrant Certificates of different denominations,
representing in the aggregate a like number of Firm Warrants, will be issued to
the transferee. Every holder of Firm Warrants, by accepting this Warrant
Certificate, consents and agrees with the company, the Warrant Agent and with
every subsequent holder of this Warrant Certificate that until due presentation
for the registration of transfer of this Warrant Certificate on the Warrant
Register maintained by the Warrant Agent, the Company and the Warrant Agent may
deem and treat the person in whose name this Warrant Certificate is registered
as the absolute and lawful owner for all purposes whatsoever and neither the
Company nor the warrant Agent shall be affected by any
B-2
<PAGE>
notice to the contrary.
Nothing contained in the Warrant Agreement or in this Warrant Certificate shall
be construed as conferring on the holder of any Firm Warrants or his transferee
any rights whatsoever as a shareholder of the Company,
This Warrant Certificate shall not be valid unless countersigned
manually by the Warrant Agent.
The Warrant Agreement and each Warrant Certificate, including this
Warrant Certificate, shall be deemed a contract made under the laws of the State
of New York and for all purposes shall be construed in accordance with the laws
of the State of New York without giving effect to the principles of conflicts of
law thereof.
* * * * *
B-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated:
ICON HOLDINGS CORP.
[CORPORATE SEAL] By:
---------------------------
B-4
<PAGE>
--------------------------------
ATTEST:
COUNTERSIGNED: [NAME OF WARRANT AGENT], as
Warrant Agent
By:
-------------------------------
Authorized Signature
B-5
<PAGE>
ELECTION TO EXERCISE
(To be executed upon exercise of Warrant)
TO [NAME OF COMPANY]:
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
____________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the purchase price in full in the form of cash or a
certified or official bank check (or combination thereof) in the amount of $
___________ .
Please issue a certificate or certificates for such shares of Common Stock
in the name of:
PLEASE INSERT SOCIAL SECURITY Name_________________________
OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
______________________________ Address________________________
______________________________ Signature_______________________
_______________________________
Note: The above signature should
correspond exactly with the name
on the face of this Warrant
Certificate or with the name of
assignee appearing in the
assignment form below.
Dated:______________________, 1998
B-6
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _____________________ hereby sells, assigns and transfer
unto, the within Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
__________________________ attorney, to transfer said Warrant Certificate on the
books of the within-named Company, with full power of substitution in the
premises.
Dated: ____________________________, 1998
________________________________________
NOTE: The above signature should correspond
exactly with the name on the face of this Warrant
Certificate.
B-7
<PAGE>
Exhibit 10.18
-------------
STOCK REDEMPTION AGREEMENT
AGREEMENT, made this _______ day of October, 1997, by and between ICON
Holdings Corp., a Delaware corporation having offices at 600 Mamaroneck Avenue,
Harrison, New York 10528-1632 (the "Company"), Summit Asset Holding L.L.C., a
Delaware limited liability company having offices at c/o Roy & Stevens, Sears
Crescent Building, 100 City Hall Plaza, 5th Floor, Boston MA 02108 (the
"Shareholder"), and Summit Asset Management Limited, a corporation organized
under the laws of England and Wales and having offices at Summit House,
Brooklands Close, Windmill Road, Sunbury-on-Thames, U.K. TW16 7EH, Managing
Member of the Shareholder ("SAM")
W I T N E S S E T H
WHEREAS, the Shareholder is currently the beneficial and record holder of
500 shares (referred to hereinafter, together with any additional shares issued
with respect thereto in the event of any stock dividend, split, combination or
any other change in the capital stock of the Company occurring prior to the
Closing (as defined below), as the "Shares") of the Company's Common Stock, par
value $.01 per share (the "Common Stock"); and
WHEREAS, the Company and SAM mutually desire that the Company redeem all,
and not less than all, of the Shares currently held by the Shareholder on the
terms and conditions hereinafter set forth, and that SAM and the Shareholder
discharge all indebtedness owed by the Company to each in consideration
therefor.
NOW, THEREFORE, in consideration of the premises and of the mutual promises
and other good and valuable considerations hereinafter contained, the parties
hereto agree as follows:
1. Redemption and Redemption Price. Subject to the conditions set forth
-------------------------------
in paragraph 4 of this Agreement, at the Closing the Company shall redeem from
the Shareholder all, but not less than all, of the Shares at a redemption price
(the "Cash Redemption Price") of Seventeen Thousand Two Hundred Dollars
($17,200) per share (subject to appropriate adjustment in the event of any stock
dividend, split, combination or any other change in the Common Stock occurring
prior to the Closing), for an aggregate Cash Redemption Price of $8,600,000. As
additional consideration for the redemption contemplated hereby the Company
shall issue to the Shareholder at the closing of the IPO (as hereinafter
defined) warrants entitling the Shareholder to purchase that number of shares of
the Common Stock of the Company that would equal to 3% of the total outstanding
as of the closing of the IPO, during the four-year period commencing on the
----------
first anniversary date of the closing of the IPO at an exercise price equal to
--- ----------
100% of the initial public offering price in the IPO.
<PAGE>
2. Closing.
-------
(a) Date, Time and Place. Subject to the provisions of paragraphs 4(a)
--------------------
and 5 or this Agreement, the closing of the redemption contemplated by this
Agreement (the "Closing") shall take place at the offices or McDermott, Will &
Emery, 75 State Street, Boston Massachusetts 02109 ("MW&E") and shall occur
simultaneously with the closing of the Company's contemplated initial public
offering of shares of the Company's Common Stock (the "IPO").
(b) Deliveries. Within fifteen days of the date hereof the parties
----------
hereby agree to deliver to MW&E, as escrow holder, (i) all certificates
representing the Shares or any portion of the Shares, together with stock powers
separate from certificates, duly endorsed in blank by the Shareholder, (ii) the
certificates and Releases required by paragraph 4 hereof, (iii) all certificates
representing the Warrants, and (iv) the Trading Agreement (items (i), (ii),
(iii) and (iv) above are collectively referred to as the "Escrow Documents").
The Escrow Documents will be held by MW&E under instructions that specify that,
provided MW&E has not previously received notice by certified mail of the
occurrence of a termination of this Agreement pursuant to Section 5 hereof, the
only condition to the release of the Escrow Documents to their respective
recipients is the receipt by the Shareholder of the Cash Redemption Price. At
the Closing, the Company shall pay to the Shareholder the Cash Redemption Price,
in full, in lawful money of the United States of America, by causing a wire
transfer of the Cash Redemption Price, in immediately available funds, to be
delivered by the clearing agent for the representative for the underwriters to
the following bank account:
Summit Asset Management Limited
Barclays Bank PLC
50 Pall Mall London SW1A 1QB United Kingdom
- ---
Sort Code: 20-65-82 Account No. 40881244
3. Representations and Warranties.
------------------------------
(a) The Company represents and warrants to the Shareholder that:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(ii) The Company has full corporate power and authority and has
taken all corporate action necessary to authorize, execute and deliver this
Agreement and the Trading Agreement and to consummate the transactions
contemplated hereby; and this Agreement and the Trading Agreement have been duly
executed and delivered by the Company and each is the valid and binding
obligation of the Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, moratorium and similar
laws affecting the enforcement of creditors' rights generally and subject to the
qualification that the availability of equitable remedies is subject to the
discretion of the court before which any proceeding therefor may be brought;
2
<PAGE>
(iii) Neither the execution and delivery of this Agreement and the
Trading Agreement, nor the consummation of the transactions contemplated hereby,
does or will as of the Closing violate any provision of the Company's
Certificate or Incorporation or By-laws, or violate or result in the breach of
any agreement or any federal or state law, rule, regulation, judgment decree or
order of any governmental authority or Court to which the Company is subject or
by which it is bound;
(iv) The Shares have been duly authorized and validly issued to the
Shareholder and are non-assessable.
(b) SAM and the Shareholder jointly and severally represent and warrant to
the Company that:
(i) The Shareholder is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(ii) SAM is a corporation duly organized, validly existing and in
good standing under the laws of England and Wales;
(iii) SAM and the Shareholder have full power and authority under
their organizational documents and the laws of the jurisdictions of their
organization and have taken all action necessary thereunder to authorize,
execute and deliver this Agreement and the Trading Agreement and to consummate
the transactions contemplated hereby, and this Agreement and the Trading
Agreement have been duly executed and delivered by SAM with respect to the
Trading Agreement and SAM and the Shareholder with respect to this Agreement and
each is a valid and binding obligation of SAM and Shareholder, as the case may
be, enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, moratorium and similar laws affecting the enforcement of
creditors' rights generally and subject to the qualification that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought;
(iv) The Shareholder is the sole beneficial and record holder of the
Shares, and has not granted or sold any options or other rights to purchase any
of the Shares to any individual, person or entity, other than to the Company
under this Agreement;
(v) Except for a pledge of the shares to TKO Finance Corporation
(which has agreed to release such lien at the Closing), the Shares are not
subject to any liens or other encumbrances, and at the Closing will be delivered
free and clear of the same;
(vi) Neither the execution and delivery of this Agreement and the
Trading Agreement nor the consummation of the transactions contemplated hereby
and thereby does or will as of the Closing violate or result in the breach of
any agreement or any federal or state law, rule, regulation, judgment, order or
decree of any governmental authority or court to which the Shareholder is
subject or by which it is bound; and
3
<PAGE>
(vii) The shares referred to in the Preamble hereto represent all
of the shares which the Shareholder is entitled to pursuant to the various
agreements by and among SAM, the Shareholder and the Company and/or any of their
affiliates. Subject to the closing of the IPO as contemplated by the Company's
registration statement to be filed with the Securities and Exchange Commission
on or about October 24, 1997, and payment for the Shares as contemplated hereby,
SAM and the Shareholder, jointly and severally, shall and hereby do release the
Company from any claims they have against the Company for any additional shares
of capital stock of the Company or for amounts due under any of the indebtedness
owed by the Company to either of them, including any accrued interest thereon or
any amounts related thereto through the Closing.
4. Conditions to Closing. The obligations of the parties to consummate
---------------------
the transactions contemplated by this Agreement shall be subject to
satisfaction, on or before the Closing of each of the following conditions
unless waived in writing by the party to be so satisfied:
(a) The IPO shall have been consummated and closed and the Company
shall have wired the Cash Redemption Price to SAM;
(b) The representations and warranties of the Company and SAM
contained herein shall be true and accurate in all material respects as of the
date when made and at and as of the Closing as though made at and as of such
date;
(c) The Company shall have furnished to SAM and the Shareholder a
certificate of the Company's President to the effect that: (i) the IPO has been
consummated, and (ii) all representations and warranties of the Company
contained in this Agreement are true and accurate in all material respects at
and as of the Closing, and
(d) SAM and the Shareholder shall have furnished to the Company
their certificate to the effect that all representations and warranties of SAM
and the Shareholder contained in this Agreement are true and accurate in all
material respects at and as of the Closing.
(e) SAM and the Shareholder shall have delivered to the Company their
duly executed release in the form of Exhibit A attached hereto pursuant to which
---------
SAM and the Shareholder release the Company from all known and unknown claims
and obligations of any kind whatsoever, other than as arise under this Agreement
and under that certain Trading Agreement of even date herewith between the
Company and SAM ("Trading Agreement") a copy of which is attached hereto as
Exhibit B.
- ---------
(f) The Company shall have delivered to the Shareholder and SAM a duly
executed release in the form of Exhibit C attached hereto pursuant to which the
---------
Company shall release the Shareholder, SAM, Neil A. Roberts and Timothy R.
Spring from all known and unknown claims and obligations of any kind whatsoever,
other than (with respect to SAM and the Shareholder) as arise under this
Agreement and under the Trading Agreement.
4
<PAGE>
(g) The Trading Agreement shall be in full force and effect subject
only to the occurrence of the IPO as a condition precedent as set forth therein.
5. Termination. Anything contained in this Agreement to the contrary
-----------
notwithstanding, in the event the IPO has not been consummated and closed on or
before February 28, 1998, then any party to this Agreement may, upon not less
than two (2) weeks prior written notice to the other parties hereto, terminate
this Agreement.
6. Notice. Any notice given or required to be given pursuant to this
------
Agreement shall be in writing and shall be deemed given three (3) days after
being deposited in the U.S. Mail, first-class postage prepaid, addressed to the
parties at the respective address first above written or such other address as
may be established by written notice given in accordance with the provisions of
this paragraph 6.
7. Miscellaneous.
-------------
(a) Entire Agreement. This Agreement constitutes the entire agreement
----------------
of the parties with respect to the subject matter hereof, supersedes all prior
such agreements whether written or oral, and may not be amended or otherwise
modified except by a subsequent written instrument duly executed by the parties
hereto.
(b) No Waiver. No delay or failure by either party to exercise any
---------
right hereunder, and no partial or single exercise of any such right, shall
constitute a waiver of that right or any other right, unless expressly waived in
writing.
(c) Governing Law. This Agreement shall be construed in accordance
-------------
with and governed by the laws of the State of New York, without giving effect to
the conflict of laws provisions thereof.
5
<PAGE>
(d) Binding Effect. The provisions of this Agreement shall be binding
--------------
upon and shall inure to the benefit of the parties and their respective
successors, representatives and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
ICON HOLDINGS CORP.
By:
----------------------------
SUMMIT ASSET HOLDING L.L.C
By:
----------------------------
SUMMIT ASSET MANAGEMENT LIMITED
By:
---------------------------------------
6
<PAGE>
Exhibit 10.19
-------------
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, made and entered into as of November ___, 1997,
by and between ICON HOLDINGS CORP., a Delaware corporation, and
___________,____________ of ICON Holdings Corp. ("Indemnitee").
RECITALS:
WHEREAS, Indemnitee currently serves as, or is assuming the position of, a
director and/or officer of ICON Holdings Corp. and concurrently therewith,
serves as, or is assuming the position of director and/or officer of any other
corporation which ICON Holdings Corp., directly or indirectly, owns or controls
(collectively, the "Corporation"), the Corporation wishes Indemnitee to continue
in each such capacity;
WHEREAS, the Corporation and Indemnitee recognize that the current state of
the law is too uncertain to provide the Corporation's directors and officers
with adequate and reliable advance knowledge or guidance with respect to the
legal risks and potential liabilities to which they may become personally
exposed as a result of performing their duties for the Corporation;
WHEREAS, The Certificate of Incorporation (the "Articles") and the By-laws
(the "By-laws") of the Corporation each provide that the Corporation may
indemnify, to the fullest extent permitted by law, certain persons, including
directors, officers, employees or agents of the Corporation, against specified
expenses and losses arising out of certain threatened, pending or completed
actions, suits or proceedings;
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware (the "Delaware GCL") expressly recognizes that the indemnification
provided by the other subsections of Section 145 of the Delaware GCL shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office;
WHEREAS, Indemnitee has indicated that he may not be willing to serve, or
continue to serve, as a director and/or officer of the Corporation in the
absence of an indemnification agreement of the Corporation;
<PAGE>
WHEREAS, the Board of Directors of the Corporation has concluded that, to
retain and attract talented and experienced individuals to serve as directors
and officers of the Corporation and to encourage such individuals to take the
business risks necessary for the success of the Corporation, it is necessary for
the Corporation to contractually indemnify them, and to assume for itself
liability for expenses and damages in connection with claims against them in
connection with their service to the Corporation, and has further concluded that
the failure to provide such contractual indemnification could result in great
harm to the Corporation and its stockholders; and
WHEREAS, the Board of Directors has recommended to the stockholders of ICON
Holdings Corp. that it is the best interest of both ICON Holdings Corp. and its
stockholders that ICON Holdings Corp. enter into this Agreement, and the
stockholders, by unanimous written consent dated December ___, 1997, have
authorized ICON Holdings Corp. to enter into this Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
-----------
a. "Expenses" means, for the purposes of this Agreement, all direct and
--------
indirect costs of any type or nature whatsoever (including, without
limitation, any fees and disbursements of Indemnitee's counsel, accountants
and other experts and other out-of-pocket costs) actually and reasonably
incurred by Indemnitee in connection with the investigation, preparation,
defense or appeal of a Proceeding (as hereinafter defined); provided,
however, that Expenses shall not include judgments, fines, penalties or
amounts paid in settlement of a Proceeding unless such matters may be
indemnified under applicable provisions of the Delaware GCL.
b. "Proceeding" means, for the purposes of this Agreement, any threatened,
------------
pending or completed action, suit or proceeding whether civil, criminal,
administrative or investigative (including actions, suits or proceedings
brought by or in the right of the Corporation) in which Indemnitee may be
or may have been involved as a party or otherwise, by reason of
Indemnitee's position as a director or officer of the Corporation or by
reason of any action taken by him or of any inaction on his part while
acting as such director or officer, whether or not he is serving in such
capacity at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this Agreement.
2. Indemnification.
---------------
a. Third-Party Proceedings. To the fullest extent permitted by law, the
-----------------------
Corporation shall indemnify Indemnitee and hold him harmless against
Expenses and
-2-
<PAGE>
liabilities of any type whatsoever (including without limitation judgments,
fines, penalties, and amounts paid in settlement; provided, that the
settlement is approved in advance by the Corporation) actually and
reasonably incurred by Indemnitee in connection with a Proceeding (other
than a Proceeding by or in the right of the Corporation) if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be
in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe Indemnitee's conduct was unlawful. The termination of any
Proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner that
Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the Corporation, or, with respect to any criminal Proceeding,
had reasonable cause to believe that Indemnitee's conduct was unlawful.
Notwithstanding the foregoing, no indemnification shall be made in any
criminal proceeding where Indemnitee has been adjudged guilty unless a
disinterested majority of the directors determines that Indemnitee did not
receive, participate or share in any pecuniary benefit to the detriment of
the Corporation and, in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnification for
Expenses or liabilities.
b. Proceedings by or in the Right of the Corporation. To the fullest
-------------------------------------------------
extent permitted by law, the Corporation shall indemnify Indemnitee against
Expenses actually and reasonably incurred by Indemnitee in connection with
the defense or settlement of a Proceeding by or in the right of the
Corporation to procure a judgment in its favor if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Corporation. Notwithstanding the
foregoing, no indemnification shall be made in respect of any claim, issue
or matter as to which Indemnitee shall have been adjudged to be liable to
the Corporation in the performance of Indemnitee's duty to the Corporation
unless and only to the extent that the court in which such Proceeding is or
was pending shall determine upon application that, in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for Expenses and then only to the extent that the court shall
determine.
c. Scope. Notwithstanding any other provision of this Agreement other
-----
than Sections 3 and 13, the Corporation shall indemnify Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by other provisions of this Agreement, the
Articles, the By-laws or applicable statute.
3. Limitations on Indemnification. Any other provision herein to the contrary
------------------------------
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
this Agreement:
-3-
<PAGE>
a. Excluded Acts. To indemnify Indemnitee for any acts or omissions or
-------------
transactions from which a director may not be relieved of liability under
Section 102(b)(7) of the Delaware GCL; or
b. Claims Initiated by Indemnitee. To indemnify or advance Expenses to
------------------------------
Indemnitee with respect to Proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification
under this Agreement or any other statute or law or otherwise as required
under Section 145 of the Delaware GCL, provided, however, that such
indemnification or advancement of Expenses may be furnished by the
Corporation in specific cases if a majority of the disinterested directors
has approved the initiation or bringing of such suit; or
c. Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred
------------------
by Indemnitee with respect to any proceeding instituted by Indemnitee to
enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous; or
d. Insured Claims. To indemnify Indemnitee for Expenses or liabilities of
--------------
any type whatsoever (including without limitation judgments, fines or
penalties, and amounts paid in settlement) that have been paid directly to
or on behalf of Indemnitee by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Corporation
or any other policy of insurance maintained by the Corporation or
Indemnitee; or
e. Claims Under Section 16(b). To indemnify Indemnitee for Expenses and
--------------------------
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, or any similar successor statute.
4. Determination of Right to Indemnification. Upon receipt of a written claim
-----------------------------------------
addressed to the Board of Directors for indemnification pursuant to Section 2 of
this Agreement, the Corporation shall determine by any of the methods set forth
in Section 145(d) of the Delaware GCL whether Indemnitee has met the applicable
standards of conduct that make it permissible under applicable law to indemnify
Indemnitee. If a claim under Section 2 of this Agreement is not paid by the
Corporation after such written claim has been received by the Corporation,
Indemnitee may at any time bring suit against the Corporation to recover the
unpaid amount of the claim and, unless such action is dismissed by the court as
frivolous or brought in bad faith, Indemnitee shall be entitled to be paid any
expenses associated with the prosecution of such claim. Neither the failure of
the Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) to make a determination prior to the commencement of such
action that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct under applicable
-4-
<PAGE>
law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has not met the applicable standard of conduct. The court in which
such action is brought shall determine whether Indemnitee or the Corporation
shall have the burden of proof concerning whether Indemnitee has or has not met
the applicable standard of conduct.
5. Advancement and Repayment of Expenses. The Expenses incurred by Indemnitee
-------------------------------------
in defending and investigating any Proceeding shall be paid by the Corporation
prior to the final disposition of such Proceeding within thirty (30) days after
receiving from Indemnitee copies of invoices presented to Indemnitee for such
Expenses and an undertaking by or on behalf of Indemnitee to the Corporation to
repay such amount to the extent it is ultimately determined that Indemnitee is
not entitled to indemnification. In determining whether or not to make an
advance hereunder, the ability of Indemnitee to repay shall not be a factor.
Notwithstanding the foregoing, in a proceeding brought by the Corporation
directly in its own right and not derivatively or by any receiver or trustee,
the Corporation shall not be required to make the advances called for hereby if
a majority of the disinterested directors determine that it does not appear that
Indemnitee has met the standards of conduct that made it permissible under
applicable law to indemnify Indemnitee and that the advancement of Expenses
would not be in the best interests of the Corporation and its stockholders.
6. Partial Indemnification. If Indemnitee is entitled under any provision of
-----------------------
this Agreement to indemnification or advancement by the Corporation of some or a
portion of any Expenses or liabilities of any type whatsoever (including without
limitation judgments, fines, penalties, and amounts paid in settlement) incurred
by him in the investigation, defense, settlement or appeal of a Proceeding, but
is not entitled to indemnification or advancement of the total amount thereof,
the Corporation shall nevertheless indemnify or pay advancements to Indemnitee
for the portion of such Expenses or liabilities to which Indemnitee is entitled.
7. Notice to Corporation by Indemnitee. Indemnitee shall notify the
-----------------------------------
Corporation in writing of any matter with respect to which Indemnitee intends to
seek indemnification hereunder as soon as reasonably practicable following the
receipt by Indemnitee of written notice thereof; provided, however, that any
delay in so notifying Corporation shall not constitute a waiver by Indemnitee of
his rights hereunder. The written notification to the Corporation shall be
addressed to the Board of Directors and shall include a description of the
nature of the Proceeding and the facts underlying the Proceeding and be
accompanied by copies of any documents filed with the court, if any, in which
the Proceeding is pending. In addition, Indemnitee shall give the Corporation
such information and cooperation as it may reasonably require and as shall be
within Indemnitee's power.
8. Defense of Claim. In the event that the Corporation shall be obligated
----------------
under Section 5 hereof to pay the Expenses of any Proceeding against Indemnitee,
the Corporation, if appropriate, shall be entitled to assume the defense of such
Proceeding, with counsel approved by Indemnitee, which approval shall not be
unreasonably withheld, upon the delivery to
-5-
<PAGE>
Indemnitee of written notice of its election to do so. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Corporation, the Corporation will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Proceeding; provided, however, that (i) Indemnitee shall
have the right to employ his own counsel in any such Proceeding at Indemnitee's
expense, and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Corporation, or (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Corporation and Indemnitee in the conduct of such defense or (C) the Corporation
shall not, in fact, have employed counsel to assume the defense of such
Proceeding, then the fees and expenses of Indemnitee's counsel shall be paid by
the Corporation.
9. Attorneys' Fees. If any legal action is necessary to enforce the terms of
---------------
this Agreement, the prevailing party shall be entitled to recover, in addition
to other amounts to which the prevailing party may be entitled, actual
attorneys' fees and court costs as may be awarded by the court.
10. Continuation of Obligations. All agreements and obligations of the
---------------------------
Corporation contained herein shall continue during the period Indemnitee is a
director or officer of the Corporation, and shall continue thereafter so long as
Indemnitee shall be subject to any possible Proceeding by reason of the fact
that Indemnitee served in any capacity referred to herein.
11. Successors and Assigns. This Agreement establishes contract rights that
----------------------
shall be binding upon, and shall inure to the benefit of, the successors,
assigns, heirs and legal representatives of the parties hereto.
12. Non-Exclusivity.
---------------
a. The provisions for indemnification and advancement of expenses set
forth in this Agreement shall not be deemed to be exclusive of any other
rights that Indemnitee may have under any provision of law, the
Corporation's Certificate of Incorporation or By-laws, the vote of the
Corporation's stockholders or disinterested directors, other agreements or
otherwise, both as to action in his official capacity and action in another
capacity while occupying his position as a director or officer of the
Corporation.
b. In the event of any changes, after the date of this Agreement, in any
applicable law, statute, or rule that expand the right of a Delaware
corporation to indemnify its directors and officers, Indemnitee's rights
and the Corporation's obligations under this Agreement shall be expanded to
the fullest extent permitted by such changes. In the event of any changes
in any applicable law, statute or rule, that narrow the right of a Delaware
corporation to indemnify a director and officer, such changes, to the
extent not otherwise required by such law, statute or rule to be applied to
this Agreement, shall have no effect on this Agreement or the parties'
rights and obligations hereunder.
-6-
<PAGE>
13. Effectiveness of Agreement. This Agreement shall be effective as of the
--------------------------
date set forth on the first page and may apply to acts or omissions of
Indemnitee that occurred prior to such date if Indemnitee was a director or
officer of the Corporation or its predecessor at the time such act or omission
occurred.
14. Severability. Nothing in this Agreement is intended to require or shall be
------------
construed as requiring the Corporation to do or fail to do any act in violation
of applicable law. The Corporation's inability, pursuant to court order, to
perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 14. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify Indemnitee to the fullest extent
permitted by any applicable portion of this Agreement that shall not have been
invalidated, and the balance of this Agreement not so invalidated shall be
enforceable in accordance with its terms.
15. Governing Law. This Agreement shall be interpreted and enforced in
-------------
accordance with the laws of the State of Delaware without regard to its rules
pertaining to conflicts of laws. To the extent permitted by applicable law, the
parties hereby waive any provisions of law that render any provision of this
Agreement unenforceable in any respect.
16. Notice. All notices, requests, demands and other communications under this
------
Agreement shall be in writing and shall be deemed duly given (i) if delivered by
hand and receipted for by the party addressed, on the date of such receipt, or
(ii) if delivered by facsimile transmission to the recipient followed by a copy
sent by mail on the same date as the facsimile transmission, on the date of
receipt of such facsimile transmission, or (iii) if mailed by certified or
registered mail with postage prepaid and return receipt requested, on the third
(3rd) business day after the mailing date. Addresses for notice to either party
are as shown on the signature page of this Agreement, or as subsequently
modified by written notice.
17. Mutual Acknowledgment. Both the Corporation and Indemnitee acknowledge
---------------------
that in certain instances, federal law or applicable public policy may prohibit
the Corporation from indemnifying its directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that the
Corporation has undertaken or may be required in the future to undertake with
the Securities and Exchange Commission to submit the question of indemnification
to a court in certain circumstances for a determination of the Corporation's
right under public policy to indemnify Indemnitee.
18. Interpretation; Syntax. The headings of the sections hereof are for
----------------------
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof. All references made and pronouns used herein
shall be construed in the singular or plural, and in such gender, as the sense
and circumstances require.
-7-
<PAGE>
19. Counterparts. This Agreement may be executed in two or more counterparts,
------------
and by different parties hereto on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
20. Amendment and Waiver. This Agreement may be modified or amended only by a
--------------------
writing signed by each party hereto. No waiver of any term or provision hereof
shall be effective unless in writing signed by the party waiving such term or
provision.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-8-
<PAGE>
WITNESS, the undersigned parties, intending to be legally bound by the
terms hereof, have hereunto set their hands under seal as of the date first
above written.
ICON HOLDINGS CORP.
By:
---------------------------------
Title:
Address: 600 Mamaroneck Avenue
Harrison, NY 10528
Telecopier: 914/698-0699
INDEMNITEE:
-------------------------------------
Name:
Address:
-9-
<PAGE>
Exhibit 10.20
-------------
EXECUTION COPY
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between ICON Holdings Corp., a corporation
organized and existing under the laws of the State of New York (together with
its subsidiary, ICON Capital Corp., as the content may require the "Company"),
and John L. Lee (the "Employee"), dated as of April 1, 1997.
In order to obtain Employee's service the Company and Employee
have each decided to enter into this Employment Agreement.
1. Employment Period.
------------------
(a) The terms and conditions of this Agreement shall be and remain
in effect during the continuation of the Employee's employment hereunder (the
"Employment Period"). The Employment Period shall commence on the date hereof
("Effective Date") and shall continue for an initial term of 24 months ("Initial
Period") and thereafter until terminated pursuant to the terms hereof.
(b) Nothing in this Agreement shall be deemed to prohibit the
Company at any time from terminating the Employee's employment during the
Employment Period with notice for any reason; provided, however, that the
relative rights and obligations of the Company and the Employee in the event of
any such termination shall be determined under this Agreement.
2. Terms of Employment.
--------------------
(a) Position and Duties.
--------------------
(i) Commencing on the Effective Date and for the remainder
of the Employment Period, the Employee shall be engaged as Senior
Vice President, General Counsel of the Company with an office
located at 31 Milk Street, Boston, Massachusetts. Employee will
report to the Chief Executive Officer of the Company and shall
have such duties, responsibilities and authority as shall be
consistent therewith and as the Chief Executive Officer of the
Company shall from time to time reasonably determine; and
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Employee is
entitled, the Employee shall devote full business time to the
business and affairs of the Company, except as
<PAGE>
noted in Section 2(b)(x) and use all reasonable efforts to perform
faithfully and efficiently such duties, responsibilities and
authority.
(b) Compensation.
-------------
(i) Base Salary. Effective as of the Effective Date,
------------
the Employee shall receive a base salary ("Base Salary") at a rate of
$155,000 per year. The Board of Directors may, at its sole discretion,
increase the Base Salary from the beginning of each subsequent fiscal
year of the Company, based upon its review of the Company's and the
Employee's performance;
(ii) Annual Bonus. In addition to Base Salary, the
-------------
Employee shall receive, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus"). Unless the
Employee shall elect to defer the receipt of any part of the Annual
Bonus, each such payment shall be paid promptly, but in no event more
than thirty (30) days, after the Company's receipt of the audited
financial statements of the Company for the fiscal year or, as the case
may be, preparation of the Company's monthly management accounts for
the relevant period. The Annual Bonus is expected to be in the $25,000
to $65,000 range, in the discretion of the Chief Executive Officer and
depending upon your performance and profitability of the Company.
However, for the fiscal year ending March 31, 1998, your Annual Bonus
will be at least $25,000.
(iii) Incentive, Savings and a Retirement Plans. During
------------------------------------------
the Employment Period, the Employee's family shall be entitled to
participate in all incentive, savings and retirement plans, practices,
policies and programs, if any, applicable generally to other employees
of the Company;
(iv) Welfare Benefit Plans. During the Employment
----------------------
Period, the Employee and/or the Employee's family, as the case may be,
shall be eligible for participation in and shall receive all benefits
currently entitled to under the Company's welfare benefit plans,
practices, policies and programs provided by the Company (including,
without limitation, medical, major medical, hospital, prescription,
dental, short-term and long-term disability, salary continuance,
employee life, group life, accidental death and travel accident
insurance plans and programs, if any);
(v) Incentive Stock Option Plan. Employee shall
----------------------------
participate in a manner commensurate with his position in the Company
in the incentive stock option plan shortly to be implemented for
certain senior offices of the Company.
(vi) Expenses. During the Employment Period, the
---------
Employee shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by -the Employee in the performance of his
duties hereunder;
-2-
<PAGE>
(vii) Vacation. The Employee should be entitled to at
---------
least three weeks annual paid vacation during the Employment Period and
as Provided under the applicable personnel policies of the Company;
(viii) Payment Schedule. Base Salary shall be paid in
-----------------
accordance with the regular payroll policies of the Company as
determined by the Board of Directors from time to time but in no event
frequently than monthly; and
Automobile. The Employee will be entitled to an automobile, which
-----------
will be leased and paid for by the Company (including insurance,
maintenance, and normal operating cost including in fuel costs) and
provided to the Employee during the Employment Period. The Employee
may chose the make and model of the automobile so long as the
monthly lease payment does not exceed $500 per month on a three
year contract;
Industry Participation. The Employee shall be encouraged to actively
-----------------------
participate in ELA including reasonable attendance at annual
meetings and other important events at the Company's expense.
3. Termination of Employment.
(a) Death or Disability. The Employee's employment shall
--------------------
terminate automatically upon the Employee's death during the Employment Period.
If the Company determines in good faith that the Disability (as defined below)
of the Employee has occurred during the Employment Period, it may give to the
Employee written notice in accordance with this Agreement of its intention to
terminate the Employee's employment. In such event, the Employee's employment
with the Company shall terminate effective on the 60th day after receipt of such
notice by the Employee (the "Disability Effective Date"), provided that, within
the 60 days after such receipt, the Employee shall not have returned to full-
time performance of the Employee's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Employee from the Employee's duties
with the Company on a full-time basis for 90 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers;
provided, that the Employee shall be entitled, during the aforesaid 60 day
period, to challenge any determination of Disability by such a physician, and in
the event of such a challenge, the final decision shall be made by a physician
selected by the Company's physician and the Employees physician.
(b) Cause. The Company may terminate the Employee's employment
------
during theEmployment Period for Cause. For purposes of this Agreement, "Cause"
shall mean dishonest conduct in connection with the performance of Employee's
duties hereunder, breach of fiduciary duty to the Company or its shareholders
involving personal profits intentional failure to perform those duties stated in
Section. 2(a)(i) under this Agreement, or fraud or conviction of a felony
resulting in or intended to result in injury to the Company;
-3-
<PAGE>
(c) By Employee. Employee may terminate this Agreement at any time
------------
during the Employment Period if the Company fails to pay the Employee any amount
due hereunder within five days after such payment is due or the Company fails to
perform any of its material obligations hereunder ("Employee Termination").
(d) Notice of Termination. Any termination by: the Company for
----------------------
Cause or any Employee Termination shall be communicated by Notice of Termination
to the other party hereto given in accordance with this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not mom than thirty days after the
giving of such notice). The failure by the Employee or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Cause or establishing the right to an Employee Termination shall not
waive any right of the Employee or the Company hereunder or preclude the
Employee or the Company from asserting such fact or circumstance in enforcing
the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
--------------------
Employee's employment is terminated by the Company for Cause or pursuant to an
Employee Termination, the date of receipt of the Notice of Termination or any
later date specified therein, as the case may be, (ii) if the Employee's
employment is terminated by the Company other than for Cause or Disability, the
date on which the Company notifies the Employee of such termination and (iii) if
the Employee's employment is terminated by reason of death or Disability, the
date of death of the Employee or the Disability Effective Date, as the case may
be.
(f) Right to Cure. Notwithstanding any provision herein to the
--------------
contrary, the Company or Employee, as applicable, Shall have a right to cure the
matters giving rise to an Employee Termination or for Cause termination,
respectively for a period of 30 days commencing upon the receipt of the Notice
of Termination. If Company or Employee successfully cures such matters within
such thirty-day period, the termination of this Agreement or any provision
hereof noticed in such Notice of Termination shall be void and ineffective.
4. Obligations of the Company Upon Termination.
--------------------------------------------
(a) Other Than for Cause. Death or Disability. If the Company
---------------------
shall terminate the Employee's employment other than for Cause, Death or
Disability, or in the event of an Employee Termination, the Company shall pay to
the Employee in a lump sum in cash within 10 Business Days after his Date of
Termination, the aggregate of the sum of (A) an amount equal to the remainder of
the Base Salary and Annual Bonus and any other forms of compensation yet unpaid
under this Agreement up to the date of expiration of the Initial Period or six
months Base Salary,
-4-
<PAGE>
whichever is the greater, (B) any compensation previously deferred by the
Employee, (C) any accrued vacation pay, and (D) any accrued commissions yet
unpaid.
(b) Death: Disability. If the Employee's employment is terminated
------------------
by reason of the Employee's death or Disability during the Employment Period,
this Agreement shall without further obligations to the Employee or the
Employee's legal representatives terminate as the case may be, under this
Agreement, other than for payment of any deferred payments.
(c) Cause: Voluntary Termination. If the Employee's employment
-----------------------------
shall be terminated for Cause during the Employment Period or in the Event the
Employee voluntarily terminates employment during the Employment Period, this
Agreement shall terminate without further obligations to the Employee.
5. Non-Competition. During the Employment Period and for a period
----------------
of six (6) default under this Agreement, Employee shall not:
(a) directly or indirectly, either individually or as a principal,
partner, member, agent, employee, consultant stockholder, joint venture or
investor, or as a director or officer of any corporation, entity, proprietorship
or association, or in any other ownership, executive or management position,
engage or assist in activities, or have an active interest, of an ownership,
executive, management or consulting nature in a business in the business of
marketing and selling income fund products that would compete with the equipment
leasing investment funds products of the Company actually being marketed at the
time of termination;
(b) directly or indirectly, either individually or as a principal
partner, member, agent, employee, consultant, stockholder, joint venture or
investor, or as a director or Officer of any corporation, entity, proprietorship
or association, or in any other ownership, executive or management position
whatsoever, (i) divert or attempt to divert from the Company any business with
any customer or prospective customer with which Employee has any business
contact or business association which was either under Employee's supervision or
the identity of which was learned by Employee while employed by the Company,
(ii) induce any salesmen, vendor, broker, dealer, representative, agent, or
other person wanting business with the Company to transact business for a
business in competition with the Company at the time of termination, or (iii)
induce or cause any employee of the Company to leave the employ of the Company
other than in the course of the loyal discharge of his duties.
Notwithstanding the above, this Section 5 shall not prohibit the Employee
from passively owning less than five percent (5%) of the shares of any
corporation or entity that is publicly traded on a securities exchange or over-
the-counter market.
6. Confidential Information.
(a) From the date hereof and at all times thereafter, the Employee
shall not at any time or in any manner, directly or indirectly, knowingly
disclose to any party, other than the
-5-
<PAGE>
Company or at the request of the Company, any trade secrets or Confidential
Information (as defined below) of the Company while employed by the Company and
for six (6) months after termination of employment. - As used herein,
Confidential Information shall mean information known to or obtained by Employee
as an employee of the Company and not generally known in the Company's industry
and that relates in any way to the business of the Company at any time during
the Employment Period, including without limitation any and all data bases,
trade secrets, know-how, and other intellectual property obtained or developed
during the Employment Period.
(b) Employee acknowledges that during the course of his
employment with the Company he may develop or otherwise acquire papers, files or
other records involving or relating to trade secrets or Confidential
Information. All such papers, files and other records shall be the exclusive
property of the Company and shall together with any and all copies thereof, be
returned to the Company upon the termination of Employee's employment with the
Company.
7. Specific Performance. The Employee acknowledges that the
---------------------
covenants the Employee in Section 5 and Section 6 are special and that the
Company will be irreparably harmed if the Employee's obligations thereunder are
not specifically enforced and that the Company would not have an adequate remedy
at law in the event of a violation or threatened violation thereof Therefore,
the Employee agrees that the Company shall be entitled to seek an injunction or
a remedy of specific performance for any actual or threatened violations or
breach by the Employee without necessity of the Company showing actual damages
or that monetary damages would not afford an adequate remedy. Employee shall
have no personal monetary liability arising out of or in connection with this
Agreement, except to the extent the Company suffers injury on account of the
Employee's willful and intentional actions resulting in or intended to result in
injury to the Company and only to the extent such willful and intentional
actions result in personal gain to the Employee.
8. Successors and Termination. This Agreement is personal to the
---------------------------
Employee and without the prior written consent of the Company shall not be
assigned by the Employee otherwise than by will or the laws of descent and
distributions. This Agreement shall insure to the benefit of and be enforceable
by the Employee's legal representatives. This Agreement may not be assigned by
the Company without the prior written consent of Employee.
9. Miscellaneous.
--------------
(a) The laws of the State of New York shall govern this
Agreement and any interpretations or constructions thereof. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors,
assigns and legal representatives, as the case may be.
(b) All notices and other communications shall be given by hand
delivery to the other party or by registered or certified mail return receipt
requested, postage prepaid, or by
-6-
<PAGE>
overnight courier or by facsimile with confirmed transmission (with a hard copy
mailed) addressed as follows:
If to the Employee:
-------------------
John L. Lee
22 Burnished Avenue
Somerville, MA 02144
If to the Company:
------------------
ICON Capital Corp.
600 Mamaroneck Avenue
Harrison, New York
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressees
(c) The invalidity or enforceability of any provision of not
affects the validity or enforceability of any other provision of this Agreement.
(d) The Company may withhold from my amounts payable under this
Agreement such Federal state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation
(e) The Employee's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Employee or the Company may have hereunder
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) This Agreement may be executed in any number of counterparts
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account for any
other counterpart.
(g) The terms defined in this Agreement have the meanings assigned
to them in this Agreement and include the plural as well as the singular, and
the words of any gender shall include each other's gender where appropriate.
(h) Any disputes, controversies, or claims arising between the
parties hereto arising out of or relating to this Agreement, or any provision
thereof, or the breach, termination or invalidity hereof, or the rights and
obligations created hereunder by the parties hereto (collectively
-7-
<PAGE>
"Disputes"), shall be finally determined and settled by arbitration in
accordance with the commercial rules of the American Arbitration Association
("AAA"), as such are in force at the time a demand for arbitration is made, as
described below.
(i) Any dispute, controversy or claim relating to this
Agreement, or any provision thereof, or any breach or default in the
performance of the terms and conditions hereof shall be settled by
arbitration in the City of White Plains in accordance with the then-
existing arbitration rules promulgated by the AAA. The decision of the
arbitrators shall be final and binding on the parties, and judgment
upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
(ii) In any arbitration proceeding under this Section 9(h),
the rights of the parties shall be determined according to the
governing law set forth in Section 9(a) above, and the arbitrators
shall apply such law.
(iii) The prevailing party shall be entitled to recover from
the non-prevailing party all costs and fees, including reasonable
attorney's fees, incurred by such prevailing party in connection with
such Dispute.
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand, and
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
------------------------------------
John L. Lee
ICON Holdings Corp.
By
------------------------------------
-8-
<PAGE>
Exhibit 10.21
-------------
EXECUTION COPY
--------------
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between ICON Capital Corp., a corporation organized and
existing under the laws of the State of Connecticut (the "Company"), and Allen
Hirsch ("you" or the "Employee"), dated as of December 5, 1996.
In order to obtain Employee's services, the Company and Employee have each
decided to enter into this Employment Agreement.
1. Employment Period.
------------------
(a) The terms and conditions of this Agreement shall be and remain in
effect during the continuation of the Employee's employment hereunder (the
"Employment Period"). The Employment Period shall commence on the date hereof
("Effective Date") and shall continue for an initial term of two (2) years
("Initial Period") and thereafter until terminated pursuant to the terms hereof.
(b) Nothing in this Agreement shall be deemed to prohibit the Company at
any time from terminating the Employee's employment during the Employment Period
with notice for any reason; provided, however, that the relative rights and
obligations of the Company and the Employee in the event of any such termination
shall be determined under this Agreement.
2. Terms of Employment.
(a) Position and Duties.
(i) Commencing on the Effective Date and for the remainder of the
Employment Period, the Employee shall be engaged as a Senior Vice President
of the Company, and as President of its affiliate, ICON Securities Corp.,
with an office located at San Francisco, California. Employee will report
to the Company's Executive Vice President of Financial Services and shall
have such duties, responsibilities and authority as shall be consistent
therewith (including being a member of any advisory investment committee
that may be established from time to time) and as the Board of Directors of
the Company shall from time to time reasonably determine; and
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee shall
devote full business time to the business and affairs of the Company and use all
reasonable efforts to perform faithfully and efficiently such duties,
responsibilities and authority.
(b) Compensation.
-------------
-1-
<PAGE>
(i) Base Salary. Effective as of the Effective Date, the
Employee shall receive a base salary ("Base Salary") at a rate of
$150,000 per year. The Board of Directors may, at its sole discretion,
increase the Base Salary from the beginning of each subsequent fiscal
year of the Company, based upon its review of the Company's and the
Employee's performance;
(ii) Commission Plan. In addition to Base Salary, the
Employee shall be entitled to an Annual Commission calculated as follows
and payable thirty days after the end of each calendar year:
0.3% of equity raised up to $24 million per calendar year, plus 0.6% of
equity raised in excess of $24 million up to $36 million, plus 1.0% of
equity raised in excess of $36 million. On this basis, as an example, in
a calendar year wherein $48 million of equity was raised, your Annual
Commission would be calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
First $24 million at 0.3%: $ 72,000
$24-$36 million at 0.6 %: $ 72,000
$36-$48 million at 1.0%: $120,000
--------
Total Commission $264,000
</TABLE>
(iii) Parachute Payment. In addition to any payments under
------------------
the Commission Plan, you may also become entitled to receive a special
"Parachute Payment" upon the occurrence of a "Triggering Event,"
provided you continue to be a full time employee of the Company on that
date. A Triggering Event shall be deemed to have occurred on the date on
which a change in control of the Company occurs in which (a) more than
50% of the voting stock of ICON Holdings Corp. ("Holdings") is sold to a
Non-Shareholder (defined herein as an entity or individual other than
Beaufort J.B. Clarke, Paul B. Weiss, Thomas W. Martin, The Summit Group
PLC, or any affiliates thereof or entities directly or indirectly
controlled by any of them); or (b) more than 36% of the voting stock of
Holdings is sold to a Non-Shareholder, and Mr. Clarke does not continue
in his capacity as President and Chief Executive Officer at the closing
date of such a sale, and the Company's activities in raising limited
partnership equity are discontinued. The Parachute Payment shall be
payable in two installments at the times and in the applicable amount
shown on the attached Parachute Payment Schedule. The obligation to pay
the Parachute Payment may, in the sole discretion of the Company's
shareholders, be assigned to its direct or indirect shareholders and
treated as an obligation of such shareholders rather than the Company;
(iv) Incentive, Savings and Retirement Plans. During the
----------------------------------------
Employment Period, the Employee shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and
programs, if any, applicable generally to other employees of the
Company;
(v) Welfare Benefit Plans. During the Employment Period, the
----------------------
Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in and shall receive all benefits currently
entitled to under the Company's welfare benefit plans, practices,
policies and programs provided by the Company (including, without
limitation, medical, major medical, hospital, prescription, dental,
short-term and long-
-2-
<PAGE>
term disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs, if
any);
(vi) Expenses. During the Employment Period, the Employee shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Employee in the performance of his duties hereunder;
(vii) Vacation. The Employee shall be entitled to at least two
weeks annual paid vacation during the Employment Period. Unused vacation
shall be carried forward without limitation; and
(viii) Payment Schedule. Base Salary shall be paid in
accordance with the regular payroll policies of the Company as
determined by the Board of Directors from time to time but in no event
less frequently than monthly.
3. Termination of Employment.
--------------------------
(a) Death or Disability. The Employee's employment shall terminate
--------------------
automatically upon the Employee's death during the Employment Period. If the
Company determines in good faith that the Disability (as defined below) of the
Employee has occurred during the Employment Period, it may give to the Employee
written notice in accordance with this Agreement of its intention to terminate
the Employee's employment. In such event, the Employee's employment with the
Company shall terminate effective on the 60th day after receipt of such notice
by the Employee (the "Disability Effective Date"), provided that, within the 60
days after such receipt, the Employee shall not have returned to full-time
performance of the Employee's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Employee from the Employee's duties
with the Company on a full-time basis for 90 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers;
provided, that the Employee shall be entitled, during the aforesaid 60 day
period, to challenge any determination of Disability by such a physician, and in
the event of such a challenge, the final decision shall be made by a physician
selected by the Company's physician and the Employee's physician.
(b) Cause. The Company may terminate the Employee's employment
------
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean dishonest conduct in connection with the performance of Employee's
duties hereunder, breach of fiduciary duty to the Company or its shareholders
involving personal profit, material or intentional failure to perform those
duties stated in Section 2(a)(i) under this Agreement (including material
failure to meet the equity-raising goals established from time to time by the
Company's Board of Directors), or fraud or conviction of a felony resulting in
or intended to result in injury to the Company.
(c) By Employee. Employee may terminate this Agreement at any time
------------
during the Employment Period if the Company fails to pay the Employee any amount
due hereunder within five days after such payment is due or the Company fails to
perform any of its material obligations hereunder ("Employee Termination").
(d) Notice of Termination. Any termination by the Company for Cause
----------------------
or any Employee Termination shall be communicated by Notice of Termination to
the other party hereto given
-3-
<PAGE>
in accordance with this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The failure
by the Employee or the Company to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Cause or establishing the
right to an Employee Termination shall not waive any right of the Employee or
the Company hereunder or preclude the Employee or the Company from asserting
such fact or circumstance in enforcing the Employee's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
--------------------
Employee's employment is terminated by the Company for Cause or pursuant to an
Employee Termination, the date of receipt of the Notice of Termination or any
later date specified therein, as the case may be, (ii) if the Employee's
employment is terminated by the Company other than for Cause or Disability, the
date on which the Company notifies the Employee of such termination and (iii) if
the Employee's employment is terminated by reason of death or Disability, the
date of death of the Employee or the Disability Effective Date, as the case may
be.
(f) Right to Cure. Notwithstanding any provision herein to the
--------------
contrary, the Company or Employee, as applicable, shall have a right to cure the
matters giving rise to an Employee Termination or for Cause termination,
respectively, for a period of 30 days commencing upon the receipt of the Notice
of Termination. If Company or Employee successfully cures such matters within
such thirty day period to the satisfaction of the other party in its or his sole
discretion, the termination of this Agreement or any provision hereof noticed in
such Notice of Termination shall be void and ineffective.
4. Obligations of the Company Upon Termination.
--------------------------------------------
(a) Other Than for Cause, Death or Disability. If the Company shall
------------------------------------------
terminate the Employee's employment other than for Cause, Death or Disability,
or in the event of an Employee Termination, the Company shall pay to the
Employee in a lump sum in cash within 10 Business Days after his Date of
Termination, the aggregate of the sum of (A) an amount equal to the remainder of
the Base Salary up to the date of expiration of the Initial Period or twelve
(12) months' Base Salary, whichever is greater, (B) any compensation previously
deferred by the Employee, (C) any accrued vacation pay, (D) any accrued
commissions yet unpaid, and (E) in the event Employee's employment is terminated
under the circumstances described above in this paragraph and a Triggering Event
occurs within six (6) months thereafter, the Parachute Payment described above
under paragraph 2(b)(iii) and the attached Parachute Payment Schedule in
accordance with the terms thereof.
(b) Death; Disability. If the Employee's employment is terminated
------------------
by reason of the Employee's death or Disability during the Employment Period,
this Agreement shall terminate without further obligations to the Employee or
the Employee's legal representatives, as the case may be, under this Agreement,
other than for payment of any deferred payments.
(c) Cause; Voluntary Termination. If the Employee's employment
-----------------------------
shall be terminated for Cause during the Employment Period or in the Event the
Employee voluntarily
-4-
<PAGE>
terminates employment during the Employment Period, this Agreement shall
terminate without further obligations to the Employee.
5. Non-Competition. During the Employment Period and for a period
----------------
of twelve (12) months following the Date of Termination, as long as the Company
is not in default under this Agreement, Employee shall not:
(a) directly or indirectly, either individually or as a principal,
partner, member, agent, employee, consultant, stockholder, joint venturer or
investor, or as a director or officer of any corporation, entity, proprietorship
or association, or in any other ownership, executive or management position,
engage or assist in activities, or have an active interest, of an ownership,
executive, management or consulting nature in a business in the business of
marketing and selling income fund products that would compete with the equipment
leasing investment funds products of the Company actually being marketed at the
time of termination;
(b) directly or indirectly, either individually or as a principal,
partner, member, agent, employee, consultant, stockholder, joint venturer or
investor, or as a director or officer of any corporation, entity, proprietorship
or association, or in any other ownership, executive or management position
whatsoever, (i) divert or attempt to divert from the Company any business with
any customer or prospective customer with which Employee has any business
contact or business association which was either under Employee's supervision or
the identity of which was learned by Employee while employed by the Company,
(ii) induce any salesmen, vendor, broker, dealer, representative, agent, or
other person transacting business with the Company to transact business for a
business in competition with the Company at the time of termination, or (iii)
induce or cause any employee of the Company to leave the employ of the Company
other than in the course of the loyal discharge of his duties.
Notwithstanding the above, this Section 5 shall not prohibit the Employee from
passively owning less than five percent (5%) of the shares of any corporation or
entity that is publicly traded on a securities exchange or over-the-counter
market.
6. Confidential Information.
-------------------------
(a) From the date hereof and at all times thereafter, the Employee shall
not at any time or in any manner, directly or indirectly, knowingly disclose to
any party, other than the Company or at the request of the Company, any trade
secrets or Confidential Information (as defined below) of the Company while
employed by the Company and for six (6) months after termination of employment.
As used herein, Confidential Information shall mean non-public information
provided to Employee by the Company in connection with his evaluation of this
employment opportunity and information hereafter obtained by Employee as an
employee of the Company and not generally known in the Company's industry and
that relates in any way to the business of the Company at any time during the
Employment Period, including without limitation any and all data bases, trade
secrets, know-how, and other intellectual property obtained or developed during
the Employment Period.
(b) Employee acknowledges that during the course of his employment
with the Company he may develop or otherwise acquire papers, files or other
records involving or relating to trade secrets or Confidential Information. All
such papers, files and other records shall be the exclusive property of the
Company and shall, together with any and all copies thereof, be returned to the
Company upon the termination of Employee's employment with the Company.
-5-
<PAGE>
7. Specific Performance. The Employee acknowledges that the covenants
---------------------
of the Employee in Section 5 and Section 6 are special and that the Company will
be irreparably harmed if the Employee's obligations thereunder are not
specifically enforced and that the Company would not have an adequate remedy at
law in the event of a violation or threatened violation thereof. Therefore, the
Employee agrees that the Company shall be entitled to seek an injunction or a
remedy of specific performance for any actual or threatened violations or breach
by the Employee without necessity of the Company showing actual damages or that
monetary damages would not afford an adequate remedy. Employee shall have no
personal monetary liability arising out of or in connection with this Agreement,
except to the extent the Company suffers injury on account of the Employee's
willful and intentional actions resulting in or intended to result in injury to
the Company and only to the extent such willful and intentional actions result
in personal gain to the Employee.
8. Successors and Termination. This Agreement is personal to the
---------------------------
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall insure to the benefit of and be enforceable
by the Employee's legal representatives. This Agreement may not be assigned by
the Company without the prior written consent of Employee except as provided
herein.
9. Miscellaneous.
--------------
(a) The laws of the State of California shall govern this Agreement
and any interpretations or constructions thereof. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors, assigns and legal
representatives, as the case may be.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier or by facsimile with confirmed transmission (with a hard copy mailed)
addressed as follows:
If to the Employee:
-------------------
Allen Hirsch
246 Seaview Avenue
Piedmont, CA 94610
If to the Company:
------------------
ICON Capital Corp.
600 Mamaroneck Avenue
Harrison, New York
Attention: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
-6-
<PAGE>
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Employee or the Company may have hereunder
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account for any
other counterpart.
(g) The terms defined in this Agreement have the meanings assigned to
them in this Agreement and include the plural as well as the singular, and the
words of any gender shall include each other's gender where appropriate.
(h) Any disputes, controversies, or claims arising between the parties
hereto arising out of or relating to this Agreement, or any provision thereof,
or the breach, termination or invalidity hereof, or the rights and obligations
created hereunder by the parties hereto (collectively "Disputes"), shall be
finally determined and settled by arbitration in accordance with the commercial
rules of the American Arbitration Association ("AAA"), as such are in force at
the time a demand for arbitration is made, as described below.
(i) Any dispute, controversy or claim relating to this Agreement, or
any provision thereof, or any breach or default in the performance of the terms
and conditions hereof shall be settled by arbitration in the City of White
Plains in accordance with the then-existing arbitration rules promulgated by the
AAA. The decision of the arbitrators shall be final and binding on the parties,
and judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
(ii) In any arbitration proceeding under this Section 9(h), the rights
of the parties shall be determined according to the governing law set forth in
Section 9(a) above, and the arbitrators shall apply such law.
(iii) The prevailing party shall be entitled to recover from the non-
prevailing party all costs and fees, including reasonable attorney's fees,
incurred by such prevailing party in connection with such Dispute.
-7-
<PAGE>
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand, and
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
______________________________________
Allen Hirsch
ICON CAPITAL CORP.
By:____________________________________
-8-
<PAGE>
PARACHUTE PAYMENT SCHEDULE
--------------------------
Upon the occurrence of a Triggering Event, the applicable "Parachute Payment"
set out below will become payable to the Employee in two installments: 50% on
the date of the Triggering Event and the remaining 50% balance on the earlier of
(a) Employee's involuntary employment termination after the Triggering Event or
(b) six months after the Triggering Event. Employee shall only be entitled to a
Parachute Payment if he is employed full time by the Company on the date of the
Triggering Event or if Section 4(a)(E) applies, and shall not be entitled to
receive the second Parachute Payment installment if he has voluntarily
terminated his employment or been terminated for Cause on the date such second
installment would otherwise be due.
<TABLE>
<CAPTION>
Equity Raised in 12 Full Months Parachute
Prior to Triggering Event Amount (in $s)
------------------------------- --------------
<S> <C> <C>
Less than 24,000,000 150,000 plus .25% of
equity raised
24,000,000 210,000
25,000,000 232,500
26,000,000 253,000
27,000,000 279,500
28,000,000 307,000
29,000,000 340,500
30,000,000 375,000
31,000,000 401,200
32,000,000 427,800
33,000,000 463,100
34,000,000 494,000
35,000,000 527,500
36,000,000 552,000
37,000,000 570,100
38,000,000 592,600
39,000,000 619,800
40,000,000 648,000
41,000,000 669,000
42,000,000 699,000
43,000,000 730,000
44,000,000 748,800
45,000,000 772,500
46,000,000 806,000
47,000,000 826,400
48,000,000 852,000
49,000,000 863,500
50,000,000 875,000
51,000,000 886,500
52,000,000 898,000
53,000,000 909,500
54,000,000 921,000
55,000,000 1,015,000
56,000,000 1,028,000
57,000,000 1,041,000
58,000,000 1,054,000
59,000,000 1,067,000
60,000,000 1,200,000
Over 60,000,000 300,000 plus 1.5% of
equity raised
</TABLE>
-9-
<PAGE>
EXHIBIT 11.01
STATEMENT RE: EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE SIX FOR THE THREE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
Net income (loss)........................ $ (186,263) $ 179,036
---------- ----------
Net income (loss) per share amount....... $ (0.01) $ 0.01
---------- ----------
Calculation of weighted average shares
outstanding:
Weighted average common stock
outstanding............................. 1,000 1,000
Adjustments:
Effects of common stock dividend to
shareholders.......................... 7,999,000 7,999,000
Issuance of stock from the initial
public offering....................... 12,500,000 12,500,000
Redemption of shares from related
party................................. (4,000,000) (4,000,000)
Conversion to common shares from
indebtedness to related party......... 111,276 111,276
Stock options granted at the initial
public offering....................... 1,328,902 1,328,902
---------- ----------
Weighted average common stock
outstanding, as adjusted................ 17,940,178 17,940,178
========== ==========
</TABLE>
<PAGE>
EXHIBIT 21.01
SUBSIDIARIES OF THE REGISTRANT
ICON HOLDINGS CORP.
<TABLE>
<CAPTION>
JURISDICTION OF NAME UNDER WHICH
NAME INCORPORATION SUBSIDIARY DOES BUSINESS
---- --------------- ------------------------
<S> <C> <C>
ICON Capital Corp. ........ Connecticut ICON Capital Corp.
ICON Securities Corp. ..... New York ICON Securities Corp.
ICON Financial Corp. ...... Delaware (1) ICON Financial Corp.
(2) ICON Financial Corp., Delaware
(in California only)
ICON Funding Corp. ........ Delaware ICON Funding Corp.
ICON Receivables Management Delaware ICON Receivables Management Corp.
Corp. ....................
MGC/Griffin Capital Delaware MGC/Griffin Capital Corp.
Corp. ....................
ICON Asset Management Delaware ICON Asset Management Corp.
Corp. ....................
ICON Leasing Corp. ........ Delaware ICON Leasing Corp.
</TABLE>
<PAGE>
EXHIBIT 23.01
The Board of Directors
ICON Holdings Corporation
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
New York, New York
December 17, 1997
<PAGE>
EXHIBIT 23.03
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I, ADOLFO R. GARCIA, hereby consent to the use in the registration statement
on Form S-1 of ICON Holdings Corp., a Delaware corporation (the "Company"), to
which this consent is filed as an exhibit included therewith, of my name as a
person about to become a director of the Company.
DATED: December 1, 1997
/s/ Adolfo R. Garcia
-------------------------------------
Adolfo R. Garcia
